ACIT, Virudhunagar V. M/s. Ramalinga Mills Limited, Aruppukottai

ITA 1419/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64257 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-09-2012
• Assessment Year: 1999-2000
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1390 TO 1394/MDS/2012 ASST. YEARS : 1999-2000 & 2001-02 TO 2004-05 A N D I.T.A. NO. 1419 TO 1423/MDS/2012 ASST. YEARS : 1999-2000 & 2001-02 TO 2004-05 THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE-I, VIRUDHUNAGAR. (APPELLANT) V. M/S. RAMALINGA MILLS LTD., RAMASAMY NAGAR, ARUPPUKOTTAI 626 159. PAN : AADCS8769A. (RESPONDENT C.O. NOS.136 TO 140/MDS/2012 IN (I.T.A. NO. 1390 TO 1394/MDS/2012) ASST. YEARS : 1999-2000 & 2001-02 TO 2004-05 M/S. RAMALINGA MILLS LTD, RAMASAMY NAGAR, ARUPPUKOTTAI 626 159. PAN : AADCS8769A. ( CROSS OBJECTOR) V. THE ASST.COMMISSIONER OF INCO ME TAX, CIRCLE-I, VIRUDHUNAGAR (RESPONDENT I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 2 APPELLANT BY : SHRI KEB RANGARAJAN JR. STANDING C OUNSEL RESPONDENT BY : NONE DATE OF HEARING : 13 SEPT. 2012 DATE OF PRONOUNCEMENT : 13 SEPT. 2012 O R D E R PER BENCH : ITA NOS. 1390 TO 1394/MDS/2012: THESE APPEALS ARE FILED BY THE REVENUE AGAINST SE PARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS)II , MADURAI, IN APPEAL NO. 488/2006-07 DATED 12.03.2012, APPEAL NO. 337/2008-09 DATED 12.03.2012, APPEAL NO. 486/2006-07 & 03/2010- 11 DATED 12.03.2012, APPEAL NO. 347/2009-10 DATED 12.03.2012 & APPEAL NO. 487/2006-07 DATED 12.03.2012 RESPECTIVELY FOR THE A SST. YEARS 1999-2000 & 2001-02 TO 2004-05. THE COMMON GROUND RAISED BY THE REVENUE IN ALL THESE APPEALS ARE AS UNDER :- I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 3 1. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE I S ENTITLED TO THE BENEFIT OF APPLICABILITY OF 3 RD PROVISO TO SECTION 80HHC(3) OF THE ACT WHEN THE ASSESSEE HAS N OT FULFILLED THE CONDITIONS LAID DOWN IN 3 RD PROVISO TO SUB- SECTION (3) OF SECTION 80HHC. 2. THE CIT(A) OUGHT TO HAVE NOTED THAT THE ASSESSE E HAS FAILED TO PROVE THAT THE ASSESSEE HAD ONLY ONE OPTION I.E. DEPB FOR THE RELEVANT PERIOD BEFORE THE ASSESSING OFFICER AS STATED BY THE CIT(A). 2. DESPITE ISSUE OF NOTICE, NONE APPEARED ON BEHAL F OF THE ASSESSEE ON THE DATE OF HEARING OF THESE APPEALS. THEREFORE, WE PROCEED TO DECIDE THESE APPEALS AFTER HEARING DEPAR TMENTAL REPRESENTATIVE. 3. AT THE TIME OF HEARING, THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY CONCEDED THAT THE ISSUE IS DE CIDED AGAINST THE REVENUE BY THE DECISION OF HON'BLE GUJARAT HIGH COU RT AND SUBMITTED THAT VALIDITY OF INSERTION OF 3 RD AND 4 TH PROVISO TO SEC.80HHC WERE CHALLENGED BEFORE VARIOUS HIGH COURTS AND THE HON'B LE GUJARAT HIGH I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 4 COURT IN THE CASE OF AVANI EXPORTS V. CIT IN SPECIA L CIVIL APPLICATION NO.7926 OF 2006 DATED 2.7.2012 HELD THAT THE AMENDM ENT INSERTING 3 RD AND 4 TH PROVISO TO SEC.80HHC BY THE TAXATION LAWS (SECOND AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FROM 01.4.1998 IS VIOLATIVE OF ARTICLE 14 OF THE CONSTITUTION OF INDI A. WE HAVE GONE THROUGH THE ORDER OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS V. CIT (SUPRA). THE HON'BLE HIGH COURT HEL D THAT RETROSPECTIVE EFFECTIVE GIVEN TO 3 RD AND 4 TH PROVISO TO SEC.80HHC IS ULTRA VIRUS. WHILE HOLDING SO, THE HON'BLE COURT H ELD AS UNDER :- (I) THE ASSESSEES CONTENTION THAT THE CLASSIFICATION BASED ON TRUNOVER IS ARBITRARY CANNOT BE ACCEPTED BECAUSE THIS IS A RECOGNIZED WAY OF CLASSIFICATION THROUGHOUT THE WORLD. PROGRESSIVE LEVY IS BASED ON INCOME CLASSIFICATION IN TERMS OF BOTH, THE BASIS OF TAXATION AND THE RATE OF TAX IS NOT AR BITRARY; (II) THE ASSESSEES CONTENTION THAT THE AMENDMENT S HOULD BE DECLARED ULTRA VIRES BEING VIOLATIVE OF THE PRINCIPLES OF PROMISSORY ESTOPPEL AND LEGITIMATE EXPECTATION IS ALSO NOT ACCEPTABLE BECAUSE THERE IS NO ESTOPPEL AGAINST LEGISLATION . THE LEGISLATURE IS NOT BOUND BY THE DOCTRINE OF PRO MISSORY ESTOPPEL; I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 5 (III) HOWEVER, THE AMENDMENT IS VIOLATIVE OF ARTICLE 14 OF THE CONSTITUTION OF INDIA BECAUSE TWO ASSESSEES OF THE SAME CLASS ARE PLACED ON DIFFERENT FOOTING . WHILE SOME ASSESSEES WHOSE EXPORT TURNOVER IS MORE THAN RS.10 CRORE AND WHO HA VE CLAIMED DEDUCTION U/S. 80 HHC ON DEPB / DFRC IN THEIR ROI A ND THE ASSESSMENTS HAVE BECOME FINAL ARE GIVEN THE BENEFIT OF DEDUCTION WITHOUT COMPLIANCE OF THE CONDITIONS IMPOSED BY THE TAXATION LAWS (SECOND AMENDMENT) ACT, 2005, ASSESSEES WHOSE TURNO VER IS MORE THAN RS.10 CRORE, AND WHO HAVE CLAIMED DEDUCTION U/ S. 80 HHC ON DEPB/DFRC AND WHOSE ASSESSMENTS ARE PENDING EITHER BEFORE THE AO OR THE APPELLATE AUTHORITY WOULD BE REQUIRED TO COMPLY WITH THOSE TWO CONDITIONS RETROSPECTIVELY. TWO ASSESSEES OF SIMILAR DESCRIPTION HAVING EXPORT TURNOVER OF MORE THAN RS. 10 CRORE ARE DISCRIMINATED INASMUCH AS THE ASSESSEES WHOSE ASSESSMENTS HAVE BECOME FINAL IS NOT REQUIRED TO CO MPLY WITH THE TWO CONDITIONS AND WOULD AVAIL DEDUCTION U/S. 80 HH C AS AGAINST THE ASSESSEES WHOSE ASSESSMENTS ARE PENDING AND WHO WOULD BE REQUIRED TO COMPLY WITH THE TWO CONDITIONS. A BENEFIT BASED ON PENDENCY OF PROCEEDINGS OF ASSESSMENT AND DISCRIMIN ATION BASED THEREON DEFINITELY VIOLATES ARTICLE 14 OF THE CONSTITUTION . IN THE MATTER OF COMPLETION OF ASSESSMENT, THE ASSESSEES HAVE LITTLE ROLE TO PAY. AFTER THE ASSESS EES HAVE SUBMITTED THEIR RETURNS WITHIN THE TIME FIXED BY LA W, IF FOR ANY REASON THE AO DELAYS IN MAKING THE ASSESSMENT, TAKING ADVANTAGE OF THEIR OWN DELAY , THE REVENUE CANNOT DEPRIVE A CLASS OF THE ASSESSEES OF THE BENEFIT WHEREAS OTHER ASSESSEES OF THE SAME CLASS WHOSE ASSESSMENT HAVE ALREADY BEEN C OMPLETED WOULD GET THE BENEFIT; I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 6 (IV) ALTHOUGH IN TAXING STATUTE LAXITY IS PERMISSIB LE AND A BENEFIT GIVEN TO THE ASSESSEE CAN BE CURTAILED, THE SAME MUST BE EFFECTIVE FROM A FUTURE DATE AND NOT FROM AN EARLIE R POINT OF TIME . IF AFTER INDUCING A CITIZEN TO ARRANGE HIS BUSINESSES IN A MANNER WITH A CLEAR STIPULATION THAT IF THE EXISTIN G STATUTORY CONDITIONS ARE SATISFIED, IN THAT EVENT, HE WOULD G ET THE BENEFIT OF TAXATION AND THEREAFTER, THE REVENUE WITHDRAWS SUCH BENEFIT AND IMPOSES A NEW CONDITION WHICH THE CITIZEN AT THAT STAGE IS INCAPABLE OF COMPLYING WHEREAS IF SUCH PROMISE WAS NOT THERE, THE CITIZEN COULD ARRANGE HIS AFFAIRS IN A D IFFERENT WAY TO GET SIMILAR OR AT LEAST SOME BENEFIT, SUCH AMENDMENT MU ST BE HELD TO BE ARBITRARY AND IF NOT, AN INGENIOUS ARTIFICE OPPOSED TO LAW. CONSEQUENTLY, THE AMENDMENT IS QUASHED TO THE EXTENT IT IS RETROSPECTIVE . FOLLOWING THIS DECISION OF THE HON'BLE GUJARAT HIGH COURT, HON'BLE BOMBAY HIGH COURT RECENTLY, IN THE CASE OF VIJAYA S ILK HOUSE (BANGALORE) LTD. V. UNION OF INDIA AND ANOTHER IN W P NOS.2446 TO 2010 DATED 16.8.2012, WHILE DISPOSING OFF BATCH OF APPEALS, TOOK SIMILAR VIEW. THE HON'BLE BOMBAY HIGH COURT IN ITS JUDGEMENT OBSERVED AS UNDER :- 7. THE GUJARAT HIGH COURT HEARD A BATCH OF WRIT PE TITIONS. BY AN ORDER AND JUDGMENT DATED 2ND JULY, 2012, A DIVISION BENCH OF THE GUJARAT HIGH COURT DISPOSED OF THE WRIT PETITIONS I N THE FOLLOWING TERMS :- I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 7 26. ON CONSIDERATION OF THE ENTIRE MATERIALS ON RECORD, WE, THEREFORE, FIND SUBSTANCE IN THE CONTEN TION OF THE LEARNED COUNSEL FOR THE PETITIONERS THAT THE IMPUGNED AMENDMENT IS VIOLATIVE FOR ITS RETROSPECTI VE OPERATION IN ORDER TO OVERCOME THE DECISION OF THE TRIBUNAL, AND AT THE SAME TIME, FOR DEPRIVING THE BENEFIT EARLIER GRANTED TO A CLASS OF THE ASSESSEES WHOSE ASSESSMENTS WERE STILL PENDING ALTHOUGH SUCH BENEFIT WILL BE AVAILABLE TO THE ASSESSEES WHOSE ASSESSMENTS HAVE ALREADY BEEN CONCLUDED. IN OTHER WORDS, IN THIS TYPE OF SUBSTANTIVE AMENDMENT, RETROSPECTIVE OPERATION CAN BE GIVEN ONLY IF IT IS FOR THE BENEFIT OF THE ASSESSE BUT NOT IN A CASE WHERE IT A FFECTS EVEN A FEWER SECTION OF THE ASSESSEE. 27. WE, ACCORDINGLY, QUASH THE IMPUGNED AMENDMENT ONLY TO THIS EXTENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN EFFECT FROM THE DATE OF THE AMENDMEN T AND NOT IN RESPECT OF EARLIER ASSESSMENT YEARS OF T HE ASSESSEES WHOSE EXPORT TURNOVER IS ABOVE RS. 10 CRO RE. IN OTHER WORDS, THE RETROSPECTIVE AMENDMENT SHOULD NOT BE DETRIMENTAL TO ANY OF THE ASSESSEE. 8. IT IS ADMITTED THAT THE PRESENT WRIT PETITIONS A RE IDENTICAL TO THE WRIT PETITIONS WHICH WERE THE SUBJECT MATTER OF THE TRANSFER PETITIONS BEFORE THE SUPREME COURT AND THE JUDGMENT OF THE GUJARAT HIGH COURT. ONLY THE FIRST FOUR WRIT PETITI ONS LISTED ABOVE WERE THE SUBJECT MATTER OF THE TRANSFER PETITIONS. IN OTHER WORDS, THE FIRST FOUR MATTERS STOOD TRANSFERRED TO THE GUJ ARAT HIGH COURT PURSUANT TO THE ABOVE ORDERS OF THE SUPREME COURT. THE OTHER PETITIONS, THEREFORE, DID NOT STAND TRANSFERRED TO THE GUJARAT HIGH COURT. I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 8 9. KEEPING IN MIND THAT THE SUPREME COURT HAD TRANS FERRED ALL THE MATTERS TO THE GUJARAT HIGH COURT IN ORDER TO AVOID CONFUSION AND DIFFICULTIES IN ENFORCEMENT OF CONFLICTING JUDGMENT S OF DIFFERENT HIGH COURTS, WE ARE OF THE VIEW THAT IT WOULD BE APPROPR IATE IN THESE WRIT PETITIONS TO FOLLOW THE JUDGMENT OF THE GUJAR AT HIGH COURT. 10. IN THE CIRCUMSTANCES, FOR THE ABOVE REASONS, TH E WRIT PETITIONS, OTHER THAN THE FIRST FOUR WRIT PETITIONS, ARE DISPO SED OF IN THE TERMS OF THE ORDER AND JUDGMENT OF THE GUJARAT HIGH COURT . THE FIRST FOUR WRIT PETITIONS, IN ANY EVENT, STAND DISPOSED OF BY THE ORDER AND JUDGMENT OF THE GUJARAT HIGH COURT. NO ORDER AS TO COSTS. RESPECTFULLY FOLLOWING THE DECISIONS OF HON'BLE GUJ ARAT HIGH COURT AND HON'BLE BOMBAY HIGH COURT (SUPRA), WE DISMISS T HE GROUNDS OF APPEAL TAKEN BY THE REVENUE ON THE APPLICABILITY OF 3 RD PROVISO TO SUB SEC.(3) OF SEC.80HHC OF THE ACT. 4. THE OTHER COMMON ISSUE IN THE APPEALS FILED BY THE REVENUE FOR THE ASST. YEARS 2002-03 TO 2004-05 IS A S UNDER :- I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 9 1. THE CIT(A) ERRED IN HOLDING THAT THE DEDUCTION U/S.80HHC IS TO BE COMPUTED SEPARATELY FOR UNIT-A AND UNIT-B AND WHILE DOING SO, THE PROFIT/LOSS AND THE TURNOVER RELATING TO GINNING AND PRESSING FACTORIES SHALL NOT TAKE INTO ACCOUNT SINCE THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR ALL THE FIVE UNITS. 2. THE CIT(A) OUGHT TO HAVE FOLLOWED THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF IPCA LABORATORY LTD. V. DCIT (2004)(266 ITR 521) & A.M.MOOSA V. CIT (2007) (294 ITR 1), WHEREIN IT HELD THAT SUB SECTION (3)(C) OF SECTION 80HHC DEAL S WITH CASES WHERE THE EXPORT IS OF BOTH SELF- MANUFACTURED GOODS AS WELL AS TRADING GOODS. THE OPENING PART OF SUB SECTION (3)(C) STATES PROFITS DERIVED FROM SUCH EXPORT SHALL. THEN FOLLOWS (I) AND (II). BETWEEN (I) AND (II) THE WORD AND APPEARS. A PLAIN READING OF SUB-SECTION (3)(C) SHOWS THAT PROFITS FROM SUCH EXPORTS HAS TO BE PROFITS OF EXPORTS OF SELF-MANUFACTURED GOODS PLUS PROFITS OF EXPORTS OF TRADING GOODS. THE PROFIT IS TO BE CALCULATED IN THE MANNER LAID DOWN IN SUB SECTION I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 10 (3)(C)(I) AND (II). THE OPENING WORDS PROFIT DERI VED FROM SUCH EXPORTS TOGETHER WITH THE WORD AND CLEARLY INDICATE THAT THE PROFITS HAVE TO BE CALCUL ATED BY COUNTING BOTH THE EXPORTS. IT IS CLEAR FROM A READING OF SUB SECTION (1) OF SECTION 80HHC THAT A DEDUCTION CAN BE PERMITTED ONLY IF THERE IS A POSIT IVE PROFIT IN THE EXPORTS OF BOTH SELF-MANUFACTURED GOO DS AS WELL AS TRADING GOODS. IF THERE IS A LOSS IN EI THER OF THE TWO THEN THAT LOSS HAS TO BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF COMPUTING PROFITS. 5. THE DEPARTMENTAL REPRESENTATIVE SUBMITS THAT IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F IPCA LABORATORY LTD. V. DCIT 266 ITR 521) AND IN THE CASE OF A.M. MOOSA V. CIT (294 ITR 1), THE PROFITS OF THE ASSESSEE HAVE TO BE CALC ULATED BY COUNTING BOTH THE EXPORT PROFITS OF ALL THE UNITS AND ONLY I F THERE IS A POSITIVE PROFIT IN THE EXPORT BUSINESSES OF THE ASSESSEE, DE DUCTION IS ALLOWABLE WITH REFERENCE TO SUCH POSITIVE PROFITS AFTER ADJUS TING THE LOSS, IF ANY, IN SUCH EXPORT BUSINESSES OF THE ASSESSEE. HE SUBM ITS THAT IN VIEW OF THE SAID DECISIONS OF THE HON'BLE SUPREME COURT THE INCOME OF ALL I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 11 THE EXPORT UNITS HAVE TO BE CLUBBED FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER SEC.80HHC OF THE ACT. THE DEDUCTIO N UNDER SEC.80HHC CANNOT BE COMPUTED UNIT-WISE AND THE PROF ITS OF THE EXPORT UNITS HAVE TO BE AGGREGATED AND DEDUCTION UN DER SEC.80HHC OF THE ACT SHOULD BE ALLOWED ACCORDINGLY. THE DEPA RTMENTAL REPRESENTATIVE SUBMITS THAT SIMILAR ISSUE WAS DECID ED AGAINST THE ASSESSEE BY THIS TRIBUNAL FOR EARLIER YEARS IN ASS ESSEES OWN CASE REJECTING THE APPEALS OF THE ASSESSEE. A COPY OF T HE ORDER OF THIS TRIBUNAL IN ITA NOS.1609/MDS/2003, 3058 & 3051/MDS/ 2004 FOR THE ASST. YEARS 1999-2000 TO 2001-2002 AND ITA NOS.654( MDS)/2003, 2755 & 2756/MDS/2004 FOR ASST. YEARS 1999-2000 TO 2 001-02 DATED 16.2.2007 IS PLACED ON RECORD. 6. WE HAVE GONE THROUGH THE ORDER OF THE CO-ORDINA TE BENCH OF THIS TRIBUNAL (SUPRA) AND WE SEE THAT THIS TRIBUNAL CONSIDERED SIMILAR ISSUE IN ITA NO.654/MDS/2003 AND HELD AS UNDER:- I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 12 8. ITA NO.654(MDS)/2003:-THE SOLITARY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE RELATES TO THE COMPUTATION OF DEDUC TION UNDER SECTION 80HHC OF THE ACT. WE HAVE HEARD THE RIVAL S UBMISSIONS. THE MAIN PLANK OF THE SUBMISSIONS OF THE LEARNED CO UNSEL FOR THE ASSESSEE IS THAT THE DEDUCTION UNDER SECTION 80HHC SHOULD BE WORKED OUT BY TAKING EACH UNIT SEPARATELY AND TREAT ING SUCH BUSINESSES CARRIED ON BY EACH UNIT AS SEPARATE BUSI NESSES WE FIND ABSOLUTELY NO SUCH PRESCRIPTION IN LAW. THE PRECEDE NT RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN CIT VS. RAT HORE BROTHERS, 254 ITR 656(MAD) REFERS TO A DIFFERENT SET OF CIRCU MSTANCES. THE HON'BLE JURISDICTIONAL HIGH COURT ILL THAT CASE WAS CONCERNED WITH THE QUESTION WHETHER SECTION 80HHC(3)(B) CAN BE INVOKED TO COMPUTE THE RELIEF IN RESPECT OF THE ENTIRE EXPORT NET PROFIT IN THIS CASE THE ASSESSEE MAINTAINED SEPARATE ACCOUNTS. ITS TRADING RECEIPTS AND PROFIT AND LOSS ACCOUNTS WERE ALSO MAI NTAINED SEPARATELY FOR EXPORT SALES AND DOMESTIC SALES. ON THIS FACTUAL BACKGROUND IT WAS HELD THAT THERE WAS NO WARRANT FO R DISALLOWING ANY PORTION OF THE EXPORT EARNINGS PRO RATA BY INVO KING CLAUSE(B) OF SUB-SECTION(3) OF SECTION 80HHC OF THE ACT. THE PUR POSE OF SUB- SECTION(3)(B) IS TO DISALLOW A PART OF THE ALLOWANC E UNDER THAT SECTION ONLY WHEN THE ENTIRE DEDUCTION CLAIMED CAN NOT BE REGARDED AS BEING RELATABLE TO EXPORTS. THE HON'BLE HIGH COU RT FOUND THAT THE INCOME CLAIMED WAS ENTIRELY DUE TO EXPORT AND WAS S UPPORTED BY ALL THE NECESSARY DOCUMENTS WHICH WERE NOT DISPUTED. I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 13 9. IN THE PRESENT CASE THE FACTS ARE DIFFERENT. T HE ASSESSEE CLAIMS THAT ALL THE EXPORT PROFITS EARNED BY THE COMPANY B Y THE DIFFERENT UNITS BE COMPUTED SEPARATELY. IN SHORT EXPORT EARN INGS OF THE UNITS BE SEGREGATED AND NOT AGGREGATED. AS PER THE MANDAT E OF SECTION 80HHC(3)(A) WHERE THE EXPORT OUT OF INDIA IS OF GOO DS OR MERCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESS EE THE PROFITS DERIVED FROM SUCH EXPORT SHALL BE THE AMOUN T WHICH BEARS TO THE PROFITS OF THE BUSINESSES THE SAME PROPORTION A S THE EXPORT TURNOVER IN RESPECT OF SUCH GOODS BEARS TO THE TOTA L TURNOVER OF THE BUSINESSES CARRIED ON BY THE ASSESSEE. THERE IS A BSOLUTELY NOTHING IN THE SECTION SUGGESTING SEGREGATION OF EX PORT PROFITS FOR COMPUTING THE DEDUCTION. 10. LOOKING AT THE SCHEME OF THE STATUTE AND THE I NTENT OF THE LEGISLATURE WE FIND THAT SEGREGATION OF PROFITS IS NOT PRAGMATIC AS IT WOULD NOT PRESENT A CORRECT AND TRUE PICTURE OF THE EXPORT EARNINGS. RATHER IT WILL PROVIDE A DISTORTED FIGURE WHERE ONE CAN PROJECT A HIGHER EXPORT INCOME BY ADJUSTING EXPENSES RELATING TO EXPORT AGAINST OTHER HEADS. BESIDES, AS PER THE LANGUAGE OF THE STATUTE THE PROFITS DERIVED FROM SUCH EXPORT SHOULD BE CONS IDERED AS A WHOLE. 11. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. MADRAS MOTORS LTD, 257 ITR 60 HAS HELD AT PAGE 72 T HAT ONCE WE READ SUB-SECTION( 1) OF SECTION 80HHC, CLAUSE(A) OF SUB-SECTION(2) AND CLAUSE(A) AND(B) OF SUB-SECTION(3), THERE REMAI NS NO DOUBT THAT THE TOTAL TURNOVER OF THE BUSINESSES WOULD CONTEMPL ATE ONLY THE I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 14 BUSINESSES REGARDING SUCH GOODS PART OF WHICH ARE E XPORTED AND THE OTHERS ARE NOT SO EXPORTED. THERE IS JUST NO SC OPE TO INCLUDE THE TURNOVER OF THE BUSINESSES OF THE GOODS WHICH ARE N OT CONTEMPLATED BY THE SECTION. THAT WAY, THOUGH THE LEGISLATURE HA S SPECIFIED ABOUT THE APPLICABILITY OF THE SECTION TO THE GOODS BY C1AUSE(A) OF SUB- SECTION(2), IT WOULD BE UNNATURALLY MAKING THE SECTION APPLICABLE EVEN TO THE GOODS WHICH ARE OUTSIDE THE LIMITS OF CLAUSE(A) OF SUB-SECTION(2) AND THAT WILL NOT BE PE RMISSIBLE 12. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER (APPEALS) ON THIS COUNT. ACCORDINGLY WE UPHOLD THE SAME. 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IN IT A NO.654(MDS)/2003 STANDS DISMISSED. SIMILARLY THE HON'BLE CALCUTTA HIGH COURT IN THE CA SE OF DUNCANS INDUSTRIES LTD. V. CIT (245 CTR 77), (202 TAXMAN 67 7), HELD THAT THOUGH THE ASSESSEE WAS MAINTAINING SEPARATE BOOKS OF ACCOUNTS FOR DIFFERENT BUSINESSES, DIFFERENT BUSINESSES OF THE A SSESSEE CANNOT BE CONSIDERED SEPARATELY FOR THE PURPOSE OF CALCULATIN G DEDUCTION UNDER SEC.80HHC. THE HIGH COURT HELD THAT THE TRIBUNAL W AS JUSTIFIED IN HOLDING THAT THE DEDUCTION UNDER SEC.80HHC WAS REQU IRED TO BE COMPUTED BY AGGREGATING THE PROFITS, EXPORT TURNOVE R AND TOTAL TURNOVER OF ALL THE BUSINESSES AND NOT SEPARATELY W ITH REFERENCE TO I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 15 THE PROFITS, EXPORT TURNOVER AND TOTAL TURNOVER FOR EACH BUSINESSES. IN COMING TO THIS CONCLUSION, THE HIGH COURT RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF IPCA LABORATOR Y LTD. V. DCIT (SUPRA). RESPECTFULLY FOLLOWING THE ABOVE ORDER O F THIS TRIBUNAL, WE ALLOW THE GROUNDS OF THE REVENUE ON THIS ISSUE AND REVERSE THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS). ITA NOS.1419/MDS/2012 TO 1423/MDS/2012 : 7. THESE APPEALS FILED BY THE REVENUE ARE DUPLICAT E APPEALS, IN ADDITION TO ORIGINAL APPEALS FILED IN ITA NOS.13 90/MDS/2012 TO 1394/MDS/2012. SINCE WE HAVE DECIDED THE ORIGINAL APPEALS, THESE DUPLICATE APPEALS ARE DISMISSED AS INFRUCTUOUS. C.O. NOS.136/MDS/2012 TO 140/MDS/2012 : 8. THESE ARE THE CROSS APPEALS FILED BY THE ASSESS EE AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX(APPEALS)-I I, MADURAI. THE GROUNDS RAISED IN THESE CROSS APPEALS BY THE AS SESSEE ARE ONLY TO SUPPORT THE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS) . I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 16 AS WE HAVE DECIDED THE APPEALS OF THE REVENUE IN IT A NOS. 1390/MDS/2012 TO 1394/MDS/2012, THESE CROSS APPEALS HAVE BECOME INFRUCTUOUS AND HENCE DISMISSED ACCORDINGLY. 9. IN THE RESULT, ITA NOS. 1390/MDS/2012 & 1391/M DS/2012 ARE DISMISSED, ITA NOS.1392/MDS/2012 TO 1394/MDS/20 12 ARE PARTLY ALLOWED, ITA NOS.1419/MDS/2012 TO 1423/MDS/2012 ARE DISMISSED AS INFRUCTUOUS BEING DUPLICATE APPEALS AND CROSS OBJEC TIONS FILED BY THE ASSESSEE IN CO NOS.136/MDS/2012 TO 140/MDS/2012 ARE DISMISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON THURS DAY, THE 13 TH DAY OF SEPTEMBER 2012. SD/- SD/- (DR. O.K. NARAYANAN) (CHALLA NAGENDRA PR ASAD) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED : 13 TH SEPTEMBER 2012 JLS. I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 17 COPY TO:- (1) APPELLANT (2) RESPONDENT (3) CIT(A)-II, MADURAI, (4) (4) CIT, MADURAI (5) D.R., (6) GUARD FILE. I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 18 5. THE FACTS OF THE CASE ARE THAT THE ASSES SEE, A COMPANY ENGAGED IN THE BUSINESSES OF MANUFACTURE AND SALE O F COTTON YARN, FILED ITS RETURN OF INCOME CLAIMING DEDUCTION UNDER SEC.80HHC ON THE INCOME FROM TWO SPINNING MILLS WHICH WERE DOING EXPORTS. THE ASSESSMENTS WERE COMPLETED BY THE ASSESSING OFF ICER UNDER SEC.143(3) OF THE ACT FOR ASST. YEAR 2002-03 TO 200 4-05 AND WHILE COMPLETING THE ASSESSMENTS THE ASSESSING OFFICER RE -COMPUTED THE DEDUCTION ALLOWABLE UNDER SEC.80HHC BY CLUBBING ALL THE INCOME OF EXPORT UNITS AND ALL THE INCOME OF NON-EX PORT UNITS AND I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 19 THEIR TURNOVERS. ON APPEAL, THE COMMISSIONER OF IN COME TAX(APPEALS) ALLOWED THE APPEALS OF THE ASSESSEE DI RECTING THE ASSESSING OFFICER TO COMPUTE THE DEDUCTION UNDER SE C.80HHC SEPARATELY FOR EXPORT UNIT A & B WITHOUT TAKIN G INTO ACCOUNT THE PROFIT/LOSS ELEMENT AND TURNOVER RELATING TO GINNIN G AND PRESSING UNITS WHICH ARE NOT EXPORT UNITS. 6. AT THE TIME OF HEARING, DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT THIS ISSUE IS DECIDED IN FAVOUR OF T HE REVENUE BY HON'BLE SUPREME COURT IN THE CASE OF A.M. MOOSA V. CIT (294 ITR 1). THE DEPARTMENTAL REPRESENTATIVE SUBMITS THAT IN VIE W OF THE DECISION OF HON'BLE SUPREME COURT THE ORDER PASSED BY COMMIS SIONER OF INCOME TAX(APPEALS) IS TO BE REVERSED. 7. WE HAVE GONE THROUGH THE ORDER OF THE AUTHORITI ES BELOW AND THE DECISION OF HON'BLE SUPREME COURT IN THE CA SE OF A.M. MOOSA V. CIT (SUPRA). THE ASSESSEE WAS HAVING FIVE BUSIN ESSES UNITS, 2 SPINNING MILLS AND 3 OTHER BUSINESSES UNITS. THE S PINNING MILLS WERE I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 20 DOING EXPORT AND DOMESTIC SALES. THE OTHER BUSINE SSES UNITS WERE NOT EXPORTING ANY ARTICLE OR THING. THE ASSESSEE M AINTAINED INDEPENDENT BOOKS, PROFIT AND LOSS ACCOUNTS AND COM PUTATION OF BUSINESSES INCOME FOR ALL THE FIVE UNITS SEPARATELY . THE ASSESSEE COMPUTED TAX UNDER SEC.80HHC OF THE ACT ON EXPORT P ROFITS UNIT-WISE AND LIMITED THE CLAIM OF DEDUCTION TO THE EXTENT OF TOTAL INCOME AVAILABLE BEFORE DEDUCTION FOR 80HHC OF THE ACT. H OWEVER, THE ASSESSING OFFICER CLUBBED THE WORKING RESULTS OF AL L THE FIVE UNITS AND COMPUTED THE EXPORT PROFIT AND A LOWER DEDUCTION UN DER SEC.80HHC OF THE ACT ON THE GROUND THAT DEDUCTION UNDER SEC.8 0HHC IS TO BE ALLOWED TO THE ASSESSEE AND NOT TO EACH UNIT. 8. THE CONTENTION OF THE ASSESSEE BEFORE COMMISSIO NER OF INCOME TAX(APPEALS) WAS THAT NO DOUBT DEDUCTION UND ER SEC.80HHC OF THE ACT IS ALLOWABLE TO THE ASSESSEE AND NOT TO UNIT BUT IT HAS TO BE COMPUTED EXPORT PROFIT UNIT-WISE AND CLUB ALL THE EXPORT PROFITS AND LIMIT THE DEDUCTION UNDER SEC.80HHC TO THE EXTENT O F TOTAL INCOME AVAILABLE BEFORE ALLOWING DEDUCTION UNDER SEC.80HHC OF THE ACT. I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 21 OTHERWISE, THE ASSESSEE WILL BE DEPRIVED OF THE BEN EFITS WHICH IT IS RIGHTLY ENTITLED TO. IT WAS CONTENDED THAT THE INC OME-TAX ACT DOES NOT SAY THE WORKING RESULTS OF ALL THE UNITS ARE T O BE CLUBBED. BUT IT SAYS THAT EXPORT PROFIT HAS TO BE COMPUTED AS PER S UB SEC.(3) OF SEC.80HHC OF THE ACT AND DEDUCTION HAS TO BE RESTRI CTED FOR FURTHER LIMITS PROVIDED IN THE SECTION. IT WAS, THEREFORE, CONTENDED THAT THE NON-EXPORT UNITS HAVE NO PLACE AT ALL IN ALLOWING D EDUCTION UNDER SEC.80HHC OF THE ACT. 9. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, T HE COMMISSIONER OF INCOME TAX(APPEALS) IN PARA 6.5 OF HIS ORDER HELD AS UNDER :- AFTER CONSIDERING THE SUBMISSIONS, I FIND THAT THE APPELLANT HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR ALL THE FIVE UNITS. THE APPELLANT HAS FILED SEPARA TE COMPUTATION OF TOTAL INCOME FOR EACH UNIT AS PER TH E PROVISIONS OF THE INCOME-TAX ACT. THUS, IT IS CLEA R THAT SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED BY THE I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 22 APPELLANT FOR EACH UNIT. AS PER THE DECISION OF TH E HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. RAT HORE BROTHERS [(2001) 254 ITR 656], THE DEDUCTION UNDER SEC.80HHC HAS TO BE COMPUTED SEPARATELY FOR EACH UN IT IF THE BOOKS OF ACCOUNTS ARE MAINTAINED SEPARATELY. I, THEREFORE, DIRECT THE ASSESSING OFFICER TO COMPUTE THE DEDUCTION U/S.80HHC SEPARATELY FOR UNIT-A AND UNIT- B. WHILE DOING SO, HE SHALL NOT TAKE INTO ACCOUNT THE PROFIT/LOSS AND THE TURNOVER RELATING TO GINNING AN D PRESSING FACTORIES. THE COMMISSIONER OF INCOME TAX(APPEALS) WHILE COMIN G TO THE CONCLUSION THAT DEDUCTION UNDER SEC.80HHC HAS TO BE COMPUTED SEPARATELY FOR UNIT-WISE AND NOT FOR THE UNITS WHIC H ARE ENGAGED IN EXPORTS WITHOUT TAKING INTO CONSIDERATION THE OTHER UNITS WHICH ARE NOT ENGAGED IN EXPORTS, RELIED ON THE DECISION OF H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. RAT HORE BROTHERS (254 ITR 656). AFTER GOING THROUGH THE DECISION OF HON' BLE SUPREME COURT IN THE CASE OF A.M. MOOSA V. CIT (SUPRA), WE ARE NO T ABLE TO AGREE WITH THE SUBMISSIONS OF THE DEPARTMENTAL REPRESENTA TIVE THAT THIS I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 23 ISSUE HAS BEEN ADDRESSED BY THE HON'BLE SUPREME COU RT IN ITS DECISION, IE. WHETHER THE INCOME OF THE UNITS WHICH ARE ENGAGED IN EXPORTS AND INCOME OF UNITS WHICH ARE NOT ENGAGED I N THE EXPORT HAVE TO BE CLUBBED FOR THE PURPOSE OF ALLOWING DEDU CTION UNDER SEC.80HHC OF THE ACT. WHAT HAS BEEN SAID IN THE DE CISION OF HON'BLE SUPREME COURT IS THAT WHEN AN UNIT WHICH IS ENGAGED IN THE BUSINESSES OF MANUFACTURE AND EXPORT OF GOODS AND T HAT UNIT IS ALSO EXPORTING TRADED GOODS, WHILE COMPUTING DEDUCTION U NDER SEC.80HHC, PROFITS HAVE TO BE CALCULATED BY ACCOUNT ING BOTH THE EXPORTS. OTHERWISE, IF THERE IS A LOSS IN EXPORTIN G TRADED GOODS AND A PROFIT IS DERIVED FROM EXPORT OF MANUFACTURED GOODS , FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SEC.80HHC, THE LO SS INCURRED IN THE TRADED GOODS HAVE TO BE CONSIDERED FOR ALLOWING DEDUCTION UNDER SEC.80HHC OF THE ACT. WE THAT THIS DECISION OF HON 'BLE SUPREME COURT HAS NO DIRECT APPLICATION TO THE FACTS OF THE ASSESSEES CASE AS THE FACTS OF THE ASSESSEE ARE TOTALLY DIFFERENT. 10. I.T.A. NO.1390 TO1394, 1419 TO 1423/MDS/12 AND CO NOS.136 TO 140/MDS/2012 24 11. ORDER PRONOUNCED IN THE OPEN COURT AFTER HEARI NG ON THURSDAY, THE 13 TH DAY OF SEPTEMBER 2012. SD/- SD/- (DR. O.K. NARAYANAN) (CHALLA NAGENDRA PR ASAD) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED : 13 TH SEPTEMBER 2012 JLS. COPY TO:- (1) APPELLANT (6) RESPONDENT (7) CIT(A)-II, COIMBATORE (8) CIT-III, COIMBATORE (9) D.R., (6) GUARD FILE