M/s. Crew B.O.S. Products Ltd, New Delhi V. ACIT, New Delhi

ITA 4164/DEL/2009

• Counselvise Citation: 416420114 RSA 2009
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 22-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 143(3); 80HHC; 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH B DELHI ] BEFORE SHRI R. P. TOLANI, JM AND SHRI K. D. RANJ AN, AM I. T. APPEAL NO. 4164 (DEL) OF 2009. ASSESSMENT YEAR : 2003-04. M/S. CREW B. O. S. PRODUCTS LTD., ASSTT. CO MMISSIONER OF INCOME-TAX, M16, 1 ST FLOOR, COMMERCIAL COMPLEX, VS. CIRCLE : 3 (1), GREATER KAILASHII, N E W D E L H I. N E W D E L H I 110 048. PAN / GIR NO. AAA CC 3222 F. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI K. SAMPATH, ADV.; DEPARTMENT BY : SHRI ROHIT GARG, SR. D. R. O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 03-04 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)VI, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA DS AS FOLLOWS :- 1. THAT THE ORDER OF THE LD. COMMISSIONER O F INCOME-TAX (APPEALS) IS BAD BOTH ON LAW AND FACTS; 2. THAT THE ACTION OF THE LD. COMMISSIONER OF INCOME-TAX, IN INITIATING PROCEEDING UNDER SECTION 263 IS BAD BOTH ON LAW AND FACTS; 3. THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF A SUM OF RS.32,87,203/- BY WRONGLY RE-COMPUTING THE DEDUCTION UNDER SECTION 80-HHC. 2 I. T. APPEAL NO. 4164 (DEL) OF 2009 . 3. THE FIRST ISSUE FOR CONSIDERATION RELATES TO INI TIATION OF PROCEEDINGS UNDER SECTION 263 OF THE ACT. IN THIS CASE ORIGINAL ASSESSMENT WAS MADE UNDER SECTION 143(3) ON 30/01/2006. THE LD. CIT , DELHI-I SET ASIDE THE ORDER ON THE GROUND THA T FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-HHC THE TURNOVER OF 100 PER CENT EXPORT ORIENTED UNIT SHOULD BE TAKEN INTO ACCOUNT FOR DETERMINATION OF THE TOTAL TURNOVER. THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST THE ORDER OF THE LD. CIT SETTING ASIDE THE ASSESSMENT ORDER. THE ASSESSING OFFICER COMPLETED ASSESSMENT AS PER THE DIRECTIONS CONTAINED IN ORDER U/S 263 OF THE AC T. BEFORE THE LD. CIT (APPEALS) THE ASSESSEE HAD TAKEN THIS GROUND ALSO. THE LD. CIT (A) REJECT ED THIS GROUND OF THE APPEAL ON THE REASON THAT THE GROUND OF APPEAL RELATED TO ORDER UNDER SECTION 263 BY CIT-I, NEW DELHI WAS BEYOND THE SCOPE OF SECTION 246A OF THE ACT. WE HAVE HEARD BOT H THE PARTIES. SINCE THE ASSESSEE HAD NOT PREFERRED ANY APPEAL AGAINST ORDER OF THE LD. CIT-I PASSED UNDER SECTION 263; NO GROUND RELATING TO ORDER UNDER SECTION 263 CAN BE TAKEN IN APPEAL A GAINST THE ORDER PASSED CONSEQUENT TO DIRECTIONS CONTAINED UNDER SECTION 263 OF THE ACT. IN VIEW OF THESE FACTS IN OUR CONSIDERED OPINION THE LD. CIT (A) WAS JUSTIFIED IN DISMISSING THE GROUND RAISED BY THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER PASSED BY THE LD. CIT (APPEALS) DISMISSING THE GROUND RAISED BY THE ASSESSEE AGAINS T INITIATING PROCEEDINGS UNDER SECTION 263 OF THE ACT. 4. THE ONLY REMAINING ISSUE FOR CONSIDERATION RELAT ES TO SUSTAINING THE ADDITION OF RS.32,87,203/- WHILE COMPUTING DEDUCTION UNDER SECT ION 80-HHC OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS OPERATING TWO UNITS (I &II) AT NOS 199 AND 172 OF UDYOG VIHAR PHA SE-I GURGAON. BOTH THE UNITS WERE INVOLVED IN EXPORT BUSINESS. THE ASSESSEE WHILE COMPUTING DE DUCTION U/S 80HHC HAD TAKEN TOTAL TURNOVER OF THE BUSINESS AT RS. 24,,26,60,362/- INSTEAD OF R S. 52,55,84,276/-. THE ASSESSING OFFICER IN ORIGINAL ASSESSMENT HAD EXCLUDED THE TURNOVER OF HU NDRED PER CENT EXPORT-ORIENTED UNIT FOR THE PURPOSE OF DETERMINATION OF TOTAL TURNOVER OF BUSIN ESS CARRIED ON BY THE ASSESSEE FOR PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80-HHC OF THE ACT . THE ASSESSING OFFICER IN SET ASIDE PROCEEDINGS, AS PER THE DIRECTIONS CONTAINED IN ORD ER UNDER SECTION 263 OF THE ACT, INCLUDED THE TURNOVER OF HUNDRED PER CENT EXPORT-ORIENTED UNIT T O DETERMINE THE TOTAL TURNOVER OF THE BUSINESS AS DIRECTED BY THE LD. CIT. THE ASSESSEE HAD TURNO VER OF THE BUSINESS IN WHICH DEDUCTION UNDER 3 I. T. APPEAL NO. 4164 (DEL) OF 2009 . SECTION 80-HHC WAS CLAIMED AT RS.24,26,60,362/-. T HE TURNOVER OF HUNDRED PER CENT EXPORT- ORIENTED UNIT WAS AT RS.28,29,23,915/-. THUS THE T OTAL TURNOVER OF HUNDRED PER CENT EXPORT- ORIENTED UNIT AND NON HUNDRED PER CENT EXPORT-ORIEN TED UNIT WAS RS.52,55,84,277/-. THE ASSESSING OFFICER COMPUTED DEDUCTION UNDER SECTION 80-HHC OF THE ACT BY TAKING THE TOTAL TURNOVER OF THE BUSINESS AT RS.52,55,84,277/-. 5. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION UNDER SECTION 10-B ON ACCOUN T OF EXPORT OF GOODS CARRIED OUT BY IT FROM HUNDRED PER CENT EXPORT-ORIENTED UNIT WHEREAS SEPAR ATE DEDUCTION WAS AVAILABLE TO THE ASSESSEE UNDER SECTION 80-HHC OF THE ACT BASED ON THE FORMUL A IN SECTION 80-HHC(3) OF THE ACT. WHILE CALCULATING DEDUCTION UNDER SECTION 80-HHC, THE ASS ESSEE HAD RIGHTLY TAKEN TOTAL BUSINESS TURNOVER AS TURNOVER PERTAINING TO EXPORT FROM NON- EOU BECAUSE THE TREATMENT OF TURNOVER AND RESULTING PROFIT FROM HUNDRED PER CENT EOU WERE PRE SCRIBED SEPARATELY. IT WAS FURTHER SUBMITTED THAT PROVISIONS OF SECTION 80-HHC(4)(B) CLEARLY STI PULATED THAT ANY EXEMPT INCOME UNDER ANY PROVISIONS OF INCOME-TAX ACT WAS NOT REQUIRED TO BE INCLUDED INTO THE INCOME WHILE CALCULATING THE QUANTUM OF DEDUCTION UNDER SECTION 80-HHC. ANY AMOUNT WHICH IS EXEMPT UNDER ANY OTHER PROVISION OF THE ACT WERE TO BE EXCLUDED FOR THE PU RPOSE OF CALCULATION OF DEDUCTION UNDER SECTION 80-HHC OF THE ACT. THEREFORE, IT WAS SUBMI TTED THAT DEDUCTION UNDER SECTION 80-HHC HAS BEEN WRONGLY CALCULATED BY THE AO BY INCLUDING TURNOVER OF HUNDRED PER CENT OF EXPORT- ORIENTED UNIT IN THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THE LD. CIT (APPEALS) ON CONSIDERATION OF SUBMISSIONS MADE BY T HE ASSESSEE OBSERVED THAT AN ASSESSEE IS ALLOWED A DEDUCTION IN RESPECT OF PROFITS DERIVED B Y THE ASSESSEE FROM EXPORT OF GOODS OR MERCHANDISE UNDER SECTION 80-HHC(3)(A). THE TOTAL T URNOVER OF THE BUSINESS IS TAKEN INTO ACCOUNT AND NOT THE TURNOVER FROM A PARTICULAR UNIT . THE TERM TOTAL TURNOVER HAS BEEN DEFINED IN EXPLANATION (BAA) OF SECTION 80-HHC ACCORDING TO WH ICH TOTAL TURNOVER SHALL NOT INCLUDE FREIGHT OR INSURANCE ATTRIBUTABLE TO THE TRANSPORT OF GOODS OR MERCHANDISE BEYOND THE CUSTOMS STATION AS DEFINED IN CUSTOMS ACT, 1962. THE LD. CIT (A) FURT HER OBSERVED THAT PROVISIONS OF SECTION 80- HHC(4)(B) ARE RELEVANT FOR COMPUTING THE TOTAL INCO ME WHEREAS CLAUSE (A) OF SUB SECTION (3) OF SECTION 80-HHC DEALS WITH TOTAL TURNOVER. THE TERM S TOTAL INCOME AND TOTAL TURNOVER HAVE THEIR SEPARATE MEANING AND SIGNIFICANT AND AN ASSES SEE IS ALLOWED, IN COMPUTING TOTAL INCOME, A 4 I. T. APPEAL NO. 4164 (DEL) OF 2009 . DEDUCTION TO THE EXTENT OF PROFITS DERIVED FROM SUC H EXPORTS WHICH IS CALCULATED AS PER FORMULA LAID DOWN IN SECTION 80-HHC(3)(A) BY TAKING INTO CO NSIDERATION EXPORT TURNOVER AND TOTAL TURNOVER. THEREFORE, FOR THE PURPOSE OF COMPUTATIO N OF DEDUCTION UNDER SECTION 80-HHC THE TOTAL TURNOVER OF THE BUSINESS WAS TO BE TAKEN INTO CONSIDERATION. SHE ACCORDINGLY UPHELD THE COMPUTATION OF DEDUCTION UNDER SECTION 80-HHC OF TH E ACT. 6. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE TURNOVER OF HUNDRED PER CENT EXPORT ORIENTED UNIT CANNOT BE TAKEN INTO CONSIDERA TION FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-HHC OF THE ACT. HE PLACED RELIANCE ON T HE FOLLOWING DECISIONS:- (I) CIT VS. RATHORE BROS. 254 ITR 656 (MAD.); (II) CIT VS. SURESH B. MEHTA 291 ITR 462 (MAD.); (III) CIT VS. M. GANI & COMPANY 301 ITR 381 (MAD.); & (IV) ACIT VS. MAHAVEER SPG. MILLS LTD. 110 I.T.D. 2 11 (CHD). 7. ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORDER OF THE LD. CIT (APPEALS). HE RELIED ON THE DECISION OF ITAT, MUMBAI IN THE CASE OF TATA BP SOLAR INDIA VS. ADDL. CIT 139 TTJ (MUM.) 289. 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. UNDER SECTION 80-HHC(3)(A) THE PROFITS DERIVED FROM EXPOR TS SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH GOODS BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON B Y THE ASSESSEE. AS PER THE CONTENTION OF THE REVENUE THE EXPRESSION TOTAL TURNOVER WOULD INCLU DE THE TURNOVER OF ENTIRE BUSINESS CARRIED ON BY THE ASSESSEE I.E. THE TURNOVER OF HUNDRED PER CE NT EXPORT ORIENTED UNIT AND THE NON-HUNDRED PER CENT EXPORT UNIT. ON THE OTHER HAND, THE CONTENTIO N OF THE ASSESSEE IS THAT THE TURNOVER OF HUNDRED 5 I. T. APPEAL NO. 4164 (DEL) OF 2009 . PER CENT EXPORT UNIT CANNOT BE INCLUDED IN THE TOTA L TURNOVER OF THE BUSINESS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-HHC OF THE ACT. 9.1 FROM THE FACTS STATED ABOVE, IT IS APPARENT THA T THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR HAD TWO EXPORT UNITS. ONE WAS ELIGIBLE FOR DE DUCTION UNDER SECTION 10-B OF THE INCOME TAX ACT, 1961 WHEREAS THE OTHER UNIT WAS ELIGIBLE FOR D EDUCTION UNDER SECTION 80-HHC OF THE ACT. UNDER SECTION 10-B(1), A DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING FROM THE EXPORT OF ARTI CLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS WITHIN W HICH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MA NUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUTER SOFTWARE, AS THE CASE MAY BE, SHALL BE ALL OWED FROM THE TOTAL INCOME OF THE ASSESSEE. THE PROVISIONS OF SECTION 10-B(1) HAVE BEEN SUBSTIT UTED BY FINANCE ACT, 2000 WITH EFFECT FROM 1/04/2001. PRIOR TO ITS SUBSTITUTION THE PROFITS A ND GAINS DERIVED BY AN ASSESSEE FROM A HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING WAS NOT TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THUS AFTER SUBSTITUTION OF SECTION 10-B WITH EFFECT FROM 1/04/2001 THE EXPORT PROFIT DERIVED FROM HUNDRED PER CENT EXPORT ORIENTED UNDERTAKING IS DED UCTIBLE FROM THE TOTAL INCOME OF THE ASSESSEE. THE EXPRESSION SHALL BE ALLOWED FROM THE TOTAL INC OME OF THE ASSESSEE APPEARING IN SECTION 10- B(1) CLEARLY SUGGESTS THAT THE DEDUCTION UNDER SECT ION 10-B(1) WILL BE ALLOWABLE FROM THE TOTAL INCOME OF THE ASSESSEE. SUB SECTION (4) OF SECTION 10-B PRESCRIBES THE PROCEDURE FOR COMPUTATION OF PROFITS DERIVED FROM EXPORT OF ELIGIBLE ARTICLES OR THINGS OR COMPUTER SOFTWARE. AS PER THE PROVISIONS OF THIS SUB SECTION THE PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE TOT AL PROFITS OF BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT O F SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. THEREFORE, FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 1 0-B THE PROFITS OF THE BUSINESS OF UNDERTAKING, THE EXPORT TURNOVER AND THE TOTAL TURN OVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING SHALL BE TAKEN INTO ACCOUNT. THEREFORE , FROM THE TOTAL INCOME TO BE COMPUTED THE PROFITS SO COMPUTED UNDER SECTION 10-B(4) OF THE AC T SHALL BE DEDUCTED. 6 I. T. APPEAL NO. 4164 (DEL) OF 2009 . 9.2 UNDER SECTION 80-A(4) WHERE IN THE CASE OF AN ASSESSEE ANY AMOUNT OF PROFITS AND GAINS OF AN UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS IS CLAIMED AND ALLOWED AS A DEDUCTION UNDER THOSE PROVISIONS FOR ANY ASSESSMENT YEAR, DED UCTION IN RESPECT OF, AND TO THE EXTENT OF, SUCH PROFITS AND GAINS SHALL NOT BE ALLOWED UNDER A NY OTHER PROVISION OF THIS ACT OR SUCH ASSESSMENT YEAR AND SHALL IN NO CASE EXCEEDS THE PR OFITS AND GAINS OF SUCH UNDERTAKING OR UNIT OR ENTERPRISE OR ELIGIBLE BUSINESS, AS THE CASE MAY BE . SUB SECTION (4) OF SECTION 80-A CONTAINS NON- OBSTANTE CLAUSE IN RELATION TO SECTION 10-A OR SECT ION 10-AA OR SECTION 10-B OR SECTION 10-B(A) OR ANY PROVISIONS OF CHAPTER VI-A UNDER THE HEADING C DEDUCTIONS IN RESPECT OF CERTAIN INCOMES. THEREFORE, THE DEDUCTION ONCE CLAIMED A ND ALLOWED UNDER SECTION 10-B SHALL NOT BE TAKEN INTO CONSIDERATION FOR COMPUTATION OF DEDUCTI ON UNDER CHAPTER VI-A OF THE ACT. THEREFORE, THE PROFITS OF HUNDRED PER CENT EXPORT U NIT WILL NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-HHC OF THE ACT. 9.3 UNDER SECTION 80-HHC(1) THE ASSESSEE IS ELIGIB LE FOR DEDUCTION OF PROFITS DERIVED FRPM EXPORT OF ELIGIBLE GOODS OR MERCHANDISE. UNDER SECT ION 80-HHC(3)(A) FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-HHC(1) IN CASE OF AN ASS ESSEE WHERE THE EXPORT OUT OF INDIA IS OF GOODS OR MERCHANDISE MANUFACTURED OR PROCESSED BY T HE ASSESSEE, THE PROFITS DERIVED FROM SUCH EXPORT SHALL BE THE AMOUNT WHICH BEARS TO THE PROFI TS OF THE BUSINESS, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH GOODS BEARS TO T HE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. HOWEVER, UNDER CLAUSE (C) OF SECTION 80-HHC(3) WHERE EXPORT OF GOODS IS OF GOODS OR MERCHANDISE MANUFACTURED OR PROCESSED BY THE ASS ESSEE AND OF TRADING GOODS, THE PROFITS DERIVED FROM SUCH EXPORTS SHALL IN RESPECT OF GOODS OR MERCHANDISE MANUFACTURED OR PROCESSED BY THE ASSESSEE, BE THE AMOUNT WHICH BEARS TO ADJUS TED PROFITS OF THE BUSINESS, THE SAME PROPORTION AS THE ADJUSTED EXPORT TURNOVER IN RESPE CT OF SUCH GOODS BEARS TO BE ADJUSTED TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE . THE TERM ADJUSTED EXPORT TURNOVER, ADJUSTED PROFIT OF BUSINESS AND ADJUSTED TOTAL T URNOVER OF THE BUSINESS HAVE BEEN DEFINED IN EXPLANATION TO SECTION 80-HHC(3) WHICH ARE DETERMIN ED BY REDUCING THE RESPECTIVE AMOUNTS RELATING TO TRADING GOODS. IN OTHER WORDS, IN ORDE R TO ARRIVE AT ADJUSTED EXPORT TURNOVER, THE EXPORT TURNOVER IN RESPECT OF TRADING GOODS WILL BE REDUCED FROM THE EXPORT TURNOVER. SIMILARLY, FROM PROFITS OF BUSINESS THE PROFITS COMPUTED IN SE CTION 80-HHC(3)(D) SHALL BE REDUCED. THE 7 I. T. APPEAL NO. 4164 (DEL) OF 2009 . ADJUSTED TURNOVER WILL BE COMPUTED BY REDUCING TOTA L TURNOVER BY THE AMOUNT OF EXPORT TURNOVER IN RESPECT OF TRADING GOODS. 9.4 THE ASSESSING OFFICER HAS TAKEN THE TOTAL TURN OVER OF THE BUSINESS INCLUDING THE TURNOVER OF HUNDRED PER CENT EXPORT ORIENTED BUSINESS WHOSE PROFITS HAVE BEEN CLAIMED AS DEDUCTION UNDER SECTION 10-B. THE INCLUSION OF TURNOVER OF HUNDRE D PER CENT EXPORT ORIENTED UNIT WILL REDUCE THE DEDUCTION UNDER SECTION 80-HHC(1) OF THE ACT. THE DEDUCTION UNDER SECTION 80-HHC(1) IS TO BE DETERMINED FROM THE EXPORT OF ELIGIBLE GOODS OR MER CHANDISE. UNDER SECTION 10-B WHEN INCOME HAS BEEN COMPUTED FOR DEDUCTION ON THE BASIS OF EXP ORT PROFITS OF THAT PARTICULAR UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 10-B IT WILL BE ILLOGICAL T O INCLUDE THE TURNOVER OF SUCH UNIT WHILE COMPUTING THE TOTAL TURNOVER FOR THE PURPOSE OF DED UCTION UNDER SECTION 80-HHC(1) OF THE ACT. THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E ASSESSEE FOR THE PURPOSES OF SECTION 80-HHC MEANS THE TOTAL TURNOVER OF THE BUSINESS INCLUDING THE LOCAL TURNOVER, THE EXPORT TURNOVER OF TRADING GOODS, TURNOVER OF MANUFACTURED OR PROCESSE D GOODS TO WHICH PROVISIONS OF SECTION 80- HHC(1) ARE APPLICABLE. IF THE TURNOVER OF HUNDRED PER CENT EXPORT ORIENTED UNIT IS INCLUDED IN THE TOTAL TURNOVER THE PROFITS DERIVED FROM THE EXPORT UNIT WHICH IS NOT A HUNDRED PER CENT EXPORT ORIENTED UNIT WILL ALWAYS BE A LOWER AMOUNT AND THU S THE PROFITS DERIVED WILL BE DISTORTED ONE AND WILL NOT BE GIVING THE CORRECT EXPORT PROFITS. WHE N SECTION 80-A(4) OF THE ACT DOES NOT PERMIT FURTHER DEDUCTION UNDER CHAPTER VI-A IN RESPECT OF DEDUCTIONS OF PROFITS CLAIMED UNDER SECTION 10-B AND ALLOWED, CONSIDERING THE FIGURES OF TURNOV ER IN RELATION TO HUNDRED PER CENT EXPORT UNIT IN COMPUTATION OF TOTAL TURNOVER WILL NOT BE AS PER PROVISIONS OF SECTION 80-HHC OF THE ACT. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT COMBINED BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED BY THE ASSESSEE, BOTH IN RESPECT OF HUNDRED PER CENT E XPORT ORIENTED UNIT AND UNIT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-HHC OF THE ACT. THEREFO RE, IN OUR CONSIDERED OPINION, THE TURNOVER OF HUNDRED PER CENT EXPORT ORIENTED UNIT CANNOT BE INCLUDED IN THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80-HHC OF THE ACT. ONLY THE TURNOVER WHICH IS IN THE NATURE OF OPERATING PROFITS IN RESPECT OF NON-HUNDR ED PER CENT EXPORT ORIENTED UNIT SHALL BE CONSIDERED FOR COMPUTATION OF DEDUCTION UNDER SECTI ON 80-HHC OF THE ACT. 8 I. T. APPEAL NO. 4164 (DEL) OF 2009 . 9.5 IN THE CASE OF CIT VS. SURESH B. MEHTA (SUPRA) THE ASSESSEE WAS CARRYING ON BUSINESS OF MANUFACTURE AND SALE OF JEWELLERY AND GOLD ORNAMENT S AT CHENNAI AND EXPORT OF DIAMONDS AND PRECIOUS STONES FROM BOMBAY. THE ASSESSEE FOR ASSE SSMENT YEAR 1997-98 CLAIMED DEDUCTION UNDER SECTION 80-HHC TREATING THE EXPORT AS SEPARAT E BUSINESS. THE AO RESTRICTED THE BENEFIT TO RS.37,43,000/- ON THE GROUND THAT ENTIRE BUSINESS O F LOCAL SALES AND EXPORT SALES WAS ONE AND THE SAME THEREBY CALCULATING DEDUCTION ON THE BASIS OF TOTAL TURNOVER OF ALL THE BUSINESS OF THE ASSESSEE. HONBLE MADRAS HIGH COURT IN VIEW OF THE SE FACTS HELD THAT THE ASSESSEE WAS MAINTAINING SEPARATE ACCOUNTS INDEPENDENT OF OTHER BUSINESS AND THAT THERE WAS NO INTER-MINGLING OF EXPENDITURE OR INTER-LACING OF FUNDS OF ANY KIND WHATSOEVER. HONBLE MADRAS HIGH COURT UPHELD THE ORDER OF THE LD. CIT (APPEALS) ALLOWING THE RELIEF. HONBLE MADRAS HIGH COURT DID NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF TH E ITAT. 9.6 IN CIT VS. M. GANI & COMPANY (SUPRA) FOR AY 200 1-02 THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-HHC ON ITS EXPORT TURNOVER IGNORIN G THE RESULTS OF DOMESTIC TURNOVER. THE AO CONSIDERED THE COMPOSITE TURNOVER COMPRISED OF BOTH EXPORT TURNOVER AND DOMESTIC TURNOVER AND RECOMPUTED THE DEDUCTION UNDER SECTION 80-HHC. BOT H THE LD. CIT(A) AS WELL AS THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE. ON APPEAL HON BLE MADRAS HIGH COURT DISMISSED THE APPEAL FILED BY THE REVENUE AND HAS HELD THAT THE ASSESSEE HAVING MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR EXPORT BUSINESS AND DOMESTIC BUSINESS, IT WAS ENTITLED TO DEDUCTION UNDER SECTION 80-HHC OF THE ACT FULLY ON EXPORT PROFIT. 9.7 IN ACIT VS. MAHAVEER SPG. MILLS (SUPRA) THE ASS ESSEE CLAIMED DEDUCTION UNDER SECTION 80-HHC IN RESPECT OF EXPORT TURNOVER OF ITS VARIOUS UNITS INCLUDING HUNDRED PER CENT EXPORT ORIENTED UNIT IN RESPECT OF WHICH INCOME HAD BEEN C LAIMED EXEMPT UNDER SECTION 10-B OF THE ACT. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT WHEN ENTIRE INCOME OF SAID EOU HAD BEEN CLAIMED TO BE EXEMPT UNDER SECTION 10-B IT WAS NOT ELIGIBLE TO CLAIM ANY OTHER DEDUCTION OR ALLOWANCE UNDER ANY PROVISIONS OF THE ACT INCLUDING SECTION 80-HHC. ON APPEAL THE LD. CIT (APPEALS) OBSERVED THAT THE LANGUAGE OF SECTION 10- B AND SECTION 80-HHC DID NOT PROVIDE ANY KIND OF RESTRICTION SO AS NOT TO CONSIDER THE EXPOR T TURNOVER OF SAID EOU FOR COMPUTATION OF 9 I. T. APPEAL NO. 4164 (DEL) OF 2009 . DEDUCTION UNDER SECTION 80-HHC AND ALLOWED THE ASSE SSEES CLAIM. ON APPEAL, ITAT CHANDIGARH BENCH HELD THAT THE EXPORT TURNOVER WHIC H EARNED PROFIT ELIGIBLE FOR DEDUCTION UNDER SECTION 10-B SHOULD NOT BE INCLUDED IN THE TURNOVER TO CLAIM DEDUCTION UNDER SECTION 80-HHC OF THE ACT. 10. IN VIEW OF ABOVE IT IS HELD THAT TURNOVER OF 10 0% EXPORT UNIT CANNOT BE INCLUDED IN THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTATION OF DE DUCTION UNDER SECTION 80-HHC OF THE ACT. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO COM PUTE DEDUCTION UNDER SECTION 80-HHC IN THE LIGHT OF DISCUSSIONS MADE ABOVE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE , IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 31 ST OCTOBER, 2011. SD/- SD/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST OCTOBER, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 10 I. T. APPEAL NO. 4164 (DEL) OF 2009 .