MEGHMANI ORGANICS LIMITED V. ASSISTANT COMMISSIONER OF INCOME TAX

TAXAP/1425/2008

AI Insights

The case involves Meghmani Organics Limited, the appellant, contesting a decision by the Assistant Commissioner of Income Tax regarding the calculation of deductions under section 80HHC for the Assessment Year 2000-2001. The primary legal issue was whether the turnover should be calculated on a global basis for the entire business or separately for each unit/division. The Income Tax Appellate Tribunal had previously ruled in favor of a global turnover approach, which was upheld by the Gujarat High Court. The court referenced the decision in Devraj R. Agarwal vs. Assistant Commissioner of Income Tax as a precedent supporting the Tribunal's decision.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 750448 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 18-02-2020
• Assessment Year: misc
• Other Referred Cases: Devraj R. Agarwal vs. Assistant Commissioner of Income Tax, International Research Park Laboratories Ltd. vs. ACIT, CIT(A) vs. Jose Thomas, CIT vs. The Madras Motors Ltd, CIT vs. Parry Agro Industries Ltd, Indian Spices Co. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: KALPANAK RAVAL
• Assessee Lawyers: SWATI SOPARKAR
• Keywords: Deduction; Export; Income Tax; Turnover; Domestic; Unit/Division Wise; Global Turnover
• Section: 80HHC; 260A

Judgement Text

"C/TAXAP/1425/2008 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1425 of 2008 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== MEGHMANI ORGANICS LIMITED Versus ASSISTANT COMMISSIONER OF INCOME TAX ========================================================== Appearance: MRS SWATI SOPARKAR(870) for the Appellant(s) No. 1 MRS KALPANAK RAVAL(1046) for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 18/02/2020 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) Page 1 of 5 C/TAXAP/1425/2008 JUDGMENT This Tax Appeal under Section 260A of the Income Tax Act, 1961, (for short “the Act”) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad dated 31.8.2007 in the ITA No. 3933/Ahd/2003 for the Assessment Year 2000-2001. 2. We are called upon to consider the following two substantial questions of law, on which the Appeal has been admitted : “1. Whether, in the facts and under the circumstances of the case the Income Tax Appellate Tribunal was right in law in holding that for the purpose of calculation of deduction u/s 80HHC of the Act, entire/global turnover of the business and not division/unit wise turnover of the business is required to be taken into consideration without differentiating between units engaged in export activities and units engaged in domestic activities ? 2. Whether, in the facts and under the circumstances of the case the Income Tax Appellate Tribunal was right in law in not following the decision of the co- ordinate Bench in the case of the very same assessee for more than 3 years wherein under identical circumstances, deductions u/s 80HHC of the Act was granted on unit/division wise profits?. Page 2 of 5 C/TAXAP/1425/2008 JUDGMENT 3. At the outset, Mr. Soparkar, the learned Senior Counsel appearing for the appellant-assessee, very fairly pointed out that both the issues raised in this Tax Appeal are no longer res integra, in view of the pronouncement of this Court in the case of Devraj R. Agarwal Assistant Commissioner of Income Tax (2016 389ITR 642). 4. The Tribunal was called upon to decide, whether the CIT (A) committed any error in holding that the deduction under section 80HHC of the Act is not available on the division/unit wise profits of the business and the same is available only on the entire business profit without differentiating between the units engaged in the export and the units engaged in the domestic sales. While answering the issue in favour of the Revenue and while dismissing the Appeal preferred by the assessee it observed, thus : “6. We have heard the parties and considered the rival submissions. In our opinion, the matter stands squarely covered by the decision of the Special Bench of the Tribunal, in the case of International Research Park Laboratories Ltd., Vs ACIT, 212 ITR 1. This view also finds support from the Kerala High Court in the case of CIT(A) Vs Jose Thomas, 253 ITR 553, wherein, the assessee was engaged in various business activities such as processing and export of sea foods, construction and sale of flats, shipping agency business and also deriving income in the form of interest and dividend. For the purpose of computing deduction u/s 80HHC, the total turnover was directed to be including cost of flats constructed by the assessee because in the opinion of Page 3 of 5 C/TAXAP/1425/2008 JUDGMENT the Lordship, turnover in respect of works contract shall be the aggregate amounts received or receivable by the dealer for the transfer of goods involved in the execution of such contract, and it was held the Tribunal an error of law in holding that the total turnover for the purpose of computation of eligible deduction u/s 80HHC (3) did not include the cost of flats constructed by the assessee. 7. Reliance by the assessee on the decision of the Madras High Court in the case of CIT Vs The Madras Motors Ltd, 254 ITR 60, would not be of much held to the assessee. In the present case, however, it is not the case of the assessee that he was engaged in two businesses. The only claim of the assessee is that, it has two units and each unit should be considered separately but it being one and same business, the two units cannot be separated and for the purpose of allowance of deductions u/s 80HHC, the entire turnover of the assessee has to taken into account. Assessee's reliance on its earlier decision in assessment year 1997-98 and 1998-99 in ITA No. 1165 and 1166/Ahd./2001 dated 17.11.2006, would also be of no help because it followed the decision in assessee's own case for assessment year 1999-2000 in ITA no. 174/Ahd./2003 dated 20.10.2009, which in turn ,has followed the decision of the Tribunal in the case of Madhusudan Industried Ltd., ITA No. 2136/Ahd./1997 and ITA No. 1925/Ahd/1997, vide order dated 6.7.2005. But, in none of the cases of International Research Park Laboratories Ltd, Vs ACIT (supra) has been referred to and taken note of it. We respectfully follow the Special Bench decision which also finds support of Kerala High Court decision in the Case of Page 4 of 5 C/TAXAP/1425/2008 JUDGMENT CIT(A) Vs Jose Thomas, 253 ITR 553, in the case of CIT Vs Parry Agro Industries Ltd, 267 ITR 41, and in the case of Indian Spices Co. Vs CIT, uphold the order of the CIT(A) in disallowing the claim of the assessee. The CIT(A) is directed to work out the deduction u/s 80HHC by taking the turnover of units separately.” 5. The aforesaid view taken by the Tribunal stands fortified by the decision of this Court in the case of Devraj R. Agarwal (supra). 6. In the aforesaid view of the matter, this Appeal fails and is hereby dismissed. The substantial questions are answered in favour of the Revenue and against the assessee. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) MARY VADAKKAN Page 5 of 5 "