TC/2690/2006 of Vs on 22 December 2006

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 22.12.2006

CORAM

THE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA

T.C.(A).No.2690 of 2006

Commissioner of Income TaxChennai...Appellant Vs.

Chemical Specialities IndiaP. Ltd., New 97, VeeraperumalKoil St., Mylapore, Chennai.

..Respondent

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Appeal under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Madras 'A' Bench dated7.7.2006 in I.T.A.No.693/Mds/2003 for the assessment year 1997-98against the order dated 2/12/2002 in ITA 111/2002-03/A-III of theCommissioner of Income Tax (Appeals) III, Chennai - 600 034 against theDeputy Commissioner of Income Tax, Company Circle I(3), Chennai dated26/3/02 in PAN/GIR/ No.AAACC 3096M.

-----For Appellant: Mr.J.Narayanaswamy-----J U D G M E N T

(Delivered by P.D.DINAKARAN, J.)

The above tax case appeal is directed against the order of theIncome-tax Appellate Tribunal in I.T.A.No.693/Mds/2003 dated 7.7.2006.

2. The Revenue is the appellant. The above appeal relates to theassessment year 1997-98. While completing the re-assessment, theassessing officer, holding that the assessee's computation of deductionunder Section 80 HHC was not based on profit from business as per theconsolidated Profit and Loss Account from all the business, but based onthe export profit of the export unit vide separate P & L Account filedwith respect to the export division, re-calculated the benefit afterincluding the turnover relating to the business of the industrial

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paints, trading in chemicals, manufacturing and export of leathergarments in the total turnover. Aggrieved by the said order ofassessment, the assessee filed appeal before the Commissioner of Income-tax (Appeals), who allowed the appeal, against which, the Revenue wenton appeal before the Tribunal and the Tribunal also confirmed the orderof the Commissioner and dismissed the appeal filed by the Revenue.

3. Hence, the present appeal by the Revenue raising the followingsubstantial question of law:- "Whether in the facts and circumstances of the case, theTribunal was right in excluding the turnover relating to thebusiness of manufacturing of industrial paints and trading inchemicals from the total turnover while computing thededuction under section 80 HHC when the assessee had filed aconsolidated Profit and Loss Account in respect of the abovementioned business and the export business ?"

4. Mr.J.Narayanaswamy, learned standing counsel appearing for theRevenue, fairly submits that the issue raised in the above question issquarely covered against the Revenue by the decision of this Court inCommissioner of Income-tax Vs. Madras Motors Ltd./M.M. Forgings Ltd[(2002) 257 I.T.R. 60], wherein this Court held as follows:- ".. the thrust of the opening clause of clause (b) of sub-section (3) of section 80HHC of the Act, has a stress on thewords “does not consist exclusively of the export”. The words“total turnover of the business” would be controlled by andhave to be read in the colour of the opening clause. The sub-section has been created only to see the ratio of the incomeout of the export to the total income out of the business inrespect of those goods because of the obvious difficulty ofsegregating the profits earned out of export alone. The totalturnover of the business would contemplate only the businessregarding such goods part of which are exported and the othersare not so exported. Hence, it is impermissible to apply thesection even to goods which are outside the limits of clause(a) of sub-section (2)."...

Ratio decidendi

" the turnover from the business of sale of motorcycles,motorcycle spare parts and television sets could not beincluded in the total turnover of the assessee for thepurposes of the computation of special deduction under section80HHC. The Tribunal was right in holding that the totalturnover in section 80HHC was only the turnover relating toexport business of the assessee and not the turnover relatingto other business of the assessee."

In view of the above settled proposition, we find no question oflaw much less a substantial question of law that arises for ourconsideration. Accordingly, the tax case appeal is dismissed.

sra

Sd/Asst. Registrar

/true copy/Sub Asst.RegistrarTo1.The Assistant Registrar,Income Tax Appellate TribunalBench "A", Chennai, Besant Nagar III Floor,Chennai-90.2.The Commissioner of Income Tax (Appeals), Chennai-34.3.The Deputy Commissioner of Income-tax Company Circle I(3), Chennai-34.4.The Commissioner of Income Tax, Chennai-34.T.C.(A).No.2690 of 2006tej(co)bp22.12.2006