2007 (6) TMI 302 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to deduction u/s 80-IB(3)(ii) of the Income-tax Act, 1961.
2. Computation of profits derived from the industrial undertaking operating a cold storage plant.
3. Deduction u/s 80HHC in respect of export incentive earned on sale of DEPB.

Summary:

Issue 1: Entitlement to deduction u/s 80-IB(3)(ii)
The assessee, a private limited company engaged in processing and exporting marine products, claimed deductions u/s 80-IB and 80HHC. The Assessing Officer denied the deduction u/s 80-IB, stating that processing fish does not qualify as an industrial undertaking. The CIT(A) agreed that the assessee is eligible for deduction but dismissed the claim due to the lack of separate profit computation from cold storage operations. The Tribunal upheld the CIT(A)'s finding that the assessee is entitled to deduction u/s 80-IB(3)(ii), referencing the legislative intent and relevant case laws, including the Madras High Court's decision in CIT v. George Marjo Exports (P.) Ltd.

Issue 2: Computation of profits derived from the industrial undertaking operating a cold storage plant
The Tribunal clarified that the deduction u/s 80-IB(3) applies to profits derived from the operation of the cold storage plant, including storage of goods for others and for sale. The Tribunal directed the Assessing Officer to compute the "profits and gains derived from the industrial undertaking which operates its cold storage plant" and grant suitable deductions, excluding profits not derived from the industrial undertaking, in line with the Supreme Court's tests in Sterling Foods and Pandian Chemicals.

Issue 3: Deduction u/s 80HHC in respect of export incentive earned on sale of DEPB
For the assessment year 2002-03, the Tribunal upheld the CIT(A)'s decision that the assessee is not entitled to the benefit of DEPB as its turnover exceeds Rs. 10 crores, per the Third Proviso to the amended provisions of section 80HHC(3).

Conclusion:
The appeals were partly allowed for statistical purposes, with directions to the Assessing Officer to compute eligible deductions under section 80-IB(1) read with section 80-IB(3) and to exclude non-qualifying business profits. The claim under section 80HHC for DEPB was rejected due to turnover limits.