2007 (2) TMI 360 - AT - Income Tax

Summary

Issues Involved:
1. Reduction in the claim of deduction u/s 80HHC.
2. Interpretation of the fifth proviso to section 80HHC(3).
3. Charging of interest u/s 234B, 234C, and 234D.

Summary:

1. Reduction in the claim of deduction u/s 80HHC:
The assessee filed a return claiming a deduction u/s 80HHC at Rs. 7,38,416. The Assessing Officer (AO) noted a net profit of Rs. 14,54,272 on a total export turnover of Rs. 2,48,26,964, which included duty drawback of Rs. 21,10,298 and DEPB of Rs. 6,63,942. The AO observed a loss on export turnover at Rs. 10,19,985 and, considering the Taxation Laws (Amendment) Act, 2005, scaled down the deduction u/s 80HHC to Rs. 4,39,641. No relief was allowed in the first appeal.

2. Interpretation of the fifth proviso to section 80HHC(3):
The main contention was whether the word 'or' in the fifth proviso to section 80HHC(3) should be read as 'and'. The assessee argued that both duty drawback and DEPB should be considered for deduction, relying on the judgments of the Hon'ble Supreme Court in Bajaj Tempo Ltd. v. CIT and Addl. CIT v. Surat Art Silk Cloth Mfrs. Association. The Tribunal noted that the first four provisos deal with cases where there is a profit, while the fifth proviso deals with cases of loss. The Tribunal held that the word 'or' between clauses (a) and (b) of the fifth proviso should not be read as 'and', emphasizing that the legislative intent was clear in using 'or'. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's contention.

3. Charging of interest u/s 234B, 234C, and 234D:
The issue of charging interest u/s 234B, 234C, and 234D was admitted by the learned AR to be consequential in nature. Since the Tribunal upheld the opinion of the first appellate authority, this ground was also dismissed.

Conclusion:
The appeal was dismissed, and the reduction in the claim of deduction u/s 80HHC and the interpretation of the fifth proviso to section 80HHC(3) were upheld. The charging of interest u/s 234B, 234C, and 234D was also dismissed as consequential.