2002 (3) TMI 9 - HC - Income Tax

Export, Special Deduction, Computation Of Profits - 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the profit derived from export is to be computed for the purpose of the relief under section 80HHC in accordance with clause (a) of sub-section (3) on Assam tea without taking into account the turnover of tea from other estates, provided the business there is exclusively of export of tea? - 2. Whether, on the facts and in the circumstances of the case and on an interpretation of section 80HHC of the Income-tax Act, should not the Tribunal have taken the total turnover of the entire business including the Assam Tea Estate since as regards the tea business is concerned, the business as a whole in respect of all tea estates has to be taken together and is not the direction to the assessing authority accordingly wrong and unwarranted?

Summary

Issues:
1. Interpretation of section 80HHC for deduction of export profits.
2. Application of sub-sections (1) and (3) of section 80HHC.
3. Calculation of profits derived from export of goods.
4. Whether separate grouping of export profits is allowed under section 80HHC.

Analysis:
The judgment pertains to an appeal against an order passed by the Income-tax Appellate Tribunal regarding the deduction claimed under section 80HHC of the Income-tax Act for the assessment year 1989-90 by a company deriving income from plantations. The primary issue revolves around the interpretation of section 80HHC for computing profits derived from the export of goods. The Tribunal directed the Assessing Officer to re-examine whether the business in Assam tea consists exclusively of export and accordingly compute the profit under section 80HHC(3)(a) or (b) based on the nature of trade. The Revenue challenged this order, raising substantial questions of law for consideration by the court.

The court analyzed the provisions of section 80HHC, emphasizing that sub-section (1) applies when the assessee is engaged solely in export business, while sub-section (3) deals with situations where the business includes both export and domestic trade. The court highlighted that the calculation of export profits under section 80HHC(3) is mandatory when the assessee is involved in both types of trade. The contention that separate grouping of export profits is permissible without following the provisions of sub-section (3) was rejected, as it would require rewriting the statute, which is beyond the court's authority.

The court specifically addressed the argument that in cases where export profits are separately maintained and ascertained, there is no need to invoke sub-section (3)(a) or (b). It clarified that the formula provided in sub-section (3)(b) must be used for calculating the profits derived from export of goods. Therefore, the court held that the Tribunal's order needed modification, and a fresh assessment should be conducted by the Assessing Officer using the prescribed formula for ascertainment of profits.

In conclusion, the court upheld the provisions of section 80HHC and emphasized that the method of calculating export profits outlined in sub-section (3) must be followed, even if the assessee maintains separate accounts for export business. The judgment serves as a significant interpretation of the statutory provisions governing the deduction of export profits under the Income-tax Act, ensuring consistency and adherence to the prescribed formula for computation.