2008 (8) TMI 576 - HC - Income Tax

Deduction under section 80HHC of the Income-tax Act - assessee filed a return of income - selected for scrutiny and notice under section 143(2) of the Act - Assessing Officer, inter alia, rejected the claim of deduction under section 80HHC of the Act - and provisions of section 50C of the Act and thereby reducing the capital loss to be carried forward - explanation offered by the assessee was rejected on the premise that section 50C of the Act makes it obligatory on the part of the Assessing Officer to treat the value adopted by the stamp valuation authority as the deemed sale consideration received/accrued as a result of transfer - Held that - 80HHC stipulates a deduction in respect of export profits - Assessing Officer to compute such export profits from out of the consolidated amount of income of the asses-see, which may involve income by way of interest, rent, commission, etc., the Legislature has provided a simple procedure under which 90 per cent. of the receipts such as interest, rent, commission, brokerage, etc., shall be excluded as profits not attributable to exports - Assessing Officer to compute such export profits from out of the consolidated amount of income of the asses-see, which may involve income by way of interest, rent, commission, etc., the Legislature has provided a simple procedure under which 90 per cent. of the receipts such as interest, rent, commission, brokerage, etc., shall be excluded as profits not attributable to exports - assessee was provided with the valuable opportunity under sub-sections (2) and (3) of section 50C in addition to the opportunity given under the Stamp Act. Even that opportunity has not been availed of by the assessee. The reasoning given the assessee has no locus standi to question the value determined by the stamp authority is also not in accordance with law - Appeal is dismissed

Summary

Issues:
1. Deduction under section 80HHC of the Income-tax Act - exclusion of 90% of gross interest and commission.
2. Invocation of provisions of section 50C of the Income-tax Act - reduction of capital loss to be carried forward.

Issue 1: Deduction under section 80HHC of the Income-tax Act - exclusion of 90% of gross interest and commission.

The case involved an appeal by the assessee against the Tribunal's order regarding the rejection of the claim of deduction under section 80HHC of the Income-tax Act. The Assessing Officer excluded 90% of the gross interest and commission from the profits of the business while determining the total income, leading to a dispute. The Tribunal upheld this decision, prompting the assessee to appeal. The court referred to previous judgments, including CIT v. V. Chinnapandi and K. S. Subbiah Pillai and Co. (India) P. Ltd. v. CIT, which clarified that deductions under section 80HHC should be made from the profits of the business as computed under the head 'Profits and gains of business or profession.' The court emphasized that the intention behind the provision was to exclude 90% of certain receipts, such as interest and commission, from the profits attributable to exports. The appeal on this issue was dismissed based on the precedent set by the cited judgments.

Issue 2: Invocation of provisions of section 50C of the Income-tax Act - reduction of capital loss to be carried forward.

The second issue revolved around the invocation of section 50C of the Income-tax Act, which resulted in the reduction of the assessee's claimed long-term capital loss. The Assessing Officer had increased the deemed sale consideration for properties sold by adopting values determined by the stamp duty authorities. The assessee's explanation for the higher stamp duty was that the buyers paid it to expedite the release of title documents, and the assessee had no say in the matter. However, the court upheld the Assessing Officer's decision, stating that section 50C mandates the use of the value determined by the stamp valuation authority as the deemed sale consideration. The court found no merit in the assessee's argument that they lacked locus standi in the stamp duty proceedings. Consequently, the court dismissed the appeal, emphasizing that the assessee had ample opportunities to contest the valuation but failed to do so. The decision was based on the confirmation of the assessment by the appellate authorities and the Tribunal, as well as the precedent set by previous judgments.

In conclusion, the High Court of Madras upheld the decisions related to both issues, emphasizing the importance of following statutory provisions and legal precedents in tax matters. The judgment serves as a reminder of the significance of complying with tax laws and utilizing available opportunities to challenge assessments effectively.