9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (2) TMI 893 - AT - Income TaxDeduction u/s.80-HHC(1) - whether the deduction is admissible only in the case of sale proceeds receivable and not the processing charges as shown by the assessee? - Held that - With regard to observation of the CIT(A) that the raw material should be owned by the assessee for the purpose of claiming deduction u/s.80-HHC it is found that sec.80-HHC does not specify any such requirement as has been held by the Tribunal in DCIT vs. Shashi Kant Mittal (2009 (1) TMI 310 - ITAT DELHI-G), wherein it has also been held that the definition of manufacture as defined by the Supreme Court in Aspinwall and Co. Ltd. 2001 (9) TMI 3 - SUPREME Court), also does not give any indication that ownership of raw material is a primary condition for manufacturing. Further, the section specifies that the assessee should engage in the business of exports out of India of any goods or merchandise, the assessee be allowed a deduction to the extent of profits derived by the assessee from the export of such goods or merchandise. It is not the case of the revenue that the VSF was not exported out of India or the assessee has not received sale proceeds in convertible foreign exchange or the assessee has not furnished report of an accountant in the prescribed Form No.10CCAC. Further as it is now settled law that book entries are not determinative factor to deal with the income/expenditure whether taxable or deductible thus assessee is entitled to the deduction u/s. 80-HHC(3) on the amount received as a result of exports to M/s. P.T. Indo Bharat Rayon, Indonesia. The AO is directed to compute and allow the same in accordance with the provisions of the law, assessee s appeal stands allowed.
Issues Involved:
1. Disallowance of deduction under section 80HHC on export of Viscose Staple Fibre (VSF). Issue-wise Detailed Analysis: 1. Disallowance of Deduction under Section 80HHC on Export of VSF: The assessee, engaged in manufacturing various products including VSF, filed a return declaring an income of Rs.66,67,09,140/-, but the assessment was completed at Rs.82,34,30,900/- due to the disallowance of deduction under section 80HHC on export of VSF amounting to Rs.47,67,779/-. The Assessing Officer (AO) noted that the amount received was shown as processing charges and not as sales, and since the word "processed" was incorporated in section 80HHC(3)(a) effective from 1.4.1992, the deduction could not be allowed for the Assessment Year 1990-91. This decision was upheld by the CIT(A). On appeal, the Tribunal restored the issue to the CIT(A) for reconsideration. The assessee argued that the amount received was export sales proceeds and not processing charges, citing that the conversion of wood pulp to VSF constitutes manufacturing, not processing. The CIT(A) observed that the ownership of the wood pulp and VSF remained with the foreign company (PTIBRI), and thus, the assessee was not eligible for the deduction under section 80HHC. The assessee contended that the book entries were not conclusive for tax implications and that the economic activity carried out was manufacturing, not processing. The assessee fulfilled all conditions prescribed in section 80HHC, including exporting goods out of India, receiving sale proceeds in convertible foreign exchange, and furnishing the accountant's report in the prescribed form. The Tribunal, after considering various judgments and the nature of the activities, concluded that the conversion of wood pulp to VSF constituted manufacturing, as the original commodity lost its identity and resulted in a new product. The Tribunal also noted that section 80HHC does not specify the ownership of raw materials as a requirement for claiming the deduction. The Tribunal directed the AO to compute and allow the deduction under section 80HHC on the amount received from exports. Conclusion: The Tribunal allowed the appeal, directing the AO to compute and allow the deduction under section 80HHC on the export proceeds of Rs.47,67,779/-, recognizing the conversion of wood pulp to VSF as a manufacturing activity and not requiring the ownership of raw materials for claiming the deduction. The grounds taken by the assessee were allowed, and the order was pronounced in the open court on 12.2.2010.
|
