2006 (9) TMI 103 - HC - Income Tax

Tribunal is justified to set aside the order of Comm(A) and remanded the matter back to assessing officer to determine the factual position regarding the maintenance of separate books of accounts No question of law arise.

Summary

Issues:
Short deduction of claim under Section 80HHC of the Income Tax Act.

Analysis:
The case revolved around the short deduction of the assessee's claim under Section 80HHC of the Income Tax Act for the assessment year 1992-93. The assessee was engaged in the business of export of goods as a trading activity, along with other sources of income like dividend receipts, foreign profits, miscellaneous receipts, local sales, and hotel division. The turnover of the assessee was primarily from exports and local sales, with a significant portion coming from exports. The assessee maintained separate books of accounts for export activities and other income sources. However, the Assessing Officer disallowed the deduction claimed under Section 80HHC, alleging that the indirect costs for local sales were inflated to claim a higher deduction. The Commissioner of Income Tax (Appeals) upheld this decision, leading to an appeal before the Tribunal.

The Tribunal considered the facts and the counsel's statement regarding separate books of accounts for export trade. It emphasized that only expenses directly attributable to export activities should be considered for calculating the deduction under Section 80HHC. In case separate books of accounts were not maintained, expenses would be apportioned based on the export turnover ratio. Due to unclear facts, the Tribunal remanded the matter to the Assessing Officer to ascertain the maintenance of separate books of accounts for export activities. The Tribunal's direction was deemed appropriate, emphasizing the need for the Assessing Officer to determine the expenses directly linked to export activities for applying the provisions of Section 80HHC accurately.

The High Court upheld the Tribunal's decision, stating that it did not raise any substantial question of law warranting consideration. The court affirmed the necessity for the Assessing Officer to establish whether separate books of accounts were maintained by the assessee and to evaluate the expenditure directly related to export activities for determining the claim under Section 80HHC. Consequently, the appeal was dismissed, endorsing the Tribunal's direction for a thorough evaluation of the factual and legal aspects concerning the deduction claim under Section 80HHC of the Income Tax Act.