2001 (12) TMI 193 - AT - Income Tax

Issues Involved:
1. Disallowance of Technical Know-how fees.
2. Disallowance of interest and commitment charges.
3. Disallowance of Hermes charges as revenue charges.
4. Deduction in respect of contribution to GIDC for developing infrastructure.
5. Disallowance of contributions to welfare trust and GACL Benevolent Fund.
6. Computation of deduction under Section 80HHC.

Detailed Analysis:

1. Disallowance of Technical Know-how fees:
The assessee contested the disallowance of Rs. 4,65,14,148 as technical know-how fees. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] had previously disallowed this expense in the assessment order and appellate order, respectively. The Tribunal upheld the disallowance, referencing its own decision in the assessee's case for the assessment year (AY) 1995-96, given the identical facts and circumstances.

2. Disallowance of interest and commitment charges:
The assessee challenged the disallowance of Rs. 10,05,25,017 on account of interest and commitment charges. The AO and CIT(A) had previously disallowed these charges. However, the Tribunal reversed this decision, citing its own ruling in the assessee's favor for AY 1995-96 due to identical facts, thereby deleting the disallowance.

3. Disallowance of Hermes charges as revenue charges:
The assessee objected to the disallowance of Rs. 5,81,02,062 as Hermes charges, which were claimed as revenue charges. Both the AO and CIT(A) had disallowed these charges. The Tribunal, however, allowed the appeal, referencing its favorable decision for the assessee in AY 1995-96 under similar circumstances, and deleted the disallowance.

4. Deduction in respect of contribution to GIDC for developing infrastructure:
This ground was not pressed by the assessee during the hearing. Consequently, it was dismissed as not pressed.

5. Disallowance of contributions to welfare trust and GACL Benevolent Fund:
The assessee contested the disallowance of Rs. 66,00,000 and Rs. 1,08,411 for contributions to a welfare trust and the GACL Benevolent Fund, respectively. The AO and CIT(A) had disallowed these contributions. The Tribunal upheld the disallowance, referencing its decision in the assessee's case for AY 1995-96, given the identical facts and circumstances.

6. Computation of deduction under Section 80HHC:
The assessee raised two points regarding the computation of deduction under Section 80HHC: (i) inclusion of excise duty and sales-tax payments in the "total turnover," and (ii) consideration of only net interest as expenditure. The second point was not pressed by the assessee. The primary contention was whether excise duty and sales-tax should form part of the total turnover. The Tribunal noted that this issue had been decided against the assessee in the earlier order for AY 1995-96. However, the assessee argued based on the subsequent decision of the Bombay High Court in CIT vs. Sudarshan Chemicals Industries Ltd. The Tribunal, after considering various judicial pronouncements and the legislative intent behind Section 80HHC, held that excise duty and sales-tax form part of the total turnover. The Tribunal referenced several Supreme Court decisions which construed the term "turnover" as inclusive of excise duty and sales-tax, emphasizing that any contrary view would violate Article 141 of the Constitution. The Tribunal also noted that the Bombay High Court decision did not consider these Supreme Court rulings and was distinguishable due to amendments in Section 80HHC post-1992. Thus, the Tribunal dismissed this ground.

Conclusion:
The appeal was partly allowed, with the Tribunal upholding some disallowances and deleting others based on prior decisions and judicial interpretations.

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