1993 (3) TMI 180 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to deduction u/s 80HHC.
2. Applicability of section 80AB.
3. Definition and inclusion of "turnover" for the purpose of section 80HHC.
4. Appealability of the Assessing Officer's order giving effect to ITAT's order.

Summary:

1. Entitlement to deduction u/s 80HHC:
The appellant-company, engaged in consultancy and exporting marine foods, claimed a deduction of Rs. 4,96,718 u/s 80HHC. The claim was based on an agreement with Devi Marine Food Products Ltd., where the processors executed export orders secured by the appellant. The Assessing Officer disallowed the claim, stating there was no supporting manufacturer or export house relationship, and the company forfeited export incentives to the processors. The CIT (Appeals) upheld this decision, noting that the contract between parties cannot override tax statutes and that only export houses and State Trading Corporations are eligible for such deductions.

2. Applicability of section 80AB:
The Assessing Officer, while giving effect to the ITAT's order, held that the appellant incurred a loss in the marine product business and thus, as per section 80AB, the deduction u/s 80HHC cannot exceed the income included in the total income, resulting in a NIL deduction. The appellant argued that the computation should be based solely on section 80HHC without invoking section 80AB, citing the ITAT Delhi Bench-C decision in Expo Machinery Ltd. v. IAC.

3. Definition and inclusion of "turnover" for the purpose of section 80HHC:
The appellant's total turnover included brokerage, dividend, interest, and profit on the sale of shares, which the ITAT held cannot be regarded as turnover. The ITAT emphasized that section 80HHC(3) distinguishes between "turnover" and "profits," and only trading receipts should be considered as turnover. The ITAT rejected the appellant's reliance on section 44AB and related CBDT Circular, stating that the term "turnover" in section 80HHC pertains to trading receipts, not income items like brokerage or dividends.

4. Appealability of the Assessing Officer's order giving effect to ITAT's order:
The CIT (Appeals) dismissed the appellant's appeal against the Assessing Officer's order on the ground that such an order is not appealable u/s 246. The ITAT upheld this view, noting that the deduction admissible to the appellant under section 80HHC is NIL due to the loss in export business.

Conclusion:
The ITAT concluded that the appellant's export business resulted in a loss, and thus, the deduction admissible under section 80HHC is NIL. The appeal was dismissed.