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TMI Blog1989 (11) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction has been allowed on items which were not exported during the previous year relevant to the asst. year 1982-83 and so these items could not be taken for working out incremental turnover. 3. It was futher pointed out in the show-cause notice that the trade expenses amounting to Rs. 29,65,975 included payment of Rs. 10,58,114 on account of sponsorship fee to Sheikh Ghalib Mansu Rifac of Jeddah. It was noted that this payment was made for securing the right to carry on business inSouth Arabiaand that it secured benefit of enduring nature and, therefore, the expenditure was capital expenditure and not a revenue expenditure. The assessing officer, according to the Commissioner, wrongly allowed this expenditure as a revenue expenditure. 4. The assessee filed a written reply. Submissions were also made on behalf of the assessee before the Commissioner. The Commissioner held that rice, coriander, garlic and chillies are primary agricultural commodities and do not involve any processing or any specific scheme of plantation in this regard, and, therefore, the benefit of Sec. 80HHC cannot be extended to these commodities. 5. Regarding deduction in respect of items which were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not available at the time when the Commissioner passed the impugned order. Shri Srivastava then referred to the amendment introduced in the said Explanation by the Finance Act, 1989 with effect from1-6-1988. Regarding this amendment also the contention advanced on behalf of the assessee was that it would operate only with effect from1-6-1988and, therefore, it would not apply to a case where an order was passed by the Commissioner before the insertion of the amendment and in support of the contention that the Explanation was not retrospective in operation. Reliance was placed on the decision of the Delhi Bench of the Tribunal in the case of Aeroplane Shoe Factory v. ITO [1989] 28 ITD 478. 8. The learned Departmental Representative contended before us that decisions of various High Courts and the Special Bench of the Tribunal cited on behalf of the assessee would be of no help to the assessee in view of the Explanation added to section 263(1) with effect from1-6-1988. It was further contended that the amendment introduced with effect from1-6-1988was merely clarificatory or declaratory in nature and would have, therefore, retrospective effect. In support of this contention reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect from that date by the Finance Act, 1989, yet a plain reading of this clause clearly indicates that the legislature intended to give it a retrospective operation. The use of the words "and shall be deemed always to have been extended" inserted with effect from 1-6-1988 by the Finance Act, 1989 makes the legislature intention quite clear ; This amendment shows that the power of the Commissioner under sub-section (1) of section 263 was extended to such matters as had not been considered and decided in the appeal filed against the assessment order. By introducing the deeming provision the legislature made it clear that such power was exercisable by the Commissioner at all times, i.e., even prior to 1-6-1988. While considering the question whether the Commissioner in the instant case had the jurisdiction to revise assessment under section 263(1) on matters which have not been considered and decided by the CIT(A), we must take into consideration the effect of the amendment introduced in section 263(1) by way of Explanation with effect from1-6-1988. 13. The decision of the Delhi Bench of the Tribunal in the case of Aeroplane Shoe Factory is of no help to the assessee for the simple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, garlic and chillies are produce of plantations and, therefore, export turnover in respect in these commodities was eligible for deduction under section 80HHC(1). In this connection our attention was invited to the definition of the word 'plantation' as given in Webster's Third International Dictionary, Words and Phrases--Legally Defined, Strouds Judicial Dictionary and Bouviers Law Dictionary in support of the contention that the aforesaid three commodities are produce of plantation. In the alternative, it was contended that these three commodities were not agricultural primary commodities and, therefore, deduction under section 80HHC(1) was also available in respect of these commodities. 16. The learned-Departmental Representative, on the other hand, fully supported the impugned order of the Commissioner on the point under consideration. It was contended that rice was agricultural primary commodity and, therefore, fell within the mischief of clause (b) of sub-section (2) of section 80HHC with the result that in respect of this item deduction under section 80HHC(1) was not allowable. Regarding the other three commodities also the contention advanced on behalf of the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in respect of export turnover relating to such goods or merchandise. In the instant case, we are concerned with sub-clause (i) of clause (b) which covers agricultural primary commodities, not being produce of plantations. Rice not being agricultural primary commodity does not fall under sub-clause (i) of clause(b) and, therefore, deduction under section 80HHC(1) would be allowable in respect of this commodity. It must, therefore, be held that the order of the ITO allowing deduction under section 80HHC(1) in respect of rice exported by the assessee was neither erroneous nor prejudicial to the interests of the revenue. The CIT(A) was clearly in error in holding that the assessee was not entitled to deduction under section 80HHC(1) in respect of this item. 19. The assessee's contention that coriander, garlic and chillies are not agricultural primary commodities, is devoid of force. It was contended before us that when these commodities are dried and sorted, they cease to be primary commodities and, therefore, these items would not fall under sub-clause (i) of clause (b) of sub-section (2) of section 80HHC. Drying and sorting of these commodities, does not change their character o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the soil for example tea seedlings are planted and they grow into bushes from which green tea leaves are plucked. Green tea leaves are, therefore, produce of plantations. Similarly, rubber saplings when planted grow into trees and produce rubber. Rubber would be produce of plantation. In the instant case none of the commodities is produce of plantations. Seeds of coriander and chillies are sown and from the crops so produced coriander and chillies are obtained. Similarly, garlic is not produced by planting saplings. We are, therefore, of the view that these commodities cannot be said to be produce of plantations. All of them are agricultural primary commodities as they are produced by agricultural operations and they retain their primary character even when exported. In this view of the matter, we hold that coriander, garlic and chillies fall under sub-clause (i) of clause (b) of sub-section (2) of section 80HHC and, therefore, in respect of these commodities deduction is not allowable under section 80HHC(1). The order of the ITO allowing deduction in respect of these items under section 80HHC was, therefore, clearly erroneous and prejudicial to the interests of the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer on the point allowing additional deduction on increased turnover under section 80HHC(1) was neither erroneous nor prejudicial to the interest of the revenue. The CIT(A) was in error in holding that benefit of additional deduction cannot be allowed to the assessee. 23. As has already been pointed out above, the ITO allowed deduction of Rs. 10,58,114 being payment of sponsorship fee to Sheikh Galib Mansu Rifac. According to the assessee this expenditure was incurred for carrying on business inSouth Arabiaand, therefore, it was in the revenue field. The Commissioner sought to revise the assessment order stating that this expenditure was capital in nature and, therefore, the assessing officer was in error in allowing it as a revenue expenditure. However, this point was not at all considered by the Commissioner in his impugned order but he chose to set aside the order of the AAC on the point simply on the ground that he was setting aside the assessment order on the other two issues relating to deduction under section 80HHC. It is well settled that the Commissioner can assume jurisdiction under section 263 in the matter of revising an assessment order on a point on which the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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