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TMI Blog2006 (5) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80HHC(3)( b ) amounting to Rs. 31,40,823 without appreciating the manufacturing activity carried on by the assessee in purchasing rough logs of wood which were sold as teak wood sawn timbers. The ld. CIT(A) has failed to appreciate that the Assessing Officer has allowed the proportionate deduction under section 80HHC(3)( a ) treating the assessee as manufacturing exporter. The ld. CIT(A) has failed to appreciate that the assessee has not maintained separate books of account for export sales and local sales and the fact that the export sale out of total turnover is of 19.81% only, hence, the Assessing Officer has correctly allowed the proportionate deduction under section 80HHC." 3. The facts relating to controversy involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is merely purchasing and selling the same commodity. He further invited our attention to the profit and loss account at page 8 of the paper book filed by the assessee, wherein, the assessee has paid sawing charges of Rs. 1,93,123. Apart from this, the assessee has also generated the fire wood which was sold separately for Rs. 22,625. In clause ( a ) of sub-section (3) of section 80HHC, after manufacture, the Legislature inserted the words "or processed" was inserted by the Finance Act, 1992 with effect from 1-4-1992. In view of this insertion, the case of the assessee is squarely covered by clause ( a ) of sub-section (3) of section 80HHC. Therefore, the Assessing Officer rightly computed the profits derived from export by invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial name of the goods that the assessee was importing teak wood round log or roughly squared teak wood or roughly squared teak wood logs as per the bills of entry for home consumption. The goods that were exported under the commercial name is teak wood sawn timber as per the bank certificate of export and realization and the bills of lading for export. All these clearly indicate that the assessee is importing round logs and exporting the sawn timber. Once the goods are processed, profit derived from export is to be computed as per formula given in clause ( a ) of sub-section (3) of section 80HHC of the Income-tax Act, 1961. Apart from this, the assessee is not maintaining separate books of account. 8. In order to understand the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Act, 1992, has amended the definition of trading goods to mean goods not manufactured or processed by the assessee . Thus, in effect, where goods processed by the taxpayer are exported, the first method of computation will apply." 9. After the insertion of words "or processed" in clause ( a ) of sub-section (3) of section 80HHC of the Income-tax Act, 1961, it is not necessary that goods must be manufactured by the assessee. Even in respect of processed goods, the said clause is applicable. The assessee in the instant case is importing teak wood round log , whereas, it had exported teak wood sawn timber, which clearly indicate that the assessee exported goods after processing. In view of this, the Assessing Officer rightly comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble J K High Court in the case of CIT v. Abdul Ahad Najar [2001] 248 ITR 744, wherein, it was held that converting tree to logs and planks is manufacturing or processing eligible for deduction under section 80J of the Income-tax Act, 1961. In the case of B.S. Bajaj Sons v. CIT [1996] 222 ITR 418 (Punj. Har.), the Hon ble High Court held that conversion of timber into rafters amount to manufacturing or processing of goods for the purpose of allowing deduction under sections 80J and 80HH of the Income-tax Act, 1961. In the impugned, the CIT(A) has distinguished the law laid down by Punj. Har. High Court in the case of B.S. Bajaj Sons ( supra ) which was rendered under the Income-tax Act, 1961 with the decision of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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