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TMI Blog2012 (6) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... [L. M. Chhabda and Sons (1967 (3) TMI 10 - SUPREME CourtSUPREME Court - Income Tax) ] - 849 to 851 of 2004 - - - Dated:- 14-6-2011 - CHITRA VENKATARAMAN MRS., JANARTHANA RAJA P. P. S., JJ. JUDGMENT Mrs. Chitra Venkataraman J.- 1. The assessee preferred the above appeals as against the order of the Tribunal relating to three assessment years, viz., 1995-96, 1996-97 and 1997-98. The assessee is engaged in the business of manufacturing and sale of silk fabrics. It has two units. One unit is situated at Bangalore which is engaged in manufacturing silk fabrics and exporting the same. In other words, the unit at Bangalore is a 100 per cent. export oriented unit. The other unit is at Ramnagaram, which is engaged in manufacturing silk fabrics, catering to the domestic market as well as exporting the manufacturing goods form this unit. 2. Initially, the assessee claimed exemption in respect of the Bangalore unit under section 10B of the Act for the assessment years 1989-90 to 1993-94. Thereafter, for the assessment years under consideration, the assessee claimed deduction under section 80HHC in respect of the Bangalore unit. It is seen from the orders of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to follow the same method. Aggrieved by the same, the assessee preferred the above appeals before this court. 4. It is made clear that the issue raised before this court is as regards 100 per cent. export oriented unit situated at Bangalore. The assessee never made any claim as regards the other unit which had export as well as local sale. 5. Learned counsel appearing for the assessee placed reliance on the deci- sion of this court, reported in : (i) CIT v. Macmillan India Ltd. [2007] 295 ITR 67 (Mad) ; (ii) CIT v. Rathore Brothers [2002] 254 ITR 656 (Mad) ; (iii) CIT v. Suresh B. Mehta [2007] 291 ITR 462 (Mad) ; and (iv) CIT v. M. Gani and Co. [2008] 301 ITR 381 (Mad). only to point out that the assessee has maintained separate accounts for export business and the domestic business and when the gross total income was a positive one, there was no warrant for disallowing any portion of the export earnings. 6. Learned counsel for the assessee placed emphasis on the decision reported in CIT v. Suresh B. Mehta [2007] 291 ITR 462 (Mad), and pointed out that when the accounts maintained by the assessee relating to the export business was independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a positive one. As such, the question of rejecting the claim based on the decision reported in IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 (SC) does not arise. In the circumstance, he prayed for setting aside the order of the Tribunal. 9. Per contra, learned senior standing counsel for the Revenue pointed out to the decision of the apex court reported in Synco Industries Ltd. v. Assessing Officer (Income-tax) [2008] 299 ITR 444 (SC), and contended that given the fact that the gross total income of the assessee has to be computed taking into account both the units, the relief granted under Chapter VI-A has to be worked out by taking note of the export turnover of both the units. Hence, the question of granting 100 per cent. relief in respect of the Bangalore unit separately did not arise. 10. Heard learned counsel for the assessee as well as the learned senior standing counsel appearing for the Revenue. 11. We have perused the orders of the Tribunal and the decisions of this court relied on by the assessee. Admittedly, the issue of grant of relief under section 80HHC in respect of the assessee having export business as well as local sales has to be decided an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure or interlacing of funds of any kind whatsoever and that the assessee had also complied with the legal requirements by filing Form No. 10CCA in support of his claim, the Revenue was not justified in rejecting the claim of the assessee. 14. In the decision reported in CIT v. Macmillan India Ltd. [2007] 295 ITR 67 (Mad), this court followed the decision reported in CIT v. Rathore Brothers [2002] 254 ITR 656 (Mad), and held that there was no warrant for disallowing any portion of the export earnings, particularly, when the export business at Bangalore had separate accounts on the export turnover. The fact that the assessee had business at Madras for local business, would (not ?) justify the Revenue rejecting the claim for 100 per cent. export oriented unit for deductions in respect of the export oriented unit. 15. In the decision reported in CIT v. M. Gani and Co. [2008] 301 ITR 381 (Mad), again following the decision of CIT v. Rathore Brothers [2002] 254 ITR 656 (Mad), this court allowed the case of the assessee by holding that in the absence of ambiguity as regards the maintenance of separate books of account, the assessee's claim for deduction under section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted total turnover of the business carried on by the assessee ; and (ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods : Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent. of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other per- son), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. 18. Referring to the provisions, the apex court pointed out that sub-section (3)(a) deals with the case where the export is only of self-manufactured goods, sub-section (3)(b) deals with the case where the export is only of trading goods, and sub-section (3)(c) deals with the cases where the export is of both self-manufactured goods as well as trading goods. The only condition that governs the grant of relief under section 80HHC is that the assessee having positive profit alone would be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other unit. But since the gross total income was nil, the Assessing Officer rejected the plea of the assessee for the benefit of deductions under Chapter VI-A. The Appellate Tribunal and the High Court affirmed the view of the officer. On further appeal, the apex court held that in determining the gross total income, the assessee has to compute the income from each one of the units. When one unit suffered loss and other unit earned profit, after setting off loss, if the gross total income worked out shows profit, the assessee would be entitled to deduction under Chapter VI-A. On the other hand, if the gross total income is a negative income, then the claim of the assessee could not be considered for any benefit under Chapter VI-A. In the light of the law thus laid down by the apex court, it is clear that only in the case of gross total income being a profit, the claim of the assessee for deduction merited to be considered. 20. Coming to the facts herein, it is not disputed by the Revenue that both the units of the assessee are profit-making units and the gross total income was computed in the manner as given under the Act and that there was a positive income of profit. Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant of relief must follow the decisions of the apex court reported in L. M. Chhabda and Sons v. CIT [1967] 65 ITR 638 (SC) as well as Waterfall Estates Ltd. v. CIT [1996] 219 ITR 563 (SC). The case of each of the units have to be con- sidered independently for the purpose of working out the relief under section 80HHC. This would depend upon the facts to show that each of the unit had maintained their accounts independently and there was no inter- dependency or interlacing of funds to treat them as one consolidated unit. Going by the facts recorded therein, we have no hesitation in accepting the plea of the assessee that the income earned from the export goods from the Bangalore unit merited to be considered for 100 per cent. relief, as one falling under section 80HHC(3)(a) of the Act. 22. In the decision reported in CIT v. Parry Agro Industries Ltd. [2002] 257 ITR 41 (Ker), the Kerala High Court considered a similar issue and held that section 80HHC(3) does not cover the situation where the assessee had export as well as domestic trade. The said situation is not covered under any of the limbs of sub-section (3) to section 80HHC. The manner as to how the profit from export o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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