9911796707
TMI Blog2013 (11) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee, a company registered under the Companies Act, 1956, claimed a deduction of Rs. 55,99,722/- under section 80-HHE of the Act per its return of income for the relevant year. In assessment, completed u/s. 143(3), the Assessing Officer (AO) restricted the assessee's said claim to Rs. 8,02,842/-by taking into account the turnover of all the Units of the appellant-company instead of the turnover of only its eligible unit, i.e., u/s. 80-HHE, as claimed by the assessee. This spells out or outlines the controversy attending this appeal, even as projected per the grounds assumed. 3.2 In appeal, the first appellate authority, vide his order dated 8.12.2006, dismissed the assessee's appeal on the issue of disallowance of deduction u/s. 80HHE against which the appellant preferred an appeal before the Tribunal. The tribunal, vide its order dated 16.03.2009 set aside the issue to the file of the AO with a direction to decide the issue afresh after affording due opportunity to the assessee. The AO, in fresh assessment, again disallowed the assessee's claim by taking into account the turnover of all the units of the appellant-company instead of the turnover of only the eligible unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing done with reference to the total turnover, i.e., by including the turnover of the assessee's other business units as well. Surely, he continued, if the total turnover of the assessee business/es is to be considered; there being admittedly no restriction in its respect in the definition of 'total turnover' under the provision, the total profit of its entire business/es would stand to be apportioned, and not that of the eligible unit alone, as done. 5. We have heard the parties, and perused the materials on record, as well as the case law cited. 5.1 The limited, and the only, issue to be decided by us is whether the 'total turnover' for the purpose of deduction u/s. 80-HHE would be the 'total turnover of the eligible unit' or 'the total turnover of all the units'. The term is not defined under the provision, except negatively, i.e., specifying the items of income which could not be considered as forming part thereof. Further, while the assessee relies on the decisions by the tribunal rendered in the context of, among others, s. 80-HHE, the Revenue's case is that the expression 'total turnover' could not possibly be assigned different meanings in the context of different section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profits, referred to in sub-section (IB) derived by the assessee from such business : (2)................. (3) For the purposes of sub-section (I), profits derived from the business referred to in that sub-section shall be the amount which bears to the profits of the business, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee." Explanation (c) "export turnover" means the consideration in respect of computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (2), but does not include freight, telecommunication charges or insurance attributable to the delivery of the computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India; (d) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by - (1) ninety per cent of any receipts by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought into India within the prescribed time. That is, the total turnover would be the export turnover plus any part thereof that is not so regarded on technical grounds. Now, if it is the profits of all the businesses of the assessee that have to be considered, which is even otherwise implicit in the stipulation of the profit as computed under the head of business income, without doubt, it is the turnover of all such businesses, spread over any number of units, whether undertaking export or domestic business, including other than in relation to production of and/or trading in computer software, that would have to be necessarily considered, even as the assessee argues before us in the alternative. The said claim, i.e., that the profits of all its units or businesses be taken into account for the purpose of apportionment of profits u/s. 80HHE(3), if their turnover is to be included while reckoning the total turnover, cannot be faulted. In fact, this is self-evident, as otherwise the apportionment would be patently mistaken and bereft of any meaning and rationale. However, we shall, before we proceed to decide the appeal on the basis of the assessee's alternate claim, have to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess' is identical to that provided by Explanation (baa) to section 80-HHC, wherein the said expression has though been uniformly understood and well accepted to mean the profits (of all businesses) as computed under Chapter IV-D of the Act. As such, there ought not to be, it may well be argued, and not without force, any warrant for according a different interpretation to the said term in the para materia provision of s. 80-HHE. This in fact is the Revenue's case before us, pressed with reference to certain decisions. In this regard, two observations would be pertinent, and which have led us to the interpretation of the said term as stated hereinabove. Section 80-HHC is a general provision according a deduction qua export out of India, which could be of any goods or merchandise except the country's mineral resources, being specifically excluded for the application of the section. As such, it is the assessee's profits of the all its business, whether domestic or export, and across all such goods and merchandise, which would stand to be taken into account or cognizance for the purpose. Section 80-HHE, on the other hand, is much limited in its scope, being confined only to the export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incompatible profit ratios, classifying them under the broad heads of trading and manufacturing activity, no such distinction is provided for u/s.80-HHE. We have also noted that section 80-HHC is applicable to, with a single exception of mineral oils & ores, to all businesses. Sec. 80-HHC is, without doubt, a section provided to encourage exports, so that it is the export of all the businesses and, correspondingly, the turnover of all the businesses, which would have to be taken into account to determine the profit relatable to exports. In fact, it is such like considerations, and the ensuing anomaly in the particular facts and circumstances of the given case, that has led the hon'ble high courts to hold that it is only the relevant turnover, i.e., of the relevant business, whose profits are unrelated to the assessee's other undertaking/s, which is to be considered for the purpose of deduction even in the context of section 80-HHC, so that it is only the profits and turnover of this business that is to be considered. It would also be pertinent to mention that it is only to neutralize (to whatever extent) such anomalies that stand to arise in the wide variety of business situations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a similar set of facts, remains unamended. This would also, in our view, take care of the charge of having read down a provision of law, including with regard to the tribunal's competence to do so. Conclusion 6. A review of the provision shows that it is only the profits of the eligible business, to the extent they are from or attributable to export out of India, which are subject to deduction under the section. No doubt, therefore, both global profits and global turnover could be considered for applying the proportionate turnover formula in determining the relevant profit, as indeed the language of the provision suggests. However, such a course is fraught with serious aberrations, leading to deduction being allowed on non-eligible profits on one hand, and being denied on the eligible profit, on the other. This is in view of non-segregation of the profits on the basis of activity, or even broadly, i.e., on the basis of trading and manufacturing sectors, which we find to have been the legislative response in respect of the para materia provision of s. 80-HHC by Finance Act, 1990 and Finance (No.2) Act, 1991, which also bore a similar computation formula based on the ratio of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
