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TMI Blog2021 (8) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 80 HHC by reckoning with the profit of the export unit alone and ignoring the losses of the other units without considering the decision of the Apex Court in the case of Ipca Laboratories 266 ITR 521. 3.Whether on the facts and circumstances of the case, the Tribunal was right in holding that disallowance under Section 40-A(3) cannot be made on the assessee with respect to the cash payments made towards the purchase of shrimp feed?" 3.We have elaborately heard Mrs.R.Hemalatha, learned Senior Standing Counsel for the appellant/Revenue and Mr.M.P.Senthil Kumar, learned counsel appearing for the respondent/assessee. 4.The assessee filed its return of income for the Assessment Year under consideration, AY 2002-03, disclosing a total income of Rs. 10,17,233/-. The assessee is engaged in the business of processing seafood and trading in shrimp food. The assessee claimed deduction under Section 80HHC and the claim was negatived by the Assessing Officer on the ground that the assessee had ignored the losses made by it in its trading division and started its computation with the figure of profits made by the manufacturing division. Thus, the Assessing Officer held that, in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will be relevant to take note of the distinguishing features between the facts in Ipca Laboratories Ltd. and that of Chamundi Textiles (Silk Mills) Ltd. and the relevant paragraphs of the judgment in Chamundi Textiles (Silk Mills) Ltd. are extracted hereunder: "16. Thus, the consistent view of this court is that even in cases where the assessee had different units of business, so long as there is no intermingling of expenditure or interlacing of funds of any kind whatsoever and that the assessee had maintained accounts separately which revealed the export business and that the claim was supported by a chartered accountant certificate in compliance with the statutory provisions, the claim of the assessee under section 80HHC to have deductions at 100 per cent. on the export made by the unit, engaged 100 per cent. in exports, could not be denied merely on the score that the assessee had various units, some of which had export and some had export as well as local sales. 17. As far as the decision of the apex court IPCA Laboratory Ltd.'s case (supra) is concerned, we do not find that the statement of law declared by the apex court could, in any way stand, in the way of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the deductions under Chapter VI-A would arise, not otherwise." 19. The apex court pointed out that in arriving at a figure of positive profit, both the profits and loss have to be considered. If the net figure is a positive profit, then the assessee would be entitled to a deduction, but if the net figure is a loss, then the assessee would not be entitled to a deduction. A reading of the judgment of the apex court reported in Synco Industries Ltd.'s case (supra) shows that the assessee therein had more than one unit. The claim of the assessee is that each unit should be treated separately and the losses suffered in the earlier years were not adjustable against the profits of 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 wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the situation of an assessee having more than one unit of business and one of the units being purely 100 per cent. export oriented unit and the other unit, a partially export unit. Even though the Act does not provide for dealing with such a situation, yet, being a beneficial provision, we feel that, in fitness of things, the assessee is entitled to the relief in respect of 100 per cent. export oriented unit. Consequently, even in respect of the computation as given in Explanation (baa) to section 80HHC, the consideration for grant of relief must follow the decisions of the apex court L.M. Chhabda and Sons as well as Waterfall Estates Ltd. case (supra). The case of each of the units have to be considered 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 interdependency 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importing shrimp food from abroad and there was no necessity for the assessee to make payments in cash to the said company. The question would be as to whether such a presumption or adverse inference could be drawn. 10.Be that as it may, the Commissioner of Income Tax (Appeals) considered the legal issue and found that, what was purchased was undoubtedly a fish or fish product, which will fall within the scope of Rule 6DD(f)(iii) and if it is so, no disallowance under Clause (a) of Sub-Section (3) of Section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under Clause (b) of Sub-Section (3) of Section 40A. This aspect has been factually brought out by the Commissioner of Income Tax (Appeals) as well as the Tribunal. 11.Mrs.R.Hemalatha, learned Standing Counsel for the appellant/Revenue would place reliance on the decision of the Division Bench of this Court in the case of Vaduganathan Talkies v. Income Tax Officer, Non-Corporate Ward 20(5), Chennai-34 reported in [2020] 428 ITR 224 (Madras). The facts in the said case were entirely different, where the assessee company made cash payment for the purpose of acquiring rights to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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