9911796707
TMI Blog2002 (11) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... 92-93 allowed the appeal of the assessee by observing as under: "It is claimed that the Assessing Officer has ignored to consider that for the purpose of computation of deduction under section 80HHC only the profit on traded and manufactured goods are to be taken into account and if there was any loss, the same had to be ignored. This issue is fully covered by the appellate order for the earlier assessment year in the case of the assessee as noted therein even when the ITAT in the case of the assessee for the assessment year 1992-93 has not examined the computation of profit under sub-section (3) of section 80HHC as read with sub-section (1) of section 80HHC as appears to be the intention of the Legislature, following the decision of the ITAT in the case of the assessee for the assessment year 1992-93, it is directed that if any loss is computed in respect of trading export or manufacturing export, the same should be ignored while working out deduction allowable to the assessee." 3.1 Being aggrieved, the Revenue has come in appeal before us. The learned D.R. vehemently contended that this issue is covered in favour of the Revenue by the judgment of Hon'ble Bombay High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only required to give answer to such aggregation method possible under clause (c) of section 80HHC(3). The net result of aggregation arrived at is further required to be increased by proportionate incentives. The issue whether in further so increasing the deduction, such loss needs to be adjusted or ignored was not before the Bombay High Court in IPCA Laboratories Ltd.'s case and, thus this has no application in the loss scenario where the deduction claim is made with reference to proportionate incentive income. With due respect to the Bombay High Court, it is submitted that the provisions of clause (b) of sub-section (4A) of the section 80HHC provide for disclaimer of the export turnover in favour of the supporting manufacturer and not disclaimed of the profits computed under sub section (3). Sub-clause (4A) reads as under; "(4A) the deduction under sub-section (1A) shall not be admissible unless the supporting manufacturer furnishes in the prescribed form along with his return of income,-- (a) The report of an account, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has correctly claimed on the basis of the profits of the suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the word 'increased' implies 'over and above', i.e., supplementing the profit as computed under sub-clauses (a), (b) and (c) under sub-section (3). In the Black's Law Dictionary the word 'further' reads as: '....'additional', and is equivalent to 'moreover, or furthermore, something beyond what has been said or likewise, or also...' From a perusal of the literal meaning of this word, it is evident that the proviso is meant to supplement the benefit envisaged under section 80HHC and not meant for the purpose of aggregation or set off. The proviso to sub-section (3) using the words 'further increased' is meant to provide more or extra benefit and, therefore, must be read independently of clauses (a), (b) and (c) in sub-section (3) of section 80HHC. This is the plain and undoubted effect of the proviso to sub section (3) of section 80HHC. Any attempt to set off the loss arrived at under the main sub-section (3) against the additional relief admissible under the proviso thereto would defeat, the purpose and legislative intent of the proviso. The proviso to sub-section (3) here operates as a substantive provision and says in unmistakable and unequivocal terms that the event of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a variety of trusts wherein there is no complete dedication of the property but only a partial dedication. A property may be dedicated entirely to a religious or charitable institution or to a deity. This is an instance of complete dedication. A property may be dedicated to a deity, subject to a charge that a part of the income shall be given to the grantor's heirs. A property may be given to an individual subject to, or burdened with, a charge in favour of an idol or a religious institution or for charitable purposes. An owner of property may retain the property for himself but carve out a beneficial interest therefrom in favour of the public by way of easement or otherwise. There may be many other instances where though there is a trust, it involves only a partial dedication of the property held under trust in the sense that only a part of the income of the property is utilized for religious or charitable purposes. The dichotomy between the two expressions 'wholly' and 'in part' is not based the dedication of the whole or a fractional part of the property, but between the dedication of the said property wholly for religious or charitable purposes or in part for such purposes.... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the same meaningless. 2. The order of the Hon'ble I.T.A.T., Chandigarh Bench, Chandigarh, which is on identical facts, is binding on the subordinate Authorities, The ITAT, Hyderabad 'B' Bench in the decision reported in [1993] 45 TTJ 282 in the case of Prasad & Co. v. Deputy Commissioner of Income Tax, relying on the Supreme Court judgment in the case of Union of India v. Kanwlakshi Finance Corp. Limited [1991] 53 ELT 433, held as under:-- "Judicial propriety demands that the order of the Tribunal should not only be respected but it should be followed by a lower authority. If the authority subordinate to the Tribunal is allowed to pick up holes, gaps or some infirmities or is of the view that different line of thinking is possible, then there will be judicial chaos and there will not be any finality to litigation. This process, if permitted, will lead to unnecessary harassment to the tax payer which is not envisaged by the statue nor permitted by law. The CIT(A) is duty bound to follow the decision of the Tribunal. It is well settled that the decision of the higher authorities is binding on a lower Authority in the judicial hierarchy. Therefore, the decision of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at by employing formula laid down in sub-clause (ii). The word "and" is not used to convey the idea of adjustment of losses calculated under one sub-clause against profits calculated under the other sub-clause. In fact it is not even stated that the amount arrived at under sub-clause (i) shall be added to the amount arrived at under sub-clause (ii) and the aggregate would be the profits derived from export. What is expressly conveyed is that there would be two independent figures of "profit derived from export" in a clause where the export is of two kinds of goods namely (i) goods manufactured and processed by the assessee and (ii) trading goods, and each positive figure would qualify for deduction and negative figure would be liable to be ignored. If these two figures were intended to be aggregated by algebraic method it would have been clearly stated. Similarly if negative figure was to be adjusted against positive figure that would also have been clearly stated. In the absence of any such mention, the negative figure is to be ignored or to be taken as nil and positive figure is to be treated as "profit derived from export" for the purpose of deduction. Section 80HHC contains a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,128 B Rs.(-) 79,98,581 C Rs. 1,07,38,753 -------------- Rs. 12,48,956 -------------- 4.1 Thus, the Assessing Officer took the view that since there was loss from the export business as computed u/s 80HHC(3)(c) therefore, 90% of the export incentives as per proviso to section 80HHC(3) is to be set off against the loss so computed for the purposes of deduction available u/s 80HHC and accordingly the assessee is not entitled for any deduction. The CIT (Appeals) as per Page 10 of his order relying on the order of the assessee for the Assessment Year 1992-93 held that the loss computed shall be ignored and shall not be set off against the amount computed in accordance with proviso to section 80HHC(3) of the Income-tax Act, 1961. Before us, neither side has filed the copy of the order of the income-tax Appellate Tribunal for the Assessment Year 1992-93. Before going to the issue whether the assessee is entitled for the deduction in respect of the amount computed in accordance with proviso to section 80HHC(3) in respect of 90% of the export incentives even though there is a loss computed in accordance with section 80HHC(3)(a) to (c). We would like to deal with the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High. Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal held that the net result should be profits for the purpose of claiming deduction under section 80HHC, if the net result was a loss, then the assessee was not entitled to claim the benefit of deduction under section 80HHC. Under these facts of the case, the short question came before the High Court "Whether the loss in respect of export of trading goods was to be ignored while determining the appellant's entitlement to deduction under section 80HHC(3)(c) of the Act". Hon'ble High Court on these facts held:-- "that the disclaimer could operate only if there was profit under section 80HHC(1), which refers only to positive figure of profit and excludes loss. In the present case without disclaimer and on the basis of the aggregation of the profits which includes loss the resultant figure was a loss, in the hands of the export house and therefore the assessee could not claim deduction of loss under section 80HHC. The word "profit" in section 80HHC(1) could not include losses whereas the word "profit" in section 80HHC(3)(c) includes losses/minus profit. The two sub-sections operate in completely different spheres. Section 80HHC(1) provides for deduction from gross total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment, divorced from the context of the questions under considerations by this court, to support their reasoning." 4.6 It is only the ratio decidendi of a case which can be binding--not the obiter dictum. Obiter, at best, may have some persuasive efficacy. Hon'ble Apex Court in the case of H.H. Maharajadhiraja Madhav Rao Jivaji Rao Scindia Bahadur v. Union of India AIR 1971 SC 530 at page 578 as reproduced at page 320 of 198 ITR observed:-- "It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment." 4.7 Now, we shall deal with the question whether the assessee is entitled to the deduction under section 80HHC in accordance with the proviso to section 80HHC(3) even though, there is loss in accordance with section 80HHC(3)(a), (b) and (c). The relevant provision of section 80HHC, as applicable to the assessment year, are laid down as under:-- "80HHC. (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion does not apply to the following goods or merchandise, namely: (i) mineral oil; and (ii) minerals and ores (other than processed minerals and ores specified in the Twelfth Schedule). [Explanation 1.--The sale proceeds referred to in clause (a) shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. Explanation 2.--For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office, warehouse or any other establishment of the assessee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then, such transfer shall be deemed to be export out of India of such goods and merchandise and the value of such goods or merchandise declared in the shipping bill or bill of export as referred to in sub-section (1) of section 50 of the Customs Act, 1962 (52 of 1962), shall, for the purposes of this section, be deemed to be the sale proceeds thereof.] [(3) For the purposes of sub-section (1),-- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs' means cost, not being direct costs, allocate in the ratio of the export turnover in respect of trading goods to the total turnover; (f) 'trading goods' means goods which are not manufactured [or processed) by the assessee.] [(4B) For the purposes of computing the total income under sub-section (1) or sub-section (1A), any income not charged to tax under this Act shall be excluded.] Explanation.--For the purposes of this section,-- (a) 'convertible foreign exchange' means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder" [(aa) "export out of India" shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962);] (b) 'export turnover' means the sale proceeds received in, or brought into, India] by the assessee in convertible foreign exchange [in accordance with clause (a) of sub-section (2)] of any goods or merchandise to which this section appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s calculated. (3) Thirdly, the figure arrived at as per No. (2) above would be further increased by an amount which bears to 90% of any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28, same proportion as export turnover bears to the total turnover of business as per proviso to section 80HHC(3). 4.9 In mathematical terms, it can be laid down as under if we presume profits and gains of business to be 'Y':--= (Y - 90% of export incentive and brokerage, commission, interest etc.) X Export turnover/total turnover profits as per proviso to section 80HHC(3) = profit from the business X export turnover/total turnover+90% of export incentive X export turnover/total turnover. Thus, if profit from the business is substituted in the profit including profit as per proviso to section 80HHC(3), the resultant profit illegible for deduction would be as under:-- (Y-90% of export incentive and brokerage, commission, interest etc.) X export turnover over/total turnover + 90% of export incentive X export turnover/total turnover). = Y X Export turnover/total turnover-90% of export incentive and brokerage, commission, interest etc. X export turnover/total turnover + 90% of export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is profit computed from the business of the nature referred to under clause (a), (b) or (c), the loss so computed will be adjusted against the profit so computed. The Bombay High Court held so in the case of IPCA Laboratories Ltd. The proviso to section 80HHC(3) shall apply subsequently. The words 'profits' and 'further increased by' are very important in the proviso. The word 'Profit' is understood and known in the common parlance as well as in the commercial world as excess of incoming over outgoing. Had the Legislature used the word "income", the word may have negative connotation also in the light of the inclusive definition of income under section 2(24) of the Act. 4.12 The fact that the word "profit" is intended by the Legislature to have positive connotation, as commonly understood in the commercial world, is further manifested by the other provisions enacted in the Income-tax Act, 1961 like section 2(22)(a) to (e), clauses (iiia) & (iiib) of section 2(24), section 10(22A), explanation 3(ii) below sub-section 5 of section 13, section 17(1)(iv) and sub-section (3), section 22, section 28(iiia), section 32AB(1)(b)(ii), section 33AB(1)(b), section 33AC(2)(b), section 33AC( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Supreme Court in the case of Motor Transport Controller v. Provincial Rashtriya Motor Kamgar Union AIR 164 SC 1690 wherein Their Lordships while construing the word 'reduction' held that reduction can only be used when something is left after reduction. Thus the phraseology used by the Legislature while enacting section 80HHC(3) clearly indicates that the figure arrived at as per Explanation (baa) would be a positive figure (which includes a Nil figure also) provided the assessee has positive income under the business head. Thus, it is only the profit derived as per clauses (a) to (c) of section 80HHC(3) which can be increased. The loss cannot be increased as per proviso to section 80HHC(3), therefore, in our opinion the word 'profit' used in the proviso to section 80HHC(3) will mean only the profit not the loss. Even the mathematical equation given in the preceding paragraph also supports the same view. 4.14 The section 80HHC is an incentive provision enacted by the legislation with the objective of increasing foreign exchange earning of the Government and therefore such provision has to be interpreted in a liberal manner. In the case before us, there is no disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as specified in section 80C to section 80U. Section 80A(2) lays down that the aggregate amount of the deductions under Chapter VIA shall not exceed the gross total income of the assessee. In other words, what is contemplated is a deduction from the gross total income. This aspect is important because computation of deduction is contemplated by section 80HHC(3), whereas the effect to be given to such computed deduction is contemplated in section 80HHC(1). In other words, the machinery to compute the income from export activity is provided in section 80HHC(3) and after computing such income, such amount is required to be deducted from the gross total income of the assessee in order to arrive at the taxable income/total income of the assessee as contemplated by section 80HHC(1). In other words, the deduction under section 80HHC(1) has to be a positive figure. If, after computing the amount under section 80HHC(3), there is a resultant loss, it cannot be deducted from the gross total income in order to arrive at the total income. Only the resultant profits from the export activities representing net profits or 90% of the export incentive as per proviso to section 80HHC(3) coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts placed before the authorities. If a bench of a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single judge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a division bench. Similarly if a division bench differs from the view taken by another division bench it does not express disagreement and pronounce if different views, but has the matter posted before a fuller bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier bench, it should place the matter before the President of the Tribunal, so that he could have the case referred to a full bench of Tribunal consisting of three or more members for which there is provision in the IT Act itself." 4.19 We, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
