Delhi High Court

Lumax Industries Ltd. vs Asstt. Cit on 31 July, 2003

Equivalent citations: (2004) 91 TTJ Del 880

ORDER

P.N. PARASHAR, J.M.:

This appeal has been filed by the assessed against the order of learned Commissioner (Appeals), 8-10-1996, for the assessment year 1993-94.

2. Shri Salil Agarwal, advocate, appeared on behalf of the assessed, whereas Shri B.D.S. Kharb, CIT (Departmental Representative) along with Shri Prahlad Singh, Senior Departmental Representative, represented the department.

3. Ground No. 1 is directed against the sustenance of disallowance of deduction of Rs. 11,428. The assessea had deposited total TDS of Rs. 50,612 as against contractual payments. Out of this Rs. 39,183 could be adjusted in the counts of job workers. The remaining amount was, therefore, written off by e assessed as a business loss. The loss claimed by the assessed was disallowed by the assessing officer on the ground that this was a payment of income-tax which is not an allowable deduction.

4. Before the learned Commissioner (Appeals) it was submitted by the appellant that this was not e tax paid by the assessed but it was excess payment in the Government count by way of TDS which was written off. The learned Commissioner (Appeals) did not accept this contention of the assessed and confirmed the addition by observing as under :

"The tax was deducted from the payment made to the contractors. The payment to the Government account was made on behalf of the said contractors. If at all it is an excess payment it represents the payments made to the contractors, which can be recovered from them as they would be entitled to the refund if tax has been deducted in excess. Thus, neither it is loss to the appellant-company nor the amount in question represents any expenditure curred by them for their business. I do not find any justification for the letion of this addition from the total income of the appellant."

5. Before us the learned counsel for the assessed challenged the finding of the learned CIT A. However, in view of the specific findings that the amount of TDS did not relate to the assessed but was in respect of payments made to the contractors, we find no merit in the submission of the learned counsel for the assessed because by any logic the amount cannot be considered as business loss to the assessed. In view of the above, we uphold the findings of the learned Commissioner (Appeals) and reject the ground taken by the assessed.

6. Ground No. 2 runs as under

"That the learned Commissioner (Appeals) on wrong interpretation of the provisions of section 80HHC has confirmed the finding of the Assistant Commissioner that no deduction under section 80HHC is allowable and the claim of deduction at Rs. 9,42,669 has been disallowed."

7. The assessed was carrying out the trading activity as well as manufacturing/trading activity in export business. It had worked out the profits under two sets of activities separately. It worked out the loss of Rs. 11,47,412 in trading account and a profit of Rs. 8,58,730 in respect of manufactured goods. The assessed had ignored the loss on trading of goods and deduction under section 80HHC was claimed in respect of profits derived, from the export of manufactured goods . The assessing officer did not accept this working. According to him, since there was no profit from the export of goods, no deduction under section 80HHC was allowable. The finding of the assessing officer was challenged before the learned Commissioner (Appeals) and it was submitted that in view of sub-section (3)(c) of section 80HHC the deduction should be worked-out by ignoring the loss. The learned Commissioner (Appeals) rejected this plea of the assessed. He was of the view that the net profit for working out the deduction under section 80HHC has to be the net of the two items and if there is a loss in one and profit in the other, these have got to be adjusted to arrive at the profit derived from the export of goods and since, in the case of the assessed- company loss was incurred in trading of goods which was much higher than the profits derived from the manufacturing unit, the net effect was that there was no export profit. On the basis of this logic, he upheld the order of the assessing officer in disallowing the claim of deduction under section 80HHC.

8. Before us, the learned counsel for the assessed submitted that, though the issue has been decided against the assessed by the decision of Hon'ble Bombay High Court in the case of IPCA Laboratories Ltd. v. Dy. CIT (2001) 251 ITR 401 (Bom), but his argument is that both loss and profits on account of two different activities should be considered separately. In support he placed reliance on the decision reported as Hindustan Fashions Ltd. v. Assistant Commissioner (1998) 61 TTJ (Ahd) 734; Assistant Commissioner v. Pratibha Syntex Ltd. (1999) 63 TTJ (Ahd) 409; Smt. T.C. Usha v. Dy. CIT (1999) 65 TTJ (Coch) 826 : (1999) 106 Taxman 305 (Coch)(Mag),- A.M. Moosa v. Assistant Commissioner (1996) 54 TTJ 193 (Coch).

9. We have carefully considered the facts and circumstances relating to this matter. The issue is directly covered by the decision of Hon'ble Bombay High Court in the case of IPCA Lahoratories Ltd. (supra). While dealing with the subject, the Hon'ble High Court has observed as under :

"Held, that the disclaimer could operate only if there was profit under section 80HHC(l), 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 txport house and, therefore, the assessed could not claim deduction of loss under section 80HHC. The word "profit" in section 80HHC(l) 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 income to arrive at the total taxable, income of the assessed. Section 80HHC(l) deals with the manner of effecting the deduction arrived at under section 80HHC(3)(c). Since the section is clear and not ambiguous, the question of liberal interpretation does not arise. Therefore, the loss in respect of export of trading goods could not be ignored while computing deduction under section 80HHC(3)(c)."

10. The above decision of Hon'ble Bombay High Court has also been followed by Delhi Bench "C" of the Tribunal in the case of DCM Shriram Industries Ltd. vide order dated 7-4-2003, iendered in ITA No. 1719/Del/1997 and other cases for assessment year 1993-94. In the case of Jeyar Consultant & Investment (P) Ltd. v. CIT (2003) 259 ITR 250 (Mad) the Hon'ble Madras High Court has also taken the similar view. In that case also the assessed had not earned any profits from the export of the marine products and on the other it had suffered the loss. It claimed benefit of section 80HHC in respect of total income received. The Hon'ble Madras High Court has held that the deduction permissible under section 80HHC is only a deduction of the profits of the assessed from the export of goods or merchandise and, therefore, the assessed was not entitled to any benefit therein in the absence of any profit.

11. In view of the above, the issue is to be decided against the assessed. Hence, ground No. 2 is also rejected.

12. In the result the appeal is dismissed.