Commissioner Of Income-Tax, ... vs M/S Dabur India Limited
2008 Latest Caselaw 1826 Del

              THE HIGH COURT OF DELHI AT NEW DELHI

%                                    Judgment delivered on: 17.10.2008

+              ITR 10/2000

COMMISSIONER OF INCOME-TAX,
DELHI (CENTRAL)                                          ...      Appellant


                                    - versus -


M/S DABUR INDIA LIMITED                                  ... Respondent

Advocates who appeared in this case:

For the Appellant     : Mr Sanjeev Sabharwal
For the Respondent    : Mr Pankaj Jain with Mr R.K. Chauhan and
                        Ms Rimpy Chaudhary


CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether Reporters of local papers may be allowed to see the judgment ? Yes

2. To be referred to the Reporter or not ? Yes

3. Whether the judgment should be reported in Digest ? Yes

BADAR DURREZ AHMED, J (ORAL)

1. This reference, at the instance of the revenue, arises out of

the order dated 11.09.1998 passed by the Income-tax Appellate

Tribunal in ITA No.145/Del/1992 pertaining to the assessment year

1989-90. The following question has been referred to us by the

tribunal under Section 256 (1) of the Income-tax Act, 1961 (hereinafter

referred to as ‗the said Act'):-

―[Whether] on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has erred in law in holding that export turnover of the unit situated in the Export Promotion Zone has to be taken into account while computing the eligible deduction under Section 80HHC of the Income-tax Act, 1961 ?‖

2. The facts are that the assessee claimed deduction under

Section 80HHC to the extent of Rs 16,59,226/-. In claiming such

deduction, the assessee also included the export turnover of its unit

situated in the Export Promotion Zone (EPZ).

3. The Assessing Officer disallowed the claim of the assessee

on the ground that the income of the unit located in the EPZ did not

form part of the total income by virtue of the provisions of Section 10-

A of the said Act. Consequently, the Assessing Officer did not include

the turnover of the said unit situated in the tax free export promotion

zone for the purposes of computing deduction under Section 80HHC of

the said Act. The Commissioner of Income-tax (Appeals) confirmed

the order of the Assessing Officer. The assessee, being aggrieved,

preferred an appeal before the tribunal and contended that though the

income of the unit located in the EPZ did not form part of the total

income by virtue of the provisions of Section 10-A of the said Act, the

deduction under Section 80HHC was not dependent on this fact. It was

contended on behalf of the assessee that the case of the assessee

squarely fell within the provisions of Section 80HHC (3) and,

according to a plain reading of the said provision, the turnover of the

unit situated in the EPZ could not be excluded while computing the

deduction under Section 80HHC.

4. The tribunal, by virtue of the impugned order, was of the

opinion that for the purposes of computation of ―profits derived from

the exports‖ it was the total export turnover which had to be considered

for both the purposes, i.e., for arriving at the amount of the export

turnover as well as the amount of total turnover. According to the

tribunal, the provisions of Section 80HHC nowhere prescribed that the

export turnover in respect of the units situated within an EPZ were not

to be taken into account. Consequently, the tribunal concluded that the

export turnover of the unit situated in the EPZ has to be taken into

consideration for computing the eligible deduction under Section

80HHC. It is in respect of this conclusion of the tribunal that the

revenue sought a reference and the above mentioned question has been

referred to us for our decision.

5. Before us, the learned counsel for the revenue contended that

the assessee was entitled to exemption in respect of all income arising

from its unit in the EPZ by virtue of Section 10-A. He submitted that

Section 10-A falls within Chapter III which deals with incomes which

do not form part of the total income. The argument of the learned

counsel for the revenue was that once the income from the unit in the

EPZ was excluded from the scope and ambit of the total income, it

could not be reintroduced for the sake of making a deduction under

Section 80HHC as profits and gains of the business. The learned

counsel for the appellant also submitted that all the deductions under

Chapter VI-A of the said Act were controlled by the provisions of

Section 80-AB. He further submitted that Section 4 of the said Act,

which was the charging Section, had reference to ―total income‖. He

then referred to Section 2(45) which defined total income. He

submitted that total income would have to be computed in the manner

indicated in the Act. Consequently, he submitted that Section 10-A

excluded the income from the unit of the EPZ, therefore, its profits

could not be included in the total income of the assessee which was to

be subjected to tax as per Section 4 of the said Act and consequently

which would be the only figure eligible for the purposes of computing

deduction under Section 80HHC.

6. On the other hand, the learned counsel for the respondent /

assessee submitted that Section 10A(4)(iii), which is the relevant

provision in the present reference, was inserted with effect from

01.04.1981. Section 10A(4)(iii) as introduced on 01.04.1981 was as

under:-

―10A. Special provision in respect of newly established industrial undertakings in free trade zones.--

                  (1) xxx            xxx      xxx       xxx xxx
                  (2) xxx            xxx      xxx       xxx xxx
                  (3) xxx            xxx      xxx       xxx xxx

(4) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year,--

(i) xxx xxx xxx xxx

(ii) xxx xxx xxx xxx

(iii) no deduction shall be allowed under Section 80HH or Section 80HHA or Section 80-I or Section 80-J in relation to the profits and gains of the industrial undertaking.‖

Section 10(A)(6)(iii) as it exists on the statute book today is as under:-

―10A. Special provision in respect of newly established undertakings in free trade zone, etc.--

                  (1) xxx         xxx        xxx       xxx xxx
                  (2) xxx         xxx        xxx       xxx xxx
                  (3) xxx         xxx        xxx       xxx xxx
                  (4) xxx         xxx        xxx       xxx xxx
                  (5) xxx         xxx        xxx       xxx xxx

(6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year,--

(i) xxx xxx xxx xxx

(ii) xxx xxx xxx xxx

(iii) no deduction shall be allowed under Section 80HH or Section 80HHA or Section 80-I or Section 80-IA or Section 80-IB in relation to the profits and gains of the undertaking.‖

7. The learned counsel for the assessee submitted that while the

deductions under Section 80HH, 80HHA and 80-I were specifically

excluded by virtue of Section 10A(4)(iii), as it was inserted on

01.04.1981, there was no exclusion of Section 80HHC. To this, the

learned counsel for the revenue submitted that there could not have

been an exclusion of Section 80HHC on 01.04.1981 because Section

80HHC was itself introduced with effect from 01.04.1983. However,

we may note that the said provision has been amended and in the form

that it stands today, i.e., as indicated by Section 10A(6)(iii), several

other provisions have been introduced, such as Section 80-IA and 80-

IB which were all introduced subsequently. Thus, where the legislature

thought it fit to specifically mention the provision which was to be

excluded, it did so. It did not do so in the case of Section 80HHC.

8. The learned counsel for the assessee also submitted with

reference to the Supreme Court decision in the case of Commissioner

of Income-tax, West Bengal I, Calcutta v. Vegetables Products

Limited: 88 ITR 192(SC) that where two interpretations are possible,

the one beneficial to the assessee ought to be taken. He also submitted

that, in any event, where a plain and literal interpretation of the statute

is clear, then the same should be taken without referring to any other

provisions of the Act. For this proposition, he placed reliance on the

decision of the Supreme Court in the case of The State of West Bengal

v. Kesoram Industries Limited and Others: 2004 (10) SCC 201 (227).

9. In rejoinder, the learned counsel for the revenue submitted

that the provisions of Section 10(A)(4)(iii) would not be relevant for

the purposes of this reference inasmuch as that provision is applicable

to years subsequent to the relevant year.

10. Having considered the arguments advanced by the counsel

for the parties, while we agree with what the learned counsel for the

revenue states that the provisions of Section 10(A)(4)(iii) would not be

applicable for the present assessment year, i.e., 1989-90, we would still

not be in a position to agree with his submissions that the export

turnover of the unit in the free trade zone is to be excluded for the

purposes of computing deduction under Section 80HHC. The

deduction under Section 80HHC is to be computed as per the formula

specified in Section 80HHC(3) which speaks of three components. The

three components being the export turnover in respect of the goods in

question, the total turnover of the business carried on by the assessee

and the profits of the business. None of these components has

reference to the expression ―total income‖. The deduction has to be

computed on the basis of these components. A literal reading of the

provisions and literal application of the formula does not enable us to

exclude the export turnover of the unit in the EPZ from the export

turnover of such goods nor from the total turnover of the business. The

profit arising out of these units in the EPZ is also not excludable from

the profits of the business. We may note that Section 80HHC is a

beneficial provision for the purposes of encouraging exports. Although

in this case, there is no doubt with regard to the interpretation or the

manner in which the deduction under Section 80HHC is to be

computed, even if there were any such doubts, the provision would

have to be interpreted to fulfill the objective of giving a benefit to the

assessee who indulges in exports. Looked at in any manner, we are of

the opinion that the export turnover from the unit in the EPZ is not to

be excluded while computing the deduction under Section 80HHC.

The deduction that is to be computed is without reference to the total

income. Once the deduction is computed in terms of the formula

prescribed in Section 80HHC(3), the amount so arrived at is to be

deducted from the total income. However, while computing the

deduction, reference to ‗total income' is not called for.

11. The question referred to us is answered in the negative, that

is, in favour of the assessee and against the revenue.

The reference stands answered accordingly.

BADAR DURREZ AHMED, J

RAJIV SHAKDHER, J October 17, 2008 dutt