Delhi High Court
Commissioner Of Income Tax, ... vs Penguin Books India (Pvt.) Ltd. on 3 December, 2009
Author: A.K.Sikri
14 & 17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA No.328/2007
Date of Decision: 3rd December, 2009
COMMISSIONER OF INCOME TAX, DELHI-V ..... Appellant
Through: Mr. Subhash Bansal, Adv.
Versus
PENGUIN BOOKS INDIA (PVT.) LTD. ..... Respondent
Through: Mr. C.S. Aggarwal, Sr. Adv.
with Mr. Prakash Kumar,
Adv.
WITH
ITA No.27/2008 with CM 117/2008
PENGUIN BOOKS INDIA PRIVATE LIMITED
11, COMMUNITY CENTRE, PANCHSHEEL PARK
NEW DELHI ..... Appellant
Through: Mr. C.S. Aggarwal, Sr. Adv.
with Mr. Prakash Kumar
Versus
COMMISSIONER OF INCOME TAX ..... Respondent
Through: Mr. Subhash Bansal, Adv.
% CORAM
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL
1. Whether reporters of local papers may be allowed to see the
judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
ITA No.328/2007 & 27/2008 Page 1 of 5
JUDGMENT
A.K. SIKRI, J (ORAL)
1. For the assessment year 1994-95 the assessee had filed
its return declaring income of Rs.17,64,090/-. Assessment was
completed under Section 143(3) of the Income Tax Act on 8 th January,
1997. In this return filed by the assessee it had claimed deduction
under Section 80-O of the Act as foreign exchange receipt in the sum
of Rs.23,14,398/- on account of royalty, technical fee etc. As per the
figures shown by the assessee total royalty in the sum of
Rs.23,64,876/- was received. Expenditure to the tune of Rs.50,479/-
which was direct expenditure, was incurred and after adjusting this
amount on the net foreign exchange convertible into Indian rupees
amounting to Rs.23,14,397/- the benefit under Section 80-O of the Act
was claimed which was allowed by the Assessing Officer while
framing the assessment.
2. The Assessing Officer thereafter reopened the
proceedings by issuing notice under Section 148 of the Act. This was
done on the ground that deduction allowed under Section 80-O was
excessive as the same was allowable on the net receipt from royalty
and not on gross receipts. Pursuant thereto re-assessment order was
framed in the following manner:
"Perusal of record shows that the assessee has claimed
deduction u/s 80 'O' on gross profit received as foreign
exchange amounting to Rs.2314398/- on account of Royalty
technical fee after excluding expenditure incurred to earn
the income. As the income attributable to technical fee
earned in foreign currency was required to be computed
after considering the expenditure incurred thereon and the
deduction @ 50% on the balance net income was to be
allowed. But this was not followed and the deduction was
allowed on gross income. This resulted in allowance of
excess deduction of Rs.1016792/-
In view of the above findings taxable income is recomputed
as under:
Total taxable income u/s 143(3) :- 1764090/-
Add: Excess deduction u/s 80O allowed
in the original order earlier :- 1016792/-
2780882/-"
3. The assessee filed appeal before the CIT(A). The assessee
had in this appeal challenged the service of notice under Section 148
and initiation of re-assessment proceedings under Section 147 of the
Act. Appeal was dismissed.
4. The assessee carried the matter further before the Income
Tax Appellate Tribunal (ITAT). Vide impugned judgment dated 24 th
February, 2006 the ground of the assessee relating to validity of the
proceedings under Section 148 of the Act has been rejected. However,
on merits the ITAT has come to the conclusion that the re-assessment
order was wrongly framed as the deduction under Section 80-O is
admissible on the foreign exchange brought into India and the
expenses incurred in India for earning of such expenses are not
relevant. Both the Revenue as well as assessee have preferred instant
appeals.
5. Appeal of the assessee is against that part of the order of
the Tribunal whereby proceedings under Section 148 are upheld.
Revenue on the other hand is aggrieved by the deletion of aforesaid
additions.
6. It is the submission of the Revenue, in the appeal
preferred by it, that Section 80AB stipulates that the gross total
income is to be computed and thereafter the deduction under Section
80-O is allowable. For calculating the gross total income, all expenses
incurred by the assessee for carrying out the business have to be
deducted from the gross receipt and thereafter, the deduction under
Section 80-O would be allowed as held by the full Bench of this Court
in Commissioner of Income Tax vs. Chemical and Metallurgical
Design Co. Ltd.-247 ITR 749 and similar view is expressed by the
Supreme Court in IPCA Laboratory Ltd. vs. Deputy Commissioner
of Income Tax, Mumbai-266 ITR 521. On that basis his submission
is that indirect expenses which would be attributable to the aforesaid
foreign exchange earning shall be taken into consideration and
deducted from the said foreign exchange and the benefit under
Section 80-O would be allowed only on the merit.
7. While there may not be any quarrel about this proposition,
in the facts of the present case we find that no basis has been
disclosed by the Assessing Officer for attributing the so called indirect
expenses. We have already extracted the relevant portion of the order
of the Assessing Officer. After mentioning that the expenditure
incurred for earning foreign exchange had to be deducted, the
Assessing Officer mentioned the figure of so called excess deduction
as Rs.10,16,792/-. No exercise is done and it is also not shown as to
what was the indirect expenditure incurred in India which were
related to earning of the foreign exchange currency and which was
not taken into consideration when the original assessment was
framed. On our specific query to the counsel for the parties as to what
was the reasons given by the Assessing Officer for reopening the
assessment, Mr. Aggarwal, learned counsel stated at bar that in spite
of various requests made by the assessee no such reasons were ever
supplied, except saying that these were sent by post and, therefore, it
was presumed that they were received by the assessee.
8. Be as it may, as no basis is disclosed for arriving at any
figure relating to the so called indirect expenditure and it is also not
mentioned as to how the excess deduction of Rs.10,16,792/- has been
worked out, we are of the opinion that on this ground alone the appeal
preferred by the Revenue needs to be dismissed. In view thereof it is
not necessary to deal with the appeal of the assessee questioning the
reopening of the assessment under Section 148 though, in view of our
aforesaid observations we prima facie feel that there was no basis for
reopening of the assessment either. We accordingly are of the opinion
that no question of law arises in the appeal preferred by the Revenue.
9. This appeal is accordingly dismissed.
10. Consequently, appeal preferred by the assessee is
disposed of as not pressed.
A.K. SIKRI, J.
SIDDHARTH MRIDUL, J.
DECEMBER 03, 2009
mk
