Madras High Court
M/S. Devi Marine Food Exports Ltd vs The Assistant Commissioner Of ... on 27 June, 2022
T.C.A.Nos.874 and 875 of 2010
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 27.06.2022
CORAM :
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
T.C.A.Nos.874 and 875 of 2010
M/s. Devi Marine Food Exports Ltd.,
3/284, Muttukadu Road,
Chennai - 600 041.
... Appellant
Versus
The Assistant Commissioner of Income Tax,
Company Circle - I (4),
Chennai - 600 034. ... Respondent
Appeals preferred under Section 260A of the Income Tax Act, 1961,
against the common order dated 07.07.2006 passed by the Income Tax
Appellate Tribunal, “A” Bench, Chennai, in I.T.A.Nos.694 &
695/Mds/2003.
For Appellant : Mr.A.S.Sriraman
for Mr.S.Sridhar
For Respondent : Mrs.R.Hemalatha
Standing Counsel
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.874 and 875 of 2010
COMMON JUDGMENT
(Judgment of the Court was delivered by R.MAHADEVAN, J.)
Both these appeals are filed by the assessee as against the order of the
Income Tax Appellate Tribunal dated 07.07.2006 relating to the assessment
years 1993-94 and 1997-98, suggesting the following substantial question of
law:
Whether the Tribunal was right in holding that the deduction under
section 80HHC is not allowable?
2. The appellant / assessee is engaged in the business of export of
sea foods. They filed return of income for the assessment year 1993-94 on
31.12.1993 admitting a sum of Rs.3,77,024/- after claiming deduction under
section 80HHC at Rs.60,52,478/- and the same was originally, processed
under section 143(1) of the Income Tax Act (in short, “the Act”) on
04.07.1995. However, the said assessment was re-opened by issuance of
notice under section 148 on 09.04.1999. In response, the assessee requested
the Assessing Officer to treat the return filed earlier as the one filed in
response to notice under section 148. During the re-assessment proceedings,
the assessing officer computed the total income at Rs.64,29,502/-, by
denying the claim of deduction under section 80HHC, on the ground that
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.874 and 875 of 2010
there is no profit attributable to export; and accordingly, passed the order of
assessment on 27.03.2002.
3. For the assessment year 1997-98, the assessee filed their return
of income on 28.11.1997 admitting an income of Rs.22,60,860/- after
claiming deduction under Section 80HHC at Rs.55,01,444/- and the same
was processed under Section 143 (1) (a) of the Act by accepting the income
returned, on 28.03.2000. However the said assessment was re-opened by
issuance of notice under section 148 on 28.03.2001. In response, the
assessee raised objection by reply dated 23.04.2001, stating that they
disclosed all the income and there was no escapement of assessment of
income. The Assessing Officer overruling the objection of the assessee,
restricted the Assessee's claim under section 80HHC to Rs."NIL" as against
the claim of Rs.55,01,444/- and computed the total income at Rs.84,92,233/-;
and passed the reassessment order on 27.03.2002.
4. Challenging the assessment orders passed by the assessing
officer relating to those two assessment years, the assessee preferred appeals
before the appellate authority / Commissioner of Income Tax (Appeals)-III.
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.874 and 875 of 2010
By separate orders dated 05.12.2002, the Appellate Authority allowed the
appeals filed by the assessee. Aggrieved by the orders of the appellate
authority, the Revenue preferred appeals before the Tribunal, which, by the
common order dated 07.07.2006, allowed the appeals filed by the Revenue.
Therefore, the assessee is before this court with these two appeals.
5. Heard the submissions made by the learned counsel appearing
for both sides and perused the materials available on record.
6. As stated earlier, the order passed by the Income Tax Appellate
Tribunal, relating to the claim of deduction under section 80HHC for the
assessment years 1993-94 and 1997-98, is questioned by the assessee in
these appeals. It is an admitted fact that there was a loss in one unit of the
assessee's business and the deduction under section 80HHC is arrived at a
loss, while computing the deduction.
7. According to the appellant / assessee, there were export earnings
and hence, the negative profit as 'Nil' should be taken into consideration for
computation of deduction under section 80HHC. It is further contended that
while computing the relief, if one limb of section 80HHC is negative, the
same should be taken as nil and the other relief available as per another limb
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.874 and 875 of 2010
of the same section, should be allowed in full without setting off the negative
figure emerging from the first limb. Whereas, it is the stand of the Revenue
that deduction under section 80HHC can be permitted only if there is a
positive profits after taking note of the export of both self manufactured as
well as trading goods and if there is a loss in either of the two, then the same
has to be taken into account for the purpose of computing profits; and in
other words, the deduction should be taken as a whole and the loss derived
by the assessee from one limb of the business should be set off against the
profit of other limb of the business. Such being the rival contentions, though
the CIT(A) allowed the claim of the assessee, the Tribunal decided the issue
in favour of the Revenue, following the decision of the Hon'ble Supreme
Court in IPCA Laboratory Ltd v. DCIT [(2004) 266 ITR 521], wherein, it
was held as follows:
"Although section 80HHC has been incorporated with a view to
provide incentive to export houses and a liberal interpretation has to be
given to such a provision, the interpretation has to be as per the wordings
of that section. When the legislature wanted to take exports from self-
manufactured goods or trading goods separately, it has already so provided
in sub-sections (3)(a) and (3)(b). The word "profit" in sections 80-HHC(1)
and sections 80-HHC(3)(a) and (b) means a positive profit. In other words,
if there is a loss then no deduction would be available under section
80-HHC(1) or (3)(a) or (3)(b). In arriving at the figure of positive profit,
both the profits and the losses will have to be considered. If the net figure is
a positive profit then the assessee will be entitled to a deduction. If the net
figure is a loss then the assessee will not be entitled to a deduction. The
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.874 and 875 of 2010
opening words "profit derived from such exports" occurring in section 80-
HHC(3) together with the word "and" occurring between clause (i) and (ii)
thereof clearly indicate that the profits have to be calculated by counting
both the exports.
The same view was followed in the subsequent decision of the Hon'ble
Supreme Court in CIT v. K.Ravindranathan Nair [(2007) 295 ITR 0228] in
which it was categorically stated that "for computation of deduction under
section 80HHC(3)(c), losses suffered by the assessee in the export of trading
goods are to be set off / adjusted against profits from export of
manufactured goods and vice versa and the assessee would not be entitled to
deduction, if after such adjustments/ set off the net figure is a loss".
8. Applying the aforesaid legal proposition to the facts of the
present case, this court is of the view that there is no infirmity in the order so
passed by the Tribunal, warranting interference. As such, the substantial
question of law raised herein is answered in favour of the Revenue.
Accordingly, both the tax case appeals filed by the assessee stand dismissed.
No costs.
(R.M.D., J.) (M.S.Q., J.)
27.06.2022
Internet : Yes / No
Index : Yes / No
av/rsh
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.874 and 875 of 2010
To
1. The Income Tax Appellate Tribunal,
“A” Bench, Chennai.
2. The Assistant Commissioner of Income Tax,
Company Circle - I (4),
Chennai - 600 034.
3. The Commissioner of Income Tax (Appeals) III
Chennai.
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.874 and 875 of 2010
R. MAHADEVAN, J
and
MOHAMMED SHAFFIQ, J
av/rsh
TCA Nos. 874 and 875 of 2010
27.06.2022
(2/2)
https://www.mhc.tn.gov.in/judis
