COMMISSIONER OF INCOME TAX v. M. GANI & CO
[Citation -2008-LL-0204-2]

Citation 2008-LL-0204-2
Appellant Name COMMISSIONER OF INCOME TAX
Respondent Name M. GANI & CO.
Court HC
Relevant Act Income-tax
Date of Order 04/02/2008
Assessment Year 2001-02
Judgment View Judgment
Keyword Tags deduction under section 80hhc • domestic turnover • export business • export turnover • total turnover
Bot Summary: The assessee is a manufacturer of garments and fancy items and exporter. The assessee filed its return of income on October 29, 2001, for the relevant assessment year 2001-02 claiming deduction under section 80HHC of the Income-tax Act, 1961 on export turnover ignoring the results of the domestic turnover. The Assessing Officer after going through the facts that the assessee while computing the deduction under section 80HHC of the Act has taken into consideration only the turnover of the export division for the purpose of total turnover, has made a composite turnover of both the export turnover as well as domestic turnover and accordingly recomputed the deduction under section 80HHC of the Act. Having regard to the said fact, this court has held that the assessee was maintaining separate accounts independent of his other business and that there was no intermingling of expenditure or interlacing of funds of any kind whatsoever the assessee was entitled to the relief. The assessee is entitled for deduction under section 80HHC of the Act fully on the export profit. In view of the fact that the assessee maintained the fully on the export profit. In view of the fact that the assessee maintained the separate books of account for export business and domestic business and in the light of the earlier decisions cited, we are of the considered view that the Tribunal has decided the issue correctly and the appeal deserves no merit consideration.


JUDGMENT judgment of court was delivered by K. Raviraja Pandian J. This appeal has been filed against order of Income-tax Appellate Tribunal in I. T. A. No. 942/Mds/2005 dated November 30, 2006. relevant assessment year is 2001-02. assessee is manufacturer of garments and fancy items and exporter. assessee filed its return of income on October 29, 2001, for relevant assessment year 2001-02 claiming deduction under section 80HHC of Income-tax Act, 1961 (hereinafter referred to as Act ) on export turnover ignoring results of domestic turnover. Assessing Officer after going through facts that assessee while computing deduction under section 80HHC of Act has taken into consideration only turnover of export division for purpose of total turnover, has made composite turnover of both export turnover as well as domestic turnover and accordingly recomputed deduction under section 80HHC of Act. Aggrieved by that order, assessee preferred appeal before Commissioner of Income-tax (Appeals) and Commissioner of Income-tax (Appeals) allowed claim of assessee relying upon provisions of section 80HHC(3)(c) of Act. Revenue carried matter on further appeal before Income-tax Appellate Tribunal, which confirmed order of Commissioner (Appeals) and dismissed appeal preferred by Department. Aggrieved by that order, present appeal has been filed by formulating following substantial question of law: Whether, on facts and in circumstances of case, Income- tax Appellate Tribunal is right in law in holding that assessee is entitled to deduction under section 80HHC fully on export profits, even though section 80HHC(3)(a) will be applicable to facts and in circumstances of case? We heard learned standing counsel appearing for Revenue. This question of law as to whether where assessee has maintained separate books of account in respect of domestic transaction as well as export transaction clubbing of income was permissible was considered by this court in CIT v. Rathore Brothers reported in [2002] 254 ITR 656. In that case, it was held that where assessee has maintained separate accounts and it had maintained its trading receipts and profit and loss accounts separately for export sales and domestic sales and there was sufficient materials supported by all necessary documents to show that deduction claimed was entirely due to export, there was no warrant for disallowing any portion of export earnings pro rata by invoking clause (b) of sub-section (3) of section 80HHC of Act. purpose of clause was to disallow part of allowance under section only when entire claim could not be regarded as being relatable to export. That decision has been followed subsequently, in CIT v. Suresh B. Mehta reported in [2007] 291 ITR 462 (Mad) in similar set of facts, where assessee had maintained separate accounts for domestic transaction as well as export transaction. Having regard to said fact, this court has held that assessee was maintaining separate accounts independent of his other business and that there was no intermingling of expenditure or interlacing of funds of any kind whatsoever assessee was entitled to relief. That decision was followed in another case in CIT v. Macmillan India Ltd. reported in [2007] 295 ITR 67, wherein also, court held as follows (headnote): Where assessee had maintained separate accounts and maintained its trading receipts and profit and loss accounts separately for export sales and domestic sales and produced sufficient material in support of all necessary documents to show that deduction claimed was entirely due to export, there is no warrant for disallowing any portion of export earnings pro rata by invoking clause (b) of sub-section (3) of section 80HHC of Income-tax Act, 1961, as purpose of clause is to disallow part of allowance under that section only when entire deduction claimed could not be regarded as being relatable to exports. Incidentally, in latter two cases, one of us was party (CVJ). In paragraph-6 of order, Tribunal has categorically stated without any ambiguity that assessee is maintaining separate set of books of account. Hence, assessee is entitled for deduction under section 80HHC of Act fully on export profit. In view of fact that assessee maintained fully on export profit. In view of fact that assessee maintained separate books of account for export business and domestic business and in light of earlier decisions cited, we are of considered view that Tribunal has decided issue correctly and appeal deserves no merit consideration. Therefore, appeal is dismissed. No costs. *** COMMISSIONER OF INCOME TAX v. M. GANI & CO.
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