Commissioner of Income Tax vs Avni Petrochem Ltd.

K.S. Jhaveri, J.—By way of this appeal, the appellant has challenged the judgment and order dated 22.6.2006 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench "D" in ITA No. 1760/Ahd/2001 for AY 1997-98.

While admitting this appeal on 18.9.2007, this Court has framed the following substantial questions of law:

(B). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the CIT(A) whereby he excluded indirect expenses of Rs. 15,89,415/- purportedly relating to the factory from the indirect expenses to the apportioned in the ratio of export turnover to total turnover for the purposes of computation of deduction u/s. 80HHC?

(C) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the CIT(A) whereby he reduced indirect costs by 10% of the amount of export incentives in the computation of deductions u/s. 80HHC?"

The facts of the present case are that the return was file don 30.11.97 declaring total income at Rs. 23,24,919/-. The return was processed and notice under sec. 143(2) of the Act was issued to the assessee on 3.7.1998. IN response to the notice issued to the assessee, the assessee has furnished necessary details. After considering the material on record, the assessment order came to be passed. Against the said order of assessment, the assessee has preferred an appeal before the CIT(Appeals) which came to be partly allowed. Against the said order of CIT (Appeals), the Revenue has preferred an appeal before ITAT, which came to be dismissed. Being aggrieved by the said order of ITAT, the Revenue has preferred present Tax Appeal before this Court.

We have heard the learned advocates appearing for the parties and considered the submissions. Ld. Advocate Mr. Shah for the assessee has contended that the amount referred is wrongly mentioned, but in fact, even before the Tribunal the amount referred to is Rs. 9,31,842/- which has been confirmed in para-19 of the order of Tribunal, which reads as under:

"19. We have heard both the parties. In absence of any material to show that a sum of Rs. 9,31,841/- was not pertaining to factory expenses, we uphold the order of CIT(A) whereby he has directed the AO to exclude the said sum from indirect expenses being related to factory expenses. We decline to interfere. This ground is, therefore, dismissed."

In that view of the matter, we concur with the finding of fact by both the authorities below, no interference is called for and no substantial question of law is found. However, the issue is governed by the decision of Supreme Court in the case of Hero Exports, G.T. Road, Ludhiana Vs. Commissioner of Income Tax (Central), Ludhiana, . Therefore, it is held that 10% if expenses for earning incentives, commission, interest etc. is required to be granted. Hence, it is held that the Tribunal was right in law in confirming the order of the CIT(A) whereby he excluded indirect expenses of Rs. 15,89,415/- purportedly relating to the factory from the indirect expenses to the apportioned in the ratio of export turnover to total turnover for the purposes of computation of deduction u/s. 80HHC and it is also held that the Tribunal was right in law in confirming the order of the CIT(A) whereby he reduced indirect costs by 10% of the amount of export incentives in the computation of deductions u/s. 80HHC. Both the questions are answered in favour of the assessee and against the Revenue. The present Tax Appeal is allowed.