Commissioner of Income Tax vs Shakthi Knitting Limited

K. Raviraja Pandian, J.—The appeal is filed against the order of the Income Tax Appellate Tribunal Madras ''C'' Bench dated 16.3.2007

made in I.T.A. No. 1375/Mds/2005 for the assessment year 2001-2002.

The brief facts of the case as culled out from the statement of facts stated in the memorandum of appeal are as follows:

The assessee is engaged in manufacture and export of knitted fabrics and garments. While computing the deduction u/s 80HHC, the assessing

officer has deducted 90% of job work Receipts, interest income and scrap scale. Against that order, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax (Appeals) held that the receipt of job works is derived from the

export business and hence form part of the profit of business. Against that order, the Department preferred an appeal before the Income Tax

Appellate Tribunal and the Income Tax Appelate Tribunal upheld the order of the Commissioner of Income Tax (Appeals) and dismissed the

Departmental appeal. The correctness of the said order is canvassed by the revenue by filing the present appeal by formulating the following

question of law.

Whether on the facts and in the circumstances of the case the Income Tax appellate Tribunal was right in holding that the Commissioner of Income

Tax (Appeals) was correct in directing the assessing officer to exclude 90% of net income from the job receipts in view of the terms of Clause

(baa) to explanation 4B to Section 80HHC of the Income Tax Act?

We heard the argument of the learned Counsel appearing for the revenue and perused the materials on record.

Learned Counsel appearing for the revenue has fairly submitted that the issue involved in this appeal is covered by the decision of this Court in

the case of K.R.M. Marine Exports Ltd. Vs. Assistant Commissioner of Income Tax, , wherein this Court has held that ""the term ""export turnover

has been defined in Clause (b) of explanation to Section 80HHC of the Income Tax Act, 1961. Clause (baa) of the explanation to Section

80HHC was inserted to clarify a formula. A conjoint reading of the Clauses (b) and (ba) of the explanation clearly indicates that the explanation

(baa) has been introduced to bring the components of ""export turnover"" and ""sale turnover"" on par with each other. Both the numerator and

denominator show that they refer to sale proceeds. The nominator and denominator are required to have a common element, which is the sale

proceeds. Any receipt, which does not form part of sale proceeds, cannot come within the ambit of the above ratio. By the proviso to Clause (ba),

it could be seen that the expression ""turnover"" shall have effect so as to exclude Section 28(iiia), (iiib) and (iiic) which refer to, inter alia, profits on

sale of a licence granted under the Imports (Control) Order, cash assistance, duty draw back, etc.,"" and ultimately held that even if the assets of

the company have been used for the purpose of job work, which is also having relation with the export income, deduction has to be considered as

per the explanation (baa).

For the fore-going reasons and in the light of the law laid down by this Court in the above referred judgment, the appeal is dismissed as no

question of law, much less a substantial question of law is involved.