Commissioner of Income Tax vs Sri Jayajothi and Co. Ltd.

P.D. Dinakaran, J.—The above tax case appeals are directed against the order of the Tribunal dt. 28th March, 2005 made in ITA Nos.

736/Mad/2001, 1471 to 1474/Mad/2003, 327/Mad/1997, 880 to 884/Mad/2000 and 1941/Mad/2000 for the asst. yrs. 1995-96, 1992-93,

1993-94, 1998-99, 1999-2000, 1986-87 to 1990-91 and 1991-92.

2.1 The Revenue is the appellant. The assessment years involved are 1995-96, 1992-93, 1993-94, 1998-99, 1999-2000, 1986-87 to 1990-91

and 1991-92. The case of the appellant is that the assesses is an industrial domestic company engaged in the manufacture and sale of cotton yarn

and blended yarn. For various assessment years the assessee has not included the excise duty and sales-tax collection for the computation of total

turnover, for computation of deduction u/s 80HHC of the IT Act (hereinafter referred to as ''the Act''). The AO negatived the contention of the

assessee, added the excise duty and sales-tax to the total turnover while computing income for the purpose of deduction u/s 80HHC of the Act.

Also, the AO made addition of Rs. 10 lakhs in relation to asst. yrs. 1986-87 to 1993-94 on account of scrap sales and inflation of expenses, i.e.,

travelling allowances, miscellaneous expenses, overtime wages, etc.

2.2 Aggrieved by the order of the AO, the assessee filed appeals before the CIT(A), who partly allowed the appeals, against which, the assessee

as well as the Revenue filed appeals, before the Tribunal, which partly allowed the assessee''s appeals and dismissed the appeals filed by the

Revenue.

Not satisfied with the order of the Tribunal, the Revenue has filed the present appeals raising the following substantial questions of law:

(i) Whether, in the facts and circumstances of the case, the Tribunal was right in holding that excise duty and sales-tax do not form part of the total

turnover for the purpose of calculation of benefit u/s 80HHC?

(ii) Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the additions on account of unaccounted sale of scrap and

inflation of expenses on the ground that seven individuals had disclosed these amounts before the Settlement Commission?

4.1 The first issue whether in the facts and circumstances of the case, the Tribunal was right in holding that excise duty and sales-tax do not form

part of the total turnover for the purpose of calculation of benefit u/s 80HHC is concededly governed by a decision of this Court in the case of The

Commissioner of Income Tax, Tamilnadu-I, Madras Vs. Wheels India Limited, in which one of us was a party (P.D. Dinakaran, J.) wherein it was

held that Section 80HHC is a code by itself and in order to remove difficulties the legislature thought it fit to explain and give meaning to various

expressions employed in that section for the purpose of its working. The object of Section 80HHC is required to be kept in mind while considering

that section. The general definition of the word ''turnover'' or the definition under the sales-tax laws or the case law dealing with the definition of

turnover under the State levy cannot be imported into Section 80HHC of the Act, particularly, when such expressions are incorporated and

explained in the provision itself. Sales-tax and excise duty are not to be included in the total turnover while computing the deduction u/s 80HHC.

4.2 Accordingly, the first question of law is answered against the Revenue.

4.3 Issue No. 2: Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the additions on account of unaccounted

sale of scrap and inflation of expenses on the ground that seven individuals had disclosed these amounts before the Settlement Commission?

4.4 Concededly, the seven individuals, who are directors of the assessee-company had made declarations in respect of the income earned by their

group concerns. It is not the case of the Department that they had earnings beyond these group of concerns. The Tribunal after going through the

submissions made by the individuals before the Settlement Commission on facts held that the additions were made in the hands of seven individuals

and hence the addition made in the hands of the concern is totally unjustified, thus agreed that there is no scope for making any addition in the

hands of the group concerns as suggested by the AO. Since the Tribunal has deleted the additions on the facts of the case, we do not see any

reason to interfere. Accordingly, we answer the second question in the affirmative, against the Revenue and in favour of the assessee.

The above tax case appeals stand dismissed. Consequently, TCMP Nos. 1276 to 1278 of 2005 are also dismissed.