Commissioner of Income Tax, Karnal vs Carpet India

Rakesh Kumar Garg, J.—The assessee, who is a supporting manufacturer is deriving income from the manufacturing and sale of textile goods to IKEA Trading (India) Ltd. (Export House/Trading House). In the return of income, the assessee is claiming deduction u/s 80HHC of the income tax Act, 1961 (''the Act'') claiming itself at par with the direct exporter on the basis of a judgment of the income tax Appellate Tribunal, Delhi Bench-I, Delhi in Eastern Leather Products (P.) Ltd. v. Dy. CIT [1999] 68 ITD 358. However, the Assessing Officer did not accept the contention of the assessee and disallowed the deductions u/s 80HHC of the Act to the assessee. On appeal of the assessee, the Commissioner of income tax (Appeals) held that the assessee was entitled to the deductions u/s 80HHC of the Act as a supporting manufacturer in the same manner as in the case of a direct exporter.

Feeling aggrieved by the aforementioned order of the Commissioner of income tax (Appeals), the revenue filed an appeal before the Tribunal, where claim of the assessee for deduction u/s 80HHC on incentives received by the assessee as a supporting manufacturer was upheld in favour of the assessee. However, on other issues (which are not relevant for the purpose of decision of this appeal), the appeal of the revenue was partly allowed.

Feeling aggrieved against the aforesaid orders of the Tribunal, the revenue has filed the present appeal u/s 260A of the Act against the order dated 30-5-2007 passed by the income tax Appellate Tribunal, New Delhi Bench ''I'' in ITA No. 3964/Delhi/2005 for the assessment year 2003-04 raising the following substantial question of law:-

"Whether on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the order of the CIT(A), directing the Assessing Officer to allow deduction u/s 80HHC to the assessee who is a supporting manufacturer in the same manner, as in the case of direct exporter, treating the supporting manufacturer at par with direct exporter and ignoring the provisions of section 80HHC(1A) read with section 80HHC(3A) read with clause (baa) of Explanation to section 80HHC of the Act."

Mr. Sanjeev Kaushik, learned counsel for the revenue has argued that the deductions allowable to the assessee u/s 80HHC of the Act had already been computed and allowed by the Assessing Officer and the Explanation (baa) to section 80HHC of the Act is not applicable in the case of the assessee and therefore, the Tribunal has erred in law while upholding the claim of the assessee.

We have heard learned counsel for the revenue and perused the record. However, we are unable to find any force in his submissions. In ITA No. 544 of 2007 in the case of the assessee itself, this Court while relying upon the judgment of the Hon''ble Apex Court in CIT v. Baby Marine Exports [2007] 290 ITR 323 1 has upheld the claim of the assessee u/s 80HHC as a supporting manufacturer at par with the direct exporter as a similar question of law raised by the revenue for the earlier assessment year has been answered against the revenue and in favour of the assessee and the appeal filed by the revenue has been dismissed. Sh. Sanjeev Kaushik, learned counsel for the revenue could not dispute the said proposition of law as settled by this Court in ITA No. 544 of 2007. In view of the above, no substantial question of law survives for our determination. We find no merit in the appeal and the same is dismissed.