Asvini Fisheries P. Ltd. (formerly known as Asvini Fisheries Ltd.) vs Deputy Commissioner of Income Tax

K. Raviraja Pandian, J.—By formulating the following substantial question of law, the assessee has filed this appeal against the order of the Income Tax Appellate Tribunal, "A" Bench, dated September 15, 2006, made in I. T. A. No. 851 (Mds)/2005:

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the appellant is not entitled to deduction u/s 80HHC of the Income Tax Act, without appreciating the fact that what is sought to be excluded in terms of Section 28(iiid) is only the profit on the transfer of DEPB licence and not the entire sale consideration thereof ?

The appellant-company, engaged in the business of processing and exporting sea foods, filed its return of income for assessment year 2001-02 on October 31, 2001, admitting an income of Rs. 4,03,430 under the head "Capital gains" and a sum of Rs. 86,16,653 under the head of "Profits and gains of business", which was reduced to nil after claiming the entire income as deduction u/s 80HHC of the Act. The return was processed u/s 143(1) of the Act on January 24, 2002. The regular assessment u/s 143(3) of the Act was completed determining the net taxable income at Rs. 90,20,080 by withdrawing the relief u/s 80HHC of the Act. While computing the deduction u/s 80HHC of the Act, the Assessing Officer excluded 90 per cent. of the processing charges, lease rent receipts, sale of DEPB licence and additional consideration in excess of FOB from the profits of business u/s 80HHC(4C), Explanation (baa)(1) which resulted in the negative figure of (-) Rs. 4,47,48,272. The Assessing Officer computed the net export relief at (-) Rs. 1,55,09,231 after setting off the negative export profits (-) Rs. 4,17,63,563 against the proviso relief of Rs. 2,92,39,040, thereby denying the deduction u/s 80HHC of the Act.

Aggrieved by the order of assessment, an appeal was preferred before the Commissioner of Income Tax (Appeals) who held that even though the processing charges, additional consideration received from the export houses should be included in the profits of the business for the purpose of Section 80HHC of the Act, the profits under the main provisions of section 80HHC(3) of the Act works out to a negative figure and hence the assessee was not entitled for any deduction u/s 80HHC of the Act. That order was again carried on appeal before the Tribunal. The Tribunal, by the impugned order, held against the assessee. The correctness of the said order is canvassed in this appeal by formulating the question of law above referred to in the summation of facts.

A reading of the order of the Tribunal shows that the only point that has been agitated before the Tribunal was that the Commissioner of Income Tax (Appeals) had erred in holding that when there is no positive profit from the export activity, the provisions of Section 80HHC of the Act would not come into play. According to the Tribunal, that issue has already reached finality by the decision of the Supreme Court in the case of IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 51. Before the Tribunal, both the parties agreed that the issue was covered. For the sake of clarity, paragraph 3 of the order of the Tribunal is extracted below:

Both the parties agreed that the issue is covered by the decision of the hon''ble Supreme Court in the case of IPCA Laboratory Ltd. [2004] 266 ITR 51. Respectfully following the decision of the hon''ble Supreme Court, we hold that the assessee is not entitled for deduction u/s 80HHC. Accordingly, we do not find any infirmity in the order passed by the authority below.

Before us, the learned Counsel for the assessee argued in line with the question of law formulated by contending that the order of the Tribunal to the effect that the assessee is not entitled to deduction u/s 80HHC of the Act is not correct because the Tribunal has not appreciated the fact that what was sought to be excluded in terms of Section 28(iiid) of the Act was only a profit on the transfer of DEPB licence and not the entire sale consideration. As already stated, from a reading of the order it could be seen that the issue has not been agitated before the Tribunal and no discussion has been made and no finding has been arrived at.

When the assessee has not argued the issue before the Tribunal and obtained an order on the merits from the Tribunal, he cannot now raise that issue in this appeal by formulating the above referred question of law. Moreover, before the Tribunal the issue has been stated to be covered by the apex court''s decision, and, hence, the assessee cannot now raise a question of law and want this Court to decide the issue. The appeal is dismissed. However, it is open to the assessee, if it is permissible under the Income Tax Act, 1961, to approach the Tribunal once again for the relief. No costs.