Commissioner of Income Tax vs Jai Bharat Gum and Chemical Ltd.

Adarsh Kumar Goel, J.—This appeal has been preferred by the revenue u/s 260-A of the Income Tax Act, 1961 (for short, "the Act") against the order dated 21.9.2004 of the Income Tax Appellate Tribunal, New Delhi in I.T.A. No. 3319/D/01 for the assessment year 1997-98 proposing to raise following substantial question of law:

Whether on the facts and in the circumstances of the case, ld. ITAT was justified in holding that deduction u/s 80HHC is admissible on the amount of compensation of Rs. 23,45,599/- received by the Assessee from M/s Pepsico India Holding (P) Ltd., in lieu of loss arising from tax payment in the absence of disclaimer certificate.

The Assessee derived income from manufacture, trading, and export of guar gum. It claimed exemption u/s 80HHC of the Act in respect of amount received from M/s Pepsico India Holding (P) Ltd., as compensation for non-issue of disclaimer certificate. The Assessing Officer did not allow the said exemption on the ground that such income was not covered u/s 80HHC of the Act. On appeal, the CIT(A) held that the said income will fall u/s 80HHC of the Act, as it does not fall u/s 28(iiia), (iiib) or (iiic) of the Act. Appeal of the revenue against the said order of CIT(A) was dismissed with the following observations:

The compensation received by the Assessee does not fall within any of the category as mentioned in Section 80HHC(4B) explanation (baa)(1). It is not a payment of any sum referred to in Section 28((iiia), (iiib), (iiic) of the Act. It is also not in the nature of brokerage, commission, interest, rent, charges or any other receipts of a similar nature included in such profits.

We have heard learned Counsel for the parties and perused the record.

Learned Counsel for the revenue submits that mere fact that the amount received by the Assessee did not fall under Clauses (iiia), (iiib) or (iiic) of Section 28, was not enough to attract Section 80HHC of the Act. Section 80HHC of the Act was not attracted to every business income but only to income derived from export, as specified in the said Section. The amount received by the Assessee was not shown to be covered by Section 80HHC of the Act as the same was not from export as required therein. The view taken by the CIT(A) and the Tribunal that the claim will be covered by the said section only on the ground that the income of the Assessee was outside Section 28(iiia), (iiib), (iiic) of the Act, was not borne out by either Section 80HHC itself or any other principle. Any exemption has to specifically fall within four corners of the provision and burden of showing that it so falls, is on the Assessee.

Learned Counsel for the Assessee has not been able to show how the compensation received by it will fall u/s 80HHC of the Act. He only submits that the said income was a business income. Mere fact that the Assessee derived business income not falling u/s 80HHC(4B) explanation (baa)(1), which refers to income covered u/s 28(iiia), (iiib), (iiic) of the Act, is not enough to attract Section 80HHC of the Act.

Accordingly, the question of law raised by the revenue has to be answered in its favour and against the Assessee. The appeal is allowed.