COMMISSIONER OF INCOME TAX-I vs. M/S ABHISHEK INDUSTRIES LTD. 85, INDL AREA 'A' LDH

I.T.A. .No.60 of 2012 (O&M) Commissioner of Income Tax-I, Ludhiana .....Appellant Vs. M/s Abhishek Industries Ltd. .....Respondent

I.T.A. .No.61 of 2012 (O&M) Commissioner of Income Tax-I, Ludhiana .....Appellant Vs. M/s Abhishek Industries Ltd. .....Respondent CORAM:- HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI Present:- Mr. Rajesh Katoch, Advocate for the appellant. **** HEMANT GUPTA, J.(Oral) This order shall dispose of two income tax appeals bearing I.T.A. No.60 of 2012 and I.T.A. No.61 of 2012 arising out of an order dated 27.9.2011 passed by the Income Tax Appellate Tribunal, Chandigarh Bench `A', Chandigarh. The revenue has claimed the following substantial questions of law in I.T.A. No.60 of 2012:- (i) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in considering the Software expenses amounting to Rs.58,82,239/- as revenue expenditure instead of capital expenditure by ignoring the decision of Hon'ble Gujrat High -2- Court reported at 96 ITR 672? (ii) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in considering the Software expenses amounting to Rs.58,82,239/- as revenue expenditure instead of capital expenditure whereas the concern is not involved in the business of development and selling computer software and computer software is only use for overall improvement and functioning of the concern and whether the acquisition of the said computer software is to be treated in the same way as development and customization of any machinery helping in the production process?' (iii) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in dismissing the appeal of revenue on the issue of Software expenses by relying upon the decision of Hon'ble P & H High appeal against this order before the Hon'ble Supreme Court which is still pending?” (iv) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in holding that sales tax subsidy amounting to Rs.6,80,61,977/- is to be treated as “business income” but at the same time 90% of such receipt is to be excluding from the profits of business?” (v) Without prejudice to above, whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in directing the A.O not to exclude 90% of the amount of sales tax subsidy from “profits of business” for the purpose of computing deduction u/s 80HHC of the Act by ignoring the decision of Hon'ble Supreme Court in the case of K. Ravindranathan Nair reported at 295 ITR 228(SC), as the Sales Tax Subsidy is an independent income of the assessee not related to export income and, hence, 90% of the same has to be excluded by considering it as “any other -3- receipt of a similar nature included in such profit” in clause (baa) to Section 80HHC?” (vi) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in upholding the decision of CIT(A) in directing to reduce only 90% of discount received from customers from profits of business for computation of deduction u/s 80HHC as these receipts are of similar nature to receipts such as brokerage, commission etc. as per explanation (baa) to section (4C) of section 80HHC? The revenue has claimed the following substantial questions of law in I.T.A. No.61 of 2012:- (i) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in restoring back the matter to the file of the A.O regarding prior period expenses whereas the A.O had passed a well reasoned order and the assessee had been accorded due opportunity to represent itself on this issue during the assessment proceedings? (ii) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal is justified in directing the A.O not to exclude 90% of the amount of sales tax subsidy from “profits of business” for the purpose of computing deduction u/s 80HHC of the Act by ignoring the decision of Hon'ble Supreme Court in the case of K. Ravindranathan Nair reported at 295 ITR 228(SC), as the Sales Tax Subsidy is an independent income of the assessee not related to export income and, hence, 90% of the same has to be excluded by considering it as “any other receipt of a similar nature included in such profit” in clause (baa) to Section 80HHC?” Learned counsel for the revenue has pressed Question Nos.(iii), (v) and (vi) in I.T.A. No.60 of 2012 and Question No.(i) in I.T.A. No.61 of -4- 2012. In respect of Question No.(iii), the same stands answered against the revenue by a judgment of this Court reported as 309 ITR 272 – CIT v. Varinder Agro Chemicals Ltd. The argument of the learned counsel for the Appellant is that the revenue's appeal against the order passed by this court is pending before the Supreme Court. We don't find any merit in the said argument. As far as this court is concerned, the matter has attained finality. The question of law stands answered against the revenue by this court. We do not find that such question of law arises for consideration in the present appeal. Question No.(v) relates to sales tax subsidy received by the assessee and Question No.(vi) relates to discounts received by the assessee from customer. The assessee has received sales tax subsidy of Rs.6,80,61,977/- and the discount of Rs.31,92,077/-. Such questions relates to interpretation of Section 80HHC (4C)(baa) of the Act, which deals with the deductions from profits earned from export businesses. The relevant clause reads as under:- “(baa) `profits of the business' means the profits of the business as computed under the head “Profits and gains of business or profession” as reduced by-- (1) ninety per cent of any sum referred to in cls. (iiia), (iiib) and (iiic) of s.28 or of any receipts by way of brokerage, commission, interest, rent charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India.”