THE ASSISTANT COMMISSIONER OF INCOME TAX vs. M/S. MADHUSUDAN SILK MILLS PRO. OF MADHUSUDAN INTERNATION

Facts

The Revenue (Assistant Commissioner of Income Tax) is aggrieved by the orders of the Income Tax Appellate Tribunal (ITAT) dated 05.11.2006, which upheld the decision of the Commissioner of Income Tax (Appeals). The assessee, M/s. Madhusudan Silk Mills, claimed deduction under Section 80HHC of the Income Tax Act for Assessment Years 2000-01 and 2001-02. The Assessing Officer (AO) had included the turnover of local sales in the total turnover for calculating the deduction. The CIT(A) allowed the assessee's appeal, and the ITAT dismissed the Revenue's appeal, leading to the present Tax Appeals before the High Court.

Held

The High Court held that the question of law raised in the present appeals was no longer res integra, referring to its own prior decision dated 15.11.2006 in Tax Appeal No. 778 of 2006 concerning the very same group of companies, Commissioner of Income Tax vs. Madhusudan Industries Ltd. In that precedent, the Court had observed that the AO had considered the total turnover of all units, including those from different divisions, for computing the deduction under Section 80HHC, whereas the CIT(A) had correctly directed the AO to consider only the total turnover of specific units (Units I, II, & III of the Sanitaryware division). The High Court found no error in the CIT(A)'s order and confirmed it. The admitted fact was that even in preceding years, the turnover of those three units was considered for Section 80HHC deduction. The Court concluded that no substantial question of law arose and the finding was not perverse. Therefore, the High Court answered the question in favour of the assessee, confirming the ITAT's order and holding that local sales are required to be excluded from the total turnover for calculating the deduction under Section 80HHC.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in concluding that local sales made by the assessee should be excluded from the total turnover for calculating the deduction available under Section 80HHC of the Income Tax Act? Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The Revenue contended that the AO correctly included the turnover of local sales in the total turnover for calculating the deduction under Section 80HHC, as per the provisions of the Act. The Revenue argued that the assessee had not incorporated the turnover of local sales in the profit and loss account as required.