M/S.PRASHANT PROTEINS LTD. vs. DY.COMMISSIONER OF INCOME TAX

Facts

The assessee, M/s. Prashant Proteins Ltd., engaged in manufacturing oil extraction, filed its return for AY 1992-93 declaring a total income of Rs. 68,35,740/-. The assessee claimed deduction under Section 80HHC on export incentives, bifurcating the claim between trading exports and manufacturing exports. The Assessing Officer (AO), vide order dated 18.03.1994 under Section 143(3), disallowed this separate computation, calculating the deduction as a whole. The CIT(A) upheld the AO's order on 01.11.1994. The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, dismissed the assessee's appeal on 23.05.2002. The assessee then filed this appeal before the High Court of Gujarat.

Held

The High Court held that the AO and the ITAT had correctly interpreted Section 80HHC. The proviso to Section 80HHC mandates that the deduction for export incentives is to be computed by taking 90% of such incentives and applying the proportion that the export turnover bears to the total turnover of the *entire business* of the assessee. The Tribunal's observation that it would be far-fetched to accept the argument of two distinct businesses and that 'total turnover' means the entire business turnover, excluding freight and insurance as defined, was found to be in line with the statutory language. The Court found no illegality or impropriety in the interpretation made by the authorities below, citing the principle that in taxing statutes, one must look at what is said, with no room for intent or presumption. The Court agreed with the ITAT's dismissal of the assessee's appeal, upholding the Revenue's position.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that deduction under Section 80HHC is to be computed as a whole, as done by the Assessing Officer, and not activity-wise as claimed by the appellant? Assessee's contention: The ITAT erred in interpreting Section 80HHC. The decision of the Madras High Court in CIT v. Rathore Brothers, [2002] 254 ITR 656, supports the assessee's claim that when two views are possible on statutory interpretation, the one favouring the assessee should be preferred. Revenue's contention: The Apex Court in IPCA Laboratory Ltd. v. Dy. CIT, [2004] 266 ITR 520, held that Section 80HHC requires profits and losses from both self-manufactured and trading goods to be considered together to arrive at the net profit for deduction. The proviso to Section 80HHC mandates computation based on total turnover.