COMMR.OF INCOME TAX vs. PARRY AGRO INDUSTRIES LTD COCHIN

PDF · subscribers
ITA/130/2000HC KeralaKLHC01015211200009 July 2012Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that deductions under Chapter VI-A of the Income Tax Act, 1961, such as Section 80HHC, are deductions from the gross total income and are not part of the computation of income under the head 'Business'. Therefore, the deduction under Section 80HHC is required to be computed *after* the apportionment of income under Rule 8(1) of the Income Tax Rules, 1962. The Court respectfully followed the judgment of the Hon'ble Supreme Court of India in CIT v. Williamson Financial Services [(2008) 297 ITR 17 (SC)]. Consequently, both questions of law were answered in favor of the Revenue and against the assessee. The order of the Tribunal confirming the first appellate authority's order was reversed, and the order of the assessing authority was revived. No costs were awarded.

What were the facts?

The assessee, M/s. Parry Agro Industries Ltd., a public limited company engaged in tea manufacturing, for assessment year 1992-93, claimed deductions under Sections 80HHC and 80-I of the Income Tax Act, 1961. The assessing officer initially allowed these deductions based on income computed after applying Rule 8 of the Income Tax Rules, 1962, which apportions income from tea business between agricultural and non-agricultural sources. The Commissioner of Income Tax (Revenue) directed the officer to calculate the deductions *before* applying Rule 8. The Income Tax Appellate Tribunal (ITAT) upheld the first appellate authority's order, which was in favor of the assessee. The Revenue has filed this appeal before the High Court challenging the ITAT's order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction under Section 80HHC and Section 80-I before applying Rule 8 of the Income-tax Rules for allocation of income from tea? 2. Whether, on the facts and in the circumstances of the case and read with Rule 8 of the Income-tax Rules which brings only 40% of the income under the Central Income-tax, the assessee is entitled to claim deduction under Section 80HHC and Section 80-I on 60% of the agricultural income as well? Assessee's Contention: The assessee contended that deductions under Chapter VI-A, including Sections 80HHC and 80-I, are to be computed before the apportionment of income under Rule 8. The ITAT had confirmed this view. Revenue's Contention: The Revenue contended that the deductions under Sections 80HHC and 80-I should be computed *after* the apportionment of income as per Rule 8, meaning deductions should only be applied to the portion of income taxable under the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 80-I

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN MONDAY, THE 9TH DAY OF JULY 2012/18TH ASHADHA 1934 I.T.A.No.130 of 2000 --------------------------------------- [AGAINST THE ORDER IN ITA NO.206(COCH)/96 DATED 29.02.2000 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, ERNAKULAM] (ASSESSMENT YEAR 1992-93). ------------- APPELLANT:- ------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY SENIOR COUNSEL FOR GOVERNMENT OF INDIA (TAXES) SRI.P.K.R.MENON & STANDING COUNSEL FOR INCOME TAX SRI.JOSE JOSEPH. RESPONDENT:- ----------------------- M/S.PARRY AGRO INDUSTRIES LTD., WELLINGDON ISLAND, COCHIN. BY ADVS.SRI.E.K.NANDAKUMAR (SENIOR ADVOCATE), SRI.A.K.JAYASANKAR NAMBIAR (SENIOR ADVOCATE) SRI.ANIL D. NAIR. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 09-07-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- Thottathil B.Radhakrishnan & K.Vinod Chandran, JJ. ------------------------------------ I.T.A.No.130 of 2000 ------------------------------------ Dated this, the 9th day of July, 2012

JUDGMENT K.Vinod Chandran,J: The assessee/respondent, a Public Limited Company, deriving income mainly from the manufacture of tea, for the assessment year 1992-93 claimed deduction under Section 80HHC and 80-I of the Income Tax Act, 1961. The assessing officer allowed the deduction on the income from tea business as computed by applying Rule 8 of the Income Tax Rules, 1962. The Commissioner of Income Tax directed the officer to work out the deduction before applying Rule 8. The Tribunal, on appeal by the Department, confirmed the order of the first appellate authority. Essentially, in revision, the question is as to whether the deductions allowable under Section 80HHC and 80-I are to be computed before or after apportionment of business income : agricultural income in the ratio of 40 : 60 as provided under Rule 8 is employed. The - 2 - Revenue is in revision, raising the following questions of law: “A) Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction u/s.80HHC and 80-I before applying Rule 8 of the Income-tax Rules for allocation in regard to income from tea? B) Whether, on the facts and in the circumstances of the case and read with Rule 8 of the Income-tax Rules which brings only 40% of the income under the Central Income-tax, the assessee is entitled to claim deduction u/s.80HHC and 80-I on 60% of the agricultural income as well?”

2.

The very same issue came up for consideration before the Hon'ble Supreme Court of India in CIT v. Williamson Financial Services [(2008) 297 ITR 17 (SC)], wherein the Apex Court considering the issue and held: “In short, deductions under Chapter VI-A are deductions not from a particular head of income but from gross total income. Therefore, section 80HHC is not part of the computation of income under the head “Business”. For the aforestated reasons, we hold that section 80HHC deduction of the 1961 Act is required to be after apportionment of income under rule 8(1) of the 1962 Rules”.

3.

In the circumstances, respectfully following the above judgment of the Hon'ble Supreme Court, we allow the above appeal answering both the questions of law in favour of the Revenue and against the assessee. The Tribunal's order confirming the order of the first appellate authority to that extent shall be reversed and the order of the assessing authority shall revive.

The appeal is allowed, however, with no costs. Thottathil B.Radhakrishnan Judge K.Vinod Chandran Judge vku/120712. --

More judgments on Section 80HHC

All 1,083 judgments and leading authorities on Section 80HHC →

Recent GST High Court judgments

Search GST case law →