COMMISSIONER OF IT vs. M/S JAI BHARAT GUM & CHEMICAL LTD

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.510 of 2005 Date of decision: 12.10.2010 Commissioner of Income Tax. -----Appellant. Vs. M/s Jai Bharat Gum & Chemical Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Sanjeev Kaushik, Sr. Standing Counsel for the Revenue. Mr. Avneesh Jhingan, Advocate for the Assessee. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue under Section 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 80 HHC 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.”

I.T.A. No.510 of 2005 2. The assessee derived income from manufacture, trading, and export of guar gum. It claimed exemption under Section 80 HHC 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 under Section 80 HHC of the Act. On appeal, the CIT(A) held that the said income will fall under Section 80 HHC of the Act, as it does not fall under Section 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:- “5. The compensation received by the assessee does not fall within any of the category as mentioned in sec.80 HHC(4B) explanation (baa)(1). It is not a payment of any sum referred to in sec.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......” 3. We have heard learned counsel for the parties and perused the record. 4. 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 80 HHC of the Act. Section 80 HHC of the Act was not attracted to every business income but only to income 2

I.T.A. No.510 of 2005 derived from export, as specified in the said Section. The amount received by the assessee was not shown to be covered by Section 80 HHC 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 80 HHC 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. 5. Learned counsel for the assessee has not been able to show how the compensation received by it will fall under Section 80 HHC of the Act. He only submits that the said income was a business income. Mere fact that the assessee derived business income not falling under Section 80 HHC(4B) explanation (baa)(1), which refers to income covered under Section 28(iiia), (iiib), (iiic) of the Act, is not enough to attract Section 80 HHC of the Act. 7. Accordingly, the question of law raised by the revenue has to be answered in its favour and against the assessee. The appeal is allowed. (ADARSH KUMAR GOEL) JUDGE October 12, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 3