THE COMMISSIONER OF INCOME vs. MR.V.C.RAGHUNATHAN

T.C.A.No.956 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.11.2019 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN and THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.No.956 of 2019 The Commissioner of Income Tax, Chennai.

... Appellant Vs Mr.V.C.Raghunathan

...Respondent PRAYER: Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 against the order dated 14.10.2005 in I.T.A.No.17201/Mds/2005 on the file of the Income Tax Appellate Tribunal Chennai 'B' Bench for the assessment year 1998-99. For Appellant : Mr.M.Swaminathan, Senior Standing Counsel. J U D G M E N T (Order of the Court was delivered by N.KIRUBAKARAN, J)

The assessee is an individual engaged in the manufacture and export of power loom fabrics. The issue relates to Asst. Year 1998- 99. The assessee claimed deduction under Section 80 HHC a sum of 1/6 http://www.judis.nic.in T.C.A.No.956 of 2019 Rs.6,74,763/- being the net profit derived in respect of the Export Oriented Unit called "Vitchuli Tex Notions" and the business profits shown in the returns represented a net profit of the unit "Dhandapani Traders". 2.Originally the return was processed under Section 143 (1). But later on the assessment proceedings were initiated by issue of notice under Section 148. The assessing officer, after reopening the assessment, passed an assessment order under Section 143 (3) read with Section 147 whereby the assessing officer clubbed the profit as well as the turnover of both the units and computed the deduction under Section 80 HHC on the ground that major chunk of the products which is the end product exported was in fact manufactured by Dhandapai Traders and was transferred to Vitchuli Tex Notions and thereafter along with other goods purchased from outside the end products were exported by Vitchuli Tex Notions. Therefore, for all purposes, the said Dhandapani Traders is an extension of Vitchuli Tex Notions and hence, both the turnovers and profits should be taken into consideration for the purpose of allowing deduction under Section 80 HHC. 2/6 http://www.judis.nic.in T.C.A.No.956 of 2019 3.Aggrieved over the order passed by the assessing officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) wherein the Commissioner of Income Tax allowed the appeals following the decision of jurisdictional High Court reported in 254 ITR 656 and 257 ITR 60. The appeal preferred by the department as against the order of the Commissioner of Income Tax to the Tribunal, was dismissed. Hence, against the order of the Tribunal, the present appeal has been filed. 4.This tax case appeal is admitted on the following substantial questions of law: "(i)Whether Section 80HHC (3)(a) and (b) means the entire turnover of the assessee or the turnover of the export unit only? (ii)Whether for the purpose of deduction on the admitted facts of the case that the goods manufactured from one unit is transferred to other unit and exported, then both the turnover and profits of both the units should be taken into consideration for the purposes of the computation of deduction under Sec.80HHC? 3/6 http://www.judis.nic.in T.C.A.No.956 of 2019 (iii)Whether Judgment reported in 275 ITR 60 prohibits the computation of turnover under Sec.80HHC (3) (a) and (b) by clubbing the turnover of the unit which manufactured the goods and the turnover of the unit to which it was transferred and exported?" 5.Mr.M.Swaminathan, learned Senior Standing Counsel appearing on behalf of the appellant would submit that the tax effect in this case is less than Rs.1 crore and is covered by Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, Delhi. As per the said circular, the monetary limit to file an appeal before the High Court is fixed at Rs.1 crore. In this case, tax effect is less than Rs.1 crore and therefore, the appeal has to be dismissed. 6.This Court perused the circular dated 08.08.2019 and Paragraph No.2 of the Circular, which prescribes monetary limit for filing appeal. Paragraph No.2 is usefully extracted as follows: 4/6 http://www.judis.nic.in T.C.A.No.956 of 2019 "2.As a step towards further management of litigation, it has been decided by the Board that monetary limits for filing of appeals in income-tax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly, the table for monetary limits specified in Para 3 of the Circular shall read as follows: S.No. Appeals / SLPs in Income-tax matters Monetary Limit (Rs.) 1. Before Appeallate Tribunal 50,00,000 2. Before High Court 1,00,00,000 3. Before Supreme Court 2,00,00,000" 7.In view of the submissions made by the learned counsel appearing on behalf of the appellant and also in view of the Circular No.17/2019 dated 08.08.2019 issued by the Director, Central Board of Direct Taxes, Delhi, this Tax Case Appeal is dismissed on account of tax effect. However, the substantial questions of law framed are left 5/6 http://www.judis.nic.in T.C.A.No.956 of 2019 N.KIRUBAKARAN, J. and P.VELMURUGAN, J. ay open. In the event the tax effect is above the limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. (N.K.K.,J.) (P.V.,J.) 26.11.2019 ay To The Commissioner of Income Tax, Chennai. T.C.A.No.956 of 2019

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