V. M. SALGAOCAR AND BROTHER LIMITED (NOW KNOWN AS V. M. SALGAOCAR AND BROTHER PRIVATE LIMITED., vs. COMMISSIONER OF INCOME TAX, PANAJI-GOA

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TXA/8/2011HC BombayHCBM05001759201126 October 2018Author: HON'BLE SHRI JUSTICE N. M. JAMDAR,HON'BLE SHRI JUSTICE PRITHVIRAJ K. CHAVAN5 pages
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What did the High Court hold?

The High Court noted that questions of law A and B were covered by its earlier judgment dated March 27, 2012, in CIT vs. V.M. Salgaonkar & Brothers Ltd. (the assessee herein), which was upheld by the Apex Court in Plastiblends India Ltd. vs. V.M. Salgaonkar & Brothers Ltd. The review of that judgment was also rejected. Therefore, questions A and B were answered in favor of the assessee. Regarding questions C, D, E, and F, the Court was informed that these issues were subject to a remand order by the ITAT, resulting in fresh assessment orders dated December 13, 2011, for the same assessment year. An appeal against these fresh orders was pending before the Commissioner of Appeals. Consequently, these questions were considered not to survive in their current form. For questions G and H, the Court noted that they were covered by the assessee's own case judgment dated March 27, 2012, which was upheld by the Apex Court. Accordingly, these questions were also answered in favor of the assessee, as the Revenue had not pointed out anything to the contrary. The appeal was disposed of in light of this position.

What were the facts?

The assessee, V.M. Salgaocar & Brother Limited, filed an appeal before the Bombay High Court at Goa challenging the order of the Income Tax Appellate Tribunal (ITAT), Panaji, dated January 10, 2011. The appeal pertains to Assessment Year 2001-2002. The High Court admitted the appeal on several substantial questions of law. The assessee's counsel pointed out that questions A and B are covered by a previous High Court judgment in the assessee's own case, which was upheld by the Supreme Court. Regarding questions C, D, E, and F, it was stated that these were subject to a remand by the ITAT, leading to fresh assessment orders on December 13, 2011, for the same assessment year. An appeal against these fresh orders is pending before the Commissioner of Appeals. Questions G and H were also stated to be covered by the High Court's earlier decision in the assessee's case, which was upheld by the Supreme Court.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. (A) Whether the Appellant is entitled to not claim depreciation under Section 32 of the Income Tax Act, 1961, in arriving at its business income under Chapter IV-D for AY 2000-01, as permitted by the Apex Court in Mahendra Mills v. CIT? 2. (B) Whether, for computing deduction under Section 80HHC(3)(c)(i), depreciation allowable under Section 32, which was not claimed, ought to be allowed? 3. (C) Whether the Tribunal was right in upholding the Assessing Officer's action of deducting 90% of income from truck hire, barge hire, ore processing, transhipper loader, and machinery hire charges while computing "profits of the business" under Explanation (baa) to Section 80HHC? 4. (D) Whether the Tribunal was right in not following its earlier order for AY 1997-98 where it upheld the Appellant's claim that no part of the specified hire and processing receipts should be reduced while computing business profits? 5. (E) Whether, for computing deduction under Section 80HHC(3)(c)(ii), depreciation ought not to be considered as part of cost and hence not reduced from export turnover, in view of Nectar Beverages P.Ltd. v. DCIT? 6. (F) Whether, if depreciation allowable under Section 32, though not claimed, is to be reduced for computing profits from export of trading goods under Section 80HHC(3)(c)(ii), it is the depreciation in books or as computed under Section 32 that should be reduced from export turnover? 7. (G) Whether the Tribunal was right in holding that loss on export of trading goods ought to be reduced from total business profits to arrive at adjusted profits for Section 80HHC(3)(c)(i)? 8. (H) Whether the Tribunal was right in taking a different view from its earlier decision for AY 1997-98, presuming the earlier decision did not consider IPCA Laboratories v. DCIT? Assessee's Contentions: - Questions A and B are covered by the High Court's judgment in CIT vs. V.M. Salgaonkar & Brothers Ltd. and its subsequent upholding by the Apex Court. - Questions C, D, E, and F are rendered moot due to a remand by the ITAT, leading to fresh assessment orders for AY 2001-2002, against which an appeal is pending. - Questions G and H are covered by the High Court's decision in the assessee's own case, which was upheld by the Apex Court. Revenue's Contentions: - No contentions were recorded for the revenue regarding the questions of law.

Which sections of the Income-tax Act were involved?

Section 32,Section 80HHC

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1 Txa8 -11dt26-10-18 Santosh IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO.8 OF 2011 V.M. Salgaocar & Brother Limited (now known as V.M. Salgaocar & Brother Pvt. Ltd.)

….... Appellant. Versus Commissioner of Income Tax, Panaji. ..…. Respondent. Mr. A. F. Diniz, Advocate for the Appellant. Ms. Amira Abdul Razaq, Standing Counsel for the Respondent. Coram : N.M. Jamdar & Prithviraj K. Chavan, JJ. Date : 26 October 2018. P.C.:

This Appeal is filed by the Assessee, challenging the orders passed by the Income Tax Appellant Tribunal, Panaji, dated 10 January 2011. It relates to the Assessment Year 2001-2002. 2. This Appeal came to be admitted on the following substantial questions of law : “A. Whether the Appellant is entitled to not claim depreciation under Section 32 of the Act in arriving at its business income under Chapter IV-D of the Act for the Assessment Year 2000-01 as permitted by decision of the Apex Court in Mahendra Mills v. CIT 243 ITR 56?

2 Txa8 -11dt26-10-18 B. Whether for the purposes of computing the deduction under Section 80HHC(3)(c)(i) of the Act depreciation allowable under Section 32 of the Act, which has not been claimed by the Appellant in computing profits under Chapter IV-D of the Act, ought not to be allowed? C. Whether on the facts and in law, the Tribunal was right in upholding the action of the Assessing Officer of deducting 90% of the income from truck hire charges, barge hire charges, ore processing receipts, transhipper loader charges and machinery hire charges while computing the “profits of the business” in accordance with Clause (baa) of the Explanation below Section 80HHC? D. Whether on the facts and in law, the Tribunal was right in not following its earlier Order dated February 26, 2010 in the Appellant's own case for the earlier Assessment Year i.e. 1997-98 where the Tribunal had upheld the Appellant's claim that no part of the income from truck hire charges, barge hire charges, ore processing receipts, transhipper loader charges and machinery hire charges was to be reduced while computing the profits of the business? E. Whether for the purposes of computing deduction under Section 80HHC(3)(c)(ii) of the Act depreciation ought not to be considered as a part of cost and hence ought not to be reduced from the export turnover in view of the decision of the Apex Court in the case of Nectar Beverages P.Ltd. v. DCIT(267 ITR 385)? F. Whether, if depreciation allowable under Section 32 of the Act, though not claimed, is to be reduced

3 Txa8 -11dt26-10-18 for the purposes of computing the profits derived from the exports of trading goods under Section 80HHC(3)(c)(ii) of the Act, it is the depreciation as recorded in the Books of Accounts, and not as computed under Section 32 of the Act, that is to be reduced from the export turnover? G. Whether the Tribunal was right in law in holding that the loss suffered on export of trading goods ought to be reduced from the total profits of the business to arrive at the adjusted profits of the business for the purposes of Section 80HHC(3)(c)(i) of the Act? H. Whether the Tribunal was right in law in taking a view different from the view taken by it in its earlier decision in the Appellant's own case for the earlier year under consideration i.e. Assessment Year 1997-98 on the presumption that the earlier decision had not taken into consideration the then existing decision of the Apex Court of IPCA Laboratories v. DCIT (reported in 266 ITR 521)?”

3.

Salgaonkar & Brothers Ltd. (the Assessee herein)

1.

He submitted Salgaonkar & Brothers Ltd. 2 wherein the Appeal in respect of the 1 Tax Appeal No.2/2002 2 [2012) 21 taxmann.com 178 (Bom).

4 Txa8 -11dt26-10-18 present Assessee was a part of a group and the Judgment of the High Court was upheld. It is further pointed out that the Review was rejected by an order dated 30 January 2018. In view thereof, the questions of law at (A) and (B) stand covered.

4.

As regards the questions of law framed at (C), (D), (E) and (F) are concerned, it is pointed out to us that they were subject-matter of a remand order by the ITAT, and consequent to the remand, fresh assessment orders were made on 13 December 2011 for the very same assessment year i.e. 2001-2002. It is stated that against the assessment order, the Appellants have filed an appeal before the Commissioner of Appeals which is pending. In view of this fresh assessment, the learned Counsel points out that these questions of law do survive.

5.

As regards questions of law at (G) and (H) are concerned, it is stated that in case of Assessee itself 1, dated 27 March 2012, which Judgment has been upheld by the Apex Court in Civil Appeal No.8794 of 2012. 6. Accordingly, these questions of law are answered as contended by the Assessee. Nothing has been pointed out by the Revenue to show otherwise. 1 [2012] 21 taxmann.com 178 (Bom.)

5 Txa8 -11dt26-10-18

7.

In view of this position, this appeal is disposed of in the above terms. Prithviraj K. Chavan, J. N.M. Jamdar, J.

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