ITA No. 6 of 2004 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH. ITA No. 6 of 2004 Date of Decision: 9.9.2010 Commissioner of Income-Tax-I, Ludhiana. ...Appellant. Versus M/s. Punjab Wool Combers Ltd., Ludhiana ...Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- PRESENT: Mr. Rajesh Katoch, Advocate for the appellant-Revenue --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the Revenue against the order dated 10.1.2003, passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in Income- tax Appeal No. 1057/CHANDI/96, in respect of assessment year 1992- 93. Briefly stated the facts of the case are that the respondent- assessee filed return of income for the assessment year 1992-93 declaring net income at Rs. 2,87,69,420/-. The return was processed under Section 143(1)(a) of the Act at an income of Rs. 2,88,83,900/- ITA No. 6 of 2004 -2- and during that processing, an adjustment on account of disallowance on rent paid for the Guest House under Section 37(4) and by reduction of 90% interest income as per explanation (baa) of Section 80HHC was made. The assessing officer vide order dated 10.3.1995 (Annexure A- 1) made assessment under Section 143(3) on total income at Rs.2,98,15,254/- by disallowing the following: i- Disallowance u/s 80-I Rs. 13,64,370/- ii- While computing the deduction u/s 80HHC the assessing officer included CST and ST in the total turnover amounting to Rs. 8,71,080/-This resulted in reduction of deduction u/s 80HHC. iii- Disallowance of Rs. 9061/- on account of telephone expenses provided at the residence of the Director iv- Disallowance on premium on redemption of debenture. The assessee filed appeal against the order of the assessing officer. The Commissioner of Income-tax (Appeals) (Central), Ludhiana {in short “CIT(A)”} confirmed the order of the assessing officer vide order dated 17.7.1996 (Annexure A-II). The assessee preferred appeal before the Tribunal. The Tribunal by order dated 10.1.2003 (Annexure A-III) disposed of the appeal of the assessee with certain observations and directions. The Tribunal directed the assessing officer to adjust profits to the extent of .0261% as was allowed by the Tribunal in the assessment year 1991-92 and it was further directed that in case the difference was more than 0.0261%, the relief to the assessee under Section 80-I should be reduced by the difference in excess of .0261%. The Tribunal also directed that item ITA No. 6 of 2004 -3- like CST and ST etc. were not to be included in the total turnover while giving deduction u/s 80HHC and directed the A.O. to re-compute the deduction u/s 80HHC. The Tribunal deleted the addition of Rs. 9,061/- on account of telephone expenses. The Tribunal confirmed the finding of the CIT(A) that the assessee should be allowed only deduction in respect of premium payable on redemption of debenture on proportionate basis. This is how the Revenue has preferred this appeal challenging the order of the Tribunal on the grounds enumerated in the grounds of appeal and pleading that the following substantial questions of law arise in this appeal for determination by this Court: i) Whether in the facts and the circumstances of the case, the Hon’ble Income-tax Appellate Tribunal was justified in reversing the order of the Commissioner of Income-tax (Appeals) in which CIT(A) upheld the action of the Assessing Officer restricting the deduction under Section 80-I from Rs. 83,91,322/- to Rs. 70,26,952/- claimed by the assessee in the light of the provisions of sub-sections 8 and 9 of Section 80-I? ii) Whether on the facts and circumstances of the case, the Hon’ble Income-tax Appellate Tribunal was not justified in directing the assessing officer that item like CST and ST are not to be included in the total turnover while giving deduction u/s 80HHC? iii) Whether in the facts and circumstances of the case, the Hon’ble Income-tax Appellate Tribunal was justified in ITA No. 6 of 2004 -4- directing the Assessing Officer to allow relief/proportionate deduction of premium payable on redemption of debenture? We have heard learned counsel for the appellant-Revenue and have gone through the record. Reg. Question (i) The Tribunal while adjudicating the issue regarding disallowance in terms of provisions of Section 80I(8) and (9) had relied upon its earlier decision in the case of the assessee relating to assessment year 1990-91. In ITR No. 168 of 1996 relating to assessment year 1990-91, similar question raised by the revenue has been answered against it. In view thereof, question No.(i) proposed by the revenue is answered against the revenue. Reg. Question (ii) Learned counsel for the revenue very fairly accepted that the aforesaid question stands concluded against the revenue by judgment of Division Bench of this Court reported in Commissioner of Income Tax v. Avery Cycle Industries Ltd., (2008) 298 ITR 239 (P&H), wherein it has been held that for computation of special deduction under Section 80HHC of the Act, Sales Tax and Central Sales Tax are to be excluded from total turnover. Accordingly, the proposed question (ii) is also answered against the revenue. Reg. Question (iii) The Tribunal relied upon decision of the Apex Court in Madras Industrial Investment Corporation Ltd. v. Commissioner of ITA No. 6 of 2004 -5- Income Tax, (1997) 225 ITR 802 (SC) holding that proportionate deduction of premium payable on redemption of debentures is admissible during the year. Nothing could be shown that this judgment is not applicable to the facts of the present case. Accordingly, it is held that this is not a substantial question of law. In view of the above, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) September 09, 2010 JUDGE rkmalik/gbs