M/s.Titan Industries Limited v. The Joint Commissioner of Income Tax Special Range IV

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 08.08.2012CORAM:THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANandTHE HONOURABLE MR.JUSTICE K.RAVICHANDRABAABUTax Case Appeal Nos.2200 and 2201 of 2006M/s.Titan Industries Limited(Formerly known as Titan Watches Ltd.)Golden Enclave, Tower AAirport RoadBangalore-560 017...AppellantversusThe Joint Commissioner of Income TaxSpecial Range IVChennai-600 034...RespondentPRAYER: Tax Case Appeals filed under Section 260A of the Income TaxAct against the order of the Income Tax Appellate Tribunal "A" Benchdated 17.02.2006 made in ITA No.621/MDS/1999 and ITA No.230/MDS/2001relating to the Assessment Year 1997-98 against the order of theCommissioner of Income Tax [Appeals], Chennai-34 dt 04.01.1999 andmade in ITA No.199/98-99, and the order of the Commissioner of IncomeTax [Appeals] X, Chennai-34 dt 31.10.2000 in ITA No.129/2000-01against the order of the Deputy Commissioner of Income Tax, SpecialRange, IV, Madras dt 13.08.1998 and made in PAN.No.47-dy-CX-4630/28and GIR No.28/T/97-98, dt 13.12.2000 on the file of the JointCommissioner of Income Tax, Special Range-IV, Chennai-34For appellant:Mr.V.S.JayaramanFor respondent:Mr.Arun Kurian JosephStanding Counsel for Income TaxJUDGMENT(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.)Tax Case No.2200 of 2006 is preferred by the assessee against https://hcservices.ecourts.gov.in/hcservices/ the order of the Income Tax Appellate Tribunal dated 17.02.2006relating to the Assessment Year 1997-98, raising the followingsubstantial question of law:Whether the Tribunal was right in holding thatthe levy of interest under Section 234B and C ofthe Income Tax Act, 1961 were legally valid whilecomputing the total income under Section 115 JA?2. The assessee herein is a public limited company engaged inthe manufacture of watches and jewellery. For the assessment year1997-98, the assessee filed a return of income admitting nil income,after claiming deduction under Chapter VIA. However, in the returnof income filed, which showed an income of Rs.8,34,10,000/- underSection 115JA of the Income Tax Act, under the proceedings issuedunder Section 143(1)(a), the Assessing Officer determined the taxableincome as per the particulars under Section 115JA and completed theassessment thereon; in the circumstances, charged interest underSections 234B and 234C of the Act. The assessee went on appealbefore the Commissioner of Income Tax (Appeals), contending that theincome estimated under Section 115JA being notional income, theprovisions under Section 207 to 212 of the Act are not applicable andhence, the assessee was not liable to pay advance tax andconsequently, there was no liability for payment of tax under Section234B and 234C of the Act. The Commissioner of Income Tax (Appeals)rejected this plea and also upheld the charging of interest. Theassessee went on appeal before the Income Tax Appellate Tribunal, whoconfirmed the order of the Commissioner of Income Tax (Appeals),applying the decisions reported in [2003] 263 ITR 307 (Mad)(Commissioner of Income-tax v. Holiday Travels P. Ltd.) and [2006]279 ITR 123 (P & H) (Commissioner of Income-tax v. Upper India SteelMfg. and Engg. Co. Ltd.). 3. Learned counsel appearing for the assessee fairly statedbefore this Court that the issue as regards the levy of interestunder Section 234B and 234C of the Income Tax Act while computing thetotal income under Section 115 JA is covered by the decision of theApex Court reported in [2011] 330 ITR 470 (Joint Commissioner ofIncome Tax Vs. Rolta India Ltd.). Applying the said decision to thecase herein, the order of the Tribunal stands confirmed and Tax Case(Appeal) No.2200 of 2006 stands dismissed. 4. Tax Case (Appeal) No.2201 of 2006 relates to the assessmentyear 1997-98, wherein the assessee has raised the followingsubstantial questions of law:(i) Whether the Tribunal was right in upholding the disallowance ofGuest House expenditure under Sections 32, 37 and otherprovisions of the Income Tax Act, 1961?(ii) Whether the Tribunal was right in law in holding that thededuction under Sections 80HH, 80I and 80IA are not allowable in https://hcservices.ecourts.gov.in/hcservices/ view of Section 80AB of the Income Tax Act, 1961?(iii) Whether the Tribunal was right in holding that the amountreceived from Timex Watches Limited are in the nature ofcommission and therefore, the deduction under Section 80HHC isnot allowable?(iv)Whether the Tribunal was right in law in holding that theinterest under Section 234B is leviable on the income computedunder Section 115JA of the Act.5. As far as the first question is concerned, learned counselappearing for the assessee fairly states before this Court that theissue is covered against the assessee by the decision reported in[2005] 278 ITR 546 (Britannia Industries Ltd. Vs. Commissioner ofIncome Tax) and hence, the question is decided against the assessee.As far as the third question is concerned, learned counsel appearingfor the assessee fairly submits that the said question is not pressedand hence dismissed as not pressed. The fourth question, beingsimilar to the issue decided in Tax Case Appeal No.2200 of 2006,stands rejected. Hence, the only question that survives forconsideration in this Tax Case is the second substantial question oflaw as regards the deduction under Section 80HH, 80I and 80IA. 6. As far as the second substantial question of law isconcerned, a perusal of the order of the Assessing Officer shows thatthe total business income of the assessee was calculated atRs.1,02,89,059/- and the deduction under Chapter VIA was to the tuneof Rs.12,81,76,101/- and in terms of Section 80AB, the deduction wasrestricted to Rs.1,02,89,059/-, being the business income of theassessee. Aggrieved by this, the assessee went on appealunsuccessfully before the Commissioner of Income Tax (Appeals) andthereafter before the Tribunal, which confirmed the order of theauthorities below, following the decision reported in [2004] 266 ITR521 (IPCA Laboratory Ltd. Vs. Deputy Commissioner of Income Tax).7. Learned counsel appearing for the assessee pointed out thatwithout questioning the applicability of Section 80AB to limit therelief to the extent of income, the question as to whether, inrespect of the claim under the various provisions, relief has to beconsidered independently had not been considered by the AssessingOfficer and hence, the assessment calls for a remand from this Court.In this connection, he referred to the decision reported in [2012]341 ITR 488 (Chamundi Textiles (Silk Mills) Ltd. Vs. Commissioner ofIncome Tax), wherein, this Court considered the question of reliefunder Section 80HHC in the case of an assessee carrying on domesticas well as export sale in the State and held that when the incomerelating to the Unit engaged in 100% export is identifiable by reasonof separate books of accounts maintained, the question of applyingthe formula did not arise. Thus this Court pointed out that whenseparate books of accounts are maintained by these Units and there https://hcservices.ecourts.gov.in/hcservices/ was no mixing up of accounts of one unit with the other and there wasno inter-dependency, the income earned from export goods from theBangalore Unit merited to be considered independently for 100% reliefas one falling under Section 80HHC(3)(a) of the Income Tax Act.Learned counsel pointed out that considering the above-said decision,the assessment on the relief under Chapter VIA be set aside and thematter be remanded back for working out the relief, keeping howeverin the background that the relief under Chapter VIA cannot exceed thebusiness income arrived at by the Officer. 8. Recording the said statement, satisfied of the claim of theassessee, in the absence of any facts relating to separatemaintenance of accounts thus discussed in any of the orders of theauthorities below, interest of justice requires that the assessmentmerits to be set aside and remanded back to the Assessing Officer onthe issue relating to deduction under Chapter VIA, for passingorders, keeping in mind the law declared by this Court as well as thelimit as available under Section 80AB of the Income Tax Act.In the result, T.C.(A) No.2200 of 2006 stands dismissed and T.C.(A) No.2201 of 2006 stands partly allowed. No costs. Sd/ Assistant Registrar /True Copy/ Sub Assistant RegistrarksvTo1. The Assistant Registrar The Income Tax Appellate Tribunal "A" Bench, Rajaji Bhavan, Iim Floor, Besant Nagar, Chennai-90.2. The Commissioner of Income Tax (Appeals) X, Chennai.3. The Joint Commissioner of Income Tax, Special Range-IV Chennai-34.4. The Deputy Commissioner of Income Tax, Special Range IV, Madras5 The Commissioner of Income Tax, [Appeals] Chennai-34 https://hcservices.ecourts.gov.in/hcservices/ + 1 C.C. To Mr.T.RAvikumar, Senior Standing Consel for I.T [Sr.47916Tax Case (Appeal) Nos.2200 and2201 of 2006 NG[CO]KS 08/10/2012