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TAXAP/480/1999 2/ 14 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 480 of 1999
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ
HONOURABLE
MR.JUSTICE BANKIM.N.MEHTA
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
Yes.
2
To be
referred to the Reporter or not ? Yes.
3
Whether
their Lordships wish to see the fair copy of the judgment ? No.
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?No.
5
Whether
it is to be circulated to the civil judge? No.
=========================================================
INCOME
TAX OFFICER - Appellant(s)
Versus
VXL
INDIA LIMITED - Opponent(s)
=========================================================
Appearance
:
MRS
MAUNA M. BHATT for
Appellant(s) : 1,
MR SN SOPARKAR for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE BANKIM.N.MEHTA
Date
: 06/08/2008
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE K.A.PUJ)
1. The
revenue has filed this Tax Appeal under Section 260A of the
Income-Tax Act, 1961 proposing to formulate the following
substantial question of law for determination and consideration of
this Court:
?SWhether, the Appellate
Tribunal is right in law and on facts in restoring the matter to the
Assessing Officer to decide the issue of grant of deduction under
Section 80HHC when the said claim was neither made nor certificates
of the auditor was filed under Section 10CCAB of the Act along with
return of income???
2. This
court has admitted this Tax appeal on 30-8-2000 reframing the
following substantial question of law :
?SWhether, the Appellate
Tribunal was right in making a remand of the case to the Assessing
Authority for considering the claim of deduction u/s 80 HHC
regardless of the fact that in accordance with sub-section (4) of the
said Section, the assessee had not submitted the requisite report
with the certification of the Accountant and the said report with
the certificate was produced in the course of assessment ???
3. The
facts giving rise to the present Tax Appeal are that the assessee
has made claim for deduction u/s 80HHC of the Income-Tax Act during
the course of assessment proceedings. No such claim was made by the
Assessee at the time of filing of the return of income. It was the
case of the assessee that the claim u/s 80HHC of the Act could be put
up even in the assessment proceedings subsequently. The Assessing
Officer held that with the plain reading of sub-section (4) of
Section 80HHC makes it clear that no deduction under sub-section (1)
shall be admissible unless the assessee furnished report of the
Accountant as defined in sub-section along with the return of
income. Keeping in view the said provisions, the Assessing Officer
has rejected the claim of the assessee.
4. Being
aggrieved by the said order of the Assessing Officer, the assessee
preferred an appeal before the Commissioner of Income-Tax (Appeal),
Rajkot. The learned CIT(A) has observed in its order that the
assessee did not put up this claim in the original return but
pressed this claim only during the assessment proceedings subsequent
on the export reserve was created in the annual accounts,
subsequently in the form of a letter dated 26-12-1989 that it
should be treated as revised return. He has, therefore, confirmed
the order of the Assessing Officer by observing that assessing
officer has rightly pointed out that the claim will not be
admissible unless the assessee files the report of an accountant
along with the return of income as provided under Section 288
sub-section (1) & (2) along with Explanation thereto.
5. Being
aggrieved by the said order of the CIT(A) the assessee took up the
matter before the Income-Tax Appellate Tribunal, Ahmedabad and the
tribunal took the view that the assessing officer should not have
rejected the claim of the assessee on merely technical ground. The
Tribunal, therefore, remitted the said issue back to the Assessing
Officer directing him to consider the claim of the assessee in
accordance with law.
6. It
is in the above background of the matter, the present appeal is
filed by the revenue.
7. Mrs.
Mauna R. Bhatt learned Standing Counsel appearing for the Revenue
submitted that the provisions contained in Section 80 HHC are very
clear. Sub-section 4 of Section 80HHC of the Income-Tax Act, 1961
clearly stipulates that the deduction under sub-section (1) shall not
be admissible unless the assessee furnishes in the prescribed form
along with the return of income, the report of an accountant, as
defined in the Explanation below sub-section (2) of Section 288,
certifying that the deduction has been correctly claimed in
accordance with the provisions of this section. She has, therefore,
submitted that whether the assessee has correctly claimed deduction
u/s 88HHC of the Act has to be seen at the time of furnishing return
of income. If the report of the Accountant is not filed along with
the return of income certifying that the deduction was correctly
claimed, the Assessing Officer cannot process the claim u/s 80HHC of
the Act. Therefore, if the assessee furnishes the report
subsequently and on that basis he claims the deduction u/s 80HHC of
the Act the same cannot be allowed. She has, therefore, submitted
that the Assessing Officer and CIT(A) have taken correct view and
the Tribunal should not have remanded the matter back to the
Assessing Officer to consider the claim of the assessee on merits.
8. As
against this, learned advocate Mr. Tushar P. Hemani appearing with
Mr. S.N. Soparkar learned senior counsel for the assessee has
submitted that the issue is squarely covered by the decision of this
Court in the case of Commissioner of Income-Tax Vs. Gujarat Oil and
Allied Industries, reported in (1993) 201 ITR 325. He has submitted
that the said decision has been followed by this Court in subsequent
decision in case of Zenith Processing Mills V/s. Commissioner of
Income-Tax, reported in (1996) 219 ITR 721.
9. Mr.
Tushar Hemani has further submitted that the Calcutta High Court in
the case of Commissioner of Income-Tax V/s. Magnum Export (P) Ltd.,
reported in (2003) 262 ITR 10 has gone one step further and held
that the deduction cannot be disallowed simply because the audit
report was not furnished along with the return. The purpose of
incorporation of sub-section (4) was to enable the Assessing Officer
to ascertain the claim for deduction on the basis of authentication
by the auditor that the goods or merchandise was really exported,
which is otherwise admissible only on actual basis, a situation
which is difficult for the Assessing Officer to determine. While
deciding the issue in favour of the assessee the Calcutta High Court
has relied on the decision of this Court in the case of Zenith
Processing Mills V/s. Commissioner of Income-Tax (supra). Mr. Hemani
has further relied on the later decision of this Court in the case of
Commissioner of Income-Tax V/s. Mayur Foundation (supra).
10. Mr.
Hemani further relied on the later decision of this Court in the case
of Commissioner of Income-Tax V/s. Mayur Fondation, (2005) 274 ITR
562 wherein this Court has taken view after considering the Hon’ble
Supreme Court’s decision in the case of Commissioner of Income-Tax
V/s. Nagpur Hotel Owners’ Association, reported in (2001) 247 ITR
201 that the details have to be furnished before the completion of
assessment proceedings and any information supplied subsequent
to the completion of the assessment cannot be taken into
consideration. The Court, therefore, was of the view that the
question that arises is when can an assessment be said to be
complete or till what point of time the assessment proceedings can
be said to be alive. Therefore, the Court took the view that
jurisdiction to entertain the new ground which the assessee claimed
the benefit under Section 11(2) of the Act and adjudicate the tax
liability of the assessee.
11. Based
on the aforesaid decisions of this Court as well as the decisions of
the Apex Court, Mr. Hemani has urged that the Tribunal has rightly
decided the appeal against the revenue and in favour of the assessee
and directed the assessing officer to consider the claim of the
assessee under Section 80HHC of the Act on its own merits.
12. We
have heard the learned counsels appearing for the Assessee and the
Revenue at great length. We have gone through the orders passed by
the authorities below. We have also considered the relevant statutory
provisions as contained in Section 80HHC of the Act and the
authorities cited before the Court. We are of the view that the issue
is covered by the decision of this Court in the case of Commission of
Income-Tax Vs. Gujarat Oil and Allied Industries (supra). The
question for consideration before the Court in the said decision was
?SWhether, on the facts and in the circumstances of the case, the
Tribunal was right in coming to the conclusion that Section 80J(6A)
merely requires that the audit report should be so furnished so that
it would be available at the time of assessment ? While answering
the said question in favour of the assessee and against the revenue,
the Court took the view that the stage which is relevant for
considering the merits of the claim of the party is the stage when
the assessing authority sits down to assess income for the purpose
of computing income-tax after framing appropriate assessment and
it is at that stage that the requirements of Section 80J(1) read
with sub-section (6A) thereof can be taken into consideration. It
is obvious that the main purpose and object of section 80J(1) is to
give incentive and development benefit to the new industries covered
by the provisions of the Act. Consequently, while considering it,
care has to be taken to see that the relevant purpose underlying
section 80J is augmented and fortified and not frustrated by the
construction put upon the said provision. The Court, therefore, took
the view, that even assuming that another view is possible on the
construction of the second part of sub-section (6A) of Section 80J,
as that view is likely to frustrate the very object and purpose of
the scheme underlying section 80J(1) and would result in absurdity,
the other view by which the beneficial provision of section 80J(1)
is made fully operative should be preferred.
13. This
very principle was reiterated by this Court in the case of Zenith
Processing Mills V/s. Commissioner of Income-Tax (supra), wherein it
is held that from the perusal of sub-section (6A) of section 80J of
the Income-Tax Act, 1961, for claiming deduction under Section 80J,
it is apparent that compliance in respect of two things is necessary.
The first requirement is that the statement of accounts for the
previous year relevant to the assessment year for which deduction
is claimed must have been audited by an accountant and the second is
that the assessee must furnish along with his return of income
the report of such audit in the prescribed form duly signed and
verified by such accountant. The former is the requirement which
furnishes the substantial foundation for claiming the allowance and
the latter is the requirement of furnishing proof that the
foundation for claiming such deduction has been laid. While
compliance with the former before the deduction is claimed is
mandatory, so far as the manner of submitting proof of such
compliance along with the return is concerned, it is directory
because such requirement falls in the realm of procedure for
furnishing evidence in support of the claim and can be furnished at
the time while allowance or disallowance under section 80J of the
Act is being considered by the concerned authority.
14. What
has been stated in respect of the claim under Section 80J of the
Income-Tax Act is equally applicable to one under Section 80HHC.
Simply because under section 80 HHC connotes that the report of
accountant in the prescribed form should be attached along with the
return of income, certifying that the deduction has been correctly
claimed in accordance with the provisions of this Section, it does
not mean that if such report is not attached along with the return of
income and it is produced before the Assessing Officer during the
course of assessment proceedings, the assessee is not entitled to
the deduction under Section 80HHC of the Act. To obtain the report
of the Chartered Accountant is a condition precedent and it is
mandatory in nature. However, non-furnishing of such report at the
time of filing the return of income but at subsequent stage and in
any case, before the assessment proceeding is completed, the
assessee’s claim for deduction under Section 80HHC of the Act cannot
be disallowed.
15. This
view which we are taking is duly supported by earlier two
decisions of this court and we have found support from
the decision of the Hon’ble Apex Court in the case of Commissioner
of Income-Tax V/s. Nagpur Hotel Owners’ Association, reported in
(2001) 247 ITR 201, where the Hon’ble Apex Court has observed that
it is abundantly clear from the wording of sub-section (2) of
section 11 of the Income-Tax Act, 1961, that it is mandatory for the
person claiming the benefit of Section 11 to intimate to the
assessing authority the particulars required, under rule 17 in Form
No.10 of the Income-Tax Rules, 1962. If during the assessment
proceedings, the Assessing Officer does not have the necessary
information, the question of excluding such income from assessment
does not arise at all. As a matter of fact, this benefit of
excluding this particular part of the income from the net of
taxation arises from section 11 and is subject to the conditions
specified therein. Therefore, it is necessary that the assessing
authority to give the benefit of such exclusion. Even assuming
that there is no valid limitation prescribed under the Act and the
Rules, it is unreasonable to presume that the intimation required
under Section 11 has to be furnished before the assessing authority
completes the concerned assessment because such requirement is
mandatory and without the particulars of this income the assessing
authority cannot entertain the claim of assessee under section 11
of the Act.
16. In
view of this settled legal position, we are of the view that the
Tribunal was right in holding that the Assessing Officer should not
have rejected the legitimate claim of the assessee on mere
technical ground i.e. non-furnishing of the Chartered Accountant’s
report along with the return of income. The Tribunal is also right
in directing the Assessing Officer to consider the claim of the
assessee under Section 80HHC on its own merits.
17. We,
therefore, decide this Tax Appeal in favour of the assessee and
against the revenue and answer the question posed before us in
affirmative.
18. This
appeal is accordingly disposed off without any order as to costs.
(K.A.
Puj, J.)
(Bankim
N. Mehta,J.)
/JVSatwara/
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