(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J) The revenue on appeal against the order of the Income Tax Appellate Tribunal dated 22.09.2006 passed in ITA.No.829/Mds/2006 relating to the assessment years 2001-02.
2. The material facts culled out from the statement of facts stated in the memorandum of appeal are as follows:-
The assessee Company is engaged in the manufacture and export of pesticides. The assessee company filed its return for the assessment year 2002-03. A notice u/s 143(2) was issued and assessment was completed by allowing the MAT credit u/s 115JAA after levying the interest u/s 234B and 234 C. The assessee had also excluded excise duty and sale tax from the total turnover for the purpose of deduction u/s 80HHC. The Assessing Officer while working out the total turnover for the computation of deduction u/s 80HHC included the sales tax and excise duty collections and brought the same to tax. On appeal, the Commissioner of Income Tax (Appeals), allowed the appeal in favour of the assessee on the two issues. The revenue filed an appeal before the Income Tax Appellate Tribunal and the Tribunal dismissed the appeal in favour of the assessee by excluding excise duty and sales tax from the total turnover for the purpose of deduction u/s 80HHC by following the decision of this Court in the case of CIT vs. Wheels India Limited reported in 275 ITR 319. With regard to MAT credit also, the Tribunal upheld the orders of the CIT (A) by following its own earlier order in the case of Chemplast Sanmar Limited. The correctness of the same is canvassed before this Court in this appeal by formulating the following questions of law:-
"1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that, Sales tax and Excise Duty do not form part of turnover for the purpose of calculation of deduction u/s 80HHC of the Income Tax Act, 1961?"
2. Whether in the facts and circumstances of the case, the Tribunal was right in holding that MAT credit is to be set off from the tax payable before levying interest under
section 234B and
234C of the Income Tax Act, 1961?".
3. We have heard the argument of the learned counsel on either side.
4. Upon hearing, it is admitted by the counsel on either side that the first question of law is covered against the revenue by the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Lakshmi Machine 2007 (290 ITR 667) wherein it has been held as follows :
section 80HHC of the Income Tax Act, 1961, is a beneficial section : it was intended to provide incentive to promote exports. The intention was to exempt profits relatable to exports. Just as commission received by the assessee is relatable to exports and yet it cannot form part of 'turnover' for the purposes of
section 80HHC, excise duty and sales tax also cannot form part of 'turnover'. Just as interest, commission, etc., do not emanate from the 'turnover' so also excise duty and sales tax do not emanate from such turnover. Since excise duty and sales tax did not involve any such turnover such taxes had to be excluded. Commission, interest, rent, etc., do yield profits, but they do not partake of the character of turnover and therefore they are not includible in the 'total turnover'. If so, excise duty and sales tax also cannot form part of the 'total turnover' under section 80HHC(3)".
5. In view of the enunciation of law by the Supreme Court, the first question of law now raised has been decided against the revenue, in favour of the assessee.
6. With regard to the second question of law, the MAT credit is to be set off from the tax payable before levying interest under Section
234B and 234 C, a Division Bench of this Court in the case of THE COMMISSIONER OF INCOME TAX, CHENNAI VS. M/S.CHEMPLAST SANMAR LIMITED, CHENNAI (T.C.No.887 of 2005 etc., batch), by judgment dated 9.4.2009 to which one of us (K.Raviraja Pandian,j.) was a party, after considering various provisions viz., Sections 115JAA,
234A,234B and
234C and
295 of Income-tax Act and Rule 12(1)(a) of the Income-tax Rules, 1962, held thus:
"18. In the present case, the intention of the legislature is to give tax credit to tax and not to the tax and interest. Once the intention is clear, the revenue cannot rely on the Form-I to say that the MAT credit under Section 115JAA should be given only after tax and interest. Further we have answered the first question of law in favour of the assessee i.e. the MAT credit under Section 115JAA should be given effect to before charging the interest under
Section 234B and
234C. Rule 12(1)(a) and Form-I cannot go beyond the provisions of the Act. Form-I cannot lay down the order of priority of adjustment of TDS, advance Tax, MAT credit under Section 115JAA which is contrary to the provisions of the Act. The order passed by the Tribunal is in accordance with law and we do not find any error or illegality in the order of the Tribunal so as to warrant interference. Accordingly, we answer the questions 2 and 3 also in favour of the assessee and as against the Revenue."
7. Hence, both the questions of law has to be necessarily answered in affirmative in favour of the assessee, against the revenue and as such it is answered. The appeal is dismissed.
(K.R.P.J.) (M.M.S.J.) 13.04.2009.
rg Index:Yes/ Internet:Yes/ K.RAVIRAJA PANDIAN,J AND M.M.SUNDRESH,J rg To
1. Commissioner of Income Tax-I, Chennai
2. Income Tax Appellate Tribunal, "B" Bench, Chennai Tax Case(Appeal) No.405 of 2007 13.04.2009