CHAMUNDI TEXTILES (SILK MILLS) LTD Vs. CIT

JUDGEMENT

(1.) The assessee preferred the above appeals as against the order of the Tribunal relating to three assessment years, viz., 1995-96, 1996-97 and 1997-98. The assessee is engaged in the business of manufacturing and sale of silk fabrics. It has two units. One unit is situated at Bangalore which is engaged in manufacturing silk fabrics and exporting the same. In other words, the unit at Bangalore is a 100 per cent. export oriented unit. The other unit is at Ramnagaram, which is engaged in manufacturing silk fabrics, catering to the domestic market as well as exporting the manufacturing goods form this unit. Initially, the assessee claimed exemption in respect of the Bangalore unit under section 10B of the Act for the assessment years 1989-90 to 1993-94. Thereafter, for the assessment years under consideration, the assessee claimed deduction under section 80HHC in respect of the Bangalore unit. It is seen from the orders of the assessment that the Assessing Officer aggregated the profit in respect of the two units and computed the relief under section 80HHC in respect of the net income. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), contending that when the profits from the export unit at Bangalore was identifiable, the assessee would be entitled to 100 per cent. deduction for the said profits. The assessee pointed out that the units at Bangalore and Ramnagaram are independent units having separate work force. Even though there was a centralised management, they are keeping separate set of books of account for the two units, having separate bank accounts. There is no inter-dependency between these units. Consequently, the assessee prayed for grant of full relief in respect of the 100 per cent. export oriented unit at Bangalore. The claim of the assessee was, however, rejected by the Commissioner of Income-tax, holding that there was no scope for working out the deduction under section 80HHC in respect of 100 per cent. export oriented unit separately and even if the accounts of 100 per cent. export oriented unit are maintained separately indicating the export profits, the assessee would not be entitled to deduction under section 80HHC. Aggrieved, by the same, the assessee preferred appeals before the Tribunal.

(2.) A reading of the order of the Tribunal shows that it went by the decision of the apex court reported in IPCA Laboratory Ltd. v. Deputy CIT, 2004 266 ITR 521, to hold that the relief under the provisions of section 80HHC is controlled by section 80AB. The Tribunal held that the "gross total income" means the total income computed under the provisions of the Income-tax Act. Hence, merely because the assessee is having two independent and separate units, it cannot be said that the assessee is entitled to ignore the loss incurred in one unit. Apart from that, what is eligible for deduction under section 80HHC is the aggregate income of the assessee in respect of all the units of the assessee. Hence, there was no justification in the claim of the assessee that the Bangalore unit should be considered separately for the purpose of deduction under section 80HHC. The sum and substance of the order of the Tribunal is, going by the methodology of computation of the gross total income the relief under section 80HHC also has to follow the same method. Aggrieved by the same, the assessee preferred the above appeals before this court.

(3.) It is made clear that the issue raised before this court is as regards 100 per cent. export oriented unit situated at Bangalore. The assessee never made any claim as regards the other unit which had export as well as local sale.