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III. Direct Taxes Case Laws:
1. Ramnagar
Pachwai & C.S. (S) Shop Vs. Income-tax Officer, I.T.A. No.
148/Kol/2015, Date of Pronouncement: 05.08.2016, ITAT - Kolkata
Issue:
Whether the Ld. A.O. was justified in disallowing cash payments (in
excess of Rs.20,000 on each occasion) made by the assessee to supplier
for purchase of its stock-in-trade in terms of Section 40A(3) of the
Income Tax Act, 1961?
Held: No
Brief Facts:
The Assessee is a retail vendor of Country Liquor and Pachai. Its
purchase and sale are strictly controlled by the State Government. As
per the revised procedure prescribed by the Excise Department, for
lifting Country Spirit, the assessee, who is a retail vendor, was
required to make the entire payment consisting of cost of the
stock-in-trade, Excise duty and bottling charges etc. only to the
wholesale Licensee appointed by the State Government. Following the
revised procedure, the Assessee made payments partly by Demand Draft and
partly by cash deposits in the Bank A/c of its Supplier i.e. M/s.
Asansol Bottling and Packaging Co. Pvt. Ltd. maintained in the State
Bank of India. While completing the assessments of the assessee, the Ld.
A.O. allowed the payments made by Demand Drafts but disallowed the cash
deposits (in excess of Rs.20,000 on each occasion) made in the Bank A/c
of the Supplier maintained in the State Bank of India in terms of
Sec.40A(3) of the I. T. Act. The Assessee filed appeals against the
aforesaid disallowances before CIT (A). The Ld. CIT (A) has, however,
rejected this submission relying on the Hon'ble Kerala High Court
decision in the case of K. Abdu & Co. -vs.- ITO reported in 170-
Taxman-297 in which it has been held that the exemption is admissible
only when the payment is made to the State Bank of India as an
Institution and not when the payment is made to the party's account
maintained by the Bank.
Held:
The Hon’ble ITAT held that it could be safely concluded that the
wholesale licensee (agent) had acted at the instance of the State
Government. Once this is so, then the said wholesale licensee could be
construed as an agent of the State Government. Therefore Rule 6DD(k) will come into picture.
The payment made by the assessee retail vendor to the Principal,
Government of West Bengal through its wholesale agent. The relationship
between the assessee (authorized retailer) and Government of West Bengal
(the supplier) acting under West Bengal Excise Rules through its
Authorised Wholesaler Licensee (Agent), both de facto and dejure , is
one of ‘Principal’ and ‘Agent’. We hold that the assessee retail vendor
had made payment to the said agent (wholesale licensee) would fall under
the exception provided in Rule 6DD(k) of the Rules. Accordingly,
disallowances made u/s 40A(3) is deleted.
(Please click here for judgment)
2. M/s Mahavir Spinning Mills Ltd. Vs. CIT, I.T.A. No. 408/2007, Date of Judgment: 02.09.2016, High Court of Punjab & Haryana
Issue:
Whether the export turnover of a unit whose profits are exempt u/s
10B of the Income Tax Act, 1961 can be included in the ‘export turnover’
for the purposes of calculating the deduction u/s 80HHC of the Act?
Held: Yes
Brief Facts
The appellant-assessee is a 100% export oriented undertaking
exporting the goods it produces and admittedly availed the benefit u/s
10B of the Income Tax Act, 1961. The department contended that to the
extent of benefit received u/s 10B the same cannot be included in the
export turnover and total turnover in the formula stipulated in section
80HHC.
However,
AR contended that Sec 10B(4)(iii) of the Act provides that in computing
the total income of the assessee, no deductions shall be allowed under
certain mentioned sections, but Sec 80HHC is not one of those sections.
It was also contended that the insertion of Sec 10B was to provide
“further incentive” to 100% export oriented undertakings for earning
more foreign exchange and not an incentive in lieu of the incentive
contained in section 80HHC. Relying upon section 80HHC(4)(C)(b) of the
Act, Ld DR. contended that section 80HHC is a self contained code and as
is Section 10B.
Held:
It was held that a literal reading of the provisions and literal
application of the formula does not enable us to exclude the export
turnover of the unit in the EPZ from the export turnover of such goods
nor from the total turnover of the business. The profit arising out of
these units in the EPZ is also not excludable from the profits of the
business. We may note that Section 80HHC is a beneficial provision for
the purposes of encouraging exports. Section 80 HHC clearly defines the
terms export turnover, total turnover and profits of business. None of
these definitions exclude the export turnover in respect whereof benefit
has been derived under section 10B. In the circumstances, the first
question of law is answered in affirmative in favour of the appellant.
(Please click here for judgment)
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