JUDGEMENT
D.N. Sharma, Judicial Member -
(1.)THIS appeal filed by the assessee is directed against the order dated(iii)-3-1988 passed by the Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961.
(2.)The assessee company is a wholly owned Government of India undertaking. The assessment for the asst. year 1983-84 was framed by the IAC (Asstt.) on 27-1-1986. On an examination of the assessment records of the assessee for the asst. year 1983-84 it was found by the CIT that the asst. order was erroneous insofar as it was prejudicial to the interests of the Revenue. A show-cause notice Under Section 263 was accordingly issued to the assessee wherein it was, inter alia, pointed out that deduction Under Section 80HHC has been wrongly allowed to the assessee on two counts namely : (i) deduction has been allowed on primary agricultural commodities namely, rice, coriander, garlic and chillies; (ii) deduction has been allowed on items which were not exported during the previous year relevant to the asst. year 1982-83 and so these items could not be taken for working out incremental turnover.
It was further pointed out in the show-cause notice that the trade expenses amounting to Rs. 29,65,975 included payment of Rs. 10,58,114 on account of sponsorship fee to Sheikh Ghalib Mansu Rifac of Jeddah. It was noted that this payment was made for securing the right to carry on business in South Arabia and that it secured benefit of enduring nature and, therefore, the expenditure was capital expenditure and not a revenue expenditure. The assessing officer, according to the Commissioner, wrongly allowed this expenditure as a revenue expenditure.
(3.)THE assessee filed a written reply. Submissions were also made on behalf of the assessee before the Commissioner. THE Commissioner held that rice, coriander, garlic and chillies are primary agricultural commodities and do not involve any processing or any specific scheme of plantation in this regard, and, therefore, the benefit of Section 80HHC cannot be extended to these commodities.
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