(135.4 KiB, 2,249 DLs)

s. 80-IA relief has to be deducted before computing s. 80-HHC relief

In ACIT Vs Rogini Garments 108 ITD 49 the Special Bench at Chennai held that relief allowed u/s 80-IA had to be deducted from profits and gains of assessee’s business on which relief u/s 80HHC of the Act is to be computed. Subsequently, the Madras High Court in SCM Creations 304 ITR 319 took a contrary view. The question whether Rogini Garments was impliedly overruled was referred to a five Member Special Bench which upheld the correctness of Rogini Garments and held:

(1) SCM Creations is not an authority on how s. 80-IA (9) is to be applied because the effect and implementation of above provision was neither raised, nor examined nor decided by the Court. A decision is an authority for the proposition that it decides and not what can logically be deduced there from. A point not raised nor argued at the Bar cannot be said to be the ratio of the decision. Accordingly SCM Creation does not impinge upon the ratio of Rogini Garments.

(2) On merits, Rogini Garments was correctly decided and did not require reconsideration. The language of s. 80-IA (9)/80-IB (9A) was clear and unambiguous and was required to be given effect to. Deduction of profit and gains allowed u/s 80-IA/80-IB had to be deducted from profits and gains of assessee’s business on which deduction u/s 80HHC had to be computed.

(140.3 KiB, 881 DLs)

Reasons for search action u/s 132 need not be given to the assessee

Search & seizure action u/s 132 was undertaken at the assessee’s premises. Thereafter an order of provisional attachment u/s 281B was passed. The assessee filed a writ petition challenging the validity of the search and the provisional attachment. HELD dismissing the Petition:

(1) Search action u/s 132 can be initiated only if the designated authority forms a reasonable belief on the basis of information that one of the three conditions of s. 132 exist. However, it is not the mandate of s. 132 that the reasonable belief recorded by the designated authority must be disclosed to the assessee.

(2) On facts, the search was justified as the information received showed that the assessee had evaded tax by claiming deduction of business expenditure of Rs.170 allegedly paid to Cyprus / UK based companies towards marketing and advertisement expenses, but which were in fact credited by the said Cyprus & U.K. based companies in the private bank account of the assessee’s CMD in Cyprus.

(3) Attaching the properties of an assessee u/s 281B even before crystallization of the demand is a drastic step and has to be exercised only in extreme circumstances. On facts, as the incriminating documents prima facie established large scale tax fraud and as the assessee and as the assessee had failed to explain the same, the provisional attachment to protect the revenue’s interests was justified.

(4) Provisional attachment u/s 281B can be levied even where proceedings are yet to be initiated. Accordingly, the fact that notice u/s 153A and the order u/s 281B were issued on the same date did not affect the validity of the provisional attachment.