Section 80HHC Explanation (baa) applies only to receipts included in business profits, with no cross-head netting of interest, rent or commission.

For Explanation (baa) to section 80HHC, brokerage, commission, interest, rent and similar receipts are reduced from export profits only when they form part of profits computed under the head "Profits and gains of business or profession". The provision does not permit netting of interest paid against interest received across different heads of income, and interest assessed as "Income from other sources" is outside the reduction formula. The same approach applies to rent and commission. The reduction must therefore be made on receipts included in business profits computation, not on a net basis across heads of income, and the issue was answered in favour of the Revenue.

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Issues: Whether, for the purposes of Explanation (baa) to section 80HHC of the Income-tax Act, 1961, interest, rent and commission are to be reduced from export profits only to the extent of net receipts after setting off related payments, and whether such reduction is confined to receipts already included in the computation under the head "Profits and gains of business or profession".

Analysis: Explanation (baa) defines "profits of the business" with reference to profits computed under the head "Profits and gains of business or profession" and requires reduction of 90 per cent of receipts by way of brokerage, commission, interest, rent, charges or similar receipts only when they are included in such computation. The provision does not contemplate reduction of interest computed under the head "Income from other sources", nor does it permit set-off of interest paid against interest received across different heads of income. The same principle applies to rent and commission.

Conclusion: The reduction is to be made from receipts included in the business profits computation and not on a netting basis across different heads of income. The question was answered against the assessee and in favour of the Revenue.

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