2012 (10) TMI 891 - AT - Income Tax

Tribunal decision on deduction under Section 80HHC for assessment years 2003-04 and 2004-05

The Tribunal partly allowed the assessee's appeals for the assessment year 2003-04 for statistical purposes and allowed the appeals for the assessment ... Calculation of deduction under Section 80HHC of Income-tax Act - A.O. while calculating deduction under Section 80HHC of the Act, had excluded 90% of the job receipts from the eligible profits relying on Explanation (baa) - As per the assessee, expenses incurred for the purpose of earning such receipts should be deducted and only 90% of the balance ought to be excluded for the purpose of calculation of deduction under Section 80HHC of the Act – Held that:- Expenses incurred by the assessee for earning income of the type mentioned in Explanation (baa) to Section 80HHC of the Act, had to be set off and 90% of the balance alone could be considered for exclusion, while working out the deduction under Section 80HHC of the Act - issue requires re-working and a re-look by the A.O – matter remanded to the A.O. Issues:1. Calculation of deduction under Section 80HHC of the Income-tax Act, 1961 by excluding 90% of job work receipts.2. Reopening of assessment for the year 2003-04 regarding the exclusion of processing charges for calculating deduction under Section 80HHC of the Act.Analysis:1. The appellant challenged the orders of CIT(Appeals) regarding the calculation of deduction under Section 80HHC of the Act, specifically the exclusion of 90% of job receipts. The Assessing Officer excluded these amounts based on Explanation (baa), despite the appellant's argument that such amounts should be considered with respect to the net amounts after deducting expenses incurred for earning the receipts. The CIT(Appeals) upheld the AO's decision, leading to the appeal. The appellant also contested the reopening for the year 2003-04, arguing that the AO had initially decided not to exclude any processing charges for calculating the deduction under Section 80HHC. However, the CIT(Appeals) disagreed, relying on the decision in CIT v. Kelvinator of India Ltd. The issue revolved around the exclusion of processing charges for deduction under Section 80HHC, with conflicting decisions from different cases.2. The appellant's representative acknowledged that the reopening for the year 2003-04 was justified due to the decision in Kelvinator of India Ltd. case. The core issue in both years was the exclusion of processing charges for calculating the deduction under Section 80HHC, particularly concerning Explanation (baa). While the K. Ravindranathan Nair case supported the inclusion of receipts like processing charges under Explanation (baa), a subsequent decision in M/s ACG Associated Capsules Pvt. Ltd. v. CIT highlighted that only the net amount after deducting expenses should be considered for exclusion. The Deputy Registrar agreed that a re-evaluation was necessary in light of the ACG Associated Capsules Pvt. Ltd. case.3. The Tribunal reviewed the orders and submissions, acknowledging the correctness of the reopening for the year 2003-04 based on the Kelvinator India Ltd. case. Regarding the exclusion of job work receipts, the Tribunal noted conflicting decisions from different cases. While the K. Ravindranathan Nair case favored treating such receipts as independent income under Explanation (baa), the ACG Associated Capsules Pvt. Ltd. case emphasized deducting only the net amount after expenses. Consequently, the Tribunal set aside the lower authorities' orders and remitted the issue of deduction under Section 80HHC, specifically related to job work receipts, back to the AO for fresh consideration in line with the law established by the Supreme Court.In conclusion, the appeals filed by the assessee for the assessment year 2003-04 were partly allowed for statistical purposes, while those for the assessment year 2004-05 were allowed for statistical purposes.