2012 (12) TMI 598 - AT - Income Tax

Tribunal decision on deduction computation under section 80HHC: clarifications and reassessment

Lupin Limited Versus The ACIT - LTU, Mumbai

Lupin Limited Versus The ACIT - LTU, Mumbai - TMI Issues Involved:1. Computation of deduction under section 80HHC based on company as a whole vs. each business unit separately.2. Exclusion of export turnover and total turnover of a specific unit while computing deduction under section 80HHC.3. Treatment of interest income and insurance claim in computing deduction under section 80HHC.4. Reduction of business receipts like VAT refund while computing profits for section 80HHC.Analysis:1. Computation of Deduction under Section 80HHC:The appellant contested the order confirming the Assessing Officer's computation of deduction under section 80HHC based on the entire company instead of each business unit separately. The Tribunal referred to the appellant's separate books of accounts for different businesses. However, it was noted that no separate unit-wise allocation was shown in Form 10CCAC. Consequently, the Tribunal dismissed this ground due to the lack of unit-wise accounts presented.2. Exclusion of Turnover for Specific Unit:The appellant challenged the exclusion of export turnover and total turnover of a specific unit while computing deduction under section 80HHC. Citing relevant judicial decisions, the Tribunal decided to restore this issue to the Assessing Officer for recomputing the deduction in line with the law, allowing the appellant a reasonable opportunity of hearing. This ground was allowed for statistical purposes.3. Treatment of Interest Income and Insurance Claim:Regarding the treatment of interest income, the Tribunal directed the Assessing Officer to reduce 90% of the net amount, not the gross amount, while computing deduction under section 80HHC. This decision aligned with a Supreme Court ruling emphasizing the deduction of the net interest amount. Additionally, the Tribunal held that insurance claims received on stock in trade should not be reduced by 90% while calculating eligible profits under section 80HHC. The Tribunal allowed this ground, emphasizing the direct nexus of insurance claims with business income.4. Reduction of Business Receipts:The appellant contested the reduction of business receipts like VAT refund while computing profits for section 80HHC. Relying on relevant decisions, the Tribunal allowed this claim, stating that VAT refunds, being integral to manufacturing operations, should be treated as income derived from such operations. The Tribunal allowed this ground, considering the submissions made by the appellant and the absence of any contradictory facts.In conclusion, the Tribunal partially allowed the appeal, addressing various issues related to the computation of deduction under section 80HHC, exclusion of turnover for specific units, treatment of interest income and insurance claims, and reduction of business receipts like VAT refunds. The decisions were based on relevant legal precedents and considerations of the direct impact on the appellant's business operations.