Assessee's Appeal Partly Allowed: Key Rulings on Turnover, Deductions, and Bonus

The appeal filed by the assessee was partly allowed. The Tribunal ruled in favor of the assessee on issues concerning the exclusion of excise duty and sales tax from total turnover, computation of deduction on a unit-wise basis, eligibility of deduction on DEPB income, and the addition of accrued bonus under the Keymen Insurance Policy. However, the Tribunal dismissed the assessee's claims regarding the adjustment of trading exports loss against manufacturing profit.

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Issues involved:
1. Exclusion of excise duty and sales tax from total turnover while computing deduction under section 80HHC after the insertion of section 145A.
2. Computation of deduction under section 80HHC on a unit-wise basis versus the company as a whole.
3. Adjustment of trading exports loss against manufacturing profit while computing deduction under section 80HHC.
4. Eligibility of deduction under section 80HHC on DEPB income.
5. Reduction of gross interest income versus net interest for computing deduction under section 80HHC.
6. Addition of accrued bonus under Keymen Insurance Policy.

Detailed Analysis:

1. Exclusion of Excise Duty and Sales Tax from Total Turnover:
The first ground of appeal concerns the exclusion of excise duty and sales tax from the total turnover while computing the deduction under section 80HHC after the insertion of section 145A. The assessee contended that these components do not form part of sale proceeds for the purpose of section 80HHC. The Tribunal found that this issue was decided in favor of the assessee by the Hon'ble Jurisdictional High Court of Gujarat in the case of Dyntex Dyechem Ltd. The High Court held that despite the insertion of section 145A, sales tax and central excise do not form part of sale proceeds for section 80HHC purposes. Respectfully following this decision, the Tribunal allowed this ground in favor of the assessee.

2. Computation of Deduction on a Unit-wise Basis:
The second ground relates to the computation of deduction under section 80HHC on a unit-wise basis rather than the company as a whole. The Tribunal referred to its own previous decisions in the assessee's case and other judicial precedents, which consistently held that deduction under section 80HHC should be allowed on a unit-wise basis. The Tribunal noted that the assessee maintained separate accounts for each unit, and these accounts were separately audited. The Tribunal, following its earlier decisions and those of higher courts, allowed this ground in favor of the assessee.

3. Adjustment of Trading Exports Loss Against Manufacturing Profit:
The third ground involves the adjustment of trading exports loss against manufacturing profit while computing the deduction under section 80HHC. The assessee acknowledged that this issue is covered against them by the decision of the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd., which held that both profits and losses must be considered in arriving at the figure of positive profit for deduction purposes. Consequently, the Tribunal dismissed this ground in favor of the revenue.

4. Eligibility of Deduction on DEPB Income:
The fourth ground concerns the denial of deduction under section 80HHC on DEPB income. The Tribunal noted that the issue was covered in favor of the assessee by the decision of the Hon'ble Supreme Court in the case of Avani Exports, which ruled that the amendments to section 80HHC were prospective and not applicable to the assessment year in question. The Tribunal, following this decision, allowed this ground in favor of the assessee.

5. Reduction of Gross Interest Income versus Net Interest:
The fifth ground, which appears to be an alternate contention to ground four, became infructuous as the Tribunal decided ground four in favor of the assessee.

6. Addition of Accrued Bonus under Keymen Insurance Policy:
The sixth ground relates to the addition of accrued bonus under the Keymen Insurance Policy. The A.O. added the bonus accrued under the scheme to the taxable income, drawing support from section 28(vi) of the Act. The Tribunal found no judicial decision or error in the A.O.'s findings and upheld the addition. Thus, this ground was dismissed.

Conclusion:
In conclusion, the appeal filed by the assessee was partly allowed, with grounds one, two, four, and six decided in favor of the assessee, while grounds three and seven were dismissed. The Tribunal's order was pronounced in open court on 07-02-2017.

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