1999 (12) TMI 114 - AT - Income Tax

Inclusion of Interest Receipts for Business Deduction | Disallowed Personal Expenses | Export Profits

The Tribunal directed the Assessing Officer to include interest receipts in computing business profits for deduction under section 80HHC, considering ... Deduction, Exporters Issues Involved:1. Consideration of interest receipts as part of business income for deduction u/s 80HHC.2. Deduction u/s 80HHC on business profits after deducting the claim u/s 32AB.3. Disallowance on account of personal use of car, vehicle, and telephone expenses.4. Inclusion of receipts from sale of export license, commission from STC, shipping freight, and processing charges for deduction u/s 80HHC.Summary:Issue 1: Consideration of Interest Receipts as Part of Business Income for Deduction u/s 80HHC- The assessee contended that interest receipts of Rs. 1,27,446 should be considered as part of business income for deduction u/s 80HHC. The CIT(A) and Assessing Officer (AO) did not accept this contention.- The Tribunal held that the interest receipts had a direct nexus with the interest expenditure and should be adjusted against the total interest expenditure. The net interest amount should be considered for computation of profits and gains of business.- The Tribunal directed the AO to include the interest receipt while computing the profits of business for purposes of computing deduction u/s 80HHC.Issue 2: Deduction u/s 80HHC on Business Profits After Deducting the Claim u/s 32AB- The assessee did not press this ground during the hearing. Hence, the Tribunal rejected Ground No. 2 of the assessee's appeal.Issue 3: Disallowance on Account of Personal Use of Car, Vehicle, and Telephone Expenses- The CIT(A) confirmed the disallowance to the extent of 1/5th of total claim for car & vehicle expenses, depreciation on motor car, and telephone expenses.- The Tribunal rejected the grounds related to car and vehicle expenses and depreciation on motor car as they were not pressed by the assessee.- For telephone expenses, the Tribunal directed the AO to restrict the disallowance to Rs. 4,000 only, considering the business use of the residential telephone.Issue 4: Inclusion of Receipts from Sale of Export License, Commission from STC, Shipping Freight, and Processing Charges for Deduction u/s 80HHC- The Revenue contended that these receipts should not be considered for deduction u/s 80HHC as they do not directly relate to export business.- The Tribunal held that these receipts are assessable under the head 'profits and gains of business' and should be included in the business profits for purposes of computing deduction u/s 80HHC.- The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s direction to include these receipts for computing the deduction.Conclusion:- The Revenue's appeal is dismissed.- The Assessee's appeal is partly allowed.