TaxTMI 
TaxTMI 
2008 (4) TMI 535
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.... and exporting the same to the foreign parties, (ii) acting as an agent for advertising sales for Star and Overseas media companies, and (iii) rendering services to media companies. In the year under consideration, the assessee claimed deduction of Rs. 12,97,67,452 under section 80HHF of the Act. In computing such deduction, the assessee applied the formula given in sub-section (3) of section 80HHC by taking the profits of business, export turnover and total turnover at Rs. 22,07,85,093, Rs. 1,03,09,80,065 and Rs. 1,75,40,99,550 respectively. The claim of the assessee was examined by the Assessing Officer in the course of assessment proceedings. Regarding this claim, the Assessing Officer had made the following observations :- (1)The provisions of section 80HHF being in pari materia with section 80HHC, the claim of the assessee is to be examined with reference to the ratios laid down by the courts with reference to section 80HHC; (2)The export of television programmes has no bearing on the other business activities of the assessee namely subscription commission and other income since all activities are independent activities; (3)The expression 'derived from' in sub-section....
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....CIT (No. 1) [2001] 251 ITR 401, it was held by him that assessee was not entitled to any deduction under section 80HHF since there was a loss in the export activity. 4. The finding of the Assessing Officer was challenged before the learned CIT(A) who after considering the submissions of the assessee held that the claim of the assessee could not be denied on the basis of segmented Profit & Loss account prepared at the instance of the Assessing Officer. It was found by the learned CIT(A) that assessee had not maintained separate books of account for each activity. It was only at the instance of the Assessing Officer that segmented Profit & Loss account was prepared in respect of each activity. It was also observed by him that decision of Hon'ble Bombay High Court in the case of IPCA Laboratories Ltd. (supra) was distinguishable on facts inasmuch as in the case before the Hon'ble High Court there were two export activities and the assessee had loss in one of the activities which the assessee wanted to be ignored for the purpose of claiming deduction under section 80HHC while in the present case, the assessee has only one export activity. He also took into consideration the judgment....
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....tention to various activities carried on by the assessee. The first activity is, admittedly, the export activity, i.e., export of television programmes and the assessee is eligible for deduction under section 80HHF. However, such programmes are exported at a profit margin of 5 per cent calculated at the cost of production plus overhead expenses. If corporate expenses which are common to all the activities are allocated then there is loss in the export business. Consequently, the question of allowing deduction under section 80HHF would not arise since there is no profit derived from such activity. The second activity carried on by the assessee is collection of advertising revenue for its principal on which assessee gets commission at the rate of 10 per cent. This activity is just opposite and reverse to export activity since the amount collected after deduction of commission, is remitted to its foreign principal. Thus, neither there is any export nor there is inflow of foreign exchange into India. If deduction is allowed in respect of such income then object behind the provisions of section 80HHF would be frustrated. The third activity is collection of subscription money and channel....
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....ould become unworkable. It was also submitted that Explanation (f ) provides the exclusion of certain business income which itself shows that the profits of business would include not only the profits from export but also the profits from the other business activities. Reliance has been placed on the decision of the Special Bench in the case of International Research Park Laboratories Ltd. v. Asstt. CIT [1994] 50 ITD 37 (Delhi) which has been approved by the Hon'ble Supreme Court in the case of P.R. Prabhakar v. CIT [2006] 284 ITR 548. While reading the decision of the Special Bench, it was pointed out by him that in that case, there was loss from export activity but there was profit in the commission activity and the claim of the assessee was rejected by the revenue authorities on the ground that there was loss from export activity. The Special Bench held that the profits of business must be computed for the entire business and accordingly, the assessee was held to be entitled to deduction under section 80HHC despite the fact that there was loss from the export business. This reasoning was found to be acceptable by the Hon'ble Supreme Court in the case of P.R. Prabhakar (supra). R....
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....ection 80HHF. On the other hand, the stand of the assessee has been that the profits of the entire business carried on by it must be taken into consideration since profits derived from business referred to in sub-section (1) of section 80HHF must be computed in ac- cordance with the provisions of sub-section (3) read with Explanation (f). 9. In order to appreciate the controversy, it would be appropriate to refer to the relevant provisions of section 80HHF which are reproduced below :- "80HHF.-(1) Where an assessee, being an Indian company [or a person (other than a company) resident in India], is engaged in the business of export or transfer by any means out of India, of any film software, television software, music software, television news software, including telecast rights (hereafter in this section referred to as the software or software rights), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of profits derived by the assessee from such business. ****** (3) For the purposes of sub-section (1), profits derived from the business referred to in that sub-section shal....
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....[or processed] by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and ( ii)in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods : Provided that..... Explanation.-For the purposes of this section,- (baa)'profits of the business' means the profits of the business as computed under the head 'Profits and gains of business or profession' as reduced by- (1)ninety per cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid ) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2)the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India;" 11. A comparison of the above provisions clearly shows that the language in both the sections is almost similar as far as computation of eligible....
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.... valuation must be made as per rules. Therefore, it should be kept in mind that whenever a provision is subject to other provisions then other provisions would have an overriding effect. Consequently, we are of the opinion that scope of the expression 'profits derived from the business' referred to in sub-section (1) of section 80HHF cannot be understood in isolation but should be understood in the sense in which Legislature has provided in sub-section (3) of section 80HHF read with Explanation ( f). 14. Sub-section (3) of section 80HHF provides that for the purpose of sub-section (1), the profits derived from the business referred to in that sub-section shall be the amount which bears to the profits of business, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. The expression 'profits of the business' has been further defined in clause (f) of Explanation to section 80HHF which means profits of business as computed under the head 'Profits & gains of business or profession' as reduced by the receipts/profits referred to in the above clause. If all these provisions are read together then the profits derived from the ....
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....und that cost of goods exported amounted to Rs. 2.21 crores which was more than the export turnover. Thus, there was loss of Rs. 2.32 lakhs. The Assessing Officer was of the view that there must be positive profit derived from export as per the provisions of sub-section (1) of section 80HHC in order to claim deduction under section 80HHC. According to him, the formula of apportionment prescribed under sub-section (3) could be applied only where there was positive profit from export activity alone. Since there was loss in export business, he denied the deduction and refused to apply the formula given in sub-section (3). The learned CIT(A) confirmed the order of Assessing Officer. Thus, the matter reached the Tribunal. The Special Bench was constituted to resolve such controversy. The Special Bench finally concluded that in order to claim deduction under section 80HHC, there was no need for any profit to be in existence in export business. The profits derived from export has to be computed by applying the formula prescribed under section 80HHC(3) irrespective of the fact whether separate books of account were maintained or not for various activities of business carried on by the asse....
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....ation except that the provisions of Explanation (baa) to section 80HHC similar to the provisions of Explanation (f) to section 80HHF were not before the Apex Court. Therefore, the question arises whether the provisions contained in the above Explanation would alter the legal position declared by the Apex Court. In our humble opinion, such change does not alter the legal position declared by the Apex Court in the case of P.R. Prabhakar (supra). The provisions of sub-sections (1) and (3) of section 80HHC as considered by the Apex Court in the case of P.R. Prabhakar (supra) required the assessee as well as Assessing Officer to compute the profits derived from export as per the formula given in sub-section (3), i.e., computation of profits under the head 'Profits and Gains from Business or Profession'. Once such profit is computed then further requirement was to apportion the same on the basis of the ratio of export turnover to the total turnover. These two steps are also contemplated by the provisions of section 80HHF since profits derived from the business specified in sub-section (1) has to be computed in accordance with the formula provided in sub-section (3) thereof. Sub-sectio....
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....om export of trading goods. The contention before the Apex Court was that the word 'and' in section 80HHC(3) should be liberally construed. If so construed, then the deduction should be allowed only in respect of the profits from export and the loss, if incurred, should be ignored. This contention of the assessee was rejected by the Apex Court by holding that the language of section was unambiguous and the profit should be computed only after adjusting the losses in- curred in the business. Since, the net result was loss it was held that assessee was not entitled to deduction under section 80HHC. The above discussion clearly shows that the issue before the Hon'ble Supreme Court was entirely different from the issue before us. It is also pertinent to note that even the Hon'ble Supreme Court considered the computation of business profits under sub-section (3) of section 80HHC which shows that profits derived from export under sub-section (1) should be computed in accordance with sub-section (3) of section 80HHC. There is nothing in the judgment to indicate that profits from export should be computed on the basis of segmented Profit & Loss account in respect of export activity alone i....
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....on'. Assessing Officer noted that assessee had received the following amounts 90 per cent of which is required to be excluded :- 1.Ad Sales & Commission 35,30,72,440 2.Subscription Income 63,77,38,563 3.Other Income-Subscription 1,56,43,879 1,00,64,54,882 It was also noted by the Assessing Officer that the assessee itself had excluded 90 per cent of net commission amounting to Rs. 5,03,81,289 as against gross commission of Rs. 35,30,72,440. It was also found by him that nothing was excluded out of subscription receipts and other income. The explanation of the assessee was that if 90 per cent of gross receipts are excluded then it will present a distorted picture and would lead to injustice. This explanation was rejected since in his view, the legislation has used the word 'receipts' and not the income. Accordingly, he computed loss of Rs. 63,46,43,012 as under :- Profits and gains of business Rs. 27,11,66,382 Less : 90 per cent of gross commission Rs. 31,77,65,196 (Rs. 35,30,72,440) Less : 90 per cent of gross subscription Rs. 58,80,44,198 (Rs. 65,33,82,442) Loss Rs. 63,46,43,012 Since there was ....
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....independent activity by itself as held by the learned CIT(A). Having held as such, the learned CIT(A) was not justified in holding that receipts from such activity could not be excluded from the profits of business computed under the head 'Profits and gains from Business or Profession'. According to him, the finding of the learned CIT(A) is fatal to the claim of the assessee since deduction is available only with reference to profits from export activity. Accordingly, it is submitted that considering the fact that cable subscription charges emanate from an independent activity without having any nexus with export activity, 90 per cent of such receipts must be excluded from the profits of business computed under the head 'Profits and gains from business or profession' in view of the latest judgment of Hon'ble Supreme Court in the case of CIT v. K. Ravindranathan Nair [2007] 295 ITR 228 . Reliance is also placed on the judgment of the Apex Court in the case of CIT v. Lakshmi Machine Work [2007] 290 ITR 667 to submit that 90 per cent of receipts are to be excluded which do not emanate from export turnover. It was also submitted that exclusion of 90 per cent of receipts is not restrict....
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....sing charges constituted part of business profits under section 28 of the Act. The only dispute before the parties was whether processing charges would form part of total turnover or not for the purpose of computing deduction in accordance with the formula given in section 80HHC(3). The assessee had not included such charges in the total turnover while the Assessing Officer not only included the same in the total turnover but also excluded 90 per cent of such charges from the profits of business. He drew our attention to the point of dispute before the Apex Court by referring to page 231 of the report. He reiterated that only dispute before the court was whether processing charges could be included in the total turnover or not. Accordingly, it was pleaded that this judgment cannot be said to lay down any ratio as to which income/receipt could be excluded from the profits of business. In this connection, he relied on the judgments of the Apex Court viz., CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 and Goodyear India Ltd. v. State of Haryana [1991] 188 ITR 402 (SC). 27. On the other hand, it was submitted that the issue is covered by the judgment of the jurisdictiona....
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....nce with the principle of Ejusdem Generis. According to him, there must be a common thread in the specific items mentioned by the Legislature which must exist in the general item to be included in the expression 'receipts of similar nature'. According to him, the specific incomes preceding the above expression are passive incomes and therefore, income from main activities of business would be outside the scope. Consequently, cable subscription emanating from the main activity cannot be excluded, in terms of Explanation (f), from the profits of business. Another common thread is the absence of the element of turnover as classified by the Circular No. 621, dated 19-12-1991 reported as 195 ITR 154 (St.). According to him, the element of turnover can be said to exist where each activity results in profit. In the case of the assessee, there are thousands of cable operators who are required to pay the subscription depending on the number of subscribers to the channel. Further, the volume of subscription depends on number of viewers as well as the period for which licence to view the programme is allowed. The activity being an organized activity, the subscription amount would partake the ....
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....g further, it was submitted that the judgment of Hon'ble Supreme Court in the case of K. Ravindranathan Nair (supra) would apply to the facts of the case and the decision of Bombay High Court in the case of Bangalore Clothing Co., does not advance the case of the assessee. Further, the decision of Hon'ble Supreme Court in the case of Baby Marine Exports (supra) was also on entirely different facts, i.e., the claim of supporting manufacturer with reference to export incentives received in Indian currency. Hence, the said decision also does not help the assessee. It was also, submitted by him that even the obiter dicta of the Hon'ble Supreme Court is binding on the subordinate courts and Tribunals and therefore, judgment of Hon'ble Supreme Court in K. Ravindranathan Nair's case (supra) would apply. Lastly, it was submitted that receipts by way of cable subscription would amount to receipt by way of charges and therefore, 90 per cent of the same would have to be excluded. He also relied on the finding of the Assessing Officer recorded in paras 6.8, 6.10 to 6.20. 34. Rival submissions of the parties have been considered carefully. The issue for our adjudication is whether 90 per cen....
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.... Since common accounts were maintained, it was difficult to ascertain the profits from export. So the object of the existing formula was to ascertain the export profits on the basis of ratio of export turnover to total turnover. Perhaps the Legislature could not foresee the other incomes which could be earned by the assessee emanating from the activities not involving the turnover. One of the variables to be considered in the formula was the profits of business computed under the head 'Profits or gains from Business or Profession' which included all types of income whether emanating from the activity involving turnover or activity not involving the turnover. Thus, the formula resulted in distorted picture allowing the deduction even in respect of income emanating from activity not involving element of turnover. In order to cure this mischief, the Legislature introduced clause (baa) in Explanation to section 80HHC as is apparent from the CBDT Circular No. 621, dated 19-12-1991. Relevant portion of the same is reproduced as under : "32.10 The existing formula often gives a distorted figure of export profits when receipts like interest commission, etc., which do not have element of....
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....e and therefore the turnover would refer to the amount of business done in respect of goods or merchandise whereas section 80HHF refers to different softwares as well as telecast rights and therefore, turnover would not only include sale of software but also consideration for transfer of rights therein as is apparent from the definition of 'export turnover' given in Explanation (c) to section 80HHF, which not only includes consideration for transfer of softwares but also consideration for transfer of software rights. What is true to export business would also be true to local business. Therefore, in our view, the amount of business done in respect of software rights would have to be treated as turnover. Section 80HHF refers to film software, music software, television news software and television software. The purpose behind production of such softwares is to view/exhibit the programmes contained therein. Consequently, right to exhibit such programmes would certainly fall within the scope of 'software rights'. Consequently, the amount of business done with reference to such right would form part of turnover. In the present case, the right to exhibit the programmes telecasted by var....
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....hose receipts which do not have element of turnover. That impliedly means that receipts having element of turnover cannot be excluded from the profits of business in terms of Explanation (f) to section 80HHF. The Constitution Bench of the Hon'ble Supreme Court in the case of Navnit Lal C. Jhaveri v. K.K. Sen, AAC [1965] 56 ITR 198 has held that circulars issued by the Board which are beneficial to the assessee are binding on the tax authorities. Keeping in mind the above binding judgment and the circular mentioned above, it must be held that cable subscription having element of turnover cannot be excluded from the profits of business computed under the head 'Profits and gains of business or profession'. We hold accordingly. 40. Heavy reliance has been placed on the judgment of Hon'ble Supreme Court in the case of K. Ravindranathan Nair (supra) by the revenue for the proposition that if the activity carried on by the assessee is an independent activity, then 90 per cent of the receipts emanating from such activity will have to be excluded from the profits of business computed under the head 'Profits and gains from Business or Profession' by virtue of the provisions of Explanation....
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....take into account all other receipts other than excluded items of receipts?" [Emphasis supplied] 41. The Hon'ble Kerala High Court upheld the order of the Tribunal by holding that processing charges could not be included in the total turnover. The revenue filed an appeal before the Hon'ble Supreme Court against the said judgment of the Hon'ble High Court. 42. The contention of the revenue before the Apex Court was to the effect that when the processing charges were includible in the business profits, the same were also includible in the total turnover in the formula prescribed by the Legislature for computing the deduction under section 80HHC. Reliance was placed on the clauses (ba) and (baa) to the Explanation to section 80HHC. On the other hand, the contention of the assessee before the Apex Court was that assessee had two independent businesses. In one case, he processed and exported his own products and in the other, he processed the raw material supplied by the third parties against job charges. According to the learned Counsel for the assessee, the income from works contract by way of processing charges was not includible in the denominator (total turnover) in the formu....
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....n authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in it. Similar observations were made by the Apex Court in the case of Union of India v. Dhanwanti Devi [1996] 6 SCC 44. Reference can also be made to another decision of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. (supra) wherein it was observed as under : "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, ascertain the true principle laid down by the decision." [Emphasis supplied] It is clear from the above decisions that each and every observation in a decision is not a precedent. It is only the ratio which is cons....
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...., the contention of the assessee was that under the contract between the assessee and the export house, the assessee was entitled to receive the export incentives as part of sale consideration and therefore, it was entitled to deduction in respect of such amount. Though the judgment of Bombay High Court in the case of Bangalore Clothing Co. (supra) was referred to by the learned Counsel for the assessee but the said judgment does not find any place in the operative part of the judgment of the Apex Court. The entire operative part of the judgment related to the interpretation of section 80HHC(1A). After interpreting the said provisions, the court held that the Tribunal was justified in holding that export incentive was integral part of sale price realised by the assessee. Therefore, it cannot be said that the said judgment of the Bombay High Court stands approved by the Apex Court. 47. In view of the above discussion, it has to be held that there is no judgment of the Apex Court on the scope of Explanation (baa) to section 80HHC. However, we find merit in the contention of the ld. Counsel for the assessee that the scope of the above Explanation was considered by the Hon'ble Bomba....
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....ould dispose of the ground No. 4 in assessee's appeal. 50. The next issue relates to the disallowance of Rs. 21,98,989 representing the expenditure on account of lease holding improvements. 51. Briefly stated, the facts are that the assessee had entered into a leave and licence agreement with Precision Components Ltd. (PCL) for occupying the premises known as masterpiece building. In the year under consideration, the assessee had incurred expenditure of Rs. 21,98,589 on account of repairs, renovation, etc., of the said building, This expenditure was claimed as deduction in computing the business income. The Assessing Officer asked the assessee to show cause as to why such expenditure be not treated as capital expenditure. The contention of the assessee before the Assessing Officer was that such expenditure was allowable under section 30(a)( i) of the Act inasmuch as all the conditions stated in that section were satisfied. Reliance was placed on various decisions namely, CIT v. B.B. Ramchandrappa & Sons [1991] 191 ITR 34 (Kar.), Allied Metal Products v. CIT [1982] 137 ITR 689 (Punj. & Har.), Ramkrishna Steel Rolling Mills [1974] 95 ITR 97 (Delhi), Instalments Supply (P.) Ltd.....
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....urring the expenditure. As per the Assessing Officer the expenditure should have been consumed within one year only to entitle the appellant for claiming the deduction. Appellant is in the business where a better presentation of the office is very important. The improvement in the working atmosphere was essential requirement for the appellant to carry on business effectively. The contentions of the Assessing Officer that the expenditure on repair must be consumed in one year cannot be sustained as such. Even a simple repair may last for several years. The expenditure on water proofing the roof is essential to avoid damage to the office premises and the records. The false ceiling provided in the office improves the air-conditioning and conceals the shabby objects." Aggrieved by the same, the revenue is in appeal before the Tribunal. 53. The learned Sr. D.R. has submitted before us that provisions of section 32 Explanation 1 are deeming provisions and, therefore, if the expenditure incurred in relation to the building not owned by the assessee which are capital in nature then assessee shall be deemed to be the owner of the building to the extent of such expenditure incurred ....
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....ny capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work in or in relation to, and by way of renovation or extension of or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee." A bare perusal of the above Explanation shows that it refers to only capital expenditure incurred in relation to premises not owned by the assessee i.e., ( i) incurred on construction of any structure, (ii ) incurred on doing of any work in or in relation to the building by way of renovation or extension of or improvement to such building. If such expenditure is incurred then such structure or work shall be deemed to be a building owned by the assessee. The provisions being deemed provisions are to be applied strictly and, therefore, if any expenditure incurred in respect of such premises does not fall under the above description, then the same shall be considered for allowance under section 30 or section 37 of the Act. On the contrary, if the expenditure is covered by the above description then such expenditure wi....
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....ection 32 of the Act. 56. At this stage, it may be pertinent to note that Explanation I to section 32 applies only to capital expenditure. That means it is only those expenditures which are per se capital in nature that are covered by the provisions of the said Explanation. The expenditures which are per se revenue in nature would remain outside the ambit of such Explanation and consequently would be allowable as deduction either under section 30 or 37 of the Act. Thus, routine repairs carried out by the assessee to the building cannot be brought within the scope of such Explanation. For example, expenditure on white washing or painting of building even by the landlord are per se revenue in nature and, therefore, would be allowable as deduction whether the assessee is landlord or tenant. Similarly, minor repairs carried out to restore the original condition would also be per se revenue expenditure not falling within the scope of Explanation I. On the other hand, the expenditure by way of renovation of the building per se would be capital in nature and cannot be allowed as deduction under section 37 of the Act in view of the judgment of hon'ble Supreme Court in the case of Ballim....
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....s. Accordingly, the order of CIT(A) is set aside on this issue and the matter is restored to the file of Assessing Officer for fresh adjudication of the matter after giving fair opportunity of being heard to the assessee. This would dispose of ground No. 1 of the department's appeal. 59. The next issue relates to the disallowance of Rs. 2,99,64,439 in respect of bad debts written off which has been deleted by the learned CIT(A). 60. Briefly stated, the facts are that assessee had claimed deduction on account of bad debts in respect of amount due from Siti Cable to the tune of Rs. 2,99,64,439. In the course of assessment proceedings, the assessee was asked to submit as to when these amounts were shown as income for tax purpose. The assessee vide letters dated 5-3-2003 and 12-3-2003 submitted as under : "As per letter dated 5-3-2003 'Bad debts written off during financial year 1999-2000 in respect of Siti Cable were to the tune of Rs. 29,964,439. This pertain to amounts receivable from Siti Cable which were accrued in prior years as well as current year. As and when invoices were raised on Siti Cable, income was accrued and, accordingly, offered for tax in the respective ....
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....ividual debtors. Therefore, individual debtor's outstanding or the quantum of services booked for individual debtor cannot be ascertained. The appellant has also not produced any correspondence from M/s. Siti Cable to substantiate the claim that the amount receivable from them was disputed nor any evidence is produced that the amounts shown receivable from Siti Cable were at any time acknowledged by them. It is obvious that appellant claims some unidentified receivables to have been offered for taxation and claims a part of such amount as Bad debts. The claim of the appellant remains unsubstantiated. In view of the above, the claim of the appellant cannot be accepted. The action of the Assessing Officer is sustained. This ground of appeal is rejected." Aggrieved by the same, the learned CIT(A) is in appeal before the Tribunal. 63. The learned Counsel for the assessee has submitted that for claiming deduction under section 36(1)(vii), it is sufficient if the debt is written off as irrecoverable and no further onus lies on the assessee to prove that the debt has actually become bad. Reliance is placed on the decision of Special Bench in the case of Dy. CIT v. Oman International....
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....t substantiate this aspect of the matter. Though certain details are filed in the paper book, but in view of the specific finding given by the lower authorities, the claim cannot be allowed at this stage unless this aspect is verified by the Assessing Officer. In our opinion, the interest of justice would be met if an opportunity is given to the assessee to prove this aspect before the Assessing Officer. Consequently, the order of learned CIT(A) is set aside on this issue and the matter is remitted to the file of Assessing Officer with the direction that if the assessee is able to prove that the amount claimed as deduction on account of bad debts was offered as revenue receipt in the earlier years, then he shall allow the claim of the assessee. It is clarified that the assessee would not be asked to prove that debt has become bad unless any decision by the jurisdictional High Court or the Apex Court is delivered to the contrary. This discussion will dispose of ground No. 1 in assessee's appeal. 65. The next issue arising from the appeal of assessee relates to the addition of Rs. 6,85,15,145 in respect of commission income (wrongly mentioned as addition of Rs. 23,64,41,347 in the....
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....essment year 1997-98 has been decided by the Tribunal in favour of the assessee vide order dated 28-7-2006 by holding that income accrued in the year in which the amount was received by the assessee or paid by the advertisers even under the Mercantile system of accounting. Since the lower authorities had relied on their orders for the preceding assessment years, the addition cannot be upheld since the additions made in the earlier years on this account have been deleted by the Tribunal. However, the learned D.R. has submitted before us that there is a change in the terms and conditions of payment of commission and that the same may be considered. In view of the same it would be appropriate to refer the relevant clauses of the agreement for the benefit of this order. The clause (8) of the agreement dated 31st day of May, 1994, which was considered by the Tribunal in the appeals relating to assessment years 1997-98 to 1999-2000 read as under : "The Agent shall be entitled to retain 15 per cent of the net invoiced amount paid by the clients as commission." 67. On the other hand, the relevant clause (E) of the agreement dated 1st April, 1999 reads as under : "E. Compensation -....