TaxTMI 
TaxTMI 
2009 (4) TMI 547
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....eleting the restriction of deduction under section 80HHC to Rs. 8,96,811, without appreciating the fact that in view of nature of business, the labour charge receipt could not be termed as 'profit of the business'." Further, the only ground raised by the assessee reads that "the Ld. Commissioner of Income-tax (A) has erred in confirming the addition made by the Ld. Assessing Officer and is not justified in restricting the deduction under section 80-IB to Rs. 14,80,138 as against Rs. 19,51,796 claimed by the assessee." ITA No. 5694/Mum./2007 (Revenue's appeal) 3. At the very outset, the Learned Counsel for the assessee filed a copy of the order of the Tribunal for assessment year 2000-01. Referring to grounds 1 & 2 relating to invoking of the provisions of section 145(3), the Learned Counsel has taken us through Para 4 and has argued that issue is decided in favour of the assessee. Learned DR has fairly agreed to the above. We have heard both the parties and perused the relevant orders and Para 4 of the said order of the Tribunal, which reads as under:- "4. After considering the orders of the authorities below, we find that on similar facts the provisions of section 145(3) were ....
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.... CIT(A). Otherwise, Assessing Officer did not grant the benefits of the provisions of Explanation (baa) of section 80HHC in respect of labour charges. Further, Counsel has argued that this issue is also covered in favour of the assessee vide Paras 8 to 10 of the Tribunal order dated 28-11-2008 in connection with assessment years 2000-01 to 2002-03 and 1998-99. In view of the significance, relevant Paras are reproduced as under:- "8. The ground No. 3 in the appeals for assessment years 2001-02 and 2002-03 is against in not directing to apply the provisions of Explanation (baa) of section 80HHC in respect of labour charges. 8.1 While computing the deduction under section 80HHC, the Assessing Officer reduced 90 per cent of labour charges from profit of business. The estimated profits under section 80HHC were arrived at Rs. 73,81,172 as against Rs. 94,91,972 shown by the assessee. It was submitted before the CIT(A) that the assessee company was carrying on consolidated activity of the manufacturing, labour charges essentially from the part of its composite business. As a result of which such receipts have to be taken into the account of computing business profits under section 28, th....
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....eting expenses, packaging materials etc., should not be charged to the profits of the eligible unit. The assessee replied vide dated 28-11-2006 stating that the expenses actually incurred by Silvassa Division was only to be debited to the P&L account of Silvassa Division, the eligible unit. Accordingly, he objected to the proposal of the apportionment of the common expenses. After duly considering the above objections, the Assessing Officer proceeded to allocate the above expenditure on the basis of their turnovers as discussed in Para 8.3 of the assessment order. During the first appellate proceedings, the CIT(A) confirmed the decision of the Assessing Officer in restricting the deduction under section 80-IB to Rs. 14,80,138 as against Rs. 19,51,796 claimed by the assessee, stating that the assessee failed to demonstrate that the explanation given by the assessee is correct. 10. Aggrieved with the above, the assessee is before us. Learned Counsel has argued stating that the profits of the eligible business should be computed strictly as per the actual expenses and not the common or indirect expenses. However, he has left the issue to the Bench for the judicious decision in the ma....
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....igible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." [Emphasis supplied] 13. From the above, it is evident that section 80-IB provides for the allowing deduction in respect of the profits and gains derived from the eligible business. Sub-section (13) of section 80-IB provides for the applicability of the provisions of sub-section (5) and sub-sections (7) to (12) of sections 80-IA, so far as may be, applicable to the eligible business under section 80-IB. On perusal of the provisions of the said sub-section (5), it is noticed that it provides for manner of computation of the profits and gains of an eligible business. Accordingly, such profits and gains are computed as if such eligible business were the only ....
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....s held as mentioned in para 6.4 of the order, that 'any allocation of the expenditure of the head office has to be done to all the units which are operating under the head office, unless there are valid reasons to exclude any particular unit'. As seen from para 7.2 of the said decision, the same was delivered in the context of section 80-IA(7) only. Thus, the provisions of section 80-IB(1) convincingly advocate for the allocation of indirect expenses towards to Silvassa Unit as well and, in principle, the decision of the revenue authorities is free from any mistake. 15. Therefore, it is fact that the assessee is under legal obligation by virtue of section 80-IB(1) to compute the 'profits and gains of the eligible business' separately and that of the others separately. It is so held in the case of Eastern Medikit Ltd. (supra) too. Further, on the issue of liberal interpretation of the said sub-section (5) on the matters relating to reducing the losses and depreciation from the profits and gains of the eligible business, the only source of income, the Ahmedabad Special Bench of the Tribunal, in the case of Asstt. CIT v. Goldmine Shares & Finance (P.) Ltd. [2008] 113 ITD 209 , held t....
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....een derived therefrom. Thus, section 80-IA/80-IB provide for the provisions against the disclosure of the excessive profits in respect of the eligible profits. In the instant case, such possibility is inevitable, as admittedly, the indirect expenses were booked only against the taxable profits of the non section 80-IB projects and not against the tax-free profits of section 80-IB unit. Therefore, any computation which supports disclosure of excessive profits of eligible business is against the provisions of section 80-IB/80-IA of the Act. 17. Thus, so far we have analysed the legal anatomy on the scope of the issue of the said manner of computation. The resultant analysis confirms the view that provisions of section 80-IA(5) are distinct, deemed and overriding provisions and they, in the combination of section 80-IB(1), advocate for special computation of 'profits and gains of the eligible business' in general and for considering all the expenses, both direct and indirect, among all the ongoing projects, if not exclusively against the profits and gains of the eligible business, the only source of income of the assessee. Various judgments discussed above along with the one of the D....