TaxTMI 
TaxTMI 
2010 (10) TMI 738
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.... business profits for the purpose of deduction u/s 80HHC of the Act; and (iv) 90% of net interest receipts from the business profits for the purpose of deduction u/s 80HHC of the Act. II. A.Y 2003-04 - ITA No. 707/B/10: 3. Likewise for this assessment year too, the Revenue had raised ten grounds in an illustrative way. For the appreciation of the issues, they are reformulated, as in last year, as under: The CIT(A) erred in directing the AO to: (i) allow depreciation on intangible assets; (ii) exclude the cost of scraps from the total turnover for the purpose of deduction u/s 80HHC of the Act; (iii) exclude 90% of the fees received from Robert Bosch from the business profits for the purpose of deduction u/s 80HHC of the Act; and (iv) exclude 90% of net interest receipts from the business profits for the purpose of deduction u/s 80HHC of the Act. 4. As the issues raised in these appeals being similar and rather inter-linked, for the sake of convenience and clarity, they were heard, considered and disposed off in this common order. 5. Briefly stated, the assessee company ['the assessee'....
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.... its finding referred above [source: P-3-58 of PB AR] had decided a similar issue in favour of the assessee for the AYs 2000-01 and 01-02 which is directly on the point before hand. It was, therefore, pleaded that the same analogy requires to be applied for the AY under dispute too. (e) We have duly considered the rival submissions. The Hon'ble Tribunal in its wisdom had followed the finding of earlier Bench on an identical issue in the case of the assessee for the AY 98-99 wherein the Hon'ble Bench had deliberated the issue thus- "9.2..................... We have heard both the parties. This Tribunal in the case of the assessee for the asst. year 1998-99 observed as under: '4. The next issue is regarding inclusion of sale of raw materials, tools, stores etc., in the total turnover. 4.1. After hearing both the sides, we find that this issue is also covered by the aforesaid decision of the Tribunal for the asst. year 1997-98 in favour of the assessee. The Tribunal held that the raw materials are not actually sold. The amount is credited in case, the sub-contractor supplies less quantity of manufactured product and the account of the contractor....
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.... The assessee received Rs.64,75,373/- as fees towards development work from Robert Bosch GmbH and claimed deduction u/s 80-O. For the purpose of deduction u/s 80HHC, the AO deducted 90% of the above amount i.e., Rs.64,75,373/-). The main contention of the assessee is that the provisions of Explanation (baa) can be applied only to these items, which are subsequently mentioned therein and technical service fees is not one of such specified item. The assessee further contended that the same is integral part of the job/business of the assessee. Similar issue came for consideration before the Cochin Bench of the Tribunal in the case of ACIT v. Herbal Isolates (P) Ltd. (2002) 83 ITD 310 (Cochin) wherein the assessee was manufacturer and exporter of various spices produces. In course of carrying on of business, assessee also received a sum in nature of drying/grinding/distillation charges collected from other companies for undertaking job work production. The AO while examining the claim of assessee for deduction available u/s 80HHC opined that the same are to be deleted from profit of assessee computed under the head 'profits and gains of business or profession'. The Hon'ble Be....
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....aforesaid provision and which are similar in nature. If the income is derived out of the activity which would have direct and immediate nexus to the activity of export, then the said income is not deductible from the said profits of the business under the aforesaid provisions. Profits are embedded in the income earned by such export business. The difference between the concepts like goods, merchandise, service, articles etc., is getting blurred with globalization and technological advancement. If any income is derived from export and by way of foreign exchange, such income is not deductible and the benefit of that income has to be given to the assessee. The expression 'any other receipt of a similar nature', has to be understood in the context of the words preceding the said expression namely 'brokerage', 'commission', 'interest', 'rent' or charges, such receipts have no nexus with the income earned by way of foreign exchange. Every receipt is not income and every income would not necessarily include element of export turn over. This aspect needs to be kept in mind while interpreting explanation (baa) to two said section. The basic requirement of section 80HHC is earning in foreign....
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....requires to be sustained. (d) We have duly considered the rival submissions and also diligently perused the ruling of various High Courts on which the Revenue had placed its faith to drive home its point. We have also perused the findings of the earlier Bench on a similar issue in the assessee's own case for the AYs. 98-99, 99-00, 2000-01 and 2001-02. The Hon'ble Bench in its finding for the AYs 2000-01 and 01-02 in ITA Nos: 335 and 336/B/2005 dated: 12.6.2008 had deliberated the issue at length. For the appreciation of facts, we venture to reproduce the relevant portions of its finding as under: "10. In respect of ground of appeal No.6.2 [that the CIT (A) erred in upholding the action of the AO in excluding 90% of gross interest receipts....], we reproduce para 30 of the order of this Tribunal dated: 4 th May, 2007: 'We have heard both the parties. The Ld. Delhi High Court in the case of Shri Ram Honda Power Equip (supra) has held that the word 'interest' in clause (baa) of Explanation connotes net interest and not gross interest. If the AO has treated the interest receipts as business income, then deduction in terms of Explanation (baa) should be wit....
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....gh Court [CIT v. Shri Ram Honda Power Equip (2007) 289 ITR 475] appears to be more appropriate and apt in the facts and circumstances of the case. Admittedly, the aforesaid judgment of the Delhi High Court was pronounced on 12.01.2007, whereas the judgments in the matter of Ravindranathan Nair and Hero Exports by the Supreme Court came to be pronounced at later point of time. Thus Delhi High Court did not have the occasion to go through the reasonings in the aforesaid two judgments of the Supreme Court pronounced by it. Therefore, it is our duty to see if the controversy as mentioned herein above with regard to liability of the deductions under clause (baa) to Explanation of section 80HHC has been set at rest by the Supreme Court or not." After due consideration of the Hon'ble Apex Court's ruling in the above cited cases, the jurisdictional High Court had come to a conclusion thus- "36. In the light of the foregoing discussion, we are of the considered opinion that sheet anchor to the facts of this case is Delhi High Court judgment in the matter of Shri Ram Honda Power Equip (supra). We say so as that was the case, wherein the direct question posed in this appea....