2013 (1) TMI 610

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....elating to the assessment year 1999-2000. 2. The appeal was admitted by this Court for determination of the following substantial questions of law: "(i) Whether in the facts and circumstances of the case the ITAT was right in law in holding that the profit on sale of scrap should be excluded from the profit of business for the purposes of computing deductions under Section 80HHC when the production of scrap was incidental to the business of the assessee which was a 100% Export Oriented Undertaking? (ii) Whether in the facts and circumstances of the case' the ITAT was right in law in upholding the order of the CIT (A) who had directed the exclusion of entire amount of turn over from the profits of business without ascertaining the profit ....

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....over for the purpose of computation of deduction under Section 80HHC. It was also clarified that the sale of scrap shall not be' considered while computing the profits of the business and accordingly by its order dated 25.9.2006, the CIT(A)allowed the appeal. 5. The order giving effect to the order of the CIT(A)was passed on 3.10.2006 by the assessing officer wherein total income was assessed at NIL. However, later on the' assessing officer was of the opinion that while giving effect to the order of the CIT(A), a mistake apparent on the face of the record had occurred as the scrap sales amounting to Rs.79,25,489/- had to be excluded from the total turnover as well' as from the profits) of the business for computing deduction under Section ....

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....f the assessee. 7. This is how the assessee is in appeal before us 8. We have heard learned counsel for the parties and have perused the record. 9. Learned counsel for the assessee can didly admitted that in-so-far as sale of scrap has been ordered to be excluded from the total turnover of the assessee for computation of deduction under Section 80HHC of the Act is concerned, the same is unsustainable in view of decision of this Court in Income Tax Appeal No. 31 of 2002 (Commissioner of Income Tax-III, Ludhiana vs. Bicyles wheels (India) decided on 11.10.2010. 10. However, learned counsel for the assessee submitted that the Tribunal had erred in concluding that the profit on sale of scrap will not be included in the profit of the busines....

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....e export profit by dividing business profits by total turnover and by multiplying the same with export turnover. Obviously the formula will work out realistically only if the business profit adopted is attributable to the turnover wherefrom it is derived. In fact exclusions under Explanation (baa)(i) of Section 80HHC are items of income referred to in Section 28(iiia), (iiib) and (iiic) of the Act and receipts by way of brokerage, commission, interest, rent charges or any other receipt of a similar nature. It would be useful to refer to the nature of receipts specifically covered by Explanation (baa)(i) to examine whether the items of income brought for the purpose of exclusion under .the residuary clause, "any other receipt of similar na....