TaxTMI 
TaxTMI 
2014 (1) TMI 1260
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....No.5072/Mum/2005 and 6774/Mum/2008 for the Assessment Years 2001-02 and 2004-05 in the case of the assessee itself. Along with the order of the coordinate bench, as mentioned above, the assessee, for the convenience of the Bench placed a synopsis in the tabular form, wherein the AR submitted that each of the ground as taken in the grounds of appeal and dealt with by the company's own decision in the Assessment Years 2001-02 and 2004-05, which covers grounds raised in the grounds of appeal for the year under consideration. 4. Ground No. 1 in both appeals relate to disallowance of Rs. 2,20,05,632 and Rs. 1,23,61,826 by the AO, against the disallowance made by the assessee at Rs. 2,13,58,387 and Rs. 1,20,76,367 under section 14A for the two years under consideration, making addition of Rs. 6,47,559 and Rs. 2,85,559 respectively. 5. The AR pointed out that the assessee itself had computed the disallowance of Rs. 2,13,58,387 and Rs. 1,20,76,367, respectively, and had added it back, by taking into account the average of opening and closing of application of funds which is in line with the formula prescribed under Rule 8D of the Income Tax Rules, much prior to the formula coming int....
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.... the AO is to be adopted, even then, there cannot be a major difference in the disallowance, in fact, the computation made in the SOF in accordance with the AO's method also, we see that the disallowance is coming at exactly the same figure. The DR, was not able to justify the disallowance made on this issue in either of the years, at Rs. 2,20,05,632 and Rs. 1,23,61826, more over, the method adopted by the assessee company has found its acceptance even by the Hon'ble Coordinate Bench (as extracted in pre para). We, therefore, are not inclined to sustain the disallowance of Rs. 2,20,05,632 and Rs. 1,23,61,826, in the two years before us and sustaining the additions of Rs. 6,47,245 and Rs. 2,85,559. We delete the same. The assessee's first ground of appeal in both years under consideration are allowed. 8. Ground no. 2 is against the addition of Rs. 2,94,174/- made by the AO on adhoc basis. 8.1 This ground is not pressed by the AR, therefore, it is dismissed. 9. Ground no. 3 is against the order of the Revenue authorities, wherein the profits of all the business activities were considered by the AO for the computation of deduction u/s 80HHE, instead of only back office suppor....
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....Since there is a negative figure, he has stated that the assessee is not eligible to any deduction under section 8OHHE of the Act. In page 4 of the assessment order under the heading "Deduction under section 8OHHE of the income Tax Act, 1961", the Assessing Officer has commented upon the working of the assessee. He has noted two features in the assessee's working. The first is that the assessee has taken the total turnover of the business as representing the turnover of only the back office support services. The second feature noticed by the Assessing Officer is that the assessee's figure of profit of Rs. 80,46,765/- is the profit of only the business of back office support services. After noticing these two features the Assessing Officer has commented that "the assessee believes that since it is engaged in different lines of business, which are not eligible to a deduction under section 8OHHE of the income Tax Act, 1961, the total profit and the total turnover for the purpose of deduction should be restricted to the eligible business i.e. the back office support services in view of the following judicial pronouncements: (i) CIT vs. K K Doshi, 245 ITR 849 (Born) (ii) ACIT vs. ....
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....fits of the business of back office support services which have to be split in the same proportion as the export turnover in the said business bears to the total turnover in the said business. Explanation (d), which defines the expression "profits of the business" refers to the profits of the business as computed under the head "Profits and gains of business". Under the Income Tax Act, having regard to the provisions of Chapter IV read with section 70 and section 71, it seems to us that in the case of an assessee carrying on more than one business, each business is considered as a separate source falling under the head "Profits and gains of business". The net result of the computation in respect of any source of business, if it is a loss, can be adjusted against the income from any other business as provided in section 70(1) Therefore, when Explanation (d) provides that the expression "profits of the business" means the profits of the business as computed under the head "Profits and gains of business", it means the profits of the eligible business as computed under the aforesaid head. In other words, Explanation (d) does not expand the meaning of the expression "profits of the busi....
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....nsideration has been narrowed down. In other words, whether the assessee derives income from any other business or not, is not a criteria and it is wholly extraneous while granting deduction under section 8OHHE, which is exclusively for computing deduction in respect of profit from export of computer software etc. For the reasons stated hereinabove, we allow the claim of the assessee on this ground." In coming to the above conclusion the Tribunal has referred to two judgments of the Madras High Court, in the case of CIT vs. Rathore Brothers (2002) 254 ITR 656 (Mad) and in the case of CIT vs. Madras Motors / M M Forgings Ltd. (2002) 257 ITR 60 (Mad). These two judgments were concerned with section 8OHHC of the Act. However, there was similarity between section 8OHHC and section 8OHHE in the sense that while working out the eligible profits on the basis of the ratio between the export turnover and the total turnover, it was held by the Madras High Court that it is only the profits of the export business that have to be so apportioned and the profits of businesses which did not qualify for the deduction, which were also carried on by the assessee, cannot be held eligible for the de....
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.... year, the action of the Revenue authorities were reversed by the coordinate bench, wherein the Hon'ble Bench, while allowing the deduction u/s 80HHE further held that the Assessing Officer ought to have reduced 90% of net receipts and not from gross receipts. Since, the deduction u/s 80HHE has been allowed by us in the current year, we hold that the profits of back office support service should be taken. In any case, the issue is of academic importance, respectfully following the decision, we too hold that though the primary issue of allowance of deduction is in the assessee's favor, the impugned issue too goes in favour of the assessee, for both years under consideration, though only academically. 14. Ground no. 4.2, similarly is decided in favour of the assessee though only academically, we also find favour of the same in the decision of Hon'ble Supreme Court of in the case of ACG Associated Capsules Pvt. Ltd. v/s. CIT (CA No.1914 of 2012), wherein the Hon'ble Apex Court too has held that only the net receipts should be considered. 15. Following the decision of the co-ordinate Bench in the assessee's own case and also the decision rendered by the Hon'ble Apex Court, we all....