2014 (7) TMI 216

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....0,83,526/- was claimed under Section 80 HHC. While examining the records, it was found that the order under Section 143 (3) of the Act was erroneous and prejudicial to the interest of revenue, inasmuch as the Assessing Officer had not made proper inquiries before quantifying the allowable deductions under Section 80 HHC of the Act. The Commissioner of Income Tax was of the opinion that job charges is not part of turnover. The Commissioner of Income Tax, accordingly passed an order under Section 263 of the Act setting aside the assessment order on the ground that it was prejudicial to the interest of the revenue and directed the Assessing Officer to pass a fresh assessment order. The assessee, being aggrieved, filed an appeal before the Tribunal, which was allowed and the order passed by the Commissioner of Income Tax under Section 263 of the Act was set aside. The department, being aggrieved by the order of the Tribunal, has filed the present appeal under Section 260A of the Act, which was admitted on the following questions of law:- "1. Whether, on the facts and in the circumstances of the case, ITAT was correct in law and on the facts in holding that job charges are integral p....

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....ears 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 the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. Explanation.-- For the purpose of this section.-- (ba) "total turnover" shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962) 90a: Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991, ....

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....ness, all receipts of income which are chargeable as profits and gains of business under Section 28 of the Act will have to be included. While computing such profits of business, different expenses which are allowable under Section 30 to 44D have to be allowed as expenses. After including such receipts of invoice and after deducting such expenses, the total of the net receipts are "profits of the business or profession" from which deduction are to be made under clauses (1) and (2) of the Explanation (baa). Under clause (1) of the Explanation (baa), 90% of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits are to be deducted from the profits of the business as computed under the head "Profits and gains of business or profession". The expression "included any such profits" in clause (1) of Explanation (baa) would mean only such receipts by way of brokerage, commission, interest, rent, charges or any other receipt, which are included in the profits of the business as computed under the head "Profits and gains of business and profession". In the present case, we are concerned with profits from the b....

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....ing words, such as brokerage, commission, interest, rent, etc. The brokerage or commission or interest, or rent does not have any nexus with any manufacturing or processing or the core business activity that could be carried on by the assessee. Similarly, the word "charges" appearing in the company of those words also will not have any nexus within manufacturing or processing or core business activity of an assessee. The word 'charges' appearing in the company of brokerage, commission, interest, rent, etc. cannot be singled out and imputed with a different meaning alleging a nexus with manufacturing or processing of core business activities. Ejusdem generis rule is the rule of generic words following more specific ones. The rule is that when general words follow specific words of the same nature, the general words must be confined to the things of the same kind as those specified. The specified words must form a distinct genesis or category. The rule reflects an attempt to reconcile incompatibility between specific and general words. In sub-clause (1) of clause (baa), the word "charges" are preceded by words of specific nature, such as brokerage, commission, interest, rent,....