2014 (9) TMI 428

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.... compensatory support, duty draw back and profit on sale of import entitlement licences will not form part of the turnover for the purpose of determining the deduction under Section 80HHC is valid in law? 2. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in holding that insurance, machinery hire charges, interest on deferred payment on export and interest on intercorporate loans, will not form part of the turnover for the purpose of determining deduction under section 80HHC is valid in law?" 2. The respondent/assessee is engaged in the manufacture of textile machinery for local sales as well as export. The assessee claimed deduction under Section 80HHC in respect of the export profits....

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....nch; and c) CIT vs. Samir Diamonds Export Ltd. (2000) 245 ITR 548 (Bom.) We have gone through the aforesaid decisions. In the decision of the Bombay High Court reported in 245 ITR 548 their Lordships held as under: "both the Commissioner of Income-tax (Appeals) and the Tribunal had found that the interest on refunds and interest on loans fell under different head of income, viz., "Income from other sources". Moreover, under section 80HHC(3)(b) of the Income-tax Act, 1961, as it stood at the relevant time, the deduction of export profits was allowed from gross total income in accordance with the following formula: Profits of the X Export turnover businessTotal turnover" The same view was taken by the Special Bench of ITAT Delhi Bench a....

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.... of section 28" 5. The plea of the assessee is that Circular No.571 dated 1.8.1990 made it clear that the total turnover will not include any sum referred to in Clauses (iiia), (iiib) and (iiic) of Section 28 and hence the Tribunal is correct in granting the benefit. We find that such a finding of the Tribunal is erroneous in view of Finance (No.2) Act, 1991 with effect from 1.4.1991, where clause (ba) of Explanation to Section 80HHC was inserted and made it clear that the expression 'total turnover' shall have its effect, as if it also excluded any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28, on or after 1.4.1991 and not before. Hence, circular No.571 dated 01.08.1990 has no relevance, in view of insertion o....