TaxTMI 
TaxTMI 
2014 (7) TMI 1125
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....rrect in law in its interpretation on the computation of relief under the provisions of section 80HHC ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that for the purposes of computation of deduction under section 80HHC, 90 per cent. of the receipts on the sale of scrap and conversion charges were to be excluded ?" Briefly stated, the facts are that the applicant is a pharmaceuticals company and apart from manufacturing drugs for being sold and used in India, it manufactures items for export also. In the ordinary course, the applicant acquires raw-material, manufactures drugs according to its own expertise and markets the products. In ....
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....s behalf was passed by the Income-tax Officer. The applicant filed an appeal before the Commissioner of Income-tax (Appeals). The appeal was dismissed through order dated March 20, 1995. Thereupon, the applicant filed I. T. A. No. 1103/Hyd/95 before the Tribunal. Through its order, dated December 3, 1997, the Tribunal dismissed the appeal. On an application submitted under section 256(1) of the Act, the Tribunal referred the two questions mentioned above : Sri S. Ravi, learned senior counsel appearing for the applicant, submits that the interpretation placed on section 80HHC of the Act by the Income- tax Appellate Commissioner and the Tribunal is contrary to the law and the settled principles. He submits that what are deductible under....
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.... component of profit from unrelated accrual ; (b) to permit deduction. According to the learned senior counsel, just as the amounts representing brokerage, commission, interest, rent mentioned in the clause do not form part of the total turnover of the business referred to in sub-section (3) of section 80HHC of the Act, the "conversion charges" also do not form part of the turnover. He submits that the Income-tax Officer, the Appellate Commissioner and the Tribunal have concurrently held on facts, that the amount representing "conversion charges" is liable to be deducted under the clause and that the questions framed by the Tribunal deserve to be answered against the applicant. Both the learned senior counsel placed reliance upon certain....
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....e assessee ; (b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export ;" (remaining part of the provision is omitted, since it is not necessary) The expression "profits of the business" employed in clause (a) of sub- section (3) of section 80HHC of the Act becomes relevant. A semblance of the definition thereof is provided under the clause, which reads : "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" ....
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....profits also. With a view to avoid the indiscriminate addition to the profits and gains of business or profession, the clause mandates that the items mentioned therein must be deducted to the extent of 90 per cent. The effort is only to ensure that the benefit of deduction provided in respect of profits, retained for export business is not claimed vis-a-vis the unrelated items. To the extent, the items are mentioned in the provision, there does not exist any difficulty for deduction from the total profits in the ordinary parlance. To arrive at the profits of business which is an expression coined specifically for the purpose of the section, not only the items mentioned therein, i.e., brokerage, commission, interest and rent but also "cha....