2007 (2) TMI 103

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....Whether on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in holding that the scrap and waste materials generated during the course of manufacture, royalty received and the guarantee commission for the purpose of calculation of 80HHC deduction would have to be excluded from business profit for the purpose of calculation of deduction under 80HHC? 3.  Whether on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in holding that excise duty and sales tax are to be included in the turnover while calculating 80HHC deduction? 2.  As the 3rd question, ex facie, is not happily worded, we reframe the same as under: Whether on the facts and in the circums....

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....royalty and guarantee commission are concerned, the Appellate Tribunal decided the  issue in favour of the assessee. The Appellate Tribunal also decided the issue of inclusion of excise duty and sales tax to the total turnover in favour of the assessee. Aggrieved by the same, the Revenue has preferred this appeal raising the questions of law referred above. 6. As regards the 1st question, the issue whether the expenditure on replacement of machinery is capital or revenue is not determined by the treatment given in the books of account or in the balance sheet.  The claim has to be determined only by the provisions of the Act and not by the accounting practice of the assessee.  7. This Court, in COMMISSIONER OF INCOME-TAX....

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.... other business of the assessee. 11. Applying the ratio laid down by this Court in  C.I.T. v. Madras Motors/M.M.Forgings Ltd. (257 ITR 60), we hold that the scrap and waste materials, which would not be relatable to export business of the assessee, have to be excluded from business profit for the purpose of calculation  of deduction under section 80HHC of the Act. 12. On the question of includibility of royalty as well as the guarantee commission for the purpose of calculation of deduction under section 80HHC of the Act,  the Bombay High Court in Commissioner of Income-tax (Appeals) v. Bangalore Clothing Co. (260 ITR 0371) held that the Explanation (baa) to section 80HHC of the Income-tax Act, 1961, was inserted by the ....