TaxTMI 
TaxTMI 
2018 (11) TMI 53
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.... in the facts and circumstances of the case, the Tribunal was right in holding not 90% of Exchange Fluctuation, provision written back, should not be deducted from the business profits under explanation (baa)? 3. The appeals before the Tribunal were by the Revenue questioning the correctness of the order passed by the Commissioner of Income Tax (Appeals), [CIT(A)], dated 03.02.2006 & 06.03.2006 respectively. The appeals before the CIT(A), were filed by the assessee challenging the assessment orders passed under Section 143(3) of the Act, dated 25.03.2004, for the assessment year 2001-02 and the assessment order dated 31.01.2004 under Section 143(3) r/w Section 147 of the Act for the assessment years 2000-01. 4. The assessee is engaged in the manufacture of rubber contraceptives and for the assessment years under question namely, 2001-02 & 2000-01 respectively, the assessee claimed deduction under Section 80HHC of the Act. The return of income was processed under Section 143(1) of the Act and subsequently, a notice under Section 143(2), dated 17.10.2002 was issued and the case was assigned to a different Commissioner and notice under Section 142(1), dated 11.11.2003, was issued al....
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....iness activities and the sales tax refund forms part of profits of business and they are not subject to Explanation (baa) to Section 80HHC. Further it held that the refund of sales tax has nexus with that of business of the assessee and the same is considered as forming part of the profits of business of the assessee and accordingly, agreed with the findings of the CIT (A) that sales tax refund receivable, cannot be excluded from the profit of the business for the purpose of calculating eligible deduction under Section 80HHC and Explanation (baa) is not applicable. 7. Mr.M.Swaminathan, learned counsel appearing for the Revenue contended that the Tribunal erred in holding that exchange fluctuations, provision written back, sales tax are in the nature of business income and hence, 90% should not be deducted in terms of Explanation (baa) to Section 80HHC. Further, it is submitted that the Tribunal failed to appreciate that the above said incomes does not arise out of the business/export activity of the assessee and the benefit under Section 80HHC is available only for the income derived out of export activity, which is absent in the assessee's case. In support of his contention, ....
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....o be considered and as pointed out by the Hon'ble Supreme Court, there are four variables which are to be taken into consideration. In support of his contentions, the learned counsel relied on the decision of the High Court of Himachal Pradesh in Commissioner of Income Tax vs. Purewal & Associates Ltd., [2016] 243 Taxman 0392 (HP); decision of the High Court of Bombay in the case of Alfa Laval India Ltd., vs. Deputy Commissioner of Income Tax (2003) 133 Taxman 0740; and the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Alfa Laval (India) Ltd., (2007) 295 ITR 0451, by which the appeal filed by the Revenue against the decision of the High Court of Bombay was dismissed. Reliance was also placed on the decision of the High Court of Calcutta in the case of Commissioner of Income Tax vs. Sinclair Murray & Co., Pvt Ltd., (1969) 75 ITR 0494, and the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax-VII vs. Punjab Stainless Industries, (2014) 364 ITR 0144 (SC). 9. Heard the learned counsels appearing for the parties and perused the materials placed on record. 10. The assessee's case, on the three variation....
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.... were liable to be excluded from the total turnover was rejected by the Supreme Court. The question whether processing charges constitute independent income like rent, commission, brokerage and whether liable to be excluded to the extent of 90% from the gross total income while arriving at business profits was considered and it was held that processing charges, which was part of gross total income was an independent income like rent, commission, brokerage, etc, and therefore, 90% of the said sum has to be reduced from the gross total income to arrive at the business profits and since the said processing charges was an important component of business profits, it also had to be included in the total turnover in the said formula to arrive at business profits in terms of clause (baa) in Explanation to Section 80HHC of the Act. It was emphasised that Explanation (baa) requires that receipts constituting independent income having no nexus with exports was required to be reduced from business profits under clause (baa). Consequently, in the said case, it was held that processing charges, constituted independent income, similar to rent, commission, etc, which formed part of gross total inc....
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....ded from profits of business within the meaning of clause (baa) of Explanation to Section 80HHC of the Act for the purpose of computation of reduction under Section 80HHC of the Act. We find from paragraph 17 of the judgment, that the counsel for the assessee conceded before the Court that the ratio laid down in K.Ravindranathan Nair, (supra), while dealing with processing charges would apply to the case of the assessee with regard to recovery of freight and insurance and packing receipts, sales tax refund and service income. Therefore, we find that the said question was answered in favour of the revenue partly on account of the concession recorded by the counsel for the assessee. However, we find in paragraphs 11 to 15, there were discussion as regards the effect of the decision in the case of K.Ravindranathan Nair, (supra), since the assessee therein argued that the issue raised before the Court was not an issue before the Supreme Court in K.Ravindranathan Nair, (supra). In any event, we find that the decision with regard to sales tax appears to have been rendered based on the concession recorded by the assessee. Therefore, we do not propose to dwell further on the said decision.....
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....profits while computing deduction under Section 80HHC of the Act. Thus, it was held that the sales tax set off etc., have been computed and assessed under the head "profits and gains of business or profession" as part of operational income and not under the head "income from other sources" and could not be deducted from business profits while computing deduction under Section 80HHC of the Act. Ultimately, it was held that the Assessing Officer having accepted that the said income as part of the business profit and the same could not be excluded from business profit while calculating deduction under Section 80HHC of the Act, answered the said substantial question of law in favour of the assessee. 18. The decision in the case of Alfa Laval India Ltd.,(supra), was challenged by the Revenue before the Hon'ble Supreme Court which was dismissed leaving the question open. 19. It was argued by Mr.R.Vijayaraghavan that in this appeal no substantial question of law arises for consideration and the entire matter revolves on facts, which have been concurrently held in favour of the assessee. Reliance was placed on the decision in the case of Sinclair Murray and Co., (supra). In the said ....
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....s also having a re-rolling plant. If the assessee does not have a re-rolling plant, the manufacturer would dispose of the scrap of steel to some one, who wants to recycle it and when such scrap is sold, sale proceeds of scrap cannot be included in the term "turnover", since the assessee's unit was engaged primarily in manufacturing and selling of steels utensils and not scrap of steel and the proceeds of such scrap would not be included in sales in profit and loss account of the assessee and since, the assessee was not primarily dealing in scrap, but was a manufacturer of stainless steel utensils, only sale proceeds from sale of utensils would be treated as his "turnover". Thus, it was held that the sale proceeds from scrap of steel is not to be included in the total turnover for computation of deduction under Section 80HHC, where the unit is engaged primarily in manufacturing and selling of steel utensils and not scrap of steels. 21. When we examined the facts of the case, the assessee had explained to the Assessing Officer that the difference in value was due to exchange fluctuation, which has been accounted separately in profit & loss account and the value adopted by it is ....