AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 1640
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellate order on the ground that the ld. CIT (A) has erred in holding the action of the AO that the interest amounting to Rs. 3,90,832/- is chargeable to tax under the head Income from other source and would not qualify as export income for claiming deduction under Section 80HHC and in not giving any direction/finding on the netting off of interest receipt with the interest expenses. 6. After considering the arguments advanced by the parties in view of the orders of the lower authorities and the decisions relied on by them, we find that both the issues raised in the ground of present appeal have already been decided by this Bench of the Tribunal in the case Shri Vallabh Dass Khandelwal vs. ACIT & Ors. in ITA No. 645/JP/2003 etc. vide order dated 10.3.2006. In this order dated 10.3.2006, the Tribunal had occasion to go through the decisions of Hon'ble Jurisdictional High Court in the cases of CIT vs. Rajasthan Land Development Corporation, 211 ITR 597 (Raj.) and Multi Investement Corporation vs. CIT, 167 ITR 368 (Raj.) which have been followed by Jaipur Bench of the Tribunal in the cases of ITO vs. Kirtichand Dhadda, 32 Tax World 38 (JP) and M/s Sagarmal Daga & Co. vs. ITO, 32 T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....FDRs or advances made to the third party is not a business income for the purpose of computation of deduction under section 80HHC of the Act. The AO is, thus, directed to treat and assess this income as income from other sources and not entitled for the purpose of computation of deduction under section 80HHC of the Act. So far as issue no.2 is concerned, the finding of the Tribunal in order dated 10.03.2006 (supra) has been given in para nos. 2.4 to 2.7 are reproduced here under for ready reference: "2.4 On careful perusal of the aforesaid provisions, we note that the word "the" has been used before the word "business" while defining the meaning of "profits of the business" under clause (baa). The word "the" has again been repeated in immediate phrase like "the profits of the business as computed...." The complete sentence under this clause "profits of the business" means the profit of the business as computed under the head "profits and gains of business or profession" as reduced by "The" is the word used before nouns, with a specifying or particularizing effect opposed to the indefinite or generalizing force of "a" or "an". The article "the" directs what particular thing or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion included in the computation under the head "Profits and gains of business or profession." 2.6 In the case of CIT vs. Dr. V.P. Gopinathan, 248 ITR 249 (SC), the assessee had put money in fixed deposit with a bank and had earned interest of Rs. 1,17,444/- on the security of the amount so deposited, the assessee took a loan from the bank and paid in respect of the loan interest of Rs. 90,410/-. The question was whether the assessee could be taxed only on the difference of Rs. 27,034/-. The Hon'ble Supreme Court held that the interest that the assessee received from the bank on the fixed deposit was income in his hands and it could stand diminished only if there was a provision in law permitting such diminution. There was no such provision of law and the interest on the loan taken from the bank did not reduce his income by way of interest on the fixed deposit. In the decision of the Special Bench of the Tribunal in the case of Lalsons Enterprises vs. DCIT (supra), relied upon by the ld. A/Rs, in our view, the more emphasis has been given to define "receipts" used in sub-clause (1) to clause (baa) to the Explanation to section 80HHC of the Act with this observation that in claus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee, hence the interest earned on FDRs in the present case for the reason whatever may be cannot be treated as income from the business of export which is the foremost requirement of granting deduction under section 80HHC of the Act. Even in the case of P.R. Prabhakar vs. CIT (supra) relied upon by the ld. A/R, the issue was altogether different hence it is not helpful to the assessee. In that case before the Hon'ble Supreme court, the issue was as to whether the CBDT Circular No. 621 dated 19.12.91 clarifying that the amendment in question to section 80HHC was prospective and thus binding on the revenue. The Hon'ble Supreme Court was pleased to hold that the Circular clarifying that the amendment in question to section 80HHC was prospective and binding on the revenue and thus the commission constituted export profit and the assessee was entitled to deduction under section 80HHC of the Act for the assessment year 1990-91. The facts were also different in the case of P.R. Prabhakar (supra) before the Hon'ble Supreme Court as therein the assessee had earned commission or brokerage in export and claimed special deduction thereon. In the meantime there was change in law defining pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and gains of business under Section 28 of the Act will have to be included. Similarly, in computation of such profits of business, different expenses which are allowable under Sections 30 to 44D have to be allowed as expenses. After including such receipts of income and after deducting such expenses, the total of the net receipts are profits of the business of the Assessee computed under the head "Profits and Gains of Business or Profession" from which deductions are to made under Clauses (1) and (2) of Explanation (baa). 10. Under Clause (1) of Explanation (baa), ninety per cent of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in any 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 the 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 or Profession". Therefore, if any quantum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and Gains of Business or Profession" referred to in the first part of the Explanation (baa). Accordingly, if any quantum of any receipt of the nature mentioned in Clause (1) of Explanation (baa) has not been included in the profits of business of an Assessee as computed under the head "Profits and Gains of Business or Profession", ninety per cent of such quantum of the receipt cannot be deducted under Explanation (baa) to Section 80HHC. 15. The Bombay High Court has also relied on the Memorandum explaining the clauses of the Finance Bill, 1991 contained in the circular dated 19.12.1991 of the Central Board of Direct Taxes to come to the conclusion that the Parliament intended to exclude items which were unrelated to the export turnover from the computation of deduction and while excluding such items which are unrelated to export for the purpose of Section 80HHC, Parliament has taken due note of the fact that the exporter Assessee would have incurred such expenditure in earning the profits and to avoid a distorted figure of export profits, ninety per cent of the receipts like brokerage, commission, interest, rent, charges are sought to be excluded from the profits of the business....