2022 (6) TMI 461

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....lts, Oil Seals etc. For the assessment year 2004-2005, they filed its return on 01.11.2004 admitting a total income of Rs.14,02,65,870/-, which was subsequently, revised by them on 20.09.2005, admitting the income at Rs.13,93,08,090/-. Upon scrutiny of the same, the respondent issued notice under section 143(2) of the Income Tax Act, 1961 (in short, "the Act") and thereafter, completed the assessment under section 143(3) on 20.12.2006 determining the total income at Rs.14,67,27,610/- which excludes long term capital gains. While doing so, the assessing officer among others, restricted the claim of deduction under section 80HHC by excluding 90% of the royalty receipts from the profits of the business under clause (baa) to explanation to sect....

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....ceipt of royalty from business profits for the purpose of deduction under section 80HHC of the Act. Therefore, the learned counsel sought to allow this appeal by setting aside the order of the Tribunal. 4.Repudiating the claim so made on the side of the appellant, the learned senior standing counsel appearing for the respondent submitted that the appellant/assessee cannot improve their case, when the issue involved herein is covered by a decision of this Court in Commissioner of Income Tax v. Shiva Distilleries Ltd., [(2007) 293 ITR 108], wherein, it was categorically held that "guarantee commission as well as royalty viz., a payment for using a right, have to be excluded from the business profit for the purpose of calculation of deduction....

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....laim of the appellant, after having held that royalty income claimed by them is not arising out of any business activity related to export and it is incidental in nature and hence, 90% of the royalty income was reduced from the profit of the business for computation of deduction under section 80HHC. 8.In the appeal filed by the appellant, the CIT(A) allowed the claim of the appellant, relating to royalty income, after following the earlier order of the Tribunal dated 31.07.2006 in ITA.No.2669/Mds/04 in respect of the appellant's own case for the assessment year 2000-01. However, the Tribunal set aside the same and directed the assessing officer to exclude the receipt of royalty from business profits for the purpose of deduction under s....

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.... 1992 and under that Explanation, "profits of the business", for the purposes of section 80HHC does not include receipts which do not have an element of turnover like rent, commission, interest etc"; and (ii)CIT v. Sundaram Clayton Ltd [(2006) 281 ITR 425], in which, it was held by this court that "the charges of miscellaneous income and commission do not form part of the turnover for the purpose of calculation of deduction under section 80HHC of the Act". Following the said two decisions, it was categorically held that "guarantee commission as well as royalty viz., a payment for using a right, have to be excluded from the business profit for the purpose of calculation of deduction under section 80HHC of the Act". 11.Applying the ratio lai....