2009 (4) TMI 34

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....7, the assessee filed its return of income. The Assessing Officer inter-alia disallowed the rent paid for guest house u/s 37(4); expenditure on sieve cylnder and motor and templates as capital expenditure. The Assessing Officer also held that sales tax and excise duty elements are to be included in the total turnover for the purpose of calculation of deduction u/s 80HHC. On appeal, the Commissioner of Income Tax (Appeals) confirmed the disallowance on guest house expenditure, upheld the action of the Assessing Officer on the issue of inclusion of sales tax and excise duty in the total turnover for 80HHC, and decided the issue regarding replacement of machinery and templates in favour of the assessee. The Tribunal on appeal held all the abov....

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.... Court has held as follows:- "While the expression "premises and buildings" in Sections 30 and 32 of the Income Tax Act, 1961, and the expression "residential accommodation including any accommodation in the nature of guest house" in sub-sections (3), (4) and (5) of section 37 can be similarly interpreted, a distinction has been sought to be introduced for the purpose of section 37 by specifying the nature of the building to be a guest house. The intention of the Legislature is clear and unambiguous : the intention was to exclude from deduction the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purpose of a guest house of the nature indicated in sub-section (4) of section 37. If the Legislatur....

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.... of brokerage, commission, interest, rent, etc., do not form part of business profits as they have no nexus with the activity of export. The amendments made from time to time indicate that they became necessary in order to make the formula workable. If so, excise duty and sales tax also cannot form part of the 'total turnover' under section 80HHC(3); otherwise, the formula becomes unworkable."  6. In respect of the 3rd and 4th questions of law, in allowing deduction of the amounts spent on replacement of machinery as revenue expenditure and purchase of templates as a revenue expenditure, they are covered by the decision of the Supreme Court in the case of Commissioner of Income Tax vs.Ramaraju Surgical Cotton Mills reported in 294 I....