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2018 (9) TMI 1632 - MADRAS HIGH COURTEntitled to deduction u/s 80HHC in respect of the interest and rent earned out of business operations - whether Tribunal was right in holding that 90% of the gross receipts should be excluded from the profits of the business under Clause (baa) of Explanation to Section 80HHC? - Held that:- Question No.1 is concerned, the same has to be answered in favour of the Revenue and against the assessee in the light of the decision, in the case of Commissioner of Income Tax Vs. K.Ravindranathan Nair [2007 (11) TMI 10 - SUPREME COURT OF INDIA] wherein held the processing charges were included in the gross total income from cashew business. In terms of Cl. (baa), 90 per cent of the 'independent income' had to be deducted from gross total income to arrive at business profits to which the fraction had to be applied. Since, the processing charges constituted independent income similar to rent, commission, etc., which formed part of the gross total income, the same had to be reduced by 90 per cent as contemplated in Cl. (baa) to arrive at business profits. Therefore, the said processing charges were includible in the total turnover in the formula under section 80HHC(3) of the IT Act. The nature of every receipt needs to be ascertained in order to find out whether the said receipt forms part of/or that it has an attribute of an export turnover. When an indirect tax is collected by the taxpayer on behalf of the Government the tax recovered is for the Government. It may be an income in the conceptual sense or even under the IT Act but while working out the formula under section 80HHC(3) of the IT Act and while applying the four variables one has to ascertain whether the receipt has an attribute of export turnover. An indirect tax like excise duty does not have that element of export turnover as understood in the above formula. As stated above, it is recovered by the taxpayer on behalf of the Government - Decided in favour of revenue 90% of the gross receipts should be excluded from the profits of the business under Clause (baa) of Explanation to Section 80HHC - Held that:- So far as the second question of law is concerned, the issue has been decided by the Hon'ble Supreme Court in the case of ACG Associated Capsules (P) Ltd. Vs. Commissioner of Income Tax [2012 (2) TMI 101 - SUPREME COURT OF INDIA] as held ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Matter remanded back to A.O. to work out the deductions – Decided in favor of assessee for statistical purposes.
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