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2006 (6) TMI 248 - AT - Income TaxDeduction u/s 80-IB - duty drawback - excluding the excise duty in the total turnover - working out the deduction u/s 80HHC - HELD THAT:- In the instant case, the assessee purchased raw material which is an integral activity of running the industrial undertaking and therefore has to pay the excise duty/custom duty. Then, the assessee has sold its finished product by way of export which is again a vital activity for running the industrial undertaking. The duty drawback resulted from undertaking the direct activities of industrial undertaking itself like Modvat and from no other activity which can be said to be a mere incidental activity to the industrial undertaking. Duty drawback has a direct nexus with the essential and vital activities required to be carried out for running of the industrial undertaking. Accordingly, in our considered view the same should form part of the profits for computing the amount of deduction u/s 80-IB of the Act and cannot be excluded. Our above view also finds support from the decision of the Hon’ble Madras High Court in the case of CIT v. Madras Motors Ltd./M.M. Forgings Ltd. [2002 (3) TMI 10 - MADRAS HIGH COURT]. Therefore, the ground of appeal of the Revenue is dismissed. Excluding the excise duty in the total turnover - We find that this issue stands covered by the decision in CIT v. Sudarshan Chemicals Industries Ltd. [2000 (8) TMI 73 - BOMBAY HIGH COURT] and the decision in the case of CIT v. Chloride India Ltd.[2001 (12) TMI 34 - CALCUTTA HIGH COURT]. It was held that in computing the special deduction u/s 80HHC, in respect of profits from export business, while determining the proportion of export turnover to total turnover, since octroi, sales tax and excise duty are excluded from the export turnover, they should be excluded from the figure of "total turnover". Therefore, the ground of appeal of the Revenue is dismissed. Deduction u/s 80HHC - business profits - HELD THAT:- In our considered opinion, the Assessing Officer cannot determine the business profits by reducing the deduction allowable u/s 80-IB as the Explanation (baa) does not provide so. Further, section 80B(5) defines gross total income as the total income computed in accordance with the provisions of the Income-tax Act before making any deduction under this Chapter. It is while computing the total income of the assessee according to the Income-tax Act the deduction is to be allowed under sections 80-IB and 80HHC to the extent of the gross total income of the assessee under this Chapter. Thus it is to be ensured that the total deduction allowed under Chapter VI-A does not exceed the gross total income of the assessee. To this effect is the decision in the case of Mittal Clothing Co. [2005 (6) TMI 480 - ITAT BANGALORE]. Thus, we set aside the order of the CIT(A) and the Assessing Officer and direct the Assessing Officer to compute the deduction u/s 80HHC on the basis of export profit determined in accordance Explanation (baa ) of the Act. The ground of appeal of the assessee is, therefore, allowed. In the result, the appeal of the assessee is allowed - In the overall result the appeal of the assessee is allowed and that of the Revenue is dismissed.
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