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2005 (11) TMI 377 - AT - Income TaxDeductions under sections 80HHC and 80-IB - Sale consideration of technical know-how drawings, designs, technology to the non-resident of manufacture of segmented tyres and DEPB licence eligible for deduction under section 80HHC? - Implication of the provisions of section 80-IB(13) read with section 80-IA(9) - HELD THAT:- In the present case, it is seen that the assessee received the consideration for providing design, development and manufacturing assistance and for defining tooling design and production process. This was done by transferring various design documents and connected papers therewith. The conjoint and harmonious reading of various definitions as well the ratio laid down by Hon’ble Supreme Court leads us in no doubt that the amount received by assessee for sale of design, development and manufacturing technology of laminated tyres amounts to sale of goods or merchandise and hence eligible for deduction under section 80HHC. It is not correct to hold that the amount received falls within the term "in consideration for the use of any patent, invention, design or registered trade mark" used in section 80-O of the Act. The amount received is not for use of but for sale of the drawing, design and technology as such. After the transfer of design and technology, the same is the property of purchaser and no longer remains with the assessee. Thus, the amount received is not for merely allowing use of such drawing, design or technology but for sale of such product, which falls within the definition of "goods or merchandise" within the meaning of section 80HHC of the Act. We accordingly hold that since the amount is received inconvertible foreign exchange as specified under section 80HHC, the assessee is entitled to deduction under section 80HHC of the Act. In view of our above answer, it is not necessary to deal whether the amount received is eligible for deduction under section 80-O also or not. Whether the assessee is entitled deduction u/s 80HHC as well as 80-IB and the implication of sub-section 9 of section 80-IA or sub-section 13 of section 80-IB - In view of the decision of this Tribunal in the case of Mittal Clothing Co. [2005 (6) TMI 480 - ITAT BANGALORE] and in view of the CBDT Circular No. 772, we hold that the assessee can claim deduction u/s 80HHC as well as section 80-IB. However, it is made clear that the total deduction in both the sections will not exceed the profit included in the gross total income, as sections 80AB governs both section 80HHC and section 80-IB. Sale of DEPB licence will be excluded as per clause (baa) of Explanation to section 80HHC - It is the contention of assessee that such amount do not fall under clause (iiia) of section 28 of the Act but falls under clause 28(iv) of the Act. Since clause (baa) refers merely to clause (iiia) of section 28 and since clause (iv) of section 28 is not referred to in clause (baa), the same is not to be excluded while computing profits of business for the purpose of section 80HHC. We are in agreement with the submission of learned counsel for assessee. Profit on sale of DEPB licence is not equivalent to profit on sale of licence granted under the Imports (Control) Order, 1955 made and under the Imports and Exports (Control) Act, 1947 referred in section under clause (iiia) of section 28. Similar view has been held by ITAT, New Delhi Bench in the case of P&G Enterprises [2004 (11) TMI 287 - ITAT DELHI-B]. We accordingly hold that while computing "profits of business" for the purpose of section 80HHC, profit on sale of DEPB licence will not be excluded under clause (baa) of Explanation to section 80HHC. In the cross-objection, it was contended that the amount realized on sale of DEPB credits is not eligible for deduction u/s 80HHC. Since it has been held that the amount realized on sale of DEPB credit is assessable as business income u/s 28(iv) of the Act, the word ‘profit of business’ will also include profit on sale of such DEPB credit. In the result, the appeal is partly allowed and the cross-objection is dismissed.
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