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2013 (6) TMI 100 - HC - Income TaxProcessing charges - whether be excluded from the computation of turnover as well as eligible profit so as to have the effect of reducing the assessee's claim under Section 80 HHC to NIL? - true and correct interpretation of the provision of Section 254 for the Tribunal to pass the impugned order which has the effect of reducing the relief under Section 80 HHC to "NIL" - Held that:- The assessee is manufacturing and exporting plastic woven fabric bags and paper reinforced bags & processing charges received is on account of conversion of granules to woven fabric/liners or bags and also printing of bags which can not be treated as having any nexus with the export activity of the assessee. As assessee has separately shown a sum of Rs.46,31,715 as processing charges and not included it as part of sales in the P/L account filed alongwith the return. By not treating the processing charges as part of the total turnover, the assessee has itself treated it as receipts in the nature of income from other sources. There is no denying the fact that the deduction u/s 80 HHC is only meant for assessee who earned profits from exports. Any business profit other than export activity is not eligible for deduction u/s 80 HHC. AO has rightly treated the processing charges as separate head of income as it was not linked to export activity of the assessee reducing 90% of it from the business profits for calculating the deduction u/s 80 HHC. The order of the A.O. in excluding the processing charge from the "business profits" for the purpose of computation and deduction under Section 80 HHC appears reasonable. Enhancement of addition by Tribunal - rectification of order - Held that:- In the instant case, the A.O. has allowed the claim of deduction by an order passed u/s 154 on 17.06.2004 for a sum of Rs.16,89,778/-. Thus, the benefit of this amount was allowed by the A.O. and the same was enhanced by the first appellate authority to Rs.28,15,3162 vide order dated 14.02.2005, but the Tribunal has not allowed either one. The relief which was given by the A.O. was also declined by the Tribunal and the same is not permissible in the eye of law. Hence, the deduction allowed which was already allowed by the A.O. vide order passed u/s 154 dated 17.06.2004 for a sum of Rs.16,89,778/-. The assessee is entitled to get this relief. For this purpose, the impugned order passed by the Tribunal is modified. Except the relief for Rs.16,89,778/-, the impugned order passed by the Tribunal upheld - in favour of the revenue partly.
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