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2015 (2) TMI 120 - HC - Income TaxComputation of deduction u/S.80HHC - ITAT directing not to exclude 90% of interest on overdue payment of sale consideration in computing the deduction - Held that:- Interest income on overdue payment is part of profit derived from it, however, this interest on overdue payment is received by the assessee on account of late payment of sale consideration by the overseas customers to whom the export have been made by the assessee. Thus considering case of Nirma Industries Ltd. (2006 (2) TMI 92 - GUJARAT High Court), such interest has a direct nexus with the sale price of an item which is exported. Hence, answer to question (A) shall be in affirmative in favour of assessee. Adjustment to the expenses having nexus with the earning of interest before excluding 90% of such interest under Explanation (baa) below section 80HHC despite the word used in the Explanation being "receipts" and not income and the adjustment of 10% having already been provided for expenses by a legal fiction - Held that:- As relying on ACG Associated Capsules Pvt. Ltd. vs. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] while calculating the amount of interest, the net interest income is to be considered and not the gross interest income. Under the circumstances, we find that the answer to question (B) shall be in affirmative in favour of the assessee. Exclusion of 90% of compensation in computing the deduction u/S.80HHC - Held that:- The compensation received may be on account of improper functioning or less than the expected capacity of the windmill by the assessee would have a different category of the income received and it cannot be made corelatable to the profits and gains from business. In our view, so far as amount of compensation received is concerned, it has no element of export turnover of the assessee and therefore, a separate treatment would be required to be given.Rational for excluding 90% of the receipt by way of brokerage, commission, interest, rent or charges is that these are independent income and their inclusion in the profit of business would result into distortion.the income by way of compensation received by the assessee cannot be made directly relatable to the regular course of business as sought to be canvassed. Hence, we find that question (C) needs to be answered in negative by holding in favour of the revenue and against the assessee.
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