Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2016 (1) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (1) TMI 809 - HC - Income TaxIncome chargeable to tax under Section 41(1) - whether excluded under clause (baa) of the Explanation to Section 80 HHC of the Act, for the purposes of computing the deduction allowable to the assessee under that section? - Held that:- Section 41(1) creates a legal fiction and can be extended for the purpose of allowing deduction from "profits of the business" as referred to in Section 80 HHC of the Act. The income chargeable to tax under Section 41(1) of the Act is from reversal of any loss, expenditure or trading liability which had extinguished or ceased to exist. The legal fiction can only be extended to the extent that the provisions of Section 80 HHC have to be understood excluding the legal fiction created by deeming provisions contained in Section 41(1) of the Act as the source of income which is chargeable cannot be related to export of goods or merchandise because if any other meaning is assigned to the aforesaid fiction created with respect to Section 41(1), it would be against the basic purpose and object of Section 80 HHC of the Act. If that be so, then the exclusion of 90% of the deemed income under Section 41(1) of the Act is not in accordance with the correct interpretation of Explanation (baa) to Section 80 HHC of the Act and, therefore, the ITAT, in such circumstances, has rightly allowed the appeal of the assessee. That apart, it would also be noticed that the liability incurred by the assessee company in respect of the interest had infact been earlier allowed as deduction while computing the profits of the export business, the same will not now undergo a change in its nature and become an independent income. However, in terms of the judgment passed by the Hon'ble Supreme Court in ACG Associated's case (2012 (2) TMI 101 - SUPREME COURT OF INDIA ), the benefit would only be available on the net interest which had been included in the profits of the business of the assessee as computed under the head "profits and gains of business or profession" that alone will be deducted under clause (1) of the Explanation (baa) to Section 80 HHC of the Act for determining the profits of the business and not the gross interest. Thus while computing the interest under clause (baa) of the Explanation, the Assessing Officer will take into account the net interest i.e. gross interest as reduced by expenditure incurred for earning such interest. - Decided in favour of assessee.
|