2012 (12) TMI 1197 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of certain incomes in profits for deduction u/s 80HHC.
2. Computation of eligible profits for deduction u/s 80HHC.
3. Exclusion of export turnover for computing deduction u/s 80HHC.
4. Allocation of head office expenses to units claiming deductions u/s 10B, 80IA, and 80IB.
5. Exclusion of DEPB benefits from eligible profits.
6. Disallowance of expenses u/s 14A.
7. Allowance of deductions u/s 10B and 80IB on certain incomes.
8. Computation of book profits u/s 115JB.

Summary:

1. Inclusion of Certain Incomes in Profits for Deduction u/s 80HHC:
The CIT (Appeals) directed not to include 90% of claims received, excess provisions written back, and miscellaneous income in the profits of business for computing deduction u/s 80HHC. The Tribunal found that the CIT (Appeals) had erred and directed the Assessing Officer to include these incomes in the profits of business for computing deduction u/s 80HHC.

2. Computation of Eligible Profits for Deduction u/s 80HHC:
The Assessing Officer excluded 90% of rent received, interest from customers and suppliers, and DEPB receipts from profits of business while computing deduction u/s 80HHC. The Tribunal upheld the exclusion of rent received from employees. For interest received, only net interest is to be excluded as per the Supreme Court's decision in M/s ACG Associated Capsules (P) Ltd. vs. CIT. The exclusion of DEPB receipts was allowed based on the retrospective amendment being ultra vires.

3. Exclusion of Export Turnover for Computing Deduction u/s 80HHC:
The export turnover of the EOU unit was excluded from the export turnover of the assessee while computing deduction u/s 80HHC. The Tribunal upheld this exclusion following the decision in ACIT vs. Mahavir Spg. Mills Ltd. and the Hon'ble Madras High Court in CIT, Chennai vs. Ambatture Clothing Ltd.

4. Allocation of Head Office Expenses to Units Claiming Deductions u/s 10B, 80IA, and 80IB:
The Assessing Officer allocated head office expenses to various units claiming deductions based on the turnover ratio. The Tribunal upheld this allocation, following the decision in Nahar Spinning Mills Ltd. vs. JCIT.

5. Exclusion of DEPB Benefits from Eligible Profits:
The exclusion of DEPB benefits from eligible profits while computing deduction u/s 80IA was upheld by the Tribunal based on the Supreme Court's decision in Liberty India vs. CIT.

6. Disallowance of Expenses u/s 14A:
The Tribunal confirmed the disallowance of Rs. 2 lacs under section 14A for earning exempt income, following the precedent set in the previous year.

7. Allowance of Deductions u/s 10B and 80IB on Certain Incomes:
The Tribunal remitted the issue back to the Assessing Officer to verify the claim of the assessee regarding the deduction u/s 10B on interest received from cotton suppliers and other incomes. The deduction u/s 80IB on profits derived from the dyeing unit was also remitted for verification.

8. Computation of Book Profits u/s 115JB:
The Tribunal upheld the CIT (Appeals) order, following the Supreme Court's decision in Ajanta Pharma Ltd. vs. CIT, and dismissed the Revenue's appeal on this issue.

Conclusion:
The appeals of both the assessee and the Revenue were partly allowed, with specific directions for verification and recomputation by the Assessing Officer on various issues.