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2016 (5) TMI 142 - HC - Income TaxDeduction u/s 80HHC - Tribunal held that the 90% of the job work charges should not be excluded from the profit of the business in terms of Explanation (baa) to Sec. 80HHC - Held that:- Apex Court in K. Ravindranathan Nair (2007 (11) TMI 10 - Supreme Court of India ) had while considering Explanation (baa) to Section 80HHC of the Act held that independent income, which has no nexus with the export activity, then 90% of such independent income is required to be deducted from business profits. Thus, in the facts before it, it held that independent income like rent, commission etc. including processing charges were be reduced by 90% so as to arrive at the profit of the business in terms of Section 80HHC of the Act. In the present facts, we find that the respondent assessee is engaged not only in the business of manufacture and export of garments but also engaged in doing job work. There is nothing on record to indicate that the activity carried out on job work has nexus with the export earnings of the respondent assessee. In fact, the Assessing Officer has categorically given a finding of fact that job work charges received has no nexus to export. Substantial question of law raised for our consideration is answered in the negative i.e. in favour of the Revenue and against the respondent assessee. So far as the alternative submission of the assessee that while giving effect to this order, the Assessing Officer should exclude 90% of the net receipts on account of the job work charges while applying Explanation (baa) to Section 80HHC of the Act. We were not inclined to accept it as we find that both the Assessing Officer as well as the CIT(Appeals) have on facts found that the respondent assessee has not been able to establish that any expenses were incurred from the gross receipts so as to arrive at the net receipts. As it is a factual finding. In response to our above observation, it was pointed out that on the aforesaid finding of fact, the respondent assessee had filed an appeal to the Tribunal. However, the same being an alternative submission was not considered as the impugned order of the Tribunal decided the basic issue in its favour. In these circumstances, the petitioner's grievance on the above finding of fact was never considered by the Tribunal. Therefore, in the interest of justice, let the respondent assessee be given an opportunity to prove its case that net expenses are different from gross.
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