TMI Blog1996 (11) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of accounts. After applying formula under sub-section (3), the assessee claimed relief under section 80HHC at Rs. 15,090,357 as is apparent from the computation of income at page 1 of the paper book. But the Assessing Officer was not satisfied with such working. He was of the view that total turnover for the purposes of section 80HHC(3) should include all the receipts by the assessee on account of ore screening charges, barge hire charges, truck transport charges, transhipper income, ore rising and transport charges and other income as credited by the assessee to the P L a/c. He, therefore, computed the total turnover at Rs. 21,48,70,288. Accordingly he modified the relief. The CIT (Appeals) has confirmed the order of the Assessing Officer. In this regard, the CIT (Appeals) relied on the definition of 'total turnover' given in clause (bb) of Explanation to section 80HHC which provides that the turnover includes profit on sale of licence, cash assistance and any duty of customs or excise repaid or repayable as draw back. He, therefore, inferred that only such receipts could be excluded from the turnover and therefore, all other receipts by the assessee had to be included in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental representative supported the order of the CIT (Appeals). He referred to the definition of total turnover given in clause (ba) of the Explanation to support the stand of the revenue that it is the freight or insurance attributable to the transport of goods or merchandise beyond the custom station that are excluded from the total turnover. According to him, the necessary corollary is that all other receipts remained to be included in the definition of 'total turnover'. He also referred to the proviso to clause (ba) of the said Explanation effective from 1-4-1991 which states that the total turnover shall not include any sum referred to clauses (iiia), (iiib) and (iiic) of section 28. From this proviso, he inferred that such receipts were included earlier which should have been excluded only with effect from 1-4-1991. It was further submitted by him that the provisions like section 80HH and 80-I refers to a particular undertaking but such is not the position with reference to section 80HHC. According to him, it is the turnover of the entire business which has to be taken into consideration and, therefore, whatever is received by the assessee would be included in the total turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods sold. These are the charges against the services rendered by the assessee in respect of goods belonging to other parties. In our view, it would be too extreme to include such service charges within the meaning of turnover. In this connection, we may refer to the decision in the case of International Research Park Laboratories Ltd. wherein it has been observed that the commission received by the assessee in respect of export orders could not be included in the total turnover. If the commission which has a link to the export of goods could not be included in the turnover, we are afraid, how the charges received by the assessee for the services rendered by it with reference to the goods belonging to the other party could be included in the word 'turnover'. The decision of this Bench in the case of Sudharshan Chemicals Industries Ltd. relied on by the learned departmental representative is also distinguishable on facts of the case, inasmuch as, in that case, we were concerned with the issue whether the sales-tax, excise duty could be included within the meaning of 'total turnover'. It was in that context, the Bench observed that the charges like excise duty and sales-tax have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [1979] 119 ITR 314 (Mad.); 2. J.K. Spg. Wvg. Mills Co. v. Addl. CIT [1976] 104 ITR 695 (All.); 3. CIT v. Travancore Tea Estates Ltd. [1994] 207 ITR 242 (Ker.). He further submitted that the decision of the Supreme Court cited by the learned counsel for the assessee is distinguishable on facts of the case, inasmuch as the tax paid by the assessee was deductible expenses and, therefore, whenever it was received back, it was held to be income. It was further argued by him that the loan was advanced to sister concern out of surplus fund as admitted by the learned counsel for the assessee and, therefore, it was clearly assessable under the head 'income from other sources'. 9. Both the parties have been heard. We are unable to accept the contention of the assessee that interest accuring on income-tax refund is not chargeable tax at all. In view of the Madras High Court judgment in the case of Smt. B. Seshamma. In this connection, we may refer to the decision of the Supreme Court in the case of Dr. Shamlal Narula v. CIT [1964] 53 ITR 151, wherein similar contention was raised on behalf of the assessee. It was contended before the Hon'ble Supreme Court that in a case where poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, we need not express our opinion since we have held that interest income is assessable under the head 'Income from other sources'. 11. The next aspect of the issue relates to the scope of the words 'profits of business' appearing in sub-section (3) of section 80HHC. On behalf of the assessee before the Assessing Officer it was contended that the profits of the business should be determined without deducting the unabsorbed investment allowance, depreciation, etc. This contention has been rejected by the Assessing Officer in view of the specific provisions of section 80AB. It was held by him that relief under section 80HHC has to be computed on the total income as reduced by unabsorbed losses and allowances of earlier years and also the deduction under sections, 32, 32A and 80G of the Act. The CIT (Appeals) has confirmed the order of the Assessing Officer on this issue in view of specific provisions of section 80AB. Aggrieved by the same, the assessee is in appeal before the Tribunal. 12. It was vehemently argued by the learned counsel for the assessee that the provisions of section 80AB are not applicable to the deduction under section 80HHC. According to him, it is onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income." The effect of this section is that where any income in respect of which deduction is claimed falling under the heading 'C' of Chapter VI-A which is included in gross total income, it is for the purpose of computing deduction under that section, the amount of income of that nature shall first be determined in accordance with the provisions of this Act (before making the deduction under Chapter VI-A) and then such income shall be deemed to have been included in the gross total income. The words 'for the purpose of computing deduction under that section' are of significant importance. That means that section under the head 'C' of Chapter VI-A must require that income of a particular nature in respect of which deduction is claimed must be included in the gross total income. This has been provided by the Legislature because various sections in Chapter VI-A provide that a particular percentage of profits derived from a particular source has to be allowed as deduction if the same is included in the gross tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned with the assessment year 1991-92. The relevant provisions of sub-section (3) are reproduced as under: " 80HHC(3) : For the purposes of sub-section (1) profits derived from the export of goods or merchandise out of India shall be the amount which bears to the profits of the business (as computed under the head 'Profits and gains of business or profession'), the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. " The perusal of this sub-section itself shows that the profits of the business are to be computed under the head 'profits and gains of profession or business'. Therefore, the extreme view of both the Parties cannot be accepted. If the profits are to be computed under the head 'Profits and gains of business or profession' as provided by the Legislature, then depreciation allowance and investment allowance have to be deducted. However, the unabsorbed business losses of the earlier years and deduction under sections 80G and 80-J cannot be deducted as such losses and deductions do not fall under the head 'Profits and gains of business or profession'. We, therefore, hold accordingly. The order of the CIT (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains and therefore, probably the section ought to have been placed along with section 48. In that case, the assessee had earned capital gains of Rs. 1,02,740 and the department wanted to set off the business losses against such capital gain. Their Lordships held that the deduction under section 80T has to be allowed against the capital gain and the question of set off the business loss did not arise in view of the language employed in section 80T. It is in this context that the relevant observations were made by their Lordships of the Supreme Court. But the words 'such income' as used in section 80T do not find place in section 80HHC. On the other hand, the language of section 80HHC is unambiguous and clearly lays down that the profits of the business has to be computed first under the head 'Profits and gains of business'. Therefore, we are unable to accept the contention of the learned counsel for the assessee. 17. The next question relates to computation of disallowance under section 37(2A). The CIT (Appeals) has observed that for the purposes of computing disallowance under section 37(2A) the profits and gains of business have to be determined after taking into consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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