TMI Blog2013 (10) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to be excluded as they are “independent incomes” which have no element of export turnover. In K. Ravindranathan Nair, the Supreme Court has held that where charges, though part of the gross total income, constitute independent incomes like rent, commission and brokerage 90% of the said sum has to be reduced from gross total income to arrive at business profits and has to be included in the total turnover in the said formula to arrive at the business profits in terms of Explanation (baa) – Relying upon the above judgment, the instant case has been decided against the Assessee. - Tax Appeal No. 26 of 2006 - - - Dated:- 18-10-2013 - Dr. D Y Chandrachud And F M Reis, JJ. For the Appellant : Mr. R. Srinivasan and Mr. Sudin Usgaonkar, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Mine Owners' Association and on 09.05.1997 enhanced rates had been allowed to the barge owners with retrospective effect. The assessee made a provision in its accounts since the return for Assessment Year 1997-98 was still to be filed and claimed the additional amount which had been paid by way of rent to the barge owners. The claim for the additional amount was disallowed by the Assessing Officer on the ground that the amount was not paid, nor had it become due upto 31.03.1997. In appeal the CIT (A) held that in the mercantile system of accounting, a contractual liability accrues on settlement of a dispute and not before it. Hence, the liability was held to have accrued on 09.05.1997. Hence, the CIT(A) held that it was allowable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is borne by the hirer. On this basis, the Tribunal was of the view that the burden of wear and tear will be greater on the hirer as compared to the lessor. As a result, the Tribunal held that a higher depreciation will be allowable only to the hirer of a vehicle and not to a lessor. 6. The issue which is raised in Question (b) will be governed by the judgment of the Supreme Court in I.C.D.S. Ltd., V/s Commissioner of Income Tax and another in (2013) 350 ITR 527 (SC). In that case, it was argued by the Revenue that depreciation can be claimed by an assessee only in a case where the assessee is both, the owner and user of the asset. In that context, the Supreme Court has observed as follows : We would like to dispose of the second c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e answered in the negative and in favour of the assessee. 8. Re Question (c) : The assessee had during the course of the financial year relevant to Assessment Year 1997-98 received premium on special import licences of Rs.1,58,729/-; an insurance claim on vehicles for Rs.2,69,500/- and was in receipt of service charges of Rs.1,80,000/-. The claim of the assessee was that these receipts were intricately linked with the export business and could not be treated as charges within the meaning of explanation (baa) to section 80HHC. In appeal, the Tribunal has confirmed the disallowance. 9. Explanation (baa) to section 80HHC defines the expression profits of the business as follows : (baa) profits of the business means the profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export . 11. In K. Ravindranathan Nair (supra), the Supreme Court has held that the formula in section 80HHC(3) provides for a fraction of export turnover divided by the total turnover to be applied to business profits calculated after deducting 90% of the sums mentioned in clause (baa) of the Explanation. Hence, profit incentives and items such as rent, commission, brokerage charges etc., though they form part of the gross total income have to be excluded as they are independent incomes which have no element of export turnover. In K. Ravindranathan Nair, the Supreme Court has held that where c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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