TMI Blog2014 (10) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... clause(A) of clause (f) of explanation to section 80HHF - all receipts of the assessee are regarding telecast of films and programmes and thus, all these receipts relate to business activity of the assessee of telecasting films and programmes - They cannot be termed to be receipts distinct from the activity of the assessee of telecasting the films and programmee - amount of Duty Drawback and receipts in the nature of operating income and amount being part of miscellaneous income relating to receipt of the assessee from Indian Film Export Association, refund of Central Excise Duty and credit note of Priya Shine do not fall within the ambit of sub-clause(A) of clause(f) of explanation to section 80HHF - These amounts are held not to be excludible from the computation of deduction under section 80HHF – Decided partly in favour of assessee. Interest earned on bank deposits – Income from other sources – Held that:- It has been the contention of the assessee that FDRs were kept as margin money for securing export payment - The fact that assessee had incurred interest expenditure on borrowed capital is also not disputed – thus, the order of the CIT(A) is upheld that the interest earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. AO s action of not setting off sundry balances written off of ₹ 2,51,269/-against sundry balances written back of ₹ 35,52,880/-. 4. The Appellant crave leaves to add, amend, alter, modify and or withdraw any of the above grounds of appeal. Revenue s Grounds of Appeal in ITA No: 809/Mum/2010: The following ground of appeal are without prejudice to one another. 1.On the facts and circumstances of the appellant s case and in law the Ld. CIT(A) erred in confirming the Ld. AO s action in reducing 90% of the other income of ₹ 1,16,34,773/- comprising of duty draw back, sundry balance written off, compensation received and miscellaneous income from the Profit of the business for the purpose of computing deduction u/s.80 HHF. 2. The appellant crave leaves to add, amend, alter, modify and or withdraw any of the above grounds of appeal. 2. At the time of hearing Ld. AR did not press Ground No.3 of assessee s appeal, therefore, the same is dismissed as not pressed. 3. The assessee is eligible for grant of deduction under section 80HHF of the Income Tax Act, 1961(the Act). However, while computing the quantum of deduction the AO reduced 90% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lm Sarfarosh for Delhi *LPTS (Hindi Best) Channel for one telecast only within a period of one 35,915 year from the date of agreement. 5. Indian Overseas Bank A/c. 1172 Govt. of Maharshtra Pay Accounts Officer Court Refund. 39,915 6. Cinematt Pictures Films rights Sarfarosh 28,72,950 7. Cinematt Pictures 30% share of ₹ 9,00,000/- for Sarfarosh Rights is accounted 2,70,000 TOTAL 34,77,330 Less: Priya Shine compensation given on the titles of DVDs and VCSs sold during the year, which were having manufacturing defect. 1,45,265 Net income credited under the head compensation 33,32,065 3.2 It may further be mentioned that detail of miscellaneous income of ₹ 50,40,378/- is also described in the order passed by Ld. CIT(A) and read as under: Compensation 33,32,065 Insurance Claim 1,71,739 Miscellaneous income 15,36,574 TOTAL 50,43,378 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 33,32,065/- ₹ 1,16,34,773 Profit of the Business ₹ 41,03,552 Deduction u/s.80HHF + 30% of Profit x Export Turnover Total turnover. = 30% of 41,03,552 X 70,61,00,996 79,61,11,456 = 30% of ₹ 36,39,594/- = ₹ 10,91,878/- 3.5 The aforementioned exclusion of 90% of receipts was challenged in an appeal filed before Ld. CIT(A). It was submitted that AO has committed an error in excluding 90% of the aforementioned receipts as they do not fall within the scope of sub-clause(A) of clause (f) of explanation to section 80 HHF. Reliance was placed on various decisions to contend that such action of the AO was against the law. However, Ld. CIT(A) has upheld the action of the AO with the following observations: 6. I have carefully considered the assessment order and the written submission filed during the assessment proceedings. The appellant has made a painstaking effort to highlight that all the judgements cited by the AO relate to deduction section other than 80HHF. Consequently, it is claimed that they do not apply in its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting profits of business under section 80 HHF. In this regard he has referred to the following observations: 11. A comparison of the above provisions clearly shows that the language in both the sections is almost similar as far as computation of eligible profits of business is concerned. Under both the provisions, the deduction is available in respect of the profits derived from the business specified in sub-section (1), i.e., profits derived by the assessee from the business of export of goods or merchandise (section 80HHC), profits derived from the business of export of any film software, television software, music software, television news software, including telecast rights (section 80HHF). Sub-section (3) of both the provisions defines profits derived from such business. Sub-section (3) under both the sections refers to profits of business which has been further defined in Explanation (baa) of section 80HHC and Explanation (f) of section 80HHF in the similar manner. The only difference is that for the purpose of section 80HHC, 90 per cent of sum referred to in clauses (iiia) to (iiie) of section 28 has also to be excluded from the profits of business while such amount is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business. This decision is a precedent only for the proposition that in such case the receipt would form part of total turnover in terms of section 80HHC(3) of the Act. 46. For the reasons given in the preceding para, we are also unable to accept the contention of the learned counsel for the assessee that the judgment of Hon. Bombay High Court in the case of Bangalore Clothing Co. (supra) has been approved by the Hon. Supreme Court in the case of Baby Marine Exports (supra). In that case also, the Supreme Court was not concerned with the scope of Explanation (baa) to section 80HHC. The question before the Court was whether the export incentives received by the supporting manufacturer from the export house could be considered as part of the sale proceeds for claiming deduction under section 80HHC. The contention of the revenue was that export incentive was received independently in Indian currency without having any link or nexus with any foreign earning and therefore the same could not be considered as part of the sale proceeds. Consequently, deduction under section 80HHC(IA) could not be allowed. On the other hand, the contention of the assessee was that under the contract be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits of business computed under the head Profits and Gains from Business and Profession in term s of the Explanation (baa) to section 80HHC. This decision clearly fortifies the view taken by us. 48. In view of the above discussion, the order of the CIT(A) is upheld on the issue discussed above. This would dispose of ground No. 2 raised by the revenue. 4.2 Referring to above contentions and the details described above he submitted that amount of ₹ 33,32,065/- related to business of the assessee of exhibition and telecast of films and programmes, therefore, he pleaded that no part of the aforesaid receipts can be reduced by relying upon sub-clause(A) of clause (f) of explanation to section 80 HHF. 4.3 Coming to the miscellaneous income of ₹ 15,36,574/-, Ld. AR submitted that the amount of ₹ 12,82,500/- relates to refund of anti piracy fund received from Indian Film Export Association and a sum of ₹ 1,78,093/- was written back by way of credit note to Priya Shine. He submitted that these are also receipts concerning with the business activity of the assessee and do not fall within the scope of sub-clause(A) of clause (f) of explanation to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. 6. On the other hand, relying upon the assessment order it was submitted by Ld. DR that the AO was right in taking other receipts within the scope of sub-clause (A) of clause (f) of explanation to section 80HHF. He further submitted that Ld. CIT(A) has also upheld the action of AO and his order should be upheld. 7. We have heard both the parties and their contentions have carefully been considered. The provisions of section 80 HHF have been carefully analyzed by Co-ordinate Bench in the case of ACIT vs. Star India Pvt. Ltd. (supra) and after careful consideration they have come to the conclusion that the provisions of section 80HHF are similar to the provisions contained in section 80HHC subject to the difference that under section 80HHC, 90% of the sum referred to in clause(iiia) to (iiie) at section 28 has also to be excluded from the profits of the business while such amount is not required to be deducted in computing profits of business under section 80HHF. The relevant observations have already been reproduced above. Provisions of clause (iiia) to (iiie) of section 28 inter-alia include duty draw back. Therefore, in absence of any express provision in section 80HHF du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be termed to be receipts distinct from the activity of the assessee of telecasting the films and programmes. 7.3 In para 3.2 details regarding ₹ 50,40,378/- are given which comprise also of aforementioned amount of ₹ 33,32,065/- and apart from miscellaneous income of ₹ 15,36,574/- (which we shall deal later on) another amount is only a sum of ₹ 1,71,739/- representing insurance claim. The insurance claim cannot be related to business activity of the assessee. The same cannot be considered to be business activity of the assessee, therefore, fall within the scope of the sub-clause (A) of clause (f) of explanation to 80HHF. 7.4 In para 3.3 details of ₹ 15,36,574/- is given, out of which amount of ₹ 12,82,500/- and ₹ 1,78,093/- relate to receipts from Indian Films Export Association towards refund of anti piracy funds and Priya Shine credit note respectively. These amounts are also received by the assessee as amount written back and covered by the decision of ITAT in the case of Extrusion Process Pvt. Ltd. vs. ITO (supra). Refund of Central Excise Duty amounting to ₹ 75,981/- also cannot be excluded as the same is not in the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,40,39,517/- on borrowed capital and thus, there is net interest expenditure of ₹ 3,22,85,721/-. It was submitted that the interest income of the assessee has direct nexus with the interest expenditure, therefore, such interest income should be set off against interest expenditure. After considering the submissions of the assessee and relying upon the decision of Special Bench of ITAT in the case of Lalson Enterprises, 89 ITD 25 (Del) (SB), Ld. CIT(A) has held that interest income is to be assessed as business income and such interest income is required to be set off against interest expenditure and no part of interest income can be reduced from the profits of the business. 10. After narrating the facts, Ld. DR relied upon the order passed by AO and submitted that the AO was right in treating the income earned by the assessee from bank deposits as income from other sources. Thus, he pleaded that Ld. CIT(A) has wrongly granted relief to the assessee and his order should be set aside and that of AO be restored. 11. On the other hand, it was submitted by Ld. AR that Ld. CIT(A) has rightly granted relief to the assessee. He submitted that what Ld. CIT(A) has done is nettin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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