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TMI Blog2015 (5) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals, framed the following substantial question of law for consideration :- "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the stickering income received from MRF for labeling 'MRF' on the toys and packing, as eligible business income for the purpose of deduction under Section 80HHC of the Act?" 2. The brief facts of the case are as follows :- The respondent/assessee in these cases is engaged in the business of exporting toys. The process of manufacture of the toys involves manufacture and then stickering job is performed, which involves three activities. The first activity involves "Tampoo Printing" with a power driven machine on the tyres and the letters "MRF" are imprinted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the help of various machines involving manpower of the company; that by putting these stickers, the value of the toy is enhanced and as a result it becomes part of the operational income and, therefore, it is eligible for deduction under Section 80HHC. To substantiate their argument, various case laws were cited by the assessee. On the contrary, the stand of the Department before the Tribunal was that stickering on the tyres and toys is of no consequence as the customer is not bothered about what is the nature of the sticker. It was the further stand of the Department that the assessee was receiving this income as advertisement and, therefore, not eligible for the benefit as claimed by them. It was further contended on behalf of the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made various operations for putting stickers on the toys. Various Benches of the Tribunal have also taken the view that if the manufacturing apparatus is used for carrying out some activity, then such activity is an operational activity. Even in the decision of K.R.M. Marine Exports Ltd. v. ACIT (201 CTR (Mad.) 1), relied on by the ld. DR, it is clearly observed in paragraph 20 that if an activity is done with the help of industrial undertaking of the assessee, then same is an operational activity. Therefore, we are of the view that stickering activity is operational activity of the assessee and is entitled to deduction u/s 80HHC." Aggrieved by the abovesaid order of the Tribunal, the Revenue is before this Court by filing the present app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f documents and also the decisions on which reliance has been placed by the Tribunal in arriving at its finding. 8. Before proceeding to analyse the case on hand, it would be useful to refer to Explanation (baa) to Section 80HHC of the Act, on which much stress has been placed by the learned standing counsel appearing for the appellant. For better clarity, Explanation (baa) to Section 80HHC of the Act is extracted hereinbelow :- "80HHC. .............. Explanation. - For the purposes of this section, --- ............. (baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by --- (1) ninety per cent of any sum referred to in clauses (iiia), (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for those expenses. However, learned counsel for the Department cannot invoke Explanation (baa) in every matter involving receipts by way of brokerage, commission, interest, rent, labour charges, etc. These items of income have got to be seen in the context of the business activity of the assessee. To give an example, in the case of a manufacturing company which undertakes exports, receipt of interest or commission may not be operational income because they do not have the element of turnover and consequently Explanation (baa) will apply. However, that will not be the case if the assessee is carrying on the business of financing because in the case of financing, the interest income which accrues to the assessee will have the element of tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, has found that the activity involved in the case requires use of machinery, labour and material which were also forming part of the activity of manufacturing of toys for exports. This is a finding of fact. It has not been challenged in the memo of appeal. The memo of appeal proceeds only on the basis that since the receipt is for the purpose of labelling 'MRF' on the toys, the charges received by the assessee would fall under the head advertisement charges and, therefore, Explanation (baa) stood attracted. It is trite law that each case has to be decided on its own facts. Therefore, each case will have to be examined by the Assessing Officer as to whether receipt of income is a part of operational income and whether the elem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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