TMI Blog2015 (5) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... of benefit under Section 80HHC. In the case on hand, the activity of the assessee in carrying out labelling 'MRF' on toys using its machinery would squarely fall within the ambit of operational activity. 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 - Decided in favour of assessee. - T.C.A. Nos. 1441 & 1442 of 2007 - - - Dated:- 22-4-2015 - R. Sudhakar And K. B. K. Vasuki,JJ. For the Appellant : Mr. T. R. Senthil Kumar For the Respondent : Mr. Venkatnarayanan for M/s. Subbaraya Aiyar Padmanabhan JUDGMENT (Delivered By R. Sudhakar, J.) Aggrieved by the order of the Tribunal in allowing the appeal filed by the assessee for the assessment year 2001-2002 and dismissing the appeal filed by the Revenue for the assessment year 2002-2003, the Revenue is before this Court by filing the present appeals. This Court, vide order dated 19.11.07, while admitting the appeals, framed the following substantial question of law for consideration :- Whether on the facts and in the circumstances of the case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument, 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 Department that putting the stickers does not involve any element of turnover and, therefore, not entitled for deduction under Section 80HHC. However, on consideration of the entire gamut of facts as also the the case laws relied on by the parties, the Tribunal found that the decision of Bombay High Court in CIT - Vs - Bangalore Clothing Co. (260 ITR371 (Bom.)) was applicable, and accordingly, following the same, held that the activity carried on by the assessee is an operational activity. For better clarity, the relevant portion of the order of the Tribunal is extracted hereinbelow :- 5. We have considered the rival submissions carefully and have gone through the relevant material on record as well as the decisions cited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Explanation (baa) to Section 80HHC of the Act. 6. Per contra, learned counsel appearing for the respondent submitted that the Tribunal, on consideration of the entire facts and on appreciation of the decisions placed before it, has come to the just conclusion by following the decision of the Bombay High Court in Bangalore Clothing Co. case (supra) and, therefore, no interference is warranted with the well considered findings of the Tribunal. 7. Heard the learned standing counsel appearing for the appellant and the learned counsel appearing for the respondent and perused the materials available in the typed set of 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 mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee will have the element of turnover and in such a case, receipts like interest, will not attract Explanation (baa). The point which we would like to make, therefore, is that in every matter the Assessing Officer will have to ascertain whether receipt of interest, commission, labour charges, etc., were a part of operational income. We cannot lay down any standard test for deciding what would constitute operational income. Broadly, the Department will have to consider the memorandum and articles of association of the company, the nature of the business, the nature of the activity and such other tests. The Department will also have to ascertain as to what is the dominant business of the company and whether receipts like interest, commission, etc., accrue as a part of the main business activity or whether they accrue out of incidental business. 10. Explanation (baa) to Section 80HHC of the Income Tax Act postulates that profits of business means the profits of the business as computed under the head Profits and gains of business or profession specified under Section 28 to 44D of the Income Tax Act. The amount so computed should be reduced by 90% of the incentive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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