TMI Blog2014 (6) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, include profits. The very basis for computing section 80HHC deduction was "business profits" as computed under section 28, a portion of which had to be apportioned in terms of the above ratio of export turnover to total turnover. Therefore, before giving deduction under section 80HHC, the gross total income of the assessee being profits from business had to be arrived at in terms of clause (baa) to the Explanation. While calculating "business profits" the same had to be done in terms of section 28 to section 44D alone. The idea of section 80HHC is to ensure that the exporter gets the benefit of the profits derived from export and not to depress the profit further. Therefore, it can only be the net commission, interest, rent, etc., whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough certain application is an enduring benefit, it does not result into acquisition of any capital asset. It merely enhances the productivity or efficiency and therefore, it has to be treated as revenue expenditure - Decided in favour of the assessee - IT Appeal No. 456 of 2008 - - - Dated:- 23-6-2014 - N. Kumar AND B. Manohar, JJ. For the Petitioner : K.V. Aravind, Advocate For the Respondent : T. Suryanarayana, Advocate JUDGMENT N. Kumar, J. This appeal is by the revenue challenging the order passed by the Tribunal granting relief to the assessee 2. The appeal was admitted to consider the following substantial questions of law:- (i) Whether the Tribunal was correct in holding that when computing d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mestic business the Legislature intended to have a formula to ascertain export profits by apportioning the total business profits on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. If the assessee has two incomes with one common pool of expenses and since principle of attribution has been retained in the scheme of section 80HHC, both in terms of section 80HHC(3). Clause (e) to the Explanation to section 80HHC(3)(a), (b) and (c) and in clause (baa) to the Explanation to section 80HHC, instead of going into lengthy exercise of dividing such common expenses, the Legislature has estimated the reduction of export turnover by 10 per cent. Ultimately, clause (baa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest , i.e., gross amount less the expenditure incurred by the assessee in earning such amount. Where, as a result of the computation of profits and gains of business and profession, the Assessing Officer treats the commission, interest, rent receipt as business income, then deduction should be permissible, in terms of Explanation (baa) of the net commission, interest, rent, etc., i.e., the gross commission, interest, rent, etc., less the expenditure incurred for the purposes of earning such commission, interest, rent, etc.:..' Similarly, the second question of law was also the subject-matter of decision by this Court in the case of CIT v. IBM India Ltd. [2013] 357 ITR 88 (Kar.) wherein this Court has held as under:- The Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital asset. The same merely enhances the productivity or efficiency and hence to be treated as revenue expenditure. In fact, this Court had an occasion to consider whether the software expenses is allowable as revenue expenses or not and held, when the life of a computer or software is less than two years and as such, the right to use it for a limited period, the fee paid for acquisition of the said right is allowable as revenue expenditure and these softwares if they are licensed for a particular period, for utilizing the same for the subsequent years fresh licence fee is to be paid. Therefore, when the software is fitted to a computer system to work, it enhances the efficiency of the operation. It is an aid in manufacturing process rat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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