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2016 (5) TMI 142 - BOMBAY HIGH COURT

2016 (5) TMI 142 - BOMBAY HIGH COURT - TMI - Deduction u/s 80HHC - Tribunal held that the 90% of the job work charges should not be excluded from the profit of the business in terms of Explanation (baa) to Sec. 80HHC - Held that:- Apex Court in K. Ravindranathan Nair (2007 (11) TMI 10 - Supreme Court of India ) had while considering Explanation (baa) to Section 80HHC of the Act held that independent income, which has no nexus with the export activity, then 90% of such independent income is requi .....

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out on job work has nexus with the export earnings of the respondent assessee. In fact, the Assessing Officer has categorically given a finding of fact that job work charges received has no nexus to export. Substantial question of law raised for our consideration is answered in the negative i.e. in favour of the Revenue and against the respondent assessee.

So far as the alternative submission of the assessee that while giving effect to this order, the Assessing Officer should exclude .....

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resaid finding of fact, the respondent assessee had filed an appeal to the Tribunal. However, the same being an alternative submission was not considered as the impugned order of the Tribunal decided the basic issue in its favour. In these circumstances, the petitioner's grievance on the above finding of fact was never considered by the Tribunal. Therefore, in the interest of justice, let the respondent assessee be given an opportunity to prove its case that net expenses are different from gross .....

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2-03. This appeal relates to Assessment Year 2000-01. 2. The Revenue has urged following two questions of law for our consideration : (a) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that sundry creditors written back should not be reduced from the profits of business under the provisions of sub-clause (1) of clause (baa) of explanation to Section 80HHC of the Act without appreciating the fact that the said receipts cannot be termed .....

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in terms of Explanation (baa) to Sec. 80HHC relying on decision of Bombay High Court in the case of CIT Vs. Banglore Clothing Co. (2003) 260 ITR 371 (Bom) without appreciating the judgment of Supreme Court in the case of CIT Vs. Ravindranathan Nair (295 ITR 228) which is squarely applicable to the facts of the case? 3. So far as question (a) is concerned, Mrs. Bharucha, learned Counsel for the Revenue very fairly states that the same does not arise from the impugned order of the Tribunal in the .....

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. Besides, being engaged in job work activity and local sales. 7. In its Return of Income for the subject assessment year, the Respondent Assessee had claimed deduction under Section 80HHC of the Act. By assessment order dated 28th March, 2003 under Section 143(3) of the Act, the Assessing Officer inter alia recomputed the deduction claimed under Section 80HHC of the Act. This by inter alia excluding 90% of the job work charges from the profits of the business of the respondent assessee on appli .....

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ssessee carried the issue in appeal before the Commissioner of Income Tax (Appeals) [CIT(Appeals)]. By an order dated 7th February, 2007, the CIT(Appeals) upheld the exclusion of 90% of the job work charges from the profits of the business in terms of Explanation (baa) to Section 80HHC of the Act. It held that the job work charges received are not export related receipts. Further, the order of the CIT(Appeals) also rejects the respondent's claim that only 90% of the net receipts on account o .....

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om the respondent assessee forms part of its operational income. Therefore, the same should be included in the profits of the business and no exclusion in terms of Explanation (baa) to Section 80HHC of the Act is warranted. Accordingly, the additions made by the Assessing Officer on account of reduction in claim for deduction under Section 80HHC of the Act was deleted on account of jobwork charges. 10. Mrs. Bharucha, learned Counsel appearing for the Revenue submits that the issue now stands con .....

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vindranathan Nair (supra) and Sesa Goa Ltd. (supra) would have to be applied to the facts of the present case. However, he submits that this issue be restored to the Assessing Officer for the purposes of examining the exact nature of job work charges received by the respondent assessee to examine whether or not the job work charges have nexus to its export activity. This restoration to the Assessing Officer for application of the law as laid down in K. Ravindranathan Nair (supra) to determine ne .....

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o reference to the same. In fact, the Apex Court in K. Ravindranathan Nair (supra) had while considering Explanation (baa) to Section 80HHC of the Act held that independent income, which has no nexus with the export activity, then 90% of such independent income is required to be deducted from business profits. Thus, in the facts before it, it held that independent income like rent, commission etc. including processing charges were be reduced by 90% so as to arrive at the profit of the business i .....

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for restoring of the issue to the Assessing Officer for fresh consideration as submitted by the respondent, is not warranted. In view of the above, as the issue stands concluded by the decision of the Apex Court in K. Ravindranathan Nair (supra) the substantial question of law raised for our consideration is answered in the negative i.e. in favour of the Revenue and against the respondent assessee. 13. So far as the alternative submission of Mr. Mistri, the learned Senior Counsel that while giv .....

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