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TMI Blog2016 (8) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahmedabad in ITA No.34&35/Ahd/2003. 2. At the time of admitting present appeals, following questions of law were framed:- TAX APPEAL No.506 of 2009 "Whether the Appellate Tribunal is right in law and on facts in holding 90% of the net amount of interest, freight and commission, is to be reduced, as per the Explanation (baa), to Section 80HHC ?" TAX APPEAL No.391 & 392 of 2010 "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the commission and insurance are business profits and accordingly not to be reduced while calculating deduction u/s 80HHC of the Act?" 3. At the time of hearing of present appeals, learned advocate for the appellant submitted that the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Business or Profession". The expression "included any such profits" in clause (1) of the Explanation (baa) would mean only such receipts by way of brokerage, commission, interest, rent, charges or any other receipt which are included in the profits of the business as computed under the head "Profits and Gains of Business or Profession". Therefore, if any quantum of the receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature is allowed as expenses under Sections 30 to 44D of the Act and is not included in the profits of business as computed under the head "Profits and Gains of Business or Profession", ninety per cent of such quantum of receipts cannot be reduced under Clause (1) of Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gross total income but also to the quantum of the income so included. Similarly, Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in Explanation (baa), the words "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits" will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head "Profits and Gains of Business or Profession" referred to in the first part of the Explanation (baa). Accordingly, if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court. On appeal being filed by the Revenue against the order of the Tribunal, the High Court has set aside the order of the Tribunal and directed the Assessing Officer to dispose of the issue in accordance with the judgment of the Bombay High Court in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra). We must, thus, examine whether reasons given by the High Court in its judgment in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra) were correct in law. 14. On a perusal of the judgment of the High Court in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra), we find that the reason which weighed with the High Court for taking a different view, is that rent, commission, interest and brokerage do not possess a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business. In this case, this Court held that the processing charges received by the assessee were part of the business turnover and accordingly the income arising therefrom should have been included in the profits and gains of business of the assessee and ninety per cent of this income also would have to be deducted under Explanation (baa) under Section 80HHC of the Act. In this case, this Court was not deciding the issue whether ninety per cent deduction is to be made from the gross or net income of any of the receipts mentioned in clause (1) of the Explanation (baa). 15. The Bombay High Court has also relied on the Memorandum explaining the clauses of the Finance Bill, 1991 contained in the circular dated 19.12.1991 of the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... briefly are that Bharat Rasayan Limited (for short `the assessee') filed a return of income tax claiming a deduction of Rs. 72,76,405/- under Section 80HHC of the Act. In the assessment order, the Assessing Officer held that ninety per cent of the gross interest has to be excluded from the profits of the business of the assessee under Explanation (baa) to Section 80HHC of the Act and deducted ninety per cent of the gross interest of Rs. 50,26,284/- from the profits of the business of the assessee. The assessee preferred an appeal contending that only ninety per cent of the net interest should have been deducted from the profits of the business of the assessee under Explanation (baa) to Section 80HHC, but the Commissioner of Income Tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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