TMI Blog2016 (8) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... WANI, JJ. FOR THE APPELLANT : MRS MAUNA M BHATT, ADVOCATE FOR THE OPPONENT : SERVED BY AFFIX.-(R) ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of these appeals, the appellant has challenged order dated 28.12.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench B , Ahmedabad in ITA No.3614/Ahd/2002 and another order dated 26.10.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench A , 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 appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of any receipt of the nature mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining profits of the business of the assessee under Explanation (baa) to Section 80HHC. 11. For this interpretation of Explanation (baa) to Section 80HHC of the Act, we rely on the judgment of the Constitution Bench of this Court in Distributors (Baroda) P. Ltd. v. Union of India and Others (supra). Section 80M of the Act provided for deduction in respect of certain intercorporate dividends and it provided in sub-section (1) of Section 80M that where the gross total income of an assessee being a company includes any income by way of dividends received by it from a domestic company, there shall, in accordance with and subject to the provisions of this Section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends an amount equal to a certain percentage of the income mentioned in this Section. The Constitution Bench held that the Court must construe Section 80M on its own language and arrive at its true interpretation according to the plain natural mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the present case has followed the judgment of the 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 any nexus with export turnover and, therefore, the inclusion of such items in the profits of the business would result in a distortion of the figure of export profits. The High Court has relied on a decision of this Court in Commissioner of Income-Tax v. K. Ravindranathan Nair [(2007) 295 ITR 228 (SC)] in which the issue raised before this Court was entirely different from the issue raised i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to be excluded from the profits of the business. In our considered opinion, it was not necessary to refer to the explanatory Memorandum when the language of Explanation (baa) to Section 80HHC was clear that only ninety per cent of receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits computed under the head profits and gains of business of an assessee could be deducted under clause (1) of Explanation (baa) and not ninety per cent of the quantum of any of the aforesaid receipts which are allowed as expenses and therefore not included in the profits of business of the assessee. 16. In the result, we allow the appeal and set aside the impugned order of the High Court and remand the matter to the Assessing Officer to work out the deductions from rent and interest in accordance with this judgment. No costs. Civil Appeal No.4534 of 2008 2. The facts of this case very briefly are that Bharat Rasayan Limited (for short `the assessee') filed a return of income tax claiming a deduction of ₹ 72,76,405/- under Section 80HHC of the Act. In the assessment order, the Assessing Officer held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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