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COMMISSIONER OF INCOME TAX-I Versus M/s JEEVAN PRODUCTS

Deduction under section 80HHC - Whether the Income Tax Appellate Tribunal is right in law and on facts in holding that 90% of profit of sale of licence computed in the proportion of export turnover to the total turnover should be added to the profit of business for computation of deduction u/s 80HHC? - Held that:- We have also gone through the judgment cited by learned advocate for the respondent. In the case of ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income-Tax reported in [2012 (2 .....

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010 With TAX APPEAL NO. 392 of 2010 - Dated:- 29-7-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, 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, .....

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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 has committed an error while dismissing the appeal preferred by the department and the impugned order is required to be set aside. 4. Ms.Parikh, learned advocate for the respondent submitted that the issue involved in these appeals is c .....

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-Tax reported in [2012] 343 ITR 89 (SC), it is observed that, ninety percent of not the gross rent or gross interest but only the net interest or rent, which had been included in the profits of business of the assessee as computed under the head Profits and gains of business or profession , was to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. In the said decision, it is observed as under:- 10. Under Clause (1) of Explanation (baa) .....

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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 Ex .....

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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 assess .....

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ross 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 he .....

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d by us in this judgment to the facts of the case before us, if the rent or interest is a receipt chargeable as profits and gains of business and chargeable to tax under Section 28 of the Act, and if any quantum of the rent or interest of the assessee is allowable as an expense in accordance with Sections 30 to 44D of the Act and is not to be included in the profits of the business of the assessee as computed under the head Profits and Gains of Business or Profession , ninety per cent of such qu .....

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that we have taken of Explanation (baa) to Section 80HHC is also the view of the Delhi High Court in Commissioner of Income-Tax v. Shri Ram Honda Power Equip (supra) and the Tribunal 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 .....

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xport 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 in this case. In that case, the assessee owned a factory in which he processed cashew nuts grown in his farm and he exporte .....

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assessee and as a result ninety per cent of the profits of the assessee arising out of the receipt of processing charges was not deducted under clauses (1) of the Explanation (baa) to Section 80HHC. This Court held that the processing charges was included in the gross total income from cashew business and hence in terms of Explanation (baa), ninety per cent of the gross total income arising from processing charges had to be deducted under Explanation (baa) to arrive at the profits of the busines .....

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ny 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 Central Board of Direct Taxes to come to the conclusion that the Parliament intended to exclude items which were unrelated to the export turnover from the computation of deduction and while excluding such items which are unrelated to export for the purpose of Section 80HH .....

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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 impu .....

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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 ₹ 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 (Appeals) reje .....

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