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2016 (10) TMI 505 - BOMBAY HIGH COURT

2016 (10) TMI 505 - BOMBAY HIGH COURT - [2016] 388 ITR 550 - Deduction under Section 80-O - whether deduction was not allowed on the gross receipts but only on that part of receipts which form part of the total income of the assessee? - Held that:- On reading the statement of case, it is noted that it records that for the earlier Assessment Year, i.e. A. Y. 1982-83, adjustment of expenses should be limited only to the items that have nexus to the earning of the income and restored the issue to t .....

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it is entitled to deduction on gross basis without being governed by Section 80AB of the Act. (Please see the emphasized portion of statement of case). In any case, the present Reference has been made in view of the Reference made for the Assessment Year 1982-83 and only with a view to maintain consistency. The attempt on the part of the Applicant-Assessee is to enlarge the scope of the question which has been referred to us for our opinion by the Tribunal. The issue which has been referred to .....

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ee Lala, for the Applicant None for the Respondent JUDGMENT ( Per M.S. Sanklecha, J. ) None appears on behalf of the Revenue. The Applicant has filed an affidavit of service, indicating completion of service upon the Revenue on 6th April, 2000. 2 This Reference under Section 256(1) of the Income Tax Act, 1961 (the Act) by the Income Tax Appellate Tribunal (the Tribunal) seeks our opinion on the following question of law: Whether on the facts and in the circumstances of the case, the Tribunal was .....

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6 The rival submissions in regard to the above have been very carefully considered. The Tribunal in the case of the assessee for the assessment year 198283 considered the claim of quantum of deduction under section 80-O i.e. gross or in the manner laid down under Section 80AB of the Act by referring to the Supreme Court decision in Distributors (Baroda) P. Ltd. (supra) where the provisions of section 80AB were considered specifically. Despite the fact that the provisions of Section 80AB were not .....

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gross income. In so far as the apportionment of expenses of the corporate office with reference to which deduction under Section 80-O has to be granted, the Tribunal observed that most of these expenses were debited to revenue account and could not be liable to be allocated in prorata manner against the income exempted under section 80-O and 80-AB of the Act and that the adjustment of expenses or losses should be limited to the items that have nexus to the earning of the income. Since the asses .....

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nd to the decision of the Tribunal in Expo Machinery Ltd. vs. I.A.C. (1989) 31 I.T.D. 41, which was concerned with the deduction under section 80HHA and 80HHB and held the section80AB was in applicable for calculating deduction under section 80HHA and 80 HHB. Section 80-O states - where the gross total income of an assessee being an India company... includes an income by way of royalty, commission, fees or any similar payment received by the assessee..... and such income is received in convertib .....

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this section be allowed in computing the total income of the assessee a deduction from such profits and gains of an amount equal to 50 per cent thereof. Subsection (3) of section 80HHB talks of the conditions for allowability of the deduction, i.e. the assessee maintains separate accounts in respect of profits and gains derived from the business of execution, etc. etc. and such accounts have been audited by an accountant, etc. etc. and the assessee furnishes a certificate from the auditor in th .....

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on under that subsection shall be limited to the amount so credited in pursuance of clause (ii) or the amount so brought into India in pursuance of clause (iii), whichever is less. The reading of section 80-O suggests that the gross total income of the assessee should include income for which deduction is allowable under section 80-O. The said income must be received in convertible foreign exchange in India and the amount of deduction is to the extent of 50 per cent of the income received in Ind .....

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ion 80AB of the Act which states specifically that notwithstanding anything contained in the section which talks of deduction under Chapter VIA, the amount of the deduction has to be with reference to the amount of income of that nature computed in accordance with the provisions of this Act alone would be deemed to be the amount of income of that nature which is derived or received by the assessee and included in the gross total income. Therefore, there is no way of superseding the provisions of .....

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uld have to be taken into account in computing the income according to the provisions of this Act, which would be necessary to comply with the provisions of section 80AB of the Act. 3. For the assessment year 198283 in R.A. No.1866/Bom/1993 the assessee had sought identical question for reference along with one other question and the same was referred for the valued opinion of the Hon'ble High Court vide Statement of the Case dated 31.10.1994. In the light of the above, the questions above i .....

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Assessee is not taking out any application for restoration of Income Tax Appeal No.5 of 2000. However, the above order dated 30th April, 2015 itself clarified that the questions raised therein are left open for consideration in an appropriate case, if not already decided. Therefore, the question raised in this Reference is being independently considered. 6 From the statement of case as set out hereinabove, the controversy revolves around the extent of availability of deduction under Section 80-O .....

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ble under Section 80-O of the Act. In fact, the question as framed has been referred to us by the Tribunal for the subject Assessment Year only for the reason that in the earlier Assessment Year it had referred the question to us for our opinion. This is particularly so, because at the time when this Reference was made on 26th August, 1996 for the Assessment Year 1985-86, the issue whether deduction under Section 80-O of the Act is to be allowed on gross or net basis (on an application of Sectio .....

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ction 80-O of the Act while doing adjustment under Section 143 (1)(a) of the Act. The Assessing Officer, while making adjustment, sought to restrict the benefit of Section 80-O of the Act only to net receipts, i.e. after reducing the expenses incurred to earn that (Section 80-O) income. The Apex Court held that at the relevant time, i.e. during the Assessment Years 1996-97 and 1997-98, in view of conflicting interpretation in respect of section 80-O of the Act, prima facie, adjustment to restric .....

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A. M. Moosa v/s. CIT 294 ITR 1 has held that Section 80AB of the Act has an overriding effect over all Sections of Chapter VIA of the Act. Undisputedly, Section 80-O of the Act is part of Chapter VIA of the Act and, therefore, would be governed by Section 80AB of the Act. 10 Therefore, we were of the view that issue stands concluded in favour of the Respondent-Revenue by virtue of the decision of this Court in Asian Cable Corporation ltd., (supra). 11 However, Mr. Lala, learned Counsel appearing .....

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es in terms of Section 80AB of the Act. Mr. Lala, submits that the question as framed is not properly worded and, therefore, the Court must take note of the dispute as recorded in the orders of the Authorities under the Act. 12 In a Reference under Section 256(1) of the Act, our jurisdiction is Advisory. We are required to answer the question as referred to us in the context of the facts set out in the statement of case for our opinion. Therefore, on reading the statement of case, it is noted th .....

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