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2017 (2) TMI 598 - ITAT AHMEDABAD

2017 (2) TMI 598 - ITAT AHMEDABAD - TMI - Exclusion of excise duty and sales tax from total turnover while computing deduction u/s. 80HHC after insertion of section 145A - Held that:- Identical issue was considered n the case of Dyntex Dyechem Ltd. [2014 (3) TMI 468 - GUJARAT HIGH COURT] wherein held that the learned Tribunal has not committed any error in holding that the components of sales tax and central excise do not form part of sale proceeds for the purpose of Section 80HHC of the Act des .....

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le computing deduction u/s. 80HHC - Held that:- This issue is squarely covered in favour of the revenue and against the assessee by the decision of the Hon’ble Supreme Court in the case of IPCA Laboratory Ltd. [2004 (3) TMI 9 - SUPREME Court] wherein held that arriving at the profits earned from export of both self manufactured goods and trading goods, the profits and losses in both the trades are required to be taken into consideration - If after such adjustments there is a positive profit the .....

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conditions and since 80HHC benefit is not available after 1.4.05, the cases of exporters having a turnover below and those above 10 crores should be treated similarly, we are of the considered view that the ld.CIT(A) was not justified in confirming the action of the AO. Therefore, we hereby direct the AO to allow the deduction u/s.80HHC of the Act. - Decided in favour of assessee. - Gross interest income as against net interest for computing deduction u/s. 80HHC of the Act - Held that:- Th .....

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n 80HHC for determining the profits of the business. Matter remanded back to A.O. to work out the deductions – Decided in favor of assessee - Addition of accrued bonus under Keymen Insurance Policy - Held that:- A.O. found that the assessee has subscribed to Keymen Insurance Scheme of LIC and is paying annual premium on the same. The A.O. noticed that the assessee has not shown the bonus accrued under the scheme. Drawing support from the provisions of Section 28(vi) of the Act, the A.O. was .....

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ssee - ITA. No: 2166/AHD/2011 - Dated:- 7-2-2017 - Shri N. K. Billaiya, Accountant Member And Shri Mahavir Prasad, Judicial Member Appellant by : Ms. Urvashi Sodhan, AR Respondent by : Shri K. Madhusudan, Sr. D.R. ORDER Per N. K. Billaiya, Accountant Member 1. This appeal by the Assessee is preferred against the order of the Ld. CIT(A)- I, Ahmedabad dated 02.06.2011 pertaining to A.Y. 2004-05. 2. The assessee has raised seven substantive grounds of appeal which will be dealt one by one. 3. Rival .....

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IT(A) but could not succeed, hence the assessee is before us. 5. The first ground relates to the exclusion of excise duty and sales tax from total turnover while computing deduction u/s. 80HHC after insertion of section 145A. The assessee strongly contends that despite of the insertion of Section 145A components of sales tax and central excise do not form part of sale proceeds for the purpose of section 80HHC of the Act. We find that an identical issue was considered by the Hon ble Jurisdictiona .....

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is Court in Tax Appeal No. 884 of 2006 and other allied appeals, to the facts of the case on hand the question raised in the present Tax Appeal is answered against the revenue and it is held that the learned Tribunal has not committed any error in holding that the components of sales tax and central excise do not form part of sale proceeds for the purpose of Section 80HHC of the Act despite insertion of Section 145A of the Act. 6. Respectfully following the decision of the Hon ble Jurisdictional .....

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deduction u/s.80HHC of the Act on unite-wise profit. 10. The brief facts leading to the above issue are that the assessee claimed deduction u/s.80HHC of the Act for Vatva Unit-II, Agro Division, Panoli Unit and Bombay Unit. The assessee is maintaining separate accounts and the accounts are separately audited. This fact has also been noted by the Assessing Officer that on verification of return, it was found that assessee had submitted various audit reports of those divisions, where export profi .....

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35-536/Ahd/2005 & 249/Ahd/2005 dated 12-06-2009, relying on the case of CIT v. Parry Agro Industries Ltd. (2002) 257 ITR 41 (Mad) and CIT v. Rathore Brothers (2002) 254 ITR 656 (Mad) has allowed the claim of the assessee vide para-5 & 6 as under:- 5. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. Both the parties before us agreed that this issue is covered in favour of the assessee by the order of the Tribunal in .....

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n ITA No.1774/Ahd/2003 for A.Y. 1999-2000 by holding as under "5.2. In the present case in hand, the Assessing Officer has held that deduction under section 80HHC is not available on division/unitewise profits of the business and the same is available on the entire business profit without differentiating between units engaged in export and units engaged in domestic sales. Therefore, by following the said decision of the Tribunal, we reverse the finding of the CIT(A) and restore the matter t .....

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ival submissions and perused record. Respectfully following the Tribunal order in assessee's own case (supra), we hold that deduction under section 80HHC is to be allowed on unite-wise basis, this ground of Revenue is dismissed.' 6. Facts being identical, respectfully following the precedent, we allow this ground of appeal of the assessee." The facts being exactly identical in this year also and respectfully following the Tribunal's decision in assessee's own case (supra), w .....

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e of Nirma Ltd. in Tax Appeal No. 360 of 2016 and has decided this issue in favour of the assessee. The relevant part reads as under:- 3. Learned counsel Shri Nitin Mehta for the revenue placed heavy reliance on the judgment in the case of Synco Industries Ltd. (supra). He also drew our attention to the judgment of the Division dated 2.7.2013 in the case of Sintex Industries Ltd. vs. Assistant Commissioner of Income Tax rendered in Tax Appeal No.261 of 2012 to contend that the course adopted by .....

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the profit making unit, the assessee had claimed deduction under section 80HH and 80I of the Act. With this background, it was held and observed as under: "37. We have considered the facts and circumstances of the present case and the law laid down by the apex court and the decision of the Delhi High Court referred hereinabove. It is not the case of the assessing authority that the gross income of the company was nil. From a perusal of the income disclosed to all the three units it appears .....

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ioner of Income-tax (Appeals) has rightly held that income of the undertaking shall be calculated on a consideration of an unabsorbed business losses, etc. in respect of each individual unit and thereafter on the profit derived by the unit the deduction is to be allowed. This view of the Commissioner of Income-tax (Appeals) confirmed by the Tribunal is in accordance to provisions of the Act as well as in consonance with the law laid down by the apex court and the Delhi High Court. The apex court .....

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ision against the profits derived from an industrial undertaking. The apex court further held that under section 80-I(6) of the Act for the purposes of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub-section (6) of the Act contemplates that only the profits shall be taken into account as if it was the only source of income. Therefore, from the decision of the apex court, two principles of law emerge one for the purposes of computation o .....

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is view is not in conflict with the decision of the Supreme Court in the case of Synco Industries Ltd. (supra). In such case, it was found that the assessee had two industrial units namely, one in oil and another in chemicals. The assessee was making profits in chemical unit but incurring losses in oil unit. In this background, it was held that while computing gross total income, income should include both profit in chemical unit and loss in oil unit. If the result thereafter is nil, the assesse .....

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n 80I deals with treatment to be given to such deductions in order to arrive at total income of the assessee and therefore, while interpreting section 80I(1) as also the gross total income, one has to read expression "gross total income" as defined under section 80B(5). It was therefore,concluded that the loss from oil division was required to be adjusted before determining gross total income and as gross total income was nil, the assessee was not entitled to claim deduction under sect .....

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for its profit making eligible industry. This is how even this Court in the judgment in the case of Synco Industries (supra) had used or viewed or situation as can be seen from the following portion of the judgment referring the judgment in the case of Canara Workshop (supra). "The Hon'ble Supreme Court has further held that the object of section 80E was properly served only by confining the application of the provisions of that section to the profits and gains of a "single indust .....

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puted deduction in order to arrive at the total income of the company and while giving effect, one has to consider the provisions of section 80IA and 80IB of the Act. In other words, while considering the gross total income of the assessee, deduction under section 80IA and 80IB of the Act are required to be allowed after adjusting loss worked out in other units." 9. We therefore, do not find any error in the view expressed by the Tribunal following the decision of the Allahabad High Court. .....

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Court (supra), we decide this issue in favour of the assessee and against the revenue. Ground No. 2 is allowed. 13. Ground no. 3 relates to the adjustment of trading exports loss against manufacturing profit while computing deduction u/s. 80HHC. 14. At the outset, the ld. counsel for the assessee fairly stated that this issue is squarely covered in favour of the revenue and against the assessee by the decision of the Hon ble Supreme Court in the case of IPCA Laboratory Ltd. 266 ITR 521 wherein t .....

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in the section. In this case we are concerned with the wordings of sub-section (3)© of section 80HHC. As noted earlier sub-section (3)(a) deals with case where the export s only of self manufactured goods. Subsection 3(b) deals with the case where the export is only of trading goods. Thus when the Legislature wanted to take exports from self manufactured goods or trading goods separately, it has already so provided in sub-sections (3)(a) and (3)(b). In arriving at the figure of positive pro .....

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word "and" appears. A plain reading of sub-section (3)(c) shows that "profits from such exports" has to be profits of exports of self manufactured goods plus profits of exports of trading goods. The profit is to be calculated in the manner laid down in sub-sections (3)(c)(i) and (ii). The opening words "profit derived from such exports" together with the word "and" clearly indicate that the profits have to be calculated by counting both the exports. It is .....

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es will have to be taken into consideration. Section 80AB is relevant. It reads as follows: "80AB. Where any deduction is required to be made or allowed under any section included in this Chapter under the heading 'C, - Deductions in respect of certain incomes' in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deductio .....

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e-tax Act. Section 80AB is also in Chapter VI-A. It starts with the words "where any deduction is required to be made or allowed under any section of this Chapter". This would include Section 80HHC. Section 80AB further provides that "notwithstanding anything contained in that section". Thus section 80AB has been given an overriding effect over all other sections in Chapter VI-A. Section 80HC does not provide that its provisions are to prevail over section 80AB or over any ot .....

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the Hon ble Apex Court s decision (supra), we decide this issue in favour of the revenue and against the assessee. Ground no. 3 is dismissed. 16. Ground no. 4 relates to the denial of granting deduction u/s. 80HHC on DEPB income ignoring that rules of duty draw back does not prescribe any allocation towards custom duty in its products. 17. While scrutinizing the return of income, case records and submissions of the assessee, the A.O. noticed that the assessee has claimed deduction u/s. 80HHC on .....

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ble profit for deduction u/s. 80HHC of the Act. 18. Before us, the ld. counsel for the assessee vehemently stated that the issue is covered in favour of the assessee by the decision of the Hon ble Supreme Court given in the case of Avani Exports 58 taxmann.com 100. 19. Per contra, the ld. D.R. stated that the decision given in the case of Avani Exports (supra) is on limited issue of the aforementioned amendment, whether it is prospective. It is say of the ld. D.R. that clauses (iiib) & (iiic .....

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e orders of the authorities below. We find that the Tribunal (ITAT 'C' Bench Ahmedabad) in ITA No.776/Ahd/2007 for Y 2003-04 (assessee's own case) vide its order dated 30/10/2009 was pleased to restore the issue in respect of deduction u/s.80HHC of the Act, by observing as under:- "9. Respectfully following the above judgment of the Tribunal, we hold that profit element on DEPB licence will be covered by section 28(iiid) and, accordingly, by third proviso to section 80HHC(3) of .....

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.T.Act, 1961 in accordance with the decision of the Special Bench in the case of M/s.Topman Exports (supra), we restore the matter to the file of Assessing Officer." 4.1. There is no dispute with regard to the fact that the decision of the Special Bench rendered in the case of Topman Exports vs. ITO(supra) has been upheld by the Hon'ble Supreme Court. Therefore, the issue remains to be examined whether the AO has computed the deduction as per the decision of the Special Bench rendered i .....

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us provisos of Section 80HHC(3) of the Act. In other words, the overall computation of claim of deduction u/s.80HHC will not materially be different under both the judgments. Thus, the amount of deduction of ₹ 38,08,898/- u/s.80HHC as shown will remain unchanged. The AO did not accept the contention on the basis that the export turnover of the assessee is more than ₹ 10 crores. Further, it was noticed that profits derived from export in respect of goods or merchandise manufactured ar .....

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ention, the ld.counsel for the assessee has relied upon the judgement of the Hon'ble Jurisdictional High Court rendered in the case of Avani Exports vs. CIT reported at reported at 348 ITR 391(Guj.). The Hon'ble Supreme Court in the case of CIT vs. Avani Exports reported at 58 taxmann.com100(SC) has categorically ruled that having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, the cases of exporters having a turnover below and those above 10 crores should .....

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inate Bench (supra), we decide this issue in favour of the assessee and against the revenue. Ground no. 4 is allowed. 22. Ground no. 5 appears to be alternate contention qua ground no. 4 (supra), since; we have decided the issues qua ground no. 4 in favour of the assessee. Ground no. 5 becomes infructuous. 23. Ground no. 6 relates to the reduction of gross interest income as against net interest for computing deduction u/s. 80HHC of the Act. 24. This issue is no more res integra as the same has .....

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lowed. Under clause (1) of Explanation (baa) to section 80HHC of the Act, ninety per cent. of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in any such profits are to be deducted from the profits of the business as computed under the head Profits and gains of business or profession . The expression included any such profits would mean only such receipts by way of brokerage, commission, interest, rent, charges or any other .....

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