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TMI Blog2000 (8) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the case of CIT v. Kantilal Chhotalal [2000] 246 ITR 440 (Bom), decided on July 31, 2000, vide Income-tax Appeal No. 533 of 2000, we hold that labour commission/indenting commission was not includible in business profits in the formula : Export turnover Business profits X --------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of the business of the assessee. According to the Assessing Officer on transfer of export reserves to the partners' capital account, the proviso to section 80HHC stood violated. Accordingly, the above amount of Rs. 1.65 lakhs was taxed as income of the assessee for the assessment year 1990-91. Being aggrieved, the assessee went in appeal to the first appellate authority which came to the conclusion that under section 80HHC, as it stood at the relevant time, the only requirement was that the funds shall be generally used for the purposes of business ; that the funds remained with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer to the partners' capital account during the assessment year 1990-91 it was clear that the deduction was not utilised for the purposes of the business of the assessee and, therefore, the Assessing Officer was right in taxing the amount of Rs. 1.65 lakhs as income of the assessee during the assessment year in question as it was in that year that the amount has been transferred to the partners' capital account. Mrs. Visanji, learned counsel appearing on behalf of the assessee, however, contended that by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, it was provided that an amount equal to the amount of the deduction claimed under the above section 80HHC(1) was required to be debited to the profit and loss account an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... She further contended that unlike section 80HHD in section 80HHC(1), as it stood at the relevant time, there was no provision for utilising the reserve for a particular purpose(s) nor was there any provision for consequences of breach. She further contended that, in any event, the requirement of creating the reserve has been dispensed with after April 1, 1989. In the circumstances, she contended that there was no provision in section 80HHC to treat the allowance made in the earlier years as wrongful allowance. Hence, she contended that the Assessing Officer erred in taxing the amount as income of the assessee. She further contended that there is no finding of fact recorded by the Assessing Officer that the amount has not been used for busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not withdrawn during the assessment years 1987-88, 1988-89 and 1989-90. They were withdrawn after the section came to be deleted. If an accounting entry like transfer to the partners' capital account was required to be treated as income then the Legislature was required to say so. For example, in the case of section 80HHD(5), the consequences of non-utilisation of the statutory reserve are clearly laid down when it states that where any amount credited to the reserve account has been utilised for any purpose other than those referred to in sub-section (4) or the statutory reserve is not utilised in the manner specified in sub-section (4) then the amount so utilised in the former case or the amount not so utilised in the latter case sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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