TMI Blog2000 (8) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... e working out deduction under section 80HHC by considering the said service charges as part of business profit. The assessee applied the formula under section 80HHC(3)(b) and worked out the deduction at Rs. 90,54,447. The assessee-firm are diamond merchants. The Assessing Officer held that service charges cannot be treated as profit relating to export business. The Assessing Officer reduced the service charges from business profits and worked out the deduction at Rs. 77,18,329. The Assessing Officer held that deduction under section 80HHC was only meant for assessees who earned profits from exports and any business profit other than from export activity was not eligible for deduction under section 80HHC. The first appellate authority and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s urged that this was a finding of fact recorded by the first appellate authority and the Tribunal. It was contended that in the circumstances, this court should not interfere with the said findings. We find merit in this appeal. The Assessing Officer has found on facts that the assessee was engaged in the manufacture and export of polished diamonds out of India. During the period, when the assessee-firm did not engage itself in the business activity of exports and manufacture, the assessee-firm offered its services on job-work basis to outsiders to polish rough diamonds for which the assessee received service charges. The Assessing Officer found, on the facts, that the assessee earned gross profits by way of service charges of Rs. 19.60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 1992, profits derived from exports were computed in the following manner : Business profits x Export turnover ---------------------------- Total turnover The said formula, however, gave a distorted figure of export profits when receipts like interest, commission, etc., which do not have an element of turnover came to be included in the profit and loss account. Every assessee tries to inflate, in the above formula, the business profits and correspondingly, he tries to reduce the denominator, viz., total turnover. It is for this reason that the Legislature amended the above formula by amending the law from the assessment year 1992-93 by clarifying that in the above formula the business profits will not include receipts by way of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entitled to sell the same. The assessee sold the said entitlements. In its total income for the assessment year 1979-80, the assessee included the sale proceeds and claimed relief under section 80HH. The High Court held that the income which the assessee made by selling the import entitlements was not a profit and gain which the assessee had derived from industrial undertaking. The Division Bench held in favour of the assessee on the basis of the retrospective amendment to section 28 of the Act by the Finance Act, 1990, making such receipts taxable as business profits. It was held by the Supreme Court that the word "derived" is followed by the word "from" which meant arising from a source. The Supreme Court held on the facts of that case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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