TMI Blog2018 (11) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ises for consideration in these appeals and the decision in the case of Alfa Laval India Ltd. [2003 (9) TMI 43 - BOMBAY HIGH COURT] would squarely apply to the facts and circumstances of this case. As relevant to take note of the decision of the High Court of Himachala Pradesh in Purewal & Associate Ltd., [2016 (1) TMI 809 - HIMACHAL PRADESH HIGH COURT] wherein the Court considered the object of Section 80HHC which was to grant an incentive to earners of foreign exchange and therefore, held that it has to be essentially considered with reference to that object. In paragraph 22 of the judgment, the Court noticed Section 41(1) and pointed out that it creates a legal fiction and can be extended for the purpose allowing from profits of business as referred to in Section 80HHC of the Act. We hold that there is no substantial questions of law arising for consideration in these appeals and the decision purely revolves around the factual matrix and it is not a case of decision on mixed questions of fact and law. Thus, we are not inclined to interfere with the order passed by the Tribunal confirming the order passed by the CIT(A). - Decided against revenue. - T.C.(A)Nos.1115 & 1116 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails, the assessment was completed under Section 143(3) of the Act. The assessment pertaining to the assessment year 2000-01, is the subject matter of T.C.A.No.1115 of 2008. 5. For the assessment year 2000-01, the assessee filed return of income on 27.11.2000, the return was processed under Section 143(1) of the Act. Subsequently, notice under Section 148 was issued and the assessee was called upon to file documents. The assessee filed reply dated 14.11.2003, after which the assessment was completed under Section 143(3) r/w Section 147 of the Act, by order dated 31.01.2004. This assessment is subject matter of appeal in T.C.A.No.1116 of 2008. 6. For both the assessment years, the Assessing Officer reducing the quantum of deduction, made the following variations namely, (i) 90% of exchange fluctuation; (ii) provision written back; (iii) sales tax refund and these were excluded from the business profit. The assessee filed appeals before the CIT(A), which were allowed by orders dated 03.02.2006, and 06.03.2006, respectively. The Revenue preferred appeals before the Tribunal which were dismissed by order dated 30.11.2007. The Tribunal, while dismissing the appeals filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2010] 191 Taxman 339 (Bombay); the decision of the High Court of Delhi in the case of Rollatainers Ltd., vs. Commissioner of Income Tax in ITA.No.166 of 2004, dated 16.02.2017, the decision in the case of Commissioner of Income Tax vs. TVS Motors Ltd. , [2014] 364 ITR 1(Mad) ; the decision of the Division Bench of this Court in the case of M/s.K.H.Shoes Limited vs. Assistant Commissioner of Income Tax in TCA.No.731 of 2004, dated 21.04.2017 and the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. K.Ravindranathan Nair [2007] 295 ITR 228 (SC). 8. Mr.R.Vijayaraghavan, learned counsel assisted by Mr.V.Vikram, learned counsel appearing for the assessee sought to sustain order passed by the Tribunal by contending that the variations done by the Assessing Officer cannot be excluded and referred to Section 80HHC (3)(a) of the Act and in particular Explanation (baa). It is argued that the proper procedure would be to first take profits and gains of business including domestic sales and from that the brokerage etc., and others of similar nature should be removed. By referring to the decision of the Hon'ble Supreme Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... variation in rates and was directly related to the imports/exports transaction of goods and therefore, it formed a part of the sales price; that the goods, which were booked at a particular sale price and the realisation made against the same, were at times more because of improved rate of exchange as on the date of realisation, therefore, the same qualifies to be included as profit of business. 11. The revenue pitches its case relying on the decision of the Hon'ble Supreme Court in K.Ravindranathan Nair, (supra) . 12. Before we examine the applicability of the said decision, we may note as to what was said in the said decision by the Hon'ble Supreme Court. 13. The facts in the said case was that the assessee therein carried out processing of cashew nuts at its factory, which were then exported. The assessee also processed cashew nuts for export on job work basis, which were returned after processing. The assessee earned processing charges, and consequently, the assessee was both a job worker and an exporter. The assessee claimed export incentives under Section 80HHC(3) of the Act, but did not include the receipts received as processing charges in his total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at business profits. Therefore, the said processing charges were includable in the total turnover in the formula under Section 80HHC(3) of the Act. 14. Mr.M.Swaminathan, after referring to the decision in the case of K.Ravindranathan Nair, (supra), argued that exchange fluctuations, provision written back, and sales tax refund, which do not have any nexus with export are to be treated as independent income and to be excluded to the extent of 90% as stipulated in the Explanation. To support his stand, reliance was placed on the decision in the Dresser Rand pvt. Ltd., (supra), wherein the Court was considering the submission made on behalf of the assessee as to whether processing charges formed part of business profits and if so, if 90% of such receipts are liable to be excluded under Explanation (baa) did not fall for determination before the Supreme Court in K.Ravindranathan Nair, (supra). It is submitted that in Dresser Rand India (P) Ltd., (supra), this contention advanced by the assessee was rejected and it was held that the Hon'ble Supreme Court while construing the provision of Section 80HHC, held that there are four variables, which are required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instant case is the facts and manner in which the assessee was assessed for the relevant assessment years. More or less, an identical case was dealt with by the High Court of Bombay in the case of Alfa Laval India Ltd.,. One of the substantial questions of law which was framed for consideration was whether the Tribunal was right in law in holding that interest from customers, sales tax set off and other refunds, claims etc, do not form part of business profits for calculating deduction under Section 80HHC. It was contended on behalf of the assessee that for computation of deduction under Section 80HHC, what is relevant is profits of business as computed under head profits and gains of business or profession and in the said case, the sales tax set off, claims, refund etc, under the caption other income have been assessed under the head profits and gains of business or profession . It was argued that once these incomes are treated as part of business income and computed under the head profit and gains of business or profession , the same cannot be excluded from business profits, while computing deduction under Section 80HHC of the Act. 17. The assessee therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question was whether money was trading receipt or not, is a pure question of fact or a mixed question of fact and law. The Court accepted the submission that if a pure question of fact has to be decided, the matter requires to be remanded to the Tribunal, if in the opinion of the High Court, there was an error. However, in the said case, since it was a mixed question of fact, the Court proceeded to decide the matter and found it not desirable to send back the matter to the Tribunal after a lapse of 15 years of the assessment. 20. In Punjab Stainless Industries, (supra), the assessee was a manufacturer and exporter of stainless steel utensils and in the process of manufacturing some portion of the steel, which could not be used or reused for manufacturing utensils, remains unused, was treated as scrap, which the assessee disposed of in the local market and income arising from sale was also reflected in the profit and loss account. The assessee for the purpose of availing deduction under Section 80HHC, income from sale proceeds of scrap was not included in the total turnover, but was shown separately in profit and loss account. The Revenue submitted that the sale proceeds f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on actual realisation of foreign exchange. 22. With regard to sale of scrap, the assessee contended that the scrap, which was sold forms an integral part of the revenue generated from the industrial undertaking, since the same is derived from operational activity of the undertaking. After examining the factual position, the CIT(A) accepted the case of the assessee and duly supported its finding by referring to the decisions on the point. 23. Thus, in the facts and circumstances of the case, we are of the considered view that no substantial question of law arises for consideration in these appeals and the decision in the case of Alfa Laval India Ltd., (supra) would squarely apply to the facts and circumstances of this case. 24. At this juncture, it would be relevant to take note of the decision of the High Court of Himachala Pradesh in Purewal Associate Ltd., (supra), wherein the Court considered the object of Section 80HHC which was to grant an incentive to earners of foreign exchange and therefore, held that it has to be essentially considered with reference to that object. In paragraph 22 of the judgment, the Court noticed Section 41(1) and pointed out th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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