TMI Blog2019 (4) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the Assessee. The words Manufacture or 'Processing' by the Assessee are wide enough to cover the processing of coffee undertaken by the third party on behalf of the Assessee also. The job work was assigned to the third party by the Assessee undoubtedly and therefore the same cannot be said to have purchased such cured coffee from the sister concerns. Therefore the sub clause (a) will apply and not the sub clause (b) as contended by the Assessee. Revision u/s 263 - No merit in the contention raised the Assessee, because in view of the clear definition of direct and indirect costs in the Explanation (d) (e) in Section 80HHC of the Act. The said bifurcation by Assessing authority would not bind the CIT (Administration) to invoke his revisional powers under Section 263 of the Act. The learned CIT (Administration) has clearly given reason in the Show cause notice u/s. 263 issued by him that the Assessing Authority has adopted indirect cost as per the clause (b) to the extent of ₹ 2,89,563/- only as against ₹ 9,52,932/- and therefore excess deduction u/s. 80 HHC to that extent has been allowed by the Assessing Authority. Hence, Section 263 was invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid question is answered in favour of the Assessee and against Revenue. - Tax Case Appeal Nos. 2674 to 2679 of 2006 - - - Dated:- 26-2-2019 - Dr. Justice Vineet Kothari And Mr. Justice C.V. Karthikeyan For the Appellant : Mr.S.Sridhar For the Respondent : Mr.M.Swaminathan Senior Standing counsel Assisted by Ms.Premalatha COMMON JUDGMENT DR.VINEET KOTHARI, J. The present Appeals have been filed by the Assessee M/s. Narasus Coffee Company, raising the Substantial Questions of law arising from the order of ITAT dated 16.06.2016 for Assessment years 1995-96 to 1998-1999 , dismissing the Assessee's appeal and allowing the cross appeal. T.C.A.Nos.2674 to 2676 of 2006 2. The Appeals in T.C.A.Nos. 2674 and 2675 of 2006 were admitted on 22.12.2006 with the following substantial questions of law: T.C.A.No.2674 of 2006: 1. Whether the Tribunal is correct in confirming the order of the Commissioner of Income Tax (Appeals) in treating the Appellant as a exporter in processed goods as against the claim of exporter in trading goods for the purpose and in the context of computation and quantification of deduction under Section 80 HHC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Whether the Tribunal is correct in concluding that the jurisdiction under section 263 of the Act to revise the assessment order passed in terms of section 143 (3) of the Act was correctly and validly assumed in view of the twin conditions of 'error' and 'prejudice caused to the revenue' in the said assessment order passed by the Respondent/Assessing Officer? (ii) Whether the Tribunal is correct in concluding that the direction in the revision order with reference to the quantification 'indirect cost' with reference to all costs as against the claim of the Appellant for exclusion of cost not attributable to the activity of export in the computation of deduction under Section 80 HHC of the Act? (iii) Whether the Tribunal is correct in concluding that no separate books of account was maintained for export of trading goods even though separate folios were maintained admittedly for the said export activity and as a corollary the quantification of 'indirect cost' upon excluding the cost not relatable to export activity was wrong and not accurate on the facts and in the circumstances of the case? 5. The learned counsel for the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer has applied his mind to the issue relating to computation of deduction under Sec.80HHC. The pre-requisite for the exercise of jurisdiction under Section 263 by the CIT is that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of Revenue. The CIT has to satisfy twin conditions viz., that the order of the Assessing Officer sought to be revised is erroneous and it is prejudicial to the interest of the Revenue. If one of these conditions is absent, he cannot exercise his jurisdiction. The other type of mistake or error committed by the Assessing officer need not be prejudicial to the interest of the Revenue. If due to an erroneous act of the Assessing Officer, the Revenue was lost by way of tax collections which shall be payable by the Assessee, it should be prejudicial to the interest of the Revenue. When the Assessing Officer has followed one possible view when two views are possible, the decision taken by the Assessing Officer cannot be said to be erroneous even if there was a loss to the Revenue unless the decision of the Assessing Officer is unsustainable in law. The learned counsel for the Assessee relied on the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e,is that such job work done by the third party cannot be said to be on behalf of the Asseseee and therefore even if such processing is done, cured coffee will remain trading goods , covered by clause (b) of Section 80 HHC (3) of the Act. 11. We are unable to accept the contention raised on behalf of the Assessee. The words Manufacture or 'Processing' by the Assessee are wide enough to cover the processing of coffee undertaken by the third party on behalf of the Assessee also. The job work was assigned to the third party by the Assessee undoubtedly and therefore the same cannot be said to have purchased such cured coffee from the sister concerns. Therefore the sub clause (a) will apply and not the sub clause (b) as contended by the Assessee. 12.As far as another contention with regard to Section 263 of the Act is concerned, we do not find merit in the contention raised by the learned counsel for the Assessee, because in view of the clear definition of direct and indirect costs in the Explanation (d) (e) in Section 80HHC of the Act. The said bifurcation by Assessing authority would not bind the CIT (Administration) to invoke his revisional powers under Section 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation of eligible profits in the ultimate quantification of deduction under Section 80 HHC of the Act on the ground of no direct nexus of the said deposits and the leasing activity of the business? 16. As far as the said question of law in respect of T.C.A.Nos. 2677 to 2679 of 2006 is concerned, the findings of the Income tax Appellate Tribunal on the interest income and lease income are quoted below for ready reference: 31. We have heard the rival submissions are perused the material on record. To treat income as business income, there should be direct nexus between the export and interest income. The contention of the Assessee is that interest was earned on deposits which were made at the insistence of the Bankers to sanction credit facilities. But we find no merit to support that there was a compulsion or insistence by the Bank to make deposits against sanction of credit facilities. The Assessee has not brought on record anything to show that the Bank has insisted to make deposit to grant credit facilities. If the deposits made with bank were for the convenience and benefit of the Assessee with a view to derive income, that cannot be treated as business inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re from the amount of profit so computed and not from the amount computed under any other head of income of that assessee. The reference to such profits in Sub-clause (1) of Clause (baa) can only be to the profits of the business computed under the head Profits and gains of business or profession . Addition of prefix the to profits in Clause (baa), while referring to the profits and gains of business or profession makes it clear that it is only the amounts already included in that computation which are now to be reduced to the extent of 90 per cent., of those items are included in Sub-clause (1) of that definition . Interest paid and claimed as deduction in the computation of profits and gains for business, cannot be set off against interest received and computed under income from other sources . What has been said about interest is equally applicable to rent and commission included in the computation under the head Profits and gains of business or profession . 33. In the light of the above discussion, we hold that the directions of the CIT (Appeals) to consider interest income as business income simply for the reasons that it was done so in the earlier y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the business as computed under the head Profits and gains of business as profession as reduced by- (1) ninety percent of any sum referred to in clauses (iiia) , (iiib), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the asseessee situate outside India ; 18. This Court in a recent Judgment in the case of M/s.AVM Cine Products Vs. The Deputy Commissioner of Income Tax in T.C.A.Nos.884 885 of 2005 rendered on 22.02.2019 , while dealing with the provisions of Section 56 in Chapter VI of the Act and Sections 80 IA, 80IB of the Act held that Income from Other Sources is only that income which cannot be brought to tax under any of the specified heads of Income in the provisions preceding Section 56 of the Act in the said Chapter IV of the Act, namely, under the Head of Salary , Income from Business or Profession , Income from House Property and Income from Capital Gains . Paragraphs 22 to 25 are quoted for ready reference. 22. In our c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for Income from Other Sources , cannot be applied at all to such interest income. The income from Business need not be directly related only to sale of goods or services. It can be from the sources like Bank deposits, which are idle or inactive sources and do not involve any actual trading or manufacturing activity on the part of the Assessee. Therefore, interest income earned by the Assessee in the ordinary course of business, cannot be said to be excluded from the head Income from Business or Profession in Part D, comprising of Sections 28 to 44DB in Chapter IV, which deals with computation of the total income in the Heads of Income as per Section 14 of the Act. If by no stretch of imagination, such interest income could be included under the Head Profits and gains of business or profession only then it could fall in the residuary clause of Income from Other Sources under Section 56 of the Act and not otherwise. 25. We do not find any such occasion to artificially bifurcate and dissect the interest income earned by the Assessee in the present case in its ordinary course of business, so as to take it out of the ambit of Deduction available to it under Section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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