TMI Blog2020 (1) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... me. In the case of K.K. Doshi and Co. v. Commissioner of Income-Tax [ 2000 (8) TMI 74 - BOMBAY HIGH COURT] an issue arose before this Court whether the service charges constitute business income for the purposes of computing export profits under Section 80HHC. Prior to the amendment export profits included interest, commission, etc., which did not have element of turnover came to be included in the profit and loss account. By way of amended provisions in the Explanation (ba) to Section 80HHC of the Income Tax Act, 1961 it was no longer permissible to do so. The Court opined that there was no nexus between the profits on the one hand and the export activity on the other hand, which was necessary. The question of retrospective operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 1,57,660/- after claiming deduction of ₹ 30,43,279/- under Section 80 HHC of the Income Tax Act, 1961. The Assessing Officer by order dated 28 August 1992 excluded the amount of Reassortment Charges and Labour Commission Charges. Having restricted the deduction under Section 80 HHC to ₹ 19,96,710/-, the Assessing Officer passed the order on 28 August 1992. 3. The Appellant filed an appeal with the Commissioner of Income Tax (Appeals), which was allowed in favour of the Appellant by order dated 22 June 1994. The Respondent-Revenue filed Income Tax Appeal bearing No.4971/Bom/94 before the Income Tax Appellate Tribunal and the Tribunal allowed the Appeal of the Revenue by order dated 6 May 2002. Hence, the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges constitute business income for the purposes of computing export profits under Section 80HHC. While deciding the question, the Court made the following observations :- The object of section 80HHC is to ascertain the export profits. It may be mentioned that in this case we are concerned with the law prior to the assessment year 1992- 93. Under section 80HHC(3), as it stood before April 1, 1992, profits derived from exports were computed in the following manner : Export turnover Business profits X -------------------- Total turnover The said formula, however, gave a distorted figure of export profits when receipts li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as part of the business profits while working out deductions under section 80HHC. The judgment of the Supreme Court in the case of CIT v. Sterling Foods (1999) 237 ITR 579 , dealt with the provisions of section 80HH. In that judgment, the Supreme Court was required to construe the expression derived from in section 80HH. In that manner, the assessee was engaged in processing prawns. It earned import entitlements from the Central Government under an Export Promotion Scheme. The assessee was 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords, there should be a direct nexus between the profits on the one hand and the export activity on the other hand. Applying the ratio of the judgment of the Supreme Court to the facts of our case, the profits earned by the assessee on account of service charges cannot be said to have a direct nexus with the export activities of the assessee. Hence, to that extent, the assessee was not entitled to claim deduction under section 80HHC. Thus, the Court observing as above opined that though prior to the amendment export profits included interest, commission, etc., which did not have element of turnover came to be included in the profit and loss account. By way of amended provisions in the Explanation (ba) to Section 80HHC of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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