TMI Blog2016 (7) TMI 1624X X X X Extracts X X X X X X X X Extracts X X X X ..... IGH COURT ] as held that the sales tax refund is to be assessed as part of business profit under the head profit and gains of business and the same could not be excluded while calculating deduction u/s.80HHC of the Act. The appellant is a 100% exporter therefore the sales tax refund was considered as a part of profit on business for computing deduction u/s.80HHC of the Act. No distinguishable facts came into notice before us to which it can be assume that the CIT(A) has arrived at wrong conclusion. Whether the appellant is entitled to deduction u/s.80HHC of the Act in view of the finding of the Assessing Officer that the assessee has no positive income from the export of 90% of incentives and other income, are reduced from profit of the business? - HELD THAT:- Since the profits derived from the export activity is a positive figure, the appellant is eligible for deduction u/s.80HHC. The A.O. is directed to re-compute and grant deduction u/s.80HHC in accordance with law. Not distinguishable facts were placed on record by the revenue to which it can be assumed that the finding given by the CIT(A) is wrong against law and facts.CIT(A) has passed the order on the basis of order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund cannot be said to be derived export sale proceeds in foreign exchange and hence not eligible for deduction u/s.80HHC; (iii) Holding that the interest on FDR is to be netted off against the interest payment expenses ignoring that there is no nexus between interest expenditure and interest on FDR; (iv) Holding that the interest on FDR is to be netted off against the interest payment expenses ignoring that any receipts not forming part of sale proceedings relating to export cannot be considered as business profits eligible for deduction u/s.80HHC; (v) Directing to treat interest income as business income without appreciating that financing is not the business of the appellant and the same cannot be netted off against the interest payments allowable as business expenditure u/s.36 of the Income Tax 1961; (vi) Directing to treat interest on FDR as business income eligible for deduction u/s.80HHC ignoring that interest income does not form part of sale proceedings relating to export for the purpose of deduction u/s.80HHC; (vii) Ignoring the jurisdictional High Court decisions in A.K. Doshi in 249 ITR 849 Kantila Chotalal in 246 ITR 439, Ravi Exports in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37,16,803 on the FDR held by the CIT(A). The finding of the CIT(A) is hereby mentioned below. 3.1 The first point of dispute concerns the taxability of gross interest of ₹ 37,16,803/- on the FDRs. In this regard, the appellant has filed before me not only a copy of the order of the ITAT, Mumbai F Bench referred to in para 2.21 of this order, but has also filed copies of orders of CIT(A)-XVII (A.Y.1992-93) dtd.28.04.1997, CIT(A)XLVII (A.Y.1997-98) dtd. 16.01.2001, CIT(A)- XVIII for A.Y.s 1998-99 1999-2000, dtd. 21.02.2002 26.06.2002, respectively wherein it has been uniformly held that in the facts and circumstances of the case, interest received is to be considered as income from business and also that interest received and interest paid will have to be netted off. Following the earlier decisions, with which I am in full agreement, I hold that the gross interest cannot be taxed by itself. The interest paid in this case is ₹ 59,29,103/-, which is much higher than the interest received. After netting off, the balance interest as debited to the P L Account will have a normal effect on the profits of the business. The netting off method of taxation of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uishable facts came into notice before us to which it can be assume that the CIT(A) has arrived at wrong conclusion. The finding of the CIT(A) is based upon the decision of Income Tax Appellate Tribunal in the case of Alfa Level Ltd. Vs. CIT (Supra), therefore, in the said circumstances we are of the view that the CIT(A) has decided this issue judiciously and correctly which does not require to be interfere with at this appellate stage. ISSUE NO.8, 9 10:- 7. Issue no.8, 9 and 10 are interconnected therefore, are being taken up together for adjudication. Under these issues the matter of controversy is that whether the appellant is entitled to deduction u/s.80HHC of the Act in view of the finding of the Assessing Officer that the assessee has no positive income from the export of 90% of incentives and other income, are reduced from profit of the business. Before going further it is necessary to advert the finding of the CIT(A) on record:- 3.3 The next issue to be dealt with is whether the appellant is entitled to deduction u/s.80HHC at all in view of the finding of the A.O. that if the export incentives are excluded, there is a negative profit. In this regard, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. is directed to re-compute and grant deduction u/s.80HHC in accordance with law. In this regard, it is noteworthy that even the recent decision of the Hon ble ITAT F bench, Mumbai in the case of M/s. Mangalya Trading Investment Ltd. Vs. DCIT, Spl. Rg. 20 in ITA No.6354/Mum/98 for A.Y.1995-96 will not come in the way of the appellant getting the benefit of deduction u/s.80HHC, as there is a positive profit after reducing 90% of the export incentives. Also in view of the decision of the ITAT, Mumbai H Special Bench in the case of M/s. Surendra Engineering Corpn. (supra), the A.O. is directed to reduce 10% of the export incentives while calculating Indirect Cost. 8. Not distinguishable facts were placed on record by the revenue to which it can be assumed that the finding given by the CIT(A) is wrong against law and facts. The CIT(A) has passed the order on the basis of order passed by the ITAT, Mumbai H Special Bench in the case of M/s. Surendra Engineering Corpn. (supra). Finding no contrary view taken by any other court of law, we are of the view that the CIT(A) has passed the order judiciously and correctly which does not require to be interfere with at this appell ..... 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