TMI Blog2001 (1) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... profits derived from exports is to be worked out in proportion to the export turnover vis-a-vis total turnover. The assessee has taken the export turnover and the total turnover as same. In other words whereas income from sources other than exports is included in the profits, these items have not been taken into account for working out the total turnover. As a result of this, deduction has been claimed in respect of the entire profits including income from commission, interest on loans, rent of surplus space, etc. 3. The AO held that the assessee was engaged in the business of export of readymade garments. The interest income had been earned by the assessee on the loans advanced to the relatives and family concerns and that advancing mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yrs. 1988-89 and 1989-90 the income was shown as income from business. The AO has assessed the same under s. 143(1)(a) of the Act. It was further pointed out that in asst. yr. 1990-91 the AO excluded the income from all the three sources on net basis for purposes of s. 80HHC. However, for asst. yr. 1991-92 the AO has taken the gross figure for exclusion in working out the deduction under s. 80HHC. 6. Relying upon the decision of the Special Bench of the Tribunal in the case of International Research Park Laboratories Ltd. vs. Asstt. CIT (1994) 50 TTJ (Del)(SB) 661 : (1994) 50 ITD 37 (Del)(SB), it was contended that the income from commission on exports should be deemed to be the profits derived from exports. That in the aforementioned de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand contended that in asst. yr. 1986-87 the assessment has been made under s. 143(1)(a) and interest income earned by the assessee was excluded from business profits. The interest having been earned on surplus and, therefore, it cannot be related to the export income of the assessee. Reliance was placed on the decision of the Bombay Bench of the Tribunal in the case of Nathani Steels Ltd. vs. Dy. CIT (1996) 56 TTJ (Bom) 240 : (1996) 57 ITD 584 (Bom) in support of the contention that deduction under s. 80HHC is permissible only in respect of profits derived from exports. Reliance in support of this proposition was also placed on the following decisions: (1) Karimjee (P) Ltd. vs. IAC (1989) 35 TTJ (Bom) 288 (2) Berlia Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from exports are such as have nexus with the export activity of the assessee. In this case their Lordships have held that the service charges received by a diamond dealer is not to be included in the profits derived from exports and the said amount is to be excluded from the P L a/c for the purpose of deduction under s. 80HHC. Similarly in the case of CIT vs. S.G. Jhaveri Consultancy Ltd. (2000) 163 CTR (Bom) 593 : (2000) 245 ITR 854 (Bom) their Lordships of the Bombay High Court held that for purposes of working the deduction under s. 80HHC the receipts by way of brokerage commission, interest, rent or any other receipt of similar nature which do not have nexus with the sale proceeds from export activities are to be excluded from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid has the nexus with the interest earned. Since there are counter-claims on behalf of the assessee and the Revenue, we consider it just and reasonable to restore this issue back to the file of AO for the purpose of verification. In case of interest of Rs. 2,50,188, it does not have any nexus with earning of interest of Rs. 4,23,676 then such interest is not to be deducted from the gross interest and on the other hand if the interest so paid is relating to the business of the assessee, then, as done by the AO, the said amount has to be deducted from the profits disclosed in the P L a/c. On the other hand if the nexus between the interest paid and interest earned is established, the AO has to take net income for the purposes of exclusion un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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