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Issues involved: Appeal against ITAT order, questions on deduction u/s 80HHC, applicability of Explanation (baa), treatment of interest earned, excise duty deduction, computation of eligible profit, adherence to Supreme Court precedent.
The appeal was filed by the assessee against the ITAT order dated 11.01.2008 in ITA No. 367/Bang/2007 by the Income Tax Appellate Tribunal, Bangalore Bench. The appeal was to be heard along with ITA 674/2007, where it was decided that only two out of the four questions raised were covered in the connected appeal, leading to the de-linking of the matter. Substantial questions of law raised: 1. Whether interest earned from deposits for obtaining letter of credit for export is to be excluded by 90% u/s 80HHC. 2. If yes, whether the excluded interest should be gross or net after deducting related expenses. 3. Applicability of Explanation (baa) to miscellaneous income like write-back of outstanding trade creditors. 4. Whether excise duty paid should be deducted from total turnover for deduction u/s 80HHC. 5. Correct method of computing deduction by reducing deduction u/s 80-IB for ascertaining eligible profit. 6. Adherence to Supreme Court precedent in quantifying deduction u/s 80HHC. The court noted that questions 1 and 2 were already covered by previous judgments and ruled in favor of the assessee against the revenue. Questions 3 and 4 were not pressed by the appellant as they were deemed not relevant. Questions 5 and 6 were answered in a previous judgment, holding in favor of the assessee against the revenue. In conclusion, the appeal was disposed of in accordance with the judgments on the various questions raised, ultimately favoring the assessee and ruling against the revenue.
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