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2012 (8) TMI 460 - HC - Income TaxComputation of export profit allowable for deduction u/s 80HHC - appellant claimed deduction of export profit u/s.80HHC on the export profit calculated with reference to the export turnover and total turnover of one unit alone - assessee has two units - Held that - The appellant being engaged in the business of tea, is not involved in the business of any other goods. The tea produced by the assessee is subjected to export as also local sale. The goods which would assume significance by the words employed in Section 80HHC is tea alone. In arriving at the allowable deduction under Section 80HHC, the export turnover to be taken is of tea. The total turnover is also of tea; since the goods, subject to export, is exclusively tea. The distinction or division now attempted by the assessee with respect to the estates in Assam and South India is artificial and not permissible under the provision - there cannot be any option for the lower denominator being the total turnover of the one unit alone as the proportion of business profits to be computed for arriving at the allowable deduction has to be made on the proportion of export turnover over of tea to the total turnover of tea. There can be no distinction between tea produced in two different units - what is applicable would be sub-section (3)(b) and that too the total turnover will be entire business turnover - against assessee. Computation of relief u/s 32AB - Tribunal s finding that interest income cannot be treated as profit for the purpose of computation of relief - Held that - As decided in Parry Agro Industries Limited Versus CIT 2006 (7) TMI 128 - KERALA HIGH COURT the assessee was not entitled to include interest income as profits of eligible business or profession for computing the deduction under Section 32AB - against assessee. Computation of depreciation while computing deduction under Section 32AB - assessee contested to take period of 32 months - Held that - Under Section 32AB eligible profits are arrived at after deducting depreciation computed in accordance with the provisions of Section 32(1) - The amount that had been computed u/s 32(1) for the relevant assessment year with respect to the previous year comprising of 21 months is the depreciation for a period of 21 months. In such circumstance, the depreciation for the purpose of Section 32AB cannot be limited to 12 months. The assessee s contention is that depreciation allowable under Section 32(1) is to be to the depreciation determined for 21 months. However, in computation of Section 32AB, the same shall be limited to 12 months. The contention is only to be rejected - against assessee. Disallowance to expenditure incurred to accommodate touring employees - Held that - Considering the facts of case in the years 1989-90 and 1990-91 where the claim was allowed it can be concluded in the period in question the facts would clearly show that in the said year the assessee had maintained two guest houses, named as Rochdale House and Mounmion House . It was in such circumstance that expenditure was disallowed as it has been covered under Section 37(3) - against assessee.
Issues Involved:
1. Computation of profits derived from the export of goods or merchandise under Section 80HHC. 2. Inclusion of interest received from Fixed Deposits as "business income" entitled to be deducted under Section 32AB. 3. Disallowance under Section 37(3) of the income claimed as expenditure to accommodate touring employees. 4. Deduction of depreciation amount for a period of 12 months or 21 months while computing deduction under Section 32AB for the year 1989-90. Detailed Analysis: 1. Computation of Profits Derived from Export under Section 80HHC: The primary contention was whether the total turnover for the computation of export profits should be limited to the Assam unit alone or include the entire business turnover of the assessee. The assessee argued that since only the tea from the Assam estate was exported, the total turnover should be restricted to that unit. However, the court held that the total turnover must include the entire business turnover, as the business involved tea alone, irrespective of its origin. The court emphasized that the distinction between the Assam and South India units was artificial and not permissible under the provision. The court followed the Division Bench decision in Commissioner of Income-tax v. Parry Agro Industries Ltd., holding that sub-section (3)(b) of Section 80HHC applies, and the total turnover includes the entire business turnover. 2. Inclusion of Interest Income under Section 32AB: The assessee sought to include interest income as "business income" for computing deductions under Section 32AB. The court referred to the Full Bench decision in Parry Agro Industries Ltd. v. Commissioner of Income Tax, which held that interest income cannot be treated as profits of eligible business or profession for the purpose of Section 32AB. Consequently, the court ruled against the assessee on this issue. 3. Disallowance under Section 37(3) for Employee Accommodation Expenses: For the years 1989-90 and 1990-91, the assessee claimed that the expenses for accommodating touring employees were reimbursements to the Estate Manager and not covered under Section 37(3). The court rejected this contention, stating that Section 37(3) includes "any residential accommodation" in connection with traveling by an employee or any other person. Therefore, the expenses were rightly disallowed. For the year 1991-92, the court noted that the assessee maintained two guest houses, and the expenses were disallowed under Section 37(3) based on the facts of that year. 4. Deduction of Depreciation for 12 or 21 Months under Section 32AB for 1989-90: The dispute was whether the depreciation amount for computing deduction under Section 32AB should be for 12 months or 21 months, given that the previous year comprised 21 months. The court held that since the depreciation for the relevant assessment year was computed for 21 months, it should be taken into account for 21 months for Section 32AB purposes. The assessee's contention to limit it to 12 months was rejected. Conclusion: All the questions of law raised for the subject assessment years were answered in favor of the Revenue and against the assessee. The Income Tax Appeals were dismissed.
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