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2013 (12) TMI 180 - AT - Income TaxDeduction u/s 80HHF Whether the duty draw back has to be excluded or included in the business income of the assessee while computing profits of business u/s 80HHF - Held that - Following Liberty India Vs. CIT 2009 (8) TMI 63 - SUPREME COURT According to explanation to section 80HHF - Duty drawback should be treated as separate items of revenue or income and accounted for accordingly - Duty drawback DEPB benefits rebates etc. cannot be credited against the cost of manufacture of goods debited in the Profit & Loss account for purposes of Sections 80-IA/80-IB as such remissions (credits) would constitute independent source of income beyond the first degree nexus between profits and the industrial undertaking - Duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80-IA/80-IB The issue restored for fresh decision. Interest income to be treated as business income Held that - Following CIT Vs. K. Ravindranathan Nayar 2007 (11) TMI 10 - Supreme Court of India The issue restored for fresh decision.
Issues:
1. Interpretation of definition of export turnover under section 80HHF. 2. Treatment of duty draw back in computing business profits under section 80HHF. 3. Classification of interest income as business income. Issue 1: Interpretation of definition of export turnover under section 80HHF The appeal involved a dispute regarding the interpretation of the definition of export turnover under section 80HHF for the assessment year 2003-04. The Assessing Officer (AO) found the deduction claimed by the assessee under section 80HHF to be erroneous and excessive as certain receipts were not excluded while computing business profits. The AO reduced 90% of specific receipts from the business income as per explanation (f) to section 80HHF. The CIT(A) held that the receipts were not of the nature specified in the explanation and disagreed with the AO's decision. The Tribunal remitted the matter back to the AO to consider the issue in light of the relevant provisions, specifically Explanation (j) to section 80HHF, providing an opportunity to the assessee to be heard. Issue 2: Treatment of duty draw back in computing business profits under section 80HHF The core issue revolved around whether duty draw back should be excluded or included in the business income of the assessee while computing profits under section 80HHF. The AO contended that duty draw back is not eligible for inclusion in business income as per explanation (f) to section 80HHF. Conversely, the CIT(A) opined that duty draw back should be included in business income. The Tribunal, considering Explanation (j) to section 80HHF, set aside the CIT(A)'s order and directed the AO to re-examine the matter, emphasizing the need to follow the provisions of the Act and provide a fair hearing to the assessee. Issue 3: Classification of interest income as business income Regarding interest income, the AO treated it as income from other sources, while the assessee reduced 90% of the interest income from business profits. The CIT(A) held the interest income to be business income, following a precedent, and allowed the deduction under section 80HHF. However, the Tribunal found the facts relating to interest income unclear in the orders of the revenue authorities. Consequently, the matter was remitted back to the AO for a fresh decision in accordance with the law and a specific Supreme Court judgment, with a directive to provide a fair hearing to the assessee. In conclusion, the appellate tribunal's judgment addressed the issues of interpreting the definition of export turnover, the treatment of duty draw back in computing business profits, and the classification of interest income. The Tribunal emphasized adherence to the statutory provisions and the need for a fair hearing for the assessee in resolving these contentious matters.
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