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2014 (8) TMI 350 - HC - Income TaxService charges of dyeing and knitting Deduction u/s 80HHC - Whether the Tribunal was right in law in holding that service charges of dyeing and knitting to be excluded from the total turnover of the assessee while computing deduction u/s 80HHC Held that - The assessee is a manufacturer and exporter of cotton yarn, woolen hosiery garments and also trades in cotton yarn - The assessment was framed by the ACIT - Deduction u/s 80HHC of the Act was reduced as service charges were included in the total turnover for the computation of deduction u/s 80HHC of the Act - the Tribunal modified the order holding that service charges to be excluded from the total turnover for the purpose of computing deduction u/s 80HHC of the Act - Following the decision in Commissioner of Income Tax III, Ludhiana v M/s Nahar Spinning Mills Limited, Ludhiana Decided against Revenue.
Issues:
1. Interpretation of Section 80HHC of the Income Tax Act, 1961 regarding the exclusion of service charges from total turnover for deduction calculation. Analysis: The High Court's judgment in ITA Nos. 426 and 428 of 2006 revolved around the interpretation of Section 80HHC of the Income Tax Act, 1961. The main issue was whether service charges of dyeing and knitting amounting to a significant sum should be excluded from the total turnover of the assessee when computing the deduction under Section 80HHC. The respondent, a limited company engaged in manufacturing and exporting cotton yarn and woolen hosiery garments, had filed its return of income for the assessment year 1995-96. The Assistant Commissioner of Income Tax had included service charges in the total turnover, resulting in a reduced deduction under Section 80HHC. The Commissioner of Income Tax (Appeals) and the Tribunal had differing opinions on the matter, leading to the filing of appeals by the revenue. The High Court noted that the issue at hand had already been settled by a previous decision dated 6.3.2014 in ITA No.98 of 2008 involving a similar case between the Commissioner of Income Tax III, Ludhiana and M/s Nahar Spinning Mills Limited, Ludhiana. Based on the precedent set in that case, the High Court disposed of the appeals in the same terms as in ITA No.98 of 2008. This means that the service charges amounting to a substantial sum were to be excluded from the total turnover for the purpose of computing the deduction under Section 80HHC of the Income Tax Act, 1961. In conclusion, the judgment clarified the interpretation of Section 80HHC in relation to the exclusion of service charges from the total turnover for deduction calculation. The decision was based on a previous ruling and provided a resolution to the dispute between the revenue and the assessee regarding the computation of deduction under Section 80HHC for the assessment year 1995-96.
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