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2014 (8) TMI 385 - HC - Income TaxDeduction u/s 80HHC - exclusion of service charges - Whether the Tribunal was right in law in holding that service charges to be excluded from the total turnover of the assessee while computing deduction u/s 80HHC Held that - Following the decision in Commissioner of Income-Tax v. Kadri Mills Ltd. 2013 (11) TMI 428 - MADRAS HIGH COURT 90 per cent of the sum has to be reduced from the gross total income, to arrive at the business profits - since the processing charges was an important component of the business profits, it has to be included in the total turnover in the formula to arrive at the business profits for computing deduction under clause (baa) of Explanation to Section 80HHC of the Act - service charges would be included in the total turnover and 90% of the service charges shall be excluded from the gross total income for arriving at the profits of the business for calculating the deduction u/s 80HHC of the Act Decided against Revenue.
Issues:
1. Delay in re-filing the appeal. 2. Interpretation of Section 260A of the Income Tax Act, 1961. 3. Exclusion of service charges from total turnover for deduction under Section 80HHC. Issue 1: Delay in re-filing the appeal The High Court allowed the application to condone the delay of 458 days in re-filing the appeal, indicating a lenient approach towards procedural delays in the legal process. Issue 2: Interpretation of Section 260A of the Income Tax Act, 1961 The appeal under Section 260A was filed by the revenue against the order of the Income Tax Appellate Tribunal. The Court admitted the appeal and identified three questions for consideration. The Court referred to relevant judgments to determine the applicability of each question. Ultimately, the Court decided to consider question (iii) related to the exclusion of service charges from the total turnover for deduction under Section 80HHC. Issue 3: Exclusion of service charges from total turnover for deduction under Section 80HHC The case involved a dispute regarding the treatment of service charges for deduction under Section 80HHC of the Income Tax Act. The Assessing Officer initially included service charges in the total turnover, affecting the calculation of deduction under Section 80HHC. The Commissioner of Income Tax (Appeals) partially allowed the appeal, directing the exclusion of service charges from the total turnover. The Tribunal upheld this decision, leading to the current appeal. The Court referred to a judgment by the Madras High Court and decisions of the Supreme Court to determine the treatment of similar charges. Following precedent, the Court held that service charges should be included in the total turnover, but 90% of the service charges should be excluded from the gross total income for calculating the deduction under Section 80HHC. In conclusion, the Court partially accepted the appeal, answering question (iii) in favor of including service charges in the total turnover but excluding 90% of the charges from the gross total income for the purpose of calculating the deduction under Section 80HHC of the Income Tax Act.
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