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2018 (9) TMI 718 - HC - Income TaxComputation of deduction u/s 80HHC - job work charges should be excluded from the profits of the business for the purpose of computation of deduction - Held that - The above tax appeal is dismissed and the substantial question of law framed is answered in favour of the Revenue and against the assessee. However, taking note of the decisions in ACG Associated Capsules (P) Ltd. 2012 (2) TMI 101 - SUPREME COURT OF INDIA and Kadri Mills Ltd. 2013 (11) TMI 428 - MADRAS HIGH COURT , the matter is remanded to the Assessing Officer for the purpose of computation of the deduction in terms of the aforementioned decisions. It is needless to state that the assessee shall provide all the details before the Assessing Officer in support of their contention.
Issues:
1. Interpretation of Section 80HHC of the Income Tax Act, 1961 regarding the deduction of job work charges from business profits. Detailed Analysis: The appeal in this case was against the order passed by the Income Tax Appellate Tribunal for the assessment year 2003-04. The main issue revolved around whether job work charges should be excluded from the profits of the business for the computation of deduction under Section 80HHC of the Income Tax Act, 1961. The Tribunal, following the decision of the Supreme Court in the case of CIT Vs. K.Ravindranathan Nair, held that 90% of certain receipts, including brokerage, commission, interest, etc., should be deducted from business profits. The Supreme Court in the case of ACG Associated Capsules (P) Ltd. clarified that only 90% of the net income of such receipts should be deducted for determining the profits of the business under Section 80HHC. The Division Bench of the High Court, considering the decisions in K.Ravindranathan Nair and ACG Associated Capsules (P) Ltd., dismissed the appeal filed by the Revenue. It was emphasized that processing charges, like other receipts, formed part of the gross total income and 90% of such sum should be reduced from the total turnover for arriving at the business profits. The Court held that net conversion charges should be considered under the Explanation to Section 80HHC for the computation of deduction, and not the gross conversion charges. Therefore, the net conversion charges were deemed to form part of the gross total income, and 90% of this sum had to be deducted from the total turnover to calculate the business profits. As a result, the Court dismissed the Revenue's appeal and remanded the matter back to the Assessing Officer for the calculation of the net income. The tax appeal was ultimately dismissed, with the substantial question of law being answered in favor of the Revenue. The Assessing Officer was directed to compute the deduction in accordance with the decisions in ACG Associated Capsules (P) Ltd. and Kadri Mills Ltd., with the requirement for the assessee to provide all necessary details to support their contentions before the Assessing Officer.
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