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2022 (2) TMI 1033 - HC - Income TaxDeduction u/s 80HHC - Income earned from hiring plant and machinery - Whether the income earned by the Appellant from leasing its plant and machinery in course of its business activity of leasing is in the nature of rent as contemplated under Explanation (baa) to Section 80 HHC of the Act? - Whether income earned by leasing plant and machinery is synonymous to the words rent or charges as contemplated in Explanation (baa) to Section 80 HHC? - HELD THAT - In Sesa Goa Ltd 2015 (5) TMI 621 - BOMBAY HIGH COURT this Court had considered that receipts from hiring barges would be in the nature of rent or similar to rent and, therefore, would fall in items specified in clause (baa) of Explanation to section 80HHC. It has been observed, the assessee has not been able to show that such an activity had any nexus to the export activity and, thus, the decision in Ravindranathan Nair's case 2007 (11) TMI 10 - SUPREME COURT had been followed. In the present matter as well, the assessee is not at loggerheads with the revenue that the amount sought to be deducted from the profits of business, under section 80HHC is not an income earned from export. It is the income earned by hiring plant and machinery. The situation thus as has been observed by the authorities hitherto is squarely covered by the decisions in Ravindranathan Nair's case and Sesa Goa (supra). There is no point in remitting the matter to the authorities. The income earned from hiring out plant and machinery would have to be deducted pursuant to Explanation (baa) to Section 80 HHC. Having regard to emerging position, what has been disallowed pursuant to Explanation (baa) to Section 80HHC is the income from hiring out plant and machinery which is independent of exports. The substantial questions of law as answered in the affirmative.
Issues:
1. Interpretation of Section 80HHC of the Income Tax Act regarding deduction for profits derived from exports. 2. Determination of whether income earned from leasing plant and machinery is eligible for deduction under Section 80HHC. 3. Application of Explanation (baa) to Section 80HHC in the context of rental income from leasing out plant and machinery. Issue 1: The High Court addressed the interpretation of Section 80HHC of the Income Tax Act concerning the deduction for profits derived from exports. The appellant, engaged in the manufacture and sale-export of Calcined Petroleum Coke (CPC), challenged the disallowance of deduction by the Assessing Officer following directions under section 263. The High Court held that CPC manufactured by the appellant does not qualify as mineral oil under Section 80HHC (2) (b) (i). Issue 2: The dispute revolved around whether income earned from leasing plant and machinery is eligible for deduction under Section 80HHC. The Assessing Officer partially allowed the claims of the appellants under Section 80HHC, but the Commissioner of Income Tax (Appeals) remanded for re-computation considering the net income from leasing. The Income Tax Appellate Tribunal (ITAT) dismissed the appeals, leading to the present appeals under Section 260A. Issue 3: The application of Explanation (baa) to Section 80HHC in the context of rental income from leasing out plant and machinery was a key consideration. The authorities observed that the income earned by leasing out the plant and machinery is to be deducted pursuant to Explanation (baa) to Section 80HHC. The High Court referred to relevant precedents such as Commissioner of Income Tax Vs. K. Ravindranathan Nair and Sesa Goa Ltd. Vs. CIT to support the conclusion that income from hiring out plant and machinery falls under items specified in Explanation (baa) of Section 80HHC. In conclusion, the High Court affirmed that the income earned from hiring out plant and machinery must be deducted in accordance with Explanation (baa) to Section 80HHC. The judgment relied on legal precedents and interpretations to determine that the income from leasing plant and machinery, independent of exports, is not eligible for deduction under Section 80HHC. The appeals were disposed of accordingly based on the established legal principles and interpretations.
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