2016 (9) TMI 113 - HC - Income Tax

Calculation of deduction u/s. 80HHC - CIT (A) directing not to exclude 90% of Excise refund (Mfg.), Excise refund (Merchant), insurance claim from the profit of the business for calculation of deduction u/s. 80HHC - Held that - Having considered the decision in case of ACG Associated Capsules (P) Ltd. (2012 (2) TMI 101 - SUPREME COURT OF INDIA ), issue with regard to insurance claim from the profit of the business for calculation of deduction under Section 80HHC is squarely covered and required to be answered in favour of the Department. While adopting the aforesaid principles of law and without giving any further elaborate reasons, we answer the above referred question in favour of the Department. So far as the question of excluding 90% of excise duty refund credited in the profit and loss account in respect of manufacturing and merchant division is concerned, the CIT (A) as well as the Tribunal has rightly come to the conclusion after considering material placed before them and various decisions. We are in complete agreement with the said finding directing the AO not to exclude the excise duty refund insurance claim while computing the deduction u/s. 80HHC.

Summary

Issues:
1. Challenge to ITAT order by Department regarding exclusion of Excise refund and insurance claim for deduction u/s. 80HHC.
2. Interpretation of legal provisions for deduction under Section 80HHC.
3. Applicability of previous court decisions on similar matters.

Analysis:

Issue 1:
The Department challenged the ITAT order dismissing the appeal and confirming the CIT (A) order regarding the exclusion of Excise refund and insurance claim for deduction u/s. 80HHC. The substantial question of law was whether the Appellate Tribunal was correct in directing not to exclude 90% of Excise refund and insurance claim from the profit of the business for calculation of deduction u/s. 80HHC.

Issue 2:
The Department contended that 90% of income related to various sources should be deducted for computation under Section 80HHC, citing a previous court decision. However, the respondent-assessee relied on a Supreme Court decision to argue that only receipts actually included in the profits should be deducted. The Court, after considering these arguments, held that the issue of insurance claim for deduction under Section 80HHC was in favor of the Department based on legal principles and the cited legal position.

Issue 3:
Regarding the exclusion of 90% of excise duty refund from the profit and loss account for manufacturing and merchant divisions, both the CIT (A) and the Tribunal had correctly concluded that such exclusion was not required. The Court agreed with this finding, stating that the AO should not exclude the excise duty refund and insurance claim while computing the deduction u/s. 80HHC. The Tax Appeal was disposed of accordingly, upholding the decisions of the lower authorities based on the material placed before them and previous court decisions.

This detailed analysis of the judgment highlights the legal issues involved, the arguments presented by both parties, and the Court's reasoning and decision on each issue, ensuring a comprehensive understanding of the case.