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2017 (2) TMI 598 - AT - Income TaxExclusion of excise duty and sales tax from total turnover while computing deduction u/s. 80HHC after insertion of section 145A - Held that - Identical issue was considered n the case of Dyntex Dyechem Ltd. 2014 (3) TMI 468 - GUJARAT HIGH COURT wherein held that the learned Tribunal has not committed any error in holding that the components of sales tax and central excise do not form part of sale proceeds for the purpose of Section 80HHC of the Act despite insertion of Section 145A of the Act. - Decided in favour of the assessee Deduction wrongly computed u/s. 80HHC on profits and turnover of company as a whole and not unit wise - Held that - As decided in M/s. Meghmani Organics Ltd. Versus Asstt. Commissioner of Income-tax 2010 (3) TMI 1149 - ITAT AHMEDABAD deduction under section 80HHC is to be allowed on unite-wise basis, this ground of Revenue is dismissed. Adjustment of trading exports loss against manufacturing profit while computing deduction u/s. 80HHC - Held that - This issue is squarely covered in favour of the revenue and against the assessee by the decision of the Hon ble Supreme Court in the case of IPCA Laboratory Ltd. 2004 (3) TMI 9 - SUPREME Court wherein held that arriving at the profits earned from export of both self manufactured goods and trading goods, the profits and losses in both the trades are required to be taken into consideration - If after such adjustments there is a positive profit the assessee would be entitled to deduction under section 80HHC(1) Denial of granting deduction u/s. 80HHC on DEPB income ignoring that rules of duty draw back does not prescribe any allocation towards custom duty in its products - Held that - As decided in Associated Dyestuff Pvt. Ltd., Ahmedabad Versus The ACIT Circle-1 Ahmedabad 2015 (7) TMI 724 - ITAT AHMEDABAD in view of the judgement of Avani Exports 2015 (4) TMI 193 - SUPREME COURT has categorically ruled that having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, the cases of exporters having a turnover below and those above 10 crores should be treated similarly, we are of the considered view that the ld.CIT(A) was not justified in confirming the action of the AO. Therefore, we hereby direct the AO to allow the deduction u/s.80HHC of the Act. - Decided in favour of assessee. Gross interest income as against net interest for computing deduction u/s. 80HHC of the Act - Held that - This issue is no more res integra as the same has been decided in favour of the assessee and against the revenue by the Hon ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. in 2012 (2) TMI 101 - SUPREME COURT OF INDIA wherein held Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads PGBP is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Matter remanded back to A.O. to work out the deductions Decided in favor of assessee Addition of accrued bonus under Keymen Insurance Policy - Held that - A.O. found that the assessee has subscribed to Keymen Insurance Scheme of LIC and is paying annual premium on the same. The A.O. noticed that the assessee has not shown the bonus accrued under the scheme. Drawing support from the provisions of Section 28(vi) of the Act, the A.O. was of the firm belief that bonus of such policy will be taxable as profit and gains of business. The A.O. accordingly made an addition. As assessee could not bring any judicial decision in favour of the assessee nor could point out any fallacy/error in the factual findings of the A.O. considering the bonus accrued on the Keymen Insurance Policy in the light of the provisions of Section 28(vi) of the Act, we do not find any error or infirmity in the findings of the ld. CIT(A). - Decided against assessee
Issues involved:
1. Exclusion of excise duty and sales tax from total turnover while computing deduction under section 80HHC after the insertion of section 145A. 2. Computation of deduction under section 80HHC on a unit-wise basis versus the company as a whole. 3. Adjustment of trading exports loss against manufacturing profit while computing deduction under section 80HHC. 4. Eligibility of deduction under section 80HHC on DEPB income. 5. Reduction of gross interest income versus net interest for computing deduction under section 80HHC. 6. Addition of accrued bonus under Keymen Insurance Policy. Detailed Analysis: 1. Exclusion of Excise Duty and Sales Tax from Total Turnover: The first ground of appeal concerns the exclusion of excise duty and sales tax from the total turnover while computing the deduction under section 80HHC after the insertion of section 145A. The assessee contended that these components do not form part of sale proceeds for the purpose of section 80HHC. The Tribunal found that this issue was decided in favor of the assessee by the Hon'ble Jurisdictional High Court of Gujarat in the case of Dyntex Dyechem Ltd. The High Court held that despite the insertion of section 145A, sales tax and central excise do not form part of sale proceeds for section 80HHC purposes. Respectfully following this decision, the Tribunal allowed this ground in favor of the assessee. 2. Computation of Deduction on a Unit-wise Basis: The second ground relates to the computation of deduction under section 80HHC on a unit-wise basis rather than the company as a whole. The Tribunal referred to its own previous decisions in the assessee's case and other judicial precedents, which consistently held that deduction under section 80HHC should be allowed on a unit-wise basis. The Tribunal noted that the assessee maintained separate accounts for each unit, and these accounts were separately audited. The Tribunal, following its earlier decisions and those of higher courts, allowed this ground in favor of the assessee. 3. Adjustment of Trading Exports Loss Against Manufacturing Profit: The third ground involves the adjustment of trading exports loss against manufacturing profit while computing the deduction under section 80HHC. The assessee acknowledged that this issue is covered against them by the decision of the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd., which held that both profits and losses must be considered in arriving at the figure of positive profit for deduction purposes. Consequently, the Tribunal dismissed this ground in favor of the revenue. 4. Eligibility of Deduction on DEPB Income: The fourth ground concerns the denial of deduction under section 80HHC on DEPB income. The Tribunal noted that the issue was covered in favor of the assessee by the decision of the Hon'ble Supreme Court in the case of Avani Exports, which ruled that the amendments to section 80HHC were prospective and not applicable to the assessment year in question. The Tribunal, following this decision, allowed this ground in favor of the assessee. 5. Reduction of Gross Interest Income versus Net Interest: The fifth ground, which appears to be an alternate contention to ground four, became infructuous as the Tribunal decided ground four in favor of the assessee. 6. Addition of Accrued Bonus under Keymen Insurance Policy: The sixth ground relates to the addition of accrued bonus under the Keymen Insurance Policy. The A.O. added the bonus accrued under the scheme to the taxable income, drawing support from section 28(vi) of the Act. The Tribunal found no judicial decision or error in the A.O.'s findings and upheld the addition. Thus, this ground was dismissed. Conclusion: In conclusion, the appeal filed by the assessee was partly allowed, with grounds one, two, four, and six decided in favor of the assessee, while grounds three and seven were dismissed. The Tribunal's order was pronounced in open court on 07-02-2017.
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