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TMI Blog2004 (6) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee and against the Revenue. Learned Departmental Representative was fair enough to concede the position. We have heard the parties. Respectfully following the earlier orders of the Tribunal, we decide the issue in favour of the assessee and against the Revenue. Ground succeeds. 3. The second ground is against the confirmation of addition of Rs. 72,478 out of telephone expenses at the director's residence. Learned Authorised Representative pointed out that this issue is also covered in favour of the assessee vide order for asst. yr. 1991-92 at p. 2, para 5. Learned Departmental Representative was fair enough to concede the position. Respectfully following the earlier orders of the Tribunal, we decide the issue in favour of the assessee and against the Revenue. Ground succeeds. 4. The third ground is against the confirmation of addition of disallowance of director's wives' foreign travelling expenses amounting to Rs. 2,26,339. Learned Authorised Representative pointed out that the issue is covered in favour of the assessee and against the Revenue vide order for asst. yr. 1991-92 p. 3, para 6. Learned Departmental Representative, on the other hand, strongly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal while disposing of the case of the assessee for asst. yr. 1991-92 in ITA No. 340/1995. So far as the claim of the assessee in disputing the order of the CIT(A) in confirming the action of the AO including central sales-tax/sales-tax/estate duty as part of total turnover for calculating deduction under s. 80HHC is concerned, learned Authorised Representative pointed out that the issue has already been decided in favour of the assessee and against the Revenue vide earlier order of the Tribunal for asst. yr. 1992-93 in ITA No. 188/1997, dt. 24th Oct., 2002 in the case of Rockman Cycle Industries Ltd. wherein it was held that these items would not form part of total income and accordingly allowed the appeal of the assessee, copy placed at pp. 147-150 of the paper book. Learned Authorised Representative further pointed out that the Special Bench while deciding the case of IFB Agro Industries Ltd. vs. Dy. CIT (2003) 78 TTJ (Cal)(SB) 177 : (2002) 83 ITD 96 (Cal)(SB) held that the sales-tax and excise duty are not part of total turnover while calculating deduction under s. 80HHC. 6.2 Learned Authorised Representative arguing against the order of the AO in including interest on a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Representative was not able to controvert the decision in the case of Kantilal Chhotalal holding that this would not form part of total turnover for the purposes of calculating deduction under s. 80HHC. We also find that the said issue has already been decided in favour of the assessee and against the Revenue for asst. yr. 1991-92. Respectfully following the same, we decide the issue in favour of the assessee and against the Revenue. 7. Ground No. 5(c) is against the order of the CIT(A) in confirming the action of the AO excluding the following items from profits of business while calculating deduction under s. 80HHC: (i) Royalty (ii) 90 per cent of interest income (iii) 90 per cent of rent (iv) IPRS The brief facts in this respect are that the AO observed that as per the statement of taxable income given by the assessee it had reduced interest to the extent of Rs. 36,89,892 on account of income from interest from its net profit. However, interest received by the assessee during the year was Rs. 52,33,288. Thus, the assessee had included interest to the extent of Rs. 15,43,396 as part of profits and gains of business. Similarly, it had also treated income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 So far issue relating to rent, learned Authorised Representative submitted that in view of above Expln. (baa) of sub-s. (4A) of s. 80HHC, 90 per cent of rent should be reduced from the original profits. Regarding IPRS, learned Authorised Representative submitted that the issue is covered in favour of the assessee and against the Revenue vide order of this Bench dt. 2nd July, 2003 in ITA No. 265/1998 for asst. yr. 1994-95 in the case of Venus Industries Corpn. copy placed on record. 7.3 On the other hand, learned Departmental Representative supported the order of the CIT(A) and submitted that the tax authorities have rightly reduced the above items from the original profits for the purposes of calculating deduction under s. 80HHC, in view of the proviso to Expln. (baa) of sub-s. (4A) of s. 80HHC. However, he could not controvert the submissions of learned Authorised Representative so far as interest received on account of late payment and issue relating to IPRS. 7.4 We have heard the rival submissions and perused the various case laws. We find that so far as the issue pertaining to royalty is concerned, it is covered in favour of the assessee and against the Revenue vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of Rs. 4,17,23,748. However, the AO observed that as per sub-s. (3)(c) of s. 80HHC, the assessee was eligible for deduction with reference to profits derived from the export of goods or merchandise during the year. Such profits were to be determined after taking into account the total exports made during the year. Sub-s. (3) of s. 80HHC merely lays down the method of arriving at the total profits of exports after computing profits/losses in respect of manufactured goods/traded goods separately. The AO further observed that the assessee had not only exported goods manufactured by it but had exported traded goods as well. Therefore, the profits from export business had to be arrived at by taking into account the export business of manufactured goods and also of traded goods. The AO observed that calculations in certain exports could not be ignored while computing profits on export business and to determine profit from export business as per sub-s. (1), the said sub-section as also sub-s. (3) of s. 80HHC had to be read together and not in isolation. The AO further observed that the provisions for claiming deduction allowable to an assessee on account of exports made was with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Representative strongly assailed the orders of the tax authorities in setting off export incentive from loss in respect of export goods and submitted that the issue has already been resolved by the Special Bench in the case of Lalsons Enterprises while deciding the question No. 2 raised before it, wherein the issue has been decided in favour of the assessee and against the Revenue. 8.2 On the other hand, learned Departmental Representative contradicted the submissions of the learned Authorised Representative and submitted that the apex Court has decided the issue against the assessee in the case of IPCA Laboratory Ltd. He, therefore, supported the order of the CIT(A). 8.3 In rejoinder, learned Authorised Representative submitted that the issue decided by the apex Court was on a different footing and the issue pertaining to export incentive was not there in the case of IPCA Laboratory Ltd. He further submitted that the Special Bench has dealt with the issue pertaining to proviso to s. 80HHC(3) in favour of the assessee, whereas the apex Court has decided the issue pertaining to negative profits or losses from the business or export computed in accordance with cls. (a), (b) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export shall,: (i) in respect of the goods or merchandise manufactured or processed by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and (ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods: Provided that the profits computed under cl. (a) or cl. (b) or cl. (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in cl. (iiia) (not being profits on sale of a licence acquired from any other person), and cls. (iiib) and (iiic) of s. 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. Explanation—For the purposes of this sub-section,— (a) 'adjusted export turnover' means the export turnover as reduced by the export turnover in respect of trading goods; (b) 'adjusted profits of the business' means the profits of the business as reduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,225 (Less - 90% of interest & rent as per para 7.1) 6,96,204 Less - 90% of export incentive 6,45,84,021 (considered separately under proviso to s. 80HHC) 6,44,30,564 1,53,457 Less : Loss from export of trading goods (since there is no dispute so far as set off of trading loss for manufactured activity following apex Court & Special Bench) 4,17,23,578 (loss) (-) 4,15,70,121 Less : Loss from export of trading goods (since there is no dispute so far as set off of trading loss for manufactured activity following apex Court & Special Bench) 4,17,23,578 (loss) (-) 4,15,70,121 Since there is loss nothing will be allowed so far as deduction of s. 80HHC(3)(c) is concerned. Now coming to deduction under proviso to sub-s. (3) of s. 80HHC, we find that the assessee has claimed Rs. 67,44,806 by applying the following formula: 90 per cent of export incentive x Export turnover Total turnover Since the intention of the legislature was quite clear while first deducting 90 per cent of incentive for the calculating the export profits under s. 80HHC(3)(a)(b) or (c) and then allowing such eligible deduction on account of such incentive separately under the proviso to sub-s. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 : (1992) 198 ITR 297 (SC) at p. 320 the apex Court has laid down the proposition as under: "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes the colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under considerations by this Court, to support their reasoning." Therefore, the Hon'ble Supreme Court clearly pointed out the way of interpreting a judgment which lays that it is only the ratio decidendi of a case which can be binding not the obiter dictum. Obiter, at best, may have some persuasive efficacy. The apex Court in the case of Madhav Rao Jiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of expenses on shaguns to dealers amounting to Rs. 53,837. At the outset of the appellate proceedings before us, learned Authorised Representative pointed out that these issues are covered in favour of the assessee and against the Revenue vide order dt. 2nd July, 2003 in ITA No. 340 in case of the assessee for asst. yr. 1991-92. Learned Departmental Representative was fair enough to concede the position. We respectfully following our earlier order in the case of the assessee for asst. yr. 1991-92 decide the issues in favour of the assessee and against the Revenue. 11. Ground No. 9 is not pressed by learned Authorised Representative, hence rejected and ground No. 10 being general in nature does not need adjudication. 12. Now taking up ITA No. 69 for asst. yr. 1993-94, we find that ground No. 1 against the confirmation of addition out of telephone expenses is covered vide ground No. 2 in ITA No. 1436/1995 for asst. yr. 1992-93. For the reasoning recorded therein, we decide the issue in favour of the assessee and against the Revenue, following our order for asst. yr. 1991-92. 13. Ground No. 2 regarding disallowance of directors' wives' travelling expenses is covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and tools, etc. At the outset of the appellate proceedings before us, learned Authorised Representative pointed out that this issue is covered in favour of the assessee and against the Revenue vide order dt. 2nd Dec., 2003 in ITA No. 278/1998 in case of the assessee for asst. yr. 1994-95. Learned Departmental Representative was fair enough to concede the position. We respectfully following our earlier order in the case of the assessee for asst. yr. 1994-95 decide the issue in favour of the assessee and against the Revenue. 22. Taking up the last appeal by the assessee in ITA No. 268 for asst. yr. 1994-95, ground No. 1 relates to the confirmation of addition on account of closing stock of consumable stores and stocks. At the outset of the appellate proceedings before us, learned Authorised Representative pointed out that this issue is covered in favour of the assessee and against the Revenue vide order dt. 25th July, 2003 in ITA No. 1402/1995 in case of the assessee for asst. yr. 1992-93. Learned Departmental Representative was fair enough to concede the position. We respectfully following our earlier order in the case of the assessee for asst. yr. 1992-93 decide the issue in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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