9911796707
TMI Blog2006 (3) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... view that this expenditure has to be treated as capital expenditure but when the matter went before the CIT(A), the CIT(A) deleted the addition by observing in para 5.3 as under-- "5.3 Following the decision of the Hon'ble I.T.A.T. in the case of Vadilal Dairy International Ltd., the decision of the Hon'ble Gujarat High Court in the case of Alembic Glass Works and also following my orders for the assessment years 1995-96 and 1996-97 in the appellant's own case, the Assessing Officer is directed to allow interest expenditure of Rs. 54,16,190. The disallowance in respect of remaining items made by the Assessing Officer is upheld. The Assessing Officer is directed accordingly." 3. Before us ld. DR relied on the order of the Assessing Officer. The reliance was also placed on the decision of Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 (SC) and it was contended that the expenditure incurred by the assessee by way of interest was capital expenditure and, therefore, it cannot be allowed under section 36(1)(iii) and also in view of the Explanation added thereto. 4. Ld. AR on the other hand relied on the order of Hon'ble Gujarat High Court in the case of Dy. CIT v. Core Healthcare Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. No contrary decision was brought to our notice by the ld. DR. We, therefore, dismiss the issue relating to the direction given by the CIT(A) that the sales and excise duty should be excluded from the total turnover while computing the deduction under section 80HHC. 10. The second issue in the second ground taken by the revenue relate to the direction given by the CIT(A) that the service charges, commission, charges, conveyance charges, miscellaneous receipts should be excluded from the total turnover while working out the deduction under section 80HHC. 11. Ld. A.R. in this regard contended that since 90% of the other receipts has been excluded in view of clause (baa) under Explanation given under section 80HHC, therefore, this receipt cannot form part of the total turnover. Reliance in this regard was placed on the following decisions : (1)CIT v. Kantilal Chhotalal [2000] 246 ITR 439 (Mum.). (2)CIT v. K. Ravindranathan Nair [2004] 265 ITR 217 (Ker.). 12. The ld. DR. on the other hand relied on the order of the Assessing Officer. 13. We have carefully considered the rival submissions and perused the materials on record and gone through the orders of the tax authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusion of service charges and commissions, conversion charges and miscellaneous receipts. 17. We have gone through the judgment of Mumbai High Court as relied by the ld. AR in the case of CIT v. Kantilal Chhotalal [2000] 246 ITR 439. In this case it was held-- "Section 80HHC of the Income-tax Act, 1961, has undergone various changes from time to time. Clause (baa) of the Explanation to section 80HHC inserted by the Finance (No. 2) Act, 1991, is clarifactory. The memorandum explaining the provisions has discussed this point in detail. In [1991] 190 ITR (St.) 300 it has been mentioned that the existing formula distorted the figure of export profits when receipts like interest, commission, etc., are included in the business profits and, therefore, to clarify the meaning of the business profits for the purpose of section 80HHC, the Legislature has excluded the above items from business profits in the formula. Therefore, the amendment was clearly intended to remove the defect in the formula for calculating export profits even before April 1, 1992. In fact, the Legislature has clarified that receipts like interest commissions, etc. have no nexus with the export activity and by incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otalal (supra) laid down the same preposition of law. 19. In this case, we find that the Assessing Officer has excluded 90% of the service charges & commission and also miscellaneous receipts from the business profit, therefore, in our opinion, the CIT(A) was correct in law in directing the Assessing Officer to exclude from total turnover service charges & commissions and miscellaneous receipts. So far as the conversion charges are concerned, the Assessing Officer has not excluded the 90% of the conversion charges while working out the business profit as per Explanation (baa ) of section 80HHC. The profit earned through the conversion charges since already included in the profit for business, therefore, in our opinion, the conversion charges cannot be carved out of total turnover. We find that under Explanation (ba) of section 80HHC, total turnover has been defined with effect from 1-4-1987, which stipulates that total turnover shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station, as defined in the Customs Act, 1962. The definition given is exclusive. The word 'means' has not been used. Therefore, the natural m ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
