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TMI Blog2006 (5) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... (3)The learned CIT(A) erred in holding that 90 per cent scrap sales of Rs. 2,71,224 is not deductible from profit available for deduction under section 80HHC without assigning any reasons and without appreciating that scrap sale is only a local sale and not export sale. (4)On facts and circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to allow, in computation of total income under section 115JB, the deduction under section 80HHC with reference to book profit whereas, by virtue of clause ( iv ) of the Explanation below section 115JB(2) read with section 80HHC(3) and clause ( baa ) of the Explanation below section 80HHC, the deduction has to be quantified by apportionment of the profits of the business as computed under the head "Profits and gains from business or profession." 2. As regards ground No. 1, at the outset, the learned DR himself admitted that the issue relating to inclusion of excise duty and sales tax in the total turnover for the computation of deduction under section 80HHC is covered in favour of the assessee by the judgment of Hon ble Bombay High Court in the case of CIT v. Sudarshan Chemicals Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be operational income by the Tribunal in the said case. Accordingly, he pleaded for treatment of job receipts as operational income in view of the judgment of Hon ble Bombay High Court in the case of Bangalore Clothing Co. ( supra ). 7. In his rejoinder, the learned DR rebutted the arguments of the learned AR by arguing that in the said order of the Tribunal referred by the learned AR, the issue of acceptance of job receipts whether to be operational income or miscellaneous income has been decided and not the gross receipt or net receipt should be excluded has been decided. 8. After hearing rival submissions, we find that we have already pointed out to the grounds of appeal filed by the assessee before the CIT(A). There was a limited issue of deciding whether gross receipts or net receipts should be excluded. However, the learned CIT(A) has allowed net receipts to be excluded relying on the judgment in the case of Bangalore Clothing Co. ( supra ). In our consideration, after perusal of the judgment in the case of Bangalore Clothing Co. ( supra ) the issue decided is whether job receipts in the facts of each case can be held to be operational income or other receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scrap sales from the export turnover by the Assessing Officer as well as exclusion of 90 per cent of the same from the deduction allowable under section 80HHC. It was contended by the learned DR that since the scrap sales included in the miscellaneous income is a local sales and not export sale, the Assessing Officer has rightly excluded 90 per cent of the same from the business profit in terms of Explanation ( baa ) to section 80HHC. Apart from this argument, the learned AR did not make any substantial argument in support of his ground. 11. After hearing rival submissions, we find that in the Tribunal order referred by the learned AR and perused by us, the Tribunal did not decide the issue whether 90 per cent of the scrap sales if taken in the miscellaneous income should be excluded from the computation of deduction under section 80HHC or not. It has only been held by the Tribunal that sale of scrap will not form part of export turnover. We find that learned Assessing Officer has rightly deducted 90 per cent of the scrap sales included in the miscellaneous income by the assessee. However, Assessing Officer has wrongly deducted the same from the export turnover as well, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submissions, going through the orders of the authorities below, material placed before us, we find that the issue before for adjudication is whether in the computation of book profit under section 115JB, the deduction allowable under section 80HHC should be allowed to be reduced or not. It will be pertinent to mention that in the relevant assessment year 2001-02, in the case of the assessee, section 115JB is applicable and not section 115J. Circular 680 placed before us by the assessee relates to Explanation III to section 115J and since section 115J is not operative in the relevant assessment year. This circular was issued by the CBDT to clarify with reference to section 115J as there was some ambiguity in the Explanation III to section 115J and CBDT has clarified that assessee will be entitled for deduction from book profit under Profit and Loss Account after adjustments envisaged in Explanation III to section 115J. It will be useful to reproduce Explanation III to section 115J as under: "[( iii )the amounts [as arrived at after increasing the net profit by the amounts referred to in clauses ( a ) to ( f ) and reducing the net profit by the amounts referred to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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