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TMI Blog2010 (12) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80HHE. In appeal CIT(A) held that salary recovery, air fare incentive and service charges, reversal of provision for doubtful debts, scrap sale were integral part of the carrying on the business activities. Therefore he held that these items of income were to be treated as part of business. As regards of sale of special import license, CIT(A) held that this had been specifically treated as business income under section 28(iiia). CIT(A) accordingly directed the AO to include the various items of income as part of the business profit while computing deduction under section 80HHE. Aggrieved by the said decision the revenue is in appeal before the tribunal. 2.1.2 Before us the Learned AR for the assessee argued that all the items of income under consideration had arisen during the course of carrying on of business and had to be assessed as business income. The Learned DR on the other hand placed reliance on the order of AO. 2.1.3 We have perused the records and considered the matter carefully. Deduction under section 80HHE is allowed in respect of profit derived from the business of export of computer software. The phrase "profit derived from" has been defined i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. Accordingly he deleted the addition made by AO aggrieved by which the revenue is in appeal. 2.2.1 Before us the Learned AR for the assessee reiterated the submissions made before lower authorities that no expenses were incurred in relation to the exempt dividend income. The Learned DR on the other hand supported the order of AO and submitted that some expenditure has to be attributed to earning of income. He referred to the judgment of Hon'ble High Court of Mumbai in case of Godrej Boyce Manufacturing Co. Ltd. (234 CTR 1) in which it was held that the expenses incurred whether direct or indirect has to be determined on a reasonable basis. 2.2.2 We have perused the records and considered the matter carefully. The dispute is regarding attribution of expenses in relation to dividend income which was exempt. The claim of the assessee is that no borrowings were used for the investment and this claim it appears had accepted by the AO also as he had not made any disallowance on account of interest. He had estimated only the administrative expenses relating to dividend income @ 5% on gross dividend income. Hon'ble High Court of Mumbai in case of Godrej & Boyce Manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same is upheld. 2.4 The fourth dispute is regarding addition on account of the expenses attributable to the exempt dividend income while computing the book profit under section 115JB. The AO while computing the book profit under section 115JB added the expenditure of Rs.13,35,850/- attributable to exempt dividend income under clause (f) of the Explanation 1 to section 115JB(2). In appeal CIT(A) held that since said addition had been deleted by him in the regular assessment, no addition would be made under clause (f). Aggrieved by the said decision the revenue is in appeal before the tribunal. 2.4.1 We have heard both the parties, perused the records and considered the matter carefully. The dispute is regarding addition of the expenditure relatable to the exempt dividend income under clause (f) of Explanation 1 to section 115JB(2). The AO had attributed a sum of Rs.13,35,850/- relating to the dividend income and therefore while computing the book profit he added the same under clause (f). We have already considered the issue of attribution of expenses relating to dividend income while dealing with the earlier ground and are held that only a sum of Rs.25,000/- will be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate accounts have been maintained. Therefore in our view the export turnover of other units will have to be excluded and it will also not be included in the total turnover while computing deduction under section 80HHE. The issue is restored to AO for passing a fresh order after necessary examination in the light of observations made above and after allowing opportunity of hearing to the assessee. 3.2 The second dispute is regarding treatment of interest income of Rs.46.13 lacs and rental income of Rs.15.28 lacs as income from other sources by the AO while computing deduction under section 80HHE. The assessee had received interest income of Rs.24,14,000/- from fixed deposits with the banks and Rs.21,98,826/- on income tax refund and Rs. /- on loans to employees. The assessee had also received rental income of Rs.15,27,800/- from three companies. All such items of income were treated as business income by the assessee. However the AO treated the same as income from other sources. In appeal the assessee submitted that interest income had arisen during the course of carrying on of business. Similarly the premises had been let out with number of facilities and therefore all suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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