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TMI Blog2011 (9) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel For Respondent : Mr. R. Venkat Narayanan COMMON JUDGMENT Delivered by ELIPE DHARMA RAO, J. The Revenue has come forward with these Appeals. 2. The facts in brief are as follows :- The assessee is a company engaged in the manufacture of cigarette and export of finished leather goods. For the assessment years 1993-94 to 1996-97, the assessee claimed deduction under Section 80HHC of the Income Tax Act. The Assessing Officer, while computing the relief, held that the turnover pertaining to the entire business including the Cigarette Division has to be taken into account as total turnover and that 90% of the interest receipts should be deducted from the business profits and the loss suffered by the Cigarette Division should be taken into account to arrive at the business profit. Against the orders passed by the Assessing Officer, the assessee filed appeals before the Commissioner of Income Tax, who, by four separate orders dated 19.7.2000, allowed the appeal in part by holding that job receipts included would very much form part of the total turnover, however, directed the Assessing Officer not to exclude the value of job receipts of the Cig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT (2003) 260 ITR 304 (Mad) and the decision of the Punjab and Haryana High Court in Rani Paliwal v. Commissioner of Income Tax (2004) 268 ITR 220 (P H), observed in paragraph 10 and 11, as follows :- 10. The above two judgments support the case of the Revenue. The appellant in the present case had received interest of ₹ 2,65,019 and hence the receipt of interest is alone relevant and the same is to be taken into consideration for the purpose of deduction for the claim under section 80HHC of the Act. No expenditure or any other deduction is permissible from the receipt of interest income. Section 80HHC stipulates a deduction in respect of export profits. Instead of enjoining the Assessing Officer to compute such export profits from out of the consolidated amount of the assessee, which may involve income by way of interest, rent, commission etc., the Legislature has provided a simple procedure under which 90 per cent of the receipts such as interest, rent, commission, brokerage, etc., shall be excluded as profits not attributable to exports. The intention is, therefore, clear that there should be no attempt to deduct any expenditure from the receipts, however, relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, once the turnover of the cigarette was not included in the total turnover, the loss suffered by the assessee in the cigarette division has nothing to do with profit of the leather goods exported and, therefore, the loss suffered by the assessee or profit earned by it in cigarette manufacturing activity cannot form part of the profit for the purpose of deduction under Section 80HHC. The Tribunal by relying on the decision of this Court in Commissioner of Income Tax v. Madras Motors Ltd./M.M. Forging Ltd. 257 ITR 60 (Mad) allowed the prayer sought for by the assessee. 10. We are unable to understand the reason given by the Tribunal for rejecting the case of the Revenue. It is no doubt true that the assessee was carrying on exporting business in leather finished goods and manufacturing of cigarette. In order to find out whether the assessee is entitled to claim deduction, one has to go through the relevant provision. The relevant provision of Section 88HHC is to the following effect :- 80-HHC. Deduction in respect of profits retained for export business. (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as reduced by the direct costs and indirect costs attributable to such export; (c) where the export out of India is of goods or merchandise manufactured or processed by the assessee and of trading goods, the profits derived from such 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 clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iii-a) (not being profit on sale of a licence acquired from any other person), and clauses (iii-b) and (iii-c) of Section 28, the same proportion as the export turnover bears to the total turnover of business carried on by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we have specifically put a question to the learned counsel for the assessee, who answered that it is a positive profit. Therefore, if there is a loss in either of the two business, then the loss has to be taken into account for the purposes of computing the profits. The Assessing Officer by applying the aforesaid provisions, has correctly observed that the assessee was not be liable for deduction. The aforesaid view receives ample support from the decision of the Supreme Court in IPCA Laboratory case (cited supra), relied on by the Revenue. In the aforesaid decision, the Apex Court has held that when the assessee was exporting trading goods as well as the manufacturing goods, the loss suffered by the assessee in export of any one of the goods, cannot be ignored and it has to be taken into consideration while computing the profit for the purpose of deduction under Section 80HHC. The Apex Court has further proceeded to observe as follows :- 12. . . . Undoubtedly, Section 80-HHC has been incorporated with a view to providing incentive to export houses. Even though a liberal interpretation has to be given to such a provision, the interpretation has to be as per the wordings of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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