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TMI Blog2010 (10) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... ation where the total turnover is explicitly defined for the purposes of this section. In law there is no distinction between an assessee maintaining separate accounts in respect of each business or the assessee maintaining one account. When once the income from all the businesses is pooled together and constitutes a total income, only the profits derived from all those businesses also should form the components of the profits of business. The Tribunal seems to have been very much carried away by the fact that the assessee has maintained separate accounts for his each business which in law makes no difference - in favour of the assessee and against the Revenue. - IT Appeal Nos. 798 and 799 of 2009 - - - Dated:- 29-10-2010 - N. Kumar, Subhash B. Adi, JJ. Ashok Kulkarni for K.R. Prasad for the Assessee Ameet Kumar Deshpande for the Revenue JUDGEMENT N. Kumar, J:- 1. The appeal IT Appeal No. 798 of 2009 is preferred by the assessee against the order passed by the Tribunal which held that, for the purpose of deduction under s. 80HHC, if separate accounts are maintained for such eligible business, then deduction under s. 80HIIC is to be computed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the export turnover and total turnover of such business. Therefore, they upheld the order passed by the appellate authority and dismissed the appeal. Aggrieved by the same, the assessee is before this Court. 5. After passing of the order, the assessee filed an application for rectification of the said order relying on a judgment of the Division Bench of this Court in the case of the CIT vs. Rajesh Art Jewellers in ITRC Nos. 29-30 of 2002 disposed of on 7th April, 2005, on the ground that though the said judgment was cited, the said judgment is not referred to. The said rectification application also came to be dismissed. Aggrieved by this order, appeal IT Appeal No. 799 of 2009 is filed. 6. The substantial question of law that arises for consideration in these two appeals is as under:- "Whether the Tribunal was justified in deleting, in order to ascertain deduction under s. 80HHC, the profit derived from all the businesses cannot be taken into consideration and it is only the profit from eligible business, i.e., export business alone should be taken into consideration?" 7. We have heard the learned counsel for the parties. 8. In order to appreciate and answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods or merchandise out of India', has been defined in sub-s. (3) of s. 80HHC. This sub-s. (3) lays down that the profits derived from the export of goods or merchandise shall be the amount which bears to the profits of the assessee as computed under the head 'Profits and gains of business or profession' the same proportion as the export turnover bears to the 'total turnover' of the business carried on by the assessee. 3. Several doubts have been expressed about how the deduction under s. 80HHC is to be allowed. Representations received by the Board show that there is lack of uniformity amongst authorities in respect of allowing the aforesaid deduction. 4. Sub-s. (3) of s. 80HHC statutorily fixes the quantum of deduction on the basis of a proportion of the profits of business under the head 'Profits and gains of business' irrespective of what could strictly be described as 'profits derived from the export of goods or merchandise out of India'. The deduction is computed in the following manner:- Profit of the business x Export turnover Total turnover 7. 'Total turnover' was not defined earlier. There has been lack of uniformity amongst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of profits for export business". By the Finance Act (No. 2) Act, 1991 w.e.f. 1st April, 1992 for the first time, the expression "profits of the business" stood defined to mean the "profits of the business" as computed under the head "Profits and gains of business" under ss. 28 to 44D of the IT Act. Therefore, before giving deduction under s. 80HHC(3)(a), (b) or (c) of the IT Act, the gross total income of the assessee being profits from business had to be arrived at in terms of cl. (baa) of the said Explanation. While calculating "business profits" the same had to be done in terms of s. 28 to s. 44D of the IT Act alone. Other provisions like ss. 70 and 71 of the IT Act were excluded. During asst. yr. 1993-94 s. 80HHC(3) of the IT Act constituted a code by itself. Subsequent amendments have imposed restrictions/qualifications by which the said provision has ceased to be a code by itself. In the above formula there existed four variables, namely, business profits, export turnover, total turnover and 90 per cent of the sums referred to in cl. (baa) to the said Explanation. In the computation of deduction under s. 80HHC all four variables had to be taken into account. All four va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses is to be taken into consideration, excluding only what is stated above. In order to attract s. 80HHC he must be in the business of export which in turn brings foreign exchange to the country. In order to determine what is the business profit out of that export income, the formula is provided in sub-s. (3). The said formula has now been explained by the circular as well as by the apex Court. The said formula is as under:- Profit of the business x Export turnover Total turnover In fact in the circular it has been specifically stated at para 4 that, sub-s. (3) of s. 80HHC statutorily fixes the quantum of deduction on the basis of proportion of the profits of business under the head "Profits and gains of business" irrespective of what could strictly be described as "profits derived from the export of goods or merchandise out of India". Therefore, even the profit derived in a business which is not part of export business is to be taken into consideration. In other words, when all the income derived from the business is included in the turnover correspondingly, all the profits from such businesses also should form part of the profit of the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is contrary to the scheme of s. 80HHC and the circular. The finding is when the assessee has maintained separate accounts for different units and the assessee is having a number of businesses, then deduction is to be ascertained in respect of eligible business and if separate accounts for such eligible business then deduction is to be computed on the basis of profit from such eligible business and export turnover and total turnover of such business. This finding is ex facie contrary to the definition clause contained in the Explanation where the total turnover is explicitly defined for the purposes of this section. In law there is no distinction between an assessee maintaining separate accounts in respect of each business or the assessee maintaining one account. Whether he maintains one account or separate accounts, for the purposes of the Act, the income of the business is calculated on the total turnover and he is assessed on that basis. When once the income from all the businesses is pooled together and constitutes a total income, only the profits derived from all those businesses also should form the components of the profits of business. In fact that is the view taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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