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TMI Blog2012 (5) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 28 (iiid) of the Income Tax Act, 1961? (ii) Whether the Tribunal was right in holding that interest income earned shall be excluded while applying Explanation (baa) to Section 80 HHC? (iii) Whether the Tribunal has correctly applied Explanation (1)(iv) to Section 115JB of the Income Tax Act, 1961 while computing the book profits? 2. As far as question no.(i) is concerned, it has to be answered in negative i.e. in favour of the appellant-assessee and against the Revenue. In Topman Exports v. CIT, (2012) 3 SCC 593 it has been held by the Supreme Court that DEPB credit which is utilized is covered under Section 28 (iiic) and profits of sale of DEPB are covered by Section 28 (iiid) of the Income Tax Act, 1961 („Act&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received is assessable under the head "business income". In Shri Ram Honda Power Equip (supra), it has been observed that netting is permissible for computation under Explanation (baa) to Section 80HHC. This view has been upheld by the Supreme Court in ACG Associated Capsules (P.) Ltd. v. CIT (Mumbai), (2012) 3 SCC 321 observing: - "...9. Explanation (baa) extracted above states that "profits of the business" means the profits of the business as computed under the head "Profits and Gains of Business or Profession" as reduced by the receipts of the nature mentioned in Clauses (1) and (2) of the Explanation (baa). Thus, profits of the business of an Assessee will have to be first computed under the head "Profits and Gains of Business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as expenses under Sections 30 to 44D of the Act and is not included in the profits of business as computed under the head "Profits and Gains of Business or Profession", ninety per cent of such quantum of receipts cannot be reduced under Clause (1) of Explanation (baa) from the profits of the business. In other words, only ninety per cent of the net amount of any receipt of the nature mentioned in Clause (1) which is actually included in the profits of the Assessee is to be deducted from the profits of the Assessee for determining "profits of the business" of the Assessee under Explanation (baa) to Section 80HHC...." 5. In this case, the assessee has stated that they had earned interest income of Rs.11,31,088/- on FDRs from bank for avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of export and, secondly, that sale proceeds of such exports should be receivable in India in convertible foreign exchange. Hence, section 80HHC(1) refers to "eligibility" whereas section 80HHC(3) refers to computation of tax incentive. Coming to section 80HHC(1B) it is clear that after the Finance Act, 2000, with effect from the assessment year 2001-02 exporters would not get 100 per cent deduction in respect of profits derived from exports but that they would get deduction of 80 per cent in the assessment year 2001-02, 70 per cent in the assessment year 2002-03 and so on. Thus, section 80HHC(1B) deals not with "eligibility" but with the "extent of deduction". As earlier stated, section 115JB is a self-contained code. It tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions raised on behalf of the Department was that if clause (iv) of the Explanation to section 115JB is read in entirety including the last line thereof (which reads "subject to the conditions specified in that section"), it becomes clear that the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, is subject to the conditions specified in that section. According to the Department, the assessee herein is trying to read the various provisions of section 80HHC in isolation whereas as per clause (iv) of the Explanation to section 115JB, it is clear that the book profit shall be reduced by the amount of profits eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant-assessee has drawn our attention to the computation of deduction under Section 80HHC made by the Assessing Officer which is marked as Annexure-I to the assessment order. The Assessing Officer had added several expenses like dis-allowances of amounts under Section 14A, feasibility report expenses, etc. The deduction as computed by the appellant-assessee is not on record and has not been referred to in the orders. In view of the decision of the Supreme Court (supra), we pass an order of remit to the Tribunal to re-compute the deduction under Explanation (1)(iv) of Section 115JB by applying on the said decision of the Supreme Court in the case of Ajanta Pharma (supra). The third question of law is also answered in negative i.e. in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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