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TMI Blog2012 (7) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer issued notice u/s. 147 on 31.3.2004 i.e., within four years from the end of relevant assessment year to consider the excessive deduction granted u/s. 80HHC of the Act. The contention of the assessee's counsel is that the notice u/s. 147 was issued for all these assessment years on 31.3.2004. According to the AR, the Assessing Officer had not given any reasons for issuing the notice u/s. 147 of the Act. The Assessing Officer while passing the impugned assessment order, considered the issue relating to the allowability of deduction u/s. 80HHE for these assessment years. According to the assessee's counsel all the required information regarding the allowability of deduction u/s. 80HHE was very much with the Assessing Officer and there is no fresh material came to the knowledge of the Assessing Officer to reopen the assessment. There is no mistake on the part of the assessee in furnishing the relevant information for the purpose of assessment and there is no fresh material which has come to the notice of the Assessing Officer indicating escapement of income and all that the Assessing Officer has done was only re-calculation based on figures available on record. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue in the case of H.V. Transmissions Ltd. (supra). He relied on the judgement of Delhi High Court in the case of P.C. Puri vs. CIT, 151 ITR 584. According to the learned AR, there is no tangible material justifying the reopening of assessment to say that there is escapement of income. He relied on the order of the Tribunal in the case of Telco Dadaji Dhakjee Ltd. vs. DCIT in I.T.A. No. 4613/Mum/05 dated 12th May, 2010. He also relied on the judgement of Delhi High Court in the case of CIT vs. Kelvinator of India & Eicher Ltd., 320 ITR 561. 4. The learned DR strongly opposed the argument of the learned counsel for the assessee and submitted that there was no assessment in this case u/s. 143(3) of the Act. Being so, there is non consideration of issue relating to deduction u/s. 80HHE of the Act. He relied on the judgement of Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra). Further he relied on the judgement of Madras High Court in the case of Areva T. and D India Ltd. vs. ACIT (294 ITR 233) for the proposition that if there is any procedural irregularities in completing the re-assessment it does not invalidate the assessment order. He also relied on the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (b) to Explanation 2 to proviso 2 of section 147 clearly authorises the Assessing Officer to reopen the assessment. This provision is to be considered for the purpose of adjudicating this issue. This ground relating to reopening of assessment is decided against the assessee. 7. The next common ground in this appeal is with regard to reducing deduction claimed by the assessee u/s. 80HHE on the reasons that (a) setting off of losses of system/training divisions against profit of the software division, (b) wrongly including turnover of system/training division in the total turnover, (c) inclusion of employees compensation in the total turnover instead of netting from expenses and (d) consideration of profit on sale of fixed assets in the total turnover. 8. The learned AR submitted that these grounds are raised against aggregation of the profits of the 100% EOU (computer software) with the losses of the training division for purposes of calculating the deduction u/s 80HHE. He submitted that the Commissioner of Income Tax has not given the correct facts. The facts are that the turnovers and profits of the computer software division constituted as a 100% EOU unit are earned indep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same. 11. The learned counsel for the assessee further submitted that the Commissioner of Income Tax (A) treated the issue as though there are no separate books of account. He cited all cases relating to 80HHC which are not applicable to the deductions under other sections like 80HHE, 80HHF. For example in sec 80HHC the mechanism for working out the profits derived from export has been given in three different situations depending on the fulfilment of the relevant requirements. But, as per 80HHE(3) and 80HHF(3) it is clear that only one method has been provided for to compute the profits derived from exports. There is no provision similar to clause (b) of sec 80HHC(3) prescribing method of determining the export profits by reducing direct and indirect costs from the export turnover. It is to be noted that sub-section (1) of sec 80HHE simply refers to deduction to the extent of profits derived by the assessee 'from such business'. Hence the lower authorities are not justified in relying on decisions rendered in the context of 80HHC as the deduction claimed in this case is under sec 80HHE. He relied on the order of the Tribunal Bombay Bench, in the case of Sri Adhikari Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturing, trading etc., should be excluded from the computation of eligible profit for sec. 80HHE. 13. In the light of the above discussion, the learned counsel for the assessee prayed that the Tribunal be pleased to allow relief u/s 80HHE on the profits of the 100% EOU computer software to the exclusion of the profits or losses of other divisions. These grounds are perfectly justified as amount received towards employee's compensation and profit on sale of fixed assets do not form part of the turnover and they may be directed to be deleted from turnovers. 14. The learned DR supported the order of the lower authorities and he also relied on the order of the Tribunal in the case of DCIT vs. EDS Electronics Data Systems (India) (P) Ld., 20 SOT 403 (Del). 15. We have carefully considered the provisions of section 80HHE and the rival arguments. In sub-section (1), it is provided that the assessee shall be allowed a deduction of the profits from the eligible business. Such deduction is to be allowed in computing the total income of the assessee. Sub-section (3) has been enacted only for the purposes of sub-section (1). Sub-section (1) requires that the profits which are eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed over the view put forth on behalf of the income tax department. As already noted, sub-section (3) exists only for the purposes of sub-section (1) and it says that profits derived from the business referred to in sub-section (1), which is the eligible business, shall be the amount which bears to the profits of the business, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. If regard is had to be use of the definite article "the", it seems to us that the expression "profits of the business" appearing in subsection (3) refers only to the profits of the eligible business which is referred to in sub-section (1). In other words, it is only the profits of the eligible business which have to be split in the same proportion as the export turnover in the said business bears to the total turnover in the said business. Explanation (d), which defines the expression "profits of the business" refers to the profits of the business as computed under the head "Profits and gains of business". Under the Income Tax Act, having regard to the provisions of Chapter IV read with section 70 and section 71, it seems to us that in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that assessee company is exporting the computer software manufactured in SEEPZ unit. Assessee is keeping separate account. The entire activity of the assessee in this zone is independent from assessee's other business. There is no overlapping and mingling of the services or any link between the manufacturing activities of both. Both are exclusive of each other. 36. As rightly contended by the learned counsel, section 80HHC speaks of deduction in respect of profits derived by the assessee from export of such goods or merchandise; whereas section 80HHE speaks of such business. 'Such business' only could mean the business of export of computer software. The scope of consideration has been narrowed down. In other words, whether the assessee derives income from any other business or not, is not a criteria and it is wholly extraneous while granting deduction under section 80HHE, which is exclusively for computing deduction in respect of profit from export of computer software etc. For the reasons stated hereinabove, we allow the claim of the assessee on this ground." In coming to the above conclusion the Tribunal has referred to two judgments of the Madras High Court, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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