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TMI Blog2012 (9) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be permissible to exclude interest receipts even if the business from which interest arose did not have an element of turnover. As it is not permissible to exclude the domestic profits from the profits of the business in order to arrive at the export profits and that even if the domestic business (the money lending activity in the present case) was not capable of having any “turnover”, the deduction under Section 80HHC cannot be denied and it had to be computed proportionately from the formula prescribed by the sub-section (3) of Section 80HHC, which was : Export Profits = Profits of Business x (Export Turnover ÷ Total Turnover) - in favour of assessee. - ITR 4/1997 - - - Dated:- 6-8-2012 - MR. JUSTICE S. RAVINDRA BHAT, MR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, he claimed deduction of Rs.33,63,149/- under Section 80HHC of the Act. While completing the assessment under Section 143(3), the Assessing Officer noticed that the assessee had claimed deduction under the aforesaid Section even in respect of rent and interest. These items of receipt were also treated as part of the turnover. He was of the opinion that deduction under Section 80HHC could only be allowed to the extent of the profits from the export business as envisaged by Section 80AB of the Act and accordingly, proposed to exclude the rent and interest receipts from the computation of the deduction. The assessee however, submitted that the proposal of the Assessing Officer would be contrary to the scheme of the deduction envisaged by Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c business need not have any nexus with export business for the purpose of deduction under Section 80HHC? . As the question shows, the real objection of the income tax authorities in this case is that the interest income, even if it is assessed as business income on the footing that the assessee was carrying on money lending business, still it represented domestic profits and not export profits and therefore, a mechanism should be devised by which the domestic profits are excluded from the profits of the business for the purpose of applying the formula prescribed by Section 80HHC(3). 4. The CIT(Appeals) having upheld the view of the Assessing Officer, the assessee preferred a further appeal to the Tribunal which held, following the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 548 where the order of the Special Bench cited (supra) stands approved. It was clarified that the amendment made to clause (baa) of the Explanation below Section 80HHC which defines profits of the business in such a manner as to exclude receipts like interest, commission etc. which did not have an element of turnover, was introduced prospectively by the Finance (No.2) Act, 1991 w.e.f. the assessment year 1992-93 and the amendment did not operate retrospectively. It was therefore held that for the assessment years prior to the assessment year 1992-93, it would not be permissible to exclude interest receipts even if the business from which interest arose did not have an element of turnover. The Supreme Court expressly referred to the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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