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TMI Blog2013 (6) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ant for assessee who earned profits from exports. Any business profit other than export activity is not eligible for deduction u/s 80 HHC. AO has rightly treated the processing charges as separate head of income as it was not linked to export activity of the assessee reducing 90% of it from the business profits for calculating the deduction u/s 80 HHC. The order of the A.O. in excluding the processing charge from the "business profits" for the purpose of computation and deduction under Section 80 HHC appears reasonable. Enhancement of addition by Tribunal - rectification of order - Held that:- In the instant case, the A.O. has allowed the claim of deduction by an order passed u/s 154 on 17.06.2004 for a sum of Rs.16,89,778/-. Thus, the benefit of this amount was allowed by the A.O. and the same was enhanced by the first appellate authority to Rs.28,15,3162 vide order dated 14.02.2005, but the Tribunal has not allowed either one. The relief which was given by the A.O. was also declined by the Tribunal and the same is not permissible in the eye of law. Hence, the deduction allowed which was already allowed by the A.O. vide order passed u/s 154 dated 17.06.2004 for a sum of Rs.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l i.e. plastic granule is purchased by the appellant while in the latter case, the raw material is provided by the clients. The manufacturing expenses are to be incurred in both the cases. The assessee has received amount of Rs.46,31,715/- as processing charges as part of the business activities. The appellant filed the return for the assessment year under consideration by declaring the NIL income. The AO had allowed the deduction under Section 80 HHC only for Rs.86,466/- vide his assessment order dated 29.03.2004. Subsequently the said assessment order was rectified by the AO vide order dated 17.06.2004 under Section 154 of the Act whereby the claim of deduction under Section 80 HHC was enhanced to Rs.16,89,778/- from Rs.86,466/-. However the first appellate authority vide order dated 14.02.2005 further allowed the claim under Section 80HHC by giving a relief for Rs.28,15,316/-. Being aggrieved, the revenue as well as the assessee have filed the appeals before the Tribunal. The Tribunal vide its impugned order has allowed the claim of the revenue by denying any relief to the appellant. Not being satisfied, the appellant-assessee has filed the present appeal. With this backgrou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not have been excluded from business profits while computing deduction under Section 80 HHC of the Act. (iii) Commissioner of Income-tax, Bangalore vs. Mittal Creations; (2011) 202 Taxman 60 (Kar), where it was held that "From the material on record, it is clear that the assessee is in the manufacture and export of ready made garments. In the course of the said export business, utilizing same man and machinery, they have undertaken some job work and they have received the aforesaid amount of Rs.32.12 lakhs as a part of the business activity of the assessee, viz., manufacture and export of ready made garments. Explanation (baa) refers to receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits. They are the types of income which has no bearing insofar as the manufacturing activity of the assessee is concerned or the income derived from such manufacturing activity. However, the assessee has earned these receipts from job work utilizing the very same machinery and man and as a part of his manufacturing activity. Therefore, there is a direct nexus between the job work and the manufacturing activity carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover but since some expenditure was incurred in earning such income an ad hoc 10% deduction from such incomes is provided to account for those expenses. No standard test has been laid down in the case relied upon by the assessee. In the present case, the assessee is manufacturing and exporting plastic woven fabric bags and paper reinforced bags. The processing charges received by the assessee is on account of conversion of granules to woven fabric/liners or bags and also printing of bags. This activity can not be treated as having any nexus with the export activity of the assessee. It is to be noted that the assessee has separately shown a sum of Rs.46,31,715 as processing charges and not included it as part of sales in the P/L account filed alongwith the return. By not treating the processing charges as part of the total turnover, the assessee has itself treated it as receipts in the nature of income from other sources. In fact, the assessee has interpreted the provisions of clause (baa) as per its convenience. There is no denying the fact that the deduction u/s 80 HHC is only meant for assessee who earned profits from exports. Any business profit other than export activity is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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