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TMI Blog2013 (12) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) perfunctorily applied the decision of Hon'ble SC in IPCA Laboratories 266 ITR 521(2004) out of context and dehors the facts and also dehors the statutory amendment with retrospective effect. 1.3 He failed to appreciate that for working out the profit or loss derived from exports as per the provisions of S. 8OHHC(3), incentives ( duty drawback entitlement) as also loss or profit from trading have to be aggregated and resultant net profit is permitted for deduction u/s 8OHHC. 1.4 Without prejudice to Ground No. 2 herein, the learned CIT(A) further failed to appreciate that once the consultancy charges Rs. 7,80,000/- is disallowed, the income from export business (excluding export incentive) also becomes positive in any case and therefore, controversy arising out of SC decision in IPCA lab., if any, fades into insignificance in the facts of the case. 1.5 Without further prejudice to Ground No. 2 herein, The learned CIT(A) while sustaining the disallowance of consultancy charges claimed, ought to have directed the learned AO to give necessary effect and thus allow consequent enhanced deduction of S.8OHHC Rs. 12,30,412/- (against Rs. 4,53,970/- claimed) owing to corresponding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was computed as under: "Deduction u/s.80HHC is claimed as under:- Profit/loss from export activity u/s.80HHC(3) : (Rs.6,41,483/-) Add: Export incentive @ 90% (proviso to S.80HHC(3) : Rs.10,95,454/- Rs.4,53,971/-" 7. However, AO stated that the export incentive received by the assessee is not to be considered for the purpose of deduction u/s.80HHC of the Act because the proviso to section 80HHC(3) will not apply to the assessee because assessee incurred loss from this trading activity. AO stated that proviso to section 80HHC(3), which provides, inter alia, that clause(b) of sub- Section(3) of Section 80HHC of the Act (as applicable in the case of the assessee before us) shall be further increased by the amount which bears to 90% of any sum referred to in clause(iiia) (not being profits on sale of a license acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. We may state that other provisos of sub-section(3) of Section 80HHC are not relevant to the case before us and, accordingly, same are not mentioned herein. AO by following the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , from trading activities will not be increased to the extent of 90% of incentives in the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. As indicated that the total activities of the assessee is on account of export of goods and, therefore, question is as to whether 90% of the incentives received by way of duty draw back by the assessee is to be considered while computing deduction u/s.80HHC of the Act i.e. after setting off of the loss of its trading activities. We observe that AO has relied on the decision of Hon'ble Bombay High Court in the case of Rohan Dyes and Intermediates Ltd (supra) and ld CIT(A) has confirmed the action of AO stating that the issue is covered by the order of Hon'ble Supreme Court in the case of IPCA Laboratories ltd (supra). We observe that the said decisions as considered by ld CIT(A) and AO (supra) are no longer relevant and applicable to the case of the assessee before us in view of amendment made by Taxation Laws (Amendment) Act, 2005 with retrospective effect from 1.4.1992 by inserting Fifth proviso to section 80HHC(3) of the Act. The said proviso reads as under: "Provided also that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee u/s.80HHC of the Act. Ld A.R. referred the decision of Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd., 331 ITR 236(Bom) and submitted that if the very basis on which assessment was reopened does not survive, and no addition is made by AO, AO cannot assess any other income in the reassessment proceedings. He submitted that said disallowance therefore has to be deleted by reversing the orders of authorities below. Ld D.R. supported the orders of authorities below and justified the disallowance as confirmed by ld CIT(A). 15. We have considered orders of authorities below and submissions of ld representatives of parties. We have also carefully considered the decision of Hon'ble Bombay High Court in the case of jet Airways (I) Ltd (supra). 16. The issue before us is as to whether the disallowance made by the AO in reassessment proceedings of Rs.7,80,000 could be justified in the light of the fact that AO initiated reassessment proceedings u/s.147 of the Act disputing the claim of the assessee made u/s.80HHC of the Act though said claim of the assessee has been allowed for the reasons as mentioned hereinabove while dealing Ground No.1 of appeal taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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