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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 ..... e amendment carried out by Taxation Laws (amendment) Act, 2005, with retrospective effect from 1st April 1992. 1.1 The learned CIT(A) misdirected himself in law in sustaining disallowance of claim u/s 8OHHC on the misconception that the Assessee is not entitled to claim exemption in respect of export incentives [viz, duty draw back assessable under clause (iiic) of S. 28] when the export business (from trading activity), excluding the export incentives, reflects a loss. 1.2 The learned CIT(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 incenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, there was a loss and if the incentive received by the assessee on export credited by the assessee in its profit and loss account of Rs.12,22,709/- is excluded, there is a loss. Therefore, deduction allowed to the assessee u/s.80HHC was wrongly allowed and consequently, the taxable income of the assessee has escaped assessment. 6. Pursuant to notice u/s.148 of the Act, assessee filed the revised return of income, wherein, deduction u/s.80HHC was revised to a reduced figure of Rs.4,53,971/-, which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,483 as mentioned in para 4.2.2 of the assessment order (somewhere the figure is also indicated as Rs.6,04,383). Further, assessee received export incentive received by way of duty draw back of Rs.12,22,749 which was computed by the assessee in its profit and loss account. AO denied the claim of deduction u/s.80HHC on the ground that assessee has (-) profit i.e. loss on account of trading activities, therefore, proviso to section 80HHC(3) will not be applicable i.e. profit as shown by the assessee, inter alia, 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 conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther development programmes especially for needy poor, helpless women and their children. AO stated that the said amount was not paid by the assessee for its wholly and exclusively purpose of business and, accordingly, disallowed the same. Ld CIT(A) confirmed the action of AO. 14. At the time of hearing, ld A.R. submitted that if the Ground No.1 of appeal is allowed, said disallowance made in the reassessment proceedings does not hold good as the AO initiated reassessment proceedings on account of claim made by the 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 caref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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