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TMI Blog2014 (1) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on section 80IA(5) – relying upon Datamatics Limited. Versus Assistant Commissioner Of Income-tax, Circle 8 (1), Mumbai [2007 (2) TMI 237 - ITAT BOMBAY-H] - The Assessing Officer has not expressed any opinion on this point because according to his calculation the figure of business profits was negative and, therefore, even at the threshold the assessee’s claim could not be entertained – What would be the export turnover and the total turnover is not the subject matter of the present appeal - The ground as taken by the assessee is allowed - the deduction u/s 80HHE as claimed by the assessee allowed – Decided partly in favour of Assessee. Disallowance u/s 14A of the Act – Held that:- The disallowance has been made in a proper manner by the assessee and even if the method adopted by the AO is to be adopted, even then, there cannot be a major difference in the disallowance, in fact, the computation made in the SOF in accordance with the AO's method also - the disallowance is coming at exactly the same figure - the disallowance cannot be sustained – Decided in favour of Assessee. - I.T.A. Nos . 2373 & 2374/Mum/2007 - - - Dated:- 27-4-2012 - Shri Rajendra Singh And Shri Vivek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of Mumbai ITAT in the assessee s own case, the coordinate Bench held as under: 7. On a proper consideration of the facts and the rival contentions, we are of the view that no strong grounds have been advanced by the departmental authorities to discard the method adopted by the assessee in disallowing the interest under section 14A of the Act. There can be no dispute that since the amount of interest debited to the Profit and Loss Account is on net basis, the disallowance of interest should also be made only with reference to the net interest, as was done by the assessee. There is also merit in the argument put forth on behalf of the assessee that it is not proper to take into consideration only the value of investments and assets as on 31.03.2001 since interest is paid on funds utilized during the entire period between 31.03.2000 and 31.03.2001 and the more appropriate method is to average the funds position as on these two dates and apply section 14A with reference to the average value. The learned counsel for the assessee is also right in his submission that Rule 8D of the Income Tax Rules does recognize the averaging method. Reference may be made to Sub-Rule (2) of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is now before the ITAT. 10. Before us, the AR pointed out, that the issue was impugned in Assessment Year 2001-02 before the Co-ordinate Bench, which held as under: 15. We have carefully considered the provisions of section 8OHHE 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 for the deduction should be derived by the assessee from the eligible business. What are the profits derived from the eligible business is explained in subsection (3). It says that the profits derived from 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 . Explanation (d) below the section defines the expression profits of the business as meaning the profits of the business as computed under the head Profits and gains of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on by the assessee, which has been explained earlier. Since after applying Explanation (d) and deducting the sum of Rs.16,l1,78,266Ifrom the profits of all the businesses carried on by the assessee the Assessing Officer arrived at a negative figure of Rs.1,16,14,O62/-, he rejected the assessee s claim for the deduction at that point itself. He did not therefore consider it necessary to examine the assessee s other contention that the total turnover of only the eligible business should be taken note of for the purpose of applying the formula laid down in sub-section (3). 16. The controversy before us therefore is limited to the question as to whether, while applying sub-section (3) and the formula prescribed therein, the expression profits of the business should mean only the profits of the eligible business or the profits of all the businesses carded on by the assessee. Whereas the figure of Rs.15,42,52,035/- adopted by the Assessing Officer represents the aggregate profits of all the businesses carried on by the assessee, the figure of Rs.8O,46,765/- which forms the basis of the assessee s computation represents only the profits of the eligible business (back office support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o include the profits of all the businesses carried on by the assessee. The Explanation can only explain the expression profits of the business appearing in sub-section (3), but it cannot expand the meaning of the expression. Explanation (d) is controlled by subsection (3) and what it says is only descriptive of what the profits of the business are. It only says that the profits of the business, which means the eligible business, are the profits as computed in the assessment order under the head Profits and gains of business . It has possibly been enacted to clarify or explain that the profits of the eligible business is not what the books of account of the assessee show and it can only be what the assessment order shows. It is also significant that sub-section (3) as well as Explanation (d) refer only to profits of the business and not the profits of all the businesses carried on by the assessee. This reasoning also takes care of the argument of the learned CIT DR based on section 80IA(5). In this view of the matter we are unable to accept the contention advanced on behalf of the department. 18. Our view is in conformity with the view taken by a Coordinate bench in Mumbai i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended for by the assessee, which figure represents the profits of the back office support services, which in other words are the profits of the eligible business. 20. We are not at present concerned with the controversy as to what would be the export turnover and the total turnover for purposes of sub-section (3) of section 8OHHE of the Act. That is a matter which the Assessing Officer, while giving effect to our order, has to adjudicate upon in accordance with law and after giving adequate opportunity to the assessee. The Assessing Officer has not expressed any opinion on this point because according to his calculation the figure of business profits was negative and, therefore, even at the threshold the assessee s claim could not be entertained. The ground taken by the assessee before us is also (Ground No: 4) that the Assessing Officer ought to have taken only the profits of the back office support services for computing the deduction under section 80HHE of the Act. What would be the export turnover and the total turnover is not the subject matter of the present appeal. The ground as taken by the assessee is allowed. 11. We have gone through the rival contentions and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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