9911796707
TMI Blog2014 (11) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... ken three grounds of appeal alongwith sub grounds. Its first ground is common with the first fold of grievance of the Revenue. In other words, according to the assessee the job work charges received by it ought to be included in the profits of the busienss while computnig the deduction, whereas the Revenue is of the opinion that these charges should be excluded. The learned CIT (A) has erred in excluding 90% of the net charges. 4. With the assistance of the learned representatives, we have gone through the record carefully. The assessee has filed its return of income on 31.10.2014 declaring an income of Rs. 1,49,26,960/-. The assessee is entitled for deduction u/s 80HHC. There is no dispute with regard to this claim. It has claimed deduction at Rs. 58,92,626/-. The assessee computed the business profit for the deduction at Rs. 2,62,65,982/- without excluding 90% of the labour charges received. The Assessing Officer has excluded 90% of the labour charges. The dispute before us is whether 90% of the net labour charges are to be excluded or gross labour charges. It is pertinent to mention here that Explanation (baa) has been appended with section 80HHC w.e.f. 1.4.1992. According to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the claim of the assessee by following the judgment of the Hon'ble Supreme Court in the case of Rotork Controls India P. Ltd. v. CIT reported in 314 ITR 62 (SC). The learned DR while impugning the order of the CIT (A) contended that as per the decision the provision was to be made by keeping in view the sensible analysis of historical trends indicating the defects in the product manufactured by the assessee. He pointed out that there is no history in this case and there is no scientific study, which enable the assessee to make a provision at 20% of the sales. According to him this deduction is not allowable to the assessee. On the other hand the learned Counsel for the assessee placed on record a note indicating the circumstances enabling the assessee to make the provision. He pointed out that this is first year when the assessee has started manufacturing of extruder. The assessee was earlier manufacturing extruder parts. This year it had manufactured extruder and in financial year 2003-04 it has sold one extruder. There was a failure in the gearbox and cost comes up to Rs. 12.00 lakhs out of the sale value of Rs. 56.00 lakhs. Similarly in next assessment year, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HHC provides for tax incentives. Section 80HHC(1) at one point of time laid down that an amount equal to the amount of deduction claimed should be debited to the P&L Account of the previous year in respect of which deduction is to be allowed and credited to the reserve account to be utilized for the business purpose. Section 80HHC(1) concerns eligibility whereas Section 80HHC(3) concerns computation of the quantum of deduction/tax relief. At one point of time prior to the Finance Act, 2000, exporters were allowed 100% deduction in respect of profits derived from export of goods. However, that has now been reduced in a phase-wise manner under Section 80HHC(1B). It may be noted that all assessable entities are not eligible for deduction under Section 80HHC. Similarly, only eligible goods are entitled to such special deduction under Section 80HHC(1). A bare reading of Section 80AB shows that computation of deduction is geared to the amount of income, but Section 80HHC(3), which refers to quantification of deduction is geared to the exports turnover and not to the income. On the other hand, Section 115JB refers to levy of MAT on the deemed income. The above discussion is only to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Explanation to Section 115JB is read in entirety including the last line thereof (which reads as "subject to the conditions specified in that section"), it becomes clear that the amount of profits eligible for deduction under Section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub section (3A) as the case may be, is subject to the conditions specified in that section. According to the Department, the assessee herein is trying to read the various provisions of section 80HHC in isolation whereas as per clause (iv) of Explanation to section 115JB, it is clear that book profit shall be reduced by the amount of profits eligible for deduction u/s 80HHC as computed under clause (a) or clause (b) or clause (c) of sub section (3) or sub section (3A) as the case may be, of that Section and subject to the conditions specified in that section, thereby meaning that the deduction allowable would be only to the extent of deduction computed in accordance with the provisions of section 80HHC. Thus according to the Department, both "eligibility" as well as "deductibility" of the profit have got to be considered together for working out the deduction as menti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
