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TMI Blog2015 (2) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... , it claimed deduction under various heads. An order of assessment was passed on 28.02.1997. The claims of the respondent, referable to Sections 80HH, 80HHC and 80I of the Act were not accepted by the Assessing Officer. An appeal was filed before the Commissioner (Appeals). That was also rejected on 15.09.2000. Aggrieved by that, the respondent filed I.T.A.No.757/Hyd/2000 before the Hyderabad Bench of the Income Tax Appellate Tribunal. The Tribunal allowed the appeal through a detailed order dated 24.01.2003 and accepted the claims of the respondent. Hence, this further appeal under Section 260-A of the Act, by the Revenue. Sri J.V.Prasad, learned Standing Counsel for the Department submits that the Assessing Officer has taken the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of the relevant records. It is also urged that neither the Assessing Officer nor the Commissioner have pointed out as to how the interest does not qualify to be added for the amount under those two provisions. Learned counsel further submits that the Tribunal has undertaken extensive discussion, not only with reference to the relevant Sub-sections and clauses of Section 80HHC of the Act but also the Circulars issued by the Central Board of Direct Taxes (CBDT) and applied the correct principles. He submits that the IDEB, in a way, falls under Clause (iiic) of Section 28 of the Act and by operation of proviso to Clause (ba) of Explanation to Section 80HHC of the Act, it deserves to be kept outside the total turnover. He contends that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the profits, thereby becomes eligible for deduction. If on the other hand, the deposits that yielded interest are unrelated to the activity, they do not qualify for deduction. In I.T.T.A.No.216 of 2003, we held that unless interest yielding deposits are made in connection with the activity, referred to in the particular provision, it does not qualify for deduction. Therefore, we direct that in case the interest in the instant case which is quantified at Rs. 1,68,466/- is from any deposit made in relation to the business activity referred to under Section 80I of the Act, it shall qualify for deduction and otherwise not. The second item is in relation to the foreign exchange fluctuation. By its very nature, the consideration for the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alifies for deduction is required to have the same proportion, which the export turnover would have to the total turnover. The amount that qualifies for deduction is to be derived through the following formula. Profits of Business x Export Turnover Total Turnover The Parliament has taken care to define the three different expressions that are employed in the formula. Export Turnover, Total Turnover and Profits of the Business are defined under Clauses (b) (ba) & (baa) respectively of explanation to Section 80HHC of the ACt, which read: (b) export turnover means the sale proceeds, received in, or brought into India] by the assessee in convertible foreign exchange in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee situate outside India; Once these three figures are arrived at, the amount which qualifies for deduction can be known. However, there are certain grey areas in the context of applying the definitions. Many a time, serious doubt arises as to whether a particular amount must be added to export turnover or total turnover. Since the first happens to be numerator and the second, the denominator, in the formula, the addition to one or the other, would make vast difference. Many a time, the assessees would make endeavour to add amounts to the numerator, so that the resultant figure that qualifies for deduction would be large. The Department on the other hand would attempt to add it to the denominator, so that the taxable income would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt either to the numerator or denominator would have its own impact. Obviously for that reason, the CBDT issued Circulars explaining the procedure. The Tribunal took the same into account and granted the relief to the assessee. Broadly stated, the principle is that while arriving at the total turnover, adequate care should be taken to avoid inclusion of the amounts that are mentioned in the proviso. We have already observed that the IDEB is referable to Clause (iiic) of Section 28 of the Act. Even otherwise, the said amount represents the notional figure and it cannot be treated as part of turnover of an assessee. The facility to the extent of that figure would be available, only when the raw-material used in the export goods is imported. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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