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TMI Blog2015 (10) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. - I.T.A. No. 1374/Hyd/2013 - - - Dated:- 29-10-2014 - SHRI B. RAMAKOTAIAH And SMT. ASHA VIJAYARAGHAVAN, JJ. For The Appellant : Sri S. Rama Rao For The Respondent : Sri B. Rama Krishna ORDER PER ASHA VIJAYARAGHAVAN, JM: This appeal by the assessee is directed against the order of the CIT(A)-V, Hyderabad dated 26.07.2013 for A.Y. 2007-08. 2 Facts of the case are that the assessee company is in the business of manufacturing of Zinc products, filed its return of income for the A.Y. 2007-08 on 12-10-2007 disclosing Nil income under normal provisions and ₹ 18,48,590 under MAT provisions. The assessment was completed by the Assessing Officer determining the total income at ₹ 1,78,51,426 by reducing oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0225/CIT(A)-II/08-09 dated 18-03-2009, for A.Y. 2006-07, in the assessee's own case, has directed the AO to include the CENVAT/MODVAT receipts in the profits of the business for the purpose of computation of deduction u/s 80IB. On appeal by the Department, the ITAT, vide ITA No. 754/Hyd/2009 dated 16-7-2010, in assessee's own case, reversed the order of the CIT (Appeals)-II, Hyderabad, and held that the CENVAT/MODVAT receipts have to be excluded from the eligible profits of business for deduction u/s 80IB, relying on the decision of the Supreme Court in the case of Liberty India vs. CIT (317 ITR 218). The assessee also relied on the decision of Delhi High Court in the case of Dharmpal Premchand Limited reported in 317 ITR 353, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and closing stock. Once the mandatory adjustment under the provisions of Section 145A is done then there will not be any income from the CENVAT MODVAT credit. The very purpose of bringing in the provisions of Section 145A is to ensure that the CENVAT/MODVAT credits are considered in the Trading Account and submitted that the AO is not correct in holding that they represent 'other income' that is not eligible for deduction u/s 80IB. 7 The CIT(A) held that the CIT (A)-II, Hyderabad, vide ITA No. 0225/CIT(A)-II/08-09 dated 18-03-2009, for A.Y. 2006-07, in assessee's own case, has directed the AO to include the CENVAT/MODVAT receipts in the profits of the business for the purpose of computation of deduction u/s 80IB. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hand, contended that the decision of the Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. vs. CIT (343 ITR 89) is applicable in the present case. 10 We have heard both the parties and perused the material on record. The direction u/ss. 80HH, 80J, 80IB and 80IA is based on the income derived from the specific type of undertaking referred in the respective sections. The profit and gains derived from the eligible unit are to be computed by taking the income and expenditure that can be said to be related to the business of the undertaking in the first degree. The receipt and expenditure which cannot be said to be related to the undertaking in the first degree has to be removed. Not only receipts which are not related closely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining profits of the business of the assessee under Explanation (baa) to Section 80HHC. 11 The Hon ble Supreme Court while dealing with the exclusion of receipts in the nature of commission, interest, charges, etc., under explanation (Baa) to section 80HHC has held that only the net income of these types should be excluded from the profits and gains of business. 12 To the extent of excluding the amounts contested before the learned CIT(A), there is no dispute. The dispute is only with reference to excluding gross or net receipts. We are not convinced with claim of net receipts on CEN ..... X X X X Extracts X X X X X X X X Extracts X X X X
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