9911796707
TMI Blog2005 (1) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under s. 80-I. For the purposes of s. 80HHC, the addition will be treated as business profits and the same will also be included in the total turnover while computing deduction under s. 80HHC. The AO is accordingly, directed to recompute the deduction under ss. 80HHC and 80-I. In the result, while the assessees appeals are party allowed, both the Departmental appeals are dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has not maintained any stock register and no details of waste material generated during the course of manufacturing of garments. The sales of rags, fents, etc. has been shown by the assessee at a round figure of ₹ 40,000. It is also notable that during the asst. yrs. 1992-93 and 1993-94, the sale proceeds shown in the books of account in respect of rags amounts to ₹ 68,455 and ₹ 54,260, respectively. Interestingly, in the asst. yr. 1997-98, the sales of such material shot to ₹ 4,56,262. Considering the entire facts and circumstances, we hold that it would be fair and reasonable to sustain the addition of ₹ 3,60,000 to the extent of ₹ 2 lakhs only. Accordingly, the addition stands reduced to ₹ 2 lakhs. These sales, for the purpose of ss. 80HHC and 80-I, will have to be treated as local sales and not export sales. Obviously, the waste generated during the manufacturing process will be sold only locally and cannot be exported. However, it is in the nature of income derived from the industrial undertaking and, therefore, the assessee will be entitled to deduction under s. 80-I. For the purposes of s. 80HHC, the addition will be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earnings in foreign exchange, this amount does not qualify for deduction under s. 80HHC. 3. Technically export premium can be equated with the items mentioned in s. 28(iiia) (profit on sale of import licences), s. 28(iiib) (cash assistance) and s. 28(iiic) (duty drawback). 4. Therefore, the present item; viz., the premium on sale of export quotas statutorily receive the same treatment as profit on sale of import licences, cash assistance and duty drawback." The learned Departmental Representative supported the order of the Revenue authorities on this issue. 8. We have considered the rival submissions vis-a-vis the provisions of law and have gone through the relevant circular issued by the CBDT. The phrase 'total turnover' has been defined under cl. (ba) of the Explanation under s. 80HHC(4C). This definition is as under : "(ba) 'total turnover' shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962) : Provided that in relation to any assessment year commencing on or after the 1st April, 1991, the expression 'total turnover, sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eight are the incentives granted as a consequence to export sales, i.e., the trading activity of the assessee and hence cannot be termed as income received out of industrial activities." 12. The learned Departmental Representative relied on the Supreme Court decision in the case of CIT vs. Sterling Foods (1999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC) for the proposition that the receipts mentioned in the grounds of appeal raised by the Department, cannot be said to be profits derived from the industrial undertaking. In this case, it was held by the Supreme Court that profits from sale of import entitlement are not profits derived from the industrial undertaking and, therefore, not eligible for deduction under s. 80HH. The learned counsel for the assessee argued before us that the Supreme Court decision is not applicable at all to the facts of the assessee's case. It is submitted that this issue is squarely covered in assessee's favour by the following Tribunal decisions : (i) Dy. CIT vs. Metro Tyres Ltd. (2001) 79 ITD 557 (Del) (ii) Andhra Pradesh Industrial Components Ltd. vs. Dy. CIT (2002) 74 TTJ (Hyd) 272 The learned counsel invited our attention to the rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bber and tyres transported. Further the claim from insurance company was on account of the damage of stock due to flood. So, there was direct nexus between the amount received from the transporter/insurance companies and the activity of the industrial undertaking. Accordingly, it was to be held that such receipts formed part of the profits derived from industrial undertaking." Similar view has been adopted by the Tribunal in the case of the Andhra Pradesh Industrial Components Ltd. (supra). The learned counsel submitted that in both the cases, the Supreme Court decision in the case of Sterling Foods (supra) has been duly considered and distinguished by the Tribunal. 13. We have considered the rival submissions vis-a-vis the provisions of law in the light of precedents cited before us. In our view, the Supreme Court decision with regard to import entitlement cannot be considered as applicable to the receipts in the nature of duty drawback, insurance, recovery of export freight, etc. These items have direct nexus with the industrial undertaking and Tribunal decisions relied upon by the learned counsel for the assessee are clearly applicable. Therefore, the order of the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
