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TMI Blog2016 (8) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... FOR THE OPPONENT : MR TEJ SHAH, ADVOCATE, MR. DEEPAK R SHAH, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of this appeal, the appellant has challenged order dated 25.07.2008 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench D , Ahmedabad in ITA No.1397/Ahd/2004. 2. At the time of admitting present appeal, following question of law was framed:- Whether the Income Tax Appellate Tribunal is right in law and on facts in holding that 90% of profit of sale of licence computed in the proportion of export turnover to the total turnover should be added to the profit of business for computation of deduction under section 80HHC of the Income-tax Act, 1961? 3. At the time of hearing of present appeal, learned advocate for the appellant submitted that the Tribunal has committed an error while dismissing the appeal preferred by the department and the impugned order is required to be set aside. 4. Learned advocate for the respondent submitted that the issue involved in this appeal is covered by decision of the Honourable Apex Court in ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income-Tax reported in [2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Distributors (Baroda) P. Ltd. v. Union of India and Others (supra). Section 80M of the Act provided for deduction in respect of certain intercorporate dividends and it provided in sub-section (1) of Section 80M that where the gross total income of an assessee being a company includes any income by way of dividends received by it from a domestic company, there shall, in accordance with and subject to the provisions of this Section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends an amount equal to a certain percentage of the income mentioned in this Section. The Constitution Bench held that the Court must construe Section 80M on its own language and arrive at its true interpretation according to the plain natural meaning of the words used by the legislature and so construed the words such income by way of dividends in sub-section (1) of Section 80M must be referable not only to the category of income included in the gross total income but also to the quantum of the income so included. Similarly, Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether reasons given by the High Court in its judgment in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra) were correct in law. 14. On a perusal of the judgment of the High Court in Commissioner of Income-Tax v. Asian Star Co. Ltd. (supra), we find that the reason which weighed with the High Court for taking a different view, is that rent, commission, interest and brokerage do not possess any nexus with export turnover and, therefore, the inclusion of such items in the profits of the business would result in a distortion of the figure of export profits. The High Court has relied on a decision of this Court in Commissioner of Income-Tax v. K. Ravindranathan Nair [(2007) 295 ITR 228 (SC)] in which the issue raised before this Court was entirely different from the issue raised in this case. In that case, the assessee owned a factory in which he processed cashew nuts grown in his farm and he exported the cashew nuts as an exporter. At the same time, the assessee processed cashew nuts which were supplied to him by exporters on job work basis and he collected processing charges for the same. He, however, did not include such processing charges collected on job work basis in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains of business of an assessee could be deducted under clause (1) of Explanation (baa) and not ninety per cent of the quantum of any of the aforesaid receipts which are allowed as expenses and therefore not included in the profits of business of the assessee. 16. In the result, we allow the appeal and set aside the impugned order of the High Court and remand the matter to the Assessing Officer to work out the deductions from rent and interest in accordance with this judgment. No costs. Civil Appeal No.4534 of 2008 2. The facts of this case very briefly are that Bharat Rasayan Limited (for short `the assessee') filed a return of income tax claiming a deduction of ₹ 72,76,405/- under Section 80HHC of the Act. In the assessment order, the Assessing Officer held that ninety per cent of the gross interest has to be excluded from the profits of the business of the assessee under Explanation (baa) to Section 80HHC of the Act and deducted ninety per cent of the gross interest of ₹ 50,26,284/- from the profits of the business of the assessee. The assessee preferred an appeal contending that only ninety per cent of the net interest should have been deducted fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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