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TMI Blog2016 (8) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue will not apply in the facts of the present case since the amount which has been received by the assesse is for the same unit of which they have commenced manufacturing. Having heard learned advocates for the revenue and the question posed for consideration for us reproduced hereinabove and considering the decisions cited, the question which is raised in the present appeal is required to be answered in favour of the assessee. - TAX APPEAL NO. 481 of 2008 - - - Dated:- 1-7-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ. FOR THE APPELLANT : MRS MAUNA M BHATT, ADVOCATE FOR THE OPPONENT : RULE SERVED ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench C, Ahmedabad (hereinafter referred to as the Tribal) dated 30.04.2007 in ITA No.2293/Ahd/2000 for the Assessment Year 1995-1996, the revenue has preferred the present Tax Appeal. 2. This appeal was admitted on 07.08.2008 for consideration of the following substantial question of law: B. Whether the Appellate Tribunal is right in law and on facts in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred by the assessee for earning such income which should be so excluded. Such a question in the context of deduction under section 80HHC came up for consideration before the Supreme Court in the case of ACG Associated Capsules Pvt. Ltd v. CIT , 343 ITR 89 (SC). The Supreme Court held that for the purpose section 80HHC of the Act, it is not the entire amount received by the assessee on sale of DEPB credit, but the sale value of less the face value of the DEPB that will represent profit on transfer of DEPB credit by the assessee. Heavy reliance was placed in the case of Topman Exports v. CIT , 342 ITR 49 (SC). Extending such logic, it was further held that even other amounts, such as, interest or rent when are to be excluded for the purpose of explanation (baa) to section 80HHC of the Act. Ninety per cent of not the gross rent or gross interest, but the net thereof shall have be excluded. It was observed as under: If we now apply Explanation (baa) as interpreted by us in this judgment to the facts of the case before us, if the rent or interest is a receipt chargeable as profits and gains of business and chargeable to tax under section 28 of the Act, and if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Essel Shyam Communication Ltd. v. Commissioner of Income tax , (2012) 28 taxmann.com 243 (Delhi), in which in detailed consideration, relying on the decision of the Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (supra), exclusion was approved for deduction under section 80IA of the Act. Having heard the learned counsel for the parties, we see no reason to entertain this tax appeal. The Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (supra) has already laid down the foundation for the logic for excluding the net profit and not the gross profit from the claim of deduction when it is found that the source of income does not quality for such deduction under section 80HHC of the Act. It is true that section 80HHC represents vastly different scheme of deduction and also provides for complex formula for deriving for the eligible profit for deduciton under different situations depending on whether the exporter is also engaged in the local business or not. However, this distinction would not be material insofar as central question of exclusion of certain profit from the activity which is not eligible for deduction under section 80HH and 80I are concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80IA/ 801B is the generation of profits (operational profits). For example an assesseecompany located in Mumbai may have a business of building housing projects or a ship in Nava Sheva. Ownership of ship per se will not attract section 80IB( 6). It is the profits arising from the business of a ship which attracts subsection (6). in other words, deduction under subsection (6) at the specified rate has linkage to the profits derived from the shipping operations. This is what we mean in drawing the distinction between profit linked tax incentives and investment linked tax incentives. Ii is for this reason that Parliament has confined the deduction to profits derived from eligible business in subsections (3) to (11A) ( as they stood at the relevant time). One more aspect needs to be highlighted. Each of the eligible business in sub sections (3) to (11A) constitutes a stand alone item in the matter of computation of profits. That is the reason why the concept of Segment Reporting stands introduced in the Indian Accounting Standards (IAS) by the Institute of Chartered Accountants of Indian (ICAI). 9. She further relied upon the decision of the Delhi Court in case of Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d supplied by Daman Unit. Ratio of liberty would, therefore, be applied squarely. 10. Learned advocate appearing for the respondent supported the impugned order and submitted that the Tribunal has rightly observed in holding that deduction under Section 80IA was allowable in respect of an amount of ₹ 46,18,021/- which was towards forfeiture of advance. He submitted that the present appeal lacks merits and therefore deserves to be dismissed. 11. We have considered the argument of the revenue. Looking to the fact that advances were taken from the customers and on receipt of advance deposit, the assessee company commences manufacturing of such specific equipments for which expenditure in excess of the advance deposit received has to be incurred by the assessee company. In case, when the customer fails to take the delivery due to his inability to pay the balance price of equipment manufactured, the assessee company has already incurred huge expenditure for manufacturing such equipments which cannot be sold to any other customer for the reasons that the same has been manufactured as per specific requirement of the customer who has placed order. The assessee had to incur lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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