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TMI Blog2018 (9) TMI 1632X X X X Extracts X X X X X X X X Extracts X X X X ..... ss total income from cashew business. In terms of Cl. (baa), 90 per cent of the 'independent income' had to be deducted from gross total income to arrive at business profits to which the fraction had to be applied. Since, the processing charges constituted independent income similar to rent, commission, etc., which formed part of the gross total income, the same had to be reduced by 90 per cent as contemplated in Cl. (baa) to arrive at business profits. Therefore, the said processing charges were includible in the total turnover in the formula under section 80HHC(3) of the IT Act. The nature of every receipt needs to be ascertained in order to find out whether the said receipt forms part of/or that it has an attribute of an export turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ROYAN, JJ. For Appellant : Mr.R.Venkatanarayanan For Respondent : Mr.T.Ravikumar, SSC ORDER Judgment was delivered by T. S. Sivagnanam, J. This appeal by the Revenue has been directed against the order passed by the Income Tax Appellate Tribunal dated 28.12.2007 for the assessment year 2003-04. 2. This appeal has been filed raising the following substantial questions of law : i. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the appellant is not entitled to deduction under Section 80HHC of the Income Tax Act, in respect of the interest and rent earned out of business operations ? ii. Whether, on the facts and in the circumstances of the case, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the fact that in the assessee's own case, this Court had taken a decision in respect of question Nos.1 and 2 for the earlier assessment year, we deem it appropriate to decide substantial questions of law Nos.1 and 2 in this appeal, which are, at the risk of repetition, as follows : i. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the appellant is not entitled to deduction under Section 80HHC of the Income Tax Act, in respect of the interest and rent earned out of business operations ? and ii. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that 90% of the gross receipts should be excluded from the profits of the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d restrictions/qualifications by which the said provision has ceased to be a code by itself. In the above formula three existed four variables, namely, business profits, export turnover, total turnover and 90 per cent of the sums referred to in Cl.(baa) to the said Explanation. In the computation of deduction under section 80HHc all four variables had to be taken into account. All four variables were required to be given weightage. The substitution of Section 80HHC(3) secures profits derived from the exports of eligible goods. Therefore, if all the four variables are kept in mind, it becomes clear that every receipt is not income and every income would not necessarily include element of export turnover. This aspect needs to be kept in mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total turnover in the above formula (see: CIT Vs. Lakshmi Machine Works (supra). 22. In the present case, the processing charges were included in the gross total income from cashew business. That, even according to assessee the said charges constituted an important component of gross total income from cashew business. This is not disputed. Therefore, in terms of Cl. (baa), 90 per cent of the 'independent income' had to be deducted from gross total income to arrive at business profits to which the fraction had to be applied. Since, the processing charges constituted independent income similar to rent, commission, etc., which formed part of the gross total income, the same had to be reduced by 90 per cent as contemplated in Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the net interest or net rent which has been included in the profits of the assessee as computed under the head #profits and gains of business or profession# and not the gross rent, is to be deducted under c;.(1) of Expln. (baa) to Section 80HHC for determining the profits of the business. 7. Therefore, we are of the view that the matter should be remanded back to the Assessing Officer to take note of the legal position and redo the assessment under the said head. 8. Accordingly, the Tax Case (Appeal) is partly allowed and the second substantial question of law is remanded back to the Assessing Officer for fresh consideration in accordance with law, by taking note of the decision in the case of ACG Associated Capsules (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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