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TMI Blog2020 (1) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... ITIN JAMDAR M.S. KARNIK, JJ. Ms. A. Vissanji for Appellant. Mr. A.R. Malhotra for Respondents. ORAL JUDGMENT :- The Appellant carried on business of exports of cut and polished diamonds. The Appellant, apart from the work of cutting and polishing diamonds, also undertook work of other exporters on contract basis. By the Assessment Year 1991-92, period relevant for this appeal, the Appellant received an amount of ₹ 22,48,436/- which was credited by the Appellant under the head Factory labour charges . The Appellant also received an amount of ₹ 73,078/- as Labour charges commission since the Appellant had given a work of cutting and polishing diamonds on sub-contracts. 2. The Appellant filed the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 25.10.1994 and the only ground raised is as under. On the facts and in the circumstances in the case, the CIT(A) has erred in allowing the Assessee s claim for deduction U/s 80 HHC on the Labour Charges and Labour Commission totaling to ₹ 23,01,514/- received by them from local parties . 2. As per A.O. s Order U/s 143(3) dated 18.3.1993, the Labour Commission and Labour Charges received by the Assessee of ₹ 23,01,514/- had no connection with the export business, therefore, while calculating deduction U/s 80 HHC, it was held that the assessee was not entitled for the said claim. The assessee has claimed the deduction U/s 80 HHC at ₹ 14,18,224/- against which the Assessing Officer has allowed the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f jurisdictional High Court in the case of K.K. Doshi and Company (Supra) and S.G. Jhaveri Consultancy (Supra). Respectfully following the said decisions, we hereby reverse the finding of CIT(A) and allow the ground of the Revenue. 7. In the result, the appeal of the revenue is allowed. 7. The order passed by the Tribunal is based on the decisions rendered by this Court in the case of K.K. Doshi and Co. v. Commissioner of Income-Tax 245 ITR 849 and S.G. Jhaveri Consultancy v. Commissioner of Income-Tax 248 ITR 854. Thus that is the foundation of the order. The Assessment Year in question is of importance. The Assessment Year is 1991-92. The Section 80HHC of the Act was amended with effect from 1 April 1992 and explanation wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome by way of brokerage, commission, etc., an ad hoc 10 percent deduction from such income was provided for to account for the expenses. Similarly, under Explanation (ba) to Section 80 HHC, the Legislature has explained that the words total turnover shall not include freight or insurance. On the other hand, vide clause (b) to the Explanation to section 80HHC, the Legislature has defined the words export turnover to mean the sale proceeds, but not freight or insurance. The combined meaning of clauses (b) and (ba) to the Explanation shows that the business profits in the above formula shall not include receipts by way of brokerage, commission, interest, rent charges or any other receipt of a similar nature as they do not have any nexus wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The Supreme Court held that the words derived from indicated a direct nexus between the profits and gains on the one hand and the industrial undertaking on the other hand since under section 80HH the expression used is derived from the industrial undertaking . In that matter, on the facts, the Supreme Court held that since the export entitlements were made available under the Scheme of the Government the nexus between the profits and the industrial undertaking was only incidental and not direct. Accordingly, the Supreme Court allowed the appeal of the Department. This judgment helps the case of the Department in this matter. Section 80HHC(1) clearly states that in computing the total income of the assessee, there shall be a deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed of the said appeal by observing thus :- The main point in this appeal is as to whether the amendment to section 80HHC of the Income-tax Act, 1961, brought about by the Finance (No.2) Act, 1991, with effect from April 1, 1992, is prospective in nature or is retrospective. This court in the case of P.R. Prabhakar v. CIT [2006] 284 ITR 548, relying upon Circular No.621 dated December 19, 1991, issued by the Central Board of Direct Taxes (CBDT), has held that the amendment in question is prospective in nature and the same is binding on the Revenue. In view of Circular No.621 dated December 19, 1991 issued by the Central Board of Direct Taxes and the aforesaid judgment of this court, these appeals are accepted and the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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