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TMI Blog1993 (2) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) On the facts and in the circumstances of the case and in law, the learned DC(A) erred in deleting the addition of Rs. 20,175 made on account of interest on debit balance of partners, without reference to the facts on which the findings of the Assessing Officer in the assessment order were based ." 2. The assessee had claimed section 80HHC deduction of Rs. 3,42,277, whereas the Assessing Officer allowed it at Rs. 3,36,241. He made two adjustments to the assessee's profits while considering the claim of the assessee : (i) addition of Rs. 20,175 being the amount of interest disallowed as pertaining to debit balances ; and (ii) reduction of Rs. 32,848 being the service charges which, according to him, is not a profit relatable to export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners is not justified. I do not find any force in the submission of the learned Departmental Representative that the profit accrued at the end of the year and, therefore, credit therefor cannot be given. The profit accrues on each and every sale, but ascertained at the end of the year. The profit was, thus, available to the assessee during the year under consideration, though ascertained at the end of the year. If that amount is taken into consideration, there would be no debit balance on which the interest can be disallowed. The disallowance of Rs. 20,175 was accordingly rightly deleted by the DCIT(A) and also excluded from the profit taken into consideration for the purposes of deduction under section 80HHC of the Act. 4. As regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee from export of goods or merchandise. It provides : " Where an assessee, being an Indian company or a person other than a company resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, 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 of the profits derived by the assessee from the export of such goods or merchandise. " Sub-section (3) provides as to how that profit is to be computed. It reads as under : " (3) For the purposes of sub-section (1), profits derived from the export of goods or merchandise out of India shall be.-- (a) in a case where the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges are profits of the business carried on by the assessee as the same had been offered by the assessee and computed by the Assessing Officer under the bead "business income". In these circumstances, they would form part of the profits and gains computed under the head "business or profession" under section 28 of the Act. Once that position is accepted, the proportion of the export turnover and the total turnover has to be that with reference to that profit as that would be the profit computed under the head "profits and gains of business or profession". One cannot, thereafter, be justified to say that the service charges have to be excluded therefrom on the ground that the same did not amount to "profit derived from export of goods or m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) shall be deemed to be the amount of that nature which is derived from or received by the assessee and which Is included in the gross total income. Sub-section (3) of section 80HHC provides the definition of the export profit which is entitled to the export incentive deduction. When it provides that profit derived from export of goods or merchandise is a particular amount, that would, in my opinion, be the amount in the nature of profits derived from export of goods or merchandise and that would be the amount entitled to deduction under section 80HHC. Section 80AB of the Act also talks about the profit of that nature in respect of which section 80HHC deduction is allowable and when that amount of profit has been defined under section 80HH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofession" irrespective of what could strictly be described as "profits derived from the export of goods or merchandise out of India". Deduction to a person falling under clause (a), of section 80HHC(3) would be the amount of profits computed under the head "Profits and gains of a business or profession". On the other hand, the deduction to a person falling under clause (b) thereof is to be computed in the following manner : Export turnover Profits of the business x ---------------------------- Total turnover 10. In these circumstances, in my opinion, the Assessing Officer was not justified in reducing the amount of service charges from the profits of the assessee in arriving at the deduction of the profit derived from the export of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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