M/s. Rane Brake Lining Limited, CHENNAI V. ITO(OSD), CHENNAI

ITA 104/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5222 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 02-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income
• Section: 80HHC; 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 104/MDS/2009 ASSESSMENT YEAR : 2003-04 M/S. RANE BRAKE LINING LTD., MAITHRI, 132, CATHEDRAL ROAD, CHENNAI-600 086. V. THE INCOME TAX OFFICER (OSD), COMPANY CIRCLE-V(3), CHENNAI. (PAN: AAACR1703L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. VIJAYARAGHAVAN RESPONDENT BY : SHRI SHAJI P. JACOB O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED CIT(APPEALS)-V, CHENNAI IN APPEAL NO. 173/2006-07 D ATED 04-06-2008 FOR THE ASSESSMENT YEAR 2003-04. 2. SHRI R. VIJAYARAGHAVAN, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED ON BEHALF OF THE REVENUE. 3. IN REGARD TO GROUNDS NO. 2(A) TO 2(E) AND 3 IT W AS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE WA S AGAINST THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ORDER OF THE ASSES SING OFFICER IN REGARD TO THE I.T.A. NO.104/MDS/2009 2 DISALLOWANCE MADE U/S. 14A OF THE INCOME TAX ACT, 1 961. IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT, THE ASSESSING OFF ICER HAD DISALLOWED AN AMOUNT OF ` 1,86,26,364/- ON THE GROUND THAT BORROWED FUNDS HA D BEEN DIVERTED FOR NON BUSINESS PURPOSES FOR INVESTMENT IN SHARES AND CONSEQUENTLY THE SAID DISALLOWANCE WAS MADE OUT OF THE INTEREST PAYMENT. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD ALSO UPHELD THE DISALLOWANCE BUT HE TOOK RECOURSE TO THE PROVISIONS OF SECTION 14A. IT WAS THE SUBMISSION T HAT THE AMOUNT WAS NOT TAXABLE DURING THE ASSESSMENT YEAR 2003-04 AS THE P ROVISIONS OF SEC. 115-O WAS NOT APPLICABLE DURING THE RELEVANT ASSESSMENT YEAR. 4. IN REPLY THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS NOT INVOKED THE PROVISIONS OF SEC. 14A. IN FACT THE ASSESSING OFFICER HAS POINTE D OUT THAT THE TOTAL INVESTMENT IN SHARES AS ON 31.03.2003 WAS ` 26,00,31,694/- WHICH INCLUDED A SUM OF ` 5,28,82,350/- INVESTED DURING THE YEAR. NO DIVIDEN D INCOME HAS ALSO BEEN ADMITTED DURING THE RELEVANT ASSESSMENT YEAR. A PE RUSAL OF THE ORDER OF THE LEARNED CIT(A) CLEARLY SHOWS THAT THE ASSESSEE HAD PUT FORWARD THE PLEA THAT IT HAD SURPLUS AND RESERVES SUFFICIENT TO COVER SUCH INVESTMENT IN PURCHASE OF SHARES. THIS IS FOUND IN PARA 3 OF THE ORDER OF TH E LEARNED CIT(A). THE LEARNED CIT(A) HAS FURTHER IN PARA 3 OF THE ORDER HAS GIVEN A FINDING THAT THE PAYMENT I.T.A. NO.104/MDS/2009 3 FOR PURCHASE OF SHARES WAS MADE OUT OF OD/CC ACCOUN TS WITH THE BANKERS OF THE ASSESSEE COMPANY. A PERUSAL OF THE BALANCE SHEET O F THE ASSESSEE AS ON 31.3.2003 SHOWS THAT THE ASSESSEE HAS A RESERVE AND SURPLUS AS ON 312.3.2003 AT ` 70.71 CRORES. FURTHER A PERUSAL OF THE BALANCE SH EET SHOWS THAT THE RESERVES AND SURPLUSES DURING THE YEAR ENDED 31.3.2 002 WAS TO ANB EXTENT OF ` 59.36 CRORES WHICH HAS INCREASED TO ` 70.71 CRORES DURING THE YEAR ENDED 31.3.2003. THE SECURED LOANS DURING THE YEAR ENDED 31.3.2002 WAS ` 19.62 CRORES WHICH CAME DOWN AS ON 31.3.2003 TO ` 17.92 CRORES WHEREAS THE UNSECURED LOANS AS ON 31.3.2002 STOOD AT ` 6.73 CRORES WHICH ALSO CAME DOWN TO ` 5.68 CRORES AS ON 31-3-2003. THUS THE CLAIM OF TH E ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE ASSESSEE DID HAVE SUFFIC IENT FUNDS IN THE FORM OF SURPLUSES AND RESERVES TO COVER THE INVESTMENT IN T HE PURCHASE OF SHARES STANDS SUPPORTED. IN THE CIRCUMSTANCES, WE ARE OF THE VIE W THAT NO DISALLOWANCE OUT OF THE INTEREST EXPENDITURE AS MADE BY THE ASSESSING O FFICER AND AS CONFIRMED BY THE LEARNED CIT(A) IS SUSTAINABLE. IN THE CIRCUMST ANCES, THE SAID DISALLAOWANCE STANDS DELETED. WE ARE NOT GOING INTO THE ISSUE OF APPLICABILITY OF SEC. 14A AT THIS STAGE AS THE DISALLOWANCE HAS NOT BEEN MADE BY INVOKING THE PROVISIONS OF SEC. 14A OF THE ACT. 6. IN REGARD TO GROUNDS 4(A) TO 4(D) AND 5(A) AND 5 (B) IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSU E WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ORDER OF THE A SSESSING OFFICER IN RESTRICTING I.T.A. NO.104/MDS/2009 4 THE RELIEF GRANTED TO THE ASSESSEE UNDER SEC. 80HHC OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE DID NOT PLACE ANY SPECIFI C ARGUMENT IN REGARD TO GROUNDS 4(A), 4(B) AND 4(D) AS ALSO GROUNDS 5(A) AN D 5(B). IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT IN REGAR D TO GROUND NO.4(C) THE ASSESSING OFFICER HAD WHEN COMPUTING THE DEDUCTION U/S 80HHC EXCLUDED 90% OF THE SHARE OF EXPENSES AND CASH DISCOUNT. IT WAS THE SUBMISSION THAT THE SHARE OF EXPENSES WAS IN RELATION TO THE EXPENSES R ECOVERED BY THE ASSESSEE BEING THE RENT RECOVERED BY THE ASSESSEE FROM THE A SSESSEES GROUP COMPANIES WHO WAS ALSO USING THE WAREHOUSE TAKEN ON LEASE BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD TAKEN ON LEASE THE WAREHOUSE AND THE ASSESSEE WAS PAYING RENT ON THE WAREHOUSE AND AS PO RTIONS OF THE WAREHOUSE HAD BEEN USED BY THE GROUP COMPANIES OF THE ASSESSE E THE EXPENSES IN RELATION TO THE WAREHOUSE REPRESENTING THE RENT AS ALSO THE MANPOWER HAD BEEN RECOVERED FROM THE GROUP COMPANIES. IT WAS THE SUB MISSION THAT THIS HAD BEEN SHOWN AS AN INCOME IN THE PROFIT & LOSS ACCOUNT. I T WAS THE SUBMISSION THAT THE DISCOUNT REPRESENTED THE DISCOUNT RECEIVED BY THE A SSESSEE WHICH WAS ALSO SHOWN BY THE ASSESSEE IN THE INCOME SIDE OF THE PRO FIT & LOSS ACCOUNT. IT WAS THE SUBMISSION THAT THE SAME WAS NOT LIABLE TO BE C ONSIDERED FOR EXCLUSION WHEN COMPUTING THE DEDUCTION U/S. 80HHC. 7. IN REPLY, THE LEARNED DR SUBMITTED THAT IN REGAR D TO THE ISSUE OF DISCOUNT NO SPECIFIC GROUND HAD BEEN RAISED AND CONSEQUENTLY THE SAME COULD NOT BE I.T.A. NO.104/MDS/2009 5 CONSIDERED. IN REGARD TO THE ISSUE OF THE SHARE OF EXPENSES IT WAS THE SUBMISSION THAT THE SHARE OF EXPENSES WHICH WAS CLA IMED WAS IN FACT THE RENTALS AND RENT ITSELF WAS A SPECIFIC ITEM WHICH WAS SPECI FIED TO BE REDUCED BY 90% AS PER THE PROVISIONS OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC. IT WAS THE SUBMISSION THAT IT WAS THE GROSS RENT WHICH WAS LIA BLE TO BE EXCLUDED AND THIS WAS EXACTLY WHAT THE ASSESSING OFFICER HAD DONE. H E RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F AMBATTUR CLOTHING CO. LTD. V. ASSISTANT COMMISSIONER OF INCOME-TAX REPORTED IN 32 6 IYTR 245. IT WAS THE SUBMISSION THAT THE SAID DECISION RELATED TO THE CO MPUTATION OF DEDUCTION U/S 80HHC WITH REGARD TO THE EXCLUSION OF THE INTEREST AND THE HON'BLE JURISDICTIONAL HIGH COURT HAD CATEGORICALLY HELD THAT 90% OF THE G ROSS INTEREST RECEIVED WAS LIABLE TO BE REDUCED. IT WAS THE SUBMISSION THAT T HE RENT ALSO FELL WITHIN THE SAME CATEGORY AND CONSEQUENTLY THE ORDER OF THE LEA RNED CIT(A) WAS LIABLE TO BE UPHELD. HE ALSO PLACED RELIANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. K. RAVINDRANATHAN NAIR REPORT ED IN 295 ITR 228. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORDER OF THE LEARNED CIT(A) SHOWS THAT SUCH A GROUND HAS NOT BEE N RAISED BEFORE HIM IN REGARD TO THE DISCOUNT. IN FACT IN PAGE 3 OF THE O RDER OF THE LEARNED CIT(A) THE AMOUNT OF ` 34,25,043/- HAS ALSO BEEN MENTIONED AS RECEIPTS BE ING DEPOT EXPENSES RECOVERED FROM DEALERS. THUS IT IS NOTICE D THAT BEFORE THE LEARNED CIT(A) THE CLAIM IS THAT THE RECEIPTS ARE DEPOT EXP ENSES RECOVERED FROM THE I.T.A. NO.104/MDS/2009 6 DEALERS AND BEFORE THE TRIBUNAL THE CLAIM IS THAT T HE SAID RECEIPTS ARE WAREHOUSE RENTALS RECOVERED FROM THE GROUP COMPANIES WHO HAVE USED THE WAREHOUSE WHICH HAS BEEN TAKEN ON RENT BY THE ASSESSEE. THER E IS NO MENTION OF ANY PORTION OF THE SAME TO BE DISCOUNTS NOR HAS THE BRE AK UP OF THE SAID AMOUNT BETWEEN THE RENTALS RECOVERED AND THE DISCOUNTS BEE N PLACED BEFORE US. ADMITTEDLY, THE SAID AMOUNT IS THE RENTALS IN RELAT ION TO THE WAREHOUSE. WHETHER IT IS FROM THE DEALERS OR FROM THE GROUP COMPANIES THE RECOVERIES ARE NOTHING BUT RENTALS. THE SAME HAVING BEEN SHOWN IN THE INCOME SIDE IT WOULD HAVE TO BE DEEMED THAT THESE ARE SUBLETTING CHARGES RECEIVED B Y THE ASSESSEE AND CONSEQUENTLY IN VIEW OF THE SPECIFIC PROVISIONS OF CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC, WE ARE OF THE VIEW THAT THE EXCLU SION OF THE 90% OF THE SAME IS ON THE RIGHT FOOTING AND DOES NOT CALL FOR ANY I NTERFERENCE. 9. IN REGARD TO GROUNDS 6(A) TO 6(D) IT WAS SUBMITT ED THAT THE ISSUE WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN CONFIRM ING THE ACTION OF THE ASSESSING OFFICER IN COMPUTING THE DEDUCTION UNDER SECTION 80 HHC AFTER REDUCING THE DEDUCTION UNDER SECTION 80-IB OF THE ACT. IT WAS S UBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE HON'BLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT V. M/S. MRF LTD. IN TAX CASE (APPEAL) NO. 1020 OF 2009 DATED 27- 10-2009 WHEREIN THE HON'BLE JURISDICTIONAL HIGH COU RT HAS HELD AS FOLLOWS : 5 IT IS SUBMITTED ACROSS THE BAR BY THE LEARNED C OUNSEL APPEARING FOR EITHER SIDE THAT THE VERY ISSUE HAS B EEN CONSIDERED AND HELD AGAINST THE REVENUE BY THE MAD HYA I.T.A. NO.104/MDS/2009 7 PRADESH HIGH COURT IN THE CASE OF J.P. TOBACCO PROD UCTS P. LTD. VS. COMMISSIONER OF INCOME TAX REPORTED IN (1998) 2 29 ITR 123. IT HAS ALSO BEEN FURTHER SUBMITTED THAT THE B OMBAY HIGH COURT ALSO HAS TAKEN THE SAME VIEW IN THE CASE OF C OMMISSIONER OF INCOME-TAX VS. NIMA SPECIFIC FAMILY TRUST REPORT ED IN (2001) 248 ITR 29. THE JUDGMENT OF THE MADHYA PRADESH HIG H COURT HAS BEEN TAKEN TO THE SUPREME COURT AND THE SUPREME COURT IN JOINT COMMISSIONER OF INCOME-TAX VS. MANDIDEEP ENGIN EERING AND PACKAGING INDUSTRIES P. LTD., (2007) 292 IYTR 1 , HAS REJECTED THE S.L.P., BY GIVING THE FOLLOWING REASON S: 2. THE MADHYA PRADESH HIGH COURT IN J.P. TOBACCO PRODUCTS P. LTD. V. CIT REPORTED IN (1998) 229 ITR 123 TOOK THE VIEW THAT BOTH THE SECTIONS ARE INDEPENDENT AND, THEREFORE, THE DEDUCTIONS COULD BE CLAIMED BOTH UNDER SECTIONS 80HH AND 80-I ON THE GROSS TOTAL INCOME. AGAINST THIS JUDGMENT, A SPECIAL LEAVE PETITION MAWS FILED IN THIS COURT WHICH WAS DISMISSED ON THE GROUND OF DELAY ON JULY 21, 2000 245 ITR (ST.) 71). THE DECISION IN J.P. TOBACCO PRODUCTS P. LTD. (1998) 229 ITR 123 WAS FOLLOWED BY THE SAME HIGH COURT IN THE CASE OF CIT V. ALPINE SOLVEX P. LTD. IN ITA NO.92 OF 1999 DECIDED ON MAY 2, 2000. SPECIAL LEAVE PETITION AGAINST THIS WAS DISMISSED BY THIS COURT ON JANUARY 12,2001, (SEE (2201) 247 ITR (ST.) 36). THIS VIEW HAS BEEN FOLLOWED REPEATEDLY BY DIFFERENT HIGH COURTS IN A NUMBER OF CASES AGAINST WHICH NO SPECIAL LEAVE PETITIONS WERE FILED I.T.A. NO.104/MDS/2009 8 MEANING THEREBY THAT THE DEPARTMENT HAS ACCEPTED THE VIEW TAKEN IN THESE JUDGMENTS. SEE CIT V. NIMA SPECIFIC FAMILY TRUST REPORTED IN (2001) 248 ITR 29 (BOM); CIT V. CHOKSHI CONTACTS P. LTD. (2001) 251 ITR 587 (RAJ); CIT V. AMOD STAMPING (2005) 274 ITR 176 (GUJ); CIT V. MITTAL APPLIANCES P. LTD. (2004) 270 ITR 65 (MP); CIT V. ROCHIRAM AND SONS (2004) 271ITR444 (RAJ); CIT V. PRAKASH CHANDRA BASANT KUMAR (2005) 276 ITR 664 (MP); CIT V. S.B. OIL INDUSTRIES P. LTD. (2005) 274 ITR 495 (P&H); CIT V. SKG ENGINEERING P. LTD. (2005) 119 DLT 673 = (2006) 285 ITR 423 (DELHI) AND CIT V. LUCKY LABORATORIES LTD. (2006) 200 CTR 305 (ALL). SINCE THE SPECIAL LEAVE PETITIONS FILED AGAINST THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT HAVE BEEN DISMISSED AND THE DEPARTMENT HAS NOT FILED THE SPECIAL LEAVE PETITIONS AGAINST THE JUDGMENTS OF DIFFERENT HIGH COURTS FOLLOWING THE VIEW TAKEN BY THE MADHYA PRADESH HIGH COURT, WE DO NOT FIND ANY MERIT IN THIS APPEAL. THE DEPARTMENT HAVING ACCEPTED THE VIEW TAKEN IN THOSE JUDGMENTS CANNOT BE PERMITTED TO TAKE A CONTRARY VIEW IN THE PRESENT CASE INVOLVING THE SAMEPOINT. ACCORDINGLY, THE CIVIL APPEAL IS DISMISSED. NO COSTS. I.T.A. NO.104/MDS/2009 9 10. IN REPLY, THE LEARNED DR VEHEMENTLY SUPPORTED T HE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT(A). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. MRF LTD., REFERRED TO SUPRA, RESPECTFU LLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE SAID C ASE, THE ORDER OF THE LEARNED CIT(A) STANDS REVERSED AND THE ASSESSING OFFICER IS DIRECTED TO GRANT DEDUCTION UNDER SECTION 80HHC WITHOUT REDUCING THE DEDUCTION U/S. 80IB OF THE ACT. 12. IN REGARD TO GROUNDS 7(A) TO 7(E) IT WAS SUBMIT TED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE WAS AGAINS T THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFF ICER IN RESTRICTING THE DEDUCTION U/S. 80-IB. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 1294/MDS/05 AND ITA NO. 1480/MDS/05 DATED 27-07-2009 WHEREIN IN PARA 8 OF THE SAID ORDER THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS : 8. THE LAST ISSUE RAISED ON BEHALF OF THE ASSESSE E IS THAT COMMISSIONER (A) ERRED IN UPHOLDING THE ORDER OF TH E AO THAT PROPORTIONATE MANAGEMENT FEES ATTRIBUTABLE TO PONDI CHERRY UNIT HAS TO BE REDUCED IN COMPUTING THE PROFITS OF ELIGI BLE BUSINESS UNDER SEC.80IB. THIS ISSUE HAS TO BE RESTORED TO T HE FILE OF AO TO CONSIDER THE ACTUAL EXPENSES IN VIEW OF THE ORDE R OF THE I.T.A. NO.104/MDS/2009 10 TRIBUNAL IN THE CASE OF FOOD SPECIALITIES LTD. VS. ACIT REPORTED IN 54 ITD 352 WHEREIN IT IS HELD AS FOLLOWS: THE BASIS ADOPTED BV THE AO FOR WORKING OUT THE OVERHEAD EXPENSES ATTRIBUTED TO THE NEW INDUSTRIAL UNIT HAD NOT GIVEN REASONABLE RESULTS. THE BASIS OF TUR NOVER WOULD BE ONE OF THE FACTORS FOR WORKING OUT THE REA SONABLE AMOUNT OF OVER HEAD EXPENSES ATTRIBUTABLE T THE NEW UNIT. THE OTHER IMPORTANT FACTOR THAT HAD TO BE CONSIDERE D WAS THE INCREASE IN THE OVERHEAD EXPENSES INCURRED BY T HE ASSESSEE AFTER THE SETTING UP OF THE NEW UNIT. THE INCREASED EXPENDITURE COULD BE APPORTIONED BETWEEN THE OLD UNITS AND THE NEW UNITS ON THE BASIS OF TURNOVE R. IN THIS VIEW OF THE MATTER, THE ISSUE IS SET ASIDE AND RESTORED TO THE FILE OF THE A O TO CONSIDER THE ACTUAL EXPENSES. AS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 2001-02 IN ITA NOS. 1294/MDS/05 AND 1480/MDS/0 5 DATED 27-07-2009, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE, THE ISSUE IS RESTORED TO THE F ILE OF THE ASSESSING OFFICER WITH IDENTICAL DIRECTIONS AS MENTIONED IN THE ABOVE ORDE R OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL. I.T.A. NO.104/MDS/2009 11 13. IN REGARD TO GROUND NO.8 IT WAS SUBMITTED BY TH E LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE WAS AGAINST THE ACTIO N OF THE LEARNED CIT(A) IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN RE GARD TO THE INCLUSION OF THE SCRAP SALES IN THE TOTAL TURNOVER WHILE COMPUTING T HE DEDUCTION U/S 80HHC. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT TH E SCRAP SALES WERE NOT LIABLE TO BE INCLUDED IN THE TOTAL TURNOVER AS THE SAME WA S NOT THE BUSINESS TURNOVER OF THE ASSESSEE. 14. IN REPLY, THE LEARNED DR RELIED UPON THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF K. RAVINDRANATHAN NAIR, REPORT ED IN 295 ITR 228 TO SUPPORT HIS CLAIM THAT THE SCRAP SALES FORMED PART OF THE G ROSS TOTAL INCOME AND AS PER THE PROVISIONS OF CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC, 90% OF THE SAME IS TO BE DEDUCTED FROM THE BUSINESS PROFITS. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. UNDI SPUTEDLY, THE SCRAP SALES ARE PART OF THE BUSINESS INCOME OF THE ASSESSEE. O NCE THIS AMOUNT FORMS PART OF THE BUSINESS INCOME, 90% OF SUCH RECEIPTS ARE TO BE EXCLUDED IN VIEW OF THE SPECIFIC PROVISIONS OF CLAUSE (BAA) OF THE EXPLANATI ON TO SECTION 80HHC. IN THE CIRCUMSTANCES AS THIS ISSUE IS SQUARELY COVERED BY THE PRINCIPLES LAID DOWN IN THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F K. RAVINDRANATHAN NAIR, REFERRED TO SUPRA, THE FINDING OF THE LEARNED CIT(A ) ON THIS ISSUE STANDS CONFIRMED. I.T.A. NO.104/MDS/2009 12 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 17. THE ORDER WAS PRONOUNCED IN THE COURT ON 21/04/ 2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 21 ST APRIL, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE