Banco Aluminium Ltd., Baroda V. The ACIT,Circle-1(1), Baroda

ITA 1069/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5848 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 25-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA SRDR
• Keywords: Business income; Depreciation; Bad and doubtful debts; Competent authority; Set aside
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1069/AHD/2008 [ASSTT.YEAR: 2004-05] BANCO ALUMINIUM LTD. -VS- ACIT, CIRCLE-1(1), BIL, NR. BHALLI RAILWAY STATION, BARODA PADRA ROAD, BARODA PAN NO.AAACB8629B (APPELLANT) (RESPONDENT) REVENUE BY : SHRI C.K. MISHRA, SR-DR ASSESSEE BY: SHRI MILIN MEH TA, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF COMMISSIONER OF INCOME-TAX (APPEALS)-I, BARODA IN APPEAL NO.CAB/I-3 03/06-07 DATED 05-01-2007. THE ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-1(1), BAR ODA U/S.143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 30-11-2006 FOR ASSESSMENT YEAR 2004-05. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF EXPENSES RELATED TO EXEMPTED INCOME U/S.14A OF THE ACT. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWIN G GROUND NO.1 :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) -I, BARODA [THE CIT(A)] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE INCOME TAX OFFICER, CIRCLE 1(1), BARODA [THE AO'] IN MAKING A N ADDITION OF RS.2,856 BEING 10% OF DIVIDEND INCOME U/S.14A OF THE INCOME TAX AC T, 1961 THE ACT] ON AD HOC BASIS ON ACCOUNT OF INTEREST AND OTHER RELATED EXPENSES PERTAINING TO THE INVESTMENTS (WHICH GAVE RISE TO DIVIDENDS) WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD IN SUPPORT OF THE SAME. ITA NO.1069/AHD/2008 A.Y. 2004-05 BANCO ALUMINIUM LTD. V. ACIT, CIR-1(1), BRD PAGE 2 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT HE HAS INSTRUCTION FROM THE ASSESSEE NOT TO PRESS THIS ISSUE, AND ACCORDING LY SAME IS DISMISSED AS NOT PRESSED. 4. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF HIGHER RAT E OF DEPRECIATION. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.2 :- 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS.19,382 OUT OF DEPRE CIATION CLAIMED ON CERTAIN ASSETS ENTITLED TO HIGHER RATES OF DEPRECIA TION BY ALLOWING DEPRECIATION AT THE STANDARD RATE OF 25% ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE EQUIPMENT IN QUESTION FALLS UNDER TH E SPECIAL CATEGORY AS PROVIDED UNDER THE INCOME TAX RULES, 1962. 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT HE HAS INSTRUCTION FROM THE ASSESSEE NOT TO PRESS THIS ISSUE, AND ACCORDING LY SAME IS DISMISSED AS NOT PRESSED. 6. THE NEXT GROUND IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKIN G THE ADDITION OF RS.2,55,343/- OUT OF BAD DEBTS. FOR THIS, ASSESSEE HAS RAISED THE FO LLOWING GROUND NO.3 :- 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN MAKING AN ADDITION OF RS.2,55,343 OUT OF BAD DEBTS CLAIMED ON THE GROUNDS THAT: (I) THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO SHOW THAT THESE BAD DEBTS HAVE ACTUALLY BECOME BAD, (II) THE ASSESSEE HAS FAILED O SHOW ANY RECOVERY EF FORTS MADE BY IT AND (III) NO PROOF OF ANY COMMUNICATION WITH THESE PART IES HAS BEEN FURNISHED. IT MAY BE MENTIONED THAT IT WAS BEYOND DOUBT PROVED THAT HE IMPUGNED AMOUNT IS A BAD DEBT AND HE APPELLANT HAD SATISFIED ALL HE CONDITIONS MENTIONED IN SECTION 36(1)(VII) OF THE ACT FOR CLAI MING IT AS BAD DEBT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THESE ARE SMALL AMOUNTS WRITTEN OFF AGAINST LARGE BILLED AMOUNTS. THESE HAVE BEEN WRITTEN OF BE ING SMALL BALANCES REMAINING OUTSTANDING AND DUE TO RATE DIFFERENCES. WE FIND F ROM THE FACTS OF THE CASE AND THE CASE RECORDS THAT THESE SMALL BALANCES HAVE BEEN UN RECOVERABLE AND THE ASSESSEE HAS WRITTEN OFF IN ITS BOOKS OF ACCOUNT AND THE DEP ARTMENT CANNOT INSIST ON ITA NO.1069/AHD/2008 A.Y. 2004-05 BANCO ALUMINIUM LTD. V. ACIT, CIR-1(1), BRD PAGE 3 DEMONSTRATIVE PROOF OF THE FACT OF THE DEBT BECOMIN G BAD AND WHICH PROVE MUST SATISFIED THE TEST OF INFALLIBILITY. IT IS A QUESTI ON AS TO WHEN THE DEBT BECAME A BAD DEBT WILL HAVE TO BE OBJECTIVELY DETERMINED ON THE MATERIAL ON RECORD AND IT MUST BE DECIDED FROM THE POINT OF VIEW OF POSSIBILITY THE R EALIZATION OF DEBT. BUT NOW THE ISSUE HAS BEEN SETTLED BY HONBLE APEX COURT IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF T.R.F. LIMITED V. COMMISSIONER OF INCOME TAX [2010] 323 ITR 397 (SC). WE FIND THAT THE ASSESSIN G OFFICER HAD MADE THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAS NO T PRODUCED SUFFICIENT EVIDENCE TO SHOW THAT REASONABLE STEPS WERE TAKEN TO RECOVER THE DEBT. HOWEVER, THERE IS NO DISPUTE THAT THE ABOVE AMOUNT WAS DULY WRITTEN OF I N THE ASSESSEES BOOKS OF ACCOUNT. ON THE ABOVE FACTS THE DECISION OF HONBL E APEX COURT IN THE CASE OF T.R.F. LIMITED (SUPRA) WOULD BE SQUARELY APPLICABLE WHEREIN, THEIR LORDSHIPS HELD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE IN COME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DED UCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTA BLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE : IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO NBLE APEX COURT, WE REVERSE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) O N THIS POINT AND ALLOW THIS GROUND OF THE ASSESSEES APPEAL. 8. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN COMPU TING THE DEDUCTION U/S.80HHC OF THE ACT BY EXCLUDING 90% OF SUNDRY BALANCED WRITTEN BACK FROM THE ASSESSEES BUSINESS PROFIT. 9. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS OF THE CASE, WE FIND THAT SUNDRY BALANCE WRITTEN OFF ARE AMOUNTS RE PRESENTS SMALL AMOUNT OUTSTANDING IN THE ACCOUNTS OF DEBTORS. SINCE THESE AMOUNTS ARE GENERATED IN NORMAL COURSE OF BUSINESS, THE SAME REPRESENTS BUSI NESS PROFITS DIRECTLY RELATED TO EXPORT BUSINESS. SINCE, THESE AMOUNTS DIRECTLY RELA TES TO EXPORT BUSINESS, NOTHING IS TO BE EXCLUDED WHILE COMPUTING DEDUCTION U/S.80HHC OF THE ACT. ASSESSING OFFICER IS DIRECTED ACCORDINGLY. THIS COMMON ISSUE OF THE ASS ESSEES APPEALS IS ALLOWED. ITA NO.1069/AHD/2008 A.Y. 2004-05 BANCO ALUMINIUM LTD. V. ACIT, CIR-1(1), BRD PAGE 4 10. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) FOR DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE EXCH ANGE RATE DIFFERENCE OF RS.23,753/- FROM PROFIT OF BUSINESS WHILE CALCULATI NG THE DEDUCTION U/S.80HHC OF THE ACT. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSI NG OFFICER HAS EXCLUDED THIS EXCHANGE RATE DIFFERENCE FROM PROFIT OF BUSINESS WH ILE COMPUTING DEDUCTION U/S.80HHC OF THE ACT AND THE CIT(A) DIRECTED THE AO NOT TO EXCLUDE THIS INCOME FROM THE BUSINESS PROFIT BY STATING THAT EXCHANGE RATE D IFFERENCE IS PART OF SALE REALIZATION AND THEREFORE IT IS NOT REQUIRED TO BE REDUCED FROM PROFIT OF THE BUSINESS AND IT HAS DIRECT NEXUS WITH THE INCOME OF EXPORTS. WE FIND T HAT THE ISSUE IS COVERED BY THE TRIBUNALS DECISION IN THE CASE OF SUJATA GROVER V. DCIT (2002) 74 TTJ 347 (DEL). FURTHER, THE ISSUE IS ALSO COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. AMBA IMPEX (2006) 282 ITR 144 (GUJ), WHEREIN THE HONBLE HIGH COURT HELD AS UNDER:- THE ENTIRE CASE OF THE REVENUE IS BUILT ON THE FAC T THAT THE AMOUNT HAS BEEN RECEIVED IN A YEAR SUBSEQUENT TO THE YEAR OF EXPORT S. AS CAN BE SEEN FROM THE ASSESSMENT ORDER IT TALKS OF EXPORT REALIZATION FOR EXPORTS MADE UP IN MARCH 31, 2000. THERE IS NOTHING TO INDICATE, AND N ONE OF THE AUTHORITIES HAVE APPLIED THEIR MIND, AS TO WHETHER THE SUM OF RS.13, 18,068 IS RELATABLE TO EXPORTS MADE DURING ONLY ONE FINANCIAL YEAR OR MORE THAN ONE FINANCIAL YEAR PRECEDING MARCH 31, 2000. THIS WOULD HAVE A MATERIA L BEARING, TAKING INTO CONSIDERATION THE PROVISIONS OF SUB-SECTION (2) OF SECTION 80HHC OF THE ACT AS WAS APPLICABLE DURING THE YEAR UNDER CONSIDERATION. UNDER SUB-SECTION (2) OF SECTION 80HHC OF THE ACT, SALE PROCEEDS OF GOODS OR MERCHANDISE EXPORTED OUT OF INDIA AND RECEIVED IN C ONVERTIBLE FOREIGN EXCHANGE BECOME ENTITLED TO THE DEDUCTION SUBJECT T O FULFILLMENT OF OTHER REQUISITE CONDITIONS. CLAUSE (A) OF SUB-SECTION (2 ) OF SECTION 80HHC OF THE ACT PROVIDES THAT SUCH SALE PROCEEDS HAVE TO BE REC EIVED IN CONVERTIBLE FOREIGN EXCHANGE WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR, WITHIN SUCH FURTHER PERIOD AS THE COMPETEN T AUTHORITY MAY ALLOW IN THIS BEHALF. THUS, A PLAIN READING OF THE PROVISION MAKE S IT CLEAR THAT ONCE THE COMPETENT AUTHORITY HAS EXTENDED THE TIME, IN A CAS E WHERE IT IS NECESSARY, OR, WHERE THE SALE PROCEEDS HAVE BEEN RECEIVED WITH IN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR, SUCH SALE PROCEE DS ARE DIRECTLY RELATABLE TO THE EXPORTS MADE AND NO FURTHER INQUIRY IS NECESSAR Y. THEREFORE, THE ENTIRE CONTROVERSY AS TO WHETHER SUCH RECEIPT AMOUNTS TO ANY OTHER RECEIPT ITA NO.1069/AHD/2008 A.Y. 2004-05 BANCO ALUMINIUM LTD. V. ACIT, CIR-1(1), BRD PAGE 5 STIPULATED IN EXPLANATION (BAA)(1) NEED NOT BE TAKEN UP FOR CONSIDERATION. ONCE THE LEGISLATURE HAS PROVIDED FOR TREATING A RE CEIPT WITHIN A PERIOD OF SIX MONTHS AFTER THE END OF THE PREVIOUS YEAR, OR WITHI N FURTHER EXTENDED PERIOD, AS SALE PROCEED RELATABLE EXPORTS, IT WOULD NOT BE OPEN TO THE REVENUE TO RAISE SUCH A CONTROVERSY. THE LEGISLATURE IN ITS WI SDOM HAS TAKEN INTO CONSIDERATION THE FACT THAT IN THE CASE OF EXPORTS MADE, SALE PROCEEDS ARE NOT NECESSARILY REALIZABLE IMMEDIATELY WITHIN THE ACCOU NTING PERIOD IN WHICH EXPORTS HAVE BEEN MADE. AS A COROLLARY, BY THE TIME SUCH SALE PROCEEDS ARE RECEIVED WITHIN THE PRESCRIBED TIME, BY VIRTUE OF E XCHANGE RATE DIFFERENCE, THERE MIGHT BE A SITUATION WHERE A LARGER AMOUNT IS RECEIVED THAN THE AMOUNT AS REFLECTED IN THE SHIPPING BILL. HENCE, MERELY BE CAUSE AN AMOUNT IS RECEIVED IN A YEAR SUBSEQUENT TO THE YEAR OF EXPORT BY WAY O F EXCHANGE RATE DIFFERENCE, IT DOES NOT NECESSARILY ALWAYS FOLLOW THAT THE SAME IS NOT RELATABLE TO THE EXPORTS MADE. AS CAN BE SEEN FROM THE IMPUGNED ORDER OF THE TRIB UNAL AS WELL AS THE ORDERS OF THE COMMISSIONER (APPEALS) AND THE ASSESSING OFF ICER, NONE OF THE AUTHORITIES HAVE APPROACHED THE ISSUE IN THE LIGHT OF THE PROVISIONS OF SUBS- SECTION (2) OF SECTION 80HHC OF THE ACT. NO EVIDENC E IS AVAILABLE ON RECORD TO ESTABLISH FULFILLMENT OR OTHERWISE, OF THE CONDITIO NS STIPULATED BY SUBS-SECTION (2) OF SECTION 80HHC OF THE ACT. IN THESE CIRCUMST ANCES, IT WOULD NOT BE FAIR AND JUST FOR EITHER SIDE TO RESOLVE THE CONTROVERSY IN THE ABSENCE OF THE RELEVANT FACTS AND EVIDENCE BEING AVAILABLE ON RECO RD. IN THE LIGHT OF WHAT IS STATED HEREINBEFORE, THE Q UESTION IS LEFT UNANSWERED AND THE APPEAL IS RESTORED TO THE FILE OF THE TRIBUNAL ONLY IN RELATION TO THE ISSUE RELATABLE TO DEDUCTION UNDER SECTION 80HHC OF THE A CT WITHOUT EXPRESSING ANY FINAL OPINION ON THE MERITS OF THE MATTER. THE TRIB UNAL SHALL, AFTER HEARING BOTH THE SIDES, DECIDE THE APPEAL ON THIS COUNT, BE OPEN TO THE TRIBUNAL TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING AUTHORITY TO ASCERTAIN PROPER FACTS IN THE CIRCUMSTANCES. IN VIEW OF THE ABOVE FACTS AND THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF AMBA IMPEX (SUPRA), THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE. THIS ISSUE OF THE ASSESSEE S A PPEAL IS ALLOWED. 12. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO SALES TAX REFUND, DIRECTED BY CIT(A) TO THE ASSESSING OFFICER TO EXCL UDE THIS AMOUNT FROM THE BUSINESS PROFIT OF THE ASSESSEE WHILE COMPUTING DEDUCTION U/ S.80HHC OF THE ACT. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE SALES T AX SET OFF AND REFUND OF SALES TAX ITA NO.1069/AHD/2008 A.Y. 2004-05 BANCO ALUMINIUM LTD. V. ACIT, CIR-1(1), BRD PAGE 6 AMOUNT IS NEITHER THE PAYMENT NOR A RECEIPT, RATHER THIS WILL NOT EFFECT EITHER THE TURNOVER OF THE ASSESSEE OR THE BUSINESS PROFITS. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE DEDUCTION U/S.80HHC A FTER EXCLUDING THE SALES TAX SET OFF AND REFUND FROM THE TOTAL TURNOVER AS WELL AS T HE BUSINESS PROFIT OF THE ASSESSEE BECAUSE THIS AMOUNT DOES NOT REPRESENTS NEITHER REC EIPT NOR THE BUSINESS PROFIT OF THE ASSESSEE AND THIS WILL NOT BE INCLUDED EITHER I N THE BUSINESS PROFIT OR IN THE TOTAL TURNOVER OF THE ASSESSEE. ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS SET ASIDE TO THE FILE OF ASSESSING OFFICER AND WE DIREC T HIM TO DECIDE IN TERMS OF THE ABOVE. 14. THE FIRST COMMON ISSUE IN THESE APPEALS IS AGAI NST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO REDUCE ONLY NET OFF INSURANCE CLAIM IN AT 90% FROM BUSINESS PROFITS WHILE COMPUTING DEDUCTION U/S.80HH C OF THE ACT. 15. AFTER HEARING THE RIVAL CONTENTIONS AND GOING T HROUGH THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE HAS CONTENDED THAT THERE IS NO PROFIT ELEMENT INVOLVED IN INSURANCE RECEIPTS, AS THE INSURANCE CLAIM IS PUREL Y FOR THE RECOVERY OF LOSS OF MATERIAL AND ASSET OF THE COMPANY DUE TO DAMAGE TO THE MATERIAL AND ASSETS. WE ARE OF THE VIEW THAT THE EXPENDITURE INCURRED BY TH E ASSESSEE ON MATERIAL AND ASSETS LOST DUE TO DAMAGE IS MORE THAN THE INSURANCE CLAIM AND THERE WAS NO INCOME TO THE ASSESSEE IN THE NATURE OF INSURANCE CLAIM. THIS VI EW HAS ALSO TAKEN BY SPECIAL BENCH OF THIS TRIBUNAL OF AHMEDABAD IN THE CASE OF NRIMA INDUSTRIES V. ACIT (2005) 95 TTJ 867 (AHD). THIS RECEIPT OF INSURANCE CLAIM IS NOT AN INCOME, THE SAME WILL NOT BE INCLUDED EITHER IN THE TOTAL TURNOVER NOR IN THE BUSINESS PROFITS OF THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S.80H HC OF THE ACT. ACCORDINGLY, ASSESSING OFFICER IS DIRECTED TO REDUCE THIS INSURA NCE CLAIM FROM THE TOTAL TURNOVER AS WELL AS FROM THE BUSINESS INCOME OF THE ASSESSEE AN D COMPUTE DEDUCTION U/S 80HCC OF THE ACT. THIS ISSUE OF ASSESSEES APPEAL I S ALLOWED FOR STATISTICAL PURPOSES. 16. THE NEXT ISSUE IN THE APPEAL OF ASSESSEE IS AS REGARDS TO THE EXCLUSION OF INTEREST INCOME FROM BANK FROM THE BUSINESS PROFITS OF THE ASSESSEE, WHILE COMPUTING DEDUCTION U/S.80HHC OF THE ACT. ITA NO.1069/AHD/2008 A.Y. 2004-05 BANCO ALUMINIUM LTD. V. ACIT, CIR-1(1), BRD PAGE 7 17. AS REGARDS TO INTEREST INCOME FROM BANK ON MAR GIN MONEY, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT ONLY NETTING HAS TO BE GRANTED IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SHRI RAM HONDA POWER EQUIP (2007) 289 ITR 475 (DEL). ON THE OTHER HAND THE LEARNED S R. DR STATED THAT NOW THE ISSUE HAS BECOME CLEAR AFTER THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT V. ASIAN STAR CO. LTD. IN ITA NO.200 OF 2009 (BOM), WHEREIN, HONBLE BOMBAY HIGH COURT OBSERVED THAT EXPLANATION (BAA) TO S. 8 0HHC REQUIRES THAT NINETY PER CENT OF RECEIPTS BY WAY OF BROKERAGE, COMMISSION, I NTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE HAVE TO BE REDUCE D FROM THE PROFITS. THE REASON WHY ITEMS LIKE BROKERAGE ETC HAVE TO BE EXCLUDED IS BEC AUSE THEY DO NOT POSSESS ANY NEXUS WITH EXPORT TURNOVER AND THEIR INCLUSION IN P ROFITS WOULD RESULT IN A DISTORTION OF THE FIGURE OF EXPORT PROFITS. HOWEVER, AS SOME EXPE NDITURE MIGHT HAVE BEEN INCURRED IN EARNING THESE INCOMES, AN ADHOC DEDUCTION OF TEN PER CENT FROM SUCH INCOME IS ALLOWED. IT WAS FURTHER OBSERVED BY THE HONBLE HIG H COURT THAT ONCE PARLIAMENT HAS LEGISLATED BOTH IN REGARD TO THE NATURE OF THE EXCL USION AND THE EXTENT OF THE EXCLUSION, IT WOULD NOT BE OPEN TO THE COURT TO ORD ER OTHERWISE BY REWRITING THE LEGISLATIVE PROVISION. THE TASK OF INTERPRETATION I S TO FIND OUT THE TRUE INTENT OF A LEGISLATIVE PROVISION AND IT IS CLEARLY NOT OPEN TO THE COURT TO LEGISLATE BY SUBSTITUTING A FORMULA OR PROVISION OTHER THAN WHAT HAS BEEN LEG ISLATED BY PARLIAMENT. IT IS NOT OPEN TO SAY THAT SOMETHING MORE THAN THE 10% STATUT ORILY PROVIDED SHOULD ALSO BE ALLOWED. HONBLE HIGH COURT FURTHER HELD THAT IN CI T V. SHRI RAM HONDA POWER EQUIP , (2007)289 ITR 475 (DEL), THE DELHI HIGH COURT HAS NOT ADEQUATELY EMPHASIZED THE ENTIRE RATIONALE FOR CONFINING THE DEDUCTION ONLY T O THE EXTENT OF NINETY PER CENT OF THE EXCLUDIBLE RECEIPTS AND IT CANNOT BE FOLLOWED. AS REGARDS THE JUDGEMENT OF THE SPECIAL BENCH IN LALSONS ENTERPRISES , HONBLE HIGH COURT HELD THAT WE ARE AFFIRMATIVELY OF THE VIEW THAT THE TRIBUNAL HAS TRA NSGRESSED THE LIMITATIONS ON THE EXERCISE OF JUDICIAL POWER AND . HAS IN EFFECT LEG ISLATED BY PROVIDING A DEDUCTION ON THE GROUND OF EXPENSES OTHER THAN IN THE TERMS WHIC H HAVE BEEN ALLOWED BY PARLIAMENT. THAT IS IMPERMISSIBLE. IN REPLY THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT WHEN TWO HIGH COURTS DIFFER ON THE SAME ISSUE, THE BENEFICIAL VIE W SHOULD BE TAKEN IN FAVOUR OF THE ASSESSEE. HE STATED THAT HONBLE DELHI HIGH COURT I N THE CASE OF CIT V. SHRI RAM HONDA POWER EQUIP (2007) 289 ITR 475 (DELHI) HAS ALLOWED THE CLAIM O F THE ITA NO.1069/AHD/2008 A.Y. 2004-05 BANCO ALUMINIUM LTD. V. ACIT, CIR-1(1), BRD PAGE 8 ASSESSEE AS REGARD TO NETTING OF INTEREST ON THE AL LOWANCE OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. 18. WE FIND THAT THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF ASIAN STAR CO. LTD. (SUPRA) HAS CONSIDERED THE DELHI HIGH COURT JUDGMEN T IN THE CASE OF SHRI RAM HONDA POWER EQUIP (SUPRA) AS WELL THE CASE OF SPECIAL BENCH OF THIS TRIBUNAL IN LALSON ENTERPRISES AND HELD THAT 90% OF RECEIPTS BY WAY OF INTEREST HA VE TO BE REDUCED FROM THE BUSINESS PROFITS WHILE COMPUTING D EDUCTION U/S.80HHC OF THE ACT UNDER CLAUSE (BAA). RESPECTFULLY FOLLOWING HONBLE BOMBAY HIGH COURT IN ASIAN STAR CO. LTD. (SUPRA), WE UPHOLD THE ORDER OF CIT(A) AND THIS IS SUE OF THE ASSESSEES APPEAL IS DISMISSED. 19. THE NEXT ISSUES IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE 90% O F LABOUR CHARGES, BAD DEBTS RECOVERED, INCOME FROM FORWARD FE CONTRACT AND SUND RY INCOME RECEIVED BY THE ASSESSEE FROM THE BUSINESS PROFITS OF THE ASSESSEE WHILE COMPUTING DEDUCTION U/S.80HHC OF THE ACT. 20. AS REGARDS TO LABOUR CHARGES, BAD DEBTS RECOVER ED, INCOME FROM FORWARD FE CONTRACT AND SUNDRY INCOME, THE LD. COUNSEL FOR TH E ASSESSEE STATED THAT ONLY NETTING HAS TO BE GRANTED IN VIEW OF THE DECISION O F HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SHRI RAM HONDA POWER EQUIP (2007) 289 ITR 475 (DEL). ON THE OTHER HAND THE LEARNED SR. DR STATED THAT NOW THE I SSUE HAS BECOME CLEAR AFTER THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT V. DRESSER RAND INDIA P. LTD. (2010) 323 ITR 429 (BOM), WHEREIN, HONBLE BOMBAY HIGH COURT HAS CLEARLY HELD THAT THE RECOVERY OF FREIGHT, INSURANCE, PACKA GING RECEIPTS, SALES TAX REFUND AND SERVICE INCOME BEING MISCELLANEOUS INCOME NOT FORMI NG PART OF EXPORT ACTIVITY COVERED BY SECTION 80HHC, NINETY PER CENT OF SUCH I NCOME SHOULD BE EXCLUDED FROM COMPUTING THE INCOME OF ELIGIBLE BUSINESS FOR PURPO SES OF SECTION 80HHC, FOLLOWING THE DECISION IN THE CASE OF CIT V. K RAVINDRANATHAN NAIR (2007) 295 ITR 228 (SC). IN REPLY THE LEARNED COUNSEL FOR THE ASSESSEE STATED T HAT WHEN TWO HIGH COURTS DIFFER ON THE SAME ISSUE, THE BENEFICIAL VIEW SHOULD BE TA KEN IN FAVOUR OF THE ASSESSEE. HE STATED THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. SHRI RAM HONDA POWER ITA NO.1069/AHD/2008 A.Y. 2004-05 BANCO ALUMINIUM LTD. V. ACIT, CIR-1(1), BRD PAGE 9 EQUIP (2007) 289 ITR 475 (DELHI) HAS ALLOWED THE CLAIM O F THE ASSESSEE AS REGARD TO NETTING OF INTEREST ON THE ALLOWANCE OF DEDUCTION U NDER SECTION 80HHC OF THE ACT. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE H ONBLE APEX COURT IN THE CASE OF K.RAVIINDRANATHAN NAIR (SUPRA) BUT THE FACTS ON THESE ISSUES ARE NOT DISC USSED BY THE CIT(A) AS WELL AS BY ASSESSING OFFICER WHETHER THESE INCOME RELATE TO EXPORT OR NOT AND IN CASE THESE RELATE TO EXPORT NOTHING IS T O BE EXCLUDED AND IN CASE THESE ARE NOT RELATED TO EXPORT. IN VIEW OF THE ABOVE, W E SET ASIDE THESE ISSUES TO THE FILE OF ASSESSING OFFICER TO VERIFY THE NATURE OF THESE INCOMES AND ACCORDINGLY DECIDE THE CLAIM OF THE ASSESSEE. THESE ISSUES OF THE ASSESSE ES APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 21. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS DAY OF 30 JUNE,2010 SD/- SD/- ( G.D.AGARWAL ) ( MAHAVIR SINGH ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 30/06/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-I, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD