DCIT, Circle - 8, Kolkata, Kolkata V. M/s. ITC Limited, Kolkata

ITA 1506/KOL/2009

• Counselvise Citation: 150623514 RSA 2009
• Duration Of Justice: 4 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2000-2001
• Appeal Filed On: 27-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Assessee Lawyers: ARIJIT CHAKRABORTY
• Keywords: Depreciation
• Section: 80HHC; 12; 28; 11

Judgement Text

I.T.A. NO.: 1506/KOL./20 09 ASSESSMENT YEAR : 2000-2001 & ITA NO. 1749/KOL/2012 ASSESSMENT YEAR : 2001-200 2 PAGE 1 TO 7 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.A. NO.: 1506/KOL./2009 ASSESSMENT YEAR : 2000-2001 & I.T.A. NO.: 1749/KOL./2012 ASSESSMENT YEAR : 2001-2002 DEPUTY COMMISSIONER OF INCOME TAX,................. ..APPELLANT CIRCLE-8, KOLKATA P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. ITC LIMITED,.................................. ....................RESPONDENT 37, J.L. NEHRU ROAD, KOLKATA-700 071 [PAN : AAACI 5950 L] APPEARANCES BY: SHRI RAVI JAIN, CIT, D.R, FOR THE DEPARTMENT SHRI ARIJIT CHAKRABORTY, A.R., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : APRIL 24, 2014 DATE OF PRONOUNCING THE ORDER : APRIL 25, 2014 O R D E R PER ABRAHAM P. GEROGE : 1. THESE ARE APPEALS FILED BY THE REVENUE DIRECTED AGAINST ORDERS DATED 09.06.2009 AND 24.08.2012 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VIII, KOLKATA, FOR THE RESPECTIVE ASSESSM ENT YEARS. 2. GROUNDS RAISED BY THE REVENUE IN BOTH THESE APPE ALS, THOUGH DIFFERENTLY WORDED, ARE SUBSTANTIALLY THE SAME. IT ASSAILS A DIRECTION GIVEN BY LD. CIT(APPEALS) TO ALLOW DEDUCTION CLAIMED BY T HE ASSESSEE UNDER SECTION 80HHC AND UNDER SECTION 80HHE OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), BY CONSIDERING THE NET AMOUNTS FO R EXCLUSION FROM I.T.A. NO.: 1506/KOL./20 09 ASSESSMENT YEAR : 2000-2001 & ITA NO. 1749/KOL/2012 ASSESSMENT YEAR : 2001-200 2 PAGE 1 TO 7 2 PROFITS OF BUSINESS, WHILE COMPUTING SUCH DEDUCTI ON AVAILABLE UNDER THESE SECTIONS. 3. ASSESSEE HAD DURING THE PREVIOUS YEARS RELEVANT TO THE IMPUGNED ASSESSMENT YEARS RECEIVED LICENCE FEES ON THE MANTR ALAYA UNDERTAKING LEASED OUT BY IT. WHILE COMPUTING THE DEDUCTION, AV AILABLE UNDER SECTION 80HHC OF THE ACT, IT HAD EXCLUDED FROM PROFITS OF THE BUSINESS, RECEIPTS IN THE NATURE OF SUCH LICENCE FEES IN ACCORDANCE WI TH EXPLANATION (BAA) OF THAT SECTION. HOWEVER, WHILE EXCLUDING SUCH LICENCE FEES, IT HAD REDUCED THERE FROM EXPENDITURE ON ACCOUNT OF DEPRECIATION O N THE LEASED OUT BUILDING. IN OTHER WORDS, ONLY THE NET AMOUNT OF LI CENCE FEES AFTER DEDUCTING DEPRECIATION WAS EXCLUDED FROM THE PROFIT S OF THE BUSINESS. SIMILARLY, ASSESSEE HAD TRANSIT FLAT/GUEST HOUSE IN COME ALSO AND WHILE EXCLUDING SUCH INCOME ASSESSEE HAD NETTED SUCH AMOU NT WITH THE EXPENDITURE INCURRED ON SUCH TRANSIT FLAT. ASSESSIN G OFFICER WAS HOWEVER OF THE OPINION THAT FOR EXCLUDING THE ITEMS OF THE NATURE MENTIONED IN CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC, G ROSS AMOUNTS ALONE COULD BE CONSIDERED. IN OTHER WORDS, HE DECLINED TO ACCEPT THE CLAIM OF EXPENDITURE ON THE RESPECTIVE INCOME. 4. ASSESSEE MOVED IN APPEAL BEFORE LD. CIT(APPEALS ) AND WAS SUCCESSFUL TO AN EXTENT. LD. CIT(APPEALS) WHILE HOL DING THAT LICENCE FEES FOR MANTRALAYA UNDERTAKING AS ALSO THE TRANSIT FLAT INCOME WERE SIMILAR TO BROKERAGE, COMMISSION, INTEREST, RENT CHARGES OR OT HER RECEIPTS OF SIMILAR NATURE, MENTIONED IN CLAUSE (1) TO EXPLANATION (BAA ) TO SECTION 80HHC, HOWEVER, RULED THAT ASSESSEE WAS ENTITLED TO DEDUCT EXPENDITURE, WHICH HAD DIRECT NEXUS TO SUCH INCOME. IN OTHER WORDS, AC CORDING TO THE LD. CIT(APPEALS) IT WAS NOT THE GROSS RECEIPT BUT THE N ET RECEIPT WHICH WAS TO BE CONSIDERED FOR APPLICATION OF EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT. THOUGH HE NOTED THAT THE ISSUE WAS DEBATA BLE, HE DIRECTED THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE CLAIMED IF ASSESSEE COULD SHOW I.T.A. NO.: 1506/KOL./20 09 ASSESSMENT YEAR : 2000-2001 & ITA NO. 1749/KOL/2012 ASSESSMENT YEAR : 2001-200 2 PAGE 1 TO 7 3 DIRECT NEXUS WITH THE EARNING OF INCOME, AND FOR TH IS LIMITED PURPOSE REMITTED THE ISSUES BACK TO THE ASSESSING OFFICER. 5. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE S UBMITTED THAT LD. CIT(APPEALS) FELL IN ERROR IN CONSIDERING INCOME ON NET BASIS FOR EXCLUSION FROM PROFITS OF THE BUSINESS, WHILE APPLY ING EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT, FOR COMPUTING DEDUCTIO N AVAILABLE TO THE ASSESSEE UNDER THE SAID SECTION. 6. PER CONTRA, LD. A.R. SUBMITTED THAT APPROACH OF THE LD. CIT(APPEALS) WAS CORRECT IN VIEW OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. VS.- CIT [201 2] 343 ITR 89. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ON THE LEASE INCO ME RECEIVED BY THE ASSESSEE ON LEASE OF THE MANTRALAYA UNDERTAKING TO M/S. ITC AGROTECH LIMITED, ASSESSEE HAD DEDUCTED DEPRECIATION ON SUCH BUILDING, BEFORE EXCLUDING IT FROM PROFITS OF THE BUSINESS, IN ACCOR DANCE WITH EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT, ASSESSING OFFICE R WAS, HOWEVER, OF THE OPINION THAT SUCH EXCLUSION HAD TO BE DONE ON GROSS BASIS. SIMILAR WAS THE CASE FOR TRANSIT FLAT INCOME ALSO. FOR APPLICATION OF THE EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT, THE QUESTION WHETHER N ET AMOUNT OF GROSS AMOUNT OF THE ITEMS MENTIONED THEREIN IS TO BE CONS IDERED, IS NO MORE RES-INTEGRA. HONBLE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA) HELD AS UNDER :- (8) BEFORE WE DEAL WITH THE CONTENTIONS OF LEARNED COUNSEL FOR THE PARTIES, WE MAY EXTRACT E X PLAN A T I O N ( BAA ) TO SECTION 80HHC OF THE ACT. 'EXPLANA T LO N . -FOR THE ' PURPOSES OF THIS SECTION,- ( BAA ) 'PROFITS OF THE BUSINESS' MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER TH E H EAD 'P R OFITS AND GAINS OF BUSINESS OR PROFESSION' AS REDUC ED BY- ( 1 ) NINETY PER CENT OF ANY SUM REFERRED TO IN CLAUSES ( IIIA), (IIIB), (IIIC), (IIID) AND (IIIE ) OF SEC T ION 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER R E C EI P T OF A S IMILA R NATURE INCLUDED IN SUCH PROFITS; AND I.T.A. NO.: 1506/KOL./20 09 ASSESSMENT YEAR : 2000-2001 & ITA NO. 1749/KOL/2012 ASSESSMENT YEAR : 2001-200 2 PAGE 1 TO 7 4 (2) THE PROF I T S OF ANY BRANCH, OFFICE, WAREHOUSE OR ANY OTHER ESTAB LISHMENT OF THE AS SESSEE S I TUATE O U T S IDE INDI A '. 9. E X P L ANATION (BAA) E X TRACTED ABOVE STATES THAT 'PROFITS OF THE BUSINESS' MEANS THE PROF I T S OF T HE BU S INES S AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION' A S R E DUC ED BY TH E R E C E IPT S OF THE NATURE MENTIONED IN CLAUSES (1) AND (2) OF T HE E X PLANATION ( BAA ) . T HU S, PROFITS O F THE BUSIN E SS OF AN ASSESSEE WILL HAVE TO BE FIRST COMPUTED UN DER THE HEAD 'PROFIT S AND GAI NS OF B U S I N E SS OR PROFESSION' IN ACCORDANCE WITH PROVISIONS OF SEC TION 2 8 TO 44D O F TH E A CT . I N THE COMP UT A TION OF SUCH PROFITS OF BUSINESS, ALL RECEIPTS OF I NCOME WHICH ARE CHARGEABLE A S PROFIT S AND GAINS OF BU S INESS UNDER SECTION 28 OF THE ACT WILL HAVE TO BE I NCLUDED. SIMI L ARLY , I N COMPUTAT ION OF SUC H P RO F I T S O F BU S INESS , D I FFERENT EXPENSES WHICH ARE ALLOWABLE UNDER SECTIONS 30 TO 44D HA VE TO BE A L L O WE D A S E X PENSES . AFTER INCLUDING SUCH RECEIPTS OF INCOME AND AFTER DEDUCTING SU C H EXPENSES, TH E T OT A L OF TH E NET RECEIPTS ARE PROFITS OF THE BUSINESS OF THE ASS ESSEE COMPUTED UNDER THE HEAD ' PROFITS AND GAINS OF BUSINESS OR PROFESSION' FROM W HICH DEDUCTIONS ARE TO MADE UND E R CL AUSES (1) AN D ( 2 ) OF E X PLANATION (BAA). 1 0 . UND E R CL A USE (1 ) OF E X PLANATION (BAA), NINETY PER CENT OF ANY RECEIPT S B Y W AY O F B ROKERAGE, CO MMI SS ION , I NTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SI MILAR NATURE INCLUDED I N A N Y SUCH P R O F IT S ARE TO BE DEDUCTED FROM THE PROFITS OF THE BUSINESS AS COMPUTED UN D ER TH E HE A D ' PR OFITS AND GAIN S OF BU S INESS OR PROFESSION'. THE E X PRESSION ' I NCLUDED ANY SUCH PROFIT S ' IN C LAU SE (1) OF THE E X PLANATION (BAA) WOULD MEAN ONLY SUCH RECE I PTS BY WAY OF BROKERAGE , COMMIS S ION , I NT EREST, RENT, C H A RG ES OR ANY OTHER RECE I PT WHICH ARE INCLUDED IN THE PROFITS OF THE BUSINES S AS COMPUT ED UNDER T H E HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THEREFORE, IF ANY QUANTUM OF TH E R ECEI PT S BY WAY OF B RO KE RAGE , COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RE C EI PT OF A SIMILAR N ATURE IS A L LOWE D AS EX PENSE S UND E R SECTIONS 30 TO 44D OF THE ACT AND I S NOT INCLUDED IN TH E P ROF I TS OF B U S I NESS AS CO MPUT E D UNDE R THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR O FE SSI ON' , NIN E T Y PER CENT O F SUC H Q UAN T UM OF RECEIPTS CANNOT BE REDUCED UNDER CLAUSE ( 1 ) O F E X PL A NATION ( B AA) FROM THE P R OFI TS O F TH E BU S INES S . IN OTHER WORDS, ONLY N I NETY PER CENT OF THE NET AMOUNT OF ANY R ECEIPT OF THE NA T URE M E NTIONED IN C L AUSE (1) WHICH IS ACTUALLY I NCLUDED IN THE PROFITS OF THE AS SE SSEE I S TO BE D E DUCT E D FROM THE PROFITS OF THE ASSESSEE FOR DETERMINING 'PROFITS OF THE BUSINESS ' OF TH E A S SESSEE UN D E R EX PLANATION (BAA) TO SECTION 80HHC . 11 . F O R THIS INTERPRETATION OF E X PLANAT I ON (BAA) TO SECTION 8 0HHC OF THE ACT, WE RELY ON THE J UDGMENT OF THE CONSTITUTION BENCH OF THIS COURT IN DISTR I BUTO RS ( BARODA ) P . L TD . V . U NI O N OF INDIA AN D O T H E R S (S UPRA). SECTION 80M OF THE ACT PROVIDED FOR DEDUCTIO N IN R ES P ECT OF CERTAIN IN T ERC O RP OR A T E DI V IDE N DS AND IT PROVIDED I N SUB-SECTION (1) OF SECTION 8 0M THA T 'W H E R E THE GROSS TOTAL IN CO M E O F AN ASSESSEE BEING A COMPANY INCLUDES ANY INCOME B Y WAY OF DIV I D E ND S RECEIVED BY I T F R OM A DOME S TIC COMPANY , THERE SHALL , IN ACCORDANCE WITH AND SUBJECT TO T HE PROVI S I ONS OF THIS SEC T I ON , BE ALLOWED, IN COMPUTING THE TOTAL I NCOME OF THE ASSESSEE , A DEDUCTION FROM S U C H INCOME BY W AY OF D I VID E NDS AN AMOUNT EQUAL TO' A CERTAIN PERCENTAGE OF THE INCOME MENT I ON ED IN THIS SEC T I ON. TH E CONSTITUTION BENCH HELD THAT THE COURT MU S T CONSTRUE SECTION 8 0M ON ITS OWN L ANG UA GE AND ARR I VE AT ITS TRUE I NTERPRETAT I ON ACCORDING TO THE PLAIN NATURAL MEAN I NG O F T HE WORDS USED BY TH E LE GISLATURE AND SO CONSTRUED THE WORDS 'SUCH I N COM E BY W AY OF D I V I D EN D S' IN SUB- SECTION (1) OF SECTION 80M MUST BE REFERABLE NOT ON LY TO THE CATEGORY OF INCOME INCLUDED IN T H E GROSS TOTAL INCOME BUT ALSO TO THE QUANTUM OF THE I NCOME SO INCLUDED. SIMILARLY, EXPLANATION (BAA ) HAS TO BE CONSTRUED ON ITS OWN LANGUAGE AND AS PER THE PLAIN NATURAL MEANING OF THE WORDS USED IN EXPLANATION (BAA), THE WORDS 'RECEIPTS BY WAY OF BR OKERAGE, COMRNISSLEN , INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN S UCH PROFITS' WILL NOT ONLY REFER TO THE NATURE O F RECEIPTS BUT ALSO THE QUANTUM OF RECEIPTS INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON' REFERRED TO IN THE FIRST PART OF THE EXPLANAT I ON (BAA). ACCORDINGLY, IF ANY QUANTUM OF ANY RECEIP T OF THE NATURE MENTIONED IN CLAUSE (1 ) OF E X P L ANATION (BAA) HAS NOT BEEN INCLUDED IN THE PROFITS OF BUSINESS OF AN ASSESSEE AS COMPU T ED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION', NINETY PER CENT OF SUCH QUANTUM OF THE RECEIPT CANNOT BE DEDUCTED UNDER EXPLANATION (B AA) TO SECTION 80HHC . 12 . IF WE NOW APPLY EXPLANATION (BAA) AS INTERPRETED BY US IN THIS JUDGMENT TO THE FACT S OF THE C A S E BEFORE US, IF THE RENT OR INTEREST IS A RECEIPT CHA RGEABLE AS PROFITS AND GAINS OF BUSINESS A ND I.T.A. NO.: 1506/KOL./20 09 ASSESSMENT YEAR : 2000-2001 & ITA NO. 1749/KOL/2012 ASSESSMENT YEAR : 2001-200 2 PAGE 1 TO 7 5 C HARGEABLE TO TAX UNDER SECTION 28 OF THE ACT, AND I F ANY QUANTUM OF THE RENT OR INTEREST OF T H E ASS ESSEE IS ALLOWABLE AS AN EXPENSE IN ACCORDANCE WITH SECTIONS 30 TO 44D OF THE ACT AND I S NO T TO BE INCLUDED IN THE PROFITS OF THE BUSINESS OF TH E ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFIT S AN D GAINS OF BUSINESS OR PROFESSION', NINETY PER CENT OF SUCH QUANTUM OF THE RECEIPT OF RENT OR I NT ERES T WILL NOT BE DEDUCTED UNDER CLAUSE (1) OF EXPLANAT ION (BAA) TO SECTION 80HHC . IN OTHER W O R D S, NINETY PER CENT OF NOT THE GROSS RENT OR GROSS INTE REST BUT ONLY THE NET INTEREST OR NET RENT , WHICH HAS BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD ' P RO FIT S A ND GAINS OF BUSINESS OR PROFESSION', IS TO BE DEDUC TED UNDER CLAUSE (1) OF EXPLANATION ( BAA ) T O S ECTION 80HHC FOR DETERMINING THE PROFITS OF THE BUS INESS. 13 . TH E V I E W THAT WE HAVE TAKEN OF EXPLANATION (BAA) TO SECTIO N 80HHC IS ALSO THE VI EW OF THE DELHI HIGH COURT IN COMMISSIONER OF INCOME-TAX V. S HRI RAM H O NDA POWER EQUIP (SUPRA) AND THE TRIBUNAL IN THE PRESENT CASE HAS FOLLOWED THE JUDGM ENT OF THE DELHI HIGH COURT . ON APP E AL BEING FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBU NAL, THE HIGH COURT HAS SET ASIDE THE ORD E R OF T HE TRIBUNAL AND DIRECTED THE ASSESSING OFFICER TO DISP OSE OF THE ISSUE IN ACCORDANCE WITH THE JUDGMEN T OF THE BOMBAY HIGH COURT IN COMMISSIONER OF INCOME- TAX V. ASIAN STAR CO. LTD . (SUPRA). W E MUST, THUS, EXAMINE WHETHER REASONS GIVEN BY THE HIGH COU RT IN ITS JUDGMENT IN COMMI S SION ER OF INCOME-TA X V. ASIAN STAR CO . LTD. (SUPRA) WERE CORRECT IN LAW. 14. ON A PERUSAL OF THE JUDGMENT OF THE HIGH COURT IN COMMISSIONER OF INCOME-TA X V . A S IA N STAR CO . LTD. ( SUPRA), WE FIND THAT THE REASON WHICH WEIGHED WITH THE HIGH COURT FOR TAKING A DIFF ERENT VI E W , I S THAT RENT, COMMISSION, INTEREST AND BROKERAGE DO NO T POSSESS ANY NE X US W ITH EX P ORT TURNO VE R AND , THEREFORE, THE INCLUSION OF SUCH ITEMS IN THE PROFI TS OF THE BUSINESS WOULD RESUL T I N A DISTORTION OF THE FIGURE OF EXPORT PROFITS. THE HIG H COURT HAS RELIED ON A DECISION OF THI S CO U RT IN C O MMISSIONER OF INCOME-TAX V. K. RAVINDRANATHAN NAIR [(2007) 295 ITR 228 (SC ) ] IN W HIC H THE IS SUE RAISED BEFORE THIS COURT WAS ENTIRELY DIFFERENT FROM THE ISSUE RAISED IN THIS CASE. IN THAT CASE, TH E AS S ESS E E OWNED A FACTORY IN WHICH HE PROCESSED CASHEW NUTS GROWN IN HIS FARM AN D HE EX PORT E D THE CASHEW NUTS AS AN EXPORTER. AT THE SAME TIME , THE ASSESSEE PROCES S ED CA S H EW N U TS W HICH W ERE SUPPLIED TO HIM BY EXPORTERS ON JOB WORK BASIS AND HE COLLECTED PROCE SS I N G C HA RG ES FOR TH E S AME. HE, HOWEVER, DID NOT INCLUDE SUCH PROCESSING C HARGES COLLECTED ON JOB WORK BA S I S IN HIS T OTAL TURNOVER FOR THE PURPOSE OF COMPUTING THE DEDU CTION UNDER SECTION 8 0HHC (3 ) O F TH E A CT A ND A S A RESULT THIS TURNOVER OF COLLECTION CHARGES WAS LE FT OUT IN THE COMPUTATION OF PROFITS AND GA INS OF BUSINESS OF THE ASSESSEE AND AS A RESULT NINETY PER CENT OF THE PROFITS OF THE ASSESSEE ARISING OUT OF THE RECEIPT OF PROCESSING CHARGES WAS NOT DEDUCTED UNDER CLAUSES (1) OF THE E X PLANATION ( BA A) T O SEC TION 80HHC . THIS COURT HELD THAT THE PROCESSING CHARGES WAS INC LUDED I N THE GROSS TOTAL I N C O ME F ROM CAS HEW BUSINESS AND HENCE IN TERMS OF EXPLANATION (BAA ), NINETY PER C E NT OF TH E GRO SS T O T AL IN C OM E A RISING FROM PROCESSING CHARGES HAD TO BE DEDUCTED U NDER EXPLANATION ( BA A) TO AR R IVE A T T H E PROFITS OF THE BUSINESS. IN THIS CASE, THIS COURT H ELD THAT THE PROCESSING CHARGE S R ECE IV ED BY THE ASSES S E E W ER E PART OF THE BUSINESS TURNOVER AND ACCORDINGLY THE INCOME AR I SING TH ER EFR OM SHOULD H A V E B E EN INCLUDED IN THE PROFITS AND GAINS OF BUSINESS OF THE ASSESSEE AND NINETY PE R CENT OF T HIS IN C OME ALSO WOULD HAVE TO BE DEDUCTED UNDER EXPLANATIO N (BAA) UNDER SECTION 80HHC OF TH E A CT. IN T HI S CASE , THIS COURT WAS NOT DECID I NG THE ISSUE WHETHER N I NETY PE R CENT DEDUCTION I S T O B E MADE FROM TH E G R O S S OR NET INCOME OF ANY OF THE RECEIPTS MENTIONED IN CLAUSE ( 1) OF TH E E XPL A NATION (BAA). 15 . TH E BOMBAY H I GH COURT HAS ALSO RELIED ON THE MEMORANDUM E X PLAIN I NG T H E CLAUSES OF THE F IN A NCE BILL, 1991 CONTAINED IN THE CIRCULAR DATED 19.12.19 91 OF THE CENTRAL BOA R D OF DI RECT TA X ES TO C O M E TO THE CONCLUSION THAT THE PARLIAMENT INTENDED TO E X CLUDE ITEM S WHICH WE RE UN RE L ATED TO THE EXPO RT T URNOVER FROM THE COMPUTAT I ON OF DEDUCTION AND W HILE E X CLUDING S UCH ITE MS WHICH ARE UNRE L ATE D TO EX PORT FOR THE PURPOSE OF SECTION 80HHC , PARLIAMENT HAS TAK E N DU E N O TE OF THE FACT THAT T HE EX PORTER ASSESSEE WOULD HAVE INC U RRED SUCH E X PENDITURE IN E ARNING TH E P ROF I TS AND TO AVOID A DISTO R TED FIGURE OF E X PORT PROFIT S, NINETY PER CENT OF THE RE C E I P T S LI KE BROKERAGE , COM M ISSI O N , INTERE S T, R ENT, CHARGE S ARE S OUGHT TO BE E X CLUDED FROM THE PRO FI T S O F T HE B U SINESS. IN OUR C O NS ID E R E D OPINION , I T W AS NOT NECES S A RY TO R EFER TO THE E XP L A NATO R Y M E M ORA ND UM WHEN THE LA N G U AGE O F E X P L ANATION (BAA) TO SECT I ON 8 0 HH C WA S CLEAR THAT ONLY NIN E T Y PER CE NT OF RECEIPTS BY WAY OF B RO KE R A GE, COMMISSION , I NTERE S T , R E NT, CHARGES OR ANY OTH ER R E C E IPT OF A SIMI L AR NATURE I.T.A. NO.: 1506/KOL./20 09 ASSESSMENT YEAR : 2000-2001 & ITA NO. 1749/KOL/2012 ASSESSMENT YEAR : 2001-200 2 PAGE 1 TO 7 6 I NCLU D E D IN S UCH PROFITS COMPUTED UNDER TH E H E AD PROFITS AND GA I N S O F BUSINESS O F AN ASSESSEE COU L D BE D E DUCTED U NDER CLAUSE ( 1 ) OF E X PLA N ATION (BAA ) AND NOT NINETY PE R CE N T OF T H E Q U ANTUM OF ANY OF TH E A FOR ES AID R E C E IPTS WHICH A R E ALLOWED A S E X PENS E S A N D THEREFO RE N OT I N C LU DED IN THE PROFITS OF B U S I NESS OF TH E A SSES S E E. 8. LD. CIT(APPEALS) HAD ONLY DIRECTED THE ASSESSING OFFICER TO EXCLUDE SUCH OF THE EXPENDITURE, WHICH HAD DIRECT NEXUS TO THE LICENCE FEES RECEIVED AND INCOME FROM TRANSIT FLAT/GUEST HOUSE. IN OTHER WORDS, LD. CIT(APPEALS) HAD INDIRECTLY REQUIRED THE ASSESSING OFFICER NOT TO ALLOW DEDUCTION OF EXPENDITURE WHICH DID NOT HAVE ANY DIR ECT LINK WITH THE EARNING OF CORRESPONDING RECEIPT. IN VIEW OF THE DE CISION OF THE HONBLE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES P VT. LTD. (SUPRA), RELEVANT PART WHICH HAS BEEN REPRODUCED ABOVE, WE C ANNOT FIND ANY LACUNA IN THE DIRECTION GIVEN BY THE LD. CIT(APPEAL S). 9. THE SECOND GRIEVANCE OF THE REVENUE IS SIMILAR T O ITS FIRST GRIEVANCE. ONLY DIFFERENCE IS THAT HERE THE DEDUCTION CLAIMED BY THE ASSESSEE WAS UNDER SECTION 80HHE. AS POINTED OUT BY THE LD. AR, EXPLANATION (BAA) TO SECTION 80HHC AND EXPLANATION (D) TO SECTION 80HHE ARE ALMOST PARI MATERIA. ONLY DIFFERENCE THAT WE FIND IS THAT SUMS ARE REFERRED TO IN CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28, WH ICH APPEAR IN CLAUSE (1) TO EXPLANATION (BAA) DOES NOT FIND A PLACE IN CLAUSE ( 1) OF EXPLANATION (D) TO SECTION 80HHE. BUT FOR THIS THE WORDINGS ARE THE VE RY SAME. THEREFORE, IN OUR OPINION, THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA) WILL SQUARELY APPLY HERE ALSO. HENCE, WE CANNOT FIND ANY DEFECT IN THE DIRECTIONS GIVEN BY THE LD. CIT(APPEALS) ON THIS ASPECT ALSO. 10. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF APRIL, 2014. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 25 TH DAY OF APRIL, 2014 I.T.A. NO.: 1506/KOL./20 09 ASSESSMENT YEAR : 2000-2001 & ITA NO. 1749/KOL/2012 ASSESSMENT YEAR : 2001-200 2 PAGE 1 TO 7 7 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8, KOLKATA P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. ITC LIMITED, 37, J.L. NEHRU ROAD, KOLKATA-700 071 (3) CIT(APPEALS) (4) CIT (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.