M/s Vardhman Holdings Ltd., Ludhiana V. DCIT, Ludhiana

ITA 280/CHANDI/2008

• Counselvise Citation: 28021514 RSA 2008
• Duration Of Justice: 4 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-12-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 04-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Business income; Depreciation; Earning of tax free income; Retrospective amendment; Benefit of exemption
• Section: 143(3); 80HHC; 14A; 115JB; 80IB; 10B; 12; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.249/CHD/2008 ( ASSESSMENT YEARS : 2001-02) THE A.C.I.T.-I, VS. M/S VARDHMAN HOLDINGS LTD. LUDHIANA. (FORMERLY KNOWN AS VARDHMAN SPG.& GENERAL MILLS LTD.), CHANDIGARH ROAD, LUDHIANA. PAN: AAACV5824C AND ITA NO.280/CHD/2008 ( ASSESSMENT YEARS : 2001-02) M/S VARDHMAN HOLDINGS LTD. VS. THE A.C.I.T.-I, (FORMERLY KNOWN AS VARDHMAN LUDHIANA. SPG.& GENERAL MILLS LTD.), CHANDIGARH ROAD, LUDHIANA. PAN: AAACV5824C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.N. GUPTA DEPARTMENT BY : SMT.JYOTI KUMARI, DR DATE OF HEARING : 10.12.2012 DATE OF PRONOUNCEMENT 28.12.2012 O R D E R PER SUSHMA CHOWLA, J.M. : THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S)-II, LUDHIANA DATED 25.01.2008 RELATING TO ASSESSMENT YEAR 2001-0 2 AGAINST THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961. 2. THE CROSS APPEALS FILED BY THE ASSESSEE AND REVE NUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 2 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE-DIRECTING NOT TO INCLUDE 90% OF RS.0.12 LACS REPRESENTING CLA IMS RECEIVED IN THE PROFITS OF BUSINESS WHILE CALCULATING DEDUCT ION U/S 80HHC OF INCOME TAX ACT. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE DIRECTING NOT TO INCLUDE 90% OF RS,64.49 LACS REPRESENTING EX CESS PROVISIONS WRITTEN BACK IN THE PROFITS OF BUSINESS WHILE CALCULATING DEDUCTION U/S 80HHC OF INCOME TAX ACT. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE DIRECTING NOT TO INCLUDE 90% OF RS.83.65 LACS REPRESENTING MI SCELLANEOUS INCOME IN THE PROFITS OF BUSINESS WHILE CALCULATING DEDUCTION U/S 80HHC OF INCOME TAX ACT. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE EXCLUDING 90% OF RS.18.09 LACS REPRESENTING RENT RE CEIVED FROM PROFITS OF BUSINESS WHILE CALCULATING DEDUCTION U/ S 80HHC OF INCOME TAX ACT. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE EXCLUDING 90% OF INTEREST RECEIVED FROM CUSTOMERS A ND SUPPLIERS AMOUNTING TO RS.341.39 LACS FROM PROFITS OF BUSINESS WHILE CALCULATING DEDUCTION U/S 80HHC OF INCOME TAX ACT. 6. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE NOT ALLOWING DEDUCTION UNDER PROVISO TO SECTION 80HHC O N PROFIT ON SALE OF DEPB AMOUNTING TO RS.14.12 LACS. 7. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS W HILE EXCLUDING EXPORT TURNOVER AMOUNTING TO RS.33,62,00,502/- IN R ESPECT OF EXPORT ORIENTED UNITS FROM EXPORT TURNOVER OF THE A PPELLANT WHILE CALCULATING DEDUCTION U/S 80HHC OF INCOME TAX ACT. 8. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE REDUCING A SUM OF RS.4,20,835/- BEING PROFITS OF UN DERTAKING (AURO - V) CLAIMING DEDUCTION U/S 80IB OF INCOME TA X ACT FROM PROFITS OF BUSINESS WHILE CALCULATING DEDUCTION U/S 80HHC OF INCOME TAX ACT. 9. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AND O N FACTS WHILE APPORTIONING ALL THE PERSONNEL, ADMINISTRATIV E, FINANCIAL EXPENSES AND SELLING EXPENSES BEING EXPEN SES NOT RELATING TO TRADING ACTIVITIES OF APPELLANT'S B USINESS FOR CALCULATING INDIRECT COST OF TRADING EXPORTS WHILE CALCULATING DEDUCTION U/S 80HHC OF INCOME TAX ACT. 10. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE REDUCING A SUM OF RS.2.50 LACS BEING INTEREST RECEI VED FROM COTTON SUPPLIERS FROM PROFITS OF THE UNDERTAKI NG WHILE CALCULATING DEDUCTION U/S 10B OF INCOME TAX A CT. 3 11. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS WHILE ALLOCATING HEAD OFFICE EXPENSES TO THE UNITS CLAIMI NG DEDUCTION U/S 10B OF INCOME TAX ACT. 12. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE ALLOCATING HEAD OFFICE EXPENSES TO THE UNIT (AURO W EAVING MILLS, UNIT - 1) CLAIMING DEDUCTION U/S 801A OF INC OME TAX ACT. 13. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE ALLOCATING HEAD OFFICE EXPENSES TO THE UNIT CLAIMIN G DEDUCTION U/S 80IB OF INCOME TAX ACT OF THE FOLLOWI NG UNITS: - - AURO - III - AURO - V - VSGM (EOU) 14. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS W HILE EXCLUDING RS.2.82 LACS REPRESENTING RENT RECEIVED F ROM EMPLOYEES FROM ELIGIBLE PROFITS OF THE UNDERTAKING OF THE APPELLANT CLAIMING DEDUCTION U/S 80IA IN CASE OF AU RO WEAVING MILLS, UNIT - 1 AMOUNTING TO RS.0.39 LACS. 15. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE EXCLUDING RS.2.82 LACS REPRESENTING RENT RECEIVED F ROM EMPLOYEES FROM ELIGIBLE PROFITS OF THE UNDERTAKING OF THE APPELLANT CLAIMING DEDUCTION U/S 80IB IN CASE OF AU RO DYEING MILLS AMOUNTING TO RS.2.43 LACS. 16. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS W HILE EXCLUDING RS.59.74 LACS REPRESENTING DEPB BENEFIT F ROM ELIGIBLE PROFITS OF THE UNDERTAKING (AURO WEAVING M ILLS (UNIT - 1)) OF THE APPELLANT CLAIMING DEDUCTION U/S 801A OF INCOME TAX ACT. 17. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE ALLOCATING RS. ONE LAC U/S 14A OF THE INCOME TAX A CT TO EXEMPT DIVIDEND INCOME EARNED BY THE APPELLANT WHIL E IGNORING THE FACT THAT NO SUCH EXPENDITURE WAS INCU RRED FOR EARNING DIVIDEND INCOME. 4. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF A PPEAL : 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW IN NOT RED UCING 90% OF RENT RECEIVED, MISC. INCOME, EXCESS PROVISION WRITT EN BACK FROM THE PROFITS OF BUSINESS FOR THE PURPOSES OF CALCULA TING DEDUCTION U/S 80HHC. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW BY DIRECTING THE A.O. FOR FRESH ADJUDICATION/ VERIFICATION OF DIRECT AND INDI RECT COST ATTRIBUTABLE TO TRADING OF EXPORT GOODS AS PER PROV ISIONS OF 4 SECTION 80HHC OF I.T. ACT, 1961, WHEREAS THE SAME W AS CALCULATED AS PER DATA SUPPLIED BY THE ASSESSEE. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING THE DEDUCTION U/S 10B ON PROVISION WRITTEN BACK AND MISC. INCOME WHICH HAVE NO NEXUS WITH THE PROFITS DERIVED FROM THE UNDERTAK ING CLAIMING EXEMPTION U/S 10B. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING DEDUCTION U/S 80IB ON THE PROFITS DERIVED FROM THE DYEING UNIT WH EN THE SAME IS NOT TREATED AS MANUFACTURING UNIT. 5. THAT THE LD. CIT(A} HAS ERRED IN LAW IN ALLOWING DEDUCTION U/S 80IA/80IB AMOUNTING TO RS.76.16 LACS REPRESENTI NG 'OTHER INCOME' I.E. THE INCOME WHICH HAVE NO NEXUS WITH TH E PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING. 6. THAT THE LD. CIT(A) HAS ERRED IN LAW IN ALLOCATI NG THE EXPENSES OF RS.1 LAC ONLY AS AGAINST RS.29,66,046/- BY THE A .O. IN EARNING THE EXEMPTED DIVIDEND INCOME WITHOUT ANY BASE. 7. THAT THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING 100% DEDUCTION U/S 80HHC INSTEAD OF 80% AS AVAILABLE FOR THE YEAR UNDER CONSIDERATION IN COMPUTING BOOK PROFIT OF THE ASSESSEE U/S 115JB. 5. THE ISSUE IN GROUND NOS. 1 TO 3 IS IDENTICAL I.E . AGAINST THE DIRECTIONS OF CIT (APPEALS) IN RESPECT OF COMPUTATI ON OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. 6. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT TH AT THE CIT (APPEALS) VIDE PARA 8 AT PAGE 2 OF THE APPELLATE OR DER HAD PLACED RELIANCE ON THE ORDER OF CIT (APPEALS) IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2000-01 WHEREIN THE APPEAL OF THE A SSESSEE WAS ALLOWED. HOWEVER, WHILE GIVING THE DIRECTIONS FOR THE YEAR U NDER CONSIDERATION THE CIT (APPEALS) HAD BY AN ERROR DIRECTED NOT TO I NCLUDE THE ABOVE SAID ITEMS OF INCOME IN THE PROFITS OF BUSINESS FOR COMP UTING DEDUCTION UNDER SECTION 80HHC OF THE ACT, AS AGAINST THE ORDER OF I NCLUSION OF THE SAID INCOME BY THE CIT (APPEALS) IN THE APPEAL RELATING TO THE PRECEDING YEAR. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY POI NTED OUT THAT THE REVENUE VIDE GROUND NO.1 IN THIS APPEAL HAS CHALLEN GED THE ABOVE SAID OBSERVATIONS OF THE CIT (APPEALS). 5 7. THE LEARNED D.R. FOR THE REVENUE FAIRLY ADMITTED THAT THE OBSERVATIONS OF CIT (APPEALS) IN THE CONCLUDING PAR A WERE INCORRECT. HOWEVER, IT STRONGLY OBJECTED TO THE RELIEF ALLOWED BY THE CIT (APPEALS). 8. ON PERUSAL OF RECORD AFTER HEARING THE AUTHORIZE D REPRESENTATIVES WE FIRST ADDRESS THE ONLY ISSUE OF THE DIRECTIONS P ASSED BY THE CIT (APPEALS) IN THE PRESENT APPEAL. WE FIND THAT THE CIT (APPEALS) VIDE PARA 8 AT PAGE 2 OF THE APPELLATE ORDER HAD REFERRE D TO THE DECISION OF THE CIT (APPEALS) IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 WHEREIN IT WAS HELD THAT MISC. INCOME, EXCESS PROVISIONS WRITTEN BACK AND PREVIOUS YEARS INCOME ARE IN THE NATURE OF BUS INESS AND THAT AS SUCH 90% OF THE SAME IS NOT TO BE DEDUCTED FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSES OF DEDUCTION U/S 80HHC OF THE ACT . THE CIT (APPEALS) WAS IN AGREEMENT WITH THE SAID FINDINGS O F THE CIT (APPEALS). HOWEVER, THE ASSESSING OFFICER WAS DIRECTED NOT TO INCLUDE 90% OF CLAIMS RECEIVED, EXCESS PROVISIONS WRITTEN BACK AND MISC. INCOME OF RS.0.12 LAC, RS.64.49 LAC AND RS.83.65 LAC RESPECTI VELY IN THE PROFITS OF THE BUSINESS FOR COMPUTING DEDUCTION U/S 80HHC. W E ARE OF THE VIEW THAT THE WORD NOT IS SUPERFLUOUS AND THE SAME IS D IRECTED TO BE EXCLUDED WHILE READING THE ORDER OF THE CIT (APPEALS) IN RES PECT OF THE SAID GROUND OF APPEAL RAISED BY THE ASSESSEE. THE CONCL USION IS THAT THE ASSESSING OFFICER IS DIRECTED TO INCLUDE 90% OF CLAIMS RECEIVED, EXCESS PROVISIONS WRITTEN BACK AND MISC. INCOME OF RS.0.12 LAC, RS.64.49 LAC AND RS.83.65 LAC RESPECTIVELY IN THE PROFITS OF THE BUSINESS FOR COMPUTING DEDUCTION U/S 80HHC . WE SHALL ADDRESS THE ISSUE RAISED BY THE REVENUE AGAINST THE INCLUSION OF THE SAID RECEIPTS IN THE P ROFITS OF BUSINESS FOR COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT, AT THE RELEVANT TIME I.E. WHILE DECIDING THE APPEAL OF THE REVENUE. THE GROUND NOS.1 TO 3 RAISED BY THE ASSESSEE ARE ALLOWED. 6 9. GROUND NOS. 4 TO 7 RAISED BY THE ASSESSEE ARE AG AINST COMPUTATION OF ELIGIBLE PROFITS OF BUSINESS FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE ASSE SSING OFFICER HAD MADE CERTAIN ADJUSTMENTS ON ACCOUNT OF FOLLOWING RE CEIPTS AND 90% OF THE RENT RECEIPTS AT RS.18.09 LACS AND 90% OF INTER EST RECEIPTS FROM CUSTOMERS AND SUPPLIERS AMOUNTING TO RS.341.39 LACS WERE EXCLUDED FROM THE PROFITS OF BUSINESS WHILE COMPUTING PROFITS ELI GIBLE FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT. FURTHER DEPB RECEI PTS WERE ALSO EXCLUDED WHILE COMPUTING THE ELIGIBLE PROFITS FOR D EDUCTION UNDER SECTION 80HHC OF THE ACT. THE LAST ADJUSTMENT MADE BY THE ASSESSING OFFICER WAS BY EXCLUDING EXPORT TURNOVER OF RS.33.6 2 CRORES IN RESPECT OF EXPORT ORIENTED UNIT FROM THE EXPORT TURNOVER OF THE ASSESSEE, WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE ABOVE SAID COMPUTATION MADE BY THE ASSESSING OFFICER IN RELATI ON TO THE DEDUCTION UNDER SECTION 80HHC OF THE ACT WAS AFFIRMED BY THE CIT (APPEALS) AND HENCE THE ASSESSEE IS IN APPEAL. 10. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMITT ED THAT THE RENT RECEIVED FROM THE EMPLOYEES ARE TO BE EXCLUDED FROM THE PROFITS OF BUSINESS FOR COMPUTING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. IN VIEW OF THE ADMISSION OF THE LEARNED A.R. FOR TH E ASSESSEE THE GROUND NO.4 RAISED BY THE ASSESSEE IN THIS REGARD IS THUS DISMISSED. 11. THE NEXT ADJUSTMENT MADE BY THE ASSESSING OFFIC ER WAS ON ACCOUNT OF INTEREST RECEIVED FROM THE CUSTOMERS AND SUPPLIE RS AMOUNTING TO RS.341.39 LACS, WHICH WAS EXCLUDED FROM THE ELIGIBL E PROFITS OF BUSINESS WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC ON TH E GROUND. THE LEARNED A.R. FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE ISSUE STANDS COVERED BY THE RATIO LAID DOWN IN M/S ACG ASSOCIATE D CAPSULES (P) LTD. VS. CIT [343 ITR 89 (SC)}, WHEREIN IT HAD BEEN HELD THAT ONLY NET 7 INTEREST IS TO BE EXCLUDED FROM THE ELIGIBLE PROFIT S OF BUSINESS WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED OUT THAT THE TOTAL INTEREST INCOME RECEIVED BY THE ASSESSEE WAS RS.341.39 LACS AS AGAI NST WHICH THE TOTAL EXPENDITURE ON INTEREST PAID ON WORKING CAPITAL WAS RS.814.01 LACS. THE LEARNED A.R. FOR THE ASSESSEE WAS THUS OF THE VIEW THAT NO PART OF THE INTEREST INCOME IS TO BE EXCLUDED WHILE COMPUTING P ROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT. 12. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDER OF THE CIT (APPEALS). 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE HON'BLE SUPREME COURT IN M/S ACG ASSOCIATED CAPSULE S (P) LTD. VS. CIT (SUPRA) AS UNDER: EXPLANATION (BAA) TO SECTION 80HHC STATES THAT 'PR OFITS OF THE BUSINESS' MEANS THE PROFITS OF THE BUSINESS AS COMP UTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AS REDUCED BY THE RECEIPTS OF THE NATURE MENTIONED IN CLAUSES (1) AND (2) OF THE EXPLANATION (BAA). THUS, PROFITS OF THE BUSINESS OF AN ASSESSEE WILL HAVE TO BE FIRST COMPUTED UNDER THE HEAD 'PROF ITS AND GAINS OF BUSINESS OR PROFESSION' IN ACCORDANCE WITH PROVI SIONS OF SECTIONS 28 TO 44D. IN THE COMPUTATION OF SUCH PROF ITS OF BUSINESS, ALL RECEIPTS OF INCOME, WHICH ARE CHARGEA BLE AS PROFITS AND GAINS OF BUSINESS UNDER SECTION 28, WILL HAVE T O BE INCLUDED. SIMILARLY, IN COMPUTATION OF SUCH PROFITS OF BUSINE SS, DIFFERENT EXPENSES WHICH ARE ALLOWABLE UNDER SECTIONS 30 TO 4 4D HAVE TO BE ALLOWED AS EXPENSES. AFTER INCLUDING SUCH RECEIPTS OF INCOME AND AFTER DEDUCTING SUCH EXPENSES, THE TOTAL OF THE NET RECEIPTS ARE PROFITS OF THE BUSINESS OF THE ASSESSEE COMPUTED UN DER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' FROM WHICH DEDUCTIONS ARE TO MADE UNDER CLAUSES (I) AND (2) O/ EXPLANATION (BAA). UNDER CLAUSE (1) O/EXPLANATION (BAA), NINETY PER CE NT OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED I N ANY SUCH PROFITS ARE TO BE DEDUCTED FROM THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION'. THE EXPRESSION 'INCLUDED ANY SUCH PROF ITS' IN CLAUSE (1) OF THE EXPLANATION (BAA) TO SECTION 80HHC WOULD MEAN ONLY SUCH RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTE REST, RENT, CHARGES OR ANY OTHER RECEIPT WHICH ARE INCLUDED IN THE PROFITS OF 8 THE BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AN D GAINS OF BUSINESS OR PROFESSION'. THEREFORE, IF ANY QUANTUM OF THE RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE IS ALLOWED AS EXPENSES UNDER SECTIONS 30 TO 44D AND IS NOT INCLUDED IN THE PROFITS OF BUSINESS AS COMPUTED UNDER THE HEAD 'PROFITS AND GA INS OF BUSINESS OR PROFESSION', NINETY PER CENT OF SUCH QU ANTUM OF RECEIPTS CANNOT BE REDUCED UNDER CLAUSE (1) OF EXPL ANATION (BAA) FROM THE PROFITS OF THE BUSINESS. IN OTHER WORDS, O NLY NINETY PER CENT OF THE NET AMOUNT OF ANY RECEIPT OF THE NATURE MENTIONED IN CLAUSE (1), WHICH IS ACTUALLY INCLUDED IN THE PROFI TS OF THE ASSESSEE, IS TO BE DEDUCTED FROM THE PROFITS OF THE ASSESSEE FOR DETERMINING 'PROFITS OF THE BUSINESS' OF THE ASSESSEE UNDER EXP LANATION (BAA) TO SECTION 80HHC. EXPLANATION (BAA) HAS TO BE CONSTRUED ON ITS OWN LA NGUAGE AND AS PER THE PLAIN NATURAL MEANING OF THE WORDS USED IN EXPLANATION (BAA), THE WORDS 'RECEIPTS BY WAY OF BR OKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RE CEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS' WILL NOT O NLY REFER TO THE NATURE OF RECEIPTS BUT ALSO THE QUANTUM OF RECEIPTS INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE H EAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' REFERRED TO IN THE FIRST PART OF THE EXPLANATION (BAA). ACCORDINGLY, IF ANY QUANT UM OF ANY RECEIPT OF THE NATURE MENTIONED IN CLAUSE (1) O/EXP LANATION (BAA) HAS NOT BEEN INCLUDED IN THE PROFITS OF BUSINESS OF AN ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION', NINETY PER CENT OF SUCH QUANTUM OF THE RECEIPT CANNOT BE DEDUCTED UNDER EXPLANATION (BAA) TO SECTI ON 80HHC. THEREFORE, IF THE RENT OR INTEREST IS A RECEIPT CHA RGEABLE AS PROFITS AND GAINS OF BUSINESS AND CHARGEABLE TO TAX UNDER S ECTION 28, AND IF ANY QUANTUM OF THE RENT OR INTEREST OF THE ASSES SEE IS ALLOWABLE AS AN EXPENSE IN ACCORDANCE WITH SECTIONS 30 TO 44D AND IS NOT TO BE INCLUDED IN THE PROFITS OF THE BUSINESS OF TH E ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSIN ESS OR PROFESSION', NINETY PER CENT OF SUCH QUANTUM OF THE RECEIPT OF RENT OR INTEREST WILL NOT BE DEDUCTED UNDER CLAUSE (1) O F EXPLANATION (BAA) TO SECTION 80HHC. IN OTHER WORDS, NINETY PER CENT OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET I NTEREST OR NET RENT, WHICH HAS BEEN INCLUDED IN THE PROFITS OF BUS INESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD 'PROFITS AND GA INS OF BUSINESS OR PROFESSION', IS TO BE DEDUCTED UNDER CL AUSE (I) O/EXPLANATION (BAA) TO SECTION 80HHC FOR DETERMININ G THE PROFITS OF THE BUSINESS. IN THE RESULT, THE APPEAL IS ALLOWED AND THE IMPUGN ED ORDER OF THE HIGH COURT IS TO BE SET ASIDE. THE MATTER IS REMAND ED TO THE ASSESSING OFFICER TO WORK OUT THE DEDUCTIONS FROM R ENT AND INTEREST IN ACCORDANCE WITH THIS JUDGMENT. 14. IN VIEW OF THE ABOVE SAID RATIO LAID DOWN BY TH E HON'BLE SUPREME COURT IN M/S ACG ASSOCIATED CAPSULES (P) LTD. VS. C IT (SUPRA) AND 9 FOLLOWING THE SAME WE HOLD THAT THE ONLY NET INTERE ST INCOME I.E. AFTER ADJUSTMENT OF THE INTEREST INCOME AGAINST THE INTER EST EXPENDITURE BOOKED FOR THE YEAR UNDER CONSIDERATION ARE TO BE EXCLUDED FOR COMPUTING THE ELIGIBLE PROFITS WHICH ARE TO BE CONSIDERED FOR DED UCTION UNDER SECTION 80HHC OF THE ACT. IN THE FACTS OF THE PRESENT CASE , CLAIM OF ASSESSEE IS THAT THE TOTAL INTEREST INCOME RECEIVED BY THE ASSE SSEE IS 341.39 LACS, AGAINST WHICH BESIDE THE OTHER INTEREST PAID BY THE ASSESSEE ON TERM LOAN ETC., THE INTEREST PAID ON WORKING CAPITAL WAS RS.8 14.01 LACS, WHICH ONCE SET OFF AGAINST THE INTEREST INCOME, NO PART OF THE INTEREST INCOME WAS TO BE EXCLUDED WHILE DETERMINING THE PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT. WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF ASSESSEE AND DECIDE THE ISSUE ACCORDINGLY. THUS GROUND NO.5 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSE. 15. THE ASSESSEE VIDE GROUND NO.4 HAD RAISED SIMILA R PLEA IN RESPECT OF THE RENT RECEIVED FROM EMPLOYEES. THE CLAIM OF THE ASSESSEE WAS THAT AGAINST SUCH RENT RECEIVED FROM EMPLOYEES, THE DEPR ECIATION ON THE BUILDING OWNED BY THE ASSESSEE SHOULD BE ALLOWED. WE FIND NO MERIT IN THE AFORESAID PLEA OF THE ASSESSEE AS THE RATIO LAI D DOWN BY THE SUPREME COURT IN M/S ACG ASSOCIATED CAPSULES (P) LTD. VS. C IT (SUPRA) IS CLEAR THAT WHERE THE NATURE OF THE RECEIPTS AND OUTGOING ARE SAME, THEN ONLY 90% OF NET RECEIPTS WERE TO BE EXCLUDED UNDER CLAU SE (1) TO EXPLANATION (BAA) FROM THE PROFITS OF BUSINESS. THUS GROUND NO .4 RAISED BY THE ASSESSEE ON THIS ALTERNATE PLEA IS REJECTED. 16. THE ISSUE IN GROUND NO.6 IS AGAINST THE EXCLUSI ON OF PROFITS ON SALE OF DEPB AMOUNTING TO RS.14.12 LACS WHILE COMPUTING THE DEDUCTION UNDER THE PROVISO TO SECTION 80HHC OF THE ACT. THE PLEA OF THE ASSESSEE IN THIS REGARD IS THAT THOUGH THE ISSUE HAS BEEN DE CIDED BY THE HON'BLE APEX COURT AGAINST THE ASSESSEE IN TOPMAN EXPORTS V S. CIT [342 ITR 49 10 (SC)] BUT THE SAID DECISION WAS NOT APPLICABLE AS T HE HON'BLE GUJARAT HIGH COURT IN AVANI EXPORTS VS. CIT (2012) [23 TAXM AN.COM 62 (GUJ)] AND THE HON'BLE BOMBAY HIGH COURT IN A BUNCH OF WRI T PETITIONS WITH LEAD ORDER IN M/S VIJAYA SILK HOUSE (BANGALORE) LTD . VS. UOI IN WRIT PETITION NO.2446 OF 2010 HAD HELD THE AMENDMENT TO SECTION 80HHC OF THE ACT BY WAY OF ADDING 3 RD AND 4 TH PROVISO WAS ULTRA VIRUS ARTICLE-14 OF THE CONSTITUTION. HOWEVER, THE HON'BLE COURTS O BSERVED THAT THE IMPUGNED AMENDMENT WAS TO BE QUASHED ONLY TO THE EX TENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN EFFECT FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF EARLIER ASSESSMENT YEARS OF ASSESSEES WHOSE EXPORT TURNOVER WAS ABOVE RS.10 CRORES. CONS EQUENTLY, RETROSPECTIVE APPLICATION OF THE SAID AMENDMENT WAS CANCELLED. THE HON'BLE BOMBAY HIGH COURT WHILE CONSIDERING ISSUE N OTED THAT SIMILAR MATTERS WERE FILED BEFORE THE VARIOUS HIGH COURTS W HEREIN THE RESPONDENT MOVED A TRANSFER PETITION FOR TRANSFER O F THE WRIT PETITION BEFORE THE HON'BLE SUPREME COURT. THE HON'BLE BOMB AY HIGH COURT FURTHER OBSERVED THAT BY AN ORDER DATED 4.4.2011, T HE HON'BLE SUPREME COURT ALLOWED THE TRANSFER PETITION. HOWEVER, SINC E THERE WERE LARGE NUMBER OF MATTERS PENDING IN VARIOUS HIGH COURTS, T HE HON'BLE SUPREME COURT DIRECTED THAT ALL THE MATTERS WHICH HAD BEEN FILED/TRANSFERRED TO THE SUPREME COURT BE SENT TO THE HIGH COURT OF GUJA RAT. REFERENCE WAS MADE TO THE JUDGMENT DATED 2.7.2012 WHEREIN THE HON 'BLE GUJARAT HIGH COURT HELD THAT RETROSPECTIVE AMENDMENT WHICH WAS D ETRIMENTAL TO THE ASSESSEE, WAS ULTRA VIRUS ARTICLE-14 OF THE CONSTIT UTION OF INDIA. THE HON'BLE BOMBAY HIGH COURT IN M/S VIJAYA SILK HOUSE (BANGALORE) LTD. VS. UIO (SUPRA) FURTHER HELD AS UNDER: 8. IT IS ADMITTED THAT THE PRESENT WRIT PETITIONS ARE IDENTICAL TO THE WRIT PETITIONS WHICH WERE THE SUBJECT MATTER OF THE TRANSFER PETITIONS BEFORE THE SUPREME COURT AND THE JUDGMENT OF THE GU JARAT HIGH COURT. ONLY THE FIRST FOUR WRIT PETITIONS LISTED AB OVE WERE THE SUBJECT 11 MATTER OF THE TRANSFER PETITIONS. IN OTHER WORDS, T HE FIRST FOUR MATTERS STOOD TRANSFERRED TO THE GUJARAT HIGH COURT PURSUAN T TO THE ABOVE ORDERS OF THE SUPREME COURT. THE OTHER PETITIONS, T HEREFORE, DID NOT STAND TRANSFERRED THE GUJARAT HIGH COURT. 9. KEEPING IN MIND THAT THE SUPREME COURT HAD TRAN SFERRED ALL THE MATTERS TO THE GUJARAT HIGH COURT IN ORDER TO AVOID CONFUSION AND DIFFICULTIES IN ENFORCEMENT OF CONFLICTING JUDGMENT S OF DIFFERENT HIGH COURTS, WE ARE OF THE VIEW THAT IT WOULD BE APPROPR IATE IN THESE WRIT PETITIONS TO FOLLOW THE JUDGMENT OF THE GUJARAT HIG H COURT. 10. IN THE CIRCUMSTANCES, FOR THE ABOVE REASONS, T HE WRIT PETITIONS, OTHER THAN THE FIRST FOUR WRIT PETITIONS, ARE DISPO SED OF IN THE TERMS OF THE ORDER AND JUDGMENT OF THE GUJARAT HIGH COURT. T HE FIRST FOUR WRIT PETITIONS, IN ANY EVENT, STAND DISPOSED OF BY THE O RDER AND JUDGMENT OF THE GUJARAT HIGH COURT. NO ORDER AS TO COSTS. 17. IN VIEW OF THE ABOVE SAID RATIO LAID DOWN BY TH E HON'BLE BOMBAY HIGH COURT WHILE FOLLOWING THE DIRECTIONS OF THE HO N'BLE SUPREME COURT OF INDIA AND ALSO THE RATIO LAID DOWN BY THE HON'BL E GUJARAT HIGH COURT, WE HOLD THAT THE ISSUE RAISED IN THE PRESENT APPEAL BEING RELATABLE TO ASSESSMENT YEAR 2001-02 I.E. THE YEAR PRIOR TO THE AMENDMENT MADE IN SECTION 80HHC OF THE ACT BY WAY OF PROVISO 3 TO SEC TION 80HHC OF THE ACT BEING RETROSPECTIVE IN NATURE WAS ULTRA VIRUS A ND CONSEQUENTLY THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCTION U NDER SECTION 80HHC OF THE ACT ON DEPB RECEIPTS, WHERE THE EXPORT TURNOVER EXCEEDED RS. 10 CRORES. WE DIRECT THE ASSESSING OFFICER TO COMPUTE DEDUCTION UNDER SECTION 80HHC OF THE ACT ACCORDINGLY. THE GROUND N O.6 RAISED BY THE ASSESSEE IS THUS ALLOWED. 18. THE ISSUE RAISED VIDE GROUND NO.7 IS IN RELATIO N TO EXCLUSION OF EXPORT TURNOVER IN RESPECT OF EOU UNIT FROM THE EXP ORT TURNOVER OF THE ASSESSEE, FOR COMPUTING THE DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10 B OF THE ACT ON THE PROFITS OF ITS WHOLLY OWNED EXPORT ORIENTED UNIT. THE ASSESSING OFFICER AND THE CIT (APPEALS) HAD EXCLUDED THE EXPORT TURNO VER AMOUNTING TO RS.33.62 CRORES IN RESPECT OF EOUS BOTH FROM THE EX PORT TURNOVER AND TOTAL TURNOVER OF THE ASSESSEE WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC 12 OF THE ACT. THE LEARNED A.R. FOR THE ASSESSEE FAIR LY CONCEDED THAT THE SAID ISSUE WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE AS REPORTED IN ACIT VS. MAHAVIR SPG. MILLS LTD. [110 ITD 211](CHD). HOWEVER, THE P RESENT ISSUE HAS NOW BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE MA DRAS HIGH COURT IN CIT, CHENNAI VS. AMBATTURE CLOTHING LTD. (2010) [19 4 TAXMAN 79 (MAD)]. 19. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE RATIO LAID DOWN IN ACIT VS. ROGINI GARMENTS [111 TTJ (CHENNAI) (SB) 274 AND ALSO IN FRIENDS CASTING P. LTD. VS. CIT [340 ITR 30 4 (P&H)]. 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDER THE PROVISIONS OF SECTION 10B OF THE ACT, 90% OF TH E PROFITS EARNED BY A WHOLLY EXPORT ORIENTED UNIT ARE EXEMPT FROM TAX. T HE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80HHC OF THE ACT BY INCLUDING THE EXPORT TURNOVER OF THE SAID 100% EOU UNIT IN BOTH T HE EXPORT TURNOVER AND TOTAL TURNOVER. THE HON'BLE MADRAS HIGH COURT IN CIT, CHENNAI VS. AMBATTURE CLOTHING LTD. (SUPRA) HAD LAID DOWN THE P ROPOSITION THAT UNDER SECTION 10A (6)(III) OF THE ACT, THERE WAS SP ECIFIC PROVISION WHICH READS AS UNDER: NO DEDUCTION SHALL BE ALLOWED UNDER SECTION 80HHC OR SECTION 80-I OR SECTION 80-IA OR SECTION 80-IB I N RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKIN G 21. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRI BUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2003-04 WHEREI N IN ITA NO.682/CHD/2007 VIDE ORDER DATED 13.7.2012, THE TRI BUNAL HAD CONSIDERED THE SUBMISSION OF THE LEARNED A.R. FOR T HE ASSESSEE THAT THE ISSUE STANDS COVERED AGAINST THE ASSESSEE BY THE RA TIO LAID DOWN BY THE HON'BLE MADRAS HIGH COURT IN M/S AMBATTURE CLOTHING LTD. (SUPRA) AND ALSO IN CASE OF SISTER CONCERN OF THE ASSESSEE IN M AHAVIR SPINNING MILLS 13 LTD. (SUPRA). HOWEVER, THE LEARNED A.R. FOR THE AS SESSEE ARGUING BEFORE US IN THE PRESENT GROUND OF APPEAL HAD POINTED OUT THAT THE ISSUE STANDS COVERED BY THE RATIO LAID DOWN BY THE HON'BLE MADRA S HIGH COURT IN M/S AMBATTURE CLOTHING LTD. (SUPRA). 22. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE RATIO LAID DOWN BY THE PUNJAB & HARYANA HIGH COURT IN FRIENDS CASTING P. LTD. (SUPRA), WHICH IS MISPLACED AS THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS IN RELATION TO THE PROHIBITION OF DEDUCTION IN RESPECT OF SAME INCOME I.E. THE DEDUCTION COMPUTED UNDER SECTION 80IB AND 80HHC OF THE ACT, WHICH IS NOT THE ISSUE RAISED BEFORE US. 23. WE FIND THAT THE ISSUE RAISED VIDE PRESENT GROU ND OF APPEAL IS IDENTICAL TO THE ISSUE RAISED IN ASSESSMENT YEAR 20 03-04 AND THE TRIBUNAL VIDE PARA 15 HELD AS UNDER: 15. THE ISSUE RAISED BY THE ASSESSEE VIDE GROUND N O.4 IN RESPECT OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT BY AP PLYING THE METHOD OF CALCULATING THE DEDUCTION U/S 80HHC(3)(C)(I) OF THE ACT WAS CHALLENGED BY THE ASSESSEE BEFORE US. THE LD.AR FO R THE ASSESSEE FAIRLY POINTED OUT THAT THE ISSUE IS PRESENTLY COVERED AGA INST THE ASSESSEE BOTH BY THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF T RIBUNAL IN THE CASE OF SISTER CONCERN OF THE ASSESSEE IN MAHAVIR SPINNI NG MILLS LTD. REPORTED IN 110 ITD 211 (CHD), AGAINST WHICH APPEAL IS PENDI NG BEFORE HON'BLE PUNJAB & HARYANA HIGH COURT. THE ISSUE OTHERWISE S TANDS COVERED AGAINST THE ASSESSEE BY THE HON'BLE MADRAS HIGH COU RT IN M/S AMBATTURE CLOTHING LTD. 194 TAXMAN 79 (MAD). IN VI EW OF THE ADMISSION OF THE LD. AR FOR THE ASSESSEE, THE ISSUE BEING COVERED AGAINST THE ASSESSEE BY THE JUDGEMENT OF HON'BLE MADRAS HIG H COURT (SUPRA) AND THE DECISION OF THE CHANDIGARH BENCH OF TRIBUNA L (SUPRA), WE DISMISS GROUND NO.4 RAISED BY THE ASSESSEE. 24. FOLLOWING THE ABOVE, WE FIND NO MERIT IN THE GR OUND OF APPEAL NO.7 RAISED BY THE ASSESSEE AND THE SAME IS DISMISSED. 25. THE GROUND NO.8 IS IN RELATION TO THE COMPUTATI ON OF DEDUCTION UNDER SECTION 80HHC OF THE ACT ON THE PROFITS OF UN DERTAKING I.E. AURO- V ON WHICH DEDUCTION UNDER SECTION 80IB OF THE ACT WAS CLAIMED. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON TH E RATIO LAID DOWN BY 14 THE HON'BLE KARNATAKA HIGH COURT IN CIT VS. MILLIP ORE INDIA (P) LTD. [341 ITR 219 (KAR) AND SERIES OF OTHER DECISIONS. THE LEARNED D.R. FOR THE REVENUE, HOWEVER, PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN FRIENDS CAST ING P. LTD. (SUPRA). 26. WE FIND THAT THE ISSUE RAISED VIDE PRESENT GROU ND OF APPEAL IS COVERED BY THE RATIO LAID DOWN BY THE HON'BLE PUNJA B & HARYANA HIGH COURT IN FRIENDS CASTING P. LTD. (SUPRA). THE HON' BLE HIGH COURT HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT THE RESTRICTION UNDER SECTION 80-IA(9) IS NOT ONLY THAT THE TOTAL DEDUCTI ON SHOULD NOT EXCEED THE PROFITS AND GAINS, BUT THERE IS A FURTHER RESTRICTION THAT DEDUCTION ALLOWED UNDER SE CTION 80-IA OR SECTION 80-IB WILL BE A BAR TO CLAIM DEDUC TION UNDER ANY OTHER PROVISION OF THE CHAPTER. 27. FOLLOWING THE ABOVE SAID RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT WE UPHOLD THE ORDER OF THE CIT (APPEALS) IN D IRECTING THE ASSESSING OFFICER TO EXCLUDE THE PROFITS OF UNDERTA KING ON WHICH DEDUCTION UNDER SECTION 80IB OF THE ACT HAD BEEN AL LOWED FROM THE PROFITS OF BUSINESS WHILE COMPUTING THE DEDUCTION U NDER SECTION 80HHC OF THE ACT. GROUND NO.8 RAISED BY THE ASSESSEE IS THUS DISMISSED. 28. GROUND NO.9 RAISED BY THE ASSESSEE IS AGAINST T HE DIRECTIONS OF THE ASSESSING OFFICER AND CIT (APPEALS) IN COMPUTING TH E INDIRECT COST OF TRADING EXPORT WHILE COMPUTING DEDUCTION UNDER SECT ION 80HHC OF THE ACT. THE ASSESSEE HAD DECLARED INDIRECT COST OF TR ADING GOODS AT RS.1,22,26,383/- WHILE CALCULATING THE LOSS OF TRAD ING GOODS FOR COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE ASSESSING OFFICER OBSERVED THE ASSESSEE TO HAVE IGNORED THE I NDIRECT EXPENSES OF EXPORT OF TRADING GOODS ON ACCOUNT OF PERSONAL EXPE NSES, ADMINISTRATIVE EXPENSES, FINANCIAL EXPENSES AND SELLING EXPENSES A ND RECOMPUTED THE INDIRECT COST OF TRADING GOODS AT RS.4,42,98,144/-. THE EXPLANATION OF 15 THE ASSESSEE BEFORE THE CIT (APPEALS) WAS THAT THE PERSONNEL EXPENSES EXCLUDED BY THE ASSESSEE WERE ON ACCOUNT OF TECHNIC AL EMPLOYEE EXPENSES AS THE SAME DID NOT PERTAIN TO TRADING ACT IVITIES. FURTHER PART OF THE ADMINISTRATIVE EXPENSES WERE EXCLUDED ON ACC OUNT OF LOSS ON SALE OF FIXED ASSETS, SUNDRY BALANCE WRITTEN OFF, PREVIO US YEAR EXPENSES, ETC. AS THE SAME DID NOT PERTAIN TO THE TRADING ACTIVITI ES. OUT OF THE FINANCIAL EXPENSES, EXPENSES ON ACCOUNT OF DEBENTURE INTEREST FOR EXPANSION, TERM LOAN FOR FIXED ASSETS WERE EXCLUDED AS THE SAME WER E NOT RELATED TO TRADING ACTIVITIES THE ASSESSING OFFICER WAS OF TH E VIEW THAT INDIRECT COST ATTRIBUTABLE TO EXPORT OF TRADING GOODS WAS TO BE CALCULATED BY ALLOCATING THE TOTAL INDIRECT COST IN THE RATIO OF EXPORT TURNOVER IN RESPECT OF THE TRADING GOODS TO THE TOTAL TURNOVER AS LAID DOWN IN EXPLANATION CLAUSE E TO SECTION 80HHC(3). THE C IT (APPEALS) VIDE PARA 18 AT PAGE 6 OF THE APPELLATE ORDER HELD AS UN DER: I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE LD. COUNSEL FOR THE APPELLANT AND PERUSED THE RELEVANT RECORD. I AM INCLINED TO AGREE WITH THE FINDINGS OF THE A.O. THAT THE EXPENSES OUT OF THE EXPENSES CLAIMED UNDER THE HEAD PERSONNEL EXPENSES, ADMINISTRATIVE EXPENSES AND FINANCIAL EXPENSES ETC. WHICH HAVE BEEN CONSIDERED BY THE APPELLANT DIRECTL Y ATTRIBUTABLE TO THE EXPORT OF THE TRADING GOODS CO ULD NOT BE CONSIDERED AS SUCH. IN MY OPINION ONLY THE COST OF TRADING GOODS AND THE EXPENSES INCURRED FOR INWA RD TRANSPORTATION ETC. OF THE SAME AND WHICH EXPENSES ARE NORMALLY TAKEN IN THE TRADING ACCOUNT COULD BE TAKE N TO BE THE COST DIRECTLY ATTRIBUTABLE TO TRADING GOODS EXPORTED OUT OF INDIA. ALL THE OTHER EXPENSES WHIC H ARE GENERALLY DEBITED IN THE PROFITS AND LOSS ACCOUNT ARE TO BE TAKEN AS INDIRECT COST. HOWEVER, FOR COMPUTI NG THE INDIRECT COST THE A.O. IS DIRECTED TO ENSURE TH AT THE COST CONSIDERED BY THE APPELLANT AS DIRECT COST ATTRIBUTABLE TO EXPORT OF TRADING GOODS AND WHICH C OSTS ARE OTHERWISE TO BE TAKEN AS INDIRECT COSTS SHOULD BE REDUCED FROM THE DIRECT COST WORKED OUT BY THE APPELLANT. IT IS HELD ACCORDINGLY. THE A.O. IS DI RECTED TO WORK OUT THE DIRECT AND INDIRECT COSTS ATTRIBUTA BLE TO TRADING OF EXPORT GOODS AS ABOVE. THIS GROUND OF APPELLANT IS, THEREFORE, DISPOSED OFF ACCORDINGLY. 16 29. THE ASSESSING OFFICER WAS ONLY DIRECTED TO COMP UTE THE DIRECT AND INDIRECT COSTS ATTRIBUTABLE TO TRADING OF EXPORT GO ODS IN LINE WITH THE DIRECTIONS OF THE CIT (APPEALS) ON THIS ASPECT. TH E LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT SIMILAR ISSUE AROSE BEFOR E THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 200 3-04 WHEREIN THE MATTER HAS ALSO BEEN RESTORED BACK TO THE FILE OF T HE ASSESSING OFFICER. 30. WE FIND THAT THE TRIBUNAL IN ITA NO.682/CHD/200 7 RELATING TO ASSESSMENT YEAR 2003-04 IN ASSESSEES OWN CASE, VID E ORDER DATED 13.7.2002 HAD CONSIDERED THE ISSUE OF CALCULATION O F INDIRECT COST OF TRADING GOODS FOR COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT, AT LENGTH VIDE PARAS 18 TO 26. THE TRIBUNAL HAD TA KEN INTO CONSIDERATION EACH ITEM OF EXPENDITURE HEAD-WISE AND THEREAFTER D IRECTED THE ASSESSING OFFICER TO RECOMPUTE THE FIGURES TO BE CONSIDERED F OR COMPUTING INDIRECT COST OF TRADING GOODS IN ORDER TO COMPUTE DEDUCTION UNDER SECTION 80HHC OF THE ACT. THE FINDINGS OF THE TRIBUNAL VID E PARAS 18 TO 26 ARE AS UNDER: 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RECORD. THE ISSUE RAISED BY THE ASSESSEE IS IN RELATION TO COMPUTATION OF INDIRECT COST OF TRADING GOODS WHICH ARE TO BE WORKED OUT FO R COMPUTING DEDUCTION U/S 80HHC OF THE ACT ON SUCH TRADED GOODS . THE ASSESSEE BEFORE US IS ENGAGED IN TWO TYPES OF ACTIVITIES I.E ., FIRST THE MANUFACTURE AND EXPORT OF ITS MANUFACTURED ITEMS AND THE SECOND IS THE DOMESTIC AND EXPORT OF TRADED ITEMS DEALT IN BY THE ASSESSEE. T HE ASSESSEE IS PREPARING A CONSOLIDATED STATEMENTS OF PROFIT & LOS S ACCOUNT AND CONSEQUENTLY, WHERE THE ASSESSEE IS ENGAGED IN BOTH MANUFACTURING AND SALE OF ITS MANUFACTURED GOODS AND ALSO TRADING AND EXPORT OF OTHER GOODS NOT MANUFACTURED BY IT, THE PROVISIONS OF SEC TION 80HHC(3) ARE ATTRACTED IN ORDER TO COMPUTE THE DEDUCTION UNDER T HE SAID SECTION. CONSEQUENTLY, THERE IS A NEED TO WORK OUT THE COST OF TRADING GOODS, WHICH IN TURN ARE EXPORTED BY THE ASSESSEE. ADMITT EDLY, THE ITEMS OF EXPENDITURE WHICH ARE PURELY RELATABLE TO THE MANUF ACTURING ACTIVITIES, CARRIED ON BY THE ASSESSEE, ARE TO BE EXCLUDED FROM THE LIST OF EXPENSES BEING ATTRIBUTABLE TO SUCH MANUFACTURING ACTIVITIES . HOWEVER, THE BALANCE EXPENDITURE IS TO BE ATTRIBUTED BOTH TO THE MANUFACTURING ACTIVITY AND TRADING ACTIVITY, IN ORDER TO COMPUTE THE DEDUC TION AVAILABLE TO THE ASSESSEE. THE FIRST ITEM OF EXPENDITURE TO BE CONS IDERED IS THE PERSONNEL EXPENSES. THE ASSESSEE HAD ATTRIBUTED 33,56,010/- B EING COMMON EXPENSES BOTH FOR MANUFACTURING AND TRADING ACTIVIT IES. THE AO ADOPTED SAID PERSONNEL EXPENSES AT RS.1,18,88,142/-. AS PE R THE ASSESSEE, THE AO 17 HAD EXCLUDED ONLY PROPORTIONATE EXPENSES RELATED TO EXPORT WHILE ASSESSEE HAD EXCLUDED ALL THE EXPENSES RELATED TO M ANUFACTURING I.E. DOMESTIC AS WELL AS EXPORTS AND ALLOCATED ONLY EXPE NSES WHICH WERE COMMON FOR TRADING AS WELL AS MANUFACTURING. 19. THE NEXT ITEM OF EXPENDITURE CONSIDERED IS ADMI NISTRATION AND OTHER EXPENSES AT RS.1.44 CRORES, BOTH BY THE AO AN D THE ASSESSEE AND THERE IS A PETTY DIFFERENCE BETWEEN THE TWO FIGURES , WHICH IS TO BE IGNORED. 20. THE THIRD ITEM OF EXPENDITURE CONSIDERED BY THE AO AND THE ASSESSEE WERE THE FINANCIAL EXPENSES. THE ASSESSEE HAD EXCLUDED THE FINANCIAL EXPENSES DIRECTLY RELATABLE TO MANUFACTUR ING ACTIVITY I.E. THE INTEREST ON TERM LOAN RELATING TO PLANT & MACHINERY WAS TO BE EXCLUDED AND THE BALANCE EXPENSES BEING COMMON BOTH FOR MANU FACTURING AS WELL AS TRADING WERE TO BE ALLOCATED FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. THE ASSESSEE HAD AD OPTED THE FIGURE OF RS.1.96 CRORE ON ACCOUNT OF FINANCIAL EXPENSES, WHE REAS THE AO INCLUDED THE TOTAL FINANCE EXPENSES OF RS.2.65 CRORES AS BEI NG ATTRIBUTABLE TO BOTH MANUFACTURING AND TRADING GOODS. WE FIND MERIT IN T HE PLEA OF THE ASSESSEE IN THIS REGARD THAT SUCH FINANCIAL EXPENSE S WHICH ARE DIRECTLY RELATABLE TO THE MANUFACTURING ACTIVITIES CARRIED O UT BY THE ASSESSEE, THEN THE SAME ARE TO BE EXCLUDED WHILE COMPUTING THE IND IRECT COST OF TRADING GOODS, AS PER SECTION 80HHC(3) OF THE ACT. HOWEVER, THIS CLAIM OF THE ASSESSEE NEEDS VERIFICATION AT THE LEVEL OF AO AS D ETAILS ARE NOT AVAILABLE ON RECORD. ACCORDINGLY, WE DIRECT THE AO TO INCLUD E ONLY SUCH PART OF FINANCIAL EXPENSES WHICH ARE RELATED BOTH TO MANUFA CTURING AND TRADING ACTIVITY AND EXCLUDE SUCH FINANCIAL EXPENSES WHICH ARE DIRECTLY RELATED TO THE MANUFACTURING ACTIVITY I.E. THE INTEREST ON TER M LOAN RAISED FOR THE PURCHASE OF PLANT & MACHINERY. THE AO SHALL, ACCOR DINGLY, RECOMPUTE THE FIGURE OF FINANCIAL EXPENSES, AFTER AFFORDING R EASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 21. SIMILARLY, IN RESPECT OF PERSONNEL EXPENSES, TH E EXPENDITURE WHICH IS DIRECTLY RELATABLE TO THE MANUFACTURING AC TIVITY I.E. THE WAGES PAID FOR WORKERS AT THE MANUFACTURING UNIT AND ANY OTHER EXPENDITURE WHICH IS DIRECTLY LINKED IN LINE WITH THE MANUFACTU RING ACTIVITIES, CARRIED ON BY THE ASSESSEE, IS TO BE EXCLUDED AND ONLY SUCH EXPENSES WHICH ARE COMMON BOTH FOR THE TRADING AND MANUFACTURING ACTIV ITIES, NEED TO BE CONSIDERED FOR COMPUTING THE INDIRECT COST OF TRADI NG GOODS. THE AO IS, THUS DIRECTED TO RECOMPUTED PERSONNEL EXPENSES AFTE R AFFORDING REASONABLE OPPORTUNITY OF HEARING TO ASSESSEE. 22. NEXT ITEM OF EXPENDITURE IS DEPRECIATION OF RS. 5.7 CRORES. IN LINE WITH OUR OBSERVATION IN THE PARAS HEREIN ABOVE, WHE RE SUCH DEPRECIATION IS ON THE PLANT INSTALLED AT THE MANUFACTURING UNIT AND BEING INVOLVED IN THE MANUFACTURING PROCESS AND SUCH DEPRECIATION ON ASSETS USED IN MANUFACTURING ACTIVITIES ARE TO BE EXCLUDED FROM TH E COST OF EXPENDITURE WHICH IS ATTRIBUTABLE TO TRADING GOODS. HOWEVER, T HE DEPRECIATION ON ASSETS INSTALLED IN THE OFFICE OF THE ASSESSEE WHIC H IS COMMON FOR BOTH MANUFACTURING AND TRADING ACTIVITIES ARE TO BE INCL UDED AS PART OF INDIRECT COST FOR TRADING GOODS. ACCORDINGLY, AO S HALL RE-COMPUTE THE DEPRECIATION AND ASSETS ATTRIBUTABLE TO THE INDIREC T COST OF TRADING GOODS. 23. NEXT ITEM OF EXPENDITURE IS SELLING EXPENSES AN D ONLY SUCH SELLING EXPENSES WHICH ARE COMMON FOR MANUFACTURING AND TRA DING ACTIVITIES, ARE TO BE SO INCLUDED AND THAT PART OF THE SELLING EXPENSES, WHICH IS EXCLUSIVELY ATTRIBUTABLE TO THE MANUFACTURED GOODS, ARE NOT TO BE 18 CONSIDERED AS PART OF INDIRECT COST OF TRADING GOOD S. THE ASSESSEE, IN THIS REGARD SHALL FURNISH THE NECESSARY EVIDENCE TO PROVE ITS CLAIM THAT ONLY SUCH EXPENSES COULD BE ALLOCATED BEING COMMON FOR TRADING AND MANUFACTURING ACTIVITIES. THE AO, ON CONSIDERATION OF SUCH EVIDENCE, SHALL DETERMINE THE COST OF SELLING EXPENSES TO BE ATTRIBUTED TO THE TRADING ITEMS. 24. THE LAST ITEM OF EXPENDITURE IS MISCELLANEOUS E XPENSES AMOUNTING TO THE TUNE OF RS.4207/-, WHICH IS VERY P ETTY AND THE SAME IS IGNORED FOR SUCH ALLOCATION. 25. THE OTHER ASPECT WHICH NEEDS TO BE KEPT IN MIND BY THE AO WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT IS THAT TH E ASSESSEE IS ENGAGED IN THE MANUFACTURE OF CERTAIN ITEMS WHICH H E IS SELLING BY WAY OF ITS DOMESTIC SALES AND CERTAIN PART OF THE MANUF ACTURED ITEMS ARE BEING EXPORTED. THE TRADING IN THE ITEMS NOT MANUF ACTURED BY THE ASSESSEE IS ALSO BEING CARRIED OUT BY IT. THE EXPE NSES RELATED PURELY TO THE MANUFACTURING ACTIVITIES, ARE TO BE EXCLUDED AT THE THRESHOLD AND THEREAFTER, BALANCE OF THE EXPENDITURE HEAD-WISE, A S EARLIER CONSIDERED BY THE AO, IS TO BE CONSIDERED, BEING BOTH ATTRIBUT ABLE TO THE MANUFACTURE AND TRADING ACTIVITIES CARRIED ON BY TH E ASSESSEE AND CONSEQUENTLY, THE INDIRECT COST OF TRADING GOODS IS WORKED OUT. 26. THE OTHER ASPECT OF THE ISSUE IS THE COMPUT ATION OF TOTAL TURNOVER WHICH INCLUDES BOTH DOMESTIC AND EXPORT SA LES AND IN THIS REGARD, IT IS DIRECTED THAT ONLY TOTAL EXPORT SALES , BOTH OF THE MANUFACTURED ITEMS AND TRADED ITEMS, IS TO BE TREAT ED AS PART OF THE TOTAL TURNOVER FOR DEDUCTION U/S 80HHC(3) OF THE ACT. CO NSEQUENTLY, GROUND NOS. 5 & 6, RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 31. THE ISSUE RAISED VIDE PRESENT GROUND OF APPEAL NO.9 BEING IDENTICAL TO THE ISSUE IN THE EARLIER YEARS AND FOLLOWING THE SAME WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE INDIRECT COST RE LATABLE TO THE TRADING GOODS IN LINE WITH OUR DIRECTIONS IN PARAS 18 TO 26 OF ORDER DATED 13.7.2012. THE HEAD-WISE EXPENDITURE CLAIMED BY TH E ASSESSEE WOULD BE LOOKED INTO IN ORDER TO WORK OUT THE INDIRECT COST OF THE TRADING GOODS IN ORDER TO COMPUTE THE DEDUCTION ALLOWED TO THE ASSES SEE UNDER SECTION 80HHC OF THE ACT. THE GROUND NO. 9 RAISED BY THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 32. THE ISSUE RAISED IN GROUND NO.10 IS AGAINST NON -ALLOWANCE OF EXEMPTION UNDER SECTION 10B OF THE ACT ON INTEREST RECEIVED FROM COTTON SUPPLIERS AMOUNTING TO RS.2,50,000/-. THE LEARNED A.R. FOR THE ASSESSEE 19 PLACED RELIANCE ON THE RATIO LAID DOWN IN PHATELA C OTGAN INDUSTRIES (P) LTD. VS. CIT [303 ITR 411 (P&H)] AND POINTED OUT TH AT THE INTEREST RECEIVED WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 1 0B OF THE ACT. 33. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE RATIO LAID DOWN IN ORCHID CHEMICALS & PHARMACEUTICALS LTD. VS. JCIT [97 ITD 277 (CHENNAI)]. 34. ON THE PERUSAL OF THE ORDER PASSED BY THE TRIBU NAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2003-04 WE FIN D THAT THE ISSUE OF ALLOWANCE OF DEDUCTION UNDER SECTION 10B OF THE ACT IN RESPECT OF INTEREST RECEIVED ON DELAYED PAYMENTS WAS ADDRESSED BY THE TRIBUNAL VIDE PARAS 7 AND 8 OF THE ORDER DATED 13.7.2012, WH ICH READS AS UNDER: 7. THE FIRST ITEM OF INCOME IS REGARDING INTERE ST FROM CUSTOMERS ON DELAYED PAYMENTS TOTALING RS.23,10,475/-. THE PLEA OF THE LD. AR FOR THE ASSESSEE WAS THAT THE SAID INTEREST WHICH WAS REALI ZABLE FROM ITS CUSTOMERS, WAS CONNECTED WITH THE SALES AND CONSEQU ENTLY, THE SAME WAS DERIVED FROM THE BUSINESS OF UNDERTAKING AND WAS EL IGIBLE FOR EXEMPTION U/S 10B OF THE ACT. 8. THE DEDUCTION U/S 10B OF THE ACT IS ALLOWABLE FROM SUCH PROFITS AND GAINS, WHICH ARE DERIVED BY 100% EXPORT ORIENTE D UNDERTAKING FROM THE EXPORT OF ARTICLES OR THING OR COMPUTER SOFTWAR E, AS PER THE PROVISIONS OF THE SAID SECTION. THE ASSESSEE BEFOR E US HAD ESTABLISHED 100% EXPORT ORIENTED UNDERTAKING AT BADDI FOR THE M ANUFACTURE AND EXPORT OF YARN AND WAS FOUND ELIGIBLE FOR THE CLAIM OF EXEMPTION U/S 10B OF THE ACT. THE ISSUE ARISING BEFORE US IS IN RELA TION TO THE OTHER INCOME RECEIVED BY THE ASSESSEE UNDERTAKING AND WHETHER TH E SAME IS ELIGIBLE FOR EXEMPTION U/S 10B OF THE ACT. THE FIRST HEAD OF SUC H OTHER INCOME TO BE CONSIDERED IS INTEREST RECEIVED FROM CUSTOMERS ON D ELAYED PAYMENTS. THE PLEA OF THE ASSESSEE, IN THIS REGARD WAS THAT T HE SAID INTEREST WHICH WAS RECEIVED FROM THE CUSTOMERS WAS ON ACCOUNT OF D ELAYED PAYMENTS OF THE SALE PROCEEDS OF THE GOODS EXPORTED BY IT AND H ENCE WAS CONNECTED TO ITS SALE AND WAS DERIVED FROM EXPORT OF ARTICLES OR THINGS BY THE SAID UNDERTAKING. WE FIND MERIT IN THE CLAIM OF THE ASS ESSEE IN THIS REGARD. HOWEVER, THE FACTUM OF THE NATURE OF INTEREST INCOM E RECEIVED BY THE ASSESSEE TOTALING RS.23.10.475/- NEEDS VERIFICATION BY THE AO. IN CASE SAID INTEREST IS RECEIVED/RECEIVABLE BY THE ASSESSE E FROM ITS CUSTOMERS ON THE DELAYED PAYMENTS, RELATABLE TO THE EXPORT SALES MADE BY THE ASSESSEE, THEN SUCH INTEREST IS TO BE INCLUDED AS PART OF THE ELIGIBLE PROFITS, FOR COMPUTING THE EXEMPTION U/S 10B OF THE ACT. HOWEVE R, WHERE SUCH INTEREST DUE FROM THE PARTIES IS NOT SO RELATABLE T O THE EXPORT SALES MADE BY THE UNDERTAKING, THEN THE ASSESSEE IS NOT ENTITL ED TO THE BENEFIT OF EXEMPTION U/S 10B OF THE ACT ON SUCH OTHER INCOMES . THE AO SHALL COMPUTE THE EXEMPTION U/S 10B OF THE ACT IN ACCORDA NCE WITH OUR 20 GUIDELINES AND AFTER AFFORDING REASONABLE OPPORTUNI TY OF HEARING TO THE ASSESSEE. 35. THE TRIBUNAL HAD DIRECTED THE ASSESSING OFFICER TO VERIFY AND ALLOW DEDUCTION UNDER SECTION 10B OF THE ACT WHERE THE INTEREST IS RECEIVED/RECEIVABLE BY THE ASSESSEE FROM ITS CUSTOM ERS ON DELAYED PAYMENTS, RELATABLE TO EXPORT SALES MADE BY IT. HO WEVER, WHERE SUCH INTEREST DUE FROM THE PARTIES WAS NOT SO RELATABLE TO THE EXPORT SALE MADE BY THE UNDERTAKING, IT WAS HELD THAT THE ASSESSEE W AS NOT ENTITLED TO THE BENEFIT OF EXEMPTION UNDER SECTION 10B OF THE ACT O N SUCH OTHER INCOME. FOLLOWING THE ABOVE SAID PARITY OF REASONING WE FIN D NO MERIT IN THE GROUND OF APPEAL NO.10 RAISED BY THE ASSESSEE AND T HE SAME IS DISMISSED. 36. THE ISSUE RAISED IN GROUND NO.11 TO 13 ARE IN R ELATION TO THE ALLOCATION OF HEAD OFFICE EXPENSES TO THE UNIT CLAI MING DEDUCTION UNDER SECTION 10B/80IA/80IB OF THE ACT. 37. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE IS DERIVING INCOME FROM MANUFACTURING AND PROCESSING O F YARN, KNITTING YARN AND PROCESSING FABRICS. THE ASSESSEE HAD CLAI MED DEDUCTION UNDER SECTION 10B OF THE ACT IN RESPECT OF ITS EOU UNIT I .E. VSGM (EOU) AND HAD FURTHER CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT IN RESPECT OF AURO WEAVING MILLS UNIT-I AND ALSO CLAIMED DEDUC TION UNDER SECTION 80IB OF THE ACT IN RESPECT OF AURO-III, AURO-V. TH E ASSESSEE HAD DEBITED ADMINISTRATION AND PERSONNEL EXPENSES TOTAL ING RS.6,21,57,190/- TO THE HEAD OFFICE. THE TOTAL TURNOVER OF THE ASSE SSEE WAS RS.563.51 CRORES AND TAKING INTO CONSIDERATION THE TURNOVER O F EACH UNIT, PROFITS OF WHICH WERE CLAIMED TO BE EXEMPT UNDER SECTION 10A/8 0IA/80IB OF THE ACT, THE ASSESSING OFFICER ALLOCATED THE HEAD OFFI CE EXPENSES IN THE RATIO OF TURNOVER OF EACH UNIT TO TOTAL TURNOVER AS COMPUTED UNDER PARA 14.2 AT PAGE 23 OF THE ASSESSMENT ORDER. CONSEQUEN TLY THE EXCESS 21 DEDUCTION CLAIMED UNDER SECTION 10B, 80IA AND 80IB OF THE ACT WAS RECOMPUTED BY THE ASSESSING OFFICER, WHICH WAS UPHE LD BY THE CIT (APPEALS). 38. ON PERUSAL OF THE RECORD WE FIND THAT DURING TH E YEAR UNDER CONSIDERATION THE ASSESSEE HAD DEBITED SUM OF RS.6. 21 CRORES TO THE HEAD OFFICE ON ACCOUNT OF ADMINISTRATION AND PERSONNEL E XPENSES, WHICH WAS AS FOLLOWS: PERSONNEL EXPENSES 1,64,97,771 ADMINISTRATIVE EXPENSES 4,56,59,419 TOTAL 6,21,57,190 39. THE TOTAL TURNOVER OF THE ASSESSEE DURING THE Y EAR WAS RS.563.51 CRORES. THE ASSESSEE DURING THE YEAR UNDER CONSIDE RATION HAD CLAIMED THE DEDUCTION UNDER SECTION 10B/80IA/80IB OF THE AC T IN RESPECT OF VARIOUS UNITS IN WHICH IT WAS MANUFACTURING AND PRO CESSING YARN, FABRICS ETC. FOR COMPUTING THE DEDUCTION UNDER SECTION 10B /80IA/80IB, THE ELIGIBLE PROFITS OF THE RESPECTIVE UNITS ARE TO BE COMPUTED AND FOR COMPUTING THE SAME, THE EXPENDITURE RELATABLE TO SU CH UNITS AND ALSO EXPENDITURE INCURRED AT HEAD OFFICE, WHICH HAD NO S EPARATE SOURCE OF INCOME, ARE TO BE APPORTIONED TO THE RESPECTIVE UNI TS. THE ASSESSING OFFICER WHILE COMPUTING THE INCOME UNIT-WISE HAD AP PLIED THE RATIO OF THE TURNOVER ON EACH UNIT TO THE TOTAL TURNOVER AND THE SAID PERCENTAGE WAS APPLIED TO WORK OUT THE UNIT-WISE ALLOCATION OF HEAD OFFICE EXPENSES. THE TABULATED WORKING UNDERTAKEN BY THE ASSESSING O FFICER IS AS UNDER: AUTO III AUTO V AURO WI VSGM 100% EOU TURNOVER OF BUSINESS 25.90 12.70 14.72 43.45 PERCENTAGE OF TURNOVER 4.59% 2.25% 2.61% 7.71% 22 COMMON EXPENSES 28,53,000 13,98,000 16,22,000 47,92,000 40. WE FIND THAT SIMILAR ISSUE OF ALLOCATION OF HEA D OFFICE EXPENSES TO THE UNITS CLAIMING DEDUCTION UNDER CHAPTER-VIA AROS E BEFORE THE CHANDIGARH BENCH OF THE TRIBUNAL IN NAHAR SPINNING MILLS LTD. VS. JCIT IN ITA NO 64/CHD/2011 RELATING TO ASSESSMENT YEAR 2 007-08 ORDER DATED 9.8.2012 AND IT WAS HELD AS UNDER: 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDER THE PROVISIONS OF SECTION 10B OF THE ACT DEDUCTION OUT OF PROFITS & GAINS ARE ALLOWED TO 100% EXPORT ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE FOR A PERIO D OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING FROM THE ASSESSMENT YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUT ER SOFTWARE. THE SAID DEDUCTION IS ALLOWABLE TO AN UNDERTAKING WHICH FULFILLS THE CONDITIONS LAID OUT IN SUB-SECTION (2) TO SECTION 10B OF THE ACT. UNDER S UB- SECTION (4) TO SECTION 10B OF THE ACT FOR COMPUTING THE DEDUCTION UNDER SECTION, THE PROFITS DERIVED FROM E XPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL TH E AMOUNT WHICH BEARS TO THE PROFITS OF BUSINESS OF TH E UNDERTAKING THE SAME PROPORTION AS THE EXPORT TURN OVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPU TER SOFTWARE BEARS TO THE TOTAL TURN OVER OF THE BUSINE SS CARRIED ON BY THE UNDERTAKING. UNDER SECTION 10B(5 ) OF THE ACT, THE REQUIREMENT IS TO FURNISH AUDIT REPORT IN THE PRESCRIBED FORM ALONGWITH RETURN OF INCOME. UNDER SECTION 10B (7) OF THE ACT IT IS PROVIDED THA T THE PROVISIONS OF SUB-SECTIONS (8) AND (10) OF SECTION 80IA OF THE ACT SHALL APPLY. SECTION 80IA(8) OF THE ACT TALKS OF RECOMPUTATION OF DEDUCTION WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSE OF ELIGIBLE BUSINESS ARE TRANSFERED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE AND THE CONSIDERATION FOR SUCH TRANSFER DO ES NOT CORRESPOND TO THE MARKET VALUE OF THE GOODS OR THE SERVICES SO TRANSFERRED. SECTION 80IA(10) OF THE A CT REFERS TO CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYING ON ELIGIBLE BUSINESS WITH ANY OTHER PERSON WHERE THE COURSE OF BUSINESS BETWEEN THEN IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES TO THE ASSESSEE MORE THAN THE ORDINARY PROFITS, WHICH MIGHT BE ACCEPTED TO ARISE IN SUCH ELIGIBLE BUSINESS. 10. READING THE PROVISIONS OF SECTION 80IA (8) OF T HE ACT IT IS APPARENT THAT THE SAME ARE APPLICABLE ONL Y WHERE THE GOODS OR SERVICES ARE TRANSFERRED FROM TH E ELIGIBLE BUSINESS TO ANY OTHER BUSINESS CARRIED ON BY 23 THE ASSESSEE OR VICE VERSA. IN THE FACTS OF THE PR ESENT CASE BEFORE US, ADMITTEDLY THERE IS NO SUCH TRANSFE R OF GOODS OR SERVICE BETWEEN DIFFERENT UNITS RUN BY THE ASSESSEE. THE ASSESSING OFFICER IN THE PRESENT CAS E HAS RECOMPUTED THE ELIGIBLE PROFITS UNDER SECTION 10B O F THE ACT ON ACCOUNT OF REALLOCATION OF THE EXPENDITURE O F MANAGING DIRECTORS REMUNERATION DEBITED TO ANOTHER UNIT OF THE ASSESSEE FIRM, BEING RELATABLE TO THE E LIGIBLE UNIT. 11. THE PROVISIONS OF SECTION 80IB(10) REFER TO THE CONNECTION BETWEEN THE ASSESSEE CARRYING ON THE ELIGIBLE BUSINESS AND ANY OTHER PERSON AND WHERE TH E BUSINESS TRANSACTED BETWEEN THEM IS SO ARRANGED THA T IT PRODUCES MORE THAN ORDINARY PROFITS WHICH MIGHT ARI SE IN SUCH ELIGIBLE BUSINESS. THE REFERENCE IN SECTIO N 80IB(10) IS TO AN ASSOCIATION BETWEEN PERSON CARRYI NG ON ELIGIBLE BUSINESS AND ANY OTHER PERSON. WE FIN D NO MERIT IN THE STAND OF THE REVENUE THAT THE REFERENC E SO MADE IS BETWEEN DIFFERENT UNITS OF THE ASSESSEE ITS ELF AND BY WAY OF DEBITING COMMON EXPENDITURE TO A NON- ELIGIBLE UNIT, THE ASSESSEE BY SHOWING HIGHER PROFI TS OF BUSINESS HAD CLAIMED HIGHER DEDUCTION UNDER SECTION 10B OF THE ACT. WE FURTHER FIND THAT THE RELIANCE BY THE LEARNED A.R. FOR THE ASSESSEE ON CIT VS. M/S PUNJAB CONCAST STEELS LTD. (SUPRA) IS MISPLACED AS THE FAC TS IN THE CASE OF CIT VS. M/S PUNJAB CONCAST STEELS LTD. (SUPRA) BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT AND BEFORE US ARE AT VARIANCE. 12. NOW COMING TO THE RECOMPUTATION OF THE PROFITS IN THE CASE OF THE BUSINESS BY ALLOCATING PROPORTIONAT E MANAGING DIRECTORS REMUNERATION, DEBITED TO NON- ELIGIBLE UNITS OF THE ASSESSEE COMPANY, TO THE ELIG IBLE UNIT OF THE ASSESSEE COMPANY IS ADMISSIBLE OR NOT. UNDER THE PROVISIONS OF SECTION 10B OF THE ACT THE DEDUCTION IS TO BE ALLOWED ON SUCH PROFITS & GAINS OF BUSINESS WHICH ARE DERIVED BY 100% EXPORT ORIENTED UNDERTAKING AND IN ORDER TO DETERMINE THE PROFITS & GAINS OF THE ELIGIBLE UNITS, ALL EXPENDITURE RELATA BLE TO SUCH UNITS ARE TO BE DEDUCTED FOR COMPUTING THE ELI GIBLE PROFITS. THE REMUNERATION PAID TO THE MANAGING DIRECTOR BEING COMMON EXPENDITURE BETWEEN THE ELIGIBLE UNITS AND THE NON-ELIGIBLE UNIT RUN BY THE ASSESSEE COMPANY NEED TO BE ALLOCATED IN ORDER TO DETERMINE THE ELIGIBLE PROFITS OF BUSINESS UNDER SE CTION 10B OF THE ACT. WE ARE IN CONFORMITY WITH THE ORDE RS OF THE AUTHORITIES BELOW IN THIS REGARD AND UPHOLDING THE SAME WE DISMISS GROUND NO.2 RAISED BY THE ASSESSEE. 41. FOLLOWING THE ABOVE SAID PARITY OF REASONING WE ARE IN CONFORMITY WITH THE FINDINGS OF THE CIT (APPEALS). WE DISMISS GROUND NOS.11 TO 13 RAISED BY THE ASSESSEE. WE FIND NO MERIT IN THE RE LIANCE PLACED BY THE ASSESSEE ON RATIO LAID DOWN IN CIT VS. PUNJAB CONCA ST STEELS LTD. [217 24 ITR 206 (P&H)] AS THE FACTS AND RATIO DECIDED BY TH E HON'BLE PUNJAB & HARYANA HIGH COURT IS AT VARIANCE TO THE ISSUE RAIS ED VIDE GROUND NOS.11 TO 13 BY THE ASSESSEE. 42. THE ISSUE IN GROUND NOS.14 AND 15 RAISED BY THE ASSESSEE IS AGAINST THE EXCLUSION OF RENT RECEIPTS FROM EMPLOYEES FROM ELIGIBLE PROFITS OF THE UNDERTAKING WHILE CLAIMING DEDUCTION UNDER SECTION 80IA/80IB OF THE ACT. WE FIND THAT THE PRESENT ISSUE IS DECIDED AGA INST THE ASSESSEE BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF VARDHMAN SPINNING & GENERAL MILLS VS. DCIT IN ITA NO.620/CHD/2005 REL ATING TO ASSESSMENT YEAR 2000-01 WHEREIN VIDE ORDER DATED 10 .1.2007 IT WAS HELD THAT THE RENT RECEIVED FROM THE EMPLOYEES WITH RESP ECT TO THE ACCOMMODATION PROVIDED TO THEM THOUGH CLOSELY CONNE CTED WITH THE BUSINESS OF THE ASSESSEE, COULD NOT BE SAID TO BE T HE INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. FOLLOWING THE SAID PARITY OF REASONING, WE DISMISS GROUND NOS.14 AND 15 OF APPEAL RAISED BY TH E ASSESSEE. 43. THE ISSUE IN GROUND NO.16 IS AGAINST THE EXCLUS ION OF DEPB BENEFIT FROM ELIGIBLE PROFITS WHILE COMPUTING THE DEDUCTION UNDER SECTION 80IA OF THE ACT. THE LEARNED A.R. FOR THE ASSESSEE FAIR LY CONCEDED THAT THE ISSUE STANDS COVERED AGAINST THE ASSESSEE BY THE RA TIO LAID DOWN BY THE HON'BLE SUPREME COURT IN LIBERTY INDIA VS. CIT, 317 ITR 218 (SC). IN VIEW OF THE ADMISSION OF THE ASSESSEE AND THE RATIO BEING SETTLED BY THE APEX COURT IN LIBERTY INDIA VS. CIT (SUPRA) WE DISM ISS GROUND NO.16 RAISED BY THE ASSESSEE. 44. THE GROUND NO.17 RAISED BY THE ASSESSEE IS AGAI NST THE DISALLOWANCE OF RS.1 LAC BEING EXPENSES ATTRIBUTABL E TO THE EARNING OF EXEMPT INCOME IN VIEW OF THE PROVISIONS OF SECTION 14A OF THE ACT. THE REVENUE HAS ALSO RAISED GROUND NO.6 AGAINST THE CUR TAILMENT OF 25 DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A OF THE ACT. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADMI TTED THAT IN THE PRECEDING YEAR THE TRIBUNAL HAD CONFIRMED THE DISAL LOWANCE OF RS.2 LACS UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. FO LLOWING THE ABOVE SAID ADMISSION OF THE ASSESSEE AND THE FACTS BEING IDENTICAL AND ALSO ON ACCOUNT OF THE FACT THAT THE TOTAL DIVIDEND INCOME EARNED BY THE ASSESSEE DURING THE YEAR WAS RS.4.50 CRORES, WE DIRECT THE A SSESSING OFFICER TO DISALLOW RS.2 LACS BEING RELATABLE TO THE EXPENDITU RE INCURRED FOR EARNING THE EXEMPT INCOME. THE GROUND OF APPEAL NO.17 RAIS ED BY THE ASSESSEE IS THUS DISMISSED AND GROUND OF APPEAL NO.6 RAISED BY THE REVENUE IS PARTLY ALLOWED. 45. NOW COMING TO THE APPEAL OF THE REVENUE IN ITA NO.249/CHD/2008, THE GROUND NO.1 OF APPEAL RAISED BY THE REVENUE IS AGAINST THE DIRECTIONS OF CIT (APPEALS) IN NOT REDUCING 90% OF RENT RECEIV ED, MISCELLANEOUS INCOME, EXCESS PROVISION WRITTEN BACK FROM THE PROF ITS OF BUSINESS, WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. EXPLANATION (BAA) TO SECTION 80HHC(4A) OF THE ACT PROVIDES THAT WHILE COMPUTING THE PROFITS OF BUSINESS 90% OF THE SUMS REFERRED TO IN CLAUSES (IIIA) AND (IIIB) OF SECTION 28 OR ANY RECEIPTS BY WAY OF BROK ERAGE, COMMISSION, INTEREST RENT CHARGES OR ANY OTHER RECEIPT OF SIMIL AR NATURE INCLUDED IN SUCH PROFITS WOULD BE REDUCED FROM THE PROFITS AND GAINS OF THE BUSINESS. FURTHER PROFITS OF ANY BRANCH OFFICE AND WAREHOUSE SITUATED OUTSIDE INDIA WOULD ALSO TO BE REDUCTED FROM THE PROFITS OF BUSIN ESS IN ORDER TO COMPUTE THE PROFITS OF BUSINESS ELIGIBLE FOR DEDUCT ION UNDER SECTION 80HHC OF THE ACT. 46. IN THE FACTS OF THE PRESENT CASE THE ASSESSING OFFICER HAD EXCLUDED 90% OF RS.695.96 LACS REPRESENTING OTHER INCOME FRO M PROFITS OF 26 BUSINESS WHILE COMPUTING DEDUCTION UNDER SECTION 80 HHC OF THE ACT. THE OTHER INCOME CONSIDERED IN THE SUM OF RS.695.96 LACS WAS AS UNDER: RENT RS. 45.18 LACS INSURANCE CLAIM RS. 0.12 LACS MISC. INCOME RS. 87.65 LALCS PROVISION WRITTEN BACK RS.401.79 LACS DEPB RS. 14.11 LACS. 47. THE REVENUE VIDE GROUND NO.1 IS AGGRIEVED BY IN CLUSION OF RENT RECEIVED, MISC. INCOME AND PROVISION WRITTEN BACK I N THE PROFITS OF BUSINESS WHILE COMPUTING THE DEDUCTION UNDER SECTIO N 80HHC OF THE ACT. THE CASE OF THE REVENUE IS THAT 90% OF SUCH RECEIPT S ARE TO BE EXCLUDED FROM THE PROFITS OF BUSINESS WHILE COMPUTING THE DE DUCTION UNDER SECTION 80HHC OF THE ACT. THE BREAK-UP OF THE SAID RECEIPT S IS PROVIDED AT PAGE 13 OF THE PAPER BOOK. THE PERUSAL OF THE SAID DETA ILS REFLECTS THAT THE CLAIM RECEIPTS ARE IN RESPECT OF THE EXPENDITURE CL AIMED OF TWO VEHICLES AND ANOTHER CLAIM AGAINST THE MOBILE PHONE. THE SA ID CLAIMS RECEIVED BY THE ASSESSEE THOUGH RELATABLE TO THE BUSINESS OF TH E ASSESSEE COULD NOT BE SAID TO BE THE INCOME DERIVED FROM INDUSTRIAL UNDER TAKING. ACCORDINGLY, WE FIND NO MERIT IN THE ORDER OF THE CIT(A) IN RESP ECT OF CLAIM RECEIPTS TOTALING RS.0.21 LACS AND 90% OF THE SAME HAVE TO B E REDUCED FROM THE PROFITS OF BUSINESS FOR COMPUTING DEDUCTION UNDER S ECTION 80HHC OF THE ACT. 48. THE NEXT ITEM IS PROVISION WRITTEN BACK OF RS.6 4.49 LACS. THE ASSESSEE HAD WRITTEN BACK EXCESS PROVISION FOR CLEA RANCE OF STOCK, EXCESS PROVISION OF FLUCTUATION, EXCESS PROVISION OF COMMI SSION WRITTEN BACK MISC. INCOME ETC. IN ADDITION, ALL OTHER PROVISIONS BEING WRITTEN BACK. TAKING INTO CONSIDERATION THE RECEIPTS UNDER THE HE AD PROVISION WRITTEN BACK, THE LEARNED A.R. FOR THE ASSESSEE HAS FAILED TO EXPLAIN THE NATURE OF THE RECEIPTS AND IN ORDER TO ADJUDICATE THE ISSU E WE DEEM IT FIT TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO LOOK INTO 27 THE NATURE OF THE RECEIPTS AND TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING T O THE ASSESSEE. SIMILARLY, THE RECEIPTS ON ACCOUNT OF MISC. INCOME NEEDS TO BE ADJUDICATED AFTER CONSIDERING THE NATURE OF THE REC EIPTS ITEM-WISE AND WE REMIT THIS ISSUE ALSO BACK TO THE FILE OF THE ASSES SING OFFICER. THE LAST ITEM FOR CONSIDERATION IS RENT RECEIVED FROM EMPLOY EES WHICH IS EXPRESSLY COVERED UNDER THE EXPLANATION (BAA) TO SE CTION 80HHC (4A) OF THE ACT AND 90% OF THE SAME IS TO BE EXCLUDED WHILE COMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT. THUS GRO UND NO.1 RAISED BY THE REVENUE IS PARTLY ALLOWED. 49. THE ISSUE IN GROUND NO.2 RAISED BY THE REVENUE IS LINKED TO GROUND NO.9 RAISED BY THE ASSESSEE. WE HAVE REMITTED THE SAID ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME IN LINE WITH OUR DIRECTION IN ASSESSMENT YEAR 2003-04 AND THUS GROUN D NO.2 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 50. THE ISSUE IN GROUND NO.3 IS AGAINST THE ALLOWAN CE OF DEDUCTION UNDER SECTION 10B OF THE ACT ON PROVISION WRITTEN B ACK AND MISC. INCOME. THE FIRST ASPECT TO BE CONSIDERED IS WHETH ER THE ASSESSEE HAS CLAIMED BOTH THE DEDUCTION UNDER SECTION 10B OF THE ACT AND ALSO DEDUCTION UNDER SECTION 80HHC OF THE ACT ON THE SAI D RECEIPTS. SIMILAR ISSUE HAD ARISEN IN ASSESSMENT YEAR 2003-04 AND THE ASSESSEE AFTER MAKING A CLAIM FOR DEDUCTION UNDER SECTION 10B OF T HE ACT ON THE SAID RECEIPTS HAD WITHDRAWN ITS CLAIM OF DEDUCTION UNDER SECTION 80HHC OF THE ACT. IN LINE WITH OUR DIRECTIONS IN ASSESSMENT YEAR 2003-04 WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE WHETHER THE SAID RECEIPTS HAD BEEN CONSIDERED BOTH FOR CLAI MING EXEMPTION UNDER SECTION 10B OF THE ACT AND ALSO DEDUCTION UNDER SEC TION 80HHC OF THE ACT AND IN CASE IT IS SO THEN THE ASSESSEE IS ENTIT LED TO ONLY ONE 28 DEDUCTION, IN CASE THE SAME IS ALLOWABLE IN ACCORDA NCE WITH LAW. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFTER VERI FYING THE CLAIM OF ASSESSEE AND AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. IF THE RECEIPTS ON WHICH DEDUCTION UNDER SECTION 10B AND 80HHC OF THE ACT WAS CLAIMED, ARE DIFFERENT, THAN T HE ASSESSING OFFICER SHALL DECIDE THE ALLOWABILITY OF SAID DEDUCTION ACC ORDANCE WITH LAW AND AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING T O ASSESSEE. THE GROUND NO. 3 IS ALLOWED FOR STATISTICAL PURPOSE. 51. GROUND NO.4 RAISED BY THE REVENUE IS AGAINST TH E ALLOWANCE OF DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE PROF ITS DERIVED FROM DYEING UNIT. WE FIND THAT SIMILAR ISSUE OF CLAIM O F DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE PROFITS DERIVED FROM DYEING UNITS AROSED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2000-01 IN ITA NO.639/CHD/2005 AND VIDE ORDER DATED 30.5.2008, VIDE PARA 6 THE ISSUE WAS REMITTED BACK TO THE FILE OF T HE CIT (APPEALS) IN ORDER TO GIVEN A FACTUAL FINDING ABOUT THE PROCESS OF THE DYEING AND THEN TO DECIDE THE ISSUE AS PER THE PROVISIONS OF LAW. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THERE IS NO MERIT IN SENDING BACK THE ISSUE AS THE SAME STANDS SETTLED BY THE HON'BLE SUPREME C OURT IN UJAGAR PRINTS VS. UOI [179 ITR 317 (SC)]. HOWEVER IN ORDER TO VE RIFY THE FACTUAL ASPECT OF THE PRESENT CASE WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. THE GROUND NO.4 RAISED BY THE R EVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 52. THE ISSUE RAISED VIDE GROUND NO.5 IS AGAINST AL LOWANCE OF DEDUCTION UNDER SECTION 80IA/80IB OF THE ACT ON OTH ER INCOME OF RS.15.98 LACS. THE LEARNED A.R. FOR THE ASSESSEE P OINTED OUT THAT THOUGH GROUND OF APPEAL NO.5 RAISED BY THE REVENUE TALKS O F RS.76.16 LACS REPRESENTING OTHER INCOME BUT THE ACTUAL FIGURE IS RS.15.98 LACS. WE 29 FIND THIS ISSUE TO BE RELATABLE TO GROUND NOS.1 AND 3 RAISED BY THE ASSESSEE. THE NATURE OF OTHER INCOME ON WHICH THE ASSESSEE IS CLAIMING DEDUCTION UNDER SECTION 80IA/80IB OF THE ACT SEEMS TO BE SAME ON WHICH DEDUCTION UNDER SECTION 80HHC OF THE ACT AND EXEMPT ION UNDER SECTION 10B OF THE ACT WAS CLAIMED. THE ASSESSING OFFICER IS THUS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AND IN CASE THE SA ME INCOME IS BEING CLAIMED AS EXEMPT UNDER SECTION 10B OF THE ACT AND ALSO ON WHICH DEDUCTION UNDER SECTION 80HHC AND/OR 80IA/80IB OF T HE ACT ARE BEING CLAIMED THEN THE DEDUCTION BEING ALLOWABLE UNDER TH E STATUTE IS TO BE ALLOWED UNDER ONE PROVISION OF THE ACT AND THE CLAI M MADE UNDER THE OTHER PROVISION IS TO BE DENIED. THE MATTER IS REM ITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR NECESSARY VERIFICATION AND ALSO FOR ADJUDICATING THE ISSUE AFTER CONSIDERING THE NATURE OF THE RECEIPTS ON WHICH THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECT ION 80IA/80IB AND 10B OF THE ACT. 53. THE GROUND OF APPEAL NO.6 RAISED BY THE REVENUE IS AGAINST ALLOCATION OF EXPENSES FOR EARNING EXEMPT INCOME HA D BEEN ADJUDICATED ALONGWITH GROUND NO.17 OF THE ASSESSEE AND THE SAME IS PARTLY ALLOWED. 54. THE GROUND NO.7 RAISED BY THE REVENUE IS AGAINS T THE COMPUTATION OF BOOK PROFITS UNDER SECTION 115JB OF THE ACT. TH E LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON THE UNDERMENTIONED DECI SIONS: I) CIT VS. BHARI INFORMATION TECHNOLOGY SYSTEM 340 ITR 593(SC) II) AL-KABEER EXPORTS LIMITED VS. CIT SLP 32274/2010 III) CIT VS. CPS TEXTILES P. LTD. (2012) 340 ITR 590 (MAD) 55. THE LEARNED D.R. FOR THE REVENUE FAIRLY ADMITTE D THAT THE ISSUE STANDS COVERED AGAINST THE ASSESSEE BY THE RATIO LA ID DOWN BY THE HON'BLE 30 SUPREME COURT IN AJANTA PHARMA LTD. VS. CIT [327 IT R 305 (SC)]. IN VIEW OF THE ADMISSION OF THE LEARNED D.R. FOR THE R EVENUE AND THE RELIANCE PLACED BY THE LEARNED A.R. FOR THE ASSESSE E ON LARGER BENCH DECISION OF THE HON'BLE SUPREME COURT IN CIT VS. BH ARI INFORMATION TECHNOLOGY SYSTEMS P. LTD. [340 ITR 593(SC)], WE UP HOLD THE ORDER OF THE CIT (APPEALS) AND DISMISS GROUND NO.7 RAISED BY THE REVENUE. 56. IN THE RESULT, THE APPEAL OF THE ASSESSEE AND R EVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF DECEMBER, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH DECEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH