M/s Vardhman Threads Ltd., Ludhiana V. ACIT, Chandigarh

ITA 556/CHANDI/2008

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6135 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-04-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 09-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Business income
• Section: 80HHC; 80IB; 32; 6; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 556/CHD/2008 ASSESSMENT YEARS : 2004-05 VARDHMAN THREADS LTD VS. A.C.I.T. CIRCLE 2(1) CHANDIGARH ROAD CHANDIGARH LUDHIANA (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUBHASH AGGARWAL RESPONDENT BY: SHRI AMARVEE R SINGH DATE OF HEARING 21.4.2014 DATE OF PRONOUNCEMENT 28.4.2014 O R D E R PER T.R. SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 16 .4.2008 OF THE LD CIT(A), CHANDIGARH. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS WHILE TREATING INTEREST AMOUNTING TO RS. 2237509/- UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS AND PROFESSION. 2 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS IN NOT ALLOWING DEDUCTION U/S 80IB ONTEH FOLLOWING AMOUNTS : PARTICULARS AMOUNT (RS) INTEREST INCOME 22,37,509/- PROVISIONS WRITTEN BACK 9,95,752/- SUNDRY BALANCES WRITTEN BACK 51,32,733/- MISC RECEIPTS 3,19,140/- 86,85,134/- 3 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS WHILE REDUCING DEDUCTION U/S 80IB FROM THE ELIGIBLE PROF ITS FOR CALCULATION OF DEDUCTION U/S 80HHC. 4 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS WHILE REDUCING 90% OF THE FOLLOWING ITEMS OF INCOME FROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S 80HHC: A) SUNDRY BALANCES WRITTEN BACK RS. 51,32,733 2 B) PROVISIONS NO LONGER REQUIRED WRITTEN BACK RS. 9.95,752 C) MISC RECEIPTS RS. 3,19,140 RS. 64,47,625 5 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS WHILE DIRECTING TO INCLUDE MISC. INCOME OF RS. 6447625/- (REFERRED IN GROUND NO. 4) IN THE TOTAL TURNOVER OF THE APPELLAN T FOR CALCULATING DEDUCTION U/S 80HHC. 6 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS WHILE EXCLUDING 90% OF GROSSA INTEREST INCOME OF RS. 3027 072/- INSTEASD OF RS. 90% OF NET INTEREST INCOME RS. 2237509/-. 7 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS WHILE NOT ADMITTINGTHE ADDITIONAL GROUND OF APPEAL RAISED BY THE APPELLANT VIDE LETTER DATED 28.12.2007 AS BELOW: THAT THE ASSESSING OFFICER HAS ERRED IN LAW AND ON THE FACTS WHILE NOT GRANTING DEDUCTION UNDER PROVISO TO SEC 8 0HHC(3) ON DUTY DRAW BACK AMOUNTING TO RS. 287513/-. 3 GROUND NO. 1 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT T HE ASSESSEE HAS EARNED INCOME FROM INTEREST AGAINST TH E INTER CORPORATE DEPOSIT AMOUNTING TO RS. 22,37,509/-. TH IS INCOME WAS TREATED BY THE ASSESSING OFFICER AS INCOME FROM OTHER SOURCES. 4 ON APPEAL ACTION OF THE ASSESSING OFFICER WAS CON FIRMED BY THE LD. CIT(A). 5 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT GIVING SURPLUS MONEY ON INTEREST WAS ONE OF TH E OBJECTS OF THE COMPANY AND THEREFORE THIS INCOME SHOULD BE TRE ATED AS BUSINESS INCOME. 6 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN CASE OF CIT VS. 289 IT R 475. 7 WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS CAREFU LLY AND FIND THAT GIVING THE SURPLUS MONEY ON INTEREST HAS NO RELATION WITH THE BUSINESS OF THE ASSESSEE. IN ANY CASE THE HON'BLE 3 DELHI HIGH COURT IN CASE OF CIT VS. SHRI RAM HONDA POWER EQUIP (SUPRA) (DELHI) HAS CLEARLY OBSERVED THAT WHE N THE SURPLUS FUNDS ARE BORROWED FROM THE BANK OR OTHER E NTITY THEN INTEREST EARNED THEREON CAN ONLY BE CATEGORIZED AS INCOME FROM OTHER SOURCES. THEREFORE WE FIND NOTHING WRON G WITH THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. ACCOR DINGLY THIS GROUND IS REJECTED. 8 GROUND NO. 2 AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSING OFFICER DENIED DEDUCTION U/S 80IB ON THE FOLLOWING ITEMS: PARTICULARS AMOUNT (RS) INTEREST INCOME 22,37,509/- PROVISIONS WRITTEN BACK 9,95,752/- SUNDRY BALANCES WRITTEN BACK 51,32,733/- MISC RECEIPTS 3,19,140/- 86,85,134/- ACCORDING TO THE ASSESSING OFFICER ABOVE ITEMS OF I NCOME WERE NOT DERIVED FROM INDUSTRIAL UNDERTAKING AND THEREFO RE SAME IS NOT ELIGIBLE FOR DEDUCTION. 9 ON APPEAL THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED BY THE LD. CIT(A). 10 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE INTEREST WAS PART OF THE BUSINESS. AS FAR AS PROVISION WRITTEN BACK IS CONCERNED, SAME RELATES TO EXPENSES FOR WHICH PROVISION WAS MADE EARLIER AND THAT THE ASSESSEE HA S REDUCED THE PROFITS EARLIER AND THEREFORE DEDUCTION SHOULD BE ALLOWED NOW. SUNDRY BALANCE WRITTEN OFF RELATES TO FOLLOWIN G PARTIES: 4 DETAILS OF SUNDRY BALANCE WRITTEN BACK NAME IF PARTY AMOUNT (RS) BARBOUR CAMPBELL TRD LTD 49,76,051 PARTAP & COLLECTION 1,07,358 MISC BALANCES 49,323 TOTAL 51,32,733 THESE ARE TRADING LIABILITIES AND THE ASSESSEE WAS NOT REQUIRED TO PAY THE SUMS AND THEREFORE EARLIER PURCHASES WHI CH WERE INFLATED NOW CAN BE REDUCED AND THIS BECOMES NORMAL PROFIT. AS FAR AS MISC. RECEIPTS ARE CONCERNED, SAME RELATE TO REBTE AND DISCOUNT, DUTY DRAWBACK AND SALE OF SAMPLES. T HESE BEING PART OF THE BUSINESS AND THEREFORE SHOULD BE HELD T O BE ELIGIBLE FOR DEDUCTION. IN THIS RESPECT HE RELIED ON THE FO LLOWING DECISIONS: (I) TRIBUNALS ORDER IN THE CASE OF VMT SPINNING CO . LTD VS. ACIT IN ITA NO. 682/07 FOR THE ASSESSMENT YEAR 200 2-03 DATED 13.7.2012 (10B ALLOWED ON PROVISIONS W/BACK) (II) CIT VS. METALMAN AUTO P. LTD, 336 ITR 434 (PH) MISC INCOME, DISCOUNT RECEIVED, SUNDRY CREDIT BALANCE WR ITTEN BACK ELIGIBLE FOR DEDUCTION U/S 80IB). 11 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE SUBMITTED THAT CLEAR DETAILS OF VARIOUS ITEMS HAS N OT BEEN PROVIDED. FURTHER AS FAR AS INTEREST AND DUTY DRAW BACK IS CONCERNED, SAME IS NOT PART OF INCOME FROM THE INDU STRIAL UNDERTAKING. THEREFORE SAME CANNOT BE ALLOWED FOR DEDUCTION PURPOSES. IN THIS REGARD HE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF PANDIAN CHEMICALS LTD VS. CIT, 262 ITR 278 (S.C) AND LIBERTY INDIA VS. CIT, 317 ITR 21 8 (S.C). 12 WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS CAREF ULLY. WE SHALL DEAL WITH INDIVIDUAL ITEMS AS UNDER: 5 (I) INTEREST INTEREST INCOME IS NOT ELIGIBLE FOR DEDUCTION BECAUSE HON'BLE SUPREME COURT IN CASE OF PANDIAN CH EMICALS LTD VS. CIT (SUPRA) HAS CLEARLY OBSERVED AND HELD A S UNDER: THE WORDS DERIVED FROM IN SECTION 80 HH OF THE I NCOME-TAX ACT, 1961, MUST BE UNDERSTOOD AS SOMETHING WHICH HAS A DIRECT OR IMMEDIATE NEXUS WITH THE ASSESSESS INDUSTRIAL UNDERTAKING. ALTHOUG H ELECTRICITY MAY BE REQUIRED FOR THE PURPOSE OF THE INDUSTRIAL UNDERTAK ING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. HELD ACCORDINGLY, THAT INTEREST DERIVED BY THE IND USTRIAL UNDERTAKING OF THE ASSESSEE ON DEPOSIT MADE WITH THE ELECTRICITY BOARD FOR THE SUPPLY OF ELECTRICITY FOR RUNNING THE INDUSTRIAL UNDERTAKI NG COULD NOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSEL F AND WAS NOT PROFITS OR GAINS DERIVED BY THE UNDERTAKING FOR THE PURPOSE OF THE SPECIAL DEDUCTION UNDER SECTION 80HH. NO DOUBT ABOVE DECISION PERTAINS TO DEDUCTION U/S 8 0HH BUT AT THE SAME TIME DEDUCTION WAS DENIED BECAUSE THE INCO ME WAS NOT DERIVED FROM INDUSTRIAL UNDERTAKING. SEC 80IB ALSO EMPLOYS THE EXPRESSION DERIVED FROM. THEREFORE DECISION OF HON'BLE APEX COURT IN CASE OF PANDIAN CHEMICALS LTD VS. CI T (SUPRA) IS SQUARELY APPLICABLE IN RESPECT OF THE INTEREST AND ACCORDINGLY NO DEDUCTION IS AVAILABLE ON THIS ITEM. (II) PROVISION WRITTEN BACK THIS CONSIST OF FOLLO WING ITEMS AS DISCUSSED BY THE LD. CIT(A) AT PAGE 9: DETAILS OF PROVISIONS NO LONGER REQUIRED WRITTEN BA CK CST 1212 TELEPHONE 2520 EXGRATIA 495917 COMMISSION 452301 DEPB 17543 DISCOUNT 8573 TRAVELLING 171 OTHERS 17515 TOTAL 995752 MOST OF THESE ITEMS PERTAIN TO EXPENDITURE EARLIER PROVIDED AND NOW WRITTEN BACK. THIS MEANS THAT PROFIT WAS REDUC ED IN THE EARLIER YEARS AND NOW THE SAME HAS GONE UP, THEREFO RE THIS IS 6 PART OF THE REVENUE RECEIPTS RELATING TO BUSINESS H ENCE ON THESE ITEMS THE ASSESSEE SHOULD BE ALLOWED DEDUCTIO N. (III) SUNDRY BALANCE WRITTEN BACK DETAILS OF THES E ITEMS HAVE BEEN GIVEN BY THE ASSESSEE AS UNDER: DETAILS OF SUNDRY BALANCE WRITTEN BACK NAME IF PARTY AMOUNT (RS) BARBOUR CAMPBELL TRD LTD 49,76,051 PARTAP & COLLECTION 1,07,358 MISC BALANCES 49,323 TOTAL 51,32,733 HOWEVER, FROM THE ABOVE DETAILS IT IS NOT CLEAR WHE THER THESE BALANCES PERTAIN TO THE REVENUE ACCOUNT OR CAPITAL ACCOUNT. THEREFORE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FO R RE-EXAMINING OF THE ISSUE. IF THE BALANCE HAVE BEEN WRITTEN BAC K ON ACCOUNT OF REVENUE RECEIPTS THEN DEDUCTION MAY BE ALLOWED O THERWISE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. (IV) MISC RECEIPTS - DETAILS OF MISC RECEIPTS IS A S UNDER: REBATE & DISCOUNT - RS. 24,516 DUTY DRAWBACK RS. 2,87,513 SALE OF SAMAPLES - RS. 7,111 RS. 86,85,134 AS FAR AS DUTY DRAWBACK IS CONCERNED THE LD. D.R. F OR THE REVENUE IS RIGHT IN POINTING OUT THAT THIS ITEM IS NOT ELIGIBLE FOR DEDUCTION IN VIEW OF THE DECISION OF HON'BLE SUPREM E COURT IN CASE OF LIBERTY INDIA VS. CIT (SUPRA). IN THAT CASE IT WAS CLEARLY HELD THAT DUTY DRAWBACK BENEFITS DID NOT FORM PART OF THE PROFIT FOR THE PURPOSE OF DEDUCTION U/S 80IA/80IB, THEREFO RE FOLLOWING THIS DECISION WE HOLD THAT NO DEDUCTION IS ELIGIBLE ON DDB. 13 AS FAR AS REBATE AND DISCOUNT AND SALE OF SAMPLE S IS CONCERNED, BOTH RECEIPTS ARE OF THE NATURE OF REVEN UE AND ARE 7 RELATED TO NORMAL BUSINESS OF THE ASSESSEE, THEREFO RE ON THESE TWO ITEMS THE ASSESSEE IS ELIGIBLE TO DEDUCTION. A CCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IB ON TH ESE TWO ITEMS. 14 GROUND NO. 3 - AFTER HEARING BOTH THE PARTIES WE FIND THAT WHILE DEDUCTING DEDUCTION U/S 80HHC THE ASSESSING O FFICER HAS REDUCED DEDUCTION U/S 80IB. 15 ON APPEAL ACTION OF THE ASSESSING OFFICER WAS CO NFIRMED BY THE LD. CIT(A). 16 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT DEDUCTION U/S 80IB SHOULD NOT HAVE BEEN REDUCE D WHILE COMPUTING THE DEDUCTION U/S 80HHC. IN THIS REGARD HE RELIED ON THE FOLLOWING DECISIONS: CIT VS. MILLIPORE INDIA P. LTD,341 ITR 219 (KAR) TOSHICA CREATION VS. ITO, 150 TAXMANN 0048 (JAIPUR ) DCIT VS. MAJAVIR SPINNING MILLS LTD IN ITA NO. 737 /2004 DIAMOND DYE CHEM LTD VS. DCIT (MUM) DATED 5.1.2011 17 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED AGAINS T THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF BROADWAYS OVERSEAS LTD VS. CIT, ITA NO. 1234/09. 18 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY T HE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE O F BROADWAYS OVERSEAS LTD VS. CIT (SUPRA). HON'BLE HIG H COURT HAS SUMMARIZED ITS CONCLUSION AT PARA 22 AT PAGE 10 WHICH IS AS UNDER: 8 SUMMING UP THE ENTIRE CONTROVERSY, IN CONCLUSION, I T IS HELD THAT WHEN PROVISION OF SECTION 80IB(13) ARE READ IN CONJUNCTI ON WITH SECTION 80IA(9) OF THE ACT, IT BECOMES CLEAR THAT DEDUCTION UNDER SECTION 80HHC OF THE ACT IS TO BE COMPUTED ON THE ELIGIBLE BUSINE SS PROFITS ONLY AFTER REDUCING THERE FROM THE PORTION OF PROFIT ON WHICH DEDUCTION HAS ALREADY BEEN AVAILED BY THE ASSESSEE UNDER THIS SECTION I.E . 80IB. IN OTHER WORDS, IF AN ASSESSEE HAS CLAIMED DEDUCTION OF PROF IT OR GAINS UNDER SECTION 80IB, DEDUCTION TO THAT EXTENT IS NOT TO BE ALLOWED UNDER SECTION 80HHC. FOLLOWING THE ABOVE WE DECIDE THIS ISSUE AGAINST TH E ASSESSEE. 19 GROUND NO. 4 - AFTER HEARING BOTH THE PARTIES WE FIND THAT SUNDRY BALANCES WRITTEN BACK AMOUNTING TO RS. 51327 33/- PROVISION NO LONGER REQUIRED AMOUNTING TO RS. 99575 2/- AND MISC RECEIPTS WERE REDUCED FROM THE PROFITS @ 90% F OR THE PURPOSE OF DDB U/S 80HHC. THIS ACTION OF THE ASSES SING OFFICER WAS CONFIRMED BY THE LD. CIT(A). 20 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THESE ITEMS SHOULD NOT HAVE BEEN REDUCED FROM THE PROFITS AND IN THIS REGARD HE RELIED ON THE DECISION OF THE TRIBUNAL IN FOLLOWING CASES: (I) TRIBUNALS ORDER DATED 31.1.2008 IN CASE OF DCI T V. MAHAVIR SPINNING MILLS LTD IN ITA NO. 737/2004 FOR ASSESSME NT YEAR 2000- 01 WHERE ITAT HELD THAT MISC INCOME COMPRISING OF S UNDRY BALANCES WRITTEN BACK, REBATE & DISCOUNT FROM SUPPL IERS, REFUND OF INSURANCE PREMIUM WERE HELD IN THE NATURE OF BUSINE SS INCOME AND THEREFORE 90% OF THE SAME NOT REDUCED WHILE CALCULA TING DEDUCTION U/S 80HHC. (II) MUNJAL SHOWA LTD VS. DCIT 94 TTJ 227 TRIBUNA L DELHI) 90% OF BALANCE WRITTEN BACK, DISCOUNT FROM PARTIES NOT REDUCED) (III) DIAMOND DYE CHEM LTD VS. DCIT (MUM) DATED 5.1 .2011 (90% OF BALANCES WRITTEN BACK NOT BE REDUCED). 21 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 22 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT AS FAR AS ITEMS OF SUNDRY BALANCES IS CONCERNED, NATUR E OF THE AMOUNT WRITTEN BACK HAS NOT BEEN EXAMINED BY THE AS SESSING OFFICER AND WAS NOT AVAILABLE BEFORE US, THEREFORE WE SET ASIDE 9 THE ORDER OF THE LD. CIT(A) AND REMIT THE MATTER BA CK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO FIRST EXAM INE THE NATURE OF ITEMS AND THEN DECIDE THE ISSUE. AS FAR AS PROV ISION NO LONGER REQUIRED IS CONCERNED, WE HAVE ALREADY SEEN THE NATURE OF THESE ITEMS WHILE ADJUDICATING GROUND NO. 2 AND FIND THAT THESE ITEMS RELATE TO PROVISION WRITTEN BACK ON ACC OUNT OF VARIOUS EXPENSES WHICH WERE NO LONGER REQUIRED. TH ESE ITEMS HAVE GOT NOTHING TO DO WITH THE ITEMS PROVIDED IN C LAUSE (BAA) OF SUB-SEC (4C) OF SEC 80HHC AND THEREFORE THEY SHO ULD NOT BE REDUCED. AS FAR AS MISC RECEIPTS ARE CONCERNED, RE BATE AND DISCOUNT AND SALE OF SAMPLES CANNOT BE REDUCED BUT THE DDB HAS TO BE REDUCED BUT SAME IS REQUIRED TO BE ADDED AGAIN TO THE PROFITS U/S SUB SEC (3) OF SEC 80HHC AND ASSES SING OFFICER SHOULD DECIDE THE ISSUE CONSIDERING THESE O BSERVATIONS. 23 GROUND NO. 5 - AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSING OFFICER HAS INCLUDED THESE ITEMS IN T HE TOTAL TURNOVER WHILE COMPUTING DEDUCTION. 24 ON APPEAL ACTION OF THE ASSESSING OFFICER WAS C ONFIRMED BY THE LD. CIT(A). 25 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE RELI ED ON THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT VS. BICYCLE WHEELS (INDIA), 335 ITR 384. 26 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE SUPPORTED THE ORDER OF THE LD. CIT(A). 27 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THE DECISION IN CASE OF CIT VS. BICYCLE WHEELS (INDIA) (SUPRA) RELATE TO INCLUSION OF SALE OF SCRAP IN THE TOTAL T URNOVER. 10 HON'BLE HIGH COURT HELD THAT SCRAP IS TO BE INCLUD ED IN THE TOTAL TURNOVER. SO THIS CASE HAS NOT RELEVANCE TO THE CASE OF THE ASSESSEE. HOWEVER, AT THE SAME TIME WE AGREE T HAT VARIOUS ITEMS CAN BE INCLUDED IN THE TOTAL TURNOVER ONLY IF THEY HAVE SOME SALE ELEMENT. SINCE NATURE OF THE ITEMS HAS NOT BEEN DISCUSSED IN THE DETAIL, WE SET ASIDE THE ORDE R OF THE LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF ASS ESSING OFFICER WITH A DIRECTION TO FIRST ASCERTAIN THE NATURE OF T HE ITEMS AND THEN GIVEN APPROPRIATE TREATMENT IN ACCORDANCE WITH LAW. 28 GROUND NO. 6 - AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSING OFFICER HAD EXCLUDED 90% OF THE GROSS INTEREST FROM THE PROFITS FOR THE PURPOSE OF COMPUTING DEDUC TION U/S 80HHC. THIS ACTION OF THE ASSESSING OFFICER WAS CO NFIRMED BY THE LD. CIT(A). 29 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT ONLY NET INTEREST SHOULD HAVE BEEN REDUCED FRO M THE PROFITS AND IN THIS REGARD HE RELIED ON THE DECISIO N OF HON'BLE SUPREME COURT IN CASE OF ACG ASSOCIATED CAPSULES PV T LTD VS. CIT, 343 ITR 89. 30 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE SUPPORTED THE ORDER OF THE LD. CIT(A). 31 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT HON'BLE SUPREME COURT IN CASE OF ACG ASSOCIATED CAP SULES PVT LTD VS. CIT (SUPRA) HAS HELD AS UNDER: HELD ACCORDINGLY THAT NINETY PER CENT. OF NOT THE GROSS RENT OR GROSS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHI CH HAD BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION , WAS TO BE DEDUCTED UNDER 11 CLAUSE (1) OF EXPLANATION (BAA) TO SECTION 80HHC FO R DETERMINING THE PROFITS OF THE BUSINESS. IT IS CLEAR THAT ONLY NET INTEREST HAS TO BE REDUCE D FROM THE PROFITS FOR COMPUTING DEDUCTION U/S 80HHC, THEREFOR E WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AS SESSING OFFICER TO REDUCE NET INTEREST FROM THE PROFITS FOR COMPUTING DEDUCTION U/S 80HHC. 32 GROUND NO. 7 THIS ISSUE HAS ALSO BEEN ADJUDICATED WHILE ADJUDICATING GROUND NO. 4 WHEREIN WE HAVE ALR EADY HELD THAT DUTY DRAWBACK WHICH HAS BEEN REDUCED @ 90% OF THE PROFITS SHOULD BE AGAIN ADDED BACK TO THE PROFITS I N TERMS OF SEC 80HHC (3). THEREFORE SAME DIRECTION IS APPLICA BLE AND THE ASSESSING OFFICER IS DIRECTED TO ADD WRITTEN BACK A MOUNT OF DUTY DRAWBACK AS PER SEC 80HHC(3) TO THE PROFITS BE FORE COMPUTING DEDUCTION. 33 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.4.2014 SD/- SD/- (SANJAY GARG) (T.R. SOOD ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28.4.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 12