Seshasayee Paper & Boards Ltd., CHENNAI V. DCIT, CHENNAI

ITA 836/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7581 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 07-01-2016
• Assessment Year: 1998-1999
• Appeal Filed On: 13-04-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Business income
• Section: 80HHC; 6; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.836 /MDS./2015 ( / ASSESSMENT YEAR :1998-99) M/S.SESHASAYEE PAPER & BOARDS LTD., CAVERY R.S.P.O PALLIPALAYAM,ERODE 638 007. VS. DEPUTY COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE- II(3),NEW BUILDING, NUNGAMBAKKAM, CHENNAI 34. PAN AACCS 1192 G ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : DR.ANITA SUMANTH,ADVOCATE / RESPONDENT BY : MR.A.V.SREEKANTH,JCIT, D.R / DATE OF HEARING : 07.01.2016 /DATE OF PRONOUNCEMENT : 24.03.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A), SALEM DATED 29.01.2015 PERTAINING TO THE ASSESSMENT YEAR 1998-9 9. ITA NO.836/MDS/2015 2 2. THE ASSESSEE HAS RAISED THE GROUNDS WITH REGARD TO DENYING RELIEF U/S.80HHC OF THE ACT IN FULL WITH RESPECT TO THE RENTAL INCOME RECEIVED BY THE ASSESSEE FROM HOUSING PROVIDED TO I TS EMPLOYEES AS WELL AS THE INCOME FROM LEASING ACTIVITY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS EARNED RENTAL INCOME OF ` 20,24,710/-FROM HOUSING PROVIDED TO ITS EMPLOYEES. ACCORDING TO THE ASSESSEE, THIS RENTAL INCOME WAS A SSESSED AS BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. AS THE RENTAL INCOME ARISES OUT OF BUSINESS OF MANUFACTURE AND SA LE OF PAPER (ELIGIBLE BUSINESS), THE AMOUNT NEED NOT BE EXCLUDE D FROM THE BUSINESS PROFIT OF ASSESSEE AND THE ENTIRE AMOUNT I S TO CONSIDER COMPUTING DEDUCTION U/S.80HHC OF THE ACT. LD.A.R RE LIED UPON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF M/S.ACG C APSULES LTD VS.CIT REPORTED IN 343 ITR 0089 WHEREIN HELD THAT O NLY THE NET INCOME FROM LEASE IS LIABLE TO BE TAKEN INTO ACCOUN T WHILE COMPUTING DEDUCTION U/S.80HHC OF THE ACT AND NOT THE GROSS IN COME SO AS TO COMPLY THE CLAUSE (BAA) TO SEC.80HHC OF THE ACT. ITA NO.836/MDS/2015 3 4. ON THE OTHER HAND, LD.D.R SUBMITTED THAT THE TR IBUNAL IN THE CASE OF ASSESSEE COMPANY IN ITA NO.860/MDS./2003 FO R ASSESSMENT YEAR 1997-98 RELIED ON THE DECISION OF BOMBAY HIGH COURT IN CIT VS.BANGALORE CLOTHING CO. IN 260 ITR 371 AND ALLOWE D THE CLAIM OF ASSESSEE. HOWEVER, THE HONBLE BOMBAY HIGH COURT I N ITS LATER JUDGEMENT IN CIT VS.DRESSER RAND INDIA P. LTD IN 32 3 ITR 429(BOM) HAS CONSIDERED THE MATTER. IN THIS CITATION, THE B OMBAY HIGH COURT DISAPPROVED THE JUDGMENT IN THE CASE OF CIT VS. BAN GALORE CLOTHING, BUT HAVE CONSIDERED DECISION OF HONBLE APEX COURT IN CIT VS. RAVINDRANATHAN NAIR REPORTED IN [2007] 295 ITR 228( SC). THE DECISION OF CIT VS.DRESSER RAND INDIA P. LTD (SUPRA ) WHEREIN HELD THAT : SUB-SECTION (1) OF SECTION 80HHC OF THE INCOME-TAX ACT, 1961, CONTEMPLATES A DEDUCTION TO AN ASSESSEE BEING AN INDIAN COMPANY OR A PERSON RESIDENT IN INDIA AND EN GAGED IN THE BUSINESS OF THE EXPORT OUT OF INDIA OF ANY GOOD S OR MERCHANDISE TO WHICH THE SECTION APPLIES. THE DEDUC TION IS TO BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASS ESSEE TO THE EXTENT OF PROFITS REFERRED TO IN SUB-SECTION (1B) D ERIVED BY THE ASSESSEE FROM THE EXPORT OF SUCH GOODS OR MERCHANDI SE. CLAUSE (A) OF SUB-SECTION (3) OF SECTION 80HHC PROV IDES A FORMULA FOR DETERMINING THE PROFITS DERIVED FROM SU CH EXPORT. THE PROPORTION BETWEEN THE EXPORT TURNOVER AND THE TOTAL TURNOVER OF THE BUSINESS IS APPLIED TO THE PROFITS OF THE BUSINESS, IN ORDER TO DETERMINE THE EXTENT TO WHICH THE PROFI TS ARE TO BE REGARDED AS BEING DERIVED FROM EXPORT. EXPLANATION (BAA) WHICH ITA NO.836/MDS/2015 4 WAS INSERTED BY THE FINANCE ACT OF 1991 DEFINES THE EXPRESSION PROFITS OF THE BUSINESS. PROFITS OF THE BUSINESS, AS EXPLANATION (BAA) WOULD POSTULATE, HAVE TO BE FIRST COMPUTED UN DER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER THE PROVISIONS OF SECTIONS 28 AND 44D OF THE ACT. THEY HAVE TO BE REDUCED BY (I) NINETY PER CENT. OF THE INCENTIVE IN COME REFERRED TO IN CLAUSES (IIIA) , (IIIB) AND (IIIC) OF SECTION 28 OR OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE I NCLUDED IN SUCH PROFITS ; AND (II) THE PROFITS OF ANY BRANCH, OFFICE, WAREHOUSE OR ANY OTHER ESTABLISHMENT OF THE ASSESSE E SITUATE OUTSIDE INDIA. IN THE SUPREME COURT HELD THAT INDEP ENDENT INCOME LIKE RENT, COMMISSION, BROKERAGE, ETC., THOU GH IT FORMED PART OF THE GROSS TOTAL INCOME HAD TO BE REDUCED BY 90 PER CENT. AS CONTEMPLATED IN EXPLANATION (BAA) IN ORDER TO AR RIVE AT BUSINESS PROFITS. THE RATIONALE FOR THIS WHICH IS I NDICATED IN THE JUDGMENT OF THE SUPREME COURT IS THAT PROFIT INCENT IVES AND ITEMS WHICH CONSTITUTE INDEPENDENT INCOMES HAVE NO ELEMENT OF EXPORT TURNOVER AND ARE CONSEQUENTLY LIABLE TO B E EXCLUDED TO THE EXTENT THAT IS STIPULATED IN EXPLANATION (BAA) . THE DECISION IN TO THE EXTENT TO WHICH IT LAYS DOWN A PRINCIPLE OF LAW AT VARIANCE WITH THE SUBSEQUENT JUDGMENT OF THE SUPREM E COURT IN WOULD NOT THEREFORE HOLD THE FIELD UNDER THE JUDGME NT OF THE SUPREME COURT. IN THERE IS NOTHING IN THE JUDGMENT OF THE SUPREME COURT TO SUGGEST THAT THE JUDGMENT IN WAS E ITHER EXPRESSLY OR IMPLIEDLY APPROVED. THE AMBIT OF EXPLA NATION (BAA) HAS BEEN CONSIDERED BY THE JUDGMENT OF THE SUPREME COURT IN . THE LEGISLATIVE POLICY UNDERLYING THE PROVISION IS THAT ITEMS WHICH ARE UNRELATABLE TO THE EXPORT ACTIVITY MUST B E EXCLUDED IN THE COMPUTATION OF BUSINESS PROFITS IN ORDER TO PRE VENT A DISTORTION IN THE COMPUTATION OF THE DEDUCTION UNDE R SECTION 80HHC . WHAT PROVISION SHOULD BE MADE CONSISTENT WI TH THE LEGISLATIVE POLICY UNDERLYING SECTION 80HHC IS A MA TTER FOR PARLIAMENT TO DETERMINE. THE DUTY OF THE COURT IS T O INTERPRET THE LANGUAGE OF THE PROVISION. THE INTERPRETATION OF TH E PROVISION BY THE SUPREME COURT IS BINDING AND HAS TO BE FOLLOWED . ITA NO.836/MDS/2015 5 5.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE ISSUE IN DISPUTE CONSIDER ED BY THE SUPREME COURT IN THE CASE OF CIT VS. RAVINDRANATHAN NAIR RE PORTED IN [2007] 295 ITR 228(SC) WHEREIN HELD THAT: 17. SECTION 80HHC HAD A HEADNOTE. THAT HEADNOTE S AID 'DEDUCTION IN RESPECT OF PROFITS RETAINED FOR EXPOR T BUSINESS'. THE SAID HEADNOTE WAS INSERTED BY THE FINANCE ACT, 1985 WITH EFFECT FROM APRIL 1, 1986. UNDER THE ORIGINAL SECTI ON AS INSERTED BY THE FINANCE ACT, 1983, THE HEADNOTE STATED 'DEDU CTION IN RESPECT OF EXPORT TURNOVER'. THEREFORE, THE VERY BA SIS SHIFTED FROM 'EXPORT TURNOVER' TO 'RETENTION OF PROFITS FOR EXPORT BUSINESS'. 18. UNDER SECTION 80HHC(1) OF THE INCOME-TAX ACT, I T WAS, INTER ALIA, PROVIDED THAT IN COMPUTING THE 'TOTAL INCOME' A DEDUCTION OF THE PROFITS DERIVED BY THE ASSESSEE FROM THE EXPORT OF GOODS SHALL BE MADE. THAT, THAT THE WORDS 'PROFITS DERIVE D FROM EXPORTS' IN THE SAID SUB-SECTION WAS SUBSTITUTED FO R THE WORDS 'WHOLE OF THE INCOME' BY THE DIRECT TAX LAWS (AMEND MENT) ACT, 1989, WITH EFFECT FROM APRIL 1, 1989. THE EXPRESSIO N 'DERIVED FROM' IN THE SAID SUB-SECTION IS NARROWER THAN THE EXPRESSION 'ATTRIBUTABLE TO', THEREFORE, IT IS ONLY 'PROFITS D ERIVED FROM EXPORTS' WHICH BECOME THE BASIS FOR WORKING OUT THE SAID FOR MULA IN SECTION 80HHC(3) OF THE ACT. SIMILARLY, BY THE FINA NCE ACT (NO. 2) ACT, 1991, WITH EFFECT FROM APRIL 1, 1992, FOR T HE FIRST TIME, THE EXPRESSION 'PROFITS OF THE BUSINESS' STOOD DEFINED TO MEAN THE 'PROFITS OF THE BUSINESS' AS COMPUTED UNDER THE HEA D 'PROFITS AND GAINS OF BUSINESS' UNDER SECTIONS 28 TO 44D OF THE INCOME- TAX ACT. THEREFORE, BEFORE GIVING DEDUCTION, UNDER SECTION 80HHC(3)(A), (B) OR (C) OF THE INCOME-TAX ACT, THE GROSS TOTAL INCOME OF THE ASSESSEE BEING PROFITS FROM BUSINESS HAD TO BE ARRIVED AT IN TERMS OF CLAUSE (BAA) OF THE SAID EXP LANATION. HOWEVER, ONE POINT NEEDS TO BE NOTED, NAMELY, WHILE CALCULATING 'BUSINESS PROFITS' THE SAME HAD TO BE DONE IN TERMS OF SECTION ITA NO.836/MDS/2015 6 28 TO SECTION 44D OF THE INCOME-TAX ACT ALONE. OTHE R PROVISIONS LIKE SECTIONS 70 AND 71 OF THE INCOME-TAX ACT WERE EXCLUDED. THEREFORE, IN OUR VIEW, IF THE SAID PROCESSING CHAR GES WERE A PART OF THE GROSS TOTAL INCOME OF THE TAXPAYER BEIN G PROFITS FROM BUSINESS THEN IT HAD TO BE INCLUDED IN THE TOTAL TU RNOVER IN THE ABOVE FORMULA. IT IS IMPORTANT THAT DEDUCTION HAS T O BE FROM PROFITS AS UNDERSTOOD IN THE COMMERCIAL SENSE. MORE OVER, UNDER CLAUSE (BAA)(1), 90 PER CENT. OF ANY AMOUNT REFERRE D TO IN CLAUSES (IIIA), (IIIB) AND (IIIC) OF SECTION 28 OF THE INCOME-TAX ACT OR ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, IN TEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE IN CLUDED IN SUCH PROFITS. THE SAID EXPRESSION 'INCLUDED IN SUCH PROF ITS' INDICATED THAT THE SAID PROCESSING CHARGES FORMED PART OF THE GROSS TOTAL INCOME BEING BUSINESS PROFITS. THIS HAS BEEN CLARIF IED BY CLAUSE (BAA) TO THE SAID EXPLANATION WHICH INSERTED THE DE FINITION OF 'PROFITS FROM BUSINESS' IN THE SAID SECTION 80HHC(3 ) OF THE INCOME-TAX ACT. 19. IN THE PRESENT CASE, THE ASSESSING OFFICER HAD WORKED OUT THE BUSINESS PROFITS OF RS. 1,94,08,220 AS THE GROS S TOTAL INCOME ON THE BASIS OF INCOME RECEIVED FROM CASHEW BUSINES S (SEE PAGES 50 AND 52 OF THE SLP PAPER BOOK). EVEN ACCORD ING TO THE ASSESSEE, IN THE ABOVE FORMULA HIS BUSINESS PROFITS INCLUDED THE ABOVEMENTIONED PROCESSING CHARGES. HOWEVER, ACCORDI NG TO THE ASSESSEES, THE SAID CHARGES WERE NOT TO BE INCLUDED IN THE TOTAL TURNOVER. WE ARE NOT INCLINED TO ACCEPT THE CONTENT ION OF THE ASSESSEES. THE ABOVE DISCUSSION INDICATES THAT THE FORMULA IN SECTION 80HHC(3) OF THE INCOME-TAX ACT PROVIDED FOR A FRACTION OF THE EXPORT TURNOVER DIVIDED BY THE TOTAL TURNOVE R TO BE APPLIED TO BUSINESS PROFITS CALCULATED AFTER DEDUCTING 90 P ER CENT. OF THE SUMS MENTIONED IN CLAUSE (BAA) TO THE SAID EXPLANAT ION. THAT, PROFIT INCENTIVES AND ITEMS LIKE RENT, COMMISSION, BROKERAGE, CHARGES, ETC., THOUGH FORMED PART OF GROSS TOTAL IN COME HAD TO BE EXCLUDED AS THEY WERE 'INDEPENDENT INCOMES' WHIC H HAD NO ELEMENT OF EXPORT TURNOVER. THAT, THE SAID ITEMS DI STORTED THE FIGURE OF EXPORT PROFITS. 20. IN OUR VIEW, FOR THE ABOVE REASONS, THE SAID PR OCESSING CHARGES, WHICH WAS PART OF GROSS TOTAL INCOME, WAS AN ITA NO.836/MDS/2015 7 INDEPENDENT INCOME LIKE RENT, COMMISSION, BROKERAGE , ETC., AND, THEREFORE, 90 PER CENT. OF THE SAID SUM HAD TO BE R EDUCED FROM THE GROSS TOTAL INCOME TO ARRIVE AT THE BUSINESS PR OFITS AND SINCE THE SAID PROCESSING CHARGE WAS AN IMPORTANT COMPONE NT OF BUSINESS PROFITS, IT ALSO HAD TO BE INCLUDED IN THE TOTAL TURNOVER IN THE SAID FORMULA TO ARRIVE AT THE BUSINESS PROFITS IN TERMS OF CLAUSE (BAA) TO THE SAID EXPLANATION. 21. ONE POINT STILL REMAINS FOR CONSIDERATION. ON B EHALF OF THE ASSESSEES IT HAS BEEN VEHEMENTLY URGED THAT THE ABOVEMENTIONED PROCESSING CHARGES EARNED BY THE ASS ESSEES BY PROCESSING RAW CASHEW NUTS FOR THIRD PARTIES, HA D NO NEXUS WITH THE EXPORT BUSINESS AND, THEREFORE, SUCH CHARG ES WERE NOT INCLUDIBLE IN THE TOTAL TURNOVER. IT WAS ALSO FURTH ER ARGUED THAT THE EXPORT INCENTIVES WERE ADMISSIBLE ONLY IN RESPECT O F PROFITS ON EXPORT SALES. IN THIS CONNECTION, IT WAS SUBMITTED THAT THE ASSESSEES EARNED PROCESSING CHARGES FROM AN ACTIVIT Y WHICH HAD NO CONNECTION WITH EXPORTS. ACCORDING TO THE AS SESSEES, NO EXPORT TURNOVER AROSE FROM PROCESSING OF RAW MATERI AL BY THE ASSESSEES FOR THIRD PARTIES AND, THEREFORE, THE SAI D RECEIPTS DID NOT CONSTITUTE AN ELEMENT OF TOTAL TURNOVER. THEREF ORE, ACCORDING TO THE ASSESSEES, THE ASSESSING OFFICER HAD ERRED I N INCLUDING THE SAID CHARGES IN THE TOTAL TURNOVER. ACCORDING T O THE ASSESSEES, PROFITS DERIVED FROM LOCAL SALES WERE IN CLUDIBLE IN THE BUSINESS PROFITS BUT NOT IN THE TOTAL TURNOVER. 22. AT THE OUTSET, WE MAY STATE THAT, IN THE PRESEN T CASE, WE ARE DEALING WITH THE LAW AS IT STOOD DURING ASSESSMENT YEAR 1993- 94. AT THAT TIME SECTION 80HHC(3) OF THE INCOME-TAX ACT CONSTITUTED A CODE BY ITSELF. SUBSEQUENT AMENDMENTS HAVE IMPOSED RESTRICTIONS/QUALIFICATIONS BY WHICH THE SA ID PROVISION HAS CEASED TO BE A CODE BY ITSELF. IN THE ABOVE FOR MULA THERE EXISTED FOUR VARIABLES, NAMELY, BUSINESS PROFITS, E XPORT TURNOVER, TOTAL TURNOVER AND 90 PER CENT. OF THE SUMS REFERRE D TO IN CLAUSE (BAA) TO THE SAID EXPLANATION. IN THE COMPUTATION O F DEDUCTION UNDER SECTION 80HHC ALL FOUR VARIABLES HAD TO BE TA KEN INTO ACCOUNT. ALL FOUR VARIABLES WERE REQUIRED TO BE GIV EN WEIGHTAGE. THE SUBSTITUTION OF SECTION 80HHC(3) SECURES PROFIT S DERIVED ITA NO.836/MDS/2015 8 FROM THE EXPORTS OF ELIGIBLE GOODS. THEREFORE, IF A LL THE FOUR VARIABLES ARE KEPT IN MIND, IT BECOMES CLEAR THAT E VERY RECEIPT IS NOT INCOME AND EVERY INCOME WOULD NOT NECESSARILY I NCLUDE ELEMENT OF EXPORT TURNOVER. THIS ASPECT NEEDS TO BE KEPT IN MIND WHILE INTERPRETING CLAUSE (BAA) TO THE SAID EXPLANA TION. THE SAID CLAUSE STATED THAT 90 PER CENT. OF INCENTIVE PROFIT S OR RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARG ES OR ANY OTHER RECEIPT OF LIKE NATURE INCLUDED IN BUSINESS P ROFITS, HAD TO BE DEDUCTED FROM BUSINESS PROFITS COMPUTED IN TERMS OF SECTIONS 28 TO 44D OF THE INCOME-TAX ACT. IN OTHER WORDS, RECEI PTS CONSTITUTING INDEPENDENT INCOME HAVING NO NEXUS WIT H EXPORTS WERE REQUIRED TO BE REDUCED FROM BUSINESS PROFITS U NDER CLAUSE (BAA). A BARE READING OF CLAUSE (BAA)(1) INDICATES THAT RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CH ARGES, ETC., FORMED PART OF GROSS TOTAL INCOME BEING BUSINESS PR OFITS. BUT FOR THE PURPOSES OF WORKING OUT THE FORMULA AND IN ORDE R TO AVOID DISTORTION OF ARRIVING AT THE EXPORT PROFITS, CLAUS E (BAA) STOOD INSERTED TO SAY THAT ALTHOUGH INCENTIVE PROFITS AND 'INDEPENDENT INCOMES' CONSTITUTED PART OF GROSS TOTAL INCOME, TH EY HAD TO BE EXCLUDED FROM GROSS TOTAL INCOME BECAUSE SUCH RECEI PTS HAD NO NEXUS WITH THE EXPORT TURNOVER. THEREFORE, IN THE A BOVE FORMULA, WE HAVE TO READ ALL THE FOUR VARIABLES. ON READING ALL THE VARIABLES IT BECOMES CLEAR THAT EVERY RECEIPT MAY N OT CONSTITUTE SALE PROCEEDS FROM EXPORTS. THAT, EVERY RECEIPT IS NOT INCOME UNDER THE INCOME- TAX ACT AND EVERY INCOME MAY NOT BE ATTRIBUTABLE TO EXPORTS. THIS WAS THE REASON FOR TH IS COURT TO HOLD THAT INDIRECT TAXES LIKE EXCISE DUTY WHICH ARE RECO VERED BY THE TAXPAYERS FOR AND ON BEHALF OF THE GOVERNMENT, SHAL L NOT BE INCLUDED IN THE TOTAL TURNOVER IN THE ABOVE FORMULA (SEE CIT V. LAKSHMI MACHINE WORKS. 5.2 FURTHER, JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. V. CHINNAPANDI REPORTED IN [2006] 282 ITR 389 (MAD) WH EREIN HELD THAT 90% GROSS RECEIPTS ARE ONLY RECEIPTS ARE TO BE RED UCED FOR ARRIVING ITA NO.836/MDS/2015 9 AT THE PROFITS OF THE BUSINESS UNDER CLAUSE (BAA) O F EXPLANATION TO SEC.80HHC OF THE ACT WHILE COMPUTING DEDUCTION. 5.3. FURTHER, HONBLE KERALA HIGH COURT IN THE CAS E OF VALLABHADAS & CO., VS. CI REPORTED IN 76 CCH 38 WHEREIN HELD T HAT SUB LEASE RENTALS RECEIVED BY THE ASSESSEE ARE ASSESSABLE AS INCOME FROM OTHER SOURCES AND CANNOT BE RECKONED IN THE COMPUTA TION OF BUSINESS INCOME AND DEDUCTION U/S.80HHC HAD TO BE COMPUTED A CCORDINGLY. 5.4. FURTHER, HONBLE KERALA HIGH COURT IN THE CA SE OF M/S.PARRY AGRO INDUSTRIES VS. JCIT REPORTED IN [200 7] 292 ITR 542 (KERALA) WHEREIN HELD THAT RENT RECEIPTS ARE INCOME HAVING NO NEXUS WITH THE ASSESSEES BUSINESS OF EXPORT AND THEREFOR E,, SUCH RECEIPTS CANNOT BE INCLUDED FOR THE PURPOSE OF DEDUCTION U/S .80HHC OF THE ACT. THUS, IN OUR OPINION, WHEN THE ABOVE INCOME I .E. RENTAL/LEASE RENTALS ASSESSED AS BUSINESS INCOME OF ASSESSEE, 90 % OF THAT INCOME BE CONSIDERED SO AS TO APPLY THE PROVISIONS OF EXPLANATION (BAA) TO SEC.80HHC OF THE ACT AND IN THIS ISSUE, O UR VIEW IS SUPPORTED BY THE SUPREME COURT DECISION IN THE CASE OF RAVINDRANATHAN NAIR (SUPRA). ALTERNATE TO THIS,LD.A .R RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF M/S.ACG C APSULES LTD. ITA NO.836/MDS/2015 10 (343 ITR 89) WHEREIN IT WAS HELD THAT ONLY 90% OF N ET RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT CHARGES O R ANY OTHER RECEIPTS OF SIMILAR NATURE INCLUDED IN SUCH PROFIT S COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OF ASSESSEE C OULD BE DEDUCTED UNDER CLAUSE (I) OF EXPLANATION (BAA) TO SEC.80HHC AND NOT 90% OF THE QUANTUM OF GROSS OF THE ABOVE SAID INCOME, WHI CH WERE ALLOWED AS EXPENSES AND THEREFORE,, INCLUDED IN THE PROFITS OF THE BUSINESS OF THE ASSESSEE. IN VIEW OF THE ABOVE, IN OUR OPINION , THE JUDGEMENT OF SUPREME COURT IN THE CASE OF M/S.ACG CAPSULES LTD.( SUPRA) IS DIRECTLY COVERED ON THE ISSUE IN DISPUTE BEFORE US. ACCORDINGLY, WE DIRECT THE AO TO EXCLUDE NET INCOME OF RENTAL INCOM E AND LEASE INCOME IF IT IS ASSESSED AS BUSINESS INCOME WHILE A PPLYING THE CLAUSE (I) OF EXPLANATION (BAA) TO SEC.80HHC OF THE ACT. IF IT IS NOT ASSESSED AS BUSINESS INCOME, THEN THERE IS NO QUESTION OF CO NSIDERING THE SAME FOR DEDUCTION U/S.80HHC OF THE ACT. 5.5 THE OTHER ARGUMENT OF THE LD.A.R IS THAT LD. ASSESSING OFFICER TRAVELLED BEYOND HIS JURISDICTION AS THE TR IBUNAL HAS NOT DIRECTED THE AO TO RE-DECIDE THE ISSUE RELATING TO RENTAL INCOME. AS SEEN FROM THE ORDER OF THE TRIBUNAL IN ITA NO.47/MD S./2001 FOR ITA NO.836/MDS/2015 11 ASSESSMENT YEAR 1998-99 DATED 17.06.2005, THERE IS A CATEGORICAL FINDING OF THE TRIBUNAL IN PARA-11 AS FOLLOWS:- THE FOURTH ISSUE RELATES TO ASSESSING OF THE LEASE INCOME AMOUNTING TO RS.3,67,89,190/- ON PROTECTIVE BASIS. THE AO HAS STATED THAT AS A RESULT OF AN ACTION U/S.132 IT WAS FOUND THA THE ENTIRE LE ASE TRANSACTIONS WERE SHAM AND THEREFORE, THE LEASE RENTAL ADMITTED AT RS .3,67,89,190/- WAS ASSESSED ON PROTECTIVE BASIS. THE AO ALSO MENTIONE D THAT THE ISSUE WAS PENDING BEFORE THE TRIBUNAL IN RESPECT OF EARLIER Y EARS. DURING THE COURSE OF HEARING IT WAS BROUGHT TO OUR NOTICE BY THE LD.A .R THAT THE ITAT, CHENNAI HAS SET ASIDE THE SIMILAR ISSUE FOR EARLIER YEAR TO THE FILE FO THE AO IN ASSESSEE'S OWN CASE AND THEREFORE,, IT WAS R EQUESTED THAT FOR ASSESSMENT YEAR UNDER CONSIDERATION THE MATTER TO B E REMITTED TO THE AO FOR FRESH CONSIDERATION. WE THEREFORE, SET ASIDE T HE MATTER TO THE FILE FO THE AO TO BE DECIDED DENOVO AS PER THE DIRECTIONS O F THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. BEING SO, THE ASSESSING OFFICER IS WITHIN THE JURIS DICTION IN CONSIDERING THE ISSUE RELATING TO THE LEASE INCOME WHILE COMPUT ING THE DEDUCTION U/S.80HHC OF THE ACT. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ONTHURSDAY , THE 24 TH OF MARCH,2016 AT CHENNAI. SD/- SD/- ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) ( ( () * + ) ) ! CHANDRA POOJARI ', JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 24 TH MARCH,2016 . K S SUNDARAM. COPY TO: , APPELLANT/RESPONDENT /CIT(A) /CIT /DR /GF