Commissioner Of Income Taxchennai v. M/S.ttk Lig Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HON'BLE MR.JUSTICE T.S.SIVAGNANAM & THE HON'BLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.(A)Nos.1115 & 1116 of 2008 Commissioner of Income TaxChennai ... Appellant / Appellant Vs. M/s.TTK LIG Ltd.,6, Cathedral Road,Chennai - 600086... Respondent / Respondent Tax Case Appeals have been filed under Section 260A of theIncome Tax Act, 1961, against the order of the Income TaxAppellate Tribunal Madras 'C' Bench, Dated 30.11.2007 inITA.No.1448/Mds/2006 & ITA No.1611/2006, against the Income TaxAppellant Tribunal, Bench “C” Chennai Assessment Year 2001-02and 2000-01 made in ITA No.1448/mds/2006 ITA No.1611/mds/2006and against the Income Tax Department dated 25.03.2004 made inP.A/GIR No.AABCT1184G/32012-T Assessment Year 2001-02. For Appellant : Mr.M.Swaminathan & Mrs.V.Pushpa COMMON JUDGMENT T.S.SIVAGNANAM, J. These Appeals filed by the Revenue under Section 260A of theIncome Tax Act (Act), is directed against the common orderpassed by the Income Tax Appellate Tribunal Bench 'C', Chennai(Tribunal) in ITA.No. 1448/Mds/2006 & 1611/Mds/2006, pertainingto the assessment years 2001-02 & 2000-01 respectively. 2. The Tax case Appeals have been admitted on the followingsubstantial questions of law:- https://hcservices.ecourts.gov.in/hcservices/ (i) Whether in the facts and circumstancesof the case, the Tribunal was right in holdingthat Exchange fluctuation, provision writtenback, should be treated as income derived out ofbusiness for computation of deduction underSection 80HHC, especially when these were nottreated as part of the total turnover? (ii) Whether in the facts and circumstancesof the case, the Tribunal was right in holdingnot 90% of Exchange Fluctuation, provisionwritten back, should not be deducted from thebusiness profits under explanation (baa)? 3. The appeals before the Tribunal were by the Revenuequestioning the correctness of the order passed by theCommissioner of Income Tax (Appeals), [CIT(A)], dated 03.02.2006& 06.03.2006 respectively. The appeals before the CIT(A), werefiled by the assessee challenging the assessment orders passedunder Section 143(3) of the Act, dated 25.03.2004, for theassessment year 2001-02 and the assessment order dated31.01.2004 under Section 143(3) r/w Section 147 of the Act forthe assessment years 2000-01. 4. The assessee is engaged in the manufacture of rubbercontraceptives and for the assessment years under questionnamely, 2001-02 & 2000-01 respectively, the assessee claimeddeduction under Section 80HHC of the Act. The return of incomewas processed under Section 143(1) of the Act and subsequently,a notice under Section 143(2), dated 17.10.2002 was issued andthe case was assigned to a different Commissioner and noticeunder Section 142(1), dated 11.11.2003, was issued along withthe questionnaire. In response, the assessee appeared beforethe Assessing Officer and filed the details, which were calledfor and after taking into consideration the details, theassessment was completed under Section 143(3) of the Act. Theassessment pertaining to the assessment year 2000-01, is thesubject matter of T.C.A.No.1115 of 2008. 5. For the assessment year 2000-01, the assessee filedreturn of income on 27.11.2000, the return was processed underSection 143(1) of the Act. Subsequently, notice under Section148 was issued and the assessee was called upon to filedocuments. The assessee filed reply dated 14.11.2003, afterwhich the assessment was completed under Section 143(3) r/wSection 147 of the Act, by order dated 31.01.2004. Thisassessment is subject matter of appeal in T.C.A.No.1116 of 2008. 5. For the assessment year 2000-01, the assessee filedreturn of income on 27.11.2000, the return was processed underSection 143(1) of the Act. Subsequently, notice under Section148 was issued and the assessee was called upon to filedocuments. The assessee filed reply dated 14.11.2003, afterwhich the assessment was completed under Section 143(3) r/wSection 147 of the Act, by order dated 31.01.2004. Thisassessment is subject matter of appeal in T.C.A.No.1116 of 2008. 6. For both the assessment years, the Assessing Officerreducing the quantum of deduction, made the following variationsnamely, (i) 90% of exchange fluctuation; (ii) provisionwritten back; (iii) sales tax refund and these were excludedfrom the business profit. The assessee filed appeals before theCIT(A), which were allowed by orders dated 03.02.2006, and06.03.2006, respectively. The Revenue preferred appeals beforethe Tribunal which were dismissed by order dated 30.11.2007.The Tribunal, while dismissing the appeals filed by the Revenue,rendered the following findings on the above three variations. 6(i) with regard to foreign exchange fluctuations, theTribunal concurred with the CIT(A) following decision of theDelhi Bench of the Tribunal in the case of Smt.Sujata Grover vs.DCIT, (2002) 74 TTJ (Del) page 347 held that exclusion of 90% ofreceipts from foreign exchange fluctuations is not justified. 6(ii) With regard to the provision written back, theTribunal concurred with a view taken by the CIT(A), holding thatthe provision written back relates to items of expenditure whichare integral to the undertaking and excess being established andit cannot be treated as 'other income' so as to attractExplanation (baa) to Section 80HHC. It further held that thedecision of the High Court of Bombay in CIT vs. BangaloreClothing Company (2003) 260 ITR 371 (Bombay) holds the field. 6(iii) With regard to sales tax refund, the Tribunal heldthat the refund is akin to trading receipt arising to theassessee in the course of its business activities and the salestax refund forms part of profits of business and they are notsubject to Explanation (baa) to Section 80HHC. Further it heldthat the refund of sales tax has nexus with that of business ofthe assessee and the same is considered as forming part of theprofits of business of the assessee and accordingly, agreed withthe findings of the CIT (A) that sales tax refund receivable,cannot be excluded from the profit of the business for thepurpose of calculating eligible deduction under Section 80HHCand Explanation (baa) is not applicable. 7. Mr.M.Swaminathan, learned counsel appearing for theRevenue contended that the Tribunal erred in holding thatexchange fluctuations, provision written back, sales tax are inthe nature of business income and hence, 90% should not bededucted in terms of Explanation (baa) to Section 80HHC.Further, it is submitted that the Tribunal failed to appreciatethat the above said incomes does not arise out of thebusiness/export activity of the assessee and the benefit underSection 80HHC is available only for the income derived out ofexport activity, which is absent in the assessee's case. In 7. Mr.M.Swaminathan, learned counsel appearing for theRevenue contended that the Tribunal erred in holding thatexchange fluctuations, provision written back, sales tax are inthe nature of business income and hence, 90% should not bededucted in terms of Explanation (baa) to Section 80HHC.Further, it is submitted that the Tribunal failed to appreciatethat the above said incomes does not arise out of thebusiness/export activity of the assessee and the benefit underSection 80HHC is available only for the income derived out ofexport activity, which is absent in the assessee's case. In support of his contention, the learned counsel placed relianceon the decision of the High Court of Bombay in the case ofCommissioner of Income Tax vs. Dresser Rand India (P) Ltd.,[2010] 191 Taxman 339 (Bombay); the decision of the High Courtof Delhi in the case of Rollatainers Ltd., vs. Commissioner ofIncome Tax in ITA.No.166 of 2004, dated 16.02.2017, the decisionin the case of Commissioner of Income Tax vs. TVS Motors Ltd.,[2014] 364 ITR 1(Mad); the decision of the Division Bench ofthis Court in the case of M/s.K.H.Shoes Limited vs. AssistantCommissioner of Income Tax in TCA.No.731 of 2004, dated21.04.2017 and the decision of the Hon'ble Supreme Court in thecase of Commissioner of Income Tax vs. K.Ravindranathan Nair[2007] 295 ITR 228 (SC). 8. Mr.R.Vijayaraghavan, learned counsel assisted byMr.V.Vikram, learned counsel appearing for the assessee soughtto sustain order passed by the Tribunal by contending that thevariations done by the Assessing Officer cannot be excluded andreferred to Section 80HHC (3)(a) of the Act and in particularExplanation (baa). It is argued that the proper procedure wouldbe to first take profits and gains of business includingdomestic sales and from that the brokerage etc., and others ofsimilar nature should be removed. By referring to the decisionof the Hon'ble Supreme Court in the case of K.RavindranathanNair, (supra), it is submitted that in the said decision, it washeld that these are independent income and connected with theregular activity of the assessee and in the facts of the case,the Hon'ble Supreme Court dealt with receipts during the yearwhich was interpreted as 'independent income'. However, theHon'ble Supreme Court did not deal with the case like therespondent/assessee, wherein this was allowed as a deduction inthe previous year, which was claimed by the assessee in thesubsequent year. Therefore, it is submitted K.RavindranathanNair, (supra), did not deal with the facts and circumstancesakin to the case of the assessee. Further, it is submitted thatgratuity is for not any independent activity, but that of theassessee. With regard to the sales tax paid, which was allowedas a deduction under Section 80HHC and it is applied when therefund is given, in other words it is trading receipt arising inthe course of business activity. Thus, it is submitted that thenature of every receipt has to be considered and as pointed outby the Hon'ble Supreme Court, there are four variables which areto be taken into consideration. In support of his contentions,the learned counsel relied on the decision of the High Court ofHimachal Pradesh in Commissioner of Income Tax vs. Purewal &Associates Ltd., [2016] 243 Taxman 0392 (HP); decision of theHigh Court of Bombay in the case of Alfa Laval India Ltd., vs.Deputy Commissioner of Income Tax (2003) 133 Taxman 0740; andthe decision of the Hon'ble Supreme Court in the case ofCommissioner of Income Tax vs. Alfa Laval (India) Ltd., (2007) 295 ITR 0451, by which the appeal filed by the Revenue againstthe decision of the High Court of Bombay was dismissed.Reliance was also placed on the decision of the High Court ofCalcutta in the case of Commissioner of Income Tax vs. SinclairMurray & Co., Pvt Ltd., (1969) 75 ITR 0494, and the decision ofthe Hon'ble Supreme Court in the case of Commissioner of IncomeTax-VII vs. Punjab Stainless Industries, (2014) 364 ITR 0144(SC). 9. Heard the learned counsels appearing for the parties andperused the materials placed on record. 10. The assessee's case, on the three variations done by theAssessing Officer are that the gain on account of the foreignexchange resulted from variation in rates and was directlyrelated to the imports/exports transaction of goods andtherefore, it formed a part of the sales price; that the goods,which were booked at a particular sale price and the realisationmade against the same, were at times more because of improvedrate of exchange as on the date of realisation, therefore, thesame qualifies to be included as profit of business. 11. The revenue pitches its case relying on the decision ofthe Hon'ble Supreme Court in K.Ravindranathan Nair, (supra). 12. Before we examine the applicability of the saiddecision, we may note as to what was said in the said decisionby the Hon'ble Supreme Court. 13. The facts in the said case was that the assessee thereincarried out processing of cashew nuts at its factory, which werethen exported. The assessee also processed cashew nuts forexport on job work basis, which were returned after processing.The assessee earned processing charges, and consequently, theassessee was both a job worker and an exporter. The assesseeclaimed export incentives under Section 80HHC(3) of the Act, butdid not include the receipts received as processing charges inhis total turnover. The business proceeds included receiptstowards processing charges. These receipts were not included bythe assessee in the total turnover. The issue which arosebefore the Supreme Court was whether, the Revenue was correct inincluding the processing charges in the total turnover, whilearriving at export profits under Section 80HHC(3), as it stoodat the relevant time. The Supreme Court held the expression“derived from” in sub-section (3) in section 80HHC, is narrowerthan the words “attributable to” and consequently, it is only“profits derived from exports”, which become the basis forworking out the formula provided in sub-section (3). TheSupreme Court further held that if the processing charges werepart of the gross total income, being profits from business, then they had to be included in the total turnover in theformula provided under sub-section (3). Further, it was pointedout that the expression “included in such profits” indicatedthat the processing charges formed a part of a gross totalincome being business profits. The contention of the assesseethat processing charges were liable to be excluded from thetotal turnover was rejected by the Supreme Court. The questionwhether processing charges constitute independent income likerent, commission, brokerage and whether liable to be excluded tothe extent of 90% from the gross total income while arriving atbusiness profits was considered and it was held that processingcharges, which was part of gross total income was an independentincome like rent, commission, brokerage, etc, and therefore, 90%of the said sum has to be reduced from the gross total income toarrive at the business profits and since the said processingcharges was an important component of business profits, it alsohad to be included in the total turnover in the said formula toarrive at business profits in terms of clause (baa) inExplanation to Section 80HHC of the Act. It was emphasised thatExplanation (baa) requires that receipts constitutingindependent income having no nexus with exports was required tobe reduced from business profits under clause (baa).Consequently, in the said case, it was held that processingcharges, constituted independent income, similar to rent,commission, etc, which formed part of gross total income, andthe same had to be reduced by 90% as contemplated in clause(baa) to arrive at business profits. Therefore, the saidprocessing charges were includable in the total turnover in theformula under Section 80HHC(3) of the Act. 14. Mr.M.Swaminathan, after referring to the decision in thecase of K.Ravindranathan Nair, (supra), argued that exchangefluctuations, provision written back, and sales tax refund,which do not have any nexus with export are to be treated as“independent income” and to be excluded to the extent of 90% asstipulated in the Explanation. To support his stand, reliancewas placed on the decision in the Dresser Rand pvt. Ltd.,(supra), wherein the Court was considering the submission madeon behalf of the assessee as to whether processing chargesformed part of business profits and if so, if 90% of suchreceipts are liable to be excluded under Explanation (baa) didnot fall for determination before the Supreme Court inK.Ravindranathan Nair, (supra). It is submitted that in DresserRand India (P) Ltd., (supra), this contention advanced by theassessee was rejected and it was held that the Hon'ble SupremeCourt while construing the provision of Section 80HHC, held thatthere are four variables, which are required to be considerednamely, business profits, export turnover, total turnover and90% of the sums referred to in Explanation (baa). Therefore, itwas held that ambit of controversy, which was raised in K.Ravindranathan Nair, (supra), did as a matter of fact requiredetermination of the nature of receipts of a similar nature,which are liable to be excluded under Explanation (baa), thoughthey constitute a part of business profits and held that theprinciples laid down in K.Ravindranathan Nair, (supra),constitute the ratio of the judgment which would bind the HighCourts. K.Ravindranathan Nair, (supra), did as a matter of fact requiredetermination of the nature of receipts of a similar nature,which are liable to be excluded under Explanation (baa), thoughthey constitute a part of business profits and held that theprinciples laid down in K.Ravindranathan Nair, (supra),constitute the ratio of the judgment which would bind the HighCourts. 15. Mr.M.Swaminathan, contended that in Dresser Rand India(P) Ltd., (supra), one of the issues was sales tax refund, whichwas required to be reduced in terms of the Explanation and thestand taken by the Revenue was accepted by the Court. We havegone through the decision in Dresser Rand India (P) Ltd.,(supra). The substantial question of law, which was framed forconsideration was whether the Tribunal was justified in law inholding that 90% of recovery of freight, insurance and packingreceipts, sales tax refund and service income are not to beexcluded from profits of business within the meaning of clause(baa) of Explanation to Section 80HHC of the Act for thepurpose of computation of reduction under Section 80HHC of theAct. We find from paragraph 17 of the judgment, that thecounsel for the assessee conceded before the Court that theratio laid down in K.Ravindranathan Nair, (supra), while dealingwith processing charges would apply to the case of the assesseewith regard to recovery of freight and insurance and packingreceipts, sales tax refund and service income. Therefore, wefind that the said question was answered in favour of therevenue partly on account of the concession recorded by thecounsel for the assessee. However, we find in paragraphs 11 to15, there were discussion as regards the effect of the decisionin the case of K.Ravindranathan Nair, (supra), since theassessee therein argued that the issue raised before the Courtwas not an issue before the Supreme Court in K.RavindranathanNair, (supra). In any event, we find that the decision withregard to sales tax appears to have been rendered based on theconcession recorded by the assessee. Therefore, we do notpropose to dwell further on the said decision. 16. What is important to note in the instant case is thefacts and manner in which the assessee was assessed for therelevant assessment years. More or less, an identical case wasdealt with by the High Court of Bombay in the case of Alfa LavalIndia Ltd.,. One of the substantial questions of law which wasframed for consideration was whether the Tribunal was right inlaw in holding that interest from customers, sales tax set offand other refunds, claims etc, do not form part of businessprofits for calculating deduction under Section 80HHC. It wascontended on behalf of the assessee that for computation ofdeduction under Section 80HHC, what is relevant is profits of business as computed under head “profits and gains of businessor profession” and in the said case, the sales tax set off,claims, refund etc, under the caption “other income” have beenassessed under the head “profits and gains of business orprofession”. It was argued that once these incomes are treatedas part of business income and computed under the head “profitand gains of business or profession”, the same cannot beexcluded from business profits, while computing deduction underSection 80HHC of the Act. business as computed under head “profits and gains of businessor profession” and in the said case, the sales tax set off,claims, refund etc, under the caption “other income” have beenassessed under the head “profits and gains of business orprofession”. It was argued that once these incomes are treatedas part of business income and computed under the head “profitand gains of business or profession”, the same cannot beexcluded from business profits, while computing deduction underSection 80HHC of the Act. 17. The assessee therein relied on the decision of theBombay in the case of Bangalore Clothing Company (supra) and itwas submitted that amounts in question being part of operationalincome, the same could not be excluded for the purpose ofdeduction under Section 80HHC of the Act. Revenue contendedthat the income shown under the caption “other income” has nonexus with the business of the assessee and the amounts inquestion were not part of operational income and hence notincludable for computing deduction under Section 80HHC of theAct. The submission made on behalf of the assessee was acceptedby the Court and it was pointed out that the Assessing Officerhas computed the income by way of sales tax set off, claims,refunds etc., under the head “profits and gains of business orprofession” and in other words, the Assessing Officer has notassessed these under the head “income from other sources orunder any other head” and having assessed the income under thehead “profits and gains of business or profession”, it is notopen to the Assessing Officer to treat these income as ifassessed under the head 'income from other sources', so as toexclude the same from business profits while computing deductionunder Section 80HHC of the Act. Thus, it was held that thesales tax set off etc., have been computed and assessed underthe head “profits and gains of business or profession” as partof operational income and not under the head “income from othersources” and could not be deducted from business profits whilecomputing deduction under Section 80HHC of the Act. Ultimately,it was held that the Assessing Officer having accepted that thesaid income as part of the business profit and the same couldnot be excluded from business profit while calculating deductionunder Section 80HHC of the Act, answered the said substantialquestion of law in favour of the assessee. 18. The decision in the case of Alfa Laval India Ltd.,(supra), was challenged by the Revenue before the Hon'bleSupreme Court which was dismissed leaving the question open. 19. It was argued by Mr.R.Vijayaraghavan that in this appealno substantial question of law arises for consideration and theentire matter revolves on facts, which have been concurrentlyheld in favour of the assessee. Reliance was placed on the decision in the case of Sinclair Murray and Co., (supra). Inthe said case, the question was whether money was tradingreceipt or not, is a pure question of fact or a mixed questionof fact and law. The Court accepted the submission that if apure question of fact has to be decided, the matter requires tobe remanded to the Tribunal, if in the opinion of the HighCourt, there was an error. However, in the said case, since itwas a mixed question of fact, the Court proceeded to decide thematter and found it not desirable to send back the matter to theTribunal after a lapse of 15 years of the assessment. decision in the case of Sinclair Murray and Co., (supra). Inthe said case, the question was whether money was tradingreceipt or not, is a pure question of fact or a mixed questionof fact and law. The Court accepted the submission that if apure question of fact has to be decided, the matter requires tobe remanded to the Tribunal, if in the opinion of the HighCourt, there was an error. However, in the said case, since itwas a mixed question of fact, the Court proceeded to decide thematter and found it not desirable to send back the matter to theTribunal after a lapse of 15 years of the assessment. 20. In Punjab Stainless Industries, (supra), the assesseewas a manufacturer and exporter of stainless steel utensils andin the process of manufacturing some portion of the steel, whichcould not be used or reused for manufacturing utensils, remainsunused, was treated as scrap, which the assessee disposed of inthe local market and income arising from sale was also reflectedin the profit and loss account. The assessee for the purpose ofavailing deduction under Section 80HHC, income from saleproceeds of scrap was not included in the total turnover, butwas shown separately in profit and loss account. The Revenuesubmitted that the sale proceeds from scrap should have beenincluded in total turnover as the assessee was also sellingscrap and that was also part of sale proceeds. The High Courtheld that the proceeds generated from the sale of scrap wouldnot be included in 'total turnover'. The Hon'ble Supreme Courtpointed out that to ascertain whether turnover would alsoinclude sale proceeds from scrap, one has to know the meaning ofthe term “turnover”, as turnover has neither been defined in theAct nor has been explained by any of the CBDT circulars and onehas to look at the meaning of term 'turnover' in ordinaryaccounting or commercial parlance. It was held that in simpleword “turnover”, would mean only amount of sale proceedsreceived in respect of goods, in which an assessee is dealingand sale proceeds from scrap may either be shown separately inprofit and loss account or may be deducted from the amountsspent by manufacturing unit on raw material, which was steel inthe case of the said assessee. Further, it was held that rawmaterial which was not capable of being used for manufacturingutensils would have to be either sold as scrap or might have tobe re-cycled it if manufacturing unit is also having a re-rolling plant. If the assessee does not have a re-rollingplant, the manufacturer would dispose of the scrap of steel tosome one, who wants to recycle it and when such scrap is sold,sale proceeds of scrap cannot be included in the term“turnover”, since the assessee's unit was engaged primarily inmanufacturing and selling of steels utensils and not scrap ofsteel and the proceeds of such scrap would not be included insales in profit and loss account of the assessee and since, theassessee was not primarily dealing in scrap, but was a manufacturer of stainless steel utensils, only sale proceedsfrom sale of utensils would be treated as his “turnover”. Thus,it was held that the sale proceeds from scrap of steel is not tobe included in the total turnover for computation of deductionunder Section 80HHC, where the unit is engaged primarily inmanufacturing and selling of steel utensils and not scrap ofsteels. 21. When we examined the facts of the case, the assessee hadexplained to the Assessing Officer that the difference in valuewas due to exchange fluctuation, which has been accountedseparately in profit & loss account and the value adopted by itis based on actual realisation of foreign exchange. manufacturer of stainless steel utensils, only sale proceedsfrom sale of utensils would be treated as his “turnover”. Thus,it was held that the sale proceeds from scrap of steel is not tobe included in the total turnover for computation of deductionunder Section 80HHC, where the unit is engaged primarily inmanufacturing and selling of steel utensils and not scrap ofsteels. 21. When we examined the facts of the case, the assessee hadexplained to the Assessing Officer that the difference in valuewas due to exchange fluctuation, which has been accountedseparately in profit & loss account and the value adopted by itis based on actual realisation of foreign exchange. 22. With regard to sale of scrap, the assessee contendedthat the scrap, which was sold forms an integral part of therevenue generated from the industrial undertaking, since thesame is derived from operational activity of the undertaking.After examining the factual position, the CIT(A) accepted thecase of the assessee and duly supported its finding by referringto the decisions on the point. 23. Thus, in the facts and circumstances of the case, we areof the considered view that no substantial question of lawarises for consideration in these appeals and the decision inthe case of Alfa Laval India Ltd.,(supra) would squarely applyto the facts and circumstances of this case. 24. At this juncture, it would be relevant to take note ofthe decision of the High Court of Himachala Pradesh in Purewal &Associate Ltd., (supra), wherein the Court considered the objectof Section 80HHC which was to grant an incentive to earners offoreign exchange and therefore, held that it has to beessentially considered with reference to that object. Inparagraph 22 of the judgment, the Court noticed Section 41(1)and pointed out that it creates a legal fiction and can beextended for the purpose allowing from profits of business asreferred to in Section 80HHC of the Act. The relevant portionof the judgment reads as follows:- “22.It would also be noticed that Section 41(1) creates a legal fiction and can be extendedfor the purpose of allowing deduction from“profits of the business”, as referred to inSection 80HHC of the Act. The income chargeableto tax under Section 41(1) of the Act is fromreversal of any loss, expenditure or tradingliability which had extinguished or ceased toexist. The legal fiction can only be extended tothe extent that the provisions of Section 80HHC https://hcservices.ecourts.gov.in/hcservices/ have to be understood excluding the legal fictioncreated by deeming provisions contained in Section41(1) of the Act as the source of income which ischargeable cannot be related to export of goods ormerchandise because if any other meaning isassigned to the aforesaid fiction created withrespect to Section 41(1), it would be against thebasic purpose and object of Section 80 HHC of theAct. If that be so, then the exclusion of 90% ofthe deemed income under Section 41(1) of the Actis not in accordance with the correctinterpretation of Explanation (baa) to Section80HHC of the Act and, therefore, the ITAT, in suchcircumstances, has rightly allowed the appeal ofthe assessee.” 25. In our view, the above decision would also come to theassistance of the case of the assessee. Thus, for the abovereasons, we hold that there is no substantial questions of lawarising for consideration in these appeals and the decisionpurely revolves around the factual matrix and it is not a caseof decision on mixed questions of fact and law. Thus, we arenot inclined to interfere with the order passed by the Tribunalconfirming the order passed by the CIT(A). In the result, the appeals filed by the Revenue aredismissed and we hold that in the facts and circumstances ofthis case, no substantial questions of law arises forconsideration. No costs. Sd/- Assistant Registrar(CS V) //True Copy// To 25. In our view, the above decision would also come to theassistance of the case of the assessee. Thus, for the abovereasons, we hold that there is no substantial questions of lawarising for consideration in these appeals and the decisionpurely revolves around the factual matrix and it is not a caseof decision on mixed questions of fact and law. Thus, we arenot inclined to interfere with the order passed by the Tribunalconfirming the order passed by the CIT(A). In the result, the appeals filed by the Revenue aredismissed and we hold that in the facts and circumstances ofthis case, no substantial questions of law arises forconsideration. No costs. Sd/- Assistant Registrar(CS V) //True Copy// To 1.The Deputy Commissioner of Income-tax, Company Circle IV (3), Chennai - 600 006. 2.The Income Tax Appellate Tribunal Bench “C”, Chennai. Chennai. 3.The Income Tax Department Circle III(2), Chennai-34. +1cc to M/S.M.Swaminathan, Advocate Sr.72738+1cc to M/S.Subbaraya AIyar Padmanabhan, Advocate Sr.72934 T.C.(A)Nos.1115 & 1116 of 2008 rr[co]srg 28/11/2018