Ita Nos. 21/13 & 20/13 v. Ita Nos. 21/13 & 20/13

THE HIGH COURT OF DELHI AT NEW DELHI %Judgment delivered on: 10.05.2013 +ITA 21/2013 & ITA 20/2013 COMMISSIONER OF INCOME TAX-(C)-III ... Appellant FLEX FOODS LTD versus…Respondent Advocates who appeared in this case:For the Appellan t: Mr N.P. SahniFor the Respondent: Mr M.P. Rastogi with Mr K.N. AhujaCORAM:- HON’BLE MR JUSTICE BADAR DURREZ AHMEDHON’BLE MR JUSTICE VIBHU BAKHRU JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1.These appeals by the revenue are in respect of the assessment years2003-04 and 2004-05 and arise out of the common order passed by the IncomeTax Appellate Tribunal on 17.04.2012 in ITA Nos. 4880-4881/Del/2011,respectively.Limited notice had been issued in this matter on the previousoccasion. The only issue sought to be raised in the present appeals relate to thesubmissions made by the learned counsel for the appellant/revenue thatmiscellaneous income and interest income should have been reduced whilecomputing the deduction of eligible profits under Section 80HHC which wouldalso be the same amount for the purposes of Section 115JB of the Income TaxAct, 1961 (hereinafter referred to as ‘the said Act’) 2.We have heard the counsel for the parties at length. There appears to bea misunderstanding on the part of the revenue. It is abundantly clear that for the purposes of computing the profits derived from the export of goods asreferred to in Section 80HHC, the same has to be computed under sub-section(3) or sub-section (3A) of Section 80HHC. In the present case, clause (a) ofsub-section (3) of Section 80HHC would be applicable. Therefore, the profitsderived from exports would have to be computed by multiplying the profits ofbusiness with the ratio of export turnover to total turnover. Or, in other words:- xProfits derived from Exports = Profits of businessExport turnoverTotal Turnover The profits of business have to be computed in the manner given inExplanation (baa) after sub-section (4) of Section 80HHC. The contention ofthe revenue is that in computing the deduction under section 80HHC, the sameshould have been reduced by the extent of miscellaneous income and interestincome as the same cannot be considered to be part of export profits. This iswhere the misunderstanding on the part of the revenue lies.The so calledmiscellaneous income and interest income, in the present case, have never beenregarded as part of the export turnover. They constitute part of the profits ofbusiness. The Assessing Officer, in the present case, has accepted the fact thatthe miscellaneous income and the interest income were part of the businessincome of the assessee. Once that is accepted, they would constitute part of theprofits of business, of course, to a limited extent as provided in Explanation(baa) referred to above. That is exactly what has been done by the AssessingOfficer as would be apparent from the computation, which we are reproducingherein below:- “Subject to these observations, the total income of theassessee is assessed as follows”- 3.In respect of the above computation, there was no grievance on the partof the assessee upto the point the deduction under Section 80HHC has beencomputed at ` 81,01,803/-. The grievance of the respondent/assessee was onlywith regard to limiting the deductions to 30% of the above figure of` 81,01,803/- by invoking Section 80HHC (1B) while computing the bookprofit under Section 115JB. That issue is no longer in dispute in view of thedecision of the Supreme Court in the case ofAjanta Pharma v. CIT: 327 ITR305 (SC), where it was made clear that 100% of the deduction would beallowable. Therefore, the Assessing Officer was wrong in allowing only 30%of the deduction allowable under Section 80HHC for the purposes ofcomputing book profits under Section 115JB. 3.In respect of the above computation, there was no grievance on the partof the assessee upto the point the deduction under Section 80HHC has beencomputed at ` 81,01,803/-. The grievance of the respondent/assessee was onlywith regard to limiting the deductions to 30% of the above figure of` 81,01,803/- by invoking Section 80HHC (1B) while computing the bookprofit under Section 115JB. That issue is no longer in dispute in view of thedecision of the Supreme Court in the case ofAjanta Pharma v. CIT: 327 ITR305 (SC), where it was made clear that 100% of the deduction would beallowable. Therefore, the Assessing Officer was wrong in allowing only 30%of the deduction allowable under Section 80HHC for the purposes ofcomputing book profits under Section 115JB. 4.It is, therefore, apparent that with regard to the issue of miscellaneousincome and interest income, there was no dispute with the Assessing Officer’streatment of the same as being part of business income.Consequently, thecontention sought to be raised on behalf of the revenue that the miscellaneousincome and interest income should be excluded does not arise at all. This is sobecause the assessing officer had treated the same as part of business income ofthe assessee. 5.As such no question of law, what to speak of a substantial question oflaw, arises for our consideration.6.The appeals are dismissed.BADAR DURREZ AHMED, JVIBHU BAKHRU, JMAY 10, 2013su