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
versus
FLEX FOODS LTD ... Respondent
Advocates who appeared in this case:
For the Appellan t : Mr N.P. Sahni
For the Respondent : Mr M.P. Rastogi with Mr K.N. Ahuja
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
1. These appeals by the revenue are in respect of the assessment years
2003-04 and 2004-05 and arise out of the common order passed by the Income
Tax Appellate Tribunal on 17.04.2012 in ITA Nos. 4880-4881/Del/2011,
respectively. Limited notice had been issued in this matter on the previous
occasion. The only issue sought to be raised in the present appeals relate to the
submissions made by the learned counsel for the appellant/revenue that
miscellaneous income and interest income should have been reduced while
computing the deduction of eligible profits under Section 80HHC which would
also be the same amount for the purposes of Section 115JB of the Income Tax
Act, 1961 (hereinafter referred to as `the said Act')
2. We have heard the counsel for the parties at length. There appears to be
a misunderstanding on the part of the revenue. It is abundantly clear that for
ITA Nos. 21/13 & 20/13 Page 1 of 4
the purposes of computing the profits derived from the export of goods as
referred 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) of
sub-section (3) of Section 80HHC would be applicable. Therefore, the profits
derived from exports would have to be computed by multiplying the profits of
business with the ratio of export turnover to total turnover. Or, in other words:-
Profits derived from Exports = Profits of business x Export turnover
Total Turnover
The profits of business have to be computed in the manner given in
Explanation (baa) after sub-section (4) of Section 80HHC. The contention of
the revenue is that in computing the deduction under section 80HHC, the same
should have been reduced by the extent of miscellaneous income and interest
income as the same cannot be considered to be part of export profits. This is
where the misunderstanding on the part of the revenue lies. The so called
miscellaneous income and interest income, in the present case, have never been
regarded as part of the export turnover. They constitute part of the profits of
business. The Assessing Officer, in the present case, has accepted the fact that
the miscellaneous income and the interest income were part of the business
income of the assessee. Once that is accepted, they would constitute part of the
profits 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 Assessing
Officer as would be apparent from the computation, which we are reproducing
herein below:-
"Subject to these observations, the total income of the
assessee is assessed as follows"-
ITA Nos. 21/13 & 20/13 Page 2 of 4
Business income as declared by the assessee 9,23,71,923/-
Add: On account of foreign exchange loss as
discussed above 4,95 736/-
9,28,67,659/-
Less: B/f losses/depreciation 7,90,26,260/-
1,38,41,399/-
Less: Deduction u/s 80HHC as discussed above.
Profit as above 1,38,41,399/-
Less: 90% of other income of ` 29,83,818/- 26,85,436/-
1,11,55,963/-
Deduction u/s 80HHC = Profit X Exportturnover/Total turnover
= 1,11,55,963 X 8,18,29,489/25,03,74,251
= 81,01,803/-
30% of above = 24,30,541/- 24,30,541/-
1,14,10,858/-
Computation of book profit u/s 115JB
Book profit as taken in the computation of income 2,21,01,867/-
Add: Claim for deduction u/s 80HHC not allowed
as per discussion (supra) 6,37,08,462/-
Book profit u/s 115JB 8,58,10,329/-
Rounded off u/s 288A 8,58,10,330/-"
3. In respect of the above computation, there was no grievance on the part
of the assessee upto the point the deduction under Section 80HHC has been
computed at ` 81,01,803/-. The grievance of the respondent/assessee was only
with regard to limiting the deductions to 30% of the above figure of
` 81,01,803/- by invoking Section 80HHC (1B) while computing the book
profit under Section 115JB. That issue is no longer in dispute in view of the
decision of the Supreme Court in the case of Ajanta Pharma v. CIT: 327 ITR
305 (SC), where it was made clear that 100% of the deduction would be
allowable. Therefore, the Assessing Officer was wrong in allowing only 30%
of the deduction allowable under Section 80HHC for the purposes of
computing book profits under Section 115JB.
ITA Nos. 21/13 & 20/13 Page 3 of 4
4. It is, therefore, apparent that with regard to the issue of miscellaneous
income and interest income, there was no dispute with the Assessing Officer's
treatment of the same as being part of business income. Consequently, the
contention sought to be raised on behalf of the revenue that the miscellaneous
income and interest income should be excluded does not arise at all. This is so
because the assessing officer had treated the same as part of business income of
the assessee.
5. As such no question of law, what to speak of a substantial question of
law, arises for our consideration.
6. The appeals are dismissed.
BADAR DURREZ AHMED, J
VIBHU BAKHRU, J
MAY 10, 2013
su
ITA Nos. 21/13 & 20/13 Page 4 of 4
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