EURESIAN,MUMBAI vs. ITO WD 12(2)(1), MUMBAI

O R D E R PER R.C.SHARMA (A.M): These are the appeals filed by the assessee against the order of CIT(A), Mumbai, for the assessment year 1999-2000, in the matter of order passed u/s.143(3) r.w.s.147 of the I.T.Act, on the following grounds:-

1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in confirming the gross interest payment of Rs. 43,01,680 to be considered as part of in-direct cost of exports as against the net interest payment of Rs. 36,34,743 while calculating deduction u/s 80 HHC for trading exports. And the learned Commissioner of Income Tax (Appeals) has further erred in not following the order of Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt Ltd V Is CIT reported in 343 ITR 89.

2. On the fads and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in confirming the gross Brokerage & Commission payment of Rs. 34,91,373 to be considered as part of in-direct cost of exports as against the net Brokerage & Commission payment of Rs. 26,48,597 while calculating deduction u/s 80 HHC for trading exports. And the learned Commissioner of Income Tax (Appeals) has further erred in 2 not following the order of Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt Ltd V/s CIT reported in 343 ITR 89. 3. Further the learned Commissioner of Income Tax (Appeals) has erred in not directing the assessing officer to re-calculate the entire deduction u/s 80 HHC applying the amended provisions and the related Supreme Court decisions, since the re-working cannot be done on piece-meal basis. 4. Your appellant craves to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, to alter, to amend or to furnish fresh and or detailed grounds of appeal.”

2. Rival contentions have been heard and record perused. Facts in brief are the assessee is engaged in the business of trading, export and import of pharmaceutical bulk drugs and chemicals. During the course of scrutiny assessment the AO reduced assessee’s claim of deduction u/s.80HHC by reducing 90% of the gross interest and 90% of the brokerage in commission payment. The issue under consideration is as to whether the gross interest and gross commission and brokerage is to be reduced or net interest expenditure and net commission and brokerage expenditure is to be reduced is squarely covered by the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd., 343 ITR 89, wherein the Hon’ble Supreme Court held that only ninety per cent of the net amount of any receipt of the nature mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining “ profits of the business” of the assessee under Explanation (baa) to section 80HHC.

3. Respectfully following the decision of Hon’ble Supreme Court, we direct the AO to reduce the net amount of interest expenditure and net amount of brokerage and commission expenditure while determining 3 ITA No.4463&4464/14 eligible amount of deduction under Explanation (baa) to section 80HHC of the I.T.Act.

4. In the result, appeals of the assessee for both the years under consideration, having similar issues, are allowed. Order pronounced in the open court on this 31/03/2016.

Sd/- Sd/- (SANDEEP GOSAIN) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 31/03/2016 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. गार्ा पाईर / Guard file. 6. सत्मावऩत प्रनत //True Copy// आदेशाि सार/ BY ORDER,