Section 80HHC of the Income Tax Act
The decision most relied on for Section 80HHC is Additionally, in CIT v. A. Raman & Co. (67 ITR 11), cited in 321 of the 1,083 judgments on BharatTax that turn on this section.
Leading authorities on Section 80HHC
The mere lawful reorganization of a business transaction does not automatically imply an intent to evade tax, and genuine business adjustments should not be considered suppressive actions without clear evidence of such intent.
Provisions in taxing statutes that grant incentives, concessions, or exemptions for promoting economic growth and industrialization must be interpreted liberally and purposively. Any restrictions placed on such provisions should also be construed reasonably to advance their objective, not frustrate it.
If unabsorbed depreciation or losses from years prior to the initial assessment year for Section 80-IA claim have already been set off against other income, they cannot be notionally carried forward again to reduce the profits of the eligible unit for computing deduction under Section 80-IA. The notional carry forward provision under Section 80-IA(5) applies only to unabsorbed depreciation or losses that have not yet been absorbed.
The word 'production' has a wider connotation than 'manufacture'; every manufacture is production, but not every production amounts to manufacture. 'Production' includes bringing into existence new goods, by-products, or inter-products through a process, which may or may not be manufacture.
Excise duty collected by the assessee as an agent on behalf of the government is not includible in the total turnover for the purpose of computing deduction under section 80HHC.
Indirect tax components, such as sales tax, are included when calculating gross turnover or sales receipts for determining business income. Deductions relating to these taxes are subject to the provisions of Section 43B, requiring actual payment for deductibility.
For calculation of deduction under Section 80HHC, if total interest is netted off after adjusting interest paid and received, the 90% reduction specified in Explanation (baa) is not applicable.
Expenses incurred for software license purchase, development of miscellaneous software, and maintenance of websites are considered revenue in nature. Such expenses are deductible in the year they are incurred.
Export incentives, such as DEPB (Duty Entitlement Pass Book) and advance license benefits, constitute income taxable on an accrual basis under Section 28 of the Income-tax Act. Profit arising on the transfer of DEPB is not eligible for deduction under Section 80HHC.
The Income Tax Appellate Tribunal is not required to repeat its reasons when it fully agrees with the conclusions of the lower appellate authority and has no further grounds to add, even as the final fact-finding body.
