INTAS PHARMACEAUTICALS LTD. Vs. DEPUTY COMMISSIONER OF INCOME TAX
LAWS(IT)-2014-5-46
INCOME TAX APPELLATE TRIBUNAL
Decided on May 16,2014

Intas Pharmaceauticals Ltd. Appellant
VERSUS
DEPUTY COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

- (1.) THESE two Misc. Applications are filed by the assessee against the Tribunal's order dated 06.08.2010 in Revenue's appeal in ITA No. 1601/Ahd/07 &assessee's appeal in ITA No. 1591/Ahd/07 for A.Y. 2003 -04.
(2.) IN these cases, this ITAT in ITA Nos. 1591 and 1601/Ahd/2007 for A.Y. 2003 -04 has decided the appeal on 06.08.2010, wherein assessee's appeal was dismissed and Revenue's appeal was partly allowed.
(3.) NOW assessee filed M.A. on 22.01.2014 which are reproduced as under: M. A. No. 10/Ahd/2014 (Assessee's M.A. against Revenue's appeal) 1. The present Miscellaneous Application arises from the aforesaid order of the Hon'ble Tribunal under which the aforesaid appeal filed by the assessee company was decided along with the Departmental appeal in ITA No. 1601/Ahd/2007 for A.Y. 2003 -04. This Miscellaneous Application seeks rectification of certain mistakes apparent from record in the order of the Hon'ble Tribunal on account of the fact that the legal position on the relevant issues was reversed on account of subsequent Supreme Court decisions on the same issues. 2. The relevant issue which requires rectification pertains to finding of the Hon'ble Tribunal with regard to Ground No. 4 of the Departmental Appeal which reads as under: "4. The learned CIT(A) erred in law and on the facts of the case in directing the AO not to exclude 90% of other incomes comprising of (i) insurance claim received of Rs.39,78,429/ - and (ii) C & F Stockist interest at Rs.5,77,309/ - from the Profit of the business for the purpose of computation of deduction u/s. 80HHC of the I. T. Act." 3. This Ground has been dealt with and adjudicated by the Hon'ble Tribunal at para 8 of the order. It has been held by the Hon'ble Tribunal that in respect of the other incomes referred to in the aforesaid Ground No. 4, 90% of the gross income is required to be excluded under clause (baa) of the Explanation u/s. 80HHC of the Income -tax Act. The Hon'ble Tribunal has referred to its decision with regard to a similar Ground of Appeal raised in assessee's appeal where the Hon'ble Tribunal relied on the Hon'ble Bombay High Court decision in the case of CIT v. Asian Star Co. Ltd. (326 ITR 56). At para 6.9 the Hon'ble Tribunal has observed that in consonance with the aforesaid Bombay High Court judgment 90% of the receipts referred to in Ground No. 2 of the assessee have to be excluded under clause (baa) of the Explanation. It is further observed that to take care of any expenditure which may have been incurred in earning this income, an ad hoc deduction of 10% has been allowed by the Legislature and as per the Bombay High Court judgment no further deduction is permissible. It is respectfully submitted that the Hon'ble Bombay High Court decision in the case of Asian Star Co. (supra) has been overruled by the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. (343 ITR 89). The Head Note of this judgment is reproduced below for ready reference: "Under clause (1) of Explanation (baa) to section 80HHC of the Act, ninety per cent, of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in any such profits are to be deducted from the profits of*the business as computed under the head "Profits and gains of business or profession". The expression "included any such profits" would mean only such receipts by way of brokerage, commission, interest, rent, charges or any other receipt which are included in the profits of the business as computed under the head "Profits and gains of business or profession". Therefore, if any quantum of the receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature is allowed as expenses under sections 30 to 44D of the Act and is not included in the profits of business as computed under the head "Profits and gains of business or profession", ninety per cent, of such quantum of receipts cannot be reduced under clause (1) of Explanation (baa) from the profits of the business. In other words, 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 pro -fits of the assessee for determining" profits of the business" of the assessee under Explanation (baa) to section 80HHC. Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in it, the words "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits" will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head "Profits and gains of business or profession" referred to in the first part of Explanation (baa). Accordingly, if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assessee as computed under the head "Profits and gains of business or profession", ninety per cent, of such quantum of the receipt cannot be deducted under Explanation (baa) to section 80HHC. Held, accordingly, that ninety per cent, of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "Profits and gains of business or profession", was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business. Decision of the Bombay High Court reversed. Decision of the Delhi High Court affirmed. Distributors (Baroda) P. Ltd. v. Union of India (1985) 155 ITR 120 (SC) relied on. CIT v. Shri Ram Honda Power Equip (2007) 289 ITR 475 (Delhi) approved. CIT v. Asian Star Co. Ltd. (2010) 326 ITR 56 (Bom) impliedly overruled.";


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