- (1.) This appeal has been preferred by the Revenue under section 260A of the Income-tax Act, 1961 (in short "the Act"), against the order dated August 12, 2005, passed by the Income-tax Appellate Tribunal, Chandigarh Bench "A", Chandigarh (hereinafter referred to as "the Tribunal"), in I.T.A. No. 523/Chandi/2003 for the assessment year 2000-01. This court, while admitting the appeal, vide order dated November 12, 2009 had passed the following order: "Learned counsel for the Revenue states that though three questions have been proposed in the appeal, question (i) may be covered by the judgment of the hon'ble Supreme Court in Hero Exports v. CIT, 2007 295 ITR 454 (SC) while question (ii) is covered against the Revenue by the judgment of the hon'ble Supreme Court in CIT v. Lakshmi Machine Works, 2007 290 ITR 667 (SC) and the judgment of this court in CIT v. Vardhman Polytex Ltd., 2008 296 ITR 382 (P & H). Question (iii) in paragraph 6 of the appeal is substantial question of law, which is to be decided by this court. Admitted to consider the question proposed in paragraph 6 of the appeal." Accordingly, question (iii) in paragraph 6 of the appeal which arises for consideration reads thus: "Whether, on the facts and in the circumstances of the case, the hon'ble Income-tax Appellate Tribunal was right in law in holding that service charges amounting to Rs. 10,46,44,301 be excluded from the total turnover of the assessee while computing deduction under section 80HHC?"
(2.) Briefly, the relevant facts necessary for disposal of the present appeal as relating to question No. (iii) only as narrated therein may be noticed. The assessee is a manufacturer and exporter of cotton yarn, woollen hosiery garments and also trades in cotton yarn. It filed the return of income on November 30, 2000, for the assessment year 2000-01 declaring the income at Rs. 9,92,49,470. The Assessing Officer, vide order dated July 30, 2002 (annexure A-1) framed the assessment at Rs. 11,95,87,260. The Assessing Officer treated service charges as part of total turnover. It was further observed that in case the plea of the assessee that it did not form part of the total turnover is accepted, then the income from service charges will be treated as income as per Explanation (baa) to section 80HHC and, therefore, 90 per cent, of income from service charges be reduced from the profits of the business while calculating the deduction under section 80HHC of the Act. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) (in short "the CIT(A)") who, vide order dated February 24, 2003 (annexure A-2) partly allowed the appeal directing the Assessing Officer not to include service charges as part of the total turnover and also not to exclude 90 per cent, of income from service charges from the profits of the business as per Explanation (baa) to section 80HHC of the Act relying upon his order passed in the case of the assessee for the assessment year 1999-2000. Against the order dated February 24, 2003 (annexure A-2), the Revenue approached the Tribunal by way of an appeal. The Tribunal, vide order dated August 12, 2005 (annexure A-3) held that service charges are to be excluded from the total turnover and are also to be excluded from the business profits for the purpose of computation of deduction under section 80HHC of the Act. Hence, the present appeal.
(3.) The matter herein relates to whether the service charges are to be excluded from the total turnover of the assessee and 90 per cent, of income from service charges is to be reduced from the profits of the business and deduction under section 80HHC of the Act to be calculated accordingly.;