Law:

Section:

Section 80HHC of the Income-tax Act, 1961 - Deduction - Exporters - Assessment year 1994-95 - Whether in computing profits of business for purpose of Explanation (baa) to section 80HHC, incomes which are deductible are those which are expressly prescribed in aforesaid provision and which are similar in nature - Held, yes - Whether, if income is derived out of activity which would have direct and immediate nexus to activity of export, then said income is not deductible from profits of business under aforesaid provisions - Held, yes - Assessee company was carrying on business of manufacturing and sale of automobile parts - During relevant assessment year, assessee received certain amount as fees towards developmental work from a German company - For purpose of computing deduction under section 80HHC, Assessing Officer deducted 90 per cent of above amount by applying provisions of Explanation (baa) to section 80HHC - Tribunal, however, set aside said deduction made by Assessing Officer - Whether since there was immediate nexus between activity of export and development work undertaking by assessee for German company, consideration received for said development work was not liable to be deducted under Explanation (baa) to section 80HHC in computing profits of business - Held, yes [In favour of assessee] FACTS The assessee company was carrying on business of manufacturing and sale of automobile parts. During relevant assessment year, the assessee received certain amount as fees towards developmental work from a German company. For the purpose of computing deduction under section 80HHC, the Assessing Officer deducted 90 per cent of the above amount applying the provisions of Explanation (baa) to section 80HHC. According to Assessing Officer, it was a consideration flowing to the assessee for the services rendered by them and, therefore, it would fall in the category of 'any other receipt of similar nature' which was to be deducted from profits of the business. On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer. On second appeal, the Tribunal, however, allowed the assessee's claim. On revenue's appeal: HELD Section 80HHC provides for…

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