« From the Courts » Open DEMAT Account in 24 hrs  Income Tax Addition Made Towards Unsubstantiated Share Capital Is Eligible For Section 80-IC Deduction: Delhi High Court «  CIT vs. Virtual Soft Systems Ltd (Delhi High Court)... M/s Topman Exports vs. CIT (Supreme Court)... » ACG Associated Capsules Pvt. Ltd vs. CIT (Supreme Court) February, 10th 2012 For Expl (baa) to s. 80HHC, netting of income from expenditure is allowed   However, the Tribunal, relying on Lalsons Enterprises 89 ITD 25 (Del) (SB) & Shri Ram Honda Power Equip 289 ITR 475 (Del), held that only the net interest could be deducted (subject to nexus between the expenditure and income being proved). On appeal by the department, the High Court (CIT vs. Asian Star Co Ltd 326 ITR 56 (Bom)) reversed the Tribunal and held that the gross receipts had to be excluded. On appeal by the assessee, HELD reversing the High Court:   Under Clause (1) of Explanation (baa) to s. 80HHC, 90% of any receipts by way of brokerage, commission, etc included in any such profits have to be deducted from the profits & gains of business. The expression included any such profits means such receipts by way of brokerage, commission, etc included in the profits & gains. Therefore, if any quantum of receipts by way of brokerage, commission, etc is allowed as expenses u/s 30 to 44D and is not included in the profits of business, 90% of such quantum of receipts cannot be reduced under clause (1) of Explanation (baa) to s. 80HHC. In other words, only 90% 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. The High Court wrongly relied on CIT vs. K. Ravindranathan Nair 295 ITR 228 (SC) & circular dated 19.12.1991 explaining the clauses of the Finance Bill, 1991 (Principle in Distributors (Baroda) 155 ITR 120 (SC) followed; Shri Ram Honda Power Equip 289 ITR 475 (Del) approved)