The main legal point established in the judgment is the interpretation and application of key provisions of the Income Tax Act, specifically Section 80HHC, 10B(4), 10B(7), and 80-IA(10), in determining the eligibility for deductions and the treatment of various receipts and expenses.

JUDGMENT

Avneesh Jhingan, J. - The assessee is in appeal under Section 260A of the Income Tax Act, 1961 (for short, the Act) against the order dated 28.12.2012 passed by the Income Tax Appellate Tribunal, Chandigarh (for short, the Tribunal). Following substantial questions of law have been claimed:

'i) Whether on true and correct interpretation of Section 80HHC, the Income Tax Appellate Tribunal erred in holding that gross rent receipts from employees without adjusting expenses incurred by the employer on running and maintenance of such accommodations are to be excluded from the eligible profits of business for section 80HHC of Income Tax Act.

ii) Whether on true and correct interpretation of Section 80HHC read with Section 10B(6)(iii) of the Income Tax Act the tribunal has erred in holding that report turnover of the unit whose profits are allowed a deduction under Section 10B of the Income Tax Act is not to be included in the export turn over for the purpose of calculating the deduction under Section 80HHC of the Income Tax Act, 1961?

iii) Whether on true and correct interpretation of Section 80HHC read with Section 80-IA/80-IB of Income Tax Act, the Income Tax Appellate Tribunal erred in holding that amounts of profits of Auro Unit V, eligible for deduction under Section 80-IB of Income Tax Act are to be excluded while calculating eligible profits for deduction under Section 80HHC of Income Tax Act?

iv) Whether the Income Tax Appellate Tribunal is correct in law in holding that gross interest received from suppliers without adjusting interest paid on working capital borrowings should be excluded from eligible profits for deduction under Section 10B of Income Tax Act?

v) Whether the Income Tax Appellate Tribunal is correct in law in apportioning the Head Office expenses amongst various units claiming deduction U/s 10-B/80-IA/80-IB of the Act, when units are maintaining their separate books of accounts?'

2. For question (iv), following question has been substituted:

'vi) Whether in facts and circumstances the ITAT is correct in law in directing the A.O. to grant the benefit of interest received/receivable on delayed payments relatable to export sales as opposed to total sales affected by the assessee?'

3. The facts in brief are that the assessment year involved is 2001-02. The assessee filed return declaring a loss, the return was revised and the loss declared earlier was reduced. The assessment was finalised under Section 143(3) of the Act on 30.3.2004 wherein the Assessing Authority disallowed various deductions claimed by the assessee. First appeal filed was partly allowed on 25.1.2008. Aggrieved of the order of the 1st Appellate Authority, both the assessee and the revenue preferred appeals. The Tribunal vide impugned order partly allowed both the appeals.

4. With regard to question (i), the facts are that the assessee received rent mainly from its employees who were using the company accommodation. The claim of the assessee before the Tribunal was that as per explanation (baa) to Section 80HHC of the Act, the depreciation on the building owned by the assessee should be allowed. The contention was rejected by the Tribunal placing reliance upon a decision of the Supreme Court in ACG Associated Capsules P. Ltd. v. C.I.T., Central-IV, Mumbai, (2013) 343 ITR 89 .

5. The same issue is raised by Ms. Radhika Suri, learned senior counsel for the assessee and is not well-founded. Relevant portion of Section 80HHC of the Act is reproduced below:

'Deduction in respect of profits retained for export business.

80HHC. (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, [a deduction to the extent of profits, referred to in sub-section (1B)], deri