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2012 (9) TMI 224 - ITAT, HYDERABADDisallowance of deduction under section 80IB - DFRC sales, DFIA sales, Interest receipts & Conversion charges - Held that:- As decided in M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] duty drawback, rebate etc. should not be treated as adjustment (credited) to cost of purchase or manufacture of goods - They should be treated as separate items of revenue or income and accounted for accordingly - duty drawback, DEPB benefits, rebates etc. cannot be credited against the cost of manufacture of goods debited in the Profit & Loss account for purposes of Sections 80-IA/80-IB as such remissions (credits) would constitute independent - sales from DFRC and DFIA cannot be treated as profit from the eligible business of the industrial undertaking for computation of deduction u/s. 80IBsource of income beyond the first degree nexus between profits and the industrial undertaking - against assessee. The interest income also cannot form part of the profit derived from the eligible business of the industrial undertaking for claiming deduction u/s. 80IB - against assessee. Conversion charges - Held that:- As the eligible business of the assessee is manufacturing of biscuits and the assessee has received the conversion charges by carrying out the manufacturing process on behalf of ITC Ltd and as the word 'manufacture' is of much wider connotation it would include any process as a result of which a different commodity having distinct name, use and character emerges from the raw material - the conversion charges received is in course of manufacturing activity by using the same machinery and labour which were used for manufacturing assessee's own product has a direct nexus with the eligible business of the assessee and the profit derived from conversion charges has to be included in the profit of the business for computing deduction u/s. 80IB - in favour of assessee.
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