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2014 (3) TMI 327 - AT - Income TaxEntitlement for deduction u/s 80HHC of the Act Interest receipt out of export business Held that:- If the interest income is earned from the TDR/FDR deposits kept as margin money towards bank guarantee in the course of export business, the same is to be considered as income from business also, if the interest income is received from the deposits made by the assessee which are inextricably linked to the business of the assessee, such interest income cannot be treated as income from other sources - 90% of the net interest which has been assessed under the head 'income from business' of the assessee has to be deducted in terms of Explanation (baa) to section 80HHC for determining the profit of business Relying upon ACG Associates Capsules Pvt. Ltd. Vs. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - as such the Explanation (baa) to section 80HHC applicable to this part of income thus, the AO is directed to recompute deduction u/s 80HHC Decided in favour of Assessee. Computation of deduction u/s 80HHC of the Act Interest income to be part of total turnover or not Held that:- The interest income is to be considered as business income subject to application of Explanation (baa) to section 80HHC thus, the AO is directed to recompute deduction u/s 80HHC of the Act Decided in favour of Assessee. Computation of deduction u/s 80HHC of the Act conversion charges - Held that:- The decision in ACIT Vs. Bio-tech Medicals, Hyderabad [2008 (3) TMI 365 - ITAT HYDERABAD-B ] followed - conversion charges to be considered as derived from the industrial undertaking of the assessee - processing charges received by the assessee being an independent income, 90% had to be reduced from this income but the same being an important component of business profits, had to be included in the total turnover as per the formula given in 80HHC of the Act thus, the AO is directed to consider the conversion charges as an independent income and exclude 90% thereof from the gross total income in terms of Explanation (baa) to section 80HHC of the Act, so as to arrive at business profits Decided partly in favour of Assessee. Exchange fluctuation If it is received in the end of the FY corresponding to the sales effected during the FY on export of exports, it should be considered as business income of the assessee, which is an integral part of the export and it cannot be separated from the export proceeds simply on the ground that increase in the rate subsequent to sale but prior to realization the decision in Bench of Tribunal, Bombay in the case of ACIT Vs. Prakash I. Shah [2008 (8) TMI 387 - ITAT BOMBAY-K ] followed it should be considered part of the total turnover of the assessee Decided in favour of Assessee. Insurance claim - If it is received on the trading assets, the same is to be considered as part of the turnover of the assessee - On the other hand, if it is received on the fixed assets, it cannot form part of the turnover of the assessee thus, the AO is directed to verify the claim Decided in favour of Assessee. Write off of credit balances If it is having direct link with the business operation of the assessee, the same is to be considered as income from business - Before the AO, nothing has been brought on record about the nature of credit balance thus, the matter is remitted back to the AO to verify whether it has nexus with the business operation of the assessee and if it has already taken into computation of income under the head 'business income', the claim of assessee has to be allowed so as to grant deduction u/s 80HHC of the Act. Nature of Consultation fee paid Capital OR Revenue Held that:- Though the claim of ₹ 2.00 lakh is relevant to AY under consideration, however, bill issued by Sri Ganesh from M/s Q Pharma Consulting India shows that only ₹ 1 lakh is relating to AY under consideration and balance ₹ 1 lakh not deductible during the year consideration - The CIT(A) allowed the amount relevant to AY under consideration thus, there was no infirmity in the order of the CIT(A) Decided against Assessee. Business Receipt u/s 28(iiib) of the Act - Deductibility of Modvat credit from raw material consumption account- Held that:- Excise duty refund does not fall u/s 28(iiib) of the Act as it related to the Modvat credits returned from the excise duty payments on exports and it was later on refunded thus, it is neither an incentive nor a rebate and the central excise duty what has paid by the assessee - there is no question of excluding 90% receipts by invoking Explanation (baa) to section 80HHC of the thus, the order of the CIT(A) set aside Decided in favour of Assessee. Disallowance of interest Advance paid Held that:- The decision in S.A. Builders Ltd. Vs. CIT(A) and Another, [2006 (12) TMI 82 - SUPREME COURT ] as long as the interest free loans are given to sister concerns as a measure of commercial expediency, disallowance cannot be resorted only on the ground that the loans have been utilized by the sister concerns for its business purposes - What is to be actually seen is commercial expediency of having advanced the loans and it is immaterial whether or not the loans so advanced is used for the purposes of the business of the assessee or for the purposes of business of the assessee's sister concerns thus, the order of the CIT(A) set aside Decided in favour of Assessee. Disallowance of interest Held that:- The investments made by the assessee are not for the purpose of the assessee's business thus, lower authorities have justified in disallowing the interest on the investments made by the assessee the order of the CIT(A) upheld Decided against Assessee. Disallowance of deduction u/s 80 HHC of the Act DEPB benefits Held that:- The assessee having satisfied conditions laid down therein the rate of draw back credit attributable to the Customs Duty was higher than the rate of credit allowable under the DEPB Scheme thus, the AO is directed to recompute the deduction u/s 80 HHC of the Act Decided in favour of Assessee. Addition on account of excise duty on closing stock u/s 43B of the Act - Held that:- The decision in ACIT Vs. Torrent Cables Ltd. [2012 (11) TMI 190 - SUPREME COURT] followed - the assessee followed the net method for valuing the closing stock and included excise duty at the time of removal of goods - the excise duty is to be excluded at the time of valuing closing stock at the end of the accounting period thus, the order of the CIT(A) upheld Decided against Revenue.
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