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2015 (5) TMI 310 - HC - Income TaxDeduction u/s 10B - 100% EOU - Tribunal was justified in not considering the profit on export of spare parts while allowing the exemption under section 10B - If the court were to hold that the assessee is not entitled to the benefit of section 10B of the Act for the export of spare parts where the cost of importing or purchase of spare parts were to be excluded while computing the export profit eligible for exemption under section 10B of the Act ? - Held that:- When the assessee imports spare parts and exports them in the same condition, may be along with the articles produced and the spare parts exported are not involved in any manufacturing activity or in production activity, section 10B is not attracted. Therefore, all the three authorities have rightly held that the assessee is not entitled to the benefit of section 10B. In the facts and circumstances, we do not see any infirmity in the said orders. Therefore, the substantial questions of law Nos. 1 and 2 are answered in favour of the Revenue and against the assessee. However, when the income derived from the sale of spare parts is held to be ineligible for the benefit under section 10B, the entire amount representing the value of spare parts is to be excluded and the profits and gains derived from sale of such spare parts alone is liable for tax. That is the exercise to be undertaken by the assessing authority and the said amount is to be excluded. - Decided against revenue. Incidental income derived by the assessee from the sale of scrap - whether would be entitled to exemption under section 10B of the Act despite the same having been not derived from the export of articles or things - Held that:- Keeping in mind principle laid down in CIT v. Sterling Foods [1999 (4) TMI 1 - SUPREME Court] no doubt the assessee is not in the business of export of scrap but is in the business of export of X-ray equipment, high voltage tanks and detectors used in CT scanners and after manufacturing these products, they are exported. In the process of manufacturing, the unutilised raw materials forms part of scrap and that scrap also has value. But it is not exported and, hence, they are eligible for the benefit under section 10B of the Act. The assessee should have earned profits and gains from such export of articles or things. The said articles or things should have been manufactured or produced by the assessee. The section does not require that the profits and gains derived should be from the articles or things which are exported only. It is the profits and gains derived by an 100 per cent. export oriented undertaking from the export of articles. Therefore, when the assessee undertakes manufacturing activity or production activity and in the process it results in any scrap, the said scrap attracts the nexus between the profits and gains derived from the assessee from export business. Therefore, it satisfies the requirements of section 10B and the Tribunal has rightly held that the assessee is entitled to the benefit of section 10B even in respect of the profits earned out of sale of scrap materials within the country. In that view of the matter, we do not see any infirmity in the order passed by the Tribunal. - Decided in favour of assessee.
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