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2015 (5) TMI 353 - AT - Income TaxComputation of deduction u/s 10B - whether receipts from forward contracts can be considered as profits derived from the business for the purpose of computing deduction ? - Held that:- Decision rendered in Assessee’s own case in AY 06-07 is applicable, wherein the Tribunal took the view that deduction u/s.10B of the Act is to be allowed only on the profits of the business of the undertaking. “Profit of the business of the undertaking”, according to the Tribunal, would be only profit from manufacture and export of readymade garments and not from gain on forward contract, has to be followed in the present AY also. As we have already observed, the AO has assessed the said gain as “Business Income” and therefore the decisions referred to above relied upon by the learned counsel for the Assessee are not relevant and helpful to the plea of the Assessee before us. Thus we do not deem it necessary to elaborate on the arguments advanced by the learned counsel for the Assessee before us. - Decided against assessee. Inclusion of inter unit job work charges for arriving at the total turnover of the EOU - Held that:- the present case, the Assessee has two EOU’s EOU-I and EOU II. Both the EOUs are manufacturing and exporting readymade garments. The reasoning adopted by the CIT(A) in the present case is that “Sales” and “Turnover” are not synonymous. According to him the word “Sale” and “Turnover” as used in Sec.44AB of the Act reveals the intention of the legislature in this regard. According to him the term “Turnover” would include have a wider connotation and would also include inter-unit sales. According to him there would have been an element of profit in the inter unit services to the unit providing service to the other unit. Factually it has not been demonstrated so. The CIT(A) has also proceeded to hold that even assuming that there was no profit element, yet such receipts have to be considered as includible in “total turnover”. We do not think that the above reasoning can be adopted in the context of the provisions of Sec.10B of the Act. In any event, the approach of the Hon’ble Supreme Court in the case of Punjab Stainless Steel Industries (2014 (5) TMI 238 - SUPREME COURT ), clearly suggests that the “total turnover” should be only in relation to the business of the Assessee which in this case is manufacture and sale of garments. Had garments been sold locally by either of the units than they were to be included in the “Total Turnover”. Keeping in mind the facts and circumstances of the present case and the precedents on which the learned counsel for the Assessee has placed reliance, we are of the view that the inter unit transfer should not be treated as part of the “Total Turnover” while computing deduction u/s.10B of the Act - Decided in favour of assessee. Disallowance of employees contribution to ESI payments by invoking the provisions of section 43B - Held that:- The issue in the aforesaid ground of appeal is squarely covered by the decision of Spectrum Consultants (India) Pvt.Ltd. Vs. CIT, (2013 (7) TMI 414 - KARNATAKA HIGH COURT) wherein it was held that if the employees contribution to ESI is paid on or before the due date for filing return of income u/s. 139(1), then the same cannot be disallowed. The AO is therefore directed to verify if the employees contribution to ESI has been paid by the assessee within the time limit as laid down in the aforesaid decision and allow the claim of the assessee, if it is found to be in accordance with the said decision - Decided in favour of assessee for statistical purposes. Taxation of long term capital gains - @20% instead of 10% - Held that:- taxation of long term As seen from the proviso of Section 112(1) if the benefit of indexation is not claimed under second proviso of section 48, then the rate of tax on long term capital gain will only be @ 10%. In the present case, neither the AO nor the CIT(A) has examined the question as to whether the benefit of indexation was claimed by the assessee or not. We therefore set aside the order of the AO for fresh consideration in the light of the provisions of law referred to above, after affording opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Computation of deduction u/s. 10B - CIT(A) directing the AO to compute deduction u/s. 10B on the profits of EOU Unit-II without adjusting the losses of EOU Unit-I from the “profits and gains of business / profession” before computing such deduction - Held that:- CIT(A) has followed the decision of CIT v. Yokogawa India ltd.[2011 (8) TMI 845 - Karnataka High Court] wherein it was held that section 10A and 10B are exemption provisions and therefore income of such units have to be excluded at source itself before arriving at GTI and since income is not to be included in the income of the assessee at all, there is no occasion to set off losses of the assessee in respect of its other business against profits of the exempt unit. Following the aforesaid decision of the Hon’ble High Court of Karnataka, we uphold the order of the CIT(Appeals) - Decided against revenue.
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