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2015 (6) TMI 572 - AT - Income TaxNon eligibility for exemption u/s 10B - foreign exchange gain derived - Held that:- The issue is squarely covered by the decision of CIT vs. Gem Plus Jewellery India Ltd (2010 (6) TMI 65 - BOMBAY HIGH COURT ) wherein the decision of CIT vs. Shah Originals (2010 (4) TMI 216 - BOMBAY HIGH COURT) has been clearly distinguished. However, the ld Counsel for the assessee submitted that foreign exchange gain before realization of sale price in convertible foreign exchange was ₹ 53,92,050 and loss on exchange fluctuation was credited to the P&L a/c i.e. the net amount accounted was ₹ 44,83,952 which we find from the account copy filed in the paper book. The foreign exchange gains/loss post receipt of sale is not income for the unit to be allowed deduction u/s 10B. In these circumstances, we set aside the issue to be examined by the AO and give an opportunity to the assessee to substantiate its claim. - Decided in favour of assessee for statistical purposes. Exclusion of an amount adjusted by the foreign customer from the eligible turnover for the purpose of computation of exemption u/s 10B - Held that:- We find that ₹ 2,61,844/- has been equal to ₹ 4,132 Euros was reduced from the amount due to the assessee and the balance of the amount was remitted into India. We are of the opinion that ₹ 2,61,844 cannot considered as receipt into India as the amount was adjusted Following the decision in the case of CIT vs. McLeod Russel (India) Ltd (2014 (2) TMI 797 - CALCUTTA HIGH COURT), we hold that the amount claimed by the assessee is to be excluded from the export turnover - Decided against assessee. Computation of deduction u/s 80IC of Baddi unit - Held that:- Once the income is assessed as business income, the corresponding expenditure is to be reduced and the balance to be excluded for the purpose of 80IC. Hence, we direct the AO to examine the nature of interest and decide this issue after giving an opportunity to the assessee. Determining the deduction claimed u/s 80IC - whether the amount derived by sale of scrap; interest income and other income were not derived by the manufacturing unit and that the same are not eligible for deduction u/s 80IC? - Held that:- Sale of scrap has the effect of reducing the cost of production. Further, sale of scrap is eligible for deduction u/s 80IC. There cannot be any two opinions that manufacturing activity of the type of material being undertaken by the assessee would also generate scrap in the process of manufacturing. The receipts of sale of scrap being part and parcel of the activity and being proximate thereto would also be within the ambit of gains derived from industrial undertaking for the purpose of computing deduction under section 80-IB. Respectfully following the decision in CIT vs. Sadhu Forgings Ltd,[2011 (6) TMI 9 - DELHI HIGH COURT]the activities of the assessee in giving heat treatment for which it had earned labour charges and job-work charges, it can thus be said that the appellant had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking - Decided in favour of assessee. Inclusion of profit on sale of assets as part of its export turnover - Held that:- The cost of the moulds is not separately billed and the payments have not been separately made. Hence, we agree with the CIT (A)’s view that the cost of moulds have become part of expenditure of the business and the entire amount of invoice price i.e sale consideration received represents the turnover on account of sale of plastic products is correct - Decided against revenue. Deduction u/s 10B relates to amortization of income and development charges - Held that:- amortization is actually cost of mould apportioned on number of pieces likely to be produced from a particular mould. Development charges also pertain to mould development only. Hence, we confirm the order of the CIT (A) that there was no justification for the adjustment to the deduction u/s 10B on account of amortization and development charges. - Decided against revenue. Deduction u/s 10B pertains to freight and insurance - Held that:- CIT (A) found the claim to be factually correct on an examination of the ledger account. Since the receipt towards freight and insurance do not form part of the export turnover in the first place, their deduction from the turnover is not justified. On an examination of the ledger account, the receipts towards freight and insurance charges does not form part of the export turnover and hence cannot be deducted from the turnover - Decided against revenue.
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