Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (1) TMI 397 - AT - Income TaxDeduction u/s 80IC - Bank Interest - CIT(A) deleted the addition - Held that:- The assessee has to import raw materials for which it has to open letters of credit(LC). The LC is an integral part of the business activity carried on by the assessee. Since pledging of FDR is necessary for drawing LC, the FDR is also an integral part of the business. The ld.CIT(A) at para 1.4 of his order observes that such FD’s had to be made before the raw material could be imported and hence the FD’s were inextricable part o the assessee’s business. We, do not find any infirmity with the findings of the ld.CIT(A). We therefore uphold the action of the ld.CIT(A) in respect of interest of FD’s given as security for LC’s. Miscellaneous Income - Held that:- In the course of carrying out business operation of the assessee that the assessee had debited this miscellaneous income to the P&L Account and claimed as business expenditure while computing the profits of business which was eligible for deduction u/s 80IC. The ld. CIT(A) observed that the provision for expenses had been made for AY 2007-08 and when the same was not required it was credited back in A.Y. 2008-09 and that such amount has been treated as part of the business income in accordance with provision of section 41 of the I.T. Act. It has been observed by the ld. CIT(A) that the provision has been made in respect of business expenditure and there is no reason why the same should be treated as anything but profit derived from business when part of such liability is returned back as the same is not required anymore.We, do not find any infirmity with the findings of the ld.CIT(A). We therefore uphold the action of the ld.CIT(A) in deleting the addition in respect of the miscellaneous income. Foreign Exchange Gain - Held that:- In reality there is no gain or loss. The cost of the purchase either goes up or goes down as the case may be. No doubt, the fluctuation in the cost of the purchase has the effect of reducing or enhancing the profit of business. The ld.CIT(A) held that such fluctuation is an essential and inextricable function of the business and the gain in question cannot be segregated from the profits derived from the business.We therefore uphold the action of the ld.CIT(A) in deleting the addition made by the ld. Assessing Officer in respect of foreign exchange fluctuation. In the light of the decision of Mepco Industries Ltd.(2009 (11) TMI 24 - SUPREME COURT ), one can have no escape from the conclusion that the nature of the subsidy has to be examined by the Court, In each case, in order to determine if as assessee’s undertaking is entitled to a particular deduction under sec. 80 IC of the Act.In the present case the issue is whether the interest income, miscellaneous expenses, foreign exchange fluctuation comes within the first degree.In the light if the above discussion, we are therefore of the considered opinion that the decision of the Ld.CIT(A) in deleting the addition made by the ld.AO in respect of Bank Interest, Miscellaneous expenses and Foreign exchange fluctuation gain, do not suffer from any infirmity, legal or factual and can be said to have a direct nexes with the business activity carried on by the assessee. Bank guarantee - Held that:- The bank guarantee is a part of the purchase process, and the income arising there from, has to be said to have been derived from the assessee’s business. We, therefore, delete the addition made by the ld. Assessing Officer in respect of the interest earned from bank guarantee.
|