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2016 (7) TMI 1624 - AT - Income TaxDeduction u/s.80HHC - Non taxability of the gross interest on the FDR - HELD THAT:- As decided in own case where there is a direct nexus between the borrowings of an assessee utilized for business purpose, and the funds kept as FDRs by way of security, margin money etc., then interest, if any received on such FDRs will have to be netted off while considering and calculating deduction u/s.80HHC. In the instant appellant’s case, it is seen that all the FDRs are acquired from the funds taken from the O.D. account with IOB and thus, on facts also there is a direct nexus. This point, therefore, goes in favour of the appellant. The appellant has furnished a certificate from the bank, certifying that the FDRs were all acquired by debiting the O.D. account. It is also seen that the O.D. balances, both at the beginning and at the end of the year, far exceed to aggregate of the FDRs - Decided against revenue. Treating the sale tax refund as allowable u/s.80HHC - HELD THAT:- CIT(A) has decided the said issue on the basis of decision in case of Alfa Level Ltd. [2003 (9) TMI 43 - BOMBAY HIGH COURT] as held that the sales tax refund is to be assessed as part of business profit under the head profit and gains of business and the same could not be excluded while calculating deduction u/s.80HHC of the Act. The appellant is a 100% exporter therefore the sales tax refund was considered as a part of profit on business for computing deduction u/s.80HHC of the Act. No distinguishable facts came into notice before us to which it can be assume that the CIT(A) has arrived at wrong conclusion. Whether the appellant is entitled to deduction u/s.80HHC of the Act in view of the finding of the Assessing Officer that the assessee has no positive income from the export of 90% of incentives and other income, are reduced from profit of the business? - HELD THAT:- Since the profits derived from the export activity is a positive figure, the appellant is eligible for deduction u/s.80HHC. The A.O. is directed to re-compute and grant deduction u/s.80HHC in accordance with law. Not distinguishable facts were placed on record by the revenue to which it can be assumed that the finding given by the CIT(A) is wrong against law and facts.CIT(A) has passed the order on the basis of order passed by the ITAT, Mumbai ‘H’ Special Bench in the case of M/s. Surendra Engineering Corpn. [2002 (12) TMI 199 - ITAT BOMBAY-H] Finding no contrary view taken by any other court of law, we are of the view that the CIT(A) has passed the order judiciously and correctly which does not require to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee. Addition holding that the purchases are fully explained in the books of account whereas the supplier were not traceable - as per CIT-A net result would be that 80% of the addition would have to be allowed as a deduction u/s.80HHC leaving only the balance 20% - HELD THAT:- These issues have been remanded by the CIT(A) to the Assessing Officer for the verification of the allowable deduction u/s.80HHC of the Act while giving effect to the order of CIT(A). The representative of the department has raised the question of verification while in this regard the CIT(A) has already directed the Assessing Officer to verify the claim of the assessee in view of the directions as desired by the CIT(A) while deciding this issue. No justifiable facts have been placed on record to take the contrary view of the said finding. Moreover these issues are based upon the facts of the case which can be verified by the Assessing Officer in accordance with law. On appraisal of the above said order we find no reasons to interfere with in the order passed by the CIT(A) in question. These issues are decided in favour of the assessee against the revenue.
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