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2018 (5) TMI 581 - AT - Income TaxDeduction u/s 10B - exchange fluctuation gain - forward contracts are devices to hedge foreign currency fluctuation risk - Held that:- AO has not brought anything on record to prove that foreign exchange gain was due to any speculative transaction entered into by assessee. - Foreign exchange gain earned by assessee was arising out of business of eligible undertaking for purposes of deduction under section 10B Expenses towards royalty/technical know-how - revenue or capital in nature - Held that:- assessee acquired merely right to draw upon technical knowledge of foreign companies for a limited purpose of carrying on its business, and that foreign companies did not part with any of their assets absolutely for ever or for a limited period of time, that they continued to have the right to use their knowledge and, even after agreements had run their course, their rights in this behalf was not lost, that assessee had not, therefore, acquired any asset or advantage of an enduring nature for benefit of its business and that payments were, therefore, revenue in nature and were deductible. Exemption u/s 10A/10B - Interest income - deposits made with banks for obtaining letters of credit - these letters of credit are utilised for purposes of export activity carried on by assessee - Held that:- Since there is no bifurcations that has been provided by assessee either before us or before the authorities below it cannot be assumed that entire interest income claimed by assessee could be linked with the export activity. - Benefit of deduction u/s 10B on interest income related to export activity allowed - AO directed to bifurcate the interest related to export activities and other activities. Bad debts deleted by holding that these are unascertained liabilities - Held that:- Hon’ble Supreme Court in the case of CIT versus HCL Commet Systems & Services Ltd. [2008 (9) TMI 18 - SUPREME COURT] has held that provisions for bad and doubtful debts being ascertained liability are not required to be added in the matter of computation. He submitted that subsequent to the decision of Hon’ble Supreme Court, an amendment has been made in section 115 JB by Finance Act 2009 with retrospective effect from 2001, and the issue now has to be decided against assessee. Indexation granted on the sale of shares by assessee of State Bank of Bikaner and Jaipur - Held that:- It is an admitted position that this is the sole transaction entered into by assessee of sales/purchase of shares in view of which loss has been incurred during the year under consideration. There is no evidence that has been brought on record by department to establish that assessee has been carrying on with activity of sales/purchase of shares. Under such circumstances applicability of Explanation to section 73 has to be construed in a narrow sense, which indicates where the income is derived from business activity of sales/purchase of shares
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