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TMI Blog2010 (6) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... enhanced due to disallowance of employer's as well as employee's contribution towards PF/ESIC; c. Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the stand of the CIT(A) in treating the interest income as business income and interest income should be taken for the purpose of deduction claimed u/s. 80HHC of the I.T. Act, 1961; d. Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the stand of the CIT(A) considering the net interest and not gross interest for the purposes of exclusion under clause (baa) of Explanation to Section 80HHC of the I.T. Act, 1961; e. Whether on the facts and in the circumstances of the case, the Tribunal was justified in directing the Assessing Officer to grant exemption u/s. 10A on foreign exchange gain earned on realization of export receipts in the year of export and to exclude the gains on sales of earlier years from the profits of the year under consideration and allow in those years;" Re Question a: 3. According to the Revenue the exemption under Section 10A is liable to be computed after excluding freight and insurance from the total turnover. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the undertaking in computing the profits derived from export. In other words, the profits of the business of the undertaking are multiplied by the export turnover in respect of the articles, things or, as the case may be, computer software and divided by the total turnover of the business carried on by the undertaking. The formula which is prescribed by sub section (4) of Section 10A is as follows : Profits derived from export of articles or things or computer software = Profits of the business export turnover in respect of the undertaking X of the articles or things or computer software divided by total turnover of the business carried on by the undertaking. The total turnover of the business carried on by the undertaking would consist of the turnover from export and the turnover from local sales. The export turnover constitutes the numerator in the formula prescribed by sub section (4). Export turnover also forms a constituent element of the denominator inasmuch as the export turnover is a part of the total turnover. 6. The export turnover, in the numerator must have the same meaning as the export turnover which is a constituent element of the total turnover in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the context of Section 80HHC, by a Division Bench of this Court in Commissioner of Income Tax v. Sudarshan Chemicals Industries Ltd.{(2000) 245 ITR 769}. In Sudarshan Chemicals the question of law that fell for decision was whether sales tax and excise duty ought to be included in the total turnover while working out the deduction under Section 80HHC. For the purposes of Section 80HHC, clause (b) of sub section (3) provides that the profits derived from export shall be computed in terms of the proportion between the export turnover to the total turnover. as applied to the profits of business. Hon'ble Mr. Justice S.H. Kapadia (as the Learned Chief Justice then was ) speaking for a Division Bench of this Court did not accept the contention of the Revenue that since the legislature had excluded only insurance and freight from the total turnover, it was not open to the assessee to contend that excise duty and sales tax should also be excluded. In that context, the Division Bench observed that the meaning of export turnover in clause (b) of the Explanation to Section 80HHC showed that export turnover did not include excise duty and sales tax. The Division Bench observed that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generated out of the manufacturing activity of the assessee company. 12. By reason of the judgment of the Supreme Court in Commissioner of Income Tax v. Alom Extrusions Limited{(2009) 319 ITR 306} the employer's contribution was liable to be allowed, since it was deposited by the due date for the filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the Court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated by the Revenue proceeds on the basis that the assessed income was enhanced due to the disallowance of the employer's as well as the employees' contribution towards Provident Fund /ESIC and the only question which is canvassed on behalf of the Revenue is whether on that basis the Tribunal was justified in directing the Assessing Officer to grant the exemption under Section 10A. On this position, in the present case it cannot be disputed that the net consequence of the disallowance of the employer's and the employee's contribution is that the business profits have to that extent been enhanced. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue that the foreign exchange was realized by the assessee within the period stipulated in law. The assessee realized a larger amount because of a foreign exchange fluctuation. The fact that this forms part of the sale proceeds would have to be accepted in view of the judgment of the Division Bench of this Court in Commissioner of Income Tax v. Amber Export (India) (ITA 1249 of 2007 decided on 18 February 2009). The judgment of this Court in turn followed the decision of the Gujarat High Court in Commissioner of Income Tax v. Amba Impex{(2006) 282 ITR 144 (Guj)}. The sole ground which has been urged on behalf of the Revenue in support of the appeal on this issue is based on the judgment of a Division Bench of this Court in Commissioner of Income Tax v. Shah Originals (ITA 431 of 2008 decided on 22 April 2010). The decision in Shah Originals is, however, distinguishable for the reason that the foreign fluctuation in that case arose after the export transaction had been completed and after the export profits were deposited by the assessee in an EEFC Account. This is evident from the following observations: "The assessee admittedly in the present case received the entire pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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