TMI Blog2004 (6) TMI 587X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the assessee also claimed deduction under section 80HHC in respect of resale value of Special Import License to the extent of Rs. 7,494. The learned counsel further submitted that section 10B has undergone a vast change. It is now that the assessee is entitled for deduction and not exemption. According to the learned counsel, originally the assessee was entitled for exemption. The learned counsel further submitted that the profit for deduction under section 10B has to be computed by multiplying the business profit by the export turnover divided by total turnover. This method of computation for the purpose of claiming deduction under section 10B is almost similar to section 80HHC. The learned counsel further submitted that there is no clause as contained in Explanation ( baa ) to section 80HHC to exclude 90 per cent of the interest and miscellaneous income. Therefore, according to the learned counsel, the profit has to be computed by taking into account all the business profit received by the assessee. 3. The learned counsel for the assessee further submitted that the assessee is 100 per cent export-oriented unit and, therefore, eligible for deduction under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee submitted that the assessee had provided excess amount towards incentives and bonus for the earlier years aggregating to Rs. 11,60,048. These provisions are now reversed and credited in the books of account. These amounts were not claimed in the earlier years. Since the provision made was reversed, the assessee is entitled for deduction under section 10B. According to the learned counsel, the observation of the first appellate authority that the provision was not deducted in the earlier years and the amount was allowed under section 10B is wrong as relief under section 10B is on income and not deductions. In any event, according to the learned counsel, that issue is not relevant as the amount is not at all taxable in this year and so exemption under section 10B is irrelevant. According to the learned counsel, the provision which is written back in the books of account is connected with the business of the assessee. Therefore, the assessee is entitled for deduction in respect of the provision also. 5. The learned counsel for the assessee further submitted that the sales tax which was paid in the earlier year was refunded when the assessee filed the proof of expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned D.R. further submitted that the language of sections 10A and 10B is almost similar. Therefore, the decision rendered by the Madras High Court in the case of Menon Impex (P.) Ltd. ( supra ) is squarely applicable in respect of claim under section 10B also. Referring to section 80HHC and the judgment of the Madras High Court in the case of N.S.C. Shoes ( supra ), the learned D.R. submitted that sections 10A and 10B are similar in nature and, therefore, the judgment of the Madras High Court in the case of Menon Impex (P.) Ltd. ( supra ) should be preferred rather than N.S.C. Shoes case ( supra ). 8. The learned D.R. further submitted that the assessee has made excess provision towards incentive and bonus for the earlier years aggregating to Rs. 11,60,048. The assessee reversed this provision and credited the same in the books of account. On this issue, the first appellate authority called for a remand report from the Assessing Officer. The Assessing Officer has also filed the remand report stating that the assessee was allowed exemption under section 10B in the respective assessment years, namely, 1999-2000 and 2001-02 which included the provision disallowed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. We have also carefully gone through the judgment of the Supreme Court in the case of Kamal Co-operative Sugar Mills Ltd. ( supra ) and also the judgment of the Madras High Court in the case of Menon Impex (P.) Ltd. ( supra ) and also the judgment of N.S.C. Shoes case ( supra ). 12. We have also carefully gone through the provisions of section 10B. Sub-clause (4) of section 10B says that profit derived from the export of article or thing shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such article or thing bears to the total turnover of the business carried on by the undertaking. We find a similar provision in section 10A(4). Section 10A relates to special deduction in respect of newly established undertakings in free trade zone. Section 10B relates to special deduction in respect of newly established hundred per cent export-oriented undertakings. We find the language employed in sections 10A and 10B are similar as submitted by the learned D.R. Section 10A says that a deduction shall be allowed from the total income of the assessee in respect of profit and gains derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guage employed in that provision. The interest received by the assessee may be a business income. The question is whether it has direct nexus with that of the industrial unit. The Supreme Court in the case of Kamal Co-operative Sugar Mills Ltd. ( supra ) has not considered the provisions of sections 10A and 10B. However, the Madras High Court considered section 10A which is almost similar in section 10B and also taking note of the judgment of the Apex Court in the case of Sterling Foods ( supra ), found that the interest received from a similar deposit does not establish a direct nexus between the interest and the industrial undertaking. Therefore, in our view, the judgment of the Madras High Court and also the Apex Court in the case of Sterling Foods ( supra ) would be applicable since the identical facts are concerned. 14. We have also carefully gone through the judgment of the Madras High Court in the case of N.S.C. Shoes ( supra ). The Madras High Court held that the term derived from is narrower than the term attributable . Insofar as section 80HHC is concerned, the Madras High Court held the interest received by the assessee from the bank deposit has been incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income derived in the respective assessment year after a provision was made. However, for the purpose of claiming deduction under section 10B, the assessee should show that the profit was received from the export for the assessment year under consideration. In our view, though by way of legal fiction, the excess provision was treated as income under section 41(1) of the Income-tax Act, it cannot be treated as income derived from export. Therefore, we do not find any infirmity in the order of the first appellate authority. Accordingly, we confirm the same. 16. Now coming to the refund received by the assessee from sales tax authorities. As already discussed regarding the issue of excess provision, the refund of sales tax may be a business income because of section 41(1) of the Income-tax Act. However, it cannot be construed as income received from export of business or it would not form part of export turnover. 17. Now coming to the special import license, the assessee received this special import license because of the scheme framed by the Government of India to encourage the export business. It may be a business income because of section 28( iii ) of the Income-tax Act. F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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