TMI Blog2011 (4) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover Interest earned on deposits as income from other sources - in the case of CIT v. Menon Impex (P.) Ltd. (2002 - TMI - 12192 - MADRAS High Court) Held that the interest received by the assessee was on deposits made by it in the banks, It was the deposit which was the source of the interest income. The mere fact that the deposit was made for the purpose of obtaining letters of credit which were in turn used for the purpose of the business of the industrial undertaking did not establish a direct nexus between the interest and the industrial undertaking and, therefore, the assessee was not entitled to get the benefit of section 10A in relation to the interest, appeal of the assessee is partly allowed - IT APPEAL NO. 715(MUM.) OF 2010 - - - Dated:- 13-4-2011 - J. SUDHAKAR REDDY, VIJAY PAL RAO, JJ. Satish R. Mody for the Appellant. Hari Govind Singh for the Respondent. ORDER Vijay Pal Rao, Judicial Member This appeal by the assessee is directed against the order dated 17.11.2009 of CIT(A) for the assessment year 2006-07. 2. The assessee has raised the following grounds in this appeal: "1. On the facts and in the circumstances of the case and in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeds from the export goods are received in or to brought into India by the assessee in convertible foreign exchange within a period of six months from the end of the previous years or within such further period as competent authority may allow in this behalf. Therefore, the condition provided u/s 10A(3) cannot be overruled by the circulars of the RBI. 5. We have considered the rival contentions and relevant record. We find that the provisions of section 10A(3) stipulates the condition for availing the deduction that the sale proceedings of the goods exported are received in India by the assessee in convertible foreign exchange within a period of six months from the end of the previous year or within such further period as competent authority may allow in this behalf. As per explanation -1 to sub-section (3), the competent authority means the Reserve Bank of India or such other authority as authorized by any law for the time being. The section 10A(3) Along with Explanation -1 is quoted as under : "[Special provision in respect of newly established undertakings in free trade zone, etc. 10A. (1) (2) . . (3) This section applies to the undertaking, if the sale proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale proceeds in question in to India in the convertible foreign exchange and the same amount remained unrealized then in the absence of any extension sought or granted by the RBI as prescribed under section 10A(3), the said unrealized amount is not entitled for deduction u/s 10A. Since, the CIT(A) has directed the AO to recompute the deduction after considering the circular, therefore, we do not find any reasons to interfere in the order of the CIT(A). 7. Grounds of appeal no.1 of the assessee's appeal is dismissed. 8. Grounds of appeal no.2 is regarding exclusion of the payment made for import from the export for the purpose of computation of deduction u/s 10A. The AO has reduced an amount of Rs. 82,55,682/- being netting of export against the payment of imports while calculating the export turnover. 9. On appeal, the CIT(A) has upheld the action of the AO. 10. Before us, the learned AR of the assessee has submitted that the netting of export is permissible as per the RBI circular, therefore, there should not be any reduction of such amount while calculating the export turnover. He has further contended that the assessee has utilized the export proceedings fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the foreign reinsurers first and thereafter to receive the commission from the foreign reinsurer, will be an empty formality and a meaningless ritual, on the facts of this case. On a perusal of the nature of the transaction and in particular the statement of remittance filed in the Reserve Bank of India regarding the transaction, we are unable to uphold the view of the respondent that the income under the agreement is generated in India or that the amount is one not received in convertible foreign exchange. We are of the view that the income is received in India in convertible foreign exchange, in a lawful and permissible manner through the premier institution concerned with the subject-matter - the Reserve Bank of India. In this view, we hold that the proceedings of the Central Board of Direct Taxes dated March 11, 1986, declining to approve the agreements of the appellant with Sedgwick Offshore Resources Ltd., London, for the purposes of section 80-O of the Income-tax Act, are improper and illegal. We declare so. We direct the respondent to process the agreements in the light of the principles laid down by us hereinabove. The appeal is allowed. There shall be no order as to cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred by the assessee in foreign currency as foreign charges for traveling, business promotion and advertisement expenditure etc. which does not fall within any of the category of the expenditure as prescribed in the definition of foreign exchange under explanation 2(IV) after sub-section 8 of the Section 10A. The learned AR has submitted that as per the Explanation 2(IV), the, the expenditure incurred in foreign currency for technical services, insurance attributable to the delivery of the articles or things outside from the expenditure net profit of technical services outside India are excluded from the export proceedings for the purpose of export turnover. 18. On the other hand, the learned DR relied upon the orders of the lower authorities. 19. After considering the rival contentions and relevant record, we find that the AO has given freight and insurance and other expenditures incurred in the foreign currency which are as under : 1. freight Rs. 19,16,384 2. Insurance Rs. 41,716 3. Expenses incurred in foreign currency as seen from the schedule-16 significant accounting policies being expenditure incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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