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TMI Blog2013 (1) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... ges, from the term "export turnover" for the purpose of computation of relief under section 10A. 3. We have heard the learned Departmental Representative, Mr. Jitendra Yadav, on behalf of the Revenue and the learned Counsel, Mr. Nitesh Joshi, on behalf of the assessee. 4. Both the Representatives had relied on number of case laws in support of their contentions. We would be considering them in due course wherever necessary. 5. The first issue is whether the interest income in question is assessable under the head "Income From Business" or under the head "Income From Other Sources". 6. The undisputed facts in this case are that, the interest in question was received on fixed deposit placed with Banks for the purpose of obtaining credit facilities. The Hon'ble Jurisdictional High Court in CIT v/s Indo Swiss Jewels Ltd., [2006] 284 ITR 389 (Bom.), has held as under:- "Held, dismissing the appeal, that from the facts and circum-stances of the present case it was clear that the inter-corporate deposits were made by the assessee from the surplus funds that were set apart for payment for imported machinery. The interest earned on the short term deposits of the money kept apart for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in K Ravindranathan Nair (supra), there is a specific Explanation (baa) which excludes 90% of the interest, even if it is assessed as business income, from the profits of the business. However, sub-section (4) of section 10B contains no such exclusion nor is there any other provision in the section similar to Explanation (baa) of section 80HHC. In Liberty India (supra), the Supreme Court was concerned with sections 80-I, 80-IA and 80-IB. In these sections also there is no statutory formula to prescribe as to what are the profits eligible for the deduction. There is no statutory prescription of such profits as in sub-section (4) of section 10B. Sub-section (5) of section 80-IA, which also has to be read as part of section 80-IB provides that the profits of an eligible business shall be computed as if such eligible business is the only source of income of the assessee. This is not similar to the statutory formula prescribed in sub-section (4) of section 10B. It cannot also be stated that the assessee was adopting a device to inflate the profits of the export oriented undertaking by including the interest income therein because even the Assessing Officer did not dispute th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the undertaking is applied to the profits of the business 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-s. (4) of s. 10A is as follows : 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 subs. (4). Export turnover also forms a constituent element of the denominator in as much as the export turnover is a part of the total turnover. 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 denominator. The legislature has provided a definition of the expression "export turnover" in Expln. 2 to s. 10A by which the expression is defined to mean the considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely, 'export turnover and total turnover' would be identical, if the entire sale proceeds are brought into India in convertible foreign exchange within the prescribed time-limit. In that case, the entire profit under the head 'Profits and gains of business or profession' (which will include the three export incentives) will be deductible under s. 80HHC. However, in order to arrive at the amount deductible under s. 80HHC in the case of an assessee doing export business as well as some other domestic business, the fraction of 'export turnover' to 'total turnover', will be applied to his profits computed under the head 'Profits and gains of business or profession' (which again will include the three export incentives). The operation of s. 80HHC r/w s. 28, as amended by the Finance Act, 1990, can be illustrated by way of the following examples: Code I (sic-Code II (sic-Code III (sic-Code IV (sic-Case Case I) Case II) 2/3 Case III) ½ IV) 1/3 export Exclusively export 1/3 export 1/2 2/3 domestic sale export business domestic sale domestic sale (Figures in lakhs of rupees) (i) Turnover (a) FOB exports 100 100 100 100 (b) omestic rate - 50 100 200 (c) Total turnover 100 150 200 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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