TMI Blog2014 (1) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... o the undertaking and not to the owner thereof - The successor will be entitled to the benefit for the unexpired period of five years provided the undertaking is taken over as a going concern - The mere change of ownership does not amount to splitting up or reconstruction - The authorities were not justified in denying the exemption u/s 10BA of the Act – Decided against Revenue. Whether DDB and DEPB be treated as part of export business – Held that:- Following M/s Suraj Exports India, Churu Vs. Income Tax Officer, ward-2, Churu [2013 (11) TMI 262 - ITAT JODHPUR] - As per the amendment vide the Finance Act, 2001 w.e.f. 01.04.2001 in section 10BA(4) - The profits derived from export of articles or thing means the amount which bears to the profits and gains of the business of the undertaking and not from any other business carried on by the assessee – Whereas prior to amendment the profits derived from export of articles was meant the amount which bore to the profits of the business, the same proportion as export turnover in respect of such articles bear to the total turnover of the business carried on by the assessee - By this amendment only the profits of the business of the unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 11% - Partly allowed in favour of assessee. Interest expense to be set off against interest receipts - Held that:- If the interest receipts are treated as "income from other sources", then the corresponding expenses shall also be allowed u/s 57 of the Act - The issue is remanded back to the file of the Assessing Officer to be decided after considering the explanation of the assessee that there was a nexus in the interest bearing funds and the advances from which interest is received. Whether purchases were genuine or not – Held that:- On account of the assessee having shown bogus purchases, the books of accounts had been rejected, and the matter was proceeded u/s 145 - The income is to be determined on the basis of best judgment assessment - The gross sales figure for the relevant year is not in controversy in the sense, that whatever bogus sales have been found by the A.O., if they were to be considered literally, they would have reduced the figure of sale, and there is no material or finding, or any indication, to show that the gross sale was shown by the assessee at any deflated figure - For making best judgment assessment the only relevant thing, required to be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act). 4. The facts related to this issue in brief are that the assessee filed its return of income on 26/9/2009 declaring NIL income after claiming deduction u/s 10BA of the Act for Rs. 29,13,843/- and tax has been paid under MAT u/s 115JB of the Act. Later on the case was selected for scrutiny. The Assessing Officer mentioned that the assessee company was incorporated on 14/12/2004 for manufacturing and export of handicrafts items of woods. One of the promoter directors of the assessee company Shri Rajendra Mehta was running a proprietorship concern under the name and style of M/s Lariya Art Palace and on 01/5/2005, the running business of the proprietorship concern was taken over by the assessee company alongwith all assets and liabilities w.e.f. 01/5/2005. Thus, in this case, the business shown by the assessee was already in existence in the name of proprietorship concern of Shri Rajendra Mehta, prior to succession by the assessee company on 30/04/2005 and plants machinery previously used by Shri Rajendra Mehta have also been transferred to the assessee company. Since one of the preliminary condition for claiming the deduction u/s 10BA of the Act is that the undertaking i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was engaged in the business of manufacturing and production of handmade articles using wood as main raw material and exported the items so manufactured/produced. It was further stated that I.T.A.T. Jodhpur Bench in I.T.A. No. 544/Ju/2009 in assessee's own case for the assessment year 2006-07 had considered this issue that whether the assessee company was formed by splitting up or reconstruction of an existing business or not. It was also stated that after detailed discussion, the I.T.A.T. Jodhpur Bench was pleased to decide the issue in favour of the assessee. Therefore, the assessee is eligible for deduction u/s 10BA of the Act. 7. Ld. CIT(A) after considering the submissions of the assessee, allowed the claim by observing that this issue had already been decided in assessee's own case for the assessment year 2006-07. Now the department is in appeal. 8. During the course of hearing, the learned D.R. supported the order of the Assessing Officer and reiterated the observations made in the assessment order dated 26/12/2011. 9. In his rival submissions, learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t business. 12. As regards to this issue, the learned counsel for the assessee at the very outset stated that this issue is squarely covered in favour of the assessee vide order dated 20/6/2013 in I.T.A. No. 37/Ju/2013 in the case of M/s Suraj Exports India, Churu Vs. The Income Tax Officer, Ward-2, Churu. Copy of which is placed at page No. 64 to 67 of the assessee's paper book. 13. In his rival submissions, the learned D.R. although supported the order of the Assessing Officer but could not controvert the aforesaid contention of the learned counsel for the assessee. 14. After considering the submissions of both the parties and the material available on record, it is noticed that the issue under consideration is squarely covered in favour of the assessee and against the revenue vide aforesaid referred to order dated 20/6/2013 in I.T.A. No. 37/Ju/2013 for the assessment year 2007-08 in the case M/s Suraj Exports India, Churu Vs. Income Tax Officer, ward-2, Churu wherein relevant finding has been given in para 3.3, which read as under:- "3.3 After considering the submissions of both the parties and the materials available on record, it is noticed that identical issue having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), (iiic), (iiid) and (iiie) etc. Duty Draw Back and any profit on transfer of DEPB. Section 28 itself makes it abundantly clear that the profit on account of Duty Draw Back or on transfer of DEPB will not form part of profit and gains of the business or profession which was carried on by the assessee as discussed above. The plain reading of Section 10BA which deals with export of certain articles or things will make it clear that 'such profits' as are derived from the export out of India shall be allowed from the total income of the assessee. Sub Section (1) of Section 10BA is subject to the provisions of S.Ss. 2, 3, 5, 6 and 7 but s.s. 4 lays down a method of computation for the purpose of sub section (1). Likewise, the sale proceeds of DEPB cannot be considered as part of turnover as it is not the sale proceeds of the articles or things manufactured and sold by the assessee, then the profits from sale of DEPB cannot apportioned on treated on profit derived by the undertaking from export out of India. The exemption provisions in 10BA have to be liberally interpreted unless the credit of DEPB and DDB is expressly taken away. 12. Accordingly, we are left with no option but to dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the case of M/s Sri Bhikshu Art's case, the G.P. rate declared, was 27.06%. The Assessing Officer estimated the G.P. rate @ 12% and made the addition. 17. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and reiterated the submissions made before the Assessing Officer and further submitted that the case referred by the Assessing Officer was not actually comparable with the assessee's case. 18. The Ld. CIT(A) after considering the submissions of the assessee, observed that the turnover of the assessee was adversely affected due to recession and the Assessing Officer also admitted this fact that the assessee turnover had gone down in comparison to the last year. He further observed that the reasons given by the assessee for increasing in cost of labour and raw material was conveniencing and the Assessing Officer had not given any comments on these points. The Ld. CIT(A) also pointed out that the turnover of the assessee was not comparable with the case of M/s Bhikshu Art. The Ld. CIT(A) was of the view that it would be justifiable and reasonable to apply G.P. rate of 11%. Now the department is in appeal against the relief allowed to the assessee while th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer was not convenienced and considered the interest received by the assessee amounting to Rs. 4,88,432/- as "income from other sources". Reliance was placed on the decision of the Hon'ble Madrass High Court in the case Pandian chemicals Ltd. reported in 254 ITR 562. 23. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted that the funds had been advanced from the various loans and credit facilities having interest burden and that there was one to one nexus and the funds had been advanced during the business cycle. The Ld. CIT(A), however, did not find merit in the above submissions of the assessee and confirmed the action of the Assessing Officer. Now the assessee had filed the cross objection. 24. Learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that if the interest receipts are treated as an "income from other sources", similar corresponding expenses shall also be allowed, to be set off against the said receipts. Reliance was placed on the following decisions of I.T.A.T. Jodhpur Benches: i. Shri Lal Chand Choudhary Vs. ACIT, Circle-1, Barmer in I.T.A. No. 191/JU/2012 order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... address, such person was not traceable and even many calls made, remained unresponded. He, therefore, sustained the addition made by the Assessing Officer. Now the assessee has filed the cross objection. 31. The learned counsel for the assessee reiterated the submissions made before the authorities below. It was further stated that the books of accounts were rejected in this case and G.P. rate was applied, therefore, the addition made by the Assessing Officer and sustained by the Ld. CIT(A) by considering the purchases as non-genuine was not justified. Reliance was placed on the judgment of the Hon'ble jurisdictional High Court in the case of CIT Vs. Shri Sindhujha Foods (P) Ltd. reported in 16 DTR 278 (Raj.) 32. In his rival submissions, the Learned D.R. supported the orders of the authorities below. 33. After considering the submissions of both the parties and the material on record, it is noticed that a similar issue has been decided by the Hon'ble jurisdictional High Court in the case of CIT Vs. Shri Sindhujha Foods (P) Ltd.,(supra), wherein it has been held as under:- "For the purpose of satisfying the question as formulated the counsel for the Revenue could not show a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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