TMI Blog2015 (2) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ‘total turnover’ and it should be excluded from the ‘domestic turnover’ as was done by the AO. - Decided against assessee. Treatment of scrap sale as domestic sale while computing deduction u/s 10B - Held that:- This issue is no more res integra in view of the judgment of the Hon’ble Supreme Court in the case of CIT vs. Punjab Stainless Steel Industries (2014 (5) TMI 238 - SUPREME COURT) in which it has been held that the sale of scrap is not includible in the ‘total turnover.’ As the assessee in question is engaged in the business of manufacturing and export of fasteners, the amount of sale of scrap cannot be included in the ‘total turnover’ or ‘domestic turnover’. Rather, it would go to reduce the cost of production. -- Decided against revenue. Treatment of interest income as ineligible for deduction u/s 10B - Held that:- Interest income having close nexus with the business activity of the assessee is assessable as income from business and, hence, eligible for the benefit u/s 10A and section 10B. Thus we hold that the assessee is entitled to deduction u/s10B of the Act in respect of the interest income earned on FDRs made for the purposes of keeping margin money or for av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the second aspect about the non-availability of bills, we find two invoices for ₹ 66,000/- and ₹ 20,400/- in respect of 110 pieces of pressure cookers and 120 pieces of gift bags,thus find no reason to make or sustain any disallowance in this regard. - Decided in favour of assessee. Ad hoc disallowance of expenses @ 10% on account of personal nature - Held that:- No reason to disturb the finding of the authorities below in making and sustaining the disallowance @ 10% of these expenses towards personal use. This disallowance, being reasonable, is upheld.- Decided in favour of revenue. Disallowance towards payment of contribution to ESI - late deposits - Held that:- here is no doubt on the fact that the employees’ share of ESI relating to the month of June, 2008 was deposited within the year though beyond the due date under the respective Act. The Hon’ble jurisdictional High Court in CIT vs. Aimil Ltd. & Others, 321 ITR 508 (Del), has held that if the employees’ share of contribution is paid before the due date of filing the return u/s 139(1) of the Act, then, no disallowance can be made. Disallowance deleted.- Decided in favour of assessee. - ITA No. 2034/De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort turnover under section 10B is no different from that u/ss 10A or 80HHC of the Act, the meaning ascribed to export turnover in such decisions will apply with full vigour in the context of section 10B as well. We, therefore, hold that such foreign exchange fluctuation difference has to be considered as part of export turnover . As the instant foreign exchange fluctuation difference forms part of the export turnover, the total turnover, in the denominator will also include the effect of foreign exchange fluctuation difference. We, therefore, sum up by holding that the amount of foreign exchange fluctuation difference should be included in the export turnover and total turnover and it should be excluded from the domestic turnover as was done by the AO. 4. The second issue taken up by the assessee is against the treatment of scrap sale as domestic sale. The AO, while computing deduction u/s 10B, considered scrap sale amounting to ₹ 31,84,869/- as part of domestic turnover. The ld. CIT(A) approved the view taken by the AO on this point. 5. After considering the rival submissions and perusing the relevant material on record, we find that this issue is no more res i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as the export turnover in respect of such articles or things, etc., bears to the total turnover of the business carried on by the undertaking. A bare perusal of sub-section (4) in juxtaposition to sub-section (1) of section 10B transpires that the expression derived by used in sub-section (1) cannot be construed in its literal sense to mean encompassing only such items of income which have direct or immediate nexus with the eligible undertaking. The meaning given to this expression in sub-section (4) as referring to the profits of the business makes the expression more liberal to cover any income which is connected with the business and should not be necessarily derived from the industrial undertaking alone. Turning to the nature of present interest income, being arising from FDRs obtained for margin money for the purposes of availing credit limits from banks, it becomes vivid that such interest bears the requisite characteristics of a business income. The Mumbai Bench of the Tribunal in Livingstones Jewellery (P) Ltd. Vs. DCIT (2009) 31 SOT 323 (Mum) has held that interest derived by an exporter from fixed deposits made with the bank for obtaining credit limits is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction u/s 24(b) of the Act. The view point of the assessee to this extent is ergo accepted in principle. However, we are unable to calculate such amount of interest with precision. Under such circumstances, the impugned order is set aside on this score and the matter is sent back to the AO for verifying and ascertaining the amount of loan utilized for the building in respect of which rental income assessable under the head Income from house property was earned and, accordingly, allowing deduction towards such interest u/s 24(b) of the Act. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such determination. 11. The next ground is against the ad hoc disallowance of ₹ 1 lac. The assessee claimed deduction of ₹ 5.47 lac for Training, ₹ 3.67 lac for Miscellaneous expenses; ₹ 1.62 lac for Short/excess and ₹ 5.59 lac for Garden maintenance. In the absence of the assesee producing sufficient external details except for internal vouchers, the AO disallowed a sum of ₹ 1 lac on ad hoc basis. The ld. CIT(A) upheld the impugned order on this score. 12. After considering the rival submissions and perusing the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenses towards personal use. This disallowance, being reasonable, is upheld. 17. The last ground is against the confirmation of disallowance of ₹ 1,111/- towards payment of contribution to ESI. The assessee late deposited the employees share of ESI for the month of June, 2008. Considering the provision of section 43B read with section 2(24)(x) and 36(i)(va), the AO made the disallowance, which was upheld in the first appeal. 18. We have heard both the sides on this point and perused the relevant material on record. There is no doubt on the fact that the employees share of ESI relating to the month of June, 2008 was deposited within the year though beyond the due date under the respective Act. The Hon ble jurisdictional High Court in CIT vs. Aimil Ltd. Others, 321 ITR 508 (Del), has held that if the employees share of contribution is paid before the due date of filing the return u/s 139(1) of the Act, then, no disallowance can be made. In view of the foregoing decision, which is squarely applicable to the facts of the instant case, we hold that the assessee deserves and is hereby allowed relief on this issue. This ground is allowed. 19. In the result, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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