TMI Blog2015 (10) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... . The expression “total turnover” has not been defined at all by Parliament for the purposes of section 10A . However, the expression “export turnover” has been defined. The definition of “export turnover” excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression “export turnover” cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance do not have an element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary. - Decided in favour of assessee. Addition being the expenses incurred for increase in the share capital - Held that:- The issue is to be decided against the assessee in the light of the decision delivered by the Hon'ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k, that out of the said amount an interest of ₹ 1,86,53,590/- was received for the 10A unit and ₹ 1,27,51,545/- pertain to non-10A units. The AO was of the opinion that interest income was to be taxed under the head income from other sources .Vide his letter,dt.2.11.2007,the AO issued a show cause notice to the assessee in that regard. In its response the assessee stated that it had outstanding credit facility in the banks, that in terms of sanction letter it was required to place fixed deposits for cash margin,that the fixed deposits were kept under lien in terms of sanction letter,that the FDs had been placed due to business compulsion and not as investment of surplus funds,that the interest on the FD formed part of the business of the assessee,that it was part of export business,that it had claimed exemption u/s.10A in respect of income from SEEPZ, that the interest had to be considered as part of profit of the business of the undertaking for calculation of profit exempt u/s.10A in view of the specific provision of sub section 4. It was further stated that interest received on FD was to be netted against interest expenses. Alternatively,it was argued that if the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st received with the business carried out by it. 2.3. W e have heard the rival submissions and perused the material on record. We find that identical issue of netting off of interest had arisen in the case of Jewelmark India Pvt. Ltd. (supra) and the Tribunal had decided the issue as under: 4. We have heard Ld. AR as well as Ld. DR and considered the relevant matter on record. The first item of disallowance is regarding bank interest ₹ 1,02,022/. The Ld. AR of the assessee submitted that the interest earned had a direct nexus with the busmess of the assessee as the fixed deposit were kept under lien with bank for sanction of loans .alternatively the ld. AR of the assessee has submitted that only net receipt was to be disallowed keeping in view the decision of Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. CIT. We note that the CIT(A) has accepted the alternative plea of the assessee while deciding the issue on para 2.3 as under: I have examined the issue. As far as interest income is concerned, I find that this issue now stands covered in favour of revenue by decision of the Madras High Court in the case of Cornet International ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit allowed by the RBI. 3.2. B efore us,the AR stated that the assessee had unit in SEEPZ,that ex-post facto permission was granted by the RBI.She referred to the letter of RBI dt.15.6.2009.She relied upon the case of Wipro Ltd.(34DTR493)of the Bangalore Tribunal. The DR supported the order of the FAA. 3.3. W e find that the FAA had given specific direction about un realised the export sale proceeds. In our opinion,his order does not suffer from any legal infirmity. If the AO has not made verification till date,he should verify as to whether the sale proceeds were realised by the assessee within the stipulated time or not. Ground no.2 is allowed for statistical purposes. 4. Next Ground of appeal is about not reducing freight on export,amounting to ₹ 23,94,037/- from total turnover for calculating deduction u/s.10A of the Act. During the assessment proceedings,the AO found that the assessee had not reduced the freight and insurance relatable to exports of 10A units from CIF value, that the export turnover was not taken at FOB value of export. He asked the assessee to explain as to why the FOB value should not be treated as export turnover. After considering the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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