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2015 (10) TMI 410 - ITAT MUMBAI

2015 (10) TMI 410 - ITAT MUMBAI - TMI - Interest income and entitlement of benefit u/s. 10A - Held that:- It is clear from the finding of CIT(A) that the AO was directed to consider the netting of expenses in view of the decisions of Hon'ble Supreme Court in the case of ACG Associated Capsules vs. CIT (2012 (2) TMI 101 - SUPREME COURT OF INDIA)

Adjustments to be made for calculating deduction us/ 10A - Held that:- We find that the FAA had given specific direction about un realised the .....

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er 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 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 i .....

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wo 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 Supreme Court in the case of Broke Bond India (1997 (2) TMI 11 - SUPREME Court ). Decided against the assessee - ITA No.6551/Mum/2008 - .....

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t as margin money with banks for availing export credit facilities for units claiming deduction u/s. 10A as income from other sources and not allowing the netting thereof against interest payment to banks on aforementioned export credit facilities, for claiming deduction u/s. 10A. 3. The learned Assessing Officer has erred in making adjustment while calculating deduction u/s.10A by reducing eligible export by ₹ 843,81 ,935/being export not received within prescribed time limit. The learned .....

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y,engaged in manufacturing export and trading of diamond studded gold jewellery etc.,filed return of income on 31.10.05,declaring total income of ₹ 91,07,772/-. The Assessing Officer(AO)completed the assessment on 27.12.2007u/s.143(3) of the Act determining the income of the assesse at ₹ 4,06,13,520/-. 2. First ground of appeal is about treatment to be given to the interest income and entitlement of benefit u/s. 10A of the Act. During the assessment proceedings,the AO found that the .....

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ssued 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 exp .....

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made for placement of such deposits had to be allowed and had to be reduced from such receipts. After considering the submission of the assessee the AO held that it had received the interest from the banks against the deposit made, that the immediate source of income was from bank and not the business carried out by it,that receipt of interest would not automatically establish that the interest income is derived from the industrial undertaking, that interest had to be treated from other sources. .....

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ther sources , that the interest of ₹ 1.86 was not eligible for exemption u/s. 10A of the Act. 2.1. Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority(FAA)and made the identical submissions that were made in the earlierAY.s.Referring to the order of his predecessors,the FAA did not allow the assessee s claim of treatment of interest received for computing deduction u/s.10A of the Act. The FAA relied upon the cases of Pandian Chemicals Ltd .....

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only for netting of interest.She referred to pg-12 of the appeal paper filed before the FAA and relied upon the cases of Motorola(265CTR 94)and Jewelmark India Pvt. Ltd.(ITA/ 5036/Mum/2012 AY.2007-08, dated 21.03.2014)The DR stated that the assessee had failed to prove the direct nexus of the interest received with the business carried out by it. 2.3. We 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 .....

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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 304 ITR 322, wher .....

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Supreme Court in the case of ACG Associated Capsules P. Ltd. cited supra, and allow interest income having direct nexus with the interest income . 5. It is clear from the finding of CIT(A) that the AO was directed to consider the netting of expenses in view of the decisions of Hon'ble Supreme Court in the case of ACG Associated Capsules vs. CIT (supra), hence no grievance is left against the order of the CIT(A). Respectfully,following the above,we decide first ground of appeal in favour of .....

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treated the amount in question as a part of export turn over and had claimed deduction u/s.10A of the Act.Referring to the sec.10A(3),the AO held that provision of the said section were applicable only if the sale proceeds for export outside India were received within a period of six month from the end of FY.or within such further period extended by RBI, that the assessee had not produced any proof of realisation/extension granted by the RBI,that the deduction claimed by it on unrealized export .....

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I.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. We 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 .....

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as export turnover. After considering the submission of the assessee the AO reduced the freight amount of ₹ 23.94 lacs from the export turn over for computing deduction u/s.10A. 4.1. In the appellate proceedings the FAA followed the order of his predecessor for AY 2003-04 and dismissed the appeal filed by the assessee . 4.2. Before us,the AR stated that issue stands decided in favour of the assessee by the judgment of the Hon ble Bombay High Court,delivered in asssessee s own case(330ITR17 .....

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the previous year in which the undertaking begins manufacture or production. Subsection (4) of section 10A provides the manner in which the profits derived from the export of articles or things or computer software shall be computed. Under subsection (4) the proportion between the export turnover in respect of the articles or things, or, as the case may be, computer software exported, to the total turnover of the business carried over by the undertaking is applied to the profits of the business .....

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