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TMI Blog2015 (11) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... ort incentive in the instant case is received from the Government of India on account of provisions of Exim Policy while 'Export Premium' in the Baby Marine Exports (Supra) is received from the export house through which export is made. iii) The reliance is placed on the decisions of Hon'ble Supreme Court in the cases of (1) M/s Liberty India vs CIT SLP (C) No. 5827/07(SC) and (2) CIT vs Sterling Foods [1999] 237 ITR 579 (SC). In these cases, the issues related to various incentives received by Exports on account of different Government Schemes, for example, Import Entitlements, Duty Drawback and DEPB etc, have been duly dressed by Hon'ble Supreme Court which are squarely applicable to the instant case. iv) The receipt of 'Export Incentive' from the Government of India on account of purchase from DTA Seller is only an income incidental and 'attributable' to the business of assessee. This income does not qualify to be called an income 'derived from' business activity of the undertaking as there is not direct nexus between the two. v) Export inventive is not eligible for computing the allowable deduction u/s 10B of the Act. 2. On the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and suspension components of four wheelers. The company supplies to Maruti Udyog Ltd., Tata Motors, General Motors, Mahindra and Mahindra, Ashok Leyland etc. and also exports its products to foreign countries. The return of income for the assessment year 2007-08 was filed on 30th October, 2007, declaring loss of Rs. 70,59,169/-. After processing the said return of income under the provisions of Section 143(1) of the Income-tax Act, 1961 (for short "the Act") the case was selected for scrutiny assessment through CASS and the assessment was completed by the Asstt. Commissioner of Income Tax, Circle-2, Gurgaon, vide order dated 23rd December, 2010 passed under Section 143(3) of the Act at a total income of Rs. 6,86,14,355/-. While doing so, the learned Assessing Officer had denied the exemption under Section 10B on DEPB, thereby making addition of Rs. 6,87,75,719/-. The learned Assessing Officer further disallowed the interest of Rs. 3,90,000/- under Section 36(1)(iii) of the Act by holding that the assessee company invested a sum of Rs. 32,50,000/- in the subsidiary company, namely, Talbros Automotive Components Ltd. The Assessing Officer further made addition of Rs. 65,07,805/- on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Principle Commissioner of Income Tax Vs. Universal Precision Screws, ITA No. 392/2015, dated 06.10.2015 and CIT Vs. XLNC Fashions, ITA No. 438/2014, dated 01.09.2014 and CIT Vs. Hritnik Exports Pvt. Ltd., ITA No. 219 & 239 of 2014, dated 13th November, 2014 held that the business profit should be considered for the purpose of deduction under Section 10B of the Act. The Hon'ble Delhi High Court in the case of XLNC Fashions (supra) held as follows: "Deduction under Section 10B of the Income Tax Act, 1961 (Act, in short) is to be made as per the formula prescribed by Sub-Section (4), which reads as under: "10B. Special provision in respect of newly established hundred per cent exportoriented undertakings- ......... ........... ................. (4) For the purposes of sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking". Sub-section (4), therefore, is the special provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of articles or things or computer software "shall be the amount which bears to the profits of the business of the undertaking", the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.' As noted by this Court in CIT v. Hritnik Exports Pvt. Ltd. (decision dated 13th November, 2014 in ITA No.219 & 239 of 2014), Section 10B (4) mandates the application of the formula for determining the profits derived from exports for the purposes of Section 10B(1). In other words, the formula would read thus: Profits derived = profits of the business x export turnover from export of the undertaking total turnover 9A. In terms of the above formula, the question that would arise is whether the interest on the FDRs could form part of the 'profits of the business of the undertaking'. The attention of the Court has been drawn to the decision of the Karnataka High Court in CIT v. Motorola India Electronics Pvt. Ltd. (2014) 46 Taxmann.com 167 (Kar.) which held that there was a direct nexus between the interest received from the FDRs cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative and no further disallowance is called for. This ground of appeal filed by the Revenue is dismissed. 9. Ground no. 4 relates to the direction of the CIT(A) to verify the amount of deduction eligible under Section 10B of the Act. In our considered view, this direction is in consonance with the settled principle of law and therefore, no prejudice is caused to the Revenue on account of this direction. Hence, this ground of appeal is also dismissed. 10. The ground no. 5 is general in nature which does not require any adjudication. ITA No. 1320/Del/2013 for AY 2008-09: 11. Ground nos. 1, 2 and 3 are similar to the grounds of appeal raised in ITA No. 1321/Del/2012 for AY 2007-08. For the reasons mentioned in our order in ITA No. 1321/Del/2012 for AY 2007-08, the grounds of appeal raised by the Revenue are dismissed. 12. Ground no. 4 relates to the disallowance of Rs. 17,58,470/- under the provisions of Section 14A of the Act. During the previous relevant to the assessment year under consideration, the respondent assessee company received dividend of Rs. 4,92,706/- from IDBI Bank. It was the contention of the respondent assessee that no expenditure was incurred to earn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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