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2015 (11) TMI 737 - ITAT DELHI

2015 (11) TMI 737 - ITAT DELHI - TMI - Eligibility for deduction u/s 10B - whether DEPB benefits are eligible for deduction under Section 10B? - Held that:- The export benefits of DEPB interest should be considered for the purposes of deduction under Section 10B of the Act. Therefore we direct the Assessing Officer to consider the export benefits for the purpose of deduction under Section 10B of the Act. See Principle Commissioner of Income Tax Vs. Universal Precision Screws [2015 (10) TMI 951 - .....

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5,57,04,538/- . The aggregate share capital are more than the investments made in the subsidiary company and it should be presumed that the investments are made out of the interest free funds and therefore, this ground of appeal filed by the Revenue is also dismissed. See Munjal Sales Corporation Vs. Commissioner of Income Tax [2008 (2) TMI 19 - Supreme Court] - Decided in favour of assessee.

Disallowance on the ground that the interest incurred till the date of assets put to use shou .....

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of the respondent assessee that no expenditure was incurred to earn the dividend income - Held that:- The Assessing Officer without giving any reason as to how he is not satisfied with the correctness of the claim of the respondent assessee company had proceeded with the disallowance. The Hon’ble Delhi High Court in the case of Maxopp Investment Ltd. Vs. CIT [2011 (11) TMI 267 - Delhi High Court] held that no such disallowance was permissible without recording the reasons as to how the claim is .....

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and 20.12.2012 passed for the assessment years 2007-08 and 2008-09 respectively. The Revenue raised the following grounds of appeal in ITA No. 1321/Del/2012: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the disallowance of ₹ 1,57,09,203/-which is not eligible for deduction u/s 10B of the Income Tax Act, 1961 in view of the following facts:- i) The facts and circumstances of the instant case are different and distinguishable .....

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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 Sel .....

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/- on the investment made for non business purpose. The reliance is placed on the decision of Hon'ble jurisdictional Punjab & Haryana High Court in the case of Abhishek Industries (286 ITR 1) held that "the entire money in a business entity comes in a common kitty. The monies received as share capital, as term loans, as working capital loan, as sale proceeds etc., do not have any different colour of business receipts and have no separate identification. Sources have no concern whats .....

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uisition of asset, unless asset is acquired and put to use, deduction for the interest cannot be claimed. Allowing any such deduction will be contrary to the proviso to section 36(1)(iii) of the Income Tax Act, 1961 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in directing the AO to recomputed the book profit u/s 115JB of the Act after allowing deduction of eligible profits u/s 10B of the Act. As the clerical error stands already rectified vi .....

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f appeal. ITA No. 1321/Del/2012 for AY 2007-08 2. The brief facts of the case are that the respondent assessee company is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing and distribution of steering 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 .....

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4,355/-. While doing so, the learned Assessing Officer had denied the exemption under Section 10B on DEPB, thereby making addition of ₹ 6,87,75,719/-. The learned Assessing Officer further disallowed the interest of ₹ 3,90,000/- under Section 36(1)(iii) of the Act by holding that the assessee company invested a sum of ₹ 32,50,000/- in the subsidiary company, namely, Talbros Automotive Components Ltd. The Assessing Officer further made addition of ₹ 65,07,805/- on the grou .....

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eligible for deduction under Section 10B of the Act. In support of this contention, he relied upon the following decisions of Hon ble Supreme Court: i. M/s Liberty India Vs. CIT, SLP (C) No. 5827/07 (SC) ii. CIT Vs. Sterling Foods [1999], 237 ITR 579 (SC) Therefore, he submitted that the CIT(A) was not justified in granting the relief. In respect of the disallowance of ₹ 3,90,000/-, he submitted that the ratio laid down by the Hon ble Punjab & Haryana High Court in the case of Abhishek .....

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any interference. In respect of the disallowance of interest on investments made to the sister concern, the learned Authorized Representative submitted that no interest expenditure was incurred since no borrowed funds were invested in the sister concern and therefore no disallowance is called for. In respect of the addition of interest in terms of proviso to section 23(1)(iii), it was submitted by the assessee on its own made disallowance of interest up to date on which the excess were put to u .....

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015 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 rea .....

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urnover of the business carried on by the undertaking . Sub-section (4), therefore, is the special provision which enables the assessee to compute the profits derived from the export of articles or things or computer software. We do not see any conflict between Sub- section (1) and Sub-section (4) to Section 10B, as Sub-section (1) states that deduction of such profits and gains as are derived by a hundred percent export-oriented undertaking from the export of articles or things or software woul .....

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s per the formula stipulated in Sub-Section (4), otherwise Sub-section (4) would become otiose and irrelevant. The issue in question in this appeal which pertains to the Assessment Year 2009-10, relates to duty draw back in the form of DEPB benefits. As per Section 28, clause (iii-c), any duty of customs or excise repaid or repayable as drawback to a person against exports under Customs and Central Excise Duties Draw Back Rules, 1971 is deemed to be profits and gains of business or profession. T .....

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alify for deduction/exemption. The position is somewhat akin or close to Section 80HHC of the Act, which also prescribes a formula for computation of deduction in respect of exports. Further, in the case of Principal Commissioner of Income Tax Vs. Universal Precision Screws (supra) the Hon ble Delhi High Court held as follows: 9. On the question of interest on the FDRs, the ITAT has referred to Section 10B (4) which states that for the purposes of Section 10B (1), the profits derived from export .....

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ining 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 .....

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formula. 6. Thus, the Hon ble High Court has categorically held that the export benefits of DEPB interest should be considered for the purposes of deduction under Section 10B of the Act. Respectfully following the ratio laid down in the above cases, we direct the Assessing Officer to consider the export benefits for the purpose of deduction under Section 10B of the Act. Therefore, the reasoning of CIT(A) while allowing these grounds of appeal is upheld. Hence, the ground of appeal file the Reve .....

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ax, Civil Appeal Nos. 1378 to 1382 of 2008, dated 19th February, 2008 (2008-TIOL-26-SC-IT). We find that the ratio of Hon ble Supreme Court in the said decision is squarely applicable to the facts and circumstances in the present case as the aggregate share capital and free reserve was stood at ₹ 15,57,04,538/- . The aggregate share capital are more than the investments made in the subsidiary company and it should be presumed that the investments are made out of the interest free funds and .....

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