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TMI Blog2015 (12) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-04 and u/s 80IC from assessment year 2004-05 to 2008- 09 and from this assessment year i.e. 2009-10 the assessee started claiming deduction u/s 10B. 2. The Ld. CIT(A) has erred in law and on the facts in making his own interpretation of provisions of section 80IC(5) vis-à-vis Section 10B, completely ignoring that in the case of Addl. CIT Vs Surat Art Silk Cloth Manufacture's Association (1980 2SSC 31) the Apex Court has observed that if the language of a statutory provision is ambiguous and capable of two constructions that construction must be adopted which will give meaning and effect to other provisions of the enactment rather than that which will give none and in this case there is no ambiguity at all in the language of Section 10B, which Section was enacted to give special benefit only to exclusively those undertakings which are newly established and 100% export oriented undertaking, while the assessee firm is not a newly established undertaking. 3. The Ld. CIT(A) has erred in law in not following the golden rule of Litera Scripta for interpretation of statutes and has erred in law in making his own interpretation of provision of section 10B. 4. The Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n advance of Rs. 2,72,43,107/- was rightly added to the income of the assessee by the AO. 11. That the order of the Ld. CIT(A) being erroneous in law and on facts be set aside and that of AO be restored." 3. The main grievance of the department in this appeal vide Ground Nos. 1 to 7 relates to the deduction u/s 10B of the Income Tax Act, 1961 (hereinafter referred to as the Act) directed to be allowed by the ld. CIT(A). 4. Facts of the case related to this issue in brief are that the assessee filed the return of income through e-filing on 23.09.2009 declaring Nil income. Later on, the case was selected for scrutiny. The AO during the course of assessment proceedings noticed that the Trading results for the year under consideration were better as compared to the preceding year and that the assessee furnished report in Form No. 10CCB in respect of deduction as per the provisions of Section 80IC of the Act and also enclosed Form No. 3CEB read with Rule 10E along with Form No. 56G read with Rule 16A for claiming the deduction u/s 10B of the Act. The AO also mentioned that the assessee stated in the Notes to the statement of income that the exemption u/s 10B of the Act was claimed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee carried the matter to the ld. CIT(A) and submitted as under: "1.0 Claim u/s 10B of the Income Tax Act 1.1 Assessee fulfills all the essential conditions to claim deduction u/s 10B of the Income Tax Act which are as follows:- (1) The undertaking should be approved 100% export oriented undertaking. It must be approved as 100% EOU by the Board appointed by the Central Government in this behalf. (2) It manufactures or produces any article or things or computer software. (3) It should not be formed by splitting up or reconstruction of an existing business. (4) It should not be formed by transfer of machinery or plant, previously used for any purpose, to a new business. (5) The sale proceeds of articles or things or computer software exported out of India should be received in, or brought into, India by the assessee in convertible foreign Exchange, within a period of six months from the end of the previous year or, within such further period RBI may allow in this behalf. (6) Assessee furnished report of the accountant under s. 10B (5) in form 56G. (7) The circular 01/2005 (Tax holiday to 100 percent export oriented undertaking) & Instruction no. 02/2009 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80IC of the Act. 1.5 Assessee is claiming exemption u/s 10B of the Income Tax Act under Chapter-III as the assessee firm is a 100% Export Oriented Undertaking which no where talks about the earnings in Indian rupee only criteria is that it should be 100% export oriented unit and must be earning foreign exchange. Further it will not be out of place to mention that Section 10B is different from the sections under Chapter-VIA. Section 80AB in Chapter-VIA would have no application even in the extended sense rightly or wrongly for section 10B under Chapter-III, so that there could have been no restrictions of relief with reference to section 80AB. It is fairly well settled that on construing a beneficial enactment and it serves its purpose must be preferred to one which obstructs the objects and paralyses the purpose of the beneficial enactment. It is too well known a principle of construction of statues that the Legislature engrafted every part of the statute for a purpose. The legislative intention is that every part of the stature should be given effect. The Legislature is deemed not to waste its words or to say anything in vain and a construction which .......redundancy to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess" eligible for deduction under Section 10B of the Act. Once an income forms part of the business income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction under section 10B of the Act. As per the computation made by the AO himself, there is no dispute that both these incomes have been treated by the AO as business income. The CBDT Circular No. 564, dt. 5th July, 1990 reported in (1990) 85 CTR (St) 53: (1990) 184 ITR (St) 37 explained the scope and ambit of s. 80HHC and the mode of determination of profits derived by an assessee from the export of goods. Tribunal, Special Bench in the case of International Research Park Laboratories Ltd. Vs Asstt. CIT (supra), after following the aforesaid circular, held that straightjacket formula given in sub-s. (3) has to be followed to determine the eligible deduction. The Hon'ble Supreme Court in the case of P.R. Prabhakar Vs CIT (2006) 204 CTR (SC) 27 : (2006) 284 ITR 548 (SC) had approved the principle laid down in the Special Bench decision in International Research Park Laboratories Vs CIT (supra). In the assessee's own case the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dural formalities for claiming relief u/s 10B were fulfilled for the year under consideration, therefore, the assessee was eligible for relief u/s 10B of the Act. As regards to denying the benefit of relief u/s 10B of the Act to the "Export Incentives" and "other income" on the ground that such receipts were not derived from the eligible business, the ld. CIT(A) confirmed the action of the AO. 7. Now the department is in appeal. The ld. DR strongly supported the order of the AO and further submitted that the deduction u/s 10B of the Act is allowed to an export oriented undertaking in respect of such profits and gains as are derived by it from the export of articles or things for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be and that there are also certain procedural conditions attached to the deduction. It was further stated that the assessee firm was constituted in 1950s and claimed to be involved in the business of producing articles of handicrafts ever since and the nature of the business had remaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment Commissioner, Noida, Special Economic Zone, Greater Noida and the permission was granted vide letter dated 21.06.2007 by the concerned authority (a reference was made to page nos. 16 & 17 of the assessee's paper book). It was emphasized that the status of the assessee as an EOU is still continuing, therefore, the assessee was eligible for deduction u/s 10B of the Act and the AO was not justified in rejecting the claim of the assessee which the ld. CIT(A) has allowed since the assessee fulfilled all the conditions to claim the deduction u/s 10B of the Act. It was further submitted that in the subsequent year i.e. assessment year 2011-12 also the deduction u/s 10B of the Act was allowed. Therefore, the AO was not justified in rejecting the claim of the assessee and the ld. CIT(A) rightly allowed the same. 9. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the deduction u/s 10B of the Act is available to an industrial undertaking which is an approved 100% export oriented undertaking by the Board appointed by Central Government of India and it manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under any other section of Chapter-VIA or Section 10A or 10B of the Act, particularly when the AO had nowhere stated that the assessee had not fulfilled the conditions necessary for claiming the deduction u/s 10B of the Act, he only disallowed the claim of the assessee by relying upon the provisions of Section 80IC(5) of the Act which are not applicable for this year as the assessee did not claim deduction u/s 80IC of the Act. We, therefore, do not see any valid ground to interfere with the findings given by the ld. CIT(A) on this issue. 10. The next issue vide Ground No. 8 relates to the deletion of addition of Rs. 2,14,669/- made by the AO by disallowing the interest on unsecured loan advanced to others by observing that it was on higher rate of interest. 11. Facts related to this issue in brief are that the AO restricted the rate of interest allowed on unsecured loan at 8% instead of 15% claimed by the assessee and made the disallowance of Rs. 2,14,669/- by observing as under: "Further since no interest has been charged from Shri Pradeep Windlass and further rate of interest charged by the Bank is quite low as such there is no justification for debiting interest at the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of Mr. Pradeep Kumar Windlass in the books of account of M/s Windlass Steel Crafts for the year ending 31.03.2009 is enclosed. Mr. Pradeep Kumar Windlass had a deposit in the firm from 2001 the balances were as under: Financial Year Balance debit as on 31.03.... Balance credit as on 31.03.... 31.03.2000 31.03.2001 65,07,130 31.03.2002 82,24,075 31.03.2003 79,72,424 31.03.2004 1,35,58,837 31.03.2005 86,82,805 31.03.2006 26,73,892 31.03.2007 2,26,131 31.03.2008 1,05,57,380 31.03.2009 2,72,43,107 During the period of deposit with the firm Mr. Pradeep Windlass was not paid any interest similarly no interest has been charged from him on the withdrawals. Major withdrawals have been made by him for construction of House at 53 R Rajpur Road, Dehradun. Hence no adverse inference can be drawn from the debit balance of Mr. Pradeep Windlass in the books of accounts of the firm..........." 17. The AO did not find merit in the submissions of the assessee and made the addition of Rs. 21,79,448/- by observing in para 11 of the assessment order dated 08.12.2011 as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified u/s 40A(2)(b) of the Act as per notation at point number 18 in the Audit Report in Form 3CD (copy of this has been filed during appellate proceedings) in lieu of deposits standing in their names. In the interest of parity and fairness this amount of Rs. 21,79,448/- since this outgoing would not be justifiable on deposits made by relatives when no interest is charged on advances made to family members. The Appellant thus gets relief of Rs. 17,79,442/- (Rs. 21,79,448 - Rs. 4,00,006/- = Rs. 17,79,442/-) on this count." 19. Now the department is in appeal. The ld. DR reiterated the observation made by the AO and strongly supported the assessment order dated 28.12.2011. 20. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order passed by the ld. CIT(A). 21. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the ld. CIT(A) has given a categorical finding that in all the earlier years Shri Pradeep Windlass was having the credit balance and no interest was paid to him. The ld. CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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