TMI Blog2013 (1) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... e from fish and is undertaking exports. For the year under consideration, i.e. assessment year 2003-04, assessee filed a return of income at ₹ 2,07,90,920/-. In the return of income, assessee had claimed deduction under section 10B of the Act at ₹ 17,38,53,807/-. In the assessment proceedings, Assessing Officer noted that assessee had included a sum of ₹ 73,45,624/- representing interest on short term deposits with Bank, for the purposes of computing deduction under section 10B of the Act. On being asked to show cause as to why the deduction should not be denied on such income as the same was not derived from the export of sea food, the assessee contended that the surplus funds of the undertaking were temporarily parked in short term deposits with the Bank and the same were kept ready for meeting the business requirements. It was pointed out that the only business of the assessee was export of products manufactured by the EOU and, therefore, the entire profits and gains of the business of the EOU constituted income of the undertaking from export of articles or things. The assessee also referred to the provisions of section 80HHC of the Act, which also prescribed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee before the Commissioner of Income-tax (Appeals) that in section 80HHC, specific exclusions have been mentioned from total turnover and profits of the business and, in the absence of such specific exclusion in section 10B, it should be construed that this section does not warrant any such exclusion. Alternatively, it was argued that interest paid by the undertaking on working capital loans be set off and only net interest income be brought to tax. The Commissioner of Income-tax (Appeals) upheld the stand of the Assessing Officer that the interest income is not eligible for deduction under section 10B of the Act. However, he allowed the alternative plea of the assessee, that interest paid of ₹ 41,37,306/- is to be reduced from the total interest income of ₹ 76,23,795/- and only the balance of ₹ 34,86,489/- is liable to be excluded for the purpose of computing deduction under section 10B of the Act. Not being satisfied with the order of the Commissioner of Income-tax (Appeals), assessee is in further appeal before us. 5. Before us, the learned Counsel for the assessee submitted that the lower authorities have erred in holding that interest income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il in the present case also. 7. We have considered the rival submissions carefully. In this case, undisputably the appellant is an individual who is running a 100% EOU, engaged in export of Sea food; and, claimed deduction under section 10B of the Act in relation to the profits and gains of the EOU. In principle, assessee has been held eligible for claim of deduction under section 10B of the Act. However, with respect to the interest on short term deposits with Banks, assessee has been held ineligible for claim of the deduction under section 10B of the Act primarily for the reason that such income is assessable as income from other sources ; and, such income is not derived from the business of export of Sea food. 8. Section 10B of the Act, as it stood for the assessment year under consideration, provided for deduction of such profit and gains as are derived by 100% EOU from the export of article or things. Sub-section 4 of section 10B prescribes that the profits derived from export of article or things shall be the amount which bears to the profit of the undertaking, the same proportion as the export turnover bears to the total turnover of the business carried on by the unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest earned on deposits held in EEFC account and inter-corporate loans advanced by the assessee to its sister concerns. Such income was held assessable as business income and eligible for claim of deduction under sections 10A/10B of the Act. In coming to such conclusion, the bench has specifically noted the relevant provisions of section 10B, as it stood for assessment year 2003-04. Following discussion by the Tribunal in the Head Note is worthy of notice: Coming to the assessment year 2001-02, the Act has undergone a change. Sec. 10B has undergone a change. Earlier, it was an exemption section and income from these undertakings which are covered by this section did not form part of total income. From this particular year, though the section appears in Chapter III, which classifies incomes which do not form part of total income, a deduction from business income from the undertaking is granted by including the special provision. Another important feature in sub-s.(4) of sec. 10B is that the methodology of arriving at the export profits of the business of the undertaking is given in a formula, as in the case of section 80HHC. The terminology used in sub-s. (4) of sec. 10B is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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