Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (1) TMI 397 - ITAT DELHI

2016 (1) TMI 397 - ITAT DELHI - TMI - Deduction u/s 80IC - Bank Interest - CIT(A) deleted the addition - Held that:- The assessee has to import raw materials for which it has to open letters of credit(LC). The LC is an integral part of the business activity carried on by the assessee. Since pledging of FDR is necessary for drawing LC, the FDR is also an integral part of the business. The ld.CIT(A) at para 1.4 of his order observes that such FDís had to be made before the raw material could be im .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f business which was eligible for deduction u/s 80IC. The ld. CIT(A) observed that the provision for expenses had been made for AY 2007-08 and when the same was not required it was credited back in A.Y. 2008-09 and that such amount has been treated as part of the business income in accordance with provision of section 41 of the I.T. Act. It has been observed by the ld. CIT(A) that the provision has been made in respect of business expenditure and there is no reason why the same should be treated .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the purchase has the effect of reducing or enhancing the profit of business. The ld.CIT(A) held that such fluctuation is an essential and inextricable function of the business and the gain in question cannot be segregated from the profits derived from the business.We therefore uphold the action of the ld.CIT(A) in deleting the addition made by the ld. Assessing Officer in respect of foreign exchange fluctuation.

In the light of the decision of Mepco Industries Ltd.(2009 (11) TMI 2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on of the Ld.CIT(A) in deleting the addition made by the ld.AO in respect of Bank Interest, Miscellaneous expenses and Foreign exchange fluctuation gain, do not suffer from any infirmity, legal or factual and can be said to have a direct nexes with the business activity carried on by the assessee.

Bank guarantee - Held that:- The bank guarantee is a part of the purchase process, and the income arising there from, has to be said to have been derived from the assesseeís business. We, th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rising out of the order passed by the CIT(A) s-1, Dehradun dated 11/10/2011 for A.Y. 2008-09. 2. Brief facts of the case as recorded by the ld.AO are that the assessee filed its e-return on 30/09/2008 declaring NIL income. The case was selected for scrutiny. The assessee is engaged in the manufacture of pre-engineered building and has manufacturing facility located at plot no. 2, sector-11, IIE, Sidcul, Hardwar. In the return filed by the assessee it had claimed a deduction u/s 80IC of the Act a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

k amounting to ₹ 51,14,800/-. iii) Gain on account of foreign exchange fluctuation amounting to ₹ 61,29,796/-. 3. The ld.AO made addition of the respective amount as not being eligible to be included for calculating the claim of deduction u/s 80IA of the Act. 4. Aggrieved by the order of the ld.AO, the assessee went into appeal before the ld. CIT(A) I. 5. The ld. CIT(A) after going through the arguments of the assessee observed that the interest on FDs given as security for LC s, is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d. CIT(A), therefore, deleted the addition made in respect of the provision written off. In respect of foreign exchange gain on account of exchange fluctuation rate between the date of receipt of the imported material and the date of payment for the same. The ld. CIT(A) observed that exchange fluctuation is a part and parcel of international monitory system. As a result, there can be gain or loss in terms of the local currency, even though the value of the transaction in terms of the currency in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o. 923/Del/2012. The grounds of appeal filed by the Revenue are as under: 1. The ld. CIT(A) has erred in law and on facts in allowing claim of deduction u/s 80IC on income from interest, miscellaneous income and income from foreign exchange fluctuation in spite of clear cut finding given in the assessment order that these were not derived by the assessee from the manufacturing activity of the eligible business. 2. The ld. CIT(A) has erred in law and on facts by upholding the submission of the as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that income qualifying for deduction under this section should be derived from business of manufacture or production of article or thing which is eligible for deduction. The expression derived from in taxation loss means something which has direct or immediate nexus with the specified activity which in the present case means manufacture and sale of pre-engineered buildings. The expression derived from is a narrower expression, then the words attributable to , which includes direct as well as in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

neous income and income from foreign exchange fluctuation. Bank Interest: He ld.CIT(A) has observed that the assessee has to import raw materials for which it has to open letters of credit. Ld. CIT(A) in his order summarizes submissions of the assessee as under; The assessee has to import raw materials for which it has to open letters of credit(LC). The LC is an integral part of the business activity carried on by the assessee. Since pledging of FDR is necessary for drawing LC, the FDR is also a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the past and credited back in the accounts during the previous year as it was not required any longer was shown as miscellaneous income by the assessee. Ld. CIT(A) in his order summarizes submissions of the assessee as under; In the course of carrying out business operation of the assessee that the assessee had debited this miscellaneous income to the P&L Account and claimed as business expenditure while computing the profits of business which was eligible for deduction u/s 80IC. The ld. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch liability is returned back as the same is not required anymore. We, do not find any infirmity with the findings of the ld.CIT(A). We therefore uphold the action of the ld.CIT(A) in deleting the addition in respect of the miscellaneous income. Foreign Exchange Gain: The assessee recorded a foreign exchange fluctuation gain on account of exchange fluctuation. Ld. CIT(A) in his order summarizes submissions of the assessee as under; In the course of carrying out business operation of the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hancing the profit of business. The ld.CIT(A) held that such fluctuation is an essential and inextricable function of the business and the gain in question cannot be segregated from the profits derived from the business. We, do not find any infirmity with the findings of the ld.CIT(A). We therefore uphold the action of the ld.CIT(A) in deleting the addition made by the ld. Assessing Officer in respect of foreign exchange fluctuation. Ground no. 2: 12. Hon ble Supreme Court in the case of Liberty .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

m" are narrower in connotation as compared to the words "attributable to". In other words, by using the expression "derived from", Parliament intended to cover sources not beyond the first degree. 13. Hon ble Supreme Court in a subsequent decision, in the case of Mepco Industries Ltd., Vs. CIT reported in (2009) 319 ITR 208, held that the nature of a subsidy in each case, is separate and distinct and, therefore, the nature of subsidy has to be examined in each case indep .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

3 was on its own facts ; so also, the judgment of this court in Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392 (SC). The nature of the subsidies in each of the three cases is separate and distinct. There is no strait jacket principle of distinguishing a capital receipt from a revenue receipt. It depends upon the circumstances of each case. As stated above, in Sahney Steel and Press Works Ltd. [1997] 228 ITR 253 (SC), this court has observed that the production incentive scheme is different f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ticular deduction under sec. 80 IC of the Act. 15. In the present case the issue is whether the interest income, miscellaneous expenses, foreign exchange fluctuation comes within the first degree. 16. In the light if the above discussion, we are therefore of the considered opinion that the decision of the Ld.CIT(A) in deleting the addition made by the ld.AO in respect of Bank Interest, Miscellaneous expenses and Foreign exchange fluctuation gain, do not suffer from any infirmity, legal or factua .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uently denying the benefit of deduction u/s 80IC of the Act on the said interest income. The Respondent craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of cross objection at any time before or at the time of hearing of the appeal. 18. Ld. CIT(A) in his order summarizes submissions of the assessee as under; The assessee had earned interest in the fixed deposits made with the banks for providing bank guarantee. That customers of the assessee, generally release .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er Book which is a purchase order, wherein the terms of the payment have been aggeed upon by the assessee. It is observed that the bank guarantee to an extent of 10% has to be given by the assessee in its due course of the business. The ld. CIT on one hand has observed that the letters of credit is an integral part of the assessee s business. On the other hand he did not appreciate that the bank guarantee is also a part of the business activity carried on by the assessee. The terms of the paymen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version