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2016 (2) TMI 300 - ITAT MUMBAI

2016 (2) TMI 300 - ITAT MUMBAI - TMI - Deduction under section 10A - Interest on Fixed Deposits - Held that:- As the interest earned from fixed deposits kept apart for the purposes of business is to be treated under the head ‘Income from Business’ and not under the head ‘Income from other sources’ and is to be treated as profits of the business while calculating the deduction under section 10A of the Act.

Exchange difference on EEFC - Held that:- Following the decision of the Coordina .....

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t from the Book Profits taxable under section 115JB directed - ITA No. 957/Mum/2014, ITA No. 1260/Mum/2014 - Dated:- 5-2-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain, Judicial Member For the Petitioner : Shri Sunil Hirawat For the Respondent : Shri Sumit Kumar ORDER Per Jason P. Boaz, A. M. These are cross appeals, by the assessee and Revenue directed against the order of the CIT(A)-9, Mumbai dated 12.12.2013 for A.Y. 2010-11. 2. The facts of the case, briefly are as unde .....

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alia, included additions/disallowances of ₹ 57,563/- on account of internet on FD s and ₹ 13,39,825/- on account of EEFC income being excluded from computation of deduction under section 10A of the Act. While computing the book profits under section 115JAB of the Act, at ₹ 2,26,92,585/-, the Assessing Officer (AO) disallowed the assessee s claim for deduction under section 10A of the Act. 2.2 Aggrieved by the order of the assessment for A.Y. 2010-11 dated 22.01.2013, the assess .....

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extent of ₹ 1,63,48,175/- from Book Profit under section 115JB of the Act. 3. Both the assessee and Revenue, being aggrieved by the orders of the CIT(A)-9, Mumbai dated 12.12.2013 for A.Y. 2010-11 to the extent the issues were held against them have preferred appeals before the Tribunal in this regard. We now proceed to dispose off these cross appeals hereunder. Assessee s appeal for A.Y. 2010-11 in ITA No. 957/Mum/2014 4. In this appeal the assessee has raised the following grounds: - 1. .....

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e to Ground of Appeal No. 1, the learned CIT(A) had erred in upholding that only net interest should be excluded for deduction u/s. 10A. 3. On facts and in law, the learned CIT(A) had failed to appreciate that ₹ 13,39,825/- is not interest received on EEFC, but the exchange difference on EEFC and the same should be considered as such while calculating deduction u/s. 10A. Under the facts and circumstances of the matter, he ought to have considered the said sum of ₹ 13,39,825/- as exch .....

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terest of ₹ 57,563/- received on Fixed Deposits was not be included as profits of the assessee s business while computing the eligible deduction under section 10A of the Act. At the outset the learned A.R. for the assessee submitted that this issue is covered in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the assessee s own case for A.Y. 2009-10 in ITA No. 7371/Mum/2012 dated 15.07.2015. 5.2 We have heard both the learned A.R. for the assessee and the .....

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ion. A perusal of the balance sheet of the assessee shows that the fixed deposit account is shown as secured against bank guarantee which shows that the fixed deposits have a direct nexus with the business of the assessee. In our considered view, the interest earned from such deposits of the money kept apart for the purpose of business is to be taxed under the head Income from business and cannot be taxed under Income from other sources . We draw support from the decision of the Hon'ble Bomb .....

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or the purposes of business is to be treated under the head Income from Business and not under the head Income from other sources and is to be treated as profits of the business while calculating the deduction under section 10A of the Act. Consequently, ground No. 1 of the assessee s appeal is allowed. 6. Grounds No. 2: At the time of hearing, the learned A.R. for the assessee submitted that this ground is not being pressed. Since this ground is not pressed in this appeal, it is rendered infruct .....

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sidered and held in favour of the assessee by the decision of the Coordinate Bench of this Tribunal in the assessee s own case for A.Y. 2008-09 in its order in ITA No. 7371/Mum/2012 dated 15.07.2015. 7.2 We have heard both the learned A.R. for the assessee and the learned D.R. for Revenue in the matter. We find, as submitted by the learned A.R. for the assessee that similar issue was considered and held in favour of the assessee by the Coordinate Bench of this Tribunal in its order in ITA No. 73 .....

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do not find any reason for giving differential treatment to the exchange gains. In our considered opinion, the exchange gains should be taxed under the head business income. We, accordingly direct the AO to tax the exchange gain under the head business income and accordingly allow deduction u/s. 10A of the Act, for the detailed reasons given while deciding ground No. 1 of this appeal, ground No. 3 is accordingly allowed. 7.2.1 Following the aforesaid decision of the Coordinate Bench in assessee .....

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thereon. 9. In the result, the assessee s appeal for A.Y. 2010-011 is allowed as indicated above. Revenue s appeal for A.Y. 2010-11 in ITA No. 1260/Mum/2014 10. In this appeal Revenue has raised the following grounds: - 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the assessee s appeal by allowing deduction u/s. 10A amounting to ₹ 1,63,48,175/- from Book Profit u/s. 115JB of the Income tax Act, 1961? 2. Whether on the facts .....

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e learned CIT(A) in the impugned order on this issue. The learned A.R. for the assessee submitted that this issue of allowing deduction under section 10A of the Act from Book Profit under section 115JB of the Act has been considered and held in favour of the assessee by a Coordinate Bench of the Tribunal in assessee s own case for A.Y. 2009-10 in its order in ITA No. 7371/Mum/2012 dated 15.07.2015. 10.3 We have heard the rival submissions and perused and carefully considered the material on reco .....

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ara 22 of the order the Coordinate Bench in assessee s own case for A.Y. 2009-10 (supra) held as under: - 22. After giving a thoughtful consideration to the facts in issue, we find force in the contention of the Ld Counsel. The Tribunal in the case of Genesys International Corpn (supra) at para-21 of its order has held as under: It is evident from above that an existing SEZ unit will also be governed by Special Economic Zones Act, 2005. Therefore, we are of the considered view that the benefits .....

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