TMI Blog2015 (7) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... direct the AO to treat the interest income under the head ‘Profits and gains of the business’ and for the reasons given in ground No. 1 of this appeal, we direct the AO to allow deduction u/s. 10A of the Act Exclusion of interest received on EEFC while calculating deduction u/s. 10A - Held that:- It is not in dispute that ₹ 35,86,248/- is not interest earned but gain on the fluctuation of foreign exchange. From the chart exhibited at page-24, we find that the assessee has suffered losses on foreign exchange fluctuation which have been accepted by the Revenue authorities. We, therefore, 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. Excluding the exemption allowable u/s. 10A from the Book Profit taxable u/s. 115JB - Held that:- Income of units located SEZ will not be included while computing book profit for the purpose of MAT as per section 115JB(6) of the Act. In view of above, we are of the considered view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the matter, he ought to have directed the Assessing Officer to include the said sum of ₹ 7,82,196/being the labour charges received as profit of the business while calculating deduction u/s.10A. 2. On facts and in law, the learned CIT(A) had erred in not directing the Assessing Officer to include ₹ 1,10,314/being the interest received on Fixed Deposits as profits of the business while calculating deduction u/s.10A. Under the facts and circumstances of the matter, he ought to have directed the Assessing Officer to include the said sum of ₹ 1,10,314/being the interest received on Fixed Deposits as profits of the business while calculating deduction u/s.10A 3. On facts and in law, the learned CIT(A) had failed to appreciate that RS.3S,86,248/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 RS.35,86,248/as exchange difference on EEFC and directed the Assessing Officer to allow deduction u/s.1OA on the said amount. 4. On facts and in law, the learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. It is the say of the Ld. Counsel that if both the sections are read together, the labour charges of the assessee would be eligible for calculating the deduction u/s. 10A of the Act. In support, the Ld. Counsel relied upon the decision of the Special Bench Tribunal in the case of Maral Overseas Ltd. Vs ACIT 146 TTJ 129. 7. Per contra, the Ld. Departmental Representative supported the orders of the Revenue authorities. 8. We have given a thoughtful consideration to the relevant provisions of the Act and have considered the orders of the authorities carefully and also the decision relied upon by the assessee. There is no dispute that the labour charges earned by the assessee have a direct nexus with the business of the assessee. All that has to be considered is whether such profit is eligible profit for the purpose of the claim of deduction u/s. 10A of the Act. The Special Bench of the Tribunal in the case of Maral Overseas (supra) has considered this issue and has held as under: It is clear from the plain reading of section 10B(1) of the Act that the said section allows deduction in respect of profits and gains as are derived by a 100% EOU. Further, section 10B(4) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 73: (2009) 317 ITR 218 (SC) distinguished. Respectfully following the decision of the Special Bench (supra), it can be safely concluded that the labour charges received are eligible for calculation of deduction u/s. 10A of the Act. Findings of the Ld. CIT(A) are reversed. The AO is directed to allow the deduction u/s. 10A in respect of labour charges received. Ground No. 1 is accordingly allowed. 9. Ground No. 2 relates to the exclusion of interest received on fixed assets as profit of the business while calculating deduction u/s. 10A of the Act. 10. The issue finds place at para-5 on page-3 of the assessment order. The assessee was asked to explain why interest on fixed deposit should not be excluded from the profit of business and taxed as income from other sources. In its reply dated 20.12.2011, the assessee stated that the fixed deposit receipts are in respect of bank guarantee provided by the bank to Seepz authority, Federation of India, Chambers of Commerce and Industry, New Delhi. It was explained that the FDR is directly related to the business of the assessee and therefore interest earned on such fixed deposits have to be taxed under the head Income from busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at para-6 of his order. The submissions of the assessee were rejected by the AO. The AO was of the firm belief that the deduction u/s. 10A is available for profits derived from the export of all goods or merchandise, subject to certain conditions. The AO further observed that the exchange fluctuation in the EEFC arose after the completion of the export activity and did not bear a proximate and direct nexus with the export transaction so as to fall within the expression derived by the taxpayer. The AO accordingly taxed the gain on EEFC account under the head Income from other sources. 16. The assessee could not succeed before the Ld. CIT(A) and is therefore before us. 17. The Ld. Counsel for the assessee drew our attention to page-24 of the paper Book and pointed out that the gain on exchange difference on EEFC account of ₹ 35,86,248/- is not an interest but a gain on the fluctuation of foreign exchange which has been wrongly considered by the Revenue authorities as interest. It is the say of the Ld. Counsel that such exchange fluctuation has a direct nexus with the business of the assessee and therefore the same should be taxed under the head business income. 18. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so inserted providing that provisions of section 115JB shall not apply to the income accrued or arisen on or after 1.4.2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. Hence, income of units located SEZ will not be included while computing book profit for the purpose of MAT as per section 115JB(6) of the Act. In view of above, we are of the considered view that there is merit in the contention of ld A.R. that irrespective of the fact that amendment has been made in clause (f) of Explanation (1) to section 115JB(2) of the Act to apply the provisions of MAT in respect of units which are entitled to deduction u/s.10A or 10B but the units which are in SEZ will continue to get benefits from the applicability of provisions of MAT in view of sub-section(6) of the Act. We also observe that benefit given to SEZ unit from the applicability of provisions of section 115JB has been withdrawn by the Finance Act, 2011 by inserting a proviso to section 115JB(6) of the Act. Respectfully following the decision of the Co ordinate Bench, we direct the AO to exclude the exemption allowable u/s/.10A from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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