New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 908 - ITAT AHMEDABAD

2016 (7) TMI 908 - ITAT AHMEDABAD - TMI - Deduction under section 10B denied - Held that:- In the present case, the income of the assessee from maintenance or services was not assessed as its income from business. It has been assessed as “income from other sources”. It has also to be kept in mind that the assessee has nowhere pleaded that service was only provided on the items sold by it. Therefore, to my mind, the ld.Revenue authorities have rightly rejected the claim of the assessee. I do not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

under section 10B of the Income Tax Act on the income of ₹ 16,05,675/-. 3. Brief facts of the case are that the assessee has filed its return of income electronically on 29.9.2008 declaring total income at NIL. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Act was issued and served upon the assessee. The assessee at the relevant time was engaged in the business of manufacture and export of aluminum blinds. It has claimed deduction unde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rces . On appeal, the ld.CIT(A) has agreed with view of the AO, but re-worked out the quantum. The finding of the ld.CIT(A) reads as under: 4. I have considered the appellant's submissions and the AO's observations. The present issue involves two different types of income. So far as development charges of ₹ 3,20,694/- is concerned, the same has been received by the appellant for developing the tools for manufacture of blinds as per the product requirements of the customer. Thus, 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

1OB. 4.1 The other part of disallowance is the amount of ₹ 16,05,675/- earned by the appellant as maintenance charges for the products sold by it. This income cannot be said to have been derived from the activity of manufacture or production of an article or thing by the industrial unit of the appellant. This is one stage removed from the manufacturing process. Hence, deduction u/s.1OB cannot be allowed on this income. The decisions relied upon by the appellant are old decisions and have b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h Kumar Drolia. In this decision the Bench has held as follows: "The assessee's argument was that an industrial undertaking was also to undertake activity of repairing and servicing, which, in turn, could complete the company's product profile so that customers are offered comprehensive services including after-sale services. But this argument of the assessee could not be accepted, as service and maintenance is not an integral part of activity of industrial undertaking and as is cle .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts and gains derived from any business and the deduction under this provision be allowed in computing the total income of the assessee from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. The Apex Court has also drawn a distinction between the expression 'derived from' and 'attributable to' in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 , wherein it is held that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rtaking but industrial undertaking itself was not the source of this profit. This profit from repair and maintenance earned by assessee was not a direct yield from industrial undertaking as the word used in section 80-IB of profits and gains derived from." (ii) [2012] 17 taxmann.com 259 (Mad.), Indian Additives Ltd. In this decision, the High Court has held that the assessee, engaged in manufacture and selling of additives on commission basis is not entitled to deduction under section 80-IB .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nder this section shall be computed by apportioning the profits of the business of the undertaking in the ratio of export turnover to the total turnover. In other words, according to the ld.counsel for the assessee, it was not mandatory for the assessee to include only those profits which has resulted from manufacturing activity. The profit of the business of the undertaking is to be considered for appropriation. He further contended that this issue has been examined by the Hon ble Delhi High Co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sidered rival contentions and gone through the record carefully. Before embarking upon an inquiry on the facts of the present case, I deem it pertinent to take note of the decisions relied upon by the ld.counsel for the assessee. In the case of Hritnik Exports P.Ltd. (supra), Hon ble Delhi High Court, while considering this issue took into consideration para-79 of the Special Bench decision in the case of Maral Overseas Ltd. (supra), wherein the Tribunal has propounded its interpretation as to h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uting the profits derived by the undertaking from export. The formula is as under :- Profit of the business of the Undertaking Export turnover X Total turnover of business carried out by the undertaking 79. Thus, sub-section (4) of section 10B stipulated that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of turnover to the total turnover. Thus, not-with-standing the fact that sub-section (1) of section 10B refers the pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

business of the undertaking, the same would be included in the profits of the business of the undertaking. Thus, once an income forms part of the business of the eligible undertaking, there is no further mandate in the provisions of section 10B to exclude the same from the eligible profits. The mode of determining the eligible deduction u/s 10B is similar to the provisions of section 80HHC inasmuch as both the sections mandates determination of eligible profits as per the formula contained there .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that both these incomes have been treated by the Assessing Officer as business income. The CBDT Circular No. 564 dated 5th July, 1990 reported in 184 ITR (St.) 137 explained the scope and ambit of section 80HHC and the mode of determination of profits deriv .....

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 asses see s own case the I.T.A.T. in the preceding years, after considering the decision in the case of Liberty India held that provisions of section 10B are different from the provisions of section 80IA wherein no formula has been laid down for computing the eligible business profit. 80. In view of the above discussion, question no. 2 is answered in affirmative and in favour of the assessee. Accordingly, the assessee is eligible for claim of deduction on export incentive received by it .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

shed hundred per cent export- oriented undertakings- ……… ……….. (4) For the purposes of sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking . Sub-section (4), t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion and identifies the income which is exempt and has to be read in harmony with Sub-section (4) which is the formula for finding out or computing what is eligible for deduction under Sub-section (1). Neither of the two provisions should be made irrelevant and both have to be applied without negating the other. In other words, the manner of computing profits derived from exports under Sub-section (1), has to be determined as per the formula stipulated in Sub-Section (4), otherwise Sub-section (4 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s that the duty draw back or duty benefits would be deemed to be a part of the business income. Thus, will be treated as profit derived from business of the undertaking. These cannot be excluded. Even otherwise, when we apply Sub-section (4) to Section 10B, the entire amount received by way of duty draw back would not become eligible for deduction/exemption. The amount quantified as per the formula would be eligible and qualify for deduction/exemption. The position is somewhat akin or close to S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ect from 01.04.2001, the present Sub- section (4) is substituted in the place of old Sub-section (4). No doubt Sub-section 10(B) speaks about deduction of such profits and gains as derived from 100% EOU from the export of articles or things or computer software. Therefore, it excludes profit and gains from export of articles. But Sub-section (4) explains what is says that profits derived from export of articles or things or computer software shall be the account which bares to the profits of the .....

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