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Commissioner of Income Tax, Kolkata Versus Hindustan Gum And Chemicals Ltd

2016 (7) TMI 920 - CALCUTTA HIGH COURT

Interest income treated as part of the profits of business of the 100% E.O.U. eligible for deduction under Section 10B - Held that:- Total turnover shall naturally include receipt on account of interest. The legislature does not appear to have provided for excluding the amount of interest from the total turn over as has been done in the case of 80HHC by explanation (baa) of sub-section (4C) thereof. In that case, 90% of the income arising out of interest has to be excluded from the profits of th .....

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ction (4). There is, as such, no scope for any controversy that part of the money was earned from interest and not from export. - There is no requirement for the purposes of section 10B to establish direct nexus between the income and the undertaking. The entire business income of the 100% EOU will be the “profits of the business of the undertaking”. It has been held above that the interest earned on temporarily surplus business funds of the 100% EOU deposited with banks for short periods is .....

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No. 3269 of 2014, ITAT 159 of 2014 - Dated:- 30-6-2016 - Girish Chandra Gupta And Asha Arora, JJ. For the Assessee : Mr. R. N. Bajoria, Sr. Advocate Mr. Akhilesh Gupta, Advocate Mr. Sanjay Bhowmik, Advocate For the Revenue : Mr. P. Dudhoria, Advocate Mrs. A. G. Gutgutia, Advocate ORDER The Court : - The subject matter of challenge in the appeal is a judgment and order dated 28th December, 2007 passed by the Income Tax Appellate Tribunal, E Bench, Kolkata in ITA No. 150 (Kol) of 2007 and ITA No. .....

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ncome Tax Appellate Tribunal erred in law in directing the Assessing Officer to treat the interest income of ₹ 28,74,473/- as part of the profits of business of the 100% E.O.U. eligible for deduction under Section 10B of the Income Tax Act, 1961 and compute deduction accordingly without appreciating the fact that the said interest income was not profit from the business but accrued on fixed deposit kept by the assessee in bank ? (b) Whether on the facts and in the circumstances of the case .....

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sus at the Bar between the learned Advocates appearing for the parties that the question no. 2 has already been answered against the revenue by a judgment of the Apex Court in the case of Liberty Footwear Co. vs. CIT reported in [2016] 383 ITR 195 (SC). In that view of the matter, no further discussion in regard thereto is required. The question no. 2 is answered in the negative and in favour of the assessee. In so far as the question no. 3 is concerned, Mr. Dudhoria, learned Advocate appearing .....

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or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee. 10B. (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 busi .....

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to the provisions contained in the other parts of the Section 10B, the benefit is available to an assessee. It was not disputed that the only relevant provision to be taken into account is subsection (4) which we already have quoted. Sub-section (4) provides the quantum of deduction which can be availed by an assessee. The quantum of deduction is dependent upon the total turnover of the business of the undertaking and the export turnover of the undertaking. Once these two figures are available, .....

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assessee under Section 10 sub-section (1) of Section 10B shall be 10% of ₹ 100, i.e. to say ₹ 10/-. This is the formula which has been provided by subsection (4) for the purpose of working out the benefit or deduction under subsection (1). Total turnover shall naturally include receipt on account of interest. The legislature does not appear to have provided for excluding the amount of interest from the total turn over as has been done in the case of 80HHC by explanation (baa) of sub .....

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of deduction available to a 100% export oriented undertaking is necessarily dependent upon the formula provided in subsection (4). There is, as such, no scope for any controversy that part of the money was earned from interest and not from export. This question came up before the Karnataka High Court and was answered in the case of CIT vs. Motorola India Electronics (P.) Ltd. reported in [2014] 46 Taxmann.com 167 (Karnataka) as follows : In the instant case, the assessee is a 100% EOU, which has .....

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o be construed as income of the business of the undertaking. There is a direct nexus between this income and the income of the business of the undertaking. Though it does not partake the character of a profits and gains from the sale of an article, it is the income which is derived from the consideration realized by export of articles. In view of the definition of income from Profits and Gains incorporated in Subsection (4), the assessee is entitled to the benefit of exemption of the said amount .....

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estion of law in both the appeals do not arise for consideration. Mr. Dudhoria, learned Advocate appearing for the revenue drew our attention to a judgment of the Madras High Court in the case of International Components India Ltd. vs. Assistant Commissioner of Income Tax reported in 2015 - (372) - ITR- 0190 - Madras wherein the following view was taken : In the light of the above said decision, we are of the firm view that the interest earned from deposits with Corporation Bank, Electricity Boa .....

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y the Hon ble Madras High Court. Therefore, this judgment is of no assistance in deciding the issue. The learned Tribunal has passed the following order : There is no requirement for the purposes of section 10B to establish direct nexus between the income and the undertaking. The entire business income of the 100% EOU will be the profits of the business of the undertaking . It has been held above that the interest earned on temporarily surplus business funds of the 100% EOU deposited with banks .....

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