TMI Blog2009 (12) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... ated is from DEPB licence and not from industrial undertaking and as such the same cannot be part of the profit of the industrial undertaking. 3. The Learned Commissioner of Income Tax(Appeals) has decided the issue as under:- 5.2 I have considered the submissions of the appellant. My findings, in respect of each item of income included in the other income are as under: (i) DEPB Licence ₹ 13,31,972/-: In the Assessment Year 2001-02, it was held by the CIT(A) that this income is not part of profit of the industrial undertaking. However, recently the Hon'ble Gujarat High Court in the case of CIT V. India Gelatine Chemicals Ltd., held that the duty draw back is given specifically to reduce the cost of manufacturing the goods and to reduce the burden of custom duties and excise duties, and therefore, any receipts by way of reimbursement of such duties are inextricably linked with cost of production and therefore, duty drawback was income derived from the industrial undertaking for the purpose of section 80J of the Act. The scheme of DEPB licence is similar to drawback. Therefore, if the DEPB licence income is by way of credit for use of licence, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80IB is not eligible on the same. 7. On appeal, Learned Commissioner of Income Tax(Appeals) held that the services charges may be considered for deduction under section 80IB if the assessee is able to show that the sales were after sale service condition or the receipts arose in the course of manufacturing. He relied on the decision of the case of Mira Industries 87 ITD 475. 8. The Learned Departmental Representative supported the order of the Learned Assessing Officer. 9. The Learned Authorised Representative of the Assessee argued and submitted that in case the receipts from service charges are more than the expenditure incurred for earning the receipts than the net amount of receipts from service charges should be deducted from the business profits for computing deduction under section 80IB otherwise, no deduction should be made from the business profits. 10. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case the Learned Commissioner of Income Tax(Appeals) in respect of service charges of ₹ 19,13,441/- credited by the assessee in its Profit Loss account and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.2000) and Gujarat Alkalis Chemicals Ltd. (ITA No.1188/Ahd/2000 dated 13.12.2001). 12. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. Both the parties agreed that the issue stands covered against the revenue by the decision of Hon'ble Supreme Court in the case of CIT Vs. Laxmi Machine Works (2007) 290 ITR 667 (SC) wherein it was held that Excise duty and sales-tax are not includible in total turnover in the formula contained in s. 80HHC (3). Respectfully following the decision of the Hon'ble Supreme Court, we dismiss these grounds of appeal of the revenue. 13. Grounds no.7 and 8 of the appeal of the Revenue reads as under: 7. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in holding that interest income of ₹ 66,13,587/- is not to be included in the turn over for the purpose of calculation of deduction under section 80HHC of the Act. 8. The Ld.CIT(A) ought to have upheld the finding of the AO that since the assessee itself had accounted for the interest income as its business income in the Profit Loss account, the same constitutes profit derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und no.1 of the appeal of the assessee reads as under: 1.1 The Commissioner of Income Tax (Appeals)-III, Baroda, [hereinafter referred to as 'the CIT(A)'] has erred in law and in facts of the case in upholding the Assistant Commissioner of Income tax, Circle 4, Baroda [ hereinafter referred to as the AO ] action in excluding the 'other income' of ₹ 47,58,885 (details given below), while arriving at the profit eligible for deduction under section 80IB of the Act on the ground that the same was not derived from 80IB unit. Sr. No. Nature of income Amount (Rs.) 1 Income from sale of wooden scrap and drum 10,088 2 Documentation charges collected from customers 127,432 3 Insurance charges incurred and then collected from customers on local sales 11,124 4 Octroi Sales 3,000 5 Interest income 46, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2009) 17 DTR (GUJ) 255. We find that the Hon'ble Gujarat High Court in the case of DCIT Vs. Core Health Care Ltd. (2009) 308 ITR 263 held as under:- 21. In relation to question No. 3 it is an accepted position that the empty containers, which were sold, were containers in which raw material in bulk had been purchased by the assessee. The cost of the containers was part of the purchase price which went to make up the total cost of the manufactured product and was thus directly relatable to the manufacturing activity of the industrial undertaking. The income generated on sale of such empty containers could be set off against the purchase cost, in other words bringing down the purchase price of raw material, or it could be treated as income directly relatable to the activity of industrial undertaking. The net result would be the same either the cost of raw material gets reduced and thus increases profits of manufactured products on sale; or the sale price of containers is directly added to swell the total profits. Therefore, in light of the decision of this High Court in the case of Dy. CIT vs. Harjivandas Juthabhai Zaveri (supra), there is no infirmity in the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire business income is deemed to be the profit derived from export business. 2.2 The appellant prays that the AO be directed to allow the deduction under section 10B of the Act on the interest income of ₹ 17,07,551. 22. At the time of the hearing, the Learned Authorised Representative of the Assessee submitted that in view of the judicial pronouncement, the issue stands covered against the assessee. Therefore, these grounds of appeal of the assessee are dismissed. 23. Ground no.3 of the appeal of the assessee reads as under:- 3.1 The CIT(A) has erred in law and in facts of the case in upholding the AO's action in reducing the deduction claimed under section 80IB of the Act (on the profits from the manufactured export turnover) from the 'profits of the business' for the purpose of calculating the deduction under section 80HHC of the Act, without considering the fact that both the sections are independent of each other and neither is made subject to the other. 3.2 The appellant submits and prays that considering the intention behind the grant of ^/ deduction under section 80HHC, the AO ought not to have reduced the deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) Bad debts recovered 0 68,829 68,829 e) Sundry balances written off 0 14,836 14,836 f) Service charges 0 19,13,441 19,13,441 g) Insurance on local sales 0 11,124 11,124 h) Octroi Sales 0 3,000 3,000 i) Others 1,46,680 0 1,46,680 Total 6,79,250 24,17,825 30,97,075 2) Exchange variation (net) 23,30,324 (13,28,333) 10,01,991 Total 30,09,574 10,89,492 40,99,066 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the export turnover then only the assessee s submission that parity demands that similar receipts should also be excluded from the denominator would have been logical. As numerator represents export turnover and denominator represent total turnover of the business naturally denominator will have more element than the nominator. We find that the Learned Authorised Representative of the Assessee has not been able to bring any material before us to show that the miscellaneous income or exchange fluctuation were not a receipt of the business. We therefore, do not find any good reason for which this business receipts could be excluded from the total turnover of the assessee for computing export deduction allowable under section 80HHC of the Act. Therefore, this ground of appeal of the assessee is rejected. 29. Ground no.5.1 of the appeal of the assessee reads as under:- 5.1 The CIT(A) has erred in law and in facts of the case, in upholding the AO's action of including the manufactured export turnover of ₹ 15,17,95,464 (pertaining to 10B unit) to the 'total turnover' for the purpose of computing the deduction under section 80HHC of the Act. 30. The brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of s. 80HHC. 32. The Learned Departmental Representative supported the order of the Learned Commissioner of Income Tax(Appeals). 33. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The claim of the assessee before us is that the unit which is eligible for deduction under section 10B being a separate unit its turnover should not have been included with the turnover of the other unit in which deduction allowable under section 80HHC is computed. In support of this claim, the assessee placed reliance on the decision of the Hon'ble Madras High Court in the Case of CIT Vs. Shivagami Match Industries (2009) 24 DTR (MAD) 209 wherein it was held that Assessee having maintained separate books of account for export business and local business, deduction under s. 80HHC is to be computed on the basis of total turnover, export turnover and profits of the business of the export division alone and not the total turnover and the profits of the entire business of the assessee. From the facts before us, it is not clear whether the assessee has maintained separate books of account of the two units or not. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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