TMI Blog2011 (6) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 4,60,174/- as against the addition of ₹ 11,53,180/- made by the Assessing Officer on account of estimated sale of scrap by holding that the sale of scrap estimated by the Assessing Officer is to be considered as part of total turnover and part of industrial undertaking as per the provisions of sub section (4) of section 10B of the Act. 3. In the first ground of appeal, the revenue contended that the ld. CIT(A), erred in deleting the addition of ₹ 11,83,478/- made on account of exchange rate fluctuation. In the brief and neat facts of the case, as culled out, from the relevant records are that the assessee filed its return of income on 31.10.2006 declaring Nil income, which was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny assessment and the assessment was finalized under section 143(3) of the Act on 29.12.2008 . The assessee is a partnership engaged in the manufacturing of engineering goods viz anti vibration products, ducting piping accessories etc. and 100% exports thereof. It has established a 100% export oriented undertaking duly approved as EOU with Development Commissioner, Noida Special Economic Zone (Noida Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be included in turnover in the year of Export. In the case of Change Pond Tehnologies Pvt. Ltd., Hon ble ITAT A Bench, Chennai (119 TTJ 18) has held that gain from the fluctuation of foreign exchange is directly related with the export activities and should be considered as income derived from export activities eligible for exemption u/s 10A. In the case of Renaissance Jewellery Pvt. Ltd., ITAT g Bench, Mumbai (104 TTJ 382) has held that profit on fluctuation in rate of exchange of foreign currency is profit derived from Export business entitled to exemption u/s 10A. In the case of Sujata Grover, ITAT E Bench, Delhi (74 TTJ 347) has held that income from foreign currency fluctuation is part of export turnover. The basic character of the receipt of foreign currency remains the same and is a sort of additional sale price. Similarly, Hon ble ITAT, Delhi, H Bench in the case of Sony India (P) Ltd. (118 TTJ 865) has held that foreign exchange gain is includible in the profits eligible for deduction u/s 10A and 10B of the Act. In the case of Banyan Chemicals Pvt. Ltd., ITAT, Ahmedabad (121 TTJ 751) has held that gain on conversion to rupee due to change in rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of scrap. The brief and neat facts of the case, as culled out, from the relevant records are that the assessee vide questionnaire dated 31.10.2008 was requested to furnish details of manufacturing process with various stages of manufacturing, consumption of raw materials and production of finished goods together with yield and scrap generated at various stages of manufacturing processes as well as the details of opening and closing stock with method of valuation. The appellant, instead of submitting such details, preferred to submit that vide variety of items with varied specifications and designs are manufactured and it was not feasible to find out quantum of raw material consumed in each item of final product. The assessee submitted a vague reply that the scrap generate is either recycled or held in stock for domestic clearance. The assessee consistently refused to furnish the details of monthly consumption and production. In nutshell, the issue of generation of scrap in the manufacturing process remained unverified. The AO considered the issue in dispute from all aspects and made an addition of ₹ 11,53,180/- on account of estimated sale of scrap. On appeal, the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring activity is profit derived from Industrial Undertaking eligible for relief u/s 80IB/80HH. The Bangalore Tribunal in the case of Motorola India Electronics Pvt. Ltd. (295 ITR (AT) 376) held that entire profits derived from the business of undertaking should be taken into consideration while computing the eligible deduction u/s 10A/10B of the Act by applying the mandatory formula laid down in sub-section (4). Thus, the sale of scrap estimated by the AO is considered as part of total turnover and part of profit of industrial undertaking. On such consideration, the disallowance of deduction on account of estimate domestic sale of scrap works out to ₹ 4,60,174/- as under in view of the clear provisions of sub section (4) of section 10B of the Act. Increased profit after inclusion of estimate sale of scrap: Rs.4,53,24,369/- + ₹ 11,53,180/- + ₹ 4,64,77,549/- Increased turnover after inclusion of estimated sale of scrap: Rs.11,53,18,007/- + ₹ 11,53,180/- + ₹ 11,64,71,187/- Profit derived from Export+ Profit x Export turn over R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussed above while deciding the appeal of the revenue. In the course of present appellate proceedings, the Ld. Counsel has taken a stand that the Ld. CIT(A) was not justified in confirming the addition to the tune of ₹ 4,60,174/- for sale of scrap outside the books of account. 15. The Ld. DR , on the other hand, relied on the order of the CIT(A). 16. We have heard both the parties and carefully considered the rival submissions with reference to facts, evidence and material placed on record. In the course of present appellate proceedings, the assessee was specifically asked to file details of closing stock. However, the assessee has expressed its inability regarding availability of such details. In view of this, the contention of the assessee, cannot be appreciated, in the absence of such details. However, in order to meet ends of natural justice, the addition is restricted to ₹ 3 lacs instead of ₹ 4,60,174/-. Accordingly, the appeal of the assessee is partly allowed. 17. In the result, the appeal filed by the revenue is dismissed and the appeal filed by the assessee is partly allowed. Decision pronounced in the open court on 10th June, 2011. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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