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2018 (3) TMI 793

round of appeal in favour of the assessee holding that the AO should not have denied the deduction under section 10 B of the Act in respect of interest income of ₹ 9. 81 lakhs and from business deposits pertaining to EOU of the assessee.- Decided against revenue - Disallowance of claims regarding deduction u/s 43B, deduction about excise duty, other expenses and claim for set off of unabsorbed depreciation - Held that:- FAA has directed the AO to allow the claim/reductions after making verification. In our opinion, his order does not suffer from any legal infirmity. The AO is directed to give effect to the order of the FAA within a period of three months of receipt of our order. - ITA No.4063/Mum/2016 - Dated:- 14-3-2018 - Shri Ra .....

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on of deduction under section 10B of the Act. 2.1. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA) and made detailed submissions. However, in his one line order, the FAA held that interest income was not directly derived from the business, that the AO was justified in excluding the said income for the 10B deduction purposes. 2.2. During the course of hearing before us, the Authorised Representative(AR) stated that business funds of EOU were retained for subsequent business requirements, that funds were not kept idle, that financial wisdom required to earn income on such funds, that interest income was directly linked with the business of the EOU. He relied on the cases of Maral O .....

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ether while computing the eligible deduction u/s 10B of the Act. We cannot ignore sub-section (4) of section 10B which provides specific formula for computing the profits derived by the undertaking from export. As per the formula so laid down, the entire profits of the business are to be determined which are further multiplied by the ratio of export turnover to the total turnover of the business. In case of Liberty India, the Hon'ble Supreme Court has dealt with the provisions of section 80IA of the Act wherein no formula was laid down for computing the profits derived by the undertaking which has specifically been provided under sub-section (4) of section 10B while computing the profits derived by the undertaking from the export. Thus, .....

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he ambit of Deductions under these provisions, but exemption under Section 10-A and 10-B of the Act encompasses the entire income derived from the business of export of such eligible Undertakings including interest income derived from the temporary parking of funds by such Undertakings in Banks or even Staff loans. The dedicated nature of business or their special geographical locations in STPI or SEZs. etc. makes them a special category of assessees entitled to the incentive in the form of 100% Deduction under Section 10-A or 10-B of the Act, rather than it being a special character of income entitled to Deduction from Gross Total Income under Chapter VI-A under Section 80-HH, etc. The computation of income entitled to exemption under Sect .....

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s regarding deduction under section 43B(Rs. 2. 12 crores), deduction about excise duty (Rs. 12. 63 crores), other expenses(Rs. 1. 77 crores)and claim for set off of unabsorbed depreciation. 3.1. The assessee agitated all the issue before the FAA. After considering the material, he directed the AO to verify the claim made by the assessee and to allow the same after verification. 3.2. Before us, the AR stated that the AO had not passed any order even though the FAA has completed the appellate proceedings in the month of March, 2016. We find that the FAA has directed the AO to allow the claim/reductions after making verification. In our opinion, his order does not suffer from any legal infirmity. The AO is directed to give effect to the order .....

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