TMI Blog2018 (5) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... SEZ unit is excludible while computing the book profit u/s 115JB of the Act. Thus, the CIT(A) made no mistake in setting aside the action of the Assessing Officer, which is hereby affirmed. Computation of deduction eligible u/s 10A - Held that:- In the case before us, it is factually evident that the interest income on FDRs with bank is with respect to the borrowings which have in turn been utilised for the eligible business and, therefore, such interest income would be eligible for the benefits of Sec. 10A of the Act. So far as the interest earned on electricity security deposit is concerned, in a similar situation, our co-ordinate Bench in the case of M/s. Dania Oro Jewellery Pvt. Ltd. vs ITO [2018 (1) TMI 240 - ITAT MUMBAI] held such interest income to be eligible for the benefits of Sec. 10A of the Act. Exclusion of sundry credit balances written-back in determining the profits of business for computing deduction u/s 10A - Held that:- The details of the sundry credit balances written-back. A perusal of the same shows that in most of the cases, the items are revenue in nature and, therefore, in our view, such income is also eligible for the benefits of Sec. 10A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10A is not liable to be included in the book profit computed u/s 115JB of the Act and ignoring the amendment by Finance Act, 2007 w.e.f. 01,04.2008 whereby the words 10A and 10B have been omitted from Explanation 1(f) and (ii) of Section 115JB of the Act, thereby bringing the profits /loss of 10A 10B units within the purview of MAT? 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that assessee is not liable to tax u/s 115JB of the Act as its unit is in the Special Economic Zone and, hence its case is covered within the exemption provided in clause (6) of section 115JB of the Act ignoring the specific omission of the words 10A and 10B in Explanation 1(f) and (ii) of Section 115JB of the Act by Finance Act, 2007 w.e.f. 01.04.2008.? 4. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that assessee is not liable to tax u/s 115JB of the Act as its unit is in the Special Economic Zone and, hence its case is covered within the exemption provided in clause (6) of section 115JB of the Act ignoring without appreciating that the Clause(6) has been inserted by the Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 2012-13. In the course of assessment proceedings, the Assessing Officer show-caused the assessee as to why the impugned sum should not be treated as a revenue receipt chargeable to tax in the instant assessment year even though the assessee-company had written back the impugned share application money in the subsequent Assessment Year of 2012-13. The assessee vide written communication dated 28.01.2013 resisted the stand of the Assessing Officer, but the Assessing Officer treated the impugned sum as a revenue receipt and consequently, brought to tax the same in the instant year itself. The reasoning advanced by the Assessing Officer can be understood as follows. On the issue of treating it as a revenue receipt, the Assessing Officer noted that initially the money was received by the assessee through automatic route under FEMA and, therefore, in the absence of any evidence with regard to the nature of receipt, the mere recording in the account books as share application money was not sufficient to treat it as capital receipt. As per the Assessing Officer, the utilisation of money determines its nature and since there was no evidence to show that the impugned share a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicate the precise controversy, we may briefly cull out the relevant facts. The assessee-company received subscription towards share application money from one, Mr. Basil Dubb in the previous year relevant to Assessment Year 2005-06 of ₹ 43,72,750/-. The said share application money continued to be reflected as part of Shareholder s Funds in the accounts of the assessee starting from the year ending 31.03.2005 to 31.03.2011; and, it was only in the year ending 31.03.2012 that the management of the assessee-company decided to write-back the same. It is also not in dispute that the source of receipt of share application money is identified and, for that matter, assessee had brought out before the CIT(A) that the assessment for the period ending 31.03.2005 corresponding to Assessment Year 2005-06 has been completed u/s 143(3) of the Act. It has also been brought out that even for the years ended on 31.03.2006 to 31.03.2008, the assessments of the assessee have been completed u/s 143(3) of the Act and the factum of such receipt subsisting as share application money was prevalent and no adverse view has been taken by the assessing authorities. It is also an admitted fact, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e waiver of liability to repay a loan towards purchase of a capital asset would not fall within the purview of Sec. 28(iv) of the Act as the said section applies only when the benefit or perquisite is received in kind. Factually speaking, in the instant case, the so-called benefit understood by the Assessing Officer, has been received in cash, namely, share application money and, therefore, its forfeiture would not fall within the purview of Sec. 28(iv) of the Act. Therefore, so far as invoking of Sec. 28(iv) of the Act is concerned, there is a clear error on the part of the Assessing Officer, and the same has been rightly negated by the CIT(A). 9. So far as the stand of the Assessing Officer that the receipt of share application money is a revenue receipt is concerned, the same, in our view, is also untenable and has been rightly set-aside by the CIT(A). Factually, since the Assessment Year 2005-06, the share application money has been reflected in the Balance-sheet as part of the Shareholder s Funds and it has been accepted as a capital receipt even in the assessments finalised u/s 143(3) of the Act. The case made out by the Revenue that it amounts to a cessation of liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be assessed in the instant year itself. In our view, the Assessing Officer has assessed the same in the instant year without any rationale which, in our view, has been rightly set-aside by the CIT(A). Thus, insofar as Ground of appeal no. 1 is concerned, the same is hereby dismissed. 11. Insofar as Ground of appeal nos. 2 to 4 are concerned, the same relate to determination of profit u/s 115JB of the Act. In this context, the relevant facts are that the Assessing Officer noted that the book profit u/s 115JB of the Act was declared at NIL while as per the Profit Loss Account, there was positive book profit of ₹ 3,10,85,092/-. On being show-caused, assessee submitted that its manufacturing unit eligible for the benefit u/s 10A of the Act was located in a SEZ area and by virtue of Sec. 115JB(6) of the Act, the provisions of MAT are not applicable to the income accrued or arising from the business carried on from said unit in SEZ. As per the Assessing Officer, provisions of Sec. 115JB of the Act were applicable to assessee s claim of deduction u/s 10A and 10B of the Act w.e.f. Assessment Year 2008-09 and that sub-section (6) of Sec. 115JB of the Act was meant only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee for Assessment Year 2009-10, wherein the following Grounds have been raised:- 1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) ought to have directed the Learned Assessing Officer (Ld.AO)- (a) not to exclude the interest income earned of ₹ 4,48,942/- in determining the profits of the business; Without prejudice to the above and in the alternate (a.i) to exclude the net interest income of ₹ 2,20,273/- in determining the profits of the business. (b) not to exclude the sundry credit balances written back of ₹ 4,73,614/- in determining the profits of the business. (c) to increase the profits of the business by interest income of ₹ 4,48,942/- as in the assessment order, the said income has been reduced twice. 2. It is humbly prayed that the relief as prayed for here-in-above should be granted. 16. The grievance of the assessee in its appeal revolves around the computation of deduction eligible u/s 10A of the Act. The first grievance of the assessee is with regard to the action of income-tax authorities in excluding the interest income of ₹ 4,48,94 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us, it is factually evident that the interest income on FDRs with bank is with respect to the borrowings which have in turn been utilised for the eligible business and, therefore, such interest income would be eligible for the benefits of Sec. 10A of the Act. So far as the interest earned on electricity security deposit is concerned, in a similar situation, our co-ordinate Bench in the case of M/s. Dania Oro Jewellery Pvt. Ltd. vs ITO, ITA No. 7635/Mum/2014 dated 03.01.2018 held such interest income to be eligible for the benefits of Sec. 10A of the Act. Following the aforesaid decisions which are directly on the point, we approve the stand of the assessee for including the interest income of ₹ 4,48,942/- in order to determine the profits of business for the calculation of deduction u/s 10A of the Act. 20. Since assessee has succeeded on the main plea in Ground of appeal no. 1(a), the alternate plea in Ground of appeal no. 1(a.i) is dismissed. 21. The second aspect raised before us is against the exclusion of sundry credit balances written-back of ₹ 4,73,650/- in determining the profits of business for computing deduction u/s 10A of the Act. In this contex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (6) has been inserted by the Special Economic Zones Act 2005, w.e.f. 10.02.2006 concurrently within the insertion of section 10AA, also by the Special Economic Zone Act 2005, w.e.f. 10.02.2006 and hence, clause (6) of section 115JB of the Act is applicable only to 10AA units and not to 10A units since due to amendment in clause (f) and (ii) of Explanation 1 of seciion 115JB by Finance Act 2007, profit/Loss of 10A 10B units has been expressly brought within the purview of MAT w.e.f. AY2008-09. 3) The appellant prays that the order of the CIT (A) on the above ground be set aside and that of the AO be restored. 25. Insofar as Grounds of appeal nos. 1 to 3 are concerned, it was a common point between the parties that so far as the facts and circumstances in the instant assessment year are concerned, they stand on an identical footing to those considered by us in Grounds of appeal nos. 2 3 of the appeal of Revenue for Assessment Year 2009-10 in the earlier paras, therefore, our decision therein shall apply mutatis mutandis to the present appeal also. 26. In the result, appeal of Revenue for Assessment Year 2010-11 is dismissed. 27. Now, we may take-up the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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