TMI Blog2015 (2) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... ered in favour of the assessee. We are of the opinion that assessee is entitled to deduction u/s 10B on all the items referred to in appeal. Therefore, we set aside the order of Ld. CIT (A) and direct the Assessing Officer allow deduction u/s 10B Reducing the profits of undertaking for calculating deduction u/s 10 B which had already been reduced by the assessee - HELD THAT:- We find force in the submissions of Ld. Counsel for the assessee because sub section (4) mandates proportionate deduction on profits depending upon the quantity of export. However, the Assessing Officer has not discussed this issue in detail how much export was carried out by the assessee and whether any domestic sales were also there. Further, this issue has not been adjudicated by CIT (A) and the same required verification of facts. Therefore, in the interest of justice, we remand this issue to the file of Assessing Officer to determine the facts regarding how deduction u/s 10B was claimed and whether some exports were there and some domestic sales were also there and then decide the issue in accordance with law. Interest received from customers on delayed payments - 'business income' OR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount Brokerage on Ocean Freight 84,880 Sale of Sample 21,956 Processing Charges 57,970 Other 80 Total 1,64,886 4. After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that assessee has certain misc. receipts details of which are as under:- Brokerage on shipping freight ₹ 84, 880 Sale of samples ₹ 91,956 Processing charges ₹ 57,970 Others ₹ 80 Total ₹ 164,6886 The assessee has included these items in the profit for the purpose of computing deduction u/s 10B. In response to the show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer to allow deduction u/s 801b on these two items. 9. From the above it becomes clear that brokerage which is basically rebate allowed by the Shipping company as well as sale of sample is directly related to the business of the assessee and since the same has already been held to be part of the business income by the Tribunal, therefore, following the same we hold that these receipts are part of the business income and eligible for deduction u/s 10B. 10. As far as the issue regarding processing charges is concerned, the Hon' ble Punjab Haryana High Court in the case of CIT v Vallabh Yarns P. Ltd (supra) following the earlier decision in the case of CIT vs Impel Forge and Allied Industries Ltd 325 ITR 27 (P H) held that the assessee is entitled to deduction u/s 801B from the job work done for others. Therefore, following this ratio, even this issue is covered in favour of the assessee. 11 In view of the above discussion, we are of the opinion that assessee is entitled to deduction u/s 10B on all the items referred to in appeal. Therefore, we set aside the order of Ld. CIT (A) and direct the Assessing Officer allow deduction u/s 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. That the Ld. CIT(A)has erred in law and on facts while treating interest income amounting to Rs. as 13,30,172/- as Income from other sources instead of Income from Business and Profession 2. That the Ld. CIT (A) has erred in law and on facts while reducing profits of undertaking for calculating deduction u/ s 10 B by the following amounts: Particulars Amount (in R s.) Interest Income from employer loan 65705 Misc. Receipt 12095 Other Claim received 564789 6,42,589 3. That the Ld. CIT (A) erred in law and on facts while confirming the action of the Ld. AO for reducing the profits of undertaking for calculating deduction u/s 10 B by ₹ 1175877/- and ₹ 88590/- aggregating to ₹ 1264467/- which had already been reduced by the assessee. 19. Out of the above, ground Nos. I 2 was not pressed, therefore, the same are dismissed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest received from customers on delayed payments amounting to ₹ 14,14,575/- as 'business income' instead of 'income from other sources' as considered by the A. O. 2. That the Ld. CIT (A) has erred in law facts in directing the A.O. to treat the gain on forex fluctuation of ₹ 7,05,637/- to be the income eligible for deduction u/ s 10 B. 3. That the Ld. CIT (A) has erred in law facts in directing the A.O. to allow deduction u/ s 801B on the balance profit of the unit after deduction u/s 10B which is not admissible as per section 27. Ground No.1 : After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that assessee has received interest from customers amounting to R s. 14,14,575/-. This amount was held not eligible to be included in profits for the purpose of computing deduction u/s 10B. 28. On appeal, the Ld. CIT (A) decided this issue in favour of the assessee by following the decision of the Hon'ble Punjab Haryana High Court in the case of Phatela Cotgin Industries P. Ltd v CIT 303 ITR 411 (P H) 29. Before us Ld. DR suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame was not eligible for deduction and in this regard he relied on the decision of Hon'ble Bombay High Court in the case of CIT v Shah Originals 327 ITR 19 (Bom) 36. On the other hand Ld. counsel of the assessee submitted that no doubt this fact has not been examined by the Assessing Officer but in the earlier years the issue was decided in favour of the assessee. He further submitted that he would have no objection if the matter is remanded to verify this fact. 37. After considering the rival submissions carefully we find that in the case of CIT v Shah Originals (supra) the assessee has filed a return for the assessment year 2000-01. An order of assessment was passed under section 143(3) of the Income-tax Act, 1961 accepting the income as returned. The assessee claimed a deduction under section 80HHC in the amount of ₹ 4.16 crores on the basis that the export turnover amounted to ₹ 8.27 crores. According to the Revenue, during the previous year, the actual export turnover was ₹ 8 crores, the differential amount of ₹ 26.62 lakhs being on account of gains arising out of foreign currency fluctuation. The assessment was reopened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exchange fluctuation was not on account of a delayed realization of export proceeds. The deposit of the receipts in the EEFC account and the exchange fluctuation which had arisen there from could not be regarded as being part of the profits derived by the assessee from the export of goods or merchandise. The interest which had arisen as a result of the deposits maintained in the EEFC account could similarly not be regarded as representing the business income of the assessee. The business of the assessee consists of the manufacture and export of garments. The interest income which was generated from the deposits held in the EEFC account would not fall for classification as income under the head of business and profession but would fall for classification as income from other sources. The interest which accrued to the assessee on the deposits held in the EEFC account could not be treated as business income. 39. Therefore, it becomes clear that if amounts are kept in the EEFC account and some interest and fluctuation on such EEFC account is received, then the same is not eligible for deduction. However, we again clarify that if gain on account of foreign exchange f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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