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TMI Blog2022 (7) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation for Assessment Year 2008- 09 & 2009-10 wherein disallowances u/s. 14A, 10B and 80IA were made. The A.O. following the Hon'ble Supreme Court judgment in the case of Liberty India Ltd. vs. CIT 317 ITR 218 (SC) held that the profits eligible for deduction u/s. 10B should be derived by the undertaking from 'exports' of articles or things and should not be incidental to it thereby the claim of deduction u/s. 10B on sale of scraps from EOU unit of Rs. 1,06,232/- was denied. Similarly, rate fluctuation of Rs. 36,16,223/- on the foreign currency loan availed exclusively for the business of CPC Blue Division (100% EOU) and Rs. 30,27,488/- claimed under 80IA on Wind Mill Unit was also denied by the Assessing Officer. 3. Aggrieved against the same, the matter travelled up to the Tribunal. The Co-ordinate Bench of this Tribunal in ITA No. 471/Ahd/2015 dated 10.08.2017 set aside the matter back to the Assessing Officer as follows: 12. While scrutinizing the claim of deduction u/s. 10B of the Act, the A.O. noticed that the assessee has claimed exemption in respect of income from sale of scraps. The A.O. was of the opinion that the assessee is not entitled for exemption for such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 1,01,840/- was received as proceeds on sale of scrap which pertained to Machinery installed at assessee's EOU unit. The assessee also submitted the ledger account of the sales of scrap of CPC Blue division and invoice dated 24.07.2009 whereby the said scrap was sold to M/s. Hanuman Traders having TIN No. 24210901626. However, the A.O. has not accepted the above facts and held that the scrap pertained to Machinery installed at EOU unit but not proved that the income generated out of manufacturing activity. Further, the assessee did not furnish any concrete evidences which show that the scrap was generated out of manufacturing activity. Accordingly, the claim of deduction of Rs. 1,06,232/- claimed u/s. 10B was denied by the Assessing Officer. 4.1. Regarding disallowance of deduction of Rs. 36,16,223/- u/s. 10B, the assessee claimed that it availed the loan was taken from State Bank of India in the Financial Year 2006-07 for purchasing Fixed Asset. The said loan was converted into foreign currency loan exclusively for the business of CPC Blue division which is 100% EOU and the foreign exchange rate fluctuation incurred by the assessee for the business purpose, the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled for deduction u/s. 80IA of the Act without any specific finding / justification for the disallowance. It is submitted that Exchange Rate Fluctuation earned from the Wind Mill Unit was intrinsic part of the business Income and allowable u/s. 80IA of the Act and same be allowed now. 6. The order passed by the Ld. CIT(A) is bad in law and contrary to the provisions of law and facts to the extent of above grounds of Appeal. It is submitted that the same be held so now. 7. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing of appeal. 6. The Ld. Counsel Mr. Sunil Talati submitted that both the Assessing Officer and ld. CIT(A) erred in denying the amount of Rs. 36,16,223/- being Foreign Exchange Fluctuation on foreign currency loan for the purpose of deduction u/s. 10B and Rs. 30,27,488/- being foreign exchange fluctuation rate on the Wind Mill unit and claim of deduction u/s. 80IA of the Act. The ld. Counsel further submitted that the issue of Foreign exchange fluctuation rate and the claim of deduction under 10B is being settled by the jurisdictional High Court in assessee's own case reported in (2018) 400 ITR 138 (Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency arises out of the export business of the assessee and does not change the character of the income from the assessee's export business. 7. The above view of the court finds support in the decision of the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Commissioner of Income-tax, [2010] 322 ITR 180 (SC), wherein the court held that the loss suffered by the assessee, maintaining accounts regularly on mercantile system and following accounting standards prescribed by the Institute of Chartered Accountants of India (ICAI), on account of fluctuation in the rate of foreign exchange as on the date of balance sheet was an item of expenditure under section 37(1) of the Act, notwithstanding that the liability had not been discharged in the year in which the fluctuation in the rate of foreign exchange occurred. 8. Section 10B of the Act provides for deduction of such profits and gains as are derived by a hundred per cent export- oriented undertaking from the export of articles or things or computer software for the period and subject to the conditions stipulated there under. Therefore, the deduction is permissible if such profits and gains as are derived from the export o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art appropriate VAT tax, Additional VAT tax were collected on the above sale of MS Scrape. Further this invoice also carries the buyers TIN Number. Thus the Assessing Officer without considering any of this fact simply held that the scrap pertained to Machinery installed at EOU unit and not generated out of manufacturing activity and thereby confirmed the addition. This clear cut fact that the above scraps have been generated out of the EOU unit and usage of Dies and Chemicals for a longer period. As it can be seen from the invoice, 4890 Kg MS Scrape Heavy were being disposed by the assessee, which is a normal thing in the manufacturing activity of dies and chemicals. Without appreciating the same, the A.O. is not correct in disallowing the claim made by the assessee. Therefore the same should be allowed for the purpose of claiming non deduction u/s. 10B of the Act. 7. Per contra, the ld. D.R. Mr. V.K. Singh appearing for the Revenue supported the order of the lower authorities however could not produce any contra judgment in support of its claim. 8. We have given our thoughtful consideration and perused the materials available on record. As far as foreign exchange fluctuation ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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