TaxTMI 
TaxTMI 
2004 (11) TMI 286
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....a Export Processing Zone (NEPZ), Noida. The assessee had claimed deduction under section 10A of the Act on its entire income including miscellaneous income comprising of following items:- (Rs.) (i) Interest on Margin Money deposited with bank 7,91,813 (ii) Duty Drawback received 8,31,232 (iii) Sale of Export Quota 97,64,554 (iv) Sales tax reimbursement 4,04,602 (v) Exchange fluctuations 6,58,316 (vi) Insurance claim 60,526 (vii) Commission 8,668 1,25,19,711 3. Out of the above, the Assessing Officer did not allow the deduction under section 10A in respect of interest on margin money and oil sale of export quota. The Assessing Officer also did not allow the impugned deduction on sale of scrap. With regard to sale of scrap, the Assessing Officer denied the deduction by observing that it was not a profit or gain from export of article or thing manufactured by the assessee. With regard to quota sales, the Assessing Officer observed that the quota is allotted by the Government of India for export of article or thing but quota itself did not form an article or thing to be exported. Further, once quota for export was sold in the dome....
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....m of fixed deposit. The assessee earned interest on the said fixed deposit. Under such a situation can it be said that the assessee had placed the fixed deposit only to earn interest therefrom? In our opinion, the reply to this question has to be in the negative. The placing of the fixed deposit was a precondition and a precursor to the running of the industrial undertaking and earning of interest therefrom was merely incidental. Therefore, the interest income, in our considered view, has a direct nexus with the running of the industrial income. According to as the fixed deposit at best can be considered to be a foster mother for the interest income, but the real mother is the industrial undertaking itself, more so, when the funds for the deposit have also come from the credit facilities provided by the bank. The decision in the case of Dr. V.P. Gopinathan was in a different context. In the present case we are called upon to decide as to whether the interest income forms part of the profit of the industrial undertaking or not. In the light of the forgoing discussions, we have no hesitation in holding that it does and hence is eligible to deduction under section 10A of the Act. Sinc....
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....hirke Construction Equipments Ltd. [2000] 246 ITR 429 and on the decision of the Delhi Bench of the Tribunal in the case of Jindal Exports (P.) Ltd. v. Asstt. CIT [1989]31 ITD 217. 8. The main contention of the learned DR was that deduction under section 80HHC was available only with regard to the export of goods and merchandise whereas here the deduction was being claimed on an item which is neither. He supported the order of the CIT(A) on this issue. 9. We have given our due consideration to the alternative contention of the learned counsel. Let us first consider the decision in the case of Shirke Construction Equipments Ltd. In that case, one of the issues before the High Court was whether section 80AB was applicable to section 80HHC or not. The High Court had held that section 80AB did not control section 80HHC. The Supreme Court held in the case of IPCA Laboratories Ltd. v. Dy. CIT [2004] 266 ITR 521 that section 80HHC was governed by Section 80AB and that the decision of the Bombay High Court could not be said to be the correct law. Thus, the decision in the case of Shirke Construction Equipments Ltd. does not help the assessee in any way. 10. Next, reliance is placed on t....
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....t all income based. Therefore, the Tribunal had rightly remarked that if the undertaking had incurred a loss, then the benefit of section 10A was illusory, and in that case why should the assessee be denied deduction under section 80HHC which was turnover-based. On the other hand, for the year under consideration, deduction under section 80HHC is profit based. In other words, for the year under consideration, exemption under section 10A is of the profits of the undertaking and deduction under section 80HHC is also in respect of the profits earned by the assessee. Therefore, as per the provisions of section 10A and section 80HHC, as they stood for the assessment year in question, there is no question of allowing deduction under section 80HHC in respect of the profits which are exempt under section 10A and which do not form part of the total income of the assessee. Thus, on the face of it, it may appear that there is a binding precedent in the shape of the decision in the case of Jindal Exports (P.) Ltd., but as we have seen above, the setting in which the said decision was rendered was totally different. The complexion of the provisions of section 80HHC was totally different and the....
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....ssessee filed its return claiming exemption under section 10A on its entire income including that which was not derived from the industrial undertaking. If as per law, exemption under section 10A was not available on such income, the assessee now cannot claim the benefit of general tax concessions by way of a back-door entry. 13. Assuming that sub-section (7) of section 10A is not applicable, even then, in our view, the assessee cannot be granted deduction under section 80HHC. The proviso to section 80HHC(3) under which the deduction is claimed, can come into play only when deduction is claimed under the main provision of sub-section (3) of section 80HHC. The relevant proviso reads as follows: "Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent of any sum referred to in clause (iiia) (not being profits on sale of licence acquired from any other person), and clauses (iiib) and (iiic) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee." The proviso contemplates that first there have t....
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.... assessment year 2000-01 i.e., upto the year under consideration, section 10A contemplated total exemption of the profits of the industrial undertaking which meant that the profits would not enter the computation at all. It is only from assessment year 2001-02 that deduction under section 10A is contemplated in place of total exemption. Hence, so far as the assessment year under consideration is concerned, the above computation' is contrary to the provisions of section 10A of the Act. 15. We now take the second alternative for computing the deduction under section 80HHC: (a) Business Income after availing exemption u/s 10A Rs. 97,64,554 (b) Profits of business: Rs. 2,28,347 (c) Deduction eligible u/s 80HHC (2,28,347+95,36,207) Rs. 97,64,554 16. Thus, (a) and (c) will even out and the taxable income will be nil. However, the above computation is not in accordance with the provisions of section 80HHC(3). The profits of the business computed at Rs. 2,28,347 are not computed in accordance with any of the clause (a), (b) or (c) of section 80HHC(3). Of course, clauses (b) and (c) are not applicable because the assessee is neither a 100 per cent trader exporter, nor a....