TaxTMI 
TaxTMI 
2006 (6) TMI 248
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....come available. In no case the source of import entitlements can be said to be the industrial undertaking of an assessee. Therefore, it was held that for the application of the words "derived from a direct nexus should exist between the profits and gains and the industrial undertaking". The assessee placed reliance on the decision of the Delhi Bench of the ITAT in Dy. CIT v. Metro Tyres Ltd. [2001] 79 ITD 557 where it was held that benefit of section 80-IB is available with respect to the duty drawback received by the assessee. The Assessing Officer was of the view that duty drawback scheme and import entitlements scheme are alternative schemes and nature of both the schemes is the same being to give boost to the exports. In view of this the decision of the Hon'ble Supreme Court covers not only the income arising on account of sale of import entitlements but also the duty drawback income. He accordingly excluded the duty drawback income from the profits derived from the industrial undertaking and allowed deduction under section 80-IB on the balance amount of profits. 5. In appeal it was argued that the scheme of duty drawback was different from the import entitlement scheme. It ....
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....e case of India Gallatine & Chemicals v. ITO [IT Appeal Nos. 1638 and 1639 of 1986 order dated 28-11-1998] and it was held that duty drawback constituted income/profit derived from industrial undertakings. In view of this the ld. CIT(A) held that the assessee was entitled to deduction under section 80-IB in respect of duty drawback received. Accordingly, he directed the Assessing Officer to recompute the deduction admissible under section 80-IB of the Act. 7. The ld. DR submitted that the Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 held that interest derived by the industrial undertaking of the assessee on deposits made with the Electricity Board for the supply of electricity for running the industrial undertaking could not be said to flow directly from the industrial undertaking itself and was not profits or gains derived from the undertaking for the purpose of the special deduction under section 80HH. Similarly, in this case also the duty drawback received by the assessee was not derived from running the industrial undertaking and could not be said to flow directly from the industrial undertaking itself and was not profits or gai....
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....essment year 1996-97, the Assessing Officer had allowed the deduction under section 80-IA on the interest on the margin monies. The point argued before us on behalf of the department, however, was that immediate source for the interest is not the industrial undertaking but the FD or margin monies. It is somewhat difficult to agree with this contention in the light of the facts found. The assessee was obliged to open letters of credit because of the exigencies of the business. It is not as if the assessee had surplus funds which were invested in banks and earned interest. But for the business obligations, it is doubtful whether the assessee would have made the deposits. The margin monies are thus part of business transactions. The interest on the margin monies has also been accepted as business income and has not been assessed under the head 'Other sources'. Since the deposits are thus closely and inextricably linked with the carrying on the business, the interest has to be considered as profits derived by the industrial undertaking. In this connection we must notice that section 80-IA as it stood at the relevant time, referred to 'profit and gains derived from any business of an in....
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..... On the other hand, the assessee-company was under business compulsion to have deposit with 'D' Ltd. and its associate concerns. During the year under consideration, the assessee had paid interest on the loan and other credit facilities extended by bank and 'D' Finance Ltd., etc. As the assessee was under the business obligation to have security deposit with 'D' Ltd. and its associates, it had earned interest income on such deposits. Such deposits with 'D' Ltd. and its associates were under the business compulsion. Such deposits were given in consideration of providing bank guarantee, organizing finance and providing franchise to set up the industry by the assessee-company. There was a direct and proximate nexus between the interest earned on such deposit and interest paid on the funds borrowed for running of the business of industrial undertaking. Since both the aforesaid decisions of the Tribunal are rendered in the context of deduction under section 80-IA and there being no decision to the contrary pointed out by the ld. DR which is directly on this issue, we respectfully follow the same to hold that the assessee was entitled for deduction under section 80-IA on the interest....
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....is reimbursement of expenses already incurred and such expenses of customs/excise duty is already debited in the profit and loss account by inclusion in the purchase account and not a fresh source of income to the industrial undertaking. The nature and character of this reimbursed amount will remain the same as that of the original amount which has been reimbursed. Thus, as the payment of excise duty and custom duty reduced the income deductible under section 80-IB of the Act, the reimbursement of the same will go on to increase the income deductible under section 80-IB of the Act. The ratio of the decision of the Hon'ble Supreme Court in the case of CIT v. Sterling Foods [1999] 237 ITR 579 is found not applicable in the facts of the present case. In this case before the Hon'ble Supreme Court, the assessee was engaged in processing prawns and other seafood. It also earned some import entitlements granted by the Central Government under the Export Promotion Scheme. Such import entitlements could be used by the assessee itself or could also be sold to others. The assessee sold the import entitlements and in respect of such sale proceeds also claimed deduction under section 80HH of th....
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....g out the deduction under section 80HHC. We find that this issue stands covered by the decision of the Hon'ble Bombay High Court in CIT v. Sudarshan Chemicals Industries Ltd. [2000] 245 ITR 769 and the decision of the Hon'ble Calcutta High Court in the case of CIT v. Chloride India Ltd. [2002] 256 ITR 625 . It was held that in computing the special deduction under section 80HHC of the Income-tax Act, 1961, in respect of profits from export business, while determining the proportion of export turnover to total turnover, since octroi, sales tax and excise duty are excluded from the export turnover, they should be excluded from the figure of "total turnover". Therefore, the ground of appeal of the Revenue is dismissed. 15. We now take up the assessee's appeal. 16. The second ground of appeal relates to taking the business profits as per Explanation (baa ) to section 80HHC at Rs. 67,20,827 in place of Rs. 1,12,06,430. The brief facts of the case are that the Assessing Officer took the profit for the purpose of computing deduction under section 80HHC as under :- Profits under the head 'business' Rs. 1,61,30,730 as per the computation Less : 90% of Duty Drawba....