TaxTMI 
TaxTMI 
2013 (1) TMI 400
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....relying on the decisions by the hon'ble apex court, as in the case of Pandian Chemicals Ltd. vs. CIT (2003) 262 ITR 278 (SC); CIT vs. Sterling Foods Ltd. (1999) 237 ITR 579 (SC) and Indian Leather Corporation Ltd. vs. CIT 222 ITR 552 (SC). In appeal, the same stood confirmed by the ld. CIT(A), discussing each of the incomes in detail and distinguishing the case law relied upon by the assessee, while at the same time also adverting to certain decisions. Aggrieved, the assessee is in second appeal. 3.1 Before us, the learned AR would seek to distinguish each of the decisions relied upon by the ld. CIT(A) with reference to the language of section 10B as it stands post amendment by Finance Act, 2000 w.e.f. 01.04.2001, i.e., A.Y. 2001-02 onwards. All the decisions, saving one, relied upon by the first appellate authority have been rendered under the pre-amended provision, which did not bear a provision corresponding to section 10B(4), which reads as under :- " Special provisions in respect of newly established hundred per cent export-oriented undertakings. 10B. (1) ............ (2) ............ (3....
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....ich only followed its earlier decision in case of CIT vs. Menon Impex Pvt. Ltd. (2003) 259 ITR 403, wherein the assessment year involved was A.Y. 1985-86. 3.2 The ld. DR, on the other hand, would submit that all the clauses of section 10B, other than section 10B(1), are only procedural in nature, and would not go to alter or detract from the basic premise of section 10B(1), the core provision, which provides or lays down the foundation as well as the ambit of the deduction, which would, thus, continue to be governed thereby (i.e., section 10B(1)). The said sub-sections, including section 10B(4), must, therefore, be read in harmony and not in derogation of section 10B(1). 4. We have heard the parties, and perused the material on record, as well as the case law cited. 4.1 Though both the parties have relied extensively on case law, the same (other than in the case of Jewelex International P. Ltd. (supra)), is primarily and essentially toward inclusion or otherwise of various incomes in computing the profits exigible to deduction u/s.10B(1), though rendered under the various other provisions. The scope and ambit of section 10B(4), with reference to which the assessee pleads i....
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....s any articles or things or computer software; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B , in the circumstances and within the period specified in that section ; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation.- The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. (3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by....
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....secondly, from its exports (s. 10B(1)). And it is this, the third step, that sec. 10B(4) is toward. Also, as a 100% E.O.U is licensed to undertake only exports, the other element of TT would normally include either the export proceeds that are not brought into India within six months (or such extended period as may be allowed) or the sale proceeds of a part of its production that it could under the terms of the 100% EOU license sell in the domestic market, or the sale of other products (of the assessee's undertaking) which arise incidentally to its operations in the domestic market. In fact, the second proviso to the provision is only by Finance Act 2002, w.e.f. 01/4/2003; its earlier version, since omitted, bearing a tolerance of up to 25% of the total sales for domestic turnover. Coming to the second step afore-said, the words 'business of the undertaking' are wider in ambit than the words 'profit of the undertaking' and could only have been so provided with a purpose. In our considered view, therefore, any profit which is derived from the business of the assessee's undertaking would qualify to be the profits of the business of the undertaking, and upon suitable apportionment ....
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....). Further, the amended provision, per sub-section (3), specifies the condition of the export being in convertible foreign exchange and bringing the export proceeds into India within six months (from the end of the relevant previous year) as a condition precedent for the application of the section itself. In fact, section 10B(4), as it now stands, is itself as substituted by Finance Act, 2001, w.e.f. 1/4/2001, prior to which it read as: "10B. (4) For the purposes of sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the assessee." The subsequent amendment, though, comes into effect from the same date (01/4/2001), so that sub-section (4) of sec. 10B, as substituted earlier by Finance Act, 2000 never came to be operative. It, nevertheless, brings forth the intention in restricting the eligible profits to that of the business of the undertaking only, i.e., the business carried on by the assessee thro....
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....ess income! (pg. 560). Though the issue here is not of the head of income under which the income would be assessable, its boils down to ascertaining if the interest income under reference is an independent receipt (which the income from the collateral security was found to be) or not. Subject to verification on this count by the AO, and returning a positive finding of the deposits not serving merely as a collateral, but extended as a part of a normative business arrangement by the bank with its clients for allowing such non-fund facilities for their business, the assessee's claim is allowed. b) Interest on FD and bank on surplus funds (Rs.2,71,217/-) : Even as admitted by the ld. counsel during hearing, the same is only on surplus funds for the time being and, therefore, cannot be said to be derived from the assessee's business. The same stands rightly excluded. c) Sales tax refund (Rs. 25,91,659) and excise duty draw back (Rs.5,92,095) : The same represents refund of sales-tax on purchases for an earlier period, being not payable by an export unit. The said benefit is only a part of the receipt of the business. No doubt, it arises from a government policy toward non-levy ....
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....Ltd. [2009] 125 TTJ (Jodhpur) 215, rendered under a cognate provision (section 10BA), also relied upon by the Revenue. In fact, no contrary decision has also been brought to our notice. d) Scrap sale (Rs.32,54,701/-)- : The appellant's case was found not acceptable in view of the decisions in the case of CIT vs. Sundaram Industries Ltd. [2002] 253 ITR 396 (Mad) and Fenner India Ltd. vs. CIT (2000) 241 ITR 803 (Mad), wherein the claim qua scrap sales stood disallowed in the context of sec. 80HH on the ground that the same could not be said to be part of the profits derived from the industrial undertaking. However, the qualifying profits per that provision are as derived from the assessee's industrial undertaking, the ambit of which could only be considered as enhanced by the use of the words 'profits of the business of the undertaking'. The scrap, as explained by the ld. AR, arises out of the manufacturing operations, and only goes to reduce the cost of production. In fact, the same, even where not sold, would necessarily be required to be valued at net realizable value, and which would be the going market rate less incidental costs, if any, and thus to the same, substantial effe....