TaxTMI 
TaxTMI 
TaxTMI 
2015 (2) TMI 102
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....assessee claimed deduction u/s 10B by, inter alia, considering foreign exchange rate difference of Rs. 32,35,700/- as eligible for deduction. The AO, going by the phraseology used in section 10B(1) being, profits and gains as are 'derived by' an eligible undertaking from export of eligible articles, came to hold that the foreign exchange difference could not be included in the eligible amount. He, therefore, held that such amount of Rs. 32.35 lac was liable to be included in the domestic sales. The ld. CIT(A) approved the view taken by the AO on this point. 3. We have heard the rival submissions and perused the relevant material on record. There is no dispute on the fact that the foreign exchange difference arose on account of transactions....
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....l turnover, in the denominator will also include the effect of foreign exchange fluctuation difference. We, therefore, sum up by holding that the amount of foreign exchange fluctuation difference should be included in the 'export turnover' and 'total turnover' and it should be excluded from the 'domestic turnover' as was done by the AO. 4. The second issue taken up by the assessee is against the treatment of scrap sale as domestic sale. The AO, while computing deduction u/s 10B, considered scrap sale amounting to Rs. 31,84,869/- as part of domestic turnover. The ld. CIT(A) approved the view taken by the AO on this point. 5. After considering the rival submissions and perusing the relevant material on record, we find that this issue is no ....
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.... 10B on it. The ld. CIT(A) echoed the assessment order on this point. 7. After considering the rival submissions and perusing the relevant material on record, we find that the AO held interest income as ineligible for deduction under section 10B(1) as it was not 'derived from' the eligible business. The view point of the AO would have been correct if there had been no further elaboration of the expression 'such profits and gains as are derived by a hundred per cent export oriented undertaking from the export of articles or things.......'. The position under consideration is not akin to some of the sections employing this expression without any further amplification of the same. Sub-section (4) of section 10B gives meaning to the expression....
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.... by holding that the interest income having close nexus with the business activity of the assessee is assessable as income from business and, hence, eligible for the benefit u/s 10A and section 10B. In view of the above discussion, we hold that the assessee is entitled to deduction u/s10B of the Act in respect of the interest income earned on FDRs made for the purposes of keeping margin money or for availing any other credit facility from banks. 8. The impugned order on the issue of deduction u/s 10B is set aside and the matter is sent back to the AO for computing deduction u/s 10B afresh in conformity with our above findings and conclusions. 9. The next ground is against not allowing of deduction of Rs. 14,53,153/- on account of interest....
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....on u/s 24(b) of the Act. The view point of the assessee to this extent is ergo accepted in principle. However, we are unable to calculate such amount of interest with precision. Under such circumstances, the impugned order is set aside on this score and the matter is sent back to the AO for verifying and ascertaining the amount of loan utilized for the building in respect of which rental income assessable under the head 'Income from house property' was earned and, accordingly, allowing deduction towards such interest u/s 24(b) of the Act. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such determination. 11. The next ground is against the ad hoc disallowance of Rs. 1 lac. The assessee claimed deduc....
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.... the businessman to decide as to whether a particular expenditure is necessary or not. He is supposed to confine himself only in determining the deductibility of the expenses incurred by the assessee as per law. Coming to the second aspect about the non-availability of bills, we find that pages 72 and 73 of the paper book are two invoices for Rs. 66,000/- and Rs. 20,400/- in respect of 110 pieces of pressure cookers and 120 pieces of gift bags. In view of the fact that complete details in respect of Diwali expenses are available and further there is no otherwise disability on such deduction, we find no reason to make or sustain any disallowance in this regard. This ground is allowed. 15. The next ground is against the ad hoc disallowance o....