TaxTMI 
TaxTMI 
2016 (5) TMI 953
X X X X Extracts X X X X
X X X X Extracts X X X X
....the business is manufacturing of control cables, rubber products and trading of heavy earth moving spares. The observation of the AO was that the assessee was having three units, namely, a) Excel Controlinkage Pvt. Ltd., b) Vaav Engineers Products Pvt. Ltd., c) G-three-M Technologies India Pvt. Ltd. It has also been mentioned by the AO that the assessee was claiming deduction u/s 10B of Rs. 33,52,127/- for the business of Unit Vaav Engineers Product Pvt. Ltd. The assessee is claiming deduction u/s 80IB of Rs. 8,52,865/- in respect of Unit G-three-M Technologies India Pvt. Ltd.. The claim of deduction u/s 80IB was restricted by the AO to Rs. 6088/-. According to the AO the following receipts/income were not derived from the industrial undertaking, therefore, not eligible for deduction u/s 80IB: G-Three-M Freight export received 263331.25 Interest received 39995.00 DEPB Received 1046433.00 Foreign Exchange Fluctuation 205090.70 Misc. income - Total 15,54,849.95 3. When the matter was carried before the first appellate authority, the observation of the learned CIT(Appeals) in respect of "freight export receipt" was that the assessee had spent Rs. 28,82,195/- and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... account of fluctuation of the Indian Currency with respect to foreign currency as on the date of receipts of payment. The Assessee makes bills at the currency rate prevailing on the date of the sale and when assessee actually receives the payment the rate may go up or reduced. Hence assessee receives more or less money than the actual bill amount. Reliance was placed on ACIT Vs. Dharampal Premchand Ltd., (2008) 113 TTJ (Del) 290." 6. However, learned CIT(Appeals) was not in agreement by referring the decision of Liberty India 317 ITR 278 and Sterling Foods 237 ITR 579 and has held that the proximate as well as immediate source of interest received, DEPB received, foreign exchange fluctuation received were not derived from the business undertaking of the assessee. There was no direct nexus between the profits and gains of the industrial undertaking. He has held that the action of the AO was in order. However, in respect of freight export earned, he has directed that the amount was required to be adjusted from the sale value. Hence the eligible business would stand reduced accordingly. Since the learned CIT(Appals) has not granted relief in respect of the above mentioned receipts ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f CIT vs. Rachana Udhyog 230 CTR 72 wherein it was held that the law declared by the Hon'ble Supreme Court in the case of Liberty India 317 ITR 218 the deduction u/s 80IB in respect of duty draw back is not entitled for claim of deduction u/s 80IB. Respectfully following this decision, this part of the ground is dismissed. 7.3 The next issue is in respect of "foreign exchange fluctuation" amounting to Rs. 2,05,090/-. On examination of the facts and the precedent cited of Dharampal Premchand 113 TTJ 290 (Del.) we are of the opinion that this issue is to be decided in favour of the assessee following that very decision of Bombay High Court pronounced in the case of Rachana Udyog (supra) wherein it was observed that when the sale proceeds of goods exported are received in India in convertible foreign exchange the rupee equivalent of the sale proceed is liable to vary, consequent upon the fluctuation in the rate of foreign exchange. The Court has, therefore, held that the exchange rate fluctuation was directly related to the export of goods, hence eligible for deduction u/s 80IB. As a result, this part of the ground is allowed in favour of the assessee. 8. To sum up, ground No. 1 is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e total turnover. According to him, sub-section (4) does not require an assessee to establish a direct nexus with the business of an undertaking. The case law relied upon was Maral Overseas Ltd. 146 TTJ 129 (Indore) (S.B.) The extract of the held portion is worth reproduction : "It is clear from the plain reading of section 10B(1) of the Act that the said section allows deduction in respect of profits and gains as are derived by a 100% EOU. Further, section 10B(4), of the Act stipulates specific formula for computing the profit derived by the undertaking from export. Section 10B sub-section (1) allows deduction in respect of profits and gains as are derived by a 100% EOU. Section 10B (4) lays down special formula for computing the profits derived by the undertaking from export. Thus, sub-section (4) of section 10B stipulated that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of turnover to the total turnover. Thus, not -with-standing the fact that sub-section (1) of section 10B refers the profits and gains as are derived by a 100% EOU, yet the manner of determining such eligible profits has been statutor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e same cannot be excluded." 14. From the side of the appellant, few more decisions have also been cited. However, considering the totality of the precedents quoted before us, we hereby hold that the issue of DEPB while calculating deduction u/s 10B stood covered in favour of the assessee. As a result, this part of the ground is allowed in favour of the assessee. 15. In respect of the "foreign exchange fluctuation" we have already taken a view in favour of the assessee. Moreover our attention has also been drawn on a decision of Hon'ble Bombay High Court pronounced in the case of Badridas Gauridu (P) Ltd. 261 ITR 256 (Bom) wherein it was held that the foreign exchange fluctuation gain is intimately connected to the export business. As a result, this part of the ground is allowed in favour of the assessee. 16. As far as the question of "miscellaneous income" of Rs. 33,326/- is concerned, we are of the view that in the absence of any evidence on record that such type of alleged income had any bearing with the business income of the undertaking therefore, the Revenue authorities were justified in not granting deduction u/s 10B on this income. Even if it was related to the cenvat cr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Hon'ble High Court has held that the expenses attributable to any other unit or Head Office expenses which have no relevance to the industrial undertaking, cannot be deducted in respect of the said undertaking while computing the profits and gains of the undertaking. Unless and until the expenditure incurred relates to the undertaking the same cannot be apportioned. We have also perused the decision of Hindustan Gum & Chemical Ltd. 23 SOT 143 (Kol) wherein an opinion was expressed in respect of travelling and conveyance expenditure of 100% EOU and held that there was no justification to apportion the expenditure specially when it was established that the travelling and conveyance was debited to a separate account and travelling was not required in respect of 100% EOU. 20.1 In the light of these decisions, we hereby conclude that the Director's remuneration was debited to an amount of Rs. 54 lakhs in Excel Controlinkage Pvt. Ltd. and Rs. 4,80,000/- debited to G-Three-M Technologies but no amount at all was debited to Vaav Engineers Products Pvt. Ltd. Directors are responsible to look after the business activity of all the three units, therefore, their remuneration is required to....