AI Drafter 
TaxTMI 
TaxTMI 
2012 (4) TMI 675
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.... Contribution to P.F. of Rs. 40,69,602/- and contribution to ESIC of Rs. 7,480/- that were paid beyond the date provided in the relevant statute. The AO invoked the provisions of section 56(2)(ic) and treated the disallowance as made above as income from other sources. Before the CIT(A), the assessee submitted that out of the disallowance of of Rs. 7,480/- made by the AO, payment of ESIC of Rs. 5936/- was made within the grace period provided in the relevant statute as under: Month Amount Due Date (including 5 grace days) Paid Payment date June 04 772 21.07.2004 772 17.07.2004 July 04 690 21.08.2004 690 17.08.2004 Aug.04 623 21.09.2004 623 15.09.2004 Sep.04 633 21.10.2004 633 19.10.2004 Oct.04 516 21.11.2004 516 13.11.2004 Nov.04 550 21.12.2005 550 15.12.2004 Dec.04 538 21.01.2005 538 15.01.2005 Jan.05 538 21.02.2005 538 17.02.2005 Feb.05 538 21.03.2005 538 16.03.2005 Mar.05 538 21.04.2005 538 20.04.2005 Total 5936 Further, ....
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.... by the order of CIT(A), the revenue has raised Gr.No.1 before the Tribunal. 7. At the time hearing the parties agreed that the issue raised by the Revenue is covered against the revenue by the decision of the Hon'ble Delhi High Court. In CIT vs. AIMIL Limited The Hon'ble Delhi High Court in ITA No. 1063 of 2006 ITA No.755 of 2008 ITA No. 204 of 2009 ITA No. 1214/2008 with ITA No. 1246/2008 ITA No. 50/2009 ITA No. 78/2009 judgment dated December 23, 2009 had to deal with a case of disallowance u/s.36(1)(va) of the Act. The Hon'ble Court discussed the provisions of S. 2 (24) (x) which provides that amounts received by an assessee from employees towards PF contributions etc shall be "income" and S. 36 (1) (va) which provides that if such sums are contributed to the employees account in the relevant fund on or before the due date specified in the PF etc legislation, the assessee shall be entitled to a deduction. The Court also noticed that the second Proviso to s. 43B (b) provided that any sum paid by the assessee as an employer by way of contribution to any provident fund etc. shall be allowed as a deduction only if paid on or before the due date specified in 36(1)(va). After the ....
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....ts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the Assessing Officer to reduce the expenditure amounting to Rs. 3,53,56,6481- froth total turnover while computing deduction u/s.10A, without appreciating the facts and circumstances of the case and in law" 10. The facts of the case relating to this issue under consideration in brief are that the assessee was engaged in the business of export of computer software. The Assessee was entitled to claim deduction u/s.10-A of the Act. While claiming the eligible deduction u/s.10-A of the Act, the assessee deducted the following expenditure from the total turnover & export turnover: S.No. Particulars Amount (Rs.) 1 Travelling Expenses 1,15,73,886/- 2 Tele Communication Expenses 57,62,895/- 3 Marketing Fees 1,29,90,278/- 4 Professional Fees 6,68,102/- 5 Salaries 20,28,520/- 6 Miscellaneous Expenses 6,35,473/- 7 Marketing Cost 4,88,724/- 8 Conveyance 41,370/- 9 Software Expenses 11,67,400/- Total: 3,53,56,648/- U/S.10-A of the Act, a deduction of such profits and gains as are derived ....
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....delivery of the computer software outside India; and expenses, if any, incurred foreign exchange in providing the technical services outside India. The Assessee thus argued that the basis for calculating Export Turnover and Total turnover should be the same. The Assessee submitted that in view of above, while computing Total Turnover these items should also be excluded. Since the definition of Export Turnover exclude these items, on the principle of parity, it is necessary that while computing the Total Turnover as well these items should be excluded. Both the Export Turnover and the Total turnover should be calculated on the same basis. The Assessee pointed out that the issue has already been considered and decided accepted the above stand on behalf of the Assessee in the following cases: ITA NO. 5235&5679/MUM/2010(A.Y. 2005-06) (i) Kadri Mills (CBE) Ltd. Vs. Jt. CIT 76 TTJ 38 (Chennai) (ii) ITO vs. Sak Soft Ltd. 20 DTR 514/ 313 ITR 353 / 30 SOT 55 (Chennai) (SB). In the aforesaid decisions, it was held that for the purpose of applying the formula under sub section (4) of section 10B, the freight telecom charges or insurance attributable to the delivery of articl....
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....should also be interpreted in the same manner. Thus, the two items of expenses referred to in the definition of "export turnover" cannot form part of the total turnover since the receipts by way of recovery of such expenses cannot be said to represent consideration for the goods exported since total turnover is nothing but the aggregate of the domestic turnover and the export turnover. In the formula prescribed by section 10B(4) the figure of export turnover has to be the same both in the numerator and in the denominator of the formula. It follows that the total turnover cannot include the two items of expenses recovered by the assessee and referred to in the definition of "export turnover"." The aforesaid decision had been considered and affirmed by the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. & Ors. 2011- ITA No.655/Bang/11 TIOL-684-HC-KAR-II wherein it has been held that for the purpose of computation of deduction u/s. 10A of the Act, if any expenditure is excluded from the export turnover, the same has to be excluded from the total turnover also. A similar view has also been taken by the Hon'ble Bombay High Court in the case of Gem Plus Jewellery I....
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....income had arisen from business activities being interest on margin money, LC margin, F.Ds. kept for running of the business, interest on loans advanced to staff etc. The Assessee submitted that these incomes were to be treated as business income as held in CIT Vs. Indo Swiss Jewels Ltd. (284 ITR 389), CIT Vs. Govinda Choudhary & Sons (203 ITR 881) (SC), ACIT Vs. Gallium Equipment Pvt. Ltd. (254 ITR 1) (Del), CIT Vs. Punit Commercial Ltd. (245 ITR 550) (Bom), Sovika Infotek Ltd. Vs. ITO (19 SOT 412) (Born), UCB India (P)Ltd. Vs. ACIT (30 SOT 95) (Bom). Without prejudice, it was argued that the appellant had debited interest paid of Rs. 1,34,97,592/- in the P&L a/c. which was to be set-off against interest earned as the interest expenses had direct nexus with the interest income and only the net interest income after such set off has to be excluded from the profits of the business eligible for deduction u/s.10-A of the Act. In this regard, the Assessee relied on the decisions in CIT Vs. Pink Star (245 ITR 757) (Born), DCIT Vs. Diamond Creek (82 ITD 291) (Born), CIT Vs. Paramount Premise (P) Ltd. (190 ITR 259) (Born), CIT Vs. Nagpur Engineering Co. Ltd. (245 ITR 806) (Born). 19. T....
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....le Bombay High Court in the case of CIT vs. Swani Spice Mills Pvt. Ltd. (2011) 12 Taxman.com 432(Bom), wherein it was held that surplus funds of an assessee utilized for discounting bills on which assessee receives discounting charges have to be assessed as income from other sources. The Assessee in the case before the Hon'ble Bombay High Court was carrying on business of export of seeds, spices and similar goods. Export bills of Assessee against fulfillment of export orders were sent for collection to banks and assesse received discounted vale of sale proceeds. According to Assessee, moneys which were so received were utilized for repayment of its loans. If the Assessee had no export orders and if there was still balance, the Assessee used its funds to discount purchase bills of private parties for short periods of three to five weeks. On such activity by utilizing surplus funds, the Assessee received interest. The question before the Hon'ble Bombay High Court was whether the interest income was "income from business" or "income from other sources". The Hon'ble Bombay High Court held that the interest income did not have a direct and proximate relationship with export activity and....
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....cified in items A to E of Section 14. Hence, income can fall for classification under the head "Income from other sources" if the income is of a kind which is not to be excluded from total income and if it is not chargeable to income-tax under any of the heads specifically enumerated in items A to E of Section 14. The question of classifying a head of income under section 56 can, therefore arise where it does not form part of any of the specifically enumerated heads." In Para 27 the Hon'ble Court observed as follows: "27. Ordinarily, where an Assessee invests funds surplus to the business and earns interest, such income does not constitute business income but falls under the head "Income from other sources". Merely because an Assessee carries on business and the income of the business is invested in deposits, that would not result in an inference that the return on the investments must partake of the character of business income. Every income which is earned by an assessee who carries on business is not business income. On the contrary, the position in law is that it is only where income earned on account of interest springs out of or emanates from the business activity....
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....uction claimed u/s. I0A to Rs. 1,41,79,046/- as against Rs. 2,70,38,837/- claimed by the assessee. The restriction in the deduction claimed u/s. I OA was due to the following (i) Inclusion of Miscellaneous Income, Finder Fees & Marketing fees in Total Turnover, (ii) Set-off of Unabsorbed Depreciation. 25. (i) Inclusion of Miscellaneous Income, Finder Fees & Marketing fees in Total Turnover: The Assessing Officer held that these receipts were incidental to the business of the assesse and therefore includible in the total turnover of the STPI Unit. The assessee submitted that as per section 1OA(4), "For the purposes of (sub-section(1) and (IA)], the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, 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 undertaking". Thus, section 10A refers to the total turnover of the business of the undertaking. The Industrial Undertaking is engaged in the business of Development of Software, CAD / CAE Services, Tra....
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....t claimed any deduction u/s.1OA. Hence, separate unit wise depreciation as per I.T. Act, has not been worked out. Thus, it cannot be held that the entire unabsorbed depreciation relates to the STPI Unit. It was argued that Unabsorbed Depreciation of past year should not be considered while computing Eligible Profits. It was argued that Section 1OA is an incentive or relief section. It should be liberally construed such that it does not act as a punitive section. The legislature itself regards the section to be a "deduction section" and not an exemption section. Being a deduction section, it should be restricted in application to a case of positive income earning deduction and should not be meant to cover the negative result. In case of an assessee running more than one undertaking, one of them being non-eligible undertaking, the assessee can set-off past losses / depreciation against the profits of non-eligible undertaking in terms of section 72 read with CBDT Circular No.2 dated 7.7.1955. 29. It was further submitted that the provisions of section 1OA(6) do not create embargo in the matter of set-off of loss carried forward earlier year/s against profit of Eligible Undertaking ....