TaxTMI 
TaxTMI 
2010 (8) TMI 1053
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....rs, software Products, Software Services, Agency commission, processing and Service charges and Micelllaneous. The assessee was duly represented in the assessment proceedings. After examination of all the books and materials produced, the assessment was completed. The assessing officer held deductions under chapter VIA not allowable as profits and gains of business works to loss and held that the assessee has concealed particulars of income/furnished inaccurate particulars of such income. Hence, he proceeded to issue a notice a under Section 271 (c). Aggrieved by the said order of assessment, the asessee preferred an appeal to the Commissioner of Appeals. The first Appellate Authority framed 30 issues and allowed the appeal in part upholding the contention of the assessee on certain issues and rejecting in respect of other issues. Aggrieved by the said order of the first Appellate Authority, Both the revenue as well as the assessee preferred appeals before the Tribunal. The Tribunal by a considered order dismissed the appeal filed by the revenue and partly allowed the appeal filed by the assessee. Aggrieved by the order of Tribunal the revenue is in appeal. 3. This appeal came t....
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....he matter to consider the question of bad debts. 7. In that view of the matter, we decline to answer the aforesaid substantial question of law But, affirm the order of remand to the Assessing Officer to consider the claim for bad debts, in the light of the observations made by the Tribunal and in the light of the judgments of the Apex Court in the case of Vijaya Bank Vs Commissioner of Income Tax and Another reported in (2010) 323 ITR 166 and T.R.F. Ltd. V/s Commissioner of Income Tax and Another reported in (2010) 230 CTR (SC) 14. 8. The Second substantial question of law framed is as under:- "25. Whether the appellate authorities were correct in holding that for the purpose of computation of deduction under section 80HHC of the Act excise duty should from part of the total turnover by ignoring the various judgments and the computation provided in section 80HHC read with section 80AB of the Act." 9. The Apex Court had an occasion to consider this question in the case of Commissioner of Income Tax Vs Laxmi Machine Tools 207 290 ITR 667 SC. After extensively dealing with the aforesaid section it ha held as under: "Tax under the Act is upon income, profits and gains. I....
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....ort turnover to total turnover. Sec.80HCC(3) was a beneficial section. It was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee having export business and domestic business the legislature intended to have a formula to ascertain export profits by apportioning the total business profits on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. This method earlier existed under Excess profits Tax Act, it existed in the business Profits Tax Act. Therefore, just as commission received by an assessee is relatable to export and yet it cannot from part of "turnover" exports and yet it cannot from part of "turnover", excise duty and sales tax also cannot from part of the "turnover". Just as interest commission, etc. did not emanate from the "turnover", so also excise duty and sales-tax did not emanate from such turnover. Since excise duty and sales-taxes did not involve any such turnover, such taxes had to be excluded. Commission, interest, rent, ets, do yield profits, but they do not partake of the character o....
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....g the year 1987-88, the asessee set p its own unit to manufacture fatty acid and glycerin. For the purpose of claiming deduction under Section 88HH and 801 of the Act, the assessee submitted a calculation of profit in respect of Fatty Acid and Glycerin Plant (FAGP) and soap unit. The assessee gave a working of the cost of fatty acid which was certified by its Cost Accountant. The Assessing Officer noted that the working of the interim transfer price fatty acid was scrutinized for the preceding assessment year. It was found that the assessee company was working out such transfer price by including inter alia the Mumbai octroi, the Amalaneroctroi and the transportation of fatty acids from Mumbai to Amalner to the cost of raw material and conversion charges of the raw materials into fatty acids. After examining the issue in detail, it was held, that the octroi at Mumbai Municipality, freight from Mumbai to Amalner and Amalneroctroi should be excluded for computing the transfer price of fatty acid from FAGP to toilet soap unit. Accordingly, after working out certain percentage of profits would stand reduced. The same was challenged by the assessee in appeal. The appeal came to be dismi....
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.... from the profit of business in accordance with the explanation (baa) of Section 80HHC of the Act. It is not in dispute that the assessee has claimed deduction u/s.80HHC of the Act in respect of the goods and merchandise which has been produced and manufactured in India and exported in addition to the income from sale of goods and merchandise. The assessee also received income from export of software service. In the earlier year it has claimed exemption. However for the current year, it did not claim any exemption u/s 80HHC of the Act. It claimed exemption u/s.10A of the Act and has been granted. This is very clear from the appellate order which is purely a question of fact. Ignoring this factual aspect, the Assessing Officer has reduced a sum of Rs. 8,29,32,396/- towards other income and Software income of Rs. 2,72,36,79,000/- from the profits and gainst of the business while computing the business profits for the claim under Section 80HHC. Therefore, it was held by both the appellate authorities that for the current assessment year when the said amount is not claimed as a deduction u/s. 80HHC and deduction was claimed u/s.10A of the Act, the question whether the assessee could cl....
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....ome other divisions are either eligible for deduction u/s. 80HHC, S.80-I and S.80-IA of the Act. Some of these are not eligible for any sort of exemptions/deduction. The assessee, as it is maintaining separate accounts for its divisions, is claiming exemptions and deductions under the Act. The accounts are audited and no defects have been pointed out by the Assessing Officer. The units claiming exemption u/s.10A of the Act are having substantial profits. 25. There is also a surplus fund with the eligible units under Section 10A of the Act. The actual interest paid for such unit on its turnover is calculated on its profits. The assessee is also required to maintain its corporate office and employ various persons. Insofar as the administration expenses are concerned, the assessee has allocated the same for various units and even in respect of the software units the expenses were allocated. However, when the claim of interest is made u/s.36(1)(iii) of the Act, it is borrowed for the purpose of business and it is not applicable for an undertaking claiming exemption u/s. 10(A) of the Act. However, the Assessing Officer as well as the Commissioner of appeals proceeded on the assumptio....
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....73,10,402 Net Loss (A+B) 9,47,59,760 27. A perusal of the aforesaid statement shows the Corporate Office has spent a sum of Rs. 7,37,98,774/- towards the expenses consisted of salaries etc. excluding interest less revenues. They allocated a sum of Rs. 4,93,49,416/- to the various sub-divisions other than the software export sub-division similarly they have recovered a sum of Rs. 3,70,00,000/- from software exports sub-division in the process the excess recoveries is 1,25,50,642/-. Further, a sum of Rs. 20,11,34,657/- is the interest out go to intra business and external agencies. The interest earned from deployment of founds intra-business and with external agencies is Rs. 9,38,24,255/-. The net interest outgo is 10,73,10,402/-. 28. It is this amount which they were claiming as deduction. In the light of the aforesaid facts it does not represent the expenditure incurred by the Corporate Office in respect of its sub-division. In those circumstances, the Assessing Officer and the First Appellate Authority were not justified in allocating the substantial portion of the amount as the expenses incurred in respect of Section 10A and disallowing the deducti....
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.... undertaking. The intention of the legislature behind introduction of Section 10A is clear to the extent that it requires earning of precious foreign exchange by setting up 100% eligible industrial units. Having undertaken the exports by setting up an eligible unit the assessee is eligible for the various export benefits. To deny exemption of such profit arising out of export benefits, therefore, amounts to defeating the purpose of the relevant section. After referring to the various judgments relied on by the parties, the Tribunal held the income arising from the sale of import entitlements is derived from the industrial undertaking eligible for exemption under Section 10A of the Act and, therefore, the Tribunal reversed the order of the Appellate Authority as well as the assessing officer and granted the exemption. 31. The learned counsel for the revenue challenging the aforesaid finding contended that, in order to claim exemption the income derived from the industrial undertaking should have direct or immediate nexus with the assessee's industrial undertaking. In other words, the source of income should not be beyond the first degree. As the said income is not derived from ex....
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....herefore, the only object of granting this incentive is to sale such import licence in the local market and the consideration released from such sale proceeds could be utilized in their activities so as to make their products competitive in the international market. In fact, the Finance Minister in his Budget Speech has categorically stated that there is imperative need to promote exports in lieu of our difficult balance of payments situation. To encourage establishment of export oriented industries in the Free Trade Zone, the Government proposes to allow complete tax holiday in respect of units set up in these Zones for an initial period of five years in lieu of other concessions. Further, the notification issued on 22.3.1994 in respect of Software Technology Parks (STPs) provide that, the Software Technology Park Scheme is a 100% export oriented scheme for undertaking of software development for export using data communication link or in the form of physical exports including export of professional services. An STP unit may import free of duty all types of goods including capital goods. The duty exemption shall also apply to goods imported by the Software Technology Parks of Indi....
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....ome from sale of old newspapers, etc., can deemed to be held as income derived from eligible export oriented units for claiming deduction under Section 10A of the Act? 36. This question of law arises in the context of the assessing officer holding that income earned from the sale of old newspapers, diesel drum, wooden racks, etc., aggregating to Rs. 21,144/- is not in the nature of income derived from the eligible unit. The Commissioner of Appeals held that the assessee does not require the above items to manufacture or produce the electronics or software items the income on account of which is claimed to be exempt under Section 10A. He further held that the assessee has not explained how the newspapers, diesel drum, wooden rocks, etc., are connected with the industrial activity. However, the Tribunal noticed that both the authorities had proceeded altogether on a wrong basis. The said amount represents the expenditure incurred by the assessee and he is claiming deduction as an expenditure. In that context the Tribunal has held that, while calculating the eligible profit the income which actually reduces such type of expenses should not be treated as other income not forming par....