TaxTMI 
TaxTMI 
2018 (3) TMI 793
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.... u/s. 143(3) r. w. s. 144C(1) of the Act, determining its total income at Rs. 10. 10 crores. 2. First ground of appeal is about denying the deduction, under section 10B of the Act, with respect to interest income of Rs. 9. 81 lakhs. During the assessment proceedings, the AO found that the assessee had earned interest on deposits and out of the same and amount of Rs. 9, 81, 482/-had been included in the profit from Export Oriented Unit (EOU). He directed the assessee to explain as to why the income on deposits should not be excluded while computing the deduction under section 10B of the Act. After considering the submissions, the AO referred to the case of Sterling Foods and held that there was no direct nexus between the interest income an....
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....had dealt with the identical issue. We are reproducing the relevant portion of the orders of the Tribunal and it reads as under: "77. .... ...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. Thus, the provisions of sub-section (4) of section 10B of the Act mandate that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of export turnover by the total turnover. Thus, even though sub-section (1) of section 10B refers to profits an....
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....ble profits has been statutorily defined in sub-section (4) of section 10B of the Act. As per the formula stated above, the entire profits of the business are to be taken which are multiplied by the ratio of the export turnover to the total turnover of the business. Sub-section (4) does not require an assessee to establish a direct nexus with the business of the undertaking and once an income forms part of the business of the undertaking, the same would be included in the profits of the business of the undertaking. " The Hon'ble Karnataka High Court in the case of Hewlett Packard Global Soft Ltd. (supra) has deliberated upon the issue in the paragraph number 35 and it reads as under: "35. The Scheme of Deductions under Chapter VIA in Se....
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....t from 'derived from' employed in Section 80-HH etc. Therefore all Profits and Gains of the Undertaking including the incidental income by way of interest on Bank Deposits or Staff loans would be entitled to 100% exemption or deduction under Section 10-A and 10-B of the Act. Such interest income arises in the ordinary course of export business of the Undertaking even though not as a direct result of export but from the Bank Deposits etc. , and is therefore eligible for 100% deduction. " Respectfully, following the above, we decide first ground of appeal in favour of the assessee holding that the AO should not have denied the deduction under section 10 B of the Act in respect of interest income of Rs. 9. 81 lakhs and from business deposits....