TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1535
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.....CIT(A) partly upheld such adjustment and partly deleted. Therefore, both the parties are impugning orders of the ld.CIT(A) on this issue. We deem it appropriate to take this issue together raised in all these three years. 3. Brief facts of the case are that returns of income for the assessment years 2007-08 to 2009-10 were filed on 31.10.2007, 30.9.2008 and 29.9.2009 declaring loss at (-)46,78,40,252/-, Rs. 18,53,52,406/- and Rs. 2,54,05,015/- respectively for the assessment years 2007-08 to 2009-09. There is no dispute between parties that cases of the assessee for all these years were taken up for scrutiny assessment and due notice under sections 143(2)/142(1) were issued and served upon the assessee. Since there were international transactions of the assessee with its AE, therefore reference under section 92CA(1) were sent by the AO to the TPO in all these years. The ld.TPO has passed orders under section 92CA(3) of the Act on 20.10.2010, 28.10.2011 and 22.1.2013 respectively. The international transactions undertaken by the assessee with its AE in these years were taken note by the ld.TPO, and the same reads as under: Assessment Year : 2007-08 Sr. No. AE Name Nature of Tr....
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....MM 15. Dishman Pharma & Chemicals (Shanghai) Co. Ltd. Short term loan 10,05,10,000 TNMM 16. Dishman Europe Limited Short term loan 22,74,113 TNMM 4. Let us first take the facts in the assessment year 2007-08 on this issue. It is pertinent to note that in the value of international transactions of Rs. 177,72,94,788/- extracted above, the ld.TPO recommended upward adjustment of Rs. 11,12,88,512/-. The adjustments were made qua four components viz. (a) adjustment in sale price of Rs. 4,78,99,891/-; (b) interest on loan of Rs. 87,19,932/-; (c) guarantee fees of Rs. 5,18,22,200/- and insurance of Rs. 28,46,489/-. The ld.CIT(A) has gone into all these transactions and deleted adjustment recommended qua sale price, guarantee fees, but upheld adjustment qua insurance and interest on loan. However, with regard to the issue of interest on loan, the ld.CIT(A) has accepted alternative contentions of the assessee that interest charged by it ought to be given set off against ultimate interest computed by the TPO, required to be charged by the assessee from its AE from international transactions. In other words, the assessee has charged interest at the rate of....
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....special bench of this tribunal in the case of Aztec software and technology services Ltd has held, that the computation of arms length price is effect to exercise. Each case depends on its own facts and circumstances. In many cases where identical or almost similar uncontrolled transactions are available for comparison, determination of arms length- an easy task. But it is not so in most of the transactions rarely one is able to locate the Identical transaction. In such cases arms length price is determined by taking the comparable transaction in: comparable circumstances and make suitable adjustment for the differences. Similarly in the present case also the PBIT of the assessee company is exactly similar or nearby with that of the other uncontrolled transactions of unconnected enterprises. The PBIT of the exports is as high as 23.02% as against the overall PBIT of the assessee company at 20.04%,Even if the assessee has compared that PBIT of other independent entities with that of the assessee and demonstrated the application of TNMM method correctly. Accordingly we uphold the TNMM method adopted by the assessee and reverse the cup method adopted by the revenue." Appellant also s....
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....P adjustment. Accordingly assessing officer is directed to reduce interest already charged by the appellant from the total interest chargeable from the AEs. The adjustment of such net amount computed is confirmed, (c) Guarantee fees- TPO made the adjustment on account of commission in respect of corporate guarantee provided by the appellant to its AE. Applicant submitted that corporate guarantee does not come under the purview of TP adjustments. Appellant relied upon the decision of ITAT Hyderabad in which it Is held that for providing corporate guarantee in obtaining loans by AE, no adjustment can be made. ITAT in the case of Four Soft Ltd. vs. DCIT,Circle - 1(3), Hyderabad :(1TA No. 495/Hyd/10) dated 09-09-2011 held as under: "27. We have, 'considered the rival submissions and perused the materials available on record. We find that the TP legislation provides for computation of income from international transaction as per Section 92B of the Act. The corporate- guarantee provided by the assessee company does not fall within the definition of international transaction. The TP legislation does not stipulate any guidance in respect to guarantee transactions. in absence of any ....
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....n sale price and guarantee fees. The ld.CIT(A) confirmed adjustment recommended for charging of interest on loan partly. In this year, the ld.CIT(A) has not recorded any independent finding rather followed her predecessor's order in the assessment year 2007-08. This fact has not only been noted by the ld.CIT(A) in the impugned order, rather the finding of the ld.CIT(A) recorded in the assessment year 2007-08 has been reproduced. 6. The facts in the assessment years 2009-10: In this assessment year, the ld.TPO has recommended upward adjustment of Rs. 14,94,92,409/- in the value of international transactions extracted (supra). He commended adjustment on three counts viz. (a) adjustment in sale price of Rs. 1,55,86,834/-; (b) interest on loan of 34,86,035/- and (c) guarantee fees of Rs. 13,04,19,540/-. On appeal, the ld.CIT(A) has followed the finding of the ld.CIT(A) in the assessment years 2007-08 and 2008-09. The ld.CIT(A) has deleted the recommendation made qua adjustment in sale price and guarantee fees. With regard to the interest on loan, the ld.CIT(A) has accepted the recommendation made by the TPO in principle, but directed the TPO to give credit of the interest already char....
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....bmissions has prepared a comparative table exhibiting profit, arm's length price adjustments and why comparison made by the TPO was not proper. In other words, the assessee has highlighted factors responsible for not applying CUP method on its transactions. After making analysis of such details and following the orders of earlier years, we have upheld the order of the ld.CIT(A) and the finding recorded by us in the assessment year 2005-06 in assessee's own case on this issue reads as under: "9. We have duly considered rival contentions and gone through the record. The ld.TPO has not pointed out defects in TNMM applied by the assessee for demonstrating ALP of its international transactions. Without any reasons, he simply changed method and held that CUP method is more appropriate method for determining ALP of international transaction entered into by the assessee with its AEs. We find that in the Asstt.Years 2003-04 and 2004-05, the Tribunal has accepted that TNMM is the most appropriate method for determining ALP of assessee's transactions with its AE. In the present assessment year, the assessee has compiled the details in tabular form submitting as to why CUP is not appro....
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....ded in the written submissions that the assessee has carried out comparability under TNMM at entity level and not at transactional level. He contended that the assessee has used TNMM on entity basis for computation of ALP for its sales to its subsidiaries. According to the ld.DR, the assessee ought to have adopted net transactional method instead of profit margin of enterprise as a whole. A reference to the order of the ITAT Mumbai in the case of UCB India P.Ltd. Vs. ACIT, 121 ITD 131(Mumbai) has been made. 11. We have gone through these submissions as well as finding of the ld.CIT(A). It is pertinent to observe that the ld.TPO in the order dated 21.10.2008 has not made any such analysis. He has not pointed out the alleged defect as contended in the written submissions. The analogy adopted by the TPO in the order passed under section 92CA is that CUP method is far better method than TNMM. How, TNMM is not applicable on the given set of facts has nowhere been discussed by the TPO in the impugned order. Therefore, the ld.DR cannot improve the case of the TPO at this level. More so when, consistently from the Asstt.Year 2002-03, it has been held that method adopted by the assessee i....
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....ded foreign currency loan amounting to Rs. 24,50,70,500/- to Dishman Europe Ltd., and Rs. 5,36,70,000/- to Dishman Pharma Solution AG. The assessee has charged total interest of Rs. 40,93,995/- at the rate of LIBOR plus 1%. The ld.TPO has observed that one of the AEs. borrowed funds from European bank at the rate of EURIBOR plus 3.75%. The ld.TPO confronted the assessee as to why this rate be not taken for benchmarking rate of interest required to be charged by the assessee. In response to the query of the AO, it was contended by the assessee that loan had been granted to the AE in order to create infrastructure facilities for the smooth operation of the AE and this is needed to sustain, survive and grow in most competitive market. The assessee further submitted that basis of charging of interest was cost of funds to the assessee, as it had raised the funds by issuing FCCB at nominal cost 0.5% to 1%. It has also stated that in any case the assessee has charged interest at the rate of LIBOR plus 1%, which is according to the market conditions. The ld.TPO rejected the contentions of the assessee and observed that it was not granted for creating infrastructure facilities. According to....
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.... be higher rate of interest prevailing for borrowing funds, but at what rate the loan could be made from India in dollar denomination ?. The assessee has pointed out that LIBOR is the prevailing rate and it has charged LIBOR plus 1%. No defect has been pointed out in this rate. Only thing is that one of the AEs has obtained loan from European market, therefore, the ld.TPO has applied that rate. To our mind this action of the ld.TPO could be justified if he has pointed out that a tested party in India has granted loan to its AE in dollar denomination at a higher rate than the LIBOR plus 1%. It is also pertinent to note the cost of the funds to the assessee. The assessee has contended that it has raised funds by issuing of FCCB at nominal cost 0.5% to 1% and it has given these funds to its AE. Thus, the assessee has demonstrated that the rate charged by it was at a market rate and its transactions were at arm's length. No adjustment can be made in the rate of interest charged by the assessee from its AE on providing loans in dollar denomination. We allow the appeal of the assessee on this aspect, and delete adjustment recommended by the ld.TPO. 13. The next item which is common in t....
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....(b) not a provision of service as the Appellant is not engaged info business of providing guarantee; (c) not a lending or borrowing money; (d) not any other transaction having a bearing on the profits, income, losses or assets or (d) not an allocation or apportionment of any expenditure. Hence, the Appellant most respectfully submits that corporate guarantee is not covered by any of the transactions as defined u/s 92B of the Act and therefore it is out of the purview of the transfer pricing provisions. Once, if is established that providing corporate guarantee to the banks is not an international transaction, no transfer pricing adjustment can be made in respect thereto. Reliance is placed on the decision of the Hyderabad Tribunal in the case of Four Soft Lfd. vs. DCff" bearing ITA No.l495/H/2010. copy of which is enclosed on page nos.207 to 227 of TP P/B. 5.6 Now the third condition (a) income arising from the international transaction is concerned, the Appellant without prejudice to above submits that even if it is presumed that the corporate guarantee is an international transaction, then also, no upward adjustment can be made for the reason that there is no income element emb....
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....ow included in the definition of international transaction. 19. On due consideration of the above facts and circumstances, we are of the view that consistently it has been held that providing of corporate guarantee does not fall within the ambit of international transactions. For buttressing ourselves, we would like to make reference to the following decisions: i) Suzlon Energy Ltd. Vs. ACIT, 81 taxmann.com 190; ii) Dr. Reddy's Laboratories Ltd. ACIT, 81 taxmann.com 398 (Hyd); iii) Aban Offshore Ltd. DCIT,76 taxmann.com 147 (Chennai-Trib) iv) Bartronics India Ltd. Vs. DCIT, 86 taxmann.com 254 (Hyd.Trib.) v) Cadila Pharmaceuticals Ltd. Vs. DCIT, 85 taxman.com 354 (Ahd.- Trib) 20. Respectfully following the orders of the ITAT across the country, we do not see any reasons to interfere order of the ld.CIT(A) on this issue. 21. In the assessment year 2007-08, there is one more adjustment recommended by the ld.TPO and that adjustment has been upheld by the ld.CIT(A). Assessee is in appeal. According to the TPO, the assessee has paid a sum of Rs. 28,46,489/- to its AE. The assessee contended that it is reimbursement of the expenditure to the AE on the insurance taken by the A....
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....ncome. 25. With the assistance of ld.representatives, we have gone through the record carefully. It is pertinent to note that along with this appeal, we have heard appeals for the assessment year 2005-06 and 2006-07. In the assessment year 2006-07, the assessee has prior period income at Rs. 46,50,648/- and it has debited prior period expenditure of Rs. 43,11,114/-. The net differential amount of Rs. 3,39,534/- has been credited to profit & loss account and offered for taxation. The AO did not allow set off prior period expenditure and taxed the gross income. The issue came up before the Tribunal. We have upheld taxability of net differential amount. The Tribunal observed that once the assessee has been offering income of prior period as an entity, then its prior period expenditure cannot be disallowed simply by observing that it is not ascertainable whether this expenditure were incurred for earning a particular receipts offered under the head "prior period income". According to the Tribunal, if an assessee is offering prior period income, then the expenditure which were incurred under different heads and crystalilised in this year ought to be set off against hat income. Consider....
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....r 2008-09) and Ground No.3 (Assessment year 2007-08 : Department's appeal). 32. Brief facts of the case are that the assessee has debited the following expenditure in the assessment year 2007-08: a) Library books : Rs.14,84,530/- b) Club Membership Fees : Rs. 7,20,000/- c) R&D Expenses : Rs. 2,20,003/- d) Deferred Revenue Exps. : Rs. 7,55,689/- Total Rs.31,80,222/- 33. According to the AO, the assessee failed to produce any detail with regard to this expenditure, hence, he disallowed claim of the assessee. Similar claim has been made in the assessment year 2008-09, which was also dismissed. On appeal, the ld.CIT(A) restricted such disallowance at Rs. 25 lakhs and deleted the remaining amount. The assessee is impugning the confirmation of disallowance of Rs. 25 lakhs whereas the Revenue is impugning part deletion made by the ld.CIT(A). 34. With the assistance of the ld.representatives, we have gone through the record. Such disallowance has come up for consideration for the assessment year 2005-06 and 2006-07. The AO made disallowance of Rs. 18,10,423/- in the assessment year 2006-07. On appeal, theld.CIT(A) confirmed disallowance at Rs. 15 lakhs and dele....
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....ives, we have gone through the record carefully. We find that the ld.CIT(A) has considered judgment of the Hon'ble Supreme Court and observed that it is distinguishable on facts. The assessee has not actually written off debts, and therefore, its claim cannot be allowed. The ld.CIT(A) has rightly upheld the disallowance. We do not find any error in this ground of appeal, hence it is rejected. 38. Ground no.11 (Assessment Year 2007-08); Ground no.6 (Assessment year 2008-09) and ground no.7 (Assessment year 2009-10). In these grounds of appeal, the assessee has pleaded that the ld.Revenue authorities erred in confirming disallowance of depreciation amounting to Rs. 56,096/-, Rs. 2,27,399/- and Rs. 8,502/- in the assessment years 2007-08 to 2009-10. The ld.counsel for the assessee did not press these grounds, hence, they are rejected. 39. In this ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in confirming disallowance of Rs. 86,77,000/-. 40. Brief facts of the case are that the assessee has given loans to its foreign subsidiary and made investment abroad in the foreign currencies. It has debited a sum of Rs. 86,77,000/- on account of fluctuations in t....
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....ereunder for ready reference: * Oil & Natural Gas Crop.Ltd, vs. CIT322ITR 180 (SC) * CIT vs. Woodward Governor India IP.) Ltd. 312 ITR 254 ISO It is most, respectfully submitted that the Appellant has satisfied the test laid down by the Supreme Court of India in the case of Woodward (supra), and therefore the foreign exchange loss incurred during the year under consideration is allowable to the Appellant. The Appellant demonstrates how the test laid down by the Apex Court is satisfied: (d) whether the system of accounting followed bv the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability figs been incurred before it is actually disbursed and brings Into: credit what is due, immediately it becomes due and before it is actually received: Admittedly, the1 Appellant is following mercantile system of accounting and that is in fact not denied by the Id. AO. (e) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bonatide; Again admittedly, -from the beginning the Appellant is following mercantile system of accounting and there is not....
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....it has been held that if rule is not considered, the decision becomes per incuram. In as much as the Appellant has following the accounting treatment which is in conformity with Accounting Standard 11 issued by the ICAI. Various authorities have held that while determining alowability of an expenditure, accounting standard has a great persuasive value. Challqpalii Sugars Ltd. Vs. CIT (1975) (98I.T.R. 167), Further following authorities have held that foreign exchange fluctuation loss suffered on account of circulating capital or revenue account should be treated as revenue expenditure in the year in which the devaluation takes place when the method of accounting followed is mercantile. 116 ITR 1 (SC) 154 ITR 460(Cal) 90 ITR 323 (Ker) 97/TO 125 (Ahd) (TM) @ 151 para 8.28 Accordingly, this itself establishes that the Appellant has adopted the system of accounting which is fair and reasonable and supported by the Accounting Standard AS-11, Rule 115 and various authorities and not adopted to avoid incidence of income tax. And in any case, as submitted by the Appellant, in earlier A.Y.2006-07 the Appellant has earned foreign exchange gain which has been offered for taxat....
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....issue by keeping in mind taxation of gains in earlier and subsequent years on the same loans, and failed to record any specific finding as to how in such circumstances the loss could be denied, we deem it appropriate to set aside this issue to the file of the AO for re-adjudication. The ld.AO shall take into consideration the specific pleadings made by the assessee pointing out taxation of gain in the assessment year 2006-07 and 2008-09, and then decide the issue in the light of Hon'ble Supreme Court's judgment cited (supra). We set aside this issue on the ground that, about taxability of gain has not been examined by the AO. Thus, veracity of this fact needs to be verified. On account of this reason, the issue is being set aside to the file of the AO for re-adjudication afresh in accordance with law. 43. Ground no.13 (Assessment year 2007-08); ground no.8 (assessment year 2008-09) and ground no.9 (assessment year 2009-10). In this ground the assessee has prayed that the ld.CIT(A) has erred in confirming disallowance of Rs. 3,93,000/-, Rs. 69,552/- and Rs. 1,21,423/- which were disallowed by the AO with the aid of section 14A r.w.s Rule 8D of the Income Tax Act, 1961 and Income Ta....
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....n Energy Ltd., 354 ITR 630 (Guj) c) CIT Vs. Gujarat Power Corporation Ltd., 352 ITR 583 (Guj) d) CIT Vs. Hitachi Home & Life Solutions (I) Ltd., 41 taxmmann.com 540 (Guj); e) CIT Vs. Reliance Utilities & Power Ltd. 313 ITR 340 (Bom) f) Munjal Sales Corporation Vs. CIT, 298 ITR 298 (SC); and submitted that no disallowance under section 14A of the Act to be made. 47. We have duly considered rival contentions and gone through the record carefully. An identical issue came up before us in the assessment year 2006- 07 also. No doubt the assessee is having sufficient interest free funds and according to the proposition in the decisions referred above, if an assessee has interest free funds more than the investment then no disallowance for interest expenditure in making investment, which would result in exempt income be made. However, in the assessment year 2006-07, we have confirmed the disallowance on account of administrative expenditure and other issues at Rs. 3.00 lakhs. Considering of our finding in the assessment year 2006-07 and overall facts and circumstances of the case, we confirm the adhoc disallowance of Rs. 3 lakhs in the assessment year 2007-08 and equivalent to the....
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....It reads as under: "80.We have duly considered rival contentions and gone through the record. A perusal of the breakup of this expenditure would indicate that expenditure incurred by the assessee could be divided into three categories viz. (a) payments towards professional service charges, (b) reimbursement of administrative services to Dishman Europe Ltd., and (c) reimbursement of insurance and foreign ravel expenditure to Dishman Europe Ltd. Before making an analysis of this expenditure, we would like to take into consideration decision of Hon'ble Supreme Court in the case of GE India Technology (supra). Hon'ble Supreme Court has propounded in this decision that a person can be held liable to deduct TDS while making payment to a non-resident if the payments made by him consists of some element of income chargeable to tax under the provisions of Income Tax Act, 1961. The ld.Revenue authorities were of the view that if the assessee has been making payment to a nonresident then either it should take a certificate from the AO under section 195(2) or deduct TDS on such payments. For this view, they are harping upon the decision of Hon'ble Karnataka High Court in the case of Samsung ....
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....tive expenses required to be incurred for availing services of Dr.Henk. It is totally in the domain of the businessman and the AO cannot dictate terms how much salary and other expenses are necessary for availing the services. This disallowance made by the AO is not sustainable. The ld.CIT(A) ought to have not confirmed disallowance made by the AO. We allow this ground of appeal and delete addition of Rs. 1,12,01,869/-. 53. Since no disparity of the facts have been pointed out by the ld.DR on this issue, we following the order of the Tribunal cited supra for the assessment year 2006-07, delete the impugned additions and allow the grounds of appeals of the assessee. 54. Ground no.22 to 24 of the assessee's appeal is against confirmation of addition of Rs. 3,10,08,567/- out of total addition of Rs. 3,82,47,265/- made under section 2(22)(e) of the Income Tax Act. Similarly, in ground no.4 in the Revenue's appeal for the assessment year 2007-08, grievance of the Revenue is that the ld.CIT(A) has erred in deleting the addition of Rs. 72,38,698/- added by the AO with help of section 2(22)(e) for the loan taken from the B.R. Laboratories. 55. Brief facts in this regard are that the AO ....
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.... taken from Bhadra Raj Holdings P.Ltd. 56. Both the assessee and Revenue are before us challenging respective additions/deletions i.e. Revenue is challenging deletion of loan of Rs. 72,38,698/- received from B.R. Laboratories and the assessee is challenging confirmation of addition made by the AO of Rs. 3,10,08,567/- received from Bhadra Raj Holdings Pvt.Ltd. 57. So far as ground no.5 of Revenue's appeal is concerned, we find that similar issue has been examined in the assessment year 2005-06 wherein we have followed the orders of the ITAT in earlier years in the case of SDBL. Even the Hon'ble High Court has confirmed the order of the ITAT in tax appeal no.958 and 959 of 2015. It is necessary to take note of the relevant portion of the order of the Tribunal on this issue. It reads as under: "18. Brief facts of the case are the AO has observed that during the assessment proceedings of A.Y 2006-07, it was seen that Schutz Dishman Bio-tech P.Ltd. ("SDBPL" for short) has given loans to the assesee. Assessee holds 22.3% share holding of SDBPL. Thus, the ld.AO was of the view that loans given to the assessee deserves to be treated as deemed dividend under section 2(22)(e) of the Act.....
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....s of purchase of raw material as well as temporary accommodation deposits. Assessing officer of M/s Schutz Dishman Biotech Ltd initiated action under section 201 (1) by treating the transaction with appellant company as deemed dividend and the said company was treated as assessee in default for not deducting TDS in assessment year 2004-05 and 2005-06. In both the years, CIT(A)-XXl, Ahmedabad by order dated 28-09-2010 held that transactions entered into by the appellant which its associate concern would not attract the provisions of section 2(22)(e) of the act. And accordingly there would not be any obligation to deduct tax under section 194 and therefore the assessee cannot be treated as the assessee in default within the meaning of section 201(1) of IT act. The relevant extract of the said appeal order in para-six is quoted below- "There is large number of debit and credit transactions. Meaning thereby, the appellant has given and received funds as and when required to and from its associate concern. It is not on account whereby loans and advances have been given to the associate concern. It is on account payments in the nature of current adjustment accommodation account wherein....
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....at he has followed the findings given in A.Y. 2006-07 wherein the First Appellate Authority has followed the decision taken in the case of SDBPL. We find that the appeal of SDBPL travelled up to the Hon'ble Jurisdictional High Court of Gujarat wherein the Hon'ble High Court was seized with the following question of law for consideration;- "Whether on facts and in law the ITAT wax right in cancelling the order passed u/s 201(1) and 201 (A) of the Act, without appreciating that the amount advanced was in the nature of deemed dividend u/s 2(22)(e) of the Act'.'" 9. And the relevant findings of the Hon'ble High Court reads as under:- 4. It can thus be seen that the Commissioner as a matter of fact found that the payments were not in the nature of current adjustment. There was movement of fund both ways on need basis. The transactions in the nature of loans and advances are usually very few in number whereas in the present case, such transactions are in the form of current accommodation adjustment entries. The Commissioner therefore, held that the transactions were not in the nature of loans and advances. The Revenue carried the matter in appeal. The Tribunal con....
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....the ld.DR submitted that the assessee-company is having 40% shareholding in the Bhadra Raj Holdings P.Ltd. Nature of accounts showed that it was not a running account as the funds moved from one direction only i.e. the assessee was getting funds from 1st April, 2006 till 5th September, 2006 and thereafter from 5th September, 2006 there were cash outflow in the form of repayment till 27th March 2007. Therefore, it showed that transactions are nothing but loan transactions and cannot be treated as inter-corporate deposits or current account with associate concern. He relied on orders of the Revenue authorities. 60. We have heard both the parties and gone through the record. We find that in the asstt.year 2006-07, we have considered similar transactions between the assessee and the SDBPL. When the issue travelled to the Hon'ble High Court in earlier year, then it was pointed out that these were not simplicitor loan transactions, rather these are the business transactions whereby the current amount is being maintained. Both parties have given amounts to each other and these are adjustment entries. Considering the current account and number of transactions, and since the Hon'ble High C....
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...., the assessee is challenging order of the ld.CIT(A) on issue no.1 and 2 whereas Revenue is challenging order of the CIT(A) on issue nos.3 to 6. 48. With the assistance of the ld.representatives, we have gone through the record carefully. There is no dispute with regard to the proposition that assessee is entitled for grant of deduction under section 10B of the Act. The dispute relates to quantification of the deduction. First we take the issue agitated by the Revenue in its grounds of appeal. In the first fold of grievance, the Revenue has contended that the AO has rightly allocated custom duty on the basis of raw-material imports in EOU and non-EOU units. The AO was of the view that custom duty paid by the assessee and debited in the accounts ought to be allocated on the imports made for the EOU units. The ld.CIT(A) after making a detailed analysis held that there was no custom duty on the imports made required to be consumed in EOU units. If that be a fact, then how the AO could allocate such amount to such units ? The assessee has been maintaining separate books of accounts and debited actual expenditure in each unit. Therefore, the ld.CIT(A) is justified in holding that cust....
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....he ld.counsel for the assessee at the very outset submitted that this issue is squarely covered in favour of the assessee by the order of Special Bench of the ITAT in the case of Maral Overseas Ltd. Vs. CIT, 136 ITD 177. He further contended that ITAT, Ahmedabad has followed this decision in the case of Sonic Technology P.Ltd. rendered in ITA NO.2665 & 2720/Ahd/2011. On the other hand, the ld.DR relied upon the orders of the ld.CIT(A). 54. We have duly considered rival submissions and gone through the record. We find that Special Bench of ITAT in the case of Maral Overseas Ltd. (supra) has considered this issue. The ld.AO has been harping upon the decision of Hon'ble Supreme Court in the case of Liberty India Ltd. Vs.CIT, 317 ITR 218 in coming to the conclusion that other incomes viz. sale of scrap etc. are not to be considered as derived from export activities. It is pertinent to observe that in the case of Sonic Technology P.Ltd. the assessee has claimed deduction after including interest income, sale of scrap, sundry balance written off, exchange rate fluctuations and incremental turnover and disbursement of subsidy from the government. These items were held to be eligible for....
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....er mandate in the provisions of section 10B to exclude the same from the eligible profits. The mode of determining the eligible deduction u/s 10B is similar to the provisions of section 80HHC inasmuch as both the sections mandates determination of eligible profits as per the formula contained therein. The only difference is that section 80HHC contains a further mandate in terms of Explanation (baa) for exclusion of certain income from the ''profits of the business'' which is, however, conspicuous by its absence in section 10B. On the basis of the aforesaid distinction, sub- section (4) of section 10A/10B of the Act is a complete code providing the mechanism for computing the ''profits of the business'' eligible for deduction u/s 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that both these incomes have been treated by the Assessing Officer as business income. The CBDT Circular No. 564 date....
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....section (1) states that deduction of such profits and gains as are derived by a hundred percent export-oriented undertaking from the export of articles or things or software would be eligible under the said Section. Sub- section (1) is a general provision and identifies the income which is exempt and has to be read in harmony with Sub-section (4) which is the formula for finding out or computing what is eligible for deduction under Sub-section (1). Neither of the two provisions should be made irrelevant and both have to be applied without negating the other. In other words, the manner of computing profits derived from exports under Sub-section (1), has to be determined as per the formula stipulated in Sub-Section (4), otherwise Sub-section (4) would become otise and irrelevant. The issue in question in this appeal which pertains to the Assessment Year 2009-10, relates to duty draw back in the form of DEPB benefits. As per Section 28, clause (iii-c), . A.Y. 2007-08 any duty of customs or excise repaid or repayable as drawback to a person against exports under Customs and Central Excise Duties Draw Back Rules, 1971 is deemed to be profits and gains of business or profession. The sa....
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.... income from the business of the undertaking." In view of the aforesaid position, the appeals have to be dismissed. We order accordingly. 12. We thus find that the decision of Special Bench of Tribunal in the case of Maral Overseas (supra) wherein the ratio that once on income forms part of the business of the income of the eligible undertaking of the Assessee, the . A.Y. 2007-08 same cannot be excluded from the eligible profits for the purpose of computing deduction u/s. 10B of the Act, has been upheld by Hon'ble Delhi & Karnataka High Courts in the case of Hritnik Exports Pvt. Ltd. & Motorola India Electronics Pvt. Ltd." 55. Respectfully following the above, we allow second fold of grievance raised by the assessee in its ground no.27 and direct the AO to include this other income in the eligible profit for the purpose of grant of deduction under section 10B of the Act. 56. In view of the above discussion, we do not find any merit in the appeal of the Revenue. It is dismissed." 63. Before us no disparity of the facts has been pointed out by the ld.DR in these years in this behalf. Therefore, following our order for the assessment year 2006-0 in assessee's own case we d....