TaxTMI 
TaxTMI 
2019 (1) TMI 260
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....(3) of the Income Tax Act, 1961(here-in-after referred to as "the Act") dated 15.01.2014 relevant to Assessment Year (AY) 2011-12. 2. The grounds of appeal raised by the assessee are as under:- "1. (a) The CIT(A) has erred both in Law and in fact in computing deduction u/s. 10B(4) of the Act and restricting the same by not treating Income of Rs. 9,19,094/- as Income from Business as claimed b> the Appellant related Business of E.O.U. for calculating deduction u/s 10B. (b) It is submitted that in the claim of the Appellant was as per provisions of Law and backed by Certificate of Chartered Accountant and that since Rs. 9,19,094/- is income attributable to Business of E.O.U. the same ought to have been allowed as claimed ....
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....income under the head other sources which inter alia include the following; Rs. 367/- Excess provision of expense written Back Rs. 291/- Discount and Kasar Rs. 56,542/- Central Sales Tax Refund as it is EOU unit Rs. 2,77,565/- Service Tax Refund as it is EOU Unit. Rs. 5,84,329/- Scrap Sales - Generated by manufacture in EOU Unit. 4.1 The assessee in support of the above income claimed the deduction u/s 10B of the Act on the ground that these are arising in the course of the business carried on under its 100% Export Oriented Unit. However, the AO disagreed with the submission of the assessee and held that the aforesaid incomes are not eligible for deduction u/s 10B of the Act. Accordingly, t....
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....pose of calculating deduction u/s 10B and therefore this action of the AO is confirmed. 5.4 As regards scrap sales of Rs. 5,84,329/-, the submission of the appellant is that this scrap sale is part of manufacturing and therefore while computing the profit of EOU, this local sale of scrap of Rs. 5,84,329/- has been included in total turnover only and not in export turnover. In my opinion, local sale of scrap of Rs. 5,84,329/- cannot be treated as part of total turnover because it has got nothing to do with export activities. However, this local sale of scrap of Rs. 5,84,329/- has to be treated as part of total turnover for the purpose of calculating the profit u/s 10B of the Act. In view of this the action of the AO regarding inclus....
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....ndred per cent export-oriented undertakings 35. 10B. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee : Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this s....
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....ces and within the period specified in that section ; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose." 8.1 From the plain reading of the above provision, we note that the profit of the undertaking is eligible for deduction u/s 10B of the Act provided it should arise in the course of business activities of 100% export unit. In the identical facts and circumstances the Hon'ble ITAT in the case of Lubrizol Advanced Materials India Pvt. Ltd.(Supra) has decided the issue in favor of the assessee by observing as under: "19. We have heard the rival submissions and perused the material on record. Before us the nature of income as submitted by the Assessee has not b....
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....e profits of the business are to be determined which are further multiplied by the ratio of export turnover to the total turnover of the business. In case of Liberty India, the Hon. Supreme Court has dealt with the provisions of section 80IA of the Act wherein no formula was laid down for computing the profits derived by the undertaking which has specifically been provided under sub-section (4) of section 10B while computing the profits derived by the undertaking from the export. Thus the decision of the Hon. Supreme Court is of no help to the revenue in determining the claim of deduction u/s 10B in respect of export incentives." 20. Thus it is seen that the respected Special Bench of the Tribunal has held that once an income forms....