TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 639
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....mmissioner of Income Tax (Appeals) ought to have seen that Appellant earned such interest on deposits made out of funds not immediately required in the business and therefore considered such income as from Business and therefore rightly claimed deduction u/s. 10AA on such income. b) Commissioner of Income Tax (Appeals) also ought to have seen that Appellant's view that such interest income shall be taken as income from business and is therefore eligible for deduction u/s. 10AA is supported by a decision of Hon'ble Karnataka High Court in the case of CIT and Another vs.Hewlett Packard Global Soft Ltd (403 ITR 453). 3. Commissioner of Income Tax (Appeals) is not justified in upholding the Assessing Officers view that book profits are to be assessed at Rs. 35,32,40,420/- u/s. 115JB of IT Act which is the income determined in the Asst. Order under normal provisions of the Act. Commissioner of Income Tax (Appeals) ought to have seen that income assessed under normal provisions of the Act cannot be considered as income from Book profits and is to be computed taking into account net profit as per Profit and Loss account and applying provisions of Sec. 115JB to th....
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....ddition under the head "income from other sources" resulting a double addition of the same income. On these pleadings, we admit the additional grounds raised by the assessee for adjudication on merits. 6. Ground No.1 is general in nature and does not require any specific adjudication. 7. Ground No.2 is regarding disallowance of claim of exemption u/s 10AA by the Assessing Officer in respect of interest earned by the assessee on fixed deposits which was assessed as income from other sources. During the course of assessement proceedings, the Assessing Officer noted that the assessee has earned interest income on fixed deposits made with banks which has been included in the business income while computing deduction u/s 10AA of the Act. The Assessing Officer held that the interest income received on bank deposit is not a business income and therefore, the same is assessable to tax under the head other sources. Accordingly, the Assessing Officer has disallowed the claim of deduction u/s 10AA on the interest income of Rs. 4,40,41,931/-. 8. Being aggrieved by the said action of the Assessing Officer, the assessee filed an appeal before the learned CIT(A) but could not succeed. Be....
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.... deduction u/s 10AA in respect of all the incomes earned by it. The quantum of deduction to be the income of the export oriented unit. He has also referred to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Vasishta Chay Vyapar Ltd (330 ITR 440) (Del.) and submitted that the Hon'ble High Court has held that a non-banking fiancé company is bound by the provisions of RBI Act, 1934 and 1998 directions under which it was mandatory on the part of the assessee not to recognize the interest on inter-corporate deposits as income having regard to the recognized accounting principles. Therefore, it is held that the Assessing Officer has to follow the RBI directions of 1998 in view of section 45Q of RBI Act and section 145 of the I.T. Act, 1961 has no role to play so far as the income recognition is concerned. He has also relied upon the judgment of the Hon'ble Supreme Court in the case of Tax Recovery Officer, Central Range-1 reported in 293 ITR 369 and submitted that the Hon'ble Supreme Court has held that the order of the Special Court in view of section 13 of the Special Court Act has an overriding effect to the provisions of the I.T. Act, 1961. ....
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....to the employees, which has direct nexus with the business of the assessee. However, in the case in hand, the assessee has made the fixed deposits for a long duration, as evident from the balance sheet of the assessee and running from year to year. He has relied upon the decision of the Hon'ble Supreme Court in the case of Orissa State Warehousing Corporation vs. CIT reported in 237 ITR 589 and submitted that the Hon'ble Supreme Court has laid down the rule of interpretation of fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same and the Court ought not, under any circumstances, to substitute its own impression and ideas in place of the legislative intent as is available from the plain reading of the statutory provisions. 9.1 The learned DR has further contended that only when there is a direct nexus between the interest income and business of industrial undertaking, the said income is eligible for exemption u/s 10A of the Act. In support of his contention, he has relied upon the judgment of the Hon'ble Supreme Court in the case of India Comnet International vs. Income Tax Officer (2012) 354 ITR 673. He has al....
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....100% deduction is allowed for first 5 years in respect of the profit and gains derived from export of such articles or things or from the services and 50% of such profits and gains for further 5 A.Ys and thereafter. Thus, subsection (1) of section 10AA of the Act has specified the profit and gain derived from export of articles or things or services. In the normal circumstances, interest on deposits with banks falls under the head "income from other sources" except when the deposits with the Banks are made by the assessee in the ordinary course of business or in order to smooth business activity of the export i.e. availing credit facility, letter of credit or obtaining bank guarantee required for the business of exports. Thus, if the deposits is made by the assessee for business expediency, then the said incidental interest income will be treated as part of the business activity of the assessee. The scheme of SEZ also contemplates that the foreign exchange earned by the enterprises in SEZ is a necessary condition for getting the incentives. Therefore, the incentive u/s 10AA is to maximise the foreign exchange by an 100% export oriented unit. Further, the export turnover of the EOU ....
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....on'ble High Court was regarding the claim of deduction u/s 10A in respect of the foreign exchange fluctuation gain which is directly related to the business activity of the export sales and turnover/proceeds from exports. Thus, in all those cases, the issue was the interest it earned as an incidental and as a result of decision of the commercial expediency. In some of the cases even the fixed deposits was made by the assessee for obtaining the letter of credit required for the business of exports and in other cases for obtaining the bank guarantee required for the business activity of the assessee and hence, the said deposit was necessary for the business activity of the assessee and the interest earned on such deposits was considered as the income earned in the normal course of business activity. In the case in hand, it is undisputed fact that the assessee has made long term deposits with the Banks which is also evident from the fact that for the A.Ys 2017-18 & 2018-19, the interest income on the same deposits with banks was assessed by the Assessing Officer as income from other sources and denied the benefit of section 10AA. Thus, it is clear that the fixed deposits made by t....
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....nsaction in question and found that the assessee had set up a new industrial undertaking in Kandla Free Trade zone for manufacturing light engineering goods. The goods therein were exported during the Assessment Year 1985-1986. In the course of business, the assessee was required to open a Letter of Credit. On such Deposit, the assessee earned interest. Under the said circumstances, the High Court held, following the judgment of this Court in the case of CIT v. Sterling Foods [1999] 237 ITR 579/ 104 Taxman 204, that the interest received by the assessee was on deposit made by it in the Banks; that such deposit was the source of income; and that, the mere fact that the deposit was made for obtaining Letter of Credit which Letter was, in turn, used for the purpose of business undertaking did not establish a direct nexus between the interest and industrial undertaking. Thus, the judgment of the Madras High Court in Menon Impex (P.) Ltd. (supra) was based on the examination of the transaction in detail which exercise has not been undertaken in the present case. For the above reasons, we set aside the impugned judgment and remit the cases to the Income Tax Appellate Tribunal [&....
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....terest of justice, this issue is remanded to the record of the Assessing Officer for proper verification of the relevant record and then to compute the book profit by considering the P&L Account and other adjustments as per the provisions of section 115JB of the I.T. Act, 1961. Needless to say, the assessee shall be given an appropriate opportunity of being heard before passing the order. 19. Ground No.4 which is an additional ground raised by the assessee regarding disallowance made u/s 43B of the Act on account of leave encashment. The learned AR of the assessee has submitted that the assessee had paid this amount during the year under consideration and the same was disallowed in the earlier year and therefore, the assessee has claimed deduction u/s 43B in the return of income. Thus, this disallowance was made by the CPC while processing the return of income u/s 143(1) of the Act and the Assessing Officer has also not considered this issue but simply taken the income assessed by the CPC while processing the return of income u/s 143(1) of the Act. The learned AR has thus, submitted that the Assessing Officer may be directed to verify the relevant record and then allow the claim....