2007 (8) TMI 369

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.... 2. The learned CIT(A) erred in upholding the action of the AO in not allowing exemption as per the provisions of sub-s. (1) r/w sub-s. (4) of s. 10A. He ought to have directed the AO to treat and include the amount of service charges receipts as forming part of total turnover and allowed exemption in accordance with the formula given in sub-s. (4) of s. 10A of the IT Act. 3. The learned CIT(A) erred in not allowing reasonable expenses against service charges receipts as he has allowed expenses only at 10 per cent of the receipts leaving the balance 90 per cent liable to tax which is totally unrealistic and unreasonable." 2. The assessee is a manufacturer and exporter of studded jewellery having its factory in, SEEPZ, Mumbai and is el....

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....The processing charges earned was by using the entire undertaking of the assessee which also manufactured jewellery for its own export sales and which processing charges were earned by incurring expenditure of the factory like wages, electricity charges, etc. debited to the P&L a/c. Thus he vehemently contended that the amount of Rs. 3,57,492 received as service charges is in fact operational income earned from business and the expenditure for earning this income is included in several items of expenditure debited to the P&L a/c. He argues that s. 10A, unlike ss. 80HHC, 80HHE and 80HHF, does not define profits of the business of the undertaking. Considering this, the exclusions specified in ss. 80HHC, 80HHE and 80HHF do not have relevance w....

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....business of the eligible undertaking, the receipt should form part of the eligible profits. It will include all receipts pertaining to the eligible undertaking which are chargeable to tax under the head "Profits and gains of business". The learned counsel relied on the Board's Circular No. 794 dt. 9th Aug., 2000 [(2000) 162 CTR (St) 9 : (2000) 245 ITR (St) 21]. With regard to the computation of exemption, the learned counsel contended that the learned CIT(A) was not justified in not directing the AO to treat and include the amount of service charges receipts as forming part of total turnover and allowed exemption accordingly. The learned Departmental Representative on the other hand has strongly supported the orders of the authorities below....