2014 (9) TMI 923 - AT - Income Tax

Exemption under section 10B - Addition u/s 68 - held that - A reading of the provisions of section 10B makes unambiguously clear that the profits and gains derived by 100 per cent export-oriented undertaking from the export of articles or things or computer software is eligible to claim deduction under section 10B. Thus it is the profits and gains from the export business of the specified items that the assessee is eligible for claiming deduction under the provisions of section 10B. Additions made under section 68 falls under the head Income from other sources and is thus not part of profits and gains of business or profession. We do not agree with the contentions of learned counsel for the assessee that the assessee is eligible for exemption under section 10B on the additions made under section 68. Accordingly this contention of the assessee is rejected. - No infirmity in the order of the Commissioner of Income-tax (Appeals). - Decided against assessee.

Summary

Issues involved:
- Appeal against Commissioner of Income-tax (Appeals) order for assessment year 2009-10.
- Addition of Rs. 10 lakhs under section 68 as unexplained cash credit.
- Eligibility of 100% export-oriented unit for exemption under section 10B.
- Identity and creditworthiness of alleged creditors.
- Validity of transactions with alleged creditors.

Analysis:
1. The appeal was filed against the Commissioner of Income-tax (Appeals) order for the assessment year 2009-10, challenging the addition of Rs. 10 lakhs under section 68 as unexplained cash credit. The assessee, a partnership firm, claimed exemption under section 10B as a 100% export-oriented unit manufacturing magnesium sulphate heptahydrate.

2. The Assessing Officer observed cash transactions of Rs. 5 lakhs each with two individuals, which were subsequently repaid. The creditors, not assessed to tax, confirmed the transactions. However, lack of substantial evidence led to the addition under section 68. The Commissioner of Income-tax (Appeals) upheld this decision, prompting the appeal before the Tribunal.

3. The assessee argued that being an export-oriented unit, the addition should be considered business income eligible for exemption under section 10B. However, the Tribunal clarified that section 10B applies to profits from export activities, not unexplained cash credits under section 68. Hence, the exemption claim was rejected.

4. The second submission addressed the genuineness of the transactions with the alleged creditors. Despite affidavits confirming the cash advances and repayments, the absence of supporting documents raised doubts. The transactions, involving multiple small cash instalments, were deemed suspicious, lacking credibility and violating tax provisions.

5. The Tribunal concurred with the Commissioner of Income-tax (Appeals), dismissing the appeal and affirming the findings. The order emphasized the need for concrete evidence to substantiate transactions and highlighted the dubious nature of the cash dealings. Ultimately, the appeal was rejected, upholding the original assessment decision.