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2012 (2) TMI 535 - HC - Income TaxDeduction u/s 10A - Netting of Income and Expenditure - Income received by the assessee from liquidated damages recovered from suppliers, write back of retention moneys, sales tax recoveries, exchange fluctuation gain, write back of credit balance in customer accounts were disallowed - HELD THAT - Assessee is in the course of export business. While calculating the profit of the eligible business the expenses and income of the same unit are required by netting the expenses and the income are eligible to the same nature. Therefore, when there is a direct nexus between the export business and the aforesaid income, that should be treated as profits and gains from exports and deduction u/s 10A of the Act is allowed. Decision in favour of the assesse. Discontinuation of Business - Assessee business was discontinued, therefore the assessee s valuation was not accepted and the loss was disallowed by AO as the items were imported and they are presumably of high value. - HELD THAT - Once the principal himself in carrying on the business and that the agent has discontinued the business the chances of anybody approaching the agent to get those product is remote and once the assessee closed his account discontinuing the business, the products which were in stock naturally would not have any value. Also, technological obsolence and cannibalization of equipment to spare parts due to non supply appears plausible in the realm of business and such occurrence is not rare. Therefore, the loss claimed by the assessee is allowable as deduction. Decision in favour of the Assesses. Payment of Gratuity and PF - Covered u/s 36(1)(va) 2(24) or not? - Deduction u/s 43B - Payment of provident fund and gratuity was not considered as allowable deduction u/s 43B by Tribunal - HELD THAT - Relying on the judgement of COMMISSIONER OF INCOME-TAX VERSUS SABARI ENTERPRISES 2007 (7) TMI 169 - KARNATAKA HIGH COURT , they are liable for deduction u/s 36(1)(va) read with section 2(24) (x), the same can be claimed deduction by the assessee only if the contribution is paid within the due date for claiming exemption. Decision in favour of Assessee.
Issues involved:
1. Disallowance of exemption on premium for special import license, disallowance of warranty expenses, and disallowance of excise duty deduction. 2. Treatment of income from various sources as profits from exports for deduction under Section 10-A. 3. Allowability of loss due to discontinuance of dealership and write-off of debts. 4. Treatment of payment of gratuity and provident fund under Section 43B. 5. Consideration of newly established undertakings as separate entities for deduction under Section 10A. Analysis: 1. The first issue involves the disallowance of exemption on the premium for a special import license, warranty expenses, and excise duty deduction. The assessing officer disallowed these claims, leading to the assessee filing an appeal. The Commissioner granted relief on some counts but rejected others. The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal. The Tribunal held that income from the sale of scrap newspaper, stationery, battery, etc., should be treated as profits from exports, allowing deduction under Section 10-A. The Tribunal's decision favored the assessee, leading to the Revenue's appeal against this order. 2. The second issue pertains to the treatment of income received from various sources as profits from exports for deduction under Section 10-A. The Tribunal held that when there is a direct nexus between the export business and the income received, it should be treated as profits from exports, allowing deduction under Section 10-A. This decision favored the assessee, prompting the Revenue to appeal against the Tribunal's order. 3. The third issue involves the allowance of loss due to discontinuance of dealership with M/s. Apple Products and the write-off of debts. The Tribunal upheld the reasoning given by the assessee for claiming the loss as allowable. The Tribunal accepted that the discontinuance of the product business and technological obsolescence justified the claimed loss. The Revenue challenged this decision, arguing that the goods had value even after discontinuation. However, the Tribunal's decision favored the assessee, leading to the Revenue's appeal against it. 4. The fourth issue concerns the treatment of payment of gratuity and provident fund under Section 43B. The Tribunal held that such payments need not be made within the stipulated period as they are allowable deductions under Section 43B. This decision was based on previous judgments in favor of the assessee, and the Tribunal's ruling was challenged by the Revenue. 5. The fifth issue involves the consideration of newly established undertakings as separate entities for deduction under Section 10A. The Tribunal's observations on this matter were deemed as not constituting findings, and the Tribunal's decision was challenged by the Revenue. The issue of whether these undertakings should be treated as separate entities for the purpose of deduction under Section 10A was not directly addressed by the Tribunal, leading to the Revenue's appeal against the Tribunal's decision.
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