2009 (12) TMI 984 - AT - Income Tax

2013 (1) TMI 540 - AT

Issues Involved:
1. Inclusion of DEPB license income in the profit of industrial undertaking for deduction under section 80IB.
2. Inclusion of income earned from service charges in the profit of industrial undertaking for deduction under section 80IB.
3. Exclusion of sales tax and excise duty from total turnover for deduction under section 80HHC.
4. Inclusion of interest income in the total turnover for deduction under section 80HHC.
5. Inclusion of 'other income' in the profit eligible for deduction under section 80IB.
6. Deduction under section 10B on interest income.
7. Reduction of deduction under section 80IB from the 'profits of the business' for calculating deduction under section 80HHC.
8. Inclusion of 'other income' as part of the 'total turnover' for deduction under section 80HHC.
9. Inclusion of manufactured export turnover of 10B unit in the 'total turnover' for deduction under section 80HHC.
10. Charging of interest under section 234D.

Detailed Analysis:

1. Inclusion of DEPB License Income:
The Tribunal noted the CIT(A)'s decision that DEPB license income, if by way of credit for use of the license, is includible in the profits of the industrial undertaking. However, following the Supreme Court decision in Liberty India Vs. CIT, it was held that DEPB benefits do not form part of net profits of the industrial undertaking for the purposes of section 80-IA or 80-IB. Therefore, the Tribunal allowed the revenue's appeal on this ground.

2. Inclusion of Service Charges:
The CIT(A) held that service charges might be considered for deduction under section 80IB if the assessee shows that the sales were conditional upon after-sales service or arose in the course of manufacturing. The Tribunal upheld this view, noting that the CIT(A) had correctly set aside the issue to the AO for verification. The Tribunal confirmed the CIT(A)'s order and dismissed the revenue's appeal on this ground.

3. Exclusion of Sales Tax and Excise Duty:
Both parties agreed that the issue is covered by the Supreme Court decision in CIT Vs. Laxmi Machine Works, which held that excise duty and sales tax are not includible in "total turnover" for section 80HHC. The Tribunal dismissed the revenue's appeal on this ground.

4. Inclusion of Interest Income:
The CIT(A) held that interest income should not be included in the total turnover for computing deduction under section 80HHC. The Tribunal upheld this decision, noting that the revenue could not bring any material to controvert the CIT(A)'s findings. Thus, the Tribunal dismissed the revenue's appeal on this ground.

5. Inclusion of 'Other Income':
The Tribunal noted that the lower authorities excluded other income of Rs. 47,58,885/- from business income while computing income derived from the industrial undertaking for section 80IB. The Tribunal remitted the issue of Rs. 10,088/- (scrap sale) and Rs. 1,27,432/- (documentation charges), Rs. 11,124/- (insurance local sales), and Rs. 3,000/- (octroi sales) back to the AO for verification. However, it confirmed the exclusion of Rs. 46,07,241/- (interest income) from the deduction. Thus, the Tribunal partly allowed the assessee's appeal on this ground.

6. Deduction under Section 10B on Interest Income:
The assessee conceded that the issue is covered against them by judicial pronouncements. Therefore, the Tribunal dismissed the assessee's appeal on this ground.

7. Reduction of Deduction under Section 80IB:
The assessee conceded that the issue is covered against them by the decision of the Special Bench of Delhi Tribunal in ACIT Vs. Hindustan Mint & Agro Products Pvt. Ltd. Therefore, the Tribunal dismissed the assessee's appeal on this ground.

8. Inclusion of 'Other Income' in Total Turnover:
The Tribunal upheld the lower authorities' decision to include exchange fluctuation gain and miscellaneous income in the total turnover for computing deduction under section 80HHC. The Tribunal found no material to exclude these business receipts from the total turnover. Therefore, the Tribunal rejected the assessee's appeal on this ground.

9. Inclusion of Manufactured Export Turnover of 10B Unit:
The Tribunal remitted the issue back to the AO for verification, directing the AO to decide the issue afresh in accordance with the Madras High Court decision in CIT Vs. Shivagami Match Industries. Thus, the Tribunal allowed the assessee's appeal for statistical purposes.

10. Charging of Interest under Section 234D:
Both parties agreed that the issue is covered by the Special Bench decision in ITO Vs. Ekta Promoters Pvt. Ltd., which held that section 234D is applicable from assessment year 2004-05 only. Therefore, the Tribunal deleted the interest charged under section 234D and allowed the assessee's appeal on this ground.

Conclusion:
The Tribunal partly allowed both the revenue's and the assessee's appeals, remitting certain issues back to the AO for verification and confirming others based on judicial precedents. The Tribunal's order was pronounced in the presence of the parties on 10/12/2009.

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