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2014 (6) TMI 991 - AT - Income TaxIssue of claim of deduction under section 10B - profits on sale of incentives received under the scheme Vishesh Krishi Upaj Yojna @ 5% of FOB value of exports, received from Ministry of Commerce, Govt. of India - Held that - CBDT has issued the circular No. 8 of 2002 dated 27.08.2002 which clarifies that the restriction in deduction under section 10A and 10B to 90% of the profits and gains of the enterprises was for only one assessment year i.e. 2003-04. The assessee is in appeal before us relating to assessment years 2006-07 and 2009-10. Hence, the assessee is entitled to the claim of deduction @ 100% of the profits and gains of the enterprises. We find that a mistake has occurred in the order of the Tribunal. In view thereof, we modify the findings of the Tribunal in para 62 and hold that the assessee is entitled to deduction @ 100% of the profits of the EOU unit. We allow the Miscellaneous Application moved by the assessee relating to assessment years 2006-07 and 2009-10 on the issue of claim of deduction under section 10B of the Act to be allowed at 100% of the profits of EOU unit. The remaining order passed by the Tribunal shall remain unchanged.
Issues Involved:
1. Claim of deduction under section 10B of the Act on profits from sale of incentives received from Ministry of Commerce, Government of India. 2. Interpretation of the second proviso under section 10B of the Act for deduction at 90% or 100% of eligible profits. 3. Application of CBDT circular No. 8 of 2002 on deduction under section 10B for specific assessment years. Analysis: Issue 1: Claim of deduction under section 10B on profits from sale of incentives: The Tribunal considered the issue of profits on sale of incentives received from the Ministry of Commerce under the Vishesh Krishi Upaj Yojna scheme. The Tribunal referred to the decision of the Hon'ble Supreme Court in Liberty India Vs CIT and held that the incentives received were not eligible for deduction under section 10B of the Act. The Tribunal found that the scheme under which the incentives were given aimed to neutralize transport costs and other disadvantages, linking it to the FOB value of exports, and thus, not qualifying for deduction under section 10B. Issue 2: Interpretation of the second proviso under section 10B for deduction at 90% or 100% of eligible profits: The applicant contested the Tribunal's decision to allow deduction at 90% of eligible profits instead of 100%. The applicant argued that the second proviso under section 10B was applicable only for the assessment year 2003-04, as clarified in CBDT circular No. 8 of 2002. The Tribunal initially upheld the restriction to 90% for assessment years 2006-07 and 2009-10. However, upon review of the circular, the Tribunal acknowledged the mistake and modified the decision, allowing deduction at 100% for the said years. Issue 3: Application of CBDT circular on deduction under section 10B for specific assessment years: The Tribunal revisited its decision based on the CBDT circular, clarifying that the restriction to 90% deduction was temporary for the assessment year 2003-04 only. As the applicant's appeal related to assessment years 2006-07 and 2009-10, the Tribunal corrected the deduction percentage to 100% in alignment with the circular's provisions. In conclusion, the Tribunal dismissed the Miscellaneous Applications related to the claim of deduction under section 10B for certain incentives, allowed the application for deduction at 100% of profits for specific assessment years, and dismissed an application filed in error against the appeal of the revenue.
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