2015 (6) TMI 852 - AT - Income Tax

Revision u/s 263 - CIT(A) direction to AO to recompute the deduction allowable under S.10B, after excluding other income from the profit of the business - Held that - In the present case, the other income in the question earned by the assessee was treated by the Assessing Officer as business income of the assessee and this position is not disputed even by the learned Commissioner in his impugned order passed under S.263. This being so and keeping in view the ratio of the judicial pronouncements discussed in Sterling Foods (1999 (4) TMI 1 - SUPREME Court ), Mysodet (P) Ltd. V/s. CIT 2008 (9) TMI 7 - SUPREME COURT & Maral Overseas Ltd 2012 (4) TMI 345 - ITAT INDORE we hold that the other income in question received by the assessee, which was assessed to tax under the head profits and gains of business or profession , is not liable to be excluded from the profits of the business of the eligible undertaking for the purposes of computing deduction under S10B of the Act, as per the formula given in sub-section (4) of that section. There was thus no error in the order of the Assessing Officer passed under S.143(3) on this issue, as alleged by the learned Commissioner, calling for any revision under S.263. We, therefore, set aside the impugned order of the learned Commissioner of Income-tax passed under S.263 and restore that of the Assessing Officer. - Decided in favour of assessee.

Summary

Issues:
1. Revision of assessment under Section 263 regarding deduction under Section 10B for excluding other income from the profit of the business.

Analysis:
The appeal was against an order revising the assessment made by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961. The issue revolved around the exclusion of other income amounting to Rs. 24,27,261 from the profit of the business for computing the deduction allowable to the assessee under Section 10B. The Commissioner found that the other income, including interest income, technical consultancy charges, and exchange fluctuation, was not derived from the exports of the assessee and should have been excluded from the profits of the business for the purpose of allowing deduction under Section 10B.

The assessee contended that the other income represented its business income and should not be excluded for computing the deduction under Section 10B. The Commissioner, however, held that the other income was not derived from the export business of the assessee and should have been excluded from the profits of the business. Relying on legal precedents, the Commissioner revised the assessment under Section 263, directing the Assessing Officer to recompute the deduction under Section 10B after excluding the other income.

In the appeal, the counsel for the assessee argued that the other income should not be excluded as it formed part of the income of the business undertaking. The Departmental Representative contended that only income directly derived from export activities should be eligible for deduction under Section 10B. The Tribunal analyzed the provisions of Section 10B and noted that a formula was provided to compute profits derived from exports. Referring to legal interpretations, the Tribunal held that if income forms part of the business profits, it should be included for computing deduction under Section 10B.

Based on the above analysis, the Tribunal concluded that the other income earned by the assessee, treated as business income, should not be excluded from the profits of the business for computing the deduction under Section 10B. The Tribunal set aside the Commissioner's order under Section 263 and restored that of the Assessing Officer, allowing the appeal of the assessee.