2018 (2) TMI 1811 - HC - Income Tax

Addition as Income from Other Sources - eligibility for the purpose of calculation of deduction under Sections 10A and 10B - Held that - RIVIERA HOME FURNISHING VERSUS ADDL. COMMISSIONER OF INCOME TAX, RANGE 15 2015 (11) TMI 1139 - DELHI HIGH COURT held that Section 10A/10B of the Act is a complete code providing the mechanism for computing the profits of the business eligible for deduction u/s 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B - Decided in favour of the assessee and against the Revenue

Summary

Issues:
1. Whether the ITAT erred in law in deleting the addition of '2.48 crores as Income from Other Sources and holding it eligible for the purpose of calculation of deduction under Sections 10A and 10B of the Income Tax Act, 1961?

Analysis:

1. The case involved the question of whether interest income earned from fixed deposits, derived from export proceeds reported by the assessee, is entitled to deduction under Sections 10A and 10B of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed the deduction, a decision upheld by the CIT(A) but reversed by the ITAT. The court referred to the judgment in Riviera Home Furnishing v. ACIT to analyze the issue.

2. The court also considered the ruling of the Supreme Court in Liberty India v. CIT to understand the implications of the relevant provisions. In the Riviera case, the court highlighted the independence of Section 80A and Chapter VIA provisions from Sections 10A and 10B. It emphasized that the purpose was not to deny relief under Section 10B but to prevent double benefits under different sections.

3. The court concurred with the interpretation in the Riviera case, emphasizing that once an income forms part of the business of the eligible undertaking, it cannot be excluded from the eligible profits for computing deduction under Section 10B. Consequently, the court ruled in favor of the assessee and dismissed the appeal.

4. The judgment provided clarity on the interpretation of provisions related to deductions under Sections 10A and 10B of the Income Tax Act, ensuring that income derived from eligible business activities is not unfairly excluded from the computation of deductions. The decision reinforced the understanding that the provisions should be interpreted to promote the intended benefits for eligible businesses without creating inconsistencies or denying legitimate relief.