2019 (1) TMI 260 - AT - Income Tax

Disallowing the deduction u/s 10B - the other income is arising from the activity of 100% Export Oriented Unit thus eligible for deduction u/s 10B of the Act - whether the income earned by the assessee from the business activities of the 100% units? - Held that - The profit of the undertaking is eligible for deduction u/s 10B of the Act provided it should arise in the course of business activities of 100% export unit. In the identical facts and circumstances the Hon ble ITAT in the case of Lubrizol Advanced Materials India Pvt. Ltd. 2013 (12) TMI 1590 - ITAT AHMEDABAD has decided the issue in favour of the assessee

Summary

Issues:
- Deduction u/s 10B of the Income Tax Act for certain income
- Eligibility of income from business activities of 100% export unit for deduction u/s 10B

Analysis:

Issue 1: Deduction u/s 10B of the Income Tax Act for certain income
The appellant contested the Commissioner of Income Tax (Appeals) decision to restrict the deduction u/s 10B of the Act by not treating an income of ?9,19,094 as income from business related to an Export Oriented Unit (EOU). The appellant argued that the income was attributable to the EOU business and should be allowed as claimed. The AO disagreed, reducing the income from the deduction eligibility under u/s 10B, stating it did not arise in the course of business. The CIT(A) upheld this decision, considering certain incomes like tax refunds and scrap sales as not part of business profit. The appellant appealed to the ITAT, presenting evidence that the income from the EOU activity was eligible for deduction u/s 10B, referencing a relevant tribunal case.

Issue 2: Eligibility of income from business activities of 100% export unit for deduction u/s 10B
The ITAT examined the provisions of Section 10B of the Act, emphasizing that the profit eligible for deduction must arise from the business activities of the 100% export unit. Citing a tribunal case, the ITAT highlighted the importance of including income that forms part of the business of the undertaking for deduction eligibility. Relying on the statutory formula for computing eligible profits from exports, the ITAT concluded that the income discussed, arising from the EOU activity, was indeed eligible for deduction u/s 10B. Consequently, the ITAT allowed the appellant's appeal, determining that the income in question was eligible for deduction under Section 10B of the Income Tax Act.

This comprehensive analysis of the judgment showcases the appellant's successful argument regarding the eligibility of certain income for deduction under Section 10B of the Income Tax Act, emphasizing the importance of income arising from specific business activities for such deductions.