2015 (10) TMI 1618 - AT - Income Tax

Computation of deduction u/section 10B - Held that - The company has maintained and submitted separate set of audited accounts for the export unit, non export trading activity and consolidated accounts for the entire entity, whereas we find that the AO has not taken into account and has got confused between the total turnover of the business and total turnover of the undertaking. The CIT (A) also confirmed the same. We find that in the proviso to section 10B refers to computation of total income of Undertaking . Further, the proviso states that the undertaking shall be entitled to deduction referred to the sub-section only for the unexplained part of the aforesaid ten consecutive assessment years. Hence we set aside the issue to the AO to compute deduction u/s 10B according to the proviso to section 10B after giving a reasonable opportunity to the assessee. - Decided in favour of assessee for statistical purposes.

Issues:
1. Computation of deduction u/s 10(B) for a company engaged in manufacturing, trading, and export of natural products.
2. Discrepancy in the calculation method of deduction u/s 10(B) by the Assessing Officer (AO) and the assessee.
3. Interpretation of the provisions of Section 10B of the Income Tax Act.
4. Consideration of separate audited accounts for the export unit, non-export trading activity, and consolidated accounts for the entire entity in computing the deduction u/s 10B.

Issue 1: Computation of deduction u/s 10(B):
The appellant, engaged in manufacturing, trading, and export of natural products, contested the AO's method of deducting u/s 10(B) by including the turnover of both Export Oriented Unit (EOU) and Trading Unit. The appellant argued that only EOU profits and turnover should be considered. The appellant presented separate audited accounts for both units and consolidated accounts. The CIT (A) upheld the AO's method, citing a CBDT circular and directed the AO to recalculate the deduction u/s 10B.

Issue 2: Discrepancy in calculation method:
The appellant contended that the AO incorrectly included non-EOU turnover for calculating the deduction u/s 10B, despite separate audited accounts. The appellant argued for division-wise profit consideration for deduction calculation. The appellant referenced judicial decisions supporting their stance, including cases from the Madras High Court and ITAT Mumbai.

Issue 3: Interpretation of Section 10B:
Section 10B allows a deduction for profits derived by a hundred percent export-oriented undertaking. The Tribunal noted the confusion between total business turnover and total undertaking turnover by the AO. The Tribunal emphasized the proviso to Section 10B, highlighting the computation of total income for the "Undertaking" and the entitlement to deduction for ten consecutive assessment years.

Issue 4: Consideration of separate audited accounts:
The Tribunal acknowledged the appellant's submission of separate audited accounts for the export unit, non-export trading activity, and consolidated accounts. The Tribunal found the AO's oversight in distinguishing between total business turnover and total undertaking turnover. Consequently, the issue was remanded to the AO to recalculate the deduction u/s 10B in accordance with the proviso to Section 10B, granting the appellant a reasonable opportunity.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the correct interpretation of Section 10B and the importance of considering separate audited accounts for different units in computing deductions. The judgment highlighted the need for precise calculation methods and adherence to statutory provisions for determining deductions under the Income Tax Act.

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