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TMI Blog2009 (12) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,059 on account of royalty expenses, treating the same as revenue expenditure ? (b) Whether Income-tax Appellate Tribunal was correct in law in holding that the entire payment of royalty as well as foreign technician fee made by the assessee was revenue expenditure and no part of it can be regarded as capital expenditure ? (c) Whether Income-tax Appellate Tribunal was correct in law in directing the Assessing Officer to exclude interest on FDRs amounting to Rs. 47,74,501 and interest on security deposits with Government Department amounting to Rs. 5,56,262 from the total turnover for the purposes of computing deduction under section 80HHC of the Act ?" 2. In so far as the first question is concerned, the same is covered in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her income, which included interest on FDR and interest received on security deposit with Government Department, was not included in the total turnover, but was treated as exempted under section 80HHC of the Act. The Assessing Officer held that this was to be included in the total turnover for the purpose of computing deduction under section 80HHC of the Act. The Commissioner of Income-tax (Appeals) deleted this disallowance and the order of the Commissioner of Income-tax (Appeals) is upheld by the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal"). The Tribunal has simply remarked that the issue is decided in favour of the assessee by the Tribunal for the assessment year 1998-99. 5. In so far as the interest earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar items have to be deducted in determining the cost of purchase. Placing reliance on AS-2, it was submitted that where excise duty paid was subsequently recoverable by way of drawback, the same would not form part of the manufacturing cost. It was submitted on behalf of the appellant(s) that the payment of excise duty/customs duty on inputs consumed in manufacture of goods by an industrial undertaking eligible for deduction under section 80-IB, was inextricably linked to the manufacturing operations of the eligible undertaking without which manufacturing operations cannot be undertaken, hence the duty, which was paid in the first instance and which had direct nexus to the manufacturing activity when received back, had first degree nexus w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt entitlements was not the industrial undertaking but the source was the Export Promotion Scheme. According to the appellant(s), in the case of sale of import entitlements/REP licence, the source was the scheme framed by the Government of India whereas in the case of DEPB/duty draw-back, the source was the fact of payment of duty in respect of inputs consumed/utilized in the manufacture of goods meant for export. That, but for such payments of duty on inputs used in the manufacture of goods meant for exports, industrial undertaking(s) would not be entitled to the benefit of duty drawback/DEPB, notwithstanding, the Export Promotion Scheme of the Government and, therefore, there was a direct and immediate nexus between payment of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for deduction whereas under section 80-I deduction was allowable to income derived from industrial undertaking. Hence, according to the appellant(s), the provisions of section 80-IB were much wider in scope than section 80-I. According to the appellant(s), section 80-IB was wider than section 80-I as the Legislature intended to give the benefit of deduction not only to the profits derived from the undertaking but also to give the benefit of deduction in respect of incomes having direct nexus with the profits of the undertaking, hence, all incomes that arose during the course of running of the eligible business would be eligible for deduction under section 80-IB, which would include income arising on sale of DEPB at premium." 6. Though th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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