9911796707
TMI Blog2011 (2) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... March 2008 he was pre-occupied with attending penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 (the Act) and in the month of April he had to proceed to home town Nohar in Rajasthan to attend some important religious ceremonies. The Chartered Accountant returned to Mumbai on 3/3/2008 and filed the appeal on 7/5/2008. The Chartered Accountant has also filed an affidavit affirming the above facts. The ld. D.R however, pointed out that no penalty proceedings under section 271(1)(c) of the Act were pending in the month of March in the case of the assessee and, therefore, the contention put forth by the assessee was not true. The ld. Counsel for the assessee submitted that the penalty proceedings referred to in the affidav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that the deduction is being claimed under section 80 GGB of the Act. The assessee claims that it was for the purpose of business but no details whatsoever have been furnished. In the said circumstances, we are of the view that the disallowance made by the revenue authorities was justified. We, therefore, dismiss Ground No.1 raised by the assessee. 7. Ground No. 2 raised by the assessee is also without any merit in view of the decision of the Hon'ble Supreme Court in the case of Liberty India Ltd. The Hon'ble Supreme Court In the case of Liberty India Ltd. vs. CIT 317 ITR 218 (SC) held that Duty drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (5) of section 80-IA (which is required to be read into section 80-IB) provides for the manner of computation of the profits of an eligible business. Such profits are computed as if such eligible business is the only source of income of the assessee. Therefore, devices adopted to reduce or inflate the profits of the eligible business have to be rejected in view of the overriding provisions of section 80-IA(5). Sections 80-I,80-IA and 80-IB provide for incentives in the form of deductions which are linked to profits and not investment. On analysis of sections 80-IA and 80-IB it becomes clear that any industrial undertaking which becomes eligible on satisfying sub-section (2) would be entitled to deduction under sub-section (1) only to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court)wherein it was held that for Expl (baa) to s. 80HHC, netting of income from expenditure is not allowed. The assessee in that case claimed deduction u/s 80HHC on profits which included interest income of Rs.3.25 crores. Under Explanation (baa) to s. 80HHC, 90% of the said interest income has to be reduced from the profits. The assessee claimed that the interest expenditure incurred by it having a nexus with the said interest income had to be netted off and only the balance, if any, could be subjected to the 90% reduction. The assessee proved that there was a nexus between the income and the expenditure. The claim was rejected by the AO though it was accepted by the CIT (A) and the Tribunal relying on Lalsons Enterprises 89 ITD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above, the claim of the Assessee for netting of interest income for exclusion under clause (baa) of Explanation to Sec.80-HHC of the Act, is rejected. 11. Similarly the claim for deduction under section 80 IA in respect of DEPB/Advance licence as raised in Ground No.3, cannot also be accepted in view of the decision of the Hon'ble Bombay High Court in the case of CIT vs. Kalpataru Colours and Chemicals (Bombay High Court) In INCOME TAX APPEAL (LODG.) No.2887 OF 2009 By judgment dated 28/29 June 2010, the Hon'ble Bombay High Court has held : that DEPB sale proceeds cannot be bifurcated into "profits" and "face value". The entire amount is "profits" for s. 80HHC r.w.s. 28(iiid). It was further held that S. 28 (iiid) provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls under s. 28(iiid). There was no basis or justification for the Tribunal to hold that the face value of the DEPB credit can be reduced from the sale consideration. It is not permissible to bifurcate the proceeds of the DEPB into "face value" and "excess of face value". The approach of the Tribunal is misconceived and unsustainable. As the assessee had an export turnover exceeding Rs.10 crores and did not fulfill the conditions set out in the third proviso to s. 80HHC (3), it was not entitled to a deduction u/s 80HHC on the amount received on transfer of DEPB. IN view of the above, the claim of the Assessee in this regard as made in Ground No.3 is rejected. 12. Thus the appeal of the assessee being without any merit is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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