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TMI Blog2011 (2) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided against of assessee. Netting of interest income - As per the Hon'ble Court further held that in Shri Ram Honda Power Equip 289 ITR 475 the Delhi High Court has not adequately emphasized the entire rationale for confining the deduction only to the extent of ninety per cent of the excludible receipts and it cannot be followed - Hence, 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. Deduction u/s 80HHC - Under section 28(iiid) covers only the "profit" (difference between sale consideration and face value of the DEPB credit) and that the "face value" is assessable u/s 28(iiib) is not correct - The entire amount received on transfer of the DEPB credit is "profits" and falls 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 ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground No.1 is concerned the AO noticed that in Note 17 to the Accounts that it had been mentioned that the assessee had paid certain contribution to organizations of political nature. The AO found that there was no receipt for claiming deduction of the aforesaid sum under section 80 GGB of the Act. The deduction claimed was accordingly disallowed by the AO. 6. On appeal by the assessee the CIT(A) held that the expenditure in question cannot be allowed as a deduction being of the nature of expenses not incurred for the purpose of business of the assessee. We are of the view that it is not the case of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) only to the extent of profits derived from such industrial undertaking after the specified date. Apart from eligibility, sub-section (1) purports to restrict the quantum of deduction to a specified percentage of the profits. This is the importance of the words "derived from an industrial undertaking" as against "profits attributable to an industrial undertaking". 8. The Hon'ble Court held that DEPB/Duty drawback are incentives which flow from the schemes framed by the Central Government or from section 75 of the Customs Act,1962. Incentive profits are not profits derived from eligible business under section 80-IB : they belong to the category of ancillary profits of such undertaking. Profits derived by way of incentives such as DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression "profits derived from industrial undertaking" under section 80-IB. 9. The decisions of the Punjab and Haryana High Court in Liberty India v. CIT [2007] 293 ITR 520 and CIT v. Lakhwinder Singh [2009] 317 ITR 209 of the Delhi High Court in CIT v. Ritesh Industries Ltd. [2005] 274 ITR 324 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nale for confining the deduction only to the extent of ninety per cent of the excludible receipts and it cannot be followed; In the view of 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 "any profit on the transfer" of the DEPB shall be business profits. Under Explanation (baa) to s. 80HHC, 90% of "the sum referred to in s. 28(iiid)" has to be reduced from the business profits. Under the third Proviso to s. 80HHC (3), in the case of an assessee having an export turnover exceeding Rs.10 crores, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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