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TMI Blog2012 (10) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. Profit has to be computed as normally understood without insisting on proximate connection between the business of undertaking and the profit. Therefore there is no dispute that foreign exchange fluctuation gain is in respect of export proceeds so amount represents income as it is in the revenue field. Allow in favour of assessee. Excess provision written back & miscellaneous income also constitute profit from business while claiming deduction u/s10A Disallowance of debonding charges – Debonding charges treated as revenue expenditure by assessee – Held that:- As the capital goods placed in the bonded area are subject to restrictions that they cannot be sold and they cannot be removed outside the area for use of self. This encumbrance is removed once the goods are cleared from the bonded area on payment of duty. The result is that the assessee can deal with the goods in any manner it desires including sale thereof. Therefore debonding charges should be treated as capital expenditure & added to cost/wdv of asset. Decision in favour of revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... neral observation made in the chart in respect of these comparables is that the use of instrument of notice u/s 133(6) for gathering information is inappropriate. However, the Ld. Counsel could not substantiate the aforesaid observation. The case of the Ld. CIT(DR) is that the AO can use all instruments available in the Act for bringing relevant information on record for determining the total income. Having considered submissions from both the sides, we are of the view that there is no substance in the argument that the AO cannot collect information about comparables by issuing notices u/s 133(6). Therefore, this submission is rejected. 4.2 The second argument is that in respect of 20 companies, of which information was obtained u/s 133 (6), the same was not put across to the assessee so that it could file its objections as to whether the cases are comparable or not and whether any adjustment is required to the book result of these companies for bringing them as near as possible to the case of the assessee. It is argued that non-sharing of the information with the assessee has led to violation of the principle of natural justice. The assessee was prevented from stating its case on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions. 4.4. In the result, the matter of transfer pricing adjustment is restored to the file of the AO for fresh decision after hearing the assessee. Therefore, these grounds are treated as allowed for statistical purpose. 5. Ground No. 8 is to the effect that the AO erred in disallowing deduction u/s 10A on foreign exchange fluctuation gain and other income of Rs. 71,68,081/-, consisting of excess provision written back and miscellaneous income. 5.1 The Ld. Counsel referred to page No. 6 of PB II, which shows that the assessee earned income of Rs. 68,94,022/- on account of fluctuation in rate of foreign exchange, Rs. 38,532/- on account of excess provision made in earlier years and written off in this year and miscellaneous income of Rs. 4,30,527/-. It is submitted that the finding of the AO is that these incomes are not related to export business and therefore they cannot be termed as income derived from the eligible undertaking. It is argued that the finding of the AO is not in consonance with the relevant provisions. Section 10A grants deduction of such profits as are derived by the eligible undertaking from the export of articles, things or computer software for a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit and loss account. This amount is clearly in the nature of income. The miscellaneous income also represents the income of the business. The only point which we find is that the income is shown at Rs. 4,30,527/- on page No. 6 of the PB, while the Ld. Counsel is mentioned that the income is of the order of Rs. 2.30 lacs. This fact may be verified by the AO. However, the point of law is clear that the profit of the business has to be found out under the business head and there is no necessity to establish proximate or immediate connection between the business and the profit. Thus, these accounts are includible in the profits of the business. The AO is directed to recompute the deduction accordingly after verifying the figure of miscellaneous income. 6. Ground No.9 is to the effect that the AO erred in disallowing office maintenance expenditure of Rs. 24,08,018/- by holding it to be capital expenditure. The AO has furnished the details of the expenditure under 6 heads and held that all of them are of capital nature. Before the Ld. DRP, the assessee submitted the details of expenditure and the vouchers in letter dated 5.9.2011. The expenditure has been incurred on office maintenanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of Rs. 8,90,608/- is held to be revenue in nature, the balance expenditure is held to be capital in nature. Thus this ground is partly allowed. 7. Ground No. 10 is that the AO erred in disallowing debonding charges of Rs. 13,59,057/-. In this connection, it has been submitted before the lower authorities that the amount represents three items - 1) duty paid on loss of laptop of Rs. 70,731/- ; 2) duty paid of Rs. 7,71,021/- on capital asset on debonding the goods and 3) duty paid of Rs. 5,17,305/- on capital goods located at Bangalore for debonding. The submission of the assessee is that it was already in possession of these assets and depreciation was being claimed and allowed. Payment of debonding charges does not lead to creation of any new capital asset, hence the charges should be treated as revenue expenditure. In particular reliance has been placed on the decision of Hon'ble Supreme Court in the case of Empire Jute company of India Ltd. vs. CIT, 124 ITR,1 in which it has been held that apart from the tests of creation of an asset or obtaining benefit of enduring nature, it should also be examined whether the expenditure is in capital field or revenue field. 7.1 Before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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