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TMI Blog2012 (12) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking and such interest , being included as business is eligible for the aforesaid deduction. In favour of assessee Deduction u/s 10B – Whether provisions written back are eligible for deduction u/s 10B – Held that:- There is no dispute that the above categories of expenses have been incurred by the assessee during the course of carrying of the eligible business of its industrial undertaking. Such reduction of expenses may not constitute income derived from the industrial under taking but all the same since such expenses in the past have reduced the eligible profits of the industrial under taking as a consequence the reduction in such expenses, which is portrayed by the “Provision no longer required written back” deserves to be considered to compute profits of the industrial undertaking eligible for deduction. In favour of assessee Deduction u/s 80HHC - Computation of indirect cost of trading goods which are to be worked out for computing deduction u/s 80HHC – Assessee is preparing a consolidated statements of P&L account for export of its manufactured items and of traded items - Held that:- As per the assessee, the AO had excluded only proportionate expenses related to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and on the facts while reducing profits of business for calculating deduction u/s 80HHC by 90% of the following amounts/ - Particulars Amount (in Rs.) Interest from: Interest From Customers on belated payments 23,10,475 Interest received from employees towards housing loans 89,752 Interest received on Income Tax Refund 51,062 Total 24.51.289 4. (a) That the Ld. CIT (A) is erred in law and on facts while treating ground number 6 as general in nature (b) That the Ld. CIT (A) is erred in law and on facts while not considering the submissions of assessee on ground no. 6 of grounds of appeal (c) That the Ld. CIT (A) is erred in law and on facts while reducing the deduction u/s 80HHC by applying the method of calculating deduction u/s 80HHC(3)(c)(i) other than as specified under section 80HHC. (d) That the Ld. CIT (A) is erred in law and on facts while taking only 10% of profits of undertaking as eligible profits for calculating deduction u/s 80HHC instead of business profits of company computed in accordance with the provisions of the act. 5. That the Ld. CIT(A) has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said unit was 100% export oriented unit. The assessee had claimed exemption u/s 10B of the Act from the profits of the manufacturing business carried on at Baddi unit. The assessee had also claimed deduction u/s 80HHC of the Act on trading export and manufacturing export. During the course of assessment proceedings, the assessee furnished revised form No. 56G for claiming deduction u/s 10B of the Act. The error in the earlier form No. 56G filed by the assessee, as pointed out by the auditor was that , by an error, he had reduced the export turnover of trading goods twice from the export turnover of the undertaking and hence, the revised form No. 56G claiming deduction u/s 10B of the Act . In addition, the assessee had shown other income totaling Rs.31,01,716/- on which it had claimed deduction u/s 10B of the Act. The ground No. 2 raised by the assessee is in respect of the aforesaid claim of exemption u/s 10B of the Act on other incomes. The break-up of the said other income was as under: Interest from Customers on belated payments Rs.23,10,475/- Interest received from employees towards Rs. 89,752/ - Housing loans Intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest income received by the assessee totaling Rs.23.10.475/- needs verification by the AO. In case said interest is received/receivable by the assessee from its customers on the delayed payments, relatable to the export sales made by the assessee, then such interest is to be included as part of the eligible profits, for computing the exemption u/s 10B of the Act . However, where such interest due from the parties is not so relatable to the export sales made by the undertaking, then the assessee is not entitled to the benefit of exemption u/s 10B of the Act on such other incomes . The AO shall compute the exemption u/s 10B of the Act in accordance with our guidelines and after affording reasonable opportunity of hearing to the assessee. 9. The second element of other income is interest received from employees on housing loans amounting to Rs.89,752/-. The Ld. AR for the assessee placed reliance on Joyco India P. Ltd.V ITO (2009) 122 TTJ 940 (Del). 10. The deduction u/s 10B of the Act is allowable on such profit gains of the undertaking which are derived from export of article or thing. The interest receivable from employees on housing loans advanced to them by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... succeeds. 13. Ground No. 2 raised by the assessee, thus, is partly allowed. 14. The issue in Ground No.3 is not pressed and the same is dismissed. 15. The issue raised by the assessee vide Ground No.4 in respect of computation of deduction u/s 80HHC of the Act by applying the method of calculating the deduction u/s 80HHC(3)(c)( i) of the Act was challenged by the assessee before us. The Ld.AR for the assessee fairly pointed out that the issue is presently covered against the assessee both by the ratio laid down by the Chandigarh Bench of Tribunal in the case of sister concern of the assessee in Mahavir Spinning Mills Ltd. reported in 110 ITD 211 (Chd), against which appeal is pending before Hon'ble Punjab Haryana High Court. The issue otherwise stands covered against the assessee by the Hon'ble Madras High Court in M/s. Ambatture Clothing Ltd. In view of the admission of the ld. AR for the assessee, the issue being covered against the assessee by the judgement of Hon'ble Madras High Court (supra) and the decision of the Chandigarh Bench of Tribunal (supra), we dismiss ground No.4 raised by the assessee. 16. The issue in Ground No. 5 6 raised by the assessee is in relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured goods and also trading and export of other goods not manufactured by it, the provisions of Section 80HHC(3) are attracted in order to compute the deduction under the said Section. Consequently, there is a need to work out the cost of trading goods, which in turn are exported by the assessee. Admittedly, the items of expenditure which are purely relatable to the manufacturing activities, carried on by the assessee, are to be excluded from the list of expenses being attributable to such manufacturing activities. However, the balance expenditure is to be attributed both to the manufacturing activity and trading activity, in order to compute the deduction available to the assessee. The first item of expenditure to be considered is the personnel expenses. The assessee had attributed 33,56,010/ - being common expenses both for manufacturing and trading activities. The AO adopted said personnel expenses at Rs.1,18,88,142/-. As per the assessee, the AO had excluded only proportionate expenses related to export while assessee had excluded all the expenses related to manufacturing i.e. domestic as well as exports and al located only expenses which were common for trading as well as manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation of Rs. 5.7 crores. In line with our observation in the paras herein above, where such depreciation is on the plant installed at the manufacturing unit and being involved in the manufacturing process and such depreciation on assets used in manufacturing activities are to be excluded from the cost of expenditure which is attributable to trading goods. However, the depreciation on assets installed in the office of the assessee which is common for both manufacturing and trading activities are to be included as part of indirect cost for trading goods. Accordingly, AO shall re-compute the depreciation and assets attributable to the indirect cost of trading goods. 23. Next item of expenditure is selling expenses and only such selling expenses which are common for manufacturing and trading activities, are to be so included and that part of the selling expenses, which is exclusively attributable to the manufactured goods, are not to be considered as part of indirect cost of trading goods. The assessee, in this regard shall furnish the necessary evidence to prove its claim that only such expenses could be al located being common for trading and manufacturing activities. The AO, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the book profits u/s 115JB of the Act, had made certain adjustments by re-computing turnover of the business i.e. on account of the income to which Section 10B applies and hence, also excluded the profits eligible for deduction u/s 80HHC of the Act. The plea of the assessee that a uniform amount of total turnover for appropriation of amounts of income as well as expenditure to be adopted for this purpose, was rejected by the AO and the book profits were recomputed. The assessee while calculating the book profits u/s 115JB of the Act had appropriated the income and expenditure of Section 10B in the same ratio which was used to calculate the deduction u/s 10B and reducing there from 100% of the profits, eligible for deduct ion u/s 80HHC of the Act. The CIT(A) had upheld the order of AO and consequently, the assessee is in appeal . From the perusal of the record, we find that at page 18 of the Paper Book, the assessee has attached the audit report in form No.29D alongwith annexures placed at pages 18, 22 of the Paper Book under which the book profits have been computed by the auditor at Nil . However, we are of the view that this computation is to be looked into by the AO in vie ..... 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