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TMI Blog2013 (1) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of ss. 10A(4) and 10B(4) respectively. The issue qua head of income under which the same is to assessed stands clarified by the hon’ble jurisdictional high court in the case of CIT vs. Indo Swiss Jewels Ltd. (2005 (9) TMI 47 - BOMBAY HIGH COURT ), since followed by the tribunal in Tropicate Textiles Pvt. Ltd. (2012 (7) TMI 57 - ITAT, MUMBAI) wherein held that the interest earned on the short-term deposits of the money kept apart for the purpose of business has to be treated as income earned on business and cannot be treated as income from other sources Thus the impugned penalty is liable to be deleted also drawing support from the decisions in the case of ITO v. Jewelex International Pvt. Ltd. (2010 (9) TMI 906 - ITAT MUMBAI) and ITO v. Greytrix (I) Pvt. Ltd. (2013 (1) TMI 381 - ITAT MUMBAI) . X X X X Extracts X X X X X X X X Extracts X X X X ..... export of the articles. Even if it is argued that the immediate source of the interest is the deposits with the banks and not the export of articles, in view of sub-section (4) of section 10B the assessee is entitled to succeed. The Assessing Officer has not assessed the interest under the head "Income from other sources". He has treated the interest as part of the profits of the assessee's business. Sub-section (4) of section 10B statutorily prescribes a formula as to what should be considered as profits derived from export of articles. The profits of the business of the undertaking are to be ascertained first and the next step is to bifurcate the same in the same proportion as the export turnover in respect of the articles bears to the total turnover of the business carried on by the undertaking. If the interest income forms part of the profits of the business of the undertaking, then in the light of the statutory formula the resultant figure after applying the formula has to be statutorily considered as profits derived from export of articles. In the present case the interest having been assessed as part of the profits of the business of the undertaking, the formula has to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking." 2.3 The ld. DR, on the other hand, would submit that the assessee having accepted its assessment disallowing deductions u/ss. 10A & 10B on the impugned interest income, there is no scope for discussing the merits of the same, which is only an accordance with the law, as explained in, among others, the decisions in the case of Liberty India (supra) and Sterling Foods (supra). Reference to the provisions of sections 10A(4) and 10B(4) would thus be of no moment. Further, the assessee had set off interest income against interest expenditure in an attempt to conceal the true particulars of its income and, in any case, has furnished inaccurate particulars thereof. The same was found only during the course of assessment proceedings u/s. 143(3). It is thus a clear case for levy of penalty u/s. 271(1)(c); the onus to prove its claims per its return of income and, in any case, to establish the bona fides of its claims, is only on the assessee, and toward which there is abundant reference in the orders by the authorities below to case law, as in the case of Atul Mohan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest expenditure on borrowings for its eligible undertakings, income for which is exigible to deduction u/ss. 10A & 10B, which stand duly claimed, does indeed amount to furnishing inaccurate particulars of income. There is no rule of accountancy or manner of presentation of accounts that subscribes to the netting of income against expenditure, which is ostensibly incurred or suffered for or in the process of earning income. The interest income therefore ought to have been exhibited separately and explicitly in accounts and, in any case, the return of income. Clearly, but for the return having been taken up under the verification procedure under the Act, and examination of the relevant deduction by the AO, this fact itself would not have to light. This is particularly relevant and assumes significance in view of the income derived from the export by the eligible undertakings being claimed exempt, and the express pronouncements by the no less than the apex court, time and again, i.e., qua different incomes and in context of different beneficial provisions, on the scope and ambit of the word 'derived from' occurring therein. In fact, the issue of netting of interest income against i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) and Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC), which again represent the settled law in respect of levy of penalty. 3.4 With regard to the assessment of the impugned income as from other sources, as against from business, which is a prerequisite for it to be considered as exigible for deduction u/s. 10A(1) or s.10B(1), what is relevant and is to be seen is the assessee's return of income, per which the claim stands made, and not its treatment by the AO, which though not disputed by the assessee, would yet not detract from the merits of the assessee's explanation in having returned it only as business income and, further, as derived by its eligible undertaking, so as to be eligible for deduction u/s. 10A(1) or, as the case may be, s.10B(1), in view of ss. 10A(4) and 10B(4) respectively. The issue qua head of income under which the same is to assessed stands clarified by the hon'ble jurisdictional high court in the case of CIT vs. Indo Swiss Jewels Ltd. (supra), since followed by the tribunal in Tropicate Textiles Pvt. Ltd. (supra). 3.5 In view of the foregoing, the impugned penalty is liable to be deleted, and we direct so, also drawing support from the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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