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TMI Blog2015 (6) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... ,261 from the profit of the business. 2. The assessee in the present case is a company, which is engaged in the business of manufacture, trading and export of bulk drugs and intermediaries. The return of income for the year under consideration was filed by it on 22.9.2008, declaring total income of Rs. 4.88,99,305, after claiming deduction under S.10B amounting to Rs. 16,06,05,559. In the assessment completed under S.143(3) vide order dated 27.12.2010, the claim of the assessee of deduction under S.10B was allowed by the Assessing Officer and the income was assessed on the same figure as returned by the assessee. 3. The records of the said assessment subsequently came to be examined by the learned Commissioner of Income-tax and on such ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade practice to negotiate price in terms of US $ with overseas customers or suppliers. While supplying to customers invoices are raised in terms of US $ and procuring materials from overseas suppliers invoices are billed to them in terms US $ Whereas such purchases and sales are reflected in the books of account in Indian Rupees at the prevailing exchange rate. However while settling the dues of suppliers or customers transactions take place in terms of US $ at the prevailing exchange rate at that time. The difference in books of account either in suppliers account or customers account treated as exchange fluctuations. It is evident that income from exchange fluctuations is emanated from business transactions. Accordingly treated as busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest Rs. 499711/-: Interest earned on electricity deposits, EEFC accounts also treated as business income for the reason that interest paid on loans charged to profit and loss account and the interest earned on deposits to be netted off with a result in interest income of Rs. 499711/-." 4. On the basis of the above submissions, it was contended on behalf of the assessee before the learned Commissioner that the other income of Rs. 24,27,261 represented its business income and the same was rightly included in the profits of the business by the Assessing Officer for the purpose of allowing deduction under S.10B. It was contended that the order of the Assessing Officer allowing the claim of the assessee for deduction under S.10B was neither er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formula given in sub-section (4) of S.10B to work out the profits derived from the export of article or thing or computer software for the purpose of allowing deduction under S.10B. He invited out attention to the provisions of sub-section (4) of S.10B, wherein the formula is given to compute the profits derived from the export of articles or things or computer software, as the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried by the undertaking. He contended that what is relevant to apply this formula is to compute the profits of the undertaking first and then to use t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t nexus or first degree connection with the export activity of the assessee. He contended that the other income in question earned by the assessee cannot be said to have any direct nexus or first degree connection with the export business of the assessee, and the same, therefore, is not eligible for deduction under S.10B, as rightly held by the learned Commissioner in his impugned order passed under S.263. 8. We have considered the rival submissions and also perused the relevant material on record. The issue that arises for our consideration in the present appeal is whether the other income in question earned by the assessee is liable to be included or excluded from the profits of the business of the undertaking for the purposes of computi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 ITR 276) that S.80 HHC statutorily fixes the quantum of deduction on the basis of a proportion of the business profits under the head 'profits and gains of business or profession' irrespective of what could strictly be described as profits derived from export of goods out of India. It was also observed by the Hon'ble Supreme Court that even the illustration given in the Board's Circular No.564 dated 5.7.1990 issued in this context clearly indicates that the ratio mentioned in sub-section (3) of S.80HHC has to be applied to the business profits computed under the provisions of S.28 to S.433D of the Act. 9. In the case of Maral Overseas Ltd. (2012) (146 ITTJ (Ind) SB 129), exactly similar issue had come up for consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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