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TMI Blog2015 (9) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... to its business in question as per the tribunal’s order in case of Aarti Industries [2005 (2) TMI 428 - ITAT AHMEDABAD-C]. The Revenue fails to rebut these findings of fact and law by quoting cogent material or case law to the contrary. We observe in these facts that these amounts lead to reduction in purchase price of the corresponding material purchased for the purpose of business only. The CIT(A)’s findings under challenge are affirmed.- Decided against revenue. Sec. 10B deduction claimed on interest received on late recoveries from customers by assessee - Held that:- The assessee is otherwise entitled for sec. 10B deduction being a newly established hundred percent export oriented undertaking. This statutory provision grants deduction of such profits and gains as are derived from a hundred percent export oriented undertaking from export of articles or things or computer software. The assessee’s stand throughout is that this interest sum of ₹ 20,82,239/- has arisen from late payments of export proceeds only from overseas export customers. Even the CIT(A) observed that the impugned interest can be treated to have been derived from industrial undertaking since the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d w.e.f. 3.1.2001 and the assessee decided not to avail such deduction from the said date. During the year under consideration, the assessee earned a after depreciation total income of ₹ 11,33,47,660/- from such Export-Oriented Unit. Out of the said gains of such EOU a deduction to the tune of ₹ 11,22,72,452/- was claimed as per the provisions of section 10(B). Vide the statement of reasons furnished to the assessee you have stated that depreciation to the tune of ₹ 8,62,13,944/- was not added back while computing the total income of the assessee for the year under consideration. Further you have quoted section 10(B)(bj, where in it is stated that where the assessee is allowed deduction under the said section, no deduction of depreciation is allowable but shall be deemed to have been allowed. The assessee here in states that it has fully complied with the provisions of the said section as quoted by yourself. You have further observed that while the book depreciation is ₹ 48,75,43,300/-, an amount of ₹ 1,40,13,29,356/- has been added back by the assessee in its return of income. With regards to the same, it may be brought to your notice that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the depreciation as per the Profit Loss Account was ₹ 148,75,43,300/-as against which in the computation the appellant had added back the amount of ₹ 140,13,29,356/-and hence according to him the amount of difference of ₹ 8,62,13,944/- remained to be added back. In this connection the appellant had given detailed explanation which is reproduced in the assessment order and if has been rejected by the A.O. without assigning any specific reason for not accepting the same. The appellant may, therefore, refer to the following para from the statement of facts: (i)With regard to depreciation, the Assessing Officer raised a query that the amount of ₹ 8,62,13,944 had not been added back and in response thereto the assessee submitted that Arvind International, a division of Arvind Mills Ltd. was a 100% Export Oriented Unit, entitled to deduction u/s. 10B of the Act. During the year under consideration, the EOU was debonded w.e.f. 3.1.2001 and the assessee decided not to avail such deduction from the said date. The assessee further stated that the assessee earned after depreciation total income of ₹ 11,33,47,660 from EOU but a deduction to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation in its computation not as so as to avoid double disallowance. The assessee places before us the Assessing Officer s consequential order dated to be 22/02/2010 wrongly mentioned expressly stating CIT(A) s order under challenge. The impugned disallowance on account of depreciation of ₹ 8,62,13,944/- stands deleted in the said order. The Revenue s grievance is rendered infructous. Its corresponding ground accordingly fails. 5. The Revenue s 2nd ground of Rs. ,8,24,522/- on account of other income is dealt in the CIT(A) findings as follows 4. The ground No.3 is against addition of ₹ 8, 24,522/- on account of the income. 4.1 The A.O. has stated in the assessment order dated 31/12/2007, which is as under: It is noticed that the during the year under consideration, the assessee earned a total income of ₹ 8,24,522/- as other income comprising of insurance claim, purchase discount and other miscellaneous income. Hence, the AR of the assessee was asked for to explain. In response to the above, the assessee has submitted reply as under:- In regards to the same, the assessee submits that during the year under consideration, Arvind International, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ITAT, Ahmedabad in the case of Aarti Industries 95 TTJ 15. 4.3 I have considered the facts of the case, assessment order and appellant s submission. Assessing officer did not allow deduction under section 10B on material purchase discount and insurance income on the ground that these are not derived from export of articles. Appellant submitted that these are directly linked to the Cost of purchases and increase the profit of the undertaking. This is nothing but part of business profit of the undertaking. Appellant also relied upon the decision of jurisdictional ITAT. I agree with the appellant that material purchase discount and insurance claims are directly linked to the business of the undertaking. These reduce the cost of purchases and therefore part of business income. Respectfully following the decision of jurisdictional ITAT referred by the appellant, assessing officer is directing to allow deduction under section 10B of IT act on these incomes. 6. Rival contentions heard. Record perused. There is no dispute that this sum of ₹ 8,24,522/- has arisen from insurance claim of exported goods, purchase material discounts and other income of ₹ 7,41,717/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome earned directly out of export of goods. In face of the same, the assessee s contention that the interest income has arisen out of such transactions is found to be invalid. Further, keeping in mind the provisions of section 10(B), the income from interest so earned should be separated while computing the net gains from such export business. Therefore, the interest earned by the assessee amounting to ₹ 20,82,239/- is to be deducted from the amount sought to be claimed by the assessee as deduction u/s 10(B) and hence, the deduction availed by the assessee stands reduced to that effect. 5.2 The appellant has submitted in its written submission which is as under: The assessing officer has stated that the above interest was set off against the interest expenditure of the unit and net interest expenditure was shown in the Profit Loss account of the export oriented unit. The appellant had explained that this interest was earned on account of late payment made by customers and, therefore, it was directly related to the expenditure/ income of the articles and was not to be excluded. In any case, the net amount of interest income and expenditure was expenditure of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessing officer is confirmed. 8. We have given our thoughtful consideration to this issue. The assessee is otherwise entitled for sec. 10B deduction being a newly established hundred percent export oriented undertaking. This statutory provision grants deduction of such profits and gains as are derived from a hundred percent export oriented undertaking from export of articles or things or computer software. The assessee s stand throughout is that this interest sum of ₹ 20,82,239/- has arisen from late payments of export proceeds only from overseas export customers. Even the CIT(A) observed that the impugned interest can be treated to have been derived from industrial undertaking since the same is received from debtors is part of profits, but not derived from exports. We disagree with this reasoning as the interest has been derived from export proceedings of the eligible business unit only. We refer to hon ble jurisdictional high court s view in Nirma Industries Ltd case (supra) in this backdrop of facts and hold that assessee s interest sum of ₹ 20,82,239/- realized from its export customers on account of delayed payments of export proceeds forms part thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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