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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 ..... which is as under: "It is observed from the records that while arriving at the A.I., the depreciation as per companies act as debited in the P&L a/c. was added to the profit of Rs. 1,40,13,29,356/- instead of actual figure of Rs, 7,48,75,43,300/-. Therefore, an amount of Rs. 8,62,13,944/- remains to be added. Hence, the AR of the assessee was asked for to explain. In response to the above, the assessee has submitted reply as under: - With regards to the same, it may be pointed out that Arvind International, a division of Arvind Mills, was a Export-oriented Unit, claiming depreciation u/s 108 of the Income Tax Act. During the year under consideration, however, the EOU was debonded 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 Rs. 11,33,47,660/- from such Export-Oriented Unit. Out of the said gains of such EOU a deduction to the tune of Rs. 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 Rs. 8,62,13,944/- was not added ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the assessee, while keeping in mind the relevant provisions of the law, if is found that the reasons given by the assessee were untenable. From the statement of computation of income submitted along with the return of income, it is clear that while the book depreciation was Rs. 1,48,75,43,300/-, the amount added back was only Rs. 1,40, 13,29,356/-. Therefore, the reasoning provided by the assessee holds no base and therefore an addition of Rs. 8,62,13,944/- is made to the total income of the assessee." 3.2 The appellant has submitted in its written submission which is as under: "The assessing officer has observed that the depreciation as per the Profit & Loss Account was Rs. 148,75,43,300/-as against which in the computation the appellant had added back the amount of Rs. 140,13,29,356/-and hence according to him the amount of difference of Rs. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any case, assessing officer is directed to verify from the computation of 10 B deductions and if the difference in book depreciation is considered in said computation then he will not make further addition in normal business computation. If the same is not considered in 10 B computations, the addition will survive." This leaves the Revenue aggrieved. 4. We have heard both the sides and perused the case file. It is to be seen that the CIT(A) has only restored the issue back to the Assessing Officer for factual verification as to whether the assesssee has already considered the very depreciation 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 Rs. 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 Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt income of the undertaking u/s. 10B and accordingly he has not accepted the same. In this connection if is submitted that the income of Rs. 8,24,522/- includes material purchase discount, insurance claim. This discount, insurance claims goes to reduce the cost and accordingly it increases the business profit of the under taking. Thus if results into reduction of cost and hence it is part of the business income of the under faking. Hence it is eligible for deduction or exemption as the case may be. This may be appreciated in view of the decision of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s asked for to explain. In response to the above, the assessee has submitted reply as under:-It may be borne in mind that u/s 10(B) of the Act, exemption is granted only in the respect of the income earned from the export of articles. In this case, the income sought to be claimed as deduction u/s 10(B) is interest earned by the assessee and not the profit earned by the assessee from the export of the articles as required by section '10(B). Section 10(B) clearly excludes from its scope any income other than the income 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 Rs. 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: "Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers can be treated as derived from industrial undertaking since interest received from debtors is part of profit of the undertaking. However interest received from customers is not derived from the business of exports. The immediate source of this income is delayed payments from customers and not exports of goods or services. Considering the apex court decision in the case of sterling foods Ltd, interest will not qualify for deduction under section 10 B. Accordingly the addition made 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 Rs. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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