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TMI Blog2015 (10) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... its claiming deduction u/s. 10A as income from other sources and not allowing the netting thereof against interest payment to banks on aforementioned export credit facilities, for claiming deduction u/s. 10A. 3. The learned Assessing Officer has erred in making adjustment while calculating deduction u/s.10A by reducing eligible export by Rs. 843,81 ,935/being export not received within prescribed time limit. The learned Assessing Officer erred in not reducing freight on exports amounting to Rs. 23,94,037/from total turnover for calculating deduction u/s. 10A even though the same has been reduced from export turnover for calculating deduction u/s. 10A. 4. The learned Assessing Officer erred in making addition of Rs. 4,20,700/being expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss compulsion and not as investment of surplus funds,that the interest on the FD formed part of the business of the assessee,that it was part of export business,that it had claimed exemption u/s.10A in respect of income from SEEPZ, that the interest had to be considered as part of profit of the business of the undertaking for calculation of profit exempt u/s.10A in view of the specific provision of sub section 4. It was further stated that interest received on FD was to be netted against interest expenses. Alternatively,it was argued that if the interest received was considered as income from other sources, then interest paid on borrowings made for placement of such deposits had to be allowed and had to be reduced from such receipts. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing deduction u/s. 10A.Regarding the netting of interest paid and interest received, he referred to the decision of Liberty Footwear Co.(287 ITR 339) and held that the netting off of interest could not be allowed. 2.2. Before us, the AR contended that the assessee was importing gold, that it had to keep margin money with the bank,that it was availing credit facility, that it had asked only for netting of interest.She referred to pg-12 of the appeal paper filed before the FAA and relied upon the cases of Motorola(265CTR 94)and Jewelmark India Pvt. Ltd.(ITA/ 5036/Mum/2012 AY.2007-08, dated 21.03.2014)The DR stated that the assessee had failed to prove the direct nexus of the interest received with the business carried out by it. 2.3. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However; with regard to the claim of setting off expenses against the said income, the AO is directed to follow the ratio of decision of the Supreme Court in the case of ACG Associated Capsules P. Ltd. cited supra, and allow interest income having direct nexus with the interest income". 5. It is clear from the finding of CIT(A) that the AO was directed to consider the netting of expenses in view of the decisions of Hon'ble Supreme Court in the case of ACG Associated Capsules vs. CIT (supra), hence no grievance is left against the order of the CIT(A)." Respectfully,following the above,we decide first ground of appeal in favour of the assessee. 3. Ground No.2 is about adjustments to be made for calculating deduction us/ 10A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bangalore Tribunal. The DR supported the order of the FAA. 3.3. We find that the FAA had given specific direction about un realised the export sale proceeds. In our opinion,his order does not suffer from any legal infirmity. If the AO has not made verification till date,he should verify as to whether the sale proceeds were realised by the assessee within the stipulated time or not. Ground no.2 is allowed for statistical purposes. 4.Next Ground of appeal is about not reducing freight on export,amounting to Rs. 23,94,037/- from total turnover for calculating deduction u/s.10A of the Act. During the assessment proceedings,the AO found that the assessee had not reduced the freight and insurance relatable to exports of 10A units from CIF value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, computer software exported, to the total turnover of the business carried over by the undertaking is applied to the profits of the business of the undertaking in computing the profits derived from export. In other words, the profits of the business of the undertaking are multiplied by the export turnover in respect of the articles, things or, as the case may be, computer software and divided by the total turnover of the business carried on by the undertaking. The expression "total turnover" has not been defined at all by Parliament for the purposes of section 10A . However, the expression "export turnover" has been defined. The definition of "export turnover" excludes freight and insurance. Since export turnover has been defined by Parl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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