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TMI Blog2015 (11) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... re made out of the interest free funds and therefore, this ground of appeal filed by the Revenue is also dismissed. See Munjal Sales Corporation Vs. Commissioner of Income Tax [2008 (2) TMI 19 - Supreme Court] - Decided in favour of assessee. Disallowance on the ground that the interest incurred till the date of assets put to use should be disallowed - Held that:- As the assessee company on its own made disallowance of ₹ 7,35,226/- in respect of the interest liability incurred for the acquisition of assets till the date the assets were put to use. This contention had not been dislodged by the Department Representative and no further disallowance is called for. This ground of appeal filed by the Revenue is dismissed.- Decided in favour of assessee. Disallowance under the provisions of Section 14A -contention of the respondent assessee that no expenditure was incurred to earn the dividend income - Held that:- The Assessing Officer without giving any reason as to how he is not satisfied with the correctness of the claim of the respondent assessee company had proceeded with the disallowance. The Hon’ble Delhi High Court in the case of Maxopp Investment Ltd. Vs. CIT [2011 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct nexus between the two. v) Export inventive is not eligible for computing the allowable deduction u/s 10B of the Act. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the disallowance of interest of ₹ 3,90,000/- on the investment made for non business purpose. The reliance is placed on the decision of Hon'ble jurisdictional Punjab Haryana High Court in the case of Abhishek Industries (286 ITR 1) held that the entire money in a business entity comes in a common kitty. The monies received as share capital, as term loans, as working capital loan, as sale proceeds etc., do not have any different colour of business receipts and have no separate identification. Sources have no concern whatsoever. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the disallowance of interest liability of ₹ 65,07,805/- made by AO under section 36(1)(iii) of the Income Tax Act. The Ld. CIT(A) has ignored the ratio of the decision of Hon'ble High Court of Karnataka in the case of 'CIT, Bangalore vs L.K. Trust. 297 ITR 53' wherein it has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company invested a sum of ₹ 32,50,000/- in the subsidiary company, namely, Talbros Automotive Components Ltd. The Assessing Officer further made addition of ₹ 65,07,805/- on the ground that the interest was paid on the borrowed funds for acquisition of the assets which were not put to use. Being aggrieved by this assessment order, an appeal was filed before the learned CIT(A), Faridabad, who vide impugned order dated 27.12.2011 allowed the same. Being aggrieved by the CIT(A) s order, the Revenue is before us with the present appeals. 3. Before us, the learned Sr. DR contended that the export incentive received is not a profit derived from the undertakings, therefore is not eligible for deduction under Section 10B of the Act. In support of this contention, he relied upon the following decisions of Hon ble Supreme Court: i. M/s Liberty India Vs. CIT, SLP (C) No. 5827/07 (SC) ii. CIT Vs. Sterling Foods [1999], 237 ITR 579 (SC) Therefore, he submitted that the CIT(A) was not justified in granting the relief. In respect of the disallowance of ₹ 3,90,000/-, he submitted that the ratio laid down by the Hon ble Punjab Haryana High Court in the case of Abh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking . Sub-section (4), therefore, is the special provision which enables the assessee to compute the profits derived from the export of articles or things or computer software. We do not see any conflict between Sub- section (1) and Sub-section (4) to Section 10B, as Sub-section (1) states that deduction of such profits and gains as are derived by a hundred percent export-oriented undertaking from the export of articles or things or software would be eligible under the said Section. Sub- section (1) is a general provision and identifies the income which is exempt and has to be read in harmony with Subsection (4) which is the formula for finding out or computing what is eligible for deduction under Sub-section (1). Neither of the two provisions should be made irrelevant and both have to be applied without negating the other. In other words, the manner of computing profits derived from exports under Sub-section (1), has to be determined as per the formula stipulated in Sub-Section (4), otherwise Sub-section (4) would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the above formula, the question that would arise is whether the interest on the FDRs could form part of the profits of the business of the undertaking . The attention of the Court has been drawn to the decision of the Karnataka High Court in CIT v. Motorola India Electronics Pvt. Ltd. (2014) 46 Taxmann.com 167 (Kar.) which held that there was a direct nexus between the interest received from the FDRs created by a similarly placed Assessee from the amounts borrowed by it. The High Court approved the order of the ITAT in that case which held that the entire profits of the business of the undertaking should be taken into consideration while computing the eligible deduction under Section 10B of the Act by ITA 392/2015 Page 5 of 5 applying the mandatory formula. 6. Thus, the Hon ble High Court has categorically held that the export benefits of DEPB interest should be considered for the purposes of deduction under Section 10B of the Act. Respectfully following the ratio laid down in the above cases, we direct the Assessing Officer to consider the export benefits for the purpose of deduction under Section 10B of the Act. Therefore, the reasoning of CIT(A) while ..... X X X X Extracts X X X X X X X X Extracts X X X X
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