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TMI Blog2018 (1) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the peculiar facts of the case under appeal, we are deciding ground in favour of the assessee. - I.T.A./7635/Mum/2014 - - - Dated:- 3-1-2018 - Sh. Rajendra,Accountant Member And Sh. Ravish Sood, Judicial Member For The Revenue : Shri V. Jenardhan, DR For The Assessee : Shri Arati Vissanji Order u/s. 254(1)of the Income- tax Act, 1961(Act) PER RAJENDRA, AM Challenging the order of the assessing officer (AO), dated 26/11/2014, passed in pursuance of the directions of the dispute resolution panel(DRP)-1, Mumbai, dated 20/10/2014, the assessee has filed present appeal. Assessee-company engaged in the business of manufacturing of studded gold jewellery filed its return of income on 21/09/2010, declaring total income of ₹ 4. 77 lakhs. The AO completed the assessment u/s. 143(3) r.w.s. 144C(1) and 144C(5) determining ₹ 35. 40 lakhs. 2. First ground of appeal is about adjustment made on account of interest on delayed payment amounting to ₹ 8. 25 lakhs. During the assessment proceedings, the AO found that the assessee had entered into International Transactions (IT. s)with its associated enterprises (AE). Therefore, he made referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 and 19/08/2013 wherein it was mentioned that rate of 8. 48% could be applied for delayed payments from the AE. s. It worked out to ₹ 6. 43 lakhs. However, the TPO adopted the rate of interest on the basis of average yield from BBB grey corporate bonds for the A. Y 2010-11 @ 10. 68%. The ALP of the interest for delay in realization of debts@ 10. 68% (Rs. 8. 10 lakhs)was suggested for an upward adjustment. The AO passed the draft order accordingly. 2.3. Aggrieved by the order of the TPO/AO the assessee preferred objection before the DRP and made elaborate submissions. After considering the available material, the DRP held that the assessee was allowing its AE to utilize interest free funds without corresponding compensation to itself, that a trade transaction could not be permitted to be utilized as a funding opportunity especially when no compensations was being received, that the TPO was correct in identifying the interest receivable and making upward adjustment, that non-AE invoices not realized for long periods could not be considered to be comparable to the interest free credit period allowed to its AE. s, that interest was chargeable from the AE. s on the invoices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in act of assessee in not charging interest from both Associated Enterprises and non-Associated Enterprises debtors for delay in realization of export proceeds Tribunal thus deleted addition of notional interest on outstanding amount of export proceeds realized belatedly whether on facts, no substantial question of law arose from Tribunal s order Held, yes [Para5] [ In favour of assessee] 6. 1 The above decision squarely applies to the present case. This is the only decision of a High Court applicable to the case at hand which has been cited before us. In the case of Dr. T. P. Kapadia vs. CIT[1973] 87 ITR 511 (Mys. ) it has been held that a decision of a High Court would have binding force in the State in which it has jurisdiction. 6. 2 Even in the case of the assessee for the assessment year 2008-09 (Dania Oro Jewellery Pvt. Ltd. vs. ITO) relied on by the ld. DR, we find that in some of the cases the terms of credit has been extended beyond 700 days and in some of the cases, it has gone beyond 1200 days whereas in the case of Non-AE, the maximum delay is of 203 days. In view of the above, the order of the Tribunal in the case of the assessee for the A. Y. 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 5, 69, 98, 514/-. It requested the AO to give directions in the order u/s. 143(3) so that as and when the amounts were to be realized, the assessee company should be granted deduction u/s. 10AA of the Act. Accordingly, the admissible deduction u/s. 10AA and the total income should be amended. Referring to the provisions of section , the AO held that the deduction u/s. 10AA was to be recomputed taking export turnover to the extent of export consideration received into India till the time of passing of draft order and not as per the calculation adopted by the assessee. The DRP confirmed the order of the AO. 3.1. Before us, the AR referred to the case of M/s. Niru Jewels P. Ltd. , (ITA/1468/Mum/2014 (AY. 2008-09), dated 27/4/16. He also referred to the RBI Cir. No. 91, dated 01/4/2003. The DR left the issue to the discretion of the Bench. He also relied upon the case of Gems and Jewellery India Ltd. (330 ITR 175) of the Bombay High Court. We find that the issue before us, including the unrealised export turnover has been dealt by the Tribunal in the case of Neeru Jewels P. Ltd. (supra)as under: 3. Rival contentions have been heard and record perused. Facts in brief a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed an indefinite time period for the same. Consequently, it cannot be said that the condition of section 10A(3) is' not satisfied. The objection of the Revenue is, in our view, not valid. In view of the above, we restore the matter back to the file of AO for recomputing eligible deduction after considering the RBI Circular and also considering the decision of coordinate bench as discussed above. We find that in the case of Gems and Jewellery India Ltd. (supra), the Hon ble Bombay High Court has held as under: 7. The export turnover, in the numerator must have the same meaning as the export turnover which is a constituent element of the total turnover in the denominator. The Legislature has provided a definition of the expression export turnover in Explanation 2 to section 10A by which the expression is defined to mean the consideration in respect of export by the undertaking of articles, things or computer software received in, or brought into India by the assessee in convertible foreign exchange but so as not to include inter alia freight, telecommunication charges or insurance attributable to the delivery of the articles, things or software outside India. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Assessee was show caused vide letter dated. 25. 01. 2014 to explain why the above said receipts should be not consider -ed for the purpose of deduction u/s. 10AA of the Act. In its reply, dated 29. 01. 2014, the assessee filed explanation in that regard. However, the AO was not satisfied with the explanation and added back the above mentioned items to the total income of the assessee, except the repairs charge(Rs. 7. 48 lakhs). 4.1. Aggrieved by the order of the AO, the assesses filed objections before the DRP and made detailed submissions. After considering the available material, he held that interest on electricity deposit/assaying income/refining income and sale of residual dust was not incidental to the manufacturing activity nor could it be said to be business income of the assessee, that the claim for deduction u/s. 10AA on these items was rightly disallowed by the AO. 4.2. Before us, the AR stated that there was no justification in denying the deduction to the assessee for the above referred items of income. He referred to pg. 67 of the PB. The DR supported the order of the DRP and stated that provisions of section 10AA could not be compared with section 10B of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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