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TMI Blog2018 (2) TMI 1873X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal revenue is aggrieved by the action of CIT(A) allowing assessee s claim of deduction u/s.10AA and allowing claim of employees contribution to PF and ESIC. 3. Rival contentions have been heard and record perused. 4. The brief facts of the case are that the assessee has filed its return of income on 27/11/2013 declaring total income at Rs. Nil after claiming deduction of ₹ 30,32,07,143/- u/s.10AA of the Act and book profit at ₹ 26,70,01,145/- u/s.115JB of the Act. The case was selected for scrutiny and assessment order u/s.143(3) of the Act was completed assessing total income under normal provisions at ₹ 45,10,543/- and at book profit of ₹ 26,70,01,145/- u/s.115Jb of the Act. 5. During the course of assessment the AO observed that the assessee had claimed deduction u/s 10AA of the Act on profit from Airoli Unit which included interest income of ₹ 25,02,849/-. The AO was of the view that the interest income included in the profit on which the assessee had computed the deduction u/s 10AA of the Act were not derived from the services/export activity and hence deduction on the same was not allowable. The AO thereby asked the assessee to exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry the hedging transaction with the bank / brokers. The entire revenue was generated by the Appellant from overseas market and hedging transactions were entered into by the Appellant as a safeguard against exchange rate fluctuation arising in forex market. Thus I find that hedging is directly related to the export business of the appellant and hence interest earned o fixed deposit for hedging has a direct link with the export business of the Appellant and AO is directed to considered the same for deduction u/s 10B of the Act. Likewise, with respect to hedging income of R$.19,57,438/- I find that the debtors receivable of the Appellant are in foreign currency which are open to exchange fluctuation. The Appellant has entered into Forward contract with ICICI Bank for hedging its Export Proceeds to vulnerable exposure of Currency Risk and to hedge the Exchange Rate. Vie transaction of forward contract entered into by the Appellant was done with the object of protecting the export business of the Appellant from the exchange fluctuation risk and it has a direct nexus to the export business of the Appellant. The lodging income was not derived from any scheme framed by the government b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. It also relied upon certain case laws. After considering the available material, the FAA held that sundry credit balance written(Rs.6.36 lakhs) actually represented the sundry creditors related to the export business of the assessee, that the said expenses were claimed in the earlier years and were considered as part of export business, that the assessee was justified in claiming deduction u/s.10B for the sundry balances returned back, that the interest income (Rs.3.19 lakhs) was earned on fixed deposits pledged with bank / authorised brokers, that it was a pre-requisite to carry the hedging transaction, that the revenue generated by the assessee from overseas market and hedging transaction were entered into by the assessee as a safeguard against exchange rate fluctuation, that hedging is directly related to export business of the assessee, that the interest earned had direct link with the export business. He directed the AO to consider the amount in question eligible for deduction u/s.10B of the Act. With regard to hedging income, he held that the debtors receivable were in foreign currency and were opened to exchange fluctuation,that the assessee has entered into forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be computed after making specified adjustment to the net profit, that the Finance 2007 widened the scope of MAT by including total income exempt u/s.10A 10B in the book profit. He held that as per the memorandum explaining the provision of Finance Act,2007 MAT provisions were applicable to company on the income which was from any business or services derived from unit of SEZ, that provisions of section 115JB(6)was applicable to assessee claiming deduction provision of section 10AA of the Act and not an assessee claiming deduction u/s.10b of the Act. Accordingly, he held that assessee was liable to tax u/s.115JB of the Act. 4.1.Before the FAA, the assessee made detailed submissions. After considering the available material, he referred to the case Genesis International Ltd. (80 DTR-Mumbai-(TRIB) 4),wherein the Tribunal had decided the identical issue in favour of the assessee. He also relied upon the case of G Jewel Craft Ltd.(36 ITR-Trib-521)and the order of his predecessor for the A.Y.2009-10. Following the above mentioned two orders of the Tribunal, he directed the AO to exclude the income relating to SEZ unit, while computing book profit u/s.115JB of the Act. The DR left the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant Act treating the same as deemed dividend within the meaning of section 2(24)(x) r.w.s. 36(1)(va) of the Act. 11. By the impugned order CIT(A) deleted the addition by following the decision of the jurisdictional High Court in the case of Hindusthan Organics Chemicals Ltd., The precise observation of CIT(A) as under:- 6.4.4. The AO's order/ the contention of the appellant and materials on record have been considered. The employees contribution to PF and ESIC although paid beyond the due date prescribed under the respective Act's but however the same were paid before the due date of filing return of income by the appellant. Infact, the same were paid within the previous year itself. The decisions of Hon'ble Jurisdictional High Court in the case of CIT Vs. M/s Hindustan Organics Chemicals Ltd (supra) and CIT Vs. Ghatge Patil . Transports Ltd (supra) squarely covers this issue and decides in favour of the assessee. Thus respectfully following the decisions of hon'ble Jurisdictional Bombay High Court, I delete the addition of ₹ 15,66,633/- made by the AO u/s 36(l)(va) r.w.s. 2(24)(x) of the Act. Accordingly this ground of appeal is allowed. 12. Ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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