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TMI Blog2014 (3) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... sment by considering only the net receipt in respect of job work. The expenditure in this respect has to be worked out on the basis of either man hours put in the job work in comparison to the own manufacturing activity or on the basis of output ratio in the own manufacturing activity and job work. The assessee is directed to produce relevant details for allocation of the expenditure regarding job work activity. If it is not possible to work out the allowable expenditure on the above said basis then the AO should work out on some reasonable basis. Disallowance is exchange difference gain on loans - We find that the assessee is having two kinds of loan one is short term loan against export bills which is clear from the schedule of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 1,02,022/- 2. Job Work Charges ₹ 19,26,857/- 3. Exchange difference on loans ₹ 18,62,865/- ----------------- ₹ 38,91,744/- ------------------ 2. The assessee is having a manufacturing unit at SEEPZ, Mumbai for manufacturing of studded jewellery for export, the assessee claimed exemption u/s 10A in respect of the business income. The AO disallowed the claim of exemption u/s 10A in respect of following incomes:- 1. Bank Interest ₹ 1,02,022/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not eligible for deduction u/s 10A. The Madras High Court has followed its own judgment in the case of Menon Impex Pvt. Ltd. 259 ITR 403. This issue is also covered by the decision of the Mumbai Tribunal in the case of Tricom India Ltd, 36 SOT 302. 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 supre, 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 (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capsules Pvt. Ltd., Vs. Commissioner of Income Tax, reported in (2012) 343 ITR 89 (SC) has held that while interpreting clause (1) of Explanation (baa) to Section 80HHC of the Act has held that it is only net , amount that should be excluded and not the gross amount. IT is the contention of the appellant in the said decision; question involved was gross rent and gross interest or net -. rent and net interest and not gross or net job work receipts Therefore, the decision has no application. This court 111 the case of Commissioner of Income Tax and another Vs M/s. Resonace Laboratories in ITA Nos. 793, 794, 796 796/2006, dated 06.06.2012 has taken into consideration the decision of the Supreme Court in the case of M/s Miani Precision P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR has submitted that whenever there is a loss the assessee has treated the same as business expenditure and accordingly has been reduced from the business income for the purpose of deduction u/s 10A. Thus the Ld. AR has urged that when the loss has been deducted as expenditure from the business income for the purpose of allowing deduction u/s 10A then the gain due to foreign exchange fluctuation should be allowed for the purpose of deduction u/s 10A. 11. On the other hand the Ld. DR has submitted that as per schedule 14 of the balance sheet, the exchange difference has been shown on long term loan, therefore it was not a short term or loan taken for working capital. 12. Having considered the rival submissions and relevant material o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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