The Income Tax Officer, Ward -4, Gandhinagar V. Sonic Technology (India) INC, Gandhinagar

ITA 1444/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9948 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMIR VAKIL
• Keywords: Business income
• Section: 80HHC; 10B; 10; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .., , !' BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.1150/AHD/2013 2. ./ I.T.A. NO.1444/AHD/2013 ( / ASSESSMENT YEAR : 2008-09) 1. SONIC TECHNOLOGY (INDIA) INC. PLOT NO.C-9, GIDC ELECTRONIC ESTATE SECTOR 25 GANDHINAGAR 382 025 2. THE INCOME TAX OFFICER WARD-4 GANDHINAGAR / VS. 1. THE INCOME TAX OFFICER WARD-4 GANDHINAGAR 2. SONIC TECHNOLOGY (INDIA) INC. GANDHINAGAR % ./ ./ PAN/GIR NO. : AARFS 3913 K ( %( / APPELLANTS ) .. ( )%( / RESPONDENTS ) A SSESSEE BY : SHRI SANJAY R. SHAH, AR REVENUE BY : SHRI SAMIR VAKIL, SR.DR *+ / DATE OF HEARING 28/10/2016 ,-.+ / DATE OF PRONOUNCEMENT 17/11/2016 / O R D E R PER PRADIP KUMAR KEDIA, AM: THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 2 - GANDHINAGAR [CIT(A) IN SHORT] DATED 14/02/2013 PAS SED FOR ASSESSMENT YEAR (AY)2008-09. 2. BRIEFLY STATED, THE RELEVANT FACTS ARE THAT THE ASSESSEE-FIRM IS A 100% EXPORT ORIENTED UNIT (EOU) AND ENGAGED IN CAR RYING ON BUSINESS OF MANUFACTURING AND SELLING OF PRINTED CIRCUIT BOA RDS. DURING THE ASSESSMENT YEAR IN APPEAL, THE ASSESSEE HAS CLAIMED EXEMPTION U/S.10B OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S 'THE ACT'). IT WAS NOTICED BY THE ASSESSING OFFICER (AO) THAT WHILE CL AIMING EXEMPTION AVAILABLE U/S.10B OF THE ACT ON BUSINESS INCOME DER IVED FROM THE 100% EOU, THE ASSESSEE HAS ALSO SIMULTANEOUSLY CLAIMED E XEMPTION U/S.10B OF THE ACT ON FOLLOWING OTHER ITEMS OF INCOME ALLEGED LY NOT IN THE NATURE OF BUSINESS INCOME AND/OR NOT DERIVED FROM THE BUSINES S OF EXPORTS, NAMELY: INTEREST [INCLUDING TAX DEDUCTED AT SOURCE RS.34,985/- PREVIOUS YEAR RS.42,228/- RS. 7,17,27 0/- INSURANCE REFUND RS.28,87,424/- SALES TAX REFUND RS. 91,150/- SALE OF SCRAP RS.16,88,437/- SUNDRY BALANCE WRITTEN OFF RS.30,72,912/- 2.1. THE AO DISCRDED THE CLAIM OF DEDUCTION UNDER S .10B OF THE ACT ON THE VARIOUS ITEMS OF INCOME NOTED ABOVE, THE RELEVANT PARAS OF THE ORDER OF THE AO DEALING WITH THE VARIOUS ITEMS IS R EPRODUCED HEREUNDER FOR READY REFERENCE: ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 3 - 3. INTEREST INCOME : ON VERIFICATION OF P&L A/C OF THE ASSESSEE, IT WAS OBSERVED THAT THE ASSESSEE HAD SHOWN INTEREST INCOME OF RS.7,17,2 0/-. VIDE ANNEXURE TO THE NOTICE U/S.142(1) DTD. 14/11/2011 T HE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY INTEREST INCOME SH OWN BY THE ASSESSEE SHOULD NOT E TREATED AS INCOME FROM OTHER SOURCES. 3.1. THE ASSESSEE VIDE LETTER DTD. 21/11/2011 FILE D THE WRITTEN SUBMISSION STATED AS UNDER: INTEREST INCOME OF RS.7,17,270/- IS DERIVED FROM T HE DEPOSIT KEPT WITH BANK OUT OF SURPLUS FUNDS GENERATED FROM THE UNDERT AKING AND THEREFORE THIS IS DERIVED FROM THE UNDERTAKING. AT THIS STAGE, WE WOULD LIKE TO STATE THAT THE ASSESSEE DOES NOT HAVE ANY O THER UNDERTAKING AND THEREFORE ALL THE SURPLUS FUNDS HAVE BEEN GENERATED FROM EOU ONLY. WE SYSTEMS & SOFTWARE LTD. V. ASSISTANT COMMISSIONE R OF INCOME TAX, RANGE 8(1) SOT 230 (BOM) WHEREIN THE TRIBUNAL WHILE ALLOWING DEDUCTION U/S.10B IN RESPECT OF INTEREST INCOME OBS ERVED AS UNDER: AS REGARDS THE CLAIM OF DEDUCTION UNDER SECTION 10 B ON INTEREST INCOME, IN THE LIGHT OF THE FACT THAT WE HAVE HELD THAT THE ASSESSEE IS ENTITLED TO RELIEF UNDER SECTION 10B ON INTEREST IN COME IN THE LIGHT OF THE FACT THAT WE HAVE HELD THAT THAT THE ASSESSEE I S NATURALLY ENTITLED FOR RELIEF UNDER SECTION 10B OF THE ACT IN RESPECT OF THE INTEREST INCOME ALSO, WHICH IS ADMITTEDLY A PART OF BUSINESS INCOME . HENCE, IN VIEW OF THE ABOVE AS ALSO THE FACT THAT T HE ASSESSEE HAS ONLY ONE BUSINESS UNIT, BEING THE EOU UNIT SUBJECTED TO BENEFIT U/S.10B OF THE ACT, IT IS SUBMITTED THAT SUCH INCOME IS DERIVE D FROM BUSINESS OF THE UNDERTAKING AND THEREFORE IT CANNOT BE EXCLUDED FRO M COMPUTATION F DEDUCTION FOR THE PURPOSE OF SECTION 10B. 3.2. THE INTEREST IS NOT THE BUSINESS PROFITS. THE INTEREST EARNED ON SURPLUS FUNDS IS INCOME FROM OTHER SOURCES. IT IS NEITHER DERIVED FROM INDUSTRIAL UNDERTAKING NOR EVEN PROFIT S AND GAINS OF ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 4 - BUSINESS. CIT VS. MENON IMPEX (P) LTD. REPORTED A T 259 ITR 403 (MAD); SHAM TABREJ VANTI, IN RE REPORTED AT (2005) 273 ITR 299 (AAR); INDIA COMMET INTERNATIONAL VS. ITO REPORTED AT (2008) 304 ITR 322 ARE RELIED UPON AND IT IS HELD THAT NO DEDUCTION U/S.10B IS ALLOWABLE ON THIS INTEREST INCOME. THE REPLY OF THE ASSESSEE IS FOUND TO BE NOT ACCEPTABLE. THE SAME I S DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 4. INSURANCE REFUND : ON VERIFICATION OF P&L A/C OF THE ASSESSEE, IT WAS OBSERVED THAT THE ASSESSEE HAD SHOWN INSURANCE REFUND OF RS.28,87 ,424/-. VIDE ANNEXURE TO THE NOTICE U/S.142(1) DTD. 14/11/2011 T HE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY INSURANCE REFUND S HOWN BY THE ASSESSEE SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. 4.1. THE ASSESSEE VIDE LETTER DTD. 21/11/20911 FILE D THE WRITTEN SUBMISSION STATED AS UNDER: FIRE TOOK PLACE AT THE PREMISE OF THE FIRM IN OCTO BER-2007 WHICH RESULTED IN DAMAGE OF ABOUT RS.80 LACS HOWEVER FINE LY THE INSURANCE CLAIM AMOUNT RECEIVED FROM THE INSURANCE COMPANY WA S RS.8,87,424/- IN THIS REGARD. THE DETAILS AND THE DOCUMENTS IN T HIS REGARD WERE SUBMITTED BEFORE YOUR GOOD SELF VIDE SUBMISSION DAT ED 23 RD AUGUST 2011. THE REFUND IS RECEIVED BY THE ASSESSEE IN THE DUE C OURSE OF BUSINESS. HENCE THE SAID INCOME GETS WITHIN THE AMBIT OF PROF IT OF BUSINESS OF UNDERTAKING AND THERE IS NO REASON AS TO WHY SUCH I TEMS SHOULD NOT BE CONSIDERED FOR THE PURPOSE OF EXEMPTION, ESPECIALLY SO IN VIEW OF THE FACT THAT WHAT IS INTENDED BY THE LEGISLATURE TO EX EMPT U/S.10IB IS WHAT FORMS PART OF THE PROFITS OF THE BUSINESS OF UNDER TAKING U/S.10B(4) R.W.S. 10B(1) OF THE ACT. IN VIEW OF ABOVE SAID SU BMISSION, WE MOST RESPECTFULLY SUBMIT THAT ALL SUCH ITEMS ARE TO BE C ONSIDERED WHILE COMPUTING DEDUCTION U/S.10B. ACCORDINGLY, THE DEDU CTION CLAIMED BY ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 5 - THE ASSESSEE IS CORRECT AND NO DISALLOWANCE IS REQU IRED TO BE MADE IN THIS REGARD. 4.2. THE ASSESSEES REPLY WAS CAREFULLY CONSIDERED AND FOUND NOT TO BE ACCEPTABLE AS THE INSURANCE REFUND IS NOT TH E PROFIT OF THE BUSINESS INCOME. FURTHER, THE SECTION 10B DEDUCTIO N IS ONLY RELATED TO THE PROFIT OF THE BUSINESS DERIVED BY HU NDRED PERCENT EXPORT ORIENTED UNDERTAKING FROM THE EXPORT OF THE ARTICLES OR THINGS, OR COMPUTER SOFTWARE FOR THE PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS T O MANUFACTURE OR PRODUCE ARTICLES OR THINGS AS THE CASE MAY BE FR OM THE ABOVE DEFINITION IT IS VERY CLEAR THAT THAT IT SHOULD BE RELATED TO THE PROFITS AND GAINS DERIVED FROM THE 100% EXPORT ORIENTED. T HE RELIANCE IS ALSO PLACED IN LIBERTY INDIA PVT.LTD. THEREFORE, T HE CLAIM OF DEDUCTION OF INSURANCE REFUND OF RS.28,87,424/- U/S .10B IS DISALLOWED AND ADDED BACK TO THE RETURNED INCOME. 5. SALES TAX REFUND : ON VERIFICATION OF PROFIT AND LOSS ACCOUNT, IT WAS SEEN THAT THE ASSESSEE HAS SHOWN SALES TAX REFUND AS AMOUNTING TO RS.91,150/- AS INCOME FROM OTHER SOURCES AND THE SAME HAS BEEN CLAIMED AS DEDUCTION U/S.10B OF THE ACT. 5.1 THE ASSESSEE VIDE LETTER DTD. 21/11/2011 FILED THE WRITTEN SUBMISSION SATED AS UNDER: DURING THE YEAR UNDER CONSIDERATION, ASSESSEE RECE IVED AMOUNT OF RS.91,150/- ON ACCOUNT OF REFUND OF SALES TAX. THE SAID AMOUNT PERTAINS TO F.Y. 2004-05 & F.Y. 2003-04 UNDER GUJAR AT SALES TAX ACT, 1969. THE SAID SALES TAX REFUND RS.91,150/- IS DER IVED FROM THE SALES TAX EXPENDITURE WHICH IS PAID IN THE DUE COURSE OF THE ASSESSEES BUSINESS AND GENERATED FROM THIS UNDERTAKING ONLY. DETAILS IN THIS ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 6 - REGARD WERE DULY SUBMITTED VIDE ASSESSMENT SUBMISSI ON LETTER DATED 23 RD AUGUST 2011. THERE IS NO REASON WHY SUCH ITEMS SH OULD NOT BE CONSIDERED FOR THE PURPOSE OF EXEMPTION, ESPECIALLY SO IN VIEW OF THE FACT THAT WHAT IS INTENDED BY THE LEGISLATURE TO EX EMPT U/S.10B IS WHAT FORMS PART OF THE PROFITS OF THE BUSINESS OF THE U NDERTAKING U/S.10B(4) R.W.S.10B(1) OF THE ACT. 5.2. THE ASSESSEES REPLY WAS CAREFULLY CONSIDERED AND FOUND NOT TO BE ACCEPTABLE. SALE TAX REFUND IS NOT A CASE OF EXCESS DEPOSITS OF TAX WHICH IS REFUNDED. THE DECISION OF HONOURAB LE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) IS SQUAR ELY APPLICABLE ON FACTS. IN SECTION 10B(4) ALSO, THE WORDS OF THE U NDER TAKING WERE INSERTED W.E.F. 01/04/2001 TO RESTRICT THE BEN EFITS FOR THE PROFITS ON THE UNDER TAKING ONLY AND NOT TO PROFITS OF THE BUSINESS OF THE ASSESSEE. THE BENEFITS AVAILABLE TO THE ASS ESSEE WHICH ARE ATTRIBUTABLE TO ITS BUSINESS ARE NOT PROFITS DERIVE D FROM EXPORTS OF THE ASSESSEES INDUSTRIAL UNDERTAKING. AS THE SECT ION 10B DEDUCTION IS ONLY RELATED TO THE PROFIT OF THE BUSI NESS DERIVED BY HUNDRED PERCENT EXPORT ORIENTED UNDERTAKING FROM TH E EXPORT OF THE ARTICLES OR THINGS, OR COMPUTER SOFTWARE FOR TH E PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASS ESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAK ING BEINGS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS AS THE CA SE MAY BE. FROM THE ABOVE DEFINITION IT IS VERY CLEAR THAT THA T IT SHOULD BE RELATED TO THE PROFITS AND GAINS DERIVED FROM THE 1 00% EXPORT ORIENTED, WHILE THE SALES TAX REFUND IS NOT THE PRO FIT WHICH IS DERIVED FROM THE EXPORT ORIENTED. THE CLAIM OF DED UCTION OF SALES TAX REFUND U/S.10B IS DISALLOWED AND ADDED BACK TO THE INCOME. 6 SUNDRY BALANCE WRITTEN OFF : ON VERIFICATION OF PROFIT AND LOSS ACCOUNT, IT WAS SEEN THAT THE ASSESSEE HAS SHOWN SUNDRY BALANCE WRITTEN OFF AMOUN TING TO RS.30,72,912/- AS INCOME FROM OTHER SOURCES AND THE SAME HAS ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 7 - BEEN CLAIMED AS DEDUCTION U/S.10B OF THE ACT. VIDE ANNEXURE TO THE NOTICE U/S.142(1) DTD. 14/11/2011 THE ASSESSEE WAS SHOW CAUSE TO EXPLAIN AS TO WHY SUNDRY BALANCE WRITTEN OFF SHO WN BY THE ASSESSEE SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. 6.1. THE ASSESSEE VIDE LETTER DTD. 21/11/2011 FILED THE WRITTEN SUBMISSION STATED AS UNDER: DURING THE YEAR UNDER CONSIDERATION RAW MATERIALS WERE PURCHASED FROM ONE OF THE SUPPLIERS (MACDERMIND SINGAPORE PTE LTD.). HOWEVER, DUE TO THE FACT THAT THE GOODS WERE NOTE UP TO THE EXPECTED LEVEL OF QUALITY, THE ASSESSEE ASKED THE SUPPLIER TO REDUCE THE PRICES. AFTER NEGOTIATION, THE SUPPLIER AGREED TO WAIVE A PART AM OUNTING TO RS.30,72,912/- OF THE PURCHASE PRICE AND THE SAME W AS CREDITED TO PROFIT & LOSS ACCOUNT, SUCH AMOUNT TO BE PAID TOW ARDS THE SUPPLY OF THE SAID MATERIAL WHICH WAS WRITTEN OFF ACTUALLY DE PICTS REDUCTION IN THE PURCHASE COAST FOR THE FIRM AND THEREFORE IT IS NOT AN INCOME FOR THE FIRM BUT ONLY REDUCTION IN MATERIAL COST. AS A LREADY DESCRIBED ABOVE, SUCH BALANCE WRITTEN BACK IS NOTHING BUT RED UCTION IN THE COST INCURRED IN THE PAST TOWARDS PURCHASE OF RAW MATERI ALS. IN ANY CASE WHILE CALCULATING AMOUNT ELIGIBLE FOR DEDUCTION U/S .10B THE ACTUAL COSTS INCURRED BY THE ASSESSEE HAVE TO BE CONSIDERE D AND THIS AMOUNT OF RS.3072,912/- IS NOTHING BUT REDUCTION IN THAT C OST INCURRED BY THE ASSESSEE TOWARDS PURCHASE OF RAW MATERIAL WHICH IS NOTHING BUT A PURE BUSINESS TRANSACTION CARRIED OUT BY THE ASSESS EE. THESE BALANCES ARE WRITTEN OFF IN THE NORMAL COURSE OF BUSINESS AN D SHOULD BE CONSTRUCTED AS PROFIT OF BUSINESS OF THE UNDERTAKIN G. HENCE THE QUESTION OF EXCLUDING THE SAME FOR CALCULATING EXEM PTION U/S.10B SHOULD NOT ARISE. 6.2. THE ASSESSEES REPLY WAS CAREFULLY CONSIDERED AND FOUND NOT TO BE ACCEPTABLE. IN NO CASE, SUCH WRITING OFF CAN BE INCOME DERIVED FROM THE ELIGIBLE BUSINESS. ACTUALLY THESE ARE DEEMED PROFITS BECAUSE OF CESSATION OF LIABILITY. THE SAM E IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 8 - 7. SCRAP REALIZATION : ON VERIFICATION OF THE P&L A/C, IT WAS OBSERVED THA T THE ASSESSEE HAS CLAIMED SCRAP INCOME AMOUNTING TO RS.16,88,437/ - EXEMPTED U/S.10B. AS PER SECTION 10B A DEDUCTION OF SUCH PR OFIT AND GAIN DERIVED BY 100% EXPORT ORIENTED UNDERTAKING FROM TH E EXPORT OF ARTICLE OF THINGS OF COMPUTER SOFTWARE FOR A PERIOD F TEN CONSECUTIVE ASSESSMENT YEAR BEGINNING WITH THE ASSE SSMENT YEAR RELEVANT TO PREVIOUS YEAR IN WHICH UNDERTAKING BEGI NS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMPUT ER SOFTWARE AS THE CASE MAY BE SHALL BE ALLOWED FROM THE TOTAL INC OME OF THE ASSESSEE. THIS SECTION APPLIES TO THE UNDERTAKING IF THE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORT OUTSIDE INDIA ARE RECEIVED IN OR BROUGHT INTO INDIA BY THE ASSESSEE IN THE CONVERTIBLE FOREIGN EXCHANGE WITHIN THE PERIOD OF S IX MONTHS FROM THE END OF THE PREVIOUS YEAR OR AS THE COMPETENT AU THORITY IS ALLOWED. THEREFORE, VIDE ANNEXURE TO THE NOTICE U/ S.142(1) DTD. 14/11/2011 THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY SCRAP REALIZATION SHOWN BY THE ASSESSEE SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. 2.2 ACCORDINGLY, THE AO HELD THAT INCOME CREDITED B Y THE ASSESSEE TOWARDS (I) SCRAP SALE, (II) SUNDRY BALANCE WRITTEN OFF, (III) INSURANCE REFUND, (IV) SALES TAX REFUND AND (V) INTEREST INCO ME ARE NOT ELIGIBLE FOR THE PURPOSES OF DEDUCTION UNDER S.10B OF THE ACT. THE AO ALSO OBSERVED THAT WHAT IS ELIGIBLE FOR DEDUCTION UNDER S.10B OF THE ACT IS PROFIT AND GAINS DERIVED BY A 100% EOU FROM THE EXPORT OF AR TICLES OR THINGS, ETC. AND NOT EVERY INCOME WHICH MAY BE ATTRIBUTABLE TO I TS BUSINESS BUT NOT DERIVED BY AN UNDERTAKING FROM EXPORTS OF ARTICLES OR THINGS, ETC. THE AO ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 9 - THUS DECLINED TO ACCEPT THE CLAIM OF THE ASSESSEE I N THE AFORESAID ITEMS TOWARDS DEDUCTION UNDER S.10B OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PR EFERRED AN APPEAL BEFORE THE CIT(A). 4. THE CIT(A) EXAMINED THE VARIOUS ISSUES RAISED BUT DID NOT FIND MERIT IN THE CLAIM OF THE ASSESSEE TOWARDS DEDUCTION UNDE R S.10B OF THE ACT ON VARIOUS MISCELLANEOUS INCOME AS NOTED ABOVE. HOWEVE R, HE GRANTED RELIEF TOWARDS INCOME FROM SALE OF SCRAP RS.16,88,437/- AN D PARTIAL RELIEF TOWARDS COMPENSATION/INSURANCE REFUND TO THE EXTENT OF 75% OF THE INSURANCE RECEIPT. THE CIT(A) THUS ACCORDINGLY RE JECTED THE CLAIM OF EXEMPTION U/S.10B OF THE ACT TOWARDS INTEREST INCOM E OF RS.7,17,270/-, SALES TAX REFUND OF RS.91,00,150/-, SUNDRY BALANCE WRITTEN OFF OF RS.30,72,912/- AND 25% OF THE INSURANCE CLAIM AMOUN TING TO RS.7,21,856/-. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE VARIOUS GROUNDS RAISED IN ASSESSEES APPEAL IN ITA NO.1150/AHD/2013 FOR AY 2008-09 READ AS UNDER:- ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 10 - YOUR APPELLANT BEING DISSATISFIED WITH THE ORDER PA SSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-GANDHINAGAR [C IT(A)], PRESENTS THIS APPEAL AGAINST THE SAME ON THE FOLLOWING AMONGST OT HER GROUND APPEAL WHICH ARE WITHOUT PREJUDICE TO EACH OTHER. 1. THE ORDER PASSED BY THE LEARNED CIT(A) IS ERRONEOU S AND REQUIRES TO BE SUITABLE MODIFIED. 2. THE LEARNED CIT(A) HAS ERRED IN REJECTING APPELLANT S CONTENTION THAT THE TERM DERIVED BY AS PRESCRIBED U/S.10B(1) OF THE ACT IS DEFINED U/S.10B(4) OF THE ACT TO MEAN PROFIT OF TH E BUSINESS OF THE UNDERTAKING 2.1 LEARNED CIT(A) HAS ERRED IN RELYING UPON THE DECISI ONS RENDERED BY THE JUDICIARIES U/S.80I/80IB INSTEAD OF DECISIONS R ENDERED U/S.80HHC WHEREAS PROVISIONS OF SECTION 10B IS IN P ARI MATERIAL WITH PROVISIONS OF SECTION 80HHC. 3. LEARNED CIT(A) HAS ERRED IN HOLDING AGAINST THE AP PELLANT SOLELY RELYING UPON THE DECISION IN CASE OF BANYAN CHEMICA LS LTD. 121 TTJ 751 (AHD.) WHEREAS THE SAID DECISION DOES NOT DEAL WITH THE ISSUE UNDER CONSIDERATION. 3.1 .LEARNED CIT(A) HAS ERRED IN SOLELY RELYING ON THE SAID DECISION WHICH DOES NOT DEAL WITH THE APPELLANTS PLEA THAT THE TERM DERIVED BY AS PRESCRIBED U/S.10B(1) OF THE ACT IS DEFINED U/S.10B(4) OF THE ACT TO MEAN PROFIT OF THE BUSINESS OF THE UNDERTAK ING. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN NOT CONSIDERING INTEREST OF RS.7,17,270, RECEIVED ON DEPOSITS KEPT WITH BANKS OUT OF SURPLUS FUNDS GENERATED FROM THE EOU (THE ONLY UNIT OF THE APPELLANT), AS PART OF PROFITS & GAINS DERIVED FROM EOU AND CONSEQUENTLY ERRED IN NOT INCLUDING THE SAME IN PRO FITS ELIGIBLE FOR EXEMPTION U/S.10B OF THE ACT. 4.1.WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THA T THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING INTERE ST INCOME AS INCOME FROM OTHER SOURCES UNDER CHAPTER-IVF OF THE ACT IN PLACE OF INCOME FROM BUSINESS OR PROFESSION UNDER CHAPTER-IV D OF THE ACT. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT CONSIDERING SALES TAX REFUND (RS.91,150) AND SUNDRY BALANCES WR ITTEN OFF (RS.30,72,912) FOR THE PURPOSE OF EXEMPTION, ESPECI ALLY SO IN VIEW OF THE FACT THAT WHAT IS INTENDED BY THE LEGISLATURE T O EXEMPT U/S.10B IS ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 11 - WHAT FORMS PART OF THE PROFITS OF BUSINESS OF THE UNDERTAKING U/S.10B(4) R.W.S.10B(1) OF THE ACT. 5.1 THE LEARNED CIT(A) AS ERRED IN STATING THAT SUN DRY BALANCES WRITTEN- BACK (IN RELATION TO RAW MATERIAL PURCHASED IN THE PAST) ARE NOT RELATED TO EXPENSES OF MANUFACTURING DESPITE THE FA CT THAT APPELLANTS UNDERTAKING, ELIGIBLE FOR DEDUCTION U/S .10B, IS THE ONLY BUSINESS UNDERTAKING IT HAS THROUGH WHICH THE BUSIN ESS IS CARRIED OUT ON BY IT. 6. THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING DED UCTION U/S.10B OF THE ACT IN RESPECT TO 25% (RS.7,21,856) OF THE INSU RANCE CLAIM RECEIVED BY THE APPELLANT IN RESPECT OF THE LOSS IN CURRED DUE TO FIRE IN ITS FACTORY PREMISES. 6.1.THE LEARNED CIT(A) HAS ERRED IN CONSIDERING 25% OF THE TOTAL CLAIM RECEIVED FROM INSURANCE COMPANY IS CAPITAL LOSS, IN RESPECT OF THE LOSS SUFFERED BY THE APPELLANT DUE TO FIRE. THE CI T(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ENTIRE LOSS (100%) I NCURRED BY THE APPELLANT WAS TOWARDS LOSS OF GOODS, CONSUMABLES AN D CERTAIN LABOUR (REPAIRS) COSTS INCURRED DUE TO FIRE. 7. LEARNED CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTI ON U/S.10B IN RELATION TO SALES TAX REFUND (RS.9,150), SUNDRY BAL ANCES WRITTEN OFF (RS.30,72,912) AND 25% (RS.7,21,856) OF THE INSURAN CE CLAIM RECEIVED DESPITE CONSIDERING THESE AS BUSINESS INCO ME. 7. LIKEWISE, THE AO IS ALSO AGGRIEVED BY THE PARTIA L RELIEF GRANTED BY CIT(A) AND HAS PREFERRED AN APPEAL AGAINST THE RELI EFS IN ITS ITA NO.1444/AHD/2013 FOR AY 2008-09 BY WAY OF FOLLOWING GROUNDS:- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEDUCTION U/S.10B OF THE ACT, ON SCRAP INC OME OF RS.16,88,437/- THOUGH THE SAME WAS NOT DERIVED FROM EXPORTS. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON F ACTS IN ALLOWING DEDUCTION U/S.10B OF THE ACT, TOWARDS INSU RANCE ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 12 - REFUND OF RS.21,65,568/- THOUGH THE SAME IS NOT INC OME DERIVED FROM EXPORTS. 8. BEFORE US, THE LD.AR FOR THE ASSESSEE MR. SANJA Y R. SHAH, AR REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND C IT(A) AND SUBMITTED THAT THE ASSESSEE IS ONLY ENGAGED IN THE BUSINESS OF PRINTED CIRCUIT BOARDS AND NO OTHER BUSINESS ACTIVITIES ARE CARRIED OUT BY IT EXCEPT FOR THE BUSINESS OF EXPORTS. ALL THE INCOME AND EX PENSES OF THE FIRM ARE ON ACCOUNT OF BUSINESS CARRIED OUT BY THE EOU ALONE . THE LD.AR FURTHER SUBMITTED THAT SECTION 10B(1) PROVIDES THAT PROFITS DERIVED FROM EXPORTS OF ARTICLES OR THINGS, ETC. SHALL BE ELIGIBLE FOR D EDUCTION FOR THE PERIOD OF 10 CONSECUTIVE YEARS AND THE MACHINERY FOR COMPUTA TION OF DEDUCTION IS PROVIDED BY SECTION 10B(4) OF THE ACT. FOR THE PUR POSE OF COMPUTATION OF DEDUCTION OF PROFITS AND GAINS AS DERIVED BY A 100% EOU FROM EXPORTS OF ARTICLES OR THINGS, ETC. SECTION 10B(4) PRESCRIBES FORMULA TO DETERMINE THE PROFITS SO DERIVED FROM EXPORTS OF AR TICLES OR THINGS, ETC. THE LD.AR ADVERTED OUR ATTENTION TO SECTION 10B(4) OF THE ACT AND SUBMITTED THAT DEDUCTION UNDER S.10B IS IN PROPORTI ON OF THE PROFITS OF THE BUSINESS OF THE UNDERTAKING TO THE EXPORT TUR NOVER COMPARED TO THE TOTAL TURNOVER. THE LD.AR FURTHER SUBMITTED THAT SECTION 10(4) DOES NOT STATE THAT PROFITS SHOULD BE DERIVED FROM THE B USINESS OF THE UNDERTAKING BUT MERELY STATES THAT THE PROFITS TO B E OF THE BUSINESS OF UNDERTAKING. HE, THUS, SUBMITTED THAT RELIANCE P LACED BY THE AO ON THE ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 13 - DECISION OF LIBERTY INDIA PVT.LTD. REPORTED IN 317 ITR 218(SC) IS MISPLACED. THE LD.AR SUBMITTED THAT SIMILAR ISSUES OF DISALLOWANCE OF VARIOUS CLAIMS TOWARDS VARIOUS MISCELLANEOUS INCOME FOR THE PURPOSES OF SECTION 10B AROSE IN ASSESSEES OWN CASE FOR AY 20 07-08 WHERE THE APPEAL OF THE ASSESSEE WAS ALLOWED. HE THEREFORE S UBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DENYING THE RELIEF CLAI MED AS PER GROUNDS OF APPEAL AND THEREFORE ORDER OF THE CIT(A) IS TO BE S ET ASIDE. THE LD.AR RELIED UPON IN ITS OWN CASE IN ITA NOS.2665 & 2720/ AHD/2011, FOR AY 2007-08, ORDER DATED 01/01/2016 TO SUPPORT THE GROU NDS OF APPEAL RAISED. 9. THE LD.DR FOR THE DEPARTMENT MR.SAMIR VAKIL, ON THE OTHER HAND, SUPPORTED REVENUES APPEAL. IN SUPPORT THEREOF, LD. DR RELIED UPON THE ORDER OF THE AO AND CHALLENGED THE ORDER OF THE CIT (A) WHEREIN CERTAIN RELIEFS WERE GRANTED BY HIM AS PER GROUNDS OF APPEA L RAISED BY THE AO. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND ORDERS OF THE AUTHORITIES BELOW AND THE CASE-LAWS CITED. WE FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS DEALT WITH VAR IOUS GROUNDS AS PER GROUNDS OF APPEAL AND HAS DECIDED THE ISSUES IN FAV OUR OF ASSESSEE. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE COORDIN ATE BENCH OF THE TRIBUNAL IN ITA NO.2665 & 2720/AHD/2011 RELEVANT TO AY 2007-08 IN ASSESSEES OWN CASE READS AS UNDER:- ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 14 - 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT DEDUCTION U/S. 10B OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS A 100% EOU AND ITS ONLY BUSINESS IS OF EXPORT OF PRINTED CIRCUIT BOARD. DURING THE YEAR UNDER CONSID ERATION, ASSESSEE HAD RECEIVED GOVERNMENT SUBSIDY AND EARNED INCOME FROM INTEREST, SALE OF SCRAP, SALES TAX REFUND WHIC H WERE HELD TO BE NOT ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT B Y THE A.O AND FOR WHICH A.O MAINLY RELIED ON THE DECISION OF HON BLE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WE FIND THAT BEFORE HONBLE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MA RAL OVERSEAS LTD. (SUPRA) ONE OF THE QUESTION FOR CONSI DERATION WAS AS TO WHETHER THE UNDERTAKING IS ELIGIBLE FOR DEDUC TION ON EXPORT INCENTIVE RECEIVED BY IT IN TERMS OF PROVISIONS OF SECTION 10B(1) R.W.S. 10B(4) OF THE ACT. THE HONBLE SPECIAL BENCH , AFTER CONSIDERING THE DECISION OF THE APEX COURT IN THE C ASE OF LIBERTY INDIA (SUPRA) HELD THAT PROVISIONS OF SECTION 10B A RE DIFFERENT FROM THE PROVISIONS OF SECTION 80IA. THE RELEVANT P ORTION OF THE DECISION READS AS UNDER:- 77.IT IS CLEAR FROM THE PLAIN READING OF SECT ION 10B(1) OF THE ACT THAT THE SAID SECTION ALLOWS DEDUCTION IN R ESPECT OF PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU. FURTHER, SECTIO N 10B(4) OF THE ACT STIPULATES SPECIFIC FORMULA FOR COMPUTING THE P ROFIT DERIVED BY THE UNDERTAKING FROM EXPORT. THUS, THE PROVISIONS OF SU B-SECTION (4) OF SECTION 10B OF THE ACT MANDATE THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONING THE PROFITS OF THE BUSI NESS OF THE UNDERTAKING IN THE RATIO OF EXPORT TURNOVER BY THE TOTAL TURNOVER. THUS, EVEN THOUGH SUB-SECTION (1) OF SECTION 10B REFERS T O PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU, THE MANNER OF DETERMI NING SUCH ELIGIBLE PROFITS HAS BEEN STATUTORILY DEFINED IN SU B-SECTION (4) OF THAT SECTION. BOTH SUB-SECTIONS (1) AND (4) ARE TO BE RE AD TOGETHER WHILE COMPUTING THE ELIGIBLE DEDUCTION U/S 10B OF THE ACT . WE CANNOT IGNORE ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 15 - SUB-SECTION (4) OF SECTION 10B WHICH PROVIDES SPECI FIC FORMULA FOR COMPUTING THE PROFITS DERIVED BY THE UNDERTAKING FR OM EXPORT. AS PER THE FORMULA SO LAID DOWN, THE ENTIRE PROFITS OF THE BUSINESS ARE TO BE DETERMINED WHICH ARE FURTHER MULTIPLIED BY THE RATI O OF EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BUSINESS. IN CASE OF L IBERTY INDIA, THE HON'BLE SUPREME COURT HAS DEALT WITH THE PROVISIONS OF SECTION 80IA OF THE ACT WHEREIN NO FORMULA WAS LAID DOWN FOR COM PUTING THE PROFITS DERIVED BY THE UNDERTAKING WHICH HAS SPECIFICALLY B EEN PROVIDED UNDER SUB-SECTION (4) OF SECTION 10B WHILE COMPUTING THE PROFITS DERIVED BY THE UNDERTAKING FROM THE EXPORT. THUS, THE DECISION OF THE HON'BLE SUPREME COURT IS OF NO HELP TO THE REVENUE IN DETER MINING THE CLAIM OF DEDUCTION U/S 10B IN RESPECT OF EXPORT INCENTIVES. 78. SECTION 10B SUB-SECTION (1) ALLOWS DEDUCTION IN RESPECT OF PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU. SECTION 10B (4) LAYS DOWN SPECIAL FORMULA FOR COMPUTING THE PROFITS DERIVED B Y THE UNDERTAKING FROM EXPORT. THE FORMULA IS AS UNDER :- PROFIT OF THE BUSINESS OF THE UNDERTAKING X _________ _____EXPORT TURNOVER________ TOTAL TURNOVER OF BUSINESS CARRIED OUT BY THE UNDERTA KING 79. THUS, SUB-SECTION (4) OF SECTION 10B STIPULATED THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONIN G THE PROFITS OF THE BUSINESS OF THE UNDERTAKING IN THE RATIO OF TURNOVE R TO THE TOTAL TURNOVER. THUS, NOT-WITH-STANDING THE FACT THAT SUB -SECTION (1) OF SECTION 10B REFERS THE PROFITS AND GAINS AS ARE DER IVED BY A 100% EOU, YET THE MANNER OF DETERMINING SUCH ELIGIBLE PR OFITS HAS BEEN STATUTORILY DEFINED IN SUB-SECTION (4) OF SECTION 1 0B OF THE ACT. AS PER THE FORMULA STATED ABOVE, THE ENTIRE PROFITS OF THE BUSINESS ARE TO BE TAKEN WHICH ARE MULTIPLIED BY THE RATIO OF THE EXPO RT TURNOVER TO THE TOTAL TURNOVER OF THE BUSINESS. SUB-SECTION (4) DOE S NOT REQUIRE AN ASSESSEE TO ESTABLISH A DIRECT NEXUS WITH THE BUSIN ESS OF THE UNDERTAKING AND ONCE AN INCOME FORMS PART OF THE BU SINESS OF THE UNDERTAKING, THE SAME WOULD BE INCLUDED IN THE PROF ITS OF THE BUSINESS OF THE UNDERTAKING.THUS, ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING, THERE IS NO FURTHER MANDA TE IN THE PROVISIONS OF SECTION 10B TO EXCLUDE THE SAME FROM THE ELIGIBL E PROFITS. THE MODE OF DETERMINING THE ELIGIBLE DEDUCTION U/S 10B IS SI MILAR TO THE PROVISIONS OF SECTION 80HHC INASMUCH AS BOTH THE SE CTIONS MANDATES ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 16 - DETERMINATION OF ELIGIBLE PROFITS AS PER THE FORMUL A CONTAINED THEREIN. THE ONLY DIFFERENCE IS THAT SECTION 80HHC CONTAINS A FURTHER MANDATE IN TERMS OF EXPLANATION (BAA) FOR EXCLUSION OF CERT AIN INCOME FROM THE 'PROFITS OF THE BUSINESS' WHICH IS, HOWEVER, CONSPI CUOUS BY ITS ABSENCE IN SECTION 10B. ON THE BASIS OF THE AFORESAID DISTI NCTION, SUB-SECTION (4) OF SECTION 10A/10B OF THE ACT IS A COMPLETE COD E PROVIDING THE MECHANISM FOR COMPUTING THE 'PROFITS OF THE BUSINES S' ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE INCOME OF THE ELIGIBLE UNDERTAKING OF THE ASSESSEE, THE SAME CANNOT BE EXCLUDED FROM THE ELIGIBLE PROFITS F OR THE PURPOSE OF COMPUTING DEDUCTION U/S 10B OF THE ACT. AS PER THE COMPUTATION MADE BY THE ASSESSING OFFICER HIMSELF, THERE IS NO DISPU TE THAT BOTH THESE INCOMES HAVE BEEN TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME. THE CBDT CIRCULAR NO. 564 DATED 5TH JULY, 1 990 REPORTED IN 184 ITR (ST.) 137 EXPLAINED THE SCOPE AND AMBIT OF SECTION 80HHC AND THE MODE OF DETERMINATION OF PROFITS DERIVED BY AN ASSESSEE FROM THE EXPORT OF GOODS. I.T.A.T., SPECIAL BENCH IN THE CASE OF INTERNATIONAL RESEARCH PARK LABORATORIES V. ACIT, 2 12 ITR (AT) 1, AFTER FOLLOWING THE AFORESAID CIRCULAR, HELD THAT S TRAIGHT JACKET FORMULA GIVEN IN SUB-SECTION (3) HAS TO BE FOLLOWED TO DETERMINE THE ELIGIBLE DEDUCTION. THE HON'BLE SUPREME COURT IN TH E CASE OF P.R. PRABHAKAR; 284 ITR 584 HAD APPROVED THE PRINCIPLE L AID DOWN IN THE SPECIAL BENCH DECISION IN INTERNATIONAL RESERARCH P ARK LABORATORIES V. ACIT (SUPRA). IN THE ASSESSEE'S OWN CASE THE I.T .A.T. IN THE PRECEDING YEARS, AFTER CONSIDERING THE DECISION IN THE CASE OF LIBERTY INDIA HELD THAT PROVISIONS OF SECTION 10B ARE DIFFE RENT FROM THE PROVISIONS OF SECTION 80IA WHEREIN NO FORMULA HAS B EEN LAID DOWN FOR COMPUTING THE ELIGIBLE BUSINESS PROFIT. 11. WE ALSO FIND THAT THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MARAL OVERSEAS LTD. (SUPRA) WAS UPHELD BY HONBL E DELHI HIGH COURT IN THE CASE OF HRITNIK EXPORT PVT. LTD.(ITA N O. 219/2014 & 239/2014 ORDER DATED 13.11.2014) WHEREIN HONBLE HI GH COURT DISMISSED THE APPEAL OF REVENUE BY HOLDING AS UNDER :- BY WAY OF THESE APPEALS, THE REVENUE HAS CHALLENGED THE ORDERS PASSED BY INCOME TAX APPELLATE TRIBUNAL (TRIBUNAL, FOR SHORT) DATED 11TH SEPTEMBER, 2013 AND 24TH OCTOBER, 2013 RELATING TO ASSESSMENT YEARS 2008-09 AND 2009- ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 17 - 10, RESPECTIVELY. TRIBUNAL HAS FOLLOWED THE DECISIO N OF THEIR SPECIAL BENCH IN THE CASE OF MARAL OVERSEAS LTD. VERSUS ADDITIONAL C OMMISSIONER OF INCOME TAX DECIDED ON 20TH MARCH, 2012, IN WHICH IT HAS BE EN HELD:- 78. SECTION 10B SUB-SECTION (1) ALLOWS DEDUCTION I N RESPECT OF PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU. SECTION 10B(4) LAYS DOWN SPECIAL FORMULA FOR COMPUTING THE PROFITS DERIVED BY THE UN DERTAKING FROM EXPORT. THE FORMULA IS AS UNDER :- PROFIT OF THE BUSINESS OF THE UNDERTAKING X EXPO RT TURNOVER TOTAL TURNOVER OF BUSI NESS CARRIED OUT BY THE UNDERTAKING 79. THUS, SUB-SECTION (4) OF SECTION 10B STIPULATED THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONING THE PROFI TS OF THE BUSINESS OF THE UNDERTAKING IN THE RATIO OF TURNOVER TO THE TOTAL T URNOVER. THUS, NOT-WITH- STANDING THE FACT THAT SUB-SECTION (1) OF SECTION 1 0B REFERS THE PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU, YET THE MANNER OF DETERMINING SUCH ELIGIBLE PROFITS HAS BEEN STATUTORILY DEFINED IN SU B-SECTION (4) OF SECTION 10B OF THE ACT. AS PER THE FORMULA STATED ABOVE, THE ENTIR E PROFITS OF THE BUSINESS ARE TO BE TAKEN WHICH ARE MULTIPLIED BY THE RATIO OF TH E EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BUSINESS. SUB-SECTION (4) DOES NOT REQUIRE AN ASSESSEE TO ESTABLISH A DIRECT NEXUS WITH THE BUSINESS OF THE U NDERTAKING AND ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE UNDERTAKIN G, THE SAME WOULD BE INCLUDED IN THE PROFITS OF THE BUSINESS OF THE UNDE RTAKING. THUS, ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE ELIGIBLE U NDERTAKING, THERE IS NO FURTHER MANDATE IN THE PROVISIONS OF SECTION 10B TO EXCLUDE THE SAME FROM THE ELIGIBLE PROFITS. THE MODE OF DETERMINING THE ELIGI BLE DEDUCTION U/S 10B IS SIMILAR TO THE PROVISIONS OF SECTION 80HHC INASMUCH AS BOTH THE SECTIONS MANDATES DETERMINATION OF ELIGIBLE PROFITS AS PER T HE FORMULA CONTAINED THEREIN. THE ONLY DIFFERENCE IS THAT SECTION 80HHC CONTAINS A FURTHER MANDATE IN TERMS OF EXPLANATION (BAA) FOR EXCLUSION OF CERT AIN INCOME FROM THE PROFITS OF THE BUSINESS WHICH IS, HOWEVER, CONS PICUOUS BY ITS ABSENCE IN SECTION 10B. ON THE BASIS OF THE AFORESAID DISTINCT ION, SUB-SECTION (4) OF SECTION 10A/10B OF THE ACT IS A COMPLETE CODE PROVI DING THE MECHANISM FOR COMPUTING THE PROFITS OF THE BUSINESS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. ONCE AN INCOME FORMS PART OF THE BUSINESS OF T HE INCOME OF THE ELIGIBLE UNDERTAKING OF THE ASSESSEE, THE SAME CANNOT BE EXC LUDED FROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 10B OF THE ACT. AS PER THE ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 18 - COMPUTATION MADE BY THE ASSESSING OFFICER HIMSELF, THERE IS NO DISPUTE THAT BOTH THESE INCOMES HAVE BEEN TREATED BY THE ASSESSI NG OFFICER AS BUSINESS INCOME. THE CBDT CIRCULAR NO. 564 DATED 5TH JULY, 1 990 REPORTED IN 184 ITR (ST.) 137 EXPLAINED THE SCOPE AND AMBIT OF SECTION 80HHC AND THE MODE OF DETERMINATION OF PROFITS DERIVED BY AN ASSESSEE FRO M THE EXPORT OF GOODS. I.T.A.T., SPECIAL BENCH IN THE CASE OF INTERNATIONA L RESEARCH PARK LABORATORIES V. ACIT, 212 ITR (AT) 1, AFTER FOLLOWI NG THE AFORESAID CIRCULAR, HELD THAT STRAIGHT JACKET FORMULA GIVEN IN SUB-SECT ION (3) HAS TO BE FOLLOWED TO DETERMINE THE ELIGIBLE DEDUCTION. THE HONBLE SUPRE ME COURT IN THE CASE OF P.R. PRABHAKAR; 284 ITR 584 HAD APPROVED THE PRINCI PLE LAID DOWN IN THE SPECIAL BENCH DECISION IN INTERNATIONAL RESERARCH P ARK LABORATORIES V. ACIT (SUPRA). IN THE ASSES SEES OWN CASE THE I.T.A.T. I N THE PRECEDING YEARS, AFTER CONSIDERING THE DECISION IN THE CASE OF LIBERTY IND IA HELD THAT PROVISIONS OF SECTION 10B ARE DIFFERENT FROM THE PROVISIONS OF SE CTION 80IA WHEREIN NO FORMULA HAS BEEN LAID DOWN FOR COMPUTING THE ELIGIB LE BUSINESS PROFIT. 80. IN VIEW OF THE ABOVE DISCUSSION, QUESTION NO. 2 IS ANSWERED IN AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE ASS ESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION ON EXPORT INCENTIVE RECEIVED BY IT IN TER MS OF PROVISIONS OF SECTION 10B( 1) READ WITH SECTION 10B(4) OF THE ACT. THE AFORESAID VIEW IS IN CONSONANCE WITH THE DECISI ON OF THIS COURT DATED 1ST SEPTEMBER, 2014 PASSED IN ITA 438/2014, COMMISSIONE R OF INCOME TAX-VII VERSUS XLNC FASHIONS IN WHICH THIS COURT HAS HELD A S UNDER :- DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961 (ACT, IN SHORT) IS TO BE MADE AS PER THE FORMULA PRESCRIBED BY SUB-SEC TION (4), WHICH READS AS UNDER: 10B. SPECIAL PROVISION IN RESPECT OF NEWLY ESTABLI SHED HUNDRED PER CENT EXPORT- ORIENTED UNDERTAKINGS- .. .. (4) FOR THE PURPOSES OF SUB-SECTION (1), THE PROFIT S DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE TH E AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAM E PROPORTION AS THE EXPORT ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 19 - TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR C OMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E UNDERTAKING. SUB-SECTION (4), THEREFORE, IS THE SPECIAL PROVISIO N WHICH ENABLES THE ASSESSEE TO COMPUTE THE PROFITS DERIVED FROM THE EXPORT OF A RTICLES OR THINGS OR COMPUTER SOFTWARE. WE DO NOT SEE ANY CONFLICT BETWE EN 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 O R SOFTWARE WOULD BE ELIGIBLE UNDER THE SAID SECTION. SUB- SECTION (1) IS A GENER AL PROVISION AND IDENTIFIES THE INCOME WHICH IS EXEMPT AND HAS TO BE READ IN HA RMONY WITH SUB-SECTION (4) WHICH IS THE FORMULA FOR FINDING OUT OR COMPUTI NG 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 DERIVE D FROM EXPORTS UNDER SUB- SECTION (1), HAS TO BE DETERMINED AS PER THE FORMUL A STIPULATED IN SUB-SECTION (4), OTHERWISE SUB-SECTION (4) WOULD BECOME OTISE A ND IRRELEVANT. THE ISSUE IN QUESTION IN THIS APPEAL WHICH PERTAINS TO THE ASSESSMENT YEAR 2009-10, RELATES TO DUTY DRAW BACK IN THE FORM OF D EPB BENEFITS. AS PER SECTION 28, CLAUSE (III-C), ANY DUTY OF CUSTOMS OR EXCISE REPAID OR REPAYABLE AS DRAWBACK TO A PERSON AGAINST EXPORTS UNDER CUSTOMS AND CENTRAL EXCISE DUTIES DRAW BACK RULES, 1971 IS DEEMED TO BE PROFIT S AND GAINS OF BUSINESS OR PROFESSION. THE SAID PROVISION HAS TO BE GIVEN F ULL EFFECT TO AND THIS MEANS AND IMPLIES THAT THE DUTY DRAW BACK OR DUTY BENEFIT S WOULD BE DEEMED TO BE A PART OF THE BUSINESS INCOME. THUS, WILL BE TREATED AS PROFIT DERIVED FROM BUSINESS OF THE UNDERTAKING. THESE CANNOT BE EXCLUD ED. EVEN OTHERWISE, WHEN WE APPLY SUB-SECTION (4) TO SE CTION 10B, THE ENTIRE AMOUNT RECEIVED BY WAY OF DUTY DRAW BACK WOULD NOT BECOME ELIGIBLE FOR DEDUCTION/EXEMPTION. THE AMOUNT QUANTIFIED AS PER T HE FORMULA WOULD BE ELIGIBLE AND QUALIFY FOR DEDUCTION/EXEMPTION. THE P OSITION IS SOMEWHAT AKIN OR CLOSE TO SECTION 80HHC OF THE ACT, WHICH ALSO PR ESCRIBES A FORMULA FOR COMPUTATION OF DEDUCTION IN RESPECT OF EXPORTS. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY MERIT IN THE PRESENT APPEAL AND THE SAME IS DISMISSED. ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 20 - KARNATAKA HIGH COURT IN COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE VERSUS MOTOROLA INDIA ELECTRONICS (P) LTD., ITA NO. 428/20 07, DECIDED ON 11.12.2013, REPORTED AS [2014] 46 TAXMANN.COM 167 (KARNATAKA) HAS ALSO TAKEN A SIMILAR VIEW, WHEREIN IT HAS BEEN HELD:- BY FINANCE, ACT, 2001, WITH EFFECT FROM 01.04.2001 , THE PRESENT SUB- SECTION (4) IS SUBSTITUTED IN THE PLACE OF OLD SUB-SECTION (4). NO DOUBT SUB-SECTION 10(B) SPEAKS ABOUT DEDUCTION OF SUCH PROFITS AND GA INS AS DERIVED FROM 100% EOU FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUT ER SOFTWARE. THEREFORE, IT EXCLUDES PROFIT AND GAINS FROM EXPORT OF ARTICLES. BUT SUB-SECTION (4) EXPLAINS WHAT IS SAYS THAT PROFITS DERIVED FROM EXPORT OF A RTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE ACCOUNT WHICH BARES TO THE PR OFITS OF THE BUSINESS OF THE UNDERTAKING AND NOT THE PROFITS AND GAINS FROM EXPO RT OF ARTICLES. THEREFORE, PROFITS AND GAINS DERIVED FROM EXPORT OF ARTICLES I S DIFFERENT FROM THE INCOME DERIVED FROM THE PROFITS OF THE BUSINESS OF THE UND ERTAKING. THE PROFITS OF THE BUSINESS OF THE UNDERTAKING INCLUDES THE PROFITS AN D GAINS FROM EXPORT OF THE ARTICLES AS WELL AS ALL OTHER INCIDENTAL INCOMES DE RIVED FROM THE BUSINESS OF THE UNDERTAKING. IT IS INTERESTING TO NOTE THAT SIM ILAR PROVISIONS ARE NOT THERE WHILE DEALING WITH COMPUTATION OF INCOME UNDER SECT ION 80HHC. ON THE CONTRARY THERE IS SPECIFIC PROVISIONS LIKE SECTION 80HHB WHICH EXPRESSLY EXCLUDES THIS TYPE OF INCOMES. THEREFORE, IN VIEW O F THE AFORESAID PROVISIONS, IT IS CLEAR THAT, WHAT IS EXEMPTED IS NOT MERELY THE P ROFITS AND GAINS FROM THE EXPORT OF ARTICLES BUT ALSO THE INCOME FROM THE BUS INESS OF THE UNDERTAKING. IN VIEW OF THE AFORESAID POSITION, THE APPEALS HAVE TO BE DISMISSED. WE ORDER ACCORDINGLY. 12. WE THUS FIND THAT THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MARAL OVERSEAS (SUPRA) WHEREIN THE RATIO THAT ON CE ON INCOME FORMS PART OF THE BUSINESS OF THE INCOME OF THE ELIGIBLE UNDERTAKING OF THE ASSESSEE, THE SAME CANNOT BE EXCLUDED FROM THE ELIG IBLE PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 10B OF THE ACT, HAS BEEN UPHELD BY HONBLE DELHI & KARNATAKA HIGH COURTS IN THE CASE O F HRITNIK EXPORTS PVT. LTD. & MOTOROLA INDIA ELECTRONICS PVT. LTD. 13. BEFORE US, REVENUE HAS NOT POINTED OUT ANY CONTRARY BINDING DECISION IN ITS SUPPORT NOR HAS PLACED ANY MATERIAL ON RECOR D TO DEMONSTRATE ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 21 - THAT ASSESSEE WAS HAVING ANY OTHER BUSINESS OTHER T HAN EXPORTS AND THE AFORESAID INCOME WERE DERIVED OUT OF THAT OTHER BUS INESS. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT ASSESSEE I S ELIGIBLE FOR DEDUCTION ON THE PROFITS FROM SUBSIDY, INTEREST INC OME, SALE OF SCRAP, SALES TAX REFUND AND SUNDRY BALANCES WRITTEN OFF. W E THUS SET ASIDE THE ORDER OF LD. CIT(A). 14. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D AND THAT OF REVENUE IS DISMISSED. 11. AT THE OUTSET, WE ARE INCLINED TO AGREE WITH TH E CONTENTIONS PUT- FORTH ON BEHALF OF THE ASSESSEE THAT THE EXPRESSION PROFITS OF BUSINESS OF THE UNDERTAKING IS WIDER THAN PROFITS AND GAINS D ERIVED BY AN UNDERTAKING. THE REASONS ARE NOT FAR TO SEEK. WE NOTE THAT SUB-SECTION 4 TO S.10B EXPLICITLY EXPLAINS THE TERM PROFIT DER IVED FROM EXPORT OF ARTICLES OR THINGS ETC. TO MEAN THE AMOUNT WHICH B EARS TO THE PROFIT OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UN DERTAKING. THUS, WHAT IS REQUIRED TO BE DETERMINED IS WHETHER THE RECEIPT S OF VARIOUS OTHER/MISCELLANEOUS INCOME IN QUESTION QUALIFIES AS THE PROFITS OF BUSINESS OF UNDERTAKING AND NOT WHETHER IT IS PRO FIT DERIVED FROM THE BUSINESS. IN OTHER WORDS, FOR DETERMINING THE SCO PE OF SECTION 10B(4), THE REFERENCE TO THE EXPRESSION DERIVED FROM IS N OT MATERIAL. HENCE, DRAWING PARALLEL WITH THE FINDINGS OF TH E COORDINATE BENCH OF THE TRIBUNAL, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 22 - U/S.10B OF THE ACT ON MISCELLANEOUS ITEMS OF INCOM E WHICH ARE IN THE NATURE OF BUSINESS INCOME ATTRIBUTABLE TO EXPORTS OF ARTICLES OR THINGS, ETC. AS A COROLLARY, WE FIND THAT RECEIPTS TOWARD S SALES TAX REFUND AND AMOUNT OF SUNDRY BALANCE WRITTEN OFF ARE IN THE NATURE OF BUSINESS INCOME IN THE EARLIER YEAR AND THE ASSESSEE IS ELI GIBLE FOR RELIEF CONTEMPLATED UNDER S.10B(1) READ WITH SECTION 10B(4 ) OF THE ACT. FOR THE PARITY OF REASONING, WE DIRECT THE AO TO ADMIT THE CLAIM OF THE ASSESSEE TOWARDS SALES TAX REFUND AND SUNDRY BALANC E WRITTEN OFF FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER S.10B OF THE ACT. 12. WE HOWEVER NOTE THAT THE RELIEF CLAIMED TOWA RDS INTEREST INCOME ON BANK DEPOSITS AMOUNTING TO RS.7,17,270/- CANNOT BE TERMED AS BUSINESS INCOME AT THE FIRST PLACE AS DISCERNIBLE FROM TH E LETTER DATED 21/11/2011 OF THE ASSESSEE EXTRACTED BY THE AO IN PARA-3.1 OF THE ASSESSMENT ORDER. IN ITS OWN AVERMENT OF ASSESSEE, THE INTEREST INCOM E WERE DERIVED FROM THE DEPOSITS KEPT WITH THE BANK OUT OF SURPLUS FUND S GENERATED FROM THE UNDERTAKING. THE SURPLUS FUND SO GENERATED IS, THU S, UNDOUBTEDLY UNRELATED TO BUSINESS ACTIVITIES OF EXPORT UNDERTAK ING. WE FAIL TO COMPREHEND AS TO HOW INTEREST INCOME EARNED ON ID LE FUNDS TOWARDS SURPLUS MONEY CAN BE TERMED AS BUSINESS INCOME OF THE ASSESSEE. IN OUR VIEW, HAVING REGARD TO THE FACTS OF THE CASE AS ADMITTED BY THE ASSESSEE ITSELF, THE INTEREST INCOME ON SURPLUS MON EY ALBEIT GENERATED FROM THE EXPORT ACTIVITY IS INCIDENTAL TO SURPLUS M ONEY AND NOT A BUSINESS ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 23 - ACTIVITY PER SE AND THEREFORE DOES NOT PASS THE TEST OF BUSINESS I NCOME. IT IS APPARENT THAT THERE IS NO DIRECT OR INDIRECT RE LATIONSHIP BETWEEN THE INTEREST INCOME AND THE BUSINESS OF THE UNDERTAKING . THE INTEREST INCOME ON FIXED DEPOSITS DERIVED FROM SURPLUS MONEY EMANAT ING FROM EXPORT ACTIVITY CANNOT BE SAID TO BE SPRINGING OUT OF EXPO RT BUSINESS IN ANY MANNER. IT IS THE PROFITS FROM BUSINESS ACTIVITIE S WHICH CAN BE TERMED AS BUSINESS INCOME AND NOT INTEREST ARISING ON DEPLOYM ENT OF SUCH BUSINESS INCOME. THUS, FOR THE PURPOSE OF COMPUTATION OF DE DUCTION OF FORMULA PROVIDED BY SECTION 10B(4) OF THE ACT, THE INTERES T INCOME CANNOT BE INCLUDED WITHIN THE PALE OF BUSINESS PROFITS WHI CH IS CLEARLY IN THE NATURE OF INCOME FROM OTHER SOURCES IN THE INSTAN T CASE. THEREFORE, ORDER OF THE CIT(A) TO THIS EXTENT CANNOT BE SAID T O BE ERRONEOUS IN THE FACTS OF THE CASE. IT WOULD BE PERTINENT TO NOTICE HERE THAT IN THE EARLIER AY 2007-08, THE INTEREST INCOME HAS BEEN ACCEPTED F OR THE PURPOSE OF DEDUCTION U/S.10B OF THE ACT PURPORTEDLY ON THE PRE MISE THAT AO HAS MAINLY RELIED UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA (317 ITR 218) WHICH WAS DISTINGUISHE D BY THE TRIBUNAL ON FACTS. AS AGAINST THIS, IN THE ASSESSMENT YEAR IN APPEAL, THE AO HAS REJECTED THE INTEREST CLAIM ON THE GROUND THAT THE INCOME ARISING FROM BANK DEPOSITS ARE IN THE NATURE OF INCOME FROM OTH ER SOURCES AND NOT BUSINESS INCOME WITH WHICH WE FULLY AGREE. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) FOR DENIAL OF DEDUCTION UNDE R S.10B OF THE ACT TOWARDS INTEREST INCOME. ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 24 - 13. AS REGARDS INSURANCE REFUND OF RS.28,87,424/- W E NOTE THAT CIT(A) HAS GRANTED PARTIAL RELIEF TO THE EXTENT OF 75% OF THE INSURANCE CLAIM RECEIVED HOLDING THE SAME TO BE AKIN TO BUSINESS IN COME AND REJECTED BALANCE 25% OF THE INSURANCE CLAIM SO RECEIVED TOWA RDS CAPITAL LOSS. AT THE TIME OF HEARING, ON BEING ASKED TO ADVERT TO TH E FACTUAL DETAILS TOWARDS ITEMS, SUCH AS REPLENISHMENT OF LOSS, INSU RANCE POLICY, ETC., LD.AR SUBMITTED THAT THESE ASPECTS ARE FACTUAL AND MAY BE VERIFIED BY AO. SIMULTANEOUSLY, WE NOTE THAT THE CIT(A) HAS AL SO NOT PROVIDED DEFINITE BASIS FOR ESTIMATION OF 75% OF THE INSURAN CE CLAIM RECEIVED TO BE TOWARDS REIMBURSEMENT OF LOSS IN THE PROFITS OF ELI GIBLE UNIT. THUS, RELEVANT FACTUAL DETAILS ARE NOT AVAILABLE BEFORE U S TO APPRECIATE THE NATURE OF RECEIPT AND DETERMINE THE ISSUE. BOTH ASSESSEE AS WELL AS REVENUE ARE AGGRIEVED BY THE ACTION OF THE CIT(A). RELEVANT FA CTS ARE NECESSARY TO UNDERSTAND AS TO WHETHER THE IMPUGNED INSURANCE RE CEIPTS ARE IN THE NAME OF BUSINESS INCOME OR NOT. THEREFORE, IT WO ULD BE IN THE FITNESS OF THINGS TO RESTORE THE ISSUE BACK TO THE FILE OF AO FOR ASCERTAINING THE RELEVANT FACTS AND DETERMINE THE ISSUE AFRESH IN AC CORDANCE LAW. NEEDLESS TO SAY THAT AO SHALL GRANT ADEQUATE OPPORT UNITY OF HEARING TO THE ASSESSEE WHILE DETERMINING THE ISSUE OF ELIGIBI LITY OF DEDUCTION ON THIS SCORE. ITA NO.1150/AHD/2013 (BY ASSESSEE) & ITA NO.1444/AHD/2013 (BY REVENUE) SONIC TECHNOLOGY (INDIA) INC. VS. ITO ASST.YEAR 2008-09 - 25 - 14. IN THE RESULT, APPEAL OF BOTH ASSESSEE AS WELL AS REVENUE ARE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 17 /11/2016 SD/- SD/- ( ..) ( ) ( R.P. TOLANI ) ( PR ADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 17/ 11 /2016 2..,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )%( / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-GANDHINAGAR 5. 78945 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 9;* / GUARD FILE. / BY ORDER, )7 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 4.11.16 (DICTATION-PAD 23 -PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 4.11.16/8.11.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.17.11.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.11.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER