The ITO, Ward-4, Gandhinagar V. Sonic Technology (India) Inc., Gandhinagar

ITA 2720/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9923 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ALBINUS TIRKEY
• Keywords: Capital asset; Business income
• Section: 143(3); 80HHC; 80IB; 10B; 28; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA NO: 2665 & 2720/AHD/2011 (ASSESSMENT YEAR: 2007-08) SONIC TECHNOLOGY (INDIA) INC. PLOT NO. C-9, GIDC ELECTRONIC ESTATE, SECTOR 25, GANDHINAGAR 382025 V/S THE INCOME TAX OFFICER WARD-4, GANDHINAGAR (APPELLANT) (RESPONDENT) THE INCOME TAX OFFICER WARD-4, GANDHINAGAR V/S SONIC TECHNOLOGY (INDIA) INC. PLOT NO. C-9, GIDC ELECTRONIC ESTATE, SECTOR 25, GANDHINAGAR 382025 (APPELLANT) (RESPONDENT) PAN: AARFS 3913K APPELLANT BY : SHRI SANJAY R. SHAH, AR RESPONDENT BY : SHRI ALBINUS TIRKEY, SR. D.R . ( )/ ORDER DATE OF HEARING : 10-12-2015 DATE OF PRONOUNCEMENT : 01 -01-2016 ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 2 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THESE TWO APPEALS OF WHICH ONE IS FILED BY THE ASSE SSEE AND THE OTHER IS FILED BY THE REVENUE, ARE AGAINST THE ORDER OF CIT( A), GANDHINAGAR DATED 17.08.2011 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM AND 100% EXPORT ORIE NTED UNIT (EOU) ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLIN G OF PRINTED CIRCUIT BOARDS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y . 2007-08 DECLARING TOTAL TAXABLE INCOME AT RS. NIL AFTER CLAIMING THE PROFIT S AS EXEMPT U/S. 10B OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAF TER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 28.12. 2010 AND THE TOTAL TAXABLE INCOME WAS DETERMINED AT RS. 82,31,002/-. A GGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A) WHO VIDE ORDER DATED 17.08.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASSESSEE AND REVENU E BOTH ARE NOW IN APPEAL BEFORE US. THE EFFECTIVE GROUND RAISED BY THE REVEN UE IN ITS APPEAL IN ITA NO. 2720/AHD/2011 READS AS UNDER:- 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION ON SCARP INCOME OF RS.23,64,835/-. 4. ON THE OTHER HAND, THE GROUNDS RAISED BY THE ASSESS EE IN ITS APPEAL IN ITA NO. 2665/AHD/2011 READS AS UNDER:- 1.THE ORDER PASSED BY THE LEARNED CIT(A) IS ERRONEO US AND REQUIRES TO BE MODIFIED. IT IS SUBMITTED THAT IT BE SO DONE NOW. 2. THE LEARNED CIT(A) HAS ERRED IN REJECTING APPEL LANT'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 THE BUSINESS OF THE UNDERTAKING'. IT IS SUBMITTED IT BE SO HELD NOW. ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 3 2.1.LEARNED CIT(A) HAS ERRED IN RELYING UPON THE DE CISIONS RENDERED BY THE JUDICIARIES U/S. 80I / 80IB INSTEAD OF DECISIONS RENDERED U/S. 80HHC WHEREAS PROVISIONS OF SECTION 10B IS IN PARI MATERIA WITH PROVISIONS OF SECTION 8 0HHC. IT BE SO HELD NOW. 3.LEARNED CIT(A) HAS ERRED IN HOLDING AGAINST THE A PPELLANT SOLELY RELYING UPON THE DECISION IN CASE OF BANYAN CHEMICALS LTD. 121 TTJ 7 51 (AHD.) WHEREAS THE SAID DECISION DOES NOT DEAL WITH THE ISSUE UNDER CONSIDERATION. I T IS SUBMITTED IT BE SO HELD NOW. 3.1 LEARNED CTT(A) HAS ERRED IN SOLELY RELYING ON THE SAID DECISION WHICH DOES NOT DEAL WITH THE APPELLANT'S 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 TH E BUSINESS OF THE UNDERTAKING'. 4.THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT CONSIDERING GOVERNMENT SUBSIDY OF RS. 50,47,078 RECEIVED ON INCREMENTAL TU RNOVER OF 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 PROFITS ELIGIBLE FOR EXEM PTION U/S. 10B OF THE ACT. IT IS SUBMITTED IT BE SO HELD NOW. 4.1. THE LEARNED CIT(A) HAS ERRED IN HOLDING THE I SSUE AGAINST THE APPELLANT EVEN AFTER ADMITTING/STATING THE FACT THAT THE TURNOVER SUBSID Y IS A BUSINESS INCOME ATTRIBUTABLE TO THE PRODUCTION IN THE ELIGIBLE UNIT. IT IS SUBMITTE D IT BE SO HELD NOW. 5.THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT CONSIDERING INTEREST OF RS.3,56,813, RECEIVED ON DEPOSITS KEPT WITH BANKS O UT OF SURPLUS FUNDS GENERATED FROM THE EOU (THE ONLY UNIT OF THE APPELLANT), AS PART OF PR OFITS & GAINS DERIVED FROM EOU AND CONSEQUENTLY ERRED IN NOT INCLUDING THE SAME IN PRO FITS ELIGIBLE FOR EXEMPTION U/S 10B OF THE ACT. IT IS SUBMITTED IT BE SO HELD NOW. 5.1 WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED T HAT THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING INTEREST INCOME AS INCO ME FROM OTHER SOURCES UNDER CHAPTER- IVF OF THE ACT IN PLACE OF INCOME FROM BUSINESS OR PROFESSION UNDER CHAPTER-IVD OF THE ACT. IT IS SUBMITTED IT BE SO HELD NOW. 6.THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT CONSIDERING SALES TAX REFUND (RS.4,40,360) AND SUNDRY BALANCES WRITTEN OFF (RS.2 1,916) FOR THE PURPOSE OF EXEMPTION, ESPECIALLY SO IN VIEW OF THE FACT THAT WHAT IS INTE NDED BY THE LEGISLATURE TO EXEMPT U/S 10B IS WHAT FORMS PART OF THE 'PROFITS OF THE BUSINESS OF THE UNDERTAKING' U/S 10B(4) R.W.S. 10B(1) OF THE ACT. IT IS SUBMITTED IT BE SO HELD NO W. 5. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THAT T HOUGH ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE ISSUE WHICH IS TO BE DECIDE D IS THE AVAILABILITY OF DEDUCTION U/S.10B OF THE ACT AND THAT THE GROUND RA ISED BY THE REVENUE IN ITS APPEAL IS ALSO CONNECTED WITH THE GROUNDS RAISED BY ASSESSEE. LD. D.R. DID NOT OBJECT TO THE AFORESAID SUBMISSION OF LD. A.R. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS TOGETHER. ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 4 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE PROFIT AND LOSS ACCOUNT, A.O NOTICED THAT ASSESSEE HAD OTHER I NCOME WHICH COMPRISED OF THE FOLLOWING:- (A) INCREMENTAL TURNOVER & CONNECTIVITY INCENTIVE RS. 50,47,078/- SUBSIDY FROM GOVERNMENT (B) INTEREST INCOME RS. 3,56,813/- (C) SALE OF SCRAP RS. 23,64,835/- (D) EXCHANGE RATE OF FLUCTUATION RS. 58,37,896 /- (E) SALES TAX REFUND RS. 4,40,360/- (F) SUNDRY BALANCE WRITTEN OFF RS. 21,916/- 7. HE NOTICED THAT THE AFORESAID OTHER INCOME AGGREGAT ING TO RS. 1,40,68,898/- HAS BEEN CLAIMED AS EXEMPT U/S. 10B OF THE ACT. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE DIFFERENT CONSTITUENTS OF OTHER INCOME NOT BE TREATED AS OTHER INCOME AND THEREFORE BEING NOT E LIGIBLE FOR DEDUCTION U/S. 10B. THE SUBMISSIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTABLE TO THE A.O. WITH RESPECT TO THE SUBSIDY RECEIVED FROM THE GOVER NMENT OF RS. 50,47,078/-, A.O WAS OF THE VIEW THAT IT WAS NOT AN OPERATIONAL INCOME BUT WAS INCOME FROM THE INCENTIVE SCHEME OF THE STATE G OVERNMENT. HE WAS OF THE VIEW THAT DEDUCTION U/S. 10B IS ONLY AVAILABLE ON OPERATIONAL INCOME AND NOT ON INCENTIVES. HE THEREFORE, RELYING ON THE DE CISION OF HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA LTD. VS. CIT, RE PORTED IN (2009) 183 TAXMANN.COM 349, HELD THE SUBSIDY TO BE NOT ELIGIBL E FOR DEDUCTION AND THEREFORE EXCLUDED IT FROM TOTAL INCOME. WITH RESPE CT TO THE INTEREST INCOME OF RS. 3,56,813/-, HE WAS OF THE VIEW THAT THE INTE REST INCOME IS TO BE CONSIDERED AS INCOME FROM OTHER SOURCES AND NOT A S BUSINESS INCOME. WITH RESPECT TO THE INCOME FROM SALE OF SCRAP OF RS . 23,64,835/- HE WAS OF ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 5 THE VIEW THAT THE INCOME CANNOT BE CONSIDERED TO HA VE BEEN DERIVED FROM EXPORTS AND THEREFORE IT CANNOT BE CONSIDERED TO BE EXEMPT U/S. 10B. SIMILARLY, WITH RESPECT TO THE SALES TAX REFUND AND SUNDRY BALANCES WRITTEN OF, HE WAS OF THE VIEW THAT THE AFORESAID ITEMS WER E NOT PROFIT DERIVED FROM EXPORT ORIENTED UNIT. HE THEREFORE PLACING RELIANCE ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA (SU PRA) DENIED THE DEDUCTION U/S. 10B OF THE ACT. HE ACCORDINGLY HELD THAT OUT OF TOTAL OTHER INCOME OF RS. 1,40,68,898/- THE AGGREGATE AMOUNT OF RS. 82,31,002/- AS BEING INCOME FROM OTHER SOURCES AND THEREFORE NOT E LIGIBLE FOR DEDUCTION U/S. 10B. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRI ED THE MATTER BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE GRANTED PARTIAL RELIEF BY HOLDING AS UNDER:- 6.1THE SECOND GROUND IS AGAINST THE AO IN NOT CONSI DERING GOVERNMENT SUBSIDY OF RS.50 , 47,078/- RECEIVED ON INCREMENTAL TURNOVER OF THE EO U (THE ONLY UNIT OF THE APPELLANT), AS PART: OF PROFITS & GAINS DERIVED FRO M EOU AND CONSEQUENTLY ERRED IN NOT INCLUDING THE SAME IN PROFITS ELIGIBLE FOR EXEMPTIO N U/S. 10B. THE TURNOVER SUBSIDY ALTHOUGH IS A BUSINESS INCOME ATTRIBUTABLE TO THE PRODUCTION IN THE ELIGIBLE UNIT, HOWEVER, IT IS NOT PROFIT DER IVED FROM THAT UNIT IT IS A BENEFIT RECEIVED FROM THIRD SOURCE LIKE THE DUTY DRAWBACK OR IMPORT ENTITLEMENTS AND ARE ONLY DEEMED PROFITS U/S. 28 OF THE IT ACT. I AGREE WITH THE AO THAT THIS IS NOT ELIGIBLE FOR-DEDUCTION U/S.10B. THE CORRESPONDING GROUNDS OF APPEAL ARE TH EREFORE DISMISSED. 6.2 THE THIRD GROUND IS THAT THE AO HAS ERRED IN LA W AND ON FACTS IN NOT CONSIDERING INTEREST OF RS. 3,56,813, RECEIVED ON DEPOSITS KEPT WITH BANKS OUT OF SURPLUS FUNDS GENERATED FROM THE EOU (THE ONLY UNIT OF THE APPELL ANT), AS PART OF PROFITS & GAINS DERIVED FROM EOU AND CONSEQUENTLY ERRED IN NOT INCL UDING THE SAME IN PROFITS ELIGIBLE FOR EXEMPTION U/S 10B OF THE ACT. HERE, THE INTEREST IS NOT EVEN THE BUSINESS PROFIT S. THE INTEREST EARNED ON SURPLUS FUNDS IS INCOME FROM OTHER SOURCES. IT IS NEITHER D ERIVED FROM INDUSTRIAL UNDERTAKING NOR EVEN PROFITS AND GAINS OF BUSINESS, CFT VS. MENON I MPEX (P) LTD REPORTED AT 259 ITR 403 (MAD); SHAM TABREZ VANTI, IN RE REPORTED AT (20 05) 273 ITR 299 (MR); INDIA COMMET INTERNATIONAL VS. ITO REPORTED AT (2008) 304 FTR 322 ARE RELIED UPON AND IT IS HELD THAT NO DEDUCTION U/S. 10B IS ALLOWABLE ON THI S INTEREST INCOME. 7. NEXT GROUND OF APPEAL IS AGAINST CONSIDERING SCR AP SALE OF RS. 23,64,835, GENERATED OUT OF MANUFACTURING PROCESS AT THE EOU AS NOT PART OF PROFITS AND GAINS DERIVED FROM EOU AND CONSEQUENTLY NOT INCLUDING THE SAME IN PROF ITS ELIGIBLE FOR EXEMPTION U/S.10B OF THE ACT. ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 6 7.1 I HAVE GONE THROUGH THE FACTS OF THE CASE, THE GENERATION OF SCRAP IN MANUFACTURING PROCESS IS DEFINITELY DERIVED FROM THE UNIT IT IS N OT THE CASE THAT THE SCRAP IS GENERATED OUT OF CAPITAL ASSETS ETC. THE SCRAP SALE OUT OF THE RA W MATERIAL PURCHASED GOES DIRECTLY TO REDUCE THE.-COST AND INCREASE THE PROFITS. SCRAP IS DEFINITELY A BY-PRODUCT OF THE INDUSTRIAL UNDERTAKING AND IT HAS BEEN SO HELD THAT IT IS ESSE NTIALLY A REMAINDER PORTION OF THE RAW- MATERIALS/FINISHED GOODS IN THE CASE OF DCIT VS. HA RJIVANDAS JUTHABHAI ZAVERI, 258 ITR 785 BY HON'BLE GUJARAT HIGH COURT, ACCORDINGLY, THE ADDITION ON THIS ACCOUNT IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 8. NEXT GROUND OF APPEAL IS AGAINST NOT CONSIDERING SALES TAX REFUND (RS.4,40,360) AND SUNDRY BALANCES WRITTEN OFF (RS.21,916) FOR THE PUR POSE OF EXEMPTION. 8.1 SUNDRY BALANCES WRITTEN OFF ARE NOT EVEN PROVED TO BE RELATED TO EXPENSES OF MANUFACTURING. IN NO CASE, SUCH WRITING OFF CAN BE INCOME DERIVED FROM THE ELIGIBLE BUSINESS. ACTUALLY, THESE ARE DEEMED PROFITS BECAUS E OF CESSATION OF LIABILITY. THE AO HAS CORRECTLY DISALLOWED THE CLAIM OF SEC.10B ON THIS I NCOME. AS FAR AS SALES TAX REFUND IS CONCERNED/ IT IS OF SIMILAR NATURE AS OF DEPB AND IS LINKED TO BENEFITS GIVEN TO EXPORTER. IT IS NOT A C ASE OF EXCESS DEPOSIT OF TAX WHICH IS REFUNDED. THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) IS SQUARELY APPLICABLE ON THE FACTS. IN SECTION 10B(4) ALSO, THE WORDS 'OF THE UNDERTAKING' WERE INSERTED W.E.F. 1/4/2001 TO RESTRICT THE BENEF ITS FOR THE PROFITS ON THE UNDERTAKING ONLY AND NOT TO PROFITS OF THE BUSINESS OF THE ASSE SSEE. THE BENEFITS AVAILABLE TO THE ASSESSEE WHICH ARE ATTRIBUTABLE TO ITS BUSINESS ARE NOT PROFITS DERIVED FROM EXPORTS OF THE ASSESSEE'S INDUSTRIAL UNDERTAKING. THE CLAIM OF THE ASSESSEE HAS RIGHTLY BEEN DISALLOWED BY THE A.O. THE GROUND OF APPEAL IS DISMISSED. 8. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), AS SESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 9. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE IS WHOLL Y ENGAGED IN THE BUSINESS OF PRINTED CIRCUIT BOARD AND NO OTHER BUSI NESS ACTIVITY IS CARRIED BY IT EXCEPT FOR THE BUSINESS OF EXPORTS AND ALL THE O PERATIONS, INCOME AND EXPENSES OF THE FIRM ARE CAUSE AND RESULT OF THE BU SINESS CARRIED OUT FROM EOU. HE FURTHER SUBMITTED THAT SECTION 10B(1) PROVI DES THAT PROFITS DERIVED FROM EXPORT OR ARTICLE OR THING SHALL BE ELIGIBLE F OR DEDUCTION FOR THE PERIOD OF TEN CONSECUTIVE YEARS AND THE COMPUTATION OF DED UCTION IS GOVERNED BY SECTION 10B(4) AND SECTION 10B(4) PRESCRIBES THE FO RMULA AS TO HOW THE DEDUCTIBLE AMOUNT OF EXPORT PROFITS NEEDS TO BE COM PUTED. HE FURTHER ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 7 SUBMITTED THAT DEDUCTION ALLOWED U/S. 10B IS PROPOR TION OF PROFITS OF THE BUSINESS OF THE UNDERTAKING TO THE EXPORT TURNOVER COMPARED TO TOTAL TURNOVER. HE FURTHER SUBMITTED THAT SECTION 10B DOE S NOT STATES THAT THE PROFITS SHOULD BE DERIVED FROM THE BUSINESS OF INDU STRIAL UNDERTAKING BUT MERELY STATES THAT THE PROFITS TO BE OF THE BUSINES S OF UNDERTAKING. HE THEREFORE SUBMITTED THAT THE RELIANCE PLACED BY THE A.O ON THE DECISION OF LIBERTY INDIA (SUPRA) WAS MISPLACED BECAUSE IT WAS IN THE CONTEXT OF DEDUCTION U/S. 80IB AND THE LANGUAGE USED U/S. 80IB AND DEDUCTION 10B ARE DIFFERENT. WITH RESPECT TO THE GOVERNMENT SUBSIDY T HAT WAS GRANTED TO THE ASSESSEE, HE SUBMITTED THAT IT RELATES TO THE INCRE MENTAL TURNOVER ACHIEVED BY EOU AND THAT THE DISBURSEMENT OF THE SUBSIDY WAS DI RECTLY LINKED TO THE ACHIEVEMENT OF INCREMENTAL TURNOVER AND WAS THUS DE RIVED FROM THE BUSINESS OF UNDERTAKING. WITH RESPECT TO THE REALIZATION FRO M SCRAP, HE SUBMITTED THAT THE SCRAP WAS GENERATED DURING THE MANUFACTURING PR OCESS OF THE GOODS MEANT FOR EXPORT AND THEREFORE THE SALE OF SCRAP WA S DERIVED FROM THE UNDERTAKING. WITH RESPECT TO THE INTEREST INCOME, H E SUBMITTED THAT ASSESSEE DOES NOT HAVE ANY OTHER UNDERTAKING AND THE INTERES T WAS DERIVED FROM DEPOSITS KEPT WITH THE BANK FROM THE FUNDS GENERATE D FROM THE UNDERTAKING AND THEREFORE IT WAS OUT OF THE BUSINESS OF THE UND ERTAKING. WITH RESPECT TO SALES TAX REFUND, HE SUBMITTED THAT IT WAS DERIVED FROM SALES TAX EXPENDITURE WHICH WAS PAID DURING THE COURSE OF BUSINESS AND GE NERATED FROM THE UNDERTAKING AND THE OTHER EXPENSES WERE ALSO WITH R ESPECT TO THE UNDERTAKING. THE LD. A.R. FURTHER SUBMITTED THAT CA SE LAWS RELIED UPON BY LD. CIT(A) WERE FOR A PERIOD PRIOR TO 2001-02 AND WERE NOT APPLICABLE . ON THE CONTRARY, HE SUBMITTED THAT THE ISSUES IN THE PRESE NT CASE ARE DIRECTLY COVERED BY THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MARAL OVERSEAS LTD. VS. ADDITIONAL CIT (2012) 20 TAXMANN.COM 346 ( INDORE TRIBUNAL) ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 8 (S.B). HE FURTHER SUBMITTED THAT WHILE RENDERING TH E AFORESAID DECISION, THE SPECIAL BENCH OF TRIBUNAL HAS ALSO CONSIDERED THE D ECISION OF HONBLE SUPREME COURT RENDERED IN THE CASE OF LIBERTY INDIA (SUPRA). HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION AND PO INTED TO THE RELEVANT PORTION OF THE DECISION. HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HRITNIK EXP ORT PVT. LTD. IN ITA NO. 219 OF 2014 ORDER DATED 13.11.2014 A COPY OF WHICH WAS PLACED AT PAGE 158 TO 160 OF THE PAPER BOOK. HE THEREFORE SUBMITTED TH AT AS PER THE FORMULA PRESCRIBED UNDER SUB-SECTION 4 OF SECTION 10B, THE ENTIRE PROFITS OF THE BUSINESS ARE TO BE CONSIDERED IN THE RATIO OF EXPOR T TURNOVER TO TOTAL TURNOVER OF THE BUSINESS AND THAT ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE INCOME OF ELIGIBLE UNDERTAKING, THE SAME CANNOT BE EXCLUDED FROM THE PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 10B OF THE ACT. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND WITH RESPECT TO THE INTEREST INCOME SUBMITTED THAT WHETHER THE INTEREST INCOME I S DERIVED FROM BUSINESS NEEDS VERIFICATION. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED 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 CONSIDERATION, ASSESSEE HAD RECEIVED GOVERNMENT SUBSIDY AND EARNED INCOME FROM INTEREST, SALE OF SCRAP, SALES TAX REFUND WHICH WER E HELD TO BE NOT ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT BY THE A.O AND FO R WHICH A.O MAINLY RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WE FIND THAT BEFORE HONBLE SPECIAL BENCH O F TRIBUNAL IN THE CASE ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 9 OF MARAL OVERSEAS LTD. (SUPRA) ONE OF THE QUESTION FOR CONSIDERATION WAS AS TO WHETHER THE UNDERTAKING IS ELIGIBLE FOR DEDUC TION ON EXPORT INCENTIVE RECEIVED BY IT IN TERMS OF PROVISIONS OF SECTION 10 B(1) R.W.S. 10B(4) OF THE ACT. THE HONBLE SPECIAL BENCH, AFTER CONSIDERI NG THE DECISION OF THE APEX COURT IN THE CASE OF LIBERTY INDIA (SUPRA) HEL D THAT PROVISIONS OF SECTION 10B ARE DIFFERENT FROM THE PROVISIONS OF SE CTION 80IA. THE RELEVANT PORTION 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 RESPECT OF PRO FITS AND GAINS AS ARE DERIVED BY A 100% EOU. FURTHER, SECTION 10B(4) OF THE ACT STIP ULATES SPECIFIC FORMULA FOR COMPUTING THE PROFIT DERIVED BY THE UNDERTAKING FRO M EXPORT. THUS, THE PROVISIONS OF SUB-SECTION (4) OF SECTION 10B OF THE ACT MANDAT E THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONING THE PROFI TS OF THE BUSINESS OF THE UNDERTAKING IN THE RATIO OF EXPORT TURNOVER BY THE TOTAL TURNOVER. THUS, EVEN THOUGH SUB-SECTION (1) OF SECTION 10B REFERS TO PRO FITS AND GAINS AS ARE DERIVED BY A 100% EOU, THE MANNER OF DETERMINING SUCH ELIGIBLE PROFITS HAS BEEN STATUTORILY DEFINED IN SUB-SECTION (4) OF THAT SECTION. BOTH SU B-SECTIONS (1) AND (4) ARE TO BE READ TOGETHER WHILE COMPUTING THE ELIGIBLE DEDUCTIO N U/S 10B OF THE ACT. WE CANNOT IGNORE SUB-SECTION (4) OF SECTION 10B WHICH PROVIDES SPECIFIC 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 AR E TO BE DETERMINED WHICH ARE FURTHER MULTIPLIED BY THE RATIO OF EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BUSINESS. IN CASE OF LIBERTY INDIA, THE HON'BLE SUP REME COURT HAS DEALT WITH THE PROVISIONS OF SECTION 80IA OF THE ACT WHEREIN NO FO RMULA WAS LAID DOWN FOR COMPUTING THE PROFITS DERIVED BY THE UNDERTAKING WH ICH HAS SPECIFICALLY BEEN PROVIDED UNDER SUB-SECTION (4) OF SECTION 10B WHILE COMPUTING THE PROFITS DERIVED BY THE UNDERTAKING FROM THE EXPORT. THUS, THE DECIS ION OF THE HON'BLE SUPREME COURT IS OF NO HELP TO THE REVENUE IN DETERMINING T HE 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 BY THE UNDERTAKING FR OM 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 APPORTIONING THE PROFI TS OF THE BUSINESS OF THE ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 10 UNDERTAKING IN THE RATIO OF TURNOVER TO THE TOTAL T URNOVER. THUS, NOT-WITH-STANDING THE FACT THAT SUB-SECTION (1) OF SECTION 10B REFERS THE PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU, YET THE MANNER OF DETERMININ G SUCH ELIGIBLE PROFITS HAS BEEN STATUTORILY DEFINED IN SUB-SECTION (4) OF SECT ION 10B OF THE ACT. AS PER THE FORMULA STATED ABOVE, THE ENTIRE PROFITS OF THE BUS INESS ARE TO BE TAKEN WHICH ARE MULTIPLIED BY THE RATIO OF THE EXPORT TURNOVER TO T HE TOTAL TURNOVER OF THE BUSINESS. SUB-SECTION (4) DOES NOT REQUIRE AN ASSESSEE TO EST ABLISH A DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING AND ONCE AN INCOME FORM S PART OF THE BUSINESS 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 MANDATE IN THE PRO VISIONS OF SECTION 10B TO EXCLUDE THE SAME FROM THE ELIGIBLE PROFITS. THE MOD E OF DETERMINING THE ELIGIBLE DEDUCTION U/S 10B IS SIMILAR TO THE PROVISIONS OF S ECTION 80HHC INASMUCH AS BOTH THE SECTIONS MANDATES DETERMINATION OF ELIGIBLE PRO FITS AS PER THE FORMULA CONTAINED THEREIN. THE ONLY DIFFERENCE IS THAT SECT ION 80HHC CONTAINS A FURTHER MANDATE IN TERMS OF EXPLANATION (BAA) FOR EXCLUSION OF CERTAIN INCOME FROM THE 'PROFITS OF THE BUSINESS' WHICH IS, HOWEVER, CONSPI CUOUS BY ITS ABSENCE IN SECTION 10B. ON THE BASIS OF THE AFORESAID DISTINCTION, SUB -SECTION (4) OF SECTION 10A/10B OF THE ACT IS A COMPLETE CODE PROVIDING THE MECHANI SM 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 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 COMPUTATIO N MADE BY THE ASSESSING OFFICER HIMSELF, THERE IS NO DISPUTE THAT BOTH THES E INCOMES HAVE BEEN TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME. THE CBDT CIRCULAR NO. 564 DATED 5TH JULY, 1990 REPORTED IN 184 ITR (ST.) 137 EXPLAINED THE SCOPE AND AMBIT OF SECTION 80HHC AND THE MODE OF DETERMINATION OF PROFITS DERI VED BY AN ASSESSEE FROM THE EXPORT OF GOODS. I.T.A.T., SPECIAL BENCH IN THE CAS E OF INTERNATIONAL RESEARCH PARK LABORATORIES V. ACIT, 212 ITR (AT) 1, AFTER FO LLOWING THE AFORESAID CIRCULAR, HELD THAT STRAIGHT JACKET FORMULA GIVEN I N SUB-SECTION (3) HAS TO BE FOLLOWED TO DETERMINE THE ELIGIBLE DEDUCTION. THE H ON'BLE SUPREME COURT IN THE CASE OF P.R. PRABHAKAR; 284 ITR 584 HAD APPROVED TH E PRINCIPLE LAID 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 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 ELIGIBLE BUSIN ESS PROFIT. 11. WE ALSO FIND THAT THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MARAL OVERSEAS LTD. (SUPRA) WAS UPHELD BY HONBLE D ELHI HIGH COURT IN THE CASE OF HRITNIK EXPORT PVT. LTD.(ITA NO. 219/2014 & 239/2014 ORDER DATED 13.11.2014) WHEREIN HONBLE HIGH COURT DISMISSED TH E APPEAL OF REVENUE BY HOLDING AS UNDER:- ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 11 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- 10, RESPECTIVELY. TRIBUNAL HAS FOLLOWED THE DECISION OF THEIR SPECIAL BENCH IN THE CASE OF MARAL OVERSEAS LTD. VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX DECIDED ON 20 TH MARCH, 2012, IN WHICH IT HAS BEEN 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 SPE CIAL FORMULA FOR COMPUTING THE PROFITS DERIVED BY 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 UNDE RTAKING 79. THUS, SUB-SECTION (4) OF SECTION 10B STIPULATED THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONING THE PROFITS OF THE BUSI NESS OF THE UNDERTAKING IN THE RATIO OF TURNOVER TO THE TOTAL TURNOVER. THUS, NOT-WITH-STAN DING 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 PROFITS HAS BEEN STATU TORILY DEFINED IN SUB-SECTION (4) OF SECTION 10B OF THE ACT. AS PER THE FORMULA STATED A BOVE, THE ENTIRE PROFITS OF THE BUSINESS ARE TO BE TAKEN WHICH ARE MULTIPLIED BY THE RATIO O F THE 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 UNDERTAKING A ND ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE UNDERTAKING, THE SAME WOULD BE INCL UDED IN THE PROFITS OF THE BUSINESS OF THE UNDERTAKING. THUS, ONCE AN INCOME FORMS PART OF THE BUSINESS OF THE ELIGIBLE UNDERTAKING, THERE IS NO FURTHER MANDATE IN THE PRO VISIONS OF SECTION 10B TO EXCLUDE THE SAME FROM THE ELIGIBLE PROFITS. THE MODE OF DETERMI NING THE ELIGIBLE DEDUCTION U/S 10B IS SIMILAR TO THE PROVISIONS OF SECTION 80HHC INASMUCH AS BOTH THE SECTIONS MANDATES 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 CERTAIN INCOME FROM THE PROFITS OF T HE BUSINESS WHICH IS, HOWEVER, CONSPICUOUS BY ITS ABSENCE IN SECTION 10B. ON THE B ASIS OF THE AFORESAID DISTINCTION, SUB- SECTION (4) OF SECTION 10A/10B OF THE ACT IS A COMP LETE CODE PROVIDING 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 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. AS PER THE COMPUTATION MADE BY THE ASSESSING OFFICER HIMSELF, THERE IS NO DISPUTE THAT BOTH THES E INCOMES HAVE BEEN TREATED BY THE ASSESSING OFFICER AS BUSINESS INCOME. THE CBDT CIRC ULAR NO. 564 DATED 5TH JULY, 1990 REPORTED IN 184 ITR (ST.) 137 EXPLAINED THE SCOPE A ND AMBIT OF SECTION 80HHC AND THE MODE OF DETERMINATION OF PROFITS DERIVED BY AN ASSE SSEE FROM 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 FOLLOWING THE AFORESAID CIRCU LAR, HELD THAT STRAIGHT JACKET FORMULA GIVEN IN SUB-SECTION (3) HAS TO BE FOLLOWED TO DETE RMINE THE ELIGIBLE DEDUCTION. THE HONBLE SUPREME COURT IN THE CASE OF P.R. PRABHAKAR ; 284 ITR 584 HAD APPROVED THE ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 12 PRINCIPLE LAID DOWN IN THE SPECIAL BENCH DECISION I N INTERNATIONAL RESERARCH PARK LABORATORIES V. ACIT (SUPRA). IN THE ASSES SEES OW N CASE THE I.T.A.T. IN THE PRECEDING YEARS, AFTER CONSIDERING THE DECISION IN THE CASE O F LIBERTY INDIA 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 ELIGIBLE BUSINESS PROFIT. 80. IN VIEW OF THE ABOVE DISCUSSION, QUESTION NO. 2 IS ANSWERED IN AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE ASSESSEE I S ELIGIBLE FOR CLAIM OF DEDUCTION ON EXPORT INCENTIVE RECEIVED BY IT IN TERMS OF PROVISI ONS 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, COMMISSIONER OF INCOME TAX-VII VERSUS XLNC FASHIONS IN WHICH THIS COURT HAS HELD AS 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-SECTION (4), W HICH 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 THE AMOUNT WHI CH BEARS TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING, THE SAME PROPORTION AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLES OR THINGS OR COMPUTER SOFTWARE BEARS TO TH E TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. SUB-SECTION (4), THEREFORE, IS THE SPECIAL PROVISIO N 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-S ECTION (4) TO SECTION 10B, AS SUB- SECTION (1) STATES THAT DEDUCTION OF SUCH PROFITS A ND 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- SECT ION (1) IS A GENERAL PROVISION AND IDENTIFIES THE INCOME WHICH IS EXEMPT AND HAS TO BE READ IN HARMONY WITH SUB-SECTION (4) WHICH IS THE FORMULA FOR FINDING OUT OR COMPUTING W HAT IS ELIGIBLE FOR DEDUCTION UNDER SUB-SECTION (1). NEITHER OF THE TWO PROVISIONS SHOU LD BE MADE IRRELEVANT AND BOTH HAVE TO BE APPLIED WITHOUT NEGATING THE OTHER. IN OTHER WOR DS, 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-SECTIO N (4) WOULD BECOME OTISE AND 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 DEPB BENEF ITS. AS PER SECTION 28, CLAUSE (III-C), ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 13 ANY DUTY OF CUSTOMS OR EXCISE REPAID OR REPAYABLE A S DRAWBACK TO A PERSON AGAINST EXPORTS UNDER CUSTOMS AND CENTRAL EXCISE DUTIES DRA W BACK RULES, 1971 IS DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE SAID PROVISION HAS TO BE GIVEN FULL EFFECT TO AND THIS MEANS AND IMPLIES THAT THE DUTY DRAW BACK OR DUTY BENEFITS WOULD BE DEEMED TO BE A PART OF THE BUSINESS INCOME. THUS, W ILL 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 THE FORMULA WOULD BE E LIGIBLE AND QUALIFY FOR DEDUCTION/EXEMPTION. THE POSITION IS SOMEWHAT AKIN OR CLOSE TO SECTION 80HHC OF THE ACT, WHICH ALSO PRESCRIBES A FORMULA FOR COMPUTATIO N 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. KARNATAKA HIGH COURT IN COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE VERSUS MOTOROLA INDIA ELECTRONICS (P) LTD., ITA NO. 428/2007, DECID ED ON 11.12.2013, REPORTED AS [2014] 46 TAXMANN.COM 167 (KARNATAKA) HAS ALSO TAKEN A SIMILAR VIEW, WHE REIN 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 GAINS AS DERIVED FROM 100% EOU FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE. THEREFORE, IT EXCLUDES PROFIT AND GAINS FROM EXPORT OF ARTICLES. BUT SUB-SECTION (4) EXPLAINS WH AT IS SAYS THAT PROFITS DERIVED FROM EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE S HALL BE THE ACCOUNT WHICH BARES TO THE PROFITS OF THE BUSINESS OF THE UNDERTAKING AND NOT THE PROFITS AND GAINS FROM EXPORT OF ARTICLES. THEREFORE, PROFITS AND GAINS DERIVED FROM EXPORT OF ARTICLES IS DIFFERENT FROM THE INCOME DERIVED FROM THE PROFITS OF THE BUSINESS OF THE UNDERTAKING. 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 DERIVED FROM T HE BUSINESS OF THE UNDERTAKING. IT IS INTERESTING TO NOTE THAT SIMILAR PROVISIONS ARE NOT THERE WHILE DEALING WITH COMPUTATION OF INCOME UNDER SECTION 80HHC. ON THE CONTRARY THERE I S SPECIFIC PROVISIONS LIKE SECTION 80HHB WHICH EXPRESSLY EXCLUDES THIS TYPE OF INCOMES . THEREFORE, IN VIEW OF THE AFORESAID PROVISIONS, IT IS CLEAR THAT, WHAT IS EXEMPTED IS N OT MERELY THE PROFITS 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 A PPEALS 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 ONCE ON INCOME FORMS PART OF THE BUSINESS OF THE INCOME OF THE ELIGIBLE UNDERTAK ING OF THE ASSESSEE, THE ITA NOS. 266 5 & 2720/AHD/2011 . A.Y. 2007-0 8 14 SAME CANNOT BE EXCLUDED FROM THE ELIGIBLE PROFITS F OR THE PURPOSE OF COMPUTING DEDUCTION U/S. 10B OF THE ACT, HAS BEEN U PHELD BY HONBLE DELHI & KARNATAKA HIGH COURTS IN THE CASE OF HRITNIK EXPO RTS 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 RECORD TO DE MONSTRATE THAT ASSESSEE WAS HAVING ANY OTHER BUSINESS OTHER THAN EXPORTS AN D THE AFORESAID INCOME WERE DERIVED OUT OF THAT OTHER BUSINESS. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION ON THE PROFITS FROM SUBSIDY, INTEREST INCOME, SALE OF SCRAP, SALES TAX REFUND AND SUNDRY BALANCES WRITTEN OFF. WE THUS SET ASIDE THE ORDER OF LD. CIT (A). 14. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED AN D THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 01 - 01 - 201 6. SD/- SD/- (S.S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD