FINESTAR JEWELLERY & DIAMONDS P.LTD, MUMBAI V. ASST CIT 5(1), MUMBAI

ITA 7371/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93202 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 29-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Assessee Lawyers: VIJAY MEHTA SHRI SUNIL HIRAWAT
• Keywords: Business income
• Section: 10AA; 115JB; 10B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , , , BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 7371/MUM/2012 ( / ASSESSMENT YEAR : 2009 - 10 M/S. FINESTAR JEWELLERY & DIAMOND PVT. LTD., C/O KARNAVAT & CO., 2A KITAB MAHAL, 1 ST FLOOR, 192, DR. D.N. ROAD, MUMBAI - 400 001 / VS. THE ACIT, CIRCLE - 5(1), MUMBAI ./ ./ PAN/GIR NO. : ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI VIJAY MEHTA SHRI SUNIL HIRAWAT / RESPONDENT BY : SHRI PAWAN KUMAR BEERLA / DATE OF HEARING : 09 . 0 7 .2015 / DATE OF PRONOUNCEMENT : 15 .0 7 .2015 / O R D E R PER N.K. BILLAIYA, AM: T HIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 9 , MUMBAI DT. 2 5 . 9 .201 2 PERTAINING TO ASSESSMENT YEAR 2009 - 1 0. 2. THE GRIEVANCES OF THE ASSESSEE READ AS UNDER: ITA. NO. 7371/M/2012 2 1. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO INCLUDE RS.7,82,196/ BEING THE LABOUR CHARGES RECEIVED AS PROFITS OF THE BUSINESS WHILE CALCULATING DEDUCTION U/S 10A. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO INCLUDE THE SAID SUM OF RS.7,82, 196/ BEING THE LABOUR CHARGES RECEIVED AS PROFIT OF THE BUSINESS WHILE CALCULATING DEDUCTION U/S.10A. 2. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO INCLUDE RS.1,10,314/ BEING THE INTEREST RECEIVED ON FIXE D DEPOSITS AS PROFITS OF THE BUSINESS WHILE CALCULATING DEDUCTION U/S.10A. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO INCLUDE THE SAID SUM OF RS.1,10,314/ BEING THE INTEREST RECEIVED ON FIXED DEPOSI TS AS PROFITS OF THE BUSINESS WHILE CALCULATING DEDUCTION U/S.10A 3. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD FAILED TO APPRECIATE THAT RS.3S,86,248/ IS NOT INTEREST RECEIVED ON EEFC, BUT THE EXCHANGE DIFFERENCE ON EEFC AND THE SAME SHOULD BE CONSIDERED AS SUCH WHILE CALCULATING DEDUCTION U/S.10A. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE CONSIDERED THE SAID SUM OF RS.35,86,248/ AS EXCHANGE DIFFERENCE ON EEFC AND DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S.1OA ON THE SAID AMOUNT. 4. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE EXEMPTION ALLOWABLE U/S.10A FROM THE BOOK PROFIT TAXABLE U/S.115JB OF THE I.T. ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE EXEMP TION ALLOWABLE U/S.10A FROM THE BOOK PROFIT TAXABLE U/S.115JB OF THE ACT. 5. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE FRINGE BENEFIT TAX OF RS.84,S8S/ FROM THE BOOK PROFIT TAXABLE U/S.115JB OF THE I.T. ACT. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE FRINGE BENEFIT TAX FROM THE BOOK PROFIT TAXABLE U/S.11SJB OF THE ACT. ITA. NO. 7371/M/2012 3 6 . ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN A PPRECIATING THAT INTEREST U/S.234C SHOULD BE CHARGED ON THE RETURNED INCOME. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO CHARGED INTEREST U/S.234C ON THE RETURNED INCOME ONLY. 3. GROUND NO. 1 RELATE S TO THE EXCLUSION OF RS. 7,82,196/ - BEING THE LABOUR CHARGES RECEIVED FROM THE PROFITS OF THE BUSINESS WHILE CALCULATING DEDUCTION U/.S 10A OF THE ACT. 4. THE ISSUE FINDS PLACE AT PARA - 4 ON PAGE - 2 OF THE ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER HA S ASKED THE ASSESSEE WHY LABOUR CHARGES AMOUNTING TO RS. 7,52,196/ - SHOULD NOT BE EXCLUDED FROM BUSINESS PROFITS WHILE CALCULATING DEDUCTION U/S. 10A OF THE ACT. 4.1. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DATED 20.12.2011. THE GIST OF THE REPL Y OF THE ASSESSEE IS INCORPORATED AT PARA - 4 OF THE ASSESSMENT ORDER. THE REPLY OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE AO WHO WAS OF THE OPINION THAT U/S. 10A OF THE ACT ONLY THE PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS OF AN UNDERTAK ING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE ARE ALLOWABLE AS DEDUCTION. THE AO RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS STERLINE FOODS 237 ITR 579 AND PANDIAN CHEMICALS LTD. VS CIT 129 TAXMAN 539 AND A CCORDINGLY EXCLUDED LABOUR CHARGES RECEIVED TOTALING TO RS. 7,52,196/ - . 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE IMPUGNED ISSUE HAS TO BE CONSIDERED WITHIN THE LIGHT OF THE PROVISIONS OF SEC. 10A(1) AND 10A(4) OF THE ACT. IT IS THE SAY OF THE LD. COUNSEL THAT IF ITA. NO. 7371/M/2012 4 BOTH THE SECTIONS ARE READ TOGETHER, THE LABOUR CHARGES OF THE ASSESSEE WOULD BE ELIGIBLE FOR CALCULATING THE DEDUCTION U/S. 10A OF THE ACT. IN SUPPORT, THE LD. COUNSEL RELIED UPON THE DECISION OF THE SPECIAL BENCH TRIBUNAL IN THE CASE OF MARAL OVERSEAS LTD. VS ACIT 146 TTJ 129. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. 8. WE HAVE G IVEN A THOUGHTFUL CONSIDERATION TO THE RELEVANT PROVISIONS OF THE ACT AND HAVE CONSIDERED THE ORDERS OF THE AUTHORITIES CAREFULLY AND ALSO THE DECISION RELIED UPON BY THE ASSESSEE. THERE IS NO DISPUTE THAT THE LABOUR CHARGES EARNED BY THE ASSESSEE HAVE A DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. ALL THAT HAS TO BE CONSIDERED IS WHETHER SUCH PROFIT IS ELIGIBLE PROFIT FOR THE PURPOSE OF THE CLAIM OF DEDUCTION U/S. 10A OF THE ACT. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MARAL OVERSEAS (SUPRA ) HAS CONSIDERED THIS ISSUE AND HAS HELD AS UNDER: IT IS CLEAR FROM THE PLAIN READING OF SECTION 10B(1) OF THE ACT THAT THE SAID SECTION ALLOWS DEDUCTION IN RESPECT OF PROFITS AND GAINS AS ARE DERIVED BY A 100% EOU. FURTHER, SECTION 10B(4) OF THE ACT S TIPULATES SPECIFIC FORMULA FOR COMPUTING THE PROFIT DERIVED BY THE UNDERTAKING FROM EXPORT. THUS, THE PROVISIONS OF SUB - SECTION (4) OF SECTION 10B OF THE ACT MANDATE THAT DEDUCTION UNDER THAT SECTION SHALL BE COMPUTED BY APPORTIONING THE PROFITS OF THE BUS INESS OF THE UNDERTAKING IN THE RATIO OF EXPORT TURNOVER BY THE TOTAL TURNOVER. THUS, EVEN THOUGH SUB - SECTION (1) OF SECTION 10B REFERS TO PROFITS 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 SUB - SECTIONS (1) AND (4) ARE TO BE READ TOGETHER WHILE COMPUTING THE ELIGIBLE DEDUCTION U/S 10B OF THE ACT. WE CANNOT IGNORE SUB - SECTION (4) OF SECTION 10B WHICH PROVIDES SPECIFIC FORMULA FOR COMPUTING THE ITA. NO. 7371/M/2012 5 P ROFITS DERIVED BY THE UNDERTAKING FROM EXPORT CANNOT BE IGNORED. AS PER THE FORMULA SO LAID DOWN, THE ENTIRE PROFITS OF THE BUSINESS ARE TO BE DETERMINED WHICH ARE FURTHER MULTIPLIED BY THE RATIO OF EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BUSINESS. TH US NOTWITHSTANDING THE FACT THAT SUB - S(1) OF S. 10B REFERS TO THE PROFITS AND GAINS AS ARE DERIVED BY A 100 PER CENT EOU YET THE MANNER OF DETERMINING SUCH ELIGIBLE PROFITS HAS BEEN STATUTORILY DEFINED IN SUB - S(4) OF S. 10B. AS PER THE FORMULA, THE ENTIRE PROFITS OF THE BUSINESS ARE TO BE TAKEN WHICH ARE MULTIPLIED BY THE RATIO OF THE EXPORT TURNOVER TO THE TOTAL TURNOVER OF THE BUSINESS. SUB - S.(4) DOES NOT REQUIRE AN ASSESSEE TO ESTABLISH A DIRECT NEXUS WITH THE BUSINESS OF THE UNDERTAKING AND ONCE AN IN COME FORMS PART OF THE BUSINESS OF THE UNDERTAKING THE SAME WOULD BE INCLUDED 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 PROVISIONS O F S. 10B TO EXCLUDE THE SAME FROM THE ELIGIBLE PROFITS. ONCE AN INCOME FORMS PART OF THE BUSINESS INCOME OF THE ELIGIBLE UNDERTAKING OF THE ASSESSEE, THE SAME CANNOT BE EXCLUDED FROM THE ELIGIBLE PROFITS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER S. 10B . AS PER THE COMPUTATION MADE BY THE AO HIMSELF, THERE IS NO DISPUTE THAT BOTH THESE INCOMES HAVE BEEN TREATED BY THE AO AS BUSINESS INCOME. ACCORDINGLY, THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION ON EXPORT INCENTIVE RECEIVED BY IT IN TERMS OF PROV ISIONS OF S. 10B(1) R/W S. 10B(4) LIBERTY INDIA VS. CIT (2009) 225 CTR (SC) 233 (2009) 28 DTR (SC) 73: (2009) 317 ITR 218 (SC) DISTINGUISHED. RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH (SUPRA), IT CAN BE SAFELY CONCLUDED THAT THE LABOUR CHARGES RECEIVED ARE ELIGIBLE FOR CALCULATION OF DEDUCTION U/S. 10A OF THE ACT. FINDINGS OF THE LD. CIT(A) ARE REVERSED. THE AO IS DIRECTED TO AL LOW THE DEDUCTION U/S. 10A IN RESPECT OF LABOUR CHARGES RECEIVED. GROUND NO. 1 IS ACCORDINGLY ALLOWED. ITA. NO. 7371/M/2012 6 9. GROUND NO. 2 RELATES TO THE EXCLUSION OF INTEREST RECEIVED ON FIXED ASSETS AS PROFIT OF THE BUSINESS WHILE CALCULATING DEDUCTION U/S. 10A OF THE ACT. 10. THE ISSUE FINDS PLACE AT PARA - 5 ON PAGE - 3 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS ASKED TO EXPLAIN WHY INTEREST ON FIXED DEPOSIT SHOULD NOT BE EXC LUDED FROM THE PROFIT OF BUSINESS AND TAXED AS INCOME FROM OTHER SOURCES. IN ITS REPLY DATED 20.12.2011, THE ASSESSEE STATED THAT THE FIXED DEPOSIT RECEIPTS ARE IN RESPECT OF BANK GUARANTEE PROVIDED BY THE BANK TO SEEPZ AUTHORITY, FEDERATION OF INDIA, CHA MBERS OF COMMERCE AND INDUSTRY, NEW DELHI. IT WAS EXPLAINED THAT THE FDR IS DIRECTLY RELATED TO THE BUSINESS OF THE ASSESSEE AND THEREFORE INTEREST EARNED ON SUCH FIXED DEPOSITS HAVE TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS. 10.1. THE SUBMISSIO NS OF THE ASSESSEE WAS DISMISSED BY THE AO RELYING UPON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. VS CIT 262 ITR 278 AND LIBERTY INDIA VS CIT 317 ITR 218 (SC) . THE AO TREATED THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES THEREBY DENYING THE CLAIM OF DEDUCTION U/S. 10A OF THE ACT. 11. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT FAILED TO CONVINCE ITS CLAIM. 12. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERATED W HAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 13. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES. ITA. NO. 7371/M/2012 7 14. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE UNDER CONSIDERATION. A PERUSAL OF THE B ALANCE SHEET OF THE ASSESSEE SHOW S THAT THE FIXED DEPOSIT ACCOUNT IS SHOWN AS SECURED AGAINST BANK GUARANTEE WHICH SHOWS THAT THE FIXED DEPOSITS HAVE A DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. IN OUR CONSIDERED VIEW, THE INTEREST EARNED FROM SUCH DE POSITS OF THE MONEY KEPT APART FOR THE PURPOSE OF BUSINESS IS TO BE TAXED UNDER THE HEAD INCOME FROM BUSINESS AND CANNOT BE TAXED UNDER INCOME FROM OTHER SOURCES. WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INDO SWISS 284 ITR 389. WE, ACCORDINGLY DIRECT THE AO TO TREAT THE INTEREST INCOME UNDER THE HEAD PROFITS AND GAINS OF THE BUSINESS AND FOR THE REASONS GIVEN IN GROUND NO. 1 OF THIS APPEAL, WE DIRECT THE AO TO ALLOW DEDUCTION U/S. 10A OF THE ACT. GROUND NO. 2 IS ACCORDINGLY ALLOWED. 15. WITH GROUND NO. 3 THE ASSESSEE CLAIMS THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT RS. 35,86,248/ - IS NOT INTEREST RECEIVED ON EEFC BUT THE EXCHANGE DIFFERENCE ON EEFC AND THEREFORE THE SAME SHOULD BE CONSIDERED AS SUCH WHILE CALCULATING DEDUCTION U/S. 10A OF THE ACT. 15.1. THE ISSUE FINDS PLACE AT PARA - 6 ON PAGE - 7 OF THE ASSESSMENT ORDER WHEREIN THE AO OBSERVED THAT THE ASSESSEE IS CLAIMING DEDUCTION U/S. 10A OF THE ACT. HOWEVER, FROM THE WORKING OF THE SAME, IT IS FOUND THAT THE ASSESSEE HAS INCLUDED INTEREST ON EEFC AT RS. 35,86,248/ - IN ITS PROFITS FROM BUSINESS. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAME SHOULD NOT BE DISALLOWED WHILE COMPUTING DEDUCTION U/S. 10A OF THE ACT. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DT. 20.12.2011 WHICH IS INCORPORATED BY THE AO AT PARA - 6 OF HIS ORDER. THE SUBMISSIONS OF THE ASSESSEE WERE REJECTED BY THE AO. THE AO WAS OF THE FIRM BELIEF THAT THE DEDUCTION U/S. 10A IS AVAILABLE FOR PROFITS DERIVED FROM THE EXPORT OF ALL ITA. NO. 7371/M/2012 8 GOODS OR MERCHANDISE, SUBJECT TO CERTAIN CONDITIONS. THE AO FURTHER OBSERVED THAT THE EXCHANGE FLUCTUATION IN THE EEFC AROSE AFTER THE COMPLETION OF THE EXPORT ACTIVITY AND DID NOT BEAR A PROXIMATE AND DIRECT NEXUS WITH THE EXPORT TRANSACTION SO AS TO FALL WITHIN THE EXPRESSION DERIVED BY THE TAXPAYER. THE AO ACCORDINGLY TAXED THE GAIN ON EEFC ACCOUNT UNDER THE HEAD INCOME FROM OTHER SOURCES. 16. THE ASSESSEE COULD NOT SUCCEED BEFORE THE LD. CIT(A) AND IS THEREFORE BEFORE US. 17. THE LD. COU NSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE - 24 OF THE PAPER BOOK AND POINTED OUT THAT THE GAIN ON EXCHANGE DIFFERENCE ON EEFC ACCOUNT OF RS. 35,86,248/ - IS NOT AN INTEREST BUT A GAIN ON THE FLUCTUATION OF FOREIGN EXCHANGE WHICH HAS BEEN WRONGLY CONS IDERED BY THE REVENUE AUTHORITIES AS INTEREST. IT IS THE SAY OF THE LD. COUNSEL THAT SUCH EXCHANGE FLUCTUATION HAS A DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE AND THEREFORE THE SAME SHOULD BE TAXED UNDER THE HEAD BUSINESS INCOME. 18. THE LD. DR RE LIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE FIRST APPELLATE AUTHORITY. 19. WE HAVE CAREFULLY PERUSED THE RELEVANT PART OF THE ORDERS OF THE REVENUE AUTHORITIES. IT IS NOT IN DISPUTE THAT RS. 35,86,248/ - IS NOT INTEREST EARNED BUT GAIN ON THE FLU CTUATION OF FOREIGN EXCHANGE. FROM THE CHART EXHIBITED AT PAGE - 24, WE FIND THAT THE ASSESSEE HAS SUFFERED LOSSES ON FOREIGN EXCHANGE FLUCTUATION WHICH HAVE BEEN ACCEPTED BY THE REVENUE AUTHORITIES. WE, THEREFORE, DO NOT FIND ANY REASON FOR GIVING DIFFERE NTIAL TREATMENT TO THE EXCHANGE GAINS. IN OUR CONSIDERED OPINION, THE EXCHANGE GAINS SHOULD BE TAXED UNDER THE HEAD BUSINESS INCOME. WE, ITA. NO. 7371/M/2012 9 ACCORDINGLY DIRECT THE AO TO TAX THE EXCHANGE GAIN UNDER THE HEAD BUSINESS INCOME AND ACCORDINGLY ALLOW DEDUCTION U/S . 10A OF THE ACT , F OR THE DETAILED REASONS GIVEN WHILE DECIDING GROUND NO. 1 OF THIS APPEAL, GROUND NO. 3 IS ACCORDINGLY ALLOWED. 20. GROUND NO. 4 RELATES TO NOT EXCLUDING THE EXEMPTION ALLOWABLE U/S. 10A FROM THE BOOK PROFIT TAXABLE U/S. 115JB OF THE ACT. 20.1. A THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL MUMBAI BENCH IN THE CASE OF GENESYS INTERNATIONAL CORPN. LTD. VS ACIT 55 SOT 10 WHEREIN THE TRIBUNAL HAS CONSIDERED THIS ISSUE VIS - - VIS CLAUSE (F) OF EXPLANATION - 1 TO SEC. 115JB(2) OF THE ACT. 21. PER CONTRA, THE LD. DR COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. 22. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FACTS IN ISSUE, WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL . T HE TRIBUNAL IN THE CASE OF GENESYS INTERNATIONAL CORPN (SUPRA) AT PARA - 21 OF ITS ORDER HAS HELD AS UNDER: IT IS EVIDENT FROM ABOVE THAT AN EXISTING SEZ UNIT WILL ALSO BE GOVERNED BY SPECIAL ECONOMIC ZONES ACT, 2005. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE BENEFITS WHICH ARE TO BE PROVIDED TO THE NEWLY ESTABLISHED UNIT IN SEZ AS PER SECTION 10AA OF TH E ACT WILL ALSO BE AVAILABLE TO THE EXISTING UNITS IN SEZ. MOREOVER, SECTION 4(1) OF SEZ ACT PROVIDES THAT AN EXISTING SEZ UNIT SHALL BE DEEMED TO HAVE BEEN NOTIFIED AND ESTABLISHED IN ACCORDANCE WITH PROVISIONS OF SEZ ACT AND THE PROVISIONS OF SPECIAL ECO NOMIC ZONES ACT SHALL APPLY TO SUCH EXISTING SEZ UNITS. IT IS ALSO OBSERVED THAT BY THE SEZ ACT, SUB - SECTION (6) TO SECTION 115JB WAS ALSO INSERTED PROVIDING THAT PROVISIONS OF SECTION 115JB SHALL NOT APPLY TO THE INCOME ACCRUED OR ARISEN ON OR AFTER 1.4.2 005 FROM ANY BUSINESS CARRIED ON, OR SERVICES RENDERED, BY AN ENTREPRENEUR OR A DEVELOPER, IN A UNIT OR SPECIAL ECONOMIC ZONE, AS THE CASE MAY BE. HENCE, INCOME OF UNITS LOCATED SEZ WILL NOT BE INCLUDED WHILE COMPUTING BOOK PROFIT FOR THE ITA. NO. 7371/M/2012 10 PURPOSE OF MAT AS PER SECTION 115JB(6) OF THE ACT. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS MERIT IN THE CONTENTION OF LD A.R. THAT IRRESPECTIVE OF THE FACT THAT AMENDMENT HAS BEEN MADE IN CLAUSE (F) OF EXPLANATION (1) TO SECTION 115JB(2) OF THE ACT TO APPLY THE PROVISIONS OF MAT IN RESPECT OF UNITS WHICH ARE ENTITLED TO DEDUCTION U/S.10A OR 10B BUT THE UNITS WHICH ARE IN SEZ WILL CONTINUE TO GET BENEFITS FROM THE APPLICABILITY OF PROVISIONS OF MAT IN VIEW OF SUB - SECTION(6) OF THE ACT. WE ALSO OBSERVE THAT BENEFIT GIVEN TO SEZ UNIT FROM THE APPLICABILITY OF PROVISIONS OF SECTION 115JB HAS BEEN WITHDRAWN BY THE FINANCE ACT, 2011 BY INSERTING A PROVISO TO SECTION 115JB(6) OF THE ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH, WE DIR ECT THE AO TO EXCLUDE THE EXEMPTION ALLOWABLE U/S/.10A FROM THE BOOK PROFIT TAXABLE U/S. 115JB OF THE ACT. GROUND NO. 4 IS ACCORDINGLY ALLOWED. 23. GROUND NO. 5 RELATES TO THE NON - EXCLUSION OF THE FRINGE BENEFIT TAX OF RS. 84,585/ - FROM THE BOOK PROFIT TA XABLE U/S. 115JB OF THE ACT. 23.1. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE LD. CIT(A) AT PARA - 5.5 OF HIS ORDER HAS CONSIDERED THIS ISSUE AS GENERAL IN NATURE. THE LD. COUNSEL DREW OUR ATTENTION TO THE CIRCULAR OF THE CB DT NO. 8 OF 2005 DT. 29 TH A U GUST, 2005 AND POINTED OUT THAT ON A SPECIFIC QUESTION NO. 103 RELATING TO WHETHER FBT WOULD BE ALLOWABLE DEDUCTION WHILE COMPUTING BOOK PROFIT U/S. 115JB OF THE ACT , T HE BOARD HAS ANSWERED AS FOLLOWS: FBT IS A LIABILITY QUA E MPLOYER. IT IS AN EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION OF THE EMPLOYER. HOWEVER, SUB CLAUSE(IC) OF CLAUSE (A) OF SEC. 40 OF THE INCOME TAX ACT EXPRESSLY PROHIBITS THE DEDUCTION OF THE AMO UNT OF FBT PAID, FOR THE PURPOSES OF COMPUTING THE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THIS PROHIBITION DOES NOT APPLY TO THE COMPUTATION OF BOOK PROFITFOR THE PURPOSE OF SEC. 115JB. ACCORDINGLY, THE FBT IS AN ALLOWABL E DEDUCTION IN THE COMPUTATION OF BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT. ITA. NO. 7371/M/2012 11 GROUND NO. 5 IS ACCORDINGLY ALLOWED. 24. GROUND NO. 6 RELATES TO THE LEVY OF INTEREST U/S. 234C OF THE ACT. 25. A PERUSAL OF SEC. 234C OF THE ACT SHOWS THAT THE INTEREST HAS TO BE CHARGED ON THE TAX DUE ON THE RETURNED INCOME. THE AO IS ACCORDINGLY DIRECTED TO CHARGE INTEREST ON THE RETURNED INCOME OF THE ASSESSEE. GROUND NO. 6 IS ACCORDINGLY ALLOWED. 26. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY, 2015 SD/ - SD/ - ( A.D. JAIN ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 15 TH JULY , 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI