Case Law Details
Brief of the Case
In Riviera Home Furnishing vs. Addl. CIT, Hon’ble Delhi High Court while dealing with the interpretation of Section 10B(4) held that the manner of determining such eligible profits has been statutorily defined in sub-section (4) of section 10B of the Act. 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-section (4) does not require an assessee to establish a direct nexus with the business of the undertaking and once an income forms part of the business of the undertaking, the same would be included in the profits of the business of the undertaking.
Fact of the Case
The Assessee, a private limited company engaged in the business of manufacture and sale of home furnishings, set up a 100% Export Oriented Undertaking (‘EOU’) which was an ‘eligible unit’ for the purposes of deductions under Section 10B of the Act. In A.Y. 2008-09, the assessee in its return of income claimed the deduction in respect of the income under the heading Deemed Export Drawback, Customer Claims, freight subsidy and interest on fixed deposit receipts made for the business purpose. During the scrutiny, the A.O. forming the view that the above receipts did not fall within the expression ‘profit derived’ from the export of articles, excluded the same from the computation of eligible income under section 10B(4) of the Act. The appeal of the assessee was dismissed by the CIT(A). However, ITAT agreed with the contention of the Assessee as regards the deemed export drawback forming part of the income eligible for deduction u/s 10B but as regards the other three items viz., customer claims, freight subsidy and interest on FDRs made for business purposes, the ITAT concurred with the view of the AO and the CIT(A).
Question of Law
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