Deduction U/s. 10B is allowed only on “undertaking” not on “whole Business”

Facts of the Case

The assessee is engaged in the business of manufacture, trading and export of natural products. Assessee filed its return of income for A.Y 2010-11 on 12.10.2010 admitting income of Rs.48,85,370. But, the consolidated profits and total turnover of both the Units i.e. EOU and Trading Divisions was considered.
Question of Law

Whether the Revenue erred in calculating the deduction u/s 10B on the whole ‘business’ instead of whole ‘undertaking’?

Contention of the Assessee

The profits and turnover of the EOU only was to be considered. The assessee was having two units, one was a manufacturing unit and the other was a trading unit. The EOU was engaged in the business of processing and exports of herbs, whereas the trading unit was engaged in the business of purchase and sale of herbs, without processing. Separate accounts were maintained for both units, separate final accounts in the form of balance sheet and profit and loss account and separate audit report was prepared for both the units. In addition consolidated audit report was also prepared. The assessee submitted that the CIT (A) has not appreciated, that the ld. AO has incorrectly added the non EOU turnover for the purpose of total turnover for 10B purposes. The correct way to calculate the deduction u/s 10B is by considering the division-wise profits and the profits attributable to exports.

Contention of the Revenue

The ld. CIT(A) mentioned about CBDT vide Circular No.7 dated 16.07.2013.

Held by the Tribunal

The Hon’ble Tribunal observed that the company has maintained and submitted separate set of accounts. There was a confusion between the total turnover of the business and total turnover of the undertaking. The Hon’ble Tribunal held that in the proviso to section 10B, there is reference to computation of total income of “Undertaking”. Hence, the matter was remanded to the AO to compute deduction u/s 10B according to the proviso to section 10B after giving a reasonable opportunity to the assessee.