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| The Tax Publishers2020 TaxPub(DT) 3243 (Mad-HC) INCOME TAX ACT, 1961
Section 10B
there is no requirement for the purposes of section 10B to establish direct nexus between income and undertaking and entire business income of 100% EOU would be profits of business of undertaking. Accordingly, when management service fee being subject-matter of dispute, was received by assessee through banking channels by way of convertible foreign exchange and there was nothing on record to show that convertible foreign exchange remittance did not fall within definition under section 10B(9A)(ii) disallowance of deduction alleging no direct nexus was not justified.
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Deduction under section 10B - 100% export-oriented unit - Allowability as regards management service fee received from overseas AE in convertible foreign exchange -
Assessee, a 100% Export-Oriented Unit [EOU] engaged in assembling valves in India and exporting same to M/s. Oliver Valves Limited, UK claimed deduction under section 10B. AO held that service fee received by assessee for providing management services to AE could not be held as incidental to business of export of valves and also on acount of assessee having received the same in Indian currency, management service fee was not eligible for deduction under section 10B. Held: Basis of computation of deductions enumerated under Chapter-VIA is different from that set out for special deductions like sections 10A and 10B. Section 80-IA provides for a deduction of profits and gains derived by an undertaking or an enterprise from an eligible business, whereas relief under section 10B on the other hand is granted in respect of profits derived from eligible activity of export, computed as a proportion of profits of business of undertaking. Accordingly, there is no requirement for the purposes of section 10B to establish direct nexus between income and undertaking and entire business income of 100% EOU would be profits of business of undertaking. In the instant case, activity of assessee was export as admitted by revenue and, therefore, income generated by EOU would be eligible for benefit of section 10B, especially when management service fee being subject-matter of dispute, was received by assessee through banking channels by way of convertible foreign exchange and there was nothing on record to show that convertible foreign exchange remittance did not fall within definition under section 10B(9A)(ii).
Supported by:Camiceria Apparels India (P) Ltd., v. ACIT [(2019) 103 taxmann.com 238 (Madras) : 2019 TaxPub(DT) 1882 (Mad-HC)] and Pr. CIT v. Dishman Pharmaceuticals & Chemicals Ltd. [(2019) 112 Taxmann.com 91 (Guj-HC) : 2019 TaxPub(DT) 7186 (Guj-HC)].
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10 & 2010-11
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