| COURT: | Delhi High Court |
| CORAM: | Sanjiv Khanna J, V. Kameswar Rao J |
| SECTION(S): | 10B |
| GENRE: | Domestic Tax |
| CATCH WORDS: | derived from the undertaking, exemption |
| COUNSEL: | Simran Mehta |
| DATE: | November 13, 2014 (Date of pronouncement) |
| DATE: | March 3, 2015 (Date of publication) |
| AY: | 2008-09, 2009-10 |
| FILE: | Click here to download the file in pdf format |
| CITATION: | |
| S. 10B(4): All business profits of the undertaking are eligible for deduction and it is not necessary to show that they have a "direct nexus" with the undertaking | |
Sub-section (4) of section 10B stipulates that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of turnover to the total turnover. Thus, notwithstanding 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 determining such eligible profits has been statutorily defined in sub-section (4) of section 10B of the Act. As per the formula stated above, 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. Thus, once an income forms part of the business of the eligible undertaking, there is no further mandate in the provisions of section 10B to exclude the same from the eligible profits (Maral Overseas Ltd 136 ITD 177 (Ind) (SB) approved, CIT vs. XLNC Fashions (Del HC) & CIT vs. Motorola India Electronics (P) Ltd (Kar HC) followed, Liberty India 317 ITR 218 (SC) distinguished, ).
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