ITO 9(3)(3), MUMBAI vs. GEBBS HEALTHCARE SOLUTIONS P.LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य सद�य,राजे�� राजे�� केकेकेके अनुसार अनुसार -Per Rajendra,AM: लेखा लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the order,dtd. 19/10/2015 of the CIT(A)-16.Mumbai the Assessing Officer(AO)has filed the present appeal.Assessee-company,engaged in the business of providing business process outsourcing (BPO)services on-site/ offshore,filed its return of income on,14/10/2010,declaring income of Rs 3.19 lakhs under normal provisions and of Rs.4.77 crores u/s.115 JB.Later on a revised return was filed declaring total income of Rs.NIL,after claiming deduction of Rs.6.07 crores u/s.10B and of Rs. 4.93 crores u/s.10AA of the Act.The assessee filed the revised book profit of rupees nil.The Assessing Officer (AO)completed the assessment on 13/03/2014, u/s. 143(3)of the Act,determining its income at Rs. 6.33 crores under normal provisions and book profit at Rs. 4.77 crores u/s.115 JB. 2.First effective ground of appeal is about allowing the claim made by the assessee u/s.10B of the Act.During the assessment proceedings,the AO found that the assessee had claimed deduction u/s.10B of Rs.6.07 crores in respect of profits from exports from its unit at SEEPZ. He observed that the claim made by the assessee u/s.10 B had been rejected in the earlier AY.s,that the matter was sub judice before the honorable Bombay High Court for the AY.s 2003-04 to 2006-07 and 2008-09.Following the earlier years’ order,he rejected the claim made by the assessee u/s.10B of the Act.

2.1.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA)and made detailed submissions.After considering the available material,he held of 2016 for M/s.Gebbs Healthcare Solutions P. Ltd that while deciding the appeals filed by the assessee for the AY.s 2003-04 to 2006-07 and 2008- 09,the Tribunal had held that assessee was entitled to claim deduction u/s.10B. He referred to the order of his predecessor for the AY.2009-10,wherein he had allowed the appeal filed by the assessee.Finally,he directed the AO to allow the deduction framed by the assessee.

2.2.During the course of hearing before us,the Departmental Representative (DR) that issue could be decided on merits.The Authorised Representative(AR)stated that the issue stands covered by the order of the Tribunal for the earlier years wherein the claim of the assessee,made u/s.10 B,has been allowed by the Tribunal.

2.3.We have heard the rival submissions and perused the material before us. We find that the issue of eligibility of deduction u/s.10B has already been decided by the Tribunal in the earlier years,that the Department has challenged the order of the Tribunal before the honorable Bombay High Court, that the honorable court has not decided the issue till date. Respectfully following the order of the Tribunal for the earlier years,we decide the first effective ground of appeal against the AO.

3.Second effective ground of appeal is about allowing the assessee’s claim of deduction u/s.10B on interest income(Rs.3.19 lakhs)and exchange loss (Rs.10.32 lakhs), and hedging gain(Rs.19.70 lakhs).During the assessment proceedings,the AO observed that during the year under consideration the assessee has claimed deduction u/s.10B of the Act on the profits from SEEPZ unit which included interest income, miscellaneous income and hedging gains of Rs.19,57,438/-. The AO was of the view that interest income,miscellaneous income and hedging gains were not derived from the services/export activity and that it was not entitled to claim deduction.After considering the submission assessee in that regard,he reduced the business income of the assessee by Rs.29.13 lakhs and added it to the total income of the assessee under the head income from other sources.

3.1.Before the FAA,the assessee made detailed submissions arguing that the disputed amount was integral part of the business profit derived from export business and claimed deduction u/s. 10B of the Act. It also relied upon certain case laws.After considering the available material, the FAA held that sundry credit balance written(Rs.6.36 lakhs) actually represented the sundry creditors related to the export business of the assessee,that the said expenses were claimed in the of 2016 for M/s.Gebbs Healthcare Solutions P. Ltd earlier years and were considered as part of export business,that the assessee was justified in claiming deduction u/s.10B for the sundry balances returned back, that the interest income (Rs.3.19 lakhs) was earned on fixed deposits pledged with bank / authorised brokers, that it was a pre-requisite to carry the hedging transaction, that the revenue generated by the assessee from overseas market and hedging transaction were entered into by the assessee as a safeguard against exchange rate fluctuation, that hedging is directly related to export business of the assessee, that the interest earned had direct link with the export business.He directed the AO to consider the amount in question eligible for deduction u/s.10B of the Act.With regard to hedging income,he held that the debtors receivable were in foreign currency and were opened to exchange fluctuation,that the assessee has entered into forward contract with ICICI Bank for hedging its export proceeds to vulnerable exposure of currency risk and to hedge the exchange rate, that the transaction were done with the object of protecting the export vision of the assessee from the exchange fluctuation risk,that it had a direct nexus to the export, that hedging income was not derived from any scheme framed by the Government, it had a direct proximate nexus with the export business of the assessee.Accordingly,he held that hedging income was derived from export business and had assessed under the head income from business.Finally,he held that income aggregating to Rs.29.13 lakhs was eligible for deduction u/s.10B of the Act.

3.2.Before us,the DR supported the order of AO and the AR relied upon the order of the FAA. We have heard the rival submissions and perused the material before us.We find that that the FAA has given a finding of fact that sundry credit balance written back represented the sundry creditors related to the export business of the assessee and that the said expenses were considered as part of export business.There is nothing on record to prove that the order of the FAA is factually incorrect.Similarly,it is found that the disputed interest income was earned on fixed deposits pledged with bank or the authorised brokers,that it was a pre-requisite to carry the hedging transaction,that the revenue generated by it from overseas,that hedging transaction were entered into by the assessee as a safeguard against exchange rate fluctuation, that hedging is directly related to export business of the assessee.Considering thes facts we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity,So,confirming the same,we decide the second effective ground of appeal against the AO. of 2016 for M/s.Gebbs Healthcare Solutions P. Ltd 4.Third effective GOA(Ground No. v & vi)is about applicability of provisions of section 115JB of Act.During the assessment proceedings, the AO observed that the assessee has filed its return of income on 14.10.2010 declaring book profit of Rs.4.77 crores u/s.115JB,that it had paid tax on the same,that later on it revised its income declaring book profit at Rs.Nil.He directed the assessee to explain as to why MAT should not be completed as per the provisions of 115JB of the Act.After considering the submission of the assessee,the AO held that book profit was to be computed after making specified adjustment to the net profit, that the Finance 2007 widened the scope of MAT by including total income exempt u/s.10A & 10B in the book profit.He held that as per the memorandum explaining the provision of Finance Act,2007 MAT provisions were applicable to company on the income which was from any business or services derived from unit of SEZ,that provisions of section 115JB(6)was applicable to assessee claiming deduction provision of section 10AA of the Act and not an assessee claiming deduction u/s.10b of the Act. Accordingly,he held that assessee was liable to tax u/s.115JB of the Act.

4.1.Before the FAA,the assessee made detailed submissions.After considering the available material,he referred to the case Genesis International Ltd. (80 DTR-Mumbai-(TRIB) 4),wherein the Tribunal had decided the identical issue in favour of the assessee.He also relied upon the case of G Jewel Craft Ltd.(36 ITR-Trib-521)and the order of his predecessor for the A.Y.2009-10. Following the above mentioned two orders of the Tribunal,he directed the AO to exclude the income relating to SEZ unit,while computing book profit u/s.115JB of the Act.

The DR left the issue to the discretion of the Bench,The AR supported the order of FAA.We find that the issue stand covered directly by the orders of the Tribunal delivered in the case of Genesis International Ltd. and G Jewel Craft Ltd.(supra).Respectfully,following the above orders,we decide third effective ground of appeal against the AO.

5.Last effective ground of appeal is about allowing the claim of the assessee of employee’s contribution to PF and ESCI,amounting to Rs.2.34 lakhs and Rs.4.15 lakhs respectively that were paid beyond the due dates specified in respective Act.The AO had disallowed the disputed amounts as they were paid beyond the due dates. However, the FAA relying upon the cases of Hindustan Organics Chemicals Ltd.(ITA. 399 of 2012 and Ghatge Patil Transporters Ltd. ITA 1002 of 2012 and 1034 of 2012) held that employee’s contribution to PF had to allowed as deduction,if it was paid by the employer before the due date of filing of income. 4 of 2016 for M/s.Gebbs Healthcare Solutions P. Ltd 5.1.Before us,the DR stated that the matter could be decided on merits. The AR relied upon the order of the FAA.We find that the issues stand covered by the above referred two judgment of the Hon’ble Jurisdiction of High Courts.Therefore,endorsing the order of the FAA,we decided the last ground of appeal of against the AO.