Tribunal upholds reassessment validity, allows deductions & disallows certain expenses

M/s. Lupin Limited (Formerly known as Lupin Laboratories Limited) Versus JCIT, Special Range 6, Mumbai and vice-versa

M/s. Lupin Limited (Formerly known as Lupin Laboratories Limited) Versus JCIT, Special Range 6, Mumbai and vice-versa - TMI Issues Involved:
1. Validity of reopening of assessment u/s 147.
2. Disallowance of amortization of payment made for leasehold land.
3. Deduction u/s 80HHC on the basis of entity as a whole.
4. Deduction u/s 80IA on interest received from IDBI, income from services, and interest received from bank deposits.
5. Deduction u/s 80IA and 80HHC on interest received from customers for delayed payments and excess recovery from debtors.
6. Allowability of deduction u/s 80-I before allowing deduction u/s 80HH.
7. Exclusion of excise duty and sales tax from the total turnover for the purpose of computing deduction u/s 80HHC.
8. Reduction of 90% of the net and not gross amount of interest from the services and interest from banks while calculating deduction u/s 80HHC.
9. Deduction u/s 80HHC on the interest income received from the customers for delayed payment of sale consideration and recovery from the debtors after allowing the netting of expenses.
10. Deletion in respect of the insurance claim u/s 41(1).
11. Non-inclusion of the processing charges from the profits of the business in Explanation (baa) to section 80HHC.
12. Deletion of disallowance in respect of foreign traveling expenses.
13. Deletion of disallowance u/s 43B in respect of the delayed payment of PF contribution.
14. Deletion of disallowance in respect of entertainment expenses.
15. Deletion of disallowance in respect of interest on amounts receivable from partnership firms.

Summary:

Validity of reopening of assessment u/s 147:
The assessee challenged the reopening of assessment u/s 147. The Tribunal upheld the validity of reopening based on the "reasons recorded" by the A.O., stating that the information received from the Deputy Commissioner, Central Circle -1, Jaipur, regarding the bogus share capital was sufficient to entertain a belief that income chargeable to tax had escaped assessment. The second part of the "reasons recorded" was deemed a "change of opinion," which is not permissible in law. However, since one part of the "reasons recorded" was sufficient to acquire jurisdiction for reopening, the Tribunal dismissed the assessee's ground.

Disallowance of amortization of payment made for leasehold land:
The assessee's claim for amortization of payment made for leasehold land was initially disallowed based on previous Tribunal orders. However, the Tribunal allowed the claim, citing the decision in DCIT v. SUN Pharmaceuticals Limited, where advance payment for acquiring land on lease was considered revenue expenditure.

Deduction u/s 80HHC on the basis of entity as a whole:
The Tribunal upheld the assessee's method of computing deduction u/s 80HHC on the basis of the entity as a whole, following the decision in the assessee's own case for the A.Y. 2000-01.

Deduction u/s 80IA on interest received from IDBI, income from services, and interest received from bank deposits:
The Tribunal dismissed the department's appeal, following the decision in the assessee's own case and the Hon'ble Supreme Court's ruling in ACG Associated Capsules Pvt. Ltd. Vs. CIT, which supported the netting of interest.

Deduction u/s 80IA and 80HHC on interest received from customers for delayed payments and excess recovery from debtors:
The Tribunal dismissed the department's appeal, following the decision in the assessee's own case and the Hon'ble Bombay High Court's ruling in CIT vs. Gridwell Norton Ltd.

Allowability of deduction u/s 80-I before allowing deduction u/s 80HH:
The Tribunal upheld the CIT(A)'s decision that deductions u/s 80HH and 80-I are independent and should be allowed on the gross total income, following the Hon'ble Supreme Court's ruling in JCIT vs. Mandideep Engg. & Packaging Industries (P) Ltd.

Exclusion of excise duty and sales tax from the total turnover for the purpose of computing deduction u/s 80HHC:
The Tribunal upheld the exclusion of excise duty and sales tax from the total turnover for computing deduction u/s 80HHC, following the Hon'ble Supreme Court's decision in CIT vs. Laxmi Machine Works.

Reduction of 90% of the net and not gross amount of interest from the services and interest from banks while calculating deduction u/s 80HHC:
The Tribunal upheld the CIT(A)'s direction to reduce 90% of the net amount of interest, following the Hon'ble Supreme Court's decision in ACG Associated Capsules Pvt. Ltd. Vs. CIT.

Deduction u/s 80HHC on the interest income received from the customers for delayed payment of sale consideration and recovery from the debtors after allowing the netting of expenses:
The Tribunal dismissed the department's appeal, following the decision in the assessee's own case and the Hon'ble High Court's ruling in ITA No.5718 of 2010.

Deletion in respect of the insurance claim u/s 41(1):
The Tribunal upheld the deletion of the addition in respect of the insurance claim u/s 41(1), following the decision in the assessee's own case and the Hon'ble Jurisdictional High Court's ruling in CIT vs. Pfizer Ltd.

Non-inclusion of the processing charges from the profits of the business in Explanation (baa) to section 80HHC:
The Tribunal allowed the department's appeal, following the Hon'ble Bombay High Court's decision in CIT vs. Bresser India Pvt. Ltd.

Deletion of disallowance in respect of foreign traveling expenses:
The Tribunal upheld the deletion of disallowance in respect of foreign traveling expenses, following the decision in the assessee's own case.

Deletion of disallowance u/s 43B in respect of the delayed payment of PF contribution:
The Tribunal upheld the deletion of disallowance u/s 43B, following the Hon'ble Supreme Court's decision in CIT vs. Alom Extrusions Ltd.

Deletion of disallowance in respect of entertainment expenses:
The Tribunal upheld the deletion of disallowance in respect of entertainment expenses, following the decision in the assessee's own case.

Deletion of disallowance in respect of interest on amounts receivable from partnership firms:
The Tribunal upheld the deletion of disallowance in respect of interest on amounts receivable from partnership firms, following the decision in the assessee's own case.

Result:
The appeals filed by the assessee and the department were partly allowed.