Tribunal rules in favor of Revenue on cost issues, but allows depreciation on intangible assets

The Tribunal partly allowed the Revenue's appeals for the assessment years 2002-03 and 2003-04. The issues regarding the exclusion of the cost of scraps, exclusion of the cost of raw materials, exclusion of 90% of fees from Robert Bosch, and exclusion of 90% of net interest receipts were decided in favor of the Revenue. However, the allowance of depreciation on intangible assets was decided in favor of the assessee.

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Issues Involved:
1. Exclusion of the cost of scraps from the total turnover for deduction u/s 80HHC.
2. Exclusion of the cost of raw materials from the total turnover for deduction u/s 80HHC.
3. Exclusion of 90% of fees received from Robert Bosch from business profits for deduction u/s 80HHC.
4. Exclusion of 90% of net interest receipts from business profits for deduction u/s 80HHC.
5. Allowance of depreciation on intangible assets.

I. A.Y. 2002-03:

1. Exclusion of Cost of Scraps:
- Assessment Officer's (AO) Stand: Included the cost of sale of scraps in the total turnover based on Board's Circular No.621.
- CIT(A)'s Decision: Directed AO to exclude the cost of scraps, conforming to the Tribunal's earlier decision in the assessee's case.
- Tribunal's Decision: Followed the jurisdictional High Court ruling which stated that amounts received from the sale of scraps in the domestic market are includible in the total turnover for purposes of s. 80HHC. Issue decided in favor of the Revenue.

2. Exclusion of Cost of Raw Materials:
- AO's Stand: Included the cost of raw materials in the total turnover for deduction purposes.
- CIT(A)'s Decision: Directed AO to exclude the cost of raw materials, based on the Tribunal's earlier decision in the assessee's case.
- Tribunal's Decision: Upheld CIT(A)'s direction, following the Tribunal's earlier decisions that the sale of raw materials should not be included in the total turnover.

3. Exclusion of 90% of Fees from Robert Bosch:
- AO's Stand: Included 90% of fees received from Robert Bosch in business profits for deduction purposes.
- CIT(A)'s Decision: Directed AO to exclude 90% of the fees, based on earlier Tribunal decisions.
- Tribunal's Decision: Upheld CIT(A)'s direction, following the jurisdictional High Court's ruling that such fees, having a direct nexus with export activities, should not be excluded from business profits.

4. Exclusion of 90% of Net Interest Receipts:
- AO's Stand: Included 90% of net interest receipts in business profits for deduction purposes.
- CIT(A)'s Decision: Directed AO to exclude 90% of net interest receipts, based on earlier Tribunal decisions.
- Tribunal's Decision: Upheld CIT(A)'s direction, following the jurisdictional High Court's ruling that only net interest should be considered for exclusion.

II. A.Y. 2003-04:

1. Allowance of Depreciation on Intangible Assets:
- AO's Stand: Disallowed depreciation on intangible assets, specifically goodwill.
- CIT(A)'s Decision: Allowed depreciation on intangible assets, following Tribunal's earlier decision for AY 2004-05.
- Tribunal's Decision: Upheld CIT(A)'s direction, following the Tribunal's earlier decision that the assessee was entitled to claim depreciation on intangible assets.

2. Exclusion of Cost of Scraps:
- AO's Stand: Included the cost of sale of scraps in the total turnover.
- CIT(A)'s Decision: Directed AO to exclude the cost of scraps.
- Tribunal's Decision: Decided in favor of the Revenue, following the same reasoning as for AY 2002-03.

3. Exclusion of 90% of Fees from Robert Bosch:
- AO's Stand: Included 90% of fees received from Robert Bosch in business profits.
- CIT(A)'s Decision: Directed AO to exclude 90% of the fees.
- Tribunal's Decision: Upheld CIT(A)'s direction, following the same reasoning as for AY 2002-03.

4. Exclusion of 90% of Net Interest Receipts:
- AO's Stand: Included 90% of net interest receipts in business profits.
- CIT(A)'s Decision: Directed AO to exclude 90% of net interest receipts.
- Tribunal's Decision: Upheld CIT(A)'s direction, following the same reasoning as for AY 2002-03.

Conclusion:
The Tribunal partly allowed the Revenue's appeals for the assessment years 2002-03 and 2003-04, deciding some issues in favor of the Revenue and others in favor of the assessee.

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