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of <h1>ITAT upholds CIT (A) decisions: lease rental, depreciation, capital gains, dividends, and section 80HHC deductions</h1> <h3>ACIT Mumbai Versus Weizmann Ltd.</h3> ACIT Mumbai Versus Weizmann Ltd. - TMI Issues Involved:1. Deletion of addition against disallowance of lease rental paid on windmill.2. Granting set off of unabsorbed depreciation against income from capital gain and dividend income.3. Allowing deduction under section 80HHC while computing book profit under section 115JB.4. Recomputing deduction under section 80HHC on a 'standalone' basis for the taxable division.Issue-wise Detailed Analysis:1. Deletion of Addition Against Disallowance of Lease Rental Paid on Windmill:The Revenue contested the deletion of an addition of Rs.23,31,963 related to lease rental paid on a 250 KW windmill. The AO had treated the transaction as a sale and leaseback, disallowing the lease rent. The CIT (A) deleted the addition based on past ITAT decisions in the assessee's favor for similar transactions. The ITAT upheld the CIT (A)'s decision, stating that the transactions were genuine and the lease rent should be allowed as a deduction. The ITAT noted that the assessee's ownership was substituted, and the windmill was operated as a lessee, emphasizing that tax authorities should not dictate business affairs.2. Granting Set Off of Unabsorbed Depreciation Against Income from Capital Gain and Dividend Income:The AO did not allow the set-off of unabsorbed depreciation against short-term capital gain and dividend income. The CIT (A) allowed the set-off, referencing section 32(2) of the Act and various judicial precedents, including Supreme Court rulings, which established that unabsorbed depreciation merges with current year depreciation and can be set off against income from other heads. The ITAT upheld the CIT (A)'s decision, noting that the assessee had sufficient unabsorbed depreciation to cover the taxable income and cited favorable judgments from the Special Bench and the Gujarat High Court.3. Allowing Deduction Under Section 80HHC While Computing Book Profit Under Section 115JB:The AO disallowed the deduction under section 80HHC for computing book profits under section 115JB, arguing that it was not allowed in regular computation. The CIT (A) allowed the deduction based on the Kerala High Court's decision in Commissioner Of Income-Tax vs. G.T.N. Textiles Ltd. and ITAT decisions. The ITAT confirmed this, referencing the Special Bench decision in Syncome Formulations (I) Ltd and the Supreme Court's approval in Ajanta Pharma Ltd vs. CIT, which supported the assessee's claim.4. Recomputing Deduction Under Section 80HHC on a 'Standalone' Basis for the Taxable Division:The AO computed the deduction under section 80HHC by aggregating all business turnovers, while the CIT (A) directed a recomputation based on the textile division's standalone turnover and profits. The ITAT upheld the CIT (A)'s approach, referencing consistent ITAT decisions in the assessee's favor, which supported computing deductions based on individual business divisions. The ITAT noted that the assessee maintained separate accounts for each division, and the textile division's standalone computation was appropriate.Conclusion:The ITAT dismissed the Revenue's appeal, upholding the CIT (A)'s decisions on all grounds, confirming the deletion of lease rental disallowance, allowing the set-off of unabsorbed depreciation, permitting the section 80HHC deduction in computing book profits, and supporting the standalone basis for section 80HHC deduction computation.
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