ITAT decision on depreciation, interest disallowance, turnover exclusion, and DEPB for deduction under section 80HHC

KEC International Ltd. Now Known as Sumit Securities Ltd. Versus Asst. Commissioner of Income Tax

KEC International Ltd. Now Known as Sumit Securities Ltd. Versus Asst. Commissioner of Income Tax - TMI Issues:
1. Depreciation claimed by the assessee
2. Disallowance of interest on borrowings
3. Exclusion of excise duty from total turnover
4. Exclusion of DEPB from eligible profits for deduction u/s 80HHC

Issue 1: Depreciation claimed by the assessee

The assessee claimed depreciation at Rs. 25,90,00,918, but the AO computed it at Rs. 21,80,55,063. The CIT(A) sustained the AO's computation. The AR cited a Full Bench judgment of the Bombay High Court approving the AO's action, and the ITAT upheld the decision based on the precedent, rejecting the assessee's appeal.

Issue 2: Disallowance of interest on borrowings

The assessee claimed interest of Rs. 6,68,53,542 as business expense, but the AO disallowed it, alleging the funds were used for investments in shares. The CIT(A) upheld the AO's decision. The AR argued for consistency with past assessments and requested similar directions. The ITAT agreed and directed the AO to reexamine the issue considering fund flow statements and Section 14A, ensuring proper adjudication with adequate opportunity for the assessee.

Issue 3: Exclusion of excise duty from total turnover

The CIT(A) relied on a Bombay High Court decision stating that excise duty should not be part of total turnover. The ITAT, respecting the jurisdictional High Court's ruling, upheld the CIT(A)'s decision, rejecting the department's appeal on this ground.

Issue 4: Exclusion of DEPB from eligible profits for deduction u/s 80HHC

Referring to a Supreme Court judgment, the ITAT directed the AO to recompute the deduction u/s. 80HHC concerning DEPB license and other export incentives. Following the Supreme Court's decision, the ITAT treated the department's appeal as allowed for statistical purposes. The appeal filed by the department was allowed in part, and that of the assessee was partly allowed for statistical purposes.

---