2021 (6) TMI 1197 - AT - Income Tax

Deductions under investment-linked incentives and export profit computations restored for fresh AO adjudication; several expenses upheld or deleted.

Deduction claims under investment-linked incentives were reinstated for de novo adjudication by the Assessing Officer, with the Tribunal directing that ... Deduction u/s 80HH and 80–I/ 80–IA - HELD THAT:- Restore the issue back to the file of the AO and direct him to issue denovo after considering the orders of the Tribunal for the preceding assessment years as stated above and in accordance with law. If common expenses to be allocated to individual units then common income should also be allocated following the same principle - We find that this issue has been decided by the Co–ordinate Bench of the Tribunal in assessee’s own case for the preceding assessment years i.e., 1993–94, 1996–97 and 1997–98, wherein the Tribunal restored the issue to the authorities below for denovo adjudication. Consistent with the view taken therein, we set aside the impugned order passed by the authorities below and restore the issue back to the file of the Assessing Officer for denovo adjudication. Deduction in respect of CDP–Chindwara, Detergents undertaking at Dharwad and Footwear – Pondichery without adjusting brought forward loss and depreciation of earlier years which was already set off against profit from other undertaking / activities - We find that the issue in the context of deduction under section 80HH of the Act arising out of the aforesaid grounds has been decided in favour of the assessee by the Co–ordinate Bench of the Tribunal in assessee’s own case for the assessment year 1988–89, 1989–90, 1991–92, 1996–97 and 1997–98. However, we also find that the issue arising out of the aforesaid grounds in the context of deduction under section 80J, has been decided in favour of the assessee by the Hon'ble Supreme Court in an appeal filed by the Revenue in CIT v/s Patiala Flour Mills Co. Pvt. Ltd [1978 (10) TMI 3 - SUPREME COURT] Deduction u/s 80HHC - As in assessee’s own case for the preceding assessment years i.e., 1991–92 1992–93, 1993–94, 1994–95, 1995–96 and 1997–98, wherein the Tribunal restored the issue to the file of the Assessing Officer for denovo adjudication. Consistent with the view taken in the preceding assessment years, we set aside the order passed by the authorities below and restore the issue back to the file of the Assessing Officer and direct him to decide the issue denovo. Profit of the business is required to be reduced by 90% of gross interest received, commission and processing charges while computing the deduction u/s 80HHC. Whether profit of the business is required to be reduced by 90% of gross interest received, commission and processing charges while computing the deduction u/s 80HHC? - We find that this issue has been decided by the Co–ordinate Bench of the Tribunal in assessee’s own case for the preceding assessment year i.e., A.Y. 1992–93 and 1993–94, wherein the Tribunal has restored the issue back to the file of the Assessing Officer for denovo adjudication. Consistent with the view taken therein, we set aside the impugned order passed by the learned Commissioner (Appeals) and restore the issue back to the file of the Assessing Officer. Share of loss on export of traded goods should not be reduced from the amount of profits derived from export of manufactured goods while computing deduction u/s 80HHC - Decided against assessee. Provision for retirement pension payable to the employees to be allowed in favour of assessee. Sales tax collected by the appellant can be disallowed u/s 43B -We find that identical issue has been decided by the Co–ordinate Bench of the Tribunal in assessee’s own case for the preceding assessment year i.e., A.Y. 1996–97 and 1997–98, wherein the Tribunal has restored the issue back to the file of Assessing Officer for denovo adjudication. Not incurring any expenditure on earning dividend and tax free interest has been decided by the Tribunal in assessment year 2009–10 wherein the Tribunal has decided these issues in favour of the assessee. Nature of expenditure - payment made to supplier (Kwality Ice–creams) from termination of arrangement for purchase of ice–creams - We find that identical issue has been decided by the Co–ordinate Bench of the Tribunal in assessee’s own case for the preceding assessment year i.e., in A.Y. 2006–07, wherein the Tribunal has decided this issue in favour of the assessee and against the Revenue. Stamp duty payment incurred in connection with amalgamation - Nature of expenditure - whether this expenditure can be treated as capital or revenue? - We notice that in the subsequent assessment year, the legislature has introduced section 35DD in the Finance Act, 1999, w.e.f. 1st April 2000 to amortise the expenditure in case of amalgamation or demerger. any expenditure incurred in the process of amalgamation is included. Since there is no authority in this assessment year to claim the amalgamation expenditure, in our considered view, the stamp duty incurred in registration of assets can be treated as capital expenditure which can be included in the respective assets. Since the assessee has taken over long term as well as current assets and further the long term or fixed assets consists of depreciable and non–depreciable assets. As far as non–depreciable assets are concern, the registration cost can be included in the cost of assets whereas the registration cost on depreciable assets, the assessee can be allowed to claim on the basis of depreciation rates on the respective assets category. With regard to registration cost relating to current assets, should be allowed to claim as revenue expenditure. Therefore, we restore this issue to the file of the Assessing Officer to determine the registration and allow the same as per our direction. Accordingly, grounds raised by the assessee are allowed for statistical purpose. Disallowance under section 40A(9) of the Act i.e., expenses reimbursed to Hindustan Lever Sports Club and Tata Sports to be deleted. Disallowance towards administration and training expenditure on rural development to be deleted. Disallowance u/s 14A - Consistent with the view taken therein, we uphold the order of the learned Commissioner (Appeals) for the assessment year 2009–10 restricting the disallowance @ 0.45%. Disallowance of rent paid to Bombay Port Trust - We notice that the Bombay Port Trust has not raised any objection and the assessee created the provision with the expectation that BPT will accept the proposed rent based on Hon’ble High Court’s direction. Therefore, it is presumed that the rent is acceptable to them and only on record it is not finalized for official purpose. This gives an impression that the rent is ascertainable expenditure. Therefore, the provision created by the assessee is allowable expenditure. In case, there is any deviation in fixing the rent in the future, the differential rent alone can be accounted for. Therefore, we are inclined to accept the finding of the learned CIT(A). Accordingly, ground raised by the Revenue is dismissed. Issues: (i) Whether various deduction/allowance issues under sections 80HH, 80-I/80-IA, 80J, 80HHC and related provisions should be decided in favour of the assessee or restored to Assessing Officer for de novo adjudication; (ii) Whether brought forward losses/depreciation should be adjusted against deduction under specified sections; (iii) Whether certain common expense/allocation and sales-tax collection issues are allowable or require fresh adjudication; (iv) Whether specific expenditures (termination payment to supplier, stamp duty on amalgamation, share department expenses, provision for retirement pension, VRS payments, rent provision to Bombay Port Trust) are capital or revenue in nature or otherwise allowable; (v) Whether Revenue's grounds (including foreign travel of spouses, section 40A(9) disallowance, exclusion of excise/sales tax from turnover for section 80HHC, reduction of royalty, rural development expenditure, section 14A disallowance, rent to BPT) should be dismissed.Issue (i): Whether deductions under sections 80HH, 80-I/80-IA, 80J and related grounds should be allowed or require reconsideration.Analysis: The Tribunal noted that identical questions were repeatedly decided in the assessee's own earlier assessment years by Co-ordinate Benches; parties agreed the prior decisions apply. For some grounds the Tribunal directed restoration to the Assessing Officer for fresh adjudication with directions to consider prior Tribunal orders; for others the Tribunal applied precedent (including Supreme Court authority as applicable) to decide in favour of the assessee.Conclusion: Grounds on sections 80HH, 80-I/80-IA and related issues are partly allowed for statistical purposes and/or set aside and restored to the Assessing Officer for de novo adjudication where directed; specific grounds decided in favour of the assessee are allowed.Issue (ii): Whether brought forward losses and depreciation should be adjusted against deductions claimed for new undertakings.Analysis: The Tribunal followed coordinate-bench decisions in the assessee's earlier years and Supreme Court authority where applicable, distinguishing contexts and applying precedents to conclude that deduction for new undertaking profit cannot be reduced by items not included in gross total income.Conclusion: These grounds are allowed in favour of the assessee.Issue (iii): Whether common expenses/income allocation, treatment of sales proceeds not realized by specified date for export turnover, and sales-tax collections credited to separate accounts are to be restored or allowed.Analysis: The Tribunal found identical issues decided in earlier assessment years; consistent practice is to restore certain matters to the Assessing Officer for de novo consideration in light of earlier Tribunal findings, and to allow deletion or direct allowance where earlier decisions favoured the assessee.Conclusion: Issues regarding allocation of common expenses/income and uncollected export proceeds are set aside and restored to the Assessing Officer for de novo adjudication (allowed for statistical purposes); sales-tax collection issue restored to AO for fresh adjudication as directed.Issue (iv): Whether various expenditures (termination payment to supplier, stamp duty on amalgamation, share department expenses, retirement pension provision, VRS payments, provision for rent to Bombay Port Trust) are revenue or capital and whether allowed.Analysis: For termination payment to supplier and similar sourcing-termination payments, the Tribunal applied prior coordinate-bench rulings and allowed the grounds for the assessee. For stamp duty on amalgamation, the Tribunal examined the nature of the amalgamation acquisition, noted legislative introduction of section 35DD thereafter, and held that in the assessment year in question stamp duty in relation to acquisition of assets by amalgamation is capital in nature but should be allocated: registration cost attributable to non-depreciable assets included in cost; registration cost attributable to depreciable assets to be claimed by depreciation at applicable rates; registration cost relating to current assets to be allowed as revenue. Share-department expense and VRS grounds were not pressed and thus dismissed as not pressed. Provision for retirement pension was allowed following coordinate-bench decisions. Provision for rent to Bombay Port Trust was held allowable under section 37(1) on facts showing ascertainable liability and accepted compromise formula.Conclusion: Termination payment and similar grounds allowed; stamp duty on amalgamation treated as capital but to be allocated between non-depreciable assets, depreciable assets (depreciation), and current assets (revenue) with issue restored to AO; retirement pension provision allowed; VRS and share-department grounds dismissed as not pressed; rent provision to BPT allowed.Issue (v): Whether Revenue's appeals raising multiple points should succeed.Analysis: The Tribunal uniformly applied coordinate-bench precedents in the assessee's own case and found the same questions had been decided in favour of the assessee on earlier years; where prior Tribunal decisions favored the assessee, the Tribunal upheld the Commissioner (Appeals) and dismissed Revenue's grounds. In respect of section 14A disallowance the Tribunal applied the coordinate-bench limitation to a specified small percentage consistent with later assessment years' practice.Conclusion: Revenue's appeal is dismissed and each of its grounds are dismissed as recorded in the order.Final Conclusion: The Tribunal partly allows the assessee's appeals (granting substantive relief on multiple grounds and directing de novo consideration on others consistent with coordinate-bench precedent) and dismisses the Revenue's appeals; several issues are restored to the Assessing Officer for fresh adjudication in accordance with the Tribunal's directions and prior Tribunal decisions.Ratio Decidendi: Where identical substantive issues have been repeatedly decided by coordinate Benches in the assessee's earlier assessment years, the Tribunal will follow those precedents-directing restoration to the Assessing Officer for de novo adjudication where appropriate or deciding in favour of the assessee where precedent and applicable higher authority require.-