TaxTMI 
TaxTMI 
2011 (3) TMI 613
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....iture on account of payment of lease rental of Rs. 23,32,963 to M/s. Weizmann Homes Limited, in respect of one 250 K.W. Windmill. The AO also noted that the lease rental expenses was disallowed in A.Y. 1998-99 on account of the fact that the said asset was purchased in the year 1997-98 being sold to the manufacture in A.Y. 1998-99, who in turn sold the same to M/s. Weizmann Homes Limited from whom the assessee company took back the windmill on lease. The AO also noted that similar rental expenditure was disallowed in A.Y. 1998-99. In this backdrop, the Assessing Officer disallowed the payment of lease rent. Aggrieved, the assessee carried the matter in appeal. The CIT (A) following the decision of the ITAT in assessee's own case for the assessment years 1998-99 and 1999-2000 on this issue, directed the Assessing Officer to delete the addition of Rs. 23,31,963. Being aggrieved by the stand so taken by the CIT (A), the Assessing officer is in appeal before the Tribunal. 3. Having heard the rival contentions, we do not find any infirmity in the order of the CIT (A) to interfere as the CIT (A) has followed the decision of the ITAT in assessee's own case for the assessment years....
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....aken in the assessment of there assessees. For the purpose of Income-tax proceedings each assessee is a separate entity. Above all there is considerable force in the contention of the assessee that while on the one hand the assessee's claim of deduction of lease rentals has been disallowed, the income earned by the assessee on sale of power to Andhra Pradesh Government has been assessed without demur. We therefore hold that the disallowance of the assessee's claim of deduction on account of lease rent paid in respect of windmill 250 KW is without adequate justification and direct the Assessing Officer to allow deduction of lease rental on this windmill." 4. Respectfully following the esteemed views of the coordinate bench, we confirm the order of the CIT(A) and decline to interfere in the matter. 5. Ground No. 1 is thus dismissed. 6. In second ground of appeal, the Assessing Officer has raised the following grievance:- 2. On the facts and in the circumstances of the case and in law, the CIT (A) erred in directing the AO to allow the deduction u/s. 80 HHC of Rs. 43,26,451 while computing the book profit u/s.115JB of the Act, in spite of the fact that ....
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....n not been available, the appellant could have got the said deduction even in the normal computation of income. The AO's contention that if the said deduction is not available in the normal course of computation of income then, the same cannot be allowed even from the book profit is not correct. The decision of the ITAT Mumbai Bench cited supra, has clarified this issue and held that deduction u/s. 80HHC in MAT cases is allowable on the basis of the adjusted book profit and not on the basis of the profit computed under the regular provisions of law applicable to the computation of profit and gains of business or profession. The computation of income under normal provisions and the computation of book profit are two distinct computation of income and both the computations are to be viewed separately. The deduction available in respect of book profit has to be allowed within the ambit of section 115JB. Thus considering the facts in totality and also the Special Bench decision, cited supra, I am of the considered opinion that the deduction u/s. 80HHC of Rs. 43,26,431 cannot be denied to the appellant. Accordingly, the AO is directed to allow the deduction of Rs. 43,26,451 u/s. 80 HHC ....
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....f this Tribunal, upheld the grievance of the assessee and directed the AO to re-compute the adjusted profit for determining 80 HHC deduction, taking into account 90% of only the profits on the sale of DEPB license and by taking only the profit element on sale of DEPB licence and not the entire sale proceeds. Aggrieved, the revenue is in appeal before us. 13. Having heard the rival contentions and having perused the material on record, we find that the issue is now squarely covered by the judgment of Hon'ble jurisdictional High Court in the case of CIT vs Kalptaru Colours and Chemicals (328 ITR 451). As held by Their Lordships, the income on sale of DEPB licence is represented by entire sale proceeds of the licence and "there is no logical justification in bifurcating the value of the sale consideration realized by the exporter on the transfer of the DEPB credit" as has been directed by the CIT(A) in this case. In the present case, while a loss has been computed because of segregation of the sale proceeds of the DEPB licence but once entire amount is taken as income, it will obviously be a positive figure. Accordingly, we vacate the relief granted by the CIT(A) and restore t....
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.... upon the judgments reported in 245 ITR 49 (Bom); 245 ITR 769 (Bom); 246 ITR 429 (Bom); 246 ITR 439 (Bom); 254 ITR 656 (Mad); 257 ITR 60 (Mad) and 132 Taxmann 297 (Ker). The learned counsel has also placed reliance on the decisions reported in 63 TTJ 409 (Ahd); 66 ITD 353 and the decision of ITAT Mumbai Bench 'A' in ITA NO. 4205/Mum/96 in the case of Miku Agencies and Mumbai Bench 'C' decision in ITA No.4259 and 4260/M/95 in the case of M/s. Trab Enterprises. The learned Departmental Representative argued that under the provisions of section 80HHC(3) no distinction has been drawn as to whether the assessee was engaged in a single business or more than one business. For the purpose of that sub-section all the business of the assessee were required to be aggregated even if the same were separate and distinct from each other. In support of these contentions he placed reliance on the decision reported in 212 ITR (AT) 1 (Del) and 257 ITR 41 (Ker). On consideration of the matter we find that the claim of the assessee for deduction u/s. 80HHC on Textile Division on stand alone basis is fully supported by the decisions of ITAT Mumbai Bench 'A' Mumbai dated 29/8/02 in ITA NO.4205/Mum/1996 i....
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....The relevant material facts are like this. In the course of assessment proceedings, from the balance sheet, the Assessing Officer noticed that the assessee company has shown closing balance of the secured loans at Rs.60.81 crores and unsecured loans at Rs.7.95 crores. Against these loans, the assessee company has paid interest expenditure of Rs.4.85 crores against term loan, Rs.25.44 lacs against debentures and Rs.3.16 crores against other loans. On a perusal of the list of the loan creditors furnished by the assessee, the AO noticed that the assessee has borrowed Rs. 4.68 crores from Weizmann Corporate Services Ltd., Rs.7.7 crores from Om Mitra Securities Ltd and Rs. 3 crores from Prabhanjan Multitrade P Ltd., the sister concerns of the assessee and allowed interest @ 15%. It was also noticed that the assessee had diverted an amount of Rs.1.21 crores on 28.3.2003,Rs. 1.76 crores on 1.4.2003 and Rs. 4.29 crores on 1.4.2003 totaling to Rs. 7.26 crores to M/s. Weizmann Homes Ltd., free of interest. The AO was of the opinion that the assessee has paid interest to sister concern @ 15% and has advanced interest free loan to M/s. Weizmann Home Ltd out of interest bearing loan. The assess....
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.... shares of M/s. Weizmann Homes Ltd. it is further noticed that during the course of assessment proceedings, the appellant has already satisfactory explained the sources of investments in M/s. Weizmann Homes Ltd. In the appellant's case, no borrowed funds have been used for non-business purposes. Thus, on the whole, looking to the facts of the matter, I find that the disallowance of interest expenditure on the ground that borrowed funds have been used for investments or advances as interest free loan has no merit. The AO has not been able to establish any nexus between the borrowed funds and its use for nonbusiness activities. Rather, the appellant has been able to establish the opposite through the chart at para 9.3 above. In view of these facts, I feel that the disallowance of expenditure cannot be sustained. Accordingly, the disallowance of interest expenditure of Rs. 109.20 lakhs is directed to be deleted..." 21. Having considered the rival contentions, we do not find any reason to interfere with the order of the CIT (A). On perusal of the paper book produced before us, as is evident from balance sheet as at 31.3.2004, it is noticed that the assessee has own fund of Rs. ....
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....lled into question. Mere fact of allowing interest free advance at a rate lower than the rate on which borrowings are made, cannot justify the impugned disallowance, but then, on the facts of this case, there is nothing more than this arithmetic to justify the impugned disallowance. Grievance of the Assessing Officer is, therefore, not really sustainable in law. We reject the grievance and decline to interfere in the matter. 26. Ground No. 6 is thus dismissed. 27. In ground no. 7, the assessee has raised the following grievance:- 7. On the facts and in the circumstances of the case and in law, the CIT (A) erred in directing the AO to restrict the disallowance of personal foreign travel at Rs. 3,98,560 as against Rs. 7,24,000 without giving any valid justification. 28. Apropos Ground No.7, brief facts are that the Assessing officer noticed that the assessee company has incurred an expenditure of Rs. 28,96,888 on foreign traveling, which includes Rs. 9,04,809 on ticketing and Rs. 19,92,079 on other miscellaneous expenditure. The Assessing Officer asked the assessee to furnish the details of miscellaneous expenses, which could not be complied with. Ther....
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....urn, the assessee has reduced its profit by Rs. 2,91,36,753 on account of remission of bank liabilities. The claim of the assessee was that since the assessee never claimed any deduction in respect of amounts so waived by the bank, it could not be added to his income under section 41(1) of the Act. It was also submitted that the said amount could not be brought to tax in the hands of the assessee under section 28(iv) either. It was pointed out that the banker, i.e. Vyasya Bank Ltd, has extended NCD facility of Rs. 7.50 crores, specifically for the purpose of meeting capital expenditure of the company, and only part amount of the said NCD was written back after due settlement with the banker. Reliance was placed on Hon'ble Gujarat High Court judgment in the case of CIT vs Chetan Chemicals 267 ITR 770 and on Hon'ble Bombay High Court's judgment in the case of Mahindra and Mahindra Ltd vs CIT (261 ITR 501). None of these submissions, however, impressed the Assessing Officer. He proceeded to add the said sum to the income returned by the assessee, and observed as follows:- "I have carefully considered the submissions of the assessee company as well as the case laws, cited by th....
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....As the full aggregate amount of Rs.320.00 lacs was received by the Bank, we have issued no dues certificate vide our letter dt. 23.06.2004." The careful reading of the above contents reveals that the bank has not given a clear-cut reply, regarding the nature of remission of liability of Rs. 2,91,36,753. On given telephone number, in the presence of the AR, I spoke to the person, who has signed the above letter. However, he could not explain, properly about the nature of liability settled, facts and figures, referred in the letter. Accordingly, vide letter dt. 07.12.06, the concerned persons of the Bank, as suggested by him, was requested to furnish the following details:- (a) Terms and Conditions under which the above loan was sanctioned. (b) Purpose for which loan was sanctioned. (c) Details of securities obtained for sanctioning the above loans. (d) Copy of letters submitted by M/s. Weizmann Ltd., for waiver of above loan. (e) Reasons recorded by the bank before waiving the loan liabilities of Rs.291.37 lacs. (f) Whether the waiver pertains to the excess rate of interest or against waiver of principle amount of loans. ....
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.... Rs.20.00 crores in their financial services division receivable from their clients. Further, the company foresees deficit of cash flows to the extent of Rs.32.00 crores by 31/03/2005. (5) Initiating legal action against the company may not be the preferred option for the bank owing to lack of adequate securities. (6) The company has paid Rs.363.63 lacs (against Rs.775.00 lacs) and has also cleared off the entire working capital facilities to the extent of Rs.140.00 lacs in Banks exposure by 5.00 crores appx. (7) This bullet payment of Rs.320 lacs to the Bank is not coming from the company's cash flows but is coming from unexpected sources, such as Income Tax Refund and outside borrowings. In fact, other banks and FIs are eyeing on targeting on this IT refund to the company and bring Pressure on the company to divert the amount to them. (8) As prospects for the group as a whole is discouraging, as seen from their deficit forecasts it is better to come out of this account strategically forthwith by accepting this bullet payment of Rs.320 lacs in full and final settlement and further SOD of appx. Rs.91.37 lacs is justified from this point of view. &nbs....
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.... pointing out that the liabilities written off were not of revenue nature, and that it represented the capital amount. Learned CIT(A) upheld the contentions of the assessee, except to the extent of Rs. 25 lakhs represented by lease rental written off, and deleted the rest of the addition. While doing so, the CIT(A) observed as follows:- 13.9 I have considered the submissions of the appellant. I have also gone through the assessment order carefully. During the year the appellant has remitted a loan liability of Rs. 2,91,36,753 on account of loans taken from ING Vysya bank. The AO was of the view that the provision of section 41(1) would apply to this remission of loan liability and accordingly, he brought the said remission to tax. The appellant contended that the said remission was on loan account to which the provisions of section 41(1) does not apply as the said remission has not routed through profit and loss account and no deduction was claimed which is a primary condition for invoking the provisions of section 41(1) of the I,.T.Act. The appellant placed heavy reliance on Gujarat High Court decision in the case of CIT v. Chetan Chemical Pvt Ltd cited supra, wherein, the....
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.... Projects ltd for Rs. 200.00 lakhs To write off balance in book balance of Rs. 163.90 lakhs To waiver the overdue interest of Rs. 159.17 lakhs To transfer the assets to them NCD Account To accept Rs. 120.00 lakhs as full and final settlement To write off balance in book balance of Rs. 266.37 lakhs To waive overdue interest of Rs. 234.91 lakhs" 13.12 From this letter, it is seen that in NCD A/c there is a remission of loan amount of Rs. 266.7 lakhs only whereas the appellant has claimed the remission of loan account of Rs. 2,91,36,753. During the course of appeal hearing, the appellant was asked to reconcile the claim of Rs. 2,91,36,753 in view of bank's letter written to the AO. The appellant informed that it seems that the bank, out of remission of Rs. 2,91,36,753 has adjusted a sum of Rs. 25,00,000 against NCD account. 13.13 From these facts, it is gathered that though the liabilities amounting to Rs. 2,91,36,753 has been considered by the appellant as remission of loan liabilities, but the bank has adjusted the payment of Rs. 25,00,000 in NCD account whereas the appellant has adjusted the same against lease ....
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....indra and Mahindra Ltd vs CIT (261 ITR 501), to that extent, ceases to be good law. We are unable to see merits in this stand for more reasons than one. In the case of Sulzer India Ltd vs DCIT (42 SOT 457), a special bench of this Tribunal, after considering a number of decisions of Hon'ble Bombay High Court as also other Hon'ble High Courts and Hon'ble Supreme Court, has held that, "Having regard to the aforesaid law laid down by the Hon'ble Supreme Court and High Courts, we find that to invoke the provisions of section 41(1) of the Act, the first requirement is as to whether in the assessment of the assessee, an allowance or deduction has been made in respect of loss, expenditure or the trading liability incurred by the assessee.". In Solid Container's case (supra), Their Lordships were dealing with a situation in which the loan was taken during the course of trading and the income was held to be directly as a result of the trading activity. In any event, this decision does not negate the law laid down by Hon'ble Bombay High Court but only holds that the law so laid down in Mahindra and Mahindra (supra) does not apply to the particular fact situation that Solid Containers' case (....