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TaxTMI 
TaxTMI 
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2011 (4) TMI 879
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....ee's own case in I.T.A.Nos.4792 and 5689/Mum/2006 for the A.Y 2003-04. On the other hand, Ld.DR relied on the order of the AO. 5. After considering the rival submissions we find that this issue was considered by the Tribunal in assessee's own case for the A.Y 2003-04 in I.T.A.No.4792/Mum/06 vide paras 39 and 40 which are as under: "39. In ground no.6(c), the grievance of the assessee is as follows:- "6. Ld. CIT(A) further erred in confirming the following action of Assessing Officer in working out 10B deduction- (b) including cotton waste sale in total turnover." 40. Learned Representatives agree before us that this issue is covered against the assessee by the decision of the Hon'ble Supreme Court rendered in the case of CIT vs K. Ravindranathan Nair, 295 ITR 229 (SC). For the reasons stated therein, we uphold the order of the ld. CIT(A) and reject the ground of appeal raised by the assessee." Following the above decision, we decide this issue against the assessee. 6. The next issue as per the chart is in respect of computation of deduction u/s.80HHC. In this issue five sub-issues are involved which we are dealing as under: &n....
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....two limbs of this grievance - first, with regard to reduction of 90% in respect of sundry creditors written back, and, second, with regard to reducing 90% of weigh bridge receipts. As regards weigh bridge receipts, learned representatives agree that the issue is now covered against the assessee by Hon'ble Supreme Court's judgment in the case of CIT vs K Ravindranath Nair (295 ITR 228). As regards the sundry creditors written back, learned counsel for the assessee contends before us that the issue for our adjudication is covered in favour of the assessee by the decision of a co-ordinate bench of this Tribunal, in assessee's own case, decided in ITA no.5787/Mum./2004, for assessment year 2001-02, vide order dated 13th June 2007. We were, thus, urged to decide the issue in favour of the assessee. Learned Departmental Representative, on the other hand, could not bring on record any contrary decision to prove otherwise and relied on the orders of the authorities below. Accordingly, as regards reducing 90% of sundry creditors back, we uphold the grievance of the assessee and direct the Assessing Officer to delete the resultant disallowance." Following the above orders, we decide ....
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....es are decided against the assessee. 14. The next issue as per the chart is regarding the action of the AO in allowing deduction u/s.80HHC on the DEPB license fee. 15. Before us Ld.counsel of the assessee fairly conceded that this issue is covered against the assessee by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Kalpataru Colour and Chemical 328 ITR 451. On the other hand, Ld.DR relied on the order of the CIT(A). 16. After considering the rival submissions carefully, we find that the Hon'ble Bombay High Court in the case of CIT vs. Kalpataru Colour and Chemical [supra] has held has under: "Under sub section (1) of Section 80HHC, a deduction is allowed to the extent of profits "derived by the assessee" from the export of goods to which the Section applies. Since the deduction is in respect of profits derived from export, sub section (3) laid down a formula on the basis of which export profits have to be computed. Under clause (a) of sub section (3) the expression "profits derived from export" are defined to be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such....
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....e DEPB scheme. In other words, the amount equivalent to the face value of DEPB as well as the amount received in excess of the DEPB would constitute profits of business under Section 28(iiid) and merely because, a part of such profits of business (face value) was offered to tax in the year in which the credit accrued to the assessee would not be a ground to hold that such profit was not covered under Section 28(iiid). Where the face value of the DEPB credit is offered to tax as business profits under Section 28(iiid) in the year in which the credit accrued to the assessee, then any further profit arising on transfer of DEPB credit would be taxed as profits of business under Section 28(iiid) in the year in which the transfer of DEPB credit took place There is another perspective from which the issue can be looked at. The DEPB credit to which an exporter is entitled is a form of an export incentive. No part of the credit that is available under the DEPB scheme can fall for classification under clause (iiib) of Section 28 which deals with cash assistance, received or receivable against any scheme of the Government of India. As the legislative history of the provision would sho....
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.... u/s.80HHC. 23. The Ld.counsel of the assessee submitted that cotton waste was generated in the unit which was eligible for deduction u/s.10B as a separate unit and, therefore, cotton waste generated from that unit could not have been included in the total turnover of the unit where deduction u/s.80HHC was claimed. On the other hand, Ld.DR relied on the orders of the AO and the CIT(A). 24. An identical issue came up for our consideration in I.T.A.No.6011/M/07 for A.Y 2001-02 and for the reasons given in para - 7 we remit the matter back to the file of the AO to verify whether the cotton waste has been generated from the same unit or otherwise and then decided the issue accordingly. 25. The next issue is regarding reduction of Rs.2,06,217/- being 90% of other business income on account of sundry creditors written off. The Ld.counsel of the assessee submitted that this issue has been decided by the Tribunal in favour of the assessee in assessee's own case for A.Yrs. 2001-02 and 2003-04. On the other hand, Ld.DR relied on the order of the CIT(A). 26. We have adjudicated this issue in the above noted para-9 and for the reasons given therein, we decide th....
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....p; 37. The Ld.counsel of the assessee fairly admitted that this issue is covered by the decision of the Tribunal against the assessee. On the other hand, Ld.DR relied on the order of the AO. 38. After considering the rival submissions, we find that this issue came up for consideration before the Tribunal in I.T.A.No.4792/Mum/06 wherein the issue was decided against the assessee and as this fact was accepted by the Ld.counsel of the assessee we decide the issue against the assessee. 39. The next issue is regarding reduction of insurance claim from business profits. The Ld.counsel of the assessee submitted that insurance claim has been held to be eligible as part of the business income by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Pfizer Ltd. [330 ITR 62]. On the other hand, Ld.DR relied on the order of the CIT(A). 40. After considering the rival submissions, we find that in the case of CIT vs. Pfizer Ltd. [supra] the Hon'ble High Court held as under: "Held, (i) that if the stock in trade of the assessee were to be sold, the income that was received from the sale of goods would constitute the profits of the business as comput....
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....r the reasons given therein we decide this issue against the assessee. 43. The next issue is regarding reduction of gross interest from the business profits for the purpose of computing deduction u/s.80HHC. The Ld.counsel of the assessee fairly conceded that this issue is covered against the assessee by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Asian Star Co. Ltd., [2010] 326 ITR 56. On the other hand, Ld.DR relied on the order of the CIT(A). 44. After considering the rival submissions, we find that the Hon'ble Bombay High Court in the case of CIT vs. Asian Star Co. Ltd. [supra] held as under: "The special deduction under section 80 HHC of the Income Tax Act, 1961, is available to an assessee engaged in the export of goods or merchandise outside India to the extent of the profits specified in subsection (1B) of the provision. Clause (a) of sub-section (3) of section 80 HHC provides that where the exported goods are manufactured by the assessee, the deduction under sub-section (1) would be in accordance with the formula stated therein. The formula is that the profits derived from such export shall be the amount which bears to the pr....
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.... received by the assessee. The extent of the exclusion which is statutorily mandated by Parliament is ninety per cent of the total receipts. This is because the expenditure which is incurred by the assessee in earning these receipts would have gone into the computation of the profits and gains of business or profession and a distortion would be caused if the entirety of the income generated from the receipts alone were to be excluded. It is in order to obviate such a distortion that Parliament mandated that ninety per cent of the receipts would be excluded. Once Parliament has legislated both in regard to the nature of the exclusion and the extent of the exclusion, it would not be open to the court to order otherwise by rewriting the legislative provision. The task of interpretation is to find out the true intent of a legislative provision. Hence for the purpose of Explanation (baa) to section 80 HHC the gross interest on fixed deposits in the bank received by the assessee should be considered for the purpose of working out the deduction under section 80 HHC and not the net interest." Following the above decision, we decide this issue against the assessee. 45. The n....
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....ng and Stationery 2,78,600 3. Inspecting and testing 89.715 4. Postage and telegram 36,39.491 5. Travelling expenses 44,93,097 6. Directors remuneration 1,85,80,000 7. Electricity charges 2,03,964 2,94,22,779 Total Expenses 7,20,15,223 Total turnover of drum closure division 60,74,54,669 Trading export turnover 10,17,59,311 Indirect cost = Rs.10,17,59,311 x 7,20,15,223 Rs.1,20,63,812/- Head Office The total indirect expenses in respect of Head Office have been shown by the assessee at Rs.29,07,968/-. The total turnover of the assessee is Rs.151,76,202/- and the export turnover of the trading goods is Rs.10,17,311/-. Hence the indirect cost in respect of Head Office will be: Rs.29,07,968 x 10,17,59,311 Rs.1,94,980/- Therefore, the indirect cost attributable to the trading export is taken at Rs.1,22,58,792/- [i.e. Rs.1,20,63,812/- + Rs.1,94,980/-] as against Rs.45,171/- taken by the assessee. On appeal, the action of the AO has been confirmed by the ld. CIT(A). 49. The Ld.counsel of the assessee argued that this is not fair method of alloc....
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....in law, the Ld. CIT[A] erred in directing the AO not to exclude 90% of CST refund from profits of business for computation of deduction u/s.80HHC of the I.T.Act, 1961 without appreciating the facts brought on record by the AO. 55. Ground No.1: After hearing both the parties, we find that an identical issue came up for consideration of the Tribunal in I.T.A.Nos.3622 and 4057/Mum/08 for the A.Y. 2005-06 The Tribunal vide para-9 held as under: "7. In reply to the above, learned AR submitted that foreign exchange gains received, discount received, sundry creditors written off and cotton waste sales were all directly related to the export activities of the assessee and were eligible for deduction u/s.10A of the Act. According to him assessee had before the Assessing officer submitted that the commission and brokerage received of Rs.29,41,650 were from parties for making inspection of different containers of cotton yarn and analyzing the quality of the material and this was never rebutted by the learned AO or the learned CIT(A). Hence, ld counsel submitted that such income was received during the course of the business activity of the assessee." Following the abov....
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....n the case of CIT vs. Dresser Rand India Pvt. Ltd. [supra]. Following the same reasons, we decide the same against the assessee and in favour of the Revenue. 62. As regards commission brokerage this issue came up for consideration before the Tribunal for the A.Y 2005-06 in I.T.A.No.3622/M/08 and 4057/M/08 for A.Y 2005-06 and the Tribunal was decided by the Tribunal vide para 8 which is as under: "8. We have heard the rival contentions and perused the orders. First we take up assessee's grievances on 10B deductions. The question arising in both assessee's appeal and Revenue's appeal on this issue is whether it is possible to consider the receipts of the nature mentioned at para 3 above as part of profits and gains derived from export of articles or things. Undisputedly, assessee is a hundred per cent export oriented undertaking eligible for deduction u/s.10b of the Act. As regards commission and brokerage receipt the immediate source cannot be considered as export activity of the assessee. Words 'derived from' imply that there should be direct nexus and such nexus should not be only incidental. The terminology used in section 10B is 'derived from exports' and this be....
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....he year of export and to exclude the gains on sales of earlier years from the profits of the year under consideration and allow in those years. The order of the CIT(A) thus deserves to be upheld on this issue as well. Respectfully following Hon'ble jurisdictional High Court judgment in the case of Gem Plus Jewellery (supra), we decline to interfere in the order of the CIT(A) on this issue, and dismiss this ground of appeal by the Assessing Officer." Following the above decision of the Tribunal, we allow this issue in favour of the assessee and against the Revenue. 64. In ground No.2 the issues raised are regarding following items: [a] discount receipts and scrap sales [b] sales tax refund. 65. We have adjudicated this issue while dealing with assessee's appeal in I.T.A.No.6011/M/07 for A.Y 2001-02. For the reasons given therein following the order of the Hon'ble Bombay High Court in the case of CIT vs. Dresser Rand India Pvt. Ltd. [supra], we decide this issue against the assessee. As regards the issue of sundry creditors, we find that we find that identical issue came up before the Tribunal in assessee's own case in A.Y 2001-02 in I.T.A.Nos.....