TaxTMI 
TaxTMI 
2010 (4) TMI 858
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....tion of Rs. 23,86,696 under section 40A(2)(b) of the Income-tax Act out of payment made to Modi Rubber Ltd. whereas the assessee failed to prove that the claimed amount of expenditure was made for the purpose of business and was commercially expedient ? (3) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was legally justified in holding that the environmental expenses for development of new product was not covered under the provisions of section 43B ignoring the fact that the amount of addition represented customs duty ? (4) Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was legally justified in con- firming the order of the learned Commissioner of Income-tax (Appeals) deleting the disallowance of Rs. 3,05,961 on account of expenses on printing of the balance-sheet and Rs. 1,80,000 on account of printing and dispatch of dividend warrants which was incurred for the benefit of shareholders and not for the business purpose ? (5) Whether, on the facts and in....
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....t constituted a unit for the business of the assessee as a whole, in totality and without appreciating the provisions of sections 80AB and 80B(5) of the Income-tax Act ?" 2. Heard Sri R. K. Upadhyay, learned standing counsel, and Sri Rupesh Jain, advocate, along with Sri R. R. Agrawal, advocate, appearing on behalf of the respondent-assessee. 3. The respondent is a company engaged in the business of manufacture and sales of photo-copier machines, toners, etc. 4. Learned counsel for both the sides fairly admitted that questions Nos. (1), (5) and (6) are covered by the decision of this court in the case of the assessee itself in I. T. Appeal No. 225 of 1999 (CIT v. Modi Xerox Ltd.) decided on May 14, 2009. 5. So far as question No. (1) is concerned, this court held that the Tribunal was not justified in allowing the claim of deduction on account of the rent paid by the assessee to the M/s. Modipur Hotels (P) Ltd. and transit house as it contravened the provisions of section 37(4) read with section 37(5) of the Act. 6. Respectfully, following the aforesaid decision of this court, question No. (1) is answered in favour of the Revenue and again....
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....The apex court held that after April 1, 1989, the position has been altered by deleting the word 'established' which existed earlier in section 36(1)(vii) of the Act and after April 1, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. In the present case, the Tribunal has recorded a categorical finding that the assessee has complied with both the requirements, namely, that the amount has been considered for computation of income in the earlier years and the debt has been written off in the books of account. The finding of the Tribunal is finding of fact. We do not see any error in the view taken by the Tribunal which is in conformity with the law laid down by the apex court, referred to hereinabove." 12. So far as question No. (8) is concerned, both the counsel agree that the issue involved is squarely covered by the decision of the apex court in the case of Berger Paints India Ltd. v. CIT reported in [2004] 266 ITR 99 (SC) wherein the apex court has held that the entire amount of excise du....
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....e the Tribunal the assessee contended that while making the disallowance both the Assessing Officer and the Commissioner of Income- tax (Appeals) have alleged that the appellant did not specify the area occu- pied by the assessee in respect of payment made to M/s. MRL without appreciating the fact that during the course of the assessment as well as the appellate proceeding the assessee furnished the rent paid to M/s. MRL and these details accompanied by copies of lease deeds of the flats taken on lease by M/s. MRL clearly specify the area of each flat. It was also sub- mitted that in the subsequent years the Assessing Officer deputed an Inspector to conduct on the spot enquiry to ascertain the actual user of the flat. Based on the Inspector's report, the Commissioner of Income-tax (Appeals), in the year 1994-95, deleted the disallowance of rent holding that the Assessing Officer has not brought on record any evidence to show that the assessee's claim of rent was false. It was further submitted that reimbursement of electricity, water and other expenses was based on actual amount spent by M/s. MRL and was evidenced by debit-note raised by M/s. MRL which also provided the details of ....
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.... payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction." 18. A perusal of section 40A(2)(a) of the Act reveals that any expenditure incurred shall be disallowed in case if the payment is made to the persons referred to in clause (b) of section 40A(2) of the Act and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate need of the business or profession of the assessee shall be disallowed. 19. In the present case, having regard to the facts and circumstances referred to hereinabove, the Tribunal has arrived to a conclusion that the Assessing Officer has failed to prove by any comparable case or compa- rison by market rate that the amount paid by the assessee was excessive or unreasonable. The finding of the Tribunal is finding of fact. On the enquiry the Inspector found that the premise was in occup....
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....bunal, in a very cryptic manner, allowed the claim of deduction and observed that "we are of the opinion that the expenditure has rightly been held as revenue in the nature by the Commissioner of Income-tax (Appeals). We also feel that the provisions of section 43B are not attracted to the facts of this ground of appeal. We accordingly delete the addition". 23. Sri R. K. Upadhyay, learned standing counsel, submitted that admittedly the customs duty was neither payable nor paid during the year under con- sideration and, therefore, any amount deducted towards customs duty in the books of account cannot be allowed as a deduction in the year under consideration. In the year under consideration only that much amount of customs duty can be allowed as a deduction which has been actually paid in view of the provisions of section 43B of the Act. He further submitted that the Tribunal has erred in holding that the provision of section 43B of the Act is not attracted. Learned counsel for the assessee supported the order of the Tribunal. 24. Section 43B of the Income-tax Act reads as follows : "43B. Notwithstanding anything contained in an....
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....pect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. Explanation 2.-For the purposes of clause (a), as in force at all material times, 'any sum payable' means a sum for which the asses- see incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. Explanation 3.-For the removal of doubts it is hereby declared that where a deduction in respect of any sum referred to in clause (c) or clause (d) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessm....
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.... (b) 'State Financial Corporation' means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951) ; (c) 'State Industrial Investment Corporation' means a Govern- ment company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and eligible for deduction under clause (viii) of sub-section (1) of section 36." 25. The above provision provides that a deduction otherwise allowable under this Act in respect of any sum payable by the assessee by way of duty shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him (emphasis provided). It appears that in the present case the goods were imported in the earli....
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....d photoreceptors. (iii) Servicing and trading activities. 29. There were three separate units for the aforesaid activities. It appears that the two units, viz., unit manufacturing xerographic equipment and unit manufacturing toner, developer and photoreceptors, were profit making units and the third unit, viz., servicing and trading activities, has suffered loss. The assessee claimed deduction under section 80HH at Rs.7,18,75,912 and deduction under section 80-I at Rs. 8,92,44,892 against which the assessing authority has allowed deduction under section 80HH at Rs. 2,04,93,837 and deduction under section 80-I at Rs. 2,56,17,297. The dispute between the assessee and the Assessing Officer appears to be with regard to the working of the deduction under section 80HH and 80-I were on account of (a) the Assessing Officer allowed deduction under the afore- said sections on the aggregate profits of the assessee-company without seeking to separately determine the profits derived from the two eligible industrial undertakings, viz., (i) xerographic equipment unit, and (ii) toner, developer and photoreceptors unit, and (b) the Assessing Office....
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....xerographic equipment installed all over the country as also trading in paper, fax, laser printer, etc., through its branches all over India and corporate office located at New Delhi. It was, therefore, submitted that the deductions under sections 80HH and 80-I is to be determined with reference to the profits derived from eligible industrial undertakings and not with reference to the aggregate profits of the appellant. As has been held by the Karnataka High Court in the case of CIT v. Siddaganga Oil Extractions P. Ltd. [1993] 201 ITR 968 (Karn). It was further submit- ted that the hon'ble apex court in the case of CIT v. Canara Work- shops P. Ltd. [1986] 161 ITR 320 (SC) held that in the application of section 80E of the Income-tax Act the profits and gains earned by one priority industry cannot be reduced by the loss suffered by any other industry or industries owned by the assessee. Each industry must be considered on its own working only. It was further submitted that the Delhi Bench Tribunal in the case of Rajasthan Petro Synthetics Ltd. v. Deputy CIT [1997] 60 ITD 682 (Delhi) held that deduction under section 80HH/80-I was admissible to the assessee in respect of the profits ....
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....the con- tention he relied upon the decision of the apex court in the case of Synco Industries Ltd. v. Assessing Officer (Income-tax) reported in [2008] 299 ITR 444 (SC) and the decision of the apex court in the case of Liberty India v. CIT reported in [2009] 317 ITR 218 (SC). 31. In the case of Synco Industries Ltd. v. Assessing Officer (Income-tax) [2008] 299 ITR 444 (SC), the apex court, while dealing with the deductions under Chapter VI-A of the Income-tax Act which provides deductions under sections 80A, 80AB, 80B(5), 80HH, 80-I, contemplates special deductions to the new industrial units from the gross total income. The facts of that case was that the assessee was engaged in the business of oil and chemical. It had a unit for oil division in Sirohi and a unit for chemical division in Jodhpur. For the assessment years 1990-91 and 1991-92, it had earned profits in both the units. But, in the earlier years, the assessee had suffered losses in the oil division. In relation to the deductions under sections 80HH and 80-I of the Income-tax Act, 1961, it claimed that each unit should be treated separately and the losses suffered in the earlier years by the oil division were....
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....income includes any profits and gains derived from an industrial undertaking to which section 80-I applies then there shall be a deduction from such profits and gains of an amount equal to 20 per cent. The words 'includes any profits' used by the Legislature in sec- tion 80-I(1) are very important which indicate that the gross total income of an assessee shall include profits from a priority under- taking. While computing the quantum of deduction under section 80- I(6), the Assessing Officer, no doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at the deductions under Chapter VI-A. However, this court finds that the non obstante clause appearing in section 80-I(6) of the Act is applicable only to the quantum of deduction, whereas the gross total income under section 80B(5) which is also referred to in section 80-I(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. If the interpretation as sug....
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....his reason that Parlia- ment has confined deduction of profits derived from eligible business men- tioned in sub-sections (3) to (11A). Sections 80-IB and 80-IA are a code by themselves as they contain both substantive as well as procedural provi- sions. Section 80-IB provides for allowing of deduction in respect of profits and gains derived from the eligible business. The connotation of the words "derived from" is narrower as compared to that of the words "attributable to". By using the expression "derived from" Parliament intended to cover sources not beyond the first degree. In this view of the matter, the duty drawback received and the DEPB benefits have been held not form part of the net profits of eligible industrial undertaking for the purposes of the deduction under sections 80AB, 80-I, 80-IA(1), 80-IB. 33. Learned counsel for the assessee submitted that the decision of the apex court in the case of Synco Industries Ltd. [2008] 299 ITR 444 (SC) has been considered by the Division Bench of the Delhi High Court in a recent deci- sion in I. T. A. No. 1279 of 2008 (CIT v. Sona Koyo Steering Systems Ltd. [2010] 321 ITR 463 (Delhi)) decided on February 10, 2010, wherein....
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....re adjusting the unabsorbed business loss, depreciation and investment allowance of the earlier years amounting to Rs. 10,93,172 on the basis of the profits of the two undertakings. The assessing authority proposed to adjust unabsorbed/brought forward losses and allowances of all the three units. In appeal, the Commissioner of Income-tax (Appeals) has held that the deduction to the undertakings are to be allowed on the profits and gains derived from each industrial undertaking but the income of the industrial undertaking eligible for deduction means income determined after adjusting unabsorbed business loss, investment allowances and depreciation. The claim of the assessee for deduction without adjustment of unabsorbed business loss, depreciation and investment allowances has not been accepted. The Commissioner of Income-tax (Appeals) held that sections 80HH and 80-I only refer the income derived from industrial undertaking, thus the income derived by the two manufacturing units are only to be considered for the purposes of the deduction. However, for the computation of the income derived by the industrial undertaking, the matter has been remanded back to the Assessing Officer. The....