TaxTMI 
TaxTMI 
2010 (4) TMI 858
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....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 the circumstances of the case, the learned Incom....
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....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 against the assessee. The order of the Tribunal is, accordingly, set asi....
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....ting 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 duty/cus- toms duty paid by the assessee in a particular accounting year is allowable und....
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....ncome- 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 such expenses. The same had been audited by both the statutory and tax auditors and have found to be in order. It was further....
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.... 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 occupation and use of the assessee and the claim of the rent was not false. The Tribunal found that the assessee has paid the actual rent an....
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....n 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 any other provision of this Act, a deduction otherwise allowable under this Act in respect of- &nbs....
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....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 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 s....
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....titution 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 earlier years, and when the goods were imported the duty was payable and the customs duty was actually paid in the said year. No customs duty has been paid in the year under consid- erat....
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....o 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 Officer allowed the deduction under sections 80HH and 80-I on the profits of the assessee- company after reducing brought forward losses and allowances. The Com- missioner of Income-tax (Appeals) directe....
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....re, 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 of the first unit without reducing therefrom the losses incurred in the second unit. The learned authorised representative further sub- mitted that the Assessing Officer has alleged that in the prese....
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....t 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 not adjustable against the profits of the chemical division. Since the gross total income after the adjustment of the losses was nil the Assessing Officer held that the assessee was not entitled to the be....
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....ds '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 suggested by the appellant is accepted it would almost render the provisions of section 80A(2) of the Act nugatory and, therefore, the interpretation canvassed on behalf of the appellant cannot be accepted. It is t....
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....ive 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 it has been held that the Supreme Court did not at all hold that while computing the deduction under section 80-IA of the Act the loss of one eligible indus- trial undertaking is to be set off against the profit of a....
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....sorbed/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 Tribunal by the impugned order has upheld the view of the Commissioner of Income- tax (Appeals). 37. We have considered the facts and circumstances of the present case and the law laid down by the apex court and the deci....