TaxTMI 
TaxTMI 
2012 (10) TMI 53
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....ome from Other Sources. II. ITA No.769/10 - AY 2000-01 - By the Revenue: 3. For this assessment year, the Revenue had raised six grounds. Ground Nos.1, 5 & 6 are general in nature and no specific adjudication is called for; hence, they are dismissed. In the remaining grounds, the issues raised are as under: (i) that the CIT (A) had erred in deleting the addition of Rs.34,38,502/- being provision for warranty without examining the details, the basis of which, the provision was made; (ii) that the CIT (A) erred in deleting the additions of Rs.7,41,13,368/- and Rs.3,38,80,000/- being VRS 1998 and VRS 2000 respectively without appreciating the facts as detailed in the assessment order; & (iii) that the CIT (A) erred in holding that the claim of depreciation of Rs.8,09,578/- on plant and machinery was justified. III. ITA No.770/10 - AY 2002-03 - By the Revenue: 4. For this assessment year, the issues raised are two fold, they are as under: (i) that the CIT (A) erred in deleting the addition of Rs.6,68,08,261/- being VRS without appreciating the facts as detailed in the assessment order; & (ii) that the CIT (A) erred in holding that the claim of depreciation of....
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....(i) that while calculating total profit of the assessee, the AO had considered the entire amount of 'income from services rendered' to be reduced from the profits for the purposes of computing deduction u/s 80HHC though this was not covered by the Explanation to the said section; (ii) that the AO had also reduced the entire 'gain on exchange fluctuation' though this was not covered by Explanation to s.80HHC; - that Explanation (ba) to s. 80HHC cannot be said to provide an exhaustive definition of the term 'total turnover' since it only limits the definition of turnover, as generally understood, by specifying that it shall not include freight, insurance attributable to the transport of goods beyond the customs station, that the Legislature uses the word 'means' when the intention is to exhaust the significance of the term defined and uses the word 'includes' when the intention is to widen the scope by specific enumeration in addition to the ordinary meaning; that in the absence of an exhaustive definition, the term 'turnover' must be understood in the context in which has been used by the Legislature. The provisions of s.80HHC being beneficial provisions, enacted to promote ex....
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....or working out the deduction u/s 80HHC of the Act. Relies on the following case laws: (a) CIT v. Sudarshan Chemical Industries Ltd - 245 ITR 769 (Bom); & (b) CIT v. Kantilal Chhotalal 246 ITR 439 (Bom). 6.3 In conclusion, it was submitted that the CIT (A) had failed to appreciate that these items were not covered by Explanation (baa) to s. 80HHC and that there was no other provision in s.80HHC to reduce such income from profits of the business and also erred in stating that income from services and gains on exchange fluctuations does not have a direct nexus with export of goods. The CIT(A) ought to have appreciated that income from services and gains on exchange fluctuations were in the nature of business income of the assessee and, hence, eligible while computing the amount of deduction u/s 80HHC of the Act. 6.4 On the other hand, the learned D R had fully supported the stand of the authorities below on the issue. 6.5 We have carefully considered the rival submissions and perused the materials on record. At the outset, we would like to highlight that the assessee had objected to the reduction of entire fluctuation gain and 90% of service rendered from the busines....
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....ced from the business income for the purposes of calculation to arrive at the profit of the business in order to calculate deduction u/s 80HHC of the Act. For the above exercise, this issue is remitted back to the file of the AO for fresh consideration and to take appropriate action, keeping in view the Explanation (baa) to s.80HHC of the Act. It is ordered accordingly. II. ITA No.769/10 - AY 2000-01 - By the Revenue: (1) Addition of Rs.34,38,502/- on account of provision for warranty: 7. Incidentally, similar issue to that of the one under consideration had cropped up before the Hon"ble Pune 'A' Bench in the assessee's own case for the AYs 1998-99 and 1999-00 in ITA Nos.1073 & 1074/PN/2003 dated 22.6.2007. After considering the rival submissions, reasoning of the authorities below and following the findings of the earlier Bench in the case of Automag India Pvt. Ltd in ITA No.1633/PN/2004 dated 25.5.2007, the Hon'ble Bench had observed thus: "17. ......................................The submissions of both the sides are very limited and certain questions in respect of methodology adopted for claim of the warranty remained unanswered. In such circumstances, more particu....
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....ssessee. On the basis of the past record and the history of percentage of claim over total turnover, in the past years, the AO is expected to ascertain the liability and should also remove this confusion that whether the assessee has maintained proper records on the basis of which the provision for warranty can be established. He is also required to ascertain the scientific method and the past history of the assessee whether any claim has been made therein so as to arrive at the correct percentage of the claim. We are restoring this ground back to AO as per the directions supra, hence may be treated as allowed only for statistical purposes.' The guidelines have been issued, so now the AO is expected to provide an opportunity of hearing to the appellant to enable him to furnish the basis on which the computation for provision of warranty was made. We may also like to add that the genuineness as well as the correctness of the claim can further be justified by producing necessary evidence of the claim in the subsequent years. With these remarks, this issue deserves to be decided deno vo by AO....." 7.1 In conformity with the observations of Hon'ble Pune Bench of the ITAT in the ....
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....ices of the company will be paid an ex-gratia not exceeding (a) an amount equal to 50 days' salary for each completed year of service as on the date of voluntary retirement; (b) An amount equal to 45 days' salary for each remaining year of service with the company from the date of voluntary retirement till the normal age of retirement of 60 years'. b) Further, there was a maximum limit of Rs.3,25,000/- to be paid to the each employee under Voluntary Retirement Scheme, so the possibility cannot be ruled out that the amount so settled might have pertained to the remaining years of service till retirement with the assessee employer. c) It is incorrect on the part of the revenue authorities to draw an adverse inference that the payment was on account of SPA dt. 26.5.97. The correct factual position is that there was a 'Equipment sale and employees absorption agreement' which was dt. 20th day of June 1997 (see page 5 to 44 of the paper book). Through this agreement, it was decided to absorb all the employees of erstwhile Elpro International India. Clause 5 can be reproduced for reference as follows: .............................................................................
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....to get rid off the errant labourers. In this manner, we have duly adjudicated upon the doubts raised by the revenue authorities and on application of law as well as on facts, concluded in the foregoing paras. Ground no.1 is allowed". 7.3 In consonance with the findings of the Hon'ble Pune Bench in the assessee's own case referred supra, we held that the CIT(A) is justified in deleting the addition of Rs.7,41,13,368/- being VRS 1998 and Rs.3,33,80,000/- being VRS 2000. Therefore, the ground no.3 raised in revenue's appeal (ITA No.769/10 - AY 2000-01) is rejected. (3) Claim of depreciation of Rs.8,09,578/- on plant and machinery: 7.4 The Hon'ble Pune Bench in assessee's own case (supra) had an occasion to deal with a similar situation. After taking into account the authorities below in denying the assessee' s claim, the Hon'ble Bench, weighing the pros and cons of the issue as recorded therein, the issue was restored to the file of the AO for de novo consideration. The relevant portions of findings, for appreciation of facts, are extracted as under: "9. Now before us, learned A R Mr S.E. Dastur has specifically mentioned that the issue is related to the principle of ac....
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.... needs further deliberation in terms of the entries made in the books. However, we want to discard the said argument of AO that those employees belonged to erstwhile Elpro International India, hence the expenditure was not wholly and exclusively related to the business of the assessee. In our humble opinion, once the assessee has taken over all the assets and liabilities of the said erstwhile company along with the liability of absorbing all those employees of the said erstwhile company, then, any development thereafter related to those employees is definitely related to the business of the assessee. This opinion has already been referred in above para while discussing the expenditure incurred on VRS and once we were convinced with the expenditure related to the business of the assessee, only thereafter, we have proceeded to examine the nature of the expenditure ante. Following those reasons, as already assigned hereinabove, we again endorse the principle of admissibility of the deduction, if it pertained to the payment of gratuity to the retiring employees. With these remarks and directions, these grounds are restored for denovo consideration; hence, allowed only for statistical p....