TaxTMI 
TaxTMI 
2013 (9) TMI 598
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....owing grounds of appeal: "1. The orders of the lower authorities are arbitrary, not based on proper evidences, without proper reasons, invalid and also bad in law. 2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii) a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the findings of the AO that the industrial undertaking of the appellant was formed by the transfer of plant and machinery previously used by SPIL and accordingly the conditions laid down u/s 80IB(2)(ii) have not been satisfied. b) The Ld.CIT(A) has not appreciated the facts in the proper perspective and erred in not appreciating the legal position that, for the purpose of section 80-IB, the initial assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production. 3. Re: Invoking the provisions of S.80IB(13) r.w.s.80IA(10): On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the invoking of the provisions of S.80IB(13) r.w.s.80IA(10) for the purpose of computing the deduction u/s 80IB. 4. Reg: Disallowance of deduction ....
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....CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 in respect of interest on delayed payments from M/s. Aditya Medisales Ltd. aggregating to Rs.4,96,67,120/-. 4. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account of disallowance of remuneration u/s 40(b) of the Act amounting to Rs.15,75,55,218/-. 5. Whether the ld. CIT(A) was right in granting higher deduction u/s 80IB of the Act on account of disallowance u/s 43B of the Act amounting to Rs.12,92,626/-." 4. In ITA No.346(Asr)/2010, the assessee has raised following grounds of appeal: "1. The orders of the lower authorities are arbitrary, not based on proper evidences, without proper reasons, invalid and also bad in law. 2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii) a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the findings of the AO that the industrial undertaking of the appellant was formed by the transfer of plant and machinery previously used by SPIL and accordingly the conditions laid down u/s 80IB(2)(ii) have not been satisfied. b) The....
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....that refund was received as a matter of procedure and that the said refund cannot be construed as an income. In any case, such refund is very much 'derived from' the business of 'industrial undertaking' and hence eligible for deduction u/s 80IB. b) The Ld. CIT(A) also erred in not appreciating that the section 80IB grants deduction in respect of 'any profits from any business' of the industrial undertaking. c) Alternatively and without prejudice to the above, on the facts and circumstances of the case and in law, the AO and CIT(A) failed to appreciate that the Central Excise Duty refund is a capital receipt as, according to Central Government's Notifications, the said benefit is granted for promoting industrialization/setting up of the industries in the State of Jammu & Kashmir. 7. Reg: Disallowance of deduction u/s 80IB in respect of interest income - Rs.9,39,496/-. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs.9,39,496/- holding them to be not derived from the industrial unde....
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....s, invalid and also bad in law. 2. "Re:Initial assessment year" u/s 80-IB(14)(c) read with sec.80-IB(2)(ii) a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in reducing the deduction u/s 80IB(4) to 25% of profit from industrial undertaking at Dadra by considering the previous year as 6th year of operation as against te assesse's claim of 100% deduction considering the previous year as 4th year of operation. b) The Ld.CIT(A) has not appreciated the facts in the proper perspective and erred in not appreciating the legal position that, for the purpose of section 80-IB, the initial assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production. Holding the year under appeal as the 6th year for claiming deduction u/s 80IB(4) of the Act being bad in law the claim of the appellant treating the year as the 4th assessment year from the beginning with the initial assessment year needs to be allowed/accepted. 3. Re: Invoking the provisions of S.80IB(13) r.w.s.80IA(10): On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the invok....
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....ntral Government's Notifications, the said benefit is granted for promoting industrialization/setting up of the industries in the State of Jammu & Kashmir. 7. Reg: Disallowance of deduction u/s 80IB in respect of interest income - Rs.55,461/-. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs.55,461/- holding them to be not derived from the industrial undertaking. b) The Ld. CIT(A) also erred in not appreciating that the section 80IB grants deduction in respect of 'any profits from any business' of the industrial undertaking. 8. Reg: Initiation of penalty proceedings u/s 271(1)(c) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in not striking down the initiation of penalty proceedings u/s 271(1)(c) of the Act." 7. In ITA No.18(Asr)/2010, the Revenue has raised following grounds of appeal: 1. Regarding disallowance of deduction u/s 80IB of the Income Tax Act, 1961 of Rs.72,88,47,291/-. a) Whether the Ld. CIT(A) was right in holding tha....
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....ve and erred in not appreciating the legal position that, for the purpose of section 80-IB, the initial assessment year is to be reckoned from the date of commencement of "commercial production" and not from the date of trial production. Holding the year under appeal as the 7th year for claiming deduction u/s 80IB(4) of the Act being bad in law the claim of the appellant treating the year as the 5th assessment year from the beginning with the initial assessment year needs to be allowed/accepted. 3. Re: Invoking the provisions of S.80IB(13) r.w.s.80IA(10): On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the invoking of the provisions of S.80IB(13) r.w.s.80IA(10) for the purpose of computing the deduction u/s 80IB. 4. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA(10) - due to alleged selling and distribution expenses. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in invoking the provisions of S.80IB(3) r.w.s.80IA(10) and thereby erred in giving direction to the AO to make the disallowance of deduction u/s 80IB(4) of Rs.45,91,02,595/- corresponding to the disallowance made ....
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....egarding disallowance of deduction u/s 80IB of the Act in respect of interest on delayed payments. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 in respect of interest on delayed payments from M/s. Aditya Medisales Ltd. aggregating to Rs.30,31,91,368/-. 4. Whether the Ld. CIT(A) was right in deleting the disallowance u/s 80IB of the Income Tax Act, 1961 on account of disallowance of remuneration u/s 40(b) of the Act amounting to Rs.40,12,76,441/-. 5. Whether the ld. CIT(A) was right in granting higher deduction u/s 80IB of the Act on account of disallowance u/s 43B of the Act amounting to Rs.5,37,09,230/-." 6. Regarding disallowance of deduction u/s 80IB on account of Central Excise Duty Refund: "a) Whether the Ld. CIT(A) was right in allowing relief on account of deduction u/s 80IB on Central Excise Duty refund by relying upon orders of Hon'ble High Court if J&K, Jammu which has been delivered not on merits of the issue but holding the receipt to be a capital receipt only because the policy under which the same was paid envisaged tackling the unemployment in the State which cannot be said to be a good test for dec....
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....ds to be allowed/accepted. 3. Re: Invoking the provisions of S.80IB(13) r.w.s.80IA(10): On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in upholding the invoking of the provisions of S.80IB(13) r.w.s.80IA(10) for the purpose of computing the deduction u/s 80IB. 4. Reg: Disallowance of deduction u/s 80IB(13) r.w.s.80IA(10) - due to alleged selling and distribution expenses. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in invoking the provisions of S.80IB(3) r.w.s.80IA(10) and thereby erred in giving direction to the AO to make the disallowance of deduction u/s 80IB(4) of Rs.97,02,11,623/- corresponding to the disallowance made by the AO of SPIL in respect of alleged selling and distribution expenses incurred by SPIL on behalf of the appellant. 5. Reg: Disallowance of deduction u/s 80IB in respect of interest income - Rs.1,17,624/- on loan to employees. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance u/s 80IB in respect of and to the extent of interest on statutory deposits, banks and on loan to employees aggregating to Rs....
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.... in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the industrial undertaking of the assessee firm at Dadra was not formed by the splitting up or reconstruction of the existing business of M/s. Sun Pharmaceuticals Industries Ltd. b) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assessee firm is entitled to deduction u/s 80IB(4) of the Income tax Act on the profits of its industrial undertaking at Dadra for the unexpired period in view of CBDT Circula F.No.15/5/63-IT(AI) dated 13.12.1963. 2. Regarding disallowance of deduction u/s 80IB read with sec. 80IA(10) of the Income Tax Act, 1961 of Rs.96,75,25,719/-. (a) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was right in deleting the disallowance made by the AO on account of deduction u/s 80IB(4) of the Act by applying the provisions of section 80-IB(13) read with section 80IA(10) of the Act. (b) The Ld. CIT(A) has erred in not considering the fact that no royalty or management fee has been charged by M/s. Sun Pharmaceutical Industries Limited from the assessee firm and major expenses on account o....
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....assessee on account of refund of Central Excise was not supposed to be spent in a particular manner for purpose of substantial expansion of the industry." 10. First of all, we take up appeal of the assessee in ITA No.345(Asr)/2010 and Revenue's appeal in ITA No.391(Asr)2010 for the assessment year 2005-06 for the assessment year 2004-05 as under: 11. In ground No.2 of the assessee and ground No.1 of the Revenue, the brief facts are that the AO made a disallowance of deduction u/s 80IB(4) in respect of profit of Dadra unit by holding tat conditions laid down under section 80IB(2) of the Act are not complied with. The Ld. CIT(A) followed the order of the ITAT, Amritsar Bench, dated 11.06.2010 in assessee's own case for the assessment year 2005-06 and allowed the deduction under section 80IB of the Act. However, he considered the assessment year 2004- 05 as 3rd year of operation instead of assessee's claim of 1st year of operation. 12. We have heard the rival contentions and perused the facts of the case. We observe that the ITAT, Amritsar Bench, Amritsar in assessee's own case vide its order dated 11.06.2010 in ITA No. 184(Asr)/2009 adjudicated the identical issue and all....
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....than price of outsiders. Hence, the Ld. DR pleaded to uphold the order of the ld. CIT(A). 14.3. After considering the facts and submissions of both the parties, we are of the view that the disallowance made by the Ld. CIT(A) is liable to upheld for the reasons that he has followed the order of the CIT(A) in the case of SPIL wherein similar disallowance has been confirmed. However, the argument of the ld. counsel for the assessee needs a consideration that in that case, the amount of disallowance is varied by the ITAT Ahmedabad Benches, then the same amount will be considered in the case of the assessee. Accordingly ground Nos. 3 & 4 are dismissed, with us above observations. 15. As regards ground No.5 with respect to selling and distribution expenses, the brief facts are that the AO has considered 4.13% of turnover as the selling and distribution expenses, which according to AO should have been incurred by the assessee. He has arrived at this percentage from the return of income of SPIL as discussed by the AO at pages 84 to 92 of assessee's AO's order. By applying said percentage and after reducing the actual expenses incurred by the assessee, the AO ultimately disallowed Rs.....
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....1973. He further argued that no disallowance needs to be made on account of selling and distribution expenses. 15.5. The Ld. DR, on the other hand, relied on the order of the A.O. He argued that quantum of expenditure incurred by the assessee is meager as compared to the size of its business and the partner's remuneration is separate and independent of selling & distribution expenses and therefore, should not be considered while adjudicating this issue. He also relied upon the order of the Ld. CIT(A) in the case of SPIL especially para 26 at pages 114 to 118 of assessee's paper book and therefore, pleaded that the disallowance at least to the extent was confirmed by the CIT(A) in the case of SPIL needs to be confirmed. 16. We have heard the rival contentions and perused the facts of the case. We observe from the perusal of the order of the ITAT, Amritsar Bench, dated 11.06.2010 passed in assessee's own case for the assessment year 2005-06 on identical facts at para 30 to 36 (Pages 63 to 67 ) which is placed at PB 186 to 190. The ITAT especially vide para 36 had concluded that no disallowance u/s 80IB(13) read with section 80IA(10) of the Act, can be made except difference ....
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.... to Rs.4,96,67,120/-, it is observed that this issue is covered by the decision of ITAT, Amritsar Bench, dated 11.06.2010 in ITA No.184(Asr)/2009 for the assessment year 2005-06 in assessee's own case vide para 41 at pages 69 to 76 of the order placed at pages 192 to 199 of PB, wherein ITAT has allowed the claim of deduction u/s 80IB of the Act in respect of the said interest from M/s. Aditya Medisales Ltd. Following the aforesaid order of the Tribunal dated 11.06.2010 this ground of appeal of the Revenue is dismissed. 18. As regards ground Nos. 4 & 5 of the Revenue regarding granting of higher deduction u/s 80IB on account of disallowance of remuneration u/s 40(b) of the Act amounting to Rs.15,75,55,218/- and on account of disallowance of deduction u/s 43B amounting to Rs.12,92,626/-, it is observed that the issue is covered by the decision of the ITAT, Amritsar Bench, vide its order dated 11.06.2010 in ITA No.184(Asr)/2009 in assessee's own case vide paras 37 to 40 at pages 67 to 69 (pages 190 to 192 PB), wherein ITAT, Amritsar Bench, has allowed the claim of the assessee on the consequential higher amount eligible for deduction under section 80IB of the Act. Following the sai....
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....amounting to Rs.4,25,18,962/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, the ground No.3 of the Revenue is dismissed. 25. In ground No. 4 & 5, the Revenue contended regarding higher deduction u/s 80IB on account of disallowance of remuneration u/s 40(b) amounting to Rs.60,82,14,815/- and on account of disallowance of deduction u/s 43B amounting to Rs.12,86,748/- 25.1. Since the facts relating to these issues are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove, following the same, ground Nos. 4 & 5 of the revenue are dismissed. 26. As regards ground No.6 of the assessee relating to disallowance of deduction u/s 80IB in respect of Central Excise Duty Refund of Rs.50,12,45,460/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, this ground of the assessee is allowed. 27. As regards ground No.7 of the assessee with respect to the disallowance of deduction u/s 80IB in respect of interest income of to the extent of interest on statutory ....
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....lowed and ground No.2 of the Revenue is dismissed. 33. As regards ground No.3 of the Revenue regarding disallowance of deduction under section 80-IB in respect of delayed payments from M/s. Aditya Medisales Ltd. amounting to Rs.11,27,33,363/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, this ground of the Revenue is dismissed. 34. As regards ground No. 4 & 5 of the Revenue's appeal regarding higher deduction u/s 80IB on account of disallowance of remuneration u/s 40(b) amounting to Rs.29,79,26,967/- and on account of disallowance of deduction u/s 43B amounting to Rs.19,73,329/- 34.1. Since the facts relating to these issues are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove, following the same, ground Nos. 4 & 5 of the revenue are dismissed. 35. As regards ground No.6 of the assessee relating to disallowance of deduction u/s 80IB in respect of Central Excise Duty Refund of Rs.80,72,19,118/-, the facts of the issue in dispute are identical to the facts in assessee's own case for the assessment year 2005-06 decided by us v....
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....s directed to make/compute so much of the disallowance as will be decided by the ITAT, Ahemabad Bench in the case of SPIL. Thus, ground No. 3 of the assessee is dismissed and ground No. 4 of the assessee is dismissed with the above observations and ground No.2 of the Revenue is dismissed. 42. As regards ground No.3 of the Revenue regarding disallowance of deduction under section 80-IB in respect of delayed payments from M/s. Aditya Medisales Ltd. amounting to Rs.11,27,33,363/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, this ground of the Revenue is dismissed. 43. As regards ground No. 4 & 5 of the Revenue's appeal regarding higher deduction u/s 80IB on account of disallowance of remuneration u/s 40(b) amounting to Rs.40,12,76,441/- and on account of disallowance of deduction u/s 43B amounting to Rs.5,37,09,230/- 43.1. Since the facts relating to these issues are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove, following the same, ground Nos. 4 & 5 of the revenue are dismissed. 44. As regards ground No.6 of the assessee ....
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....cted to delete the disallowance in respect of royalty, management fees and selling & distribution expenses. Thus, ground No.3 of the assessee is dismissed and ground No.4 of the assessee is allowed and ground No.2 of the revenue is dismissed. 51. As regards ground No.3 of the Revenue regarding disallowance of deduction under section 80-IB in respect of delayed payments from M/s. Aditya Medisales Ltd. amounting to Rs.48,20,32,772/-, the facts are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove. Following the same, this ground of the Revenue is dismissed. 52. As regards ground No. 4 & 5 of the Revenue's appeal regarding higher deduction u/s 80IB on account of disallowance of remuneration u/s 40(b) amounting to Rs.57,22,21,001/- and on account of disallowance of deduction u/s 43B. 52.1. Since the facts relating to these issues are identical to the facts in assessee's own case for the assessment year 2004-05 decided by us hereinabove, following the same, ground Nos. 4 & 5 of the revenue are dismissed. 53. As regards ground No.6 of the assessee relating to disallowance of deduction u/s 80IB in respect of Central Exci....