TaxTMI 
TaxTMI 
2014 (2) TMI 936
X X X X Extracts X X X X
X X X X Extracts X X X X
....evidence on record and is based on conjectures and surmises. 4. The learned lower authorities have grossly erred in disallowing expenses of Rs.1,106,715/- incurred at Dehradun Unit. Reasons assigned for impugned disallowance are wrong and contrary to the provisions of law. 5. The learned lower authorities have grossly erred in adding a sum of Rs.349,525/- by recourse to Sec.14A of the I.T. Act 1961, even though the said provisions are not attracted at all. The impugned disallowance has been made without complying with the requirements of said section read with the decision of jurisdictional High Court. 6.The learned Assessing Officer has grossly erred in not allowing the set off of brought forward unabsorbed depreciation/business loss. The reasons assigned for the said refusal are wrong and contrary to the provisions of law." 3. ITA NO.1063/M/2011, Departmental appeal for A.Y.2007-08. "1.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.35,04,640/- which represents the proportionate disallowance of deduction claimed u/s.10B overlooking the finding of the Assessing Officer that only the profits derived wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....income of Rs. 53,422/- received on account of Miscellaneous Receipts does not qualify for deduction u/s 1 OA/1 OB of the IT Act, 1961. 2. Reasons given by the CIT Appeals for confirming that income of Rs. 53,422/- received on account of Miscellaneous Receipts does not qualify for deduction uls 1 OA/1 OB of the IT Act, 1961 are wrong, insufficient and contrary to the facts and evidences on record V. Disallowance of Commission & brokerage - Rs. 8,02,536/- 1.In the facts and circumstances of the case and in law, the learned CIT Appeals erred in confirming the disallowance of Rs. 8,02,536/- on account of Commission & Brokerage being the amount not qualifying for deduction u/s 1 OA/1 OB of the IT Act, 1961. 2 Reasons given by the CIT Appeals for confirming the disallowance of Rs. 8,02,536/- on account of Commission & Brokerage being the amount not qualifying for deduction u/s 1 OA/1 OB of the IT Act, 1961 are wrong, insufficient and contrary to the facts and evidences on record VI. Disallowance of Exchange variation gain - Rs. 4,93,202/- 1. In the facts and circumstances of the case and in law, the learned CIT Appeals erred in confirming the disallowance of Rs. 4,93,20....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any of the aforesaid Grounds of Appeal as occasion may arise of demand 5. ITA NO.8691/M/2011, Departmental appeal for A.Y.2007-08 "1.On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance u/s 14A of Rs. 4,00,104 relying on the assessee's ground, that the said amount of disallowance has been added to the computation/return of income, whereas the assessee had not added in back in the computation/return of income. The same is enclosed herewith as Annexured-A. All these appeals were argued together by both the parties, hence for the sake of convenience, these appeals are disposed of by this common order. ITA No.59/M/2011 6. Ground no. 1 is general in nature and in ground nos. 2 and 3 the assessee is aggrieved by the exclusion of an amount of Rs.83,24,090/- out of a total exclusion of Rs. 89,94,622/- from eligible amount for deduction u/s.10A and 10B. The details of aggregate amount of Rs. 89,94,622/- is given in para 5of the assessment order which is as read under: (Rs.) Sale of Scrap 96,789 Excise Refund 677,186 Sale Tax Refund 134,324 ECGC Claim Received 287,434 Dividend Received 67....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der or in the order passed by CIT(A). Therefore, after hearing both the parties, we are of the opinion that it will serve the interest of justice, if the matter is restored back to the file of AO, in respect of items other than which are not pressed by the assessee, with a direction to give an appropriate opportunity to the assessee to place all the facts and material on record and thereafter to re-adjudicate the same as per provisions of law. We direct accordingly. Ground no.2 and 3 are considered to be partly allowed for statistical purposes in the manner aforesaid. 10. In ground no.4 the assessee is aggrieved by the sustained addition of Rs. 11,06,715/- in respect of Dehradun Unit. It was further noticed that there were no sales or any other revenue arising out of Dehradun Unit. Therefore, AO observed that the business of Dehradun Unit did not commence and those expenses are "Pre-commencement Expenses". Accordingly, he disallowed this expenditure and the disallowance was agitated in appeal filed before learned CIT(A) who has discussed this issue in para 8 to 10. Before CIT(A), it was submitted that assessee is already in the business of manufacturing of pharma goods and setti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etermined the disallowance of Rs.3,49,525/-. Before the learned CIT(A), it was submitted that interest cost of Rs.2,74,471/- should not be included as investment in shares was not made out of borrowed funds. It was pleaded that according to the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT [2010] 234 CTR(Bom) 1], Rule 8D could not be applied. Learned CIT(A), though has accepted this submission of the assessee but has sustained the disallowance. It is the submission of the learned AR that he has no objection if the matter is restored back to the file of AO with a direction to re- adjudicate this issue without application of rule 8D. 14. In this view of the situation, after hearing both the parties, we restore this issue to the file of AO for re-adjudication in the light of aforesaid decision of Hon'ble High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (supra), as admittedly the disallowance cannot be made as per rule 8D as the same not cannot be applied to the impugned assessment year. We direct accordingly, this ground is considered to be allowed for statistical purpose. 15. In ground no.6, the assessee is seeking set....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loss of another firm in the process of computation of deduction under section 10A of the Act. He also adverted our attention to the decision of the Hon'ble Karnataka High Court (CIT vs. Yokogawa India Ltd. 341 ITR 385) to submit that the ITAT Bangalore Bench's decision was upheld by the Hon'ble Karnataka High Court. 6. We have carefully considered the rival submission and perused the record. In the light of the decision of the Hon'ble Bombay High Court cited supra we are of the view that the deduction under section 10A has to be computed before setting off the loss of earlier years or of a different unit. Since the view taken by the learned CIT(A) is in conformity with the view taken by the Hon'ble jurisdictional High Court, we do not find any infirmity in the said order. Therefore, ground No.1 & 2 are rejected." 16. In this situation, after hearing both the parties, we restore this issue to the file of AO with a direction to adopt a similar computation as he will adopt for A.Y.2005-06 while giving effect to the aforementioned order of the Tribunal. We direct accordingly. For statistical purpose, this ground is considered as allowed. 17. In the result, the appeal is partly....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The main provision does not restrict eligibility of deduction from the date of the approval but it relates to assessment year relevant to previous year in which undertaking begins manufacture or products articles or things. Therefore, we do not find any infirmity in the relief granted by Ld. CIT(A). We decline to interfere and this ground of the Revenue is dismissed. 20. Accordingly, the appeal filed by the Revenue is dismissed. ITA No.8703/M/2011 21. For this year also a sum of Rs.80,83,556/- was excluded from eligibility of deduction u/s 10A/10B of the Act. The details as described in the assessment order are as under: "(i) Sale of Scrap Rs.1,44,400/- (ii) Excise Refund Rs. 3,135/- (iii) Dividend Rs.6,25,048/- (iv) Export Benefits (DEPB) Rs.33,34,332/- (v) Interest on fixed deposits/margin money (vi) Interest on I.T.Refund Rs.2,01,475/- (vii) Sundry balance written back Rs.8,34,761/- (viii) Miscellaneous Receipts Rs.8,38,487/- (ix) Commission and brokerage Rs.8,02,536/- (x) Exchange variation gain Rs.4,93,202/- (xi) Notice period salary recovered Rs. 30,158/- (xii) Profit on sale of assets Rs. 84,591/- Total.... Rs.80,83,556/- 22.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the remaining amount of Rs.6,54,171/- which was received by the non 10A and 10B units cannot be disallowed. The appellant gets partial relief in respect of this item. / E. Disallowance of Rs. 2,01,475/- being interest on I.T.Refund: I. This receipt was considered separately and did not form part & parcel of total income in the computation and so was not claimed while computing deduction u/s.10A and u/s.10B and therefore, the said amount which was added by the Assessing Officer for the purposes of computation u/s.10A and u/s.10B is deleted. The appellant gets relief on this issue. F. Disallowance of sundry balances written off- Rs. 8,34,761/-: I. It was highlighted that it was refund of expenses in earlier years and,therefore, has a direct nexus to export business. The amounts pertaining to Ankleshwar Unit is Rs. 1,68,059/- and Kandla Unit is Rs. 86,635/- and the balance amount does not form part of deduction u/s.1 OA and u/s.1 OB II. In view of the factual position, the amount which can be added back is Rs..2,54,694/- and the balance amount has to be deleted. The appellant getspartial relief on this point. G. Disallowance of miscellaneous receipts - Rs.8,38.487/-: I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or examines each item in detail. To sum up, out of isallowances comprising of 12 items, the appellant gets partial relief on some items while balance is disallowed as per this order. 5. Ground of appeal No.3 relates to disallowance of Rs.5,88,814/- on account of valuation of work-in-progress. 5.1 The Assessing Officer has made the addition on account of under valuation of work-in- progress on the ground that work-in-progress was valued at cost including raw-material and excluding labour charges. In this connection, it was submitted that in the past also such additions was made and work-in- progress was enhanced. However by adding the said amount of Rs. 5,88,814/- the Assessing Officer failed to adjust the opening work-in-progress of AY.2007-08. 5.2. I have perused the assessment order and written submissions of the appellant. The Assessing Officer is directed to take opening work-in-progress at the same figure of closing work-in-progress of AY.2007-08 so as to take the at logical end. By not doing so, it was only weakening the addition made in the current year. This Ground of appeal is decided in appellant's favour.* 23. For A.Y. 2008-09 also Ld. AR has submitted a char....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in favour of the assessee by the earlier decision of the Tribunal. 26. On the other hand, ld. DR relied upon the order passed by CIT(A). 27. After hearing both the parties, in view of the submissions of the assessee in the chart Ground No.I(1)(2),II(1)(2),IV(1)(2), VII(1)(2) are dismissed being not pressed. Ground Nos. III(1)(2), V(1)(2), VI(1)(2) are being restored back to the file of the AO with a direction to re-adjudicate the same as per our decision given in respect of A.Y.2007-08. Ground No.VIII(1)(2) relating to disallowance of DEPB incentives is covered in favour of assessee by the decision of Tribunal in the case of Arts and Crafts Export vs. ITO(supra) which has been approved by Hon'ble jurisdictional High Court in the case of CIT vs. Arts and Crafts (supra) and this ground is allowed. 28. Ground No.IX(1)(2) is covered in favour of the assessee by the decision of Tribunal in assessee's own case for A.Y.2001-02, where disallowance of Rs.57,55,256/- on account of product registration charges was deleted with the following observations; "2. The first ground relates to deisallowance of Rs.57,55,256/- on account of product registration charges. 3.The assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... time until the renewal of registration is required. The benefit form the said registration of the product is not restricted to the relevant assessment year at the same time the expense is of revenue nature. We are of the view that the issue is covered by the said decision of the Tribunal in the case of Anglo French Durgs & Industries Ltd. Supra, in which the Tribunal has allowed product registration charges paid for five years as revenue expenditure. Respectfully following the same we allow the product registration charges as claimed by the assessee and the finding of both the lower authorities are vacated. The first ground is allowed." 29. Reference in this record can also be made to the decision of Tribunal dated 25th May, 2006 in ITA No.127/Mum/2005 copy placed on record. The aforementioned decision was subsequently followed by ITAT in respect of assessment year 2002-03 vide order dated 31st August, 2006 in ITA No.2182/Mum/2006 copy of the said order is also placed on record. The relevant observation of Tribunal are as under: "The only issue in this appeal is that according to the revenue expenditure of Rs.46,03,887/- towards product registration charges is capital expend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e that if it is a case of Revenue that Ld.CIT(A), based on wrong facts, has given the impugned relief to the assessee then the revenue can file rectification application before CIT(A) and can get the impugned order rectified if there is a patent and obvious mistake. With these observations the appeal filed by the Revenue is dismissed on account of low tax effect. 33. To sum up, both the appeals by the Assessee are partly allowed for statistical purposes & both the appeals filed by the Revenue are dismissed. Order pronounced on this 16th day of January 2014. ============= Document 1 (i) Particulars Amount Disallowance of Sale 96,789/- of Scrap (ii) Excise Refund 6,77,186/- (iii) Sales Tax Refund 1,34,324/- (iv) ECGC Claim 2,87,434/- (v) Disallowance of 4,53,652/- DEPB Incentives Submission Scrap was generated during the Not pressed process of manufacturing and has direct nexus to export oriented business. The said excise refund pertains to Mumbai Unit other than Kandla & Ankaleshwar Unit therefore it does not form part of 10A&10B profit. The said excise refund pertains to Mumbai unit ot....