TaxTMI 
TaxTMI 
2014 (10) TMI 423
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....sessee preferred appeal before ld. CIT(A), who partly allowed the assessee's appeal. Being aggrieved, with the order of ld. CIT(A), both the assessee and department are in appeal before us. Assessee's appeal (ITA no. 2990/Del/07): 3. The assessee has filed two additional grounds for admission under Rule 11 of the ITAT Rules: "1. That without prejudice, on the facts and circumstances of the case and in law, the amount credited to the profit and loss account during the relevant previous year in respect of Duty Entitlement Pass Book (DEPB) licence, being not related to sale of DEPB licence, 90% of same was not required to be reduced from the profits while computing 'profits of the business' in terms of Explanation (baa) to that section 80HHC of the Income-tax Act, 1961" 2. That on the facts and in the circumstances of the case the excise duty refund, amounting to Rs. 21,84,01,513/- arising to the appellant in terms of Notification no. 39/2001-CE dated 31st July, 2001, being capital receipt, ought to be excluded in determining the taxable income of the appellant for the relevant previous year, the same being not liable to tax under the provisions of the Income-tax Act, 1961." 4. A....
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....al, herein also we remand the additional ground no. 1 to the file of assessing officer for adjudication in accordance with law. In the result, ground is allowed for statistical purposes. 9. As far as additional ground no. 2 is concerned, the same deserves to be admitted in view of the decision of Hon'ble Supreme Court in the case of Pooni Sugars and Chemicals Ltd. (supra). The nature of subsidy granted to assessee has to be determined having regard to the purpose for which the subsidy is made. The assessee's contention is that purpose of granting the excise duty was to promote industrial development in Kutch district of Gujarat in the wake of massive devastation caused by earthquake in the said region and the subsidy/ incentive by way of excise duty refund was granted to the assessee to meet the larger pubic interest of rehabilitation of the people and economic activity in the aforesaid affected region. We, therefore, admit this ground of appeal. Since the entire claim is to be examined to arrive at proper conclusion, we restore this issue to the file of assessing officer for decision as per law. In the result, this ground is also allowed for statistical purposes. 10. The assesse....
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....officer relied on the decision of Hon'ble Supreme Court in the case of CIT Vs. United General Trust Ltd. 200 ITR 488. He disallowed 5% out of the total expenditure of Rs. 77,385.56 lacs and thus made a disallowance of Rs. 7,33,745/- u/s 14A. 11.1. Before ld. CIT(A) the assessee had submitted that no expenditure was incurred to earn dividend income. It was automatically received as and when declared by the investee company. In support of its contention the assessee had furnished chart of dividend income and investment made in the preceding three years, which revealed that investment has remained static but dividend income has increased four fold. No change in investment in last 3 years was there. The assessee submitted that only actual expenditure incurred should be disallowed u/s 14A. 11.2. Ld. CIT(A) did not agree with the assessee's submission that no expenditure was incurred in earning dividend income. He pointed out that a company cannot earn dividend without its existence and management. The ld. CIT(A) sustained the disallowance at Rs. 1,80,360/-, inter alia, observing as under: "As per unit wise P&L Account furnished by the appellant, it is noticed that appellant has shown....
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....me from other sources' and not as business income, upheld the assessing officer's action. 16. Ld. Counsel for the assessee submitted that interest realized from customers on delayed payment is to be treated as income from business as held in following decisions: CIT Vs. Govinda Choudhury & Sons 203 ITR 881 CIT Vs. Madras Motors Ltd. 257 ITR 60 (Mad) CIT Vs. Rane (Madras) Ltd. 238 ITR 377 17. We have considered the submissions of both the parties and perused the record of the case. We find that nature of interest receipt has not been examined by learned authorities and, therefore, keeping in view the various decisions relied upon by ld. Counsel for the assessee and the decision relied upon by ld. CIT(A), the nature of interest received is to be examined by assessing officer and to the extent the interest income is to be treated as income from business, in view of the decisions relied upon ld. Counsel for the assessee, only 90% of the said interest is to be excluded while computing deduction u/s 80HHC, treating the same as business income and not 100%. In view of this, we, therefore, restore this matter to the file of assessing officer to decide the issue de novo keeping in view....
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....eted the disallowance taking note of the fact that there was no delay in deposit of these amounts as per the submissions made by assessee. 23. We have considered the submissions of both the parties and perused the record of the case. The submissions made by ld. Counsel for the assessee before the ld. CIT(A) have not been controverted by the department. However, in any view of the matter, it is not disputed that before the due date of filing of the return, the amounts were paid. Therefore, we see no reason to interfere in the order of CIT(A), deleting the disallowance in question. Ground is dismissed. 24. Brief facts apropos to ground no. 2 are that assessing officer noticed that during the assessment year under consideration assessee company had incurred Rs. 187,66,712/- as commission on sales out of which he paid commission of Rs. 109,82,874/- for its 100% export oriented unit (EOU). He noted from the details that assessee company had paid a sum of Rs. 102,12,436/- to M/s Indus Pipe Lines (Mumbai), out of which Rs. 47,94,745/- pertained to 100% EOU. Since the commission amounting to Rs. 1.02 crores pertained to sales to the government departments, assessee was required to explai....
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....so filed confirmation of the receipt of commission of the aforesaid party. Payments were made through a/c payee cheques. The party was a regular income-tax assessee and its income tax particulars were also available on record. He also observed that party had shown total receipt of Rs. 2.94 crores. It had shown substantial commission income and filed its return of income declaring income of about Rs. 36 lakhs on which it had paid tax of Rs. 11.93 lacs. Considering all the factual aspects CIT(A) concluded that these transactions could not be called sham and the party was genuine. He further observed that M/s Indus Pipe Lines had rendered following services: "The pipes supplied to ONGC were made of low carbon steel. Quantity of steel was a very key factor as the pipes had to withstand the high pressure and temperature in transportation of oil. The same were imported as steel of that quality is not manufactured in the country. The party informed the appellant about reliable sources of such material at most economical prices. To provide time schedule for placement of purchase order so that timely material is received to avoid any delay in execution of order. This also optimizes invent....
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....e's appeal. 27. We have considered the submissions of both the parties and perused the record of the case. We find that similar issue has been decided by the Tribunal in earlier assessment years and the Tribunal has observed as under: "At the time of hearing before us, the learned representatives of both the sides have agreed that the issue under consideration involved in ground no. 1 of the Revenue's appeal is squarely covered in favour of the assessee and against the Revenue by the decision rendered by Delhi 'I' Bench of this Tribunal for AY 2002-03 vide an order dated 4.7.2008 passed in ITA no. 3879/Del/2005. A copy of the said order is also passed on record before us by the learned counsel for the assessee and a perusal of the same shows that a similar expenditure claimed by the assessee company on payment of commission to procure orders from government undertakings was disallowed by the AO in AY 2002-03 invoking explanation to Section 17(1). The said disallowance was subsequently deleted by the learned CIT(A) and when the matter came before the Tribunal, the scope and ambit of Explanation to Section 37(1) was considered by the Tribunal in the light of the facts of the case i....
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.... that the claim of the assessee company for higher deduction u/s 10B made on the basis of new method of allocation of interest expenses incurred at HO level to different units was rejected by the AO as the new method so adopted by the assessee company, according to him, was not appropriate in the facts and circumstances of the case. He also doubted the bona fide of the assessee in adopting the new method. The learned CIT(A), on the other hand, found the said new method adopted by the assessee to be more appropriate and also agreed with the stand of the assessee company that the change adopted by it was bona fide. After having perused the orders of AO as well as the learned CIT(A) and keeping in view the submissions made by the learned representatives of both the sides before us, we are inclined to agree with the decision of the learned CIT(A) on this issue. As explained on behalf of the assessee company before the learned CIT(A) as well as before us and accepted by the learned CIT(A) in his impugned order by giving an illustration, the method adopted by the assessee company earlier for allocation of interest expenses incurred at HO level to respective units on the basis of their tu....
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....basis of actual utilization of borrowed funds and as such utilization was worked out scientifically by taking the actual facts and figures, we are of the view that the learned CIT(A) was quite right in accepting the said working. It is pertinent to note here that even the AO also could not find any fault with the said working prepared and furnished by the assessee as pointed out by the learned CIT(A) in his impugned order and further emphasized by the learned counsel for the assessee at the time of hearing before us. As regards the objection raised by the AO initially in his order and further reiterated by the learned DR before us that major amount of loan was utilized for working capital, we find that even the current assets of the respective units were taken into account by the assessee company while working out the capital employed in the said units making the objection raised in this regard by the department totally unsustainable. As regards the doubt raised by the AO as well as by the learned DR about the bona fides of the assessee company in changing the method of allocation of interest expenditure incurred at HO level to different units, we are of the view that once the new....
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....ipts were derived from the industrial undertaking. The assessee had failed to establish the nexus between rental incomes, old store items, discount on DEPB, cash discount, guest house receipt services provided by hydra & EOT crane and other incomes with reference to its export business. 31.2. As regards balances written back also, the assessee had failed to bring on record any evidence that this was in respect of its turnover of the items in which the assessee was carrying out export business. The assessee had not established that the balance written back pertained to the year under consideration. He pointed out that the right to receive these amounts had already accrued on the date of sale itself. The receipt of money on account of write off and then settlement later on was only consequential. He, accordingly, excluded the above items from the profit for the purpose of deduction u/s 80HHC. 31.3. Before ld. CIT(A) the assessee submitted that all these incomes were business income and arose in normal course of carrying business activity of business export. It was further stated that expenditure relating to all these income had been debited in the P&L a/c and if income was excluded....