TaxTMI 
TaxTMI 
2015 (7) TMI 559
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted 11-9-2007 in proceedings under sec. 143(3) r.w.s. 147 of the Act. The last assessment year 2004-05 involves assessee's yet another appeal ITA 1173/Ahd/2011 against the order of CIT-III Ahmedabad dated 28-3- 2011 in proceedings u/s.263 of the Act. 2. We proceed serial-wise in order of appeals for the sake of convenience and brevity. Assessee's appeal ITA 4135/Ahd/2007 Assessment Year 2000-01 3. This appeal raises following grounds: "1. In law and in facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in points of law and facts. 2. In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming issue of Notice u/s.148 of I.T. Act. 3.In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming re-assessment order passed u/s. 147 of I.T. Act. 4. In law and in facts and circumstances of the Appellant's case, the Id. Commissioner of Income-tax (Appeals) has erred in confirming vyaj badla income of Rs. 41,43,543 as interest income instead of short term capital gain. 5. In law and in facts and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r for this issue and the submissions made on behalf of the appellant are similar to those arising in other appeals of the cases of the same group. In all such cases the modus operandi is almost similar. In one of the cases namely Kisan Discretionary Family Trust in Appeal No.CIT(A) XII/CC 1(1)/87/03-04 the CIT(Appeals)-XII had vide appellate order dated 17- 12-2003 for A.Y. 2000-01 considered similar issue. The arguments raised on behalf of the assessee in that case were similar to those advanced in this case. The CIT (Appeals) has in that case confirmed the order of the A.O. holding that vyaj badala transactions are finance transactions and income arising therefrom is to be taxed as interest income. Following the said appellate order, I also confirm the action of the A.O. on this issue. This ground of appeal is, therefore, dismissed. 5. In ground No.6 it is submitted by the appellant that the income of Rs. 41,43,543/- is already included in the returned income as short term capital gain and now it is being assessed as interest income and thus it amounts to taxing the same income twice. On consideration of the facts of the appellant's case, I find that as observed in the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessee's appeal ITA 1173/Ahd/2011 Assessment Year 2005-06 11. The assessee submits in the course of hearing that in view of the Assessing Officer consequential order passed in furtherance to the CIT's Section 263 order under challenge, it does not wish to press the instant appeal. The Revenue does not raise any objection. We accept the assessee's above stated submission and dismiss the instant appeal as not pressed. 12. Assessee's appeal ITA 1173/Ahd/2011 is dismissed as having been rendered infructuous. Revenue's appeal ITA 1388/Ahd/2011 with Assessee's cross appeal no.1441/Ahd/2011 Assessment Year 1999-00 13. The Revenue's sole substantive grievance in its appeal is against CIT(A) order deleting depreciation disallowance of Rs. 1,49,43,270/- on sales tax incentive as made by the Assessing Officer in the course of re-assessment framed on 31.12.2007. The assessee's grounds challenge the lower appellate order upholding validity of the reopening in question. 14. The assessee-company started getting benefit of sales tax subsidy from the impugned assessment year onwards in respect of its detergent complex, Alindra and Soda S. Project (Chemical Complex) at Kalatalav, Bhavnagar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cumstances and affirm the CIT(A) findings under challenge. The Revenue's sole substantive ground fails. 17. The Revenue's appeal ITA 1388/Ahd/2011 is dismissed on merits. This renders the assessee's cross appeal no.1441/Ahd/2011 challenging validity of the reopening infructuous. Revenue's appeal ITA 1389/Ahd/2011 & Assessee's appeal ITA 1442/Ahd/2011 (Assessment Year 1999-00) 18. We come to the Revenue's appeal ITA 1389/Ahd/2011. Its first ground challenges the CIT(A) order directing the Assessing Officer to allow deduction u/s.80HH and 80IA on exchange rate difference (Mandali Division) of Rs. 1,56,350/-. We do not find any discussion much less an elaborate one in the Assessing Officer's order dated 28.12.2007. The CIT(A) holds that the assessee's plea of impugned deduction in respect of this exchange rate difference is covered by the tribunal's decision of the tribunal in Priyanka Gems vs. ACIT 94 TTJ 557 (Ahm.). The hon'ble jurisdictional high court has affirmed the said decision in its judgment reported as (2014) 367 ITR 575 (Guj.) CIT vs. Priyanka Gems and holds that such an income is directly related to assessee's export business and it could not be been removed beyond the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w nor commercial practice. The Tribunal was, therefore, not justified in holding that while computing deduction under section 80-1 of the Act, interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the industrial undertaking as the same cannot be stated to have been derived from the business of the industrial under taking". 20. We have confronted the Revenue a specific query to prove that the impugned sums of Rs. 12,96,576/- have not arisen from the assessee's trade debts. It replies in negative. Nor any infirmity is pointed out in the assessee's books of account. We follow the hon'ble jurisdictional high court decision in these facts and hold that once the assessee's interest in question has arisen from trade debtors, the same could not have been disallowed for the purpose of impugned deduction u/ss. 80HHC and 80IA of the Act. The Revenue's second substantive ground fails. 21. The Revenue's next ground is against the CIT(A) directions directing the Assessing Officer to excluded sales tax and excise duty while working out section 80HHC deduction. The same is stated to be in contravention of section 145A o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....confirming disallowance of expenditure Rs. 5,35,61,516 of Soda Ash project and Rs. 40,57,968 of LAB project. 7) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming disallowance of depreciation Rs. 39,00,750 on Soda Ash Project and Rs. 2,199 on LAB End Project. 8) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in holding that charging of interest u/ss.234B and 234C is consequential." 25. The assessee submits at the very outset that its grounds no.2 to 4 relate to interest on fixed deposits, loans, interest expenditure and reduction of expenses from the insurance claim for the purpose of deductions claimed u/ss. 80HH, 80HHC and 80IA of the Act. It quotes the decision of hon'ble jurisdictional high court in Tax Appeal No.358 of 2014 for A.Y.1998-99 and also the other judgment reported as (2014) 367 ITR 12 (Guj.) in its own case directing the authorities below to adopt netting formula i.e. the total receipts minus the expenditure incurred in relation thereto for the purpose of excluding it from the deduction claimed u/s.80HH or 80I in the light of the hon'ble....
X X X X Extracts X X X X
X X X X Extracts X X X X
....603/- has been rightly disallowed by both the lower authorities for want of necessary factual evidence. The assessee's corresponding ground is accordingly rejected. 29. The assessee's next substantive ground challenges the CIT(A) order confirming disallowance of expenditure of Rs. 5,35,61,516/- of soda ash project and Rs. 40,57,968/- of the LAB project. The Assessing Officer refers to the tribunal's direction in the earlier round of litigation holding that the common indirect revenue expenditure pertaining to existing as well as new units e.g. Auditor's fees, director's remuneration is allowable. The Assessing Officer noticed from details of both soda ash and LAB project and observed that no relief was allowable since none of the expenditure was of common indirect revenue nature. This resulted in the impugned disallowance of expenditure of Rs. 5,35,61,516/- relating to soda ash project and Rs. 40,57,968/- relating to LAB project. 30. The CIT(A) has also affirmed the Assessing Officer's findings in the order under challenge. He agreed with the assessee's submission that in A.Y. 1997-98 the tribunal had held identical expenses to be revenue in nature. However, he refers to the trib....
X X X X Extracts X X X X
X X X X Extracts X X X X
....date of such commencement. 33. We have heard rival contentions. The lower appellate authority draws a presumption that even if the assessee's assets are used during the construction of the project, depreciation in question cannot be allowed before commencement of the production. It does not give any specific after examining the assessee's books and other relevant supportive details. The assessee quotes hon'ble Madras high court decision (supra) and that of the tribunal in assessment year 1997-98 and 1998-99 allowing the very relief. We find that the hon'ble Madras high court dealt with a case of revenue expenditure arising from expansion of existing business units and not that of depreciation. Similar is the factual position in assessee's cases decided by the tribunal in assessment year 1997-98 and 1998-99 allowing identical claims of revenue expenditure. Therefore, we proceed to decide this issue independently. The Assessing Officer's order is silent on the impugned depreciation claimed. This is not the Revenue's case in appellate order that the assessee has not put its assets in question in ready to use condition even if its commercial production has not commenced. We quote the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....f. 01.06.2003 and thus, the provision was applicable only from A.Y.2004-05 onwards and not prior assessment years. 5.2 I have considered the facts and the submissions. I do not agree with the appellant's views. The CIT(A) vide order dated 27.08.2004 and 05.09.2007 has deleted the interest charged by following the Hon'ble ITAT Ahmedabad Bench decision in the case of S.K. Patel Family Trust where it was held that section 234D was introduced w.e.f. 01.06.2003 and not applicable to the earlier assessment years and also interest u/s.234B cannot be charged u/s.154 of the Incometax Act. However, this view of the Hon'ble ITAT has not been upheld by the Hon'ble High Court in the case of CIT vs Kerala Chemicals & Proteins Ltd. (323 ITR 584), has held as under: "Interest u/s.234D - chargeability - applicability of section 234D - Tribunal holding that interest under section 234D was not chargeable as the provision was applicable only from A.Y.2004-05 - not justified - section 234D was introduced w.e.f. 1st June, 2003 and not with reference to any assessment year - interest chargeable for the period from 1st June, 2003 till completion of regular assessment." Following thi....