AI Drafter 
TaxTMI 
TaxTMI 
2010 (8) TMI 984
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....nfirming the action of the AO in reducing 90 % of the following amounts from profits of the business for the purpose of computing deduction u/s. 80HHC of the Act on the ground that they do not constitute business income: a) Interest from hank on Margin Money 11,61,870 b) Interest on ICD given at the same rate at which the monies are borrowed by the company 9,64,740 c) Insurance Claim 3,42.628 Total Interest Income 24,69.438 The learned Commissioner of Income Tax (Appeals) erred in fact and in law in holding that gross amount of interest and other income is required to he excluded from the profits for the purpose of computing deduction u/s. 80HHC and no deduction should be granted for expenses incurred for earning the said income, 2. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in reducing the following amounts from income eligible for deduction u/s. 80IA of the Act on the ground that these incomes are not derived from industrial undertaking; Amount (Rs.) a) Interest from hank on Margin Money 11,61,870 b) Interes....
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.... business of manufacturing of Vacuum Insulated Tanks, Cold Converter System, Atmospheric Vaporisers and Cryo Containers etc. 4. The first issue relates to reduction of 90% of the amounts such as interest from bank on margin money, interest from ICD, insurance claim from the profits of business for the purposes of computation of deduction under section 80 HHC. 5. We have heard the parties and carefully perused the material on record. It was submitted by the ld. AR that this issue has been set aside by the Tribunal in Asst. Year 1999-00 in ITA No.1063/Ahd/2003 for Asst. Year 1999-00 and ITA No.823/Ahd/2003 Asst. Year 1999-00 pronounced on 23/01/2009 following the decision of Hon. Supreme Court in the case of Karnal Co-op. Sugar Mills Ltd. 243 ITR 02 (SC) in para 30 of their order. 6. The ld. DR on the other hand supported the orders of authorities below. 7. Respectfully following the above decision of the Tribunal, we restore the matter to the file of AO to decide the issue afresh after considering the decision of Hon. Supreme Court as referred above. 8. The issue regarding interest on inter corporate deposits and insurance claim received, has been confirmed by the Tri....
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....n u/s 80-IA of the Act." Accordingly, this part of the assessee's ground is allowed. 11. Lease rent on lease of assets manufactured by the assessee has been set aside to the file of ld. CIT(A) for fresh consideration in the previous year by the Tribunal as per para 10.2 of their order as under:- "10.2 Coming to lease rent income, we as per our observations against ground No.4 (supra), restore the issue back to the file of CIT(A) with the same directions." Accordingly, we also restore the issue to the file of ld. CIT(A) for fresh adjudication and also keeping in view the Hon. Apex Courts decision in CIT vs. K. Ravindran Iyer 295 ITR 228 (SC). Thus ground No.2 is partly allowed and partly allowed for statistical purposes. 12. Ground No.3 relates to rejection of claim of 100% EOU u/s 10B of the Act on the ground that no exemption u/s 10B is available to the assessee. 13. The ld. AR relied on the decision of Hon. Delhi High Court in CIT vs. Shri Ram Honda Power Equipment 289 ITR 475 for the proposition that netting should be allowed. However, Hon. Bombay High Court in the case of CIT vs. Asian Stars, Bombay, pronounced on 5th April, 2010 held that netting of exp....
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.... to exemption. Further, in other words, the onus on the assessee that it satisfies the conditions as laid down in section 10B as stood for Asst. Year 2001-02 is discharged in that year then assessee would be entitled to such exemption in all subsequent unexpired years notwithstanding that it satisfies the conditions in those subsequent years, or not. Thus if AO allows exemption to the assessee in one initial year year then assessee will be continued to be granted such exemption for next unexpired period without looking into whether it satisfies such conditions in such subsequent years. The ld. DR on the other hand opposed this contention put forward by the ld. AR and supported the order of CIT(A). 16. We have heard the rival submissions and perused the material on record. In our considered view the interpretation advanced by ld. A.R. is not correct. Income of every Asst. Year has to be computed in accordance with the provisions of the Act as existing for that Asst. Year. The applicability of the amended provisions has to be looked into and is to be seen whether assessee satisfies those conditions or not and whether it falls into charging section relevant to that Asst. Year. In o....
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.... a period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf. Explanation -1 -For the purposes of this sub-section the expression "competent authority" means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange. Explanation -2 - The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. Thus it has to be seen that assessee is bringing foreign exchange into India as a result of its export. The argument of the assessee is that other concerns to whom assessee has sold its product in India are bringing convertible foreign exchange in India through export of their product contained in the containers manufactured by the assessee. Thus products of the assessee in fact are exported by the other concerns and convertible foreign exchanges are brought by them into India.....
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....nce total turnover. 1(b) The CJT(A) also failed to take note of the definition of total turnover in clause (ba) of the Explanation below section 80HHC, excluding only freight & insurance up to the customs station, leaving the concept of total turnover to be understood as in common commercial parlance. 1(c) The CIT{A) failed to take note of the mandate of section 145A(b), inserted w.e.f, 1.4.1999, governing the computation of profits having inescapable bearing on the computation of deduction u/s.80HHC, which is made by apportioning the same profits in the ratio of export turnover to total turnover. 2(a) On the facts and In the circumstances of the case and in law, the CIT(A) erred in negating the exclusion of lease rent of Rs. 1,07,74,556/- from the profits of the business in the computation of deduction u/s 80 HHC on the sole ground that the lease rent was assessable as business income, without appreciating that Explanation (baa)(1) below section 80 HHC provides for exclusion of 90%, inter alia, of rent, only when the same was assessable as business income, i.e. under the head "Profits and gains of business or profession", as is clear from the words "incl....
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....over while computing deduction under section 80 HHC. 22. This issue is now directly covered in favour of the assessee by the decision of Hon. Apex Court in the case of CIT vs. Laxmi Machine Works 290 ITR 667(SC). Accordingly this ground of Revenue is rejected. 23. Ground No.2 is relates to exclusion of lease rent from the profits of the business in the computation of deduction under section 80 HHC. 24. This issue in assessee's appeal has been restored to the file of ld. CIT(A) and accordingly entire issue has to be examined by him afresh including the point raised by the Revenue. Accordingly, this ground of Revenue is allowed for statistical purposes. 25. Ground No.3 relates to exclusion of income from profits of the business while computing deduction u/s 80 HHC. This issue has been decided in favour of the assessee by following the decision of the Tribunal in assessee's own case in earlier year. Accordingly this ground of Revenue is rejected. 26. As a result, the appeal filed by the Revenue is partly allowed for statistical purposes. ITA No.282/Ahd/2007 Asst. Year 2001-02 (Assessee's appeal) 27. The assessee has raised the following grounds in this appeal :- ....
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....in confirming the action of the AO in applying the amended provision of section 10B of the Act, despite the fact that the appellant was entitled to exemption u/s. 10B for AY 2000-01 being the assessment year immediately prior to AY 2001-02, the assessment year in which the amended provisions were made effective. The learned Commissioner of Income Tax (Appeals) also erred in fact and in law in upholding the action of the AO in rejecting the claim of 100 % EOU u/s. 10B of the Act on the ground that no exemption u/s. 10B is available to the appellant as the entire sales are in domestic market and also the appellant has not received any sale proceeds in convertible foreign exchange. 5. The learned Commissioner of Income Tax (Appeals) erred in fact, and in law in confirming the disallowance of Rs. 8,003 being prior period expenses. 6. The learned Commissioner of Income Tax (Appeals) erred in. fact and in law in confirming the action of the AO in charging interest u/s. 234B and 234Dof the Act. 7. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in initiating penalty proceedings u/s. 27l(l)(c) ....
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....dismissed. 36. Ground No.5 relates to disallowance of prior period expenses. Following our order for Asst. Year 2000-01 we confirm the order of ld. CIT(A) and dismiss the ground of appeal filed by the assessee. 37. Ground No.6 is regarding charging of interest under section 234D. This issue is decided in favour of assessee following our order for Asst. Year 2000-01. ITA No.490/Ahd/2007 Asst. Year 2001-02 (Revenue's appeal) 38. The Revenue has raised the following grounds in its appeal:- 1(a) On the Facts and in the circumstances of the case and in law, the CIT(A) erred in directing to exclude excise duty of Rs. 3,23,51,323/- and sales tax of Rs. 1,00,69,057/- from the total turnover for the purpose of computing deduction u/s.80HHC, without appreciating the ratio laid down by the Supreme Court in the case of Chowringhee Sales Bureau P. Ltd vs CIT 87 ITR 542 (SC) and Sinclair Murray & Co P. Ltd. vs CET 97 ITR 615 (SC) holding that the collection of taxes forms part of trading receipts and hence total turnover, 1(b) The CIT(A) also failed to take note of the definition of total turnover fn clause (ba) of the Explanation below section 80HHC, excluding only....
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.... m case such receipt was assessable under the head "income from other sources", there was no question at all of any portion thereof entering into the computation of deduction U/s 80HHC. 3(b) CIT(A) failed to take note of the jurisdictional High Court decision In the case of Alembic chemical Works Ltd. vs. CIT 266 ITR 47 (Guj) specifically holding such miscellaneous incomes as excludible to the extent of 90% in the computation of deduction u/s 80HHC besides the decisions in the case of CIT vs. K.K. Doshi & Co. 245 ITR 849 (Bom) and CIT vs Kantilal Chhotalal 246 ITR 439 (Bom) holding that 90% of all receipts which do not form part of turnover are excludible under the Explanation (baa) that was enacted in order to remove distortion in the working of profits derived from the export by apportionment of the profits of the business in the ratio of export turnover to total turnover, which envisages entire profits as arising from turnover, 39. Ground No.1 of Revenue's appeal relates to exclusion of sales-tax and excise duty from total turnover while computing deduction under section 80 HHC. 40. This issue has been decided in favour of the assessee in Asst. Year 2000-01 follow....
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.... It is submitted that all the above incomes including of repairing activity and installation and lease is business activity form an integral part of the manufacturing activity and hence has to be treated as income derived from industrial undertaking and therefore eligible for deduction u/s 80lA of the Act. 3. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in excluding various incomes from the profits and gains from business or profession and from profits derived from industrial undertaking for computing the deduction u/s. 80HHC and 80IA respectively on the basis of "gross receipts" thereof and in not allowing any expenditure incurred for earning the respective income, 4. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in reducing deduction claimed u/s. 80IA from the profit of the business while calculating deduction u/s.80HHC of the Income Tax Act, 1961. 5. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in applying the amended provision of section 10B of the Act, despi....
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.... order for the Asst. Year 2000-01. 47. The issue regarding interest on income-tax refund cannot be considered at par as interest from business and therefore, this will not come into computation of deduction u/s 80 HHC at all. This part of the ground is rejected. 48. Ground No.2 relates to deduction of interest and other income from the income eligible for deduction under section 80IB. 49. Similar issue had arisen in the case of assessee for Asst. Year 2000-01 wherein we have confirmed the order of AO in respect of interest from bank on margin money, interest from ICD and interest from IDBI omni bonds. Following our decision in Asst. Year 2000-01 we confirm the order of the AO in respect of interest from bank on margin money and interest from ICD. However, the issue relating to insurance and income from operation is allowed in favour of assessee following our order for Asst. Year 2000-01. 50. The issue regarding lease rent on lease of assets manufactured by the assessee is restored to the file of AO following our order in Asst. Year 2000-01. This ground of assessee is partly allowed and partly allowed for statistical purposes. 51. Ground No.3 relates to reduction o....
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....It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer's account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off." We restore the matter to the file of AO to verify whether the amount has been actually written off and then decide the issue in accordance with the decision of Hon. Apex Court in TRF Ltd. vs. CIT (supra). Accordingly, this issue is allowed for statistical purposes. 59. Ground No.8 is regarding charging of interest u/s 234D of the Act. This ground is decided in....
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....n of deduction u/s 80HHC, besides the decisions in the case of CIT vs K.K. Doshi & Co. 245 ITR 849 (Bom) and CIT vs Kantilal Chhotala 246 ITR 439 (Bom), 3(a) On the facts and in the circumstances of the case and in law, the CIT(A) erred in negating the exclusion of income of P.s.81,84,014/- from repairs and other service charges shown under the head 'operations', from the profits of the business in the computation of deduction u/s 80HHC, on the sole ground that the same was assessable as business income, without appreciating that Explanation (baa)(l) below section 80HHC provides for exclusion of 90% of "charges" and "any other receipt of a similar nature", only when the same were assessable as business income, i.e. under the head "Profits and gains of business or profession", as is clear from the words "included in such profits" in this Explanation and, in case such receipt was assessable under the head "Income from other sources", there was no question at all of any portion thereof entering into the computation of deduction u/s 80HHC, 3(b) CIT(A) failed to take note of the jurisdictions! High Court decision in the case of Alembic Chemical Works Ltd. vs CI....
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....grounds in this appeal :- 1. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in reducing 90 % of the following amounts from profits of the business for the purpose of computing deduction u/s. 80HHC of the Act on the ground that they do not income a) Interest from bank on Margin Money 15,05,952 b) Interest on ICD given at the same rate at which the monies are borrowed by the company 6,00,000 c) Interest on Income Tax Refund 1,39,365 d) Sales Tax refund and interest thereon 3,47,275 e) Lease Rent 54,66,8666 f) Income from Operations 56,01,175 The learned Commissioner of Income Tax (Appeals) erred in fact and in law in not giving any decision on item nos. (e) and (f) above despite the fact that specific grounds were taken by the appellant and also submissions were made at the time of hearing. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in holding that gross amount of interest and other income is required to be excluded from the profits for the purpose of computing deduction u/s. 80HHC and no deduction shou....
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....al for Asst. Year 2000-01 wherein we have decided the same. Following our order for Asst. Year 2000-01 we confirm the order of ld. CIT(A) and dismiss the ground of appeal filed by the assessee. 73. Ground No.4 relates to charging of interest u/s 234D of the IT Act. Similar issue came up for adjudication before us in assessee's own appeal for Asst. Year 2000-01 wherein we have decided the same. This issue is decided in favour of assessee following our order for Asst. Year 2000-01. ITA No.492/Ahd/2007 Asst. Year 2003-04 (Revenue's appeal) 74. The Revenue has raised following grounds in this appeal:- 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing to exclude excise duty of Rs. 1,71,77,281/- and sales tax of Rs,60,75,207/- from the total turnover for the purpose of computing deduction u/s 80HHC, without appreciating the ratio laid down by the Supreme Court in the case of Chowringhee Sales Bureau P. Ltd vs CIT 87 ITR 542 (SC) and Sinclair Murray & Co. P. Ltd. vs CIT 97 ITR 615 (SC) holding that the collection of taxes forms part of trading receipts and hence total turnover. 2. The CIT(A) also failed to take note o....
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.... profit of the business on the ground that they do not constitute business income. Particulars Amount (Rs.) Interest on Margin money 7,24,039/- Interest on IT Refunds 2,56,738/- Interest on NSC 933/- TOTAL 9,81,760/- b. The CIT(A) erred in fact and in law in confirming action of the AO in holding that gross amount of interest and other income which is required to be excluded from the profits for the purpose of computing deduction u/s. 80HHC and no deduction should be granted for expenses incurred for earning the said income. 2. The learned CIT (A) erred in fact end in law in confirming action of the AO in applying the amended provision of section 10B of the Act despite the fact that the appellant was entitled to exemption u/s 10B of the Act, for assessment year 2000-2001 being the A.Y. immediately preceding the A.Y. 2001-02, the A.Y. in which the amended provision were made effective. The learned Assessing officer erred in fact and in rejecting the claim of 100% EOU u/s 10B of the Act, on a mistaken ground that no exemption u/s 10B is available to the appellant as the entire sales are in domestic market and also the....
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.... 1(a) On the facts and in the circumstances of the case and in law, the ld. C1T(A) erred in deleting the addition of Rs. 6,37,345/- on account of expenditure incurred on ceiling renovation, construction of road and boundary wall, concrete flooring etc. treated as capital expenditure by the assessing officer. (b) The Id. CIT(A) failed to appreciate that renewal, replacement or modification of an asset or part of an asset cannot be treated as allowable expenditure under the Income-tax Act, though as per accounting norms, these could be treated as revenue expenditure or current expenditure in the light of the Supreme Court decision in the case of Ballimal Naval Kishore vs CIT 224 1TR 414 and CIT vs Saravana Spinning Mills Pvt. Ltd., 293 ITR 201(SC). 2(a) The Id. CIT(A) erred in negating the exclusion of lease rent of Rs. 52,30,180/- from the turnover of the business in the computation of deduction u/s 80HHC, without appreciating that Explanation (baa) (1) below section 80HHC provides for exclusion of 90% of rent and other non-business income including receipts from exchange rate fluctuations. (b) The ld. CIT(A) erred in negating the exclusion of income o....
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....lates to exclusion of lease rent from the turnover of the business in the computation of deduction u/s 80 HHC. 95. The issue of lease rent on lease of assets manufactured by the assessee has been set aside to the file of ld. CIT(A) for fresh consideration in the previous year by the Tribunal as per para 10.2 of their order as under:- "10.2 Coming to lease rent income, we as per our observations against ground No.4 (supra), restore the issue back to the file of CIT(A) with the same directions." Accordingly, we also restore the issue to the file of ld. CIT(A) for fresh adjudication and also keeping in view the Hon. Apex Courts decision in CIT vs. K. Ravindran Iyer 295 ITR 228 (SC). Thus ground No.2 is partly allowed and partly allowed for statistical purposes. 96. Ground No.2(b) relates to exclusion of income from profits of the business while computing deduction u/s 80 HHC. Similar issue came up before us for consideration in Revenue's appeal for Asst. Year 2000-01. The same has been decided in favour of the assessee by following the decision of the Tribunal in assessee's own case in earlier year. Accordingly this ground of Revenue is rejected. ITA No.148/Ahd....
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....their leaving the factory gate was debited in the profit and loss account. Further a sum of Rs. 4,44,608/- being excise duty was paid on free sale to a Research Unit of Government of India. As per Excise Law assessee takes the benefit of 8-10% of the duty as MODVAT on raw material and if it does not charge any excise duty on sale of product then such 8-10% excise duty on sale has to be recovered from the customers. Since it was a free sale to the Research Unit of Government of India no excise duty was charged on such free sale then MODVAT component had to be debited in the profit and loss account and adjusted in the MODVAT a/c. Thus it becomes additional cost to the company. Similarly a sum of Rs. 3048/- was also paid as excise duty for repairing the product on behalf of the customer. The MODVAT a/c has to be adjusted by debiting in the profit and loss account as it was also a free replacement. The AO, however, took the view that assessee has been following exclusive method in accounting for the excise duty i.e. excise duty is separately accounted whether paid or received but in this case assessee has adopted inclusive method by debiting the same to the profit and loss account. He ....
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.... a mistaken ground that no exemption u/s 10B is available to the appellant as the entire sates are in domestic market and also the appellant has not received any sale proceeds in convertible foreign exchange. 3. The learned Commissioner of Income Tax (A) erred in fact and in law in charging penalty u/s 271(1)(c) of the Income-Tax Act, 1961. 4. The learned Commissioner of Income Tax (A) erred in fad and in law in charging interest u/s 234C. 234D, & 244 of the Income-Tax Act, 1961. 107. Ground Nos.1 & 2 relate to claim of exemption u/s 10B. This issue came up for consideration before us in assessee's own appeal for Asst. Year 2000-01. We have decided the same against the assessee in that Asst. Year. Following the above order of the Tribunal, this issue is decided against this assessee this year also. 108. Ground No.3. relates to charging of penalty u/s 271(1)(c) of the I.T. Act, 1961. 109. This issue is pre-mature and hence it is rejected. 110. Ground No.4 relates to charging of interest u/s 234C, 234D & 244 of the Act. 111. The issue regarding charging of interest u/s 234C & u/s 244 of the Act is consequential in nature and will depend upon the asses....