TaxTMI 
TaxTMI 
2012 (3) TMI 475
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....rofit u/s 115JB at Rs. 14,94,68,054/-. However, the assessment was completed after making various disallowances and additions at Rs. 9,60,28,040/- under normal provisions of the Act vide order dated 16.2.2004 passed u/s 143(3) of the Income Tax Act, 1961(in short the Act). The return for the assessment year 2002-03 was filed showing an income of Rs. 5,69,11,090/-. However, the assessment was completed after making various disallowances and additions at Rs. 11,03,79,400/- vide order dated 4.3.2005 passed u/s 143(3) of the Act. On appeal, the ld. CIT(A) partly allowed the appeals. 3. Being aggrieved by the order of the ld. CIT(A), the assessee and Revenue both are in appeal before us. ITA No.8387/Mum/2004(AY:2001-02)(by the assessee) 4. Ground No.1 taken by the assessee reads as under: "1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as 'the learned CIT(A)] erred in confirming the disallowance of interest relatable to earning Dividend Income u/s. 14A of the IT Act as the Appellant had huge own funds in the form of share capital and reserves to adequately cover the investment ....
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....er of the Tribunal (supra) wherein the Tribunal after considering the fund flow statement to show that interest free funds were actually available for making investment in shares held that "....Thus in our view, 2% of the dividend received should be attributed towards earning of the same....". Since there is no change to the facts of the present case and in the absence of any other distinguishing feature brought on record by the parties, we respectfully following consistent view of the Tribunal (supra) direct the AO to restrict the disallowance attributable towards earning of the dividend u/s 14A at 2% of the earning of dividend received. The ground taken by the assessee is, therefore, partly allowed. 9. Ground No.2 taken by the assessee reads as under : "2.1 The learned CIT(A) grossly erred in invoking Sec. 80IB(13) (erstwhile 80IA(9)) while calculating deduction u/s. 80HHC in view of the fact S. 8OHHC is a code in itself providing for a specific formula for computation of the deduction and there is no corresponding provision in sec. 80HHC to restrict the deduction. 2.2 The learned CIT(A) ought to have appreciated that the Appellant was entitled to merely30% deduction in ....
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....ance of PF and ESIC amounting to Rs. 11,647/- on the ground that there was a delay in making the payment as against due date. The ld. CIT(A) following certain decisions held that since the appellant has made PF payment even beyond grace period confirmed the disallowance made by the AO. 16. At the time of hearing, the ld. Counsel for the assessee submits that this issue is covered in favour of the assessee by the decision of the Hon. Supreme Court in the case of CIT V/s Alom Extrusions Ltd. (2009) 319 ITR 306 (SC), M/s Pik Pen Private Limited V/s ITO in ITA No.6847/Mum/2008 (AY: 2005-06) dated 28.1.2010 and CIT V/s AIMIL Limited (2010) 321 ITR 508(Del). 17. On the other hand, the ld. DR supports the order of the AO and the ld. CIT(A). 18. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that the assessee has paid above amount much before filing the return of income. This being so, we respectfully following the decision of the Hon'ble Supreme Court in Alom Extrusions Ltd. (supra) and the decision of the Hon'ble Delhi High Court in AIMIL Limited (supra), wherein it has been ....
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....preciation on such assets. 25. On appeal, the ld. CIT(A) while agreeing with the views of the AO confirmed the disallowance made by the AO. 26. At the time of hearing, the ld. Counsel for the assessee submits that the issue is covered in favour of the assessee by the order of the Tribunal in the assessee's own case in Aarti Industries Limited V/s ACIT and vice-versa (supra), therefore, the issue may be decided accordingly. 27. On the other hand, the ld. DR supports the order of the AO and the ld. CIT(A). 28. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the Tribunal in the assessee's own case for the assessment years 1999-2000 and 2000-01 (supra) vide paragraph 19 of its order while observing that the facts are not explicitly clear on this aspect, restored the issue to the file of the AO to re-examine this issue and decide the same afresh after giving an adequate opportunity of being heard to the assessee. Respectfully following the above decision of the Tribunal, we restore this issue to the file of the AO to examine the same afresh in the light of the direction of the Tribunal (supra....
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....n 36(1)(iii) of the Act and withdraw the depreciation. 34. At the time of hearing, the ld. DR supports the order of the AO. 35. On the other hand, the ld. Counsel for the assessee submits that the issue is covered in favour of the assessee by the decisions in (a) DCIT V/s Core Healthcare Ltd. (2008) 298 ITR 194 (SC), (b) CIT V/s Tata Chemicals Ltd. (2002) 256 ITR 395 (Bom) and (c) in assessee's own case in M/s Aarti Industries V/s DCIT and vice -versa in ITA No.5986/Mum/2003 and ITA No.6240/Mum/2003 (AY-1996-97) dated 30.11.2006. 36. We have carefully considered the submissions of the rival parties and perused the material available on record. At the outset we observe that it is settled law that when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice. Accounting practice cannot override section 56 or any other provision of the Act. We find merit that the issue is covered in favour of the assessee by the decision of Hon'ble Supreme Court in Core Health Car....
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....pany had already complied with the procedure and has been granted recognition certificate from the Department of Scientific and Industrial Research, Government of India (DSIR) in respect of its R&D Units at Vapi and Turbhe. However, the AO observed that the assessee company did not fulfill the conditions laid down u/s 35(2AB) of the Act and hence not eligible for weighted deduction. He further observed that the assessee company is however, is eligible for deduction u/s 35(1)(i) and 35(1)(iv) for the expenses incurred to the extent of Rs. 3,57,67,089/- for revenue expenses and Rs. 43,21,943/- for capital expenses which have been separately claimed by the assessee in the computation of income. Thus, the AO disallowed the excess deduction of Rs. 1,78,83,545/-. On appeal, the ld. CIT(A) observed that the appellant should not be allowed to suffer for the mere fact that the prescribed authority has issued the approval letter to appellant company on 6.7.2001, whereas the fact that the appellant company has incurred the expenditure for setting up the in-house R & D facility is not in doubt. He further observed that the approval granted by DSIR is operative from the date and year, ....
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....d the ld. CIT(A) was fully justified in allowing the same. The ground taken by the Revenue is, therefore, rejected. 47. Ground No.4 taken by the Revenue reads as under : "4. On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in directing the Assessing Officer not to recompute the deduction u/s.80IB of the IT. Act." 48. Brief facts on the above issue are that the AO noted that the assessee company has claimed deduction u/s 80IB for 9th year of Rs. 4,22,19,595/- in respect of profit derived from the Acid division. The AO after considering the assessee's chart of computation of deduction u/s 80IB observed that in the assessment year 2000-01 wherein the expenses under the head 'office & administrative expenses, 'selling & distribution expenses', 'interest & financial charges' and 'non-operating expenses' were allocated in the ratio of sales turnover of Acid division to the total turnover. On the same logic the AO for the year under consideration allowed the deduction u/s 80IB Rs. 4,08,70,251/- as against the assessee's claim of Rs. 4,22,19,595/-. On appeal, the ld. CIT(A) while observing that the appellant is following a sci....
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....(3) of the IT. Act." 53. Brief facts of the above issue are that the AO noted that the assessee company has claimed deduction u/s 80HHC as per proviso to sub-section 3 of section 80HHC on sale of DEPB licences claiming that same are export incentives covered u/s 28(iiia). However, the AO was of the view that the sale of DEPB licence are not covered u/s 28 (iiia) and accordingly not eligible for deduction as per proviso to sub-section 3 of section 80HHC. However, the same has to be excluded at the rate of 90% from the profits of the business computed under the head 'Profits and gains from business and profession' as per Explanation (baa) to sub-section 4B of section 80HHC. On appeal, the ld. CIT(A), however, directed the AO to treat profit on sale of DEPB license as export incentives and allow the deduction u/s 80HHC under proviso to section 80HHC(3) of the Act. 54. At the time of hearing, both the parties have agreed that this issue is covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT V/s Kalpataru Colours and Chemicals (2010) 328 ITR 451 (Bom) 55. We have carefully considered the submissions of the parties and perused the material avai....
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....sions of the rival parties and perused the material available on record. We find that the facts are not in dispute. The issue involve in the present case is no more res integra and is covered by the decision of the Hon'ble Apex Court in the cases of and CIT V/s Catapharma (India) P. Ltd. (2007) 292 ITR 641 (SC). In Lakshmi Machine Works (supra), it has been held that "just as interest, commission etc. do not emanate from the "turnover" so also excise duty and sales tax do not emanate from such turnover. Since excise duty and sales tax do not involve any such turnover, such taxes have to be excluded." Respectfully following the authoritative pronouncement of the Hon'ble Apex Court, we are not inclined to interfere with the order passed by the ld. CIT(A) on this account. The ground taken by the Revenue is, therefore, rejected. 61. Ground No.5(C) taken by the Revenue reads as under : "On the facts and in the circumstances of the case as well as in law, the Ld. CIT(A) has erred in directing the Assessing Officer not to reduce the Deduction u/s.80IB while working out the Profits of Business under Explanation (baa) of Section 80HHC while calculating deduction u/s.80HHC of the....
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....or deduction u/s 80HHC amounting to Rs. 5,70,69,195/-. The deduction was computed in the manner as prescribed under sub section (3) of Section 80HHC. The profits of the business for such computation was with reference to the book profits computed under Section 115JB and not taxable profits determined for the purpose of Income Tax Act, 1961. This was consistent with the CBDT circular No.680 dated 2.12.1994 and the legal position as prevailing in this regard. However, the AO determined the deduction under Explanation (iv) at Rs. Nil worked out with reference to the taxable profits of the business determined under the Act. On appeal, the ld. CIT(A) observed that the profits of the business for such computation should be with reference to the book profit computed u/s 115JB of the Act and not the taxable profits determined for the purpose of Income Tax Act, 1961 which is consistent with CBDT circular No.680 dated 2.12.1994 and the legal position in this regard and accordingly allowed the ground raised by the assessee. 68. At the time of hearing, the ld. DR supports the order of the AO. 69. On the other hand, the ld. Counsel for the assessee submits that this issue is covered in fa....
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....er hearing the rival parties and perusing the material available on record and keeping in view of our findings recorded in the assessee's appeal for the assessment year 2001-02 in the paragraph 28 of this order, we restore this issue to the file of the AO to examine the same afresh in the light of the direction of the Tribunal (supra) and according to law after providing reasonable opportunity of being heard to the assessee. The ground No.1 taken by the assessee is, therefore, partly allowed for statistical purposes. 76. Ground No.2 taken by the assessee reads as under : "2.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) grossly erred in confirming the disallowance of interest relatable to earning dividend income u/s. 14A of the I.T. Act as the Appellant had huge own funds in the form of share capital and reserves to adequately cover the investment in shares." 77. At the time of hearing, both the parties have agreed that the facts of the present issue are similar to the facts of the ground No.1 raised in the assessee's appeal for the assessment year 2001-02, therefore, plea taken by them in that appeal may be considered while deciding the....
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....Aarti Industries Ltd. V/s Add.CIT and vice-versa in ITA No.3013/Mum/2004 and ITA No.2998/Mum/2004 (AY:1997-98) dated 20.2.2007. The reliance was also placed on;- (a) Essar Steel Ltd. V/s DCIT (2005) 97 ITD 125 (Ahd) (TM), (b) Toyo Engineering India Ltd. V/s JCIT (2006)100 TTJ (Mum) 373, (c) Sterlite Industries (India) Ltd. V/s Addl.CIT (2006) 102 TTJ (Mum) 53, and (d) Goetze (India) Ltd. V/s DCIT (2007) 112 TTJ (Del) 1. 85. On the other hand, the ld. DR supports the order of the AO and the ld. CIT(A). 86. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the similar disallowance was made in the assessment years 1997 98, 1999-2000 and 2000-01. The Tribunal in the order dated 25.1.2008 for the assessment year 2000 01 vide paragraph 84 of the order while allowing the expenses on the basis of actually crystallized during the year, directed the AO to allow other expenses in the years to which these belong, if permitted by law. In the absence of any distinguishing feature brought on record by the assessee, we respectfully ....
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.... of section 80HHC in the absence of any approval received from the Reserve Bank of India in this regard for extension of time to bring such amount after such due date. On appeal, the ld. CIT(A) while agreeing with the views of the AO, confirmed the order of the Assessing Officer on this account. 92. At the time of hearing, the ld. Counsel for the assessee submits that the assessee has made application to the Reserve Bank of India but no order received till the date whereas the payment was received in the month of October 2003. He further submits that since the assessee has applied for the approval seeking extension of time to the Reserve Bank of India, therefore, the export proceeds should be treated as export turnover for the purpose of deduction u/s 80HHC of the Act. In this regard, the reliance was also placed in ACIT V/s Prakash L. Shah (2008) 115 ITD 167(MUM) (SB) and in M/s Diksha Technologies Pvt.Ltd. V/s DCIT and vice-versa in ITA NO.1064/B/2010 and ITA No.1113/B/2010(AY:2006 07) order dated 5.8.2011. He also placed on record the copy of the said order. 93. On the other hand, the ld. DR supports the order of the AO and the ld. CIT(A). 94. We have carefully consider....
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....sion of time, we hold that the AO and the ld.CIT(A) were not justified in reducing the unrealized export of Rs. 29,35,437/- from the export turnover for the purpose of deduction u/s 80HHC. The AO is directed to allow the deduction on the said amount of unrealized export. The ground taken by the assessee is, therefore, allowed. 96. Ground No.7 taken by the assessee reads as under : " 7.1 The learned CIT (A) erred in upholding the contention of the Assessing Officer by considering gross interest amounting to Rs. 29,98,048/- for computing 'profits of the business' for the purpose of S. 80HHC. The CIT(A) ought to have considered only the net interest income for the said purpose. 7.2 The learned CIT (A) erred in upholding the contention of the Assessing Officer by considering gross rent income amounting to Rs. 9,00,000/- for computing 'profits of the business' for the purpose of S. 8OHHC. The CIT(A) ought to have considered only the net rent income for the said purpose." 97. The brief facts of the above issue are that the AO observed that the assessee excluded 90% of interest income of Rs. 29,98,048/- while computing the profit of business as per Explanation (baa) to sub sec....
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....urther find that on the issue of netting of the interest the Tribunal following its earlier order for the assessment year 1997-98 has decided the issue in favour of the assessee vide paragraph 60 of its order dated 25.1.2008 (supra). 102. After considering the ratio of the above decisions to the facts of the present case, we find that the ld. CIT(A) has disallowed the claim of the assessee of netting of interest and netting of the rent on the ground that the assessee has failed to prove the nexus. However, on the issue of netting of interest, recently the Hon'ble Jurisdictional High Court in the case of CIT V/s Asian Star Co.Ltd. (2010) 326 ITR 56 (Bom) has distinguished the decision in Shri Ram Honda Power Equip (supra) and disapproved the decision of the Special Bench of the Tribunal in Lalsons Enterprises (supra) and held as under (headnote): "....Hence for the purpose of Explanation (baa) to section 80HHC the gross interest on fixed deposits in the bank received by the assessee should be considered for the purposes of working out the deduction under section 80HHC and not the net interest." Since in the earlier assessment years, the issue has been set aside by th....
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..... On the other hand, the ld.DR supports the order of the AO and the ld. CIT(A). 107. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that it has been held by the Hon'ble Supreme Court in IPCA Laboratories Limited (supra) (Head note): "......A plain reading of section 80HHC makes it clear that in arriving at profits earned from export of both self manufactured goods and trading goods, the profits and losses in both trades have to be taken into consideration. If after such adjustments there is a positive profit the assessee would be entitled to deduction under section 80HHC(1). If there is a loss the assessee would not be entitled to deduction.." ...... Section 80AB has been given an overriding effect over all other sections, in Chapter VI-A. Section 80HHC does not provide that its provisions are to prevail over section 80AB or over any other provision of the Act....." 108. In Sona Koyo Steering Systems Ltd.(supra) relied on by the learned counsel for the assessee it has been held that the loss of one such industrial undertaking could not be set off against the profit of the another such indust....
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....O should be struck down as without jurisdiction and bad in law." 113. At the time of hearing, the ld. Counsel for the assessee submits that he does not want to press additional ground No.1 taken by the assessee which was not objected to by the ld. DR. 114. That being so and in the absence of any other supporting materials placed on record by the ld. Counsel for the assessee, the additional ground No.1 taken by the assessee is, therefore, rejected being not pressed. 115. The additional ground No.2 taken by the assessee reads as under : "2.1 The loss from trading exports should be ignored while calculating deduction u/s 80HHC". 116. At the time of hearing, the ld. Counsel for the assessee submits that in view of the retrospective amendment brought in the section 80HHC by the Taxation Laws (Amendment) 2005, this ground does not survive which was not objected to by the ld. DR. 117. That being so and in the absence of any other supporting materials placed on record by the ld. Counsel for the assessee, the additional ground No.2 taken by the assessee is, therefore, rejected being not pressed. 118. The additional ground No.3 taken by the assessee reads as under....
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....y) stating that this issue was decided in the above said case in assessee's favour for A.Y. 1995-96. However, verification of the records for A.Y. 1995-96 in the case of M/s. Alechemie Organics Ltd., shows that this issue was merely set aside by the then CIT(A) to the file of the A.O., for further verification and the issue was not decided in assessee company's favour." 125. Brief facts on the above issue are that during the course of assessment proceedings the AO observed that the assessee company has claimed 100% depreciation on Effluent Treatment Plant purchased by the amalgamated company Alchemie Organic at Rs. 24,25,071/- for whole year and Rs. 21,44,680/- for half of the year. According to the AO Effluent Treatment System was not included on items on which 100% depreciation is allowed and hence treating the same as normal plant and machineries the AO allowed 25% and 12.5% depreciation respectively. On appeal, the ld. CIT(A) on perusal of the Appendix found that item used for water pollution control equipment are eligible for depreciation at 100% and accordingly directed the AO to allow depreciation at the rate of 100% on the above plant and machinery. 126. At ....
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....i Construction Pvt. Ltd., has categorically stated that the software expenses are in nature of capital expenditure and considering that the rate of obsolescence of software is high, the Act has allowed depreciation at the rate of 60%." 133. The brief facts of the case are that during the assessment proceedings it was observed that assessee had debited sum of Rs. 41,44,000/- under the head administrative expenses which was incurred for computer software expenses. The details of such expenses are given in para 7 of the order. According to the assessee it had installed SAP accounting package in place of Tally used earlier and the amount of such expenses did not result in enduring advantage to the assessee company and therefore it was submitted before the AO that such expenses should be allowed as revenue expenses. However, the AO taking clue from the decision of Hon'ble Rajasthan High Court in case of CIT V/s Arawali Constructions Co. (P.) Ltd. (2003) 259 ITR 30 (Raj) treated such expenses as capital expenses. On appeal, the ld. CIT(A) following the decision of the Tribunal in Dancal (India) Private Limited in ITA No.5644/Mum/1997, directed the AO to treat the expenditure as....
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....ine or the same are not for business purposes, we are of the view that the SAP accounting package was scraped by the assessee due to commercial expediency, therefore, the claim of the assessee as business expenditure was rightly allowed by the ld.CIT(A). The ground taken by the Revenue is, therefore, rejected. 137. Ground No.5 taken by the Revenue reads as under : "5. On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in directing the AO, to compute deduction u/s. 80IB without considering the allocation of non-operating expenses in respect of acid division for the purpose of computing deduction u/s 80IB" 138. Briefly stated facts are that the assessee company claimed deduction u/s 80IB in respect of its Acid division. The AO observed that while claiming the deduction for Acid division the assessee company though allocated expenses in respect of administrative and other financial expenses, it again added a sum of Rs. 29,43,634/- for the purpose of working out deduction u/s 80IB. However not satisfied with the method adopted by the assessee, the AO computed the deduction u/s 80IB after considering the allocation of non-operative....