TaxTMI 
TaxTMI 
2014 (8) TMI 1032
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....rned AO be directed to allow the claim of Rs. 7,42,992/- and to reduce the total income accordingly. 2. Without prejudice to the claim of appellant that no addition of MODV A T (CENV A T) to be made in closing stock in A Y 2002-03 as held by CIT(A). However if it is held that closing stock for AY 2002-03 to be increased by CENVAT of Rs. 5,87,21,072 as held by AO, then opening stock in AY 2003-04 shall also be increase by CENVAT of Rs. 5,87,21,072. The AO may be directed accordingly. 3. Without prejudice to the claim of the appellant that the deduction claimed uls.36(1)(iii) for interest on loans taken for new projects/expansion/modernization during assessment years 1994- 95 to 1999-2000 is revenue expenditure, however, if it is held in those years that the said expenditure is not revenue expenditure, the appellant claims that the said expenditure be capitalized to the actual cost of fixed assets and depreciation be allowed on the same and to reduce the total income accordingly. 4. That, on the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing Rs. 2,48,12,593/- u/s 43B(f) being provision made for leave salary and learned CIT (A))....
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....(A) has erred in confirming the order of the learned AO. The learned AO be directed to delete the disallowance of Rs. 36,05,953, increase the deduction U/S 80lA & 80lB by Rs. 36,05,953 and to reduce the total income computed under normal provisions of the Act. 10. a) On the facts and in the circumstances of the case and in law, the learned AO has erred in adjusting unabsorbed depreciation of Rs. 28,17,40,867 from the current year's income from business or profession for the purpose of calculating deduction u/s 80HHC and thereby reduced deduction u/s 80HHC claimed by the appellant. The learned CIT(A) has erred in confirming the order of the learned AO. The learned AO be directed to allow deduction U/S 80HHC as claimed by the appellant and reduce the total income computed under the normal provisions of Income Tax Act as well as u/s 1151B accordingly. b) On the facts and in the circumstances of the case and in law, the learned AO has erred in holding that export incentives in the form of sale proceeds of DEPB of Rs. 5,81 ,80,230 are not eligible for deduction u/s 80HHC of the Act. Further, The learned AO has erred in rejecting the claim of the appellant that only 90% of prof....
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....1,71,99,694/-. 14. On the facts and in the circumstances of the cases and in law, the learned CIT(A) has erred in not entertaining the additional ground to direct the AO to exclude from taxable profit, the sales tax exemption benefit of Rs. 5,17,28,688/-, the learned CIT(A) be directed to accept the ground of appeal and the learned AO be directed to exclude the sales tax exemption amount of Rs. 5,17,28,688/- from the taxable income. 15. Without prejudice to the claim of the appellant company that no TDS was applicable u/s 195 on fees paid to lead managers to the issues during AY 1994-95 as also held by Hon'ble ITAT and If in department appeal at higher level, it is held that withholding tax on fee paid to lead manager is required to be deducted - then the deduction u/s 35D should be allowed to the appellant. 16. On the facts and in the circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 and CIT (A) dismissed the ground as premature in nature. The learned AO be directed to drop the penalty proceedings initiated u/s 271 (1)(c). 17. The appellant reserves the right to add, alter, ame....
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....A) has erred in confirming the order of the learned AO. The learned be directed to delete the disallowance of Rs. 38,57,757/- increase the deduction U/S 80IA & 80IB by Rs. 38,57,757/- and to reduce the total income computed under normal provisions of the Act. 7. On the facts and in the circumstances of the case and in law, for the purpose of calculating deduction u/s 80HHC of the Act the learned AO has erred in reducing entire sale proceeds of DEPB licenses i.e Rs. 40,91 ,641, rejecting the claim of the appellant that only 90% of profit on transfer of DEPB be reduced from export incentives. The learned AO be directed to allow deduction u/s 80HHC without reducing sale proceeds of DEPB (as appellant has suffered loss of Rs. 1358 on sale of DEPB) and reduce the total income accordingly. 8. Without prejudice to the claim of the appellant that the deduction claimed u/s.36(1 )(iii) or interest on loans taken for new projects/ expansion /modernization during assessment years 1995- 96 to 1999-2000 is revenue expenditure, however, if it is held in those years that the said expenditure is not revenue expenditure, the appellant claims that the said expenditure be capitalized to the actu....
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....that no addition of MODV A T (CENV A T) to be made in closing stock in A Y 2004-05 as held by CIT(A). However if it is held that closing stock for AY 2004-05 to be increased by CENVAT of Rs. 7,15,73,598 as held by AO, then opening stock in A Y 2005-06 shall also be increase by CENV A T of Rs. 7,15,73,598. The AO may be directed accordingly. 2. That, on the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing Rs. 2,16,16,918/- U/S 43B(f) being provision made for leave salary and learned CIT(A) has erred in confirming the order of the learned AO. The learned AO be directed to allow the deduction of Rs. 2,16,16,9181- and to reduce the total income accordingly. 3. That, on the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing depreciation of Rs. 1,40,85,022 claimed by the appellant on goodwill of Rs. 20.35 crores acquired on acquisition of 'Madura Garments' division from Madura Coasts Ltd. on a going concern basis and learned CIT(A) has erred in confirming the order of the learned AO. The learned AO be directed to allow the depreciation on goodwill and to reduce the total income accordi....
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....ngly. 9.On the facts and in the circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 and CIT (A) dismissed the ground as premature in nature. The learned AO be directed to drop the penalty proceedings initiated u/s 271(1)(c) 10.The appellant reserves the right to add, alter, amend and delete the above ground/s at or before the time of hearing." AO has filed following grounds of appeal: ITA/616/Mum/2009-AY.2003-2004: 1. "On the facts and circumstances of the case and in law the Ld CIT(A) erred in deleting addition of Rs. 2,80,263/- made by the Assessing Officer on account of expenses incurred in live stock without appreciating that the issue of business expediency is not proved before the Assessing Officer." 2. "On the facts and circumstances of the case and in law the Ld CIT(A) erred in deleting the amount of Rs. 5,04,24,066/- being the MODVAT credit available to the assessee without appreciating the provisions of section 145A of the I.T.Act." 3. "On the facts and circumstances of the case and in law the Ld CIT(A) erred in deleting amount of Rs. 5,43,4601- relating to deductio....
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....Following are the grounds for cross objections. CO/117/Mum/2009-AY.2003-2004: 1.That,on the facts and circumstances of the case and in law the learned Assistant Commissioner of Income Tax (hereinafter referred to as "AO") has erred in not increasing opening stock by an amount of Rs. 5,87,21,092 on account of addition made to closing stock on account of MODVAT credit during the previous year relevant to assessment year 2002-03 and the learned Commissioner of Income Tax (Appeals) Central-II has erred in confirming the action of the learned AO. The learned AO be directed to allow the claim of deduction of MODVA T credit of Rs. 5,87,21,092 and to reduce the total income of the appellant accordingly. 2. The appellant reserves the right to add, alter, amend and delete the above ground/s at or before the time of hearing. CO/118/Mum/2009-AY.2005-2006: 1.That,on the facts and circumstances of the case and in law the learned Assistant Commissioner of Income Tax (hereinafter referred to as "AO" has erred in not increasing opening stock by an amount of Rs. 7,15,73,958 on account of addition made to closing stock on account of MODVAT credit during the previous year rele....
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.... Returned Income Assessment date Assessed Income Dt.of CIT(A) order 2003-04 01.12.2003 35,93,01,389/- 31.01.2006 9,11,83,630/- 26.11.2008 2004-05 28.10.2004 104,84,05,543/- 24.11.2006 34,42,94,490/- 26.11.2008 2005-06 24.10.2005 110,22,79,994/- 05.03.2007 1,20,04,69,950/- 26.11.2008 ITA/660-62,616-18& CO-AYs.03-04-05-06,Adita Birla Nova Ltd. As most of the grounds of appeal are common or almost identical, so for the sake convenience, we are adjudicating all the appeals by a single common order.We would like prepare a chart of common gounds. Issue Ground of Appeal (G.) no. & AY. Depreciation of goodwill of ongoing concern G.5-2003-04,G.9-2004-05,G.3-2005-06 Provisions made for the leave salary u/s.. 43f G.4-2003-04,G.2-2004-05,G.2-2005-06 Deduction u/s. 80IA and 80IB G.9-2003-04,G.6-2004-05,G.4-2005-06 Disallowance of eligible claim u/s.10IA/10IB G.6-2003-04,G.3-2004-05 Enhancement/ withdrawal of 10B exemption G.8-2003-04,G.4-2004-05 Eligibility of DEPB-80HHC G.10(b)-2003-04,G.7-2004-05 Common grounds raised by the AO Deletion of unutilised Modvat Credit G.2-2003-04,G.1-2004-05,G.1-2005-06 Rural Development G.2-2004-05,G.2-2005-06 ....
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.... the year 2002-03 (supra). 4.1.We find that Tribunal in its order has decided the isuse as under: "15.7.We have carefully perused the orders of the lower authorities and the claim of the assessee vis-à-vis Sec.43B(f).A perusal of Sec. 43B(f) shows that the explanation to Sec. 43B referring to the amendment of the word any sum payable is applicable only for clause (a) of Sec.43B which means that it is not applicable for clause (f).Hon'ble Andhra Pradesh High Court in the case of Srikakollu Shubbarao & Co.173 ITR 708 has held that in order to apply the provisions of Sec. 43B not only should be the liability to pay the tax or duty be incurred in the accounting year but also should be statutorily payable in the accounting year. In our considered opinion, the provision for leave salary is not a statutory liability but only a contractual liability which is payable only if the employees resigns or retired from the services.We also find that the Hon'ble Calcutta High Court in the case of Excide Industries Ltd. (supra) has struck down Sec. 43B(f) being arbitrary, unconscionable and dehors the Apex Court decision in the case of Bharat EarthMovers 245 ITR 428. It is relevant to s....
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....e expenses, expenses of Rayon Division and interest income. Ground No. 9 is allowed." Respectfully following the above order,we decide grounds no.9,6 and 4 in favour of the assessee for the AY.s.2003-04to2005-06. 6.Issue of deduction in exemption u/s. 10B towards allocation of head office expenses/expense of other division and interest income earned by 100% E.O.U. under normal income and MAT provisions.The issue is subject matter of appeal for the AY 2003-04 and 2004-05 and the amounts involved are Rs. 1,42,544/- and 1,10,488/-. AR brought to our notice that Tribunal had in the order for the AY 2002-03 has decided the issue in favour of the assessee-company while deciding ground no.9 for that year. 6.1.While deciding the earlier common grounds of appeal no.3,at paragraph no.5.1.we have reproduced the order of the Tribunal for the earlier year where the issue of interest income earned by the 100%EOU and allocation of head office expenses of other division have been decided in favour of the assessee-company.Considering the above ground no.6 and ground no.3 for the AY.s.2003-04 and 2004-05 are decided in favour of the assessee. 7.Enhancement and withdrawal of exempt....
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....in the case of Topman Exports(342 ITR 49).We find that while deciding the appeal in the case of Topman Exports (supra) the Hon'ble Apex Court has dealt with the issue as under:- "The objective of the Duty Entitlement Passbook Scheme (DEPB) is to neutralize the incidence of customs duty on the import content of the export products. Hence, it has direct nexus with the cost of the imports made by an exporter for manufacturing the export products. The neutralization of the cost of customs duty under the DEPB credit scheme, however, is by granting a duty credit against the export product and this credit can be utilized for paying customs duty on any item which is freely importable. The DEPB credit is issued against the exports to the exporter and is transferable by the exporter. The DEPB credit is "cash assistance" receivable by a person against exports under the scheme of the Government of India and falls under clause (iiib) of section 28 of the Income-tax Act, 1961, and is chargeable to income-tax under the head "Profits and gains of business or profession" even before it is transferred by the assessee. Under clause (iiid) of section 28, any profit on transfer of the DEPB cr....
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....ome. Sub-section (3)(a) of section 80HHC provides that where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such exports shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. Explanation (baa) under section 80HHC states that "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced, inter alia, by ninety per cent. of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28. Thus, ninety per cent. of the DEPB credit which is "cash assistance" against exports and is covered under clause (iiib) of section 28 will get excluded from the "profits of the business" of the assessee if such the DEPB credit has accrued to the assessee during the previous year. Similarly, if during the same previous year, the assessee has transferred the DEPB credit and the sale value of such the DEPB credit is more than the face value of the DEPB credit, the difference betwe....
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.... sum referred to in clause (iiib) of section 28 of the Act. The second proviso to sub-section (3) of section 80HHC states that in the case of an assessee having export turnover not exceeding Rs. 10 crores during the previous year, after giving effect to the first proviso, the export profits are to be increased further by the amount which bears to ninety per cent. of any sum referred to in clauses (iiid) and (iiie) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee. The third proviso to sub-section (3) states that in the case of an assessee having export turnover exceeding Rs. 10 crores, similar addition of ninety per cent. of the sums referred to in clause (iiid) of section 28 can be made only if the assessee has the necessary and sufficient evidence to prove that (a) he had an option to choose either the duty drawback or the duty entitlement pass book scheme, being the duty remission scheme ; and (b) the rate of drawback credit attributable to the customs duty was higher than the rate of credit allowable under the duty entitlement pass book scheme, being the duty remission scheme. Therefore, if the as....
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..../M/03.As no distinguishing facts have been brought on record, respectfully following the decision of the Tribunal in assessee's own case as mentioned hereinabove, we direct the AO to allow the expenditure of Rs. 6,37,883/- incurred on Rural Development. Ground No. 1 is accordingly allowed." Considering the orders for the earlier years of the Tribunal,we decided ground no.1 in favour of the assessee-company. 10.Ground no.10(a), and 10(c) deal with deduction made u/s. 80HHC of the Act.10(a) is about adjustment of brought forward unabsorbed depreciation of Rs. 28.17 lakhs.Before us,AR fairly conceded that issue was decided against the assessee by the judgment of the Hon'ble Supreme Court delivered in the case of Ipca Laboratories Ltd.(266ITR521).Respectfully,following the order of the Hon'ble Apex Court,ground no.10(a) is decided against the assessee. 10.a.Last ground(10c)related with computation of 80HHC is about deduction u/s. 10B vis-à-vis deduction u/s. 80HHC and the amount involved is 10.76 lakhs.Before us,AR stated that issue stands covered by the order of the Hon'ble jurisdictional High Court in the case of Associates Capsule (197Taxman 84).We find t....
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....ut deduction u/s 115JB of the Act of Rs. 31.71 crores,being deduction u/s. 80HHC.Representative of both the sides agreed that in the earlier years,including AY.2002-03, the matter was restored back to the file of the AO to recompute the deduction as per the decision of Bharat Information Technology System Pvt. Ltd. (340ITR593) delivered by the Hon'ble Supreme Court. We find that in paragraph 25 of the order for the AY 2002-03 the tribunal has dealt with the issue as under: "25.This issue has been decided by the Tribunal in assessee's own case in A.Y. 2000-01 in ITA No.5422/M/05. We find that the Tribunal has considered an identical issue at para-66 of its order and at para-70, the Tribunal has set aside this issue and directed the AO to recompute the deduction u/s. 80HHC under MAT provisions as per law and keeping in view the decision in the case of Bharati Information Tech. Pvt. Ltd. 340 ITR 593. As no distinguishing facts have been brought before us, respectfully following the decision of the Co ordinate Bench as mentioned hereinabove, we direct the AO to recompute the deduction as per provisions of the law and in line with the decision in the case of Bharati Information T....
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....le would depend on order giving effect of the Tribunal orders of earlier years.Considering the facts,AO is directed to pass necessary orders,if he has not passed the till date.Ground no.10 is allowed for statistical purposes. 16.In the appeals filed by the AO,there are two grounds of appeal,that are common.First we would like to adjudicate them.Grounds no.2,1 and 1 for the AY.s.2003-04,2004-05 and 2005-06 deal with deletion of unutilised Modvat Credit in closing stock and amounts involved are Rs. 5. 04 crores,Rs.7.15 crores and Rs. 7.03crores respectively for the AY.s.concerned. 16.1.Before us,DR and AR agreed that the issue has been already decided in favour of the assessee by earlier years' order including the order for the AY.2002-03.We find that while deciding the identical issue for the immediate previous assessment year, the Tribunal had dismissed the appeal of the AO.Besides,the issue of MODVAT credit has been finally settled by the case of Indo Nippon Chemicals Co.Ltd.(261ITR275)by the Hon'ble Apex Court.Here is the decision of the Hon'ble Court: "It is not open to the Assessing Officer to treat outgoings as income under section 145 of the Income-tax Act, 1961.What....
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....lopment against the AO for the both the AY.s. Now,we will discuss the individual grounds taken by the AO for particular AY.s. ITA/616/Mum/2009-AY.2003-04: 18.Ground no.1 for the year is about deletion of expenditure incurred on live stock of Rs. 2.80 lakhs.Before us,DR supported the order of the AO. AR stated that claim made by the assessee had been allowed by the FAA from assessment year 1998-99 onwards and department had accepted the same.He referred to the order of Birla NGk Insulators Pvt. Ltd.(ITA No.3239/ Mum/2006- AY.2003-04,dated 29.02.2012). 18.1.We find that in the case of Birla NGk Insulators Pvt. Ltd. (supra) has been discussed as under: "43.Ground no.2, in Revenue's appeal is on the issue of disallowance of maintenance of livestock. 44.The Assessing Officer disallowed the expenditure on the ground that the expenditure on the ground that maintenance of livestock and sale of milk is not the business of the assessee. 45.On appeal, the Commissioner (Appeals) allowed the allowed the expenditure holding as follows:- "57. The submission made by the appellant's representative has been considered. Clearly the appellant has in the instant case incurred addition....
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....Hon'ble Apex Court has discussed the issue as under: "Section 80AB of the Income-tax Act, 1961, specifying that profits are those as determined for the purpose of the Act, will apply for determining profits from export business for the purposes of the deduction under section 80HHC." Following the above decision,we confirm the order of the FAA and decide ground no.4 against the AO. ITA/618/Mum/2009-AY. 2005-06 21.Ground no.3 is about disallowance u/s 14A of the Act,amounting to Rs. 1.69 lakhs. Before us,both the representatives admitted that Tribunal had dismissed the appeal filed by the AO on the identical issue,while deciding the appeal for the AY 2002-03. 21.1.We find that at page 19-20 of the order for the AY 2002-03 (supra) issue of disallowance u/s 14A was discussed as under: "32.Ground No. 2 relates to the restriction of the disallowance made u/s.14A of the Act. 32.1.During the course of the assessment proceedings, the AO noticed that the assessee has claimed the entire dividend income has been claimed as exempt. Invoking the provisions of Sec.14A, the AO asked the assessee to justify why the interest expenses incurred should not be apportioned towards earning ....