AI Drafter 
TaxTMI 
TaxTMI 
2016 (5) TMI 952
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.... Authorized Representative for the assessee at the outset pointed out that majorly the issues raised both in assessee's appeal and appeal of the Revenue were covered by the earlier orders of Tribunal in assessee's own case. In this regard, the learned Authorized Representative for the assessee filed tabulated chart of issues involved in all the years and made reference to different orders of the Tribunal in assessee's own case. We proceed to decide the present bunch of appeals by this consolidated order. 4. The assessee in ITA No.1439/PN/2004 has raised the following grounds of appeal:- 1 Deduction Under section 37(1) of the Income-tax Act, 1961 ("the Act") in respect of expenditure on computer software 1.1 The learned Commissioner of Income-tax (Appeals)-Ill, Pune ["the CIT(A)"] erred in upholding the disallowance in respect of expenditure on computer software aggregating to Rs. 1,900,060 incurred in the previous year. 1.2 As the said expenditure did not result in any enduring benefit for Sandvik Asia Ltd ("the Appellant"), the CITCA) ought to have treated the same as a deductible expenditure under section 37(1) of the Act and reversed the disallow....
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....in rejecting the Appellant's claim that interest of Rs. 12,714,842 (comprising interest on income-tax refund of Rs. 12,046,639, NSC interest of Rs. 336,249, bank interest of Rs. 235,759 and other interest of Rs. 96,195) be included in computing the profits eligible for deduction under section 80HHC of the Act, which, in turn, are to be reduced in computing the book profits under section 115JA of the Act. The Appellant prays that the aforesaid interest be included in computing the profits eligible for deduction under section 80HHC of the Act, which are to be reduced in computing the book profits under section 115JA of the Act. 3.4 Without prejudice to Ground No.3. I above, in computing the profits eligible for deduction under section 80HHC of the Act, which in turn are to be reduced in computing the book profits under section 115JA of the Act, the CIT(A) erred i n setting off the loss computed under clauses (a), (b) and (c) of sub section (3) of section 80HHC of the Act from the profits derived in respect of the sums referred to in clauses (iiia), (iiib) and (iiic) of section 28 of the Act. The Appellant prays that in computing the profits eligible for....
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....ecide the present appeal. 9. Briefly, in the facts of the present case, the assessee was engaged in the business of manufacturing and selling of Tungsten Carbide Tools . For the year under consideration, the assessee filed return of income declaring loss of Rs. 46,21,840/-. Thereafter, the assessee filed revised return of income declaring loss of Rs. 4,47,77,470/- and declared income of Rs. 80,00,855/- under section 115JA o f the Act. The Assessing Officer however, made various additions and assessed the loss at Rs. 16,72,660/- under the normal provisions of the Act and determined the income of Rs. 89,41,258/- under section 115JA of the Act. 10. The CIT(A) allowed certain relief to the assessee, against which the Revenue is in appeal and the issues which have been sustained by the CIT(A), against which the assessee is in appeal. 11. The first issue raised by the assessee vide ground of appeal No.1 is against the disallowance of expenditure on computer software of Rs. 19,00,060/- incurred during the year. The assessee had claimed deduction on account of computer software expenditure of Rs. 38.68 lakhs. The Assessing Officer noted that the assessee had spent major part of ex....
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....ring the nature of the software licence i.e. application software, the same has to be allowed as a revenue expenditure. In view of the finding of fact arrived at further by the Tribunal that the expenses have been incurred on application software which is for a limited time frame and has to be renewed from time to time, we see no reason to entertain question B as framed by the revenue." 22.1 Respectfully following the decision of the jurisdictional High Court cited (Supra), the order of the CIT(A) on this issue is upheld and the ground raised by the Revenue is dismissed." 16. The assessee during the year also claims to have purchased similar computer software i.e. application software for upgrading its systems, hence the same is to be allowed as revenue expenditure in the hands of assessee, in line with order of Tribunal in assessment year 2002-03 in appeal filed by the Revenue. We also find support from ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Raychem RPG Ltd. (2012) 346 ITR 138 (Bom). The Assessing Officer is directed to allow the expenditure in totality and depreciation already allowed should be withdrawn. The ground of appeal No.1 is thus, all....
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....exclusion from the profits of business for the purpose of computing profits eligible for deduction under section 80HHC of the Act were as under:- a) interest on inter-corporate deposits of Rs. 71,93,000/-; b) bank interest of Rs. 2,54,000/-; c) NSC interest of Rs. 35,000/-; and d) interest received on income-tax refunds of Rs. 7,08,000/- 36. The learned Authorized Representative for the assessee pointed out that the above said issue of exclusion of items of income enlisted in ground of appeal No.2.1 was decided against the assessee by the Tribunal in assessee's own case in ITA No.580/PN/2000, relating to assessment year 1996 -97, order dated 02.02.2001. The Tribunal vide para 29 on page 20 had considered the said receipts and vide para 31 had held that the interest earned on deposits with MIDC, MSEB as well as interest on outstanding amount from the customers are assessable under the head 'profit & gain' of the business. However, the contention of assessee in respect of other items i.e. interest received from employees, bank interest, interest received on income tax, inter corporate deposits, had no nexus between income earne....
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....ell as of patent and trade marks relating thereto. On the other hand, the assessee was supplying different types of products to Sandvik for sale through its international sales organization. It is further provided in the said Preamble Whereas, SAL, has expressed an interest in obtaining long term access to Sandvik know-how as well as patent rights for the purpose of manufacturing, marketing and selling certain cemented carbide products, primarily in India but also outside India. In the definition clause, products are defined as under:- "1.6 "Products" shall mean such cemented carbide cutting tools (including spares) and cutting tool systems for metal working being either manufactured by the application of Sandvik know-how (processes) or being developed by or on behalf of Sandvik, which are licensed by Sandvik to SAL hereunder. The present group of such tools and systems are identified in Appendix A:1 hereto, and any further groups of such tools and systems are to be identified in Appendix A:2, A:3 etc., such further appendix or appendices to form an integral part of this Agreement." 14. Further, Sandvik know-how is defined as under:- "1.7 "Sandvik know-how" sha....
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.... 16. As per clause 3.1 of the agreement, the assessee was granted the right and license to use the Sandvik Patent Rights and the Sandvik know-how for the manufacture in India. However, the license did not include the right to assign it and grants sublicenses under it. However, Sandvik had final say as to the sale of products manufactured by the assessee in Europe and North America, but no such control was in respect of sale of products in India and elsewhere through Sandvik sales organization. Under clause 3.2 of the agreement, the assessee had the right, subject to Sandvik approval to apply for or maintain such patent/s in the name of Sandvik or the relevant subsidiaries. A secrecy clause vis-à-vis use of Sandvik know-how was agreed upon between the parties under clause 5 of the agreement, which reads as under:- "SAL shall keep all Sandvik know-how as well as all advice and assistance provided by Sandvik and its Subsidiaries strictly confidential and secret both during the subsistence of this Agreement and thereafter and shall not disclose the same to any person whatsoever except to those employees engaged in the manufacture, marketing and sale of the Products ....
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.... all countries free of charge and to use in India also free of charge any invention under the Sandvik Patent Rights (Indian), As to the sale by SAL outside India or for use outside India of any Product incorporating an invention under Sandvik Patent Rights such sale is subject to continuous - as long as the relevant Sandvik Patent Rights are valid - payment of royalty as stated herein with regard to Products being either used or sold in a country where any patent within the Sandvik Patent Rights is maintained. 8.3 Should this Agreement terminate prematurely according to Article 7.3 then any sums payable under Article 6 shall be due with respect of such part of the Agreement year in question as the Agreement has been valid and be made within two months from the date of expiry of this Agreement. SAL's rights according to Article 2 and Article 3 shall then terminate with immediate effect. 8.4 The termination of this Agreement shall not effect SAL's secrecy obligations according to Article 5 above or its obligation under this Article U, which obligations shall continue to apply as set out in those articles." 18. Even after the termination of ....
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....-section (2B) of section 32A, one-third of the said lump sum consideration paid in the previous year by the assessee shall be deducted in computing the profits and gains of the business for that year, and the balance amount shall be deducted in equal instalments for each of the two immediately succeeding previous years. 46[(3) Where there is a transfer of an undertaking under a scheme of amalgamation or demerger and the amalgamating or the demerged company is entitled to a deduction under this section, then, the amalgamated company or the resulting company, as the case may be, shall be entitled to claim deduction under this section in respect of such undertaking to the same extent and in respect of the residual period as it would have been allowable to the amalgamating company or the demerged company, as the case may be, had such amalgamation or demerger not taken place.] Explanation.--For the purposes of this section, "know-how" means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil well or other sources of mineral deposits (including the searching for, discovery or testing of depo....
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....id down by Hon'ble Madras High Court in CIT Vs. Simpson and Co. Ltd. (1999) 239 ITR 83 (Mad) for the proposition that the acquisition of technical know-how relating to manufacture of automobile engines, was not of enduring benefit and amount paid for acquiring such technical know-how was revenue expenditure. Similar proposition had been laid down by the Hon'ble Supreme Court in CIT Vs. I.A.E.C. (Pumps) Ltd. (1998) 232 ITR 316 (SC) on which further reliance was placed upon by the learned Authorized Representative for the assessee. In all these case laws, the distinction drawn was between capital and revenue expenditure and if revenue in nature, then its allowability under section 37(1) of the Act. 23. Another reliance was placed upon by the learned Authorized Representative for the assessee was on the decision of Chandigarh Bench of the Tribunal in DCIT Vs. Metalman Auto (P.) Ltd. (2001) 78 ITD 327 (Chd.) for the proposition that where the expenditure resulted in improving existing products already manufactured by the assessee and did not relate to setting up of altogether new product or for setting up of new unit, such expenditure would be revenue in nature, since ....
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....iew of section 37(1) of the Act. It was thus, held that where the assessee had acquired a benefit of enduring nature and the expenditure in connection thereof being capital in nature, was not deductible under section 37(1) of the Act. The learned Departmental Representative for the Revenue further pointed out that the ratio laid down by the Hon'ble Supreme Court in Alembic Chemical Works Co Ltd Vs CIT (supra) related to pre-introduction of section 35AB of the Act. 25. The learned Authorized Representative for the assessee referring to the ratio laid down by the Hon'ble Supreme Court in Drilcos (India) (P.) Ltd. Vs. CIT (supra) pointed out that the assessee did not receive any know-how and regardless of the same, section 35AB of the Act was applied and the alternate plea was allowed by the Hon'ble Supreme Court. In respect of ratio laid down by the Hon'ble Madhya Pradesh High Court, it was pointed out by the learned Authorized Representative for the assessee that the facts of the case of the assessee were distinguishable and in respect of the decision of Ahmedabad Bench of the Tribunal in APS-Star Industries Ltd. Vs. DCIT (supra), the issue was whether it fe....
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....n (1) of Section 35AB of the Act clearly states that where the assessee has paid in any previous year any lump sum consideration for acquiring any know-how for use for the purposes of his business, then one-sixth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year and the balance amount shall be deducted in equal instalments for each of the five immediately succeeding previous years. Explanation to the said section says that the word 'know-how' means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine. If one carefully analyzes Section 35AB of the Act, it is clear that prior to 1st April, I986 there was some doubt as to whether such expenditure could fall under section 37 of the Act. To remove that doubt Section 35AB of the Act stood inserted. In subsection (1) of Section 35AB of the Act, there is a concept of amortization of expenditure. In the present case, it is true that on account of certain disputes which arose between the parties, the balance amount was not paid by the assessee to the American company. However, the word 'for'....
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.... the Tribunal in APS - Star Industries Ltd. Vs. DCIT (supra) on the said issue held as under:- "19. Regarding the applicability of section 37(1) we have held above that the lump sum consideration paid by the assesses would fall within the purview of section 35AB and therefore would be excluded from the ambit of section 37(1). Without prejudice to the aforesaid conclusion reached by us in the preceding paragraphs, we may point out that the expenditure in question is clearly of the nature of capital expenditure and on this ground also it would not be deductible business expenditure under section 37(1). The lump sum consideration of Rs. 14,50,249/- has been paid by the assesses for acquiring technical knowhow for an indefinite period. There is no stipulation, as we have already noted above, in the collaboration agreement for the return of documentation, drawings and designs on expiration of the agreement alter 10 years to the German Company and there is no bar on the assesses in continuing with the manufacture of the contract products by utilisation of the technical knowhow even after the period of 10 years. The assesses has thus acquired a benefit of enduring nature and the ....
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....ion are dearly of capital nature and are therefore, outside the purview of section 37(1). The various documents such as drawings, designs, charts, plans included in the technical documentation provided by the foreign collaborator obviously form the tools by using which the business of manufacturing the textile machinery spare parts was to be done by the assessee and for acquiring such technical knowhow through these documents, a lump sum payment was made. This expenditure was incurred by the assessee as and by way of purchase price of such documentation and was of a capital nature inasmuch as the documentation provided id the assessee was a tool of his trade with which he carried on his business. The capital asset acquired by the assessee vis-a-vis the technical knowhow in the shape of drawings, designs, charts, plans and other literature fell within the definition of "plant" and the expenditure incurred for acquiring the same was capital expenditure. The decision of Supreme Court in the case of Scientific Engg. House (P.) Ltd. v. CIT [1986) 157 ITR 86 fully supports the view adopted by us." 31. In view of introduction of provisions of section 35AB of the Act which were in....
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....pe of cemented carbide products, and acquisition gave rise to coming into existence of asset and advantage of enduring benefit and the same is envisaged in section 35AB of the Act. There is passage of rights, know-how and technology under the agreement, and the said asset and advantage had been acquired for use in business of the assessee and the same could be used by assessee even after the term of agreement. We hold that the assessee having acquired the technical know-how is to be subjected to the provisions of section 35AB of the Act vis-à-vis its claim of deduction of the said amount. The CIT(A) vide observations on page 11 of appellate order had held that the liability for payment of technical know-how accrued in assessment year 1997-98 itself and the deduction under section 35AB of the Act had to be allowed on full amount. The Revenue is not in appeal against the said observations of the CIT(A). Accordingly, we uphold the order of CIT(A) in this regard and we hold that the assessee is entitled to the deduction under section 35AB of the Act on the full amount i.e. Rs. 8.82 crores. The Ahmedabad Bench of the Tribunal in APS- Star Industries Ltd. Vs. DCIT (supra) had also....
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....essing Officer with directions to consider the true nature of the claim in the light of the observations of the Commissioner of Income-tax (Appeals) in para 6.3 of his order dated 28.11.1997 and not be guided by merely the nomenclature of the head under which the claim has been made. Needless to say, in carrying out the aforesaid exercise, the Assessing Officer shall provide reasonable opportunity of being heard to the assessee. Thus, on this issue assessee succeeds for statistical purposes. 19. In the result, appeal of the assessee is partly allowed. 20. The appeal by the Revenue vide ITA No 113/PN/98 i s directed against the order of the Commissioner of Income-tax (Appeals) dated 28.11.1997 pertaining to the assessment year 1994-95 and the Cross objection in CO No 58/PN/2005 by the assessee also emanates from the same order of the Commissioner of Income-tax (Appeals). 21. In the appeal of the Revenue, following two Grounds have been raised: "(1) On the facts and in the circumstances of the case, the ld CIT(A) erred in deleting the addition of Rs. 1,99,43,610/- made by the AO on account of excise duty payment on finished goods which is not inclu....
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....t received in order to arrive at the assessable income. In this view of the matter, the impugned order of the Commissioner of Income-tax (Appeals) on this issue is set aside and that of the Assessing Officer is restored. Thus, on this Ground Revenue succeeds. 26. In the result, appeal of the Revenue is partly allowed." 34. In view thereof, we allow the alternate plea raised by the assessee that the provisions of section 35AB of the Act are to be applied on the total liability of Rs. 8.82 crores and 1/6th on said amount is to be allowed as deduction in the hands of the assessee. The ground of appeal No.1 raised by the assessee is thus, partly allowed." 24. The issue arising before us is identical and following the same parity of reasoning, we hold and direct the Assessing Officer to allow the deduction under section 35AB of the Act @ 1/6 th of the total know-how fees paid of Rs. 8.82 crores. The additional ground of appeal No.1 raised by the assessee is thus, allowed. 25. The issue in additional ground of appeal No.2 is against disallowance of deduction claimed of appropriate part of exchange fluctuation loss of Rs. 51,72,000/-. The case of the assessee befor....
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....47,07,778 - 1,47,07,778 2002-03 9,34,83,668 1,47,07,778 - 1,47,07,778 2003-04 9,34,83,668 1,47,07,778 - - Total 8,82,46,668 51,72,000 9,34,18,668 8.2 On the other hand the ld. DR objected to the same and submitted that there is no infirmity in the findings of the authorities below on this issue. 8.3 We have heard the submissions made by the representatives of rival sides and have perused the orders of authorities below. We are of the view that if the exchange fluctuation loss has been wrongly computed, the same has to be reworked. We deem it appropriate to restore this issue back to the file of Assessing Officer for re-computing exchange fluctuation loss and arrive at the correct amount of deduction u/s. 37(1) of the Act. Accordingly, this ground of appeal of the assessee is allowed for the statistical purposes." 27. The claim of the assessee before us is identical as claimed in assessment year 1998-99. Following the same parity of reasoning, we remit this issue also back to Assessing Officer, who shall determine the amount, which is to be allowed in the hands of asses....
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....ve to add, amend or alter any of the above grounds of appeal. 29. The ground of appeal No.1 raised by the Revenue is against order of CIT(A) in allowing the claim of VRS expenditure. 30. The assessee for the year under consideration had debited sum of Rs. 4,00,39,000/- as expenditure on account of Voluntary Retirement Scheme. The explanation of the assessee was that in order to reduce the size of workforce, the assessee company had offered compensation to workers who availed of the VRS Scheme. The assessee further explained that it achieved the reduction in number of its workers and did not close any part of its business operations and hence, the expenses incurred were wholly and exclusively for the efficient running of business. The Assessing Officer took note of the Preamble of the Scheme, under which the purpose of scheme was to reduce the manpower to enable the company to manage its affairs in a more economic and efficient manner. The assessee claimed that by virtue of this scheme, the assessee had incurred expenditure which in turn, would reduce its manpower and would draw benefit of enduring nature. The Assessing Officer in turn, show caused the assessee to explain as t....
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....r had approved the scheme of VRS under section 10(10C) of the Act 35. We have heard the rival contentions and perused the record. The assessee for the year under consideration had floated a VRS Scheme and the object of the said Scheme was to reduce the workforce of assessee company. Under the said scheme, the employees of the assessee company were offered retirement benefits and the assessee had debited sum of Rs. 4,00,39,000/-. The object of the said Scheme by way of reducing number of workers was in order to efficiently run business of the assessee company and the assessee further claims that after the said object was achieved, there was no need to close any part of business operations. The assessee claimed the said expenditure to be revenue in nature, whereas the Assessing Officer was of the view that since the said expenditure had enduring benefit, the same was capital in nature. 36. We find that similar issue of allowability of VRS expenses arose before the Hon'ble Bombay High Court in CIT Vs. Bhor Industries Ltd. (supra) and it was held that the expenditure was of revenue in nature and allowable as deduction in computing profits of the assessee company. In turn, rel....
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....f CIT(A) in holding that the interest on customers and hundies, interest on MSEB/MIDC were part of business income and had to be considered as part of eligible profits while computing deduction under section 80HHC of the Act. 40. The learned Authorized Representative for the assessee pointed out that the said issue is covered in favour of the assessee by order of Tribunal in assessee's own case in ITA No.580/PN/2000, relating to assessment year 1996-97, order dated 02.02.2001. 41. We find that the Tribunal in assessment year 1996-97 vide para 30 had held that the interest received on deposits with MIDC/MSEB customers and Inter-corporate deposits part take the nature of business and hence, assessable under the head "Profits and Gains of Business". Accordingly, these amounts shall be included in the business income for the purpose of relief under section 80HHC of the Act. Where there was no nexus between income earned and business activity of the assessee, the said amounts were held to be assessable as income from other sources. We find that the issue arising before us is in respect of interest on customers and hundies, interest on MSEB/MIDC and the same are to be included ....
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....nover under section 80HHC(3) of the Act. Following the same directive, we find no error in the order of CIT(A) and accordingly, we dismiss the ground of appeal No.4 raised by the Revenue. 48. The grounds of appeal No.5 and 6 raised by the Revenue are general in nature and are dismissed. 49. The assessee in ITA No.112/PN/2006 , relating to assessment year 2000-01 has raised the following grounds of appeal:- 1. Addition of consideration towards development and other rights received as capital gains The CIT(A) erred in confirming the addition of Rs. 3,030,000 with reference to the consideration received towards sale of development and other rights in respect of land by treating the same as capital gains. The appellant prays that the consideration received towards sale of development and other rights in respect of land constitutes a capital receipt, not taxable under the Act. 2. Disallowance of software expenses The learned CIT(A) erred in confirming the disallowance of the deduction in respect of software expenses of Rs. 2,320,000 by treating the same as capital expenditure. The appellant prays that the impugned be treated revenue expenditure ....
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....rounds of appeal raised by the assessee are similar to additional grounds of appeal in ITA N o.1439/PN/2004 and being legal, are admitted for adjudication. 52. The issue in ground of appeal No.1 is against the addition made with reference to consideration received towards sale of development and other rights. 53. Briefly, in the facts relating to the issue, the assessee had credited sum of Rs. 91,45,400/- on account of sale of development and other rights in respect of land. The claim of the assessee was that the same was capital receipt and hence excluded while computing the total income. The said amount was received by assessee from M/s. Dadhe Constructions Pvt. Ltd., as consideration for assignment of development and other rights and since there was no actual transfer of land, there was no scope of computing capital gains. The Assessing Officer, however, held otherwise. It was observed by him that, as was evident from the agreement, the appellant had handed over physical possession of the land to the developers and had also granted irrevocable power of attorney to the developers who on the strength of the said power of attorney could develop the land in the manner and to t....
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....Managing Director of M/s. Dadhe Construction Pvt. Ltd. whereby the former was given authorisation to make constructions to the extent 49,239.49 sq.ft. from out of the total area of 61,548.30 sq.ft. on which it (the appellant) was required to make construction for its own use as per the exemption order. The appellant informed Shri Dadhe that "the balance construction of 49,239.49 sq.ft. may be utilised by you if possible at such place on our earlier surrendered land for construction of flats," and, for this purpose, he could approach the State Government, if necessary, to get the exemption order suitably modified. The consideration payable for the above fresh assignation was stipulated at Rs. 24 lakhs. The appellant filed yet another letter dated 12.7.1993 addressed to Shri Vijay Narayan Dadhe whereby the latter was required to pay Rs. 5 lakhs to the appellant as security deposits / additional amount in connection with the allotment of development rights in respect of land ad measuring 11161 sq.mtrs. Apart from submitting the above agreements/letters etc., the appellant also furnished details of the payments received from time to time and comprised in the total amount of Rs. 91,45,4....
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.... at the earliest and decide the issue. 59. The issue raised vide ground of appeal No.2 against disallowance of software expenses is similar to ground of appeal No.1 in assessment year 1999-2000 and following our decision in paras hereinabove, we allow this ground of appeal No.2 raised by the assessee. 60. The next ground of appeal No.3 is against disallowance of liquidated damages of Rs. 11,01,173/- by treating them as payment for infraction of law. 61. Briefly, the facts relating to the issue are that, the Assessing Officer noted that the assessee had debited sum of Rs. 11,15,000/- on account of liquidated damages. The explanation of the assessee in this regard was that the said amount was short paid by the customers on account of delay in delivery of goods. The case of the assessee was that these amounts were on account of contractual obligations and were not for contravention of any law. The Assessing Officer rejecting the contention of assessee noted that the same was held as non-deductible in the case of Rohtak Textile Mills Vs. CIT (1997) 226 ITR 485 (Del) to be in the nature of penalty, hence, deduction of Rs. 11,15,000/- claimed by the assessee was disallowed. 6....
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....n respect of sum of Rs. 13,527/- for which the evidence was filed and confirmed the disallowance of Rs. 11,01,473/-, against which the assessee is in appeal. 63. The learned Authorized Representative for the assessee before us pointed out that the details of liquidated damages are placed at pages 109 to 117 of the Paper Book. He further pointed out that the CIT(A) had disallowed the claim of assessee for infraction of laws, whereas the cutting tools were supplied to government agencies and where the supplies were not made in time, then 1% was to be deducted. Our attention was drawn to the purchase order placed at page 109 of Paper Book and further at page 112 of the Paper Book, where the copy of invoice is attached and the copy of credit notes at page 114 of the Paper Book. The learned Authorized Representative for the assessee stressed that the similar amount was allowed in assessment year 1999-2000 and as against the return of income filed of Rs. 7.26 crores, deduction claimed was very meager. 64. The learned Departmental Representative for the Revenue pointed out that the principles of res judicata are not applicable and where the assessee has failed to produce any evidenc....
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....f natural justice, we deem it fit to restore the issue to the file of Assessing Officer and direct the assessee to furnish requisite details before the Assessing Officer in order to establish its claim. The Assessing Officer shall afford reasonable opportunity of hearing to the assessee. The ground of appeal No.3 raised by the assessee is thus, allowed for statistical purposes. 66. The issue in ground of appeal No.4 is against disallowance of set off of interest paid against interest received. 67. The assessee had set off interest paid under sections 220, 234B, 234C of the Act totaling Rs. 65,92,331/- against interest received from Department under section 244 of the Act. Both the authorities below had denied the set off of interest paid against interest received. The learned Authorized Representative for the assessee fairly pointed out that the issue has been decided against the assessee by the Tribunal in assessee's own case by Third Member in ITA No.119/PN/1996 relating to assessment year 1992 -93, order of Third Member dated 02.06.2011. Following the same parity of reasoning, we hold that the interest paid under sections 220, 234B and 234C of the Act cannot be set off....
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....lanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in it, the words "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits" will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head "Profits and gains of business or profession" referred to in the first part of Explanation (baa). 12. Accordingly, if any quantum of any receipt of the nature mentioned in clause (1) of Explanation (baa) has not been included in the profits of business of an assessee as computed under the head "Profits and gains of business or profession", ninety per cent. of such quantum of the receipt cannot be deducted under Explanation (baa) to section 80HHC." 70. The case of the assessee before authorities below was that on netting, there would not be any interest or rent to be considered under clause (baa) since the interest and rent payments were far in excess of interest and rent receipts. The commission on netting would work to Rs. 20,48,883/-. The Assessing Officer is directed ....
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.... The learned CIT(A) erred in confirming the disallowance of deduction in respect of software expenses of Rs. 4,141,000 by treating the same as capital expenditure. The appellant prays that software expenses of Rs. 4,141,000 for the financial year ended 31 March 2001 should be treated as a allowable revenue expenditure. 2. Disallowance of deduction towards liquidated damages The learned CIT(A) erred in confirming the disallowance of the deduction towards liquidated damages amounting to Rs. 583,000 by treating the same as payment for infraction of law. The appellant prays that the deduction towards liquidated damages amounting to Rs. 583,000 was contractual in nature and should be allowed as a deduction under section 37(1) of the Act. 3. Disallowance of car expenses The learned CIT(A) erred in confirming the ad-hoc disallowance to the extent of Rs. 50,000 towards car expenses by treating the same as incurred for personal / non-business purposes. The appellant prays that the disallowance of Rs. 50,000 towards car expenses should be deleted as the same has been incurred wholly and exclusively for the purpose of businesses. 4. Disallo....
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....receipts in relation to rent and service charges, interest and commission should be excluded from the profits of the business for the financial year ended 31 March 2001. 9. Set off of interest paid under section 220 against interest received under section 244A The learned CIT(A) erred in confirming the disallowance of set-off of interest paid under section 220 of the Act amounting to Rs. 82,180 against interest received under section 244A of the Act. The appellant prays that the deduction of Rs. 82,180 on account of interest paid under section 220 of the Act, should be allowed to set off against interest received under section 244A of the Act. 10. Levy of interest under section 234D The learned CIT(A) erred in confirming the levy of interest under section 234D from 1 June 2003 till the date of the assessment order. The appellant prays that the interest under section 234D of the Act is not leviable on the refund issued in June 2002, as section 234D of the Act has been inserted after the date on which the impugned refund was issued. 11. Addition of interest for AY 1999 -2000 under section 244A as 'income from other sources' ....
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..... 50,000/- each by treating the same as incurred for personal / non-business purposes. 81. The assessee before us is a limited company and no disallowance can be made in the hands of assessee on account of personal use. We find support from the ratio laid down by the Tribunal in assessee's own case in ITA Nos.1841 & 1842/PN/2012 and ITA Nos.2053 & 2054/PN/2012, relating to assessment years 2002-03 & 2003-04, order dated 31.12.2014 and we direct the Assessing Officer to delete addition of Rs. 50,000/- each towards car and communication expenses. The grounds of appeal No.3 and 4 are thus, allowed. 82. Now, coming to ground of appeal No.5 i.e. with regard to claim of deduction under section 80HHC and as to whether unabsorbed depreciation of Titex India Pvt. Ltd. is to be adjusted or not. 83. The Assessing Officer while perusing computation filed by the assessee with regard to deduction under section 80HHC of the Act noted that while computing business profit, the income from business had been taken at Rs. 17,50,47,080/- before setting off of brought forward unabsorbed depreciation of losses of Titex India Pvt. Ltd. of Rs. 5,83,35,102/- for assessment years 1999-2000 and 2....
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....ness as computed under the head 'profits and gains of business or profession' ........". Therefore, there can be no dispute over the fact that profits of the business under section 80HHC will have to be computed in the manner of computation provided under the head 'profits and gains of business or profession'. Section 28 deals with 'profits and gains of business or profession'. Section 29 prescribes the manner in which the above 'profits and gains of business or profession' are to be computed. It has been stated that the computation has to be made in accordance with the provisions contained in sections 30 to 43D. Section 32 forms part of these provisions. As per section 32(2), the unabsorbed depreciation allowance of any previous year shall, to the extent to which it cannot be set off in the said previous year, "be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years". It is thus evident that unabsorbed depreciation becomes p....
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....essee before us. All the assets were taken over also get amalgamated. The said concern had carried forward unabsorbed depreciation relating to earlier years and after amalgamation, the assessee was entitled to claim set off of such unabsorbed losses of Titex India Pvt. Ltd., against its own business profits. Once such a claim is allowable in the hands of assessee, then the profits of assessee stand reduced on account of claim of unabsorbed depreciation. In order to work out the deduction under section 80HHC of the Act, such reduced profits after set off of unabsorbed depreciation of Titex India Pvt. Ltd. are to be considered for computing deduction under section 80HHC of the Act. Admittedly, the said losses relate to amalgamated company. However, unabsorbed depreciation becomes part of current depreciation of the assessee company after amalgamation and hence, the profits are to be re-computed and the profits as computed under the provisions of sections 28 and 29 of the Act are the eligible profits to be considered while computing deduction under section 80HHC of the Act. The Hon'ble Supreme Court in CIT Vs. Shirke Construction Equipment Ltd. (supra) had held that while determin....
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....e for claiming deduction under section 80HHC of the Act. We hold so and ground of appeal No.7 is thus, dismissed. 95. The issue in ground of appeal No.8 i.e. reduction of 90% of gross receipts of interest, rent and commission is to be reduced while computing deduction under section 80HHC of the Act. 96. This issue is identical to the ground of appeal No.5 raised by the assessee in ITA No.112/PN/2006 and following the same parity of reasoning, we direct the Assessing Officer to re-compute deduction under section 80HHC of the Act in line with our directions in respect of ground of appeal No.5 in assessment year 2000-01. The ground of appeal No.8 is thus, allowed for statistical purposes. 97. The issue in ground of appeal No.9 i.e. disallowance of set off of interest paid against interest received is also similar to the ground of appeal No.4 raised by the assessee in ITA No.112/PN/2006 and following the same, we hold that this issue is against the assessee and ground of appeal No.9 raised by the assessee is dismissed. 98. Now, coming to the issue in ground of appeal No.10 i.e. levy of interest under section 234D of the Act. 99. The learned Authorized Representative for ....
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....income from other sources and it is not the case of assessee that it had not received the said interest. Hence, the addition made on this count was upheld by CIT(A). The Assessing Officer had noted that pursuant to intimation under section 143(1) of the Act, the assessee had received interest under section 244A of the Act at Rs. 4,02,663/- in respect of assessment year 1999- 2000. Since the assessment proceedings for the said year were in progress and the assessee had not offered the said income for taxation, the Assessing Officer while completing assessment proceedings under section 143(3) of the Act, included interest under section 244A of the Act of Rs. 4,02,663/- as income under the head "Income from Other Sources" relating to assessment year 2001-02. 103. We find no merit in the ground of appeal raised by the assessee. The interest was computed by the Assessing Officer on 30.06.2000 and consequently, the same is includable in the hands of assessee in the year ending 31.03.2001, which has been so included by the authorities below. Further, there is no merit in the plea raised by the assessee that only interest as finally determined could be assessed in the hands of assessee.....