TaxTMI 
TaxTMI 
2016 (5) TMI 952
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....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 disallowance. 1.3 The Appellant prays that it be granted deduction ....
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....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 deduction under section 80HHC of the Act, which are to be reduced in computing the book profits under section 115JA of the Act, only the pro....
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....der 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 expenditure for acquiring software, which would help the assessee in carrying on of its business operations. Since the benefit of acquiring such software would be of enduring nature, therefore, ....
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.... 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, allowed. 17. The issue in ground of appeal No.2 is against the order of CIT(A) in not allowing deduction under section 10(33) of the Act on dividend income of Rs. 12,68,541/- earned on Master shares and other units of UTI.....
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....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 earned and the business activity of the assessee and the same are to be assessed as income from other sources. Following the same parity of reasoning, we hold that the items of income i.e. interest on inter-corporate deposits, bank interest, NSC interest and interest received on income-tax ....
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....m 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" shall mean all specifications, drawings, procedures, processes, performance and procurement standards, and all other related information necessary for or useful for the manufacture according to Article 2 and being specified in Appendix B attached hereto." 15. As per clause 2.1 to the agreement, Sandvik shall m....
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.... 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 in India to whom it shall be essential to disclose the same and SAL shall take all reasonable measures to prevent such employees from disclosing the same, to others. The foregoing shall not relate to any information which SAL can show by written record to have been in its possession at the time of its disclosure by Sandvik or which is ....
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....alty 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 the agreement, it is provided that the assessee shall have the right subject to the compliance with the obligations, to continue without any time limit and without any charge the use of un-patented Sandvik know-how made available to it under the agreement, vide clause 8.1 of the agreement. Under clause 8.2, the termination of the agreement pursuant to Article 7.2 i.e. the term of agreement for....
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....er 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 deposits or the winning of access thereto).] [Expenditure for obtaining licence to operate telecommunication services.]" 20. The section provides that within the stipulated period, where any lump sum consideration is paid for acquiring any know-how for use or for the purpose of business, then 1/6th of the amount so paid shall be deducted in computing profits and gains of the business for that year. The year under appeal, i....
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....rther 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 the benefit acquired by it was not of enduring nature to put in the category of capital expenditure. The Tribunal in that case held that the provisions of section 35AB would be applicable to the consideration paid for acquiring technical know-how, which would otherwise be disallowable as being on capital account. Further reliance was placed on the ratio laid down by the Kolkata Bench of the Tribunal in Wellman Incandescent India Ltd. Vs. DCIT (1995) 55 ITD ....
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....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 fell within the realm of capital or revenue expenditure. 26. The Hon'ble Supreme Court in Alembic Chemical Works Co Ltd Vs CIT (supra) while deciding the issue of allowability of expenditure on acquisition of know-how, for which lump sum payment was made held that idea of once for all payment and enduring benefit are to be treated as something akin statutory conditions; nor are the notions of capital or revenue, a judicial fetish. It was further held that there was n....
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....ord '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' in Section 35 AB of the Act, which is a preposition in English grammar, has to be emphasised while interpreting Section 35AB of the Act. Section 35AB of the Act says that the expenditure should have been incurred for the purposes of the business of the assessee. In the present case, the Technical Assistance Agreement was entered into between the assessee and the American company for acquiring know- how which was, in turn, to be used in the business of the assessee. Once Section 35AB of the....
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....n 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 expenditure in connection thereof is capital in nature. In support of the view taken by us reliance is placed on the decision of Supreme Court in the case of CIT v Indian Oxygen Lid. I1996) 218 ITR 337 wherein the Supreme Court held that since the Indian Company was not entitled to use the Technical knowhow after the termination of the agreement, it could not be said that Indian Company had incurred the expenditure for the purposes of bringing into existence an asset or advantage of an enduring nature. A similar test based ....
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....e 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 inserted by the Finance Act, 1985 w.e.f. 01.04.1986, we are of the view that in cases of payment of lump sum consideration for acquiring technical know-how, the provisions of section 35AB of the Act are attracted and the expenditure is not allowable under section 37(1) of the Act, which is general provision and specifically excludes expenditure covered under sections 30 to 36 of the Act. Consequently, the said expenditure is to be amortized under section 35AB of the Act and cannot be allowed as a deduction in the year in which the liabilit....
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....rave;-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 held that what is material for section 35AB of the Act is not the actual amount paid during the year but the amount in respect of which liability had been incurred for acquiring technical know-how. We hold so. The CIT(A) after holding the assessee to be eligible for deduction under section 35AB of the Act on the full amount, had not allowed the claim of the assessee in view of non-deduction of tax at source on the balance two installments, which were paid in the succeeding assessment years, in view of the provisions of section 40(a)(i) of the ....
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....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 included in the value of closing stock. (2) On the facts and in the circumstances of the case, the ld CIT(A) erred in taxing the net of interest and thus giving relief for interest paid by the assessee to the I.T department." 22. The first Ground relates to an addition of Rs. 1,99,43,610/- made by the Assessing Officer on account of valuation of closing stock of finished goods due to Excise Duty payable. The Commissioner of Income-tax (Appeals) has deleted the addition by observing that similar issue was considered in assessee's own case for the assessment years 1992-93 and 199....
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....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 before us is that this issue arose in assessment year 1998-99 and Tribunal held that the same was allowable in various years and the matter was set-aside to Assessing Officer. 26. We find that the Tribunal in ITA No.339/PN/2004 , relating to assessment year 1998-99, order dated 11.12.2015 had adjudicated identical claim of deduction on account of exchange fluctuation loss of Rs. 51,72,003/-. The assessee before us has also claimed identical amount of loss. The Tribunal had set-aside the issue to Assessing Officer to re-compute the loss in respective years, holding as under:- "8. Ground No. 6 of the appeal and findings thereon are as ....
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....puting 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 assessee in the present year on account of exchange fluctuation loss. The additional ground of appeal No.2 raised by the assessee is thus, allowed. 28. The Revenue in ITA No.1468/PN/2004, relating to assessment year 1999-2000 has raised the following grounds of appeal:- 01. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the claim of VRS expenditure treating it as revenue in nature. 2.1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that interest on customers and hundies, interest on MSEB/MIDC are held as part of business income. 2.2 The Ld. CIT(A) ought to have held that interest on customers and hundies, interest on MSEB/MIDC as 'Income from Ot....
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....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 to why the entire expenditure should not be treated as capital expenditure, in turn, the assessee placed reliance on different decisions of Hon'ble Supreme Court and submitted that the said expenditure could not be treated as capital expenditure. The Assessing Officer in this regard observed that what had to be seen was whether or not such benefits of enduring nature had brought into existence the capital asset. The Assessing Officer was of the view that while reducing the manpower, the assessee had been able to restructure its human resources, thereby increasing its profitability, productivity, competitiveness and further induction of technology and had derived benefit of enduring nature. The amount paid under the VRS scheme was held to be compensatory in nature payable to the concerned employe....
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....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, reliance was placed on the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Ashok Leyland Ltd. (1972) 86 ITR 549 (SC), wherein it was held that compensation paid for termination of services of managing agents in order to save business expenditure in the accounting period as well as during subsequent years, the Hon'ble Supreme Court held that by avoiding certain expenditure, the company did not acquire any income yielding asset and the same was allowable as deduction. Applying the said ratio, the Hon'ble Bombay High Court in CIT Vs. Bhor Industries Ltd. (supra) held that the VRS expenses were incurred by the company to save on the expenditure and since the expenditure was not relatable to any income yielding asset, the revenue expenditure incurred wholly and exclusively for the purpose of busine....
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....ome 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 as profits and gains of business and are eligible for claiming deduction under section 80HHC of the Act. Upholding the order of CIT(A), we dismiss the ground of appeal No.2 raised by the Revenue. 42. The issue in ground of appeal No.3 by the Revenue is against the order of CIT(A) in holding that loss, if any, would be allowed to be set off against 90% of sum referred in clause (iiia), (iiib) and (iiic) in the same proportion as the export turnover as bears to the total turnover of the business. 43. The Revenue is aggrieved by the order of CIT(A) in allowing the deduction under section 80HHC of the Act on the loss from export business. Further, the Revenue has placed reliance on the ratio laid down by the Hon'ble Supreme Court in IPCA Laboratories Ltd. Vs. DCIT reported in 266 ITR 521 (SC) 44. The learned Authoriz....
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....es 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 and allowed accordingly. 3. Disallowance of deduction towards liquidated damages The learned CIT(A) erred in confirming the disallowance of the deduction towards damages aggregating to Rs. 1,101,473 by treating the same as payment for infraction of law. The appellant prays that the impugned damages, being contractual in nature, should be allowed as a deduction under section 37(1) of the Act. 4. Set off of interest paid under section 220, 234B and 234C against interest received under section 244A The learned CIT(A) erred in confirming the disallowance of set-off of interest paid under section 220, 234B and 234C of the Act aggregating to Rs. 6,592,331 against interest received under section 244A of the Act. The appellant prays that the impugned interest paid under section 220, 234B and 234C of the Act should be allowed to set off against interest rec....
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....ent, 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 the extent they deemed fit and could also sell the land to the prospective buyers subject to certain terms and conditions stipulated in the exemption order issued by the Government of Maharashtra under the Urban Land Ceiling Act. Thus, what was pending was mere formal conveyancing of the land. It was reasoned out by the Assessing Officer that the transaction thus resorted to amounted to part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act and would thus come within the ambit of section 2(47)(v) of the Income-tax Act, 1961, which came into effect from the assessment year 1988-89. In this context, he also placed reliance on the decision of the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. Vs. CIT, 239 ITR 775, wherein depreciation had been held as admissible to the assessee who was in possession of a building on part payment of price. Accordingly, the Ass essing Officer came....
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.... 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. 91,45,400/-. In the details thus furnished, a sum of Rs. 1,50,000/- stated to have been received on December 31, 1999, was shown additionally. It was argued by the appellant that the entire receipts were capital in nature and, therefore, could not be taxed." 55. The CIT(A) forwarded the submissions of assessee to Assessing Officer and who reported as under:- "8.3 The various submissions thus made were put across to the Assessing Officer since it appeared that the same had not been filed at the time of the assessment. The Assessing Officer was specifically asked as to how the sum of Rs. 30,30,000/- was brought to tax for the present assessment year when as per the appellant the transactions had taken placed during the earlier years and an aggregate sum of Rs. 60,95,400/- had also been already brought to tax in the assessments for the assessment years 1991-92 & 1995-96. In his reply dated 16.8.2004, the Assessing Officer informed that although the app....
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....hat 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. 62. Before the CIT(A), the claim of the assessee was that the said payments were not penal in nature and were deductible under section 37(1) of the Act. It was also pointed out that the decision in Rohtak Textiles Mills Vs. CIT (supra) was not relevant since the said decision related to infraction under section 14B of the Employees Provident Fund Act, 1952 and not contractual payments made on account of late deliveries. Another plea raised by the assessee was that identical issue was involved in the appeal for assessment year 1999-2000 and the CIT(A) had already allowed the claim of assessee holding that the customers had deducted the amounts in the normal instance of business and hence, were allowable as business expenditure. The CIT(A) informed the assessee that since the issue is one of the facts, the relevant facts had to be considered that the damages actually related to supply of goods which had been accounted for as income and whether the liability in respect o....
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....ction 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 evidence, how it could be said that the claim is allowable in the hands of assessee for the year under consideration. 65. We have heard the rival contentions and perused the record. The assessee has claimed deduction on account of liquidated damages paid being the amount charged by the company, for not delivering the goods in time. The case of the assessee before us is that in the purchase order itself it was mentioned that in case the supplies were not made within time, then the liquidated damages for the same were leviable @ 1% per month subject to maximum limits. Our attention was drawn to the purchase order of one concern which is placed at page 109 of Paper Book and accompanying documents in this regard. Admittedly, the assessee has further placed on record Annexure -4 detailing the list of liquidated damages date-wise paid by the assessee. The perusal of liquidated damages reflect the payments to the tune of Rs. 1,82,181/- on 18.05.1999, Rs. 1,01,000/- on 18.05.1999 and ....
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....lating 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 against interest received under section 244 of the Act. The ground of appeal No.4 raised by the assessee is thus, dismissed. 68. The issue in ground of appeal No.5 is against the computation of deduction under section 80HHC of the Act. 69. The plea of the assessee was that 90% of net receipts of interest, rent and commission should be reduced under section clause (1) of Explanation (baa) to section 80HHC of the Act for computing deduction under section 80HHC of the Act. The issue is settled by Apex Court in ACG Associate Capsules Pvt. Ltd. Vs. CIT (2012) 343 ITR 89 (SC). It has been held by the Apex Court that only 90% of net amount of any receipt of the nature mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of business for determining profits of the business under Clause (1) of Explanation (baa) to section 80HHC of the Act. The Hon'ble Supreme Court held as under:- "10. Under clause (1) of Explanati....
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.... (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 to verify the claim of assessee and allow the claim as per ratio laid down by the Apex Court in ACG Associate Capsules Pvt. Ltd. Vs. CIT (supra). The ground of appeal No.5 is thus, allowed. 71. The issue in ground of appeal No.6 is against disallowance of deduction under section 35AB for Rs. 53,22,114/-. 72. During the appellate proceedings, notice of enhancement was issued to the assessee. The issue was the deduction allowable under section 35AB of the Act. The assessee had claimed and deduction under section 35AB of the Act, which was allowed at Rs. 1,56,56,000/-. However, the CIT(A) noted that in assessment years 1997-98 and 1998-99, deduction was allowed to the extent of Rs. 1,55,80,611/- only. Hence, differential of Rs. 53,22,114/ - was added as income of assessee. 73. The issue of allowability of deduction under section 35AB of the Act and quantum of deduction has already been decided by Tribunal in ITA No.525/PN/2003 relating to assessment year 1997-98. The Assessing Officer has been direct....
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.... car expenses should be deleted as the same has been incurred wholly and exclusively for the purpose of businesses. 4. Disallowance of communication expenses The learned CIT(A) erred in confirming the ad-hoc disallowance to the extent of Rs. 50,000 towards communication expenses by treating the same as incurred for personal / non-business purposes. The appellant prays that the disallowance of Rs. 50,000 towards communication expenses should be deleted as the same has been incurred wholly and exclusively for the purpose of businesses 5. Set off of unabsorbed depreciation of Titex India Private Limited The learned CIT(A) erred in confirming set off of un absorbed depreciation of Titex India Private Limited (amalgamated with the appellant in the financial year ended 31 March 2001) relating to assessment year ('AY') 1999-2000 and AY 2000 -2001, while calculating "profits of the business" for the purpose of computing the deduction under section 80HHC of the Act. The appellant prays that the unabsorbed depreciation of Titex India Private Limited should not be reduced in computing the "profits of the business" for the purpose of computing the deduction under section 80HH....
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....ncome from other sources' The CIT(A) erred in confirming the addition of Rs. 402,663 with reference to the interest received under section 244A in respect of AY 1999-2000 by treating the same as 'income from other sources' for the financial year ended 31 March 2001. The appellant prays that the interest received under section 244A of the Act in respect of AY 1999 - 2000 should not be treated as 'income from other sources' for the financial year ended 31 March 2001 as the assessment proceedings for AY 1999 -2000 were still in progress. 77. The assessee also filed additional grounds of appeal, which read as under:- Additional Ground 1: Deduction under section 35AB of the Income Tax Act, 1961 ("the Act") in respect of lump sum know how fees of Rs. 1,47,07,778 The learned CIT(A) ought to have held that the assessee is entitled to deduction of Rs. 1,47,07,778/- in respect of lump sum know how fees u/s.35AB of the IT Act. Additional Ground 2: Assessee entitled to deduction of Exchange Fluctuation loss. The learned CIT(A) ought to have held that the assessee is entitled to deduction of appropriate part of exchange fluctuation loss of Rs. 51,72,000/- A....
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.... the assessee before the Assessing Officer was that the unabsorbed depreciation should not be reduced from income from business while computing deduction under section 80HHC of the Act. The Assessing Officer noted from the bare reading of section 80HHC of the Act along with clause b(a) or bb(aa) indicates that the profits of business were required to be computed under the head "Profits and Gains of business". Further, section 28 and 29 of the Act clearly lays down different types of criteria chargeable to income tax under the above head. The Assessing Officer was of the view that unabsorbed depreciation of earlier year is deemed to be the current year's depreciation in view of the provisions of section 32(2) of the Act and section 29 of the Act states that income referred to in section 28 of the Act shall be computed in accordance with provisions containing in section 30 to 43D of the Act, hence, the provisions of section 32(2) of the Act have to be taken into account to arrive at the correct profit of current year. In view thereof, the Assessing Officer held that set off of brought forward depreciation loss of Rs. 5.83 crores is to be deducted from the profits of business befo....
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....eciation and accordingly comes into the computation of profits and gains of business or profession as prescribed in section 29. In the circumstances, the Assessing Officer was perfectly justified in computing the "profits of the business" of the appellant, for the purpose of arriving at the admissible deduction under section 80HHC, after setting off the unabsorbed depreciation of the merged entity. The recomputation thus made is accordingly confirmed; and the ground raised by the appellant is hereby dismissed." 85. The assessee is in appeal against the order of CIT(A). 86. The learned Authorized Representative for the assessee pointed out that Titex India Pvt. Ltd. got amalgamated with the assessee company w.e.f. 01.01.2001 and the issue was in respect of unabsorbed depreciation available in the hands of said entity relating to earlier years. The learned Authorized Representative for the assessee referred to the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Shirke Construction Equipment Ltd. (2007) 291 ITR 380 (SC), wherein it was held that for claiming the deduction from export business, section 80AB of the Act provides that profits are to be computed in accordanc....
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....der section 80HHC of the Act, unabsorbed business losses of earlier years under section 72 of the Act should be set off. Accordingly, we hold so and the ground of appeal No.5 raised by the assessee is thus, dismissed. 89. The issue in ground of appeal No.6 is treatment of scrap sales in the total turnover while computing deduction under section 80HHC of the Act. 90. The claim of the assessee before us was that the said scrap sale was not includable in the export turnover and total turnover while computing deduction under section 80HHC of the Act. Both the authorities below were of the view that the proceeds realized on the sale of scrap were received and were not levies as was case with sales tax and Excise duties. Accordingly, inclusion of scrap sale of Rs. 1,44,20,000/- in total turnover was made, while computing the deduction under section 80HHC of the Act. 91. The learned Authorized Representative for the assessee placed reliance on the ratio laid down by the Hon'ble High Court of Madras in CIT Vs. Ashok Leyland Ltd. (2008) 297 ITR 107 (Mad) for the proposition that scrap sale is not to be included in the total turnover for the purpose of calculating deduction under sect....
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....nd of appeal No.10 is against the assessee in view of the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Indian Oil Corporation Ltd. (2012) 254 CTR 113 (Bom). 100. We find that the Hon'ble Bombay High Court in CIT Vs. Indian Oil Corporation Ltd. (supra) had held that consequent to addition of Explanation 2 to section 234D by the Finance Act, 2012 with retrospective effect from 01.06.2003, section 234D of the Act was applicable even to period prior to assessment year 2004-05. Where the Assessing Officer had granted refund to the assessee under section 143(1) of the Act and subsequently regular assessment order was passed under section 143(3) of the Act and tax demand was raised upon the assessee, then the assessee was liable to pay interest under section 234D of the Act on excess refund granted to it. Applying the said ratio, we uphold the order of CIT(A) in this regard, though interest under section 234D of the Act is to be charged from 01.06.2003 to till the date of assessment order and ground of appeal No.10 raised by the assessee is thus, dismissed. 101. The issue in ground of appeal No.11 is whether interest under section 244A of the Act of Rs. 4,02,663/ ....