TaxTMI 
TaxTMI 
2016 (9) TMI 404
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....f the year by holding it as previous years' expenditure. 4. While scrutinizing the return of income and perusing the Tax Audit Reports, the A.O. found that the assessee has debited Rs. 90.38 lacs as expenses pertaining to previous year. The assessee was asked to justify its claim. Assessee filed a detailed reply along with the details of the prior period expenses. It was strongly contended that the details are exhaustive and contain the details of expenses as well as income. It was brought to the notice of the A.O. that prior period transactions include both income and expenditure and the expenses have been crystallized during the year under consideration. Similarly, the income pertaining to previous year was made known to the company in the current year. Necessary details division-wise were filed. The submissions and the details field by the assessee did not find any favour with the A.O. who was of the opinion that since the assessee company is maintaining its books of accounts on mercantile system of accounting and accordingly disallowed Rs. 90.38 lacs and added to the return of income. 5. Assessee carried the matter before the ld. CIT(A) but without any success. 6. Befo....
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....s Pvt. Ltd upholding CIT(A)'s and tribunal's view that if the assessee admits prior period income which was not excluded while working out relevant previous year income, it is unreasonable to allow one part of prior period adjustment i.e. prior period expenditure. We come to Revenue's case law now. The first one is (2013) 33 taxmann.com 92 (Bang) Bearing Point Business Solutions vs. DCIT and (2013) 35 taxmann.com (Hyd) now Bharat Ventures Ltd vs. CIT deciding the issue in Revenue's favour. We find that these tribunal's decisions do not confirm to different views of various hon'ble high courts hereinabove. Next case law (2013) 42 taxmann.com 142 (Guj) CIT vs. Gujarat Mineral Development Corporation is an admission order after framing substantial question of law wherein the main case is still pending for final disposal. We observe that this latter order does not settle a ratio. We take into account above stated discussions, relevant facts and case law to conclude that both the lower authorities have wrongly disallowed assessee's claim or prior period expenditure. The same stands deleted. This first substantive ground is treated as allowed. 9. Respect....
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....deration to the facts in issue and have carefully perused the orders of the authorities below. We find that the assessee has closed the business of trading in Sessame seeds during the year under consideration and accordingly wrote off the entire stock which was not saleable as per the standards prescribed by the Government authorities and the same has been destroyed. In our considered opinion, this is a loss and not shortage though claimed as a shortage. The total quantity wrote off was 5940 MT on a total value of Rs. 29.48 crores which comes to 0.86% only. The only reason for upholding the disallowance given by the First Appellate Authority is that the assessee has failed to quantify the shortage/loss due to substandards material. There may be some force in the findings of the First Appellate Authority. Considering the smallness of the overall percentage which is 0.86%, the balance of convenience is tilted in favour of the assessee. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the disallowance of Rs. 15,19,800/-. Ground no. 2 is accordingly allowed. 16. Ground no. 3 is an alternative claim in respect of deduction u/s. 80HHC for the dis....
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.... that the Hon'ble Supreme Court has considered this issue and has decided in favour of the assessee by holding:- "Section 28(iiib), read with section 28(iiid) of the Income-tax Act, 1961 - Business income - Cash assistance - Assessment year 2002-03 - Whether DEPB is a 'cash assistance' receivable by assessee and is covered under clause (iiib) of section 28, whereas profit on transfer of DEPB takes place on a subsequent date when DEPB is sold by assessee and is covered under clause (iiid) of section 28 - Held, yes Section 80HHC, read with section 28(iiid) of the Income-tax Act, 1961 - Deductions -Exporters - Assessment year 2002-03 - Whether when DEPB accrues to assessee in first previous year and assessee transfers DEPB certificate in second previous year, it is only ninety per cent of profit on transfer of DEPB covered under clause (iiid) of section 28 and not ninety per cent of entire sale value including face value of DEPB gets excluded from 'profits of business' in terms of Explanation (baa) under section 80HHC and, as a result, assessee gets a bigger figure of 'profits of business' which becomes multiplier in formula under section 80HHC(3)(a) for ....
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....in the light of the order of the Special Bench of the Tribunal in the case of Lalsons Enterprises [2004] 89 ITD 25 (para. 28). The Commissioner of Income-tax (Appeals) in para. 11 of his order has rejected the assessee's claim for netting. However, in the light of the order of the of the Special Bench cited above, the order of the income- tax authorities rejecting the principle of netting cannot be upheld. While, therefore, upholding the assessee's claim for netting of the interest, we restore the matter to the Assessing Officer to enable him to examine the assessee's claim that there is factually a nexus between the Special Bench Order. The assessee shall be given adequate opportunity of being before, decision is taken. These grounds are decided accordingly.' Although the Tribunal has followed Lalsons and 'held that netting should be allowed, it has remitted the matter to the Assessing Officer "to enable him to examine the assessee's claim that there is factually a nexus between the interest paid and received and take a fresh decision." We find no reason to interfere with the directions given by the Income-tax Appellate Tribunal, which is consistent with the dec....
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....he Tribunal in earlier year and has decided the issue in favour of the assessee and against the revenue. 41. We have carefully considered the facts in issue and the decision of the Co-ordinate Bench relied upon by the assessee. We find force in the contention of the ld. counsel. An identical issue was considered by the Tribunal in A.Y. 1994-95 (supra) qua ground no. 4 of that appeal at para 28 and the relevant part of the decisions of the Co-ordinate Bench reads as under:- 28. Ground no. 4 of the appeal of the Revenue is directed against the order of Ld. CIT(A) to allow deduction u/s 80HHC in respect of income of marine division. 29. The brief facts of the case are that the assessee is a recognized export house. The export turnover (FOB) in the marine division during the year was Rs. 3,07,51,05,859/- in the Assessment Year. The Assessing Officer stated that in the original return of income filed, no deduction u/s 80HHC was claimed in respect of exports in this division. Subsequently, the revised return of income was filed by the assessee and deduction u/s 80HHC was quantified by tax auditors in the report in Form No. 10CCAC filed along with return of income. The Assessing ....
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....HC admissible to the assessee regarding the marine division. 33. With regard to admissibility of deduction u/s 80HHC, the Ld. CIT(A) observed that the assessee submitted FOB of the export turnover of marine division is Rs. 3,07,51,859/- and after deducting the direct cost and indirect cost totaling to Rs. 3,21,01,72,578/-, there is a business loss of Rs. 13,50,71,719/- without considering 90% of the export incentives of Rs. 13,70,95,917/-. The Ld. CIT(A) observed that it was submitted that section 80HHC is an incentive provision and it should be interpreted in a liberal way. The words 'further increase' clearly show that the benefit as per proviso is over and above the benefit as per clause (a) of subsection (3) of section 80HHC in the case of a negative balance as per clause (a) of subsection (3), benefit of proviso cannot be adjusted or reduced. The Ld. CIT(A) further observed that it was submitted that further increase contemplated as per proviso cannot be reduced and adjusted against the loss arrived at the stage of computation. The assessee filed copy of the decision dated 14.09.1995 of the Cochin Bench of the Tribunal in the case of A.M. Moosa Vs. ACIT (1996) 54 TT....
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....itted that the Delhi Bench of the Tribunal in the case of MMTC Limited Vs JCIT 112 TTJ 15 (Delhi) has held that when an export house surrenders part of its export turnover in favour of supporting manufacturer, it is required to issue a certificate as referred to in clause (b) of subsection (4A) in respect of the amount of turnover specified therein, then the amount of deduction in the case of the assessee being export house shall be reduced by such amount which bears to the total profit derived by the assessee from export of trading goods, same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods. Thus, in respect of the income which the assessee did not disclaim in favour of the supporting manufacturer which pertains to and is attributable to the export incentive, there is no reason to reduce the export incentive relatable to the disclaimed turnover in terms of proviso to section 80HHC (1) of the Act. He also submitted that this is the only decision of the Tribunal in favour of the assessee. He also submitted that no appeal has been filed against this order by the Departmen....
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.... export house has disclaimed its turnover in favour of a supporting manufacturer, the turnover of the exporter gets reduced to the extent disclaimed. It is submitted that as the turnover, which is disclaimed, is reduced it cannot then be taken into consideration for the purposes of computing profits under sub- section 3(c)( ii). In our view this is an argument which merely needs to be stated to be rejected. if such an argument is accepted it would lead to an absurd result. It would mean when if there was no disclaimer the export house would not be entitled to any deduction in cases where there is a loss but because disclaimer has been made both the export house and the supporting manufacturer would become entitled to deductions. The proviso to subsection (3) of section 80HHC enables a disclaimer only to enable the export house to pass on deductions. It in no way reduces the turnover of the export house. In computing total income, the entire turnover is taken into account even though there is a disclaimer. Thus even though the disclaimer is made the taxable income of Rs. 4.39 crores has been arrived at by the Appellants after taking into account the entire turnover from export of tr....
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....s. 20,24,198/- in the instant case. Therefore, the assessee was entitled for deduction u/s 80HHC in respect of Rs. 20,24,198/- only. We, therefore, modify the order of the Ld. CIT(A) to the above extent. Thus, the ground of appeal of Revenue is partly allowed. 42. Respectfully following the findings of the Co-ordinate Bench (supra), we direct accordingly. 43. The last grievance of the revenue relates to the direction to allow deduction u/s. 80HHC to the extent of gross total income without restricting the total income derived from export of goods. 44. We find that an identical issue was considered by the Tribunal in assessee's own case in A.Y. 1994-95 in ITA No. 3403/Ahd/1997 qua ground no. 5 of that appeal at para 44 and the same reads as under:- 44. The ground no. 5 of the appeal of the Revenue is directed against the order of the Ld. CIT(A) directing to allow deduction u/s 80HHC as mentioned in the grounds thereby resulting in computation of income lower than shown by the assessee in revised return of income. 45. The Ld. AR of the assessee relied on the decision of Hon'ble Supreme Court in the case of CIT Vs. Shelly Products and others (2003) 261 ITR 367 (SC) ....
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.... appeal and the same have been decided on merits. We are of the considered view that the income of the assessee is to be computed as per provisions of the law and simply because an assessee has suffered more amount on tax than what is legally due, then the Department can not assess the income at a higher figure but should assess the income at correct amount as per the provisions of law. We, therefore, do not find any merit in this ground of appeal of the Revenue and hence, the same is dismissed. 45. Respectfully following the findings of the Co-ordinate Bench, we do not find any reason to interfere with the findings of the ld. CIT(A). Ground no. 5 is accordingly dismissed. ITA No. 3184/Ahd/2004 for A.Y. 2001-02 Revenue's appeal 46. The first grievance of the revenue relates to the deletion of the disallowance of previous year expenses of Rs. 4,62,11,501/-. 47. An identical issue has been considered and decided by us in ITA No. 3190/Ahd/2003 qua ground no. 1 of that appeal. For our detailed discussion therein, this ground of the revenue is dismissed. 48. Ground no. 2 relates to the direction to allow deduction u/s. 80HHC on General division of Rs. 55,89,38,610/- and M....