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2011 (9) TMI 1135

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....ead to conclusion that the same has not been derived from the industrial undertaking and hence, the disallowance of part deduction claimed u/s. 80 IB of the Act is unjustified and may be deleted." 3. The Assessee is a company. It is engaged in the business of manufacture and sale of glass. The Assessee was entitled to a deduction while computing total income a deduction of the income derived from the industrial undertaking viz., manufacture of glass. The above grounds are directed against the action of the revenue authorities in not considering 'other income' amounting to ₹ 1,07,05,561 for deduction u/s 8OlB of the Act. The aforesaid amount comprises of the following sums: Insurance Receipt- Sales 358,577 Octroi Receipts 539,399 Insurance claim received 1,486,649 Miscellaneous income 96,594 Gain due to Foreign exchange difference 653,804 Cash Discount received 266,125 Sundry Advances w/back 1,926,135 Sundry credit balances w/back 1,383,326 Administrative charges 3,600,000 Interest on Trade Deposit 32,000 Interest on Margin Money 172,593 Interest on Inter corporate Deposit 146,436 Interest on Bill of Exchange 17,045 Dividend on shares ___ 20,000 1....

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.... of the ld. Counsel for the assessee before us was that when it sells its product the same includes the cost of the glass as well as the insurance on the glass sold to the customers. The customer pays the cost of the glass plus the insurance premium paid by the assessee and for accounting purposes assessee shows insurance receipts separately. According to the assessee this also is part of the sale proceeds of glass and eligible for deduction under section 80 IB of the Act. The Assessee submits that the amount is credited to this separate account instead of considering the same as part of actual sales value since the same are separately charged. The Assessee submits that this receipt is directly related to the manufacturing activity and hence, deduction rightly claimed u/s.8OlB of the Act and the same may be allowed. Without prejudice, it was submitted that this is not income as such but merely recoupment of the cost that the appellant incurred on behalf of the customers and thus entitled to relief u/s.801B of the Act. We are unable to accept the stand of the assessee in this regard. The insurance premium paid by the assessee would be shown as an expenditure in the P&L account and....

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....s direct bearing on the income of the undertaking. Without prejudice, the appellant submits that the amounts received against breakages/damages would go to reduce the cost of purchases of manufacturing of the glass articles and., hence, has direct connection with the income of the undertaking and hence, the same would form part of eligible profits of the undertaking and thus, the deduction ought to be allowed in respect of the same. As far as insurance claim received by the assessee on account of damage of the goods in transit has to be considered as income derived from the eligible business. The decision of the Hon'ble Bombay High Court in the case of Pfizer Ltd. 330 ITR 62 (Bom) as well as the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sporting India Ltd., 324 ITR 283 have taken the view that amount received from insurance company for loss of goods has to be considered as income eligible for deduction under section 80 IA/(80 HHC) of the Act. Following the said decision the claim of the assessee in this regard has to be accepted. (iv) Miscellaneous Income of ₹ 96,594 is in 2 parts i.e. ₹ 50,000 being advance amount received from customer M/s. Th....

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.... supported by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Kamper Industries India Ltd., 326 ITR 455(Bom), wherein it was held that they are part of sale proceeds and have to be considered as income derived from the eligible business. The AO is directed to allow the claim of the assessee for deduction. (vi) Cash Discount received of ₹ 2,66,125 is on purchases from one of the suppliers M/s. Asahi India Limited and since the assessee made early payment to the said party, discount was received, which in effect, would go to reduce the purchase cost of the assessee and hence, eligible for deduction u/s.8OlB of the Act. Cash discount received is also income derived from the eligible business as they would be in the nature of reduction in the cost of goods sold by the assessee. The AO is therefore, directed to allow the claim of the assessee for deduction in this regard as claimed by the assessee. (vii) Sundry Advances Written back of ₹ 19,26,135 is the aggregate of various amounts received as advance from various customers against orders for purchase of glass manufactured by it but later cancelled by the customers whereupon the assessee does not ref....

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....rom the group concern is basically in the form of reimbursement of the various expenses incurred by the Assessee and hence, would go to reduce the overall expenses of the appellant and thereby increase the profits of the eligible undertaking. The Assessee submits that the amount recovered from the group concern is part and parcel of the business profits eligible for claim of deduction uls.801B of the Act and hence, the Assessee should be allowed the deduction accordingly. We have considered the rival submissions. It is the claim of the assessee that the amount in question is reimbursement of expenses by the group concern of the assessee of expenses incurred by the assessee on behalf of the group concern. In our view the claim of the assessee needs to be examined by the AO afresh. For this purpose the matter is remanded to the AO. If the administrative charges incurred by the assessee on behalf of the group concern is debited in the P&L Account then to that extent the debit to the P&L Account has to be removed, which will result in increase in income of the eligible industrial undertaking. If on verification, the claim of the assessee of debit of the impugned expenses to the profit....

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....m the eligible business. (xiii) Interest of ₹ 17,045 is on Bill of Exchange drawn on customers against sales realized late. Interest is charged thereon for delayed payment by the customers. Thus, the Assessee submits that the interest is earned on delayed payment from the customers and hence, part and parcel of sale proceeds and thereby deduction u/s.801B is allowable on the said amount and the same may be therefore allowed. Interest paid by the customer for late payment as we have already held should be considered as interest derived from the eligible business for allowing deduction under section 80 IB of the Act. (xiv) Dividend of ₹ 20,000 is claimed to be part and parcel of the business activity of the industrial undertaking for the reason that as per the terms and conditions of sanctioning of loan from the bank,, The Cosmos Cooperative Bank Ltd., it is one of the pre-condition to purchase shares of the bank. Thus the shares are not purchased as investment out of surplus funds, but the same is purchased as a business compulsion in order to obtain loan facility from the bank. Thus, the dividend income forms part of the income of the industrial undertaking and hence....

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....source on payment of ₹ 2,50,893/- purported to a payment to the Assessee as a contractor. The AO called upon the Assessee to explain this receipt and how it is reflected in the books of accounts of the Assessee. The Assessee explained that a firm of Architects M/S.Euro Architectural (P) Ltd. (Dona Planate) was a group concern of DB. The Assessee sold "Reflective Super Silver Dark Blue Glass" to them under sale invoice dated 24.1.2006. A copy of the invoice together with copy of the Ledger extract of Euro Architectural Pvt. Ltd. In the books of the Assessee was also given to the AO. The Account showed that sales of ₹ 3,67.925/- were made by the Assessee to DB on 24.1.2006, though the ledger account is in the name of Euro Architect (P) Ltd.(Dona Planate). A payment of ₹ 1,50,000/- had been received by the Assessee from DB on 9.1.2006 itslf. A further payment of ₹ 2,41,913 had been received on 3.2.2006 leaving a balance of ₹ 23,988. The Assessee wrote this off in its books on 31.3.2006. Thus the Assessee explained the transaction between it and DB. The AO however held that the figure of sales as claimed by the Assessee was not found in the AIR of DB and f....

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....unt of ₹ 2,50,893/- in the income declared in the return. The AO has rightly brought this amount to tax. The ground is dismissed." 11. Aggrieved by the order of the CIT(A), the Assessee has raised Gr. (B) before the Tribunal. We have heard the rival submissions. The same submissions made before AO were reiterated on behalf of the Assessee. The Learned D.R. relied on the order of the CIT(A). 12. We have considered the orders of the revenue authorities and the documents on record. Copy of the invoice for supply of "Reflective Super Silver Dark Blue Glass" dated 24.1.2006 shows that the Assessee supplied glass material worth ₹ 3,67,925 to Euro Architect (P) Ltd.(Dona Planate). On enquiry from DB they produced the account of the Assessee as per their books. The said account shows that they have recorded purchases worth ₹ 3,88,893 and another purchase worth ₹ 12,000 treated as wastage. Thus the value of purchases reflected by DB was ₹ 4,00,893. DB has effected payment of ₹ 1,50,000 on 31.12.05, ₹ 2.41.913 on 3.2.2006 and made TDS payment of ₹ 8,980. Thus the account stands squared. In the books of the Assessee however the sale value to....