TaxTMI 
TaxTMI 
2014 (10) TMI 994
X X X X Extracts X X X X
X X X X Extracts X X X X
....have held that in the event the Department stand is accepted by the ITAT in earlier years, then deduction of amounts paid or written back amounting to Rs. 4,55,53,707/- should be allowed in the previous year. 2. Exchange Fluctuation loss: 2.1 The CIT(A) failed to decide ground No.9.4 that the learned AO erred in not allowing deduction in respect of exchange fluctuation loss of Rs. 1,99,71,608/- actually incurred during the year, which had been disallowed in earlier years, consistent with the Department's stand. 2.2 The CIT(A) ought to have held hat in the event the Department's stand is accepted by the ITAT in earlier years, then deduction of amounts actually paid in the previous year amounting to Rs. 1,99,71,608/- should be allowed. 3. Notional interest accrued but not due on securities 3.1 The learned CIT(A) erred in upholding the action of the AO in taxing interest nationally computed on securities amounting to Rs. 66,575/-. 3.2 The learned CIT(A) ought to have held that interest notionally computed on a per day basis on securities amounting to Rs. 66,575/- cannot be taxed, as the said interest had not accrued i.e. interest w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld that interdivisional transfers should not be included in the total turnover for computing the deduction under section 80 HHC. CIT(A) failed to appreciate that transfer of goods from on division to another division of the appellant company is not turnover. 6.8 The CIT(A) erred in upholding the action of the AO in adjusting loss on export of traded goods against profit on export of manufactured goods, while calculating export of traded goods is to be ignored or should not be adjusted against the profits on export of manufactured goods. 7. Interest under section 244A 7.1 The CIT(A) erred in upholding action of the AO in not allowing interest under section 144A on refund of Rs. 12 crores paid by the appellant on 30.04.2001. 7.2 The CIT(A) ought to have directed the AO to allow interest on refund of Rs. 12 Crores under section 244A of the Income Tax Act from date of payment to date of refund. 8. The appellant prays for the cost of this appeal in vies of section 154(2B) of the I.T. Act." 2. Rival contentions have been heard and perused the record. The assessee is engaged in manufacturing and sale various products. During the course of sc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al interest accrued but not due on securities. 6. We have considered the rival contentions and found that the issue regarding the taxability of interest have been decided by the Tribunal in assessee's own case in its favour in A.Y. 1998-99 and also by the Hon'ble Bombay High Court in assessee's own case for assessment years 1994-95, 1995-96 wherein it was held that such interest are taxable in subsequent year when securities are sold. Respectfully following the decision of the Tribunal as well as Hon'ble Bombay High Court in assessee's own case as referred, we do not find any merit for taxing the interest accrued but not due on securities during the year under consideration. 7. The assessee is also aggrieved for taxing of interest received from Income Tax Department amounting to Rs. 13,64,09,609/-. We find that similar issue has been dealt with by the Tribunal in A.Y. 1993-94 in ITA No. 1523/Mum/1997 vide para 62 as under;- "We have heard the parties and considered the rival submissions. These refunds have been granted to the assessee in the year under consideration and therefore they would partake the character of income of the assessee. If however, any refund has b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... company as a whole or separately for each unit. 13. The ld. Counsel for the assessee fairly conceded that the issue has been decided against the assessee by the Tribunal in the A.Y. 1996-97 & 1997-98. As the facts and circumstances during the year under consideration are same, we do not find any infirmity in the order of the lower authorities for allowing the claim of deduction u/s 80HHC of the Act to be computed on the profit of the company as a whole, rather than unit-wise. 14. The next grievance of the assessee relates to allowing deduction u/s 80HHC of the Act with respect to interest income. The issue under consideration is squarely covered by the decision of Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd., 343 ITR 89(SC) wherein it was held that net interest income is to be excluded from the eligible profit for computing deduction u/s 80HHC rather than gross interest. 15. An identical issue raised as additional grounds for the assessment year 1996-97 and 97-98 was considered and decided by this Tribunal in assessee's own case in paras 30 & 30.1 as under: "30 As regards the additional ground no.1 pertaining to deduction u/s 80HH on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tal turnover while computing deduction u/s. 8OHHC. Second aspect is regarding exclusion of excise duty from total turnover for the same purpose. Second aspect of the matter regarding exclusion of excise duty from total turnover for computing deduction u/s. 8OHHC is covered in favour of the assessee by the judgement of Hon'ble jurisdictional High Court rendered in the case of Sudarshan Chemicals Industries Ltd. (supra). Respectfully following the same, this aspect of the matter is decided in favour of the assessee. Regarding the first aspect of the matter ie. regarding exclusion of interdivision transfer from total turnover, we find that this issue is covered in favour of the assessee by the judgment of the tribunal rendered in assessee's own case for A.Y. 1990-91 to 1992-93. In para No. 152 of the judgment, this has been held by the Tribunal that inter-division transfer has to be excluded as that would amount to double addition in the figure of total turnover. Respectfully following this judgment, this aspect of the matter is also decided in favour of the assessee. This ground No. 26(ii) stands allowed. Respectfully following the decision of the Tribunal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion of the Tribunal for allowing appropriation of HO expenses in computing deduction u/s 80-O of the Act. 27. For the assessment year 1996-97 and 1997-98, this Tribunal has considered and decided an identical issue in para 15.2 to 15.4 as under: "15.2 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. A similar issue has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 29.1 & 29.2 as under: 29.1 On a similar issue the Tribunal in assessee's own case in AY 1994-95(supra) in paragraphs 25 to 25.2 has held as follows:-, '25. In grounds of appeal No. 32 to 35, the assessee has challenged the order of the CIT(A) in allocating head office expenses and thereby reducing the quantum of deduction available to the assessee under the following provisions: Section Rs. 8OHH 14,20,000 801 5,54,600 80M 7,50,000 80-0 3,50,000 30,74,600 25.1 Facts of the case, in brief, are that the AO estimated the expenses and allocated head office expense to the various units which had claimed benefits u/s. 8OHH,80....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ge 11 has restored the issue back to the file of the A.O.to decide the issue afresh after considering the decision in the case of Special Bench of the Tribunal in the case of Reliance Industries Ltd. (supra). Respectfully following the same, the issue is restored back to the file of the A.O. for deciding the same afresh. 29. The next grievance relates to the disallowance of royalty and interest on royalty u/s 43B of the Act treating it as tax. The issue is now settled by various orders of the Tribunal in assessee's own case for assessment years 1995-96 to 2000-01. A similar issue was considered by the Tribunal in the assessee's own case in A.Y. 1999-2000 in ITA No. 5631/M/2002, wherein we find that the Tribunal has followed its earlier order in the assessee's own case in ITA No. 5630/Mum/02 for A.Y. 1998-99. In the absence of any contradictory facts brought on record by the Revenue, following the aforementioned decision, we decide this issue in favour of the assessee. Additional ground No. 2 is accordingly allowed. 30. The Revenue has raised the following grounds:- "1. On the facts and in the circumstances of the case and in law, the CT(A) erred in deleting the disal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in law, the CIT(A) erred in deleting the disallowance of Rs. 2,00,03,443/- made on account of exchange rate fluctuation loss, relying upon the order of the CIT(A) in the assessee's own case for the A.Y. 1998-99 which has not been accepted by the department and contested in further appeal before the ITAT. 8. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of interest of Rs. l,45,77,507/- pertaining to the construction period, relying upon the order of the CIT(A) in the assessee's own case for the A.Y. 20000l which has not been accepted by the department and contested in further appeal before the ITAT. 9. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs. 17,79,22,078/- being revised electricity charges liability for the period from 1994 to 1997 ignoring, inter alia, the following :- (i) The decision of the Hon'ble Supreme Court in the case of Raymonds Limited cannot form the basis of crystallization of the liability in the assessee's case when, as per record, the assessee's own writ petition in the M.P. High Court was still pending. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Assessing Officer rightly disallowed this expenditure. 14. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to compute the deduction u/s. 80HHC before setting off of the unabsorbed business losses and unabsorbed depreciation of the earlier years against the current years income, relying upon the judgment of the Bombay High Court in the case of Shirke Construction Equipments Ltd. (246 ITR 429) without appreciating that the decision of the Bombay High Court, as aforesaid, has not been accepted by the department and contested by way of filing SLP. 15. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to reduce the net interest, arrived at after reducing the amount of interest paid from the interest received in case the interest received is found to be linked with the business of the assessee, from the profits of the business for the purpose of computation of deduction u/s. 8OHHC, without appreciating that there is no provision for reduction of net interest from the profits of the business as per Explanation to sub-section (4B) of section....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order. The ld. CIT(A) dealt with this issue at page No. 2, para 5 of his order and deleted the disallowance by following the order of the Tribunal in earlier years. From the record, we found that the Tribunal has been consistently allowed the issue in favour of the assessee in assessment years 1990-91, 1993-94, 1994-95, 1996-97, 1997-98 & 1998-99. We further found that against the order of the Tribunal, the Department has not filed any appeal before the Hon'ble High Court in assessment years 1996-97, 1997-98, 1995- 96 & 1994-95. As the matter has been settled and the ld. CIT(A) deleted the disallowance by following the order of the Tribunal, we do not find any reason to interfere with the order of the ld. CIT(A) deleting the disallowance made by the A.O. u/s 43-B of the Act. 32. With regard to the contribution to the local organization, the issue has been dealt with by the A.O. at page 6 -7, para 10 of his order. The ld. CIT(A) deleted the addition/disallowance by dealing the issue at page 3, para 7 of his order wherein he has followed the order of the Tribunal in earlier years. 33. We have considered the rival contentions and we found that the issue has been decided by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herein the disallowance was restricted to 1.5% of the exempt income. As the facts and circumstances during the year under consideration are same, we direct the A.O. to restrict the disallowance to 1.5% of the exempt income. 38. Ground No. 6 of Revenue's appeal relates to the disallowance of rural development expenses. The A.O. has dealt with this issue at page 9, para 15 and the ld. CIT(A) has dealt with this issue at page 4-5, para 11 of his order. We found that the issue has been decided by the Tribunal in assessee's own case in its favour in assessment years 1998-99, 1999-00 & 2000-01. We further found that the Department on this ground is not in appeal before the Hon'ble High Court in these years. Respectfully following the order of the Tribunal, we do not find any reason to interfere with the order of the ld. CIT(A) for deleting the rural development expenses amounting to Rs. 66,08,937/-. 39. Ground No. 7 pertains to exchange rate fluctuation loss on conversion of trading assets and liabilities amounting to Rs. 2,00,03,443/-. The A.O. has dealt with this issue at page 9-10, para 16-16.6and the ld. CIT(A) has dealt with this issue at page 5, para 12 of his order. The ld. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant, which would crystallise the liability. (e) Although the said crystallisation has taken place after the close of the financial year, since it has taken place before finalising of accounts, as per Accounting Standard no. 4, the appellant is well within its rights to claim the deduction in the year under consideration. Based on the above, since the liability has crystallized during the year under consideration, the same is allowed. The ground of appeal is allowed." 42. We have considered the rival contentions and found that after considering the decision of Hon'ble Supreme Court in the case of CIT vs. Swadeshi Cotton Flour Mills Pvt. Ltd. (1964) 53 ITR 134 on this issue, the ld. CIT(A) reached the conclusion that liability has been crystalised under consideration, the same is therefore allowable. We do not find any reason to interfere with the order of the ld. CIT(A) as the same is based on the decision of Hon'ble Supreme Court dated 16/11/2000. 43. Ground No. 10 pertains to allowing the deduction against bad debts. The A.O. has dealt with this issue at page 12, para 21 of his order. The ld. CIT(A) has deleted the disallowance after having observed at para....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de only for advertisement and its useful life is very short and such films do not add to the capital structure of the company. 48. Ground No. 14 pertains to computation of deduction u/s 80HHC of the Act before setting off of the unabsorbed depreciation and business losses of earlier years 49. This issue has already been decided by the Hon'ble Supreme Court in the case of CIT vs. Shirke Construction, 291 ITR 380 (SC) in Revenue's favour. Respectfully following the same, we do not find any merit in the order of the ld. CIT(A) for directing the A.O. to compute deduction u/s 80HHC of the Act before setting off of the unabsorbed business losses and unabsorbed depreciation of the earlier years against the current years income. Accordingly this ground of the Revenue is allowed. 50. Ground No. 15 of Revenue's appeal has already been dealt with by us while deciding assessee's appeal with regard to deduction of interest expenses out of allowable profit of asseessee. On the same reasoning, we direct the A.O. to reduce the net amount of interest expenditure out of allowable income of the assessee for the purpose of computing deduction u/s 80HHC of the Act. We direct accordingly. 51....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ermore, the Department is not in appeal against the Tribunal order on this issue before the Hon'ble High Court for A.Y. 1998-99. Respectfully following the order of the Tribunal, we do not find any infirmity in the order of the ld. CIT(A) for allowing deduction u/s 80IA of the Act in respect of Vikram Unit amounting to Rs. 3,58,74,158/-. 58. Ground No. 20 pertains to the direction of the ld. CIT(A) to the A.O. to recompute the amount of deduction towards export profit for the limited purpose of computing book profit in accordance with the Circular No. 680 dated 21-02-1994 issued by the CBDT. We do not find any infirmity in this direction of the ld. CIT(A) to the A.O., hence allowed this ground of the assessee. 59. In its C.O., the assessee has raised the following grounds:- "1. The Ld. CIT(A) erred in rejecting the alternate ground raised by the Respondent that the AO erred in not allowing deduction for tax paid in foreign countries amounting to Rs. 23,36,958/- from tax payable in India on profit of the foreign branches. 2. The Ld. CIT(A) erred in rejecting the alternate/without prejudice submission of the respondent that the deduction of Rs. 17,79,22,078/- ....