TaxTMI 
TaxTMI 
2019 (4) TMI 1302
X X X X Extracts X X X X
X X X X Extracts X X X X
....the deduction to the extent of Rs. 4,90,68,559/- instead of Rs. 5,47,46,712/- as claimed by the assessee and that too by recording incorrect facts and findings and without giving adequate opportunity of hearing. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in not allowing the statutory claim of deduction u/s 80IC of Rs. 56,78,153/- pertaining to Guwahati Unit and has further erred in restricting the deduction to the extent of Rs. 4,90,68,559/- instead of Rs. 5,47,46,712/- as claimed by the assessee is bad in law and against the facts and circumstances of the case. 3. Without prejudice to the above ground and having regard to the facts and circumstances of the case, deduction u/s 80IC should have been allowed on the amount of income assessed by Ld. AO. A.Y. 2009-10: 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not allowing the statutory claim of deduction u/s 80IC of Rs. 1,09,81,936/- pertaining to Guwahati Unit and has further erred in restricting the deduction to the extent of Rs. 1,64,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A) has erred in law and on facts in confirming the action of Ld. AO in ITA Nos. 2935, 2936 & 2937 and 3770, 3771 & 3772/Del/2015 4 disallowing a sum of Rs. 18,24,490/- on account of interest of FNCR which was to be paid to the bank on the accrual basis as per law. 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in disallowing a sum of Rs. 18,24,490/- on account of interest of FNCR is bad in law and against the facts and circumstances of the case. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the disallowance of Rs. 14,54,111/- fully as made by Ld. AO u/s 14A read with Rule 8D and has further erred in sustaining the disallowance to the extent of Rs. 1,09,400/- under Rule 8D(2)(iii) of Income Tax Rules, 1962. 6. That in any case and in any view of the matter, action of Ld. CIT(A) in not deleting the disallowance of Rs. 14,54,111/- fully as made by Ld. AO u/s 14A read with Rule 8D and has further erred in sustaining the disallowance to the extent of Rs. 1,09,400/- under Rule 8D(2)(iii) is bad in law and against the facts and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l. 2. On the facts and in the circumstances of the case, the Id CIT(A) has erred in law in deleting the disallowance of Rs. 9,00,103/- out of total disallowance of Rs. 10,55,810/- made by Assessing Officer u/s 14A r.w.r 8D(2(ii) by ignoring the mandatory provisions of sub-rule 8D r.w.s.l4A of the Income tax Act, 1961. A.Y. 20010-11: 1. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs. 13,86,656/- since the assessee is not entitled to claim deduction u/s 80IC on the products which are being manufactured by other company without appreciating the facts that the assessee has failed to submit the details material with evidence. 2. On the facts and in the circumstances of the case, the Id CIT(A) has erred in deleting the addition of Rs. 1,21,42,231/- on account of 'Sale promotion expenses' without appreciating the facts that the assessee company has failed to submit the details material with evidence and the bills /vouchers relating to sale promotion expenses were not furnished in full. 3. On the facts and in the circumstances of the case, the Id CIT(A) has erred in deleting the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,559/-. Similar disallowances on the identical reasoning were also made to the tune of Rs. 1,09,81,936/- & Rs. 1,10,87,971/- respectively for the assessment years 2009-10 and 2010-11. In appeal, the ld. CIT(A) confirmed the action of the Assessing Officer on the premise that the aforesaid incomes were not linked with the manufacturing activity and are not derived from the manufacturing activity of the undertaking. He also relied on several decisions on the issue. 6. Before us, the ld. counsel for the assessee, reiterating the submissions made before the ld. CIT(A), submitted that the aforesaid amounts pertain to the business activities of the assessee carried out at Guwahati and as such the denial of deduction u/s. 80IC on such incomes is not justified. However, the ld. AR of the assessee further submitted in his written synopsis on this issue as under : In this regard, it is respectfully submitted that deduction under section 80IC of the Act has been disallowed in respect of the 'other incomes' of the appellant, however, it includes interest subsidy, insurance subsidy and similar incomes which are inextricably linked to the business of the appellant and are eligible fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Bal. W/off Rs.5,02,061/- Cheque Dishonour charges Rs.4,49,941/- Interest income Rs.2,50,053/- Misc. receipts Rs.1,70,578 Penalty interest income Rs.2,99,791/- Tax remission Assam Account Rs.9,11,729/- Testing charges Income Rs.28,81,625/- Rs.54,65,328/- A perusal of the assessment order, as also contended on behalf of the assessee, we find that the Assessing Officer has not examined these incomes as detailed above. In presence of all these facts, and in view of our aforesaid discussion, we think it appropriate to restore this issue to the file of Assessing Officer to decide the same afresh after examining all the details of income and in the light of recent decision of Hon'ble Supreme Court in the case of CIT vs. Meghalaya Steels Ltd. (supra). Needless to say, the assessee shall be given reasonable opportunity of being heard. Accordingly, Grounds Nos. 1 & 2 in all the three appeals of the assessee for A.Yrs. 2008-09, 2009-10 and 2010-11 are allowed for statistical purposes. Ground No.3 raised in A.Y. 2008-09 is misconceived as no disallowance of expenditure is made during this year. 9. The second issue involved in appea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his score. It was submitted that in order to make investment and to manage it, it requires high skilled personnel and decisions and therefore, management expenditure incurred in such investments cannot be ruled out. The assessee had failed to the details to substantiate its contention that only own fund was utilized in the investments. The assessee has also paid interest during the year, therefore, the AO has rightly disallowed expenditure u/s. 14A by applying the provisions of Rule 8D. 12. We have heard the rival submissions and have gone through the entire material on record. We noted from the order of the ld. CIT(A) that the assessee had invested in shares etc., income from which does not form part of the total income. It is also noticed from assessee's submissions made before CIT(A) that assessee has also earned Rs. 28,73,189.85 as profit from partnership firm, namely M/s. Ozone Architectural Products from investment of Rs. 1,83,87,130/- in A.Y. 2009-10. The share of profit from firm falls u/s. 10 and exempt from tax. This fact has not been considered by the ld. CIT(A) while examining the contention of the assessee that he had earned exempt income only to the extent of Rs. 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ary directions may be given for verification by the Assessing Officer. He also sought relief as per CBDT Circular No. 37/2016 dated 02.11.2016 in case any disallowance with respect to eligible unit is sustained. 15. The ld. DR supported the orders of the lower authorities. 16. After hearing both the sides and perusing the record, we find that as per assessee the interest on FCNR was paid on 09.08.2010 before filing the return of income (date of filing of return mentioned in asst. order as 31.03.2012) and as such, this amount is allowable u/s. 43B of the Act. This fact requires verification at the stage of AO. In case the contention of the assessee is found correct, then this amount would be allowable u/s. 43B of the Act and in case it is found otherwise, the AO shall examine the disallowance on the anvil of CBDT Circular No. 37/2016 dated 02.11.2016, as contended by the assessee also in alternate. Accordingly, this issue is also restored to the file of AO to decide it afresh after giving reasonable opportunity of hearing to the assessee. Accordingly, ground No. 3 for A.Y. 2010-11 is also allowed for statistical purposes. 17. In the result, all the appeals of assessee ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd exclusively for the purpose of business and identical disallowance was made in assessee's own case in A.Y. 2006-07 and the Tribunal deleted the disallowance. In alternate, it was submitted that in case disallowance out of expenses incurred relating to the unit eligible for deduction u/s. 80IC is sustained, deduction u/s. 80IC may be allowed with regard to the enhanced profit as per Circular No. 37/2016 dated 02.11.2016. 22. After hearing both the parties we find that before the ld. CIT(A), it was emphatically submitted by the ld. Counsel for the assessee that complete books of accounts along with complete bills and vouchers were produced before the AO. However, on perusal of the assessment order, it reveals that the AO has categorically averred that complete bills/vouchers were not produced. It was also stated before the ld. CIT(A) that the assessee has brought complete accounts alongwith complete bills/vouchers and requested the CIT(A) to verify at his own or to get them verified from the AO. But while deleting the entire addition, the findings recorded by ld. CIT(A), nowhere demonstrate that the impugned expenditure were verified by the ld. CIT(A) from bills/vouchers all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xigency to conduct foreign travel with other employees, the AO was justified to disallow the same. 26. The ld. AR, on the other hand, reiterated the submissions made before the ld. CIT(A) and supported the impugned order. In alternate, it was submitted that in case these expenditures are disallowed, the assessee's enhanced profit for eligible unit may be considered for deduction u/s. 80IC as per CBDT Circular No. 37/2016 dated 02.11.2016. 27. After considering the submissions of both the parties, we find substance in the contention of assessee. It is not the case of the AO that the impugned expenditure were not supported by any evidence or were not open for verification. Secondly, the submissions made before the ld. CIT(A) were also that the assessee had invested in M/s. Ozone Research Frontier Ltd. in USA, in which research in respect of protein sequence was being carried out and also visited China to attend the Trade Fair. These submissions of assessee do not stand controverted by the ld. DR. Therefore, it cannot be said that the aforesaid visits were made for the purpose other than business. We, therefore, reject this ground. 28. The next issue involved in appeal of Rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... medicines purchased from its sister concern M/s Ozone Ayurvedics as trading activity is not eligible for deduction u/s 80IC of the Act. In this regard, it is respectfully submitted that Assessee Company is engaged in manufacturing of medicines as well as in trading of medicines. Assessee Company claims deduction u/s 80IC on the profits earned by its manufacturing unit situated at Guhawati. Besides having its manufacturing unit in Guwahati, Assessee Company is also engaged in business of trading in medicines. For the purposes of trading, appellant company makes purchases from different parties and in turn books sales of these medicines in its trading unit only. It is submitted that 80IC unit of the appellant company does not make any purchases for trading and is engaged in the manufacturing of medicines only. Ld. AO inadvertently presumed that purchases made from M/s. Ozone Ayurvedics (an associated concern of the assessee company) of Rs. 5 Crores are for Guwahati Unit, and these are sold from Guwahati Unit only, whereas, the fact is that these medicines were purchased by the assessee company in the trading units only and has no concern with the purchases made by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which were not manufactured by assessee, but by its sister concern M/s. Ozone Ayurvedics. Accordingly, this issue is remitted back to the AO for deciding it afresh in the light of above verification. Needless to say, the assessee shall be given reasonable opportunity of being heard. 33. The last issue involved in appeal of the Revenue for A.Y. 2010-11 is with respect to Sales Promotion Expenses in the name of sister concern amounting to Rs. 52,20,590/- made by the AO and deleted by the ld. CIT(A). The brief facts relating to this issue are that in the assessment proceedings, the AO noted that the assessee had claimed sales promotion expenses in the profit & loss account to the tune of Rs. 16,18,96,408/-, out of which a sum of Rs. 5,22,05,896/- had been paid to the following parties, which are relatives as per section 40A(2)(b) of the IT Act : (i). M/s. Ozone Ayurvedics 3,75,02,642/- (ii). M/s. Fourth Dimension Media P. Ltd. 1,17,76,015/- (iii). M/s. Fourth Dimension IMC P. Ltd. 25,51,988/- (iv). M/s. Ozone Mission 3,75,251/- 5,22,05,896/- The assessee was asked to justify the genuineness of expenses and whether th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee company. No such items purchased either as sample or for trading or for sales promotion are sold by M/s Ozone Ayurvedics to any third party. 2) M/s Fourth Dimension Media Pvt. Ltd. - Rs.l,17,76,015/- Fourth Dimension Media Pvt. Ltd. published magazines for the products manufactured by the assessee company. These magazines are sold in the market but market sales are very nominal. Whereas bulk purchases are made by the assessee company since these materials (magazines) are purchased by the assessee company for promoting its sales as it contains advertisement materials and describes the products manufactured by the assessee. For this reason, assessee purchased bulk magazines and these are at lesser price as compared to price at which these are sold to other vendors who purchases these magazines in small quantities. Therefore, without appreciating these facts the addition made by Ld. AO @ 10% in an ad hoc manner is contrary to law and without appreciating the facts of the case. PB 92 - 118 are copies of bills evidencing the rates at which magazines have been sold to appellant company and to third parties by M/s Fourth Dimension. In view of above....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for which payments were made. It was also observed that all the correspondence and details of professional charges paid were given to the AO and copies of TDS, returns and statement of account were shown. Therefore, treating the impugned expenditure to have been incurred for the purpose of business, the ld. CIT(A) deleted the addition. 34. The ld. DR supported the order of the AO and submitted that the assessee failed to prove that the payment made for services/goods were at arm's length, which was the primary onus of the assessee not being discharged. Therefore, the AO was justified to make the adhoc addition. The case law relied by assessee is not applicable. 35. The ld. AR on the other hand, reiterated the submissions made before the CIT(A) and submitted that the ld. CIT(A) has rightly deleted the addition after considering the written submissions of the assessee. It was further submitted that the onus to prove that the impugned expenditure were excessive or unreasonable was on the Assessing officer, which he failed to discharge while making the adhoc addition. Reliance is placed on the decision in the case of S.K. Engineering vs. JCIT, 103 ITD 97 (Bang. Tribunal) and ACI....