TaxTMI 
TaxTMI 
2019 (3) TMI 1608
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....N/CIT(A)-III/Cir-10/101/06-07) granted partial relief to the assessee. Aggrieved by the order of Ld. CIT(A), Assessee and Revenue are now in appeal before us. 3. The grounds raised by the Assessee in ITA No.1055/PUN/2009 reads as under : "Being aggrieved by the order passed by the CIT(A) III PUNE, your appellant submits the following grounds of appeal for your sympathetic consideration. 1. PREMIUM ON LEASE HOLD LAND The learned CIT(A) further erred in confirming the action of the AO in disallowing Appellant's claim for deduction of amortised amount of premium in respect of leasehold land in the amount of Rs. 2,69,628/-. 2. REVENUE RECOGNITION On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the AO, to work out the excess provision for profit equalization in the light of the directions of the learned CIT(A) for A.Y. 2002-03. On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have accepted the contention of the Appellant that it had correctly applied the said Accounting Standard and accordingly only income as accounted by the Appellant in terms of the said Standard ....
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....year under appeal and was allowable as such. Alternatively, without prejudice to the above, the learned CIT(A), could have directed AO to allow the deduction for the same in the year of payment. 8. DEPRECIATION ON KNOW HOW On the facts and in the circumstances of the case and in law the learned CIT(A) erred in disallowing depreciation on technical know how on the ground that the technical know how was not actually put to use on 31.03.2003 of Rs. 61,58,625/-. 9. CLUB EXPENSES The learned CIT(A) erred in confirming the action of AO in disallowing full amount of club expenses amounting to Rs. 1,34,210/- on the ground that it was a non-business expenditure rejecting the contention of the appellant that the said expenditure was incurred wholly and exclusively for the purposes of the business of the appellant and no enduring benefit accrued there from. 10. ADHOC DISALLOWANCES: On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the action of the AO of making the following adhoc and aribitrary disallowances : Expense Head Gross Amount(in Rs.) Disallowance by Assessing Officer (in Rs.) Public Relation Expenses 11....
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....facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 324.5 lacs on account of adjustments made to closing stock in accordance with the provisions of Sec.145A of the I.T. Act.? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the entire amount accrued to the assessee as per invoice raised is not taxable and there is no fault in following AS-7 ? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in giving direction to AO to delete the disallowance of Rs. 200.26 lacs, claimed as liquidated damages, when as per Sec.251 of the I.T. Act, 1961 the Ld.CIT(A) is not empowered to issue any such direction to AO ? 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,53,21,302/- made by AO on account of lease rent on accrual basis ? 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 7,54,000/- on account of provision for medical expense....
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.... respect of leasehold land. AO on perusing the details of expenditure noticed that assessee had debited an amount of Rs. 2,69,628/- being amortization of premium paid on leasehold land. AO noted that similar expenditure claimed by the assessee in earlier years was disallowed by the AO and the action of AO was also upheld by Ld.CIT(A). He therefore, by following the reasoning of AO and CIT(A)'s decision of earlier years, disallowed the claim. Aggrieved by the order of AO, assessee carried the matter before CIT(A), who dismissed the same being not pressed. Aggrieved by the order of Ld.CIT(A) assessee is now in appeal before us. 8. Before us, at the outset, Ld. AR fairly conceded that identical issue arose is assessee's appeal before Tribunal in A.Ys. 2000-01 to 2002-03 and the issue was decided against the assessee. He pointed to the relevant findings of the Tribunal. He therefore submitted that the issue be decided accordingly. Ld. DR did not controvert the submissions made by the Ld. AR but supported the order of lower authorities. 9. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to claim of amo....
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.... to A.Y. 2000-01 and 2001-02 and since in those years the issue was decided against the assessee, we find no reason to interfere with the order of Ld.CIT(A) and thus the assessee's ground is dismissed." 10. Before us, Ld AR has not pointed to as distinction in the facts of the case for the year under consideration and that of earlier years. We therefore following the same reasoning as given by the Co-ordinate Bench while deciding the issue in Assessee's own case in AY 2000-01 to 2002-03, find no reason to interfere with the order of Ld.CIT(A) and thus the assessee's ground is dismissed. 11. Ground No.2 is with respect to addition made to the contract income. AO noticed that assessee is a manufacturer of industrial boilers and heat transfer equipments and undertakes the projects on contract basis and the contract normally runs over a period of more than one year. The assessee was accounting for income on such projects by following the "Projection Completion method" and was raising invoices as per the scheduled payments agreed with the clients but at the same time had created provision towards "Contribution Equalization Provision" to adjust excess billing. During the year....
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....y the Co-ordinate Bench of the Tribunal in assessee's favour by following the Tribunal order in A.Ys.1997-98 to 2002-03. He placed on record the order of Tribunal for A.Ys. 2000-01 to 2002-03 and pointed to the relevant findings of the Tribunal. He submitted that since there are no change in the facts of the case for the year under consideration, therefore following the order of the Tribunal in Assessee's own case for earlier years, the issue be decided in favour of the assessee. Ld. DR did not controvert the submissions made by the Ld. AR but however supported the order of AO. 13. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to increasing the income to the extent of provision for profit equalization. We find that identical issue of increase in the contract income arose in assessee's own case in A.Ys.2000-01 to 2002-03 and the coordinate Bench of the Tribunal decided the issue in assessee's favour by following the Tribunal order for A.Ys. 1997-98 to 2000-01, by holding as under: "18. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect t....
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....hile noted that in the case of Thermax Babcock & Wilcox Ltd. (supra) which was a group company of the assessee, the Tribunal recognizing incomes on application of percentage of completion method in the case of long term contracts in the light of the AS-7 issued by the ICAI. In view of the decision of the Tribunal in the assessee's own case in the preceding assessment year, we do not deal with the issue any further except directing the Assessing Officer to implement the order of the Tribunal dated 03.09.2014 (supra) on this Ground too. As a consequence, whereas Ground of Appeal of the assessee is allowed that of the Revenue is dismissed." There has been no change in the facts and circumstances in the present year, nor there is any change in the accounting treatment given by the assessee. We do not find any reason to deviate from the view taken by the Co-ordinate Bench in assessment years 1998-99 and 1999-2000. Accordingly, this ground in the appeal of the assessee is accepted and the ground raised by the Revenue in its appeal is dismissed. 19. Before us, since both the parties have admitted that the facts of since in earlier years, the issue has been decided by Co-ordinate Ben....
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....ed as deductible during this year on the ground that the same has been remitted during the year. Accordingly, this ground of appeal fails." Aggrieved by the order of Ld.CIT(A) assessee is now in appeal before us. 16. Before us, Ld. AR reiterated the submissions made before AO and Ld.CIT(A) and further fairly submitted that identical issue arose in assessee's appeal in AY 2002-03 and the ground was decided against the Assessee by the Tribunal. He therefore submitted that the issue be decided accordingly. Ld.D.R. on the other hand, did not controvert the submissions of Ld AR and supported the order of lower authorities. 17. We have heard the rival submissions and perused the material on record. Before us both the parties have fairly admitted that the issue in the year under consideration is identical to that of AY 200203. In AY 2002-03, the coordinate Bench of Tribunal had decided the issue against the Assessee by observing as under : "30. We have heard the rival submissions and perused the material on record. We find that CIT(A) while granting partial relief has noted that some of the expenses got crystallized during the year and therefore he directed the AO to allow ....
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....es, computer software has been clubbed with computers and both put together have been made eligible for depreciation at 60% which also shows that the expenditure is of capital in nature. He accordingly denied the claim of expenses as revenue expenditure but however granted depreciation @ 60% which comes to Rs. 2,07,053/- and accordingly made net disallowance of Rs. 4,00,263/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A), who upheld the order of AO, by holding as under : "9.3. After careful consideration, I am not inclined to accept the contention of the appellant. The nature of softwares purchased by the appellant shows that the appellant is going to derive benefit from the same at least for more than one year. It is also seen that 60% of the expenditure has already been allowed by the Assessing Officer during this year by way of depreciation. The stand taken by the Assessing Officer is also found supported by the decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Arawali Construction (P) Ltd., I, therefore, see no reason to make any interference in the action of the Assessing Officer and the same is upheld. Accordingly, this ground of ap....
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....e have carefully considered the rival submissions. In our considered opinion, the issue regarding the nature of the expenditure incurred on account of acquisition of software is liable to be decided in terms of the ratio of the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Raychem Rpg. Ltd., 346 ITR 138 (Bom.). The Hon'ble Bombay High Court upheld the order of the Tribunal whereby the expenditure incurred on acquisition of software which did not form part of the profit making apparatus of the assessee was treated as a revenue expenditure. In the said context, it is to be noted that the CIT(A) has given a finding that expenditure of Rs. 22,16,107/- was incurred on acquisition of software connected with the manufacturing operations of the assessee. Such softwares have been identified as Autocad, project management software, designing software, etc.. The assessee is in the business of manufacturing of boilers and heat transfer equipment and therefore the aforesaid softwares form part of its profits making apparatus and thus it is liable to be considered as capital expenditure in view of the judgement of the Hon'ble Bombay High Court in the case of Raychem Rpg. Ltd.....
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....(A) and thus the assessee's ground No.4 is dismissed. 22. Ground No.5 of Assessee's appeal and Ground No.3 of Revenue's appeal is with respect to Liquidated Damages. 22.1. During the course of assessment proceedings AO noticed that Assessee had debited Rs. 200.26 lacs under the head "Liquidated damages". The Assessee was asked to justify it towards the allowability along with the evidences. Assessee inter-alia submitted that Assessee manufactures water treatment plants, pollution control equipments etc and these are manufactured as per the order and requirements of the customers. The contracts involves medium to long term contracts which include activities like pre-design, discussion with the clients, drawings, designs, procurement, fabrication, erection, commissioning and installation of the equipments which is followed by performance guarantee according to the agreed conditions. The contracts generally contain clauses for payment of compensation in the form of liquidated damages which are usually payable at stipulated percentage of the contract value. Some-times the contracts provides for compensation for non performance or satisfactory performance of the products supplied by....
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....relied upon by the Assessing Officer while disallowing the liquidated damages of Rs. 200.26 lakhs have also been successfully distinguished by the appellant by explaining the difference in the facts of appellant's case from the facts of those cases. In this view of the matter, I direct the Assessing Officer to verify and allow the appellant's claim of liquidated damages out of Rs. 200.26 lakhs to the extent the amounts debited under this head are found supported by the clause of Liquidated Damages. Decided accordingly." Aggrieved by the order of CIT(A), Assessee and Revenue are now in appeal before us. 23. Before us, Ld AR reiterated the submissions made before AO and CIT(A) and further submitted that Assessee is engaged in the business of manufacturing of engineering goods, heat transfer equipments such as boilers, heat pumps, manufacture of water treatment plants, waste water management system, pollution control systems etc. Some of the contracts provide for ancillary activities like erection and commissioning of the manufactured equipments. The contracts which the Assessee enters into with the customers generally carry a clause of payment of liquidated damages in the event ....
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....ourt in the case of SA Builders (288 ITR 1) has held that to the extent that the expenditure may not have been incurred under legal obligation but yet it is allowable as a business expenditure if it is incurred on grounds of commercial expediency. It has further held that "commercial expediency" is a term of wide import and has been held to include such expenditure as a prudent businessmen incurs for the purpose of business. He further submitted that no disallowance of liquidated damages were made in earlier years though the assessee was following similar methodology for accounting. Ld AR thereafter submitted that when CIT(A) had accepted the allowability of claim for liquidated damages as a business expenditure then he should have not directed the AO to allow deduction to the extent there were Liquidated damages clauses in the purchase orders. He therefore reiterated that when the expenses have been incurred for the purpose of business and during the course of business, the claim of Assessee for allowing the expenditure be upheld. 24. LD DR on the other hand took us through the order of AO and submitted that Assessee did not furnish the required details as called for by the AO a....
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....vises and therefore it was eligible for higher rate of depreciation of 80%. The submissions of the Assessee were not found acceptable to AO. AO was of the view that due to the type of equipments that were manufactured by the assessee with the aforesaid machines, the aforesaid machines per se did not qualify for higher depreciation as those machineries could be used for manufacturing of other types of machinery as well and that it cannot be said that the machineries were used wholly and exclusively for manufacturing the energy saving machineries. He accordingly held that Assessee was only eligible for normal depreciation of 25% on such machineries. He accordingly disallowed the claim of additional depreciation of Rs. 17,25,103/-. Aggrieved by the order of AO, assessee carried the matter before Ld CIT(A), who following the order of his predecessor for A.Y 2002-03, upheld the order of AO by observing as under : "12.3 This issue has elaborately been dealt with by my predecessor who while adjudicating upon this issue in assessee's appeal for AY. 2002-03 observed as follows: I have carefully considered the ground raised by the appellant and the arguments of the Ld.Authori....
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....no.3(iii). During the course of the appeal proceedings, the appellant was asked to obtain and furnish certificate from experts to the effect that the multitherms, shellmax, fluidpacs and bi-drum boilers are in the nature of renewal energy devices. The appellant was also asked to submit copies of brochures, pamphlets as may be available with regard to the specifications and functioning of these products. The details / evidences thus called for have not been furnished. In the circumstances, I have to hold that the appellant has not been able to substantiate that these products are in the nature of renewal energy devices being air/gas/fluid heating systems. It is also clear from entry 3(xiii) that all the sub-items figuring in this entry, including sub-entry (r), have to be in the nature of renewal energy devices. The starting words viz. 'renewal energy devices being' qualify all the sub-items including (r). This would indicate that even the 'machinery and plant used in the manufacture of any of the above subitems' will themselves have to be in the nature of renewal energy devices. Or else, (r) would have come as a separate entry and not as a sub-item in entry No.3(xiii). Nothing has ....
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....ssue as ground No.2 in its appeal. 11.1 The assessee had claimed 100% depreciation on its plant and machinery in Plant No.3, Plant No.4, Plant No.8, Plant No.10 and Plant No.11. In the first appeal, the Commissioner of Income Tax (Appeals) accepted the contentions of the assessee in respect of all the plants except Plant No.11. The assessee has come in second appeal with respect to the claim of depreciation @ 100% in respect of item of Plant No.11. Whereas, the Revenue in its appeal has assailed the findings of the Commissioner of Income Ta the Commissioner of Income Tax (Appeals) in respect of all the plants except Plant No.11. 11.2 Similar claims were made by the assessee in respect of Plant No. 11 and the Revenue in respect of other plants (excluding Plant No. 11). The issue was decided by the Tribunal in assessee's own case for assessment years 1998-99 and 1999-2000 as under :- "35. Now, we may first take-up assessee's claim for depreciation 100% with respect to the plant & machinery used in the manufacture of air/gas/fluid heating systems. In this context, it is clear noted that having regard to the entry 3(xiii)(r) read with 3(xiii)(e) of the Depreciation Table annex....
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....parties have admitted that the facts of the case in the present ground are identical to that of earlier years, we therefore following the decision of the Co-ordinate Bench of the Tribunal in assessee's own case for A.Y 2002-03 and for similar reasons hold that assessee is eligible to claim depreciation @ 80% with respect to plant and machinery used Plant Nos.4 and 8 in the manufacture of air / gas / fluid systems but is not eligible for 100% depreciation in respect of plant and machinery used in the manufacture of heat pumps. Thus, the ground of assessee is partly allowed. 30. Ground No.7 is with respect to Disallowance of Rs. 4.63 crores (rounded off) of Short Term Incentive Plan (STIP): 31. AO on perusing the tax audit report noticed that Assessee had created a provision of Rs. 4,63,70,760/- for Short Term Incentive Plan and the amount was unpaid till 30.09.2003. The Assessee was asked to explain as to why the same was not covered u/s 36(1)(iii) or 43B of the Act and the entire provision not be disallowed as it was not incurred during the year. Assessee inter-alia submitted that for promoting growth and prosperity of the assessee, a policy for paying an annual incentive to al....
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....t these cases are based on facts which are distinguishable from the facts of the present case. In the case of United Motors (I) Ltd., 181 ITR 347, a provision was made pursuant to the notice of termination of awards given by the trade union. Therefore, on the facts of the case, the Hon'ble Court held that an impending liability arose, pursuant to the termination. No such situation is found in the case of the appellant. Similarly, the provision made on a reasonable basis for payment to be made to the workers was held as allowable deduction in the case of Mahindra Ugene Steel Company Ltd. 250 ITR 84 because as per terms and conditions of the wage settlement entered into by the assessee-company, there was a liability on the assessee company to make lumpsum payment to the workers under the conciliation proceedings. In the present case, no such liability is there on the appellant company. I therefore, uphold the action of the Assessing Officer in disallowing provision for short term incentive plan of Rs. 4,63,70,760/-. The disallowance is confirmed." Aggrieved by the order of CIT(A), Assessee is now before us. 32. Before us, Ld AR reiterated the submissions made before AO and Ld.CI....
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....Directors of the Company. In such a situation the AO had rightly disallowed the expenses. He thus supported the order of lower authorities. 34. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to allowability of provision made for short term incentive plan to the employees. It is Assessee's submission that it has been consistently paying performance based incentives in the past and which has been allowed. However, during the year, the assessee has booked the expenditure on wholesome basis. We further find that pre-declared scheme is dated 22.12.2002 recommended by the VP HR and it was by the committee only on 28.05.2003 i.e., after the close of year. The AO has given a finding that the amounts were not credited to respective employees account in the instant year. Hence, we find no merit in claim of assessee. But the assessee is entitled to deduction of amounts, if any paid under the proposed scheme. In the result, the ground No.7 of the Assessee is partly allowed. 35. Ground No 8 is with respect to Depreciation on knowhow: 35.1. On perusing the depreciation statement, AO noticed that Assessee had shown pay....
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....uction commence before 31.03.2003 or for that matter, the technical knowhow was put to use during the year. In this view of the matter, I hold that the Assessing Officer is justified in disallowing assessee's claim of depreciation in respect of the technical knowhow. The disallowance is confirmed." Aggrieved by the order of CIT(A), Assessee is now before us. 36. Before us, Ld AR reiterated the submissions made before AO and CIT(A) and further submitted that the Agreement with Air Pol for the knowhow of scrubbers, absorbers and gas cleaning plants was dated 19.4.2002 and upto 30th Sept 2002, the 1st installment of Rs. 20,33,974/- was paid. The amount due to Kawasaki was also paid before 30th Sept 2002 and both the aforesaid amounts were claimed as addition to the block of intangible assets before 30th Sept 2002. The balance amount of Rs. 40,05,862/- payable to Air Pol after 30th Sept 2002 was shown as addition in the second half of the year. He submitted that the CA vide Certificate u/s 195 dated 28th April 2003 has certified. Ld DR on the other hand supported the order of lower authorities and further submitted that there is no external evidence to demonstrate that the assets ....
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....d further submitted that providing club membership to employees is a normal trade practice. He further submitted that it is not necessary that each and every business expenditure should result in benefit to business and what is important is that the expenditure must have been incurred by the assessee wholly and exclusively for the purposes of business which fact cannot be denied. He further relying on the decision of Hon'ble Apex Court in the case of United Glass Manufacturing CO Ltd (Civil Appeal No 6447 of 2013) submitted that club entrance fees and subscription and user charges have consistently been held to be as allowable business expenditure. He also place reliance on the decision in the case of R.B.Bansilal Abirchand Spn & Weaving Mills (81 ITR 34 Bom). He therefore submitted that the expenses be allowed. Ld DR on the other hand supported the order of lower authorities. 40. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to disallowance of club expenses. The expenses have been disallowed by the Revenue authorities by holding it to be not for the purpose of business. On the other hand it is Assessee's c....
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.... out. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), Assessee is now before us. 42. Before us, Ld AR reiterated the submissions made before lower authorities and further submitted that identical issue arose in Assessee's own case in A.Y 2002-03 before the tribunal and the issue was decided in Assessee's favour. He placed on record the order of tribunal for A.Y 2002-03 and pointed to the relevant findings of the tribunal. He further submitted that the facts of the case in the year under appeal is similar to that of A.Y 2002-03 and therefore following the decision of A.Y 2002-03, the addition be deleted. He further submitted that in the subsequent years, CIT(A) has deleted such adhoc disallowances. Ld DR on the other hand supported the order of lower authorities. 43. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to identical issue of adhoc disallowance arose in Assessee's own case in disallowance of various expenses on adhoc basis. We find that A.Y 2002-03 where such disallowance was deleted by the co-ordinate bench of tr....
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....hus the ground of Assessee is allowed. 45. Ground No.11 is with respect to deduction u/s 80HHC of the Act. 45.1. During the course of assessment proceedings, AO noticed that assessee had claimed deduction of Rs. 5,56,43,000/- u/s 80HHC of the Act. On perusing the details of deduction, he noticed that assessee had not included excise duty (Rs. 24,97,57,000/-) and sales tax collected (Rs. 14,77,41,675/-) as forming part of total turnover. AO was of the view that the sales tax and the excise duty was part of turnover and should have been considered as part of total turnover in view of Hon'ble Apex Court's decision in the case of Chowringhee Sales Bureau Pvt. Limited (87 ITR 542). The submission of the assessee for non inclusion of excise duty and sales tax as part of total turnover was in view of the decision of Bombay High Court in the case of Sudarshan Chemical Industries Ltd was not found acceptable to AO as he was of the view against the decision of Hon'ble High Court, Revenue had preferred appeal before Hon'ble Apex Court. He also noticed that Assessee had trading exports to the tune of Rs. 268.83 lacs but the same was not considered as part of total turnover while calculatin....
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....bsection (2) of any goods or merchandise to which section 80HHC applies and which are exported out of India. In the present case, the appellant has taken the figure of export turnover as per statutory mandate while calculating deduction u/s 80HHC. It is not the case of the Assessing Officer that the sale proceeds brought into India. by the assessee are more than Rs. 1,11,49,759/-. Therefore, the Assessing Officer is not justified in adopting the figure of export turnover at Rs. 2,68,83,000/- instead of Rs. 1,11,49,759/-. His action in doing so is accordingly negatived. 19.3.3. As regards inclusion of the amount of Rs. 1,45,40,142/- representing sale of scrap, it is seen from the submission that the appellant has not disputed the action of the Assessing Officer in adding (baa) to section 80HHC. As regards inclusion of sale of scrap in the the amount to the total turnover and has only contended that this amount should not be subjected to 90% reduction under explanation total turnover, I find no infirmity in the action of the Assessing Officer because the proceeds from disposal of scrap that is generated in the manufacturing process forms the operational income of the assessee. How....
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....ssee from the profits of business and profession for the purpose of deduction u/s. 80HHC. He was of the view that the receipts from claims and refunds is not the operational income of the assessee as the same specifically pertains to the claims which might have been made by the assessee on certain pretext and refunds which may have been received by the assessee from the Government agencies. He observed that it is not the business of the assessee to make claims and to earn by way of receiving refunds. He was of the view that these receipts are incidental and relatable to certain incidents or from the policies of the Government and therefore, cannot be treated to be operational income of the assessee. He, therefore, excluded the entire amount so received at Rs. 38,19,594/- from the profits of the business for the purpose of computation of deduction u/s 80HHC. Regarding receipt of Rs. 22,71,036/- from the balances earlier written off now recovered, the Assessing Officer rejected the submission made by the assessee that this amount represented an operational income because of remission of liability u/s 41 (2). The Assessing Officer was of the view that these are the receipts of the ass....
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....ritten back of material and expenses, rent received, warehousing charges, cash discounts, miscellaneous income and short provisions written off. From the details of these receipts he observed that except the receipts from DEPB and cash discounts, others do not form part of the operational income of the assessee. Accordingly, the miscellaneous receipts of Rs. 10,68,69,368/-* as reduced by the DEPB and cash discount amounting to Rs. 8,61,30,026/- was excluded by him from profits eligible for computation of deduction u/s 80HHC. 20.1.6 Regarding exclusion of Rs. 10,42,000/- in respect of trading profit as reduced in computation of form 10CCAC, the Assessing Officer has mentioned nothing in the assessment order and the same has been excluded directly from the total profits of the business in the computation of deduction u/s 80HHC. 20.2 In this context, the appellant submitted that the items of income from Sr. No. (i) to (vii) are part of operational income of the appellant company and should not have been excluded from the profit considered for computing deduction u/s 80HHC. Reliance has been placed for this purpose on the decision of Bombay High Court in the case of Bangalore Clo....
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....e same from profits of the business for the purpose of deduction u/s 80HHC has to be confirmed. The income earned by way of lease of various goods is neither related to the manufacturing nor export activity of the assessee and therefore, does not qualify as its operational income. However, the amount to be excluded under this head has to be restricted to the amount which has been credited by assessee in the accounts of this year. 20.3.3 Before me, the appellant submitted that only an amount of Rs. 1,29,31,371/- has been accounted for as lease rent for this year. The Assessing Officer is directed to verify the same and restrict the exclusion to this extent only. 21. Ground of appeal No.16(c) is against the action of the Assessing 4 Officer in reducing from the eligible profits and gains of business at 90% of following : i. Sale of scrap also included by him in total turnover Rs. 1,45,40,142 ii. Exchange Difference net Rs. 14,883 21.1 It has already been held in Par 19.3.3 that the Assessing Officer is not not justified in subjecting the amount of sale of scrap to 90% reduction under explanation (baa) of section 80HHC. As regards exchange difference, ....
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.... 24.2. It is seen from the assessment order that this issue has . elaborately been dealt with by the Assessing Officer who after verification of the details submitted by the assessee in this regard has given a categorical finding that the entire sale proceeds of Rs. 8,76,93,013/- were such which were received not only after so" September, 2003 but were also beyond one year time of the date of their shipment and therefore, they were such which were received not only after 30 September, 2003 but were also beyond one year time of the date of their shipment and therefore, they were not within the time period of time period of six months from the end of the previous year or even within such further period as competent authority may allow in this behalf. During appellate appellants, no material has been produced before me by the appellant to refute the finding of the Assessing Officer. Therefore, I find no reason to interfere with the action of the Assessing Officer which is upheld and the ground of appeal is dismissed. 25. Ground of appeal no.16(g) is against the action of the Assessing Officer in reducing deduction u/s 80HHC by the amount of deduction allowed by him u/s 80-IB of the....
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....g. The aforesaid contention of the assessee is not controverted by the Revenue. In such a situation, we find that the ratio of the decision of Hon'ble Apex Court in the case of CIT Vs. Punjab Steel Industries India reported in 364 ITR 144 would be applicable to the present facts and therefore the sale of scrap cannot be considered as part of "total turnover" for the purpose of calculation of deduction u/s 80HHC of the Act. Further, identical issue arose in Assessee's own case in AY 2002-03 wherein the issue was decided in favour of the Assessee by the co-ordinate Bench of Tribunal. 50. The next item in ground of appeal No.11(a) is Exchange Difference, wherein the Ld.A.R. for the assessee fairly admitted that the said difference to the extent of sales would form part of the total turnover and the balance needs to be excluded. We find merit in the plea of the assessee that exchange difference to the extent of sales would be included as part of the total turnover. With respect to ground No.7 of Revenue, we find that CIT(A) has held that Assessee had taken the figure of export turnover of Rs. 1.11 crore as per the statutory mandate while calculating the deduction u/s 80HHC. No fall....
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....f the representatives of the assessee ought to be excluded u/s 80HHC of the Act, so consequently the losses have to be excluded under Explanation baa (2) of Sec.80HHC of the Act and consequently the profits eligible for claiming the deduction u/s 80HHC of the Act should be increased. We find merit in the plea of the assessee as Explanation (baa) to Sec.80HHC of the Act provides that the profits of any branch office, warehouse or any other establishment of the assessee situated outside India ought to be revised from the profits of business computed under the head of profits and gains of business and profession. Consequently in cases from the any loss of over-seas, branch or office then the same also needs to be excluded and the profits eligible to claim deduction u/s 80HHC of the Act should be increased and we direct so. Thus, ground of appeal No.11(c) and (d) are allowed. With respect to ground 11(e), the assessee is aggrieved by the reducing the profits of the business by Rs. 104.96 lacs. 52. Before us, Ld AR submitted that in AY 2002-03, the Tribunal vide para 45 of the order directed the AO to apply the amendment to Sec.80HHC(3) and decide the issue. He submitted that as per....
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....allowed the claim of the assessee to the extent of Rs. 2.29 crores referring the Ld. CIT(A) vide para 24.3 discussed the issue and we find merit in his observations and upheld the order of Ld. CIT(A) regarding miscellaneous income to be excluded. Hence, the ground of appeal No.10(c) is partly allowed. 55. Ground No.12 is with respect to charging of interest u/s 234D. 55.1. Before us, at the outset, Ld.A.R. submitted that this ground needs to be decided against assessee as the provisions of Sec.234D were applicable as assessment was completed after 01.06.2003. He further submitted that similar ground raised by the Assessee in 200203 was decided against the Assessee. In view of the submission of Ld.A.R., the ground of assessee is dismissed. 56. In the result, the appeal of the Assessee is partly allowed. 57. Now we take up the grounds raised in Revenue's appeal: 58. 1st ground is with respect to deletion of addition of Rs. 324.50 lacs on account of adjustment made to closing stock. 58.1. AO on perusing the details noticed that the figures of Excise duty (CENVAT), sales tax etc relatable to closing stock stood at Rs. 324.50 lacs. AO was of the view that closing stock has t....
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....aluation of closing stock only. Further, while forming the above mentioned view that provisions of section 145A apply to the closing stock only, the Assessing Officer has relied upon his understanding of the phrase 'as on the date of valuation' mentioned in the clause (b) of Section 145A. Here again, I do not agree with the Assessing Officer. The 'date of valuation' does not necessarily mean the date when the accounts are closed. It can be any date when the valuation of goods is made. The Assessing Officer has also expressed his concern that if the adjustments made as per provisions of section 145A have no effect on the gross profit, then the provisions of section 145A would become superfluous. I do not consider it to be so. What is aimed at by inserting the provisions of section 145A is to have the value of closing stock inclusive of excise duty etc. This aim is automatically achieved once the excise duty is included in the opening stock, purchases and sales as has been categorically specified in the provisions of section 145A which, as per the opening lines, mandate that the valuation of purchase and sale of goods and inventory has to be done as prescribed in the ....
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....s dismissed. 63. Ground No.3 is with respect to the action of CIT(A) in directing deletion of addition of Rs. 200.26 lacs. 63.1. Before us both the parties submitted that the present ground is inter-connected to ground No.5 of assessee's appeal. 64. We have heard the rival submissions and perused the material on record. Before us both the parties submitted that the present ground is inter-connected to ground No.5 of assessee's appeal. We have hereinabove have decided the ground No.5 in Assessee's appeal in assessee's favour. In view of the reasons cited therein while deciding the ground No.5 of assessee, the ground No.3 of Revenue is dismissed. 65. Ground No.4 is with respect to the action of CIT(A) in directing deletion of addition of Rs. 1.53 crore on account of lease rent. 66. During the course of assessment proceedings AO noticed that the Assessee is engaged in the business of self manufactured products in the past. The Assessee was asked to give the details of the lease rentals which was furnished by the Assessee and it was further submitted that during the year under consideration no assets during the year. It was further submitted that in AY 2002-03 similar have be....
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....the provision was without quantification and the amount did not crystalised. He accordingly disallowed Rs. 7,54,000 and made its addition. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who deleted the addition by observing as under : "17.3 I find that the issue is covered in favour of the appellant by the order of CIT(A) in appellant's own case in A.Y. 2002-03. After careful consideration, I do not find any reason to form a view other than that formed by my predecessor. Accordingly, this ground of appeal succeeds. Aggrieved by the order of CIT(A), Revenue is now before us. 70. Before us Ld DR supported the order of CIT(A). Ld AR on the other hand reiterated the submissions made before lower authorities and further submitted that in AY 2001-02 the identical issue was decided by tribunal in assessee's favour. He further submitted that the issue was not challenged by the Department in AY 2002-03. He thus supported the order of CIT(A). on record. The issue in the present ground is with respect to 71. We have heard the rival submissions and perused the material disallowance of additional medical expenses. We find that CIT(A) while deciding the i....