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2017 (11) TMI 1842
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....f AO, assessee carried the matter before Ld. CIT(A), who vide order dt.30- 11-2005 in (appeal No.PN/CIT(A)-III/Cir-8/39/05-06) granted partial relief to the assessee. Aggrieved by the order of Ld. CIT(A), Assessee and Revenue are both in appeal before us. 3. The grounds raised by the Assessee in ITA No.259/PUN/2006 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. EXPENDITURE IN RELATION TO DIVIDEND ETC. The learned CIT(A) erred in confirming the action of the AO of notionally attributing expenditure to dividend and interest-free income rejecting the contention of the Appellant that no such expenditure was, in fact, incurred for earning such income and accordingly none was so attributable. The learned CIT(A) also erred in observing that the appellant had failed to furnish the relevant information in this connection. In any event, the estimate made by the learned CIT(A) @ 2.5% of such income is excessive and unrealistic. 2. LOSS FUNDING OF SUBSIDIARY On the facts and in the circumstances of the case and in ....
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....nt. 6. DEPRECIATION On the facts and in the circumstances of the case and in law, the learned CIT(A) further erred in confirming the action of the AO of rejecting the contention of the Appellant that it was entitled to claim depreciation @ 100% in respect of certain items of plant and machinery which were so entitled in accordance with Appendix to Income-tax Rules, 1962 and instead allowing depreciation @ 25%. Without prejudice to the above the learned CIT(A) erred in wrongly concluding that machinery used in the manufacture of renewable energy devices referred to in entry 3(xiii)(r) of the Appendix has itself to be in the nature of renewable energy devices and in consequently observing that the appellant had failed to adduce evidence in support of such eligibility. The learned CIT(A) failed to notice that the claim in respect of renewable energy devices and plant and machinery used in the manufacture there of was allowed in the earlier years. The claim of the appellant be directed to be allowed. 7. PRIOR YEAR EXPENSES: On the facts and in the circumstances of the case and in law the learned CIT(A) erred in remitting back to the....
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....presentative offices Rs. 3,44,90,526/- instead of accepting the contention of the appellant that loss of foreign representative offices should go to increase the" profits of the business" eligible for deduction u/s 80 HHC instead of ignoring the same. e) Confirming reducing the profits of the business by Rs. 72.71 lacs by not allowing deduction with reference to the proportionate export incentive (DEPB ). f) Confirming the action of the AO in reducing the profits of the business by the amount of unabsorbed losses and depreciation u/s 72A and in also observing that the appellant had not pursued this ground in appeal proceedings. 11. On the facts and in the circumstances of the case and in law and without giving the appellant an opportunity of being heard in the matter the learned CIT(A) erred in directing the AO to determined and bring to tax certain portion of Exchange Difference under the head 'Income from Other Sources' when in fact the whole of it was assessable under Business Income. 12. INTEREST U/s 234D On the facts and in the circumstances of the case and in law the learned CIT(A) further erred in confirming the action of ....
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....be disallowed to which assessee inter alia submitted that it has not incurred any expenditure towards the exempt income and therefore no disallowance of expenditure is called for. The submission of the assessee was not found acceptable to the AO as he was of the view that company had an investment of Rs. 189.43 crores as at the end of the year and to manage such huge investment some expenses would have been incurred. In the absence of any details submitted by assessee, AO estimated an expenditure of Rs. 25 lakhs to have been incurred for earning the exempt income and accordingly disallowed Rs. 25 lakhs u/s.14A of the Act. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A) who decided the issue by observing as under : "6.2. I have carefully considered the appellant's submissions. During the course of the appeal proceedings, the appellant was called upon to furnish details as regards the immediate sources from out of which investments in shares and tax-free bonds had been made. It was also asked to establish that such investments had been made from out of free-funds. The above information was called for as the appellant was found to have made subs....
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....empt income at Rs. 25 lacs. When the matter was carried before Ld.CIT(A), he relying on the decision of his predecessors in assessee's own case for earlier years, restricted the disallowance @ 2.5% of exempt income. We find that identical issue arose before the Co-ordinate Bench of the Tribunal in assessee's own case in A.Yrs. 2000-01 and 2001-02 (in ITA Nos.1247 & 1248/PUN/2005 order dated 30-06-2015) and the issue was decided against the assessee by holding as under : "12. The sixth ground raised by the assessee in its appeal is with respect to the amount of expenditure attributable to dividend and taxfree interest. We find that identical ground was raised by assessee in appeal for assessment year 1998-99 before the Tribunal. The Tribunal dismissed the contentions of the assessee with following observations :- "45. In this context, the relevant facts are that the Assessing Officer estimated 5% of gross dividend and other tax-free incomes as an expenditure incurred for earning of such income and disallowed the same. The CIT(A) following the decision of her predecessor restricted the disallowance to 2.5% of the gross income. Not being satisfied with the order of t....
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....y other details pertaining to the issue have been furnished. In the circumstances, the ground on this score deserves to be treated as not having been established in any manner. Even otherwise, the arguments raised by the Assessing Officer are prima facie tenable. The appellant and its subsidiary are two different and independent taxable entities. Therefore, the payment made by the appellant to its subsidiary by way of funding the latter's loss cannot be allowed as a deduction either u/s.37(1) or u/s.28 merely because of the relationship between the two, and without there being anything to show that the payment had been necessitated by commercial expediency. The presence of any such commercial expediency has not even been highlighted, let alone proved. I would, therefore, hold that the stand taken in this matter by the Assessing Officer will have to be confirmed. The same is confirmed accordingly. Before concluding on this issue it may be pertinent to mention that as in the case of retention money, even in respect of loss-funding of the subsidiary, the appellant cannot be said to have had any grievance arising from the stand taken by the Assessing Officer since the latter merely....
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.... "8. The next ground pertains to the disallowance of the appellant's claim of deduction of Rs. 2,41,534/-, being amortization of the premium paid on lease-hold land. The appellant had made this claim as revenue expenditure by relying on the decision of the Hon'ble Karnataka High Court in the case of Commissioner of Income-tax Vs. HMT Ltd., 203 ITR 820. The Assessing Officer, however, rejected the claim by following, among other things, the decision of the Hon'ble Supreme Court in the case of Commissioner of Income- tax Vs. Govind Sugar Mills Ltd. 232 ITR 319. It was also observed by him that identical disallowances made for some of the earlier assessment years had been confirmed by the Commissioners of Income-tax (Appeals). "8.1 In the grounds of appeal it has been argued that the Assessing Officer erred in disallowing the above claim. During the course of the appeal proceedings, however, the appellant fairly conceded that this ground is covered against it by the decision of the Hon'ble Apex Court in the case of Gobind Sugar Mills Ltd., 232 ITR 319. In view of the submission thus made, the disallowance of Rs. 2,41,534/- is hereby confirmed." Aggrieved ....
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....sideration is similar 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. 16. Ground No.4 is with respect to addition made to the contract income. AO noticed that assessee is a manufacturer of 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, the provision of contribution equalization debited to the Profit and Loss account was Rs. 9,15,29,000/-. AO noticed that the excess amount realized as per the invoices was not offered as revenue receipts and to that extent profit was not offered as income. AO was of the view that since the invoices was raised as per the agreed schedule; the invoice value should be treated as revenue ....
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....e taken. In the case of the Moser Baer-III Project, the total order value was Rs. 755.14 lakhs. The budgeted expenses were Rs. 493.89 lakhs leading to an estimated contribution/profit of Rs. 261.25 lakhs. Year ending 31.3 .2002 was the first year of exclusion of this work. By the year end, the appellant had invoiced the contractee for an amount of Rs. 100.61 lakhs. Against the net expenses of Rs. 67.73 lakhs booked during the year (i.e. gross expenses of Rs. 95.34 lakhs as reduced by closing stock of Rs. 27.61 lakh), the actual profits worked out to Rs. 32.88 lakhs. However, as the project had been completed upto the year end only to the extent 14% of the total project, the appellant reversed the entire profit of Rs. 32.88 lakhs by taking the same to the equalisation provision. 20.2.2 The moot question is if the appellant was justified in recognizing profit as per the above method. This presupposes a further question if Accounting Standard 7 was applicable to the projects taken up by the appellant. As already noted, both these questions have been already answered in the appellate orders in the appellant's own case for some of the earlier assessment years as well as in ....
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....cognising any profit on percentage completion method in respect of contracts which are less than Rs. 25 lakhs. This is certainly not correct; particularly as the appellant is billing the contractee irrespective of the percentages upto which contract execution has progressed and irrespective of the total value of the contract. It would have been a different matter if no such billings had been made. Once the billings are made and payments are also received, on the contractee being satisfied that works reflected in the bills have been actually completed, the income embedded in the bill amounts would become chargeable to tax as per section 4. Such income can by no means be put on hold or postponed by adopting y pothetical bench-marks. As already mentioned, in the appellate order in the case of M/s. Thermax Surface Coatings Ltd. for the assessment year 1998-99, the Commissioner of Income-tax (Appeals)-III, Pune, had given an identical finding. I am in agreement with the finding thus given. I am in agreement with the further finding given in the said order that there is no justification for further scaling down (i.e. as shown in the table in para 20.2) towards contingencies / unforeseeab....
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....pellate order for the assessment year 2001-02. The Assessing Officer is directed accordingly. The appellant is also directed to submit before the Assessing Officer all the details / workings as have been furnished before this forum as also such other details as the Assessing Officer may require to arrive at the admissible provision." Aggrieved by the order of Ld.CIT(A) assessee is now in appeal before us. Revenue is also aggrieved by order to the extent of relief granted by Ld CIT(A) and has therefore raised ground No.2 in its appeal. Since the grounds raised by assessee and Revenue are interconnected, both are considered together. 17. Before us, Ld. AR submitted that identical issue arose before Tribunal in assessee's appeal for A.Ys. 2000-01 and 2001-02 and the issue was decided by the coordinate Bench of the Tribunal in assessee's favour by following the Tribunal order in A.Yrs. 1997-98, 1998-99 and 1999-2000. He placed on record the order of Tribunal for A.Y. 2000-01 and 2001-02 and pointed to the relevant findings of the Tribunal. He submitted that since there are no changes in the facts of the case for the year under consideration and therefore following the order of th....
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.... of the Pune Bench of the Tribunal on a similar issue in the case of Thermax Babcock & Wilcox Ltd. vs. DCIT vide ITA Nos.157 & 158/PN/1995 dated 11.05.2001 for assessment years 1990- 91 & 1991-92. The Tribunal in its order dated 03.09.2014 (supra) noted that in the case of Thermax Babcock & Wilcox Ltd. (supra) which was a group company of the assessee, the Tribunal upheld the allowability of provision for profit equalization while 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 i....
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..... If by its nature, a software is intended to activate the hardware in the sense of making it functional, but for which the computer cannot be made use of vis-a-vis a specific function, the software will be as much in the nature of an apparatus as the hardware is. Further, if a software helps in standardization and patternization as would help avoid fresh in-putting each time, it cannot be seen as any the different from a die or a pattern or a mould. Similarly, if a software is intended to be used as a tool in the manufacturing operation much as a plant is used, it cannot be seen as different from a plant. In short, the issue has to be decided by posing the question if the software is a part of and aids the profitmaking apparatus or the profit-making process. If it is the former, it will be capital in nature. If it is the latter, it will be revenue in nature. As can be seen from the assessment order, the appellant had not submitted before the Assessing Officer complete details in respect of the software acquired during the year and the manner in which these were put to use. Even before this forum, only the skeletal break-up for the software expenditures have been furnished. Their a....
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....h the parties. 10.2 A perusal of the order of the Co-ordinate Bench in assessee's own case for assessment years 1998-99 and 1999-2000 shows that the Tribunal followed the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Raychem Rpg. Ltd. reported as 346 ITR 138 (Bom.) and rejected the ground raised by the assessee, as well as, the Revenue by observing as under :- "30. We 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 h....
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.... is with respect to disallowance of higher depreciation. On perusing the depreciation chart, AO noticed that assessee had claimed 100% depreciation on plant Nos.4, 8 and 11 wherein it was manufacturing shell type boilers and absorption cooling division. 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. He accordingly disallowed the claim of additional depreciation. Aggrieved by the order of AO, assessee carried the matter before Ld CIT(A), who decided the issue by holding as under : "19.2.1 First coming to plant No.11, i.e., absorption cooling division, which manufactures heat pumps, the stand taken by the Assessing Officer will have to be confirmed. Entry No.3(iii)(C)(c) specifically deals with heat pumps. It provides for depreciation on heat pumps at the rate of 100%. This entry will not apply to the appellant as the appellant does not own / use the heat pumps. Instead, it manufactures them. This entry also does not cover to plants and machineries manufacturing heat pumps. Hence plant No.11 would fall outside the purview ....
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....peal of the assessee is with respect to claim of 100% depreciation on plant and machinery. The Revenue has also impugned the findings of the Commissioner of Income Tax (Appeals) on this issue 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....
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....e 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. 28. Ground No.7 is with respect to prior period expenses. During the course of assessment proceedings AO noticed that though the assessee was following mercantile system of accounting, it had claimed expenses to the extent of Rs. 92.37 lakhs which pertained to prior period. Assessee was asked to justify the claim. AO has noted that assessee had only given head-wise break up without giving proper evidence of supporting vouchers. AO was of the view that since assessee was following mercantile system of accounting, it should have booked the expenses in the respective years. He was therefore of the view that the expenses pertaining to prior years aggregating to Rs. 92.37 lakhs are not allowable and accordingly disallowed the same. Aggrieved by the order of AO, assessee carried the matter before Ld CIT(A), who decided the issue by holding as under : "16.2 During the course of the appeal proceedings, the appellant was asked to submit details in respect of the expenses in question. The a....
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....ssible as the credit notes, bills etc. relating thereto seem to have been received prior to the relevant previous year. Examples are - domestic sales-spares: Rs.l,87,757/-; Material purchase-site: Rs.l5,652/-; material purchase - Non-modvat project: Rs. 2,31,540/-' legal and professional charges: Rs. 21,762/-; customerrelation expenses: Rs. 25,983/- etc. As for some other expenses, the appellant has not furnished any details or evidences to substantiate their crystallisation during the relevant previous year. Examples are - Shri R.V.Ramani-loan remission - gross of tax: Rs. 37 lakhs; purchase trade - domestic: Rs. 5,90,899/-; commission on sales - franchise: Rs. 2,11,365/-; drawings and designings : Rs. 6,41,695/- etc. These are not exhaustive. In these circumstances, it is appropriate that this issue goes back to the Assessing Officer who shall examine the evidences in respect of each and every prior period expenses and to the extent that the expenses are found to have got crystallised during this year itself in view of late receipt of bills, invoices, statements, credit notes etc. or late-booking of expenses due to factors beyond the control of the appellant etc., he shall al....
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....penses the relevant invoices, bills, statements etc., were received prior to the relevant previous years and for some of the expenses assessee did not furnish any details or evidence to substantiate the crystallization of the liability during the year under consideration. He further directed the AO to consider the evidence and thereby granted partial relief to the assessee. Before us, assessee has not placed any material on record to controvert the findings of Ld. CIT(A) nor has placed the details of expenditure to substantiate its stand that the liability got crystallised during the year under consideration. Before us, assessee has also not placed the details of expenses. Before us, Revenue has also not placed any material to point out any fallacy in the findings of Ld.CIT(A). In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground No.7 of the assessee is dismissed and likewise the ground of Revenue is also dismissed. 31. Ground No.8 is with respect to loss of amount on embezzlement. During the course of assessment, AO noticed that assessee had debited a sum of Rs. 78,44,316/- under the Head of Miscellaneous Expenditure on accou....
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....d not be relevant. The facts in the present case are not similar. On the other hand, there are plethora of decisions, some of which have been already cited earlier on, as well as two circulars of the Board, to the effect that the entire loss arising on embezzlement should be allowed in the assessment year relevant to the previous year in which embezzlement is detected even though the loss actually relates to other years. Therefore, the stand taken by the Assessing Officer that only the loss relating to the present assessment year could be allowed as deduction is without any basis. The same is accordingly negatived. 10.3.2 Even while the appellant's claim is admissible in principle, it however appears, on the basis of the details and facts which are available and which have been filed, that the. entire claim of Rs. 78 lakhs is not deductible. By the appellant's own submission, the quantum of the fraud amount as per the confirmations received from the bankers is Rs. 93,86,463/-. This is less than the gross claim of loss of Rs. 1,03, 12,693/-. Further, the above confirmed amount of Rs. 93,86,463/- includes a sum of Rs. 3,82,523/- with the narration "details of other d....
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....her facts and evidences as may be furnished by the appellant. The Assessing Officer is hereby directed to collect all the relevant facts and evidences and determine the admissible loss." Aggrieved by the order of Ld.CIT(A) assessee is now in appeal before us. 32. Before us, Ld. AR reiterated the submissions made before AO & Ld.CIT(A). He submitted that against the total loss of Rs. 78,44,316/-, AO allowed the claim of Rs. 4,04,327/- during the assessment proceedings and later while giving effect to the order of Ld.CIT(A) allowed loss of Rs. 64,82,136/- and thus the issue before Hon'ble Tribunal is with respect to loss of Rs. 9,57,853/-. He submitted that in principle the AO and Ld.CIT(A) have both held that the loss is allowable. AO allowed only loss relatable to the year under assessment. Ld.CIT(A) had allowed the loss since it was discovered during the year except for some items for want of details / narration etc. He further submitted that the entire loss have been written off in the accounts as reflected in the police complaint filed by the assessee on 04.04.2002 (the copy of which is placed at page 92 of the Paper Book) and therefore the entire loss should be allow....
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....at assessee had debited Rs. 1,23,25,243/- on account of vehicle expenses. In the absence of details of expenses i.e., bills, vouchers etc, AO held that the reasonableness and the genuineness of the expenses were not verifiable and the element of vehicle for perusal use cannot be denied. He accordingly disallowed Rs. 6,16,262/- of the expenses (being 5% of expenses). AO also noticed that assessee had claimed Telephone Expenses of Rs. 79,47,667/- being expenses of telephone installed at the residence of its executive. He was of the view that the personal use of the telephone cannot be ruled out. He accordingly disallowed Rs. 3,97,383/- (being 5% of residential telephone expenses). Aggrieved by the order of AO, assessee carried the matter before Ld CIT(A), who decided the issue by holding as under : "11. The next ground relates to the disallowance of a sum of Rs. 50,000/- from out of the appellant's claim of deduction towards public relation expenses which was of the order of Rs. 9,84,462/-. The Assessing Officer noticed from the details filed before him that these were in the nature of sales promotion expenses which also included small gifts, lunch with guests, etc. It was h....
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....t of the major expenses were in the nature of expenses incurred in the branch offices abroad such as in Bangladesh, Indonesia, Malaysia, etc. There were also small pooja expenses, expenses incurred on stamps, and other incidental expenses. Prima facie, there is nothing in this account as would justify a disallowance. -Coming to the house magazine expenses, the account clearly shows that these expenses had been incurred on the publication of two magazines, 'Kshitij' and 'Fire-side'. The appellant also submitted a copy each of these magazines for perusal. It is only the membership and subscription account which shows a few items which are prima facie not admissible. Examples are the BCCI membership fees of Rs. 22,000/-, 'listing fees' of Rs.l,40,250/- which have not been clarified, and, membership fees and subscription' of Rs. 6,44,205/- (vide entry dated 31.1.2002) in respect of which no specific details have been furnished. In the light of the above analyses of the relevant accounts, I would hold that the Assessing Officer would have been justified in making some disallowance only in respect of the membership and subscription expenses. At the rate of 5% ....
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....ed hereinabove on a sample basis, I am of the opinion that out of the appellant's claim of deduction towards vehicle expenses, a sum of Rs. 2,50,000/- can be reasonably disallowed for want of supporting narrations / evidences. The disallowance made in the assessment in this matter is accordingly substituted. 13.2.1 The issue has been decided as above on a scrutiny of the relevant account and without drawing any adverse inference on personal use of vehicles by the directors and other senior employees since the sample copies of forms No.16 show that perquisite value of use of motor cars had been duly considered in their hands. 14. The next ground relates to the disallowance made from out of the appellant's claim towards telephone expenses. As already mentioned, the AO made such disallowance with reference to the charges incurred on the residential telephones only. It was held by him that since the appellant could not produce any bills, vouchers or other documentary evidences in support of the claim, the plea that the expenses had been incurred wholly and exclusively for the purpose of business was not amenable to verification, and, moreover, personal use could not b....
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.... rival submissions and perused the material on record. In the present case, we find that the disallowance of expenses under various heads has been made by the AO on adhoc basis. Ld.CIT(A) has granted partial relief to the assessee. With respect to disallowance of vehicle expenses, the AO disallowed the expenses for the reason that personal use of expenses cannot be ruled out. It is an undisputed fact that the assessee is a limited Company. With respect to a disallowance of expenses being personal in nature in case of limited company, we find that Hon'ble Gujarat High Court in the case of Sayaji Iron and Engineering Company (supra) has held that a limited company by its very nature cannot have personal use. In the absence of any contrary binding decision in favour of Revenue, we relying on the aforesaid decision of Hon'ble High Court of Gujarat in the case of Sayaji Iron & Engg. Co. (supra), hold that no disallowance of vehicle expenses on account of being personal in nature is called for in the present case. As far as the disallowance of other expenses on adhoc basis is concerned, we find that AO has not pointed out any expenses which are not for the purpose of business. Further it....
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....isdictional High Court in the case of Sudarshan Chemical Industries Ltd. The above decision of the jurisdictional High Court has also since been followed in a few other cases. In the case of Commissioner of Income-tax Vs. Chloride India Ltd., 53 ITD 180/256 ITR 626, being one such case where the decision in the case of Sudarshan Chemical Industries Ltd. was followed, the Hon'ble Calcutta High Court had the occasion to analyse the earlier decision of the Hon'ble Supreme Court in the case of McDowell & Co. Vs. Income-tax Officer, (1985), 154 ITR 148, wherein it had been held that excise duty collections would form part of turnover. The Hon'ble Calcutta High Court held that as the Hon'ble Apex Court had rendered the decision in the McDowell & Co. case in the context of the Sales Tax Act, a separate enactment altogether, the interpretation of turnover given therein could not be applied to interpret the expression "total turnover" used under the Income-tax Act, 1961. Accordingly, the Hon'ble Calcutta High Court rejected Revenue's appeal for inclusion of sales tax and excise duty in "total turnover" for the purpose of computing deduction u/s.80HHC. Respectfully fo....
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.... Vs. Commissioner of Income-tax, 113 ITR 84; and, Commissioner of Income-tax Vs. Pandian Chemicals Ltd., 263 ITR 278. 24.2 In this appeal the appellant has argued that the Assessing Officer was not justified in excluding the above items of receipts under clause (baa). During the course of the appeal proceedings, it was contended that the facts and legal position vis-a-vis the impugned receipts are the same as obtained in the previous year relevant to the assessment year 1998-99. The appellant submitted an extract from the reply filed by it in connection with the appeal proceedings for the said assessment year. 24.3 On a careful consideration of the stand taken by the Assessing Officer as well as the submissions made by the appellant, the issue is decided as under. (i) Claims and refunds The Assessing Officer has considered gross claims and refunds amounting to Rs. 1,32,37,677/- under clause (baa). This is not correct because the appellant had already considered insurance claims and refunds of Rs.l6,55,318/- under this clause. Coming to the balance claims and refunds, amounting to Rs. 1,15,82,359/- the same, being recovery of excise duty, cu....
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....for the assessment year 1993- 94. Mis. Thermax Babcock & Wilcox Ltd. happens to be a sister concern of the appellant. In the above decision, the Tribunal followed the decision of the Mumbai Bench in the case of Ankit Diamonds, 75 ITD 329, and, the decision of the Calcutta Bench in the case of Reckitt & Colman of India Ltd., Vs. Deputy Commissioner of Income-tax, 77 ITD 198, and held that 'scrap sales' would form part of total turnover. Respectfully following the above decision of the Pune Bench, the Assessing Officer's action in excluding 90% of the scrap sales of Rs. 1,37,16,681/- under clause (baa) is hereby negatived. The above amount is directed to be included in 'total turnover'. (iv) Settlement of claim on order cancellation It is evident from the nomenclature of these receipts that the same preceded the implementation of the orders which were never acted upon. Therefore, the receipts of Rs. 2,50,00,000/- cannot be considered as part of the appellant's operational income. On the contrary, the same will have to be treated as being in the nature of compensatory charges liable for consideration under clause (baa). Hence the action of the....
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....t to which the written back / appropriated provisions and balances could be so considered, and, consequently, could not be excluded under clause (baa); and, to the extent to which the same would fall under clause (baa). The Assessing Officer shall call for and examine the details and decide the issue along the lines suggested above. In so far as the miscellaneous receipts of Rs. 1,02,90,430/- are concerned, the appellant has not furnished any details. The appellant has also not furnished anything in respect of the balance amount of Rs. 57,65,562/-. Nothing has been adduced to show that these receipts were in the nature of operational income. In the appellate order for the assessment year 2001-02, under identical circumstances, exclusion of the miscellaneous receipts under clause (baa) had been confirmed. Following the said order, exclusion of 90% of the miscellaneous and other receipts of Rs. 1,60,55,992/- (Rs. 1,02,90,430/- + Rs. 57,65,562/-) under clause (baa) is hereby confirmed. 24.3.1 The Assessing Officer shall recompute the amounts to be excluded (i.e. 90%) under clause (baa) as well as the 'total turnover' in the light of the decisions given hereinabove. 2....
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....ofits and gains derived from the assessee's industrial undertaking. In view of the above decision, as also the decisions of the jurisdictional High Court in several cases (viz. Commissioner of Income-tax Vs. Kantilal Chhotalal, 246 ITR 439; Commissioner of Income-tax Vs. Ravi Ratna Exports (P) Ltd., 246 ITR 443; Commissioner of Income-tax Vs. K.K.Doshi, 245 ITR 849, etc.) wherein it has been held that deduction u/s.80HHC could be availed only in respect of receipts having direct nexus with sales, the action of the Assessing Officer in not considering the DEPB incentive ofRs. 72.71 lakhs for the purpose of computing deduction admissible u/s.80HHC is hereby confirmed. Consequently, the ground raised on this score is dismissed." Aggrieved by the order of Ld.CIT(A) assessee is now in appeal before us vide ground Nos.10 and 11. Revenue is also aggrieved by the order of Ld.CIT(A), to the extent of relief granted by Ld.CIT(A) and has raised ground Nos. 5 and 6. Since the grounds raised by assessee and Revenue are inter-connected, both are considered together. 38. The assessee by way of ground of appeal No.10 has raised various issues in respect of the items to be considered in t....
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....t 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. Thus, ground of appeal No.10(a) raised by the assessee is partly allowed and ground of appeal No.6 raised by the Revenue is dismissed. 43. Now coming to the issue raised by assessee in ground of appeal No.10(b) relates to disputed adjustments to the export turnover wherein the various claims have been raised before us and we proceed with the same by referring to each one of them. (i) Business claims and refunds : In this regard the amount relates to insurance refund of Rs. 1,15,82,359/-. The issue was remitted back to the AO with direction. We also remit this issue back to the AO to apply the said directions. (ii) Balances written off now recovered : The assessee pointed out that it was part of operational income recovered. Since the expenses when booked were allowed as expenditure, hence, the same is to be considered at cost of export turnover. We find merit in the plea of the assessee in t....
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.... should be increased and we direct so. Thus, ground of appeal No.10(d) is allowed. 45. Now coming to ground of appeal No.10(e), assessee has sought proportionate deduction with reference to its export and on account of (DEPB). The said issue now stands decided as per the amendment to Section and the AO in this regard is directed to apply the amendment and decide the issue. 46. The issue in ground of appeal No.10(f) is against the claim of unabsorbed losses u/s 72A of the Act i.e., the same may be reduced from the profits of business. The Ld. CIT(A) has decided the said issue relying on the ratio laid down by the Hon'ble Bombay High Court at para 27 page 77, which has not been reversed. Applying the said principle, we dismiss the ground of appeal No.10(f). 47. The issue in ground of appeal No.11 raised by the assessee is against the assumption of exchange difference as business income or under the head 'income from other sources'. The Ld. CIT(A) relied on para Nos.73 and 74 of the order and has considered the plea of the assessee and in the absence of details of deductions, has directed the AO to call for the details and examine the same and decide the issue as per his dire....
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....s foregone by the assessee in the previous year relevant to A.Y. 2001-02 and there was no accrual of income in the year under consideration. The submission of the assessee was not found acceptable to AO. AO noted that the income from lease were estimated at Rs. 1,53,21,302/- in A.Y. 2001-02. He also noted that the decision of Ld.CIT(A) in not considering it as income was not accepted by Revenue and appeal was preferred by the Revenue before the Tribunal. Since Revenue had preferred appeal and to keep the matter alive, AO estimated the income from lease at Rs. 1,53,21,302/- and made its addition. Aggrieved by the order of AO, Assessee carried the matter before Ld.CIT(A), who decided the issue by holding as under : "9.2 I have carefully considered the submissions thus made by the appellant and its learned Authorised Representative. I find that assessability of lease rents had figured in the assessment as well as appellate orders for the assessment years 2000-01 & 2001-02. It would, therefore, be of use of briefly discuss these orders. 9.2.1 For the assessment year 2000-01, the appellant had not accounted lease rentals from 8 lessees including M/s.Arvind Mills Ltd., ....
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....le rupee from them till date. In the year-ended 1.3.1999, the appellant had already written off as bad debts sums of Rs. 18,12,600/- and Rs. 11,37,370/- being monies due from these two parties respectively. Such write-off had also been allowed in the assessment for the assessment year 1999- 00. Taking these facts into account, the Commissioner of Income-tax (Appeals) held that the appellant was justified, in view of the deteriorating financial position of the two companies, in not recognising revenue in respect of which there were no prospects of recovery. "In my opinion even for accrual to take place there must be a bonafide probability of ultimate collection. Existence of a mere legal right without the possibility of its enforceability can give rise to only a hollow claim of income and not real income". In deciding as above and, consequently, in deleting the addition made in the assessment on this score, she also relied on the judgement in the case of RBL Banarasidas & Co. Pvt. Ltd. 9.2.2 For the assessment year 2001-02, the appellant had not shown lease rentals amounting to Rs. 1,53,21,302/- from 5 parties which were the same as the parties figuring in the present appea....
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.... off in the accounts relevant to the said assessment year, no debts were left thereafter on which any interest could accrue. In the circumstances, and also as the Commissioner of Income-tax (Appeals) held that not even a single rupee could have been offered by the appellant for the assessment years 2000-01 & 2001-02 towards lease rentals from these two concerns, a different stand cannot possibly be taken for the present assessment year. I would accordingly hold that the addition of Rs. 1,53,21,302/- made for the present assessment year with reference to the subject leases was without any basis. For these reasons, the addition of Rs. 1,53,21,302/- is hereby deleted." Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us. 53. Before us, Ld. D.R. submitted that identical issue arose in assessee's own case in A.Y. 2000-01 and 2001-02 and the Coordinate Bench of the Tribunal vide order dated 29.08.2016 had restored the issue to the file of Ld.CIT(A). He submitted that the issue for the year under consideration being identical to that of earlier years the matter be restored back as earlier years. Ld.A.R. on the other hand supported the order of Ld.CIT(A). ....
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....er of Income Tax (Appeals) while dealing with the issue in assessment year 2000-01 partly deleted the addition in respect of Parasrampuria Industries Ltd. and Parasrampuria International Ltd. by following the concept of real income and upheld the addition in respect of Modi Alkalies Ltd. and Inertia Industries Ltd. whereas, all the four companies are similarly placed. Accordingly, we deem it appropriate to remit this issue back to the file of Commissioner of Income Tax (Appeals) for deciding the issue afresh, in the light of decision rendered in the case of 8 ITA Nos. 1247, 1290 & 1291/PN/2005 Commissioner of Income Tax Vs. M/s. Excel Industries Ltd. (supra). The findings of Commissioner of Income Tax (Appeals) on this issue are set aside and the ground No. 7 in the appeal of the assessee and ground No. 4.1 to 4.5 in the appeal of the Revenue for assessment year 2000-01 are allowed for statistical purpose." We thus find that the Co-ordinate Bench, while deciding the issue in assessee's own case in earlier year had set aside the issue to the file of Ld.CIT(A). It is also a fact that both the parties have admitted that the issue in the year under consideration is identical to that....
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....uthorised Representative. The same carry considerable force. No doubt, both section 80AB as well sub-section (5) of section 80IA are in the nature of over-riding provisions. But there need not be any debate as to which of the two shall prevail. For, these two over-riding provisions operate in domains which are separate. Section 80AB deals with an assessee at large. In section 80IA the assessee has been consciously reduced to an undertaking. Therefore, while vis-à-vis the other sections appearing under the heading 'C' of chapter VIA, the losses including unabsorbed depreciation of the assessee on the whole will have to be considered for set off before arriving at the gross total income, in so far as section 80IA is concerned, only the losses and unabsorbed depreciation etc. of the eligible business undertaking can be so considered. This is because of the fiction that the eligible business undertaking is the only business of the assessee. In other words, while section 80AB will apply to section 80IA as well, such application will be through the medium of the fiction. Accordingly, the stand taken by the Assessing Officer in setting off the entire unabsorbed loss of M/s. Thermax....