TaxTMI 
TaxTMI 
2011 (1) TMI 1558
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....ting the disallowance on account of selling, publicity and medical expenses. For this, assessee has raised the following ground No.1:- ITA No.333/Ahd/2006 in A.Y.2002-03. "1. The ld. CIT(A) has erred in law and on facts in deleting selling, publicity expenses and medical expenses amounting to Rs. 18,58,17,166/-." ITA No.4356/Ahd/2007 in A.Y.2004-05. "1. The ld. Commissioner of Income-tax(A)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance made out of selling, publicity and medical literature expenses amounting to Rs. 23,76,75,964/-" The issue being identical on facts in both the years, we will decide the issue after taking the facts from assessment year 2002-03. 3. The brief facts leading to the above issue are that Assessing Officer made disallowance of selling publicity and medical literature expenditure. The assesseecompany has incurred expenditure of Rs. 33,05,49,237/- on selling & publicity expenses along with includes presentation articles of Rs. 5,18,23,488/-. The assessee-company has incurred expense on printing on packing i.e. brief literature of medicines, medical representative training expenses, sales pr....
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....ure while disallowing the remaining amount. 8. On appeal, the learned CIT(A), following his own orders for the assessment years 1998-99 and 1999-2000 and the decision of the ITAT for the AY 199-93, allowed the claim of the assessee. 9. Both the parties agreed that issue is covered in favour of the assessee by the decision dated 9-6-2007 of the ITAT in assessee's own case for the assessment year 1998-99 in ITA No.446/Ahd/2002. 10. We find that the Tribunal while adjudicating a similar claim in the assessee's own case in the AY 1998-99, concluded in their order dated 26-6-2007 as under: '10. During the course of hearing, both the parties agreed that this issue is covered in favour of the assessee by the decision of ITAT, Ahmedabad Bench in assessee's own case for the AY 1997-98 in ITA No.1044/Ahd/2002. wherein the ITAT has upheld the order of the CIT(A) and dismiss the ground raised by the Revenue by observing in its order in paragraph 3-series, which is reproduced as under: "3.1 Ground no.2 is in respect of deletion of Disallowance on account of selling publicity and medical literature expenses Rs. 7,83,87,87/- 3.2 Facts of the i....
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....nsidering the same as deferred revenue expenditure. It was pleased that the CIT(A) however has allowed the claim of the assessee following the decision of the jurisdictional. High Court in the case of Navsari Cotton & Silk Mills supra" After considering the submission of the parties to the disputes, we are of the opinion that the order of CIT(A) requires no interference as it is based on the principles laid down by the jurisdictional High Court in the case of Navsari Cotton & Silk Mills supra. Accordingly this ground of appeal is also dismissed. 15. After hearing both the parties, respectfully following the afore cited decision, we find no merits in this ground and the same is dismissed. The order of the ld. CIT(A) in this regard is upheld." 3.4 Thus, respectfully following the above order of the Tribunal as the revenue did no dispute that facts were not identical, we uphold the order of the CIT(A), deleting the disallowance made by the Assessing Officer." Respectfully following the said order of the ITAT, as the Revenue did not dispute that facts were not identical, we uphold the impugned order of the CIT(A) in disallowance made by the Assessing....
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....nting but the liability of expenditure accrues, moment assessee incurs expenditure on a particular item. It is also a fact that the assessee has produced complete bills & vouchers for verification before Assessing Officer as argued by Ld. counsel for the assessee and the AO could not point out, which bills pertains to next year. Accordingly, we feel that this issue is squarely covered in favour of the assessee by Tribunal's decision in assessee's own case (supra). Respectfully following the co-ordinate Bench decision, we allow the claim of the assessee and confirm the order of CIT(A). This common issue of Revenue's appeal, in both years, is dismissed. 7. The next common issue in these cross appeals of Revenue as well as assessee is as regards to the order of CIT(A) in restricting the disallowance u/s.14A of the Act to Rs. 1 lac out of Rs. 30,54,041/- made by Assessing Officer. For this, assessee has raised the following ground No.2:- ITA No.333/Ahd/2006 by Revenue (for A.Y.2002-03) "2. The ld. CIT has erred in law and on facts in directing to restrict the disallowance u/s.14A to Rs. 1 lac out of Rs. 30,54,041/- made by the A.O." And against the deletio....
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....nces the assessee' administrative expenses are partly referable to earning of such dividend. Hence it should be apportioned by estimate. The A.O has allocated expenses of Rs. 30.54 lacs for earning dividend income of Rs. 55.83 lacs which is not reasonable. I hold that on estimate basis the disallowance of Rs. 1,00,000 would be sufficient to cover such expenses as referable to earning of dividend. The addition is therefore, confirmed at Rs. 1,00,000/.- and the balance amount is deleted". Aggrieved, both came in appeal before Tribunal. 9. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has not incurred any specific expenditure for the purpose of earning exempted income i.e. dividend income of Rs. 55.83 lakhs. A proportionate management expenses are required to be disallowed in proportion to dividend income or not, this aspect has been examined by Hon'ble Pubjab & Haryana High Court in the case of CIT v. Winsome Textiles Industries Ltd. (2009) 319 ITR 204 (P&H) and CIT v. Abhishek Industries Ltd. (2006) 286 ITR 1 (P&H). Further we find that the Hon'ble Bombay High Court In the case of Godrej & Boyce Mfg. Co.....
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....as well as assessee's appeal is dismissed. 11. The next common issue in these cross-appeals of Revenue as well as assessee is against the order of CIT(A) in allowing deduction u/s.35(AB) of the Act on security expenses, municipal tax and salary paid to Mr. Dutt and building expenses. For this, both have raised the following grounds:- ITA No.333/Ahd/2006 (for the A.Y. 2002-03 by Revenue) "3. The ld. CIT(A) has erred in law and on facts in directing to give weighted deducted u/s.35(AB) on security expenses, Municipal Tax and Salary paid to Mr. Dutt and Building expenses." ITA No.346/Ahd./2006 for A.Y. 2002-03 (by assessee) "2. On the facts and in the circumstances of the case, CIT(A) has grossly erred in holding while disposing of the ground regarding the disallowance of Rs. 1,67,62,039 as inadmissible weighted deduction u/s.35(AB) that the expenditure of Rs. 1,75,28,000 being professional fees and Rs. 11.21,000 being garden expenses are not of the nature envisaged in Sec. 35(2AB) and, therefore, the appellant would not be entitled to a further deduction of 50% thereon u/s.35(2AB) of the I.T. Act when he ought to have held that the appellant is ....
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....,04,74,340/- C) Total ( A + B) Rs. 22,48,38,685/- D) Weighted deduction @ 150% Rs. 33,72,58,028/ - Deduction u/s.35(1)(ii) Contribution to U.N. Mehta Charitable Institute of Cardiology Rs. 5,00,000/- Eligible Deduction @ 125% Rs. 6,25,000/- The Assessing Officer noted that the amount of Rs. 20,46,74,340/- debited to the profit & loss account has not been written back in the return of income and the deduction has been claimed at lesser amount as against deduction worked out in the tax audit report and he referred to certificate of the prescribed authority u/s.35(2AB) dated 23-01-2004 and stated that out of the claim for revenue expenditure of Rs. 1926.73 lakh expenditure to the extent of Rs. 1667.07 lakh is allowed and disallowance of Rs. 305.86 lakh is worked out. The assessee stated in reply given various explanation and details and claimed excess deduction of Rs. 59.07 lakh and further excess deduction u/s.35(2AB) of Rs. 89,871/-. After considering the explanation of the assessee, the Assessing Officer has stated that the explanation g....
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....sider this ground for disposal on merits. On perusal of the nature of expenditure it is seen that except for professional fees of Rs. 48 lacs and garden expense of Rs. 6.93 lacs the other are in connection with patent to be registered overseas and hence it would be covered by the nature of expense covered above. Garden expense has no relation with the research activity, therefore I hold that the A.O was justified din excluding these two expenses in granting deduction u/s.35(2AB). However, he is directed to allow deduction in respect of the other deduction. This ground is accordingly partly allowed. I agree with the above findings of the CIT(A) in appellant's own case for A.Y 2001-02 and direct the assessing officer to consider the deduction u/s.35(2AB) in the light of the said directions. Accordingly I direct the Assessing Officer to allow weighted deduction with reference to Security expenses of Rs. 10.87 Lakhs, Municipal tax of Rs. 1.14 lakhs and salary of Mr. Dutt of Rs. 60.36 lakhs. That building expenses of Rs. 46.20 lakhs is also deductible. However, garden expenses of Rs. 11.21 lakhs and professional fees of Rs. 175.28 lakhs is not of the nature envisaged i....
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....all these factors, security expenses of Rs. 11.01 lacs is eligible for weighted deduction u/s.35(2AB). So far as gardening expenses of Rs. 9.44 lacs, it is submitted as under:- The company has a dedicated research centre where extensive research is carried out. The company has a very composite R & D facility. The company is conscious of the environmental issues and has put up effluent treatment plant (costs approx. Rs. 36 lacs.). As is widely accepted the vegetation particularly the trees help contain the pollution resulting from the release of pollutants (including gases). So the trees and plants become an integral part of the research centre. Once having accepted this position any expenditure incurred on gardening should be fully allowed under the provisions of section 35(2AB) of the Income Tax Act. In this connection, we would like to add that the Gujarat Pollution Control Board has also directed that such trees and gardens should be developed and watered treated by the ETP should be utilized for a forestation purposes. Over and above this, good laboratory practices require that research centers should have green cover so that pollution levels (including dust) ....
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....oper security is required to avoid leakage and only in-house staff will have assessed to building. Accordingly, this expenditure are for preserving the research which is completed and its clinical trial is pending. As regards to the environmental issue, the assessee-company has set up an affluent plant and as is widely accepted the vegetation, i.e. trees have contained the pollution. This expenditure of gardening and plantation have been done for the perseverance of environment and this is directly related to R & D facilities. As regards to salary paid to Dr. C.Dutt amounting to Rs. 58.54 lakhs, he is in-charge of R & D Centre at Bhatt. He is the person through whom all co-ordination of technical scientists and other technical persons are carried out. The entire reporting of the research activity to the management has been taken to the Board of Directors through him only and for this the salary is paid. Accordingly, the assessee has rightly paid the entire expenditure of Rs. 133.92 lakhs and building repairs Rs. 37.55 lakhas on which weighted deduction u/s.35(2AB) of the Act is allowable. In view of the above discussion, we allow the claim of the assessee and this issue of the Reve....
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....rred in relation to drugs and pharmaceuticals. The device of inserting an explanation is found to be a convenient method of elucidating several detailed aspects that cannot be verbally accommodated in the main provision. It enables the draftsman to say, what he has to say without encumbering the main provision with too many detail. The function of the Explanation is to clarify the scope of certain words or expression (occurring in the main provision), about whose precise scope a doubt may arise as has been held by the Hon'ble Supreme Court in the case of Controller of Estate Duty Vs Kantilal Trikamlal, AIR 1976 SC 1935. Also the Hon'ble Supreme Court in the case of Oblum Electrical Industries Pvt Ltd, Hyderabad Vs Collector of Customs, Bombay AIR 1997 SC 3467 has held that the Explanation should not be construed so as to widen the scope of the main section. The Explanation uses the words "Shall Include". Provisions which are inclusive in their content use the plural word "Includes" as opposed to the singular "Include". In this particular Explanation the phrase that has been used is "Shall Include". The phrase "Shall Include" has necessarily to be interpreted as signifying ....
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....n law and on facts in deleting the disallowance of long term capital loss of Rs. 17,30,67,016/- on account of assignment of unsecured loan given to Torrent Gujarat Byotech Ltd. in favour of M/s. Focus Corporate Restructuring Pvt. Ltd." 18. The brief facts leading to the above issue are that the Assessing Officer disallowed assessee's claim for long term capital loss by stating that assessee claimed long term capital loss on account of assignment of a loan of Torrent Gujarat Biotech Ltd. (TGBL for short) to Focus Corporate Restructuring Pvt. Ltd. The assessee had given a loan of Rs. 12.84 crores to associated concern TGBI in the year 1996-97 and during that year under consideration the assessee had assigned/transferred the said loan to Focus Corporate Restructuring Pvt. Ltd. vide agreement dated 07-02-2005 for a sum of Rs. 64 lakhs and the difference of Rs. 12,21,28,000/- was claimed as long term capital loss. After claiming indexation benefits, the long term capital loss was calculated at Rs. 17,30,67,016/- which was claimed and set off with long term capital gains from sale of trade mark. The AO stated that as per section 45(1) of the Act capital gain/loss is chargeable only on....
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....ing the yar ended 31st March, 1996 through subordinated interest free unsecured loans from the promoters, which shall not be repaid without the prior approval of IFCL. The terms and conditions of such unsecured loans shall be to the satisfaction of IFCI. c) Thus it will be appreciated that the appellant had to give advance to TGBI as a promoter company and that it was in the interest of the company who had made huge investment in the company as a promoter group. d) However, TGBL could not successfully carry out restructuring and its business activities and incurred huge financial loss. They were not in a apposition to repay the loans borrowed by them from financial institute in as also from the group companies. It is declared as sick undertaking under the SICA Act. In the circumstances the appellant thought that the capital of TGBL was eroded and there was no likelihood of getting any recovery of the loan. In the meantime the appellant entered into an agreement with Focus Corporate Restructuring Pvt. Ltd. whereby the above loan was assigned to them for a sum of Rs. 64 lakh. This amount of assignment is supported by the report of the Chartered Accountant Mr. Divyan....
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....ort of this proposition we need take notice of the following two decisions: 1) CIT v. Minor Bababhaia alias Lavkumar Kantilal (1981) 128 ITR 1 (Guj). Therein the assessee had advanced a sum of Rs. 25,000 to a company on account of promissory note and could realize only Rs. 13,323 and a share of Rs. 50 and hence claimed the balance of Rs. 11,617 as capital loss. The High Court naturally considered both the aspects viz. existence (i) of capital asset and (ii) of transfer of the same. On the fist aspect of the existence of capital asset towards the middle of page-4 of the Reports (128 ITR) fresh para starts with the following sentence: "Mr. Raval. Ld. Advocate appearing for the revenue did not contest the proposition that the assets was holding a capital asset in the form of a promissory note of Rs. 25,000 under which he was an unsecured creditor of the mill company in the winding up proceedings (emphasis supplied.) Note: In that decision greater part is devoted to the second aspect of 'transfer' which may not be really important for our purpose because in our case an assignment of a debt would certainly be a transfer. All the same, in the interest of comple....
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....ly benefit of indexation may be available to the capital asset which is a creditor's right in a loss given or deposit made." The CIT(A) keeping in view the above explanation and submissions held that this loan was a capital asset within the meaning of Section 2(14) of the Act.. According to CIT(A) this being a capital asset transferred for a consideration, the loss arising on account of transfer of this long term capital asset is a long term capital loss and held as under:- "6.2 I have considered the assessment order and the facts relating to this claim of the appellant. It is a fact that the appellant had given an amount of Rs. 1284 lacs to TGBL to promoted the company and for appellant it was an investment. The Assessing Officer has rejected the claim mainly for the reasons that according to him it is not an asset but is advance/investment and that no reason is explained for assignment of loan at lessor value. On perusal of explanation of assessee it is seen that TGBL had become sick undertaking the amount invested was not likely to be received back. Hence, the appellant justifiably assigned the said right to other company so that loss in future can be minimized....
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....ort term capital loss. In view of the facts as discussed above and the case law mentioned above, the assessing officer is accordingly directed to allow long term capital loss claimed by the appellant." Aggrieved, Revenue came in appeal before Tribunal. 20. We have heard the rival contentions and gone through the facts and circumstances of the case. Before us Ld. CIT-DR made submissions that TPL was the promoter of TGBL and IFCI had sanctioned a scheme of financial assistance vide letter dated 28-08-1996 in which it had sanctioned a loan to TGBL. As a part of the scheme TPL had to infuse fresh capital in TGBL in the form of share capital and as part of the same scheme, TPL as promoters of TGBL, had to give unsecured loan to TGBL. He further stated that capital infusion in TGBL had taken place in two forms, i.e. as equity share capital and as unsecured loan. He argued that during the year under consideration the equity share capital had been sold off to Torrent Private Ltd, a group company and this transaction was not routed through the stock exchange and further unsecured loan was sold off to Focus Corporate Restructuring Pvt Ltd. Long Term capital Loss has been claim....
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....FCL, TGBL shall:- a) deploy share capital to the extent of Rs. 1250/- lakh out of the rights issue of equity shares and 50% of the envisaged internal accruals of Rs. 613 lakh i.e. Rs. 307 lakh from the promoters for financing the down stream project. b) Finance the cash loss of Rs. 671 lakh incurred during the year ended 31st March, 1996 through subordinated interest free unsecured loans from the promoters, which shall not be repaid without the prior approval of IFCI. The terms and conditions of such unsecured loans shall be to the satisfaction of IFCI... .... " The TGBL incurred huge losses as it could not carry out restructuring successfully and they were not in a position to repay the loans borrowed from IFCI and also the group company and accordingly it was declared as "sick undertaking". Accordingly, the assessee entered into an agreement with Focus Corporate Restructuring Pvt. Ltd. for assigning the above loan for a sum of Rs. 64 lakh. Now the question arises that how this loan is an asset. The first requirement is that it should be a capital asset within the provisions of Section 2(14) of the Act as defined so as to "Capital asset" means property of any ....
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....e milling companyin the winding-up proceedings......... 22. Further, we find from the decision of Hon'ble Calcutta High Court in the case of CIT v. East India Charitable Trust (1994) 206 ITR 152 (Cal) in that case the trust had earned some capital gains on sale of shares and utilized the sale proceeds, inter alia, for making fixed deposits with some banks or public sector undertakings. It was held that "the investment or deposit in a public sector company is firstly an asset and secondly a capital asset and thirdly a permitted capital asset under special law relating to the assessment of charitable or public religious trust". (page 153 C & D of 206 ITR). Accordingly, in the present case also, we are of the view, on the proposition of law that creditor's right in a loan is a capital asset. On the other aspect of transfer, the legal proposition in respect of assignment of "debt" should be considered as transfer and this has rightly been held so by the CIT(A). Accordingly, we confirm the order of CIT(A) on this issue and Revenue's issue is dismissed. 23. The next common issue in these cross-appeals of Revenue as well as assessee is as regards to the order of CIT(A) in allowing t....
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....ome as business income." ITA No.4356/Ahd/2007 for A.Y. 04-05 (by Revenue) "4. The ld. commissioner of Income-tax(A)-XIV, Ahmedabad has erred in law and on facts in directing to exclude the component of excise duty from the total turnover for the purpose of computation off deduction u/s.80HHC of the Act. 5. The ld. commissioner of Income-tax(A)-XIV, Ahmedabad has erred in law and on facts in directing to treat interest income to be treated as business income rather than income from other sources of Rs. 23,63,668/-. 8. The ld. commissioner of Income-tax(A)-XIV, Ahmedabad has erred in law and on facts in directing to treat the processing charges as business since amounting to Rs. 1,26,73,537/-." ITA No.4343/Ahd/2007 for A.Y.04-05 (by assessee.) "2. On the facts and in the circumstances of the case, the CIT(A) erred in holding that in computation of deduction u/s.80HHC job work charges of Rs. 1,26,73,572 were required to be included in the total turnover. 3. On the facts and in the circumstances of the case, the CIT(A) erred in upholding the view taken by the Assessing Officer that in the quantification of deduction u/s.80H....
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.... was prescribed at that particular time. This account was not mandatory to be part of trading or profit and loss account even by Accounting standard. He argued that after introduction of section 145A of the Act., where basic issue was settled related to value of closing stock on account of modvat credit and it was made compulsory to include the duties in the form of sales-tax, Central Excise, octroi etc. not only in the opening, purchase of raw material but also in the closing stock of such goods. He argued with due regard to ratio of Laxmi Machine Works (supra) and K Ravindranathan Nair (supra) in respect of exclusion of such duties that to exclude only from turn over is not applicable in the present context. Either both side of trading account and profit and loss account should be included with such duties or else excluded. The account of reducing Central excise from total turnover is given distorting picture particular with concept of modvat credit. The profit elements is therefore crept in the 'business profit' of the assessee on account of modvat credit, is benefit given to assessee out of the total collection of central Excise for the central excise paid on raw material and c....
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....urnover. Respectfully following the Hon'ble Apex Court and co-ordinate Bench, cited (supra), we confirm the order of CIT(A) and these common issue of the Revenue's appeals is dismissed. 28. As regards to Foreign Exchange Gains, the issue raised by the assessee, we find that the issue is squarely covered in favour of the assessee and against the Revenue by the decision of jurisdictional High Court in the case of CIT v. Amba Impex (2006) 282 ITR 144 (Guj), wherein it is held as under:- "The entire case of the Revenue is built on the fact that the amount has been received in a year subsequent to the year of exports. As can be seen from the assessment order it talks of export realization for exports made up in March 31, 2000. There is nothing to indicate, and none of the authorities have applied their mind, as to whether the sum of Rs. 13,18,068 is relatable to exports made during only one financial year or more than one financial year preceding March 31, 2000. This would have a material bearing, taking into consideration the provisions of sub-section (2) of section 80HHC of the Act as was applicable during the year under consideration. Under sub-section (2) of sec....
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....ances, it would not be fair and just for either side to resolve the controversy in the absence of the relevant facts and evidence being available on record. In the light of what is stated hereinbefore, the question is left unanswered and the appeal is restored to the file of the Tribunal only in relation to the issue relatable to deduction under section 80HHC of the Act without expressing any final opinion on the merits of the matter. The Tribunal shall, after hearing both the sides, decide the appeal on this count, be open to the Tribunal to restore the issue to the file of the assessing authority to ascertain proper facts in the circumstances." We find that the issue is squarely covered by the jurisdictional High Court decision in the case of Amba Impex (supra), respectfully following the same we allow the claim of the assessee. 29. The next common issues i.e. scrap disposal, insurance receipts, labour testing fee, bad debt recover, notice pay, kasar/right off, balance written off, whether all these items require exclusion of 90% of these receipts from the business profits under clause (baa) for the purpose of deduction u/s.80HHC of the Act.. We find that thi....
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.... Glenmark Laboratories Ltd. vs. DCIT (2008) 1 DTR (Mum)(Trib) 460, wherein it is held that part of the direct cost of export of trading goods is attributable to the value of DEPB licence and this has to be reduced from the total direct cost to find out the direct cost relatable to trading export: issue is restored to the AO to ascertain the value of DEPB licence on the date of receipt and reduce the same from total direct cost. The Assessing Officer will decide the issue in the light of latest decision of Hon'ble Bombay High Court in the case of CIT v. Kalpataru Colours & Chemicals Ltd. 233 CTR 313 (Bom) 33. The next issue is regarding export trading loss is to be reduced from export manufacturing profit u/s.80HHC of the Act. 34. At the outset, the Ld. counsel for the assessee fairly conceded that this issue is covered is against the assessee and in favour of Revenue by the decision of Hon'ble apex court in the case of IPCA Laboratory Ltd. v. DCIT [2004] 266 ITR 521 (SC), wherein it is held as under:- "We are unable to accept the submission of Mr. Dastur. Undoubtedly section 80HHC has been incorporated with a view to providing incentive to export houses. Even though ....
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.... allowed under any section included in this Chapter under the heading 'C, - Deductions in respect of certain incomes' in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income." Section 80B(5) is also relevant. Section 80B(5) provides that "gross total income" means the total income computed in accordance with the provisions of the Income-tax Act. Section 80AB is also in Chapter VI-A. It starts with the words "where any deduction is required to be made or allowed under any section of this Chapter". This would include Section 80HHC. Section 80AB further provides that "notwithstanding anything contained in that section". Thus section 80AB has been given an overriding effect over all oth....
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..... Shri Ram Honda Power Equip, (2007)289 ITR 475 (Del), the Delhi High Court has not adequately emphasized the entire rationale for confining the deduction only to the extent of ninety per cent of the excludible receipts and it cannot be followed. As regards the judgment of the Special Bench in Lalsons Enterprises, Hon'ble High Court held that "We are affirmatively of the view that the Tribunal has transgressed the limitations on the exercise of judicial power and .... has in effect legislated by providing a deduction on the ground of expenses other than in the terms which have been allowed by Parliament. That is impermissible". In reply the learned Counsel for the assessee stated that when two High Courts differ on the same issue, the beneficial view should be taken in favour of the assessee. He stated that Hon'ble Delhi High Court in the case of CIT v. Shri Ram Honda Power Equip (2007) 289 ITR 475 (Delhi) has allowed the claim of the assessee as regard to netting of interest on the allowance of deduction under Section 80HHC of the Act. 37. We find that the Hon'ble Bombay High Court in the case of Asian Star Co. Ltd. (supra) has considered the Delhi High Court judgment ....
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....f Rs. 1,50,88,115 over Rs. 1,48,13,367 - vide page 6 of the assessment order) was not entitled to weighted deduction. The CIT(A) should have held that the assessee was actually entitled the weighted deduction also with reference to the said sum of Rs. 2,74,748" 41. At the outset Ld. Counsel for the assessee stated that this issue is squarely covered in favour of assessee and against the Revenue by the decision of this Tribunal in the case of ACIT v. Torrent Pharmaceuticals Ltd. in ITA No.3569/Ahd/2004 & CO No.18/Ahd/2005 for assessment year 2001-02 vide order dated 13-11-2009, wherein the Tribunal has held in para-10:- "10. In view of the above facts and circumstances, we are of the view that it is only the expenditure which will only be allowed, whereas the assessee vide the copy of the letter reproduced hereinabove has very clearly explained as to how the entire expenditure claimed by the assessee is allowable. Thus there was no justification in harping upon the figure contained in Form No.3CL as is done by the Assessing Officer. The provisions of the Act it does not contain any specific conditions for the allowance of expenditure to the effect that it will be restric....
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....rounds No.7:- "7 On the facts and in the circumstances of the case, the CIT(A) has grossly erred in holding that levy of interest u/s.234B and 234C of the I.T. Act are mandatory and consequential when the same ought to have been directed to be deleted as the appellant objected to the very levy of such interest.. This Hon'ble Tribunal may, therefore, be pleased to so hold and direct the deletion of interest levied u/s.234B and 234C of the I.T. Act. 7. On the facts and in the circumstances of the case, the CIT(A) erred in not upholding the assessee's contention that it was not at all a fit case for levy of interest u/s. 234B, 234C and 234D and he further erred in holding that only consequential relief may be allowed to the assessee. Actually, he should have held that it was not at all a fit case for levy of interest u/s.234B, 234C and 234D of the Act." 43. At the outset, Ld. Counsel for the assessee fairly stated that this common issue is squarely covered in favour of assessee and against the Revenue by the decision of this Tribunal in assessee's own case in ITA No.970/Ahd/2007 for assessment year 2003-04 dated 21-05-2010, wherein the Tribunal has held i....
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....nagement system that integrates all facets of the business including planning, manufacturing, sales and marketing. As the ERP methodology has become more popular software applications have emerged to help business managers implement ERP in business activities such as inventory control, order tracking, customer service, finance and human resources. The IBM would undertake to study the existing business system and come with solutions as required by an ERP provided by SAP. The IBM would also help train people so that the data migration from the legacy system to SAP would be smooth and would also train people in the running of the ERP system. Ld. Counsel for the assessee stated that this issue is squarely covered in favour of assessee and against the Revenue by the decision of this Tribunal. 46. We find from arguments made by the Ld-CIT-DR and Ld-Counsel that this software purchased by the assessee is for the purpose of smooth running of the computers and better management and conduct of business. This expenditure was incurred for the purchase of software which only aids in better management and conduct of business and becomes part of earning process. This in itself is not an advant....
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....ok into account the view of American courts on the issue as well as its own decision rendered in the case of Associated Cement Co. [2001] 124 STC 59 in the context of 1 the Customs Act wherein the definition of the term "goods" given was not as wide or exhaustive as the definition of the term "goods" in the A. P. Tax Act, to hold that software, whether customised or non-customised, satisfies all the attributes of being a "goods" and as such, is capable of being bought and sold and becomes an object of trade and commerce can only lead to the conclusion that purchase of such disc is acquiring a tangible asset. If the disc, tape or floppy or other electronic medium in which the software is stored is by itself goods, then the assessee who acquires the same, acquires a tangible asset. Computer software has not .been defined in the Income-tax Act, 1961, but in Note 7 to Appendix I to the Income-tax Rules, 1962, it has been explained to include computer programme recorded on any disc, tape, perforated media or other information storage device. Therefore computer software (whether in canned form or un-canned form) is goods and a tangible asset by itself. The question whether an assessee by....
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....e scope, power, longevity of such a tool and its centrality to the functions of the business will all bear on its treatment. Where the assessee-company is engaged in the business of software development as well as running a training centre to impart specialized training to the students in software technology, f the software is used in such business to impart training to the students, it would be part of the profit-making apparatus of the assessee and consequently expenditure on software, capital. Where the said software helps in compression of size of e-mails and it includes licences for 150 users and it is limited to facilitate merely an effective and fast communication in order to increase in its organizational efficiency it cannot be treated as forming part of the profit-making apparatus, of the assessee. On the other hand, if such software is being used by an assess engaged in the business of placement agency where the applications from per- sons seeking jobs .are invited through e-mail and are also forwarded to t concerned clients through e-mail, it may form part of the profit-making apparatus of the assessee's business of placement agency and can be trea....
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....of outright purchase is to be considered as capital in nature. But in the present case, the facts are entirely different and it is not the allegation of the Revenue from the Assessing Officer's stage till now that the assessee has acquired this software for unlimited user of licence and this is outright purchase. The Revenue also relied on the decision of Hon'ble Rajasthan High Court in the case of CIT v. Arawali Constructions Co.(P) Ltd. (2003) 259 ITR 30 (Raj) but the facts in that case are also in regard to distinguishable as in that case the software was an outright purchase of computer programme which relates to technical "know-how". We find that the Assessing Officer has not given any finding as to the fact that whether expenditure on computer software gives an enduring benefit to an assessee, the duration of time for which the assessee right to use the software becomes relevant. Accordingly we are of the view that in case the software becomes obsolete with technological innovation and advancement within a short span of time, it can be said that where the life of the computer software is shorter or say less than 2 years, it may be treated as revenue expenditure. Hence, we fin....
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....prevent the health of thee workers engaged in production. Therefore, the assessee maintained the garden for maintaining better environment in the factory and the expenditure incurred in the process was therefore, for the purposes of the business of the assessee and was rightly allowed by the Learned Commissioner of Income Tax(Appeals). We therefore, confirm the order of the Learned Commissioner of Income Tax(Appeals) and dismiss the ground of appeal of the revenue." Respectfully following the same, we dismiss this issue in the appeal of Revenue. This issue of Revenue's appeal is dismissed. 50. The next ground in this appeal of Revenue in ITA No.4356/Ahd/2007 is against the order of CIT(A) in deleting the addition made by Assessing Officer on account of international transaction u/s.92B of the Act. For this, Revenue has raised the following ground No.3:- "3. The ld. commissioner of Income-tax(A)-XIV, Ahmedabad has erred in law and on facts in deleting the addition made out of international transaction u/s 92B of the Act of Rs. 48,520/-." 51. At the outset Ld. Counsel for the assessee stated that this issue is covered in favour of assessee and against the Revenue....