TaxTMI 
TaxTMI 
2014 (2) TMI 1377
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....80IA/80IB on other sales viz., Iron Scrap Sale, Misc Sales and Metal Scrap Sales." Since the facts and issue involved in both these grounds of appeal are similar, they are being disposed of together as under: 3. The Assessing Officer made the disallowance by observing as under: "3.1 Apart from the Trikampura Division, the assessee company has also claimed deduction u/s 80IA for Indore Division, Moraiya (Detergent) and Windfarm Division. In earlier assessment years, it has been the consistent stand of revenue to hold that other sales done by a particular division i.e. sales other than the sales of the manufactured article are not eligible for deduction u/s 80IA. In view of this, the assessee company was asked to furnish full details of other sales of these divisions for which deduction u/s 80IA was claimed. These details were furnished by the assessee vide submission dated 29.03.2004. In this, it was observed that these divisions had other sales as under: Indore Division i) Waste Wrapper sale Rs 22,943 ii) Waste Plastic sales Rs 16,816 iii) Sale of barrels Rs 3,444 iv) Iron scrap sale Rs 79,184 v) Bardan sales ....
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....n the accounts. 6. The Ld. AR of the assessee has relied upon the decision of the Hon'ble Gujarat High Court in the case of the assessee itself wherein it was held as under: "Insofar as question Nos. 2, 5 7 and 12 are concerned, it is an undisputed position that the issues are covered by a decision of this Court in the case of Dy. CIT Vs. Harijivandas Juthabhai Zaveri, 258 ITR 785 in which the court upheld the decision of the Tribunal granting benefit of deduction under section 801 of the Act on various incomes, such as job work receipt, sale of empty soda ash bardan, sale of empty barrels and plastic waste. Such questions are, therefore, not required to be considered." 7. In view of the above decision of the Hon'ble Jurisdictional High Court, we find no infirmity in the order of the Ld. CIT(A), hence ground no. 1 of Revenue's appeal and ground no. 3 of assessee's appeal both are dismissed. 8. Ground no. 2 of the appeal of Revenue is directed against the order of the Ld. CIT(A) directing the Assessing Officer to compute deduction u/s 80HHC on export profits arrived at on the basis of the export turnover and the total turnover exclusive of the receipts of exc....
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....ing Officer to readjudicate the issue afresh as per law after taking into consideration the above quoted decision of the Hon'ble Supreme Court in the case of Associated Capsules Private Limited (supra). Thus, ground no. 3 of the Revenue's appeal is dismissed and ground no. 4(2) of assessee's appeal is allowed. 13. Ground no. 4 of the appeal of the Revenue is directed against the order of the Ld. CIT(A) restricting the addition of Rs. 1,07,34,486/- to Rs. 22,95,198/- on account of disallowance of late payment of Provident Fund and ESI u/s 43B of the Act. 14. The brief facts of the case are that the Assessing Officer observed that the assessee had made payments of Provident Fund and ESI contribution beyond the prescribed due date, and therefore, by following the decision of Hon'ble Kerala High Court, he disallowed the deduction for the following payments: Provident Fund Division Due date Date of payment Amount (Rs) Mandali 15.4.2001 16.4.2001 11,24,118 Udaipur 15.3.2001 22.3.2001 18,030 Moraiya 15.6.2000 17.6.2000 14,59,248 Moraiya 15.7.2000 17.7.2000 14,92,431 Moraiya 15.8.2000 16.8.2000 12,90,283....
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.... expenses Rs 8970 2 Misc. expenses Rs. 16280 3 Gift expenses Rs 1602 Rs 26852 Trikampura Division 1 Advertisement exp. Rs 100000 2 Out of Misc. exp. Rs 1235 Rs 101235 Manpur Division 1 Out of Misc. exp. Rs 10230 2 Out of gift exp. Rs 43960 3 House maintenance exp. Rs 100000 Rs 154190 Indore Division 1 Diwali expenses Rs 27872 2 Out of hotel expenses Rs 50000 3 Out of Misc. expenses Rs 50000 4 Tea & coffee exp. Rs 72000 5 Gift expenses Rs 2000 Rs 202872 Allindra Division 1 Hotel expenses Rs 100000 2 Entertainment exp. Rs 7638 3 Misc. exp. Rs 100000 4 Gift expenses Rs 12253 5 Donation to grampanchapat Rs 3500 223391 Bhavnagar Division 1 Hotel expenses Rs 50000 2 Entertainment exp. Rs 200000 3 Misc exp. Rs 100000 4 Guest House exp. Rs 100000 5 Donation to employee Rs 17000 ....
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....vely for the business of the assessee and that similar disallowance was made by him in earlier years which was deleted by the Ld. CIT(A) and the Revenue was in appeal before the Tribunal. 22. On appeal, the Ld. CIT(A) following his order for the Assessment Years 1999-2000 and 2000-01 deleted the disallowance. Both the parties before us agreed that this issue is covered in favour of the assessee by the order of the Tribunal in Assessment Year 1999-2000 passed in ITA No. 175 and 523/Ahd/2003 and C.O. No. 9/Ahd/2003 order dated 31.07.2006 wherein the Tribunal observed as under: "The second ground is pertaining to disallowance various expenses of Rs. 11,17,625 of which details is reproduced by the CIT(A) in his order at page No. 17 and 18. The CIT(A) deleted the addition with the finding that A.O. has made adhoc addition without any basis. The ld. AR pointed out that identical adhoc disallowance were made in A.Y. 1998-99 which have been deleted by the CIT(A). After hearing both sides we find that CIT(A) has rightly deleted the lum sum/adhoc addition which were made without any basis. We accordingly confirm the order of the CIT(A)." Therefore, we do not find any infirmity....
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....en. If the liability to pay the same has arisen during the year under consideration and if the expenses are allowable as per the provisions of the Act, the A.O. is directed to allow the same as the appellant company is following mercantile system of accounting. If the same has not arisen during the year under consideration or otherwise not allowable, the same should not be allowed. The assessing officer is directed accordingly." 26. The Ld. DR supported the order of the Assessing Officer. 27. The Ld. AR of the assessee supported the order of Ld. CIT(A). 28. Ld. DR could not point out any specific error in the order of the Ld. CIT(A) nor cold he explain the grievance caused to the Revenue by the above order of the Ld. CIT(A). Therefore, this ground of appeal of the Revenue is dismissed. 29. Ground no. 7 & 8 of the Revenue's appeal are general in nature and therefore, require no separate adjudication by us. 30. In the assessee's appeal, ground no. 1 is general in nature and therefore, requires no separate adjudication by us. 31. In ground no. 2 of the appeal of assessee, the grievance of the assessee is that the Ld. CIT(A) erred in confirming the disallowance of cla....
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....ssessing Officer by observing as under: "5.2 I have considered the facts of the case and submissions of the A. R. of the appellant carefully. I have also gone through the decisions relied upon by the A. R. and the details produced by him before me. I have also gone through the observations of the assessing officer in the assessment order. With regard to the appellant's claim of deduction u/s.8oIB it is seen that the appellant has not fulfilled the condition as laid down as per the provisions of section 80IB of the Act. The Trikampura division for which the appellant has claimed deduction has ceased to be an industrial undertaking w.e.f. 30-11-1999. A careful examination of the terms and conditions of agreement dated 25-11-1999 between the appellant company and Nisarg Enterprises Pvt. Ltd. makes ft clear that the appellant had given the possession and right to use the furniture, fittings equipments, tankages, plant & machineries on Plot No.3601 and 3602 situated at village Trikampura (Dist. Ahmedabad) together with electric connection, water connection and other amenities as stated in the Schedule attached to the said agreement. Further Nisrag Enterprises Pvt. Ltd. had ....
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....0IB. The appellant has failed to discharge its onus in this regard. The reliance is placed on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Northern India Iron and Steel Company Ltd. 226 ITR 342 which was rendered on the issue of deduction u/s.80J which had identical conditions for allowability of deduction U/S.80IB. In the said case, the Hon'ble Delhi High Court held that the assessee is required to fulfill for claiming rebate is that it manufactures or produces articles and if the assessee has no control over the machinery, the question of grant of rebate u/s.80J does not arise, in the instant case there is no control over the machinery by the appellant and it has not manufactured or produced articles. The reliance is also placed in the case of CIT vs. Panwalt India Ltd. 196 ITR 813 (Bom) wherein the Bombay High Court has held that a part of processing or manufacturing activity must be done by the assessee. Whereas in the instant case there is no manufacturing activity being done by the appellant from the Trikampura Division. In the case of CIT vs. Sterling Foods 237 ITR 589 (SC), e Hon'ble Supreme Court held that there must be for the applicatio....
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....ality control and last but not the least, being responsible for the proper functioning of the machinery granted for sale/services for a stipulated period. Out of so many activities except for one activity, namely, getting the machinery manufactured from T, all other activities were admittedly undertaken by the assessee. In the circumstances, it was obvious that the assessee was engaged in the business of manufacture of sugar and tea machinery and was accordingly qualified for relief u/s 80-I". He also relied on the decision of the Delhi Bench of the Tribunal in the case of Claas India Limited Vs. ACIT (2008) 21 SOT 580 (Delhi) wherein it was held that "Sub-section (2) of section 80IB provides certain conditions to be fulfilled by an industrial undertaking to claim deduction u/s 80IB. Admittedly, these conditions were fulfilled, in the instant case, in respect of manufacture and sale of harvester combine and the deduction had been granted. Sub-section (3) of section 80IB provides that amount of deduction in the case of an industrial undertaking shall be 25% of the profits and gains derived from such industrial undertaking. Therefore, the question for considerati....
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....sessee. Spares and components are unquestionably the goods of the undertaking. These are being manufactured on the basis of the imported technology which is a capital asset of the industrial undertaking. The undertaking had adopted the technology and modified the designs and drawings so as to suit the Indian conditions. The drawing, designs and specifications, prepared by the industrial undertaking formed the very basis for production or manufacturing of the components. These components were either produced inside the factory or they were fabricated from outside under supervision and control of the industrial undertaking. Cost of such operations debited in the books of account of undertaking has been duly loaded on the cost of the components which are either used for the assembly of the combines, machines or sold as integral part of machines. It would go without saying that components, spares and sub-assemblies were the goods of the industrial undertaking. These were reflected in the closing stock as goods under process. Even if these goods were treated as intermediate products in the process of manufacture of the final product that is the harvester combines, sale of such intermedi....
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....the Act. 35. On appeal, the Ld. CIT(A) confirmed the action of the Assessing Officer by observing as under: "5.2 I have considered the facts of the case and submissions of the A. R. of the appellant carefully. I have also gone through the decisions relied upon by the A. R. and the details produced by him before me. I have also gone through the observations of the assessing officer in the assessment order. With regard to the appellant's claim of deduction u/s.8oIB it is seen that the appellant has not fulfilled the condition as laid down as per the provisions of section 80IB of the Act. The Trikampura division for which the appellant has claimed deduction has ceased to be an industrial undertaking w.e.f. 30-11-1999. A careful examination of the terms and conditions of agreement dated 25-11-1999 between the appellant company and Nisarg Enterprises Pvt. Ltd. makes ft clear that the appellant had given the possession and right to use the furniture, fittings equipments, tankages, plant & machineries on Plot No.3601 and 3602 situated at village Trikampura (Dist. Ahmedabad) together with electric connection, water connection and other amenities as stated in the Schedule at....
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....claimed satisfies all the mandatory conditions as laid down in section 80IB. The appellant has failed to discharge its onus in this regard. The reliance is placed on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Northern India Iron and Steel Company Ltd. 226 ITR 342 which was rendered on the issue of deduction u/s.80J which had identical conditions for allowability of deduction U/S.80IB. In the said case, the Hon'ble Delhi High Court held that the assessee is required to fulfill for claiming rebate is that it manufactures or produces articles and if the assessee has no control over the machinery, the question of grant of rebate u/s.80J does not arise, in the instant case there is no control over the machinery by the appellant and it has not manufactured or produced articles. The reliance is also placed in the case of CIT vs. Panwalt India Ltd. 196 ITR 813 (Bom) wherein the Bombay High Court has held that a part of processing or manufacturing activity must be done by the assessee. Whereas in the instant case there is no manufacturing activity being done by the appellant from the Trikampura Division. In the case of CIT vs. Sterling Foods 237 ITR 589 (SC)....
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....y of the agreement entered into by the assessee with the lessee of the unit could be produced by the assessee. The assessee brought no material to controvert the finding of the Ld. CIT(A) that "the appellant company has also not been able to establish that the job workers are the specific agent of the Trikampura industrial undertaking and the appellant was exercising any quality control as no employees were there in the said division to exercise any control over the production." 39. Hon'ble Bombay High Court in the case of Panwalt India Limited has held that "an assessee would be said to be engaged in manufacturing activity if it is doing a part of manufacturing activity by itself and for the rest of it engages the services of somebody else on a contract other than a contract of purchase." However, in the instant case, the assessee has brought no material on record to show that any part of the manufacturing activity at Trikampura Unit was carried out by the assessee. Therefore, in our considered view, the above cited decision of the Hon'ble Bombay High Court does not apply in the instant case. 40. Further in the case, of Claas India Limited (supra), the Delhi Bench o....
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.... or evidence against following finding of CIT(A) :- "Next objection of the appellant is that the assessing officer has excluded 90% of gross interest income, while only net interest income as held by Commissioner of Income-tax (Appeals) in appellant's case for assessment year 1997-98 should have been considered. In this regard it has to be held that netting off of interest receipts and payments could be done only if both of hem are related to earning of interest income. For example if interest receipts are on account of bank deposits then only interest paid for acquiring such deposits could be set off against these receipts. Otherwise interest paid for the purposes of business of exports cannot be set off against such interest. It is, therefore, directed that the assessing officer will verify the facts correctly and if the payment of interest is directly linked with receipt of interest then he shall allow the set off of the requisite amount. Otherwise the interest paid will be related to business income only and could not be set off against receipts. This is so because as discussed in the ground related to deduction under section 80HH and 80IA, this interest has to be ....
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.... ninety per cent of such quantum of receipts cannot be reduced under Clause (1) of Explanation (baa) from the profits of the business. In other words, only ninety per cent of the net amount of any receipt of the nature mentioned in clause (1) which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining "profits of the business" of the assessee under Explanation (baa) to Section 80HHC." 50. In the instant case, we find that it is not in dispute that interest income earned by the assessee is assessable under the head profits and gains of business and as evidenced by the fact that Assessing Officer has excluded 90% of the gross interest income for computing profits of business out of the income under the head profits and gains of business. We, therefore, set aside the orders of lower authorities and direct the Assessing Officer to reduce 90% of net interest income while computing deduction u/s 80HHC as held by the Hon'ble Supreme Court in above cited decision. Therefore, ground no. 4(1) of appeal of assessee is allowed. 51. Ground no. 5 of the appeal of the assessee is directed against the order of Ld. CIT(A) direct....
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....208 to section 219, in respect of the total income of the assessee that would be chargeable to tax for the assessment year immediately following that financial year. Section 215(5) of the Act defines what is 'assessed tax'. Tax determined on the basis of regular assessment, so far as such tax relates to advance tax. The evaluation of the current income and the determination has to be made comprising section 115J/115JA of the Act. Hence, levying of interest was inescapable. The Supreme Court further held that it was clear from reading section 115JA and section 115JB that a specific provision is made on that section, which says all the provisions of the Act shall apply to the MAT company. Further, amendments have been made in relevant Finance Acts, providing for payment of advance tax u/s.115JA and u/s.115JB. As far as interest leviable u/s.234B was concerned, the Supreme Court held that the section was clear in that it applied to all companies. The Supreme Court further held that the pre-requisite condition for applicability of section 234B is that the assessee is liable to pay tax u/s.208 and the expression 'assessed tax' is defined to mean tax on the total income determin....
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....t and against the assessee. It appeared that none of the assessees challenged the decisions of the Gauhati High Court, Madhya Pradesh High Court as well as the Bombay High Court in the Supreme Court. The Supreme Court observed that the judgment of the Karnataka High Court in Kwality Biscuits Ltd. was confined to section 115J of the Act. The order of the Supreme Court dismissing the special leave petition in limine filed by the Department against Kwality Biscuits Ltd. was reported in (2006) 284 ITR 434. Thus, the judgment of the Karnataka High Court in Kwality Biscuits Ltd. stood affirmed. However, the Karnataka High Court had thereafter, in the case of Jindal Thermal Power Co. Ltd. v. Deputy CIT, reported in (2006) 154 Taxman 547, distinguished its own decision in the case of Kwality Biscuits Ltd. (supra) and held that section 115JB, with which the Supreme Court was concerned, was a self-contained code pertaining to MAT, which imposed liability for payment of advance tax on MAT companies; and, therefore, where such companies defaulted in payment of advance tax in respect of tax payable u/s.115JB, it was liable to pay interest u/s.234B and u/s.234C of the Act. The Supreme Court, the....
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.... on this issue in the orders u/s 143(3) read with section 147 for Assessment Year 1998-99 and 1999-2000. The Ld. AR relied on the decision in the case of the assessee itself passed in Tax Appeal No. 811 of 2013 wherein vide order dated 27.01.2014, the Hon'ble Gujarat High Court dismissed appeal of the Revenue by observing as under: "The sole surviving question No. 13, pertains to disallowance of soda ash project interest expenses of Rs. 3.33 crores (rounded off) and lab project interest of Rs. 12.27 crores (rounded off). The Assessing Officer questioned the assessee on these expenses and deleted the same on two grounds, firstly that the interest was paid by way pre-operative expenditure and secondly the assessee had capitalized such expenditure. The assessee carried the matter in appeal. CIT (Appeals) relying on a decision of this Court in the case of CIT v. Alembic Glass Industries Ltd., 103 ITR 715 (Guj) held in favour of the assessee. In addition to coming to the conclusion that there was commonality of business it was further held that the expenditure was in connection with the expansion of the existing business. On such ground, the expenditure was held allowa....