TaxTMI 
TaxTMI 
2016 (11) TMI 1721
X X X X Extracts X X X X
X X X X Extracts X X X X
....wards the consumption of Pit and Land Expenses from the deduction claimed u/s. 80IA. (2) Exclusion of other income and miscellaneous income from the deduction claimed u/s. 80IA. (3) Disallowance of provision for Pit Covering Expenses. (4) Disallowance of Post Closure Expenses. (5) Levy of interest u/s. 234D of the Act 4. In addition to the afore-stated common issues, there are additional issues raised which will be considered hereinafter. 5. At the very outset, representatives of both sides agreed that facts in ITA No. 733/Ahd/2007 may be taken as the basis for the disposal of common issues. 6. Representatives of both sides were heard at length and with the assistance of the ld. Senior Counsel, we have gone through the relevant documentary evidences in the light of Rule 18(6) of the Appellate Tribunal Rules. We have carefully perused the orders of the authorities below. 7. Common grievance no. 1- Exclusion of subsidy from the deduction claimed u/s. 80IA. 8. The assessee has received subsidy from the State Government in respect of the Capital Assets acquired on or before 31.03.2003. Pursuance to the application of the assessee for the grant of subsidy vide letter d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(supra) lays down a very important test in order to determine whether profits and gains are derived from business or an industrial undertaking. This Court has stated that there should be a direct nexus between such profits and gains and the industrial undertaking or business. Such nexus cannot be only incidental. It therefore found, on the facts before it, that by reason of an export promotion scheme, an assessee was entitled to import entitlements which it could thereafter sell. Obviously, the sale consideration therefrom could not be said to be directly from profits and gains by the industrial undertaking but only attributable to such industrial undertaking inasmuch as such import entitlements did not relate to manufacture or sale of the products of the undertaking, but related only to an event which was post-manufacture namely, export. On an application of the aforesaid test to the facts of the present case, it can be said that as all the four subsidies in the present case are revenue receipts which are reimbursed to the assessee for elements of cost relating to manufacture or sale of their products there can certainly be said to be a direct nexus between profits and gains of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on said deposits was to be regarded as business income for the purpose of computing amount of deduction u/s. 80-I of the Act." The Hon'ble Jurisdictional High Court had followed its own decision given in the case of Nirma Industries Ltd. 387 ITR 402. The relevant findings in the said decision reads as under:- "When one reads the opening portion of section 801 of the Act it is clear that words used are : "gross total income of an assessee includes any profits and gains derived from an industrial undertaking". Once this is the position then, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the prescribed percentage is to be allowed. That, in fact the gross total income of the assessee included profits and gains from such business, and this is apparent on a plain glance at the computation in the assessment order. Both in relation to Vatva unit and Mandali unit the computation commences by taking profit as per statement of income filed alongwith return of income. Therefore, the same item of receipt cannot be treated differently: once while computing the gross total income, and secondly, at the time of computing deduction und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on'ble Supreme Court in the case of Appollo Tyres Ltd. 255 ITR 273 has held that "while determining the "book profits" u/s.115J, the Assessing Officer could not recompute the profits in the profit and loss account by excluding provisions made for arrears of depreciation". The Hon'ble Apex Court has further observed that the Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its account in a manner provided by that Act and the same to be scrutinized and certified by statutory auditors and approved by the company in general meeting and thereafter to be filed before the Registrar of companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the recruitments of the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of account of the company. 24. Common grievance no. 3 is accordingly allowed. 25. Common grievance no. 4 - Disallowance of Post Closure Expenses. 26. The assessee has made a pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....accordingly direct the A.O. to charge interest u/s. 234D of the Act in the light of the ratio laid down by the Hon'ble Supreme Court in 358 ITR 370. Now we will take up additional issues taken by the Assessee in ITA No. 1424/Ahd/2007. 30. Ground no. 1- Disallowance of deduction u/s. 80IA of Rs. 87,02,208/- on account of land and pit construction expenses. 31. In its Profit and Loss account for the period ended on 31.03.2002, the assessee has written back an amount of Rs. 87,02,208 being write back in respect of consumption of land and pit construction. It was explained that during the year the company revised the capacity of Phase-I based on the estimated capacity of the entire project. Consequently, the capacities of land and pits of Phase-I were revised upwards to 505041 M.T. and 2,36,00 M.T. respectively. As a result the excess stock of land and expenditure on pit construction written off in earlier years aggregating to Rs. 22,513/- and Rs. 8,679,695/- respectively have been written back to the Profit and Loss account. 32. As the company is in the new line of business, there is no established practice of determining exact expenses incurred on the process of treatment of sol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n off As per revised rate = Rs. 1,35,37,600 (f) Excess Cost pit to be Written back in 2001-2001 = Rs. 2,21,17,295- Rs. 1,35,37,600 = Rs. 86,79,695 (B) Cost of pit for Solid Waste Received in 2001-2002 (a) Total Solid Waste Received = Rs.51,406.715 MT (b) Cost of Pit to be written off = 51406.715 x 131.20 = Rs. 67,44,561 33. A perusal of the above shows that the revised computation is scientific. We further find that the expenditures claimed in the earlier years were allowed by the revenue. Therefore, write back of the same has a direct nexus with the business activity of the assessee. Hence, the assessee is eligible for the deduction u/s. 80IA of the Act. Ground no. 1 is accordingly allowed. ITA No.4398/Ahd/2007 for A.Y. 2004-05 34. Ground No. 3 is not pressed and is dismissed accordingly. 35. Ground no. 6 relates to the non-adjudication of ground no. 5 relating to the computation of accumulated profits. We find that the First Appellate Authority has not adjudicated this grievance of the assessee. Therefore, we restore this issue to the files of the ld. CIT(A). The ld. CIT(A) is ....