TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 830
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....d to the total income of the assessee. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance made by the Assessing Officer amounting of Rs.64683703/- made u/s 14A of the Income-tax Act, 1961 (hereinafter referred as 'the Act') since, the dividend and interest on bonds, share of profit from firms are the sources of income of assessee and the assessee has incurred expenditure on salary and miscellaneous expenses. Thus, these expenditures are incurred for earning both type of income. Thus the provisions of the Section 14A of the Income-tax Act, 1961 are squarely applicable and the same was applied correctly during the course of the assessment proceedings. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made by the Assessing Officer amounting of Rs. 2445047/- on account of foreign travel expenses as being in a nature of personal expenditure, however, the same should have been treated as capital expenditure as the same has been incurred by the employees of the assessee company with the aim of purchase of assets. 4. On the facts and circumstances of the case....
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....ly. 9. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance made by the Assessing Officer amounting of Rs.29094637/- on account of Disallowance of Freebies to Doctors, as the same expenses are cannot be treated as discount as it is not reduced from sale price, rather some monetary benefit in kind were used to be given. 10. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance made by the Assessing Officer amounting of Rs. 3106820/- on account of Increase in Book Profit u/s 115JB (as Wealth lax expenditure), since there is no provision in section 115JB, that the assessee can claim wealth tax as expenditure and can reduce it from book profit. 11. For this and such other reasons, as may be urged at the time of the hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 12. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course appellate proceedings before the Hon'ble Tribunal." 3. Briefly, the facts of the case are as under : The respondent-assessee is a company incor....
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....that the expenditure was incurred for the purpose of other than the projects of machinery, had allowed the expenditure. (iii) As regards to the disallowance of depreciation of Rs.1,38,153/- on items stainless steel table, tools, trollies used in the laboratory, the ld. CIT(A) following the decision of this Tribunal in assessee's own case for the assessment year 2001-02, allowed the depreciation at the rate applicable to the Plant & Machinery. (iv) As regards, the disallowance of Product Development Expenditure, the ld. CIT(A) taking into consideration the fact that in the earlier assessment years i.e. for the assessment year 2011-12 and 2012-13 pursuant to the order of the Tribunal, the ld. CIT(A) had allowed the deduction under the provisions of section 35(2AB) following the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Cadila Healthcare Ltd., 31 taxmann.com 300 (Gujarat). (v) As regards to the disallowance of Rs.1,64,05,330/-, being the payments made to two foreign parties, namely, (i) Vakzine Project Management, Germany and (ii) Medicine in need corporation, USA, the ld. CIT(A) held that the same may be allowed as revenue expenditure. (vi) As regards,....
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....ee for borrowing made by its foreign subsidiaries. Further, it had not charged any corporate guarantee commission. The respondent-assessee had also given corporate guarantee in favour of its subsidiaries viz. Serum International BV and Bilthoven Biologicals BV, Netherlands. On reference to the TPO u/s 92CA for benchmarking of the above international transactions, it was contented before the TPO that the corporate guarantee was given to the lenders for the loan taken by its AE is for the benefit of respondent-assessee and it is not in the nature of service being provided to its AE. It was also contended that providing corporate guarantee is a shareholder activities. Thus, it was contended that the transaction of corporate guarantee is not an international transaction u/s 92B of the Act. However, the TPO rejecting the above contentions proposed a TP adjustment of Rs.1,20,29,793/- at the rate of 2%. On receipt of the TPO's order, the Assessing Officer passed a draft assessment order after making the TP adjustments. On appeal before the ld. CIT(A), the ld. CIT(A) following the decision of the Hon'ble Bombay High Court in the case of Everest Kanto Cylinders Ltd. vs. CIT, 58 taxmann.c....
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.... that the corporate guarantee fees charged at the rate of 0.5% cannot be called in question. The ratio of this decision was subsequently followed by the Hon'ble Bombay High Court in the case of CIT vs. Glenmark Pharmaceuticals Ltd., 398 ITR 439. The order of the ld. CIT(A) is based on the decision of the Hon'ble Bombay High Court in the case of Everest Kento Cylinders Ltd. referred to supra. 10. In view of the above, we find no illegality and perversity in the finding of the ld. CIT(A) restricting the TP adjustment on account corporate guarantee commission at the rate of 0.5%. Hence, we do not find any merit in the ground of appeal no.1 filed by the Revenue. Accordingly, ground of appeal no.1 stands dismissed. 11. Ground of appeal no.2 challenges the correctness of the finding of the ld. CIT(A) in holding that the provisions of section 14A have no application in the absence of recording a satisfaction as to the incorrectness of the claim of the respondent-assessee that the respondent-assessee incurred expenditure of Rs.1,35,00,000/- to earn the exempt income. The factual matrix of the issue is as under: During the course of assessment proceedings, the Assessing Officer found tha....
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....lls Financial Services Ltd. vs. DCIT, 395 ITR 242 (Delhi.). Thus, he submits that the order of the ld. CIT(A) deleting the addition cannot be sustained in the eyes of law. 13. On the other hand, ld. Sr. Counsel submits that from the perusal of the assessment order, it would reveal that the Assessing Officer without recording the satisfaction, as to how the claim of the assessee that only expenditure of Rs.1,35,00,000/- was incurred to earn exempt income is incorrect, cannot resort to the provisions of section 14A of the Act. He placed reliance on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Taikisha Engineering India Ltd., 370 ITR 338 (Del) and PCIT vs. Moonstar Securities Trading and Finance Co. (P) Ltd, 105 taxmann.com 274. 14. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal no.2 relates to the applicability of provisions of section 14A of the Act to the facts of the present case. Admittedly, the respondent-assessee company made investments, which yielded the dividend income. The respondent-assessee company itself offered suo motu disallowance of Rs.1,35,00,000/-. The provisions of sub-section (....
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.... is whether the above observation made by the AO amounts to satisfaction as envisaged u/s 14A(2). It is a settled position of law that the satisfaction recorded by the AO should be based on the objective material and cannot be subjective. From mere reading of para 7.6, it is clear that the AO has not recorded satisfaction regarding the correctness of suo motu disallowance offered by the assessee u/s 14A and mere rejection of the explanation of the assessee per se, cannot be said to be a satisfaction as envisaged u/s 14A(2). The ratio laid down by the Hon'ble Delhi High Court in the case of PCIT vs. Moonstar Securities Trading and Finance Co. (P) Ltd (supra) and PCIT vs. Keshav Power Ltd., 112 taxmann.com 323 as well as the Hon'ble Bombay High Court in the case of Pr.CIT vs. Reliance Capital Asset Management Ltd (supra) is squarely applicable to the facts of the present case. Therefore, we hold that the disallowance of Rs.7,81,83,703/- as made by the AO deleted by the ld. CIT(A) is correct in law, as the AO had failed to record the satisfaction as envisaged u/s 14A(2). Since the order of the ld. CIT(A) is based on the ratio laid down by the Hon'ble Jurisdictional High Court in the c....
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....the respondent-assessee company for the purpose of procurement of machinery. As regards to the foreign travel expenses of wife of the director of the respondent-assessee company, he submitted that expenditure incurred by Mrs. B.Z. Poonawalla is purely personal expenditure and cannot be allowed for deduction. 17. On the other hand, ld. Sr. Counsel submits that the visit of employees is for the purpose of running business as some more plant and machinery was intended to be purchased. If the visit was either to take a decision whether it was suitable for its business or not or for any other such purpose, it cannot be said that the expenditure incurred on such visits is on account of capital outlay. In this connection, he placed reliance on the decision of the Hon'ble Bombay High Court in the case of Bralco Metal Industries (P.) Ltd. vs. CIT, 206 ITR 477 (Bom.) and Antifriction Bearings Corpn. Ltd. vs. CIT, 114 ITR 335 (Bom.). He finally submits that the Assessing Officer in the remand assessment proceedings for the assessment years 2011-12 and 2012-13 had accepted the submission of the assessee following the decision of the Hon'ble Bombay High Court in the case cited supra. Thus, it....
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.... nature. Where a decision is taken to purchase the machinery and the purchase has in fact been made in pursuance of such decision, it may be possible for the revenue to contend that the expenditure should be added to the cost of the machinery but in a case where a decision is taken note to purchase the machinery it would not be possible to treat the expenditure as part of the cost of any machinery because no machinery, as such, is purchased. In such an event, either it may be disallowed altogether or it may be allowed treating it as a revenue expenditure. In aforesaid circumstances, applying the decision of the Supreme Court in CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140 it was to be held that the Tribunal was not justified in holding the expenditure in question was capital expenditure and in disallowing the claim of the assessee for deduction under section 37(1)." We also find that the AO for assessment years 2011-12 and 2012-13 pursuant to the remand made by the ITAT accepted vide order dated 26.12.2019 passed u/s 143(3) r.w.s. 254 had accepted the position that the purpose of foreign visits of the employees is only for the purpose of to take decision whether the machi....
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....tus of the parties as spelt out and the nature or character of the trade or venture, the purpose for which the expenses were incurred and the object which was sought to be achieved in incurring those expenses. 5. Applying normal, prudent businessman's approach, we do not think that the expenses incurred by the assessee on a foreign trip of the wife of the company's President could be said to be not for the purposes of the business of the assessee-company. Considering the concurrent finding of fact recorded by both the authorities below, in our view, the expenditure would be allowable as deduction while computing the profit and gains of the business." In view of the law laid down by the Hon'ble Jurisdictional High Court in the case of Alfa Laval (I) Ltd. (supra), it cannot be said that the expenditure incurred on foreign travel of the director of the respondent-assessee company and his wife cannot be said to be personal in nature. Therefore, we do not find any illegality and perversity in the finding of the ld. CIT(A) allowing the foreign travel expenses as revenue expenditure. Thus, the ground of appeal no.3 filed by the Revenue stands dismissed. 19. Ground of appeal no....
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....est. We find from the order of the Tribunal in assessee's own case (supra) that the Tribunal taking into consideration the ratio of the decision of the Hon'ble Bombay High Court in the case of CIT vs. Parke Devis, 214 ITR 587 (Bom.) wherein it was held that if the scientists or lab technicians used the said stainless steel tables, stools, trollies, racks as part of the production of vaccine and other should be classified as plant and machinery, accordingly, the depreciation should be allowed at the rate applicable to plant and machinery. We do not see any illegality and perversity in the decision of this Tribunal in the earlier assessment year 2001-02. Even the ld. CIT(A) only followed the order of the Tribunal for the assessment year 2001-02 in deciding the issue. Therefore, we do not see any reason to interfere with the order of the ld. CIT(A). Accordingly, the ground of appeal no.4 filed by the Revenue stands dismissed. 23. Ground of appeal no.5 challenges the correctness of the decision of the ld. CIT(A) allowing the weighted deduction u/s 35(2AB) in respect of the product development expenditure of Rs.10,03,55,672/-. During the previous year relevant to the assessment year u....
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....cer denied the claim for weighted deduction of expenditure incurred amounting to Rs.4,19,75,171/- on the ground that the expenditure was incurred outside approved facilities. The reasoning of the Assessing Officer was not approved by the Hon'ble Gujarat High Court in the case of Cadila Healthcare Ltd. (supra) and following the ratio laid down by the Hon'ble Gujarat High Court in the case of Cadila Healthcare Ltd. (supra), the Assessing Officer had accepted the expenditure incurred on clinical trial outside the approved facility as eligible for weighted deduction u/s 35(2AB) for the assessment years 2011-12 and 2012-13 pursuant to the remand made by this Tribunal. Thus, it is submitted that on the parity of the same reasoning, the order of the ld. CIT(A) requires no interference. 26. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal relates to the allowance of weighted deduction u/s 35(2AB) of Rs.4,19,75,171/- in respect of expenditure incurred on clinical trial expenditure. Admittedly, this expenditure was incurred outside approved facility for the purpose of section 35(2AB) of the Act. The Hon'ble Gujarat High court in th....
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.... of this Court had touched on the aspect of what can be termed as scientific research. In the context, certain observations made by the Bench may be of some relevance. "25. It can thus be seen that the term scientific research in the context of the deduction allowable under section 35(1) of the Act would include wide variety of activities. It can also be appreciated that every scientific research need not necessarily result into the ultimate goal with which it may have been undertaken. Often times in the field of research and invention, the efforts undertaken may or may not yield fruitful results. What is to be ascertained is whether any scientific research was undertaken and not whether such scientific research resulted into the ultimate aim for which such research was undertaken. It can be easily envisaged that the scientific research undertaken often times would completely fail to achieve desired results. That by itself does not mean that no scientific research was undertaken. What the Legislature desired to encourage by granting deduction under section 35(1) of the Act was a scientific research and not necessarily only the successful scientific research undertaken by an asses....
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.... of the Act. The Assessing Officer was of the opinion that such expenditure is capital in nature and cannot be allowed as revenue expenditure and, accordingly, disallowed the same. On appeal before the ld. CIT(A), the ld. CIT(A) following the decision of the Tribunal for the assessment year 2008-09 onwards allowed said expenditure is revenue expenditure u/s 35(1)(iv) of the Act. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal ground of appeal no.6. 28. The ld. CIT-DR submits that the expenditure was incurred in the process of developing a new product and, therefore, the same should be held to be capital expenditure and cannot be allowed as deduction. 29. On the other hand, ld. Sr. Counsel submits that the expenditure which does not qualify for weighted deduction can be allowed as revenue expenditure either under the provisions of section 35(1)(iv) or u/s 37(1) of the Act. He submits that this issue was covered by the decision of the Co-ordinate Bench of the Tribunal in assessee's own case for the assessment year 2008-09. Since the CIT(A) only followed the decision of the ITAT in assessee's own case in ITA No.914/PUN/20....
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....and had supplied vaccines manufactured in Special Economic Zone, Hadapsar, Pune, Maharashtra to be supplied all over the world. The respondent-assessee company made supply of some of the required vaccines in India as per delivery instructions by UNICEF. It had received the sale proceeds in convertible foreign exchange, even in respect of supplies made in India. The assessee is at no stage privy to the arrangement between UNICEF and its beneficiaries in India or abroad. The Assessing Officer was of the opinion that since the sales were delivered in India and were not exported out of India, the respondent-assessee was not entitled for deduction u/s 10AA of the Act and, accordingly, denied the deduction u/s 10AA in respect of sales made to UNICEF in India placing reliance on the Explanation 1 to section 10AA which defines the term "export out of India". On appeal before the ld. CIT(A), the ld. CIT(A) taking into consideration the following facts had concluded that the provisions of Special Economic Zone (SEZ) Act, 2005 shall override the provisions of section 10AA of the Act :- "A. The assessee company is selling vaccines to "UNICEF" (based outside India) on principal to principal ....
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....e Kerala High Court in the case of Girnar Industries vs. CIT, 338 ITR 277 (Kerala) and also the decision of the Hon'ble Delhi High Court in the case of PCIT vs. Macquarie Global Services (P.) Ltd., 102 taxmann.com 272 (Delhi). He further submits that the provisions of section (1) of section 10AA provides that while computing the total income of the respondent-assessee company, an entrepreneur, who begins to manufacture or produce articles or things or provide any services from a unit established in Special Economic Zone shall be entitled for deduction of the profits derived from such unit. Taking us through the provisions of sub-section (1) of section 10AA, he submits that no condition as to the export of goods outside India was stipulated in order to be eligible to claim of deduction u/s 10AA of the Act. He further submits that the provisions of sub-section 7 of section 10AA only provides the methodology for computing the amount of deduction of eligible profits for deduction u/s 10AA of the Act. As regards, the interpretation of the provisions of sub-section (7) of section 10AA, he submits that the Literal Interpretation of provisions of subsection (7) of section 10AA would result....
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.... its projects in India as "Deemed Exports". The correctness of this finding of the ld. CIT(A) is under challenge before us. For better appreciation of issue on hand, it is apt to reproduce the relevant provisions of section 10AA of the Act :- "Special provisions in respect of newly established Units in Special Economic Zones. 10AA. (1) Subject to the provisions of this section, in computing the total income of an assessee, being an entrepreneur as referred to in clause (j) of section 2 of the Special Economic Zones Act, 2005, from his Unit, who begins to manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2006, but before the first day of April, 2021, the following deduction shall be allowed- (i) hundred per cent of profits and gains derived from the export, of such articles or things or from services for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the Unit begins to manufacture or produce such articles or things or provide services, as the case may be, and fifty per cent of such profits....
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....ferred to in clause (a), in the year in which the amount was so utilised; or (ii) in a case referred to in clause (b), in the year immediately following the period of three years specified in sub-clause (i) of clause (a) of sub-section (2), and shall be charged to tax accordingly : Provided that where in computing the total income of the Unit for any assessment year, its profits and gains had not been included by application of the provisions of sub-section (7B) of section 10A, the undertaking, being the Unit shall be entitled to deduction referred to in this sub-section only for the unexpired period of ten consecutive assessment years and thereafter it shall be eligible for deduction from income as provided in clause (ii) of sub-section (1). Explanation.-For the removal of doubts, it is hereby declared that an undertaking, being the Unit, which had already availed, before the commencement of the Special Economic Zones Act, 2005, the deductions referred to in section 10A for ten consecutive assessment years, such Unit shall not be eligible for deduction from income under this section : Provided further that where a Unit initially located in any free trade zone or export p....
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....rged Unit, being the company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as they would have applied to the amalgamating or the demerged Unit being the company as if the amalgamation or demerger had not taken place. (6) Loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, being the Unit shall be allowed to be carried forward or set off. (7) For the purposes of sub-section (1), the profits derived from the export of articles or things or services (including computer software) shall be the amount which bears to the profits of the business of the undertaking, being the Unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on by the undertaking : Provided that the provisions of this sub-section [as amended by section 6 of the Finance (No. 2) Act, 2009 (33 of 2009)] shall have effect for the assessment year beginning on the 1st day of April, 2006 and subsequent assessment years. (8) The pro....
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....s derived from the export of computer software outside India. For the purpose of deciding the issue on hand, the provisions of sub-section (1) and sub-section (7) of section 10AA of the Act are relevant. Sub-section (1) of section 10AA provides that while computing the total income of the assessee, the income derived at from it unit who beings to manufacture or produce the article or things provide any service during the relevant period deduction shall be allowed. Sub-section (2) of section 10AA stipulates the conditions for availing the deduction u/s 10AA of the Act. The provision of sub-section (7) of section 10AA provides the methodology for computing the amount of deduction u/s 10AA of the Act. We find that the provisions of sub-section (7) of section 10AA provides that the amount of deduction shall be the profits derived from export of articles or things bears to the profits of business of undertaking, as export turnover to total turnover of the business. Clause (ii) to Explanation 1 of section 10AA defines the term "export in relation to Special Economic Zones" to mean taking the goods or otherwise out of India by - land, - sea, - air, or - any other mode, - wheth....
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....or otherwise ; or (ii) supplying goods, or providing services, from the domestic tariff area to a unit or developer; or (iii) supplying goods, or providing services, from one unit to another unit or developer, in the same or different Special Economic Zone." Therefore, the legislative history of provisions of section 10AA would clearly reveal that the provisions of section 10AA have been inserted in the Income Tax Act in order to give effect to the provisions of Special Economic Zone Act, 2005. Therefore, it is imperative that if a particular transaction of supply of goods falls within the ambit of the terms "export" as defined under Special Economic Zone Act, 2005, the same definition should be imported while construing the provisions of section 10AA of the Act. The Rules framed under the Special Economic Zone Act, 2005 for the purpose of computing net foreign exchange earnings, even the supply made to the project funded by United Nation Agencies should be considered as a "export". The Special Economic Zone Act, 2005 was introduced only for purpose of implementation of EXIM policy of Government of India and, therefore, the definition contained in EXIM policy are very much rel....
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....ions of sub-section (1) of section 10AA of the Act. It is settled principle of construction of the statute, when a language of statute is clear of unambiguous, the courts are to interpret the same in its literal sense and not to give a meaning which would cause violence to the provisions of the statute as held in Britania Industries Ltd. vs. CIT, 278 ITR 546 at 547 (SC). It is also well-settled principle of law that the court cannot read anything into a statutory provision or a stipulated condition which is plain and unambiguous. A statute is an edict of the Legislature. The language employed in a statute is the determinative factor of legislative intention. While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is misused and subject to the abuse of process of law, it is for the Legislature to amend, modify or repeal it, if deemed necessary. Legislative casus omissus cannot be supplied by judicial interpretative process. A casus omissus ought not to be created by interpretation, save in some case of strong necessity as held in Union of India vs. Dharmendra Textiles Processors and Others, 306 ITR 277 at 278 (SC). The Constit....
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.... such requirement under the provisions of section 80HHC and they need not be any two-way traffic for bringing the goods from a foreign country into Indian shores and thereafter exporting that goods from Indian shores to offshore because it is a mere empty formality and meaningless ritual. The relevant paragraphs of the said judgement are extracted herein asunder :- "13. Now section 80HHC provides that an assessee who is engaged in the business of export out of India of any goods or merchandise, to which the said section applies in computing his total income, deduction to the extent of profits referred to in sub-section (1)(b ) derived by the assessee from the export of such goods or merchandise is allowed. In the entire provision, there are no express words which provide that the export of such goods is to be from India. Two conditions which require to be satisfied before an assessee claims deduction under this provision are : (1) the assessee must be engaged in the business of export out of India of any goods or merchandise. (2) sale proceeds of such goods or merchandise exported out of India are receivable by the assessee in convertible foreign exchange. If these two cond....
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....cases as mentioned in the said explanation, it can be said that it is not export out of India and in all other cases, it, amounts to export out of India. In fact this provision was the subject matter of a judgment by the Allahabad High Court. In the case of Ran Babu & Sons v. Union of India [1996] 222 ITR 606 , wherein it is held as under : "Section 80HHC was made to give certain benefits to exporters. However, Explanation (aa ) was inserted by the Finance (No. 2) Act of 1991, with effect from April 1, 1986. An exception was carved out from the main provision of section 80HHC. In our opinion, Explanation (aa ) was to plug a loophole in the Act since there was possibility that the goods after purchase may not he exported at all and yet the benefit may be claimed. In our opinion. Explanation (aa ) is constitutionally valid, as it was made to plug a loophole in section 80HHC. It is settled law that in fiscal statutes greater latitude is given to the Legislature and the Legislature has an option to pick and choose the item which is to be taxed. âEUR¦âEUR¦Explanation (aa ) means is that it will not be an export out of India if two conditions are satisfied: ....
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....tion is by way of sale, in a shop, emporium or an establishment situated in India and it does not involve clearance at any customs station, then it is not an export out of India. Therefore, the aforesaid explanations read with the main section do not in any way indicate that, to be eligible for the benefit of deduction under section 80HHC, the goods or merchandise has to emanate from India. Though we do not find any direct decision on the point, this question has been discussed by several High Courts as well as the Supreme Court in different contexts which throw light upon the interpretation of these words. In fact, the circular issued by the Board in Circular No. 621 elated 19.12.1991 reads as under: "Tax concession for export of ... 31. Under the existing provisions of section 80HHC of the Income-tax Act exporters are allowed, in the computation of their total income, a deduction of the entire profits derived from export of goods or merchandise other than mineral oil, minerals and ores. 31.1 In view of the fact that significant value addition is achieved when a mineral is processed or when a stone is cut and polished, it is desirable to encourage their export. The benefit o....
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....mal remittance to the foreign reinsurers first and thereafter to receive the commission from the foreign reinsurers first and thereafter to receive the commission from the foreign reinsurer, will be an empty formality and a meaningless ritual, on the facts of this case, ...We are of the view that the income is received in India in convertible foreign exchange, in a lawful and permissible manner through the premier institution concerned with the subject-matter, the Reserve Bank of India. In this view, we hold that the proceedings of the Central Board of Direct Taxes dated March 11, 1986, declining to approve the agreements of the appellant with Sedgwick Offshore Resources Ltd., London, for the purposes of section 80-O of the Income-tax Act, are improper and illegal." 19. The Apex Court in CIT v. Bombay Burmah Trading Corpn. [2000] 242 ITR 298/ 109 Taxman 72 , while interpreting the provisions of section 35B of the Act, the deductions in respect of the execution of any contract for the supply outside India of such goods, services or facilities, held that the Tribunal's reading of the Section that the export should be ex-India is not supported by the language of the provision or....
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....y sold in Bangladesh.: 22. In this context, it is necessary to know-how the Parliament has chosen to make known its intention in the event the goods have to be exported from India. Section 80HHC deals with deductions in respect of profits from export of computer software etc. 23. There also the words used are "export out of India". But to be eligible for deduction under the aforesaid provision, mere export out of India is not sufficient. What is to be exported out of India should be from India to a place outside India by any means. Such a wording is conspicuously missing in section 80HHC. It stands to reason. Today, India is a leader in the world insofar as software is concerned. If the intention of the Parliament is not only the assessee should earn foreign exchange in the process of exporting out of India, the country also should be benefited by way of encouraging local talent and activity in India. They have chosen to carve out a separate section by way of section 80HHC. The Parliament here wants to achieve dual object. First, they want to earn foreign exchange by export out of India and secondly, what is to be exported out of India namely, computer software or its transmiss....
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....ning of the ld. CIT(A). Accordingly, this ground of appeal no.7 filed by the Revenue stands dismissed. 35. Ground of appeal no.8 challenges the decision of the ld. CIT(A) allowing the additional depreciation in respect of civil works and electrical works associated with windmill. The factual matrix of the issue is as under : During the previous year relevant to the assessment year under consideration, the respondent-assessee company installed 7 windmills of Rs.75,24,16,115/- and the same were capitalized in the books of account. The respondent-assessee company claimed depreciation at the rate of 15% of the windmill and also additional depreciation at the rate of 20%. It is claimed that the expenditure incurred during the process of acquisition of capital assets requires to be capitalized to the same asset. Accordingly, the respondent-assessee company had capitalized the cost amounting to Rs.7,14,24,367/- i.e. on electrical works of Rs.2,77,69,890/- and civil works of Rs.4,36,54,477/- claimed the depreciation at rates applicable to the windmill. The Assessing Officer was of the opinion that the respondent-assessee company is not entitled for additional depreciation on entire civil....
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....rt of the windmill, as that could have not been operational without electrical works. Similarly, the Hon'ble Bombay High Court in the case of CIT vs. Cooper Foundry Pvt. Ltd. (ITA No.1326/2010) also held to the same effect. In view of these decisions, we do not find any illegality and unreasonableness in the order of the ld. CIT(A). Accordingly, we do not find any reason to interfere with the order of the ld. CIT(A). Accordingly, this ground of appeal no.8 filed by the Revenue stands dismissed. 39. Ground of appeal no.9 challenges the decision of the ld. CIT(A) deleting the addition of Rs.2,90,94,637/- on account of alleged freebies to doctors. The factual background of the present issue is as under : During the previous year relevant to the assessment year under consideration, the respondent-assessee company had incurred an expenditure on discounts given to doctors amounting to Rs.2,90,94,637/-. It is contention of the respondent-assessee that there were no freebies given to the doctors, as incentives are given in the form of discount linked to the sales made by them and target achieved by doctors. It was contended that the Explanation 1 to section 37 has no application, inasmuc....
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....f Apex Laboratories (P.) Ltd. vs. DCIT, 442 ITR 1 (SC) which is against the respondent-assessee. 41. On the other hand, ld. Sr. Counsel submits that the under the scheme the respondent-assessee company does not distribute freebies to doctors, but it is a sale promotion scheme under which the discounts are passed on to the doctors linked with the quantum of sales. The medical professional were never provided any free gifts such hospitality or conference fees etc to promote its product and the provisions of Explanation 1 to section 37 have no application nor is there any violation of the provisions of Medical Council (Professional Conducts, Etiquettes and Ethics) Regulation Act, 2002. 42. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal relates to allowability of discount passed on to the doctors on achieving such sales targets. On mere perusal of the sale campaign programme extracted above, it would reveal that the respondent-assessee company had not indulged in distribution of any freebies, gifts to medical professionals, which amounts to misconduct under the provisions of the provisions of Medical Council (Professional ....