AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 1563
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....here under are without prejudice to, and independent of one another. GROUND NO. 1 (a) The Commissioner of Income Tax (Appeals) -15 (hereinafter referred to as the "CIT(A)") erred in holding that the appellant would not be eligible for depreciation on assets that stood vested in Ciba Specialty Chemicals (India) Ltd., (CSCIL) pursuant to the scheme of demerger. (b) The CIT(A) erred in holding that a consideration had flowed to the appellant for the transfer of the assets to CSCIL GROUND NO. 2 The CIT(A) erred upholding the action of the Assessing Officer (hereinafter referred to as the "AO") of disallowing the expenditure on computer software/licence fees of Rs. 1,22,12,738 in nature of application software on the ground that the same is capital expenditure of enduring nature. GROUND NO. 3 (a) The CIT(A) erred in upholding the action of the AO in disallowing advances written off pre predominantly MODVAT credit claims receivable from parties towards purchase of finished goods amounting to Rs. 16,68,997 charged to the profit and loss account. (b) Without prejudice, the CIT(A) ought to have allowed the above under s....
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....Rifampacin as Comparable Uncontrolled Price ('CUP') to determine the arm's length price of the said international transaction. Further, the learned CIT(A) while determining the arm's length price of the said international transaction has erred in using the CUP method by taking the third party rates for sale of Rifampacin as on the date of sale of Rifampacin to associated enterprises without making appropriate adjustments for differences between the international transactions and the uncontrolled transactions on account of quantity of products sold. GROUND NO. 8 The Learned CIT(A) erred in computing the arm's length price of the international transaction pertaining to export of Rifampacin by not considering the +/-5% variation from the arm's length price permitted to the Appellant under the provisions of section 92C(2) of the Act. GROUND NO. 9 The CIT(A) ought to have directed the AO to charge interest under section 234C per Revised Return of Income. The appellants crave leave to add to, amend, alter, vary, omit or substitute the above grounds of appeal or add a new ground or grounds at any time before or ....
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....a 3.11 of the order as under: "3.11 In view of the above, since the assets have been transferred by the assessee at book value and depreciation has been claimed by the transferee company on the said book value, it is the book value (i.e. book WDV) of transferred assets and not IT WDV which has to be reduced from the assessee's block of assets for the purpose of depreciation. The book WDV of the assets transferred to M/s Ciba Speciality Chemicals India Ltd comes to Rs 20,7868,221/-. On reduction of the above book WDV from the assessee's block of assets, the depreciation admissible under the I.T. Act for this year comes to Rs 114,544,180/- as per the 'without prejudice depreciation chart' submitted by the assessee vide letter dated 24.11.05, as against depreciation of Rs.122,132,992/- claimed by the assessee in its computation of Income filed with the Return. The depreciation allowance is accordingly allowed at Rs.114,544,180/- only. Net addition on this account comes to Rs.7,588,812/-. Needless to say, in subsequent years also depreciation will be allowed on the reduced WDV as per this order after exclusion of the book WDV of transferred assets at Rs.20,98,0....
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....xable income, proportionate amount thereof, has not been included in the valuation of closing stock. It may be mentioned here that as laid down by the apex court in CIT Vs. British Paints 1991 188 ITR 44, it is the real cost of stock-in-trade which has been taken into account to determine the taxable income of the assessee for the relevant year. It is held by the apex court that in this regard section 145 of the IT Act not only confers the relevant powers of the AO but also imposes duty upon him to make such computation in such a manner so as to ensure that all costs involved in bringing the stock-in-trade which forms part of the closing stock have to be included in the valuation of such closing stock. Exclusion of any part of cost would result in distorted picture so as computation of taxable income of the assessee for this year is concerned. On being confronted, the assessee vide letter dated 09.12.2005 submitted a without prejudice statement of freight component on closing stock of finished goods at depots which comes to Rs.60,29,327/-. It is further submitted by the assessee that an amount of Rs.44,45,792/- was added in assessment order for A.Y.2002-03. Therefore, there would b....
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....dated 16.12.2005, the A.O found that out of the above details Rs.1,32,45,017/- has been stated to be on account of off the shelf computer software packages and treated as revenue expenditure. The AO has dealt on the facts and submissions of the assessee and is of the opinion that the claim cannot be fully allowed and observed at Para 7.4 of the order as under: "7.4 It was, however, submitted that depreciation may be allowed in respect of similar treatment to the computer software expenses in the earlier years. The assessee filed a working of the depreciation allowable on the amounts capitalised in the earlier years. As per this working, the assessee claimed depreciation of Rs.29,18,517/- on the items capitalised in the earlier years. This working is not acceptable as it does not account for the items pertaining to the demerged division have not been excluded by the assessee. A revised working was by the assessee as per which, the depreciation allowable on items capitalised in the earlier years and which are continued to be owned by the assessee and used in the business of the assessee, is Rs.24,83,645/-. The same is allowed to the assessee" 8. The A.O on the sixth dispu....
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....002-03 have been incurred in AY 2003- 04 Rs.9,73,318/-but were allowed in AY 2002-03. These are now, therefore, disallowed. Considering the above and the past history of the case, the net effect will be a relief of Rs.11,82,883/-on account of excess provision." 11. The ninth disputed issue with respect to expenditure on tax free bonds / dividends. The AO found that the assessee has claimed deduction u/sec 80M of the Act in respect of the dividend income received. The assessee has filed the details explaining the reasons and the basis of claim of deduction vide letter dated 24.11.2005, whereas the AO considered the facts, submissions and made disallowance observing at Para 11.5 of the order as under: 11.5 In view of the above and since no details in this regards have been filed by the assessee, 2% of the gross dividend earned at Rs.93,43,470/- being Rs.1,86,869/- is reasonably estimated as the proportionate expenditure for earning the above exempted income. u/s 80M is, therefore, to be limited to Rs.91,56,601/-. Based on this finding, the expenditure claimed by the assessee in its profit and loss account towards administrative and other overheads is to be disallowed u/s.....
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....e of the business of banking or money lending which is carried on by the assessee. The debt represented by the amount of Rs. 16,68,997/- as receivable from the above mentioned parties has neither been taken into account in computing the income of the assessee for any previous year nor does it represent money lent in the ordinary course of business of banking or money lending as the assessee does not carry on any such business. Therefore, the claim of bad debts of Rs, 16,68,997/- is disallowed and added to the total income of the assessee. Penalty u/s271(1)(c) is initiated separately for furnishing inaccurate particulars of income." 16. The fourteenth disputed issue, being computation of claim of deduction U/sec80HHC of the Act. The AO found that that assessee has claimed deduction u/sec 80HHC to the extent of Rs.14,61,000/-, whereas while calculation of the total turnover, the assessee has not included sales tax and also the excise duty.The AO has dealt on the facts, provisions, elaborate submissions, CBDT circular and has restricted the claim dealt at Para 17.16 to 17.23 of the order as under: "17.16 In view of the discussion above the amount to be reduced from the pro....
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....m House property. the AO found that in the profit and loss account filed along with the return of income, the assessee has claimed expenditure. The assessee has explained the recovery of cost of services vide letter dated 16.12.2005. Further the AO has dealt on the facts of the case and has estimated the valuation of the house property and determined the notional income of house property dealt at Para 18.10 of the order as under: "18.10 As the assessee has failed to indicate the exact area in respect of the residential buildings as per the details filed by the assessee, 58% of the total area of 26,342 Sq.ft. is being used by M/s Ciba Speciality Chemicals Ltd. Therefore, total residential area let out is 15,278 Sq.ft. Applying the market rate Rs.15/- per Sq.ft. per month for residential property, the annual value is determined Rs.2,750,105/- for the residential property The total annual value of the let out property is therefore, held to beRs.2,750,105/-. Further considering the inflation and other factors, the total annual value of the let out property is increased by 5% i.e. Rs.1,37,505/-. Therefore, the total annual value of the let out property is, therefore, held to be....
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....r as in Assessment Year 2002-2003. (i) Capital Gains on sale of plot no.2 The capital gains on sale of plot no.1 would be recomputed as under: Sale consideration received 19,65,45,000 Less: Expenses incurred on sale of land 28,59,250 Less: Cost of acquisition 48945.90Sq.mtrX63X447/100= 1,37,83,655 Long term Capital Gain 17,99,02,095 19. The seventeenth disputed issue being the claim of amortization charges of leasehold land, the AO found that the assessee has made claim of amortization expenses of leasehold land Rs.2,14,000/- in the revised return of income, whereas the AO found that the assessee has amortized the lea....
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....re the Honble Tribunal. 23. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the additions and disallowance of the claims on the issues overlooking the submissions in the appellate proceedings and ignoring the principles of accountancy and the judicial decisions in the assessee own case. Further Ld. AR submitted that the disputed issues in appeal are covered in favour of the assessee by the Hon'ble Tribunal order for the A.Y 200203. The Ld.AR substantiated the submissions with the factual paper book, chart and judicial decisions and prayed for allowing the appeal. Per Contra, the Ld. DR relied on the order of the CIT(A) to some extent and submitted that the revenue has filed the cross appeal. 24. We heard the rival submissions and perused the material on record. On the first ground of appeal, where the CIT(A) has erred in not allowing the deprecation on assets transferred to Ciba Speciality Chemicals(India) Ltd pursuant to the scheme of demerger. The Hon'ble Tribunal in ITA No.6832 & 6772/Mum/2010 & C.O.190/Mum/2011 for the A.Y 2002-03 dated 20-03-2024 has allowed the ground of appeal observing at Page 51to 60 Para No.22 to 33 of the order ....
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....r demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; 24 Since, the Assessee's case did not fall within any of the circumstances mentioned above, it continued to claim depreciation on the written down value of the block of assets including those relating to the demerged undertaking. 25 The Assessing Officer denied Assessee's depreciation claim for the first time in the previous year relevant to assessment year 1997-98, whereby he reduced the book written value of the demerged assets from the written down value of the block of assets. Upon further appeal, the Ld.CIT(A) has accepted the conclusion of the Assessing Officer however directed the reduction of the tax written down value of the block of assets as against book value. Thereafter, the same stand has been taken by the Assessing Officer / Ld.CIT(A) in all the later years including the year under consideration. 26 In this regard, it was submitted before us that disallowance of depreciation on assets transferred on account of demerger has been deleted ....
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....nclusion in A.Y.2000-01 interpreting the provisions as applicable at that point of time. In our view the assets in the block has to be evaluated every assessment year and as per provision 43(6)(C)(B), it clearly indicates that the value has to be reduced of the moneys payable in respective of any assets falling within that block which is sold/discarded/demolished or destroyed. In the given case, the block does not consist the assets, which are transferred in the demerger in the A.Y. 1997-98. However, these particular assets are not in existence in the beginning of the year and it can be considered as discarded in the provisions with "NIL" value. This issue needs to end some point of time. In that case, the value of the assets has to be written off this year and to be claimed as loss in the statement of income (instead of depreciation). Therefore, we are inclined to direct the Assessing Officer to treat the opening balance of the assets to the extent of assets, which was already transferred to the demerged company as loss of assets or discarded. Accordingly, this ground of appeal filed by the assessee is partly allowed. 29 It was submitted before us that in order to effecti....
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....ock of assets while computing depreciation claims. It further argued that what was required to be reduced from the block was money value received from the sale of assets. It relied on the decision of Kasturi & Sons(237ITR24) of the Hon'ble Supreme Court wherein the Hon'ble Court had defined the words "moneys payable" and had held that the phrase included actual currency form and not money's worth. It was, therefore, contended that since no money in actual currency was received by the assessee on account of demerger, no adjustment was required to be done to the WDV with reference to assets in question. It further submitted that reliance placed by the AO with regard to the treatment given by another assessee in its own case was irrelevant and also that the observation made by the AO that the assessee had fraudulently claimed excess depreciation was wholly unjustified, that it had fully disclosed the stand taken by it in the return filed. After considering the submissions of the assessee and the order of the AO, he held,that an assessee had to be the owner of a particular asset on which depreciation had been claimed, that the said assets had to be used for the purpose of its busin....
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....TR692)and Bharat Bijlee Ltd.(46taxmann.com 257). The DR supported the order of the FAA. The DR stated that entire chemical business was not transferred, that only one division was transferred, that the AO had made enquiry with other concern, that he found that the assets were taken on book value, that requirement of ownership of assets was a must, that it was not a case of slump sale, that the cases relied upon by the assessee were distinguishable on facts. 8.3. We find that in the case of Kastur i& Sons(supra)the Hon'ble Apex Court has interpreted the phrase money's worth and applicability of section 41(2)of the Act as under: " 19. We are unable to accept the contention that the word `money' should be interpreted as `money's worth'. The reasons given by us earlier are sufficient and we need not add to them. The reason for introducing a fiction in S.41 (2) of the Act as explained in Bipinchandra Maganlal& Co. Ltd. (41 I.T.R. 290) quoted in Artex Manufacturing Co. (1997) 6 S.C.C. 437 that it is for the purpose of recoupment by the Revenue of the benefit allowed to the assessee in the previous years does not alter the situation. 20. In the resul....
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....n respective of any assets falling within that block which is sold/discarded/demolished or destroyed. In the given case, the block does not consist the assets, which are transferred in the demerger in the A.Y. 1997-98. However, these particular assets are not in existence in the beginning of the year and it can be considered as discarded in the provisions with "NIL" value. This issue needs to end some point of time. In that case, the value of the assets has to be written off this year and to be claimed as loss in the statement of income (instead of depreciation). Therefore, we are inclined to direct the Assessing Officer to treat the opening balance of the assets to the extent of assets, which was already transferred to the demerged company as loss of assets or discarded. Accordingly, this ground of appeal filed by the assessee is partly allowed." 33 In the above decision, the coordinate bench has directed the Assessing Officer to allow the outstanding value of block of assets as on 1.4.2007 as loss in the AY 2008-09. In order to follow the above recent decision on this issue, the depreciation disallowed by the Assessing Officer has to be allowed in favour of the assessee ....
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....9697 and that the Department had not challenged the orders of the Tribunal before the Hon'ble High Court. The AR further referred to the cases of Raychem RPG Ltd.(346ITR148) and Asahi India Safety Glass Limited(245CTR529) 12.1 We find that while deciding the appeal for the AY.1996-97 the Tribunal has dealt the issue as under: "11. First ground of appeal is about expenditure incurred on computer software, amounting to Rs.19.45 lakhs. First ground of CO also deals with the identical issue. During the assessment proceedings, A.O held that the expenditure incurred by the assessee was of capital nature, whereas FAA was of the opinion expenditure was of revenue nature. 11.1. Before us, DR supported the order of the AO.AR contended that similar issue was decided in favour of the assessee by the Tribunal while deciding the appeal for the year 91-92 and 9596.He referred to pages 236-37 of the paper book. He relied upon the case of Ashi Glass safety India Ltd.(245CTR)delivered by the Delhi High Court. 11.2. We find that while deciding the appeal for the year 1995-96(ITA/1749/mum/2003-25.09. 2013),Tribunal has dealt the issue as under: "The AO was ....
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....xcel sheet, word document, power point presentation etc.) and Oracle software for developing accounting software at C & F locations. The assessee submitted that software expenses were for software packages which get frequently outdated and have to be replaced and therefore, the expenditure was revenue in nature. The assessee further stated that operating software is treated as capital expenditure whereas application software which gets outdated early, is revenue in nature. However, following the stand taken in AYs 199596 to 2000-01, the expenditure was said to be enduring in nature and thus capital expenditure. Accordingly, depreciation of 25% was allowed against the same. The action of Ld. AO resulted into an addition of Rs.20.48 Lacs. Consequently, similar depreciation of earlier years for Rs.18.98 Lacs was allowed to the assessee disregarding the depreciation on assets pertaining to demerged division. 8.2 The Ld. CIT(A) noted that the payments were in the nature of license fees or for right to use certain packages which have normally longer periods of life, usage and validity and therefore, the benefits would be enduring in nature. Accordingly, the action of Ld. AO was ....
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....rying out its business. However, both the lower authorities adjudged the assessee's claim merely in terms of Sec. 36(1)(vii) r.w.s. 36(2) which was not the case. The perusal of the details filed before us would show that the amounts written-off by the assessee was mostly in the nature of advance payments for procurement of goods from third parties, which have become irrecoverable over a period and are under dispute. Few of the write-offs represent MODVAT claims outstanding against third party manufacturers for more than 5 years. Majority of these amounts are stated to be outstanding prior to 01/04/1996. This being the case, we are of the considered opinion that the claim is allowable in terms of Sec. 37(1) as business expenditure or alternatively as business loss u/s 28. For the same, we draw support from the decisions of Hon'ble Bombay High Court in Lord Dairy Farm Ltd. V/s CIT (1955 27 ITR 700); IBM World Trade Corpn. V/s CIT (48 Taxman 11); the decision of Mumbai Tribunal ion ACIT V/s Sodexo Food Solutions India Private Ltd. (ITA Nos.5781/Mum/2016 &ors. dated 03/10/2018). The ratio of all the stated decisions support the conclusion that advances lost during the course o....
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.... under: - "35. The next issue in ITA No. 5981/Mum/2004 for AY 2000-01 of Revenue's appeal is against the order of CIT(A) in directing the AO to exclude sale tax and excise duty and scrap sale from the total turnover for the purpose of computing deduction under section 80HHC of the act. For this Revenue has raised following ground No.5: - "5(a) On the facts and in the circumstances of the case and in law, the CITA) erred in directing the AO to exclude the sales tax of Rs.23,06,07,000/- and excise duty of Rs.30,58,34,000/- and scrap sale of Rs.76,29,000/- from the total turnover for the purpose of computing the deduction u/s.80HHC. 5(b) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing that 90°/o of the net machinery hire receipts are to be excluded for computing the business for the purpose of deduction u/s. 8o HHC as against the action of the AO in reducing 90% of the gross machinery hire receipts." 36. At the outset, the learned Counsel for the assessee stated that this issue of exclusion of excise duty and sales tax is squarely covered in favour of assessee and against Revenue by the jurisdictio....
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....d out profits derived from the exports. In this connection, section 80 HHC (1) may also be noticed. Under section 80 HHC (1), it is, inter alia, provided that where an assessee is engaged in business of exports of any goods, there shall be allowed in computing the total of income of the assessee, a deduction of the profits derived by the assessee from the export of such goods. In other words, in computing the total income of such an assessee, profits derived by the assessee from the exports are deductible. The above expression, namely, 'profits derived from exports' also finds place in section 80HHC(3)(a). It says that where the export is of goods, the profits derived from such export shall be the amount which bears to the profits of the business the same proportion as the export turnover in respect of such goods bears to the total turnover of the business. In fact, the earlier section 80 HHC (3) consisted of two parts, namely, whether the assessee carried on business as 100% exporter and, secondly, whether the assessee carried on composite business. In the latter case, it was provided that the profits derived from exports shall be the amount which bears to the profits of the busin....
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....plant, the manufacturer would dispose of the scrap of steel to someone who would re-cycle the said scrap into steel so that the said steel can be re-used. 23. When such scrap is sold, in our opinion, the sale proceeds of the scrap cannot be included in the term 'turnover' for the reason that the respondent unit is engaged primarily in the manufacturing and selling of steel utensils and not scrap of steel. Therefore, the proceeds of such scrap would not be included in 'sales' in the Profit and Loss Account of the respondent-assessee. 24. The situation would be different in the case of the buyer, who purchases scrap from the respondent-assessee and sells it to someone else. The sale proceeds for such a buyer would be treated as "turnover" for a simple reason that the buyer of the scrap is a person who is primarily dealing in scrap. In the case on hand, as the respondent-assessee is not primarily dealing in scrap but is a manufacturer of stainless steel utensils, only sale proceeds from sale of utensils would be treated as his "turnover"" 35. According to the learned Counsel both the issues is covered in favour of assessee and against Revenue....
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....ess receipts and not the receipts as mentioned in explanation (baa) of Sec.80HHC. Any income which necessarily flows from assessee's business is not required to be reduced. All the receipts were stated to be arising out of assessee's business activities and hence, not covered by explanation (baa) to Sec.80HHC. However, Ld. AO, interpreting the said explanation in the light of various juridical decisions, held that the items mentioned in explanation (baa) were only illustrative in nature and not exhaustive one. Reliance was also placed on CBDT Circular No. 621 dated 19/12/1991. Accordingly, all such receipts which do not have element of turnover would be excluded and all these items would fall under the expression "any other receipt of similar nature‟ as mentioned in explanation (baa) to Sec.80HHC. Accordingly 90% of above items aggregating to Rs.2527.38 Lacs was to be reduced while working out eligible profits for the purpose of Sec.80HHC. The said adjustment reduced the deduction u/s 80HHC from Rs.177.76 Lacs to Rs.167.14 Lacs. The working of the same has been made part of assessment order as „Annexure-1‟. From the perusal of the same, it could be observed that t....
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....e profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee. "Adjusted profits of the business" would mean the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3). Finally, the profits of the business as defined in Explanation (baa) below sub-section (4C) would mean as follows: - (baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by- (1) ninety per cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India ; In this appeal, the expressions „profits of the business‟ fall for our adjudication. The....
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....es the insured for a loss that has occurred, in the present case to the stock-in-trade. Learned counsel submitted that the claim for insurance on account of the stock-in-trade, hence, did not constitute an independent item of income similar to commission, interest, rent, brokerage or other charges: On this foundation it has been urged that the insurance claim would not be susceptible to a deduction of 90 per cent under Expln. (baa). 5. (At the outset it would be necessary for the Court to advert to the judgment of this Division Bench dt. 8th April, 2010 in the CIT v. Dresser Rand India (P) Ltd. (IT Appeal No. 2186 of 2009) [reported at [2010] 39 DTR (Bom) 169: [2010] 232 CTR (Bom.) 52-Ed.]. The question of law which was formulated in the appeal by the Revenue was as follows: "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that 90 per cent of recovery of freight, insurance and packing receipts amounting to Rs. 49,14,076, sales-tax set off refund amounting to Rs. 38,33,148 and service income of Rs. 2,89,17,545 are not to be excluded from profits of business within the meaning of clause (baa) of Explanation to ....
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....as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. In other words, the proportion between the export turnover and the total turnover of the business is applied to the profits of the business in order to determine the extent to which the profits are to be regarded as being derived from export. 8. It would be necessary to advert to Expln. (baa) which defines the profits of business as follows : "(baa) 'profits of the business' means the profits of the business as computed under the head 'Profits and gains of business or profession' as reduced by- (1) ninety per cent of any sum referred to in clauses (iiia), ( iiib) and (iiic) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India." 9. Under Expln. (baa), the profits of business are defined to mean the profits of business as computed under the head of profits and gains of business or profess....
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....er the receipt is "of a similar nature included in such profits". The rationale for excluding ninety per cent of the receipts by way of brokerage, commission, interest, rent or charges is that these are independent incomes and their inclusion in the profits of business would result in a distortion. In determining whether any other receipt-is liable to undergo a reduction of ninety per cent the basic prescription which must be borne in mind is whether the receipt is of a similar nature and is included in the profits of business. To be susceptible of a reduction the receipt must be of a nature similar to brokerage, commission, interest, rent or charges. 11. In the present case, the insurance claim, it must be clarified, related to the stock-in-trade and it is only an insurance claim of that nature which forms the subject matter of the appeal. Now, it cannot be disputed that if the stock-in-trade of the assessee were to be sold, the-income that were to be received from the sale of goods would constitute the profits of the business as computed under the head of profits and gains of business or profession. The income emanating from the sale would not be sustainable to a reducti....
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....mula which is referred to in sub-section (3) of section 80HHC. In determining the profits of the business for the purposes of Expln. (baa), the incomes which are susceptible to a reduction of ninety per cent are those which are specifically prescribed by the legislature. These are inter alia the incomes referred to in clauses (iiia), (iiib) and (iiic) of section 28 and receipts by way of brokerage, commission, interest, rent, charges or receipts of a similar nature included in such profits. Therefore, before a receipt is liable to be excluded to the extent of ninety per cent, it must be a receipt of a nature similar to brokerage, commission, interest, rent or charges. For the reasons which we have already indicated, we have come to the conclusion that the claim on account of insurance for the stock-in-trade did not constitute a receipt of a similar nature within the meaning of Expln. (baa) and was therefore not liable to be reduced to the extent of ninety per cent. The first question will therefore not raise any substantial question of law. In terms of above decision, the vital test to determine the exclusion or inclusion of an item would be whether it was an independent i....
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....e. Equipment lease rentals- represent amount received by assessee on lease of packing machines & other equipment to licensed manufacturers who are carrying on the manufacturing activity for the assessee. Conversion Charges- These charges are directly related to assessee‟s manufacturing activity. Write back of liabilities- These are the writeback of expenditure which were early shown payable but no longer required to be paid. The writebacks are not in the nature of actual receipts but reversal of early provisions. Cost of Services Recovered- The cost of services refers to recovery of costs in the nature of Municipal Taxes, Security and Electricity Charges of a shares premises between the assessee and CSCIL. These expenses have first been paid by the assessee and later on recovered from CSCIL. These are mere recoveries of expenses from associate concern. Profit u/s 41(3) on sale of R & D Assets - The research & development activity is directly connected with manufacturing activities and could not be said to be independent source of income for the assessee. Misc. Claims- These are petty claims arising out of business activity....
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....203,while working out profit of the business for the purpose of claim of deduction u/sec80HHC of the act. The Ld.AR relied on the decision of the Honble High Court of Bombay in the case of CIT Vs Gem Plus Jewellery India Ltd(2011)(330 ITR 175(Bombay).We considering the submissions and judicial decision relied by the Ld.AR, the exchange gains are realised in export transactions and are directly related to assessee activities. We respectfully follow the decision of the Hon'ble Tribunal in the earlier year A.Y.2002-03 and judicial decision and partly allow this ground of appeal of the assessee. 32. The Ld.AR submitted that the CIT(A) has erred in confirming the action of the AO in computing the income from house property at a notional value that,the property is owned by the assessee and used by the demerged company and rent is not collected/reflected in the assesses financial statements and the assessing officer has invoked the provisions of Section22 of the Act and calculated the notional rent. We find the Hon'ble Tribunal in ITA No.6832 & 6772/Mum/2010 & C.O.190/Mum/2011 for the A.Y 2002-03 dated 20-03-2024 has allowed the ground of appeal observing at Page 105 to 109 Para No.103....
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.... 16.2 On the basis of said submission Ld. AO formed an opinion that part of assessee's immovable property was let out to third parties and accordingly show-caused assessee as to why rent receivable should not be taxed as rental income. The assessee explained that the assessee and Ciba Specialty Chemicals (India) Limited (CSCIL) jointly own the property. However, in the rejoinder, it was submitted that the assessee as well as CSCIL bears the costs related to the shared promises in the ratio of occupation of the premises. The assessee incurs the cost and recovers the proportionate expenditure from CSCIL. As a part of mutual agreement, the respective companies had occupied the property jointly and shared the respective costs. The assessee by recovering the cost of shared premises does not stand to lose since occupation cost is recovered. However, Ld. AO opined that property owned by assessee was used by CSCIL for which no rent was reflected in the accounts of the assessee. The assessee owned the property and let out the same to CSCIL without charging any rent. No agreement was produced by assessee for use of premises by CSCIL. Therefore, the exact commercial consideration or t....
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....the arrangement of demerger, the immoveable property situated at Goregaon came to the assessee. However, since the speciality chemical business was also carried on from the same premises, CSCIL was allowed to occupy the residential and office premises earlier used by them for a certain period till CSCIL was able to identify and acquire alternate facility. As per the arrangement, CSCIL was to pay to the assessee share of expenses incurred for the maintenance of the property. The total recovery of such costs for the year stood at Rs.92.24 Lacs which actually goes to reduce the expenditure debited to Profit & Loss Account. It was further explained that from AYs 1997-98 to 200001, the same arrangement continued and Ld. AO did not dispute the fact that the property stood occupied by the assessee for the purposes of its business and hence, was not liable to be assessed as "Income from House Property‟. For this, the attention was drawn to the assessment orders for AYs 1997-98 to 2000-01. Therefore, there being no change in facts, it was not open for Ld. AO to take a different view in the matter. In terms of Sec. 23(1), the income could not be assessed as „Income from House Pro....
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....rrangement has never been disturbed by Ld. AO while framing assessment for AYs 199798 to 2000-01 which is evident from extract of assessment orders of those years as placed on record. Therefore, rule of consistency would operate in assessee's favor and the facts being identical, Ld. AO was not justified in disturbing such an arrangement. Therefore, on the peculiar facts and circumstances, the action of Ld.AO in bringing to tax notional rental value of the common premises was not justified. We order so. Ground No. 10(a) stands allowed which makes Ground Nos. 10(b) &10(c) infructuous." 107. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in assessee's own case for the preceding assessment year is respectfully followed, accordingly, ground raised No.9 raised by the assessee is allowed". 33. We respectfully follow the decision of the Hon'ble ITAT in the assessee's own case for earlier year assessment year and direct the AO to delete the addition and we allow this ground of appeal in favour of the assessee. 34. On the ground of appeal no.6,the Ld. AR submitted that the CIT(A) has erred in holding that th....
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....f the lower authorities and submitted that the submissions of the assessee are not consistent. 124 Considered the submissions and material placed on record, we observe from the record that the assessee has initially relied on the valuation report from Knight Frank, which was found to be defective and to substantiate the assessee once again filed the revised reports from Knight Frank and Poonager Billimoria & Co. The same was not acceptable to the assessing officer and the reasons recorded by the AO may be proper but in the subsequent AY 2004-05, the AO had referred and collected the DVO valuation, as per which the value of land is determined at Rs. 71.12 per sq. feet. Since, the valuation was conducted by the DVO, the same can be applied for the purpose under consideration considering the fact the valuation was conducted for the same land under the same vicinity of assessee own land. That means the valuation report submitted by the DVO to evaluate the same pieces of land which the assessee had sold on piecemeal basis. The valuation was done by the neutral agency, there should not be any issue for adopting the same in the assessment year under consideration. Therefore, we d....
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.... the assessee by following the orders of the ITAT in the assessee's own case for the earlier years. Accordingly, the ground of appeal raised by the revenue is dismissed. 42. The revenue has raised the ground of appeal.no-2: - 2.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of assessee's claim of Rs.64,61,771/- incurred towards cost of advertisement films holding that the expenditure of the assessee is covered by the decision of the Bombay High Court in the case of M/s Geoffery Manners & Co. Ltd., dated 09.02.2009 overlooking the fact that the facts of the assessee's case are distinguishable and the revenue has not a accepted the decision of the Bombay High Court in the aforesaid case. 43. Further, in the cross objections filed by the assessee, the assessee has raised following ground: - "1. The respondents submit that the A.O has directed to allow depreciation applicable to Plant &Machinery if the action of- AO of holding expenditure of Rs.64,61,771/-incurred on purchase cost of films and other production expenses for producing advertisement films and commercials is upheld as capit....
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....ue under consideration is similar to the issues raised in the earlier assessment years. Per Contra the Ld.AR submitted that the disputed issue in appeal has been considered by the Honble tribunal in the assessee's own case and decided the issue in favour of the assesse. 49. We have considered the submissions and material available on record, we find the identical issue is decided in favour of the assessee for the A.Y. 1997-98 by the Honble Tribunal in ITA.No.5238/Mum/2003 dated 25.01.2017 observed at Page10 Para 13 &14 as under: - "13. Fifth Ground deals with deletion of an addition of Rs.71.70 lakhs made by the AO on account of estimated freight components in the closing stock. It was brought to our notice that identical issue was decided against the department by the Tribunal while adjudicating the appeals for the earlier AY.s(1992-93 to 1996-97).We are reproducing page 12-13 of the order of the Tribunal for 1996-97,dealing with the issue and it reads as under: "14. Ground no.4 is about deletion of Rs.33.58 lakhs on account of freight component of closing stock.Ground no.3 of CO also deals with same issue.Beforeus,DR supported the order of the AO.AR stated th....
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....stock. They are post manufacturing expenses are to be as selling expenses. Normally, the manufacturing are debited to the manufacturing account whereas the expenses are debited to the profit & loss account. According to the Advanced Accounts by R.N.Carter (1939 Rev.Edn.,Page-32),carriage inwards increases the cost of the goods purchased and is hence debited to trading account whereas carriage outwards is a selling expenses and is debited to profit & loss account. In the present case, the goods manufactured by the assessee had to be distributed to the depots across the country from the centralized distribution depot at Bombay and the transporting cost is purely for the purpose of selling the goods. The packaging expenses are not the expenses are not expenses incurred in the primary wrapping of the products, but they have been incurred in packing them in boxes so as to facilitate easy transport to the various depots. The primary packing which makes the product marketable is no doubt part of the cost, but the further packaging carried out for the purpose of transporting the products is part of the selling. William Pickles in his 1960 edition of Accountancy has recognized this by obser....
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.....2021 held as under: - "5.1 The assessee did not include proportionate amount of freight component while valuing closing stock of finished goods. As against this, the assessee claimed full expenditure of freight as deduction. The AO opined that as per the decision of Hon'ble Apex Court in CIT Vs. British Paints (1991; 188 ITR 44), it is the real cost of stock which was to be taken into account to determine real income of the assessee. All costs incurred towards stock-in-trade were to be considered while valuing the closing stock and exclusion of any cost would result in distorted picture of taxable income. The freight component on closing stock came to be Rs.44.09 Lacs. However, similar adjustment made in AY 2000-01 resulted into increase in valuation of closing stock of that year by Rs.147.46 Lacs and therefore, opening stock for this year was to be increased by that amount. Consequently, the differential of the two i.e. Rs.103.36 Lacs was reduced from assessee's income. 5.2 The Ld. CIT(A), relying upon Tribunal's decision for AY 1993-94 and appellate orders for AYs 1994-95 to 2000-01, deleted the adjustment made by Ld. AO. 5.3 We find that this issu....
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....sessee, deals with upholding the disallowance on account of incremental liability (Rs.3,21,03,537/-)for payment of pension created on an actuarial basis. It was brought to our notice that while deciding the appeal for the AY.1995-96(ITA/ 498/ Mum/2003,dt.25.09.2013)Tribunal had dealt with the same issue. We would like to reproduce the relevant portion of the said order and it reads as under:- "36. Ground no. 6 relates to the disallowance of Rs.3,90,12,431/- on account of incremental liability for payment of pension under the Voluntary retirement scheme (VRS) created on an actuarial basis in computing the assessee's total income. The AO has discussed this issue on para 12 on page 32 of his order, wherein the AO followed order of 1993-94 and 1994-95 for disallowing the incremental liability of Rs.3.90 crores. When the matter was agitated before the CIT(A), the CIT(A) has considered this issue of the assessee at para 13 of page 33 of his order wherein the CIT(A) has followed the decision of his predecessors for A.Y. 1993-94 and 1994-95 and confirmed the disallowance made by the AO. Before us, the counsel for the assessee drew our attention to page 134 of the paper bo....
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....he year relating to the provision created during financial year 1992-93 but disallowed in AY 1993-94. Similar directions were given by Ld. CIT(A) for this year, against which revenue is in further appeal before us. 6.3 We find that this issue has been adjudicated in Tribunal's order for AY 2000-01, para nos.31 to 34. In concluding para-34, the bench restored the issue to the file of Ld. AO for re-adjudication as per directions given in Tribunal order for AY 1995-96. The assessee sought rectification of the directions vide MA No.50/Mum/2018. The Learned Judicial Member concurred with the submissions that Tribunal order for AY 1995-96 stood amended by MA order dated 27/02/2015 wherein deduction was allowed to the assessee. Accordingly, applying the amended order, the deduction would be allowable to the assessee. However, the Learned Accountant Member, vide separate order, opined that the issue was to be recalled and placed before regular bench for fresh adjudication. Keeping in view the contrary views, a reference was made u/s 255(4) to Hon'ble Vice President (third member) who concurred with the view of Hon'ble Judicial Member. Finally, following majority view, confirmatory....