TaxTMI 
TaxTMI 
2023 (5) TMI 1483
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....T(A) erred in confirming that for the purposes of section 80-I and 80-IB the profits derived from the new industrial undertakings ought to be reduced by the amount of certain common expenses incurred at the Head Office on central departments such as Audit, Legal & Secretarial Shares dept, Selection & Training. Central accounts & Treasury etc. which cannot be identified with any of the industrial undertakings of the appellant eligible for deduction u/s 80-I and 80-IB. 2.2 The learned CIT(A) erred on facts in disposing of ground no 3 to 6 of the appellant's appeal on the assumption that the Assessing Officer has only apportioned expenses of purchase department advertisement and transport He failed to appreciate that the appellant on its own had allocated the expenses of purchase department advertisement, transport and other expenses. 2.3 The learned CIT(A) failed to appreciate that the appellant was in appeal against the allocation of only those Head Office overheads which in any case have to be incurred by the appellant irrespective of the new undertakings eligible u/s 80-I & 80IB and are in no way dependent on the said new industrial undertakings and therefore....
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....ned CIT(A) erred in confirming that 90% of the following amounts are to be reduced from the profits & gains from business for the purposes of allowing deduction under Sec. 80HHC (i) Interest 1,91,58,69,283 (ii) Royalty 1,87,25,437 (iii) Commission 58,84,229 (iv) Other Income 5,28,26,259 (v) Receipts from services rendered 37,96,32,000 (vi) Rent-Oil storage 24,70,135 7.1 The learned CIT(A) further failed to appreciate that Royalty is not specified in the clause (baa) to the Explanation under sec. 80HHC and therefore, he ought not to have reduced 90% of the amount of Royalty from the amount of profits from the business. 7.2 The learned CIT(A) erred in not adjudicating ground no. 102, of the grounds of appeal to the Commissioner of Income Tax(Appeals), reproduced below: "10.2. The learned AC failed to appreciate and ought to have held that since the appellant had also incurred interest expenditure of Rs 18,01,67,000/-, there was no justification in reducing 90% of the gross amount of interest receipts from the profits of the business without considering the interest expenditure." 8. The lea....
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....ct of merger of erstwhile Ponds (India) Limited is a capital expenditure 14.1 He failed to appreciate that the legal cost was incurred during the year and was laid out wholly and exclusively for the purposes of the business of the appellant. 15. The learned CIT(A) erred in confirming the reduction of appellant's claim under section 80-0 by notional expenditure of Rs.77,319/- 15.1 He failed to appreciate and ought to have held that the appellant did not incur any expenditure on earning of royalty income. The appellant craves leave to add to, alter or amend all or any of the aforestated grounds of appeal." 2. The fact in brief is that return of income declaring total income of Rs. 6,73,16,39,240/- was filed on 30.11.2000. The assessee company is engaged in the manufacturing, trading and marketing (including export) of Fast Moving Consumer Goods (FMCG) etc. The case was subject to scrutiny assessment and assessment order u/s 143(3) of the Act was passed on 03.03.2003. The total income was assessed at Rs. 81,15,35,13,191/- after making various disallowances. The further fact of the case are discussed while adjudicating the ground of appeal fil....
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....bserved that for computing deduction u/s 80I and 80IB losses and depreciation and investment allowances of earlier years have to be taken into consideration. Accordingly, the AO has recomputed the claim of deduction and restricted the claim u/s 80IB to Rs. 11,00,81,388/- and u/s 80IB to Rs. 6,25,58,99,199/-. 8. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 9. During the course of appellate proceedings before us the ld. Counsel submitted that identical issue on similar facts in the case of the assessee has been adjudicated by the ITAT, Mumbai for the assessment year 1998-99 and 1999-2000. 10. The ld. D.R supported the order of lower authorities. 11. Heard both the sides and perused the material on record. Regarding claim of deduction, the ITAT vide ITA No. 2201/Mum/2004 for assessment year 1998-99 held that this issue has been decided by the coordinate bench of the Tribunal in assesse's own case for the preceding assessment year 1985-86 to 1997-98, 2006-07 and AY 2009- 10 wherein the Tribunal has partly allowed the identical issue in favour of the assessee while adjudicating these appeals. Accordingly, the T....
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....the decision of Tribunal in assessment year 1988-89 (supra). In that year, the Revenue had relied on the judgment of Hon'ble Supreme Court in case of Synco Industries Ltd. vs. Assessing Officer (299 ITR 444), to argue that the brought forward losses and unabsorbed depreciation have to be adjusted before allowing claim of deduction u/s 80HH & 80I. The Tribunal distinguished the said case on the ground that brought forward losses/depreciation of the new unit had already been set off against other income of the assessee and nothing was brought forward either as loss or unabsorbed depreciation. Therefore, the Tribunal held that the deduction u/s 80HH has to be allowed without adjusting the brought forward losses/depreciation. However, in relation deduction u/s 80I, the Tribunal noted that in view of the specific provision of sec. 80I(6) as per which deduction u/s 80I has to be allowed on stand allone basis, treating the undertaking as the only source of income. Therefore, the Tribunal directed that brought forward losses and unabsorbed depreciation of the unit of the earlier years starting from the initial year has to be set off before allowing claim u/s 80I. Facts of this year are....
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.... ITA No. 2201/Mum/2004. With the assistance of Ld. Representative we have perused the above referred decision of the ITAT wherein the issue of 90% reducing of gross interest received while computing deduction u/s 80HHC was decided in favour of the assessee after following the decision of the ITAT in the case of the assessee for AY 1995-96 to 1997-98. Thereafter, taking consistent view we restore this issue to the file of the AO to allow the claim of the assessee as directed supra by the ITAT in its decision on similar issue for preceding assessment years. Similarly vide ITAT order No. 2031/Mum/2004 for AY 1998-99 the issue related to reduction of 90% of Royalty from the profit and gains of business was decided in favour of the assessee after following the decision of the ITAT on this issue for AY 1995-96 to 1997-98. We also restore this issue to the file of the AO for allowing as per the direction of the ITAT given in the above referred order. In respect of commission and other income the ld. Counsel submitted that ITAT vide ITA No. 1039/Mum/2005 for assessment year 1999-2000 has decided the issue against the assessee. Following the decision of the ITAT as referred supra we conside....
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....material and packing material by Rs.13.83 crores representing unutilized balance of Modvat as on 31.03.2000. 22. The ld. Counsel submitted that ITAT in assessment year 2006-07 in assessee own case has restored the issue back to the file of the A.O. With the assistance of ld. Representatives we have perused the decision of the ITAT on the identical issue on similar facts for assessment year 1999-2000 vide ITA No. 1039/Mum/2005. The relevant part of the decision is reproduced as under: 60. Ground No. 12 ―12. The learned CIT(A) erred in increasing the value of closing stock of raw materials and packing materials by Rs.13,84,00,000/- representing unutilised balance of Modvat as on 31.3.99. 61. During the relevant previous year the Assessee accounted for purchase of raw material and packing materials on net of excise duty basis. The Assessing Officer increased the value of closing stock of raw material and packing materials by the unutilised balance in the Modvat Credit Account of INR.13,84,00,000/- as on 31.3.1999. The CIT(A) declined to grant any relief on this issue in appeal preferred by the Assessee. Therefore, the Assessee is in appeal before us....
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....om.182 (Kar) & GE BE P. Ltd. Vs. ACIT 49 taxman.com 348 (Kar). The ld. Counsel also submitted that ITAT in assessment year 1999-2000 vide ITA No. 1039/Mum/2005 has restored the issue to the file of the A.O for adjudicating afresh. We have perused the above referred order of the ITAT and found that the similar issue on identical facts has been restored back to the file of the A.O for deciding afresh as per provisions of Sec. 10B applicable at the relevant time after giving the assessee reasonable opportunity of being heard. Accordingly, we restore this issue to the file of the A.O for deciding afresh as per the direction of the ITAT given at para 69 of the above referred order. Therefor this ground of appeal is allowed for statistical purposes. Ground No. 14: Legal cost incurred in respect of merger of Erstwhile Ponds (India) Ltd. is a capital expenditure: 27. During the course of assessment the AO noticed that assessee claimed certain expenses in connection with amalgamation of M/s Industrial Perfumes Ltd. with the assessee. One of the claim was a sum of Rs. 7,09,997/- towards legal cost incurred in respect of merger of Erstwhile Ponds Ltd. with the assessee company. The AO h....
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....und No. 2: Disallowance of 50% of the expenditure incurred on membership and entrance fees to club: 35. During the course of assessment the A.O noticed that in clause 17(a) of part B of form no. 3CD of the audit report the auditor has reported the amount of expenditure incurred on club membership as entrance fees to the amount of Rs. 237.68 lacs and Rs. 34.03 lacs respectively towards cost of club services and facilities used. On query, the assessee explained that rational behind obtaining club membership was to enable its senior employees to interact with their counterpart and colleague in the industry in the competitive business environment. It was further subtitled that short term corporate membership was obtained purely for business reasons. However, the A.O was of the view that by becoming members, the executive have also obtained benefits of personal nature. Therefore, the A.O treated 50% of such expenditure incurred for non-business purpose. Accordingly, 50% of Rs. 2,71,72,121/- which comes to Rs. 1,35,86,060/- was added to the total income of the assessee. 36. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee af....
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....lves with the conditions there the experiment will be beneficial to the business interest of the company and as such any expenditure incurred therein will be an expenditure incurred for the purpose of business. So the issue is to find out the details of the expenditure incurred. Since my predecessors have accepted such expenditure on rural development, I am inclined to follow my predecessors in the absence of any evidence to the contrary. Under the circumstances the AO is directed to allow the expenditure claimed under this head." 41. Heard the rival contentions and perused the material on record. The ITAT Mumbai in the case of the assessee itself vide ITA No. 2201/Mum/2004 for A.Y. 1998-99 has decided the similar issue as per para 46 of the order after following the ITAT decision for A.Y. 1989-90 to 1997-98. Being a recurring issue after following the decision of ITAT as supra this ground of appeal of revenue stand dismissed. Ground No. 4: Deleting disallowance of Rs. 33.57 crores being the deduction claimed by the assessee towards voluntary retirement: 42. During the course of assessment the A.O noticed that assessee has claimed expenditure being ex-gratia payment on the....