TaxTMI 
TaxTMI 
2023 (8) TMI 1700
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.... the income at Rs. 948,46,19,890/- after making various disallowances / additions. Aggrieved, the assessee filed further appeal before the CIT(A) in which the CIT(A) gave partial relief. Against the order of the CIT(A) both the assessee and the Revenue are in appeal before the Tribunal raising various grounds contending the following issues :- Assessee (1) Disallowance of travelling expenditure relating to foreign travel in respect of spouses who accompanied some of the company employees or official tour.(Ground 1) (2) Deduction under section 80I/80IB (Grounds 2 - 2.1 to 2.3) (3) Allocation of expenditure to individual units in respect of deduction u/s 80IB (Ground 3) (4) Deduction under section 80IB in respect of tea unit at Dharwad (Ground 4 - 4.1 to 4.2) (5) Allocating research expenses whilst determining the profits and gains derived from industrial undertaking eligible for deduction u/s 80IB (Ground 5- 5.1) (6) Allocating interest expenses whilst determining the profits and gains derived from industrial undertaking eligible for deduction u/ 80IB. (Ground 6- 6.1) (7) Deduction under section 80HHC - scrap sales / ....
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....nstitutions or to attend seminars or to work in Unilever companies on temporary posts abroad. The assessee, therefore, argued that expenses are incurred for the purposes of business and hence allowable. The Assessing Officer, however, did not agree with the same and relying on earlier year's order disallowed the claim. On appeal, the Ld CIT(A), upheld the finding of the Assessing Officer, with regard to the disallowance. Further aggrieved, the assessee is in appeal before the Tribunal. 4. Before us, the Ld.AR for the assessee submitted that the issue stands decided in favour of the assessee by the Tribunal in assessee's own case for A.Y. 2000-01 in ITA Nos. 3951/Mum/2008 & 4033/Mum/2008 vide order dated 16/05/2023. The Ld. DR relied on the order of the lower authorities. 5. We heard the rival submissions, we find that the Tribunal in assessee's own case for A.Y. 2000-01 (supra) has considered the identical issue and decided the issue in favour of the assessee by holding that :- "5. During the course of appellate proceedings before us the ld. Counsel contended that such foreign travelling expenses is covered in favour of the assessee vide order of the ITAT....
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....gly. In result the CIT(A) partly allowed this issue in favour of the assessee. 8. Before us, both the parties agreed that the issue is squarely covered by the decision of the Tribunal in assessee's own case for A.Y. 2000-01 (surpa) in which the Hon'ble Tribunal has considered an exactly identical issue and held as under :- "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 Tribunal has restored the issue back to the AO for de novo adjudication after considering the findings of the Tribunal in accordance with law. Similarly, taking consistent view we restored this issue to the file of the A.O for de novo adjudication as directed vide ITA No. 2201/Mum/2004. Accordingly, ground no. 2 & 3 are allowed for statistical purposes." 9. Consistent with t....
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....tical issues in appeal for the Assessment Year 1990-91 [ITA No. 4628 & 4658/Mum/2003, 08.02.2012] the Tribunal has held as under: 37 Ground No.10 regarding setting off of loss of earlier years for deduction u/s 80I. The Assessing Officer adjusted the earlier year's loss of the unit eligible for deduction u/s 80I and consequently the claim of deduction u/s 80I was not allowed in full as claimed by the assessee. On appeal, the CIT(A) has referred sub. sec. (1) of sub sec (6) of sec. 80I and held that the profit has to be computed,, if the Haldia unit eligible for deduction u/s 80I was only undertaking. 38. We have heard the ld Sr counsel for the assessee as well as ld DR and considered the relevant material on record. At the outset, we note that this issue has been decided against the assessee by the Tribunal for the AY 88- 89 & 89- 90. The Tribunal for the AY 89- 90 has adjudicated the issue in para 27.1 as under; "27.1 After hearing both the parties, we find that this issue is also covered by 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 ....
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....its for the purpose of deduction under section 80IB - Ground No.5 & 6 14. The Assessing Officer during the course of assessment held that the outcome of the research expenditure is futuristic in nature in the manufacturing processes and product development of units that are eligible for deduction under section 80IB. Accordingly the Assessing Officer allocated the expenditure incurred on research and development while arriving at the profits eligible for deduction under section 80IB. The Assessing Officer similarly allocated the interest expenses to the unit for arriving at the profits for the purpose of deduction under section 80HHC. The CIT(A) upheld the allocation by stating that the expenditure incurred towards research and development benefits the assessee to the upliftment and progress of the products that are manufactured by the eligible units. The CIT(A) also rejected the submissions of the assessee that borrowed funds were not utilised for the undertaking for the reason that the assessee did not submit any evidence for the claim. 15. The ld AR submitted that the coordinate bench in assessee's own case for AY 2006-07 (ITA No. 7868/Mum/2010 dated 10.12.2012) has con....
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.... Act ? 3. Whether on facts and in circumstances of the case and in law the Tribunal was right in not allocating the research expenses and interest expenses for calculating allowable deduction/exemption under Section 10A and 10B of the Act on Pune Tea Export Unit and Khandla Unit ? 4. Regarding question No. 2 and 3 : (a) We find that the impugned order of the Tribunal allowed the respondent - assessee's appeal before it by following a decision of this Court in Zandu Pharmaceuticals Works Ltd. v. CIT [2013] 350 ITR 366/213 Taxman_207/31 taxmann.com 191. The Tribunal while following the principle in this Court's order in Zandu Pharmaceuticals Works Ltd. (supra) held that so far as research and interest expenses are concerned, it can only be allowed to the extent it has nexus to the unit claiming the deduction. The grievance of the revenue before us is that the aforesaid decision would have no application to the present facts as it is distinguishable. However, besides stating the above nothing has been pointed out in support of its submission that the Zandu Pharmaceuticals Works Ltd. (supra) has no application. (b) In the above view, as the i....
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.... AO on this issue. (ii) Regarding deduction of 90% out of various receipts like interest, etc. the AO's action was upheld following the judgement of Hon'ble Bombay High Court in the case of Asian Stars Co Ltd 326 ITR 56 (Bom). (iii) With regard to deduction u/s 80HHC on unrealised export profit of Rs. 45,87,382/-, the Ld.CIT(A) held that the AO was justified in not allowing deduction on the unrealised export profit as the assessee has not taken the required permission from the CIT u/s 80HHC(2)(a). (iv) In respect of loss from export, the Ld.CIT(A) held that the AO has correctly set off the loss against profit for the purpose of deduction u/s 80HHC in the light of the decision of the Hon'ble Bombay High Court in IPCA Laboratories Ltd which has been confirmed by the Hon'ble Apex Court in 266 ITR 521 (SC). 22. Aggrieved, the assessee is in further appeal before the Tribunal. At the time of hearing the Ld.AR submitted that all the above issues in relation to deduction u/s 80HHC have been decided by the Tribunal in assessee's own case for AY 2000- 01 and therefore submitted that the issues stand covered by the decision of the Tribunal. ....
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....re 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 consider that 90% of the amount of commission and other income should be reduced from the amount of profit from the business while calculating profit of business for computing deduction u/s 80HHC of the Act. Therefore, this ground of appeal of the assessee is partly allowed for statistical purposes." 26. Respectfully following the above decision of the coordinate bench we restore the issue of reducing 90% interest and Royalty from the profits computed for the purpose of deduction under section 80HHC back to the file of the Assessing Officer with a direction to allow the claim of the assessee in accordance with the directions given by the Tribunal for AY 1995-96 to 1997-98 and 1998-99 after allowing reasonable opportunity of being heard. 27. With regard to the issue of deduction u/s 80HHC on unrealised export profit, we notice that....
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....e manner so that they can maintain their required standard of living after retirement. Due to inflation the amount of pension payable by superannuating fund maintained by the LIC is inadequate. Therefore, the company is making payment to its employees under retirement pension plan by supplementing the amount payable by the LIC under approved superannuation fund. The Assessing Officer however, did not find force in the submissions of the assessee. He observed that the assessee has claimed liability on account of contribution for which a sinking fund must have the requisite approval u/s 36(1)(iv) or any contribution to the fund shall meet the provisions of se.40A(9). Referring to the provisions of sec.43B the Assessing Officer held that only the actual payment made is allowable. The Assessing Officer observed that such disallowance has been upheld by the CIT(A) for AYs 1991-92 & 1992-93. Accordingly he allowed the sum of Rs.1712.20 lac actually paid and disallowed the balance amount of Rs.2929.23 lac. On further appeal, the CIT(A) held that the provision made is not an ascertained liability and by relying on the decisions for earlier years by his predecessor dismissed the ground rais....
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....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 on this issue. 62. We have considered rival submissions. Both the sides agree that identical issue has been remanded back to the file of Assessing Officer vide order dated 10.12.2012 passed in ITA No. 7868/Mum/2010 for the Assessment Year 2006-07. We note that the Assessee has taken a position that the accounting policy has been consistently been followed by the Tribunal. For the Assessment Year 2006-07, the Dispute Resolution had directed Assessing Officer to adjust the opening stock, purchases and the closing stock by considering all taxes/duties and shares and thereafter, make addition under section 145A of the Act in case there was....
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.... 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. Therefore this ground of appeal is allowed for statistical purposes. " 37. The facts being identical, consistent with the earlier decision of the Tribunal, we restore the issue to the file of the Assessing Officer for fresh consideration as per the directions of the Tribunal issued earlier. Disallowance of exemption under section 10B in respect of internal transfer - Ground 14 38. In the computation of income, the assessee had claimed an amount of Rs. 8,78,95,659/- as exempt under section 10B in respect of its industrial undertaking at Chorwad. The Assessing Officer noticed that the sales of the unit includes internal t....
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.... exported is being fulfilled. The lower authorities rejected the claim for the reason that the internal transfer included in the sales has no relevance to the export profits of the assessee. Accordingly, the assessee was denied the benefit of section 10B to the extent of Rs. 2,35,988/-. With regard to whether the transfer from one export unit to another can be considered as deemed export for the purpose of section 10B, we notice that the issue has been considered by Hon'ble Karnataka High Court in the case of Granite Mart Ltd vs ITO (supra) where the question of law raised and the decision of the Hon'ble High Court is extracted as below :- (i) Whether the Tribunal was justified in law in holding that the exports made through third parties and inter unit transfers are not entitled for deduction under section 10B of the Act on the facts and circumstances of the case and consequently gave a perverse finding? "12. Thus, from perusal of section 10A of the Act, it is evident that the intention of the legislature is to encourage establishment of export oriented industries with the object of receiving convertible foreign exchange. In order to claim deduction under....
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....against the revenue. In the result the order passed by the Income-tax Appellate Tribunal as well as the Commissioner of Income-tax (Appeals) insofar as it disallows the claim of the appellant with regard to transactions through third parties and inter- unit transfers is hereby quashed and the assessee is held entitled to the benefit of deduction under section 10B of the Act in respect of third parties and inter unit transfers as well. In the result, the appeals are allowed." 42. We notice that the issue in assessee's case is similar to the one considered by the Hon'ble High Court in the above case. Accordingly, respectfully following the above decision, we hold that the amount of internal transfer between two EOUs of the assessee is to be considered for the purpose of arriving at the profit eligible for exemption under section 10B of the Act. It is also to be noted here that since the impugned amount is an internal transfer which is shown as sales in one EOU and as expenditure in the other EOU, there is merit in the contention that at entity level it is tax neutral. In view of the above discussion, we delete the addition made by the Assessing Officer denying the amount o....
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....enewal of the R&D unit at Hyderabad was not submitted. The CIT(A) upheld the disallowance made by the Assessing Officer. 46. The Ld.AR in this regard submitted that the lower authorities have proceeded based on the incorrect assumption that the assessee has claimed deduction towards scientific expenditure under section 35(1)(ii) whereas the assessee has claimed expenditure under section 35(2)(ia) of the Act. The Ld.AR further submitted that it is only as per the provisions of section 35(1)(ii), that the approval of the R&D Centres had to be submitted and since the assessee has claimed deduction under section 35(2)(ia), there was no such requirement. In this regard, the Ld.AR drew our attention to the relevant clause (clause 15(b)) of the Tax Audit Report for the relevant assessment year where the impugned amount has been claimed as a deduction under section 35(2)(ia). Accordingly, the Ld.AR submitted that the lower authorities erred in disallowing the expenditure under the wrong presumption that the assessee has claimed deduction under section 35(1)(ii) and, therefore, the disallowance is not tenable. 47. We heard the parties and perused the material available on record. We n....
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....he assessee has not fulfilled the requirement. The lower authorities have not examined the merits of the issues to verify whether the assessee's claim is allowable under section 35(2)(ia). Therefore we remit the issue back to the Assessing Officer for a fresh consideration of the claim made by the assessee under the correct section i.e.35(2)(ia). The assessee is directed to submit the relevant details as may be called for and cooperate with the proceedings. It is ordered accordingly. Disallowance of cess on green leaf- Ground No.17 49. In the computation of income, assessee has shown profit from plantation pertaining to Plantation Tea Estate India (TEI) at Rs. 16,97,88,000/- and Doom Dooma India (DDI) division at a loss of Rs. 2,58,56,000/-. The assessee has computed income from manufacturing of tea in accordance with section 29 read with Rule 8 of the Income-tax Rules, 1962. The Assessing Officer noticed from the said computation that the assessee has allocated cess on agriculture in the ratio of 60:40 towards agriculture and business. Accordingly the assessee has claimed 40% as business expenditure. The Assessing Officer called on the assessee to state as to why the ent....
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.... Tribunal has examined the provisions of Rule 8 and the other relevant provisions of the Income-tax Act and has also referred to decisions of the Supreme Court in Tata Tea Ltd. v. State of West Bengal, [1988] " ITR 18, Assam Company Ltd. & Anr. Vs. State of Assam & Ors [2001] 248 ITR 567. In view of the above, it is submitted that the cess on green leaf is an expenditure incurred while growing and manufacture of tea and ought to be apportioned in terms of the provisions of Rule 8." 50. The Assessing Officer however denied the claim of the assessee by relying on the decision of the Guwahati High Court in the case of Jorhaut Group Ltd vs Agricultural ITO 226 ITR 622 (Gau). Accordingly, the Assessing Officer disallowed an amount of Rs. 47,22,938/- being 40% of the total expenditure claimed by the assessee as business expenditure. The CIT(A) on further appeal upheld the disallowance. 51. The Ld.AR in this regard submitted that assessee's case is covered by the decision of the Calcutta High Court in assessee's own case. The Ld.AR further submitted that the Hon'ble Calcutta High Court while considering the issue has also distinguished the decision of the Hon....
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.... and forty per cent of such income shall be deemed to be income liable to tax. Rule 8 provides for a legal fiction for determining what part of the income of an assessee, who engages in the growing of tea leaves and the manufacture of tea, would be regarded as being attributable to income from the manufacturing operations and liable to tax. As a result of the fiction brought in by Rule 8, the entire income which is derived from the sale of tea grown and manufactured by the seller is required to be computed, in the first instance, as if it is an income derived from business. 40% of the income which is so derived, is then deemed to be income which is liable to tax. The expenditure which was incurred by the assessee on the payment of cess on green leaves, is expenditure which is liable to be taken into account in computing the income of the assessee from the business. As a matter of fact, this view has been taken by the Calcutta High Court in Income Tax Appeal 193 of 2002 decided in the case of the assessee itself on 4 February 2011. One of the questions which was formulated for the decision of the Calcutta High Court was to the following effect: "Whether in computing the com....
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....x on Distributed Profits) referred to in sec.115-O of the Act, such additional income tax payable by the domestic company shall be at the rate mentioned in section 115-O of the Act and not at the rate of tax applicable to the non-resident shareholder(s) as specified in the relevant DTAA with reference to such dividend income. Nevertheless, we are conscious of the sovereign's prerogative to extend the treaty protection to domestic companies paying dividend distribution tax through the mechanism of DTAAs. Thus, wherever the Contracting States to a tax treaty intend to extend the treaty protection to the domestic company paying dividend distribution tax, only then, the domestic company can claim benefit of the DTAA, if any. Thus, the question before the Special Bench is answered, accordingly. 58. In view of the above decision the addition ground of the assessee is dismissed. ITA No.5549/Mum/2011 (Revenue's appeal) Deletion of addition towards Membership Fees and Entrance to Club - Ground No.1 59. The Assessing Officer disallowed 50% of the expenditure claimed by the assessee as incurred towards Membership Fees and Entrance as expenditure incurred for non-business p....
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....nded with effect from 1.4.1989 whereby the legislature has withdrawn the specific concession. Accordingly, the AO disallowed the expenditure. On appeal, the Ld. CIT(A) allowed the ground of the assessee with the following observations :- "8.3 I have considered the A.O.'s order as well as the appellant's A/R submission. Having considered both, I find that the AO has disallowed the amount only on the ground that the specific deduction available u/s 35CC has been withdrawn and not available for this year. However, allowability of the expenditure, like any other expenditure, can be considered u/s. 37. There is no dispute that the appellant company manufactures a large number of products which are sold all over India including the rural areas. If the executives of the company are sent to the rural areas to acquaint themselves 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 in earlier years have accepted such expenditure on....
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....st of the shares and securities on which tax free dividend interest received over the total assets of the company to the interest cost has been applied. In view of the same and insertion of section 14A under the Income-tax Act with retrospective from 1-4-1962 and explanatory provision relating to finance bill, 2001, expenses incurred to extent of earning exempt income is to be disallowed, and wherever such expenses are not available, the same is to be ascertained. In this regard, I apply the ratio of the decision in case of Consolidated Coffee Ltd. vs. State of Karnataka (2002) 176 CTR 98 (SC) where it has been held that in the absence of all the relevant particulars, apportionment of expenses towards agricultural and non-agricultural income was justified." 67. Aggrieved, assessee carried the matter before the CIT(A). The Ld. CIT(A), by following the judgement of the Hon'ble jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd vs DCIT (supra) restored the issue to the file of the Assessing Officer with a direction to provide reasonable opportunity to the assessee and work out the total expenditure i.e. direct or indirect both in relation to exempt income and ....
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....erested, the CIT(A) held that the Assessing Officer has incorrectly applied the provisions of section 10B(9). 70. In this regard, the Ld.AR submitted that sub section (9) is omitted by the Finance Act, 2003 without any saving clause and, therefore, the disallowance made by the Assessing Officer by invoking sub section (9) is no longer valid. The Ld.AR submitted that when a section is omitted without any saving clause, then it has to be taken that the section never existed and accordingly, the disallowance made is not tenable. The Ld.AR in this regard relied on the decision of the Hon'ble Karnataka High Court in the case of GE Thermometrics India Pvt. Ltd (ITA No.876 of 2008 C/W ITA No.877 of 2008) judgement dated 25th November, 2014 for A.Y. 2002-03. The Ld.AR submitted that in the above decision, the Hon'ble Karnataka High Court has held that sub section (9) of section 10B is not applicable to the assessee for A.Y. 2002-03 which is prior to the Finance Act, 2003 which omitted the said sub section (9). The Ld.AR therefore submitted that in assessee's case for A.Y. 2001-02, the ratio laid down by the Hon'ble Karnataka High Court is squarely applicable. 71. The ....