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2022 (8) TMI 1444 - AT - Income TaxIncome from other sources - sale of scrap, interest and other income - assessee is an eligible undertaking under section 80IA/80IE - HELD THAT:- We find that issue on hand is covered by order of the coordinate bench of this tribunal in the own case of the assessee for A.Y. 2010-11 held if an item whose sale was linked with the business of the assessee, and cannot be assessed as an income from other sources, then that receipt deserves to be included in the eligible profit - we allow this ground of appeal partly, and direct the AO to include a sum in the eligible profit for grant of deduction under section 80IE of the Act. Thus, respectfully following the order this tribunal in the own case of assessee above , we set aside the finding of the learned CIT(A) to the extent of amount of exclusion of income on account of scrap sale whereas we uphold the finding of the learned CIT(A). With regard to the exclusion of interest and other income as discussed above, we hold that such income is not eligible for deduction under section 80-IE of the Act. Thus, the ground of appeal raised by the Assessee is hereby partly allowed. Deduction u/s 80IE - HELD THAT:- We find that issue on hand is covered by the order of the coordinate bench of this tribunal in the own case of the assessee for AY 2010-11as held that Revenue failed to demonstrate that machineries exceeding 20% of the total value of the plant & machinery were old machinery. Therefore, considering the facts on this fold of grievance of the Revenue, we do not find any error in the order of theCIT(A). Assessee is entitled for deduction under section 80IE. Quashing the book result u/s 145(3) - HELD THAT:- As before rejecting the books of accounts, the AO must record the specific reasons for rejecting the books of accounts. Such satisfaction has to be established and substantiated based on facts and figures, which further depends on the circumstances of each case. Mere minor mistakes/typological errors/absence of stock registers/ lower GP may not ipso facto amount to incorrectness/incompleteness of accounts in terms of section 145(3) - But the case would be different where the above-mentioned mistakes are coupled with other findings. In the given case, AO has rejected the book results for the reason that the assessee has not provide certain details asked for during the course of assessment and the assessee diverted in its expenses in books of parent company to claim higher exemption under section 80IA - However the AO did not make any estimate of NP or GP. In this connection we found that the assessee has maintained proper books of account and furnished details as required by the assessee except certain detail with respect to that the assessee has submitted either those required detail not applicable in its case or some detail are at factory premises will be submitted at later stage if required. In these documentary evidence no defect was pointed out by the AO. Therefore, without bringing any corroborative material on record suggesting specific defect in the books of account the book result cannot be rejected merely for not providing certain detail which AO requires to verify. Without prejudice to the above, we also note that the AO after rejecting the books accounts has proceeded to disallow or recomputed the deduction under section 80IA of the Act on various different grounds. In other words, the AO has relied upon the same set of data/figures as shown by the assessee for making allowances or disallowances. As such, there was no iota of doubt on the genuineness of the other income and the expenses was brought on record by the AO. To our mind, once the books of accounts have been rejected, the AO has to estimate the profit and he has no right to make any individual addition or deletion to the total income of the assessee. Disallowances of deduction u/s 80IE made on account of apportionment of selling & distribution expenses, R&D expenses, royalty expenses, managerial fee and remuneration to partners SPIL - HELD THAT:- As issue on hand is covered by order of the coordinate bench of this tribunal on own case of the assessee for A.Y. 2010-11 no justification at the end of the AO to estimate 8% of the turnover as fee required to be paid for use of logo, trademark etc. The assessee has already paid 5% of turnover as remuneration to SPIL for extending facility, sale and distribution, R&D, use of logo etc - as assessee has already paid remuneration at 5% of the turnover which has been accounted in the accounts. No further adjustment was required. This stand of the assessee in the case of SPI has been approved. We find that the finding of the CIT(A) is on this line, and we do not see any reason to deviate from the order of the ITAT, Amristar Bench on this issue - also supplementary deed was a contract amongst the partners to decide the terms either prospective or retrospective. Therefore, remuneration to the partners cannot be disallowed by the AO with help of section 40b of the Act. Explanation 4 to section 40b talks of working partner to whom remuneration can be paid. Apart from the above, ld.CIT(A) further observed that in a revised return assessee itself disallowed this expenditure suomoto. Once this amount has been added back, then the AO is not justified to add back it again. Deduction u/s 80-IB in respect of interest on delayed payments in question allowed and direct the AO to delete the additions. Deduction u/s 80IB on account disallowances of expenses under section 43B - HELD THAT:- As decided the issue in favour the assessee. As in A.Y. 2010-11 allowed the claim of the assessee on the consequential higher amount eligible foe deduction under section 80IB. Deduction under section 80IB on account allocation of R&D expenses - HELD THAT:-As in own case of the assessee for A.Y. 2010-11 held no disallowance is called for because clause 7-B of the partnership deed specifically provides for remuneration for technical assistance in the manufacturing activities and R&D facilities were included in the same. The Ld. CIT(A) has further based its findings on the ground that the notional disallowance on account of R&D expenses has been made by the AO on similar lines as have been made in respect of royalty, management fees and selling and distribution expenses and the said pounds were found not tenable by the Tribunal.
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