2023 (4) TMI 1288 - ITAT MUMBAI

Nature of expenses - expenditure on dies & moulds - revenue or capital expenditure - HELD THAT:- We observe from the record that identical issue is decided in favour of the assessee in the A.Y. 1995-96 as allowing the revenue expenditure in respect of replacement of jigs and fixtures and dies and moulds - Decided in favour of assessee.

Addition of penalty charges received from machinery suppliers - HELD THAT:- Identical issue is decided in favour of the assessee in the A.Y. 1995-96 wherein held CIT(A) has deleted the addition following his order for Assessment Years 1989-90 to 1991-92 as well as the decision of Hon’ble Andhra Pradesh High Court in the case of Barium and Chemicals Ltd. [1987 (2) TMI 18 - ANDHRA PRADESH HIGH COURT]

Deduction towards expenditure relating to purchase of jigs and fixtures - HELD THAT:- As in assessee’s own case for the A.Y. 1996-97 CIT(A) reversed the findings of Assessing Officer and held the expenditure to be on revenue account.

Deduction u/s.80HH and 80-IA without deducting notional depreciation of individual units - HELD THAT:- As decided in A.Y. 1996-97 Co-ordinate Bench in the appeal by Revenue for assessment year 1995-96 had accepted identical ground raised by the Revenue following the decision rendered by the Tribunal in assessee's own case - No contrary material has been placed before us by assessee. We find no reason to take a different view. Consequently, the fining of the CIT(A) on this issue are reversed and Ground No.4 raised in the appeal by Revenue is allowed.

Deduction u/s.80HH and 80-IA by including duty drawback and interest - whether the income earned by the assessee relating to interest earned from the suppliers and duty drawback from the customs are relating to the business carried on by the assessee or income from other sources? - HELD THAT:- The issue under consideration is already considered by various courts particularly the Hon’ble Supreme Court in the case of Meghalaya Steels Ltd [2016 (3) TMI 375 - SUPREME COURT] as it is clear that the source of income earned by the assessee which has direct link to the business carried on by the assessee has to be considered to assess the same under the head income from Business and earned from the eligible unit. Therefore, it is eligible to get the benefit under section 80HH and 80IA. Accordingly, the ground raised by the revenue is dismissed.

Deduction u/s.80HHC pertaining to exclusion of excise duty and exclusion of Sales-tax - HELD THAT:- Identical issue is decided in favour of the assessee for the A.Y. 1996-97 While deciding the issue, the Coordinate Bench of the Tribunal in following the decision in assessee’s own case for the A.Ys. 1995-96 and held that the sale of aforesaid items should be excluded from total turnover for the purpose of calculating deduction u/s 80HHC of the Act, as in Assessment Year 1995-96 these very items were excluded from total turnover while computing deduction u/s 80HHC of the Act.

Allowability of “Technical knowhow” charges - HELD THAT:- As the issue in appeal has been considered by the Co-ordinate Bench of this tribunal in assessee’s own case and decided the issue in favour of the assessee and against the department as held that rendering of technical know-how in the peculiar line of industry in which the assessee is engaged in, is undoubtedly an activity related to the business carried on by the assessee. Therefore, the technical know-how income earned by the assessee company cannot be dissociated with its business income. For the same reason, it cannot be brought under the items qualified in sub-clause (i) of clause (baa). Therefore, the finding of the CIT that the technical know-how need to be excluded to the extent of 90 per cent is again not sustainable in law.

Disallowance of entertainment expenditure confirmed.

Expenditure on lease land for 99 years allowed as revenue expenditure.

Addition towards wealth tax liability by holding that the same is wealth tax paid by the assessee - HELD THAT:- Identical issue is decided in favour of the assessee for the A.Y. 1995-96 and held that the wealth-tax chargeable with reference to the value of any particular asset of the business or profession will not be covered by the prohibition clause of Section 40(a)(iia) of the IT Act, 1961, and as such wealthtax could be admissible for deduction. Admittedly, the wealth-tax paid in pursuance to Section 40 of the Finance Act, 1983, was with reference to the value of particular asset of the business of the assessee. Under Section 40 of the Finance Act, 1983, total wealth of the company was not chargeable to wealth-tax. It was only the assets specified under Sub-section (3) of Section 40 of the Finance Act, 1983, which was chargeable to wealth-tax. 'Therefore, the exception part of Explanation to Section 40(a)(iia) of the Act referred to above became applicable in the present case and the wealth-tax paid by the assessee in pursuance to Section 40 of the Finance Act, 1983, was admissible for deduction. Decided in favour of assessee.

Allowing expenses on GDR issue as covered in section 35D - HELD THAT:- We observe that the assessee has incurred expenses in connection with the issue of GDR and these expenses are allowable only when new or expansion of industrial undertaking. During the current Assessment Year, the assessee has completed the expansion of the Industrial undertaking, the expenses are allowable deduction u/s 35D of the Act, since the expenses are incurred during previous AY and expansion was completed only this AY, the relevant expenses are allowable in this Assessment Year. In the similar facts, the ITAT Ahmedabad Bench has decided the issue in favour of the assessee, in the case of Gujarat Narmada Valley Fertilizers Co. Ltd. [2011 (12) TMI 519 - ITAT AHMEDABAD] - Thus we direct assessing officer to allow the claim made by the assessee relating to deduction u/s. 35D of the Act.

Allowability of depreciation in respect of sale and lease back transaction - HELD THAT:- We observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1996-97. However, the Ld AR has brought to our notice that the assessee has not entered in any such transaction with Tata Chemical Ltd. Therefore, this ground raised by the revenue is not maintainable considering the fact that no such transactions are carried on by the assessee with the above company. Accordingly, ground raised by the revenue is dismissed.

Lease agreement with JCT Ltd - HELD THAT:- As following the principle of consistency, the view taken by the Tribunal in A.Y. 1996-97 is respectfully followed and the issue involved in relation to transaction with JCT Ltd are similar to the above findings in relation to transaction with PSEB, accordingly, ground raised by the revenue is dismissed.

Nature of receipts - taxability of surplus on account of redemption of preference shares, debentures, bonds, certificate of deposits - revenue receipts or Capital Gains - HELD THAT:- As it is brought to our notice that the Assessing Officer himself treated the surplus of redemption of preference shares and preference shares as income chargeable to tax under the head “capital gain”. Therefore, even Ld. CIT(A) has decided the issue as per the findings of the Assessing Officer. Therefore, it is not the case of the Assessing Officer that the above surplus should be considered for taxation under the head “under the term revenue receipt”. Therefore, in our considered view the ground raised by the revenue is not maintainable as the fact suggest that the ground raised by the revenue is not connected with the findings of the Assessing Officer. The Ld.CIT(A) has sustained the findings of the Assessing Officer, therefore, there is no grievance to the revenue. Accordingly, ground raised by the revenue is dismissed.

Redemption of treasury bills - above said surplus has to be treated as “interest income” substantiating the views of the AO and not under the head “capital gain” - HELD THAT:- After considering submissions of both the parties, we are not inclined to accept the submissions raised by the revenue that the surplus earned by the assessee cannot be treated as interest income and it is fact on record that assessee has held the treasury bills for certain period of time as investment and the surplus has to be taxed under the head “capital gain” and the same was sustained by the Ld.CIT(A). Therefore, the contention of the Assessing Officer is accordingly rejected and we observe that CIT(A) has rejected claim made by the assessee that the redemption of such treasury bills is not a transfer - Grounds raised by the revenue is allowed.