TMI Blog2009 (1) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in this appeal is that the CIT(A) erred in confirming the addition of Rs. 17,19,215, representing the accrued interest on deep discount bonds issued by ICICI and IDBI. 4. Facts of the case in brief relating to this issue are that the assessee during the previous years relevant to assessment years 1998-99 and 1999-2000 invested an amount of Rs. 2,00,00,000 in deep discount bonds of IDBI and ICICI. For the assessment year under consideration, the assessee has shown an amount of Rs. 24,31,266 as interest accrued from these bonds and credited the same in the Profit Loss Account. However, the assessee reduced the same while calculating the taxable income, on the ground that the gains arising out of the transfer/redemption of the above bonds in the year of redemption/transfer is taxable as capital gains in that year. Assessing Officer was not convinced with the argument of the assessee in view of the Circular of the CBDT, being Circular No. 2 dated 15-2-2002, wherein it was clarified that interest accrued on bonds would be taxable in the relevant assessment year. In the absence of satisfactory explanation from the assessee, the Assessing Officer brought to tax the accrued inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of this contention, he relied on the decision of the Kolkata Bench of this Tribunal in the case of JCT Ltd. v. Asstt. CIT [1998] 65 ITD 169 . He also relied on the decision of this Tribunal in assessee s own case for the assessment year 2000-01, wherein corresponding addition made is confirmed. 8. We have considered, the rival submissions and perused the material available on record. As per the CBDT Circular No. 2 of 2002 dated 15-2-2002 ( supra ), which requires the difference between the cost and the market value at the end of the financial year in the year of subscription and the difference between the market value at the beginning and the end of the year for every successive year to be treated as interest income accrued during the year. The market value at the beginning of the next financial year and the date of redemption will also be taxed as interest. It follows that since the entire income is being taxed on year to year basis as accretion, there is no other liability for the assessee. In the event of transfer before maturity, the cost will be the aggregate of the amount subscribed for the bond and assessed interest on accrual basis, so that the difference betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 9. Next effective grievance of the assessee in this appeal relates to disallowance of depreciation to the tune of Rs. 5,41,282 claimed by the assessee on commercial vehicles in the revised statement filed before the Assessing Officer. 10. For the assessment year 2001-02, assessee claimed depreciation of Rs. 2,47,43,950 under the Income-tax Rules. As in earlier years, depreciation was recomputed in the assessments made under section 143(3) for the assessment years 1999-2000 and 2000-01, disallowing a part of the claim, assessee was asked to recompute the depreciation for the assessment year under consideration also. Assessee filed revised computation statement in respect of depreciation, and arrived at a depreciation of Rs. 2,46,95,011. From the said statement, the Assessing Officer noticed that the assessee has included a block of assets on which 40 per cent depreciation was claimed. As the same was not shown in the original statement filed with the return, and as the assessee was unable to reconcile the same with the original statement, the depreciation claimed on this block was not allowed, and proceeding on that basis, depreciation allowable was worked out at Rs. 2,42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the depreciation claimed on the commercial vehicles in the revised statement of depreciation at 40 per cent should be allowed. 13. On the contrary, the learned Departmental Representative submitted that the assessee filed revised statement in which it included block of assets, on which 40 per cent depreciation has been claimed. The same was not shown in the original statement filed along with the return of income. Assessee has not been able to reconcile the same with the original statement also. Further, from the classification/statement, it cannot be made out whether the vehicles are heavy vehicles or cars and further whether the commercial vehicles were used in the business of hiring or otherwise. No evidence is placed before the Assessing Officer as well as the learned CIT(A). Therefore, the Assessing Officer could not examine this aspect of the matter. If at all, the matter may be sent back to the Assessing Officer for fresh examination, but the depreciation cannot be claimed by filing a revised statement. For this proposition, reliance is placed on the decision in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC). 14. We have considered the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2004] 87 TTJ (Mum.) 268. ( b ) Asstt. CIT v. Sharda Gums Chemicals [2001] 76 ITD 282 (Jodh.). ( c ) Pathi Designs v. Dy. CIT [2005] 2 SOT 408 (Bang.). Reliance is also placed on the decision of this Tribunal in assessee s own case Dy. CIT v. Avanti Feeds Ltd. [IT Appeal No. 417 (Hyd.) of 2003 for assessment year 1999-2000]. 17. Learned Departmental Representative on the other hand, submitted that interest on margin money cannot be deemed as income from business. He objected to the alternative plea of the assessee for netting, on the ground that for netting of the interest, nexus has to be established between the interest receipts and interest payments. Assessee has not submitted any details in this regard, and as such netting is not permissible. He relied on the following decisions, in support of these contentions ( a ) CIT v. Liberty Footwear Co. [2006] 287 ITR 339 (Punj. Har.). ( b ) CIT v. V. Chinnapandi [2006] 282 ITR 389 (Mad.). She also relied on the order of Hyderabad Bench A of this Tribunal dated 30-11-2007 in the case of PVR Industries v. Asstt. CIT [IT Appeal No. 340 (Hyd.) of 2006 for assessment year 2000-01), inviting our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years 1999-2000 and 2000-01 in ITA Nos. 1110-1111/Hyd./2005 dated 27-9-2006 following the decision of Special Bench of the Tribunal in Lalsons Enterprises case ( supra ) has allowed the assessee s appeals. We further find that their lordships of Hon ble Delhi High Court in the case of CIT v. Sri Ram Honda Power Equip [2007] 289 ITR 475 while affirming the decision of the Special Bench of the Tribunal in Lalsons Enterprises ( supra ), have differed from the judgment of the Hon ble Madras High Court in the case of V. Chinnapandi ( supra ), relied on by the learned Departmental Representative. In this view of the matter, we respectfully following the decision of the Tribunal in assessee s own case and the judgment of the Hon ble Delhi High Court in the case of Sri Ram Honda Power Equip ( supra ) and the rule of consistency and also keeping in view that it is settled law that where there are contrary views, the view which is in favour of the assessee, is to be adopted, vide CIT v. Vegetable Products Ltd. ( 88 ITR 192)(SC), direct the Assessing Officer to follow the ratio of decision in the said cases and allow appropriate relief to the assessee and accordingly, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the assessee and in favour of the Department. It has been held, therein following its earlier decision in the case of Sterling Foods v. CIT [1984] 150 ITR 292 (Kar.) which was later affirmed by the Apex Court in CIT v. Sterling Foods [1999] 237 ITR 579 3 , that so as to qualify for being treated as derived from industrial undertaking , the very industrial undertaking should be the direct source of profit; income derived by the assessee from any other source cannot be held to be the income derived from the industrial undertaking. It is an admitted fact that the gain on account of foreign exchange fluctuations in the instant case is of a capital nature, being in relation to IDBI loan. The matter would have been entirely different if it is a case of gain on account of foreign exchange fluctuations, arising out of export of finished goods or import of raw-material, because in such a case, the gain derived is directly linked to the manufacturing activity of the industrial undertaking of the assessee. In this view of the matter, we find no merit in the contentions of the assessee on this issue. Assessee s contentions on this aspect are rejected. 24. The next effective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges also form part of the business income of the assessee, and as such they are not liable to be excluded from the profits and gains of business while computing deduction under section 80HHC. Placing reliance on the decision of the Bombay High Court in the case of CIT v. Bangalore Clothing Co. [2003] 260 ITR 371 1 , he submitted that processing charges constitute income derived from industrial undertaking, and the same, as such are not liable to be excluded in terms of clause ( baa ) of section 80HHC, while computing relief under section 80HHC. He also submitted that the CIT(A) has correctly allowed deduction under section 80-IA even in respect of processing charges and that being so, there is no justification for giving a different treatment while computing deduction under section 80HHC. In this behalf he relied on the decision of the Tribunal in the case of Asstt. CIT v. U.P. National Manufactures Ltd. [2001] 76 ITD 272 (All.). In the alternative, he pleaded that if at all they are to be excluded, it is only 90 per cent of the net processing charges received, viz., net of expenditure incurred for earning such processing charges, which should be excluded. 30. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice by the learned Departmental Representative, we find no justification to interfere with the order of the CIT(A). This ground of the revenue is accordingly rejected. 35. Next effective ground of the revenue in its appeal is that the CIT(A) ought to have upheld the decision of the Assessing Officer that excise duty and sales tax form integral part of turnover and cannot be reduced from total turnover, while computing deduction under section 80HHC of the Act. 36. We have considered the rival submissions and perused the orders of the lower authorities on this issue. We find that the decision of the Supreme Court in the case of CIT v. Lakshmi Machine Works [2007] 290 ITR 667, wherein it has been held that since excise duty and sales tax did involve any element of turnover, such taxes have to be excluded. Commission, interest, rent etc. do yield profit, but they do not partake the character of turnover and therefore, they are not includible in total turnover. Similarly, excise duty and sales tax also cannot form part of total turnover. Hence, they have to be excluded from the total turnover, for the purpose of computing deduction under section 80HHC. We therefore do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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