TMI Blog2005 (2) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty has not reduced the business profit of the assessee, therefore, refund of excise duty paid should not be excluded from the business profit, had not been controverted by the Department. We are, therefore, inclined to agree with the learned Authorised Representative, that there is no infirmity in the order of the CIT(A) in directing the AO not to exclude 90 percent of such excise duty refund in terms of Expln. (baa), from the profit of business for computing deduction u/s 80HHC. In the result, appeal of the Revenue is dismissed. Exclusion of sale of scrap, sundry balance written back and octroi refund - We find that the issue is squarely covered by the decision of the jurisdictional High Court in the case of Harjivandas Juthabhai, in favour of the assessee, wherein it was held that the scrap generated during the course of manufacturing was eligible for deduction u/s 80-I [ 1999 (12) TMI 5 - GUJARAT HIGH COURT] . It was categorically observed by the High Court that it requires to be noted that if the assessee was not engaged in the industrial activity there was no question of generating any scrap and if the assessee was doing trading activity, obviously this section will n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Tribunal, Jodhpur and Mumbai Benches, we are inclined to reverse the findings of the lower authorities and allow this ground in favour of the assessee. In the result, Revenue's appeal for the AY 1992-93 is dismissed, whereas the cross-appeals of the assessee and the Revenue for the AY 1993-94 are allowed in part, as indicated above. - Member(s) : R. P. TOLANI., R. C. SHARMA. ORDER - R.C. SHARMA, A.M.: These are cross-appeals filed by the assessee and the Revenue against the order of the CIT(A), dt. 5th Dec., 1996, for the asst. yr. 1993-94 in the matter of the order passed by the AO under s. 143(3) of IT Act, and an appeal filed by the Revenue against the order of the CIT(A) , dt. 18th Dec., 1996, for the asst. yr. 1992-93 in the matter of order by passed by the AO under s. 250 to give appeal effect of the order of CIT(A) dt. 2nd Jan., 1996. 2. As all the appeals have been heard together, for the sake of convenience, we dispose of all these appeals by this consolidated order. 3. The only grievance of the Revenue in the asst. yr. 1992-93 relates to the CIT(A)'s action for directing the AO not to exclude 90 per cent of the excise duty refund from profit of business, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise duty paid should be added back as representing no expenditure at all. 7. We have considered the rival contentions and found from the record that profit of the assessee's business did not include the excise duty refund. As the assessee was not liable to pay excise duty on the goods which were exported, and he was only required to deposit the excise duty, at the time of purchases pending export of the same. As and when the export was materialised, the amount of corresponding excise duty deposited earlier was refunded to the assessee-company. In case of an exporter having facility of bounded warehouse, is not required at all to deposit excise duty in the first instance and then receive refund of the same. If the assessee was having bounded warehouse facility, these payments and refunds of excise duty would not have taken place. As and when such excise duty was paid by the assessee as a temporary measure, the amount was debited and similarly, on refund of such excise duty, the same was credited to the books of account. Thus, we found that alleged amount of excise duty either paid or refunded did not affect the business profits of the assessee at all and, therefore, there is no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anr. (2002) 258 ITR 785 (Guj). 14. We have considered the rival contentions and gone through the orders of the lower authorities as well as order of the Tribunal in assessee's own case in asst. yr. 1992-93, dt. 22nd Sept., 2003, and found that the issue has been elaborately dealt with in para 6, page Nos. 4, 5 and 6 of the order and after discussing the judgment of the various High Courts, the Tribunal reached to the conclusion that the incomes on account of balance written off, rent received and discount are not to be included while computing the profit from business for the purpose of deduction under s. 80HHC as such income cannot be said to have been derived from industrial undertaking. However, in respect of sale of scrap, we find that the issue is squarely covered by the decision of the jurisdictional High Court in the case of Harjivandas Juthabhai, in favour of the assessee, wherein it was held that the scrap generated during the course of manufacturing was eligible for deduction under s. 80-I as reported in (2002) 258 ITR 785 (Guj). It was categorically observed by the High Court that it requires to be noted that if the assessee was not engaged in the industrial activity th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eased accordingly. The assessee has also claimed depreciation on the enhanced cost of fixed assets. During the course of assessment proceedings, by filing a letter dt. 22nd Feb., 1996, the assessee claimed deduction of Rs. 1,51,688 under s. 35D. By the impugned assessment order, the AO allowed the assessee's claim under s. 35D of Rs. 1,51,688 by making an addition of Rs. 22,53,467 in the computation of income at para 12 of the assessment order. The AO was of the view that assessee had claimed deduction of Rs. 24,05,135 whereas amount eligible for deduction is Rs. 1,51,688; he, therefore added Rs. 22,53,467 (Rs. 24,05,135 - Rs. 1,51,638) in the income of the assessee. 20. By the impugned order, the CIT(A) directed the AO to reduce the income of Rs. 24,05,135, by recording a finding that nothing had been charged to P L a/c and, therefore, no profit as per the P L a/c has been arrived at without reducing any part of these expenditure. The finding recorded by the CIT(A) has not been controverted by the learned Departmental Representative. We, therefore, do not find any reason to interfere in the findings recorded by the CIT(A) for excluding a sum of Rs. 24,05,135 from the assessed inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act, but is required to be allowed as per the provisions of s. 37(3) of the IT Act. We, therefore, direct the AO to consider the allowability of these expenses under s. 37(3) of the Act, rather than treating these expenses under s. 35D. 28. Next grievance of the Revenue relates to the CIT(A)'s action for directing the AO to allow deduction under s. 80HHC by disregarding the fact that along with the original return of income-tax auditors' report was not furnished. 29. We have heard the rival contentions and found from the record that along with return of income the assessee did not file tax auditors' report prescribed under Form 10-CCAC. The AO processed the return under s. 143(1)(a) and the assessee's claim for deduction under s. 80HHC was declined. After receiving the intimation under s. 143(1)(a), the assessee-company filed a letter dt. 15th Dec., 1994, enclosing the Form 10CCAC and requested for rectification of intimation under s. 143(1)(a). The AO declined the assessee's rectification petition. However, the CIT(A) vide its order dt. 23rd March, 1995, in respect of order passed under s. 143(1)(a), allowed the assessee's claim. However, while completing the assessment under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under s. 80HHC. 34. The learned Authorised Representative had drawn our attention towards the order of the Tribunal in assessee's own case for the asst. yr. 1992-93 at para 15, wherein the issue has been dealt with in details and action of the CIT(A) was upheld to the effect that the refund of excise duty of earlier year cannot be included in the total turnover for the year under consideration for the purpose of computing deduction under s. 80HHC. 35. We have gone through the impugned order of the Tribunal in assessee's own case. Same issue has been dealt with by us while disposing of the Revenue's appeal for asst. yr. 1992-93 and discussed in detail at para 6, hereinabove, wherein we held that excise duty refund was neither includible in the turnover nor 90 per cent of it is required to be reduced from the business profits in terms of Expln. (baa) below s. 80HHC(4B). As the facts and circumstances of the case under consideration for the asst. yr. 1993-94 are the same, we do not find any reason to deviate from the conclusions already drawn by us in assessee's own case for the asst. yr. 1992-93. 36. Next grievance of the Revenue relates to exclusion of 90 per cent processing char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions and deliberated on the case law cited at Bar by the learned Authorised Representative. We found from the record that income from processing charges was related to main manufacturing activity undertaken by the assessee-company. As per the Expln. (baa) profit of the business means profit of the business as computed under the head "Profits and gains or profession" as reduced by 90 per cent of any receipts by way of brokerage, commission, rent, interest, charges or any other receipt of a similar nature included in such profits. The doctrine of ejusdem generis lays down well accepted principle of interpretation of statutes that the meaning of general words following the specific words in succession would derive colour from the specific words preceding them. Per contra, the meaning of general words would have to be seen in the light of the words in whose company such general words fall, the reasons being that such general words are used to provide completeness to the specific words in the statutes and to avoid the possibility of anything of that nature being excluded. In such circumstances, these general words should not be independent of the words accompanying them. The object of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by bring any positive material on record. Keeping in view the judgment of Bombay High Court, as discussed hereinabove, we do not find any infirmity in the order of CIT(A) for not treating such processing charges in the nature of income falling within the purview of Expln. (baa) of s. 80HH(4B), 90 per cent of which is required to be excluded from "profits of the business", while computing the deduction under s. 80HHC. No contrary judgment of any High Court or Tribunal order was brought to our notice by the learned Departmental Representative during the course of hearing. We are, therefore, inclined to agree with the learned Authorised Representative that in view of judgment of Bombay High Court such processing charges are not in the character of the receipt falling within the purview of Expln. (baa), 90 per cent of which is required to be excluded from business profit while computing deduction under s. 80HHC. 42. The last grievance of the Revenue in the asst. yr. 1993-94 relates to the CIT(A) direction to allow depreciation at 100 per cent in respect of energy saving devices as mentioned in para 3(iii) of machinery and plant in Appen. I of IT Rules, 1962. 43. Rival contentions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged by the AO. 46. We have considered the rival contentions and find from the record that there is no dispute of Revenue and assessee both with regard to allowing of the assessee's claim of 100 per cent depreciation on the energy saving devices as per the order of the Tribunal in assessee's own case of the asst. yr. 1992-93. However, in respect of building/structure in which such machinery is required to be put have already been treated by the AO as plant. We are, therefore, inclined to agree with the learned Departmental Representative that such building/structure is not eligible for 100 per cent depreciation like energy saving device. However, it is not clear from the record whether the value of such building/structure was also included in the value of energy saving device on which 100 per cent depreciation has been claimed. In the interest of justice, we restore this ground to the file of AO with a direction to verify the record and allow 100 per cent depreciation on the energy saving devices and restrict the claim of depreciation at 25 per cent in respect of building/structure meant for putting such plant. We direct accordingly. ITA No. 740/Ahd/1997: 47. The first ground i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re application money received on public issue for expansion of existing business was entitled to set off out of public issue expenses incurred for public issue and such interest income is not chargeable as income from other sources. The learned Authorised Representative also relied on the order of the Tribunal, Mumbai Bench, in the case of J.M. Shares Stock Brokers Ltd. vs. Dy. CIT (2004) 83 TTJ (Mumbai) 1052, in which it was held that where the deposit in the bank was made under mandatory situation, the interest is allowed to be set off against the share issue expenses. While deciding the issue the Mumbai Bench followed the order of coordinate Bench in the case of Dy. CIT vs. Exlo GWB Garden Salt Ltd., ITA No. 6113/Mum/1995 and 1931/Mum/1998. Learned Authorised Representative, therefore, submitted that issue is squarely covered by the orders of Tribunal referred hereinabove and submitted for upholding the assessee's claim. He further submitted that it was not a surplus money parked with the bank with an intention to earn interest thereon, but the assessee was under an statutory compulsion to keep the money in the bank account till listing of shares at stock exchange. 50. On the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its plant undertaken by the assessee. The advance which the assessee made to the contractors to facilitate the construction activity of putting together a very large project was as much to ensure that the work of the contractors proceeded without any financial hitch as to help the contractors. The arrangements which were made between the assessee-company and the contractors pertaining to these receipts were arrangements which were intrinsically connected with the construction of its steel plant. The receipts had been adjusted against the charges payable to the contractors and had gone to reduce the cost of construction. They had, therefore, been rightly held as capital receipts and not income of the assessee from any independent source. After concluding the above observations of the Hon'ble Supreme Court in the case of Bokaro Steel Ltd., the Tribunal held that "the assessee is entitled to set off interest earned on deposits out of public issue money against the expenses incurred for public issue." In that view of the matter, the Tribunal reversed the findings of the CIT(A) and directed the AO to set off the interest earned by the assessee against the public issue expenses. 52. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the project. 56. In the instant case, there is no dispute to the fact that such deposit was made in a bank as a statutory requirement for keeping such share application money in separate bank account in a scheduled bank until permission for listing of share on stock exchange is granted. Decision for putting the deposit in bank was not taken as a prudent business decision to earn interest income thereon. Let us now examine the ratio laid down in the various case law as discussed by the lower authorities and cited at Bar. In the case of Tuticorin Alkalies Chemicals Fertilisers Ltd., the Hon'ble Supreme Court vide its order dt. 8th July, 1997 held: "That when a company has surplus funds in its hands and in order to earn income out of the surplus funds, it had invested for the purpose of earning interest, the interest thus earned is clearly of revenue in nature and would have to be taxed accordingly. The application of income for payment of interest on the borrowed funds would not affect its taxability in any way. It was also observed that if a person borrows money for business purposes, but utilises that money to earn interest, however, temporarily, the interest so generated will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, not liable to tax." 60. In the case of Kamal Co-operative Sugar Mills Ltd., the Hon'ble Supreme Court vide its order dt. 23rd April, 1999, observed that: "When the assessee has deposited money to open letter of credit for purchase of machinery required for setting up of its plant in terms of assessee's agreement with the supplier, any income earned on such deposit is incidental to the acquisition of assets for setting up of the plant and machinery. The interest was a capital receipt which would go to reduce the cost of assets." 61. Keeping in view the ratio laid down in various Supreme Court decisions, viz., in the cases of Bokaro Steels Ltd. and Karnal Co-operative Sugar Mills Ltd., after considering its earlier judgment in case of Tuticorin Alkalies, we find that in the instant case, deposit with the bank was under statutory compulsion; this is not the case where any surplus money which was left idle had been deposited in the bank for the purpose of earning interest. The deposit of money in the present case is directly and intrinsically linked with the public issue and, therefore, the expenditure incurred on public issue can very well be set off against the income arising fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C), we ate inclined to agree with the learned Departmental Representative that rental income does not qualify for deduction under s. 80-I/IA, on the ground that such income is not derived from assessee's industrial undertaking. 65. Ground No. 6 is regarding not granting of deduction under ss. 80HHA and 80-I in respect 6f manufacturing activity carried out at third party premises on job work. This ground has already been restored to the AO by the Tribunal in assessee's own casein the asst. yr. 1992-93 vide order dt. 22nd Sept., 2003. As the facts and circumstances of the case during the relevant asst. yr. 1993-94 under consideration are the same, we restore the ground No. 6 to the file of AO by respectfully following the order of the Tribunal. The finding of the Tribunal has been given at page Nos. 7 to 10, para 9. 67. Ground No. 7 relates to allowing public issue expenses. From the order of the AO we find that assessee had withdrawn its claim for capitalisation of such expenses and stated that such expenses are to be allowed as per s. 35D. 68. In view of above, we dismiss this ground of assessee's appeal in limine. 69. Next grievance of the assessee in ground No. 8(a) regarding exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s this ground of assessee's appeal. 74. Ground No. 11 not pressed, therefore dismissed in limine. 75. Ground No. 12 is regarding deduction of interest under s. 36(1)(iii) amounting Rs. 4,73,007 paid to the Gujarat Industrial Development Corpn. 76. Rival contentions have been heard and record perused. The facts of the case are that the assessee obtained loan from GIDC which was utilised for purchase of land. In the books of account the interest paid had been capitalised and included in the cost of the land. Since, no depreciation was admissible on land, during the course of assessment proceedings, the assessee furnished an alternative contention relating to deduction of interest under s. 36(1)(iii). The lower authorities held that after capitalisation of the amount of interest, the so-called interest no longer retained its separate identity but was merged with the cost of acquisition of land. In these circumstances, as lower authorities applied, the provisions of s. 43(1) r/w s. 32, there did not arise any question of application of s. 36(1)(iii) of IT Act. It was further observed that in view of treatment given by the assessee itself in its books of account, the assessee is no more ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
