TMI Blog1999 (12) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... er assessment years. The CIT(A) has deleted the disallowance by following his order for the earlier assessment years. The Assessing Officer observed in the order that the incentive wages was nothing but bonus and, therefore, its allowability was subject to the provisions of Bonus Act. So he has estimated the amount of disallowance at Rs. 30,40,000 as against Rs. 28,40,880 of the last year. The CIT(A) has followed his earlier decision and also discussed case laws mentioned in his order at page 4 and finally observed that the Assessing Officer has failed to bring any material on record for not accepting the order in the assessee's case for the earlier assessment year. 3. We have heard both the parties and gone through the materials available on record, from which it appears that since assessment year 1982-83 similar disallowance had consistently been deleted and also the same was followed in the subsequent assessment years. But during the assessment year under consideration the Assessing Officer made the addition without bringing any material on record. The matter was also discussed by the Tribunal for the assessment years 1985-86 to 1987-88. In the just previous assessment year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced due to artificial under valuation of the closing stocks. The CIT(A) has followed the guidelines issued by the Institute of Chartered Accountants of India pertaining to the method of debiting input cost at net of MODVAT price. So he has deleted the said additions. 5. After hearing both the parties at length and on perusal of the record it appears that the MODVAT Scheme was introduced by the Finance Minister with effect from 1-3-1986. The nature of the MODVAT Scheme is intended to be a revenue neutral. It was not the purpose to use the MODVAT to give substantial relief on excise. The shifting the effective burden of excise taxation away from inputs and on the final products is the heart of the said scheme. In short, the MODVAT Scheme allows the manufacturer to obtain instant and complete reimbursement of the excise duty paid on the components and raw materials which will, result in considerable reduction in the cost of final product. The CIT(A) has already discussed this issue at length in his order and without repetition it may be mentioned that the benefit of MODVAT is available only in respect of such raw material/components actually consumed in production of final goods ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned that the 100% export unit at Haldia is identifiable separate business for which books of account are maintained separately. He also mentioned that under section 80HH if the gross total income of the assessee includes any profit and gains derived from an industrial undertaking, a relief of 20% of the total profit and gains from such undertaking is allowed by way of deduction. Hence for determining the quantum of relief under section 80HH from the consolidated accounts which reproduce the aggregate position of the business comprises several industrial undertakings of which Haldia Export Unit is a part, the profit from Haldia Export Unit was computed for the purpose of relief under section 80HH. He was fair enough to accept that the assessee-company is not maintaining any separate account in respect of 100% Haldia Export Unit nor it was statutory required except for the purpose of section 80HH(5) as mentioned by CIT(A) in his order at page 21. On query from the Bench, he accepted that section 80HHC and section 80HH are neither interlinked nor interdependent. They are separate and distinct provision inserted in the Act fulfilling different objects and purposes. In other word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80HHC of the Act shall only apply and not partly clause (a) and partly clause (b). The clause (a) relates to the business consisting exclusively of the export of goods outside India and clause (b) relates for the other businesses. 12. In the light of our discussion and by keeping in mind the CBDT Circular No. 564 dated 5th July, 1990, we are of the view that the assessee has only one composite business. Therefore, the assessee is entitled for computation of export profit of all the units as per section 80HH(3)(b). In the absence of any additional material/evidence we find no infirmity in the order of CIT(A) who has observed that though the assessee has claimed deduction under sections 80HH and 80-I of the Act, nonetheless the Haldia Export Factory does not constitute a separate business. In the light of our discussion and by keeping in mind the ratio laid down by the Supreme Court in Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195, 204, 206, we confirm the order of CIT(A) who has rightly directed the Assessing Officer to give the benefit under section 80HHC for both the assessment years under consideration by computing the deduction in accordance with section 80HHC(3)(b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the deposit and investment with the business income of the relevant previous year so he has disallowed the claim for deduction in its entirety. 15. In the first appeal the CIT(A) has deleted the said addition by observing that the deposit was made with IDBI within six months before the end of the previous year. He further observed that in order to be the eligible for the benefit under section 32AB, the assessee has to have income which is chargeable to tax under the head profit and gains of business or profession. This is because both the deposits as well as utilisation through purchases of plant and machinery has to be out of the income chargeable to tax under the profit and gains of business or profession. Further the CIT(A) has observed in his order that the Assessing Officer himself computed the business profit at 15.18 crores. The investment and deposit was for an aggregate amount of Rs. 3.03 crores and Rs. 5.34 crores respectively. In other words the CIT(A) observed that the Assessing Officer did not dispute the sanctity of the audit report but ironically the Assessing Officer was not prepared to accept the certificate of the auditor that the new plant and machinery has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597, 608 observed that a statute has to be interpreted in a manner so as to achieve the object or intention of the Legislature in enacting the same. It is submitted that if one were to interpret the provisions of section 32AB(1) with a view to achieve the object for which it had been enacted, then the conclusion which would follow is that by using the term "out of such income", the Legislature intended that the income chargeable under the head "profit and gains of business or profession" for a previous year should be sufficient to cover the aggregate of the amounts of utilisation and deposits. It is further submitted that the said term "out of such income" cannot be construed in a manner so as to connote the insistence on the part of the revenue of demonstrative proof that the utilisation and deposits had their origin in the profits embedded in the bank accounts on which the cheques were drawn, by matching receipts and payments in bank statements on a "one to one". Further Mr. R.K. Mitra submitted that the revenue has neither denied nor disputed that the bank accounts on which the cheques in connection with the utilisatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance in the overdraft account at the time of payment of the tax. 19. In the instant case, before making the said addition the Assessing Officer has not proved the nexus pertaining to deposit/investment vis-a-vis the income chargeable under the head profit and gains of business or profession. Now it is well settled law that the deposits from the various sources are put in a common account, no attempt should be made to relate or match the payments made out of the amount with the deposits or borrowing since it is not possible to co-relate a particular receipt with particular expenditure. Further if a question arises as to whether particular payment is made from the composite account was out of the overdraft fund or out of an accumulated profits embedded in the collection of sale proceeds and other incomes deposited therein, it cannot be said that the payment was made out of the overdraft account. On the other hand, the presumption should be that the payment was made out of the profits generated during the relevant previous year and embedded in the overdraft account. The jurisdictional High Court observed in Alkali's case that the fact that the said overdraft had a continued debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of welfare of the employees. That means that there should be a complete identity between the donor and the donee. Here staff recreation club and the staff club are a part and parcel of the organisation itself and they are given money by way of subsidy, an age old practice. In various Govt. departments also subsidies are given as a matter of course for carrying on welfare activities. So finally the Tribunal upheld the order of the CIT(A) who has deleted the said addition. By respectfully following the earlier order of the Tribunal and by keeping in mind the ratio laid down in the following cases :--- (1) Otis Elevator Co. (I) Ltd. v. CIT [1992] 195 ITR 682 (Bom.) (2) Gujarat State Export Corpn. Ltd. v. CIT [1994] 209 ITR 649 (Guj.) We find no infirmity with the order of CIT(A) who has rightly deleted the said addition pertaining to the staff welfare. By considering the totality of the facts and circumstances of the case, we uphold his order. 23. After hearing both the parties it appears that the assessee has filed cross objections for both the assessment years under consideration as an abundant caution. In the light of our discussion the same do not deserve any discussion on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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