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2011 (4) TMI 825 - AT - Income TaxCapital receipt vs Revenue Receipt - Compensation received by the assessee company from M/s Konica Gelatine Corporation (KGCL), Japan, purchaser company in lieu of stoppage of 'ossein' purchases from assessee company - Held that:- KGCL had stopped purchasing ossein on account of its being not able to sell gelatine manufactured by it from ossein. It allowed the assessee to operate in India in respect of ossein by not entering into Indian territory for sale of the product of the like manufactured by the assessee company. It clearly shows that KGCL did not have any intention to take over the production or marketing of ossein or gelatine in India. It had in fact already agreed to allow the assessee company to sell gelatine anywhere in the world by virtue of its 1995 agreement. The termination agreement of 2001 only provided that KGCL would cease to provide technical support to assessee company for manufacturing and operation of gelatine plant at Vapi. Thus neither the ossein manufacturing plant nor gelatine manufacturing plant being the source of the income of the assessee company were impaired. Since there was an obligation with KGCL to purchase ossein from assessee company and KGCL desired to forgo all these obligations, it paid compensation to the assessee. This will certainly be in the nature of revenue receipt - Decided in favor of Revenue Claim of additional depreciation on account of fluctuation in the rate of foreign exchange - assessee-company had purchased plant and machinery, cost of which increased due to adverse fluctuation in exchange rate - Held that:- The liability of repayment increased on account of fluctuation in the exchange rate, hence depreciation claimed on such increased cost will be allowed - Decided in favor of assessee. Sale promotion expenses - Tribunal restricted the dis-allowance to 10% of total expenditure - Held that:- We remit the matter back to the file of AO for considering dis-allowance at 10% of the total expenses subject to the rider that such dis-allowance will not be more than the dis-allowance already made by the AO - Decided in favor of Revenue for statistical purposes. Deduction u/s 80HHC - Held that:- Excise duty and sales tax will be excluded from the total turnover for the purpose of deduction u/s 80HHC - Scrap and waste material if not relatable to export business of the assessee, has to be excluded from the business profit for the purpose of calculation of deduction u/s 80HHC. Similarly, the same will not form part of the total turnover. Exchange fluctuation loss - loan for circulating capital - Held that:- Once loan is taken for revenue purposes then loss suffered by it on account of adverse exchange rate fluctuation has to be allowed as deduction u/s 37(1). The difference in foreign exchange rate in respect of foreign exchange liability by way of working capital or by way of trading transaction is either the revenue liability or revenue income for which necessary provision should be made - Decided in afvor of assessee. Matter of dis-allowance u/s 14A is remitted back to AO for fresh adjudication
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