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2014 (7) TMI 1372 - AT - Income TaxDenial of deduction in respect of amount of credit under DEPB Scheme - AO denied the same holding that the assessee has not actually utilized the credit before closing of the relevant previous year for payment of duty on the import of goods - HELD THAT:- As decided in M/s. Excel Industries Ltd [2013 (10) TMI 324 - SUPREME COURT] even if it is assumed that the assessee is entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialize ad its money value is therefore not the income of the assessee - thus we are of the opinion that the assessee is entitled to relief. Accordingly, ground no.1 raised by the assessee is allowed. Addition u/s 14A - expenditure incurred for earning of the exempt income - HELD THAT:- Assessee mentioned that the said grounds require revisit to the file of the AO considering the fact that the assessee was not given a proper opportunity to clarify the allegations against the bogus purchases on one side and the Assessing Officer failed to record his dissatisfaction with regard to the claim of the assessee that no expenditure was incurred for earning of the exempt income and this is relevant for the issue raised in ground no.3. Denial of weighted deduction u/s 35(2AB) with regard to the expenditure incurred on scientific research - HELD THAT:- As gone through the cited judgment of CADILA HEALTHCARE LTD [2013 (3) TMI 539 - GUJARAT HIGH COURT] On hearing both the parties and on perusal of the said order of the High Court, we are of the opinion that the issues raised in ground no.4 should be set aside to the file of the AO to examine each of the expenses in detail and apply the cited judgment of the Hon’ble Gujarat High Court (supra) in connection with the claim of expenses relating to the clinical trials. Accordingly, we remand this part of the ground to the file of the AO and ground no.4 is partly allowed statistical purposes. Deduction u/s 80IB admissible to the eligible units - HELD THAT:- The Tribunal in assessee own case after considering the departmental argument that the AO has correctly invoked the proviso to section 80IA(a) as well as in applying the “global profit percentage method”, while confirming the order of the CIT (A). We find that the facts for this year in question are no different. Therefore, we find no reason to interfere with the order of the CIT (A) for this year. Accordingly, ground raised by the Revenue is dismissed. Deduction u/s 80IB in respect of receipts in sale of scrap - HELD THAT:- Representatives of both the parties mentioned this issue is required to revisit the file of the AO in view of the fact that the said scrap not only includes generated during manufacturing activity but also other general scrap such as packing material etc. It is a settled issue that the receipts received on sale of scrap during the manufacturing activity is entitled for deduction u/s 80IB and other scrap proceeds are not eligible in view of the principles laid down in the judgment of Liberty India [2009 (8) TMI 63 - SUPREME COURT] AO is required to examine the above issue afresh after affording a reasonable opportunity of being heard to the assessee. Accordingly, ground no.4 is allowed for statistical purposes. Disallowance of provision of loss on forward contracts - HELD THAT:- The tests laid down by the Hon’ble Supreme Court in the case of Wodward Governor [2009 (4) TMI 4 - SUPREME COURT] are satisfied in the appellant’s case on the basis that the appellant is following mercantile system of accounting, the accounting policy in this behalf has been consistently followed by the appellant and the claim made by the appellant is bona fide. Therefore, appellant has made correct claim for deductibility of provision for loss by marking to marking the outstanding forward cover contracts and the disallowance by the AO is not justified both on facts and in law. The disallowance is therefore directed to be deleted. The loss quantified on revaluation of the forward contract is an allowable business loss. This is not the case of the Revenue that the impugned losses are earned on account of premature cancellation of forward contracts. Appeal of the Revenue is partly allowed.
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