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2021 (10) TMI 398 - AT - Income TaxDeduction u/s 80 HHC - reduction of 90% of rental income, insurance claim, cash subsidy, refund of sales tax, commission, income from profit on sale of fixed assets etc. - HELD THAT:- The coordinate bench of this Tribunal on identical facts in Assessee’s own case for AY 2001-2002[2021 (3) TMI 1230 - ITAT BANGALORE] considering the income, the AO shall take net income after setting off the expenditure incurred to earn that income. Thus, the ground by the assessee is allowed, while the grounds of the revenue on this issue are dismissed. Deduction u/s 80 HHE - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] CIT(A) held that the excise duty and sales tax should not be included in total turnover and accordingly directed the A.O. to recompute deduction u/s 80HHE of the Act. Thus, we notice that there is no discussion about the other income by Ld. CIT(A). Similar is the case with AY 2003-04 also. Accordingly, we are of the view that the impugned ground of the assessee raised in assessment year 2002-03 as well as in 2003-04 does not emanate from the order passed by Ld. CIT(A). Accordingly, we reject the grounds raised by the assessee relating to deduction u/s 80HHE. Allocation of head office expenses u/s 80I / 80IA - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] decision rests on the facts of that case, where it was found that common head office expenses were simple administrative expenses for running the business. - Decided against assessee. Disallowance u/s 14A - Sufficiency of own funds - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] the own funds available with the assessee in both the years are in far excess of the value of investments. Accordingly, as per the decision rendered by Hon’ble Karnataka High Court in the case of Micro Labs Ltd. [2016 (4) TMI 219 - KARNATAKA HIGH COURT], no disallowance out of interest expenditure is called for. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue in both the years under consideration and direct the A.O. to delete disallowance made u/s 14A. Disallowance of sum being technical and professional fees paid to M/s Kotawala - no services has been received by the assessee - HELD THAT:- Even before us the Ld.Counsel could not counter the statement given by the Director of Kotawala. Further nothing was placed on record before us to establish that services have been rendered. We therefore do not find any infirmity in the view taken by Ld.CIT(A) and the same is upheld. Deduction u/s 80 HHB - separate books of accounts were not maintained for the foreign projects - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] though separate books of accounts were not maintained separate accounts were maintained in respect of each foreign project and audit certificates in Form No.10CCAH have also been furnished in respect of each project. In these circumstances, we are of the view that the decision rendered by the Tribunal in assessee’s own case for the earlier Assessment Years on identical ground would apply and therefore the assessee cannot be denied the benefit of deduction under section 80HHA of the Act on the ground that separate books of accounts were not maintained for the foreign projects. Allowable business expenditure - Entrance and subscription fees paid to the club - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] entrance fee and membership fees paid where the employees become members is allowable as a business expenditure and was allowed as deduction in Assessee’s own case in AY 1999-2000. Entrance fees paid towards corporate membership of the club is an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprises and accordingly CIT (A) was justified in deleting the disallowances - Decided in favour of assessee. Expenses on the basis of purchase of packing material, loose tools etc., in the year of purchase - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] Assessing Officer rejected account books of assessee and made certain addition to his income. The Tribunal held that:- (i) it was not case of revenue that purchases as debited were not genuine, and (ii) assessee was following a consistent method of valuing closing stock by including packing material as consumed at time of purchase. Rejection of account books of assessee and addition to his income was held to be not justified. - Decided against revenue. Excise duty and sales tax to be excluded from the total turnover for the purpose of deduction u/s 80HHC & 80HHE - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] sales tax and central excise duty should not be included as a part of the total turnover while computing deduction under section 80HHC. Gross interest receipt or net interest income to be reduced for computing business profit under clause (baa) of Section 80HHC - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] principle of netting has been recognized by the various decisions of Hon’ble High Courts and has also been affirmed by the Hon’ble Supreme Court in the case of ACG Associated Capsules [2012 (2) TMI 101 - SUPREME COURT] The principle of netting is however applicable only on the assessee establishing nexus between the interest paid and the interest earned. If such nexus is proved, it is only the net interest that has to be excluded under explanation baa to section 80HHC. Deduction u/s 80HHC in respect of cash discount, excise duty recovered, scrap sales and exchange rate variation - HELD THAT:- As decided in own case [2021 (7) TMI 1019 - ITAT BANGALORE] where assessee claimed deduction under section 35(2AB) pursuant to certificate issued by prescribed authority, i.e., Department of Scientific & Industrial Research (DSIR), approving such claim, Assessing Officer could not have denied weighted deduction under section 35(2AB) in respect of scientific expenditure. It was held that Assessing Officer cannot sit in judgment over report submitted by prescribed authority . It was held that where Assessing Officer does not accept claim of assessee made under section 35(2AB), he should refer the matter to Board, which will then refer question to the prescribed authority.
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