Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (7) TMI 1019 - AT - Income TaxDeduction u/s 80HHB when no separate books in respect of foreign project were maintained - HELD THAT:- As decided in own case [2021 (3) TMI 1230 - ITAT BANGALORE] Tribunal noticed that 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. Nature of expenses - claim of expenses towards entrance and the subscription fees paid by the assessee to clubs - HELD THAT:- The law is well settled that 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. When membership of a club is taken in the name of director, it is for the assessee-company to prove that membership was obtained solely for the purpose of business. 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 of entrances fee made by the Assessing Officer.M/S. BANK OF AMERICA SECURITIES (INDIA) PVT. LTD. [2010 (9) TMI 1084 - ITAT MUMBAI] - Again, Corporate membership fees payable to club is revenue exp. R & D expenditure u/s 35(1)(iv) when the activity claimed to be the R & D activity is part of normal business of the assessee - HELD THAT:- At the time of hearing, it was brought to our notice that identical issue was decided by the Hon’ble Karnataka High Court in the case of Tejas Network Ltd. [2015 (4) TMI 1064 - KARNATAKA HIGH COURT] and it was held that 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, AO 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. In view of the aforesaid decision, we are of the view that there is no merit in ground No.4 raised by the Revenue. Claim of expenses on the basis of purchase of packing materials, loose tools and consumables in the year of purchase - CIT-A deleted the addition - HELD THAT:- As decided in own case 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 as on 31-3-2005 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. We therefore uphold the order of CIT(A) on this issue. Exclusion of the amount of excise duty and sales tax from the 'total turnover' for the purpose of computing deduction under section 80HHC - exclusion of the amount of excise duty and sales tax from the 'total turnover' for the purpose of computing deduction under section 80HHE - HELD THAT:- CIT(A), however, following the decision of the Hon’ble Supreme Court in the case of CIT Vs. Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] held that the sales tax and central excise duty should not be included as a part of the total turnover while computing deduction under section 80HHC of the Act. In view of the aforesaid decision of the Hon’ble Supreme Court in the case of Lakshmi Machine Works (supra), which has settled the issue, we are of the view that there is no merit in ground Nos. 6 and 9 raised by the Revenue. Exclusion of amount of deduction allowed under section 80IA from the business profits for the purpose of computation of deduction under section 80HHC if the export divisions have not claimed - HELD THAT:- As we have already observed, the CIT(A) has given the clear finding that none of the export division of the assessee which claimed deduction under section 80HHC of the Act have also claimed deduction on the same profits under section 80IA of the Act. In the grounds of appeal, the Revenue has not disputed this factual aspect. The grievance projected in ground of appeal by the Revenue is that the profits of the 80-IA units will stand included in the business profits of the 80HHC unit and deduction will be computed on the business profits of the 80HHC unit. Reading of the provisions of section 80IA(9) of the Act would show that the prohibition contained therein is only against inclusion of profits and gains of an industrial undertaking which was claimed and allowed as deduction under section 80IA of the Act being included and allowed deduction under any other provisions of Chapter VI-IA of the Act. Therefore when the deduction under section 80IA has not been claimed on the profits of the industrial undertaking, there was no question of applying the provisions of section 80IA(9) of the Act. In this factual background of the case, we are of the view that the relief allowed by the CIT(A) is in order and does not call for any interference. Exclude 90% of the 'net interest income' instead of 'gross interest receipts' from the profits and gains of business or profession' to arrive at 'business profit under clause (baa) for the purpose of computation of deduction under sec.80HHC - HELD THAT:- As 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 Vs. CIT [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 of the Act. Disallowance of claim made by the assessee towards write off of advances amount - HELD THAT:- We notice from the explanation furnished by the assessee that the assessee had customs duty concession at the time of importing of certain capital goods under EPCG scheme. It appears that the same was shown as “Receivable” in the books of account, since it had to comply with the condition of meeting export obligations. Since the assessee has not complied with the conditions imposed for getting the above said amount, the assessee chose to write off the above said amount in its books of accounts We notice that the assessee has furnished explanations before the Ld. CIT(A) and also furnished certain details relating to export benefits. Be that as it may, we notice that the transactions relate to business activities carried on by the assessee and further the explanations furnished by the assessee would show that the same was considered as no longer receivable by the assessee, since it has failed to meet the mandatory conditions. Hence, we are of the view that the above said claim of the assessee is in the nature of business loss incurred in the normal course of the business and hence allowable as deduction. Disallowance of claim of write off of amount given to NSL - HELD THAT:- there was no business compulsion or commercial expediency vis-a-vis business carried on by the assessee. The Ld CIT(A), in our view, has rightly observed that the advances have been given more as a promoter than as a customer of M/s NSL. The Ld A.R contended that it is imperative for the assessee to maintain its reputation in business circles and hence the assessee has given money to M/s NSL. The said contention may support the assessee as the promoter. However, the question that needs to be answered is whether there was business necessity/compulsion or is there any commercial expediency in given advances to M/s NSL to meet its day to day expenses even when M/s NSL was under liquidation?. In our view, the answer would be negative. The various case laws relied upon by Ld A.R are distinguishable from the facts prevailing in the instant case. Accordingly, we do not find any infirmity in the decision rendered by Ld CIT(A) on this issue in both the years under consideration. Disallowance u/s 14A - HELD THAT:- As 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. Disallowance of repairs and maintenance claimed by the assessee - A.O. noticed that the assessee has incurred repairs & maintenance expenses on the premises taken on lease - HELD THAT:- We notice that the assessee has not furnished break-up details of repairs & maintenance expenses claimed in both the years under consideration. However, it was stated that the expenditure was incurred on wooden partition, false ceiling, panelling, etc. Hence,in the absence of break-up details of expenses, we are not able to give decision. Accordingly, we restore this issue in both the years to the file of the A.O. with a direction to follow the decision rendered in assessment year 2000-01 on this issue, which is extracted above. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue in both the years under consideration. Computation of deduction u/s 80HHC - while computing profits of business, receipts by way of brokerage, commission, interest, rent, charges or any other receipts of similar nature included in such profits should be excluded to the extent of 90% of the amount so included - HELD THAT:- The Ld CIT(A) accepted the chart prepared by the assessee and correctly held that All the items mentioned in the column 3 of the table are not required to be excluded for computing “profits of business” in terms of clause (baa). Computation of deduction u/s 80HHE - assessee has submitted in its grounds of appeals that the “miscellaneous income” has been excluded by the A.O. for computing profits of business, even though certain items are not liable to be excluded - HELD THAT:- According to the Ld. CIT(A), the A.O. has included “excise duty and sales tax” in the total turnover and accordingly computed deduction u/s 80HHE of the Act. The Ld. 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. Deduction u/s 80IA - A.O. deducted proportionate “head office expenses” while computing deduction u/s 80IA - HELD THAT:- A.O. deducted proportionate “head office expenses” while computing deduction u/s 80IA of the Act and the Ld. CIT(A) also confirmed the same. The Ld. A.R. submitted that this issue has been decided against the assessee in assessment year 2000-01. We also notice that the coordinate bench has decided the issue against the assessee by following the decision rendered in the assessee’s own case in assessment year 1997-98 and 1999-2000. Deduction u/s 80O - HELD THAT:- We notice that the issue relating to deduction u/s 80O of the Act has been decided against the assessee by the coordinate bench in assessment year 2001-02 by following the decision rendered by the Tribunal in assessment year 1999-2000. There is no material before us in the present AY to take a contrary view. We are also of the view that in view of the aforesaid conclusion, the question as to whether; to claim deduction u/s. 80-O, the person claiming deduction should be the owner of the IPR or not, is academic and therefore does not call for any adjudication in the facts and circumstances of the present case.
|