TMI Blog2008 (8) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee himself having utilized the same, is to be considered as falling under sub-s. (iiie) of s. 28 and not under sub-s. (iiid) of s. 28. Therefore, the assessee, under first proviso below sub-s. (3) of s. 80HHC, is entitled to deduction in respect of any sum referred to in sub-s. (iiie) of s. 28, in the same proportion as the export turnover bears to the total turnover of the business carried on. We, therefore, direct the AO to grant appropriate deduction as per first proviso below sub-s. (3) of s. 80HHC in respect of DEPB credits utilised by the assessee - Assessee has not made the claim as per the revised claim filed before the CIT(A) and hence, the assessee is not entitled to deduction u/s. 80HHC in respect of profit on sale of DEPB scheme as the requisite condition laid down in third proviso below sub-s. (3) of s. 80HHC is not fulfilled. Exclusion of 90 per cent of excess provision written back from the profits of business - HELD THAT:- Once the amount forms part of 'profits of business', in terms of cl. (baa) of Explanation. 90 per cent of any receipt by way of brokerage, commission, interest, rent charges or any receipt of similar nature included in such profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon by treating the same as acquisition of software - CIT(A) confirmed the same - HELD THAT:- By incurring the expenditure, the assessee has not acquired any software though the software itself may be needed to access the website. The website requires regular updates - Therefore, the expenses incurred for development of website cannot be equated with acquisition of software or to treat it as capital expenditure. The expenses being inclined just to promote the business interest are allowable as revenue expenditure. We, therefore, delete the disallowance in respect of website development expenses. Disallowance on delayed payment of PF - AO noted that the employees' contribution towards PF for the months of May, June and October, 2003 in respect of Khatima Trust and the for the month of October, 2003 for the head office employees were paid beyond the due date prescribed u/s. 36(1)(va) though paid before the end of the relevant financial year - HELD THAT:- We find that High Court in the case of CIT vs. Dharmendra Sharma [ 2007 (11) TMI 39 - DELHI HIGH COURT] held that where the assessee made payments of PF and ESI within 2 to 4 days after the grace period but before, filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction is allowable. The third proviso applies only to the sum of Rs. 67,10,929 which is profit on sale of DEPB credits but not in respect of duty received as drawback and is governed under s. 28(iiic). The AO treated both the different sums as covered under sub-s. (iiid) of s. 28 and since such sum is available for deduction only in terms of condition laid down in third provision below sub-s. 80HHC and since the assessee failed to satisfy the condition laid down in the said third proviso, no deduction in respect of the amount in question was granted. The same was confirmed by learned CIT(A). The assessee is in further appeal before us wherein the assessee has raised following ground before us: (a) That the AO has erred on facts and in law in disallowing the claim of the assessee at Rs. 45,05,656 out of a total of Rs. 5,79,74,883 being 90 per cent of export benefit eligible for deduction under s. 80HHC and computing deduction under s. 80HHC at Rs. 2,60,57,040 only. 4. Learned counsel for assessee reiterated the submissions made before AO. He submitted that the words any profit on the transfer of DEPB cannot by any yardstick be construed to mean any savings in expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There was no transfer of DEPB scheme credit but the assessee himself having utilized the same, is to be considered as falling under sub-s. (iiie) of s. 28 and not under sub-s. (iiid) of s. 28. Therefore, the assessee, under first proviso below sub-s. (3) of s. 80HHC, is entitled to deduction in respect of any sum referred to in sub-s. (iiie) of s. 28, in the same proportion as the export turnover bears to the total turnover of the business carried on. We, therefore, direct the AO to grant appropriate deduction as per first proviso below sub-s. (3) of s. 80HHC in respect of DEPB credits utilised by the assessee amounting to Rs. 5,79,74,883. 7. As regards profit on sale of DEPB licence amounting to Rs. 67,10,929, the assessee has not made the claim as per the revised claim filed before the CIT(A) and hence, the assessee is not entitled to deduction under s. 80HHC in respect of profit on sale of DEPB scheme as the requisite condition laid down in third proviso below sub-s. (3) of s. 80HHC is not fulfilled. 8. The next issue in appeal regarding deduction under s. 80HHC is with respect to exclusion of 90 per cent of excess provision written back from the profits of business for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as personal expenses of the directors and could not be termed as business expenditure. Accordingly, said sum was disallowed. Learned CIT(A) confirmed the same and hence, this ground in this appeal. 15. After considering rival submissions, we find that the appellant assessee is a public limited company. The company functions through the directors. Therefore, the appellant, being a corporate entity, cannot have any expenditure of personal nature. Paying small sum by way of gift at the marriage ceremony of staff/relative of customers etc. is business related expenditure and allowable as such. We, therefore, delete the disallowance of Rs. 3,868. 16. The next ground of appeal is against disallowance of a sum of Rs. 39,307 held to be disallowable in terms of Explanation to s. 37(1) of the Act. The same was confirmed by learned CIT(A) and hence, this ground before us. 17. Learned counsel for assessee submitted that which expenses are considered in this regard are not extricable either from the accounts or from the details of expenses filed. How this sum was arrived at is unknown to the assessee. There is bald observation of AO that in the details of rates and business promotion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that since the expenses are not related to existing business but in respect of business which is yet to be set up, the same are not allowable while computing the profits of such business. 23. We have considered rival submissions. It is admitted position that business of assessee is already set up. The assessee is manufacturing polyester films. In this business, the assessee desired to have a captive power plant for which a tender was submitted to Uttaranchal Jal Vidyut Nigam and consultant was appointed for feasibility study of this project. The tender fees was mandatory for filing tender. Setting up a captive power plant cannot be considered to be a separate business but for the existing business itself, the power requirements were felt and hence, was proposed to be set up. In a sense, the expenses are in relation to the existing business itself. Therefore, the tender fees paid to Uttaranchal Jal Vidyut Nigam and consultancy in respect of the said hydro power project are allowable as business revenue expenditure. Hon'ble Gujarat High Court in the case of CIT vs. Jyoti Electric Motors Ltd. (2002) 173 CTR (Guj) 20 : (2002) 255 ITR 345 (Guj) held that fees paid for te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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