TMI Blog2012 (8) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... , being the sum payable by the employer shall be allowed as deduction if it is paid before the due date of filing of the return - as the assessee has paid the sum though belated but before the date of filing of return the grievance of the assessee is accepted and objection of the Revenue is overruled - in favour of assessee. Disallowance foreign travel expenses - CIT(A) deleted the disallowance - Held that:- As immediately preceding assessment year in the Tribunal has held that no disallowance on account of foreign travel expenses can be sustained - in favour of assessee. Deduction u/s 80-IA(9) - whether relief u/s 80-IA/80-IB should be adjusted before allowing deduction u/s 80HHC - Held that:- As decided in Associated Capsules P. Ltd. Versus DCIT [2011 (1) TMI 787 - BOMBAY HIGH COURT ]that restriction u/s 80-IA(9) is not applicable at the stage of computing deduction u/s 80HHC but only at the stage of allowing deduction u/s 80HHC - in favour of assessee. Netting of interest receipts for the purpose of deduction u/s 80HHC - Held that:- As decided in Associated Capsules Pvt. Ltd. v. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA ] netting of interest is permissible - in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of benefit admissible to an assessee u/s 80HHC - CIT(A) was correct to direct the assessee in treating sale of scrap as part of 'total turnover' - against assessee. Levy of interest u/s 234D - Held that:- As there is no merit in the contention found raised by the assessee as the regular assessment in this case was completed on 16.02.2004 which is well after the cut off date of 1st June, 2003, in our considered opinion, the Assessing Officer was justified in charging interest u/s 234D - against assessee. Entitlement for credit in respect of minimum alternate tax paid by the amalgamating company - Held that:- As no factual details in this regard are available it will be just and fair if the Assessing Officer is directed to look into these aspects as per law and then decide the matter afresh - in favour of assessee by way of remand. - IT Appeal NO. 6487 (MUM.) OF 2004 - - - Dated:- 3-8-2012 - R.S. SYAL, I.P. BANSAL, JJ. ORDER R.S. Syal, Accountant Member This appeal by the Revenue and cross objection by the assessee arise out of the order passed by the Commissioner of Income-tax (Appeals) on 15.06.2004 in relation to the assessment year 2001-2002. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by the assessee in relation to income which does not form part of the total income under this Act. Section 10(33), at the material time, exempted inter alia dividend referred to in section 115-O from the purview of taxation. Section 115-O talks of a 'domestic company'. A 'domestic company' has been defined u/s 2(22A) to mean 'an Indian company or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangement for the declaration and payment, within India, of the dividend (including dividends on preference shares) payable out of such income.' A bare perusal of the definition of 'domestic company' transpires that it is only Indian company or any other company, which in respect of its income is liable to tax under this Act, has made prescribed arrangement for the declaration and payment of dividend. Obviously this definition does not extend to foreign companies. As such the disallowance u/s 14A is conceivable in respect of investment made in the shares of domestic companies and not foreign companies. No material has been brought on record by the learned Departmental Representative to controvert the finding recorded by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an has been raised, it can be presumed that the investments were made from interest free funds. While reaching this conclusion the Hon'ble jurisdictional High Court considered the judgment of the Hon'ble Supreme Court in the case of East India Pharmaceutical Works Ltd. v. CIT [(1997) 224 ITR 627 (SC)]. In view of the aforesaid precedent of the Hon'ble jurisdictional High Court, it is apparent that no interest bearing funds can be said to have been deployed by the assessee for the purposes of making investment in the shares of these three companies, from which exempt dividend income was earned. It is axiomatic that where investment is made out of assessee's own funds and not out of borrowed funds, there can be no disallowance u/s 14A. Our view is fortified by the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. K.Raheja Corporation Pvt. Ltd., a copy of this judgment dated 8th October, 2011, has been placed on record. In view of the foregoing discussion, we are of the considered opinion that the learned CIT(A) was not justified in sustaining the disallowance at Rs. 17.65 lakh u/s 14A in respect of the investments made by the assessee in the shares of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) deleted the disallowance by holding that foreign travel expenses were incurred for the purpose of business. 8. Having heard the rival submissions and perused the relevant material on record it is observed that the immediately preceding assessment year, that is, 2000-2001 came up for adjudication before the Tribunal. Vide its order, copy of which is available on record, the Tribunal, through para 10, has held that no disallowance on account of foreign travel expenses can be sustained. As the view of the Assessing Officer in making the disallowance is based on his view for assessment year 2000-2001, which no more survives, in our considered opinion, there can be no justification in sustaining this disallowance also. We, therefore, uphold the impugned order on this issue. 9. Ground no.5 of the Revenue's appeal and ground no.5 of the assessee cross objection are on the question as to whether relief u/s 80-IA/80-IB should be adjusted before allowing deduction u/s 80HHC. While computing 'profits of the business' for the purpose of deduction u/s 80HHC, the Assessing Officer deducted the amount of deduction u/s 80-IB by considering sub-section (9) of section 80-IA. The learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record we find that this issue has also been settled by the Hon'ble Supreme Court in the case of CIT v. Laxmi Machine Works [(2007) 290 ITR 667 (SC)] holding that the excise duty is not includible in the 'total turnover' in the formula contained in section 80HHC. The impugned order on this issue, being in conformity with the view taken by the Hon'ble Supreme Court, does not warrant any interference. This ground is not allowed. 14. Ground no.8 of the Revenue's appeal is against the direction of the learned CIT(A) for treating the profit on sale of DEPB licence as export incentives and allowing deduction u/s 80HHC under proviso to section 80HHC(3) of the Act. 15. After considering the rival submissions and perusing the relevant material on record we find that the issue raised through this grounds is no more res integra in view of the judgment of the Hon'ble Supreme Court in the case of Topman Exports v. ITO [(2012) 67 DTR 185 (SC)] in which it has been held that when DEPB is sold by a person, his profit on transfer of DEPB will be sales value of DEPB less its face value. It has further been held that DEPB is chargeable as income u/s 28(iiib) in the year in which s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p as part of 'total turnover' in the computation of deduction u/s 80HHC. 20. After considering the rival submissions and perusing the relevant material on record we find that the learned CIT(A) sustained the inclusion of 'scrap sale' within the 'total turnover'. The assessee's contention that the amount of realization from sale of scrap should be reduced from the direct cost of exports is not acceptable in view of the fact that there is no material on record to indicate that the scrap was generated from the material directly used for manufacture of goods exported having no element of profit. The Hon'ble Punjab Haryana High Court in CIT v. Bicycle Wheels (India) [(2011) 335 ITR 384 (P H)] has held that the sale of scrap cannot be excluded from 'total turnover' which shall increase the denominator of formula for determining the extent of benefit admissible to an assessee u/s 80HHC of the Act. Similar view has been taken by the Mumbai bench of the tribunal in the case of M/s. Albright Wilson Chemicals India Limited v. DCIT in ITA No. 4362/m/2003. In our considered opinion the learned CIT(A) was justified in deciding accordingly. This ground of C.O. is not allowed. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to intimation under section 143(1). To resolve the controversy, this issue was referred to the Special Bench of the Tribunal in the case of ITO v. Ekta Promoters Pvt. Ltd. [(2008) 113 ITD 719 (Del) (SB)]. The Special Bench noticed that section 234D was inserted with effect from 01.06.2003. This provision, being substantive in nature, was held not to have retrospective effect and hence applicable from assessment year 2004-2005 only. It was, therefore, held that interest u/s 234D is chargeable from assessment year 2004-2005 only and hence this section cannot be applied to earlier assessment years even though regular assessment for such assessment years were framed after 1st June, 2003 or the refund granted for those years after the said date. The Hon'ble Delhi High Court in the case of Director of Income Tax v. Jacabs Civil Incorporated [(2011) 330 ITR 578 (Del.)] upheld the view taken by the Special Bench of the tribunal in the afore noted case by holding that section 234D is applicable only from assessment year 2004-2005. The Hon'ble Madras High Court in CIT v. Infrastructure Development Finance Co. Ltd. took a contrary view vide its judgment dated 8th September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... makes it manifest that interest u/s 234D is chargeable in respect of any assessment year commencing before or after the 1st day of June, 2003. Second, the deployment of language 'if the proceedings in respect of such assessment year is completed after the said date' makes it unequivocal that the cut-off date of 01.06.2003 is relevant for the completion of assessment. The upshot is that the directive of section 234D applies to any assessment year commencing before or after the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date. In other words, if the regular assessment is completed after the cut off date which results in obliterating or reducing the amount of refund which was granted even prior to such date, interest u/s 234D is chargeable. With this legislative insertion, the view expressed by the Hon'ble Madras High Court in Infrastructure Development Finance Co. Ltd. ( supra ) has been accepted and the contrary view rendered by the Hon'ble Delhi High Court in Jacabs Civil Incorporated ( supra ) that section 234D applies only from A.Y. 2004-05, has been negated. 28. Thus, the net effect of insertion of Explanation 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egments shall result in the levy of interest. It is self evident that the underlying object and the command of section 234D is to charge interest. The occasion for charging of interest u/s 234D can arise only on the completion of assessment and not when the original refund was granted. The date of original grant of refund is relevant only for the purpose of calculation of the amount of interest under this section as the interest is payable by the assessee from the date of grant of refund to the date of regular assessment. 31. If we interpret section 234D as suggested by the learned AR, then the effect of insertion of Explanation 2 will be rendered redundant and it will lead to taking the clock back to the pre-amendment position thus reading sub-section (1) de hors Explanation 2. In our considered opinion, there is no merit in the contention raised by the learned AR in this regard. As the regular assessment in this case was completed on 16.02.2004 which is well after the cut off date of 1st June, 2003, in our considered opinion, the Assessing Officer was justified in charging interest u/s 234D. This additional ground is not allowed. 32. The last additional ground is as und ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
