TMI Blog2012 (12) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was having two units (deduction is available u/s 80IB on Kosi unit) and and utilise common funds to earn income, apportioned income between two units on sale basis and dis-allowed deduction in respect of Dholpur unit - Held that:- CIT(A) rightly rejected the AO’s formula of apportion method of other income on the basis of sale between two units on observation that once the assessee is maintaining separate Profit & Loss account for the unit on which section 80-IB is available, deduction u/s 80-IB is to be calculated accordingly - Decided against Revenue Dis-allowance of deduction u/s 80-IB in respect of other income viz Insurance claim, other charges, interest received, miscellaneous receipts and scrap sales - Held that:- Insurance claim in respect of receipt/income on goods damaged in transit is eligible for deduction u/s 80-IB, however insurance claim of car is rightly disallowed. Deduction u/s 80-IB - Held that:- In respect of other charges it is observed that these are petty amounts on account of difference in sale bills which is pertaining to the assessee’s business and such petty receipts are income derived from Industrial Undertaking. Therefore, deduction u/s 80-IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g grounds of appeal :- 1. That CIT (Appeals) has erred on facts and in law while sustaining the addition for ₹ 7414230/- by invoking of the provision of section 14 A of LT. Act. treating the expenditure under the head interest, alleged to be incurred in relation to the income not includible in the total income without appreciating the facts and the submissions made by the appellant particularly in absence of the basis for making of such addition not brought on record, the addition made by the AO and sustained by the CIT(Appeals) is not called for, same is liable to be deleted. 2. That while determine and disallowing the expenditure at ₹ 7414230/- u/s 14A of I.T. Act, the authorities below have not appreciated, that the appellant has not incurred any amount of expenditure in relation to the income which does not form the part of the total income under the I.T. Act., all the investment alleged to be made with share holdings were not made in the year under consideration and is fully explained being invested out of the accumulated profit and also out of the interest free deposits with the Co., the provision of section 14A of I.T. Act is not applicable in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That while sustaining the additions by CIT (Appeals) as made by the AO, the CIT (Appeals) has not given any reasoning or basis for not accepting the submissions of the assessee and also for sustaining of the same, the order of the CIT (Appeals) is bad in law, liable to be set aside and assessee s appeal is liable to be allowed. Additions made by the AO and sustained by CIT (Appeals) is liable to be deleted. 3. The Revenue has raised the following grounds of appeal:- 1. The Ld. CIT(A) has erred in law and in facts in allowing deduction u/s 80IB amounting to ₹ 64,77,454/- against ₹ 51,74,202/- allowed by the AO without properly appreciating the facts of the case, especially that the common funds are utilized and there is no scientific method to apportion the other income unit wise except making reliance in the proportions of sales between two units. 2. The order of the ld. CIT(A) being erroneous in law and on facts deserve to be quashed and that the order of AO to be restored. 3. The appellant craves leave to add or alter any or more ground or grounds of appeal as may be deemed fit at the time of hearing of appeal. 4. First we will deal with ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as invested in the F.Y. relevant to 2007-08. 8. The ld. Departmental Representative, on the other hand, relied upon the order of the Revenue Authorities and submitted that the assessee has failed to point out that it was having sufficient own funds at the time of making investment in shares. The ld. Departmental Representative further submitted that the A.O. and CIT(A) have relied upon various judgements in their orders on which the ld. Departmental Representative has also relied upon. 9. We have heard the ld. Representatives of the parties and records perused. The admitted facts of the case are that the assessee was having capital of ₹ 96,52,30,001/- which is sufficient to cover the investment of ₹ 13 crores made towards purchase of shares. We find that the issue is squarely covered by the order of I.T.A.T., Agra Bench in favour of the assessee in assessee s own case for A.Y. 2007-08 in ITA No.142/Agr/2011. The relevant finding from the order of I.T.A.T. (supra) is reproduced as under :- 6. We have heard the ld. Representatives of the parties and records perused. We find that the assessee was having own capital reserves and surplus of ₹ 64,24,17,895/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces. Therefore, there is no question of invoking Rule 8D of the Rules. In the light of the above discussions and after considering the admitted fact that the assessee was having sufficient own interest free fund to cover the investment made in shares, we, therefore, are of the view that no disallowance can be made under section 14A of the Act. We, therefore, delete the additions of ₹ 15,00,000/- made by the Assessing Officer and sustained by the CIT(A) for each Assessment Year i.e. 2007-08 2006-07. 7. We follow the order of I.T.A.T. wherein the contention of the Ld. Departmental Representative that the own capital has been already invested in the business is not acceptable as per detailed discussions made by the I.T.A.T., Mumbai Bench in its order in the case of H.P. Shah Co. ITA No.3694/Mum/2006 order dated 15.01.2009. Since in the case under consideration, the assessee was having sufficient own funds to make investment in shares, under the circumstances, the disallowance is not warranted. We accordingly delete the addition of ₹ 21,94,877/-. 10. As regards the judgement of Bombay High Court in the case of Godrej Boyce vs. DCIT, 328 ITR 81 on which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the order of A.O. 14. After hearing the ld. Representatives of the parties, we find that the issue is squarely covered in favour of the Revenue by the judgment of Hon ble M.P. High Court in the case of CIT vs. Anupchand Co., 239 ITR 466 (M.P.) wherein it has been held as under :- The assessee was a registered firm deriving income from contract work. The assessee claimed depreciation allowance at the rate of 40 per cent. on trucks used for its business purpose. The Income Tax Officer allowed only 30 per cent. allowance on the ground that the vehicles were used for the assessee s own business of transporting goods. On a reference : Held , that the benefit of 40 per cent. depreciation allowance was admissible only for vehicles used for business of hire in view of the provisions of Entry No.III(ii)E(1-A) of Part I of Appendix I to the Income-tax Rules, 1962, and since the assessee used the vehicles for its own business of transporting its goods only 30 per cent. depreciation was allowable. 15. Respectfully following the above order of the Hon ble High Court of M.P., the order of the CIT(A) is confirmed. 16. Ground no.5 of the assessee s appeal is in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income (as calculated above) Rs.57,56,282 Rs.172,47,340 Admissible deduction u/s. 80IB i.e. 30% of the above Rs.51,74,202 However, the assessee has claimed deduction of ₹ 97,65,626/- u/s. 80IB of the Act. Therefore, deduction of ₹ 45,91,424/- is not admissible to the assessee, hence added back to the income of the assessee. (Addition of ₹ 45,41,924/-) 17. The CIT(A) held that the adjustment of duty draw back has been given by the assessee himself by deducting ₹ 95,48,466/-. Therefore, no further disallowance is warranted. However, the CIT(A) confirmed the disallowance in respect of other income totaling to ₹ 14,12,108.67 and accordingly directed the A.O. to recalculate the deduction under section 80-IB of the Act. The relevant finding of CIT(A) is reproduced as under :- (paragraph no.5.3) I have considered the rival contentions. It is noted that the assessee originally had claimed deduction of ₹ 94,53,191/- u/s 80IB of the Act in the case of Dholpur Unit. However, during the course of assessment proceedings, this claim was bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me on which the CIT(A) did not allow deduction under section 80-IB of the Act. 19. We have heard the ld. Representatives of the parties and records perused. We find that the CIT(A) has rejected the AO s formula of apportion method of other income on the basis of sale between two units. The CIT(A) held that once the assessee is maintaining separate Profit Loss account for the unit on which section 80-IB is available, deduction under section 80-IB is to be calculated accordingly. The CIT(A) has also held that the A.O. did not point out that income pertaining to Dholpur Unit on which deduction under section 80-IB is available has been diverted to other unit. The finding of CIT(A) is based on material on record and the Revenue has not pointed out any contrary material to the finding of CIT(A), neither the same is available on record. In the light of the facts, we uphold the order of the CIT(A) in rejecting the A.O. s formula in respect of apportionment of other income unit-wise on the basis of sale between two units. Thus, the ground of Revenue s appeal is dismissed. Insurance Claim - ₹ 4,63,716/- 20. As regards the assessee s ground of appeal which is in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original nucleus funds which had yielded the interest came from an Industrial Undertaking. Following the above judgement of the jurisdictional High Court, we confirm the order of CIT(A) on the issue. Miscellaneous Receipts - ₹ 48,204.50 24. The details of miscellaneous receipts are given at page no. 94 of the assessee s Paper Book. On a perusal of such details, we noticed that ₹ 45,000/- is on account of cancellation charges against supply order of SMP and ₹ 3,204/- being amount of income transfer from H.O. We find that the cancellation charges against supply order is income derived from Industrial Undertaking. Therefore, the same is allowable. Other petty amount of ₹ 3,204/- is treated to be same nature. In the light of the facts, we are of the view that the assessee is entitled to deduction under section 80-IB for ₹ 48,204.50. The A.O. is directed accordingly. Scrap Sales - ₹ 1,00,000/- 25. The scrap sale is income derived from Industrial Undertaking as held by various Courts including judgement of the Hon ble High Court of Gujarat in the case of DCIT vs. Harjivandas Juthabhai Zaveri Another, 258 ITR 785 (Guj). In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Apex Court in the case of DCIT vs. Core Health Care Limited, 298 ITR 194 (SC). In the light of law laid down by the Apex Court in the above judgement in the case of DCIT vs. Core Health Care Limited, we delete the addition of ₹ 1,00,000/-. 30. Ground no.8 is in respect of disallowance of ₹ 50,000/- out of deduction under section 80-IB of the Act. The A.O. disallowed deduction under section 80- IB of the Act on the ground that the assessee made purchase of finished goods and sold the same. The A.O. was of the view that the assessee did not manufacture the goods, therefore, the assessee is not entitled for deduction under section 80-IB of the Act. The A.O. disallowed the lump sum amount of ₹ 50,000/- on estimation basis. 31. After hearing the ld. Representatives of the parties, we notice that the A.O. had disallowed the claim of the assessee under section 80-IB of the Act on presumption basis without determining the exact amount of disallowance. It is not the case of the A.O. that the said amount is not from the Industrial Undertaking. Such disallowance of deduction under section 80IB of the Act is not sustainable in law. The A.O. himself made t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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