TMI Blog2013 (4) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the instant ground in the orders of the authorities below. Since section 35DDA has been inserted by the Finance Act, 2001, which is relevant from assessment year 2001-2002 therefore, set aside the impugned order and remit the matter to the file of A.O. for deciding this issue afresh in the light of section 35DDA, if applicable. Provision of cash discount - Held that:- As dealt with this issue in the appeals for the assessment year 2000- 2001, by which the matter has been restored to the file of A.O. for allowing deduction of cash discount on actual payment basis. Disallowance of payments made to the persons specified u/s 40A(2)(b) - Held that:- In so far as royalty payment is concerned, it is observed that the assessee made payment to Johnson & Johnson, USA after due approval from RBI. If the RBI has given approval to such payment, the AO, without any cogent material, cannot take a stand that such payment was excessive, thus CIT(A) was justified in deleting disallowance to this extent. Now, disallowance at 10% of the value of goods purchased from sister concerns. The onus is on the AO to demonstrate that the payment was excessive. There is no warrant for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. (2001 (7) TMI 70 - GUJARAT HIGH COURT), which view has been reiterated in Dinesh Mills Ltd. v. CIT [2002 (10) TMI 10 - GUJARAT HIGH COURT] - against revenue. Disallowance of hotel expenses - CIT(A) deleted this addition - Held that:- No infirmity in the impugned order on this issue. When the guests are entertained by the assessee, it is but natural to arrange for their stay. This ground is, therefore, not allowed. Disallowance of club entrance fee - Held that:- The case is covered by the judgment of of Otis Elevator v. CIT 195 ITR 682 (1991 (4) TMI 53 - BOMBAY HIGH COURT) as per which deduction of such entrance fee paid for club is allowable in the year of incurring. Therefore, the view taken by the CIT(A)approved. AO is directed to ensure that no deduction is allowed for the 4/5th of the total amount in the succeeding years. Disallowance of 10% of professional sponsorship expenses - Held that:- It is amply borne out that the AO accepted the incurring of such expenses towards the promotion of assessee's business. Once the expenditure is held to be for business purposes, there is no question of disallowing 10% of such expenses by treating the same as for non-business pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respectfully following the precedent, we set aside the impugned order on this issue and remit the matter to the file of A.O. for deciding it in conformity with the view taken by the Tribunal in its order for assessment year 1999-2000. 6. Third ground of the assessee's appeal is against the confirmation of disallowance of Rs.63,42,497 being provision for Executive Retirement Scheme (ERS). 7. After considering the rival submissions and perusing the relevant material on record, it is observed from the chart prepared by the assessee on the grounds of appeal and showing how such grounds are covered, that this issue also came up before the Tribunal in its appeal for assessment year 1997-98 to 1999-2000. The Tribunal has directed to allow deduction for executive retirement scheme on the Rs.Payment basis' as against the Rs.Provision basis' claimed by the assessee. The same direction is repeated for this year as well. Eventually the impugned order on this issue is set aside and the matter is restored to the file of A.O. for allowing deduction of payment made on ERS. 8. Ground no.4 of the appeal is against the sustenance of part of disallowance of deduction u/s 80-IB from Rs.4.92 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it can qualify for deduction under Chapter VI-A as per the relevant provisions. If an income is exempt in itself, then there is no point of including such income in the total income and thereafter granting deduction. In the present appeal we are concerned with the assessee earning exempt dividend income and not claiming deduction u/s 80M. Obviously, provisions of section 14A would apply in respect of exempt dividend income u/s 10(33) of the Act. In our considered opinion the authorities below were more than justified in disallowing a mere 2% of the gross dividend as incidental expenses for earning exempt income. This ground is not allowed. 13. Ground no.7 is against the sustenance of disallowance of deduction u/s 80HHC on rent. 14. After considering the rival submissions and perusing the relevant material on record, it is observed that similar issue was raised in the assessee's appeal for assessment year 1999-2000 also. The Tribunal, following the judgment of the Hon'ble Supreme Court in the case of ACG Associate Capsules Private Limited v. CIT [343 ITR 89 (SC)] , has held that "netting off" of rent paid should be done against the rent received and only 90% of such net ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeals for the assessment years 1997-98 to 1999-2000. The Tribunal decided this issue in assessee's favour by following certain other earlier orders passed in assessee's own case. Following the same, we uphold the impugned order on this issue. 19. Ground no.4 is against the exclusion of excise duty and trade discount from total turnover for deduction u/s 80HHC. Here again both the sides are unanimous in their submission that the Tribunal has decided this issue in assessee's favour in its order for assessment years 1997-98 to 1999-2000 by relying on the judgment of the Hon'ble Supreme Court in the case of Lakshmi Machine Works [290 ITR 667 (SC)]. Following the view taken by the Tribunal in earlier year, we approve the impugned order on this issue. 20. Ground no.5 is against allowing depreciation of Rs.16,10,654 on Testing equipment. 21. The learned Counsel for the assessee contended that similar issue was raised in the case of assessee's sister concern, namely, NR Jet Enterprises Limited and the Tribunal vide its order dated 28th May, 2008 in ITA No.4474/Mum/2004 has held that depreciation should be allowed on the testing equipment provided to laboratories and hospitals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the assessee's appeal and ground no.2 of the Revenue's appeal are against the provision of cash discount. We have dealt with this issue in the appeals for the assessment year 2000- 2001, by which the matter has been restored to the file of A.O. for allowing deduction of cash discount on actual payment basis. As the facts and circumstances of these grounds continue to remain the same, we direct the A.O. to decide this issue in conformity with our direction in the said earlier year. The impugned order is, therefore, set aside to this extent. 27. Ground no.4 of the assessee's appeal and ground no.5 of the Revenue's appeal are against confirmation/deletion of disallowance of payments made to the persons specified u/s 40A(2)(b). The Assessing Officer observed that the assessee paid royalty and also purchased finished goods from its sister concerns. On being called upon to prove that the payments to sister concerns were not excessive or unreasonable, the assessee submitted that royalty was paid to Johnson Johnson, USA and purchase of finished goods were made from its sister concerns. The assessee submitted that there were no market comparables for the purchase of such goods. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st not allowing full amount of deduction u/s 80-IB. This ground has been decided against the assessee in earlier years. The same view is repeated and the impugned order is upheld. 31. Other part of Ground no.6 is against denial of deduction u/s 80- IB on certain items of miscellaneous income. The learned AR relied on certain decisions and requested that the matter may be restored to the file of A.O. for fresh decision on such items in the light of such decisions. The learned Departmental Representative did not object to the restoration of the matter but requested that the decision be taken by considering the judgment of the Hon'ble Supreme Court in the case of Liberty India v. CIT [(2009) 317 ITR 218 (SC)]. Considering the entire factual aspects of the matter, we deem it fit to set aside the impugned order and restore the matter to the file of A.O. as requested by both the sides for deciding this issue afresh by considering inter alia the judgment of the Hon'ble Supreme Court in the case of Liberty India (supra). 32. Ground nos.7, 8 and 10 are against reduction/denial of deduction u/s 80HHC on the amount of Write back of liabilities and Miscellaneous income with Service charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. 38. After considering the rival submissions and perusing the relevant material on record, it is seen from the details of expenses disallowed by the A.O. that all are of revenue nature. Aounts has been incurred on items of revenue nature, such as, false ceiling, paneling and monsoon shed of temporary period. In our considered opinion, the learned CIT(A) was justified in deleting the disallowance. 39. Ground no.6 of the Revenue's appeal is against deletion of 10% of ad hoc disallowance of traveling expenses. The Assessing Officer made disallowance at 10% of the total traveling expenses. The learned CIT(A) deleted the said addition by considering that it was a case of a company and no disallowance was called for. He relied on the judgment of the Hon'ble Gujarat High Court in the case of Sayaji Iron Engg. Co. 253 ITR 749 for deleting the disallowance. 40. After considering the rival submissions and perusing the relevant material on record, there is no doubt that the assessee is a limited company. In such a situation, there cannot be any question of sustaining any disallowance even by treating the expenditure for non- business purposes. It has been held so by the Hon'ble Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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