TMI Blog2013 (5) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... s subsidiaries incur all kinds of sponsorship expense. The expenses of such sponsorship also contribute significantly to the sales by these entities. Hence, agreeing with the CIT(A) that considering the sale data of 14 of the Cricket Playing nations LGEIL contribution is reasonable. TPO's action of apportionment of GCC contribution in the ratio of 5.40 : 94.60 between LGEIL and LGEK is not correct affirming the CIT(A)'s view that LGEIL has received commensurate befits of its 40% share contribution. Hence holding that the adjustments made by the AO /TPO on this account has rightly been deleted by the CIT(A). Provision for warranty expenses - Held that:- The issue involved in the appeal is covered by the decision of CIT vs. Vinitec Corporation Pvt. Ltd. (2005 (5) TMI 54 - DELHI High Court) - The assessee had made the provision of warranty liability having regard to the past factor of actual expenses incurred by the assessee towards warranty liability. In favour of assessee. Sales tax subsidy - capital subsidy v/s revenue in nature - Held that:- When the assessee is not permitted to collect the sales tax under the notification issued by the State Govt. the collection of sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are as under:- S.No. International Transaction Method Value (in Rs.) 1. Import of raw material and components TNMM 55,45,42,940 2 Import of service spares TNMM 4,79,80,282 3 Export of raw materials and components Cost Plus 22,49,801 4 Import of finished goods TPM/TNMM 1,96,01,67,598 5 Export of manufactured goods CUP 31,11,29,843 6 Import of production equipment Cost Plus 53,67,67,978 7 Royalty CUP 15,33,91,187 8 Expenses towards overseas market development CUP 12,03,750 9 Interest paid for the usance period availed CUP 80,02,500 10 Reimbursement of expenses - 14,80,95,057 11 Other transactions (Material-in-transit, Goods-in-transit, capital work-in-progress) TNMM 1,06,47,18,813 12 Design and Development fee TNMM 22,03,47,432 13 Communications Link Charges CUP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up 2003, the sales of LG products would grow due to greater visibility achieved by sponsoring the Cricket World Cup 2003. b) Brand Awareness growth :- LGEIL anticipated that the media coverage of the event would lead to greater brand awareness in India (expected to grow from 17.50% to 35.00%. c) Viewership :- There are 14 nations playing in 2003 World Cup of which three nations are new. The population table of these Countries is as given below:- S. No. Country Population (in crores) % 1 India 103.41 65% 2 Australia 1.97 3 New Zealand 0.39 4 England 6.00 5 South Africa 4.27 6 Srilanka 1.97 7 Bangladesh 13.56 8 Pakistan 14.76 35% 9 Kenya 3.16 10 Zimbabwe 1.25 11 Canada 3.22 12 West Indies 2.97 13 Namibia 0.19 14 Holland 1.61 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uying consumer which drives his first decision to buy or not to buy a consumer product. The appellant company has not considered that purchasing power of South Asian Sub-continent is comparatively very poor as compared to Western Continents. In fact media appliances and other consumer durables are considered as luxurious items in this part of the world whereas in developed nations these items have greater penetration. It is also demonstrated from the fact that consumer companies keep on adding new models and versions of products in more advanced countries to begin with having better per capita income and then these versions are brought to Asian Continent market. Therefore, while arriving at a conclusion that impact of level of enthusiasm only will bear fruits for appellant is not a correct assumption. 3.8 The TPO further commented that that cricketing events involving Indian team would benefit LGEIL also but if there is an additional sale of Rs. 100 of LG product in India it will add a profit of Rs. 5.85 to LGEIL (since as per transfer pricing documentation submitted by the appellant operating margin of LGEIL over sale is 5.85%.) However at the same time it will mean additional p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the population viewer ship. The appellant contended that as per TPO's own order, in England, Soccer is most popular game whereas Australia has proved its supremacy in Hockey as well as along with Cricket. In Western Countries Tennis has a high popularity which is evident from Wimbledon matches and Australian open matches. Therefore, a lower proportion of population in these countries would be interested in watching cricket vis-a vis India. Hence, LGEIL would have benefitted significantly out of the sponsorship ..... " "....Vide its submission dated 11th December' 2008, the appellant further submitted extracts of an article which highlights the importance of cricket advertising in India, "Global Cricket Corporation (GCC), the Newscorp company, is said to have paid $550 million to buy the rights for two World Cup tournaments and then sold them to Sony TV. About 70 per cent of the advertising revenue is expected to come from India." [Source http:/www.domain-b.com/industry/entertainment/20021221 cricket. html The appellant therefore submitted that since 70% of advertisement revenue was expected to be from India, it cannot be reasonably constructed that purchase power of South As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant vide its submission dated 23th April 2009, has contended that Hero Honda, an Indian Company has also entered into a similar agreement with GCC. No benefits are accruing to any foreign entity in this case still Hero Honda has allocated Rs. 120 crores for cricket sponsorship during the same period.[Source http://www.domain-b.com/industrv/entertainment/20021221 cricket.html]. On the other hand, the appellant's share amounted to Rs. 16.29 crores, which is 40% to the total global sponsorship contract for the year. On examining the above mentioned contentions, an inference can be drawn that an Indian entity, is incurring much higher expenses as is being jointly incurred by LGEK and LGEIL. Hence, Hero Honda must have anticipated much higher benefit than its 'expenditure out of advertising for the world cup. Since the appellant has contributed a mere 40% of such an expense, it cannot be regarded as excessive in the case. Allocation key adopted by the TPO is incorrect The allocation of cost on the basis of allocation key (percentage of profit/ sales between LGEK and LGEIL and its AEs) used by the TPO is not correct since:- It doesn't adhere to the mechanism of cost al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket playing nations. From the above, it evident that the TPO had used an incorrect measure to determine LGEIL's share in the GCC contribution as 62% of the global sales comprised of countries, which do not play/watch cricket. Further the appellant separately collated data pertaining to sales made by major cricket playing nations. The same is tabulated below:- Name of Country 2002 Australia $ 307,661,748 England $ 451,684,982 South Africa $ 130,097,693 Canada Not available New Zealand No subsidiary in this country In F.Y. 2002-03 Srilanka -do- Banladesh -do- Pakistan -do- Kenya -do- Zimbabwe -do- West Indies -do- Namibia -do- Holland -do- Total Sales in Major Cricket Playing Nations Other than India (in $) $ 889,444,423 Exchange rate 48.40 Total sales in Major Cricket Playing Nations Other than India (In Rs.) INR 43,044,662,852 Total sales of LGEIL (in Rs.) INR 30,317,261,932 Proportion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity exclusively for Star TV and, therefore, survival of its business depends on the success of programmes transmitted by Star TV Assessee was required to solicit the advertisements for Star TV channel. No person would give advertisement unless he is sure of large viewership of programmes on Star TV Therefore, if assessee incurs expenditure on advertisement with a view to increase the viewership of Star TV, in our opinion, such expenditure would be in the interest of assessee's business though it may also benefit its principal ... " Further, reliance has been placed on the judgment of Delhi ITAT in the case of Nestle India wherein the facts were similar to that of the Appellant. The Tribunal held that the expenditure has been incurred to promote business in India. Therefore, these expenses were incurred wholly and exclusively for the purpose of business of the assessee. Further, payments for these expenses have been made to third parties in India, who are not in any way related to the parent entity of Nestle. Therefore, there is no justification on the part of the assessing officer to invoke the provisions of Section 92 of the Act. In light of the above mentioned facts, it may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a one sided allocation of the benefits. Moreover, it will also be unreasonable to conclude that all the profits earned by LGEK and the promotion of the LG brand worldwide is consequent to the ICC Cricket Sponsorship only. If a both sided allocation is made, even using the flawed method adopted by the TPO, the contribution attributable to LGEIL would be far greater than what it is currently liable to pay. Guidance on similar issue by the Australian Tax Office ("ATO") The appellant has submitted that the ATO in its guidance for marketing intangibles has laid down an identical example wherein the marketer/distributor bears the costs and risks of its marketing activities and has a royalty-free contractual arrangement (with exclusive right) with the owner of the brand. Under this example, the distributor (B) receives no reimbursement from brand owner (A) in respect of any expenditure it incurs or any other indirect or implied compensation from A and expects to earn its reward solely from the sales of branded watches to third party customers in the Australian market. The ATO agrees that if A was compensating B for its marketing activities, it would've charged higher for products so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entities of LG Group. 7. Ld. Commissioner of Income Tax (A) further referred to the following sales data submitted by the assessee:- Name of Country 2002 Australia $ 307,661,748 England $ 451,684,982 South Africa $ 130,097,693 Canada Not available New Zealand No subsidiary in this country In F.Y. 2002-03 Srilanka -do- Banladesh -do- Pakistan -do- Kenya -do- Zimbabwe -do- West Indies -do- Namibia -do- Holland -do- Total Sales in Major Cricket Playing Nations Other than India (in $) $ 889,444,423 Exchange rate 48.40 Total sales in Major Cricket Playing Nations INR Other than India (In Rs.) 43,044,662,852 Total sales of LGEIL (in Rs.) INR 30,317,261,932 Proportionate sales of LGEIL 41.33% 8. From the above, Ld. Commissioner of Income Tax (A) observed that sale of LGEIL constitute 41.33% of such sales. Ld. Commissioner of Income Tax (A) further observed that LGEK and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax (A) further referred to the article submitted by the assessee "Cashing in on Cricket". The said article stated the following:- "Global Cricket Corporation (GCC), the Newscorp Company, is said to have paid $550 million to buy the rights for two World Cup tournaments and then sold them to Sony TV. About 70 percent of the advertising revenue is expected to come from India. And not without reason - for cricket to India is what football is to Brazil. It is almost a religion and hence companies here look forward to the event with glee since it means assured eyeballs for nearly every match with even channel surfing down to a minimum as people fear missing even a single delivery....." From this Ld. Commissioner of Income Tax (A) opined that this demonstrates that LGEIL shares may have closed to 70% according to market estimates. 12. Ld. Commissioner of Income Tax (A) further referred to the empirical study by ad agency 'LINTAS' which shows that the air time during the LG logo was on display during the telecast of various matches had an opportunity cost of approximately Rs. 95.20 crores in the first year itself which is roughly 73% of the total agreement value,wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (A) referred to financial information obtained from the assessee which showed that only 31.16% was procured from its associated enterprises and the balance was purchased from local Indian Vendors. Hence, Ld. Commissioner of Income Tax (A) opined that in case of LGEIL's sale benefit both the AEs and third party vendors and applying TPO's rationale, even LGEIL's third party vendors should contribute towards its ad spend. Since under arm's length circumstances, no such payment was made by third parties, LGEK (and its subsidiaries) should also not be liable for any such contribution. Furthermore, Ld. Commissioner of Income Tax (A) referred to the decision of the ITAT in the case of Nestle India and Star India Pvt. Ltd.. He observed that in both the cases it has been regarded it is immaterial that third party is being benefited by the advt. expenses of the assessee, if an expense has been incurred by a Company for its own benefit, the same should be allowed to the company as bonafide expenses. 15. In view of the aforesaid discussion, Ld. Commissioner of Income Tax (A) held that the TPO's action of apportionment of GCC contribution in the rate of 5.40:94.60 between LGEIL an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng consumer durables. The assessee company has not considered that purchasing power of South Asian Sub-continent is comparatively very poor as compared to Western Continents. TPO further observed that Cricket events involving India would benefit LGEIL also but at the same time, he observed that this will also result in additional profit to LGEK. Apart from direct benefits, it further strengthens Brand awareness of LG in India providing more bargain power to Korea company worldwide. The TPO further observed that there are large number of subsidiaries of LGEK all over the globe. That the Cricket game involving other nations would similarly benefit on above basis to LGE Korea only for which no benefit would pass to Indian entity. TPO held that percentage of profit between LGEK and LGEIL as the most appropriate base to allocate the cost between the appellant and its AE. 19.1 We agree with the Ld. Commissioner of Income Tax (A) that considering the sales of the entire LG group is not an appropriate basis to apportion the benefits emerging from sponsorship of the World Cup and other events to the entities of the LG Group. In this regard, following break-up of Global sales of the LG Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is reasonable. Further, LGEIL has not made any contribution towards the expenses of approximately Rs. 3441 crores incurred by LG Korea and other group companies in sponsoring and advertising in other sports events viz. motor sports, soccer, golf which are popular and played outside India but they enjoy significant viewership in India as well. 22. While considering the cost contribution, it is also necessary to bear in mind the penetration level of sales in advanced countries. For example in UK for every 100 household the number of Color Television is 98.6 as compared to India where for every 100 households only 31.1 Color Television are available. As per details submitted by the assessee the sales increased by 35.04% during the financial year 2002-03. This shows that benefits in terms of increase in sales would be much higher in the case of LGEIL, as compared to the advanced countries. 23. We further find that assessee has referred to an Article in the media "Cashing in on Cricket". This article mentions that Global Cricket Corporation (GCC), the Newscorp Company, is said to have paid $ 550 million to buy the rights for two World Cup tournaments and then sold them to Sony ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e further refer to the TPO's contention that the benefit of LGEIL sales would accrue to the associated enterprises since they are earning from LGEIL by way of imports, royalty etc. Hence, they should also contribute to LGEIL's ad spend. In this regard, Ld. Commissioner of Income Tax (A) has referred to the financial information obtained from the assessee which showed that only 31.16% was procured from its associated enterprises and the balance was purchased from local Indian Vendors. Hence, Ld. Commissioner of Income Tax (A) opined that in case of LGEIL's sale benefit both the AEs and third party vendors and applying TPO's rationale, even LGEIL's third party vendors should contribute towards its ad spend. Since under arm's length circumstances, no such payment was made by third parties, LGEK and its subsidiaries should also not be liable for any such contribution. 27. We may further refer to the assessee's submission that Hero Honda India Company has also entered into a similar agreement with GCC, and no benefits are accruing to any foreign entity. In this case still Hero Honda has allocated Rs. 120 crores for cricket sponsorship during the same period. This compares very favoura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the ratio of 5.40 : 94.60 between LGEIL and LGEK is not correct. We affirm the Ld. Commissioner of Income Tax (A)'s view that LGEIL has received commensurate befits of its 40% share contribution. Hence, we hold that the adjustments made by the Assessing Officer /TPO on this account has rightly been deleted by the Ld. Commissioner of Income Tax (A). 32. Apropos ground no. 2 :- Provision for warranty expenses. On this issue Assessing Officer observed that the assessee has made a provision of Rs. 6,57,19,516/- for service of warranty. Assessing Officer observed that the same was a provision and was not allowable. 33. Upon assessee's Appeal Ld. Commissioner of Income Tax (A) considered the Ld. Commissioner of Income Tax (A)'s order as well as ITAT order in assessee's own case for assessment year 2002-03. He noted that while adjudicating this issue reliance has been placed on Hon'ble Apex Court decision in the case Bharat Earth Movers vs. C.I.T. 245 ITR 428 and Delhi High Court decision in the case of C.I.T. vs. Vinitech Corporation Pvt. Ltd. 278 ITR 377 and accordingly, assessee's appeal has been allowed. Considering the above, Ld. Commissioner of Income Tax (A) allowed the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so worked out was applied as a multiplying factor on the sale of the year resulting into expenses including provisions. The difference in the expenses including provisions and actual expenses was considered for providing the additional provisions. This method was followed by the assessee company uniformly right from the first year of the commencement of the production. Although the claim of the provisions as a revenue expense was made first time in the year under consideration based on the decision of Hon'ble Supreme Court in the case of Bharat Earth Movers Ltd., Vs. CIT (2000)245 ITR 428 and many other courts' citations submitted by the appellant company in its submission in the course of assessment proceedings and also in the course of appellate proceedings but I find that its time claim in the year under consideration is allowable as per the ratio laid down by the jurisdictional Delhi High Court in the case of CIT Vs. Vinitec Corporation Pvt. Ltd. (2005)278 ITR 337 (Delhi). The Observation made by the Assessing Officer that since these provisions have not been incurred wholly and exclusively for the purpose of business, they stand disallowed under section 37(1) of the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law Ld. Commissioner of Income Tax (A) erred in relying on the fact that industrial policy was not formulated with the sole objective of encouraging the capital investment in NOIDA area, but various other objectives as well. He should have instead evaluated the purpose and the object of the subsidy or exemption scheme to determine the nature of the receipt in accordance with the principles laid down by Supreme Court in the case of Sahney Steel (228 ITR 253). 2.4 That on facts and in law Ld. Commissioner of Income Tax (A) erred in coming to the conclusion that sales tax subsidy is given subsequent to the commencement of business and hence has to be considered as an assistance for carrying out the business. 3. That on facts and in law the Ld. Commissioner of Income Tax (A) erred in para 16.3 of the impugned order by upholding the inclusion of profit of I C division while calculating the appellant's claim under section 80HHC. 4. That on facts and in law the Ld. Commissioner of Income Tax (A) erred by upholding the levy of interest under section 234D. The appellant prays for leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation No. 1179 dated 31.03.1995 issued by the State Government of Uttar Pradesh. The State Govt. has provided sales tax exemption with an objective to promote the development of certain industries which have been set up or undertaken modernisation, diversification, backward integration by way of fixed capital investment of Rs.50 crores or more. The exemption of from sales tax or benefit of reduced rate of tax is available to those units which have started production or have carried out expansion or modernisation or backward integration etc. between 1.12.1994 and 31.03.2000. Para 2 of the notification specifies that the exemption or reduction in the rate of sales tax including the additional tax would not be more than 5 per cent of sale of goods. In case where tax rate was more than 5 per cent including additional tax, the balance was to be paid by the unit. Para7 (2) of the notification provides for the exemption of sales tax to the extent of exemption or reduction in tax. Item (2) of the Schedule includes Greater Noida Industrial Development Area wherein exemption from sales tax to the extent of 200 per cent of capital investment has been provided. None of the clauses of the Notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the dealers' price as a sale price of the product. In the States other than Uttar Pradesh, the sales tax so collected as a part of dealers' price has been paid to respective State Governments, whereas in the case of the assessee, since the assessee was not liable to pay sales tax, as exemption has been provided to the extent of 200 per cent of fixed capital investment, the sales tax element which is embedded in the sale price have been retained by the assessee as excess sales consideration. At the year-end the assessee has allocated the sales tax element from dealer's price and has claimed the same as capital subsidy. Therefore, the collection of dealers' price has been made in the ordinary course of trading activities. When the assessee is not permitted to collect the sales tax under the notification issued by the State Govt. the collection of sales tax as a part of dealers' price is nothing but constitutes a trading receipt. 11. Our view that the sales tax collected by the assessee as a part of dealer's price would constitute trading receipt is supported by the decision of Hon'ble Supreme court in the case of Sinclair Murray and Co. P. Ltd. Vs. CIT (1974) 97 ITR 615 (SC). In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of eligible units. In the case of the assessee the production of expended unit started from 9 th March, 1998 and the first sale was effected on 27th March, 1998. The assessee had made application for the purpose of exemption on 19/09/1998. It is a undisputed fact that none of the clause of the Notification issued under section 4-A of Trade Tax Act, 1948 had authorised the assessee to collect sales tax / trade tax. It is also a fact that the collection of sales tax / trade tax has been made after the eligible industrial unit started production. Nowhere in the Notification has it been stated that exemption from sales tax / trade tax was provided for the setting up of the eligible unit. Therefore, the exemption from sales tax was granted in the course of carrying out of the business of the assessee. Hence, the grant of exemption from sales tax cannot be treated for the purpose of setting up of the industry. In other words, the industry was to be first set up and after it went into production and made the first sale, the assessee became eligible for exemption of sales tax / trade tax. The eligibility certificate was to be produced before the sales tax authorities in order to enable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the cane price paid by the assessee is a revenue expenditure and, therefore, any amount provided as aid for making revenue expenditure, would partake the nature of revenue receipt." 12.3 Similar view has been taken by Hon'ble Punjab Haryana High Court in the case of CIT Vs. Abhishek Industries Ltd. (supra). The facts of this case were that the assessee initially while filing the return of income treated the sales tax subsidy as a revenue receipt. Even though a revised return was filed by the assessee on 12/08/1994, still no claim was made for treating the sales tax subsidy as capital receipt as against the revenue receipt. However, it was only at the time of framing the assessment the assessee changed its stand where vide letter dated 29/2/1996, a plea was sought to be raised that the sales tax subsidy was inadvertently treated as revenue receipt. The claim of the assessee was that the sales tax subsidy was in the form of sales tax exemption granted by the State of Punjab under the 1991 Rules, as amended by Notification dated 29th September, 1992. The relevant Rule as was sought to be relied upon by the counsel for the assessee is extracted below:- "4. A (1) Notwithsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the same strongly lay on the assessee, which it had failed to discharge. " 12.5 Likewise in the case of Mudit Refrigeration P. Ltd. Vs. ACIT (2003) 84 I.T.D. 289 (All.) according to scheme notified by State Govt. the assessee company, a cinema owner was entitled to grants-in-aid or subsidy by way of adjustment of Entertainment Tax, which was treated as paid by way of adjustment and retained by the assessee. The assessee claimed it as a capital receipt, on plea that subsidy was paid to carry on trade and that its quantification on the basis of entertainment tax was only a measure to determine it and that it was not a fact that entertainment tax was not payable by the assessee to the Govt. The assessing officer treated it as revenue receipt. The question before the Bench was whether if grants in aid were given by way of assistance to the assessee in carrying on of his trade or business and for purpose of making cinema business more profitable in backward areas, and not to acquire any asset or against capital outlay it had to be treated as a trading receipt and the source of funds was quite immaterial. It was also held that grant in aid received by way of adjustment of Entertainme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction in the year 1973. The assessee maintained its accounts according to the calendar year. It was, therefore, entitled to the benefits of the said Government order in the calendar year 1973, which meant the assessment year 1974-75. In the said accounting year, the assessee obtained refund totalling Rs.14,665.70 being refund of sales tax on purchase of machines, purchase of raw materials and sale of finished goods. The Income-tax Officer, while making the assessment for the year 1974-75, included the said amount in the assessable income of the assessee which was confirmed on appeal by the Commissioner of Income-tax (Appeals). On further appeal, however, the Tribunal upheld the assessee's contention and held that the amount of Rs.14,665.70 refunded to the assessee in terms of the said Government order "did not represent refund of sales tax" but was a development subsidy in the nature of a capital receipt. The High Court held that the amount was assessable. On appeal to the Supreme Court by the assessee : " Held, dismissing the appeal, that, under the notification in question the payments were made to assist the new industries at the commencement of business to carry on their bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the assessee by the decision of Special Bench of the Tribunal in the case of Reliance Industries (supra), in our view, is not correct in view of the decision of Hon'ble Punjab Haryana High Court in the case of Abhishek Industries P. Ltd. (supra); the decision of jurisdictional High Court in the case of CIT Vs. K. M. Sugar Mills Ltd. (supra) and the decision of Sahney Steel and Press Works (supra). Moreover, the decision of Special Bench of the Tribunal was rendered before the decision in the case of Abhishek Industries P. Ltd. (supra). The assessee had not been able to produce any evidence that the assessee was authorised to collect sales tax as authorised by the State Government or collection of sales tax was required for investment in setting up of the industry or expansion of the industrial unit. Hence, in view of the decision of Punjab Haryana High Court in the case of Abhishek Industries P. Ltd. (supra); and the decision of jurisdictional High Court K.M. Sugars as well as Hon'ble Supreme Court in the case of Sahney Steel and Press Works (supra) the sales collected by the assessee as dealers price and retained with it has to be taxed as revenue receipt. 15.1 The alte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is totally wrong. The issue before the Hon'ble Supreme Court in IPCA's case was "whether the appellant are entitled to deduction of 80HHC ignoring the loss" and Hon'ble Supreme Court, held in clear term that while calculating the deduction under section 80HHC, the provision of Section 80B(5) and Section 80AB cannot be overlooked and the income has to be computed in accordance with the provisions of this Act, then not only profits but losses have to be taken into consideration. Thus the legal proposition is very clear that Section 80HHC is governed by Section 80AB and Section 80AB has been given an overriding effect over all other sections in Chapter VIA. Section 80HHC does'nt provide that their provisions are to prevail over Section 80AB or over any provision of the Act. Supreme Court has clearly held that Section 80HHC would be governed by Section 80AB. Further, even under section 80HHC(3)(C)(i), the profit to be taken up has to be "adjusted profit of the business", therefore, if there are losses, they cannot be ignored. Hence, in view of the above. I hold that Assessing Officer was right in including the profit of I C Division while calculating the appellant's claim under ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
