TMI Blog2014 (2) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act - Profits on one unit cannot be set off from the loss of another firm in the process of computation of deduction under section 10A of the Act - The issue has been restored for fresh adjudication in the light of aforementioned judgement. Deduction u/s 10B - Held that:- a deduction of such profits and gains as are derived by 100% Export Oriented undertaking from the export of articles or things or computer software for a period of 10 consecutive assessment years relevant to the previous year in which the undertaking begins manufacture or products articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee - The approval relates to the assessment year relevant to previous year in which undertaking begins manufacture or products articles or things - Decided against Revenue. Product registration charges - Held that:- The expenditure incurred by the assessee on registration of its products was in the Revenue nature - The products once registered are not sold only in that particular year but the sale can be made over a span of time until the renewal of registration is required - The benefit form the said registration of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible for the exemption, based on the certificate regarding Export Oriented Undertaking issued to the assessee for the Ankleshwar Unit and that the profits of the prior period did not qualify of the exemption u/s.10B. 2.The appellant prays that the order of the CIT(A) be set aside on the grounds mentioned above and that of the Assessing Officer be restored." 4. ITA NO.8703/M/2011, assessee's appeal for A.Y.2008-09. I.Disallowance of Sale of Scrap-Rs.1,44,000/- 1. In the facts and circumstances of the case and in law, the learned CIT Appeals erred in confirming that income of Rs.1,44,000/- on account of Sale of Scrap does not qualify for deduction u/s. 10A/10B of the IT Act, 1961. 2. Reasons given by the CIT Appeals for confirming that income of Rs.1,44,000/- on account of Sale of Scrap does not qualify for deduction u/s 10A/10B of the IT Act, 1961 are wrong, insufficient and contrary to the facts and evidence on record. II Disallowance of FD Interest-Rs.37,620/- 1. In the facts and circumstances of the case and in law, the learned CIT Appeals erred in confirming that income of Rs.37,260/- on account of FD Interest received from Ankleshwar Unit does not qualify for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount not qualifying for deduction u/s 1 OA/1 OB of the IT Act, 1961. 2. Reasons given by the CIT Appeals for confirming the disallowance of Rs. 4,93,202/- on account of Exchange Variation Gain being the amount not qualifying for deduction u/s 1 OA/1 OB of the IT Act, 1961, are wrong, insufficient and contrary to the facts and evidences on record VII. Disallowance of notice period salary recovered - Rs. 30,158/- 1. In the facts and circumstances of the case and in law, the learned CIT Appeals erred in confirming the disallowance of Rs. 30,158/- on account of notice period salary recovered being the amount not qualifying for deduction u/s 1 OA/1 OB of the IT Act, 1961. 2. Reasons given by the CIT Appeals for confirming the disallowance of Rs. 4,93,202/- on account of Exchange Variation Gain being the amount not qualifying for deduction u/s 1 OA/1 DB of the IT Act, 1961, are wrong, insufficient and contrary to the facts and evidences on record VIII. Disallowance of DEPB License - Rs. 25,88,979/- 1 In the facts and circumstances of the case and in law, the learned CIT Appeals erred in confirming that income of Rs. 25,88,979/- on account of DEPB Incentive pertaining to Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Export Benefits (DEPB) 453,652 Interest on F.D./Margin Money 681,665 (Tax deducted at source Rs.143593/previousyear Rs.37,491/-) Miscellaneous Receipts 1,068,956 Insurance claim Received 687,774 Commission Brokerage Received 1,351,840 Exchange Variation Gain (Net) 2,781,414 Notice Period Salary Recovered 102,956 Long Term Capital Gains ------- Discount Received ------ Interest on Income Tax Refund ----- Profit on Sale of Assets 100 Total .... 8,997,622 7. According to the AO, the aforementioned amount was not eligible for deduction u/s.10A/10B of the Income Tax Act as it constitutes income from other sources. Each of the aforementioned items has not been discussed separately in the order of AO. The aforementioned exclusion was agitated in the appeal filed before the CIT(A) on aggregate basis and this issue has been discussed by the learned CIT(A) in para 5 to 7. Before the learned CIT(A), it was pleaded that the aforementioned amounts should be considered for elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that assessee is already in the business of manufacturing of pharma goods and setting up of a plant at Dehradun which is merely expansion of its existing business and is not starting of a new or separate business. Therefore, it was pleaded that expenses should be allowed. On these submissions of the assessee, the learned CIT(A) has observed that the assessee has been manufacturing different products in various units. From the Director's Report for the financial year 2001-02, it was seen that the major strength was development of new process for bulk drug and formulation of molecules. The assessee had identified harm reduction pain management as its thrust area for future growth. The future plans of action was reported as focus on developing DMF for bulk drugs formulations to cater to various European markets, process development for the Nalloxane and Amorphine and new thrust areas for diversification and expansion will be identified. It was further observed that assessee was manufacturing different products in its existing units at Mumbai, Ankleshwar and Kandla. No material was brought to his attention to show that whether Dehradun Unit is proposed to manufacture sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be allowed for statistical purpose. 15. In ground no.6, the assessee is seeking set off of brought forward/business loss. It was submitted that this issue is now settled by he Tribunal in assessee's own case for A.Y.2005-06 and reference was made to the order dated 18th June, 2013 passed in ITA No.6139/M/2010. The copy of the order was placed on record and was also given to learned DR. In the said appeal similar issue was raised as per Ground No. 1 2 which read as under: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that deduction u/s.10A of the Income tax Act,1061 should be worked out without setting off the loss and unabsorbed depreciation on non-10A units. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that the provision of section 10A as amended w.e.f. 01.04.2001, contemplate a deduction from the total income of the assessee which has to be computed after setting off the loss and/or unabsorbed depreciation including those of non-10A units." Aforementioned ground has been decided by the Tribunal with the following observations: "4. Aggrieved, Revenue pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round is considered as allowed. 17. In the result, the appeal is partly allowed in the manner as indicated above. 18. ITA No.1063/M/2011 The only issue raised by the Department in the present appeal is regarding deletion of addition of a sum of Rs.35,04,640/- which represent proportionate disallowance of deduction claimed u/s.10B. This issue is discussed by the AO in para 6 of the assessment order. The AO noticed that Ankleshwar Unit (Export Oriented Undertaking) of the assessee was granted certificate from 22.6.2006, he observed that deduction u/s.10B should be allowed only w.e.f. 22.6.2006. Accordingly, the AO disallowed a sum of Rs. 35,04,640/-. The disallowance made by the AO was challenged in an appeal filed before the CIT(A) and this issue has been discussed by Ld. CIT(A) in para 11 to 13. Referring to the provisions of section 10B, it was pleaded that when the certificate is granted and conditions are fulfilled, section 10B does not contain any restriction as canvassed AO and the section provides for the deduction in the context of assessment year. The learned CIT(A) has considered such submissions of the assessee. Ld. CIT(A) referred to explanation-2(iv) below section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assets Rs. 84,591/- Total.... Rs.80,83,556/- 22. Similar reasons have been assigned by AO, while excluding the aforementioned amount for the purpose of section 10A/10B as were given in A.Y. 2007-08. However, before Ld. CIT(A) for each items the submissions were made and relevant part of the order of ld. CIT(A) read as under: A. "Disallowance of sale of scrap - Rs.1,44,400/-: I.The appellant claims that sale of scrap was generated during manufacturing and it was directly related to export business. II.This is a recurring issue which came up in appeal for A.Y. 2007-08 where the CIT(A) relying on the decision of Liberty India 317 ITR 218 has upheld the disallowance while passing the order on 26.11.2010. Since the decision is of the coordinate authority, no interference is called for. The disallowance is, therefore, confirmed. B. Disallowance of excise refund -Rs. 3,135/- I. It was highlighted that excise refund is received from the unit other than. Kandla and Ankleshwar units and, therefore, it does not form part of profit u/s.10A and u/s.10B and so not liable for exclusion. It highlighted the fact that Schedule 'A' to'S' annexed to and forming part of balance sheet as o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... miscellaneous receipts - Rs.8,38.487/-: I. It was highlighted that this amount includes amounts received from sale of scrap and that amount is Rs. 7,85,065/-. This amount was already added and not considered for the purposes of section 108. Keeping in view the fact that this amount is already added back, the addition made by the Assessing Officer tantamount to double one. The balance addition of Rs.53,422/- is confirmed. The appellant gets partial relief on this issue. H. Disallowance of commission brokerage - Rs. 8,02,536/-. disallowance of exchange variation gain - Rs.4,93,202/-, disallowance of notice period salary recovered -Rs.. 30,158/-: I. These items will also disallowed in earlier year while computing profits u/s.10A and was upheld by CIT(A) in his order for A.Y.2007-08 hence the additions/disallowances is, therefore, confirmed. I.Disallowance of profit on sale of assets - Rs.84.591/-: I. It was highlighted that this was not included while computing profit u/s.10A and u/s.10B and, therefore, needs to be deleted. II.Since this amount was not included initially while computing profits, there was no case for its being disallowance while computing profits. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also Ld. AR has submitted a chart which read as under:- 24. Referring to the aforementioned chart, it was submitted by Ld. AR that Ld. CIT(A) has wrongly sustained the addition which are pressed in the chart and to that extent relief should be granted to the assessee. In respect of DEPB issue, he submitted that the deduction was claimed for a sum of Rs.25,88,979/-. Ld. AR submitted that this issue is covered in favour of assessee by the decision of Hon'ble Bombay High Court in the case of CIT vs. Arts and Crafts Export Lmt. 246 CTR (Bom) 463. Reference was made to following question answer theirto. Q.(C)."Whether on the facts and circumstances of the case, the Tribunal erred in law in holding DEPB as a profit derived from export business for the purpose of computing deduction under section 10BA ignoring the ratio of decision in the case of Liberty India vs. CIT(2009) 225 CTR (SC) 233:(2009) 28 DTR (SC) 73 : (2009) 317 ITR 218 (SC) having binding force on facts and circumstances of the case. Decision: As regards question (c) is concerned, counsel for the Revenue fairly states that though the question has been raised by relying upon the decision of the apex Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.The assessee had claimed sum of Rs. 57,55,256/- as product registration charges for registration as well as renewal charges for its products paid to US authorities for getting the product registered. The same were disallowed by the Assessing Officer on the ground that the new products would be sold by the assessee not only for one year but in many years as such the expense has been incurred to have benefit of enduring nature. The ld. CIT(A) uplehd the trading of the Assessing Officer. 4. The Counsel for the assessee Shri K. Gopal stated that in order to export the goods manufactured by the assessee it had to register the same. He further stated that the said registration charges includes registration of new products as well as renewal of registration of some of the products. He stated that at the time of registration there is no surety for a future sale of a particular product. It may be possible that the said product may not have good market in future. In order to sell the goods in foreign market the same are required to be registered with the regulatory authority. The mere fact that the assessee was getting some benefit of enduring nature does not mean that expense can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital expenditure whereas according to the assessee, the same is allowable as revenue expenditure. During the course of hearing before us, the Ld. Counsel for the assessee stated that this issue is covered in favour of the assessee and against revenue by the decision of ITAT, 'F' Bench, Mumbai dated 25.5.2006 in the case of assessee in ITA No.127/Mum/2005 for assessment year 2001-02. The Ld. DR however, relied upon the judgment reported in 82 ITR 98(SC) and 260 ITR 102(Mumbai). On consideration of the matter, we find that the judgments relief upon by the Ld. DR are on different facts, whereas the Tribunal decision is in the case of the assessee himself and directly on the controversy for us. Respectfully following the aforesaid order of the Tribunal, we allow this appeal filed by the assessee and direct the Ld. AO deduction of Rs.46,03,887/- as revenue expenditure as claimed by the assessee. Accordingly, Ground No.IX(1)(2) is allowed. 30. In the result, this appeal filed by the assessee is partly allowed for statistical purposes in the manner aforesaid. ITA No.8691/Mum/2011 31. It was observed that the deletion which is agitated by revenue in the present appeal is only a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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