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2015 (4) TMI 473 - ITAT AHMEDABAD

2015 (4) TMI 473 - ITAT AHMEDABAD - TMI - Reduction of amount of profits eligible for deduction u/s 80HHC from the book profits u/s 115JA - MAT computation - Held that:- Respectfully following the precedents [2015 (4) TMI 466 - ITAT AHMEDABAD] wherein held that if the dichotomy between "eligibility" of profit and "deductibility" of profit is not kept in mind then s. 115JB will cease to be a self-contained code. In s. 115JB, as in s. 115JA, it has been clearly stated that the relief will be compu .....

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lity" of profits as contended on behalf of the Department. Thus we hereby hold that the AO is required to re-compute the taxable profit for the purpose of computation of book profit u/s.115JA of the Act in the light of the guide lines laid down by the Hon Courts as cited above. - Decided in favour of assessee.

Reduction of amount of profits derived by eligible industrial undertaking referred in s. 80IB [Old Section 80IA] from the book profits u/s 115JA - whether the computation carrie .....

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pute the deduction U/s 80IA. But it was pleaded that this issue was not decided by Ld. CIT(A). Also in the past for A.Y. 1998-99 [2011 (1) TMI 1305 - ITAT AHMEDABAD] this very issue was restored back to the file of Ld. CIT (A) in assessee's own case - Thus for this year as well, this ground may be treated as allowed but for statistical purposes only. - Decided in favour of assessee for statistical purpose only.

Deduction of Lease Equalisation Charge from Book Profits u/s 115JA - w .....

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by the assessee in which there was a corresponding debit or credit to the lease adjustment account. Almost on identical facts in the case of GE Capital Transportation Financial Services Ltd (2007 (7) TMI 343 - ITAT DELHI-D ) it was held that any adjustment made by the Assessing Officer by adding the amount of lease equalization charges while computing the book profit was unjustified. Likewise, in the case of TVS Finance & Services Ltd (2009 (2) TMI 283 - MADRAS HIGH COURT) opined that the lease .....

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income forming part of total turnover for the purpose of deduction u/s 80HHC - Exchange rate difference on the balances in the EEFC account ought to be treated as export turnover for the purpose of computing the deduction u/s 80HHC - Held that:- This issue has already been decided by us in Assessment Year 1999-2000 wherein held that now this issue is directly covered in favour of the assessee by an order of Honble Gujarat High Court in the case of CIT vs, Alps Chemicals Pvt Ltd [2014 (10) TMI 25 .....

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ose subsequent to receiving the sale consideration hence part of the export sales . The gain was not due to delayed realization of export proceeds. - Decided in favour of the assessee

Inclusion of Sale of scrap in total turnover for the purpose of deduction u/s 80HHC - Held that:- This issue has also been dealt with by us while deciding ground No.4 for Assessment Year 1999-2000, wherein held that for the purpose of availing deduction u/s.80HHC, income from sale proceeds of sale scrap .....

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deduction u/s 80HHC? - AO held that where an assessee is engaged in export of trading goods and manufactured goods, then the profit of the two should be clubbed - CIT(A) has placed reliance on Ipca Laboratories Ltd [2001 (7) TMI 99 - BOMBAY High Court] and affirmed the calculation of the Assessing Officer - Held that:- The said decision of the Hon'ble Bombay High Court of Ipca Laboratories Ltd was affirmed by the Hon'ble Supreme Court in [2004 (3) TMI 9 - SUPREME Court] wherein the Hon&# .....

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(8) TMI 63 - SUPREME COURT ] wherein it was held that Duty Drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purpose of deduction U/s 80I / 80IA / 80IB. It was commented by S.C. that Sec. 80IB provides for the allowing of deduction in respect of profits and gains derived from the eligible business. The connotation of the words 'derived from' is narrower as compared to that of the words ' attributable to.' By using t .....

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penditure pertaining to issue of debenture is entitled U/s 37(1) and the provision of Sec. 35D are not going to effect such deduction. So the outcome of the above discussion is that the provision of amortisation is not intended to supersede any other provision of the income tax act under which such expenditure is otherwise admissible as a deduction . Under the fitness of circumstances it is therefore required to restore this issue back to A.O. to examine both the aspects i.e. Revenue Expenditure .....

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in the ordinary course of business. We therefore follow the view already taken by the respected coordinate benches and affirm the decision of CIT(A)- Decided against revenue.

Unaccounted sale of spent solvents - CIT(A) deleted the addition - Held that:- The post search period and in the financial year under consideration the Assessing Officer has simply presumed that the assessee might have sold the spent solvents; therefore, following the past history of the case, we hereby hold tha .....

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HC purpose - CIT(A) deleted the addition - Held that:- As decided in Laxmi Machine Works [2007 (4) TMI 202 - SUPREME Court] for the legal proposition that Excise Duty & Sales Tax are indirect taxes so do not involve any element of 'Turnover'. Respectfully following this precedent we hereby affirm the findings of CIT(A) - Decided against revenue.

Inclusion of insurance claim as part of total turnover for 80HHC purpose - CIT(A) deleted the addition - Held that:- The fundamental .....

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art of the total turnover or not. Because of this reason, we hereby restore this ground back to the stage of the Assessing Officer to examine the nature of receipt and then decide according to law as discussed above. - Decided in favour of revenue for statistical purposes.

Gross interest,Gross lease rent & Operational charges for computing 'Profit of the Business' for 80HHC purpose - CIT(A) deleted the addition - Held that:- As relying on ACG Associated Capsules Pvt. Ltd.,[201 .....

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e Revenue should not have any grievance because the ld. CIT(A) has followed the decision in the case of Ipca Laboratories (supra). - Decided against revenue.

Deduction under section 80IA reduced by CIT(A)- Assessing Officer has disallowed the profit on sale of DEPB on the ground that the proceeds were not derived from manufacturing activity. - Held that:- Once this issue has been decided by ld. CIT(A) in favour of the Revenue Department, then there was no legal requirement to raise th .....

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rkar, A.R. ORDER Per Mukul Kumar Shrawat, JUDICIAL MEMBER:- These cross appeals for Assessment Year 2000-01 are emanating from the order of Ld. CIT(A)-IV, Ahmedabad dated 17.01.2003. These two appeals are consolidated and hereby decided by this common order. A. Assessee's Appeal (ITA No. 1400/Ahd/2003) 1. Ground No. 1 is reproduced below: "1. Re: Reduction of amount of profits eligible for deduction u/s 80HHC from the book profits u/s 115JA. 1.1 The computation of the amount deductible .....

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ssing Officer has noted that while calculating the book profit u/s 115JA, the assessee has reduced an amount of ₹ 10,05,31,321/- as 80HHC deduction. The Assessing Officer has objected the calculation of the assessee. According to the Assessing Officer, the said issue has already been decided by the ld. CIT(A) in assessee's own case for AY 1999-2000; hence, the deduction u/s 80HHC was curtailed to ₹ 5,72,08,084/- for the purpose of calculation of profit u/s 115JA. 1.2 The First Ap .....

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d. 340 ITR 593 ( S.C.) in the background of the facts of this case we are of the view that the decision of Syncome Formulations (I) Ltd. 292 ITR 144 (AT)(Mum.)(SB) has been approved by the Hon'ble Supreme Court in the case of Bhari Information Tech.Sys.P.Ltd.(supra). Therein it was held that the deduction u/s.80HHE of the Act in the case of Export of Computer Software has got to be worked out on the basis of adjusted book profits u/s.115JA of the Act and not on the basis computed under the r .....

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) Ltd. (supra), the Special Bench of the Tribunal came to the conclusion that deduction claimed by the assessee u/s.80HHC has to be worked out on the basis of adjusted book profit u/s.115JA of the Act and not on the basis of profits computed under regular provisions of law applicable to computation of profits and gains of business. The view taken by the Special Bench was accordingly affirmed and the Special Leave Petition filed by the Revenue Department was dismissed. We have also noted that a d .....

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lanation to section 115JB of the Act. The Hon'ble Court has said that there was no merit in the said argument of the Revenue Department. The Court has made an observation as under:- "10.If the dichotomy between "eligibility" of profit and "deductibility" of profit is not kept in mind then s. 115JB will cease to be a self-contained code. In s. 115JB, as in s. 115JA, it has been clearly stated that the relief will be computed under s. 80HHC(3)/(3A), subject to the cond .....

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ed on behalf of the Department. 11. For the above reasons, we set aside the impugned judgment of the High Court and restore the judgment of the Tribunal. Accordingly, the civil appeal of the assessee is allowed with no order as to costs." 1.4. Therefore, respectfully following the above precedents, we hereby hold that the AO is required to re-compute the taxable profit for the purpose of computation of book profit u/s.115JA of the Act in the light of the guide lines laid down by the Hon Cou .....

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on carried out by the Assessing Officer of the amount of profits derived by eligible industrial undertaking referred in S. 80IA for the purpose of computation of book profits under explanation to Sec. 115JA(1) should be made with reference to the book profits and not the taxable profits." 2.1 The Assessing Officer has noticed that while calculating the book profit u/s 115JA, the assessee has reduced a sum of ₹ 21,16,08,000/- u/s 80IA. That calculation was rejected by the Assessing Off .....

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. Before us it is pleaded that this issue was not decided by Ld. CIT(A). We have also been informed that in the past for A.Y. 1998-99 this very issue was restored back to the file of Ld. CIT (A) in assessee's own case in ITA No. 363 & 692/Ahd/2002 vide order dated 7.1.2011.( ref. para 20 page 15 & para 22 page 16) Naturally, if the First Appellate Authority has not expressed a view how the Tribunal can comment on the correctness of the same, therefore, for this year as well this issu .....

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uld be deleted." 3.1 The assessee was asked by the Assessing Officer to explain why the lease equalization charges should not be added to book profit u/s 115JA. The assessee's explanation was that the equalization charges were reduced from the gross lease rental. The lease equalization charges were stated to be created to ensure that in case of a lease, only the fair income is accounted as income of the lesser. The annual lease equalization charges represented the recovery of the fair v .....

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le calculating the book profit u/s 115JA. According to the Assessing Officer, Section 115JA prescribes that the book profit means the net profit as shown in the profit and loss account which is to be increased by any reserves by whatever name called. In the opinion of the Assessing Officer, the lease equalization charges were nothing but reserves created by the assessee; hence, the same was added back for the purpose of calculating the book profit u/s 115JA(2) of the Income-tax Act. 3.2 When the .....

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e has wrongly calculated the profit for the purpose of section 115JA. 3.4 On the other hand, from the side of the assessee, ld. Authorized Representative Shri S.N. Soparkar appeared and placed reliance on the decisions of TVS Finance & Services Ltd, 318 ITR 435 (Mad.) and GE Capital Transportation Financial Services Ltd, 113 ITD 22 (Delhi). 3.5 We have heard both the sides. As per the arguments and facts appearing from the assessment records, we have noted that the assessee has explained tha .....

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and loss account and it was disclosed separately as a deduction from addition to the gross value of lease rental. The statutory depreciation was shown separately in the profit and loss account. Therefore, it was argued that the lease equalization charge was not in the nature of any reserve created by any way of appropriation of profit. Rather, it was a charge to profit and loss account just like in the nature of depreciation. Almost on identical facts in the case of GE Capital Transportation Fin .....

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justified. Likewise, in the case of TVS Finance & Services Ltd (supra), the Hon'ble Madras High Court has opined that the lease equalization charges over the period of lease is equal to the difference between the quantum of principal recovered and the residual value. The provision was made as per ICAI guidelines note, therefore, same is not contingent in nature. It was held that the lease equalization charges is not to be included in computing book profit u/s 115JA of the Income-tax Act. .....

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fference of ₹ 11,72,828/- in respect of balances under EEFC Account should not be considered as miscellaneous trading receipt forming part of 'total turnover' for the purpose of computing the deduction u/s 80HHC of the Act. 4.2 Without prejudice to the above the Exchange rate difference on the balances in the EEFC account ought to be treated as export turnover for the purpose of computing the deduction u/s 80HHC of the Act." 4.1 On perusal of break-up of various expenses debit .....

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rther 90% of the same was reduced while working the eligible profit for deduction u/s 80HHC. 4.2 This issue has already been decided by us in Assessment Year 1999-2000 in ground No.3, wherein we have held as under:- "3.3. With this factual back ground we have heard both the sides. At the outset we have been informed that now this issue is directly covered in favour of the assessee by an order of Honble Gujarat High Court in the case of CIT vs, Alps Chemicals Pvt Ltd 367 ITR 594. The Hon' .....

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e foreign exchange rate. Conscious of the fact that the assessee had received the proceeds of the export transaction and gained due to fluctuation the court held that such gain cannot only be said to have been 'derived' from export business but the fluctuation gain arose subsequent to receiving the sale consideration hence part of the export sales . The gain was not due to delayed realization of export proceeds. The issue was decided in favour of the assessee. Respectfully following the .....

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. 5.1 The scrap sales of ₹ 47,14,326/- should not be considered to form part of total turnover for computing the deduction u/s 80HHC." 5.1 On perusal of P&L account, it was noted by the Assessing Officer that the assessee had included a receipt of ₹ 47,14,326/- on account of sale of scrap generated from business. According to the Assessing Officer, the receipts on sale of scrap was earned in direct exercise of the business, therefore, to be treated as part of the total turno .....

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decide the meaning of word "total turnover". That assessee was a manufacturer and exporter of Stainless Steel Utensils. In the process of manufacturing, some portion of the Steel could not be used and it was treated as scrap. The assessee sold this scrap in the local market and income arising from sale was reflected in the Profit & Loss account. For the purpose of availing deduction u/s.80HHC, income from sale proceeds of sale scrap was not included in the "total turnover" .....

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I which denotes that in normal parlance the word "turnover" would be total sales, and according to the Hon'ble Court said sales would not include scrap material. According to the Hon'ble Court, intention behind enactment of section 80HHC of the Act is to encourage export to earn Foreign Exchange. It was finally concluded that the proceeds generated from the sale of scrap would not be included in the "total turnover". 4.3. Respectfully following the aforesaid view expr .....

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u/s 80HHC. 6.1 The unrealised export proceeds of ₹ 71,09,340/- should not be reduced from the export turnover for the purpose of computing the deduction u/s 80HHC. 6.2 Without prejudice to the above, the export realised till the date of completion of the assessment should be considered as export turnover for the purpose of computing the deduction u/s 80HHC. 6.3 Without prejudice to the above, the direct and indirect costs relatable to the unrealised trading export proceeds should be reduc .....

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s in convertible foreign exchange within the period of six months from the end of the previous year or the period as may be allowed. It was also noted that the RBI, the competent authority, had not granted extension of time. With the result, the unrealized amount of ₹ 71,09,340/- was reduced for the calculation of deduction u/s 80HHC. 6.2 In the past i.e. Assessment Year 1999-2000, we have found that the assessee has preferred not to contest this ground. In the like manner, for this year a .....

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e of calculation of deduction u/s 80HHC of Income-tax Act. It was found by the Assessing Officer that the assessee had incurred a loss on the export of trading goods. The assessee has earned profit on export of manufactured goods. While calculating the deduction u/s 80HHC, the assessee has treated the loss on export of trading goods as "Rs. Nil". The Assessing Officer has referred Section 80HHC(3) and held that where an assessee is engaged in export of trading goods and manufactured go .....

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ourt was of the view that loss from business of export for the purpose of computing u/s 80HHC do not qualify because the opening words are "profit derived from such exports". Therefore, the view taken by the Hon'ble High Court was affirmed and the assessee's contention was dismissed. Respectfully following this decision of the Hon'ble Supreme Court, we find no in the arguments of the assessee and confirm the view taken by the Revenue Authorities. This ground of the assessee .....

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unit. The said amount was reduced by the Assessing Officer while computing the profit for the purpose of deduction u/s 80IA. The action of the Assessing Officer was confirmed by the ld. CIT(A). Now, the issue has been decided by us in Assessment Year 1999-2000 in assessee's own case while deciding Revenue's ground No.5 in paragraph 15.3 - the relevant portion is reproduced below:- "15.3 With this back ground, we heard both the sides. We are not in agreement with the view taken by Ld .....

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e words 'derived from' is narrower as compared to that of the words ' attributable to.' By using the expression ' derived from' Parliament intended to cover sources not beyond the first degree. Further Ld CIT(A) has also held that only the balance amount available after the amount taxed in the Block Assessment is to be to be taken into account. This finding is not required to be disturbed being covered by the decision of the jurisdictional high court. In the result this g .....

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of the new industrial undertaking u/s 80IA." 9.1 In respect of exchange rate difference, a discussion has already been made above. The exchange rate difference was removed from the miscellaneous expenses. As per above paragraph, we have taken a decision that the gain was not due to delayed realization of export proceeds; therefore, the assessee was held as entitled for the claim of deduction. During the course of hearing, we have been informed that the issue in respect of deduction u/s 80IA .....

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on account of redeemable preference shares should be allowed as a deductible expenditure and without prejudice to the above on a pro rata basis over 3 years being the term of the preference shares." 10.1 On perusal of the Return of Income, it was observed by the Assessing Officer that the assessee had claimed a sum of ₹ 4,54,000/- as amortization of share issue expenses u/s 35D of the Income-tax Act. Following the past history, the same was disallowed. The First Appellate Authority ha .....

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prior to the setting up of the business, but in instalments in number of assessment years. This can also be interpreted, and naturally so, that an expenditure which is otherwise allowable as revenue expenditure cannot be brought within the purview of this section. Certain fine distinction had been made by Honble courts in respect of the Sub-sections of this section 35D, such as, that the fees paid for registration of the amendment of the memorandum of association for enhancement of authorised ca .....

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were not under consideration. The only point to decide was whether a particular expenditure incurred was in the nature of capital expenditure or not. So it was held that the expenditure incurred by a company in connection with issue of shares, with a view to increase its share capital, is directly related to the expansion of the capital base of the company, hence a capital expenditure. Likewise the other decision of Mihir Textiles Ltd.225 ITR 327 (Guj.) was dealing with issue in respect of the .....

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apital expenditure then the view is that after examining the nature and genuineness of the expenditure the same can be considered as Revenue Expenditure. To elaborate it further it can be said that after the insertion of Sec. 35D; the Act has not denied the allowability of Revenue Expenditure. There are few examples such as payment of stamp duty for issue of public subscription of debentures which was held as revenue expenditure U/s 37(1); even though after the insertion of Sec. 35D. Likewise ot .....

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diture or Capital Expenditure and then decide the question of disallowance. Resultantly this ground is restored back for denovo adjudication hence to be treated as allowed for statistical purpose only." 10.3 Since this issue has been restored back for de novo consideration, hence this ground may be treated as allowed for statistical purpose only. 11. Ground No. 11 is reproduced below: "11. Re: Set Off brought forward losses of erstwhile Gujarat Lyka Organics Ltd. 11.1 The set off of br .....

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acts in granting relief of ₹ 18,17,251/- being interest payment to the Dadhas." 13.1 The assessee was asked to explain as to why the interest payment to Dadhas not to be disallowed, following the past history. The assessee's contention was that there was no evidence found through which it could be established that the interest was actually paid to Dadhas. According to the assessee, there was no paper which could indicate that the interest was paid in cash to Dadhas. However, the A .....

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lowed and the addition was deleted. 13.3 Heard both the sides. The issue of addition of interest payment to Dadhas was decided by us in ground No.3 of the Revenue's appeal for Assessment Year 1999-2000 (ITA No.3273/Ahd/2002), wherein we have followed the decisions of the Tribunal as under:- "13.3. With this back ground we have heard both the sides. The issue is resolved vide a consolidated order for A.Y. 99-00,2000-2001, 01-02, 02- 03 & 03-04 of Aditya Medisales bearing ITA No. 3272 .....

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e Assessee to its suppliers, the Assessee did not charge interest to the two parties. We find force in the contention of the Assessee that on account of amalgamation of TDPL with SPIL the Assessee would experience growth in its turnover and operations. Subsequent events and the figures of turnover of the Assessee vindicate this point in favour of the Assessee. On any such acquisition of business / amalgamation the acquirer would be keen to ensure that there is smooth integration of business acro .....

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carrying on the said activity. The Assessing Officer has also acknowledged that there was savings in turnover tax in the state of TamilNadu as a result of the appointment by the said firms. The Assessing Officer having accepted in part the business benefit of the appointment of the said firms, as distributors cannot in the same breadth question the other part Even otherwise, it is seen that the Assessing Officer has considered trade advances given by the Assessee to the individual members of th .....

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fere with the order of the CIT(A) and accordingly we confirm the order of the CIT(A) on this ground." 13.4. Since in the past a consistent view had been taken that once the Revenue had accepted the business decision of appointment of the said firms then in the same breath could not question the assessee's other decision taken in the ordinary course of business. We therefore follow the view already taken by the respected coordinate benches and affirm the decision of CIT(A), hence this gr .....

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ect of the addition on account of sale of solvents. This year he has added a sum of ₹ 12,03,520/-, however, which was deleted by the ld. CIT(A). 14.2 The issue of alleged unaccounted sale of spent solvents was discussed by us for Revenue's appeal for Assessment Year 1999-2000 and vide ground No.4, it was decided in the following manner:- "14.4 Heard both the sides. First point from the side of the assessee is that the said Block Assessment had already been quashed by the Tribunal .....

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hat it was merely presumed by the A.O. that even for the post search period the Solvent might have been sold on the same rates. But the basic question is that when even for search period the impugned addition did not survive on account of lack of evidence then how such presumption could be approved for the post search period. The reasoning appears to be convincing especially when no contrary material is available on record form the side of the Revenue. This ground of the Revenue is therefore dis .....

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as erred in law and on facts in deleting the compulsory depreciation allowance of ₹ 1,72,02,764/-." 15.1 On perusal of depreciation chart, it was found by the Assessing Officer that the assessee had not claimed depreciation in respect of plant and machineries of Silvasa Unit. The assessee was otherwise eligible for depreciation @25%. The Assessing Officer was aware of the fact that in the past this issue was decided by ld. CIT(A) in favour of the assessee; however, he has repeated the .....

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upon the assessee, an order of the Hon. Gujarat High Court pronounced in Assessee's own case bearing Tax Appeal No. 93 of 2000 dated 17.12.2014 titled as Dy.CIT vs Sun Pharmaceuticals Ind. Ltd. is cited wherein it was held that the Tribunal was right in law in holding that depreciation not claimed by the assessee could be deducted despite the introduction of the block-assets concept. One more order of Hon Guj. High Court is referred as Sakun Polymers Ltd. ( Tax Appeal No. 41 of 2007 with ot .....

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nt took place, the depreciation cannot be foisted upon the assessee. Therefore, this ground of the Revenue is hereby dismissed. 16. Ground No. 4 is reproduced below: "4. The Ld. CIT(A) has erred in law and on facts in deleting the inclusion of sales-tax & excise duty as part of total turnover for 80HHC purpose." 16.1 The observation of the Assessing Officer was that the assessee has excluded the amount of sales-tax and excise duty from the total turnover. This issue was carried in .....

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; 16.2 Respectfully following the above decision, we hereby affirm the findings in the order of the ld. CIT(A) and dismiss this ground of the Revenue. 7. Ground No. 5 is reproduced below: "5. The ld. CIT(A) has erred in law and on facts in deleting the inclusion of insurance claim as part of total turnover for 80HHC purpose." 17.1 On perusal of profit and loss account, it was observed by the Assessing Officer that under the head "Income" the assessee has included a receipt of .....

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on of his predecessor of the earlier year, he has directed the Assessing Officer to delete the addition made on account of inclusion of insurance claim. 17.3 We have heard both the sides. As far as the past history is concerned, for Assessment Year 1999-2000, we have decided the issue of inclusion of sale of scrap in the total turnover in favour of the assessee by following the decision in the case of Punjab Stainless Steel Industries, reported in 364 ITR 144 (SC). Now before us, from the side o .....

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from the sale of goods would constitute the profits of the business as computed under the head of profits and gains of business or profession. The income emanating from the sale would not be liable to a reduction of ninety per cent for the simple reason that it would not constitute a receipt of a nature similar to brokerage, commission, interest, rent or charges. A contract of insurance was a contract of indemnity. The insurance claim in essence indemnifies the assessee for the loss of the stoc .....

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(baa). In determining the profits of the business for the purposes of Explanation (baa), the income which were susceptible to a reduction of ninety per cent were those incomes referred to in clauses (iiia), (iiib) and (iiic) of section 28 and receipts by way of brokerage, commission, interest, rent, charges or receipts of a similar nature included in such profits. Therefore, before a receipt was liable to be excluded to the extent of ninety per cent, it must be a receipt of a nature similar to .....

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n clause. If the claim received is on account of loss of goods which form part of the total turnover then it has to be treated as business profit and the corresponding turnover will form part of the total turnover in the computation of export profit for deduction. 17.5 Considering the above judgments, we are of the view that the whole exercise of sub-section (3) of section 80HHC is to determine the proportionate profit attributable to export business. The Section provides for a formula to determ .....

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profit arises only if such item of profit is included in business profit. Section 28 of the Act provides for inclusion of certain items as business income because such items otherwise would not have fallen under "business profits" but for such specific inclusion. In the first place, the items covered by Explanation are items which got included in the 'Business Profit', by virtue of operation of three clauses of section 28. The said three items of income are not referable to any .....

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d, an examination is required that whether it was on account of loss of goods so as to consider that the insurance receipt form part of the total turnover or not. Because of this reason, we hereby restore this ground back to the stage of the Assessing Officer to examine the nature of receipt and then decide according to law as discussed above. This ground of the Revenue is allowed for statistical purposes only. 18. Ground No. 6 is reproduced below: "6. The ld. CIT(A) has erred in law and on .....

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ee was that what is to be excluded was the 90% of the receipt by way of interest forming part of the profits and gains of the business. Therefore, it was the net interest income. According to the assessee, it was not in respect of gross income exclusion. However, the Assessing Officer was not convinced and held that the total interest receipts as credited in the profit and loss account are to be reduced from the profits of the business for the purpose of calculating the 80HHC deduction. 18.2 Whe .....

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est which had been included in the profits of the business was required to be deducted as per Explanation (baa) of section 80HHC. On the same line, we hereby direct to compute the 80HHC deduction. Therefore, this ground of the Revenue is hereby dismissed. 19. Ground No. 7 is reproduced below: "7. The ld. CIT(A) has erred in law and on facts in deleting the consideration of gross lease rent for computing 'Profit of the Business' for 80HHC purpose." 19.1 While calculating "o .....

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y and allowed the claim. 19.3 With this brief factual background, we have noted that while deciding ground No.9 of the Revenue Department, we have followed the decisions of ACG Associated Capsules Pvt. Ltd. (supra) and Topman Exports (supra) and held that net amount was to be taken into account for the purpose of claim of deduction u/s 80HHC. Following the above decision in assessee's own case for Assessment Year 1999-2000, the ground raised by the Revenue Department is hereby dismissed. 20. .....

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deduction u/s 80HHC of the Income-tax Act. The Assessing Officer has accordingly reduced the impugned amount while calculating the deduction u/s 80HHC. 20.2 Being aggrieved, the assessee has preferred an appeal before the First Appellate Authority who has followed the decision taken in the past by CIT(A) and directed the Assessing Officer to give necessary relief. 20.3 The issue of operational charges was decided by us in Ground No.10 for Assessment Year 1999-2000 while deciding the Revenue' .....

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ing goods not to be adjusted while calculating the deduction u/s 80HHC of the Income-tax Act. It was found by the Assessing Officer that there was a loss on the export of trading goods, whereas the assessee earned profit on export of manufactured goods. While calculating the deduction u/s 80HHC, the assessee has treated the loss at Rs. Nil. According to the Assessing Officer, as per Section 80HHC(3), if the assessee is engaged in export of trading goods and manufactured goods, then the business .....

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