TMI Blog2011 (2) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... his ground of assessee is allowed. Deduction u/s 080 HHC - on sale of scrap - HELD THAT:- Relying on the decision in CIT vs. Ashok Leyland Ltd.[ 2007 (2) TMI 151 - HIGH COURT, MADRAS] held that if scrap has formed part of gross receipts of the assessee and it is coming out of manufacturing process and profit therefrom is included in the trading cum manufacturing account then scrap would form part of turnover. Accordingly, this issue is decided against the assessee. This ground of assessee is rejected. Exclusion of 90% of sale and scrap - deduction u/s 080 HHC - HELD THAT:- Here in the present case the scrap is business income generated from manufacturing activities and is, therefore, part of business profit but as it is not akin to commission, brokerage, interest, rent etc. any part thereof cannot be excluded from the business profit. Therefore, this ground of assessee is rejected. HELD THAT:- Once interest income is treated as income from other sources, therefore, excluded 90% thereof as per explanation (baa) to section 80 HHC would not arise. Accordingly, this ground of assessee is also rejected. challenged the computation of assessed income as a whole - HELD T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ware. The assessee does not get any right over them. They are to be modified from time to time, what assessee gets is licence to use them and they are not integral to computer system. Accordingly they are revenue expenditure and has to be allowed. Similar view has been taken in CIT vs. Varinder Agro Chemicals Ltd.[ 2008 (10) TMI 100 - PUNJAB AND HARYANA HIGH COURT] . Therefore,we allow the claim of the assessee that application software is Revenue in nature and expenditure thereon is deductible. disallowance proportionate interest - HELD THAT:- In the present case we notice that loan funds have decreased this year as compared to earlier years. Even though investments have increased from ₹ 940.32 lacs to ₹ 1008.51 lacs but such increase in investment cannot be linked to any borrowed funds this year as assessee has in fact not borrowed any additional fund this year. Since assessee had sufficient profits generated this year and it had mixed funds and no nexus is established by the AO as to whether investment was made out of interest bearing funds, disallowance of interest cannot be made. Similarly no disallowance out of administrative expenditure can be made as there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised following grounds :- (1) The ld. CIT(A) failed to understand the facts and circumstances of the case. (2) The ld. CIT(A) erred in confirming the addition of ₹ 1,20,930/- being adjustment with regard to International transactions with Suzhou Pfaudler Glass lined Equipment Co. Ltd. China for sale of Firt 1912. He has considered the submission of the vouchers clarifying the actual facts as additional evidene though the same was submitted before the AO at the assessment stage. (3) (a) The ld. CIT(A) erred in holding that the acquisition of computer software of ₹ 508728/- is the intangible asset and the rate of depreciation is 25% against claim of depreciation @ 60% under the head computers. (b) The ld. CIT(A) erred in confirming the disallowance of software expenses ₹ 4,32,248/- claimed as revenue expenditure after allowing depreciation @ 25%. (4) (a) The ld. CIT(A) erred in confirming the disallowance of interest of ₹ 10,70,000/- on the assumption that borrowed money has been used proportionately for acquisition of investments as on balance sheet date. Alternatively, without prejudice to the above, the ld. CIT(A) erred in not accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant for the purpose of computation of deduction u/s 80 HHC of the IT Act, 1061. (14) The ld. CIT(A) erred in confirming the charging of interest u/s 234D of the IT Act, 1961 on the excess refund granted u/s 143(1) prior to the operation of the provisions of section 234D i.e. 01/06/2003. It may be noted that the refund was granted as per intimation dated 03/01/2003 u/s 143(1). (15) The appellant prays for appropriate relief on the above grounds of appeals. (16) The appellant craves leave to add, alter, amend, substitute or withdraw any of the above grounds of appeal as circumstances may justify. ITA No.1476/Ahd/2006 Asst. Year 2002-03 (Assessee's appeal) 4. First we take up assessee's appeal for Asst. Year 2002-03. The first ground of this appeal is general and does not require any specific adjudication. The same is accordingly rejected. 5. The second ground relates to addition of ₹ 1,20,930/- being adjustment made by the AO in respect of price paid by the assessee in International transactions with Suzhou Pfaudler Glass lined Equipment Co. Ltd., China. This ground was not pressed by the assessee and hence it is rejected. 6. Ground No.3(a) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are not integral to computer system. Accordingly they are revenue expenditure and has to be allowed. Similar view has been taken by Hon. Punjab Haryana High Court in CIT vs. Varinder Agro Chemicals Ltd. (2009) 309 ITR 272 (P H) wherein it is held as under :- 6. It is well settled that for claiming deduction, apart from expenditure being for business, the same has to be revenue expenditure. Though, there is no rigid rule to determine when expenditure is capital or revenue, generally acceptable test is where advantage is for enduring nature, it may be capital expenditure, while if the expenditure is for running of the business, it is of revenue nature. Some of the leading judgments of the Hon'ble Supreme Court dealing with the issue are : Assam Bengal Cement Co. Ltd. vs. CIT (1955) 27 ITR 34, CIT vs. Vazir Sultan and Sons (1959) 36 ITR 175, Empire Jute Co. Ltd. vs. CIT (1980) 124 ITR 1(SC); (1980) 4 SCC 25 Alembic Chemical Works Co. Ltd. vs. CIT (1989) 177 ITR 377 (SC); AIR 1989 SC 1913 and CIT vs. General Insurance Corporation (2006) ITR 232 (SC). 7. In Alembic Chemical Works Co. Ltd.'scase (supra), the issue was whether the expenditure on technical know-how un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O held that expenditure for earning exempted income cannot be allowed as deduction. Similarly, the AO identified that administrative expenditure which could have been incurred for handling the investment in shares and Mutual Fund. A part of such expenditure was considered attributable to investment made in sister concerns, the income therefrom was exempt under section 10(33). The assessee submitted that it has enough working capital and it has not increased its borrowings this year. Therefore, it cannot be said that investment in subsidiary was done during this year out of any borrowed capital made this year. Regarding administrative expenditure sought to be disallowed assessee submitted before the AO that there is no relationship of such expenditure with the investment activities. No specific staff has been appointed for this purpose. The AO, however, did not agree and disallowed proportionate interest by holding that assessee did not produce any evidence to show that interest free funds were alone used for making such investment in sister concerns. The assessee has not maintained separate account for making investment are out of mixed funds. There is no nexus between the investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h -G in the case of M/s Godrej Agrovet Ltd. vs. ACIT, Rg.10(2), Mumbai in ITA No.1629/Mum/09 Asst. Year 2005-06 that of Hon'ble Supreme Court in the case of Munjal Sales Corpn. Vs. CIT 298 ITR 298 (SC) and Reliance Utilities Power Ltd. 313 ITR 340 (Bom). He also referred to the judgments reported in 192 ITR 265 and 273 ITR 518 in support of above proposition. 13. On the other hand, the ld. DR relied on the orders of authorities below. He further referred to the decision of Punjab Haryana High Court in CIT vs. Abhishek Industries Ltd. 286 ITR 1 (P H) and of Hon. Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (2010) 328 ITR 81 (Bom) and submitted that the issue regarding bifurcation of expenditure may go to the AO for determining reasonable disallowance. 14. We have considered the rival submissions and perused the material on record. In our considered view, the matter would go to the file of AO as per the decision of Hon. Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (supra) only when it is held that some amount is required to disallowed as there is a nexus between the exempted income and investment, i.e. if Revenue is able to show that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had sufficient profits generated this year and it had mixed funds and no nexus is established by the AO as to whether investment was made out of interest bearing funds, disallowance of interest cannot be made. Similarly no disallowance out of administrative expenditure can be made as there is no direct nexus. As a result, this ground is allowed. 17. Ground No.5 is not pressed by the assessee and hence it is treated as rejected. 18. Ground No.6 relates to accrued interest of ₹ 8,33,185/- payable to APSEB as per order of the City Civil Court. This issue has been decided against the assessee by the Tribunal in ITA No.1400/Ahd/2001 Asst. Year 1998-99 in the case of Addl. CIT, SR-8, Ahmedabad vs. GMM Pfaulder Ltd. as under :- 4. The second ground is pertaining to ₹ 8,33,185/- being interest paid to APSEB. During the assessment proceeding, the AO noticed that the company has claimed an amount of ₹ 8,33,185/- being payable to Andhra Pradesh State Electricity Board. The assessee company has claimed this deduction on account of the City Civil Court dated 16.12.1994. A copy of the said order has been filed in Asst. Year 1995-96 and 1996-97. However, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to enhancement of compensation from Boards side and reduction in compensation from assessee's side, and it is a case of contractual liability, therefore, in our considered view, the liability with regard to decretal amount cannot be held to be ascertained one. Therefore, the AO's action is legally correct in disallowing the claim of the assessee in this regard. Support can be taken from various decisions as cited by the ld. DR including Hon. Supreme Court decision in the case of CIT vs. Gajapatti Naidu 53 ITR 114 and Swadeshi Cotton and Flour Mills (P) Ltd. 53 ITR 134 and the decision of Hon. Madhya Pradesh High Court in the case of CIT vs. Ratlam Straw Board 152 ITR 425. This view gets further support from Hon. Gujarat High Court in the case of CIT vs. Ashwin Vanaspati Industrial (P) Ltd. 196 CTR (Guj) 117, in which following conclusion has been done: Disputed liability towards damages claimed by customer from assessee for the latter's failure to supply part of the contracted goods which was pending for adjudication before the sole arbitrator and was not discharged during the relevant year was not allowable as deduction. 21. In view of the above noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly when after insertion of section 145A legal position has changed. 23. We have considered the rival submissions and perused the material on record. The short question is whether computation of trading results as per section 145A would affect computation of deduction under section 80HHC. Section 145A was inserted by the Finance Act (No.2) 1998 w.e.f. 1.4.1999. Section 145A so inserted, would be relevant for Asst. Year 2002-03 also. It would read as under :- [Method of accounting in certain cases. Sec.145A -Notwithstanding anything to the contrary contained in section 145 the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head profits and gains of business or profession shall be - (a) in accordance with the method of accounting regularly employed by the assessee; and (b) further adjusted to include the amount of any tax, dutycess or fee(by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Explanation -for the purposes of this section, any tax, duty, cess or fee (by whatever name called) u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree items by including sales-tax and excise duty and then compute profits thereafter. In our considered view section 145A is a deeming section and it creates a fiction for directing to ITA Nos.1241 1476/Ahd/2006 four others Asst. Year 2002-03 others include sales-tax and excise duty and other taxes while drawing trading/manufacturing account even though assessee might not have done so. But for the purpose of computing deduction under section 80 HHC the profits and gains of business computed under sections 28 43D whether by inclusion principle or exclusion principle, would not be disturbed. In other words wherever assessee has adopted inclusion principle for accounting in its books of accounts then same has to be followed for computing profits of business for the purpose of deduction under section 80 HHC, but where assessee has followed exclusion principle then provisions of section 145A would only alter the computation of income for the purpose of computing gross total income but it will not alter computation of profits of the business computation of deduction under section 80 HHC. Section 145A as such over rides only the accounting method followed by the assessee and subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 32,29,959/-. The AO did not allow the claim on value of the scrap treating it as not forming part of business income. For arriving at this decision the AO relied on the ITA Nos.1241 1476/Ahd/2006 four others Asst. Year 2002-03 others decision of ITAT, SMC, Mumbai Bench in the case of Coftab Exports vs. ITO in ITA No.913/Mum/1999 wherein it appears that it is held that sale of waste material generated during manufacturing of finished goods does not form part of total turnover. The ld. CIT(A) following the order of his predecessor in Asst. Year 2001-02 included these receipts in the total turnover. The assessee has challenged this decision to include the sale of scrap in total turnover. 30. We have heard the parties and carefully perused the material on record. The assessee has referred to the decision of the Tribunal Delhi Bench-A in the case of Claas India Ltd. vs. ACIT (2008) 21 SOT 580 (Delhi) wherein it is held that scrap generated during manufacturing process if sold would only go to reduce the cost of material consumed and for computing deduction under section 80HHC same cannot be considered as part of turnover of business. 31. The ld. AR also referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of explanation (baa)(i) of section 80HHC is that if any receipt is taxable and is included in the profit and is of the nature of brokerage, commission, interest, rent, charges or amount similar to them then 90% thereof will be excluded. If nature of receipt included in the profits is of the type as mentioned in sub-clause (i) then 90% shall not be excluded and, therefore, 100% thereof as such would be considered for computation of deduction under section 80 HHC. Hon. Bombay High Court in CIT vs. Asian Starch Co. Ltd. (2010) 326 ITR 56 (Bom) very elaborately and clearly explained as to which type of receipts are to be excluded @ 90% and why they should be so excluded. It would be pertinent to refer to the head Notes from that judgment - The special deduction under section 80HHC of the Income-tax Act, 1961, is available to an assessee engaged in the export of goods or merchandise outside India to the extent of the profits specified in sub- section (1B) of the provision. Clause (a) of sub-section (3) of section 80HHC provides that where the exported goods are manufactured by the assessee, the deduction under sub-section (1) would be in accordance with the formula stated therein. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g those receipts was factored in by Parliament by excluding only ninety per cent. of the receipts received by the assessee. The extent of the exclusion which is statutorily mandated by Parliament is ninety per cent. of the total receipts. This is because the expenditure which is incurred by the assessee in earning these receipts would have gone into the computation of the profits and gains of business or profession and a distortion would be caused if the entirety of the income generated from the receipts alone were to be excluded. It is in order to obviate such a distortion that Parliament mandated that ninety per cent. of the receipts would be excluded. Once Parliament has legislated both in regard to the nature of the exclusion and the extent of the exclusion, it would not be open to the court to order otherwise by rewriting the legislative provision. Hon. Supreme Court in CIT vs. K. Ravindranathan Nair (2007) 295 ITR 228 (SC) held that independent income like rent, commission, brokerage etc. though had formed part of the gross total income had to be reduced by 90% as contemplated in explanation (baa) in order to arrive at business profit. The rationale as laid down by Hon. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 80 HHC assessee wanted to take profits as declared by him at ₹ 24,77,032/- as against business profit at ₹ 63,65,406/- taken by the AO. Since various types of additions made by the AO while computing business profit have been separately agitated and considered, this ground becomes of academic interest only. The only argument of the ld. AR which requires consideration is that wherever additions are sustained then they should be taken into account while computing business profit for the purpose of deduction under section 80 HHC. We agree with the above submission and direct the AO to recomputed the deduction under section 80 HHC by considering the additions sustained in appeal while computing business profits. This ground is disposed of accordingly. 39. Ground No.14 relates to charging of interest under section 234D. The contention of the ld. AR is that interest should be charged with effect from 1.6.2003 as that section has come into statute w.e.f. 1.6.2003 only. Section 234D was inserted by the Finance Act, 2003 w.e.f. 1.6.2003. It laid down the proposition that if the amount refunded under section 143 exceeds the amount refundable on regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -02. These amounts were not quite old. He also held that it is for the assessee to show that debt has become bad and each amount written off has to be considered on its merits for allowing the claim. 42. The ld. CIT(A) allowed the claim by holding that once amount is written off then it has to be allowed and where assessee is able to cover any sum then it has to be taxed under section 41(4). The ld. CIT(A) held as under :- 3.2 I have considered the submissions of the appellant and facts of the case carefully. The appellant has emphasized that in the ledger accounts these amounts have been written off after considering that the amount is not recoverable in spite of the efforts made by the appellant company. Therefore, the conditions of 36(1)(vi) have been fully complied with. From the details of bad debt written off, I find that the amount represents reductions made by the clients' rejection of goods, rejection of packing charges, petty amounts not paid by the party, rejection of spares. I also find that the appellant has filed suit for recovery in number of cases and certain companies had closed their business and are in BIFR. The appellant has also offered the income wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of TRF Ltd. vs. CIT (2010) 323 ITR 397 (SC) wherein it is held that w.e.f. 1.4.1989 in order to obtain a deduction in relation to bad debts it is not necessary for the assessee to establish that the debt in fact has become irrecoverable. It is enough if the bad debt is written off and the bad debt is irrecoverable in the account of assessee. Following the above decision of Hon. Supreme Court, we confirm the order of ld. CIT(A) and dismiss this ground of Revenue. 44. The second ground in Revenue's appeal relates to decision of ld. CIT(A) in directing the AO not to exclude 90% of other income by way of debt recovery, discount and insurance claim etc. while computing the deduction under section 80 HHC. The AO had treated those items as other income and excluded 90% thereof as per sub-clause (i) of clause (baa) of Explanation to Section 80 HHC. The ld. CIT(A) treated them as business income but not of the nature of interest, commission, brokerage, charges etc. , therefore, directed not to exclude 90% of the sum from the business profit for computation of deduction under section 80 HHC. The amount of bad debt recovered were ₹ 7,83,377/-, insurance claim was of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view thereof, both parties agreed that various case laws have been developed in respect of these items of income. Both parties also agreed that issue in respect of 80 HHC computation may set aside restored back to the file of to be decided afresh in accordance with law keeping in view various case laws including on netting of income etc. Consequently ground no.1 of the Revenue is allowed for statistical purpose. In the result, Revenue's appeal is partly allowed for statistical purpose. Since the issue has been restored to the AO for fresh adjudication, respectfully following the above decision of the Tribunal, we restore the three matters to the file of AO for fresh adjudication in line with the decision he takes for Asst. Year 2001-02. As a result, appeal of the Revenue is partly allowed for statistical purposes. ITA No.1926/Ahd/2007 Asst. Year 2003-04 (Revenue's appeal) 48. The following grounds have been raised by the Revenue in this appeal:- (1) The ld. CIT(A) erred in law and on the facts of the case in deleting the disallowance of ₹ 46,84,621/- made on account of Bad Debts written off. (2) The ld. CIT(A) erred in law and on the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is general in nature and hence does not require any specific adjudication. 51. The second ground relates to taxing of bad debts recovered at ₹ 5,09,389/-. The amount recovered relates to bad debt written off in Asst. Year 2002-03. The ld. CIT(A) dismissed the ground of assessee on the ground that issue regarding claim of bad debt is pending for adjudication before the Tribunal. 52. We have heard the parties. While disposing of ground no.1 in Revenue's appeal for Asst. Year 2002-03 we have allowed the claim of bad debts following the decision of Hon. Supreme Court in the case of TRF Ltd. vs. CIT (supra). Therefore, once the amount is recovered by the assessee, it is rightly taxable under section 41(4). This ground of assessee is accordingly disposed of. 53. Ground No.3 relates to claim of liquidated damages of ₹ 26,76,000/- and bad debt written off to the extent of ₹ 7,58,000/-. The AO found that assessee has debited a sum of ₹ 49,05,038/- as provision of bad debts which was, however, added by the assessee in computation statement. However, during the course of assessment proceedings assessee claimed a sum of ₹ 26,76,000/- towards liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of accrued interest payable to APSEB as per order of City Civil Court. Similar issue had arisen in Asst. Year 2002-03 as per ground no.6. Following out decision in that year, we dismiss this ground of assessee. 59. Ground No.5 this year is similar to ground No.12 in Asst. Year 2002-03 wherein issue has been decided against the assessee as above. Following our above order, we dismiss this ground of assessee this year as well. 60. Ground no.6 relates to exclusion of 90% on sale of scrap from the business income for computing deduction under section 80 HHC. In Asst. Year 2002-03 similar ground has come up as ground no.11. This issue has been decided in favour of the assessee that year. As the facts this year are similar, following that order, we decide this issue this year also in favour of assessee. This ground of assessee is allowed. 61. Ground No.7 is general in nature and hence it is rejected. As a result, appeal of assessee is partly allowed and partly for statistical purposes. Revenue's appeal Asst. Year 2003-04 62. Ground No.1 relates to bad debt written off. In Asst. Year 2002-03 Revenue had raised similar issue as ground no.1. The issue has been deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d following grounds in this appeal:- (1) The ld. CIT(A) failed to understand the facts and circumstances of the case. (2) The ld. CIT(A) erred in confirming the non-allowance of claim of accrued interest ₹ 8,33,185/- payable to APSEB as per order of the city civil court. (3) The ld. CIT(A) erred in confirming disallowance of ₹ 16,52,778/- out of total disallowance ₹ 59,71,000/- of provisions of Bad debts on the ground that the appellant has received the said amount in financial year 2006-07 and therefore this amount has not become bad in this year. It is contented that since the provision has been made in respect of advances given during the course of business, the claim is allowable u/s 37(1) of the Act, there is no question of the amount becoming bad during this year. (4) The ld. CIT(A) erred in confirming the disallowance of ₹ 1,20,000/- being administrative expenses u/s 14A of the Act, considering them incurred in relation to exempted dividend income. (5) The ld. CIT(A) erred in accepting the AO's action to exclude 90% of interest income ₹ 18,14,000/- from the business income for the purpose of computation of deduction u/s 80 H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt which has already been taken into account by computing income in earlier year or even in current year is written off then the same has to be allowed as deduction as per the ratio of Hon. Supreme Court in TRF Ltd.'s case (supra). If any amount is recovered subsequently, then the same is taxable under section 41(4). We, therefore, restore this issue to the file of AO to allow the claim of bad debt to the extent the amount is actually written off. The assessee will submit independent account to the AO and specify how and when such amount has been written off in the account of individual parties. To that extent ground raised by the assessee is allowed but for statistical purposes. 71. Ground no.4 relates to disallowance of administrative expenses of ₹ 1,20,000/- under section 14A as it apparently related to exempted dividend income. The AO found that assessee has earned dividend income of ₹ 2.97 crores and has shown investment of ₹ 14.56 crores in Mutual Fund of ₹ 4.05 lacs in shares during the year. Such dividend income was exempt. AO sought to disallow proportionate interest expenses and administrative expenses. In response to show cause notice as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranty stood attached to the sale price of the product. In this case the warranty provisions had to be recognized because the assessee had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of the obligation. Therefore, the assessee had incurred a liability during the assessment year which was entitled to deduction under section 37 of the Income-tax Act, 1961. The present value of a contingent liability, like the warranty expense, if properly ascertained and discounted on accrual basis can be an item of deduction under section 37. The principle of estimation of the contingent liability is not the normal rule. It would depend on the nature of the business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting adopted by the assessee. It would also depend upon the historical trend and upon the number of articles produced. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when : (a) an enterprise has a present obligation as a result of a past event ; (b) it is probabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on record. Similar issue had arisen in Asst. Year 2002-03 and 2003-04 on different items. The assessee has referred to the judgment of Hon. Bombay High Court in the case of CIT vs. M/s Pfizer Ltd. (2010) 233 CTR 521 wherein it is held that insurance claim on account of stock-in-trade would not be subject to deduction of 90% as per clause (i) of Explanation (baa) to section 80HHC. 84. In case of bad debt recovered of ₹ 18,23,000/- it is to be enquired whether they are related to trade and what treatment has been given in computation of deduction under section 80 HHC when they were written off in the books of account and claim was allowed accordingly. If the bad debt directly related to trade then they would be business receipts and exclusion of 90% would not be applicable. Similarly, if sundry credit balance which were written back also related to trade then they would be business income and exclusion of 90% will not be applicable. Same is the position in respect of sales-tax and excise duty refund. They are apparently business receipts and they are not akin to interest, commission, brokerage charges etc. Therefore, the principle of exclusion of 90% would not be applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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