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2015 (5) TMI 474 - ITAT DELHI

2015 (5) TMI 474 - ITAT DELHI - TMI - Deduction under Section 80IC - CIT(A) restricted the deduction holding that profit on sale of undertaking & interest income from FDR is not income derived by an undertaking from any business and as such not eligible for deduction under section 80IC - Held that:- The assessee company itself has submitted revised computation of its income before the AO twice, firstly on 27.11.2009 and secondly on 07.12.2009, wherein the short term capital gain on sale of asset .....

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vid that the assessee company sold its business assets and received sale consideration of land and building of ₹ 5,75,00,000/-. The assessee company also earned interest from FDRs by deploying said amount of consideration with the bank in short term fixed deposit account. Therefore, we are inclined to hold that such profits and gains from sale of assets and interest cannot be held as income derived from the activities of the industrial undertaking eligible for deduction u/s 80IC and the wo .....

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lusion of the authorities below that sale of assets by the assessee company was not a slump sale in the light of definition given by the statute to the slump sale in section 2(42C) of the Act as the assessee company raised separate bills for each and every asset stating therein value of sale separately assigned to every asset, therefore, the sale of assets by the assessee company cannot be held as slump sale. - Decided against assessee.

Prior period expenses disallowed - Held that:- S .....

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dered view that when the assessee itself admitted that the expenditure in question was incurred towards setting up of a new unit then the same cannot be allowed as expenditure towards the business which was closed and assets were sold on 16.11.2006. - Decided against assessee. - ITA No.71/Del/2011 - Dated:- 17-4-2015 - Shri B.C. Meena and Shri C.M. Garg JJ. For the Appellant : Shri Ved Jain, Advocate For the Respondet : Shri Vikram Sahay, Senior DR ORDER Per C.M. Garg, JUDICIAL MEMBER : This app .....

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ction 80IC of the Act to ₹ 83,71,889/- as against ₹ 5,75,33,565/- claimed by the assessee and allowable under the provision of the Act. (ii) On the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law in confirming the action of the Assessing Officer by holding that profit on sale of undertaking is not income derived by an undertaking from any business and as such not eligible for deduction under section 80IC of the Act. (iii) On the facts and circumstan .....

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, despite the assessee bringing to his notice the judgement of Gauhati High Court in the case of Pancharatna Cement (P) Ltd vs Union of India (2009) 317 ITR 259. 3(i). On the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law in confirming the action of the Assessing Officer in computing short-term capital gain at ₹ 5,14,80,518/- against ₹ 4,90,59,320/- computed as slump sale by the assessee. (ii) That the above-said addition has been made rejecting th .....

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tails filed in respect of other income, it was revealed that the same consisted of profit on the sale of asset and bank interest. On specific query from the AO, the assessee vide letter dated 27.11.2009 filed a revised computation of income wherein short term capital gain of ₹ 4,90,59,329.04 has been declared and claim of deduction u/s 80IC of the Act has been revised to ₹ 84,74,263.87. Again on 07.12.2009, the ld. AR of the assessee company filed another revised computation of total .....

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nd every assets which clearly proved that it was not a slump sale and the AO calculated the short term capital gain at ₹ 5,14,80,518/-. The AO also made certain disallowances with regard to interest from FDR and disallowances on account of expenses incurred by the assessee and finalised, the assessment at ₹ 5,22,30,062/-. 4. Being aggrieved by the above assessment order, the assessee preferred an appeal before CIT (A) which was also dismissed on all the grounds. Now, the empty handed .....

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, such profits and gains need not essentially be derived from industrial undertaking. The ld. Counsel also contended that they are eligible for deduction u/s 80IC of the Act. Replying to the above, the ld. Departmental Representative (DR) contended that when the assessee itself is showing the income from sale of business as short term capital gain in the revised computation of income filed on 27.11.2009 and 07.12.2009 then the same cannot be held entitled for deduction u/s 80IC of the Act. The l .....

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ort term capital gain is not eligible for deduction u/s 80IC of the Act. 6. On careful consideration of the above submissions, at the very outset, we find it appropriate to consider the ratio of the decision of Hon ble Gauhati High Court in the case of Pancharatna Cement P. Ltd., supra, wherein it has been held that the words derived by an undertaking or an enterprise from any business in section 80IC having regard to the plenitude of expense would take in their fold profits and gains made by an .....

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apital gain from sale of its business assets, therefore, we respectfully hold that the benefit of the ratio of this decision of Hon ble Gauhati High Court is not available for the assessee. As we have already pointed out that the assessee, during the assessment proceedings, revised its computation of income twice and finally, claimed deduction u/s 80IC of the Act at ₹ 83,71,889.87 excluding the short term capital gain earned from sale of business assets. The ld. Counsel of the assessee cou .....

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f the Act was also disallowed thereon, the ld. Counsel of the assessee submitted that the sum received by the assessee company from interest on FDR was accrued to the assessee as the assessee company deployed the funds received from the sale proceeds into short term FDR s and the interest thereon was also credited to the profit and loss account. The ld. Counsel further pointed out that in both the instances, the income from sale of assets and income from fixed deposits are profits derived from t .....

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u/s 80IC of the Act. The ld. DR further pointed out that the assessee company itself has excluded these amounts in the revised computation of total income filed before AO on 07.12.2009, therefore, the same cannot be claimed as deduction u/s 80IC of the Act. 6.2 On careful consideration of above submissions, we note that the CIT (A) has decided the issue with following observations and conclusion :- 2.2. I have carefully considered the submission of the Ld. AR and perused the assessment order pas .....

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ote investment and employment in such areas. Sub-section (1) of section 80 IC provides for the deduction in respect of gross total income of an assessee from any business refer to in sub-section (2). Sub-section (2) provides that the section applies to any undertaking or enterprise which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the 13th Schedule, or which manufactures or produces any article or thing not being any article or .....

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AR are not of much help to the appellant as they were decided on different facts. Therefore, they are distinguishable on facts. The Ld. AR has placed reliance on the judgement of Hon'ble Gauhati High Court in the case of Pancharatna Cement (P) Ltd. vs. Union of India (2009) 317 ITR 259 (Gau). In that case, the appellant company had received transport subsidy and insurance subsidy and said amounts were duly accounted for and credit in the P&L account. The issue in that case was whether d .....

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The Hon'ble Supreme Court in the case of CIT vs. Venkateshwara Hatcheries (P) Ltd. (SC) 237 ITR 174 has held that words take colour from context in which they are used. The jurisdictional High Court in the case of American Hotel and Lodging Association Educational Institute vs. CBDT (Del) 289 ITR 46 has held that the interpretation of the statute should be in conformity with object of provision. The Hon'ble Supreme Court in the case of Liberty India vs. CIT (2009) 317 ITR 218 has held th .....

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s claiming deduction u/s 80 IC on the sale of its manufacturing unit. The profit from sale of a unit cannot be termed as derived from the business of manufacturing or production or an article or thing. Considering the facts and circumstances of the case in its totality and various judicial pronouncements on the issue, I hold that the AO was fully justified in rejecting the claim of the 'appellant company. I therefore, confirm the addition made by the AO. This ground of appeal is rejected. 6. .....

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onnotation of the words derived from is narrower as compared to words attributable to . Speaking for Hon ble Supreme Court, their Lordships further observed that by using the expression derived from , the Parliament intended to cover sources not beyond the first degree business activities. From the facts emerged before us, it is vivid that the assessee company sold its business assets and received sale consideration of land and building of ₹ 5,75,00,000/-. The assessee company also earned .....

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ell as CIT (A) was right in disallowing claim of deduction u/s 80IC of the Act on the income from sale of business assets and income from interest on short term fixed deposits with the banks. Accordingly, grounds no.2(ii) & (iv) being de void of merits are dismissed. GROUNDS NO.3(i) & (ii) 7. The ld. counsel of the assessee submitted that the CIT (A) has erred both on facts and in law in confirming the action of the AO in computing short term capital gain at ₹ 5,14,80,518/- against .....

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s assets as a result of sale of a lump sum consideration without values being assigned to the individual concern and liabilities in such sale. The ld. DR also pointed out that in the letter dated 19.02.2009, the assessee explained that the assessee company sold its land and building along with all furniture, fixtures and fittings for a lump sum consideration without assigning value of individual assets, therefore, benefit of section 50B of the Act is available to the assessee company but this ex .....

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p sale in the light of definition given by the statute to the slump sale in section 2(42C) of the Act. Therefore, we uphold the same and grounds no.3(i) and (ii) of the assessee being de void of merits are also dismissed. GROUND NO.4 9. Apropos ground no.4, the ld. counsel of the assessee reiterating its written submissions submitted that as per decision of Hon ble jurisdictional High Court of Delhi in the case of CIT vs. Hughes Escort Communication Ltd. - 311 ITR 253, the expenses incurred in t .....

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usiness and, therefore, an amount of ₹ 6,47,197/- on account of expenses incurred by the assessee during the relevant period should have been allowed as revenue expenditure. 10. Replying to the above, the ld. DR pointed out that the assessee has debited impugned sum towards indirect expenses pertaining to December 2006 to March 2007 which were not allowable as expenses as the company sold almost entire all its assets and purchased new ones in the process of establishing an entirely new est .....

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llant company has sold its industrial land at Khasra No. 158 admeasuring 8.6179 hectares situated at Village Raipur, Bhagwanpur, Tehsil Roorki, District Haridwar together with the structure on the said plot of land for ₹ 5,75,00,000/-. The perusal of MOU dated 16.11.2006 made between the appellant company and Mirc Electronics Ltd. reveals that the appellant was required to handover the plot with other structure as a vacant plot. Para 10 of the MOU reveals that the Mirc Electronics Ltd. was .....

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,00,000/- by a separate agreement which does not include plant & machinery and other assets. In addition to the plot of land and structure, the appellant also sold the other assets such as' plant and machinery for ₹ 23,65,000, Computer for ₹ 80,000/- furniture & fixture for ₹ 45,000/- and office equipment for ₹ 10,000/-. Is further noted that separate bills' were raised for each and every asset, which clearly proves that it is not a slump sale. It is furth .....

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f the AO to the effect that it was not a slump sale. Considering the facts and circumstances of the case, I hold that the AO was justified in rejecting the alternate claim of the appellant regarding short term capital gain. Therefore, I do not find any infirmity in the order of the AO. Regarding the claim of ₹ 6,47,197/- to be revenue expenditure, the appellant has not been able to substantiate its claim that these expenses were revenue expenses. It has been admitted by the appellant that .....

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