TMI Blog2010 (3) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... . (2009) 319 ITR 306 (SC) and Hon ble Delhi High Court in the case of P.M. Electronics Lt. (2008) 220 CTR 635 (Del) wherein, the Hon ble Delhi High Court in para-4 has held as under:- 4. On 27th Nov., 1998 the assessee had filed a return of income declaring a loss of ₹ 8,92,888. On 11th May, 1999 the return was processed under s. 143(1)(a) of the Act. The case of the assessee was selected for scrutiny. Accordingly, a notice dt. 27th Sept., 1999 under s. 143(2) of the Act was issued to the assessee. In response to the notice and on examination of the details submitted by the assessee with respect to provident fund payments made both on account of employer s and employees share revealed that payments in the sum of ₹ 17,94,042 were late as per the provisions of s. 36(1)(va) r.w s. 2(24)(x) and s. 43B. Consequently, the AO disallowed the deduction and added a sum of ₹ 17,94,042 towards EPF contribution. And subsequently decide this issue in para-10 to 14 of Hon'ble Delhi High Court, which read as under:- 10. In view of the above, it is quite evident that the special leave petition was dismissed by a speaking order and while doing so the Supreme Court had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputer (P) Ltd. (supra) came to the conclusion that the view taken by the Supreme Court in Vinay Cement (supra) would bind the High Court as it was law declared by the Supreme Court under Art. 141 of the Constitution. 12. We are in respectful agreement with the reasoning of the Madras High Court in Nexus Computer (P) Ltd. (supra). Judicial discipline requires us to follow the view of the Supreme Court in Vinay Cement (supra) as also the view of the Division Bench of this Court in Dharmendra Sharma (supra). 13. In these circumstances, we respectfully disagree with the approach adopted by a Division Bench of the Bombay High Court in Pamwi Tissues Ltd. (supra). 14. In these circumstances indicated above, we are of the opinion that no substantial question of law arises for our consideration in the present appeal. The appeal is, thus, dismissed. 4. We find that the facts are clearly admitted that ESIC and PF payments are made belatedly but within the due date of filing of returns. The CIT(A) has only directed the Assessing Officer to verify the dates and accordingly allow the claim of the assessee. We find that the Hon'ble Delhi High Court in the case of P.M. Electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT v. Shri Ram Honda Power Equip (2007) 289 ITR 475 (Del) and Delhi Tribunal in Special Bench in the case of Lalson Enterprise v. DCIT (2004) 82 TTJ 1048 (Del) (SB). In view of the above decisions, it is clear that the CIT(A) has rightly directed the Assessing Officer to allowed the claim of assessee as regards to netting only. Accordingly, we uphold the order of CIT(A) and this issue of the Revenue s appeal is dismissed. 9. The next issue in this appeal of Revenue is against the order of CIT(A) in allowing deduction u/s.80HHC of the Act for foreign exchange gains. 10. The Ld. Counsel for the assessee stated that this issue is squarely covered in favour of the assessee and against the Revenue by the Tribunal s decision in the case of ACIT v. M/s. Mitsu Ltd. in ITA No.2445/Ahd/2007 dated 01-08-2008, wherein the Tribunal has considered the issue as under:- 43.3 We have heard the rival contentions and gone through the case records. We have also perused the assessment orders as well as the order of CIT(A). First of all, it is noticed that in the case of foreign exchange realization, no incentive has been granted by any policy of Govt. of India. The currency between two cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the nature of applicable deduction is Sec. 80HHC of the Act. The sale realization proposed to be maximized is the foreign exchange value of the export deals. The Learned Departmental Representative has stated that anybody having exposure in foreign currency can enter into forward contract. But that does not per se make the gain from forward foreign exchange contract as speculation business. Only if foreign exchange contract is allowed to be made by any person, even without exposure in foreign currency without any underlying transaction of export / import then only it can be said to be a speculative transaction. The Ld DR relied on the decision of Hon ble Gujarat High Court in the case of Chimanlal Chotalal v. CIT (1968) 69 ITR 129 (Guj.) and the facts of that case are different from the present case. The assessee in that case had entered into forward contract of sale as a hedge for the purpose of guarding him against loss through price fluctuations in respect of his forward contracts of purchase of cotton bales. Whereas in the present case, the assessee-company is a manufacturer exporter, and has only participated in the administrative mechanism provided by the government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia v. CIT (2009) 317 ITR 218 (SC), wherein the apex court has analyzed the provisions of Section 80-IB and 80-IA and stated that Section 80-IB provides for allowing deduction in respect of profit gains derived from the eligible business. The Hon ble apex court held that Section 80-IB provides for allowing deduction in respect of profit gains derived from eligible business and analysis the provisions as under:- Before analysing sect ion 80-IB, as a prefatory note, i t needs to be mentioned that the 1961 Act broadly provides for two types of tax incentives, namely, investment -linked incentives and prof it - linked incentives. Chapter VI -A which provides for incentives in the form of tax deduct ions essentially belong to the category of prof it linked incentives . Therefore, when sect ion 80-IA/80-TB refers to prof its derived from eligible business, it is not the ownership of that business which attracts the incentives. What attracts the incentives under sect ion 80-IA/80-IB is the generation of prof its (operational prof its). For example, an assessee-company located in Mumbai may have a business of building housing projects or a ship in Nava Sheva. Ownership of a ship pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department places heavy rel iance on the judgment of this court in Sterl ing Foods [1999) 237 ITR 579. Therefore, in the present cases, in which we are requi red to examine the el igible business of an indust r ial undertaking, we need to trace the source of the prof i ts to manufacture. (see CIT v. Kir loskar Oi l Engines Ltd. reported in [1986] 157 ITR 762. ) Cont inuing our analysis of sect ion 80-IA/80-IB i t may be ment ioned that sub-sect ion (13) of sect ion 80-lB provides for appl icabil i ty of the provisions of sub-sect ion (5) and sub-sect ions (7) to (12) of sect ion 80- IA, so far as may be, applicable to the eligible business under sect ion 80- lB. Therefore, at the outset , we stated that one needs to read sect ions 80-I, 80- IA and 80-IB as having a common scheme. On a perusal of sub-sect ion (5) of sect ion 80- lA, it is not iced that it provides for the manner of computat ion of prof its of an el igible business. Accordingly, such prof its are to be computed as i f such eligible business is the only source of income of the assessee. Therefore, the devices adopted to reduce or inf late the prof i ts of el igible business have got to be rejected in view of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the average amount of duty paid on materials of any part icular class or descript ion of goods used in the manufacture of export goods of specif ied class. The Rules do not envisage a refund of an amount ar ithmet ical ly equal to customs duty or Cent ral excise duty actual ly paid by an individual importer -cummanufacturer. Sub-sect ion (2) of sect ion 75 of the Customs Act requi res the amount of drawback to be determined on a considerat ion of al l the circumstances prevalent in a particular trade and also based on the facts situat ion relevant in respect of each of various classes of goods imported. Basically, the source of the duty drawback receipt lies in sect ion 75 of the Customs Act and sect ion 37 of the Central Excise Act . Analysing the concept of remission of duty drawback and DEPB, we are satisfied that the remission of duty is on account of the statutory/pol icy provisions in the Customs Act /Scheme(s) framed by the Government of India. In the circumstances, we hold that prof its derived by way of such incentives do not fall within the expression prof its derived from industrial undertaking in sect ion 80-lB. Since reliance was placed on behalf of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of the Revenue s appeal. Now we will take up assessee s CO No.218/Ahd/2007. 17. In the assessee s CO., the ground Nos 1 to 7 are supportive of the order of CIT(A) and accordingly require no adjudication. 18. The ground Nos. 8 to 10 in this CO of the assessee are against the order of CIT(A) confirming the disallowance of expenses of product development and design charges at ₹ 72,000/-, out of repair maintenance of furniture at ₹ 1,38,583/- and the preliminary and pre-operative expenses at ₹ 75,727/-. 19. As regards to product development and design charges, we find that CIT(A) has already allowed depreciation on these expenditures treating the same as capital in nature reason being that the purchases are made of dice which exists in separate block. We find no reason to interfere with this finding. As regards to repair maintenance of furniture, the CIT(A) has already allowed depreciation on the purchase of furniture and there is no infirmity in the same. As regards to the disallowance of preliminary and pre-operative expenses, the CIT(A) has categorically recorded a finding that u/s.35D of the Act the assessee is eligible only for specified expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
