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2015 (9) TMI 224 - ITAT AHMEDABAD

2015 (9) TMI 224 - ITAT AHMEDABAD - TMI - Disallowance of depreciation - CIT(A) allowed the claim - Held that:- It is to be seen that the CIT(A) has only restored the issue back to the Assessing Officer for factual verification as to whether the assesssee has already considered the very depreciation in its computation not as so as to avoid double disallowance. The assessee places before us the Assessing Officer’s consequential order dated to be 22/02/2010 wrongly mentioned expressly stating CIT( .....

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77; 81,706/- and ₹ 1,099/-; respectively. The CIT(A) accepts assessee’s arguments and holds that the same is directly linked to its business in question as per the tribunal’s order in case of Aarti Industries [2005 (2) TMI 428 - ITAT AHMEDABAD-C]. The Revenue fails to rebut these findings of fact and law by quoting cogent material or case law to the contrary. We observe in these facts that these amounts lead to reduction in purchase price of the corresponding material purchased for the pur .....

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ticles or things or computer software. The assessee’s stand throughout is that this interest sum of ₹ 20,82,239/- has arisen from late payments of export proceeds only from overseas export customers. Even the CIT(A) observed that the impugned interest can be treated to have been derived from industrial undertaking since the same is received from debtors is part of profits, but not derived from exports. We disagree with this reasoning as the interest has been derived from export proceedings .....

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A No. 1022/Ahd/2011 - Dated:- 26-8-2015 - Shri G. D. Agrawal and Shri S. S. Godara, JJ. For The Revenue : Shri R.I, Patel CIT-DR with Dinesh Singh, Sr. D.R. For The Assessee : Shri P.M. Mehta with G.M., Thakor, A.R. ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- These cross appeals filed by the Revenue and assessee for A.Y. 2001-02, arise from order of the CIT(A)-VI, Ahmedabad dated 17-01-2011 in appeal no. CIT(A)-VI/DCIT. CIR.1/236/07-08, in proceedings under section 143(3) r. W.s. 147 of the Inco .....

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hich is as under: It is observed from the records that while arriving at the A.I., the depreciation as per companies act as debited in the P&L a/c. was added to the profit of ₹ 1,40,13,29,356/- instead of actual figure of Rs, 7,48,75,43,300/-. Therefore, an amount of ₹ 8,62,13,944/- remains to be added. Hence, the AR of the assessee was asked for to explain. In response to the above, the assessee has submitted reply as under: - With regards to the same, it may be pointed out that .....

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8377; 11,22,72,452/- was claimed as per the provisions of section 10(B). Vide the statement of reasons furnished to the assessee you have stated that depreciation to the tune of ₹ 8,62,13,944/- was not added back while computing the total income of the assessee for the year under consideration. Further you have quoted section 10(B)(bj, where in it is stated that where the assessee is allowed deduction under the said section, no deduction of depreciation is allowable but shall be deemed to .....

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s as a whole, which also includes the depreciation for the unit of Arvind International. Further, while arriving at the figure of 11,22,72,452/- as deduction u/s 10(B), depreciation of ₹ 8,62,13,944/- was already deducted from the profit of the entity. Therefore, while adding back the depreciation to compute the business income of the assessee as a whole, there was no further need to add back the depreciation on account of such unit. It may be further brought to your notice that while comp .....

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, there is no short-levy of tax. Further it may be also brought to your notice that the assessee had adopted the same method to compute the total income even for the earlier years. The assessee to further substantiate its stand, attaches a copy of the computation of income for A.Y. 2000-01 for your kind perusal. In view of the above, it is clear that the assessee has rightly added back the amount of depreciation to the tune of ₹ 1,40,13,29,356/- and therefore, in the opinion of the assesse .....

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re, the reasoning provided by the assessee holds no base and therefore an addition of ₹ 8,62,13,944/- is made to the total income of the assessee. 3.2 The appellant has submitted in its written submission which is as under: The assessing officer has observed that the depreciation as per the Profit & Loss Account was ₹ 148,75,43,300/-as against which in the computation the appellant had added back the amount of ₹ 140,13,29,356/-and hence according to him the amount of differ .....

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se thereto the assessee submitted that Arvind International, a division of Arvind Mills Ltd. was a 100% Export Oriented Unit, entitled to deduction u/s. 10B of the Act. During the year under consideration, the EOU was debonded w.e.f. 3.1.2001 and the assessee decided not to avail such deduction from the said date. The assessee further stated that the assessee earned after depreciation total income of ₹ 11,33,47,660 from EOU but a deduction to the tune of ₹ 11,22,72,452 was claimed as .....

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as per the provisions of Income Tax was considered only for the period for 3.1.2001 to 31.3.2001 i.e. the period after the renunciation of right to claim deduction u/s. 10B. The same is also highlighted in the return of income filed by the assessee. Hence, the total income as offered to tax by the assessee has been rightly computed taking into consideration all the provisions applicable to the assessee and therefore, there is no short-levy of tax. 3.3 I have considered the facts of the case, as .....

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on was added while computing deduction under section 10 B, no separate addition in general computation of income was made. It is a matter of verification. I have gone through the computation of 10 B and I find that the said book depreciation is considered there. In any case, assessing officer is directed to verify from the computation of 10 B deductions and if the difference in book depreciation is considered in said computation then he will not make further addition in normal business computati .....

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r dated to be 22/02/2010 wrongly mentioned expressly stating CIT(A) s order under challenge. The impugned disallowance on account of depreciation of ₹ 8,62,13,944/- stands deleted in the said order. The Revenue s grievance is rendered infructous. Its corresponding ground accordingly fails. 5. The Revenue s 2nd ground of Rs. ,8,24,522/- on account of other income is dealt in the CIT(A) findings as follows 4. The ground No.3 is against addition of ₹ 8, 24,522/- on account of the income .....

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onsideration, Arvind International, a division of Arv/ nd Mills Ltd. earmarked as a 100% EOU, earned a total income classified under other income to the tune of ₹ 8,24,522/- comprising of material purchase discount, insurance claim received and other miscellaneous income. It may be noted that though all such income as referred to hereinabove, classified under other income are essentially linked to the division s main business. Classifying the same under other income has been done merely to .....

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nked to the income arising out of the export of articles. In view of the same, the arguments of the assessee were found to be untenable and therefore, the income pertaining to insurance claim and other miscellaneous income is sought to be deducted while computing the deduction available u/s 10(B). Therefore, the claim of the assessee for deduct/on u/s 10B stands reduced to that effect. 4.2 The appellant has submitted in its written submission which is as under: The A.O. has stated that the other .....

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7; 8,24,522/- includes material purchase discount, insurance claim. This discount, insurance claims goes to reduce the cost and accordingly it increases the business profit of the under taking. Thus if results into reduction of cost and hence it is part of the business income of the under faking. Hence it is eligible for deduction or exemption as the case may be. This may be appreciated in view of the decision of the ITAT, Ahmedabad in the case of Aarti Industries 95 TTJ 15. 4.3 I have considere .....

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ee with the appellant that material purchase discount and insurance claims are directly linked to the business of the undertaking. These reduce the cost of purchases and therefore part of business income. Respectfully following the decision of jurisdictional ITAT referred by the appellant, assessing officer is directing to allow deduction under section 10B of IT act on these incomes. 6. Rival contentions heard. Record perused. There is no dispute that this sum of ₹ 8,24,522/- has arisen fr .....

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of the corresponding material purchased for the purpose of business only. The CIT(A) s findings under challenge are affirmed. Revenue s appeal ITA 816/Ahd/2011 is dismissed. 7. This leaves us with the assessee s appeal ITA 1022/Ahd/2011 challenging validity of the reopening in question and also claiming sec. 10B deduction on interest of ₹ 20,82,239/- received on late recoveries from customers. Both the lower authorities hold that above stated interest as not to have arisen from the eligib .....

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y the assessee to be a 100% EOU. Such interest was set-off against the interest expenditure of the unit and the net interest expenditure was shown in the Profit & Loss o/c of the division. As the assessee initially failed to submit the actual details of the interest earned, it was proposed to apportion the total interest earned by the assessee, Arvind Mills to its division Arvind International in the ratio of their respective turnover. Hence, the AR of the assessee was asked for to explain. .....

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rned directly out of export of goods. In face of the same, the assessee s contention that the interest income has arisen out of such transactions is found to be invalid. Further, keeping in mind the provisions of section 10(B), the income from interest so earned should be separated while computing the net gains from such export business. Therefore, the interest earned by the assessee amounting to ₹ 20,82,239/- is to be deducted from the amount sought to be claimed by the assessee as deduct .....

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ore, it was directly related to the expenditure/ income of the articles and was not to be excluded. In any case, the net amount of interest income and expenditure was expenditure of ₹ 131.36 lakh. Hence also there was no justification for not considering this income for the purpose of section 10(B). The A.O. has stated that it is not considered income and not the profit of the undertaking. Hence he says that the claim is not valid. In this connection it is submitted that as stated before t .....

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ustomers. Accordingly, it is part of the sale proceedings of the undertaking and hence it should not be excluded from the eligible profit. This view is supported by various decisions as under: i) Gujarat High Court in the case of Nirma Industries Ltd. 283 ITR 402. ii) Madras High Court decision in the case of Indo Matsushita Carbon Co. Ltd. 286 ITR 201. Having regard to the above specific decisions, the impugned amount of interest forms part of the eligible profit/ eligible income of the underta .....

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deduction under section 80 IA and not on 80 HHC or 10 B. The interest from customers can be treated as derived from industrial undertaking since interest received from debtors is part of profit of the undertaking. However interest received from customers is not derived from the business of exports. The immediate source of this income is delayed payments from customers and not exports of goods or services. Considering the apex court decision in the case of sterling foods Ltd, interest will not q .....

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