TMI Blog2011 (9) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... i Kumar ORDER PER H.L.KARWA, VP These cross appeals by the assessee and Revenue are directed against the order of CIT(A), Jalandhar dated 30.12.2008 relating to assessment year 2004.-05. 2. Firstly, we will take up the assessee s appeal i.e. ITA No. 321/Chd/2009, wherein ground No.1 raised by the assessee reads as under:- 1. That order passed u/s 250(6) by the Ld. CIT(A), Jalandhar is against law and facts on the file in as much as he was not justified to hold the action of the Assessing Officer in: i) Disallowing prior period expenditure amounting to ₹ 45,44,691/- on the ground that they do not relate to the period under appeal. ii) Denying deduction u/s 80G of the amount of donation of ₹ 1,25,000/- on the ground that the receipts is in the name of Shri Rajinder Gupta and not in the name of the appellant company. 3. Ground No.1 (i) relates to disallowance to prior period expenditure amounting to ₹ 45,44,691/-. During the course of assessment proceedings, the Assessing Officer asked the assessee to submit details of the liability which had arisen during the year out of this expenditure. However, no details were furnished befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The facts of the present year are similar to that of assessment years 2002-03 and 2003-04 and therefore, respectfully following the order of Tribunal dated 31.3.2008 passed in assessee s own case for assessment years 2002-03 and 2003-04, we set aside the order of CIT(A) on this issue and restore the matter to the file of the Assessing Officer with a direction to decide the issue afresh keeping in view the directions and guidelines given by the Tribunal in its order dated 31.3.2008 in assessee s own case in ITA Nos. 837 311/Chandi/2007 relating to assessment years 2002-03 and 2003-04. The Assessing Officer shall pass a speaking order after affording due and reasonable opportunity of being heard to the assessee. Ground No. 1(i) stands allowed for statistical purposes. 7. Ground No. 1 (ii) regarding denying deduction u/s 80G was not pressed before us and accordingly, we dismiss the same as not pressed. 8. Ground No.2 of the appeal reads as under:- 2. That the Ld. CIT(A) was not justified to hold the action of the Ld. Assessing Officer in computing the deduction u/s 80IA after excluding a sum of ₹ 2,69,96,242/- (comprised of miscellaneous Income of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not profit or gains derived by the undertaking for the purpose of deduction u/s 80-IA. In view of the decision of the Hon'ble Supreme Court in the case of Pandian Chemicals Vs. CIT (supra), the issue is decided against the assessee and in favour of the Revenue. 11. The assessee also claimed deduction of ₹ 2,00,61,091/- u/s 80-IA of the Act. This amount was received by the assessee company on account of Insurance Claim for loss of profit policy. The Assessing Officer has noted that this claim was a one time receipt which accrues only on the happening of certain mishap like break down or loss due to fire etc. It was received by the assessee since the assessee s plant was shut down for a specific period. The Assessing Officer took the view that the sources of Insurance Claim received on account of shut down is not the industrial undertaking itself but an insurance policy taken to cover certain losses arriving on contingencies. He further held that insurance claim though related and attributable to the industrial undertaking arose out of risk coverable policy of the insurance company and cannot not be said to be derived from industrial undertaking. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT v M/s Sportking India Ltd (supra), in the previous year relevant to assessment year 1998-99, on account of loss of goods which was destroyed by fire, the assessee company received an insurance claim of ₹ 39,35,841/- The Assessing Officer denied benefit of section 80IA of the Act to the assessee holding that the amount received from the insurance company was not derived from the manufacturing activity of the assessee company. On appeal, the CIT(A) reversed the order of Assessing Officer and the order of the CIT(A) was confirmed by the Tribunal. The Revenue went in appeal before the Hon'ble Delhi High Court. The Hon'ble Delhi High Court at page 288 held as under:- The case of Pandian Chemicals (2004) 270 ITR 448 (SC) has held that sale of scrap is not a revenue receipt derived from business though the same was held eligible by the Madras High Court in the earlier cases of CIT v. Sundaram Clayton Ltd. (1982) 133 ITR 34 and CIT v. Wheels India Ltd. (1983) 141 ITR 745 (Mad). So far as the judgment of Pandian Chemicals (2004) 270 ITR 448 (SC) holds that the profit amount received from the insurance company is not a revenue receipt, the same would be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as close connection with the profits derived from industrial undertaking. It was observed that raw material which was lost in fire would have been used in generating income for the industrial undertaking and therefore, compensation received for such raw materials could be held as profit derived from the industrial undertaking. On a reference, the Hon'ble jurisdictional High Court following the decision of the Hon'ble Apex Court in Pandian Chemicals (2003) 262 ITR 278 and Sterling Foods [1999 237 ITR 579 at page 562 held as under:- we are clearly of the view that the amount of insurance claim received by the assessee cannot be held to be income derived from the industrial undertaking so as to qualify for deduction under section 80-I of the Act. We, however, make it clear that the amount of ₹ 1,50,733 is the amount received from the insurance company in respect of the claim of raw material destroyed in fire. However, while computing the profits of the industrial undertaking for the purposes of deduction under section 80-I, what has to be excluded is not the gross receipt but the income arising out of this receipt. Such income can only be computed by deducting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing deduction u/s 80HHC in respect thereof. 20. This ground of appeal has five parts. Firstly we will adjudicate ground No.3 (a) in succeeding paras. 21. At the time of hearing of the appeal, Shri Ashwani Kumar, Ld. counsel for the assessee did not press for this ground i.e Ground No. 3(a) of appeal and accordingly we dismiss the same as not pressed. 22. As regards, the issue raised by the assessee vide ground No. 3(b) of the appeal, Ld. counsel for the assessee submitted that the issue is squarely covered by the decision of the jurisdictional High Court in the case of CIT v Abhishek Industries Ltd (2006) 286 ITR 1(P H) wherein it has been held that sales tax subsidy received by the assessee is held to be Revenue receipt and not capital in nature. Ld. counsel for the assessee submitted that this amount should not be excluded for the purpose of computing profits of the business u/s 80HHC of the Act, because this income does not fall under the parameters provided in clause (baa) to Section 80HHC (4C) 23 We have heard the rival submissions. In view of the decision of the jurisdictional High Court in the case of CIT v Abhishek Industries ltd (supra), we hold that sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction is in respect of profits derived from export, sub-section (3) laid down a formula on the basis of which export profits have to be computed. Under clause (a) of sub-section (3), the expression profits derived from is defined to be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. However, where an assessee carries on the business of export of trading goods, clause (b) defines export profits to be the export turnover in respect of such trading goods which is to be reduced by the direct and indirect costs attributable to the export. In the application of the formula to a manufacturer exporter, clause (a) refers to the profits of the business. The expression profits of the business in Explanation (baa) to section 80HHC means profits as computed under the head of profits and gains of business or profession under sections 28 to 44D and they are thereupon to be reduced to the extent provided by clauses (1) and (2). Section 28 elucidates incomes which shall be chargeable to income-tax under the head of profits and gains o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can fall for classification under clause (iiib) of section 28 which deals with cash assistance, received or receivable against any scheme of the Government of India. Clause (iiib) was enacted at a time when the export incentives that were available were (i) import entitlement licences; (ii) cash compensatory support; and (iii) duty drawback. The DEPB scheme was not in existence when clause (iiib) came to be enacted into section 28 by the Finance Act of 1990. The DEPB scheme was brought into existence with effect from April 1, 1998. The value of the DEPB credit cannot be regarded as a cash assistance which is received or receivable by a person against exports under any scheme of the Government of India. It cannot be inferred from the speech of the Finance Minister that the insertion of clause (iiid) in section 28 was made with a view to tax only the amount which has been received in excess of the face value of the DEPB credit. DEPB credit introduced with effect from April 1, 1997, which was after the insertion of clause (iiib) in section 28; section 28(iiib) refers to cash assistance received by the assessee from the Government pursuant to a scheme of the Government wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are may be needed like raw material. Computer software expenses were Revenue expenditure and deductible as such. 33. Respectfully following the ratio laid down by the jurisdictional High Court in the case of CIT v Varinder Agro Chemicals Ltd (supra), we do not find any merit in this ground of appeal and accordingly we dismiss the same. 34. Ground No.2 of the appeal reads as under:- 2. That the Ld. CIT(A) has erred in treating sale tax subsidy as income from business and profession instead of income from other sources and directing the Assessing Officer to reduce 90% of the sale tax subsidy from profits of business for the purpose of computing of deduction u/s 80HHC. 35. While deciding the ground No. 3(b) in ITA No. 321/Chd/2009, we have held that sales tax subsidy is a Revenue receipt in view of the decision of the Hon ble Punjab Haryana High Court in the case of Abhishek Industries Ltd (supra). Further, we have held that the amount of sales tax subsidy is to be excluded for the purpose of computing profits of business u/s 80HHC of the Act. We, therefore, do not find any merit in this ground of appeal and dismiss the same. 36. Ground No.3 of the appeal reads a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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