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2015 (12) TMI 907 - PUNJAB & HARYANA HIGH COURT

2015 (12) TMI 907 - PUNJAB & HARYANA HIGH COURT - TMI - Quantum of deduction under section 80I - CIT(A) reduced the amount of deduction available to the assessee under Section 32AB - Tribunal reversed the decision taken by the CIT(A) holding that deduction under Section 80I of the Act was to be allowed after reducing the deduction allowable to the appellant under Section 32AB - Held that:- Learned counsel for the assessee was unable to demonstrate that the approach of the Tribunal was erroneous .....

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7 - DELHI HIGH COURT), it was held that the liability arising out of a warranty was an allowable deduction even when the amount payable by the assessee was quantified and discharged in future. Learned counsel for the revenue was not able to rebut the aforesaid contention. Accordingly, this question is answered in favour of the assessee and it is held that the authorities below were not justified in rejecting the claim of the appellant assessee that 5% to 10% of the sale price in each year of sup .....

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e revenue.

Deduction u/s 32AB - whether the deduction to be allowed under section 32AB is to be restricted to each profit making unit of the assessee or by taking the utilization of the plant and machinery purchased by the assessee as a whole? - Held that:- Tribunal following the decision of Phoneix Overseas Limited vs. CIT reported in [1995 (10) TMI 75 - ITAT DELHI-D ] directed the Assessing Officer to recompute the claim of the assessee under Section 32AB of the Act in respect of ea .....

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by learned counsel for the revenue to raise any challenge to the aforesaid finding of the Tribunal. In the absence of any issue raised by the revenue, no ground for interference by this Court is made out. - Decided in favour of assessee. - ITA No. 49 of 2001 - Dated:- 29-9-2015 - Ajay Kumar Mittal And Ramendra Jain, JJ. For the Appellant : Mr. Pankaj Jain, Sr. Adv. Mr. Divya Suri, Adv For the Respondent : Ms. Urvashi Dhugga, Adv ORDER Ajay Kumar Mittal, J. 1. This order shall dispose of ITA No. .....

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essment years 1987-88 and 1988-89, claiming following substantial questions of law:- "i) Whether under the facts and circumstances of the case, the Tribunal was justified in setting aside the orders of learned CIT (A) in so far as directing the learned AO in allowing the deduction under section 80I after reducing the amount of deduction allowable to the appellant under section 32AB of the Income Tax Act, 1961 whereas the issue was on the quantification/computation of the claim under section .....

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ns, the third question claimed by the assessee reads thus:- "iii) Whether under the facts and circumstances of the case, the Tribunal was justified in rejecting the claim of the appellant that in respect of 5% to 10% of the sale price in each year of supplies no income accrues or arises for which the amount was released against the bank guarantees as the performance of the contract was not completed by giving a finding that the claim of the appellant is against a contingent liability and wh .....

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ot relate/restrict it to the extent of plant and machinery purchased for the eligible unit?" 3. In so far as Question No.(ii) quoted above is concerned in ITA No.49 of 2001 and similar question claimed in ITA No.187 of 2002, the same being not a substantial question of law, is, thus, declined. 4. A few facts relevant for the decision of the controversy involved as narrated in ITA No.49 of 2001 may be noticed. The assessee is engaged in the business of manufacturing of Telecommunications Equ .....

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for allowing deduction under Section 32AB of the Act for ₹ 18,72,739/- and ₹ 23,27,233/- while claim under Section 80I of the Act was for ₹ 23,40,940/- and ₹ 29,20,496/- for the assessment years 1987-88 and 1988-89 respectively which was calculated by the appellant as per the provisions of law as both the deductions were independent claims. The Assessing Officer allowed claim under Section 32AB of the Act but allowed deduction under Section 80I of the Act amounting to &# .....

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the order, the revenue filed appeals before the Tribunal. The Tribunal vide order dated 17.5.2000 decided the issue against the assessee reversing the decision of the CIT(A) holding that deduction under section 80I of the Act was to be allowed after reducing the deduction allowable to the appellant under section 32AB of the Act. Hence the instant appeals by the assessee. 5. We have heard learned counsel for the parties. 6. A perusal of the findings recorded by the authorities below shows that t .....

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and while computing the quantum of deduction under section 80I of the Act, reduced the amount of deduction available to the assessee under Section 32AB of the Act. The assessee preferred appeal before CIT(A) challenging the said order where the issue was decided in favour of the assessee and the Assessing Officer was directed to compute deduction under Section 80I of the Act without reducing the deduction allowable to the assessee under Section 32AB of the Act. On appeal by the revenue, the Tri .....

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d DR have force and that the provisions of section 80AB and 80B(5) have been interpreted in various judgments in favour of the department. In this connection, reference may be made to the decision of the Hon'ble Rajasthan High Court in the case of CIT vs. Loonkar Tools Pvt. Limited, 213 ITR 721 wherein the provisions of Sections 80B and 80HH have been considered and it had been held that depreciation and investment allowance have to be deducted before giving the special deduction under secti .....

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ench of the Tribunal in the case of Century Iron and Steel Limited vs. ITO 31 ITD 117 wherein the provisions of sections 80AB and Section 80HH were considered. The Tribunal observed that Section 80HH is made subject to the provision of Section 80AB and does not operate in isolation or independent of that section. The Tribunal also observed that it has been clarified by categorical provisions made in section 80AB that the deduction should be with reference to the balance of income. It was also ob .....

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special deduction under Section 80HH is to be calculated on net income after deduction of depreciation, investment allowance etc. The Hon'ble High Court followed its decision reported in 218 ITR 71. The said decision was also followed in the case reported in 225 ITR 374. We may further refer to the decision of the Hon'be Supreme Court in the case of Moti Lal Pesticides (India) Pvt. Limited vs. CIT, 243 ITR 26 wherein the provisions of sections 80AA, 80AB and 80HH have been considered an .....

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to be allowed only on the net dividend income and not the gross income. It observed that with reference to section 80AB, the Apex Court had said that it was merely of a classificatory nature. The Apex Court further observed that on a parity of reasoning with section 80AA, as given in Distributors (Baroda) Pvt. Limited vs. Union of India, 155 ITR 120 (SC), it must be held that Section 80AB was enacted to declare the law as it always stood in relation to the deductions to be made in respect of the .....

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of the CIT(A) in relation to both the assessment years on this issue and restore the orders of the AO for both the years i.e. deduction under Section 80I is to be allowed after deduction under Section 32AB." Learned counsel for the assessee was unable to demonstrate that the approach of the Tribunal was erroneous or perverse in any manner in allowing deduction under Section 80I of the Act after reducing the deduction allowable to the assessee under Section 32AB of the Act. We endorse the vi .....

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ee filed appeal before the CIT (A) who held that the claim of the assessee was not admissible and the amount of full value of sale as depicted in the profit and loss account had been correctly disclosed and hence taxable. The Tribunal held that the assessee shall be entitled for deduction of the amount to meet the obligation which may arise under the warranty clause in the year in which the claim was actually lodged by the client i.e DOT or MTNL and the income had actually accrued and arisen and .....

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urity for repair/replacement was an existing liability at the time of sale and was thus an allowable deduction. On the other hand, learned counsel for the revenue supported the order passed by the Assessing Officer, CIT(A) and the Tribunal. 9. We find merit in the submission of learned counsel for the assessee-appellant. The various judgments relied upon by learned counsel for the assessee supports his contention. In Jay Bee Industries' case (supra), the question before this Court was whethe .....

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year in question. It was held that the Tribunal was not justified in restricting the amount of deduction at ₹ 1000/- per vehicle there being no material before the authorities to restrict the deduction to an amount other than as claimed by the assessee. In Sony India (P) Limited's case, (supra), it was held by the Delhi High Court that the liability arising out of a warranty was an allowable deduction even when the amount payable by the assessee was quantified and discharged in future .....

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tion and the assessee has to offer performance security under the contract. It shall, however, form part of the income to the extent the liability ceases to exist in the year in which the obligation of the assessee stands discharged. The said question is thus answered in favour of the assessee and against the revenue. 10. Adverting to the question (iv) claimed by the revenue in ITA No.200 of 2012, the only issue that arises therein is whether the deduction to be allowed under section 32AB of the .....

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However, the Tribunal on further appeal of the assessee, following the decision of Delhi Bench of the Tribunal in the case of Phoneix Overseas Limited vs. CIT reported in 56 ITD 274 directed the Assessing Officer to recompute the claim of the assessee under Section 32AB of the Act in respect of each unit taking the utilization of the plant and machinery purchased by the assessee as a whole and not relate it with each profit making unit of the assessee only, with the following observations:- &quo .....

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her units also. The assessee submitted that this is fully covered by the decision of ITAT Delhi Branch in the case of Pheonix Overseas Limited vs. CIT reported in 56 ITD 274 to which the learned DR did not object but relied on the order of the CIT(A). 11.2 We have heard both the parties and perused the material on record. We also have gone through the judgment of Delhi Bench of ITAT in the case of Pheonix Overseas Limited vs. CIT (supra) and we find that the case of the assessee is fully covered .....

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