TMI Blog2014 (4) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, therefore, we hold that the CIT(A) is not justified in curtailing the deduction u/s.10B by excluding the delayed receipt of export proceeds from the export turnover. We therefore set-aside the order of the CIT(A) on this issue and direct the AO to allow the claim of the assessee u/s.10B with respect to the export invoice - Decided in favour of assessee Refusing to treat ‘PMS’ fees paid as part of either of cost of acquisition/improvement or as ‘Cost of transfer’ for working Income from Capital Gain - Held that:- Respectfully following the decision of the Tribunal in the case of KRA Holding and Trading Pvt. Ltd. (2013 (9) TMI 1013 - ITAT PUNE ) we hold that the ‘PMS’ fees paid by the assessee is an allowable deduction from the capital gains.- Decided in favour of assessee Entitlement for higher depreciation on SMF batteries - Held that:- Since SMF batteries are integrated with UPS and used with it, we hold that the assessee is entitled to higher rate of depreciation on SMF Batteries.- Decided in favour of assessee - ITA No. 17/PN/2012, ITA No. 102/PN/2012, ITA No. 1575/PN/2012, ITA No. 1616/PN/2012 - - - Dated:- 10-4-2014 - Shri Shailendra Kumar Yadav, Judicial M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ltd. has not been accepted and appeal u/s.260A has been filed by the department. 3.1 Facts of the case, in brief, are that the AO during the course of assessment proceedings observed that the assessee has deducted Freight charges amounting to ₹ 32,69,97,710/- and Insurance charges amounting to ₹ 3,53,49,404/- from the total turnover as well as export turnover. Rejecting the various explanations given by the assessee and observing that in view of Explanation 2 (iii) to section 10B Freight, Telecommunication charges or Insurance are to be excluded from the export turnover and not from the total turnover, the AO added both the items, i.e. Freight charges amounting to ₹ 32,69,97,710/- and Insurance charges amounting to ₹ 3,53,49,404/- to the total turnover for the purpose of working out deduction u/s.10B of the Income Tax Act. 3.2 In appeal the Ld.CIT(A) relying on various decisions including the decision of the Special Bench of the Tribunal in the case of Sak Soft Ltd. reported in 121 TTJ 865 and the decision of the Hon ble Bombay High Court in the case of Gems Plus Jewellery India Ltd. reported in 330 ITR 175 directed the AO to exclude the Freight ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince export turnover has been defined by the Parliament and there is a specific exclusion of freight and insurance charges, the expression 'export turnover' cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. Undoubtedly, it was open to the Parliament to make a provision to the contrary. However, no such provision having been made, the principle which has been enunciated earlier must prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the revenue was to be accepted, the same expression, viz., 'export turnover' would have a different connotation in the application of the same formula. The submission of the revenue would lead to a situation where freight and insurance, though they have been specifically excluded from 'export turnover' for the purposes of the numerator would be brought in as part of the 'export turnover' when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which leads to an absurdity must be avoided [Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue are as under: 05. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in directing the Assessing Officer to segregate the furniture into two categories, one falling under furniture eligible for depreciation @ 10% and the other items which were used for carrying products from the laboratory to store under the head 'Plant and Machinery eligible for depreciation @ 15%, and to allow depreciation accordingly. 06. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in not appreciating that the Assessing Officer had correctly classified the assets under the head 'furniture' and had allowed depreciation as per law @ 10% and in consonance with the decision of the Hon'ble Bombay High Court in the case of Siemens India Pvt. Ltd., 217 ITR 622 (Bom.). 5.1 Facts of the case, in brief, are that the assessee had shown additions to plant machinery to the tune of ₹ 8,76,45,866/- in the depreciation chart as part of the Audit report furnished along with the return of income. During the assessment proceedings, it was clarified before the Assessing Officer that stainless stools and chairs used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2001-02 vide ITA No.948/PN/2005 dated 18-1-2012. In this view of the matter, the Assessing Officer is directed to adjudicate the issue and grant the entitled relief to the assessee as per directions contained in the order of the Tribunal pertaining to A.Y. 2001-02 (supra). On this issue, the assessee succeeds . 6.1 Similarly, the Tribunal while deciding the issue for A.Y. 2006-07 at Para 27 of the order has observed as under: 27. The next issue relates to partial disallowance of depreciation by classifying certain items of fixed assets costing ₹ 8,82,555/- located in manufacturing unit as Furniture and Fixtures and not as Plant and Machinery as contended by the assessee. Similar issue came up for consideration before Co-ordinate Bench of the Tribunal in assessee s own case for the assessment year 2001-02 vide ITA No.948/PN/2005 dated 18-1-2012. In this view of the matter, the Assessing Officer is directed to adjudicate the issue and grant the entitled relief to the assessee as per directions contained in the order of the Tribunal pertaining to A.Y. 2001-02 (supra). On this issue, the assessee succeeds . 6.2 Respectfully following the decision of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th such order of the CIT(A) the assessee is in appeal before us. 8. The Ld. Counsel for the assessee submitted that the assessee has set up an Export Oriented Undertaking (EOU) engaged in the business of production and exports of vaccines. Profits from the exports derived by the EOU are eligible for deduction u/s.10B. The export proceeds in respect of one export invoice raised by the EOU for ₹ 7,19,934/- were received late viz. on 24th December, 2007, i.e. after 30-09-2007 for the impugned A.Y. He submitted that Reserve Bank of India (RBI) is the competent authority under FEMA, for extension of time for receipt of export proceeds beyond a period of six months from the end of the relevant previous year. FEMA under liberalised procedures allows self extension of time limit providing full flexibility to all the exporters. He submitted that the provisions of Section 10B(3) are in pari materia with 10A(3). Since RBI had neither rejected nor declined the request of the assessee and had taken the inward remittances on record, therefore, the extension was deemed to have been granted. He submitted that the issue is squarely covered in favour of the assessee by the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the approval granted by it under the 1999 Act would meet the requirements of section 10A of the Act. Moreover, the Reserve Bank of India had neither declined nor rejected the application made by the assessee seeking extension of time under section IDA of the Act. Therefore, the decision of the Tribunal holding that the approval granted under the 1999 Act constituted deemed approval granted by the Reserve Bank of India under section 10A(3) could not be faulted. The assessee was entitled to exemption under section 10A 10.2 Since the assessee in the instant case has applied for extension of time by the prescribed authority which has neither been rejected nor declined and the RBI has taken the inward remittances on record, therefore, we hold that the CIT(A) is not justified in curtailing the deduction u/s.10B by excluding the delayed receipt of export proceeds of ₹ 7,19,934/- from the export turnover. We therefore set-aside the order of the CIT(A) on this issue and direct the AO to allow the claim of the assessee u/s.10B with respect to the export invoice of ₹ 9,19,934/- . Ground raised by the assessee is accordingly allowed. 11. Grounds of appeal No.2 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gain. 11.3 Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 12. After hearing both the sides we find an identical issue had come up before the coordinate Bench of the Tribunal in the case of KRA Holding and Trading Investment Pvt. Ltd. Vs. DCIT. We find the Tribunal vide ITA No.703/PN/2012 order dated 19-09- 2013 for A.Y. 2008-09 while deciding an identical issue has observed as under : 9. In the appeal of the assessee, the solitary issue is with regard to the action of the CIT(A) in confirming the stand of the Assessing Officer that fees paid to ENAM Asset Management Company Pvt. Ltd. was not an allowable expenditure in computing appellant s income whether under the head business or under the head capital gains . 10. In this regard, the Assessing Officer noticed that assessee had incurred expenditure of ₹ 2,79,31,009/- representing payments to ENAM Asset Management Company Pvt. Ltd. as portfolio management fees in terms of an Investment Management Agreement dated 01.01.2005. Following his decision for the earlier assessment years i.e. assessment year 2004-05 to 2007-08, the Assessing Officer disallowed the expense against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenditure by way of Portfolio Management Fee representing payments to ENAM Asset Management Company Pvt. Ltd. while computing the income under the head Capital Gains . After noticing the aforesaid the Tribunal concluded as under in para 11 of its order dated 25.07.2012:- 11. The decision of the Mumbai Bench of the Tribunal in the case of Homi K. Bhabha vs. ITO was brought to our notice by the learned DR wherein it was held that Portfolio Management Scheme fees is not deductible against capital gains. The decision of the Pune Bench of the Tribunal in the case of KRA Holding Trading was not followed by the Mumbai Bench in the above cited decision. The Mumbai Bench following other decisions of the coordinate Benches of the Tribunal declined to follow the decision in the case of KRA Holding Trading (supra). It is the settled proposition of law that when two view are possible on the same issue the view which is favourable to the assessee has to be followed. [CIT vs. Vegetable Products 88 ITR 192 (SC)]. Further, in the instant case the Tribunal in assessee s own case has already taken a view in favour of the assessee. Since the AO CIT(A) have followed the order for earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and in absence of any objection by the Ld. Departmental Representative the above ground by the assessee is dismissed. 15. Grounds of appeal No.5(a) was not pressed by the assessee for which the Ld. Departmental Representative has no objection. Accordingly, ground of appeal No.5(a) is dismissed as not pressed . 16. Grounds of appeal No.5(b) by the assessee reads as under: without prejudice to Ground a above) not allowing depreciation at the rate of 80% on SMF Batteries (assuming it is capital expenditure) as applicable to Machinery Plant as per Section 32 of the Income Tax Act r.w. Rule 5 Appendix-I of Income Tax Rules particularly Part-III (8)(B)(ix) being the rate applicable to Energy Saving Devices being instrumentation and monitoring system for monitoring energy flows instead of allowing the same @15%, i.e. the rate applicable to Plant and Machinery . 16.1 Facts of the case, in brief, are that the Assessing Officer noted that the assessee had debited an amount of ₹ 67,79,712/- (DTA Unit- ₹ 21,03,205/-, EOU - ₹ 45,05,534/- and SEZ Unit- ₹ 1,70,972/-) as EDP (Electronic data processing expenses) under the head 'Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding depreciation on UPS being energy saving device. It is the case of the assessee that the UPS employed by it being an energy saving device is entitled for higher depreciation @ 80% as against the claim of the revenue that the same is not an energy saving device; but an energy supply device. The impact of this disallowance is the lesser depreciation of ₹ 5,74,579/- and for Assessment Year 2007- 08, the said amount is ₹ 4,72,596/-. It is the case of the ld AR that this issue is covered by the decision of the Tribunal in assessee's own case for the Assessment Year 2002-03 in ITA No. 2792/M/2006; for Assessment Year 2003-04 in ITA No.1071/M/2007; for Assessment Year 2004-05 in ITA No.5569/M/2007 and for Assessment Year 2005-06 in ITA No.6964/M/2008, copies of these orders are enclosed in the paper book at pages 1 to 22; 23 to 47 and 48 to 67 respectively. For the sake of convenience, the observations of the Tribunal in respect of the Assessment Year 2002-03 deciding the issue are reproduced below: 13. We have heard the rival contentions. Short question is whether UPS is a Automatic Voltage Controller' falling within the heading of energy saving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to our notice we hold that the assessee is entitled to higher rate of depreciation on SMF Batteries. Ground raised by the assessee is accordingly allowed. 18. Grounds of appeal No.6(a) and 6(b) by the assessee read as under : On the facts and in the circumstances of the case and in law the Ld.CIT(A) erred in confirming the classification of items of fixed assets of ₹ 9,86,959/- like stainless steel tables, stools, racks etc. located in manufacturing unit by considering them as Furniture and Fixtures and not as Plant and Machinery . On the facts and in the circumstances of the case and in law the Ld.CIT(A) erred in not applying correctly the functional test to the facts of the case while deciding whether certain items like Stainless steel table, stools, trolleys etc. constituted plant or not . 18.1 Facts of the case, in brief, are that the assessee had shown additions to plant machinery to the tune of ₹ 8,76,45,866/- in the depreciation chart as part of the Audit report furnished along with the return of income. During the assessment proceedings, it was clarified before the Assessing Officer that stainless stools and chairs used by the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other which are used for carrying products from the laboratories to the store room eligible for depreciation @25% and to allow depreciation on furniture accordingly. 11. On this aspect, it was a common ground between the parties that the directions of the CIT(A) are in line with the decision of the Tribunal in the assessee s own case for assessment year 2001-02 vide ITA No.948/PN/2005 dated 18-01-2012. Since the facts and circumstances in this year are similar, following the precedent the order of the CIT(A) is approved and the Revenue fails. 19.1 Respectfully following the decision of the Tribunal in assessee s own case in the preceding years the above grounds by the assessee are allowed. ITA No.1616/PN/2012 (By Revenue) (A.Y. 2006-07) : 20. Grounds of appeal No.1 2 by the Revenue are as under : 1. On the facts and in the circumstances of the case, the CIT(A) is not justified in excluding freight of ₹ 39,15,34,252/- and insurance of ₹ 3,14,16,456/- from the total turnover to compute the deduction u/s.10B of the Act. 2. The CIT(A) has erred in excluding freight and insurance claim of the assessee from the total turnover for computi ..... 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