TMI Blog2016 (3) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... e the order of the authorities below and remand the matter back to the file of the AO to adjudicate the claim of the assessee for 80IC for Baddi unit and 80I for Gurgaon unit and direct him to admit Form 10CCB and de novo adjudicate both the claims. Disallowance of interest - Held that:- Interest on working capital and term loan, which is only ₹ 9,90,825/- and ₹ 3,71,187/- respectively. Further, interest of ₹ 9,90,825/- is for availing facilities of packing credit, bills purchases, OCC and not for any diversion of funds for non-business purposes. Further, it is neither been established such interest on term loan was for capital work-in-progress. Moreover, identical interest has been allowed in the preceding year (AY 2005-06). Having regard to the above, disallowance made is deleted. - Decided in favour of assessee Disallowance of depreciation on factory building - Held that:- We find that the CIT (A) has not considered the depreciation chart furnished by the assessee. We further notice that even the AO has held that whether the asset was put to use or not could not be ascertained. Having regard to the above, it is apparent that the disallowance has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(Appeal) had accepted the additional evidence and then only forwarded the same to the assessing officer or his comments. Accordingly the CIT(Appeal) had erred in holding that such additional ground is not to be entertained and erred in rejecting such additional evidence. 6. It is contended that for technical breach of not filing Form No.10CCB before the AO, could not lead to disallowance of the claim of deduction u/s. 80IC. Further contended that the AO had never called for the Form No.10CCB from the Appellant. 7. It is contended that the Appellant had fulfilled the conditions of 80IC which also has not been disputed by the lower authorities but for non-filing of Form NO.10CCB such deduction claimed by the Appellant was disallowed. 8. The assessing officer had erred in disallowing interest of ₹ 16,57,972/ - as claimed by the Appellant. 9. It is contended that the assessing officer and the CIT(Appeal) have wrong established the alleged nexus between the loan taken and the interest free advance given. It is contended that there is no nexus between the two and accordingly disallowance of interest / restricting the disallowance is wrong and bad in law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances of the case, in deleting the addition of ₹ 5,00,000/- made by the AO out of travelling expenses. 5. The appellant craves to amend, modify, alter, add or forego any ground of appeal at any time before or during the hearing of this appeal. 3. The assessee company is engaged in the business of manufacturing and sale of electronic component mainly in switches, relays and other assemblies. The assessee company had two units one at Baddi (Himachal Pradesh) and other at Gurgaon (Haryana). The Baddi Unit was situated in special economic zone and the profit of which were claimed as deduction u/s 80IC of the Income Tax Act, 1961 (hereinafter 'the Act') @ 100% while the profits derived from Gurgaon unit were claimed to be qualifying of deduction u/s 80I. The return of income was filed on 23.11.2006 electronically declaring an income of ₹ 53,93,220/-. The case was processed u/s 143(1) of the Act on 19.01.2008. The assessee's case was selected for scrutiny and notices u/s 143(2) and 142(1) were issued. In response to these notices, the assessee filed the requisite details/ information. The assessment was completed u/s 143(3) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Profit (as per Computation of income) 2,06,15,948/- % of profits 6.45% (approx.) Profits of Baddi units 40,46,546/- Profits of Gurgaon units 1,65,69,402/- Deduction allowable u/s 80I In respect of Gurgaon Units i.e. 30% of ₹ 1,65,69,402/- 49,70,820/- Deduction allowable u/s 80IC In respect of Baddi Units i.e. 100% of ₹ 40,46,546/- 40,46,546/- 90,17,366/- Deduction claim by the assessee u/s 80I 23,22,307/- u/s 80IC 1,28,74,923/- 1,51,97,230/- Difference 61,79,864/- The AO, therefore, was of the opinion that the assessee had claimed deduction in excess b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present AY being the last AY for such claim. In all the previous 9 years, the claim of the appellant was allowed by the Revenue. Section 80I(7) clearly states that the mandatory provision is applicable for a person other than a company or cooperative society and assessee being a company, according to the Ld AR, is not covered by the provisions of this section. In none of the years such certificate was filed, as it was never called for [although the assessments were completed u/s 143(3)]. The amount of disallowance u/s 80I was ₹ 23,22,307/ -. However in other provisions of the law under Chapter VIA i.e. 80IA, 80IB or 80IC, there is a requirement of furnishing of certificate in Form 10CCB and it is quite possible that the AO might have carried away by such provisions of the law although for 80I, this is no such requirement for a Company. Section 80I allows deduction @ 30% of profits and gains computed under the Act whereas in section 80IC etc. the admissible amount is 100% thereof. Furthermore section 80I was introduced by Finance Act, 1980 w.e.f. 01.04.1981 whereas 80IC was brought into the statute by Finance Act, 2003 w.e.f. 01.04.2004 i.e. it is a much later development. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee refused to submit the same. He submitted that there was no reason given by the assessee which prevented the assessee to file the same, and this shows the malafile intention of the assessee. He submitted that before the CIT (A), certificate for both the units were filed and the CIT (A) accepted the certificate of Gurgaon unit because it was the 10th year and previous 9 years, it was allowed by the department, but in respect of Baddi unit the claim of 80IC was not accepted being the first year of claim. He submitted that accountancy is a pure jugglery and wondered as to how can a new unit make such a huge profit in the first year and compared the low profit of 10 year unit at Gurgaon. He submitted that there is clear case of transfer of profit from one unit to another. The ld. DR does not want us to interfere in the order of the authorities below as regards 80IC deduction and pleaded to remit the matter back to the file of the ld. CIT (A) on the issue of deduction claimed under section 80I. 10. We have heard both the sides and perused the material on record. Before discussing the aforesaid issues, we need to first see whether to admit the additional evidence filed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. 11. Grounds No.8 to 10 of the assessee's appeal are against the disallowance of interest of ₹ 16,57,972/- as claimed by the assessee. 12. The AO observed that in the Gurgaon Unit, the assessee had shown an increase in the capital work in progress from ₹ 60,616/- in the last year to ₹ 1,86,86,902/- during the year. The AO observed that any amount of interest relatable to this capital work had to be disallowed and capitalized. Further, the AO observed that the assessee had made loans and advances amounting to ₹ 2.42 crores and there was no evidence on record to show that any interest had been charged on the loans and advances given. The AO also observed that as against these elements of capital work in progress and interest free loans/advances given, the assessee had claimed interest payment of ₹ 16,57,972/- to the banks against secured loans taken. Therefore, the AO held that interest paid @ 15% disallowed on the amount of secured loans of ₹ 2.42 crores is not allowable and, therefore, restricted the disallowance to ₹ 16,57,972/- being the amount of interest actually claimed. The ld. CIT (A) sustained the addition by o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t interest free advances to employees. He took our attention to page 94, 95 96 of the paper book and he further submitted that it was suppliers advance against the purchases and no disallowance was made in the past also. He drew our attention to pages 94 95 of the paper book to bolster his claim. 14. On the other hand, ld. DR relied on the orders of the authorities below. He submitted that it was not notional interest being added back and the assessee has taken the loans. He submitted that the loans were taken for capital purposes and accordingly, the interest is to be capitalized. He submitted that these were interest bearing loans and not interest free loan. He submitted that when interest bearing loan are diverted for the purposes other than business, disallowance is valid. 15. We have heard both the sides and perused the material on record. From the balance sheet placed before us, we take note that assessee had share capital of ₹ 1,50,82,500/= and reserves and surplus of ₹ 9,26,94,892/= at the end of the year, which are far in excess to the amount invested in capital works in progress of ₹ 1.86 crores and interest free advance of ₹ 2.42 crores. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that interest on working capital and term loan, which is only ₹ 9,90,825/- and ₹ 3,71,187/- respectively. Further, interest of ₹ 9,90,825/- is for availing facilities of packing credit, bills purchases, OCC and not for any diversion of funds for non-business purposes. Further, it is neither been established such interest on term loan was for capital work-in-progress. Moreover, identical interest has been allowed in the preceding year (AY 2005-06). Having regard to the above, disallowance made is deleted. 16. Ground No.11 is against the disallowance of depreciation of ₹ 2,47,703/- on the additions to the factory building of ₹ 24,77,037/-. 17. The AO noted from the depreciation chart for the Gurgaon Unit that the assessee had incurred a cost of ₹ 24,77,037/- as addition to the factory building and claimed depreciation of this added amount for the entire year. The AO held that as there was nothing on record to show that the building was actually put to use during the year, depreciation of ₹ 2,47,703/- @ 10% on the amount of addition to the building was disallowed. Ld. CIT (A) sustained the action of the AO on the ground that details we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure was incurred wholly and exclusively for the purposes of business of the assessee company. The claim that though the accommodation was in the name of director but was used by the customers/employees is entirely unsubstantiated. We, therefore, do not find any merit in the claim, so the same is dismissed. 26. Grounds No.13 is against the deduction u/s 80G of ₹ 25,500/-. The AO made the deduction u/s 80G and the ld. CIT (A) sustained the action of the AO as no document was produced either before AO or before him. 27. We have heard both the sides on the issue and perused the material. We find that the ld. AR submitted that the claim may be verified by the AO and given, whereas the ld. DR submitted that the original documents have to be produced before the AO while a claim is made. 28. Having considered rival submissions, we consider it appropriate and just to set aside the issue to the file of AO, for verification of the claim of deduction u/s 80G. The assessee is entitled to lead the necessary evidence to support its claim. Ground is allowed for statistical purposes. 29. Grounds No.14 to 17 are consequential in nature. 30. Grounds No.18 19 are general i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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