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2016 (5) TMI 50 - ITAT AHMEDABAD

2016 (5) TMI 50 - ITAT AHMEDABAD - TMI - Disallowance u/s 10A - Held that:- The Authorized Representative furnished the comments on remand report vide letter dated 28.05.2010 and he had also furnished calculation of exempted amount and other amount as well. An amount of ₹ 1,75,93,582/- was not received within the period of 6 months as stipulated in the Section. Further ₹ 91,75,435/- on account of sales within zone, sales to EOU and sales 100% export were not received in time. Thus, t .....

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997/- the proportionate disallowance came to ₹ 51,89,138/-. Therefore, the said amount of ₹ 51,89,138/- was directed to be deducted from the total amount of claim of ₹ 5,82,65,233/-. Thus, allowable claim u/s. 10A of the Act was of ₹ 5,30,76,095/-. Therefore, the claim u/s.10A of the assessee-company was rightly allowed to the extent of ₹ 5,30,76,095/- and rest was rightly disallowed by the CIT(A). No interference is called for and we uphold the order of the CIT(A) .....

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Therefore, the disallowance made by the Assessing Officer was rightly deleted by the CIT(A) and these reasoned findings of the CIT(A) do not require any interference from our side.- Decided against revenue.

Disallowance of Miscellaneous Expenses - Held that:- Assessing Officer, without put forth any cogent reasons, has made the ad-hoc disallowance in question. The Assessing Officer has also not recorded any specific reasons or evidences which can be categorized as that of personal nat .....

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ved that the when the building is ready and put to use by the assessee, there is no ground of disallowance. These reasoning findings of the CIT(A) do not require any interference from our side; we uphold the same.- Decided against revenue.

Disallowance u/s 41(1) - Held that:- There are two conditions stipulated u/s. 41(1) of the Act which needs to be satisfied before disallowance u/s. 41(1) and therefore in the present case the provisions of the said section are not attracted. Moreove .....

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attracted but has failed to state any reasons for the same. Moreover when the confirmations of concerned parties were produced before the CIT(A), he rightly observed that liability is still in existence. Therefore, in view of the facts and circumstances of the case, the CIT(A) was justified in deleting the addition - Decided against revenue.

Disallowance of staff welfare expenses, vehicle expenses and travelling expenses - Held that:- CIT(A), having considered the same, held that the .....

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AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Revenue : Smt. Sonia Kumar, Sr-DR For The Assessee : Shri Vijay H. Patel, AR ORDER PER SHAILENDRA K. YADAV, JUDICIAL MEMBER: This appeal has been filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-XIV, Ahmedabad dated 30.09.2010 for Assessment Year 2007-08, on the following grounds:- 1) The Ld. Commissioner of lncome-tax(A)-XIV, Ahmedabad has erred in law and on facts in allowing the claim of the assessee u/s.10A .....

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ciation on building amounting to ₹ 3,37,157/- 5) The Ld. Commissioner of Income-tax(A)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowances made u/s. 41(1) of the Act amounting to ₹ 13,34,951/-. 6) The Ld. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred In law and on facts in deleting the disallowances made by the Assessing Officer amounting to ₹ 1,12,368/- out of staff welfare expenses, ₹ 1,53,970/- out of vehicle expenses, and ₹ 13,05 .....

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of Surat Special Economic Zone. 2.1 The first issue raised by the assessee-company, before us, is with regard to the disallowance of ₹ 5,30,76,095/- made by the Assessing Officer u/s 10A of the Income-tax Act. The brief background in this regard, as mentioned by the Assessing Officer in the assessment order, are as under:- "The appellant filed return of income on 30/10/2007 showing total income of ₹ 1,47,41,231/-. The appellant company is engaged in the business of manufacturin .....

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0A of the IT Act. The relevant part is reproduced hereunder : "(5) The deduction under this section shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section." .....

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ange within a period of six months from the end of previous year or within such further period as the competent authority may allow in this behalf. The assessee vide various order sheet entries as narrated above was requested to furnish BRCs in this regard. The assessee furnished a chart which shows that there were sales in various categories as under: (a) Sales against EPCG , ₹ 26.65 crores (b) Sales within zone ₹ 22.99 lacs (c) Sales to EOU ₹ 22.99 lacs (d) Sales (100% export .....

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was eligible for exemption u/s. 10A of the Act. Further, for sales of ₹ 26.65 crores, it was observed that total 119 invoices were raised which could have been realized within stipulated time limit as mentioned in the relevant section. However, again such 119 invoices, the assessee could be able to produce 4 BRCs only. In absence of any evidences of realization of foreign convertible exchange, the claim of the assessee cannot be accepted. Moreover, the assessee produced a BRC of invoice No .....

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same had been realized or not. In absence of any evidential support, the claim of the assessee is not found tenable . Further, invoice shows that sales of ₹ 1061584 were made but ₹ 250000/- were realized only. Likewise, invoice No.13 reveals that as against sales of ₹ 588610, the sum of ₹ 5 lacs were received only. This issue was 'discussed with the authorised representative but he was not able to explain the discrepancies found during the course of hearing as stated .....

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7; 1499013/-. However, the assessee had claimed exemption on such sales for which the assessee was not eligible. Therefore, the claim of the assesses is not acceptable. 6. Further, on perusal of chart of "sales to EOU", it was found that the assessee had claimed to have made sales of ₹ 5847405. But out of these sales, a sum of ₹ 4547200 could not be realized till date. As stated in earlier para, the assessee cannot claim exemption on sales which could not be realized. 7. As .....

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he claim of exemption u/s. 10A of the Act. Thus, it is very clear that the assessee did not consider this aspect as mentioned in this section itself. Since the assessee could produce only 4 BRCs as against around 130 invoices, therefore, the quantum of discrepancies cannot be identified. 8. The assessee was requested to produce production register of the Unit, sales of which were falling under the net of exemption u/s. 10A. But the assessee did not produce production register despite of given it .....

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lf of the assessee and having considered the same, the CIT(A) granted relief to the assessee and the same has been opposed on behalf of the Revenue, inter alia, submitting that the CIT(A) erred in law and on facts in allowing the claim of the assessee u/s 10A of the Act amounting to ₹ 5,30,76,095. Accordingly, the ld. Departmental Representative pleaded that the order of the CIT(A) may be set aside and that of the Assessing Officer be restored. On the other hand, ld. Authorized Representat .....

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t furnished all the Bank Realization Certificates (BRCs) for all the exports. The assessee has exported the items not directly but through EPCG license holders. In any case, the BRCs for exports made by the assessee were to be furnished before the Income-tax Authorities for the claim of exemption u/s. 10A of the Act. The Assessing Officer has mentioned in the assessment order that the copy of only 4 BRCs were furnished by the assessee on 24.12.2009. The chart of the sale of the exports has also .....

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s the invoices raised but the fact is otherwise. It is not necessary that whatever the number of invoices has been raised, the BRCs should be in the same number. More invoices can be raised to a single party and BRCs can be only one. Therefore, the Assessing Officer has further raised the question that sales within zone, sales to EOU and sales (100% export) did not qualify for exemption u/s. 10A of the Act. The CIT(A) was of the opinion that the Assessing Officer has mistaken this fact also that .....

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d in sub-section 1 in computing the total income of the undertaking in any special economic zone shall be 100%. In the case of assessee-company, the sales within zone, sales of EOU and sales (100% export) of ₹ 22.99 lacs, ₹ 58.47 lacs and ₹ 3.74 crores respectively, totaling to ₹ 4.55 crores was deducted from the total income of the assessee. 3.2 The CIT(A) further found that although the assessee was having all the necessary certificates in Form No.56F and BRCs but were .....

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assessment proceedings. Further, the concerned official of the company was looking after its banking operations viz. Shri Rajesh suddenly fell unconscious while performing his duties in the premises of the assesseecompany. He was also admitted to the hospital and, therefore, he could not gather the relevant documents in time and as a result the assesseecompany was unable to produce the same before the concerned Assessing Officer. The copies of medical certificate of Shri Arvind Patel and Shri R .....

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ted 28.05.2010 and he had also furnished calculation of exempted amount and other amount as well. An amount of ₹ 1,75,93,582/- was not received within the period of 6 months as stipulated in the Section. Further ₹ 91,75,435/- on account of sales within zone, sales to EOU and sales 100% export were not received in time. Thus, the total amount of ₹ 2,67,68,997/- was not received by the company within the statutory time limit as prescribed under the Act. Therefore, the deduction c .....

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mount of claim of ₹ 5,82,65,233/-. Thus, allowable claim u/s. 10A of the Act was of ₹ 5,30,76,095/-. Therefore, the claim u/s.10A of the assessee-company was rightly allowed to the extent of ₹ 5,30,76,095/- and rest was rightly disallowed by the CIT(A). No interference is called for and we uphold the order of the CIT(A) in this regard. 4. Next issue is with regard to the disallowance of interest expenses of ₹ 15,21,790/-. The Assessing Officer observed that the assessee p .....

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ng to ₹ 15,21,790/-. 4.1 Matter was carried before the First Appellate Authority wherein various contentions were raised on behalf of the assessee and having considered the same, the CIT(A) deleted the disallowance in question, which has been opposed on behalf of the Revenue, inter alia, submitting that the CIT(A) has erred in allowing the claim of interest expenses of ₹ 15,21,790/-. On the other hand, ld. Authorized Representative for the assessee supported the order of the CIT(A) a .....

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,58,075/- 4.2 We find that that assessee has paid the interest on the borrowed fund and has also advanced loan but did not charge any interest on that because it was the business/commercial necessity to take and give the loan simultaneously for business purpose. As the assessee was having fund more than the amount of advance given without interest, it did not cause any adverse effect on the business prudence. Therefore, the disallowance made by the Assessing Officer was rightly deleted by the CI .....

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same, the CIT(A) deleted the disallowance in question amounting to ₹ 1 lakh. Revenue has opposed the order of the CIT(A), inter alia, submitting that the CIT(A) erred in allowing the disallowance of ₹ 1 lakh made out of miscellaneous expenses and accordingly, the ld. Departmental Representative submitted that the order of the CIT(A) be set aside and that of Assessing Officer be restored. On the other hand, ld. Authorized Representative supported the order of the CIT(A) and submitted .....

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categorized as that of personal nature; therefore, the CIT(A) has rightly directed the Assessing Officer to delete the disallowance in question. This reasoned finding of the CIT(A) needs no interference from our side. We uphold the same. 6. Next issue is with regard to the disallowance of depreciation on building amounting to ₹ 3,37,157/-. The Assessing Officer has disallowed the claim of depreciation amounting to ₹ 3,37,157/- on building situated at A/8, Gandhinagar which was purch .....

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ill produced by the assessee signifies that the assessee had infact used the building in the year under consideration. The CIT(A) also observed that the when the building is ready and put to use by the assessee, there is no ground of disallowance. These reasoning findings of the CIT(A) do not require any interference from our side; we uphold the same. 7. Next issue is with regard to the disallowance u/s 41(1) amounting to ₹ 13,34,951/-. The Assessing Officer in the assessment order has hel .....

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the CIT(A) has been opposed by the Revenue, inter alia, submitting that the CIT(A) has erred in deleting the disallowance made u/s 41(1) of the Act, amounting to ₹ 13,34,951/-. On the other hand, ld. Authorized Representative supported the order of the CIT(A) and submitted that all the liabilities are still in existence and neither the assessee nor the creditors have written off the said liabilities from their respective books of accounts. He further contended that there are two conditions .....

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