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M/s. Apex Packing Products Pvt. Ltd., Versus Assistant Commissioner of Income Tax, Circle-2 (1) , Panaji.

2016 (4) TMI 1137 - ITAT PANAJI

Allowability of deduction under sec. 80-IB(4) on sales-tax incentive - Held that:- Similar issue had come up before this Tribunal in the case of ACIT Vs. M/s. Coral Clinical Systems [2015 (10) TMI 2182 - ITAT PANAJI] wherein held there is an inextricable link between the manufacturing activity, the payment of sales tax and the sales tax incentive. Therefore, in our opinion, such sales tax incentive which has been retained by the assessee from the Sales Tax collected has to be held as derived fro .....

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ng Officer considering it to be a capital loss, then he should have allowed depreciation on the WDV of the assets. We, therefore, set aside the orders of the lower authorities and remand back to the file of the Assessing Officer to re-adjudicate the issue, afresh after verification as per law. - Decided in favour of assessee for statistical purpose.

Disallowance under section 14A read with rule 8D - Held that:- Question of satisfaction is provided in section 14A and rule 8D(1), that r .....

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e issue of dividend striping. In any case, as we have already held that the assessee has not incurred any expenditure by way of interest during the previous year, which is not directly attributable to any particular income. As the Assessing Officer has not considered the above therefore, we set aside the orders of the lower authorities and remand back to the file of the Assessing Officer for adjudicating the issue, afresh in the light of the observations made hereinabove after allowing reasonabl .....

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eals), Hubli, dated 26/11/2015. 2. Ground Nos. 1 & 9 are general in nature and hence, require no separate adjudication by us. Ground No.2 of the appeal reads as under:- The CIT(A) grossly erred in sustaining the disallowance of deduction under sec. 80-IB(4) of the Act without properly appreciating the facts of the case vis-a-vis the requirements of law as satisfied by the appellant. 3. At the time of hearing, Authorized Representative of the assessee not pressed this .....

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material for FMCG companies, such as Nestle, Hindustan Lever & Parle. Assessee received sales-tax incentive of ₹ 30,95,163/- and claimed deduction on this amount under sec. 80-IB of the Act. The Assessing Officer relying on the decisions of the Hon ble Supreme Court in the case of Sterling Foods Vs. CIT (237 ITR 579), Pandian Chemicals Ltd. Vs. CIT (262 ITR 278), disallowed deduction under sec. 80-IB on ₹ 30,95,163/-. 6. On appeal, Commissioner of Income Tax (Appeals) .....

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f CIT Vs. Meghalaya Steels Ltd. in Civil Appeal No. 7622/2014, order dated 09/03/2016 and submitted that it has been held by the Hon ble Supreme Court that subsidies (such as transport subsidy, interest subsidy and power subsidy) paid to the assessee with the object of reducing cost of production constitutes profits derived from the business of the industrial undertaking and is eligible for deduction under sec. 80-IB. Liberty India ((supra) is distinguishable on facts. Therefore, he submitted th .....

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t on a similar issue, the Bombay Bench of the Tribunal in the case of M/s. Diamond Tool Industries Vs. JCIT in I.T.A.No. 136/MUM/2009 vide order dated 14/12/2011, held as under:- "6. We have considered the rival arguments made by both the sides, pursued the orders of the Assessing Officer and the CIT (A) and the paper book filed on behalf of the assessee. We find the Hon'ble Gauhati High Court in the case of Meghalaya Steels Ltd. (supra) after considering the decision of Hon'ble Sup .....

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on, we are of the considered opinion that there is an inextricable link between the manufacturing activity, the payment of sales tax and the sales tax incentive. Therefore, in our opinion, such sales tax incentive which has been retained by the assessee from the Sales Tax collected has to be held as derived from the industrial undertaking and consequently is eligible for deduction u/s 80-IB of the Act. In this view of the matter, the order of the ld.CIT(A) is set aside and the A.O. is directed n .....

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the assessee. 11. In ground No.5, the grievance of the assessee is that the Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of assets written off without appreciating the claim of the assessee that writing off was strictly in accordance with sec. 43(6)(c)(i)(B) of the Act. 12 Brief facts of the case are that the assessee claimed deduction of ₹ 6,86,413/- as value of assets written off. The Assessing Officer disallowed the same as writing off .....

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amount of such reduction does not exceed the WDV as so increased. Under the block of assets method, moneys payable are reduced from the WDV of the block to arrive at the amount eligible for depreciation. A capital gain or loss would arise only where sale value of moneys payable exceed the WDV or on extinguishment of the block respectively which would then be dealt with under relevant capital gains provisions. The assessee has reduced the value of assets to NIL by writing off the same from books .....

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should have allowed depreciation on the same. On a query by the Bench, whether assessee had claimed depreciation before the Assessing Officer during the course of assessment proceedings or before Commissioner of Income Tax (Appeals), the Authorized Representative of the assessee categorically denied of having done so. 15 On the other hand, Departmental Representative supported the orders of the lower authorities. 16 After considering the rival submissions and perusing the .....

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ee is allowed for statistical purpose. 17 Ground Nos. 6 & 7 of the appeal are directed against the order of the Commissioner of Income Tax (Appeals) sustaining disallowance of ₹3,87,977/- under sec. 14A read with Rule 8D of the I.T. Rules. 18 Brief facts of the case are that the Assessing Officer found from the balance sheet of the assessee that the assessee was having investments and the said investments are earning dividend income which is exempt from tax. The a .....

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Officer making disallowance of ₹ 3,87,977/- under sec. 14A of the Act and not accepting the explanation of the assessee that it has not incurred any expenditure for earning exempt income. 20 On the other hand, Departmental Representative supported the orders of the lower authorities. 21 After considering the rival submissions and perusing the material available on record, we find that the Assessing Officer while working out the value of average investments, has taken .....

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that the calculation made by the AO shows that the AO has considered all the investments which is not permissible whereas the Assessee has not provided a proper computation of the disallowance u/s 14A and the ld. CIT(A) has also not considered the calculation provided under Rule 8D, the issue of disallowance u/s 14A is restored to the file of the AO for re-adjudication in line with the decision of the co-ordinate bench of this Tribunal in the case of M/s. Sesa Resources Ltd. in in ITA Nos. 252 .....

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A Nos. 1331/Kol/2011 and 1423/Kol/2011 dt. 19.6.2013 wherein the co-ordinate bench of this Tribunal has held as follows : 7. Now coming to the merits of the issue. A perusal of the provision of section 14A(1) clearly shows the wordings, "in relation to the income which does not form part of the total income under this Act". In the present case, this income, which does not form part of the total income under the Act, is the dividend income of ₹ 1,32,638/-. Therefore, if .....

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ection 14A read with rule 8D. A perusal of the provisions of rule 8D also talks of satisfaction in sub-rule (1). Rule 8D(2) has three sub-parts. The first subpart i.e. (i) deals with the amount of expenditure directly relating to the income which does not form part of the total income. That issue is not in dispute here and therefore, we do not go into it in this case. In second sub-part i.e. (ii), it is a computation provided in respect of expenditure incurred by the asses .....

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AO that the loan funds have been diverted for making the investment in shares or for non-business purposes. Further rule 8D(2)(ii) clearly is worded in the negative with the words "not directly attributable". Thus for bringing any interest expenditure, claimed by the assessee, under the ambit of rule 8D(2)(ii) it will have to be shown by the AO that the said interest is not directly attributable to any particular income or receipt. Why we say here that it is to be shown by .....

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t of reserves and surplus, the increase is ₹ 112 crores. The loans taken during the year admittedly are for the letters of credit and the assessee is bound to provide the bank stock statement and other details to show the utilization of the loans. No bank would permit the loan given for one purpose to be used for making any investment in shares. The ld. CIT(A), it is noticed that after considering these facts that the assessee had not used any of its borrowings for purchasing the shares, h .....

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in the balance-sheet as on the first day and in the last day of the previous year. Here the AO has taken into consideration the investment of ₹ 103 crores made this year, which has not earned any dividend or exempt income. It is only the average of the value of the investment from which the income has been earned which is not falling within the part of the total income that is to be considered. This is why the question of satisfaction is provided in section 14A and rule 8D(1), that relates .....

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