Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (10) TMI 686 - ITAT AHMEDABAD

2016 (10) TMI 686 - ITAT AHMEDABAD - TMI - Exclusion of income on sale of DEPB for the purpose of deduction u/s.80IB - Held that:- CIT(A) while deciding the issue and after placing the reliance on the decision in the case of Topman Exports vs. CIT (2012 (2) TMI 100 - SUPREME COURT OF INDIA ) has held that only the income on sale of DEPB is to be excluded and not the entire sale of DEPB for the purpose of calculation of deduction u/s.80IB of the Act. Before us, neither of the parties have placed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of amendment made by Finance Act 2001 with effect from 1.06.2001. Thus it can be seen that CIT(A) has set aside the issue to the file of A.O, the powers of which are not available to him at the relevant time. While deciding the issue, we find that ld.CIT(A) has noted that assessee could not substantiate that the amount used by the assessee for acquisition of shares of Banpal Agro Tech Pvt.Ltd. was on account of commercial expediency and that the argument of not utilizing the interest-free fund .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

facts and circumstances of the case and in accordance with law. Needless to state that AO shall grant adequate opportunity of hearing to Assessee. Thus, this ground of Revenue and Assessee are allowed for statistical purposes. - Disallowance of premium paid on Keymen Insurance - Held that:- As out of the premium paid for 5 policies, 3 persons namely Shri Yashwant Bachani, Shri Shantidan Thakor and Shri Arunbhai Desai are the Directors of the assessee-company whereas Shri Mukesh Gadhvi is Di .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ium paid for 2 persons, who are not the Directors of assessee, assessee has not placed any material on record to show their nature of work, since how long they are associated with the assessee, whether assessee has paid for premium for other persons who work in assessee’s company in same capacity as that of these two persons and how these two persons can be considered to be the key persons to the assessee’s business. In such a situation, we are of the view that AO has rightly disallowed the expe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mium paid for the 3 Directors needs to be allowed. In view of the aforesaid facts, we direct the restricting the disallowance of Keymen Insurance Premium only to the extent of ₹ 40 lacs as against ₹ 1,00,00,000/- made by AO - Decided partly in favour of assessee. - I.T.A. No.1550/Ahd/2012, I.T.A. No.1683/Ahd/2012 - Dated:- 29-8-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Appellant : Shri T.P. Hemani, AR For The Respondent : Shri James .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ated to be engaged in the business of manufacturing of Cold Process Castor Oil and other by-products. Assessee filed its return of income for AY 2008-09 and declared total income of ₹ 18,41,470/-. The case was selected for scrutiny and thereafter assessment was framed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 31/12/2010 and the total income was determined at ₹ 1,53,52,832/-. Aggrieved by the order of the Assessing Officer .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

le computing the deduction u/s.80IB of the Act after following the decision of the Hon ble Supreme Court in the case of Topman Exports Vs. CIT, reported in 67 DTR 185, without appreciation the fact that the Hon ble SC has held that both the fact value and the profit on sale of DEPB is taxable as revenue receipts and the same is not derived from eligible business / unit as held by the Hon ble SC in the case of Liberty India vs. CIT reported in 317 ITR 218, more particularly when such DEPB income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1)(a) of the Act as amended w.e.f.01/10/1998. 2.2 On the other hand, the grounds raised by the Assessee in ITA No.1550/Ahd/2012 read as under:- 1. The Hon ble CIT(A) has grossly erred both in law and on facts in confirming the reduction of DEPB amount from the deduction allowable u/s.80IB of the Income tax Act. 2. The Hon ble CIT(A) has grossly erred in directing the AO to decide the amount of disallowance to be made out of total disallowance of interest expenditure of ₹ 27,27,514 u/s. 14A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dicating the ground relating to non-allowance of deduction u/s.80IB on addition made during the course of assessment. 3. First ground of Revenue is with respect to excluding the income on sale of DEPB for the purpose of deduction u/s.80IB of the Act. The ld.AR submitted that this ground is inter-connected with ground No.1 of Assessee s appeal. 3.1. During the course of assessment proceedings, AO noticed that assessee has claimed deduction u/s.80IB of the Act and the claim of deduction included t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

who decided the issue holding as under:- 3.2. Vide para-3 of the assessment order, AO observed that the appellant claimed deduction u/s.80IB of ₹ 7,83,848/-; the said claim was revised to ₹ 9,12,158/- during the assessment proceedings; in view of Supreme Court decision cited at 317 ITR 218, DEPB income was to be excluded while calculating the deduction u/s.80IB and accordingly the deduction claimed of ₹ 7,83,848/- was being disallowed. The contention of the ld.A.R. is that in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ordingly. This ground of appeal is partly allowed. 3.2. Aggrieved by the order of ld.CIT(A), Revenue and Assessee are now in appeal before us. 4. Before us, ld.AR reiterated the submission made before the AO & ld.CIT(A) and further submitted that the whole face value of DEPB cannot be stated to be the income of the assessee but only the premium, if any, received by the assessee can be stated to be income arising out of DEPB and for this proposition, he relied on the decision of Hon ble Apex .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of Topman Exports vs. CIT(supra) has held that only the income on sale of DEPB is to be excluded and not the entire sale of DEPB for the purpose of calculation of deduction u/s.80IB of the Act. Before us, neither of the parties have placed any contrary binding decision in their support. We therefore find no reason to interfere with the order of the ld.CIT(A). Thus, this ground(s) of Revenue and Assessee are dismissed. 6. Next ground is with respect to disallowance of interest expenditure. 6.1. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of ₹ 1,56,74,752/-. AO observed that on one hand assessee has given interest-free advance and on the other hand assessee has claimed interest expenditure on the loans borrowed from banks and unsecured loans. He was therefore of the view that proportionate interest on the amount utilized for the purpose of purchase of shares of Banpal Agro Tech Pvt.Ltd. cannot be considered to be for the purpose of business and therefore the interest on the amounts used for making investments was required .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

de; interest of ₹ 1,56,74,752/- was debited to the profit & loss account; in response to the show cause notice issued, appellant contended that the investment in M/s.Banpal Agro Tech Pvt.Ltd. was out of commercial expediency; said explanation was not satisfactory and proportionate interest disallowance @12% on the amount of ₹ 2,27,29,285/- was being made u/s.36(1)(iii), which worked out to ₹ 27,27,514/-. The ld.AR s contentions are three pronged. The first one is that no di .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

refore, I deem it fit to direct the appellant to demonstrate before the AO that the investment/advances were not out of interest bearing funds. AO is directed to verify the evidence produced in this regard and modify the order accordingly. Thus, subject to verification, this ground of appeal is treated as allowed. 6.3. Aggrieved by the order of the ld.CIT(A), Revenue is now in appeal before us. 7. Before us, ld.Sr.DR supported the order of AO. He further submitted that ld.CIT(A) had remitted the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s were acquired for commercial expediency. 8. We have heard the rival submissions and perused the material on record. We find that CIT(A) while deciding the issue had directed the A.O to verify the various evidences submitted by the Assessee and thereafter delete the addition. At this moment it will be relevant to refer to relevant provisions of Section 251 which reads as under:- Powers of the Commissioner (Appeals) 251 (1) In disposing of an appeal, the Commissioner (Appeals) shall have the fol .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the issue to the file of A.O, the powers of which are not available to him at the relevant time. While deciding the issue, we find that ld.CIT(A) has noted that assessee could not substantiate that the amount used by the assessee for acquisition of shares of Banpal Agro Tech Pvt.Ltd. was on account of commercial expediency and that the argument of not utilizing the interest-free funds for making investments was made by assessee before AO. We find that on those issues apart from oral submissions, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

portunity of hearing to Assessee. Thus, this ground of Revenue and Assessee are allowed for statistical purposes. 9. In the result, the appeal of Revenue is partly allowed for statistical purposes. 10. Now we left with the Assessee s ground No.3 which is with respect to disallowance of premium paid on Keymen Insurance. 10.1. During the course of assessment proceedings, AO noticed that the assessee had paid insurance premium of ₹ 1 crore for taking Keymen Insurance Policies in the names of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he organization. He, thereafter relying on the CBDT Circular No.18/02/1998 reported in 230 ITR St.12, held that in the present case there was no benefit that was available to the company and the benefit was to be received by life insured at the time of retirement as lump sum cash and had annuity options. He therefore concluded that the expenses was personal in nature and not allowable u/s.37(1) of the Act and accordingly disallowed the expenses. Aggrieved by the order of AO, assessee carried the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sively for the purposes of the business. In accordance with CBDT s Circular No.762, premium paid on keyman insurance policy taken by a business organization in order to protect the business against the financial loss which may occur from the persons premature death is allowable expenditure. In the instant case, as observed by the AO rightly, there is nothing to indicate that the policies were taken in order to protect the business. Instead in all the five policies, the beneficiaries were the ind .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s whether a partner of the firm could be considered a keyman. There was a clear finding that the policy was taken for the benefit of the firm and not for the personal benefit of the partner. In the case of CIT Vs. Rajan Nanda (Delhi), at the time of taking the policy it was for the benefit of the business. The policies were assigned in favour of the beneficiaries subsequently. Therefore, it was held that the subsequent action of assigning the policies to the beneficiaries did not change the char .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e insurance policies were obtained for the benefit of the beneficiaries. Therefore, I am of the considered view that the appellant failed the litmus test to establish that the expenditure was laid out for the purposes of the business. I do not see any infirmity in the action of the AO in disallowing the impugned expenditure of ₹ 1 crore. Disallowance is upheld. This ground of appeal is dismissed. 11. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us. 11.1 Before us, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with reference to allowability of premium paid for Keymen Insurance Policy. In the present case, we find that assessee has paid insurance premium towards Keymen Insurance Policy for the following persons:- Name Designation Premium paid Sh. Yashwant Bachani Director Rs.20 lakhs Sh. Shantidan Thakor Director Rs.20 lakhs Sh. Arunbhai D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version