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2016 (11) TMI 725 - PUNJAB AND HARYANA HIGH COURT

2016 (11) TMI 725 - PUNJAB AND HARYANA HIGH COURT - TMI - Claim for deduction under Section 80 IA - whether ITAT was right in directing AO to compute the deduction u/s 80 IA by following the method in section 80 HHC (3) for working out profit/loss from trading goods? - AO came to the conclusion that the profit earned by the assessee's eligible unit was not only on account of its manufacturing activities but also from its trading activities - Held that:- The assessee admittedly carries on trading .....

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laim under Section 80 IA. The loss in the trading activities is still a loss. We are unable to hold that this finding which is essentially one of fact is perverse or absurd - The Tribunal has upheld the findings of the CIT(A) on the same basis. Having done so, the Tribunal rightly remanded the issue to the AO to recalculate the deductions under Section 80 IA. - ITA No. 253 of 2007(O&M) - Dated:- 19-10-2016 - MR. S.J.VAZIFDAR AND MR. DARSHAN SINGH, JJ. For The Appellant : Mr. Rajesh Katoch, A .....

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g Officer (for short 'A.O') to recalculate the same by applying the same method which had been followed in respect of the trading loss while allowing the deduction under Section 80 HHC. 3. The appellant contended that four substantial questions of law arise in the case. By an order dated 12.11.2009, a Division Bench of this Court admitted the appeal only as regards question No. 2, which reads as under:- 2. Whether on the fact and circumstances of the case, the Hon'ble ITAT was right .....

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ntral Board Direct Taxes under Section 119 of the Act. 5. It is admitted by the parties that the aggregate tax effect of all the questions raised in this appeal is more than Rs. 20 lacs. It is also agreed that the tax effect in respect of question No. 2 itself is less than Rs. 20 lacs. The question that falls for consideration is whether the tax effect for the purpose of the said circular is to be determined on the basis of the aggregate tax effect in the appeal or only on the basis of the value .....

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ncome in respect of the issues against which appeal is intended to be filed (hereinafter referred to as disputed issues ). However, the tax will not include any interest thereon, except where chargeability of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty .....

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ry limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in resp .....

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e monetary limit prescribed above, the Commissioner of Income- tax shall specifically record that even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this instruction . Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income- tax Department shall not be precluded from filing an appeal against the .....

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anguage of the circular. Paragraph 4 states that the tax effect means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which the appeal is intended to be filed. Therefore, the value depends upon the issues against which the appeal is intended to be filed by the Revenue. The sustainability of the Revenue's case is not relevant at that stage. What i .....

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issue in the appeal. 8. Paragraph 5 of the circular also supports Mr. Katoch's submissions. It provides that the AO shall calculate the tax effect separately for every assessment year in respect of the disputed issues . The tax effect therefore is to be computed in respect of the assessment year and not in respect of any particular claim or item in the assessment proceedings pertaining to the relevant year. The second sentence in paragraph 5 also supports the contentions on behalf of the Rev .....

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h reference to the tax effect in the relevant assessment year . It does not refer to the tax effect qua each independent issue in respect whereof the appeal is filed. 9. In the result, the monetary limit stipulated in paragraph 3 of the circular must be determined on the basis of the appeal considered as the whole and not in respect of any individual issue or question raised in the appeal. 10. The appeal is therefore maintainable as the aggregate tax effect therein exceed the limit of Rs. 20 lak .....

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view thereof, he observed that the assessee's claim that it had incurred a loss qua its trading activities was not acceptable. He came to the conclusion that the profit earned by the assessee's eligible unit was not only on account of its manufacturing activities but also from its trading activities. It is difficult to understand the basis on which this observation is made for while computing the assessee's claim under Section 80 HHC in Annexure B to the assessment year, it is expres .....

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hat the only way out is to split the profit on the basis of the ratio of expenses on purchases and direct expenses of the two activities. The AO found that the total cost of material and other direct expenses was about ₹ 142.46 crores as against which the total cost of traded goods was ₹ 22.47 crores. He, therefore, directed that while computing the deduction under Section 80 IA, 1/ 7th of the profits would be excluded from the total profit. 13. The CIT (A) on the other hand noted th .....

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