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2017 (5) TMI 776

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..... ity. Accordingly, the same is set aside and the disallowance made by the Assessing Officer to the extent of ₹ 5.50 Crores is restored. Claim of the assessee under the provisions of Section 145A - Held that:- Once the assessee changed its method of accounting and consistently followed the same in subsequent years, the Department cannot doubt the method of accounting followed by the assessee. In the initial years, there may be fluctuation in the profit of the assessee due to increase in purchase price by changing the method of accounting. However, when the assessee was consistently following the same, there will be revenue neutral, hence there cannot be loss to the Revenue. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee under the provisions of Section 145A of the Act. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Addition consequent to the block assessment - Held that:- The addition made in the present case is in the assessment made under Section 143(3) of the Act. Under the scheme of Income-tax Act, there can be simu .....

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..... f the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall refer the matter to TPO once again and determine the arm's length price in respect of services rendered by the assessee in the light of finding and conclusion that may be reached by the Transfer Pricing Officer. Addition towards management consultancy fees paid to M/s Twin Star Holdings Ltd., Mauritius - Held that:- Since the actual service rendered by M/s Twin Star Holdings Ltd. was not brought on record by the CIT(Appeals), this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall refer the matter to the TPO once again and TPO shall examined the actual service rendered by M/s Twin Star Holdings Ltd. to the assessee and thereafter determine the arm's length price after giving a reasonable opportunity to the assessee. Disallowance under Section 14A - Held that:- Tribunal is unable to uphold the order of the lower authority. However, since the natu .....

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..... of Tuticorin, therefore, there is an obligation on the part of the assessee to give donation to the rehabilitation work so that the assessee can carry on its business activity in a peaceful atmosphere. Therefore, even though technically speaking, the donation is not for earning any business income, it would definitely mitigate the difficulties suffered by the local people who are affected by Tsunami. Therefore, as found by the Madras High Court in Cholan Roadways Corporation Ltd. [1997 (2) TMI 38 - MADRAS High Court ] has rightly allowed the claim of the assessee. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Disallowance under Section 14A - Held that:- It is not in dispute that Rule 8D is not applicable for the year under consideration. As rightly submitted by the Ld. Sr. Standing Counsel, this Tribunal is uniformly estimating the expenditure at 2% before introduction of Rule 8D of Income-tax Rules, 1962. The CIT(Appeals) without any basis has restricted the same to ₹ 5 lakhs instead of disallowing ₹ 27.48 lakhs which comes to 2% of exempt income earned by the assessee. Therefore, this .....

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..... th year to 10th year. Therefore, whether the claim is for 7th year or 8th year, so long it falls within the period of 6th to 10th year, the assessee is eligible for deduction under Section 80-IB of the Act at 30%. Therefore, as rightly submitted by the CIT(Appeals), the issue becomes infructuous. Accordingly, the same is confirmed. Management consultancy fee disallowance u/s 40(a)(i) for non-deduction of tax at source - Held that:- The assessee has paid management consultancy fees and Representative Office fees to its holding company in UK. In respect of Representative Office fees, the CIT(Appeals) himself found that the payment was made for the service rendered outside India, therefore, it was not liable for taxation in India. Accordingly, the CIT(Appeals) found that there is no need to deduct tax. Coming to management consultancy fees, it is not in dispute that UK company deputed their skilled employees to India to render services to the assessee. In fact, the assessee-company availed services of UK company in India. Therefore, the payment made to the assessee towards management consultancy fees is liable to tax in India. Hence the assessee has to necessarily deduct tax as .....

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..... d whether profit on foreign exchange fluctuation was due to sale of finished goods or raw material. No material is available on record to suggest that the foreign exchange fluctuation was due to sale of finished goods on export. Therefore, this Tribunal is of the considered opinion that the matter needs to be verified by the Assessing Officer. Unclaimed liabilities written back, the unclaimed liabilities relate to earlier assessment year, due to unclaimed liabilities of the earlier year, the same were written back in the books of account and treated as income of the assessee. This Tribunal is of the considered opinion that deduction under Section 80-IB of the Act is only in respect of current profit. The profit written back in the books of account as unclaimed of the earlier year cannot be construed as profit of current year, therefore, by including the unclaimed liabilities written back in the books of account, the assessee cannot inflate the eligible profit for the purpose of deduction under Section 80-IB of the Act. Interest received from customers, it is not known whether the interest was received on sale of finished goods or interest was received on any other situation. .....

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..... :- Tribunal found that the advance was made to companies outside India and the lower authorities have not examined whether the advance made to the companies outside India would amount to shifting of profit to other jurisdiction. Accordingly, the matter was remitted back to the file of the Assessing Officer. For the very same reason, the orders of the lower authorities are set aside and the disallowance of notional interest is remitted back to the file of the Assessing Officer. - ITA Nos.318 & 319/Mds/2008, ITA No. 1020/Mds/2010, ITA No. 1665/Mds/2010, ITA No.86/Mds/2008, And ITA No. 1386/Mds/2010 - - - Dated:- 29-3-2017 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER, AND ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For The Revenue : Shri M. Swaminathan, Sr.Standing Counsel For The Assessee : Shri G. Baskar, Advocate ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: All the appeals of the assessee and the Revenue are directed against the respective orders of the Commissioner of Income Tax (Appeals). Since common issues arise for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order. Let s first take assessee s .....

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..... er of the Assessing Officer it appears that the Assessing Officer has initiated the penalty proceedings and no order appears to have been passed. The assessee has sought remedy by way of appeal before the CIT(Appeals) and further appeal before this Tribunal against the order passed by the Assessing Officer under Section 271AA and 271G of the Act. Therefore, mere initiation of proceedings by issuing show cause notice cannot be a subject matter of appeal before this Tribunal. Hence, the CIT(Appeals) has rightly considered this as premature. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 8. In the result, the assessee s appeal in I.T.A. No.86/Mds/2008 stands dismissed. 9. Now coming to the Revenue s appeal in I.T.A. No. 319/Mds/2008 for the assessment year 2004-05, the first ground of appeal is with regard to addition of ₹ 5.50 Crores in respect of donation made by the assessee to M/s Public Political Awareness Trust. 10. Shri M. Swaminathan, Ld. Sr.Standing Counsel for the Revenue, submitted that the assessee made donation to M/s Public Political Awareness Trust and claimed deduction un .....

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..... uted by way of cash.] Explanation For the removal of doubts, it is hereby declared that for the purposes of this section, the word contribute , with its grammatical variation, has the meaning assigned to it under section 293A of the Companies Act, 1956 (1 of 1956). 13. Before 01.04.2010, the amount contributed by any Indian company to any political party has to be reduced from total income for the purpose of computing taxable income. The Parliament by Finance (No.2) Act, 2009 with effect from 01.04.2010 amended Section 80GGB by incorporating the word or an electoral trust . Therefore, with effect from 01.04.2010, if a contribution was made to an electoral trust, that amount is eligible for deduction while computing the taxable income. In the case before us, admittedly, the contribution was made to trust and not to any political party directly. Even though Companies Act, more particularly Section 293A(2)(b), allows the companies to donate for political purpose to any person, the Income-tax Act allows the payment made to a political party. Therefore, the question arises for consideration is when the assessee contributed to a trust, whether such payment may be construed .....

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..... counting method is not compulsory. The assessee should have accounted for increase in purchase price at the time of finalization of accounts on 31.03.2004. By increasing the purchase price, according to the Ld. Sr. Standing Counsel, the assessee is making an attempt to reduce the profit, therefore, the CIT(Appeals) is not correct in allowing the claim of the assessee. 17. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that in fact, the assessee changed the method of accounting from mark to market. It is for the assessee to change the method of accounting with regard to policy of the company. The Assessing Officer cannot comment on the policy of the company unless and until the method of accounting adopted by the assessee does not disclose the correct profit of the assessee. Even though the purchase price was increased by changing the method of accounting from mark to market, the assessee was uniformly following the method to subsequent years. Therefore, according to the Ld. counsel, it cannot be said that the assessee was making an attempt to reduce the profit by shifting the accounting policy. As rightly observed by the CIT(Appeals), the method of a .....

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..... rival submissions on either side and perused the relevant material available on record. The addition made in the block assessment is in respect of the undisclosed income. The addition made in the present case is in the assessment made under Section 143(3) of the Act. Under the scheme of Income-tax Act, there can be simultaneous assessment one for regular assessment and another for block period. Therefore, as rightly submitted by the Ld. Sr. Standing Counsel for the Revenue, the block assessment made by the Assessing Officer was separate and distinct. However, it needs to be verified whether the same income which formed part of undisclosed income for the block period has been added once again in the regular assessment. For the purpose of verification, this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, the orders of the lower authorities are set aside and the entire issue with regard to addition of ₹ 14,58,83,105/- is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue and bring on record whether any income which formed part of undisclosed income in the block assessment was included .....

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..... ame is confirmed. 27. The next ground of appeal is with regard to disallowance of ₹ 2.13 Crores towards notional interest on interest free loan advanced to wholly owned subsidiary company. 28. Shri M. Swaminathan, Ld. Sr.Standing Counsel for the Revenue, submitted that the assessee advanced money to subsidiary company outside the country. In fact, the loan was borrowed in India and advanced it to its wholly owned subsidiary companies outside India. According to the Ld. Sr. Standing Counsel, by diverting the borrowed funds outside India, the assessee is diverting the taxable profit outside the jurisdiction. Referring to the assessment order, the Ld. Sr. Standing Counsel submitted that the Transfer Pricing Officer originally suggested to make adjustment to the extent of ₹ 13,64,01,948/-. However, on the representation made by the assessee, an adjustment was made to the extent of ₹ 2,13,80,690/-. According to Ld. Sr. Standing Counsel, the advance was made to Monte Cello BV. Since the loan was advanced to foreign company, according to Ld. Sr. Standing Counsel, the interest claimed by the cannot be allowed. 29. On the contrary, Shri G. Baskar, the Ld.counsel f .....

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..... f profit to other nation. Thereafter the Assessing Officer shall decide the issue afresh in accordance with law after giving a reasonable opportunity to the assessee. 31. The next issue arises for consideration is with regard to addition of ₹ 4.35 Crores. 32. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that the assessee has claimed ₹ 4.35 Crores towards management consultancy fees. The Transfer Pricing Officer found that the details of specific services provided by the assessee are not available. The assessee assumed margin of 15% on the cost and computed the arm's length price. The Transfer Pricing Officer found that the method of computation of arm's length price by the assessee was not correct. According to the Ld. Sr. Standing Counsel, in terms of property, plant and equipment used, the value of the asset is almost eight times that of the comparable company. The inventory of four times that of the comparable company was not taken into consideration by the TPO and the Assessing Officer. According to Ld. Sr. Standing Counsel, considering the proportion of the comparable companies, business size, the value of the asset, it was .....

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..... re the CIT(Appeals) that the TPO arbitrarily estimated the fee at ₹ 8.70 Crores instead of ₹ 4.35 Crores. The assessee appears to have adopted cost plus method for computing arm's length price in respect of management consultancy charges. From the tabular column available at page 69 of the order of the CIT(Appeals), it appears the business size of CMT is almost twice that of TCM. Moreover, in terms of property, plant, equipment, value of the asset, CMT is almost eight times bigger than that of TCM. Therefore, the Transfer Pricing Officer assumed that the assessee-company should have received double the amount towards management consultancy fee from TCM and CMT. 35. We have carefully gone through the provisions of Rule 10C of Income-tax Rules, 1962. For the purpose of determining the most appropriate method, the Transfer Pricing Officer has to identify the nature and class of international transaction. Apart from that, the degree of comparability between international transaction and uncontrolled transaction between the enterprises entered into such transaction has to be identified. In the case before us, the Transfer Pricing Officer has not compared the third par .....

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..... assessee. 38. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee has produced details of consultancy services provided by M/s Twin Star Holdings Ltd., Mauritius along with copy of agreement before the Assessing Officer as well as the Transfer Pricing Officer. The assessee has also explained the nature of consultancy charges paid. However, the Transfer Pricing Officer ignoring the explanation offered by the assessee, arbitrarily decided and observed that M/s Twin Star Holdings Ltd. lacked resource for providing management consultancy to the assessee-company, thereafter determined economic cost of funds paid to M/s Twin Star Holdings Ltd. According to the Ld. counsel, the payment of ₹ 30.50 lakhs to M/s Twin Star Holdings Ltd. was made out of commercial expediency and the assessee-company greatly benefited out of the payment since the holding company was listed in UK Stock Exchanges. 39. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee has paid management consultancy fees to M/s Twin Star Holdings Ltd., Mauritius. From the material available o .....

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..... leting the addition made by the Assessing Officer. 42. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that admittedly the assessee is engaged in the business of manufacturing of copper, zinc and aluminium. The investment made by the assessee in Balco was part of its business expansion all over the world. The investment made by the assessee in Balco cannot be equated with ordinary investment made by ordinary shareholder to earn capital gain or exempted income. The investment was made by the assessee in order to diversification in the non-ferrous metal sector. Therefore, the interest, if any, paid by the assessee has to be allowed under Section 36(1)(iii) of the Act. Since the investment was made in the course of business, there cannot be any disallowance towards interest on borrowed funds. The Ld.counsel further submitted that the income earned from the investment in Balco is business income. The investment made in Balco was for running business of the assessee in a profitable manner. Therefore, according to the Ld. counsel, the disallowance made by the Assessing Officer was rightly deleted by the CIT(Appeals). 43. We have considered the rival subm .....

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..... her side and perused the relevant material available on record. As rightly submitted by the Ld. Counsel for the assessee, the issue was considered by the Madras High Court in SCM Creations (supra). The Madras High Court by following the judgment of Madhya Pradesh High Court in J.P. Tobacco Products Pvt. Ltd. v. CIT (1998) 229 ITR 123 and the judgments of various High Courts, found that the deduction allowed under Section 80-IA of the Act need not be reduced while computing relief under Section 80HHC of the Act. In view of this judgment of Madras High Court, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 47. Now coming to Revenue s appeal in I.T.A. No.318/Mds/2008 for assessment year 2004-05, the only issue arises for consideration is with regard to levy of penalty under Section 271G of the Act. 48. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that the assessee has failed to furnish the information in respect of international transaction under Section 92D(3) of the Act. Referring to Section 92D(3) of the Act, the Ld. Sr. Standing Counsel submitted that every person who e .....

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..... icer. 50. We have considered the rival submissions on either side and perused the relevant material available on record. The main reason on which the penalty was deleted was that the CIT(Appeals) deleted the adjustment made by the Transfer Pricing Officer in respect of management consultancy service said to be provided by the assessee to TCM and CMT. While considering the appeal of the Revenue in respect of the quantum addition, this Tribunal remitted back the matter to the file of the Assessing Officer for reconsideration with a direction to bring on record the actual services said to be rendered by the assessee to CMT and TCM. 51. We have carefully gone through the order of the CIT(Appeals). The Assessing Officer referring to the observation made by the Transfer Pricing Officer, more particularly page 27 of his order, found that the assessee has failed to furnish information and documents regarding the expenses said to be incurred by providing management consultancy services to CMT and TCM. To ascertain the nature of service rendered by the assessee to CMT and TCM, the matter was remitted back to the file of the Assessing Officer, this Tribunal is of the considered opinion .....

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..... e Ld. counsel, the CIT(Appeals) has rightly allowed the claim of the assessee. 55. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee has used the power for captive consumption and claimed deduction under Section 80-IA of the Act. This Tribunal in Mohan Breweries Distilleries Ltd. (supra) examined this issue elaborately and found that even though the power was generated for captive consumption, the assessee was eligible for deduction under Section 80-IA of the Act. A similar view was taken by Mumbai Bench of this Tribunal as well. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee. Hence, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 56. Now coming to disallowance of ₹ 1 Crore donated to Tsunami Relief Fund of Rajiv Gandhi Relief and National Welfare Trust. 57. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that the payment made by the assessee to Tsunami Relief Fund is not for business purpos .....

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..... the assessee is not in contravention of any law. It is for the welfare of the people. It is common knowledge that the State of Tamil Nadu was very badly affected due to Tsunami and several lakhs of people were made homeless. The assessee is doing business in the State of Tamil Nadu, more particularly in the district of Tuticorin, therefore, there is an obligation on the part of the assessee to give donation to the rehabilitation work so that the assessee can carry on its business activity in a peaceful atmosphere. Therefore, even though technically speaking, the donation is not for earning any business income, it would definitely mitigate the difficulties suffered by the local people who are affected by Tsunami. Therefore, as found by the Madras High Court in Cholan Roadways Corporation Ltd. (supra) and Velumanickam Lodge (supra), the CIT(Appeals) has rightly allowed the claim of the assessee. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 61. The next ground of appeal is with regard to disallowance under Section 14A of the Act. 62. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, s .....

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..... 377; 10.99 Crores. 66. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that the income of the assessee has to be computed in accordance with method of accounting regularly followed by the assessee. The assessee can also change the method of accounting, in case adoption of different accounting policy was required to determine the correct taxable income. The assessee adopted prudent accounting policy on mark to market basis. In fact, the liability of the assessee to pay on account of MTM copper concentrate goes up substantially in view of increase in the prices of copper concentrate and fluctuation in foreign currency. The increase in price was not accounted. Therefore, the accounts of the assessee would not reflect the true and fair view as per Accounting Standard - 1 prescribed by the Institute of Chartered Accountants of India. In order to determine the correct taxable income, the assessee has changed the accounting policy. In fact, the assessee knowing fairly well that the liability to pay towards purchase of copper concentrate has gone up substantially, bonafidely changed the method of accounting. Therefore, the CIT(Appeals) found that the method o .....

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..... al is with regard to addition of ₹ 11.08 Crores on account of depreciation on bogus steel purchases and capitalization of foreign exchange fluctuation. 69. We have heard Ld. Sr. Standing Counsel for the Revenue and the Ld.counsel for the assessee. The only contention of the Ld.counsel for the assessee is that in the block assessment, the order of the Assessing Officer was set aside on the ground that it was barred by limitation. This issue was examined by this Tribunal in in the case of assessee in I.T.A. No.718/Mds/2011 I.T.A. No.1008/Mds/2011 and by order dated 23.09.2016, the very same issue was remitted back to the file of the Assessing Officer for reconsideration. For the reason stated in the order dated 23.09.2016 in the assessee's own case, on identical circumstances, this issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh and thereafter decide as indicated in the order of this Tribunal dated 23.09.2016. 70. The next ground of appeal is with regard to addition of ₹ 4,00,099/- towards prior period expenses. 71. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted t .....

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..... o pay compensation by the assessee and the year in which the liability was crystallized and thereafter decide in accordance with law after giving a reasonable opportunity to the assessee. 74. In the result, this appeal of the Revenue is partly allowed. 75. Now coming to assessment year 2006-07 in I.T.A. No. 1386/Mds/2010 filed by the assessee, the first ground of the appeal is with regard to deduction claimed by the assessee under Section 80-IB of the Act. 76. Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee claimed deduction under Section 80-IB of the Act in respect of Chinchpada and Rakholi units for 8th and 7th year respectively. The Ld.counsel submitted that the CIT(Appeals) confirmed the order of the Assessing Officer on the ground that the claim is for 7th or 8th year, the deduction claimed by the assessee is only at 30%, therefore, the CIT(Appeals) found that the issue becomes infructuous. According to the Ld. counsel, the claim made by the assessee in respect of Chinchpada and Rakholi units was for 8th and 9th year respectively, therefore, the Assessing Officer is not justified. 77. We have heard Shri M. Swaminathan, Ld. Sr. Standing .....

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..... resentative Office fees, the CIT(Appeals) himself found that the said fees is not chargeable to tax in India. Accordingly, it was found that no TDS is required to be made. However, in respect of management consultancy fees, the CIT(Appeals) found that Vedanta Resources Plc, UK company agreed to provide services. Referring to Article 13 of Double Taxation Avoidance Agreement between India and UK, it was found that the foreign company has deputed the skilled employees to India and the assessee-company availed their services. Therefore, the CIT(Appeals) found that the assesseeITA Nos.318,319 86/08 company utilised the services in Indian soil. Therefore, the transaction between the assessee and the UK company has to be treated as technical services in terms of Section 9(1)(vii) of the Act as well as Article 13 of Double Taxation Avoidance Agreement between India and UK. Therefore, according to the Ld. Sr. Standing Counsel, the CIT(Appeals) found that the assessee is liable to deduct tax. 82. We have considered the rival submissions on either side and perused the relevant material available on record. The assessee has paid management consultancy fees and Representative Office fees .....

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..... the lower authority and accordingly the same is confirmed. 92. The next ground of appeal relates to deduction claim of the assessee under Section 80GGB of the Act. 93. We have heard Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue and Shri G. Baskar, the Ld. counsel for the assessee. The deduction claimed by the assessee under Section 80GGB of the Act was examined by this Tribunal in the earlier part of this order for assessment year 2004-05. After referring to the amendment carried out by the Parliament by Finance (No.2) Act, 2009 with effect from 01.04.2010, this Tribunal found that the contribution made by the assessee was to M/s Public Political Awareness Trust and not to any political party. Accordingly, this Tribunal found that the CIT(Appeals) is not justified in allowing the claim of the assessee. This Tribunal has also found that the judgment of Madras High Court in Cheran Engineering Corporation (supra) was in respect of the claim made by the assessee under Section 37 of the Act, therefore, the said judgment is not applicable to the facts of the case. In view of the above, the order of the CIT(Appeals) is set aside and that of the Assessing Officer is .....

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..... 8), the Ld. Sr. Standing Counsel submitted that the profit or gain of the assessee must be derived from actual conduct of the business. A mere commercial connection between income and industrial undertaking would not be sufficient for the purpose of allowing deduction under Section 80-IB of the Act. If the income of the assessee is part and parcel of manufacturing activity, there is no need for the assessee to disclose income from other sources. Since the income was admittedly derived from other sources other than the manufacturing process, the assessee cannot say that it was derived from eligible industrial undertaking. Therefore, according to the Ld. Sr. Standing Counsel, the CIT(Appeals) is not justified in allowing the claim of the assessee. 100. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that the income which was shown as other income, was from sale of raw material, unclaimed liabilities written back, interest received from customers, interest on employee loans, etc. These incomes are inextricably connected with business of the assessee, therefore, it has to be construed that the same was derived from industrial undertaking. Referring to the .....

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..... oreign exchange fluctuation was due to sale of finished goods or raw material. No material is available on record to suggest that the foreign exchange fluctuation was due to sale of finished goods on export. Therefore, this Tribunal is of the considered opinion that the matter needs to be verified by the Assessing Officer. 102. Now coming to unclaimed liabilities written back, the unclaimed liabilities relate to earlier assessment year, due to unclaimed liabilities of the earlier year, the same were written back in the books of account and treated as income of the assessee. This Tribunal is of the considered opinion that deduction under Section 80-IB of the Act is only in respect of current profit. The profit written back in the books of account as unclaimed of the earlier year cannot be construed as profit of current year, therefore, by including the unclaimed liabilities written back in the books of account, the assessee cannot inflate the eligible profit for the purpose of deduction under Section 80-IB of the Act. 103. Now coming to the interest received from customers, it is not known whether the interest was received on sale of finished goods or interest was received on .....

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..... ction 195 of the Act at the time of making payment. 107. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that admittedly the assessee has paid USD 20 lakhs towards representative office fees. Referring to Article 13 of Double Taxation Avoidance Agreement between UK and India, the Ld.counsel submitted that representative office fees is not liable to tax in India. Since no tax is to be levied in respect of payment made to UK company in India, according to the Ld. counsel, the assessee need not deduct tax, therefore, there cannot be any disallowance under Section 40(a)(ia) of the Act. 108. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee-company nominated M/s Vedanta Resources Plc, a UK company to represent it in London. The assessee-company availed the services of M/s Vedanta Resources Plc to expand its business operation and interact with its consultant in London. The UK company appears to have not made available any technical knowledge to the assessee-company. The UK company rendered its services only in London Metal Exchange for the purpose of expanding its busi .....

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