TMI Blog2016 (7) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... e collection of receipt of ₹ 100 from debenture-holders was not contingent upon the happening of any event in future. The company's obligation to pay ₹ 105 against receipt of ₹ 100 was certain in praesenti and known at the time when the debentures were issued and was to be payable in ordinary circumstances. It was only for the company to avoid payment of such liability if it decides to repurchase the debentures earlier. Such repayment prior to the due date, was contingent on exercise of option. It would not make the liability, which is certain in praesenti, to be contingent merely because on happening of a certain event, which could be avoided. In view of the aforesaid, the Tribunal was in error in con firming the order of the Assessing Officer of disallowing the expenditure towards redemption premium payable to the debenture-holders. Conse quently, we answer question No. (B) in favour of the assessee Disallowance of interest expenditure - Held that:- Commissioner of Income-tax (Appeals) correctly deleted the disallowance by following the decision of this court in the case of Deputy CIT v. Core Healthcare Ltd. reported in [2001 (4) TMI 46 - GUJARAT High Court] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), in I. T. A. No. 1141/Ahd/1999 raising the following questions of law for our determination : (A) Whether the Appellate Tribunal was right in law and on facts in holding that for the purpose of computing deduction under sec tions 80HH and 80-I, deductions under section 35(1)(iv) are not to be deducted ? (B) Whether the Appellate Tribunal was right in law and on facts in deleting the disallowance of redemption premium amounting to ₹ 2,00,000 payable to debenture-holders ? 2.1 Tax Appeal No. 957 of 2007 also arises out of the common order dated December 29, 2006 passed by the Tribunal in I. T. A. No. 856/Ahd/1999 raising the following questions of law for our determination : (1) Whether the Appellate Tribunal was right in law and on facts in holding that for the purpose of computing deduction under sec tions 80HHC and 80-I, deductions under section 35(1)(iv) are not to be deducted ? (2) Whether the Appellate Tribunal was right in law and on facts in holding that deduction for the use of technical know-how is allow able under section 37 and deduction for the acquisition of technical know-how is allowable under section 35AB of the Act ? 3. Tax App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax (Appeals) in deleting the disallowance of ₹ 61,79,000 being interest on funds utilised for non-business advances ? (D) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax (Appeals) in directing to allow deduction under section 80HH of the Income-tax Act, 1961 ? (E) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax (Appeals) in holding that for computation of deduction under section 80HHC only net interest receipts should be excluded ? 5. The assessee herein is a part of the Torrent group and is engaged in the manufacture and sale of pharmaceutical products. Its factories are situated in Ahmedabad and Mehsana Districts. The products of the assessee-company are also exported through its sister concern, viz., Torrent Exports Ltd. and Ruainde Pharmaceuticals Ltd. For the purpose of this judgment, T.A. No. 956 of 2007 is taken as the lead matter. 6. The assessee filed its return of income on November 30, 1995 for the assessment year 1995-96 declaring total income of ₹ 12,40,87,170. The said return was proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of gross income by reducing expenditure which has been incurred for the eligible undertaking out of the gross income derived from the industrial undertaking. In view of the aforesaid, question No. (A) is answered in favour of the assessee and against the Revenue. 9. As regards question No. (B), it transpires that the assessee-company had issued 2,00,000 and 1,20,000 secured redeemable non-convertible debentures on March 29, 1991 and April 10, 1991 respectively. On the face value of the debentures, the assessee was required to pay ₹ 5 to the investor at the time of redemption of the debenture amount. 9.1 It is pertinent to note that in the accounting period relevant to the assessment years 1991-92 and 1992-93, the assessee had not debited the aforesaid amount in the books of account. Before the Assessing Officer, the assessee claimed that the amount payable at the time of redemption by way of premium was deductible proportionately in each of the years during the life of the debenture and accordingly, claimed deduction of ₹ 2,00,000 for the year under consideration being 1/8th of the redemption premium payable of ₹ 16 lakhs. However, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal and accordingly, keep the issue open for adjudication by the Assessing Officer. Accordingly, the issue is remitted to the file of the Assessing Officer for consideration afresh on the merits. Consequently, question No. (2) remains unanswered and is kept open for adjudication by the Assessing Officer. Tax Appeal No. 2231 of 2009 : 12. In this appeal, the sole question relates to deduction under section 80HH of the Act. The Assessing Officer did not allow deduction under section 80HH in view of the assessment orders for the assessment years 1991- 92 to 1996-97. Alternatively, the Assessing Officer recorded a finding that subsequently, even if the claim is held to be allowable, it should be restricted to the following : (i) Job charges would not form part of the manufacturing activities ; and (ii) Deduction under section 80HH is to be allowed after reducing deduction under section 35(2AB) and 35(1) of the Act. The Commissioner of Income-tax (Appeals) deleted the addition relating to the issue of job charges and sustained the order relating to the other issue, which was confirmed by the Tribunal. While entertaining the appeal, the Tribunal followed its earlier decision pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses. 15.1 However, after considering the records, the Tribunal found that advance had been given for the purpose of business. It appears from the record that the assessee had earned income during the year to the extent of ₹ 36 crores. The assessee had submitted evidence to prove that it was having interest-free funds to the extent of ₹ 225.83 crores with it. How ever, the said fact was not appreciated by the Assessing Officer. Nothing was on record to prove that the borrowed funds had been diverted by the assessee for making advances to M/s. Baldevbhai Dosabhai group. Hence, we answer the question in favour of the assessee and against the Revenue. 16. In so far as question No. (D) is concerned, we have already answered it in Tax Appeal No. 2231 of 2009, as discussed hereinabove. Hence, this issue will be governed by the decision rendered in Tax Appeal No. 2231 of 2009. Consequently, the question is answered in favour of the assessee and against the Revenue. 17. As regards question No. (E), the same is covered by the decision of the apex court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012] 343 ITR 89 (SC) wherein, it has been held that nine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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