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2018 (4) TMI 1065

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..... ided in favour of assessee Carry forward of unabsorbed loss and unabsorbed depreciation on the basis of value as per records - Held that:- The assessee took the value of brand at ₹ 500.00 crores which was reduced by the AO at ₹ 53 crores. This has given rise to different valuation for unabsorbed depreciation and unabsorbed loss. If this value has been accepted then again figure of unabsorbed depreciation and loss would change. CIT(A) has rightly directed the AO for re-computation of unabsorbed depreciation and loss for carry forward. It is pertinent to observe that as and when this figure and any other figure or other would change on the basis of order giving effect of higher authorities consequential effect would be given. Addition added by the AO on account of notional interest income considered as accrued from investment - Held that:- We find that the Tribunal in the assessee’s own case has followed the finding of the ITAT in the case of Kulgam Holdings P.Ltd.(2013 (7) TMI 31 - ITAT AHMEDABAD). The Tribunal in that case has observed that OFCPN have their maturity dates, and option as given to the assessee either to purchase shares by surrendering OFCPN or get .....

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..... he Companies Act; whereas the accounts are prepared accordingly and if profits are computed, the accounts are audited and approved in the Board of Directors’ meeting, then the AO has no power to make adjustment. Reducing eligible profit of Moraiya Division for grant of deduction under section 80IA - Held that:- The assessee has pointed out that its profit for the last two years was ₹ 2791.97 lakhs and ₹ 1779.89 lakhs. Fixed assets of this division is of ₹ 3195.28 lakhs, as against fixed assets of the company at ₹ 2125.30 crores. The DDBs were issued by the company for raising capital. It is to be seen whether this capital was being used for the purpose of acquiring assets in this division. Assessee pointed out that fixed assets of this division is of ₹ 3195.28 lakhs (roughly ₹ 31 crores), as against aggregated fixed assets of the company at ₹ 2125.30 lakhs. Similarly profit for the last two years in the Moraiya Division was ₹ 27.91 crores and ₹ 17.79 crores. These two years profit would easily take care of any fund required at this undertaking. Thus, the ld.Revenue authorities have failed to point out deployment of any intere .....

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..... ainst order of the ld.CIT(A)-II, dated 4.11.2009 passed in the Asstt.Year 2003-04. This appeal has arisen out of penalty proceedings imposed under section 271(1)(c) of the Income Tax Act. In the case of Nirma Industries, Revenue alone is in appeal against order of ld.CIT(A)-XI, Ahmedabad dated 10.3.2014 passed for Asstt.Year 2003-04. 2. As far as cross objection of the assessee in the case of Nirma Ltd., ld. counsel for assessee did not press the CO on the ground that grounds taken in the CO have already been taken in the appeal filed by the assessee. Accordingly, CO No.202/Ahd/2013 is dismissed. 3. Now we take up Revenue s appeal in ITA NO.177/Ahd/2010. 4. The grievance of the Revenue is that the ld.CIT(A) has erred in law and on facts in cancelling penalty of ₹ 9,43,48,749/- imposed by the AO under section 271(1)(c) of the Act. 5. Brief facts of the case are that the assessee has filed its return of income on 1.12.2003 declaring total income of ₹ 98,69,75,310/-. An assessment order was passed under section 143(3) on 24.3.2006 at a total income of ₹ 2,55,31,93,621/-. The major addition made by AO relates to disallowance of interest expenses pertaining .....

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..... esent case and restore the case back to his file to decide the same in accordance with law after giving assessee an opportunity of being heard. 5. Since we have set aside the order back to the file of the CIT(A) as discussed in the foregoing paragraph, the other grounds on merit are not adjudicated. 7. We have duly considered rival contentions and gone through the record carefully. We find that sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable by him, which shall not be less than, but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income and furnishing of inaccurate particulars of income. In other words, the quantification of the penalty is depended upon the addition made to the income of the assessee. In the present, quantum addition on which penalty has been imposed was challenged before the Tribunal and the Tribunal vide order dated 18.3.2008 (supra) set aside all issues and restored to the file of ld.CIT(A) for fresh adjudication. Same is now adjudicated by the ld.CIT(A). Th .....

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..... the disallowance. 12. The ld.counsel for the assessee submitted that the issue in dispute is squarely covered in favour of the assessee by the order of the ITAT passed in Asstt.Year 2001-02 in the assessee s appeal bearing ITA No.386/Ahd/2010, and the Revenue s appeal in ITA No.658/Ahd/2010. Copy of order of the Tribunal has been placed at page no.27 to 38 of the paper book. He drew our attention towards page no.34 of the paper book wherein the Tribunal has made discussion on this issue. The ld.DR was unable to controvert this contention of the ld.counsel for the assessee. 13. On due consideration of the above, we find that the Tribunal has made detailed analysis in the Asstt.Year 2001-02. Discussion made by the Tribunal on the issue reads as under: 3.3 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgements cited by both the sides. First of all, we reproduce the provisions of Section 43(1) and its Explanation (3) which are as under: 43. In sections 28 to 41 and in this section, unless the context otherwise requires- ( 1) actual cost means the actual cost5 of th .....

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..... ving regard to all the circumstances of the case. 3.4 We find that in the present case, the entire case of the A.O. is based on Explanation (3) to Section 43(1) as reproduced above. As per this explanation, we are of the considered opinion that the A.O. can determine the original cost of the assets for allowing depreciation to the assessee only if he is satisfied that the main purpose of transfer of such asset, directly or indirectly to the assessee, was the reduction of liability to income tax by claiming extra depreciation with reference to an enhanced cost. It is not sufficient that one of the main purposes was this. Hence, in our humble opinion, this is the first prerequisite that the A.O. has to establish that the main purpose of transfer of such asset was the reduction of liability to income tax by claiming extra depreciation on enhanced cost. In order to establish this, it has to be established that apart from claiming additional deprecation on enhanced cost, there is no other main purpose for acquiring the asset in question. In the present case, the A.O. is only disputing the valuation of intangible asset i.e. the trademark acquired by the assessee from related parti .....

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..... iability of the assessee and he has further stated that the detailed observation in this regard are given in the following paras and thereafter, in para 14.1 to 14.13, the A.O. has discussed about the various valuation reports but there is no mention about any basis on which he is alleging this that main purpose of transfer of this asset was to reduce the tax liability of the assessee. Even if the A.O.'s allegation has some force that some extra price had been paid by the assessee for acquiring this asset, this is not sufficient in order to invoke Exp.(3) to Section 43(1), and the A.O. has to establish that the main purpose of this transfer of asset to the assessee was to reduce tax liability of the assessee and in our considered opinion, the A.O. has miserably failed on this aspect. Even if all the allegations of the A. O. are accepted, in the absence of any allegation supported by cogent material to the effect that business use of the asset in question was not even one of the main purposes, it has to be accepted that business use of the asset was at least one of the main purposes even if not the only main purpose and hence, the allegation of the A.O. that main purpose of tran .....

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..... odwill of the business. The A.O. has totally ignored the terms and conditions for the trademark given to NL and NCCL i.e. Nirma Ltd. and Nirma Chemicals Ltd by NCWL as per which, royalty was payable by these two companies to NCWL @1% for the period from 01.04.1998 to 31.03.2000, @2% during 01.04.2000 to 31.03.2002 and @ 4% from 01.04.2002 onwards. In our considered opinion, for the purpose of valuing the asset, past royalty rate and past income cannot be the guiding factor and the guiding factor has to be the income expected in future from such asset i.e. the royalty in the present case. When the expected royalty is @2% during 01.04.2000 to 31.03.2002 and 4% from 01.04.2002 onwards, for the purpose of valuation of trademark in question, we do not find fault in adopting 4% rate of royalty being agreed rate of Royalty from 01.04.2002 for the purpose of valuation of Trade Mark as has been done by RSM Co., Chartered Accountants. Regarding this allegation of the A.O. that goodwill was not transferred by NCWL to NCCL and NL, we are of the considered opinion that it has no bearing on the valuation of trade mark because we are considering the amount the assessee is paying for the asset a .....

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..... ll or without goodwill. Hence, we have seen that even the valuation done by the A.O. is not proper and therefore, the action of the A.O. is not justified. 14. Respectfully following order of the ITAT in assessee s own case on similar issue, we do not find any merit to interfere in the order of the ld.CIT(A). This ground is rejected. 15. Ground No.2: In this ground, grievance of the Revenue is that the ld.CIT(A) has erred in directing the AO to allow carry forward of unabsorbed loss and unabsorbed depreciation on the basis of value as per records, and after giving effect to various appellate orders, ignoring the fact that related issues have not reached their finality and pending before the Hon ble High Court of Gujarat. 16. With the assistance of the ld.representatives, we have gone through the record carefully. Basically, it is a consequential issue on the basis of re-determination of value of brand and trademarks by the AO. Figures of unabsorbed depreciation and loss have changed in earlier years. In other words, the assessee took the value of brand at ₹ 500.00 crores which was reduced by the AO at ₹ 53 crores. This has given rise to different valuation fo .....

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..... ot. The AO was of the opinion that the assessee has claimed notional interest which is not an ascertained liability, because it has to pay interest on maturity of the bond. Similarly, the assessee has re-purchased certain OFCPN and incurred interest expenditure. The ld.AO disallowed this interest expenditure to the assessee. On appeal, the ld.CIT(A) deleted disallowance by following order of the ITAT in earlier years. Finding recorded by the ld.CIT(A) on this issue reads as under: I have carefully considered the facts of the case, the findings given by the AO and the written arguments submitted by the appellant. The appellant had claimed interest expenses on Deep Discount Bonds on a pro rata basis over the period of borrowing. The AO held that pro rata basis expenses cannot be allowed as the holders have not offered the income on accrual basis. It has been pointed out by the appellant that the issue of expenses of Deep Discount Bonds is decided in its favour by ITAT Ahmedabad in its own case for A Y 2004 - 05 and 2005 - 06. It is noted that the claim of the appellant is correct the Hon'ble ITAT Ahmedabad has decided the issue in ITA number 386 658/AHD/2010 in its own c .....

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..... d the rival submissions and gone through the record. The ITAT has considered this issue vide order dated 13.7.2009 passed in ITA No.3724/Ahd/2008 in the case of Nirma Ltd., and ITA No.3946-47/Ahd/2008 in the case of Nirma Industries for Asstt.year 2004-05 and 2005-06. This order in the assessee s own case on this issue was followed by ITAT in Asstt.Year 2001-02 in ITA No.386/Ahd/2010 and 658/Ahd/2010. This order was passed on 24.1.2013. The finding of ITAT reads as under: 6.2.1 Ld. D.R. supported the assessment order whereas the Ld. A.R. supported the order of Ld. CIT (A). He also submitted that this issue is now covered in favour of the assessee by the Tribunal decision rendered in the case o Nirma Ltd. Vs DCIT and DCIT Vs Nirma Industries Ltd. in I.T.A.No. No. 3725, 3946 and 3947/Ahd/2008 dated 03.07.2009, copy of which is available on pages 120- 181 of the paper book. In particular, our attention was drawn to para 26 of this tribunal decision which is available on page 131 of the paper book. 6.2.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the Tribunal decision cited by the Ld. A.R. We .....

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..... by the order of the ITAT passed in ITA No.1266/Ahd/2006 in the assessee s own case for the Asstt.Year 2002-03. He placed on record copy of the Tribunal s order dated 31.12.2008. The ld.DR on the other hand relied on the order of the AO. 24. We have duly considered rival contentions and gone through the record. We find that the Tribunal in the assessee s own case has followed the finding of the ITAT in the case of Kulgam Holdings P.Ltd., (supra). The Tribunal in that case has observed that OFCPN have their maturity dates, and option as given to the assessee either to purchase shares by surrendering OFCPN or get maturity value. Thus, the Tribunal was of the view that interest income has not materialized in the case of the assessee because if they are redeemed on maturity then gain accursed on such investment will be long term capital gain, and if they are converted into shares then nothing would come to the assessee. Relevant finding of the Tribunal in the case of Kulgam Holdings P.Ltd.. (supra) on this issue reads as under: 2.8.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that adm .....

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..... eriod of five years from the date of allotment. This is also a fact that these debentures are transferable during this period of five years and the company is also eligible to purchase debentures at discount, at par or at premium in the open market or otherwise. Hence, in this earlier period also, even if assessee is not opting for conversion in equity shares, the assessee can sell the debentures in the open market or to the issuer company and it is quite natural that in the open market, such debentures will command such price which will include offer price + proportionate accretion on account of difference in the issue price and face value which can be considered as interest although no such nomenclature is given for this accretion in the issue details. 25. There is no disparity on facts. This order has been followed by the Tribunal in the assessee s own case for the Asstt.Year 2002-03. Thus, respectfully following order of the ITAT we do not find any merit in this ground of appeal, it is rejected. 26. In the result, appeal of the Revenue is dismissed. 27. ITA No.1599/Ahd/2013 Nirma Limited (AY: 2003-04) 28. This is an appeal by the Revenue. In the first ground .....

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..... DDB Series C 4. 5 3,95,53,893 DDB vested into appellant company upon demerger 32. The AO was of the opinion that liability of payment of such interest had not accrued to the assessee because interest on these Deep Discount Bonds was required to be paid at the time of maturity. Hence, in his opinion, it was not ascertained liability and the assessee cannot claim it proportionately in the year in dispute. Accordingly he disallowed it. On appeal, the ld.CIT(A) has deleted disallowance by following orders of the ITAT passed in the case of Nirma Industries. Brief finding of the ld.CIT(A) reads as under: 3.5 Perusal of the Hon'ble ITAT's order reveals that this issue stands covered by the above said order. Hon'ble ITAT had gone into details of the objections raised by the A.O. in the assessment order. Respectfully following the decision of Hon'ble ITAT, I hold that disallowance of interest on DDBs claimed on pro rata basis is untenable. It is further seen that the A.O. made a disallowance of interest on DDBs of ₹ 24,71,32,934/-. On this issue the appellant vide its .....

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..... challenged in further appeal. Considering this stand of the Revenue in subsequent years, we do not find any error in the order of the ld.CIT(A). The ld.CIT(A) has rightly deleted disallowance of ₹ 95,98,355/-. This ground of appeal is rejected. 36. Ground no.3: In this ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in law and on facts in directing the AO not to include Inter Division Transfer while computing total turnover for the purpose of 80HHC. 37. Brief facts of the case are that there was inter-division transfer of goods from one unit to other unit. The stand of the assessee was that it is not a sale therefore, this inter-divisional transfer of goods cannot be taken in total turnover while computing deduction under section 80HHC. This plea of the assessee was not accepted by the AO. However, on appeal, the ld.CIT(A) directed the AO not to take inter-divisional transfer as a part of total turnover. The ld.CIT(A) has given this direction on the basis of ITAT s order passed in ITA No.2280/Ahd/2004 for the Asstt.Year 2002-03 in the assessee s own case. Considering order of the ITAT in the Asstt.Year 1998-99 and 2002-03, we are of the vie .....

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..... s value is to be taken at ₹ 53.43 cores considered by the AO has been disputed in the case of Nirma Industries in the Asstt.Year 2003-04. The ld.AO has made disallowance of ₹ 61.8 crores out of depreciation claimed which was deleted by the ld.CIT(A). This issue has been considered by us in ITA No.1738/Ahd/2014 at para 8 of this order. We have followed order of the ITAT in the Asstt.Year 2001-02 wherein value of intangible assets was upheld at ₹ 500 crores. Thus, following order in the case of Nirma Industries, para-8 of order onwards, we are of the view that the ld.CIT(A) has rightly taken the value of intangible assets at ₹ 500 crores and has rightly allowed depreciation to the assessee. There is no merit in this ground of appeal. It is rejected. 42. Ground No.6: In this ground of appeal grievance of the Revenue is that the ld.CIT(A) has erred in holding that sales-tax incentive was capital receipts and not revenue receipt as held by the AO. 43. The ld.counsel for the assessee at the very outset submitted that this issue was considered in the case of the assessee in earlier years and dispute travelled upto the Hon ble Gujarat High Court in Tax appeal .....

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..... oduced by the AO in this communication reads as under: Our Submissions: Pursuant to the demerger of the operating division of Nirma Industries Ltd. with the company effective from 01-02-03, since the company had acquired, inter alia the Brands and Trade Marks related to which the company had earlier paid Licence Fees to Kisan Industries, as stated in (i) above, so as to hold right to supply 20% of the Sales under the said brand name. Accordingly Upon the acquisition under the demerger, effective from() 1-02-2003. the assessee has acquired the Trade Marks related to which the company has paid Licence fees to hold partial rights, thereby though the right under the Licence Fees (The value of the Licence was related to its right to suppy upto 20% of the Nirma Brand Sales) has existed, the Trade Mark in form of the asset acquired under the demerger has virtually merged with the existing right under the Liceenee Fees with the Trade Mark , the assessee had the Licence in respect of Trade Marks., then it became the owner of the very Trade Marks, in view of this the assessee apparently became the owner of an asset which originally was licenced to it. A man cannot be lice .....

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..... set which originally was licenced to it. A man cannot be licencee of his own property, The Licence which is an inferior right would merge into superior right of ownership, therefore the cost of the licence has to be w/off in the books of accounts. The above exactly clarify the points raised by your good self re. the reasons for w/off etc. We have to further state that, the computation of book profit u/s. I 15.J B is computation based on the Book profit of the assessee as per the Company L.aw, and the accounts as furnished in the revised return of the company are published accounts, as made out giving effect to the directions of the Hon. Gujarat High court, and duly adopted by the General body of the company as per the provisions of the Company Law and there is no scope () f enhancing ( nor disturbing in any way) the said book profit by any amount whatsoever except for the items specified in (a) to (f) of the explanation to sec. 115.JB( I); further please note that there is no provision under the company law which requires the write off of capital expenditure below the line of hook profit. We rely on the decision the Supreme Court in the case of Apollo Tyres vs CIT 255 ITR 2 .....

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..... eal, which does not require any specific finding to be recorded, hence rejected. 54. Ground NO.2: In this ground of appeal, grievance of the assessee is that the ld.CIT(A)has erred in reducing eligible profit of Moraiya Division for grant of deduction under section 80IA of ₹ 1,15,00,957/-. 55. Brief facts of the case are that the assessee has claimed deduction under section 80IA of the Income Tax Act, 1961 on the undertaking of Moraiya Division. The ld.AO has reduced eligible profit of this undertaking. The case of the AO is that the assessee had shown loss of ₹ 46,31,65,493/- in corporate division. Out of which ₹ 44.35 crores loss was with respect to interest expenditure incurred by the assessee on issuance of Deep Discount Bonds ( DDB for short). In other words, the assessee has issued DDB on which it has claimed interest expenditure on accrual basis. The ld.AO disallowed interest expenditure of the assessee to the extent of ₹ 24.71 crores. He worked out net loss of corporate division at ₹ 21.60 crores and by taking this figure he allocated pro rata loss to the Moraiya Division in the ratio of turnover. 56. On appeal, the ld.CIT(A) has obse .....

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..... ks of accounts of Moraiya division. The profit is correctly reflected and eligible for deduction u/s. 80IA of I.T. Act. The loss of corporate division should not be reduced from the profit of this division. b) Profit Loss Account of Corporate division is enclosed herewith.(Annexure - J) Perusal of the same would show that no expenditure is incurred while working of the activities of this division. c) It is submitted that this division at Moraiya earned profit of ₹ 28,92,21,330 during previous year 2002-03 corresponding to Asst. Year 2003-04. This would show that there is surplus of internal accruals. This undertaking would not require finance to run the activities of the unit. Moreover, even during the earlier year, this unit earned a substantial profit. Hence, the accumulated surplus is substantially higher. The profit of the last two years as on 31.03.2002 and 31.03.2001 was ₹ 27,91,97,143 and ₹ 17,78,89,747 respectively. d) It is further submitted that Corporate division incurred interest expenses of net amount of ₹ 46,30,55,511 (interest expenses ₹ 55,17,03,195 - interest income ₹ 8,86,47,684). The interest expenses is inc .....

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..... Less: Relief granted by ITAT - DDEs . (as per prorata calculation) ( 22,75,11,624) Revised loss 44,35,44,183/- Without prejudice to the above, it is humbly submitted that no part of borrowing is invested in the Wind Farm Unit as seen from the Profit and Loss Account and Balance Sheet corresponding to Asst. Years 2003-04 and 2002-03 .The statement of depreciation allowable u/s.32 of I.T. Act shows that there is no addition to fixed assets. Copies of the return of income, depreciation statement and profit and loss account for Asst. Year 2002-03 and 2003-04 are enclosed marked as Annexure-C. Moreover, the total revenues were generated from captive consumption. It shows that there is no fund invested in Wind Farm Division. Hence no portion of interest expenses debited in the corporate division is allocated to Wind Farm Division . 57. On the strength of the above submissions, he contended that eligible profit of Moraiya Division need not to be reduced. On the other hand, the ld.DR relied upon the order of the ld.CIT(A). She contended that the ld.CIT(A) has gone through all the details, and .....

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..... ; 2125.30 lakhs. Similarly profit for the last two years in the Moraiya Division was ₹ 27.91 crores and ₹ 17.79 crores. These two years profit would easily take care of any fund required at this undertaking. Thus, the ld.Revenue authorities have failed to point out deployment of any interest bearing funds for which interest expenditure has been incurred at the corporate division of this unit. In that case, it is not advisable to reduce eligible profit in the ratio of turnover. We allow this ground of appeal and delete disallowance. 59. Ground No.3: In this ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in excluding 90% of the gross interest income from eligible profit for the purpose of deduction under section 80HHC. The ld.counsel for the assessee at the very outset submitted that this issue travelled to the Hon ble jurisdictional High Court in the assessee s own case. He placed on record copy of the Hon ble High Court s decision in Tax Appeal No.423 of 2007. The Hon ble High Court has held that only net interest income is to be excluded for the purpose of deduction under section 80HHC. The question framed by the Hon ble High Court reads .....

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..... his appeal is presently answered in favour of the assessee in view of decision of this Court in Tax Appeal No.763 of 2009 subject to the final outcome of the aforesaid appeal pending before the Hon ble Apex Court which shall be binding to the assessee and the AO will give effect accordingly. 65. Taking into consideration this aspect, we remit this issue to the file of the AO for re-adjudication in accordance with law. 66. Ground No.5: It reads as under: 5. In law and in facts and circumstances of the Appellant company's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in holding that following incomes should be reduced for the purpose of deduction u/s.80HHC of I.T. Act. a) Job Work Income ₹ 2,30,289 b) Exchange Rate Difference ₹ 1,11,69,348 c) Profit on sale of assets ₹ 25,16,962 d) Misc. expenses Rs.4,44,26,137 e) Dividend Income ₹ 2,14,275 .....

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..... ities of the assessee, hence, the ld.CIT(A) has rightly disallowed the claim of the assessee. 70. With regard to profit on sale of asset is concerned, the ld.counsel for the assessee contended that the assessee itself has not included this amount in the eligible profit for grant of deduction under section 80HHC. We remit this issue to the file of the AO for verification and re-adjudication. If the assessee itself has excluded this amount, then it should not be again excluded otherwise that will be double exclusion. Similarly, dividend income has not been included by the assessee. The ld.AO shall verify this aspect also, and if it is found that the dividend income has not been included by the assessee in the eligible profit, then it should not be excluded again. 71. As far as misc. income is concerned, the ld.CIT(A) has duly noticed its break up and thereafter disallowed the same. The finding of the ld.CIT(A) reads as under: 7.18.7 Misc. income ₹ 4,44,26,137/- The appellant has claimed deduction u/s.80HHC on Misc. income of ₹ 4,44,26,137/-. The details of miscellaneous incomes are given as under:- Particulars Am .....

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..... nsit, then such receipt could be considered as derived from export of articles. It can be understood by way of following example; viz. an assessee is engaged in manufacture and export of sea-foods. It has exported frozen sea-food. On account of some mishaps, due to electricity failure, fishes got damaged/decayed in transit and the assessee received claim. This claim would be construed as derived from export activities. On the other hand, a claim has been received by an assessee on account of some damage to the plant machinery, then that would not qualify for consideration for grant of deduction under section 80HHC. Neither the AO, nor the ld.CIT(A) has determined nature of insurance claim in the impugned order. Therefore, we deem it appropriate to set aside this limited issue to the file of AO. The ld.AO first determine the nature of insurance claim in the light of the above discussion, and then decide its inclusion or exclusion from eligible profit for grant of deduction under section 80HHC. As far as other items are concerned, we do not find any error in the order of the ld.CIT(A). This ground of appeal is partly allowed. 73. Ground No.6: The issue involved in this appeal is .....

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..... en down value has to be taken as per the meaning or definition given in the Act. Even before the omission of terms as appearing in the books of account , the emphasis of the legislature in Explanation 2B, in our humble opinion, is the written down value of the transferred asset. The omission of these words as appearing in the books of account with effect from 1-4-2004, in our humble opinion, is curative and thus retroactive. Hence, we uphold the findings of the demerged company shall constitute the written down value of the block of assets of the resulting company. 10.8 The above discussion makes it very clear that the amendment made by Finance Act, 2003, in the explanation 2B to section 43(6) of the IT.Act is curative in nature and thus the same is retroactive. Taking into account the provisions of section 2(19AA), 49(2C), 49(2D), 72A and explanation 2A 2B of section 43(6), the Hon'ble ITAT had held that the Tax written down value of the transferred assets of the demerged company shall constitute the written down value of the block of assets of the resulting company. This case pertains to A.Y.2002-03 and is very relevant for the case in hand as the assessment year .....

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