9911796707
TMI Blog2016 (10) TMI 1271X X X X Extracts X X X X X X X X Extracts X X X X ..... d 29.12.2006; wherein the income of the assessee was determined at R. 11,35,58,715/- under the normal provisions of the Act and 'Book Profits' under section 115JB of the Act were computed at Rs. 10,94,92,680/- due to certain additions/disallowances. 2.2 Aggrieved by the order of assessment dated 29.12.2006 for ay 2004- 05, the assessee preferred an appeal before the CIT(A)-I, Mumbai who disposed off the appeal vide the impugned order dated 24.12.2008 allowing the assessee partial relief. 3. Presently, both Revenue and the assessee being aggrieved by the order of the CIT(A)-1, Mumbai dated 24.12.2008 for A.Y. 2004-05, have preferred appeals which are being disposed off hereunder. Assessee's appeal in ITA No. 1382/Mum/2009 4. In this appeal, the assessee has raised the following grounds: - "GROUND I: Application of Rule 80 of the Income Tax Rules, 1962 ("the Rules") 1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in directing the AO to compute disallowance of interest and other expenditures u/s. 14A by applying Rule 80 of the Rules. 2. The Appellant most humbly prays that it be held that in view of the provisions of the section 295(4) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (baa) as "any other receipt of the similar nature included in such profits". 2. The Appellant prays that it be held that the said items are related to business operations and are not in the nature as envisaged under explanation (baa). With out prejudice to Ground VI above : GROUND VII Not allowing to set off the incentives against the profits 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of rejecting Appellant's claim of getting deduction u/s. 80HHC in respect of sale of Duty Entitlement Pass Book ("DEPB") Licence and Duty Draw back amounting to Rs. 48585160/- 2. The Appellant prays that it be held that the Appellant is entitled to the deduction u/s. 80HHC. 3. Without prejudice if the act of CIT(A) is upheld, the AO be directed to exclude only the profit on transfer of DEPB and not the entire DEPB receipts. GROUND VIII The Appellant craves leave to add, to alter and/or to amend all or any of the foregoing grounds of appeal." 5. Ground No. I & II - Disallowance under section 14 r.w. Rule 8D 5.1 In ground No. 1, the assessee contends that the learned CIT(A) erred in directing the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee challenges the impugned order of the learned CIT(A) in confirming the AO's action in disallowing non-compete fee paid to ex-directors. 6.2 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. We find that this issue has been held in favour of Revenue and against the assessee in the decisions of the Coordinate Bench of the Tribunal in the assessee's own case for A.Y. 2003-04 in ITA No. 6721/Mum/2007 dated 10.08.2016, following the decision of another Coordinate Bench in the assessee's own case for A.Y. 2002-03 in ITA No. 6720/Mum/2007 dated 12.06.2013. In its order for A.Y. 2003-04 (supra), to which both of us are party, at para 6 thereof it was held us under: - "6. We have heard the rival submissions, perused the materials on record and carefully gone through the orders of the Revenue authorities. On perusal of the records, it is found that this issue has been decided against the assessee by the Co-ordinate 'F' Bench of ITAT Mumbai vide order dated 12th June, 2013 for assessment year 2002-03, the relevant portion of which reads as under:- "9. Ground No.2 is about disallowance of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see assails the impugned order of the learned CIT(A) in confirming the action of the AO of excluding incentives and other items of miscellaneous income while computing the disallowance under section 80HHC on the ground that they are covered under Explanation (baa) to section 80HHC of the Act. The learned counsel for the assessee submitted that the very same issue raised by the assessee before a Coordinate Bench of the Tribunal for A.Y. 2003-04 was set aside and restored to the file of the AO in its order in ITA No. 6721/Mum/2007 dated 10.08.2016. 9.2 After hearing both parties in the matter, we have carefully considered the material on record; including the judicial decision cited. We find that as contended by the assessee, the very same issue was raised before a Coordinate Bench of this Tribunal in the assessee's own case for A.Y. 2003-04 (supra). It is seen from a perusal of the orders of the authorities below that the AO, as in A.Y. 2003-04, in this year also, has not examined the issue in detail before disallowing the assessee's claim. On appeal also, the learned CIT(A) has rejected the assessee's claim and confirmed the AO's action holding that there was no direct nexus betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t off of incentives against profits. The assessee claimed set off of miscellaneous income for an amount of Rs. 8,39,51,299/-. However, the AO treated the above amount as sundry creditors and hence are not eligible for deduction u/s 80 HHC and has to be reduced to 90%. Further, the AO also held that this amount includes the sale of DEPB licence of Rs. 2,68,47,494/- and duty draw back of Rs. 1,32,91,296/- and as such these have no direct nexus with the export activity of the assessee company and is not eligible for deduction. While the assessee carried the matter in appeal, the learned CIT (A) has also held that the turnover of the appellant is more than Rs. 10 crores and hence, the assessee is not eligible for deduction as claimed by the assessee in view of the amended provisions of the Act and accordingly, the learned CIT (A) rejected the claim of the assessee. Hence, the assessee is in appeal before the Tribunal. 13. At the time of hearing, the learned AR for the assessee drew our out attention to page 94 of the paper book wherein the details of working of deduction u/s 80 HHC of the Act have been given. Further, the learned AR by relying on the decisions in the case of (i) Ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g unutilized MODVAT credit. 2. Whether on the facts and circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to adopt the net interest for the purpose of deduction u/s 80HHC. 3. Whether on the facts and circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to deduct 90% of the net service income only after adjustment of expenses, if any for the purpose of deduction u/s 80HHC. 4. Whether on the facts and circumstances of the case and in law, the CIT(A) erred in allowing the assessee's ground of appeal relating to addition of provisions for doubtful debts and advances and provisions for diminution in the value of investment while computing the tax liability u/s.115JB of the Act. 5. The appellant craves leave to add to, amend or withdraw the aforesaid ground of appeal." 14. Ground No. 1 - Addition of unutilized Modvat Credit to closing stock 14.1 In this ground, Revenue contends that the learned CIT(A) erred in deleting the addition of Rs. 59,31,477/- made by the AO to the closing stock on account of unutilized MODVAT credit. 14.2 The learned A.R. submits that the same issue has been considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2000-01, on this issue, it was held that the appellant had added back Rs. 53,38,796 as per provisions of section 145A of the Act and this amount as added by the assessing officer is not of unutilised Modvat but it was the amount of deposit made by the appellant with the excise authorities. Therefore, there was no reason for making this disallowance by the assessing officer hence this addition is deleted." 38. In our view, the issue has been rightly decided by the learned CIT(A) and the valuation of closing stock is already in consonance with section 145A. His order is, therefore, confirmed on this issue." Following the aforesaid decision of Coordinate Bench of this Tribunal in the assessee's own case for A.Y. 2001-02, we uphold the decision of the learned CIT(A) in directing the AO to delete the addition made in the closing stock towards unutilized Modvat credit. Consequently, ground No. 1 of Revenue's appeal is dismissed. 15. Ground No. 2 - Deduction under section 80HHC and net interest 15.1 In this ground, Revenue assails the order of the learned CIT(A) in directing the AO to adopt the net interest for the purpose of computation of deduction under section 80HHC of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. vs. CIT (2012) 343 ITR 89 (SC) (ii) Lalsons Enterprises vs. DCIT (2004) 89 itd 25 (Del. SB) (iii) Shri Ram Honda Power Equipment (2007) 289 ITR 475 (Del) 16.3 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. In our view, this issue is settled by judicial pronouncements cited above by the decisions of the Hon'ble Apex Court in the case of ACG Associated Capsules (P) Ltd. vs. CIT (supra), of the Hon'ble Delhi High Court in the case of Shri Ram Honda Power Equipment (supra) and of the ITAT - Delhi (Special Bench) in the case of Lalson Enterprises (2004) 89 IGD 25 (Del SB). Respectfully following these decisions (supra), we uphold the decision of the learned CIT(A) in directing the AO to deduct only 90% of the net income after adjustment of expenses, if any, from the business profits while computing the eligible deduction under section 80HHC of the Act. Consequently, Revenue's ground No. 3 is dismissed. 17. Ground No. 4 - 'Book Profits' under section 115JB - Adjustment for provisions 17.1 In this ground, Revenue contends that the learned CIT(A) erred in allowing the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment in the respective provisions which are on assets of the assessee including provisions for doubtful and advances and provisions for diminution in the value of investments. In view of the amendment of the provisions of section 115JB of the Act being retrospective, we find no reason to sustain the findings of the learned CIT(A). Hence, we uphold the order of AO and while setting aside the order of CIT this ground of appeal of the Revenue is allowed." Following the decision of the Coordinate Bench of this Tribunal in the assessee's own case for A.Y. 2003-04 in ITA No. 6580/Mum/2007 dated 10.08.2016 (supra), in view of the amendments to the provisions of section 155JB of the Act being operational retrospectively, we are unable to sustain the impugned order of the learned CIT(A) on this issue and therefore set aside/reverse his finding in the matter and restore that of the AO. Consequently, Revenue's ground No. 4 is allowed. 18. Ground No. 5 - being general in nature, no adjudication is called for thereon. 19. In the result, Revenue's appeal for A.Y. 2003-04 is partly allowed. 20. To sum up, both cross appeals of the assessee and Revenue for A.Y. 2003-04 are partly allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
