TMI Blog2016 (10) TMI 1271X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Tribunal in the assessee s own case for A.Y. 2003-04 [2016 (8) TMI 1450 - ITAT MUMBAI] - we uphold the orders of the authorities below and against the assessee. Consequently, ground III of assessee s appeal is disallowed. Setting off of losses while computing deduction under section 80HHC - HELD THAT:- We hold this issue against the assessee, and uphold the orders of the authorities below following, inter alia, the decisions of the Hon'ble Apex Court in the case of CIT vs. Shirke Construction Equipment Ltd. [ 2007 (5) TMI 194 - SUPREME COURT ] and J.K. Industries vs. ACIT [ 2013 (5) TMI 152 - KARNATAKA HIGH COURT ]. Deduction of Miscellaneous income while computing deduction under section 80HHC - HELD THAT:- CIT(A) has rejected the assessee s claim and confirmed the AO s action holding that there was no direct nexus between the nature of income clubbed under the head miscellaneous income and the export business of the assessee, without considering the breakup of the aforesaid income brought on record by the assessee. Following the decision of the Coordinate Bench of this Tribunal in the assessee s own case for A.Y. 2003-04 [ 2016 (8) TMI 1450 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the learned D.R., that this issue was considered and adjudicated in favour of the Revenue, by Coordinate Bench of this Tribunal in the assessee s own case for A.Y. 2003-04 [ 2016 (8) TMI 1450 - ITAT MUMBAI ] in view of the amendments to the provisions of section 115JB 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. - ITA No. 1382/Mum/2009, ITA No. 1573/Mum/2009 - - - Dated:- 7-10-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain , Judicial Member Assessee by : Shri Girish Dave Shri Kadambari Dave Revenue by : Shri Pratap Sinh Shri V.K. Bora ORDER Per Jason P. Boaz, A.M. These are cross appeals, by Revenue and the assessee, directed against the order of the CIT(A)-1, Mumbai dated 24.12.2008 for A.Y. 2004- 05. 2. The facts of the case, briefly, are as under: - 2.1 The assessee, a company engaged in the business of manufacturing of yarn, engineering goods, shipping and a host of other business, filed its return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case and in law, the CIT(A) erred in confirming the action of the AO of disallowing noncompete fees paid to the ex-directors of the Appellant on the alleged ground that such expenditure is of capital nature. 2. The Appellant prays that the aforesaid addition be deleted. GROUND IV: Disallowance of deduction u/s 80HHC. 1. On the facts and in circumstances of the case CIT(A) erred in confirming the action of the AO in denying the Appellant's claim for deduction u/s. 80HHC on the ground that eligible profit works out to be negative. 2. The Appellant prays that deduction u/s. 80HHC be allowed as claimed by the Appellant. With out prejudice to Ground IV above: GROUND V : Setting of losses while computing deduction u/s. 80HHC of the Act 1. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of setting off brought forward losses of earlier years from business profits for the purpose of allowing deduction u/s. 80HHC of the Act. 2. The Appellant prays that the deduction u/s 80HHC be allowed from the business profits before setting off brought forward business loss. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 14A of the Act to R. 7,61,476/- and that complete relief was allowed to the assessee by another Coordinate Bench in the assessee s own case of A.Y. 2003-04 in ITA No. 6721/Mum/2007 dated 10.08.2016. The learned A.R., however, fairly submitted that since Rule 8D was not applicable for the year under consideration, viz. A.Y. 2004-05, the matter may be restored to the file of the Assessing Officer (AO) for computing the disallowance under section 14A of the Act. The learned D.R. on his part did not oppose this proposition of the learned A.R. 5.2 We have heard both parties and perused and carefully considered the material on record; including the judicial pronouncements cited. As contended by the assessee, it is settled position of law that the provisions of Rule 8D of the I.T. Rules, 1962 are applicable prospectively for and from A.Y. 2008-09 and would not operate for the assessment years prior thereto. In this view of the matter, the learned CIT(A) s directions to the AO to work out/compute the disallowance under section 14A of the Act by applying Rule 8D of the Rules is erroneous and we therefore delete the same and in the fitness of things, we direct the AO to recompute the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his ground of assessee s appeal stands dismissed. Following the decision of the Coordinate Bench of the Tribunal in the assessee s own case for assessment years 2002-03 (supra) and 2003-04 (supra), we uphold the orders of the authorities below and against the assessee. Consequently, ground III of assessee s appeal is disallowed. 7. Ground No. IV Disallowance of deduction under section 80HHC 7.1 Before us, the learned counsel for the assessee submitted that this ground is not being pressed in this appeal by the assessee. Since this ground is not pressed, it is rendered infructuous and is accordingly dismissed. 8. Ground No. V Setting off of losses while computing deduction under section 80HHC 8.1 At the outset itself, the learned counsel for the assessee fairly conceded that this issue is to be held against the assessee in view of the settled position of law laid down by the Hon'ble Apex Court in the case of CIT vs. Shirke Construction Equipment Ltd. (2007) 291 ITR 380 (SC) and the Hon'ble Karnataka High Court in the case of J.K. Industries vs. ACIT (2013) 351 ITR 434 (Kar). 8.2 After hearing both parties in the matter, we hold this issue against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80HHC of the Act. Needless to add, the assessee is to be afforded adequate opportunity of being heard and to file submissions/details in this regard by the AO before adjudicating this issue. Consequently, ground No. VI of assessee s appeal is treated as allowed for statistical purposes. 10. Ground No. VII Not allowing set off of incentives against the profits ( DEPB / DDB ) 10.1 In this ground, the assessee assails the impugned order of the learned CIT(A), confirming the action of the AO in rejecting the assessee s claim for bring allowed deduction under section 80HHC of the Act in respect of sale of DEPB licence and Duty Draw Back amounting to R. 4,85,85,169/-. The learned counsel for the assessee submitted that the very same issue has been considered and held in favour of the assessee by a Coordinate Bench in the assessee s own case for A.Y. 2003-04, following the decision of the Hon'ble Apex Court in the case of CIT vs. Avani Exports (2015) 58 taxmann.com 100 (SC) and the Hon'ble Bombay High Court in the case of Vijaya Silk House (Bangalore Ltd. Vs GOI (2013) 349 ITR 566 (Bom). 10.2 Per contra, the learned D.R. supported the orders of the authorities b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available after 1.4.05, we are satisfied that cases of exporters having a turn over below and those above 10 cr. should be treated similarly. This order is in substitution of the judgment in Appeal. The learned DR could not controvert the aforesaid decision of the Hon ble Apex Court by placing on record any relevant material. We have even noticed that the assessee s claim of deduction u/s 80HHC relates to assessment year 2003-04 i.e. prior to the date of amendment of the provisions with effect from 1st April, 2005. In view of the above, we respectfully following the decision of the Hon ble Apex Court in the case of CIT Vs Avani Exports cited supra, hold that the order of the learned CIT (A) is not sustainable and accordingly we reverse the same. Resultantly, this ground of appeal of the assessee stands allowed. Respectfully following the decision of the Hon'ble Apex Court in the case Avani Exports (supra) and the decision of the Coordinate Bench of this Tribunal in the assessee s own case for A.Y. 2003-04 (supra), to which both of us are party, we hold that the impugned order of the learned CIT(A) on this issue is unsustainable and reverse the same. Accordingly, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aras 36 and 37 thereof it was held as under: - 36. With regard to ground no. 3, the learned D.R. contended that after introduction of section 145A, the element of un-utilized modvat has to be added to the value of the closing stock and therefore, it is argued that the learned CIT(A) was not justified in deleting the addition. The learned counsel for assessee contended that the valuation of closing stock is already in consonance with section 145A. He invited our attention to page 15 of the PB, which contains the working of the opening stock and closing stock. It is pointed out that section 145A was introduced with effect from assessment year 99-00 and the assessment year under appeal is 2001-02. In the earlier years, section 145A was already complied with and the element of excise duty/movatwere added to the closing stock and the same has been brought forward as opening stock in the present assessment year. Some adjustments have also been made in the value of the closing stock. It is argued that disputed sum of ₹ 8,38,262/- is only in the nature of deposit with the excise department and is not in the nature of un-utilised modvat credit. He relied on the order of learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. DCIT (2004) 89 itd 25 (Del. SB) (iii) Shri Ram Honda Power Equipment (2007) 289 ITR 475 (Del) 15.3 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 well settled by the judicial pronouncements cited (supra); by the decisions of the Hon'ble Apex Court in the case of ACG Associated Capsules (P) Ltd. vs. CIT (2012) 343 ITR 89 (SC); of the Hon'ble Delhi High Court in the case of Shri Ram Honda Power Equipments (2007) 289 ITR 475 (Del) and of the ITAT Delhi (Special Bench) in the case of Lalsons Enterprises (2004) 89 ITD 25 (Del SB). Respectfully following these decisions (supra), we confirm the decision of the learned CIT(A) in holding and directing the AO, that for the purpose of computing the deduction under section 80HHC if the Act, the net interest is to be considered. Consequently, Revenue s ground No. 2 is dismissed. 16. Ground No. 3 Deduction under section 80HHC and treatment of income from services 16.1 In this ground, the Revenue assails the impugned order of the learned CIT(A) for directing the AO to deduct 90% of the net servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the assessee. It was argued that facts being similar in this year also, the learned CIT(A) s order on this issue be reversed and that of the AO be restored. 17.2 Per contra, the learned A.R. supported the impugned order of the learned CIT(A), but fairly conceded that this issue has been held against the assessee by the order of the Coordinate Bench of this Tribunal in the assessee s on case for A.Y. 2003-04 (supra) referred to by the learned D.R. 17.3 We have heard the rival contentions and perused and carefully considered the material on record. We find, as submitted by the learned D.R., that this issue was considered and adjudicated in favour of the Revenue, by 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), wherein at para 26 thereof it has been held as under: - Ground No.4 relates to re-computation of book profits without making adjustment in respective provisions. The AO had adjusted the provisions on the ground that these were mere provisions and that the assessee had been writing back these provisions in various years which implies that these were unascertainable provisions and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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