TMI Blog2008 (2) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... as allowed partial relief to the assessee. As mentioned earlier the assessee as well as the revenue being not satisfied with the order of the Commissioner of Income-tax (A) are in appeal before us. 4. We first take up the appeal of the assessee. The first ground of appeal is as under. 1. That the learned Commissioner of Income-tax (A) has erred in law and on the facts while upholding the addition of ₹ 3,08,533 on account of prior pained expanses debited to Profit and Loss Account. 5. The Assessing Officer had made addition of ₹ 3,08,533 on account of prior period expenses debited to profit and loss account in respect of which the assessee failed to furnish any evidence before the Assessing Officer or before the Commissioner of Income-tax (A). 6. The learned counsel for the assessee fairly conceded before us that there is no evidence in possession of the assessee to support the claim. We, therefore, have no option but to sustain the addition of ₹ 3,08,533 on account of prior period expenses. 7. 2nd ground of appeal is as under :- 2. The learned Commissioner of Income-tax (A) has ignored the facts while coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover in computing the deduction 80HHC. The ground of appeal raised by the assesses is accordingly allowed. 9. Ground No. 3 is as under :- 3 That the learned Commissioner of Income-tax (A) has erroneously held that 90 per cent of gross receipts on account of DEPB shall be reduced horn profits of business for calculating relief under section 80HHC instead of profit on sale of DEPB as claimed by the assessee. 10. The assessee has credited the following amounts lo the profit and loss account :- Profit on transfer of DEPB = ₹ 31 60 lacs Sale of DEPB = ₹ 462,69 lacs ₹ 494.25 lacs 11. In response to the query by the Assessing Office as to why the effect may not be given to the amendment to section 80HHC and section 28(iiid) of the Income-tax Act, 1961 brought about by Taxation Laws Amendment Act, 2005, the assessee had stated that only the profit earned on transfer of DEPB, may be excluded and not entire receipts. The Assessing Officer held that in case of DEPB there is no cost and accordingly he reduced the entire amount of ₹ 494,25 lacs from the profit of business for calculation of relief un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... job charges in the total turnover for calculating the deduction under section 80HHC. The Assessing Officer, by holding the job charges as part of the total turnover excluded 90 per cent from the business expenses and also held the insurance scheme as part of other income as per clause (baa) to Explanation to section 80HHC of the Act. The Commissioner of Income-tax (A) has upheld the view of the Assessing Officer. 17. The learned counsel for the assessee relied upon the decision of the Bombay High Court in the case of CIT v. Bangalore Clothing Co. [2003] 260 ITR 371 in support of the contention that for invoking clause (baa) of Explanation to section 80HHC of the Act excluding receipts from profits of business are to be seen in the context of business activity of the assessee. In that case the Hon'ble High Court held that the labour charges and processing charges are not the receipts of the nature as provided in clause (baa) to Explanation to section 80HHC of the Act. 18. The learned DR, on the other hand, relied upon the orders of the revenue authorities Reliance was also placed on the decision bf the Tribunal for assessment year 2001-02 in the case of Dy. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered to be profit of business. The said decision relates to deduction under section 80I. So however. In our considered view the principle laid down by the Hon'ble High Court is also applicable in computing the deduction under section 80HHC. The compensation received from the Insurance company for destruction of assets does not form part of the business income of the assessee. Therefore, the Assessing Officer was justified in excluding 90 per cent of the receipts from the insurance claim of ₹ 7,59 lacs. This part of the ground of appeal raised by the assessee is dismissed. 23. 5th ground of appeal is as under :- 5 That the learned Commissioner of Income-tax (A) has erroneously held that for calculating relief under section 80HHC 90 per cent of gross interest received from customers is to be reduced from profits of business and not net interest as claimed by the assessee. 24. It has been conceded by the learned counsel for the assessee that the issue as to whether gross or net interest needs to be excluded in terms of clause (baa) of Explanation to section 80HHC of the Act is covered against the assessee by the decisions of the Jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is as under:- 1. That the learned Commissioner of Income-tax (A) has erred in law and on the facts in deleting the addition of ₹ 38,00,000 on account of commission debited to profit loss account. 32. The relevant facts relating to this issue are that the assessee has claimed deduction of ₹ 379,79 facts on account of payment to foreign agents for procuring export orders. The Assessing Officer disallowed 10 per cent of the commission payment on the ground that the assessee had failed to justify the reasonableness of the commission paid. 33. The Commissioner f Income-tax (A) has deleted the addition on the ground that the Assessing Officer had failed to bring on record any transaction or circumstances under which genuineness of the commission was in doubt. It has further been observed by the Commissioner of Income-tax (A) that the Assessing Officer has himself allowed much higher commission on tower turnover in the earlier year. 34. Before us the learned DR contended that the assessee has not debited the commission bill-wise and accordingly it is difficult to verify the claim of the assessee. 35. The learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rajasthan High Court in the case of CIT v. Hindustan Jinc Ltd. [2004] 269 ITR 369 and the decision of the Delhi High Court in the case of CIT v. Dalmia Cement (Bharat) Ltd. [2005] 242 ITR 129 . Reliance has also been placed on the decision of the Hon'ble Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52 to support the decision of the Commissioner of Income-tax (A). 43. We have given our careful consideration to the rival contentions. The claim of the assessee had been accepted by the Commissioner of Income-tax (A) firstly on the ground that the borrowed funds have not been utilized in respect of the work in progress. The assessee has borrowed money for the purpose of business and no nexus has been established by the revenue that such borrowed funds have been utilized for the work in progress. Even otherwise once the funds are borrowed for the purpose of business, the interest on such borrowed funds have been utilized for the work in progress. Even otherwise once the funds are borrowed for the purpose of business, the interest on such borrowed funds is permissible as a deduction under section 36(1)(iii) of the Act. The amendment in section 36 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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