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2018 (3) TMI 1834

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....m stand alone warehouse as eligible deduction u/s 80IA of the Income Tax Act, 1961, whereas the definition of infrastructural facilities provided in Explanation to Section 80IA of the Income Tax Act, 1961 does not include maintenance of stand alone warehouses. (2) That on the facts and in circumstances of the case and in law, the CIT(A) erred in holding that the assessee company was eligible for deduction u/s 80IB of the Income Tax Act, 1961 for the profit derived from the business of handling, storage and transportation of food grains, whereas, no such business was carried on with any outside or third party and, therefore, assessee-company was not eligible for deduction on 'notional profit' claimed to have derived". 3. The assessee in the present case is a Company, which is engaged in the business of import of Edible Oil and Pulses and export of Agro Commodities, Iron ore etc. The return of income for the year under consideration was filed by the assssee-company on 26.09.2009 declaring total income of Rs. 2,93,51,430/-, which was subsequently revised on 01.06.2010 declaring total income of Rs. 2,96,16,994/-. In the said return, deductions of Rs. 3,68,38,770/- and Rs. 5,04,44,....

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....from an eligible business to any other business carried on by the assessee. He held that the assessee could not prove any such transfer and, therefore, the provision of section 80IA(8) could not be pressed into service in the assessee's case. He accordingly disallowed the claim of the assessee for deduction under section 80IB(11A). 5. The disallowance made by the Assessing Officer on account of its claim for deduction under sections 80IA & 80IB was challenged by the assessee in the appeal filed before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), further details and documents were furnished by the assessee-company in support of its claim for deductions under sections 80IA and 80IB. The same were forwarded by the ld. CIT(Appeals) to the Assessing Officer seeking his comments. In the remand report submitted to the ld. CIT(Appeals), the Assessing Officer offered his comments and when the same were confronted to the assessee-company, it also filed its counter-comments. After taking into consideration this entire material available on record, the ld. CIT(Appeals) found merit in the case of the assessee and deleted the disallowance made b....

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....sidered the facts of the case, the material placed on record and the arguments as well as submissions put forth on behalf of the appellant. From the facts stated, it is clear that the appellant is an industrial undertaking, other than infrastructure development undertaking, engaged in the business of integrated handling, storage and transportation of food grains units. Thus, the basic requirement for claiming deduction under sec. 80-IB has been fulfilled. . (vii) The working of eligible profit for deduction under section 80-IB has also bearing on the working of eligible profits under section 80-1A of the Act. Therefore, following the ratio laid down in the reported cases, I am of the view that the appellant company is entitled for deduction under section 80-1B of the Act on the eligible profit of the industrial undertaking. (viii) It may be further mentioned that such deduction has been allowed in the earlier years. In CIT vs. Arts & Crafts Exports (2012) 246 CTR (Born) 463, it has been held that decision of the Tribunal in the case of the assessee for earlier years holding that the assessee is engaged in manufacturing activity and thus entitled to deduction under section 80-....

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....constructed by the assessee on the lease land are part and parcel of the Port infrastructure facility at Visakhapatnam. He contended that there was no adverse comments offered by the Assessing Officer in his remand report on the said certificate forwarded by the ld. CIT(Appeals) for his verification. He also contended that the claim of the assessee for deductions under sections 80IA and 80IB was allowed by the Assessing Officer himself in the assessments completed for A.Ys. 2006-07 and 2011-12 and the ld. CIT(Appeals), therefore, was fully justified in allowing the claim of the assessee for the said deductions even for the year under consideration by following the Rule of Consistency. 8. As regards the claim of the assessee for deduction under section 80IB(11A), he contended that even if there are no transactions with the third party, assessee is eligible for deduction under section 80IB. In support of this contention, he relied on the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- ITC Limited [236 taxman 612], wherein it was held that deduction under section 80IA cannot be denied to the assessee merely because power generated by the assessee in its entirety....

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....lenged by the Revenue on the ground that such business was not carried on by the assessee-company with any outside or third party and it was, therefore, not eligible for deduction on notional profit claimed to have been derived from the said business. As rightly contended by the ld. Counsel for the assessee, this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Calcutta High Court in the case of ITC Limited (supra), wherein it was held that the claim made by the assessee for deduction under section 80IA in respect of profit derived from the business of generation of power could not be denied merely because power generated by the assessee was in its entirety consumed by other business of the assessee and was not sold to outsiders. Respectfully following the said decision of the Hon'ble jurisdictional High Court, we uphold the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for deduction under section 80IB and dismiss Ground No. 2 of the Revenue's appeal. 11. The issue raised in Ground No. 3 of the Revenue's appeal relates to the deletion by the ld. CIT(Appeals) of the disallowance made by the Assessing Officer under secti....

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....er section 40(a)(ia) in view of the decision of Special Bench of ITAT in the case of Merlin Shipping & Transporters. He accordingly deleted the amount of balance disallowance also thereby allowing entire relief to the assessee on this issue. 14. At the time of hearing before the Tribunal, the ld. D.R. relied on the order of the Assessing Officer in support of the revenue's case on this issue. The ld. Counsel for the assessee, on the other hand, invited our attention to the relevant portion of the remand report submitted by the Assessing Officer to the ld. CIT(Appeals) at page no. 4 of the paper book to point out that the claim of the assessee to the extent of Rs. 28.24 crores was accepted by the Assessing Officer himself in the remand report. He, however, fairly and frankly pointed out that the said amount to the extent of Rs. 3.56 crores was paid by the assessee on account of ocean freight to resident sub-agents of NRI ship owners, which are not covered by the CBDT Circular No. 723 dated 19.09.1995. He, however, contended that this issue is covered by the decision of the Hon'ble Delhi High Court in the case of CIT -vs.- Continental Carriers (Pvt. Ltd.) [163 Taxman 479], wherein ....

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....Hon'ble Delhi High Court in the case of Continental Carriers (Pvt.) Limited (supra), wherein it was held that payments made to resident agents or sub-agents of the foreign shipping companies do not attract TDS under section 194C of the Act. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer under section 40(a)(a) on account of ocean freight to the extent of Rs. 28.24 crores. The deletion of disallowance by the ld. CIT(Appeals) to the extent of balance amount of Rs. 1.40 crores going to Indian beneficiaries by relying on the decision of the Special Bench of ITAT in the case of Merlin Shipping & Transporters (supra), however, is not justified as the said decision of this Special Bench of ITAT has been subsequently overruled by the Hon'ble Calcutta High Court. As contended by the ld. Counsel for the assessee in this regard, the assessee could not raise its alternative contention on this issue keeping in view that the issue was covered by the Special Bench of ITAT in the case of Merlin Shipping & Transporters. In order to give such opportunity to the assessee as sought by its ld. Counsel, we restore thi....

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....accounting standards or rates or method of depreciation are different. The positive adjustments possible in the book profit do not include the loan redemption reserve fund or such other reserves. Therefore, in view of the facts of the case and the ratio laid down in the reported cases, in my view, no adjustment was called for under sec. 115JB in respect of the loan redemption reserve of Rs. 5,00,00,000/-. The fact that the loan redemption reserve has not been debited in the profit and loss account, but shown in the profit appropriation account did not alter the position. In view of the above discussion and after perusing the entire facts of the case, this ground of appeal of the appellant regarding disallowance of provision of loan redemption reserve of Rs. 5 crore while computing book profit under section 115JB is decided in favour of the appellant as because this provision has been made for meeting out an ascertained liability. My this view is in accordance with the Hon'ble ITAT Kolkata Bench in the case of IOL Ltd. v DCIT 81 TTJ 525. In that case it was held that transfer from profit & loss account to debenture redemption account has to be consider for working out book profit....

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....g the amount of loan redemption reserve. Since the said amount of loan redemption reserve was not debited by the assessee-company in its profit & loss account and was shown as appropriation below the line, the Assessing Officer added back the same while computing the book profit of the assessee-company under section 115JB. As held by the Hon'ble Mumbai Bench of this Tribunal in the case of Duke Offshore Limited -vs.- DCIT [45 SOT 0399] cited by the ld. Counsel for the assessee, language of section 115JB is very clear to indicate that starting point of the profit and loss should be the figure after the appropriation as well as any extraordinary item made or prior year expenses which the company may for the purpose of presentation show 'below the line'. It was held that the amounts credited or debited to the profit & loss account below the line, therefore, cannot be ignored for the purpose of computing book profit under section 115JB. A similar view has been expressed by the Hyderabad Bench of this Tribunal in the case of Gulf Oil Corporation Limited -vs.- ACIT [111 ITD 124] cited by the ld. Counsel for the assessee, wherein it was held that Schedule VI of the Companies Act, 1956 in ....

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.... the assessee's appeal. The same are accordingly dismissed as not pressed. 24. As regards the issue involved in Ground No. 2 of the assessee's appeal relating to the disallowance of Rs. 37,39,560/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 40(a)(ia) on account of commission expenses, it is observed that payments of commission and brokerage exceeding Rs. 2,500/- were made by the assessee-company to various parties totalling to Rs. 37,39,560/-. According to the Assessing Officer, the assessee-company was liable to deduct tax at source from the said payments as per section 194H of the Act and since there was failure on the part of the assessee-company to do so, he disallowed the commission expenses to the tune of Rs. 37,39,560/- by invoking the provisions of section 40(a)(ia). Before the ld. CIT(Appeals), it was contended on behalf of the assessee-company that the amount in question towards commission and brokerage was substantially paid during the year under consideration itself. The ld. CIT(Appeals) accordingly directed the Assessing Officer to verify this claim of the assessee and allow the commission and brokerage expenses to the extent to....