TMI Blog2020 (4) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, as referred to above, we restore the issue to the Assessing Officer for fresh adjudication with similar direction. Disallowance under section 14A - HELD THAT:- Investments on which the assessee has received dividend income were made long time back and not in the current year. Further, in the year under consideration, the assessee had sufficient interest free funds available with it. Therefore, no disallowance of interest expenditure can be made. It is further noticed, while deciding identical issue in assessee s own case in Assessment Year 2001-02 (supra), the Tribunal after examining the availability of fund and all other aspects has deleted disallowance of interest expenditure and further, has restricted the disallowance of administrative expenditure to 1% of the exempt income earned. Keeping in view the facts of the present case as well as the decision of the Tribunal in Assessment Year 2001-02, we hold that learned Commissioner (Appeals) was justified in restricting the disallowance to ₹ 2 lacs. Disallowance of depreciation on share issue expenses incurred and capitalized in earlier assessment years - HELD THAT:- Tribunal has allowed assessee s claim of depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SBPI had already been allocated to the Bangalore Unit. Accordingly, the Tribunal upheld the order of learned Commissioner (Appeals) on this issue. Facts being identical, the aforesaid decision of co-ordinate bench squarely applies to the case. Therefore, we do not find any infirmity in the order of learned Commissioner (Appeals). Ground raised is dismissed. Interest liability on account of Drug Price Equalization Account (DPEA) has to be allowed on year to year basis - HELD THAT:- Issue relating to DPEA has already attained finality as the Hon'ble Supreme Court vide order dated 30.03.2011 has confirmed the DPEA demand raised by the Central Government while dismissing the petitions filed by the assessee. Thus, in effect, the DPEA demand has also crystallised. That being the case, the decision of learned Commissioner (Appeals) on the issue deserves to be upheld. Ground raised is dismissed. Claim of deduction under section 80HHC of the Act has to be allowed only on actual amount of advance licence benefit utilized and offered to tax. Accordingly, we restore the issue to the Assessing Officer for deciding afresh after due opportunity of being heard to the assessee. TP A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrap in the total turnover for computing the deduction under section 80HHC of the Act. Briefly, the facts are that assessee, a resident company, is engaged in the business of manufacturer of pharmaceuticals, bulk drugs and chemicals. For the assessment year under dispute assessee filed its return of income on 31st October, 2002 declaring total income of ₹102,48,80,810/-. In course of assessment proceedings, the Assessing Officer while examining assessee s claim of deduction under section 80HHC of the Act noticed that the assessee has excluded the amount of ₹97.57 lacs which represent the amount received from the sale of scrap from the total turnover while computing the deduction under section 80HHC of the Act. Referring to clause (ba) of explanation below section 80HHC (4A), the Assessing Officer opined that amount received towards sale of scrap is not one of the items which can be excluded from the total turnover while computing deduction under section 80HHC of the Act. Thus, ultimately rejecting explanation of the assessee, the Assessing Officer included the amount of ₹97.57 lacs received from sale of scrap in the total turnover for computing the deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid decision, the Tribunal while deciding identical issue in assessee s own case for Assessment Year 2001-02 in ITA No. 3266/Mum/2005 dated 04.05.2018 has restored the issue to the Assessing Officer for considering afresh keeping in view the ratio laid down by the Hon ble Supreme Court in the decision referred to above. Facts being identical, respectfully following the decision of the Tribunal in assessment year 2001-02, as referred to above, we restore the issue to the Assessing Officer for fresh adjudication with similar direction. Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. 7. In ground No. 4, assessee has challenged the decision of the Revenue authorities in holding certain income as not derived from the profits of business, hence, not eligible for deduction under section 80HHC of the Act. 8. Briefly, the facts are, during the assessment proceedings the Assessing Officer noticed that while computing the deduction under section 80HHC of the Act, the assessee has included certain items of income in the profits of business and claimed deduction under section 80HHC of the Act there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh, relied upon the decision of learned Commissioner (Appeals), however, he submitted, keeping in view the orders passed by the Tribunal in the preceding assessment years, the issue may be restored back to the Assessing Officer. 12. We have considered rival submissions and perused the material on record. Undisputedly, the issue raised in this ground is a recurring issue between the assessee and Revenue since the preceding assessment years. While deciding identical issue in Assessment Years 1998-99 to 2000-01, the Tribunal restored the issue to the Assessing Officer for examining assessee s claim. It is the contention of the learned AR that while giving effect to the direction of the Tribunal in these assessment years, the Assessing Officer has actually allowed assessee s claim in respect of other income except miscellaneous income. We have also noticed, while deciding identical issue in assessee s own case for Assessment Year 2001-02 in ITA No 3266/Mum/2006 dated 04.05.2018, the Tribunal following its earlier decision has restored the issue to the Assessing Officer for fresh adjudication. Facts being identical, keeping in view the decision of the Tribunal in assessee s own cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, no disallowance of interest expenditure can be made. It is further noticed, while deciding identical issue in assessee s own case in Assessment Year 2001-02 (supra), the Tribunal after examining the availability of fund and all other aspects has deleted disallowance of interest expenditure and further, has restricted the disallowance of administrative expenditure to 1% of the exempt income earned. Keeping in view the facts of the present case as well as the decision of the Tribunal in Assessment Year 2001-02, we hold that learned Commissioner (Appeals) was justified in restricting the disallowance to ₹ 2 lacs. Accordingly, the decision of learned Commissioner (Appeals) on the issue is upheld by dismissing the ground raised. 18. In ground No. 2, the Revenue has challenged the deletion of disallowance of depreciation on share issue expenses incurred and capitalized in earlier assessment years. 19. Briefly, the facts are, in the Assessment Year 1984-85, the assessee had claimed share issue expenses amounting to ₹62,55,639/-. Out of which the assessee has capitalized in Assessment Year 1984-85 a sum of ₹22,67,281/- and in Assessment Year 1986-87 a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish the supporting details. After verifying the same, he was of the view that an amount of ₹1,21,48,000/- was not actually written off in the books of account in the year under consideration. Therefore, he disallowed the amount of ₹1,21,48,000/- out of the claim of bad debts written off. The assessee challenged the aforesaid disallowance before learned Commissioner (Appeals). After considering the submissions of the assessee in the context of facts and materials on record as well as the decision taken by the First Appellate Authority in assessee s own case in Assessment Years 2001-01 and 2001-02, learned Commissioner (Appeals) deleted the disallowance made by the Assessing Officer. 23. We have considered rival submissions and perused the materials on record. As could be seen from record, the assessee follows calendar year as the accounting period. In respect of bad debts pertaining to the months of January to March 2002, the decision to write off bad debts was taken after end of March 2002 and correspondent entries were passed in the books of account post March 2002. However, it is the claim of the assessee that bad debts written off pertained to previous year endi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer disallowed assessee s claim of deprecation on the assets relating to FPU. While deciding the issue in Assessment Year 1995-96, the Tribunal directed the Assessing Officer to reduce the WDV of FPU assets from the block of assets and allow deprecation on the balance written down value. The aforesaid decision was followed by the Tribunal in the subsequent assessment years upto Assessment Year 2001-02. On a perusal of the latest order of the Tribunal in ITA No.3266/Mum/2005 dated 04.05.2018 for Assessment Year 2001-02, it is noticed that the Tribunal after following its earlier decision has directed the Assessing Officer to allow deprecation after reducing the WDV of FPU assets from the block of assets. Facts being identical, respectfully following the decisions of the Tribunal in the preceding assessment years, we uphold the order of learned Commissioner (Appeals) on this issue. Ground raised dismissed. 27. In ground No. 5, the Revenue has challenged deletion of disallowance made on account of closing stock of diesel, oil and coal. 28. Briefly, the facts are, during the course of assessment proceedings, vide letter dated 2.12.2004 assessee claimed deduction for an amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of learned Commissioner (Appeals) in allowing assessee s claim of deduction under section 80IB of the Act for New Iodex Plant (NIP), Bangalore. 31. Briefly, the facts are, during the year ended 31.03.2001, Smithkline Beecham Pharmaceuticals (India) Ltd. (SBPI) amalgamated with Glaxo (India) Ltd. to form the present company. The appointed date for amalgamation was 01.02.2001. The process for amalgamation was completed after approval of the Hon'ble High court only in October, 2001. As a part of amalgamation, the assessee acquired NIP located at Bangalore which was eligible for deduction under section 80IB of the Act. In the year under consideration, the assessee claimed an amount of ₹2,29,31,050/- towards deduction under section 80IB of the Act in respect of NIP. In course of assessment proceedings, it was submitted by the assessee that till October, 2001, the management operations of SBPI was at Bangalore and not that of assessee. Therefore, the head office general and administrative expenses for the period 01.04.2001 till October, 2001 cannot be allocated to the NIP. Rejecting the aforesaid contention of the assessee, the Assessing Officer held that head office g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court after hearing the parties did not pass any order for deposit of the amount claimed. Further, it was stated that the DPEA demand of ₹71.79 crores was on account of upward revision of bulk drug prices. Thus, it was claimed by the assessee, if ultimately it is held that the assessee is liable to pay interest, part of the interest which is attributable to the period 01.04.2001 to 31.03.2002 should be allowed while computing the income for the impugned assessment year. 35. The Assessing Officer observed, the application filed before the Hon'ble Delhi High Court is still pending and the recovery of demand is stayed. The assessee has also not debited any amount to the profit and loss account towards the interest paid or payable to the government. Thus, ultimately the Assessing Officer disallowed assessee s claim. The assessee contested the aforesaid decision before learned Commissioner (Appeals). After considering the submissions of the assessee and following the decision of the Tribunal in assessee s own case in Assessment Years 1986-87 to 1995-96, learned Commissioner (Appeals) allowed deduction of interest on DPEA liability for the period 01.04.2001 to 31.03.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made during the year have to be included in the profit and loss account. Accordingly, he added the differential amount of ₹1,43,57,307/- to the income of the assessee. Assessee challenged the aforesaid addition before learned Commissioner (Appeals). After considering the submissions of the assessee, learned Commissioner (Appeals) held that since actual import was not made by the assessee, only estimated benefit from import was accounted. Hence, same cannot be treated as income. Further, learned Commissioner (Appeals) also allowed deduction under section 80HHC of the Act in respect of advance license benefit by treating it as profit of business. 39. We have considered rival submissions and perused the materials on record. As could be seen, while deciding identical issue in assessee s own case in Assessment Year 2001-02 in ITA No. 3266/Mum/2005 dated 04.05.2018, the Tribunal has restored the issue to the Assessing Officer for deciding afresh keeping in view the decision of Hon'ble Supreme Court in the case of CIT vs Excel Industries Ltd., (2013) 358 ITR 295 (SC). Insofar as the issue of deduction under section 80HHC of the Act relating to advance license benefit, it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from 1st January, 2002 and not from May/ June, 2001, as held by the Transfer Pricing Officer. Further, he observed, the additional staff cost for the period 1st May, 2001 to 31st December, 2001 could not have been recovered by the assessee as no global procurement services was provided during that period. He observed, post 1st January, 2001, assessee s employees had dual responsibilities and accordingly, only 60% of the total time of 8 employees was spent on global procurement activity, whereas, the assessee has recovered full salary of such employees from AEs, thereby the assessee has earned a mark-up of 67% from the provision of global procurement services. Thus, he ultimately held that further estimation of mark-up at 15% is not necessary. Accordingly, he deleted the adjustment of ₹69,67,405/-. 43. We have considered rival submissions and perused the materials on record. As could be seen from the ground raised by the Revenue, only the decision of learned Commissioner (Appeals), vis- -vis the mark-up of 15% has been challenged. whereas, the Revenue has not challenged either the allocation of manpower or earning of mark-up from provision of global procurement services ..... X X X X Extracts X X X X X X X X Extracts X X X X
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