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TMI Blog2021 (3) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... aw and on facts in not reversing action of Ld. AO in not allowing the deduction u/s 80 HHC on DEPB in full as claimed by the assessee in his return of income. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) (A) has erred in law and on facts in not reversing action of Ld. AO in not allowing the deduction u/s 80 IB on the amount of DEPB and duty draw back in full as claimed by the assessee in his return of income, more so when the assessee id supporting manufacturer and more so when Hon'ble ITAT has allowed this claim in earlier years. 4. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in sustaining the disallowance of Rs. 1,3 8,7047- out of Rs. 25,48,292/- on account of foreign traveling expenses. 5. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of Rs. 8,15,788/- on account of interest. 6. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in treating the income of Rs. 2,18,413/- on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard and disposed off. 6/8. It is prayed that the order of the Commissioner of Income-tax (Appeals) be set aside and that of the A.O be restored." 3. The assessee is a supporting manufacturer as well as direct explorer of home furnishing products. The return of income for the Assessment Year 2004- 05 was filed on 1/11/2004 declaring total income of at Rs. 1,19,42,960/-. The return was processed u/s 143(1) of the Income Tax Act 25/01/2005. Subsequently, the case was selected for scrutiny and notice u/s 143(2) dated 25/1/2005 was served upon the assessee. In response to the said notice Chartered Accountant of the assessee attended the assessment proceedings on behalf of the assessee and submitted necessary details and clarification. The Assessing Officer observed that in the Financial Year 2003-04, the export turnover of the assessee is more than 10 crores. Therefore, it is covered under 3rd proviso to Sub Section 3 of Section 80HHC of the Income Tax Act, 1961. The assessee was asked to file justification regarding its claim of deduction u/s 80HHC in view of the taxation laws (Amendment) Act 2005, wherein the deduction u/s 80HHC of the Act is not allowable on the export incent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee u/s 69 of the Act and ha to be assessed under the head income from other sources. The Assessing Officer made an addition of Rs. 5,50,156/- in respect of the claim related to access depreciation on machinery under TUFS and the same was disallowed in the hands of the assessee. The Assessing Officer also made addition on Rs. 25,48,292/- related to expenses incurred on foreign travel in the hands of the assessee. The Assessing Officer made further addition of Rs. 8,15,788/- towards pro rate interest on loss paid to the extent the advance which was made to the sister concern and others without carrying any interest and without any business purpose and without any business purpose and disallowed the same u/s 36(1) (iii) of the Act. The Assessing Officer also made addition of Rs. 17,56,508/- related to expenses incurred by the assessee under the head building repairs and maintenance. Lastly, the Assessing Officer made an addition of Rs. 1,48,249/- on account of export promotion expenses which are in personal in nature. 4. Being aggrieved by the assessment order, the assessee filed appeal before CIT(A). The CIT(A) partly allowed the appeal of the assessee. 6. As regards to asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partly allowed for statistical purpose. 10. As regards to Ground No. 5 relating to disallowance of Rs. 8,15,788/- on account of interest, the Ld. AR submitted that there could be no disallowance of interest in respect of advances given in earlier years as no findings was ever recorded in those years that such advances were made for non business purpose or such advances were made out of the interest bearing borrowed funds for advancing these amounts. The Ld. AR pointed out from copies of accounts enclosed in the paper book that there were opening balances and these advances were made for the purpose of business in ordinary course of the business of the assessee. Further, the Ld. AR pointed out that no interest bearing borrowed funds were used for giving these advances as is clear from the fact that these amounts were paid from the current account. 11. The Ld. DR relied upon the assessment order and the order of the CIT(A). 12. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that from the paper books pointed out by the Ld. AR during the hearing, it can be seen that these advances were not from the interest bearing b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restricted the claim to 25%. 19. The Ld. AR relied upon the order of the CIT(A) and submitted that the assessee provided all the requisite documents relating to the purchase of the machinery and its utilization. The Assessing Officer overlooked the evidences. 20. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee is in the business of manufacturing and export of handloom goods, floor coverings and made ups which are covered under the TUF scheme, though the Assessing Officer has not denied these facts. The assesse in fact, has demonstrated before us by giving details which was produced before the Assessing Officer as well, as to how each machinery is covered under which clause of TUF Scheme. Thus, the CIT(A) has rightly held that after comparing the bills, the description of the machines and the relevant entry in schedules to TUF Scheme, it is clear that item no. 1 to 30 and 36 are covered under TUF Scheme and the same are eligible for depreciation accordingly @ 50%, whereas, item no. 31 to 35 totaling for value of Rs. 97,000/- only are not covered under any clause of the schedules of TUF Scheme, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (baa) of Explanation to Section 80HHC, the deduction is to be allowed to the extent of profits referred to in sub-section (1B) of Section 80HHC of the Income Tax Act read with sub- Section (1A) and sub-section (3A) of Section 80HHC of the Act. The profit and gains of business or profession are to be reduced by 90% of export incentives, brokerage, commission etc. to arrive at profits of the business and then 30% of these profits are to be allowed as deduction u/s 80HHC of the Income Tax Act in the case of the supporting manufacturer, in A.Y. 2004-05. 25. The Ld. AR submitted that Ground Nos. 2 and 3 of the assessee's appeal is dealing with this issue only and the same may be remanded back to the file of the Assessing Officer in light of the decision in earlier year in assessee's own case given by the Tribunal. 26. We have heard both the parties and perused all the relevant material available on record. We have already dealt with this issue in above paras while deciding Ground Nos. 2 and 3 of assessee's appeal, hence, the issue is remanded back to the file of the Assessing Officer. Ground No. 3 of the revenue's appeal is partly allowed for statistical purposes. 27. As regards ..... 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