TMI Blog2013 (2) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... red under the Rent Control Act. The AO, however, following the decision in earlier year held that annual value has to be the sum for which the property might reasonably be expected laid from year to year. He computed the fair value at ₹ 150 per Sq.Ft. and accordingly determined the house property income at ₹ 1,00,46,700/-. In CIT(A) held that the Annual Rateable Value of the flat has to be taken at ₹ 24 lacs. Aggrieved, the assessee is in appeal to the Tribunal. 2.1.1 At the time of hearing, both the parties agreed that the issue was covered in the favour of the assessee by the decision of Tribunal in the assessee s own case the A.Y. 1994-95, in ITA No. 5867/Mum/1999 in which the Tribunal following the decision in the earlier year allowed the claim of the assessee to take Municipal Rateable Value all the annual value. No distinguishing features including any changes in the Maharashtra Rent Control Act has been brought to our notice so as to take a different view in the matter. Therefore, respectfully following the decision of the Tribunal in the A.Y. 1994-95 (supra) which has also been followed subsequent years i.e. A.Y. 1996-97 and 1998-99, the order of the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had only licence to use the software and therefore, it was not a capital asset. The AO however, after detailed examination treated the sum of ₹ 37,29,907/- out of the total expenditure, as capital in nature which was disallowed and depreciation @ ₹ 12.5% i.e. ₹ 4,65,113 was allowed. In appeal CIT(A) gave relief of ₹ 3,90,704/- by treating the same revenue expenditure and directed, the AO to treat the balance sum of ₹ 33,30,203/- as capital expenditure. Aggrieved by the decision of CIT(A), the assessee is an appeal before Tribunal. 2.3.1 Before us, the Ld.A.R. for the assessee submitted that the issue was covered in favour of the assessee by the decision of the Tribunal in assessee s own case in A.Y. 1995-96 in ITA No.70/Mum/2001 as well as by the judgement of Hon ble High Court of Delhi in case of CIT Vs. Amway India Enterprises (2012) (346 ITR 341) and the judgement in the case of Asahi India Safety Glass Ltd (2012) (346 ITR 329). The Ld.D.R. fairly conceded that the issue was covered in favour of the assessee. 2.3.2 We have perused the records and considered the matter carefully. We find that similar expenditure on acquisition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of allowing the depreciation only the block of asset had to be considered. The Tribunal, therefore, held that the depreciation was allowable on obsolete assets to the assessee. Facts this year are identical. Therefore, respectfully, following the decision of the Tribunal in A.Y. 1998-99 (supra), we set aside the order of CIT(A) and allow the claim of assessee. 2.5 The Fifth dispute is regarding determination of fair market value of the property as on 01.04.1981 for the purpose of computation of long term capital gain on sale of R D Center Land. The assessee in the original return of income had taken the value of industrial land as on 01.04.1981 @ ₹ 60 per Sq.Ft. Subsequently during the assessment proceedings, the rate was revised to ₹ 75 per Sq.Ft. based on valuation report. The AO observed that the assessee could make a fresh claim only by way of a revised return the time limit for which had expired. He also observed that in respect of part of the same land, CIT(A) in the immediate proceeding year had adopted the rate of ₹ 23.52 per Sq.Ft. as on 01.04.1981. He, adopted the said rate and computed capital gain accordingly, which in appeal was confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the disallowance for 22 days only on the ground that sale proceeds had been received later. It was, therefore, urged that the addition should be deleted. The Ld.D.R. placed reliance on the order of CIT(A). 2.7.2 We have perused the records and considered the matter carefully. CIT(A), has confirmed the disallowance only for 22 days. There is no clear finding emerging from the order of CIT(A) that the assessee had borrowed funds for making payments for 22 days. In the absence of clear nexus between investment and the borrowing the disallowance can not be upheld. We therefore, set aside the order of CIT(A) and allow the claim of the assessee. 2.8 The dispute rasied in Ground No. 6(c) is regarding the disallowance of interest attributable to tax free income from investment of ₹ 22,000 made during the year on purchase of equity shares of Bharuch Enviro Infrastructure Ltd. The AO had made disallowance on the ground that income from investment was tax free. The assessee submitted before CIT(A) that the purchase of shares in the said company had given assessee the right of disposal for Solid effluent generated in the Manufacturing Units. The investment was therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges that is, opening stock, purchases and sales and closing stock. It has been held by the Hon ble High Court of Delhi in case of Mahavir Aluminium Ltd. (295 ITR 77) that adjustment u/s 145A has to be made both to the opening stock and closing stock. This issue therefore in our view requires fresh examination. We, therefore, set aside the order of CIT(A), and restore the matter to AO for passing a fresh order after allowing opportunity of hearing to assessee. 2.10 The issue raised in Ground No. 8 is regarding reduction of 90% of processing charges, sale tax refund and set off from the profit of business in terms of Explanation (baa) of u/s 80HHC. The assessee had received processing charges of ₹ 89.03 lac for manufacturing products on behalf of other parties. This had been taken as covered by Explanation (baa) and 90% of the same had been deducted from profit of business by the AO while computing deduction u/s 80HHC. Similarly, sales tax setoff and sales tax refund had also been taken by AO as per Explanation (baa). In appeal CIT(A) held that these receipts could not be considered as part of turnover and, therefore, could not be included in profit of business and according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Dresser Rand (supra) respectfully following the said decision, we hold that sales tax refund and set off will be considered for reduction as per Explanation (baa). Further, the alternate claim of the assessee that only the net receipt should be considered for reduction as per Explanation (baa) is covered by the judgement of Hon ble Supreme Court in case of ACG Associated Capsules P. Ltd. v. CIT (343 ITR 89). We therefore direct the Assessing Officer only the net receipt after deducting expenditure incurred for earning of such income, will be considered for reduction as per Explanation (baa). 2.11 The Ground No. 8 is regarding the issue whether Hyderabad sales office expenses are attributable to export of trading goods. The AO had treated all the expenses other than direct material cost as indirect cost for the purpose of computation of business profit for export of trading goods. The AO treated the Hyderabad sales office expenses as part of indirect cost. Under the provision u/s 80HHC, the profit of business in case of trading export is required to be computed after reducing the direct cost and indirect cost from the export value. In appeal CIT(A), did not agree with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as part of indirect cost. The order of CIT(A) is therefore upheld. 3. ITA No. 4485/Mum/2003, the appeal of the Revenue. We now take up the appeal of the department in ITA No. 4485/Mum/2003. In this appeal, the revenue has raised disputes are even different grounds. 3.1 The disputes raised in ground Nos. 1 and 2 relate to computation of income from house property in respect of Hoechst House and addition on account of purchases u/s 92 of the Income-tax Act. These issues we have already dealt with while deciding the appeal of the assessee and as held the earlier issues are covered in favour assessee. Therefore, the appeals of the revenue on these issues are dismissed. 3.2 The Ground No. 3 is regarding the disallowance of amalgamation expenses. During the immediate preceding year, Rouse India Pvt. Ltd. had amalgamated with the assessee Company, which was duly approved by Hon ble High Court of Bombay. The expenditure incurred on amalgamation had been claimed as revenue expenditure. The assessee relied on the judgement of Hon ble High Court of Bombay in case of CIT Vs. Bombay Dyeing Manufacturing Co. Ltd. (219 ITR 521). The AO, however, disallowed the claim. In appeal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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