TMI Blog2014 (7) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... id grounds require revisit to the file of the AO considering the fact that the assessee was not given a proper opportunity to clarify the allegations against the bogus purchases on one side and the Assessing Officer failed to record his dissatisfaction with regard to the claim of the assessee that no expenditure was incurred for earning of the exempt income and this is relevant for the issue raised in ground no.3. Denial of weighted deduction u/s 35(2AB) with regard to the expenditure incurred on scientific research - HELD THAT:- As gone through the cited judgment of CADILA HEALTHCARE LTD [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] On hearing both the parties and on perusal of the said order of the High Court, we are of the opinion that the issues raised in ground no.4 should be set aside to the file of the AO to examine each of the expenses in detail and apply the cited judgment of the Hon ble Gujarat High Court (supra) in connection with the claim of expenses relating to the clinical trials. Accordingly, we remand this part of the ground to the file of the AO and ground no.4 is partly allowed statistical purposes. Deduction u/s 80IB admissible to the eligible units - HELD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER Assessee by : Shri D.P. Bapat Revenue by : Shri A.C. Tejpal O R D E R PER D. KARUNAKARA RAO, AM: There are four appeals under consideration and they are cross appeals involving two assessment years 2008-2009 and 2009-2010. Since, the grounds raised in all these appeals are connected and therefore, for the sake of convenience, they are clubbed, heard combinedly and being disposed of this consolidated order. Appeal wise and ground wise adjudication is given in the following paragraphs. Cross appeals for the AY 2008-2009 ITA No.6471/M/2010 (By assessee) 2. Firstly, we shall take up the appeal ITA No.6471/M/2010, which is filed by the assessee on 3.9.2010 against the order of the CIT (A)-36, Mumbai dated 11.6.2010. In this appeal, assessee raised the following gourds which read as under: 1. The CIT (A) erred in upholding denial of deduction from the income of the appellant of a sum of Rs. 10,35,39,731/- being the amount of credit under DEPB scheme which was not actually utilized before the close of the relevant previous year for payment of duty on the importation of goods. 2. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd both the parties and perused the orders of the Revenue Authorities as well as the cited judgment of the Apex Court in the case of M/s. Excel Industries Ltd (supra). On perusal of the said order of the Supreme Court, we find para 21 of the said judgment is relevant here and the same is reproduced here under: 21. In so far as the present case is concerned, even if it is assumed that the assessee is entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialize ad its money value is therefore not the income of the assessee. 6. Considering the settled nature of the issue in favour of the assessee, we are of the opinion that the assessee is entitled to relief. Accordingly, ground no.1 raised by the assessee is allowed. 7. Referring to grounds no.2 3, Ld Counsel for the assessee mentioned that the said grounds require revisit to the file of the AO consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the AO for fresh adjudication. 9. On the other hand, Ld DR relied on the order of the AO. 10. We have heard both the parties and perused orders of the Revenue Authorities as well as the relevant material placed before us. We have also gone through the cited judgment of the Hon ble Gujarat High Court (supra). On hearing both the parties and on perusal of the said order of the High Court, we are of the opinion that the issues raised in ground no.4 should be set aside to the file of the AO to examine each of the expenses in detail and apply the cited judgment of the Hon ble Gujarat High Court (supra) in connection with the claim of expenses relating to the clinical trials. Accordingly, we remand this part of the ground to the file of the AO and ground no.4 is partly allowed statistical purposes. 11. In the result, appeal of the assessee is partly allowed for statistical purposes. ITA No.6299/M/2010 (AY 2008-2009) (By Revenue) 12. This appeal filed by the Revenue on 23.8.2010 is against the order of the CIT (A)-36, Mumbai dated 11.6.2010. In this appeal, Revenue raised the following grounds which read as under: 1. On the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the ground raised by the Revenue. In this regard he read out the relevant paras 2 and 3 of the said order of the Tribunal. 14. On the other hand, Ld DR relied on the orders of the Revenue Authorities. 15. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited orders of the Tribunal (supra). On perusal of the said order of the Tribunal (supra) dated 2.1.2009, wherein one of us (AM) is the party to that order, we find paras 2 and 3 are relevant in this regard which read as under: 2. During the course of hearing, the Ld Counsel for the assessee has filed a chart identifying the issues involved in these appeals. In the light of the chart filed before us, we are of the view that these appeals should be disposed off issue wise instead of dealing these appeals one by one. We, therefore, first take up the Revenue s appeal ITA Nos.7412/Mum/2005, 4320/Mum/2006 and 4321/Mum/2006. The first ground raised in this appeal relate to the basis adopted by the Assessing Officer for computing deduction under section 80IB admissible to the eligible units. The learned Counsel for the assessee has invited our attention that the identical grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reads as under: 8. The next ground relates to allowance of deduction under section 80IB on the profits derived for manufacturing done by the assessee from the Loan License Manufactures (LLMs). In this regard, it was further contended that this issue is also covered by the order of the Tribunal in assessee s case for assessment year 2002- 2003 in which the Tribunal has decided the issue in favour of the assessee following its order in ITA No.4142/Mum/2005. The relevant observations of the Tribunal are extracted hereunder: 16. The AO denied the deduction holding that such profit are derived from out-sourcing activities and not for the manufacturing done by the assessee itself and therefore, such profits are not entitled to deduction. CIT (A) gave a relief to the assessee relying on his own order for AY 2001-02. During the assessment proceedings before us, the Counsel mentioned that the said order for AY 2001-02 travelled up to the ITAT, where the Tribunal held that the assessee is entitled to relief as discussed in para 5 and 5.1 of the order of ITA No. 4142/Mum/2005 which is placed at pages 17 to 20 of the paper book. 17. We have perused the same and relevant pats of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80IB and other scrap proceeds are not eligible in view of the principles laid down in the judgment of the Hon ble Supreme Court in the case of Liberty India (supra). AO is required to examine the above issue afresh after affording a reasonable opportunity of being heard to the assessee. Accordingly, ground no.4 is allowed for statistical purposes. 23. In connection with Ground no.5, Ld Counsel for the assessee mentioned that CIT (A) has not allowed any relief on account technology transfer fees, therefore, the ground is misplaced. On this issue, we find merit in the assertions of the Ld Counsel and this part of the ground is dismissed. In connection with the other issues raised in this ground i.e., miscellaneous sales / processing charges, miscellaneous receipts, whether they are eligible for deduction u/s 80IB of the Act, we find that the similar issues came up for adjudication before the Tribunal in the earlier years and the similar grounds were dismissed by the Tribunal vide para 6 7 of the said order of the Tribunal 2.1.2009 (supra). For the sake of completeness of this order, the said paras are reproduced here under: 6. The next ground relate to the finding of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT (A)-36, Mumbai dated 23.5.2011. In this appeal, assessee raised the following grounds which read as under: 1. The CIT (A) erred in holding that receipts by way of insurance claims do not qualify to be included in the profits derived from the undertaking in the context of section 80IB / 80IC / 80IE / 10B of the Act and the same is restricted to the cost of the goods. 2. The Ld CIT (A) has further erred in upholding disallowance of alleged bogus purchases in the amount of Rs. 83,27,214/-. Without prejudice to the generality, the Ld CIT (A) has erred in alleging unclarified discrepancies. Your appellant is aggrieved by the denial of opportunity to clarify the alleged discrepancies. Your appellant seeks the opportunity to clarify to the Hon ble Tribunal that the alleged discrepancies are amenable to appropriate explanation with reference to the material on record and such supplementary material which may be requisitioned in the course of the proceedings. 3. The Ld CIT (A) has erred in not allowing the weighted deduction under section 35(2AB) on Revenue and capital expenditure on approved R D centre of Rs. 57,15,86,155/- and Rs. 7,43,26,886/-. 4. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admissible to the eligible units and in holding that the AO was not justified in invoking the provisions of section 80IB(13) r.w. proviso to section 80IA (8) of the Act, when the assessee was under obligation of law to adopt the market value for the goods transferred to and from the 80IB undertaking. 2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in holding that the assessee is eligible for claiming deduction u/s 80IB on the profits derived from the work / manufacturing got done through Lease and License Manufacturing (LLMs). 3. On the facts and in the circumstances of the case and in law, the Ld CIT (A) was not justified in holding that DEPB Credit is eligible for computation of profits for the purpose of claiming deduction u/s 80IB when ITAT has decided this matter against assessee in ITA No.5606/Mum/2008 for AY 2006-2007 by relying on the decision of Supreme Court in the case of Liberty India vs. CIT (317 ITR 218). 4. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in deleting the disallowance of provision of loss of Rs. 1,04,96,93,011/- representing provision for unsettled forward contract with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuant to section 211(3C) of the Companies Act, 1956. Pursuant to the above, assessee recognized currency fluctuation gains of Rs. 106.14 Crs in respect of outstanding dues arising from the business transactions as on 31st March, 2009 and credited the same to the profit and loss account. The gains were offered to tax in the return of income consistent with the accounting policy employed in the accounts. At the same time, assessee recognized the losses of Rs.104.97 Crs in respect of the outstanding forward cover contracts as on 31.3.2009 and provided the same in the P L Account. The said loss was claimed as a deductible business loss in the return. During the assessment, AO made disallowance, on the gross basis, of the provision for loss of Rs. 104.97 Crs and brought to tax the provision made for gains of Rs. 106.14 Crs arising from the outstanding dues from the business transactions. Aggrieved, assessee filed an appeal before the first appellate authority. 35. During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) deleted the disallowance made by the AO vide decision given in page 19 and 20 of his order . Aggriev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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