TMI Blog2018 (9) TMI 2118X X X X Extracts X X X X X X X X Extracts X X X X ..... Deduction u/s 80IA - certain items like interest on security deposits / loans, interest on delayed payment by customers, charges towards warehousing of cargo, revenue profit on disposal of fixed assets, sale of tender documents etc. were not derived from the industrial undertaking of CFS activity and denied the deduction u/s 80IA - HELD THAT:- For net realization from auction of cargo argued that the credit balances written back and forfeiture of deposit represents advances and deposits received from customers which were treated as no longer payable and hence written back to income. When asked for the details for the same, the ld AR prayed for one opportunity before the ld AO for furnishing the same. Accordingly we direct the ld AO to verify this aspect in order to ascertain whether the same relates to CFS activity so as to fall within the expression derived from from the details to be filed by the assessee in this regard. Income derived from disposal of pallets / garbages - We find that the pallets are not owned by the assessee but the same are owned by the customers who stack their products in the pallets. While removing the goods from the warehouse of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customers as part and parcel of the CFS activity carried on by the assessee for smooth and effective storage of the goods and income derived thereon in the form of hire charges is inextricably linked with the CFS activity carried on by the assessee. Hence we direct the ld AO to grant deduction u/s 80IA. Sale of tender documents - The tender documents were printed by the assessee and had incurred expenses for the same. These tender documents, when remaining unutilized, were sold by the assessee in order to recover its cost / expenses incurred thereon. Hence it would only tantamount to recovery of expenses incurred directly in connection with the CFS unit. We find that the reliance has been rightly placed by the ld AR on the decision of Meghalaya Steels Ltd [ 2016 (3) TMI 375 - SUPREME COURT] in this regard. Hence we direct the ld AO to grant deduction u/s 80IA of the Act for the same. Disallowance of Prior period expenses - HELD THAT:- We find that the entire details of prior period expenses are enclosed in paper book. It is not in dispute that these details were also filed before the lower authorities. From the perusal of the said details, we are convinced of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ANESH, AM 1. These cross appeals by the Assessee as well as Revenue arise out of the common order of the Learned Commissioner of Income Tax(Appeals)-VI, Kolkata [in short the ld CIT(A)] in Appeal No. 65/CIT(A)-VI/Cir-513-14/Kol dated 27.12.2013 against the order passed by the DCIT, Circle-5, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 07.03.2013 for the Assessment Year 2010-11. These cross appeals by the Assessee as well as Revenue arise out of the common order of the Learned Commissioner of Income Tax(Appeals)-8, Kolkata [in short the ld CIT(A)] in Appeal No. 970/2014-15 dated 12.01.2016 against the order passed by the DCIT, Circle-5, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 31.01.2014 for the Assessment Year 2011-12. Since identical facts are involved in both the appeals, they are taken up together and disposed off by this common order for the sake of convenience. 2. WRITE OFF OF ADVANCES Rs 12,92,000/- Ground No.1 of Revenue Appeal for Asst Year 2010-11 The brief facts of this issue are that the assessee is a Government of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had duly credited its profit and loss account in the earlier years either by offering the income or reducing its expenses thereby making it eligible for deduction u/s 36(1)(vii) read with section 36(2) of the Act. We also find that certain advances were actually made in the normal course of its business which was meant wholly and exclusively for the purpose of its business. We find further that certain amounts lying in the advances recoverable became irrecoverable for quite a long time and the assessee had consciously taken a call to write off the same during the year under consideration which would be squarely allowable as trading loss. We find that the reliance placed by the ld AR on the decision of Hon ble Apex Court in the case of CIT vs Mysore Sugar Co. Ltd reported in 46 ITR 649 (SC) and the Hon ble Jurisdictional High Court in the case of CIT vs Rohtas Industries Ltd reported in 120 ITR 110 (Cal) are very well founded, among others. In view of the aforesaid observations and respectfully following the aforesaid judicial precedents, we find no infirmity in the order of the ld CITA granting relief to the assessee in this regard. Accordingly, the Ground No.1 raised by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd forfeiture of deposits, which aggregate to Rs.77.06 lacs. Therefore, in my opinion, these are eligible for deduction u/s 80IA of the Income Tax Act, 1961. However, the remaining items such as interest, profit on disposal of asset, rent, hire charges and sale of tender documents etc., which aggregate to Rs.2.95 lacs, cannot be called to be derived from operation of the undertaking, as they are one step removed from the main function of CFS. It may be mentioned here, that in the appellate order for immediately preceding assessment year, it has been held by my Id. predecessor, that receipt from sale of tender documents, interest and profit from disposal of assets etc. are not eligible for deduction u/s 80IA. Similar finding has been given in respect of rent in the appellate order for A.Y. 2008-09. Considering this, the amount on which deduction is not allowable is taken as Rs. 2.95 lacs. The assessing officer is directed to reduce the disallowance accordingly. 3.2. Aggrieved, both the assessee as well as the revenue are in appeal before us. 3.3. We have heard the rival submissions. It is not in dispute that the CFS activity of the assessee falls under the ambit of an indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r furnishing the same. Accordingly we direct the ld AO to verify this aspect in order to ascertain whether the same relates to CFS activity so as to fall within the expression derived from from the details to be filed by the assessee in this regard. After verification of the details, the ld AO is directed to give a definite finding as to whether the same has a first degree nexus with the CFS unit. If so, deduction is to be granted u/s 80IA of the Act to the assessee. 3.3.2. With regard to income derived from disposal of pallets / garbages, the ld AR argued that the same are equivalent to sale of scrap. We find that the pallets are not owned by the assessee but the same are owned by the customers who stack their products in the pallets. While removing the goods from the warehouse of the assessee, the assessee stated that the pallets are left by the parties, which were unnecessarily occupying the space of the assessee and hence the same were disposed off. We find that this does not have any first degree nexus with the CFS activity of the assessee and cannot be construed as income derived from the said undertaking. Hence we hold that the ld AO had rightly denied deduction u/s 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said unit and accordingly would be eligible for deduction u/s 80IA of the Act. We find that the reliance in this regard has been rightly placed on the decision of the Hon ble Jurisdictional High Court in the case of Reckitt Benckiser (India) Ltd vs Additional CIT reported in 56 taxmann.com 415 (Cal HC). Accordingly we direct the ld AO to grant deduction u/s 80IA of the Act for the same. 3.3.6. With regard to rent receipts of Rs 1.59 lakhs, we find that the same is similar to demurrage claims of the assessee and hence has got first degree nexus with the CFS unit and eligible for deduction u/s 80IA of the Act. Accordingly we direct the ld AO to grant deduction u/s 80IA of the Act for the same. 3.3.7. On hire charges received on assets to the tune of Rs 0.02 and Rs 0.07 lakhs, we find that the assessee had provided refrigerators, generator sets and personal computers to the customers who had stored the goods in the godown / warehouse of the assessee and had collected hire charges. These assets are given to the customers as part and parcel of the CFS activity carried on by the assessee for smooth and effective storage of the goods and income derived thereon in the form of hire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire amount was deductible in computing the business income. It was also specifically pointed out that no deduction was claimed in respect of such expenditure in earlier year on mercantile basis. It was pointed out before the ld CITA that similar disallowance made in Asst Year 2002-03 was deleted by the ld CITA vide order dated 29.9.2005 and for the Asst Year 2003-04, no disallowance was made by the ld AO u/s 143(3) of the Act towards prior period expenditure. It was also pointed out that similar disallowances made for the Asst Years 2005-06, 2007-08, 2008-09 and 2009-10 were deleted by the ld CITA. 4.1. The ld CITA by following the order of his predecessor for Asst Year 2009-10, gave a finding that liability in respect of the prior period expenses crystallized during the year which are quite evident from the details filed before the ld AO. The ld CITA also observed that no discrepancy was noticed by the ld AO on the said details of prior period expenditure. The ld CITA noticed that the prior period expenditure debited during the year include depreciation of Rs 7,16,473/- being the depreciation as per books, which in any case, would have to be added back while computing the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order in assessee s own case for the Asst Year 2008-09 in ITA No. 1481/Kol/2011 dated 30.4.2012 and decided the issue against the assessee. Aggrieved, the assessee is in appeal before us. 8.3. We have heard the rival submissions. The details of claim in respect of lease premium are as under:- The assessee had claimed the proportionate premium on lease hold land as advance rent payable by it in accordance with the terms of the lease agreement as business expenditure allowable u/s 37 of the Act. Apparently, the issue is already decided against the assessee by this tribunal in its own case for the Asst Year 2008-09 in ITA No. 1481/Kol/2011 dated 30.4.2012. But we find that the ld AR was trying to make out a case on the ground that there were fresh facts involved in this year which make it distinguishable from the facts of the Asst Year 2008-09. He brought the following fresh facts in the year under appeal by stating that during the year under appeal, the assessee had entered into a fresh lease agreement with Kolkata Port Trust for a fresh period of 15 years in respect of land situated at CGS Kolkata and W D (i.e last 2 items in the aforesaid table) for which it had claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee submitted that it had sufficient own funds at its disposal which were much more than the investments made. It was also submitted that in any case, only dividend bearing investments alone should be considered while making disallowance under Rule 8D(2) of the Rules. It was submitted further that foreign investments held by the assessee company should be excluded as the dividend from the same, if any, would be taxable as per the Act and accordingly would be outside the ambit of provisions of Section 14A of the Act. The ld CITA directed the ld AO to exclude the foreign investments made by the assessee accepting the contention of the assessee in that regard and sustained the remaining disallowance made by the ld AO. We find that this tribunal had already held that only dividend bearing investments should be considered for the purpose of working out the disallowance under second and third limb of Rule 8D(2) of the Rules. In the instant case, since the assessee company is having sufficient own funds, by placing reliance on the decision of the Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd reported in 313 ITR 340 (Bom), we direct the ld AO not to make ..... X X X X Extracts X X X X X X X X Extracts X X X X
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