TMI Blog2019 (2) TMI 2078X X X X Extracts X X X X X X X X Extracts X X X X ..... on sale of the undertaking. We, therefore, do not find any reason for declining the claim of the assessee - claim can be denied in the case of amalgamation and demerger but since the Act is silent in the case of sale of undertaking, in our understanding of the law, the Revenue authorities have erred in denying the claim. Decided in favour of assessee. Addition on account of annual value of the property - As per revenue determining the annual value @ 12% of the cost of land and building shall mean that the same annual value shall remain for eternity as the cost of the land and building will never change - HELD THAT:- As assessee s contented that the direction should be given in accordance with the earlier year ITAT order that the annual value of the property should be 12% of the cost and the land and building, we note that it is the plea of the Revenue that making an annual value as a percentage of the cost of the land and building forever will lead to annual value fixed for eternity which can never be permitted. We find that the ITAT earlier had confirmed the same direction. The matter is already before the Hon'ble Jurisdictional High Court. We do not find any cogent reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it pertains to Steel Division which was sold during the financial year 2000- 2001. (b) The appellant submits that the learned Commissioner of Income-tax (Appeals) ought to have directed the Assessing Officer to allow deduction under section 35D in respect of sum of Rs.60,00,150/- pertaining to steel division, in accordance with the provisions of aforesaid section as there is no prohibition, in the Act, on allowance of aforesaid deduction in case a division is transferred and no deduction is allowable to the transferee. (c) The learned Commissioner of Income-tax (Appeals) erred in holding that the appellant has not stated full facts which is contrary to the submissions made that in the case of the appellant the undertaking was transferred as a slump sale. 3. The learned Commissioner of Income tax (Appeals) ought to have deleted the annual value of the property determined by the Assessing Officer at Rs.3,60,21,880/- as against Rs. 2,89,000/-, as determined by the appellant, since it is not in accordance with section 23 of the Income tax Act, 1961 (the Act). 4. The learned Commissioner of Income tax (Appeals) erred in law in upholding the action of the Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption; and to modify the assessment in accordance with the provisions of the Act. 7. Each of the above grounds of appeal are independent and without prejudice to each other. 3. The grounds raised in the cross objection by the Revenue are as under: 1. The CIT(A) has erred in taking the rental income at 12% of the cost of land and building, which will not change over the years and have its effect in future years. 2. The CIT(A) has erred in not taking the annual value of the property as per section 22 and 23 of the I.T. Income Tax Act, 1961, that the annual value of the property is a sum which may be expected to be let out from year to year basis. 4. At the outset, it is noted that this is a delay of 3127 days (8 years 7 months 21 days) in filing the cross objection before us. The reason for condonation of delay in the filing the cross objection are as under: 2. In this case, appeal was filed by the assessee before the IT AT on 31.03.2009. A letter dated 03/07/2017 was received from the office of Commissioner of Income-tax (DR), ITAT-4, 'D' Bench, Mumbai, wherein the DR has stated that during the course of appellate proceedings it is observed that as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.257/M/99 ITA No. 6269/M/99) and this Hon'ble Tribunal by its order dated 22-03-2007 has decided the point of annual letting value in favour of the respondent on the Appeals filed by the Assesse. The Income Tax Department who is the present Appellant had not even filed any Appeal against the order of CIT (Appeals). The same issue about the annual letting value had also come up in the following assessment years where this Hon'ble Tribunal followed its earlier orders. In none of those years Income Tax Department filed any Appeal or cross objections against the order of the CIT (Appeals). In subsequent years they have accepted the Order of the CIT (Appeals). 4. In fact, it was the Assesse who was aggrieved by the order of CIT (Appeals) and even when they lost before this Hon'ble Tribunal, they have taken the matter to High Court and the said Appeals are still pending. The Income Tax Department has not approached either the Tribunal or the High Court in any of these years. 5. The annual letting value of a property cannot change from Year to Year. It remains the same as the standard rent in those places where the Rent Control Act is in m force. This is a settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in favour of Assessee by ITAT order of A.Y. 2003-04. page 6 para 13 as per Topman Exports vs. CIT. 342 ITR 49 SC) Apropos ground relating to deduction u/s. 14A of the Act : 7. On this issue, the A.O. made a disallowance of Rs.3,21,73,680/- being disallowance for interest on funds used for making the investment for earning the tax free income. The A.O. disregarded the assessee s submissions that the assessee has sufficient interest free own funds. The A.O. rejected the contention by observing that the assessee has failed to prove the nexus between the interest free funds available and the investments made. Hence, the A.O. proceeded to conclude the disallowance of interest. 8. Upon the assessee s appeal, the ld. CIT(A) confirmed the A.O. s action by holding that in earlier years the ld. CIT(A) has confirmed the similar addition. 9. Against this addition, the assessee is in appeal before us. 10. We have heard both the counsel and perused the records. The ld. Counsel of the assessee submitted that the issue is covered in favour of the assessee inasmuch as the ITAT in its order for A.Y. 2005-06 in assessee s own case has directed to work out a disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of an amount equal to 1/10th of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commenced or as the case may be the previous year in which the extension of the undertaking is completed or the new unit commenced production or operation. The past history of the assessee was that there is no dispute insofar as the eligibility criteria of the assessee is concerned. The preliminary expenses were incurred by the assessee in assessment year 1996-97, which was the first year of the claim of 1/10th of the expenditure. Since then 1/10th was claimed and allowed till assessment year 2001-2002. The impugned assessment year, i.e., M/s. Raymond Limited. assessment year 2005-2006 is the last assessment year, i.e., the tenth year of claim of deduction, which has been denied since the Steel Unit has been sold by the assessee. On a perusal of section 35D shows that the Act is silent in the case when a unit is sold. Section 35D(5) of the Act refers to the transfer before the expiry of the period of 10 years to another Indian company in a scheme of amalgamation and section 35D(5A) refers to the transfer before the expiry of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J.K. Trust, 1st to 4th floor of JK House 18325 Sq Ft 1,000 0.05 2 Pashmina Holdings Ltd, 5th to 12 Floors 23367 sq. ft. 2,88,000 12.32 The A.O. further observed that the following facts are noticed during the proceedings from the earlier records submissions made during the proceedings:- (a) The J.K. House property let out by the assessee company is located in posh commercial area at warden road. (b) M/s. Pashmina Holdings Ltd to whom 23367 sq. ft. have been let out, is a fully owned subsidiary company of the assessee JK trust to whom 18325 Sq ft is also the trust in which the directors of the company are trustee. The A.O. further noted that the assessee company during the assessment proceeding has taken the following contentions:- (i) the actual rent received from the above mentioned tenants in this year is more than the Municipal Rateables value of Rs.1,05,275/-, hence, the income under the head House Property has to be computed on the basis of actual rent received. (ii) In the preceding years CIT(A) has take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rent Act i.e. 12% of the cost of land and building. The CIT(A) in this A regard has stated as under: Similar issue had come up for appeal for Assessment Year 1997-98 to 2000-01 wherein similar order of earlier year was followed. The direction given were as follows: (i) Annual Value cannot be based on market rent of the property. (ii) Municipal Value or accrual rent received, whichever is higher cannot be taken as a basis for determining annual value. (iii) Annual Value has to be determined with reference to the standard rent of the property determinable as per the relevant provisions of the Rent Act. In conformity with appellate order for A.Y. 1997-98 to 2000-01, the Assessing Officer is directed to modify the assessment order accordingly. 11.1 From the above, it is seen that this issue has already been decided by the CIT(A). I am in agreement with the same. I, therefore, direct the Assessing Officer to compute the Annual Value with reference to the Standard Rent of the property determinable as per relevant provisions of the Rent Act and modify the assessment accordingly. 14. Against the above order, the assessee has filed appeal before us. 15. The Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal in para 2.7 of its order and at 2.7.1, the Tribunal has followed the decision of the co- ordinate bench given for assessment years 1994-95 and 1995-96 to assessment year 1998-99. Following the decision of the Tribunal, the appeal of the assessee was dismissed. As the learned Senior Counsel has fairly conceded that since this issue has been decided against the assessee by the Tribunal, the same view should be taken. Respectfully following the finding of the co-ordinate bench in assessee's own case (supra) ground no.1 is dismissed. A reading of the above decisions and the pleadings of the ld. Counsel of the assessee and the submissions of the ld. DR shows that the A.O. has computed the annual value of the property at Rs.3,60,21,880/- and the income chargeable under the property can be Rs.2,56,41,066/-. The ld. CIT(A) on the other hand directed the A.O. to compute the annual value of the property with reference to the standard rate of the property determinable as per the relevant provisions of the Rent Act and modify the A.O. s order accordingly. In this regard, the assessee s contention is that the direction should be given in accordance with the earlier year I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not the case that the Hon'ble Jurisdictional High Court has reversed the said decision. Respectfully following the same, we uphold the order of the ld. CIT(A). Apropos issue of deduction u/s. 80HHC: 23. Brief facts on this issue are that the assessee has claimed deduction on DEPB. The A.O. observed that on perusal of audit report in form 10 CCAC it is noticed that the assessee company has claimed deduction under section 80 HHC on profit from DEPB amounting to Rs.2136.15 lacs and other export incentive i.e. Duty drawback of Rs 9.09 lakhs 6.06 lakhs on premium on licenses, totaling to Rs.2151.30 lacs. The A.O. noted that the profit on DEPB are covered under 3rd proviso to section 80 HHC, As per the third proviso of section 80HHC of the Act, the profits computed u/s. 80HHC(3) shall be further increased by amount which bears to ninety per cent, of any sum referred to in clause (iiid) (ie Profit on transfer Duty Entitlement Pass Book scheme) of section 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee, only if, the assessee has necessary and sufficient evidence to prove that:- a) He had an option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above arguments are not tenable in view of the fact that the assessee company it self has credited the entire amount as profit from DEPB in the Profit loss account Even if we consider, the argument that the DEPB certificates were utilised in purchase of raw material etc, than also the entire amount of credit availed is profit on transfer on utilisation, as the credit can not be allowed without the transfer of DEPB certificates in favour of the Excise custom authorities. Even other wise, the assessee it self in the statements of deduction filed with the return of income has claimed the deduction showing the DEPB amount of as export incentive only and in the audit report also the amount has been shown as export incentive only. The export incentives are included in the business profits under clause (iiia) to (iiie) of section 28. The profit on transfer of DEPB is covered in clause (iiid) of section 28. In view of the above, as the assessee has failed to satisfy the conditions laid down under 3rd proviso to sub section (3) of section 80 HHC, hence, the deduction on the DEPB certificates claimed by the assessee is not allowable. Further, the assessee also failed to furnish a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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