TMI Blog2024 (1) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... f in the books of account as irrecoverable is an allowable deduction. The effect of the aforesaid statutory provision has been lucidly explained by the Hon'ble Apex Court in case of TRF Ltd VS CIT [ 2010 (2) TMI 211 - SUPREME COURT ] Therefore, once the conditions of section 36(1)(vii) are fulfilled, assessee's claim has to be allowed. Keeping in view the uncontroverted factual position that the conditions of section 36(1)(vii) are satisfied, we allow assessee s claim. Adjustment u/s. 145A of Modvat - HELD THAT:- As decided in A.Y.1999-2000 [ 2013 (2) TMI 907 - ITAT MUMBAI ] under the provision u/s 145A adjustment on account of tax, duty etc has to be made at all stages 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. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in previous Assessment Years is respectfully followed. It is brought to our notice that the department has accepted the similar decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT:- As assessee submitted that the assessee has reversed the provisions made. It is fact on record that the assessee has claimed the expenses on leave encashment on the basis of actuarial valuation until previous year and no specific details were submitted before us to adjudicate the issue on merit, since it is factual matter, in our considered view, it needs to be verified by the tax authorities on the aspect of status of opening provisions outstanding in the books of the assessee, which was based on the actuarial valuation, which needs to be reversed first before allowing any expenditure on actual basis. Therefore, we are inclined to remit this issue back to the file of Assessing Officer to determine the provisions outstanding in the books of the assessee and disallow the same during this year and allow the actual claim of the assessee on the basis of actual payment. Accordingly, we allow the ground raised by the assessee for statistical purpose. Interest allowed u/s 244(1A) - A.O. noted that the assessee had not subjected the interest to tax on the plea that such interest was withdrawn on completion of regular assessment u/s 143(3) - HELD THAT:- We observed that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges, these income are additional income generated in the business and may not be part of total turnover or export turnover but it is an additional income earned by the assessee. These are not part of turnover but can be considered as additional income eligible to be claimed under clause (baa) of explanation to section 80HHC of the Act. Therefore, the findings of the Ld CIT(A) are proper and as per law. Hence, we are inclined to dismiss the ground raised by the revenue. Indirect cost attributable to trading export - HELD THAT:- As denied in assessee's own case for the assessment year 1998-99 in AVENTIS PHARMA LTD. VERSUS DEPUTY COMMISSIONER OF IN COME TAX, RANGE-8(1), MUMBAI [ 2013 (1) TMI 257 - ITAT MUMBAI ] we have already discussed that for the purpose of sec. 80HHC(3}(b) r.w.clause (e) of Explanation, the indirect cost to be allocated in the ratio of export turnover of trading goods to the total turnover has to be taken as the total figure of the indirect cost incurred for the total turnover and not the indirect cost directly related to the export turnover as held by the C!T(A). - It is clear from the working of the Assessing Officer that for determining the indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit for the purpose of deduction u/s 80HHC. Therefore, there is no grievance to the revenue and it is as per the provisions of determining the deduction u/s. 80HHC of the Act. Therefore, this ground of appeal raised by the revenue dismissed. Penalty u/s. 271(1)(c) - defective notice u/s 274 - non-strike off of the irrelevant part in the notice - HELD THAT:- As could be seen from the case of Mr. Mohd. Farhan A. Shaikh [[ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) ] while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s. 271(1)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Ratio of this full bench decision of the Hon'ble Bombay High Court (Goa) squarely applies to the facts of the assessee s case as the notices u/s. 274 r.w.s. 271(1)(c) of the Act were issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Decided in favour of assessee. Disallowance of write off of tender security deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above has come into effect only from 01.04.2017, however, the courts have held that this amendment is retrospective in nature) or referred the issue to DVO for fresh valuation. It is also relevant to notice that the value for total land was approved by the appropriate authority and at that point of time the value obtained from appropriate authority existed in statute which is a high power committee consisting of Two Commissioners of Income Tax and a Chief Engineer of CPWD. Therefore, this valuation cannot be ignored and plays pivotal role in determining the valuation of property. Therefore, we are inclined to agree with the findings of the Ld.CIT(A) and Accordingly, ground raised by the revenue is dismissed. Penalty u/s 271(1)(c) - In the quantum appeals, as the additions were deleted by us or remitted the issues back to the file of Assessing Officer in the quantum appeal proceedings. The other issues, which are sustained by us are all debatable issues as adjudicated by Ld. CIT(A). Therefore, as such this penalty order is not sustainable. Accordingly, this appeal preferred by revenue is dismissed. - SHRI VIKAS AWASTHY, HON BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout prejudice to Ground No.3, on the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have allowed deduction of Modvat of Rs. 6,37,43,762/- relating to opening stock of this assessment without adding Modvat relating to closing stock. 5. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the disallowance of brokerage of Rs 7,00,000/- He ought not to have done so. 6. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the disallowance of repairs expenditure of Rs. 1,27,66,471/- as capital expenditure and has also erred in allowing only depreciation of Rs. 12,76,648/- with reference to the same. He ought not to have done so. 7. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the disallowance of the expenditure of Rs. 13,91,89,365 under section 40A(2)(a)(b) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 8. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the disallowance of Rs 87,61,130 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this stage, accordingly, the above additional ground is dismissed as not pressed. 8. With regard to, Ground No. 1 which is in respect of disallowance of estimated depreciation on obsolete assets to the extent of ₹. 50,19,393/-, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this Tribunal and decided the issue in favour of the assessee and against the department. He brought to our notice order of the Coordinate Bench in assessee s own case in ITA. No. 3092/Mum/2006 dated 11.08.2021 (Para No. 15 and 16). Copy of the order is placed on record. 9. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR. 10. Considered the rival submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2002-03. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 3092/Mum/2006 dated 11.08.2021 held as under: - 15. We have considered rival submissions and perused materials on record. It evident, assessee's claim of depreciation on the opening WDV of block of assets has been disallowed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xactly similar issue has been decided by the Tribunal in assessee's own case for the assessment year 1998- 99 and 1999- 2000, wherein the Tribunal after considering the decision in the case of G.R. Shipping Company and Inductotherm India Ltd, 73 ITD 529. held that depreciation was allowable on obsolete assets to the assessee. However, against this decision of the Tribunal, the department has not filed any further appeal before the Hon'ble High court. Thereafter relying the same, the Tribunal in assessee's own for the assessment year 2000-01 has decided the issue in favour of the assessee. 8.2 As the facts and circumstances during the year under consideration are same, respectfully following the decision of the Tribunal in assessee's own case, we do not find any merit in the action of the AO for declining assessee's claim of depreciation on obsolete assets. 12. Respectfully following the above decisions and following the principle of consistency, the view taken by the Coordinate Bench in previous Assessment Years are respectfully followed, ground raised by the assessee is accordingly allowed. 13. With regard to Ground No. 2 which is in respect of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice order of the Coordinate Bench in assessee s own case in ITA. No. 3092/Mum/2006 dated 11.08.2021 (Para No. 34). Copy of the order is placed on record. 18. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR. 19. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2002-03. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 3092/Mum/2006 dated 11.08.2021 held as under: - 34. Facts being identical, respectfully following the aforesaid decision of the co-ordinate bench, we restore the issue to the assessing officer with similar directions. This ground is allowed for statistical purpose. 20. Further, the Coordinate Bench in assessee s own case for the A.Y.1999-2000 in ITA. No. 4180/Mum/2003 held as under: 2.9.1 We have heard both the parties, perused records and considered the matter carefully. The dispute is regarding adjustment on account of Modvat Credit u/s 145A of the Income-tax Act. Under the said provision, valuation of purchase and sale of goods and inventory has to be made on the basis of method of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the business premises which had been given on rent where it was found that the premises had become surplus on account of shifting of the office to other premises. DECISION: The issue has been examined and the plea of the appellant is rejected. The facts of the case are that the appellant found that it was left with a premise which was surplus on account of the shifting of the office. It therefore, decided to rent out such premises. The fact that the rental has to be accounted to under the Income from House property is accepted by the appellant. It is not understood how then the brokerage be considered to be a business expenditure. It was indeed not the business of the appellant to let out its premises whether Surplus or not for earning rental incomes and therefore, it is difficult to appreciate the claim of the appellant regarding the brokerage paid by it for finding out a tenant for such a premise which was to be given on rent. The stand of the A.O. is upheld and so is the disallowance. This ground is decided against the appellant. 24. Considered the rival submissions and material placed on record, we observe that at the time of hearing Ld AR submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is allowed in this regard considering the above discussions. 26. With regard to Ground No. 6, Ld. AR of the assessee submitted that this ground is not pressed, accordingly the same is dismissed as not pressed. 27. With regard to, Ground No. 7 which is in respect of disallowance of expenditure of ₹. 13,91,89,365/- under section 40A (2)(a)/(b) of the Act. 28. Brief facts relating to the above ground are, Assessee [Aventis Pharma Ltd. now known as Sanofi India Ltd.] was manufacturing and selling Rabipur vaccine under technical agreement with Behringwerke GMBH, a German company. After worldwide takeover of Behringwerke GMBH by Chiron Corp Inc, USA (Chiron, USA) in 1997, Rabipur vaccine was manufactured in India by joint venture company namely, M/s Chiron Behring Vaccines Private Limited (Chiron India) formed by Assessee and Chiron USA holding 49% and 51% respectively. Assessee entered into agreement [page 59 of paper book volume 1] with joint venture company, M/s Chiron India, whereby inter alia Assessee would market, sell and distribute Rabipur vaccine in territories of India, Nepal and Sri Lanka and Chiron of USA or its affiliate would do same in territorie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al products; b) usual trade practice is that export price is higher than domestic one, c) persons buying in bulk and cash get heavy discount, d) purchase of Rabipur vaccine by Assessee from Chiron India is on payment of cash and not credit; and e) arrangement is to pass on profit to sister concern and intention to reduce tax burden of Assessee. 30. In the premises, Assessing Officer added difference of ₹. 35 [₹.127 (-) ₹. 92] per vial under Section 40A(2) amounting ₹. 13,91,89,365/-. 31. Aggrieved with the above order of the Assessing Officer, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) confirmed the addition made by the Assessing Officer with the following observations: - The Assessing Officer in the assessment order has examined the transactions between the appellant and Chiron Behring Vaccines P. Ltd and concluded that the assessee had made excessive payments to M/s Chiron Behring Vaccines P. Ltd. by way of paying excess purchase price of the vaccines. The A.O. has pointed out that the price paid per vial to M/s Chiron Behring Vaccines P. Ltd was at the rate of Rs 127 per vial whereas the price at which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which payment has been made to any person refereed to in clause (b) of this subsection, and the A.O. is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods services or facilities for which the payment is made or the, so much of the expenditure as is to considered by him to be excessive or unreasonable shall not be allowed as a deduction. Clause 9b) of the above said section mentions about the nature of the persons. A perusal of the record would disclose that the assessee company has paid much higher price at Rs 127 per vial to its sister concern M/s Chiron Behing India P. Ltd. for certain vaccine, which was sold @Rs 92/-to other persons by CBIPL. and made an addition of Rs 13,91,89,365/- to the income of the appellant. Ld CIT(A) has held as under: The issue raised by the appellant has been carefully appreciated. But, however, it is not understood how there can be such a substantial and wide variance between the sale price charged by M/s CBVPL from the appellant and on other clients. The variation is of 27.55 % which is indeed a wide variation even after considering the various arguments of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2004-05, the then Ld.CIT(A) decided the issue in favour of the assessee even though his predecessors have taken contrary decisions in Assessment years 2003-04 and 2005-06. In Assessment Year 2004-05, Ld.CIT(A) deleted addition under Section 40A(2) by observing as under:- a) material fact is that Assessee has not purchased Rabipur vaccine from any independent third party at lower rates; b) there is nothing in Assessee's books to demonstrate that it has paid more than market price: c) it is none of the business of Assessee nor latter is answerable that Chiron India sells Rabipur vaccine to its associate concern at lower price: d) Chiron India sells a very small part of its production to its associated enterprise stationed abroad; e) export price cannot be taken as market rate [benchmark] since it is a controlled transaction being executed with associated enterprise, a related party as held in VAN OORD DREDGING v. DDIT (2007) 105 ITD 97 (MUM); f) thus whole exercise undertaken by AO is inherently flawed; g) TPO in the case of Chiron India has made adjustments based on purchase price of Assessee i.e. Rs. 127/- per vial which is mutually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... q) in the result, CIT(A) holds in AY 2004-05 that no disallowance is required to be made under section 40A(2) in respect of purchases of Rabipur vaccine by Assessee from Chiron India. 34. Further, Ld.AR of the assessee submitted that cumulative conditions precedent of Section 40A(2) namely, expenditure of purchase of Rabipur vaccine must be excessive or unreasonable having regard to fair market value of Rabipur vaccine, legitimate needs of business of Assessee and benefit derived by or accruing to Assessee there from are not at all from any angle and whatsoever manner satisfied in Assessee's case. It is urged that Assessing Officer failed to discharge primary onus that afore mentioned parameters are fulfilled in Assessee's case and relied on the case of CIT v. Johnson and Johnson (2018) 11 ITR OL 48 (BOM). Assessing Officer, without any shred or iota of material much less cogent, straightway, purely founded on his ipse dixit, compared export sale price Rs. 92/- per vial realized by Chiron India from its associate with purchase price Rs. 127/- per vial of Assessee and wrongly deemed same to be the fair market value ignoring and overlooking distinguishing factors wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 396 ITR 452 (BOM). Therefore, if whole transaction is tax neutral in the sense that both Assessee and payee fall in the same tax bracket then there is no question of attempt to evade tax as laid down in ITO v. HDFC TRUSTEE MANAGEMENT LTD 10 ITR (TRIB)-OL (ITAT) (MUM) following ratio of pronouncement of Supreme Court in CIT v. GLAXOSMITHKLINE ASIA PVT LTD 195 TAXMAN 35 (SC). In present case, both Assessee and payee, Chiron India, are assessed to tax by same AO, Range 8(1), Mumbai, subjected to identical rate of corporate tax and paid substantial tax in assessment year under appeal [Chiron India made huge profits as reflected at pages 97, 136 of paper book volume 1 and thus there is neither any revenue leakage or evasion of tax and in the result, AO failed to establish factually that there is any attempt to evade tax except making a bald and unsupported statement to that effect in assessment order. In the result, ratio of aforestated judgments apply on all fours to Appellant-Assessee and hence addition be deleted on this ground alone; b) Assessee earns average gross margin of 24 to 25% on other products traded with third parties in domestic market and is a direct internal comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siderable. This difference cannot be ignored and the assessee shifts its profit to other sister concern. 37. Considered the rival submissions and material placed on record, we observe that Assessing Officer has disallowed the portion of cost of purchase of vial, purchased from Chiron India, which is a subsidiary company of the assessee. Based on the information available on record, we observe that the subsidiary is a Joint venture between the assessee and Chiron USA with the holding ratio of 49:51 between them. As per the agreement for forming the above said JV in the form of subsidiary company ie., Chiron India, as per the terms of engagement, it is agreed to manufacture the Rabipur vaccine for the exclusive Indian/South Asia Market, Chiron India will produce the vaccine and sell the same to the assessee at the 60% of the selling price of the Assessee. Accordingly, the obligation of the assessee to market the same in the South Asia, which has demand of about 80 to 85% of the capacity of the Chiron India. The rest of the capacity are available to Chiron USA to market in the rest of World. From the record we observe that the assessee has purchased the vaccine at 60% of the sellin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee depends on the JV agreement and majority of the vaccines are marketed only by the assessee and the business of the assessee depends on the supply of vaccines from Chiron India, it is like co existence and mutual dependence. 40. In the similar situation and facts, the Hon ble Bombay High Court in the case of CIT v. Goa Mineral Pvt. Ltd., [2017] 396 ITR 452 (Bom.) (Goa Bench) held as under: - 5. We have duly considered the rival contentions and we have also gone through the records. Section 40A(2)(a) of the Income Tax Act reads thus : (2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub- section, and the [Assessing] Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction 6. On goi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subsidiary which is the seller are in the same tax bracket and pay same rate of tax is a fact which assumes importance. Admittedly, it is not a case of tax evasion inasmuch as if the rate would have been less, the assessee's profit would have been more, but the profits of the seller would have been less and both being taxable at the same rate, there would be no difference in the aggregate tax payable by the assessee and its subsidiary. 9. Clause (a) of sub-section (2) of Section 40A of the Act provides that where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of the sub-section and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as it so considered by him to be excessive or unreasonable, shall not be allowed as a deduction. The object of Section 40A(2) is to prevent diversion of income. An as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , partner of such firm or member of the association or family, or any relative of such director, partner, or member, has a substantial interest in the business or profession of that person. Explanation. For the purposes of this sub-section, a person shall be deemed to have a substantial interest in a business or profession, if, (a) in a case where the business or profession is carried on by a company, such person is, at any time during the previous year, the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profit) carrying not less than twenty per cent of the voting power; and (b) in any other case, such person is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the profits of such business or profession. 10. Learned Counsel for the appellant submitted that the present case falls under sub-clause (ii) or sub- clause (iv) of clause (b) of Section 40A(2). Subclause (ii) provides that where the assessee is a company, firm, association of persons or Hindu undivided family, any director of the company, partner of the firm, or member of the asso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directors. It is also pointed out that the records reveal that the barges were taken on payment of time charter charges of income earned from the transportation of iron ore on the basis of per tonne rate as prescribed by the Goa Barge Owners Association. Considering the said factual position, the learned Tribunal observed that in the absence of any comparative case that the payments were excessive and unreasonable, the orders of the Revenue Authorities are liable to be set aside. The learned Tribunal also took note of the Circular dated 06.07.1968, particularly para 74 thereof and noted that there is nothing on record to show that either of the parties enriched by getting a fixed sum of money as charter hire charges and the tax due by the Assessee has been reduced by this arrangement. The learned Tribunal also found that as far as the other appeal being I.T.A. No. 48/PANJ/2006, the issues involved are identical and consequently, the appeal filed by the respondents came to be allowed. 9. In the present case, we find that the factual findings are that there is no excessive payment or that the arrangement has in any way enriched the respondents which cannot be faulted as they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the facts of the case the comments of the assessee himself it is established that the double deduction is being claimed by the assessee company. The only thing left is to determine the amount of double deduction, In this regard vide show cause letter dated 8.12.2005 the assessee was asked to explain as to what was the amount of leave encashment claimed in the past on the basis of actuarial valuation report in respect of the employees to whom leave encashment was paid during the year. In response the assessee has explained its inability to arrive at the amount of leave encashment claimed in earlier years on account of retiring employees based on the actuarial valuation report. 43. The A.O. thereafter taking the normal tenure of the employee at 25 years concluded that 124 of the actual payment had been claimed in the past on the basis of actuarial valuation report. 44. Aggrieved with the above order, assessee preferred appeal before the Ld. CIT(A) and Ld. CIT(A) sustained the action of the Assessing Officer and held as under: - In appeal, it has been argued that: It was pointed out that in the earlier years when the deduction was being allowed, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and material placed on record, we observe from the submissions made and material available on record. We notice that the assessee has started adopting the amended provisions of section 43B and started claiming actual payments of leave encashment. However, until previous AY, it has claimed deduction based on Actuarial valuation by claiming on the basis of provisions created. Since the assessee has started adopting the expenses on actual payment basis, it is the duty of the assessee to declare the provisions created until previous assessment years and the same has to reversed in the current assessment year and start claiming on the basis of actual payments. 48. We observe that the AO has rejected the submissions of the assessee and disallowed the actual claim made by the assessee without any discussion on the reversal of provisions by the assessee. Before us Ld.AR of the assessee submitted that the assessee has reversed the provisions made. It is fact on record that the assessee has claimed the expenses on leave encashment on the basis of actuarial valuation until previous year and no specific details were submitted before us to adjudicate the issue on merit, since it is factu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving allowed in the intimation. 50. However, the A.O. rejected the above plea by stating that the assessee is to follow the mercantile system of accounting and the receipts to be bound to account for those which have accrued. The A.O. also rejected the plea that interest gets nullified on the passing of the assessment order u/s 143(3) by stating that such a prospective liability can only be contingent in nature and there after the taxability of receipt by way of interest on income tax refund is not contingent upon the future levy of interest. It has also been stated that under the I.T. Act, the assessee always gets interest after the assessee having been finalized. 51. Aggrieved with the above order, assessee preferred an appeal before Ld.CIT(A) and after considering the assessee s submissions, he dismissed the ground and held as under: The issue has been examined and the plea of the appellant is rejected. The scheme of issue of refund alongwith interest is embedded in the I.T. Act. It is also embedded in the I.T. Act that as a consequence to the order u/s 143(3) of the I.T. Act, such amounts have to be adjusted against the demands if any. Further, it is also embedded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to mistake, which, in our opinion, can be rectified. Similarly, any income assessed may become non-taxable by virtue of retrospective amendment and consequently, erroneous assessment can be rectified. Therefore, in our humble opinion, if the interest granted under Section 244A(1) is varied under Sub-section (3) of such section, then the interest originally granted would be substituted by the reduced/increased amount as the case may be. Thus, income on account of interest if assessed can be rectified under Section 154. 15. In view of the above discussion, we are of the view that interest on refund under Section 244A(1) would be assessable in the year in which it is granted and not in the year in which proceedings under Section 143(1)(a) attain finality. 55. Respectfully following the above said decision, this issue is decided in favour of the revenue. Accordingly, this ground is dismissed. 56. With regard to, Ground No. 10 which is in respect of enhancement of long term capital gain on account of FMV as on 01.04.1981 to ₹. 3,24,40,774/-. Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f jurisdictional High Court in CIT V. Pfizer India [330 ITR 62]. Further, he submitted that 90% of Sale of scrap Rs. 19,48,232/- is to be reduced under Explanation (baa) from profits of business which controversy is adjudicated in favour of department by Tribunal in Assessee's own case for Assessment Year 2002-03 and earlier years. 62. Ld.AR of the assessee submitted that Duty Entitlement Pass Book [DEPB] does not fall within any of clauses covered by Section 28(iiia) to 28(iiie) and consequently, ought not to be reduced from profits of business as defined in Explanation (baa) because it is specifically covered by Section 28(iv) which position is accepted by Assessing Officer in order giving effect for Assessment Year 2002-03 pursuance to Tribunal order for that assessment year. Therefore, following same view, DEPB Rs. 1,68,15,592/- should not reduced from profits of business under Explanation (baa) and deduction under Section 80HHC computed accordingly. Copy of order giving effect dated 07.11.2022 for AY 2002-03 was handed over across the bar during course of hearing on 24.08.23. 63. Furthermore, Ld. AR of the assessee brought to our notice that the issue in appeal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, as could be seen from the aforesaid decision of learned Commissioner (Appeals), he has not at all addressed the reasoning of the assessing officer that DEPB entitlement falls under section 28(iv) of the Act. Learned Commissioner (Appeals) has moved in a completely different direction by holding that DEPB entitlement received and utilized during the year would not be covered under Explanation (baa) of section 80HHC of the Act. We fail to understand, how and why DEPB entitlement only to the extent of received and utilized during the year would not be covered under Explanation (baa) of section 80HHC of the Act. In our view, the nature and character of DEPB entitlement would remain same, whether it is utilized or unutilized. Further, the reasoning of the assessing officer that DEPB entitlement is covered under section 28(iv) requires thorough examination. It is also noticed, while deciding identical issue in assessee's own case in assessment year 2000-01 (supra), the Tribunal has directedthe assessing officer to compute deduction on DEPB license by following the ratio laid down by the Hon ble Supreme Court in case of Topman Exports vs CIT (supra). For better appreciation, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was entitled to a deduction under section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee. The impugned judgment and .orders of the Bombay High Court are accordingly set aside. The appeals are. allowed to the extent indicated in this judgment. The Assessing Officer is directed to compute the deduction under section BOHHC in the case of the appellants in accordance with this judgment There shall be no order as to costs. 19.1 We have considered rival contentions and perused the record. As the issue is covered by the decision of the Hon'ble Supreme Court in the case of Topman Exports (supra), respectfully following the same, we direct the AO to compute deduction on DEPB since license sold in terms of decision in the case of Topman Exports (supra). 47. Pertinently, the same view was reiterated by the Tribunal while deciding revenue s appeal for assessment year 2001-02 (supra). On a careful perusal of the observations of the Tribunal reproduced above, it appears that the Tribunal has proceeded on the basis that the income claimed as deduction under section 80HHC of the Act arises out of sale of DEPB license. However, bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;. 7,71,47,232/- under section 92C(4) of the Act. Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this Tribunal and decided the issue in favour of the assessee and against the department. He brought notice order of the Coordinate Bench in assessee s own case in ITA. No. 3092/Mum/2006 dated 11.08.2021 (Para No. 2 to 8). Copy of the order is placed on record. 68. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR. 69. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2002-03. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 3092/Mum/2006 dated 11.08.2021 held as under: - 2. In ground 1, assessee has challenged addition made on account of adjustment to the arm s length price (ALP, hereafter) of export commission paid to the overseas associated enterprises (AE). 3. Briefly the facts are, the assessee is a subsidiary of Aventis Pharma Holding GmbH, which, in turn, is a wholly owned subsidiary of Hoechst AGTE. As stated by the Transfer Pricing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferential amount of Rs. 8,15,77,203/- was proposed for adjustment to the ALP. The adjustment proposed by the TPO was added to the income of the assessee in the assessment order. The assessee contested the aforesaid addition before learned Commissioner (Appeals). After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner (Appeals) determined the arm s length rate of commission at 5% on estimate basis. Thus, learned Commissioner (Appeals) granted partial relief to the assessee. 4. Shri J. D. Mistry, learned senior counsel appearing for the assessee submitted, while the assessee has benchmarked the payment of export commission by applying one of the prescribed methods, both, the TPO and learned Commissioner (Appeals) have determined the ALP purely on adhoc/estimate basis. He submitted, while doing so, both the TPO and learned Commissioner (Appeals) have failed to appreciate various documentary evidences filed by the assessee to demonstrate rendition of service by the AE for facilitating the export sales. Drawing our attention to various documentary evidences placed in the paper book, he submitted, the progressive grow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benchmarked under TNMM. It is evident, the assessee had entered into an agreement with its overseas AE in Germany termed as export guarantee agreement for exploring foreign market and facilitating its export sales. In terms with the agreement, the assessee has agreed to pay commission at 12.5% to the AE towards service rendered by the AE. Undisputedly, in the benchmarking done under TNMM, the transactions relating to import and export of formulations and bulk drugs as well as payment of export commission was found to be at arm s length. Before the TPO, the assessee has also furnished supporting evidence to demonstrate that assessee s foreign exchange outflow at 12.5% is much lesser than similar foreign exchange outflow of comparables at 34.05%. 7. Thus, it is patent and obvious, not only the assessee has benchmarked the subject transaction by adopting one of the methods prescribed under the statute, but, in course of proceedings before the TPO assessee has also furnished various other evidences to support its benchmarking and to further demonstrate that export commission paid at 12.5% is at arm s length. Whereas, the TPO has determined ALP of commission at 3% purely on adho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said, we are inclined to delete the adjustment made to the ALP of export commission paid to the AE. This ground is allowed. 70. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in previous Assessment Year is respectfully followed and ground raised by the assessee is accordingly allowed. 71. In the result, appeal filed by the assessee is partly allowed as indicated above. ITA.No. 1302/MUM/2007 (Revenue Appeal) 72. Revenue has raised following grounds in its cross appeal: - 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to exclude the excise duty of Rs. 47,32,23,552/- from total turnover for computation of deduction u/s 80HHC of the IT Act without appreciating the facts of the case. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to exclude an amount of Rs 79,34,650/- being tool manufacturing and other service charges from total turnover for computation of deduction u/s. 80HHC of the I.T. Act. 3. On the facts and in the circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Welfare fund (Rs. 19,51,237/-), sale proceeds of Mira Road flat considered as short term capital gain (Rs. 3,00,000/-) and especially in deleting the disallowance after stating that the appellant has agreed to the fact that the issue is covered against the appellant in the CIT(A)'s order dt. 13/03/2006 for A.Y. 2002-03. 10. The appellant prays that the order of the CIT(A) on the above ground to be set aside and that of the ITO/AC/DCIT be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 73. With regard to, Ground No. 1 which is in respect of excise duty of ₹. 47,32,23,552/- is not to be excluded from the total Turnover of the Business. Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this Tribunal and decided the issue in favour of the assessee and against the department. He brought notice order of the Coordinate Bench in assessee s own case in ITA. No. 3187/Mum/2006 dated 11.08.2021 (Para No. 63 to 66). Copy of the order is placed on record. 74. On the other hand, Ld. DR has fairly accepted the submissions of the Ld.AR. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of profit, therefore, not includible in total turnover for computing deduction u/s. 80HHC. Respectfully, following the decision of the Hon'ble Supreme Court, we do not find any infirmity in the order of CIT(A) directing for exclusion of excise duty from the total turnover for computing deduction u/s 80HHC. 77. Respectfully following the above decision and following the principle of consistency, the view taken by the Coordinate Bench in previous Assessment Year is respectfully followed, ground raised by the revenue is accordingly dismissed. 78. With regard to, Ground No. 2 which is in respect of Ld.CIT(A) erred in excluding Toll Manufacturing charges and services charges (Processing Charges) of ₹. 79,34,650/- from the total turnover of the business. Brief facts relating to the above ground are, Assessee had considered Rs. 34,34,950 representing income from processing charges as part of the turnover and the balance amount of Rs. 44.99,700 representing service charges as Business income, 90% of which was excluded in computing 80HHC deduction in view of Expanation (baa). The AO has considered the entire amount as part of turnover and also excluded 90% of the Rs. 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me earned by the assessee. These are not part of turnover but can be considered as additional income eligible to be claimed under clause (baa) of explanation to section 80HHC of the Act. Therefore, the findings of the Ld CIT(A) are proper and as per law. Hence, we are inclined to dismiss the ground raised by the revenue. 83. With regard to, Ground No. 3 which is in respect of Ld.CIT(A) erred in deleting Sales Tax set off of ₹. 42,49,253/- and sale of scrap of ₹. 19,48,232/- for determining adjusted profits of the business. Brief facts relating to the above ground are, the assessee has claimed the above income under explanation (baa) to section 80HHC of the Act and the AO has rejected the same. We observe that this issue was decided against the assessee by Ld CIT(A) as well as by the coordinate bench in the earlier AYs. This ground raised by the revenue is misconceived. At the time of hearing, both the counsels agreed that the issues were decided by the Ld CIT(A) dismissing the plea of the assessee and this ground is misconceived. Hence this ground of appeal raised by the revenue is dismissed. 84. With regard to, Ground No. 4 which is in respect of Ld.CIT(A) erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the said finding of the CIT(A) /s based on the view taken by the Commissioner of Income Tax(Appeals) that u/s sub.sec. 3(b) of sec. 80HHC, indirect cost attributable to export includes the items of expenditure only if it has some connection, link, attributes to - ' export. This proposition propounded by the CIT(A) is apparently against the provisions of section 80HHC(3)(b). If the provisions of sec 80HHC(3)(b) are read in conjunction with clause (e) of Explanation to the said sub. section, it is clear that the indirect cost . for the purpose of allocation under sub.sec (3) shall be taken as the total indirect cost incurred for the total turnover (local + export) and the same has to be allocated in the ratio of export turnover of trading goods to the total turnover 10.1 For ready reference, we quote sec 80HHC(3)(b) and clause (e) of Explanation as under: [(3) For the purposes of sub-section (1) (a)...................... : (b) where the export out of India is of trading goods, the profits ' derived from such export shall be the export tumover45 in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export; (c). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of raising a plea against the sustainability of the impugned order as the respondent defended against the appeal filed by other party has been provided under Rule 27 of ITAT Rules; therefore, though the impugned order of the C!T(A) would stand and will have full effect in so far as it is against the revenue; but if the plea raised by the revenue is accepted as regards the validity of the impugned order but then the revenue succeeds only to the extent that the appeal of the assesses would fait. 10.7 The scope of Rule 27 of ITAT Rules has been discussed by the Hon'b!e jurisdictions! High Court in the case of Bamasi (B.R.) v. Commissioner of Income-tax reported in 83 ITR 223 as under, But even if the assesses had not made such a statement, the above judgment shows that the assesses would be entitled to raise a new ground, provided it is a ground of law and does not necessitate any other evidence to be recorded, the nature of which would not only be a defence to the appeal itself, but may also affect the validity of the entire assessment proceedings. If the ground succeeds, the only result would be that the appeal would fail. The acceptance of the ground would show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished the details of Head Office Expenses. It was claimed that some of the expenses incurred therein are for domestic activities and only expenditure amounting to Rs. 29,04,71,863/- is such that is to be taken as somehow attributable to exports to be taken as part direct expenses. A perusal of the details show that as far as the Head Office Expenses is concerned, the working thereof is correct and hence needed to be accepted. 30 However, the appellant company exported trading goods during the year that were procured from Hyderabad and Mumbai. At both the places the appellant company has branch offices apart from the head office being located in Mumbai. Though it was claimed that the job of procurement of trading goods exported are carried out from head office that is having separate procurement and export divisions, while the involvement of branch office at Mumbai can be ruled out with a specific office for the purpose located therein, in respect of the branch office at Hyderabad, the other place for procurement, the same cannot be accepted. Hence the expenditure incurred at Hyderabad branch office to the extent not directly related to domestic sales is also required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided in favour of the assessee for the A.Y. 2002-03. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 3187/Mum/2006 dated 11.08.2021 held as under: - 73. In grounds 9 to 12, the revenue has challenged partial relief granted by learned Commissioner (Appeals) with regard to deduction claimed on DEPB entitlement. 74. The issue raised in these grounds are corresponding to identical issue raised by the assessee in ground 7(c) of ITA No.3092/Mum/2016. Since, we have restored the issue to the assessing officer while deciding the said ground in assessee s appeal, there is no need for separate adjudication of the issue in this appeal. Accordingly, these grounds have become infructuous, hence, dismissed. 91. Respectfully following the above decision and following the principle of consistency, the view taken by the coordinate Bench in previous Assessment Year is respectfully followed, accordingly, ground raised by the revenue is dismissed. 92. With regard to Ground No. 6, which is in respect of Ld.CIT(A) erred in directing not to deduct profit of ₹. 8,21,42,894/- u/s 80IB while determining profit eligible for deduction u/s 80HHC. Ld. AR of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed by the Kerala High Court in the case of Olam Exports (supra). 39. In the result, we hold that Section 80IA(9) does not affect the computability of deduction under various provisions under heading C of Chapter VIA, but it affects the allowability of deductions computed under various provisions under heading C of Chapter VIA, so that the aggregate deduction under Section 80IA and other provisions under heading C of Chapter VIA do not exceed 100% of the profits of the business of the assessee. Our above view is also supported by the C.B.D.T. Circular No.772 dated 23121998, wherein it is stated that Section 80IA(9) has been introduced with a view to prevent the tax- payers from claiming repeated deductions in respect of the same amount of eligible income and that too in excess of the eligible profits. Thus, the object of Section 80IA(9) being not to curtail the deductions computable under various provisions under heading C of Chapter, it is reasonable to hold that Section 80IA(9) affects allowability of deduction and not computation of deduction. To illustrate, if Rs. 100/ is the profits of the business of the undertaking, Rs. 30/ is the profits allowed as deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case, the Tribunal was right in holding that deduction for actual repairs and depreciation in respect of Modi Bhawan are deductible as business expenses ? IT Ref. No. 70 of 1982 : Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing that depreciation be allowed on a sum of Rs. 1,09,876 spent on Modi Bhawan ? Since the questions referred to us in both the references are materially identical, we intend to dispose of both the references by this common judgment. 2. The Division Bench before which the case originally came up for hearing was of the view that : (1) the issue raised should be considered by a Full Bench as it was felt that in the decision of this Court in New Bank of India Ltd. vs. CIT (1983) 33 CTR (Del) 29 : (1983) 140 ITR 132 (Del) : TC 27R.586, some aspects, viz., the Supreme Court's decision in East India Housing Land Development Trust Ltd. vs. CIT (1961) 42 ITR 49 (SC) : TC 13R.800 and the Andhra Pradesh High Court's decision in P.V.G. Raju Rajah of Vizianagaram vs. CIT (1967) 66 ITR 122 (AP) had not been considered; (2) while interpreting ss. 22 and 23 of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or repairs. In appeal by the assessee, the AAC came to the conclusion that the premises had been occupied by R.B. Gujar Mal Modi and K.N. Modi previously as employees of and for the purposes of the assessee-company's business which was also clear from the fact that the assessee had throughout treated this property as its business asset and that the ITO had not only allowed depreciation but also repairs carried out to the building. The AAC found no difference in the situation simply because the property had been given over to the managing agents. According to him, this did not change the purpose for which the house had been built and that it remained in physical possession of the same persons who were managing the affairs of the assessee-company earlier as its employees and later on behalf of the managing agents of the assessee- company. The AAC, therefore, held that the said property should be treated as the business asset of the assessee-company and its income should be assessed under the head Profits and gains of business or profession and not under the head Income from house property . Aggrieved, the Revenue preferred an appeal to the Tribunal but the appeal was unsuccess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax under the head `Income from house property'. 6. From a plain reading of s. 22, it is clear that the annual value of the property, consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, is chargeable to income-tax under the head Income from house property except such portions of such property which the assessee may occupy for the purposes of any business or profession carried on by him, profits whereof are chargeable to income-tax. In other words, when an owner occupies the whole or any portion of house property for the purposes of his business carried on by him, the profits of which are chargeable to income-tax, the annual value of the whole or that portion of the property, as the case may be, will not be chargeable to tax under the head Income from house property . The exception in s. 22 itself takes the bottom out of the first contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges of the employees concerned. A question arose whether the income to the assessee from the quarters rented out to its employees was income from business and fell for assessment under s. 10 (profits and gains of business, profession or vocation) of the Indian IT Act, 1922, and not under s. 9 (income from property) of the said Act. The Circuit Bench of the Punjab High Court at Delhi observed that, in each case, where there is a conflict as to whether income from property has to be assessed under s. 9 or s. 10, what has to be determined is whether such income does or does not arise from property occupied by the assessee for purposes of his business. The question is essentially a question of fact and what has to be discovered is whether the occupation of the property by its employees is subservient to the main business of the assessee. The point for decision was : is the provision of residential quarters to its employees a part of the business of the company ? The Bench pointed out that the employees in that case were engaged in the main business of the company and their residence in the building in question was incidental to their main occupation, namely, the carrying on of the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts employees, on payment of rent, could be said to be property which was occupied or used by the assessee-bank for the purposes of its business. A Division Bench of this Court pointed out that the assessee-bank was forced to purchase this property in somewhat special circumstances. It was a consequence of migration forced on the bank and its employees at the time of partition of the country that necessitated the purchase. They further pointed out that although the bank did not occupy the premises for running its business, in the extraordinary situation following the partition, the bank considered it necessary that its employees who had to flee their homes in Pakistan should be provided with residential accommodation in order to enable them to function efficiently for the purposes of the business of the assessee-bank. The Bench, thus, observed that the purchase of the property and its allotment to the employees were made not with a view to derive the rental income from the property but on grounds of commercial expediency for carrying on the business of the bank more efficiently and fruitfully and accordingly held that the property was a capital asset and, therefore, the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to run its business management and activity efficiently to improve its profitability, which is charged to tax as such. In all the three cases, properties were used for residential purposes of its employees/workers/directors/. Herein, the property is occupied as a residence for persons comparatively much higher in status, who are not employees of the assessee-company but nominee directors of the assessee's managing agents. M/s R.B. Multani Mal Sons (P.) Ltd., which company is distinct from the assessee-company, and the contention of the Revenue is that the analogy of occupation of a worker-employee cannot be stretched to affluent persons like nominee directors of another company only having managing agency charge. 14. At first blush, the argument appears to be attractive but does not survive on closer scrutiny. It is true that the status in life of persons in occupation of the property, who as such are not employees of the assessee-company and the posh premises in their occupation bear no comparison with the humble quarters provided for living by the assessee-company to its workers or employees in the three cases, but what is relevant, and indeed the pith and substance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s nominees. Occupation of the property by them for the purpose of effectual discharge of their duties vis-a-vis business of the company, in our view, is tantamount to occupation by the assessee-company for the purposes of its business. 16. Applying the ratio of the said decisions on the facts found by the Tribunal in the instant case, we are of the view that the answers to the questions proposed have to be in favour of the assessee. 17. Adverting to the points raised by the Division Bench, it is true that East India Housing Land Development Trust Ltd.'s case (supra) and P.V.G. Raju's case (supra) are not referred to in the decisions rendered in Delhi Cloth General Mills Co. Ltd.'s case (supra) and New Bank of India's case (supra). The ratio decidendi of these decisions is that the distinct heads specified in s. 14 of the Act indicating the sources are mutually exclusive and income derived from different sources falling under specific heads has to be computed for the purpose of taxation in the manner provided by the appropriate section. There is no quarrel with the proposition of law laid therein. But the same had no application to either Delhi Cloth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to deduction for the actual amount spent by it on repairs of the said building as also the depreciation while computing its income under the head Profits and gains of business . Accordingly, we answer the questions in both the references in the affirmative, in favour of the assessee and against the Revenue. 99. Respectfully following the above said decision of the Hon'ble High Court, we observe that the issue under consideration is similar and Ld.CIT(A) has considered the same and allowed the ground raised by the assessee before him, we do not see any reason to take divergent view in this regard. Accordingly, the ground raised by the revenue is dismissed. 100. With regard to Ground No. 8 which is in respect of Ld.CIT(A) erred in reducing Discounts from the total turnover of the business for the purpose of 80HHC. 101. At the time of hearing, Ld DR submitted that Ld CIT(A) has not given any reason on the above issues and at the same time, Ld AR also submitted that in the above issue there is no grievance to the assessee. Accordingly, the issue raised by the revenue that the discount should not be part of total turnover is accordingly decided in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es leave to add to and/or amend and/or modify and/or alter and/or delete the aforesaid additional grounds of appeal. IV) Aforesaid additional grounds of appeal is without prejudice to the original grounds of appeal. 106. Ld. Counsel for the assessee submitted that the above additional grounds of appeal is purely legal ground and do not require any fresh examination of facts. Therefore, Ld. Counsel for the assessee prayed it may be admitted. 107. Ld. DR objected for admission of the additional grounds as they were never raised before lower authorities and therefore cannot be admitted. 108. Considered the rival submissions and material placed on record, we observe that as the said additional ground is legal grounds, wherein, the facts are on record and facts do not require fresh investigation, following the decision of Hon ble Supreme Court in the case of National Thermal Power Co., Limited v. CIT 229 ITR 383 (SC), we admit the said additional grounds of appeal. 109. At the outset, Ld. Counsel for the assessee referring to the penalty notice issued u/s. 274 r.w.s. 271(1)(c) of the Act submitted that notice was issued stating that assessee has concealed particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee s favour. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Question No.2: Has Kaushalya failed to discuss the aspect of 'prejudice'? 184. Indeed, Kaushalya did discuss the aspect of prejudice. As we have already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, fully knew in detail the exact charge of the Revenue against him . For Kaushalya, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays nonapplication of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest . 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T YEAR 2004-05: ITA.No. 5939/MUM/2010 (ASSESSEE APPEAL) 115. Assessee has raised following grounds in its appeal: 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (hereinafter referred to as the learned CIT(A)) has erred in confirming the disallowance of write off of tender and security deposits amounting to Rs. 11,52,393/-, He ought not to have done so. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the disallowance of brokerage of Rs. 26,63,086/- He ought not to have done so. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the disallowance of repairs expenditure of Rs. 90.09,581/- as capital expenditure and has also erred in allowing only depreciation of 10% with reference to the same. He ought not to have done so. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the disallowance of Rs. 73,87,293/- representing part of the payment made for encashment of leave. He ought not to have done so. 5. On the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Ld. CIT(A) observed that these tender deposits are made to secure business for the assessee but it is not an expenditure which has been debited to the profit and loss account rather it is a balance sheet item. It is also not in the nature of bad debts in as much as no income was included in the accounts earlier. After considering the submissions and the nature of deposits written off by the assessee we observe that no doubt these advances are made to secure the business for the assessee, however, when these tender deposits are not recoverable it becomes part of the expenditure for the assessee which assessee failed to claim. However, these are all outstanding for a long period of time, it becomes irrecoverable and becomes bad debts. Therefore, it is allowed as allowable expenditure for the assessee. Further, it is also brought to our notice that Ld. CIT(A) has allowed the similar deduction in A.Y. 2000-01 in his order dated 19.03.2004, however, it is brought to our notice that revenue has not preferred any further appeal against the above findings of the Ld. CIT(A). Accordingly, the ground raised by the assessee is allowed. 120. With regard to Ground No. 2, which is in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer and Ld. CIT(A) has rejected submissions of the assessee that it is not part of earning out of profit from the export business. Therefore, it is not eligible to claim the benefit under section 80HHC of the Act. We are inclined to agree with the findings of the lower authorities and certainly insurance claim made can never be part of profit earned in export business. Therefore, this cannot be allowed for claiming benefit under section 80HHC of the Act. Unless it is claimed out of marine insurance or claim against the export, then it is part of export business. We observe from the details of insurance claim submitted before at page 142 of the paper book, these contains various claims made by the assessee including burglary, transit claim, flood loss claim and export insurance claim. After considering the nature of claims, in our considered view, only export insurance claim of Rs. 33,13,189, transit insurance claim against finished goods lost in transit claim of Rs. 121,79,216/- are eligible to claim as part of export business. Accordingly, we direct the Assessing Officer to allow only the above said claim under this head and other insurance claims disallowed by Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50C of the I.T. Act without appreciating the facts of the case. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to allow necessary relief by reducing the discount from the total turnover for computation of deduction u/s. 80HHC of the IT Act, without giving any reason why the gross sale before discount should not be regarded as total turnover. 7. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in taking indirect cost attributable to trading export it Rs. 34,79,770/- instead of Rs. 7,03,120/-, The CIT(A) erred in directing the AO to recomputed the deduction in trading export profit, without appreciating the facts of the case. 8. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to re-compute deduction a/s. 80HHC(3) by applying the first Proviso even though the assessee's case was not covered within the first Proviso as discussed elaborately by the AO in the impugned assessment order 131. We proceed to dispose of the appeal by adjudicating the issues raised by the assessee ground wise. 132. Ground No. 1 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stamp duty at ₹. 19,03,41,070/- as per the provisions of section 50C of the Act. 137. With regard to first adjustment of adopting fair market value as on 01.04.1981 Ld. CIT(A) has decided the issue against the assessee, therefore, revenue is in not in appeal before us on this ground. Therefore, this issue is not considered for further discussion. 138. With regard to second issue of adopting stamp duty value for computation of capital gains under section 50C of the Act, we observe that the assessee has submitted before Assessing Officer that Memorandum of Understanding (MOU) was entered with M/s.Nirmal Life Style Pvt. Ltd on 31.03.2000 for granting development rights in respect of land admeasuring 1,15,050 sq. meter for a total consideration of ₹. 35.82 crores. The development rights were to be transferred in three phases and the necessary approval under section 269UC of the Act was taken from the appropriate authorities. Accordingly, assessee has already recorded the sale consideration for Phase I - 51,7000 sq mtr at the value of ₹. 21.20 crores (stamp duty value ₹. 18.50 crores) and Phase II-18.945 sq. mtr. (includes Phase II and part of Phase III ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in asst. year 2004-05 for Rs. 8.62 crores (development agreement dated 31st March 2004) The total value of these 3 phases for stamp duty purpose is Rs. 43,20,73.820, amount considered as consideration in the assessment order, the break up of which is as under: Phase Area (Sq. mtr.) Stamp duty value (Rs.) Consideration taxed in the Ass Orders (Rs) Assessment year Phase I 51,700 18,50,00,000 21,20,00,000 2001-02 Phase II part of Phase III 18,945 5,67,32,750 6,00,00,000 2003-04 Balance Phase in 44,405 19,03,41,0 70 19,03,41,070 (under appeal) 2004-05 (Under appeal ) Total 115,050 43,20,73, 820 46,23,41,070 The actual consideration of Rs. 35.82 crores was approved by the Appropriate Authority u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appropriate Authority. 6.2 Incidently, ITAT Mumbai, in the case of Abbas T Reshamwaia VS ITO ITA 3093/Mum/09 dated 3ioth Nov 2009 has also held that where the assessee objected to substitution of sale price, AO has no discretion and should refer the matter to valuation officer for determination of fair value. Here to, ITAT has affirmed that 'may' used in Sec 50C(2) is to be read as 'shall'. 7. The appellant claims that the development rights under transfer in Ass year 2004-05 is a part of the overall MOU signed on 31 March 2000 and the overall sale consideration of Rs. 35.82 crores was approved to be appropriate value for the property by the Appropriate Authority for the purpose of transfer. Therefore the Certificate issued u/s 269UL by the Appropriate Authority approving the value of Rs 35.82 crores has to be considered as full value of consideration even without referring to the DVO and the AO has no reason to replace the same by the valuation considered by Stamp duty Authority for stamp duty purpose. 8. The following documents are attached herewith Particulars Page nos. Valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - as taken in assessment order. Accordingly the appeal on this ground is partly allowed. 141. Aggrieved revenue is in appeal before us. At the time of hearing, Ld DR heavily relied on the assessment order. 142. Considered the rival submissions and material placed on record, we observe from the record that assessee has entered into an MOU for developing land at Mulund on 31.03.2000 for the total land admeasuring 1,15,050 sq. mtr and mutually agreed to develop the above said land in three phases and accordingly, two phases were already developed and recorded the sale consideration of ₹. 21.2 crores and ₹. 6 crores respectively in two phases. While recording the remaining development land in third phase to the extent of 44,405 sq.mtrs the assessee has adopted the balance value of ₹. 8.62 crores which was arrived based on the total consideration of ₹. 35.82 crores, this consideration was also approved by the appropriate authorities, the assessee has reduced the value of already declared in Phase I and Phase II to the extent of ₹. 27.2 crores and the balance of ₹. 8.62 crores (₹.35.82 cores (-) ₹. 27.2 crores) was declared as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of appeal raised by the revenue for the A.Y. 2003-04 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y.2004-05. We order accordingly. 146. In the result, appeal filed by the revenue is partly allowed. ITA.No. 6745/Mum/2010 (Revenue Appeal u/s. 271(1)(c) of the Act.) 147. Brief facts of the case are, in this case, assessment u/s 143(3) was completed on 22/12/2006 determining total income at ₹. 171,68,14,630/- as against total income of ₹. 133,72,43,709/- declared by the assessee in the Return of Income. In the assessment order u/s. 143(3), the Assessing Officer made various disallowances and additions to the total income of the assessee. The Assessing Officer also initiated penalty proceedings u/s. 271(1)(c) in respect of additions and disallowances made in the assessment order. The additions/disallowances which are subject matter of quantum appeal and penalty proceedings are as under: - Sr. No. Addition/Disallowance Amount (Rs.) 1 Addition on account of Encashment of Leave 73,87,293/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,52,393/- 4 Enhancement of Long Term Capital Gain 25,00,107/- 5 Disallowance of Software Expenses 37,260/- TOTAL 1,58,79,583 6. Without prejudice to above, penalty u/s 271(1)(c) is also leviable in view of the following discussion (1) The Supreme Court decision in the case of Reliance Petroproducts (supra) as has been relied upon by the assessee is not applicable to the facts of the present case as the additions and disallowance made by the AO were not mere disallowances as has been referred by the Hon'ble Supreme Court in the case of Reliance Petroproducts. The additions and disallowances were made on the basis of solid material and evidences gathered by the AO. while making assessment, which has been confirmed by the CIT(A) vide his above referred order. The assessee has surely made inaccurate particulars of income and/or concealed particulars of income which lead to the above additions and disallowances. Hence, the provisions of Section 271(1)(c) are clearly applicable to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (Lah), CIT v. Gates Foam Rubber Co. (1973) 91 ITR 467 (Ker.)] 9. Under the Act, penalty u/s 271(1)(c) is leviable not only for concealing the income but also for furnishing inaccurate particulars of such income. In the instant case, the assessee has furnished inaccurate particulars of its income. By furnishing inaccurate particulars of income the assessee has tried to get undue benefit and thus has concealed its income. It has been held the word 'income' in section 271(1)(c) is not used in the popular sense of money received but connotes the assessable figures arrived at after accounting for all the legitimate and exemptions (Naginchand v. CIT 6 ITR 534). Therefore, if an assessee falsely claims a deduction, it would amounts to concealing the particulars of his income or deliberately furnishing inaccurate particulars of such income within the meaning of the section 271(1)(c) and the assessee can be penalised 10. In view of the above facts circumstances of the case, it is proved beyond doubt that the assessee has willfully claimed wrong deductions which means the assessee has furnished inaccurate particulars of income and finally has concealed its income to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the report of the approved valuer and similar disallowance in the past was being disputed by the assessee before appellate authorities, without appreciating that by adopting such higher cost of acquisition as on 01.04.1981, the assessee had deliberately reduced its capital gains liable for tax and hence penalty was rightly imposed by the Assessing Officer under section 271(1)(c) read with Explanation 1 thereof. 3. The Appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the A.O. be restored. 4. The Appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 153. Considered the rival submissions and material placed on record, at the time of hearing, both the counsels agreed that most of the issues on which Assessing Officer has levied penalty on the following additions are subject matter of appeal in the cross appeals filed by both the parties: - Sr. No. Addition/Disallowance Amount (Rs.) 1 Addition on account of Encashment of Leave 73,87,293/- 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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