9911796707
TMI Blog2024 (1) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was issued and served upon the assessee. The assessment u/s 143(3) of the Act was finalized on 11.03.2002 and total income was assessed at Rs. 654,33,13,860/- after making various additions and disallowances of expenses. Further, facts of the case are discussed while adjudicating the grounds of appeal filed by the assessee and revenue as follows: 3. Assessee's Appeal ITA No. 2125/Mum/2015 Ground No.1- Taxability surplus on redemption of securities under the head Capital Gain of Rs. 6,04,15,151/- 4. During the course of assessment the AO noticed that a sum of Rs. 6,04,15,151/- being surplus on redemption of treasury bills etc. has not been offered to tax under the head 'Capital Gains'. The assessee claimed that the amount was not liable to tax on the ground that redemption does not amounting to transfer, resulting in capital gain after relying on the decision of the Hon'ble Supreme Court in the case of Vaniya Silk Mils Pvt. Ltd. Vs CIT 191 ITR 647. However, the AO has not agreed with the submission of the assessee, after referring the decision of the Hon'ble Supreme Court in the case of Grace Collins v/s CIT [248 ITR 323] wherein held that extinguishment of the assets i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee itself after following the decision of the Hon'ble Supreme Court in the case of CIT v/s Grace Collis (2001) (248 ITR 232 (SC)) that surplus on redemption of treasury bills is to be taxed under the head Capital Gains. Therefore, following the decision of Coordinate Bench, We direct the AO to assessee the same as capital gains. Therefore, this ground of appeal is allowed. Ground No. 3- Deduction of the cost of Dies and moulds leased to Job Workers Rs. 12,62,77,761/- 10. This ground of appeal is not pressed by the assessee. Therefore, this ground of appeal stand dismissed. Ground No. 4 - Reduce the cost of the assets by the Penalty charges recovered for the purpose of granting depreciation : Rs. 86,65,552/- 11. This ground of appeal is not pressed by the assessee. Therefore, this ground of appeal stand dismissed. Ground No. 5 Rejecting the claim of deduction of expenditure incurred with respect to Masala Grinder and toaster of Rs. 48,485/- 12. During the course of assessment the AO noticed that the assessee has incurred expenditure on Masala Grinder and toaster aggregating to Rs. 48,845/-. The AO has disallowed the same by treating as capital expenditure. The assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputing indirect expenses in respect of traded goods for deduction under section 80HHC. 19. The assessee has not pressed this ground of appeal, therefore, this ground of appeal stand dismissed. Ground No. 10 - Allowing deduction u/s 80 IA of the Act on profits after deducting depreciation under section 32 of the Act from the profit of eligible undertaking. 20. The assessee has arrived at eligible profit for deduction without considering the depreciation. During the course of assessment the AO computed deduction allowable u/s 80 IA of the Act, after deducting depreciation from the profits of eligible undertakings. The AO considered that depreciation was of the nature of expense therefore same required to be considered for arriving at the correct income. Therefore, after placing reliance on the ratio laid down by the Hon'ble Supreme Court in Mother India Refrigeration Industries Pvt. Ltd. Vs CIT [155 ITR 711] the eligible profit was worked out after considering the depreciation allowable as per Income Tax Act. 21. After hearing both the sides and perusal of all the material on record, we find that identical issue on similar fact in the cases of the assessee itself has been deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Counsel has submitted that the identical issue on similar fact has been adjudicated in favour of the assessee by co-ordinate bench of ITAT vide ITA No. 3493/Mum/1999 (1995-96), 1781/Mum/2000 (1996-97), 5030/Mum/2001 (1997-98). The relevant extract of the decision is reproduced as under: 93. 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. 1996-97. While deciding the issue, the Coordinate Bench of the Tribunal in the immediately preceding assessment year vide ITA. No. 1781/Mum/2000 dated 20.06.2022 following the decision in assessee's own case for the A.Y. 1995-96, held as under: - 5.3 In additional ground No.2 of the appeal the assessee has assailed exclusion of certain expenses le. indirect cost" attributable to export of trading goods for the purpose of deduction u/s 80HHC of the Act. In first appellate proceedings the CIT(A) directed the Assessing Officer to exclude expenses attributable to other Income and export incentive, estimated at 10%. We find that similar issue had come up before the Co-ordinate Bench in assessee's own case for the Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal after considering the judgment rendered in the case of Zandu Pharmaceuticals Ltd. vs. CIT 350 ITR 356(Bom), CIT vs. Hindustan Unilever Ltd., 72 taxmann.com 325 (Bom) and CHT vs. Hindustan Lever Ltd., 42 taxmann.com 132(Mad) decided the issue in favour of the assessee. 8.1 The Id. Departmental Representative fairly conceded that the issue has been decided by the Tribunal in immediately preceding Assessment Year in favour of the 8.2 In the case of Zandu Pharmaceuticals Ltd. vs CIT(supra) it has been held that while computing profits and gains of the concerned undertaking only expenses relating thereto can be deducted. The expenses attributable to other unit or head office expenses which have no relevance to the Industrial undertaking cannot be deducted in respect of the said undertaking while computing profit and gains of the said undertaking for the purpose of computing deduction u/s 80HH, 801 and 80IA of the Act. The Co-ordinate Bench in assessee's own case for Assessment Year 1995 96 following the ratio laid down in the case of Zandu Pharmaceuticals Ltd.(supra) allowed identical ground raised in the appeal before the Tribunal. Since, there has been no chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.Y. 1996-97. While deciding the issue, the Coordinate Bench of the Tribunal in the immediately preceding assessment year in ITA. No. 1781/Mum/2000 dated 20.06.2022 following the decision in assessee's own case for the A.Y. 1995- 96, held as under: - 19. A perusal of the assessment order shows that in computation of total income the Assessing Officer has added provision for bad and doubtful debts Rs. 2,85,47,483/-. However, the Assessing Officer has not given any reasoning for adding provision for doubtful debts. In the first appellate proceedings the CIT(A) has directed the Assessing Officer to allow deduction of the aforesaid amount. Against this the Revenue is in appeal before the Tribunal. We find that in assessment year 1995- 96 the Assessing Officer in identical manner had added provision for doubtful debts. The CIT(A) directed the Assessing Officer to delete the addition. The Revenue carried the issue in appeal before the Tribunal. The Tribunal following the decision rendered in the case of Vijaya Bank vs. CIT, 323 ITR 166 (SC) upheld the findings of CIT(A) and dismissed the ground raised by the Revenue. In the impugned assessment year there is no change in the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the assessee following the decision rendered by Ahmedabad bench of Tribunal in the case of Gujarat Narmada Valley Fertilisers Co. Ltd vs. DCIT (ITA No.1463/ Ahd/2007), i.e., it was held that the assessee is eligible for deduction u/s 35D of the Act in respect of this expenditure. U/s 35D of the Act, this expenditure is allowable in installments. Hence the assessee has claimed proportionate amount in this year. Since the co-ordinate bench has held it to be allowable u/s 35D of the Act, following the said decision of co-ordinate bench, we direct the AO to allow eligible amount relatable to this year as deduction u/s 35D of the Act in this year. 30. Following the decision of co-ordinate bench as referred above, we do not find any infirmity in the decision of Ld. CIT(A), therefore, this ground of appeal of the revenue is dismissed. Ground No. 2. Depreciation in respect of sale and lease back transaction with JCT Limited : Rs. 85,17,592/- 31. During the assessment the AO noticed that the assessee has claimed depreciation in respect of sale lease back transaction with JCIT Ltd. for Rs. 85,17,592/-. The AO has disallowed the claim of depreciation stating that arrangement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Moulds amounting to Rs. 30.47 crores. The assessee treated the above said expenses as Capital in nature in the books of account, but claimed the same as revenue expenditure for income tax purposes. This is a recurring issue. The co-ordinate bench has decided this issue in favour of the assessee by confirming the decision rendered by Ld CIT(A) in holding that the expenditure incurred in purchase of dies and moulds are allowable as revenue expenditure in AY 1990-91. The said decision is being followed year after year. In AY 1997-98 also in ITA No.5030/Mum/2001 dated 13.04.2023, the Tribunal has upheld the identical decision taken by Ld CIT(A). Consistent with the view taken by the co-ordinate benches year after year, we confirm the order passed by Ld CIT(A) in holding that the expenditure incurred on Dies and Moulds is allowable as deduction. 35. Therefore, following the decision of ITAT, we do not find any infirmity in the CIT(A) order. Therefore, this ground appeal of the revenue stand dismissed. Ground No. 4 Allowing penalty charges recovered from suppliers of capital goods as capital receipts and therefore not chargeable to tax: Rs. 85,65,552/- 36. The assessee claimed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,135/- 40. The assessee claim annual rent payable as per the lease agreement as deduction which was not allowed by the AO. However, the Ld. CIT(A) allowed the claim of the assessee. We find that similar issue on identical fact has been decided by the co-ordinate bench of ITAT in the case of assessee itself vide ITA No. 3493/Mum/1999 (A.Y. 1995-96), 1781/Mum/2000 (1996- 97), 5030/Mum/2001 (A.Y. 1997-98), 8952/Mum/2004 (1998- 99). 41. Following the decision, we do not find any merit in the appeal of the revenue. Therefore, this ground of appeal of the revenue stand dismissed. Ground No. 7 Allowing corresponding adjustment in the opening stock under section 145A of the Act. 46. During the course of assessment the assessing officer has made adjustment on account of modvat credit as per provision of Sec. 145A of the Act amounting to Rs. 2,49,55,431/-. 47. In the appeal, the ld. CIT(A) held that corresponding opening stock should also be adjusted. He also referred the decision of Hon'ble Supreme Court in the case of CIT Vs. British Paint 188 ITR 44 (SC) and CIT Vs. Agrawal Enterprise 235 ITR 412 that real income can be ascertained on the basis of the real value of opening and clos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of disallowance of expenses incurred on the foreign trips of company's President only for the reason that there was concurrent finding of both Ld CIT(A) and the Tribunal that it has been incurred for the purposes of business. However, the jurisdictional high court has clarified that the case needs to be decided on its own facts primarily considering the business expediency. It was further held that this kind of claim is to be allowed only if it is connected with the business of the assessee. 25.3 In the instant case, we notice that the Managing director Shri Rahul Bajaj has visited Netherland & UK for attending India Growth fund Board Meeting. The Board resolution with regard to the expenses to be incurred on wife of Shri Rahul Bajaj reads as under:- "Further Resolved that air-fare and other expenses in connection with the above visit (including those of Smt. Bajaj) be and are hereby authorized to be borne by the Company." We notice that the Board resolution did not bring out any business expediency. Further, the assessee has also not proved existence of any commercial or business expediency in incurring the foreign travel expenses of wife of M D except producing copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gets support from the decision rendered by Hon'ble Bombay High Court in the case of HDFC Bank Ltd (366 ITR 505)(Bom). The jurisdictional Bombay High Court has held in the above said case that the interest disallowance u/r 8D(2)(ii) of IT Rules is not called for when the own funds available with the assessee is in excess of the value of investments. In our view, the ratio of the said decision shall apply to the facts of the present issue. Accordingly, we confirm the order passed by Ld CIT(A) on this issue." 55. Since, the assessee was having more interest free funds then the amount of investment made on which the exempt income was earned, therefore, following the decision of coordinate bench on the identical issue on similar fact as discussed supra we don't find any merit in this ground of appeal the revenue, therefore, this ground of appeal of the revenue is dismissed. Ground No. 10 Allowing deduction for Prior period of expenses Rs. 2,29,71,289/-: 56. During the course of assessment assessee claimed expenditure amounting of Rs. 2,29,71,289/- pertaining to assessment year 1998-99 debited in assessment year 1999-2000. The AO has rejected the claim of deduction on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT-AY 1995-96 (ITA No. 3493/Mum/1999, para no. 7 pg. no.5) Respectfully, following the decision of ITAT as referred supra this ground of appeal of revenue is dismissed. ITA No. 573/Mum/2007 & C.O. No. 119/Mum/2007 60. Both the appeal of the revenue and cross objection filed by the assessee are pertained to the issue on levied of penalty u/s 271(1)(c) of the Act, therefore, both these appeals are adjudicated together as follows: ITA No.573/Mum/2007 61. The assessing officer vide order u/s 271(1)(c) of the Act dated 27.03.2006 as levied penalty of Rs. 6,72,67,079/- in respect of the following additions made in the assessment order under the following heads: a) Surplus on redemption on securities b) GDR issues expenses c) Capital expenditure (Jigs & Fixtures) d) Fines and penalties e) Wealth tax payment f) Excess claim of deduction under section 80HHC g) Deduction under Section 80-O 62. The ld. CIT(A) has deleted the penalty levied on all the above issue vide order dated 16.10.2006. 63. However, the revenue has filed appeal against the order of ld. CIT(A) in deleting the penalty levied u/s 271(1)(c) of a sum of Rs. 160,11,024/- in respect of excess deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deleted the said penalty holding that the claim made by the assessee was a bonafide claim and there was no concealment of particular of income or furnishing inaccurate particulars of income. 68. Heard both the sides and perused the material on record. We find that in support of its claim of deduction u/s 80-O the assessee has furnished form no. 10HA certified by the tax auditor in the tax audit report. It was also pointed out that in the earlier assessment year i.e 1997-98 the similar claim of deduction has been granted to the assessee in respect of royalty received. In view of the above fact we consider that assessing officer has not brought any material to substantiate that assessee has concealed the particulars of income or furnished inaccurate particulars of income. Therefore, considering the similar facts and finding as given above for deleting the penalty levied of claim of deduction u/s 80HHC we don't find any merit in this appeal of the revenue, therefore, this ground of appeal of the revenue is dismissed. C.O. 119/Mum/2007 69. In the Cross Objection the assesse submitted that ld. CIT(A) has not adjudicated the ground of levy of penalty u/s 271(1)(c) of Act amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25/Mum/2005 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2125/Mum/2005 as mutatis mutandis this ground of appeal of the assessee dismissed. Ground No. 7: Deduction in respect of wealth tax paidRs.15,53,672/-: 76. Since the facts and the issue involved in this ground of appeal is similar to the facts and issue involved in the ground no. 7 of appeal vide ITA No. 2125/Mum/2005 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2125/Mum/2005 as mutatis mutandis this ground of appeal of the assessee is allowed. Ground No. 8: Exclusion of Miscellaneous receipts from total turnover while computing deduction under section 80HHC: Rs. 30,94,18,261/-: 77. This ground of appeal is not pressed by the assessee. Therefore, this ground of appeal stand dismissed. Ground No.9: Exclusion of cost which have been incurred for the purpose of manufacturing while computing indirect expenses in respect of traded goods for deduction under section 80HHC: 78. This ground of appeal is not pressed by the assessee. Therefore, this ground of appeal stand dismissed. Ground No.10 & 11: Exclusion of deduction u/s 80-IB for the purpose of computi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing item as other income and reduced the same for the purpose of working deduction u/s 80IB of the Act. a. Misc. Receipts - Rs. 44,83,316 b. Interest - Rs. 8,73,623 c. Duty Draw Back - Rs. 2,76,72,060 d. Profit on traded goods Rs. 49,97,702 85. The assessee filed before the ld. CIT(A). The ld. CIT(A) has dismissed the claim of the assessee. 86. The ld. CIT(A) after following the decision of Hon'ble Supreme Court in the case of Pandian Chemicals & Sterling Foods held that such income like interest, duty drawback and profit and traded goods are not derived from the eligible unit and held that same cannot be included for the purpose of computing eligible profit and accordingly, upheld the computation made by the assessing officer. 87. During the course of appellate proceedings before us in respect of duty drawback and interest the identical issue on similar fact has been decided by the ITAT in favour of the assessee vide the following ITA Number: a. ITAT - AY 1998-99 (ITA No. 9564/Mum/2004, Para 7 page no. 3) b. ITAT AY 1997-98 (ITA No. 5030/Mum/2001, para no. 23 to 26, pg. no. 16 to 19 With the assistance of ld. representative we have perused the decision of ITAT t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant refund up to the date of refund order, we restore this case to the file of the assessing officer for deciding afresh after verification of the supporting documents to be furnished by the assessee. Therefore, this ground of appeal is allowed for statistical purpose. Additional Ground No. 1: Addition on account of provision for doubtful debts: Rs. 6,24,12,712/-: 92. Since the facts and the issue involved in this additional ground of appeal is similar to the facts and issue involved in the additional ground no. 5 of appeal vide ITA No. 2125/Mum/2005 as adjudicated supra in this order, therefore, applying the finding of ITA No. 2125/Mum/2005 as mutatis mutandis this ground of appeal of the assessee is also allowed for statistical purpose. Additional Ground No. 2: Deduction on account of provision for doubtful debts in the year of actual write-off, if the same is not allowed in the year of provision: 93. Since, we have adjudicated the Additional Ground No.1 as supra therefore this ground of appeal stand dismissed. ITA No.2655/Mum/2005 Ground No. 1: Deduction under Section 35D in respect of GDR issue expenses Rs. 3,45,06,99,697/-: 94. Since the facts and the issue involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id amount was added back out of abundant caution. In the note no. 4 of the notes to computation of total income it was submitted that such expenditure was incidental to carrying on the business and after referring the decision of Hon'ble Supreme Court in the case of Prakash Cotton Mills Ltd. (201 ITR 684) submitted that the amount which are compensatory in nature to be allowed. However, the assessing officer has disallowed such claim treating the same as panel in nature. 100. The ld. CIT(A) has allowed the claim in respect of fines paid u/s 112(a) and 125 of the Custom Act 1962 holding that same were venial in nature. The ld. CIT(A) has also considered the decision of Hon'ble High Court and Hon'ble Supreme Court in the case of CIT Vs. N.M. Parthasarathy (212 ITR 105) (Mad) & in the case of CIT Vs. Ahmedabad Cotton Imfg. Co. Ltd. (2015 ITR 163)(SC) and held that the item expenditure paid u/s 125 of the Custom Act, 1962 amounting to Rs. 19,50,000/- were allowable after relying on the decision of Hon'ble Madras High Court as referred above. 101. Heard both the sides and perused the material on record. During the course of appellate proceedings before us the ld. D.R has not brought a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 1997-98 vide ITA No. 5030/Mum/2001 assessment year 1997-98 is reproduced as under: "5. The first issue raised by the assessee in appeal is against the exclusion of excise duty and sales tax from total turnover for the purpose of computing deduction u/s 80HHC of the Act. A perusal of the assessment order and the order of CIT(A) would show that perse assessee's eligibility to claim deduction u/s 80HHC is not disputed. It is only some of the components of total income from exports on which the assessee has claimed benefit of deduction u/s 80HHC of the Act that have been excluded by the Assessing Officer while computing the deduction. In Assessment Year 1995-96 similar ground was raised by the assessee before the Tribunal assailing exclusion of excise duty and sales tax from the total turnover while computing deduction u/s 80HHC of the Act. The Coordinate Bench in appeal by the assessee in ITA No.3144/Mum/1999(supra) decided this issue in favour of the assessee by placing reliance on the judgment rendered by Hon'ble Supreme Court of India in the case of CIT vs. Laxmi Machine Works, 290 ITR 667. The facts germane to the issue raised the present appeal are admittedly identi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses attributable to other Income and export incentive, estimated at 10%. We find that similar issue had come up before the Co-ordinate Bench in assessee's own case for the Assessment Year 1995-96 (supra). The Tribunal after examining the issue placed reliance on the decision of Hon'ble Supreme Court of India in the case of Hero Exports vs. CIT 295 ITR 454 and the decision of Special Bench of the Tribunal in the case of Surendra Engineering Corporation vs. ACIT, 86 ITD 121 and decided the issue in favour of assessee. For the sake of brevity the findings of the Co-ordinate Bench are not reproduced hereunder. The Revenue could not controvert the findings of Coordinate Bench on the issue. Following the decision of Tribunal in assessee's own case for the immediately preceding Assessment Year, the additional ground No.2 of the appeal is allowed." 94. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y. 1996-97 is respectfully followed, accordingly, ground raised by the assessee is allowed." Following the decision of the ITAT we don't find any merit therefore, this ground of appeal of the revenue sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
