2010 (2) TMI 948 - AT - Income Tax

Summary

Issues:
1. Granting depreciation in vehicles purchased in the name of directors
2. Deletion of addition under section 92AC read with section 92C(3) of the Income-tax Act
3. Treatment of sales tax and excise duty in computing deduction under section 80HHC
4. Treatment of interest from customers, insurance claim, and scrap sales as part of business profits for deduction under section 80HHC

Analysis:

Issue 1: Granting Depreciation in Vehicles
The Tribunal found that the issue of granting depreciation on vehicles purchased in the name of directors was previously decided in favor of the assessee in a similar case. Referring to the judgment of the Hon'ble Bombay High Court, it was held that depreciation is allowable to the beneficial owner. Therefore, the Tribunal dismissed the revenue's appeal, deciding the issue against the revenue and in favor of the assessee.

Issue 2: Deletion of Addition under Section 92AC
The Assessing Officer made an adjustment to the profits of the assessee concerning transactions with associated enterprises. The CIT(A) deleted the addition, noting the negligible difference and the failure to consider the 5% threshold. However, the Tribunal found that neither the Assessing Officer nor the CIT(A) discussed the issue in detail. Therefore, the Tribunal set aside the issue for fresh consideration by the Assessing Officer, emphasizing compliance with the second proviso to section 92C.

Issue 3: Treatment of Sales Tax and Excise Duty
Citing the decision of the Hon'ble Supreme Court, the Tribunal held that excise duty and sales tax cannot be included in the "total turnover" under section 80HHC. The interpretation emphasized that certain receipts do not form part of business profits as they lack a nexus with export activities. Consequently, the issue was decided against the revenue.

Issue 4: Treatment of Interest, Insurance Claim, and Scrap Sales
Regarding interest from customers, insurance claim, and scrap sales, the Tribunal referred to previous judgments favoring the assessee. It upheld the order of the CIT(A) on these aspects, deciding the issue against the revenue. However, due to insufficient discussion on scrap sales and insurance claims, the Tribunal remitted the matters back to the Assessing Officer for reconsideration in light of relevant legal precedents.

In conclusion, the Tribunal partly allowed the revenue's appeal for statistical purposes, addressing various issues related to depreciation, transfer pricing adjustments, deduction computation under section 80HHC, and treatment of specific receipts for business profits.