2010 (5) TMI 809 - AT - Income Tax

Summary

Issues Involved:
1. Allowance of depreciation.
2. Computation of deduction under section 80HHC.
3. Addition to book profit under section 115JB.
4. Disallowance of ESI payments.
5. Determination and carry forward of long-term capital loss.
6. Computation of interest under sections 234B and 234C.
7. Exclusion of sales tax and excise duty from total turnover.
8. Confirmation of disallowance of deduction under section 80HHC on DEPB credit.
9. Reduction of deduction under section 80HHC while computing book profit under section 115JB.

Detailed Analysis:

1. Allowance of Depreciation:
The Assessing Officer (AO) disallowed excess depreciation claimed by the assessee by changing the method of calculating depreciation from SLM to WDV. The CIT(A) directed the AO to allow depreciation based on earlier appellate orders. The ITAT upheld this decision, citing previous ITAT decisions in the assessee's favor.

2. Computation of Deduction Under Section 80HHC:
The AO included excise duty and sales tax in the total turnover while computing the deduction under section 80HHC. The CIT(A) directed the AO to recompute the deduction as per the prevailing law. The ITAT upheld the CIT(A)'s direction, noting that the relevant provisions of section 80HHC were amended after the assessment order was passed.

3. Addition to Book Profit Under Section 115JB:
The AO added an amount of Rs. 1,11,75,348 on account of the write-back of excess provision of income tax of an earlier year while determining book profits under section 115JB. The CIT(A) deleted this addition, and the ITAT upheld the CIT(A)'s decision, noting that the provision had already been considered in the previous assessment year.

4. Disallowance of ESI Payments:
The AO disallowed belated ESI payments. The CIT(A) allowed the claim, relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. The ITAT upheld the CIT(A)'s decision, noting that the payments were made before the due date of filing the return under section 139(1).

5. Determination and Carry Forward of Long-Term Capital Loss:
The CIT(A) directed the AO to verify the assessee's claim and determine the long-term capital loss for carry forward and set-off in succeeding years. The ITAT upheld this direction, finding no infirmity in the CIT(A)'s order.

6. Computation of Interest Under Sections 234B and 234C:
The AO levied interest under sections 234B and 234C. The CIT(A) upheld the levy but directed the AO to allow credit under section 115JAA. The ITAT upheld the CIT(A)'s direction, citing decisions of the Hon'ble Delhi High Court and the Hon'ble Madras High Court.

7. Exclusion of Sales Tax and Excise Duty from Total Turnover:
The AO included sales tax and excise duty in the total turnover for computing deduction under section 80HHC. The CIT(A) directed the AO to exclude these amounts. The ITAT upheld the CIT(A)'s direction, citing the decision of the Hon'ble Supreme Court in the case of CIT vs. Lakshmi Machine Works.

8. Confirmation of Disallowance of Deduction Under Section 80HHC on DEPB Credit:
The AO disallowed the deduction under section 80HHC on DEPB credit, stating that the assessee did not fulfill the conditions stipulated in the third proviso to section 80HHC(3). The CIT(A) upheld the AO's decision. The ITAT set aside the CIT(A)'s order and remitted the matter back to the CIT(A) for fresh consideration in light of the Special Bench decision in the case of M/s Topman Exports.

9. Reduction of Deduction Under Section 80HHC While Computing Book Profit Under Section 115JB:
The AO rejected the assessee's claim for reduction of deduction under section 80HHC while computing book profit under section 115JB. The CIT(A) upheld the AO's decision. The ITAT set aside the CIT(A)'s order and remitted the matter back to the CIT(A) for fresh consideration in light of various judicial pronouncements, including the decision of the Mumbai Special Bench in the case of Syncome Formulations (I) Ltd.

Conclusion:
The ITAT dismissed the appeals of the Revenue and partly allowed the appeals of the assessee for statistical purposes. The matters were remitted back to the CIT(A) for fresh consideration on specific issues, particularly those related to the deduction under section 80HHC and the computation of book profit under section 115JB.