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Issues Involved:
1. Reopening of assessment. 2. Disallowance of interest incurred on capital borrowed for Amorphous Project under section 36(1)(iii). 3. Addition of provision for doubtful debts in computing book profit under section 115JB. 4. Deduction under section 80HHC while computing book profit under section 115JB. 5. Depreciation on computer peripherals. 6. Disallowance of usance interest on import bills due to non-deduction of tax under section 195. 7. Disallowance of notional value of unutilized import entitlements due to change in accounting policy. Issue-wise Detailed Analysis: 1. Reopening of Assessment: The first issue was the reopening of the assessment under section 148. The original assessment was completed under section 143(3) and later reopened to add an unascertained liability of Rs. 48,21,346 towards provision for doubtful debts. The Tribunal held that reopening was based on a change of opinion and not on new material. The Assessing Officer had all relevant records during the original assessment. Hence, the reopening was invalid, and the CIT(A)'s order favoring the assessee was upheld. 2. Disallowance of Interest on Capital Borrowed for Amorphous Project: The second issue concerned the disallowance of interest on capital borrowed for the Amorphous Core Project under section 36(1)(iii). The Assessing Officer disallowed the interest, treating it as capital expenditure. The Tribunal found that the Amorphous Metal Plant was an extension of the existing business, satisfying the criteria of common management, control, and funds. Therefore, the interest was allowable as revenue expenditure under section 36(1)(iii). 3. Addition of Provision for Doubtful Debts in Computing Book Profit: The third issue was the addition of provision for doubtful debts in computing book profit under section 115JB. The Tribunal referred to the Supreme Court decision in CIT vs. HCL Comnet Systems and Services, which held that provisions for doubtful debts are not to be added back to book profits as they do not constitute a liability. Consequently, the Tribunal upheld the CIT(A)'s decision in favor of the assessee. 4. Deduction under Section 80HHC while Computing Book Profit: The fourth issue was the deduction under section 80HHC while computing book profit under section 115JB. The Tribunal referred to the Supreme Court judgment in Ajanta Pharma Ltd. vs. CIT, which allowed 100% of export profits to be deducted from book profits under section 115JB. The Tribunal ruled in favor of the assessee, allowing the deduction as claimed. 5. Depreciation on Computer Peripherals: The fifth issue was the rate of depreciation on computer peripherals. The Tribunal ruled that computer peripherals are entitled to 60% depreciation as per the depreciation schedule in the Income-tax Rules, aligning with the Kolkata Tribunal's decision in ITO vs. Samiran Majumdar. The Revenue's appeal on this issue was dismissed. 6. Disallowance of Usance Interest on Import Bills: The sixth issue was the disallowance of usance interest on import bills due to non-deduction of tax under section 195. The Tribunal referred to the Supreme Court decision in Vijay Ship Breaking Corporation & Ors. vs. CIT, which held that usance interest is part of the purchase price and not subject to TDS. Consequently, the Tribunal allowed the assessee's appeal, holding that the provisions of section 195 r.w.s. 40(a)(ia) were not applicable. 7. Disallowance of Notional Value of Unutilized Import Entitlements: The seventh issue involved the disallowance of notional value of unutilized import entitlements due to a change in accounting policy. The Tribunal held that the Assessing Officer could not make adjustments to the book profit beyond the provisions of section 115JB. The change in accounting policy was accepted as per the Companies Act, and the disallowance was not justified. However, for normal income computation, the Assessing Officer could disallow the amount if it was not offered to tax in earlier years. Conclusion: The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals, providing detailed reasoning for each issue based on legal precedents and the specific facts of the case. The judgment emphasized the importance of adhering to established accounting principles and legal interpretations.
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