2012 (8) TMI 1046 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of DEPB entitlement/Duty drawbacks.
2. Inclusion of sale of used packing material and scrap in turnover of 10-B Unit.
3. Deduction u/s 80IA for captive power plant.
4. Disallowance of ESI contribution.
5. Disallowance u/s 14A.

Summary:

1. Taxability of DEPB entitlement/Duty drawbacks:
The Revenue challenged the CIT(A)'s decision to tax DEPB entitlement/Duty drawbacks on an accrual basis, citing the reversal of the Topman Exports decision by the Bombay High Court in CIT vs. Kalpataru Colours & Chemicals Ltd. However, the ITAT upheld the CIT(A)'s decision, noting that the Supreme Court had ultimately upheld the Topman Exports decision. Consequently, the Revenue's appeals were dismissed.

2. Inclusion of sale of used packing material and scrap in turnover of 10-B Unit:
The AO included the sale of scraps and raw material in the turnover of the 10-B Unit, which the CIT(A) upheld. However, the ITAT referred to its earlier decision in the assessee's case for AY 2004-05, which held that such sales should not be included in the turnover for the purpose of deduction u/s 10B. Therefore, the ITAT directed the AO to exclude these sales from the turnover, allowing the assessee's grounds on this issue.

3. Deduction u/s 80IA for captive power plant:
The assessee claimed deduction u/s 80IA for a gas-based Genset installed in AY 2003-04, which the AO and CIT(A) denied, arguing it was not an independent undertaking. The ITAT noted the need for further examination of whether the Genset could be considered an independent undertaking eligible for deduction u/s 80IA. The issue was restored to the AO for fresh determination, considering legal principles and facts.

4. Disallowance of ESI contribution:
In AY 2006-07, the AO disallowed ESI contributions made beyond the due date. The ITAT referenced the Supreme Court's decision in CIT vs. Alom Extrusions Ltd and the Delhi High Court's decision in AIMIL Ltd, which allowed such contributions if paid before filing the return. The ITAT directed the AO to allow the claimed amounts.

5. Disallowance u/s 14A:
The AO disallowed amounts u/s 14A for AY 2006-07. The ITAT noted that Rule 8D was not applicable for the year under consideration and directed the AO to re-examine the issue in light of the principles laid down in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT. The issue was restored to the AO for fresh examination and determination.

Conclusion:
The assessee's appeals for AY 2005-06 and 2006-07 were allowed for statistical purposes, while the Revenue's appeals were dismissed. The order was pronounced in the open court on 10th August, 2012.