2011 (8) TMI 1225 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of labour charges of Koramangala Unit in total turnover for calculation of deduction u/s 80HHC.
2. Treatment of Sales Tax Refund and Miscellaneous Income for deduction u/s 80HHC.
3. Disallowance of car expenses and depreciation.
4. Levy of interest u/s 234D.

Summary:

1. Inclusion of Labour Charges of Koramangala Unit in Total Turnover for Calculation of Deduction u/s 80HHC:
The AO included the turnover of the Koramangala unit amounting to Rs. 3,20,94,126 in the total turnover for the calculation of deduction u/s 80HHC, arguing that the unit's business was interlaced with the main business of the assessee. The assessee contended that the profits from labour charges were in the nature of other receipts and thus excluded from the total turnover. The Tribunal, following its earlier decision in the assessee's own case, set aside the order and remanded the matter back to the AO for fresh consideration, emphasizing the rule of consistency.

2. Treatment of Sales Tax Refund and Miscellaneous Income for Deduction u/s 80HHC:
The AO excluded the sales tax refund of Rs. 6,14,188 and miscellaneous income of Rs. 2,167 from the calculation of deduction u/s 80HHC, treating them as other income not connected with the main business. The Tribunal, referencing its previous decision and the judgment of the Hon'ble Bombay High Court in Alfa Laval India Ltd. V/s CIT, directed the AO not to exclude the sales tax refund while calculating the deduction u/s 80HHC. However, the exclusion of miscellaneous income of Rs. 2,167 was upheld due to lack of supporting material.

3. Disallowance of Car Expenses and Depreciation:
The AO disallowed 20% of car expenses and depreciation due to the absence of a logbook proving exclusive business use. The Tribunal, following its earlier decision in the assessee's own case, directed the AO to reduce the disallowance to 1/6th instead of 20%, acknowledging the possibility of personal use.

4. Levy of Interest u/s 234D:
The AO levied interest u/s 234D, which was upheld by the Commissioner of Income Tax (A) as consequential. The Tribunal, referencing the Special Bench decision in ITO V/s Ekta Promotors (P) Ltd., held that section 234D, effective from 1.6.2003, could not be applied to the assessment year 2003-04 or earlier years. Consequently, the levy of interest u/s 234D was deleted.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific directions for each issue as detailed above. The order was pronounced in the open court on 10th August, 2011.