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2016 (6) TMI 1145 - AT - Income TaxPrior period expenses allowed in accordance with the order of Co-ordinate Bench in assessee s case for AY 2004-05 Depreciation on Cars - Held that - A.O. simply disallowed the depreciation stating that the cars were registered in the names of the Directors. That alone cannot be a reason for disallowance unless it is examined whether the cars are purchased by the company but registered in the name of the Director or it is Director s vehicles purchased from their source treated as companies assets. Further the usage also has not been examined. It is also noticed that the CIT (A) in the later year has given findings that that assets have been purchased by the company and accordingly the depreciation is allowable following the decision of the Hon ble Supreme Court in the case of Mysore Minerals Ltd. 1999 (9) TMI 1 - SUPREME Court. However there is no finding with reference to the details of payments and ownership. For these reasons we are of the opinion that the issue has to be re-examined by the A.O. in the light of the above observations for which purpose the issue is restored to the file of the A.O. to re-examine the nature of purchase of car source thereof and claim of expenditure etc. Commission of export to Iraq - Held that - The commission on export activity had been fully disclosed in all correspondences and an activity in relation to export the commission was paid through banking channel of RBI approval and it was paid pursuant to an agreement approved by Government of India and UN. The payment of commission was for business consideration and there was apparently no illegality in making payment of commission. Besides this nothing has brought on record to show that the transactions relating to payment of commission are non-genuine or are excessive and unreasonable. The Volker Commission report had discussed about the utilization of money by the recipient of the commission in parting some of the fund so received as commission with the Government of Iraq and such parting of commission with the Government of Iraq was objected to by the Volker Commission report which was a pact between the Iraq Government and the UN wherein as it appears neither the appellant company is involved nor Government of India is involved. See CIT vs. Rajrani Export 2013 (5) TMI 410 - CALCUTTA HIGH COURT Disallowance of DEPB/DEFRC - Held that - Issue referred back for reconsideration Exchange rate gain on forward contract is business income. Accordingly the foreign exchange gain would be export profit and hence cannot be excluded from export turnover under Section 80HHC of the Income Tax Act 1961.
Issues Involved:
1. Reopening of assessment 2. Prior Period Expenditure 3. Disallowances under Section 14A/36(1)(iii) 4. Depreciation on cars 5. Export to Iraq 6. Deduction under Section 80HHC 7. Exclusion of foreign exchange gain from total turnover and export turnover Issue-wise Detailed Analysis: 1. Reopening of Assessment - Summary: The assessee did not press this ground, and it was dismissed as not pressed. 2. Prior Period Expenditure - Summary: The assessee argued that the disallowance of Rs. 61,874 was covered in their favor by a previous tribunal order for AY 2004-05. The Tribunal agreed, directing the AO to allow the prior period expenses in accordance with the order for AY 2004-05, emphasizing the principle of consistency. 3. Disallowances under Section 14A/36(1)(iii) - Summary: The assessee did not press this ground, and it was dismissed as not pressed. 4. Depreciation on Cars - Summary: The assessee claimed depreciation on cars purchased in the name of an employee. The Tribunal referred to the previous order for AY 2004-05, which required examining whether the cars were purchased by the company and merely registered in the employee's name. The Tribunal directed the AO to re-examine the issue, following the principle of consistency. 5. Export to Iraq - Summary: The assessee argued that the disallowance of commission paid for exports to Iraq was covered in their favor by various tribunal and high court decisions. The Tribunal agreed, noting that there was no evidence to prove the payments were illegal, and allowed the ground in favor of the assessee. 6. Deduction under Section 80HHC - 6.1 Disallowance of Commission: This was considered consequential to the decision on the export to Iraq issue and thus allowed in favor of the assessee. - 6.2 DEPB/DFRC: The Tribunal noted that this issue was covered by the Supreme Court's decision in Topman Exports vs. CIT. The Tribunal restored the matter to the CIT(A) for fresh consideration in light of the Supreme Court's judgment. - 6.3, 6.4, 6.5(iv), and 6.6: These grounds were not adjudicated by the CIT(A) and were restored to the CIT(A) for fresh consideration. - 6.5(i), (ii), (iii), (vi): Similar to the previous grounds, these were restored to the CIT(A) for fresh consideration, following the principle of consistency. 7. Exclusion of Foreign Exchange Gain from Total Turnover and Export Turnover - Summary: The Revenue's appeal on this issue was dismissed. The Tribunal referred to its previous decision for AY 2003-04, which was upheld by the jurisdictional High Court. The High Court had ruled that foreign exchange gains related to export proceeds should be included in export turnover and profit of business for Section 80HHC calculations. Additional Points: - Ground No. 3(a) of Revenue's Appeal: The Tribunal restored this issue to the AO for fresh consideration in line with the jurisdictional High Court's direction in the assessee's own case. - Ground No. 3(b) of Revenue's Appeal: This ground was rejected as it did not arise from the CIT(A)'s order. Conclusion: - Assessee's Appeal: Allowed in part, with several issues restored to the CIT(A) or AO for fresh consideration. - Revenue's Appeal: Partly allowed, with some grounds dismissed and others restored for fresh consideration.
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