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2011 (5) TMI 578 - AT - Income TaxDisallowance of rural development expenditure - Held that - The impugned issue has been decided by the Tribunal in assessee s own case against the assessee and in favour of the revenue following the earlier order of the Tribunal for the Assessment Years 1990-91 to 1993-94 thus respectfully following the consistent view of the Tribunal the disallowance made by the AO upheld - Appeal is rejected Disallowance of provisions for contractual liability towards the third party converters - Held that As decided in assessee s own case vide order dated 30.6.2010 that the said liability was a contingent liability and it was not deductible while computing the income of the assessee and accordingly confirmed the disallowance made by the AO - against assessee. Bad debts claim - disallowance as assessee has not furnished the details of doubtful bad debts - Held that - As decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX 2010 (2) TMI 211 - SUPREME COURT to obtain a deduction in relation to bad debts it is not necessary for the assessee to establish that the debt in fact has become irrecoverable. It is enough of the bad debt is written off as irrecoverable in the accounts of the assessee - as the AO in absence of any relevant details has not examined the issue it is to be send back the matter to the file of the AO to examine the same afresh - in favour of assessee by way of remand. Unrecorded sales - Held that - Nothing is found during the course of survey to show that the assessee has made a sale out of the books of account. The milk fat is subject matter of excise regulations and assessee is showing the same to the excise authorities and the said record. i.e. excise register etc supports the case of the assessee that whatever the production of the milk fat is shown is correct. Also as per the statement filed by the assessee the assessee has given the detailed break-up of the cans. There is also some force in the argument of Ld. Counsel that the weight of each and every filed-in can is not taken. There is some variation and it cannot be presumed that in each and every can the weight of the milk fat is 50 KGs. Even presuming that each and every can is having the milk fat of 50 Kgs. then on the basis of the production log-sheet the total fat produced during the year come to 4, 17, 476 kgs. only and while as per the excise register the total milk fat production is declared at 4, 70, 674 kgs. Thus production log sheet (PLS) which was found during the course of survey action cannot be said to be conclusive as even as per the AO it is normally 50Kgs. In the absence of any distinguishing features brought on record by the revenue appeal decided in the favour of assessee Regarding deduction u/s 80HHC - Held that - Respect fully following the order of the Tribunal in assessee s own case direct the AO that the miscellaneous income shown by the assessee should be included in the total turnover. However with regard to the exclusion of 90% of the said income while computing the profits of the business the decision in CIT V/s K.Ravindranathan Nair 2007 (11) TMI 10 - SUPREME COURT OF INDIA is to follwed to hold that the same should also be reduced from the business profits for the purpose of Clause (baa) of Explanation to Section 80HHC - against assessee. Claim received from insurance interest other income and octroi refund - computation of deduction u/s 80HHC - Held that - As assessee has failed to show that the receipt of interest other income and octroi refund has nexus with the export of the assessee AO was justified in excluding 90% of the receipt of all in view of the Explanation (baa) to section 80HHC. With regard to the amount of insurance claim in the absence of any details the issue remitted back to the file of the AO to verify the same and decide the issue afresh in the light of the decision of the Hon. Jurisdictional High Court in the case of CIT V/s Pfizer Ltd. (2010 (6) TMI 433 - BOMBAY HIGH COURT) - partly in favour of assessee. Netting off interest received from the Income Tax Department and paid to the Department - Held that - As in Sandvik Asia Ltd. Versus JCIT Spl. Range 5 Pune 2011 (11) TMI 509 - ITAT PUNE AO was directed to tax only the net interest income in the hands of the assessee - as CIT(A) has not dealt with the issue send the matter back his file to decide the issue afresh - in favour of assessee by way of remand.
Issues Involved:
1. Disallowance of rural development expenditure. 2. Disallowance of provisions for contractual liability. 3. Disallowance of bad debts. 4. Addition of unrecorded sales. 5. Inclusion of miscellaneous income in total turnover for Section 80HHC. 6. Exclusion of certain incomes from business profits for Section 80HHC. 7. Non-determination of capital loss. 8. Netting off interest received from and paid to the Income Tax Department. Issue-wise Detailed Analysis: 1. Disallowance of Rural Development Expenditure: The assessee's claim for rural development expenditure was disallowed by the AO on the grounds of no business nexus. The CIT(A) upheld this disallowance citing previous Tribunal decisions against the assessee. The Tribunal, following its consistent view, rejected the assessee's ground. 2. Disallowance of Provisions for Contractual Liability: The claim for contractual liability towards third-party converters was disallowed as a contingent liability. The CIT(A) upheld this disallowance based on previous appellate orders. The Tribunal, following its earlier decisions, confirmed the disallowance. 3. Disallowance of Bad Debts: The AO disallowed the bad debts claim due to lack of evidence. The CIT(A) upheld this disallowance. However, the Tribunal, referencing the Supreme Court's decision in T.R.F. Ltd. v. CIT, remanded the matter back to the AO to verify if the bad debts were written off in the accounts. 4. Addition of Unrecorded Sales: The AO added unrecorded sales based on discrepancies found during a survey of the assessee's sister concern. The CIT(A) confirmed this addition. The Tribunal, following its decision for the previous assessment year, deleted the addition due to lack of evidence of sales out of the books. 5. Inclusion of Miscellaneous Income in Total Turnover for Section 80HHC: The AO included miscellaneous income in total turnover for Section 80HHC deduction. The CIT(A) upheld this inclusion. The Tribunal, referencing its earlier decision, confirmed that miscellaneous income should be included in the total turnover but also reduced 90% of the same from business profits as per the Supreme Court's decision in CIT v. K. Ravindranathan Nair. 6. Exclusion of Certain Incomes from Business Profits for Section 80HHC: The AO excluded 90% of insurance claim, interest, other income, and octroi refund from business profits. The CIT(A) upheld this exclusion. The Tribunal, following its earlier decision, confirmed the exclusion of interest and other income but remanded the issue of insurance claim back to the AO for verification in light of the jurisdictional High Court's decision in CIT v. Pfizer Ltd. 7. Non-determination of Capital Loss: The assessee did not press this ground, and the Tribunal rejected it due to lack of supporting material. 8. Netting off Interest Received from and Paid to the Income Tax Department: The AO added net interest received from the department. The CIT(A) upheld this addition. The Tribunal, referencing its earlier decision, remanded the matter back to the CIT(A) to decide afresh with proper section-wise details of interest. Conclusion: The Tribunal partly allowed the appeals for statistical purposes, remanding certain issues back to the AO and CIT(A) for fresh consideration and verification in light of relevant judicial precedents. The assessee's grounds were rejected or upheld based on consistent Tribunal views and Supreme Court decisions. The order was pronounced in the open court on 11.5.2011.
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