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2012 (7) TMI 269 - AT - Income TaxTaxability of advance license benefit receivable - whether the value of such ALBR by the assessee could be treated as income accrued to them in the year when the exports were actually made or such income would accrue only in the year when the duty-free raw material was actually imported pursuant to such import licenses - Held that - ALBR benefit is contingent and it materializes only when the relevant imports are made and not earlier and therefore the same cannot be said to accrue prior to the import of raw material - The assessee had maintained their accounts on accrual basis, accounted for the value of such benefit only in the year in which the corresponding export obligation had duly been dis-charged - the income represented by the value of ALBR by the assessee had been accounted for in the books of account in the year when the exports had actually been made, which was in conformity with one of the alternative recognized methods of accounting. The choice of choosing one of the recognized alternative methods of accounting rested with the assessee,the assessee could not thereafter contend while filing the return of income that such income should not be treated as having accrued in the year under consideration, as duty-free raw material had not actually been imported till the end of the relevant year but it should be treated as income accrued in the year, when raw material had actually been imported - CIT(A) had rightly held that the income by way of ALBR duly accounted for as income in the books of account maintained by the assessee in the year under consideration on accrual basis could not be excluded from the taxable income of the year under consideration. Dis allowance of claim in respect of deduction paid to GIDC as premium on leasehold land - Held that - As Coordinate Bench decision in assessee s own case is against them, thus following the same ground raised by assessee is dismissed - against assessee. Dis allowance of miscellaneous expenses in respect of leasehold land - Held that - Considering the nature of the expenditure incurred on the land being utilized in the business the amount is allowable as revenue expenditure - in favour of assessee. Disallowance on account of depreciation - Held that - Considering the assessee s submission that he has furnished revised statement of depreciation after excluding depreciation on interest capitalized in earlier year and in the A/Y 1992-93 the interest capitalized but claimed as revenue was not allowed and accordingly the depreciation had to be increased on a higher written down value - AO is directed to examine whether the interest capitalized in the books was allowed as revenue expenditure in that year. If it is allowed as revenue expenditure, the ground will become infructuous, else AO is directed to allow depreciation on the capitalized interest portion - in favour of assessee for statistical purposes. Allowing deductions u/s 80I and 80IA after deducting depreciation eligible u/s 32 - decided against assessee. Interest u/s 244A - Held that - Held that - As interest under section 244A was granted for the period upto 31/3/1994 although refund order was issued on 25.4.1994,claim is in favour of assessee for granting of one month interest. Computing the deduction u/s 80HHC - Held that - Even under section 80HHC(3)(c)(i) the profit is to be the adjusted profit of business. The adjusted profit of the business means a profit as reduced by the profit derived from business of exports out of India of trading goods. Thus, in calculating the profits under sub-section (3)(c)(i) one necessarily has to reduce the profits under subsection (3)(c)(ii)- AO is directed to work out the deduction accordingly as the loss derived from export of traded goods should be added back to the profits of the business while computing the adjusted profits of the business as required by clause (b) of the Explanation below section 80HHC(3) for arriving at the amount of deduction eligible under sub-section 3(c)(i)- in favour of assessee.
Issues Involved:
1. Taxability of advance license benefit receivable. 2. Deduction of premium on leasehold land. 3. Deduction of stamp duty paid for transfer of leasehold land. 4. Deduction of miscellaneous expenses for facilitating the use of leasehold land. 5. Disallowance of registration fee and stamp duty as capital expenditure. 6. Depreciation on plant and machinery items costing less than Rs. 5,000. 7. Depreciation claim as per revised statement considering interest capitalized. 8. Deductions under sections 80I and 80IA after deducting depreciation under section 32. 9. Treatment of interest under section 244A. 10. Computation of deduction under section 80HHC. Detailed Analysis: 1. Taxability of Advance License Benefit Receivable: The assessee showed an advance license receivable of Rs. 5,46,20,751/- and claimed a deduction based on the decision in M/s. Jamshri Ranjitsinghji Spg. & Wvg. Mills Ltd. The AO did not allow the claim and taxed the amount as adjusted in the books of account. The CIT (A) confirmed this. The ITAT Ahmedabad Tribunal in assessee's own case for earlier years held the issue against the assessee. The Hon'ble Gujarat High Court admitted the questions, and the matter is pending. The Hon'ble Bombay High Court in the case of M/s Excel Industries Ltd upheld that the amounts are taxable in the year in which benefits actually accrue. The Special Bench decision in Topman Exports also supported this view. Therefore, the ITAT followed the Coordinate Bench decision and dismissed the ground. 2. Deduction of Premium on Leasehold Land: The assessee paid Rs. 22,88,579/- as premium to GIDC. Despite citing favorable decisions, it was admitted that in assessee's own case for earlier years, the issue was held against the assessee. Following the Coordinate Bench decision, the ground was dismissed. 3. Deduction of Stamp Duty Paid for Transfer of Leasehold Land: This ground was not pressed by the assessee and was thus not considered. 4. Deduction of Miscellaneous Expenses for Facilitating the Use of Leasehold Land: The assessee spent Rs. 42,911/- on leveling charges, grass cutting, site cleaning, and digging. The AO and CIT (A) considered these as capital in nature. The ITAT held that these expenses are revenue in nature and allowed the deduction. 5. Disallowance of Registration Fee and Stamp Duty as Capital Expenditure: This ground was not pressed by the assessee and was thus not considered. 6. Depreciation on Plant and Machinery Items Costing Less Than Rs. 5,000: This ground was not pressed by the assessee and was thus not considered. 7. Depreciation Claim as per Revised Statement Considering Interest Capitalized: The assessee furnished a revised statement excluding depreciation on interest capitalized in the earlier year. The AO was directed to examine if the interest capitalized was allowed as revenue expenditure in that year. If allowed, the ground becomes infructuous; otherwise, the AO was directed to allow depreciation on the capitalized interest portion. The ground was allowed for statistical purposes. 8. Deductions under Sections 80I and 80IA After Deducting Depreciation Under Section 32: It was admitted that this issue was against the assessee by the ITAT orders for earlier years and the Hon'ble Bombay High Court decision in Plastibends India Ltd. Consequently, the ground was dismissed. 9. Treatment of Interest Under Section 244A: The assessee claimed interest under section 244A was granted only up to 31/3/1994, although the refund order was issued on 25/4/1994. The ITAT directed the AO to grant interest for the month of April 1994 or until the issuance of the refund order. The ground was allowed. 10. Computation of Deduction Under Section 80HHC: - 10(a): Loss from export of traded goods to be added back while computing adjusted profits of the business. The ITAT directed the AO to work out the deduction accordingly, following the Hon'ble Supreme Court decision in A.M. Moosa. - 10(b): Deduction as a supporting manufacturer in respect of export through export houses. The ITAT restored this issue to the AO for fresh consideration according to law and facts. Additional Grounds: - Ground Nos. 1 and 2: Not pressed. - Ground No. 3: Deduction under sections 80I and 80IA. The ITAT restored the matter to the AO for examination of the assessee's contentions and fresh decision. - Ground No. 4: Interest under section 234B. The issue was against the assessee by the Special Bench decision in Motorola Inc. The ground was dismissed. Conclusion: The appeal filed by the assessee was partly allowed. The order was pronounced in the open court on 30th May 2012.
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