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2012 (12) TMI 189 - AT - Income TaxDis-allowance u/s 14A - expenses attributable to exempt income - Held that - Admittedly, assessee was having sufficient interest free funds to cover the investment made in shares of which income is exempt u/s 10. In case of CIT vs. Hero Cycles Limited (2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT ) it has been held that disallowance u/s 14A is not permissible where no nexus between the expenditure incurred and income generated has been established. If the investment is made out of the assessee s own interest free funds, no disallowance can be made u/s 14A - Decided in favor of assessee Depreciation on trucks used for its own business for transportation of milk from collection centre to the processing plants of the assessee company - higher depreciation @ 30% as claimed by assessee or 15% - Held that - Issue is squarely covered in favour of the Revenue by the judgment in the case of CIT vs. Anupchand & Co.(1999 (6) TMI 25 - MADHYA PRADESH HIGH COURT ) Dis-allowance of deduction u/s 80-IB - AO on observation that assessee was having two units (deduction is available u/s 80IB on Kosi unit) and and utilise common funds to earn income, apportioned income between two units on sale basis and dis-allowed deduction in respect of Dholpur unit - Held that - CIT(A) rightly rejected the AO s formula of apportion method of other income on the basis of sale between two units on observation that once the assessee is maintaining separate Profit & Loss account for the unit on which section 80-IB is available, deduction u/s 80-IB is to be calculated accordingly - Decided against Revenue Dis-allowance of deduction u/s 80-IB in respect of other income viz Insurance claim, other charges, interest received, miscellaneous receipts and scrap sales - Held that - Insurance claim in respect of receipt/income on goods damaged in transit is eligible for deduction u/s 80-IB, however insurance claim of car is rightly disallowed. Deduction u/s 80-IB - Held that - In respect of other charges it is observed that these are petty amounts on account of difference in sale bills which is pertaining to the assessee s business and such petty receipts are income derived from Industrial Undertaking. Therefore, deduction u/s 80-IB is allowed. Deduction u/s 80-IB - Interest received - Held that - Interest income accrued to the assessee, from investment in bank could not be treated as income derived from Industrial Undertaking merely because the original nucleus funds which had yielded the interest came from an Industrial Undertaking. Deduction u/s 80-IB - Miscellaneous receipts comprising of cancellation charges against supply order of SMP and income transfer from H.O v- Held that - Cancellation charges against supply order is income derived from Industrial Undertaking. Therefore, the same is allowable u/s 80IB. Other petty amount of transfer from HO is treated to be same nature. Deduction u/s 80-IB - Scrap sales - Held that - Scrap sale is income derived from Industrial Undertaking and allowable u/s 80IB Addition on account of interest attributable to the payment of Income Tax - increase in interest cost presumed to be towards payment of huge income tax - Held that - Assessee was having sufficient own funds, therefore, such lump sum disallowance on presumption basis is not warranted. Therefore, the same is deleted. Addition towards capital work-in-progress - lump sum dis-allowance on presumption basis that the borrowed fund has been used for the purpose of capital work-in-progress - Held that - Issue is squarely covered in favour of the assessee by the judgement of the Apex Court in the case of DCIT vs. Core Health Care Limited (2008 (2) TMI 8 - SUPREME COURT OF INDIA). Dis-allowance of deduction u/s 80IB on the ground that the assessee made purchase of finished goods and sold the same - Held that - A.O. had disallowed the claim of the assessee u/s 80-IB on presumption basis without determining the exact amount of disallowance. It is not the case of the A.O. that the said amount is not from the Industrial Undertaking. Such disallowance of deduction u/s 80IB is not sustainable in law.
Issues Involved:
1. Disallowance of interest expenditure under Section 14A of the Income Tax Act. 2. Depreciation rate applicable to trucks used by the assessee. 3. Deduction under Section 80-IB of the Income Tax Act. 4. Addition on account of interest attributable to the payment of Income Tax. 5. Addition towards capital work-in-progress. 6. Disallowance of deduction under Section 80-IB for purchase of finished goods. Issue-wise Detailed Analysis: 1. Disallowance of Interest Expenditure under Section 14A: The assessee contended that the disallowance of Rs. 74,14,230 under Section 14A was not justified as the investments were made from its own funds. The Tribunal found that the assessee had sufficient own funds to cover the investments in shares, referencing the I.T.A.T. Agra Bench's decision in the assessee's own case for A.Y. 2007-08. The Tribunal concluded that no disallowance under Section 14A was warranted and deleted the addition of Rs. 74,14,230. 2. Depreciation Rate Applicable to Trucks: The assessee claimed higher depreciation at 30% for trucks used in its business. However, the Tribunal upheld the CIT(A)'s decision, confirming that the trucks were not used for hire but for the assessee's own business, thus only normal depreciation of 15% was allowable, referencing the Hon'ble M.P. High Court's judgment in CIT vs. Anupchand & Co. 3. Deduction under Section 80-IB: The Tribunal addressed both the assessee's and Revenue's appeals concerning the deduction under Section 80-IB. The CIT(A) had allowed the deduction for certain incomes but disallowed it for others like insurance claims, interest received, and miscellaneous receipts. The Tribunal upheld the CIT(A)'s decision, allowing deductions for insurance claims related to goods damaged in transit and other charges but disallowing it for interest received and certain miscellaneous receipts, referencing the jurisdictional High Court's judgment in CIT vs. Kothari Products Limited. 4. Addition on Account of Interest Attributable to the Payment of Income Tax: The A.O. made a lump sum addition of Rs. 1,00,000, presuming that borrowed funds were used to pay Income Tax. The Tribunal found that the assessee had sufficient own funds and deleted the addition, rejecting the A.O.'s presumption-based disallowance. 5. Addition Towards Capital Work-in-Progress: The A.O. disallowed Rs. 1,00,000 on the presumption that borrowed funds were used for capital work-in-progress. The Tribunal, referencing the Apex Court's judgment in DCIT vs. Core Health Care Limited, found that the disallowance was not warranted and deleted the addition. 6. Disallowance of Deduction under Section 80-IB for Purchase of Finished Goods: The A.O. disallowed Rs. 50,000 on the presumption that the assessee did not manufacture the goods. The Tribunal found that the disallowance was made on a presumption basis without proper calculation and directed the A.O. to allow the claim, concluding that such disallowance was not sustainable in law. Conclusion: The appeal of the assessee was partly allowed, and the appeal of the Revenue was dismissed. The Tribunal provided detailed reasoning for each issue, referencing relevant case laws and ensuring that the decisions were based on material facts and legal precedents.
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