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2012 (12) TMI 574 - AT - Income TaxDisallowance of quantity discount u/s 40A(2)(b) - the dispute is for free cells and not trade discount. - the free cells scheme is on the basis of sales at the point of stokist and, therefore, details of free cells passed on to various stokists is necessary to determine whether free cells were actually passed on or not. Regarding this argument of the assessee that distribution of free cells is by way of quantity discount and, therefore, the same is not covered u/s 40A(2b), - held that - it was decided by Ld. CIT(A) that the assessee has claimed costs in respect of distribution of free cells in the P & L account and, therefore, it amounts to claim of expenses. - Decision of CIT(A) confirmed. - Decided against the assessee. Disallowance of royalty of Rs.4,45,53,651/- by invoking the provisions of Section 40A(2b) - TPO has made addition on account of payment of royalty on the ground that the assessee did not provide details of cost of development of technology by the separate enterprise and the information relating to payment of royalty by other group companies. - held that - the claim of assessee is not correct that those documents were furnished by the assessee before Ld. CIT(A) and before us also, these documents are not submitted by way of compliance of the relevant Tribunal rules and, therefore, the same are not admitted - Decided against the assessee. Deduction u/s 80IB - assessee failed to file mandatory form No. 10CCB with the return of income - held that - even if it was a procedural requirement and the assessee could not submit the same along with return of income for any reason, there could not be any reason for non-submission of the same before the completion of the assessment proceedings and the assessee in the present case has not submitted the same even during assessment proceedings. - Decided against the assessee. Computation of eligible profit - reduction of interest on overdue customers and on staff loan - held that - if deduction is not allowable to the assessee u/s 80-IB, individual item of income is not required to be examined for eligibility of deduction u/s 80-IB - Decided in favor of assessee.
Issues Involved:
1. Disallowance of amortization of premium paid for land taken on lease. 2. Ad hoc disallowance of miscellaneous and welfare expenses. 3. Deduction claimed under section 80-IB of the Income Tax Act, 1961. 4. Allocation of expenses and computation of deduction under section 80HHC. 5. Disallowance of royalty payment under section 40A(2b). 6. Addition of sale of scrap in total turnover for computing deduction under section 80HHC. 7. Reduction of 90% of certain incomes from business profits for computing deduction under section 80HHC. 8. Allocation of export expenses for computing deduction under section 80HHC. 9. Allocation of indirect expenses for computing deduction under section 80HHC. 10. Non-filing of mandatory Form 10CCB for claiming deduction under section 80-IB. 11. Addition under section 14A for expenditure attributable to exempt income. Detailed Analysis: 1. Disallowance of Amortization of Premium Paid for Land Taken on Lease: The Tribunal found that the issue was covered in favor of the assessee by the tribunal order in the assessee's own case for the assessment year 2002-03 and the judgment of the Gujarat High Court in Sun Pharmaceutical Ind. Ltd. vs. DCIT. Thus, the disallowance made by the AO and confirmed by the CIT(A) was deleted. 2. Ad Hoc Disallowance of Miscellaneous and Welfare Expenses: The Tribunal noted that the issues were covered against the assessee by the tribunal order for the assessment year 2002-03. Consequently, the ad hoc disallowances of Rs. 84,908/- for miscellaneous expenses and Rs. 2,08,999/- for welfare expenses were upheld. 3. Deduction Claimed Under Section 80-IB: - Interest on Staff Loan: The Tribunal rejected the claim as it was covered against the assessee by the tribunal order for the assessment year 2002-03. - Insurance Claim: The Tribunal allowed the claim, following the decision of the Special Bench of the Tribunal in Nirma Industries Ltd. vs. ACIT. - Discount Receipt: The Tribunal allowed the claim, following the tribunal order for the assessment year 2002-03, noting it as a reduction in purchase price and not income. 4. Allocation of Expenses and Computation of Deduction Under Section 80HHC: - Sale of Scrap: The Tribunal held that the assessee is not eligible for deduction under section 80HHC for sales of scrap but should include it in the formula for computing the deduction. - Reduction of 90% of Certain Incomes: The Tribunal rejected the assessee's claim, following the tribunal order for the assessment year 2002-03. - Netting of Interest Income: The Tribunal restored the matter to the AO for fresh consideration in light of the Supreme Court judgment in ACG Associated Capsules Pvt. Ltd. vs. CIT. - Allocation of Export Expenses: The Tribunal set aside the issue to the AO for verification, following the tribunal order for the assessment year 1998-99. - Allocation of Indirect Expenses: The Tribunal rejected the assessee's claim, following the tribunal order for the assessment year 1998-99. 5. Disallowance of Royalty Payment Under Section 40A(2b): The Tribunal rejected the assessee's claim due to the failure to provide necessary details and information to demonstrate that the royalty payment was at arm's length price. 6. Addition of Sale of Scrap in Total Turnover for Computing Deduction Under Section 80HHC: The Tribunal held that the assessee is not eligible for deduction under section 80HHC for sales of scrap but should include it in the formula for computing the deduction. 7. Reduction of 90% of Certain Incomes from Business Profits for Computing Deduction Under Section 80HHC: The Tribunal rejected the assessee's claim, following the tribunal order for the assessment year 2002-03. 8. Allocation of Export Expenses for Computing Deduction Under Section 80HHC: The Tribunal set aside the issue to the AO for verification, following the tribunal order for the assessment year 1998-99. 9. Allocation of Indirect Expenses for Computing Deduction Under Section 80HHC: The Tribunal rejected the assessee's claim, following the tribunal order for the assessment year 1998-99. 10. Non-Filing of Mandatory Form 10CCB for Claiming Deduction Under Section 80-IB: The Tribunal upheld the AO's disallowance due to the assessee's failure to submit the mandatory form 10CCB even during the assessment proceedings. 11. Addition Under Section 14A for Expenditure Attributable to Exempt Income: The Tribunal upheld the CIT(A)'s decision to delete the addition, noting that the AO had made the addition without any discussion in the assessment order. Conclusion: Both the appeals of the revenue and the assessee were partly allowed, with specific issues being upheld or remanded for fresh consideration based on the established precedents and the facts of the case.
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