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2013 (1) TMI 288 - AT - Income TaxExemption under Section 10B - Receipt on account of sale of vegetables, fruits, grass etc. - Held that - It is seen that these items have no connection with the industrial undertaking and are not derived from profits and gains of the undertaking, therefore, the finding given by the CIT(A) that it is to be excluded from the computation of income under Section 10B is confirmed - against the assessee. Stores Miscellaneous Sale in Century Denim Unit - Held that - This issue has been decided by the CIT(A) that the sale of miscellaneous stores cannot be held to be derived from export oriented undertaking and in absence of any detail to controvert the same, the finding of the CIT(A) is accordingly affirmed. The assessee could not explain as to how the sale of miscellaneous store items is derived from the activities carried on by the EOU undertaking. Thus, this issue is decided against the assessee. Receipts on account of cotton waste expenses - Held that - Assessee is engaged in manufacturing of Denim cloth in the said EOU, which results in cotton waste also - the cost of packing material for such packing of cotton waste is debited to the waste expenses and the amount received from the customers is credited to this account and net excess is shown in the profit and loss account. This sale is directly related to the activities carried out by the assessee and, is, therefore, derived from the undertaking of EOU. Thus, this income is directed to be included in the computation for exemption under Section 10B being derived from the said unit - issue allowed in favour of the assessee. Bonus on spare purchase from W.Schlafhorst A.G. & Co., Germany From 1.11.99 to 30.10.00 - Held that - From the perusal of the order of the AO as well as CIT(A), it is not clear whether the purchase for stores was on revenue account or not. If it is on the revenue account, then it is derived from the profit and gain from the EOU. Therefore this issue is restored back to the file of the AO to consider it afresh after giving due opportunity to the assessee - in favour of assessee for statistical purposes. Project expenses - revenue v/s capital - Held that - This issue has been decided in favour of the assessee in assessee s own case for the assessment year 2001-02 & also travelled upto the stage of Hon ble High Court wherein the departmental appeal on this question has been dismissed stating that the said expenditure was incurred by the assessee related to the same line of business carried on by the assessee and therefore allowable as revenue expenditure. The expenditure incurred related to salary, conveyance, legal and professional charges, printing and stationery, which are revenue in nature - in favour of assessee. Disallowance of written off on leasehold land in various division - Held that - The issue be set aside to the file of the AO following the preceding yea 2000-01 orders for re-examination of the issue in the light decision in the case of Mukund Ltd.(2007 (2) TMI 358 - ITAT MUMBAI) for finding the nature of the premium part - in favour of assessee for statistical purposes. Disallowance of provision for doubtful debts and advances while computing the book profits under Section 115JB - Held that - This issue now stands covered against the assessee by insertion of clause 1 in Explanation 1 to Section 115JB, which has been inserted by Finance (No.2) Act, 2009 w.r.e.f. 1-4-2001. Thus, in view of the amendment in the said provision the ground taken by the assessee cannot be allowed. Disallowance of interest u/s 14A r.w.s. 36(1)(iii) on the notional basis - assessee contested against non establishing of direct nexus between tax free income and interest expenses - Held that - The issue is to be restored to the AO to be decided on the basis of the decision of Godrej & Boyce Mfg. Co. Ltd. vs DCIT 2010 (8) TMI 77 - BOMBAY HIGH COURT . Disallowance of deduction u/s 80HHC - the income as per normal computation is Nil and accordingly no deduction is allowed u/s 80HHC while computing book profit u/s 115JB - Held that - This issue now stands covered in the case of DCIT Vs. Syncome Formulations (I) Ltd., 2007 (3) TMI 288 - ITAT BOMBAY-H wherein it has been held that deduction under Section 80HHC in the case of MAT assessment, is to be worked out on the basis of adjusted book profit and not on the basis of profit computed under the regular provisions of law applicable to the computation of profit and gains of business or profession . This judgment of the Special Bench has been affirmed by the Hon ble Supreme Court in the case of Al- Kabeer Exports Limited Vs. CIT 2012 (2) TMI 119 - SUPREME COURT OF INDIA . Disallowance u/s Sec.37(1) - damages or penalty or interest - Held that - Similar issue was there in the earlier year also for the assessment year 2001-02, wherein the Tribunal set aside this issue to the file of the Assessing Officer to re-examine the exact nature of payments whether these are compensatory or penal in nature - as decided in Prakash Cotton Mills Pvt. Limited Versus Commissioner of Income-Tax 1993 (4) TMI 3 - SUPREME COURT and Standard Batteries Ltd. vs. CIT 1994 (4) TMI 2 - SUPREME COURT whatever is paid to the Govt. authorities, though known as penalty, but if the same is of compensatory nature, then the same, strictly speaking, is not penalty and has to be allowed as business expenditure - remit the matter back to the file of AO for re-examination.
Issues Involved:
1. Exemption under Section 10B of the Income Tax Act. 2. Forfeiture of employees' security deposit. 3. Disallowance of project expenses. 4. Disallowance of penalties and fines. 5. Written off on leasehold land. 6. Mining lease expenses. 7. Compensation received from exploitation of commercial premises. 8. Interest paid on Income Tax. 9. Interest paid to SSI units. 10. Provision for difference of electricity duty. 11. Provision for doubtful debts and advances. 12. Disallowance under Section 14A. 13. Deduction under Section 80HHC. 14. Disallowance of foreign travel expenses. 15. Depreciation on provision for custom duty. Detailed Analysis: 1. Exemption under Section 10B of the Income Tax Act: - Stores Bardana Sale (Rs.4,79,829/-): The issue was not pressed by the assessee as the CIT(A) had allowed the deduction. Hence, dismissed. - Bonus on Imported Spares (Rs.24,693/-): The issue was not properly examined by authorities; hence, it was restored back to the Assessing Officer for fresh consideration. - Sale of Vegetables, Fruits, Grass (Rs.6,908/-): These items were not connected with the industrial undertaking and hence excluded from the computation of income under Section 10B. - Stores Miscellaneous Sale (Rs.8,01,900/-): The sale was not related to manufacturing activities and hence not considered as income from the industrial undertaking. - Cotton Waste Expenses (Rs.6,94,339/-): The income from cotton waste was directly related to the undertaking and hence included in the computation for exemption under Section 10B. - Bonus on Spare Purchase (Rs.1,50,972/-): The issue was restored back to the Assessing Officer to determine if the purchase was on revenue account. - Settlement of Sale Contract Cancellation (Rs.9,55,562/-): The issue was not pressed by the assessee and hence dismissed. 2. Forfeiture of Employees' Security Deposit: - The Tribunal followed its earlier decision against the assessee, confirming the inclusion of forfeiture of employees' security deposit (Rs.51,327/-) as income. 3. Disallowance of Project Expenses: - The issue was decided in favor of the assessee, following earlier Tribunal and High Court decisions, allowing the project expenses (Rs.19,546/-) as revenue expenditure. 4. Disallowance of Penalties and Fines: - The Tribunal upheld the disallowance of penalties and fines (Rs.1,03,700/-), following the earlier year's decision confirming the nature of penalties and fines as non-deductible. 5. Written Off on Leasehold Land: - The issue was set aside to the Assessing Officer for re-examination in light of the Special Bench decision in the case of Mukund Ltd. regarding the nature of the premium part. 6. Mining Lease Expenses: - The Tribunal allowed the mining lease expenses (Rs.81,180/-) following the earlier year's decision in favor of the assessee. 7. Compensation from Exploitation of Commercial Premises: - The issue was decided against the assessee, following the earlier year's decision. 8. Interest Paid on Income Tax: - The interest paid on Income Tax (Rs.11,135/-) was dismissed as it was not derived from the activities carried out by the EOU. 9. Interest Paid to SSI Units: - The issue was decided against the assessee, following the consistent Tribunal decisions from earlier years. 10. Provision for Difference of Electricity Duty: - The issue was restored to the Assessing Officer with a direction to allow the expenditure on a payment basis, following the earlier year's decision. 11. Provision for Doubtful Debts and Advances: - The issue was dismissed as it was covered against the assessee by the insertion of clause 1 in Explanation 1 to Section 115JB by Finance (No.2) Act, 2009. 12. Disallowance under Section 14A: - The issue was restored back to the Assessing Officer to work out a reasonable basis for disallowance in view of the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. 13. Deduction under Section 80HHC: - The issue was decided in favor of the assessee, following the decision of ITAT Special Bench and the Hon'ble Supreme Court, allowing the deduction under Section 80HHC based on adjusted book profit. 14. Disallowance of Foreign Travel Expenses: - The issue was restored to the Assessing Officer to examine the nature of expenses along with the Board's resolution, following the earlier year's Tribunal decision. 15. Depreciation on Provision for Custom Duty: - The issue was decided in favor of the assessee, following the earlier year's Tribunal decision, allowing depreciation on provision for custom duty on Airjet looms and Auto Coner. Conclusion: - The appeal filed by the assessee was partly allowed for statistical purposes, and the department's appeal was also partly allowed for statistical purposes.
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