2013 (10) TMI 549 - AT - Income Tax

Exemption u/s 10B - Income pertaining to/derived from 100% EOU s - Losses from business units - CIT allowed partial relief - Held that - There is 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 - Following decision of CENTURY TEXTILES AND INDUSTRIES LTD. Versus DEPUTY COMMISSIONER OF INCOME TAX RANGE-6(2) MUMBAI 2013 (1) TMI 288 - ITAT MUMBAI - Decided against Assessee. Amount paid as penalty - CIT allowed compensatory payments - Held that - 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 - Following decision of Prakash Cotton Mills Pvt. Limited Versus Commissioner of Income-Tax 1993 (4) TMI 3 - SUPREME Court - Decided 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 year 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 - Decided 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 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 .

Summary

Issues Involved:

1. Treatment of certain incomes for claiming exemption under section 10B.
2. Forfeiture of security deposit from employees.
3. Penalty payments and their nature (compensatory or penal).
4. Leasehold amount written off.
5. Mining lease expenses.
6. Taxation of compensation received from commercial premises.
7. Interest paid on Income Tax.
8. Interest paid to SSI Units on delayed payments.
9. Provision for electricity duty on colony consumption.
10. Addition of provision for doubtful debts and advances while computing book profits under section 115JB.
11. Deduction under section 80HHC in computing book profits under section 115JB.
12. Foreign travel expenses of Mrs. S.D. Birla.
13. Depreciation on provision for custom duty on Plant & Machinery.
14. Allowance of penalties as compensatory in nature.

Detailed Analysis:

1. Treatment of Certain Incomes for Claiming Exemption Under Section 10B:
The assessee's appeal on treating certain incomes as not pertaining to/derived from 100% EOUs was partly allowed. The surplus on sales of assets was decided against the assessee, following the ITAT's previous ruling. The bonus received against purchase of spares was restored to the AO for fresh examination. Staff agreement deposit forfeited was decided against the assessee, consistent with earlier years. The amount recovered from employees against one month notice period salary was not pressed by the assessee.

2. Forfeiture of Security Deposit from Employees:
The issue of treating forfeiture of security deposit collected from employees as capital receipts was decided against the assessee, following the Tribunal's previous rulings in the assessee's own case.

3. Penalty Payments and Their Nature (Compensatory or Penal):
The penalties paid by the assessee were restored to the AO to examine whether they were compensatory or penal in nature, following the principles laid down by the Hon'ble Supreme Court.

4. Leasehold Amount Written Off:
The issue of leasehold amount written off was restored to the AO for fresh examination, following the Tribunal's previous orders in the assessee's own case.

5. Mining Lease Expenses:
The issue of disallowing mining lease expenses was decided in favor of the assessee, consistent with the Tribunal's rulings in earlier years.

6. Taxation of Compensation Received from Commercial Premises:
The compensation received from commercial premises was treated as income from house property instead of business income, consistent with the Tribunal's rulings in earlier years.

7. Interest Paid on Income Tax:
The disallowance of interest paid on Income Tax was confirmed against the assessee, following the Tribunal's previous rulings.

8. Interest Paid to SSI Units on Delayed Payments:
The disallowance of interest paid to SSI Units on delayed payments was confirmed against the assessee, consistent with the Tribunal's previous rulings.

9. Provision for Electricity Duty on Colony Consumption:
The issue of provision for electricity duty on colony consumption was restored to the AO to allow the expenditure on payment basis, following the Tribunal's previous orders.

10. Addition of Provision for Doubtful Debts and Advances While Computing Book Profits Under Section 115JB:
The addition of provision for doubtful debts and advances while computing book profits under section 115JB was decided against the assessee, following the amendment in the Act.

11. Deduction Under Section 80HHC in Computing Book Profits Under Section 115JB:
The issue of deduction under section 80HHC while computing book profits under section 115JB was decided in favor of the assessee, following the Hon'ble Supreme Court's decision in Ajanta Pharma vs. CIT.

12. Foreign Travel Expenses of Mrs. S.D. Birla:
The issue of allowing foreign travel expenses of Mrs. S.D. Birla was restored to the AO for fresh examination, consistent with the Tribunal's rulings in earlier years.

13. Depreciation on Provision for Custom Duty on Plant & Machinery:
The issue of allowing depreciation on provision for custom duty on Plant & Machinery was decided in favor of the assessee, consistent with the Tribunal's rulings in earlier years.

14. Allowance of Penalties as Compensatory in Nature:
The issue of allowance of penalties as compensatory in nature was restored to the AO for fresh examination, consistent with the Tribunal's rulings in earlier years.

Conclusion:
Both the assessee's appeal and the Revenue's appeal were partly allowed for statistical purposes. The issues were either decided based on previous rulings or restored to the AO for fresh examination.