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2013 (11) TMI 1268 - AT - Income TaxVarious Disallowances - Extension of Time for Construction of Building - Disallowance of Expenses on Professional Fees Held that - Following Gujarat Flurochemicals Limited Versus Additional Commissioner of Income Tax 2010 (1) TMI 1096 - ITAT AHMEDABAD - The issue was restored back to the file of the AO for fresh decision by following the same direction of the Tribunal - Disallowance of sundry balances written off Held that - If it was found that the advances written off are business advances, then the same was allowable as business loss, but this aspect was not examined by the authorities below, and hence, we set aside the order of the CIT(A) on this issue, and restore the matter back to the file of the AO for fresh decision - The AO should examine the nature of these advances, and if it is found that the same are business advances, then it should be allowed as business loss. Deduction u/s.80HHC Reduction of amount paid to customers for shortage claims from export turnover - Reduction of 90% of other income computing profits of the business - Held that - There were two components of this claim of the assessee for deduction under Section 80HHC, which was not allowed by the authorities below - It was held by the Tribunal that the claim of shortage paid by the assessee in fact increases the cost of the export, but it does not decrease the export turnover - For second aspect of the matter regarding 90% of the other income there was no merit in the claim of the assessee - In the absence of any evidence to establish that this income was business income, this part of the ground was rejected. Deletion of Compensation from Multilateral Fund Loss of Business Earnings Revenue OR Capital Receipt Held that - Following Assistant Commissioner of Income Tax, Circle 1(1), Versus Gujarat Fluorochemicals Ltd. 2012 (8) TMI 37 - ITAT, AHMEDABAD - No difference in facts could be pointed out by the learned DR of the Revenue in the present year - Accordingly, we find no reason to take a contrary view in this matter, and thus, this additional ground of the Revenue was rejected. Expenses u/s 37(1) Village development expenses to be allowed or not - Nexus between the work of the association and the business of the assessee - the onus case on the assessee in this regard was not discharged - Following The A. C. I. T., Circle-1(1) Versus Gujarat Fluorochemicals Ltd. 2013 (9) TMI 573 - ITAT AHMEDABAD - The issue was covered in favour of the assessee by the Tribunal order in A.Y.2003-2004, and since no difference in facts could be pointed out by the Revenue, we find no reason to take contrary view. Deduction u/s 80HHC - Exclusion of sales tax and excise duty from the total turnover - Whether excise duty and sales tax were includible in the total turnover , which was the denominator in the formula contained in section 80HHC(3) as it stood in the material time - Following Commissioner of Income-tax v. Lakshmi Machine Works, 2007 (4) TMI 202 - SUPREME Court Amendments to section 80HHC(3) indicated exclusion of book profits - difficulty arises because the formula is based on the hybrid system of profits, namely, actual and statutory profits - Our reasoning in this judgment is confined to the workability of the formula in section 80HHC(3) as it stood at the material time. Exclusion 90% of the insurance claim - Clause (baa) of the Explanation below section 80HHC Held that - CIT(A) had not examined the nature of the insurance claim - There is no finding of the AO also regarding the nature of the insurance claim the matter restored back to the file of the AO for fresh decision after examining the nature of insurance claim - The AO should examine nature of the insurance claim and then decide the issue afresh after providing adequate opportunity of hearing to the assessee. Disallowance out of Interest Expenses Disallowed u/s.14A of Income Tax Act Following Commissioner of Income-tax Vs Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - HIGH COURT BOMBAY Interest on borrowed funds - disallowance of interest - Revenue contend that the shareholders funds were utilised for the purpose of fixed assets (investments) - C.I.T. (A) & ITAT have given a clear finding that the assessee had interest free funds of its own - Apart from that in terms of the balance sheet there was a further availability of share capital - finding of fact recorded by C.I.T. (A) and I.T.A.T. cannot be faulted additions not justified - if the own funds were more than the investment, then it should be accepted that the investment was made out of own funds, and in that situation no disallowance was called for out of interest expenditure in respect of investment - Since the balance sheet was not available before us, we set aside the order of the CIT(A) on this issue, and restore the matter back to the file of the AO for fresh decision.
Issues Involved:
1. Cross appeals by the assessee and Revenue for Assessment Years 2002-2003 and 2004-2005. 2. Penalty appeal by Revenue for A.Y. 2004-2005. 3. Disallowances and observations by CIT(A). 4. Sundry balances written off. 5. Deduction under Section 80HHC. 6. Compensation from multilateral fund under Montreal Protocol. 7. Village development expenses. 8. Contribution to Refrigerant Gas Manufacturer Association. 9. Exclusion of sales tax and excise duty from total turnover. 10. Exclusion of insurance claim under clause (baa) of Explanation below Section 80HHC. 11. Disallowance under Section 14A. 12. Addition of interest on income tax refund. 13. Charges for extension of time for construction of building. 14. Professional fees. 15. Pre-feasibility study charges. 16. Short term capital loss. 17. Penalty under Section 271(1)(c). Detailed Analysis: 1. Cross Appeals for A.Y. 2002-2003 and 2004-2005: - The appeals involve multiple grounds, including general disallowances, deductions, and specific financial transactions. 2. Penalty Appeal for A.Y. 2004-2005: - The appeal concerns the deletion of penalty imposed under Section 271(1)(c) amounting to Rs.8,15,000/-. 3. Disallowances and Observations by CIT(A): - Ground Nos. 1, 2, and 5 were rejected as they were covered against the assessee by the Tribunal's order in the assessee's own case for A.Y. 2003-2004. 4. Sundry Balances Written Off: - The issue was restored back to the AO for fresh decision to examine the nature of advances, with reference to the Tribunal's direction in A.Y. 1999-2000. 5. Deduction Under Section 80HHC: - The Tribunal decided in favor of the assessee regarding the reduction of Rs.26,73,037/- paid to customers for shortage claims, as it increases the cost of export but does not decrease the export turnover. - The reduction of 90% of other income of Rs.33,998/- was rejected due to lack of evidence. 6. Compensation from Multilateral Fund Under Montreal Protocol: - The Tribunal upheld the CIT(A)'s decision treating the compensation as a capital receipt, following the Tribunal's order in the assessee's own case for A.Y. 2001-2002. 7. Village Development Expenses: - The Tribunal rejected the Revenue's appeal, following the Tribunal's order in the assessee's own case for A.Y. 2003-2004, which allowed such expenses. 8. Contribution to Refrigerant Gas Manufacturer Association: - The Tribunal upheld the CIT(A)'s decision, following the Tribunal's order in the assessee's own case for A.Y. 2003-2004. 9. Exclusion of Sales Tax and Excise Duty from Total Turnover: - The Tribunal rejected the Revenue's appeal, following the judgment of the Hon'ble Apex Court in the case of Commissioner of Income-tax v. Lakshmi Machine Works. 10. Exclusion of Insurance Claim Under Clause (baa) of Explanation Below Section 80HHC: - The issue was restored back to the AO for fresh decision after examining the nature of the insurance claim. 11. Disallowance Under Section 14A: - The Tribunal restored the issue back to the AO for fresh decision after examining the balance sheet to determine if own funds were more than the investment. 12. Addition of Interest on Income Tax Refund: - The Tribunal rejected the assessee's appeal, following the decision of the Special Bench of the Tribunal. 13. Charges for Extension of Time for Construction of Building: - The Tribunal rejected the assessee's appeal, following the Tribunal's order in A.Y. 2003-2004. 14. Professional Fees: - The Tribunal rejected the assessee's appeal, following the Tribunal's order in A.Y. 2003-2004. 15. Pre-feasibility Study Charges: - The Tribunal rejected the assessee's appeal, as the amount is required to be capitalized along with other related charges. 16. Short Term Capital Loss: - The Tribunal upheld the CIT(A)'s decision, rejecting the Revenue's appeal, and followed the judgment in the case of Commissioner of Income-tax v. Walfort Share and Stock Brokers P. Ltd. 17. Penalty Under Section 271(1)(c): - The Tribunal upheld the CIT(A)'s decision to delete the penalty, as the disallowances were substantially reduced and the issues were debatable. Conclusion: - The appeals of the assessee are partly allowed. - The quantum appeals of the Revenue are partly allowed for statistical purposes. - The penalty appeal of the Revenue is dismissed.
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