2014 (7) TMI 1086 - HC - Income Tax

Deduction u/s 80HHC - Business profits Computation - 90% reduction of gross hire charges or net hire charges as per Explanation (baa) to section 80HHC Held that - Following the decision in ACG Associated Capsules Pvt. Ltd. V/s. Commissioner of Income-tax 2012 (2) TMI 101 - SUPREME COURT OF INDIA - ninety percent of not the gross interest but only the net interest is liable to be included in the profits of the business of the assessee as computed under the heads Profits and gains of business or profession while making the computation under Section 80HHC no substantial question of law arises for consideration Decided against Revenue. Onetime payment made to forest department Capital or revenue expenses Held that - Following the decision in Commissioner of Income Tax V/s. Dr. Prafulla R. Hede and Anr. 2014 (7) TMI 1085 - BOMBAY HIGH COURT - The assessee was directed to pay the net present value for diversion of forest land for the purpose of mining - the expenditure so incurred to be for commercial expediency and that it should therefore not be treated as expenditure of capital nature Decided against Revenue.

Summary

Issues involved:
1. Adjustment to addition u/s 80HHC in assessment under Section 153A
2. Review possibility in assessment completed under Section 143(3) r.w.s. 153A
3. Interpretation of Explanation (baa) to section 80HHC
4. Classification of one-time payment to forest Department as capital or revenue expenditure
5. Treatment of expenditure towards afforestation compensation as deferred revenue expenditure

Analysis:

Adjustment to addition u/s 80HHC in assessment under Section 153A:
The appellant contested the Tribunal's decision regarding the assessing officer's ability to make adjustments to the addition u/s 80HHC in assessments under Section 153A. The Tribunal held that such adjustments amounted to a review, which was not permissible in Section 153A assessments. The appellant argued that the assessment under Section 153A was a fresh assessment, allowing for a review of Section 80HHC provisions. However, the court dismissed this argument, upholding the Tribunal's decision.

Review possibility in assessment completed under Section 143(3) r.w.s. 153A:
The Tribunal's decision on the review possibility in assessments completed under Section 143(3) r.w.s. 153A was challenged by the appellant. The Tribunal relied on a previous case to support its stance that review was not possible in such assessments. The court agreed with the Tribunal, emphasizing that the cited case was distinguishable from the present scenario, which was completed under Section 143(3) r.w.s. 153A.

Interpretation of Explanation (baa) to section 80HHC:
The Tribunal was critiqued for not acknowledging the significance of Explanation (baa) to section 80HHC, which clarified the computation of 'Business Profits.' The appellant argued that the profits should be reduced by 90% of gross hire charges, not net hire charges. However, the court did not find this issue to be substantial, citing a Supreme Court judgment that supported the inclusion of net interest in profit calculations under Section 80HHC.

Classification of one-time payment to forest Department as capital or revenue expenditure:
The appellant questioned the Tribunal's classification of a one-time payment made to the forest Department towards Net Present Value (NPV) and afforestation compensation as revenue expenditure instead of capital expenditure. The court referenced a previous judgment where a similar expenditure was deemed for commercial expediency and not of capital nature, leading to the dismissal of this issue.

Treatment of expenditure towards afforestation compensation as deferred revenue expenditure:
Additionally, the appellant argued that the expenditure towards afforestation compensation should have been treated as deferred revenue expenditure, eligible for proportionate allowance over the lease period. However, the court noted that the appellant had paid the amounts as a lump sum without indication of spreading payments over the lease duration, leading to the rejection of this argument.

In conclusion, the court dismissed the appeal, upholding the Tribunal's decisions on various issues raised by the appellant, emphasizing the lack of substantial legal questions in the presented arguments.