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2014 (10) TMI 423 - AT - Income TaxAddition u/s 14A and 80HHC made DEPB benefits Held that - No fresh investments were made during the year - CIT(A) was partly influenced by the market research and day to day analysis of market trends for taking investment decisions - Since no fresh investment decision has been taken, therefore, considering the role of administrative machinery in collection of dividend - the nature of interest received is to be examined by assessing officer and to the extent the interest income is to be treated as income from business, only 90% of the interest is to be excluded while computing deduction u/s 80HHC, treating the same as business income and not 100% - thus, the matter is to be remitted back to the AO for fresh adjudication. Addition of commission paid Held that - As decided in assessee s own case for the earlier assessment year, it has been rightly held that the legislative intention of the explanation inserted in the statute by the Finance (No.2) Act, 1998 with retrospective effect from 1.4.1962 was also considered by the Tribunal in the light of budget speech of the Finance Minister as well as Circular no. 772 dated 23.12.1998 issued by the Board and on such consideration, it was held that the said Explanation was not applicable to the facts of the assessee s case - the disallowance made by the AO as deleted by CIT(A) is upheld on account of payment of commission by invoking explanation to Section 37(1) Decided against revenue. Deduction u/s 80HHC Inclusion of income Held that - Explanation (baa) to section 80HHC specifically defines profits of the business and, only those profits of business can qualify for deduction u/s 80HHC as are contemplated in the explanation - the profits of the business as computed under the head profits and gains of business or profession forms the basis out of which the items mentioned in clause (1) & (2) are to be excluded the order of the CIT(A) is upheld Decided against revenue.
Issues Involved:
1. Admission of additional grounds related to DEPB license and excise duty refund. 2. Disallowance under Section 14A for earning dividend income. 3. Deduction under Section 80HHC on DEPB benefits and other incomes. 4. Allocation of interest income and rental income for deduction under Section 80HHC. 5. Deletion of additions related to employees' contribution towards PF and ESI. 6. Deletion of disallowance of commission paid. 7. Deletion of disallowance under Section 14A. 8. Deletion of addition under Section 10B. 9. Deletion of deduction under Section 80HHC for various incomes. Detailed Analysis: 1. Admission of Additional Grounds: - DEPB License: The Tribunal admitted the additional ground regarding the DEPB license, citing previous decisions and remanded the issue back to the assessing officer for adjudication. - Excise Duty Refund: The Tribunal admitted the additional ground concerning the excise duty refund, referencing the Supreme Court decision in CIT Vs. Pooni Sugars and Chemicals Ltd., and remanded it to the assessing officer for examination. 2. Disallowance under Section 14A for Earning Dividend Income: - The assessee argued no expenditure was incurred to earn dividend income. The CIT(A) partially agreed, reducing the disallowance to Rs. 1,80,360. - The Tribunal further reduced the disallowance to Rs. 1,50,000, considering no fresh investments were made during the year. 3. Deduction under Section 80HHC on DEPB Benefits and Other Incomes: - DEPB Benefits: The Tribunal restored the issue concerning DEPB benefits to the assessing officer for fresh adjudication. - Interest Income: The Tribunal directed the assessing officer to examine the nature of interest receipts and treat only 90% of the interest as business income for deduction purposes. - Rental Income: The Tribunal upheld the exclusion of 90% of rental income as per Explanation (baa). 4. Allocation of Interest Income and Rental Income for Deduction under Section 80HHC: - The Tribunal restored the issue of interest income allocation to the assessing officer to determine the nature of interest receipts and apply the appropriate deductions. - The Tribunal upheld the exclusion of 90% of rental income from eligible profits for deduction under Section 80HHC. 5. Deletion of Additions Related to Employees' Contribution towards PF and ESI: - The CIT(A) deleted the disallowance, noting that the payments were made before the due date of filing the return. The Tribunal upheld this decision. 6. Deletion of Disallowance of Commission Paid: - The CIT(A) deleted the disallowance of commission paid to M/s Indus Pipe Lines, citing genuine services rendered and previous Tribunal decisions in favor of the assessee. The Tribunal upheld this deletion. 7. Deletion of Disallowance under Section 14A: - The Tribunal, having already restricted the disallowance to Rs. 1,50,000 in the assessee's appeal, dismissed the revenue's ground on this issue. 8. Deletion of Addition under Section 10B: - The CIT(A) allowed the revised claim of deduction under Section 10B. The Tribunal upheld this decision, referencing a previous Tribunal order in the assessee's favor. 9. Deletion of Deduction under Section 80HHC for Various Incomes: - The CIT(A) included various incomes (insurance claims, old store items, discounts, balances written back, etc.) in the eligible profits for deduction under Section 80HHC, except for Rs. 89,711 for which details were not provided. The Tribunal upheld this decision. Conclusion: The Tribunal's judgment resulted in partial relief for the assessee by remanding certain issues back to the assessing officer for fresh adjudication and upholding the CIT(A)'s decisions on several grounds. The revenue's appeal was dismissed, and the assessee's appeal was partly allowed for statistical purposes.
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