2013 (12) TMI 1697 - AT - Income Tax

Summary

Issues Involved:

1. Addition of Rs. 1,34,24,319/- on account of income accrual shown as loan written back.
2. Addition of Rs. 1,73,783/- on account of stock discrepancy.
3. Addition of Rs. 32,290/- on account of finished goods supplied as free samples.
4. Allowing relief of Rs. 2,70,262/- on account of deduction u/s 80IB of the Income-tax Act, 1961.
5. Allowing relief of Rs. 6,31,073/- on account of deduction u/s 80HHC of the Income-tax Act, 1961.

Summary:

1. Addition of Rs. 1,34,24,319/- on account of income accrual shown as loan written back:

The assessee claimed that the waiver of a loan taken for acquiring capital assets should be treated as a capital receipt and not taxable. The CIT (A) agreed, stating that the transaction was of a capital nature. The Revenue argued that the assessee benefited from depreciation and thus the amount should be taxable. The Tribunal upheld the CIT (A)'s decision, referencing the case of Mahindra and Mahindra Ltd. Vs. CIT, where a similar waiver was deemed non-taxable as it was a capital receipt.

2. Addition of Rs. 1,73,783/- on account of stock discrepancy:

The AO added the amount due to minor discrepancies in raw material and finished goods. The CIT (A) deleted the addition, accepting the assessee's explanation of wastage and testing. The Tribunal found the shortage negligible and upheld the CIT (A)'s decision.

3. Addition of Rs. 32,290/- on account of finished goods supplied as free samples:

The AO added the amount as the reduction in closing stock was not clear. The CIT (A) deleted the addition, accepting that samples were given for product promotion. The Tribunal upheld the CIT (A)'s decision, finding the practice customary in the industry.

4. Allowing relief of Rs. 2,70,262/- on account of deduction u/s 80IB:

The AO excluded certain incomes from the deduction calculation. The CIT (A) directed the inclusion of some items but excluded others. The Tribunal upheld the inclusion of interest from customers as per Nirma Industries Ltd. Vs. DCIT but excluded insurance claims and other unspecified claims, remanding the issue of written-back provisions to the AO for fresh examination.

5. Allowing relief of Rs. 6,31,073/- on account of deduction u/s 80HHC:

The AO recalculated the deduction by excluding the amount under sub-section (9) of Section 80IA. The CIT (A) disagreed, but the Tribunal sided with the AO, referencing the Special Bench decision in A.C.I.T. Vs. Hindustan Mint & Agro Products (P) Ltd. and the Punjab & Haryana High Court decision in M/S Broadway Overseas Limited, ruling that deductions u/s 80HHC must be computed after reducing the deduction u/s 80IB.

Conclusion:

The appeal of the revenue was partly allowed, with some decisions of the CIT (A) being upheld and others being overturned or remanded for further examination. The order was pronounced in the open court on 23.12.2013.