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2019 (1) TMI 797 - AT - Income TaxDisallowance of excessive licence fee paid to M/s Uflex Ltd. - Held that - Issue of increase of the license fee from ₹ 50 Lac per month to ₹ 2 Crore per month was examined by the ITAT in the immediately preceding year. The ITAT after considering the facts and submissions of both the parties deem it appropriate to allow the increase of license fee from 1st February, 2006. The order of ITAT is approved by Hon ble High Court and Supreme Court. Therefore, from 1.4.2006 some licence fee i.e. @ ₹ 2 crore p.a. is to be allowed. So far as the contention of the learned DR with regard to furnishing of lease agreement is concerned, it would be relevant to the preceding year and not to the year under consideration because the license fee was increased by the lease agreement in the preceding year. After considering the agreement and entire material, the issue of increasing the license fee is considered by all the authorities in the preceding years therefore, in the immediately preceding year, we hold that the CIT(A) was fully justified in allowing the license fee @ ₹ 2 Crore per month in the year under consideration. The ground no. 1 of the Revenue appeal is accordingly rejected. Addition u/s 68 - Held that - CIT(A) had allowed the opportunity to the AO and has decided the issue only after taking into consideration the remand report submitted by the AO. However, in the year under consideration, the CIT(A) has allowed no opportunity to the AO to examine the copy of account of the customer in subsequent years and no remand report is called for. In view of the above, we deem it appropriate to set aside the order of the CIT(A) on this point and restore the matter back to the file of the AO. We direct the assessee to produce the copy of account of above three customers for subsequent years before the AO thereafter the AO will examine whether the above three parties are the regular customers and the assessee has supplied the goods to those parties in the normal course of business and whether these advances have been adjusted against such supply of goods. If it is so than the observation of ITAT would be squarely applicable and no addition would be made for trade advances received by the assessee. Addition u/s 68 - Held that - The director of AEPP stated that the net worth of AEPP is more than ₹ 100 crores and there is no cash deposit in the bank account of AEPP before making the payment for share application money to MEPL i.e., the assessee. The assessee has furnished the copy of audited balance sheet of AEPP, from which, we find that the share capital of AEPP including reserves and surplus is ₹ 103.64 crores and the investment in shares of various companies by AEPP is ₹ 95.32 crores. In our opinion, these facts clearly establish the creditworthiness of AEPP. In view of the above hold that the assessee has been able to discharge the burden of proving the share application money received by it from AEPP and therefore, learned CIT(A) rightly deleted the addition made by the Assessing Officer. Deduction u/s 80-IB on account of Self Cenvat Credit availment - Held that - This issue is squarely covered in favour of the assessee by case of CIT Vs. Dharam Pal Prem Chand Ltd. 2008 (11) TMI 231 - DELHI HIGH COURT held that the assessee had on the payment of excise duty debited the profit and loss account and upon receipt of refund credited the profit and loss account. The net effect on the profit and loss was nil on account of the methodology followed by the assessee. Therefore, there was no reason to exclude the amount of refund of excise duty in arriving at profit derived for the purpose of claiming deduction under section 80-IB. Excise duty refund - a capital receipt in nature and not liable to tax - Held that - This claim of the assessee has been accepted by the learned CIT(A) and the order of learned CIT(A) has been upheld by us by rejecting ground No.6 of the Revenue s appeal. Thus, the assessee s claim that it is revenue receipt is approved by the learned CIT(A) as well as by us. Therefore, in our opinion, learned CIT(A) was not justified in holding this same income to be capital receipt in the year under consideration. We reverse the finding of the learned CIT(A) on this point and allow ground No.7 of the Revenue s appeal.
Issues Involved:
1. Deletion of addition made by disallowance of excessive licence fee. 2. Deletion of addition made under Section 68 of the Income Tax Act, 1961 on account of unverifiable and unconfirmed advances. 3. Admission of additional evidence without giving opportunity to the Assessing Officer as provided under Rule 46A of the Income Tax Rules, 1962. 4. Deletion of addition made under Section 68 of the Income Tax Act, 1961 on account of bogus share capital. 5. Disallowance of claim for deduction under Section 80-IB on account of Self Cenvat Credit availment. 6. Classification of excise duty refund as capital receipt and not liable to tax. Detailed Analysis: 1. Deletion of Addition Made by Disallowance of Excessive Licence Fee: The Revenue challenged the deletion of an addition of ?18,00,00,000/- made by disallowing the excessive licence fee paid to M/s Uflex Ltd. The Tribunal noted that this issue was already decided in favor of the assessee in the preceding assessment year 2006-07, where the ITAT accepted the licence fee of ?2 Crore per month starting from 1st February 2006. This decision was upheld by the Hon’ble High Court and the Supreme Court. Given this precedent, the Tribunal found no justification for allowing only ?50 Lac per month for the current year and upheld the CIT(A)'s decision to allow the licence fee at ?2 Crore per month. 2. Deletion of Addition Made Under Section 68 on Account of Unverifiable and Unconfirmed Advances: The Revenue contested the deletion of an addition of ?2,00,67,589/- made by the AO under Section 68 for unverifiable and unconfirmed advances from customers. The Tribunal observed that this issue was similarly decided in favor of the assessee in the preceding year, where the advances were found to be from regular customers and were verified. However, in the current year, the CIT(A) admitted additional evidence without giving the AO an opportunity to examine it, violating Rule 46A. Hence, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the AO for re-examination with the direction to allow adequate opportunity to the assessee. 3. Admission of Additional Evidence Without Giving Opportunity to the AO: The Tribunal noted that the CIT(A) admitted additional evidence in the form of subsequent year accounts of the customers without giving the AO an opportunity to examine them, which is against Rule 46A. Therefore, the Tribunal remanded the matter back to the AO to allow the assessee to produce the necessary documents and for the AO to verify them. 4. Deletion of Addition Made Under Section 68 on Account of Bogus Share Capital: The AO made an addition of ?20,00,00,000/- under Section 68, treating the share capital received from M/s Adhyay Equi Pref Pvt. Ltd. as unexplained cash credit. The CIT(A) deleted this addition, accepting the assessee's explanation and supporting documents, including the valuation report justifying the share premium. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the share applicant. The Tribunal found that the AO's suspicion was based on high premium and low bank balance without proper inquiry into the provided documents. 5. Disallowance of Claim for Deduction Under Section 80-IB on Account of Self Cenvat Credit Availment: The AO excluded ?2,71,73,987/- credited in the profit & loss account on account of Self Cenvat Credit Availment from the income eligible for deduction under Section 80-IB. The CIT(A) allowed the deduction, and the Tribunal upheld this decision, referencing the ITAT's decision in the assessee's case for the preceding year and the Delhi High Court's ruling in CIT Vs. Dharam Pal Prem Chand Ltd., which supported the inclusion of such credits in the eligible income for deduction under Section 80-IB. 6. Classification of Excise Duty Refund as Capital Receipt: The CIT(A) held that the excise duty refund is a capital receipt and not liable to tax, following the decision in Shree Balaji Alloys & Ors. Vs. CIT. However, the Tribunal noted that the assessee had treated the refund as a revenue receipt in its accounts and claimed it under Section 80-IB. Since this claim was accepted, the Tribunal held that the same receipt could not be treated as capital in the same year. Therefore, the Tribunal reversed the CIT(A)'s finding on this point but left open the question of classification for future years. Conclusion: The appeal of the Revenue was partly allowed. The Tribunal upheld the deletion of additions related to the licence fee and share capital but remanded the issue of unverifiable advances back to the AO. The Tribunal also upheld the deduction under Section 80-IB for Self Cenvat Credit but reversed the CIT(A)'s decision on treating excise duty refund as a capital receipt.
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