2023 (2) TMI 147 - AT - Income Tax

Addition of the custom duty benefit against the advance license which was not offered for taxation - HELD THAT - Assessee/Respondent has filed the relevant accounting entries and monthly statement of advance licenses. From these entries /details it is noticed that the entire amount of accrued Advance Licenses Benefit has been credited to purchase of raw material account. The purchases thus reduced have obviously increased the profit. Therefore a further addition of the unutilized amount will tantamount to double addition. The Assessing Officer is therefore not justified in making the said addition. Non grant of benefit of provisions of Sec. 80HHC in respect of advance import license by holding the same was covered under clause (iiib) of Sec. 28 - HELD THAT - As decided in own case 2007 (2) TMI 357 - ITAT MUMBAI valve of Advance Import License is an export incentive within the meaning of clause 28(iiib) of section 28 of the Act. This is owing to the reason that Duty Entitlement Passbook Scheme ( DEPB ) is a cash assistance covered under clause (iiib) of section 28 of the Act and both Advance Import License and DEPB License have common features as both provide the benefit of duty drawback. The only difference between the two is that the Advance Import License is not transferrable whereas DEPB License is transferrable. Export incentive is not a part of the profits of the business u/s 80HHC (1) but it is entitled for the benefit of the proviso to section 80HHC(3) - AO is directed to grant the benefit of the proviso to sec 80HHC(3) in respect of export benefit. Disallowance of expenditure incurred under voluntary retirement scheme - HELD THAT - As issues concerning the benefit of enduring nature and income-yielding asset have been adequately dealt with by the Supreme Court and by the jurisdictional High Court in its judgment in the case of Bhor Industries. Respectfully following the decision of the Bombay High Court in the case of CIT v. Bhor Industries Ltd 2003 (2) TMI 20 - BOMBAY HIGH COURT and in view of a favourable decision in appellant s own case by the ITAT Mumbai for A.Ys 1984-85 and 1985-86 direct the Assessing Officer to delete the disallowance of VRS payment. Adhoc deduction being 20% of the expenditure incurred on advertisement - HELD THAT - From the records find that this ground has since assessment year 2000-01 been allowed in favour of the appellant by relying on the decision in the case of DCIT v. Metro Shoes 2002 (8) TMI 800 - ITAT MUMBAI and the decision of Honorable ITAT Mumbai Bench F Mumbai in the case of M/s Geoffrey Manners and Co. Mumbai 1978 (7) TMI 240 - ITAT MUMBAI . Similarly following the ratio of these decisions and the reasons of my Id. predecessors disallowance for the year under appeal is also deleted. This ground of appeal is thus decided in favour of the appellant.

Summary

Issues:
- Appeal by revenue against orders passed by CIT(A) under sections 143(3) and 250 of the Income Tax Act.
- Common and identical issues in appeals by revenue and cross objection by assessee.
- Grounds of appeal by revenue include deletion of additions, grant of benefits, and disallowance of expenditure.
- Lead case for A.Y. 1999-2000 - issues related to customs duty benefit, advance import license, and expenditure under Voluntary Retirement Scheme.
- Detailed analysis of each issue in the judgment.

Customs Duty Benefit Issue:
- Revenue appealed deletion of addition on customs duty benefit against advance license not offered for taxation.
- CIT(A) found benefit credited to purchase account, leading to increased profit, thus double addition unjustified.
- CIT(A) decision in favor of assessee upheld.

Advance Import License Issue:
- Revenue challenged CIT(A) direction to grant benefit under Sec. 80HHC for advance import license under Sec. 28(iiib) of the Act.
- CIT(A) relied on case law, treated license as export incentive under Sec. 28(iiib), entitled to benefit under proviso to Sec. 80HHC(3).
- Revenue's appeal dismissed, benefit granted to the assessee.

Expenditure under Voluntary Retirement Scheme Issue:
- Revenue disputed CIT(A) deletion of disallowance of VRS expenditure.
- CIT(A) found expenditure not capital in nature, aimed at reducing costs for efficient business conduct.
- CIT(A) relied on relevant case laws, directed AO to delete disallowance.
- Revenue's appeal dismissed, disallowance deleted in favor of the assessee.

Additional Case for A.Y. 2003-04:
- Revenue raised grounds related to advertisement expenditure, excise duty and sales tax treatment, and advance import license benefit.
- CIT(A) allowed adhoc deduction on advertisement expenditure based on past decisions.
- CIT(A) directed exclusion of excise duty and sales tax from total turnover for Sec. 80HHC deduction.
- CIT(A) granted benefit of Sec. 80HHC for advance import license covered under Sec. 28(iiib).
- Revenue's appeals dismissed, CIT(A) decisions upheld.

Cross Objection:
- As revenue's appeals dismissed, cross objection by assessee becomes infructuous and is also dismissed.
- Both revenue appeals and assessee cross objection dismissed.

This comprehensive summary outlines the issues, arguments, and decisions in the legal judgment by the Appellate Tribunal ITAT Mumbai, covering appeals by revenue and cross objection by the assessee for different assessment years.