2012 (8) TMI 554 - AT - Income Tax

Depreciation on electrical fittings - Held that - CIT(A) rightly pointed that items in the list are not like furniture and fittings but they are integral part of plant and machinery as the items listed are insulators, LT panel, CT coils, electrodes, MCC panels, generator set etc., which form an integral part in operation of the plant and machinery. We do not find any infirmity in the order of the CIT(A) and uphold the same. Depreciation allowed. Deduction u/s 80HHC - Revenue contended exclusion of total interest income, credit balances written back, sales tax refund and processing charges, etc., from eligible business profits on ground of being not directly derived from the industrial undertaking - Held that - Tribunal in assessment of earlier year held that 90% of the gross amount of interest was liable to be deducted from the business profit of the assessee for the purpose of deduction u/s. 80HHC and the amount of interest paid by the assessee could not be deducted from gross interest. What has been said about interest is clearly applicable to the other items of income included in the computation under the head profits and gains of business or profession. Same has been held for current year Reduction of 80IA relief from the eligible business profits for computing relief u/s. 80HHC - Held that - Deduction u/s. 80HHC is to be allowed on profit and gain as reduced by the deduction claimed and allowed u/s. 80IB/80IA. See ACIT vs. Hindustan Mint and Agro Products (P) Ltd.(2009 (6) TMI 124 - ITAT DELHI-C). Matter set aside to the file of the CIT(A) to adjudicate this issue in the light aforesaid decision Deduction u/s 80HHC - exclusion of excise duty and sales tax from total turnover for the purpose of deduction - Held that - Since excise duty and sales tax did not involve any such turnover, such taxes had to be excluded. See CIT vs. Lakshmi Machine Works (2007 (4) TMI 202 - SUPREME COURT) - Decided in favour of the assessee

Summary

Issues:
1. Reclassification of assets - Depreciation on electrical fittings.
2. Exclusion of certain incomes from eligible business profits for deduction u/s. 80IA.
3. Reduction of deduction u/s. 80IA from profits before computing relief u/s. 80HHC.
4. Inclusion of excise duty and sales tax in total turnover for deduction u/s. 80HHC.

Reclassification of Assets - Depreciation on Electrical Fittings:
The Assessing Officer reclassified electrical fittings claimed under plant and machinery, allowing lesser depreciation. The CIT(A) found these items integral to plant and machinery, directing verification for appropriate depreciation. The Tribunal upheld CIT(A)'s decision, noting the items' nature and operation in plant machinery, dismissing Revenue's appeal.

Exclusion of Incomes for Deduction u/s. 80IA:
The Assessing Officer excluded interest income, credit balances, sales tax refund, and processing charges from eligible profits for deduction u/s. 80IA. The CIT(A) directed inclusion of net interest and credit balances, following Tribunal decisions. The Tribunal reversed CIT(A)'s order, allowing the Revenue's grounds.

Reduction of Deduction u/s. 80IA for Relief u/s. 80HHC:
The CIT(A) directed not reducing deduction u/s. 80IA from profits before computing relief u/s. 80HHC, citing Tribunal and High Court decisions. The Tribunal set aside the issue for reconsideration in light of a Special Bench decision, allowing the Revenue's ground for statistical purposes.

Inclusion of Excise Duty and Sales Tax in Total Turnover for Deduction u/s. 80HHC:
The CIT(A) excluded excise duty and sales tax from total turnover for deduction u/s. 80HHC, following a Supreme Court judgment. The Tribunal confirmed CIT(A)'s decision based on the Supreme Court's interpretation, leading to the partial allowance of the Revenue's appeal.

This detailed analysis covers the reclassification of assets for depreciation, exclusion of specific incomes for deductions, the order of deduction u/s. 80IA for relief u/s. 80HHC, and the treatment of excise duty and sales tax in total turnover for deductions, as per the ITAT, Hyderabad judgment in 2012.