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2012 (9) TMI 826 - AT - Income TaxDeduction u/s 43B Whether deduction u/s 43B can be claimed for pre-paid expenses AO reject the said claim on ground that only expenses incurred during the year can be allowed u/s 43B Held that - As these amounts in respect of which deduction has been claimed are covered u/s 43B and have actually been paid during the year. Thus, the sum which is actually paid irrespective of the year in which the liability to pay such sum had incurred even according to the method of accounting regularly employed by the assessee, has to be allowed in view of the provisions of Sec 43B. Assessee also contended that these amounts which have been debited in the profit and loss account has not been claimed in the subsequent year and has been accepted by the department as well as by the assessee. Therefore deduction allowed. Issue decides in favour of assessee Taxability of Advance licence benefit receivable - The benefit of concession in custom duty during import goods - Imports were not done during the accounting year and, therefore, no benefits is derived - The entries made in the P&L are notional in nature as the same represents the notional value of benefits under EXIM Held that - Following the in assessee own case for another assessment years, the issue is decided against the department. Disallowance u/s 43B - PF and employees contribution to the Provident Fund and EPF paid beyond the due date but before the end of the previous year Held that - Following the decision of the Tribunal in the earlier years, that no disallowance is called for as the same is covered by the decision of the Alom Extrusions Ltd (2009 (11) TMI 27 - SUPREME COURT), wherein it has been held that the amendment in second proviso is with retrospective effect. Therefore, the amendment takes retrospective effect and accordingly any contribution to approved PF paid before the filing of the return has to be allowed as a deduction. Decision in favour of assessee Whether Excise Duty and Sales Tax is part of total turnover while computing deduction u/s 80HHC Held that - Following the decision in case of Lakshmi Machine Works(2007 (4) TMI 202 - SUPREME COURT) wherein it was held that excise duty and sales tax would not have an element of turnover and they ought not to be included in the total turnover or export turnover. Appeal decides in favour of assessee Whether other income is a part of total turnover while computing deduction u/s 80HHC - AO has included the items of other income like dividend, interest, royalty and technical fees, rent, sales-tax refund etc as part of turnover - Since, the Hon ble Supreme Court also has confirmed in the case of Laxmi Machine Works that even excise duty and sales tax which do not have any element of profit cannot be included in the total turnover, similar logic also applies to the other incomes which does not have any bearing on the export turnover and total turnover, while working out the deduction under section 80HHC. Appeal decides in favour of revenue Exclusion of export proceeds not realized within Six months from the total turnover for the purpose of deduction u/s 80HHC Held that - Following the decision in case of Abad Fisheries (2002 (8) TMI 95 - KERALA HIGH COURT) wherein the Hon ble High Court held that if the exports sales proceeds which could not be brought into India in convertible foreign exchange and could not be included in the profits, the same cannot also be included in the total turnover for the purpose of computation u/s 80HHC. Decision in favour of assessee Whether Profits of foreign branch is part of the turnover while calculating deduction u/s 80HHC AO while computing the deduction u/s 80HHC has not reduced the profit of foreign while computing the profits of the business as per Clause (baa) of Explanation Section 80HHC(4B) Held that - From the reading of the said clause, it is abundantly clear that the profit of the foreign branch has to be reduced and if there is any loss, that should be added back. Issue decided in favour of assessee Deduction u/s 80IB - Profit of the unit calculated without deducting the losses incurred by the other units Following the decision in case of Canara Workshops Ltd. (1986 (7) TMI 5 - SUPREME COURT) and ITAT in earlier years in assessee own case and decided in favour of assessee. Appeal decides in favour of assessee Deduction of penalty under Sales Tax Act Assessee contended that nature of fines and penalties, were compensatory in nature Held that - Following the decision in case of Lachmandas Mathuradas (1997 (12) TMI 16 - SUPREME COURT) which was a penalty levied u/s 45(6) of Gujarat Sales Tax Act, is compensatory in nature and not in the nature of penal violation. Decision in favour of assessee Deduction in respect of advances written off Assessee invest in a project turned out to be non-viable and was thus abandoned before any installation took place Said expenditure incurred for development of the project was written off during the current assessment year - AO treated the said expenditure as capital expenditure and disallowed the same Assessee contended that the said expenses incurred were mostly revenue in nature relating to travelling, salary and other administrative expenses Held that - Following the decision in the case of Indo Rama Synthetics (I) Ltd (2009 (9) TMI 635 - DELHI HIGH COURT) if the advances are completely in the nature of salary, wages and other administrative expenses as contended by assessee, then the same is to be treated as revenue expenditure. However, this finding is purely subject to verification by the AO. Appeal decided in favour of assessee subject to verification by AO Deduction of demerger expense u/s 35DD - AO did not grant deduction u/s 35DD in respect of 1/5th pertaining to the relevant AY on the ground that the said expenses were not debited in accounts for the AY Held that - Assessee incurs an expenditure on or after 1st day of April, 1999, wholly and exclusively for the purpose of amalgamation or demerger of an undertaking, the assessee shall be allowed the deduction of an amount equal to one-fifth of such expenditure for each of five successive previous years beginning with the previous year in which the amalgamation or de-merger takes place. Hence, 1/5th of the expenditure has to be allowed in this year which is beginning of the previous year in which de-merger has taken place. Appeal decides in favour of assessee
Issues Involved:
1. Disallowance of interest paid. 2. Disallowance of expenditure under Section 14A. 3. Disallowance under Section 43B. 4. Disallowance of Wealth Tax Payment. 5. Taxability of advance licence benefit receivable and pass book benefit receivable. 6. Disallowance of employees' contribution to Provident Fund under Section 43B. 7. Exclusion of Excise Duty and Sales Tax from total turnover for deduction under Section 80HHC. 8. Exclusion of other income from total turnover for deduction under Section 80HHC. 9. Exclusion of export proceeds not realized from total turnover for deduction under Section 80HHC. 10. Exclusion of 90% of certain incomes from profit of business for deduction under Section 80HHC. 11. Deduction of Rs.6,73,258/- being penalty under Section 45(6) of the Gujarat Sales Tax Act. 12. Addition of book depreciation of demerged entity. 13. Deduction of advances written off. 14. Deduction under Section 35DD. 15. Deduction under Section 36(1)(va) for employees' contribution to Provident Fund. Detailed Analysis: 1. Disallowance of Interest Paid: The issue of disallowance of interest paid by the assessee was restored back to the Assessing Officer (AO) for fresh consideration, following the principles laid down by the Hon'ble Supreme Court in the case of S.A. Builders vs. CIT 288 ITR 1 (S.C.). 2. Disallowance of Expenditure under Section 14A: The Tribunal directed that the disallowance should be restricted to 2% of the gross dividend income, following the decision in the assessee's own case for earlier years. 3. Disallowance under Section 43B: The Tribunal held that the assessee is entitled to deduction for sums paid during the year under Section 43B, even if such sums were shown as prepaid expenses and not debited to the Profit and Loss Account. 4. Disallowance of Wealth Tax Payment: The Tribunal upheld the disallowance of Wealth Tax Payment, following the decision in the assessee's own case for earlier years and the decision of the Mumbai Bench in Bachcharj Factories Ltd. vs. ACIT. 5. Taxability of Advance Licence Benefit Receivable and Pass Book Benefit Receivable: The Tribunal deleted the addition made on account of advance licence benefit receivable and pass book benefit receivable, following the decision of the Hon'ble Bombay High Court in the assessee's own case. 6. Disallowance of Employees' Contribution to Provident Fund under Section 43B: The Tribunal held that no disallowance is called for as the payments were made within the grace period and before the end of the financial year, following the decision of the Hon'ble Supreme Court in CIT vs. Alom Extrusions Ltd. 7. Exclusion of Excise Duty and Sales Tax from Total Turnover for Deduction under Section 80HHC: The Tribunal held that excise duty and sales tax should be excluded from the total turnover, following the decision of the Hon'ble Supreme Court in the case of Laxmi Machine Works. 8. Exclusion of Other Income from Total Turnover for Deduction under Section 80HHC: The Tribunal directed to exclude items like dividend, interest, rent, and sales-tax refund from the total turnover, following the decision in the assessee's own case for earlier years. 9. Exclusion of Export Proceeds Not Realized from Total Turnover for Deduction under Section 80HHC: The Tribunal held that export proceeds not realized should be excluded from the total turnover, following the decision of the Kerala High Court in CIT vs. Abad Fisheries. 10. Exclusion of 90% of Certain Incomes from Profit of Business for Deduction under Section 80HHC: The Tribunal upheld the CIT(A)'s decision that certain incomes like sales tax refund, insurance claims, and technical fees are business receipts and need not be excluded while arriving at the profits of business under clause (baa). 11. Deduction of Rs.6,73,258/- Being Penalty under Section 45(6) of the Gujarat Sales Tax Act: The Tribunal upheld the CIT(A)'s decision that the penalty is compensatory in nature and allowed the deduction, following the decision of the Hon'ble Supreme Court in Lachmandas Mathuradas vs. CIT. 12. Addition of Book Depreciation of Demerged Entity: The Tribunal held that the addition of book depreciation allocated to the demerged entity is not called for, as the amount was not debited to the Profit and Loss Account. 13. Deduction of Advances Written Off: The Tribunal allowed the deduction of advances written off for UPEXCEL Ltd., subject to verification by the AO that the expenses are revenue in nature, following the decision in DCIT vs. Mukand Ltd. 14. Deduction under Section 35DD: The Tribunal upheld the CIT(A)'s decision to allow 1/5th of the demerger expenses as deduction under Section 35DD, beginning with the previous year in which the demerger took place. 15. Deduction under Section 36(1)(va) for Employees' Contribution to Provident Fund: The Tribunal allowed the deduction for employees' contribution to the provident fund paid after the due date but within the grace period, following the provisions of Section 43B.
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