9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (2) TMI 554 - AT - Income TaxDeduction u/s 80IA - Rectification u/s 154 - held that - even though AO correctly stated that the deduction under section 80IB has to be restricted to the gross total income while allowing the set off, he wrongly restricted it to profits and gains of the business. As against the eligible amount under section 80IB, assessee gross total income (including the income from house property) was at Rs.9,14,13,162/-. Instead of allowing the deduction under section 80IB invoking the provisions of section 80A(2), AO restricted the amount to Rs.8,33,80,662/- ie. Income from business only. Therefore, the computation made by AO is factually not correct. Assessee is entitled for deduction under section 80IB on the gross total income which should include income from house property and income from business and other incomes under other heads before allowing the deduction under Chapter VIA. Hon ble Bombay High Court in the case of Synco Industries Ltd vs. AO, 2001 (7) TMI 45 - BOMBAY HIGH COURT has held that, The provisions of 80IA and 80IB are pari materia and the principles will apply equally. Expenditure towards sponsoring the Indian Science Congress - held that - The expenditure is in the nature of advertisement of assessee business and is laid out and expended wholly and exclusively for the purpose of the business. - Expenditure allowed. Nature of exchange difference - held that - Following the principles laid down by the Hon ble Supreme Court in the case of Liberty India Vs Commissioner of Income-tax, 2009 (8) TMI 63 - SUPREME COURT the income from premium relating to import license cannot be considered as income derived from the undertaking. - Decided in favor of revenue.
Issues Involved:
1. Disallowance of Rs.10,00,000/- under section 35(1)(ii) or section 37(1) of the Income-Tax Act, 1961. 2. Adjustment of loss on export of manufactured goods under section 80HHC(3). 3. Reduction of 'Miscellaneous Income' from the amount of profit eligible for deduction under section 80IB. 4. Disallowance of Rs.34,000/- on account of payment to the staff sports club under section 40A(9). 5. Restriction of deduction under section 80-IB to the amount of income determined under the head 'Business Income' and not the 'Gross Total Income'. 6. Levy of interest under section 234D of the Income Tax Act. Detailed Analysis: 1. Disallowance of Rs.10,00,000/- under section 35(1)(ii) or section 37(1): The assessee claimed a deduction of Rs.10,00,000/- paid to the 88th session of Indian Science Congress of ICAR, initially under section 35(1)(ii). The AO disallowed this as the eligibility under section 35(1)(ii) expired on 31.3.2000. The alternate claim under section 37(1) was also rejected. However, it was determined that the amount is eligible for deduction under section 37(1) as it was an expenditure for advertisement and wholly and exclusively for the business purpose. Therefore, Ground No.1 was allowed. 2. Adjustment of loss on export of manufactured goods under section 80HHC(3): The assessee had a loss on export of manufactured goods, which the AO set off against the export incentives. This was upheld by the CIT (A) and confirmed by the Supreme Court in IPCA Laboratories Ltd vs. DCIT, 266 ITR 521 (SC). Hence, Ground No.2 was rejected. 3. Reduction of 'Miscellaneous Income' from the amount of profit eligible for deduction under section 80IB: The AO excluded certain incomes, such as exchange difference, premium relating to import license, and miscellaneous interest, from the profits of the industrial undertaking. The CIT (A) allowed Rs.3,86,282/- towards scrap sale but upheld the AO's action on other items. The Tribunal upheld the CIT (A)'s decision, citing lack of necessary details and relevant legal precedents. Therefore, Ground No.3 was rejected. 4. Disallowance of Rs.34,000/- on account of payment to the staff sports club under section 40A(9): The AO disallowed the amount under section 40A(9). However, this was overturned based on the jurisdictional High Court judgment in CIT vs. Bharat Petroleum Corporation Ltd, 252 ITR 43, which allowed such expenses. Hence, Ground No.4 was allowed. 5. Restriction of deduction under section 80-IB to the amount of income determined under the head 'Business Income' and not the 'Gross Total Income': The AO restricted the deduction under section 80IB to the profits and gains of the business, excluding income from house property. The Tribunal found this incorrect, stating that the deduction should be allowed on the gross total income, which includes all heads of income before Chapter VIA deductions. This was supported by the Bombay High Court decisions in CIT vs. M/s Eskay K'N'IT (India) Ltd and CIT vs. Tridoss Laboratories Ltd. Therefore, Ground No.5 in ITA No.7699 and Ground No.1 in ITA No.2551 were allowed. 6. Levy of interest under section 234D: This issue was deemed consequential. The AO was directed to consider the amended provisions of law while giving effect to the order. Hence, Ground No.6 was noted for consequential action. Conclusion: The appeals were partly allowed, with specific directions provided to the AO for re-computation and application of relevant legal principles.
|
