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2014 (4) TMI 743 - AT - Income TaxError in determination of annual rateable value of the property let out Computation of income from house property Held that - As decided in assesee s own case, it has been held that gross annual ratable value of the property at the annual value determined for the purposes of computation of house property income is to be determined at the annual value determined by Municipal Corporation - the AO is directed to determine ALV at the value determined by Municipal Corporation for the year Decided in favour of Assessee. Addition u/s 92 of the Act - Purchases of Cefotaxime Sodium & Roxythromycin Held that - As decided in assesee s own case, it has been held that the transaction between the assessee and the non-resident company was not an arranged transaction - The certificates produced by the assessee from various parties establish that the assessee did not buy the product cefoaxime sodium at a price higher than the price at which the same product was sold to others - the AO failed to establish a case where provisions of section 92 could be applied to disown the loss incurred by the assessee - the order of the CIT(A) is upheld Decided against Revenue. Disallowance of estimated depreciation on obsolete assets Held that - The decision in CIT Vs. GR Shipping Ltd. 2009 (7) TMI 1169 - BOMBAY HIGH COURT followed depreciation was allowable on obsolete assets to the assessee there was no merit in the action of the AO for declining assessee s claim of depreciation on obsolete assets Decided in favour of Assessee. Disallowance of full revenue deduction VRS and Early retirement incentives Held that - Mulund factory was working and the AO was not justified in observing that expenditure was incurred for closing that unit - various manufacturing unit of assessee at Mulund, Ankleshwar and Goa and under loan licence agreement part of the corporate business and many of the projects which were being maintained at Mulund were continued to be produced under loan licence agreement - the expenditure incurred on VRS was wholly and exclusively for the purpose of business, even if it is consider the same under the provision of Section 37(1), it cannot be disallowed Relying upon K Ravindranathan Nair Versus Commissioner of Income-Tax 2000 (11) TMI 3 - SUPREME Court there was no merit in the action of the lower authorities for declining the assessee s claim for deduction of VRS and early retirement incentives paid to the workers Decided in favour of Assessee. Sales tax set off and refund Inclusion in taxable turn over Computation of deduction u/s 80HHC of the Act - Held that - The issue with regard to allowing claim of deduction in respect of sales tax set off and refund, the assessee is not eligible in view of Explanation (baa) to Section 80HHC the AO is directed to reduce the amount of sales tax refund from the eligible profit for computing claim of deduction u/s 80HHC Decided against Assessee. Claim of deduction u/s.80HHC in respect of processing charges Held that - As decided in assessee s own case, it has been held that the AO is directed that only net receipts after deducting expenditure incurred for earning such income will be considered for reduction from eligible business profit as per Explanation (baa). Disallowance of bad debts Held that - The amount so written off by the assessee is eligible for deduction as bad debts or business loss - Merely because the AO was not convinced with the efforts made by the assessee for recovery of the bad debts, no disallowance can be made Relying upon TRF. LTD. Versus COMMISSIONER OF INCOME-TAX 2010 (2) TMI 211 - SUPREME COURT - the CIT(A) that he has already considered amended provisions of law and allowed assessee s claim for deduction u/s 36(1)(vii) except amount of Rs.4,64,239 - no evidence with regard to export debt outstanding was produced before the CIT(A), he has partly confirmed the disallowance thus, the matter is remitted back to the AO to the extent of Rs.4,64,239/- for fresh adjudication. Taxing of STCG on sale of brands Held that - The claim of the assessee was however not accepted by the AO who after analyzing the basis on which the right over trade marks got acquired, came to the conclusion that certain portion of the expenditure incurred by the assessee company over a period of time and claimed as deduction under various heads can be related to the cost of acquisition of these trademarks the ground was not taken before the CIT(A) - Therefore, he has not decided the issue thus, the matter is required to be remitted back to the CIT(A) for adjudication Decided in favour of Assessee. Disallowance of interest Tax free investment income Held that - As decided in assessee s own case for the previous year, it has been held that the CIT(A) accepted the claim of sale proceeds but confirmed disallowance of interest for 20 days as there was time gap of 20 days between date of investment and date of receipt - No material is placed on record to controvert the claim of the assessee regarding availability of sale proceeds Decided against Revenue. Exclusion of excise duty from turnover Computation of deduction u/s 80HHC of the Act Held that - The decision in CIT Vs. Laxmi Machine Works 2007 (4) TMI 202 - SUPREME Court followed - excise duty has no element of profit, therefore, not includible in total turnover for computing deduction u/s.80HHC thus, there was no infirmity in the order of CIT(A) directing for exclusion of excise duty from the total turnover for computing deduction u/s.80HHC Decided against Revenue. Exclusion of processing charges and bad debts Computation of deduction u/s 80HHC of the Act Held that - The decision in CIT Vs. Ravindranathan Nair 2007 (11) TMI 10 - Supreme Court of India followed - the AO is directed to recompute the deduction u/s 80HHC after excluding the net income from processing charges - bad debts recovered is neither part of total turnover nor export turnover for the purpose of Section 80HHC thus, it is required to be excluded from eligible profit for the purpose of clause (baa) Decided against Revenue. Re-computation of indirect cost attributable to export of trading goods Held that - As decided in assessee s own case, it has been held that it is clear from the working of the AO that for determining the indirect cost, the AO has reduced from the total cost of business, cost of goods as well as the other items thus, there was no error as far as the formula adopted by the Assessing Officer for computation of indirect cost allocated to the export of trading goods Decided in favour of Revenue. Direction to the AO for calculating deduction u/s 80HHC of the Act 90% of DEPB license license not reduced Held that - The decision in Topman Exports Vs. CIT 2012 (2) TMI 100 - SUPREME COURT OF INDIA followed - a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Explanation (baa) to section 80HHC read with the words used in clauses (iiid) and (iiie) of section 28, the assessee was entitled to a deduction under section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee thus, the AO is directed to compute deduction on DEPB since license sold Decided in favour of Assessee. Restriction of penalty u/s 271(1)(c) of the Act Held that - As the addition made u/s.92 is already set aside, disallowance of VRS as well as claim of depreciation on obsolete assets - the quantum itself has been deleted, there is no legs for levy of penalty for such disallowance/addition - the action of the CIT(A) is confirmed for deleting the penalty imposed with respect to these above three items - In respect of penalty imposed for addition on account of short term capital gain, the matter has been remitted back to the CIT(A) for fresh adjudication thus, penalty for such addition is also restored to the file of CIT(A) Decided against Revenue.
Issues Involved:
1. Computation of income from house property. 2. Addition under Section 92 regarding transfer pricing. 3. Disallowance of estimated depreciation on obsolete assets. 4. Computation of long-term capital gains. 5. Disallowance under Section 14A. 6. Deduction of VRS and early retirement incentives. 7. Inclusion of sales-tax set off and refund in total turnover for Section 80HHC. 8. Reduction of processing charges and bad debts recovered under Clause (baa) of Section 80HHC. 9. Disallowance of bad debts. 10. Taxation of short-term capital gain on sale of brands. 11. Disallowance of interest attributable to tax-free investment income. 12. Exclusion of excise duty from total turnover for Section 80HHC. 13. Recalculation of indirect costs for export of trading goods. 14. Calculation of deduction under Section 80HHC without reducing 90% of DEPB license sold. 15. Penalty under Section 271(1)(c). Detailed Analysis: 1. Computation of Income from House Property: The Tribunal directed the AO to determine the Annual Letting Value (ALV) of the property at the value determined by the Municipal Corporation, following its earlier decision in the assessee's own case. This ground of the assessee was allowed for statistical purposes, and the Revenue's ground was dismissed. 2. Addition under Section 92 Regarding Transfer Pricing: The Tribunal found that the AO's addition under Section 92 was not justified, as the transaction was not an "arranged transaction." The Tribunal followed the Hon'ble Bombay High Court's decision in the assessee's own case and deleted the addition. The Revenue's ground was dismissed. 3. Disallowance of Estimated Depreciation on Obsolete Assets: The Tribunal allowed the assessee's claim for depreciation on obsolete assets, following its earlier decision in the assessee's own case and the decision of the Hon'ble Bombay High Court in the case of G.R. Shipping Ltd. The AO's action was found to be without merit. 4. Computation of Long-Term Capital Gains: The Tribunal dismissed the assessee's ground regarding the fair market value as on 01.04.1981 for computing long-term capital gains, following its earlier decision against the assessee in the assessee's own case. 5. Disallowance under Section 14A: The Tribunal found no merit in the disallowance made under Section 14A, following its earlier decision in the assessee's own case. The AO's action was not justified as the facts and circumstances were the same. 6. Deduction of VRS and Early Retirement Incentives: The Tribunal allowed the assessee's claim for deduction of VRS and early retirement incentives, following the Hon'ble Supreme Court's decision in K. Ravindranathan Nair and the Hon'ble Bombay High Court's decision in Foseco India Ltd. The Revenue's ground was dismissed. 7. Inclusion of Sales-Tax Set Off and Refund in Total Turnover for Section 80HHC: The Tribunal dismissed the assessee's ground and directed the AO to reduce the amount of sales tax refund from the eligible profit for computing the deduction under Section 80HHC, following the Hon'ble Supreme Court's decision in ACG Associated Capsules. 8. Reduction of Processing Charges and Bad Debts Recovered under Clause (baa) of Section 80HHC: The Tribunal directed the AO to consider only the net receipts after deducting expenditure incurred for earning such income for reduction from eligible business profit, following its earlier decision in the assessee's own case. 9. Disallowance of Bad Debts: The Tribunal restored the ground regarding the disallowance of bad debts to the AO for fresh decision, directing the assessee to furnish details regarding the income accounted for in respect of export debts. 10. Taxation of Short-Term Capital Gain on Sale of Brands: The Tribunal restored the ground to the CIT(A) for deciding on merit after considering the Hon'ble Supreme Court's decision in B.C. Srinivasa Shetty. The AO's action was not justified without proper consideration. 11. Disallowance of Interest Attributable to Tax-Free Investment Income: The Tribunal dismissed the Revenue's ground, following its earlier decision in the assessee's own case, where the investment was found to be from sale proceeds and not borrowed funds. 12. Exclusion of Excise Duty from Total Turnover for Section 80HHC: The Tribunal upheld the CIT(A)'s order directing the exclusion of excise duty from total turnover, following the Hon'ble Supreme Court's decision in CIT Vs. Laxmi Machine Works. 13. Recalculation of Indirect Costs for Export of Trading Goods: The Tribunal allowed the Revenue's ground and dismissed the assessee's cross objection, following its earlier decision in the assessee's own case, where the indirect cost was to be allocated in the ratio of export turnover to total turnover. 14. Calculation of Deduction under Section 80HHC without Reducing 90% of DEPB License Sold: The Tribunal directed the AO to compute the deduction on DEPB license sold, following the Hon'ble Supreme Court's decision in Topman Exports. 15. Penalty under Section 271(1)(c): The Tribunal confirmed the deletion of penalty imposed on additions under Section 92, VRS expenses, and depreciation on obsolete assets, following the Hon'ble Supreme Court's decision in Reliance Petroproducts Pvt. Ltd. The penalty for short-term capital gain addition was restored to the CIT(A) for fresh decision after deciding the quantum addition. Conclusion: The Tribunal's order resulted in partial allowance of the appeals filed by the assessee and Revenue, while the cross objection filed by the assessee was dismissed. The Tribunal followed its earlier decisions and relevant judicial pronouncements to arrive at its conclusions.
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