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2016 (9) TMI 404 - AT - Income TaxDisallowance of previous years expenditure - Held that - As decided in assessee s own case for assessment year 2006-07 wherein held both the lower authorities have wrongly disallowed assessee's claim or prior period expenditure. The same stands deleted. Disallowance for the alleged excessive shortage in the Sesame seeds account - Held that - We find that the assessee has closed the business of trading in Sessame seeds during the year under consideration and accordingly wrote off the entire stock which was not saleable as per the standards prescribed by the Government authorities and the same has been destroyed. In our considered opinion, this is a loss and not shortage though claimed as a shortage. The total quantity wrote off was 5940 MT on a total value of ₹ 29.48 crores which comes to 0.86% only. The only reason for upholding the disallowance given by the First Appellate Authority is that the assessee has failed to quantify the shortage/loss due to substandards material. There may be some force in the findings of the First Appellate Authority. Considering the smallness of the overall percentage which is 0.86%, the balance of convenience is tilted in favour of the assessee. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the disallowance Profit on sale of DEPB license for computation u/s. 80HHC - Held that - As decided in Topman Exports 2012 (2) TMI 100 - SUPREME COURT OF INDIA DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB and while the face value of the DEPB will fall under clause (iiib) of Section 28, difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 Decided in favor of assessee. Taking net interest as part of indirect cost for the purpose of computation of deduction - Held that - As decided in ACG Associated Capsules Pvt. Ltd 2012 (2) TMI 101 - SUPREME COURT OF INDIA Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads PGBP is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Decided in favor of assessee Deduction u/s. 80HHC to the extent of gross total income without restricting the total income derived from export of goods - Held that - We are of the considered view that the income of the assessee is to be computed as per provisions of the law and simply because an assessee has suffered more amount on tax than what is legally due, then the Department can not assess the income at a higher figure but should assess the income at correct amount as per the provisions of law. We, therefore, do not find any merit in this ground of appeal of the Revenue Decided in favor of assessee
Issues Involved:
1. Disallowance of ?90.38 lacs from business income as previous years’ expenditure. 2. Disallowance for alleged excessive shortage in the Sesame seeds account. 3. Deduction under Section 80HHC for disallowances made by the A.O. 4. Levy of interest under Section 234B. 5. Consideration of profit on sale of DEPB license for computation under Section 80HHC. 6. Consideration of net interest as part of indirect cost for deduction computation under Section 80HHC. 7. Recalculation of deduction under Section 80HHC due to interest expenses. 8. Deduction under Section 80HHC for Marine Division ignoring loss. 9. Allowance of deduction under Section 80HHC to the extent of gross total income. 10. Deletion of disallowance of previous year expenses of ?4,62,11,501. 11. Allowance of deduction under Section 80HHC on General and Marine divisions. 12. Reduction of export turnover for deduction under Section 80HHC. Detailed Analysis: 1. Disallowance of ?90.38 lacs from business income as previous years’ expenditure: The assessee argued that the expenses were crystallized in the current year and should be allowed. The Tribunal referred to its earlier decision in the assessee’s case and found that similar disallowances had been deleted. Respectfully following the earlier decision, the Tribunal directed the A.O. to delete the addition of ?90.38 lacs. 2. Disallowance for alleged excessive shortage in the Sesame seeds account: The assessee claimed that the shortage was due to the destruction of non-saleable stock upon closing the business. The Tribunal noted that the shortage was only 0.86% of the total stock and considered it a business loss rather than a shortage. The Tribunal directed the A.O. to delete the disallowance of ?15,19,800. 3. Deduction under Section 80HHC for disallowances made by the A.O.: Since the Tribunal deleted the disallowances, the alternative claim for deduction under Section 80HHC became infructuous. 4. Levy of interest under Section 234B: The Tribunal noted that the charging of interest under Section 234B is mandatory and directed the A.O. to levy interest as per the law. 5. Consideration of profit on sale of DEPB license for computation under Section 80HHC: The Tribunal referred to the Supreme Court decision in Topman Exports, which held that DEPB is a cash assistance covered under Section 28(iiib) and profit on its transfer is covered under Section 28(iiid). Following this decision, the Tribunal upheld the CIT(A)'s direction to grant deduction for DEPB licenses. 6. Consideration of net interest as part of indirect cost for deduction computation under Section 80HHC: The Tribunal followed the Supreme Court decision in ACG Associated Capsules Pvt. Ltd., which allowed the netting off of interest for the purpose of Section 80HHC. The Tribunal upheld the CIT(A)'s direction to consider only the net interest. 7. Recalculation of deduction under Section 80HHC due to interest expenses: The Tribunal noted that this issue was similar to the net interest consideration and dismissed the ground following the same reasoning. 8. Deduction under Section 80HHC for Marine Division ignoring loss: The Tribunal referred to its earlier decision and the Supreme Court ruling in IPCA Laboratory, which held that losses cannot be ignored even if a disclaimer certificate is issued. The Tribunal modified the CIT(A)'s order to allow deduction only for the positive profit after considering the loss. 9. Allowance of deduction under Section 80HHC to the extent of gross total income: The Tribunal followed its earlier decision and the Supreme Court ruling in Shelly Products, which stated that the income should be computed as per the law and not necessarily higher than the returned income. The Tribunal dismissed the revenue’s ground. 10. Deletion of disallowance of previous year expenses of ?4,62,11,501: The Tribunal dismissed the revenue’s ground, following its earlier decision to allow similar expenses. 11. Allowance of deduction under Section 80HHC on General and Marine divisions: The Tribunal partly allowed the revenue’s appeal, following its earlier decision regarding the Marine division and the treatment of export incentives. 12. Reduction of export turnover for deduction under Section 80HHC: The Tribunal restored the issue to the A.O. to decide afresh in light of Section 155(13), directing the A.O. to consider the provisions appropriately. Conclusion: The Tribunal provided detailed directions on each issue, largely favoring the assessee by following precedents and Supreme Court rulings. The appeals were partly allowed or dismissed based on the established legal principles and previous decisions.
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