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TMI Blog2011 (12) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee was not in a position to correlate the amounts received as rent from outside parties as recovery of the amounts paid and other receipts, details of which are not available at present - Assessee could not relate the receipt of the above income to the industrial unit for claim of deduction under section 80I - Decided against the assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... business', these receipts have no direct relationship with the assessee's claim under section 80HHC on export of goods. These are services separately rendered by the assessee company to a foreign company. Therefore, even though it is a business income, these incomes will fall under non operational income like brokerage, commission, interest or any other receipt of similar nature to be excluded at 90% under the provisions of section 80HHC Explanation (baa). Even in the proceedings before the AO when restored by ITAT, assessee did not submit any details to substantiate the claim. Considering that assessee originally excluded the same and only contested before the ITAT as additional ground, the Assessing Officer's and the CIT (A)'s orders on this issue are upheld and assessee's ground is rejected. 1.4 In the result, all respective grounds on this issue stands rejected. Issue-2. "Exclusion of miscellaneous receipts from profits and gains in computing deduction under section 80I": This issue arises as Ground No.3 in assessment year 1996-97 only. 2.1 The facts of the issue are that the assessee included miscellaneous receipts as profit and gains of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the issue is with reference to amount of duty drawback, the principle of which was subsequently reversed by the Hon'ble Supreme Court in Liberty India 317 ITR218 (SC). Assessee could not relate the receipt of the above income to the industrial unit for claim of deduction under section 80I. In view of this, the assessee's claim cannot be allowed. Accordingly the ground on this issue is dismissed. Issue-3. "Error on computation of interest under section 244A: This issue arises as Ground No.1 in AY 1990-91 and AY 1991-92, as Ground No.2 in AY 1992-93 and AY 1994-95 and as Ground No.4 in 1996-97. 3.1 The assessee was aggrieved by the method of calculation of interest on the refund under section 244A. The main grievance of the assessee was that the interest under section 244A is to be calculated on the tax refund without reducing the interest granted earlier on refund. 3.2 It was fairly submitted before us that this issue was considered by the ITAT Mumbai Benches (A) in Abudhabi Commercial Bank Ltd vs. DCIT in ITA No.5136/Mum/2009 (copy placed on record) wherein it has been held that the interest needs to be calculated on the refund due to the assessee without re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd assessee. It is seen that method adopted by the Assessing Officer is being consistently followed in respect of all assessee's. Therefore, I am of the view that method adopted by the Assessing Officer as per provisions of the act cannot be faulted. I therefore included to agree with the computation method adopted by the Assessing Officer. Accordingly, the ground under appeal is dismissed". 8. From the above it is clear that the CIT (A) has not gone into the question of correctness of method adopted by the Assessing Officer but decided the issue on the ground that the method adopted by the Assessing Officer is being consistently followed in respect of all assessees. Therefore, the impugned order of the CIT (A) qua this issue is not sustainable in law and liable to be set aside. We accordingly decide this issue in favour of the assessee and direct the Assessing Officer to calculate the interest on the refund due to the assessee without reducing the interest under section 244A which is part of the refund earlier granted from the refund due". 3.3 Respectfully following the above, since the issue is same, the Assessing Officer is directed to recalculate the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Income Tax Officer (2005) 93 ITD 603 (Mum). It was also submitted that giving effect to the orders of the ITAT are proceedings equivalent to Sec.154 as has been considered by the Hon'ble Bombay High Court in the case of Empire Industries Ltd vs. CIT (1992) 93 ITR 295 (Bom). Further issue is such that two views are possible, the Assessing Officer's action in denying the interest under section 244A in consequential proceedings is not correct. 4.3. The learned Departmental Representative however, submitted that the decision of the assessee's in making the claim belatedly has resulted in refunds in consequential proceeding only and had the assessee made the claims at the time of filing the return, the Revenue would have issued refund without any interest liability at the earliest possible time and therefore, the Assessing Officer was correct in denying the interest on the delay attributable to the assessee under section 244A(2). The Ld.DR relied on CIT vs Assam Roofing Ltd, 330 ITR 87 (Gau) for the proposition that appellate proceedings has to be included in the expression 'proceeding' as appearing in sub section 2 of Sec. 244A. Therefore delay in making clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d refund without varying the period for which interest was granted earlier. 4.5 The case of revenue is supported by judgment of Hon'ble Gauhati High Court in the case of CIT vs Assam Roofing Ltd, 330 ITR 87(Gau) but in that case interest u/s 244A (1) was granted for the first time after the order of CIT(A) in which claim was made. Moreover the Hon'ble Kerala High Court in the case of South Indian Bank (supra) held against revenue and in favor of assessee. No jurisdictional High Court judgment was brought to our notice. Therefore, the view favourable to assessee is to be followed. However, we are of the view that provisions of Sec 244A(3) are applicable on the facts of this case. AO has no obligation to re determine the period for which interest was to be granted once interest was granted in earlier proceeding. He has to enhance or decrease on the quantum only. In view of this, we direct the Assessing Officer to increase or reduce the interest under section 244A(1) r.w.s. 244A(3) and rework the interest accordingly. 4.6 Since the Assessing Officer also has not referred the matter to the Chief Commissioner or CIT where any question arises as to the period to be excluded, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not only followed the above orders, but also analyzed the issue in the light of the Supreme Court judgment and the jurisdictional High Court in the case of DCIT vs. Reliance Industries Ltd (2004) and the orders of the CIT (A) is as under: "5.8 I have carefully considered the submission made on behalf of the appellant. I have also gone through the Transport Subsidy Scheme, 1971. From the perusal of the scheme and various facts placed before me, I found that, the Gagal Unit of the appellant company is situated in the state of Himachal Pradesh which is among one of the selected areas eligible for transport subsidy. On perusal of the preamble and other salient features of the scheme, it is seen that the purpose of the introduction of scheme was to encourage setting up of industries to promote growth in certain selected areas and the selected areas specified in the scheme were industrially underdeveloped areas and hence thrust was sought to be given for their industrial growth. From the reading of the scheme, it is evident that the purpose of the scheme was to encourage industrialization on backward areas. Hence, applying the ratio of the decision in the case of the Apex Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 115J. The assessee claimed exclusion of interest under the income tax in computing book profit by way of additional ground the issue of which was restored to the file of the Assessing Officer. The Assessing Officer while giving effect to the orders did not allow claim contending that the provisions of interest on income tax is unascertained liability and hence falls under the ambit of clause (c) to Explanation to Section 115J of the Act. The CIT (A) gave relief to the assessee by stating as under: "8.3 I have considered the submission made by the AR of the appellant and also perused the decision relied upon by them. As per clause (a) of Explanation to section 115J, only the amount of income tax paid or payable be added back in computing book profit. Income Tax is charged under section 4 of the Act at the rate specified in the Finance Act, whereas interest is charged under the various other provisions of the Act. Thus there are distinct provision for charging income tax and interest. The purpose of charging income tax and interest is altogether different. While there was provision for waiver of interest, there is no provision for waiver of income tax. Thus, it is not po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of filing Form 10CCAC is mandatory if the assessee is claiming deduction under section 80HHC in the normal computation of total income. No such requirement has been specified in the provisions of section 115J. 9.3 It has been submitted that identical issue has been decided in favour of the assessee by the ITAT in the assessment year 1998-99 following the decision of the Hon'ble Supreme Court in the case of Ajanta Pharma 327 ITR 305 (SC). The ITAT held as under: "18. The short issue involved in this appeal is as to what is the amount of deduction under section 80HHC - export profits computed under the head 'profits and gains from business and profession, or export profits as per books of account to be excluded for the purpose of computation of book profits under section 115JA. While the Assessing Officer has held that the profit to be excluded is profits computed under the head 'profits and gains from business and profession', the CIT (A) has confirmed the said action by placing reliance on the IPCA Laboratories Limited vs DCIT (251 ITR 401). The assessee is not satisfied and is in further appeal before us. 19. In the case of Ajanta Pharma Ltd vs. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained code. It taxes deemed income. It begins with a non abstante clause. Section 115JB refers to computation of "book profits" which have to be computed by making upward and Downward Adjustments. In the Downward Adjustment, vide clause (iv) it seeks to exclude "eligible" profits derived from exports. On the other hand, under section 80HHC(1B) it is the extent of deduction which matters. The word "thereof" in each of the items under section 80HHC(1B) is important. Thus, if an assessee earns ₹ 100 crores then for the assessment year 201-02, the extent of deduction is 80 per cent thereof and so on which means that the principle of proportionality is brought into scale down the tax incentive in a phased manner. However, for the purposes of computation of book profits which computation is different from normal computation under the 1961 Act/computation under Chapter VIA. We need to keep in mind the Upward and Downward Adjustments and if so read it becomes clear that clause (iv) covers full export profits of 100 per cent as "eligible profits" and that the same cannot be reduced to 80 per cent by relying on section 80HHC(1B). Thus, for comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation to section 115JB (subject to the conditions specified in sub-section (4) and (4A) of that section) to obliterate the difference between "eligibility" and "deductibility" of profits as contended on behalf of the Department. 20. The same principles apply on the situation before us. Therefore, what is to be excluded must start with book profits of export business as base. One cannot have computation of book profit with tax profits as the base. In this view of the matter, and in view of the broad principles clearly discernable from Hon'ble Supreme Court's judgment in Ajanta Pharma case (surpa), we uphold the grievance of the assessee and direct the Assessing Officer to give resultant relief, if any" 9.4. In view of this, there is no need to modify the orders of the CIT (A) and accordingly the ground of the Revenue stands dismissed. In the result, this appeal is partly allowed. ITA No.6263/Mum/2010: 10.0 Ground No.1 in this Revenue appeal pertains to the issue of exclusion of miscellaneous receipts from profits and gains in computing deduction under section 80HHC. It was submitted that the miscellaneous receipts are inextricably linked t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.2 pertains to claim of exclusion of sale of machinery in computing 'total turnover' for the purpose of deduction under section 80HHC. The assessee claimed exclusion on account of sale of machinery from total turnover in computing deductions under section 80HHC before the Hon'ble I.T.A.T. by way of additional ground. The Hon'ble ITAT has restored the matter to the file of the Assessing Officer. The Assessing Officer while giving effect to the order of the Hon'ble ITAT did not grant relief in this respect on the contention that the items to be excluded to work out the "total turnover" are clearly specified in explanation (baa) below section 80HHC(4C) of the Act. The CIT (A) has held that the total turnover should not include any income which has no nexus with the sale proceeds and directed the Assessing Officer to exclude the sale of machinery from total turnover in computing deduction u/s 80HHC. Since similar issue was decided in favour of the assessee in assessment year 1998-99 in ITA No.6289/M/2003 following the decision of the Hon'ble Supreme Court in the case of CIT vs. Lakshmi Machine Works (2007) 290 ITR 667 (SC), we do not see any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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