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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 ..... nbsp; 1.0 This issue arises as Ground No.1 in assessment years 1992- 93, 1993-94, 1994-95 and as ground no 1 and 2 in AY 1996-97. The contention is with reference to exclusion of above receipts from profits of business under Sec. 80HHC. 1.1 In the course of arguments, the learned Counsel did not press the issue with reference to exclusion of rental income and interest income in view of the orders of the ITAT in earlier years as well as the decision of the Hon'ble Bombay High Court in the case of Asian Star Co. Ltd 326 ITR 56. Hence that part of the ground pertaining to the exclusion of rental income and interest income was treated as withdrawn. 1.2 The other issue to be considered in these grounds is with reference to the receipt of management fees. The assessee has entered into an agreement with the Yanbu Cement Company Ltd to offer technical knowhow for the operation, maintenance and efficient working of their cement plants. The assessee received consideration in foreign currency by way of management consultancy fees. It is the claim of the assessee that the receipt is nothing but income arising in the course of main business, hence to be considered as 'p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The AO did not allow deduction on the above incomes but, CIT (A) has allowed the same. Against the orders of the CIT (A), the Revenue went in appeal. The Hon'ble ITAT has restored the matter to Assessing Officer for deciding the issue in the line with decisions of Hon'ble Ahmedabad Special Bench in the case of Nirma Industries Ltd vs. ACIT (2005) 95 ITD 199 (Ahd-SB) as well as decision of Delhi Special Bench in the case of Lalson Enterprises vs. DCIT 89 ITD 25(Del.SB). In computing deduction under section 80HH and 80I, in consequential orders, relief was not granted by the Assessing Officer in respect of the following amounts: Particulars Amount (Rs.) Car and Bus Hire Charges 14,716.80 Sale of Empty Oil Drums 4,544.70 Rent recovered from outside parties 18,23,465.00 School Grant received 3,11,269.15 Incidental charges on material received 26,859.00 Recovery of lost tools 400.00 Consultancy service charges 10,200.00 Rebate on franking machine 901.00 Sundry 5,83,397.51 HO Entry 4,47,599.00 Total 32,23,352.16 The Assessing Officer examined the amounts and has come to the conclusion that these receipts were nowhere established to have direct o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of refund earlier granted. In the above case it was held vide Para 7 and 8, as under: 7."We have considered the rival contentions and relevant record. It is evident from the orders of the lower authorities that the Assessing Officer has calculated the interest under section 244A by reducing the refund of tax already granted to the assessee. In the amount of refund the interest which was granted earlier occasions also included. Therefore, the Assessing Officer has reduced the total refund granted which consists refund of tax and interest already granted under section 244A. Therefore, we find force in the contention of the learned Authorized Representative that while computing the interest under section 244A, the Assessing Officer has reduced both the refund of tax as well interest granted under section 244A from the refund due to the assessees. In order to compute the interest under section 244A, the amount of balance refund due to the assessee has to be determined after deducting the amount of tax already refunded and not amount of interest already granted under section 244A. Thus, the interest component in the refund already granted should be excluded while the same i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest already granted in the earlier refund. With these directions, respective grounds are considered as allowed. Issue.4. Non-grant of interest under section 244A on refund arising due to additional grounds taken before Hon'ble ITAT: This issue arises in the appeal at ground No.2 for the AY1990-91 and 1991-92, Ground No.3 in AY1992-93, Ground No.2 in AY1993-94 and 1994-95 and Ground No.5 in AY 1996-97. 4.1 The issue arises in a peculiar way in the assessee's case as the assessee has not made certain claims before the Assessing Officer in the course of original assessment or before the CIT (A). It raised additional grounds before the ITAT on inclusion and exclusion of certain amounts for deduction under section 80HHC and 80I. Income Tax Appellate Tribunal after admission of additional grounds restored the issues to the file of the Assessing Officer for fresh consideration. While giving effect to the orders of the ITAT the Assessing Officer allowed certain claims resulting in refund to the assessee due to re-determination of total income. It was the assessee's contention that the interest under section 244A was not allowed on such refund on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to assessee as held in the above case. 4.4 We have heard the rival contentions and perused the orders placed on record on this issue. Even though the Hon'ble Kerala High Court has held in the case of CIT vs. South Indian Bank Ltd (2011) 237 CTR 74 (Ker) that the belated claim of deduction by the assessee will not justify the denial of interest and refund arising out of such claims otherwise eligible under section 244A(1), in this case the refund arose consequent to the orders of the ITAT under section 254. Therefore, in our view the provisions of section 244A(3) will apply which is as under: "244A. Interest on refunds: ...... (1)..... (2).... (3) Where, as a result of an order under sub-section (3) of section 115WE or section 115WF or section 115WG or sub-section(3) of section143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the period to be excluded, the action of the Assessing Officer in excluding certain period is also not acceptable. Respectfully following the principles laid down by the ITAT in the case of DCIT vs. Videocon International Ltd (2006)6 SOT 247 (Mum) and Artist Tree Pvt Ltd vs. Income Tax Officer (2005) 93 ITD 603 (Mum), Assessing Officer's action cannot be justified on this reason also. However, as provisions of section 244A(3) are very clear, in our opinion, Assessing Officer has no option to vary period for granting increased interest when the period was already fixed in the original proceedings under section 244A(1). Accordingly the Assessing Officer is directed to rework the interest. The respective grounds are considered allowed. 5. In the result, appeals in AY 1990-91 and AY 1991-92 are allowed, whereas appeals in AY 1992-93, AY 1993-94, AY1994-95 and AY 1996-97 are partly allowed. Revenue appeals ITA 6262 and 6263/Mum/2010 ITA Nos. 6262: Assessment year 1990-91. 6. Ground No.1 in the Revenue's appeal is with reference to non allowance of claim on road transport subsidy. Briefly stated the assessee had received certain road transport su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e industrialization on backward areas. Hence, applying the ratio of the decision in the case of the Apex Court in the case of Sahney Steel (supra) and Ponni Sugar (supra), it is held that the Road Transport Subsidy is in the nature of capital receipt. The said view is also fortifies by the decision of special bench of jurisdictional ITAT and also by the jurisdictional High Court, both in the case of Reliance Industries (supra). Furthermore, transport subsidy availed in subsequent assessment years, pursuant to the same scheme, has been held as capital receipt by the jurisdictional ITAT in appellant's own case. Therefore, the Assessing Officer is directed to treat the Road Transport Subsidy received by the appellant as capital receipt and exclude the same in computing total income. This ground is thus allowed". We do not see any reason to interfere with the orders of the CIT as similar issue was decided in favour of the assessee in all the later years on the same scheme. Accordingly Revenue ground is rejected. 7. Ground No.2 pertains to non exclusion of profits on sale of fixed assets from book profits computed under section 115J. The assessee's claim for excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different. While there was provision for waiver of interest, there is no provision for waiver of income tax. Thus, it is not possible to treat interest as part of income tax. The above views is fortified by the decision of Panaji ITAT in the case of Salgoacar Mining Ind. (P) Ltd - vs. JCIT (2006) 102 ITD 289 (Panaji). 8.4 Following the said decision and also the decision of Kerala High Court referred to herein above, the Assessing Officer is directed to exclude interest on income tax of Rs. 46,57,560/-in computing book profit under section 115J. This ground is thus allowed". 8.2 After considering rival arguments, we are of the opinion that there is no need to modify the order of the CIT (A) on this issue. The issue is covered by the Hon'ble High Court of Kerala decision in the case of CIT vs. Fertilizer and Chemicals Travancore Ltd 261 ITR 484(Ker) wherein it was held that section 115J (1A)Explanation(a) mentions only the amount of income tax paid or payable and does not include the interest on income tax. The Hon'ble High Court held as under:- "Held (i) that in so far as interest on income-tax was not mentioned in section 115J, Explanation (a) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 (327 ITR 305), the question which came up for consideration of Hon'ble Supreme Court was "whether for determining the "book profits" in terms of section 115JB, the net profits as shown in the profit and loss account have to be reduced by the amount of profits eligible for deduction under section 80HHC or by the amount of deduction under section 80HHC?. Their Lordships, inter alia, noted that the provisions regarding Minimum Alternate Tax and incentives for exports operate in two different spheres and formula meant for computing export incentive cannot be used in adjustment of the book profits for minimum alternative tax. Hon'ble Supreme Court, inter alia, observed as follows: ....sec 80HHC provides for tax incentives. Section 80HHC(1) at one point of time laid down that an amount equal to the amount of deduction claimed should be debited to the PandL A/c of the previous year in respect of which deduction is to be allowed and credited to the reserve account to be utilized for the business purpose. Section 80HHC(1) concerns e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to 80 per cent by relying on section 80HHC(1B). Thus, for computing "book profits" the Downward Adjustment, in the above example, would be Rs. 100 crores and not Rs. 90 crores. The idea being to exclude "export profits" from computation of book profits under section 115JB which imposes MAT on deemed income. The above reasoning also gets support from the Memorandum of Explanation to the Finance Bill 2000. 10. One of the contentions raised on behalf of the Department was that if clause (iv) of Explanation to section 115JB is read in entirety including the last line thereof (which reads as "subject to the conditions specified in that section"), it becomes clear that the amount of profits eligible for deduction under section 80HHC computed under clause (a) or clause (b) or clause (c) of sub section 3 or sub section (3A), as the case may be, is subject to the conditions specified in that section. According to the Department, the assessee herein is trying to read the various provisions of section 80HHC in isolation whereas as per clause (iv) of Explanation to sec 115JB, it is clear that book profit shall be reduced by the amount of profits eligible for deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial undertaking and have in essence reduced the corresponding expenses of the industrial undertaking. Therefore, following the principles established by the Hon'ble Mad High Court in the case of CIT vs. Sundaram Industries Ltd (2002) 253 ITR 396 (Mad), the above amounts are to be included for the purpose of profits and gains in computing deduction under section 80HHC and 80I. The learned Departmental Representative however referring to the order of the Assessing Officer while giving effect to the order of the ITAT submitted that the assessee has not furnished any evidence with reference to the nature of receipt of sale of stores and materials. That is the reason the Assessing Officer did not include the above amount as part of income of the above profit of the undertaking. Further referring to the order of the CIT (A) it was submitted that the CIT (A) also without examining the nature of the amount directed the Assessing Officer to include the amount of receipts from profits and gains of the undertaking. 10.2. We have considered the issue and the nature of the amount as stated above. Even though the ground refers to the amount of Rs. 22,71,530/- the CIT (A) did n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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