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TMI Blog2012 (9) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... re not deductible u/s 37(1) r.w.s 40(a)(ii) and Sec. 2(43). Appeal decided in favour of revenue. Deduction u/s 80HHC – Whether turnover is to be compute on prorata basis despite of that assessee has maintain separate books of account in respect of that unit, while computing deduction u/s 80HHC - Assessee engage in export of electronic hardware from its unit in EHTP – Assessee compute deduction u/s 80HHC by taking only the total turnover of one unit – Whereas AO takes total turnover of the assessee company – Assessee maintain separate books of accounts in respect of this unit and were duly audited – Held that:- When separate books of account are maintained by the assessee in respect of the concerned unit and profit eligible for deduction u/s 80HHC can be worked out directly on the basis of such separate books of account, the same needs to be preferred than the formula given in sub-section 3 which works out such profit only on prorata basis in absence of separate book of accounts following the decision in case of Rathore Brothers (2001 (10) TMI 72 - MADRAS HIGH COURT). Decision in favour of assessee Exemption u/s 10A – Whether exemption can be claimed when the relevant statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the valuation was done on the basis of actuarial valuation, it cannot be said that the liability was not determined with a reasonable certainty. Decision in favour of assessee Interest income taxable under head PGBP or Income from other sources – Held that:- On the basis of decision of Tribunal in assessee’s own case holding that interest income in the facts and circumstances of the assessee’s case was chargeable to tax under the head income from other sources. The Tribunal however accepted that only net interest income should be assessed under the head income from other sources after deducting expenses incurred for earning the said income. Therefore issue partly allowed. Exclusion of Excise duty & Sales Tax from turnover for computing deduction u/s 80HHE – Held that:- Following the decision in case of Sudarshan Chemicals Industries Ltd (2000 (8) TMI 73 - BOMBAY HIGH COURT), to exclude excise duty and sales tax from the “total turnover” for the purpose of computing deduction u/s 80HHE. Decision in favour of assessee - ITA Nos. 3578, 3579, 3580 & 5577/M/2005 - - - Dated:- 4-7-2012 - SHRI P.M. JAGTAP AND SHRI AMIT SHUKLA, JJ. Appellant by: Shri P.J. Pardiwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the assessee by the Tribunal in its order for Assessment Year 1989-90 but it is submitted that this issue needs reconsideration in the light of the decision in the case of CIT vs. Best Crompton Engg. Ltd. as reported in 156 Taxman 216. It is further submitted that this issue has not been examined in the case where there is a Double Taxation Avoidance Agreement (DTAA) with two countries that is New Zealand and Japan. Our attention was drawn to DTAA with New Zealand and reported in 166 ITR (St.) 90 Clause 2(a) of Article 23 and it is submitted that as per DTAA with these two countries, the assessee company should be given deduction of the entire taxes paid in these two countries on the income earned in these two countries and hence granting of relief only up to 50% of the entire foreign taxes paid is not correct. The ld DR supported the order of the authorities below. We have considered the rival submissions and perused the material on record and have gone through the order of the authorities below and order of the Tribunal in assessee s own case for assessment year 1989-90. We find that in assessment year 1989-90 the issue was decided against the assessee and there is no dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein a similar issue was decided against the assessee for the following reasons given in paragraph no.16 of its order. We have considered the rival submissions, perused the materials on record and have gone through the judgments cited by both sides and relied upon by authorities below. In the case of Smith Kline and French (India) Ltd. 219 ITR 561, it was held by Hon ble Apex Court tat sur-tax under Companies (Profits) Sur-tax Act, 1964 is tax on profits within the meaning of section 40(a)(ii); and hence not an allowable deduction. In the case of CIT vs. Kerala Lines Ltd 201 ITR 106, the issue involved was similar i.e. regarding deductibility of amount paid by the assessee by way of income tax at foreign ports and under this fact, it was held by Hon ble Madra High Court that the amount paid by the assessee by way of income tax at foreign ports is not deductible under section 37 of I.T. Act. It was further held by Hon ble Madras High Court that since, once, it is held that income tax payment made by the assessee at the foreign ports is not allowable deduction u/s 37 of the Act, it would really be unnecessary to consider whether those amounts shall not be deductible u/s 40(a)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply, it was submitted on behalf of the assessee company that its industrial undertaking namely Electronic Hardware Technology Park was an independent unit which was operating from a different premises where manufacturing process was carried out independently. It was also submitted that separate books of account were maintained in respect of the said industrial undertaking and the annual accounts prepared on the basis of separate books of account were duly audited. It was contended that deduction u/s 80HHC therefore was rightly computed by taking financial data of the said unit alone and there was no necessity to take a figure of total turnover of the assessee company as such which included turnover of all the businesses of the assessee company. Reliance in support of this contention was placed by the assessee inter alia on the decision of Hon ble Madras High Court in the case of CIT vs. Rathore Brothers 254 ITR 656. 12. The Assessing Officer did not find merit in the stand taken by the assessee on this issue. According to him, the deduction u/s 80HHC was required to be computed as per the formula given in sub-section 3 of that section and since the profit eligible for the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates to assessee s claim for exemption u/s 10A. 15. As per the provisions of section 10A prevalent at the relevant time, the assessee claimed exemption u/s 10A for a period of five years from AY 1991-92 to 1995-96. The relevant provisions of sec.10A were amended by Income Tax (Second Amendment) Act, 1998 w.e.f. 1.4.1999 extending the benefit of exemption u/s 10A for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the eligible undertaking began to manufacture or produce articles or things or computer software, as the case may be. Relying on the said amendment made in section 10A, the assessee claimed exemption u/s 10A for the year under consideration i.e. 1998-99 on the basis that it was ninth year from the assessment year in which it s eligible undertaking began manufacture or production. The AO however denied the claim of the assessee for exemption u/s 10A on the ground that such exemption was not claimed by the assessee in the preceding two years i.e. AY 1996-97 and 1997-98 and the extended period of exemption up to ten years was applicable only to those undertakings which were currently enjoying the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aph 8 of its judgment by observing that before an assessee can claim the benefit of tax holiday, the said law governing the tax holiday should be in force on the first day of the relevant year. Since the provisions of section 10B were amended w.e.f. 1.4.1999, Hon ble Karnataka High Court held that the assessee was entitled for the benefit as per the amended provisions for AY 1999- 2000, 2000-2001 and 2001-2002. In the present case, the assessment year involved is AY 1998-99 and since the provisions of section 10A as amended w.e.f. 1.4.1999 were not there in the statute on the first day of AY 1998-99, we hold relying on the decision of Hon ble Karnataka High Court in the case of M/s. DSL Software Ltd (supra) that the assessee cannot claim exemption u/s 10A for AY 1998-99 relying on the said amended provisions. We therefore uphold the impugned order of the Ld. CIT (A) denying the claim of the assessee for exemption u/s 10A although on different ground. Ground no.5 of the assessee s appeal is accordingly dismissed. 17. The issue raised in ground no.6 relates to the assessee s claim for deduction u/s 80HHE which has been restricted by the Assessing Officer. 18. The learned Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in favour of the assessee and which has already been followed by the coordinate Bench of this Tribunal. Following the said decision rendered by us in the context of computation of deduction u/s 80HHC while deciding ground no.4 of the appeal, we direct the AO to allow the deduction to the assessee u/s 80HHE on the basis of separate books of account maintained in respect of the concerned undertaking / unit of the assessee namely System Integration (overseas) Division. Ground no.6 is accordingly allowed. 20. Now we shall take up the appeal of the assessee for AY 1999-2000 being ITA No. 3579/M/2005 which is directed against the order of Ld. CIT (A)-23, Mumbai dated 25.2.2005. 21. Ground no.1 of this appeal relating to assessee s claim for deduction of common management and facility expenses, in computing the income eligible for exemption u/s 10A has not been pressed by the learned Counsel for the assessee at the time of hearing before us. The same is accordingly dismissed as not pressed. 22. Ground Nos. 2.1 and 2.2 of the appeal of the assessee relate to its claim for relief u/s 90 and 91 and the same read as under: 2.1. The Learned Commissioner of Income-tax (Appeals) e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and order of the Tribunal in assessee s own case for assessment year 1989-90. We find that in assessment year 1989-90 the issue was decided against the assessee and there is no discussion regarding DTAA with New Zealand and Japan. In view of this submission of the assessee and the fact that there was a DTAA of India with these two countries, we feel that while deciding the issue, DTAA should also be considered and hence, we are of the opinion that this matter should go back to the file of the CIT (A) for deciding afresh after considering the issue in the light of these two DTAA of India with New Zealand and Japan and hence we set aside the order of CIT (A) on this issue and restore it to his file with the direction that he should decide the matter afresh after considering the Tribunal order in Assessment Order 1989-90along with DTAA with New Zealand and Japan and then he should pass necessary order as per law after providing adequate opportunity of being heard to both the sides. 24. As is evident from the relevant portion of the Tribunal s order for AY 1990-91 reproduced above, a similar issue has been restored by the Tribunal, to the file of the AO with specific directions af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee at the foreign ports is not allowable deduction u/s 37 of the Act, it would really be unnecessary to consider whether those amounts shall not be deductible u/s 40(a)(ii) of the Act. The facts in the present case are similar to the facts in the case of CIT vs. Kerala Lines Ltd (supra); and hence, respectfully following this judgment of Hon ble Madras High Court, this issue is decided in favor of the revenue. Regarding the Tribunal judgment rendered in the case of ITO vs. South East Asia Shipping Co. (P) Ltd. (supra), we find that in this case, the issue was decided in favour of the assessee on the basis that the tax levied by different countries is not tax on profits; but necessary condition precedent to earning of profits; and therefore, it was held in this case that section 40(a)(ii) is not applicable. We are of the considered opinion that since, judgment of Hon ble Madras High Court rendered in the case of Kerala Lines Ltd. (supra) is against the assessee, the same has to be followed in preference to the Tribunal judgment rendered in the case of South East Area Shipping Co. (P) Ltd. (supra); and hence, we decide this issue in favour of the revenue by following this judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n paragraph no. 13 of this order. Following our decision rendered in AY 1998-99, we decide this issue in favour of the assessee and allow additional ground raised by the assessee in AY 1999-2000. 33. Now, we shall take up the appeal of the assessee for AY 2000-2001 being ITA No.3580/M/ 2005 which is directed against the order of the Ld. CIT (A)-23, Mumbai dated 25.2.2005. 34. Ground no.1 of this appeal is relating to deduction of common management and facility expenses in computing the income eligible for exemption u/s 10A has not been pressed by the learned Counsel for the assessee at the time of hearing before us. The same is accordingly dismissed as not pressed. 35. In ground no.2, the assessee has challenged the action of the ld CIT (A) in holding that taxes paid outside India are not deductable under the provisions of sec.37(1) and r.w.s 40(a)(ii) and section 2(43) of the Income-tax Act, 1961. 36. As agreed by the learned representatives of both the sides at the time of hearing before us, the issue involved in the ground no.2 of the assessee s appeal is squarely covered in favour of the revenue and against the assessee by the decision of the Tribunal in assessee s ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e involved in the year under consideration as well as all the material facts relevant thereto are similar to that of AY 1993-94, we respectfully follow the order of the coordinate Bench of the Tribunal for AY 1993-94 and uphold the decision of the Ld. CIT (A) that the taxes paid by the assessee outside India are not deductible under the provisions of sec. 37(1) r.w.s 40(a)(ii) and section 2(43). Ground no.2 of the assessee s appeal is accordingly dismissed. 38. The issue raised in ground no.3 of this appeal relates to the disallowance made by the AO and confirmed by the Ld. CIT (A) on account of provision for pension made by the assessee company for its Managing Director. 39. At the time of hearing before us, the learned representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of the Tribunal rendered in assessee s own case for AY 1996-97 by its common order dated 17.1.2007 wherein a similar issue has been decided by the Tribunal in favour of the assessee for the following reasons given in paragraph 85 of its order. We have considered the rival submissions and perused the materials on record. We find that rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Counsel for the assessee at the time of hearing before us. The same is accordingly dismissed as not pressed. 43. As regards ground no.2 of the assessee s appeal for AY 2001-2002, it is observed that the issues involved therein relating to assessee s claim for relief u/s 90 and 91 are similar to the issues involved in ground no. 2.1 and 2.2 of the assessee s appeal for AY 1998-99 which have already been decided by us in paragraph no.6 of this order. Following our decision rendered in AY 1998-99, we set aside the order of the Ld. CIT (A) on these issues and restore the matter to the file of the AO for deciding the same afresh as per the same directions as given by the Tribunal in the earlier years. Ground no.2 is accordingly treated as allowed for statistical purposes. 44. The issue raised in ground no.3 relates to the dispute as regards the head of income under which income from interest is assessable to tax whether under the head income from other sources as held by the authorities below or under the head profits and gains of business as claimed by the assessee. 45. We have heard the arguments of both the sides on this issue and also perused the relevant material on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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