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TMI Blog2012 (10) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... urces’ - CIT (A) reducing 100% of ‘income from the services rendered’ – Held that:- There is no discussion by the Assessing Officer and the CIT(A) with regard to the nature of transaction and the same has not been elaborately discussed either in the orders of the Assessing Officer or of the CIT(A). Case remand back to AO. Addition on account of provision for warranty – Held that:- Estimation should be on a reasonable basis as well as on a scientific basis and on the basis of past history of assessee, so that on the basis of certain information gathered in due course of time, so as to arrive at the correct percentage of the claim. Case remand back to the AO. Addition on account of Voluntary retirement scheme – Assessee has taken over the another company - The attached liabilities have also been agreed to be taken over which resulted into absorption of 184 employees of the said erstwhile company – AO treat it as capital expenditure – CIT(A) delete the same – Held that:- It was held that when the payment is made for the purpose of retrenchment of workers, it was for the purpose of reducing the staff and bring about a reduction in wage bill as well. So, the expenditure incurred w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) erred in holding that the claim of depreciation of Rs.8,09,578/- on plant and machinery was justified. III. ITA No.770/10 - AY 2002-03 - By the Revenue: 4. For this assessment year, the issues raised are two fold, they are as under: (i) that the CIT (A) erred in deleting the addition of Rs.6,68,08,261/- being VRS without appreciating the facts as detailed in the assessment order; (ii) that the CIT (A) erred in holding that the claim of depreciation of Rs.4,55,388/- on plant and machinery was justified. 5. As the issues raised in these appeals pertain to the same assessee, for the sake of convenience, they were heard together and disposed off in this consolidated order. I. ITA No.767/10 - AY 2000-01 - By the assessee: 6. The facts, in brief, are as follows: The assessee company [ the assessee in short] has been in the business of manufacture and marketing of x-ray medical equipments and other allied activities. The return of income, declaring Re.Nil income and book profit of Rs.94.85 lakhs was initially processed u/s 143(1) of the Act. Subsequently, the assessment in question was concluded, after, determining its income at Rs.6.05 crores whereby making sev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation, that the Legislature uses the word means when the intention is to exhaust the significance of the term defined and uses the word includes when the intention is to widen the scope by specific enumeration in addition to the ordinary meaning; that in the absence of an exhaustive definition, the term turnover must be understood in the context in which has been used by the Legislature. The provisions of s.80HHC being beneficial provisions, enacted to promote exports of goods or merchandise out of India, they have to be interpreted to advance the objective; Relies on the case of Bajaj Tempo Limited v. CIT (1992) 196 ITR 188 (SC) - that the turnover should be restricted to such receipts only which have element of profit in it; that it was the only actual sale price which was relevant and, therefore, anything charged by the assessee by way of statutory levies collected by the assessee have no element of profit; - that according to the accounting principles also, it does not form part of trading and profit and loss account, in as much s these levies were charged separately in addition to the price and the same were credited to their respective accounts; that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f business income of the assessee and, hence, eligible while computing the amount of deduction u/s 80HHC of the Act. 6.4 On the other hand, the learned D R had fully supported the stand of the authorities below on the issue. 6.5 We have carefully considered the rival submissions and perused the materials on record. At the outset, we would like to highlight that the assessee had objected to the reduction of entire fluctuation gain and 90% of service rendered from the business profits shown by the assessee for the purpose of calculation of deduction u/s 80HHC of the Act. As far as the issue of gain on exchange fluctuation of Rs.99,97,852/- is concerned, we would like to reiterate that tribunal in the case of Sujata Grover (2002) 74 TTJ 347 (Del.) and in the case of Priyanka Gems (2005) 3 SOT 817 have held that gains due to fluctuation in the foreign exchange rate emanating from export is its integral part and cannot be differentiated from the export proceeds and it is the part of profits of business. In the above cases considered by the Tribunal, the assessee included the exchange fluctuation in the export turnover for the purpose of claiming deduction under section 80HHC. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .6.2007. After considering the rival submissions, reasoning of the authorities below and following the findings of the earlier Bench in the case of Automag India Pvt. Ltd in ITA No.1633/PN/2004 dated 25.5.2007, the Hon ble Bench had observed thus: 17. ..The submissions of both the sides are very limited and certain questions in respect of methodology adopted for claim of the warranty remained unanswered. In such circumstances, more particularly in the absence of proper details and facts, we deem it proper to restore this issue back to the stage of AO because, in our opinion, the AO was expected to enquire certain basic facts and should not have disallowed the claim summarily. This issue has cropped up before us in the case of Automag India Private Limited, constituting B Bench, ITAT, Pune in ITA No.1633/PN/2004 AY 1999-2000 order dt. 25th May 2007 wherein vide para 5, we have held as under: 5. After hearing the submissions of both the sides, we have noticed that the issue is covered by ITAT A Bench, Pune in the case of DCIT v. Kirloskar Cummins Ltd, Pune ITAST No.255/PN/93 AY 1998-99, order dt. 21st June 2005 wherein it was observed by the respected Bench t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of hearing to the appellant to enable him to furnish the basis on which the computation for provision of warranty was made. We may also like to add that the genuineness as well as the correctness of the claim can further be justified by producing necessary evidence of the claim in the subsequent years. With these remarks, this issue deserves to be decided deno vo by AO .. 7.1 In conformity with the observations of Hon ble Pune Bench of the ITAT in the assessee s own case in an identical issue, we remit back the issue to the file of the AO with a specific direction to verify the details of the basis on which the computation for provision of warranty and to take appropriate action in accordance with the provisions of the Act. Such details shall, however, be produced by the assessee with necessary evidence to justify the genuineness and correctness of the said claim. It is ordered accordingly. Hence, ground No.2 of revenue s appeal is allowed for statistical purposes. (2) Addition of Rs.7.41 crores and Rs.3.38 crores being VRS 1998 VRS 2000: 7.2 An identical issue to that of the present issue had also come up before the Hon ble Pune Bench in the assessee s own case refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verse inference that the payment was on account of SPA dt. 26.5.97. The correct factual position is that there was a Equipment sale and employees absorption agreement which was dt. 20th day of June 1997 (see page 5 to 44 of the paper book). Through this agreement, it was decided to absorb all the employees of erstwhile Elpro International India. Clause 5 can be reproduced for reference as follows: . (d) Once the assessee company was taking over the assets of M/s. Elpro hence the attached liabilities have also been agreed to be taken over which resulted into absorption of 184 employees of the said erstwhile company. (e) As the scheme suggested, it was a voluntary decision of the employees and there was no compulsory retirement or retrenchment of the employees, therefore, it was incorrect on the part of the AO to make an observation that the assessee company, in fact, was not in need of those employees. This is simply a case of floating an optional scheme entirely dependent upon the decision of the employees. (f) The revenue authorities have also commented that it was not in the course of business, however, we r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s claim, the Hon ble Bench, weighing the pros and cons of the issue as recorded therein, the issue was restored to the file of the AO for de novo consideration. The relevant portions of findings, for appreciation of facts, are extracted as under: 9. Now before us, learned A R Mr S.E. Dastur has specifically mentioned that the issue is related to the principle of accountancy which has not been property understood by the revenue authorities. He has narrated that on one hand, the issue was to make payment to the said erstwhile company and on the other hand, in terms of the agreement he has to receive some payment from the said erstwhile company so the account was settled by transferring only the balance amount pertaining to the value settled for plant and machinery. During the course of his arguments, we wanted further elaboration in terms of the actual account entries made in the books of accounts. However, on hearing the submissions of both the sides and since Ld. D R has also suggested that instead of examining those accounts at this stage of appeal, the matter requires re-investigation as well as reconsideration at the stage of AO, hence we deem it proper to restore it b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to examine the nature of the expenditure ante. Following those reasons, as already assigned hereinabove, we again endorse the principle of admissibility of the deduction, if it pertained to the payment of gratuity to the retiring employees. With these remarks and directions, these grounds are restored for denovo consideration; hence, allowed only for statistical purposes. 7.5 Taking into account the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and also in consistency with the findings of the Hon ble Pune Bench (supra), we remit back the issue to the file of the AO for fresh consideration. Hence, revenue s 4th ground raised in ITA No.769/2010 is allowed for statistical purposes. III. ITA No.770/10 AY 2002-03 By the Revenue: 8. At the outset, we would like to affirm that the issues of (i) the deletion of addition of Rs.6,68,08,2612/- being VRS ; (ii) the claim of depreciation of Rs.4,55,388/- on plant and machinery raised in this appeal have since been deliberated upon by this Bench in the Revenue s appeal for the AY 2000-01 in the assessee s own case (supra), the findings recorded therein hold good for this AY as well. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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