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TMI Blog2012 (11) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts and in law in holding that interest on income tax refund of Rs.12,27,94,011/- is taxable in the hands of the assessee on receipt basis. The CIT(A) completely ignored the fact that interest on income tax refund has not attained finality as department has appealed to higher forums and as such the interest on income tax refund is not taxable in the hands of the assessee. b) Without prejudice to the aforesaid, the learned CIT(A) has erred in not holding that in case the interest on income tax refund is reversed in future, then the interest on income tax already taxed by the department in the instant year shall be reduced from the income of the assessee in A.Y. 2007-08 within 4 years of receipt of such order (reversed by higher forum) on moving an application u/s 154 of the Income-tax Act, 4. That the learned CIT(A) failed to appreciate that interest u/s 234D of the Income-tax Act of Rs.12,23,806/- levied by the AO for 10 months (March 2009 to December 2009) is not leviable at all as the refund u/s 143(1) for assessment year 2007-08 was not released even upto the date of issue of assessment order u/s 143(3) of the Income-tax Act dated 30.12.2009. 5. The appellant craves leav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CIT(A)-XIII, the appellant's contention is accepted the depreciation on building of Rs.26,58,308/- is hereby allowed." 4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR supported the order of the AO while the ld. AR on behalf of the assessee relied upon the decision dated 15.11.2011 in the assessee's own case in ITA nos.5943 & 5960/Del./2010 for the AY 2005-06. 5. We have heard both the parties and gone through the facts of the case and as also the aforesaid decision dated 15.11.2011 in ITA nos.5943 & 5960/Del./2010 for the AY 2005-06 wherein while adjudicating an identical issue, the ITAT concluded as under:- "8. In the case of hearing of this appeal, it was pointed out by the ld. Counsel for the assessee that ld. CIT (A)'s order passed in A.Y. 2004-05 has been upheld by the Income Tax Appellate Tribunal, Delhi Bench 'C' vide order dated 29.04.2011 by holding and observing as under: - "35. We have heard both the parties. There is no dispute about the fact that assessee had purchased the property in the financial year 1999-2000 and was occupied by the assessee. The assessee had been paying house tax in its own name. The Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the revenue is rejected. 5.1 The aforesaid decision was followed by the ITAT in their decision dated 29.12.2011 in ITA nos.130& 923/Del. /2011for the AY 2006-07. In the light of view taken by the ITAT in their aforesaid decisions for the AYs 2004-05 to 2006-07 on identical facts and circumstances, we do not find any reason to interfere with the findings of the ld. CIT(A) in allowing the claim of depreciation. Therefore, ground no.1 in the appeal of the Revenue is dismissed. 6. Ground no.2 in the appeal of the Revenue relates to disallowance of Rs.15,21,592/- towards foreign travel expenditure. During the course of assessment proceedings, the AO noticed that the assessee claimed foreign travel expenses of Rs.15,21,592/- in respect of its employees for attending meeting of Global Alliance for sugar trade & Reform and Liberalization. Following his decision in the AY 2002-03, the AO disallowed the claim for these foreign travel expenses. 7. On appeal, the learned CIT(A),following the decisions of his predecessors in the assessee's own case for the AYs. 2001-02 to 2006-07 and decision of the ITAT for the AY 2003-04 deleted the disallowance in the following terms:- "5,2 The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bal Alliance for Sugar Trade Reform & Liberalization. Respectfully following the Tribunal's order passed in A.Y. 2003-04, the order of ld. CIT(A) in the present A.Y. on this issue is upheld." 9.1 The aforesaid decision was followed by the ITAT in their decision dated 29.12.2011 in ITA nos.130& 923/Del. /2011for the AY 2006-07. In the light of view taken by the ITAT in their aforesaid decisions for the AYs 2003-04, 2005- 06 & 2006-07 on identical facts and circumstances, we do not find any reason to interfere with the findings of the ld. CIT(A) in allowing the claim for deduction of foreign travel expenses. Therefore, ground no.2 in the appeal of the Revenue is dismissed. 10. Ground no.3 in the appeal of the Revenue relates to disallowance of Rs.Rs.11,26,848/- on account of contribution towards provident fund. The AO noticed during the course of assessment proceedings that the provident fund of the assessee company namely 'Indian Sugar General Industry Export Import Corporation Ltd. Delhi Provident Fund' did not invest the funds as per prescribed Income-tax Rules. Accordingly, while relying on his findings in the AY 2003-04, the AO disallowed the claim for deduction in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that to claim deduction by way of contribution to a recognized provident fund, it has to be demonstrated that the contribution is towards a recognized provident fund. The phrase "Recognized Provident Fund" is defined in sec. 2(38) of the Act. As per the definition it means a provident fund, which has been and continues to be recognized by the Chief Commissioner or Commissioner in accordance with rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952. Since as per the letter issued by CIT, Delhi-III dated 28.05.1976 the provident fund is considered as fund to which Provident Fund Act, 1925/1952 applies, it amounts to a "Recognized provident fund" within the meaning of sec. 2(38) of the Act and hence in terms of sec. 36(1)(iv) the contribution to "recognized provident fund" is allowable as such. Since there is no dispute that the amount was paid within the due dates prescribed, the disallowance is to be deleted. We, therefore, delete the disallowance of Rs. 15,22,234/-." 21. Respectfully following the aforesaid Tribunal's order passed in A.Y. 2003-04, we are incline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clearly mentioned that the assessee has been provided packing credit facility and not cash credit or overdraft facility. Further, the assessee has also filed confirmation certificate from ICICI Bank, confirming that there is no cash credit I overdraft facility and interest in relation to export packing credit limits were enjoyed by the assesssee. Moreover, it is important to mention that the packing credit loan can only be liquidated from export proceeds. Even in A Y 2001-02, the CIT(A) in appeal no 266/03-04 had after considering the facts of the case wherein only packing credit facilities were availed by the assessee , had deleted disallowance of interest. This order was confirmed by the Hon'ble ITAT in appeal no 1566/Del/2004 and 1042/Del/2005 as observed in para 8.1 of the Order: - "We are unable to agree with this argument of the learned DR for the reason that the whole of the interest was paid in relation to packing credit limit for which additional evidence was filed before the CIT(Appeals), and which was rightly admitted by him. He decided the matter after hearing the matter. His finding could not in any way be displaced by the learned DR before us. Therefore, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective in operation. (This decision has overruled ITAT decision in Daga Capital Management P. Ltd. (supra) on the issue of retrospective application of Rule 8D. 7.5 The Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd., has been held as under: "Even in the absence of sub sections (2) and (3) of Section 14A and of Rule 8D, the Assessing Officer was not precluded from making apportionment. Such an apportionment would have to be made in order to give effect to the substantive provisions of sub section (1) of Section 14A which provide that no deduction would be allowed in respect of expenditure incurred in relation to income which does not form part of the total income under the Act. Consequently, dehors the provisions of Sections (2) and (3) of Section 14A and Rule 8D, the Assessing Officer was entitled to determine by the application of a reasonable method what quantum of the expenditure incurred by the assessee would have to be disallowed on the ground that it was incurred in relation to the earning of income which does not form part of the total income under the Act. Undoubtedly in determining what would constitute a reasonable method for effecting the disallowance, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctions performed by the personnel, I find that the administrative expenses would mostly relate to the carrying on of the normal and primary business activities of the appellant. However, even the appellant has admitted vide submission dated 2.12.2010 to the fact of part of such expenses having been incurred to earning of exempt income In fact the appellant has also provided it's own working of such expenses related to Head office at Ansal Plaza, Delhi only, as investment in tax exempt instruments are taken only at Head Office and not at appellant's office at Mumbai or Port Offices at Chennai, Kolkata or Kandala which can be attributed to earning of exempt income. The contention of the appellant that expenses at the Port offices cannot be proximately related to their investment decisions at Head Office is reasonable and therefore acceptable. Accordingly only such of the administrative expense which are made at Head Office and which can be reasonably co related to earning of exempt income are considered for disallowance. The assessee has submitted the calculation of disallowance u/s 14A as per Annexure A annexed to this order. As per the assessee's own calculation the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, find no reason to interfere with the order of ld. CIT(A) in sustaining the disallowance to the extent of Rs. 6,49,336/-. Thus, this ground raised by both revenue as well as by assessee is rejected. " 17.1. The aforesaid decision was followed by the ITAT in their decision dated 29.12.2011 in ITA nos.130& 923/Del. /2011for the AY 2006-07.As in the AY 2006-07, In the year under consideration, as regards disallowance out of interest, the ld. CIT(A) concluded that interest has been paid to factories towards advance taken by the assessee for import of sugar. Therefore, the ld. CIT(A) accepted the contention of the assessee that interest paid to factories is not to be considered for proportionate disallowance u/s 14A of the Act. As regards bank interest , the ld. CIT(A) on perusal of sanction letters of loan from Maharashtra State Cooperative Bank, Standard Chartered Bank, ICICI Bank, ledger a/c along with photocopies of all the vouchers ,bank debit advices etc. found that the assessee had been provided packing credit facility and not cash credit or overdraft facility while the packing credit loan can be liquidated only from export proceeds. Even in assessment year 2001-02, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Method Amount[In Rs.] Amount at cost[In Rs.] Difference [In Rs.] 2005- 06 864 white 10690 cost 9192960 9192960 - 10100 raw 15139 cost 152908950 152908950 - Total Nil 2006- 07 11 raw 17000 cost 187000 187000 - 7758 white 18200 cost 141195600 141195600 - 5712 White 18870 cost 107785440 107785440 - 12293white 19980 cost 245614140 245614140 - Total Nil 2007- 08 2707 12857 Realisation 34073009 52854175 18781166 60 11103 Realisation 666212 1195500 529288 9812 11103 Realisation 128566636 132756360 4189724 Total 23500178 18.1 However, the AO did not accept the submissions of the assessee on the ground that the Revenue was in appeal before the Hon'ble High Court in the preceding years. 19. On appeal, the learned CIT(A) allowed the claim of the assessee in the following terms:- "8. This ground relates to addition of Rs.2,35,00,178/- to the value of closing stock of sugar declared by the assessee. The Assessing Officer held that the assessee is following the method of valuation of stock of sugar on the basis of cost or market price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is following method of valuation of stock on the basis of cost or market price whichever is lower. In assessment year 1993-94 the method of valuation of closing stock adopted was rejected and the closing stock was valued at cost price. Therefore, if the value is adopted on cost price, there is under valuation, which is required to be added to the income of the assessee. The learned CIT(A) held that for assessment year 1993-94 though the addition was confirmed by the Commissioner (Appeals), the same was deleted by ITAT Delhi in I.T.A. No.4362/D/96 and the method of valuation adopted by the assessee was accepted. Following the said order in subsequent years i.e. 1995-96, 1996-97, 1997-98 and 1998-99 the issue is decided in favour of the assessee and therefore, for this year also the valuation being as per the recognized method, the addition is to be deleted." 21.1 In the light of aforesaid view taken by the ITAT, especially when the ld. CIT(A) followed the decision of the ITAT for the AYs 1993-94,1995-96 to 1998- 99, 2001-02 & 2003-04 while deleting a similar addition and the Revenue having not placed before us any contrary decision nor any other material so as to ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to consider the revised computation filed during the course of assessment proceedings as the claim can be made by filing revised return and compute the income as per law . The observations and findings of the ITAT read as under: "11. We have heard the parties. The assessee filed revised computation to exclude interest on refund, which was originally granted by taking the loss on export as 'Nil'. However, later on as per the decision of Hon'ble Supreme Court in the case of Ipca Laboratory Ltd. Vs. Dy. CIT, 266 ITR 521, the assessee may not be allowed deduction u/s 80HHC and hence refund received will have to be refunded back and so also the interest paid along with the refund. Therefore, interest cannot be said to have been paid and since the issue /is pending before the High Court, though refund is received such refund is not due to the assessee and hence interest on such refund does not accrue to the assessee. Therefore, the Assessing Officer was required to examine whether the refund granted to the assessee has been due to it and is not subject matter of further litigation. Hon'ble Delhi High Court in the case of CIT Vs. Jai Paraboloics Pvt. Ltd., 306 ITR 42, held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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