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TMI Blog2013 (3) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... interest income. - partly in favor of assessee. Penalty u/s 271(1)(c) - held that:- Considering the smallness of the amount and this being the first year of amended provisions, in our view the claim of depreciation at a higher rate has to be considered due to bonafide mistake. Therefore, in our view it is not a fit case for levy of penalty for concealment of income when all necessary details had been filed with the return of income. - Penalty deleted. - ITA No.2972, 4476 & 5913/Mum/2006 - - - Dated:- 20-1-2012 - SHRI R.S. PADVEKAR AND SHRI RAJENDRA SINGH, JJ. Appellant by Shri M. Subramanian Respondent by: Shri Parthsarthy Naik ORDER Per RAJENDRA SINGH (AM) These appeals by the assessee are directed against different orders dated 22/2/2006, 11/5/2006 and 11/8/2009 of CIT(A) relating to assessment orders and penalty orders for the assessment years 2002-03 and 2003-04. All these appeals which are inter-connected are being disposed by a single consolidated order for the sake of convenience. 2. We first take up the appeals of the assessee in ITA No.2972/M/06 and 4476/M/06 . These two appeals relate to assessment orders for assessment years 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be made out of interest paid on borrowings. We find that three is no dispute that loans/deposits had been given from own funds as AO himself in para 4.3 of the order has noted that the assessee had used surplus funds for non business purposes. Once the loans/deposits have been given out of own funds, disallowance of interest paid on borrowings will not be justified. We, therefore, set aside the orders of CIT(A) on this point and delete the additions made. 2.2 The second dispute which is also common in both years is regarding disallowance of claim of deduction under section 80IB of the IT Act. The AO noted that the assessee had made claim of deduction under section 80IB in respect of the following items of income also. Item of income Assessment year- Item of income Assessment year- 2002-03(in Rs.) Assessment year 2003-04 (in Rs.) Excise duty rebate claim 6,02,176 5,44,249 Sales tax set off 4,19,232 11,65,529 House rent received 1,96,596 1,45,123 Interest income 1,98,32,095 1,67,79,954 2.2.1 The AO observed that deduction under section 80IB was allowable only in respect of income derived from the industrial undertaking b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80IB will be allowable in respect of sales tax set off and excise duty rebate but not in relation to the rental and interest income. The ground raised is thus partly allowed. 2.3 The third dispute is regarding inclusion of excise duty and sales tax in total turnover while computing deduction under section 80HHC. The AO had included excise duty and sales tax in total turnover in computation of deduction under section 80HHC. CIT(A) directed the AO to exclude the excise duty and sales tax from total turnover following the judgment of Hon ble High Court of Bombay in case of Sudershan Chemicals (245 ITR 769) aggrieved by the said decision the assessee has raised the ground. 2.3.1 We have heard both parties, perused records and considered the matter carefully. The excise duty and sales tax are not required to be included in the total turnover while computing deduction under section 80HHC in view of judgment of Hon ble High Court of Bombay in case of Sudershan Chemicals (supra), which has also been affirmed by the Hon'ble Supreme Court in case of Laxmi Machine Works (290 ITR 667). The decision of CIT(A) to direct the AO to exclude excise duty and sales tax from total turnover i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeds have to be included in the turnover if the same had been received within extended period. However, this aspect requires verification by the AO as details regarding application to RBI and the permission of RBI extending the time period was not available before AO. We, therefore, restore this aspect to the AO for passing a fresh order after necessary verification and after allowing opportunity of hearing to the assessee. 2.5 The fifth dispute is regarding set off of loss from trading activities against profit from the manufacturing activities while computing deduction under section 80HHC. The assessee had shown loss in both the years from trading of goods which had not been set off against profit from manufacturing and export of goods and entire profit from manufacturing had been claimed as eligible for deduction under section 80HHC. The AO however set off loss from trading activity against profit from manufacturing activity and only net profit was considered for deduction under section 80HHC. Order of AO was upheld by CIT(A) against which assessee is in appeal before the Tribunal. 2.5.1 Before us, the ld. AR for the assessee submitted that the trading activities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse Rent Received 1,96,596.00 1,45,523.00 Interest Income 1,98,32,098.00 1,67,79,954.00 Total 2,10,50,099.00 1,86,34,855.00 2.6.1 AO however held that above receipts were covered by Explanation (baa) as per which 90% of brokerage, commission, interest, rent, charges, or any receipt of similar nature has to be excluded from the profit of business. The AO therefore, reduced 90% of the above receipts from the profits of business while computing deduction under section 80HHC. In appeal, CIT(A) confirmed the order of AO aggrieved, by which the assessee is in appeal before the Tribunal. 2.6.2 Before us, the ld. Authorised Representative for the assessee submitted that this issue has already been considered by the Tribunal in assessee s own case in assessment year 2001-02 in ITA No.6550/M/2006 and therefore, the issue may be decided following the said decision. The ld. DR on the other hand placed reliance on the orders of authorities below. 2.6.3 We have perused the records and considered the rival contentions carefully. The dispute is regarding applicability of provisions of Explanation (baa) in relation to receipts like excise duty rebate, sales ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 80IA is not required to be reduced from the profit of business while computing deduction under section 80 HHC. The only condition was that the total deduction allowed under the two provisions should not exceed the profits of business of the undertaking. We, therefore, set aside the order of CIT(A) and direct the AO to compute deduction under section 80IA and 80HHC in view of the judgment of the Hon ble Bombay High Court (supra). 3. ITA No.5913/Mum/2009 (Assessment Year 2003-04): In this appeal, the only dispute raised is regarding levy of penalty under section 271(1)(c) for assessment year 2003-04. 3.1 The AO noted that while computing total income under section 143(3) for the said assessment year, assessee had claimed depreciation on electrical fittings @ 25% treating the same as plant and machinery whereas depreciation actually was allowable only @ 15% from assessment year 2003-04. The AO thus disallowed excess depreciation of Rs.1,01,484/- and also initiated penalty proceedings under section 271(1)(c) and levied penalty @ 100% of tax sought to be evaded amounting to Rs.37,295/-. In appeal CIT(A) confirmed the order of AO aggrieved by which t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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