9911796707
TMI Blog2013 (11) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.1,93,93,359 (B) In Kanpur Division: (i) Interest on FD Rs.2,77,442 (ii) Interest income Rs. 20,300 (iii) Rent income Rs. 3,500 (C) In Indore Division: (i) Interest on FD Rs.83,58,945 (ii) Interest on loans Rs.92,06,866 (iii) Interest on FD Rs. 5,07,976 (iv) Discount Rs.29,02,192 (v) Insurance Rs. 3,37,561 (vi) Transport income Rs.6,22,409 (vii) Warehousing charges Rs. 2,000 (viii) Tank rent Rs. 3,000 (ix) Rent Income Rs. 8,000 4. It was submitted by the Ld. AR of the assessee that the first item is FD interest of Rs.78,698/- in respect of Mandali Division for which the Assessing Officer (AO) has disallowed the deduction u/s. 80I and 80HH of the Incometax Act, 1961 (hereinafter referred to as 'the Act'). It was submitted by him that as per the Tribunal's orders in assessee's own case for AY 1994-95, 1995-96 and 1996-97, copy of which are available in the paper book, this issue is decided by the Tribunal against the assessee but as per the decision of Special Bench of the Tribunal rendered in the case of Lalsons Enterprises v. DCIT (2004) 89 ITD 25 (Del) (SB), benefit of netting is allowable to the assessee and only net in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of netting should be allowed to the assessee and in that situation, only net rental income should be excluded from business profit for the purpose of computing deduction allowable to the assessee u/s. 80I and 80HH of the Act. 7. It was further submitted by the Ld. AR of the assessee that third item of income in this regard is interest on loan of Rs.1,93,93,359/- and he submitted that as in the case of FD interest, for this interest income also, the issue should be restored to the file of AO for granting benefit of netting and he fairly conceded that regarding allowability of these two deductions for the interest income, the issue is covered against the assessee by the Tribunal's decision in earlier three years. Hence, as per our decision in respect of FD interest income, for this income on account of interest on loan also, we direct the AO to allow benefit of netting if the assessee can establish the nexus between interest expenditure and interest income and in that situation, only net interest income should be excluded from business profit for the purpose of allowing deduction under these two Sections. The main aspect i.e. allowability of these deductions for this income is deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecide the issue in favour of assessee by following the Tribunal's orders in earlier years. For all the remaining items, the main aspect i.e. allowability of these deductions for these incomes is decided against the assessee but for these remaining items, the issue is restored to the file of AO for granting benefit of netting income to assessee in case the assessee is able to establish nexus between expenses incurred, if any, for earning these income. In that situation, only net income should be excluded from the business profit for the purpose of computing deduction allowable to assessee under these two Sections. 11. Ground No.3 is as under:- "In law and in the facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in confirming disallowance of interest expense Rs.56,670/-." 12. It was submitted by Ld. AR of the assessee that assessee is having current accounts with bank and all business receipts are deposited in the said accounts and also business payments are made from the said accounts and only because on the date of payment of advance taxes, the assessee was having temporary overdraft, it cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e already restored the matter to the file of AO for allowing the benefit of netting to the assessee if the assessee is able to establish the nexus for the purpose of allowing deduction u/s. 80I and 80HH of the Act. Hence, for the purpose of allowing deduction u/s. 80HHC also, we direct the AO to examine the allowability of benefit of netting to the assessee and if the assessee is able to establish the nexus between interest expenditure incurred for earning these income, if any, he should allow the benefit of netting to the assessee and 90% of such net income only should be excluded from business profit for the purpose of allowed deduction u/s. 80HHC of the Act. This ground of assessee is allowed for statistical purpose. 17. Ground No.5 is as under:- "5. In law and in the facts and circumstances of the Appellant's case, the learned Commissioner of Income-tax (Appeals) has grossly erred in directing the Assessing Officer to charge interest u/s. 234B of I.T. Act consequential on giving effect to the appellate order. He ought to have appreciated that Appellant company challenged very basic levy of interest u/s. 234B of I.T. Act. He ought to have deleted interest u/s. 234 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of Ld. CIT (A). 27. Regarding first item i.e. interest on LC of Rs.20,83,941/-, he submitted that this issue was decided against the assessee by the Tribunal in earlier orders but as per the decision of Special Bench of the Tribunal rendered in the case of Lalsons Enterprises (supra), benefit of netting should be allowed to the assessee. We have already decided while deciding the appeal of assessee that Assessing Officer should allow the benefit of netting if the assessee can establish the nexus between interest expenditure and interest income. Hence, in respect of this ground of Revenue also, we set aside the order of Ld. CIT(A) and restore the matter back to the file of AO for a fresh decision in respect of allowability of benefit of netting to the assessee although the assessee is not eligible for deduction under these Sections in respect of this income but in case, the assessee is able to establish the nexus then only net interest income should be excluded from the business profit for computing deduction allowable to the assessee u/s. 80I / 80IA / 80HH of the Act in respect of profit of Mandali Division. 27.1 Regarding second item of miscellaneous income i.e. sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses and in that situation, it is not required to be excluded from business profit but if the assessee is not able to establish that all these receipts are nothing but reimbursement of expenses, then also the Assessing Officer should examine the alternative claim of the assessee i.e. benefit of netting should be allowed to the assessee. For this benefit also, the assessee has to establish nexus between truck hire charges received and truck hire charges paid by showing that for the same income, expenses was incurred by the assessee and in that situation, the AO should exclude only net income on account of truck hire charges from profit of Mandali Division for computing deduction allowable to the assessee u/s. 80I, 80A and 80HH of the Act. 27.4 The 4th item received of Rs.2,95,10,650/- is on account of sale of poster papers, iron scrap, gunny bags, plastic waste sale bardana etc., and in respect of these items, Ld. DR of the Revenue supported the assessment order whereas Ld. AR of the assessee supported the order of Ld. CIT(A) and it was also submitted that as per judgment of Hon'ble jurisdictional High Court rendered in the case of Harjivandas Juthabhai Zaveri And Another (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etting should be allowed to the assessee and only net income should be excluded from the business profit for the purpose of allowing deduction to the assessee u/s. 80I, 80IA and 80HH of the Act. We direct the Assessing Officer accordingly and if the assessee can establish the nexus, netting should be allowed. The Assessing Officer should decide this issue as per law after providing adequate opportunity of being heard to assessee. 27.9 In the result, this ground of Revenue's appeal is partly allowed in the terms indicated above. 28. Ground No.(iv) is as under:- "iv) to allow deduction u/s. 80J / 80JA / 80HH for Trikampura Division on following income: (i) Interest from debtors RS.39,26,316/- (ii) Insurance claim RS 72,902/- (iii) Truck hire charges RS. 1,40,000/- (iv) Other sales RS. 63,08,141/-" 29. Regarding first item i.e. interest from debtors of Rs.39,26,316/-, Ld. DR of the Revenue supported the assessment order whereas Ld. AR of the assessee supported the order of Ld. CIT(A). He also submitted that as per Tribunal's decision in assessee's own case for AY 1994-95, this issue is covered in favour of assessee. He also placed reliance on the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese two divisions, we have already decided similar issue and hence for this division also, we hold accordingly and decline to interfere in the order of Ld. CIT(A) by respectfully following the decisions of Hon'ble jurisdictional High Court rendered in the case of Nirma Industries Ltd. (supra) and Harjivandas Juthabhai Zaveri And Another (supra). For the remaining two items of Kanpur Division i.e. interest on loan given to staff of Rs.583/- and Truck hire charges of Rs.90,950/-, we restore the matter back to the file of Assessing Officer for granting the benefit of netting if assessee can establish the nexus of these incomes with expenditure incurred if any. 31. Ground No.(vi) is as under:- to allow deduction u/s. 80J / 80JA / 80HH for Indore Division on following income: (i) Interest from debtors RS.238,97,496/- (ii) Other sales RS. 75,68,786/-" 31.1 For the Indore Division, there are two issues involved i.e., interest from debtors of Rs.2,38,97,496/- and sales of plastic waste, barrels, iron scrap, gunny bags and bardana of Rs.s75,68,786/- and both these are covered in favour of assessee by same two judgments of Hon'ble jurisdictional High Court render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also submitted by him that as per the judgment of Hon'ble jurisdictional High Court rendered in the case of Harjivandas Juthabhai Zaveri And Another (supra), this issue is covered in favour of assessee. Accordingly this issue is decided in favour of assessee and we decline to interfere in the order of Ld. CIT(A) on this issue. This ground of Revenue's appeal is rejected. 35. Ground No. (x) is as under:- ""x) to delete disallowance of expenditure on guest house u/s. 37(4) for Rs.1,28,227/-." 35.1 It was fairly conceded by Ld. AR of the assessee that this issue is covered against the assessee by the Tribunal's order in assessee's own case for AY 1993-94 and also the judgment of Hon'ble Supreme Court rendered in the case of Britannia Industries Ltd. v. CIT And Another (2005) 278 ITR 546 (SC). Accordingly, this issue is decided in favour of Revenue and against the assessee. This ground of Revenue's appeal is allowed. 36. Ground (xi) is as under:- "xi) to delete disallowance of entertainment expenses of Rs.7,92,720/-." 36.1 Ld. DR of the Revenue supported the assessment order whereas it is submitted by Ld. AR of the assessee that actual amount disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowances were deleted by Ld. CIT(A) on this basis that these are business expenses. He has followed the order of CIT (A) for earlier year's i.e., AYs 1994-95 and 1996-97 and also Tribunal's order for AY 1996-97 which is available in paper book submitted by assessee. Ld. DR of the Revenue could not point out that order of Ld. CIT(A) in earlier years has been revised by the Tribunal on this issue in any of the earlier years and hence, we decline to interfere in order of Ld. CIT(A) on this issue. This ground of Revenue's appeal is rejected. 39. Ground xiii) is as under:- "xiii) to delete disallowance of claim of Soda ash project expenses of Rs.4,90,73,761/- and Lab Project expenses of Rs.16,71,71,909/-." 40. Ld. DR of the Revenue supported the assessment order whereas it is submitted by Ld. AR of the assessee that in respect of interest expenses and part of the project expenses, the matter is covered in favour of assessee by the Tribunal's order in assessee's own case for AY 1996-97. Regarding allowability of depreciation expenditure of both the projects i.e. soda ash project and Lab. Project, it was submitted that this issue is also covered in favour of assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Ltd. (supra). For the remaining expenditure, LD. CIT(A) should decide the issue after providing adequate opportunity of being heard to both sides and while deciding that aspect of the matter, he should keep in mind the various judicial pronouncements cited by the Ld. AR of the assessee before us. This ground of Revenue is partly allowed for statistical purposes. 42. Ground No. xiv) is as under:- "to delete disallowance of claim of deduction u/s. 35AB on Rs.16,78,93,425/-." 43. Ld. DR of the Revenue supported the assessment order whereas Ld. AR of the assessee supported the order of Ld. CIT (A). He also submitted that this issue is covered in favour of assessee by the Tribunal's order in assessee's own case for AY 1999-00 and it was pointed out by him that relevant Para is para-5 of this Tribunal's order which is available on page-45 of the paper book. At this juncture, the bench wanted to know as to which is the year in which the relevant expenditure was incurred because deduction is allowable in respect of such expenditure in six yearly installments and if that period of this six years has already expired in earlier year then no more deduction is allowable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, we decline to interfere in the order of Ld. CIT(A). This ground of Revenue's appeal is rejected. 48. Ground No. xvi) is as under:- "xvi) to delete disallowance of Rs.3,88,122/- made under sec. 40A(2) of IT Act." 49. Ld. DR of the Revenue supported the assessment order whereas Ld. AR of the assessee supported the order of Ld. CIT(A). He also submitted that the price paid by the assessee to outsiders is at Rs.0.60 per kg. whereas from sister concern, price paid is at Rs.0.61 per kg. and difference of Rs.0.01 per kg. is neither excessive nor unreasonable. 50. We have considered the rival submissions, perused the materials on record and gone through the orders of authorities below. We find that as per the requirement of Section 40A(2) of the Act, if the Assessing Officer finds that expenditure incurred by the assessee in respect of which payment has been made to related persons is excessive or unreasonable having regard to the fair market value of the goods or the benefit derived by the assessee therefrom then such excessive amount can be disallowed. In the present case, the difference in price paid to the related party with the price paid to outsider is Rs.0.01 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on pages 10 to 15 of paper book No.3. 53. Regarding other interest income of soda ash project, it was submitted that this includes interest on FD of Rs.7,56,704/-, interest on NSC of Rs.1,35,069/- and late payment from SPN/NCD holder of Rs.1,85,794/- and business income of Rs.4,877/- in respect of soda ash project. Regarding Lab project, it was submitted that the amount of Rs.1,09,973/- consist of interest income of Rs.60,473/- and miscellaneous income of Rs.49,500/-. He submitted that at least this interest expenditure of Rs.2,39,92,013 pertaining to fund utilized by General Division should not be assessed as income of the assessee and project expenses should be allowed net of this income. 54. We have considered the rival submissions, perused the materials on record and gone through the orders of authorities below. We find that on page No.25 of the assessment order, the allegation of the Assessing Officer is this that assessee is claiming double deduction for interest expenses, one on account of interest payment to the lenders and secondly for the payment made by one division i.e., General Division to other division by passing book entry. The case of AR is this that no double ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t benefit of netting should be allowed to the assessee as is held by the Ld. CIT (A) and in support of this contention Ld. AR of the assessee placed reliance on the Tribunal's decision in assessee's own case for AY 2000-01. 57. We have considered the rival submissions and we find that the issue regarding interest from debtors is covered by the judgment of Hon'ble jurisdictional High Court rendered in the case of Nirma Industries Ltd. (supra) and as per this judgment, interest from the debtors is to be considered as part of sale price and hence, no exclusion is called for in respect of such interest from business profit for the purpose of computing deduction allowable to the assessee u/s. 80HHC of the Act. Regarding other interest income, it is held by Ld. CIT (A) that netting should be allowed of interest expenditure of Rs.228.27 lakhs and 90% of net interest income only should be excluded from business profit for the purpose of computing deduction allowable to the assessee u/s. 80HHC. In this regard, we feel that matter should go back to the file of Assessing Officer for fresh decision because the assessee has to establish nexus of interest expenditure and interest income. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the materials available on record and gone through the orders of authorities below. We are of the considered opinion that even if the amalgamation scheme was approved by Hon'ble Gujarat High Court on 16-01-1997, the same is with effect from 01-09-1996 and in any case, income from this date is to be included in the income of the assessee for this year and therefore, the interest also is to be paid by the assessee in respect of any deficit in payment of advance tax on 15-09-1996 and 15-12-1996, if any, but if any advance tax on these two dates, was paid by those amalgamating companies then the same should also be considered for computing the total advance tax paid by the assessee on these two dates, and interest liability u/s. 234C of the Act should be worked out on that basis. Hence, we set aside the order of Ld. CIT (A) on this issue and we restore the matter back to the file of Assessing Officer for fresh decision. Since, the date of amalgamation is with effect from 01-09- 1996, the income of these companies up to 31-08-1996 does not belong to assessee-company and hence, there is no effect of amalgamation in respect of installment of advance tax falling due on 15-06-1996. For ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
