9911796707
TMI Blog2015 (5) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed u/s.143(3) dated 28.03.2003 it was stated that the Assessee company is in the business of manufacturing and export of pharmaceuticals products. As per the return the Assessee has declared an income u/s.115JB at Rs. 92,81,34,716/-. That return was revised and u/s.115JB the amount declared was at Rs. 92,60,12,264/-. It was observed by the AO that the book profit calculated u/s.115JB was reduced by an amount of Rs. 32,48,52,351/- as deduction u/s.80HHC. Following the past history the said claim was revised to Rs. 15,97,76,930/- and accordingly calculated the book profit u/s.115JB. When the matter was carried before the First Appellate Authority, learned CIT(A) has held that there was no change in the circumstances of the case as held in the past years; therefore, applying the same ratio the action of the AO was upheld. Being aggrieved now the Assessee is further in Appeal. 1.2 In the past for A.Ys. 1999-00 in assessee's own case (ITA Nos.3047/Ahd/2002 & 3273/Ahd/2002) it was held as under: 1.3 Having heard the submissions of both the sides and after reading the cited decisions viz. Ajanta Pharma Ltd. 327 ITR 305 (S.C.) and Bhari Information Tech.Sys.P.Ltd. 340 ITR 593 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under s. 80HHC(3)/(3A), subject to the conditions under sub-cls. (4) and (4A) of that section. The conditions are only that the relief should be certified by the chartered accountant. Such condition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in cl. (iv) of Explanation to s. 115JB [subject to the conditions specified in sub-cls. (4) and (4A) of that section] to obliterate the difference between "eligibility" and "deductibility" of profits as contended on behalf of the Department. 11. For the above reasons, we set aside the impugned judgment of the High Court and restore the judgment of the Tribunal. Accordingly, the civil appeal of the assessee is allowed with no order as to costs." 1.4. Therefore, respectfully following the above precedents, we hereby hold that the AO is required to re-compute the taxable profit for the purpose of computation of book profit u/s.115JA of the Act in the light of the guide lines laid down by the Hon Courts as cited above. Thus, ground raised by the assessee is, therefore, allowed. 1.3 Even in A.Y.2000-01 (ITA No.1400 & 1622/Ahd/2003) order dated 13.3.2015 the same view was tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 115JB of the Income Tax Act, 1961." 2.2 It was concluded by the AO that the expenditure was not deductible in the P&L Account as per the Companies Act. The expenditure pertained to undisclosed expenses which were detected during the search operation. The Assessee had debited those expenses in the books in A.Y.2001-02 which was not permissible hence the book profit as calculated was suppressed by the said sum of Rs. 7,73,732/-. The AO has revised the "book profit" by adding the said amount for the purpose of calculation of tax u/s.115JB of IT Act. 2.3 The Assessee has reiterated those submissions before learned CIT(A) however he has affirmed the action of the AO. Being aggrieved now the Assessee is in Appeal. 2.4 Heard both the sides. The Explanation of the Assessee was that the impugned amount represented the undisclosed expenditure which was withdrawn from regular books of accounts. It was claimed that the said amount was part of cash in hand. According to Assessee, the expenditure was considered in block assessment hence in the regular assessment it was not claimed, therefore, added back to the total income in the return filed for A.Y.2001-02. The other argument of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was duly approved by Hon'ble Supreme Court. It has also been explained by virtue of Section 72A of IT Act the unabsorbed depreciation and unabsorbed loss of PDCL had become the unabsorbed depreciation and unabsorbed loss of SPIL. However, the AO was of the view that as per the provisions of Section 115JB the book profit is to be computed of one unit and not the combination of different units. Further, he has noted that the Assessee was having substantial reserves and after the merger there was no brought forward loss of the unabsorbed depreciation so according to him there was no question of any reduction of unabsorbed loss and unabsorbed depreciation from the books profit. Therefore, the AO has held that there was no question of any reduction of brought forward loss or unabsorbed depreciation of PDCL from the "Book Profit" of SPIL. Finally, the amount of Rs. 3,39,12,399/- was not allowed to be reduced from the working of the "Book Profit". When the matter was carried before the First Appellate Authority, the action of the AO was confirmed. 3.2 We have heard both the sides. At the outset, we have been informed that this issue has not been raised in the past in A.Y.1999- 00 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has already been discussed and decided in the past in A.Y.1999-00 and 2000-01 by ITAT 'D' Bench (supra). Relevant paragraphs 4.2 and 4.3 from A.Y.2000-01 are reproduced below: 4.2 This issue has already been decided by us in Assessment Year 1999- 2000 in ground No.3, wherein we have held as under:- "3.3. With this factual back ground we have heard both the sides. At the outset we have been informed that now this issue is directly covered in favour of the assessee by an order of Hon'ble Gujarat High Court in the case of CIT vs, Alps Chemicals Pvt Ltd 367 ITR 594. The Hon'ble Court has discussed decisions namely Sterling Foods 237 ITR 579 (S.C.), wherein the legal proposition was that the source of the income was the export and earned the said income merely on account of fluctuation in foreign exchange. Also cited a decision of Shah Originals 327 ITR 19 (Bom.) wherein as well held that an exporter had an option to keep certain percentage of export receipts in EEFC a/c. The assessee received higher amount in Indian rupees on such amount due to fluctuation in the foreign exchange rate. Conscious of the fact that the assessee had received the proceeds of the export tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s.80HHC, income from sale proceeds of sale scrap was not included in the "total turnover" but it was shown separately. The Revenue Department has accounted the sale proceeds from scrap in the "total turnover". The Hon'ble High Court was of the view that the proceeds generated from the sale of scrap would not be included in the "total turnover". On further appeal, The Hon'ble Supreme Court has expressed that the term "turnover" has not been defined in the Income Tax Act. According to the Hon'ble Court, a meaning of this term was given by ICAI which denotes that in normal parlance the word "turnover" would be total sales, and according to the Hon'ble Court said sales would not include scrap material. According to the Hon'ble Court, intention behind enactment of section 80HHC of the Act is to encourage export to earn Foreign Exchange. It was finally concluded that the proceeds generated from the sale of scrap would not be included in the "total turnover". 4.3. Respectfully following the aforesaid view expressed by the Hon'ble Supreme Court, we hereby direct to re-compute the turnover after excluding the sale amount of scrap. Resultantly, this ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee has also pleaded that as per the insertion of Section 155 of IT Act, the Assessee is entitled to get the claim subsequently in the year in which the convertible fund exchange is received in India. So the request of the Assessee was that the AO can amend the assessment order u/s.154 by allowing the deduction u/s.80HHC accordingly. It was also pleaded that intention of the legislature was that the Assessee should be given the deduction u/s.80HHC on the basis of the sale proceeds received or to be received within six months. If not received within six months from the end of the Financial Year; then the benefit is to be granted subsequently in the year the same is realized. According to AO, the provisions of Section 80HHC(2)(a) prescribes that the sale proceeds of goods exported out of India are to be received in or brought into India by the Assessee in convertible foreign exchange within the period of six months from the end of the previous year or within such further period as allowed by the competent authority. The AO has thereafter prepared a chart to demonstrate that certain invoice numbers were approved by the RBI to brought in the foreign exchange totaling Rs. 1,61,71, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while computing the profit for the purpose of deduction u/s 80IA. The action of the Assessing Officer was confirmed by the ld. CIT(A). Now, the issue has been decided by us in Assessment Year 1999-2000 in assessee's own case while deciding Revenue's ground No.5 in paragraph 15.3 the relevant portion is reproduced below:- "15.3 With this back ground, we heard both the sides. We are not in agreement with the view taken by Ld. CIT(A), primarily because of the reason that now this issue is well settled by the Hon'ble S.C. in the case of Liberty India 317 ITR 218 wherein it was held that Duty Drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purpose of deduction U/s 80I / 80IA / 80IB. It was commented by S.C. that Sec. 80IB provides for the allowing of deduction in respect of profits and gains derived from the eligible business. The connotation of the words 'derived from' is narrower as compared to that of the words 'attributable to.' By using the expression 'derived from' Parliament intended to cover sources not beyond the first degree. Further Ld CIT(A) has also held that only the bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit as discussed in previous paragraph and income of the 80IA units is further reduced by Rs. 11,41,480/- (iv) As share issue expenses cannot be ammortised the same is added back to profit/income of the 80IA both unit by Rs. 74,095/-" 8.2 In the light of the above discussion, the AO has revised the eligible profit for Silvassa (New Unit) to Rs. 40,12,51,174/-. 8.3 At the outset, we have been informed that the learned CIT(A) has mistakenly not adjudicated this ground pertaining to exchange rate itself. In a situation when the First Appellate Authority has not given an opinion on this issue it is not possible for us to decide that issue because the order in Appeal before us is the order of First Appellate Authority. Therefore in the interest of natural justice, we hereby restore this ground back to him to be decided as per law, needless to say, after providing an adequate opportunity of hearing to both the sides. Since this ground is restored back hence may be treated as allowed for statistical purpose. 9. Ground No.9 is reproduced below: "9. Re: Disallowance of expenses for increase in share capital of Rs. 4,54,000/- 10.1 The expenses for increase in share capital on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 225 ITR 327 (Guj.) was dealing with issue in respect of the expenditure incurred by way of filing fees for increasing the authorised capital of the company, and it was held as capital expenditure. Both these decisions are not dealing the applicability of the provisions of Sec 35D. 10.5) As already mentioned above Sec. 35D would apply only in respect of expenditure which is otherwise not allowable under the law being a capital expenditure. This section subscribed or listed certain types of capital expenditure which can be amortised. But if those are not capital expenditure then the view is that after examining the nature and genuineness of the expenditure the same can be considered as Revenue Expenditure. To elaborate it further it can be said that after the insertion of Sec. 35D; the Act has not denied the allowability of Revenue Expenditure. There are few examples such as payment of stamp duty for issue of public subscription of debentures which was held as revenue expenditure U/s 37(1); even though after the insertion of Sec. 35D. Likewise other expenditure pertaining to issue of debenture is entitled U/s 37(1) and the provision of Sec. 35D are not going to effect such deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 11.2 While deciding the Revenue's Appeal for A.Y.2000-01 vide paragraph 13.3 and 13.4 we have confirmed the view taken by learned CIT(A), relevant portion reproduced below: "13.3 Heard both the sides. The issue of addition of interest payment to Dadhas was decided by us in ground No.3 of the Revenue's appeal for Assessment Year 1999-2000 (ITA No.3273/Ahd/2002), wherein we have followed the decisions of the Tribunal as under:- "13.3. With this back ground we have heard both the sides. The issue is resolved vide a consolidated order for A.Y. 99-00,2000-2001, 01-02, 02-03 & 03-04 of Aditya Medisales bearing ITA No. 3272/Ahd/2002, ITA 1623/Ahd/2003, ITA 1353 & 2180/Ahd/2005 & ITA no. 08/Ahd/2007 dated 30/09/2010. In that order there was a reference of an another order of the Tribunal pertaining to Block Assessment of Aditya Medisales bearing IT(SS)A No.95/Ahd/2001 dated 31/05/2007 wherein vide paragraph no 28 (reproduced by the Tribunal) it was held as under: "28. We have carefully considered the rival submissions. We find that the main reason for disallowance is that while interest was paid by the Assessee to its suppliers, the Assessee did not charge interest to the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), hence this ground of the Revenue is dismissed. 13.4 Consistent with the view already taken in the past, for this year as well, we hereby affirm the deletion of the impugned addition. In the result, this ground of the Revenue is dismissed." 11.3 In the result, following the past history, this Ground of the Revenue is hereby dismissed. 12. Ground No.2 is reproduced below: "2. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,01,340/- made on account of unaccounted sale of solvents." 12.1 It was mentioned by the AO that although learned CIT(A) had deleted the addition but a second appeal had been preferred before ITAT by the Revenue Department; hence, to keep the issue alive the addition on account of unaccounted sale of solvent was made in the hands of the Assessee. 12.2 This issue had been decided in favour of the Assessee in A.Y.1999-00 and 2000-01 in the past. For ready reference paragraph 14.2 from A.Y.2000-01 is hereby reproduced below: "14.2 The issue of alleged unaccounted sale of spent solvents was discussed by us for Revenue's appeal for Assessment Year 1999-2000 and vide ground No.4, it was decided in the following manner:- " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.3 which is reproduced below:- "16.3 Heard both the sides. The assessment Year under consideration is A.Y. 1999-2000. On this issue that whether the depreciation can be compulsorily foisted upon the assessee, an order of the Hon. Gujarat High Court pronounced in Assessee's own case bearing Tax Appeal No. 93 of 2000 dated 17.12.2014 titled as Dy.CIT vs Sun Pharmaceuticals Ind. Ltd. is cited wherein it was held that the Tribunal was right in law in holding that depreciation not claimed by the assessee could be deducted despite the introduction of the blockassets concept. One more order of Hon Guj. High Court is referred as Sakun Polymers Ltd. (Tax Appeal No. 41 of 2007 with others order dated 23.12.2014) wherein for A.Y. 1995-96 it was held that the Tribunal was not right in law in holding that depreciation, whether claimed or not, has to be foisted upon the assessee even prior to insertion of Explanation 5 to Sec. 32(1) of the Act. Respectfully following these decisions, we hereby affirm the findings of Ld. CIT(A). This ground of the Revenue is dismissed." 15.3 On the same lines, we hereby hold that for the year under consideration, which is before the amendment took place, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be treated as part of total turnover as decided by his predecessor against the Assessee. However for the year under consideration this issue was decided in favour of the Assessee due to this reason. For this year now the Revenue is in Appeal. 15.3 However we have noted that in the past where the Assessee was in Appeal we have taken a view following Punjab Stainless Steel, 341 ITR 144 that the profit generated from the sale of scrap would not be included in the "total turnover". On the same lines, we hereby uphold the view taken by learned CIT(A) and reject this ground of the Revenue. Revenue's Ground is dismissed. 16. Ground No.6 is reproduced below: 6. The Ld. CIT(A) has erred in law and on facts in directing to consider the gross interest for computing 'Profit of the Business' for the purpose of deduction under section 80HHC." 16.1 The AO has considered the gross interest for the purpose of computing "profit of the business" for the purpose of calculating the deduction u/s.80HHC of IT Act. 16.2 This issue was dealt with us in A.Y.2000-01 in Revenue's Appeal vide paragraph 18.1, 18.2 and 18.3, we have held as under: "18.1 The Assessing Officer has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of deduction u/s 80HHC. Accordingly, the computation u/s 80HHC was reduced. 19.2 When the matter was carried before the First Appellate Authority, he has followed the past history and allowed the claim. 19.3 With this brief factual background, we have noted that while deciding ground No.9 of the Revenue Department, we have followed the decisions of ACG Associated Capsules Pvt. Ltd. (supra) and Topman Exports (supra) and held that net amount was to be taken into account for the purpose of claim of deduction u/s 80HHC. Following the above decision in assessee's own case for Assessment Year 1999-2000, the ground raised by the Revenue Department is hereby dismissed." 17.2 Respectfully following the past history; for this year as well, this Ground of the Revenue is hereby dismissed. 18. Ground No.8 is reproduced below: "8. The Ld. CIT(A) has erred in law and on facts in deleting the reduction / deduction u/s.80IB (old section 80IA) of the Income Tax Act,1961." 18.1 It appears that this Ground has inadvertently been raised by the Revenue, however the issue on sale of DEPB license is in favour the Revenue following Liberty India, 317 ITR 218 hence the issue raised by the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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