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TMI Blog2015 (9) TMI 1164X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of final opening WDV - Held that:- The Commissioner of Income Tax (Appeals) gave direction to the Assessing Officer to recompute the depreciation on the basis of written down value after giving effect to the Tribunal order in assessee's own case for the assessment year 2002-03. Being so, we find no infirmity in the order of the Commissioner of Income Tax (Appeals). This ground of the Revenue is rejected.- Decided in favour of assessee. Eligibility for deduction u/s.80HHC on the issue of adjustment of negative profit and export incentives without application of eligibility conditions in the 3rd and 4th proviso to sec 80HHC (3) of the I.T. Act as allowed by CIT(A) - Held that:- The Gujarat High Court in the case of Avani Exports & Others (2012 (7) TMI 190 - GUJARAT HIGH COURT ) quashed the amendment made by the Taxation Law and (Amendment) Act, 2005 with retrospective effect from 1st April, 1998 by way of adding second, third, fourth and fifth proviso to section 80HHC (3), only to the extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees who export turnover is abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lia, it was held that 15. By applying the principle laid down in the aforesaid decisions, particularly in Agro Cargo Transport Ltd case, one has to come to a conclusion that there is no particulars with regard to the expenditure incurred by the assessee to claim deduction and further the expenditure incurred by the assessee is to be treated as a capital expenditure and not as a revenue expenditure. The decision of the Assessing Officer is also liable to be confirmed for another reason. In the appeals before the Commissioner of Income-tax and the Tribunal, both the authorities have not gone into the merits of the case or perused the materials to show the expenditure incurred by the assessee. On the other hand, both the authorities by simply stating that the claim of the assessee for the previous assessment years had been allowed, the claim of the assessee. If the appellate authority or the Tribunal would have gone into the merits of the case and perused the material, they would have come to a reasonable conclusion. Since both the authorizes have not decided the matter on merits and, in the light of the aforesaid decisions, the finding of the Assessing Officer has to be confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax (Appeals). 9. On appeal, the Commissioner of Income Tax (Appeals) observed that this issue of adjustment of the negative profit with 90% of the export incentives, the Supreme Court of India in the case of IPCA Laboratory reported in 256 ITR 521 held that the deduction should be computed after adjustment of negative profit with the 90% of the export incentives in proportion of the export turnover to the total turnover. Subsequently, fifth proviso was inserted by Taxation Laws (Amendment) Act, 2005 w.r.e.f. 1.4.1992 to sub-sec (3)of 80HHC wherein it was provided that the loss was necessarily required to be set off against the 90% of the export incentives in proportion of the export turnover to the total turnover. Meanwhile, several assessees' filed Writ Petition before Hon'ble Madras High Court and also other Courts challenging the insertion of the third and fourth provisos to sec 80HHC(3) of the I.T.Act. Regarding the validity of the insertion of the third and fourth proviso to sec 80HHC, on the direction of Supreme Court of India, the Gujarat High Court heard the issue at length, considered various decisions of the Apex Court including the cases of To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive profit and also on the issue of consideration of the export incentives and allowed the ground. Against this, the Revenue is in appeal before us 10. On the other hand, the ld. Departmental Representative submitted that the Commissioner of Income Tax (Appeals) relied on the judgment of the Gujarat High Court in the case of M/s. Avani Exports Others 348 ITR 391, and the decision of the Gujarat High Court has not become final and the department has preferred an SLP which is pending before the Supreme Court. The ld. Departmental Representative further submitted that the decision of the Tribunal relied upon by the Commissioner of Income Tax (Appeals) in ITA No.1633/Mds/2006, dated 19.11.2007 in the assessee's own case has not become final and the Department had preferred an appeal before the High Court of Madras. 11. On the other hand, the ld. Authorised Representative for assessee submitted that is issue is squarely covered by the judgment of Gujarat High Court in the case of Avani Exports Others 348 ITR 391. 12. We have both the parties and perused the material on record. As discussed in para No.9 of this order, the Gujarat High Court in the case of Avani Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenditure of ₹ 70,65,156/- but only disallowed on account of the approval not granted by the competent authority at weighted perecented. The Assessing Officer has also not disputed the nature of the expenditure. The sec 35(1) provides for deduction of expenditure other than the capital expenditure laid out or expended on scientific research related to the business. The nature of the expenses claimed are like civil work including refurnishing of floor, painting work, carpentry work, general housekeeping, gardening, false ceiling, cleaning door, repairing, salary paid to personal in R D unit whose serves Associated Enterprise in administrative in nature, security guard expenses, interest expense etc. The expenses are essentially incurred for repair and maintenance of existing R D facility and for general upkeeping of the R D unit which was subject to inspection by various authorities like US FDA etc. and not for construction of new building or extension of the existing building. Even otherwise, these expenses are allowable u/s.37 of the I.T. Act, 1961. Looking at the nature of the expenses claimed by the assessee, the Commissioner of Income Tax (Appeals) confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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