9911796707
TMI Blog2011 (9) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... ta and not in the name of the appellant company. 3. Ground No.1 (i) relates to disallowance to prior period expenditure amounting to Rs. 45,44,691/-. During the course of assessment proceedings, the Assessing Officer asked the assessee to submit details of the liability which had arisen during the year out of this expenditure. However, no details were furnished before the Assessing Officer. The Assessing Officer held that the concept of matching principles was to be applied to determine the total income of the assessee and that only income and expenditure relevant to previous year was required to be considered. He, therefore, held that no deduction of the prior period expenditure of Rs. 54,56,428/- was to be allowed. However, the Assessing Officer excluded a sum of Rs. 9,11,737/- relating to assessment year 2005-06. The net disallowance of Rs. 45,44,691/- was made on this account. 4. On appeal, the CIT(A) confirmed the disallowance stating that the assessee has not lead any evidence to show that the expenditure arose in the relevant previous year. According to him, the expenditure pertain to the earlier years. The onus was on the assessee to show that the liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denying deduction u/s 80G was not pressed before us and accordingly, we dismiss the same as not pressed. 8. Ground No.2 of the appeal reads as under:- 2. That the Ld. CIT(A) was not justified to hold the action of the Ld. Assessing Officer in computing the deduction u/s 80IA after excluding a sum of Rs. 2,69,96,242/- (comprised of miscellaneous Income of Rs. 2,32,124/-, interest Rs. 67,03,027/- and insurance claim of Rs. 2,00,71,091/-). 9. The assessee claimed deduction u/s 80IA of the Act after excluding a sum of Rs. 2,69,96,242/- (comprising of Misc. Income of Rs. 2,32,124/-, Interest Income of Rs. 67,03,027/- and Insurance claim of Rs. 2,00,61,091/-). The Assessing Officer did not allow the above claim of the assessee and in further appeal the CIT(A) confirmed the order of Assessing Officer and hence assessee is in appeal before the Tribunal. At the very outset Shri Ashwani Kumar, Ld. counsel for the assessee submitted that the issue of claim of deduction u/s 80IA of the Income Tax Act, 1961 (in short 'the Act') of Misc Income of Rs. 2,32,124/- is covered against the assessee by the judgment of the Hon'ble Supreme Court in the case of Liberty India vs CIT (2009) 317 ITR 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim received on account of shut down is not the industrial undertaking itself but an insurance policy taken to cover certain losses arriving on contingencies. He further held that insurance claim though related and attributable to the industrial undertaking arose out of risk coverable policy of the insurance company and cannot not be said to be derived from industrial undertaking. 12. On appeal the CIT(A) upheld the order of Assessing Officer relying on the decision of the jurisdictional High Court in the case of CIT v Khemka Container (P) Ltd (2005) 275 ITR 559 (P&H) wherein the Hon'ble Court upheld the stand of the Revenue that Insurance claim did not arise from the industrial undertaking of the assessee. The CIT(A) observed that in the present case the Assessing Officer has himself not excluded the insurance claim received in respect of machinery break down since it was on the reimbursement. The sum of Rs. 200.61 lacs, is however, not a reimbursement and all expenses have already been debited in the accounts, observed the CIT(A). The CIT(A) has also referred to the decision of the Hon'ble Supreme Court in the case of Liberty India v CIT (supra). The CIT(A) following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough the same was held eligible by the Madras High Court in the earlier cases of CIT v. Sundaram Clayton Ltd. (1982) 133 ITR 34 and CIT v. Wheels India Ltd. (1983) 141 ITR 745 (Mad). So far as the judgment of Pandian Chemicals (2004) 270 ITR 448 (SC) holds that the profit amount received from the insurance company is not a revenue receipt, the same would be at divergence with the view of the Supreme Court in the case of Raghuvansi Mills Ltd. (1952) 22 ITR 484. We note that the Pandian Chemicals case does not refer to the decision of the Supreme Court in Raghuvanshi Mills Ltd. V. CIT (1952) 22 ITR 484 which clearly holds that the amount received from an insurance company on account of loss of profit is very much a revenue receipt. So far as the Supreme Court decision in the case of Vania Silk Mills P. Ltd. (1991) 191 ITR 647, the same cannot be applied to the facts of the present case inasmuch as the said decision turned upon the meaning of the word "transfer" as occurring in section 45 of the Act for the purpose of determining capital gains. The decision dealt with the issue that if the machinery is damaged by fire then, it cannot be said that there is transfer within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the insurance company in respect of the claim of raw material destroyed in fire. However, while computing the profits of the industrial undertaking for the purposes of deduction under section 80-I, what has to be excluded is not the gross receipt but the income arising out of this receipt. Such income can only be computed by deducting the cost of raw material destroyed in fire from the gross receipt of insurance claims. The raw material had been admittedly purchased during the year under consideration and its cost debited in the purchase account of the year. Accordingly, the question is answered in the negative, i.e., in favour of the Revenue and against the assessee. However, in view of the observations made above, the Tribunal will compute the profit attributable to the receipt of insurance claim and exclude only such profit out of the total income for working out the deduction under section 80-I of the Act." 18. No doubt, the decision of the Hon'ble Delhi High Court in the case of Sportking India ltd (supra), is in favour of the assessee, however, the decision of the Hon'ble jurisdictional High Court in the case of Khemka Containers (supra) is in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 80HHC of the Act, because this income does not fall under the parameters provided in clause (baa) to Section 80HHC (4C) 23 We have heard the rival submissions. In view of the decision of the jurisdictional High Court in the case of CIT v Abhishek Industries ltd (supra), we hold that sales tax subidy amounting to Rs. 6,81,61,977/- to be treated as Revenue income. As regarding the plea of Ld. counsel for the assessee that 90% of such receipts should not be excluded for the purpose of profits of the business u/s 80HHC of the Act is concerned, we find merit in the same because the amount of sales tax subsidy does not fall in clause (baa) below section 80HHC(4C). Clause (baa) below section 80HHC (4C) reads as under:- [(baa) "profits of the business" means the profits of business as computed under the head "Profits and gains of business or profession": as reduced by - (1) ninety per cent of any sum referred to in clauses (iiia),(iiib)(iiic),(iiid) and (iiie) of section 28 or of any receipts by way of brokerage, commission, interest, rent charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "profits and gains of business or profession" under sections 28 to 44D and they are thereupon to be reduced to the extent provided by clauses (1) and (2). Section 28 elucidates incomes which shall be chargeable to income-tax under the head of "profits and gains of business or profession". Clauses (iiia), (iiib) and (iiic) were inserted into the section by the Finance Act of 1990. By the Finance Act of 2005, Parliament inserted a specific clause, namely, clause (iiid) in section 28 to the effect that profits on transfer of DEPB, i.e., the amount received on transfer of DEPB is income chargeable to tax under the head "Profits and gains of business or profession". As regards the deduction under section 80HHC, the Legislature substituted Explanation (baa) in section 80HHC so as to exclude 90 per cent of the profits received on transfer of DEPB from the profits of business for the purposes of section 80HHC and inserted the second and third provisos to section 80HHC(3). The second proviso provided that in the case of an assessee having an export turnover not exceeding Rs. 10 crores, the profits computed under section 80HHC(3) shall be increased by 90 per cent, of the sum referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit introduced with effect from April 1, 1997, which was after the insertion of clause (iiib) in section 28; section 28(iiib) refers to cash assistance received by the assessee from the Government pursuant to a scheme of the Government within the meaning of clause (iiic); and when section 28(iiid) specifically deals with profits realized on the transfer of the DEPB credit, it would be impermissible as a matter of first principle to bifurcate the face value of the DEPB and the amount received in excess of the face value of the DEPB. The entirety of the sale consideration would fall within the purview of section 28(iiid)." 28. Since the issue is squarely covered by the decision of the Hon'ble Bombay High Court in the case of CIT v Kalapataru Colours and Chemicals (supra), therefore, respectfully following the same, we hold that deduction in respect of 90% of DEPB and DFRC benefits are not allowable u/s 80HHC of the Act. We, therefore, dismiss ground No.3(d) of the appeal. 29. Ground No.3(e) of the appeals is dismissed as not pressed. ITA No. 259/Chd/2009 30. In this appeal, ground No.1 raised by the Revenue is as under:- 1. That the Ld. CIT(A) has erred in cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be excluded for the purpose of computing profits of business u/s 80HHC of the Act. We, therefore, do not find any merit in this ground of appeal and dismiss the same. 36. Ground No.3 of the appeal reads as under:- 3. The Ld. CIT(A) has erred in directing to reduce only 90% of discount received from customers from profits of business for computation of deduction u/s 80HHC as the discount received is not linked with export businessman. 37. We have heard the rival submissions. The Ld. DR strongly supported the order of the Assessing Officer and Ld. counsel for the assessee reiterated the submissions made before the lower authorities. The CIT(A) has discussed this issue in para 12.4 of the order which reads as under:- "12.4 However, as regards discount of Rs. 31.92 lac, since this is stated to be received on early payment by the appellant for goods purchased, it is inextricably linked to the export turnover of the assessee and is, therefore, held by me not to be independent income of the nature of brokerage, commission, etc. Hence, the Assessing Officer is directed not to exclude 90% of discount received of Rs. 31.92 lac from profits of the business for the purpose of computi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
