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TMI Blog2016 (4) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In ground Nos. 3 & 4 of the appeal, the grievance of the assessee is that the Commissioner of Income Tax (Appeals) erred in not allowing deduction under sec. 80-IB(4) on sales-tax incentive. 5. Brief facts of the case are that the assessee is engaged in the business of manufacturing of packaging material for FMCG companies, such as Nestle, Hindustan Lever & Parle. Assessee received sales-tax incentive of Rs. 30,95,163/- and claimed deduction on this amount under sec. 80-IB of the Act. The Assessing Officer relying on the decisions of the Hon'ble Supreme Court in the case of Sterling Foods Vs. CIT (237 ITR 579), Pandian Chemicals Ltd. Vs. CIT (262 ITR 278), disallowed deduction under sec. 80-IB on Rs. 30,95,163/-. 6. On appeal, Commissioner of Income Tax (Appeals) following the decision of Hon'ble Supreme Court in the case of Liberty India Vs. CIT (317 ITR 218), wherein it was held that duty drawbacks are incentives which flows from the scheme framed by the Central Govt. and from sec. 75 of the Customs Act, 1962, and are therefore, not profits derived from eligible business under sec. 80-IB, disallowed the claim of the assessee. 7. Before us, Authorized Representative of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible for deduction u/s 80-IB of the Act. In this view of the matter, the order of the ld.CIT(A) is set aside and the A.O. is directed not to exclude the sales tax incentive of 12,94,1097- and Rs. 84,687/- from the profit of Unit-1 and Unit-II respectively while calculating deduction u/s 80-IB of the Act. The ground raised by the assessee is accordingly allowed." 10. Facts being identical, respectfully following the precedent, we set aside the orders of the lower authorities and allow deduction under sec. 80-IB claimed by the assessee on sales-tax incentive of Rs. 30,95,163/- and allow the ground of appeal of the assessee. 11. In ground No.5, the grievance of the assessee is that the Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of assets written off without appreciating the claim of the assessee that writing off was strictly in accordance with sec. 43(6)(c)(i)(B) of the Act. 12 Brief facts of the case are that the assessee claimed deduction of Rs. 6,86,413/- as value of assets written off. The Assessing Officer disallowed the same as writing off assets or scrapping of a fixed asset is a capital loss and is not allowable deduction under sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose. 17 Ground Nos. 6 & 7 of the appeal are directed against the order of the Commissioner of Income Tax (Appeals) sustaining disallowance of Rs.3,87,977/- under sec. 14A read with Rule 8D of the I.T. Rules. 18 Brief facts of the case are that the Assessing Officer found from the balance sheet of the assessee that the assessee was having investments and the said investments are earning dividend income which is exempt from tax. The assessee submitted before the Assessing Officer that it has not incurred any expenditure on investment. The Assessing Officer did not accept the same and worked out disallowance under sec. 14A read with Rule 8D and made disallowance of Rs. 3,87,977/-, which was confirmed in appeal by the Commissioner of Income Tax (Appeals). 19 Authorized Representative of the assessee submitted that the Commissioner of Income Tax (Appeals) was not justified in confirming the order of the Assessing Officer making disallowance of Rs. 3,87,977/- under sec. 14A of the Act and not accepting the explanation of the assessee that it has not incurred any expenditure for earning exempt income. 20 On the other hand, Departmental Representative supported the orders of the low ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come or exempt income as also investment which does not generate exempt income, it is only such investments in respect of which the dividend income or exempted income has been earned which can be considered when computing the disallowance under section 14A read with rule 8D. A perusal of the provisions of rule 8D also talks of satisfaction in sub-rule (1). Rule 8D(2) has three sub-parts. The first subpart i.e. (i) deals with the amount of expenditure directly relating to the income which does not form part of the total income. That issue is not in dispute here and therefore, we do not go into it in this case. In second sub-part i.e. (ii), it is a computation provided in respect of expenditure incurred by the assessee by way of interest during the previous year which is not directly attributable to any particular income or receipt. This clearly means that if there is any interest expenditure, which is directly relatable to any particular income or receipt, such interest expenditure is not to be considered under rule 8D(2)(ii). In the assessee's case here the interest has been paid by the assessee on the loans taken from the banks for its business purpose. There is no allegati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in section 14A and rule 8D(1), that relates to the accounts of the assessee. Thus, it is not the total investment at the beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to the income which does not form part of the total income which is to be considered. A question may arise as to why the term "average of the value of investment" is then used. The term average of the value of investment would be to take care of cases where there is the issue of dividend striping. In any case, as we have already held that the assessee has not incurred any expenditure by way of interest during the previous year, which is not directly attributable to any particular income, the findings of the ld. CIT(A) on the issue stand confirmed and consequently the appeal filed by the Revenue stands dismissed." Consequently, ground no. 2 of the Revenue's appeal and ground nos. 1.1 to 1.3 of the Assessee's appeal stand partly allowed for statistical purposes." 23 As the Assessing Officer has not considered the above order of the Tribunal, therefore, we set aside the orders of the lower authorities and remand back ..... X X X X Extracts X X X X X X X X Extracts X X X X
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