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TMI Blog2016 (9) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... r as it relates to the computation of the quantum of deduction u/s 80HHC of the Act in the light of the decision of the Hon’ble Supreme Court in the case of Topman Exports (supra). For statistical purposes the appeal of the revenue is treated as allowed. Depreciation claim at 100% on pollution control equipment - Held that:- Test of emission after installation of pollution control equipments was conducted by one M/s. Envirochek and a copy of the said report was filed before the AO. Order of the AO is silent on all these facts. The reasons assigned by the AO for rejecting the claim of 100% depreciation by the Assessee was, a mere observation that the assessee did not justify the claim for depreciation on pollution control equipments. There is no finding of the AO that the assessee did not manufacture pollution control equipments by utilising the raw materials which it had purchased. In the given circumstances we are of the view that the equipments in question on which the depreciation at 100% was claimed was pollution control equipments and the assessee was entitled to the claim of depreciation at 100% as claimed by it. We do not find any ground to interfere with the order of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal by the Revenue against the order dated 04.01.2013 of CIT(A)-XX, Kolkata, relating to AY 2003-04. ITA No.974/Kol/2013 is also an appeal by the Revenue against the order dated 04.01.2013 of CIT(A)-XX, Kolkata, relating to AY 2006-07. C.O. No.70/Kol/2013 is a Cross Objection filed by the assessee against the order of CIT(A)-XX, Kolkata dated 04.01.2013 relating to AY 2006-07. ITA No. 973/Kol/2013 (A.Y.2003-04): 2. Grounds of appeal raised by the revenue read as follows :- 1. Ld. CIT(A) is erred in law and on the facts and in circumstances of the case by allowing deduction u/s 80HHC for ₹ 1,33,92,449/- by violating the provisions of Rule 46A and allowing the claim of the assessee without due verification of the facts figures required to arrive at the correct amount of allowance. 2. That the Department craves leave to add, alter or modify any ground of appeal during the hearing. The Assessee is a company. It is engaged in the business of manufacture of iron castings, MS item plastic items. The assessee filed return of income for A.Y.2003- 04 declaring the total income of ₹ 1,49,71,820/-. Order of assessment u/s 143(3) of the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e customs duty was not .higher than the rate of credit allowable under DEPB. The assesses company thus opted for DEPB and hence the second, third, and fourth proviso to sec 80HHC (3) would not apply to the assessee. The benefit u/s 80HHC(3) for the assessee would thus be calculated as under: a) Profit of the business X Export Turnover Total Turnover b) The amount in. (a) above. shall be increased by 90% of amount in clause (iiia), (iiib) and (iiic) of section 28 X Export Turnover Total Turnover. c) Profit of business means the profit of the business as computed under the head Profit and gains of business or profession as reduced by - ' i) Ninety percent of any sum refereed to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28. or any receipts by way of brokerage, commission, interest, rent, or any other .receipt of a similar' nature Included in such profits and (ii) the profits of any branch, .office, warehouse or any other. est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;market condition. iv) In the -first option of making import, there is no transfer of DEPB while in the second option he transfers his entitlement of Rs:I0/- for say ₹ 11/. v) The entitlement value of Rs.l0/-, which could be used for availing tax credit has is, thus, nothing but his cost and any premium received over and above the entitlement value is his profit; which in instant example is Re.1/-. 5. In the. light of above,. while calculating Profit of Business u/s 80HHC(4C)(baa) only profit element on transfer of DEPB entitlement is required to be deducted and not the entire value received on transfer of DEPB. It was submitted that the above proposition of law has been upheld by Special Bench of Hon'ble ITAT, Mumbai in the case of Topman Exports Vs. ITO 318 ITR 87 (Mum) (SB)(AT) and the same was also confirmed by the Hon ble Supreme Court. It was argued that the AO has taken entire amount recd on DEPB sale as profit u/s 28(iiid) which needs to be bifurcated into cost, the entitlement portion, and the profit, the difference between sale price and entitlement portion. The profit can only be ignored while calculating deduction u/s 80HHC and not the entire sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case by deleting of ₹ 14,32,581/ - accepting the written submission which is not supported by any documentary evidences like certificate from pollution control authority, or any certificate from any technical person / authority certifying that the assets in question are pollution control equipment. 10. The facts as far as ground no.1 raised by the revenue is concerned are that the assessee claimed depreciation at 100% on pollution control equipments. The AO called upon the assessee to furnish the details on which the depreciation has been claimed. The asseseee furnished copies of the bills before the AO. The AO on perusal of the bills noticed that the assessee had purchased raw materials like H.R. coil, plate, CD Bars etc. The assessee further claimed that from these raw materials the assessee had manufactured on its own pollution control equipments on which depreciation at 100% was claimed. The AO however made the following observations in the order of assessment to deny the claim of the assessee to depreciation on pollution control equipment. The assessee was requested to justify the claim of depreciation @100% on alleged pollution control equipm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on control equipment. After' careful consideration of the Submission, I find from the facts that the so claimed asset was pollution control equipment which can not be treated as general plant and machinery because all the facts and conditions which require for an asset to treat it as pollution control equipment are satisfied. Therefore, the ground of appeal is allowed. 12. Aggrieved by the order of CIT(A) the revenue has raised ground no.1 before the Tribunal. The ld. DR placed reliance on the order of AO and further filed before us copies of the bills which according to him the evidence for purchase of raw materials. The ld. Counsel for the assessee relied on the order of CIT(A). 13. After considering the rival submissions we find that the AO in the order of assessment, the AO has not disputed the claim of the assessee that raw materials and parts which are purchased had been used for manufacture of pollution control equipment. In a letter dated 26.11.2008 filed before the AO the assessee clearly brought to the notice of the AO that the assessee did not buy any pollution control equipment that it bought raw materials such as coil, plate etc and got the equipments fabric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that surplus funds were invested to make investments. The Assessee had authorized the bank to make investments and no expenditure whatsoever was incurred to earn the tax free income and therefore no disallowance of expenses u/s.14A of the Act is necessary. 16. The AO however in the order of assessment did not make any reference to the aforesaid contention of the assessee and proceeded to determine the disallowance u/s 14A of the Act by applying the formula given in Rule 8D of Rules. The following was the computation done by the AO :- The disallowance in respect of the long term investments as above is computed under Rule 8D read with Sec.14A holding that the provisions of Rule 8D are applicable with retrospective effect as under: Direct Expenses : The amount of expenditure directly relating to income which does not form part of total income In the P L A/c. No item of expenditure is identified which can be directly attributable to earning of such income or making of the long term investments listed above. Therefore, this figure is adopted at Rs. Nil. Disallowance of Interest = A x B/C Where A = Amount of expenditure by way of interest other than the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore disallowance had to be made on a reasonable basis. In coming to the aforesaid conclusion the CIT(A) relied on the decision of the ITAT, Kolkata Bench in the case of Sagrika Goods Services Pvt. Ltd. Vs ITO in ITA NO.1278/Kol/2010. 18. Aggrieved by the relief granted by the CIT(A)the revenue has raised ground no.2 before the tribunal. The ld. DR relied on the order of the AO. The ld. Counsel for the assessee relied on the order of the CIT(A). 19. After considering the rival submissions, we are of the view that order of the CIT(A) on this issue does not call for any interference. As far as the disallowance on interest expenses is concerned the available funds available with the assessee were much more than the investments made by the assessee. The following chart would demonstrate the same. A. Dividend Earned 7,69,946.27 B. B. Investment as on 31/03/2005 2,28,41,863.34 C. Investment as on 31/03/2006 1,33,02,756.00 D. Own Capital (Equity + Reserves) as n 31/03/2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no 551 dated 23.03.1990 clarifying that after the amendment the law no longer requires the assessee to establish that the debt has actually become bad. It was clarified that under the amended law write off of debt would be regarded as sufficient compliance of the provision in order to claim deduction u/s 36(1)(vii) of the Act. Further Hon'ble supreme court in the case of T.R.F. Limited vs C.I.T reported in 323 ITR 397(SC) has clearly observed that after 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Hence it was claimed that in view of the above circular of CBDT and the above judgment of Hon'ble Supreme Court, the A.O. has clearly erred in restricting the claim of Bad Debt to 50% of the claimed amount and the entire amount of Bad debt of ₹ 8046502/- needs to allowed u/s 36(l)(vii). 24. The CIT(A) accepted the contention of the assessee and deleted the disallowance made by the AO. Aggrieved by the order of CIT(A) the revenue has raised ground No.3 before the Tribunal. 25. We have heard the submissions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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