9911796707
TMI Blog2017 (5) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... years, the Department cannot doubt the method of accounting followed by the assessee. In the initial years, there may be fluctuation in the profit of the assessee due to increase in purchase price by changing the method of accounting. However, when the assessee was consistently following the same, there will be revenue neutral, hence there cannot be loss to the Revenue. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly allowed the claim of the assessee under the provisions of Section 145A of the Act. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Addition consequent to the block assessment - Held that:- The addition made in the present case is in the assessment made under Section 143(3) of the Act. Under the scheme of Income-tax Act, there can be simultaneous assessment one for regular assessment and another for block period. Therefore, as rightly submitted by the Ld. Sr. Standing Counsel for the Revenue, the block assessment made by the Assessing Officer was separate and distinct. However, it needs to be verified whether the same income which formed part of undisc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer Pricing Officer. Addition towards management consultancy fees paid to M/s Twin Star Holdings Ltd., Mauritius - Held that:- Since the actual service rendered by M/s Twin Star Holdings Ltd. was not brought on record by the CIT(Appeals), this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall refer the matter to the TPO once again and TPO shall examined the actual service rendered by M/s Twin Star Holdings Ltd. to the assessee and thereafter determine the arm's length price after giving a reasonable opportunity to the assessee. Disallowance under Section 14A - Held that:- Tribunal is unable to uphold the order of the lower authority. However, since the nature of transaction and the relationship was not brought on record, the matter needs to be re-examined by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the entire issue with regard to disallowance made under Section 14A of the Act is remitted back to the file of the Assessing Officer. The Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dispute that the Tax Audit Report clearly says that the goods were transported in the earlier years, therefore, the payment to be made relates to the earlier assessment year. It is nobody’s case that the compensation was paid in respect of loss suffered during the year under consideration. It is also not known how the loss was quantified to pay compensation by the assessee. In the absence of any material available on record regarding the quantification of compensation and liability to pay the same, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue of compensation is remitted back to the file of the Assessing Officer. The Assessing Officer shall bring on record the liability to pay compensation by the assessee and the year in which the liability was crystallized and thereafter decide in accordance with law after giving a reasonable opportunity to the assessee. Deduction claimed under Section 80-IB - only contention of the assessee before this Tribunal is that the Assessing Officer changed the year of claim to 9th and 10th year arbitrarily - Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow 2% of exempt income earned by the assessee for the year under consideration. Addition on account of bogus steel purchase - Held that:- Referring to the order passed by the Assessing Officer for the block period, this Tribunal found that the order passed by the Assessing Officer is barred by limitation. This Tribunal had no occasion to go into the merit of the disallowance made by the Assessing Officer. Accordingly, this issue was remitted back to the file of the Assessing Officer. For the sake of consistency, the order of the CIT(Appeals) is set aside and the issue of claim of bogus steel purchase is also remitted back to the file of the Assessing Officer. Deduction claimed under Section 80-IB - Held that:- Though the assessee claimed before the lower authorities that foreign exchange fluctuation on sale of finished goods, this Tribunal is of the considered opinion that profit on sale of finished goods, due to fluctuation in foreign exchange, the same has to be construed as derived from industrial undertaking. In case the profit was on the sale of raw material, the same cannot be taken as income derived from industrial undertaking at all. Since no details/materials are availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter afresh decide the issue in accordance with law, after giving a reasonable opportunity to the assessee. TDS u/s 195 - payment made to M/s Vedanta Resources Plc, UK - non TDS deduction - Held that:- Admittedly, the assessee-company nominated M/s Vedanta Resources Plc, a UK company to represent it in London. The assessee-company availed the services of M/s Vedanta Resources Plc to expand its business operation and interact with its consultant in London. The UK company appears to have not made available any technical knowledge to the assessee-company. The UK company rendered its services only in London Metal Exchange for the purpose of expanding its business operation in London. Since no activity was carried out in India by the foreign company, and entire advice was made by UK company to expand the assessee’s business in UK, namely, London Metal Exchange. Therefore, this Tribunal is of the considered opinion that the payment made to M/s Vedanta Resources Plc, UK is not liable to tax in India. Accordingly, the assessee is not liable to deduct tax under Section 195 of the Act. Disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow deduction under Section 80HHC and 80-IB of the Act more than the profit earned by the assessee. Therefore, according to the Ld. Sr. Standing Counsel, the CIT(Appeals) has rightly directed the Assessing Officer to reduce the deduction allowed under Section 80-IB of the Act while computing deduction under Section 80HHC of the Act. 5. We have considered the rival submissions on either side and perused the relevant material available on record. The judgment of Madras High Court in SCM Creations v. ACIT (2008) 304 ITR 319 would cover the issue. Accordingly, the orders of lower authorities are set aside and the Assessing Officer is directed to decide the issue in the light of the judgment of Madras High Court in SCM Creations (supra) after giving a reasonable opportunity to the assessee. 6. The next ground of appeal arises for consideration is with regard to initiation of penalty proceeding under Section 271AA and 271G of the Act. 7. We have heard the Ld.counsel for the assessee and the Ld. Sr. Standing Counsel for the Revenue. From the order of the Assessing Officer it appears that the Assessing Officer has initiated the penalty proceedings and no order appears to have been passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 5% of its average net profit to any political party or to any political purpose, to any person. The Ld.counsel further submitted that the assessee being an Indian company has taken the Trust as medium to donate funds for political purpose and the actual beneficiary are the political parties and not the Trust. Therefore, according to the Ld. counsel, the CIT(Appeals) has rightly allowed the claim of the assessee under Section 80GGB of the Act. 12. We have considered the rival submissions on either side and perused the relevant material available on record. We have also carefully gone through the provisions of Section 80GGB of the Act which reads as follows:- "DEDUCTION IN RESPECT OF CONTRIBUTIONS GIVEN BY COMPANIES TO POLITICAL PARTIES In computing the total income of an assessee, being an Indian company, there shall be deducted any sum contributed by it, in the previous year to any political party or an electoral trust. [Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash.] Explanation For the removal of doubts, it is hereby declared that for the purposes of this section, the word "contribute", with its grammatic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... welfare of the employees. Therefore, the Madras High Court held that it has to be allowed under Section 37 of the Act. In the case before us, it is not the contribution made by the assessee to the welfare of the employees. It was made to a trust for creating political awareness, therefore, the judgment of Madras High Court in Cheran Engineering Corporation Ltd. (supra) may not be applicable at all. Hence, we are unable to uphold the order of the lower authority. Accordingly, the same is set aside and the disallowance made by the Assessing Officer to the extent of ₹ 5.50 Crores is restored. 15. The next ground of appeal is with regard to addition of ₹ 38.83 Crores. 16. Shri M. Swaminathan, Ld. Sr.Standing Counsel for the Revenue, submitted that the assessee changed its method of accounting in respect of copper concentrate purchases from mark to market to take into effect the increase in the liability of the assessee which was ascertained. According to the Ld. Sr. Standing Counsel, change of accounting method is not compulsory. The assessee should have accounted for increase in purchase price at the time of finalization of accounts on 31.03.2004. By increasing the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, the Assessing Officer made an addition of ₹ 14,58,83,105/-. However, the CIT(Appeals) found that in the block assessment, the addition made by the Assessing Officer to the extent of ₹ 14,00,86,150/- was deleted. Due to exchange fluctuation, the addition made in pursuance of block assessment, was also deleted by the CIT(Appeals) to the extent of ₹ 57,96,955/-. According to the Ld. D.R., the addition made by the Assessing Officer in the block assessment is with regard to undisclosed income. The present assessment is under Section 143(3) of the Act. Therefore, according to Ld. Sr. Standing Counsel, the order of the CIT(Appeals) for the block assessment cannot be a reason for deleting the addition made in the regular assessment. 21. We have heard the Ld.counsel for the assessee also. According to the Ld. counsel, the addition made in the block assessment was deleted, therefore, consequently, there cannot be any addition in the regular assessment. 22. We have considered the rival submissions on either side and perused the relevant material available on record. The addition made in the block assessment is in respect of the undisclosed income. The addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.counsel submitted that where a company was in the business, incurred expenditure on issue of debentures, such an expenditure has to be allowed while computing the total income of the assessee. As held by Apex Court in India Cements Ltd. (supra), such an expenditure need not be amortized against the profit over the period. Therefore, the CIT(Appeals) by following the judgment of Apex Court and Accounting Standard AS 26, allowed the claim of the assessee. 26. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee-company is already in business, therefore, the expenses for issue of debentures need not be amortised under Section 35D of the Act and it has to be allowed under Section 37 of the Act. The CIT(Appeals), in fact, has placed his reliance in India Cements Ltd. (supra). Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 27. The next ground of appeal is with regard to disallowance of ₹ 2.13 Crores towards notional interest on interest free loan advanced to wholly owned subsidiary company. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that since money was borrowed in India and paid interest, the profit in India was considerably reduced, since the profit of the assessee was shifted to outside the jurisdiction. The CIT(Appeals) by placing reliance on the judgment of Apex Court in S.A.Builders Ltd. (supra), allowed the claim of the assessee. The fact that the advance was made to foreign countries and shifting of profit to other nation was not examined by the CIT(Appeals). Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered. Accordingly, the orders of the lower authorities are set aside and the transfer pricing adjustment made by the Assessing Officer is remitted back to his file. The Assessing Officer shall re-examine the matter and refer the same to TPO for reconsideration. The Transfer Pricing Officer shall examine the matter afresh and find out whether any advance was made to foreign company during the current year and whether such advance would amount to shifting of profit to other nation. Thereafter the Assessing Officer shall decide the issue afresh in accordance with law after giving a reasonable opportunity to the assessee. 31. The next issue arises for consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the CIT(Appeals) and this Tribunal as well. Hence, the CIT(Appeals) found that the Transfer Pricing Officer arbitrarily estimated the management service fees at ₹ 8.70 Crores as against ₹ 4.35 Crores actually received by the assessee. Therefore, the CIT(Appeals) has rightly deleted the addition made by the Assessing Officer. 34. We have considered the rival submissions on either side and perused the relevant material available on record. The assesseecompany claims to have received management service fee of ₹ 4.35 Crores each from CMT and TCM. However, it appears the assessee could not provide the details of specific services provided to those entities. The assessee claims that the details were made available before the TPO and they are available before the CIT(Appeals) and before this Tribunal. It is not in dispute that the assessee-company assumed a profit of 15% on the revenue in the form of management service fee. The assessee further claimed before the CIT(Appeals) that the TPO arbitrarily estimated the fee at ₹ 8.70 Crores instead of ₹ 4.35 Crores. The assessee appears to have adopted cost plus method for computing arm's length price in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ius. 37. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that the assessee claims to have paid ₹ 30.50 lakhs towards economic cost of funds paid to M/s Twin Star Holdings Ltd., Mauritius. Referring to the order of the Transfer Pricing Officer, the Ld. Sr. Standing Counsel submitted that the payment made to M/s Twin Star Holdings Ltd. is not exclusively for business of the assessee. Referring to the order of the CIT(Appeals), the Ld. Sr. Standing Counsel submitted that it is not known how the payment of ₹ 30.50 lakhs made to M/s Twin Star Holdings Ltd., Mauritius benefited the assessee-company. Referring to the observation made by the CIT(Appeals), the Ld. Sr. Standing Counsel submitted that the CIT(Appeals) made generalized remarks that the assessee's market capitalization has gone up substantially after listing of holding company in the UK Stock Exchange, therefore, the CIT(Appeals) is not justified in allowing the claim of the assessee. 38. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee has produced details of consultancy services provided by M/s Twin Star Holdings Ltd., Mauritius along with cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. 40. The next ground of appeal is with regard to disallowance of ₹ 1.68 Crores under Section 14A of the Act. 41. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that the CIT(Appeals) deleted ₹ 1.68 Crores under Section 14A of the Act on the ground that the investment made by the assessee in Balco cannot be equated with ordinary investment of the ordinary shareholder. According to the Ld. Sr. Standing Counsel, the assessee is engaged in the business of manufacturing non-ferrous metals, namely, copper, zinc and aluminium. The assessee made investment in Balco in the year 2001 to the extent of ₹ 553.17 Crores out of which ₹ 551.92 Crores was out of borrowed funds. Since ₹ 69.92 Crores was outstanding in the assessment year 2004-05, the Assessing Officer disallowed the proportionate interest of ₹ 1.68 Crores. Therefore, according to Ld. Sr. Standing Counsel, the CIT(Appeals) is not justified in deleting the addition made by the Assessing Officer. 42. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that admittedly the assessee is engaged in the business of manufacturing of copper, zinc and alu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, after giving a reasonable opportunity to the assessee. 44. The next issue arises for consideration is with regard to deduction made by the assessee under Section 80-IA of the Act. 44. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that the assessee claimed deduction under Sections 80-IA, 80-IB and 80HHC of the Act. Referring to Section 80-IA(9) of the Act, the Ld. Sr. Standing Counsel submitted that the CIT(Appeals) directed the Assessing Officer to reduce deduction allowed under Section 80-IA of the Act while computing deduction under Section 80HHC of the Act. 45. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that the deduction allowed under Section 80-IA of the Act shall be reduced while computing relief under Section 80HHC of the Act. The Ld.counsel placed his reliance on the judgment of Madras High Court in SCM Creations v. ACIT. 46. We have considered the rival submissions on either side and perused the relevant material available on record. As rightly submitted by the Ld. Counsel for the assessee, the issue was considered by the Madras High Court in SCM Creations (supra). The Madras High Court by following the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al transaction. The Ld.counsel further submitted that it is not the case of the Transfer Pricing Officer that the required information and document were not produced before him. According to the Ld. counsel, the detailed information supported by documentary evidence regarding the ownership, international transaction, copies of balance sheet, copies of comparable transactions, etc were submitted before the Transfer Pricing Officer. The Assessing Officer has simply initiated the penalty proceeding under Section 271G of the Act without indicating the document which was not produced by the assessee. According to the Ld. counsel, the assessee's accounts were duly audited by the statutory auditor as well as internal auditors. The audited accounts were also published in the annual report. The apportionment of expenditure was on the basis as done in the last year. Therefore, the CIT(Appeals) has rightly deleted the penalty levied by the Assessing Officer. 50. We have considered the rival submissions on either side and perused the relevant material available on record. The main reason on which the penalty was deleted was that the CIT(Appeals) deleted the adjustment made by the Transfer Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in allowing the claim of the assessee. 54. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that in fact, this Tribunal in Mohan Breweries & Distilleries Ltd. v. ACIT (2009) 311 ITR (AT) 346, found that the captive power plant set up for distillery unit is eligible for deduction under Section 80-IA of the Act. Moreover, in the assessee's own case, this Tribunal for the earlier assessment year found that the assessee is eligible for deduction when the power generated used for captive consumption. The Mumbai Bench of this Tribunal has also taken a similar view allowing the identical claim of the assessee. It is not the case of the Revenue that any of the condition prescribed for allowing deduction under Section 80-IA of the Act was not complied with. Merely because the power was utilised for captive consumption that cannot be a reason for disallowing the claim of the assessee. Therefore, according to the Ld. counsel, the CIT(Appeals) has rightly allowed the claim of the assessee. 55. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee has used the power f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee before the Madras High Court, a civil contractor, constructed a hockey stadium in the Collectorate complex at Ramanathapuram. The assessee claimed the expenditure for constructing the hockey stadium as revenue expenditure. The Madras High Court after considering its earlier judgment in Cholan Roadways Corporation Ltd. v. CIT (1999) 235 ITR 473, found that the contribution made towards Flag Day Fund and Chief Minister's Rehabilitation Fund are deductible as they are not in contravention of any law. The Madras High Court further found that the expenditure incurred by the assessee towards construction of hockey stadium was for promotion of its business, hence it was allowed as revenue expenditure. 60. In this case before us also the donation of ₹ 1 Crore was made to Rajiv Gandhi Relief and National Welfare Trust with an intention to give relief to the people who are affected by Tsunami. The payment made by the assessee is not in contravention of any law. It is for the welfare of the people. It is common knowledge that the State of Tamil Nadu was very badly affected due to Tsunami and several lakhs of people were made homeless. The assessee is doing business in the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to addition of ₹ 10.99 Crores as loss on account of change in method of accounting. 65. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that due to change in the method of accounting, there was a loss to the extent of ₹ 10.99 Crores. According to the Ld. Sr. Standing Counsel, there was no reason for change in the method of accounting which was regularly followed by the assessee for several years. Change in the method of accounting resulted decrease in profit. The Ld. Sr. Standing Counsel further submitted that each transaction is different and independent from other transactions, therefore, just because the assessee changed the method of accounting for all the transactions that cannot be a reason for setting up of loss suffered in one unit against the other. Therefore, according to the Ld. Sr. Standing Counsel, the CIT(Appeals) ought to have upheld the addition of ₹ 10.99 Crores. 66. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that the income of the assessee has to be computed in accordance with method of accounting regularly followed by the assessee. The assessee can also change the method of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e change of method of accounting was due to malafide intention of the assessee. When the assessee bonafidely changed the method of accounting as per the Accounting Standard adopted under Section 145 of the Act and continues to follow the same, even though there was loss at initial year, the same would not stand in the way of changing the accounting policy. In other words, the loss suffered in the first year would be set off in the subsequent year and there would be revenue neutral. Hence, there can be no loss to the Revenue. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that the addition of ₹ 10.10 Crores on account of fall in net profit due to change in the method of accounting cannot be sustained. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 68. The next ground of appeal is with regard to addition of ₹ 11.08 Crores on account of depreciation on bogus steel purchases and capitalization of foreign exchange fluctuation. 69. We have heard Ld. Sr. Standing Counsel for the Revenue and the Ld.counsel for the assessee. The only contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration which was unforeseen due to Tsunami and heavy flood in the State. It is not in dispute that the Tax Audit Report clearly says that the goods were transported in the earlier years, therefore, the payment to be made relates to the earlier assessment year. It is nobody's case that the compensation was paid in respect of loss suffered during the year under consideration. It is also not known how the loss was quantified to pay compensation by the assessee. In the absence of any material available on record regarding the quantification of compensation and liability to pay the same, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue of compensation is remitted back to the file of the Assessing Officer. The Assessing Officer shall bring on record the liability to pay compensation by the assessee and the year in which the liability was crystallized and thereafter decide in accordance with law after giving a reasonable opportunity to the assessee. 74. In the result, this appeal of the Revenue is partly allowed. 75. Now coming to assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed to the extent of ₹ 13,38,30,000/- under Section 40(a)(i) of the Act for non-deduction of tax at source. 80. Shri G. Baskar, the Ld.counsel for the assessee submitted that in respect of management consultancy fee of USD 3 million which is equivalent to ₹ 13,38,30,000/- paid to the holding company, namely, Vedanta Resource Plc, the assessee is not required to deduct tax at all. The management consultancy fee is not taxable in India, therefore, the CIT(Appeals) is not justified in disallowing the claim of the assessee. 81. On the contrary, Shri M. Swaminathan, Ld. Sr. Standing Counsel submitted that the assessee has paid USD 3 million towards management consultancy service and also paid USD 2 million as Representative Office fees. Both the payments were admittedly made to Vedanta Resources Plc, a body corporate incorporated in England and Wales. In respect of Representative Office fees, the CIT(Appeals) himself found that the said fees is not chargeable to tax in India. Accordingly, it was found that no TDS is required to be made. However, in respect of management consultancy fees, the CIT(Appeals) found that Vedanta Resources Plc, UK company agreed to provide serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction claimed by the assessee under Section 80-IA of the Act for the power plant set up by the assessee. 90. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue submitted that the assessee used the power generated for captive consumption. Therefore, the assessee is not eligible for deduction under Section 80-IA of the Act. 91. We have heard Shri G. Baskar, the Ld.counsel for the assessee, also. This issue was examined by this Tribunal for assessment year 2005-06 in the Revenue's appeal at paras 52 to 55 of this order. This Tribunal found that even though the power generated was used for captive consumption, the assessee is eligible for deduction under Section 80-IA of the Act. In fact, this Tribunal placed its reliance in Mohan Breweries & Distilleries Ltd. (supra). In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 92. The next ground of appeal relates to deduction claim of the assessee under Section 80GGB of the Act. 93. We have heard Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue and Shri G. Baskar, the Ld. counsel for the assessee. The deduction clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also remitted back to the file of the Assessing Officer. The Assessing Officer shall reexamine the matter afresh in the light of the material available on record and thereafter decide the issue afresh, in accordance with law, after giving a reasonable opportunity to the assessee. 98. The next issue arises for consideration is with regard to deduction claimed by the assessee under Section 80-IB of the Act. 99. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that the assessee claims deduction under Section 80-IB of the Act in respect of other income of the assessee. Referring to Section 80-IB of the Act, the Ld. Sr. Standing Counsel submitted that Section 80-IB of the Act is applicable only in respect of income derived from industrial undertaking. Referring to judgment of Apex Court in Pandian Chemicals Ltd. v. CIT (262 ITR 278), the Ld. Sr. Standing Counsel submitted that the profit or gain of the assessee must be derived from actual conduct of the business. A mere commercial connection between income and industrial undertaking would not be sufficient for the purpose of allowing deduction under Section 80-IB of the Act. If the income of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the relevant material available on record. The assessee appears to have claimed deduction under Section 80-IB of the Act in respect of foreign exchange fluctuation on sale of finished goods, unclaimed liabilities written back, interest received from customers, scrap sales and interest on employees loan. Though the assessee claimed before the lower authorities that foreign exchange fluctuation on sale of finished goods, this Tribunal is of the considered opinion that profit on sale of finished goods, due to fluctuation in foreign exchange, the same has to be construed as derived from industrial undertaking. In case the profit was on the sale of raw material, the same cannot be taken as income derived from industrial undertaking at all. Since no details/materials are available before this Tribunal, it has to be first ascertained whether profit on foreign exchange fluctuation was due to sale of finished goods or raw material. No material is available on record to suggest that the foreign exchange fluctuation was due to sale of finished goods on export. Therefore, this Tribunal is of the considered opinion that the matter needs to be verified by the Assessing Officer. 102. Now com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 579) and Pandian Chemicals Ltd. v. CIT (262 ITR 278) and thereafter, decide the issue in accordance with law, after giving a reasonable opportunity to the assessee. 105. The next issue arises for consideration is with regard to disallowance under Section 40(a)(ia) of the Act. 106. Shri M. Swaminathan, Ld. Sr. Standing Counsel for the Revenue, submitted that the assessee has paid representative office fees of USD 20 lakhs. Considering the need of business of the assessee, the assessee required presence of M/s Vedanta Resources Plc, a UK company, to represent it in London. According to Ld. Sr. Standing Counsel, the assessee-company availed the services of Representative Office of M/s Vedanta Resources Plc to expand its business operation and interact with consultant. Therefore, the payment made by the assessee is liable to tax under Section 195 of the Act at the time of making payment. 107. On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that admittedly the assessee has paid USD 20 lakhs towards representative office fees. Referring to Article 13 of Double Taxation Avoidance Agreement between UK and India, the Ld.counsel submitted that representati ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
