9911796707
TMI Blog2018 (4) TMI 1065X X X X Extracts X X X X X X X X Extracts X X X X ..... be given. Addition added by the AO on account of notional interest income considered as accrued from investment - Held that:- We find that the Tribunal in the assessee’s own case has followed the finding of the ITAT in the case of Kulgam Holdings P.Ltd.(2013 (7) TMI 31 - ITAT AHMEDABAD). The Tribunal in that case has observed that OFCPN have their maturity dates, and option as given to the assessee either to purchase shares by surrendering OFCPN or get maturity value. Tribunal was of the view that interest income has not materialized in the case of the assessee because if they are redeemed on maturity then gain accursed on such investment will be long term capital gain, and if they are converted into shares then nothing would come to the assessee. Disallowance claimed towards interest expenditure on Deep Discount Bonds Series A, B, C and Deep Discount Bonds vested into the assessee - company upon demerger of operating division of Nirma Industries Ltd. - Held that:- As followed order of the ITAT passed in earlier years and held that interest expenditure incurred by the assessee on Deep Discount Bonds is an allowable expenditure on accrual basis in this year also. Following the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .28 lakhs (roughly 31 crores), as against aggregated fixed assets of the company at 2125.30 lakhs. Similarly profit for the last two years in the Moraiya Division was 27.91 crores and 17.79 crores. These two years profit would easily take care of any fund required at this undertaking. Thus, the ld.Revenue authorities have failed to point out deployment of any interest bearing funds for which interest expenditure has been incurred at the corporate division of this unit. In that case, it is not advisable to reduce eligible profit in the ratio of turnover. We allow this ground of appeal and delete disallowance. Excluding 90% of the gross interest income from eligible profit for the purpose of deduction under section 80HHC - Held that:- We remit this issue to the file of AO for re-working of eligible profit for grant of deduction under section 80HHC. The ld.AO shall exclude net interest income from the eligible profit. This ground of appeal of the assessee is allowed. Deduction under section 80HHC - insurance claim - Held that:- On account of some mishaps, due to electricity failure, fishes got damaged/decayed in transit and the assessee received claim. This claim would be construed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order was passed under section 143(3) on 24.3.2006 at a total income of ₹ 2,55,31,93,621/-. The major addition made by AO relates to disallowance of interest expenses pertaining to Deep Discount Bonds ("DDB" for short), disallowance of claim under section 80IA and 80IB in respect of wind farm division and disallowance of deduction under section 80IA in respect of Maraiya Division. The ld.AO initiated penalty proceedings and passed order under section 271(1)(c) on 31.3.2008 imposing penalty of ₹ 9,43,48,749/-. On appeal, the ld.CIT(A) has deleted this penalty vide impugned order dated 4.11.2009. 6. The ld.counsel for the assessee at the very outset submitted that assessment order dated 24.3.2006 passed in the case of assessee was challenged before the ld.CIT(A). The ld.First Appellate Authority has decided the appeal of the assessee in quantum proceedings ex parte vide order dated 8.2.2007. This order of the ld.CIT(A) was challenged in ITA No.818/Ahd/2017. The Tribunal has allowed appeal of the assessee statistically and set aside order of the ld.CIT(A). Tribunal restored all these issues to the file of the ld.CIT(A). The finding recorded by the Tribunal in para-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Tribunal vide order dated 18.3.2008 (supra) set aside all issues and restored to the file of ld.CIT(A) for fresh adjudication. Same is now adjudicated by the ld.CIT(A). Therefore, we deem it appropriate to set aside the impugned order of ld.CIT(A), because it based on an order which has already been set aside. The question, whether penalty is to be imposed or not be required to be adjudicated again by the ld.CIT(A) on the basis of fresh order passed by her. Therefore, this appeal of Revenue is allowed for statistical purpose. ITA No.1738/Ahd/2014 (Revenue's appeal) (M/s.Nirma Industries_) 8. In the first ground of appeal, Revenue has pleaded that the ld.CIT(A) has erred in deleting disallowance of ₹ 61,48,20,284/- which was added by the AO by making disallowance out of depreciation on brands and trademarks. 9. Brief facts of the case are that the ld.AO has observed that the assessee has taken cost of assets under the head brand/trademark at ₹ 500 crores. While passing assessment order for Asstt.Year 2001-02, the cost was determined at ₹ 53 crores, and accordingly depreciation was calculated. Details of depreciation claimed in the return and ultimately al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, [but before the 1st day of March, 1975,] and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees.] Explanation 1.--Where an asset is used in the business after it ceases to be used for scientific research related to that business and a deduction has to be made under [clause (ii) of sub-section (1)] of section 32 in respect of that asset, the actual cost of the asset to the assessee shall be the actual cost to the assessee as reduced by the amount of any deduction allowed under clause (iv) of sub-section (1) of section 35 or under any corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922). [Explanation 2.--Where an asset is acquired by the assessee by way of gift or inheritance, the actual cost of the asset to the assessee shall be the actual cost to the previous owner, as reduced by-- (a) the amount of depreciation actually allowed under this Act and the correspond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A' purchases a machine which is very much required by him for his business purpose but for such acquisition of machine by him, he paid some extra price as per the A.O. This is not the case of the A.O. that using of machine for business purpose is not the main purpose of acquiring of machine and in that situation, in our humble opinion, the A.O. cannot invoke Exp.(3) to Section 43(1) of the Act. In our considered opinion, this requirement has been specified in Explanation (3) to take care of various situations where the assessee may be forced to pay extra consideration for acquiring an asset or anything else for business purpose. Such extra consideration may be required to be paid for many reasons such as, scarcity of that particular item, inability of the assessee to make timely payment out of own funds or out of borrowed funds and, therefore, he may be forced to purchase the machine/the asset on credit and for this reason also, he may be required to pay extra consideration. There may be other reasons also and because of this, legislature had thought it fit and proper to put this restriction in Explanation (3) to Section 43(1) and only where the A.O. is satisfied that the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, in the present case, the A.O. has not even made any attempt or allegation on this aspect and nothing has been brought on record by the A.O. that the asset in question was not acquired by the assessee with main purpose being business purpose and, therefore, the main purpose of acquisition of this asset was to reduce the tax liability of the assessee. Hence, in our considered opinion, the A.O. did not fulfill the pre requirement of invoking Exp.(3) to Section 43(1) of the Income tax Act, 1961. 3.6 Moreover, while determining the value of the asset in question after invoking Exp.(3) to Section 43(1), the A.O. has ignored four valuation reports submitted by the assessee from various firms of the Chartered Accountants without getting a valuation done by any independent valuer. As per the judgement of Hon'ble Gujarat High Court, rendered in the case of Aswin Vanaspati Industries (supra), as has been cited by the Ld. A.R. in the brief written note, it was held by Hon'ble Gujarat High Court that since there is a report by the registered valuer, it is incumbent upon the authority to dislodge the same by bringing adequate material on record in the form of departmental valuat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired in full by the assessee company and, therefore, the royalty rate expected by the assessee company in future has to be accepted @ 4% as per the agreement between NCCL and NL with NCWL and even if the same is without goodwill, it makes no difference since the assessee company in future is assured of 4% royalty and the same has to be adopted for the purpose of valuation. Moreover, as per remaining three valuation reports also, the value worked out by these valuers was more than ₹ 500 Crores paid by the assessee. We also find that in one of these reports by Delloite, even the method adopted for valuation is different and still the value worked out is more than ₹ 500 Crores and no defect had been pointed out in the method adopted by Delloite and hence, for this reason also, the price paid by the assessee cannot be said to be excessive or unreasonable warranting any disallowance of depreciation. 3.7 In view of our above discussion, we find that the action of the A.O. is not justified for two reasons. The first reason is this that he has not fulfilled the pre requirement for invoking the provision of Exp.(3) to Section 43(1) of the Income tax Act, 1961. The second r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and loss for carry forward. It is pertinent to observe that as and when this figure and any other figure or other would change on the basis of order giving effect of higher authorities consequential effect would be given. Thus, there is no merit in this ground of appeal, it is rejected. 17. Ground no.3 and 4: Both these grounds are interconnected with each other. Revenue has pleaded that the ld.CIT(A) has erred in law and on facts in deleting addition of ₹ 40,99,56,735/- which was added by the AO by making disallowance on interest expenditure claimed on deep discount bond. Similarly, the ld.CIT(A) has erred in deleting addition of ₹ 2,65,24,193/- which was added by the AO on account of disallowance of interest on OFCPN incurred by the assessee for re-purchase of such bonds and their redemption. 18. Brief facts of the case are that the assessee has filed its return of income on 1.12.2003 declaring total income at ₹ 1,25,84,851/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) issued on 8.3.2004. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed interest expenditure of ₹ 19,77,69,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest expenses should be allowed on pro rata basis for the period of holding of the Bonds. Respectfully following the judgement, the addition made by the Assessing Officer is directed to be deleted. The AO has also disallowed the interest/discount cost of ₹ 2,65,24,193/- claimed by the appellant on the OFCPNs repurchased during the year. The appellant had issued these OFCPNs in financial year 2001 - 02. The appellant claimed interest expenditure on pro rata basis in the first year. Subsequently in the next year, that is, in the current assessment year these OFCPNs were repurchased by the appellant and the difference between the repurchase proceeds and the cost as per the books of accounts was claimed by the appellant as revenue expenditure in the current year itself. The AO disallowed the claim. It is noted that the issue is covered in favour of the appellant by order of the honourable ITAT in the case of Nirma Ltd for A Y 2002 - 03 (para-88 to 91 in ITA number 1245/AHD/2006 and 2280/AHD/2004). The honourable Tribunal has held that the expenses incurred towards repurchase of DDBs (Deep Discount Bonds) before maturity is revenue expenditure. Since these OFCPNs are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case that the assessee is entitled to proportionate claim of expenditure towards discount/interest of DDBs on actual basis in the year of appeal and the A.O. was directed to correctly work out the same and to allow deduction to the extent it relates to the year under appeal. In the present case, Ld. CIT (A) has decided this issue by following this very order of the tribunal cited before us and he has granted relief to the assessee with similar directions to the A.O. as has been given by the Tribunal in the case of Nirma Ltd. (supra). Hence, we do not find any reason to take a contrary view in the present case and since the order of Ld. CIT (A) is in line with the tribunal order in the case of Nirma Ltd., we decline to interfere in the order of Ld. CIT(A) on this issue. This ground is also rejected." Respectfully following the order of Co-ordinate Bench, we do not find any merit in these ground of appeal. They are rejected. 21. Ground No.5: In this ground, grievance of the Revenue is that the ld.CIT(A) has erred in deleting addition of ₹ 1,79,56,195/- which was added by the AO on account of notional interest income considered as accrued from investment. 22. Brief facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a situation, we generally restore back the issue to the file of Ld. CIT (A) or to the A.O. for their decision first. But in the peculiar facts of the present case, as per which a legal issue has to be decided as to whether as per the terms of OFCPN of Nirma Industries Ltd., it can be said that any income is accruing on year to year basis or not, we feel that since the terms of issue are very much available before us and the same were available before the authorities below also, the issue can be decided at our level and, therefore, it is not necessary that we must restore back this issue to the file of the A.O. /Ld. CIT(A). Hence, we proceed to decide this issue after considering the facts as per the issue details of OFCPN of Nirma Industries Ltd. available on pages 7-14 of the paper book and after considering the arguments of both the sides. 2.8.4 As per the issue details of these OFCPNs of Nirma Industries Ltd. Available on page 7 of the common paper book, we find that the issue price of these debentures was ₹ 25000 each having face value of ₹ 33750/-. The tenure was 5 years form the date of allotment. One such OFCPN is convertible into 2500 equity shares of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision of Nirma Industries Ltd. 29. The amount mentioned by the Revenue is not a correct figure. Out of total claim of ₹ 24.74 crores, the ld.CIT(A) has granted relief to the extent of ₹ 22,75,11,447/-. A disallowance to the extent of ₹ 1,96,21,487/- has been confirmed which is discernible from the finding of the ld.CIT(A) recorded in para 3.5 of his order. 30. Brief facts of the case are that the assessee had issued secured redeemable Deep Discount Bonds Series A, B, C in order to re-finance existing short term debt and part finance of normal capital expenditure of the company. Similarly, Deep Discount Bonds were issued by Nirma Industries which were acquired by the assessee under scheme of demerger. The salient features of terms and conditions of issue have been highlighted before the AO which reads as under: Particulars DDB series A DDB series B DDB series C DDB of Nirma Industries Ltd. on demerger Issue size Rs.350 crores Rs.100 crores Rs.100 crores Rs.400 crores Face value (Per Bond) Rs.1,50,000/- Rs.1,15,500/- Rs.1,00,000/- Rs.1,00,00,000 Issue value (Per Bond) Rs.1,00,000/- Rs.1,00,000/- Rs.1,13,000/- Rs.1,50,00,000 2 31. The e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that the ld.CIT(A) has followed order of the ITAT and allowed prorata deduction of interest expenditure. There is no error in order of the ld.CIT(A), hence, this ground of appeal is rejected. 34. Ground no.2: In this ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting the disallowance of deduction under section 80IA of ₹ 95,98,355/-. 35. Brief facts of the case are that the assessee had a wind farm division which has generated electricity. It claimed deduction under section 80IA of the Act at the rate of 30% on the income of ₹ 3,19,94,515/-. This deduction was disallowed by the AO on the ground that electricity produced by the assessee was consumed by Mandali division. In other words, it was a captive power plant. The ld.AO observed that electricity is not covered under definition of "goods or articles", accordingly, the assessee is not eligible for claim of deduction under section 80IA. The ld.CIT(A) has deleted the disallowance by observing that in the Asstt.Year 2004-05, the ld.CIT(A) has allowed appeal of the assessee and held that even for captive consumption, electricity produced by the assessee would be eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssments for the Asstt.Year 2001- 02, 2002-03 and 2003-04 in the case of Nirma Industries were completed, therefore, the ld.CIT(A) has directed the AO to take into consideration unabsorbed depreciation and loss as on 1.2.2003 in the operating division of Nirma Industries should be accounted for in the accounts of Nirma Ltd. i.e. respondent herein. We do not find any error in this direction of the CIT(A) because once demerger has been approved by the Hon'ble High Court, then all assets and liabilities of demerged company would be taken into consideration in the new company. Carry forwarded unabsorbed depreciation and loss has to be given effect in the new company. The ld.CIT(A) has rightly directed the AO to give benefit of carry forwarded of unabsorbed loss and depreciation of Nirma Industries. Hence, this ground of appeal is rejected. 40. Ground No.5: In this ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in law and on facts in holding that correct value of intangible assets of the Nirma Industries was ₹ 500 crores and not ₹ 53.43 crores as determined by the AO and in directing the AO to allow depreciation on entire written down value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that a sum of ₹ 94,74,24,668/- could not be added in the book profit for the purpose of section 115JB of the Act. 47. Brief facts of the case are that on verification of accounts, the ld.AO observed that the assessee has written off ₹ 94,74,24,668/- as licence fee on 31.3.2003. He further observed that the assessee is being assessed for the purpose of levy of tax under MAT provision, and therefore, by writing off of this amount, it has reduced its liability under the MAT substantially. The ld.AO confronted the assessee with a query viz. "explain as to how this capitalized licence fee can be written off and claimed as deduction in the profit & loss account for the Asstt.Year 2003-04". The assessee made detailed reply which has been reproduced by the AO as well as by the CIT(A). According to the assessee, after demerger of operating division of Nirma Limited with the assessee effecting from 1.2.2003, the assessee had acquired, inter alia, brands and trademarks related to which the company had earlier paid licence fees to Kisan Industries. In other words, after demerger trademark vested in the assessee. So it became owner of the trademark itself for which the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed as deduction in the computation as conceived in your above query. Please note the amount written off by way of depreciation in the books of account, is added back in the computation of income in respect of the Moraiya (Detergent division). AO's Query It Explain (IS to how this licence has ceased to exit as on 3/-3-03 without a sale or surrender of the same so that (here was heed to write-off the same. Our submissions: As regards to the cessation of the existence of the licence and need 1.0 write off the same, please note that though the asset has not ceased to exist the amount is required to he written off in the hook of accounts in order to avoid duplication of evaluation, and we request reference to our reply in para (ii) herein above. Unquote The position is clear, that the assessee had the Licence in respect of Trade Marks", then it became the owner of the very Trade Mails, in view of this the assessee apparently became the owner of an asset which originally was licenced to it. A man cannot be licencee of his own property, The Licence which is an inferior right would merge into superior right of ownership, therefore the cost of the licence has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowhere brought on record that accounts of the assessee were not drawn as per Part-II and Part-III of the Schedule-VI of the Companies Act; whereas the accounts are prepared accordingly and if profits are computed, the accounts are audited and approved in the Board of Directors' meeting, then the AO has no power to make adjustment. The issue in dispute is covered by decision of the Hon'ble Supreme Court in the case of Apollo Typres (supra) and the ld.CIT(A) has correctly applied this decision. Therefore, we do not find any merit in this ground of appeal. It is rejected. 50. Ground Nos.8 and 9: These are general grounds of appeal, which do not require recording of any specific finding, hence dismissed. 51. In the result, we do not find any merit in the appeal of the Revenue. It is dismissed. 52. Now we take the appeal No.1280/Ahd/2013 - Asstt.Year 2003-04 by Nirma Limited. 53. First ground of appeal taken by the assessee is general ground of appeal, which does not require any specific finding to be recorded, hence rejected. 54. Ground NO.2: In this ground of appeal, grievance of the assessee is that the ld.CIT(A)has erred in reducing eligible profit of Moraiya Division for gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that basically loss of corporate division is the result of interest expenditure incurred on DDB. If details of fund available with Moraiya Division and its assets are being considered, then it would reveal that this concern does not require any funds for running of its activities. He took us through submissions filed before the ld.CIT(A) which are reproduced in para 6.2 of the impugned order. It reads as under: "6.2 During the appellate proceedings appellant vide its letter dated 20.3.2011 made following submissions:- "Ground No.9: Allocating loss of Corporate division: Vide discussion at para 8 on page no. 24 of the assessment order, the Id. A.O. reduced the pro-rata loss of corporate division on the basis of turnover by ₹ 2,3 8,09,974 from the profit of General division at Moraiya while working out deduction u/s.80IA of I.T. Act. a) It is submitted that the appellant company maintained separate books of accounts of Moraiya division. The profit is correctly reflected and eligible for deduction u/s. 80IA of I.T. Act. The loss of corporate division should not be reduced from the profit of this division. b) Profit & Loss Account of Corporate division is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The loss of corporate division worked out to ₹ 21,60,32,559/- on account of disallowance of interest/ discount on DDEs. Hon'ble Tribunal allowed the claim for Asst. Years 2002-03 and 2004-05 vide order dated 13-07-2009. Copy was enclosed in Annexure E vide submission dtd.20.03.2012. Though deduction is not allowed during Asst. Year 2003-04. However, as per direction of Hon'ble Tribunal the pro-rata allowance of DDB comes to ₹ 22,75,11,624 as per working enclosed marked as Annexure B. Therefore the revised loss of the corporate division will be ₹ 44,35,44,183 as per the following calculation. Particulars Amount(Rs.) Corporate loss as per Return of Income (46,31,65,493) Add: Disallowance in the assessment order 24,71,32,934 Less: Relief granted by ITAT - DDEs . (as per prorata calculation) (22,75,11,624) Revised loss 44,35,44,183/- Without prejudice to the above, it is humbly submitted that no part of borrowing is invested in the Wind Farm Unit as seen from the Profit and Loss Account and Balance Sheet corresponding to Asst. Years 2003-04 and 2002-03 .The statement of depreciation allowable u/s.32 of I.T. Act shows that there is no ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 44.35crores representing DDB has any relationship with the activities of Moraiya Division. The assessee has pointed out that its profit for the last two years was ₹ 2791.97 lakhs and ₹ 1779.89 lakhs. Fixed assets of this division is of ₹ 3195.28 lakhs, as against fixed assets of the company at ₹ 2125.30 crores. The DDBs were issued by the company for raising capital. It is to be seen whether this capital was being used for the purpose of acquiring assets in this division. Assessee pointed out that fixed assets of this division is of ₹ 3195.28 lakhs (roughly ₹ 31 crores), as against aggregated fixed assets of the company at ₹ 2125.30 lakhs. Similarly profit for the last two years in the Moraiya Division was ₹ 27.91 crores and ₹ 17.79 crores. These two years profit would easily take care of any fund required at this undertaking. Thus, the ld.Revenue authorities have failed to point out deployment of any interest bearing funds for which interest expenditure has been incurred at the corporate division of this unit. In that case, it is not advisable to reduce eligible profit in the ratio of turnover. We allow this ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld.counsel for the assessee contended that this matter has been referred to larger Bench of the Hon'ble Supreme Court and the issue is pending. He prayed that this issue be set aside to the AO and to be adjudicated afresh after decision of Hon'ble Supreme Court. The ld.DR on the other hand is unable to controvert his proposition. 64. We find that in Tax Appeal No.423 of 2007 Hon'ble High Court has also taken cognizance of this fact by recording the following finding in the order: "6. Similar issue as decided in Tax Appeal No.763 of 2009 is before the Hon'ble Apex Court which is pending for adjudication. Accordingly, issue No.(B) raised in this appeal is presently answered in favour of the assessee in view of decision of this Court in Tax Appeal No.763 of 2009 subject to the final outcome of the aforesaid appeal pending before the Hon'ble Apex Court which shall be binding to the assessee and the AO will give effect accordingly." 65. Taking into consideration this aspect, we remit this issue to the file of the AO for re-adjudication in accordance with law. 66. Ground No.5: It reads as under: "5. In law and in facts and circumstances of the Appellant company's case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealized by the assessee and on account of exchange fluctuation the assessee received more sale proceeds, then the total amount will qualify for grant of deduction under section 80HHC. However, the ld.CIT(A) has observed that the assessee has taken various foreign currency loans and on repayment of which exchange gain was there. These are not related to export activities of the assessee, hence, the ld.CIT(A) has rightly disallowed the claim of the assessee. 70. With regard to profit on sale of asset is concerned, the ld.counsel for the assessee contended that the assessee itself has not included this amount in the eligible profit for grant of deduction under section 80HHC. We remit this issue to the file of the AO for verification and re-adjudication. If the assessee itself has excluded this amount, then it should not be again excluded otherwise that will be double exclusion. Similarly, dividend income has not been included by the assessee. The ld.AO shall verify this aspect also, and if it is found that the dividend income has not been included by the assessee in the eligible profit, then it should not be excluded again. 71. As far as misc. income is concerned, the ld.CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frozen sea-food. On account of some mishaps, due to electricity failure, fishes got damaged/decayed in transit and the assessee received claim. This claim would be construed as derived from export activities. On the other hand, a claim has been received by an assessee on account of some damage to the plant & machinery, then that would not qualify for consideration for grant of deduction under section 80HHC. Neither the AO, nor the ld.CIT(A) has determined nature of insurance claim in the impugned order. Therefore, we deem it appropriate to set aside this limited issue to the file of AO. The ld.AO first determine the nature of insurance claim in the light of the above discussion, and then decide its inclusion or exclusion from eligible profit for grant of deduction under section 80HHC. As far as other items are concerned, we do not find any error in the order of the ld.CIT(A). This ground of appeal is partly allowed. 73. Ground No.6: The issue involved in this appeal is whether depreciation on intangible assets after merger is to be allowed on tax written down value of ₹ 2,49,07,23,831/- or book WDV value of ₹ 4,29,16,89,375/-. The ld.representative have submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the written down value of the transferred asset. The omission of these words "as appearing in the books of account" with effect from 1-4-2004, in our humble opinion, is curative and thus retroactive. Hence, we uphold the findings of the demerged company shall constitute the written down value of the block of assets of the resulting company." 10.8 The above discussion makes it very clear that the amendment made by Finance Act, 2003, in the explanation 2B to section 43(6) of the IT.Act is curative in nature and thus the same is retroactive. Taking into account the provisions of section 2(19AA), 49(2C), 49(2D), 72A and explanation 2A & 2B of section 43(6), the Hon'ble ITAT had held that the Tax written down value of the transferred assets of the demerged company shall constitute the written down value of the block of assets of the resulting company. This case pertains to A.Y.2002-03 and is very relevant for the case in hand as the assessment year involved is A.Y.2003-04. Taking entirety of facts in view and respectfully following the ratio of Godrej Industries Ltd. (supra), I hold that the depreciation on the transferred assets should be allowed on the tax WDV of these assets ..... X X X X Extracts X X X X X X X X Extracts X X X X
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