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TMI Blog2012 (10) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The learned A.O. erred in excluding ₹ 2,67,299/- as trading profit for computing deduction u/s 80IB of I.T. Act 1961. 4. The learned CIT(A) erred in directing to exclude 10.05% of ₹ 1,60,91,184/- as trading profit at Para- 10.5 of the appellate order for allowing deduction u/s 80IB of I.T. Act 1961.. 5. The learned A.O. erred in not allowing depreciation and expenses of Thapoda Unit at ₹ 19,76,740/- as claimed in Profit Loss Account.. 6. The learned CIT (A) erred in sustaining part addition out of total addition made by A.O. at ₹ 1,16,757/- out of claim of depreciation. 7. The learned CIT(A) ought to have deleted addition made by AO. at ₹ 3,86,072/- out of sale commission expenses claimed by assessee and also erred in not admitting submissions and documents filed in appellate proceedings. 8. The learned A.O. erred in holding that surplus arising on sale of shares at ₹ 15,15,246/- is assessable as business income as against claimed by assessee to be assessed under the head capital gains. 3. In Ground No. 1 assessee has challenged action of A.O. in not reducing the interest paid from interest received for the purpose of exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purpose of computing deduction u/s 80HHC of I.T. Act 1961. The ratio laid down by aforesaid two decisions squarely supports the submission of the assessee. Respectfully following the same we hereby direct to reduce interest paid at ₹ 2,86,956/- from interest received for computing deduction u/s 80IB of I.T. Act 1961. Ground of appeal of assessee is allowed. 7. In Ground No. 2 assessee has objected for non grant of deduction u/s 80IB of I.T. Act 1961 in respect to amount written back at ₹ 59,376/- shown and assessed as income at the hands of assessee. The aforesaid income is assessed u/s 41(1) of I.T. Act 1961. The A.O. as well as CIT has held that aforesaid sum is not income derived from industrial undertaking and not eligible for deduction u/s 80IB of I.T. Act 1961. It is submitted that income has been assessed at the hands of assessee u/s 41(1) of I.T. Act 1961. The income having been assessed u/s 41(1) of I.T. Act 1961 it is income of industrial undertaking and can not be excluded for computing deduction u/s 80IB of I.T. Act 1961. 8. The assessee placed reliance on the decision of ITAT Hyderabad Bench, in the case of Amar Raja Batteries Ltd. vs ACIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute in the case of assessee that surgical kit is an article or thing manufactured and produced by assessee and assessee is eligible for deduction u/s 80IB of I.T. Act 1961. A.O. has held that certain items purchased like goggles, thread, soap etc. are assembled in kit but no process is performed on same. A.O. held that proportionate income arising on same is liable to excluded for grant of deduction u/s 80IB of I.T. Act 1961. To make the surgical kit complete and functionally acceptable to end user the appellant had to procure certain items which are of smaller value. Such goods are also put through process of sterilization and packing them to make fit to be used as surgical kit. Without such items surgical kit would not meet the purpose for which it is manufactured. It is submitted that prior to Asstt. Year 2001-02 no such disallowance was made by bifurcating the cost of products used for manufacture of kit. In view of above in subsequent years there is no rationale to dissect the kit and hold partly as trading. The sale by assessee is entire surgical kit. The assessee does not sell any individual product. Thus there is no justification for bifurcation as made by A.O. t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of deduction u/s 80IB of I.T. Act 1961of the assessee. The A.O. is not justified in reducing the claim of assessee by holding that ₹ 2,67,299/- is trading profit of the assessee. Similarly the direction of CIT(A) to exclude 10.05% of ₹ 1,60,91,184/- i.e. ₹ 16,17,163/- for the purpose of grant of deduction u/s 80IB of I.T. Act 1961 is also held to be not justified. The grounds of appeal of assessee are accepted and are allowed. 12. In Ground No. 5 assessee has challenged the disallowance of depreciation of Thapoda Unit and administrative expenses of ₹ 19,76,740/-. The A.O. while computing the income of assessee as at page 9 10 of the assessment order determined income in respect to Thapoda Unit. The A.O. has taken figure to compute income as appearing in profit loss account at page 23 of the paper book. The A.O. however while granting deduction on account of expenses has observed that same are estimated at ₹ 2,00,000/- as against 21,76,740/- shown in audited profit loss account. The perusal of assessment order reveals that there is no adverse observation with regard to any of the expenses shown in audited financial statement submitted along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made by A.O. is justified as demonstrated hereinabove. The interest expenses, depreciation, employees expenses, administrative expenses and selling expenses are in the nature of allowable business expenses. The addition made by A.O. at ₹ 19,76,740/- is held to be unjustified and is therefore directed to be deleted. In the case of assessee relief of ₹ 2,00,000/- has already been granted in order of CIT(A)-II at para 6.2. Thus A.O. is directed to grant further relief of ₹ 17,76,740/-. The ground of appeal is disposed off as per above direction. 15. In Ground No. 6 assessee has challenged non-grant of depreciation in respect to certain additions to assets as detailed in assessment order at para 3 4. It was explained that complete details are submitted before A.O. and addition to assets is duly recorded in regular books of account. The Auditor in Form 3CD has not made adverse observation about addition to assets. Certain bills were in the form of office vouchers. The assets as audited in financial statement are actually used for the purpose of business activities. It is submitted that there was no justification to disallow depreciation. The CIT (DR) placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vati S. Shah vs. CIT . It is submitted that payment to Dinesh has been made during the year and no sum is payable as on 31/3/2006. TDS is paid on 26/12/2006 in respect to commission paid to Dinesh. In view of decision of Special Bench of ITAT in the case of Merilyn Shipping Transports in ITA No.477/Viz/2008 vide order dated 29/3/2012 no disallowance can be made for payment made to Dinesh u/s 40(a)(ia) of I.T. Act, 1961. 18. We have considered the submissions and details of commission and evidence submitted before CIT(A)-II and copy of which is placed in paper book to demonstrate the genuineness of payment. The evidence submitted indicates nature of service rendered. The payment made to various parties is through proper banking channel and appropriate TDS has been made in respect to various payments made. In respect to payment made to Shri Dinesh TDS has been deposited on 26/12/2006. The ledger account of such party which is placed in paper book at page 75 indicates that no amount is remaining as payable as at the close of accounting year. In view of decision of Spl. Bench, ITAT in the case of Merilyn Shipping Transport in ITA No. 477/Viz/2008 vide order dated 29/03/2012 no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court vide judgement dated 28/10/2010 in ITA No.67 of 2009, (iii) ITA No.961/Mum/2010 in the case of Nagindas P Sheth (HUF) vs. ACIT, (iv) ITA No.6429/Mum/2009 in the case of ACIT vs. Naishadh V. Vachharajani, 21. We have carefully considered the rival submissions and perused the material on record along with the order of the tax authorities below. We have also gone through the case law as has been cited before us. We find that in the case of CIT (Central), Calcutta vs. Associated Industrial Development Company (P) Ltd. (82 ITR 586), the Hon ble Supreme Court has held as under: Whether a particular holding of shares is by way of investment or forms part of the stock-in-trade is a matter which is within the knowledge of the assessee who holds the shares and he should, in normal circumstances, be in a position to produce evidence from his records as to whether he has maintained any distinction between those shares which are his stock-in-trade and those which are held by way of investment. 22. We noted that in the case of CIT vs. V.A. Trivedi 172 ITR 95 (Bom.) Hon ble Jurisdiction High Court has clearly laid down under para 12 of the order that the onus of establishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon ble Jurisdictional High Court and SLP against that decision has been dismissed by the Supreme Court. The above decisions support the submission of assessee. 24. We have considered the submissions made before us and find that assessee has made investment in shares out of own funds and no borrowed money is utilized for investment in shares. The investment is reflected in balance sheet as investment and are not shown as stock in trade. The ratio laid down by Bombay High Court in the case of Gopal Purohit fully supports the submissions of assessee. Respectfully following the same we direct the A.O. to assess surplus arising on sale of shares as capital gain and not business income. 25. In the result, the appeal filed by the assessee is partly allowed. 26. In appeal filed by Revenue has challenged direction of CIT(A)-II to allow deduction u/s 80IB of I.T. Act 1961 in respect to business income of Thapoda Unit as activity at Amravati manufacturing facilities. The Learned CIT(DR) has submitted that it is for assessee to show that income earned by assessee is eligible for deduction u/s 80IB of I.T. Act 1961. The assessee has not been able to show that assessee is eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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