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TMI Blog2018 (8) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... ve received - the assessee itself has treated the Sales Tax incentive received by it as revenue in nature by including it in the sales as reflected in the books of account and audited financial statements. It is only at the second appellate stage before the Tribunal the assessee has claimed the Sales Tax incentives received by it as capital in nature by raising the additional grounds. - Held that:- the additional grounds raised by the assessee have to be admitted. Accordingly, we do so. However, it is a fact on record, the issues raised in the additional grounds were never raised by the assessee in course of proceedings before the Departmental Authorities. - Matter remanded back to the AO for reconsideration of the issue. Nature of expenses incurred for issue of foreign currency bonds - assessee has claimed deduction under section 35D - Held that:- It is a fact on record that the assessee is claiming deduction under section 35D of the Act @ 1/5th of the total expenditure incurred. Therefore, when a part of the expenditure has been accepted by the Department in assessment year 2001–02, it cannot be disallowed in the impugned assessment year. - ITA no.7092/Mum./2005, ITA no.72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the consistent view of the Tribunal in assessee s own case the expenditure should be allowed. 7. The learned Departmental Representative, though, agreed that the issue has been decided in favour of the assessee in the earlier assessment years, however, he relied upon the observations of the learned Commissioner (Appeals). 8. We have considered rival submissions and perused materials on record. As could be seen from the material on record, this is a recurring dispute between the assessee and the Department from past several assessment years and the Tribunal has decided this issue in favour of the assessee in all the preceding assessment years. In the latest order of the Tribunal in ITA no.3360/Mum./2005, dated 18th January 2017, which is for the assessment year 2001 02, the Tribunal following its earlier order, has allowed the expenditure observing as under: 2. Ground No.1 raised in respect of disallowance of Pooja/function of ₹ 26,17,767/-. 3. After hearing rival contentions and perusing the records, we find that an identical issue has been raised by the assessee and decided in ITA No.2486/Mum/2005(AY-1999-2000) vide order dated 30.6.2016 by the Co-ordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the co-ordinate Bench of the Tribunal we are inclined to decide this ground in favour of the assessee. 9. Therefore, respectfully following the consistent view of the Tribunal with regard to the disputed issue in assessee s own case for the earlier assessment year, as referred to above, we allow the expenditure claimed. This ground is allowed. 10. In ground no.2, the assessee has challenged the disallowance of consultancy charges of ₹ 4.50 lakh. 11. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction for an amount of ₹ 4.50 lakh towards consultancy charges paid to one S.K. Sekhsaria, for advise on civil construction called for the necessary details and after examining them found that in the preceding assessment year, the Assessing Officer has disallowed similar claim made by the assessee and held the expenditure incurred as not allowable. Following the same the Assessing Officer disallowed assessee s claim of expenditure. 12. When the issue came in appeal before the learned Commissioner (Appeals), he also sustained the disallowance following the view taken by his predecessor in offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Co-ordinate Bench of the Tribunal in favour of the assessee vide para 6 of the order following the earlier years and was followed in the subsequent years. The relevant portion of the order, for the sake of convenience, is reproduced below : 6. Ground No.2 and 3, for our consideration are disallowance of consultancy charges of ₹ 11,10,000/- and service charges of ₹ 1,66,160/-,. The Ld AR of the assessee argued that similar disallowance in respect of consultancy fee was made against the assessee in AY-1990-91. And disallowances of service charges were made in AY 1992-93. However, on appeal the FAA/ CIT(A) allowed the same in favour of assessee , the Revenue filed appeal before ITAT and both the grounds were allowed in favour of assessee. We have seen that in AY-1990-91,the Revenue filed appeal before ITAT, Mumbai vide ITA No. 2291/M/1994, and while dealing with the similar Ground related with consultancy fee the Coordinate Bench passed the following order: 14.6 we have considered the rival submissions in the light of the facts and findings as stated above, the legal provisions and the judicial pronouncements on the subject, we are inclined to uphold the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised in ground no.2. Following the decision of the Tribunal, in assessment year 2001 02, as referred to above, we allow the claim of the assessee. This ground is allowed. 19. In ground no.4, assessee has challenged disallowance of employee stock option (ESOP) expenses amounting to ₹ 37,518. 20. In course of the assessment proceedings, while examining the aforesaid claim made by the assessee the Assessing Officer held that the assessee would be entitled for deduction in the year in which the employees actually exercised the option on the basis of share price at the relevant time. Following the view taken by him in assessment year 2000 01 and 2001 02, he allowed an amount of ₹ 1,553, thereby disallowing the amount of ₹ 35,965. 21. The learned Commissioner (Appeals) also sustained the disallowance made by the Assessing Officer. 22. The learned Authorised Representative submitted, the Tribunal while deciding the issue in assessment year 2000 01 and 2001 02 has allowed assessee s claim. 23. The learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals). 24. We have considered rival submissions and perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r following similar disallowance made by him in the preceding assessment years, disallowed an amount of ₹ 20,35,717 being 2% of the dividend income. 28. When the dispute came in appeal before the first appellate authority, after considering the submissions of the assessee he restricted the disallowance to ₹ 2,00,000. 29. The learned Authorised Representative submitted, no expenditure was incurred for earning dividend income. However, he submitted, assessee is willing to accept the disallowance made by the learned Commissioner (Appeals). 30. The learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals). 31. We have considered rival submissions and perused materials on record. As could be seen from the facts on record, the Assessing Officer has made disallowance under section 14A of the Act on ad hoc basis @ 2% of the dividend income earned. However, while considering the issue relating to similar disallowance made in assessee s own case in assessment year 2001 02, the Tribunal has restricted the disallowance to ₹ 50,000. However, considering the quantum of dividend income earned in the impugned assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO in assessing interest income of ₹ 9,25,71,358/-. And Truck hire charges of ₹ 75,02,298/- (net) as income under the head income from other sources That on the facts and in the circumstances of the case, and without prejudice to ground no.7(a) taken hereinabove, having held that the said income were to be assessed under the head income from other sources , the ld. CIT(A) ought to have allowed the actual expenditure incurred to earn the aforesaid income 20. The ld.AR at the time of hearing of this issue brought to our notice that an identical issue had been raised by the assessee in ITA No.2486/Mum/2005(AY-1999-2000) and the same has been decided by the Co-ordinate Bench of the Tribunal in favour of the assessee vide order dated 30.6.2016 following the earlier year s and was also followed in the subsequent years. The DR did not controvert the arguments of the ld AR. The Tribunal while deciding the issue in favour of the assessee has observed and held as under :\\ 9. Ground No.6 for our consideration is Interest Income, Truck Hire Charges and Incentive on application money under the head Income from other sources and in alternative assessee rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision in the cases of Plast Ltd Vs CIT (237 ITR 454) (SC). CIT Vs Tirupati Woollen Mills Ltd. (193 ITR 252) (Cal) and Lakshmi Silk Mills Ltd 20 ITR 451(SC). 18. Ld. Counsel submitted that instead of considering ₹ 2,000/- on adhoc basis as expenditure incurred to earn the said income, the actual expenditure incurred to earn the aforesaid income is to be excluded. 19. The Ld. Departmental Representative relied on the order of the Ld. CIT(A). 20. We have heard both the parties. In order to verify the nexus between the income from earning from moneys deployed out of unutilized funds and interest on borrowed funds, the AO has to verify when the moneys ere borrowed and even if the interest income and income from bill discounting are in the nature of other income and taken under the head Income from Other Sources the AO is directed to determine the nexus for the purpose of arriving at the net income. Secondly, the AO isdirected to take the actual expenditure incurred for earning, the aforesaid income and exclude the same and tax the net income only. Keeping in view the above finding of co-ordinate bench on similar issues, we restore this ground of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in confirming the disallowance of the proportionate amount of premium on leasehold land of ₹ 29,47,824/- written off during the year as revenue expenditure by treating the same as capital expenditure; (b) That on the facts and in the circumstances of the case, the ld. CIT(A) failed to appreciate the fact that the premium on lease hold land, essentially bears the character of rent paid in advance with does not entails acquisition any assets. 23. The ld. AR fairly conceded that similar issue had come up before the Tribunal in No.2486/Mum/2005(supra) and the same has been decided by the Co-ordinate Bench of the Tribunal against the assessee. 24. We find from the decision of the Tribunal an identical issue had come up before this Tribunal and the Tribunal vide para 8 of the Tribunal order passed in ITA No.2486/M/2005 has observed and held as under : 8. Ground No.5 for our consideration is disallowance of proportionate amount of premium on lease hold rent. AR of the assessee argued that assessee acquired various land on lease and had paid less premium in advance of required such land on lease, the total premium paid is written of over the period of lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorised Representative submitted, unutilized MODVAT credit is nothing but Excise Duty paid on in puts to be utilized for the dispatches of the finished goods. He submitted, the said credit not being related to the closing stock of raw materials should not be added to the closing stock. He submitted, identical dispute arising in assessee s own case in the preceding assessment years have been decided in favour of the assessee. 49. The learned Departmental Representative relied upon the order of the Assessing Officer and the learned Commissioner (Appeals). 50. We have considered rival submissions and perused materials on record. It is evident, the issue in dispute is continuing between the parties from the preceding assessment years. While deciding the dispute relating to the identical addition made in assessment year 1999 2000, the Tribunal in ITA no.2486/Mum./2005, dated 30th May 2016, held that MODVAT credit of Excise Duty is not includible as unutilized MODVAT credit on the last day of the accounting year. Accordingly, the addition was deleted. The same view has been reiterated by the Co ordinate Bench while deciding assessee s appeals for assessment years 2000 01 and 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has been adjusted. The assessee has also claimed deduction u/s. 43B of excise duty payable on stock of finished goods as on 31.03.1999 of ₹ 1,32,58,505/-, details of which are available on page no. 37 45 of Paper Book, the AO while making the assessment concluded that in case of Melmould Corporation Vs. CIT (1993) 202 ITR 789 (Mum) held that unutilized MODVAT credit balance shall be added to the closing stock. The CIT(A) while dealing with this ground concluded the unutilized MODVAT credit at the end of year should be added to the income of assessee. However, corresponding adjustment in the opening stock should also be made. AR of the assessee argued that unutilized balance of MODVAT credit is nothing but excise duty paid on inputs to be utilized on future dispatch of finished goods. The said credit is not related to the closing stock of raw-material and should not be added to the closing stock and relied upon 14 DTR 206 Mum, Hawkins Cookers Ltd. vs. ITO, CIT vs. Godrej Boyce Mfg. Co. Ltd. (2008) 2 DTR 36 (Bom) , DCIT vs. Venus Wire Industries Ltd. (2006) 99 TTJ 561 (Mum) DCIT vs. M/s Axis Electrical Components (I) (P) Ltd. (2011-TIOL-351-ITAT, Mum) and argued that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inyl Product Ltd. v/s DCIT, [1993] 47 ITD 111 (Mum.).While deciding assessee s appeal, the learned Commissioner (Appeals) also upheld the decision of the Assessing Officer. 54. The learned Authorised Representative submitted, while deciding identical dispute in assessee s own case in assessment year 2001 02, the Tribunal has allowed assessee s claim. He also submitted, the issue is also covered in favour of the assessee by the decision of the Hon'ble Supreme Court in CIT v/s Bhari Information Technologies Systems Pvt. Ltd., [2011] 62 DTR 337 (SC). 55. The learned Departmental Representative relied upon the decision of the learned Commissioner (Appeals). 56. We have considered rival submissions and perused materials on record. Notably, while deciding identical issue in assessee s own case for assessment year 1999 2000, the Tribunal in ITA no.2486/Mum./ 2005, dated 30th June 2016, has allowed assessee s claim. The same view was again expressed by the Co ordinate Bench while deciding assessee s appeal in assessment year 2001 02, vide ITA no. 3360/Mum./2005, dated 18th January 2017. Relevant observation of the Tribunal in this regard is as under: 28. Ground No. 11(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in CIT vs. Bhari Information Technologies System (P) Ltd. (2011) 62 DTR 337(SC) wherein it was held that deduction u/s. 80HHE is to be worked out on the basis of adjusted book profit u/s. 115JA and not on the basis of profit computed under the regular provision of law is applicable the computation of profit and gain of business. We have considered the rival contention of the parties and noted that in ITAT No. 1859/Mum/2004, it was held: The seventh dispute is regarding not allowing the exclusion of profit from the Himachal Unit computed as per books while computing the book profit as per clause (v) to Explanation to section 115JA(2). The income from Himachal unit was exempt under section 80IA. The AO held that income as computed under the provisions of the Act and as reduced by brought forward losses was only to be deducted. CIT(A) upheld the view of the AO that the income computed under the provisions of Act has to be deducted but he directed not to deduct the brought forward losses. After hearing both the parties we find that this issue is covered in favour of the assessee by the decision of the Tribunal in case of Tushako Pump Ltd. (2 SOT 556) in which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 The ld.AR very fairly conceded across the bar that an identical issue had come up before this Tribunal in assessee s own case in ITA No.2486/Mum/2005(supra) and the coordinate bench has decided this issue against the assessee. 33. We find from the decision in the case of assessee in ITA No.2486/Mum/2005 (supra) vide para 13, the Tribunal has decided this issue against the assessee. Accordingly, we dismiss this ground of appeal. 62. Respectfully following the consistent view of the Co ordinate Bench in assessee s own case, we dismiss the ground raised by the assessee. 63. Ground no.12, as stated by the learned Authorised Representative, is corresponding to additional grounds no.1 and 2, raised by the assessee. The said additional grounds are reproduced herein below:- 1. That on the facts and n the circumstances of the case, sales tax incentives / subsidy of ₹ 50,37,88,520 availed during the year under consideration be treated as capital receipt and hence not taxable in computing total income under the normal provisions of the Act. 2. That on the facts and in the circumstances of the case, sales tax incentive / subsidy of ₹ 50,37,88,520 availed du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom.); vii) Ahmedabad Electricity Co. Ltd. v/s CIT, [1993] 199 ITR 351 (Bom.) viii) Maya Enterprises v/s ACIT, ITA no.507/Mum./2017, dated 28.02.2017. 65. As regards the merits of the issue, the learned Authorised Representative submitted, Sales Tax incentives have been granted by various State Governments for setting up industries in the backward areas keeping in view the economic development and industrialization of under developed regions. Thus, he submitted, the Sales Tax subsidy granted being not operational in nature has to be treated as capital in nature, hence, not taxable. In support of such contention, he relied upon a number of decisions. Further, to emphasize upon the fact that the Sales Tax incentive is capital in nature, the learned Authorised Representative sought to rely upon Sales Tax incentive schemes of various State Governments as well as eligibility certificates issued to the assessee for availing such incentives which were sought to be brought on record by way of additional evidence. 66. Vehemently opposing the admission of the additional grounds raised by the assessee at this stage, the learned Departmental Representative submitted, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has received Sales Tax incentive which forms part of the sales is evident from the audited financial statements of the assessee filed before the Assessing Officer. The only thing which requires to be decided is a purely legal issue as to whether the receipt is of revenue or capital nature keeping in view the relevant Sales Tax incentive schemes as well as the nature of incentive granted. Once such facts are examined from the relevant Sales Tax incentive schemes and for what purpose the Sales Tax incentive is to be utilized, then, the nature of such receipt can be decided by applying the principles laid down in the judicial precedents relied upon by the assessee. Article 265 of the Constitution of India mandates that no tax shall be levied and collected except by authority of law. It is also accepted legal position that all receipts are not in the nature of income. Under the provisions of Income Tax Act, 1961, receipts which are capital in nature are not taxable. Therefore, it needs to be examined in the touchstone of the judicial precedents relied upon by the assessee whether the Sales Tax incentive received are of capital or revenue nature. That being the case, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment having failed to satisfactorily explain such inordinate delay, we are inclined to dismiss the cross objection on the ground of delay. In any case of the matter, while deciding assessee s appeal in ITA no.7092/Mum./ 2005, herein before, we have decided to admit the additional grounds raised by the assessee for the reasons stated in the order. That being the case, the cross objection filed by the Department has otherwise become infructuous, hence, deserves to be dismissed. 70. In the result, cross objection is dismissed. ITA no.7227/Mum./2005 Revenue s Appeal A.Y. 2002 03 71. In ground no.1, the Revenue has challenged deletion of disallowance of community welfare expenses of ₹ 28,76,407. 72. The learned Counsels appearing for both the parties submitted before us that similar disallowance made by the Assessing Officer in the preceding assessment years were deleted by the learned Commissioner (Appeals) and the Tribunal also confirmed such deletion made by the learned Commissioner (Appeals). 73. Having considered rival submissions, we find that while deciding identical issue in assessee s own case for assessment year 1999 2000 in ITA no.2653/M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred for the community in the village surrounding the factory area, on which the assessee company is dependent for smooth functioning of its business. Being a cement manufacturing company, the assessee has to take necessary precautionary measures against risk of public resistance due to the polluting nature of the industry and the disturbance and dislocation which results in the surrounding habitation due to the assessee s business. Instead of facing the consequences of disturbance in the conduct of the business and resultant losses and expenses, the assessee in its own commercial wisdom has incurred the impugned expenses which are nothing but part and partial of its business expenses, there being a clear and undeniable nexus between incurring of expenses and smooth running of assessee s business. Further, as the plant of the company is situated in a remote area, it is quite natural that the company will provide basic facilities to the nearby village. The fact that many of the employees and indirect support people (ancillary services) came from the local village is to be taken note of. It was held by the Hon ble Supreme Court in the case of Sri Venkata Satyanarayan Rice Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g heard the parties, we find that while deciding Revenue s appeal for assessment year 2001 02 on identical issue vide ITA no.4374/Mum./2005, dated 18th January 2017, the Tribunal following its earlier decision has upheld deletion of such disallowance by the learned Commissioner (Appeals). The observation of the Tribunal in this regard is reproduced hereunder: 41. The ground no.2 is against the deletion of disallowance of temple expenses of ₹ 8,45,191/- and Pooja Expenses of ₹ 2 6,17,767/-. We have already decided the similar issue in assessee s case in ITA No.3360/Mum/2005 vide para 2 and 3 of this order. Therefore, the decision taken therein would be applied to this ground. Accordingly, the ground taken by the revenue stands dismissed. 78. There being no material difference in facts, respectfully following the aforesaid decision of the Co ordinate Bench, we dismiss the ground raised by the Revenue. 79. In ground no.3, the Revenue have challenged deletion of addition made of ₹ 19,62,893, on account of prior period expenses. 80. Brief facts are, during the assessment proceedings the Assessing Officer noticing that the assessee has claimed certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticing that the assessee has claimed deduction of an amount of ₹ 32,81,952 towards mines prospecting expenses called for necessary details. After examining the details filed by the assessee, he disallowed the expenditure on the reasoning that it is capital in nature. Being aggrieved, assessee preferred appeal before the first appellate authority. 87. The learned Commissioner (Appeals) having found that in the preceding assessment years similar disallowances made by the Assessing Officer was deleted by the Tribunal, followed the same and deleted the disallowance made by the Assessing Officer. 88. The learned Counsels appearing for both the parties agreed before us that the issue is covered by the decisions of the Tribunal in assessee s own case for preceding assessment years. 89. We have considered rival submissions and perused materials on record. As could be seen, this is a recurring dispute between the parties from earlier years. While deciding identical issue in assessee s own case for assessment year 2001 02 in ITA no.4374/Mum./2005, dated 18th January 2017, the Tribunal following its own order upheld the deletion of disallowance with the following observations: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer has not discussed the issue at all. The appeal of the revenue fails on this issue as well . In view of the above, quarry development expenses are treated as revenue expenditure and are allowed. The assessee succeeds on this ground . Hence, keeping in view the order of Co-ordinate Bench in assessee s own case and following the principle of consistency this ground of appeal raised by the Revenue is dismissed. 44. Respectfully following the decision of the Tribunal as mentioned above, we dismiss ground taken by the revenue. 90. Facts being identical, respectfully following the aforesaid decision of the Co ordinate Bench, we uphold the order of the learned Commissioner (Appeals). Ground raised is dismissed. 91. In ground no.5, the Revenue has challenged deletion of addition made of ₹ 3,90,55,937, on account of disallowance of foreign exchange loss. 92. The Assessing Officer, during the assessment proceedings, noticing that the assessee has claimed loss of ₹ 4,13,63,010, towards exchange rage fluctuation called for necessary details. After examining the details filed by the assessee, the Assessing Officer observed that similar claim made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accepting the loss claimed by the assessee. The Department should maintain consistency in its approach with regard to foreign exchange gain / loss. If the loss is treated as notional then the gain from foreign exchange fluctuation also has to be treated as notional. In fact, while deciding identical issue in assessee s own case for assessment year 2001 02, the Tribunal following its earlier order upheld deletion of disallowance with the following observations: 47. After hearing both the parties and on perusal of the order relied upon by the assessee, we find that the issue taken by the revenue is decided against the revenue vide para 18 of Tribunal decision passed in ITA No.2653/Mum/2005 (supra). For the sake of brevity, we reproduce para 18 of the said order as under : 18. Ground No.4 raised in the present appeal is deletion of disallowance of foreign exchange loss of ₹ 2,02,82,094/-. Ld. DR for Revenue argued that the ld. CIT(A) wrongly deleted the disallowance of foreign exchange loss and prayed that order of CIT(A) be reversed and that the order of AO be restored. Ld. AR of the assessee argued that foreign exchange fluctuation has been incurred for various t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon ble Gujarat High Court in the case of Gujarat Mineral Devp.Corp.(supra); which is affirmed by the Hon ble Supreme Court and reported in (2001) 249 ITR 787. We find that the Hon ble Gujarat High Court has decided the issue vide para 14 of the order as under : 14. Applying the test laid down by the Supreme Court in Empire Jute Co.'s case [1980] 124 ITR 1 to the facts before us, it is clear that even if securing electric supply for a period of seven years and longer, if the agreement to supply is not terminated by the Electricity Board, is a benefit of an enduring nature, if the advantage consisted in facilitating the assessee's trading operations and enabled the assessee to conduct its business more efficiently and more profitably, then, the expenditure would still be on revenue account and not on capital account. The peculiar feature in this case is that the amount was spent for securing electric supply for the Beneficiation Plant which was intended to enable the assessee-company to carry on its business more efficiently and more profitably. It was a business which was being previously carried on by the assessee-company, namely, of extracting fluorspar ore an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Gujarat Earthquake Relief. 105. The learned Counsels appearing of the parties agreed before us that the issue has been decided in favour of the assessee in the preceding assessment years. 106. We have considered rival submissions and perused materials on record. Notably, identical issue came up before the Tribunal in assessee s own case for assessment year 2001 02. The Co ordinate Bench while deciding the issue in ITA no.4374/Mum./2005, dated 18th January 2017, has upheld the deletion of disallowance. The observation of the Co ordinate Bench in this regard is reproduced below: 56. We have heard the rival contentions and perused the relevant material placed before us including the impugned order. The assessee has incurred expenses in providing relief to the victims of earthquake in Gujrat and claimed the same as revenue expenses on the ground that these expenses were incurred to meet the socio economic obligation towards the society in the hour of crisis.The ld FAA allowed the same by holding these expenses at par with community welfare expenses which has been allowed as admissible expenses in assessee s own case supra. Having considered the facts of the case and natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide which the Tribunal has decided this issue in favour of the assessee by rejecting the ground taken by the revenue. The relevant para is reproduced below for ready reference: 39. The ground no.6 is related with non-inclusion of sales tax and excise duty in the total turnover for the purpose of section 80HHC. Ld. DR for the revenue supported the order of AO and prayed for setting aside the order of ld.CIT(A). On the other hand, the ld. AR of the assessee argued that this ground of appeal is covered in his favour by the decision of Hon ble Apex Court in CIT V/s Lakshmi Machine Works (2007) 290 ITR 667. The Hon ble Apex Court held that sales tax and excise duty do not have any element of turnover . Excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are relatable to exports, the formula u/s 80HHC would become unworkable. Hence, excise duty and sales tax cannot form part of turnover for the purpose of computing deduct9on u/s 80HHC. Thus, following decision of Hon ble Apex Court, this ground of appeal raised by the revenue is dismissed 59. We find from the record and the decision relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 118. In ground no.11, the Revenue has challenged deletion of addition of ₹ 4,06,31,549, towards expenses incurred for issue of foreign currency bonds. 119. Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction under section 35D of the Act towards expenditure incurred on issue of foreign currency bond called for the necessary details and after examining them found that the assessee has claimed 1/5th of the total expenditure incurred on foreign currency convertible bond. Noticing that similar deduction claimed by the assessee in assessment year 2001 02 was disallowed, the Assessing Officer proceeded to make similar disallowance in the impugned assessment year as well. While doing so, the Assessing Officer also rejected assessee s claim that the expenditure is otherwise allowable under section 37(1) of the Act. Assessee challenged the aforesaid disallowance before the first appellate authority. 120. The learned Commissioner (Appeals) after considering the submissions of the assessee, though, accepted assessee s claim that the expenditure has been incurred for the purpose of extension of its business, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is dismissed. ITA no.765/Mum./2007 Assessee s Appeal A.Y. 2003 04 125. Ground no.1, is similar to ground no.1 of ITA no.7092/Mum./ 2005. Following our decision therein, we allow the ground raised by the assessee. 126. Grounds no.2 and 3, are similar to grounds no.2 and 3 of ITA no.7092/Mum./ 2005. Following our decision therein, we allow the grounds raised by the assessee. 127. In ground no.4, the assessee has sought deletion of addition made on account foreign exchange fluctuation gain. 128. At the time of hearing, the learned Authorised Representative fairly submitted that the assessee itself has offered the gain as income. He submitted, considering the fact that in the preceding assessment years foreign exchange fluctuation loss was disallowed by the Assessing Officer, the assessee has raised this ground. He submitted, if foreign exchange fluctuation loss is allowed to the assessee, then foreign exchange gain has to be treated as income. 129. The learned Departmental Representative submitted, in case foreign exchange loss is allowed to the assessee, foreign exchange gain should be taxed. 130. We have considered rival submissions and perused mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh financial crisis. The assessee submitted, it filed a winding up petition against PWSL for recovery of the balance amount and the Hon'ble High Court of P H appointed Official Liquidator which was communicated to the assessee on 14th November 2002. Therefore, the balance amount of ₹ 1 crore was written off in the books of account as bad debt. It was submitted by the assessee that either the deduction is to be allowed as bad debt under section 36(1)(vii) of the Act or as business loss under section 37(1) of the Act. The Assessing Officer did not find merit in the submissions of the assessee and was of the view that since the debenture was held as investment to earn interest, the loss suffered by the assessee due to non redemption of debenture cannot be treated as bad debt or business loss as it is in the nature of capital loss. 139. The learned Commissioner (Appeals) while deciding assessee s appeal on the issue, also upheld the decision of the Assessing Officer. 140. The learned Authorised Representative submitted that the assessee has invested surplus unutilized fund for its gainful utilization and such systematic and organized investing activity form an integral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer for fresh adjudication after due opportunity of being heard to the assessee. 143. In ground no.9, the assessee has challenged the disallowance of untilled MODVAT credit under section 145A of the Act. 144. This ground is similar to ground no.9 of ITA no.7092/Mum./2005. Following our decision therein, we allow assessee s claim. This ground is allowed. 145. In ground no.10, the assessee has challenged the decision of the Departmental Authorities in computing the deduction under section 80HHC of the Act after reducing the deduction clamed under section 80IB of the Act in respect of Gajambuja Unit. 146. Brief facts are, during the assessment proceedings, the Assessing Officer while examining assessee s claim of deduction under section 80HHC of the Act amounting to ₹ 6,09,53,889, found that the assessee has also included business profits of Gajambuja Unit while computing deduction under section 80HHC of the Act. The Assessing Officer being of the view that profits of Gajambuja Unit is entitled to deduction under section 80IB of the Act, it cannot be considered for the purpose of computing deduction under section 80HHC of the Act in view of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. It is evident, the only reasoning on which assessee s claim of deduction under section 80HHC of the Act has been curtailed is, the eligible profit of Gajambuja Unit on which deduction under section 80IB of the Act is allowable, cannot form part of the adjusted profit for computing deduction under section 80HHC of the Act. The Departmental Authorities came to the aforesaid conclusion taking re course to the provisions of section 80IA(9) of the Act. However, the Hon'ble Jurisdictional High Court while dealing with an identical issue in case of Associate Capsules Pvt. Ltd. (supra) have held that the provision of section 80IA(9) of the Act does not expressly or impliedly provide that the amount of profits allowed as deduction under section 80IA(1) of the Act should be reduced from the profits of business for the purpose of computing deduction under section 80HHC of the Act or computing deduction under any other provisions in heading C of Chapter VI A. The Hon'ble Jurisdictional High Court held that unless it is specifically provided by the statute, the profits of the business for the purpose of section 80HHC of the Act cannot be reduced by any amount save and except th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter VI A but affects the allowability of deduction computed under various provisions of heading C of Chapter VI A. In other words, the aggregate deduction under various provisions under heading C of Chapter VI A should not exceed 100% of the profits of business of the assessee. Therefore, we direct the Assessing Officer to compute deduction under section 80HHC of the Act by applying the ratio laid down by the Hon'ble Jurisdictional High Court in Associated Capsules Pvt. Ltd. (supra). This ground is allowed for statistical purposes. 151. In ground no.11, assessee has raised the issue of non inclusion of profit on sale of investment in computing book profit under section 115JB of the Act. 152. This ground is similar to ground no.11 of ITA no.7092/Mum./ 2005. Following our decision therein, we dismiss the ground raised by the assessee. 153. In ground no.12, assessee has challenged the non allowance of exclusion of deduction under section 80HHC of the Act for computing book profit under section 115JB of the Act. 154. This ground is similar to ground no.10 of ITA no.7092/Mum./ 2005. Following our decision therein, we allow the ground raised by the assessee. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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