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TMI Blog2019 (2) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... hat these incomes from sale of scrap was derived from the industrial undertaking on which deduction u/s. 80IC was claimed, as is contemplated and required under Section 80IC. Similar is for the other incomes viz. discount from supplies, excess provision written back, credit balances written back and miscellaneous income, we are of the view that the assessee has to show that these incomes from discount from supplies , excess provision written back, credit balances written back and miscellaneous income have direct nexus and were derived from the industrial undertaking on which deduction u/s. 80IC was claimed by the assessee to get benefit of deduction u/s 80IC. Hence for verification purposes, we are restoring the matter back to the file of the AO wherein the assessee will be required to prove through cogent evidences that these incomes from discount from supplies, excess provision written back, credit balances written back and miscellaneous income were derived from the industrial undertaking on which deduction u/s. 80IC was claimed, as is contemplated and required under the provisions of Section 80IC of the Act. Ad-hoc disallowance of 2% of total Miscellaneous Expenditure booked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- Being aggrieved by the order passed under section 250 of the Income tax Act, 1961 ('Act') by the learned Commissioner of Income tax (Appeals)-10, Mumbai (hereinafter referred to as the CIT(A) ), your appellant submits the following grounds of appeal for your sympathetic consideration: 1. The learned C1T(A) erred in holding that income of INR 45,44,428/- being Sr No Item of Other Income Amount 1 Interest 17,136 2 Rent 4,17,732 3 Discount from supplies 3,77,960 4 DEPB income 4,76,975 5 Excess Provision written back 2,45,543 6 Credit balances written back 4,48,529 7 Miscellaneous income 14,390 8 Sale of scrap 25,46,572 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245543 6. Credit balances written back 448529 7. Miscellaneous income 14390 8. Sale of scrap 2546572 Total 45,44,428 From the working of deduction u/s 80IC of the 1961 Act furnished by the assessee, the AO had observed that these items of income had been apportioned from head office (from the non 80IC unit) in the profits of the three units for the purpose of claiming deductions u/s. 80IC , even though these items of income have no direct nexus with nor are they derived from the business operation of the industrial undertaking on which the deductions u/s 80IC have been claimed. The AO relying upon the decision of Hon ble Supreme Court in the case of CIT v. Sterling Foods (237 ITR 579) , Pandian Chemicals Ltd., v. CIT (129 Taxman 539) and also decision of Hon ble Supreme Court in the case of Liberty India v. CIT reported in (2009) 317 ITR 218(SC), disallowed the claim of the assessee for deduction u/s. 80IC of the 1961 Act. The AO also relied upon decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was prejudiced with double addition on this count which was corrected by Ld. CIT(A) by issuing appropriate directions to AO , vide appellate order dated 19.01.2017 passed by Ld. CIT(A). 7. Aggrieved with the appellate order dated 19.01.2017 passed by learned CIT(A) dismissing assessee s appeal on both the issues, the assessee has filed an appeal before the tribunal. On the first issue , the Ld. Counsel for the assessee submitted that so far as non allowability of deduction u/s. 80IC is concerned , the assessee is admitting and conceding that following income shall not be considered for deduction u/s. 80IC and the below mentioned incomes included in Other Incomes are to be excluded while computing deduction u/s 80IC and the issue has to be adjudicated against the assessee. a. Interest Income ₹ 17,136/- b. Rent Income ₹ 4,17,732/- c. DEPB Income ₹ 4,76,975/- It was submitted that tribunal in assessee s own case for AY 2011-12 in ITA no.4550/Mum/2016 vide orders dated 10.07.2018 has decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as ground no. 3 and 4 are concerned these grounds are not pressed by the assessee and prayers is made to dismiss these two grounds. It was submitted that ground number 5 is general in nature and prayer was made to dismiss the same. 8. The Ld. DR on the other hand relied upon the order of the Ld. CIT(A). So far as ground no. 2 is concerned it was prayed by learned DR that this issue can be set aside to the file of the AO. 9. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is manufacture and seller of Ride Control Products i.e. shock absorbers, struts, front forks and components thereof . The assessee is multiple location company having its units at Dewas (M.P.), Pune, Nasik, Parwanoo, Hosur and Khandsa. The assessee had claimed deduction u/s. 80IC to the tune of ₹ 11,03,71,511/- . From the details furnished by the assessee during the course of assessment proceedings in respect of Parwanoo unit , the AO observed that the assessee has included following items of the income under the head Other Sources for the purpose of computing the profit of the undertakings , as detailed hereunde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes with the income derived from the undertaking entitled for deduction u/s 80IC of the 1961 Act. The assessee has admitted and conceded before us that following income s included in the aforesaid Other Incomes are to be excluded while computing deduction u/s 80IC of the 1961 Act and the issue so far as the following incomes are concerned is to be adjudicated against the assessee, namely as under: a. Interest Income ₹ 17,136/- b. Rent Income ₹ 4,17,732/- c. DEPB Income ₹ 4,76,975/- The tribunal in assessee s own case for AY 2011-12 in ITA no.4550/Mum/2016 vide orders dated 10.07.2018 has decided the issue of considering interest income and rental income while allowing deduction u/s 80IC against the assessee , by following the decision of ITAT for AY 2010-11 in assessee s own. Further Hon ble Supreme Court in the case of Liberty India(supra) has held that the DEPB income cannot be considered for allowing deduction u/s 80IC of the 1961 Act. Thus, Respectfully following the aforesaid decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the details of sale of scrap and its nature to bring a parallel with the decision relied on by the ld. AR. Further, the decisions relied on by the ld. AR are not binding as they are not of jurisdictional court. In view of the above, I hold that the deletion of other income of ₹ 45,44,428/- from the working of 80-IC deduction is in order. The Assessee has contended that these are income which are derived from the undertaking on which deduction u/s. 80IC was claimed and there is a direct nexus of these incomes with the undertaking entitled for deduction u/s 80IC of the 1961 Act but however the AO and learned CIT(A) based on material on record has recorded concurrent finding contrary to the claim of the assessee that the assessee has not been able to furnish details/evidences to prove direct nexus of these income with the income of the undertaking on which deduction u/s 80IC was claimed and their concurrent finding is not yet demolished by the assessee. The assessee has filed certain details of sale of scrap, discount from suppliers , excess provision written back , credit balance written back and miscellaneous income before us which required verification by the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 in Gabriel India Limited v.DCIT(supra) to support its contentions. The ground no. 1 is partly allowed for statistical purposes. We order accordingly. 10. The second issue relates to the ad-hoc disallowance of 2% of total Miscellaneous Expenditure of ₹ 3.56 crores booked by the assessee under the head Miscellaneous Expenses in its books of accounts . We have observed that these payments are in the nature of repairs to machines, shifting charges of machines, CST paid, labour charges paid, welding/fabricating charges, software AMC, godown rent, R D block consultation charges, drawing payments, soap oil charges, lunch expenses, purchases of fruits/vegetables/groceries/ flower etc., guest house expenses, KEB softwares, amounts written off etc., deposit balance written off , taxes paid and so on. The AO held that considering the nature of expenses , nexus of these expenses with business expediency and its allowability with reference to the provisions of the 1961 Act is not verifiable. The AO also held that it is not known whether income-tax deducted at source (TDS) provisions were complied with or not. The AO made ad-hoc disallowance of 2% of these expenses on the grounds th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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