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TMI Blog2019 (2) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... the file of the AO wherein the assessee will be required to prove through cogent evidences that 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 Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Income-Tax 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 Total 45,44,428 are not eligible for deduction u/s 80IC of the Act on the ground that these incomes are not derived from the eligible undertaking without assigning any reasons for coming to this conclusion. 2. The learned CIT(A) erred in confirming the disallowance of miscellaneous expenses amounting to INR 7,13,304/- being 2% of the total miscellaneous expense of INR 3,56,65,622/- on the ground that veracity of such e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decision in the case of CIT v. Menon Impex Private Ltd., (259 ITR 403) (Mad) to deny the assessee deduction u/s. 80IC with respect to aforesaid items of 'Other Income' of ₹ 45,44,428/- claimed by the assessee by holding that these income were not derived from the industrial undertaking as these income were not having direct nexus with the business operations of the undertaking or were apportioned from head office to the 80IC units, vide assessment order dated 20.03.2015 passed by the AO u/s. 143(3) of the Act. 5. Miscellaneous Expenses of ₹ 3,56,65,622/-:- On going through the P&L Account during the course of assessment proceedings u/s 143(3) of the 1961 Act, the AO observed that the assessee has debited an amount of ₹ 3,56,65,622/- on account of Miscellaneous Expenses. The assessee was asked to furnish the details of these Miscellaneous Expenses by the AO and the assessee furnished chart showing details of payment made and debited to the Miscellaneous Expenses account. The AO observed that these payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue of interest income and rental income while allowing deduction u/s 80IC against the assessee , by following the decision of ITAT for AY 2010-11. Further , it was submitted that in view of decision of Hon'ble Supreme Court in the case of Liberty India(supra), the DEPB income cannot be considered for allowing deduction u/s 80IC of the 1961 Act. So far as other income apart from Rental Income, Interest Income and DEPB income , included in 'Other Income' viz. Discounts from Supplies, Excess Provision written back, credit balance written back, miscellaneous income and sale of scrap is concerned , it was claimed that the said incomes are to be considered for computing deduction u/s 80IC of the 1961 Act and the issue is to be adjudicated in favour of the assessee. The assessee had relied upon decision of tribunal in assessee's own case in ITA no. 4550/Mum/2016 dated 10.07.2018 for AY 2011-12 for allowability of income from sale of scrap. The assessee relied upon following judgement to support its contentions (a) Quadrant EPP Surlon Uttranchal Private Ltd. v. ITO [2017] 88 taxman.com 261 (Delhi- Trib.) and DCIT v. Ansysco [2017] 184 TTJ 1 (Chandigarh-Trib.)(UO). So far as second i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Items of Other Income Amount ' (Rs.) 1. Interest 17136 2. Rent 417732 3. Discount from supplies 377960 4. DEPB Income 476975 5. Excess provision written back 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 as per the AO 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 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 decision in the case of CIT v. Menon Impe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "4.2 From the working of the deduction u/s. 80IC furnished by the assessee, it is seen that the assessee has not reduced any other items of income from other sources from the profits of the Undertakings for computation of deduction u/s. 80IC. More especially, the assessee has erroneously included the above-said units and income apportioned from head office (from the non-80IC Units) in the profits of the three units for the purpose of claiming deduction u/s. 80IC, even though these items of income have no direct nexus with nor are they derived from the business operations of the industrial undertakings on which the deductions have been claimed." The learned CIT(A) has also recorded finding of fact contrary to the claim of the assessee that no direct nexus of these income with the undertaking on which deduction u/s 80IC is claimed is proved by the assessee, by holding as under in para 4.2 of the appellate order dated 19.01.2017 passed by learned CIT(A): " 4.2 I have carefully considered the facts of the case and submissions made by the ld. AR. I have also gone through the decisions relied on by the AO and the ld. AR. As has been rightly pointed out by the AO any income which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 80IC . This is a factual matter and requires verification of fact and the facts may differ from year to year. 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 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 of the Act. 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, credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se expenses may not be verifiable . The contention of the authorities below that TDS might not have been deducted on some of these expenses also lacks merit as the assessee has brought on record tax audit report to prove that there was no default in compliance of TDS. The complete details of these expenses were furnished by the assessee before the authorities below. In our considered view, disallowance of these miscellaneous expenses on adhoc basis @ 2% of miscellaneous expenses was made by authorities below merely on conjectures and surmises without bring any incriminating material on record and such disallowances on adhoc basis in the manner done by the authorities below keeping in view facts and material on record before the authorities below is not permissible. Our view is fortified by the following decisions of tribunal relied upon by the assessee, M/s. PNC Construction Co. Ltd., v. DCIT, ITA no. 145/Agr/2012 dated 15.02.2003, ACIT v. M/s. Perfect Circle Victor Ltd., ITA no. 2067/Mum/2007 vide order dated 30.06.2011 and decision of Mumbai-tribunal in the case of Hindustan Unilever Ltd. v. ITO, ITA no. 1144/Mum/2011 vide order dated 09.11.2016. Thus, the assessee succeeds on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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