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TMI Blog2018 (12) TMI 1623X X X X Extracts X X X X X X X X Extracts X X X X ..... ean freight is nothing but refund / rebate out of the freight expenditure - HELD THAT:- Assessee has fairly agreed that except the brokerage from ocean freight, the other items do not constitute income derived from undertaking. Assessing officer is directed to consider the rebate on ocean freight as income of the undertaking of the assessee. Adjustment of Head office expenses for computation of deductions u/s 10B, 80IC and 80IB - HELD THAT:- CIT(A) while holding so above, however, has directed the Assessing officer to allocate the net Head office expenses and not the gross net expenditure. We do not find any infirmity in the order of the CIT(A) on the issue and the same is accordingly upheld. Taxing the amount received on sale tax exemption / subsidy - revenue or capital receipt - HELD THAT:- The issue is now covered by the various decisions of the Hon'ble High Courts including the decision of the Hon'ble Supreme Court in ‘CIT-I Vs. M/s Chaphalkar Brothers, Pune and Others’ [2017 (12) TMI 816 - SUPREME COURT] wherein, it has been held that the aforesaid receipt is a capital receipt and not exigible to taxation. We hold accordingly and the lower authorities are directed not to tax t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, after perusal of the same, it is not clear as to which of the items constituted capital assets and which of the items constituted trading asset of the assessee. We therefore, restore this issue to the file of the assessee to bifurcate the items between capital assets and trading assets and to allow the claim in respect of insurance claim received on trading assets only. Allowability of foreign exchange fluctuation gain for deduction u/s 80IB and 80IC and exemption u/s 10B - assessee submitted the foreign exchange fluctuation gain is in respect of export receipts / receivable of the assessee and any gain in respect of receivable on account of foreign exchange fluctuation in fact contributes to the profits of the assessee from the sale/ export of the products - HELD THAT:- We find force in the aforesaid contention. We do not find any infirmity in the order of the CIT(A) in this respect also directing the Assessing officer not to reduce foreign exchange fluctuation gain from eligible profits of units eligible for deduction Allowbility of deduction u/s 80IB in respect of unit which has already claimed exemption u/s 10B - Double deduction - HELD THAT:- It is not a case of double ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le confirming the action of Ld.AO. for reducing profits of units eligible for deduction u/s 10B, 801B and 801C by allocating Head office expenses. 4. That without prejudice to ground No. 3, the Ld. CIT(A) erred in law and on facts while allocating gross head office expenses instead of expenses net of income. 5. That the Ld. C1T(A) erred in law and on the facts while confirming theaction of Ld. AO while taxing the capital receipt amounting TO ₹ 8,55,37,074/- on account of Sales Tax Exemption; Subsidy received from Government of Punjab as revenue receipt of the appellant. 6. Without prejudice to the ground (5) above, the Ld. CIT{A) erred in law and on the facts while confirming the action of Ld. AO while taxing the capital receipt amounting to ₹ 8,55,37,074/- on account of Sales Tax Exemption/Subsidy received from Government of Punjab as 'Income from other Sources'. 7. The. CIT(A) erred in law and on the facts while directing the assessing officer to make disallowance under section 14A of The Income Tax Act w.r.t. dividend income earned by the assessee. 8. That the Ld. CIT(A) erred in law and on the facts while confirming the action of Ld.AO for disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of other income which is mentioned in the ground No. 2 itself. A perusal of the aforesaid details will reveal that the assessee claimed rent, Misc. receipts, DEPB, commission and interest income as 'other income' and has claimed deductions in respect of the same u/s 10B, 80IB and 80IC etc., as applicable in respect of the respective unit. The Ld. Counsel for the assessee has fairly agreed that except the brokerage from ocean freight, the other items do not constitute income derived from undertaking. So far as the brokerage of ocean freight is concerned, the Ld. Counsel for the assessee has submitted that the same is nothing but refund / rebate out of the freight expenditure incurred by the assessee which has resulted in increase in income of the assessee. 9. The Ld. DR also could not rebut the aforesaid arguments of the assessee 10. In view of this, out of the items mentioned in ground No.2, the Assessing officer is directed to consider the rebate on ocean freight as income of the undertaking of the assessee. However, the findings of the lower authorities in respect of the remaining items is affirmed. 11. Ground Nos. 3 & 4 : Vide these grounds, the assessee has agitated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to assessment year 2008-09, the disallowance u/s 14A is to be made on some reasonable basis. Considering the overall facts and circumstances of the case and the respective submissions of the Ld. representatives of the parties, we confirm the disallowance of ₹ 2 lacs u/s s 14A of the Act on this issue for the year under consideration. The remaining disallowance made by the lower authorities is ordered to be deleted. 17. Ground No. 8 : Vide this ground the assessee assessee has agitated the disallowance of foreign travel expenses of ₹ 11,46,863/- in respect of expenditure on foreign travelling of the wife of the Chairman & Managing Director, pleading that she had accompanied him for business purpose and that she had duly assisted for procuring business. 18. On the other hand, the Ld. DR has submitted that since the wife of the Managing Director of the assessee is neither employee nor the director of the company, hence, the expenditure relating to her foreign travelling should be disallowed. In rebuttal, the Ld. Counsel for the assessee has submitted that the company had passed a resolution authorizing the director of the company to accompany his wife on the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Fund Scheme' (TUFS) should be treated as capital receipt instead of Revenue receipt as treated by the lower authorities. Admittedly, this ground has been taken as addition ground which has not been examined by the lower authorities. The Ld. Counsel for the assessee submitted that in the earlier years also this issue has been restored to the file of the CIT(A) for decision afresh. 24. Considering the above submissions of the Ld. Counsel for the assessee, this additional ground is restored to the file of the CIT(A) for adjudication afresh in accordance with law taking intro consideration the relevant case laws as may be available or cited before him. The appeal of the assessee is accordingly treated as partly allowed. ITA No. 35/Chd/2011 (A.Y.2006-07) 25. Now coming to the Revenue appeal in ITA No. 35/Chd/2011 (A.Y.2006-07), in its appeal, has taken the following grounds:- 1. That the Id. CIT(A) has erred in law and facts in directing the A.O. to consider interest income received by the assessee on delayed payments from customers as 'Business Income' instead of 'Income from Other Sources' as considered by the A.O. 2 (i) That the Id. CIT(A) has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gitated the action of the CIT(A) in directing the Assessing officer to treat the interest received from the customers and suppliers to be income derived from industrial undertaking and eligible for exemption u/s 10B and deduction u/s 80IB and 80IC of the Act. Since we have already held that the interest income received on delayed payment is in fact part of the sale consideration / receivable from the customers and we have also held that the same to be treated as business income and since the aforesaid receipts are relating to the sale receipts of the assessee of the produced manufactured, hence, we do not find any infirmity in the order of the CIT(A) in this respect. In the second part of ground No.2, the Revenue has agitated the action of the CIT(A) in directing the Assessing officer to allow deduction u/s 80IB and 80IC and exemption u/s 10B on profit after excluding loses debited in the accounts in respect of which insurance claims were received. The Ld. Counsel for the assessee in this respect has invited our attention to the paper book page 2 wherein the details of the items has been given on which insurance claim was received. However, after perusal of the same, it is not cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A of the Act on account of expenditure incurred for earning of tax exempt dividend income. This ground has already been dealt with while adjudicating ground No.7 of the assessee's appeal wherein after considering the over facts and circumstances of the case, we have directed to restrict the disallowance to ₹ 2 lacs on this issue. We order accordingly. 33. Ground No.6: Vide ground No.6, the assessee has agitated the action of the CIT(A) in treating the income from sale of shares as income from capital gains instead of income from speculative loss as assessed by the Assessing officer. 34. After considering the rival submissions of the parties and after going through the impugned order of the CIT(A), we are of the view that the Ld. CIT(A) has rightly held that it was not a case of speculative / trading in sale and purchase of the shares. The Ld. CIT(A) therefore, has rightly treated the same as income from capital gains while following the order of his predecessor for assessment year 2005-06. In view of this, we do not find any infirmity in the order of the CIT(A) on this issue. 35. Ground Nos. 7 & 8 : These grounds are general in nature and do not require any specific adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Ld. CIT(A) erred in law and on facts while confirming the action of Ld.AO while misinterpreting and applying the provisions of Rule 8D of Income Tax Rules as the said provision is effective from Assessment year 2008-09 only. 8. That the Ld. CIT(A) erred in law and on facts while confirming the action of the Ld.AO in allocating and disallowing expenses amounting to ₹ 34,28,175/- for earning dividend income under Section 14A of the Act read with Rule 8D of Income Tax Rules. 9. That the Ld. CIT(A) erred in law and on facts while confirming the action of the Ld.AO in allocating proportionate indirect personnel, administrative and financial expenses amounting to ₹ 22.84,306/- to dividend income. 10. That the Ld. C)T(A) erred in law and on the facts while confirming the action of Ld.AO for disallowing foreign traveling expenses of wife of Chairman & Managing Director amounting to ₹ 5,16,573/-. 11. That the Ld. C1T( A) erred in law and on the facts while confirming the action of Ld.AO for not allowing premium payable on redemption of optionally onvertible foreign currency bonds as revenue expenditure. 12. That the appellant craves leave to add/alter/am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue are identical to that have been taken for assessment year 2006-07, hence our findings arrived at in respect of each of the issue will apply mutatis-mutandis to the issues taken by the assessee as well as by the Revenue for assessment year under consideration i.e assessment year 2007-08. It is clarified that one of the issue which is identical to assessment year 2006-07 in relation to the disallowance u/s 14A of the Act, there is a difference in figure of tax exempt dividend income earned by the assessee during the year. The assessee during the year had earned dividend income of ₹ 2.19 cores whereas in the assessment year 2006-07, the assessee had earned dividend income of ₹ 1.59 crores. 40. Considering the facts and circumstances, the disallowance u/s 14A of the Act is restricted to ₹ 2.50 lacs for the year under consideration. As discussed above, our findings as arrived at in the assessment year 2006-07 on the remaining issues will apply to the issues raised in appeals relating to assessment year 2007-08 also. Accordingly, the appeals of the assessee as well of the Revenue are treated as partly allowed. Order dictated and pronounced in the Open Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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