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TMI Blog2016 (8) TMI 1450X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance accrued. Therefore, keeping in view the said legal proposition we agree with the contention of the learned AR and delete the entire addition made by the AO. Resultantly, ground No. I of the assesee s appeal stands allowed. Disallowance of non-compete Fees paid to ex-directors - HELD THAT:- Issue decided against assessee as relying on its own case. While at the time of hearing of the present appeal of the assessee for assessment year 2003-04, both the sides conceded to the aforementioned fact, we respectfully following the above mentioned order of the Co-ordinate Bench and with a view of maintenance of judicial consistency, uphold the orders of the authorities below. As a result, this ground of assessee s appeal stands dismissed. Setting off of losses while computing deduction u/s 80HHC - AO rejected the assessee s claim by observing that the assessee while filing return of income had claimed deduction u/s 80HHC before taking into account the unabsorbed brought forward loss and depreciation and the same claim had also been claimed against the income determined u/s 115JB - CIT (A) rejected the claim of the assessee relying on the decision of J. K. Industries Ltd. Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee stands allowed. Deduction of income from service while computing profits u/s 80HHC - claim rejected by the AO on the ground that the assessee had not filed any break-up of the income from services - HELD THAT:- We find that the order of the learned CIT (A) on this ground is not sustainable since the detailed break up has not been examined by the authorities below. We, therefore, set aside the order of ld. CIT(A) and restore back the issue to the file of the AO for deciding the same afresh in accordance with law after examining the details of service income provided by the assessee after granting the assessee adequate opportunity of being heard in order to substantiate its claim. Resultantly, this ground of appeal of the assessee stands partly allowed for statistical purpose. Computation of book profits u/s 115JB / disallowance u/s 14A - HELD THAT:- The issue has already been decided in assessee s own case for assessment year 2002-03 issue of disallowance of interest on the borrowings for both the AYs we have remitted back the matter to the file of the AO. Computation of income as per the provisions of the section 115JB of the Act would depend on the decision taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r The Revenue : Shri G. M. Doss, CIT/DR ORDER PER BENCH: Out of these two cross appeals, one in ITA No.6721/Mum/2007 is filed by the assessee and the other in ITA No.6580/Mum/2007 is filed by the Revenue against the order of the learned CIT(A)-I, Mumbai dated 23- 08-2007 passed in appeal No.CIT(A)-I/IT/126/06-07 for assessment year 2003-04 on the following respective grounds:- Assessee s appeal in ITA No.6721/Mum/2007 (AY- 2003-04) Ground No. I: Disallowance of Interest on borrowings of ₹ 7,61,476/- 1. On he facts and in the circumstances f the case and in law, the CIT (A) erred in partly confirming the disallowance made by the Assessing Officer ( AO ) of interest of ₹ 7,61,476/- on prorata basis on the ground that borrowed funds are utilized for making investment in tax-free securities. 2. He failed to appreciate and ought to have held that: i) the interest was not a direct expense for earning tax free income and no disallowance can be made on proportionate basis by attributing the same towards tax free inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the payments were made beyond due date specified under the relevant law. 2. The Appellant prays that the disallowance of ₹ 14,818/- be deleted. Ground IV: Direction given to AO for deduction u/s 80HHC 1. On the facts and in circumstances of the case and in law, the CIT (A) erred in giving direction to the AO for deduction u/s 80HHC. Ground V: Setting off losses while computing deduction u/s 80HHC . 1. On the facts and in circumstances of the case and in law, the CIT (A) erred in confirming the action of the AO of setting off brought forward loses of earlier years from business profits for the purpose of allowing deduction u/s 80HHC of the Act. 2. The Appellant prays that the deduction u/s 80HHC be allowed from the business profits before setting off brought forward business loss. Ground VI: Deduction of Miscellaneous Income and Other Items From The Profit While Computing The Deduction U/S 80HHC. 1. On the facts and in circumstances of the case and in law, the CIT (A) erred in confirming the action o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing book profit u/s. 115JB of the Act by reducing expenses of ₹ 7,61,476/- on the alleged ground that the same were incurred for earning the same the tax free income. 2. The Appellant prays that the AO be directed to accept the book profit as computed by the Appellant. Ground X: Interest u/s. 234B, 234C and 234D of the Act. 1. On the facts and in circumstances of the case and in law, the CIT (A) erred in confirming the action of the AO of levying interest u/s 234B, 234C and 234D of the Act. Ground XI: Levy of interest u/s 220(2) of the Act. 1. On the facts and in circumstances of the case and in law, the CIT (A) erred in confirming the action of the AO of levying interest u/s 220(2) of the Act. Ground XII: The Appellant craves leave to add to/amend and/or alter all or any of the foregoing grounds of appeal. Revenue s appeal in ITA No.6580/Mum/2007 (AY-2003-04) 1. On the facts and in the circumstances of the case and in law, the ld. CIT (A) erred in directing the AO to restrict the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces and consequent additions to the total income of the assessee company. Being aggrieved, the assessee carried the matter in appeal before the learned CIT (A). The learned CIT (A) after considering the facts circumstances of the case partly allowed the appeal of the assessee by upholding certain disallowances/additions made by the AO. Being aggrieved by the order of the learned CIT (A), the assessee is now in appeal before us. 3. Firstly, we take up the assessee s appeal in ITA No.6721/Mum/2007 [AY 2003-04]. 4. Ground No. I of the assessee s appeal relates to disallowance of interest on borrowings amounting to ₹ 7,61,476/-. On perusal of the records, it is found that this issue has already been decided by the AO and the learned CIT (A) by following their respective orders in the assessee s own case for the previous assessment year 2002-03. At the very outset, the learned AR of the assessee submitted before us that the said issue has been decided against the assessee and in favour of the Revenue by the Tribunal in assessee s own case in ITA No.6720/Mum/2007 for assessment year 2002-03 vide order dated 12th June, 2013 passed by ITAT Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. Grounds No.III IV At the time of hearing, the learned AR of the assessee submitted that he is not pressing these grounds. The learned DR also did not object to the submission of the learned AR, accordingly, the learned AR has been allowed to withdraw these grounds. As such, grounds No.III IV of the assessee s appeal are dismissed as not pressed/withdrawn. 8. Ground No.V of the assessee s appeal relates to setting off of losses while computing deduction u/s 80HHC of the Act. The AO rejected the assessee s claim by observing that the assessee while filing return of income had claimed deduction u/s 80HHC before taking into account the unabsorbed brought forward loss and depreciation and the same claim had also been claimed against the income determined u/s 115JB of the Act and that the assessee s claim was not tenable as the deduction u/s 80HHC was available on profits of business as computed under the head profits and gains as per business and profession . While computing the profits for the relevant year, the unabsorbed depreciation which was considered as current years depreciation as per the Act had to be set off and the brought forwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee and then to decide the same regarding applicability of the claim of deduction as raised by the assessee u/s 80HHC of the Act after affording adequate opportunity of being heard to the assessee. Consequently, this ground of appeal is allowed for statistically purpose. 12. Ground No.VII of the appeal relates to not allowing set off of incentives against profits. The assessee claimed set off of miscellaneous income for an amount of ₹ 8,39,51,299/-. However, the AO treated the above amount as sundry creditors and hence are not eligible for deduction u/s 80 HHC and has to be reduced to 90%. Further, the AO also held that this amount includes the sale of DEPB licence of ₹ 2,68,47,494/- and duty draw back of ₹ 1,32,91,296/- and as such these have no direct nexus with the export activity of the assessee company and is not eligible for deduction. While the assessee carried the matter in appeal, the learned CIT (A) has also held that the turnover of the appellant is more than ₹ 10 crores and hence, the assessee is not eligible for deduction as claimed by the assessee in view of the amended provisions of the Act and accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of income received from services while computing profits under section 80HHC of the Income-tax Act. 16.1 According to the appellant, service income of ₹ 23,03,85,764/- has been earned during the financial year under consideration. The appellant has treated the entire service income as business income and has accordingly calculated the deduction under section 80HHC. In contrast, the AO has reduced 90% of the service income while computing business profits for the purpose of deduction under section 80HHC. According to the AO explanation (baa) requires reduction to the extent of 90% of receipts which do not have element of turnover but are included in the profit loss account. In contrast, the ld. Counsel of the appellant has argued that they are agents of various shipping lines. They are also in the business of cargo booking on behalf of the importers and exporters. They are also clearing and forwarding agents, and are engaged in warehousing of the goods, container booking, inland container services, feeder services, cargo handling and crew recruitment etc. It is claimed that all the activities are one of the main activities of the business. It is further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal of the assessee stands partly allowed for statistical purpose. 15. Ground No. IX relates to computation of book profits u/s 115JB / disallowance u/s 14AA of the Act of ₹ 7,61,476/-. This issue has already been decided in assessee s own case for assessment year 2002-03 in ITA No.6720/Mum/2002 by ITAT Mumbai F Bench vide order that 12th June, 2013 whereby the matter has been restored back to the file of the AO for deciding afresh. The relevant portion of the above order is reproduced herein below for the sake of reference:- 11. Next ground of appeal filed by the AO pertains to Computation of book profits u/s. 115JB of the Act. During the assessment proceedings AO held that expenses amounting to ₹ 7,61,476/- were incurred for earning tax free income. He further held that while computing the book profit u/s. 115JB of the Act same should be reduced. FAA confirmed the action of the AO of reducing the said amount for working the computation of book profits as per the provisions of section 115JB of the Act. Before the FAA, AR of the assessee had agreed in principle that if relief on the quantum of interest disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 12th June 2013 vide Para 4.1.1. to 4.1.2. The relevant portion of the above order is reproduced herein under for reference:- 4.1.1 Second limb of the issue of disallowance is about disallowance of administrative expenses of ₹ 31.83 lakhs, being 2% of gross dividend income on account of general and administrative expenses attributable to earn exempt income assessee had challenged the addition made by the AO before FAA. He found that Tribunal had decided the issue in favour of the assessee while deciding the appeal for the AY 2000-01 (ITA/5896/M/2004). Following the order of the ITAT he deleted the addition made by the AO. 4.2.2 Before us, DR agreed that matter was decided against the department. AR relied upon the order of the Tribunal. Respectfully following the order of the Tribunal for AY 2000-01i we confirm the order of the FAA. Ground No.2 filed by the AO is decided against him. 23. There being no deviation in the year under consideration, we in order to maintain the principle of judicial consistency, respectfully following the above decision cited supra of our Co-ordinate Bench, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions in the year under consideration with the subsidiary company were in the current account and there was commercial expediency in the said transactions. In our opinion, these two factors are sufficient to allow the interest expenditure claimed by the assessee. Respectfully following the judgments in the case of S. A. Builder and Reliance Utilities (supra) delivered by the Hon ble Apex Court and the Jurisdictional High Court we uphold the order of the FAA. Ground No.3 is decided against the AO. 25. Facts and circumstances being similar and the issue involved being identical for the present year under consideration, we respectfully following the order of the Co-ordinate Bench of this Tribunal viz. ITAT Mumbai F Bench referred to above, dismiss this ground of appeal of the Revenue. 26. Ground No.4 relates to re-computation of book profits without making adjustment in respective provisions. The AO had adjusted the provisions on the ground that these were mere provisions and that the assessee had been writing back these provisions in various years which implies that these were unascertainable provisions and therefore required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y computation for deduction u/s 80HHC. Finally, he held that no deduction u/s 80HHC was to be allowed to the working u/s 115JB of the Act. 7.1 The assessee preferred an appeal before the FAA. After considering the submissions of the assessee he held that the issue was covered by the decision of the Special Bench of the Mumbai Tribunal in the case of Syncome Formulations (292 ITR (AT) 144 (SB). 7.2 Before us, DR relied upon the order of the AO. AR submitted that issue was fully covered in favour of the assessee. We have heard the rival submissions. We find that the Special Bench of Mumbai Tribunal, in the case of Syncome Formulations (supra) has held that notional computation of deduction u/s 80HHC on the book profit would have to be made and reduced from the book profit for computing tax payable under section 115JB of the Act. Respectfully following the order of the Special Bench of the Mumbai Tribunal (supra), we uphold the order of the FAA. Ground No.5 is decided against the AO. 28. Respectfully following the above decision of the Co-ordinate Bench in the assessee s case for assessment year 2002-03, we dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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