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TMI Blog2018 (12) TMI 1759X X X X Extracts X X X X X X X X Extracts X X X X ..... ying upon the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Godrej Agrovet Ltd., [ 2014 (8) TMI 457 - BOMBAY HIGH COURT] taking into account the consideration of facts and circumstances of that case has held that the expenditure equal to 4% of the exempt income earned by the assessee would constitute reasonable disallowance u/s 14A - in our view the interest of justice will be met if the disallowance made u/s 14A of the Act is restricted to 5% of the total tax exempt earned income Deduction u/s 80IC - non-inclusion of the receipts, on account of interest received from customers on account of delayed payments, the provision of written back and sundry balances written back - HELD THAT:- The income for the times as discussed above is eligible to be considered and included in the income the assessee for the purpose of deduction u/s 80IC of the Act. However , the claim of duty draw back amounting to ₹ 427/- and Misc. receipts of ₹ 1201/- is not found tenable and the said receipts are to be excluded for the purpose of computing deduct ion u/s 80IC of the Act Addition on account of shortage of furnished goods - HELD THAT:- As decided in own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions of the assessee and also considering the fact that only a reasonable profit @ 7.37 has been paid to the sister concern, deleted the disallowance of the expenditure. We have considered the rival submissions and also have gone through the order of the CIT(A) and we do not find any infirmity in the same. In view of this, there is no merit in the ground raised by the Revenue Only the profit element in the sale / purchase of raw material is to be excluded for deduct ion u/s 80IC - ITA Nos. 762/CHD/2009, ITA Nos. 550/CHD/2009, ITA Nos. 539/CHD/2011 - - - Dated:- 11-12-2018 - SHRI SANJAY GARG AND Ms. ANNAPURNA GUPTA, JJ. For the Appellant: Sh. Subhash Agrawal, Advocate For the Respondent: Sh.G.S.Phani, CIT DR Order Sanjay Garg, J. The captioned appeals have been preferred by the assessee and Revenue against the separate orders of the Commissioner of Income Tax (Appeals), Chandigarh [hereinafter referred to as CIT(A)]. 2. First, we shall take up assessee s appeal in ITA No. 550/Chd/2009, wherein, following grounds of appeal have been taken: 1. That the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in short 'the Act '). Admittedly, the assessment year involved in this appeal is assessment year 2006-07. The assessee did not offer any disallowance u/s 14A of the Act , whereas, the Assessing officer made the disallowance of ₹ 2,70,645/-, however, the assessee has disputed the computation made by the Assessing officer. I t may be observed that in the case of Godrej Boyce Manufacturing Co. Ltd. 234 CTR 1 (Bom.) the Hon'ble Bombay High Court has held that Rule 8D of the I.T. Rules r.w.s. 14A(2) of the I.T. Act is not arbitrary or unreasonable but can be applied only if the assessee's method is not satisfactory. I t has been further held that Rule 8D is not retrospective and applies from A.Y. 2008-09. For the years for which Rule 8D is not applicable and in the event of that the AO is not satisfied with the explanation/working given by the assessee, disallowance under section 14A has to be made on a reasonable basis. Almost similar view has been expressed by Hon'ble Delhi High Court in the case of 'Maxopp Investment Ltd, Others' vs. CIT (247 ITR 162). In respect of cases prior to assessment year 2008-09, the different co-ordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 and has submitted that while deciding Revenue s appeal bearing No. 569/Chd/2012, the Tribunal has deal t with the issue taken in ground No.3 of the assessee which has been decided in favour of the assessee. We have also examined the details of claim in respect of Misc. receipts which constitute the insurance claim of ₹ 1,89,394/- on account of damaged stock, which in our view, is a loss compensated for the damaged stock and thereby i t will have effect to reduce the loss / expenditure, hence allowable for deduction u/s 80IC of the Act. So far as the receipts on account of interest from customers, provisions writ ten back and sundry balances written back, these undisputedly relate to the business activity of the assessee and f rom income f rom the unit of the assessee. So far as the discount on brokerage of ocean freight is concerned, the Ld. Counsel for the assessee has explained that it is discount received by the assessee on payment of brokerage and it will have resulted in net ting of the expenditure incurred on account of brokerage and this will goes on to increase the business income of the assessee. 8. In view of this, in the light of the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made by the A.O. on account of purchase of steam on arm length pricing especially when steam is a fast depleting commodity and can not possibly be sold in the open market. 11. At the outset , both the Ld. Representatives of the parties have drawn our attention to a char t to demonstrate that most of the issues are covered in favour of the assessee by the earlier orders of the Tribunal. 12. Ground Nos. 1 2: So far as ground Nos. 1 2 which are relating to the addition of ₹ 56,770/- on account of shortage of furnished goods, the same is covered by the decision of the Tribunal in the own case of the assessee for assessment year 2003-04 bearing ITA No. 265/Chd/2007 dated 23.12.2013, wherein, identical issue is decided vide para 11 of the said order for assessment year 2003-04, and the Tribunal after discussing the facts of the case has observed that the shortage in the finished goods being very small and is normally due to wastage etc. and also considering the plea of the assessee that it is customary that some of the samples may be distributed for promotion of the products, had deleted the addition. 13. Considering the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the manufacturing unit of the assessee. However, what is to be disallowed is the prof it on the sale of the raw material. We do not find any infirmity in the order of the CIT(A) on this issue and the same is upheld. 19. Ground No.6 : The Revenue vide this ground has agitated the action of the CIT(A) in allowing deduct ion u/s 80IC of the Act on the income from waste and scrap sale. The plea of the assessee is that the waste and scrap is generated out of the manufacturing activity of the assessee. The Ld. CIT(A) considering the facts and circumstances of the case has also held so. In view of this, we do not find any infirmity in the order of the CIT(A) on this issue. This ground of the Revenue is therefore, dismissed. 20. Ground No.7 : Vide ground No.7, the Revenue has agitated the act ion of the CIT(A) in directing the Assessing officer to al low deduction u/s 80IC of the Act on the processing charges received by the assessee. The Ld. CIT(A) after considering the submissions of both the parties and also examining the facts of the case held that the same to be an activity carried out by the assessee for third par ty and has directed the Assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. That the appellant craves leave to add/alter/amend any ground of appeal on or before the due date of hearing of appeal. Hence the appeal may kindly be allowed, necessary reliefs as per aforesaid grounds may kindly be granted and/or other reliefs deemed f it and proper under the circumstances of the case may kindly be granted 25. A perusal of the above grounds of appeal reveals that al l the issues taken in this appeal have been discussed in the earlier paras of this order while disposing of the appeal of the assessee for assessment year 2006-07 in ITA No. 550/Chd/2009. 26. In view of our observations made above, the receipts of interest from customers, insurance claims and prof its of processing charges as directed above are to be included under the eligible income for the purpose of deduction u/s 80IC of the Act. However, the claim of the assessee regarding DEPB has since not been pressed, is rejected. So far as the receipts on account of raw material sale is concerned, as observed above, only the prof i t element in the sale / purchase of raw material is to be excluded for deduct ion u/s 80IC of the Act as directe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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