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TMI Blog2020 (5) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... ure has been incurred for the purpose of business hence, same is allowable as deduction. Further, the issue is covered in favour of the assessee by order of Tribunal [ 2009 (8) TMI 1255 - ITAT AHMEDABAD] . We find that the AO has disallowed the same on estimate basis without any justification. Hence, same are directed to be allowed. This ground of appeal is therefore, allowed. Characterization of receipt - transfer of technical know-how and for undertaking non-compete obligation - capital receipt or not? - HELD THAT:- We find that the issue is now squarely covered in favour of the assessee by the judgement of Hon`ble Jurisdictional High Court of Gujarat in the assessee`s own case [ 2014 (4) TMI 168 - GUJARAT HIGH COURT] wherein after considering the decision of Hon`ble Supreme Court in the case of Guffic Chem (P.) Ltd. v. CIT [ [ 2011 (3) TMI 6 - SUPREME COURT] which held that non-compete fees received for from refraining from carrying on business was capital receipt and non-compete fees received prior to 01.04.2003 was not taxable under section 28(va) of the Act and CIT v. Sapthagiri Distilleries Ltd. [ 2014 (11) TMI 1078 - SUPREME COURT] it was held that compensation amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee by the decision of Co-ordinate Bench of Tribunal in the case of the assessee in [ 2009 (8) TMI 1255 - ITAT AHMEDABAD] . Hence, same is allowed. Thus, this ground of appeal is therefore, partly allowed. Not to exclude the amount of DEPB Credit from the profits eligible for deduction under section 80HHC - as per AO though the same has no direct nexus with the export activity of the assessee - HELD THAT:- We have already decided this issue in favour of the assessee in a separate judgment in Topman Exports v. CIT [ 2012 (2) TMI 100 - SUPREME COURT] and we have held that not the entire amount received by the assessee on sale of DEPB, but the sale value less the face value of the DEPB will represent profit on transfer of DEPB by the assessee. The first issue is, therefore, decided accordingly. Therefore, respectfully following same we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. Accordingly, this additional ground of appeal of the Revenue is therefore, dismissed. Payments of PF and ESIC - Whether payment made before filing of return of income are eligible for deduction without considering the fact that the due date in the respective Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to the benefit of section 80-O. Foreign exchange earned is foreign exchange saved. The CBDT Circular No. 700 dated March 23, 1995 clarified section 80-O by stating that as long as the technical and professional services arc rendered from India and are received by the foreign Government or enterprise outside India, deduction under section 80-O of the Act would be available to the person rendering the service, even if the foreign recipient of the service utilizes the benefit of such services in India. In view of above facts, we are of the considered opinion that the assessee is entitled to claim of deduction under section 80-O of the Act. Accordingly, this ground is allowed. - I.T.A No. 1671/Ahd/2006, 1371/Ahd/2006, CO.NO.184/Ahd/2006, 1672/Ahd/2006, 1764/Ahd/2006, 1000/Ahd/2016, 3510/Ahd/2016 - - - Dated:- 4-5-2020 - Shri Sandip Gosain, Judicial Member And Shri O. P. Meena, Accountant Member For the Assessee : Shri A. Gopalakrishnan, CA For the Revenue : Shri Ritesh Mishra, CIT(D.R.) ORDER PER BENCH: 1. The above captioned appeals by the Assessee and Revenue are directed against the separate orders of learned Commissioner of Income tax (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the issue is covered in favour of the assessee by order of Tribunal [I.T.A.No. 2453/Ahd/2004/A.Y. 01-02] vide Para 23.1 at Page No. 22. We find that the AO has disallowed the same on estimate basis without any justification. Hence, same are directed to be allowed. This ground of appeal is therefore, allowed. 8. Ground No. 5 6 : states that Ld. CIT (A) has erred in confirming the action of the AO in not considering the claim of the assessee that the entire receipt to the tune of ₹ 23,06,12,200 by way of transfer of technical know-how and for undertaking non-compete obligation as capital receipts and the Ld. CIT (A) erred in confirming action of the AO on account of claim of the appellant on part transfer as non-compete fees to the tune of ₹ 14,55,41,760 not exigible to tax. The action of the AO is contrary to the facts. 9. Brief facts are that the assessee is engaged in the business of manufacturing and selling of various kinds of pesticides. During the year under consideration, the assessee company has imparted the process/technology of production of chloropyridine products developed by it to M/s. Dow Agro Science B. V., (in short DAS) company registered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure to third parties for use of MITSU of know-how by its employees, subsequent to the effective date of this paragraph 2.4 MITSU acknowledges and confirms that the covenants which has provided under this agreement are reasonable on it. In view of the consideration, it has received under this agreement. 10. The AO observed that the perusal of the above clause of technology purchase agreement makes it clear that the assessee was restrained from doing any kind of activity related to Chloropyridine Products for a period of 10 years and as a result, it lost its source of income from the particular activity. However, it is hard to believe that the receipt is not a business receipt. If the assessee were not engaged into the business of manufacturing and selling various kinds of pesticides, it would have not earned this income. The assessee company earned this income only because of this knowledge and expertise in that business. Had the assessee company not been in the business of manufacturing and selling of pesticides and it would have not acquired knowledge and expertise related to the development of Chloropyridine Products. It is true that the assessee has lost its source of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment 2003-04 only. The assessee company has sold the technical know-how along with undertaking non-compete covenants. The Hon`ble Bombay High Court in the case of CIT v. Rawllwolf Limited [1983] 143 ITR 720 (Bombay) held that such receipts are capital in nature not liable to tax. The case laws of CIT v. R L Bhargava (86 of 1981) is distinguishable as in that case the assessee has transferred only technical know-how with no commercial obligation which is not the case of the assessee. However, the ld. CIT (A) has echoed the findings of the AO on the ground that the assessee company was manufacture and exporter of the products in India and abroad. The appellant company has sold its line of business and technical know-how to a foreign company who will naturally insist that such technology not be shared with a third party. It is true that the sale of knowhow and undertaking of non-compete obligations is resulting in loss of source of income of the appellant company. The AO has relied in the case of CIT v. R L Bhargava (supra) wherein sale of technical know-how has been held to be the business receipt. Therefore, after perusal of the various factual aspect of the case, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilleries Ltd. [2015] 53 taxmann.com 218 (SC) it was held that compensation amount received towards loss of source of income and non-competition fees would only be treated as capital receipt and was not liable to tax, held in favour of the assessee. The learned counsel for the assessee further relied in the case of CIT v. Mrs. TARA SINHA [I.T.A.No. 154/2005 dated 11.08.2017 of Hon`ble Delhi High Court] in support of his contentions. 13. Per contra, Ld. D.R. supported the order of lower authorities. 14. We have heard the rival submissions and perused the relevant material on record. We find that the issue is covered by decision of Hon ble Gujarat High Court in the case of the assessee wherein it was held Against the order of the Commissioner of (Appeals), the assessee preferred the appeal before the Tribunal. The Tribunal by its order dated 4.1.2008 allowed the appeal by holding that section 28(iv) of the Act was not applicable in the case of the assessee. Hence the revenue is before us. 7. Learned counsel for the appellant-revenue Mr. Sudhir Mehta has contended that the Tribunal has committed an error in allowing the appeal of the assessee whereby holding that that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect from 1.4.2003. Hence, the said section 28(va) is amendatory and not clarificatory. Lastly, in CIT v. Rai Bahadur Jairam Valji (1959) 35 ITR 148 it was held by this court that if a contract is entered into in the ordinary course of business, any compensation received for its termination (loss of agency) would be a revenue receipt. In the present case, both CIT(A) as well as the Tribunal, came to the conclusion that the agreement entered into by the assessee with Ranbaxy led to loss of source of business; that payment was received under the negative covenant and therefore the receipt of ₹ 50 lakhs by the assessee from Ranbaxy was in the nature of capital receipt. In fact, in order to put an end to the litigation, Parliament stepped into specifically tax such receipts under non- competition agreement with effect from 1.4.2003. 9. The learned counsel for the respondent has further relied on the decision of the Apex Court in the case of CIT v. Sapthagiri Distilleries Ltd. [2015] 53 taxmann.com 218/229 Taxman 487 (SC) where it was held that compensation amount received towards loss of source of income and non-competition fee could only be treated as capital receipt and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternative ground which says the ld. CIT (A) has erred in upholding in not granting deduction under section 80HHC on receipts by way of non-compete fees to the tune of ₹ 14,55,41,760 and assessed the income from business. The action of the Assessing Officer is contrary to the facts and law and deserve to be deleted. 17. Succinct facts are that during the course of assessment proceedings the assessee has claimed an alternate claim that since the non-compete fees are treated as revenue receipt and income from business and profession hence, same are includible under the head business income eligible for deduction under section 80HHC. However, the AO was of the view that deduction under section 80HHC is allowed in respect of export out of India of any goods or merchandise to which that section applies. The Jurisdictional assessee company has not received this income from exporting any goods and merchandise. Therefore, the claim of the assessee has no force hence, same was rejected. 18. Being aggrieved, the assessee filed an appeal before the ld. CIT (A). The CIT (A) observed that with regard to claim of deduction under section 80HHC(4C), the main thrust of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied on lower authorities. 26. We have heard the rival submissions and perused the relevant material on record. Since, we have allowed the appeal of the assessee in respect of Ground No. 5 6 of non-compete fees. As capital receipt as per judgement of Hon`ble High Court. Therefore, the claim of deduction under section 80HHC becomes academic in nature and infructuous, hence, same is not being adjudicated hence, it is treated as dismissed. 27. Ground No. 9 states that the ld. CIT (A) has erred in upholding the action of the AO in not granting deduction under section 80-O on receipts treated as non-compete fees to the tune of ₹ 14,55,41,760 and assessed as business income purely on technical ground stating that revised certificate in Form No. 10HA is not filed. The action of the AO is contrary to the facts and law and deserve to be deleted. 28. The assessee has made an alternate claim for deduction under section 80-O in respect of receipts from transfer of technical know-how. However, the AO observed that section 80-O allows a deduction of 30% from the amount received by any assessee company, if its gross total income includes any income from the government of fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO denying deduction under section 80-O, the appellant company. This ground was accordingly, dismissed. 30. Being, aggrieved the assessee filed this appeal before the Tribunal. The learned Counsel for the assessee submitted that that this is alternate ground if the amount of non-compete fees is treated as business income then the deduction under section 80-O is required to be allowed. 31. Per contra, the Ld. DR relied upon the orders of the lower authorities. 32. We have heard the rival submissions and perused the relevant material on record. Since, we have allowed the appeal of the assessee in respect of Ground No. 5 6 of non-compete fees. As capital receipt as per judgement of Hon`ble High Court. Therefore, the claim of deduction under section 80HHC becomes academic in nature and infructuous, hence, same is not being adjudicated hence, it is treated as dismissed. 33. Ground No. 10 states that the ld. CIT (A) has erred in confirming the action of the AO in not considering interest income to the tune of ₹ 1,88,07,480 as income from business for computing deduction under section 80HHC. The action of the AO is contrary to the facts and law and deserve to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [2009] 317 ITR 218/183 Taxman 349 (SC); Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278/129 Taxman 539 (SC); and Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC). 27. In Tuticorin Alkali Chemicals Fertilizers Ltd. (supra), the Supreme Court held, while discussing the classification of income under ss. 4, 14, 56 and 57 of the Act, that interest income is always of revenue nature unless received by way of damages or compensation. Where interest is earned by assessee on investment of share capital, it can be assessed separately under the head income from other sources . The income attracts tax as soon as it accrues. 28. In Swani Spice Mills (P.) Ltd. (supra), the Bombay High Court, after discussing several judgments, held in para 20, that the income of an assessee which is chargeable to tax under s. 4, is required for the purposes of computation to be classified under various heads of income specified in s. 14. Sec. 56, which deals with income from other sources is attracted where the income does not belong to a category which is specified in any of the other heads elucidated in s. 14. The income earned by an assessee, which utilizes its surpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n para 8, the Supreme Court held as follows : 8. As regards the aspect emerging from the expression 'attributable to occurring in the phrase 'profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor General relied, it will be pertinent to observe that the Legislature has deliberately used the expression 'attributable to' and not the expression 'derived from'. It cannot be disputed that the expression 'attributable to' is certainly wider in import than the expression 'derived from'. Had the expression 'derived from' been used it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business or generation and distribution of electricity. In this connection it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General it has used the expression 'derived from', as for instance in section 80J. In our view sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port shall be the amount which bears to the profits of the business . 35. In Cambay Electric Supply Industrial Co. Ltd. (supra), it was held as follows; In our view, since the expression of wider import, namely 'attributable to', has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity . 36. The Supreme Court in Vellore Electric Corpn. Ltd. v. CIT [1997] 227 ITR 557/93 Taxman 401, held in the context of s. 80-I, which uses the words profits and gains attributable to any priority industry , answering the question in affirmative, that the income earned by way of interest on the investment in securities of the amounts appropriated to the contingencies reserve, which was mandatorily required to be maintained by it in terms of the Electricity (Supply) Act, 1948. It was held that the condition statutorily incorporated is incidental to the carrying on of the business of generation and distribution of electricity by the assessee. 37. In sub-s. (3) of s. 80HHC of the Act, the words used are, derived from . In our view, the words derived from , are of restricte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Explanation to s.80HHC of the Act, is indicative of net interest i.e. gross interest as reduced by expenditure incurred by the assessee in earning such interest. 41. While applying the direct and proximate nexus test, we are of the view that where the interest earned does not have direct and proximate nexus, with the income from the business of export, the interest cannot be deducted as income from export under s. 80HHC(3)(a) of the Act, and has to be given the same treatment for tax, as income from other sources under s. 56 of the Act. 42. The question No. 1 is, thus, answered in favour of the Revenue, and against the assessee. 43. So far as question No. 2 is concerned, on the aforesaid discussion, we are also of the view that the amendment in s. 80HHC, by way of insertion of sub-s. (4B), excluding interest income for the purposes of deduction under' s. 80HHC of the Act, will also affect the deduction of interest income under s. 80HHC of the Act. for the period prior to the amendment, inasmuch as the applicability of the principle of direct and proximate nexus to the business income, will apply both, to the provisions of the Act prior to, and after the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at netting off expenses has been granted by the CIT (A). The amount of ₹ 54,316 was received for damage of raw material. This issue is covered in favour of the assessee by decision of tribunal in A.Y. 2001-02 in I.T.A.No. 2435/Ahd/2004 (Page 33 para 32). 44. Per contra, learned CIT(D.R.) relied on CIT (A). 45. We have heard the rival submissions and perused the relevant material on record. We find that the insurance claim and misc. income have been received against business loss, hence, such receipt is not income derived from export business. However, an amount of ₹ 54,316 was received against damage, which is covered in favour of the assessee by the decision of Co-ordinate Bench of Tribunal in the case of the assessee in I.T.A.No. 2435/Ahd/2004. Hence, same is allowed. Thus, this ground of appeal is therefore, partly allowed. 46. Ground No.12 to14 are general in nature; and not pressed before us, hence, does not require our adjudication. 47. In the result, the appeal of the assessee is partly allowed. 48. I.T.A.No. 1371/AHD/2006/A.Y. 2002-03: By the Revenue: 49. Additional Ground: During the course of appellate proceedings, the AO has filed an additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitlements and licenses being not derived from Industrial Undertaking. The mere receipt of an expert benefit to reimburse the duty elements cannot be treated as one degree away from the activity of Industrial Undertaking. In view of this matter, the CIT (A) directed the AO to grant deduction under section 80HHC without excluding ₹ 3,31,22,811 by way of DEPB credits from eligible profits. 53. Being aggrieved, the Revenue has filed this appeal before the Tribunal. The Ld. CIT (D.R.) relied on the order the findings of the Ld. AO. 54. Per contra, the learned counsel for the assessee submitted that the issue covered by amendment by Finance Act, 2005 and decision of Hon`ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012] 343 ITR 89 (SC). 55. We have heard the rival submissions and perused the relevant material on record. We find that the Hon`ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012] 343 ITR 89 (SC) the Hon`ble Supreme Court observed as This is an appeal against the judgment and order dated 06.08.2010 of the Bombay High Court in ITA(L) No. 1276 of 2010 deciding two issues against the assessee. On the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that whether the assessee was benefitted by foreign travel or not was subsequent event and was not relevant. Hence, foreign travel undertaken by directors for business purpose and there no justification for disallowing 50% on pure estimate. The Ld. AR for the assessee also relied the decision of Hon ble Gujarat High Court in case of Sayaji Iron Engineering Co. v. CIT [2002] 253 ITR 749 [2002] 121 Taxman 43 (Guj). In view of these facts and circumstances, the ld. CIT (A) observed that the AO has not brought on record any material/ evidence that 1/5th expenditure was not incurred for business purpose. The AO has not analyzed each and every visit and particular trip of director that he has over stayed. Therefore, considering aforesaid judicial pronouncements the CIT (A) held that action of the AO is not sustainable in the eyes of law, as same is without any merit and concrete findings. Therefore, 1/5th disallowance made by the AO were deleted. 59. Being aggrieved, the Revenue has filed this appeal before the Tribunal. The Ld. CIT (DR) vehemently supported the findings of the AO recorded in assessment order and submitted that the assessee has could not justify the stay of fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y relying on the ratio laid down by the Hon ble Gujarat High Court in the case of Sayaji Iron Engineering Co. v. CIT [2002] 253 ITR 749 [2002] 121 Taxman 43 (Guj) wherein it was held that public limited company is an inanimate person and there cannot be anything personal about such an entity. 65. Being aggrieved, the Revenue has filed this appeal before the Tribunal. The Ld. CIT (DR) relied on the AO and submitted that the assessee company itself admitted that log-book is not maintained and disallowed ₹ 50,000 on this account. 66. Per contra, the learned counsel for the assessee relied on the order of Ld. CIT (A). 67. We have heard the rival submissions and perused the relevant material on record. We find that there cannot be any personal use of vehicles in the case of limited company. Therefore, relying on the ratio laid down by the Hon ble Gujarat High Court in the case of Sayaji Iron Engineering Co. v. CIT [2002] 253 ITR 749 [2002] 121 Taxman 43 (Guj), we find no fault in the findings of Ld. CIT (A). Accordingly, same is upheld. Consequently, this ground is dismissed. 68. Ground No. 3 states that Ld. CIT (A) has erred in holding that expenditure incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trademark and not for the purchase of trademark. Hence, the CIT (A) rightly treated it as revenue expenditure, allowable as deduction under section 37(1) of the Act. Similarly, expenditure of ₹ 40,400 has been incurred towards drafting legal agreement and part receipts from technology transfer are treated as revenue receipts and treated as business income. Therefore, the action of the AO is merely based on presumption basis. Hence, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. This ground of appeal is therefore, dismissed. 73. Ground No. 4 states that the ld. CIT (A) has erred in holding that the payments of PF and ESIC amounting to ₹ 1,28,209 made before filing of return of income are eligible for deduction without considering the fact that the due date in the respective Acts for said payment is 15th and 21st of every months. 74. The assessee company filed month-wise details of payment of PF and ESIC with return of income. The payment made beyond grace period was suo-moto disallowed by the assessee at ₹ 1,36,534. However, the payment of ₹ 1,28,209 is made beyond due date under the PF and ESIC Rules was not disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , CIT (A) keeping in view that the assessee has already disallowed ₹ 50,000 for personal use hence, further disallowance made without any merit and concrete finding, hence, same were disallowed. 82. Being aggrieved, the Revenue has filed this appeal before the Tribunal. The learned D.R. vehemently supported the order of the AO whereas the learned counsel for the assessee supported the order of the CIT (A). 83. We have heard the rival submissions and perused the relevant material on record. We find that the assessee company has already disallowed ₹ 50,000 for personal use hence; further disallowance made by the AO was rightly deleted by the Ld. CIT (A). Therefore, same is upheld. This ground of appeal is dismissed. 84. Ground No. 6 states that the ld. CIT (A) has erred in directing not to exclude the following amounts from the profits eligible for deduction under section 80HHC, though same have no direct or immediate nexus with export activity of the assessee a) Restricted exclusion interest income of ₹ 44,15,400 as against ₹ 1,88,07,480 b) Exchange rate difference of ₹ 1,55,25,673 c) Sale of scrap of ₹ 44,621. The CIT (A) has gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Being aggrieved, the Revenue has filed this appeal before the Tribunal. The learned D.R. supported the order of the AO. 88. Per contra, Learned Counsel submitted the issue is covered in favour of the assessee by various decisions. It was submitted that netting of interest has been allowed by the Hon`ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012] 343 ITR 89 (SC) and Hon ble Gujarat High Court in the case of DCIT v. Narmada Valley Fertilizer [2015] 57 taxmann.com 250 (Gujarat) and also covered by the decision of ITAT in I.T.A.No. 1672/ 2245/Ahd/.20027 for A.Y. 2004-05 in assessee`s own case. Further exchange rate difference is also covered in favour of the assessee by ITAT in I.T.A.No. 1672/Ahd/2007 (Page No. 53 to 55 ) Further. Tax appeal filed by the Revenue has been dismissed by the Hon ble Gujarat High Court in Tax Appeal No. 658 of 2009 for A.Y. 2004-05. Further, the scrap is generated during manufacturing process and same is covered by decision of Gujarat High Court in the case of Nirma Limited 55 taxmann.com 125 (Gujarat) and Harjivandas J. Javeri 258 ITR 758 (Gujarat) and also covered by decision of the ITAT in I.T.A.No. 1672/ 2245/Ah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that expenditure incurred of ₹ 1,43,200 on registration of trademark and reviewing the draft technology agreement was revenue in nature though the same was giving enduring benefit. 99. We have heard the rival submissions and perused the relevant material on record. As we have dismissed this grounds of appeal of Revenue, therefore, this ground of the assessee is accordingly, dismissed. 100. Ground No. 5 states that the ld. CIT (A) has rightly held that payments of PF and ESIC amounting to ₹ 1,28,209 made before filing of return of income are eligible for deduction without considering the fact that the due date in the respective Acts for said payment is 15th and 21st of every months. 101. We have heard the rival submissions and perused the relevant material on record. Our finding as given in respect of Revenue appeal would apply to this ground hence, this grounds of appeal is therefore, dismissed. 102. Ground No. 6 states that the ld. CIT (A) has rightly deleted the disallowance of ₹ 1,250 made out of telephone expenses. 103. We have dismissed this ground of revenue hence, this ground becomes infructuous. 104. Ground No.7 : states that the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. 112. The perusal of details submitted by the assessee showed that ₹ 4,85,400 has been incurred from registration of imidacloprid product, which will give enduring benefit to the assessee as it is renewable in three years. Therefore, same was treated as capital expenditure. However, the AO has accepted alternate plea that the product is deferred revenue expenditure to be written off in three years. Hence, 1/3rd was allowed and balance 2/3rd of ₹ 3,23,600 was disallowed. 113. In appeal, CIT (A) observed that expenditure has been incurred for new product registration without which the assessee cannot sell its product in market. The benefit of this registration would be available to the assessee at least three years for which the AO has accepted the alternate plea. Hence, this ground was dismissed. 114. Being, aggrieved the assessee filed this appeal before the Tribunal. The learned counsel for the assessee repeated same argument as taken before lower authorities. 115. Per contra, the learned D.R. supported the order of authorities below. 116. We have heard the rival submissions and perused the relevant material on record. We find that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are also assessed at maximum marginal rate. We find that the AO had made addition only on presumption basis without bringing on record any cogent material to establish that sales were made with a view to decrease profit. The assessee company which is having a turnover of more than ₹ 40 crores would undertake such step total income suppress the profit. Since the addition is made for presumption basis. Therefore, same is directed to be deleted. This ground of appeal of the assessee is allowed. 123. Ground No. 6 states the ld. CIT (A) has erred in in not considering that interest income to the tune of ₹ 92,15,954 as income from business for the purpose of computing deduction under section 80HHC. The action of the AO is contrary to the facts and law and deserve to be deleted. 124. We have heard the rival submissions and perused the relevant material on record. We find that this ground is covered by our findings as given in the case of the assessee for the assessment year 2002-03 in Ground No. 10 as discussed in earlier part of this order. Therefore, following our finding as given therein this grounds of appeal of the assessee is accordingly, dismissed. 125. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of CIT (A), accordingly, same is upheld. Hence, following the same this ground of appeal is therefore, allowed. 130. Ground No. 9 states that Ld. CIT (A) has erred in confirming the action of the AO in excluding claim received by the assessee company amounting ₹ 2,70,00,000 for loss of profit the profit eligible for deduction under section 80HHC. The action of the AO is contrary to the facts and law and deserve to be deleted. 131. The learned counsel for the assessee submitted that similar claim has been allowed by the Tribunal in own case of the assessee for A.Y. 2004-05 in I.T.A.No. 1672/Ahd/2007 (Page No. 42 para 26). 132. Per contra, the Ld. DR relied upon the orders of the lower authorities 133. We have heard the rival submissions and perused the relevant material on record. We find that similar claim has been allowed by the Tribunal in own case of the assessee for A.Y. 2004-05 in I.T.A.No. 1672/Ahd/2007 (Page No. 42 para 26). Therefore, respectfully following the same this ground is allowed. 134. Ground No. 10 11 are general in nature hence, does not require any adjudication. 135. In the result, the appeal of the assessee is partly allowed. 136. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43. Ground No. 4 states the ld. CIT (A) has erred in deleting addition of ₹ 13,596 on account of petrol and diesel expenses without appreciating facts. 144. We have heard the rival submissions and perused the relevant material on record. We find that this ground of appeal was also come before us in A.Y. 2002-03 in the case of the assessee, wherein we have dismissed the Revenue appeal, on this ground. Therefore, following same, this ground of appeal is dismissed. 145. Ground No. 5: states that the ld. CIT (A) has erred in holding that payments of PF and ESIC amounting to ₹ 2,330 made before filing of return of income are eligible for deduction without considering the fact that the due date in the respective Acts for said payment is 15th and 21st of every months. 146. We have heard the rival submissions and perused the relevant material on record. We find that this ground of appeal was also come before us in A.Y. 2002-03 in the case of the assessee, wherein we have allowed the Revenue appeal, by following decision of Hon ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation [2014] 366 ITR 170 (Guj) : 223 Taxman 398 : [2014] 41 taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012] 343 ITR 89 (SC) and DCIT v. Narmada Velley Fertilizers Co Ltd. [2015] 57 taxmann.com 250 (Gujarat) wherein it was held that where interest income was received on investments, while interest paid on borrowings pertained to business expenditure, not 90 percent of gross interest , but 90 percent of net interest was to be reduced for computing section 80HHC deduction. Further the issue of exchange rate difference is covered in favour of the assessee by the decision of ITAT in assessee`s own case in I.T.A.No. 1672 2245/Ahd/2007 for assessment year 2004-05[ PB-53] and I.T.A.No. 1614/Ahd/2009 for A.Y. 2006-07 [ PB-110 to 104]. Further, Tax Appeal of the Department has been dismissed by the Hon ble Gujarat High Court in CIT v. Mitsu Limited [Tax Appeal No. 658 of 2009 dated 19.03.2014] (PB-22 to 24) and sale of scrap is covered in favour of the assessee by the decision of Tribunal in I.T.A.No.1672 2245/Ahd/2007 for assessment year 2004-05 [PB-19-20]. 154. We have heard the rival submissions and perused the relevant material on record. We find that this ground of appeal was also come before us in A.Y. 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2001-02 in I.T.A.No. 2453/Ahd/2004 [PB56-57] and for A.Y. 2004-05 I.T.A.No. 1672 2245/Ahd/2007 for assessment year 2004-05[ PB-53]. Further, Tax Appeal of the Department has been dismissed by the Hon ble Gujarat High Court in I.T.A.No. 658 of 2009 (PB-22 to 24). In view of these facts and circumstances, respectfully following the above cited judgements of Hon`ble Supreme Court and Hon`ble High Court and tribunal, this grounds of appeal of revenue is therefore, dismissed. 159. Ground No. 10 is general in nature hence, does not require any adjudication. 160. In the result, the appeal of the Revenue for A.Y. 2003-04 is partly allowed. 161. I.T.A.No.1000/AHD/2016/A.Y.2002-03:By the assessee: 162. Ground no. 1 to 4 are against the non allowing deduction under section 80-O of the Act by not considering the direction of ITAT used vide order dated 22.03.2013 and not adjudicating appeal in arbitrary manner without considering legal aspect. 163. Succinct facts are that original assessment was made under section 143 (3) on 21.03.2005 declaring total income of ₹ 45,86,66,943 which was later on revised to ₹ 41,82,55,337 under section 154 of the Act. This order wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. It was explained that the assessee company has received a sum of ₹ 18,19,27,200 from M/s. Dow Agro Science BV for the transfer of technical know-how of which 80% amount of ₹ 14,55,41,760 has been claimed as consideration received for loss of income and as such treated the same as capital receipt. The balance 20% amount of ₹ 3,63,85,440 has been claimed as royalty received for the use of process and technology. The assessee company had also received a sum of ₹ 4,86,85,000 from Syngenta Crop Protection AG and the same has been treated as royalty. The appellant company has claimed deduction under section 80-O of the Act on royalty payments of ₹ 8,50,70,440 [ ₹ 3,63,85 440 + ₹ 4,86,85,000] and the balance amount of ₹ 14,55,41,760 was claimed as exempt being capital receipt. The appellant company also filed the Chartered Accountant certificate in regard to the nature of receipt and claim of deduction under section 80-O on which the AO originally granted deduction under section 80-O vide order dated under section 143 (3) dated 21.03.2005 and CIT (A) has allowed the appeal. However, vide order dated 30.08.2006 under section 143 (3) read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawn our attention that products sold are insecticides, pesticides and/or its intermediates. Such products cannot be manufactured in India without obtaining a license in the form of registration from the concerned government Department in India. The purchaser of technical know-how has never approached the appellant company for such permission to use the technical know-how in India and to the best of their knowledge and belief of the appellant company, the aforesaid purchasers have not used the process of know-how of manufacturing products in India. 166. Learned Counsel further supported his view by placing reliance in the case of LI Fung India (P) Ltd. v. CIT [2008] 305 ITR 105 (Delhi) wherein considering the CBDT Circular No. 700 dated 23.03.1995 it was observed that where the technical and professional services are rendered from India and are received by a foreign Government or enterprise outside India, deduction under section 80-O would be available to the person rendering the service even if the foreign recipient of the services utilizes the benefit of such services in India. Similar findings were given in the case of CIT v. Inchcape India P. Ltd.[2005] 273 ITR 92 (Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicating the appeal the due consideration to CBDT Circular No. 700 dated 23.03.1995 has not been given which amounts to omission and requires to be rectified. Beside this, no evidence has been adduced which shows that there was restriction on the buyer of technical know-how to use the same in India at any point of time. Keeping in view the direction of the of Hon`ble Ahmedabad and submissions of the appellant as well as reliance on the assessment order, the CIT (A) held that the appellant has not been able to place on record any evidence which shows that there was any restriction on the buyers of technical know-how for using it in India at any point of time. Therefore, as per direction of the ITAT, the appellant is not eligible for deduction under section 80-O of the Act. Learned Counsel also referred clause 6.4 (PB-35) of Technology Purchase Agreement dated 01.01.2002 (PB-30) entered in to with Dow AgroSciences B.V., Netherland to contend that this agreement cannot be assigned to third party by the neither party, without written consent of the other party. Thus, the buyer has only a license to use the technical know-how and do not have a right to transfer the same. Learned Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Board of Direct Taxes circular in Circular No. 700 dated March 23, 1995 ([1995] 213 ITR (St.) 78), clarified section 80-O by stating that as long as the technical and professional services arc rendered from India and are received by the foreign Government or enterprise outside India, deduction under section 80-O of the Act would be available to the person rendering the service, even if the foreign recipient of the service utilises the benefit of such services in India. 172. In view of above, we note that the assessee has rendered technical service from India and are received in India from the foreign company in convertible foreign exchange. Hence, the rendering of the commercial service and receiving commission in foreign exchange by the assessee would entitle the assessee to the benefit of section 80-O. Foreign exchange earned is foreign exchange saved. The CBDT Circular No. 700 dated March 23, 1995 ([1995] 213 ITR (St.) 78), clarified section 80-O by stating that as long as the technical and professional services arc rendered from India and are received by the foreign Government or enterprise outside India, deduction under section 80-O of the Act would be available to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent sections in respect of same business. The AO has worked out the deduction under section 80HHC at ₹ 8,21,84,014 as against the deduction of ₹ 10.03.50,355 computed in the original assessment. The AO excluded the entire amount of noncompete fees of ₹ 10 crores and also excluded deduction of ₹ 1,83,58,427 under section 80IA while calculating the eligible profit for the purpose of deduction under section 80HHC. Being, aggrieved, the assessee has assailed the order passed by the AO under section 143 (3) read with section 147 before the Ld. CIT (A). The assessee has challenged the reopening of assessment on the ground that the reopening is based on change of opinion and is also on the issue of section 80HHC which is subject matter of appeal before ITAT and therefore, the AO has no jurisdiction to reopen the said assessment. The ld. CIT (A) vide order dated 12.02.2007 held that the appeal is adjudicated on merit hence, issue of reopening of assessment becomes consequential in nature and accordingly, he refrained from adjudicating this issue of validity of assessment. However, with regard to receipt of non-compete fees arose out of the carrying of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-opening assessment has not been found as per law therefore, other grounds of appeal the appellant were not adjudicated. 178. Being aggrieved, the Revenue has filed this appeal before the Tribunal. The learned D.R. supported the order of the AO. It was contended that the CIT (A) has failed to consider the legal position brought by the AO in his remand report based on various judgements. The AO in original assessment treated the non-compete fees as revenue receipt but he did not discuss in the assessment whether the non-compete fees received be treated as income derived from business and can be treated as income attributable to the carrying out of the business. 179. Per contra, the learned counsel for the assessee submitted that the AO has duly considered the issue in the original assessment by treating the amount received on account of non-compete fees of ₹ 10 crores as revenue receipt being a benefit to the company out of carrying out of the business, and the AO has also considered the same in the computation of income as well as calculation of deduction under section 80HHC and therefore, the view taken by the AO amounts to change of opinion because on the similar se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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