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TMI Blog2010 (11) TMI 1102X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed an amount of ₹ 2,01,718/- out of the total claim of interest charges. There was no other expenditure allocated towards the investment in shares. Before the CIT(A) it was contended that the assessee has not borrowed any funds for the purpose of investment in shares and the disallowance of interest under section 14A does not arise. The assessee also relied on the orders of the ITAT Mumbai Bench in ITA No. 2017/Mum/2004 dated 28.08.2006 in assessee s own case for A.Y. 2000-01 wherein a finding was given that the company has sufficient own funds and reserves and hence allocation of expenditure of interest does not arise and assessee also further relied on CIT(A) s orders for A.Y. 2002-03 and 2003-04 wherein such disallowance was cancelled by the CIT(A) and Revenue has not preferred any further appeals. However, in this year the CIT(A) by giving a finding that there has been fresh investment during the year of more than ₹ 1 crores, which is out of borrowed funds, confirmed the disallowance. 4. Drawing our attention to the observations of the A.O. while making the disallowance in para 3 3.1 in page 2 of the assessment order and further in para 3.1 to 3.3 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no need for any disallowance of interest expenditure under section 14A of the ITA Act. 5. The learned D.R., however, submitted that the issue can be restored to the file of the A.O. for fresh finding following the decision of the Hon'ble Bombay High Court in the case of Godrej and Boyce Ltd 328 ITR 81). 6. We have considered the issue and examined the facts of the case as well as the orders of the ITAT in earlier years in assessee s own case. It is an admitted fact that during the year the assessee has not invested any fresh funds and even the A.O. gave a finding that the investment has come down from the beginning of the year to the end of the year and has taken the average investment for consideration in the assessment order. When this fact is very clear in the order of the A.O. as well in the Balance Sheet and the enclosures, we are unable to understand from where the CIT(A) has come to the conclusion that assessee has invested during the year more than ₹ 1 crore out of the borrowed funds. As the record indicates the assessee has invested in earlier years in various concerns and public limited companies and there is a finding by the ITAT in earlier years, follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A). The CIT(A), while allowing the scrap sales as income from business, however, rejected the above two contentions, eventhough it was pointed out to the CIT(A) what on similar issues in earlier years the ITAT has held in favour of the assessee that these two amounts are part of business receipts and cannot be excluded. The ITAT, following the decision of the Hon'ble Bombay High Court in the case of Alfa Laval India Ltd. vs. CIT 266 ITR 418 in earlier years directed the A.O. to treat the insurance claim as part of business receipt. The CIT(A) distinguished the above judgement and confirmed the addition made by the A.O. 9. The learned counsel submitted that the insurance claim was a receipt of reimbursement of expenditure claim on car accident and relying on the principles established by the ITAT in the case of ACIT vs. Diamond Dye Chem Ltd. in ITA No. 3342/Mum/2006 submitted that the amounts when incurred has gone to reduce the profits of business and when the entry is reversed or expenditure is reimbursed the profits of the business goes up. Since these items are connected with the operations of the assessee the amounts cannot be excluded under Explanation (baa) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not the case of the A.O. that these amounts are to be excluded at 90% invoking Explanation (baa) to section 80HHC. The reason for exclusion of 100% was not given by the A.O. at all. He also has not treated the amount as income under other sources. We are unable to understand how while treating the income as business income these two amounts can be excluded while computing adjusted business profits without invoking Explanation (baa) to section 80HHC. Prima facie the action of the A.O. is not sustainable. It is further surprising that in spite of the orders of the ITAT in earlier years on similar issues in favour of the assessee the CIT(A) tried to distinguish and upheld the addition. We are unable to understand the reasoning given by the CIT(A) on similar facts. 13. The learned D.R., however, tried to make out a case that the amounts should have been excluded under Explanation (baa) relying of the decision of the Hon'ble Bombay High Court in the case of CIT vs. Dresser Rand India P. Ltd. 323 ITR 429. In that case the A.O. has excluded 90% of the amount recovered in the guise of freight, insurance, packaging as well as tax refund and service income and while considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts P. Ltd. 315 ITR (AT) 401 (Del) (SB). Accordingly the issue of restricting the claims under section 80IB is restored to the file of the A.O. to reconsider it according to the principles established by the above said Special Bench decision. These grounds are considered allowed for statistical purposes. 17. Ground No. 8 is consequential in nature with reference to interest which does not require any adjudication. 18. Assessee has raised the additional ground vide letter dated 27.08.2009 stating that the A.O. has erred in holding that the assessee was not entitled to deduction under section 80HHC on export incentives. 19. The learned counsel fairly submitted that this ground was raised consequent to the decision in the case of Topman Exports in ITA No. 5769/Mum/2006 where in has been held that only profit on sale of export incentives was covered under section 28(iiid) of the Act and consequent to the decision of the Hon'ble Bombay High Court in the case of Kalpataru Colours and Chemicals ITA No. 2887 of 2009 the issue is to be decided to against the assessee. In view of this the additional ground is rejected. This issue is also held against the assessee by the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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