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TMI Blog2017 (5) TMI 1760X X X X Extracts X X X X X X X X Extracts X X X X ..... the element of excise duty. On this aspect also we find enough merit in the plea of the assessee because in the figure of export total turnover(i.e the numerator) the element of excise duty is not present, therefore, in the denominator also i.e. in the figure of total turnover, the element of excise duty should also be excluded for reasons of parity. Disallowance u/s 14A - suo moto disallowance made by assessee - HELD THAT:- It is noticeable that neither before the Assessing Officer nor before the CIT(A) assessee has taken the issue of suo-motu disallowance made out of legal and professional expenses which has been canvassed before us. In this context, we deem it fit and proper to set-aside the matter back to the file of Assessing Officer, who shall re-examine the disallwoance under section 14A of the Act in the context of the fresh plea of the assessee that there is already a suo-motu disallowance made in the computation of income. In any case, we may clarify here that the disallowance, if any, made by the Assessing Officer in the ensuing remand shall not exceed the sum of ₹ 3,08,871/-, disallowed by the CIT(A). Disallowance out of employees contribution to P.F and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we shall deal in seriatim. The appellant before us is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of manufacture of sulphur products and agro chemicals. For the assessment year under consideration, it file the return of income declaring total income of ₹ 11,30,49,668/-, which was subject to a scrutiny assessment, whereby the total income has been assessed at ₹ 12,35,26,120/-, after making additions/ disallowances, which was carried in appeal before the CIT(A). The CIT(A) allowed partial relief and not being satisfied with the order of the CIT(A), assessee is in further appeal before us. 3. The first issue raised by the assessee is with regard to the manner in which the Assessing Officer has computed the deduction allowable to the assessee under section 10B of the Act. Notably, assessee had claimed deduction under section 10B of the Act of ₹ 3,89,39,967/- with respect to Export Oriented Unit at Panoli, against which the Assessing Officer allowed deduction of ₹ 3,19,46,548/-. The first limb of the dispute is with respect to the incomes by way of interest ₹ 40,63,409/- and cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the cases of Advance Detergent Ltd.(188 taxmann 15),Nirma Industries Ltd (153 taxmann 550);Hritnik Exports P.Ltd.(IT Appeal No.219 and 239 of 2014);Motorola India Electronics(46 taxmann .com167);Technocraft Industries(India)Ltd. (43 taxmann.com.110); Empire Pumps Pvt.Ltd. (IT Appeal no.187 of 2003); Lubrizol Advance Materials India (P.) Ltd. (42taxmann.com.263), Gem Plus Jewellery India Ltd(233CTR240). With regard to other five items the AR argued that the AO could not make any adjustment while computing the income as per the provision of section 10B,that the income was assessed as business income,that same could not be assessed as income from other sources,that the provisions of section 10B provided straight jacket formula and same had to be applied.He referred to the order of Century Textiles and Industries Ltd. (ITA 3926/Mum/2005-AY01-02 dated 16.5.2012), Arvind Footwear (ITA 363/Luck/2010 order dt.27.8.13),Tessitura Monti India(P) Ltd. (ITA/7127/Mum/2010 AY05-06, dt.11.01. 2013).DR supported the order of the FAA.The Departmental Representative (DR) supported the order of the FAA. 5.3.We have heard the rival submissions and perused the material before us.We find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B(1)). And it is this, the third step, that sec. 10B(4) is toward. Also, as a 100% E.O.U is licensed to undertake only exports, the other element of TT would normally include either the export proceeds that are not brought into India within six months (or such extended period as may be allowed) or the sale proceeds of a part of its production that it could under the terms of the 100% EOU license sell in the domestic market, or the sale of other products (of the assessee s undertaking) which arise incidentally to its operations in the domestic market. In fact, the second proviso to the provision is only by Finance Act 2002, w.e.f. 01/4/2003; its earlier version, since omitted, bearing a tolerance of up to 25% of the total sales for domestic turnover. Coming to the second step afore-said, the words business of the undertaking are wider in ambit than the words profit of the undertaking and could only have been so provided with a purpose. In our considered view, therefore, any profit which is derived from the business of the assessee s undertaking would qualify to be the profits of the business of the undertaking, and upon suitable apportionment toward excluding as much of it as ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced on the decision of the Tribunal in assessment year 2006-07 vide order dated 01/01/2010(supra) wherein similar issue has been adjudicated in favour of the assessee. 4.1 Though the Ld. Departmental Representative has supported the orders of the authorities below, but the factual matrix based on the decision of the Tribunal in the case of the assessee dated 01/01/2010(supra) has not been disputed. 4.2 Having considered the rival submissions, in our view, the stand of the assessee has to succeed in view of the precedent in assessee s own case, wherein the following discussion is relevant:- 2.First Ground of appeal raised by the AO deals with disallowance of ₹ 18.59 lacs made under section 40(a)(ia) of the Act with regard to deduction claimed u/s. 10(B) of the Act. During the assessment proceedings the AO found that the assessee had added expenses of ₹ 18,59,902/-inadmissible u/s. 40(a)(ia) for the year under appeal pertaining to the EOU for the purposes of computation of deduction admissible u/s.10B of the Act, that it had reduced disallowance of ₹ 17.67 lacs made in the earlier AY, which was admissible in view of the subsequent payment.As per the AO t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the decision of ITA No. 6186/M/12 ITA No.6400/M/12 AY: 2009-10 5 Hon'ble Jurisdictional High Court in the case of Gem Plus Jewellery India Ltd. (supra), wherein while deciding the question of granting of exemption under section 10A on the enhanced income due to disallowance of employers as well as employees contribution towards PF/ESIC, the Hon'ble Jurisdictional High Court has held in para-12 as under :- 12. By reason of the judgment of the Supreme Court in CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306 the employer's contribution was liable to be allowed, since it was deposited by the due date for the filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the Court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated by the revenue proceeds on the basis that the assessed income was enhanced due to the disallowance of the employer's as well as the employees' contribution towards Provident Fund/ESIC and the only question which is canvassed on behalf of the revenue is whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs.) Amount (Rs.) Disallwoances Expenses disallowed u/s 40(a) 283264 Donations 11078 Loss on Sale of Assets 839793 Legal and Professional fees on investments 839793 Depreciation 3057751 Provision for doubtful debts 69170 4817392 2. Allowances Depreciation as per Income Tax 2004394 Profit on Investments (taken as ₹ 3869954- by AO instead of ₹ 3809954/-) 60000 2064394 4.4 On this aspect our decision in the earlier para would hold good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein it has been held that Rule 8D of the Rules is applicable from assessment year 2008-09 onwards. However, the CIT(A) retained the disallowance to the extent of ₹ 3,00,871/- based on the calculation filed by the assessee. Against such action of the CIT(A), assessee is in further appeal before us. 5.1 Before us, the Ld. Representative for the assessee pointed out that assessee had suo-motu disallowed a sum of ₹ 15,45,376/- out of legal and professional fees in terms of section 14A of the Act. Secondly, it is pointed out that in the earlier year of 2006-07, the CIT(A) has concluded that expenditure relatable to the exempt income can be estimated at 10% of the relevant exempt income. 5.2 On the other hand, the Ld. Departmental Representative has defended the order of the CIT(A) by pointing out that the disallowance has been restricted to the amount estimated by the assessee itself and, therefore, there should not be any grievance against the order of the CIT(A). 5.3 We have carefully considered the rival submissions. Quite clearly, the CIT(A) records that disallowance of ₹ 3,08,871/- was as per the calculation furnished by the assessee. So however, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same have been rightly disallowed. However, in the context, of the present controversy the judgment of the Hon ble Jurisdictional High Court in the case of CIT v. Hindustan Organics Chemicals Ltd., ITA No.399 of 2012 dated 11th July, 2014 is fully applicable and the impugned disallowance is unsustainable. The judgment of the Hon'ble Bombay High Court in the case of CIT v. Ghatge Patil Transport Ltd., ITA No.1002 1034 of 2012 dated 14th October, 2014 is also directly on the point and impugned disallowance is unsustainable. For the said reasons the plea of the assessee is allowed. 8. The last Ground in this appeal, is with regard to the charging of interest under section 234B 234C, which is consequential in nature and does not require any adjudication. 9. In the result, appeal of the assessee for 2007-08 is partly allowed. 10. Now we may take up the appeal of the assessee for assessment year 2009-10. In this appeal, the first issue relates to assessee s claim for deduction under section 10B of the Act on account of incomes by way of cheque bouncing and delayed payment charges. The said dispute stands on similar footing as has been decided by us in assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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