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TMI Blog2018 (9) TMI 2076X X X X Extracts X X X X X X X X Extracts X X X X ..... after considering the facts on record. A perusal of the assessment order reveals that the assessee has filed all the necessary details in respect of sundry debtors and trading advances which were written off in the books of account. Both the authorities below have not gone into the evidence filed by the assessee. On the other hand the position of law is very clear that if the amounts are written off in the books of account by the assessee, the same have to be allowed. Under these circumstances, we are not in agreement with the conclusion of the learned Commissioner of Income-tax (Appeals) and accordingly direct the Assessing Officer to delete the disallowance. Disallowance of reallocation expenses pertaining to head office - HELD THAT:- AO has given a clear finding that the expenditure claimed under various heads also related to the Daman unit and therefore the same was estimated. There is no material produced before us to controvert the said finding. Merely because the accounts are audited does not mean that expenses incurred for the head office could not relate to the other unit. The assessee has also referred to some other decisions but in none of the cases it has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own case held f royalty received reliance was placed on the decision of the Tribunal in the case of Glaxo Smithkline Asia (P.) Ltd.[ 2005 (8) TMI 301 - ITAT DELHI-C] in which it was specifically held that computed on the basis of profit of business computed under the head profit or gains of business or profession, under the provisions of the Act and as per method prescribed under sub-section (3) or (3A) of section 80HHC and the deduction actually available under the provisions of sub-section (1B) of section 80HHC will be allowed as deduction under clause (iv) of Explanation I to section 115JB. Applying Explanation (baa) to section 80HHC in respect of labour charges received from job-work is a part of the operational income of the assessee - As decided in BANGALORE CLOTHING CO. [ 2003 (1) TMI 89 - BOMBAY HIGH COURT] where element of turnover was involved, 90 per cent. of the job charges could not be excluded from the profit of business. The Tribunal following the said judgment held that 90 per cent. of job charges was not required to be excluded as per Explanation (baa). We have to follow the decision of the co-ordinate Bench as the co-ordinate Bench had specifically consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid appeal to be withdrawn by the assessee. The Bench put a query to the learned Departmental representative who did not object to the withdrawal of the appeal. Accordingly, the appeal of the assessee is dismissed as withdrawn. I. T. A. No. 1240/Mum/2007 assessment year 2001-02 (assessee's appeal) 4. The assessee has raised 12 ground of appeal. In ground No. 1, the assessee has challenged the jurisdiction of the Assessing Officer under section 148 of the Act whereas in ground Nos. 2 to 12 the additions have been challenged on the merits. 5. We would like to adjudicate the jurisdictional issue challenged by the assessee contesting the learned Commissioner of Income-tax (Appeals)'s order on wrong confirmation or upholding the order of the Assessing Officer on reopening of reassessment proceedings under section 148 of the Act. 5.1. The facts in brief are that the original assessment in this case was completed vide order dated January 28, 2005 passed under section 143(3) determining the total income of ₹ 52,84,369. Thereafter, the case of the assessee was reopened by issue of notice under section 148 on March 4, 2005. The case of the assessee was reopened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and consequently are required to be reduced by 90 per cent. from the profits of the business. As the assessee has failed to do so in the return of income and the deduction under section 80HHC has been allowed in the order under section 143(3) without making this adjustment, I am satisfied that excessive deduction under section 80HHC has been allowed to the assessee and income charge able to tax has escaped assessment. 5.2. The learned counsel, at the outset, submitted that on the first reason recorded for reopening the assessment is because of wrong claim of deduction under section 80HHC. The Assessing Officer found that the assessee has claimed deduction under section 80HHC in respect of the same income which has been subjected to deduction under section 80-IB in violation of the provisions of section 80-IB(13) read with section 80-IA(9) and therefore the same has resulted in double deduction under section 80HHC as well as under section 80-IB of the Act and thus the income has escaped assessment. The learned counsel submitted before the Bench that the issue is squarely covered in favour of the assessee by the decision of the hon'ble jurisdictional High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of details and profit and loss account filed by the assessee, the Assessing Officer took a decision to allow the deduction and therefore to reopen the assessment on the basis of same material amounted to change of opinion which is not permissible under the Act. The learned authorised representative also vehemently submitted that the assessee filed objection to reopening of the assessment which was not disposed of by the Assessing Officer by way of separate order disposing of the said objections and therefore assessment order passed by the Assessing Officer is bad in law as laid down by the hon'ble Bombay High Court in the cases of KSS Petron Pvt. Ltd. v. Asst. CIT in I. T. A. No. 224 of 2014 order dated October 3, 2016 which has been passed by the hon'ble Bombay High Court after following the decision of the apex court in the case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC) and held that if the objections filed by the assessee against the reopening are not disposed of, the order passed in the reassessment proceeding has to be quashed. 5.5 The learned Departmental representative, on the other hand, relied on the order of the authorities below and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (Appeals) as made by the Assessing Officer towards various bad debts and advance given during the ordinary course of business of the assessee written off. 7.1. The facts in brief are that the Assessing Officer during the course of assessment proceedings noted that the assessee has debited a sum of ₹ 1,30,015 on account of sundry balance written off and accordingly called upon the assessee to explain the allowability of the said amount which was replied by the assessee by submitting that during the year sundry debtors amounting to ₹ 60,015 were written off as irrecoverable whereas ₹ 70,000 was written off towards trading advances given in the ordinary course of business of the assessee in view of the nature of business of the assessee. The plea of the assessee did not find favour with the Assessing Officer and he disallowed the entire amount and the learned Commissioner of Income-tax (Appeals) confirmed the addition by following the order of the earlier year without passing any speaking order. 7.2 Having heard both the sides and perusing the material on record, we find that the learned Commissioner of Income-tax (Appeals) ought to have passed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn under various heads related to both the units. The Assessing Officer had excluded those expenses which were directly relatable to the Daman unit and the balance expenditure was allocated to the two units in the ratio of turnover. The case of the assessee is that the only actual expenditure relating to Daman unit could be allocated and not on the basis of estimate. The assessee has relied on several decisions. But on careful perusal we find that the cases are distinguishable. In case of Central Bank of India (supra) the issue was deduction under section 80M. It was held that only the net dividend after deducting the expenditure actually incurred has to be allowed as deduction and not the proportionate expenses on estimate. The issue in the present case is different. The Assessing Officer has clearly held that the expenses incurred also related to Daman unit and therefore once it is established that the expenses were incurred the quantification can be made on estimate. The situation will be different when there is no evidence of incurring any expenditure and in this case proportionate disallowance will not be justified. The decision of the Tribunal in case of National Thermal Powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary examination and after allowing an opportunity of hearing to the assessee. We, accordingly following the decision of the co-ordinate Bench of the Tribunal, restore the issue back to the file of the Assessing Officer for deciding afresh after examination of records and evidence and after allowing an opportunity of being heard to the assessee only allocating the incremental cost and additional expenses. The grounds are allowed. 9. The issue raised in ground No. 4 is against the order of the learned Commissioner of Income-tax (Appeals) confirming the exclusion of other income of ₹ 10,42,655 while calculating the deduction under section 80-IB and ground No. 5 is without prejudice to ground No. 2 that income excluded should be netted against the expenses attributable to the earning of such income under the same head. 9.1. After perusal of the order of the co-ordinate Bench of the Tribunal, we find that the issue is covered in favour of the assessee by the decision of the co-ordinate Bench of the Tribunal in the assessee's own case in Allied Instruments P. Ltd. v. Dy. CIT I. T. A. No.2726/Mum/2006 assessment year 2002-03 order dated October 20, 2009 in para 2.3.3 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). The denial of deduction in relation to interest income is also upheld. As regards the other items such as rebate and discount, cash discount and difference in exchange rate the same had been received during the course of carrying on of business and therefore such income has been obviously derived from the business of undertaking. We are thus unable to sustain the order of the Commissioner of Income-tax (Appeals) disallowing the claim in respect of other items and the same is therefore set aside and the claim in relation to these items is allowed. We, therefore, respectfully following the same, allow the appeal of the assessee on this ground. 10. The issue raised in ground Nos. 5 and 10 is against the order of the learned Commissioner of Income-tax (Appeals) not allowing the exclusion of income from the expenses attributable that that income or revenue under the same head. 10.1. The learned authorised representative submitted that the issue is squarely covered by the decision of the hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012] 343 ITR 89 (SC) wherein it has been held that income should be netted against the expenses incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80HHC. 2.4.2 In appeal the Commissioner of Income-tax (Appeals) observed that the dividend income and the profit on sale of assets had to be excluded as the same were exempt. The difference in exchange rate was to be considered as part of export turnover on the basis of foreign exchange actually realised and the duty drawback was covered under section 28(iiic). The Commissioner of Income-tax (Appeals) further observed that all other receipts were covered by Explanation (baa) to section 80HHC amounting to ₹ 27,96,998 and accordingly 90 per cent. of the same was required to be deducted from the profit of business while computing deduction under section 80HHC. Aggrieved by the decision of the Commissioner of Income-tax (Appeals) the assessee is in appeal before the Tribunal. 2.4.3 Before us the learned authorised representative for the asses see submitted that the following items of income had arisen as part of the business operation and therefore have to be considered as integral part of profit of business and will not be covered by Explanation (baa). Reliance was placed on the judgment of the hon'ble High Court of Bombay in the case of CIT v. Bangalore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Supreme Court was whether the labour charges received by the assessee on account of job work could be treated as part of total turn over and the scope of Explanation (baa) to section 80HHC was not before the Supreme Court. No arguments had also been advanced on this aspect before Supreme Court. Therefore the judgment of the Supreme Court cannot be treated as a precedent for the proposition that in case of an independent activity involving element of turnover 90 per cent. receipt should be excluded from the profit of business. The scope of Explanation (baa) in regard to the labour charges for job work had been specifically considered by the jurisdictional High Court of Bombay in the case of CIT v. Bangalore Clothing Co. [2003] 260 ITR 371 (Bom) in which it was held that the job charges being operational income will be part of profit of business as well as part of total turnover. It was also held that where element of turnover was involved, 90 per cent. of the job charges could not be excluded from the profit of business. The Tribunal following the said judgment held that 90 per cent. of job charges was not required to be excluded as per Explanation (baa). We have to follow the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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