9911796707
TMI Blog2024 (4) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment u/s 143(3) of the Act. This addition was not made with reference to any impounded material seized in search. Hence, in absence of any incriminating material to justify this addition, and following the decision of Abhisar Buildwell Pvt Ltd [ 2023 (4) TMI 1056 - SUPREME COURT] we hold that the impugned disallowance was legally untenable in the unabated AY 2010-11. Disallowance of purchases in relation to over-invoicing of raw materials - addition made it was made on the basis of statements given by the three employees in the course of search u/s 132(4) of the Act, which is an important piece of evidence in itself and that their subsequent retraction, being an afterthought, was of no relevance - HELD THAT:- We direct the AO to delete the addition made on account of over invoicing in purchases across all AYs. Hence, the grounds raised by the assessee are allowed and the grounds of Revenue are dismissed. Estimation of income - bogus purchases - whether the entire value of payments made to the suppliers was to be disallowed or only the profit element embedded therein was to be taxed in hands of the assessee? - HELD THAT:- Only the profit element embedded in these purchases ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.2016 has excluded nominal gifts valuing Rs. 1000/- and less from the mischief of MCI Regulations, 2009. This was also clarified by a public notice issued by Government of India dated 16.03.2022. In light of the foregoing and following the decision of this Tribunal at Bangalore in the case of Himalaya Drug Company [ 2020 (12) TMI 1060 - ITAT BANGALORE] the disallowance made by the AO out of these sub-heads of sales promotion expenses is held to be unsustainable and is thus directed to be deleted. Expenditure u/Sub-head Journals Periodicals , it is noted that these expenses were incurred for researching printing literature or purchasing journals regarding the products and its related uses/effects. As noted earlier, these expenses do not result in any benefit or gifts given to the doctors. We thus agree with the following findings of Ld. CIT(A) recorded in AY 2011-12 deleting the disallowance made by the AO on account of expenses incurred under this sub-head. Sub-head Taxi Hire Charges we note that these expenses were incurred by sales personnel of the assessee and not paid to any doctors or medical practitioners. Accordingly, the disallowance of taxi hire charges is held to be unw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fact that the Hon ble Karnataka High Court in their judgment reported [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] has since affirmed the decision of the Special Bench. Thus, in light of aforesaid decisions, we have no hesitation in upholding the order of Ld. CIT(A) deleting this impugned addition. We thus dismiss these grounds of the Revenue. D isallowance of deduction u/s 80IC in relation to sale of scrap - HELD THAT:- Heard both the parties. It is noted that the impugned issue stands squarely covered in favour of the assessee by the decision rendered by this Tribunal in their common order passed in assessee s own case for AYs 2008-09 2009-10, [ 2022 (9) TMI 526 - ITAT MUMBAI] wherein as held Provision of Section 80IC of the Act allows deduction of profit and gains derived by undertaking from eligible business. It cannot said that sale of empty containers is altogether different business of the assessee. We further held that this issue is squarely covered in favour of the assessee by the decision of honourable Delhi High Court in case of CIT versus Sadhu forging Ltd [ 2011 (6) TMI 9 - DELHI HIGH COURT] Exclusion of excise subsidy by way of capital receipt not liable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing income under normal provisions as well as book profit u/s 115JB of the Act. These grounds of the Revenue are therefore dismissed. MAT computation - Non-inclusion of foreign fluctuation translation reserve while computing book profit u/s 115JB - HELD THAT:- As rightly pointed out by the Ld. AR, there is no specific adjustment prescribed in this regard in Explanation (1) to Section 115JB of the Act. We further observe that, similar gains were credited to foreign fluctuation translation reserve on restatement of foreign currency loans in earlier AYs 2012-13 2013-14 and the same was not added to computation of book profit u/s 115JB of the Act by the assessee. The earlier AYs 2012-13 2013-14 are noted to be abated assessments. We note that, in the income-tax assessments u/s 153A/143(3) for these AYs 2012-13 2013-14 was completed by the same AO. The AO is noted to have accepted the computation of book profit made by the assessee in AYs 2012-13 2013-14 and the gains directly credited to foreign fluctuation translation reserve were not added while assessing book profit u/s 115JB of the Act. Hence, when on same set of facts and circumstances, the Revenue, in the earlier AYs 2012- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessments. The summary of the additions/disallowances in Rupees made by the AO which are in dispute in the cross- appeals for AYs 2009-10 to 2012-13 2014-15 are as follows:- (in Rs. ) Sl. Issue AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13 AY 2014-15 1. Additions made in original assessment u/s 143(3) again added by the AO in assessment u/s 153A/143(3): - Transfer Pricing Adjustment 2,20,82,583 1,32,62,654 - - - - Denial of deduction u/s 80IC on sale of scrap 10,27,691 18,77,499 - - - - Disallowance of addl. Depreciation 2,84,75,543 1,93,865 - - - - Disallowance of ESOP expenses 2,15,74,527 1,08,19,644 - - - 2. Disallowance of loss incurred by SEZ while computing book profit u/s 115JB 5,97,86,283 10,46,88,729 - - - 3. Disallowance of weighted deduction u/s 35(2AB) 8,08,000 - - - - 4. Disallowance of tax paid on ESOP while computing book profit u/s 115JB - 1,60,34,723 - - - 5. Disallowance of purchases in relation to over-invoicing of raw materials 52,30,300 1,18,40,000 1,39,88,050 2,07,60,787 2,72,63,943 6. Disallowance of bogus purchases 24,92,650 1,08,17,902 29,39,917 69,98,521 - 7. Disallowance of professional fees paid 67,41,600 66,18,000 69,48,900 69,48,900 - 8. Disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), both the parties are in appeal before us. 4.3 Assailing the action of the lower authorities, the Ld. AR of the assessee contended that the AYs 2009-10 2010-11 were unabated assessments and therefore the impugned additions/disallowances made by the AO, which were already added in the original assessment, were unsustainable in the assessment completed u/s 153A of the Act, since it was not based on any incriminating material seized during the course of search. For this, the Ld. AR relied on the decision of the Hon ble Delhi High Court in the case of CIT vs Kabul Chawla (380 ITR 573) which has since been affirmed by the Hon ble Supreme Court in the case of PCIT vs Abhisar Buildwell (P) Ltd. (149 taxmann.com 399). On merits, the Ld. AR brought to our notice that issues (b), (c), (d) [supra] had been fully allowed and issue (a) had been partly allowed by this Tribunal in the regular appellate orders passed in relation to the original assessments framed u/s 143(3) of the Act. Per contra, the Ld. CIT, DR supported the order of the AO. 4.4 After hearing the rival contentions and perusing the material on record, it is an admitted fact that AYs 2009-10 2010-11 are unabated assessments. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) issues highlighted above in these unabated AYs 2009-10 2010-11 to be unsustainable. Hence, the grounds taken by the assessee in this regard stands allowed and the grounds of the Revenue in this regard stands dismissed. 5. Issue 2: Disallowance of loss incurred by SEZ added u/s 115JB of the Act Ground Nos. 11-12 of the assessee s appeal for AY 2009-10 Additional Ground No. 1 of the assessee s appeal for AY 2010-11 5.1 The facts relating to this issue are that, the AO had disallowed the loss of Rs. 5,97,86,283/- incurred in the SEZ Unit of the assessee, while computing book profit u/s 115JB of the Act for AY 2009-10. Briefly stated, the AO is noted to have observed that one of the assessee s manufacturing units was situated in Special Economic Zone ( SEZ ) at Pritampur, Madhya Pradesh. Upon verification of books of accounts, the AO noted that the said unit had incurred loss on account of various trial expenses. The AO was of the view that such loss incurred by the SEZ unit could not be allowed in view of provisions of Section 115JB (6) of the Act and therefore disallowed the same. Being aggrieved by this action of the AO, the assessee preferred appeal before the Ld. CIT(A) who conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/s 115JB (6) of the Act. He shows us that, it was not in dispute that the SEZ Unit had only incurred trial expenses during the year which had resulted in the impugned loss and that, the business of the SEZ Unit at Pritampur, Madhya Pradesh had not commenced during the year. The Ld. AR placed before the letter dated 26.08.2013 which was filed by the assessee before the AO informing him that the unit had commenced business activity only from 23.03.2011 and thus it had not claimed any exemption u/s 10AA of the Act. In the said letter, the assessee accordingly stated that the depreciation claimed on the assets prior to the unit becoming eligible for exemption u/s 10AA of the Act has to be allowed u/s 32 of the Act. The Ld. AR thereafter took us through the provisions of Section 10AA of the Act to show that even the exemption provided therein begins only when the unit begins to manufacture or produce i.e. the commercial production commences and that no exemption is available qua any profits derived from trial production. According to Ld. AR, since the assessee did not commence the business activity at the SEZ Unit during the year, the provisions of Section 10AA did not kick in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave heard the rival contentions and perused the record. The years under appeal are assessment years 2004-05 to 2008-09. The assessee in each of the years had filed the return of income within prescribed period and time for taking up for scrutiny had also lapsed before the date of search on the assessee. Survey proceedings had taken place on 23.09.2009. The assessee in response to notice issued under section 153A of the Act, made certain fresh claims in the returns of income filed. The Assessing Officer while completing proceedings under section 153A r.w.s. 143(3) of the Act made certain additions on account of agricultural income, deemed dividend under section 2(22)(e) of the Act, cash in hand and adhoc addition out of expenses and interest payment to Ravi Cooperative Bank. The new claim of assessee in the returns of income on account of depreciation on Motor Car in assessment years 2004-05 and 2005-06 and loss on trading of shares in assessment year 2006-07 was rejected by the Assessing Officer. 10. The issue which arises is in respect of respective additions made and the rejection of new claim of deduction in the returns of income filed under section 153A of the Act in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fresh claim made in the return of income filed in response to notice under section 153A of the Act. Consequently, the first issue raised by way of ground of appeal No.1 in assessment year 2005-06, grounds of appeal No.1 and 3 in assessment year 2006-07, ground of appeal No.1 in assessment years 2007-08 and 2008-09 are dismissed. 12. The issue arising before us is identical to the issue before the Tribunal in Shri Gajendra D. Pawar Vs. DCIT (supra) and following the same parity of reasoning, we hold that the assessee is not entitled to make any fresh claim of deduction on following counts. 5.6 In view of the above, this Additional Ground raised in AY 2010-11 is dismissed. 6. Issue 3: Disallowance of deduction claimed u/s 35(2AB) of the Act Ground No. 7 of the Revenue s appeal for AY 2009-10 6.1 This ground raised by the Revenue relates to the Ld. CIT(A) s action of deleting the disallowance of amount of Rs. 8,08,000/- spent by the assessee on registration of patent, claimed u/s 35(2AB) of the Act. The AO is noted to have held that the reimbursement of expenses for obtaining patent specification and renewal of patents was not eligible for deduction u/s 35(2AB) of the Act. On appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he return of income, which had not been disputed in the original assessment u/s 143(3) of the Act. This addition was not made with reference to any impounded material seized in search. Hence, in absence of any incriminating material to justify this addition, and following the decision of Hon ble Supreme Court in the case of Pr.CIT vs Abhisar Buildwell Pvt Ltd (supra), we hold that the impugned disallowance was legally untenable in the unabated AY 2010-11. For the aforesaid reasons, we uphold the order of Ld. CIT(A) deleting the same but on legal issue and dismiss this ground of the Revenue. 8. Issue 5: Disallowance of purchases in relation to over-invoicing of raw materials Ground Nos. 5-7 of the assessee s appeal and the Ground No. 4 of the Revenue s appeal for AY 2009-10 Ground Nos. 5-7 of the assessee s appeal and the Ground No. 4 of the Revenue s appeal for AY 2010-11 Ground Nos. 5-7 of the assessee s appeal and the Ground No. 4 of the Revenue s appeal for AY 2011-12 Ground Nos. 5-7 of the assessee s appeal and the Ground No. 7 of the Revenue s appeal for AY 2012-13 Ground Nos. 5-7 of the assessee s appeal and the Ground No. 6 of the Revenue s appeal for AY 2014-15 8.1 These gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at a higher rate: Name of the Products Market Rate Inflated Rate Difference per Kg taken out in cash Paracetomol 235/- 245/- 10/- Erythromycin Estolate 2400/- 2750/- 350/- Meta chloro Aniline 290/- 320/- 30/- The market price keeps on fluctuating with time. However, the difference per Kg. taken out in cash remains same. Relevant part of statement of Mr. Manoj Suresh Jayawant:- Q.10 Are you aware of any bogus purchases booked or bogus commission payments made by M/s IPCA Laboratories Ltd. Ans: Sir, I am not aware of any bogus commission made by M/s IPCA Laboratories ltd. but there is bogus purchase booked from M/s Reynolds Petro Chem Ltd. Q. 12 Please furnish the details of the transactions made with M/s Reynolds Petro Chem Ltd, along with the modes operandi followed. Ans: Sir, in case of purchase of product MAPA (Methyl Amino Propyl Amine) which is made in M/s Makers Laboratories Ltd., the adjustments are made. M/s Makers Laboratories Ltd. makes purchase from M/s Reynolds Petro Chem Ltd; at the rate which is Rs. 73/- per kg. higher than the market rate. This excess payment made to the M/s Reynolds Petro Chem Ltd. is returned back to M/s IPCA Laboratories Ltd. in cash with the Kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is noted to have made multi-fold submissions viz., the assessee firstly pointed out that Mr. Godha had retracted his statement, which formed the genesis of this dispute. The assessee showed that Mr. Godha in his retraction affidavit had clarified that the sum of Rs. 1.17 crores found from his possession did not represent any amount generated from over-invoicing done by the assessee company but represented his own unaccounted cash income. The assessee corroborated the retraction affidavit by showing that Mr. Godha had offered the same to tax as his own unaccounted income in the return of income filed by him for AY 2015-16. Secondly, the assessee explained that each of the three (3) employees had also retracted their original statements and therefore according to assessee, their original statements had lost its evidentiary value. The assessee had placed on record their retraction affidavits as well. The AO however is noted to have rejected the explanation put forth by the assessee. The AO observed that, in a subsequent survey action conducted on 16.04.2015, Shri Jagdish Somani, Director of M/s Reynolds Petro Chem Ltd, had also admitted to the modus operandi of providing inflated bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter, he himself is observed to have undertaken detailed comparative exercise of the each of the above products procured by the assessee from the five (suppliers). The Ld. CIT(A) noted that, the average price paid by the assessee for purchase of MCA and Paracetamol from M/s Sarna Chemicals Pvt Ltd and M/s Farmson Pharmaceuticals Pvt Ltd respectively was commensurate with the average prices paid to other vendors. The Ld. CIT(A) is noted to have accordingly partly deleted the addition made in respect of these purchases. With regard to the purchase of Erythromycin Estolate made from M/s Anuh Pharma Ltd, M/s Mehta API Pvt Ltd, M/s Calyx Chemicals and Pharmaceuticals Ltd, the Ld. CIT(A) noted that, the assessee had not purchased this particular raw material from any other vendors. Hence in absence of any comparative details, the Ld. CIT(A) is noted to have confirmed the addition. Being aggrieved by this order of the Ld. CIT(A), both the assessee and the Revenue are in appeal before us. 8.6 We have heard both the parties and perused the relevant statements and retraction affidavits and also the other material placed on our record. The main thrust of the Revenue s argument was that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s context, the Hon'ble Apex Court in the case of Pullengole Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) has held that although an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was held that, it is open to the assessee who made the admission to show that it is incorrect based on mistake of fact. An oral statement on a relevant fact is a piece of evidence, and the weight to be attached to it must depend on the factual circumstances in which it was made. It is open for the assessee to show the contents/facts stated therein to be erroneous or untrue, based on mistake of fact. Hence, the position which emerges is that a statement u/s 132(4) of the Act by itself cannot be reason enough to justify an addition, if the assessee is able to show that the facts admitted by him was purely based on wrong assumption of facts and able to adduce evidence/material to show that he was wrong on the facts he admitted. So, when an admission u/s 132(4) of the Act has been retracted on the aforesaid reasons, then the AO should cross-examine the person again to ascertain the correct facts. The AO ought to conduct proper investigation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were no purchases made by the assessee from M/s M/s Reynolds Petro Chem Ltd and this admitted factual position was not controverted by the Revenue. The Ld. AR brought to our notice that only M/s Maker Laboratories Ltd had conducted transactions with M/s Reynolds Petro Chem Ltd, and that the AO had already drawn adverse inference on account of over-invoicing in the hands of M/s Maker Laboratories Ltd. The Ld. AR also brought to our notice that Shri Prashant Godha was also an erstwhile Director of M/s Maker Laboratories Ltd and that he had remitted his office only a few months prior to the date of search. The Ld. AR has therefore rightly suggested that even if the statement of Mr. Godha was to be taken at face value, i.e. the cash found on him was generated from over-invoicing, then he has mistakenly named the assessee instead of M/s Maker Laboratories Ltd in his statement. Having regard to these facts and evidences brought on record, we find force in the submissions of the Ld. AR that the statement given by Shri Prashant Godha that the cash found from his possession belonged to the assessee, which it had generated from over-invoicing, was based on mistaken understanding of fact and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns should not be discarded straightaway. The Ld. AR has accordingly pointed out apparent fallacies in the manner in which the AO inferred over-invoicing from the vendors in question. The Ld. AR showed us that the AO had cited instances and made comparison on selective data. For instance, it was shown to us, that the AO had cherry picked six (6) transactions of M/s Sarna Chemicals Pvt Ltd as opposed to the twenty (20) transactions undertaken during the entire year. Likewise, in the case of purchases from M/s Mehta API Private Limited, the AO has picked up only two (2) out of thirteen (13) transactions actually entered into by the assessee. The Ld. AR has shown us similar cherry-picking exercise in almost all cases. It was shown to us that, if the overall transactions were compared, the rates were commensurate and the differences were minimal. Hence, the purported values of over-invoicing obtained from these employees were not backed by the given facts of the case. We also find merit in the submissions of the Ld. AR that the price comparison undertaken by the lower authorities was inherently flawed as the lower authorities had failed to consider the functional, economic and risk diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to bring on record tangible material or evidence that the assessee had paid excess price and got back monies/cash from suppliers, according to us, merely because there were rates differential amongst purchases from different vendors cannot be sole reason to infer over-invoicing/inflation of purchases. We also note that the AO himself had ultimately not given any relevance to the enquiry and comparison made by him, which although was extensively discussed in the assessment order. It is noted that the AO had ultimately made the addition based on the value of over-invoicing as stated by the employees in their statements and not based on his comparison/ independent enquiry from these vendors. As already held above, the statements of the employees had no bearing in the given facts of the assessee s case as the over-invoicing component admitted by them was in relation to purchases made from M/s Reynolds Petro Chem Ltd. Hence, for the various reasons as discussed in the foregoing, we hold that the impugned addition on account of alleged over-invoicing was unwarranted on the given facts as well. 8.12 In light of the above findings, we direct the AO to delete the addition made on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same to the total income. On appeal the Ld. CIT(A) is noted to have restricted the addition to the extent of profit element of 12.5% embedded in these purchases. Aggrieved by the order of Ld. CIT(A), both Revenue and assessee are in appeal before us. 9.2 Assailing the action of Ld. CIT(A), the Ld. AR for the assessee submitted that the additions made in unabated AYs 2009-10 2010-11 was not tenable since they were not based on any incriminating material unearthed in course of search. Moreover, according to him, since the statement basis which the impugned addition was made, had been retracted by Mr. Bhupendra Joshi, the same was not tenable in law. On merits, the Ld. AR submitted that the assessee had already provided all relevant contemporaneous evidences, which it was required to maintain in ordinary course to substantiate the genuineness of purchases. The Ld. AR further took us through the published list of the Sales Tax Department of Maharashtra referred to by the AO, which was in relation to suspicious dealers and not hawala dealers, as wrongly inferred by the AO. He pointed out that, the list also came with a disclaimer wherein any supplier who had grievance could lodge their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of independent verification and having regard to the published list of Maharashtra Sales Tax Department, the purchases made by the assessee from these seven (7) suppliers were indeed suspicious. Overall, therefore, we are in agreement with the lower authorities that the assessee was unable to fully discharge the genuineness of the purchases made from these suppliers. 9.5 The next issue for consideration is whether the entire value of payments made to the suppliers was to be disallowed or only the profit element embedded therein was to be taxed in hands of the assessee. From the material available on record, it is noted that the fact that assessee had purchased these materials is not in dispute. The Ld. AR has rightly pointed out that, the quantitative details reported in the tax audit report, consumption of raw materials, corresponding sales and the book results have not been rejected by the AO. It was also brought to our notice that certain purchases were capitalized to the cost of fixed assets and that the AO did not dispute the actual cost of assets and the depreciation claimed thereon. It is therefore a case where the purchases were indeed made, but the parties, who the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld as under: 2. The first question pertains to restricting the addition of Rs. 23.16 Lakhs to Rs. 2,21,600/- by the Tribunal. The Assessing Officer had made the said addition on the ground that the assessee's purchases were found to be bogus. The entire purchase amount was therefore, added to the assessee's income. The Tribunal, however, restricted to the said sum of Rs. 2,21,600/-. The Tribunal recorded that the Assessing Officer has not rejected either the purchases or the sales made out of the said purchases. The Tribunal therefore, was of the opinion that the addition should be restricted to 10% of the total purchases. The Revenue strongly disputes this proposition. 3. Without elaboration, what the Tribunal by the impugned Judgment held is that the Department had not rejected the instance of the purchases since the sales out of purchase of such raw material was accounted for and accepted. With above position, the Tribunal applied the principle of taxing the profit embedded in such purchases covered by the bogus bills, instead of disallowing the entire expenditure. We do not find any error in the view of the Tribunal. No question of law arises. 9.8 Following this princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld by the Hon'ble Gujarat High Court depending upon the nature of the business. As held in the case of Simit P. Sheth (supra) no uniform yardstick could be applied to estimate the rate of profit and it vary with the nature of business. Taking all the facts into consideration and the findings of the Hon'ble Courts on this issue, I am of the view that estimation of 17.5% of profit would meet the ends of justice. Therefore, I direct the AO to estimate profit of 17.5% on the total alleged bogus purchase which works out to Rs. 20,11,270(17.5% of Rs. 1,14,92,970/-). The appellant get the relief of the balance Rs. 94,81,700/-. The grounds raised are partly Allowed. 13. Thus as can be seen from the above, CIT (A) had relied upon the decision of the Gujarat High Court in Simit P. Sheth (supra) and took the view that entire purchases from the eight parties could not be added as bogus but what needed to be added to the total income of the assessee was the profit element embedded in such transaction. CIT(A) noted that assessee carried out only the job work of designing the clothes on contract basis; profit estimation ranged from 12.5% to 25%. In the circumstances of the case, CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e such information could not be relied upon. This court in the case of Pr. CIT v. Vaman International (P.) Ltd. [IT Appeal No. 1940 of 2017, decided on January 29, 2020] held as under:- 17.1 Thus, from the above, it is seen that Tribunal had returned a finding of fact that the assessee had filed copies of purchase bills, copies of purchase/sale invoices, challan cum tax invoices in respect of the purchases, extracts of stock ledger showing entry/exit of the materials purchased, copies of bank statements to show that payment for such purchases were made through regular banking channels, etc., to establish the genuineness of the purchases. Thereafter, Tribunal held that Assessing Officer could not bring on record any material evidence to show that the purchases were bogus. Mere reliance by the Assessing Officer on information obtained from the Sales Tax Department or the statements of two persons made before the Sales Tax Department would not be sufficient to treat the purchases as bogus and thereafter to make addition under section 69C of the Act. Tribunal has also held that if the Assessing Officer had doubted the genuineness of the purchases, it was incumbent upon the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground Nos. 8-11 of the Revenue s appeal for AY 2010-11 Ground Nos. 7-10 of the Revenue s appeal for AY 2011-12 Ground Nos. 10-13 of the Revenue s appeal for AY 2012-13 10.1 These grounds raised by the Revenue in AYs 2009-10 to 2012-13 are against the Ld. CIT(A) s action of deleting the disallowance of professional fees paid to M/s Allied Computers International (Asia) Ltd [in short ACIAL ]. The observations and findings given by the AO and Ld. CIT(A) are same across all AYs. We therefore take AY 2009-10 to be the lead case and the decision rendered therein would apply mutatis mutandis to all other AYs. 10.2 Briefly stated, the AO in the course of assessment had required the assessee to provide the details of the professional services availed from various persons / agencies. After perusing the details furnished, the AO vide order sheet noting dated 06.10.2016 had required the assessee to provide proof of performance of services rendered by ACIAL. The assessee is noted to have filed its reply vide letter dated 13.10.2016 in which it provided the details of services rendered by ACIAL, invoices raised by them, service tax charged, TDS deducted etc. The AO however observed that this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tandard packages like MS Office and other in house developed applications. The AO has not doubted the services rendered by the service provider. The payment to the service provider has been made through banking channels and TDS has also been made. The copies of the invoices, payment details and TDS certificate were submitted before the A.O. Thus, the appellant, by submitting the above documents, has proved the business exigency and genuineness of the expense. The services are proved by the above invoices and nature of the work done. It is also pertinent to mention here that the appellant company is a big corporate with huge computer infrastructure. The maintenance of such computers and their internal systems is essential for the entire business and they cannot work in the absence of the same. In view of the above discussion, the disallowance made for AY 2009-10 is deleted. 10.4 The invoices raised by ACIAL are noted to be subject to levy of service tax at the rate of 12.36%. The assessee is noted to have paid the professional fees inclusive of service tax after deducting tax at source through banking channel. These facts are not in dispute before us. We therefore note that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, VAT Registration of the sellers their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted. 4. The ITAT by its judgment dated 16th May, 2014 reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant question put to him and his answer is noted to be as follows:- Q.16 Please state as to whether M/s. IPCA ltd had incurred sales promotion expenses submitted by you which has direct nexus to doctors which are under the category of freebees as detail in para 6.8.1 of Medical Council of India Notification on 'Professional Conduct, Etiquette and Ethics Regulation, 2002 No. MCI-211(1)/2009(Ethics), dt.10.12.2009 and Circular no. 5/2012 dt.01.08.2012 issued by Hon'ble CBDT. Ans: Sir, from the combined statement, submitted in reply to Q15 above, you will find that various types of nature of expenses are incurred by the company and clubbed under the head of Sales and Marketing expenses. Sir, we are further submitting herewith the sales promotion expenses from FY 2010-11 to 2013-14 which have direct nexus to doctors which are as under: Sr. No and Code Account Head Financial Year (in Rs. ) 2013-14 2012-13 2011-12 2010-11 Total 1)547014 Patient Education / Detection Camp 91918890 23210338 15485059 11417698 142031985 2)547019 HTC expenses 5437948 5437948 3)547050 Other Sales promotion expenses 303491 7434329 4458844 9527184 21723848 4)548262 Sales promotion expenses 102224 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 I am showing you the statement Mr.Shravan Beli, Head Taxation at M/s IPCA, recorded U/s 131 on 25.12.2014, wherein he has admitted that M/s IPCA Laboratories Limited has incurred expenses of Rs. 63.66 crores under various subheads of sales and promotion. These expenses have nexus with the doctors. These expenses are in contrarian to the guidelines issued by MCI vide notification No. MCI-211(1)/2009 (Ethics)/ 55667 dt. 10/12/2009 and CBDT Circular No. 05/2012 issued in August 2012. Shri Shravan Beli has admitted that these expenses of Rs. 63.66 Crores are not allowable expenses as per the provisions of 1.T.Act. 1961. Ans. Sir, I confirm that I have gone through the statement of Mr. Shravan Beli recorde U/s 131 on 25.12.2014. I do agree with him and state that expenses of Rs. 63.66 crores are not allowable expenses and M/s IPCA will disallow the same and pay the applicable taxes. 11.3 In the post search enquiries, the assessee is however noted to have furnished explanation for selective impounded material relating to sales promotion expenses which has been extracted by way of a Table in Para 7.3 of the assessment order for AY 2009-10. The assessee is noted to have provided the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 05/2012 dated 01.08.2012, was not an allowable expenditure as it fell under the ambit of Explanation to Section 37(1) of the Act. On facts, qua each of the sub-head of sales promotion expenses, the AO is noted to have examined the same and made disallowance in the following manner, which is noted to be independent and different from the amounts admitted to be disallowable by Mr. Beli. Nature of Expenses Quantum Disallowed - Expenses on Patient Detection / Education Camp 100% - Camp Expenses 10% Sponsorship Expenses 100% Participation in Symposium Separate Quantification by AO Doctor Meeting/ Medical Awareness Separate Quantification by AO Corporate / Brand-recall Promotion Expenses 10% HTC Expenses 100% CRM Expenses 100% Sales Promotion Other Sales Promotion Expenses 100% Journals Periodicals 100% Taxi Hire Charges 100% Field Printing Expenses 100% Trade Relation Expenses Gifts for sales promotion 100% Air Ticket Expenses 100% 11.6 Being aggrieved by the above action of the AO, the assessee had preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) is also noted to have undertaken factual exercise into the nature and details of the above sales promotion expenses and re-quan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance made in AYs 2009-10 2010-11 be upheld as the CBDT Circular did not apply to these assessment years. The Ld.AR further took us through the details of the expenses incurred towards sales promotions expenses to show us that none of these expenses were incurred for the benefit of the doctors. According to him therefore, even on facts the sales promotion expenses did not fall within the mischief of MCI Regulations, 2009 read with CBDT Circular (supra) and thus he prayed that the entire addition be deleted in full. The Ld. AR has also furnished a written note in support of the same. 11.9 In the rejoinder, the Ld. CIT, DR in his written submissions has submitted that, in the course of search, the statement of Mr. Beli and Mr. Godha were recorded which constituted incriminating material to justify the disallowances made in the unabated AYs 2009-10 2010-11. According to him, the AO had analyzed the details of expenses found on the server and unearthed that certain expenses which were in nature of freebies had been guised as sales promotion expenses , and this, in his view was incriminating in nature. The Ld. CIT, DR has also filed written submissions obtained from the AO. 11.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing offcer could not have any basis for his reason to believe that the claim was prohibited in terms of Section 37 r/w the CBDT circular dated Circular No.5/2012 (F.No.225/142/2012-ITA.II), dated 01.08.2012 and the regulations of 2002. 20 In this context it becomes necessary to briefly refer to the regulations of 2002 as also the CBDT circular dated 1 August 2012. 21 The Medical Council of India in exercise of powers conferred under the MCI Act 1956 framed the regulations called the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002. These regulations pertain to the professional conduct, etiquette and ethics for medical practitioners. 22 Chapter 6 of the regulations in particular deals with certain acts which would be construed as unethical like advertising his professional skill or practice soliciting patients directly or indirectly etc. . 23 However, vide notifcation dated 10 December 2009 the aforementioned regulations were amended to include Clause 6.8. This was incorporated for the reason that the existing regulations prescribed conditions and regulations for medical practitioners only and did not cover their relationship with the pharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly held that the CBDT Circular being clarifcatory in nature and was in effect from the date of implementation of Regulation 6.8 of 2002 Regulations, i.e. from 14 December 2009. 29 In our opinion, since the CBDT Circular No.5/12 as also Regulation 6.8 of 2002, were not applicable to the case of the Petitioner for the relevant assessment year 2008-09, there would be no tangible material or basis for the assessing officer to have reason to believe that income for the said assessment year 2008-09 had escaped assessment. 11.12 Having regard to the above position of law, we thus hold that the CBDT Circular No. 5/2012 read with MCI Regulations, 2009 did not apply to the sales promotion expenses incurred by the assessee in FY 2008-09 relevant to AY 2009-10. It is accordingly held that the sales promotion expenses disallowed by the AO in this AY 2009-10 by invoking Explanation (1) to Section 37(1) of the Act was unjustified. Thus, the entire disallowance is held to be unsustainable and is directed to be deleted. 11.13 Now coming to AY 2010-11, as noted above, the CBDT Circular No. 5/2012 read with MCI Regulations, 2009 is effective only from 14.12.2009. Accordingly, any sales promotio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MCI regulations 2009. 11.17 The Ld. AR has also rightly pointed out that, being a pharmaceutical company, the assessee cannot advertise its products. However, the assessee is entitled to create awareness of its products by participating in exhibitions and organizing conferences and therefore the expenditure incurred for organizing the same would not fall within the ambit of CBDT Circular No.5/2012 read with MCI Regulations 2009. Likewise, any journals or periodicals printed and shared with customers, distributors or medical practitioners to make them aware about the research behind manufacture of any new medication or its uses or effects in any particular disease also cannot be termed as gifts given to doctors. However, the expenses, if any, incurred on travel and hotel accommodation of the doctors to attend these exhibitions or conferences would however be hit by the rigors of MCI Regulations, 2009. 11.18 In light of the above understanding of the position of law and MCI Regulations, 2009, we now proceed to examine the head-wise nature of sales promotion expenses claimed by the assessee and ascertain as to the quantum of expenses, if any, which qualifies as freebies given to doct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the expenses on Patient Detection were incurred for the benefit of patients and not the doctors and thus deleted the same. Likewise, camp expenses were examined by the Ld. CIT(A) and was noted to have been paid to various camps and included expenses incurred for travelling refreshments of field staff or patients and thus was not related to doctors. 11.19.3 Before us, the Ld. DR was unable to point out any specific defect in the above submissions of the Ld. AR as well as the findings of Ld. CIT(A). We thus do not see any reason to interfere with the Ld. CIT(A) s action of deleting the disallowance made by the AO out of Expenses on Patient Detection / Education Camp Camp expenses. 11.20 We now come to Sponsorship Expenses. The AO is noted to have held that these expenses were for the benefit of doctors and thus disallowed the same in full. It is observed that, there were no specific reasons assigned by the AO for arriving at such conclusion. On appeal, the Ld. CIT(A) is noted to have examined the details of these expenses and he found that these payments were made to trade associations for sponsoring their events as a measure of brand-awareness by the asessee and not to any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head majorly comprised of payments to organizers for hiring erection of stalls at their symposiums, registration charges, hotel expenses travelling expenses and disallowed the entire amount as freebies to doctors. The Ld. CIT(A) however noted that these expenses were paid to institutions and not doctors and thus deleted the same. Having heard the rival submissions and upon examining the facts placed before us, it is noted that the payments made by the assessee can be categorized into three categories viz., (a) payments made to institutions/trade bodies for registration, hiring of stall, designing and erecting their stalls, (b) hotel expenses and (c) travelling expenses. According to us, there is no such bar under the MCI regulations preventing the assessee from registering themselves at different symposiums, hiring erecting stalls etc. The Ld. AR showed us that these expenses were paid to institutions / trade bodies. We agree with the Ld. CIT(A) that these expenses did not result in any benefit to the medical practitioners and thus could not be disallowed u/s 37 of the Act. With regard to hotel travelling expenses, we find that these expenses comprised of refreshments provided to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be said to constitute freebies to medical practitioners and thus is held allowable u/s 37(1) of the Act. As far as hotel travelling expenses are concerned, we find that these expenses comprised of refreshments provided to doctors who were the delegates at the conferences and reimbursement of their travelling expenses. As noted earlier, these expenses indeed benefitted the doctors and would tantamount to availing hospitality from a pharmaceutical company. According to us therefore, only the hotel travelling expenses fell within the ambit of MCI regulations and directed to be disallowed and added back u/s 37(1) of the Act. 11.23 We now take up the Brand Recall Purchases, HTC Expenses, CRM Expenses and Sales Promotion Other Sales Promotion Expenses together. Briefly stated, the AO noted that the brand re-call purchases included procurement of customized items such as clock, cup, cookware etc. The assessee had explained that these sales promotion articles which had their name logo were given to customers, retailers, stockiest and distributors as a part of their advertisement strategy. The AO however noted that certain items purchased included paper weight, utility pouch, calling b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were incurred for researching printing literature or purchasing journals regarding the products and its related uses/effects. As noted earlier, these expenses do not result in any benefit or gifts given to the doctors. We thus agree with the following findings of Ld. CIT(A) recorded in AY 2011-12 deleting the disallowance made by the AO on account of expenses incurred under this sub-head. 6.4.3 Further, with respect to expenses incurred under the head 'Journal and periodicals', I find that the same are not related to doctors and used for the branding of the products of the assessee. The said journals and periodicals contains the description and articles on the products of the assessee which are circulated by the assessee in order to advertise its brands. The main purpose behind these expenses is for providing knowledge and update about its products. Thus, the doctors have not get any benefit from such expenses paid to third party. Therefore, 100% disallowance of Rs. 98,05,864/- made by the AO is deleted. 11.25 Now we examine the sub-head Taxi Hire Charges . It is noted that these expenses related to the reimbursements of local taxi / conveyance expenses incurred by the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses Gifts for Sales Promotion . Briefly noted, these expenses are noted to cover the cost of articles / gifts purchased by field staff to be distributed to wholesalers / stockiest / business partners etc. The assessee is noted to have placed sample supporting s at Page Nos. 270 to 279 of Paper Book No. 3. It is observed that, the AO had disallowed these expenses under erroneous understanding that these were given to doctors. On appeal, the Ld. CIT(A) in AY 2014-15 is noted to have deleted the addition by observing as under :- Further, with respect to the expenditure incurred under the head Trade relation expense and gifts for sales promotion expenses, the same has majorly incurred on the distributors and stockists for the domestic marketing. Therefore, it is not incurred in relation to the doctors. Therefore, 100% of the disallowance of Rs. 95,79,992/- in relation to Trade Relation expenses and Rs. 5,66,672/- in relation to Gift for sales promotion expenses by the AO is deleted. 11.27.1 The Ld. CIT, DR appearing for the Revenue was unable to dislodge the above findings of the Ld. CIT(A) in light of the details placed by the assessee in the paper book. We accordingly uphold the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher profit-linked deduction under Chapter VI-A. 2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits . 3. In view of the above, the Board has accepted the settled position that the disallowances made under sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance. 11.31 It was brought to our notice that the AO had already, in principle, accepted the above plea of the assessee qua the amount disallowed in the assessment and accorded the benefit of the Circular (supra). The AO is noted to have attributed the disallowance relatable to the eligible units and enhanced the eligible profits of the units available for deduction u/s 80-IC of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal for AY 2012-13 Ground No. 8 of the Assessee s appeal for AY 2014-15 13.1 These grounds of the Revenue are against the Ld. CIT(A) s action of reversing the AO s action of not considering the profit derived from sale of scrap as eligible profit of industrial undertaking u/s 80IC of the Act. Briefly noted, the AO following the identical line of reasoning set out by his predecessors held that the sale of scrap does not constitute turnover and is not derived from the eligible undertaking. The AO accordingly held the profit from sale of scrap to be ineligible for deduction u/s 80-IC of the Act. Likewise, on appeal, the Ld. CIT(A) is noted to have deleted this disallowance by following the order passed by this Tribunal in assessee s own case in ITA No.3597/Mum/2016 for AY 2009-10 dated 29.08.2022. The Revenue is now in appeal before us. 13.2 Heard both the parties. It is noted that the impugned issue stands squarely covered in favour of the assessee by the decision rendered by this Tribunal in their common order passed in assessee s own case for AYs 2008-09 2009-10. The relevant findings of the Tribunal is noted to be as under :- We have carefully considered the rival contention and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from excise duty in terms of the said Notification as a new unit with effect from 01.07.2011 i.e. the date of commencement of commercial production. It is noted that the said exemption was given to the new units for development of Industries and generation of employment in the North Eastern States. In this regard relevant extracts of Notification dated 01.04.2007 is reproduced below: Incentives will be available to all industrial units, new as well as existing units on their substantial expansion, located anywhere in the North Eastern Region. Consequently, the distinction made between thrust and non-thrust industries made in NEIP, 1997 will be discontinued from 01.04.2007. 14.2 In view of the above, it was the plea of the assessee that the incentive in the form of excise duty subsidy, have been granted for setting up new unit in the State of Sikkim which lagged behind in industrial development, for development of industries and generation of employment opportunities. The object of the assistance was not to enable the assessee to run the business more profitably but encourage them to set up a new unit or expand the existing unit for overall economic development of the State. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws: 21. What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the purpose test . It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is equally immaterial. 22. Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugar, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference. (Emphasis Supplied) 14.5 The above decision of the Hon'ble Supreme Court has been followed by the jurisdictional Hon'ble Bombay High Court in the case of Pr. CIT Vs Welspun Steel Ltd (264 Taxman 252). In the decided case also, the Hon ble Court held that, where the incentive under the Industrial Scheme is given only to new units and units which have undergone an expansion, then the real purpose of such incentive has to be seen as a capital subsidy and therefore should be regarded as a capital receipt and not a revenue receipt. The relevant findings of the Hon ble High Court are noted to be as follows :- 6. Having heard the learned Counsel for the parties on this question, we notice that, the Government of Gujarat Sales Tax Incentive Scheme was envisaged to promote large scale investments in the Kutch District since on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se test would ensure that, the subsidy was capital in nature. 14.6 Following the ratio laid down in the judgements (supra), we see no reason to interfere with the Ld. CIT(A) s findings hold that the excise subsidy received by the assessee was in the nature of capital receipt not liable to tax, as the object of granting subsidy was to encourage setting up new industries for industrial growth of industrially non-developed area. 14.7 We now come to the issue relating to treatment of these subsidies while computing book profit u/s 115JB. It is noted that, in the context of similar State Industrial Scheme, the Hon'ble Calcutta High Court in the case of Ankit Metal and Power Ltd. (416 ITR 591) has held that, the subsidies received for setting up new industry is not in the nature of income, and therefore cannot be deemed as income, for the purposes of computing book profit u/s 115JB of the Act. In the decided case, the assessee had received interest subsidy under the WB Incentive Scheme, 2000 and power subsidy under the Power Intensive Industries Scheme, 2005 for setting up Sponge Iron Plant in Bankura. Before this Tribunal, the assessee claimed that receipt of such subsidies in form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ievance projected by the Revenue in the aforesaid ground No. 2 is as to whether the excise duty refund which were held by the CIT(A) to be capital receipts not chargeable to tax can still be considered as part of the book profits u/s. 115JB of the Act, even though these sums have been credited in the profit and loss account and treated as income and even though the exclusion of these sums for the purpose of computing book profit u/s. 115JB has not been specifically provided under explanation below sec. 115JB (2) of the Act. In rejecting the claim of the Assessee in this regard, the AO held that these sums have been credited in the profit and loss account and treated as income and exclusion of these incomes (sums) for the purpose of computing book profit u/s. 115JB has not been specifically provided under explanation below sec. 115JB (2) of the Act. 22. We have heard the submission of the learned counsel for the Assessee. As far as the excluding the subsidies in question from computation of book profit u/s 115JB of the Act is concerned, the provisions of sec. 115JB of the Act have to be looked at. Section 115JB of the Act provides that notwithstanding anything contained in any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on identical facts as that of the Assessee's case, there can be no doubt that subsidies in question does not have any character of income. 24. When a receipt is not in the character of income, can it form part of the book profits for the purpose of sec. 115JB of the Act, is the question that arises for consideration. The ITAT Kolkata Bench in the case of Dy. CIT v. Binani Industries Ltd. [2016] 178 TTJ 658 : had to deal with a case where the question was as to whether receipts on account of forfeiture of share warrants amounting to Rs. 12,65,75,000/-, being a capital receipt, would be liable for taxation u/s 115JB. The tribunal after referring to several decisions on the issue viz., the Hon'ble Apex Court in case of Indo Rama Synthetics (I) Ltd. v. CIT [2011] 330 ITR 336/9 taxmann.com 25, Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 (SC), Special Bench ITAT in the case of Rain Commodities Ltd. v. Dy. CIT [2010] 40 SOT 265 (Hyd.) (SB), ITAT Luknow Bench in the case of ACIT v. L.H. Sugar Factory Ltd. and vice versa [ITA Nos. 417 , 418 339/LKW/2013, dated 9-2-2016] and decision of Mumbai ITAT in the case of Shivalik Venture (P.) Ltd. v. Dy. CIT [2015] 70 SOT 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not included in the book profits. The Bench also referred to the decision of the Mumbai Bench of the ITAT in the case of Shivalik Venture (P.) Ltd. (supra) which was a case where the question was whether profits arising on transfer of a capital asset by a company to its wholly owned subsidiary company which is not treated as income u/s 2(24) of the Act and since it does not form part of the total income u/s. 10 of the Act and therefore does not enter into computation provision at all under the normal provisions of the Act, the same should be considered for the purpose of computing book profit u/s 115JB of the Act. The Mumbai Bench held as follows: '26. We shall now examine the scheme of the provisions of sec. 115JB of the Act. It is pertinent to note that the provisions of sec. 10 lists out various types of income, which do not form part of Total income. All those items of receipts shall otherwise fall under the definition of the term income as defined in sec. 2(24) of the Act, but they are not included in total income in view of the provisions of sec. 10 of the Act. Since they are considered as incomes not included in total income for some policy reasons, the legislature, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Pr. CIT v. JSW Steel Limited (270 Taxman 201) and CIT v. B. G. Shirke Construction Technology (P.) Ltd.(395 ITR 371) has held that, it is open for an assessee to lodge a new claim in a proceeding under section 153A which was not claimed in his regular return of income, provided the assessment stood abated as a consequence of the search. Also, the Hon ble Bombay High Court in the case of CIT Vs Pruthvi Brokers Shareholders (supra) after considering the decisions of the Hon ble Supreme Court in the cases of Addl. CIT v. Gurjargravures (P.) Ltd., (111 ITR 1), Jute Corpn. of India Ltd. v. CIT (187 ITR 688), National Thermal Power Co. Ltd. v. CIT (229 ITR 383) and Goetze (India) Ltd. v. CIT (supra) has upheld the powers of the appellate authorities including Ld. CIT(A) to entertain and adjudicate additional claims which was not made by an assessee in the return of income. 14.11 We further note that, on similar set of facts circumstances, identical contention was also raised by the Revenue before the Hon'ble Calcutta High Court in the case of Ankit Metal and Power Ltd. (supra). In the decided case also, the assessee had raised this plea for the first time before the Tribunal viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (supra) holding that Tribunal has the power to entertain the claim of deduction not claimed before the Assessing Officer by filing revised return. Respectfully following the aforesaid decision as well as the view already taken by us in this case that the aforesaid subsidies are capital receipt and not an 'income' and not liable to Tax Tribunal in exercise of its power under section 254 of the Income-tax Act justified this claim though no revised return under section 139 (5) of the Act was filed before the Assessing Officer. We answer both the question Nos. 1 and 2 in negative and in favour of assessee. 14.13 For the reasons set out above therefore, we do not find any merit in the legal plea raised by the Ld. CIT, DR contesting validity of admission of additional claim by the Ld. CIT(A). Overall thus, we see no reason to interfere with the order of Ld. CIT(A) on this issue and uphold his action of directing the AO to delete / reduce the excise duty subsidy both while computing income under normal provisions as well as book profit u/s 115JB of the Act. These grounds of the Revenue are therefore dismissed. 15. Issue 12: Additional Claim for deduction of foreign fluctuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered on this particular claim. The Ld. AR further brought to our notice that, the AO while giving effect to the appellate order u/s 250/143(3) of the Act had accepted the revised computation of income in its entirety. The AO had accordingly reduced the gain credited to foreign fluctuation translation reserve along with the excise duty subsidy, while re-computing the book profit u/s 115JB of the Act. Hence, prima facie there was no grievance of the assessee. The Ld. AR however submitted that, since the Ld. CIT(A) had not rendered any specific finding in his appellate order directing the AO to do so, the assessee was advised to raise this issue by way of additional ground before this Tribunal. 15.3 We have heard both the parties. It is noted that, the assessee had credited notional gains to foreign fluctuation translation reserve in the Schedule to Balance Sheet, which is found available at Page 302 of the Paper Book. This restatement of foreign currency loans and directly crediting of the gains to the foreign fluctuation translation reserve, without routing the same through P L A/c, was stated to be in compliance with AS-11 notified by the ICAI. It is also not in dispute that the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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