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TMI Blog2007 (6) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... g reasons : 3. The learned CIT found that the assessee has two units one at Kanjikode and the other one at Goa. While Kanjikode unit is eligible for deduction @ 30 per cent, the Goa unit is eligible for 100 per cent deduction. He found that although the assessee had debited depreciation in the P&L a/c for these two units it has not considered depreciation in computation of its business income and consequently no depreciation was considered while calculating the deduction under s. 80-IB which resulted in higher deduction under s. 80-IB. According to the learned CIT this is not in conformity with the provisions of the Act and not in conformity with the decision of the Hon'ble Bombay High Court in the case of Indian Rayon Corpn. Ltd. v. CIT [2003] 182 CTR (Bom) 247 : [2003] 261 ITR 98 (Bom). 3.1 Similarly, he observed that as against the total sales of Rs. 657.28 crores which includes sales of Goa and Kanjikode units which are eligible for benefit of deduction under s. 80-IB, the assessee had declared the net profit of Rs. 62.20 crores. However, from the P&L a/c for Goa and Kanjkode units furnished by the assessee, he found that the combined total sales of these units are shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as during block assessment proceedings and in subsequent years. It was also submitted before the learned CIT that the issue regarding basis of determination of the profits of the Goa and Kanjikode units was subject-matter of appeal before CIT(A). 8. As regards treatment of interest of Rs. 23.39 lakhs, it was submitted that as per para 2 of the agreement a time-limit for payment of interest was provided and therefore any delay in payment could attract interest. It was further submitted that M/s Bombay Oil Industries Ltd. has shown the interest in its income. The assessee also relied on the decision of the Hon'ble Supreme Court in the case of Bombay Steam Navigation Co. (1953) (P) Ltd. v. CIT [1965] 56 ITR 52 (SC) and submitted that the interest is allowable as a deduction under s. 37(1). 9. As regards calculation of income under s. 115JB of the IT Act, it was submitted that any amount added or deleted while computing the taxable income under normal provisions of the IT Act has no relevance while determining profits under s. 115JB. It was further submitted that books of account are prepared under the Companies Act, 1956 and duly certified by the auditors and filed with RoC and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act, 1961. Referring to p. 4 of the paper book, he submitted that the assessee vide his letter dt. 20th Feb., 2006 had given reply to the notice issued by the CIT under s. 263. Referring to the p. 9 of he paper book, he submitted that the assessee vide letter dt. 29th March, 2006 had again written another letter to the CIT explaining the various issues raised by him. The learned counsel further submitted that since the issue has clearly merged with the order of the learned CIT(A), the learned CIT has no power to assume jurisdiction under s. 263. 12. He further submitted that the assessee made claim under s. 80-IB which includes various aspects. He submitted that the assessee has taken a particular view for calculation of deduction under s. 80-IB. The AO took another view and reworked the deduction whereas the learned CIT(A) still took another view. Referring to the order of the learned CIT(A), a copy of which is placed at pp. 34 to 39 of the paper book, he submitted that the learned CIT(A) vide para 6.1 has clearly discussed this issue. He submitted that in the earlier assessment year depreciation was claimed but during this year no depreciation has been claimed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 80-IB, depreciation has also to be allowed as a deduction for computation of business profit. 17. As regards head office/administrative office expenses, he submitted that the order of the AO had fully merged with the order of the learned CIT(A) on the basis of the decisions cited as above because the learned CIT(A) has also discussed and gave partial relief on same items and hence the learned CIT has no power to assume jurisdiction under s. 263 of the Act. He further submitted that there are also factual inaccuracies in the annexure given by the learned CIT. 18. As regards to the claim of interest amounting to Rs. 23.39 lacs relating to purchase of brand names and trademarks as revenue expenses, he submitted that the interest was paid for delay in paying the purchase price of the asset. He further submitted that although the agreement did not provide for the interest payment, the parties mutually agreed for payment of interest. Referring to p. 10 of the order of the CIT passed under s. 263, he submitted that the learned CIT misdirected himself and invoked the provisions of the Expln. 8 to s. 43(1) of the Act holding that the payment is capital in nature. However, the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for calculation of deduction under s. 80-IB was never before the AO or the learned CIT(A). Therefore, the question of merger as argued by the learned counsel for the assessee is not applicable to the facts of the percent case. The learned Departmental Representative also relied on the following cases : (i) Indian Rayon Corpn. Ltd. v. CIT; (ii) Vahid Paper Converters v. ITO [2006] 100 TTJ (Ahd)(SB) 532 : [2006] 98 ITD 165 (Ahd)(SB); (iii) CIT v. Shri Arbuda Mills Ltd. [1998] 147 CTR (SC) 4 74 : [1998] 231 ITR 50 (SC); (iv) CIT v. G.M. Mittal Stainless Steel (P) Ltd. [2003] 179 CTR (SC) 553 : [2003] 263 ITR 255 (SC). 22. As regards apportionment of expenses, the learned Departmental Representative referring to the p. 8 of the order of the learned CIT submitted that the assessee has apportioned the expenses only on domestic sales. Neither the AO nor the learned CIT(A) has held that export sales should be excluded. 23. Referring to the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 159 CTR (SC) 1 : [2000] 243 ITR 83 (SC), he submitted that an incorrect assumption of fact or incorrect application of law will render the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the CIT has no power to assume jurisdiction under s. 263. At the same time it is the contention of the Revenue that since the issue regarding computation of deduction under s. 80-IB without claim of depreciation was not considered either by the AO or the leaned CIT(A), therefore, the question of doctrine of merger does not apply. 29. We find that the Expln. (c) to s. 263 reads as under : 263. Revision of orders prejudicial to Revenue.-(1)... Explanation.-... (a) ..... (b) ..... (c) where any order referred to in this sub-section and passed by the AO had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the CIT under this sub-section shall extend (and shall be deemed always to have extended) to such matters as had not been considered and decided in such appeal." 30. From the above it is clear that after 1st June, 1988 the powers of CIT under s. 263 have been extended in respect of matters which had not been considered and decided in appeal filed against the assessment order. 31. We further find that the AO at p. 9 of the assessment order has recorded the deduction under s. 80-IB with the following observations : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered the mater. It is seen that this issue had come up for the decision of my learned predecessor in asst. yrs. 1999-2000 and 2000-01. Therefore, detailed reasons given, the allocation of corporate office expenses and depreciation to Goa and Kanjikode units for purposes of computing deduction under s. 80-IB had been upheld. I quite agree with the view taken by my learned predecessor on this issue. Accordingly and for the same reasons, the action of the AO in this regard is confirmed." 33.1 We also find from the order of the learned CIT(A) that he had given detailed findings regarding apportionment of some of the expenses. 33.2 It is the settled proposition of law that the CIT(A) has plenary powers in disposing of an appeal. The scope of his power is conterminous with that of the AO. He can do what the AO can do and can also direct him to do what he has failed to do. [Vide decision of the Hon'ble apex Court in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC)]. Therefore, in our opinion, when the issue of deduction under s. 80-IB was before the learned CIT(A) he is presumed to have applied his mind regarding the deduction under s. 80-IB as a whole. 33.3 We f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercised revisional powers. The order of revision was null and void." 34. We find that the Tribunal in the case of Siemens India Ltd., after considering the decision of the Hon'ble Calcutta High Court in the case of Oil India Ltd. and the decision of the jurisdictional High Court in the case of Remix Construction has held as under : "6. Having regard to the rival submissions we are of the view that the assessee deserves to succeed. Firstly, the deduction under s. 80HHC was the subject-matter of appeal before the CIT(A), as is evident from the relevant portions of his order which was extracted hereinbefore. The subject-matter of the appeal before him is the deduction under s. 80HHC and not any other element which goes into the computation of the deduction under s. 80HHC like export turnover or total turnover. We find that the decision of the Hon'ble Calcutta High Court in the case of Oil India Ltd., cited supra, clearly covers this issue and it is in favour of the assessee. The head note of this decision reads as follows : 'where an appeal is preferred before the AAC and a subject is particularly raised, the CIT cannot revise such an order taking into account an asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order appealed against was passed notwithstanding that such matter was not raised before him. This shows that any matter arising out of the proceedings before the AO is open before the CIT(A) and he is competent to do and can also direct him to do what he has failed to do. The CIT(A) is competent to consider all the aspects of the matter which is agitated before him. It is not only the right but the duty of the CIT(A) to examine various aspects of the issue which is the subject-matter of controversy before him. When a particular matter is disputed by the assessee before the first appellate authority and he gives his findings on some aspects of the matter, it is implied that he has examined all aspects of that matter before adjudicating upon the matter. This is obvious from his power of enhancement, which has the effect of increasing the income by setting right the lacunae left over by the AO while framing the assessment. Jute Corporation of India Ltd. v. CIT [1990] 88 CTR (SC) 66 : [1991] 187 1TR 688 (SC) and CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC) relied on." 36. In view of the above discussion, we are of the considered opinion that since the matter regarding deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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