Income Tax Appellate Tribunal - Mumbai
Lupin Ltd. (Lupin Laboratories Ltd.), ... vs Assessee on 11 October, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES " I ", MUMBAI
BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER
AND SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. : 5088/Mum/2005
Assessment Year : 1994-95
M/s. Lupin Limited JCIT, Special Range 6,
(Formerly known as Lupin Mumbai
Laboratories Limited)
159, CST Road, Santacruz (E), Vs.
Kalina, Mumbai-400 098.
PAN NO: AAACL 1121 E
(Appellant) (Respondent)
&
ITA No. : 4907/Mum/2005
Assessment Year : 1994-95
JCIT, Special Range 6, M/s. Lupin Laboratories Ltd.
Mumbai (since merged with Lupin
Chemicals Ltd, now known as
Lupin Ltd)
Vs. 159, CST Road, Santacruz (E),
Kalina, Mumbai-400 098.
PAN NO: AAACL 1121 E
(Appellant) (Respondent)
Appellant by : Ms. Vasanti B. Patel
Respondent by : Shri P. K. Shukla
Date of hearing : 11.10.2012
Date of Pronouncement : 02.11.2012
ORDER
Per AMIT SHUKLA, J.M. :
These are the cross appeals filed by the assessee and the department against impugned order dated 09.05.2005 passed by the Ld. CIT-X, Mumbai 2 ITA Nos : 5088 & 4907/Mum/2005 for the quantum of assessment passed u/s.143(3) r.w.s 147 for the Assessment Year 1994-95.
ITA No. : 5088/Mum/2005 Assessment Year : 1994-95
2. In ground no. 1, the assessee has challenged the validity of reopening of assessment u/s.147. The facts in brief are that the assessee has filed its return of income at "Nil" on 08.08.1995. In pursuance to that scrutiny assessment was completed u/s.143(3) vide order dated 17.03.1997 at an income of `.3,81,850/-. This order was further modified u/s.154 vide order dated 09.07.1998 and the total income was determined at `.1,68,360/-. In the mean time, the assessments so completed u/s.143(3) was sought to be reopened u/s.148, vide notice dated 24.07.1997 interalia on the following "reasons recorded" by the A.O. :-
"Assessment Year - 1994-95 A letter has been received from Deputy Commissioner, Special Range 3, dated 26/6/97 whereby letter dated 28/4/97 of Deputy Commissioner of Income tax, Central circle I, Jaipur, was forwarded along with copy of assessment order for assessment year 1994-95 in the case of Meru Woodlands Caterers (P) Ltd., Kotawala Market, Tripolia Bazar, Jaipur passed under sec. 143(3) on 31/3/97. From the perusal of this letter and assessment order it is seen that share capital raised by the assessee is bogus and not completely verificable, e.g., M/s. Meru Woodland Caterers (P) Ltd. has not been able to explain the investment in the shares of Lupin Laboratories Limited through public issue.
Share investment requires verification. Hence in view of Delhi High Court decision in the case of Sophia Finance Ltd., income has escaped assessment, as the unverifiable share capital would need to be added under sec. 68.3
ITA Nos : 5088 & 4907/Mum/2005 Further loan given by the assessee to Kothawala Exports Pvt. Ltd., at lower rate of interest than the rate at which it has borrowed is also not for business purpose and hence disallowance under sec. 37 in view of H.R. Sugar Factory 187 ITR 363 (All). Hence income has escaped assessment.
Further from perusal of record it is seen that deduction under sec. 80HHC has been wrongly computed as the total business is not the basis but unit wise profit is taken. Hence, deduction under sec. 80HHC is excess than allowable. Hence income has escaped assessment under sec 147 Explanation (c)(iii) & (iv). Further deduction under sec. 80G should be allowed only after other deductions, which was not done. Hence, income has escaped assessment under sec. 147 Explanation (c)(iii) & (iv)."
3. The learned counsel appearing on behalf of the assessee submitted that so far as the first part of the "reasons recorded", the A.O. has not made any addition from which it can be inferred that he has dropped the proceedings u/s.147 on this issue. With regard to the second part of the "reasons recorded", she submitted that this amounts to "change of opinion"
as the assessee has made the full disclosure of the facts made in the computation of income and in Form No.10CCAC filed along with the return of income. It was based on these material and facts on record and on explanation offered during the course of the assessment proceedings, the A.O. has allowed the deduction u/s.80HHC to the assessee. Without there being any fresh material on record, such a reopening on the concluded issue amounts to "change of opinion" which is not permissible in law. In support of her contention she has relied upon the decision of the ITAT Mumbai Bench in the assessee's own case for the Assessment Year 1993-94 in ITA No.4951 & 4906/Mum/2005. Further reliance was also placed on the 4 ITA Nos : 5088 & 4907/Mum/2005 decision of CIT vs. Kelvinator of India reported in 256 ITR 1(FB) (Del), which has been approved by the Hon'ble Supreme Court in 320 ITR 561 and on the decision of Hon'ble Bombay High Court in the case of General Insurance Corporation of India vs. DCIT reported in 342 ITR 27. Besides this, host of other decisions were referred to, the list of which was provided before us. Based on these decisions, she submitted that the A.O. cannot reopen the case merely on the basis of "change of opinion".
4. Per contra, the ld. DR submitted that so far as the first part of the "reasons recorded", the same was based on the information received from the department. This itself is a prima facie 'reasons' to entertain a belief that the income chargeable to tax has escaped assessment. Even though the A.O. has not made any addition on this scope, this does not preclude the A.O. for entertaining the reason to belief based on such information. Regarding the second part of the "reasons recorded", he submitted that apparently the deduction computed u/s.80HHC was erroneous and was excess of what was admissible in law. Thus the reasoning given by the Ld. CIT(A) in his order for sustaining the "reasons recorded" is justified. He strongly relied upon the findings of the Ld. CIT(A).
5. We have carefully considered the rival contentions, perused the material on record. From the perusal of the "reasons recorded" it is seen that an information was received from the Deputy Commissioner, Central 5 ITA Nos : 5088 & 4907/Mum/2005 Circle -1, Jaipur along with the copy of the assessment order in the case of Meru Woodlands Caterers (P) Ltd. passed u/s.143(3), that share capital raised by the assessee is bogus and not completely verifiable. This information itself prima-facie can lead to the 'reasons to believe' that the income chargeable to tax has escaped assessment. Even though the A.O. has not finally made any addition on this score in the assessment order, however, at the time of entertaining the 'reasons to believe' the A.O. is required to see whether there was any information or credible material having live nexus with the income chargeable to tax which can be said to have escaped assessment. This 'reason' itself is sufficient to clothe the A.O. to acquire the jurisdiction to reopen the case u/s.147. So far as the second part of the "reasons recorded", prima facie it can be said that the said 'reasons' are based on "change of opinion", as the assessee has disclosed all the material facts necessary for the computation of deduction u/s. 80HHC and the responsibility of the assessee is limited to disclosure of all the primary facts necessary for the assessment and it is the A.O. who has to draw the legal inference based on such primary facts and compute the correct income as per law. Thus the second part of the "reasons recorded"
do not meet the requirement of the law. However, once, one part of the "reason recorded" is held to be sufficient to acquire the jurisdiction for reopening the case u/s.147, then there is no requirement to go into the second part of the "reasons recorded" which even though is not prima facie tenable in law. Thus on these facts and circumstances of the case, we do 6 ITA Nos : 5088 & 4907/Mum/2005 not find any merits in the contention of the learned counsel and accordingly we uphold the validity of reopening u/s.147 based on the "reasons recorded". Thus ground no. 1 is decided against the assessee and, therefore, is dismissed.
6. Ground nos. 2, 3, and 4 which are relating to various other objections to the validity of the assessment, the same has not been pressed by the learned counsel at the time of hearing. Accordingly these grounds are being dismissed as not pressed.
7. Ground nos. 5 and 6 relates to the disallowance of amortisation of payment made for leasehold land of `.2,45,000/-. At the outset, the learned counsel of the assessee submitted that this issue has come up for consideration in assessee's own case in the A.Y. 2000-01 in ITA No. 3314/3242/M/05 and in the A.Y. 2002-03 in ITA No.648/411/M/2008, wherein this issue has been decided against the assessee. However, the learned counsel submitted that this issue now stands covered by the decision of DCIT v SUN Pharmaceuticals Limited reported in 329 ITR 479, wherein it has been held that making of advance payment for acquiring land on lease for 19 years was allowable as revenue expenditure. Therefore, the decision of the earlier Tribunal order may not be followed. 7.1 On the other hand, the learned DR relied upon the findings given by the Ld. CIT(A) as well as the earlier orders of the ITAT. 7
ITA Nos : 5088 & 4907/Mum/2005
8. After carefully considering the rival submissions, we find that the amount which has been amortized relates to the payment for lease hold of land and building. The Ld. CIT(A) has dismissed the assessee's ground on the reason that this issue has been decided against the assessee by the Ld. CIT(A) in the earlier year. The Tribunal also in the A.Y. 2000-01 in ITA No.3314/M/2005 has dismissed the assessee's appeal on the following reasoning:-
"6. Ground 2 relates to CIT (A)'s decision in confirming the disallowance of the assessee's claim of Rs 2,97,015/- u/s 35D.
7. During the assessment proceedings before us, the Ld AR stated that the said expenditure was incurred in connection with the issue of shares for increase in share capital. AO made disallowance basing on the apex court judgments in the case of M/s Brooke Bond India Ltd (225 ITR 798)(SC) and M/s Punjab State Industrial Development Corporation Ltd (225 ITR 792)(SC). The CIT (A) confirmed the action of the AO stating that the said expenditure should not be allowed as revenue expenditure. During the proceedings before us, Ld AR for assessee relied on various judgments including the jurisdictional High Court judgment in the case of Maharashtra Ugine and Steel Co Ltd (250 ITR 84)(Bom). After going through the said judgments, we find that the said jurisdictional High Court judgment relates to allowability of expenditure incurred on payment of Stamp duty for debenture issue and, therefore, we are of the considered opinion that the apex court judgments cited above are relevant and expenses are not allowable as revenue expenditure and thus, the order of the CIT (A) does not call for any interference. Accordingly, ground 2 is dismissed."
9. From the perusal of the above decision, it is seen that the Tribunal had decided this issue based on the decision of M/s Brooke Bond India Ltd. (supra) and M/s Punjab State Industrial Development Corporation Ltd (supra), wherein the matter related to the issue of allotment of shares 8 ITA Nos : 5088 & 4907/Mum/2005 and increase in share capital, whereas in this case, the issue is entirely different and relates to the payment on account of lease hold of land and building. This issue as rightly been pointed out by the learned counsel is covered by the decision of the Hon'ble High Court of Gujarat in the case of DCIT vs. Sun Pharmaceuticals Industries Ltd. reported in 329 ITR 479, wherein the Hon'ble High Court has held that the payment of advance lease rent for acquisition of land on lease for a period of 19 years is revenue expenditure. While coming to this conclusion the Hon'ble High Court has relied upon the principle and ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Madras Auto Services Ltd. (1998), reported in 233 ITR 468 (SC). The point in issue is also covered by the decision of the Hon'ble Madras High Court in the case of CIT vs. Ucal Fuel Systems Ltd. reported in 296 ITR 702, wherein similar matter was involved and was held that upfront lease rent charges paid for obtaining lease of land and building is revenue expenditure. In view of the aforesaid preposition laid down by the Hon'ble High Courts, we are persuaded to agree with the learned counsel that the earlier decision of the Tribunal cannot be held as a binding precedence on the facts of the case. Accordingly, the ground nos. 5 and 6 are allowed in favour of the assessee.
10. Ground Nos. 7, 8, 9 and 10 have not been pressed by the learned counsel at the time of hearing, accordingly the same is being dismissed as not pressed.
9
ITA Nos : 5088 & 4907/Mum/2005
11. In ground no. 11 the assessee has challenged the disallowance of deduction u/s.80HHC on the basis of entity, as a whole, as against on the basis of each business unit separately computed by the assessee. At the outset the learned counsel submitted that this issue has been decided in favour of the assessee by the Tribunal in assessee's own case for the A.Y. 2000-01 vide order dated 23.09.2008 passed in ITA No.3242 & 3314/M/05. The learned DR fairly conceded that this issue stands covered by the said decision of the Tribunal in the favour of the assessee.
12. After carefully considering the orders passed by the authorities below and the decision of the Tribunal in assessee's own case we find that similar issue has been decided by the Tribunal in favour of the assessee. The learned Tribunal has discussed this issue in the said order in para 8 to 11 which for the sake of ready reference is reproduced herein below :-
"8. Ground 3 relates to CIT (A)'s decision of calculating the allowable deduction u/s 80HHC not on the basis of the company as a whole but on the basis of each business unit of the assessee separately. In this regard, Ld AR for assessee relied on the submissions made before the CIT (A) in addition to various judgments. The said submissions of the assessee are reproduced from Para 12.2 of the CIT (A) order, which are as under:-
(1) the units/factories are located at different placed and the ventures were undertaken at different times and they are independent of one another;
(2) each establishment has its own subsidiary account and managed locally although overall some control is exercised by the head office;
(3) there are separate staff at each unit;
10
ITA Nos : 5088 & 4907/Mum/2005
(4) the character of the business activities / ventures in different places are different;
(5) apart from the existence of a centralized management in administrative matters and head office where a single set of final accounts is maintained, the different activities are not inter-
locked, inter-connected and inter-dependent in the day to day affairs; nor is the functioning of each activity dovetailed into one another; and (6) different know-how, different plants, different process method and technology are used for the manufacture of different products.
(7) separate identity of export benefit was available in Form No.10CCAC i e, when export profits were easily identifiable, such profits alone should have been considered for deduction.
9. After considering the above submissions, the CIT (A) decided the issue against the assessee and the relevant Para 12.3 is as under:-
"12.3 I have gone through the rival submissions, the decisions quoted by the rival parties and also the relevant materials on record. The crust of the problem is that whether deduction under sec 80HHC is 'qua business' or 'qua assessee'. In the appellant's case separate books of accounts are maintained for bulk drugs, formulations, export division, etc, which after auditing are merged at the Head Office for preparing a single profit and loss account. On a similar issue in para 9.4, pg 21-22 of the appeal order No. CIT (A) X/IF/88/04-05, dated 21/10/2004 for the assessment year 2001-02, I have decided this issue against the appellant and in favour of the Department. In view of this, the appeals of the appellant company fail on these grounds of appeal."
10. Aggrieved with the above, the assessee is before us. Assessee, while relying on the submissions made before the CIT (A), has relied on the recent judgment of the Madras High Court in the case of M Gani & Co (301 ITR 381) (Mad) relevant to assessment year 2001-02 apart from the coordinate Bench order 11 ITA Nos : 5088 & 4907/Mum/2005 in the case of Miku Agencies vide ITA 4205/Mum/1995 for AY 1991-92 to support his case that the computation u/s 80HHC must be calculated quo assessee and not qua business. Ld DR for revenue relied on the orders of the lower authorities.
11. We have heard the rival submissions and perused the orders of the lower authorities along with the judgments relied upon by the parties. From the perusal of the judgment in the case of M Gani & Co (supra), we find that the assessee is entitled to the allowability of deduction u/s 80HHC with the turnover of qua assessee and not the qua business, when assessee having maintained separate books of accounts for different businesses which is the case in the instant case also. Therefore, we are of the considered opinion that the CIT (A) order is set aside on this issue and AO is directed to recompute allowability of deduction u/s 80HHC qua business and not qua assessee as separate books of accounts maintained by the assessee for bulk drugs, formulas, export divisions etc. The merger of accounts at the head of office for making of single profit and loss account will not come in the way, as such merger is only 'for the limited purpose' of making of the financial statements as books of accounts is allowable. Accordingly, ground 3 is allowed."
Thus respectfully following the aforesaid decision, the said ground raised by the assessee stands allowed.
13. Ground no. 12 as admitted by both the parties is consequential in nature and, therefore, the same is treated as infructuous and is not adjudicated upon.
14. Ground nos. 13, 14, 15, 16, 17 and 18 have not have pressed by the learned counsel at the time of hearing, therefore, all these grounds are being treated as dismissed as not pressed.
15. In the result, the appeal filed by the assessee is partly allowed. 12
ITA Nos : 5088 & 4907/Mum/2005 ITA No. : 4907/Mum/2005 Assessment Year : 1994-95
16. We now take up department's appeal. Ground no. 1 relates to the deduction u/s.80IA on interest received from IDBI, income from services and interest received from bank deposit. The learned counsel of the assessee fairly admitted that interest on bank deposits though is not derived from industrial undertaking, however only net interest should be excluded.
17. The learned DR submitted that initially in the memo of appeal this ground was not taken, however, by way of additional ground this issue has been raised before the Tribunal challenging the direction of CIT(A) for netting of the interest. He submitted that once it is held that interest is not derived from the industrial undertaking, then the same cannot be netted against the other interest expenses. He strongly relied upon the findings of the A.O. On the other hand, the learned counsel for the assessee submitted that the issue of netting of interest has been decided in favour of the assessee by the Tribunal in assessee's own case in the A.Y. 2000-01 vide order dated 27.09.2008 in ITA No.3314 & 3342/M/05. She further submitted that in assessee's own case, the Hon'ble High Court has also decided this issue in the favour of the assessee following the decision of the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. CIT reported in 343 ITR 89.
13
ITA Nos : 5088 & 4907/Mum/2005
18. After carefully considering the rival submissions, the order passed by the authorities below and the decisions relied upon by the parties, we find that this issue stands squarely covered by the decision of the Tribunal in assessee's own case for the A.Y. 2000-01 and A.Y. 2002-03 and also in the appeal for the block period, decided by the Tribunal in ITA No. 311/M/03. We also find that the department has challenged this issue before the Hon'ble High Court in ITA No.5718 of 2010, wherein the question of law no. IV was specifically raised, which has been dismissed by the Hon'ble High Court following the decision of the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. CIT (supra). In view of these facts, we do not found any merits in the additional ground raised by the department and, therefore, the same is dismissed.
19. Ground no. 1 which has been raised by the departmental appeal in memo of the appeal is not adjudicated upon, as fairly admitted by the learned DR that the said issue is covered by additional ground as discussed above.
20. In ground no. 2, the department has challenged the deduction u/s.80IA and 80HHC on interest received from customers for delayed payments and excess recovery from debtors. The learned DR submitted that this interest received from the customers is not derived from the business carried on by the industrial undertaking, therefore, the same cannot be allowed for the purpose of deduction u/s.80IA and 80HHC. The 14 ITA Nos : 5088 & 4907/Mum/2005 learned counsel, on the other hand, submitted that this issue has been decided in favour of the assessee in assessee's own case for the A.Y. 2000- 01 in ITA No.3314 & 3242/M/05. It was also submitted that this issue has also attained finality from the stage of the Hon'ble High Court in assessee's own case. This issue was raised before the Hon'ble High Court by the department vide question of law no. VI raised in ITA No.5718 of 2010 which has been answered in favour of the assessee following the decision of the Hon'ble Bombay High Court in the case of CIT vs. Gridwell Norton Ltd. reported in (2009) 318 ITR 172.
21. After carefully considering the rival submissions and the judgements relied upon the learned counsel in assessee's own case, we find that this issue stands squarely covered in favour of the assessee by the order of Tribunal in A.Y. 2000-01 and also by the judgement of Hon'ble High Court of Bombay in ITA No.5718 of 2010 decided vide order dated 24.09.2012, wherein in para 5 thereof the Hon'ble High Court had categorically stated that this issue stands covered by the judgement given in the case of the CIT vs. Gridwell Norton Ltd. (supra). Thus respectfully following the said decision, the ground no. 2 raised by the department stands dismissed.
22. In ground no.3, the department has challenged the allowibility of deduction u/s.80-I before allowing deduction u/s.80HH. The Ld. CIT(A) has decided this issue in favour of the assessee after following the various decisions and after observing and holding as under :- 15
ITA Nos : 5088 & 4907/Mum/2005 "7. In grounds no. 12(d) of assessment year 1993-94 and ground no. 14(d) of assessment year 1994-95 the appellant has objected that benefit of sec. 80-I has to be granted on the gross total income and not on the income reduced by the amount allowed under sec. 80HH. I am in full agreement with the contentions of the A/R that deduction under sec. 80- I has to be allowed on the gross total income and not on the income reduced by the amount allowed under sec. 80HH. In view of the decisions in the case of J.P. Tobacco Products Pvt. Ltd. v. CIT 229 ITR 123 (MP)[SLP dismissed 245 ITR (St.) 71], CIT v. Nima Specific Family Trust 248 ITR 29 (Bom), CIT v. Chokshi Contracts Pvt. Ltd. 251 ITR 587 (Raj), CIT v. Sidpur Isabgul Processing Co. Ltd. 252 ITR 777 (Guj), CIT v. Avon Emery Industries 117 Taxman 510 (Raj), CIT v. M.P. State Electronics Development Corpn Ltd. 267 ITR 405 (MP), CIT v. Anita Stampings 2000 Tax LR 1009 (Guj), CIT v. Mittal Appliances Pvt. Ltd. 270 ITR 176 (Guj), Vam Organic Chemicals Ltd. v. DCIT 138 Taxman 20 (Del)(Mag) and Ramnath Exports Pvt. Ltd. v. IAC 42 TTJ (Del) 331. Secs 80HH and 80-I are independent; therefore, deduction under sec 80-I shall be allowed on the profits without reducing the deduction under sec.
80HH. In other words, a new industrial undertaking can claim deduction under both these sections. It is not necessary that after taking deduction under sec 80HH deduction under sec 80-I should be taken on the reduced balance. The appellant, therefore, succeeds on these grounds of appeal."
22.1 On this issue, the learned DR relied on the findings of the A.O. On the other hand, the learned counsel submitted that besides the decision cited by the Ld. CIT(A), this issue now stands decided in favour of the assessee by the decision of Hon'ble Gujarat High Court in the case of CIT vs. Venus Electricals reported in (2008) 304 ITR 347.
23. After carefully considering the rival submissions and the order passed by the authorities below, we find that this issue has been decided by the Hon'ble Supreme Court in the case of JCIT vs. Mandideep Engg. & 16 ITA Nos : 5088 & 4907/Mum/2005 Packaging Industries (P) Ltd. (2007) reported in 292 ITR 1 (SC), wherein the Hon'ble Supreme Court has held that u/s.80HH and 80-I are independent of each other and therefore, the deductions could be claimed both under ss. 80HH and 80-IA on the gross total income. The Hon'ble Gujarat High Court also in the case CIT vs. Venus Electricals (supra) has also held that the assessee is entitled to relief u/s.80IA without the deduction u/s.80HH from the profit of the business. Thus following the judicial precedence in the aforesaid cases and also the judgment relied upon by the Ld. CIT(A), we uphold the findings and the conclusion drawn by the Ld. CIT(A) and thus ground no. 3 as raised by the department stands dismissed.
24. Ground no. 4 relates to the exclusion of excise duty and sales tax from the total turnover for the purpose of computing deduction u/s.80HHC. At the outset both the parties agreed that this issue now stands covered by the decision of the Hon'ble Supreme Court in the case of Laxmi Machine Works reported in 290 ITR 667 and host of other decisions. It is also admitted by both the parties that this issue has been decided in favour of the assessee by the Tribunal in assessee's own case for the A.Y. 2000-01 in ITA No.3314 & 3242/M/05. After going through the said decisions we find that this issue has been decided in favour of the assessee by the Tribunal following the decision of the Hon'ble Bombay High Court in the case of CIT v. Sudershan Chemicals Industries Ltd. (2000) reported in 245 ITR 17 ITA Nos : 5088 & 4907/Mum/2005 769 (Bom). However, this issue now stands concluded by the judgment of Hon'ble Supreme Court in the case of CIT vs. Laxmi Machine Works (supra), followed by another decision of Hon'ble Supreme Court in the case of CIT v. Catapharma (India) (P.) Ltd. [2007] reported in 292 ITR 641. Thus in view of the law settled down by the Hon'ble Supreme Court, we hold that while calculating the deduction u/s.80HHC, amount of excise duty, sales tax are not to be included in the total turnover. In the result, the ground no. 4 as raised by the department stands dismissed.
25. In ground no. 5 the department has challenged the direction of the Ld. CIT(A) to reduce 90% of the net and not gross amount of interest from the services and interest from banks while calculating deduction u/s.80HHC. At the outset both the parties agreed that this issue now stands covered by the decision of the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. Vs. CIT (supra).
26. The learned counsel also pointed out that this issue has came up for consideration before the Hon'ble High Court in assessee's own case in ITA No.5718 of 2010, wherein specific the question of law no. V was taken which has been answered against the revenue and in favour of the assessee following the aforesaid decision of the Hon'ble Supreme Court. Thus following the binding precedence, we do not find any merits in the grounds raised by the department and the same is dismissed.
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ITA Nos : 5088 & 4907/Mum/2005
27. In ground no. 6, the department has challenged the deduction u/s.80HHC on the interest income received from the customers for delayed payment of sale consideration and recovery from the debtors after allowing the netting of expenses. Both the parties admitted that this issue stands covered against the department by the decision of the Tribunal in assessee's own case in the A.Y. 2000-01 in ITA No.3314 & 3242/M/05, wherein this issue has been decided following another decision of the Tribunal in assessee's own case in ITA No.2739/M/1992. It has been further pointed out that this issue has been decided by the Hon'ble High Court in assessee's own case in ITA No.5718 of 2010, wherein the question of law no. IV was raised by the department which has been answered against the department. Thus, respectfully following the decision of the Tribunal in assessee's own case for the A.Y. 2000-01 in ITA Nos. 3314 & 3242/M/05 and the order of the Hon'ble High Court in assessee's own case, this issue is decided against the department and the same is treated as dismissed.
28. Ground no. 7 relates to the deletion in respect of the insurance claim u/s.41(1). The learned DR pointed out that the assessee has credited a sum of `.8.93 lakhs under the head "other income". The amount so credited has no direct relationship with the industrial activity of the undertaking of the assessee and, therefore, it is not derived from the industrial undertaking. On the other hand, the learned counsel pointed out that the receipt from the insurance received is to be assessed under the head "profit and gains from 19 ITA Nos : 5088 & 4907/Mum/2005 business and profession", as it formed part of the operational income and it is integrally linked with the main business of the assessee. She further submitted that this issue has already been decided in favour of the assessee by the Tribunal in assessee's own case for the A.Y. 2000-01 in ITA No.3314 and 3242/M/05.
29. After carefully considering the rival submissions, we find that this has been decided in the favour of the assessee and against the Revenue by the Tribunal in the earlier year. This issue has been discussed in paras 25 to 29 of the said order which for the sake of ready reference is reproduced herein below :-
"6. Ground 2 relates to CIT (A)'s decision in confirming the disallowance of the assessee's claim of Rs 2,97,015/- u/s 35D.
7. During the assessment proceedings before us, the Ld AR stated that the said expenditure was incurred in connection with the issue of shares for increase in share capital. AO made disallowance basing on the apex court judgments in the case of M/s Brooke Bond India Ltd (225 ITR 798)(SC) and M/s Punjab State Industrial Development Corporation Ltd (225 ITR 792)(SC). The CIT (A) confirmed the action of the AO stating that the said expenditure should not be allowed as revenue expenditure. During the proceedings before us, Ld AR for assessee relied on various judgments including the jurisdictional High Court judgment in the case of Maharashtra Ugine and Steel Co Ltd (250 ITR 84)(Bom). After going through the said judgments, we find that the said jurisdictional High Court judgment relates to allowability of expenditure incurred on payment of Stamp duty for debenture issue and, therefore, we are of the considered opinion that the apex court judgments cited above are relevant and expenses are not allowable as revenue expenditure and thus, the order of the CIT (A) does not call for any interference. Accordingly, ground 2 is dismissed."20
ITA Nos : 5088 & 4907/Mum/2005 Further this issue also stands covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Pfizer Ltd. reported in (2011) 330 ITR 62. Thus following the aforesaid judgment of the Hon'ble Jurisdictional High Court we do not find any merit in the grounds raised by the department and the same is treated as dismissed.
30. Ground no. 8 relates to the non inclusion of the processing charges from the profits of the business in Explanation (baa) to section 80HHC. Both the parties fairly agreed that this issue now stands decided against the assessee and in favour of the department in the case of CIT vs. Bresser India Pvt. Ltd. reported in 323 ITR 429.
31. After going through the said decision, we find that this issue now stands covered against the assessee as while computing the deduction u/s.80HHC these charges are to be excluded in terms of the Explanation (baa) to section 80HHC. Accordingly this ground stands allowed.
32. Ground no. 9 relates to the deletion of disallowance in respect of foreign travelling expenses amounting to `.2,04,877/-. This issue has been deleted by the Ld. CIT(A) in the following manner :-
"13.1.2 In para 6, pgs 16-20 of the consolidated appeal order No.CIT(A)-X/IT/20/25/28/95-96/96-97/97-98 dated 10/5/2002 for assessment years 1992-93, 1993-94 and 1994- 95, I have deleted disallowance of `.4,27,382/- (`.1,99,338 + `.2,28,044) and `.2,04,877/- for the detailed reasoning contained in para 6.5 of the consolidated appeal order. However, I have confirmed the disallowance of `.2,40,767/- made in the 21 ITA Nos : 5088 & 4907/Mum/2005 assessment year 1994-95 in the absence of details. Therefore, disallowances of `.4,27,534/- and `.2,04,877/- on account of foreign travelling expenses and project expenses made in assessment years 1993-94 and 1994-95 are deleted and disallowance of `.2,40,767/- made in assessment year 1994-95 on account of foreign travelling expenditure is confirmed."
33. The learned DR relied upon the findings of the A.O., whereas the learned counsel submitted that this issue stands decided in favour of the assessee in assessee's own case by the Tribunal in the A.Y. 1994-95 in ITA No.4461/M/2002.
34. After carefully considering the order passed by the authorities below and the decision of the Tribunal relied upon by the assessee in assessee's own case, we find that this addition has been deleted by the Tribunal in the A.Y. 1994-95 in the following manner :-
"13. The next issue is regarding the disallowance of foreign travel expenses and project expenses. The first Appellate Authority has found that these expenses were not incurred for the purpose of setting up any new project but were incurred only for the purpose of bringing improvement to the existing manufacturing process and in the technology of the product already manufactured by it. We do not find any merit in the submission of the ld. Departmental Representative that the expenditure should be disallowed for the reason that the assessee has not given details of per person and per tirp. The First Appellate Authority has observed that the disallowances were made by making some general observations and without pointing out any specific defect. He has recorded a specific finding that these expenses were incurred by the assessee in connection with running his business and the foreign tours were undertaken by Senior Executives and Consultants for bringing up improvements in the existing manufacturing operations so as to facilitate the conduct of the assessee's business in a more efficient and profitable manner. We fully agree with his finding and uphold his order on this issue. Thus, this ground of the Revenue for the Assessment Year 1992-93, 1993-94 and 1994- 95 is dismissed as devoid of merits."22
ITA Nos : 5088 & 4907/Mum/2005 Thus respectfully following the aforesaid decision and also the fact that we do not found any infirmity in the order of the Ld.CIT(A), the grounds raised by the department on this score stands dismissed.
35. Ground no. 10 relates to the deletion of disallowance of `.10,42,290/- made by the A.O. u/s.43B in respect of the delayed payment of PF contribution. Both the parties agreed that the payment has been made within the grace period and in any case before filing the return. In view of this admitted facts and also the judgment of Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. [2009] reported in 319 ITR 306 (SC) this issue is decided against the department and the finding given by the Ld.CIT(A) is upheld. Accordingly this ground stands dismissed.
36. Ground no. 11 relates to the deletion of disallowance of `.2,76,455/- in respect of entertainment expenses. The Ld. CIT(A) has discussed this issue in para 15 of the order. He has followed his findings given in the earlier assessment years. Both the parties fairly agreed that this issue has been decided by the Tribunal in assessee's own case for the A.Y.1994-95 in ITA No.4461/M/02.
37. After going through the findings of the Ld. CIT(A) we find that the A.O. has disallowed the sum of `.2,76,455/- over and above the sum of `.5,76,000/- disallowed by the assessee itself in the return of income. Looking to the fact that the assessee has itself disallowed the said expenses, 23 ITA Nos : 5088 & 4907/Mum/2005 the Ld. CIT(A) following the earlier years has deleted the said addition. Moreover this issue has already been decided in favour of the assessee in assessee's own case by the Tribunal in the A.Y. 1994-95. Thus we do not find any merits in the ground raised by the department and the same stands dismissed.
38. Ground no. 12 relates to the deletion of `.11,87,960/- in respect of interest. Both the parties fairly agreed that this issue has been decided against the department by the Tribunal in assessee's own case in the A.Y. 1994-95 in ITA No.4461/M/2002. After going through the said decision, we find that this issue has been decided in the favour of the assessee and against the department after observing and holding as under :-
"20. The next issue for the assessment year 1994-95 is an addition of `.11,87,960/- being interest on amounts receivable from partnership firms. Here also the first Appellate Authority found that there was no diversion of funds for non-business purpose. It was also found by him that interest bearing funds were not diverted for interest free loans and thus no disallowance of interest ought to be made. The ld. Departmental Representative, though not levying this ground, ultimately submitted that the finding of the first Appellate Authority need to be upheld. Thus, this ground of the Revenue is dismissed."
Thus respectfully following the aforesaid decision, we do not find any merits in the ground raised by the department and the same is dismissed. 24
ITA Nos : 5088 & 4907/Mum/2005
39. In the result, the appeals filed by the assessee as well as by the department are partly allowed Order pronounced on this 02nd day of November, 2012.
Sd/- Sd/-
( P. M. JAGTAP ) ( AMIT SHUKLA )
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, Dt: 02.11.2012
Copy forwarded to :
1. The Appellant,
2. The Respondent,
3. The C.I.T.
4. CIT (A)
5. The DR, - Bench, ITAT, Mumbai
//True Copy//
BY ORDER
ASSISTANT REGISTRAR
ITAT, Mumbai Benches, Mumbai
Roshani