Income Tax Appellate Tribunal - Chandigarh
Acit,, Ludhiana vs M/S Vardhman Holdings Ltd.,, Ludhiana on 26 November, 2018
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B', CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपणा
ू ग$ता
ु , लेखा सद य
BEFORE: SHRI SANJAY GARG, JM & SMT. ANNAPURNA GUPTA, AM
आयकर अपील सं./ ITA No.88/Chd/2009
नधा रण वष / Assessment Year : 2003-04
M/s Vardhman Holdings Limited, बनाम The A.C.I.T.,
(Formerly known as Vardhman Spg. Circle-1,
& Genl. Mills Limited), Ludhiana.
Chandigarh Road, Ludhiana.
थायी लेखा सं./PAN NO: A A B C V 8 0 8 8 P
अपीलाथ /Appellant यथ /Responden
t
आयकर अपील सं./ ITA No.118/Chd/2009
नधा रण वष / Assessment Year : 2003-04
The A.C.I.T., बनाम M/s Vardhman Holdings Limited,
Circle-1, (Formerly known as Vardhman
Ludhiana Spg. & Genl. Mills Limited),
Chandigarh Road, Ludhiana
थायी लेखा सं./PAN NO: A A B C V 8 0 8 8 P
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by: S h r i S u bh a s h A g g a r w a l , A d v .
राज व क ओर से/ Revenue by : Shri Jagdish Goyal , CIT DR
सनवाई
ु क तार#ख/Date of Hearing : 30.08.2018
उदघोषणा क तार#ख/Date of Pronouncement : 26.11.2018
आदे श/ORDER
PER ANNA PURNA GUPTA, A. M. :
Th e i m p u g n e d c r o s s a p pe a l s by the assessee and the Revenue h a v e b ee n fi l ed a g a i n s t t h e o r d e r p a s se d b y t h e L d . C o m m i s si o n er o f I nc o m e Ta x ( A p p e a l s ) -I I , L u dh i a n a , ( i n s h o r t ( " CI T( A ) " ) dated 17.11.2008 r e l a t i n g t o a s s e s s m e nt 2 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 y e a r 2 00 3 - 0 4 , u/s 250( 6) of the I ncome Ta x Act, 1961 ( herei nafter referred to as 'Act') .
2. B r i e f f a c t s of t h e c a s e ar e t ha t t h e a s se s s e e is a P u b l i c L i m i t e d Co m p a ny w i t h i t s r e g i st er e d a n d c or p o r a te o f f i c e at L u d h i a n a ( P un j ab ) a n d B a d d i ( H P ) . Th e b u s i n e s s o f t h e a s s e s s e e co m p a ny i s m a n u f ac t u r i n g a n d p r o c es s i ng o f y a r n, knitting ya r n , fabrics a nd processed f ab r i c s . Th e m a n u f a c t ur i n g u n i t o f t h e as se s s e e a t B a dd i i . e . V S G M B a d d i i s 1 0 0 % Ex p o r t O r i e n te d U n i t ( E O U ) a n d t he a s s e s s e e h a d c l a i m ed e x em p t i o n u / s 10 B o f t h e A c t o n th e p r o f i t s earned from t he same. Th e assessee has a l so claimed d e d u c t i o n u /s 80 H H C o n p r o f i t s e a r n e d f r o m i ts b u s i n e s s o f e x p o r t of t r a di ng a s w e l l a s m an u f a c t u r ed g o o ds . F u r t he r t h e a s s e s s e e c om p a n y h a d c l a i m e d d e d u c t i o n u / s 8 0 I B o f t h e A c t o n i t s A u r o S p i n n i n g U n i t -I I I , A u r o Un i t -I V a n d Auro Unit-V, Au r o W e a v i n g -I I and Auro Dyeing, Auro Te x t i l e s , V S G M 1 0 0 % E O U . D u ri n g a s s e s s m en t pr o c e e d i n gs , t h e A s s e s si n g O f f i c e r ( A . O ) f ou n d t h a t t he m a i n i s s u es i n v o l v e d i n t h e ca s e r e l a t ed t o n et t i n g o f i n te r e s t , e x e m p t i o n u / s 1 0 B o f t h e A c t , d e d u c ti o n u/s 80HHC and 8IB of the Act and d i vi d en d income an d sales tax su bs i d y ,and a c c o r d i n gl y m ade d i s a l l o w a n c es /a d d i t i o n s i n r e l at i o n t o t h e s a i d i s su e s i n hi s o r d e r f r a me d u / s 1 4 3 ( 3 ) o f t he A c t . Th e s a i d o r d e r w a s co n t e s t e d i n a p p ea l b e f o r e t h e L d .C I T( A ) w h o partly al l o w e d th e a s s e ss e e s ap p e a l . Th e i s sue s r a i s ed , t h e r e f o r e, i n t h e p r e s e n t a p pe a l s b y b o t h t h e p ar t ie s p e r t a i n t o t h e s ai d i s su es .
3 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
3. A t t h e o u t s e t i t se l f , t h e L d . c o u ns e l f o r a s s e s s ee s t a t ed t h a t a l l t h e i s su e s r a i s e d i n th e c r o s s a p p e a l s h a d b e e n d e a l t w i th b y t h e I . T. A . T. i n t h e ca s e o f s i st e r c o nc e r n o f t he a s s e s s e e , M /s V a r d h m a n Te x t i l es L i m i t e d v i d e th e i r o r d er d a t e d 4 .5 . 2 0 1 8 i n r e l a t i o n t o a ss e s s m e n t y e a r 20 0 2 - 0 3 to 2 0 0 5 - 0 6 . A gi s t o f t h e i s s u es r a i s e d i n t h e p r e s en t a p p e al a n d d e a l t w i t h by t h e I . T. A . T. i n t h e s a i d o r d e r a lo n g w i t h a c o p y o f t h e o r d er w a s f i l e d b e f ore u s . I t wa s s ta te d t h a t t h e s a i d o rd e r , t h e r ef o r e , wa s p er t i n en t f o r a d j u di c a t in g v a r i o us g r o u n d s ra i s e d i n t h e c ro s s a pp ea l s b e f or e u s . Ta k i n g n o te o f t h e s a me w e s h a l l n o w p r o c ee d t o a d j u di c a t e t h e c r o s s a p p e a l s a n d s ha l l f i r st b e t a ki n g u p th e a ppe a l o f t h e a s s e s s e e i n I TA N o . 8 8 / C h d/ 2 0 0 9.
I T A N o . 8 8/ C h d /2 0 0 9 ( A s s es s e e ' s a p p e a l ) :
4. Ground No.1 rai sed by the assessee reads as under:
"1. That the Ld. CIT (A) has erred in law and on facts while confirming the action of the Assessing officer for taxing the capital receipt amounting to Rs.2,04,11,70//- on account of Sales Tax Exemption/Subsidy received from Government of Punjab as the revenue receipt of the appellant."
5. The above groun d i s agai nst the acti on of the CI T( A) i n treati ng the sal es ta x subsi dy recei ved by the assessee amounti ng to R s.2,04,11,707/- as revenue recei pt agai nst capi tal recei pt cl ai med by the assessee.
6. Bri ef facts rel evant to the i ssue are that the manufacturi ng Uni t of the assessee, VSGM( Uni t II) set up i n Ludhi ana, had been granted i ncenti ve of Sal es Ta x e xempti on in terms of Government noti fi cati on No.1NC 4 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 11/15/43/96-5/IB 4176,dt.01-06-96 vi de Di stri ct Industri es Center, Ludhi ana. Duri ng the i m pugned year, i n t he ori gi nal return fi l ed, the assessee sho wed subsi dy as reven ue recei pt by wa y of credi t in the Profi t & Loss Account but subsequentl y cl ai med the same as capi tal recei pt i n the revi sed return fi l ed. Duri ng assessment proceedi ngs, the assessee fi l ed detai l s of the scheme of Punjab Government as per whi ch the subsi dy had been recei ved and submi tted that si nce the i ncenti ve was gi ven to spurt i ndustri al gro wth as wel l as for generati on of empl oyment opportuni ti es to i ts unempl o yed youth through rapi d i ndustri al i zati on of the State, the scheme was capi tal i n nature. Rel i ance was pl aced on certai n case la ws but the A.O. di smi ssed the contenti on of the assessee after di scussi ng the scheme i n detai l and referri ng to judgment i n the case of M/s Sahni Steel & Press Works Ltd. Vs. C I T, 228 I TR 253 ( SC) and DCI T Vs . Rel i ance I ndustri es Ltd., 88 I TD 273 ( I TAT SB) .
7. The assessee went i n appeal to the CI T( A) who uphel d the order of th e A.O. rel yi ng upon the judgm ent of the Hon'bl e Juri sdi cti onal Hi gh Court i n the case of CI T Vs. Abhi shek I ndustri es Ltd., 286 I TR 1.
8. Duri ng the course of heari ng before us the Ld. counsel for assessee rel ied upon the submi ssi ons made before the l o wer authori ti es stati ng that as per the sch eme of the Punjab Government the subsi dy had been gi ven to spurt i ndustri al gro wth as wel l as for generati on of emplo yment opportuni ti es through rapi d i nd ustri al i zati on i n the State 5 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 and thus the sub si dy recei ved was capi tal i n natur e. Copy of the Scheme was pl aced before us and rel i ance was placed on several case l a ws as under:
((i) Tribunal's order in the case of Mahavir Spinning Mills vs. ACIT Ltd in ITA No. 344/09 A.Y 1997-98 dated 30.11.2015(Chd) ( Pg. 1-8)
(ii) Tribunal's order in the case of Vardhman Textiles Ltd.
vs. ACIT in ITA No. 392/07 AY 2001-02 dated 21.10.15(Chd) (Pg. 135-144)
(iii) CIT vs. Nirma Ltd. 397 ITR 49 ( Guj) - Dated 08.6.16.
(case law pgs. 212 - 218)
9. Further the Ld. counsel for asse ssee poi nted out that i denti cal i ssue had been deal t wi th i n the case of si ster concern of the assessee M/s V ardhman Te xti l e s Ltd., as poi nted out earl ier, wherei n the I . T.A. T. had held the sai d subsi dy as bei ng capi tal recei pt. Our attenti on was dra wn to the rel evant porti on of the order deal i ng wi th the sai d i ssue at pages 27 to 3 4, more speci fi c al l y, to the fi ndi ngs of the I . T.A. T. at para 3 9 of i ts order wh erei n fol l o wi ng the deci si on of the I . T.A. T. in the case of Vardhman Acr yl i c Ltd., Ludhi ana Vs. ACI T & Other n I TA No.773/Chd/2012 & Others rel ati ng t o assessment yea r 2006-07 and th e deci si on of the I . T.A. T. i n the case of Mahavi r Spi nni ng Mi ll s Ltd. Vs. JCI T i n I TA No.344/Chd/2009 for assessment year 1997-98 the appeal of the assessee was al l o wed hol di ng the subsi dy to be capi tal i n nature.
10. The Ld. DR fai rl y conceded that t he I . T.A. T. in the case of si ster concer n of the assess ee M/s Vardhm an Te xti l es ( supra) had hel d i denti cal subsi d y recei ved from t he Punjab 6 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 Government as capi tal i n nature though at the same ti me had heavi l y rel i ed upon the order of the A.O.
11. Havi ng heard the ri val contenti ons we fi nd merit in the contenti on of the Ld. counsel for assessee. We have gone through the order passed by the I TAT i n the c ase of M/s Vardhman Te xti l es ( supra) ,rel i ed upon by the Ld.Counsel for the assessee i n support of i ts contenti on that the subsi dy was capi tal i n n ature, and fi nd that the facts i n the sai d case were i denti cal , the sal es ta x subsi dy bei ng r ecei ved by vi rtue of scheme of the Punjab Government vi de the same noti fi cati on of the Department of I ndustri es as i n the case of the assessee. Th e sai d fact fi nds menti on i n page 27 of the order. The I TA T i n the sai d case f ol l o wed the deci s i on of i ts coordi nate Bench i n the case of Mahavi r Spi nni ng Mil l s Ltd. vs JCI T i n I TA No.344/Chd/2009, wherei n, we fi nd, thi s i ssue had ori gi n al l y been deci de d by the I TA T a gai nst the assessee fol l o wi ng the deci si on of the juri sdi cti onal Hi gh Court i n the ca se of Abhi shek I ndustri es( supra) ,but on appeal by the assessee, the Hon'bl e Hi gh Court had restored the matter back to the I TA T to re adjudi cate the s ame i n the l i ght of the decisi ons of the apex court i n Ponni Sugars & Chemi cal s Li mi ted. Thereafter, the I TAT had hel d the subsi dy to be capi tal i n nature .
12. I n vi e w of the above ,the i ssue i n the present case stands covered as deci ded i n fav our of the asses see by the above orders of t he I TAT even aft er consi deri ng th e deci si on 7 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 of the juri sdi cti onal hi gh court i n the case of Abhi shek I ndustri es ( supra) .
13. Even otherwi se, we fi nd that the i ssue has been settl ed by vari ous deci si ons of the Hon'b l e Ape x Court l a ying do wn the proposi ti on that true test for determi ni ng the nature of subsi dy whether capi tal or revenue i s the purpose test i .e. It i s the purpose for whi ch the subsi dy has been gi ven whi ch i s determi nati ve of the nature of the subsi dy a nd not the manner of di sbursement of the same. The manner of cal cul ati ng the s ame or even the poi nt of ti me at whi ch i t i s di sbursed. The Hon'bl e Ape x Court ti me and agai n had rei terated thi s proposi ti on ri ght from M/s Sahni Steel & Press Works Ltd. and CI T Vs. Ponni Sugar & Chemi cals Ltd. 306 I TR 392 and i ts l atest judgment i n the case of CI T Vs. Chaphal kar Brothers,Pune I n Ci vi l Appeal no.6513-6514 dt. 7 t h Dec 2017. I n the present case undi sputedl y as per the scheme of Punjab Government the purpose of di sbursement i s to spurt i ndustri al gro wth as wel l as to generate the empl o yment opportuni ti es through rapi d i ndustri al i zati on i n the State. There i s no doubt, th erefore, that the nature of the subsi dy i s capi tal .
I n vi e w of the above ground of appeal No.1 rai sed by the assessee i s al l o wed.
14. Ground No.2 rai sed by the assessee reads as under:
"2. That the Ld. CIT (A) has erred in law and on facts while allocating Rs. one lac to dividend income earned by the appellant."8 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
15. I n the above ground the assessee has chal l enged the acti on of Ld. CI T( A) in al l ocating e xpenses of Rs.1 l ac attri buti ng the same to di vi den d i ncome earne d by the assessee.
16. Bri efl y stated, the assessee had returned to tax the gross amount of di vi dend earned duri ng the year amounti ng to Rs.321.75 l acs u/s 56 of the A ct, wi thout setti ng off any e xpenses i ncurred i n rel ati on to the same u/s 57 of the Act. The A.O. al l ocat ed a sum of Rs.44.96 l acs ( on proporti onate basi s) out of personnel , fi nance and admi ni strati ve e xpenses, cl ai med as busi ness e xpenses by the assessee, attri buti ng the same to havi ng be en i ncurred for t he purpose of earni ng di vi d end i ncome. Th us the AO re duced the busi ness e xpenses cl ai med by the assessee on account of the above, resul ti ng i n addi ti on to i ts ta xabl e i ncome to the sai d e xtent. Further the assessee had al so cl ai med deducti on of the gross amount of di vi dend earned u/s 80M of the Act, whi ch was also reduced by the AO after netti ng e xpenses i ncurred for earni ng the i ncome as aforesai d. Th e Ld.CI T( A) fol l o wi ng hi s own order for assessment year 2002-03, reduced the e xpenses al l ocated to Rs.1 l ac.
17. Before us, the Ld. counsel for assessee contended that no e xpendi ture had been i nc urred for earni ng di vi dend i ncome. The Ld. counsel for assessee rel i ed upon the order of the I . T.A. T. i n i t s o wn case for a ssessment year 2001-02 i n I TA No.280/Chd/2008 dated 28.12.2012 wherei n I . T.A. T. had uphel d the al l ocati on of Rs.2 l acs to di vi dend i ncome 9 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 earned of Rs.4.50 crores. Copy of the order was pl aced before us. Rel i ance was al so placed on the decisi on of the Hon'bl e Hi gh Co urt i n the case of the assessee i tsel f for assessment years 1994-95, 1995-96, 1997-98 and 2000 -01 i n I TA No.50/Chd/2012 dated 25.1.2013 wherei n al l ocati on of Rs.1 to Rs.2 lacs i n vari ous years was uphel d. Copy of the order was pl aced before us. The Ld. counsel for assessee al so rel i ed upon the order of the I. T.A. T. i n the cas e of si ster concern of the assessee M/s Vardhman Te xti l es ( supra) poi nti ng out that i n the sai d orde r di sal l o wance of Rs.2 l acs was uphel d i n assessment year 2002-03 whi l e i n the rest of the years the di sal l o wance made was del eted. Our attenti on was dra wn to the rel evant fi ndi ngs at page 13 & 14 of the order as under:
"7.3 The similar matter was considered by the lTAT in the case of the assessee for the assessment year 2001-02 in ITA No.1174/CHD/2013 vide order dt.16/04/2014 wherein it has been held that the disallowance was made on surmises and there was no merit in the disallowances made wrongly on the premise that borrowed funds were used for investment purpose. The Tribunal has affirmed the confirming of disallowance of Rs. 1,00,000/- made by the Ld. CIT(A). In the instant year the Ld. CIT(A) has confirmed an amount of Rs.2,00,000/- being the expenses incurred for earning of the dividend income. Following the same rationale we hereby uphold the order of the Ld. CIT(A)."
18. The Ld. DR poi n ted out that thi s i ssue has been deal t wi th i n the case of the assessee i n the precedi ng years ri ght up to the Hon'b l e Hi gh Court, as poi nted out by the Ld. counsel for assessee, uphol di ng al l ocati on of expenses of Rs.1 to Rs.2 l acs.
19. We have heard th e ri val contenti o ns. We do not fi n d any meri t i n the present ground rai sed by the assessee. As 10 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 poi nted out by the Ld. counsel for assessee hi msel f i n the earl i er years al so, the I . T.A. T. a nd even the Hon'bl e Hi gh Court had uphel d the al l ocati on of e xpenses ra ngi ng from Rs.1 l ac to Rs.2 l acs as bei ng expendi ture i ncurred for the purpose of earni ng di vi dend i nco me. Even the I . T. A.T. i n the case of si ster concern of the assessee i .e. M/s Vardhman Te xti l es ( supra) had confi rmed th e di sal l o wance of Rs.2 l acs. Consi deri ng the past hi stor y of the assessee, wherei n i t has been hel d by the Hon'bl e Hi gh Court that e xpenses rangi ng from Rs.1 to 2 l acs were to be al l ocated as i n curred for earni ng di vi dend i ncome upto Rs.4.5 crores and the Ld.Counsel for the assessee havi ng not poi nted out any di sti ngui shi ng fact i n the present case the acti on of the Ld.CI T( A) i n al l ocati ng e xpenses of Rs.1 l ac agai nst di vi dend i ncome earned of Rs.3.21 crores is, therefore we hol d, whol l y justi fi ed. We th erefore, see no reason to i nterf ere i n the order of the Ld. CI T( A) and the ground No.2 raised by the assessee i s, therefore, di smi ssed.
20. Ground No.3 rai sed by the assessee reads as under:
"3. The Ld. CIT (A) has erred in law and on facts while treating interest income amounting to Rs.34,73,788/- as "Income from other Sources" instead of "Income from Business or Profession".
21. I n the above ground, the assessee has chal l enged the acti on of the Ld.CI T( A) i n treati ng the i nterest i ncome earned by the assessee of Rs.34.74 l acs as i ncome from other sources.
11 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
22. Duri ng the course of heari ng before us, the Ld. co unsel for assessee poi nted out that the fi gure of i nterest menti oned i n the assessment ord er was not corre ct and the correct fi gures were tabul ated before us as under:
AO's order Correct figures Gross interest received Rs. 294.83 Lacs Rs. 3.80 Cr. Interest from customers/supplier Rs. 257.22 Lacs Rs. 345.75 Lacs Interest from bank & others Rs. 37.61 lacs Rs. 34.74 Lacs Interest Paid Rs. 1255.57 Lacs Rs. 9.23 Cr.
23. Thereafter dra wi ng our attenti on to the facts of the case it was contended that duri ng the course of assessment proceedi ngs the A.O. i n the conte xt of al l o wi ng deducti on u/s 80HHC rai sed a quer y as to why 90% of the interest be not deducted from the profi ts of the busi ness. Th e assessee cl ai med whol e of the i nterest to be i n the nature of busi ness i ncome and further contended that si nce i t had al so pai d i nterest of Rs.9.2 3 crores and i f t he same was nett ed agai nst the i nterest i ncome earned there woul d be no i ncome earned by the assessee and thus no qu e sti on of reduci ng 90% of the same from the busi ness of the assessee for the purpose of cal cul ati ng deducti on u/s 80HHC of the Act. Detai l s regardi ng the same were fi l ed before the A.O. but the A.O. di d not agree with the contenti on of the assessee and hel d that the gross amount of i nterest recei ved i s to be treated as i ncome from other sources and thus reduced from the profi ts of the busi ness for the purpose of computati on of deducti on u/s 10B/80I B/80HHC of the Act.
24. The matter was carri ed i n appeal before the CI T( A) who hel d that out of the gross i nteres t recei ved, i ntere st recei ved 12 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 on bel ated pa yments from customers/suppl i ers was i n the nature of busi ne ss i ncome whi l e the other i nter est i ncome recei ved from Banks and others amounti ng to Rs.34.74 l acs was uphel d as to be treated as i ncome from other sources
25. Duri ng the course of heari ng before us, the Ld. co unsel for assessee rei terated the contenti on made before the l o wer authori ti es that the i nterest i ncome shoul d be netted for al l purposes and the i nterest pai d by the assessee of Rs.9.23 crores shoul d be set off agai nst t he i nterest received for the purpose of deter mi ni ng whether a ny i nterest i s to be reduced from the profi ts of the assessee f or the purpose c al cul ati ng the deducti on al l o wabl e to the a ssessee u/s 80H HC of the Act. Rel i ance was pl aced on the fol l o wi ng deci si ons i n thi s regard:
1) M/s ACG Associ ated Capsul es Pvt. Ltd. Vs. CI T ( 2012) 343 I TR 89
2) Vardhman Hol di ng Ltd. Vs. ACI T, I TA No. 280/Chd/2008 dated 28.12.2012 for Assessment year 2001-02.
26. I t was further poi nted out that i d enti cal i ssue had been deal t wi th i n the case of si ster concern of the assessee M/s Vardhman Te xti l es ( supra) where i n netti ng of i nt erest was al l o wed. Our attenti on was dra wn to the rel evant discussi on on the i ssue at pages 38 to 43 poi nti ng out that the i ssue deal t wi th i n the sai d case rel ate d to treatment of i ncome a s i ncome from other sources and the I . T.A. T. fol l o wi ng the deci si on of the Hon'bl e Ape x Co urt i n the case of M/s ACG Associ ated Capsul es Pvt. Ltd. ( supra) referred the matter to the A.O. to al l o w the netti ng of i nterest i f the as sessee was 13 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 abl e to prove the ne xus bet ween t he i nterest e xpen di ture and i nterest i ncome.
27. The Ld. DR fai rl y conceded to the above.
28. We have consi dered the ri val contenti ons. We find meri t i n the contenti on rai sed by the Ld. counsel for a ssessee. As poi nted out by the Ld. counsel for assessee and as admi tted by both the parti es, i denti cal i ssue has been deal t wi th i n the case of si ster concern of the assessee M/s Vardhman Te xti l es ( supra) wherei n the mat ter has been res tored back to the A.O. to al l o w the netti ng i f ne xus i s establi shed bet ween the i nterest e xpenses i ncurred and i nterest i ncome earned. Fol l o wi ng the same we restore the i ssue back to the A.O. i n the present case al so for determi ni ng the ne xus bet ween the i nterest e xpendi ture and i nterest i ncome earned and thereafter al l o w the benefi t of netti ng to the assessee. Ground of appea l No.3 rai sed by the assessee i s, therefore, al l o wed i n above terms.
29. Ground Nos.4 ( i ) and ( i i ) were t aken up togethe r by the assessee si nce the y rel ated to the same i ssue of cal cul ati on of deducti on u/s 10B of the Act . The sai d grounds read as under:
"4. (i) That the Ld. CIT(A) has erred in law and on facts while confirming the action of the assessing officer for applying method of calculating deduction u/s 10B other than that specified u/s 10B and at variance to the method regularly adopted by the appellant in earlier years and accepted by the department.
(ii) That the Ld. CIT(A) has erred in law and on the facts while confirming the action of the Assessing officer for 14 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 increasing the Total Turnover of VSGM E.O.U. for calculating exemption u/s 10B of Income Tax Act by the following amounts:
Particulars Amount (in Rs.)
Excise Duty 64,96,590/-
Export Turnover of Trading goods 2,98,73,357/-"
30. These grounds a re agai nst the order of the CI T(A) i n uphol di ng the order of the A.O. in treati ng the exci se dut y and e xport turno ver of traded goo ds as part of tot al turnover of Export Ori ented Uni t ( i n short referred to as 'EOU') for the purpose of cal cul ati ng e xempti on u/s 10B of the Act.
Ld.Counsel for the assessee poi nted out from the assessment order that the A. O., after referri n g to vari ous deci si ons hel d that e xci se dut y was to be treate d as part of tota l turnover for computati on of deducti on u/s 80HHC and i ncl uded the same i n the total turnover of the assessee both for the purpose of comp utati on of deduct i on u/s 80HHC and 10B of the Act. Further whi l e computi ng the deducti on u/s 10B at the end of the order, the A.O. al so added turnover of traded goods to the tota l turnover. The a ssessee agi tated the same before the CI T( A) , submi tti ng that i n vi e w of the judgment of the Hon'bl e Ape x Court i n the case of CI T Vs. Lakshmi machi ne Works, 290 I TR 667 ( SC) both e xci se dut y and e xport turnover of traded goods shoul d not be incl uded i n total turnover for cal cul ati ng deducti on u/s 10B of the Act. The CI T( A) di d not agree wi th the submi ssi ons of the assessee hol di ng that the rati o w as l ai d do wn i n t he conte xt of e xcl usi on of e xci se dut y for the purposes of secti on 80 HHC of the Act and therefore di d not appl y for e xcl usi on of the same for the purposes of secti on 10B. Further it was 15 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 hel d that as per the provi si ons of secti on 10B the turnover of traded goods were to be i ncl uded i n the total turnover for the purpose cal cul ati on of e xempti on u/s 10B of the Act.
31. Duri ng the course of heari ng before us the Ld. counsel for assessee rei terated the contenti on made before the l o wer authori ti es stati ng that the provi si ons of secti ons 10B and 80HHC are pa ri -materi a si nce the y both rel ate to computati on of deducti on on e xport and, therefore, the deci si on of the Hon'bl e Ape x Co urt i n the case of Lakshmi machi ne Works ( supra) woul d appl y for the purpose of secti on 10B al so. Rel i ance w as further pl ac ed on the deci si on of the I .T.A. T. i n the case of ACI T Vs. VMT Spi nni ng Company Ltd. d ated 22.5.2008 i n I TA No.690/20 07 and on the deci si on of t he Speci al Bench of the I . T.A. T. i n the case of I TO Vs. Sak Soft Ltd. ( 2009) 313 I TR ( AT 3353 ( SB) ( Mad) for the proposi ti on that the turn over of traded go ods i s to b e e xcl uded from th e total turnover. Further the Ld. c ounsel for assessee dre w our attenti on to the recent order passed by the I TAT Cha ndi garh Bench i n t he case of si ster concern of the assessee M/s Vardhman Te x ti l es ( supra) poi nti ng out therefrom that both the i ssues of e xcl usi on of e xcise dut y and turnover of traded goods fr om the total tur nover had been deci ded i n favour of the assessee. Our attention was dra wn to the order of the I . T.A. T. at paras 10.1 poi nti ng out therefrom that the i ssue i n the sai d case was i denti cal , bei ng i ncl usi on/e xcl usi on of e xci se dut y and e xport turnover of traded goods in the total turnover of the assessee for 16 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 cal cul ati ng deducti on u/s 10B of the Act. Ther eafter our attenti on was dra wn to the fi ndi ngs of the I TAT at para 10.5 hol di ng that the deci si on of the ape x court i n the case of La xmi Machi ne works ( supra) squarel y appl i ed to the i ssue and di recti ng th e AO to recomp uted the el i gi bl e profi ts as per gui del i nes lai d do wn therein. Our attenti on was al so dra wn to page 35 of the order wherei n fol l o wi ng the deci si on of the coordi nate bench in the case of VMT Spi nni ng Co.Ltd.( supra) , i t was hel d that both the profi ts and the turnover of e xport traded goods was to be e xcl uded from the profi ts and total turnover of the assessee for the purposes of cal cul ati ng deducti on u/s 10B of the Act.
32. The Ld. DR fai rl y conceded that the i ssues had been deci ded i n the case of Vardhman Te xti l es ( supra) as stated above though he heavi l y rel i ed upon the orde rs of the authori ti es bel o w.
33. We have gone through the order of the I . T.A. T. i n the case of M/s Vardhman Te xti l e s ( supra) and fi nd that i denti cal i ssue had been deal t wi th i n the sai d ca se wherei n i t was hel d that the deci si on of the Hon'bl e Ape x Court i n the case of Lakshmi machi ne Works ( supra) woul d squarel y appl y for the purpose of cal cul ati on of deducti on u/s 10B and as per whi c h e xci se dut y w as to be e xcl ude d from th e total turnover of the assessee. Further the I . T.A. T. had al so hel d that the turnover of the tradi ng e xport acti viti es was to be e xcl uded from the total turnover and the profi ts of the tradi ng e xport acti vi t y were to be e xcl uded from the profi ts 17 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 for the purpose of cal cul ati ng deducti on u/s 10B of the Act fol l o wi ng the deci si on of the Tri bunal i n the case of VMT Spi nni ng Company Ltd. ( supra) . Si nce the i ssues i n the present case are i denti cal to that in the case of M/s Vardhman Te xti l es ( supra) the de ci si on rendered therei n wi l l appl y i n the present case al so, foll o wi ng whi ch we hol d that e xci se dut y be e xcl uded from the total turnover for the purpose of cal culati on of deducti on u/s 10B of the Act. But vi s a vi s the e xcl usi on of e xport turnover of traded goods , we fi nd that the i n the case of VMT Spi nni ng Mi l l s ( supra) ,i t was hel d that deducti on u/s 10B was granted qua profi ts earned on man ufactured goods and therefore nei ther the profi ts of traded goods was to be i ncl uded i n the profi ts nor the turnover of traded goods was to be i ncl uded i n the total turnover for cal cul ati ng deducti on u/s 10B of the Act. Accordi ngl y the AO i s di rected to cal cul ate the deducti on u/s 10B of the Act after e xcl uding both the profi ts and the turnover of e xport traded goods from the profi ts of the busi ness and the total turnover.
Ground of appeal Nos.4( i ) & ( i i ) rai sed by the assessee are, therefore, al l o wed i n above terms.
34. Ground No.4( i i i ) rai sed by the assessee reads as under:
"(iii) That the Ld. CIT (A) has erred in law and on the facts while confirming the action of the Assessing officer for reducing profits of VSGM E.O.U. for calculating exemption u/s 10B by the following amounts: -
Particulars Amount (in Rs.)
- Loss on Export of Trading Goods 1,61,934/-
- Rent received from employees 1,53,733/-
- R & D Subsidy received 1,00,000/-
18 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
4,15, 667 /-"
35. The above groun d chal l enges the acti on of the Ld. CI T( A) i n reduci ng the fol l o wi ng from the profi ts of the EOU whi l e cal cul ati ng e xempti on u/s 10B of the Act:
1) Loss on e xport of traded goods = Rs.1,61,934/-
2) Rent recei ved from empl o yees = Rs.1,53,733/-
3) R & D subsi dy = Rs.1,00,000/-
36. Bri ef facts rel ati ng to the i ssue are that the assessee had cl ai med ded ucti on u/s 10B on i ts EOU uni t amounti ng to Rs.1,97,20,837/- bei ng 90% of the profi ts am ounti ng to Rs.2,18,92,041/-, attri butabl e to the e xport turnover of the undertaki ng in proporti on to the total turnover of the undertaki ng. The sai d deduc ti on was comp uted after reduci ng both the turnover of traded goods from the total turnover and the profi t/l oss on e xport of traded goods .Si nce the assessee had i ncurred l osses i n the tradi ng acti vi t y amounti ng to Rs. 1,61,934/- the s ame were added t o the total profi ts of the undertaki ng. Further no adjustment was made to the profi ts of the undertaki ng i n respect of rent and mi scel l aneous i ncome i .e. R & D subsi dy. The A.O. hel d that the rent and mi scel l aneous i ncome was to be reduced from the same. Furt her he al so, red uced the profi ts by the l oss i ncurred on e xport of traded goods. The CI T( A) uphel d the order of the A.O.
37. Before us the Ld . counsel for ass essee contended that as regards the l oss on traded g oods the same i s not to be consi dered i n computi ng the deducti on u/s 10B of the Act i n 19 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 vi e w of the deci si on of the I . T.A. T. i n the case o f ACI T Vs. VMT Spi nni ng C ompany Ltd. ( supra) . As far as the rent and R& D subsi dy, i t was contended t hat these i ncome s regul arl y arose i n the course of busi ness and had to be i ncl uded i n the ta xabl e i ncome for the i mpugned year. Further it was poi nted out that the I . T.A. T. i n the case of M/s Vardhman Te xti l es ( supra) had hel d the rent recei ved to be incl uded i n the profi ts for the purpose of cal cul ati ng deducti on u/s 80HHC of the Act. Our attenti on was dra wn to the rel evant fi ndi ngs at para 6.10 of the or der wherei n the i ssue was deci ded i n favou r of the assesse e fol l o wi ng the deci si on of the Hon'bl e Juri sdi cti onal Hi gh Court i n the cas e of CI T Vs. Metal man Auto Pvt. Ltd., 366 I TR 434 and VMT Spi nning Company Ltd. i n I TA No.654/C hd/2005 vi de o rder dated 317.2006.
38. We have heard the ri val contenti ons. Wi th regard the i ssue of treatme nt of l oss/profi t on e xport traded goods, the same has been deal t wi th by us i n Ground No. 4( i ) & ( i i) above, di recti ng e xcl usi on of the same from the profi ts of the busi ness of the a ssessee, at para 33 of our order above. As for rent recei ved from empl o yees, we fi nd that i n the case of the assessee i tsel f for A.Y 2001-02, i t was conceded by the assessee before the Tri bunal that 90% of the same was to be e xcl uded . Even other wi se ,secti on 10B grants deducti on to profi ts deri ved b y a 100% EOU from e xport of arti cles or thi ngs.Rent recei ved even from empl o yees, cannot be sai d to be deri ved from e xport of goods. As for the decisi on of the 20 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 juri sdi cti onal Hi gh court rel i ed upon by the Ld.Counsel for the assessee i n the case of Metalman ( supra) , the issue was not i n rel ati on to rent recei ved an d therefore the s ame woul d not appl y i n the present case. Even R &D subsi dy recei ved, cannot be sai d to be deri ved fr om e xport of go ods but i s cl earl y on account of scheme of the government granti ng the subsi dy. R&D s ubsi dy al so, we hol d ,i s not e nti tl ed to e xempti on u/s 10B of the Act. The i ssue i s squarel y covered by the deci si on of the ape x court in Li bert y I ndi a vs Commi ssi oner of I ncome Ta x( 2009) 317 I TR 218, wherein i t was hel d that i ncenti ves recei ved on account of schemes of government cannot be sai d to be deri ved from th e busi ness acti vi t y carri ed out by assessees, for the purpose of grant of deducti on u/s 80I B of the Act. Si nce secti on 10B is i denti cal l y worded usi ng the term "deri ved from e x ports",the i nterpretati on gi ven to the sai d t erm wi l l appl y i n rel ati on to e xempti on cl ai med u/s 10B of the Act al so.
I n vi e w of the above we hol d that l oss on e xport traded goods,rent recei ved and R&D subsi dy recei ved al l are to be e xcl uded for cal cul ati ng deducti on u/s 10B of the Act. Ground of appeal No.4( i i i ) i s therefore partl y al l owed i n above terms.
39. Ground No.4( i v) rai sed by the assessee reads as under:
"(iv) That the Ld. CIT(A) has erred in law and on the facts while reducing profits of VSGM E.O.U. by proportionate Head office expenses amounting to Rs.79,60,109/- while calculating deduction u/s 10B."21 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
40. Thi s ground i s a gai nst the CI T( A) 's order upholdi n g the order of the A.O. al l ocati ng head offi ce expenses of Rs.79,60,109/- to EOU uni t thus reduci ng the el i gi bl e profi ts of the u ndertaki ng for t he purpose of c al cul ati on deducti on u/s 10B of the Act.
41. Bri ef facts rel ati ng to the i ssue are that the assessee had i ncurred t otal head offi c e e xpenses am ounti ng to Rs.11,91,43,587/- and had not al l ocated any e xpense s to any of the uni ts on the ground that secretarial functi on performed by the head offi ce had nothi ng to do wi th the manufacturi ng uni ts. The A.O. di d not agree wi th the submi ssi ons of the assessee and hel d that the h ead offi ce was provi di ng servi ce to al l uni ts and, therefore, he proporti onatel y al l ocated a sum of Rs.79,60,109/- to the EOU uni t, thus reduci ng i ts profi ts el i gi bl e for deducti on u/s 10B of the Act. The CI T( A) di smi ssed the clai m of the assessee fol l o wi ng the order i n the case of the assessee for assessment year 2002-03.
42. Before us the Ld. counsel for assessee made t wo fol d contenti ons; i ) that out of the total head offi ce expenses certai n e xpense s had al ready been added ba ck in the computati on of i ncome and as su ch those were no t l iabl e to be al l ocated. The e xpenses referred to were as under:
1) Chari t y and Donati on = Rs. 2,06,900/-
2) Pri or peri od e xpenses = Rs.10,88,093/-
3) Loss on sal e of fi xed asset = Rs.1,66,246/-
4) Provi si on for fal l i n val ue
Of i nvestment = Rs.47,33,280/-
22 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
Total : = Rs.61,94,519/-
43. The Ld. counsel for assessee al so contended that i f any al l ocati on was t o be done i t sho ul d be of the ne t expenses i ncurred by the assessee after reduci ng i ncome earned by the head offi ce whi ch the Ld. counsel for assessee contended amounted to Rs. 4,70,49,661/- by wa y of i nterest and other mi scel l aneous recei pts. Rel i ance was pl aced on th e deci si on of the I . T.A. T. i n the case of Emerson El ectri c Company ( I ndi a) Pvt. Ltd. Vs. DCI T i n I TA No.4142/Mum/2015 dated 25.9.2017. It was al so poi nted out that in the recent deci si on of the I . T.A. T. i n the cas e of si ster concer n i .e. M/ s Vardhman Te xti l es ( supra) the I . T.A. T. had hel d only net e xpenses to be al l ocated. Our attenti on was dra wn to the rel evant fi ndi ngs of the I . T.A. T. at pages 19 to 22 of the order.
44. The Ld. DR fai rl y conceded that the i ssue was squarel y covered by the deci si on of the I. T.A. T. i n the case of VMT Spi nni ng Compa ny Ltd. ( supra) though he hea vi l y reli ed upon the orders of the authori ti es bel o w.
45. I n vi e w of the above, si nce admi ttedl y the I . T.A. T. i n the case of M/s Var dhman Te xti l es ( supra) has adjud i cated thi s i ssue hol di ng that onl y net e xpenses, after reduci ng i ncome earned therefrom, of the head offi ce are to be al l ocated, we di rect the A.O. to recompute the deducti on after all ocati ng net head offi ce e xpenses onl y a s per the di recti ons of the I . T.A. T. i n the c ase of M/s Vardhman Te xti l es ( s upra) . We al so agree wi th the contenti on of the Ld. co unsel for 23 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 assessee that the e xpenses al ready added back need not be al l ocated agai n for the purpose of cal cul ati ng profi ts of el i gi bl e uni ts. We, therefore, di rect the A.O. to verif y the fact of di sal l o wance of certai n e xpenses suo moto by the assessee and thereafter n ot real l ocate the same to the hea d offi ce for the purpose of c al cul ati ng el i gi bl e profi ts for ded ucti on u/s 10B of the Act. Ground of app eal No.4( i v) i s a ccordi ngl y al l o wed.
46. Ground No.5( i ) & ( i i ) rai sed by the assessee reads as under:
" 5. (i) That the Ld. CIT(A) has erred in law and on the facts in excluding Export Turnover of units claiming exemption u/s 10B from Export Turnover of the appellant while calculating the deduction u/s 80HHC of Income Tax Act.
(ii) Without prejudice to ground No. 5(i) above, the Ld. CIT(A) has erred in law and on facts while directing to exclude 100% of export turnover of the EOUs instead of 90% of export turnover of EOUs from the eligible export turnover for deduction u/s 80HHC of Income Tax Act."
47. The above groun d i s agai nst the acti on of the Ld.CI T( A) i n e xcl udi ng e xport turnover of uni ts cl ai mi ng e xempti on u/s 10B of the Act from the e xport turnover of the company whi l e cal cul ati ng deducti on u/s 80HHC of the Act.
48. Bri efl y stated the AO found th at the assesse e had cl ai med e xempti on of e xport profi ts both u/s10B and 80 HHC of the Act .He hel d that si nce the sai d profi ts were e xempt u/s 10B of the Act ,they di d not form part of the gross total i ncome of the assessee and were therefore not el i gi bl e for deducti on u/s 80HHC of the Act. He, therefore, reduced 90% of the e xport turnover and total turnover of EOU uni t from the e xport and total turnover of the company 24 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 for computi ng deducti on u/s 80HHC of the Act. The Ld.CI T( A) re jected the cl ai m of t he assessee by r eferri ng to the orders i n assessee's case for assessment years 2001-02 and 2002-03 and fol l o wi ng the same di rected that 100% of the turnover be reduced as opposed to 90% done by the AO.
49. Before us, Ld.Counsel for the assessee, rel i ed upon the judgment of the Tri bunal i n the case of Mahavi r Spi nni ng Mi l l s Ltd. i n I TA No.212/2005 for assessment year 2001-02 dated 5.1.2016 h ol di ng that the t urnover of 10B unit i s not to be e xcl uded for the purpose of computi ng deduction u/s 80HHC of the Act. Our attenti on was dra wn to the rel evant fi ndi ngs of the Tri bunal at page 48 of the order, a copy of whi ch was pl aced before us. I t was al so contended that thi s i ssue has al so b een deci ded by the Hon'bl e Hi g h Court i n favour of the assessee i n the case of M/s Mahavir Spi nni ng Mi l l s Ltd. vs Commi ssi oner of I ncome Ta x, Ludhi ana i n I TA No.408 of 2007 dated 02-09-16, for assessment y ear 1998-
99. Copy of the order was pl aced before us.
The Ld. DR, on t he other hand re l i ed upon the or der of the authori ti es bel o w.
50. We have heard ri val contenti ons a nd al so gone thr ough vari ous case l a ws referred to before us. The i ssu e before us i s whether for the purpose of computi ng ded ucti on u/s 80HHC i n a case where deduction u/s 10B i s al so being cl ai med, whether the e xport turnover and total turnover of the EOU uni t woul d be taken i nto consi derati on or not. We have gone through the order of the Hon'bl e Hi gh Court i n the 25 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 case of M/s Mahavi r Spi nni ng Mi l l s Ltd.( supra) for assessment year 1998-99 and fi nd that the ques ti on of l a w before i t was i de nti cal to the i ss ue at hand whet her e xport turnover of uni ts e xempt u/s 10B of the Act are to be i ncl uded in e xport turnover for 80HHC purposes. Th e questi on framed reads as under:
"i) Whether on a true and correct interpretation of Section 80 HHC of the Income Tax Act, 1961, the Tribunal has erred in law in holding that the export turnover of the unit whose profits are exempt under section 10B of the Income Tax Act, 1961 is not to be included in the 'export turnover' for the purposes of calculating the deduction under section 80HHC of the Income Tax Act, 1961?"
51. The Hon'bl e Hi gh Court, we fi nd, rul ed i n favour o f the assessee hol di ng that i n vi e w of the defi ni ti on of the sai d term i n secti on 80HHC, no such e xcl usi on i s pro vi ded. The rel evant fi ndi ng of the Hon'bl e Hi gh Court at para 16 of i ts order i s as under:
"16. We are, therefore, unable to agree with the decision of the Tribunal and of the CIT (Appeals) upholding the assessment order. The Tribunal held that the turnover of sales made by the assessee for which deduction under section 10B had been claimed did not answer the description of the turnover eligible for deduction under section 80HHC and therefore, the Assessing Officer rightly excluded such turnover from export turnover while computing relief available to the assessee under section 80HHC of the Act. We are unable to agree. Section 80 HHC clearly defines the terms export turnover, total turnover and profits of business. None of these definitions exclude the export turnover in respect whereof benefit has been derived under section 10B. To accept the respondent's contention would require the section to be rewritten and the expression to be redefined which is not permissible."
I n vi e w of the same we agree with the Ld.Counsel for the assessee that e xport turnover for whi ch e xemption u/s 10B of the Act has al ready been cl ai med, i s to be incl uded i n the turnover for purposes of cal cul ati ng deducti on u/s 80 HHC of the Act. Ground of appea l No.5( i ) &( i i ) rai sed by the assessee i s therefore al l o wed.
52. Ground No.5( i i i ) rai sed by the assessee reads as under: 26 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04 "5. (iii) The Ld. C1T (A) has erred in law and on facts while apportioning all the Administrative, Financial Expenses and Depreciation being expenses not relating to trading activities of appellant's business for calculating indirect cost of trading exports while calculating deduction u/s 80HHC of Income Tax Act."
53. Thi s ground i s agai nst the acti on of the CI T( A) i n apporti oni ng al l admi ni strati ve and fi nanci al e xpenses and depreci ati on for cal cul ati ng i ndi rect cost of tradi ng goods whi l e cal cul ati ng deducti on u/s 80HHC of the Act.
54. Bri efl y stated, th e assessee whi l e cal cul ati ng deducti on u/s 80HHC of the Act had cal cul ated the i ndi rect cost of tradi ng goods at Rs.90.76 l acs , by al l ocati ng common e xpenses whi ch were not di rectl y rel ati ng to manufacturi ng or tradi ng uni ts where tradi ng was done bet wee n both the tradi ng and manufacturi ng acti vi ti es. The assessee submi tted before the A.O. that as per Expl an ati on-d to secti on 80HHC( 3) di rect cost meant cost di rectl y attri butabl e to the tradi ng goods e xported out of I ndi a and as per Expl anati on-( e) to the sai d secti o n, i ndi rect cost meant cost not bei ng di rect cost al l ocated i n the rati o of t urnover i n respect of tradi ng goods to the total turnover. The A.O. di d not agree wi th the submi ssi ons of the assessee and cal cul ated the i ndi rect cost at Rs.244.07 l acs, by al l ocati ng al l e xpenses of t he company. Th e Ld.CI T( A) di spo sed off the appeal of the assessee wi th the di recti on to the A.O. to compute di rect and i ndi rect co st of tradi ng c ost as per fi ndi ngs gi ven i n the appel l ate or der dated 25.1.2 008 i n the case of the assessee for assessment year 2001-02. 27 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
55. Before us the Ld . counsel for ass essee contended that the appel l ate order fol l o wed by the Ld.CI T( A) i n the case of the assessee for assessment year 2001-02 had been deci ded i n favour of the assessee by the Tri bunal vi de i t s order i n I TA No.249/2008 and I TA No.280/2008 dated 28.12.201 2. It was poi nted out that the I . T.A. T. after goi ng through the facts of the case al l o wed the app eal for stati sti ca l purposes di recti ng the A.O. to recompute i ndi rect cost rel ati ng to tradi ng goods i n l i ne wi th the di recti on gi ven by the I . T.A. T. i n the case of VMT Spi nni ng Co mpany Ltd. Vs. ACI T in I TA No.682/2007 for assessment year 2003-04. I t was further poi nted out that i n the case of si s ter concern of th e assessee i .e. M/s Vardhman Te xti l es ( s upra) , i denti cal i ssue had been deal t wi th by the I . T.A. T. i n i ts recent order dated 4.5.2018, wherei n the order of t he CI T( A) had be en uphel d, setti ng asi de the i ssue for re worki ng the i ndi rect cost of tradi ng goods i n accordance wi th the deci si on of the Speci al Bench of the I . T.A. T. i n the cas e of Surendra Engi neeri ng Corporati on Vs. ACI T, 86 I TD 121 ( SB) ( Mum) .
56. Ld.DR ,on the o ther hand, rel i e d on the order of the l o wer authori ti es.
57. We fi nd that thi s i ssue al ready stands deci ded by the I TAT i n the case of the VM T Spi nn i ng Co. Ltd. , for A.Y 2003- 04,i n I TA no.682/chd/07 dt.13.07.2012, wherei n each i tem of e xpendi ture headwi se was ta ken i nto consi d erati on for al l ocati on to traded goods. The di recti ons gi ven i n the sai d deci si on was by the I TAT i n the case of the assessee for A.Y 28 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 2001-02 in I TA No.249 & 280 /chd/08 dt.28-1 2-12. We accordi ngl y di rect the assessi ng offi cer to recompute the i ndi rect cost rel atabl e to traded goods i n l i ne wi th the di recti ons gi ven i n para 18-25 of the order of the I TAT i n the case of VM T Spi nni ng( supra) for A.Y 2003-04 dt.13-07-
12. Ground of appeal No.5( i i i ) is therefore al l o wed for stati sti cal purposes.
58. Ground No.5( i v) rai sed by the assessee reads as under:
"5. (iv) That the Ld. CIT(A) has erred in law and on the facts while reducing profits of business eligible for deduction u/s 80HHC by 90% of interest received from suppliers and customers amounting to Rs.3,45,75,013/-"
59. Thi s ground is agai nst the acti on of the CI T( A)i n reduci ng the profi ts of the business el i gi bl e for deducti on u/s 80HHC by 9 0% of i nterest r ecei ved from sup pl i ers and customers amounti ng to Rs.3,45,75,013/-. The AO had reduced 100% of the sai d i nterest. The CI T( A) hel d that the i nterest from customers/suppl i ers was in the nature of busi ness i ncome but 90% of the same shoul d be deducted from the profi ts of the busi ness f or computi ng de ducti on u/s 80HHC of the Act.
60. Before us, the Ld. counsel for assessee contended that the i nterest from customers and suppl i ers bei ng in the nature of busi ness i ncome there i s no reason for deducti ng 90% of the same from the profits of the company for the purpose of cal cul ati ng deducti on u/s 80HHC of the Act. Rel i ance was pl aced on the deci sion of the Hon'bl e Punjab & Har yana Hi gh Court i n the case of Phatel a Cotgi n I ndustri es 29 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 P. Ltd. Vs. CI T ( 2007) 303 I TR 4 11 ( P&H) for the proposi ti on that the i nterest from customers was el i gi bl e for deducti on u/s 80HHC/80I A of the Act. I t was further contended that i n any case, the i nterest i ncome to be reduced shoul d be that after netti n g the i nterest e x penses i ncurred and i n thi s regard rel i ance was pl aced on the deci si on of the Hi gh Court i n the case of M/ s ACG Associ ated Capsul es Pvt. Lt d. ( supra) and the deci si on of the I TA T Cha ndi garh Bench i n the case of ACI T Vs. Mahavi r Spi nni ng Mi l l s Ltd. i n I TA No.212/2015 for assessment year 2001-02 dated 5.1.2016. It was al so poi nted out that i n the case of si s ter concern of th e assessee i .e. M/s Vardhman Te xti l es ( sup ra) the I . T.A. T. i n a recent deci si on had held that 90% of such i nterest earned from customers and suppl i ers need not be reduced for the purpose of cal cul ati ng deducti on u/s 80HHC of the Act. Our attenti on was dra wn to the rel evant fi ndi ngs at pages 11 to 13 of the order.
61. Ld.DR rel i ed on the order of the authori ti es bel o w.
62. We have heard t he ri val contenti ons. The Hon'ble ape x court i n the case of ACG Capsul e s ( supra) has l ai d do wn the l a w that onl y net i nterest earned ,e xcl udi ng i nterest pai d in rel ati on to the s ame, i s to be co nsi dered for the purpose of e xcl usi on from the profi ts for cal cul ati ng deducti on u/s 80HHC of the Ac t. Fol l o wi ng the same, we restore thi s i ssue to the AO to det ermi ne the net i nterest earned , as per the rati o l ai d do wn i n the case of ACG Capsul es( supra) and thereafter deci de the i ssue i n accordance wi th l a w. Thi s 30 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 ground of appeal No.5( i v) i s there fore al l o wed for stati sti cal purposes.
63. Ground No.5( v) rai sed by the assessee reads as under:
"5. (v) That the Ld. CIT(A) has erred in law and on the facts while reducing 90% of rent received from employees amounting to Rs.23,68,054/- from profits of business eligible for deduction u/s 80HHC."
64. Thi s ground i s agai nst the acti on of the CI T( A) i n reduci ng 90% of the rent recei ved from the empl o yees amounti ng to Rs.23,68,054/- whi l e computi ng profi ts of the busi ness el i gi bl e for deducti on u/s 80HHC of the Act. The CI T( A) deci ded the i ssue agai nst the assessee fol l owi ng hi s o wn order for assessment year 2001-02.
65. Before us the Ld . counsel for ass essee contended that the rent i ncome recei ved was i n the nature of busi ness i ncome and, therefore, 90% of the same need not be reduced. I t was poi nted out that i n the case of si ster concern of the assessee, Vardhman Te xti l es ( s upra) , the rental i ncome sho wn as part of mi scel l aneous i ncome was hel d by the I TA T not be reduced to the e xtent of 90% of the sam e from the profi ts of the busi ness. Our attenti on was dra wn to the rel evant fi ndi ngs of the I ATA at page 11-13 of the order.
66. We have both the parti es. We fi nd that i denti cal i ssue has been deal t wi th by us i n the conte xt of e xcl usion of rent recei ved for the purposes of cal cul ati ng deducti on/e xempti on u/s 10B of the Act i n ground no.4( i i i ) rai sed by the assessee. Si nce secti on 10B and 80 HHC are para materi a, al l owi ng deducti on/e xempti on of profi ts deri ved from e x ports, our 31 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 deci si on rendered i n the conte xt of secti on 10B of the Act, at para 38 of o ur order above wi l l appl y for p urposes of secti on 80HHC al so, fol l o wi ng whi ch, we di smi ss thi s ground rai sed by the assessee.
67. Ground No.5( vi ) rai sed by the assessee reads as under:
"5. (vi) That the Ld. CIT(A) has erred in law and on the facts while not allowing deduction u/s 80HHC (3)(c)(iii) on export incentives amounting to Rs.4,85,35,947/-."
68. Thi s ground i s a gai nst the acti on of the CI T( A) i n not al l o wi ng deducti on u/s 80HHC( 3) ( c) ( i i i ) on e xport incenti ves bei ng DEPB of Rs.4,85,35,947/-.
69. Bri efl y stated, the assessee had earned premi um on transfer of sal e of l i cences, REP/DEPB ( Rs.53.34 l acs premi um on DEPB) and cl ai med deducti on u/s 80HHC( 3) as per audi tor's certi fi cate. The A.O. whi l e computi ng deducti on u/s 80HHC reduced the gross sal e proceeds of DEPB of Rs.4,85,35,947/- and deni ed the benefi t of deducti on on the basi s of the pro vi si ons of secti o n 80HHC( 3) as the e xport turnover of the company e xi sted Rs.10 crores. The CI T( A) fol l o wi ng hi s own order for assessment year 2001-02 di smi ssed the cl ai m of the assessee.
70. Before us the Ld . counsel for ass essee contended that the provi so to secti on 80HHC( 3) had been struck do wn and as such the assessee was enti tl ed to deducti on u/s 80HHC on premi um on sal e of DEPB /REP l i cences. Rel i ance was pl aced on the de ci si on of the Ho n'bl e Gujarat Hi gh Court i n the case of Avani Exports Vs. CI T ( 2012) 348 I TR 349. The 32 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 Hon'bl e Juri sdi cti onal Hi gh Court i n the case of Guru Nanak Exports, Phag wara Vs. ACI T Jal andhar ( 2 012) CWP NO.11328 of 200 9 and Vi ja y Si l k House ( Bangal o re) Ltd Vs. UOI , WP No.2446/2010 ( Bomba y Hi gh Court) . I t was also poi nted out tha t i n the case o f si ster concern i .e. M/s Vardhman Te xti l es ( supra) the I . T.A. T. had al l o wed the cl aim of the assessee agreei ng that the provi so had been hel d to be ul tra vi res. Our attenti on was dra wn to the fi ndi ngs of the I . T.A. T. i n the sa i d case at pages 34 to 35 as under:-
"17.1 The Assessing Officer has not allowed deduction under section 80HHC(3)(c)(iii) on export incentives. The assessee submitted before the Ld.. CIT(A) that this amendment is not applicable as company adoption to choose duty drawback or DEPB being duty remission scheme. He argued that the Assessing Officer had reduced total DEPB amounting to Rs.4.10 Crores instead of losses from transfer of DEPB amounting to Rs.12.34 Crores from export incentives while calculating deduction under proviso to Section 80HHCJ3). He further argued that amendment relating to export incentives is not applicable and DEPB of Rs.4.10 Crores included duty drawback of Rs.36.15 Lacs on which no restriction to allow deduction under section 80HHC have been laid in taxation provisions.
17.2 Ld. CIT(A) has confirmed the addition based on the earlier order in the assessees own case, relying on the decision of Hon'ble jurisdictional High Court in the case of Liberty India Ltd. (supra).
17.3 Before us the assessee brought to our notice the order of Hon'ble jurisdictional High Court in the case of Guru Nanak Exports in C.W.P No. 11328 of 2009 dt. 03/10/2012 wherein the amendment brought with retrospective effect has been held ultra-vires with regard to the retrospective nature of the amendment.
17.4 Since the amendment is not applicable to the case of the assessee before us this ground of appeal f the assessee is hereby allowed."
71. Ld.DR rel i ed on the order of the authori ti es bel o w.
72. Havi ng heard the ri val cont enti ons. We a re in agreement wi th the Ld.Counsel for the assessee that the thi rd provi so to secti on 80HHC( 3) , appl yi ng whi ch the assessees cl ai m of deducti on u/s 80HHC on sale of DEPB was deni ed, was brought on the statute by the Tta xati on Amendment Act, 2005 and i ts retrospecti vi t y from 33 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 01.04.1998, was categori cal l y struck do wn by courts i n the judgements rel i ed upon by the L d.Counsel for th e assessee. Si nce the i mpug ned year fal l s be fore 2005, the th i rd provi so i s not appl i cabl e to the assesse e. The deni al of deducti on u/s 80HHC of th e Act on sal e of DEPB i s therefor e set asi de. Thi s ground of a ppeal of the aseessee i s therefore al l o wed.
73. The assessee has taken the fol l o wi ng addi ti onal ground before us whi ch reads as under:
" That the authorities below have erred in treating the interest reimbursement of Rs.8,32,78,691/- under T echnology Upgradatio n Fund Sc heme (FU FS) as reve nue receip ts ins te ad of capital receip t."
74. The assessee has contended that i t i s a purel y l egal ground whi ch ma y be admi tted for adjudi cati on. Agreei ng wi th the contention of Ld. counsel for assessee and fol l o wi ng the judgment of the Hon'bl e Supreme Court i n the case of N TPC Vs. CI T 29 9 I TR 383, the a ddi ti onal ground raised by the assessee i s bei ng admi tted for adjudi cati on being a purel y l egal ground.
75. Before us the Ld. counsel for assessee poi nted out the facts rel ati ng to the i ssue stati ng that the assessee had pai d i nterest to the bank amounti ng to Rs.24,55,51,691/- on term l oans rai sed by i t and sai d i nterest was debi ted i n the Profit & Loss Account of the assessee company. As p er the TUF Scheme of the Government the assessee had recei ved subsi dy of Rs.8, 32,78,691/- whi ch was credi ted i n the Profi t & Loss Account and accordi ngl y ta xed. I t i s thi s TUFS subsi dy of Rs.8.32 crores, the Ld. counsel for assessee 34 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 poi nted out that the assessee i s cl ai mi ng as capi tal recei pt. The Ld. counsel for assessee contended that thi s i ssue of treatment of i nt erest subsi dy un der TUF Scheme has been deal t wi th i n a number of deci si ons hol di ng the same to be capi tal i n nature . Our attenti on was dra wn to th e fol l o wi ng case l a ws i n thi s regard:
1) CIT Vs. Shamlal Bansal, ITA No.472/2010 ` dated 17.1.2011 (P&H).
2) M/s CNV Textiles Pvt. Ltd. Vs. DCIT, ITA No.746/Mad/2014, dated 21.11.2014.
3) DCIT Vs. M/s Gloster Jute Mills Ltd., ITA No.687/Kol/2010, dated 2.7.2014.
4) DCIT Vs. Satluj Textiles & Industries Ltd., ITA No.5142/Del/2013, dated 3.7.2015.
Copi es of the above orders were al so pl aced before us.
76. The Ld. counsel for assessee al s o contended tha t thi s i ssue arose i n th e case of the si st er concern of the assessee M/s Vardhman Te xti l es ( supra) where the matter had been restored to the CI T( A) to adjudi cate the same. I t was poi nted out that i n the s ai d case al so thi s i ssue had been rai sed as an addi ti onal and si nce i t has n ot been consi dered by the authori ti es bel o w it was remanded to the CI T( A) . Our attenti on was dra wn to para 23.5 of the order hol ding so.
77. The Ld. DR al s o contended that si nce the aforesai d ground had not been there befor e the CI T( A) an opportuni t y to be provi ded to the Revenue to deal wi th enti re gamat of the i ssue.
35 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
78. I n vi e w of the above, we restore the i ssue of treatment of subsi dy received of i nterest under TUF Scheme back to the CI T( A) for adjudi cati ng afresh di recti ng hi m to pass a speaki ng order i n thi s regard after consi deri ng al l the facts rel ati ng to the scheme and the judi ci al precedent in thi s regard. The a ssessee woul d be at l i berty to make submi ssi ons as deemed fi t before the CI T( A) . Thus addi ti onal ground of appeal i s, therefore, al l o wed for stati sti cal purposes.
79. I n effect the appeal of the assess ee i s partl y al l o w ed for stati sti cal purposes.
80. We shal l no w take up the appeal of the Revenue i n I TA No.118/Chd/2009.
ITA No.118/Chd/2009(Revenue's Appeal):
81. Ground No.1 rai sed by the Revenue reads as under:
"1. T hat the Ld. C IT (A)- II h as erred in l aw & f acts in del eting the addition of Rs.44,96,028/- made u/s 14A by the A.O. on proportionate basis out of personnel, administrative and misc. expenses for earning of dividend income."
82. The above grou nd rel ates to the i ssue of attributi ng e xpenses to di vi dend i ncome earned by the assessee whi ch the A.O. had attri buted to the extent of Rs.44.96 lacs. The CI T( A) had reduc ed the same to R s.1 l ac. Thi s i ssu e has been deal t wi th by us i n ground No.2 r ai sed by the asse ssee i n i ts appeal as above wherei n we have uphel d the restri cti on of attri buti on of e xpenses to the e xtent of Rs.1 l ac at para 19of our order above. The ground of appeal No.1 rai sed by the 36 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 Revenue, therefore, stands adjudi cated as above and thus di smi ssed.
83. Ground No.2 rai sed by the Revenue reads as under:
"2. Ld. CIT(A) has erred in law & f acts in directing the A.O. to consider interest income received by the assessee on delayed payment from customers as "business income"
instead of "Income of other sources" as considered by the A.O."
84. The Revenue i nt erest he above ground has chal l enged the acti on of the Ld.CI T( A) i n treati ng the i nterest recei ved by the assessee on del a yed pa yments from cu stomers as busi ness i ncome i nstead of i ncome from other sources as hel d by the A. O. The CI T( A) had hel d the s ai d i nterest i ncome to be in the nature of busi ness i ncome of the assessee fol l o wi ng hi s order i n the case of the assessee for assessment year 2002-03 wherei n the deci si on of t he Hon'bl e Juri sdi cti onal Hi gh Court i n the case of Phatel a Cotgin I ndustri es P. Ltd. Vs. CI T, 167 Ta xman 9 had been fol l o wed. The Ld. DR was unabl e to bri ng to our noti ce any contrar y deci si on i n thi s regard. I n vi e w of the same, we d o not fi nd any reason to i nt erfere i n the ord er of the CI T( A) hol di ng the i nterest i ncome earned from del a yed pa yments from customers etc. as busi ness i ncome. Ground of appeal No.2 rai sed by the Revenue i s, therefore, di smi ssed.
85. Ground No.3 rai sed by the Revenue reads as under:
"3. That the Id. CIT(A) has erred in law & facts in allowing deduction u/s 10B on sale of sample forming part of misc. income which have no nexus with the profits derived from the undertaking claiming exemption u/s 10B."37 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04
86. The i ssue rai sed i n the above ground rel ates to the di recti on of the Ld.CI T( A) al l o wi ng deducti on u/s 10B on sal e of sampl es whi ch form part of mi scel l aneous i ncome. The A.O. had hel d that si nce i t ha d no ne xus wi th the profi ts deri ved from the undertaki ng, the assessee was not el i gi bl e to cl ai med deducti on u/s 10B of the Act on the same. The Ld.CI T( A) , on the other hand, hel d that thi s i ncome from sal e of sampl es had to be taken as income deri ved from 100% EOU si nce the sampl es sol d were manufactured by the EOU onl y. The Ld. DR was unabl e to controvert thi s fi ndi ng of the Ld.CI T( A) before us. On the contr ar y, i t was poi nt ed out to us that i n the case of Vardhman Threads Ltd. Vs. ACI T, the I . T.A. T. i n thi s o rder passed i n I TA No.556/Chd/ 2008 dated 28.4.2014 had h el d that the sal e of sampl es was related to normal busi ness of the assessee e nti tl i ng i t to ded ucti on u/s 80I B of the Act. I n vi e w of the above, there i s no doubt, therefore, that the CI T( A) had ri ghtl y hel d the assessee to be el i gi bl e for deducti on on sal e of sampl es u/s 10B of the Act. Ground of appea l No.3 rai sed by the Revenue i s, therefore, di smi ssed.
87. Ground of appea l No.4 rai sed by the Revenue rea ds as under:
"4. That the Ld. CIT(A) has erred in law by directing the A.O. for fresh adjudication/ verification of direct and indirect cost attributable to trading of export goods as per provisions of section 80HHC of I.T.Act. 1961, whereas the same was calculated as per data supplied by the assessee."
88. The above groun d chal l enges the acti on of the C I T( A) di recti ng fresh adjudi cati on/veri fi cati on of the direct or 38 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 i ndi rect cost attr i butabl e to the t radi ng on e xport goods fpp of cal cul ati ng t he el i gi bl e dedu cti on of the as sessee u/s 80HHC of the Ac t. The Ld. DR po i nted out that th i s ground of appeal was common to that raised by the assessee i n i t i s appeal i n I TA No.88/Chd/2009 above i n ground No.5.(i i i ) . Si nce the i ssue h as been adjudi ca ted by us i n the case of the assessee at para 55 of the order above uphol di ng the order of the CI T( A) , the ground of appeal No.4 rai sed b the Revenue stands covered by our deci si on as above. I n vi e w of the same, ground No.4 rai sed by the Revenue i s di smi ssed.
89. Ground No.5 rai sed by the Revenue reads as under:
"5. That the Ld. C1T(A) has erred in law & facts in directing the A.O. to treat the interest received from customers and suppliers to be the income eligible for deduction u/s 10B."
90. I n the above ground the Reven ue has chal l eng ed the acti on of the Ld. CI T( A) i n treati n g the i nterest re cei pts from customers and suppl i ers as bei ng el i gi bl e for deducti on u/s 10B of the Act. The Ld. DR i n t hi s regard rel i ed upon the order of the A.O. but at the same ti me poi nted out that the Hon'bl e Juri sdi cti onal Hi gh Court i n the case of Phatel a Cotgi n I ndustries P. Ltd. Vs. CI T, 303 I TR 411 had categori cal l y hel d that the i nterest from customers/suppl i ers was enti tl ed to deducti on u/s 8 0HH and 80I of the Act. In vi e w of the above, we fi nd no reason to i nterfere in the order of the Ld.CI T( A) and ground rai sed by th e Revenue, therefore, i s di smi ssed.
91. Ground No.6 rai sed by the Revenue i s as under: 39 ITA Nos.88 & 118/Chd/2009
A.Y.2003-04 "6. That the Id. CIT(A) has erred in law & f acts in allowing deduction u/s 80HHC(3)(c)(i) on adjusted profit of business after increasing the same with the loss on trading goods exported amounting to Rs.1,45.02.286/- and directed the A.O. to calculate deduction u/s 80HHC(3)(c)(i) accordingly."
92. The a bove groun d rai sed by the Revenue i s agai n st the di recti on of the Ld.CI T( A) al l o wi ng deducti on u/s 80HHC of the Act on the adjusted profi ts of the busi ness after adjusti ng l oss on sal e of traded e xports as agai nst the order passed by the A.O. wi thout maki ng such adjustment. Thi s i ssue has ri sen i n the case of the assessee's appeal al so i n ground No.4.( i i i ) wherei n we have hel d that both the profi t/l oss on the e xport of trading goods and the turnover of e xport tradi ng goods need to be adjusted for the purpose of cal cul ati ng/determi ni ng the el i gi bl e deducti on u/s 10B of the Act at para 3 8 of our order ab ove. Fol l o wi ng th e same we uphol d the order of the Ld.CI T( A) i n al l o wi ng the adjustment of l oss on e xport of tradi ng goods for the purpose of cal cul ati ng dedu cti on u/s 10B of the Act. Ground of appeal No.6 rai sed by the Revenue i s, therefore, di smi ssed.
93. Ground of appea l No.7 rai sed by the Revenue rea ds as under:
"7. That the Id. CTT(A) has erred in law & facts in allowing the deduction u/s 80IB in case of Aurodying Mills as the unit is not doing manufacturing activities."
94. I n the above ground the Reven ue has chal l eng ed the acti on of the Ld.CI T( A) i n granti ng deducti on u/s 80I B of the Act to Auro D ying Mi l l s of the assessee. The A. O., i t was poi nted out, had deni ed the sai d hol di ng that th e uni t was not undertaki ng any manufacturi ng acti vi ti es. The Ld.CI T( A) , on the other han d, had al l o wed t he cl ai m of the a ssessee on 40 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 fi ndi ng that i denti cal i ssue had ari sen i n the case of the assessee i n asse ssment year 200 2-03 wherei n the same was al l o wed i n fi rst appeal vi de order dated 29.4.2008.
95. The Ld. DR befor e us rel i ed upon the order of the A.O. but was unabl e to controvert the fi ndi ng of the Ld.CI T( A) that the i ssue ha d been deci ded i n favour of the a ssessee i n the precedi ng as sessment year. Nor di d the Ld. DR bri ng to our noti ce any order of hi gher authori ti es reversi ng the CI T( A) 's order on thi s i ssue for the precedi ng year. I n vi e w of the same, we do not fi nd any reason to i nterf ere i n the order of the CI T( A) hol di ng that A uro D yi ng Mi l l s was el i gi bl e for deducti on u /s 80I B of the Act. I n vi e w of the above, ground No.7 rai sed by the Revenue i s di smi ssed.
96. Ground No.8 rai sed by the Revenue reads as under:
"8. That the Id. CIT(A) has erred in law & facts in allowing 100%) deduction u/s 80HHC instead of 90% as available for the year under consideration in computing book profit of the assessee u/s 11 5JB."
97. The Revenue has chal l enged the acti on of the Ld. CI T( A) i n al l o wi ng 100% deducti on u/s 80HHC of the Act for the purpose of comp uti ng book profi t s u/s 115JB of the Act as agai nst 90% of the profi ts al l o wed by the A.O.
98. Before us the Ld. DR conceded that thi s i ssue was covered i n favour of the assessee by the order of t he I . T.A. T. i n the case of the assessee i tsel f for assessment year 2001- 02 i n I TA No.249/Chd/2008 dated 28.12.2012 wherei n at para 55 the I . T.A. T. had noted that the Ld. DR had conceded 41 ITA Nos.88 & 118/Chd/2009 A.Y.2003-04 that the i ssue st ood covered i n fa vour of the asses see i n the case of Ajanta Pharma Ltd. Vs. CI T, 327 I TR 305.
99. I n vi e w of the above, we do not fi nd any reason to i nterfere i n the order of the Ld. CI T( A) i n al l o wi n g deducti on of 100% of el i gi bl e deducti on u/s 80HHC of the Act for the purpose of cal cul ati on of book profi ts u/s 115JB of the Act. Ground of appea l No.8 rai sed by the Revenue i s, therefore, di smi ssed.
100. The appeal of the Revenue i s therefore di smi ssed
101. I n effect, the appeal of the assessee i s partly all o wed and the appeal of the Revenue i s di smi ssed.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
संजय गग अ नपणा
ू ग$ता
ु
(SANJAY GARG ) ANNAPURNA GUPTA)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
*दनांक /Dated: 26th November, 2018
*रती*
आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय-त
ु / CIT
4. आयकर आय-त
ु (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकर अपील#य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानसार ु / By order, सहायक पंजीकार/ Assistant Registrar