Income Tax Appellate Tribunal - Chandigarh
Acit,, Ludhiana vs M/S Vardhman Holdings Ltd.,, Ludhiana on 31 May, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH'B', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.527/CHD/2009
Assessment Year:2004-05
Vardhman Holdings Limited v. Jt. Cit
(Formerly known as Vardhman Spg. Range 1
& Genl. Mills Limited) Ludhiana
Chandigarh Road
Ludhiana
TAN/PAN:AABCV8088P
(Appellant) (Respondent)
ITA No.574/CHD/2009
Assessment Year:2004-05
Jt. Cit v. Vardhman Holdings Limited
Range 1 (Formerly known as Vardhman Spg.
Ludhiana & Genl. Mills Limited)
Chandigarh Road
Ludhiana
TAN/PAN:AABCV8088P
(Appellant) (Respondent)
ITA No.1138/CHD/2011
Assessment Year:2004-05
Vardhman Holdings Limited v. Jt. Cit
(Formerly known as Vardhman Spg. Range 1
& Genl. Mills Limited) Ludhiana
Chandigarh Road
Ludhiana
TAN/PAN:AABCV8088P
(Appellant) (Respondent)
ITA No.1150/CHD/2011
Assessment Year:2004-05
Jt. Cit v. Vardhman Holdings Limited
Range 1 (Formerly known as Vardhman Spg.
Ludhiana & Genl. Mills Limited)
Chandigarh Road
Ludhiana
TAN/PAN:AABCV8088P
(Appellant) (Respondent)
Assessee by:- Shri Subhash Aggarwal, Advocate
Department by: Shri G. S. Phani Kishore, CIT (DR) and
Shri Manjit Singh, D.R.
Date of hearing: 13 03 2019
Date of pronouncement: 05 2019
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 2 of 65
ORDER
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER:
The above are cross-appeals filed by the assessee and the Revenue challenging the order passed by the learned Commissioner of Income Tax (Appeals),Jalandar, (hereinafter referred to as Ld. CIT(A)) under section 250(6) of the Income Tax Act, 1961 (in short referred to as the Act) . The cross appeals relate to quantum and penalty proceedings for A.Y 2004-05 We shall first be taking up the cross-appeals filed against the order passed by the Ld.CIT(A) in quantum proceedings in ITA No.527 & 574/Chd/2009, and shall first be dealing the appeal filed by the assessee in ITA No.527/CHD/2009.
2. The Grounds raised by the assessee read as under:-
1. That the order passed by the Ld. CIT(A) is bad in law so far as following grounds are concerned.
2. That the Ld. CIT (A) has erred in law and on facts while confirming the action of the Assessing officer for treating Interest income amounting to Rs. 238.89 Lacs as "Income from other sources" instead of "Income from Business or Profession".
3. 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.2,15,31,035/- on account of Sales Tax Exemption/Subsidy received from Government of Punjab as the revenue receipt of the appellant.
4. Without prejudice to the Ground (3) above, 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.2,15,31,035/- on account of Sales Tax Exemption/Subsidy received from Government of Punjab as "Income from other sources".
5 That the Ld. CIT (A) has erred in law and on facts while confirming the action of the Assessing officer for reducing profits of units eligible for deduction u/s 10B (VSGM EOU) and 80IB ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 3 of 65 (VSGM EOU, Auro Wvg II and Auro Dyeing) by the following amounts :-
Particulars VSGM EOU Auro Wvg II Auro Dyeing Interest received from 8,196 others Rent received from 1,84,185 90,119 3,18,483 employees Misc. Income 1,97,807 34,67,723 33,780 DEPB 43,78,816 3,01,649
6. That the Ld. CIT(A) has erred in law and on the facts while directing to Assessing officer to reduce profits eligible for deduction u/s 10B and 80IB of VSGM E.O.U., Auro Wvg-II and Auro Dying by proportionate Head office expenses.
7. 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.
8. That the Ld. CIT(A) has erred in law and on the facts while confirming the action of the A.O. for not adjusting actual profit/loss on sale of trading goods while calculating profits of units eligible for deduction under section 10B.
9. That the Ld. CIT(A) has erred in law and on the facts while confirming the action of the Assessing officer for increasing the Total Turnover of units eligible for deduction u/s 10B by Export Turnover of Trading goods amounting to Rs. 20,31/15,331/-.
10. 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.2,93,45,849/-.
11. 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 ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 4 of 65 Turnover of the appellant while calculating the deduction u/s 80HHC of Income Tax Act.
12. The Ld. CIT (A) has erred in law and on facts in excluding sale tax subsidy amounting to Rs. 2,15,31,035/- from the eligible profits of the business while calculating deduction u/s 80HHC.
13. The Ld. CIT (A) has erred in law and on facts while reducing eligible profits of business by scrap sales amounting to Rs.1,70,25,000/- while calculating deduction u/s 80HHC.
14. That the Ld. CIT(A) has erred in law and on the facts while disallowing deduction u/s 80HHC (3)(c)(iii) on export incentives amounting to Rs. 5,30,04,339/-.
15. Without prejudice to ground 14 above the Ld. CIT(A) has erred in law and on facts while excluding twice 90% of DEPB, amounting to Rs. 3,61,898/-which was already reduced by the appellant.
16. Without prejudice to ground 14 above the Ld. CIT(A) has erred in law and on facts while disallowing deduction u/s 80HHC (3)(c)(iii) on export incentives amounting to Rs. 5,30,04,339/- instead of loss on transfer of DEPB amounting to Rs. 18,24,347/-.
17. The Ld. CIT (A) has erred in law and on facts while applying method of calculating cost of trading goods exported for deduction u/s 80-HHC other than that specified u/s 80-HHC and at variance to the method regularly adopted by the appellant in earlier years.
18. The Ld. CIT (A) has erred in law and on facts while apportioning full amount of Personnel, Administrative, Financial Expenses and Depreciation to the indirect cost of trading goods while calculating deduction u/s 80HHC of Income Tax Act, ignoring the fact that full amount of these expenses were not related to the trading activities.
19. That the Ld. CIT (A) has erred in law and on facts while allocating Rs. one lac to dividend income earned by the appellant.ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 5 of 65
20. That the Ld. CIT(A) has erred in law and on the facts while confirming the action of the Assessing officer for disallowing 50% of the foreign traveling expenses of employee of Rs.55370/-
21. That the Ld. CIT(A) has erred in law and on the facts in including-
the trading turnover in Total turnover while calculating the amount of income to which provisions of section 10B applies for calculation of MAT.
22. That the appellant craves leave to add/alter/amend any ground of appeal on or before the due date of hearing of appeal.
3. The assessee has also raised an additional ground before us vide its application under Rule 11 of the Income Tax Appellate Tribunal Rules, 1963, dated 12/11/2015, as under:-
"That the authorities below have erred in treating the interest reimbursement of Rs.8,78,00,400/-under Technology Upgradation Fund Scheme (TUFS) as revenue receipt instead of capital receipt".
4. It was contended that the said ground was a purely legal ground and prayed that the same be admitted. The ld. D.R. did not object to the same. In view of the same and considering the fact that the ground raised before us is a purely legal ground requiring no further investigation of facts, we admit the same for adjudication.
5. Grounds No.1 and 22 are general in nature and need no adjudication.
6. Ground No.2 raised by the assessee challenges the order of the Ld.CIT(A) upholding the treatment by the Assessing Officer ( AO )of interest income amounting to Rs.238.89 lakhs as income from other sources, instead of income from business or profession claimed by the assessee.
7. The brief facts relating to the issue are that the Assessing Officer (A.O.) noted that the appellant had credited a sum of Rs.51.02 lakhs as interest income in the profit and loss account which was the net figure of the interest earned after reducing the interest expenditure. The gross interest was found to include a sum of Rs.293.46 lakhs as interest received ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 6 of 65 from customers and suppliers and a sum of Rs. 238.89 lakhs as received from FDRs etc. The AO noted that as per section 2(28A), the interest income included all kinds of interest received by the assessee, including interest received from customers on delayed payments. The AO was of the opinion that the interest received was to be taxed under the head income from other sources and that the interest received could not be set off against the liability to pay interest. He accordingly taxed the entire gross interest income earned by the assessee under the head "Income from Other Sources". The AO relied on the judgments of the Hon'ble Supreme Court in the case of Tuticorian Alkali Chemicals & Fertilizers Ltd., 227 ITR 172 (SC) and on Bio Pharma Vs. DCIT, 85 ITD 575 (Ahd).
8. The Ld. CIT(A) held that the interest received from customers and from suppliers was to be treated as business income while the interest income from FDRs as income from other sources, following the orders passed by the Ld. CIT(A) in the case of the assessee for Assessment Year 2002-03 and in the case of M/s Vardhman Textiles Ltd., a sister concern of the assessee,. He further disallowed netting of interest received against interest expenditure of the assessee.
9. Before us, the asseessee ,by way of the present ground , has challenged the treatment of the interest earned on FDR's as Income from other sources. During the course of arguments made before us, the Ld. Counsel for the assessee contended that its solitary prayer in this regard was that the benefit of netting the interest income earned be provided by setting off interest paid against the same. The details of the same were submitted to us, as under:-
Interest paid Rs.10.33 crores
Interest rec. Rs.5.32 crores
Net interest expense Rs.5.01 crores
10. The Ld. Counsel for the assessee further pointed out that identical issue had been decided by the ITAT in the case of the assessee itself for the Assessment Year 2003-04 wherein the issue was set aside to the file of the A.O. for determining the nexus between the interest expenditure and interest income and thereafter to allow the benefit of netting. The copy of the order in ITA No.88 & 118/CHD/2009 Dt.26-11-18 was placed before us. Our attention was drawn to the ground raised by the ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 7 of 65 assessee in that year, reproduced at paras 20 and 21 of the order, and to the finding of the ITAT at para 28 of the order, as under:-
"20. Ground No.3 raised by the assessee reads as under:
"3. The Ld. C1T (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. In the above ground, the assessee has challenged the action of the Ld.CIT(A) in treating the interest income earned by the assessee of Rs.34.74 lacs as income from other sources x.
x.
x.
x.
28. We have considered the rival contentions. We find merit in the contention raised by the Ld. counsel for assessee. As pointed out by the Ld. counsel for assessee and as admitted by both the parties, identical issue has been dealt with in the case of sister concern of the assessee M/s Vardhman Textiles (supra) wherein the matter has been restored back to the A.O. to allow the netting if nexus is established between the interest expenses incurred and interest income earned. Following the same we restore the issue back to the A.O. in the present case also for determining the nexus between the interest expenditure and interest income earned and thereafter allow the benefit of netting to the assessee. Ground of appeal No.3 raised by the assessee is, therefore, allowed in above terms."
11. The Ld. Counsel for the assessee, therefore, contended that the issue was squarely covered as above by the order of the ITAT in the case of the assessee for the Assessment Year 2003-04.
12. The ld. D.R. fairly conceded that identical issue had been decided in the case of the assessee as pointed out by the Ld. Counsel for the assessee above.
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 8 of 6513. We have heard the contentions of both the parties. We have also gone through the order of the ITAT in the case of the assessee for A.Y 2003- 04 and as pointed out by the Ld. Counsel for the assessee and admitted by both the parties, we find that identical issue has been adjudicated in the said case by the ITAT restoring the matter back to the A.O. to allow netting if nexus is established between the interest expenses incurred and the interest income earned. Since the issue before us is identical to that in A.Y 2003-04 it is squarely covered by the order of the ITAT, following which we restore the issue back to the A.O. in the present case also to decide the same in accordance with the direction given by the ITAT in ITA No.88 & 118/CHD/2009 Dt.26-11-18.
The ground of appeal No.2 raised by the assessee is, therefore, allowed for statistical purposes.
14. Ground of appeal No.3 raised by the assessee relates to the issue of treatment of sales tax exemption/subsidy received by the assessee from Government of Punjab, amounting to Rs.2,15,31,035/-.
15. The brief facts relating to this issue are that the AO noted that the appellant had shown sales tax subsidy of Rs.215.31 lakhs as capital receipt in the original return, but in its revised return the same was shown as revenue receipt and offered for taxation. In the revised return, the appellant included a note requesting that the sales tax subsidy may be reduced from taxable income in view of the decision of the ITAT, Mumbai Bench in the case of Reliance Inds Ltd (supra). The AO did not accept the appellant's claim in view of the judgment of Jurisdictional Punjab & Haryana High Court in the case of CIT Vs Abhishek Inds Ltd. for AY 1993-94 in ITA No. 110 of 2005.
16. The Ld. CI T(A) upheld the order of the A.O.
17. Before us, the Ld. Counsel for the assessee contended that as per the scheme of the Government of Punjab, subsidy was of capital nature as the incentive was given to spurt industrial growth as well as generation of employment opportunities through rapid industrialization in the State. The Ld. Counsel for the assessee contended that the scheme of the Government of Punjab, vide which the subsidy had been granted to the assessee, had been examined in the case of the assessee ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 9 of 65 for Assessment Year 2003-04 and the matter had travelled upto the I TAT who, vide their order dated 26/11/2018 in ITA No.88 & 118/CHD/2009 for Assessment Year 2003-04, held that sales tax subsidy was a capital receipt. Our attention was drawn to the findings of the ITAT at paras 11 to 13 of the order, as under:-
"11. Having heard the rival contentions we f ind merit in the contention of the Ld. counsel f or assessee. We have gone through the order passed by the ITAT in the case of M/s Vardhman Textiles (supra), relied upon by the Ld. Counsel for the assessee in support of its contention that the subsidy was capital in nature, and f ind that the f acts in the said case were identical, the sales tax subsidy being received by virtue of scheme of the Punjab Government vide the same notif ication of the Department of Industries as in the case of the assessee. The said f act f inds mention in page 27 of the order. The ITAT in the said case follo wed the decision of its coordinate Bench in the case of Mahavir Spinning Mills Ltd. vs JCFT in ITA No.344/Chd/2009, wherein, we find, this issue had originally been decided by the ITAT against the assessee f ollo wing the decision of the jurisdictional High Court in the case of Abhishek Industries(supra), but on appeal by the assessee, the Hon'ble High Court had restored the matter back to the ITAT to readjudicate the same in the light of the decisions of the apex court in Ponni Sugars & Chemicals Limited. Thereaf ter, the ITAT had held the subsidy to be capital in nature.
12. In vie w of the above, the issue in the present case stands covered as decided in f avour of the assessee by the above orders of the ITAT even af ter considering the decision jurisdictional high court in the case of Abhishek Industries (supra).
13. Even other wise, we f ind that the issue has been settled by various decisions of the Hon'ble Apex Court laying do wn the proposition that true test f or determining the nature of subsidy whether capital or revenue is the purpose test i.e. It is the purpose f or which the subsidy has been given which ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 10 of 65 is determinative of the nature of the subsidy and not the manner of disbursement of the same. The manner of calculating the same or even the point of time at which it is disbursed. The Hon'ble Apex Court time and again reiterated this proposition right f rom M/s Sahni Steei & Press Works Ltd. and CIT Vs. Ponni Sugar & Chemicals Ltd. 306 ITR 392 and its latest judgment in the case of CIT Vs. Chaphalkar Brothers, Pune in Civil Appeal no.6513-6514 dt. 7 th Dec 2017. In the present case undisputedly as per the scheme of Punjab Government the purpose of disbursement is to spurt industrial gro wth as well as to generate the employment opportunities through rapid industrial ization in the State. There is no doubt, theref ore, that the nature of the subsidy is capital."
18. The ld. D.R. fairly conceded that the issue had been decided in favour of the assessee in its own case in the preceding year.
19. In view of the above, since it is an admitted fact that identical issue has been decided in favour of the assessee in Assessment Year 2003-04 by the ITAT vide its order in ITA No.88 & 118/CHD/2009, and no distinguishing facts have been brought to our notice by the Ld.DR, the impugned issue stands squarely covered by the said order, following which we hold that the sales tax subsidy received by the assessee is capital in nature. We, therefore, direct deletion of the addition of the same.
The ground of appeal No.3, therefore, stands allowed.
20. Ground No.4 raised by the assessee is against the action of the Ld. CI T(A) in confirming the act of the A.O. taxing the sales tax subsidy/exemption received by the assessee from the Government of Punjab as income from other sources.
21. Since we have held the sales tax subsidy to be capital in nature at para 20 of our order above while dealing with ground No.3 raised by the assessee, the said ground raised before us regarding the character or nature of the subsidy, whether income from other sources or otherwise becomes infructuous.
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 11 of 65Ground No.4 raised by the assessee is, therefore dismissed as being infructuous.
22. Ground No.5 raised by the assessee is against the reduction of profits of units of the assessee, eligible for deduction under section 10B and 80IB of the Act, by certain incomes, treating the same as not having been earned or derived from the manufacturing activities of the assessee in those units.
23. The brief facts relating to this issue are that the AO was of the opinion that deduction u/s 80IB and section 10B were allowable in respect of the profits derived from the industrial undertaking. The AO relied on the decision of Hon'ble Supreme Court in the case of Sterling Foods reported in 237 ITR 579 for this proposition. He noted that the Hon'ble Jurisdictional High Court, relying on the decision in the case of Sterling Foods [supra], had held in the case of M/s Nahar Exports 204 CTR 464 that interest income and income from sale of import entitlements could not be included in the income of the assessee for the purpose of computing deduction u/s 80IA. He also noted that the Jurisdictional High Court in the case of Liberty India I TA No. 590 of 2005 had held that deduction u/s 80IB was not allowable in respect of DEPB and Duty Drawback. Relying on these judgments, the AO held that deduction u/s 801B and u/s 10B was not allowable in respect of the impugned amounts of income:
Particulars VSHM EOU Auro Wvgll
Auro Dyeing
Interest from 18,55,196 7,01,994 36,15,500
customers & suppliers
Interest received - - -
from others
Insurance claims 58,356 18,655 -
received
Rent received 1,84,185 90,119 3,18,483
from employees
Gain on Forex 0.82,884/- 5,27,442 -
Fluctuation
Miscellaneous 1,97,807 34,67,723 33,780
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 12 of 65
income
DEPB - 43,78,816
3,01,649
24. The Ld. CI T(A) allowed deduction on interest received from customers/suppliers, insurance claim and gain on Forex fluctuation, however, he reduced the profits in respect of the following incomes:-
1. Interest from others Rs.8,196/-
2. Rent from employees Rs.5,92,787/-
3. Miscellaneous income Rs.36,99,310/-
4. DEPB Rs.46,80,465/-
25. Aggrieved by the order of the CIT(A) the assessee has raised the above ground before us.
26. During the course of hearing before us, the Ld. Counsel for the assessee relied on various case laws stating that the issue was covered in its favour on account of the same. The submissions of the Ld. Counsel for the assessee in this regard are reproduced hereunder:-
"Covered by Tribunal's order dt 5/1/2016 in ITA No.212/CHD/20015 in the case of ACIT vs. Mahavir Spinning Mills Ltd. f or Assessment Year 2001-02 - (Deduction allo wed on rebate/discount, bal ance w/back, misc. income, excise ref und and insurance cl aims received (pg. 94-127 relevant at 110).
CIT vs. Metal man Auto P. Ltd. (2011) 336 ITR 434 (P&H) - (Misc income, discount received, sundry bal. W/back. Held eligible f or deduction u/s 80IB/10B)- Reported CIT vs. Dharam Pal Prem Chand Ltd. (2009) 180 Taxman 557 (Del) - Ref und of excise duty is el igible f or deduction u/s 80 HHC) Interest received from others comprises of interest received from employees against Housing Loans advanced to them. Income thus arising during the course of business is liable to be included in prof its derived from business. In this ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 13 of 65 connection we reliance is pl aced on the judgment of VMT Spinning Co. Ltd vs. ACIT in ITA No.682/07 dated 13.7.12 for AY 2003-04 - Interest income f rom employees is business income and is eligible f or deduction u/s 10B. Judgment at Page 128-131 (relevant 129-130) M/s ACG Associated capsules (p) Ltd. Vs. CIT, Mum, 2012 343 ITR 89 (SC) - Interest income to be netted (Reported) The Hon'ble Tribunal vide order dated 04.05.2018 of Vardhman Textiles Limited f or A.Y. 2002-03 to 2004-05 has set aside the issue to the f ile of AO to decide the issue on the basis of case laws cited and in AY 2005-06 allowed the deduction on the other income ( issue dealt with 80HHC issue). Page 18-19 & 11-13 respectively of the order."
27. The ld. D.R., on the other hand, heavily relied on the findings of the Ld. CI T(A) at para 9.3 dealing with interest received from others; para 9.3.2 dealing with rent from employees; para 9.3.4 dealing with miscellaneous income and para 9.3.5 dealing with DEPB, as under:-
"9.3.2 In respect of rent received f rom the employees, the Id. CIT(A)-II, Ludhiana, in the assessee's case f or AY 2002-03 [supra] has upheld the action of the AO in excluding these receipts f rom the eligible income of the assessee f or computing the deduction u/s 80IB. Follo wing the same, the AO's action in respect of rent received f rom employees is upheld.
93.4 As regards misc income, the issue has been held against the appellant in AY 2002-03 by the CIT(A) as well as in the case of M/s Vardhman Textile Ltd f or AY 2004-05 by the CIT(A) in their orders ref erred to above. Follo wing these decisions, the f indings of the AO in respect of this income is conf irmed.
9.3.5 As regards income f rom DEPB, the issue is covered squarely against the appellant by the decision of Jurisdictional High Court in the case of Liberty India 293 ITR 520 (P&H), relied upon by the AO. Follo wing the same, the AO's action in respect of DEPB is upheld."ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 14 of 65
28. We have heard the rival contentions. We do not find any infirmity in the order of the Ld. CIT(A). The legal position that only incomes having first degree nexus with the industrial undertaking of the assessee are eligible for deduction under section 80IB/10B of the Act is not disputed. The factual findings of the Ld. CI T(A) that the assessee has been unable to establish first degree nexus between the impugned incomes i.e. interest receipt from others, rent received from employees, miscellaneous income and DEPB, and the industrial undertaking of the assessee has not been controverted. Even before us the Ld. Counsel for the assessee has been unable to establish the nexus. In view of the same, we see no reason to interfere in the order of the Ld. CIT(A) denying deduction u/s 10B and 80 IB of the Act on Interest received from Others, Rent received from employees, Misc.Income and DEPB as detailed above.
Ground of appeal No.5 raised by the assessee is, therefore, dismissed.
29. Ground No.6 raised by the assessee is against the direction of the Ld. CI T(A) to reduce the profits eligible for deduction under section 10B and 80IB of the Act of different units of the assessee by the proportionate head office expenses.
30. The above ground was not pressed before us and the same is, therefore, dismissed as not pressed.
31. Grounds No.7 and 9 challenge the method applied for calculating deduction under section 10B of the Act.
32. The Ld. Counsel for the assessee pointed that there is no specific finding by the A.O. in the order vis-à-vis the same, but while calculating the taxable income of the assessee, at the end of the order and more specifically calculating exemption under section 10B of the Act, the A.O. included export turnover of traded goods amounting to Rs.20.31 crores to the total turnover of the assessee ignoring assessee's calculation excluding the same for the reason that deduction under section 10B of the Act is allowed only on manufacturing activities and not on trading activities.
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 15 of 6533. Before us, the Ld. Counsel for the assessee contended that this issue also stood covered in favour of the assessee by the decision of the ITAT in the case of the assessee itself for the preceding year i.e. Assessment Year 2003-04 in ITA No.88 & 118/CHD/2009, order dated 26/11/2018. Our attention was drawn to the findings of the ITAT at para 33 of the order, as under:-
"33. We have gone through the order of the I.T.A.T. in the case of M/s Vardhman Textiles (supra) and f ind that identical issue had been dealt with in the said case wherein it was held that the decision of the Hon'ble Apex Court in the case of Lakshmi machine Works (supra) would squarely apply f or the purpose of calculation of deduction u/s 10B and as per which excise duty was to be excluded from the total turnover of the assessee. Further the I.T.A.T. had also held that the turnover of the trading export activities was to be excluded f rom the total turnover and the prof its of the trading export activity were to be excluded from the prof its for the purpose of calculating deduction u/s 10B of the Act f ollo wing the decision of the Tribunal in the case of VMT Spinning Company Ltd. (supra). Since the issues in the present case are identical to that in the case of M/s Vardhman Textiles (supra) the decision rendered therein will apply in the present case also, following which we hold that excise duty be excluded f rom the total turnover f or the purpose of calculation of deduction u/s 10B of the Act. But vis a vis the exclusion of export turnover of traded goods, we f ind that the in the case of VMT Spinning Mills (supra), it was held that deduction u/s 10B was granted qua prof its earned on manuf actured goods and theref ore neither the prof its of traded goods was to be included in the prof its nor the turnover of traded goods was to be included in the total turnover f or calculating deduction u/s 10B of the Act. Accordingly the AO is directed to calculate the deduction u/s 10B of the Act af ter excluding both the prof its and the turnover of export traded goods from the prof its of the business and the total turnover.ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 16 of 65
Ground of appeal Nos.4( i) & ( ii) raised by the assessee are, theref ore, allo wed in above terms."
34. The ld. D.R. fairly conceded that the issue stood decided in favour of the assessee in the preceding Assessment Year by the order of I TAT as pointed out by the Ld. Counsel for the assessee, though he vehemently supported the order of the Ld. CIT(A) in this regard.
35. In view of the above, since it is an admitted fact that identical issue has been decided in favour of the assessee in preceding Assessment Year i.e. Assessment Year 2003-04, the said decision will apply to the present case also, following which we hold that the turnover of export traded goods cannot be included in the total turnover for the purpose of calculating the exemption under section 10B of the Act and accordingly we direct the A.O. to exclude the same.
Grounds of appeal No.7 and 9 are accordingly decided in favour of the assessee and stand allowed.
36. Ground No.8 raised by the assessee relates to the issue of adjustment of profit or loss on sale of traded goods while calculating the profits of the units eligible for deduction under section 10B of the Act.
37. The Ld. Counsel for the assessee pointed out that as in grounds No.7 and 9 raised above, the A.O., without giving any specific finding in this regard while calculating the gross double income of the assessee, at the end of the order and more specifically the exemption under section 10B of the Act, had adjusted the actual profit or loss on traded goods while calculating the profits of the unit eligible for deduction under section 10B of the Act though the assessee had excluded the same for the reason that section 10B of the Act is applicable only on manufacturing activities and not on trading activities visi-a-vis the said ground also, the Ld. Counsel for the assessee contended that the issue was covered in favour of the assessee by the order of the ITAT in the case of the assessee itself for the preceding year i.e. Assessment Year 2003-04 in ITA No.88 & 118/CHD/2009, order dated 26/11/2018. Our attention was ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 17 of 65 drawn to the findings of the I TAT at para 33 of the order , which is reproduced above .
38. The ld. D.R. fairly conceded that the issue stood decided in favour of the assessee in the earlier Assessment Year by the order of I TAT as pointed out by the Ld. Counsel for the assessee, though he vehemently supported the order of the Ld. CI T(A) in this regard.
39. In view of the above, since it is an admitted fact that identical issue has been decided in favour of the assessee in preceding Assessment Year i.e. Assessment Year 2003-04, the said decision will apply to the present case also, following which we direct the AO to calculate the deduction u/s 10B of the Act after excluding both the profits and the turnover of export traded goods from the profits of the business and the total turnover.
Ground of appeal No.8 is accordingly decided in favour of the assessee and stands allowed.
40. The issue raised in ground No.10 relates to reduction of profits eligible for deduction under section 80HHC of the Act by 90% of the interest received from suppliers and customers, amounting to Rs.2,93,45,849/-.
41. The Ld. Counsel for the assessee pointed that identical issue had been decided in favour of the assessee in the preceding year by the ITAT in ITA No.88 & 118/CHD/2009. Our attention was drawn to the findings of the I TAT in para 62 of the order. Referring to the same, the Ld. Counsel for the assessee contended that the ITAT in the said case had restored the issue to the A.O. to determine the net interest earned by the assessee and directed exclusion of the same as against the gross interest reduced by the Revenue authorities.
42. The ld. D.R. fairly conceded that identical issue had been decided in the case of the assessee as pointed out by the Ld. Counsel for the assessee above.
43. We have heard the contentions of both the parties. We have also gone through the order of the ITAT in the case of the assessee for the preceding year at para 62 which reads as under:-
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 18 of 65"62. We have heard the rival contentions. The Hon'ble apex court in the case of ACG Capsules (supra) has laid do wn the law that only net interest earned ,excluding interest paid in relation to the same, is to be considered f or the purpose of exclusion f rom the prof its f or calculating deduction u/s 80HHC of the Act. Follo wing the same, we restore this issue to the AO to determine the net interest earned, as per the ratio l aid do wn in the case of ACG Capsules (supra) and thereaf ter decide the issue in accordance with law. This ground of appeal No.5 (iv) is therefore allo wed f or statistical purposes."
44. Admittedly identical issue has been decided in the case of the assessee itself in the preceding Assessment Year i.e. Assessment Year 2003-04. The said decision will therefore squarely apply to the present case also, following which we restore the issue to the AO and direct him to adjudicate the same in accordance with the directions given by the ITAT in I TA No.88 & 118/Chd/2009 dated 26-11-18.
45. The ground of appeal No.10 is, therefore, allowed for statistical purposes
46. Ground No.11 relates to the exclusion of export turnover of units claiming exemption under section 10B of the Act, from the export turnover of the assessee for the purpose of calculating deduction under section 80HHC of the Act.
47. Briefly stated, the A.O. while calculating deduction under section 80HHC of the Act, reduced the export turnover and total turnover of export oriented units claiming exemption u/s 10B of the Act, from the export turnover and total turnover of the assessee company. The CI T(A) upheld the same.
48. Before us the Ld. Counsel for the assessee pointed out that this issue also stood covered in favour of the assessee by the decision of the I TAT in earlier year i.e. Assessment Year 2003-04 in I TA No.88 & 118/CHD/2009, order dated 26/11/2018. Our attention was drawn to the findings of the ITAT at paras 50 and 51 of the order, as under:-
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 19 of 65"50. We have heard rival contentions and also gone through various case laws ref erred to bef ore us. The issue bef ore us is whether f or the purpose of computing deduction u/s 80HHC in a case where deduction u/s 10B is also being claimed, whether the export turnover and total turnover of the EOU unit would be taken into consideration or not. We have gone through the order of the Hon'ble High Court in the case of M/s Mahavir Spinning Mills Ltd.(supra) f or assessment year 1998-99 and f ind that the question of law bef ore it was identical to the issue at hand whether export turnover of units exempt u/s 10B of the Act are to be included in export turnover f or 80HHC purposes. The question f ramed reads as under:
"i) Whether on a true and correct interpretation of Section 80 HHC of the Income T ax Act, 1961, the Tribunal has erred in law in holding that the export turnover of the unit whose prof its are exempt under section 10B of the Income T ax Act, 1961 is not to be included in the 'export turnover' f or the purposes of calculating the deduction under section 80HHC of the Income Tax Act, 1961?"
51. The Hon'ble High Court, we f ind, ruled in f avour of the assessee holding that in vie w of the def inition of the said term in section 80HHC, no such exclusion is provided. The relevant f inding of the Hon'ble High Court at para 16 of its order is as under:
"16. We are, theref ore, 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 f or which deduction under section 10B had been claimed did not ans wer the description of the turnover eligible f or deduction under section 80HHC and theref ore, the Assessing Off icer rightly excluded such turnover fro m export turnover while computing relief avail able to the assessee under section 80HHC of the Act. We are unable to agree. Section 80 HHC clearly def ines the terms export turnover, total turnover and prof its of business. None of ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 20 of 65 these def initions exclude the export turnover in respect whereof benef it has been derived under section 10B. To accept the respondent's contention would require the section to be re written and the expression to be redefined which is not permissible."
In vie w of the same we agree with the Ld. Counsel f or the assessee that export turnover f or which exemption u/s 10B of the Act has already been claimed, is to be included in the turnover f or purposes of calcul ating deduction u/s 80 HHC of the Act. Ground of appeal No.5( i)&(ii) raised by the assessee is therefore allo wed."
49. The ld. D.R. fairly conceded that the issue stood decided in favour of the assessee in the earlier Assessment Year by the order of I TAT as pointed out by the Ld. Counsel for the assessee, though he vehemently supported the order of the Ld. CI T(A) in this regard.
50. In view of the above, since it is an admitted fact that identical issue has been decided in favour of the assessee in preceding Assessment Year i.e. Assessment Year 2003-04, the said decision will apply to the present case also, following which we hold that export turnover for which exemption u/s 10B of the Act has already been claimed, is to be included in the turnover for purposes of calculating deduction u/s 80 HHC of the Act.
Ground of appeal No.11 is accordingly decided in favour of the assessee and stands allowed.
51. The issue raised in ground No.12 is regarding exclusion of sales tax subsidy amounting to Rs.2,15,31,035/- from the eligible profits of the business while calculating deduction under section 80HHC of the Act. The A.O. had treated the sales tax subsidy received by the assessee as being Revenue in nature and thereafter treating the same as income from other sources, had denied deduction under section 80HHC of the Act on the same by excluding it from eligible profits of the business of the assessee.
52. Since we have held that sales tax subsidy received by the assessee as being capital in nature in ground of appeal No.3 ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 21 of 65 raised by the assessee before us, at para 17 of our order above, this ground is infructuous .
Ground of appeal No.12 is, therefore, dismissed as being infructuous.
53. Ground No.13 relates to the reduction of profits of the business of the assessee by scrap sales, amounting to Rs.1,70,25,000/- while calculating deduction under section 80HHC of the Act. The A.O. had excluded 90% of the scrap sales from the profit of the business of the assessee, on the ground that the same was not derived from the business of export. The Ld. CIT(A) confirmed the action of the A.O.
54. Before us, the Ld. Counsel for the assessee relied upon the decision of the Hon'ble jurisdictional High Court in the case of R. N. Gupta Co. Ltd. vs. CI T, 351 I TR 369 (P&H) and the decision of the ITAT in the case of Highway Industries Ltd. vs. ACIT in I TA No.267/15, dated 11/4/2016 for the proposition that scrap sale is to be included in the profits of the business under section 80HHC of the Act.
55. The ld. D.R., on the other hand, supported the order of the Ld. CI T(A), drawing our attention to para 12.2.4, as under:-
"12.2.4 As regard ground No. 12(vi), it is seen that the Jurisdictional ITAT, in the case of M/s Parker Cycle Inds. (supra), has held that the scrap sales should be excluded both f rom the prof its of the business as well as from the total turnover f or the purpose of computing the deduction u/s 80HHC. The AO has excluded the scrap sales f rom the prof its of the business f or computing the deduction u/s 80HHC. He is, however, in light of the decision in the case of M/s Parker Cycle Inds., directed to also exclude the scrap sales f rom the total turnover of the assessee f or computing the deduction u/s 80HHC, if any. This ground of appeal is rejected"
56. We have heard the ri val con tenti ons and c areful l y perused the orders of authori ti es bel o w. The i ssue before us i s whether scrap sal es i s to be taken i nto consi derati on for ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 22 of 65 the purpose cal cul ati ng the profi ts el i gi bl e for deducti on u/s 80HHC. We fi nd that thi s i ssue has been settl ed by the Hon'bl e Ape x Court i n i ts deci si on rendered i n the case of CI T Vs. Punjab Stai nl ess Steel I ndustri es, reported i n ( 2015) 229 Ta xman 423 and whi ch was fol l o wed subsequentl y i n another deci si on of the Hon'bl e Ape x Court i n the case of Jagraon Exports Vs. CI T ( 2016) 284 C TR 209. The Hon'bl e Ape x Court i n the sai d deci si on had categori cal l y stated that the scrap sal es has to be e xcl ud ed for al l purpos es, for the purpose of cal cul ati on of deduction u/s 80HHC of the Act hol di ng that the turnover for th e same di d not quali f y as total turnover from the "busi ness" of the assessee. The rel evant fi ndi ngs of the Hon'bl e Ape x Court i n t he case of Punjab Stai nl ess Steel I ndustri es ( supra) i s as under:
17. To ascertain whether the turnover would also include sale proceeds from scrap, one has to know the meaning of the term 'turnover'. The term 'turnover' has neither been defined in the Act nor has been explained by any of the CBDT circulars.
18. In the aforestated circumstances, one has to look at the meaning of the term 'turnover' in ordinary accounting or commercial parlance.
19. Normally, the term 'turnover' would show the sale effected by a business unit. It may happen that in the course of the business, in addition to the normal sales, the business unit may also sell some other things. For example, an assessee who is manufacturing and selling stainless steel utensils, in addition to steel utensils, the assessee might also sell some other things like an old air conditioner or old furniture or something which has outlived its utility. When such things are disposed of, the question would be whether the sale proceeds of such things would be included in the 'turnover'. Similarly in the process of manufacturing utensils, there would be some scrap of stainless steel material, which cannot be used for manufacturing utensils.
Such small pieces of stainless steel would be sold as scrap. Here also, the question is whether sale proceeds of such scrap can be included in the term 'sales' when it is to be reflected in the Profit and Loss Account.
20. In ordinary accounting parlance, as approved by all accountants and auditors, the term 'sales', when reflected in the ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 23 of 65 Profit and Loss Account, would indicate sale proceeds from sale of the articles or things in which the business unit is dealing. When some other things like old furniture or a capital asset, in which the business unit is not dealing are sold, the sale proceeds therefrom would not be included in 'sales' but it would be shown separately.
21. In simple words, the word "turnover" would mean only the amount of sale proceeds received in respect of the goods in which an assessee is dealing in. For example- If a manufacturer and seller of air-conditioners is asked to declare his 'turnover', the answer given by him would show the sale proceeds of air- conditioners during a particular accounting year. He would not include the amount received, if any, from the sale of scrap of metal pieces or sale proceeds of old or useless things sold during that accounting year. This clearly denotes that ordinarily a businessman by word "turnover" would mean the sale proceeds of the goods (the things in which he is dealing) sold by him.
22. So far as the scrap is concerned, the sale proceeds from the scrap may either be shown separately in the Profit and Loss Account or may be deducted from the amount spent by the manufacturing unit on the raw material, which is steel in the case of the respondent-assessee, as the respondent- assessee is using stainless steel as raw material, from which utensils are manufactured. The raw material, which is not capable of being used for manufacturing utensils will have to be either sold as scrap or might have to be re-cycled in the form of sheets of stainless steel, if the manufacturing unit is also having its re- rolling plant. If it is not having such a plant, the manufacturer would dispose of the scrap of steel to someone who would re- cycle the said scrap into steel so that the said steel can be re- used.
23. When such scrap is sold, in our opinion, the sale proceeds of the scrap cannot be included in the term 'turnover' for the reason that the respondent-unit is engaged primarily in the manufacturing and selling of steel utensils and not scrap of steel. Therefore, the proceeds of such scrap would not be included in 'sales' in the Profit and Loss Account of the respondent-assessee..
24. The situation would be different in the case of the buyer, who purchases scrap from the respondent-assessee and sells it to someone else. The sale proceeds for such a buyer would be treated as "turnover" for a simple reason that the buyer of the scrap is a person who is primarily dealing in scrap. In the case on hand, as the respondent-assessee is not primarily dealing in scrap but is a manufacturer of stainless steel utensils, only sale proceeds from sale of utensils would be treated as his "turnover".
25. So as to be more accurate about the word "turnover", one can either refer to dictionaries or to materials which are published by bodies of Accountants. The Institute of Chartered Accountants of India ( hereinafter referred to as the 'ICAI') has published some material under the head "Guidance Note on Tax ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 24 of 65 Audit Under Section 44AB of the Income Tax Act". The said material has been published so as to guide the members of the ICAI. In our opinion, when a recognized body of Accountants, after due deliberation and consideration publishes certain material for its members, one can rely upon the same. Para 5 of the said Note deals with "Sales", "turnover" and "gross receipts". Paras 5.2 and 5.3 of the said Note are reproduced hereinbelow, which pertain to the term "turnover".
"5.2 In the "Guidance Note on Terms Used in Financial Statements" published by the ICAI, the expression "Sales Turnover" (Item 15.01) has been defined as under:-
"The aggregate amount for which sales are effected or services rendered by an enterprise. The term `gross turnover' and `net turnover' (or `gross sales' and `net sales') are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts".
5.3 The Guide to Company Audit issued by the ICAI in the year 1980, while discussing "sales", stated as follows:
"Total turnover, that is, the aggregate amount for which sales are effected by the company, giving the amount of sales in respect of each class of goods dealt with by the company and indicating the quantities of such sales for each class separately.
Note (i) The term 'turnover' would mean the total sales after deducting therefrom goods returned, price adjustments, trade discount and cancellation of bills for the period of audit, if any. Adjustments which do not relate to turnover should not be made e.g. writing off bad debts, royalty etc. Where excise duty is included in turnover, the corresponding amount should be distinctly shown as a debit item in the profit and loss account."
(emphasis added) The aforestated meaning given by the ICAI clearly denotes that in normal accounting parlance the word "turnover" would mean "total sales" as explained hereinabove. The said sales would definitely not include the scrap material which is either to be deducted from the cost of raw material or is to be shown separately under a different head. We do not see any reason for not accepting the meaning of the term "turnover" given by a body of Accountants, which is having a statutory recognition.
26. If all accountants, auditors, businessmen, manufacturers etc. are normally interpreting the term 'turnover' as sale proceeds of the commodity in which the business unit is dealing, we see no reason to take a different view than the view normally taken by the persons who are concerned with the said term.
27. In addition to the above factors, which we have considered for understanding the meaning of the term "turnover", we should not miss the purpose with which the said term has been incorporated in Section 80 HHC of the Act.
28 The intention behind enactment of Section 80HHC of the Act was to encourage export so as to earn more foreign exchange. For the said purpose the Government wanted to encourage ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 25 of 65 businessmen, traders and manufacturers to increase the export so as to bring more foreign exchange in our country. If the purpose is to bring more foreign exchange and to encourage export, we are of the view that the legislature would surely like to give more benefit to persons who are making an effort to help our nation in the process of bringing more foreign exchange. If a trader or a manufacturer is trying his best to increase his exports, even at the cost of his business in a local market, we are sure that the Government would like to encourage such a person. In our opinion, once the Government decides to give some benefit to someone who is helping the nation in bringing foreign exchange, the Revenue should also make all possible efforts to encourage such traders or manufacturers by giving such business units more benefits as contemplated under the provisions of law.
29. For the aforesaid reasons, we are of the view that the view expressed by the High Court is in conformity with the normal accounting practice followed by the traders, including the respondent-assessee and it was justified in coming to a conclusion that the proceeds generated from the sale of scrap would not be included in the 'total turnover"
57. I n vi e w of the above, we hol d that the scrap sal es has to be reduced both from the profi t s of the assesse e and total turnover for cal cul ati ng the el i gi bl e deducti on u/s 80hHC of the Act. Ground of appeal No.13 rai sed by the assessee i s al l o wed i n above terms.
58. Grounds No.14, 15 and 16 relate to disallowance of deduction under section 80HHC(3)(c)(iii) of the Act on export incentives, amounting to Rs.5,30,04,339/-.
59. The facts relating to the issue are that the A.O. examined the issue of grant of deduction u/s 80HHC in light of the amended provisions of section 80HHC pursuant to the Taxation Laws (Amendment Act), 2005. He noted that the export turnover of the appellant exceeded Rs.10 crores. He further examined the matter and found that the assessee had failed to satisfy the conditions prescribed in the third and forth provisos of section 80HHC (3) which were necessary to allow deduction u/s 80HHC(3) in respect of DEPB and DFRC export incentives. Hence, he held that no deduction in respect of profit on transfer of DEPB and profit on transfer of DFRC was allowable to the assessee. He also held that the cost of DEPB and DFRC was nil ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 26 of 65 and therefore, the entire sale consideration of DEPB and DFRC was the profit on transfer of DEPB/DFRC.
60. The Ld. CI T(A) upheld the order of the A.O.
61. Before us, the Ld. Counsel for the assessee contended that the issue stood covered in favour of the assessee by the decision of the I TAT in earlier year i.e. Assessment Year 2003-04 in ITA No.88 & 118/CHD/2009, order dated 26/11/2018. Our attention was drawn to the findings of the I TAT at para 72 of the order, as under:-
"72. Having heard the rival contentions. We are in agreement with the Ld. Counsel for the assessee that the third proviso to section 80HHC(3), applying which the assessees claim of deduction u/s 80HHC on sale of DEPB was denied, was brought on the statute by the taxation Amendment Act, 2005 and its retrospectivity from 01.04.1998, was categorically struck do wn by courts in the judgements relied upon by the Ld. Counsel f or the assessee. Since the impugned year f alls bef ore 2005, the third proviso is not appl icable to the assessee. The denial of deduction u/s 80HHC of the Act on sale of DEPB is theref ore set aside. This ground of appeal of the assessee is theref ore allo wed."
62. The ld. D.R. fairly conceded that the issue stood decided in favour of the assessee in the earlier Assessment Year by the order of I TAT as pointed out by the Ld. Counsel for the assessee, though he vehemently supported the order of the Ld. CI T(A) in this regard.
63. In view of the above, since it is an admitted fact that identical issue has been decided in favour of the assessee in preceding Assessment Year i.e. Assessment Year 2003-04, the said decision will apply to the present case also, following which we hold that since the impugned year falls before 2005, the third proviso is not applicable to the assessee. The denial of deduction u/s 80HHC of the Act on sale of DEPB is, therefore, set aside.
Grounds of appeal No.14, is therefore allowed. Ground of appeal NO.15 & 16 ,being alternate grounds relating to the same issue, ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 27 of 65 are not being dealt with by us since it would only be an academic exercise.
64. In grounds No.17 & 18, the issue raised is regarding application of method of calculating cost of traded goods exported for the purpose of deduction under section 80HHC of the Act.
65. The assessee has challenged the action of the Ld. CIT(A) in directing apportionment of the full amount of administrative, financial and depreciation to the indirect cost of trading goods while calculating deduction under section 80HHC of the Act.
66. The brief facts relating to this issue are that the assessee while calculating deduction under section 80HHC of the Act had calculated indirect cost of traded goods by allocating only common expenses i.e. which were not directly related to the manufacturing or trading activity of the units where trading was done between both the trading and manufacturing activity i.e. by apportioning the total indirect cost of trading units in the ratio of total turnover to export turnover of traded goods of the said units. The assessee submitted before the A.O. that as per Explanation (d) to section 80HHC(3) of the Act direct cost means the cost directly attributable to the traded goods exported out of India and as per Explanation (e) to section 80HHC(3) of the Act, indirect cost means cost not being the direct cost allocated in the ratio of turnover in respect of trading goods to the total turnover. The A.O. did not agree with the submissions of the assessee and calculated the indirect cost by allocating the expenses of the company.
67. The Ld. CI T(A) confirmed the action of the A.O.
68. Before us, the Ld. Counsel for the assessee contended that this issue stood covered in favour of the assessee by the decision of the I TAT in earlier year i.e. Assessment Year 2003-04 in ITA No.88 & 118/CHD/2009, order dated 26/11/2018. Our attention was drawn to the findings of the I TAT at paras 52 to 57 of the order, as under:-
"52. Ground No.5(iii) raised by the assessee reads as under:ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 28 of 65
"5. ( iii) The Ld. C1T (A) has erred in l aw and on f acts while apportioning all the Administrative, Financial Expenses and Depreciation being expenses not relating to trading activities of appellant's business f or calculating indirect cost of trading exports while calculating deduction u/s 80HHC of Income Tax Act."
53. This ground is against the action of the CIT(A) in apportioning all administrative and f inancial expenses and depreciation f or calculating indirect cost of trading goods while calculating deduction u/s 80HHC of the Act.
54. Brief ly stated, the assessee while calculating deduction u/s 80HHC of the Act had calculated the indirect cost of trading goods at Rs.90.76 lacs, by allocating common expenses which were not directly rel ating to manuf acturing or trading units where trading was done between both the trading and manuf acturing activities. The assessee submitted bef ore the A.O. that as per Explanation-d to section 80HHC(3) direct cost meant cost directly attributable to the trading goods exported out of India and as per Expl anation-(e) to the said section, indirect cost meant cost not being direct cost allocated in the ratio of turnover in respect of trading goods to the total turnover. The A.O. did not agree with the submissions of the assessee and calculated the indirect cost at Rs.244.07 lacs, by allocating all expenses of the company. The Ld.CIT(A) disposed off the appeal of the assessee with the direction to the A.O. to compute direct and indirect cost of trading cost as per f indings given in the appell ate order dated 25.1.2008 in the case of the assessee f or assessment year 2001-02.
55. Bef ore us the Ld. counsel f or assessee contended that the appellate order f ollowed by the Ld.CIT(A) in the case of the assessee f or assessment year 2001-02 had been decided in f avour of the assessee by the Tribunal vide its order in ITA No.249/2008 and ITA No.280/2008 dated 28.12.2012. It was pointed out that the I.T.A.T. af ter going through the f acts of the case allo wed the appeal f or statistical purposes directing the A.O. to recompute indirect cost relating to ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 29 of 65 trading goods in line with the direction given by the I.T.A.T. in the case of VMT Spinning Company Ltd. Vs. ACIT in ITA No.682/2007 f or assessment year 2003-04. It was f urther pointed out that in the case of sister concern of the assessee i.e. M/s Vardhman Textiles (supra), identical issue had been deal t with by the I.T.A.T. in its recent order dated 4.5.2018, wherein the order of the CIT(A) had been upheld, setting aside the issue f or re working the indirect cost of trading goods in accordance with the decision of the Special Bench of the I.T.A.T. in the case of Surendra Engineering Corporation Vs. ACIT, 86 ITD 121 (SB) (Mum).
56. Ld. DR, on the other hand, rel ied on the order of the lo wer authorities.
57. We f ind that this issue already stands decided by the ITAT in the case of the VMT Spinning Co. Ltd. , f or A.Y 2003- 04,in ITA no.682/chd/07 dt.13.07.2012, wherein each item of expenditure head- wise was taken into consideration f or allocation to traded goods. The directions given in the said decision was by the ITAT in the case of the assessee f or A.Y 2001-02 in ITA No.249 & 280/chd/08 dt.28-12-12. We accordingly direct the assessing off icer to recompute the indirect cost relatable to traded goods in line with the directions given in para 18-25 of the order of the ITAT in the case of VMT Spinning(supra) f or A.Y 2003-04 dt.13-07-12. Ground of appeal No.5(iii) is theref ore allo wed f or statistical purposes."
69. The ld. D.R. fairly conceded that this issue stood decided in favour of the assessee in the earlier Assessment Year by the order of ITAT as pointed out by the Ld. Counsel for the assessee, though he vehemently supported the order of the Ld. CIT(A) in this regard.
70. In view of the above, since it is an admitted fact that identical issue has been decided in favour of the assessee in preceding Assessment Year i.e. Assessment Year 2003-04, the said decision will apply to the present case also, following which we direct the Assessing Officer to re-compute the indirect cost relatable to traded goods in line with the directions given in ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 30 of 65 para 57 of the order of the ITAT in the assessee's own case in earlier year i.e. Assessment Year 2003-04 in ITA No.88 & 118/CHD/2009, order dated 26/11/2018.
Grounds of appeal No.17 & 18 are, therefore, allowed for statistical purposes.
71. Ground No.19 relates to the allocation and disallowance of expenses towards dividend income earned by the assessee.
72. The brief facts relevant to this issue are that the A.O. has noted that the assessee had shown dividend income of Rs.389.83 lakhs and that no expenditure had been allocated for earning the dividend income. He did not accept the appellant's contention that the dividend income had been earned without incurring any expenditure. The A.O. held that the assessee had shown to have incurred substantial expenditure for earning the business income and that the expenditure for earning the dividend income had been debited under the business and profession head. The A.O. also analyzed the fund flow of the assessee company and noted that the share capital had been invested in fixed assets, cash and bank balances and loans and advances. He noted that if borrowed funds were held to have been invested in fixed assets, the interest on such borrowed funds would become disallowable as capital expenditure. Hence, he treated the investments on which dividend had been earned as having been made out of borrowed funds. He allocated the personnel, administration and financial expenditure of the assess company to the earning of dividend income in the ratio of gross dividend received by the assessee to the total income of the assessee and worked out the proportionate expenditure at Rs.51,35,386/- related to the dividend income.
73. The Ld. CIT(A), noting that identical issue arose in the case of the assessee for Assessment Year 2002-3 which stood adjudicated by the Ld. CI T(A), who had upheld the disallowance to the extent of Rs.1 lakh, followed the order of the Ld. CI T(A) and restricted the disallowance to the extent of Rs.1 lakh in the impugned year also.
74. Before us, the Ld. Counsel for the assessee conceded that the issue stood decided against the assessee by the order of ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 31 of 65 the I TAT in earlier year i.e. Assessment Year 2003-04 in ITA No.88 & 118/CHD/2009, order dated 26/11/2018. Our attention was drawn to the findings of the I TAT at para 19 of the order, as under:-
"19. We have heard the rival contentions. We do not f ind any merit in the present ground raised by the assessee. As pointed out by the Ld. counsel f or assessee himself in the earl ier years also, the I.T.A.T. and even the Hon'ble High Court had upheld the allocation of expenses ranging f rom Rs.1 lac to Rs.2 lacs as being expenditure incurred f or the purpose of earning dividend income. Even the I.T.A.T. in the case of sister concern of the assessee i.e. M/s Vardhman Textiles (supra) had conf irmed the disallo wance of Rs.2 lacs. Considering the past history of the assessee, wherein it has been held by the Hon'ble High Court that expenses ranging from Rs.1 to 2 lacs were to be allocated as incurred f or earning dividend income upto Rs.4.5 crores and the Ld. Counsel f or the assessee having not pointed out any distinguishing f act in the present case the action of the Ld.CIT(A) in allocating expenses of Rs.1 lac against dividend income earned of Rs.3.21 crores is, theref ore we hold, wholly justif ied. We theref ore, see no reason to interf ere in the order of the Ld. CIT(A) and the ground No.2 raised by the assessee is, therefore, dismissed."
75. In view of the above, since it is an admitted fact that identical issue has been decided against the assessee in preceding Assessment Year i.e. Assessment Year 2003-04, the said decision will apply to the present case also. Following the same we uphold the order of the Ld.CI T(A) restricting the disallowance of expenses incurred for earning dividend income to the extent of Rs.1 lacs.
76. Ground of appeal No.19 is accordingly decided against the assessee and stands dismissed.
77. Ground No.20 was not pressed, hence the same is dismissed as not pressed.
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 32 of 6578. Ground No.21 relates to the issue of inclusion of trading turnover in the total turnover while calculating the amount of income to which provisions of section 10B of the Act applies for calculation of tax payable under section 115JB of the Act. The A.O. had included the turnover of traded goods in the total turnover of the undertaking while calculating exemption eligible under section 10B of the Act which was to be reduced from the book profits of the assessee for the purposes of payment of tax under section 115JB of the Act. The Ld. Counsel for the assessee pointed out that there was no specific finding by the A.O. in the order, whereas the same had been done by the A.O. in the calculation of tax payable by the assessee at the end of the order.
79. Before us, the Ld. Counsel for the assessee contended that this issue stood covered in favour of the assessee by the decision of the I TAT in earlier year i.e. Assessment Year 2003-04 in ITA No.88 & 118/CHD/2009, order dated 26/11/2018. Our attention was drawn to the findings of the I TAT at para 33 of the order, as under:-
"33. We have gone through the order of the I.T.A.T. in the case of M/s Vardhman Textiles (supra) and f ind that identical issue had been deal t with in the said case wherein it was held that the decision of the Hon'ble Apex Court in the case of Lakshmi machine Works (supra) would squarely apply f or the purpose of calculation of deduction u/s 10B and as per which excise duty was to be excluded from the total turnover of the assessee. Further the I.T.A.T. had also held that the turnover of the trading export activities was to be excluded f rom the total turnover and the prof its of the trading export activity were to be excluded f rom the prof its for the purpose of calcul ating deduction u/s 10B of the Act following the decision of the Tribunal in the case of VMT Spinning Company Ltd. (supra). Since the issues in the present case are identical to that in the case of M/s Vardhman Textiles (supra) the decision rendered therein will apply in the present case also, f ollo wing which we hold that excise duty be excluded f rom the total turnover for the ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 33 of 65 purpose of calculation of deduction u/s 10B of the Act. But vis a vis the exclusion of export turnover of traded goods, we f ind that the in the case of VMT Spinning Mills (supra), it was held that deduction u/s 10B was granted qua prof its earned on manufactured goods and theref ore neither the prof its of traded goods was to be included in the prof its nor the turnover of traded goods was to be included in the total turnover f or calculating deduction u/s 10B of the Act. Accordingly the AO is directed to calculate the deduction u/s 10B of the Act af ter excluding both the prof its and the turnover of export traded goods from the prof its of the business and the total turnover.
Ground of appeal Nos. 4(i) & (ii) raised by the assessee are, theref ore, allo wed in above terms."
80. The ld. D.R. fairly conceded that this issue stood decided in favour of the assessee in the earlier Assessment Year by the order of ITAT as pointed out by the Ld. Counsel for the assessee, though he vehemently supported the order of the Ld. CIT(A) in this regard.
81. In view of the above, since it is an admitted fact that identical issue has been decided in favour of the assessee in preceding Assessment Year i.e. Assessment Year 2003-04, the said decision will apply to the present case also, following which we direct the AO to calculate the deduction u/s 10B of the Act after excluding both the profits and the turnover of export traded goods from the profits of the business and the total turnover.
82. Ground of appeal No.21 is accordingly decided in favour of the assessee and stands allowed.
83. In the additional ground raised, the assessee has challenged the action of the Revenue authorities in treating the interest reimbursement of Rs.8,78,00,400/- received under the technology upgrading fund scheme as revenue receipt instead of capital receipt.
84. Before us, the Ld. Counsel for the assessee contended that this issue has been adjudicated by the I TAT in the case of ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 34 of 65 the assessee in preceding year i.e. Assessment Year 2003-04 in ITA No.88 & 118/CHD/2009, order dated 26/11/2018. Our attention was drawn to the findings of the I TAT at paras 73 to 78 of the order, as under:-
"73. The assessee has taken the follo wing additional ground bef ore us which reads as under:
"That the authorities belo w have erred in treating the interest reimbursement of Rs.8,32,78,691/- under Technology Upgradation Fund Scheme (FUFS) as revenue receipts instead of capital receipt."
74. The assessee has contended that it is a purely legal ground which may be admitted f or adjudication. Agreeing with the contention of Ld. counsel f or assessee and following the judgment of the Hon'ble Supreme Court in the case of NTPC Vs. CIT 299 ITR 383, the additional ground raised by the assessee is being admitted f or adjudication being a purely legal ground.
75. Bef ore us the Ld. counsel f or assessee pointed out the f acts rel ating to the issue stating that the assessee had paid interest to the bank amounting to Rs.24,55,51,691/- on term loans raised by it and said interest was debited in the Prof it & Loss Account of the assessee company. As per the TUF Scheme of the Government the assessee had received subsidy of Rs.8,32,78,691/- which was credited in the Prof it & Loss Account and accordingly taxed. It is this TUFS subsidy of Rs.8.32 crores, the Ld. counsel f or assessee pointed out that the assessee is claiming as capital receipt. The Ld. counsel for assessee contended that this issue of treatment of interest subsidy under TUF Scheme has been deal t with in a number of decisions holding the same to be capital in nature. Our attention was drawn to the f ollo wing case laws in this regard:
1) CIT Vs. Shaml al 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.
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 35 of 653) 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.
Copies of the above orders were al so placed bef ore us.
76. The Ld. counsel for assessee also contended that this issue arose in the case of the sister concern of the assessee M/s Vardhman Textiles (supra) where the matter had been restored to the CIT(A) to adjudicate the same. It was pointed out that in the said case also this issue had been raised as an additional and since it has not been considered by the authorities below it was remanded to the CIT(A). Our attention was drawn to para 23.5 of the order holding so.
77. The Ld. DR also contended that since the af oresaid ground had not been there bef ore the CIT(A) an opportunity to be provided to the Revenue to deal with entire gamat of the issue.
78. In vie w of the above, we restore the issue of treatment of subsidy received of interest under TUF Scheme back to the CIT(A) f or adjudicating af resh directing him to pass a speaking order in this regard af ter considering all the f acts relating to the scheme and the judicial precedent in this regard. The assessee would be at liberty to make submissions as deemed f it bef ore the CIT(A). Thus additional ground of appeal is, theref ore, allo wed f or statistical purposes."
85. The ld. D.R. fairly conceded that this issue stands adjudicated by the IAT in the case of the assessee in the preceding year.
86. In view of the above, since it is an admitted fact that identical issue has been adjudicated in the preceding Assessment Year i.e. Assessment Year 2003-04, the said decision will apply to the present case also, following which we restore the issue of treatment of subsidy received of interest under TUF Scheme back to the CIT(A) for adjudicating afresh directing him to pass a speaking order in this regard after ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 36 of 65 considering all the facts relating to the scheme and the judicial precedent in this regard.
87. Accordingly, additional ground of appeal taken by the assessee is, therefore, allowed for statistical purposes.
The appeal of the assessee is partly allowed for statistical purposes.
We shall now take up the appeal of the Revenue in ITA No.574/Chd/2009.
88. Ground No.1 raised by the Revenue reads as under:
1. That the Id. C1T(A) has erred in law and facts in directing the A.O. to consider interest income received from customers and suppliers as 'Business Income' instead of 'Income from Other Sources' as considered by the A.O.
89. The Revenue in the above ground has challenged the action of the Ld.CIT(A) in treating interest income received from customers and suppliers as business income instead of income from other sources as held by the A.O. The A.O. had noted that the assessee had credited a sum of Rs.51.02 lacs as interest income in its Profit & Loss Account which was the net figure of interest earned after reducing the interest expenditure.
The gross interest was found to include as sum of Rs.293.46 lacs as interest received from customers and suppliers and a sum of Rs.238.89 lacs as interest received from FDRs. The A.O. treated the entire gross interest received as taxable under the head income from other sources and further denied the netting of interest paid against the same. The Ld.CIT(A) held the interest earned by the assessee from FDRs to be considered as income from other sources, while the interest income ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 37 of 65 earned from customers and suppliers was held to be the business income of the assessee following his decision in the case of the assessee itself for assessment year 2002-03. Further following the judgment of the Hon'ble Jurisdictional High Court in the case of Rani Paliwal, Vs. CIT 268 ITR 220(P&H) the netting of interest received against interest expenditure for the purpose of claiming deduction/exemption was not allowed. In the above ground, the Revenue has challenged the action of the Ld.CIT(A) in treating the interest income received from customers and suppliers as business income of the assessee.
90. At the outset itself, the Ld. counsel for assessee pointed out that identical issue had been adjudicated by the I.T.A.T. in the case of the assessee itself for the immediately preceding assessment year i.e. A.Y 2003- 04, wherein the CIT(A) had held the interest income received from customers and suppliers to be the business income of the assessee which was challenged before the I.T.A.T., which in turn was dismissed by the ITAT. Our attention was drawn to paras 83 and 84 of the order of the in this regard in this regard as under:
"83. Ground No. 2 rai sed by the Reve nue re ads as under:
"2. Ld. C IT ( A) h as er red in l a w & f ac ts in d irec ting the A. O. to cons i der in teres t inco me rece ived b y the assessee on del ayed p ay men t f rom cus to mers as " bus iness inco me" ins te ad of " Inco me of o ther sources" as con s idered b y the A. O. "ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 38 of 65
84. T he Revenue in teres t he above ground h as ch al l enged the ac tion of the Ld. CIT ( A) in tre atin g the in teres t rece ive d by the ass essee on del ayed p ay men ts f ro m c us to mers as bus i ness inco me ins te ad of inco me f ro m o ther sources as h el d by the A. O. T he C IT ( A) had hel d the s aid in teres t i nco me to be in the n ature of busine ss inco me of the assessee f ol l o wi ng h is order in the c ase of the asse ssee f or assess men t ye ar 2002-03 where in the dec is ion of the Hon' bl e Jur isd ic tion al H i gh Cour t in th e c ase of Ph atel a Co tg in Indus tr ies P. Ltd. Vs. C IT , 167 T ax man 9 had been f ol l o wed. T he Ld. DR was u n abl e to br ing to our no tice an y con tr ary dec is ion in th i s reg ard. In v ie w of the s ame , we do no t f ind an y re ason to in terf ere in the order of the C IT ( A) hol d ing the in teres t inco me e arned f ro m del ayed p ay me n ts f rom cus to mers e tc. as bus iness inco me. Ground of appe al No. 2 r aised by the Revenue is, there f ore, dis missed. "
91. The Ld. counsel for assessee, therefore, contended that the issue stands squarely covered in favour of the assessee.
92. The Ld. DR fairly conceded that the issue had been decided in favour of the assessee in the preceding year, as pointed out by the Ld. counsel for assessee.
93. In view of the above, since admittedly, the issue of treatment of interest received from suppliers and customers being in the nature of business income of the assessee has already been adjudicated by the I.T.A.T. as such in the preceding year in the case of the assessee itself, we see no reason to interfere in the order of the Ld.CIT(A) treating the said income as business income of the assessee.
Ground of appeal No.1 raised by the Revenue is, therefore, dismissed.
94. Ground No.2 rai sed by the assessee reads as under:ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 39 of 65
"2. That the Id. C1T(A) has erred in law and facts in allowing deduction u/s 801B on eligible profits of its units named Vardhman Spinning & General Mills (100% EOU) availing exemption u/s 10B."
95. Bri efl y stated, the assessee had cl ai med deduction wi th respect to the profi ts of VSGM EOU uni t u/s 80I B, u/s 10B and u/s 80HHC of the Act. The A.O. was of the opi nion that deducti on u/s 80I B of the Act was not al l owabl e to the assessee si nce i t tantamounted t o doubl e deducti on i n respect of the same i nco me. Accordi ngl y, he hel d that de ducti on u/s 80I B of the Act cl ai med by the as sessee i n respect of thi s uni t was not al l o wabl e to the assessee.
96. The Ld.CI T( A) noted that i denti cal i ssue had been adjudi cated i n t he case of M/s Vardhman Te xt i l es Ltd. for assessment year 2004-05 by t he Fi rst Appel l a te Authori t y wherei n i t was hel d that to the e xtent the profi ts remai ned after cl ai mi ng deducti on u/s 10B of the Act, the assessee was enti tl ed to cl ai m deducti on u/s 80I B of the Act on the same.
Fol l o wi ng the same the Ld. CI T( A) di rected the A.O. to al l o w deducti on u/s 8 0I B of the Act i f there remai ns any el i gi bl e i ncome i ncl uded i n the total gross i ncome of the assessee after al l o wi ng deducti on u/s 10B of the Act.
97. Aggri eved by the same, the Revenue has come up i n appeal before us. At the outset i tsel f the Ld. counsel for assessee poi nted out that i denti cal i ssue had been adjudi cated by the I . T.A. T. i n the case of M/s Vardhman Te xti l es Ltd. Vs. Addl .CI T i n I TA No.35/Chd/2011 dated 18.12.2018 wherei n i t was hel d that the assessee was enti tl ed to deducti on u/s 80I B of the Act on the profi ts remai ni ng after cl ai mi ng ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 40 of 65 deducti on/e xempti on u/s 10B of the Act. Our attention was dra wn to the fi ndi ngs of the I . T.A. T. at para 31 of the order as under:
"31. Ground No.4 : Vide ground No.4, the Revenue has agitated the action of the CIT(A) in allowing deduction u/s 80IB in respect of unit which has already cl aimed exemption u/s 10B of the Act. The Ld. Counsel f or the assessee has submitted that the assessee has cl aimed deduction u/s 80IB in respect of unit Vardhman Spinning & General Mills on the balance amount, af ter excluding the amount upon which the exemption u/s 10B of the Act has been claimed.
In vie w of this, it is not a case of double deduction, hence we do not f ind any inf irmity in the order of CIT(A) on this issue also. The order of the CIT(A)on this issue is accordingly upheld."
98. The Ld. D R fai rl y conceded th at the i ssue ha d been adjudi cated i n favour of the assessee i n the case of M/s Vardhman Te xti l es Ltd. ( supra) , as poi nted out by the Ld. counsel for assessee above.
99. We have heard t he contenti ons o f both the parti es and al so gone through the order of the I . T.A. T. i n the case of M/s Vardhman Te xti l es Ltd. ( supra) . We have al so no ted that the I . T.A. T. i n the sa i d case had uph el d the cl ai m of the assessee u/s 80I B on the bal ance profi ts remai ni ng after cl ai mi ng deducti on u/s 10B of the Act. Si nce the i ssue i n the present case i s i denti cal to that i n the ca se of M/s Vardh man Te xti l es Ltd. ( supra) , the deci si on rendered by the I . T.A. T. i n the sai d case wi l l squarely appl y to the present ground also, fol l o wi ng whi ch we uphol d the order of th e Ld.CI T( A) hol d i ng that the assessee i s enti tled to cl ai m deducti on u/s 80I B of the Act on the profi ts of i ts VSGM EOU uni t remai ni ng after clai mi ng ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 41 of 65 deducti on u/s 10 B of the Act. Gro und of appeal No .2 rai sed by the Revenue i s accordi ngl y, di smi ssed.
100. Ground of appeal No.3 rai sed by the Revenue reads as under:
3. That the Id. C1T(A) has erred in law and facts in allowing the deduction u/s 801B in case of Auro-Dyeing mills as the unit is not doing manufacturing activities.
101. The Revenue i n the above ground has chal l enged the acti on of the Ld. CI T( A) i n al l o wi n g deducti on u/s 80I B of the Act on profi ts of a uni t of the a ssessee named Auro D yei ng Mi l l s amounti ng to Rs.2,46,92,719/- .
102. Bri efl y stated, the A.O. had hel d t he acti vi ties carri ed out i n Auro D yei ng Mi l l s of the assessee as not amounting to producti on of arti cl e or thi n g, whi ch was an essenti al condi ti on /prerequi si te for cl ai mi ng deducti on u/ s 80I B of the Act. He was of the opi ni on that dyei ng of yarn or fi ber was a process whi ch d i d not amount t o manufacture and no ne w arti cl e or thi ng was generated as a resul t of the process.
Accordi ngl y he h el d that the prof i ts of the sai d u ni t were not el i gi bl e for deducti on u/s 80I B of the Act
103. Before the Ld .CI T( A) the as sessee fi l ed d etai led submi ssi ons on the i ssue, co ntendi ng that i ts acti vi ti es amounted to manufacture of arti cl e or thi ng. The Ld.CI T( A) al l o wed the assessee's cl ai m fol l o wi ng the order of the Ld.CI T( A) i n the case of the assessee i tsel f i n assessment year 2002-03, wherei n the process of the assessee at t his uni t was hel d to amounti ng to manufacture of arti cl e or thi ng justi f yi ng ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 42 of 65 the cl ai m of ded ucti on of profi ts of the sai d uni t u/s 80I B of the Act.
104. A t t h e o u t s e t i t s e l f , t h e L d . c o u n s e l f o r a s s e s s e e pointed out that identical issue had been adjudicated by the I.T.A.T. in the case of the assessee itself for the immediately preceding assessment year i.e. A.Y 2003- 0 4 . Our attenti on was dra wn to the fi ndi ngs of the I . T.A. T. at paras 93 to 95 of the order as under:
"93. Ground of appe al No. 7 raised b y the Revenue re ads 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. In the above grou nd the Revenue h as ch al l enged the ac tion of the Ld. C IT ( A) in gr an ting deduc tion u/s 80 IB of the Ac t to Auro Dying M il l s of the assesse e. T he A. O. , it was po in ted ou t, h ad den ied the s ai d hol d ing th at th e un it was no t under tak ing an y man uf ac tur ing ac tiv i ties. T he Ld. CIT ( A), on the o th er h and, h ad al l o we d the cl ai m of the assessee on f inding th at iden tic al issue h ad ar isen in the c ase of the assessee in assess men t ye ar 2002-03 wh e re in the s ame was al l o we d in f irs t appe al v ide or der d ated 29. 4. 2008.
95. T he Ld. DR bef ore us rel ied upon the order of the A. O. bu t was un abl e to con trover t the f ind ing of the Ld. C IT ( A) th at th e issue h ad bee n dec ided in f av our of the assessee in the preced ing assess me n t ye ar. Nor d id the Ld. DR br ing to our no tice an y order of h igher au thor i tie s revers ing the C IT ( A) ' s order on th is issue f or the preced ing ye ar. In v ie w of the s ame, we do no t f ind any re ason to in te rf ere in the order of the C IT ( A) hol d in g th at Auro Dyin g M il l s was el ig i bl e f or deduction u / s 80 IB of the A c t. In v ie w of the above, ground No. 7 r aised b y the Revenue is d is missed. "
105. I n vi e w of the above, si nce admi ttedl y the i ssue rai sed i n the above groun d vi s-à-vi s the el i gi bi l i t y of the assessee to cl ai m deducti on of the profi ts of i ts Auro D yeing Mi l l s u/s 80I B of the Act has been deci ded i n favour of the assessee i n ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 43 of 65 the i mmedi atel y precedi ng year i .e. assessment year 2003-04 by the I . T.A. T. v i de i ts order i n I TA Nos.88 & 118/Chd/2009 dated 26.11.2018, we do not fi nd any reason to i n terfere i n the order of the Ld. CI T( A) . Ground of appeal No.3 r ai sed by the Revenue i s, therefore, di smi ssed.
106. Ground of appeal No.4( i ) ( i i ) & ( i i i ) rai sed by the R evenue reads as under:
"4(i). That the Id. ClT(A) has erred in law and facts in directing the A.O. to treat the interest received from the customers and suppliers to be the income eligible for deduction u/s 80IB and exemption u/s 10B.
(ii) That the Id. C1T(A) has erred in law and facts in directing the A.O. to allow deduction u/s 801B and exemption 10B on profits after excluding loss debited in the accounts in respect of which the Insurance claims were received.
(iii) That the Id. C1T(A) has erred in law and facts in directing the A.O, not to reduce foreign exchange fluctuation gain from eligible profits of units eligible for deduction u/s 801B and exemption u/s 10B."
107. The Revenue i n the above ground has chal l enged the acti on of the Ld.CI T( A) i n al l o wi ng the fol l o wi ng to be treated as part of the pr ofi ts of the asses see el i gi bl e for e xempti on u/s 10B of the Act:
1. I nterest recei ved from customers and suppl i ers.
2. In provi di ng that the l osses correspondi ng to i nsurance i ncome recei ved to be e xcl uded from the e xpendi ture for the purpose of cal cul ati ng the i ncome el i gi bl e for deducti on u/s 80I B of the Act.
3. Forei gn Exchange Fl uctuati on.
108. The A.O. had de ni ed e xempti on o n these i ncomes hol di ng that the y were not i n the natur e of profi ts deri ved from the i ndustri al undertaki ng i n respect of whi ch the e xempti on u/s 10B of the Act was al l o wabl e. The Ld.CI T( A) , i n turn al l o wed ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 44 of 65 the e xempti on o n the i nterest r ecei ved from su ppl i ers and customers fol l o wi ng the deci si on of the Hon'bl e J uri sdi cti onal Hi gh Court i n the case of Phatela Cotgi n I ndustri es Ltd. 166 Ta xman 9 ( P&H) , On forei gn Exchange Fl uctuati on foll o wi ng the deci si on of the I TAT Chandi g arh Bench i n the case of M/s VMT Spi nni ng Ltd. in I TA No.502/Chd/2005 and I TA No.654/Chd/2005 and further hel d that the l oss on assets i n respect of whi ch i nsurance cl ai m was recei ved shoul d be removed from th e e xpenses for t he purpose of ca l culati ng the i ncome el i gi bl e f or e xempti on u/ s 10B of the Act fol l o wi ng the deci si on of the Hon'bl e Juri sdi cti onal Hi gh Court in the case of CI T Vs. Khemka Contai ner ( P) Ltd.( 2005) , 275 I TR 559 ( P&H) .
109. At the outset i tsel f, the Ld. counsel for assessee poi nted out that the i ssue of cl ai m of e xempti on u/s 10B of the Act on the i nterest recei ved from the customers and suppl iers had ari sen i n the i mmedi atel y precedi ng year I .e A.Y 2003-04 and the I TAT had deci ded the i ssue i n favour of the assessee.
Our attenti on wa s dra wn to paras 89 and 90 of I . T.A. T. order as under:
"89. Ground No. 5 rai sed by the Reve nue re ads 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. In the above grou nd the Revenue h as ch al l enged the ac tion of th e Ld. C IT ( A) in tr e ating the in tere s t rece ip ts f ro m cus to mers and suppl iers as be ing el ig ibl e f or deduction u/s 10 B of the Ac t. T he Ld. DR in th is reg ar d rel ied upon the order of the A. O. bu t at the s ame ti me po in ted ou t th at the Hon'b l e Jur isd ic tion al H i gh Cour t in th e c ase of Ph atel a Co tg in Indus tr ies P. L td. Vs. C IT , 303 IT R 411 had c ategor ic al l y h el d th at the in teres t f rom ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 45 of 65 cus to mers/suppl i ers was en ti tl ed to deduc tion u /s 80HH and 80 I of the Ac t. In v ie w o f the above, we f ind no reason to in terf ere in the order of the Ld. C IT ( A) and ground r aised by the Revenu e, theref ore, is d is missed. "
110. Ld.Counsel for the assesse e further poi nte d out that i n the case of Va rdhaman Te xti l e s Ltd. Vs Addl .CI T in I TA No.35/2011 ,the I TAT had adjudi cated the al l o wance of cl ai m of deducti on u /s 80I B/10B of the Act on t he aforesai d i ncomes.Copy of the order was pl aced before us. Further Vi s-à-vi s the cl ai m of e xempti on u/s 10B of the Act on Forei gn Exchange Fl uctuati on and adjus tment of l oss o n goods in respect of whi ch i nsurance cl ai m was recei ved,the Ld. counsel for assessee rel i ed upon the order of the CI T( A) .
111. The Ld. DR, on t he other hand, conceded that the i ssue of cl ai m of e xempti on u/s 10B on i nterest recei ved from customers and suppl i ers had been adjudi cated i n favour of the assessee i n the immedi atel y precedi ng year, as poi nted out by the Ld. counsel for assessee. Rest of the cl ai m on Forei gn Exchange Fl uctuati on and adjustment of l oss on goods agai nst i nsurance cl ai m recei ved, the Ld. DR rel i ed upon the order of the A.O.
112. We have heard the ri val contenti ons. The i ss ue before us rel ates to cl ai m of e xempti on u/s 10B on the i nterest recei ved from customers and suppl i ers, F orei gn Exchange Fl uctuati on and the e xcl usi on of l oss on goods on whi ch i nsurance cl ai m has been recei ved for the purpose of computi ng the profi ts el i gi bl e for deducti on. Admi ttedl y, the I . T.A. T. in the precedi ng year i n the case of the assessee i tsel f, has hel d that the e xempti on u/s 10B of the Act i s al l o wabl e on i nterest ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 46 of 65 i ncome recei ved from customers and suppl i ers. F ol l owi ng the same, therefore, we uphol d the order of the Ld.CI T(A) al l o wi ng the assessee's cl ai m of deducti on u/s 10B of the Act on i nterest recei ved from customers and suppl i ers u/s 10B of the Act. Further we have gone through the order of the I . T.A. T. i n the case of M/s Vardhman Te xti l es Ltd. ( supra) wherei n the I . T.A. T. had res tored the cl ai m of deducti on o n account of i nsurance cl ai m recei ved to the A.O. wi th a di rection to bi furcate the cl ai m recei ved bet ween that recei ved on account of capi tal assets and tradi ng assets and thereafter to al l o w the cl ai m i n resp ect of recei vabl es on account of tr adi ng assets onl y. The rel eva nt fi ndi ngs of the I . T.A. T. at p ara 27 of i ts order are as under:
"27. Ground No.2 :Ground No.2raised by the Revenue is in three parts. The Revenue in the Ist part has agitated the action of the CIT(A) in directing the Assessing off icer to treat the interest received f rom the customers and suppl iers to be income derived f rom industrial undertaking and el igible f or exemption u/s 10B and deduction u/s 80IB and 80IC of the Act. Since we have al ready held that the interest income received on del ayed payment is in f act part of the sale consideration / receivable f rom the customers and we have also held that the same tobe treated as business income and since the af oresaid receipts are rel ating to the sale receipts of the assessee of the produced manuf actured, hence, we do not f ind any inf irmity in the order of the CIT(A) in this respect."
113. Admi ttedl y, The i ssue rega rdi ng cl ai m of deducti on on i nsurance i n the i mpugned case , bei ng i denti cal t o that i n the case of Vardhman Te xti l es ( supr a) ,the same i s al so restored back to the A.O to be deci ded in accordance wi th the di recti ons gi ven i n the case of Vardhman Te xti l es( s upra) .
114. Moreover We find that the I . T.A. T. i n the sai d case had al l o wed assessee's cl ai m of deducti on on forei gn e xchange gai n ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 47 of 65 on fi ndi ng that the y were in respect of e xport recei pts/recei vabl es of the assessee. The fi nd i ngs of the I . T.A. T. i n thi s regard at para Nos.28 & 29 of the order are as under:
"28. The third part of ground No.2 is against the action of the CIT(A) in directing the Assessing off icer not to reduce f oreign exchange f luctuation gain f rom eligible prof its of units eligible f or deduction u/s 80IB and 80IC and exemption u/s 10B of the Act.
29. The Ld. Counsel for the assessee has submitted that the f oreign exchange f luctuation gain is in respect of export receipts/receivable of the assessee and any gain in respect of receivable on account of f oreign exchange f luctuation inf act contributes to the prof its of the assessee f rom the sale/ export of the products. We f ind f orce in the af oresaid contention. We do not f ind any inf irmity in the order of the CIT(A) in this respect also."
115. Si nce before us al so the Ld. counsel for assessee stated that the forei gn e xchange fl uctu ati on gai n was i n respect of e xport recei pts o f the assessee, t he i ssue i s squa rel y covered by the deci si on o the I . T.A. T. i n the case of M/s Vardhman Te xti l es Ltd. ( su pra) , fol l o wi ng whi ch we uphol d the order of the CI T( A) al l o wi ng the cl ai m of the assessee.
I n vi e w of the above, Ground of appeal No.4( i ) , & (i i i ) are di smi ssed whi l e Ground No 4( ii ) is al l o wed for stati sti cal purposes.
116. Ground No.5 rai sed by the Revenue reads as under:
"5 . The Id. C1T(A) has erred in law and facts in directing the A.O. to allocate the eligible head office income to the respective unit for calculating deduction u/s 801B and exemption u/s 10B."
117. Bri efl y stated, duri ng assessment proceedi ngs, the A.O. noted that the assessee had not al l ocated admi ni strati ve, fi nanci al and pe rsonnel e xpense s of the head o ffi ce, to the ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 48 of 65 uni ts el i gi bl e for deducti on u/s 80I B and 10B of the Act, i n order to arri ve at the actual profi ts deri ved from the sai d uni t.
The A.O. hel d that the offi ce bei ng an i ntegral part of the manufacturi ng uni ts, the e xpe nses i ncurred t o wards head offi ce had to be p roporti onatel y al l ocated agai nst the uni ts and Accordi ngl y, he al l ocated the i mpugned e xpenses i n the rati o of turnover of th ese uni ts to the t otal turnover and recomputed the deducti on u/s 80I B and 10B of the Act accordi ngl y,
118. The Ld.CI T( A) u phel d the order of the A.O. but at the same ti me he di r ected that even t he i ncome of the head offi ce shoul d be al l ocated to the respecti ve uni ts, i n turn hol di ng that onl y the net e xpenses of the head offi ce have to be al l ocated to the el i gi bl e uni ts. The Ld.CI T( A) fol lowed hi s o wn order i n the case of the assessee for assessment year 2002-03 and the order o f the CI T( A) i n the case of M/s Vardhman Te xti l es Ltd. ( s upra) for assessment year 2004-05, whi l e hol di ng so.
119. Before us, the Ld. counsel for assessee poi nted out that thi s i ssue had b een adjudi cated i n the case of M /s Vardhman Te xti l es Ltd. ( supra) i n I TA No.1429/Chd/2010 rel ati ng to assessment year 2006-07, wherei n the assessee h ad chal l enged i denti cal order of the CI T( A) di recti ng al l ocati on of net i ncome.
It was poi nted out that the I . T.A. T. had di smi ssed the assessee's appeal on thi s ground uphol di ng the orde r of the CI T( A) . Our attenti on was dra wn to para 11 of the sai d order as under:
"11. Ground Nos. 3 &4: Vide these grounds, the assessee has agitated the action of the CIT(A) in ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 49 of 65 directing the Assessing off icer in conf irming the action of the CIT(A) f or reducing prof its of the units eligible for deductions u/s 10B, 80IC and 80IB of the Act by allocating Head off ice expenses. The Ld. CIT(A) while holding so, ho wever, has directed the Assessing off icer to allocate the net Head off ice expenses and not the gross net expenditure. We do not find any inf irmity in the order of the CIT(A) on the issue and the same is accordingly upheld."
120. Our attenti on wa s al so dra wn to t he ground raised by the Revenue i n i ts appeal i n the sa me year i .e. 20 06-07 i n I TA No.35/Chd/2011 whi ch was al so di smi ssed. Our a ttenti on was dra wn to para 30 of the order as under:
"Ground No.3: Vide ground No.3,the Revenue has agitated the action of the CIT(A) in directing the Assessing Off icer to allocate the eligible Head Off ice expenses to the respective units f or reducing the same out of eligible prof its of assessee for claim of exemption/deduction u/s 80IB,80IC and u/s 10B of the Act.
This issue has already been discussed while adjudicating ground no.4 of the assesses appeal wherein we have upheld the order of the CIT(A) on this issue.
In vie w of this, ground No.3 of the Revenues appeals is hereby dismissed"
121. The Ld. DR fai rl y conceded that the i ssue was covered by the deci si on of the I . T.A. T. i n the case of M/s Vardhman Te xti l es Ltd. ( sup ra) .
122. We have heard both the parties. We have also gone through the order of the I . T.A. T. i n the case of M/s Vardhman Te xti l es Ltd. ( supra) . We fi nd that i n the sai d case al so the CI T( A) had di rect ed al l ocati on of net e xpenses i nc urred by the head offi ce to th e uni ts el i gi bl e f or deducti on u/s s 10B, 80IC and 80I B of the Act, whi ch we fi nd was uphel d by the I . T.A. T. vi de i ts i mpugned order. Si nce the i ssue i n t he i mpugned ground i s i denti cal to that i n the case of M/s Vardhman Te xti l es Ltd. ( supra) , the decisi on rendered therein wi l l ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 50 of 65 squarel y appl y to the present case al so, fol l o wing whi ch we uphel d the order of the Ld.CI T( A) di recti ng al l ocati on of net e xpenses i ncurred by the head o ffi ce. Ground of appeal No.5 rai sed by the Revenue i s accordi ngl y di smi ssed.
123. Ground No.6( i ) to ( i v) ( b) relates to the issue of computati on of profi ts el i gi bl e for deducti on u/s 80HHC of the Act and reads as under:
"6(i) That the Id. C1T(A) has erred in law and facts in directing the A.O. to increase the eligible profits of business by 10% of the interest receipt from FDRs and others, which are taxable under the head 'income from other sources' for the purpose of calculation u/s 80 HHC.
(ii) That the Id. CIT(A) has erred in law and facts in directing the A.O. to treat the interest received from customers and suppliers as business income and reduce only 90% of the same from profits of business as per explanation (baa) to sec. 80HCC against 100% reduced by A.O.
(iii) That the Id. C1T(A) has erred in law and facts in directing the A.O. not to reduce 90% of misc. income from rent received , foreign exchange fluctuation and other misc. receipts from the profit of business for the purposes of calculating deduction u/s 80HHC.
(iv)(a) That the ld. CIT() has erred in law and facts in directing the assessing Officer to allow deduction u/s 80 HHC in respect of DEPB which is self consumed.
(iv)(b) That the Id. CIT(A) has erred in law and facts in directing the A.O. that income from transfer of DEPB could be taxed only in the year in which it was transferred and not in the year in which it was shown in the accounts as receivable, as the assessee is following mercantile system of accounting."
124. The Revenue i n the above ground has chal l enged the acti on of the Ld.CI T( A) i n al l o wi ng the fol l o wi ng adjustments to be made to the profi ts of the as sessee el i gi bl e for deducti on u/s 80HHC of the Act:
1. Excl udi ng onl y 90% of the i nte rest recei ved fr om banks and other as agai nst 100 % e xcl uded by t he A.O. ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 51 of 65
2. Excl udi ng onl y 90% of the i nte rest recei ved fr om customers and suppl i ers as agai nst 100% reduced by the A.O.
3. In not reduci ng 90% on rent recei ved, Forei gn Exchange Fl uct uati on and mi s cel l aneous i nco me from the profi ts el i gi bl e for deducti on u/s 80HHC and;
4. In al l o wi ng deducti on u/s 80HHC on DEPB sel f consumed/recei vabl e.
125. Bri efl y stated, the A.O. had e xcl uded the fol lo wi ng from the profi ts el i gi bl e for deducti on u/s 80HHC of the Act:
1. 100% of the i nte rest recei ved fro m others and fr om suppl i ers and customers.
2. Mi scel l aneous i ncome whi ch i ncl uded the fol l o wi ng:
Detail of Miscell aneous income Amount (in Rs.)
- Mi sc. Recei pts 55,65,594
- Forei gn Exchange Fl uctuati on 2,32,82,584
- Rent Recei ved 20,63,157
--------------
Total 3,09,11,335
and;
3. DEPB sel f consumed.
126. Vi s-à-vi s the findi ngs of the Ld.CI T( A) that 10% of
i nterest i ncome recei vabl e from FDRs & other s was to be i ncreased i n the el i gi bl e profi ts of the busi ness for the purpose of computi ng deducti on u/s 80HHC of the Act, the Ld. counsel for assessee con tended that the assessee i n i ts a ppeal before us i n I TA No.52 7/Chd/2009 abo ve had i n groun d No.2 rai sed the i ssue of netti ng of i nterest i ncome whi ch i f all o wed to the assessee, the sai d ground becomes i nfructuous.ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 52 of 65
127. I n ground No.2 rai sed before us i n assesses app eal , we have restored the i ssue rai sed to the AO di recti ng hi m to al l o w the assessee the benefi t of netti ng of i nterest after veri f yi ng ne xus bet ween the i nte rest i ncome earn ed and pai d ,at para 14 of our order. Thi s i ssue i s al so therefore restored back to the A O to be adjudi c ated after dea l i ng wi th the i ssue rai sed in ground no.2 of the assesse s appeal .
Accordi ngl y, Ground No.6( i ) rai sed by the Revenue i s al l o wed for stati sti cal purposes.
128. Vi s-à-vi s the fi ndi ngs of the CI T( A) that 90% of the i nterest recei ved from customers, suppl i ers i s to be reduced for the purpose of computi ng deducti on u/s 80HHC of the Act, the Ld. counsel for assessee poi nted out that i n ground No.10 of the assessee's appeal the assessee had pl eaded that the sai d i nterest i ncome be treated as part of i ts i ncome from busi ness and professi on and i f so treat ed the ground r ai sed by the Revenue woul d become i nfructuous.
129. I n ground No.10 rai sed by the assessee i n i ts appeal above we have al l o wed the benefi t of netti ng of the i nterest recei ved from suppl i ers and customers restori ng the i ssue to the AO to al l o w the benfi t after veri f yi ng the nexus bet ween i nterest i ncome earned and e xpended at para 14 of our order.
Thi s i ssue i s al s o therefore restored back to the AO to be adjudi cated after deal i ng wi th the i ssue rai sed in ground no.10 of the assesses appeal . Accordi ngl y, Ground No.6( i i ) rai sed by the Revenue i s al l o wed for stati sti cal purposes.
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 53 of 65130. Vi s-à-vi s ground No.6( i i i ) wherei n the CI T( A) had al l o wed 100% deducti o n u/s 80HHC o f the Act ,on mi scel l aneous recei pts, forei gn e xchange fl uctuati on and rent recei ved from empl o yees, we hol d that vi s-s-vi s the rent recei ved from empl o yees, the s ame cannot be s ai d to have any ne xus wi th the busi ness of e xport carri ed out by the a ssessee and, therefore, the A.O. had ri ghtl y e xcl uded 90% of the same from the profi ts of busi ness. As far the forei gn e xchange fl uctuati on, si nce the Ld. counsel for assessee had submi tted that the same rel ated to the e xport sal es or transacti on carri ed out by i t, we hol d that the Ld.CI T( A) had ri ghtl y hel d that 100% of the sam e was to be i ncl u ded i n the el i gi bl e profi ts for cal cul ati ng ded ucti on u/s 80H HC of the Act. As for the mi scel l aneous i ncome recei ved b y the assessee, our attenti on was dra wn to p age 42 of Paper Book fi l ed by t he assessee, wherei n the detai l s of mi scel l aneous i ncome was fi led as under:
Detail of Misc. Receipts Rebate & Discount 32,950 Sale of Scrap 41,170 Testing charges of samples 91,106 Other incomes 98,591 Cenvat on yarn tfd. 169,099 Discount on HPS from suppliers 250,780 Export samples 270,791 Insurance and Misc claims 411,478 Export sales excise refund 4,199,629 TOTAL --------------
5,565,594
-------------
131. On perusi ng the above, we fi nd t hat out of the sa me sal e of scrap and other i ncome do not qual i f y to be treated as i ncome rel ati ng to the e xport busi ness of the assessee whi l e the rest i n the nature of rebate and di scount, testi ng charges ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 54 of 65 and e xport sampl e di scount recei ved from suppl i ers, e xport sampl e, e xci se refund al l rel ate to the busi ness of the assessee. Ther efore, we hol d that the deducti on u /s 80HHC of the Act be not al l o wed on sal e of scrap and other income of the assessee. The d educti on on the rest i s al l o wed. Ground of appeal no.6( i i i ) i s partl y al l o wed.
132. Vi s-à-vi s ground No.6 i v( a) & i v( b) the Revenue i s i n appeal agai nst the order of the CI T( A) al l o wi ng the assessee's cl ai m of deducti on u/s 80HHC on the DEPB w hi ch was sel f consumed hol di ng that thi s onl y goes to reduce the cost of the i mport of the assessee sal es, and, therefore, do not fi gure separatel y i n the computati on of deducti on u/s 80HHC of the Act. The Ld. DR has been unabl e to controvert the fi ndi ngs of the CI T( A) in thi s regard .We therefore do not fi nd any i nfi rmi t y i n the order of the CI T( A) i n thi s regard and uphol d the same Ground of appeal No.6( i va) i s di smi ssed.
133. The Ld.CI T( A) ha d al so hel d that the DEPB transferred i n the subsequent year was to be t a xed onl y i n the year i t was transferred and not when i t was sho wn as recei vabl e. The Ld.CI T( A) had fol l o wed the deci si on of the I TAT Chandi garh Bench i n the case of ACI T Vs. Paraker C ycl e I nds., 104 TTJ 983( Chd) i n thi s regard. The Ld. DR has been unable to controvert the fi ndi ngs of the CI T( A) , nor has bee n abl e to ci te any deci si on contrar y to that rel ied upon by the Ld.CI T( A) . We, therefore, uphol d the order of the Ld.CI T( A i n thi s regard.
Ground of appeal No.6( i vb) i s di smi ssed.
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 55 of 65I n vi e w of the above the vari ous Grounds rai sed i n ground No.6 are di sposed off accordi ngl y.
134. Ground No.7 reads as under:
"7. That the Id. C1T(A) has erred in law and facts in deleting the addition of Rs.51,31,306/- made u/s 14A by the A.O. on proportionate basis out of personal, administrative and financial expenses for earning of dividend income."
135. The Revenue has chal l eng ed the restri c ti on of di sal l o wance made u/s 14A by the CI T( A) to Rs. One l acs as agai nst Rs.51,31,386/-made by the A.O.
136. Thi s i ssue has been deal t wi th by us i n ground No.19 of the assessee's appeal wherei n we have uphel d the acti on of the Ld.CI T( A) at para 75 of our order above. I n vi e w of the same, we di smi ss thi s ground rai sed by the Revenue.
137. Ground No.8 relates to the vari ous adjustments al l o wed by the CI T( A) whi l e computi ng the Book Profi ts of the assessee for the purposes of pa yi ng mi ni mum al ternate ta xes u/s 115 JB of the Act.Ground 8( i ) reads as under:
"8. That the Id. CIT(A) has erred in law and facts in directing the A.O. to compute the tax liability u/s 115JB, taking into 'consideration the following points:-
(i) To reduce the income to which section 10B applies and is credited to Profit and Loss Accounts."
138. Bri efl y stated the AO had i ncreased the ta x li abi l i t y u/s 115JB of the Act as cal cul ated by the assessee,by reduci ng the amount of i ncome to whi ch secti on 10B appl i ed. The AO whi l e cal cul ati ng the el i gi bl e prof i ts, i ncl uded e xc i se dut y and tradi ng turnover in total turno ver, whi ch were e xcl uded by the assessee. Th e Ld.CI T( A) di re cted e xcl usi on of e xci se dut y from the total turnover.
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 56 of 65139. Before us at the outset i tsel f, the Ld. counsel for assessee poi nted out the i ssue has been adjudi cated i n the case of the asse ssee i n the prec edi ng year i .e. A.Y 2003-04.
Our attenti on was dra wn at para 33 of the I . T.A. T. order whi ch i s as under:
33. We h ave gone thr ough the order of the I. T . A.T . in the c ase of M/s V ardh man T extil es ( supr a) and f ind th at iden tic al iss ue h ad been de al t wi th in the s aid c ase wh ere in it was hel d th at the dec is ion of the Hon'bl e Apex Co ur t in the c ase o f Laksh mi mach ine Works ( supr a) woul d squ arel y ap pl y f or the pur po se of cal cul ation of deduc tion u/s 10B and as per wh i ch exc ise du ty wa s to be excl ud ed f ro m the to tal turnover of the assessee. Fur the r the I. T . A.T . had al so hel d th at the turnover of the tr ad ing ex p or t ac tiv i ties was to be excl uded f rom the to tal turno ver and the prof its o f the tr ad ing ex p or t ac tiv i ty we re to be excl uded f rom the prof its f or the pur pose of c al cul ating deduc tion u/s 10B of the Ac t f ol l o wing the dec is ion of the T r ibun al in the c ase of VMT Spinn i ng Co mp an y L td. ( su pr a). S ince the is sues in the prese n t c ase are iden ti c al to th at in the c ase of M/s V ardh man T extil es ( supr a) the dec is ion rendere d there in wil l appl y in the presen t c ase al so, f ol l o wi ng wh ic h we hol d th at exc ise du ty b e excl uded f ro m the to tal turnover f or the pur pose of cal cul ation of deduc tion u/s 10B of the Ac t. Bu t v is a v is the excl us ion of ex por t turnover of tr aded goods , we f ind th at the in the c ase of VMT Spin n ing M il l s( supr a) , it was hel d th at d educ tion u/s 10 B was gr an ted q u a prof its e arned o n manuf ac tured goods and theref ore ne ither the prof its of tr aded goods was to be incl ud ed in the prof its nor the turnover of tr aded goods was to be incl uded in the to tal turno ver f or cal cul ati ng deduc tion u/s 10 B of the Ac t. Acc ord ingl y the AO is d irec ted to c al c ul ate the deduc ti on u/s 10B of the Ac t af ter excl ud ing bo th the prof its and the turno ver of ex port tr ade d goods f ro m the prof its of the bus iness and the to tal turnover.
Ground of appe al Nos. 4( i) & ( i i) r aised b y the assessee are, the ref ore, al l o we d in above ter ms.
I n vi e w of the above, si nce admi ttedl y the i ssue rai sed i n the above ground vi s-à-vi s the e xcl usi on of e xci se dut y from total turnover for the purposes of cal cul ati ng the profi ts el i gi bl e for dedu cti on u/s 10B of the Act, has bee n deci ded i n ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 57 of 65 favour of the assessee i n the i mmedi atel y precedi ng year i .e.
assessment year 2003-04 by the I . T.A. T. vi de i ts order i n I TA Nos.88 & 118/Chd/2009 dated 2 6.11.2018, we do not fi nd any reason to i nterfere i n the order of the Ld.CI T( A) . Ground of appeal No.8( i ) rai sed by the Revenue i s, therefore, di smi ssed.
140. Ground No.8( i i ) reads as under:
'(ii) To reduce 100'% of 80HHC calculated on book profits of the company.:
141. The Revenue i n the above gro und has chal l en g ed the acti on of the CI T( A) i n al l o wi ng 100% deducti on u/s 80HHC on the book profi ts u/s 115JB of the Act.
142. Bri efl y stated, the A.O. had cal cul ated the deducti on u/s 80HHC to b e reduced from t he profi ts of the assessee for ta xati on as per the provi si ons of secti on 115JB of the Act, on the basi s of the normal computati on of the profi ts and gai ns of busi ness and professi on. I n effect, the profi ts deducti bl e u/s 80HHC as per normal provi si ons of the Act were reduced by the A.O. from the profi ts of the assessee for the purpose cal cul ati ng book profi ts, whi l e the assessee had cal cul ated the deducti on on the basi s of the profi ts as per the Profi t & Loss Account of the assessee. The Ld. CI T( A) al l o wed the assessee's cl ai m fol l o wi ng the order of the Speci al Bench of the I . T.A. T. i n the case of DCI T Vs. Syn com Formul ati on 292 I TR 144( AT) ( Mumbai ) ( SB) .
143. We do not s ee any reason to i nterfere i n the order of the Ld.CI T( A) . the Ld.CI T( A) has fol l o wed the deci si on of the Speci al Bench of the I TAT i n the case of Syncom ( supra) , whi l e ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 58 of 65 hol di ng that pr ofi ts el i gi bl e for deducti on u/s 8 0HHC of the Act for the purposes of reduci ng them from the Book Profi ts u/s 115JB of the Act, are to be cal cul ated on the Profi ts as sho wn i n the Pr ofi t and Loss ac count and not t hat computed as per the provi si ons of the Act. The LD.DR has not brought to our noti ce any d eci si on to the co ntrar y of a hi gh court or the ape x court. The order passed by the Ld.CI T( A) i s therefore uphel d.
144. Ground of appe al No.8( i i ) rai sed by the Reve nue i s, therefore, di smi ssed.
145. Ground No.8( i i i ) reads as under:
"(iii) Not to take lessor figure of exempted dividend income to be reduced from book profits for MAT due to allocation of expenses amounting to Rs.51,31,386/-."Ground 8( i i i )
146. Bri ef facts rel ati ng to the i ssue are that the A.O. had reduced the net fi gure of e xempt di vi dend i ncome from the profi ts of the assessee after reduci ng therefrom the e xpenses al l ocated to i t from the profi ts of the assessee for the purpose of cal cul ati ng book profi ts l i abl e to ta x u/s 115JB of the Act.
The CI T( A) di rec ted the A.O. to e xcl ude the di vi dend i ncome after reduci ng the cost rel atabl e to i t as adjudi cated by hi m i n the case of the assessee.
147. Before us the Ld. DR rel i ed upon the order of the A.O., whi l e the Ld. counsel for assessee stated that the i ssue of adjustment of e xpenses al l ocated u/s 14A of the Act has been deal t wi th by the Speci al Bench of the I . T.A. T. i n the case of ACI T, Ne w Del hi Vs. Vi reet I nvestment Pvt. Ltd. ( 2017) 165 I TD ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 59 of 65 27 ( SB) ( Del ) hol di ng that no adjustment on account of di sal l o wance of e xpenses u/s 14A i s to be done.
148. We have heard ri val contenti on. We have also gone through the order of the Speci al Bench of the I . T.A. T. i n the case of Vi reet I nvestment ( supra) wherei n it has been categori cal l y hel d that no a djustment on account of di sal l o wance of e xpenses u/s 14A i s to be done for the purpose of cal cul ati ng book profi ts u/s 115JB of the Act. The Ld. DR has not poi nted out any contrar y deci si on of the higher Court i n thi s regard. I n vi e w of the sa me, fol l o wi ng th e deci si on i n the case of Vi reet I nvestment ( supra) we hol d that no adjustment on account of e xpenses di sal l o wed u/s 14A i s to be made for the purpose of cal c ul ati ng book p rofi ts to be subjected to ta x u/s 115JB of the Act. Ground No.8(i i i ) i s, therefore, di smi ssed.
I n effect, the appeal of the Revenue i s partl y allo wed for stati sti cal purposes
149. We shall now be dealing with cross appeals relating to penalty levied u/s 271(1)© of the Act.We shall first take up the appeal of the assessee in ITA No.1138/Chd/2011 .
150. The grounds of appeal rai sed by the assessee read as under:
"1. That the Ld.CIT(A) erred in law and on facts in confirming the penalty levied by AO on the issues which were of debatable nature and the claims made were bonafide.
1. That the Ld.CIT(A) erred in law and on facts while upholding penalty on the following issues;ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 60 of 65
a) That the Ld.CIT(A) erred in law and on facts in upholding penalty on deduction claimed u/s 10B of The Act on Rent received.
b) That the Ld.CIT(A) erred in law and on facts in upholding penalty on deduction claimed u/s 80IB of The Act on Interest Income.
c) That the Ld.CIT(A) erred in law and on facts in upholding penalty on deduction claimed u/s 80IB of The Act on Rent received.
d) That the Ld.CIT(A) erred in law and on facts in upholding penalty on deduction claimed u/s 80IB of The Act on DEPB.
3. That the Ld.CIT(A) has erred in law and facts in confirming penalty on the above items.
4. That the penalty levied is against the law and facts of the case.
151. Bri efl y stated, the Ld.CI T( A) had uphel d the penal t y l evi ed on the addi ti ons made by the A.O. and confirmed by hi m as under:
a) Deducti on cl ai med u/s 10B on rent recei ved.
b) Deducti on cl ai med u/s 80I B on interest i ncome and rent recei ved.
c) Deducti on cl ai med u/s 80I B and DEPB. In the quantum proceedi ngs before us, the addi ti on confi rmed by the CI T( A) on account of the above was
chal l enged by the assessee i n ground No.5 rai sed before us and deal t wi th at paras 23 to 29 of the order above, wherei n we have uphel d the addi ti ons so made.
152. The argument of the Ld.Counsel for the assessee agai nst the l ev y of penal t y was that the assessee had di sclosed al l parti cul ars rel ati ng to the sai d i ncomes and i ts clai m was bonafi de si nce i denti cal cl ai ms had been al l o wed in the case of si ster concerns as under:
ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 61 of 65"Covered by Tribunal's order dt 5/1/2016 in ITA No.212/CHD/20015 in the case of ACIT vs. Mahavir Spinning Mills Ltd. f or Assessment Year 2001-02 - (Deduction allowed on rebate/discount, bal ance w/back, misc. income, excise refund and insurance claims received (pg. 94-127 relevant at 110).
CIT vs. Metal man Auto P. Ltd. (2011) 336 ITR 434 (P&H) - (Misc income, discount received, sundry bal. W/back. Held eligible f or deduction u/s 80IB/10B)- Reported CIT vs. Dharam Pal Prem Chand Ltd. (2009) 180 Taxman 557 (Del) - Ref und of excise duty is eligible for deduction u/s 80 HHC) Interest received from others comprises of interest received f rom employees against Housing Loans advanced to them. Income thus arising during the course of business is liable to be included in profits derived f rom business. In this connection we rel iance is placed on the judgment of VMT Spinning Co. Ltd vs. ACIT in ITA No.682/07 dated 13.7.12 f or AY 2003-04 - Interest income f rom employees is business income and is eligible f or deduction u/s 10B. Judgment at Page 128-131 (relevant 129-130) M/s ACG Associated capsules (p) Ltd. Vs. CIT, Mum, 2012 343 ITR 89 (SC) - Interest income to be netted (Reported) The Hon'ble Tribunal vide order dated 04.05.2018 of Vardhman Textiles Limited f or A.Y. 2002-03 to 2004-05 has set aside the issue to the f ile of AO to decide the issue on the basis of case l aws cited and in AY 2005- 06 allo wed the deduction on the other income (issue deal t with 80HHC issue). Page 18-19 & 11-13 respectively of the order."
153. We are i n agreement wi th the contenti ons made by the Ld. counsel for the assessee that i t was not a fi t case for l ev y of penal t y on the i mpugned i ncomes. Though the cl aim of the ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 62 of 65 assessee of dedu cti on of the sai d i ncomes u/s 80I B/10B of the Act ,has been he l d by us as not t enabl e i n l a w, bu t thi s al one i s not suffi ci ent for l ev y of penal t y. Undoubtedl y the detai l s regardi ng the afo resai d i ncome by wa y of rent i nter est or DEPB had been dul y d i scl osed by the assessee. Al so the fact that i denti cal cl ai ms had been al l o wed in the cas e of sister concerns of the assessee proves the bonafi des of the cl ai m made by the ass essee. I n the case of VMT Spi nni ng Company Ltd. Vs. ACI T, t he I TAT had al l o wed deducti on cl ai med on i nterest recei ved from others ,vi de i ts order in I TA No 682/2017 dated 13.7.2012 for assessment year 2003-0 4.
Further i t has be en hel d by the H on'bl e Ape x Cour t i n the case of ACG Capsul es Pvt. Ltd. Vs. CI T, 343 I TR 89 that the i nterest i ncome i s to be netted. Therefo re, as far as the clai med of deducti on u/s 8 0I B and 10B of the Act on renta l i ncome and i nterest i ncome i s concerned, i t was not whol l y untenabl e i n l a w but was a debatabl e i ssue and, therefore, i n these facts and ci rcumstances, it cannot sai d that the assessee had conceal ed any parti cul ars of i ncome rel ati ng to the same havi ng di scl osed al l detai l s of such i ncome and only cl ai m of deducti on bei ng di sal l o wed to i t. We dra w supp ort from the deci si on of the Hon'bl e Ape x Co urt i n the case of CI T Vs .
Rel i ance Petroproducts Pvt., 322 I TR 158 Ltd., i n thi s regard.
As far the cl ai m of the assessee for deducti on u/s 80I B of the Act on the DEPB , the A.O., we fi nd, had deni ed t he sai d cl ai m on the basi s of the deci si on of the Hon'bl e Juri sdicti onal Hi gh Court i n the case of Li bert y I ndi a Vs. CI T ( 2007) , 293 I TR 520, whi ch we have noted was affi rm ed by the Hon'bl e Ape x Court al so. The sai d deci si on of the Hon'bl e Juri sdi cti onal Hi gh ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 63 of 65 Court was rendered on 22.9.2006, whi l e the assessee had fi l ed i ts return for the i mpugned year on 29.4.2004. Therefore, when the assessee had made the cl ai m, i t had not been hel d to be whol l y untenabl e i n l a w and, therefore, havi ng furni shed the detai l s of the i mpugned i ncome al so, mere deni al of cl ai m of deducti on on DEPB cannot attract the l ev y of penal t y u/s 271( 1) ( c) of the Act. We, therefore, set asi de the order of the Ld.CI T( A) i n confi rmi ng the l ev y o f penal t y u/s 27 1( 1) ( c) of the Act on the deni al of deducti on u/s 10B on rent recei ved, the deni al of deducti on u/s 80I B on i nterest i ncome, rent recei ved and DEPB.
154. The appeal of the assessee i s, therefore, al lo wed.
155. We shal l no w take up Revenue's appeal in ITA No.1150/Chd/2011 .
The Revenue has rai sed the fol l o wi ng grounds of appeal :
"1. That the Ld. C1T(A) has erred in law in cancelling the penalty imposed by the AO u/s 271(l)(c) for furnishing inaccurate particulars regarding deduction us 10B 80IB claimed by the assessee on misc. receipts, as there was no direct nexus between receipts and eligible business i.e. manufacturing of yarn (in view of the judgement of Hon'ble Supreme Court in the case of CIT Vs. Sterling Foods reported at 237 1'1'R 579) and the assessee had resorted to making false claim for said deduction.
2. That the Ld. CIT(A) has erred in law in deleting the penalty imposed u/s 271(1 )(c) on the issue of scrap sales which has rightly been excluded by the AO from profits of business while computing deduction u/s 80HHC whereas the assessee resorted to furnishing inaccurate particular by including scrap sales in the profit of business while computing deduction u/s 80HHC.
3. That the Ld. C1T(A) has erred in law in deleting penalty imposed u/s 271(l)(c) on the deduction claimed u/s 80HHC by including export turnover of EOU units whereas the A.O had rightly disallowed the same to avoid double deduction, and the assessee had furnished inaccurate particular by claiming deduction under sections 10B & 801B also.ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 64 of 65
4. The order of the Ld. CIT(A) be set aside and that of A.O.be restored."
156. As i s evi dent from the ground rai sed before us, the Revenue has chal l enged the order of the Ld.CI T( A) del eti ng the penal t y l evi ed on the fol l o wi ng addi ti ons/di sal l o wances:
1) Deducti on cl ai med u/s 10B & 80IB on mi scel l aneous recei pts .
2) Deducti on cl ai med u/s 80HHC on scrap sal es by i ncl udi ng the same i n the profi ts of the busi ness.
3) Deducti on cl ai med u/s 80HHC by i ncl udi ng e xport turnover of EOU uni ts.
157. The i ssue rel at i ng to di sal l o w ance of deducti on u/s 80HHC of the Act by i ncl udi ng e xport turnover of EOU uni ts has been deal t wi th by us i n ground No.11 of the assessee's appeal in I TA No.527/Chd/2009 above wherein we have al l o wed the cl aim of the assessee that the e xport turnover of EUO uni t i s to be i ncl uded for the purpose of cal cul ati ng deducti on u/s 80HHC of the Act. Therefore, i n vi e w of the same, si nce the addi ti on made of the same has been del eted by us, there i s no cause for l ev y of any penal t y u/s 271( 1) ( c) of the Act.
158. As far as the i ss ue of cl ai m of d educti on u/s10B & 80I B of the Act on scrap sal es, undoubtedl y al l parti cul ars rel ati ng to the cl ai ms had been di scl osed by the assessee.
Further as poi nted out by the Ld.CI T( A) the I . T.A.T. Mumbai Bench had i n th e case of Mazda Col ours Ltd. V s. ACI T,hel d that i t woul d be part of the sal es /turnover. There fore we agree wi th the Ld.CI T( A) that i t was a contenti ous i ssue and the assessee havi ng di scl osed al l p arti cul ars of th e same, the cl ai m of the ass essee of deducti on u/s 80HHC by i ncl udi ng ITA No.527 & 574/CHD/2009 & ITA No.1138 & 1150/CHD/2011 Page 65 of 65 scrap sal es cann ot be sai d to be mal afi de. The as sessee cannot be charged wi th havi ng conceal ed/furni shed i naccurate parti cul ars of i ncome. The order of the CI T( A) del eti ng the penal t y on the same i s, therefore, uphel d.
As far as the mi scel l aneous recei pts, al so undoubtedl y the assessee had di scl osed al l parti cul ars rel ati ng to the same and, therefore, mere deni al of the cl ai m cannot l ead to the l ev y of penal t y as hel d by the Hon'bl e Supreme Court i n the case of Rel i ance Petroproducts 322 I TR 158. I n vi e w of the same, the order of the CI T( A) del eti ng the penal t y on the s ame i s al so uphel d.
159. I n effect, al l the grounds rai se d by the Reven ue are di smi ssed.
The appeal of the Revenue i s di smi ssed.
Order pronounced in the open Court on 31..../05/2019.
[SANJAY GARG] [ANNAPURNA GUPTA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
DATED:........./05/2019
JJ:
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR