Income Tax Appellate Tribunal - Ahmedabad
Hamilton Houseware Pvt.Ltd.,, Vapi vs Department Of Income Tax on 13 February, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL AT
AHMEDABAD
AHMEDABAD "B"BENCH
Before Shri G.D. Agarwal, Vice-President (AZ) and
Shri Mahavir Singh, Judicial Member
ITA No.2438/ Ahd/2007
[Asstt.Year 2004-05]
Asstt. Commissioner of vs Hamilton Houseware Pvt. Ltd.
Incom e-tax, Vapi Circle, Survey No.288/A, Near Dadra
Vapi Demni Road, Dadra, D & NH.
PAN No. AABCD1683Q
(Appellant) (Respondent)
C.O. No.218/ Ahd/2007
(arising out ITA No.2428/Ahd/2007)
(Assessment Year: 2004-05)
Hamilton Houseware Pvt. Ltd. vs. Asstt. Commissioner of
Survey No.288/A, Near Dadra Income-tax, Vapi Circle,
Demni Road, Dadra, D& NG Vapi
(Appellant) (Respondent)
Order reserved for pronouncement on 18/03/10
Revenue by :Smt.Neeta Shah, SR-DR
Assessee by: Shri Mahul K Patel,AR
ORDER
PER Mahavir Singh, Judicial Member:-
This appeal by Revenue and Cross Objection (CO) by assessee are arising out of the order of Commissioner of Income-tax (Appeals)-Valsad in appeal No.CIT(A)/VLS/383/06-07 dated 13-02-2007. The assessment was framed by ACIT, Vapi u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 29-12-2006 for the assessment year 2004-05.
2. The first issue in this appeal of the Revenue is against the order of CIT(A) deleting the disallowance made by the Assessing Officer on account of belated payments of PF and ESIC amounting to Rs.24,034/-.
ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 2
3. At the outset, Ld. Counsel for the assessee, Shri Mehul K Patel stated that this issue is covered in favour of the assessee and against the Revenue in the case of CIT v. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) and Hon'ble Delhi High Court in the case of P.M. Electronics Lt. (2008) 220 CTR 635 (Del) wherein, the Hon'ble Delhi High Court in para-4 has held as under:-
"4. On 27th Nov., 1998 the assessee had filed a return of income declaring a loss of Rs.8,92,888. On 11th May, 1999 the return was processed under s. 143(1)(a) of the Act. The case of the assessee was selected for scrutiny. Accordingly, a notice dt. 27th Sept., 1999 under s. 143(2) of the Act was issued to the assessee. In response to the notice and on examination of the details submitted by the assessee with respect to provident fund payments made both on account of employer's and employees' share revealed that payments in the sum of Rs.17,94,042 were late as per the provisions of s. 36(1)(va) r.w s. 2(24)(x) and s. 43B. Consequently, the AO disallowed the deduction and added a sum of Rs.17,94,042 towards EPF contribution."
And subsequently decide this issue in para-10 to 14 of Hon'ble Delhi High Court, which read as under:-
"10. In view of the above, it is quite evident that the special leave petition was dismissed by a speaking order and while doing so the Supreme Court had noticed the fact that the matter in appeal before it pertains to a period prior to the amendment brought about in s. 43B of the Act. The aforesaid position as regards the state of the law for a period prior to the amendment to s. 43B has been noticed by a Division Bench of this Court in Dharmendra Sharma (supra) . Applying the ratio of the decision of the Supreme Court in Vinay Cement (supra) a Division Bench of this Court dismissed the appeals of the Revenue.
In the passing we may also note that a Division Bench of the Madras High Court in the case of CIT vs. Nexus Computer (P) Ltd. by a judgment dt. 19th Aug., 2008, passed in Tax Case (Appeal) No.1192/2008 [reported at (2008) 219 CTR (Mad.) 54 - Ed.] discussed the impact of both the dismissal of the special leave petition in the case of George Williamson (Assam) Ltd. (supra) and Vinay Cement (supra) as well as a contrary view of the Division Bench of its own Court in Synergy Financial Exchange (supra). The Division Bench of the Madras High Court has explained the effect of the dismissal of a special leave petition by a speaking order by relying upon the judgment of the Supreme Court in the case of Kunhayammed & Ors.Vs. State of Kerala & Anr. (2000) 162 CTR (SC) 97: 119 STC 505 at p. 526 in para 40 and noted the following observations :
"If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Art. 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the Court. Tribunal or authority in any proceedings subsequent thereto by ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 3 way of judicial discipline, the Supreme Court being the apex Court of the country. But, this does not amount to saying that the order of the Court. Tribunal or authority below has stood merged in the order of the Supreme Court rejecting special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties."
11. Upon noting the observations of the Supreme Court in Kunhayammed & Ors. (supra) the Division Bench of the Madras High Court in the case of Nexus Computer (P) Ltd. (supra) came to the conclusion that the view taken by the Supreme Court in Vinay Cement (supra) would bind the High Court as it was law declared by the Supreme Court under Art. 141 of the Constitution.
12. We are in respectful agreement with the reasoning of the Madras High Court in Nexus Computer (P) Ltd. (supra). Judicial discipline requires us to follow the view of the Supreme Court in Vinay Cement (supra) as also the view of the Division Bench of this Court in Dharmendra Sharma (supra).
13. In these circumstances, we respectfully disagree with the approach adopted by a Division Bench of the Bombay High Court in Pamwi Tissues Ltd. (supra).
14. In these circumstances indicated above, we are of the opinion that no substantial question of law arises for our consideration in the present appeal. The appeal is, thus, dismissed."
4. We find that the facts are clearly admitted that ESIC and PF payments are made belatedly but within the due date of filing of returns. The CIT(A) has only directed the Assessing Officer to verify the dates and accordingly allow the claim of the assessee. We find that the Hon'ble Delhi High Court in the case of P.M. Electronics Ltd. (supra) has decided this issue of payment of Employees contribution towards Provident Fund after considering the decision of Hon'ble Apex Court in the case of Vinay Cement (supra) and also distinguished the case law referred by the Ld. DR of Bombay High Court in Pamwi Tissues Ltd. (supra). Accordingly, following Delhi High Court in P.M. Electronics Ltd. (supra), we allow the claim of the assessee. Accordingly this issue of the Revenue's appeal is dismissed.
5. The next issue in this appeal of the Revenue is against the order of CIT(A) in directing the Assessing Officer to exclude the excise and sales tax, while computing the deduction u/s.80HHC of the Act, from total turnover of the assessee.
ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 4
6. At the outset, we find that this issue is squarely covered by the decision of Honble apex court in the case of CIT vs. Lakshmi Machine Works (2007) 290 ITR 667 (SC), wherein the Hon'ble Apex Court has held as under:-
"6. The learned CIT(Appeals)-V, Ahmedabad erred in confirming that excise duty is part of total turnover for the purpose of calculation of deduction u/s.80HHC of the Act."
"In fact, in Civil Appeal No.4409 of 2005, the above proposition has been accepted by the Assessing Officer [See : page No.24 of the paper book], if so, then excise duty and sales tax also cannot form part of the "total turnover"
under section 80HHC(3), otherwise the formula becomes unworkable. In our view, sales tax and excise duty also do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc., It is important to bear in mind that excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula under section 80HHC would become unworkable. The view which we have taken is in the light of the amendments made to section 80HHC from time to time."
As the issue is squarely covered in favour of the assessee, we dismiss this issue of the Revenue's appeal. Accordingly, this issue of the Revenue's appeal is dismissed.
7. The next issue in this appeal of Revenue is against the order of CIT(A) in allowing the netting of interest for deduction u/s.80-IB of the Act.
8. At the outset, Ld. counsel for the assessee stated that this issue is squarely covered by the decision of Hon'ble Delhi High Court in the case of CIT v. Shri Ram Honda Power Equip (2007) 289 ITR 475 (Del) and Delhi Tribunal in Special Bench in the case of Lalson Enterprise v. DCIT (2004) 82 TTJ 1048 (Del) (SB). In view of the above decisions, it is clear that the CIT(A) has rightly directed the Assessing Officer to allowed the claim of assessee as regards to netting only. Accordingly, we uphold the order of CIT(A) and this issue of the Revenue's appeal is dismissed.
9. The next issue in this appeal of Revenue is against the order of CIT(A) in allowing deduction u/s.80HHC of the Act for foreign exchange gains.
10. The Ld. Counsel for the assessee stated that this issue is squarely covered in favour of the assessee and against the Revenue by the Tribunal's decision in the ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 5 case of ACIT v. M/s. Mitsu Ltd. in ITA No.2445/Ahd/2007 dated 01-08-2008, wherein the Tribunal has considered the issue as under:-
43.3 We have heard the rival contentions and gone through the case records.
We have also perused the assessment orders as well as the order of CIT(A). First of all, it is noticed that in the case of foreign exchange realization, no incentive has been granted by any policy of Govt. of India. The currency between two countries being different, the government of the respective countries manage the payments on a country to country basis. Reserve Bank of India is the administrative authority and FEMA is the administrative law. The Indian exporters may export goods or import goods for a price which may be designated in Indian Rupees or in Foreign Currency. Depending upon the demand - supply position on a global basis, the value of the currency fluctuates on different dates. The Indian party has to calculate their earnings or payments in Indian currency. In order to remove the uncertainty in earning the RBI has permitted hedging of future realization or payments. FEMA and related RBI regulations are only mechanisms to facilitate risk management of foreign exchange realization or payments. This is to facilitate foreign trade by managing the risk of increase or decrease in the value of realization/payments and not for earning any income. The entire mechanism is not a permissible mode of earning income due to ups and downs in currency valuation, but is to manage and control the erosion in value on account of difference in export realization or import payments. FEMA of 1999 do not permit speculation in foreign exchange. The underlying transaction is the receivable/ payable generated on account of export or import transaction. The amount receivable is for sale or purchase of goods. Even if the amount is given by the bank, as an agent, it is ultimately a permitted transaction to maximize the value of sale of goods as against a possible currency deterioration, or to bring certainty to transactions. Without sale of goods an exporter cannot hedge or claim to have currency exposure. The bank as only a medium, is an administrative authority to facilitate the mechanism. As against the ld. DR's observation that it is not attributable to the business we would like to submit that it is derived from the business. The foreign exchange realization is ultimately in regard to the value of goods exported. The mechanism only maximizes the value realization of export of the involved foreign currency, which is received through export activity. The decision of the Hon'be Apex Court in the case of CIT v. Sterling Foods (1999) 237 ITR 579 (SC), is with respect to the deduction U/s. 80HH and not with respect to Sec. 80HHC of the Act. In the instant case, the assessee-company is a manufacturer exporter and hence the nature of applicable deduction is Sec. 80HHC of the Act. The sale realization proposed to be maximized is the foreign exchange value of the export deals. The Learned Departmental Representative has stated that anybody having exposure in foreign currency can enter into forward contract. But that does not per se make the gain from forward foreign exchange contract as speculation business. Only if foreign exchange contract is allowed to be made by any person, even without exposure in foreign currency without any underlying transaction of export / import then only it can be said to be a speculative transaction. The Ld DR relied on the decision of Hon'ble Gujarat High Court in the case of Chimanlal Chotalal v. CIT (1968) 69 ITR 129 (Guj.) and the facts of that case are different from the present case. The assessee in that case ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 6 had entered into forward contract of sale as a hedge for the purpose of guarding him against loss through price fluctuations in respect of his forward contracts of purchase of cotton bales. Whereas in the present case, the assessee-company is a manufacturer exporter, and has only participated in the administrative mechanism provided by the government of India through FEMA of 1999 in order to realize the amount due on sale of goods. In view of the above discussions, we are in full agreement with the finding of C IT(A) allowing the claim of deduction u/s. 80HHC of the Act. Accordingly, this issue of the Revenue's appeal is dismissed."
11. After going through the facts of the case and the decision of the Tribunal in the case of M/s. Mitsu Ltd. (supra), we find that gain recorded on account of fluctuation in exchange rates bears the character of the income which is treated as derived from the export sales and it is part and parcel of the export profits only. We find that the CIT(A) has rightly directed the AO to include the amount of account of gains on cancellation of forward cover contracts of Rs.1,55,554/- within the term profits from business while computing deduction u/s.80HHC of the Act. We find no infirmity in the findings of CIT(A) and accordingly we uphold the same. This issue of the Revenue's appeal is dismissed.
12. The next issue in this appeal of Revenue is whether in view of the provisions of Section 80-IA(9) deduction u/s.s 80HHC of the Act is to be allowed on profit and gains as reduced by deduction u/s.80-IB or 80-IA of the Act or not.
13. At the outset, the Ld. counsel for the assessee fairly stated that the issue is squarely covered against the assessee and in favour of the Revenue by the decision of Special Bench, Delhi, of this Tribunal in the case of ACIT v. Hindustan Mint & Agro Products (P) Ltd. (2009) 119 ITD 107 (Del) (SB) wherein, it was held:
"that in view of the provisions of s. 80-IA(9) deduction under s. 80HHC is to be allowed on profits and gains as reduced by the deduction claimed and allowed under s. 80-IB/80-IA. Respectfully following the said decision Hon'ble Special Bench of the Tribunal"
14. Respectfully following the decision of Delhi Tribunal, we set aside the order of the CIT(A) and restore back to the order of the AO. Therefore, this ground of appeal of the revenue is allowed.
ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 7
15. The next issue in this appeal of Revenue is against the order of CIT(A) not granting deduction u/s. 80-IB on the amount of profit of DEPB to the assessee.
16. At the outset, the Ld. counsel for the assessee fairly stated that the issue is squarely covered against the assessee and in favour of Revenue by the decision of Hon'ble apex court in the case of Liberty India v. CIT (2009) 317 ITR 218 (SC), wherein the apex court has analyzed the provisions of Section 80-IB and 80-IA and stated that Section 80-IB provides for allowing deduction in respect of profit & gains derived from the eligible business. The Hon'ble apex court held that Section 80-IB provides for allowing deduction in respect of profit & gains derived from eligible business and analysis the provisions as under:-
"Before analysing section 80-IB, as a prefatory note, it needs to be mentioned that the 1961 Act broadly provides for two types of tax incentives, namely, investment-linked incentives and profit- linked incentives. Chapter VI-A which provides for incentives in the form of tax deductions essentially belong to the category of "profit linked incentives". Therefore, when section 80-IA/80-TB refers to profits derived from eligible business, it is not the ownership of that business which attracts the incentives. What attracts the incentives under section 80-IA/80-IB is the generation of profits (operational profits). For example, an assessee- company located in Mu mbai may have a business of building housing projects or a ship in Nava Sheva. Ownership of a ship per se will not attract section 80-IB(6). It is the profits arising from the business of a ship which attracts sub-section (6). In other words, deduction under sub-section (6) at the specified rate has linkage to the profits derived from the shipping operations. This is what we mean in drawing the distinction betwee n profit- linked tax incentives and investment-linked tax incentives. It is for this reason that Parliament has con fined the deduction to profits derived from eligible businesses mentioned in sub-sections (3) to (11A) (as they stood at the relevant time). One more aspect needs to be highlighted. Each of the eligible business in sub sections (3) to (11A) constitutes a stand-alone item in the matter of computation of profits. That is the reason why the concept of "Segment Reporting " stands introduced in the Indian Accounting Standards (IAS) by the Institute of Chartered Accountants of India (ICAT).
Analysing Chapter VT-A, we find that section 80-113/80-IA are a code by themselves as they contain both substantive as well as procedural provisions. Therefore, we need to examine what these provisions prescribe for "computation of profits of the eligible business ". It is evident that section 80-IB provides for allowing of deduction in respect of profits and gains derived from the eligible business. The words "derived from" are narrower in connotation ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 8 as compared to the words "attributable to". In other words, by using the expression "derived from", Parliament intended to cover sources not beyond the first degree. In the present batch of cases, the controversy which arises for determination is: whether the DEPB credit/duty drawback receipt comes within the first degree sources? According to the assessee(s), DEPB credit/duty drawback receipt reduces the value of purchases (cost neutralization), hence, it comes within first degree source as it increases the net profit proportionately. On the other hand, according to the Department, DEPB credit/duty drawback receipts do not come within first degree source as the said incentives flow from the incentive schemes enacted by the Government of India or from section 75 of the Customs Act, 1962. Hence, according to the Department, in the present cases, the first degree source is the incentive scheme/provisions of the Customs Act. In this connection, the Department places heavy reliance on the judgment of this court in Sterling Foods [1999) 237 ITR 579. Therefore, in the present cases, in which we are required to examine the eligible business of an industrial undertaking, we need to trace the source of the profits to manufacture. (see CIT v. Kirloskar Oil Engines Ltd. reported in [1986] 157 ITR 762.) Continuing our analysis of section 80-IA/80-IB it may be mentioned that sub-section (13) of section 80-lB provides for applicability of the provisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA, so far as may be, applicable to the eligible business under section 80-lB. Therefore, at the outset, we stated that one needs to read sections 80-I, 80-IA and 80-IB as having a common scheme. On a perusal of sub-section (5) of section 80-lA, it is noticed that it provides for the manner of computation of profits of an eligible business. Accordingly, such profits are to be computed as if such eligible business is the only source of income of the assessee. Therefore, the devices adopted to reduce or inflate the profits of eligible business have got to be rejected in view of the overriding provisions of subsection (5) of section 80-IA, which are also required to be read into section 80-TB. (see section 80-IB(13)). We may reiterate that sections 80-I, 80-IA and 80-IB have a common scheme and if so read it is clear that the said sections provide for incentives in the form of deduction(s) which are linked to profits and not to investment. On an analysis of sections 80-IA and 80-IB it becomes clear that any industrial undertaking, which becomes eligible on satisfying sub-section (2), would be entitled to deduction under sub-section (1) only to the extent of profits derived from such industrial undertaking after specified date(s). Hence, apart from eligibility, sub-section (1) purports to restrict the quantum of deduction to a specified percentage of profits. This is the importance of the words "derived from industrial undertaking " as against "profits attributable to industrial undertaking ".
ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 9
DEPB is an incentive. It is given under the Duty Exemption Remission Scheme. Essentially, it is an export incentive. No doubt, the object behind DEPB is to neutralize the incidence of customs duty payment on the import content of export product. This neutralization is provided for by credit to customs duty against export product. Under DEPB, an exporter may apply for credit as a percentage of the FOB value of exports made in freely convertible currency. Credit is available only against the export product and at rates specified by the DGFT for import of raw materials, components, etc., DEPB credit under the Scheme has to be calculated by taking into account the deemed import content of the export product as per basic customs duty and special additional duty payable on such deemed imports. Therefore, in our view, DEPB/Duty drawback are incentives which flow from the schemes framed by Central Government or from section 75 of the Customs Act, 1962, hence, incentives profits are not profits derived from the eligible business under section 80-113. They belong to the category of ancillary profits of such undertakings.
The next question is -- what is duty drawback? Section 75 of the Customs Act, 1962, and section 37 of the Central Excise Act, 1944, empower the Government of India to provide for repayment of customs duty and excise duty paid by an assessee. The refund is of the average amount of duty paid on materials of any particular class or description of goods used in the manufacture of export goods of specified class. The Rules do not envisage a refund of an amount arithmetically equal to customs duty or Central excise duty actually paid by an individual importer-cum- manufacturer. Sub-section (2) of section 75 of the Customs Act requires the amo unt of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and also based on the facts situation relevant in respect of each of various classes of goods imported. Basically, the source of the duty drawback receipt lies in section 75 of the Customs Act and section 37 of the Central Excise Act.
Analysing the concept of remission of duty drawback and DEPB, we are satisfied that the remission of duty is on account of the statutory/policy provisions in the Customs Act/Scheme(s) framed by the Government of India. In the circumstances, we hold that profits derived by way of such incentives do not fall within the expression "profits derived from industrial undertaking" in section 80-lB.
Since reliance was placed on behalf of the assessee(s) on AS-2 we need to analyse the said Standard.
AS-2 deals with valuation of inventories. Inventories are assets held for sale in the course of business; in the production for such ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 10 sale or in the form of materials or supplies to be consumed in the production.
"Inventory " should be valued at the lower of cost and net realizable value (NRV). The cost of "inventory " should comprise all costs of purchase, costs of conversion and other costs including costs incurred in bringing the "inventory " to their present location and condition.
The cost of purchase includes duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition Hence, trade discounts, rebate, duty drawback, and such similar items are deducted in determining the costs of purchase. Therefore, duty drawback, rebate, etc., should not be treated as adjustment (credited) to the cost of purchase or manufacture of goods. They should be treated as separate items of revenue or income and accounted for accordingly (see page 44 of the Indian Accounting Standards and GAAP by Dolphy D 'souza). Therefore, for the purposes of AS-2, Cenvat credits should not be included in the cost of purchase of inventories. Even the Institute of Chartered Accountants of India (1CM) has issued guidance note on accounting treatment for Cenvat/Modvat under which the inputs consumed and the inventory of inputs should be valued on the basis of purchase cost net of specified duty on inputs (i.e., duty recoverable from the Department at a later stage) arising on account of rebates, duty drawback, DEPB benefit, etc. Profit generation could be on account of cost cutting, cost rationalization, business restructuring, tax planning on sundry balances being written back, liquidation of current assets, etc. Therefore, we are of the view that the duty drawback, DEPB benefits, rebates, etc., cannot be credited against the cost of manufacture of goods debited in the profit and loss account for purposes of section 80-IA/80-IB as such remissions (credits) would constitute independent source of income beyond the first degree nexus between profits and the industrial undertaking. "
As the issue is squarely covered in favour of the Revenue by the above decision of Hon'ble apex court, we allow this issue of the Revenue's appeal.
Now we will take up assessee's CO No.218/Ahd/2007.
17. In the assessee's CO., the ground Nos 1 to 7 are supportive of the order of CIT(A) and accordingly require no adjudication.
ITA No.2428/Ahd./2007 & CO 218/Ahd/2007 A.Y.2004-05 ACIT, Vapi Cir. v. Hamilton Houseware P. Ltd. Page 11
18. The ground Nos. 8 to 10 in this CO of the assessee are against the order of CIT(A) confirming the disallowance of expenses of product development and design charges at Rs.72,000/-, out of repair & maintenance of furniture at Rs.1,38,583/- and the preliminary and pre-operative expenses at Rs.75,727/-.
19. As regards to product development and design charges, we find that CIT(A) has already allowed depreciation on these expenditures treating the same as capital in nature reason being that the purchases are made of dice which exists in separate block. We find no reason to interfere with this finding. As regards to repair & maintenance of furniture, the CIT(A) has already allowed depreciation on the purchase of furniture and there is no infirmity in the same. As regards to the disallowance of preliminary and pre-operative expenses, the CIT(A) has categorically recorded a finding that u/s.35D of the Act the assessee is eligible only for specified expenditure and the expenses claimed does not fall within the scope of this Section and accordingly we find no infirmity in the order of CIT(A). Accordingly, these grounds of assessee's CO are dismissed.
20. In the result, Revenue's appeal is partly allowed and that of assessee's CO is dismissed.
Order pronounced on this day of 26th March,2010
Sd/- Sd/-
(G.D.Agarwal) (Mahavir Singh)
(Vice President) (Judicial Member)
Ahmedabad,
Dated :26/03/2010
*Dkp
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT(Appeals)- Valsad
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad