Grasim Industries Ltd Vs CIT (ITAT Mumbai)
Conclusion: In present facts of the case, the Hon’ble Tribunal held that expenses made pertaining to Club Membership fees shall be allowed as business expenditure. Further, on the issue of taxability of the dividend received from the Egyptian company, it was held that as per the DTAA with Egypt, the dividend income received by the assessee from Egypt entity is to be excluded while computing the taxable income of the assessee in India.
Facts: The present cross appeal has been filed challenging the impugned order dated 21/05/2004, passed under section 250 of the Income Tax Act, 1961 for the assessment year 2003–04. The brief facts of the case, as emanating from the record, are: For the year under consideration, the assessee filed its return declaring a total income of Rs.458,45,81,926. The return of income filed by the assessee was selected for scrutiny and statutory notices under section 143(3) as well as under section 142(1) of the Act were issued and served on the assessee. The assessee is engaged in the production and sales of Viscose Staple Fibre, Chemicals, Cement, and the production of Sponge Iron and Textile. The AO vide order dated 26/03/2004, passed u/s 143(3) of the Act, assessed the total income of the assessee at Rs.494,59,33,333, after making certain additions/disallowances to the income declared by the assessee. The learned CIT(A), vide impugned order granted partial relief to the assessee.
In the said case, various issues were decided by the Hon’ble Tribunal which are as follows:
A) The issue pertaining to the disallowance of Club Membership fees, wherein the assessee paid Club Membership fees of Rs.11,32,074, towards membership fees to various Clubs. The assessee was asked as to why this amount should not be treated as capital expenditure. In response thereto, the assessee submitted that the payments have been made to various Clubs for enrolling its senior officials as members for the purpose of promoting the business of the assessee. For developing business relationships benefiting the assessee company. The assessee also submitted that in commercial work, the contact with right persons is vital for efficient business organization and, therefore, the expenditure should be allowed as business expenditure. The AO, vide order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that the payments made for obtaining membership is not allowable expenditure. The learned CIT(A), vide impugned order, granted partial relief to the assessee and directed the A.O. to disallow only the entrance fees as capital in nature and allow all other expenditures as revenue expenditure.
The Hon’ble Tribunal observed that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee’s own case for the assessment year 2002-03 have allowed the same as business expenditure and accordingly the said ground in said appeal was allowed.
B) The issue arising in ground no.3, raised in assessee’s appeal, is pertaining to the taxability of the interest received from the Income–tax Department. The brief facts of the case pertaining to the issue, as emanating from the record, are that the assessee, before the learned CIT(A), submitted that since the receipt of interest on refund has not reached the stage of finality as the Department has not accepted the decision of the learned CIT(A) and has preferred further appeal before the Tribunal, at this stage, the interest on refund should not be taxed. The Hon’ble Tribunal Having considered the submissions of both sides and perused the material available on record, and observed that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee’s own case for the assessment year 2002–03, by following the decision rendered in the preceding year wherein it was observed that if refund of interest is withdrawn, then the same should be reduced from the total income of the assessee and accordingly allowed appeal of the assessee on this ground.
C) Another issue arising in the aforesaid additional ground of appeal was pertaining to the taxability of the dividend received from the Egyptian company. It is the plea of the assessee that as per the terms of the India and United Arab Republic (Egypt) Double Taxation Avoidance Agreement (“DTAA”), the dividend received is taxable only in Egypt and therefore the same is to be excluded while computing the taxable income of the assessee in India. In this regard, reliance was placed upon the decisions of the coordinate bench of the Tribunal in assessee’s own case in the preceding assessment years, wherein it was held that income of the foreign branch office is not taxable in India as per the relevant tax treaty. Further, it was held that having considered the submissions of both sides, as per Article 11(2) of the India- UAR (Egypt) DTAA, dividends paid by a company which is a resident of the UAR (Egypt) to a resident of India may be taxed in the UAR (Egypt). As noted above, it is the plea of the assessee that prior to amendment by Finance Act 2003, w.e.f. 01/04/2004, to section 90 of the Act, the term “may be taxed” means that only the source country has the right to tax the income earned in such country and the resident country does not have any taxing rights. Therefore, the dividend received by the assessee from the Egyptian company, in the present case, is only taxable in Egypt. Thus, following the legal position as it existed during the year under consideration, which was taken due note by the coordinate bench in the aforesaid decision, it was held that the dividend income received by the assessee from Egypt entity is to be excluded while computing the taxable income of the assessee in India. Accordingly, the additional ground filed by the assessee vide application dated 23/01/2013, was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present cross appeal has been filed challenging the impugned order dated 21/05/2004, passed under section 250 of the Income Tax Act, 1961 (for short “the Act”) by the learned Commissioner of Income Tax (Appeals)–XXVI,
Mumbai, [“learned CIT(A)”], for the assessment year 2003–04.
2. The brief facts of the case, as emanating from the record, are: For the year under consideration, the assessee filed its return of income on 31/10/2003, declaring a total income of Rs.458,45,81,926. The return of income filed by the assessee was selected for scrutiny and statutory notices under section 143(3) as well as under section 142(1) of the Act were issued and served on the assessee. The assessee is engaged in the production and sales of Viscose Staple Fibre, Chemicals, Cement, and the production of Sponge Iron and Textile. The Assessing Officer (“AO”), vide order dated 26/03/2004, passed u/s 143(3) of the Act, assessed the total income of the assessee at Rs.494,59,33,333, after making certain additions/disallowances to the income declared by the assessee. The learned CIT(A), vide impugned order granted partial relief to the assessee. Being aggrieved, both, the assessee as well as the Revenue are in appeal before us.
ITA no.4754/Mum./2004
Assessee’s Appeal –A.Y. 2003–04
3. In its appeal, the assessee has raised the following grounds:–
The appellant prefers an appeal against the order of the Commissioner of Income Tax (Appeals)- XXVI [hereinafter referred as “CIT (A) “] on the following amongst other grounds each of which is without prejudice to any other.
1. Disallowance under section 43B:
1.1 The CIT (A) erred in not allowing the amounts paid or written back during the previous year amounting to Rs. 1.30,00,904/-, which had already been disallowed in the past under clause (c), (d) and (e) of section 43B, consistent with the Department’s stand.
1.2 The CIT (A) ought to have held that in the event the Department’s stand is accepted by the ITAT in earlier years, then deduction of amounts paid or written back amounting to Rs. 1,30,00.904/- should be allowed in the previous year.
2 Disallowance of Club membership fees
The CIT (A) erred in not allowing club membership fees of Rs. 8,48,100/- paid to Wellington Sports Club as deduction.
3 Interest received from Income Tax Department:
3.1 The CIT (A) erred in upholding the action of the AO in taxing interest of Rs. 14,38,79,778/- allowed by the Department.
3.2 The CIT (A) failed to appreciate that no income can be taxed until the entitlement is absolute or irretrievable. The CIT (A) ought to have held that interest allowed by the Department is not to be taxed till the matters are finally decided and the appellant is absolutely entitled to such interest.
4. Deduction under section 80 HHC
4.1 The CIT (A) erred in not directing the AO to allow deduction under section 80 HHC, as claimed by the appellant.
4.2 The CIT (A) ought to have held that no amount of interest received is to be reduced from profit of the business for the purpose of calculating deduction u/s. 80 HHC.
4.3 Without prejudice to the above, the CIT (A) failed to appreciate that interest paid during the previous year amounting to Rs. 168,40,60,135/- was higher than the amount of interest received amounting to Rs. 39,32,84,366/- resulting in net interest paid and therefore amount of interest received during the previous year cannot be reduced from the profit of the business.
4.4 The CIT (A) ought to have held that rent Rs. 1,53,05,670/- should not be reduced from the profit of the business, while calculating allowable deduction under section 80HHC.
4.5 The CIT (A) ought to have held that miscellaneous receipts Rs. 11,47,54,429/- should not be reduced from the profit of the business, while calculating allowable deduction under section 80HHC.
4.6 The CIT (A) failed to appreciate that interest, rent and miscellaneous receipts were operational income and were accrued out of incidental business.
4.7 The CIT (A) erred in not following the decisions of the Jurisdictional High Court in the cases of Bangalore Clothing Co. (260 ITR 371) and Alfa Laval India Ltd. (133 Taxman 740).
4.8 The CIT (A) erred in upholding the action of the AO in adjusting loss on export of traded goods against profit on export of manufactured goods, while calculating deduction under section 80 HHC.
5. Appropriation of Head Office expenses
5.1 The CIT (A) erred in confirming the AO’s action in appropriating Head Office expenses and reducing the amount of allowable deduction u/s 80O.
5.2 The CIT (A) failed to appreciate that Head Office expenses cannot be reduced from the receipts while computing allowable deduction u/s. 80O.
5.3 Without prejudice to the above, the CIT (A) failed to appreciate that even if head office expenses are to be reduced from gross receipts for computing allowable deduction u/s. 80O, such expenses can only be a certain percentage of the gross receipts eligible for deduction u/s. 80O and not the total turnover of the division.
6. Long Term Capital Loss
6.1 The CIT (A) erred in upholding the action of the AO in reducing long term capital on sale of equity shares of MRPL from Rs. 328,24,90,776/- to Rs. 314,11,35,651/-.
6.2 The CIT (A) ought to have held that the third proviso to Sec 48(ii) is not
applicable to the appellant’s case.
7. Additional depreciation u/s. 32(1)(iia)
The CIT (A) erred in confirming action of the AO in rejecting the appellant’s claim for additional depreciation of Rs. 30,19,657/- u/s. 32(1) (iia).
8. The appellant prays for the cost of this appeal in view of section 254 (2B) of the IT. Act.
The appellant craves leave to add to, alter, amplify or delete any of the above ground(s) before or at the time of hearing.
The appellant respectfully prays that relief prayed for in the abovementioned grounds be granted and that the appellate order of the learned CIT (A) be modified accordingly.”
4. The issue arising in ground no.1, raised by the assessee, is pertaining to the amount paid or written back, during the year under consideration, which had already been disallowed in earlier years under section 43B of the Act.
5. At the outset, the learned Sr. Counsel, appearing for the assessee, submitted that this ground is in respect of alternate claim of the assessee to allow deduction under section 43B(c), (d) and (e) of the Act in respect of liability disallowed in earlier years, which are paid/written back in the year under consideration. The learned Sr. Counsel further submitted that the claim of the assessee under section 43B of the Act has been allowed by the Tribunal in earlier years and, therefore, this ground now is rendered infructuous.
6. We find that a similar issue came up for consideration before the coordinate bench of the Tribunal in assessee’s own case in Grasim Industries Ltd. v/s ACIT, in ITA no.4753/Mum./ 2004 and ITA no.5584/Mum./2004, for the assessment year 2002–03, wherein the coordinate bench, while dismissing the similar issue, following the earlier decision rendered in assessee’s own case, observed as under:–
“6. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A. Y. 2001-02. While deciding the issue, the Coordinate Bench of the Tribunal in ITA. No. 4083/Mum./2003 dated 22.10.2014 held as under: –
“2. Rival contentions have been heard and perused the record. The assessee is engaged in manufacturing and sale various products. During the course of scrutiny assessment, the A. O. disallowed assessee’s claim of deduction u/s 43-B of the Act in respect of liabilities disallowed in earlier years which are paid/written back in the current year. The A.O. found that in the computation of income an amount of Rs. 10.85 crores has been considered as disallowance u/s 43-B (a) of the Act by the assessee itself. However, an amount of Rs. 1.31 crores was not considered as disallowance u/s 43-B of the Act falling under clause (b) to (d). The contention of the assessee was that the amount of Rs. 1.31 crores which falls under clauses (b) to (d) of section 43-B of the Act which are not payable as on 31-3- 2001 cannot be covered by the provisions of section 43-B of the Act. However, the A.O. did not agree with this explanation and made the disallowance. The ld. CIT(A) by his impugned order, confirmed the order of the A. O. and the assessee is in appeal before us.
3. At the outset, the ld. Counsel for the assessee contended that the issue is covered by the decision of the Tribunal in earlier years i.e assessment years 1993-94 to 1998-99 and 2000-01 in assessee’s own case, copy of which was placed on record. We find that similar issue was considered by the Tribunal in A.Y. 2000-01 vide order dated 9-10-2013 wherein the ground taken by the assessee was dismissed as the same has become in fructuous. It was found by Tribunal that it is an alternative plea which relates to A. Y. 1993-94 decided by the Tribunal in assessee‘s favour. The appeal filed by the Department has been dismissed by the Tribunal vide order dated 20- 12-2001. As the facts and circumstances during the year under consideration are para materia wherein appeal of department in earlier year was dismissed by the Tribunal, therefore, ground taken by assessee for disallowance during the year has become in fructuous. The view taken by the Tribunal in A. Y. 2000-01 is respectfully followed, ground of the assessee becomes otiose and is accordingly dismissed.
7. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A. Y. 2000-01 is respectfully followed, ground raised by the assessee is accordingly dismissed.”
7. Thus, respectfully following the aforesaid decision, ground no.1, raised in assessee’s appeal is dismissed.
8. The issue arising in ground no.2, raised in assessee’s appeal, is pertaining to the disallowance of Club Membership fees.
9. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee paid Club Membership fees of Rs.11,32,074, towards membership fees to various Clubs. During the assessment proceedings, on a perusal of the details, it was observed that an amount of Rs.8,48,100, is paid to Willingdon Sports Club for obtaining Corporate Membership. Accordingly, the assessee was asked as to why this amount should not be treated as capital expenditure. In response thereto, the assessee submitted that the payments have been made to various Clubs for enrolling its senior officials as members for the purpose of promoting the business of the assessee. It was further submitted that such members meet various kind of people because of which they developed business relationships benefiting the assessee company. The assessee also submitted that in commercial work, the contact with right persons is vital for efficient business organization and, therefore, the expenditure should be allowed as business expenditure. The AO, vide order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that the payments made for obtaining membership is not allowable expenditure and the payments made towards annual renewal fees and expenditure incurred at Clubs for the business purpose is allowable expenditure, but not the payment made for obtaining membership. The AO further held that by such payment, the assessee got the right to use the facilities of the Club which is the advantage of enduring nature. Accordingly, the AO disallowed the payment towards Club Membership fees of Rs.8,48,100. The AO further accepted the alternative contention of the assessee and allowed depreciation considering it it as intangible asset.
10. The learned CIT(A), vide impugned order, granted partial relief to the assessee and directed the A.O. to disallow only the entrance fees as capital in nature and allow all other expenditures as revenue expenditure. Being aggrieved, the assessee is in appeal before us.
11. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee’s own case for the assessment year 2002–03 cited supra, by following the decision rendered in the preceding year, observed as under:–
“12. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A. Y. 1993-94. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA. No. 2944/Mum/1997 dated 31.01.2005 held as under: –
“15. Ground No. 4 raised only in the assessment year 199-34 only reads as under:-
“On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting the sum of Rs.6,183/- incurred in the Diners Club and Rs. 17,350/- incurred in the Taj Hotel Membership fees for S. V. Birla disallowed by Assessing Officer on the reasoning that early hearing same is business expenditure.
16. We have heard both the parties, we find that he aforesaid issue raised in the assessment year 1993-94 is covered in favour of the assessee by the decision of the jurisdictional High Court in Otis Elevator CO. (India) Ltd., v. CIT 195 ITR 682 (Bom.). Respectfully following the same, we dismiss the ground raised by the department.
13. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in ay 1993–94 is respectfully followed, accordingly, ground raised by the assessee is allowed.”
12. The learned Departmental Representative (“learned DR”) could not show us any reason to deviate from the aforesaid decision rendered in assessee’s own case and no change in the facts and law was alleged in the relevant assessment year. Therefore, respectfully following the judicial precedent in assessee’s own case cited supra, we uphold the plea of the assessee and allow the Club Membership fees paid by the assessee. As a result, ground no.2, raised in assessee’s appeal is allowed.
13. The issue arising in ground no.3, raised in assessee’s appeal, is pertaining to the taxability of the interest received from the Income–tax Department.
14. The brief facts of the case pertaining to the issue, as emanating from the record, are: The assessee, before the learned CIT(A), submitted that since the receipt of interest on refund has not reached the stage of finality as the Department has not accepted the decision of the learned CIT(A) and has preferred further appeal before the Tribunal, at this stage, the interest on refund should not be taxed. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee and held that there is nothing in the Act to wait for such taxation till the matter reaches the stage of finality. Being aggrieved, the assessee is in appeal before us.
15. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee’s own case for the assessment year 2002–03 cited supra, by following the decision rendered in the preceding year, observed as under:–
“15. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A. Y. 2001-02. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: –
“7. The assessee is also aggrieved for taxing of interest received from Income Tax Department amounting to Rs. 13,64,09,609/-. We find that similar issue has been dealt with by the Tribunal in A. Y. 1993-94 in ITA No. 1523/Mum/1997 vide para 62 as under;-
“We have heard the parties and considered the rival submissions. These refunds have been granted to the assessee in the year under consideration and therefore they would partake the character of income of the assessee. If however, any refund has been found to be not refundable to the assessee and consequently the interest granted is withdrawn the same would not partake the character of income. We accordingly direct the Assessing Officer to reduce from the taxability of he aforesaid interest granted to the assessee, the amount which has been withdrawn subsequently. We direct accordingly.”
8. It was argued by the Id. A.R. that benefit of interest so allowed by the department was subsequently withdrawn as a result of the appellate orders should be given to the assessee and the interest subsequently withdrawn should not be taxed and for this, reliance was placed on the decision of the Tribunal in the case of Avada Trading Co. (P.) Ltd. vs. ACIT (2006) 100 ITD 131.
9. We have considered the rival contentions. As far as the taxability of interest amounting to Rs. 1 3,64,09,609/- is concerned, granted alongwith interest. However, if in the subsequent year refund of interest is withdrawn, then the same should be reduced from the total income of the assessee. Accordingly, we direct the A. O. to tax interest income in terms of the order of the tribunal for Y. 1993-94 as reproduced above, keeping in view our above observation”
16. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal is respectfully followed, we order accordingly.”
16. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee’s own case and no change in the facts and law was alleged in the relevant assessment year. Therefore, we allow ground no.3, raised in assessee’s appeal with similar directions, as rendered by the coordinate bench in the preceding assessment years.
17. The issue arising in ground no.4.1 is general in nature and therefore, the same needs no separate adjudication.
18. The issue arising in grounds no.4.2 and 4.3, raised in assessee’s appeal is pertaining to the reduction of interest income while calculating the deduction under section 80HHC of the Act.
19. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee claimed deduction under section 80HHC of Rs.7,78,77,192 and furnished Form 10CCAC along with the return of income. From the perusal of the working, it was observed that the assessee has not reduced the interest income of Rs.39,32,84,366 while computing the profit of the business for the purpose of deduction under section 80HHC of the Act. Accordingly, the assessee was asked to show cause as to why 90% of the above receipt be not reduced from the profit of the business for the purpose of deduction under section 80HHC of the Act. In response thereto, the assessee submitted that the interest paid during the previous year is Rs.168.41 crore, and, therefore, only net interest should be reduced from business profit. The AO, vide order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that only gross interest is to be reduced for the purpose of section 80HHC of the Act.
20. The learned CIT(A), vide impugned order, dismissed the ground taken by the assessee. Being aggrieved, the assessee is in appeal before us.
21. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee‘s own case for the assessment year 2002–03 cited supra, by following the decision rendered in the preceding year, observed as under:–
“18. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A. Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: –
“14. The next grievance of the assessee relates to allowing deduction u/s 80HHC of the Act with respect to interest income. The issue under consideration is squarely covered by the decision of Hon ‘ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd., 343 ITR 89(SC) wherein it was held that net interest income is to be excluded from the eligible profit for computing deduction u/s 80HHC rather than gross interest.
15. An identical issue raised as additional grounds for the assessment year 1996-97 and 97-98 was considered and decided by this Tribunal in assessee’s own case in paras 30 & 30.1 as under:
“30 As regards the additional ground no.1 pertaining to deduction u/s 80HH on gross interest the Sr Id counsel for the assessee has submitted that this issue has been decided by the Hon ‘ble Supreme Court in the case of ACG Associated Capsules vs CIT vide decision dated 8.2.2012; therefore, the deduction u/s 80HH should be allowed on the gross interest received.
30.1 Since this ground has been raised by the assessee first time in view of the decision of the Hon ‘ble Supreme Court; therefore, it requires verification and examination at the level of the AO. Accordingly, we remit this issue to the record of the AO to consider and decide the same as per law after considering the contention of the assessee and after giving reasonable opportunity of being heard to the assessee.
16. In view of the decision of honourable Supreme Court in case of ACG Associated Capsules reported in 67 DTR (SC) 205, the Explanation to section 80 HHC to be applied on net interest and not on gross interest. Accordingly, we direct the AO to apply clause (baa) in respect of interest receipt by following the decision of honourable Supreme Court (supra). We accordingly direct the A. O. to exclude the excess of interest income over interest expenditure from the eligible profit of the company while computing deduction u/s 80HHC of the Act.
19. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A. Y. 2001-02 is respectfully followed, we order accordingly.”
22. We also find that in the preceding assessment years, the coordinate bench, followed the decision of the Hon’ble Supreme Court in ACG Associate Capsule Pvt. Ltd. v/s CIT, [2012] 343 ITR 89 (SC), wherein it was held that for computation of profit of business for the purpose of deduction under section 80HHC of the Act, only 90% of net interest or net rental income is to be reduced under clause (1) of Explanation (baa) to section 80HHC of the Act. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee’s own case and no change in the facts and law was alleged in the relevant assessment year. Since in the present case, it is an accepted fact that interest paid during the year is Rs.168.41 crore, while interest received is Rs.39.33 crore, therefore, respectfully following the judicial precedence in assessee’s own case cited supra, we uphold the plea of the assessee and allow grounds no.4.2 and 4.3, raised in assessee’s appeal.
23. The issue arising in ground no.4.4, is pertaining to the reduction of rental income while calculating deduction under section 80HHC of the Act.
24. The brief facts of the case pertaining to the issue, as emanating from the record, are: The AO, vide assessment order passed under section 143(3) of the Act, reduced 90% of the rental income credited to the Profit & Loss Account for computing the profit of business for the purpose of deduction under section 80HHC of the Act.
25. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us.
26. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee‘s own case for the assessment year 2002–03 cited supra, by following the decision rendered in the preceding year, observed as under:–
“21. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A. Y. 2001-02 in favour of the assessee. While deciding, the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: –
“17. On the same proposition, the net rent expenditure and net commission expenditure is required to be reduced from eligible profit rather than the gross rent and gross commission for the computation of deduction u/s 80HHC of the Act. We direct accordingly.”
22. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A. Y. 2001-02 is respectfully followed, we order accordingly.”
27. On a perusal of the audited financial statements, forming part of the paper book, we find that during the year, the assessee paid rent of Rs.8.12 crore, while it received rental income of Rs.1.93 crore. Therefore, following the judicial precedents in assessee’s own case cited supra, we uphold the plea of the assessee and allow ground no.4.4, raised in assessee’s appeal.
28. The issue arising in grounds no.4.5, 4.6 and 4.7 raised in assessee’s appeal is pertaining to the reduction of miscellaneous receipts from the profit of business while calculating the deduction under section 80HHC of the Act.
29. The brief facts of the case pertaining to the issue, as emanating from the record, are: The AO, vide assessment order passed under section 143(3) of the Act, reduced 90% of the miscellaneous receipts of Rs.11,47,54,429, credited to the Profit & Loss Account for the purpose of computation of deduction under section 80HHC of the Act.
30. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us.
31. The learned Sr. Counsel, appearing for the assessee, during the hearing, by referring to Page–41 of the paper book submitted that these miscellaneous receipts are in respect of various items. The learned Sr. Counsel further submitted that these receipts are in the nature of rebate on sales tax, refund of mineral area development cess, sundry balance returned back, scrap sales, sale of empty cement bags, plastic barrel, scrap barrel, waste oil, insurance claim and recovery, deposit forfeited, discount, recovery of water charges, freight recovery, liquidated damages, recovery of packing charges and other miscellaneous income. The learned Sr. Counsel submitted that under Explanation (baa) to section 80HHC of the Act, only non–operation receipts are excluded for the computation of deduction under the said section, however, the aforesaid receipts are pertaining to operations carried out by the assessee and, therefore, the same are not to be excluded while computing deduction under section 80HHC of the Act.
32. On the contrary, the learned DR submitted that there is no examination by any of the lower authorities whether these receipts are directly in relation to operations carried out by the assessee.
33. We have considered the submissions of both sides and perused the material available on record. From the perusal of the audited financial statements, forming part of the paper book, we find that during the year, the assessee received miscellaneous receipts of Rs.11.48 crore. The details of these receipts as provided on Page–41 of the paper book, are as under:-
