Sheena Industries, Panipat V. ACIT Circle, Panipat

ITA 3075/DEL/2008

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8074 (ITAT-DELHI)
• Duration Of Justice: 12 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 07-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AND AGAINST DATED PASSED
• Keywords: Business income; Depreciation; Principle of natural justice; Deemed to accrue or arise in india; Capital expenditure; Set aside
• Section: 80HHC; 80IB; 143(1); 80IA; 143(2); 13; 69

Judgement Text

1 ITA NO. 3075 & 2958/DEL/2008 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G. S. PANNU, VICE PRESIDEN T AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 3075/DEL/20 08 (A.Y 2004-05) (THROUGH VIDEO CON FERENCING) M/S SHEENA INDUSTRIES UJHA ROAD PANIPAT (APPELLANT) VS ACIT CIRCLE- PANIPAT (RESPONDENT) I.T.A. NO. 2958/DEL/200 8 (A.Y 2004-05) (THROUGH VIDEO CONFER ENCING) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-KARNAL (APPELLANT) VS M/S SHEENA INDUSTRIES UJHA ROAD PANIPAT (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THESE TWO APPEALS ARE FILED BY THE ASSESSEE AND RE VENUE AGAINST ORDER DATED 18.07.2008 PASSED BY CIT (A)-KARNAL FOR ASSES SMENT YEAR 2004-05. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- I.T.A. NO. 3075/DEL/2008 (A.Y 2004-05) ASSESSEES A PPEAL 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE LD.CIT(A) ERRED IN LAW AND ON FACTS IN NOT GIVING DEPRECIATIO N @ 50% ON ALL THE ITEMS OF APPELLANT BY DR. RAKESH GUPTA, ADVOCATE RESPONDENT BY SH. H. K. CHOUDHARY, CIT(DR) DATE OF HEARING 15.02.2021 DATE OF PRONOUNCEMENT 30.03.2021 2 ITA NO. 3075 & 2958/DEL/2008 PLANT AND MACHINERY AS MENTIONED AT PAGE 7 OF THE C IT (A)S ORDER AND HAS FURTHER ERRED IN OBSERVING THAT ITEM NO.31 TO 35 AR E NOT COVERED UNDER TUF SCHEME. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) (A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSING ACTION OF LD. AO IN NOT ALLOWING THE DEDUCTION U/S 80 HHC ON DEPB IN FULL A S CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) (A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSING ACTION OF LD. AO IN NOT ALLOWING THE DEDUCTION U/S 80 IB ON THE AMOUNT OF D EPB AND DUTY DRAW BACK IN FULL AS CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME, MORE SO WHEN THE ASSESSEE ID SUPPORTING MANUFACTURER AND MORE SO WHE N HONBLE ITAT HAS ALLOWED THIS CLAIM IN EARLIER YEARS. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE DIS ALLOWANCE OF RS. 1,3 8,7047- OUT OF RS.25,48,292/- ON ACCOUNT OF FOREIGN TRAVELING EXPENSES. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACT ION OF LD. AO IN MAKING DISALLOWANCE OF RS.8,15,788/- ON ACCOUNT OF INTERES T. 6. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACT ION OF LD. AO IN TREATING THE INCOME OF RS.2,18,413/- ON ACCOUNT OF INTEREST RECE IVED AS INCOME FROM OTHER SOURCES. 7. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACT ION OF LD. AO IN DELETING AN AMOUNT OF RS.77,413/- RECEIVABLE FROM FOREIGN BUYER OUT OF EXPORT TURNOVER FOR COMPUTATION OF DEDUCTION U/S 80 HHC. 8. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. A THE DEDUCTION U/S 80HHC ONLY AFTER REDUCING THE AMOUNT OF 80IB FROM THE AMO UNT OF BUSINESS PROFIT. 9. THAT IN ANY VIEW OF MATTER AND IN ANY CASE, ACTION OF LD. CIT (A) IN NOT 3 ITA NO. 3075 & 2958/DEL/2008 REVERSING THE ACTION OF LD. AO IN DISALLOWING THE C LAIM OF DEDUCTION U/S 80HHC AND 80 IB IS ILLEGAL, VOID AB-INITIO, ARBITRA RY, UNJUSTIFIED, AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND CONTRARY TO THE L AW AND FACTS AND HAS FURTHER ERRED IN NOT QUASHING THE IMPUGNED ASSESSMENT FRAME D BY LD. A.O BEING ILLEGAL VOID AB INITIO, IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. I.T.A. NO. 2958/DEL/2008 (A.Y 2004-05) REVENUES A PPEAL 1. THE LD. CTI'(A) HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN ALLOWING DEPRECIATION (A) 50% ON MACHINERY PURCHASED FOR RS.23,70,949/- UNDER TUF SCHEME AS AGAINST DEPRECIA TION @ 25% ALLOWED BY THE A.O. 2. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FAC TS OF THE CASE IN DELETING AN ADDITION OF RS.5,51,19,865/- MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE IN THE VALUE OF STOCK AS PER STOCK STATEMENT SUBMITTED TO THE BANK AND AS DECLARED IN THE TRADIN G RESULTS OF THE ASSESSEE. 3. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FAC TS OF THE CASE IN ALLOWING DEDUCTION U/S 80HHC TO THE ASSESSEE ON THE EXPORT INCENTIVE, BEING SUPPORTING MANUFACTURER. 4. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FAC TS OF THE CASE IN DELETING AN ADDITION OF RS.24,09,588/- OUT OF TOTAL ADDITION OF RS.25,48,292/- MADE BY THE A.O. BY DISALLOWING FORE IGN TRAVELING EXPENSES. 5. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACT S OF THE CASE IN DELETING AN ADDITION OF RS. 17,56,508/- MADE BY THE A.O. ON ACCOUNT OF BUILDING REPAIR AND MAINTENANCE EXPENSES . 4/6. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FA CTS OF THE CASE IN DELETING AN ADDITION OF RS. 1,48,249/- MADE BY T HE A.O. BY DISALLOWING EXPORT PROMOTION EXPENSES. 5/7. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL ON OR BEFORE THE APPEAL IS HEARD AND DISPOSE D OFF. 6/8. IT IS PRAYED THAT THE ORDER OF THE COMMISSIONE R OF INCOME- TAX (APPEALS) BE SET ASIDE AND THAT OF THE A.O BE R ESTORED. 3. THE ASSESSEE IS A SUPPORTING MANUFACTURER AS WEL L AS DIRECT EXPLORER OF HOME FURNISHING PRODUCTS. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004- 05 WAS FILED ON 1/11/2004 DECLARING TOTAL INCOME OF AT RS. 1,19,42,960/-. THE 4 ITA NO. 3075 & 2958/DEL/2008 RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX A CT 25/01/2005. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S 143(2) DATED 25/1/2005 WAS SERVED UPON THE ASSESSEE. IN RESPONS E TO THE SAID NOTICE CHARTERED ACCOUNTANT OF THE ASSESSEE ATTENDED THE A SSESSMENT PROCEEDINGS ON BEHALF OF THE ASSESSEE AND SUBMITTED NECESSARY DETA ILS AND CLARIFICATION. THE ASSESSING OFFICER OBSERVED THAT IN THE FINANCIAL YE AR 2003-04, THE EXPORT TURNOVER OF THE ASSESSEE IS MORE THAN 10 CRORES. T HEREFORE, IT IS COVERED UNDER 3 RD PROVISO TO SUB SECTION 3 OF SECTION 80HHC OF THE I NCOME TAX ACT, 1961. THE ASSESSEE WAS ASKED TO FILE JUSTIFICATION REGARD ING ITS CLAIM OF DEDUCTION U/S 80HHC IN VIEW OF THE TAXATION LAWS (AMENDMENT) ACT 2005, WHEREIN THE DEDUCTION U/S 80HHC OF THE ACT IS NOT ALLOWABLE ON THE EXPORT INCENTIVES IN THE SHAPE OF DEPC PREMIUM, IF THE EXPORT TURNOVER EXCEE DS RS. 10 CRORES UNLESS THE ASSESSEE PROVES CERTAIN CONDITIONS. THE ASSESS EE FILED ITS SUBMISSIONS WHICH WAS CONSIDERED BY THE ASSESSING OFFICER AND T HUS HELD THAT DEDUCTION U/S 80HHC IS TO BE ALLOWED AS PER THE PROVISIONS OF SUB SECTION (1A) READ WITH SUB SECTION (3A) OF SECTION 80HHC OF THE ACT READ W ITH CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC OF THE ACT AS THE ASSE SSEE IS A SUPPORTING MANUFACTURER. THE ASSESSING OFFICER FURTHER NOTICE THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IB OF THE ACT FOR WHICH THE ASSESSE E FILED ITS EXPLANATION. THE ASSESSING OFFICER AFTER TAKING INTO ACCOUNT THE SUB MISSIONS OF THE ASSESSEE HELD THAT DEDUCTION U/S 80IB IS NOT ALLOWABLE ON TH E AMOUNT OF EXPORT INCENTIVES AND THE ASSESSEE WRONGLY CLAIMED DEDUCTI ON U/S 80IB ON EXPORT INCENTIVES AND, THEREFORE, DISALLOWED THE SAME. TH E ASSESSING OFFICER IN RESPECT OF COMPUTATION U/S 80HHC AND 80IB NOTICE TH AT THE ASSESSEE HAS COMPUTED DEDUCTION U/S 80HHC AND 80IB IGNORING THE PROVISIONS OF SECTION 80IB (13) READ WITH 80IA (9). THE ASSESSEE WAS ASK ED TO JUSTIFY ITS CLAIM FOR WHICH THE ASSESSEE FILED ITS SUBMISSIONS. AFTER TA KING INTO ACCOUNT THE SUBMISSIONS, THE ASSESSING OFFICER HELD THAT DEDUC TION U/S 80HHC AND 80IB IS TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 8 0IB (13) READ WITH SECTION 80IA (9) OF THE ACT. THE ASSESSING OFFICER FURTHER MADE AN OBSERVATION THAT AS THE EXPORT PROCEEDS OF RS. 77,413/- RECEIVED FROM M /S R D MARTIN INC. USA AS 5 ITA NO. 3075 & 2958/DEL/2008 ON 31/03/2004 COULD NOT BE REALIZED TILL 30/09/2004 , THE SAME SHOULD BE DEDUCTED FROM EXPORT TURNOVER FOR COMPUTATION OF DE DUCTION U/S 80HHC OF THE ACT. FURTHER, THE ASSESSING OFFICER OBSERVED THAT SINCE THE INTEREST RECEIVED FROM BANK ON FDR AND INCOME ON ACCOUNT OF PRIOR PER IOD ITEMS ARE NOT INCOME DERIVED FROM BUSINESS, THEREFORE, THESE ARE TO BE T REATED AS INCOME FROM OTHER SOURCES AND NOT THE BUSINESS INCOME AS THESE HAVE B EEN TREATED BY THE ASSESSEE. THE ASSESSING OFFICER MADE ADDITIONS OF RS. 5,51,19,865/- WHICH IS A DIFFERENCE BETWEEN THE VALUE OF STOCK AS ON 31/3/ 2004 COMPUTED ON THE BASIS OF VALUE OF STOCK AS ON 29/2/2004 AS PER THE STOCK HAS STATEMENT SUBMITTED TO THE SAID BANK, NEW DELHI AND VALUE OF THE CLOSING STOCK AS ON 31/3/2004 AS SHOWN IN THE BALANCE SHEET AND THE SAM E ADDED TO THE INCOME OF THE ASSESSEE, THEREBY HOLDING THAT THE SAME IS D EEMED INCOME OF THE ASSESSEE U/S 69 OF THE ACT AND HA TO BE ASSESSED UN DER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER MADE AN ADDIT ION OF RS. 5,50,156/- IN RESPECT OF THE CLAIM RELATED TO ACCESS DEPRECIATION ON MACHINERY UNDER TUFS AND THE SAME WAS DISALLOWED IN THE HANDS OF THE ASS ESSEE. THE ASSESSING OFFICER ALSO MADE ADDITION ON RS. 25,48,292/- RELAT ED TO EXPENSES INCURRED ON FOREIGN TRAVEL IN THE HANDS OF THE ASSESSEE. THE A SSESSING OFFICER MADE FURTHER ADDITION OF RS. 8,15,788/- TOWARDS PRO RATE INTERES T ON LOSS PAID TO THE EXTENT THE ADVANCE WHICH WAS MADE TO THE SISTER CONCERN AN D OTHERS WITHOUT CARRYING ANY INTEREST AND WITHOUT ANY BUSINESS PURPOSE AND WITHOUT ANY BUSINESS PURPOSE AND DISALLOWED THE SAME U/S 36(1) (III) OF THE ACT. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 17,56,508/- RELAT ED TO EXPENSES INCURRED BY THE ASSESSEE UNDER THE HEAD BUILDING REPAIRS AND MA INTENANCE. LASTLY, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 1,48,249/ - ON ACCOUNT OF EXPORT PROMOTION EXPENSES WHICH ARE IN PERSONAL IN NATURE. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF TH E ASSESSEE. 6. AS REGARDS TO ASSESSEES APPEAL, THE LD. AR HAS NOT PRESSED GROUND NO. 6 ITA NO. 3075 & 2958/DEL/2008 1, 4, 6, 7 AND FURTHER SUBMITTED THAT GROUND NO. 9 IS A GENERAL GROUND. HENCE, GROUND NO. 1, 4, 6, 7 ARE DISMISSED AND GROUND NO. 9 IS ADJUDICATED IN RESPECT OF SPECIFIC GROUNDS TAKEN BY THE ASSESSEE BEFORE US . 7. AS REGARDS TO GROUND NOS. 2, THE LD. AR SUBMITTE D THAT THE CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION UNDER SECTION 80HHC O N DEPB IN FULL AS CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME. THE LD. AR SUBMITTED THAT THE ISSUE IS SETTLED BY THE VARIOUS DECISIONS OF THE HONBLE HIG H COURTS AND APEX COURT, HENCE THE ISSUE MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN LIGHT OF THE LAW LAID DOWN BY THE VARIOUS DECISIONS OF THE HONBLE HIGH COURT AND SUPREME COURT. AS REGARDS TO GROUND NO. 3, THE LD. AR SUBMITTED THAT THE CIT(A) ERRED IN NOT ALLOWING THE DEDUCTION UNDER SECTION 80IB ON THE ACCOUNT OF DEPB AND DUTY DRAW BACK IN F ULL AS CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME, AS THE ASSESSEE I S SUPPORTING MANUFACTURER AND THE TRIBUNAL IN EARLIER YEARS HAD ALLOWED THIS CLAIM. THUS, THE LD. AR SUBMITTED THAT THE ISSUE MAY BE REMANDED BACK TO TH E FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION ON MERIT AND ON THE LAW LAID DOWN BY VARIOUS DECISIONS OF THE HONBLE HIGH COURT AND SUPREME COU RT ESPECIALLY IN CASE OF CIT VS. AVANI EXPORT [2005] 232 TAXMAN 357 (SC) AND CIT VS. CARPET INDIA (2020) 424 ITR 316 (SC). 8. THE LD. DR RELIED UPON THE ORDER OF THE CIT(A) A ND ASSESSMENT ORDER, BUT SUBMITTED THAT IN LIGHT OF THE DECISIONS OF THE HONBLE HIGH COURT AND SUPREME COURT, BOTH THE ISSUES NEEDS VERIFICATIONS AND THEREFORE, BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. GROUND NOS. 2 AND 3 AS SUBMITTED BY BOTH TH E PARTIES HAVE TO BE LOOKED INTO THE CONTEXT OF THE LAW LAID DOWN BY VAR IOUS DECISIONS PASSED BY THE HONBLE HIGH COURTS AS WELL AS THE SUPREME COURT IN CASES OF AVANI EXPORTS (SUPRA) AND CARPET INDIA (SUPRA). HENCE, WE ARE REM ANDING BACK BOTH THE 7 ITA NO. 3075 & 2958/DEL/2008 ISSUES TO THE FILE OF THE ASSESSING OFFICER FOR FRE SH ADJUDICATION IN LIGHT OF THE PROVISIONS OF LAW SETTLED BY THE JUDICIAL FORUMS IN CLUDING HONBLE APEX COURT. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. HENCE, GROUND NOS. 2 AND 3 OF THE ASSESSEES APPEAL ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 10. AS REGARDS TO GROUND NO. 5 RELATING TO DISALLOW ANCE OF RS. 8,15,788/- ON ACCOUNT OF INTEREST, THE LD. AR SUBMITTED THAT THER E COULD BE NO DISALLOWANCE OF INTEREST IN RESPECT OF ADVANCES GIVEN IN EARLIER YEARS AS NO FINDINGS WAS EVER RECORDED IN THOSE YEARS THAT SUCH ADVANCES WERE MAD E FOR NON BUSINESS PURPOSE OR SUCH ADVANCES WERE MADE OUT OF THE INTER EST BEARING BORROWED FUNDS FOR ADVANCING THESE AMOUNTS. THE LD. AR POINT ED OUT FROM COPIES OF ACCOUNTS ENCLOSED IN THE PAPER BOOK THAT THERE WERE OPENING BALANCES AND THESE ADVANCES WERE MADE FOR THE PURPOSE OF BUSINES S IN ORDINARY COURSE OF THE BUSINESS OF THE ASSESSEE. FURTHER, THE LD. AR P OINTED OUT THAT NO INTEREST BEARING BORROWED FUNDS WERE USED FOR GIVING THESE A DVANCES AS IS CLEAR FROM THE FACT THAT THESE AMOUNTS WERE PAID FROM THE CURR ENT ACCOUNT. 11. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT F ROM THE PAPER BOOKS POINTED OUT BY THE LD. AR DURING THE HEARING, IT CAN BE SEE N THAT THESE ADVANCES WERE NOT FROM THE INTEREST BEARING BORROWED FUNDS. THUS, THE ADVANCES WERE EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASS ESSEE AND THE ASSESSING OFFICER HAS NOT TAKEN COGNIZANCE OF THE SAME. FURTH ER WHILE DISALLOWING THE CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER FAILED TO ESTABLISH THE NEXUS BETWEEN THE AMOUNT NOT GIVEN AND THE ADVANCES. THUS , THE CIT(A) WAS NOT CORRECT IN CONFIRMING THIS ADDITION. HENCE, GROUND NO. 5 OF THE ASSESSEES APPEAL IS ALLOWED. 8 ITA NO. 3075 & 2958/DEL/2008 13. AS REGARDS TO GROUND NO. 8, RELATING TO ALLOWAB ILITY OF DEDUCTION U/S 80HHC BY THE ASSESSING OFFICER ONLY AFTER REDUCING THE AMOUNT OF DEDUCTION U/S 80IB FROM THE AMOUNT OF BUSINESS PROFIT, THE LD . AR SUBMITTED THAT THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AS PER THE DE CISION OF THE HONBLE DELHI HIGH COURT IN CASE OF GREAT EASTERN EXPORTS LTD. VS . CIT ORDER DATED 04.12.2010. 14. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE HONBLE DELHI HIGH COURT IN CASE OF GREAT EASTERN EXPORTS LTD. (SUPRA) HELD THA T THE DEDUCTION ALLOWED U/S 80-IA HAD TO BE REDUCED FROM THE PROFITS FOR COMPUT ING DEDUCTION U/S 80HHC. THE SAME PRINCIPLE WILL BE APPLICABLE IN THE PRESEN T CASE, HENCE, GROUND NO. 8 IS DISMISSED. 16. THUS, THE APPEAL FILED BY THE ASSESSEE BEING IT A NO. 3075/DEL/2008 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 17. NOW WE ARE TAKING UP REVENUES APPEAL BEING IT A NO. 2958/DEL/2008. 18. AS REGARDS TO GROUND NO. 1 OF THE REVENUES APP EAL RELATING TO DEPRECIATION @ 50% ON MACHINERY PURCHASED FOR RS. 2 3,70,949/- UNDER TUF SCHEME ALLOWED BY THE CIT(A) AS AGAINST THE DEPRECI ATION @ 25% ALLOWED BY THE ASSESSING OFFICER, THE LD. DR SUBMITTED THAT THE AS SESSING OFFICER HAS GIVEN A CLEAR FINDING THAT THE DESCRIPTION OF VARIOUS MACHI NERIES PURCHASED UNDER TUFS AS PER THE COPY OF ACCOUNT OF MACHINERY PURCHA SED UNDER TUFS/BILLS OR VOUCHERS OF MACHINERY PURCHASED WAS NOT AS PER THE ANNEXURE F1 GIVING HE LIST OF PROCESSING MACHINERY ELIGIBLE UNDER TUFS FO R PROCESS HOUSE FOR YARN/FABRIC/GARMENTS/MADE UPS (OTHER THAN WOOL AND POLYESTER/WOOL BLADES AND KNITS) ISSUED BY MINISTRY OF TEXTILES FOR TECHN OLOGY OF UP-GRADATION FUND 9 ITA NO. 3075 & 2958/DEL/2008 SCHEME FOR TEXTILE AND JUTE INDUSTRIES AS SUBMITTED BY THE ASSESSEE. THUS, THE ASSESSEE DOES NOT FULFILL THE REQUIREMENTS OF TUFS AND HENCE, THE ASSESSING OFFICER RIGHTLY RESTRICTED THE CLAIM TO 25%. 19. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE PROVIDED ALL THE REQUISITE DOCUMENTS RELAT ING TO THE PURCHASE OF THE MACHINERY AND ITS UTILIZATION. THE ASSESSING OFFICE R OVERLOOKED THE EVIDENCES. 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND EXPORT OF HANDLOOM GOODS, FLOO R COVERINGS AND MADE UPS WHICH ARE COVERED UNDER THE TUF SCHEME, THOUGH THE ASSESSING OFFICER HAS NOT DENIED THESE FACTS. THE ASSESSE IN FACT, HAS DEMONS TRATED BEFORE US BY GIVING DETAILS WHICH WAS PRODUCED BEFORE THE ASSESSING OFF ICER AS WELL, AS TO HOW EACH MACHINERY IS COVERED UNDER WHICH CLAUSE OF TUF SCHE ME. THUS, THE CIT(A) HAS RIGHTLY HELD THAT AFTER COMPARING THE BILLS, THE DE SCRIPTION OF THE MACHINES AND THE RELEVANT ENTRY IN SCHEDULES TO TUF SCHEME, IT I S CLEAR THAT ITEM NO. 1 TO 30 AND 36 ARE COVERED UNDER TUF SCHEME AND THE SAME AR E ELIGIBLE FOR DEPRECIATION ACCORDINGLY @ 50%, WHEREAS, ITEM NO. 3 1 TO 35 TOTALING FOR VALUE OF RS. 97,000/- ONLY ARE NOT COVERED UNDER ANY CLAUSE OF THE SCHEDULES OF TUF SCHEME, THEREFORE, THE MACHINERY WORTH RS. 97,000/- ARE ELIGIBLE FOR DEPRECIATION AT THE NORMAL RATE OF 25% AND ACCORDIN GLY DIRECTED THE ASSESSING OFFICER. THEREFORE, THERE IS NO NEED TO INTERFERE W ITH THE FINDINGS OF THE CIT(A). HENCE, GROUND NO. 1 OF THE REVENUES APPEAL IS DISM ISSED. 21. AS REGARDS TO GROUND NO. 2 OF THE REVENUES APP EAL RELATING TO ADDITION OF RS. 5,51,19,865/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN THE VALUE OF STOCK AS PER STOCK STATEMENT SUBMITTED TO THE BANK AND AS DECLARED IN THE TRADING RESULTS OF THE ASSESSEE, TH E LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS CLEARLY OBSERVED THAT AS PER THE MANUFACTURING CUM TRADING ACCOUNT FOR THE PERIOD 01.03.2004 TO 31.03. 2004, THE CLOSING STOCK AS 10 ITA NO. 3075 & 2958/DEL/2008 ON 31.03.2004 WOULD HAVE BEEN RS. 6,40,91,216/- WHI LE THE ASSESSEE HAS SHOWN THE CLOSING STOCK OF ONLY RS. 89,71,351/- IN ITS BALANCE SHEET AS ON 31.03.2004. THEREFORE, THE ASSESSING OFFICER RIGHTL Y MADE ADDITION OF RS. 4,41,19,865/- AS DEEMED INCOME UNDER SECTION 69 OF THE INCOME TAX ACT, 1961. 22. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A) AND ALSO THAT OF THE ORDER OF THE CIT(A) FOR SUBSEQUENT YEAR. THE LD. AR FURTH ER SUBMITTED THAT THE ASSESSEE RECEIVED PURCHASED GOODS WORTH RS. 4,66,94 ,618/- BEFORE 01.03.2004 WHICH IS CLEARLY SET OUT FROM THE BOOKS OF ACCOUNTS . THE LD. AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT REJECT ED THE BOOKS OF ACCOUNTS. 23. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS UNDISPUTED FACT THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NEVER REJECTED BY THE ASSESSEE DURING THE YEAR. FURTHER, FROM THE PERUSAL OF THE DETAILS FILED BY THE ASSESSEE, IT CA N BEEN SEEN THAT THE ASSESSEE RECEIVED/ PURCHASED GOODS WORTH RS. 4,66,94,618/- B EFORE 01.03.2004. THE SAID PURCHASE IS EVIDENT FROM THE BILLS AND VOUCHER S. ALL THESE DOCUMENTS/EVIDENCES WERE BEFORE THE ASSESSING OFFIC ER. THUS, THE CIT(A) RIGHTLY DELETED THIS ADDITION WITH JUSTIFIABLE REAS ONING. THEREFORE, THERE IS NO NEED TO INTERFERE WITH THE FINDING OF THE CIT(A). HENCE, GROUND NO. 2 OF THE REVENUES APPEAL IS DISMISSED. 24. AS REGARDS TO GROUND NO. 3 OF THE REVENUES APP EAL RELATING TO DEDUCTION UNDER SECTION 80HHC TO THE ASSESSEE ON THE EXPORT I NCENTIVE, BEING SUPPORTING MANUFACTURER, THE LD. DR SUBMITTED THAT IN CASE OF SUPPORTING MANUFACTURER AFTER COMPUTING PROFITS OF THE BUSINESS AS PER CLAU SE (BAA) OF EXPLANATION TO SECTION 80HHC, THE DEDUCTION IS TO BE ALLOWED TO TH E EXTENT OF PROFITS REFERRED TO IN SUB-SECTION (1B) OF SECTION 80HHC OF THE INCO ME TAX ACT READ WITH SUB- SECTION (1A) AND SUB-SECTION (3A) OF SECTION 80HHC OF THE ACT. THE PROFIT AND GAINS OF BUSINESS OR PROFESSION ARE TO BE REDUCED B Y 90% OF EXPORT INCENTIVES, 11 ITA NO. 3075 & 2958/DEL/2008 BROKERAGE, COMMISSION ETC. TO ARRIVE AT PROFITS OF THE BUSINESS AND THEN 30% OF THESE PROFITS ARE TO BE ALLOWED AS DEDUCTION U/S 80 HHC OF THE INCOME TAX ACT IN THE CASE OF THE SUPPORTING MANUFACTURER, IN A.Y. 2004-05. 25. THE LD. AR SUBMITTED THAT GROUND NOS. 2 AND 3 O F THE ASSESSEES APPEAL IS DEALING WITH THIS ISSUE ONLY AND THE SAME MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER IN LIGHT OF THE DECISION I N EARLIER YEAR IN ASSESSEES OWN CASE GIVEN BY THE TRIBUNAL. 26. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALREADY DEALT WITH THI S ISSUE IN ABOVE PARAS WHILE DECIDING GROUND NOS. 2 AND 3 OF ASSESSEES APPEAL, HENCE, THE ISSUE IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. GROUND NO. 3 OF THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 27. AS REGARDS TO GROUND NO. 4 OF THE REVENUES APP EAL RELATING TO ADDITION OF RS. 24,09,588 OUT OF TOTAL ADDITION OF RS. 25,48 ,292/- MADE BY THE ASSESSING OFFICER BY DISALLOWING FOREIGN TRAVELING EXPENSES, THE LD. DR SUBMITTED THAT THE ASSESSEE OTHER THAN THE PARTNERS OF THE FIRM OR THE SUPPORTING BILLS COULD NOT PRODUCED ANY OTHER EVIDENCE TO ESTABLISH THAT THESE EXPENSES HAVE BEEN WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. 28. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 29. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF THE ORDER OF THE CIT(A) AS WELL AS THE ASSESSMENT ORDER, IT CAN BE SEEN THAT THE EVIDENCES /DOCUMENTS WERE PRODUCED BY THE ASSESSEE DURING THE ASSESSMENT PROC EEDINGS TO ESTABLISH THE CLAIM OF THE ASSESSEE THAT THE FOREIGN TRAVEL WAS E XCLUSIVELY FOR THE BUSINESS PURPOSE ONLY. HENCE, THERE IS NO NEED TO INTERFERE THE FINDINGS OF THE CIT(A). THEREFORE, GROUND NO. 4 OF THE REVENUES APPEAL IS DISMISSED. 12 ITA NO. 3075 & 2958/DEL/2008 30. AS REGARDS TO GROUND NO. 5 OF THE REVENUES APP EAL RELATING TO ADDITION OF RS. 17,56,508/- ON ACCOUNT OF BUILDING REPAIR AN D MAINTENANCE EXPENSES, THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 31. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 32. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE ASSESSING OFFICER HAS NOT DISPUTED THE EXPENDITURE INCURRED ON REPAIR AND MAI NTENANCE BUT HELD THE SAME AS CAPITAL EXPENDITURE. THE ASSESSEES FACTORY IS ON RENTED PREMISES AND THERE IS NO NEW STRUCTURE CREATED BY THE ASSESSEE. THESE FACTS WERE ALSO NOT DISPUTED BY THE ASSESSING OFFICER. HENCE, THERE IS NO NEED TO INTERFERE WITH THE FINDING OF THE CIT(A). GROUND NO. 5 OF THE REVENUE S APPEAL IS DISMISSED. 33. AS REGARDS TO GROUND NO. 4/6 OF THE REVENUES A PPEAL RELATING TO ADDITION OF RS. 1,48,249/- DISALLOWING EXPORT PROMOTION EXPE NSES, THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 34. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 35. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE ASSESSING OFFICER HAS ALLOWED THE EXPORT PROMOTION EXPENSES TO THE EXTENT OF 9/10 TH OF THE EXPENSES CLAIMED BY THE ASSESSEE. THUS, THE ASSESSING OFFICE R NEVER DISPUTED THAT THERE IS EXPORT PROMOTION EXPENSES. IN FACT, THERE IS NO OBSERVATION BY THE ASSESSING OFFICER THAT CERTAIN PORTION OF THESE EXPENSES WERE UTILIZED FOR PERSONAL USE. THE DISALLOWANCE IS ONLY ON THE BASIS OF PRESUMPTIO N AND ASSUMPTIONS. THEREFORE, THE CIT(A) RIGHTLY DELETED THIS ADDITION . THERE IS NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). HENCE, GROUND NO. 4/6 IS DISMISSED. 36. IN RESULT, THE APPEAL OF THE ASSESSEE AND APPEA L OF THE REVENUE IS PARTLY 13 ITA NO. 3075 & 2958/DEL/2008 ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30TH DAY OF MARCH, 2021. SD/- SD/- (G. S. PANNU) (SUCHITRA KAMBLE) VICE PRESIDENT JU DICIAL MEMBER DATED: 30/03/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI