DCIT Rg. 3(3), MUMBAI V. M/s. WARTSILA INDIA LTD., MUMBAI

ITA 7926/MUM/2004

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9483 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 06-09-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 05-11-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SHUKLA
• Assessee Lawyers: J D MISTRY; SANJIV M SHAH
• Keywords: Business income; Bad and doubtful debts; Revenue expenditure
• Section: 80HHC; 14A; 37(1)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI .. , !.'.#$%, '& '(, ' BEFORE SHRI H.L.KARWA, PRESIDENT AND SHRI N.K.BILLA IYA, AM ./ ITA NO.7926/MUM/2004 ( *! + *! + *! + *! + / / / / ASSESSMENT YEAR : 2000-2001) THE DY.COMMISSIONER OF INCOME-TAX RANGE 3(3) MUMBAI. M/S.WARTSILA INDIA LIMITED 76, FREE PRESS HOUSE, NARIMAN POINT MUMBAI 400 021. PAN : AAACW0345D. ( ,- / // / APPELLANT) ! ! ! ! / VS. ( ./,-/ RESPONDENT) ,- 0 00 0 1 ' 1 ' 1 ' 1 ' / APPELLANT BY : SHRI P.K.SHUKLA ./,- 0 1 ' 0 1 ' 0 1 ' 0 1 ' / RESPONDENT BY : S/SHRI J.D.MISTRY & SANJIV M.SHAH ! 0 2& / / / / DATE OF HEARING : 26.11.2012 34+ 0 2& / DATE OF PRONOUNCEMENT : 26.11.2012 ''5 ''5 ''5 ''5 / / / / O R D E R PER N.K.BILLAIYA (AM) : THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) 32, MUMBAI D ATED 10.08.2004, PERTAINING TO ASSESSMENT YEAR 2000-2001 . 2. THE REVENUE HAS RAISED FOLLOWING EIGHT SUBSTANTI VE GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALL OWANCE OF ` 14,97,379/- OUT OF THE STAFF WELFARE EXPENSES AND DISALLOWANCE OF ` 6.03 LAKHS OUT OF THE OTHER EXPENSES. ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 2 2. ON THE FACTS AND IN THE CIR CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITI ON OF ` 4,65,568/- MADE BY THE ASSESSING OFFICER UNDER SEC.145A OF THE I.T.ACT. 3. ON THE FACTS AND IN THE CIR CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALL OWANCE OF EXPENDITURE OF ` 1,25,37,044/- INCURRED ON IMPROVEMENT ON LEASE HOLD PROPERTIES WHICH WAS HELD BY THE ASSESSING OFFICER TO BE OF CAPITAL IN NATURE. 4. ON THE FACTS AND IN THE CIR CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALL OWANCE OF ` 5 LAKHS U/S.14A OF THE I.T.ACT AND CONSEQUENTLY ERR ED IN DIRECTING THE ASSESSING OFFICER NOT TO INCREASE THE BOOK PROFIT BY THE SAME AMOUNT FOR COMPUTING THE TAX LIA BILITY U/S 115JA. 5. ON THE FACTS AND IN THE CIR CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALL OWANCE OF BAD DEBTS TO THE EXTENT OF ` 10,97,891/- WHICH HAD NOT BEEN ESTABLISHED TO HAVE BECOME BAD. 6. ON THE FACTS AND IN THE CIR CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALL OWANCE OF THE CLAIM OF LIQUIDATED DAMAGES TO THE EXTENT OF ` 13,17,110/- WHICH HAD NOT BEEN ESTABLISHED TO BE IRRECOVERABLE. 7. ON THE FACTS AND IN THE CIR CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSES SING OFFICER TO ALLOW THE DEDUCTION U/S 80HHC BY - (A) REDUCING 90% OF THE NET RECEIPTS FROM HIRING CHARGES FROM THE PROFITS OF THE BUSINESS AS AGAINST THE GROSS RECEIPTS CONSIDERED BY THE ASSESSING OFFICER. ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 3 (B) NOT EXCLUDING 90% OF THE FOREIGN CURRENCY FLUCTUATION PROFITS FROM THE PROFITS OF THE BUSINES S ALTHOUGH THE NATURE OF THE SAID PROFIT HAD NOT BEEN CONSIDERED BY THE CIT(A).. (C) NOT EXCLUDING 90% OF THE RECEIPTS BY WAY OF DISCOUNT RECEIVED, DISCOUNT ON MEDICLAIM POLICIES, REFUND OF SUPERANNUATION CONTRIBUTION OF NON ELIGIBLE EMPL OYEES, OCTROI REFUND, SALES-TAX SET OFF, BALANCE RETURN BA CK FROM THE PROFITS OF THE BUSINESS. 8. ON THE FACTS AND IN THE CIR CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSES SING OFFICER TO CONSIDER THE REVISED DEDUCTION U/S 80HHC FOR COMPUTING THE BOOK PROFIT U/S 115JA AS THE CIT(A)S DIRECTION FOR REVISING THE DEDUCTION U/S 80HHC HAVE BEEN CHALLENGED IN THE GROUND ABOVE. 3. AT THE VERY OUTSET THE SENIOR COUNSEL FOR THE AS SESSEE SUBMITTED THAT ALL THE ISSUES RAISED BY THE REVENUE ARE COVER ED IN ASSESSEES FAVOUR BY THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE. TO SUBSTANTIATE HIS CLAIM, THE SENIOR COUNSEL SUBMITTE D A CHART EXPLAINING HOW THE ISSUES RAISED BY THE REVENUE ARE COVERED. LET US NOW TAKE THE ISSUES ONE BY ONE VIS--VIS THE SUBMIS SIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. 4. GROUND NO1. RELATES TO THE DISALLOWANCE OF ` 14,97,379 OUT OF STAFF WELFARE EXPENSES AND ` 6.03 LAKH OUT OF OTHER EXPENSES. THESE ISSUES FIND PLACE AT PAGE 2 PARA 3 OF THE ASSESSMEN T ORDER. IT IS THE SAY OF THE COUNSEL THAT THESE ISSUES WERE BEFORE THE TR IBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 1999-2000 AND 2004-200 5 IN ITA ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 4 NO.7925/MUM/2004 AND ITA NO.1278/MUM/2009, RESPECTI VELY. IT IS THE SAY OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THESE EXPENSES HAVE TO BE VERIFIED IN DETAIL VIS--VIS TU RN OVER OF THE ASSESSEE AND THEREFORE, THE MATTER SHOULD BE RESTOR ED BACK TO THE FILE OF A.O. 5. WE HAVE CONSIDERED THE SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE TRIBUNAL. W E FIND THAT THE TRIBUNAL IN ITA NO.7925/MUM/2004 FOLLOWED THE ORDER FOR ASSESSMENT YEAR 1998-99 AND DELETED THE DISALLOWANC E MADE UNDER THE HEAD STAFF WELFARE EXPENSES AND OUT OF OTHER EX PENSES. THE DECISION OF THE TRIBUNAL IS AT PARA 5 OF THE ORDER. THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THESE EXPENSES REQUIRE FURTHER VERIFICATION CANNOT BE ACCEPTED AS IN THE E ARLIER YEARS APPEALS THE CIT(A) HAS REMANDED THESE ISSUES TO THE FILE OF THE ASSESSING OFFICER AND THE ASSESSING OFFICER, AFTER VERIFYING THE VOUCHERS ETC. PRODUCED BY THE APPELLANT-COMPANY, SUBMITTED A DETA ILED REPORT ON THE NATURE OF EXPENSES INCURRED BY IT UNDER THE HEA D STAFF WELFARE EXPENSES. BASED ON SUCH REPORT FOR ONE YEAR THE CIT (A) FULLY DELETED THE SAID DISALLOWANCE OUT OF STAFF WELFARE EXPENSES AND SIMILARLY FOR SIMILAR REASONS HAS DELETED THE DISALLOWANCE OUT OF OTHER EXPENSES. AS NO NEW FACTS HAVE BEEN BROUGHT ON RECORD, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A) , WHICH WE CONFIRM. GROUND NO.1 IS ACCORDINGLY DISMISSED. ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 5 6. GROUND NO.2 RELATES TO THE ADDITION OF ` 4,65,568 MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 145A OF THE ACT. SIMILAR ISSUE CAME UP FOR HEARING BEFORE THE TRIBUNAL IN AS SESSMENT YEAR 1999-2000 IN ITA NO.7925/MUM/2004. WE FIND THAT THI S ISSUE WAS RAISED BY GROUND NO.2 AT PAGE 2 PARA 8 OF THE SAID TRIBUNAL ORDER. THE TRIBUNAL IN PARA 12 PAGE 3 HAS GIVEN A CATEGORICAL FINDING THAT THE ADJUSTMENT REQUIRED U/S 145A ARE REVENUE NEUTRAL AS FOUND OUT BY THE CIT(A). THE TRIBUNAL ALSO FOLLOWED THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. MAHAVIR ALLUMINIUM LTD. (297 ITR 77) AND CONFIRMED THE FINDINGS OF THE CIT(A) REJECTING THE REVENUES GROUND. AS THE FACTS AND CIRCUMSTANCES ARE IDENTICA L AND ACCEPTING THE FACT THAT THE NET EFFECT OF THE ADJUSTMENT U/S 145A ON THE NET PROFIT IS ALWAYS NIL BECAUSE WHEN THE TAX, DUTY ARE INCLUD ED ON THE DEBIT SIDE EITHER IN THE OPENING STOCK OR PURCHASE THE SA ME WILL AUTOMATICALLY BE INCLUDED ON CREDIT SIDE EITHER IN SALES OR IN CLOSING STOCKS. THIS VIEW HAS ALSO BEEN ACCEPTED IN THE GUI DANCE NOTE ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. CONSIDERING ALL THESE IN TOTALITY, THE FINDINGS OF THE CIT(A) ARE C ONFIRMED. GROUND NO.2 IS ACCORDINGLY DISMISSED. 7. GROUND NO.3 RELATES TO THE CLAIM OF EXPENDITURE OF ` 1,25,37,044 INCURRED ON IMPROVEMENT ON LEASE HOLD PROPERTIES WH ICH WAS HELD BY THE A.O. TO BE OF CAPITAL IN NATURE. SIMILAR DISALL OWANCE WAS MADE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1998-99 WHI CH MATTER TRAVELED UP TO TRIBUNAL AND THE TRIBUNAL IN ITA NO. 2166/MUM/2004 ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 6 WHILE DECIDING GROUND NO.3 AT PAGE 5 PARA 14 OF ITS ORDER, GAVE ITS FINDING EXHIBITING AT PAGE 8 PARA 18 OF THE ORDER, HAS HELD THAT WHAT HAS TO BE EXAMINED IS THE NATURE OF THE EXPENDITURE IF THE EXPENDITURE IS CAPITAL IN NATURE THEN EXPLANATION 1 TO SECTION 32(1) OF THE ACT WILL COME INTO PLAY IF THE EXPENDITURE IS OF REVENUE NAT URE THEN THE SAME IS ALLOWABLE AS DEDUCTION U/S 30(A)(1) OR 37(1) OF THE ACT. IN OUR VIEW, GOING BY THE DESCRIPTION OF THE EXPENDITURE I NCURRED BY THE ASSESSEE, THE SAME IS NOT OF CAPITAL NATURE AND THE TRIBUNAL WENT ON TO ACCEPT THE EXPENSES INCURRED AS REVENUE EXPENDITURE . WE FIND THAT THE A.O. HAS DISALLOWED THE EXPENDITURE IN THE LINE OF THE ASSESSMENT MADE IN ASSESSMENT YEAR 1998-99. AS THE SAME HAS BE EN TREATED AS REVENUE EXPENDITURE BY THE TRIBUNAL AS MENTIONED HE REINABOVE, WE HAVE NO HESITATION TO TAKE THE SIMILAR VIEW AS TAKE N BY THE TRIBUNAL IN ITA NO.2166/MUM/2004 AND DIRECT THE A.O. TO TREAT T HE EXPENSES AS REVENUE IN NATURE. GROUND NO.3 IS ACCORDINGLY DISMI SSED. 8. GROUND NO.4 RELATES TO DISALLOWANCE OF ` 5 LAKH U/S 14A OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF ` 44.55 LAKH AS DIVIDEND INCOME EXEMPT U/S 10(33) OF THE ACT. THE A.O. SOUGH T EXPLANATION FROM THE ASSESSEE REGARDING THE SOURCE OF INVESTMEN TS MADE IN SECURITIES, WHICH WAS TO ASCERTAIN INTEREST AND OTH ER EXPENDITURE INCURRED IN EARNING DIVIDEND INCOME FOR THE PURPOSE OF SECTION 14A OF THE ACT. IT WAS EXPLAINED BY THE ASSESSEE THAT T HE INVESTMENTS WERE MADE DURING THE YEAR 1994 AND ALL THE INVESTMENTS W ERE MADE OUT OF THE COMPANYS OWN FUNDS. IT WAS EXPLAINED THAT THE AGGREGATE VALUE ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 7 OF INVESTMENTS IS ` 4.86 CRORE WHEREAS NON-INTEREST BEARING FUNDS AVAILABLE WITH THE ASSESSEE IS ` 91.42 CRORE AND THEREFORE, NO INTEREST COST WAS INCURRED BY THE ASSESSEE ON THESE INVESTME NTS. THE A.O. REJECTED THE SUBMISSIONS MADE BY THE ASSESSEE AND W ENT ON TO ADD ` 5 LAKH ON ESTIMATE BASIS TOWARDS EXPENDITURE INCURRED ON ESTABLISHMENT AND ADMINISTRATION FOR EARNING DIVIDEND INCOME. BEF ORE THE CIT(A), THE ASSESSEE REITERATED THAT THE INVESTMENTS HAVE N OT BEEN MADE FROM THE BORROWED FUNDS. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES THE CIT(A) DELETED THE ENTIRE ADDITION OF ` 5 LAKH HOLDING THAT THE A.O. HAS GIVEN NO BASIS FOR DISALLOWING THE AMOUNT OF ` 5 LAKH. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT P LACE ANY MATERIAL ON RECORD TO SHOW THAT THE INVESTMENTS HAVE BEEN MA DE OUT OF BORROWED FUNDS. THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT V. RELIANCE UTILITY AND POWER LTD. [(2009) 313 ITR 340 (BOM.)] HAS HELD THAT EVEN WHERE BOTH OWN FUNDS AND BORROWE D FUNDS ARE UTILIZED, IT CAN BE SAFELY PRESUME THAT THE INVESTM ENTS HAVE BEEN MADE OUT OF OWN FUNDS UNLESS IT IS PROVED OTHERWISE . AS THE ASSESSING OFFICER HAS NOT CONTROVERTED THE FINDINGS OF THE ASSESSEE THAT INVESTMENTS MADE IN 1994 ARE OUT OF OWN FUNDS, WE DO NOT FIND ANY REASON TO SUSTAIN THE ADDITION, WHICH HAS RIGHT LY BEEN DELETED BY THE CIT(A) AND THE SAME IS CONFIRMED. GROUND NO.4 I S ACCORDINGLY DISMISSED. 9. GROUND NO.5 RELATES TO THE DISALLOWANCE OF BAD D EBTS AT ` 10,97,891 AND GROUND NO.6 RELATES TO THE DISALLOWAN CE OF THE CLAIM ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 8 OF LIQUIDATED DAMAGES AT ` 13,17,110. WE ARE TAKING UP BOTH THESE GROUNDS TOGETHER AS SIMILAR ISSUES ARE INVOLVED. TH E A.O. HAS DISCUSSED THESE DISALLOWANCES FROM PAGE 7 PARA 9 ON WARDS, WHICH SHOW THAT DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT COMPLETE DETAILS OF BA D DEBTS AND LIQUIDATED DAMAGES. IT WAS SUBMITTED BY THE ASSESSE E THAT POST- AMENDMENT WITH EFFECT FROM 01.04.1989 ALL THAT THE ASSESSEE WAS REQUIRED TO SHOW IS THAT THE DEBT HAD ACTUALLY BECO ME BAD. THE SUBMISSIONS OF THE ASSESSEE DID NOT FIND FAVOUR WIT H THE A.O., WHO WENT ON TO DISALLOW THE CLAIM OF BAD DEBTS AND ALSO THE LIQUIDATED DAMAGES. WHEN THE MATTER WAS AGITATED BEFORE THE CI T(A), THE CIT(A) AGREED WITH THE SUBMISSIONS OF THE ASSESSEE THAT POST- AMENDMENT TO SECTION 36(1)(VII) OF THE ACT WITH EFF ECT FROM 01.04.1989 THE CONDITIONS OF ALLOWABILITY OF BAD DE BT IS ACTUAL WRITE OFF BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND THA T THE REQUIREMENT WITH RESPECT TO PROVING THAT THE DEBT TO BE BAD IS NO MORE APPLICABLE. THE CIT(A) ACCORDINGLY DELETED THE ADDITION OF BAD DEBT AND ALSO THE LIQUIDATED DAMAGES. BEFORE US THE LEARNED DEPARTMEN TAL REPRESENTATIVE POINTED OUT THAT SO FAR AS THE LIQUI DATED DAMAGES ARE CONCERNED, THEY HAVE NOT BEEN TAKEN FOR CONSIDERATI ON IN EARLIER YEARS INCOME AND THEREFORE, THE SAME CANNOT BE ALLOWED AS WRITE OFF. THIS SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATI VE CANNOT BE ACCEPTED AS THE LIQUIDATED DAMAGES HAVE BEEN TAKEN IN THE INCOME OF THE ASSESSEE IN THE FINANCIAL YEARS 1997-98 AND 199 8-99. FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF TRF ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 9 LIMITED VS. CIT [(2010) 323 ITR 397 (SC)] , WE HAVE NO HESITATION TO HOLD THAT BOTH THE BAD DEBT AND LIQUIDATED DAMAGES ARE TO BE ALLOWED AS WRITE OFF FOR THE YEAR UNDER CONSIDERATION AND O N THAT BASIS WE CONFIRM THE FINDINGS OF THE CIT(A). GROUNDS NO.5 AN D 6 ARE ACCORDINGLY DISMISSED. 10. GROUND NO.7 IS IN THREE PARTS. THE SUM AND SUBS TANCE OF THE GRIEVANCE OF THE REVENUE IS THAT FOR CONSIDERIN G THE PROVISIONS OF SECTION 80HHC, THE CIT(A) ERRED IN DI RECTING THE A.O. TO CONSIDER NET RECEIPTS ON ACCOUNT OF HIR ING CHARGES, DISCOUNT RECEIPT, DISCOUNT OF MEDI-CLAIM POLICIES, REFUND OF SUPERANNUATION CONTRIBUTION, OCTROI REFUND, SALES T AX SET OFF AND BALANCE RETURNED BACK FROM THE PROFITS OF THE B USINESS. THE ISSUE HAS BEEN ELABORATELY DISCUSSED BY THE A.O . AT PAGE 9 OF THE ASSESSMENT ORDER. AT PAGE 10 THE A.O. HAS OBSERVED THAT IN THE QUESTIONNAIRE ISSUED WITH NOTICE U/S 14 2 DATED 29.10.2002, THE ASSESSEE WAS ASKED TO EXPLAIN WHY T HE FOLLOWING INCOME CREDITED TO THE PROFIT AND LOSS AC COUNT HAS NOT BEEN CONSIDERED FOR EXCLUSION TO THE EXTENT OF 90% UNDER EXPLANATION (BAA) TO SECTION 80HHC. HIRE CHARGES RECEIVED ` 91,75,969 TRAINING INCOME ` 7,36,648 PROFIT ON FOREIGN CURRENCY TRANSACTION ` 2,03,30,593 MISCELLANEOUS INCOME ` 1,65,76,225 ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 10 PROVISION WRITTEN BACK FOR TRADE GUARANTEE ` 1,27,47,882 PROVISION WRITTEN BACK FOR SUNDRIES ` 91,56,430 11. IT WAS EXPLAINED BY THE ASSESSEE THAT THESE INC OMES WERE BASICALLY BUSINESS INCOME, THEREFORE, SHOULD NOT BE DEDUCTED TO THE EXTENT OF 90% UNDER EXPLANATION (BAA) . HOWEVER THE A.O. WAS OF THE OPINION THAT THESE WERE NOT DERIVED OUT OF EXPORTS I.E. THERE WAS NO DIRECT NEXUS BETWEEN THESE ITEMS OF INCOME AND THE EXPORT ACTIVITY OF THE ASSESSEE-COMPANY. THE A.O. WENT ON TO DISCUSS C ERTAIN JUDICIAL PRONOUNCEMENTS AND WENT ON TO DISCREDIT PROVISIONS OF SECTION 80HHC BY 90% OF THE ITEMS CONSIDERED. WHEN THE MATTE R WAS AGITATED BEFORE THE CIT(A), THE CIT(A) HAS ELABORAT ELY DISCUSSED THE ISSUE AT PAGE 12 PARA 13 ONWARDS AND AFTER CONSIDER ING EACH AND EVERY ITEM, HELD THAT AS FAR AS DISCOUNT RECEIPT, D ISCOUNT ON MEDI- CLAIM POLICIES, REFUND OF SUPERANNUATION CONTRIBUTI ON, OCTROI REFUND AND SALES TAX SET OFF ARE CONCERNED, THEY GO TO RED UCE THE CORRESPONDING COSTS WHICH HAVE ALREADY BEEN DEDUCTE D IN COMPUTING THE TOTAL INCOME ELIGIBLE FOR DEDUCTION U/S 80HHC O F THE ACT, HENCE THESE ITEMS CANNOT BE EXCLUDED UNDER EXPLANATION (BAA) . SO FAR AS WRITE BACK OF SUNDRY CREDITORS ARE CONCERNED, THE S AME WAS ALLOWED AS DEDUCTION IN THE EARLIER YEARS, ACCORDINGLY THE SAME SHOULD NOT BE EXCLUDED AGAIN FROM THE INCOME FOR THE YEAR UNDER C ONSIDERATION. THE LEARNED DEPARTMENTAL REPRESENTATIVE ONLY POINTED OU T TO THE REDUCTION OF 90% OF FOREIGN CURRENCY GAIN AND SUBMI TTED THAT THE SAME HAS TO BE FOR THE YEAR UNDER CONSIDERATION AND NOT FOR EARLIER YEARS TO WHICH THE SENIOR COUNSEL REBUTTED THAT THI S IS NOT THE CASE OF ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 11 THE A.O. THE A.O. HAS SIMPLY DISALLOWED THE CLAIM H OLDING THAT IT HAS NO DIRECT NEXUS WITH THE EXPORT ACTIVITY OF THE ASS ESSEE. THE COUNSEL FURTHER RELIED UPON THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. CIVIL APPEAL NO.1 914 OF 2012, COPY OF WHICH WAS GIVEN DURING THE COURSE OF HEARIN G AND ALSO RELIED UPON THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT V. UNITED RICELAND LTD. IN INCOME TAX APPEAL NO.6997 OF 2010, COPY OF WHICH IS ALSO PLACED ON RE CORD. 12. WE HAVE CAREFULLY PERUSED THESE ORDERS. WE FIND T HAT THE HONBLE SUPREME COURT IN THE CASE OF ACG ASSOCIATED CAPSULES PVT. LTD. (SUPRA) AT PAGE 18 PARA 2 OF ITS ORDER HELD THAT THE ASSES SEE WAS ENTITLED TO DEDUCT THE EXPENSES FROM THE INTEREST R ECEIVED AND ONLY 90% OF THE NET AMOUNT OF INTEREST COULD BE EXCLUDED UNDER EXPLANATION (BAA) TO SECTION 80HHC. SIMILARLY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNITED RICELAND LTD. (SUPRA) WHILE ANSWERING TO QUESTION (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL W AS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE- COMPANY FOR A DEDUCTION U/S 80HHC INTER ALIA ON CURRENCY EXCHANGE GAIN AND THE ANSWER FINDS PLACE AT PAGE 2 PARA 3 AN D RELYING UPON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. RACHNA UDYOG [230 CTR (BOM.) 72] . WE FIND THAT IN THE CASE OF RACHNA UDYOG (SUPRA), THE HONBLE COURT HAS HELD AS FOLLOWS:- ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 12 AS REGARDS QUESTION (B), COUNSEL APPEARING ON BEHA LF OF THE REVENUE AND COUNSEL APPEARING ON BEHALF OF T HE ASSESSEE STATE THAT QUESTION (B) MAY BE RESTORED TO THE ASSESSING OFFICER TO BE DECIDED IN THE LIGHT OF THE JUDGMENT OF THE SUPREME COURT IN ACG ASSOCIATED CAPSLES PRIVATE LTD. V. COMMISSIONER OF INCOME-TAX. IN VIEW OF THE STATEMENT MADE BY THE COUNSEL, ORDERED ACCORDINGLY. WE ALSO LEAVE IT OPEN TO THE ASSESSING OFFICER TO DETERMINE THE ISSUE AS TO WHETHER THE DEDUCTION FALLS WITHIN THE PURVIEW OF EXPLANATION ( BAA) TO SECTION 80HHC, IN ACCORDANCE WITH LAW, ON THE REQUEST OF THE LEARNED COUNSEL. ORDERED ACCORDINGLY . HOWEVER, THE REMIT TO THE ASSESSING OFFICER WILL NO T COVER THE ISSUE OF FOREIGN EXCHANGE GAIN SINCE THAT ISSUE IS COVERED BY THE DECISION ON THE FIRST QUESTION IN FAVOUR OF THE ASSESSEE. AS REGARDS QUESTION (C), COUNSEL APPEARING ON BEHALF OF THE ASSESSEE AND COUNSEL APPEARING ON BEHALF OF THE REVENUE SUBMIT THAT IN T ERMS OF THE JUDGMENT OF THE SUPREME COURT IN TOPMAN EXPORTS V. COMMISSIONER OF INCOME TAX, THE ASSESSIN G OFFICER MAY BE DIRECTED TO COMPUTE THE DEDUCTION UN DER SECTION 80HHC. ORDERED ACCORDINGLY. THE APPEAL IS ACCORDINGLY DISPOSED OF. 13. AS THE FACTS AND CIRCUMSTANCES ARE THE SAME, RE SPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS CITED HEREINA BOVE, GROUND NO.7 IS DISMISSED. 14. GROUND NO.8 RELATES TO THE GRIEVANCE THAT THE C IT(A) ERRED IN DIRECTING THE A.O. TO CONSIDER THE REVISED DEDUCTIO N U/S 80HHC FOR COMPUTING BOOK PROFIT U/S 115JA. IT IS THE SAY OF T HE COUNSEL THAT THE CIT(A)S DIRECTION FOR REVISING THE DEDUCTION U/S 8 0HHC HAVE BEEN CHALLENGED IN THE AFOREMENTIONED GROUNDS OF APPEAL. THEREFORE, THE ITA NO.7926/MUM/2004. M/S.WARTSILA INDIA LIMITED. 13 ISSUES RAISED VIDE GROUND NO.8 ARE CONSEQUENTIAL TO THE FINDINGS IN THE OTHER GROUNDS OF APPEAL. AS WE HAVE DISMISSED ALL T HE OTHER GROUNDS OF APPEAL TAKEN BY THE REVENUE, WE AGREE WITH THE S UBMISSION OF THE COUNSEL THAT GROUND NO.8 IS CONSEQUENTIAL AND ACCOR DINGLY CONFIRM THE FINDING OF THE CIT(A). 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH DAY OF NOVEMBER, 2012. ''5 0 34+ 6'!7 4 0 8 SD/- SD/- (H.L.KARWA) (N.K.BILLAIYA) / PRESIDENT '& '( '& '( '& '( '& '( / ACCOUNTANT MEMBER MUMBAI ; 6'! DATED : 26 TH NOVEMBER, 2012. DEVDAS* ''5 0 .*29: ;':+2 ''5 0 .*29: ;':+2 ''5 0 .*29: ;':+2 ''5 0 .*29: ;':+2/ COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. < () / THE CIT(A)- XXXII, MUMBAI. 4. < / CIT 5. :?8 .*2*! , , / DR, ITAT, MUMBAI 6. 8@ A / GUARD FILE. ''5! ''5! ''5! ''5! / BY ORDER, /:2 .*2 //TRUE COPY// B B B B/ // /C D C D C D C D ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI