KEC International Ltd. v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 0269 (Mum-Trib) : (2012) 020 ITR (Trib) 0282 INCOME TAX ACT, 1961 --Business expenditure--Disallowance under section 14A Interest on borrowed fund utilized to earn exempt income--Assessee had obtained borrowed fund and also its own fund which were utilized in investment in investment in shares and units of mutual funds. The assessing officer disallowed interest on borrowed fund the Commissioner (Appeals) after giving partial relief disallowed certain sums as interest on borrowed fund. In earlier year the Tribunal remanded fee issue in assessment year 1998-99 and directed assessing officer to examine the issue under section 124A which was operative retrospectively from assessment year 1-4-1962. Further, fund flow statement was not furnished by the assessee. Held: As fund flow statement was not furnished and issue was not examined under section 14A the matter is remanded to assessing officer to decide afresh. Income Tax Act, 1961 Section 14A Income Tax Act, 1961 Section 36(1)(iii) INCOME TAX ACT, 1961 --Deduction under section 80HHC--Allowability Profit from trading goods whereas loss from manufacturing export--Assessee for relevant year had earned profit of Rs. 11.12 crores from trading export and there was loss of 68.80 crores from manufacturing exports. Assessee claimed deduction under section 80HHC ignoring loss from manufacturing export. Assessing officer held that deduction has to be allowed only from net profit from both activities and since there was net loss, he disallowed the claim of deduction the Commissioner (Appeals) upheld assessing officer's order. Held: Rightly so. Deduction under section 80HHC would be allowed from net profit from the trading of export and manufacturing export of goods. Since there was net loss no deduction would be allowed. Income Tax Act, 1961 Section 80HHC INCOME TAX ACT, 1961 --Deduction under section 80HHcComputation Adjustment under section 115JA--The issue raised was regarding adjustment of book profit on account of profit eligible for deduction under section 80HHC in terms of provision (viii) of Explanation to section 115JA. The assessing officer held that since there was huge issues and assessee was not eligible from deduction under section 80HHC, no adjustment was required to be made. The Commissioner (Appeals) upheld the order of assessing officer. Held: Not rightly so. assessing officer is directed to compute profit eligible for deduction under section 80HHC on the basis of adjusted book profit under section 115JA and not on the basis of profit computed under normal provision of the Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0269 (Mum-Trib) : (2012) 020 ITR (Trib) 0282

INCOME TAX ACT, 1961

--Business expenditure--Disallowance under section 14A Interest on borrowed fund utilized to earn exempt income--Assessee had obtained borrowed fund and also its own fund which were utilized in investment in investment in shares and units of mutual funds. The assessing officer disallowed interest on borrowed fund the Commissioner (Appeals) after giving partial relief disallowed certain sums as interest on borrowed fund. In earlier year the Tribunal remanded fee issue in assessment year 1998-99 and directed assessing officer to examine the issue under section 124A which was operative retrospectively from assessment year 1-4-1962. Further, fund flow statement was not furnished by the assessee. Held: As fund flow statement was not furnished and issue was not examined under section 14A the matter is remanded to assessing officer to decide afresh.

Income Tax Act, 1961 Section 14A

Income Tax Act, 1961 Section 36(1)(iii)

INCOME TAX ACT, 1961

--Deduction under section 80HHC--Allowability Profit from trading goods whereas loss from manufacturing export--Assessee for relevant year had earned profit of Rs. 11.12 crores from trading export and there was loss of 68.80 crores from manufacturing exports. Assessee claimed deduction under section 80HHC ignoring loss from manufacturing export. Assessing officer held that deduction has to be allowed only from net profit from both activities and since there was net loss, he disallowed the claim of deduction the Commissioner (Appeals) upheld assessing officer's order. Held: Rightly so. Deduction under section 80HHC would be allowed from net profit from the trading of export and manufacturing export of goods. Since there was net loss no deduction would be allowed.

Income Tax Act, 1961 Section 80HHC

INCOME TAX ACT, 1961

--Deduction under section 80HHcComputation Adjustment under section 115JA--The issue raised was regarding adjustment of book profit on account of profit eligible for deduction under section 80HHC in terms of provision (viii) of Explanation to section 115JA. The assessing officer held that since there was huge issues and assessee was not eligible from deduction under section 80HHC, no adjustment was required to be made. The Commissioner (Appeals) upheld the order of assessing officer. Held: Not rightly so. assessing officer is directed to compute profit eligible for deduction under section 80HHC on the basis of adjusted book profit under section 115JA and not on the basis of profit computed under normal provision of the Act.