, IN INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI VIJAY PAL RAO, JM ITA No.3703/Mum/2004 ( Assessment Year :2000-01) M/s Aventis Pharma limited, Vs. ACIT-8(1), Mumbai Ventis House, 54/A, Sir Mathuradas Vasanji Road, Andheri (East), Mumbai-400 093 PAN/GIR No. : AAACH 2736 F ( Appellant) .. ( Respondent) AND ITA No.4493/Mum/2004 ( Assessment Year :2000 -01) DCIT-8(1), Mumbai Vs. M/s Aventis Pharma limited, Ventis House, 54/A, Sir Mathuradas Vasanji Road, Andheri (East), Mumbai-93 PAN/GIR No. : AAACH 2736 F ( Appellant) .. ( Respondent) AND /Mum/2005 (Arising Out of ITA No. 4493/Mum/2004) ( Assessment Year :200 0-01) M/s Aventis Pharma limited, Vs. DCIT-8(1), Mumbai Ventis House, 54/A, Sir Mathuradas Vasanji Road, Andheri (East), Mumbai-400 093 PAN/GIR No. : AAACH 2736 F ( Appellant) .. ( Respondent) AND ITA No.635/Mum/2006 ( Assessment Year :200 0-01) M/s Aventis Pharma limited, Vs. DCIT-8(1), Mumbai Ventis House, 54/A, Sir Mathuradas Vasanji Road, Andheri (East), Mumbai-400 093 PAN/GIR No. : AAACH 2736 F 2 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 ( Appellant) .. ( Respondent) AND ITA No.695/Mum/2006 ( Assessment Year :2000 -01) ACIT-8(1), Mumbai Vs. M/s Aventis Pharma limited, Ventis House, 54/A, Sir Mathuradas Vasanji Road, Andheri (East), Mumbai-93 PAN/GIR No. : AAACH 2736 F ( Appellant) .. ( Respondent) /Assessee by : Mr. J.D.Mistry & Sanjiv M. Shah /Revenue by : Mr. Ajeet Kumar Jain & Mr. Deepak Repote Date of Hearing : 26th February, 2014 Date of Pronouncement : 16th April, 2014 ORDER PER BENCH : These are cross appeals filed by assessee and Revenue as well as cross objection by assessee against order of CIT(A) for assessment year 2000-01, in matter of order passed under Section143(3) and Section 271(1)(c) of I.T.Act. ITA Nos.3703/Mum/2004, 4493/Mum/2004 & CO No.65/Mum/2005 2. Rival contentions have been heard and record perused. Facts in brief are that assessee is involved in manufacturing of pharmaceutical products and drugs and pharmaceutical formulation in form of tablets, capsules, injections. After taking into consideration various replies of assessee, additions were made by AO in 3 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 respect of income from house property, transfer pricing under Section 92, expenditure on software depreciation on obsolete assets, VRS expenses, bad debts and advances written off, capital gains etc., By impugned order, CIT(A) deleted part of addition. Against this order of CIT(A), both assessee and revenue are in appeal before us. Assessee has also filed cross objection. 3. In appeal filed by assessee (i.e. ITA No.3703/Mum/2004), assessee has raised following grounds :- 1. On facts and in circumstances of case and in law, learned Commissioner of Income-tax (Appeals) (hereinafter referred to as learned CIT(A) ) has erred in determining annual rateable value of property let out to Messrs United Breweries Limited at Rs.24,00,000 for computing income under head "House Property" as against municipal value adopted by appellant for computing same. He ought not to have done so. 2. On facts and in circumstances of case and in law, learned CIT(A) has erred in not deleting entire addition under section 92 of Income-tax Act, 1961 (hereinafter referred to as "the Act")) which was made to extent of Rs.10,56,64,492 by learned assessing officer. He ought not to have done so. 3. On facts and in circumstances of case and in law, learned CIT(A) has erred in confirming disallowance of estimated depreciation on obsolete assets to extent of Rs.34,43,610. He ought not to have done so. 4. On facts and in circumstances of case and in law, learned CIT(A) has erred in confirming that long- term capital gain arising on account of transfer of two plots of land has to be computed by adopting fair market value as on 151 April, 1981 at Rs.23.52 per sq.ft. as cost instead of Rs.75 per sq. ft. as was adopted by appellants. He ought not to have done so. 5. On facts and in circumstances of case and in law, learned CIT(A) has erred in confirming 4 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 disallowance under section 14A to extent of Rs.1,08,216. He ought not to have done so. 6. On facts and in circumstances of case and in law, learned CIT(A) has erred in not allowing full revenue deduction of VRS and early retirement incentive aggregating to Rs.11, 72, 72,664. He ought not to have done so. 7. On facts and in circumstances of case and in law, learned CIT(A) has erred in holding that sales-tax set off and refund amounting to Rs.l,76,85,412 is liable to be included in total turnover for computing deduction under section 80HHC of Act. He ought not to have done so. 8. On facts and in circumstances of case and in law learned CIT(A) has erred in holding that processing charges of Rs.34,97,542 and bad debts recovered amounting to Rs. 89,475/- are required to be reduced to extent of 90% under Clause (baa) of explanation to Section 80HHC for purposes of granting relief. He ought not to have done so. 9. On facts and in circumstances of case and in law, learned CIT(A) has erred in confirming disallowance of bad debts to extent of Rs.464,239. He ought not to have done so. Additional Ground : On facts and in circumstances of case and in law, learned Assistant Commissioner of Income-tax has erred in taxing Rs.5,53,63,662/- as short term capital gain arising on sale of Haemaccel Brand and Omnatax Brand. He ought not to have done so 4. In appeal filed by Revenue (i.e. ITA No.4493/Mum/2004), following grounds have been raised :- (i) "On facts and in circumstances of case and in law, CIT(A) erred in directing AO to recompute income from house property taking annual ratable value of flat at Rs.24,00,000/-. (ii) On facts and in circumstances of case and in law, CIT(A) erred in directing AO to work out profit by taking cost of raw materials at rates at which supplies are made by Korean concerns to other pharma companies with increase of 10 % thereof instead 5 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 of actual cost declared by assessee while invoking provisions of section 92 of Act. (iii) On facts and in circumstances of case and in law, CIT(A) erred in restricting disallowance of interest u/s.l4A of Act when nexus between sale of assets and investment in shares is not established by assessee. (iv) On facts and in circumstances of case and in law, CIT(A) erred in directing AO to exclude excise duty from total turnover while computing eligible deduction u/s.80HHC. (v) On facts and in circumstances of case and in law, CIT(A) erred in directing AO to exclude only processing charges and bad debts from total turnover while computing eligible deduction u/s.80HHC.. (vi) On facts and in circumstances of case and in law, CIT(A) erred in directing AO to recompute indirect cost as per directions given in his order without appreciating fact that indirect cost attributable to exports is defined in statute and AO has adopted method given in statute. (vii) On facts and in circumstances of case and in law, CIT(A) erred in directing AO to calculate deduction u/s.80HHC without reducing 90% of DEPB license sold without appreciating facts of case. (viii) On facts and in circumstances of case and in law, CIT(A) erred in directing AO to allow expenditure on account of VRS payment made to employees without appreciating facts of case". 5. At outset, learned AR placed on record orders of Tribunal and Hon ble High Court in assessee s own case wherein various grounds raised in present appeal has been decided. Copy of all these orders along with chart indicating various para numbers by which issues are covered, were handed over to Ld. Dr., wherein he did not point out any inconsistency. Both in assessee s appeal as well as Revenue s appeal, ground No.1 is regarding computation of income 6 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 from HP in respect of 5th floor of Hoechst House. Facts in brief are that assessee has let out 5th Floor of its building known as Hoechst House located at Nariman Point with total area of 7442 sq.ft. at monthly rate of Re.1/-. assessee has computed income of Rs.1,29,096/- in respect of this floor under head income from house property . AO computed ALP by taking Rs.150/- per sq.ft. per month for 7442 sq.ft., which works out to be Rs.1,33,95,600/-. By impugned order, CIT(A) directed AO to compute ALV at Rs.24,00,000/-. Both assessee and Revenue are in further appeals before us. Learned AR submitted that this issue has been decided by Tribunal in assessee s own case passed in ITA No.5791/Mum/2000 for assessment year 1994-95, vide order dated 5-11-2004, wherein Tribunal decided issue in favour of assessee after having following observations :- 11. Apropos ground No.5, it is requested that income from house property be computed as per municipal ratable value at Rs.1,44,058/- and not on adhoc figure of Rs.24,00,000/-. fifth floor of property Hoechst House , was let out to M/s VB Limited by assessee on monthly rent of Re.1 besides interest free deposit of Rs.2.20 crores. income from fifth floor was however, not calculated on rent of Re.1 per month. Municipal Corporation fixed book value of fifth floor at Rs.1,44,058/-, being 1/5th of total value so fixed. income from fifth floor was thus paid by assessee at Rs.1,26,146/-. Disagreeing, AO held that rent of Re.1 per month charged by assessee did not represent sum for which property might reasonably be expected to let from year to year, as contemplated under provisions of Section 23(1)(a) of IT Act. Since floor did not let out to M/s VB Limited, which held 26 percent share in assessee-company. Mr. Vijay Mallya, Chairman of UB Limited, was also Chairman of assessee-company. AO determined reasonable rent of floor after taking into account comparative rent charged by assessee from tenant of said floor. Thus, 7 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 fair rent of fifth floor was fixed by AO at Rs.1,20,56,040/- income from fifth floor was thus computed at Rs.96,44,832/-. learned CIT(A) directed AO to compute income from fifth floor, taking annual letting value thereof at Rs.24 lakhs as against Rs.1,44,058/- offered by assessee and Rs.31,20,36,040/- fixed by AO. 12. x x x x x 13. x x x x x 14. In Mr. M V Sonavala Vs. CIT (1989) 177 ITR 246 (Bom), Hon ble Bombay High Court has held that income from house property has to be computed on basis of sum for which property might reasonably be let out from year to year and annual municipal ratable value. It has been taken note of that in cases of properties subject to rent control legislation provided for fixation of standard rent, standard rent alone can be base for fixation of municipal ratable value for purposes of municipal tax (As per Dewan Daulat Rai Kapoor Vs. New Delhi Municipal Committee (1980) 122 ITR 700 (SC), Dr. Dalbir Singh Vs. MCD (1985) 46 CTR (SC)= 152 ITR 388 (SC) and Sheila Kaushish Vs. CIT (1981) 131 ITR 435 (SC). In last referred case, Hon ble Supreme Court has held that annual value of property is required to be determined with reference to standard rent and not actual rent received. As such, grievance of assessee justified. Gross annual ratable value of property , viz 5th floor Hoechst house is directed to be determined at Rs.1,44,058/-, being annual value determined by Municipal Corporation for purposes of computation of property income. As such, ground No.5 is allowed. Learned DR also did not oppose to aforesaid submission made by learned AR to effect that issue has been decided in favour of assessee by aforesaid orders of Tribunal in assessee s own case. 5.1 We have heard rival contentions, perused from record and orders of Tribunal and found that very same issue has already been decided by Tribunal in assessee s own case in terms discussed above. After considering decision of Hon ble Supreme Court, Tribunal has concluded that gross annual ratable value of property at annual value determined for purposes of computation of house property income is to be determined at 8 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 annual value determined by Municipal Corporation. As facts and circumstances during year under consideration are same, hence, respectfully following decision of Tribunal, we direct AO to determine ALV at value determined by Municipal Corporation for year under consideration. Hence, this ground of assessee is allowed for statistical purposes, whereas ground raised by Revenue is dismissed. 6. Ground No.2 is regarding addition u/s.92 in respect of purchases of Cefotaxime Sodium & Roxythromycin. Facts in brief are that in respect of manufacturing pharmaceutical formulation in form of tablets, capsules, injections etc., assessee has claimed loss. However, AO did not accept assessee s claim of loss and observed that assessee has reduced profit by inflating price of raw materials which has gone into its production. AO observed that purchase price paid for Cefotaxime Sodium was Rs.55,347.34 per kg., is higher than price paid by other importers, accordingly, AO invoked provisions of Section 92 and made addition of Rs.10.56 crores. By impugned order, CIT(A) partly allowed assessee s claim after having following observations :- 9. submission made by appellant's representative has been considered. As cited above, issue in so far as applicability of provisions of Section 92 of Act is concerned, it is repetitive issue and has been there in assessment year 1999-00 as well. In appellate order dated 20/03/2003, action of Assessing Officer in this respect has been confirmed. Since facts in year are same as in preceding assessment year, for reasons given in appellate order dated 20103/2003 in this year as well, action of Assessing Officer to hold that provisions of Section 92(1) are applicable in respect of 9 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 transactions of import of two raw materials utilised by appellant company in its manufacturing process is held correct and on that account decision calls for no interference. 10. As far as computation of amount to be added on account is concerned, first issue raised and discussed in item No. (i) is concerned as to whether for purposes of determination of profit of CIF value or landed cost be taken issue has been considered in appellate order dated 23/02/2004, where claim of appellant to adopt CIF value has been discussed. In light of reasons given therein, there is no cause to interfere in decision of Assessing Office in matter. Similarly, issue raised in item (ii) above is subject matter of verification for there is no dispute where raw material supplied has been received through out year either actual conversion rate is to be adopted or if that is not possible then average rate is to be adopted. Since claim regarding average conversion rate made by appellant is matter of verification, Assessing Officer is directed to verify this aspect and make adjustment to addition on this account if required. In so far as grant of further weightage discussed in para-8 above, there is no merit in claim in view of detailed discussions in this respect made in appellate order dated 20/03/2003. weightage is, therefore, required to be retained at 10% over and above purchase price paid by other pharmaceutical company in import of raw material from Korean concern at arms length. Assessing Officer shall, therefore, make adjustment to amount added as per directions given above. appeal in respect of Ground No.2 is thus, disposed off as partly allowed. Both assessee and revenue are in appeals before us. 6.1 Learned AR submitted that Hon ble Bombay High Court in Income Tax Appeal No.1528/2009 vide order dated 8-9-2009 in assessee s own case has decided similar issue in favour of assessee. Our attention was also invited to order of Tribunal in assessee s own case for A.Y.1996-97 & 1997-98, dated 16-5- 2007, wherein exactly similar issue was dealt with and following conclusions were arrived at :- 28. In view of above we hold that transaction between assessee and non-resident company was not arranged transaction . certificates produced by assessee from various parties establish that assessee did not buy product cefoaxime sodium at price higher than price at which 10 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 same product was sold to others. Accordingly, we hold that assessing officer failed to establish case where provisions of section 92 could be applied to disown loss incurred by assessee. Therefore, we do not find reason to take different view than one arrived at by learned CIT(A). We therefore reject ground of Revenue. 6.2 relevant observation in order of Hon ble Bombay High Court, dated 8-9-2009, reads as under :- 1. Heard learned Counsel for parties. 2. Following two substantial questions of law are sought to be raised in appeal. a) Whether on facts and in circumstances of case Tribunal is justified in law in deleting additions made on account of provisions for liability towards long service entitlement and leave salary encashment? b) Whether on facts and in circumstances of case Tribunal is justified in law in confirming order of CIT(A) in deleting addition of Rs.7.42 crores on ground that Assessing Officer was not justified in invoking provisions of Section 92 of Act. 3. So far as first question is concerned, it is squarely covered by judgment of Apex Court in case of Bharat Earth Movers Ltd Vs. CIT 245 ITR 248. Learned Counsel for appellant could not distinguish said judgment and so far as second question is concerned, in paragraph No.28 of order, Tribunal, after threadbare discussion and after appreciation of evidence recorded finding of fact with which no fault can be found. appeal is without any substance, same stands dismissed with no order as to costs. 6.3 Similar issue had also come before Tribunal in ITA No.4993/Mum/2001 in assessee s own case and Tribunal vide order dated 27.10.2010 by following its earlier order confirmed order of ld. CIT(A) and dismissed grounds of appeal taken by Revenue. As facts and circumstances during year under consideration are same, respectfully following decision of Tribunal and Hon ble Bombay High Court, we decide this issue in favour of assessee and ground raised by Revenue is dismissed. 11 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 7. Ground No.3 is regarding disallowance of estimated depreciation on obsolete assets of Rs.34,43,610/-. It was contended by learned AR that this issue has been decided by Hon ble Bombay High Court in case of CIT Vs. GR Shipping Ltd., ITA No.598/2009 in favour of assessee. 7.1 We have considered rival contentions and found from record that exactly similar issue has been decided by Tribunal in assessee s own case for assessment year 1998-99 and 1999- 2000, wherein Tribunal after considering decision in case of G.R.Shipping Company and Inductotherm India Ltd, 73 ITD 529, held that depreciation was allowable on obsolete assets to assessee. However, against this decision of Tribunal, department has not filed any further appeal before Hon ble High Court. 7.2 As facts and circumstances during year under consideration are same, respectfully following decision of Tribunal in assessee s own case, we do not find any merit in action of AO for declining assessee s claim of depreciation on obsolete assets. 8. Ground No.4 is in regard to fair market value as on 01.04.1981 for computation of LT capital gain on sale of 2 plots of Mulund factory land to Mafatlal Dyes & Chem and Nicholas Piramal. It was fairly conceded by ld. AR that this issue is covered by decision of 12 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 Tribunal in assessee s own case for A.Y.1998-99 and 1999-2000 against assessee. Therefore, respectfully following order of Tribunal in assessee s own case, we dismiss this ground of assessee and decide in favour Department. 9. Ground No.5 is regarding disallowance u/s.14A. Learned AR stated that this issue has been decided by Tribunal in assessee s own case for A.Y.1990-91 and 1998-99 in favour of assessee, against which department has not filed any appeal before High Court. Precise observation of Tribunal for A.Y.1998-99 reads as under :- 22. AO has not applied section 14A. In fact this section was not in statute during that year. learned CIT(Appeals) has factually analyzed issue and has come to conclusion that no expenditure can be attributable to earning of tax free income. On this factual matrix, we agree with learned counsel that decision of Hon ble Bombay High Court in case of Topstar Mercantile (P) Ltd. vs. ACIT 225 CTR (Bom) 351 applies and Tribunal cannot set aside issue for fresh adjudication for applying section 14A. Hon ble High court held as follows : In absence of any adverse finding by AO against assessee vis- -vis applicability of s. 14A Tribunal, while accepting assessee s contention, was not correct in recording direction to consider applicability of s. 14A while remanding matter. 23. Respectfully following same, we uphold order of first appellate authority and dismiss this ground of Revenue. Against above order of Tribunal, Revenue has not filed any appeal before High Court. As facts and circumstances during year under consideration are same, respectfully following 13 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 decision of Tribunal in assessee s own case as discussed above, we do not find any merit in disallowance made under Section 14A. 10. Ground No.6 is regarding disallowance of full revenue deduction of VRS & early retirement incentives aggregating to Rs.11,72,72,664/-. It was contended by learned AR that similar issue has been decided by Hon ble Supreme Court in case of K. Ravindranathan Nair Vs. CIT, 247 ITR 178 (SC) in favour of assessee. Reliance was also placed on decision of Hon ble Bombay High Court in case of CIT Vs. Foseco India Ltd, 352 ITR 320. Learned AR also submitted that similar claim of Rs.41.64 cores in assessment year 1999-2000 was allowed by AO himself. 10.1 We have heard rival contentions. Facts in brief are that assessee has incurred expenditure under VRS scheme for its various units and head office. assessee had shown total cost incurred on VRS at Rs.41.64 crores incurred in financial year 1998-1999. Out of this, VRS cost debited in financial year 1999-2000 is Rs.2.82 crores and 13.88 crores out of VRS expenses incurred during financial year 1998-99. AO declined assessee s claim by observing that assessee company stopped manufacturing certain industrial products permanently at this Mulund unit, therefore, business of assessee, as far as manufacturing of those particular products was concerned, is stopped. As per AO, VRS expenses incurred by assessee is only allowable to it in case of going concern. As per AO, business expenditure is allowed for business only when it is 14 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 carried on by assessee, where business has been closed down and not merely suspended, compensation paid to employees while winding up business should not be allowed as deduction. AO also observed that expenditure claimed by assessee is not in nature of VRS expenses but it is expenses incurred for compulsory retrenchment, as per AO this is cost incurred by assessee for winding up and not to reach its business. It is not at all covered by Scheme of VRS. By impugned order, CIT(A) by observing that entire sum disallowed by AO does not partake character of retrenchment compensation and that part of amount is one time character of ex-gratia payment that employees are eligible to receive even otherwise on retirement or resignation even where there is no closure is to be allowed. Accordingly, it was held by CIT(A) that disallowance is to be restricted as to what has been paid as VRS amount and early retirement incentive for Mulund Factory that has arisen on account of closure into accounting years. Against this order of CIT(A), both assessee and Revenue are in appeal before us. 10.2 We have considered rival contentions and found from record that expenditure on VRS debited and claimed in this year were duly approved by Income Tax Department itself. Even during relevant assessment year under consideration, we found that Mulund factory was working and AO was not justified in observing that expenditure was incurred for closing that unit. We found that various 15 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 manufacturing unit of assessee at Mulund, Ankleshwar and Goa and under loan licence agreement part of corporate business and many of projects which were being maintained at Mulund were continued to be produced under loan licence agreement. As expenditure so incurred on VRS was wholly and exclusively for purpose of business, even if we consider same under provision of Section 37(1), same cannot be disallowed. Applying proposition of law laid down by Hon ble Supreme Court in case of K. Ravindranathan Nair (supra) and Hon ble High Court in case of Foseco India Ltd,(supra) to facts of instant case, we do not find any merit in action of lower authorities for declining assessee s claim for deduction of VRS and early retirement incentives paid to workers. In result, ground taken by assessee is allowed, whereas ground of revenue is dismissed. 11. Ground No.7 is in regard to sales-tax set off and refund amounting to Rs.1,76,85,412 is liable to be included in total turnover for computing deduction under section 80HHC of Act and Ground No.8 is regarding processing charges of Rs.34,97,542 and bad debts recovered amounting to Rs. 89,475/- are required to be reduced to extent of 90% under Clause (baa) of explanation to Section 80HHC for purposes of granting relief. This issue of eligibility of income from processing charges has been considered by Hon ble Supreme Court in case of ACG Associated Capsules Vs. CIT, 343 ITR 89 (SC). Tribunal also in assessee s own case 16 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 for A.Y.1999-2000, in ITA No.4180/Mum/2003, following judgment of Hon ble Apex Court in case of ACG Associated Capsules (supra), held as under :- 2.10.2 We have perused records and considered matter carefully. dispute is regarding applicability of provision of Explanation (baa) to processing charges and sales tax refund and setoff. As regards processing charges, issues is covered by judgement of Hon ble Supreme Court in case of Ravindranathan Nair (295 ITR 228) in which it has been held that processing charges form independent item of income like commission rent etc. and, therefore, 90% of same is required to be reduced from profit of business as per Explanation (baa). We therefore hold processing charges will be covered by Explanation (baa). issue of applicability of provision of Explanation (baa) to seals tax refund had been considered by Hon ble High Court of Bombay in case of Dresser Rand (322 ITR 449) in which it has been held that receipts like recovery of freight insurance, packing charges, sales tax refund and service income will not be part of business profit and has to be considered for reduction as per Explanation (baa). Subsequently, however Hon ble High Court in case of Pfizer Ltd. (330 ITR 62) after referring to judgement of in case of Dresser Rand (supra) held that insurance claim on stock in trade was not independent item of income and therefore has to be considered as integral part of business profit. However, since sales tax refund has been specifically considered by Hon ble High Court in case of Dresser Rand (supra) respectfully following said decision, we hold that sales tax refund and set off will be considered for reduction as per Explanation (baa). Further, alternate claim of assessee that only net receipt should be considered for reduction as per Explanation (baa) is covered by judgement of Hon ble Supreme Court in case of ACG Associated Capsules P. Ltd. v. CIT (343 ITR 89). We therefore direct Assessing Officer only net receipt after deducting expenditure incurred for earning of such income, will be considered for reduction as per Explanation (baa). 11.1 In view of above, issue with regard to allowing claim of deduction in respect of sales tax set off and refund, assessee is not eligible in view of Explanation (baa) to Section 80HHC. Accordingly, we dismiss this ground of assessee s appeal and direct AO to reduce amount of sales tax refund from eligible profit for computing claim of deduction u/s.80HHC. 17 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 11.2 With respect to claim of deduction u/s.80HHC in respect of processing charges, issue has been dealt by Tribunal in assessee s own case for assessment year 1999-2000 as narrated above. Respectfully following same, we direct AO that only net receipts after deducting expenditure incurred for earning such income will be considered for reduction from eligible business profit as per Explanation (baa). Matter is restored back to file of AO for deciding as per direction given by Tribunal in its order for assessment year 1999-2000 in assessee s own case, as discussed hereinabove. 12. Ground No.9 is in regard to confirming disallowance of bad debts to extent of Rs.464,239/-. As per learned AR, this issue has been decided in favour of assessee by Hon ble Supreme Court in case of TRF Ltd. Vs. CIT, Ranchi, (2010) 323 ITR 397 (SC), wherein Hon ble Supreme Court held that, this position in law is well settled. After April 1, 1989, it is not necessary for assessee to establish that debt, in fact, has become irrecoverable. It is enough if bad debt is written off as irrecoverable in accounts of assessee. 12.1 We have considered rival contentions and found that before AO assessee has furnished reasons for writing off bad debts along with details of bad debts written off. reasons cited by assessee in case of bad debts pertain to old unreconciled balance, short 18 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 payment against invoices, consignment loss in transit, amount short paid etc. As per our considered view amount so written off by assessee is eligible for deduction as bad debts or business loss. Merely because AO was not convinced with efforts made by assessee for recovery of bad debts, no disallowance can be made in view of decision of Hon ble Supreme Court in case of TRF, 323 ITR 397 (SC). 12.2 From record we find that out of total disallowance of Rs.11,22,804/- claimed as bad debts written off, CIT(A) confirmed disallowance of Rs.4,64,239/- against which assessee is in further appeal before us. precise observation of CIT(A) while restricting disallowance to Rs.4,64,239/- was as under :- However, no such evidence has been produced in regard to export debt outstanding against AO KOVI Pharma Russia and Mark International Russia totaling to Rs.4,64,239/-. In respect of domestic debts, amounts are small and apparently are outstanding for considerable period of time. Therefore, if in respect of these domestic debts, even without taking legal course of action If appellant as prudent business person had arrived at conclusion that debt had become had and written off all amounts in accounts its claim for deduction under Section 36(1)(vii) read with Section 36(2) of Act is required to be accepted. In terms of amended provisions of law in this regard nothing further needed to be established. It is clear from above observation of CIT(A) that he has already considered amended provisions of law and allowed assessee s claim for deduction under Section 36(1)(vii) except amount of Rs.4,64,239/-. Since no evidence with regard to export debt outstanding was produced before CIT(A), he has partly confirmed disallowance 19 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 of Rs.4,64,239/-. In interest of justice and fair play, we restore this ground to extent of Rs.4,64,239/- to file of AO for deciding afresh and assessee is directed to furnish details regarding income accounted for in respect of export to AOKOVI Pharma Russia and Mark International Russia. 13. additional ground raised by assessee pertains to taxing Rs.5,53,63,662/- as short term capital gain arising on sale of Haemaccel Brand and Omnatax Brand. It was contended by ld. AR that this issue has been decided by Hon ble Surpeme Court in case of CIT Vs. B.C.Srinivasa Shetty, reported in 128 ITR 294 (SC), wherein Hon ble Apex Court has held as under :- We are of opinion that goodwill generated in newly commenced business cannot be described as "asset" within terms of section 45 and, therefore, its transfer is not subject to income-tax under head "Capital gains". question which has been raised before us has been considered by some High Courts, and it appears that there is conflict of opinion. Madras High Court in CIT v. K. Rathnam Nadar [1969] 71 ITR 433, Calcutta High Court in CIT v. Chunilal Prabhudas & Co. [1970] 76 ITR 566, Delhi High Court in Jagdev Singh Mumick v. CIT [1971] 81 ITR 500, Kerala High Court in CIT v. E.C. Jacob [1973] 89 ITR 88 [FB], Bombay High Court in CIT v. Home Industries and Co. [1977] 107 ITR 609 and CIT v. Michel Postel [1978] 112 ITR 315 and Madhya Pradesh High Court in CIT v. Jaswantlal Dayabhai[1978] 114 ITR 798, have taken view that receipt on transfer of goodwill generated in business is not subject to income-tax as capital gain. On other side lies view taken by Gujarat High Court in CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393 and Calcutta High Court in K.N. Daftary v. CIT[1977] 106 ITR 998, that even if no cost is incurred in building up goodwill of business, it is nevertheless capital asset for purpose of capital gains, and cost of acquisition being nil entire amount of sale proceeds relating to goodwill must be brought to tax under head "Capital gains". It is apparent that preponderance of judicial opinion favours view that transfer of goodwill initially generated in business does not give rise to capital gain for purposes of income-tax. 20 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 Upon aforesaid consideration, Civil Appeal No. 1146(T) of 1975 and Civil Appeal No. 1378 of 1976 must be dismissed. Civil Appeal No. 926 of 1973 raises same question with reference to section 12B, Indian IT Act, 1922. As relevant statutory provisions of Indian IT Act, 1922, are substantially similar to corresponding provisions of IT Act, 1961, that appeal is also liable to be dismissed. Accordingly, appeals are dismissed with costs. 14. We have considered rival contentions and found that AO has taxed STCG of Rs.5.53 cores on sale of Haemacceel Brand & Omnatax brand. In return of income originally filed u/s.139(1) of Act, assessee company had shown entire receipt arising to it on sale of technology as well as on sale of trade mark as not chargeable to tax. However, in subsequent revised return filed, it had offered for tax receipt arising on sale of technology as chargeable to tax as long term capital gains. However, receipt on sale of trade mark was still claimed as exempt on ground that assessee company had not incurred any cost for acquisition of these trade marks. claim was made relying upon decision of Apex Court in case of B.C. Srinivasa Shetty (supra). assessee copany had thus claimed that consideration received is not taxable and hence is not included in computation of long term capital gains. This claim of assessee was however not accepted by Assessing Officer who after analyzing basis on which right6 over trade marks got acquired, came to conclusion that certain portion of expenditure incurred by assessee company over period of time and claimed as deduction under various heads can be related to cost of 21 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 acquisition of these trademarks. On that basis, he concluded that receipt claimed as exempt from tax that is arising to appellant on transfer of trademarks is chargeable to tax and brought amount so determined to tax as income of appellant under head short term capital gains. However, this ground was not taken before CIT(A). Therefore, he has not decided issue. In fitness things, we restore this ground to file of CIT(A) for deciding on merit after giving due opportunity to assessee and also considering decision of of Hon ble Supreme Court in case of B.C.Srinivasa Shetty (supra). We direct accordingly. Now, we take grounds raised by Revenue in its appeal, not decided hereinabove. 15. Ground No.(iii) in Revenue s appeal is regarding disallowance of interest attributable to tax free investment income in Chiron Behring Vaccines Pvt. Ltd.. Learned AR, at outset, submitted that very issue has been decided by Tribunal for A.Y.1999-2000 in ITA No4180/Mum/2009 in assessee s own case vide order dated 20-2- 2013. precise observation of Tribunal reads as under :- 3.3 fourth dispute is regarding disallowance of interest attributable to tax free income from investment in Chiron Behring Vaccines Private Limited. assessee had made investment of Rs.4.90 cr in equity shares of Chiron Behring Vaccines Private Limited and sources of investment had been explained as sale proceeds of Rs.19 cr from sale of assets to said company. CIT(A) accepted claim of sale proceeds but confirmed disallowance of interest for 20 days as there was time gap of 20 days between date of investment and date of receipt. No material is placed on record before us to controvert claim of assessee regarding availability of sale proceeds. Further while dealing with appeal of assessee we have deleted disallowance of 22 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 interest even for 20 days upheld by CIT(A). Therefore, appeal filed by revenue deserves to be dismissed. order of CIT(A) is upheld. 15.1 We have gone through order passed by Tribunal and found that aforesaid issue has been decided by Tribunal in assessee s favour. As facts and circumstances during year are same, respectfully following order of Tribunal in assessee s own case as cited above by learned AR, we dismiss ground raised by Revenue. 16. Ground No.(iv) in Revenue s appeal is regarding directing AO to exclude excise duty from total turnover while computing eligible deduction u/s.80HHC. This issue has been decided by Hon ble Supreme Court in case of CIT Vs. Laxmi Machine Works, 290 ITR 667(SC), wherein it was held that excise duty has no element of profit, therefore, not includible in total turnover for computing deduction u/s.80HHC. Respectfully, following decision of Hon ble Supreme Court, we do not find any infirmity in order of CIT(A) directing for exclusion of excise duty from total turnover for computing deduction u/s.80HHC. 17. Ground No.(v) is regarding excluding only processing charges and bad debts from total turnover while computing eligible deduction u/s.80HHC. This issue is covered by decision of Hon ble Supreme Court in case of CIT Vs. Ravindranathan Nair, 295 ITR 228(SC), wherein Hon ble Supreme Court has decided this issue in favour of department. 23 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 21. At outset, we may state that, in present case, we are dealing with law as it stood during assessment year 1993-94. At that time Section 80HHC(3) of I.T. Act constituted Code by itself. Subsequent amendments have imposed restrictions/qualifications by which said provision has ceased to be code by itself. In above formula there existed four variables, namely, business profits, export turnover, total turnover and 90% of sums referred to in clause (baa) to said Explanation. In computation of deduction under Section 80HHC all four variables had to be taken into account. All four variables were required to be given weightage. substitution of Section 80HHC(3) secures profits derived from exports of eligible goods. Therefore, if all four variables are kept in mind, it becomes clear that every receipt is not income and every income would not necessarily include element of export turnover. This aspect needs to be kept in mind while interpreting clause (baa) to said Explanation. said clause stated that 90% of incentive profits or receipts by way of brokerage, commission, interest, rent, charges or any other receipt of like nature included in Business Profits, had to be deducted from Business Profits computed in terms of Sections 28 to 44D of I.T. Act. In other words, receipts constituting independent income having no nexus with exports were required to be reduced from Business Profits under clause (baa). bare reading of clause (baa)(1) indicates that receipts by way of brokerage, commission, interest, rent, charges etc. formed part of gross total income being Business Profits. But for purposes of working out formula and in order to avoid distortion of arriving export profits clause (baa) stood inserted to say that although incentive profits and "independent incomes" constituted part of gross total income, they had to be excluded from gross total income because such receipts had no nexus with export turnover. Therefore, in above formula, we have to read all four variables. On reading all variables it becomes clear that every receipt may not constitute sale proceeds from exports. That, every receipt is not income under I.T. Act and every income may not be attributable to exports. This was reason for this Court to hold that indirect taxes like excise duty which are recovered by taxpayers for and on behalf of government, shall not be included in total turnover in above formula (See:Commissioner of Income Tax, Coimbatore v. M/s. Lakshmi Machine Works - 2007(6) Scale 168). 22. In present case, processing charges were included in gross total income from cashew business. That, even according to assessee said charges constituted important component of gross total income from cashew business. This is not disputed. Therefore, in terms of clause (baa), 90% of "independent income" had to be deducted from gross total income to arrive at Business Profits to which fraction had to be applied. Since, processing charges constituted independent income similar to rent, commission, etc., which formed part of gross total income, same had to be reduced by 90% as contemplated in clause (baa) to arrive at Business Profits. Therefore, said processing charges 24 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 were includible in total turnover in formula under Section 80HHC(3) of I.T. Act. 23. Before concluding we state that nature of every receipt needs to be ascertained in order to find out whether said receipt forms part of/or that it has attribute of export turnover. When indirect tax is collected by taxpayer on behalf of government tax recovered is for government. It may be income in conceptual sense or even under I.T. Act but while working out formula under Section 80HHC(3) of I.T. Act and while applying four variables one has to ascertain whether receipt has attribute of export turnover. indirect tax like excise duty does not have that element of export turnover as understood in above formula. As stated above, it is recovered by taxpayer on behalf of government. Therefore, in present cases, our judgment in Commissioner of Income Tax, Coimbatore v. M/s. Lakshmi Machine Works - 2007(6) Scale 168, has no application. 24. Accordingly, impugned judgments of High Court and Tribunal are set aside and above civil appeals filed by Department are accordingly allowed with no order as to costs. 17.1 This issue has been discussed by us at para 11.2 hereinabove, accordingly AO to recompute deduction u/s.80HHC after excluding net income from processing charges. However, bad debts recovered is neither part of total turnover nor export turnover for purpose of Section 80HHC, therefore, same is required to be excluded from eligible profit for purpose of clause (baa). 18. Ground No.(vi) is in regard to recomputation of indirect cost attributable to export of trading goods. Facts in brief are that assessee is mixed exporter in year under consideration and has therefore claimed deduction in terms of clauses (i) and (ii) of Section 80HHC(3)(c) in regard to export of manufactured goods and trading goods. further deduction of Rs.56,62,707/- was claimed in terms of proviso to Section 80HCC(3) of Act. In regard to 25 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 computation of deduction under Section, assessee has expressed grievances in respect of taking indirect cost for computing deduction in respect of export of trading goods at higher amount holding that all expenses not directly related to manufacturing activities to be taken for said purpose. 18.1 It was contended by learned DR that this issue is covered by decision of Tribunal in assessee s own case for A.Y.1998-99, wherein Tribunal has decided this issue in favour of department, wherein Tribunal has held as under :- 10.12 It is clear from working of Assessing Officer that for determining indirect cost, AO has reduced from total cost of business, cost of goods as well as other items. Therefore, we do not find any error as far as formula adopted by Assessing Officer for computation of indirect cost allocated to export of trading goods. 18.2 On other hand, learned Senior AR appearing for assessee contended that AO committed factual error in determining indirect cost, insofar as no export was effected from Hyderabad branch, therefore, cost at Hyderabad branch with respect to local sales cannot be attributed to export of trading goods effected from Mumbai. As per learned Senior AR for purpose of computation of indirect cost allocable to export of goods under Section 80HHC(3b), expenses, which has nothing to do with export of trading goods should be excluded. He further contended that those expenses which relate to either manufacturing of goods or to domestic sales should not be considered as indirect expenses for purpose of 26 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 computation of deduction in respect of trading goods. As per learned AR, Hyderabad branch did not carry out any activity relating to export of trading goods, therefore, there is no justification for reducing profit of trading export by Hyderabad branch expenses. 18.3 We have considered rival contentions and found from record that exactly similar issue has been dealt by Tribunal in assessee s own case for assessment year 1998-99. We found that in cross objection (i.e. CONo.65/Mum/2005), also assessee has raised following issue :- On facts and in circumstances of case and in law learned Commissioner of Income-tax (Appeals) has erred in holding that in computing deduction in respect of export of trading goods under section 80HHC of Income-tax Act, 1961, expenditure incurred at branches of appellant company to extent not directly related to domestic sale was liable to be treated as part of indirect cost of trading exports without appreciating fact that branches did not carry out any activity relating to trading export. He ought not to have done so. 18.4 We found that this issue is covered by decision of Tribunal in assessee s own case for A.Y.1998-99 in ITA No.4179/Mum/2003, vide order dated 12-12-2012, wherein Tribunal has upheld action of AO for computing profit of trading export after having detailed discussion, which reads as under :- 10 We have considered rival submissions as well as relevant material on record. Though, issue before us is limited only to extent of finding of CIT(A) pertaining to expenditure incurred at Hyderabad branch office to be taken as part of indirect cost for working out deduction u/s 80HHC (3)(b). However, said finding of CIT(A) is based on view taken by Commissioner of Income Tax(Appeals) that u/s sub.sec. 3(b) of sec. 80HHC, indirect cost attributable to export includes items of expenditure only if it has some connection, link, attributes to 27 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 export. This proposition propounded by CIT(A) is apparently against provisions of section 80HHC(3)(b). If provisions of sec 80HHC(3)(b) are read in conjunction with clause (e) of Explanation to said sub. section, it is clear that indirect cost for purpose of allocation under sub.sec (3) shall be taken as total indirect cost incurred for total turnover (local + export) and same has to be allocated in ratio of export turnover of trading goods to total turnover. 10.1 For ready reference, we quote sec 80HHC(3)(b) and clause (e) of Explanation as under: [(3) For purposes of sub-section (1), (a) . (b) where export out of India is of trading goods, profits derived from such export shall be export turnover45 in respect of such trading goods as reduced by direct costs and indirect costs attributable to such export; (c) Explanation. For purposes of this sub-section, (a) .. (b) (d) . (e) "indirect costs" means costs, not being direct costs, allocated in ratio of export turnover in respect of trading goods to total turnover ; (f) 10.2 It is clear from combined reading of sub. Sec. 3(b) and clause (e) of explanation to sec. 80HHC(3) that profit derived from export of trading goods shall be export turnover of trading goods minus direct cost and indirect cost attributable to such exports. indirect cost has been defined under clause (e) of Explanation which means indirect cost which is not direct cost and allocated in ratio of export of trading goods to total turnover. 10.3 total turnover further defined under clause (ba) of Explanation to sub sec. 4C. Therefore, total turnover includes local sales as well as export sales regarding manufacturing goods and trading goods except certain items which shall be included as per clause (ba). When indirect cost has to be allocated in ratio of export turnover of trading goods to total turnover, then indirect cost subjected to be allocated in said ratio includes all items of indirect cost incurred for total turnover. 10.4 It is manifest from plan reading of relevant provisions that indirect cost for purpose of sec. 80HHC (3)(b) r.w.s clause (e) of Explanation does not restrict items of expenditure incurred in relation to export of trading goods only; but entire indirect cost incurred for total turnover has to be allocated in ratio of export turnover of trading goods to total turnover which itself makes it clear that only such portion of total indirect cost in ratio of export turnover of trading goods to total turnover shall be allocated for purpose of computing profits derived from such export u/s 80HHC(3)(b). 28 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 10.5 Though revenue has not filed any appeal against findings of CIT(A); however, revenue, being respondent can raise plea against sustainability of order of CIT(A); but effect of such plea would be only to extent of defence against appeal and if respondent/revenue succeeds in said ground/plea, then appeal of appellant/assessee would fail. 10.6 scope of raising plea against sustainability of impugned order as respondent defended against appeal filed by other party has been provided under Rule 27 of ITAT Rules; therefore, though impugned order of CIT(A) would stand and will have full effect in so far as it is against revenue; but if plea raised by revenue is accepted as regards validity of impugned order but then revenue succeeds only to extent that appeal of assessee would fail. 10.7 scope of Rule 27 of ITAT Rules has been discussed by Hon ble jurisdictional High Court in case of Bamasi (B.R.) v. Commissioner of Income-tax reported in 83 ITR 223 as under; But even if assessee had not made such statement, above judgment shows that assessee would be entitled to raise new ground, provided it is ground of law and does not necessitate any other evidence to be recorded, nature of which would not only be defence to appeal itself, but may also affect validity of entire assessment proceedings. If ground succeeds, only result would be that appeal would fail. acceptance of ground would show that entire assessment proceedings were invalid, but yet Tribunal which hears that appeal would have no power to disturb or to set aside order in favour of appellant against which appeal has been filed. ground would serve only as weapon of defence against appeal. If respondent has not himself taken any proceedings to challenge order in appeal, Tribunal cannot set aside order appealed against. That order would stand and would have full effect in so far as it is against respondent. Tribunal refused to allow assessee to take up this ground under incorrect impression of law that if point was allowed to be urged and succeeded, Tribunal would have not only to dismiss appeal, but also to set aside entire assessment. point would have served as weapon of defence against appeal, but it could not be made into weapon of attack against order in so far as it was against assessee. 10.8 CIT(A) has given findings on issue in paras 28 to 30 as under; 28. After careful consideration of submission, it has to be said that section of Assessing Officer does not appear to be correct. What cannot be ignored is that subsection (3)(b)deduction inter-alia of indirect cost attributable to such exports. phrase attributable to such export cannot be missed out. Therefore, item of expenditure can be taken as cost for purpose only if it has some connection, link, attributes to export. If expenditure is 29 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 totally disconnected with export activity, it cannot be taken as part of indirect costs, Therefore, Assessing Officer has definitely gone beyond what is provided in Act to workout indirect cost attributable to export of trading goods. 29. In order to determine correctly indirect cost, appellant s representative was asked to furnish details of trading export activities. In this regard details reveal that trading goods exports comprise partly of goods imported and partly purchased locally either from Mumbai or elsewhere. It was submitted that material department of company procured items of trading exports. All actions and formalities for exports are carried out by Export Department. Expenses of both these departments are booked as Head Office Expenses. appellant s representative furnished details of Head Office Expenses. It was claimed that some of expenses incurred therein are for domestic activities and only expenditure amounting to Rs.29,04,71,863/- is such that is to be taken as somehow attributable to exports to be taken as part direct expenses. perusal of details show that as far as Head Office Expenses is concerned, working thereof is correct and hence needed to be accepted. 30 However, appellant company exported trading goods during year that were procured from Hyderabad and Mumbai. At both places appellant company has branch offices apart from head office being located in Mumbai. Though it was claimed that job of procurement of trading goods exported are carried out from head office that is having separate procurement and export divisions, while involvement of branch office at Mumbai can be ruled out with specific office for purpose located therein, in respect of branch office at Hyderabad, other place for procurement, same cannot be accepted. Hence expenditure incurred at Hyderabad branch office to extent not directly related to domestic sales is also required to be taken as part of indirect cost for working out deduction under section 80 HHC (3)(b) of Act, Assessing Officer shall rework out indirect cost under section accordingly. x x x x x x 10.10 As we have already discussed that for purpose of sec. 80HHC(3)(b) r.w.clause (e) of Explanation, indirect cost to be allocated in ratio of export turnover of trading goods to total turnover has to be taken as total figure of indirect cost incurred for total turnover and not indirect cost directly related to export turnover as held by CIT(A). x x x x x x x 10.12 It is clear from working of Assessing Officer that for determining indirect cost, AO has reduced from total cost of business, cost of goods as well as other items. Therefore, we do not find any error as far as formula adopted by Assessing Officer for computation of indirect cost allocated to export of trading goods. 30 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 18.5 As facts and circumstances during year under consideration are same, respectfully following decision of Tribunal in assessee s own case, ground in Revenue s appeal is allowed and cross objection filed by assessee is dismissed. 19. Ground No.(vii) is regarding directing AO to calculate deduction u/s.80HHC without reducing 90% of DEPB license sold without appreciating facts of case. This issue has been decided in favour of assessee by decision of Hon ble Supreme Court in case of Topman Exports Vs. CIT, 342 ITR 49 (SC), wherein Hon ble Supreme Court has held as under :- aforesaid discussion would show that where assessee has export turnover exceeding Rs. 10 crores and has made profits on transfer of DEPB under clause (d) of section 28, he would not get benefit of addition to export profits under third or fourth proviso to sub-section (3) of section 80HHC, but he would get benefit of exclusion of smaller figure from "profits of business" under Explanation (baa) to section 80HHC of Act and there is nothing in Explanation (baa) to section 80HHC to show that this benefit of exclusion of smaller figure from "profits of business" will not be available to assessee having export turnover exceeding Rs. 10 crores. In other words, where export turnover of assessee exceeds Rs. 10 crores, he does not get benefit of addition of ninety per cent, of export incentive under clause (iiid) of section 28 to his export profits, but he gets higher figure of profits of business, which ultimately results in computation of bigger export profit. High Court, therefore, was not right in coming to conclusion that as assessee did not have export turnover exceeding Rs. 10 crores and as assessee did not fulfill conditions set out in third proviso to section 80HHC(iii), assessee was not entitled to deduction under section 80HHC on amount received on transfer of DEPB and with view to get over this difficulty assessee was contending that profits on transfer of DEPB under section 28(iiid) would not include face value of DEPB. It is well-settled principle of statutory interpretation of taxing statute that subject will be liable to tax and will be entitled to exemption from tax according to strict language of taxing statute and if as per words used in Explanation (baa) to section 80HHC read with words used in clauses (iiid) and (iiie) of section 28, assessee was entitled to deduction under 31 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 section 80HHC on export profits, benefit of such deduction cannot be denied to assessee. impugned judgment and .orders of Bombay High Court are accordingly set aside. appeals are. allowed to extent indicated in this judgment. Assessing Officer is directed to compute deduction under section 80HHC in case of appellants in accordance with this judgment. There shall be no order as to costs. 19.1 We have considered rival contentions and perused record. As issue is covered by decision of Hon ble Supreme Court in case of Topman Exports (supra), respectfully following same, we direct AO to compute deduction on DEPB since license sold in terms of decision in case of Topman Exports (supra). 20. In result, appeals of assessee (ITA No.3703/Mum/04) and Revenue (ITA No.4493/Mum/13) are allowed in part, whereas Cross Objection filed by assessee (CO No.65/Mum/2005) is dismissed. 21. In appeal filed by Revenue (i.e. ITA No.695/Mum/2004), following grounds have been raised :- 1. "On facts and in circumstances of case and in law, CIT (A) erred in restricting penalty levied u/s 271(1)(c) to amount leviable on account receipt arising to assessee on transfer of trade marks only, without appreciating facts of case." 2. "The appellant prays that Order of CIT(A) on above ground to be set aside and that of ITO/AO/DCIT be restored. appellant craves leave to amend or alter any grounds or add new ground which may be necessary." 21.1 Assessee is also in appeal (ITA No.635/Mum/2006) against order of CIT(A) for upholding penalty on short-term capital gains computed by AO. 32 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 21.2 We have heard rival contentions and found that AO has initiated penalty proceedings under Section 271(1)(c) with respect to addition made u/s.92 of Act (Rs.10,56,64,492/-), b) inadmissible and wrong claim of deduction on account of VRS expenses (Rs.15,08,52,250/-), c) suppression of short-term capital gain on sale of trademarks (Rs.5,53,63,662/-) and d) wrong claim of depreciation amounting to Rs.34,43,610/-. 21.3 By impugned order, CIT(A) deleted penalty imposed with respect to addition made under Section 92 by following order of earlier assessment order, wherein similar penalty imposed by AO was deleted by CIT(A) in Appeal No.214/2004-05, dated 18-11- 2005. CIT(A) also deleted penalty imposed with respect to expenditure disallowed on VRS by observing that two views are possible for such expenditure, therefore, issue has become debatable one on which no penalty can be imposed. Similarly, with respect to penalty imposed for denial of claim of depreciation on obsolete assets, CIT(A) had deleted same by observing that issue is debatable and assessee has disclosed all material facts and excluded value of all these assets of written down value of respective block of assets. CIT(A) further observed that on issue which is not only legal but is also clearly debatable, no penalty can be held as imposable. However, in respect of penalty for addition made on account of short term capital gain, CIT(A) confirmed penalty. 33 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 21.4 Both assessee and Revenue are in appeals before us. Learned AR relied on order of Hon ble Supreme Court in case of Reliance Petroproducts Pvt. Ltd. 322 ITR 158, wherein it was held that for levy of penalty under Section 271(1)(c), there has to be concealment of particulars of income of assessee and revenue is required to show that assessee must have furnished inaccurate particulars in his income. When there is no finding that any details supplied by assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting penalty under Section 271(1)(c). mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of assessee. Such claim made in return cannot amount to inaccurate particulars. 21.5 We have considered rival contentions, carefully gone through orders of authorities below and also deliberated on judicial pronouncements referred by lower authorities in their respective orders as well as by learned AR and learned DR during course of hearing before us. As discussed in quantum appeal, we have already deleted addition made u/s.92, disallowance of VRS as well as claim of depreciation on obsolete assets. As quantum itself has been deleted, there is no legs for levy of penalty for such disallowance/addition. Accordingly, we confirm action of CIT(A) for deleting penalty imposed with respect to these above three items. In respect of penalty imposed for addition on account of short 34 ITA Nos.3703/04, 4493/04, 635/06, 695/06 & CO No.65/05 term capital gain, we have already restored matter to CIT(A) in this regard for deciding afresh, accordingly, penalty for such addition is also restored to file of CIT(A) for deciding afresh after deciding quantum addition in terms of direction given hereinabove. 22. In result, appeal of Revenue is dismissed, whereas appeal of assessee is allowed in part for statistical purposes. 23. Resultantly, ITA No.3703/M/2004, ITA No.4493/M/2004 & ITA No.635/M/2006 are partly allowed and ITA No.695/M/2006 and C.O.No.65/M/2006 are dismissed. Order pronounced in open court on this 16th April.2014. 16th April,2014 Sd/- Sd/- ( ) ( ) (VIJAY PAL RAO) (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER Mumbai; Dated 16/04/2014 /pkm, PS Copy of Order forwarded to : 1. / Appellant 2. / Respondent. 3. / CIT(A)-X, Mumbai. 4. / CIT 5. / DR, ITAT, Mumbai 6. Guard file. //True Copy// / BY ORDER, (Asstt. Registrar) / ITAT, Mumbai ACIT Rg. - 8(1) v. M/s. Aventis Pharma Ltd