TaxTMI 
TaxTMI 
2012 (9) TMI 510
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.... various additions. The assessee challenged the assessment order before Ld CIT(A) and got partial relief. The revenue has filed this appeal challenging the relief granted by Ld CIT(A). 3. The first issue relates to the disallowance of licence fee paid to RPG Enterprises amounting to Rs. 60.00 lakhs. We notice that the assessing officer has disallowed the licence fee payments by following his order in the earlier years. In those years, the assessee has carried the matter in appeal before the Ld CIT(A) and then to the Tribunal. The Cochin bench of the Tribunal in its appellate order dated 11.5.2007 in ITA Nos. 104 to 106 of 2005 relating to the assessment year 2001-02 to 2003-04 has held that the licence fee paid to M/s RPG Enterprises was an allowable expenditure. The said view was reiterated by the Tribunal in its order dated 12.5.2009 relating to the assessment year 2005-06 in ITA No.60/Coch/2009. We further notice that the Ld CIT(A) has followed the decisions rendered by the Tribunal in deciding this issue in favour of the assessee. The assessee submitted before us that there was no change in the facts surrounding this expenditure. However, the Ld D.R, by placing reliance o....
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....m sale of investments. The appellant maintained composite bank account in which all receipts from sale of goods, sale of investments and assets etc. were deposited. The amounts so deposited were in excess of the loans granted to subsidiaries. I also find that the interest-free loans were granted to the appellant's wholly owned subsidiaries wherein the appellant had 100% direct economic interest. It is not a case where interest-free funds were granted to parties wherein the appellant had no beneficial interest. On analogous facts Mumbai Bench of the Tribunal in the case of RPG Life Sciences Ltd. in I.T.A. No. 3999/Mum/05 dated 28.10.2009 deleted the estimated disallowance of interest paid. In that case also the assessee belonging to RPG Group had granted interest free loans to its wholly owned subsidiary and interest was partly disallowed for the alleged reason that the assessee had diverted borrowed funds for granting interest free loans to wholly owned subsidiary. The Mumbai Tribunal following the decisions of the Supreme Court in the case of S.A. Builders Ltd. and the Bombay High Court in Reliance Utilities & Power Ltd. deleted the disallowance of interest. Accordingly, I hold th....
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.... further relied upon the decision of Hon'ble High Court of Delhi in the case of Commissioner of Income tax Vs. Bharti Televentures Ltd (2011)(11 taxmann.com 356) (Delhi) to submit that the disallowance of interest expenditure cannot be made when the investments made in subsidiary companies could not be linked to the borrowed funds. He also relied upon the decision of Mumbai bench of the Tribunal dated 28.10.2009 in the case of M/s RPG Life Sciences ltd in ITA Nos. 3999 to 4001/Mum?05 and ITA No.612/Mum/06, wherein the Tribunal, by following the Bombay High Court's decision in the case of CIT Vs. Reliance Utilities 7 powers Ltd (313 ITR 340) has deleted similar disallowances made by observing that there was no nexus established between the borrowed capital and interest free loans. 9. We have heard the rival contentions on this issue. In paragraph 4 supra, we have narrated the methodology adopted by the AO in working out the disallowance of interest expenditure relatable to the investments made in subsidiary companies. The said methodology suggests about non-application of mind on the part of the AO, i.e., he has made the disallowance in a mechanical manner without analysing wheth....
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....Delhi High Court in the case of Bharti Televentures Ltd, referred supra apply to the facts of the instant case. In view of the foregoing discussions, we do not find any infirmity in the decision of Ld CIT(A) in deleting the disallowance of interest claim. 12. The next issue relates to the disallowance of Rs. 3,99,72,854/-, Rs. 82,068/- and Rs. 64,913/- pertaining to delayed payments of Employees Contribution to Provident fund, Labour welfare fund and Employees State Insurance respectively. The Ld CIT(A) deleted the said disallowances with the following observations:- "Before me the A/Rs of the appellant submitted that on identical reasoning on account of delayed contributions of Provident Fund etc. were disallowed by the Assessing Officer in the A.Y. 2005-06 and the same was upheld by the CIT(A) in his order dated 28.11.2008. On further appeal at the instance of the assessee, the Income Tax Appellate Tribunal, Cochin Bench in its order dated 12.5.2009 in I.T.A. No. 54/Coch/2009 taking note of the fact that Employees contributions to P.F. etc. were all actually paid prior to due date for filing of the return deleted the said disallowance by following decisions in the cases ....
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....that the rubber trees are not capital assets. Accordingly, the AO brought to tax 35% of the amount realised on sale of old and unyielding trees. The Ld CIT(A) allowed the claim of the assessee by holding that Rule 7A shall not apply to the sale of old and unyielding trees. 14. The main contention of the department is that the Rule 7A shall apply to the income generated on sale of old and unyielding rubber trees. We have gone through Rule 7A of Income Tax Rules and for the sake of convenience, we extract the same below:- "Income from the manufacture of rubber 7A (1) Income derived from the sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India shall be computed as if it were income derived from business, and thirty-five per cent of such income shall be deemed to be income liable to tax". On a careful perusal of Rule 7A, we notice that the said rule talks about computation of income derived f....
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....les laid down by the Supreme Court in the earlier decisions continue to hold good even after introduction of Rule 7A. In tune with the Supreme Court decisions in the case of Kalpetta Estates Ltd Vs. CIT reported in 221 ITR 601 and in the case of Kailas Rubber & Co. Ltd reported in 60 ITR 435, I hold that no income chargeable to tax accrued on sale of old and unyielding rubber trees." 15. We notice that the Ld CIT(A) has taken the view with regard to the application of Rule 7A, which is identical with the view expressed by us in the earlier paragraph, i.e., it applies only to a person who carries on the combined activity of growing rubber trees and also manufacturing or processing of field latex or coagulum obtained from rubber plants. The dominant purpose of growing rubber trees is to obtain liquid latex from them. The rubber trees are not used as it is for the purpose of manufacturing or processing, but only the latex obtained from them. Hence, the sale value of old rubber trees cannot be considered as salvage value obtained from the exhausted stock. Since the rubber trees continue to the Capital asset. Accordingly, the examples of sale of old gunny bags or old bottles quoted b....
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....lture business against other business income. Ground No. 5 is accordingly allowed". Thus, we notice that the assessee has proved the fact of generation of income from these two activities. In our view, the AO has disallowed the claim of loss from these units without properly appreciating the facts. Since the ld CIT(A) has rendered his decision on this issue by duly considering the facts surrounding the issue, we do not find any infirmity in his decision on this issue. 17. The next issue relates to the assessment of Rs. 83,65,516/- as Capital Gain on sale of Grevelia trees. During the year under consideration, the assessee realised a sum of Rs. 1.19 crores on sale of Grevelia trees. These trees are grown to afford shade to the tea bushes. In the return of income filed, the assessee estimated the market price as on 1.4.1981 at 30% of the sale price realised by it. After claiming indexed cost of acquisition, the assessee returned a Long term capital loss of Rs. 58,66,409/-. However, the AO took the view that the cost of acquisition as on 1.4.1981 would be negligible as the trees would have been young saplings at that point of time. Accordingly, the AO considered 30% of the....
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....ng officer was taking consistent stand in the earlier years that no capital gain or capital loss can be computed on sale of Grevelia trees, as the cost of acquisition could not be ascertained in a reasonable manner. To support his view, the AO has taken the help of the jurisdictional High Court decision in the case of Rajagiri Rubber & Produce Company Ltd, referred supra, which was also confirmed by the Supreme Court in the case of Kalpetta Estates Ltd, referred supra. The AO has also taken support from the decision of the Hon'ble Apex Court in the case of B.C. Sreenivasa Shetty. Having taken such a consistent stand over the years, the AO has changed his stand in the instant year and has proceeded to assess the Capital gain on sale of Grevelia trees. In our view, the legal position with regard to the taxability of the old Grevelia trees, which was discussed at length in the earlier assessment orders, cannot be changed in the year under consideration, merely because the present assessing officer has a different view. It is pertinent to note that the AO has not brought on record any new fact or any new legal view which would compel him to change the view that was consistently taken i....
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....ion of Nagamallay Estate carried out during the instant year. It is also a fact that the decision rendered by Ld CIT(A) in respect of the Boyce Rubber estate in the assessment year 2005-06 by holding that the said sale was in the nature of "slump sale" has since been revered by the Tribunal, vide its order dated 12.5.2009 referred supra. We further notice that the Ld CIT(A) has followed the above cited decision of the Tribunal in holding that the sale of two estates in the year under consideration cannot be termed as "slump sale". The department did not bring on record any difference in the facts pertaining to Boyce Rubber Estate sold in the preceding year and the two estates sold during the year under consideration. Under these circumstances, the decision rendered by the Tribunal in the case of sale of Boyce Rubber Estate shall apply to the sale of two estates referred supra. Since, the Ld CIT(A) has rendered his decision by following the order of the Tribunal, we do not find any reason to interfere with the same. 24. The next issue relates to the inclusion of profit on sale of Cheruvalli Estate and Thenmala Division of Nagmallay estate for the purpose of computation of book pr....