TaxTMI 
TaxTMI 
2013 (1) TMI 135
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....d against the order of Ld. CIT(A)-I Baroda dated 03-11-2010 which is arising out of appeal effect order passed by Assessing Officer on 10-12-2007 as per the direction of Ld. CIT(A) in his order dated 14-09-2007. Remaining two appeals are for A.Y. 2005-06, which are cross-appeals filed by the assessee and Revenue and are directed against the order of Ld. CIT(A)-I Baroda dated 16-09-2008. For the sake of convenience, all these appeals are being disposed of by way of this common order. First we take up assessee's appeal in ITA No.4522/Ahd/2007 for A.Y. 04-05. 2. It is arising out of assessment order passed by Assessing Officer u/s 143(3) of the Act. Ground No.1 of appeal is as under:- "1. The learned CIT(Appeals) erred in law and on facts in confirming disallowance of Rs.641.53 Lacs under the nomenclature "Take or P[assessment year lease rental charges to GCPTCL". The learned CIT(Appeals) erred in holding that payments / expenditure in question is contingent in nature and had not crystallized during the year. It is submitted that the expenditure having been incurred during the year under consideration, the same may please be allowed to be deducted. Without prejudice to the ....
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....is squarely covered against the assessee by the journal decision rendered in the case of Schrader Duncan Ltd. v. ACIT (2012) reported inn 18 Taxman.com 287 (Mum). Respectfully following this Tribunal decision, this ground of assessee is also rejected. 8. Ground No.4 and 4.1 read as under:- "4. The learned CIT(Appeals) erred in confirming disallowance of Rs.7 Crores on account of liability in respect of wages payable to 490 contract labourers pursuant to Order dated 13-06-2003 of the Industrial Tribunal, on the ground that the said liability has not crystallized during the year. Your appellant submits that since the liability has crystallized during the year, it is allowable under the mercantile basis from the profit of the year and the same may please be allowed. It is submitted that it be so held now. 4.1 The learned CIT(Appeals) has erred ion not giving direction to allow when payments made. It is submitted that direction be given to allow on payment basis, if held not allowable in the present year." 9. It was submitted by Ld. Authorized Representative of the assessee that admittedly, these expenditures were not provided for the books of account but were claimed vide note in ....
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....d "Prior Period Expenses" it is submitted that in the facts and circumstances of the case, the liability was known / crystallized during the year and hence deduction as claimed may please be allowed. It is submitted that it be so held now. 5.1 Without prejudice to above, appellant submits that in view of carried forward losses and even losses for the year, allowability of the year in academic and considering that no disallowance was required to be made. It be so held now." 13. It was submitted by Ld. Authorized Representative of the assessee that break up of prior period expenditure is available at page 81 to 82 of the P.B. He also submitted that liability has crystallized during the present year and there was no disallowance in any earlier years. Ld. DR of the Revenue supported the orders of authorities below. 14. We have considered the rival submissions, perused the material on record and gone through the orders of authorities below. In the details appearing at page 81 to 83 of the P.B., we find that the previous year expenditure includes Rs.270.11 lakhs on account of salary, wages, bonus and welfare expenses and Rs.74.39 lakh on account of water expenses and there are some sm....
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....ities below. We find that a clear finding is given by Ld. CIT(A) that the provisions regarding take or pay lease rental charges of Rs.6,41,53,000/- is a contingent liability. Regarding the provisions for wage revision of Rs.10,08,49,000/- also, a clear finding given by Ld. CIT(A) and also by the Assessing Officer that the same is unascertained liability. This is also submitted by assessee before us that this provision was written back in A.Y. 2006-07 and in that year, reduction was allowed in MAT computation. Considering all these facts, we decline to interfere in the order of Ld. CIT(A) on this issue also. This ground is also rejected. 18. Ground No. 7 and 7.1 read as under:- "7. The learned CIT(Appeals) erred in upholding the addition of Rs.6,41,25,924/- to the book profit u/s. 115JB while computing the book profit u/s 115JB. It is submitted that in the facts and circumstances, the amount credited back to Profit & Loss Account being excess provision for doubtful advances made in the earlier year ought to have been reduced. It be so held now. 7.1 The learned CIT(Appeals) failed to appreciate that the excess provision was made in earlier assessment year 2003-04 for which deducti....
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....eduction can be allowed from book profit in the year of withdrawal from such reserve or provision. As per the working of computation of book profit u/s 115JB as available at page 121-122 of the P.B, it is seen that same amount was added in book profit of Rs.6,41,25,924/- but in view of the contradictory finding of Assessing Officer in assessment order, we feel it proper that in the interest of natural justice, this matter should go back to the file of AO for fresh decision. Accordingly, we set aside the order of Ld. CIT(A) on this issue and restore the matter back to the file of AO for fresh decision. AO should examine this again that while computing book profit for A.Y. 2003-04, this addition was made in the book profit or not. Thereafter, AO should pass necessary order as per law. Before parting, we would like to observe that as per copy of assessment order for A.Y. 2003-04 which is available at pages 306 and 307 of the P.B, it is seen that total loss as per regular provision was assessed by AO at Rs.334.96 crores and there is no working of book profit in the assessment order which is available in P.B. A.O. should keep this aspect also in mind while deciding this issue. Ground No....
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....y asset, without appreciating that these are not the relevant considerations for determining the capital vis-à-vis revenue nature of an expenditure and the expenses, being in capital field and giving an advantage of enduring nature, constitute capital expenditure as settled in the case of Ballimal Naval Kishore vs. CIT 224 ITR 414 (SC)." 28. Ld. DR of Revenue supported the order of Assessing Officer whereas Ld. AR of the assessee supported the order of Ld. CIT(A). He further submitted that in the earlier years for A.Y. 2001-02 to 2003-04 as were cited in respect of ground No.1 of Revenue's appeal, this issue was decided by the Tribunal in favour of the assessee. Since Ld. DR could not show that there is any difference in the facts in the present year, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue also. Ground No.2 is also rejected. 29. Ground No.3 is as under:- "3(a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance of Rs.91.80 lacs u/s. 14A towards interest and other expenses incurred in relation to exempted income of dividend, without taking note of the landmark decision in t....
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....owance of Rs.5 lakh can be made in respect of administrative expenses. 31. We have considered the rival submissions, perused the material on record and gone through the orders of authorities below. We find that disallowance was made by Assessing Officer mainly on this basis that assessee could not establish that the investment was made out of own fund and no borrowed funds have been utilized for making such investments. The Assessing Officer has categorically stated in para-7 of his assessment order that it is held that assessee has utilized interest bearing borrowed funds for non-business purpose i.e. for making the investments. He also observed that disallowance is to be made for administrative expenses also. He made disallowance to the extent 10% of dividend income. So far interest expenditure is concerned for earning dividend income, we are of the considered opinion that the own fund is much higher than investment and therefore, it cannot be said that interest bearing borrowed funds were used for making investments in shares and therefore, no disallowance u/s. 14A is required in respect of interest expenditure. For other expenses, Ld. DR of the Revenue has requested to restore....
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....any good reason to interfere in the order of Ld. CIT(A) on this issue. We therefore decline to interfere in the order of Ld. CIT(A) on this issue. This ground of Revenue is also rejected. 35. Ground No.5 of the Revenue's appeal is as under:- "5(a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in excluding the waived amount of Rs.60.13 crores out of the principal loans, from the total income, disregarding the inclusive definition of income u/s. 2(24) and of the profits and gains of business in section 28 and the ratio settled in the landmark decision in the case of CIT vs. T.V. Sundaram Iyengar &Sons Ltd. 222 ITR 344 (SC), holding that waiver of such loans received in the course of business constitutes income receipt on being written off, by virtue of section 28(i) itself. (b) The ld. CIT(A) failed to appreciate that, when section 28(iv) charges the value of any benefit or perquisite, whether convertible into money or not, arising from business, it presupposes that any monetary benefit so arising is already covered by section 28(i) as held in the case of T.V. Sundaram Iyengar & Sons Ltd. (supra); otherwise, there is no rational for excluding m....
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....f the same cannot be taxed u/s. 41(1) of the Act or u/s. 28(iv) of the Act. Respectfully following this judgment of Hon'ble jurisdictional High Court rendered in the case of Chetan Chemicals Pvt. Ltd. (supra), we decline to interfere in the order of Ld. CIT(A) of this issue also. This ground of Revenue's appeal is also rejected. 38. Ground No. 6 & 7 of the Revenue's appeal are as under:- "6(a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the adjustment of book profit u/s. 115JB by the estimated gratuity provision of Rs.5,35,80,234/- made on the basis of actuarial valuation, which is an unascertained liability as specifically settled in the case of Shree Sajjan Mlls Ltd. vs. CIT 156 ITR (SC) (b) The Ld. CIT(A) wrongly equated this liability with that of leave encashment which accrues yare to year on account of the eligible employees not availing of leave during the year whereas gratuity liability provided in respect of all the employees on actuarial basis is purely contingent on their retirement in future and the mere fact that the accounting practice formulated as AS-15 enjoins such provision does not render it as ascertained liab....
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....rder of Assessing Officer whereas Ld. AR of the assessee supported the order of Ld. CIT(A) He also submitted that this issue was decided by the Tribunal against the assessee in assessee's own case in A.Y. 2003-04. But there is a decision of Tribunal in favour of assessee rendered in the case of CIT v. Yokogawa India Ltd. (2012) 17 taxman.com 15 (Kar). 42. We have considered the rival submissions, perused the materials on record and gone through the orders of authorities below and judgments cited by Ld. AR of the assessee. We find that retrospective amendment was made by (Finance Act, 2002) with effect from 1-4-2001 as per which the amount set aside for a provision for diminution in the value of any asset is to be added back in book profit. We reverse the order of Ld. CIT(A) on this issue and restore that of the Assessing Officer. This ground of Revenue's appeal is allowed. 43. Ground No.9 of Revenue's appeal is as under:- "9.(a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing to adjust deduction u/s. 80HHC as per book profit and not as computed under the provisions of section 80HHC in the computation of deemed total income u....
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.... the assessee on book profit u/s. 115JB of the Act only. He further submitted that out of these two additions for which penalty was imposed by Assessing Officer, no addition was made in computing book profit by the AO and hence, there is no impact on tax payable by the assessee. Even out of these two additions in regular income, in fact only one addition was made by the AO in the regular income also of Rs.37,64,700/- regarding depreciation on co-generation power plant. Regarding the claim of the assessee for long term capital loss of Rs.7,49,49,713/-, it was submitted that the claim was made only through notes to return income for adjudication by the AO and not in the return of income itself. He further submitted that under these facts, penalty is not justified and in support of this contention, reliance was placed on the judgment of Hon'ble Delhi High Court rendered in the case of CIT v. Nalwa Sons Investments Ltd. (2010) as reported in 327 ITR 543 (Del) and also on judgment of Hon'ble jurisdictional High Court rendered in the case of CIT v. Vijay Mistry Construction & Rajakamal Builders Pvt. Ltd. in Tax Appeal No.2224 of 2009 dated 29-03-2011. 49. We have considered the rival su....
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....mputation was made u/s 115JB of the Act, alleged concealment has no role to play on tax payable and therefore, the concealment did not lead to tax evasion at all and by making this observation, penalty was deleted in that case. In the case of Vijay Mistry Construction & Rajakamal Builders Pvt. Ltd. (supra), it was held by Hon'ble jurisdictional High Court that even after making some disallowance, tax finally required to be paid as per Section 115JB of the Act, remains the same. It cannot be said that the assessee evaded tax. Facts in the present case are similar with these two judgments and hence, respectfully following these two judgments of Hon'ble Delhi High Court and Hon'ble jurisdictional High Court, we decline to interfere in the order of Ld. CIT(A) on this issue. This ground of Revenue's appeal is dismissed. 50. In the result, Revenue's appeal is dismissed. 51. Now we take up the 4th appeal of A.Y. 2004-05 i.e. arising in course of appeal effect order passed by Assessing Officer in ITA No.302/Ahd/2011. This appeal is filed by assessee and grounds raised by assessee are as under:- "1. The learned CIT(Appeals) erred in deciding the ground of not granting by learned A.O of 1....
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....n facts in confirming disallowance of Rs.903.65 Lacs under the nomenclature "Take or Pay lease rental charges to GCPTCL". The learned CIT(Appeals) erred in holding that payments / expenditure in question is contingent in nature and had not crystallized during the year. It is submitted that the expenditure having been incurred during the year under consideration, the same may please be allowed to be deducted. Without prejudice to the above, if at all any portion of the expenditure is held to be not allowable; the same may please be directed to be deducted from the income of the assessment year where the remission in respect of such expenditure has been offered for tax." 58. It was submitted by Ld. Authorized Representative for the assessee that this issue is identical to ground No.1 of assessee's appeal in A.Y 2004-05 in ITA No.4522/Ahd/2007. He also submitted that in A.Y. 2006-07, reversal of this liability has been held to be not taxable by the Ld. CIT(A) and while passing the appeal effect order, the Assessing Officer has allowed relief in that year. Hence, this present ground of appeal of assessee is academic in nature only. Accordingly, this ground of assessee's appeal is rej....
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.... of the assessee that this issue is also identical to ground No.4 of assessee's appeal in A.Y. 2004-05 and same can be decided on similar line in the present year. We have decided this issue against the assessee at paras No. 9 to 11 of this order and hence, in the present year also, this issue is decided against the assessee on similar line. This ground of assessee is also rejected. 63. Ground No.4 is as under:- "4. The learned CIT(Appeals) erred in confirming addition of Rs.903.65 Lacs being "Take or Pay" lease rental charges, made in the accounts during the year under consideration while calculating Book profit u/s. 155JB of the Act. It is submitted that this kind of addition to the Book profit is not envisaged in the Explanation provided u/s. 115JB of the Act and hence should not have been made. It is submitted that it be so held now and addition of the amounts made to the Book profit u/s. 115JB be deleted." 64. It was fairly conceded by Ld. AR of the assessee that this issue is same to ground No.6.1 of assessee's appeal in A.Y. 2004-05. In that year, we have decided this issue against the assessee as per paras 16 & 17 of this order. Accordingly, in the present year also, th....
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....ing that the expenditure gave an advantage of enduring nature and fell in the capital field, and, for being capital expenditure, it is not always necessary that it results in creation of a new, depreciable asset for the assessee, as settled in the case of CIT vs. Hoogly Mills Co. Ltd. 287 ITR 333 (SC)." 72. Ld. DR of the Revenue supported the assessment order whereas Ld. AR of the assessee supported the order of Ld. CIT(A). He further submitted that this issue is identical to Ground No.1 of Revenue's appeal for A.Y. 2004- 05 in ITA No.4557/Ahd/2007. 73. We have considered rival submissions and we find that similar issue was decided in favour of assessee in A.Y. 2004-05 while deciding ground No.1 of the Revenue's appeal, in that year, and the same was by following various Tribunal decisions in assessee's own case for earlier three years. Hence in the present year also, we do not find any reason to take a contrary view because no difference in facts could be pointed out by the Ld. DR of the Revenue. This ground of Revenue's appeal is rejected. 74. Ground No.2 of Revenue's appeal is as under:- "2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred i....
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....n the relevant borrowings were made; otherwise, there was no need for such borrowings and hence it is these borrowings which were utilized to earn exempted income and the co-relation between the borrowings and utilization can not be reflected in the balance sheet prepared on a particular date. (c) The ld. CIT(A) failed to appreciate that, it was up to the assessee to prove by furnishing day-to-day cash flow that no interest-bearing funds were deployed to earn exempted income and, in the absence of the same, the Assessing Officer was justified in drawing inference as per the ratio settled in the case of CIT vs Motor General Finance Ltd. 254 ITR 449 (Del) since confirmed in principle by the Supreme Court in the case of Motor General Finance vs. CIT 267 ITR 381 (SC). (d) The ld. CIT(A) erred in deleting the disallowance by putting arbitrary and narrow meaning on the term 'incurred' in section 14A when this section nowhere refers to incurring of expressly quantified expenditure in relation to exempted income and, instead, uses the wider expression "in relation to" and not "for earning of". 78. Ld. DR of the Revenue supported the assessment order whereas Ld. AR of the assessee....
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....e total income. Disregarding the inclusive definition of income U/s.2(24) and of the profits and gains of business in section 28 and the ratio settled in landmark decision in the case of CIT vs. t.v. Sundaram Iyengar & Sons Ltd. 222 ITR 344 (SC), holding that waiver of such loans received in the course of business constitutes income receipt on being written off by virtue of section 28(1) itself. (b) The learned CIT(A) failed to appreciate that when section 28(iv) charges the value of any benefit or perquisite, whether convertible into money or not, arising from business, it presupposes hat any monetary benefit so arising is already covered by section 28(i) as held in the case of T.V Sndaram Iyengar & Sons Ltd. (supra); otherwise, there is no rationale for excluding monetary benefits or perquisites when nonmonetary benefits or perquisites are also included in the business profit." 84. Ld. DR of the Revenue supported the assessment order whereas Ld. AR of the assessee supported the order of Ld. CIT(A). He also submitted that this issue is identical to ground No.5 of Revenue's appeal in ITA No.4557/Ahd/2007 for A.Y. 2004-05. 85. We have considered the rival submissions and perused ....
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....tances of the case and in law, the ld CIT(A) erred in negating the adjustment of provision for doubtful debts in the computation of book profit u/s 115JB, on the ground that it was not a liability for expenses but a liability relating to assets, without appreciating that the word 'liability'' in clause (c) of the Explanation below section 115JB(2) does not distinguish between a liability towards expenses and a liability relating to assets, both of which are equally a charge on the profits. (b) Without prejudice, the ld CIT(A) failed to appreciate that if the amount did not constitu9te liability, it was a reserve 'by whatever name called' within the meaning of clause (b) of the Explanation below section 115jB(2) in view of not being actual amount of debts written off but only an arbitrary provision at an estimated fraction of total debts, which is treated as reserve even under rule 7(2) of Schedule VI of the Companies Act without the extension of meaning as in clause (b) of the aforesaid Explanation." 90. Ld. DR of the Revenue supported the assessment order whereas Ld. AR of the assessee supported the order of Ld. CIT(A). It was fairly conceded by Ld. AR that this issue is now squ....