TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 74
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....essment in the hands of the company was originally completed under section 143(3) of the Act. Subsequently the assessment was reopened by issuing notice under section 148 of the Act and the order was passed under section 143(3) read with section 147 of the Act. The assessee challenged both assessment orders before the learned Commissioner of Income-tax (Appeals) and got partial relief. The Department is aggrieved by the relief so granted and hence they are in appeal before us. We shall first take up the appeal numbered as I. T. A. 430/Coch/06. The first issue in that appeal relates to the claim of expenditure of Rs. 56,35,059 incurred on renovation of showrooms as revenue expenditure. The assessee spent a sum of Rs. 64,40,068 in purchasing equipments, viz., wheel balancer, wheel aligner, wheel changer and tyre changer and the said equipments were given to its dealers, who owned the "branded showrooms" under the name "Appollo Tyre World". The assessee capitalised the said expenditure in its books of account and in the original return of income, it claimed a depreciation of Rs. 8,05,009 thereon. However, in the revised return, the assessee changed its stand and claimed the entire ex....
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....cordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore the disallowance made by the Assessing Officer. The next issue relates to the disallowance of Rs. 3,53,95,231 incurred by the assessee on account of interest and processing charges on availing loan from International Finance Corporation, Washington for the purpose of setting up of a new industrial undertaking for manufacture of truck tyres. The assessee capitalised the same in the books of account, but claimed it as revenue expenditure in the income-tax return. The Assessing Officer treated the abovesaid amount as capital expenditure and accordingly disallowed the said claim. The learned Commissioner of Income-tax (Appeals), however, deleted the said disallowance by following the decision of the hon'ble Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52 (SC), the decision of the hon'ble Delhi High court in the case of CIT v. Modi Industries Ltd. (No. 3) [1993] 200 ITR 341 (Delhi). We notice that the hon'ble Kerala High Court has considered an identical issue in the assessee's own case in I. T. R. No. 68 of 2000 and the jurisdictional High Cou....
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....of interest paid on borrowed capital used in the acquisition of asset even though the asset is not put to use during the previous year relevant for the assessment year. In the next decision above referred the expenditure in the form of "finance charges" incurred for availing the loan which is similar to expenditure on debenture issue incurred by the assessee is seen allowed by the Supreme Court. Following these two decisions, we answer question No. (iii) above referred in favour of the assessee and against the Revenue." We notice that the decision rendered by the learned Commissioner of Income-tax (Appeals) on this issue is in accordance with the decision of the jurisdictional High Court and hence we do not find any reason to interfere with the same. The next issue relates to the disallowance of payment to clubs amounting to Rs. 1,48,212 by treating the same as non-business expenditure, which was deleted by the learned Commissioner of Income-tax (Appeals). The Assessing Officer noticed that the assessee incurred a sum of Rs.3,51,602 in clubs, which consisted of Rs. 2,03,390 incurred towards entrance fee/subscription and Rs. 1,48,212 incurred towards cost of services. The A....
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....ring the year cannot be allowed as deduction again. Learned counsel has submitted that the Tribunal has restored the identical issue to the file of the Assessing Officer for the assessment year 2001-02. It is not clear whether the Tribunal allowed the claim of deemed payment in the assessment years 1996-97 to 2000-01 and 2002-03. Thus, in our view, the facts surrounding this claim were not clearly brought out on record. In any case, the claim for deduction made by the assessee would depend upon the outcome of the decision taken in the earlier years. Accordingly, this aspect requires verification. If the claim of deemed payment had been disallowed in the earlier years, then the assessee is entitled for deduction of the amount referred supra. Accordingly, we restore this issue to the file of the Assessing Officer with the direction to examine the claim of the assessee afresh in accordance with the law by duly considering the observations made supra. The next issue relates to the claim of deduction of Bonus amount of Rs. 3,75,44,731. The assessee created a provision for payment of bonus to the tune of Rs. 4,07,00,000 during the year ending March 31, 2002 relating to the assessment ye....
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....eduction has to be claimed in the earlier year which Assessing Officer had interpreted. We fail to understand as to how the Assessing Officer has referred to the decision of McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) by observing that in earlier year, i.e., the assessment year 2001-02 there was a loss and that is why the assessee has not claimed any deduction. Even if it is a case of loss, such loss would have been carried forward to next year and allowed accordingly. Simply because the assessee has not claimed a particular deduction, it cannot be said to be a colourable device as envisaged by the decision of McDowell's case. The deduction relates to payment of bonus which has actually been paid in the present year and deduction has been claimed as per section 43B. Such deduction has been claimed on consistent basis in the year of payment and, therefore, no adverse inference should have been taken. In these circumstances, we find nothing wrong in the order of the learned Commissioner of Incometax (Appeals) and confirm the same." The facts relating to this issue is identical in nature and accordingly, by following the decision of the co-ordinate Bench referred supra, whic....
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....tice. Accordingly, we set aside the issue of determination of interest expenditure to the file of the Assessing Officer. The order of the learned Commissioner of Income-tax (Appeals) stands modified accordingly. The next issue relates to the claim of "debts and advances written off". The assessee claimed a deduction of Rs. 8,74,73,974, out of which a sum of Rs. 6,13,12,992 related to the trade debts. The remaining amount consisted of the following two groups: Advances given for acquisition of capital assets-Rs. 28,67,407 Advances given for acquisition of revenue items-Rs. 2,32,93,575 The Assessing Officer treated the claim of Rs. 28,67,407 as capital loss and disallowed the same. With regard to the claim of Rs. 2,32,93,575, the Assessing Officer held that the same is not allowable under section 36(1)(vii) read with section 36(2), as the said amount was not offered for taxation. The Assessing Officer further held that the said amount cannot be allowed under section 37(1) also since the said expenditure was in the nature of expenses described in sections 30 to 36 and further they were related to the prior periods. The learned Commissioner of Income-tax (Appeals), however, allowed....
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....mmissioner of Income-tax (Appeals) stands modified. The last issue in the appeal numbered as I. T. A. 430/Coch/2005 relates to the nature of "provision for bonus and leave encashment" for the purposes of computation of book profit under section 115JB of the Act. The Assessing Officer treated the provision of bonus (Rs. 38,22,370) and the provision for leave encashment (Rs. 27,74,176) as unascertained liability for the purpose of computation of book profit under section 115JB of the Act. The learned Commissioner of Income-tax (Appeals) reversed the said decision of the Assessing Officer. It was brought to our notice that the Tribunal considered an identical issue in the assessee's own case in I. T. A. No. 429/Coch/2006 and 377/ Coch/2009 and held that the provision for bonus and the provision for leave encashment are ascertained liabilities. However, the matter relating to provision for leave encashment was set aside by the Tribunal to the file of the Assessing Officer only to ascertain whether the provision for leave encashment was made on the basis of actuarial valuation. We find the relevant discussions in paragraphs 79 to 83 of the Tribunal's order referred supra. Consi....