TaxTMI 
TaxTMI 
2013 (9) TMI 520
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....98 in I.T.A.No. 2728/Ahd/2000. It is further submitted that this tribunal order is available on pages 21-83 of the decision paper book and the relevant discussion is in para 83 of this Tribunal decision on page 75 of the paper book. He further fairly conceded that this issue is covered against the assessee by the decision of Special bench of the Tribunal rendered in the case of Indusind Bank Ltd. Vs Addl. CIT as reported in 145 TTJ 409 (SB). Ld. D.R. placed reliance on this decision of Special bench of the Tribunal and submitted that when the decision of Special bench of the Tribunal decision is against the assessee, the same should be followed in preference to the Division Bench order in assessee's own case cited by the Ld. A.R. 2.1.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and we find that this issue is covered against the assessee by the decision of Special bench of the Tribunal rendered in the case of Indusind Bank Ltd (supra) and, therefore, respectfully following the decision of Special bench of the Tribunal, this issue is decided against the assessee. In addition to holding this that in t....
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....isions are available. In the combined tribunal order for the assessment years 1994-95, 1996-96 and 1997-98 in para 25 of this tribunal order, this fact is noted by the tribunal that the issue in dispute was regarding expenses incurred in respect of Boxite project at Ghadsesa and Lignite project at Mata No Madh. It is further noted by the tribunal in para 28 of the tribunal decision that the A.O. disallowed the expenditure of Mata No Madh project by treating the same as capital expenditure. It is further noted by the tribunal that it was submitted by the Ld. A.R. before the tribunal that this issue is covered in favour of the assessee by the tribunal decision in the assessee's own case in I.T.A.No. 3232/Ahd/1996 for the assessment year 1990-91 as per order dated 05.05.2005 and also for assessment year 1992-93 in I.T.A.No. 936/Ahd/1999 as per tribunal order dated 12.07.2005. As per this tribunal order for the assessment year 1994-95, 1996-97 and 1997-98, the issue in dispute was decided in favour of the assessee by respectfully following the earlier tribunal order for the assessment years 1990-91 and 1992-93. Regarding the tribunal order for assessment year 1998-99 and 1999-2000 in w....
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.... this year also, this issue is decided in favour of the assessee. This ground of assessee is allowed. 3.2 Ground No.1(b) of the assessee is regarding confirmation of disallowance of Rs. 424239124/- made by the A.O. on account of expense relating to Akri Mota Power Project. It was also an alternative contention that in any case, financial charges of Rs. 2.21 crores are fully allowable u/s 36(1)(iii) of the Income tax Act, 1961. 3.2.1 It was submitted by the Ld. A.R. that these are the expenses on diversification and forward integration and the same is allowable and in support of this contention, reliance was placed on the following judgements. There was an alternative contention that interest part is allowable in any case. In support of this contention reliance was placed on the following judgements. (a) 81 ITD 553 United Phosphorus Ltd. Vs JCIT (b) 393 ITR 459 (Mad.) CIT Vs Rane (Madras) Ltd. (c) 296 ITR 140 CIT Vs Usha Iron and Ferro Metal Corporation Ltd. (d) 318 ITR 140 CIT Vs Denso India Ltd. (e) 323 ITR 11 CIT Vs Escorts Auto Components Ltd. & Eco Auto Components Ltd. (f) 251 ITR 61 (Guj.) (g) 298 ITR 194 (S.C.) DCIT Vs Core Health Care Ltd. 3.2.2 As against this, it....
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....ncurred an expenditure of Rs. 208 lacs during assessment year 1996-97 and Rs. 9.48 lacs during assessment year 1997-98 in respect of interest on Exim Bank Loan, various raw material consumed, stores consumed, tools consumed, travel expenses, salaries and wages, printing and stationery, computer stationery, freight inward, freight outward, power and fuel, insurance, repairs and maintenance, central overheads of Madras plant and other various miscellaneous expenses. The assessee claimed in that case that the entire expenditure is revenue expenditure but the A.O. treated these expenses as capital in nature on this basis that the proposal unit is entirely a new unit. On appeal, it was held by Ld. CIT(A) in both the years that these are revenue expenditure and on further appeal, the order of Ld. CIT(A) was confirmed by the tribunal and against such tribunal order, the revenue preferred an appeal before Hon'ble Madras High Court. It was held by the Hon'ble Madras High Court that the product remained one and the same i.e. steering gear and, therefore, the new business set up is nothing but an extension of the existing industry at Velachery and Mysore and the deduction claimed by the asses....
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....tal expenditure on salary and wages, telephone, traveling expenses and other administrative expenses and allocated to modification of existing product/development of new product with the same management and same workforce and expertise. By making this observation, the order of Ld. CIT(A) was confirmed by the Tribunal. Under these facts, it was held by the Hon'ble Punjab & Haryana High Court that the expenditure is revenue expenditure because there is clear finding of the tribunal and CIT(A) that no capital asset has come into existence and this finding was not challenged before the Hon'ble Punjab & Haryana High Court. In the present case, the facts are different. In the present case, it is noted by the A.O. that the expenditure in question relate to expenditure incurred on a new power project being set up at Akri Mota and the total expenditure as stated was shown at Rs. 1562.63 lacs and after deduction of opening balance of the expenditure of Rs. 1138.34 lacs, the expenditure on the new power project being set up is claimed at Rs. 424.29 lacs and in the original return, assessee did not claim deduction for this expenditure. This finding is also given by the A.O. that this is totall....
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....r the same reason, this judgment of Hon'ble apex Court is also not applicable in the present case. 3.2.4 As per above discussion, we have seen that none of the judgements cited by the Ld. A.R. is rendering any help to the assessee in the present case except the tribunal decision rendered in the case of United Phosphorus Ltd. (supra). In that case, it was held by the Tribunal that interest paid on funds borrowed for business purpose, including for the purpose of setting of anew unit of the existing running business is allowable u/s 36(1)(iii) of the Act. While examining the applicability of this tribunal decision, we have noted above that interest expenditure will be allowable if it is found that borrowed fund were used for the purpose of setting up of a new unit of the existing running business. As per above discussion, while examining the applicability of various other judgments, we have seen that borrowed funds were not used for setting up of a new unit of an existing running business but it was setting up of a new unit for production of an altogether new product i.e. power whereas the existing business of the assessee was production of lignite. Since this aspect is not fulfille....
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....Ld. CIT(A) and as per the finding of Ld. D.R., this expenditure is in violation of the guidelines issued by the Government of Gujarat dated 28.08.1998 and is against Article 192 of the Articles of Corporation. In our considered opinion, this will not tantamount to an offence and also it does not tantamount to an expenditure which is prohibited by law. The guidelines of the Government of Gujarat and the Articles of Corporation cannot be considered as law of the Country. Hence, in our considered opinion, this disallowance is not justified. If the expenditure is incurred in violation of the guidelines of Government of Gujarat and against Article 192 of the assessee corporation then the remedy lies somewhere else and action can be taken as per law against the person responsible for such violation but this cannot be the basis for making disallowance of expenses without proving that it is not for the purpose of assessee's business. This is not the claim of the revenue that this expenditure is not for the purpose of business and therefore, this disallowance is deleted. This ground of the assessee is allowed. 3.4 Ground No.3 is regarding confirmation of disallowance of Rs. 2220392/- in re....
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....d to tax when sold, we would like to observe that the assessee is following mercantile system of accounting and hence, scrap value has to be considered in the present year itself and it could not be deferred till the actual sale of scrap. Needless to say, the scrap value of stock has to be considered as opening stock in the year of sale and we hold accordingly. This ground of the assessee as well as the revenue is rejected. 3.5 Ground No.4 of the assessee's appeal is regarding confirmation of disallowance of Rs. 56459076/- in respect of depreciation claimed on assets leased to GSRTC and GEB. 3.5.1 It was agreed by both the sides that this issue is to be decided by following the decision of Special bench of the Tribunal rendered in the case of Indusind Bank Ltd. (supra) as submitted in the course of arguments for ground No.1 of the assessee's appeal in assessment year 2000-01. In that year, we have held that the claim of the assessee regarding depreciation has to be disallowed but as per the decision of Special bench of the Tribunal, out of lease rental received by the assessee, only interest portion has to be considered as income as has been held by Special bench of the Tribunal ....
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....per book. 4.3.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the decision cited by the Ld. A.R. We find that in assessment year 1990-91, it is observed by the Tribunal in para 15 of the tribunal order that the liability has crystelised during the year under consideration and there is no dispute on this fact that on this basis of order of Ld. CIT(A) was upheld by the tribunal in that year. In the present year, no finding is given by Ld. CIT(A) as to whether the expenses in question have utilized during this year or not. It is further noted by Ld. CIT(A) on page 4 of his order that the A.O. has not given this finding that the expense did not crystelise during the present year. Therefore, in our considered opinion, this fact has to be brought out on record as to whether the expenses in question have crystelised during this year and if the assessee is able to do so, no disallowance should be made. The A.O. should pass necessary order as per law as per above discussion after providing adequate opportunity of being heard to the assessee. Ground No.2 of the revenue's appeal is allowed for statistical pu....
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....do not find any reason to interfere in the order of Ld. CIT(A) on this issue. Hence, this ground of the revenue is also rejected. 4.4 Ground No.4 of the revenue has been already decided while deciding ground No.3 of the assessee's appeal above. 4.5 There is no other gerund of the revenue's appeal. In the result, appeal of the revenue stands partly allowed for statistical purposes. 5. Now, we take the cross appeals of the assessee and the revenue for assessment year 2002-03 in I.T.A.No. 1114/Ahd/2006 (assessee's appeal) and I.T.A.No. 1036/Ahd/2006 (revenue's appeal). 5.1 The first ground raised by the assessee is regarding confirmation of disallowance of Rs. 9658220/- made on account of expenses relating to Akri Mota project which include financial charges of Rs. 6.63 crores. It was agreed by both the sides that this issue is identical to ground No. 1(b) in assessment year 2001-02 and the same can be decided on similar lines. In that year, this issue has been decided by us against the assessee as per para 3.2.3 above and accordingly in the present year also, this ground of the assessee is rejected. 5.2 Ground No.2 of the assessee's appeal is regarding confirmation of addition o....
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.... to be taxed. Since, the order of Ld. CIT(A) is on similar lines, we confirm the same. This ground is rejected. 5.5 Ground No.5 of the assessee's appeal is regarding confirming disallowance of depreciation claimed of Rs. 343800/- on assets used in Mata No Madh project and Rs. 4358210/- on assets used in Akri Mota Power Project. 5.5.1 It was submitted by the Ld. A.R. that the assets were used in implementation of these two projects and, therefore, the claim of the assessee regarding depreciation is allowable. As against this, Ld. D.R. supported the orders of authorities below. 5.5.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Regarding the claim of the assessee in respect of depreciation claimed ofRs.343800/- on the assets used in Mata No Madh project, we are of the considered opinion that the expenses incurred for this project were allowed as revenue expenditure in earlier year included deprecation on those asset which were used in the implementation of this projects and, therefore, in the present year also, the same is allowable. Regarding the depreciation claimed on the assets used in Akri Mota ....
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....ition of Rs. 30,19,123/- by rejecting the claim of interest on share loan written off. Before Ld. CIT(A), it was submitted by the Ld. A.R. that at the time of investment of shares of the company by staff members of the company they were provided loan for subscribing 200 shares of the company. It was also submitted that the interest charged on such loan was already offered for taxation. But at a later stage, considering the representation made by GMDC and to maintain cordial relations with the employees, it was decided to waive the interest to the extent of Rs. 30,19,123/- and such waiver is debited to P & L account. Ld. CIT(A) was not satisfied and he confirmed the disallowance. Now, the assessee is in further appeal before us. 5.7.2 It is submitted by the Ld. A.R. that the present claim of the assessee is equivalent to bad debt written off because income on account of interest on loan to staff was accounted for as income and in the present year the same was written off and this is not in dispute. Therefore, deduction should be allowed. Ld. D.R. supported the orders of authorities below. 5.7.3 We have considered the rival submissions, perused the material on record and have gone ....
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.... two judgements of Hon'ble Apex Court relied upon by the Ld. A.R. before us. Hence, we set aside the order of Ld. CIT(A) on this issue and restore the matter back to the file of the A.O. for a fresh decision in the light of above discussion after providing adequate opportunity of being heard to the assessee. This ground of the assessee is allowed for statistical purposes. 5.9 The next ground of assessee's appeal is regarding initiation of penalty proceedings u/s 271(1)(c) of the Act. This ground is premature and hence, rejected accordingly. 5.10 The last ground is regarding charging of interest u/s 234B and 234C of the Income tax Act, 1961. Since this is consequential issue, no adjudication is called for. 5.11 In the result, appeal of the assessee stands partly allowed. 6. Now, we take up the remaining issues as per the appeal of the revenue. 6.1 Ground No.1 is regarding deletion of disallowances of Rs. 37,92,357/- debited under the head project expenses of Mata No Madh. 6.2 It was agreed by both the sides that this issue is identical to ground No.1(a) of the assessee's appeal for the assessment year 2001-02 and the same can be decided on similar lines. In that year, as per p....
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....stands dismissed. 8. Now we taken up the cross appeals field by the assessee and the revenue for the assessment year 2001-02 in I.T.A.No. 1245/Ahd/2007 and 1184/Ahd/2007 directed against the order of Ld. CIT(A) VI, Ahmedabad dated 26.12.2006 in the course of penalty proceedings. 8.1 At the very outset, it was submitted by the Ld. A.R. that in this year also, ultimately the assessed income is lower than the returned income and therefore, no penalty is justified. 8.2 Regarding the ultimately assessed income, it is submitted that the appeal effect order passed by the A.O. for this year is dated 31.01.2007 and the same is available on page 66 of the relevant paper book as per which the total income was determined at Rs. 110.57 lacs. He further submitted that copy of the original assessment order dated 26.02.2004 is available on pages 31-43 of the paper book and on the 1st page of the assessment order, it is noted by the A.O. that in the return of income filed by the assessee on 29.10.2001, the income was declared at Rs. 126.52 lacs. He submitted that ultimately assessed income is lower than the returned income and, therefore, in this year also, penalty u/s 271(1)(c) is not justified....