TaxTMI 
TaxTMI 
2013 (10) TMI 16
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....ief of Rs.16,21,58,151/- out of addition made for undervaluation of closing stock? 5. The ITAT has recorded finding on the issue in paragraphs 5 and 6, as follows:- "5. Next common ground of the revenue's appeal relate to deletion of addition on account of under valuation of closing stock of free sugar in sugar unit at Dhampur and Rauzagaon. We have considered the rival contentions and found that exactly similar issue has been decided in favour of the company vide ITAT order dated 17.2.2003 in I.T.A. No.4125/Del/93 for the assessment year 1990-91 vide paras 3-6 on pages 4-7. Similarly, decided in favour of the company in I.T.A. No.7779/Del/92 vide paras 15-18 on pages 6-12 of the order for the assessment year 1989-90. Similarly, decided in favour of the company in I.T.A. No.6662/Del/94 vide para 7 on pages 203 of the order for the assessment year 1991-92. Similarly, decided in favour of the company in I.T.A. No.57/Del/96 - departmental appeal - for the assessment year 1992-93 vide paras 5 & 5.1 on pages 5-7 of the order. 6. We have carefully gone through the order of the ITAT for the assessment year 1992-93 wherein at para 5.1, the issue has been dealt with as follows and the ad....
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....A) who deleted the addition of Rs.8,64,33,161/- made by the A.O treating the income of the assessee on account of incentives subsidy received on free sale of sugar? 9. The question is covered by the judgment of Supreme Court in Commissioner of Income Tax v. Ponni Sugars and Chemicals Ltd (2008) 306 ITR 392 (SC) in which it was held in respect of same scheme namely the Sugar Incentive Scheme based on recommendation of Sampat Committee that where the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand an existing unit, then the receipt of the subsidy would be on capital account. 10. In the present case, from the orders of AO, CIT (A) and ITAT we find that the assesee was allowed additional free sale of sugar quota under the scheme for setting up or expanding the sugar unit. The benefit was given to the sugar mills to meet the capital outlay in setting up or expanding the sugar mills. 11. The Tribunal has relied on the judgment of this Court in CIT vs. Kisan Sahkari Chini Mills Ltd. 284 ITR 418, which was also followed by Uttrakhand High Court in case of CIT vs. M/s Kishan Sahkari Chini Mills Ltd in ITA NO.101 of 2006 vide i....
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....s of manufacture had commended. The consumption of raw material, if any, and deduction of amount claimed as business expenditure could not be allowed. The judgment is distinguishable inasmuch in Sir Shadi Lal Sugar & Gen Mills Ltd vs. CIT (supra) there was no turning out of the finished products, hence it could not be treated to be a trial run or pre-operational expense. Though a new unit was set up but an experiment with deduction of amount claimed by itself could not be allowed as revenue expenses and had to be given treatment as capital expenses. 18. In the present case, the pre-operation expenses have been detailed in the material produced before the AO and which has been referred to in the paper book at pages 14, 15 and 17 in respect to Co-Generation Plant, Rauzagaon; Oxalic Acid, Dhampur and thus the pre-operational expenses, were revenue expenses and not capital expenses. These expenses were actually claimed as revenue expenses in the computation with the return and were to be allowed as revenue expenses. 19. The question of law is thus decided in favour of the assessee and against the revenue. 20. Question no. 5 "(5) Whether on the facts and in the circumstances of the ....
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....t in Madras Industrial Investment Corpn. Ltd v. Commissioner of Income Tax (1997) 225 ITR 0802. The business expenditure under Section 37 not being expenditure in the nature described in sections 30 to 36 exclusively for the purpose of the business or profession was held to be allowed in computing income chargeable under the head "Profits and gains of business or profession". Relying upon Section 37 it was held that the expenditure should not be of a capital nature. The question whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the principles of commercial trading. Ordinarily, revenue expenditure, which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books, over a period of years. 29. In the present case from the facts discussed by the Tribunal we find that the expenditure on Convertible Premium Notes (CPM) was spread over the period of life on CPM for six years. The year of payment was s....
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....er of offer are subject to the provisions of the Act, the Memorandum and Articles of Association of the company, the terms and conditions mentioned in the Letter of Offer, the Composite Application Form and the guidelines for issue and listing of securities issued by the Government of India and the Securities and Exchange Board of India. The Convertible Premium Notes shall also be subject to such other terms and conditions, as may be incorporated in the CPN certificate letter of allotment and/or other documents in respect of these Convertible Premium Notes and the terms and conditions, as may be desired by any Government agency." 30. The expenditure in this case spread over the period for which the discount has been paid. From the order of the AO we find that the entire amount was claimed in two years namely in the year 1997-98 and 1998-99. 31. On the aforesaid facts and circumstances brought before us, we are of the view that the reasoning in the judgment in Madras Industrial Investment Corpn. Ltd v. Commissioner of Income Tax (supra) is applicable and that the expenditure had to be spread out for a period of six years, and was not allowable in the years 1997-98 and 1998-99 alo....