TaxTMI 
TaxTMI 
2014 (2) TMI 1110
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....hod of claim was changed from cash basis to accrual basis. Since this amount pertains to period prior to Assessment Year 1985-86, the same should be allowed as deduction on payment basis in the Assessment Year 1986-87 when it was actually paid. Ground of Appeal No. 3 {Page 24 of CIT (A)'s Order} Expenditure on maintenance of certain Buildings Rs. 90, 20, 020 The learned CIT (A) erred in rejecting the claim of the appellant that certain buildings were maintained at far flung places due to business expediency and as hotels were not available in these places, expenditure on the same is allowable as revenue expenditure. The learned CIT (A) further erred in not accepting appellant's contention that expenses specifically allowable uls, 30 to 36 cannot be disallowed as per provisions of Section 3 7(4) as well as that Section 37(4) is limited to disallow maintenance expenses and not the running expenses. Ground of Appeal No. 4 {page 30 of CIT (A)'s Order} Recovery of Guest House Expenses considered under Rule 6D - Rs. 4, 10, 354 The learned CIT (A) erred in rejecting appellant's claim that recoveries made in respect of Guest House expenses should be treated as travelling exp....
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....isallowing the expenditure on partly Convertible Debentures (attributable to convertible portion) on the ground that the same is capital expenditure Ground of Appeal No. 13 {Page 79 of CIT (A)'s Order} Disallowance of Tata Steel Rural Development Society Expenditure- Rs. 1, 08, 11, 768 The learned CIT (A) failed to appreciate the circumstances in which expenditure through the medium of TSRDS was incurred and erred a treating the same as non-business expenditure. Ground of Appeal No. 14 {Page 80 of CIT (A)'s Order} Disallowance of Annual Contribution to Steel Plants' Sports Board and Tata Sports Club Rs. 5, 69, 619 The learned CIT (A) erred in holding that contribution to Tata Sports Club is and Steel Plant Sports Board covered by the provisions of Section 40A(a). Ground of Appeal No. 15 {Page 90 of CIT (A)'s Order} Contributions to various Institutions Rs. 11, 77, 102 The learned CIT (A) erred in disallowing contributions to institutions on the ground that such expenditure was not incurred for the purposes of the business, having failed to understand the scenario that establishes nexus between the contributions made and the business of the appellant. Ground of Appeal....
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....l No. 20 {Page 156 of CIT (AYs Order} Investment Allowance on items of Plant and Machinery in the Works of Tubes Division- Rs. 3, 03, 915. The learned CIT (A) erred in not granting investment allowance on the following items of Plant & Machinery installed in the factory of Tubes Division: Rs. Computer Terminals at Works 9, 08, 634 Weighing Machine at Medical Unit 6, 632 Electrical equipment for Works Personnel Office 17, 552 Electric equipment for Works Cash Office 42, 345 Electrical equipment for Works Telephone Exchange 2, 04, 3 17 Electrical equipment for electronic laboratory 19, 913 Automatic Fire Alarm System 16, 265, 12, 15, 658 Investment Allowance @ 25% 3, 03, 915 Ground of Appeal No. 21 {Page 206 of CIT (A)'s Order} Contribution to the Society for Sports & Stadium at Kolkata- Rs. 10, 00, 000 The learned CIT (A) erred in disallowing the said contribution on the ground that there was no direct nexus with the business carried on by the appellant. Ground of Appeal No. 22 (Page 206 of CIT (A)'s Order} Contribution to Beldih and United Clubs Rs. 2, 26, 532 The learned CIT (A) erred in disallowing such contribution on the ground that it is ....
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....payment to Ahmedabad Advance Mills Ltd. ' 4. On the facts and in the circumstances of the case and in law, the learned CIT(A)has erred in directing the A. O. to allow Rs. 10, 799/- on account of payment for holiday plan at hotels as guest house expenses. ' 5. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 93, 306/- on account of remuneration to Chairman and Managing Director. ' 6. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 10, 16, 000/- on account of contribution to Tata Services for maintenance of Horniman circle gardens as an advertise campaign. ' 7. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 83, 23, 124/- on account of investment allowance. ' 8. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 8, 166/- on account of investment allowance on plant and machinery installed at stock yards. ' 9. On the facts and in the circumstances of the case an....
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....n payment basis though it pertained to earlier years, that whenever there was change in accounting system such peculiar circumstances could arise, that in a particular year assessee could get benefits of accrual and payment system. He relied upon the case of West Coast Sugar Mills Ltd. , delivered by the Hon'ble Bombay High Court(59 Taxman 398). Departmental Representative (DR) supported the order of the FAA. 2. 3. We have heard the rival submissions and perused the material before us. We find that during the year under consideration the assessee had made claim about leave salary on payment basis as well as on accrual basis. In the immediate preceding year, similar claims were made by the assessee and claim made on payment basis was allowed by the Tribunal in its order 27. 02. 2009 (ITA/ 3938/ Mum/03 and ITA/3980/Mum/03). In the matter of West Coast Sugar Mills Ltd. (supra)Hon'ble High Court had dealt with the issue of bonus paid and bonus accrued in the same year. After considering the submissions of both the sides, Hon'ble High Court held as under: "The question was whether the assessee could claim deduction on both cash and provision basis. Whenever there is change of method,....
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....e set off against the guest house expenses under first proviso to section 3 7(4). The assessee included the service charges notionally computed for using the guest house in the travelling expenses account. At the time of quantification of the disallowance under Rule 6D, the expenditure which was incurred at the guest house was also included in the disallowance under Rule 6D. 4. 1. Against the order of the AO assessee preferred an appeal before the FAA. Considering the material available he held that the assessee provided guest houses to its employees at various places, that it collected cash for providing lodging or boarding and lodging to the suppliers and business associates, that in the case of the employees, no cash was collected and a debit note was raised, that the procedure adopted by the AO was correct, that the notional recoveries were book entries only, that the assessee debited the notional guest house expenses to the travelling expenses account and credited the same to guest house expenses account. , that the assessee, had quantified the disallowance under Rule 6D at Rs. 62, 88, 451/-, that amount in question included the guest house recoveries to the extent of Rs. 4....
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....ssee is allowed. ' Respectfully, following the above ground no. 4 is decided in favour of the assessee. 5. Next ground is about disallowance made under Rule 6B with respect to Calendars and Diaries, amounting to Rs. 2, 57, 609/-. During the assessment proceedings, AO found that the assessee presented the calendars and diaries and treated the same as the expenditure on public relations. He made disallowance under Rule 6B in respect of articles of presentation intended for advertisement comprised of cost of diaries and calendars in excess of the prescribed limits with the logo of the assessee and also quantified the disallowance. 5. 1. Against the order of the AO assessee preferred an appeal before the First Appeal Authority (FAA). After considering the submissions of the assessee and the assessment order he held that that the diaries and calendars with the logo of the company had advertisement value, that the diaries and the calendars were the presentation articles as they bore the logo of the company, that the diaries and calendars with the logo of the company came within the purview of Rule 6B. Relying upon the ratio laid down by the jurisdictional High Court in the case ....
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....overed by the Explanation 2 to section 37(2A)/37(2), that the sweep of the words entertainment expenditure found in the Explanation 2 to section 37(2A) was wide and broad to cover every expenditure on provision of hospitality of every kind to any person other than the employees at the place of their work. Following the judgement of the Karnataka High Court in the case of Mysore Minerals Ltd. (162 ITR 562), the disallowance made by the AO u/s. 37(2A)/37(2) was upheld by the FAA. 6. 2. Before us, AR and DR agreed that the Tribunal had decided the issue against the assessee in AY. 1985 -86. We find that, Tribunal had dealt the issue in paragrahs16-18 of the order of earlier year(supra) as under : ' 16. Ground No. 6 raised by the assessee is as follows: ' The learned CIT(A)erred in treating expenditure at Annual General Meeting in the nature of entertainment expenditure, hence disallowing the same. ' 17. The very same issue arose for consideration in assessee's own case in A. Y. 1988-89 in I. T. A. No. 3222/ Mum/92 and this Tribunal has taken a view that serving of tea, coffee arnd soft drinks to shareholders at Annual General Meeting is not expenditure in the nature of ent....
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....Next Ground of appeal deals with Disallowance of expenditure, on tea and coffee served to visitors u/s. 37(2A) of the Act. While framing assessment AO found that that the entertainment expenditure quantified by the auditors did not include the expenditure on tea, coffee, food or other beverages provided to the visitors either in office or in factory, that the assessee did not include such expenses in the entertainment expenditure. He estimated the expenditure on tea, coffee etc. to visitors at Rs. 2 lakhs, and treated the same as entertainment expenditure u/s. 37(2A) of the Act. The AO further observed that considering the size of the assessee, the above estimation towards the entertainment expenditure was reasonable. 7. 1. Against the order of the AO assessee preferred an appeal before the FAA. Considering the relevant material he held that the expenditure incurred by the assessee on tea, coffee etc. served to the visitors was covered by Explanation 2 to sub-section (2A) of section 37, that the Explanation 2 made it clear that the expenditure on provision of hospitality of every kind by the assessee to any person other than the employees in office, factory or other place of the....
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....diture provided the expenditure is incurred in office/factory or other place of their work, that in the case under appeal the expenditure was incurred in the hotels, that the expenditure incurred on entertainment at hotels attributable to employees could not be brought under the expression other place of their work, that the expression had to be interpreted in the context in which other words preceding the expression were used, that the other words used were office/or factory, that 'other place of their work'had to be similar to office/factory, that normally, the said expression included places such as mine, work site, drilling-site, godown etc. , that the expression did not include expenditure incurred at a place other than the place at which an employee normally works, that words' other place of work' should be akin to office or factory and it could not be taken to include hotel or restaurant, that the assessee did not place any evidence to establish the fact that the expenditure incurred on business meetings & conferences contained the rent paid for the halls in the hotels. He directed the AO to examine & allow if the assessee is able to furnish the evidence of rent paid to the ....
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....d or beverages provided by the assessee to the employees in office, factory or other place of their work as entertainment expenditure. The expenditure was not incurred either in office or in factory. The expenditure incurred on entertainment at hotels attributable to employees cannot be brought under the expression "other place of their work". This expression has to be interpreted in the context in which other words preceding the expression were used. The other words used are "office" or "factory". In my view, "other place of their work" has to be similar to "office" or "factory". Normally, the expression "other place of their work" includes places such as mine, work site, drilling site, godown etc. But certainly the expression does not include expenditure incurred at a place other than the place at which an employee normally works. The principle of ejusdem generic warrants that "other place of work" should be akin to office or factory and it cannot be taken to include hotel or restaurant. The expenditure incurred by the appellant was towards food or beverages. In my view, the expenditure incurred on the employees at a place other than office or factory requires to be treated as en....
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....29. The decision in the case of Expo Machinery Ltd. (supra) by Hon'ble Delhi High Court is also distinguishable as follows: It was a case of employees participation while entertaining guests and the issue of place of work in the context of Explanation 2 to section 37(2A) was not considered by the Hon'ble Court. In the present case the employees alone participated in the entertainment and there were no customers and guests. 30. We, therefore, confirm the order of the CIT(A) and dismiss ground Nos. 8 to 10. " Respectfully following the above we decide ground no. 8 against the assessee. 9. Next Ground of appeal is about payment to clubs. On the basis of the details furnished by the assessee in the tax audit report, AO came to the conclusion that the payments made to clubs were in the nature of entertainment expenditure and disallowed the amount claimed, u/s. 37(2A)/37(2) of the Act, under the head payment to club. 9. 1. In the appellate proceedings FAA held that that the assessee did not bring any material on record to establish that payments to clubs did not contain the expenditure in the nature of entertainment expenditure, that the payment made to clubs comprised mainly....
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....ion following the decision taken for earlier issue. 10. 2. Before us, AR and DR submitted that issue was identical to issue no. 10 for the AY. 1985-86 and the disallowance confirmed by the FAA, was upheld by the Tribunal. We find that ground no. 10 and facts related to it were deliberated upon by the Tribunal as under: "10. The learned CIT(A) erred in holding that the expenditure incurred on employees' get- togethers on the ground that the same is covered as entertainment expenditure. " XXXX The AO disallowed the claim for deduction on the same ground on which expenditure on business meetings and conference of employees were disallowed. The CIT(A) confirmed the order of the Assessing Officer. For identical reasons given above, the AO and CIT(A) disallowed expenditure of Rs. 2, 00, 000/- on providing food at employees get-together and picnics. These expenses were admittedly not incurred in the place of work. 30. We, therefore, confirm the order of the CIT(A) and dismiss ground Nos. 8 to 10. " Considering the fact that the issue has been already decided against the assessee in the immediate previous AY. , we want to confirm the order of the FAA. Ground no. 10 stands di....
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....as made by the CIT(A) is proper and has to be upheld. Ground No 11 is therefore, dismissed. Following the above, we confirm the order of the FAA and dismiss ground no. 11. 12. Next issue is Expenditure on Partly Convertible Debenture. The assessee had issued fully convertible bonds in AY. 1981-82. The expense disallowed by the AO in AY. 1986-87 was in respect of 131/2% fully convertible bonds. Tax Audit reports revealed that the expenses were incurred by the assessee on conversion of bonds into shares. The assessee claimed the expenses incurred on conversion of bonds into shares as revenue expenditure, whereas the AO treated the same as capital expenditure. 12. 1. Relying upon the matters of the Hon'ble supreme Court in the case of Brooke Bond India Ltd. (225ITR798)and Punjab State Industrial Development Corporation Ltd. (225ITR792), FAA held that the expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital was directly related to the expansion of the capital base of the company and was a capital expenditure even though it might incidentally help in the business of the company and in the profit making, that the acti....
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....red had no nexus with the business carried on by the assessee, that it was an application of income for a charitable or philanthropic cause, that there was no commercial expediency also in incurring the expenditure on the rural development, that the disallowance made by the AO did not call for any interference. 13. 2. Before us, AR submitted that expenditure was incurred in connection with the purpose of the assessee's business, that company was under legal obligation;as per the memorandum of settlement between the assessee and the Tata Workers' Union;for incurring said expenditure and to provide facilities, that expenditure incurred for discharging social responsibilities has to be allowed as revenue expenditure. He relied upon the orders of the Tribunal delivered in the cases of TISCO(Tata Steel)for the AYs. 1968-69, 1980-81and1985-86(ITA/2068&2321/Bom/74-75, ITA/2046/Bom/1984, ITA/3938&3980/ Mum/2003). He also relied upon the order of the Tribunal pronounced in the case of TELCO for the AYs. 1983-84, 1984-85, 1986-87 to 1990-91(ITA/6003 to 6008/Mum/98). DR supported the order of the FAA. 13. 3. We have heard the rival submissions and perused the material before us. We f....
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....ies Act or other charitable institutions to undertake activities in the field of sports, education, medical relief, cultural promotions, etc. The assessee from time to time made contributions towards expenses of such institutions To the extent they provide the service to the people of Jamsheapur, the burden to provide similar civic amenities by the assessee is reduced The assessee had made contributions of Rs 11, 31, 700 to the institutions mentioned above during the accounting year 1984-85 to achieve this objectiveThe Assessing Officer rejected the assessee's claim that these contributions were made to discharge its obligations towards civic amenities and, therefore, it was an item of business expenditure incurred wholly and exclusively in the ordinary course of business. He held that since the major beneficiaries of the expenditure were the company's employees, it was an item of labour welfare expenditure. 43. On appeal by the assessee, the CIT(A) confirmed the order of the Assessing Officer. We have heard the rival submissions. In A. Y. 1968-69 on an identical issue, the ITAT, Mumbal in I. T. A. No. 2068/Bom/74-75 was pleased to hold that expenditure was for welfare of employ....
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.... of business. 14. 1. In the appellant proceedings, FAA considered the submissions of the assessee and held that the contributions were covered by section 40A(9) of the Act, that Section 40A(9) was enacted with a view to discouraging creation of certain irrevocable trusts ostensibly for the welfare of the employees and transfer to such trust substantial amounts by way of contribution, that with a view to discouraging creation of such trusts, funds, companies, association of persons, societies etc. , the Finance Act, 1984 had provided that no deduction would be allowed in the computation of taxable profits in respect of any sums paid by the assessee as an employer towards the setting up or formation of or a contribution to any fund, trust, company, association of persons, body of individuals or society or any other institution for any purpose except where such sum was paid or contributed to a recognised provident fund or an approved gratuity fund or approved superannua - tion fund or for the purposes of and to the extent required by or under any other law, that the contributions were given to Tata Sports Club in the capacity of an employer for the benefit of the employees as well ....
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....ntributions made by the assessee were on the nature of application of income, that the contributions were hit by the provisions of section 40A(9) of the Act. FAA upheld the order of the AO. 15. 2. Before us, AR and DR took the same stand that they had taken for the earlier two grounds. We have decided grounds no. 14-15 in favour of the assessee. Following the same ground no. 16 is also allowed, as the facts of the ground are identical to earlier grounds-the only difference is the names of the institutions. 16. Next Ground of appeal pertains to disallowance of fees paid to consultants for feasibility studies, amounting to Rs. 13. 14 lakhs. During the assessment proceedings AO held that the expenditure was incurred in connection with the expansion of the industrial undertaking, that it was a capital expenditure, that the expenditure incurred on preparation of feasibility/project report in connection with the expansion of industrial undertaking or in connection with the setting up of a new unit was an admissible deduction u/s. 35D of the Act. 16. 1. In appellate proceedings FAA held that Rs. 5 lakhs were paid to M. N. Dastur & Co. for conduct- ing techno economic feasibility ....
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....d. 16. 2. Before us, AR submitted that similar issue was decided in favour of the assessee in the preceding AY. DR did not controvert the fact. We find that in the AY. 1985-86 assessee had paid fees for feasibility study to the same consultant to whom fess was paid during the year also. While deciding the appeal, Tribunal at paragraph 38 has held as under: "We have perused the details of the expenses. A sum of Rs. 10 lakhs was paid for modernisation project phase-I. A sum of Rs. 2 lakhs and Rs. 3 lakhs was paid for project report for feasibility of plastic lines and coated pipes and revamping the ERW Mill respectively. In AY. 1968-69 in I. T. A. No. 2068/Bom/74- 75 the Hon'ble ITAT in assessee's own case considered expenditure on report for increasing production capacity and future development. After elaborate discussion, the Tribunal came to the conclusion that expenditure was not a capital expenditure and allowed deduction of same as a revenue expenditure. Facts and circumstances being identical in this year, respectfully following the decision of the Tribunal, we hold that the expenditure in question has to be allowed as a deduction being a revenue expenditure. Ground No. ....
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....l undertaking for the purpose of business of construction/manufacture/production of any article or thing was entitled for investment allowance, that the town division could not be considered as a part of the industrial undertaking, that it served only the employees of the assessee and other residents of the city at large. Comparing the provisions of section 32A and 33 of the Act, he held that the plant & machinery in the town division was not an integral part of the manufacturing process. Giving description of the machinery installed and the location of the P&M he held that the assets were installed and used had nothing to do with the manufacturing activities of the assessee. AO found that the assessee-company had a licence to manufacture electricity, that it had claimed that electrical machinery was installed in the electricity division, that it had produced electricity and used such electricity in its manufacturing process, that the assessee also sold the power to other group companies and residents of Jamshedpur and derived substantial revenues from selling the power, that the assessee had not identify the P&M which were used for the purpose of generation and distribution of pow....
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....r distribution of electricity then investment allowance had to be allowed, that the assessee had a licence for generation and distribution of electricity, that the electricity division was an industrial undertaking by itself engaged in the generation or distribution of power, that the assessee had classified the cost of machinery under the heading town division but that did not mean that the plant and machinery was not used for the purpose of generation and distribution of electricity. He directed the AO to allow investment allowance on electrical machinery. With regard to the claim of extra shift allowance on the electrical machinery, FAA held that the assessee was not entitled for extra shift allowance for the said machinery, that the electrical machinery appeared in Appendix 1, Part I of Depreciation Schedule. For clarity's sake, he reprodu- ced the details of the machinery i. e. Batteries;X-Ray and electro therapeutic apparatus and accessories thereto, switchgear and instruments, transformers and other stationary plant, wiring and fittings of electric light and fan insta -llations. FAA held that on a combined reading of III C(4)of the depreciation schedule it was clear that the....
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....e operational integration should be taken as machinery or plant pertaining to the manufacturing process, that the P&M installed in hospital, clubs, airport and training institute could not be treated as P&M having a link in the total process of the operational integration of steel manufacturing, that there was no doubt that the facilities provided help to the assessee in carrying on the business, that they did not have any link in the operational integration of manufacturing process, that the assessee was not entitled for investment allowance on the P&M installed in the hospital, club, airport and the training institute. FAA considered the decisions delivered by the Tribunal for the AYs. 1981-82 & 1982-83 and held that Tribunal had not considered the significance of the word 'industrial undertaking' which has been employed in Section 32A. Finally, he held that hospital, club and airport could not be called industrial undertaking, that the plant & machinery installed at these places could not be called P&M installed in an industrial undertaking, that such plant & machinery had no link with the manufacturing process. As a result, he upheld the order of the AO of not allowing the i....
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....issions and perused the material before us. We find that while adjudicating the issue of investment allowance and extra shift allowance on various items of P&M Tribunal has dealt the question as under: 44. Ground No 15 of the assessee reads as follows "The learned CIT(A) erred in not allowing investment allowance, ESA and additional depreciation on plant and machinery installed in Town Division's water works, sanitary works, hospital and technical and training institutes which are an integral part of the Works and further erred in giving partial allowance of additional depreciation and ESA on other Plant and Machinery. The learned CIT(A) further erred in not following the order of the Hon'ble Mumbai ITAT in appellant's own case for assessment years 1981-82 and 1982-83. 45. The assessee has an integrated Steel Plant at Jamshedpur to manufacture steel. It has also set up a township in the process of setting up the manufacturing facilities for producing steel. The township is an integrated part of Works of the assessee. The background of setting up of the township has been fully elaborated while dealing with ground No. 14. In respect of depreciation and investment allowance t....
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....ssion "for the purpose of business of construction, manufacture of production of is wider in scope than the expression for construction, manufacture or production. " It was also brought to CIT(A)'s notice that in assessee's own case for assessment years 1981-82, 1982-83 and 1983-84 it has been consistently held that tractors and trailers installed in the Town Division, which were in the nature of earth moving machineries, were eligible for investment allowance by application of the wider expression as explained above. 47. The CIT(A), however, held as follows: The investment allowance is admissible u/s. 32A and subsection (1) requires that the plant and machinery should be owned by the assessee, should be wholly used for the purpose of the business carried on by him and should be the machinery or plant specified in subsection (2). Subsection (2) stipulates that the plant and machinery should be installed in an industrial undertalcing for the purpose of business of manufacture or production of any article or thing other than the articles or things specified in the Eleventh Schedule. No deduction by way of investment allowance is allowable in respect of (i) any machinery or plan....
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.... to the employees, their dependents and others which does not visibly have any connection with the manufacturing activity, is directly needed for the running of the priority/ industry. We therefore direct the Income-tax Officer to allow development rebate at higher rate of 25% on the value of the plant and machinery under consideration"Definitely, the scope of expression used in section 33 "for the purpose of business of manufacture" is wider and in that context, the Hon'ble ITAT, D Bench in assessment year 1968-69 to 1971-72 held that the plant and machinery installed for providing necessary facilities to the employees formed an integral part of the manufacturing activity. As observed earlier, the word "industrial undertaking" was not employed in section 33. In my view, by employing the word "industrial undertaking", the scope has been restricted in section 32A of the I. T. Act. With utmost respect, I submit that the Hon'ble ITAT, D-Bench, Mumbai for assessment year 1981-82 and 1982-83 in the appellant's case did not consider the significance of the word "industrial undertaking" in section 32A. Thus, the context in which the Hon'ble ITAT treated the hospital and other facilities a....
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....presented before us. The decisions relied on by the Ld. DR are, in our opinion, distinguishable in facts. The decision in the case of ACC Ltd. (supra) relates to development rebate and not to additional depreciation, In the case of Machinery Manufacturing Corpn. Ltd. (supra) investment allowance on Fire Extinguishers and Time-office Equipment was denied as it was held that such items are not plant and machinery which are installed for the purpose of business of construction, manufacture or production of article or thing, In the case of Pieco Electronics Ltd. (supra) the investment allowance on the new equipment installed in the canteen was denied. In Technico Enterprises (P) Ltd. (supra), it was held that the computer was not used for manufacture or production of any article by the assessee and hence the assessee was not entitled to investment allowance On the other hand, the decisions relied on by the ld counsel of the assessee do assist the case of the assessee In the case of Tnveni Tissues Ltd (supra), the Hon'ble Calcutta High Court has held that the assessee, who was manufacturing tissue papers was entitled to investment allowance on motors, electric installations, underground....
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....ributed a sum of Rs. 10 lakhs to Society for sports and stadium at Calcutta. He called for details in this regard and held that the expenditure was not incurred for the purpose of business. 21. 1. After perusing the receipt dated 7-12-1985 issued by the Society for sports and stadium, Calcutta, FAA held that it was a contribution given by the assessee, that the contribution was one of the forms of advertisement, that the contribution was made to an independent society, that for making a substantial contribution one of the gates of the stadium was named after the assessee, that the contribution was an application of income and there was no direct nexus with the business carried on by the company. 21. 2. Before us, AR submitted that the amount in question was in the nature of advertisement and publicity expenses and the same should be allowed as deduction, that the Calcutta society undertook the job of constructing the biggest stadium in Asia for accommodating 120000 people, that one of the schemes of the society was to name the different gates after the names of different advertisers, that there were two prominent gates available at Rs. 10 lakhs each and the company decided to....
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.... filed by the department wherein order of the Tribunal for the AY. 1985-86 was challenged and issue of contribution to clubs was agitated before the Hon'ble Court. (IT Appeal no. 3176 of 2010:dated 26. 04. 2012, -question of law no. F). Following the order of the Tribunal for the year 1985-86, we allow the appeal of the assessee with regard to payment to Beldih and United clubs. 23. Ground No. 23 is about Contribution to Xavier Labour Relations Institute(XLRI). Before the AO, assessee claimed that it had contributed a sum of Rs. 2 lakhs to XLRI and same was claimed as deduction as per the provisions of the Section 35(l)(iii) of the Act, but it did not produce the evidence in support of its claim. AO observed that XLRI was engaged in the management research in the field of social science and the claim of the assessee was not acceptable because such research was not related to the business of the assessee. He did not allow the deduction claim made by the assessee. 23. 1. In the appellate proceedings FAA held that the assessee did not produce any evidence either before the AO or before him in support of payment of Rs. 2 lakhs to XLRI, that in the absence of evidence, no deductio....
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....flats, etc. , for its employees on such land. A few private parties engaged in trade, commerce and contract work in Jamshedpur have been given some plots of land by the assessee for construction of residential accommodation. Various Departments of the Central and State Governments like Central Excise, Income-tax, Sales-tax, police, judicial officials, Deputy Commissioners'Office staff, etc. , have requisiti -oned the assessee's bungalows, houses and flats for residential purposes for the officers of these Departments. The assessee had, in accordance with its scale of charging of rent for the water charges and sewage charges, raised bills either against the specific Departments or the specific officers occupying these accommodations. The Government officials in spite of repeated reminders, ignored the payment of the rental and other charges for the accommodations occupied by them and on their transfers, even the concerned Departments disowned their liability on the ground that it was the liability of the concerned officers to pay the rent and the other charges of the accommodation. In these circumstances, the assessee found itself in an unenviable position of tracing the Government ....
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....assessment proceedings, AO found that the assessee-company had claimed deduction u/s. 80HHC of the Act, that it had created reserve to the extent of Rs. 40 lakhs only. He restricted the deduction to the extent of reserve created by the assessee. 27. 1. Before the FAA, assessee contended that an opportunity should be given for creation of the reserve in future as it was a beneficial provision. After considering the submissions of the assessee, he that that there was no error in the computation of deduction u/s. 80HHC of the Act, that for availing the deduction u/s. 80-HHC for AYs. 1986-87 to 1988-89, it was essential that an amount equal to the amount of deduction claimed u/s. 80 HHC was to be debited to profit and loss account of the previous year in respect of which the deduction was to be allowed and credited to a reserve account to be utilised for the purposes of the business of the eligible assessee, that the AO had restricted the deduction in accordance with the provisions of the Act prevailing in the previous year. He upheld the action of the AO. 27. 2. Before us, AR submitted that an opportunity should be given to the assessee to credit further amount to reserve accoun....
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.... towards leave salary and had also made provisions for leave salary. AO was of the opinion that the provision made by the assessee for salary on accrual basis was not an ascertained liability. He disallowed the provision, amounting to Rs. 2. 69 Crores, made by the assessee under the head 'provision towards leave salary'. 29. 1. FAA, after hearing the assessee, held that . 29. 2. Before us, AR submitted that Tribunal vide its order 27. 02. 2009(supra)for the AY. 1985-86, had decided the issue of provision for leave salary in favour of the assessee, that similar issue had arisen in the AY. 1992-93 also and the appeal filed by the AO against the order of the FAA was dismissed by the Tribunal. DR supported the order of the AO. 29. 3. We have heard the rival submissions and perused the material before us. We find that while deciding the similar issue, for the earlier AY. , ITAT had allowed the appeal of the assessee, that the department had not challenged the order of the Tribunal before the Hon'ble High Court while filing appeal for that AY. , that similar issue was decided in favour of the assessee by the Tribunal while deciding the appeal for the AY. 1992-93( ITA7083/Mum/199....
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....ion. He directed the AO to allow 20% of the initial contribution to the ASF. 30. 2. Before us, DR agreed that the issue was decided in favour of the assessee. by the orders of the Tribunal delivered for the AYs. 1985-85(supra). AR submitted that for the AY. 1992-93(supra) similar issue was decided against the AO by the Tribunal. 30. 3. We have heard the rival submissions and perused the material before us. We find that the issue of contribution to ASF has been dealt by the Tribunal while passing order for the AY. 1985-86 making following observations: "101. After hearing both the sides, we find the issue stands covered in favour of the assessee and against the Revenue by the decision of the Tribunal in assessee's own case vide I. T. A. No. 7083/Bom/96 order dated 27th, December, 2004. We find the Tribunal at para 4 of the order has held as under: "4. Ground No. 2 disputes the Ld. CIT(A)'s order in directing to allow the entire amount of Rs. 2, 43, 471/- being initial contribution of assessee to superannuation fund as against 1/5th of 80% of such sum allowed by Assessing Officer. The ld. DR has relied on the orders of Assessing Officer. The ld. AR of assessee has contend....
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....According to the AO, the contribution made by the assessee on account of shortfall in the operating profit of AAML was not an allowable expenditure, that the agreement provided for making good the amount paid earlier therefore, that same could not be considered expenditure, that the payment made to AAML was in the nature of capital expenditure because the expenditure incurred was for acquisition of a source of income, that there was no need to make any payment to AAML and the payment defied the logic. Finally the AO concluded that the payment made to AAML was not business expenditure. 31. 1. Against the order of the AO, assessee preferred an appeal before the FAA. After considering the submissions of the assessee and the assessment order he held that, the assessee in terms of the agreement entered into a commercial transaction and thereby incurred expenses in first three years, that commercial expediency compelled the assessee to make the payment, that the sums paid by the assessee to AAML were admissible as deduction. He directed the AO to allow the same from assessment years 1985-86 to 1987-88 and observed that the AO had taxed the sums received from AAML in AYs. 1989-90 and 1....
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.... 182 days and no recovery was made from the employees. The AO held that the payments made to various hotels for holiday plan are covered by the provisions of section 37(4). He made a disallowance of Rs. 10, 799/-. 32. 1. After considering the assessment order and the submissions of the assessee in this regard, FAA held that the assessee has reserved the room nights in reputed hotels to provide accommodation to its employees under the Holiday plan, that the second proviso to section 37(4) excluded the operation of clauses (i) and (ii) if the guest house was maintained as a holiday home throughout the previous year for the purpose of exclusive use of the employees of the assessee during the leave period of the employee if the employer had not less than 100 whole time employees in the business or profession carried on by them, that if any expenditure was allowable under sub-sections (1) and (3) of section 37 but if that expenditure related to maintenance of a guest house, it would not be an allowable deduction and an exception was that where the guest house was maintained by an assessee having more than 100 employees for the purpose of being used by the employees during their holid....
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....and Managing Director. In the returns of income, the assessee company had computed the remuneration to chairman and managing director u/s. 40(C) of the Act, that it had disallowed the remuneration over and above the permissible limits voluntarily under the said section. According to the AO, the remuneration to CMD required to be computed in accordance with the provisions of section 40A(5) of the Act, that the managing director was provided with free electricity. He quantified the value of the free electricity at Rs. 10, 306/-. He further observed that the CMD was provided accommodation and the maintenance and upkeep of such building was done by the assessee, that he was provided a car by the assessee, that the company provided furniture, air conditioners etc. at the residence of the managing director. He estimated the value of the perquisites at Rs. 50, 000/-. 33. 1. In the appellate proceedings, FAA held that the assessee had denied having provided any furniture or air conditioners at the residence of the CMD, that the power was supplied to the CMD from its own resources, that the car was provided to him for official purposes only, that the assessee had provided accommodation t....
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....with his order. Ground no. 6 is decided against the AO. 35. Grounds no. 7-9 are about Investment allowance and Extra shift allowance on town division, (Gr. 7), Investment allowance on P& M installed at stock yard(Gr. 8)and Investment allowance on various items of P&M(Gr. 9). Facts related to these issues have been elaborately discussed at paragr -aphs 18 to 20. 1. a of our order. During the assessment proceedings, AO had made certain additions under the heads investment allowance, extra shift allowance, but in the appellate proceedings, FAA gave partial relief to the assessee. AO has challenged that part of his order before us. Ground 7 is about order of the FAA wherein he had allowed Investment allowance and extra shift allowance on certain items P&M of town division amounting to Rs. 83. 23 lakhs. He was of the opinion that such items had direct relation with manufacturing activities. Before us, DR agreed that similar issue had arisen in the earlier AY. also and the Tribunal had dismissed the appeal filed by the Department. We find that identical issue had arisen in earlier AYs. also. While dealing with the issue of 'Investment allowance and Extra shift allowance on town div....
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....rt of articles out of or into factory were held to be 'plant' entitled to investment allowance. We feel that we need not discuss each and every case relied on by the assessee, particularly when a view has been taken by the ITAT, Bombay Bench, in assessee's own case for the assessment years 1968-69 to 1971-72. In this order dated 13-10-1976, it has been held by the Tribunal that main works and the township formed an integral part of the whole industrial complex, one of which cannot exist without the other. It has been held that the plant and machinery installed even for providing the necessary facilities to the employees which does not apparently have any connection with the manufacturing activity is directly needed for the running of the priority industry. We, therefore, hold that investment allowance is admissible to the assessee on the plant and machinery in the Town Division, particularly when on the items like light and fan installations the assessee had itself not claimed any investment allowance. We, therefore, hold that additional depredation, extra shift allowance and investment allowance are admissible to the assessee on the plant and machinery in the Town Division. Theref....
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....alled by the assessee in the stock yard. " Respectfully, following the above we decide ground no. 8 against the assessee. 37. As stated earlier, during the assessment proceedings, AO denied investment allowance on certain items of assets on the ground that the assets were not used for the process of manufacturing iron and steel and they are in the nature of office equipments covered by the proviso of section 31A(1) of the Act. FAA had allowed Investment Allowance on such items of P&M that were not part of the P&M of Town division. Before us, DR and AR agreed that the Tribunal had decided the similar issue against the AO while passing order for the AY. 1985-86. We find that the Tribunal has held as under: 137. In appeal, the learned CIT(A) held that investment allowance is not admissible on the plant and machinery installed in any office premises or in the residential accommodation. Similarly investment allowance is not admissible on any office appliances or road transport vehicles. However, any machinery or plant having a link in the process of the operational integration should be taken as machinery or plant belonging to the manufacturing process. He accordingly held that....