TaxTMI 
TaxTMI 
2014 (7) TMI 684
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....law and in facts & circumstances of the case in confirming the disallowances towards late payment of ESI & PF for Rs. 47,403/-. The disallowance may be cancelled. 3. The Ld.CIT(A) has erred in law and in facts & circumstances of the case in confirming the unpaid Leave Encashment under section 43B of the IT Act 1961 for Rs. 2,04,973/-. The disallowance may be cancelled. 4. The Ld.CIT(A) has erred in law and in facts & circumstances of the case in confirming disallowances of prior period expenses for Rs. 23,27,520. The disallowance may be cancelled. 5. The Ld.CIT(A) has erred in law and in facts & circumstances of the case in confirming the disallowances on the expenses for scientific research u/s.35(2AB) for Rs. 3,59,500/-. The disallowance may be cancelled. 6. The Ld.CIT(A) has erred in law and in facts & circumstances of the case in confirming disallowances to the extent of Rs. 17,06,566/- for interest claimed, as considered to be diverted for non-business purposes. The disallowance may be cancelled. 7. The Ld.CIT(A) has erred in law and in facts & circumstances of the cas....
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....11,73,87,951/-, addition on account of depreciation of Rs. 28,77,600/- and claim of additional depreciation of Rs. 1,10,62,481/-. While computing the book profit, the AO made addition on provision for doubtful debts and provision for diminution in value of investments and prior period expenses disallowed u/s.14A of the Act. Against this, assessee filed an appeal before the ld.CIT(A), who after considering the submissions partly allowed the appeal. Now, both the Assessee and Revenue feeling aggrieved by the order of the ld.CIT(A) have preferred the present appeals. 3. Ground No.1 is against the disallowance of Rs. 1,02,575/- towards the payment of donation u/s.80G of the Act. During the course of hearing, ld.counsel for the assessee fairly conceded that no evidence in support of the donation was filed. In view of the submission made by the ld.counsel for the assessee, ground No.1 is rejected. 4. Ground No.2 is against the disallowances of Rs. 47,403/- towards late payment of ESI & PF. The ld.counsel for the assessee submitted that the payment was made within the grace period. He placed reliance on the judgement of the Hon'ble High Court rendered in the case of CIT vs. Amoli Or....
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....on made by the assessing officer is therefore confirmed." 6.1. Both the authorities have given a finding on fact that the expenditure claimed amounting to Rs. 2,04,873/- as leave encashment was not incurred during the year. This fact is not controverted by the ld.counsel for the assessee by placing any contrary material on record. Therefore, we do not find any infirmity in the orders of the authorities below, same is hereby upheld. This ground of assessee's appeal is rejected. 7. Ground No.4 is against confirmation of disallowance of prior period expenses of Rs. 23,27,520/-. The ld.counsel for the assessee submitted that the authorities below were not justified in making the disallowance. He submitted that the cost of recovery and interest is not an expenditure at all. Reversal entry of earlier year booking of income. He placed reliance on the judgment of Hon'ble Delhi High Court rendered in the case of CIT Vs. Jagajit Industries Ltd. (339 ITR 382) and decision of Bombay High Court (221 Taxman 80). 8. On the contrary, ld.Sr.DR supported the orders of the authorities below. 9. We have heard the rival submissions, perused the material available on record and gone through ....
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....sessee's submission before the ld.CIT(A) was that Rs. 35,927/- towards out of pocket expenses of sales representative of the assessee-company. This amount represents the advances given to the sales representative who subsequently left the company and did not settle the account. It was contended that amount of Rs. 20,41,593/- debited in that account was actually interest which was recorded in the year on 30/04/2005 towards interest debit notes on debts receivable of the company, which when the debts became bad, the recovery of related interest was also reversed, being not earned. Factually, the entry for recording interest accrual based on debit note recorded in financial books on 30/4/2005, being the extended financial year under company law last year, the reversal of the said on 31/3/2006 was treated as prior period in the 11 months financial accounts under the company law for FY 05-06. However, for the income tax purposes the said represents reversal falling within the year, and not really prior period. Similarly, Rs. 2,50,000/- being adjustment of cost recovery recorded on 30/4/2005 is reversed, not having the character of prior period for the financial year 1/4/2005 to 31/3/200....
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....the Appellate Tribunal has substantially erred in holding that the expenses incurred outside the approved R&D facility would also get weighted deduction based on the word under "on in house" interpreting contradictorily to the finding of coordinate bench in Concept Pharmaceuticals Ltd v. ACIT (ITAT, Mum) reported at 43 SOT 423?" 12. We may record that question 'E' in the appeal memo is an additional question which has an element of above noted question. We have, therefore, not separately reproduced the same in this order. The issue is whether the assessee who has incurred expenditure for scientific research, which was not in the in-house facility, could be covered for deduction under section 35(2AB) of the Income Tax Act, 1961." 11.1 The Hon'ble High Court of Gujarat after examining the entire issue came to the conclusion that the Tribunal committed no error. Respectfully following the judgement of Jurisdictional High Court in the case of CIT vs. Cadila Healthcare Ltd. (supra), we hereby direct the AO to allow the claim of the assessee. Thus, this ground of assessee's appeal is allowed. 12. Ground No.6 is against the disallowance of interest amounting to....
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....learly shows that this is interest-free advances given out of overall business fund which included borrowed funds also. The contention of the assessee before the authorities below was two folds; firstly, advances were given for business purposes, therefore provisions of section 36(1)(iii) cannot be applied and secondly, the assessee was having sufficient interest-free funds to make advances. The judgement relied upon by the ld.counsel for the assessee in the case of CIT vs. Raghuvir Synthetics Ltd. (supra), wherein the Hon'ble High Court of Gujarat relying on the judgement of the Hon'ble Apex Court in the case of S. A. Builders Ltd. vs. CIT reported in (2007) 288 ITR 01 (SC) answered the question in favour of assessee. In the present case, both the authorities have made addition on the basis that the advances given have been continuing for a long period of time. Both the authorities have not given any finding with regard to availability of funds with the assessee for making such advances. However, the contention of the assessee is that the fact is not controverted by the authorities below that the advances have been given for business purposes since the assessee has been making pur....
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....4. The ld.counsel for the assessee also placed reliance on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT-I vs. UTI Bank Ltd. (supra) and of CIT-II vs. Hitachi Home and Life Solutions(I) Ltd. reported at (2014) 41 taxmann.com 540 (Guj.). 14.1. On the contrary, ld.Sr.DR has supported the orders of the authorities below. 15. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements relied upon by the ld.counsel for the assessee. The AO observed that primarily the investments by the assessee are on account of shares in Casil Industries Ltd. However, there are a few other investments also. The assessee had submitted before the AO that the shares have come by way of amalgamation, hence there is no direct cost involved. The AO placed reliance on the decision of the Special Bench of the Tribunal (ITAT Delhi-SB) rendered in the case of Cheminvest Ltd. vs. ITO in ITA No.87/Del/2008 and applied Rule 8D and made disallowance of Rs. 64,13,532/-. The ld.CIT(A) recorded the submissions of the assessee in para-11.2 of his order and decided the issue in para- 11.3 o....
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....ce Mfg.Co.Ltd. Mumbai vs. Dy.CIT reported at 328 ITR 81 (Bom.) has held that the Rule 8D is applicable w.e.f. AY 2008-09, therefore the authorities below were not justified in applying the Rule 8D for making the disallowance. In this case, the assessee has shown exempt income of Rs. 1,704/- from dividend. The investment of Casil Health Products Ltd. is vested into the assessee-company under the amalgamation and arrangement as approved by the Hon'ble Gujarat High Court, whereby the four erstwhile companies of Cadila Laboratories Ltd. belonging to Modi Group and Patel Group were merged into two companies. During the current year, the incremental Preference Shares Rs. 4.75 crores are vested by the Hon'ble Gujarat High Court order for Casil Health Products Ltd. This fact is completely ignored by the authorities below. No finding is given by ld.CIT(A) on this aspect. Therefore, it requires fresh decision. In respect of disallowance towards administrative expenses reliance has been placed on the decision of Coordinate Bench (ITA "B" Bench Ahmedabad) of this Tribunal in the case of Torrent Power Ltd. vs. DCIT [(2013) 33 taxmann.com 287] in ITA Nos.504 & 773 (Ahd.) of 2008 for AY 2004-05, ....
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....of disallowance of depreciation of Rs. 28,776,600/- on building and Plant & Machinery. The ld.counsel for the assessee submitted that the authorities below were not justified in disallowing the claim. He placed reliance on the judgement of Hon'ble Gujarat High Court rendered in the case of ACIT vs. Ashima Syntex Ltd. reported at 251 ITR 133. He submitted that the details were given with regard to installation of the machinery as well as the commencement of the production by producing electricity power consumption bill, registration of excise, etc. He submitted that the authorities below failed to appreciate the fact that it was not necessary that the production so made should be sold, in fact the assessee had furnished evidence of commencement of the production. He submitted that the issue is squarely covered by the judgement of Hon'ble Gujarat High Court rendered in the case of ACIT vs. Ashima Syntex Ltd.(supra). On the contrary, ld.Sr.DR supported the orders of the authorities below. He submitted that the assessee should have given the cogent evidence regarding usage of the plant purchased from Pfizer Ltd. and also production so made. 17. We have heard the rival submissions, p....
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....ry is imported and merely it is fixed here, it does not mean that the machine would not work. Ultimately, on evidence, the Tribunal has found that 2,68,412 mtrs. of grey cloth was manufactured. Law does not require that there must be optimum production for granting the benefit. Law only required that there must be use of plant and machinery for the purpose of business. Use of such words that plant and machinery was run more extensively or was required to be used for larger production, is not to be found in the Act or Rules. Whether the plant and machinery were upto the extent of its efficiency is irrelevant for the purpose of deciding depreciation. The test is that building, plant and machinery are used for the purpose of business. It is not even necessary that in a year it must have been used for a particular number of days. If the intention of the legislature was that if the plant and machinery is used for a particular number of days, only then one is entitled to get the benefit of depreciation, legislature would have made that provision. Earlier, rules were to the aforesaid extent. Even recently, with regard to depreciation of vehicles, law is made clear. Therefore, it is for th....
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....he assessee, it can be seen that the provision of bad and doubtful debts has been reduced from the gross debtors and the net sundry debtors are shown as asset in the balance sheet. Thus the provision for bad and doubtful debts cannot be termed as a provision for liability but is in the nature of diminution in the value of asset. In view of the aforesaid facts, we are of the view that the facts in the present case are identical to that of the case of Yokogwa India Ltd (supra). We therefore, respectfully following the decision of Hon'ble High Court in the case of CIT vs. Yokogwa India Ltd., (supra) we do not find any infirmity in the order of CIT(A). Accordingly the appeal of the Revenue is dismissed." 19.1 Respectfully following the aforesaid decision of the Hon'ble Coordinate Bench, we delete the addition of Rs. 52,59,803/- and allow the ground of assessee's appeal. 20. Ground No.10 is against the addition of Rs. 23,27,520/- for prior period expenses. The ld.counsel for the assessee submitted that the action of the authorities below is not justified. He placed reliance on the judgement of Hon'ble Gujarat High Court rendered in the case of CIT vs. Meghmani Organics Ltd. in Tax....
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....is against the confirmation of disallowance made u/s.14A of the Act of Rs. 64,13,532/-. The ld.counsel for the assessee submitted that the AO made addition in calculation of adjusted book profit and disallowed u/s.14A of the Act while relying on Explanation(i)(f) of section 115JB of the Act. The ld.counsel for the assessee placed reliance on the judgement of the Hon'ble Gujarat High Court rendered in the case of Commissioner of Income Tax vs. Gujarat State Fertilizers & Chemicals Ltd. reported at (2013) 358 ITR 323 (Guj.). On the contrary,ld.Sr.DR supported the orders of the authorities below. 23. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax vs. Gujarat State Fertilizers & Chemicals Ltd. held as under: "6.4 As rightly held by both, the CIT (Appeals) and the Tribunal, this issue has a direct correlation with the first question. It was argued by the Revenue that while computing the book profit under Section 115JB of the Act, the disallowance of interest expenditure on exempt income ....
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....he orders of the authorities below as well as the judgement relied upon by the ld.counsel for the assessee. We find that the ld.CIT(A) deleted the addition in para-7.3 of his order by observing as under:- "7.3. I have considered the facts of the case, assessment order and appellant's submission. It is not in dispute that appellant deducted TDS and also deposited the same in government account in time. The only difference is in respect of deducting surcharge. The rate of surcharge was changed by finance bill 2005 which became act in May 2005. Till such time it became act, appellant deducted TDS by charging surcharge at the rate applicable prior to the passing of finance act 2005. After May 2005, appellant started deducting TDS at the correct rate of surcharge. Therefore there was no serious default on the part of appellant. The shortfall in deduction of surcharge is there with valid reason and therefore entire expense cannot be disallowed on account of such nominal shortfall. Accordingly I delete the addition made by the assessing officer." 26.1. We have gone through the judgement of Hon'ble Calcutta High Court in the case of CIT vs. M/s. S. K. Tekriwal (sup....