TaxTMI 
TaxTMI 
2014 (10) TMI 154
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....the yearend as per best estimates according to prudent accounting policies. 3. has erred in confirming the not increasing the opening stock by Rs. 7, 03, 57, 036 being addition made to closing stock of Raw Material on account of CENVAT credit. 4. has erred in confirming the disallowance of Rs. 1, 73, 01, 914 u/s 43B(f) being the provision made for Leave Salary. 5. has erred in confirming the disallowance of Rs. 31, 32, 199 being the deduction u/s 801A on account of allocation of Head Office expenses to undertakings eligible to claim deduction u/s 80IA i. e. Rs. 27, 14, 703 for Rayon Power Plant and Rs. 4, 17, 490 for Chennai Power Plant. 6. has erred in confirming disallowance of claim of depreciation on goodwill on acquisition of Madura Garments Division from Madura Coats Limited in the A. Y. 2000-O1. 7. The appellant submits that the expenditure of Rs. 90, 70, 31, 366 on deduction u/s 36(1)(ii) interest on loans taken for new projects/ expansion /modernization is allowable as revenue expenditure in the respective assessment years. The appellant submits that such expenditure: i)If it is held that in those years that the said expenditure is not revenue, the appell....
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....ies. Invoking the provisions of section 14A r. w. Rule 8D of the Income tax Rules, 1962 (Rules), the AO made a disallowance of Rs. 5. 9386 Crores. 2. 1. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submission of the assessee and the assessment order, FAA held that his predecessor, in the AY. s. 2004-05 and 2005-06, had held that 0. 5% of average investment only in non-strategic investment had to be disallowed. On the basis of that, he restricted the disallowance to Rs. 85. 47 Lakhs and partly allowed the appeal filed by the assessee. 2. 2. Before us, AR stated that similar issue had arisen in the earlier years and was decided in favour of the assessee, that the assessee itself had made a disallowance of Rs. 31. 11 Lakhs u/s 14A of the Act. Departmental Representative (DR) argued that disallowance u/s 14A had to be made on the basis of facts of each year. 2. 3. We have heard the rival submissions and perused the material before us. We find that the issue had arisen in the AY. s. 2002-03 and 2005-06 also. Deciding the appeal for the AY 2005-06 (ITA No. 662/Mum/2009), the Tribunal at parag....
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....owance to Rs. 1. 87 lakhs. We do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 2 is accordingly dismissed. " Respectfully, following the order for the year 2002-03, ground no. 3 is decided against the AO. " Respectfully, following the order for the earlier years, ground no. 1 is decided in favour of the assessee. 3. Ground No. 2 is about disallowance of Rs. 3. 42 Crores u/s. 40(a)(ia) towards the provisions made at the year end. During the assessment proceedings, on perusal of the statement of income and report filed u/s 44AB of the Act, the AO found that the Auditor had made a qualifying remark about the provisions for expenses, that the assessee had not considered the remark of the Auditor and had not made any disallowance in the computation of income. The AO, vide order-sheet noting dt. 18. 11. 2008, specifically required the assessee to explain as to why the impugned amount should not be considered for disallowance u/s 40(a)(ia) of the Act. The assessee-company filed its reply vide letter dated 20. 11. 2008 and stated that as on 31. 03. 2006 the assessee had made provision of expenses on estimated basis pending the receipt of actual bills f....
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....s per the provisions of the Act. 3. 2. We have heard the rival submissions and perused the material before us. We find that the AO had invoked the provisions of section 40(a)(ia), though he has also discussed the principles of contingent liability, while making the disallowance. We find that FAA has passed a non-speaking order and just endorsed the views of the AO but he was also of the opinion that provisions of section 40(a)(ia) were applicable. It is found that assessee had specifically mentioned during the assessment proceedings, that it had not received the bills under various heads, that provisions of tax deducting at source were not applicable for the provisions made. We find that similar issue had arisen in the case of Mahindra & Mahindra Ltd. (supra). In that matter it was held that TDS provisions were not applicable for the provisions made at the year-end. Similarly, in the case of Industrial Development Banking Company(supra), the Tribunal had held as under: "The deduction of tax at source can only be effected when payee is known. As far as the situation before us is concerned, the regular return bonds being transferable on simple endorsement and delivery and the r....
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....for leave salary is not a statutory liability but only a contractual liability which is payable only if the employees resigns or retired from the services. We also find that the Hon'ble Calcutta High Court in the case of Excide Industries Ltd. (supra) has struck down Sec. 43B(f) being arbitrary, unconscionable and dehors the Apex Court decision in the case of Bharat Earth Movers 245 ITR 428. It is relevant to state that the Tribunal in the case of CIT Vs Universal Medicare in ITA No. 6191/M/08, has followed the decision of the Hon'ble Supreme Court in the case of Bharat Earth Movers and directed the AO to allow the amounts so claimed. Respectfully following the afore discussed decisions, we direct the AO to allow the claim of provisions for leave salary. Ground No. 6 is accordingly allowed. " Respectfully following the above, grounds no. 4, 2 and 2 for the AY. s. under appeal are decided in favour of the assessee-company. In view of the above, ground no. 4 is decided in favour of the assessee. 5. Next ground is about reduction of deduction, amounting to Rs. 31. 32 Lakhs on account of allocation of Head Office (HO) expenses. During the assessment proceedings, the AO found t....
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....the Hon'ble Delhi High Court are different from the facts of the case under consideration. 5. 3. We have heard the rival submission and perused the material before us. We find that while deciding the appeal for the earlier AY. s. , the Tribunal has discussed the issue of HO expenses with regard to section 10B /80IA and 80IB of the Act. We would like to reproduce the paragraph no. 5 and 5. 1 of the order for the earlier years and that reads as under: 5. Next ground for all the three years is about disallowance of Rs. 36. 05 lakhs, 38. 57 lakhs and 36. 23 lakhs and is related to claim of deduction u/s. 80IA and 80IB of the Act. Before us, AR and DR stated that while deciding the issue for the AY 2002-03, the Tribunal had deleted allocation of head office expenses in computing 10B deduction. A reference was made to page 14 paras no. 19-20 of the order for the AY 2002-03(supra). 5. 1. We would like to reproduce the paragraphs no. 19 and 20 of order of the Tribunal for the AY 2002-03 (supra) and same read as under: "19. Ground No. 9 reads as under: "On the facts and in the circumstances of the cases and in law, the learned AO has erred in reducing the exemption u/s. 10B i....
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....ided in favour of the assessee. 6. Next ground is about disallowance of depreciation on goodwill on acquisition of Madura Graments Division ongoing concern basis. We find that in the earlier identical issue had been decided in favour of the assessee as following: 3. 1. We find that sum of Rs. 3. 33 crores, Rs. 2. 50 crores and Rs. 1. 87 crores was found to be incurred by the assessee for the AY. s. 2003-04. 2004-05 and 2005-06 respectively on account of marketing and knowhow incurred on acquisition of Madura Garments division. We find that the identical issue was deliberated upon by the Tribunal while deciding the appeal for earlier AY. We are reproducing the relevant paragraph of that order and same reads as under: 18. Ground No. 8 reads as under: "That, on the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing depreciation of Rs. 3, 33, 86, 719 claimed by the appellant on goodwill of Rs. 20. 35 crores acquired on acquisition of 'Madura Garments' division from Madura Coasts Ltd. on a going concern basis and learned CIT (A) has erred in confirming the order of the learned AO. The learned AO be directed to allow the depreciation o....
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....1). He referred to the scheme of amalgamation between the assessee and BGFL(page no. 43-63 of the paper book)and the order of High Court of Gujarat approving amalgamation of both the entities. He further argued that the phrase industrial undertaking has been used in section 35 D as well as in section 72, that the Tribunal in the case of HSBC Securities India Holding Ltd. (supra) had dealt with section 35D of the Act. He also relied upon the case of Pruthvi Brokers and Shareholders P. Ltd. (349ITR336) of Hon'ble Bombay High Court. DR relied upon the order of the FAA. 7. 3. We have heard the rival submissions. We find that the assessee had made the claim of carry forward of unabsorbed depreciation of the amalgamated company during the assessment proceedings, that in the return such claim was not made, that the FAA had decided the issue against the assessee as he was of the opinion that all the claims of deductions/exemption/set off should be made in the original return only. We find that at the time of passing the order the FAA did not have benefit of the case of Pruthvi Brokers and Shareholders P. Ltd. (supra)of the jurisdictional High Court. In our opinion, after the said order ....
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....s. We find that identical issue had arisen in the earlier years also in the appeals filed by the AO(ITA/616/Mum/2009-AY. 2003-04 to 2005-06 dated 01. 08. 2014)and the Tribunal has adjudicated the issue of unutilised Modat Credit as under. "16. In the appeals filed by the AO, there are two grounds of appeal, that are common. First we would like to adjudicate them. Grounds no. 2, 1 and 1 for the AY. s. 2003-04, 2004-05 and 2005-06 deal with deletion of unutilised Modvat Credit in closing stock and amounts involved are Rs. 5. 04 crores, Rs. 7. 15 crores and Rs. 7. 03crores respectively for the AY. s. concerned. 16. 1. Before us, DR and AR agreed that the issue has been already decided in favour of the assessee by earlier years' order including the order for the AY. 2002-03. We find that while deciding the identical issue for the immediate previous assessment year, theTribunal had dismissed the appeal of the AO. Besides, the issue of MODVAT credit has been finally settled by the case of Indo Nippon Chemicals Co. Ltd. (261ITR275)by the Hon'ble Apex Court. Here is the decision of the Hon'ble Court: "It is not open to the Assessing Officer to treat outgoings as income under secti....