TaxTMI 
TaxTMI 
2015 (5) TMI 926
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....(Appeals) erred in deleting the addition of Rs. 1,48,54,169 lacs made on account of disallowance of extra-ordinary items being loss due to cyclone, flood, fire, etc. as the evidence in respect of such claim was not submitted during the course of assessment proceedings. 2. On the facts and in the circumstances of the case and in law, the ld.CIT(Appeals) erred in deleting the addition of Rs. 8,39,04,550/- made on account of disallowance of claim of guarantee fees paid to Government of Gujarat. The disallowance was made by disallowing the claim as revenue expenditure as it is of enduring nature in the assessee's business and hence capital in nature. 3. On the facts and in the circumstances of the case and in law, the ld.CIT(Appeals) erred in deleting the addition of Rs. 45,24,582/- made on account of disallowance of claim of cost of raising finance for specialized job as revenue expenditure. The ld.CIT(Appeals) erred in not appreciating the fact that as the result of this expenditure, the assessee had derived benefit of enduring nature, hence the expenditure is of capital nature. 4. On the facts and in the circumstances of the case and in law, the Ld.CIT(Appeals) erred in del....
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....acs claim on account of penalty expenses. The AO further made disallowance of Rs. 58,82,406/- on account of preliminary and incidental expenses and of Rs. 57,43,80,598/- on account of interest paid u/s.43B of the Act. The AO while computing the book profit u/s.115JB of the Act made addition of Rs. 20,38,15,872/- in respect of the provision for deferred tax liability. The AO also made addition of Rs. 14,32,02,331/- in respect of the depreciation while computing the book profit u/s.115JB of the Act. The AO also added back while computing the book profit u/s.115JB of the Act. The assessee feeling aggrieved by the assessment order, preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee deleted the addition of Rs. 1,48,54,169/- claimed on account of losses due to flood, cyclone, fire, etc. The ld.CIT(A) also deleted the disallowance of Rs. 8,39,04,550/- claimed on account of guarantee fees paid to Government of Gujarat. The ld.CIT(A) deleted the disallowance of Rs. 45,24,582/- claimed to have been incurred for cost of raising finance treated as capital expenditure. The ld.CIT(A) also deleted the disallowance of Rs. 3,13,53,470/- claimed on accoun....
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.... property. The assessee company being engaged in the production of an essential commodity, i.e. power, immediately took steps to repair its damaged assets and to restore generation of electricity. For this purpose, for full recoupment of the expenditure due to damage, it sought financial help from Government of Gujarat and received a subsidy against loss due to flood amounting to Rs. 16,01,00,000/-. Subsequently, the cost of repair of damaged assets was found to be Rs. 1,48,54,169/- only. Both the receipt of subsidy and the expenditure on repair of damaged assets were recognized as revenue items. The receipt was credited to the profit and loss account under the head 'revenue subsidies and grant'. Details in this regard had been disclosed in Schedule 15 to the profit and loss account. At the same time, the expenditure was also claimed as a venue expense. Hence, there was no justification for disallowing Rs. 1,48,54,169/-. 4.2. I have considered the submissions of the ld.AR and the facts of the case. The disallowance has been made only on the ground that the assessee could not substantiate that it had incurred expenditure of Rs. 1,48,54,169/- on repairing its assets damaged due to....
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.... rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) decided these issues in paras-5.2 & 5.3 and 6.2 respectively by observing as under:- "5.2. I have considered the submissions of the ld.AR and the facts of the case. The issue relating to whether an item of expenditure lies in the capital or the revenue field has exercised the courts in numerous cases. From an analysis of such cases a few guiding principles/tests can be identified. One of the important tests for categorizing any expenditure as capital in nature is whether the laying out of the impugned expenditure results in the acquisition of creation of any new asset. Where no such asset is created, it would be indicative of an expenditure which was not capital in nature. Another test relates to the principle of "enduring benefit". "Enduring benefit" may be in the form of long lasting use of an asset or the acquisition of a right to exploit certain commercial processes, etc. In the instant case, the assessee did not acquire any right to exploit a commercial technology or process, and neither was the benefit "enduring", since the ....
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....king the disallowance of Rs. 45,24,582/-, which is directed to be deleted." 6.1 The ld.CIT(A) has followed the decision of the Tribunal passed in ITA No.738/Ahd/2009 for AY 2006-07 in the case of Himalaya Mahcinery Pvt.Ltd., dated 5.6.2009 and in the case of Shri Rama Multi Tech vs. ACIT reported at 92 TTJ 568. 6.2. The ld.CIT-DR could not distinguish the facts of the case, therefore we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, these two grounds raised in the Revenue's appeal are rejected. 8. Ground No.4 is against deletion of addition of Rs. 3,13,53,470/-. The ld.CIT-DR has supported the order of AO and submitted that the ld.CIT(A) was not justified in deleting the addition. However, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that the ld.CIT(A) has verified from the records that there was pilferage, shortage of material in transit, shortage arising on physical verification, etc. 9. 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 ld.CIT(A) has given a finding in para-7.2 of his ord....
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....d Transmission Division Kodinar normally entered the expenditure incurred on rates and taxes under the accounting hear 'Penalties on Statutory Levies'. From the supporting documents filed it is seen that the payments actually pertained to rates and taxes being in the nature of land revenue. Hence the discrepancy stands explained. There was no penal payment involved. Accordingly, it is held that the AO was not justified in making the disallowance of Rs. 6,29,000/-, which is directed to be deleted." 11.1. This finding of the ld.CIT(A) is not controverted by the ld.CIT-DR by placing any contrary material on record, therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue's appeal is rejected. 12. Ground No.6 is against the direction given to the AO to recompute the book profit u/s.115JB of the Act for the purpose of computing MAT by the ld.CIT(A). The ld.CIT-DR supported the order of the AO and submitted that the ld.CIT(A) was not justified in giving direction to the AO for recomputing the book profit u/s.115JB of the Act for MAT. 12.1 On the contrary, ld.counsel for the assessee supported the order ....
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.... preparing the accounts. The provisions of Income-tax Act with regard to depreciation etc., would not be material to the computation. On similar facts, the jurisdictional High Court of Gujarat in DCIT v Vardhman Fabrics (P) Ltd., 122 Taxman 375 had occasion to consider the Circular of the Company Law Board which clarified that the rates prescribed in Schedule XIV were minimum rates of depreciation and the company could claim higher depreciation on the basis of a bonafide technological evaluation and proper disclosure thereof in the notes forming part of annual accounts. In the instant case, from the facts as above, I am of the opinion that the assessee has complied with the provisions contained in Schedule-VI to the Companies Act read with Schedule-XIY and Circular dt. 7.3.2009 of the Department of Company Affairs. Hence the AO's action in reducing the claim of depreciation under item (ii)(a) by Rs. 14,32,02,331/- is held to be unjustified. The AO is directed to recompute the book profit for MAT by allowing the depreciation claimed." 13.1. The ld.CIT(A) has applied the ratio laid down in the judgements of Hon'ble Apex Court rendered in the case of Apollo Tyres Ltd. (255 ITR ....
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....f pay had not crystallized during the year under consideration since the final decision to pay the same was still awaited. There was not liability fastened upon the assessee to pay the arrears of 6th pay commission. Since the assessee is following mercantile system of accounting and the liability to pay arrears of 6th pay commission had actually not been crystallized during the year under consideration, a sum of Rs. 61,00,00,000/- is disallowed and added back to total income being contingent liability." The ld.CIT(A) confirmed the finding of the AO by observing that the report of the 6th Pay Commission was submitted to the Government of India in March- 2008. In respect of the Central Government employees the liability accrued from the day when the report was accepted by the Central Government. In respect of State Governments the report is not binding and it is not to be mandatorily accepted and adopted. In fact, number of State Governments were against accepting the report because of huge financial burden and in fact Government of Madhya Pradesh constituted Pay Commission of its own, to reframe the recommendations. In other words, without acceptance of the report the liability cann....
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....t a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied, the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. "" 15.3. Further, the High Court held as under:- "6. In this case, the Tribunal had noticed that there was no dispute as regards the terms of employment of the workers and officers. The only question was the exact quantification of the compensation or wage revision. The Tribunal also held that provision for wage revision was based on past experience, interim Pay Commission of government employees, previous Pay Commission's reports of public sector employees, union demands and other relevant factors. The Tribunal also held that with the expiry of one wage settlement or agreement, invariably, there is a time lag when another fresh wage revision agreement is negotiated and entered. The deduction claimed for that ....
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....pectfully following the ratio laid down in the judgement of Hon'ble High Court of Kerala in the case of CIT vs. Kerala State Financial Enterprises Ltd.(supra) and in the judgement of Hon'ble High Court of Delhi in the case of CIT vs. Bharat Heavy Electrical Ltd.(supra), the disallowance made by the AO is hereby deleted. Thus, ground of assessee's appeal is allowed. 16. Ground No.2 of assessee's appeal is against confirming the enhancement of book profit computed under section 115JB of the Act by Rs. 61,00,00,000/- on account of provision for employees' cost pending the decision of pay commission treating the same as unascertained liability. The CIT-DR supported the orders of the authorities below, whereas the ld.counsel for the assessee relied upon the judgement of Hon'ble Kerala High Court in the case of CIT vs. Kerala State Financial Enterprises Ltd.(supra) and the judgement of Hon'ble Delhi High Court in the case of CIT vs. Bharat Heavy Electrical Ltd.(supra). 17. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. Since we have allowed the ground No.1 of assessee's appeal(supra) by following t....