TaxTMI 
TaxTMI 
TaxTMI 
2011 (7) TMI 1153
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....2 relates to disallowance of Rs. 50,000/- made u/s 14A of the Act stating that part of administration/office/personnel cost is attributable to tax free income. The parties mentioned that the issue has to be referred to the files of the A.O for deciding the issue afresh in the light of the Bombay High Court judgment in the case of Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT ITXA No. 626/10 and Writ Petition No. 758/10 reported in 328 ITR 81 (Mum). Further, they mentioned that said binding High Court judgment considered the Special Bench decisions in the case of Daga Capital Management Pvt. Ltd. [2009] 117 ITD 169 (Mum)(SB). They also made a mention of the manner in which the rule 8D is required to be implemented to the AY prior to the amendment. Considering the above submissions of the parties, we are of the opinion that the matter should be set aside for reexamining the issue afresh in the light of the above referred decisions after giving reasonable opportunity of being heard. Accordingly, the grounds are set aside. 4. Ground no. 3 relates disallowance of Rs. 27,000/- representing corporate membership fee paid to club. The total payments were of Rs. 33,300/- (27000+6300) consi....
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....e matter, restored the order of the ITO. In our judgment, considering the clear finding given by the AAC, without a contrary finding thereto by the Tribunal, we must accept the facts as found by the AAC Consequently, the payments must be allowed as business expenditure." We have examined if the payment made by the company for want of club membership in the name of the executives is allowable as business and revenue expenditure. In our opinion, the existence of the membership in the names of the employees should not make any difference on taxability so long as they were used for the employer's business purposes and the company has paid the FBT as per the law. Thus, impugned issue is settled in favour of the assessee and therefore, the order of the CIT(A) has to be reversed and in favour of the assessee. Accordingly, relevant ground is allowed. 6. Ground No. 4 relates to disallowance of 10% of the miscellaneous expenses on the ground that it is a not an allowable expenditure u/s 37(1) of the Act. On hearing the assessee's submissions that the disallowance if unjustified, CIT(A) followed his decision for the AY 2000-01 and 2001-02 and restricted the disallowance to 5% of the claim.....
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....d is dismissed. 8. Grounds No. 6 and 8 relate to confirmation of the disallowance of Rs. 4,08,697/-and Rs. 18,18,129/.- respectively out of the total expenditure on running and maintenance of aircraft on the ground of personal use. During the proceedings, at the prompt of the Bench, Ld Counsel fairly mentioned that the issue has to be decided in line with our decision on the issue in the case of M/s Kirloskar Oil Engines Ltd vide ITA no 1039 and 1040 for the AY 1995-96 and 1996-97 and Avinash Bhosale vide ITA No. 1425 & 1524/PN/08. We find paras 10 to 14 of the said order in the case of Avinash Bhosale (supra) are relevant and hence reproduced as under. 10. We have heard the parties and perused the orders and the paper books made available to us. Undisputed facts are that the assessee used both Bell helicopter as well as the Cessna aircraft for the mixed use and therefore, there is no dispute on the invoking of the provisions of section 38(2) of the Act. Further, there is no dispute that the AO restricted the disallowance art 1/7th of the claim. The same is evidenced by filing the copies of the assessment orders for the AYs 2002-03 to AYs 2004-05. They are placed at pages 128 to ....
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....ficer was empowered to restrict the depreciation to a fair part thereof having regard to the user of asset for the purposes of business. In this view of the matter, we hold that order of the revenue authorities is correct in law. As far as the proportion of disallowance for personal use is concerned, we find that the revenue authorities have made a reasonable proportionate disallowance at the rate of 1/6th of the total expenses including depreciation. Accordingly, we decline to interfere in the matter." Further, it has come to our notice that the Pune bench has taken decision in the case of M/s Kirloskar Oil Engines Ltd vide ITA no 1039 and 1040 for the AY 1995-96 and 1996-97 in connection with the disallowance of aircraft expenditure and held that the disallowances at the rate of 15% (nearly 1/7th) of the claim is fair and reasonable. Relevant para 12 and 13 of the said decision is as follows. "12. Ground No 4 is directed against the CIT(A)'s order in confirming Aircraft expenses amounting to Rs. 10,28,179/-. 13. We have heard both the parties. In the assessment year 90- 91, this issue was decided against the assessee by the Tribunal vide order dt 20.7.2005 in ITA No. 916....
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.... undertaken any exercise to establish the said fairness in adopting the said percentages. It is true that the onus is on the assessee to substantiate the claim of the assessee. Considering the peculiar circumstances better known to the assessee, there is surrender of claim to the extent of 1/7th of the total claims Rs. 93,96,771/- (ie Rs. 66,04,980/- on account of depreciation of vehicles and Rs. 27,91,791/- on account of aviation expenses). At this point of time, in our opinion, the Onus has shifted to the revenue to demonstrate that the said surrender is incorrect and estimations made by the AO are fair within the meaning of section 38(2) of the Act. Fairness is an important factor in matters of quantification of the disallowances, when section 38(2) of the Act is invoked. The revenue has not done any probe independently to demonstrate that assessee's offer is unfair and his estimations are fair. Hence, we are of the opinion, that the estimations made by the AO, which are confirmed in case of the Cessna Aircraft and altered in case of Bell Helicoptor are hereby set aside. 14. In view of the existence of the Pune bench decision, which is binding, we are of the opinion, that ....
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....f this order, we proceed to import the same here as under. 19. Ground 11 relates to deduction u/s 80IA with reference to Pimpri and Urse Unit II. At the very outset, Ld Counsel stated that this issue is identical to the one pending adjudication before the AO in the set aside proceedings vide the direction of the Tribunal in ITA 1014/pn/2000 dt 30.3.2010 for the AY 1997- 98. Considering the linkage of the issue, we proceed to set aside this issue too to the files of the AO with identical directions. Assessee is directed filed relevant orders of the Tribunal before the AO during the set aside proceedings. Accordingly, the grounds are set aside. Considering the linkage of the issue, we set aside this issue too to the files of the AO with identical directions. Assessee is directed to file relevant orders of the Tribunal before the AO during the set aside proceedings. Accordingly, the grounds are set aside. 13. As regards ground No. 9(b) is concerned, at the very outset, the learned counsel for the assessee mentioned that Rs. 56,32,480/- is eligible income for the purpose of computation of deduction u/s 80-IB. However, he mentioned that a sum of Rs. 44,24,715/- is only pressed rela....
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....ling Foods Ltd. (supra). In our opinion, for the sake clarity of the facts, we find that the matter should be set aside to the file of the A.O for want of facts as well as application of law as it existed now. Apart from other facts, AO must demonstrate the immediate nexus of these cash discount receipts vis a vis purchases or to the payments to the suppliers of the raw materials purchased by the assessee. Accordingly, this ground is set aside. 15. Ground no. 10 regarding relief u/s 80-HHC has not been pressed by the learned counsel for the assessee. Hence the same is dismissed as withdrawn. 16. Ground no. 11 relates to denial of deduction of Rs. 1,85,52,844/- on account of the carried forward unabsorbed depreciation of the amalgamating company and charging of MAT u/s 115JB of the Act on the book profits equalant of the said amount. We need to decide whether the unabsorbed depreciation of Rs. 1.85 crores belonging to amalgamating company i.e. Finolex Technologies Ltd is eligible for reduction from the book profit of the assessee in view of the provisions of clause (iii) to Explanation (1) of 115JB of the Act. 17. Relying on the provisions, the Ld counsel for the assessee argued ....
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..... In this regard, the Ld counsel for the assessee rebutted by saying that the provisions of section 72A have no bearing for determination of book profit for the purpose of section 115JB of the Act. 18. We have heard both the parties and perused the orders of Revenue. There is no dispute on the quantum of claim of deduction of unabsorbed depreciation. Further, there is no dispute on the fact that unabsorbed depreciation has become the claim of the assessee w.e.f. 1-4-2001 and the same merged into the books of the assessee from the said effective date. With this background, we have examined the provisions of clause (iii) of the said Explanation I and the same read as under. The relevant clause reads as under: Explanation (1) - For the purposes of this section, 'book profit' means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2) as increased by - ----- ----- ----- ----- --- (a) to (i) If any amount referred to in clauses (a) to (i) is debited to the profit and loss account, and as reduced by (i) ... (ii) (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is les....
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....fulfilled. So far as the conditions are concerned, we find that the AO has not brought anything on to the records to demonstrate that the assessee failed to fulfil the conditions specified in the said section 72A of the Act. Thus, the relevant arguments of the DR are dismissed. Accordingly, the ground 11 of the appeal is allowed. 19. In the result appeal filed by the assessee is partly allowed pro-tanto. ITA No. 105/PN/2007 for A.Y. 2002-03 (Department's appeal) 20. Ground no. 1 relates to disallowance of Rs. 50,000/- made u/s 14A of the Act stating that part of administration/office/personnel cost is attributable to tax free income. On hearing the parties we find that this issue has to be reexamined in the light of recent judgments by the Bombay High Court in the case of Godrej Boyce Ltd and others (supra). Therefore, we set aside this issue to the files of the AO for deciding the issue afresh after granting reasonable opportunity of being heard to the assessee. Accordingly, the ground is set aside. 21. Ground 2 relates to restriction of disallowance made on account of gifts and presentations. CIT(A) confirmed Rs. 4,50,000/- against the total disallowance. This decision of the....
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.... with a direction to decide the issue in line with the judgment of Bombay High Court in the case of Vidyut Corporation (supra) after granting reasonable opportunity of being heard to the assessee. Accordingly, the ground is set aside. 26. Ground no. 5 relates to the CIT(A)'s action in holding that excise duty and sales tax collected by the assessee to be excluded from the total turnover for the purpose of computation of deduction u/s 80-HHC of the Act. This issue is settled at the level of Hon'ble supreme Court in the case of CIT Vs. Laxmi Machine Works (2007) 290 ITR 667 (SC) in favour of the assessee wherein it is held that excise duty and sales tax are not includible in total turnover in the formula contained in section 80-HH(3) of the Act. We accordingly uphold the order of the CIT(A) on this issue and dismiss the ground raised by the assessee. 27. Ground no. 6 relates to CIT(A)'s direction to the A.O to allow the deduction u/s 80-IB of the Act in respect of scrap generated out of manufacturing process treating the same as business income. The A.O observed that the scrap is not a bye product of the assessee and hence the sale of the same cannot be treated as the business inco....