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2014 (6) TMI 945
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....il and as per provisions Sec. 115JB at Rs. 33,31,20,734/-. The return was selected for scrutiny assessment and statutory notices were issued and served upon the assessee. 3. The first ground of appeal reads as under: "That, on the facts and in the circumstances of the case and in law, the learned Additional Commissioner of Income Tax (herein after referred to as AO) has erred in making disallowance of Rs. 6,37,883/- being rural development expenditure incurred by the appellant and learned Commissioner of Income Tax (Appeals) (herein after referred to as CIT (A)) has erred in confirming the order of the learned AO. The learned AO be directed to allow the claim of Rs. 6,37,883/- and to reduce the total income accordingly. 4. While scrutinizing the return of income, the Assessing Officer noticed that the assessee has claimed an expenditure of Rs. 6,37,883/- as deduction on account of Rural development expenditure. It was explained that this amount was incurred at Rayon Division, Veraval. The assessee was asked to explain why the expenditure on Rural Development not be disallowed. It was explained that these expenses were incurred for welfare and upliftment of the rural ....
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..../s 36(1)(iii) for interest on loans taken for new projects/ expansion / modernization during assessment years 1994- 95 to 1999-2000 is revenue expenditure, however, if it is held in those years that the said expenditure is not revenue expenditure, the appellant claims that the said expenditure be capitalized to the actual cost of fixed assets and depreciation be allowed on the same and to reduce the total income accordingly." 11. This grievance relates to the deduction claimed on account of interest on loan taken for new projects/expansion/modernization during assessment years 1994-95 to 1999-2000. It is claimed that if the interest payment is not allowed as revenue expenditure in earlier years, then the same should be considered for depreciation. 11.1. We find that in the earlier years the claim of interest has been allowed making this grievance of the assessee infructuous. Ground No. 3 is accordingly dismissed. 12. Ground No. 4 reads as under: "Without prejudice to the claim of appellant company that Rs. 19,64,93,193 incurred on marketing and technical knowhow expenses on acquisition of Madura Garments during the AY 2000-01 is allowable fully in AY 2000-01 itsel....
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....the notes to return of income the assessee has disclosed the following note: "The provision for leave salary is made on actuarial valuation, which is a scientific method of computing estimated liability by considering various yardsticks. This global pro vision is covered by Judgment of Supreme Court in Bharat Earth Movers Ltd. Vs. CIT 245 ITR 428. According to the assessee the clause (f) of section 43B covers only the amounts of leave salary due and payable to employees retired/resigned during the relevant previous year in respect of leave at the credit of such employees at the time of retirement / resignation. Since the global provision is not such sum payable in lieu of any leave at the credit of the employee as an employer, the said clause is not applicable in respect of such provision. The global provision is allowable as held by Hon'ble SC in the case of Bharat Earth Movers Ltd. Further the assessee contends that the explanation 2 of section 43B is not applicable since the said explanation only applies to clause 'a' of section 43B. As such the assessee contends that the leave salary payable does not fail u/s 43B(f) as the said amount is not "sum payable" as h....
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....ovision is not sum payable in view of any leave at the credit of the employee as an employer, the said clause is not applicable in respect of such provision. The global provision is allowable as held by Hon'ble Supreme Court in case of Bharat Earth Movers 245 ITR 428. In this decision the Hon'ble SC has held if that the business liability has definitely arisen in the accounting year, the deduction should be allowed even if quantificaton is on a reasonable basis. The future date when the liability would be discharged being uncertain is not an obstacle in claiming the deduction. In deciding this case the apex court has applied its earlier decision in case of Metal Box Company of India 73 ITR 53 in which it was held that the discounted value of the estimated liability of gratuity is deductible. The assessee also relies on judgment of Hon'ble Andhra Pradesh High court in case of Srikakollu Shubbarao & Co. 273 ITR 708 wherein it was field that in order to apply the provisions of section 43B, not only should the liability to pay the tax or duty be incurred in the accounting year but also should be statutorily payable in the accounting year. The provisions for leave salary by no ....
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....he liability to pay the tax or duty be incurred in the accounting year but also should be statutorily payable in the accounting year. In our considered opinion, the provision 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 aforediscussed decisions, we direct the AO to allow the claim of provisions for leave salary. Ground No. 6 is accordingly allowed. 16. Ground No. 7 reads as under: "On the facts and in the circumstances of the cases and in law, the learned AO has erred in disallowing Rs. 2,91,52,190/- being payment made for restructuring of 161h & 17th serie....
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....the findings of the AO. 17.3. Before us, the Ld. Sr. Counsel reiterated what has been submitted before the lower authorities. 17.4. The Ld. DR supported the findings of the lower authorities. 17.5. We have carefully perused the orders of the authorities below. We find that none of the Revenue authorities has doubted the revenue nature of expenditure. The bone of contention is whether the entire expenditure is to be allowed during the year under consideration or to be allowed proportionately over a period of time. In our considered view, firstly there is no such thing as deferred revenue expenditure. Secondly, by way of incurring such expenditure from the business point of view, the assessee got the benefit of reduced interest rate. The Hon'ble Supreme Court in the case of Associated Cement Co. Ltd. 172 ITR 257 has laid down that whereby incurring expenditure, no capital asset is created but the expenditure enable the assessee to avoid a recurring revenue expenditure in future, the same would be revenue expenditure. Further, if an expenditure is of the nature described in any of the specified Sec. i.e. Sec. 30 to 36, the same cannot be fall within Sec. 37(1) of the Act. We ....
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....ve again considered a similar issue at para-54 of its order directed the AO not to reduce the claim of deduction u/s. 80IB of the Act by allocating Head Office expenses to profits derived from eligible units. Respectfully following the decision of the Tribunal mentioned hereinabove, we direct the AO not to reduce the claim of deduction by allocating Head office expenses, expenses of Rayon Division and interest income. Ground No. 9 is allowed. 21. Ground No. 10 reads as under: "On the facts and in the circumstances of the cases and in law, the learned CIT(A) has also erred in making enhancement and withdrawing the exemption u/s lOB on the ground that undertaking is not approved by the Board particularly appointed u/s 14 of the Industrial (Development and Regulation) Act. The learned AO be directed to allow the exemption u/s 1 OB and reduce the total income and reduce the book profit u/s 11 5JB accordingly. 21.1. At the very outset, we have to state that this is not the first year of claim of exemption u/s. 10B of the Act. The Hon'ble Bombay High Court in the case of CIT Vs Paul Brothers 79 Taxman 378 and in the case of Western Outdoor Inter Active Pvt. Ltd. 25 Taxm....
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....lant and accordingly reduce the total income under normal provisions of Income Tax." 25. This issue has been decided by the Tribunal in assessee's own case in A.Y. 2000-01 in ITA No. 5422/M/05. We find that the Tribunal has considered an identical issue at para-66 of its order and at para-70, the Tribunal has set aside this issue and directed the AO to recompute the deduction u/s. 80HHC under MAT provisions as per law and keeping in view the decision in the case of Bharati Information Tech. Pvt. Ltd. 340 ITR 593. As no distinguishing facts have been brought before us, respectfully following the decision of the Co ordinate Bench as mentioned hereinabove, we direct the AO to recompute the deduction as per provisions of the law and in line with the decision in the case of Bharati Information Tech. Pvt. Ltd (supra). Ground No. 12 is allowed for statistical purpose and ground No. 13 become otiose. 25. Ground No. 14 reads as under: "On the facts and in the circumstances of the cases and in law, the learned CIT(A) has erred in not entertaining the additional ground to direct the AU to exclude from taxable profit, the sales tax exemption benefit of Rs. 5,89,11, 855/-, the learn....
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....d of accounting for MODVAT. It was explained that MODVAT is accounted separately and not debited to purchases and hence purchases charged to profit and loss account is net of MODVAT and therefore closing stock is also valued accordingly. The statement of the assessee did not find any favour from the AO who went on to add Rs. 5,87,21,092/-. 31.2. The Ld. CIT(A) has considered this grievance vide para-5 of his order wherein the Ld. CIT(A) has observed that this is a recurring issue and has been decided by his predecessor in favour of the assessee for A.Y. 2001-02 on finding that the facts for the year under consideration are similar, the Ld. CIT(A) followed the decision of his predecessor and deleted the addition. 31.3. The Ld. DR strongly supported the findings of the AO. 31.4. The Ld. Sr. Counsel stated that in earlier years the Revenue has accepted the findings of the Ld. CIT(A). 31.5. We have carefully perused the orders of the authorities below. We find that the Ld. CIT(A) has followed the findings for A.Y. 2001-02 given by his predecessor. We also find that in A.Y. 2001-02, the Revenue has not taken this grievance before the Tribunal. Therefore, following the rule o....