TaxTMI 
TaxTMI 
2016 (5) TMI 1010
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....d grounds, which are reproduced below:- "1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in allowing the assessee of Rs. 22,69,471/- towards security deposits which were written off by the assessee company and claimed as deduction u/s. 28 of the I.T. Act when the assessee failed to give any reasons/evidences in support of its claim during the course of assessment proceedings as to why these amounts have become irrecoverable. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the claim of the assessee of Rs. 34,03,526/- as contingencies written off u/s. 28 of the IT Act without appreciating the face that the assessee paid the sales tax under protest and since the liability as on date does not stand as it has not been crystallized in view of the decision of the appellant Authorities by way of remand orders to the lower Authorities which became time-barred subsequently. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in allowing the amount of Rs. 17,98,092/- being excess depreciation on building when the current cost of construction should be t....
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....ion of Hon'ble Apex Supreme Court in the case of Badridas Daga v. CIT 34 ITR 10 wherein it was held that loss other than capital loss which is really incidental to the business is allowable under section 28 of the Income Tax Act. The assessee also relied in the case of Satluj Cotton Mills Ltd. Vs. CIT 116 ITR 1 wherein it was held that the loss on account of trading assets was allowable deduction and the loss on account of capital asset was not allowable deduction. In the instant case the security deposits were classified as current assets i.e. trading assets as these were made in the normal course and for the effective running of business. Accordingly the learned CIT(A) deleted the addition made by the AO. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 6. The ld. DR vehemently supported the order of AO whereas ld. AR supported the order of the learned CIT(A). We have heard the contentions of both the parties and perused the materials available on record. The AR has filed a paper book which is running from pages 1 to 76. From the aforesaid discussion we find that the assessee has written off certain security deposits during the year which were made w....
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.... 263 (SC) the Apex Court affirming the order of the Hon'ble High Court of Madras has held that if there is a direct and proximate nexus between the business operation and the loss or it is incidental to it, then the loss is deductible, as, without the business operation and doing all that is incidental to it, no profit can be earned. It is in that sense that from a commercial standard such a loss is considered to be a trading one and becomes deductible from the total income. It is to be remembered that the direct and proximate connection and nexus must be between the business operation and the loss. Further, the Hon'ble Madras High Court in the case of CIT vs. Textool Co. Ltd. 135 ITR 200 (Mad) has held as follows:- "where the assessee claims a business loss, the main question to be considered is, whether the loss is incidental to the business....... The tribunal found that the assessee had to import from abroad certain component parts necessary for its manufacturing business. The assessee had to be abide by the scheme of import licences under which the assessee had to pay premiums to the Federation in advance covering the entire import entitlement. Owing to business exigencies,....
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.... authorities but there was no progress so these appeals became time barred. Therefore the assessee has written off the payments made to the Sales Tax Department under protest. However, the AO opined that writing off contingencies for an amount of Rs. 34,03,526/- is in the nature of an extra ordinary item therefore the same cannot be allowed as trading loss incurred in the ordinary course of business. 9. Aggrieved assessee preferred an appeal to Ld. CIT(A) where the assessee submitted that the amount of contingencies written off represent trade loss incurred in the ordinary course of business and as such it is an allowable deduction under Section 28 of the Act. Accordingly, Ld CIT(A) deleted the addition made by the AO. Being aggrieved by this order of the Ld CIT(A) Revenue is in appeal before us. 10. Before us Ld. DR vehemently supported the order of AO and he left the issue to the discretion of the Bench whereas Ld. AR supported the order of the Ld CIT(A). 10.1 We have heard the contentions of both the parties and perused the materials available on record. From the aforesaid discussion we find that the assessee has written off the payments made to the Sales Tax Department....
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....connection with the assessee and is claimed on revenue accounts. Therefore we uphold the order of Ld. CIT(A) and dismiss this ground of appeal of the Revenue. 11. Third issue raised by Revenue in ground number 3 is that learned CIT(A) erred in deleting the addition made by the AO for an amount of Rs. 17,98,092/- on account of excess depreciation claimed by the assessee. 12. During the year under consideration assessee has sold its factory located in Delhi, comprising of land and building. The AO sought the clarification from the assessee regarding the bifurcation of sale proceeds between the land and the building. In response to the notice the assessee submitted that the higher of the following amounts had been considered as received towards building. 1. The market value of the building near to the date of the sale which is Rs. 51,09,800.00 as per the valuer's report dated 8.12.2000. AND/ OR 2. The book value of the building reflecting in the books of accounts which is Rs. 52,85,030.00. However, the AO disregarded the working of the assessee with regard to the sale consideration of the building. The AO held that the sale consideration/fair market value of the buildin....
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....the WDV of the building by the amount of current cost of construction i.e. Rs. 2,32,65,950/-. As a result of change in the WDV excess depreciation claimed by the assessee was worked out by the AO for an amount of Rs. 17,98,092/- which was disallowed and added to the income of the assessee. 15. Now the question before us what should be the value of the consideration of the building sold by the assessee. In the instant case, we find from the submission of the assessee that the building was very old and it was constructed in the year 1950. Subsequently the additions were made in the building up to the financial year 1977. Besides the above, there was no maintenance of the building as the factory was closed down. We also find from the valuer's report dated 8th December 2000 issued by M. Chaudhry and associates that the market value of the building near to the date of sale was at Rs. 51,09,800/-. In the instant case, assessee has declared the sale consideration higher than the market value which is Rs. 52,85,030/- being book value of the building as per accounting records. We further observed that the AO has not doubted the market value of the assessee building as per valuer's report....
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....that the factory of the assessee which was located in Delhi was closed down in November 1996. The assessee after the closure of the factory did not book any electricity expense in its books of accounts on the ground of non-receipt of electricity bills although the assessee was following mercantile system of accounting. The assessee claimed all the bills of electricity dues in the year under consideration as deduction on the ground that these dues came to its notice in this year only and same were settled accordingly. However the AO disagreed with the view of the assessee and held these expenses as prior period expenses so he disallowed. But at the appellate stage Ld CIT(A) reversed the order of the AO. 20. From the facts in hand we find that assessee failed to claim the electricity expenses due to non-receipt of the bills as the Delhi factory was closed in November 1996. We find force in the argument of the Ld. AR that these expenses were made known to the assessee and accordingly settled in the year under consideration. Therefore in our considered view these expenses were exclusively incurred in connection with the business only and eligible for deduction under section 37 of th....
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....ard the contentions of both the parties and perused the materials available on record. From the aforesaid discussion we find that the AO has disallowed the labour expenses by treating it as capital in nature. However we find from the facts of the case that the liability towards the labour expenses was determined and crystallized in the year under consideration so it should be allowed as deduction under section 37 of the Act. We also find that the liability towards the labour expenses was on the revenue account so holding it on capital account is not appropriate. Moreover, the decision of the Hon'ble Supreme Court K. Ravindranathan Nayeras (supra) is entirely applicable to the facts of the assessee as the instant case also relates to the labour dispute. The learned DR also failed to bring anything on record to controvert the finding of the Ld CIT(A). Therefore taking a consistent view in the judgment of Hon'ble Supreme Court and we have no hesitation in upholding the order of Ld CIT(A). Hence this ground of appeal of the revenue is dismissed. 24. In the result, Revenue's appeal is dismissed. Coming to assessee's appeal in ITA No. 669/Kol/08 AY 03-04. 25. Grounds rai....
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....eal is that ld. CIT(A) erred in confirming the order of AO by disallowing port charges written off for an amount of Rs. 9,49,461/- against deposits lying with Calcutta Port Trust. 27. The assessee had been importing raw materials, stores and spares parts through Calcutta Port Trust (CPT for short). The CPT did not raise the bills to the assessee for the services rendered in connection with the above import. However the assessee deposited the money time to time with CPT in connection with the import of goods which was classified in its books of accounts as current assets. The amount payable to CPT as port charges was determined and known to the assessee in the year under consideration. So the assessee adjusted the amount paid earlier to CPT with the port charges and claimed such expenses under section 37 of the Act. However the AO disregarded the claim of the assessee by holding that the goods were imported in earlier years which have already been accounted for. Therefore the expenses pertaining to port charges should have been recorded in the year of import as the assessee is following mercantile system of accounting. Accordingly the AO disallowed the port charges for an amount ....
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....se bills were provided in the year under consideration by CPT and the assessee accounted for the same in the books of accounts in the year under consideration on the ground that these expenses were determined and crystallized in the year under consideration. However, the lower authorities have disallowed by the treating the same as prior period expenses and holding that these expenses should have been claimed as deduction in the year of import of the goods. However in the instant case, the facts revealed that the assessee failed to claim the expenses due to non-availability of the bills from the CPT but the assessee kept paying the money to the CPT in the form of deposits. The bills were determined and crystallized in the year under consideration so in our considered view these expenses are very much in connection with the business and entitled for deduction under section 37 of the Act. In holding so we are putting our reliance in Hon'ble Gujarat Hon'ble High Court in the case of Saurashtra Cement & Chemical Industries Ltd. Vs. CIT 23 ITR 523 (Guj), wherein the Hon'ble Gujarat High Court at page 531 has observed "... such items without investigation in to the facts abou....
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....ng deductions : 1. Prepayment discount Rs. 47,50,000.00 2. Expenses for vacating property Rs. 11,88,098.00 3. Other connected expenses Rs. 3,45,777.00 4. Valuation as on 1.4.1981 Rs. 1,46,20,000.00 Prepayment discount The factory was sold to M/s Lohia Developers private Limited (for short LDPL) for an amount of Rs. 15.51 crores on dated 25th of June 2002. Subsequently on dated 20th day of March 2003 the assessee has reduced the sale price by an amount of Rs. 47.50 lacs on account of prepayment. However the AO disregarded the claim of the assessee by holding that the reduction in the sale consideration on account of prepayment of the amount by M/s LDPL is purely cash discount and the same cannot be reduced from the sale consideration for the purpose of computing the capital gain under section 45 read with section 48 of the Act. Expenses for vacating property The assessee at the time of assessment submitted that for getting the property vacated certain expenses were incurred. These expenses relate to the payment made by the company to certain persons as detailed below : 1. Laxman Singh Rawat Rs. 5.80 lacs ....