TaxTMI 
TaxTMI 
2007 (4) TMI 725
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....961." 3. This first ground of revenue's appeal relates to deletion of disallowance of Rs. 1,02,62,333 being the expenditure on advertisement. The facts in brief are that the assessee had claimed advertisement expenses of Rs. 3,07,87,000. The Assessing Officer felt that this expenditure obtained for the assessee some element of enduring benefit with regard to enhancing its brand equity. This was contested by the assessee who relied on the judgment of the Supreme Court in case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1. The assessee's submission was not accepted and 1/3rd of this expenditure was disallowed as being of capital nature. Reliance was placed by the Assessing Officer on the decisions of the Apex Court in the following cases: (i) Assam Bengal Cement Co. Ltd. v. CIT [1955] 27 ITR 34 (ii) CIT v. Ashok Leyland Ltd. [1972] 86 ITR 549 (SC), & (iii) Arvind Mills Ltd. v. CIT [1992] 197 ITR 422 (SC). 4. By the impugned order, the CIT(Appeals) allowed assessee's claim of entire expenditure on advertisement as revenue, in nature. Aggrieved by the order of the CIT(Appeals), the revenue is in further appeal before us. 5. We have considered the rival contention....
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....essee company had acquired from Government of Assam a lease of certain lime stone query for a period of 20 years for certain half yearly rent and royalty. In addition to the rents and royalty, the assessee also agree to pay to the lesser annually a sum of Rs. 5,000 during the whole period of lease as a production fee and in consideration of that payment, the lesser undertook not to grant any person any lease, permit or license of lime stone in a group of query without a condition that no lime stone should be used for the manufacture of the cement. The assessee also agreed to pay Rs. 35,000 annually for 5 years as a further production fee and the lesser in consideration of that payment gave similar undertaking in respect of the whole district. The question was whether in computing the profit of the assessee, the sum of Rs. 5,000 and Rs. 35,000 paid to the lesser by the assessee could be deducted as revenue expenditure, the Hon'ble Supreme Court held that payment of Rs. 40,000 was capital expenditure since the payment was made by the assessee to the Government of Assam by way of protection money in consideration for which the Government of Assam undertook to allow exclusive right....
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.... entitled to the right to produce the components as aforesaid. Since payment was made in respect of a "right to produce" and not with respect to day to day production, the Assessing Officer treated this expenditure as capital expenditure and added back the entire amount of 10,61,000 to the taxable income of the assessee. 8. By the impugned order, the CIT(Appeals) allowed the deduction of royalty by observing that quantum of payment was linked to the quantum of sales. Had there been no sales, there would have been no royalty to be paid. The revenue is in appeal before us against this decision of CIT(Appeals). 9. We have considered the rival contentions and also deliberated on the case laws cited by the lower authorities in their respective orders, as well as referred by the learned AR and DR during the course of hearing before us, in the context of factual matrix of the case. From the record, we found that agreement with the Japanese companies was signed in 1986, and at that time a lump sum amount of US$2,00,000 was paid. This amount was capitalized by the assessee company itself in the assessment year 1987-88. In the subsequent years, starting from 1989-90, when the assessee ....
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....tion on its part to change the view at its sweet will, without any change of facts and circumstances during the year under consideration. 11. With regard to disallowance of bad-debts written by the assessee, the revenue grounds reads as under : (3) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 41,26,603 and Rs. 37,50,495 made by the Assessing Officer on account of writing of irrecoverable advances to Shing Shung Textile Co. and Qualitron Components Ltd. respectively without appreciating the full facts as brought out by the Assessing Officer in the assessment order. Ground No. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 45,54,907 made by the Assessing Officer on account of bad debt written off even though writing off was not bona fide. Ground No. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the Assessing Officer not to include the amount of excise duty in total turnover while calculating the quantum of deduction under section 80HHC. 12. With regard to disallowance of irrecoverable advances written off, the ....
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....e question of writing off this amount did not arise, what has been written of is the interest thereon. The interest is a revenue receipt. It has been taxed as such in the earlier years. No recovery was possible since the debtor had become sick and was before the BIFR. As the assessee had actually written of this amount and the whole of the amount had suffered tax in earlier years. We do not find any infirmity in the orders of the CIT(Appeals) that the writing off of this amount is in accordance with the provisions of section 36(1)(vii ) of the Act. Otherwise also, the amount of advance was given in normal course of business, interest thereon offered as revenue receipt on accrual basis, non-recovery/receipt of interest in subsequent year amounts to business loss to be allowed under sec. 28 of the Income-tax Act, 1961. 16. With regard to the write off of Rs. 37,50,494 receivable from M/s. Qualitron Components Ltd., the facts are that the assessee company had made advances to M/s. Qualitron Components for the supply of picture tubes. The picture tubes supplied were not of the required quality and as such the advances made on the normal course of business were receivable back from M....
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....d circumstances, we do not find any infirmity in the orders of the CIT(Appeals) for deleting the disallowance of bad debts as claimed by the assessee. 19. With regard to short receipt of duty draw-back, we found that the assessee was entitled to receive duty draw back from the Government on exports made by it during earlier years. The assessee company accordingly treated the receivable amount as income under section 28(iii)( c). However, subsequently, the government reduced amount of duty draw back payable to the assessee and accordingly, paid lesser amount to the assessee. It is this short amount of Rs. 5,91,999 which has been written off in the books. Similarly, in respect of special import licenses and DEPB, the facts are that the assessee was granted a license against exports by the Commerce Ministry which entitled it to import goods without payment of Custom duties upto a certain value. The DBPB was issued in respect of these licenses. The assessee offered the value of the licenses for taxation in financial year 1999-00 relevant to assessment year 2000-01. The special import licenses specified a cut-off date by which the imports are to be effected. The assessee could utiliz....
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.... Jammu & Kashmir by the name of Salora Velley Vision. The assessee had received orders for the supply of television sets to CSD canteen from its agent Salora Valley Vision. The agent used to collect the amount, who in turn used to remit the amount to the company. The said agent collected the amount from CSD canteen but did not remit the amount to the company and as the agent could not be traced the amount was written off as bad debt. The CSD canteen had informed the assessee company that the amount were paid to their agent Salora Valley Vision and therefore, they refused to pay the amount. The Assessing Officer objected to the writing of amount receivable from the Army. He, therefore, disallowed the same. 22. By the impugned order, the CIT(Appeals) observed that as per the amended provision of section 36(1)(vii), the assessee is entitled to claim the amount as bad debt. 23. We have considered the rival contentions and found from the record that the agent failed to remit the amount of Rs. 11,01,107 collected from CSD to the assessee since 1998-99 and is absconding. The army (C&D) refused to make the payment to the company, since it had already done so to the agent. Since the a....
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....e conditions prescribed for allowing bad debts under section 36(1)(vii) have been satisfied and necessary finding to this effect has also been recorded by the CIT(Appeals), we do not find any reason to interfere in his order for deleting the disallowance of Rs. 12,72,922. 27. With regard to the allowance of loss claimed on embezzlement, the CIT(Appeals) found that the TV sets sold by the staff of Jaipur Branch was not accounted in the books of account and some of the cash were also embezzled by them. He, therefore, allowed the loss on embezzlement as revenue loss. 28. We have considered the rival contentions and found from the record that during the course of audit, the embezzlement was discovered, an FIR was lodged against the two employees and criminal case was filed against them. As a result of the police action, recovery of a substantial amount could be effected. However, Rs. 2,46,467 could not be recovered. It is this amount which was claimed as a business loss on account of embezzlement. The two employees were working as a manager and show room in-charge at the assessee's Jaipur Shor-Room. Both had been working there for the last 10 years or so. They occupied positi....
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.... for which were received by the assessee only during the year under consideration. We, therefore, reverse the order of the CIT(Appeals) and direct to allow the sum of Rs. 2,61,410. 33. Ground taken by the revenue with regard to computation of total turnover for calculating deduction under section 80HHC reads as under: "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in directing the Assessing Officer not to include the amount of excise duty in total turnover while calculating the quantum of deduction under section 80HHC." 34. This grievance of the revenue relates to computation of total turn over while working out deduction under section 80-HHC of the Act. The Assessing Officer was of the view that the excise duty was includible in total turnover for computing deduction under section 80-HHC of the Act. 35. We have considered the rival contentions, the issue regarding exclusion of excise duty from the total turn over is no more res integra in view of the decision of Bombay High Court in case of CIT v. Sudarshan Chemicals Industries Ltd. [2000] 245 ITR 769 and Rajasthan High Court in case of CIT v. Wolken India Ltd. [2003] 132 Taxman 7. It was obse....
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....e to import of raw materials amounting to Rs. 56,66,000 was revenue in nature. The CIT(Appeals) found that loss of Rs. 1,92,000 was attributable to repayment of working capital, since the higher amount was required to be paid on account of principal sum due and not on account of interest, he, therefore, held that it was a capital loss and cannot be allowed. 40. We have considered the rival contentions. As per our considered view, the loss suffered on account of import of raw material was clearly a revenue loss in view of the decision of the Hon'ble Supreme Court in case of Satluj Cotton Mills Ltd. v. CIT [1979] 116 ITR 1. We, therefore, do not find any infirmity in the order of the CIT(Appeals) for treating such loss as revenue in nature. With regard to loss on account of repayment of working capital, we found that assessee was required to pay more to the bank on account of exchange rates fluctuation adversely effecting the total sum which was required to be paid. Even though the excess sum paid due to exchanged fluctuation was not on account of interest, but the same was essentially in respect of loss taken for working capital. Hon'ble Delhi High Court in case of CIT v.....
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....ear, for the first time, a quality audit of inventory was also conducted whereby it was revealed that the number of defective sets was in fact much larger than expected. It is not the case that all these defective sets were produced only during this year. They were lying in stock and were carried forward from the previous years and remained unsold. They were counted as good sets and valued as such. To that extent, the closing stock of earlier years got inflated and tax was paid by the company on an artificially higher income. This exercise was only by way of correction and to find out the actual position of saleable goods. Efforts were made to cannibalized these sets and to minimize the loss. As per our considered view, there was actually no under valuation of stock as observed by the Assessing Officer, but it represented write off of dead stock on account of quality audit being conducted by the assessee. While comparing the number of defective sets, we found that it was a negligible percentage of 0.47 per cent of total production. 45. In view of the above, we do not find any infirmity in the order of the CIT(Appeals) for deleting the addition of Rs. 36,33,433 on account of unde....
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.... any employer makes such payments within such period of grace, not only is he not liable to pay any damage in accordance with employee's provident fund scheme and the relevant Act, but by virtue of circular dated 29-4-1967 as stated above, he will also not be treated to be in default. Hence, the five days period of grace after 15th for the succeeding month to be considered merely as an extension of the 15 days & all consequences of making payment within 15 days should be considered to made the payment within due date. The explanation to clause (va) of section 36(1) again define "due date" rather in vague way to "mean the date by which the assessee is required to make the payment in accordance with the relevant act, rule, order or notification or even any standing order, contract of services or otherwise. From the above discussion, it becomes clear that the concept of "due date" here is to be taken in a very flexible sense. In as much as the assessee is very much under an immunity to make the payment of the amount under consideration with 20th of the following month and the purpose of clause (va) of section 36(1) will be substantially complied with if the payments are made withi....
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.... in case of CIT v. Madras Radiators & Pressing Ltd. [2003] 129 Taxman 709 were discussed in detail and after relying on the decisions of Sedco Forex International Drill Inc. v. CIT [2005] 279 ITR 310 (SC), wherein it was held that unless there is an amendment which is clarificatory or declaratory in nature, for the removal of doubts, the same cannot be read into the main provision with effect from the time when the main proviso came into force. But, in the instant case, there is no material available to hold that the impugned deletion is either clarificatory or declaratory or intended for the removal of doubts to give a consequential retrospective effect to the impugned deletion so as to make it applicable to the assessment year 1994-95. 55. After discussing all these decisions, Hon'ble Madras High Court finally concluded that delay \n payment of PF etc. is to be disallowed under section 43-B. Respectfully following the judgment of the Hon'ble Madras High Court, ground relating to payment of PF contribution even beyond the grace period, are decided in favour of the revenue and against the assessee. 56. In view of the above, we confirm the disallowance of Rs. 1,58,179,....