TaxTMI 
TaxTMI 
2016 (5) TMI 1320
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....005 declaring total income of Rs. 108,15,96,455/-. Case was selected for scrutiny assessment under CASS. Notice u/s 143(2) of the Act was issued on 29.06.2006 and served on the assessee on 4.7.2006 followed by notice u/s 142(1) of the Act along with questionnaire duly served on the assessee on 6.2.2007. Case was discussed, books of account were verified, relevant details were filed and assessment was completed at an assessed income of 109,68,29,630/- after making additions and disallowance of Rs. 1,52,33,175/-. 3. Aggrieved, assessee went in appeal before ld. CIT(A) and the appeal was partly allowed. 4. Now assessee and the revenue both are in appeal against the order of ld. CIT(A) and assessee has filed Cross Objection against the order of ld. CIT(A). 5. First we take up appeal filed by the assessee in ITA No.1921/Ahd/2011 for Asst. Year 2005-06. 6. First ground of the appeal is general in nature which need not be adjudicated. 7. Ground No.2 of the appeal reads as follows :- 2. The learned CIT(A) erred in law and facts in confirming the disallowance of inventory written off of Rs. 12,80,536/-. In the facts of the case, appellant submits that the inventory w....
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....bsolete and slow moving stock of Rs. 12,80,536/-, ld. AR replied that certainly these slow moving items should have fetched some scrap value but the same has been accounted for in the books of account in the following years as and when they have been sold. 11. We further observe from the orders of lower authorities that the only basis taken for processing the addition as well as confirming the same for not allowing the claim of inventory written off at Rs. 12,80,536/- rested upon the fact that no scrap value was reported by the assessee to have been received while writing off of these slow moving items. In these circumstances, we are of the view that it will be just and proper to set aside this issue to the file of Assessing Officer for verification to the limited extent and the assessee shall put before him necessary details which can prove that some process has been followed for selling such scrap items and specific scrap value of the inventory written off has been accounted for as an income in the books of account. Ld. AR agreed to the same and no objection was raised by the ld. DR to this fact and accordingly, we set aside this issue to the file of Assessing Officer as discu....
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....les/lease back with RSEB which was allowed by the co-ordinate bench vide its order dated 30.11.2006 by observing as under :- "10.6 The Id. AR heavily relied on the decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Rajasthan State Electricity Board 204 CTR 415, we noted in this case under para 15 Hon'ble High Court has held as under;- "After going into facts of the case, we find: :that the assessee's board and the lessor with various companies had entered into genuine agreement. The assets had been sold for which consideration had been received. By this colourable device, the assessee's board had been able to raise funds at lesser rote which is prevalent in the market. By entering into these transactions, the tax liability of the assessee board has not been reduced. We find that this cannot be termed as sham transaction as held in the case of CIT Vs. Sakasaria Sons (P) Ltd 25 CTR (Bom) 148 138 ITR 419 for the following reasons: (I) No actual transaction was executed on the basis of the agreement. (ii) The agreement is without any consideration. (iii) The amount be paid on the basis of the agreement which were....
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....tion should be used by the lessee for its business, (vi) The transaction of sale and lease back or purchase and lease back should be evidenced by a duly executed lease-deed and the party should have acted accordingly. (vii) The lessor must have paid the purchase price.. 14. If we consider the facts and circumstances of the present case, it will be revealed that (I) There is no dispute with respect to the physical existence of assets which were already owned and used by the lessee, (ii) The lessor has made the payment for purchase of relevant assets directly to the lessee; (iii) The lessee has been using the assets even after the transaction for his business. (iv) Transaction is evidenced by duly executed. (v) The parties have acted upon the /ease-deed. 14.1 From the above facts of the present case, it is quite clear that it satisfies all the requirements for. a transaction to be of purchase and lease back/sale or lease back. 15. In view of above facts, we are of the opinion that the assessee has succeeded in establishing all the ingredients of a genuine purchase and lease back/sale and lease back trans....
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....ording to AO, the transaction was a tool for tax avoidance. The assessee had not disputed the 'Sale and Lease Back' transaction. According to AO the transaction took place in earlier years, but depreciation was claimed during the current year as well. The AO has commented that in A.Y.2001-02 learned CIT(A) has affirmed the addition, therefore, following the past history, for the year under consideration as well, the AO had disallowed the depreciation. 3.2. When the matter was carried before the First Appellate Authority, learned CIT(A) has followed the past history. However, considered the alternative argument as follows: "4.2 Without prejudice to the above, it was also submitted that if the transactions are considered as financial transactions, then deemed recovery of principal amount of Rs. 26,58,740/- should be excluded and only the interest portion included in the lease rent should be taxed and not the entire lease rent received of Rs. 36,87,992/- 4.3 This issue has also been dealt with by my predecessor in para 7.3 of the above appellate order. Following the directions given in the said order, the AO is directed to re-computed the allowable d....
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.... jurisdictional High Court in the assessee's own case of the A.Y. 1995-96 and decision of Hon'ble Rajasthan High Court in the case of CIT Vs. Rajasthan State Electricity Board (supra) as also decision of the Tribunal for the A.Ys.2003-04 & 2004- 05, facts and issue being admittedly similar in the assessment year under consideration, we set aside the impugned order of the learned CIT(A) and direct the Assessing Officer to allow the depreciation as claimed by the assessee. Therefore, ground no.3 in the appeal of the assessee is allowed. 3.4 We have also noted that learned CIT(A) has simply followed the verdict of his predecessor for A.Y.2001-02 however that view of learned CIT(A) was also reversed by ITAT 'A' Bench Ahmedabad (supra) in the following manner: "4.3 Indisputably, since the facts obtaining in the year under consideration are similar to the facts in the assessment years 1995-96, 2000-01, 2003- 04 & 2004-05, following the view taken by the Hon'ble Jurisdictional High Court in the assessee's own case in the A.Y. 1995-96 and by the Hon'ble Rajasthan High Court in the case of CIT Vs. Rajasthan State Electricity Board (supra) a also....
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....ion a part thereof to earning of tax free income on assumption that such part of common expenditure was incurred in relation to tax free income by applying section 14A of the Act and burden is on Assessing Officer to not only show that such expenditure was factually incurred but also to show its relationship with income exempt from tax. Ld. CIT(A) on an estimate basis disallowed 2% of exempt dividend income considering it as expenditure incurred for earning exempt income. Therefore, disallowance of Rs. 4,54,333/- was made by ld. CIY(A) after considering the disallowance of Rs. 6,00,000/- already made by the assessee. Further it was also submitted that the Hon. Tribunal in assessee's own case in AY 2004-05 deleted the disallowance made u/s 14A by the Assessing Officer. It was also submitted that disallowance made by the assessee u/s 14A of the Act of Rs. 6,00,000/- is fair and reasonable in the facts and in the circumstances of the case and in view of the order of the Tribunal for asst. year 2004-05 no disallowance should have been confirmed by ld. CIT(A). 24. We have heard the rival contentions and perused the material on record. Through this ground Revenue is aggrieved by t....
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....mate basis. 7. Ld. D.R., on the other hand, relied on the order of A.O. and submitted that considering the dividend income earned by the assessee the A.O. was quite ITA No.4488/Ahd/ 2007 reasonable and fair in estimating the disallowance. He therefore, submitted that the disallowance made by the A.O. be upheld. 8. We have heard the rival submissions and perused the material on record. It is undisputed fact that the assessee has earned dividend in excess of Rs. 5 crores during the year. It is also an undisputed fact that the assessee, on the basis of its own estimate has worked out the disallowance of administrative expenses incurred for managing the portfolio u/s 14A. It is also an admitted fact that all the investments of the assessee are in Demat form and dividends were credited to its account electronically. The A.O. while disallowing the expenditure could not controvert or find any fault in the working of disallowance of administrative expenses made by the assessee. The A.O. has not given a finding that the assessee has incurred expenditure in excess which has been suo motu disallowed by the assessee while computing its income. In the case of Godrej Boyce Manu....
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.... 14A. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the Act. In other words, sub- section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the Act and sub-section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In both cases, the Assessing Officer, if satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon a determination of the amount of expenditure in accordance with any prescribed method, as mentioned in sub-section (2) of section 14A of the Act. It is only if the Assessing Officer is not satisfied with the correctness of the claim of the assessee, in both cases, that the Assessing Officer gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with the prescribed method. The prescribed....
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....n the ground that the same are non-business expenses. It has been submitted that the holiday home expenditure was incurred for the purpose of keeping healthy relation with its employees and therefore it was purely business expenses. Ld. CIT(A) has rightly held that in absence of finding by the Assessing Officer that such expenses were not incurred for business purpose, the same should not be disallowed. 31. We have heard the rival contentions and perused the record. Revenue is in appeal against the order of ld. CIT(A) deleting the disallowance of 20% on holiday home expenses. From going through the assessment order we observe that in para 4.1 of the order holiday home expenses have been shown at Rs. 1,54,715/- and the disallowance made by ld. Assessing Officer should have been calculated at 20% of Rs. 1,54,715/- i.e. Rs. 30,943/-; whereas in the ground of appeal no.3 Revenue has mentioned the amount wrongly at Rs. 2,46,652/-, the same needs to be corrected at Rs. 1,54,715/-. As regards disallowance of Rs. 30,943/- being 20% on holiday home expenses made by ld. Assessing Officer on estimate basis that they may not have been incurred wholly and exclusively for the purpose of busin....
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.... of assessee. Applying our decision of ground no.3 on this issue, the ground raised by the Revenue is dismissed. 40. Ground No.6 of the appeal reads as under :- 6 The Ld.GT(A) has erred in law and on facts in deleting the addition made by the A.O. on account of unutilized modvat/cenvat credit of Rs. 56,08,089/-. 41. Ld. DR supported the order of ld. Assessing Officer. 42. Whereas ld. AR relied on the order of ld. CIT(A) and further submitted that the unutilized cenvat/modvat credit is in nature of advance payment to excise department and the same is recoverable/ adjustable against excise payable on CNG sales. It was also submitted that to the extent there is modvat receivable a/c, there was corresponding less debit to the purchase a/c and hence to that extent there was already income offered to tax. Ld. AR placed reliance on the decision of the Tribunal in the case of DCIT, Cir-4 vs. M/s Jay Laminart Pvt. Ltd. (ITA No.264/Ahd/2007 wherein it was held that unutilized cenvat/modvat credit does not constitute income. Accordingly, ld. CIT(A) has rightly allowed the expenses. Ld. AR also relied on the following decisions :- 1. Supreme Court decision in the cas....
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....cost of raw material & capital goods to the extent of modvat claim were reduced, was a fact, which is not disputed by the Assessing Officer. It is difference which remains as debit balance in the balance sheet after adjustment for current years utilization. It is in fact a pre-paid expenditure, not chargeable to profit & loss account and hence cannot constitute income. The CIT(A), in our opinion, was justified in allowing claim of the assessee. His order, thus, does not call for any interference. " Considering the order of ITAT, I am of the opinion that unutllized cenvat/modvat credit does not constitute income and accordingly the addition made by the Assessing Officer is deleted." 44. Further we observe that the Tribunal in ITA No.264/Ahd/2007 for Asst. Year 2002-03 vide its order dated 3rd April, 2007 has allowed the claim of assessee by observing as under :- "3. We have heard the parties and considered the rival submissions. The cost of raw material and capital goods to the extent of Modvat claim were reduced, was a fact, which is not disputed by the Assessing Officer. It is this difference which remains as debit balance in the balance sheet after adjustment....
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....stently by the assessee. We are, therefore, of the view that ld. CIT(A) has rightly deleted the disallowance by observing as under :- "7. The sixth ground of appeal is with regard to disallowance of provision of travelling expenses of Rs. 1,06,796. The appellant had made provision for travelling expenses for Rs. 12,19,300/- out of which Rs. 1,06,796 was made on estimate basis to provide for the expenses of last month for which details would come in the subsequent year due to no. of locations at which assessee's offices are situated and no. of employees who undertake travel. The A.O. disallowed the same considering that the same is not an expense but only a provision which is reversed in the next year. The A.R. submitted that these are routine expenses and as the company follows accrual system of accounting, provision for expenses are required to be made even from Companies Act requirement. 7.1 The A.R. explained that every year such provision is made at the end of the year for the expenses for which bills / claim is not received but an expense has been incurred. Such provision does involve some element of estimation. Next year such provision is reversed and ac....
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....om Mahanagar Gas Ltd. (MGL), Mumbai. We observe that assessee had taken a contract of MGL for laying gas line for domestic customers on the same line and the project income is accounted for on completion method based on mutual stand achieved as specified in the contract. During the previous year i.e. Asst. Year 2004-05 assessee raised sales/invoices on MGL and offered the income for tax. But during Asst. Year 2005-06 when the sales invoices were verified by MGL, certain connections were not certified by them and such amount of income claimed by the assessee but not backed up by certificate of MGL was reversed during Asst. Year 2005-06. However, this write off was not allowed by ld. Assessing Officer on the ground that project referred by the assessee was not in operation during the year and in respect of said project the assessee was following completion contract method and, therefore, said method did not relate to the same and could not be allowed u/s 37 of the Act. We further observe that ld. CIT(A) while deleting the disallowance has observed as under :- "10.2 I have considered the submissions made by the appellant in this regard. It may be noted that it is not disputed....
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....enditure claimed at Rs. 22,36,196/- towards software development and software license expenditure to the extent of Rs. 20,90,051/- was disallowed by ld. Assessing Officer and treated as capital expenditure and allowed depreciation at the prevailing rates. During the course of appellate proceedings before ld. CIT(A) relating to Asst. Year 2005-06 ground was raised by the assessee against the order of Assessing Officer for not allowing depreciation on software license fee of Rs. 20,90,051/- relating to Asst. Year 2002-03. The reason for raising this ground by assessee was that at the time of appellate proceedings going before ld. CIT(A) for Asst. Year 2005-06 the issue relating to Asst. Year 2002-03 was pending before the co-ordinate bench wherein assessee had raised the ground against the order of ld. CIT(A) wherein the view of ld. Assessing Officer and treating the expenditure of Rs. 20,90,051/- as capital expenditure was confirmed. We further observe that co-ordinate bench in ITA No.1264/Ahd/2006 for asst. year 2002-03 pronounced on 30th May, 2014 has adjudicated this issue by observing as under :- "8. Ground No.8 is reproduced below: "8(i). The learned Commissioner of....
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.... the purpose of software, it is a statutory requirement of procurement of license. Therefore it is a recurring expenditure. It is not a one time expenditures. The software is required for running of the business; hence, the expenditure has direct nexus with the business activity of the assessee. Before us a decision of Hon'ble ITAT Ahmedabad in the case of UB Electricals Pvt. Ltd. cited as 1997 Tax L.R. 250 is referred wherein it was held that the purchase of software programmes are subject to change; therefore, not enduring in nature but revenue in nature, hence; an allowable expenditure. The assessee has also furnished a decision of Hon'ble Delhi High Court pronounced in the case of CIT Vs. Amway India Enterprises, 22 taxmann. com 22 (Delhi) wherein it was pronounced that an expenditure for acquiring license to use software applications would be applicable as Revenue expenditure. Respectfully following these decisions, we hereby hold that the expenditure in question is to be allowed in the hands of the assessee. This ground is, therefore, allowed." 58. From going through the order of co-ordinate bench we observe that ground of the assessee has been allowed and expendit....