TaxTMI 
TaxTMI 
2011 (10) TMI 702
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....ed in the ground of appeal that decision of the ld. CIT(A) is based on the decision given in earlier years and finding of the ld. CIT(A) has not been accepted by the revenue in earlier years. 2.2 The AO noticed from the audit report that the assessee has paid a sum of Rs. 20,77,107/- to DAV Trust Management Society towards running of school and claimed it as business expenditure in view of Tribunal's decision in the case of Rassi Cement Vs. ITO, 45 ITD 233 (Hyderabad). According to the AO, the decision in the case of Rasssi Cement Vs. ITO, supra is distinguishable as in that case the draft deed was prepared in which role of both the parties was specified. In the instant case, the contents of the trust deed did not stipulate any conditions wherein role of the assessee company in maintaining the school is defined. The trust is not obliged to admit or gives priority in admission to the children of company's employees. It has been admitted that children of nearby area are far more in numbers than those of the employees. According to the AO, the decision of Shree Saraswathi Mills Ltd. is applicable. The facts for the assessment year under consideration are in consonance with those of....
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....s respect it may be noted that all the case laws relied upon by the assessee for allowing this deduction u/s 37 were rendered by various courts before the decision of Hon. Supreme Court in the case of Southern Technologies Ltd. (supra). Therefore, after this decision of Hon. Apex Court all these decisions stand nullified and are no more good law. (iii) In the assessment order the AO has given a clear cut finding that in the above school the number of students of nearby areas are far more than the children of the employees of the assessee. The school is not obliged to give priority to the children of the employees of the assessee. These findings of the AO have not been contradicted by the assessee anywhere. This is a case of general contribution made by the assessee company to the trust. The assessee is not under any contractual liability to pay this amount to the trust. Therefore, it cannot be said that these expenses are incurred wholly and exclusively in connection with the business of the assessee and hence they are not allowable. (iv) It is claimed by the assessee that it is a reimbursement of the expenses to the school for the education of the children of the....
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....atia payment made by the company to assist it without any obligation towards the school or its employees. It is agreed that some of the children of the employees are studying there but the expenditure cannot be treated as wholly & exclusively for the purpose of business activities. Further more, no such deduction is allowable as per express provisions of section 40A(9) which are as under:- "No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of or as contribution to, any fund. Trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860(21 of 1860), or other institution for any purpose, except where such sum is so paid, for the purpose and to the extent provided by or under clause (iv) or clause (v) of sub-section (1) of section 36, or, as required by or under any other law for the time being in force." In this regard, it is pertinent to mention here that though the CIT(A) has deleted the addition, but the department has gone in further appeal before Hon'ble ITAT. After considering these facts, the payment of Rs. 20,73,099/- made to....
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....ture incurred by the assessee by way of contribution to the welfare trust of the employees was rightly held to be deductible under section 37 of the Income- tax Act." 2.8 We therefore, following our findings for earlier years hold that ld. CIT(A) was justified in deleting the addition. We also hold that the amount so paid is not covered u/s 40A(9) of the Act. 3.1 The second ground of appeal of the revenue is that the ld. CIT(A) has erred in holding that the assessee is entitled to claim of depreciation on catalyst. 3.2 During the course of proceeding before us, the ld. DR in his written submission has stated that this ground of appeal is covered by the decision of Tribunal in the case of the assessee in earlier years. 3.3 This issue has been decided by the Tribunal while deciding the appeal of the assessee for the assessment year 2002-03 to 2005-06. Following our findings, we hold that the ld. CIT(A) was justified in deleting the disallowance of Rs. 74,64,626/-. 4.1 The third ground of appeal of the revenue is that the ld. CIT(A) has erred in holding that the assessee is entitled to deduction u/s 80IA in respect of its Captive Power Plant and thereby deleting the dis....
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....10 years out of 15 years. In the cases of Reliance Jute & Industries Ltd. vs. CIT 120 ITR 921(SC), Maharajah of Pithapuram vs. CIT Madras 13 ITR 221(PC), Karimtharuvi Tea Estate Ltd. Vs. State of Kerala 60 ITR 262(SC) and CIT vs. Goslino Mario and Others 241 ITR 314(SC) Hon'ble Courts have clearly held that substantive law has to be applied for any assessment year as it stands on the first day of the assessment year. In the case of Reliance Jute & Industries Ltd. vs. CIT 120 ITR 921(SC) the appellant claimed set off of unabsorbed loss of the assessment year 1950-51, against its income for the assessment year 1960-61, on the ground that by virtue of section 24(2)(iii) of the Indian Income-tax Act, 1922, as it stood before its amendment by the Finance (No. 2) Act, 1957, it had a vested right to have the unabsorbed loss carried forward from year to year until it was completely absorbed and the subsequent amendment made by that Act limiting the period for carrying forward to eight years could not divest the appellant of that vested right which had accrued to it. Hon'ble Supreme Court rejected this claim of the assessee and held as under: "The assessee claims ....
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.... been allowed deduction u/s 80 IA for the first time for the A.Yr. 1990-2000. It is submitted that this observation is not correct. During the hearing for A.Yr. 2004-05 and the written submission made for this year, kind attention of the Hon'ble Tribunal was invited to notes made by the assessee in the returns of income for A.Yr. 1997-98 and 1998-99 which were as follows: For A.Yr. 1997-98: "The company started its commercial production on 1/01/1994 and the A.Y 1997-98 being the 4^th year of commencement of commercial production, claim u/s 80 IA has not been computed as there is no taxable income. However, in case of income for year becomes positive, for any reason the deduction u/s 80 IA may be computed and allowed as per law" For A.Yr. 1998-99: "The company started its commercial production on 1/04/1994 and the A.Y 1998-99 being the 5^th year commencement of commercial production, claim u/s 80 IB has not been computed as there is no taxable income. However, in case the income for the current year becomes positive for any reason, the deduction u/s 80 IA may be allowed as per law." From these notes, it is clear that as per the provisions....
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....td. Vs. DCIT 315 ITR 153. In this decision Hon'ble High Court has reproduced the financial statement of the assessee on page 161 and 162 of the ITR in which for A.Yrs. 1996-97, 1998-99 and 1999-2000. The assessee has mentioned that 'In the absence of profit, claim under section 80 IA has not been made'. On the basis of these financial statements, Hon'ble Court approved the finding of ITAT that commercial production commenced in the A.Yr. 1996-97. This issue of the year of commencement of production was to be decided for deciding the initial year in terms of section 80 IB(9). Thus, it can be seen that Hon'ble High Court held that the mention of the sentence 'In the absence of profit, claim under section 80 IA has not been made' would mean that the deduction u/s 80 IA has been claimed. Here, in the case of the assessee also the notes for A.Yrs. 1997-98 reproduced above clearly show that the deduction u/s 80 IA has been claimed for these years as 4^th year and 5^th year. This deduction was claimed for the whole unit which included the captive power plant. Therefore, A.Yr. 1999-2000 should be treated as the 6^th year of the claim of deduction u/s 80 IA and not the 1^st year. (....
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....TA No. 1878/Ah. 2009) of Ahmadabad Bench dated 29.01.10 is squarely applicable in this case. In this regard, it is respectfully submitted that the facts of the above case of Vodafone Essar are totally different from those of the assessee. It may kindly be noted that in the above case of ITAT, Ahmadabad Bench, the assessee company started providing telecom services from A.Yr. 1997-98 but did not claim deduction u/s 80 IA till A.Yr. 2004-05. The deduction was claimed for the 1^st time in A.Yr. 2005-06, which was claimed to be treated as the 1^st A.Yr. u/s 80 IA(2). In the above decision dated 29.01.2010, the A.Yr. involved was A.Yr. 2006-07. Thus, it can be seen that in this case the A.Yr. in which the benefit of section 80 IA(2) was allowed was for A.yrs. which were after the A.Yr. 2000-01 from which the benefit of section 80 IA(2) was available to the assessees. But here, the benefit of choosing 10 years out of 15 years is being allowed for an A.yr. which is prior to the A.Yr. from which such benefit was extended by the legislature. As mentioned above, this amounts to making the provisions of section 80 IA(2) effective retrospectively whereas the legislature has made this ....
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....ould be continuity and consistency in judicial decisions, and law should be certain and definite. It is almost as important that the law should be settled correctly. But there may be circumstances where public interest demands that the previous decision be reviewed and reconsidered. The doctrine of stare decisis should not deter the Court from overruling an earlier decision, if it is satisfied that such decision is manifestly wrong or proceeds upon a mistaken assumption in regard to the existence or continuance of a statutory provision or is contrary to another decision of the Court." Then after discussing over-riding considerations which compelled reconsideration and review of the earlier decision in Cloth Traders Case, it has been held that: "We have given our most anxious consideration to this question, particularly since one of us, namely, P.N. Bhagwati, J. was a party to the decision in Cloth Traders case (supra). But having regard to various considerations to which we shall advert in detail when we examine the arguments advanced on behalf of the parties, we are compelled to reach the conclusion that Cloth Traders case must be regarded as wrongly decided. The....
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....und of appeal of the revenue is that the ld. CIT(A) has erred in not confirming the disallowance of Rs. 6,70,422/- on account of club expenses without appreciating the facts mentioned by the AO in his order. 10.2 The details of payments made to club expenses are available at pages 158 to 161 of the paper book. In these details, the assessee has given the name of the employees, date, amount, name of the club, nature of payment and period. The club membership has been paid in respect of 28 employees. It is noticed from the period mentioned in the chart that payments are annual subscription or subscription for part of the year. It is not a case where the assessee has paid corporate fee to the club. There is no payment for the period exceeding one year so that the benefit may be given to the employees for more than a year. The expenditure as club membership fee is an expenditure for the purpose of the business. Hence, the expenditure is allowable u/s 37 of the Act. Therefore, the ld. CIT(A) was justified in deleting the disallowance of Rs. 6,70,422/-". 5.4 Hence, the ld. CIT(A) was justified in deleting the addition. Therefore, this ground of appeal of the revenue is dismis....
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....s intention through display of advertisement or otherwise or should have invited open tender to get the better bargain. The sale has been made through the sister concern. The provisions of Section 40A(2)(a) were invoked. The assessee has obliged the sister concern and accordingly the AO disallowed the loss of Rs. 58,36,741/-. 7.3 The ld. CIT(A) after considering the submissions of the assessee deleted the disallowance after observing as under:- "The case of the appellant is that the catalyst in question was lying unused in the store for six years, for it was no longer required due to change in the process. Being an industry specific product the appellant made an offer to several companies (Duncan Industries Ltd., Shriram Fertilisers and Chemicals, Coromandel Fertilisers Ltd., Madras Fertilisers Ltd., Mangalore Chemicals and Fertilisers Ltd., SPIC, Gujarat State Fertilisers and Chemicals Ltd., IFFCO and FACT) that could have some use for it, though none responded. Eventually, Zuari Industries Ltd offered to purchase and the catalyst was sold for Rs. 2,16,34,615/-. The differences in its book value and the sale price of Rs. 58,36,741/- was debited to Profit and Loss accou....
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....understated. No addition can be made on the basis of the suspicion. The transactions has not been considered as sham. M/s. Zuari Industries Ltd. is also a concern in which profit is being shown. Hence it cannot be a case of evasion/avoiding of tax. We therefore, feel that the ld. CIT(A) was justified in deleting the disallowance of Rs. 58,36,741/-.. 8.1 The 7^th ground of appeal of the revenue is that the ld. CIT(A) has erred in deleting the disallowance of loss of Rs. 42,38,664/- made by the AO on account of revaluation of inventory of two imported pumps. 8.2 The assessee has imported two nos. of Auxiliary Oil Pumps (mechanical seals) from Japan at the price of Rs. 42,85,368/-. These pumps were lying in the stores. Subsequently, indigenous pumps became available at lower price of Rs. 23,352/- each. Keeping in view the accounting practices and valuation of stores at lower or monthly weighted average cost or net realizable value, the difference in cost of imported pumps and the indigenous pumps to the extent of Rs. 42,38,664/- was debited to the profit and loss account. 8.3 The ld. CIT(A) has allowed the deduction after observing as under:- "The appellant submitted....
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....as drawn to the following decisions. Our attention was drawn to the following decisions. CIT Vs. Hotline Teletube & Components Ltd., 175 Taxman 286 (Del.) "In this case, the Hon'ble Delhi High Court upheld the finding of the Tribunal in allowing provisions for diminution in the value of the stock. In that case, the stock became obsolete and has not moved for over three years." National Alunimium Co. Ltd. Vs. DCIT, 110 TTJ 948 (Cuttack) "In this case, the loss of non-moving stores and spares was allowed as business loss." 8.6 We have heard both the parties. We also required the assessee to give brief note in respect of inventory written off. The brief note is as under:- "The auxiliary oil pumps (AOP) were procured in the year 2000 in package under the expansion project. The cost of mechanical sale of the imported auxiliary oil pump was Rs. 21,42,684/- per seal. The OEM for these pumps was M/s. Taikokikai, Japn. In course of time these, AOPs were also developed indigenously. We have procured four indigenous pumps (alongwith seal) from M/s. Shilpa Trade Links (P) Ltd. against purchase order no. 45495 dated 27-11-2002 which w....
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....r the assessment year 2006-07. Following our above order in Ground No. 4 for the assessment year 2006-07, we hold that the ld. CIT(A) was justified in deleting the addition of Rs. 6,99,281/-. 11.1 The third ground of appeal of the revenue is that the ld. CIT(A) has erred in deleting the addition on account of donation given to the DAV Trust amounting to Rs. 20,95,726/-. 11.2 This issue also decided by us while disposing off the appeal in Ground No. 1 in the case of the assessee for the assessment year 2006-07. Following our findings, we hold that the ld. CIT(A) was justified in deleting the disallowance of Rs. 20,95,726/-. 12.1 The fourth ground of appeal of the revenue is that the ld. CIT(A) has erred in deleting the addition made by the AO on account of disallowance of depreciation on catalyst amounting to Rs. 1,18,08,057/-. 12.2 This issue has also been decided in the case of the assessee for the assessment year 2006-07 while disposing of the Ground No. 2. Following our findings for the assessment year 2006-07, we hold that the ld. CIT(A) was justified in deleting the disallowance of depreciation on catalyst. 13.1 The fifth third ground of appeal of the revenue is....
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..... It will be useful to reproduce following para from the order of the Tribunal. "2.11 We have heard both the parties. Section 25(3) of the Rajasthan Sales Tax Act 1994 authorises the state Govt. of defer the tax by making a notification. Section 25(3) of Rajasthan Sals Tax Act 1994 is as under : Notwithstanding anything contained in sub section (1) & (2) where the state Govt. is of opinion that it is necessary or expedient in the public interest so as to do, it may, by notification in the official gazette defer the payment of tax payable by any cl.... of dealers with or without interest, for any period as such conditions and under such circumstances as may be specified in the notification 2.12 Second Proviso to clause 4 (d)(i) of Rajasthan Sales Tax New Deferment scheme 1989 is as under:- Provided further that notwithstanding anything contained in this notification but subject to such conditions as the state govt. may, by general or special order specify, where a dealer to whom incentive by way of deferment of sales tax has been granted by virtue of eligibility certificate issued under this notification and where a loan liability equal to the amo....
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....d already mentioned that in sales tax deferment scheme, it is provided that sales tax will be considred as paid and such deferred sales tax is a loan. The deeming provision is to be construed for the purpose for which it is enacted. Thus deferred sales tax is to be considred as paid. The revenue has already allowed such deduction of sales tax u/s 43B of the I.T.Act. Now there is no liability of payment of sales tax. 2.18 The Hon'ble Bombay High Court in the case of S.I. Group India Ltd (supra) held that sales tax being a trading liability in respect of which an allowance or deduction has been made u/s 43B. 2.19 It is true that in notification dated 27.3.2003, the state Govt. provided a scheme for the dealers who availed the deferment of sales tax to deposit the amount of deferred tax even before the stipulated due date of deposit. The payment is to be on the basis of net present value as specified in that notification. Net present value has been mentioned as percentage of amount payable and such percentage varies as per the period of month between the actual date of payment and the extended date of payment. However Board Circular 496 dated 25.9.87 stated that stat....
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....an that the payment made by the assessee cannot be accepted as the payment of NPV of the future sum towards discharge of full liability-Amount which was payable from Ist May, 2003 to ist May, 2008 has been paid on 30^th Dec., 2002-This does not satisfy the condition of actual remission in praesenti Amount has been paid as per the formula for collecting the NPV given by SICOM-Therefore, such payment of NPV of the future liability cannot be treated as remission or cessation of liability so as to attract the provisions of s. 41(1) 2.20 The special bench in respect of applicability of section 28 (iv) has held that it will not be applicable. The special Bench observed as under. "Sec.28(iv) seeks to charge the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, as profits and gains of business or profession. Therefore, what is to be examined is whether the waiver of loan would amount to a perquisite so as to be taxable, as such, under s. 28. The Bombay High Court in the case of Mahindra & Mahindra Ltd. Vs. CIT (2003) 182 CTR (Bom) 34 : (2003) 261 ITR 501(Bom) : (2003) 128 Taxman 394 (Bom), has....