TaxTMI 
TaxTMI 
2017 (5) TMI 1500
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the appeals on different dates, the following substantial questions of law, appeal-wise, were framed for consideration of the Court: I. DB ITA No.866/2008 admitted on 04.03.2009 "(i) Whether under the facts and circumstances of the case and in law the Tribunal was justified in allowing Rs. 15,64,979/- as business expenditure u/s. 37 incurred on foreign tour of wife of the Director of the Company? (ii) Whether under the facts and in thecircumstances of the case and in law the Tribunal was justified in allowing 100% deduction u/s.80IA specifically when the assessee company itself and claimed deduction @ 30% u/s. 80IA? (iii) Whether under the facts and in thecircumstances of the case and in law the Tribunal was justified in holding that the assessee company is entitled for consequential relief in computing income tax payable u/s. 115JA specifically when the assessee company did not distribute the power and the plant was set up for manufacturing of fertilizer and the power plant was a part of fertilizer unit of the company?" 2.I.1.a The first issue regarding expenditure which are incurred by the Director while going with his wife is covered by the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Commissioner of Income-tax Vs. DCM Shriram Consolidated Ltd.- (2014) 368 ITR 720, wherein it has been held as under: "The High Court in the impugned order has relied upon the decision of the six-judge Bench of this Court in Tata Iron and Steel Co. Ltd. v. State of Bihar : [1963] 48 ITR (SC) 125. The proposition of law propounded in TISCO [1963] 48 ITR (SC) 125 has rightly been applied by the High Court in the facts and circumstances of the case. The view taken by the High Court, therefore, is in conformity with the law laid down in TISCO [1963] 48 ITR (SC) 125. No interference is called for. Civil appeals are, accordingly, dismissed with no order as to costs." 2.I.3.a In that view of the matter, the issue is answered in favour of the assessee and against the revenue. 2.I.3.b Accordingly, the appeal stands dismissed. II. DB ITA No.203/2008 admitted on 23.10.2008 "Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the order of the CIT(A) in cancelling the rectification order under Section 154 and deleting the interest levied u/s.234C?" 3.II.1 With regard to this issue the Tribunal in para 6 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....garh Bench of the Tribunal in the case of Joint Commissioner of Income-Tax vs. Arihant Industries reported in 961TD 464 (Chd) wherein it has been held that section 115JA had been brought on statute by the Finance (No.2) Act 1996 with effect from 1.4.1997 and applicable to the previous year relevant to the assessment year 1997-98. The Finance (No.2 Act, 1996 got the assent of president of India on 28.9.96 and before this date this section was not on statute. Admittedly, the first instalment of advance tax became due on 15.6.1996 and the second on 15.9.1996. In the case of assessee these dates are prior to the date when the finance No.2) Act, 1996 got the assent of President of India. In that view of the matter, the assessee was not liable to pay advance tax for these two dates, held the Tribunal. Any way since the issue of charging of interest under section 234C of the Act under the facts and circumstances of the present case was debatable one and hence the AO was not justified in charging the same by passing an order under section 154 of the Act. The Hon'ble Supreme Court in the case of CIT vs. Hero Cycles Pvt. Ltd, 220 ITR 463 (SC) was pleased to hold that the condition precedent ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-IA and in particular Sub-clause (iv) of the said section which provides for the benefit even in respect of electricity generation plant established by the Assessee and the income derived from such enterprise of the Assessee, it will have to be held that the Assessee fully complied with the requirements prescribed under Section 80IA in order to avail the benefits provided therein. Therefore, the contention based on the interpretation of the expression 'derived from' can have no application to the case where the provisions of Section 80-IA get attracted." I.4 In that view of the matter, the issue No.(ii) is required to be answered in favour of the assessee and against the revenue." 4.III.1.a In that view of the matter, the issue is required to be answered in favour of the assessee and against the revenue. 4.III.2. In so far as issue No.(ii) is concerned, it is covered by the decision on issue No.(iii) of appeal No.866/2008 which reads as under: "I.5 Regarding issue No.(iii), whether the assessee company is entitled for consequential relief in computing income tax payable u/s. 115JA specifically when the assessee company did not distribute the power an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ircumstances of the case and in law the Tribunal was justified in deleting the addition of Rs. 11,62,550 lakhs made in respect of fees paid to a consultant for drafting the shareholders agreement? (vi) Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in allowing the fees paid to consultant as revenue expenditure instead of capital expenditure? 5.IV.1 In so far as issues no.(i) and (ii) are concerned, the Supreme court in the case of Goetze (India) Ltd. Vs. Commissioner of Income Tax- (2006) 284 ITR 323, has held as under: 4. The decision in question is that the power of the Tribunal under section 254 of the Income Tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the AO has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its accounts in a manner provided by the Companies Act and the same is to scrutinized and certified by the statutory auditors and will have to be approved by the company and its General meeting. The AO has only power to make adjustment as provided in explanantion. The amount set aside for making the ascertained liability cannot be added to the book profit. Hence, sub clause (c) to explanation (1) of Section 115 JB is not applicable. The amount so debited is not a reserve to be covered under sub-clause (d) to explanation 1 of Section 115JB of the Act. We do not agree with the contention ld. AR the Retention Price Subsidy credited be not treated as part of the book profit. If the assessee is crediting the Retention Price Subsidy in the books of accounts and such subsidy is included in the accounts approved in General Body Meeting, the same cannot be excluded from the book profit. One has to consider the method of accounting being followed by the assessee consistently. Accordingly we hold that the debit in respect of Retention Price ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....facts of this case. 15. The said view was approved by thisCourt in Commr. of Income-tax v. Birla Gwalior (P) Ltd. [1973]89ITR266(SC) (supra) where the assessee maintained its accounts on the mercantile system. In that case this Court, after referring to the decision in Morvi Industries Ltd. v. Commr. of Income-tax [1971]82ITR835(SC) , which was also a case where the accounts were maintained on mercantile system, has said: Hence it is clear that this Court in Morvi Industries case did emphasise the fact that the real question for decision was whether the income had really accrued or not. It is not a hypothetical accrual of income that has got to be taken into consideration but the real accrual of the income. [P. 273] (of ITR): (at P. 2491 of AIR) 16. In Poona Electric Supply Co. Ltd. v.Commr. of Income-tax, Bombay City-I [1965]57ITR521(SC) (supra) this Court has said: Income-tax is a tax on the real income, i.e., the profits arrived at on commercial principles subject to the provisions of the Income-tax Act. 17. In that case the Court has approvedthe following principle laid down by the Bom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ealistic manner and dovetailing of these factors together but once the accrual takes place, on the conduct of the parties subsequent to the year of closing an income which has accrued cannot be made 'no income'. |p. 1541 (of ITR): (at p. 788 of AIR) 7. If the matter is examined in the light of the aforementioned principles laid down by this Court, it must be held that even though the assessee-Company was following the mercantile system of accounting and had made entries in the books regarding enhanced charges for the supply made to the consumers, no real income had accrued to the assesseeCompany in respect of those enhanced charges in view of the fact that soon after the assessee-Company decided to enhance the rates in 1963 representative suits (Civil Suits Nos. 152 of 1963 and 50 of 1964) were filed by the consumers which were decreed by the trial Court and which decree was affirmed by the appellate Court and the learned single Judge of the High Court and it is only on December 3, 1968 that the Letters Patent Appeals filed by the assessee-Company were allowed by the Division Bench of the High Court and the said suits were dismissed. But appeals were filed against ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as a result, the assessee-Company was not in a position to take steps to recover the enhanced charges. 9. The question whether there was real accrual of income to the assesseeCompany in respect of the enhanced charges for supply of electricity has to be considered by taking the probability or improbability of realisation in a realistic manner. If the matter is considered in this light, it is not possible to hold that there was real accrual of income to the assesseeCompany in respect of the enhanced charges for supply of electricity which were added by the Income-tax Officer while passing the assessment orders in respect of the assessment years under consideration. The Appellate Assistant Commissioner was right in deleting the said addition made by the Income-tax Officer and the Tribunal had rightly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the Income-tax Officer did not represent the income which had really accrued to the assessee-Company during the relevant previous years. The High Court, in our opinion, was....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 11.62 lacs. Now we will take up appeal of the revenue." 5.IV.3.a It will not be out of place to mention that the contentions which have been raised by the department with regard to the following observations made by the CIT(A) was never challenged before the Tribunal by the department. "15.4 I have considered the argument of the appellant and submission of the AO and perused the assessment order as well as the relevant records. It is an undisputed fact that the appellant company has incurred expenditure of Rs. 11.62 lakhs in connection with drafting of stock subscription and share holders agreement for acquiring stock/equity shares of Novasoft Information Technology Corporation , USA. The Expenditure is directly relatable to the acquisition of shares/equity of another company but not in relation to the share capital of the appellant company. Hence, it can not be directly considered as capital expenditure. If the shares so acquired have been treated as non-trade investment, then it would have added to the cost of shares (being asset). However, on perusal of balance sheet, it is seen that these shares have been treated as trade investment and accordingly the expenditure....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7 made u/s 115 JB on account of sales tax collected and converted into loan is concerned, it is squarely covered by the decision in the case of Apollo Tyres Ltd. Vs. Commissioner of Income Tax- (2002) 255 ITR 0273, wherein it has been observed as under: "5. For deciding this issue, it is necessary for us to examine the object of introducing Section 115-J in the IT Act which can be easily deduced from the Budget Speech of the then Hon. Finance Minister of India made in the Parliament while introducing the said Section which is as follows: "It is only fair and proper that the prosperous should pay at least some tax. The phenomenon of so-called "zero-tax" highly profitable companies deserves attention. In 1983, a new Section 80VVA was inserted in the Act so that all profitable companies pay some tax. This does not seem to have helped and is being withdrawn. I now propose to introduce a provision whereby every company will to have to pay a "minimum corporate tax" on the profits declared by it in its own accounts. Under this new provision, a company will pay tax on at least 30% of its book profit. In other words, a domestic widely held company will pay tax of at least ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....matter of fact, mandates the company to maintain its account in accordance with the requirements of the Companies Act which mandate, according to us, is bodily lifted from the Companies Act into the IT Act for the limited purpose of making the said account so maintained as a basis for computing the company's income for levy of income-tax. Beyond that, we do not think that the said sub-section empowers the authority under the Income-tax Act to probe into the accounts accepted by the authorities under the Companies Act. If the statute mandates that income prepared in accordance with the Companies Act shall be deemed income for the purpose of Section 115J of the Act, then it should be that income which is acceptable to the authorities under the Companies Act. There can not be two incomes one for the purpose of Companies Act and another for the purpose of income tax both maintained under the same Act. If the legislature intended the assessing officer to reassess the company's income, then it would have stated in Section 115J that "income of the company as accepted by the assessing officer". In the absence of the same and on the language of Section 115J, it will have to held tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chased are installed are revenue expenditure and not of capital expenditure. Therefore, we are in complete agreement with the view taken by the Tribunal. 6.V.1.b Therefore, this issue is answered in favour of the assessee and against the revenue. 6.V.2 So far as issue No.(iii) is concerned, the Tribunal in para 13.5 has observed as under: "13.5 We have heard both the parties. The ld. DR during the course of proceedings relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs. Heridilla Chemicals Ltd. 225 ITR 532. In that case, the issue was allowability of obsolescence allowance u/s 32(1)(iii) of the Act. Since the catalyst is sold. In that case, the assessee himself treated catalyst as capital asset. The assessee is following the consistent method of accounting in respect of catalyst. Before the AO, it was submitted that the life of the catalyst is between two to five years. Catalyst is required for initiating the chemical process for the maufacture of a product. The expenditure incurred on the consumption of a consumable item is Revenue. Since the assessee was following consistent method of accounting, therefore the AO should not have de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: "3. While deciding the above question, several cases of the High Courts and the Supreme Court were considered by the Bench. In Mahalakshmi Sugar Mills Co. v. CIT: [1980]123ITR429(SC) , the Supreme Court had considered the provisions of the U.P. Sugar Cane Cess Act, 1956. Section 3(3) of the said Act provided that any arrear of cess not paid on the date prescribed under Subsection (2) shall carry interest at 6% per annum from such date to the date of payment. The Supreme Court in the above case held that the interest that was paid under Section 3(3) of the Cess Act could not be described as a penalty paid for an infringement of the law and that it was in the nature of revenue expenditure in respect of which the assessee could claim deduction under Section 10(2)(xv) of the Indian Income Tax Act, 1922. The Bench of this court placing reliance on the above Supreme Court case held that the Tribunal was not right in law in holding that the provision for payment of interest amounting to Rs. 5,050 on sales tax collections withheld by the assessee and utilised for the purpose of its own business was not admissible as deduction in computing its total income. The question was, ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....catalyst is sold. In that case, the assessee himself treated catalyst as capital asset. The assessee is following the consistent method of accounting in respect of catalyst. Before the AO, it was submitted that the life of the catalyst is between two to five years. Catalyst is required for initiating the chemical process for the maufacture of a product. The expenditure incurred on the consumption of a consumable item is Revenue. Since the assessee was following consistent method of accounting, therefore the AO should not have deviated from the consistent method which has been followed. There is no change in the facts and circumstances of the case. The Mumbai Tribunal in the case of Sanghi Motors (P) Ltd vs. ACIT, 2010-TIOL-477_ITAT directed the AO to adopt Annual Letting Value as per earlier years on the principle of consistency. The Hon'ble P&II High Court in the case of CIT vs. Haryana Tourism Corp. Ltd, 327 ITR 26 held that rental income taxed as income from house property in earlier years cannot be changed without reason. We therefore, feel that on the principal consistency, the ld. CIT(A) was justified in deleting the disallowance of Rs. 1.69 crores." V.7 Whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies within the tax net that Section 115J was introduced in the IT Act with a deeming provision which makes the company liable to pay tax on at least 30% of its book profits as shown in its own account. For the said purpose, Section 115J makes the income reflected in the companies books of accounts as the deemed income for the purpose of assessing the tax. If we examine the said provision in the above background, we notice that the use of the words "in accordance with the provisions of Part II and III of Schedule VI to the Companies Act" was made for the limited purpose of empowering the assessing authority to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, an assessing officer under the IT Act has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its account in a manner provided by the Companies Act and the same to be scrutinised and certified by statutory auditors and will have to be approved by the company in its General Meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to exa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... with the Companies Act. The assessing officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the assessing officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J." V.2 Therefore, the issue is answered in favour of the assessee." 7.VI.2.a Therefore, this issue is answered in favour of the assessee and against the revenue. 7.VI.3 In so far as issue No.(iii) is concerned, the CIT(A) in para 7.2 has observed as under: "7.2 before me, it was submitted on behalf of the appellant as follows: At the outset, we wish to mention that the entire finding of the L'd Assessing Officer is best on the findings in assessment year 2002-03. L'd CIT(appeals) has allowed the similar claim for donation to DAV trust for the Assessment year 2002-03 vide order no. 14/2005-06 dated 14.12.2006, hence on this point alone, the additon deserve to be deleted. 7.2.1 Other submissions made were broadly same as made in A.Y. 02-03." 7.VI.3.a The Tribunal in para 10.1 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds disposed of. VII. DB ITA No.13/2012 admitted on 16.11.2016 i) Whether the findings of the Tribunal are perverse in reversing the findings of the CIT(A) and allowing the deduction of Rs. 41,45,12,073/- u/s 80IA to captive power plant on DG Set when the power consumption was by the assessee only? ii) Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in reversing the findings of the CIT(A) and deleting the addition of Rs. 60,92,55,017/- made on account of downward impact of Rentention Price Subsidy? iii)Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in allowing the Retention Price Subsidy specifically when it was an unascertained liability and represented "reserve" which is now allowable? iv)Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in reversing the findings of the CIT(A) and allowing set off of MAT Credit of Rs. 17,57,35,134/- relating to the A.Y. 1997-98 which could be carried forward for 5 years only i.e. Up to 2002-03 as per section 115 JAA(3) and Circular No. 763?" 8.VII.1 Regardi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee was creating adhoc Retention Price Liability on the basis of manufacture of fertilizers. Such adhoc credit is based on the notification available. Since the amount was being credited for Retention Price Subsidy on the basis of earlier notification and the assessee became aware of retention for the Retention Price Subsidy as per notification dated 15-04-02, therefore, the excess so credited was debited in the P&L account. The assessee is required to follow the accounting standards in case of any event which occurs after balance sheet before the finalization of the accounts. The assessee is required to make adjustment. The ld. CIT (A) has held that such adjustment is correct but it should have been made in the subsequent assessment year before notification i.e. after the date of the end of the accounting year. Thus it is clear that such liability was an ascertained liability. In the case of Bharat Earthmovers Ltd., 245 ITR 428, the Hon'ble Supreme Court has held that liability of leave encashment is admissible deduction because the liability is ascertained, though it may not be quantified on scientific method. If the quantum of Retention Price Subsidy is made available ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and the accrual of the liability to disburse or pay. In Commr. of Income-tax, Bombay City-I v. Shoorji Vallabhdas and Co. [1962]46ITR144(SC) (supra), it has been laid down: Income-tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialise. 14. This principle is applicable whether theaccounts are maintained on cash system or under the mercantile system. If the accounts are maintained under the mercantile system what has to be seen is whether income can be said to have really accrued to the assessee-Company. In H.M. KashiParekh and Co. Ltd. v. Commr. of Income-tax [1960]39ITR706(Bom) , the Bombay High Court had said (Para 10 of AIR): Even so, (the failure to produce account losses) we shall proceed on the footing that the assessee-Company having followed the mercantile system of account, there must have been entries made in its books in the acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... (as the learned Chief Justice then was) has said: An acceptable formula of correlating the notion of real income in conjunction with the method of accounting for the purpose of the computation of income for the purpose of taxation is difficult to evolve. Besides, any strait-jacket formula is bound to create problems in its application to every situation, it must depend upon the facts and circumstances of each case. When and how does an income accrue and what are the consequences that follow from accrual of income as well-settled. The accrual must be real taking into account the actuality of the situation. Whether an accrual has taken place or not must, in appropriate cases, be judged on the principles of real income theory. After accrual, non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted. In determining the question whether it is hypothetical income or whether real income has materialised or not, various factors will have to be taken into account. It would be difficult and improper to extend the concept of real income to all cases depending upon the ipse dixit of the assessee which would then become a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the earlier representative suits of the consumers followed by the letter of the Under Secretary to the Government of Gujarat and the subsequent suit of the consumers and during the pendency of the subsequent suit the management of the undertaking of the assessee-Company was taken over by the Government of Gujarat under the Defence of India Rules, 1971 and the undertaking was subsequently transferred to the Gujarat State Electricity Board. It is no doubt true that the letter addressed by the Under Secretary to the Government of Gujarat to the assessee-Company had no legally binding effect but one has to look at things from practical point of view. [See : R.B. Jodha Mal Kuthiala v. Commr. of Income-tax, Punjab [1971]82ITR570(SC) ] The assessee-Company, being a licensee, could not ignore the direction of the State Government which was couched in the form of an advice, whereby the assessee-Company was asked to maintain the status quo for at least six months and not to take steps to recover the dues towards enhanced charges from the consumers during this period. Before the expiry of the period of six months the subsequent suit had been filed by the consumers and during the pend....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the reliance has been placed on the decision of Hon'ble Apex Court in the case of Commissioner of Central Excise vs. Ratan Melting & Wires Industries, 220 CTR 98. We therefore, hold that the ld. CIT(A) was not justified in holding that MAT credit for the Assessment year 1997-98 cannot be set off for the assessment year 2003-04 in case the tax is payable under normal provisions of Income Tax Act." 8.VII.3.a Therefore, in view of the observations made by the Tribunal, this issue is answered in favour of the assessee and against the department. VIII. DB ITA No.15/2012 admitted on 16.11.2016 "i) Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in upholding the order of the CIT(A) by deleting the addition of Rs. 1,13,00,877/- made on account of depreciation on catalyst not allowable under section 32 and Income Tax Rules? ii) Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in upholding the order of the CIT(A) by deleting the addition of Rs. 6,96,77,835/- made u/s 115 JB on account of sales tax collected and converted into loan? iii)Whether under the fact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ge in the facts and circumstances of the case. The Mumbai Tribunal in the case of Sanghi Motors (P) Ltd vs. ACIT, 2010-TIOL-477_ITAT directed the AO to adopt Annual Letting Value as per earlier years on the principle of consistency. The Hon'ble P&II High Court in the case of CIT vs. Haryana Tourism Corp. Ltd, 327 ITR 26 held that rental income taxed as income from house property in earlier years cannot be changed without reason. We therefore, feel that on the principal consistency, the ld. CIT(A) was justified in deleting the disallowance of Rs. 1.69 crores." V.7 While considering the case, the Tribunal has also considered the judgment of Punjab and Haryana High Court in the case of CIT vs. Haryana Tourism Corp. Ltd. 327 ITR 26 and has observed that in the previous year same practise was followed by the Company and was accepted by the department. V.8 In that view of the matter, the view taken by the Tribunal is just and proper. V.9 Accordingly, this issue is answered in favour of the assessee and against the department." 9.VIII.1.a Therefore, this issue is answered in favour of the assessee and against the department. 9.VIII.2 Regarding issue No.(ii), this issue is s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de for the limited purpose of empowering the assessing authority to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, an assessing officer under the IT Act has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its account in a manner provided by the Companies Act and the same to be scrutinised and certified by statutory auditors and will have to be approved by the company in its General Meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and satisfy that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Inspite of all these procedures contemplated under the provisions of the Companies Act, we find it difficult to accept the argument of the Revenue that it is still open to the assessing officer to re-scrutinize this account and satisfy himself that these accounts have been maintained in accordance with the provisions of the Companies Act. In our opinion, reliance placed by the Revenue on Sub-section (1A) of Section 115J of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment. 9.VIII.3 Regarding issue No.(iii), this issue is squarely covered by the issue No.(iii) of Appeal No.11/2012 which reads as under: "VI.4 In so far as issue No.(iii) is concerned, the CIT(A) in para 7.2 has observed as under: "7.2 before me, it was submitted on behalf of the appellant as follows: At the outset, we wish to mention that the entire finding of the L'd Assessing Officer is best on the findings in assessment year 2002-03. L'd CIT(appeals) has allowed the similar claim for donation to DAV trust for the Assessment year 2002-03 vide order no. 14/2005-06 dated 14.12.2006, hence on this point alone, the addition deserve to be deleted. 7.2.1 Other submissions made were broadly same as made in A.Y. 02-03." VI.5 The Tribunal in para 10.1 has observed as under: 10.1 The third ground of appeal of the revenue is that the ld. CIT(A) has erred in deleting the addition of Rs. 1,74,42,151/- in respect of donation paid to DAV Trust." VI.6 More particularly, the expenses which are incurred given to the institution is less than 10% of the total income. Even if the donation exceeds 10% of the total income, it will not make any difference to an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....et attracted." I.4 In that view of the matter, the issue No.(ii) is required to be answered in favour of the assessee and against the revenue." 9.VIII.5.a Therefore, this issue is answered in favour of the assessee and against the department. 9.VIII.6 Regarding issue No.(vi) & (vii), these issues are squarely covered by the issue No.(iii) & (iv) of Appeal No.377/2011 which reads as under: "IV.3 So far as issues No.(iii) and (iv) are concerned, the Tribunal while considering the case has observed as under: "6.8 We have heard both the parties. The AO has added the deduction on account of Retention Price Liability under Clause (c) and (b) of explanation (1) to Section 115JB of the Act. Clause (c) of explanation (1) to Section 115 JB refers to the amount or amounts set aside for provision made for meeting liabilities other than ascertain liabilities. Clause (b) to explanation (1) of Section 115JB refers to the amount carried to any reserve. It is not disputed that the assessee was creating adhoc Retention Price Liability on the basis of manufacture of fertilizers. Such adhoc credit is based on the notification available. Since the amount was being credi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e method of accounting being followed by the assessee consistently. Accordingly we hold that the debit in respect of Retention Price Subsidy on account of notification dated 15.04.2009 is allowable." IV.4 The Supreme Court in the case of Godhra Electricity Co. Ltd. Vs. Commissioner of Income-tax- (1997) 225 ITR 746 (SC) has observed as under: "6.Under the Act income charged to tax is the income that is received or is deemed to be received in India in the previous year relevant to the year for which assessment is made or on the income that accrues or arises or is deemed to accrue or arise in India during such year. The computation of such income is to be made in accordance with the method of accounting regularly employed by the assessee. It may be either the cash system where entries are made on the basis of actual receipts and actual outgoings or disbursements or it may be the mercantile system where entries are made on accrual basis, i.e., accrual of the right to receive payment and the accrual of the liability to disburse or pay. In Commr. of Income-tax, Bombay City-I v. Shoorji Vallabhdas and Co. [1962]46ITR144(SC) (supra), it has been laid down: Income-tax ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt has approvedthe following principle laid down by the Bombay High Court in H.M. Kashiparekh & Co. Ltd. v. Commr. of Income-tax AIR1961 Bom 84 (supra) (Para 15 of AIR): The principle of real income is not to be so subordinated as to amount virtually to a negation of it when a surrender or concession or rebate in respect of managing agency commission is made, agreed to or given on grounds of commercial expediency, simply because it takes place some time after the close of an accounting year. In examining any transaction and situation of this nature the Court would have more regard to the reality and speciality of the situation rather than the purely theoretical or doctrinaire aspect of it. It will lay greater emphasis on the business aspect of the matter viewed as a whole when that can be done without disregarding statutory language. 18. In State Bank of Travancore v. Commr.of Income-tax, Kerala [1986]158ITR102(SC) (supra), after considering the various decisions of this Court, Sabyasachi Mukharji, J. (as the learned Chief Justice then was) has said: An acceptable formula of correlating the notion of real income in conjunction with the method of accounting fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts were dismissed. But appeals were filed against the said judgment by the consumers in this Court and the same were dismissed by the judgment of this Court dated February 26, 1969. Shortly thereafter, on March 19, 1969, the Under Secretary to the Government of Gujarat wrote a letter advising the assesseeCompany to maintain the status quo for the rates to the consumers for at least six months and the Chief Electrical Inspector was directed to go through the accounts of the assessee-Company from year to year and to report to the Government about the actual position about the reasonable returns earned by the assessee-Company. On May 16, 1969 another representative suit (Suit No. 118 of 1969) was filed by the consumers wherein interim-injunction was granted by the Court and which was finally decreed in favour of the consumers on June 23, 1974. It would thus appear that after the decision was taken by the assessee-Company to enhance the charges it was not able to realise the enhanced charges on account of pendency of the earlier representative suits of the consumers followed by the letter of the Under Secretary to the Government of Gujarat and the subsequent suit of the consumers and d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. The High Court, in our opinion, was in error in upsetting the said view of the Tribunal. IV.5 Therefore, issues No.(iii) and (iv) are required to be answered in favour of the assessee and against the department." 9.VIII.6.a Therefore, this issue is answered in favour of the assessee and against the department. IX. DB ITA No.16/2012 admitted on 16.11.2016 "i) Whether the Tribunal was legally justified in reversing the order of CIT(A) and partly deleting the addition of Rs. 2,45,53,629/- incurred on erection of new cement plant out of the income of the existing fertilizer unit? ii) Whether the Tribunal was legally justified in reversing the findings of the CIT(A) and partly deleting the addition of Rs. 2,45,53,629/- while computing income u/s 28 and MAT purpose u/s 115 JB in respect of new project expenses, which was subsequently abandoned and was in the nature of capital expenditure? 10.IX.1 Regarding issue No.(i), this Court in the case of Maharaja Shri Umaid Mills Ltd. Vs. Commissioner of Income Tax- (1989) 175 ITR 0072, has held as under: "5. In our opinion, necessary facts on the basis of which the aforesaid question No. (2) has to be an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lying the test indicated. This question cannot, therefore, be answered at this stage without necessary facts and the Tribunal will have to decide the same afresh after determin ing the necessary facts giving opportunity, if necessary, to the parties, to adduce further evidence for this purpose." 10.IX.1.a Therefore, this issue is answered in favour of the assessee and against the department. 10.IX.2 Regarding issue No.(ii), in view of decision of the Delhi High Court in the case of Commissioner of Income-tax Vs. DCM Shriram Consolidated Ltd. (supra) and the decision of Supreme Court in the case of CIT Vs. Apollo Tyres Ltd. (supra), this issue is answered in favour of the assessee and against the department. 10.IX.3 The appeal stands dismissed. X. DB ITA No.65/2012 admitted on 16.11.2016 "i) Whether under the facts and circumstances of the case and in law the Tribunal was justified in reversing the findings of the CIT(A) by deleting the addition of Rs. 12,06,33,254/- on account of sales tax collected and converted into loan as revenue receipt? ii) Whether under the facts and circumstancesof the case and in law the Tribunal was justified in holding the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he sales tax dues had to be paid in five installments commencing from April 2010. SICOM as the implementing agency quantified, according to the assessee, the net present value of the deferred liability of the assessee at Rs. 50.44 lacs which was paid by the assessee to SICOM. However, the sales tax officer while passing the assessment order on 18 March 2004 did not consider the amount paid to SICOM as repayment of the deferred liability of the assessee to the extent of Rs. 1.79 Crores under the Bombay Sales Tax Act, 1959 and Central Sales Tax Act, 1956. The appeals filed by the assessee before the Deputy Commissioner of Sales Tax were dismissed upon which the assessee filed a second appeal before the Maharashtra Sales Tax Tribunal. The Tribunal, by its judgment dated 8 February 2008 upheld the order of the lower authorities of not giving credit of the payment made by the assessee to SICOM. In these proceedings, neither the validity of the order passed by the Sales Tax Tribunal nor for that matter the correctness of the reasons that weighed with the Tribunal can be called into question. The Tribunal observed that though the assessee had made a premature payment of the deferred tax i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t that the order of the Sales Tax Tribunal was placed for consideration before the Income Tax Appellate Tribunal emerges from the order of the Tribunal itself. Consistent with the order passed by the Sales Tax Tribunal which continues to hold the field, the ITAT could not have come to the conclusion that there had occurred a remission or cessation of liability during the Assessment Years in question." 11.X.1.a The Karnataka High Court in the case of Commissioner of Income Tax & Anr. Vs. Mcdowell & Co. Ltd., (2014) 369 ITR 0684 (Kar), has observed as under: "12. In the instant case, as per the scheme he was allowed to retain the sales tax as determined by the competent authority and pay the same 15 years thereafter. The tax collected was deemed to have been paid and, therefore, the tax so collected cannot be construed as income in the hands of the assessee. The tax so retained by the assessee is in the nature of a loan given by the Government as an incentive for setting up the industrial unit in a rural area. The said loan had to be repaid after 15 years. Again it is an incentive. However, by a subsequent scheme, a provision was made for premature payment. When the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In so far as issue no.(ii) in allowing 100% deduction u/s.80IA specifically when the assessee company itself claimed deduction @ 30% u/s. 80IA, is concerned counsel for the appellant has taken us to the order of CIT (A) and contended that the view taken by the Tribunal is required to be reversed. However, the issue is now covered by the decision of Madras High Court in the case of Tamilnadu Petro Products Ltd. Vs. Assistant Commissioner of Income-tax(2011) =388 ITR 643 (Madras), wherein it has been held as under: "7. In our considered opinion, the said contention can have no application to the case on hand. In as much as we dealt with the issue in the light of Section 80-IA and in particular Sub-clause (iv) of the said section which provides for the benefit even in respect of electricity generation plant established by the Assessee and the income derived from such enterprise of the Assessee, it will have to be held that the Assessee fully complied with the requirements prescribed under Section 80IA in order to avail the benefits provided therein. Therefore, the contention based on the interpretation of the expression 'derived from' can have no application to the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... comments and has not collected any evidence to rebut the contention of the assessee that assets were put to use as on 1-10-04. hence, the ld. CIT(A) was justified in deleting the disallowance of Rs. 27,53,678/-." 11.X.5.a Therefore, this issue is answered in favour of the assessee and against the department. 11.X.6 The appeal stands dismissed. XI. DB ITA No.66/2012 admitted on 16.11.2016 "i) Whether the Tribunal was legally justified in treating the incentive of Rs. 12,06,33,254/received on pre payment of deferred sales tax liability as capital receipt and loan instead of revenue receipt ignoring the book entries made by the assessee? ii) Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in reversing the findings of the CIT(A) by deleting the addition of Rs. 12,06,33,254/- on account of sales tax collected and converted into loan being not taxable u/s 41(1)?" 12.XI.1 Both these issues are squarely covered by the issue No. (i) of Appeal No.65/2012 which reads as under: "X.1 Regarding issue No.(i), the Bombay High Court in the case of SI Group India Ltd. Vs. Assistant Commissioner of Income Tax &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deferred tax in accordance with the scheme issued by the Department of Industries of the State Government under the package scheme of incentives of 1993, the payment of the net present value was to be made in the challan prescribed under the Sales Tax Act which constituted the lawful mode of making payment and the payment which was made to SICOM would nonetheless have to follow the procedure prescribed under the Act. The Tribunal was of the view that the decision of the assessing authority and of the Deputy Commissioner of Sales Tax not to give credit to the payment made to SICOM would have to be upheld, but left it open to the assessee to procure a valid document under the scheme which would be "considered for relevant period for relevant deferred amount". 10. The net result of the order of the Sales TaxTribunal dated 8 February 2008 is to uphold the decision of the assessing authority declining to grant credit of the payment made by the assessee to SICOM towards discharge of the deferred sales tax liability. As a matter of fact, on 22 July 2008 a notice of demand was issued under Section 38 of the Bombay Sales Tax Act of 1959 to the assessee by the Deputy Commissioner of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee had the benefit of making the payment after 15 years, if he is making a premature payment, the said amount equal to the net present value of the deferred tax was determined at Rs. 4,25,79,684/- and on such payment the entire liability to pay tax/loan stood discharged. Again it is not a benefit conferred on an assessee. Therefore, Section 41(1) of the Act is not attracted to the facts of this case. Hence, the Tribunal was justified in holding that there is no liability to pay tax. Under these circumstances, we do not see any error committed by the Tribunal in passing the impugned order. The substantial question of law is answered in favour of the assessee and against the revenue." X.3 Therefore, this issue is answered in favour of the assessee and against the department." 12.XI.1.a Therefore, both the issues are answered in favour of the assessee and against the department. 12.XI.2 The appeal stands dismissed. XII. DB ITA No.140/2012 admitted on 16.11.2016 "i) Whether the findings of the Tribunal are perverse in reversing the findings of the CIT(A) and allowing the deduction of Rs. 38,65,73,335/- 80IA to captive power plant on DG Set when the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntion based on the interpretation of the expression 'derived from' can have no application to the case where the provisions of Section 80-IA get attracted." I.4 In that view of the matter, the issue No.(ii) is required to be answered in favour of the assessee and against the revenue." 13.XII.1.a Therefore, this issue is answered in favour of the assessee and against the department. 13.XII.2 Regarding issue No.(ii), this issue is squarely covered by the issue No.(iii) of Appeal No.378/2011 which reads as under: "V.6 So far as issue No.(iii) is concerned, the Tribunal in para 13.5 has observed as under: "13.5 We have heard both the parties. The ld. DR during the course of proceedings relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs. Heridilla Chemicals Ltd. 225 ITR 532. In that case, the issue was allowability of obsolescence allowance u/s 32(1)(iii) of the Act. Since the catalyst is sold. In that case, the assessee himself treated catalyst as capital asset. The assessee is following the consistent method of accounting in respect of catalyst. Before the AO, it was submitted that the life of the catalyst is between two to five years....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... addition of Rs. 1,74,42,151/- in respect of donation paid to DAV Trust." VI.6 More particularly, the expenses which are incurred given to the institution is less than 10% of the total income. Even if the donation exceeds 10% of the total income, it will not make any difference to any trust. We are in complete agreement with the view taken by the Tribunal. VI.7 Therefore, the issue is answered in favour of the assessee and against the department." 13.XII.3.a Therefore, this issue is answered in favour of the assessee and against the department. 13.XII.4 Regarding issue No.(iv & v), the Punjab & Haryana High Court in the case of Commissioner of Income-tax Vs. Groz Beckert Asia Ltd.- (2013) 351 ITR 196 (Punjab & Haryana) has observed as under: "6. Section 37 of the Income Tax Act, 1961 provides that "Any expenditure (not being expenditure of the nature described in Sections 30 to 36) and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure.... 15. In the present case, the nature of the expenditure incurred by the assessee cannot be said to be a capital expenditure. The second test culled down in Assam Bengal Cement Co. Ltd.'s case (supra) is that expenditure should bring into existence an asset or an advantage for the enduring benefit of a trade. In the present case, the corporate membership of Rs. 6 lacs was for a limited period of 5 years. The corporate membership was obtained for running the business with a view to produce profit. Such membership does not bring into existence an asset or an advantag....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... expenditure which gives enduring benefit is by itself not conclusive as regards the nature of the expenditure. We may add that even lump sum payment, which was the case in the instant matter, is not decisive as regards the nature of the payment. See observations in Empire Jute Co. Ltd. v. CIT [1980]124ITR1(SC) as also the judgment of the Division Bench of this Court in CIT v. J.K. Synthetics ITR Nos. 139/1988 and 202/1989. The true test for qualification of expenditure under Section 37 of the Act is that it should be incurred wholly and exclusively for the purposes of business and the expenditure should not be towards capital account. In the instant case, as discussed above, the admission fee paid towards corporate membership is an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprise. 6. In view of the above, in the aforesaid circumstances we are of the opinion that the impugned judgment as indicated above, deserves to be upheld." 13.XII.4.c The Bombay High Court in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s sales tax dues during the period 1 May 1999 and 31 March 2000. Under the package scheme of incentives announced by the Government of Maharashtra in 1993 the sales tax dues had to be paid in five installments commencing from April 2010. SICOM as the implementing agency quantified, according to the assessee, the net present value of the deferred liability of the assessee at Rs. 50.44 lacs which was paid by the assessee to SICOM. However, the sales tax officer while passing the assessment order on 18 March 2004 did not consider the amount paid to SICOM as repayment of the deferred liability of the assessee to the extent of Rs. 1.79 Crores under the Bombay Sales Tax Act, 1959 and Central Sales Tax Act, 1956. The appeals filed by the assessee before the Deputy Commissioner of Sales Tax were dismissed upon which the assessee filed a second appeal before the Maharashtra Sales Tax Tribunal. The Tribunal, by its judgment dated 8 February 2008 upheld the order of the lower authorities of not giving credit of the payment made by the assessee to SICOM. In these proceedings, neither the validity of the order passed by the Sales Tax Tribunal nor for that matter the correctness of the reasons t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e basis that there was a remission or cessation of liability. The attention of the Tribunal was drawn to the order passed by the Sales Tax Tribunal. The fact that the order of the Sales Tax Tribunal was placed for consideration before the Income Tax Appellate Tribunal emerges from the order of the Tribunal itself. Consistent with the order passed by the Sales Tax Tribunal which continues to hold the field, the ITAT could not have come to the conclusion that there had occurred a remission or cessation of liability during the Assessment Years in question." X.2 The Karnataka High Court in the case of Commissioner of Income Tax & Anr. Vs. Mcdowell & Co. Ltd., (2014) 369 ITR 0684 (Kar), has observed as under: "12. In the instant case, as per the scheme he was allowed to retain the sales tax as determined by the competent authority and pay the same 15 years thereafter. The tax collected was deemed to have been paid and, therefore, the tax so collected cannot be construed as income in the hands of the assessee. The tax so retained by the assessee is in the nature of a loan given by the Government as an incentive for setting up the industrial unit in a rural area. The said loan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ually a reimbursement of expenses incurred by the individual employees of the company and were in the nature of personal expenses being not incidental to the business? vi) Whether the findings of the Tribunal areperverse in upholding the order of the CIT(A) and deleting the disallowance of Rs. 58,36,741/- made u/s 40A (2)(a) on account of loss on sale of inventory to the sister concern when the proper procedure for the disposal of inventory was not followed? vii) Whether the findings of the Tribunal areperverse in upholding the order of the CIT(A) and deleting the disallowance of Rs. 42,38,664/- made on account of revaluation of imported pumps, when it was specifically held that loss would be allowable as and when the pumps are treated as scrap or are sold and the loss did not relate to the impugned year?" 15.XIV.1 Regarding issue No.(i), this issue is squarely covered by the issue No.(iii) of Appeal No.378/2011 which reads as under: "V.6 So far as issue No.(iii) is concerned, the Tribunal in para 13.5 has observed as under: "13.5 We have heard both the parties. The ld. DR during the course of proceedings relied upon the decision of Hon'ble Bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar 2002-03. L'd CIT(appeals) has allowed the similar claim for donation to DAV trust for the Assessment year 2002-03 vide order no. 14/2005-06 dated 14.12.2006, hence on this point alone, the addition deserve to be deleted. 7.2.1 Other submissions made were broadly same as made in A.Y. 02-03." VI.5 The Tribunal in para 10.1 has observed as under: 10.1 The third ground of appeal of the revenue is that the ld. CIT(A) has erred in deleting the addition of Rs. 1,74,42,151/- in respect of donation paid to DAV Trust." VI.6 More particularly, the expenses which are incurred given to the institution is less than 10% of the total income. Even if the donation exceeds 10% of the total income, it will not make any difference to any trust. We are in complete agreement with the view taken by the Tribunal. VI.7 Therefore, the issue is answered in favour of the assessee and against the department." 15.XIV.2.a Therefore, this issue is answered in favour of the assessee and against the department. 15.XIV.3 Regarding issue No.(iii), this issue is squarely covered by the issue No.(ii) of Appeal No.866/2008 which reads as under: "I.3 In so far as issue no.(ii) in all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase (supra), wherein the Supreme Court approved the opinion of the Full Bench of Lahore High Court in Benarsidas Jagannath (1947) 15 ITR 185 and held that it is not easy to define the term 'capital expenditure' in the abstract or to lay down any general and satisfactory test to discriminate between a capital and a revenue expenditure. Some of the broad principles deduced were that, outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment and; expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence as asset or an advantage for the enduring benefit of a trade. The expression 'enduring benefit' or 'of a permanent character' were introduced to make it clear that the asset or the right acquired must have enough durability to justify its being treated as a capital asset. The Court observed to the following effect: This synthesis attempted by the Full Bench of the Lahore High Court truly enunciates the principles which emerge from the authorities. In cases where the expendi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bership of a club, no capital asset is created or comes into existence. By such membership, a privilege to use facilities of a club alone, are conferred on the assessee and that too for a limited period. Such expenses are for running the business with a view to produce the benefits to the assessee. Consequently, it cannot be treated as capital asset. Therefore, the reasoning given by Delhi, Bombay and Gujarat High Courts in respect of members of Clubs is based upon correct enunciations of the principles of law as delineated above in the judgments of the Supreme Court." XII.8The Bombay High Court in the case of American Express International Banking Corpn. Vs. Commissioner of Income Tax- (2002) 258 ITR 601 (Bombay) has observed as under: In view of the judgment of this court in the case of Otis Elevator Co. (India) Ltd. v. CIT [1992] 195 ITR 682 question no. 6 is answered in the affirmative i.e. in favour of the assessee and against the department i.e. section 40A(5) is not applicable for disallowance of expenses incurred by the assessee in respect of Club Membership subscription fees, which is held to be business expenditure and not a perquisite. " XII.9The Delhi High Court in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rnational Banking Corpn. Vs. CIT (2002) 258 ITR 601, we answer the above question in the affirmative i.e. in favour of the assessee and againsgt the department." XII.11 Therefore, the issues No.(iv and v) are answered in favour of the assessee and against the department." 15.XIV.4.a Therefore, this issue is answered in favour of the assessee and against the department. 15.XIV.5 In so far as issue No.(vi) is concerned, the Madras High Court in the case of Commissioner of Income Tax Vs. A.K. Subbaraya Chetty & sons- (1980) 123 ITR 0592 has held as under: "What happened actually was that the assessee sold the goods to Somasundaram and Brothers at a discount. This means that so far as the sales to Somasundaram & Brothers were concerned, the assessee charged a lower sale rate in effect." 8. Again, in para. 8, the Tribunal found : "The present case is one where a certain portion of the normal sale price is given up, there is nothing which is paid out or away by the assessee from the sale price or the income that had accrued to it." 9. The Tribunal has also referred to a decision of this court in Sri Ramalinga Choodambikai Mills Ltd. v. CIT [1955]....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ference between the market rate and the price at which the bidis were sold cannot, in our opinion, be termed as expenditure incurred by the assessee. On the finding reached by the Tribunal, it has to be held that the ITO was not right in adding Rs. 6,81,987 under Section 40A(2). 6. As regards the purchase of tobacco from M/s. Mohanlal & Company, the finding of the Tribunal is that there is no adequate material to hold that the purchase was not made at the market rate. In view of this finding it cannot be held that the payment of price made by the assessee to this firm was either excessive or unreasonable. Section 40A(2)(a) is, therefore, clearly not attracted." 15.XIV.5.b Delhi High Court in the case of United Exports Vs. Commissioner of Income Tax- (2011) 330 ITR 0549 has held as under: 10. The ITAT has clearly erred and itsfindings cannot be said to be those of a reasonable person. The conclusions are clearly perverse and are liable to be set aside by this Court in exercise of its powers under Section 260-A. Firstly, it is quite clear that a trade discount of 11% was allowed in the assessment year 2003-2004 and that too when the sales to the sister concern wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cable. A trade discount, and admittedly it is not in dispute that the subject matter of the claim is a trade discount, and not an expenditure, clearly therefore there does not arise the question of applicability of Section 40-A(2)(b)." 15.XIV.5.c Therefore, this issue is answered in favour of the assessee and against the department. 15.XIV.6 Regarding issue No.(vii), the observations made by the Tribunal are against the assessee. Therefore, the observations which are wrongly stated in favour of the assessee are clarified that the issue is decided against the assessee. Therefore, this issue has been wrongly framed. No substantial question of law in the case arises for consideration of the Court. 15.XIV.7 The appeal stands disposed of. XV. DB ITA No.47/2015 admitted on 07.02.2017 "(i) Whether the Tribunal was legally justified in reversing the findings of the CIT(A) and cancelling the penalty levied u/s 271(1)(c) specifically when the assessee furnished inaccurate particulars and concealed particulars of income?" 16.XV.1 In view of the decision in Tax Appeal No.11/2012 and 13/2012, the issue is answered in favour of the assessee and against the department. ....