TaxTMI 
TaxTMI 
2018 (4) TMI 881
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....goods by this appellant." 3. Brief facts relating to this issue are that the assessee imported items from Finland aggregating to approximately Rs. 37 crores in early 1997 and these were lying in the custody of Port Authorities and in bonded warehouse. The cost of import of such materials including duties and insurance is said to be to the tune of Rs. 37 crores. The assessee also stated that material worth Rs. 6 crores had been cleared and these materials were in the nature of stores and spares. Copies of the invoices, bills of entries, market value of the material and statement showing material cleared from the Port Authorities were furnished during the course of assessment proceedings. The A.O. in the assessment order has held as under:- "The assessee's reply has been considered. The goods had been imported from outside of India i.e. from Finland which was never brought in to the assessee's business premises/factory and utilized for the business of the assessee. In other words, plant and machinery was neither released from the Port Authorities nor installed and used for the business purpose and the materials had been simply dumped in the port and no part of uti....
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.... in the bonded ware house without being cleared. Although the assessee has stated that it was due to financial stringency that the custom duty could not be paid no documentary evidence regarding any such claim of dues for payment of custom duty nor any material to substantiate the claim of financial stringency has been brought on record. Further it is seen from the paper book that vide letter dt.17.07.2001,the assessee had written to the Commissioner of Customs (JNPT) stating that the title of these goods lying in the bonded ware house were relinquished. A basic question therefore arises that when the assessee has decided to relinquish the title of these goods for the F.Yr.2001-02 what is the rationale behind writing off such amounts in the F.Yr.2004-05 and whether the liability can be said to have crystallized during the F.Yr,2004-05 The assessee has not attempted to explain this anomaly. It is also seen that the assessee has only unilaterally intimated the custom authorities relinquishing the title to these goods. There is no order regarding this relinquishment by the custom authorities produced either before the AO or in appellate proceedings. The issue that emerges for....
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.... We hereby relinquish our title to these goods in accordance with Sub-section (2) of section 23 of Custom Act, 1962. The details of these containers covered by the above bill of entry are annexed herewith. As appellant has claimed that these goods are relinquished u/s 23 of the Customs Act it is worth considering the Provisions of section 23 of the Customs Act which reads as follows "Remission of duty on lost, destroyed or abandoned goods 1) Without prejudice to the provisions of section 13, where it is shown to the satisfaction of the (Assistant Commissioner of Customs or Deputy Commissioner of Customs) that any imported goods have been lost (otherwise than as a result of pilferage) or destroyed, at any time before clearance for home consumption, the (Assistant Commissioner of Customs or Deputy Commissioner of Customs) shall remit the duty on such goods. The owner of any imported goods may, at any time before an order for clearance of goods for home consumption under section 47 or air for permitting the deposit of goods in a warehouse tinder section 60 has boon made, relinquish his title to the goods and thereupon he shall not be liable to pay ....
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.... evidence. To conclude, it is seen that the assessee's claim is not tenable for the following reasons 1) As per the invoice of Valmet Finland the goods are described as paper making machinery Therefore, the claim of the appellant that these are stores and spares is contradictory 2) The goods are stated to be relinquished to the Customs authorities in F.Yr. 2001-02. On relinquishment title in the goods would pass to the Customs authorities and would not remain with the assessee 3.7 The write off in A Yr.2005-06 of goods over which assessee has no title is not in accordance with AS 28 and does not entitle the assessee to a claim u/s37of the l.T. Act. The action of the A.O is upheld This ground is, therefore, dismissed." Aggrieved, assessee preferred appeal before Tribunal. 5. Before us the learned counsel for the assessee argued that assessee has acquired spare parts & equipment which were lying at the stores to be cleared for home consumption since 1997. He explained that the expenditure incurred was in the course of carrying on business is not in dispute and all along in the past it was shown as business asset/advance and same has been ....
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....y carried forward loss. 8. On the other hand, the learned CIT DR supported the orders of the lower authorities and argued that the assessee has already relinquished the title over the imported goods in assessment year 2002-03 relevant to FY 2001-02 as is evident from assessee's letter dated 17-07-2001 addressed to the commissioner of Customs, Mumbai giving intimation regarding relinquishing of title to the goods paper machinery imported. The learned CIT DR stated that in lieu of proceedings initiated regarding for relinquishment of goods an order was passed to levy dues from the concerned party but no such order was produced by the assessee of custom authorities under section 68 of the Customs Act. It was argued by the learned CIT DR, the Act of the assessee is unilateral Act. He also stated that the claim of the assessee is not tenable for another reason that as per the invoice of Valmat, Finland the goods are described as paper making machinery whereas the assessee claim the same as stores and spares, which is totally contradictory. In view of these reasons, he argued that the claim of the assessee cannot be allowed. 9. We have heard rival contentions and gone through facts....
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....d surrounding circumstances, even if opposed to principle of accountancy, should not be a factor in order to decide the true character of income and or loss. The assessee before lower authorities and before us also filed documents such as, i.e. import invoices details for the goods damaged and for lost its market value, payment details in respect of import of market value of goods, statement showing materials cleared from, Port Authorities for use in the assessee's business and the materials relinquish thereof, bill of entries for goods cleared and use for the business etc. Stores & spares being essentially a standby item for any paper plant more particularly for a chain of manufacturing/processing of paper units when all such units are running continuously 365 days in a year. Thus, expenditure or the imported item whether used or not was for assessee's existing business. For allowance of a claim for deduction as business loss / expenditure, all that is necessary is that firstly, the money, i.e. capital, must have been utilized, secondly, it must have been expended in relation to business. It is admitted position in law, where there is no specific statutory provision for a dedu....
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.... the sole selling agency was a business expenditure which was incurred by the assessee after proper consideration on the facts and circumstances of the case and on the basis of legal opinion of its solicitors. The Tribunal has also recorded a clear finding of fact that the payment was made for commercial expediency. In view of this clear finding that the payment for termination of the sole selling agency was wholly on business considerations, we do not find any cogent reason to hold that the claim of the assessee was not allowable as a business deduction. 8. The principles governing the allowance of deduction in respect of such expenditure are well-settled by now by a catena of decisions of the Supreme Court and the various High Courts. Such deductions are ordinarily claimed and allowed under section 37 of the Act which is a residuary section extending the allowance of deduction to items of business expenditure not covered by any of the preceding sections (sections 30 to 36) and section 80VV of the Act. The only conditions are that (i) it is not an expenditure (a) in the nature of capital expenditure or (b) personal expenses of the assessee, and (ii) it is laid out or expe....
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....for business or commercial expediency. 11. The learned counsel for the revenue placed reliance upon the provisions of section 294AA(2) in support of his contention that the sole selling agency stood automatically terminated in the absence of the approval of the Central Government. It was urged that there being no legal obligation on the assessee to pay any compensation to the said sole selling agents, the payment made by the assessee by way of compensation for loss of office of sole selling agents cannot be held to be for commercial consideration. We are not impressed by these submissions. So far as the second contention regarding payment for extra- commercial consideration is concerned, we find that it is wholly untenable in view of the clear finding of the Tribunal to the contrary. The Tribunal, on consideration of the totality of the facts and circumstances of the case, has come to a clear finding of fact that the payment was dictated by commercial expediency. This finding of fact having not been challenged on the ground of perversity or the like, it is not open to the revenue at this stage to contend that the payment of compensation by the assessee was not for business....
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....ther than a loss during the normal course of business. The Tribunal observed that the assessee had not even produced the inspection report in order to prove that the goods were really rusted. Shri Toprani, learned counsel for the assessee, submitted that the departmental authorities as well as the Tribunal had failed to appreciate that the consignment containing spare parts was not traced by port/Customs authorities but was traced by the assessee's agents, Messrs. Insimax Corporation, Bombay, who were paid their fees of Rs. 3,500 for the purpose. When they traced the consignment, they informed the assessee that the spare parts in the consignment were almost junk and that it was not worthwhile to clear them by incurring further expenditure by way of duty, wharfage, demurrage, etc. It was a business decision which their clients took and the departmental authorities had no business to question the same unless there was even a suggestion that the goods were wrongly imported or that the Customs authorities would have otherwise confiscated them. Dr. Balasubramanian relied on the order of the Tribunal. In our opinion, the submissions on behalf of the assessee are wel....
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....itled to claim this amount of Rs. 32,000 as a trading loss but is also entitled to claim this amount in the assessment year, viz., 1947-48. 13. We will, therefore, reframe the question in the following way : "Whether the assessee was entitled to claim a sum of Rs. 32,000 as a permissible allowance under the circumstances of the case ?" and answer it in the affirmative. The Commissioner to pay the costs. 14. Reference answered in the affirmative." 14. In view of the above legal authorities and facts of the case as discussed above, we are of the view that write off of stores & spares imported earlier but lying in the godown of a port authority is a loss incidental to the business. We allow the loss accordingly. This issue of assessee's appeal is allowed. 15. The next common issue in these cross-appeals is as regards to the order of CIT(A) in restricting the disallowance of write-off of an amount out of Rs. 1,47,51,335/- claimed by the assessee at Rs. 16,20,186/-. The Revenue is against deletion of disallowance of deduction of write-off of an amount of Rs. 1,31,34,610/- and assessee is in appeal for confirming the disallowance at Rs. 16,20,186....
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....p; 17. According to the Assessing Officer, as per the provisions of Section 36(i)(vii) of the Act, the assessee has to comply with the conditions that it must be a proper debt or part thereof and debt must be bad. Further, it should be revenue in nature and the amount which has been written off as recoverable in the accounts of the assessee for the previous year. Further, the same amount should have been accounted for while computing the income of the assessee for the previous year in which the amount of such debt or part thereof is written off. According to the Assessing Officer, the assessee must prove that the debt has actually become bad. As the assessee failed to prove the same, the Assessing Officer added the bad debts to the returned income of the assessee amounting to Rs. 1,47,51,335/-. Aggrieved, assessee preferred appeal before the learned CIT(A), who restricted the disallowance at Rs. 16,20,186/- and deleted the balance by observing in paragraph 4.2 as under :- "4.2 I have considered the facts of the case. It is seen that out of the amount of Rs. 1,47,51,335/- an amount of Rs. 16,20,186/- pertains to loans and advances, the balance amount of Rs. 1,31,34,610/-....
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....l, the assessee has not pressed the issue and hence, the same is also dismissed. 19. The next issue in Revenue's appeal is as regards to the order of CIT(A) in directing the Assessing Officer to consider the claim of the assessee regarding payment made on account of charity and donations amounting to Rs. 2,15,38,948/-. For this, the Revenue has raised the following ground No.2 :- "2. On the facts and in the circumstances of the case, the learned CIT(A) erred in directing the A.O. to consider claim of the assessee regarding payment on account of charity and donations of Rs. 2,15,38,948/- as per directions of the Hon'ble ITAT in ITA No.261/Nag/2007." 20. At the outset, learned counsel for the assessee stated that CIT(A) has only remanded the matter to the file of the Assessing Officer to follow the directions of the Tribunal, who has restored the matter for assessment year 2004-05 in ITA No.261/Nag/2007. The CIT(A) has reproduced the directions of the Tribunal for assessment year 2004-05. When a query was put to learned CIT DR, he fairly conceded the position. 21. After hearing both the sides and going through the order of CIT(A), it is observed that CIT(A) has dire....
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....g Officer treated the claim as revenue in nature. Aggrieved, assessee preferred appeal before the CIT(A). The CIT(A), relying on earlier years and also Tribunal's decision for assessment year 2003-04 and 2008-09, allowed the claim of the assessee by observing in paragraph 9 and 9.1 as under :- "9.0 Ground No.7 : This ground is against addition on account of sales tax incentive of Rs. 35,30,93,136/-. I have considered the submissions made by counsel of the assessee and perused the evidence on record and assessment order. The A.O. has discussed the disallowance at para 15 of the assessment order. The A.O. has made disallowance and has observed that claim is made by assessee as in earlier assessment years. The addition made in the case of assessee in earlier assessment year has been deleted in appellate order for earlier assessment years. In assessment year 2004-05 CIT(A) has considered the issue at para 8 of appellate order and held that sales tax incentives availed under the Package Scheme of Incentives of Govt. of Maharashtra is capital receipts not chargeable to tax at the hands of assessee. The Hon'ble Bombay High Court has held in the case of Reliance Industries Ltd. in....
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.... respect to distribution to educational institutions and employee's club located in the vicinity of industrial undertaking of the company. The order passed by A.O. has been upheld by ITAT in the appeal filed by Revenue in ITA No.226/Nag/2008 vide order dated 12th August 2009 at para 45. Respectfully following the said decision the addition made by A.O. at Rs. 70,38,703/- is unsustainable and is hereby directed to be deleted. The ground of appeal of assessee is allowed." Learned CIT DR also conceded the position. 28. We find that this issue is squarely covered by the Tribunal's decision in assessee's own case. Respectfully following the same, we confirm the order of CIT(A) and this issue of Revenue's appeal is dismissed. 29. The next issue in this appeal of the Revenue is against the order of CIT(A) deleting the addition of sales tax incentive availed under Package Scheme of Incentives of Government of Maharashtra as capital receipt by reducing the same for the purpose of computing of book profit u/s 115JB of the Act. For this, Revenue has raised following ground No.5:- "5. On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that ....
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....nts made to LIC in respect of contribution to superannuation fund for its employees at Unit Bhigwan, Pune as not recognized as per the provisions of Chapter IV of the Act. For this, assessee has raised following ground No.4:- "4. That the learned Commissioner of Income Tax (Appeals)-II, Nagpur has erred in disallowing payment Rs. 20,76,160/- made to the Life Insurance Corporation of India in respect of contribution to Superannuation Fund for its employees employed in one of the establishments situated at Unit Bhigwan, Pune not recognized as per provisions under Chapter IV(Part B) of the IT Act, 1961." 35. Brief facts are that the Assessing Officer noted from the profit & loss account that the assessee has made payment on account of contribution to another superannuation fund relating to erstwhile amalgamated company Built Graphic Papers Ltd. amalgamated with effect from assessment year 2003-04 is not eligible for deduction u/s 36(1)(iv) of the Act, because this particular fund is not recognized as per Rule 2 Part B of Schedule-6 of the Act. The CIT(A) also confirmed the action of the Assessing Officer. Aggrieved, now the assessee is in appeal before us. 36. At the ou....