TaxTMI 
TaxTMI 
2017 (1) TMI 1607
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....greed to this. The Tribunal while deciding the issue in favour of the assessee has observed and held as under : "5. Ground No.1 raised in respect of disallowance of Pooja/function of Rs. 11,31,515/-,We have seen that similar disallowance was made against the assessee in AY 1988-89 and AY 1989-90. The co-ordinate bench of this Tribunal while dealing with the similar issue in assessee‟s own case for AY 1988-89 held as under: "The fifth ground is regarding disallowance of Pooja Expenses of Rs. 61,984/-. According to the assessee, the issue is covered in its favour by the decision of the Tribunal in assessee‟s own case, in ITA No. 2690/M/1993 vide its order dated 20.12.2012 for assessment year 1989-90. We find that this issue is covered in favour of the assessee by the above decision of the Tribunal. In the assessment year 89-90, the Tribunal followed the temple inauguration expenses except disallowance of Rs. 3.00 lac out of lavish travelling expenses of Rs. 3.8 lacs on travelling and food. The present year expenditure seems to be normal day to day expenses on Pooja for running the temple in the vicinity of the plant. Accordingly, after considering the ri....
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....of the assessee vide para 6 of the order following the earlier years and was followed in the subsequent years. The relevant portion of the order, for the sake of convenience, is reproduced below : "6. Ground No.2 and 3, for our consideration are disallowance of consultancy charges of Rs. 11,10,000/- and service charges of Rs. 1,66,160/-,. The Ld AR of the assessee argued that similar disallowance in respect of consultancy fee was made against the assessee in AY-1990-91. And disallowances of service charges were made in AY 1992-93. However, on appeal the FAA/ CIT(A) allowed the same in favour of assessee , the Revenue filed appeal before ITAT and both the grounds were allowed in favour of assessee. We have seen that in AY-1990-91,the Revenue filed appeal before ITAT, Mumbai vide ITA No. 2291/M/1994, and while dealing with the similar Ground related with consultancy fee the Coordinate Bench passed the following order: "14.6 we have considered the rival submissions in the light of the facts and findings as stated above, the legal provisions and the judicial pronouncements on the subject, we are inclined to uphold the order of the CIT(A) on this Ground. The CIT(A) has....
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....olding that Employees Stock Option Expenses amounting to Rs. 7,73,665/- is a notional figure and a contingent liability" 8. We find that an identical issue had come up before the Tribunal in assessee‟s own case in ITA No.3359/Mum/2005 (AY-2000-01) and the co-ordinate Bench of the Tribunal has decided the issue in favour assessee vide order dated 21.10.2016, para 31 of the said order which is reproduced below: "31. The ground no.4 is related with the disallowance of ESOP Expenses of Rs. 2,44,57,408/-. We have seen that this ground of appeal is squarely covered in favour of assessee by the decision of Biocon Ltd. vs. DCIT(supra). The ld. DR for the Revenue has fairly conceded that the factual as well as legal position. Hence, this ground of appeal is allowed in favour of assessee." 9. Respectfully following the decision of the Tribunal in assessee‟s case (supra), we decide this issue in favour of the assessee. Accordingly, ground no.4 taken by the assessee stands allowed. 10. Grounds of appeal no.5 (a) and (b) are as under : 5(a) That on the facts and in the circumstances of the case, the CIT (A) was not justified in confirming the decision of t....
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.... ld counsel for the assessee submitted that assessee incurred expenses on dismantling the plant to replace the same with new plant in order to upgrade and enhance the capacity of the plant. The ld AR submitted that in the case of Sitapur Sugar Works Ltd (supra) was distinguishable on facts as in the said case the entire factory was shifted to another site however in the present case only a part of plant was dismantled with the object of installing new plant to upgrade and enhance the production capacity. The ld counsel argued that in the case of JCIT Vs ITC Ltd (2008)112ITD0057(Cal)SB, the hon‟ble bench distinguished the Sitapur Sugar Works Ltd(Supra) by holding that the expenses incurred for shifting plant and machinery from one location to another is revenue in nature whereas the expenses for shifting entire factory is capital in nature. In the Hardillia Chemical Ltd the issue was with respect to expenses incurred to get the plot vacated from unauthorized occupants which were held to be of capital nature. In the case of Seiakella Glass Works (supra) it was held that expenses incurred on periodical repairs and maintenance are of revenue nature. In defence of his arguments th....
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....improvement of existing business should be allowed as revenue expense. In DCIT Vs Escorts Tractors Ltd it has been held that expenditure on dismantling of existing floor and reflooring is of revenue nature. In view of facts as stated hereinabove and ratio in the decision relied upon by the assessee we are inclined to direct the AO to allow the expenditure as deduction u/s 37 of the Act. In result the ground raised by the assessee is allowed. 14. Grounds of appeal no.6 reads as under : 6 That on the facts and in the circumstances of the case, the CIT (A) was not justified in estimating Rs. 50,000/- as expenses incurred towards earning dividend income u/s 14A, when no such expenses were actually incurred by the appellant" 15. Facts of the issue in brief are that the assessee earned a dividend income of Rs. 3,17,06,725/- which was claimed as exempt income u/s 10(33) of the Act. The AO called upon the assessee to explain as to why proportionate disallowance should not be made for earning the dividend income by invoking the provisions of section 14A of the Act. In reply, the assessee contended before the AO that the dividend is earned on the investments made in the earlie....
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....the case, the CIT (A) was not justified in confirming the decision of the AO in assessing interest income of Rs. 9,25,71,358/-. And Truck hire charges of Rs. 75,02,298/- (net) as income under the head "income from other sources" That on the facts and in the circumstances of the case, and without prejudice to ground no.7(a) taken hereinabove, having held that the said income were to be assessed under the head "income from other sources", the ld. CIT(A) ought to have allowed the actual expenditure incurred to earn the aforesaid income" 20. The ld.AR at the time of hearing of this issue brought to our notice that an identical issue had been raised by the assessee in ITA No.2486/Mum/2005(AY-1999-2000) and the same has been decided by the Co-ordinate Bench of the Tribunal in favour of the assessee vide order dated 30.6.2016 following the earlier year‟s and was also followed in the subsequent years. The DR did not controvert the arguments of the ld AR. The Tribunal while deciding the issue in favour of the assessee has observed and held as under : "9. Ground No.6 for our consideration is Interest Income, Truck Hire Charges and Incentive on application money und....
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.... the course of business is assessable a business Income. He relied on the decision in the cases of Plast Ltd Vs CIT (237 ITR 454) (SC). CIT Vs Tirupati Woollen Mills Ltd. (193 ITR 252) (Cal) and Lakshmi Silk Mills Ltd 20 ITR 451(SC). 18. Ld. Counsel submitted that instead of considering Rs. 2,000/- on adhoc basis as expenditure incurred to earn the said income, the actual expenditure incurred to earn the aforesaid income is to be excluded 19. The Ld. Departmental Representative relied on the order of the Ld. CIT(A). 20. We have heard both the parties. In order to verify the nexus between the income from earning from moneys deployed out of unutilized funds and interest on borrowed funds, the AO has to verify when the moneys ere borrowed and even if the interest income and income from bill discounting are in the nature of other income and taken under the head "Income from Other Sources" the AO is directed to determine the nexus for the purpose of arriving at the net income. Secondly, the AO is directed to take the actual expenditure incurred for earning, the aforesaid income and exclude the same and tax the net income only." Keeping in view t....
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....enditure. AR of the assessee fairly conceded that this issue is covered against the assessee in special bench in case of ITAT, Mumbai titled as JCIT vs. Mukund Ltd. (2007) 106 ITD 231 (Mum)(SB).We have perused the order of AO and Ld. CIT(A) as discussed above and considered the submissions of Ld AR of the assessee, wherein he has fairly conceded that this issue is covered against the assessee as referred above, hence, keeping in view the order of ITAT Mumbai JCIT vs. Mukund Ltd. (2007) 106 ITD 231 (Mum)(SB), this ground of appeal is dismissed." 25. Since the Tribunal has decided similar issue against the assessee and we therefore respectfully following the earlier findings of the Tribunal, dismiss the appeal of the assessee on this ground. 26. Ground No.10(a) and (b) taken by the assessee are as under : "(a) That on the facts and in the circumstances of the case, the CIT (A) was not justified in confirming the disallowance of unutilized MODVAT credit s on last day of accounting year being 31st March, 2001 as adjustment under section 145A disregarding the fact that the appellant himself has already carried out necessary adjustment u/s 145A which was duly certified by ....
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....tock should also be made. AR of the assessee argued that unutilized balance of MODVAT credit is nothing but excise duty paid on inputs to be utilized on future dispatch of finished goods. The said credit is not related to the closing stock of raw-material and should not be added to the closing stock and relied upon 14 DTR 206 Mum, HawkinsCookers Ltd. vs. ITO, CIT vs. Godrej & Boyce Mfg. Co. Ltd. (2008) 2 DTR 36(Bom) , DCIT vs. Venus Wire Industries Ltd. (2006) 99 TTJ 561 (Mum) & DCIT vs. M/s Axis Electrical Components (I) (P) Ltd. (2011-TIOL-351-ITAT, Mum) and argued that the decision of Melmould Corporation vs. CIT 202 ITR 789 (Bom) is not applicable as soon as in the said case the Hon‟ble High Court has decided on theissue of change in method of valuing the stock and nowhere it has been unutilized MODVAT credit should be added is the value of closing stock of finished goods. In Hawkins Cookers Ltd. vs. ITO, it was held by the co-ordinate bench that addition on entire balance in MODVAT account is not proper because the nature of this account is personal account, and item of asset side of balance sheet always having a debit balance. Further, excise duty adjusted the closing s....
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....vour of the assessee by the decision of the Tribunal in assessee‟s own case (supra) following the decision in earlier years and this also following in subsequent years. For the sake of convenience we reproduce relevant findings of the Tribunal order as under: "12. Ground No. 9 for our consideration is non-allowance of exclusion of deduction u/s. 80HHC computed on profit of the business as per account prepared under Companies Act, in computing book profit u/s. 115JA of the Act. The assessee claimed exclusion of deduction u/s. 80HHE in computing book profit u/s. 115JA. The AO while making assessment followed the order of earlier years and denied the claim to the assessee. CIT(A) confirmed the order of AO on similar lines. AR of the assessee argued that for the year 1997-98 similar claim was denied by the revenue authorities but in the appeal before the ITAT for AY 1997-98 in ITA No. 1859/Mum/2004. The relief was granted to the assessee. The department preferred appeal but the same has not been admitted in the Hon‟ble High Court and thus the issue is squarely covered in favour of assessee, the assessee also relied upon the judgment of Hon‟ble Supreme Court i....
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....ns of section 115JB." 32 The ld.AR very fairly conceded across the bar that an identical issue had come up before this Tribunal in assessee‟s own case in ITA No.2486/Mum/2005(supra) and the coordinate bench has decided this issue against the assessee. 33. We find from the decision in the case of assessee in ITA No.2486/Mum/2005 (supra) vide para 13, the Tribunal has decided this issue against the assessee. Accordingly, we dismiss this ground of appeal. 34. Ground no.13 is in respect of charging of interest u/s 234C amounting to Rs. 11,85,264/-. 35. We have heard the rival submissions and perused the material placed before us. We find that the AO has calculated interest on the basis of assessed income rather than the returned income. Therefore, the AO is directed to calculate the interest u/s 234C on the basis of return of income and not assessed income. This ground is allowed for statistical purposes. 36. Ground of appeal no.14 taken by the assessee reads as under : "That on the facts and in the circumstances of the case, on disposal of this appeal, material adjustments would be required in computing total income, book profit, interest and tax and nece....
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....evenue was dismissed by the co-ordinate bench of the Tribunal vide its order dated 30.5.2016 and therefore prayed the Bench that the similar view be taken in this appeal also. The ld. AR also drew our attention to page 236 of the assessee‟s paper book at para 15 of the Tribunal order. The ld. DR did not controvert the submissions of the assessee. 39. After hearing both the parties and on perusal of the Tribunal order passed in ITA No.2653/Mum/2005 (supra), we find that the issue raised by the revenue in this appeal stands covered against the revenue and in favour of the assessee. For the sake of conveniences, we reproduce the observations and finding of the Tribunal order as under : "15. Ground No. 1 raised by Revenue is deletion of disallowance of community welfare expenses of Rs. 163,83,699/-.The ld. AR of the assessee argued that a similar disallowance was made against the assessee in AY 1988-89, AY 1989-90, AY 1990-91, 1991-92 & 1992-93 and the assessee carried the matter to ITAT and the same was allowed by the co-ordinate bench of ITAT, Mumbai and the appeal filed by the Revenue has not been admitted by the Hon‟ble High Court for the AY 1988-89 and for ....
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....atyanarayan Rice Mills Contractors Co. (supra) that what is to be seen is not whether it was compulsory for the assessee to make the payment or not but whether it was expended out of commercial expediency. The ld. Counsel of the assessee also argued that the Delhi High Court in the case of Delhi Cloth & General Mills Co. Ltd. (supra) even held that expenditure incurred for conducing directly related to the business of the assessee." "5.8 In view of the aforesaid findings the impugned expenditure is held to be allowable business expenditure u/s. 37(1) of the Act. At this juncture, it will not be out of place to mention that similar disallowances were also attempted by Revenue in other cases and Bombay Tribunal vide its order dated 09/02/1994 in ITA No.2696/B/1990 has deleted such disallowances and held that such Welfare Expenses have to be allowed as deduction u/s. 37(1) of the Income Tax Act, 1961. Our conclusion that the impugned expenses are allowable as deduction stands fortified by the aforesaid decision of Mumbai Tribunal. The appeal of the assessee, therefore, succeeds on this issue. The order of the CIT(A) is set aside on this issue and AO is directed to delete the ....
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....ribunal for the assessment year 89-90 in ITA No. 2690/M/93heldas under: "17.3 We have considered the rival submissions in the light of material placed before us. It is a fact that assessee‟s business had started during the preceding year and it had already started extracting limestone from the mines. The impugned expenses are to be incurred on year to year basis and cannot be said to be incurred prior to commencement of business. Since the business had already commenced, the same will not be covered by the provisions of section 35(1). Further, the said expenditure was incurred for extracting raw material and not for acquiring any asset of enduring benefit or advantage. In this context, we rely on the decision of apex court in the case of Empire Jute Co. Ltd. (supra) wherein it was held that if the advantage consists merely in facilitating the assessee‟s trading operation, the expenditure would be on revenue account. Respectfully, following the said decision and other decisions relied upon by the ld. Counsel, we hold that the said expenditure can in no way be treated as capital in nature. We, therefore confirm the order of CIT(A) who has held that the impugned e....
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....l and Natural Gas Corporation(supra) the Hon‟ble Apex Court has held as under: "Loss on account of fluctuation in the rate of foreign exchange as on the date of balance sheet in respect of loans taken for revenue purposes is allowable as expenditure u/s.37(1), notwithstanding the fact that liability has not been discharged in the year of fluctuation" Hence, keeping in view the order of Hon‟ble Apex Court (supra) this ground is squarely covered in favour of assessee. Hence, this ground of appeal raised by the Revenue is dismissed." Following the decision of the coordinate bench we are inclined to dismiss ground taken by the revenue. 48. Ground No.5 taken by the revenue is in respect of deletion of disallowance of expenses on powerline and marine structures amounting to Rs. 5,31,69,962/- and Rs. 7,37,523/-. 49. During the course of assessment proceedings, the AO observed that the assessee has claimed an amount of Rs. 5,31,69,962/- on powerline and an amount of Rs. 7,37,523/- on account of Marine Structures. The AO called for the explanation from the assessee to which the assessee replied that powerline does not belong to assessee and....
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....e law the ld AR prayed that the order passed by the ld.CIT(A) be confirmed. 52. We have heard the rival submissions and perused the material placed before us including the orders of authorities below and case relied upon by the ld.AR. We find that the issue raised by the revenue in this appeal stands covered in favour of the assessee and against the revenue by the decision of Hon‟ble Gujarat High Court in the case of Gujarat Mineral Devp.Corp.(supra); which is affirmed by the Hon‟ble Supreme Court and reported in (2001) 249 ITR 787. We find that the Hon‟ble Gujarat High Court has decided the issue vide para 14 of the order as under : "14. Applying the test laid down by the Supreme Court in Empire Jute Co.'s case [1980] 124 ITR 1 to the facts before us, it is clear that even if securing electric supply for a period of seven years and longer, if the agreement to supply is not terminated by the Electricity Board, is a benefit of an enduring nature, if the advantage consisted in facilitating the assessee's trading operations and enabled the assessee to conduct its business more efficiently and more profitably, then, the expenditure would still be o....
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.... 18,67,738/-. 55. During the course of assessment proceedings, the AO observed that the assessee has debited an amount of Rs. 18,67,378/- in the profit and loss account towards Gujarat Earthquake relief and claimed deduction u/s 37(1) of the Act on the ground that these expenses were incurred to cater socio-economic cause. The AO called for the explanation from the assessee as to how these expenditure was eligible for deduction u/s 37(1) of the Act. The assessee replied that during the major earthquake on 26.1.2001 so many people were affected and the assessee company provided relief and rehabilitation to the general public who was suffering from the natural calamity and the assessee-company incurred expenses. The assessee submitted that expenses of similar nature having socio-economic value incurred by it in earlier years under the head "Community Welfare Expenses" has been held as allowable business expenses by Mumbai Bench of the Tribunal in the assessee‟s own case for the assessment year 1989-90 and 1990-91 and the revenue did appeal before the higher forum. Hence these expenses are allowable expenses. The AO rejected the contention of the assessee and disallowed these....