TaxTMI 
TaxTMI 
2017 (1) TMI 1607
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....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 rival submissions, facts of the issue as stated above, and Trib....
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....t 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 rightly held that the impugned expenses is not directly related to the creation of new capital assets and in the na....
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....e 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 the AO that dismantling expenses amounting to Rs. 1,52,84,680/- is a capital expenditure. 5(b) That on the facts and in the circumstances of the case and without prejudice to....
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....nt. 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 the ld AR relied on the decisions of Alembic Chemicals Works Co Ltd Vs CIT (1989) 177 ITR 377(SC), DCIT Vs Escorts Tractors Ltd (2004)(23) CCH 0036 (Delhi) and prayed before the bench that....
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....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 earlier years out of internal accruals and the assessee has not incurred any direct expenses like interest, collection charges for earning such dividend income and therefore the same has been rightly claim....
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....ources" 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 under the head "Income from other sources" and in alternative assessee raised ground for depreciation to be allowed on Truck. AR of the assessee has argued that assessee has treated income of Rs. 25,91,62,561/-, incentive on application mon....
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....ad 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 the above finding of co-ordinate bench on similar issues, we restore this ground of appeal to the file of AO, with the similar direction to AO to decide this issue in accordance with the order passed in ITA No. 942/Mum/2004 dated 27.10.2008." Respectfully following the above decision we set aside th....
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.... 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 Tax auditors and hence any further adjustment was not warranted. (b) That on the facts and in the circumstances of the case, and without prejudice to the ground no.1(a) taken herein above, even if adjustment u/s 145A in respect of unutilized MODVAT credit is carried out, deduction for the same is available to the appellant under provision....
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....TO, 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 stock is an eligible deduction u/s. 34B on payment basis. Further, CIT vs. Godrej & Boyce Mfg. Co. Ltd., it was held by jurisdictional High Court that MODVAT credit of excise duty is not includable in the value of closing stock. In DCIT vs. Venus Wire Industries Ltd., it was held that wherein assessee having account for both the purchase and closing stock, ....
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.... 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 in CIT vs. Bhari Information Technologies System (P) Ltd. (2011) 62 DTR 337(SC) wherein it was held that deduction u/s. 80HHE is to be worked out on the basis of adjusted book profit u/s. 115JA and not on the basis of profit computed under the regular provision of law is applicable the computation of profit and gain of business. We have considered the rival contention of the parties an....
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....sessee. 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 necessary direction may be given to the AO on this front" 37. The ground raised by the assessee is of general and consequential nature of the grounds of appeal taken by the assessee in this appeal. Therefore, no separate adjudication is called for. ITA NO.4374/Mum/2005 The various grounds raised by the revenue are as under:- "(1) "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting t....
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.... 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 AY 1989-90 and further SLP filed before the Hon‟ble Apex Court for AY 1988-89 as since we dismissed vide order dated 17.07.2009, however, the department has not filed appeal before the Hon‟ble High Court for AY 1990-91, AY 1991-92 and AY 1993-94. We have seen the order of ITA No. 3733/Mu/10096 for AY 1988-89, the co-ordinate bench of this Tribunal while dealing with identical ground has held as under: "The sixth ground is regarding disallowance of Rs. 93,220/- being village welfare expenses. Th....
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....s 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 impugned addition". Further, we have noticed that the similar grounds of appeal were allowed in favour of assessee for AY 1990-91 vide ITA No. 2419/Mum/1994, for AY 1991-92 vide ITA No. 4034/Mum/1996 and for AY 1992-93 vide ITA No. 4035/Mum/1996, for AY 1993-94 vide ITA No. 1577/Mum/1999 and for AY 1994-95 vide MA No.218/Mum/2006. Hence, keeping in view the principle of consistency and following the order of Co-ordinate Bench and Hon‟ble High Court of Bombay, this ground of appeal raised by the Revenue is dismissed. 40. In vie....
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.... 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 expenditure is revenue expenditure allowable u/s. 37(1). The assessing officer has not discussed the issue at all. The appeal of the revenue fails on this issue as well". In view of the above, quarry development expenses are treated as revenue expenditure and are allowed. The assessee succeeds on this ground". Hence, keeping in view the order of Co-ordinate Bench in assessee‟s own case and following the principle of consistency this ground of appeal raised by the Revenue is dismissed. 44. Respectfully following the decision of the Tribunal as mentioned above, we dismiss ground taken by the revenue. 45. Groun....
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.... 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 it belongs to State Electricity Board, hence the expenditure incurred for it is revenue expenditure and hence claimed as revenue expenditure. In support of this contention the assessee relied on the decision of the Hon‟ble Supreme Court in the case of Gujarat Mineral Development Corporation V/s CIT reported in 249 ITR 789 and also the decision of Tribunal in the case of Bajaj Auto Ltd V/s DCIT in ITA No.49/Mum/1991. The AO did not accept the contention of the assessee and opined that the expenditure incurred by the assessee towards powerline is nothing but some sort of capital expenditure and hence disallowed the claim of the assessee by adding back to the tot....
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....se [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 on revenue account and not on capital account. The peculiar feature in this case is that the amount was spent for securing electric supply for the Beneficiation Plant which was intended to enable the assessee-company to carry on its business more efficiently and more profitably. It was a business which was being previously carried on by the assessee-company, namely, of extracting fluorspar ore and selling it but in order to enable it to carry on that business more efficiently and more profitably, the Beneficiation Plant was proposed to be installed and the electric cables and supply lines were laid for that Beneficiation Plant as has been pointed out by the Tribunal in its order. Once the purpose of the Beneficiation Plant is properly understoo....
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....f 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 expenses and added back to the total income of the assessee. Aggrieved by the order of the AO, assessee appealed before ht ld. CIT(A). The ld. CIT(A) by a reasoned order accepted the claim and contention of the assessee and allowed the expenses as allowable expenses. Aggrieved by the order of the Ld. CIT(A), the revenue has preferred an appeal before us. 56. We have heard the rival contentions and perused the relevant material placed before us including the impugned order. The assessee has incurred expenses in providing relief to the victims of earthquake in Gujrat and claimed the same as revenue expenses on the ground that these expenses were incurred to meet the socio economic obligation towards the society in the hour of crisis.The ld FAA allowed....