TaxTMI 
TaxTMI 
2018 (8) TMI 1643
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....cumstances of the case, the order passed by the Learned Assistant Commissioner of Income Tax, Corporate Circle - 1(2), Bhubaneswar ('Ld. AO') u/s 147 read with section 143(3) of the Income-tax Act, 1961 ('Act') and upheld by Learned Commissioner of Income Tax (Appeals)-I, Bhubaneswar (here-in-after referred to as 'Ld. CIT(Appeals)') is contrary to the provisions of law and erroneous on the facts of the case and liable to be quashed. 2(a) That on the facts and in circumstances of the case, the proceedings initiated u/s 147 of the Act by the Ld. AO is erroneous, bad in law and liable to be quashed. 2(b) That on the facts and in circumstances of the case, the Ld. AO was not justified and erred in reopening the assessment based on mere change of opinion on same facts. 3(a) That on the facts and in the circumstances of the Ld. CIT (Appeals) grossly erred in confirming the disallowance of provision for diminution in value of GOI Fertiliser Bonds amounting to Rs. 56,33,75,052/- made by the Ld. AO ignoring the merits of the case. 3(b) That on the facts and in the circumstances of the case, the lower authorities have failed to appr....
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....7.04.2018. 7. Per contra, ld. DR supported the orders of lower authorities. 8. We have heard rival submissions and perused the material on record. We find that the disputed issue in respect of diminution in value of GOI Fertiliser Bonds as envisaged by the ld. AR of the assessee has been dealt by the coordinate bench of this Tribunal in assessee's own case for the assessment year 2009-2010 in ITA No. 560/CTK/2013, order dated 27.04.2018, wherein the Tribunal at para 19 to 21 at page 12 to 14 has observed as under:- "19. In respect to ground No.4, the AO in response to the questionnaire, called for the assessee to furnish a working of provision for Diminution of GOI Fertilizer Bonds of Rs. 46,86,09,535/- and why such provision should not be added back to the total income. The assessee submitted that since the bonds were issued against subsidy, which is in lieu of cash any diminution in the value of bonds is an allowable business expenses. The AO was not satisfied with the submissions of assessee and made the addition. On appeal, the CIT(A) has confirmed the action of AO. 20. Before us, ld.AR submitted that the assessee has to purchase the Government of India ....
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....in these circumstances of the case, the losses suffered by the assessee should be treated as Revenue loss and not a capital loss. We, further respectfully take cognizance of the judgment of the Hon'ble High Court of Delhi in the case of CIT vs. D.S. Bisht and Sons (supra), wherein it was held that when the assessee had no option but to subscribe the securities if it wanted to continue to do business with the Government Departments, then the investments were thus, necessarily by way of commercial expediency for the purpose of carrying on the business. The Hon'ble Delhi high Court affirming the above decision of the Tribunal in the case of DCM Shriram Consolidated Ltd. Vs. CIT, ITA No.939/2015, dated 14.12.2015, has held as under :- "4. The first issue that arises for consideration is whether the Assessee could have claimed loss for the diminution in value of fertilizer bonds against the sale of fertilizers. 5. The assessment order itself shows that in its books, the Assessee categorized the bonds under the head 'current investment assets'. In that view of the matter, the diminishing value of the bonds not being held as long term investment was in the n....
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....3/CTK/2018, wherein the Revenue has raised the following grounds :- 1. The order of the Ld. CIT(A) is erroneous on facts and in law. On the facts and the circumstances of the case and in law, Id. CIT(A) is not justified in deleting the addition of Rs. 2,84,34,453/-, which was made by the AO holding that the said amount of expenses incurred in running of a school, claimed by the assessee is not allowable u/s. 40A(9) of the I.T. Act. 2. On the facts and the circumstances of the case and in law, Id.CIT(A) is not justified in deleting the addition of Rs. 2,84,34,453/- incurred by the assessee in running of a school which is not incidental to the business of the assessee company. 3. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceedings. 15. Ld. DR submitted that the CIT(A) has erred in deleting the addition on account of school expenses and supported the order of AO. 16. On the other hand, ld. AR relied on the order of CIT(A) and the decision of the coordinate bench of this Tribunal for the assessment year 2010-2011 in ITA No.289/CTK/2014, order dated 04.08.2017. 17. We have h....
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....xpenses had been incurred for the staff welfare, the same is an allowable business expenditure. Section 40A(9) provides that "No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860 (21 of 1860), or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under clause (iv) 58a [or clause (iva)] or clause (v) of sub-section (1) of section 36, or as required by or under any other law for the time being in force." Since, payment to DAV school Management is neither falling under "Setting up" nor under "Formation of" nor under "as Contribution to" any fund /trust etc, the same is outside the purview of Sec 40 A (9) of the IT Act. Although the aforesaid fact was appreciated by the Ld. AO in the assessment order, but disallowed the expenses on a flimsy ground. Without considering the basic criteria laid down in the Sec 40 A (9) i.e. "towards the setting up or formation of, or as contribution to, any fund....
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....r disallowed the same u/s.40A(9) of the Act, which bars deduction of contribution made by an employer to any fund, trust, etc, for the benefit of employees. On appeal, the CIT(A) allowed the deduction by following the decision of the Delhi Benches of the Tribunal in the case of Modi Rubber Ltd vs IAC(IT Appeal Nos.6227 (Delhi) of 1986 and 142 (Del) of 1987 dated 29.1.1993. On further appeal, the Tribunal confirmed the order of the CIT(A). 24. Further, ld A.R. relied on the decision of Hon'ble Kerala High Court in the case of CIT vs N.Radhakrishnan, (2000) 243 ITR 284 (Ker) where the assessee a public sector undertaking engaged in the manufacture and sale of certain chemicals claimed in the assessment year 1985-86, deduction for payment of Rs. 5,34,406/- made to FACT school where children of its employees were studying by way of reimbursement of the school's proportionate expenditure on the ground that the same was allowable under section 40A(10) and section 37(1) of the Act as expenditure was incurred for welfare of the employees and for business purposes. However, the Assessing Officer disallowed the claim observing that the payment had no direct relation with the busines....