AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 1541
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....rn: 1. The learned Commissioner (Appeals) erred in confirming the disallowance of interest amounting to Rs. 2,53,07,139 being estimated interest @ 15 percent on the following amounts advanced to the following parties: Sr. No. Parties Amount (Rs.) (a) Ibiza Industries Ltd 25,50,000 (b) Mafatlal S.A. Intex Ltd. 2,04,20,095 (c) Mafatlal V.K. Intex Ltd. 38,00,000 (d) Repal Apparel P. Ltd. 75,76,557 (e) Silvia Apparel Ltd. 80,00,000 (f) Sushmita Holdings Ltd. 4,75,02,610 (g) Mafatlal Engineering Industries Limited (MEIL) 3,91,15,000 (h) MEIL by Mafatlal Fine Spg. & Mfg.Co. Ltd. 2,77,50,000 Total 15,67,14,262 2. Without prejudice, the learned Commissioner (Appeals) ought to have appreciated that interest on advances to MEIL was to accrue only after all the dues of the financial institutions had been paid and that the question of comparing the interest paid with the interest receivable from MEIL did not arise in the present year. 3. The learned Commissioner (Appeals) ought to have appreciated that the advances to Ibiza Industries Ltd., Mafatlal S.A. Intex L....
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....following the precedent laid down by the Hon'ble Apex Court in S.A.Builders, reported in 288 ITR 1(SC). Therefore, this being identical issue, the same view may be taken as taken earlier by this Tribunal. 9. The Id. DR did not object to the plea put forth by the Id.AR. 10. After hearing both the parties and on perusal of the record, we find that the similar issue had come up before this Tribunal in assessee's own cases in the assessment years (supra) and the Tribunal has restored this issue to the file of AO for fresh adjudication. Accordingly, we set aside the order of Ld. CIT(A) on this issue and restore the same to the file of AO to decide the issue denovo. Ground No.1 is allowed for statistical purposes." 4. The learned D.R. also stated that the issue is exactly identical and matter can be remitted back in terms of the Tribunal's decision. 5. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the Tribunal consistently set aside the issue to follow the precedent laid down by Hon'ble Supreme Court in the case of S.A. Builders 288 ITR 1 (SC). On same reasoning, we set aside this issue to the fi....
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....directing the Assessing Officer to allow the capital expenditure on scientific research of Rs. 2,27890." 10. At the outset, the learned Counsel for the assessee stated that he has instructions from the assessee not to press this issue. The learned D.R. has not objected the same. Accordingly, these two issues are dismissed as not pressed. 11. The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in taxing interest on Government securities. For this, assessee has raised following Ground No.10: "Interest on securities 10. The learned Commissioner (Appeals) erred in confirming the action of the Assessing Officer in bringing to tax a sum of Rs. 15,840 as interest on Government Securities." 12. At the outset, the learned Counsel for the assessee stated that this issue is adjudicated in assessee's own case by Tribunal in earlier years and Tribunal in ITA No.4597/Mum/2015 for assessment year 2009-10 vide order dated 21.10.2015 has adjudicated the issue in para Nos.15 & 16 as under: " 15. The facts with regard to disallowance of interest on securities of Rs. 15,840/- are that the AO noticed that the asses....
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.... the assessee by following the decision of the Tribunal in the case of Jamshri Ranjitsinghji Spinning and Weaving s v. Inspecting Assistant Commissioner [1992] 41 1TD 142 (Mum), wherein it has held that the import entitlement receivable by the assessee do not constitute -the income of the assessee in the year under appeal as neither the income accrued nor arisen during the year of accounting. Following the said order of the Tribunal dated 16=04.2008 for the A.Y, 1997-98 in the assessee's own case, we direct the AO to exclude the import duty entitlement from the total income of the assessee for the year under appeal. Thus, Ground No.18 is allowed." 16. As the facts circumstances are exactly identical in this year, respectfully following the Tribunal's order in earlier years, we direct the AO to exclude the import duty entitlements from the total income of the assessee. This issue of the assessee's appeal is accordingly allowed. 17. The next issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance on Pooja expenses of Rs.2,30,445/-. For this, assessee has raised following ground Nos.12 & 13: "Pooja expenses 12. The ....
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....pellant's own case for the assessment years 1985-86 and 1986-87 had in fact deleted the disallowance in respect of payment to relatives of deceased employees." 21. As the facts circumstances are exactly identical in this year, respectfully following the Tribunal's order in earlier years, we direct the AO to allow the claim of payment made to relatives of deceased employees. This issue of the assessee's appeal is accordingly allowed. 22. The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in disallowing expenses relatable to exempt income. For this, assessee has raised following ground Nos.17 & 18: "Setting Off interest expenses against dividend income: 17. The learned Commissioner (Appeals) erred confirming the action of the Assessing Officer in estimating & disallowing expenses to the extent of Rs. 53,70,804 and setting off the same against dividend income. 18. The learned Commissioner (Appeals) ought to have appreciated that the learned Assessing Officer had not established any nexus and therefore the expenditure of Rs. 50,70,804 cannot be set off against the dividend income." 23. A....
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.... In the present case, the assessee neither before the AO nor the Ld.CIT(A) or the Tribunal produced any documents how the assessee is eligible for deduction of the expenditures incurred for earning dividend income. We find that the Id, CIT(A) restricted the claim to 50%, Therefore; we are of the considered opinion, that this facts requires details investigation and verification at the level of AO to determine the exact expenditure incurred by the Assessee, The AO is directed to follow the decision rendered by the Hon'ble High Court in Godrej & Boyce Mfg. Co. Ltd (supra). Resultantly, Grounds No. 25 and 26 are allowed for statistical purposes. 24. We find that the Tribunal in earlier years also remanded the matter back to the file of the AO with certain directions. Accordingly, we also direct the AO to decide the issue in terms of the directions of Tribunal in 1999-2000. Accordingly, this issue is remanded back to the file of the AO. 25. The next issue in this appeal of assessee is against the order of the CIT(A) confirming the action of the AO in not excluding the CFC grant received in pursuant to the Montreal Protocol for phasing out production of refrigerant gases....
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....ny would be able to make saving in its production cost. As the grant is given with the intention to reduce the revenue expenses of the company, it cannot be said to capital receipt. It is in the revenue in the nature. Therefore, it has to be offered to tax in the return of income. It may also be further noted that the Finance Act 2002 has excluded from the purview of taxation this kind of grant only with effect from the assessment year 2003-04 and subsequent assessment years. Hence, earlier this type of grant was always taxable. As the assessee has already offered for tax CFC grant of Rs.1748.89 lacs in the return of income, no further addition is required to be made on this account. On the other hand, the appellant submitted that later on since such grant were to be considered as capital receipt, on the same principle similar effect should be given this year also. The appellant's ground is not tenable as the amendment has come by the Finance Act 2002 i.e. with effect from A.Y. 2003-04. Therefore, the AO's action is upheld." Aggrieved, now assessee is in second appeal before Tribunal. 28. Before us, the learned Counsel for the assessee Shri....
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....5. Deed of Indemnity dated 25 August 2000 executed by Mafatlal Industries Limited in favour of the President of India acting through the Director (Ozone Cell), Ministry of Environments and Forests, Government of India with annexures." 29. On the other hand, the learned Sr. D.R. relied on assessment order and the order of CIT(A). 30. We have heard the rival contentions and gone through the facts and circumstances of the case. To adjudicate this issue, first of all we have to go through the copy of resolution of Board of Directors dated 7.6.2000 (which is enclosed in assessee's paper book at page No.166), whereby resolution is passed to execute Performance Agreement with the Government of India and the assessee in view of Government order No.11/7/99-OC dated 2.3.2000 issued by Government of India, Ministry of Environment & Forests, Ozone cell for implementation and adherence to quota system for CFC production and CFC phasing out obligations in India. In consequence to this, a Performance Agreement between assessee and the Government of India through Director (Ozone Cell), Ministry of Environment and Forests, Government of India was entered into on 25.8.2000, whereby obligation ....
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....m the Beneficiary, whichever is later." 32. Even the deed of indemnity dated 25.8.2000 was executed by assessee in favour of the President of India through the Director (Ozone Cell), Ministry of Environment and Forests, Government of India. In this case, the assessee acquired necessary equipment on lease in consequence to a agreement between assessee and British Gas Asia Pacific Holding Limited and assessee applied through Ministry of Environment and Forests for grant from Montreal Protocol Multilateral fund to meet the capital cost incurred in changeover from CCFC for phasing out of production of refrigerant gases. Before us revenue has relied on the decision of Hon'ble Madras High Court in the case of CIT Vs. Ramaniyam Homes Private Limited (2016) 68 Taxmann.com 289 (Madras) and according to revenue, the grant received by assessee is business receipt and for this the learned Sr. D.R. relied on para 39 of the judgement, which reads as under: "39. Therefore, it is not the actual receipt of money, but the receipt of a benefit or perquisite, which has a monetary value, whether such benefit or perquisite is convertible into money or not, which is what is covered by Section....
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....nverting the operations based on water which is considered as environmental friendly. The Coordinate bench of this Tribunal in the case of Bharat Seats Limited (supra) has considered this issue and considered the grant as Capital receipt. But Tribunal considered the same as capital cost of equipment and consequently capital receipt by observing that there no material on record to indicate that the grant sanctioning and disbursing authority had anywhere stated that the grant was to recoup any revenue expenditure. The purpose of the grant, without any debate or controversy, was to phase out ODS under the Montreal Protocol. The Government of India Office Memorandum stated that the assessee's project was examined and recommended by the Ministry of Environment and Forests, for approval of the Executive Committee. The Executive Committee approved the project to be implemented by the World Bank at cost of US $ 5,30,000. It was stated that the release of grant would be subject to terms and conditions as decided by the Government of India and in terms of the Montreal Protocol. The accounting or tax treatment of the capital cost of the equipment had nothing to do with the sanction of the gra....