TaxTMI 
TaxTMI 
2018 (10) TMI 1398
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....ly considering the factual and legal objections to the draft assessment order, is illegal and bad in law. 1.2. That the DRP erred on facts and in law in not interfering with the draft order passed by the Assessing Officer holding that since appeals have been field by the appellant and the Department on various issues, there is no warrant to interfere with the proposed additions/disallowances. 1.3. That the DRP erred on facts and in law in not directing the Assessing Officer to delete various additions/disallowance, which were squarely covered in favour of the appellant by the appellate orders for the earlier years. 2.0. That the Assessing Officer erred on facts of the case and in law in completing the impugned assessment at an income of Rs. 2071,38,86,572/- against income of Rs. 1262,60,79,909/-. 3.0. That the Assessing Officer erred on facts and in law in not allowing an aggregate claim of deduction of Rs. 78,01,08,417/- under section 43B of the Act. 3.1. That the Assessing Officer erred in making disallowance under section 43B of the Act following the assessment orders for the earlier assessment years despite admitting that in the earlier year(s) most of the issues....
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....tom duty (CVD) paid to be adjusted against excise duty payable on finished products. 3.10. That the Assessing Officer erred on facts and in law in not allowing deduction under section 43B of the Act for a sum of Rs. 7,13,58,922/- representing custom duty in respect of the goods in transit/under inspection. 3.11. That the Assessing Officer erred on facts and in law in not allowing deduction under section 43B of the Act for a sum of Rs. 2,20,97,979/- being Customs Duty paid under protest. 3.12. That the Assessing Officer erred on facts and in law in not allowing deduction u/s 43B of the Act for a sum of Rs. 1,06,72,866/- being Excise Duty paid under protest. 3.13. That the Assessing Officer erred in not following the binding decisions of the High Court and the Tribunal in the appellant's own case for the earlier assessment years, in gross violation of principles of judicial propriety. 4.0. That the Assessing Officer has erred in law, on facts and in the circumstances of the case in not allowing the claim of the assessee for withdrawal of add back of Rs. 69,50,54,572/- in the computation of taxable income, being the amounts disallowed in earlier years under Section ....
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....entical issue was decided in favour of the appellant both by the CIT(A) and the ITAT in appellant's own case for AY 2005- 06, following the decision of the apex Court in the case of CIT v Ponni Sugars and Chemicals Limited: 306 ITR 392 (SC). 6.3 That the Assessing Officer erred on facts and in law in not appreciating that since the object of subsidy was to promote industrial growth/ development, to generate employment, etc., the subsidy so received was in the nature of capital receipt not liable to tax under the provisions of the Act. 6.4. That the Assessing Officer erred on facts and in law in not appreciating that the fact that appellant is a cash rich company or that the appellant was granted subsidy under prestigious unit category or that the appellant could utilize the subsidy amount without any pre-restricted object, had no bearing on deciding the issue in question. 6.5. That the Assessing Officer erred on facts and in law in not considering the Memorandum dated 18.10.01 issued by the Prohibition, Excise and Taxation Commissioner, Haryana, which was the competent authority and part of High Powered Committee, certifying the aforesaid amount retained as per entitlement....
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.... on facts and in law in not appreciating that the appellant had suo-moto disallowed R&D cess paid on royalty to the extent of Rs. 52,84,893/- under section 43B , thereby resulting in a double disallowance to the extent of Rs. 52,84,893/-. 8.0. That the Assessing Officer has erred in law and on facts in disallowing deduction of Rs. 67,00,000/- representing the excise duty paid by the appellant during the relevant previous year. 8.1. That the Assessing Officer failed to appreciate that the said amount of Rs. 67,00,000/- constituted and represented excise duty actually paid by the appellant and is, therefore, allowable deduction under section 43 B of the Act. 8.2. That the Assessing Officer erred on facts and in law in leveling false and baseless allegations of the appellant having, inter alia, hidden true nature of payment of excise duty. 9.0 That the Assessing Officer has erred on facts and in law in making disallowance of Rs. 36,38,43,197/- being the expenditure provided on estimated basis on account of foreseen price increase (in short "FPI"), disregarding the consistent and accepted method followed by the appellant for last many years since inception. 9.1. That the....
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....3. Without prejudice to the aforesaid, the quantum of disallowance computed by the Assessing Officer is very high as compared to expenses that could, if at all, reasonably attributed towards sharing of expenses. 11.0 That the Assessing Officer erred on facts and in law in disallowing Rs. 7.67.00.000-. being the expenditure incurred on account of discharging corporate social responsibility}. without appreciating that such expenditure was incurred wholly and exclusively for the purposes of business. 11.1. That the assessing officer erred on facts and in law in holding that the expenditure incurred on corporate social responsibility is, even otherwise, capital in nature on the ground that the same resulted in enduring benefit to the appellant. 11.2. Without prejudice, the assessing officer erred on facts and in law in not allowing depreciation under section 32 of the Act, consistent with his finding that the aforesaid expenditure is capital in nature. 12.0. That the assessing officer has erred on facts and in law in disallowing a sum of Rs. 6,41,060/-, being expenditure incurred on account of club membership fees, following the assessment orders for the earlier years, alle....
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....f "transaction" between the taxpayer and the foreign AE for creating marketing intangibles on behalf of the later. 15.5. The DRP/TPO erred on facts and in law in holding that expenditure incurred by the appellant which incidentally resulted in brand building for the foreign AE, was a transaction of creating and improving marketing intangibles for and on behalf of its foreign AE and further that such a transaction was in the nature of provision of a service by the appellant to the AE. 15.6. That the assessing officer erred on facts and in law in not appreciating that the characterization of the appellant being that of a full fledged manufacturer and the sole beneficiary of the AMP expenditure incurred by it, justifies the conduct of the appellant in incurring and bearing the cost of AMP expenditure. 15.7. The DRP erred on facts and in law in not holding that expenditure on advertisement and brand promotion, unilaterally incurred by the appellant, could not be regarded as a 'transaction' in the absence of any proved understanding / arrangement between the appellant and the associated enterprise. 15.8. The DRP/TPO erred on facts and in law in not appreciating that the AMP ....
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....6. Without prejudice that the assessing officer erred on facts and in law in ignoring the fact that, since the appellant earns return commensurate with other brand owners, the appellant is adequately compensated for its functions and AMP expenses. 15.17. Without prejudice that the assessing officer erred on facts and in law, in not appreciating that the AMP expenses incurred by the appellant was appropriately established to be at arm's length applying Transactional Net Margin Method (TNMM). 15.18. The DRP/TPO erred on facts and in law in applying Bright Line Test ("BLT") for computing adjustment on account of expenditure on advertisement and brand promotion expenses, without appreciating that in absence of specific provision in the Transfer Pricing statutory provisions in India., adjustment on account of the arm's length price of the advertisement and brand promotion expenses could not be made. 15.19. The DRPTPO erred on facts and in law in not appreciating that such a Transfer Pricing adjustment cannot at all be made in law without determining the Arm's Length Price ("ALP") by applying one of the methods specified in section 92C of the Act. 15.20. The DRP/TPO erred....
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....3% Maruti Suzuki India Ltd. 20358.3 258.50 1.27% 15.28 That the assessing officer erred on facts and in law in not following the DRP direction to take the correct figures for turnover and AMP expenditure for Hindustan Motors. 16.0. That the assessing officer erred on facts and in law in making transfer pricing adjustment amounting to Rs. 311,73,59,562/- in relation to the international transaction of payment of royalty entered into by the appellant. 16.1. That the assessing officer erred on facts and in law, in not appreciating that the international transaction of payment of royalty entered into by the appellant was appropriately established to be at arm's length applying Transactional Net Margin Method (TNMM). 16.2. That the assessing officer erred on facts and in law in artificially splitting the single and inseverable license agreement entered into by the applicant into two separate agreements for use of technology and for use of brand name failing to appreciate that the License Agreement provided the appellant an exclusive right and license to manufacture and sell the licensed product for a specified duration in India and all others rights ve....
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....nd in law in holding, on the basis of conjectures and surmises that, the associated enterprises has charged separate royalty for the use of technology and for use of brand name in the proportion in which it incurs expenditure on R&D and Brand promotion. 16.10. Without prejudice, the assessing officer erred in considering the consolidated financials of the associated enterprise for the purpose of segregating the payment of royalty for the use of technology and for the use of brand name. 16.11 That the assessing officer erred on facts and in law in failing to appreciate stature of the associated enterprise and the brand recognition enjoyed by it globally. 16.12. That the assessing officer erred on facts and in law in ignoring the search for third party independent technology agreements conducted by the appellant. 16.13. Without prejudice, the assessing officer erred in failing to appreciate the permissible limits of RBI for the payment of the brand royalty i.e. 5% on domestic sales and 8% on exports for composite royalty (both brand and technology) and 1 % and 2% if only for brand resulting is a maximum 20-25% of royalty attribution towards brand as against the 46% comput....
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....ian market. It also exports vehicles to various countries in Europe, Asia, etc. MSIL has various models currently plying on Indian roads including Maruti 800, Omni, Esteem, Alto, Gypsy, Swift, Versa, Wagon R, SX4, Vitara, Zen Estilo, Swift DZire and Ertiga. MSIL undertakes sales promotion and customer education activities as well. Further, 315 Maruti True Value outlets were engaged in the sale, purchase and exchange of preowned cars. MSIL also operates in auto finance, auto insurance, corporate lease and fleet management and pre-owned cars, in addition to operating to over 50 driving schools. The following international transactions had been undertaken by the assessee during the F.Y. 2008-09: S. No. Description of the transactions Amount (In Rs.) Method 1 Purchase of components, consumables, spares etc. 12,110,450,295 TNMM 2 Purchase of CBUs 24,206,633 TNMM 3 Sale of vehicles, spares and components 4,427,693,972 TNMM 4 Purchase of capital items 3,571,719,761 TNMM 5 Payment of Royalty 6,776,868,613 TNMM 6 Payment of Technical Service Fee 654,248,018 TNMM 7 Other Expenditure 6,248,255 TNMM 8 Payment of Guaran....
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.... submitted that the Assessing Officer failed to appreciate that as per the mandate of Section 43B of the Act any amount of duty paid by the assessee is allowable as deduction on payment basis irrespective of the method of accounting followed by the assessee. Such duty can only be claimed in the year of payment and not in any other year(s). Accordingly, irrespective of the treatment given by the assessee to the various amount of duties paid during the year under consideration, the duties paid were allowable as deduction under section 43B of the Act. Therefore, the Ld. AR submitted that the aggregate amount of Rs. 78,01,08,417/- was allowable as deduction to the assessee under section 43B of the Act. The Ld. AR relied upon the following decisions:- * Berger Paints India Ltd. Vs. CIT(2004) 266 ITR 99 (S.C) * CIT v. Shri Ram Honda Power Equipment Corporation : 258 CTR 329 / 352 ITR 481 (SC) * CIT v. Modipon Ltd.: 400 ITR 1 (SC) * CIT v. Paharpur Cooling Towers Ltd.: CA No. 19769 of 2017 (SC) * Lakhanpal National v. ITO : 162 ITR 240 (Guj) * Bharat Petroleum Corporation Ltd: 252 ITR 43 (Bom) * CIT v. NCR Corporation India (P) Ltd.: 240 Taxman 598 (Kar.) * Chemicals and P....
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....1 on page 3 of its order for A.Y. 2006-07, the coordinate Bench of this Tribunal has, itself agreed that the amounts paid under PLA are nothing but excise duty paid as advance inasmuch as in Indian Molasses Co. (P.) Ltd. 37 ITR 66, the Hon'ble Supreme Court stated that "Spending" in the sense of "paying out or away" of money is the primary meaning of "expenditure and "Expenditure" is what is paid out or away and is gone irretrievably. Basing on this, he argued that the expenditure, which is deductible for income tax purposes is one which is towards a liability existing at the time, but putting aside of money which may become expenditure on the happening of an event is not an expenditure and on this analogy, he submitted that any advance payment of tax or duty cannot be considered as expenditure since it is neither irretrievably gone nor does it relate to any existing liability. In reply to the submission on behalf of the assessee that the issue was covered in the assessee's own case for the assessment years 1994- 95, 1995-96, 1996-97, 1999-00, 2000-01, 2002-03, 2004-05, 2005-06, 2006- 07 and 2007-08, the Ld. DR submits that these are continuous issues forming part of the as....
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....sues forming part of the assessment order for AY 2005-06 and 2006-07 also, and are at present pending adjudication before Hon'ble Delhi High Court is not a ground for us to deviate from the consistent view taken by this Tribunal in assessee's own case for the earlier years. 9. We have heard both the parties and perused the records. It is pertinent to note that the Hon'ble Delhi High Court in Assessee's own case for A.Y. 1994- 95 to 1996-97 held as under: "3. Issue involved in grounds No 3 to 3.0.2 relates to the allowability or disallowability of deduction of the statutory duties on payment basis under section 43B of the Income-tax Act, 1961 ('the Act). According to the Assessment order, the following are such statutory duties claimed by the assessee for deduction, but disallowed by the Assessing Officer: Item No. Item Particulars Amount (Rs.) 1(a) PLA Balance of Excise Duty on Vehicles 28,21,616 1(b) PLA Balance R&D Cess on Vehicles 23,02,815 1(c) PLA Balance Excise Duty on Spare parts 90,04,752 2 Customs Duty paid on import of components for Exports for purposes for which export had not been made by year end 42,961 3 Customs Duty paid on import of com....
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....ble as deduction under section 43B of the Act. 3.3. While placing reliance on the decisions reported in Berger Paints India Ltd. v. CIT (2004) 266 ITR 99 (SC), CIT v. Shri Ram Honda Power Equipment Corporation : 258 CTR 329 / 352 ITR 481 (SC), CIT v. Modipon Ltd.:334 ITR 106 (Del), Lakhanpal National Ltd. v. ITO : 162 ITR 240 (Guj), Bharat Petroleum Corporation Ltd.: 252 ITR 43 (Bom), CIT v. NCR Corporation India (P) Ltd. : 240 Taxman 598 (Kar.), Chemicals and Plastics India Ltd. v. CIT : 260 ITR 193 (Mad), CIT v. C.L. Gupta: 259 ITR513 (All.), CIT v. Raj and Sans Deep Ltd: 293 ITR 12 (P&H), Indian Communication Network 206 ITR 96 (ITAT - SB), DCIT v. Glaxo SmithKline Consumer Healthcare Ltd: 107 ITD 343 (SB) (Chd.), Hind Lamps Ltd. DCIT: ITA No. 283/D/92 (Agra), Euro RSCG Advertising (P) Ltd v. ACIT : 154 TTJ 389 (Mum), he submitted that the aggregate amount of Rs. 66,23,77,487 was allowable as deduction to the assessee under section 43B of the Act. Ld. AR further submitted that this issue is, in principle, also covered by the order of the Delhi High Court in assessee's own case for the assessment years 1994-95, 1995-96 and 1996- 97, reported in 255 CTR 140. 3.4. In the ligh....
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....the Tribunal has been confirmed by Hon'ble Delhi High Court for the assessment years 1994-95,1995-96 and 1996-97, reported in 255 CTR 140. The orders of the Delhi Tribunal have been affirmed by the Hon'ble Delhi High Court for the assessment years 1999-00 (ITA No.31/2005) and 2000-01 (ITA No.442/2005). 13. The Ld. DR relied upon the Assessment order. 14. We have heard both the parties and perused the records. It is pertinent to note that the Hon'ble Delhi High Court in Assessee's own case held as under: "15. In the present case, the assessee had no option, but to keep the account, in respect of each excisable U' product (evident from the mandate in Rule 173G that it "shall keep an account current"). The latter part of the main rule makes it clear beyond any doubt that the assessee has no choice in the obligation, and cannot remove the goods manufactured by it, unless sufficient amounts are kept in credit: "...and the assessee shall periodically made credit in such accountcurrent, by cash payment into the treasury, so as to keep the balances, in such account-current sufficient to cover the duly due on the goods intended to be removed at any time, and every such assessee s....
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....ading account in April, 1987, and before the actual delivery of the goods, the value of the goods and customs duty paid thereon was shown in the balance-sheet as document in hands, therefore, the deduction should be allowed in the assessment year 1988-89, is contrary to the prescription of law. Section 43B in clear terms provides that the deduction claimed by the assessee in respect of any sum paid by way of tax, duty, cess or fee, shall be allowed only in computing the income referred to in Section 28 of that previous year in which it was actually paid, irrespective of the previous year in which the liability was incurred for the payment of such sum as per the method of accounting regularly employed by the assessee. For the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant and is only to be taken into account. The year in which the assessee incurred the liability to pay such tax. duty, etc., has no relevance and cannot be linked with the matter of giving benefit of deduction under Section 43B of the Act. In this view of the matter, the appeal deserves to be allowed. 16. This court also n....
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....only when the claim of the exporter-assessee is sanctioned by the custom authorities; Duty drawback receivable is separately chargeable to tax as income of the assessee under section 28 of the Act. Receipt of duty drawback is altogether different from allowability of deduction in respect of which duty paid by the assessee on payment basis under section 43B of the Act. The Ld. AR further submitted that without prejudice to the aforesaid, in case the assessing officer's contention were to be accepted, then duty drawback income amounting to Rs. 15,93,11,093/- declared by the assessee himself, being the amount of duty drawback received in the instant year but which allegedly accrued in the previous year, as per the principle adopted by the assessing officer is not taxable in the year under consideration. The Ld. AR submitted that there is no justification for adopting two different and inconsistent methods while computing the income of the present year. The aforesaid sum was duly declared as the income of the immediately succeeding year on receipt, a method consistently adopted by the assessee company and accepted by the AO since inception. The Tribunal has decided the aforesaid issue ....
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....Credit in respect of the amount of central excise duty so paid on raw material and inputs purchased for manufacture of excisable goods. The said amount of duty paid to the supplier of raw material and inputs is regarded as amount of central excise duty actually paid by the assessee under the Excise Laws. Since the aforesaid amount of excise duty was actually paid by the assessee as part of purchase price of raw material and inputs, the same has been claimed as deduction under section 43 B of the Act. The Assessing Officer, however, disallowed the aforesaid amount following the assessment orders for the preceding years. 22. The Ld. AR submitted that the Special Bench of the Tribunal in the case of DCIT v Glaxo SmithKline Consumer Healthcare Ltd: 107 ITD 343/ 299 ITR (AT) 1 (Chd.) (SB), has held that, unutilized MODVAT credit is not an allowable deduction, since such credit does not amount to payment of duty. Therefore, the Ld. AR pointed out that, as a result of the order of the Tribunal, such deduction may be held as not allowable to the assessee in the instant year but would be allowable in the year when the same is adjusted against excise duty payable. The principle laid down is....
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.... be "under any law for the time being in force" (c) the payment of such sum should have been made by the Assessee; d) irrespective of the method of accounting regularly employed by the Assessee, deduction shall be allowed while computing the income tax for the previous year "in which sum is actually paid" by the Assessee; e) the expression 'any such sum payable' refers to a sum for which the Assessee "incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. 33. There are two kinds of payment envisaged by Section 43B of the Act. Tax payable could be in the form of excise duty on the raw material/inputs purchased by the manufacturer. The second kind of payment could be of excise duty that is payable by manufacturer on the final product at the time of clearance of such final products from the factory. 34. In Eicher Motors (supra), a challenge was raised to the validity of Rule 57F (4A) of the CE Rules under which credit which was lying unutilised as of 16th March 1995 with the manufacturers stood lapsed in the manner set out therein. The Supreme Court upheld the challenge by the manufacturers to th....
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....cept where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no corelation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. 19. It is, therefore, that in the case of Eicher Motors Ltd. vs. Union of India (1999) 2 SCC 361 this Court said that a credit under the MODVAT scheme was as good as tax paid." 37. Now turning to the treatment of the said payment of excise duty which has any MODVAT credit in the books of accounts, a reference may be made first to the AS-2 issued by the ICAI, para 7 of which reads as und....
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....One, to claim excise duty paid as explained, and the other, to claim it under MODVAT credit for utilization at a subsequent point in time. It is plain that the Assessee in the present case has not exercised the first option. 41.1. The Court now turns to the decision in Oswal Agro Mills (supra). The facts, in brief, in the above decision were that the Appellant therein was engaged in the manufacture and trade of products like de-oiled meals, industrial hard oil, edible oils etc. The Assessee entered into agreements with other entities for the purchase of imported palm stearin fatty acid ('imported material') from the said importers. In terms of the said agreement, the imported material was to be purchased by the Appellant at landed cost, i.e. CIF price, customs duty, clearing charges, etc. and 3% ofthe total cost. Under Clause 11 of the agreements, any liability arising after the sale of the imported material in respect of customs duty, excise duty, penalty, sales tax, etc. would be paid by the appellant and included in the landed cost of imported material. 41.2 At the time of actual import of material, the Customs Department demanded 100% of the applicable customs duty as add....
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.... the condition precedent for the Appellant to pay disputed amount would not be satisfied. The liability of the Appellant to pay the additional customs duty was contingent upon the importers being called upon to pay the same. Reference was made by this Court to the decision of the Supreme Court in Rotork Controls India P. Ltd. v. CIT [2009] 314 ITR 62 (SC) where three conditions were laid down while considering where a provision made for future claims against warrantees was allowable as a deduction. On the facts of the case, this Court held that subject liability was a contingent liability in respect thereof could not be allowed as a deduction for the AY in question. 41.6. Specific to Section 43B, the Court considered whether it was in fact an obligation of the Appellant therein to pay additional customs duty and whether such obligation could be considered to be a Court observed: "Although the Assessee is obliged to pay the additional customs duty as and when the importers are called upon to pay the same, nonetheless, it cannot be considered as a statutory liability because the same is not imposed on the Assessee by virtue of any statute. Customs duty is an incident of import ....
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....aforementioned unutilized MODVAT credit claimed as a deduction by the Assessee for the AY 1999-00, a further amount of Rs. 14,96,79,029 represents additional or countervailing duty which has been paid by the Assessee directly to the Customs Department on the import of raw materials, components and the inputs. This, according to the Assessee, is borne out by the RG-23 (Part-II) Register maintained by the Assessee and verified and audited from time to time by the excise authorities. It is asserted that the said amount "has actually been paid by the Appellant to the customs authorities (and not to the Appellant's suppliers)" and therefore, this amount should also be allowed under Section 43B of the Act. 44. The Court would only like to observe that it would be for the AO to give effect to the order pertaining to the aforementioned amounts paid by the Assessee to be made in respect of those goods already consumed as on 31st March 1999 and in respect of additional countervailing duty paid directly to the customs authorities. If indeed such payment has been made, the credit for the same would be allowable as a deduction under Section 43B of the Act. 45. However, it is also to be no....
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....Sec: 145 A of the Income-tax Act, 1961, the unutilized MODVAT credit ha: be included in the closing stock of raw material and work in progress, whereas the excise duty paid on unsold finished goods had to be include, m the inventory of finished goods." However, Section 145A of the Ac- 5 prospective and does not apply to the AY in question. 48. The Court is not inclined to permit the Assessee to raise the plea for more than one reason. In the first place, it is a plea taken for the first time in these proceedings. It appears to be an afterthought. Secondly, the ITAT has already accepted another alternate plea made before it by the Assessee by allowing deduction in respect of the unutilized MODVAT credit of the earlier AY, the Court is not inclined to disagree with the reasoning and conclusion of the ITAT. The assessee cannot be allowed to go back and forth on the above plea. There has to be consistency. Thirdly, balance sheet of the Assessee for AY 1999-00 shows that the turnover for the year was over Rs. 8,000 crores. The corresponding sum claimed as deduction representing the unutilized MODVAT credit is not very significant in comparison. 49. Consequently, Question (ii) is a....
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....Supreme Court in the case of Samtel Color Ltd wherein the Court dismissed the SLP in Civil Appeal No 6449/2012 filed by department against the order of Delhi High Court in 184 Taxman 120 and held that advance customs duty paid is allowable deduction u/s 43B of the Act. The Karnataka High Court in the case of CIT v. NCR Corporation India (P) Ltd. 240 Taxman 598, reiterated the principle laid down by the Apex Court in the case of Berger Paints (supra) and held that the entire amount of excise duty and customs duty paid by the assessee in a particular year are allowable as deduction irrespective of the fact that such duties are included in the value of closing stock. It was further held that provisions of Section 43B, while overriding all the other provisions of the Act, also override Section 145A and further that the provisions of section 145A does not in any manner dilute or nullify the effect of provisions of Section 43B of the Act. The Ld. AR further submitted that the issue stands covered in favour of the assessee by the order of the Tribunal in the assessee's own case for A.Y 1999-00, 2000-01, 2001-02, 2002-03, 2004-05 2005-06, 2006-07, 2007-08 and 2008-09 wherein the Tribunal h....
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....following the Assessment Orders for the preceding Assessment Years. 32. The Ld. AR submitted that the aforesaid issue is covered in favour of the assessee by the decision of the Supreme Court in Civil Appeal No. 6449/2012 dismissing the SLP filed by the department against the order of the Delhi High Court in the case of CIT vs. Samtel Color Ltd : 184 Taxman 120. The issue stands covered in favour of the assessee by the order of the Tribunal for the Assessment Years 1999-2000, 2000-01, 2002-03, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. 33. The Ld. DR relied upon the order of the Assessing Officer. 34. We have heard both the parties and perused the records. It is pertinent to note that in assessee's own case the Tribunal held this issue in favour of the assessee. The Tribunal held as under: "3.25 Insofar as the disallowance of deduction under Section 43B of the Act for a sum of Rs. 13,51,93,089/- representing custom duty (CVD) paid to be adjusted against excise duty payable on finished products, and a sum of Rs. 1,93,27,627/- representing custom duty in respect of the goods in transit/under inspection is concerned, the case of the assessee is that these amounts represent c....
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....r AY 2005-06, 2006-07 and 2007-08 also, and are at present pending adjudication before Hon'ble Delhi High Court. 3.27. Substantially this question had fallen for consideration before a coordinate Bench of this tribunal in assessee's own case for the AY 2006-07 and 2007-08 and by para Nos. 5.3 and 5.4 of its order for A.Y. 2006-07, a coordinate Bench of this Tribunal resolved the issue in the following manner, "5.3. Next item is customs duty (CVD) paid to be adjusted against excise duty payable on finished products amounting to Rs. 15,59,44,258/-, which is the amount of customs duties on goods in transit/under inspection. The assessee claimed deduction for the above amounts u/s 43B of the Act, which the AO denied. 5.4 We have heard the rival submissions and perused the relevant material on record. The Ld. AR contended that this issue has been decided in earlier years in the assessee's favour by the Tribunal. He further referred to the judgment of the Hon'ble Delhi High Court in CIT vs. Samtel Colour Ltd. (2009) 184 Taxman 120 (Del) in which it has been held that advance customs duty paid in the year in question is an admissible deduction u/s 43B. In our considered opinion, ....
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....ical purpose. 34. Ground No. 3.9 to 3.10 are partly allowed for statistical purpose. 35. Ground No. 3.11 to 3.12 is in respect of Custom Duty and Excise Duty both paid under protest. Custom duty paid under protest represented the duties paid as per the additional demand raised by the statutory authorities, i.e. the Excise Department and the Customs Department. Though the assessee has disputed such additional demand and paid the amount under protest, in view of the demand being in the nature of a statutory liability, the same represented accrued/ crystallized liability. As per the mandate of section 43B of the Act, the aforesaid additional excise duty and custom duty so actually paid under protest was claimed as deduction on payment basis which has been disallowed by the assessing officer. The Assessing Officer, following the orders for preceding assessment years, disallowed the said claim on the ground that since the assessee was contesting these liabilities and there was no finality regarding the liabilities and that the same were not debited to the P&L A/c. 36. The Ld. AR submitted that the Tribunal has held in assessee's own case that, since the duty has been paid, deduction....
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....ty alongwith the interest was paid on the basis of show cause notice issued by the service tax authorities, the same was allowable under section 43B in the year in which the payment was made irrespective of the fact that such demand was paid under protest and the matter was subjudice before the authorities. He further submitted that in similar circumstances the Honhle Delhi High Court in the case of CIT v. Dharampal Satyapal Sons (P.) Ltd.: 50 DTR 287, held that the amount paid by the assessee against excise duty demand raised by excise authorities was allowable deduction as it was statutory liability which was allowable on payment basis under section 43B of the Act, and also submitted that in assessee's own case for A.Y's 1999-00, 2000-01, 2001-02, 2002-03, 2005-06, 2006-07 and 2007-08, coordinate Benches of this Tribunal have held that, since the duty is paid, deduction claimed u/s 43B of the Act has to be allowed. 3.29. This aspect of disallowance of claim for deduction under section 43B of the Act for the amount of Customs Duty paid under protest has been one of the subject of matters in assessee's own case for the AY 2006-07 and 2007- 08 successively, and for the AY 2006-07....
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.... deduction would be allowed in preceding years on payment basis. 42. The Ld. AR submitted that the aforesaid total amount has not been allowed to the assessee on payment basis in the preceding assessment years and thus the assessee has prayed that it should be allowed a withdrawal of add back of the aforesaid amount. Not allowing withdrawal of add back has resulted in the claim not being allowed in any year. To the extent the assessee's claim under Section 43B of the Act are allowed in the earlier assessment years out of the said amount of Rs. 69,50,54,573/-, the same would certainly be liable to be added to the assessable income of the present year. Withdrawal of add back has also been allowed by ITAT in assessee case for AY 2000- 01, 2004-05, AY 2005-06, AY 2006-07 and AY 2008-09. Department Appeal in AY 2004-05 on this issue has not been admitted by Delhi High Court vide order dated 28- 01-2010. 43. The Ld. DR relied upon the order of TPO/AO. 44. We have heard both the parties and perused the records. It is pertinent to note that the Tribunal in Assessee's own case held as under: "Grounds No. 4 to 4.2 Not allowing withdrawal of add back u/s 43B: 4. Adverting to Ground No....
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....imed in the earlier year, which finally stands denied, should not be charged to tax. On being called upon to furnish the detail of such amount, it was stated that it, inter alia, includes a sum of Rs. 71,63,89,449, which is subject matter of ground no. 3.5, that we have discussed immediately hereinbefore. We note that apart from the sustenance of disallowance of Rs. 71.63 crore in the preceding year, there is no other disallowance u/s 43B which has been upheld by the Tribunal. It is overt that all other disallowances made by the AO u/s 43B have been deleted by the tribunal. The ld. AR could not furnish any detail of the remaining amount of Rs. 69.96 crore (Rs.141.59 crore minus Rs. 71.63 crore), allegedly finally disallowed u/s 43B of the Act by the tribunal in the preceding year. It is simple and plain that if the tribunal has allowed deduction for the amounts disallowed by the AO in the preceding year, then the same are rightly chargeable to tax in the current year. This ground is, therefore, dismissed, subject to our decision on ground no. 3.5 in granting deduction of Rs. 71,63,89,449, representing last year's unutilized Modvat credit which was claimed by the assessee as ded....
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....llowance made in the final assessment order is, in our respectful submission, without judicious appreciation of the facts and correct position of law, and is liable to be deleted for the reasons elaborated hereunder: a) Re: Assessing officer erred in applying Rule 8D in present case In terms of the provisions of section 14A of the Act, only expenditure incurred, having relation with earning of exempt income, is not an allowable deduction under the provisions of the Act. The phrase "expenditure incurred" used in the aforesaid section refers to actual expenditure, which has proximate nexus with exempt income, and not some imaginary or notional expenses, for the purposes of disallowance under that Section. In view thereof, the provisions of section 14A are applicable only if the assessing officer at the first place finds that the assessee has actually incurred expenses, which have proximate nexus with earning of exempt dividend income and not otherwise. In other words, the onus is on the assessing officer to find proximate nexus of expenses with earning of exempt income, before rejecting the claim of assessee and computing disallowance under section 14A of the Act. The provisions ....
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....e Statute to mitigate the calculation of disallowance; * assessee-company is paying huge interest on loans, which could have been reduced by not making such investments; * fact that assessee, suo motu, made disallowance goes to show that the assessee was conscious of the fact that it had incurred some expenditure for acquiring shares. b) Re: No disallowance was warranted under section 14A in present case The assessee, it will be appreciated, is an operating company engaged in manufacture of automobiles. The entire expenditure incurred was in relation to the manufacturing operations of the assessee and the assessing officer has failed to bring on record any evidence/ material to demonstrate that any part of such expenditure was relatable to the exempt income. c) Re: Disallowance out of interest expenditure Insofar as interest expenditure was concerned, interest paid by the assessee was on account of the following: Particulars Amount (Rs. Millions) (b) Interest on- advances from dealers 79 (b) Others including interest on export credit/overdraft 69 Total 148 On perusal of the aforesaid, it will kindly be noticed that the aforesaid expenditure actually related to the ma....
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....: 134 ITR 219 (Cal.) - approved by Supreme Court in the case of East India Pharmaceutical Works Ltd. v. CIT: 224 ITR 627 * Alkali & Chemical Corp. of India v. CIT: (1986) 161 ITR 820 (Cal.) * CIT v. Reliance Utilities and Power Ltd.: 313 ITR 340 (Bom.) * CIT vs. M/s. Ashok Commercial Enterprises: ITA No. No.2985 of 2009 (Bom) * Gujarat State Fertilizers and Chemicals Ltd : 358 ITR 323 (Guj) * Hero Honda Finlease Ltd vs. ACIT: ITA No. 3726 & 6102/Del/2012 (Del) The Gujarat High Court in the case of CIT v. UTI Bank Ltd: 215 Taxman 8 (Mag.) held that where there are sufficient interest free funds to meet tax free investments, they are presumed to be made from interest free funds and not loaned funds and no disallowance can be made under section 14A of the Act. The Supreme Court has dismissed the Revenue's SLP in Civil Appeal No. 468/2014 against the aforesaid decision. In the case of mixed funds, the option is with the assessee to appropriate fund and expenditure in a manner most favourable to the assessee. While following the ratio emanating from the aforesaid decisions, it has been held in the following cases, that interest expenditure cannot be disallowed under section 1....
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....ministrative expenditure following an objective method of computation. d) Re: Incorrect computation of disallowance under section 14A Without prejudice, the Ld. AR submitted that, the disallowance computed under section 14A of the Act is incorrect since while computing disallowance as per Rule 8D, entire investments have been considered, without excluding investments not resulting in any exempt income during the year under consideration. e) Re- Investments not resulting in exempt income to be excluded In the following decisions, it has consistently been held disallowance under section 14A of the Act is only to be made only if there is exempt income and not otherwise: Cheminvest Ltd. v. CIT : 379 ITR 33 (Del.) * PCIT v. IL & FS Energy Development Company Ltd. : 297 CTR 452 (Del.) * CIT v. Holcim India (P) Ltd.: 272 CTR 282 (Del.)"' * CIT v. Corrtech Energy Pvt. Ltd.: 372 ITR 97 (Guj.) * CIT v. Winsome Textile Industries Ltd.: 319 ITR 204 (P&H) * CIT v. M/s Lakhani Marketing: 272 CTR 265 (P&H) * CIT v. M/s. Shivam Motors (P) Ltd.: 272 CTR 277 (All) * Redington (India) Ltd vs. ACIT: 392 ITR 633 (Mad.) * SInterglobe Enterprises v. DCIT: ITA No.1362 & 1032/....
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....lish proximate nexus of expenses with earning of exempt income and that no disallowance of interest was called for under section 14A of the Act. In the aforesaid circumstances, the assessing officer erred in disallowing Rs. 8,35,98,603/- in the assessment order and the same, therefore, calls for being deleted. Alternatively, the assessing officer may be directed to re-compute the disallowance under section 14A of the Act. 48. The Ld. DR relied upon the Assessment Order. 49. We have heard both the parties and perused the records. It is pertinent to note that though the Hon'ble Delhi High Court in Assessee's own case held that there was no question of disallowance of any amount on account of interest under Section 14A of the Act, but the Tribunal in assessee's own case for A.Y. 2008-09 held as under: "Ground No 6.0 to 6.4 disallowance of Rs. 7,43,27,349/- under section 14A of the Act 6. Adverting to the aspect of disallowance u/s 14A of the Act, we find from the record and contentions of the parties that, during the year under consideration, the appellant earned dividend income of Rs. 166,83,50,967/-, which was claimed as exempt from tax under sections 10(34) and 10(35) of the....
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....s is on the assessing officer to find proximate nexus of expenses with earning of exempt income, before rejecting the claim of assessee and computing disallowance under section 14A of the Act, and the provisions of sub-section (2) and (3) to section 14A, which empowers the assessing officer to compute disallowance as per provisions of Rule 8D of the Rules, w.e.f. assessment year 2008-09, also provides that disallowance as per provisions of Rule 8D can be computed, only if the assessing officer, having regard to the accounts of assessee is not satisfied with the claim of assessee that no expenditure in relation to exempt income has been incurred by assessee. In other words, even from assessment year 2008-09 and onwards, the assessing officer can compute disallowance under section 14A as per the provisions of Rule 8D, only if assessing officer, having regard to accounts of assessee, reaches a finding, that assessee has incurred expenses, having proximate nexus with earning of exempt dividend income. According to the Ld. AR in the absence of such finding, as is held in CIT vs. Walfort Share & Stock Brokers: 326 ITR 1 (SC), Godrej & Boyce Mfg. Co. Ltd. v. DCIT : 394 ITR 449 (SC) - affi....
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....erest and/or administrative expenditure was incurred in relation to exempt income. 6.5. Further the assessing officer, in the assessment order, has not pointed out even a single expenditure being incurred by the appellant during the year, having relation/ proximate nexus with exempt dividend income earned during the year. The assessing officer, it is submitted, invoked the provisions of section 14A read with Rule 8D of the Rules in a mechanical manner, which, it is respectfully submitted is beyond jurisdiction. 6.6. For the principle that disallowance under section 14A of the Act cannot be sustain without any satisfaction being recorded by the assessing officer before applying Rule 8D of the Rules, reliance is placed on the decisions reported in Pr.CIT vs. U.K. Paints (India) (P.) Ltd.: 244 Taxman 309 (Del.), Joint Investments P. Ltd. v. CIT: 275 CTR 471 (Del.), Minda Investments Ltd. vs. DCIT: 138 TTJ 240 ( Del.) , ACIT vs. MMTC Limited: ITA No. 724/Del/2014 (Del. Trib.), REI Agro Ltd vs. DCIT: 144 ITD 141 (Revenue appeal dismissed by Calcutta High Court in appeal No. GA No.3581 of 2013)., CIT v. Abhishek Industries Ltd - 231 Taxman 85 (P&H), 6.7. Second contention raised on....
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....: 215 Taxman 8 (Mag.) held that where there are ITA No.-6021/Del/2012 sufficient interest free funds to meet tax free investments, they are presumed to be made from interest free funds and not loaned funds and no disallowance can be made under section 14A of the Act, and the Hon'ble Apex Court has dismissed the revenue's SLP in Civil Appeal No. 468/2014 against the aforesaid decision. 6.10. He contended that in the case of mixed funds, the option is with the assessee to appropriate fund and expenditure in a manner most favorable to the assessee, and by placing reliance on Godrej & Boyce Mfg. Co. Ltd. v. DCIT : 394 ITR 449 (SC), HDFC Bank Ltd v. DCIT: 366 ITR 505 (Bom), HDFC Bank Ltd v. DCIT: 383 ITR 529 (Bom), CIT v. K. Raheja Corporation Pvt. Ltd: ITA No.1260 of 2009 (Bom.), Bright enterprises Pvt Ltd. v. CIT: 381 ITR 107 (P&H), CIT v. Max India Ltd: 388 ITR 81 (P&H), Gurdas Garg v. CIT: ITA No.413 of 2014 (P&H), CIT v. Microlabs Ltd. : 383 ITR 490 (Kar.), Lubi Submersibles Ltd.: ITA No.868 of 2010 (Guj.), CIT v. Gujarat Power Corporation Ltd.: 352 ITR 583 (Guj), Gujarat State Fertilizers and Chemicals Ltd: Tax Appeal No. 82 of 2013 (Guj HC), CIT v. Torrent Power Ltd.: ....
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....rayed that, the assessing officer may be directed to recompute disallowance under that section after reducing the strategic longterm trade investments. 6.13. For the principle that disallowance under section 14A of the Act is only to be made only if there is exempt income and not otherwise, support is derived from the decisions in ACB India Ltd. v. ACIT: 374 ITA No.- 6021/Del/2012 ITR 108 (Del.), Cheminvest Ltd. v. CIT : 379 ITR 33 (Del.), CIT v. Holcim India (P) Ltd.: 272 CTR 282 (Del.), ACIT v. Vireet Investments (P.) Ltd: 165 ITD 27 (Del SB), CIT v. Corrtech Energy Pvt. Ltd.: 372 ITR 97 (Guj.), CIT v. Winsome Textile Industries Ltd.: 319 ITR 204 (P&H), CIT v. M/s Lakhani Marketing: 272 CTR 265 (P&H) , CIT v. M/s. Shivam Motors (P) Ltd.: 272 CTR 277 (All), Interglobe Enterprises v. DCIT: ITA No.1362 & 1032/Del./2013 (Del. Trib.) - affirmed by Delhi High Court in ITA No.456 of 2016, REI Agro Ltd vs. DCIT: 144 ITD 141 (Kol. Trib.) - Department appeal dismissed in CIT v. REI Agro Ltd. : I.T.A.T No.220 of 2013 (Cal. HC), DCIT v. Morgan Stanley India Securities Pvt. Ltd. : ITA No. 114/Mum/2013 (Mum.), ACIT v. M. Baskaran: 152 ITD 844 (Chn. Trib.), and it is submitted that the asses....
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....dverting to the arguments of the Ld. AR on the aspects of interest expenses relevant under Rule 8(ii) of the Rules and the reckoning of the investment amount relevant for 8D(iii), on a consideration of the same in the light of the principles of law laid down by the Court, as stated supra, we agree with the submissions made on behalf of the assessee that insofar as the interest expense under Rule 8D(ii) is concerned, it has to be determined after examination of the macro fund/ cash flow position during the year and if the assessee had sufficient surplus funds available, presumption should be drawn in favour of the assessee that surplus funds have been utilized for making investments, and while ITA No.-6021/Del/2012 calculating the disallowance under Rule 8D(iii) has to be calculated in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income after reducing the strategic longterm trade investments. We, therefore, deem it just and proper to set aside the impugned order on this score and send the matter to the file of AO for m....
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....ustry to move strongly to the front ranks of global competition. Accordingly, sales tax concessions were to be provided to new units and also industrial units undergoing expansion/ diversification. Pursuant to the aforesaid Policy, Chapter IV-C was inserted in July, 2000 in the Haryana General Sales Tax Rules' 1975, containing Rule 28C dealing with "Tax Concessions , Class of Industries, Period and Other Conditions". In the aforesaid background, the assessee had undertaken industrial expansion in terms of the Rule 28C of Haryana General Sales Tax Rules, 1975. The High Powered Committee, thereafter, in its meeting held on 14.06.2001, granted sales tax concession to the assessee, whereby the assessee company was required to pay 50% of the sales tax collected on sales of finished products from expanded unit and, retain balance 50% of the tax so collected, subject to maximum permissible benefit of Rs. 564.35 crores. The letter/ communication received from Director of Industries, Haryana intimating the aforesaid decision, clearly referred to concession being granted "only in respect of vehicles rolled out of production capacity of 70,000 vehicles added as a result of first expansion". P....
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.... the Supreme Court in the case of Sahney Steel and Press Works Ltd. and Others vs. CIT: 228 ITR 253 wherein the Court held that the character of a subsidy in the hands of the recipient, whether revenue or capital, is to be determined having regard to the purpose for which the subsidy is given. The Hon'ble Supreme Court of India in Sahney Steel & Press Works Ltd.'s case (supra) and Ponni Sugars & Chemicals Ltd.'s case (supra). The Ld. AR relied upon the decision of the jurisdictional High Court in the case of CIT vs. Johnson Matthey India Pvt. Ltd. : ITA No. 193/2015 wherein the Hon'ble Delhi High Court, on exactly similar facts decided the aforesaid issue in favour of the assessee by holding that the sales tax subsidy received by the assessee pursuant to Haryana Government's Scheme given for promoting the local industry was in the nature of a capital receipt, not liable to tax under the provisions of the Act. In that case, the assessee was a manufacturer of catalysts for auto industries and was awarded an entitlement certificate under Rule 28C of the Haryana General Sales Tax Rules, 1975 which entitled the assessee to a 50% sales tax concession for a period of ten years. The sales ....
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....before the Tribunal. It was argued that their lordship of Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd. (supra) have again reiterated that the purpose for which the subsidy is given is only relevant for determining its nature. The purpose of subsidy was to promote industrial development in the State by promoting an establishment of new industrial unit or substantial expansion of existing industrial units. Almost similar are the facts in the present case before us as well as similar are the industrial policy 1999 issued by the department of industries, Govt. of Haryana and the relevant rule 28C of General Sales Tax Rules, 1975 as applicable in the case of present assessee, whereby the assessee was required to pay 50% of the tax collected and retain 50% subject to other conditions. Similarly in the case of present assessee was issued entitlement certificate under Rule 28C of the Haryana Sales Tax Rule 1975 to avail the sales tax concession during the period. The Hon'ble Supreme Court in the case of Ponni Sugar & Chemicals Ltd has laid down some principles after elaborately discussing its earlier judgment in the case of M/s. Sahney "Steel & Press Works (....
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....ame effect: * CIT v. Chaphalkar Brothers Pune : 400 ITR 279 (SC) * Sunbeam Auto Pvt. Ltd. v. PCIT : 402 ITR 309 (Del.) * Bougainvillea Multiplex Entertainment Centre (P.) Ltd.: 373 ITR 14 (Del) * CIT vs. Siya Ram Garg (HUF): 237 CTR 21 (P&H) * CIT vs. Talbros Engineering Ltd.: 386 ITR 154 (P&H) * CIT vs Rasoi Ltd.: 335 ITR 438 (Cal.) * DCIT vs. Inox Leisure Ltd.: 351 ITR 314 (Guj) * Garden Silk Mills Ltd. v. CIT and Anr. : 394 ITR 192 (Guj.) * CIT vs. Birla VXL Ltd.: 215 Taxman 117 (Guj.) * DCIT vs. Munjal Auto Industries Ltd.: 218 Taxman 135 (Guj.) * CIT vs. Samta Chavigarh: ITA No. 144 of 2007 (Raj)/ 222 Taxman 205 (Mag.) * Shiv Shakti Flour Mills (P) Ltd. v. CIT: ITA No. 6 of 2014 (Gau) * Honda Siel Cars India Ltd in ITA No.5577/ Del/ 2004 (Del.) * ACIT vs. Shree Cement Ltd. : ITA No. 614, 615 and 635/JP/2010 (JP) * DCIT vs. M/s Teesta Agro Industries Ltd. ITA No. 1237, 1053, 1753/Kol/2010 Associated Cement Co. Ltd. vs. Addl. CIT : ITA No. 6289 & 6320 /Mum/2003 * Everest Industries Ltd vs. ACIT: ITA No.814/Mum/2007 * Zenith Fiber Ltd vs. ITO: 2009 TIOL 468 (Mum) * Sterlite Optical Technologies Ltd. in ITA No.7136/Mum/04 * Indo Rama Industr....
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....rt in the case of Bhushan Steels and Strips Ltd. has been stayed by the Hon'ble Supreme Court vide order dated 20.11.2017 in SLP (C) No.30728-30732/2017. Further, the order of the Tribunal for AY 2005- 06 has recently been affirmed by the Delhi High Court vide order dated 7.12.2017 in ITA No.171/2012, wherein the High Court has, relying upon the decision in the case of Johnson Matthey (supra) held that sales tax exemption received under the Haryana General Sales Tax Rules, 1975 is to be treated as capital receipt. Similarly, order of the Tribunal for assessment year 2006-07 has also been affirmed by the Delhi High Court in ITA No.381/2016. Therefore, the Ld. AR submitted that the assessing officer erred in not excluding the amount of subsidy while computing the taxable income of the assessee. Such action is contrary to the facts of the case and position in law and the same, therefore, calls for being reversed. 53. The Ld. DR relied upon the Assessment Order. 54. We have heard both the parties and perused all the relevant records. The Tribunal in assessee's own case for A.Y. 2008-09 held as under: "11. Grounds No 11 to 11.5 relate to the Sales Tax Subsidy claimed as capital ....
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.... DCIT vs. Munjal Auto Industries Ltd.: 218 Taxman 135 (Guj.), DCIT vs. Reliance Industries Limited: 88 ITD 273 (Mum SB.). 11.2. He drew support from the decision of the jurisdictional High Court in the case of CIT v. Bougainvillea Multiplex Entertainment Centre (P.) Ltd.: 373 ITR 14. Ld. AR further submitted that a coordinate Bench of Delhi Bench of the Tribunal considered all relevant facts and decided the issue in favour of the assessee in assessee's own cases in ITA No.1927/Del/2010 (AY 2005-06), ITA No.5120/Del/2010 (AY 2006-07), ITA No.5720/Del/2011 (AY 2007-08) and the decision in ITA No.1927/Del/2010 for assessment year 2005-06 was followed by the Delhi Bench of the Tribunal in the case of Johnson Matthey India (P) Ltd.v. Addl. CIT in ITA No.952/Del/2011, wherein the Tribunal, in the context of the aforesaid sales tax incentive in the State of Haryana, held the incentive to be capital receipt, not liable to tax, most importantly the Hon'ble Delhi High Court affirmed the said decision in the case titled as CIT vs. Johnson Matthey India Pvt. Ltd. in ITA No. 193/2015. 11.3. Basing on this set of facts and law, Ld. AR submitted that the issue of taxability of Sales Tax Sub....
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....lex Entertainment Centre Pvt. Ltd. 373 ITR 14(Del) and Johnson Matthey India Pvt. Ltd., ITANo. 192/2015(Del) are misplaced. Ld. DR emphasizes that the Hon'ble Delhi High Court's decision in the case of M/s Bhushan Steel and Stripes Ltd. dt. 13.7.2017 being the recent decision after consideration of all the case laws, wherein the wisdom of the Delhi High Court has reached, in the processes of advancement of jurisprudence, as to treat the sales tax subsidy as revenue receipt, has to be preferred to other earlier decisions. This is being recent, speaking and the well reasoned order needs to be followed by the Hon'ble Bench, ITAT which falls under the jurisdiction of the Hon'ble Delhi High Court. 11.6. On this premise, Ld. DR, therefore, prayed to consider the recent decision of the Hon'ble Delhi High Court reached in the case of Bhushan Steel & Stripes Ltd. for considering the sales tax subsidy as the revenue receipt without considering the decision as per incuriam which is a subject matter of Hon'ble supreme Court. 11.7. In reply, Ld. AR submitted that in the case of the Bhushan Steel & Strips Limited the Hon'ble Delhi High Court considered the case of sales-tax subsidy receive....
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.... any condition towards capital utilization meant that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialization of the state, ensuring greater employment. Clearly, the subsidy was revenue in nature." 11.9. Basing on the above observations, he submitted that the Hon'ble Court gave much emphasis to the fact that the UP Industrial Policy specifically provided for capital subsidies, and considering the fact that the in that case assessee was not granted capital subsidy, as specifically contained in the said Policy, the Court concluded that the subsidy received was not in the nature of a capital subsidy but only a revenue subsidy; whereas, according to the Ld. AR, unlike in the UP Industrial Policy, there is no specific provision in the Haryana Industrial Policy for capital subsidy and hence, the decision in the case of Bhushan is not applicable. As regards observations of the Hon'ble Court regarding no strings being attached to the incentives, Ld. AR submitted that such observations have to be read in the aforesaid context/ discussion wherein the Court held that the case of Bhushan was not falling in capital subsidy....
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....988 SC 1531 (SC), R. Thiruvirkolam v. Presiding Officer and Another : 1 SCC 9 (SC), State of Assam v. RipaSarma : 3 SCC 63 (SC), Punjab Development and Reclamation Corporation Limited vs. Presiding Officer, Labour Court : 1990 : 3SCC 682 (SC), CIT v. Thana Electricity Supply Ltd.: 206 ITR 727 (Bom.), CIT v. Cascade Holdings (P) Ltd.: 365 ITR 84 (Bom.), Ld. AR submitted that even if there is a conflict between the judgements of jurisdictional High Court, viz., Bougainvillea Multiplex Entertainment Centre (supra) and Johnson Matthey (supra) on the one hand, and Bhushan Steels (supra) on the other, the judgment rendered in case of Johnson Matthey (supra) has to be preferred because the decision in the case of Bhushan Steel (supra) was rendered without considering the earlier decisions rendered by the bench of co-equal strength in case of Johnson Matthey (supra) and Bougainvillea Multiplex Entertainment Centre (P.) Ltd. (supra). Saying so, he submitted that the contention of the Ld. DR that in the processes of advancement of jurisprudence, the Hon'ble High Court has evolved the law to treat the sales tax subsidy as revenue receipt cannot be accepted. 11.14. Lastly, Ld. AR contended ....
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....nt capital (excluding working capital) not exceeding Rs. 5 crores. The incentives were to be allowed for a period of five years from the date of commencement of production. Concession is also available for subsequent expansion of 50 per cent and above of existing capacities provided in each case, the expansion was located in a city or town or panchayat area other than that in which the existing unit is located. The incentives were, refund of sales-tax on raw materials, machinery and finished goods, levied by the State Government subject to a maximum of 10 per cent of the equity capital paid up in the case of public limited companies and the actual capital in the case of others; subsidy on power consumed for production to the extent of 10 per cent in the case of medium and large scale industries etc; exemption from payment of water rate Liability on account of assessment of land revenue or taxes on land used for establishment of any industry, shall be limited to the amount of such taxes payable immediately before the land is so used. 11.17. In Sahney Steel's case, it was contended on behalf of the assessee that the subsidy given was up to 10 per cent of the capital investment cal....
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.... being provided to the industries during the early days to enable them to come to a competitive level with other established industries. In such circumstances, the Hon'ble Court held that the payments were nothing but supplementary trade receipts, though the assessee could not use this money for distribution as dividend to its shareholders, but, the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the money for a particular purpose, as such, by no stretch of imagination can the subsidies whether by way of refund of sales-tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. If any subsidy is given, the character of the subsidy in the hands of the recipient-whether revenue or capital-will have to be determined by having regard to the purpose for which the subsidy is given. If it is given by way of assistance to the assessee in carrying on of his trade or business, it has to be treated as trading receipt. The sales-tax upon collection forms part of the public funds of the State. In this sense it was held that the source of the fund is quite immaterial. If the pu....
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....nificant fact that under the scheme framed by the Government, no subsidy was given until the time production was actually commenced, mere setting up of the industry did not qualify an industrialist for getting any subsidy, and the subsidy was given as help not for the setting up of the industry which was already there but as an assistance after the industry commenced production. Hon'ble Apex Court, therefore, held that the view taken by the Madhya Pradesh High Court is erroneous. 11.19. Law laid down by the Hon'ble Apex Court in Sahney Steel and Press Works Ltd ( supra) is, therefore, that the character of the subsidy in the hands of the recipient-whether revenue or capital-will have to be determined by having regard to the purpose for which the subsidy is given. If the purpose is to help the assessee to set up its business or complete a project, the monies must be treated as to have been received for capital purpose, and if it is given by way of assistance to the assessee in carrying on of his trade or business, it has to be treated as trading receipt. The source of the fund is quite immaterial. In a case where 75 per cent of the sales-tax paid in a year for a period of five ye....
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....are that setting up an operation of such multiplexes involves various problems including huge capital investments, had come up with schemes offering incentives to cinema industry and the Government of the State of Uttar Pradesh formulated a promotional scheme to such effect and notified it by Government order issued on 13.07.1999. Hon'ble jurisdictional High Court after noticing the decisions of the Hon'ble Apex Court in Sahney Steel and Press Works Ltd. v. CIT: 228 ITR 253 (SC), and CIT vs Ponni Sugars and Chemicals Ltd: 306 ITR 392 (SC) found vide Para No 32, that the UP Scheme under which the assessee claims exemption to the extent of entertainment tax subsidy, claiming it to be capital receipt, is clearly designed to promote the investors in the cinema industry encouraging establishment of new multiplexes. Since the subsidy of such nature cannot possibly be granted by the Government directly, the Entertainment tax is leviable on the admission tickets to cinema halls only after the facility becomes operational, and since the source of the subsidy is the public at large which is to be attracted as viewers to the cinema halls, the funds to support such an incentive cannot be gener....
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.... pay sales tax, but at the same time, the collector (i.e. the assessee) could retain the amount so collected, undoubtedly was to achieve the larger goal of industrialization, and the achievement of a quantitative limit (of 125% of capital expenditure in the case of small scale units and 100% in the case of other units) meant that the subsidy could no longer be claimed. However, it was further observed that whilst it might be tempting to read the linkage with capital expenditure as not only applying to the limit, but also implying an underlying intention that the capital expenditure would thereby be recouped, the absence of any such condition should restrain the court from so concluding. In this matter, it was stated that in Sahney Steel (supra) and Ponni Sugars (supra) the issue decided was - what was the true purpose of the incentive or the subsidy, whereas the end use of the funds was considered as an additional argument to decide the matter either way. Furthermore, basing on the amendment to Section 2(24) of the Act by the Finance Act, 2015, it was contended before the Hon'ble jurisdictional High Court that, ........ the Finance Act of 2015 which came into force on 01.04.2016....
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....e purpose for which the subsidy is given. If the purpose is to help the assessee to set up its business or complete a project, the monies must be treated as to have been received for capital purpose. But, if monies are given to the assessee for assisting him in carrying out the business operation and the money is given only after and conditional upon commencement of production, such subsidies must be treated as assistance for the purpose of the However, any stipulation placing the assessee is under obligation to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business, or to liquidate the cost incurred in creating the capital asset, makes the receipt a capital receipt and renders the time of providing the subsidy irrelevant. Mere indication of the limit of subsidy as the capital expended does not justify the conclusion that it replenished the capital expenditure and therefore, the subsidy is capital. It is, therefore, neither the lofty ideals/objectives of the policy document nor the presumed end use of the subsidy amount that determines the nature or subsidy in the hands of the recipient, but the purpos....
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....essions were to be provided to new units and also industrial units undergoing expansion/ diversification. Pursuant to the aforesaid Policy, Chapter IV-C was inserted in July, 2000 in the Haryana General Sales Tax Rules' 1975, containing Rule 28C dealing with "Tax Concessions, Class of Industries, Period and Other Conditions". The Salient features of the said Rule 28C, to the extent relevant, are as under: (a) Concessions shall be available to an "eligible industrial unit"; (b) The expression "eligible industrial unit" was defined in sub-clause (c) of Rule 28C(3) of Haryana General Sales Tax Rules'1975 to include a new industrial unit or unit undertaking expansion or diversification subject to fulfillment of other conditions. The relevant extract of the said definition is as under: "Rule 28-C ......... (3)(c) "eligible industrial unit" means- (1) a new industrial unit or a unit undertaking expansion or diversification which, on the date of commercial production of new/expanded/diversified unit, fulfills the following conditions......" (emphasis supplied) (c) The term "expansion" was defined in clause (f) of Rule 28C(3) of Haryana General Sales Tax Rules'1975 as under: ....
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....rsuant thereto, the assessee was issued entitlement certificate dated 01.08.2001 under rule 28C of Haryana General Sales Tax Rules, 1975 to avail sales tax concession to the extent of Rs. 564.35 crores during the period 01.08.2001 to 31.07.2015. 11.32. Ld. AR submitted that in the case of the Bhushan Steel & Strips Limited the Hon'ble Delhi High Court considered the case of sales-tax subsidy received under an altogether different industrial policy of the Government of UP, and in that different context of the policy of the Government of UP, the Court held that the sales tax subsidy was in the nature of a revenue receipt and not a capital receipt. 11.33. A comparative analysis of the both the policies, namely, Uttar Pradesh Industrial Policy, 1990 (applicable to the facts of Bhushan's case (supra)) and Haryana Industrial Policy, 1999 (applicable to the case of the appellant), is tabulated by the Ld. AR as follows: Salient Features Bhushan's case Appellant/ Johnson Matthey case Policy Uttar Pradesh Industrial Policy, 1990 Haryana Industrial Policy, 1999 Governing Act and section Section 4A of the UP Sales Tax Act, 1948 read with Rule 25 of the UP Sales Tax Rules. Rule ....
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....ment (gross block) of the unit before expansion at the same or new location." ............ (m)"prestigious unit" means an eligible unit having fixed capital investment exceeding Rs.30 crores. .............. (5)(b) Decision about the tax concession to prestigious unit shall be taken by the High Powered Committee on the basis of factors like employment generation, likely revenue, growth of ancillaries, impact on overall industrial growth etc. A prestigious unit shall not be, as a matter of right entitled to benefits available to other units. 11.34. Basing on this he subitted that the Uttar Pradesh Industrial Policy, 1990 and the Haryana Industrial Policy,1999, are altogether different Industrial Policies with altogether different eligibility criteria. He submitted that the UP Industrial Policy specifically provided for "Capital Subsidy Scheme", which is not there in the case of Haryana Policy. 11.35. However, on a careful perusal of the schemes in question, we find that, but for certain changes in the form and expression, there is no material difference between these schemes in substances. They are similar in respect of the time, its source and the form of subsidy in t....
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....Court in CIT vs. Johnson Matthey India Pvt. Ltd., we find it difficult to agree with the argument of the Ld. AR that the observations of this Tribunal made in assesee's case were approved by the Hon'ble High Court, inasmuch as the Hon'ble Court has not specifically considered the same. As has been consistently held in all the decisions from Sahney Steels to Bhushan steels that insofar as the subsidy benefits inure to the benefit of the assessee after the accomplishment of the expansion without any burden of any condition towards capital utilization of the subsidy amount meant that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialization of the state, ensuring greater employment. In this context, we find it difficult to agree with the submission of the Ld. AR that the decision in CIT vs. Johnson Matthey India Pvt. Ltd., has to be preferred to the latest decision of the Jurisdictional High Court in CIT vs Bhushan Steel and Stripes Ltd. on the ground that the Haryana State scheme was considered in the later, whereas in the later one UP Scheme was considered. For that matter in both Bougainville's case and Bhushan Ste....
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....action of the Assessing Officer in holding the royalty payments to be capital in nature. The aforesaid right vested with the assessee was not exclusive in as much as in terms of Article 2.01(b)(ii), SMC granted license for non-exclusive use outside India, meaning thereby, that the owner of the trademark reserved with itself, the right to allow the user of the very same trademark to any other nature is not tenable in law due to the reason that the payment was under the agreement and the same is allowable revenue expenditure. Expenditure is regarded as capital in nature, if the same results in, (i) acquisition of capital asset (s); or (ii) benefit of enduring nature in the capital field or adds to the profit earning apparatus of the assessee. Having regard to the aforesaid settled legal principles, the Ld. AR submitted that in the present case since the payment of royalty by the assessee under the aforesaid agreement does not result in acquisition of any new assets or benefit of enduring nature in the capital field, the same cannot be regarded as in the nature of capital expenditure. The Ld. AR submitted that on perusal of the agreement dated 04.01.2005 entered into between the asses....
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....odi Revlon (P) Ltd : 210 Taxman 161(MAG.) (Del.) * CIT v. Prem Heavy Engineering Works P. Limited: 282 ITR 11 (All.) * CIT v. Artos Breweries Ltd : [2013] 215 Taxman 80 (AP) * CIT v. Essel Propack 325 ITR 185 (Bom) * CIT v. Eicher Motors Ltd : 293 ITR 464 (M.P.) * ITO v. Shivani Locks : 118 TTJ 467 (Del ITAT) * Goodyear India Ltd. v. ITO : 73 ITD 189 (Del ITAT) Hero MotoCorp Ltd. v. ACIT : ITA Nos. 5130/Del/2010 for assessment year 2006-07 (Del. ITAT) * Fenner (India) Ltd v. ACIT : [2012] 139 ITD 406 (Chennai) Glaxo SmithKline Consumer Healthcare Ltd. : ITA No. 1324/Chd/2012 (Chd) * Glaxo SmithKline Consumer Healthcare Ltd. v DCIT: 175 TTJ 552 (Chd. Trib.) The Ld. AR further pointed out the decision of the Delhi High Court in the case of CIT v. Hero Honda Motors Ltd.: 372 ITR 481, wherein the High Court while following the aforesaid decisions has held that royalty payment made to a foreign company for merely acquiring right to use technical knowhow whereas ownership and intellectual property rights in know how remained with foreign company, was allowable revenue expenditure. In the aforesaid judgments, the Courts/ Tribunal have, on an analysis of the agreement, c....
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....he Ld. AR further submitted that there is no enduring benefit in capital field. The assessee only had the right to use the Trademark on non-exclusive basis. In terms of Article 7.04 and 7.05, the assessee is always exposed to the risk of premature termination of the agreement by the licensor. On termination of the agreement, the assessee carries the risk of not getting the upgraded technology from owner, i.e. SMC in the present case. The mere fact that the agreement with the licensor did not specifically debar the assessee from using the knowledge after the termination of the agreement does not, the Ld. AR submitted, mean that the assessee acquired any advantage of capital in nature so as to be treated as capital expenditure, considering the rapid stride in technological advancement and the fast technological obsolescence. The advantage of the continued utilization of the special knowledge and technical know-how along with the specific drawings, business and other information, in light of the quick changing technology does not result in any enduring advantage in the capital field, apart from the submission made earlier that the assessee was a mere licensee, entitled to use the tech....
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....t to be derived from such payment. Accordingly, there is no enduring benefit of capital nature to the assessee and the expenditure is revenue in nature. It has been laid down by the Hon'ble Supreme Court in case of Alembic Chemical Works Co. Ltd. 177 ITR 377 and also in Empire Jute case 124 ITR 1 (SC) that the tests of "enduring benefit" and "lumpsum payment" or "once for all payments" are immaterial and irrelevant for laying down whether a particular item of expenditure is capital or revenue. The Ld. AR referred the decision of the Delhi High Court in the case of Shriram Refrigeration Industries Ltd. v. CIT: 127 ITR 746. The assessee, in that case, in consideration of the rights granted for use of know-how agreed to pay lump-sum fee and recurring royalty. The revenue allowed deduction for the recurring royalty paid but held payment of lump-sum fee to be capital in nature. The High Court, on an analysis of the agreement, came to the conclusion that the payment of lumpsum fee not being for acquisition of any ownership rights in the know-how was allowable revenue expenditure. The Court further noted that the Revenue having allowed deduction for the recurring royalty paid, the lump-su....
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....foresaid findings/ observations of the assessing officer are erroneous, based on incorrect appreciation of the facts and the settled legal position, as pointed out by the Ld. AR hereinafter. It was contended by the Assessing Officer that the life cycle of a car is much less than the term of the agreement. In this regard, the Ld. AR submitted that even assuming (without admitting) the life cycle of a car to be so, still the conclusion of the assessing officer based on the so-called life cycle of a car vis-a-vis tenure of agreement being 10 years is totally erroneous. The assessing officer, it is respectfully submitted, failed to appreciate that 10 years is merely the tenure of the agreement and if the assessee were to manufacture a particular car for say 5 years only, then, the royalty payment would accordingly be payable for that period. Thus, the tenure of agreement being 10 years was totally irrelevant for period. Thus, the tenure of agreement being 10 years was totally irrelevant for holding that the agreement resulted in more than enduring benefit to the assessee. In order to determine the nature of the royalty payment, whether capital or revenue, what is material is the underl....
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....it has been held in the following judicial precedents that where the assessee continued to manufacture using the technology obtained even after expiry of the agreement, the same was not conclusive and the expenditure would be allowable revenue expenditure, if on a cumulative reading of the agreement, it appeared that the assessee did not acquire any asset or enduring advantage in the capital field: * CIT v. Tata Engineering Ltd: 123 ITR 538 (Bom.) (HC) * Praga Tools Ltd. v. CIT: 123 ITR 733 (AP) * ACIT v. Shama Engine Valves Ltd.: 138 ITR 216 (Del) * CIT v. J.K Synthetics : 309 ITR 371 (Del) * CIT v. B. N Elias & Co. Ltd.: 168 ITR 190 (Guj) * CIT v. Avery India Ltd.: 207 ITR 813 (Cal) * SRP Tools Ltd. v. CIT: 237 ITR 684 (Mad) * Mysore Kirloskar Ltd. : 114 ITR 443 The assessing officer further stated that the assessee obtained an exclusive license to manufacture the products and parts in India in as much as the licensor (SMC) agreed not to manufacture similar products in India nor to provide the technology to any other party. In this regard, the Ld. AR submitted that the exclusive license by itself would not, it is respectfully submitted, render the expenditure by ....
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..... The aforesaid issue has been decided in favour of the assessee by the Delhi Bench of the Tribunal in assessee's own case for the AY 2006-07, AY 2007-08 and AY 2008-09 holding that amount of royalty considered by the assessing officer as capital expenditure should be allowed as revenue expenditure. In view of the aforesaid, the assessing officer should be directed to allow the entire royalty payment as allowable revenue deduction. 57. The Ld. DR relied upon the Assessment Order. 58. We have heard both the parties and perused all the relevant material available on record. The Tribunal held in A.Y. 2008-09 as under: "Ground No 9 to 9.3 disallowance of expenditure of Rs. 192.77 Cr out of the total amount of Rs. 495.15 Cr incurred on account of royalty. 9. Insofar as the disallowance of Rs. 192.77 Crores royalty paid to Suzuki Motor Corporation, Japan ('SMC'), is concerned, according to the assessee, during the year under consideration, the assessee paid royalty of Rs. 495,15,40,443/- to Suzuki Motor Corporation, Japan ('SMC') for use of licensed information for the engineering, design and development, manufacture, testing, quality control, sale and after sales service of produ....
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....greement and the proprietary rights for the know-how and the intellectual property rights in relation thereto continue to be owned by SMC alone, the payment is undoubtedly revenue in nature. 9.3. While placing reliance on Circular No. 21 of 1969 issued by CBDT, he argued that if in terms of the Agreement, only a license is obtained for user of technical knowledge from a foreign participant for a limited period together with or without the right to use the patents and trademarks of the foreign party, the payment would not bring into existence an asset of enduring advantage to the Indian party. He further submitted that while following the aforesaid Circular, the jurisdictional Delhi High Court in case of CIT v Lumax Industries Limited: 173 Taxman 390 held that similar royalty payment was allowable as revenue deduction. 9.4. He submitted that in a host of decisions, namely, CIT v. Ciba India Ltd: 69 ITR 692 (SC) , Alembic Chemical Works Co. Ltd. v. CIT: 177 ITR 377 (SC), CIT v. Shriram Pistons and Rings Limited -CC 12154/2009 (SC) (dismissing the SLP filed by the revenue against the order of the Delhi High Court in ITA No. 167/2008), Shriram Refrigeration Industries Ltd. v. CIT....
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....ssing officer failed to appreciate that the assessee is engaged in the business of manufacture of automobiles and various models of the cars introduced by the assessee from time to time are nothing but part of the same business of the assessee, as such the mere fact that new models/ variants of car are introduced by the assessee based on the license agreement does not mean that an altogether new product was manufactured. He made a reference to the decisions of the Delhi High Court in case of CIT v. Hero Honda Motors Ltd.: 372 ITR 481 and decision of the Delhi Bench of the Tribunal in the case of Hero Honda Motors Limited v. DCIT: ITA no. 5130/Del/2010 for A.Y. 2006-07, and also to the decision of the Delhi Bench of the Tribunal in the case of Hero Honda Motors Limited v. DCIT in ITA Nos. 716 to 718/Del/2008 for the assessment years 2000-01 to 2002-03 wherein, a coordinate Bench of this Tribunal, after analyzing all the decisions, held royalty to be in the nature of revenue expenditure even though royalty was paid for exclusive use of technical knowhow/ information, the agreement was for 10 years and extendable, the assessee was permitted to continue to manufacture motorcycles even ....
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....n charging this royalty even if its name was used only on the rear of the vehicle. But now after taking over the management of the company, it has repositioned its name and brand and logo on these vehicles. The question is whether any independent party that had assiduously over the years have built up a name and reputation would have allowed so? And that too absolutely free when the other party had been throughout charging it for whatever it was providing it be it machinery, technology, spare parts, technical assistance, corporate guarantee, trade name, trade mark. That does not seem to be a situation in normal and independent circumstances and this was not appreciated by the Tribunal, as a consequence of which the Revenue preferr3d an appeal on this issue also. According to him, the Tribunal had merely relied on its order for earlier years which in turn relied merely on decision of Hon'ble Delhi High Court in Hero Honda Motors Ltd. (2015) 372 ITR 481 (Del) and not discussed the facts that are recorded in the assessment order. It is submitted that on the basis of the facts mentioned in the assessment order, the ratio decidendi of the Delhi High Court decision in Hero Honda Motors L....
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....receding year has also given some observations, which prima facie indicate that the entire amount of royalty is for the use of licensed information. Since we have held the royalty for use of licensed information as revenue expenditure, the quantification aspect becomes irrelevant. It is so because the TPO has held royalty for use of licensed information at ALP. We, therefore, hold that the amount of royalty considered by the AO as capital expenditure should be allowed as a revenue expenditure. At the same time, depreciation allowed by the AO on this amount should be taken back." 9.8. Following the above decision for AY 2006-07, which is on an identical issue in the case of assessee itself, this Tribunal for the AY 2007-08 hold that the amount of royalty considered by the Assessing Officer as capital expenditure should be allowed as a revenue expenditure, and at the same time, depreciation allowed by the Assessing Officer on this amount should be taken back. This tribunal specifically held that the terms of the agreement considered by the Hon'ble Jurisdictional High Court in CIT vs. Hero Honda Motors Ltd. (2015) 372 ITR 481 (Del), are considerably matching with the Agreement unde....
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....he earlier part of this submission as to why the royalty payment be considered as revenue expenditure. The Ld. AR submitted that the aforesaid issue is dependent and interlinked to the issue of royalty expenditure, since if it is held that royalty payments by assessee is a revenue expenditure, the R&D cess should also be considered as a revenue expenditure. The aforesaid issue has been decided in favour of the assessee by the Delhi Bench of the Tribunal in assessee's own case for the AY 2006-07, AY 2007-08 and AY 2008-09. 61. The Ld. DR relied upon the Assessment Order. 62. We have heard both the parties and perused the relevant material available on record. We find that in assessee's own case for A.Y. 2008-09, the Tribunal held as under: Ground No 10 to 10.2 disallowance of Rs. 16,93,68,741/- on account of R&D Cess on Royalty 10. Case of assessee in respect of Disallowance of R&D Cess paid, is that as per provisions of Research and Development Cess Act, 1986, R&D cess is imposed on import of technology by the Government of India, which is definitely not a related party of the appellant company, and the assessee has been instructed by the Government of India's approval for r....
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....ct to allow deduction of Rs. 9.68 crore. " 10.3. This Tribunal followed the above reasoning for the AY 2007- 08 also. Since the related facts of the present assessment year are similar to those in the assessment year 2006- 07 and 2007-08 on an identical issue, we, while respectfully following the same direct the Assessing Officer to allow the deduction as directed by the ITAT in the appeal for the assessment year 2006-07 and 2007-08 after affording opportunity of being heard to the assessee. Grounds 10 to 10.2 are allowed accordingly." Thus, the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee's own case for A.Y.2008-09. Therefore, in absence of any contrary material brought to our notice by the Ld. DR against the order of the Tribunal, we allow these grounds. Hence Ground No. 74 to 7.7 are allowed. 63. In result, Ground No. 7.4 to 7.7 are allowed. 64. Ground No. 8 to 8.2 is regarding disallowance on account of Expenditure on Excise Duty. The Ld. AR submitted that the assessee had, during the relevant assessment year, paid excise duty of Rs. 67,00,000/-, being provision for MODVAT on quantity difference on inputs disallowed in....
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....ed in favour of the assessee by the orders of the Tribunal in the assessee's own case for AYs 2000-01, 2001-02, AY 2002-03 and AY 2007-08. 13.2. Per contra, it is the argument of the Ld. DR that this issue is related to the disallowance u/s. 43B for the year immediately preceding the previous year, and the ITAT has allowed this expenditure following the same principle laid down earlier to allow relief to the assessee on the issue of excise duty and customs duty. According to the Ld. DR, if this proposition is accepted in the current year, it shall defeat the very purpose of making the disallowance in the previous year and moreover, Revenue has not accepted the proposition of ITAT in allowing relief to the assessee and in that sense is a live issue. Accepting the decision of tribunal on this issue shall give finality to this issue for that particular year only. It is further averred that these are continuous issues forming part of the assessment order for AY 2005-06, 2006-07 and 2007-08 also, and are at present pending adjudication before Hon'ble Delhi High Court. 13.3. On a perusal of the decision, we find that this issue is substantially involved in Ground Nos. 14 to 14.3 in....
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.... such by respectfully following the same, we direct the Assessing Officer to allow the deduction of Rs. 58,61,136/- representing the excise duty paid by the appellant during the relevant previous year. Grounds No 13 to 13.3 are allowed accordingly." Thus, the issue is squarely covered in favour of the assessee by the Tribunal in assessee's own case for A.Y. 2008-09. Therefore, in absence of any contrary material brought to our notice by the Ld. DR against the order of the Tribunal, we allow these grounds. Hence Ground No. 8 to 8.2 are allowed 67. In result, Ground No. 8 to 8.2 are allowed. 68. Ground No. 9 to 9.5 is regarding disallowance on account of Provisional Liability Expenditure on account of FPI-OE Components. The assessee had accounted for liability on account of foreseen price increase (FPI) based on scientific analysis of increase in input prices, on purchases already made by the company at provisional prices, and on which the final price is yet to be settled with the supplier. FPI of Rs. 36,38,43,197/- was debited to consumption of raw material and components in the profit and loss account in accordance with mercantile system of accounting. The same was claimed as bu....
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....te common in the motor vehicle industry which has also been duly recognized in the departmental clarification issued by the Central Excise Department. Thus, the Ld. AR submitted that it is not a case of provisional liability/contingent liability incurring of which is dependent on happening of an event. The liability, in our respectful submission, is in fact in respect of such purchases already made by the assessee and duly debited in the books of accounts. Thus, the amount of FPI is a liability which accrues simultaneously with each purchase made by assessee and is allowable as deduction in determining the income of the relevant assessment year. The aforesaid is further in accordance with practice prevalent in motor vehicles industry. Reference in this regard is invited to a notification dated 28.7.2003 issued by the Excise Authorities on the subject of charging of interest under section 11AB wherein the excise authorities recognized prevailing commercial practice of supplementary invoices being made in addition to the original invoices. The liability on account of FPI was an ascertained liability representing additional purchase price of the goods. Since the liability accrued duri....
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....esult in an outflow of resources and in respect of which a reliable estimate is possible of the amount of obligation. " The Ld. AR submitted that the invoices, raised by the suppliers, were provisional and each invoice was liable to be reviewed/ amended once the quantum is determined and that this quantum of increase would apply to recompute the prices payable by assessee on all supplies made by the suppliers during the year. The aforesaid method of accounting regularly and consistently followed does not lead to any loss of revenue, whatsoever. The liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit & loss account. The income as well as the charge on settlement in the subsequent year is brought to the income or expenses statement of the assessee company to the extent of variation from the actual FPI liability. It is well settled that mere timing difference should not be used to disturb the method of accounting and books of accounts of a tax payer consistently maintained and accepted year after year. The Ld. AR further submitted that the aforesaid method of accounting has been regularly followed by assessee and claims were a....
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....iture on account of FPI-OE Components, case of the assessee is that the assessee had accounted for liability on account foreseen price increase (FPI) on an estimate basis, this FPI of Rs. 32,11,63,153 was debited to consumption of raw material and components in the profit and loss account in accordance with mercantile system of accounting and the same was claimed as business deduction in the computation of income. Grievance of the assessee is that the assessing officer however, disallowed the aforesaid claim of the assessee on the ground that assessee has quantified the liability without acknowledging the quantified liability to the creditors. However, according to the assessee the change in price of the components takes place to give effect to the increase in the cost of the inputs required for manufacturing of the components. The same is, as per the agreement with the suppliers, to ensure uninterrupted supply of components, even when their cost has increased. According to the assessee FPI is an existing liability as per the understanding arrived at with the suppliers of the components, who are original manufacturers of the components. It is submitted on behalf of the assessee tha....
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...., and also the decisions reported in Calcutta Discount Co. Ltd.: 37 ITR 1 (SC), Metal Box India (P) Limited (1969): 73 ITR 53 (SC) , United Commercial Bank v. CIT 240 ITR 355 (SC), Bharat Earth Movers: 245 ITR 428 (SC) , CIT v Vinitec Corpn. (P) Ltd.: 278 ITR 337 (Delhi), National Mineral Development Corporation Ltd. v JCIT: 98 ITD 278 (Hyd. ITAT), Ld. AR argued that that liability which has arisen in the relevant accounting year is an allowable deduction even though its actual quantification and discharge is deferred to a future date. In respect of the vendor-wise and item-wise details of total provision of Rs. 32,11,63,153 made during the relevant year in the paper book, it is submitted that the said details contain name of the vendor, the amount of additional value in respect of the component, the invoices, raised by the suppliers, were provisional and each invoice was liable to be reviewed/ amended once the quantum is determined and that this quantum of increase would apply to re-compute the prices payable by assessee on all supplies made by the suppliers during the year, and the liability for FPI was provided in the books of accounts on a scientific analysis of increase in pri....
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....ll the preceding years except in assessment year AY 2003-04 and AY 2007- 08. There has been no change in method of accounting or estimation. It is submitted that this method of accounting regularly and consistently followed does not lead to any loss of revenue, whatsoever and the liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit & loss account, whereby the income as well as the charge on settlement in the subsequent year is brought to the income or expenses statement of the assessee company to the extent of variation from the actual FPI liability. Ld. AR argued that it is well settled that mere timing difference should not be used to disturb the method of accounting and books of accounts of a tax payer consistently maintained and accepted year after year. In support of his argument that while the principle of res judicata does not apply to the income-tax proceedings, the Courts have emphasized there must be consistency in the position that the Revenue takes on an issue in different assessment years, Ld. AR cited the decisions reported in CIT vs. Excel Industries (P) Limited: 358 ITR 295 (SC), Radhasoami Satsang v. CIT 193 I....
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....this issue covered by the ground Nos. 13 to 13.5 and by noticing that similar disallowance was deleted by the first appellate authority and revenue did not prefer any appeal thereon, and the Tribunal observed as follows: "26.5 Considering the above submissions, we find that similar disallowance was made in the assessment year 2003-04 and the first appellate order had deleted the disallowance while deciding the issue in favour of the assessee against which Revenue did not prefer any appeal before the ITAT. Thereafter, only during the year under consideration, such disallowance has been made. Of course, principles of res-judicata is not application in the incometax matters but rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. It is an established proposition of law that a method of accounting regularly and consistently followed does not lead to any loss of Revenue, whatsoever. The liability estimated in a particular year finally settled in the subsequent year gets reflected in the profit and loss account. We thus set aside the matter to the file of the Assessing ....
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....de maximum services to its customers under one-roof to improve customer experience and delight with company products. The company transformed it's dealerships to one-stop shop for sale of its products and providing all related facilities of financing, insurance, auto-card, purchase and sale of used cars, etc. All these added facilities are integrally linked to the main business of the assessee company to sell passenger cars and although the earnings from these activities per se may not be very significant, the activities contribute significantly in generating the demand for the products of the company. In India, under the provisions of the Motor Vehicles Act, 1988, it is mandatory that every vehicle should have a valid Insurance to drive on the road. Any vehicle used for social, domestic and pleasure purpose and for the insurer's business motor purpose should be insured. Therefore, the car buyer needs to have a valid insurance at the time of taking delivery itself from the dealership to legally drive it on the road. Further, under the governing insurance laws, it is not permissible for the company to obtain insurance agency. Therefore, the group companies were promoted by the c....
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....s Ltd.: 82 ITR 166 (SC) * Madhav Prasad Jatia vs. CIT : 118 ITR 200 (SC) In the present case, sharing of MSIL resources by group/ subsidiary companies providing insurance services was only meant to promote the purpose of MSIL's business and hence the entire expenditure incurred by the company was allowable as deduction. The Ld. AR further submitted that since the entire expenditure as incurred by the assessee wholly and exclusively for purposes of its business, any incidental/ indirect benefit to the group company(ies), it is settled law, cannot be the basis for disallowing the expenditure in the hands of the assessee. The Ld. AR further relied upon the decisions referred supra, some of which are as follows: * Sassoon J. David and Co. P. Ltd. vs. CIT : 118 ITR 261 (SC); * CIT v Nestle India Ltd. 337 ITR ITR 103 (Del. HC) (affirmed by the Supreme Court) * CIT vs Adidas India Marketing (P) Ltd: 195 Taxman 256 (Del) * CIT vs Agra Beverages Corporation (P) Ltd: 200 Taxman 43 (Del. Mag.) (HC); * Sony India (P) Ltd vs. Dy. CIT : 315 ITR 150 (Del ITAT) * Star India (P) Ltd.: 103 ITD 73 TM (Mum.) In view of the aforesaid, the Ld. AR that the assessing officer erred in disal....
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....unal in Assessee's own case for A.Y.2008- 09 has held as under: "Grounds No 14 to 14.4 Sharing of resources with other Group Companies/ Subsidiary Companies 14. Succinctly stated facts relating to this ground are that during FY 2007-08, the subsidiary companies of MSIL were operating as Corporate Insurance agents of different Insurance companies, and in an era of increasing competition and consumer expectations, it was the endeavour of MSIL to provide maximum services to its customers under one-roof to improve customer experience and delight with company products. The company transformed it's dealerships to one-stop shop for sale of its products and providing all related facilities of financing, insurance, auto-card, purchase and sale of used cars, etc. Assessee submits that all these added facilities are integrally linked to the main business of the company to sell passenger cars and although the earnings from these activities per-se may not be very significant, the activities contribute significantly in generating the demand for the products of the company. Looking at this, the assessing officer made an ad-hoc disallowance of Rs. 12,87,88,243 in the final assessment order ho....
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.... the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. It cannot include sums spent by the assessee as agent of a third party, whether the origin of the agency is voluntary or statutory; in that event, he pays the amount on behalf of another and for a purpose unconnected with the business" (emphasis supplied) 14.3. He submitted that the said approach is reiterated by the Hon'ble Apex Court in CIT vs. Birla Cotton Spinning. & Weaving Mills Ltd.: 82 ITR 166 (SC) and Madhav Prasad Jatia vs. CIT : 118 ITR 200 (SC) also. 14.4. By placing reliance on the decisions in Sassoon J. David and Co. P. Ltd. vs. CIT : 118 ITR 261 (SC); , CIT v Nestle India Ltd. 337 ITR ITR 103 (Del. HC) (affirmed by the Supreme Court), CIT vs Adidas India Marketing (P) Ltd: 195 Taxman 256 (Del), CIT vs Agra Beverages Corporation (P) Ltd: 200 Taxman 43 (Del. Mag.) (HC); , Sony India (P) Ltd vs. Dy. CIT : 315 ITR 150 (Del ITAT), Star India (P) Ltd.: 103 ITD 73 TM (Mum.) he argued that si....
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....n under section 37(1) of the Act, either in the hands of the appellant company or to the group companies. In these circumstances, while respectfully following the decisions of the Hon'ble Apex Court and the jurisdictional High Court, we find that the addition on this score cannot be sustained. Accordingly, while along ground Nos 14 to 14.4, we direct the Ld. AO to delete the same." The issue is identical with the A.Y. 2008-09 decided by the Tribunal. Therefore it will be appropriate to remand back this issue to the file of the Assessing Officer and we direct the Assessing Officer to delete the disallowance based on an adhoc percentage of the turnover made in the assessment order in light of the decision of the Tribunal. Needless to say the assessee be given opportunity of hearing by following principles of natural justice. Hence Ground No. 10 to 10.3 are partly allowed for statistical purpose. 75. In result, Ground Nos. 10 to 10.3 are partly allowed for statistical purpose. 76. Ground No. 11 to 11.2 is relating to disallowance of expenditure incurred on Corporate Social Responsibility amounting to Rs. 7,67,00,000/-. The Ld. AR submitted that during the relevant assessment year, ....
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...., green and safe playgrounds where children can have fun together even as they learn and grow. The Park prominently displavs the banner of the assessee company at various places within the park including the entrance gates and the ticket counters. Further, the company's initiative in the taking over and developing the children's park has hogged limelight through publicity in the print and social media. It is pertinent to note that the assessee company cannot be said to be merely carrying out philanthropic objects, rather the contributions are indirectly aimed for promoting business of the assessee company and also for advertising its name. (b) National Road Safety Mission, as a mark of gratitude to the people of the country, on the occasion of completing 25 years of successful operations, the company launched a National Road Safety Mission to promote a culture of safe and accident free driving on Indian roads. Even during the slow down period year like F.Y. 08-09, the management devoted time and resources to start a national road safety program to promote consciousness for safe driving in the country. It is pertinent to note that the aforesaid is not in principle a range of addit....
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....e minds of the functionaries of the company. It will be appreciated that whenever aforesaid CSR activities are undertaken by the company, the same is covered by print and electronic media. The expenditures incurred by the assessee in such identified causes, thus, creates goodwill and brand image for the assessee and helps in promoting business interests in long run. Such expenditure creates a positive all-round brand image, which leaves impact on the mind of everyone and ultimately attracts customers to the products and services offered by the company. Following all laws and caring for the environment makes good business sense, and helps in image building. The assessee company is undertaking the aforesaid CSR activities which would cumulatively maximize the probability of its long-term survival and sustained growth. Considered in the light of the aforesaid background, the Ld. AR submitted, that the CSR expenditure is allowable as a business deduction under the provisions of the Income Tax Act ('the Act"). In this regard, the Ld. AR pointed out to provisions of section 37(1) of the Act, and submitted that under section 37(1) of the Act the fundamental condition for allowability is t....
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....of 2006, held that social and welfare community expenses are deductible as business expenditure. The Gujarat High Court in the case of CIT vs Jayendrakumar Hiralal: 327 ITR 147. The Karnataka High Court in the case of Mysore Kirloskar v. CIT: 166 ITR 836, held that the contribution made for common treatment of effluents was allowable business expenditure under section 37(1) observed that the expenditure incurred on account of donations to certain funds, charitable institutions, etc. is allowable even if the donation has no nexus with the business of the assessee and regardless of any business activity or any commercial expediency. The money may be expended on grounds of commercial expediency but not of necessity and still would be allowable as a business deduction. The Karnataka High Court in the case of CIT vs. Karnataka Financial Corporation: 326 ITR 355 held that expenditure incurred in setting up "model villages" at the instance of the government is allowable as deduction. In the case of Infosys Technologies Ltd. v. JCIT: 109 TTJ 631 (Bang.), the assessee incurred installed traffic signals at Bannerghatta Circle where the office of assessee was situated as there used to be traf....
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....e claim of the assessee that prior to assessment year 2015-16, even CSR expenditure was an allowable business deduction. In view of the above catena of judicial pronouncements, the Ld. AR submitted that, CSR expenses are expenditure incurred wholly and exclusively for the purpose of business and are hence allowable as a revenue deduction. 77. The Ld. DR relied upon the order of the Assessing Officer. 78. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Ld. AR submitted before us that the CSR expenditure is allowable as a business deduction under the provisions of the Income Tax Act ('the Act"). In this regard, the Ld. AR pointed out to provisions of section 37(1) of the Act, and submitted that under section 37(1) of the Act the fundamental condition for allowability is that the expenditure must be incurred "for the purpose of business". The said expression is, much wider than "for the purpose of earning income". For any expenditure to be eligible for deduction, such expenditure must be incurred for the purposes of business, irrespective of fact whether incurring of such expenditure is voluntarily and withou....
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....lowed the said expenditure of Rs. 6,41,060/- by holding that the same cannot be considered as business expenditure. At the outset, the Ld. AR submitted that the aforesaid expenditure has been incurred for business purposes on the grounds of commercial expediency and there is no element of any personal benefit being granted either to the employee or director. The Tax Auditors have amply clarified this position vide clause 17(b) of the Tax Audit Report. The aforesaid expenditure is, thus, allowable as deduction. The aforesaid issue is covered by the decision of the Supreme Court in the case of Samtel Color Ltd (Civil appeal No 6449/2012) wherein the Court dismissed the SLP filed by Revenue against the order of Dr Delhi High Court (referred infra) allowing the claim for deduction representing 6 expenditure incurred on club membership. The Ld. AR relied upon the following judicial pronouncements: * Nestle India Limited: 296 ITR 682 (Del.) * CIT v. Samtel Color Ltd.: 326 ITR 425 (Del.) - SLP filed by the Revenue dismissed in C.A No.6449/2012 * Otis Elevators Co. (India) Ltd v. CIT 195 ITR 682 (Bom) * CIT v. Citibank N.A.: 264 ITR 18 (Bom) * CIT v. Force Motors Ltd.: ITA No. 52....
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....) Ltd. v. CIT 195 ITR 682 (Bom); American Express International Banking Corporation v. CIT 258 ITR 601 (Bom.); CIT v. Citibank N.A.:264 ITR 18 (Bom), CIT v. Force Motors Ltd.:ITA No. 5296 of 2010 (Bom), CIT v. Sundharam Industries Ltd. 240 ITR 649 (Guj.), CIT v. Infosys Technologies Ltd.: 205 Taxman 59 (Kar), Assam Brook Ltd. v. CIT: 267 ITR 121 (Cal), DCIT v Max India Ltd. (2007) 112 TTJ (Asr.)726, this issue is also covered in favour of the assessee by the decisions of the Tribunal in the assessee's own case for the assessment years 2001-02, 2002-03, 2004-05, 2005-06, 2006-07 and 2007- 08. 8.1 On this aspect, the Ld. DR submitted that in view of the decision of Hon'ble Supreme Court cited above, the decision of the ITAT was accepted and further appeal before the Hon'ble High Court u/s 260A was not preferred on this issue for AY 2006-07 and 2007-08. In view of this submission of Ld. DR this ground is allowed and the Assessing Officer is directed to allow a sum of Rs. 10,06,470/- being expenditure incurred on account of club membership fees." Thus, this issue is squarely covered by the decision of the Tribunal in assessee's own case. Hence Ground No. 12 is allowed. 83. In res....
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....aid by the assessee. In this regard, the Ld. AR submitted that the Tribunal in assessee's own case for A.Y. 2005-06 (ITA No. 5237/Del/2011) and for A.Y. 2006-07 (ITA No. 5120/Del/2010) deleted similar adjustment on account of payment of Brand royalty. Following the order for A.Y. 2006-07, the Tribunal directed for the deletion of transfer pricing adjustment on account of payment of royalty in A.Y. 2007-08 (ITA No. 5270/Del/2011). Similarly, the Tribunal for A.Y. 2008-09 (ITA No. 6020/Del/2012) deleted the adjustment on account of royalty made by the TPO. Similarly in the case of Goodyear India Ltd. vs. DCIT (ITA No. 5650/Del/2011) held that payment of royalty cannot be disallowed arbitrarily on the basis that a brand is weak. The Ld. AR submitted that following the findings of the Co-ordinate benches in the preceding year, similar Transfer Pricing adjustment on account of brand royalty, amounting to Rs. 311.73 crores calls for being deleted. 87. The Ld. DR relied upon the order of the TPO/AO. 88. We have heard both the parties and perused all the relevant material available on record. The Tribunal held that there is a direct nexus between the revenue of the taxpayer and the payme....
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....ame. Needless to say, the assessee be given the opportunity of the hearing by following the principles of the natural justice. Hence, Ground No. 18 is partly allowed for statistical purpose. 94. In result, Ground No. 18 is partly allowed for statistical purpose. 95. As relating to Ground No. 19 to 19.1, the same is regarding error in computation of interest u/s 234B of the Act. The Assessing Officer has computed interest under section 234B of the Act by firstly computing on the assessed income upto the date of payment of first self assessment tax prior to filing the original return. After computing interest as aforesaid, self assessment tax paid by the assessee is first adjusted against the interest calculated as aforesaid. As against the aforesaid, according to the Ld. AR, the Assessing Officer erred in first adjusting the self assessment tax against the interest leviable under section 234B of the Act calculated on the basis of assessed income. The Ld. AR submitted that such adjustment, under section 140A of the Act is permissible only with reference to interest computed with reference to the returned income and not with reference of the assessed income. The method of computatio....
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....made by Id. A.R that the interest payable under section 234 B for the purpose of adjustment against the tax paid under section 140A has to be computed with respect to assessed tax determined on the basis of total income declared in the return. But this is only for the limited purpose of adiustment of payment made u/s. 140A against interest payable under section 234B while making computation of interest payable by the assessee under section 234B which has to be computed with respect to the total income determined in regular assessment as per the definition of assessed tax given in section 234B. The assessee has also followed the same procedure with which we agree. The order of CIT(A) confirming the method followed by the AO is therefore set aside and the claim of the assessee is allowed. " The aforesaid issue is now covered in favour of the assessee by the Delhi Bench of the Tribunal in assessee's own case for AY 2007-08 and 2008-09. The Assessing Officer should, therefore, be directed to recompute interest under section 234B of the Act, as aforesaid. As per section 234C of the Act, interest is required to be calculated on the basis of returned income and not on the basis of asses....