TaxTMI 
TaxTMI 
2018 (11) TMI 994
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....erforming such work. 3. That on the fact and in the circumstances of the case CIT(A) erred in allowing amortisation of expenses, though the same is patently disallowable. 4. That on the fact and in the circumstances of the case order of the CIT(A) is erroneous in allowing loss arising out of exchange rate fluctuation in a perfunctory manner without going into the details regarding the nature of such claim. 5. That on the fact and in the circumstances of the case order of the CIT(A) is erroneous in allowing loss arising out of exchange rate fluctuation merely on the basis of earlier year's order, without checking the facts related to the claims and also without considering the fact that in tax matters res judicata is not applicable. 6. That on the fact and in the circumstances of the case CIT(A) erred in allowing expenses of Rs. 36,60,000/- despite the fact that its nature was explained as "Share/debenture issue expenses" before the AO and as annual trusteeship fees before the CIT(A). 7. That on the fact and in the circumstances of the case order of the CIT(A) is erroneous in allowing expenses of Rs. 36,60,000/- without referring the ....
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....eld that the township is owned and maintained by Haldia Riverside Estate Limited, a subsidiary of the assessee (herein after referred to as HREL) and not by the assessee and as HREL is responsible for providing housing facility and maintaining the township, the expenditure incurred towards construction of approach road in Khudiramnagar from the township to the assessee's factory should have been borne by HREL. 2.1. Aggrieved the assessee carried in appeal before the ld. First Appellate Authority. The ld. CIT(A) allowed this ground of the assessee by relying on the judgment of the Hon'ble Apex Court in the case of LH Sugar Factory & Oil Mills Pvt. Ltd. vs. CIT (1980) 125 ITR 0293, wherein such expenditure was held to be categorized as revenue expenditure. 2.2. We find no infirmity in the findings of the ld. CIT(A) and uphold the same. Hence Ground No. 1 & 2 of the revenue are dismissed. 3. Ground No. 3 is regarding disallowance of Rs. 15.46 Crores being amortization expenses. We find that the issue is covered in favour of the assessee by the decision of the Kolkata 'A' Bench of the Tribunal in the assessee's own case for the Assessment Year 2005-06; in ITA Nos. 581& 587....
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....preliminary cost over five years. The assessee also relied on the decision of the Supreme Court in CIT vs up State Industrial Investment Corporation (1997) 225 ITR 703 and Challapalli Sugar Limited vs CIT (1975) 98 ITR 167.The assessee also submitted that these deferred revenue expenditure pertains to the assessment years starting from AY 1985-86 to 2001-02. However, the AO has disregarded the claim of the assessee by considering that the amount of amortized expenses and its allowability needs to be determined as per the provisions of the Act. There is no provision under the Act for claiming the deferred revenue expenditure. All the deferred revenue expenditures are revenue in nature and should have been claimed in the year of its incurrence. Accordingly, the A.O. has disallowed the deferred revenue expenditure and added to the total income of the assessee. 15. Aggrieved, assessee preferred an appeal before the Ld. CIT(A). Before Ld. CIT(A) assessee has claimed the deferred revenue expenditure as per the Guidance Note issued by ICAI on expenditure incurred during construction period. The assessee has amortized this deferred revenue expenditure amounting t....
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....d on the jurisdictional High Court in case of India Steamship Co. Ltd. Vs. Joint Commissioner of Income Tax & ors. (2005)194 CTR (Cal) 386; Eq: (2005) 275 ITR 155 (Cal) has denied the claim of the Revenue that there is no concept of deferred revenue expenditure in the act and assessee can claim the deduction of the amount incurred before the commencement of commercial production over a number of years. Hon'ble Supreme Court in case of Madras Industrial Investment Corporation Limited vs. CIT [1997] 225 ITR 802 (SC) has also upheld the principle of deferred revenue expenses. The ld. AR also pleaded that the deferred revenue expenses can also be allowed to be capitalized under section 32 of the Act. 17. From the aforesaid discussion, we find that the assessee has incurred expenses prior to the commencement of business and classified as deferred revenue expenditure. The assessee started claiming those expenses after the commencement of business 1/5th over the period of 5 years. However, the lower authorities disallowed the same on the ground that there is no provision under the Act to claim the deferred revenue expenses. From the facts of the case we observe that the AO is....
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....nefits, staff welfare expenses, etc. (b) Expenditure on technical and other consultants. (c) General administrative and office expenditure which is indirectly related or incidental to construction, including, as may be appropriate, stationery and printing, rent, rates and taxes, postage and telegrams, travel and conveyance etc. (d) Appropriate insurance charges. (e) Appropriate expenditures on maintenance and operation of vehicles. (f) Appropriate expenditures in connection with temporary structures and service facilities built or acquired specially for the purpose of construction (see paragraphs 9.4 and 9.5 of this Note). (g) Preliminary project expenditure to the extent to which it is capitalized as part of the construction cost (see paragraph 3 of this Note). (h) Financial expenses including interest and other similar charges (see paragraph 4 of the Note). (i) Depreciation on fixed assets as well as on temporary structure and other facilities used during the period of construction (see paragraph 9.4 and 9.5 of this Note). (j) Expenses on test runs (see paragraph 11 of this Note). (k) Expens....
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....a result on the quantum of profits. It is well settled that pre-existing liabilities should be adjusted in the light of foreign exchange under mercantile system of accounting. The claim of the assessee cannot be denied merely on the ground that it is just a provision and no amount has been paid. Accordingly the learned CIT(A) has deleted the addition made by the AO by observing as under:- "the appellant's contention in this regard is found to be acceptable, since the AR of the assessee vide his letter dt. 15.01.2009 has confirmed that the sundry creditors under this account were on revenue account and not on capital account. Since, it is submitted that such exchange fluctuation has arisen on account of normal business transactions of material procurement etc., it is an allowable deduction u/s. 37(1). I agree with the contention of the appellant and hence this ground is allowed." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 30. We have heard rival contentions and perused the materials available on record. Before us Ld. DR vehemently supported the order of AO and on the other hand the learned AR relied on the order of Ld CIT(A) and....
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.... or as expenses in the period in which they arise..." At this juncture we also wish to reproduce the provisions of section 145 of the Act which reads as under:- "3.4 As per section 145 of the Act, '(1) Income chargeable under the head "Profits and gains of business or profession" or "income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144." 31. We also find support from the decision of Hon'ble Delhi High Court in the case of CIT vs Woodward Governor I....
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....ment Year 2005-06; in ITA Nos. 581& 587/Kol/2009, wherein it was held as follows:- "32. The 2nd issue raised by Revenue in ground number 2 in this appeal is that learned CIT(A) erred in deleting the addition made by the AO for Rs. 13,55,80,000/- on account of freight expenses. 33. During the year assessee has claimed net freight expenses incurred in connection with domestic, export of the goods and freight on stock transfer. The assessee has also recovered part of the freight charges from the customers incurred in connection with the sales. However the AO observed that expenses incurred on freight was more than the recovery made by the assessee from the customers. The AO also found that the claim of the assessee towards such freight expenses was also disallowed in the AYs 2003-04 and 2004-05, so the AO accordingly disallowed the claim of the assessee for freight expenses and added to the total income of the assessee. 34. Aggrieved, assessee is in appeal preferred an appeal to Ld CIT(A) where it was demonstrated that when the goods are sold to customers on delivery basis then the assessee recovers freight charges from the customers as per the agreement but....
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....the customers, I find force in assessee's contentions in this regard, hence, this ground of the appellant is allowed." Being aggrieved by this order of the learned CIT(A) Revenue is in appeal before us. 35. We have heard rival contentions and perused the materials available on record. Before us Ld. DR vehemently supported the order of AO and left the issue to the discretion of the Bench whereas Ld AR relied the order of Ld CIT(A). From the aforesaid rival materials, we find that the AO has disallowed the freight expenses on the ground that assessee has made short recovery from the customers and similar addition was made in the earlier assessment year. However, the AO has not disputed the quantum of expenses incurred by the assessee on freight. From the submission of Ld. AR we find that out of the total disallowance made by the AO towards freight expenses, a sum of Rs. 86,59,000/- was incurred on the stock transfer by the assessee from the factory to the depots. In our view, the question of disallowance of freight expenses in connection with the stock transfer does not arise. This freight expense has direct connection with the business of the assessee. For othe....