TaxTMI 
TaxTMI 
2019 (7) TMI 882
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....the Assessing Officer assessed the total income of the assessee at Rs. 61.41 Crores as against returned income of the assessee of Rs. 51.40 Crores after making series of additions as per Para 22 of the assessment order which is scanned and extracted as under :- "22. Subject to the above, the total income of the assessee is computed as under: Income from business (as per computation of income) Rs. 52,85,31,712/- Add: Additions/Disallowance's as per the body of the Assessment Order a) Amortization of lease hold land as per para 4 Rs. 2,66,396/- b) Addition on account of negative CIP (AS-7) as per para 5 Rs. 3,72,84,000/- c) Prior year expenses as per para 6 Rs. 3,23,912/- d) Liquidated damages as per para 7 Rs. 92,59,000/- e) Lease rentals as per para 8 Rs. 1,53,21,302/- f) Depreciation as per para 9 Rs. 58,73,012/- g) Short Term Incentive plan as per para 10 Rs. 23,21,....
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....se and in law, the learned CIT(A) erred in sustaining addition under this head to the extent of Rs. 26.55 lacs by holding that the adjustment made by the learned AO in respect of freight was justified. The learned CIT(A) ought to have accepted the contention of the Appellant that freight paid by the Appellant and freight recovered from the customer were not relevant for determining the stage of completion of any project and were therefore rightly not considered by the appellant for this purpose. The addition sustained by the learned CIT(A) be deleted The learned CIT(A) further erred in omitting to direct the AO to allow deduction for a sum of Rs. 13,69,648/- being the amount of income already brought to tax AY 2003-04 pursuant to the order of the CIT(A) for that year. 3. Prior Year Expenses: On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming disallowance of 'prior period expenses' of Rs. 3,23,912/-. 4. Liquidated Damages: On the facts and in the circumstances of the case and in law the learned CIT(A), erred in directing the....
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....Explanation (baa) of 90% of the following: Claims and refunds (Rs. 35,68,363/-), balance written off now recovered (Rs. 67,80,532/-); Premium of forward contracts (6,32,505/-), Other Receipts (Rs. 6,23,95,946/-), Export Incentive ( Rs. 4,51,90,553/-). c) Confirming exclusion from eligible profits of business, loss/expenses on foreign representative offices Rs. 5,30,06,437/- on the basis of CIT(A) order for AY 2003-04 and thereby ignoring the relief allowed by the learned CIT(A)'s in years prior thereto. d) The Learned CIT(A) ought to have accepted the contention of the appellant that loss of foreign representative offices should go to increase the "profits of the business" eligible for deduction u/s.80HHC instead of ignoring the same. e) Reducing the profits of the business by Rs. 451.90 lacs by not allowing deduction with reference to the proportionate export incentive (DEPB 156.45 & Duty Draw back Rs. 295.45)." 6. Ground No.1 relates to the claim for deduction of proportionate premium on leasehold land amortized Rs. 2,66,396/- which has been wrongly referred to as Rs. 2,69,628/- in th....
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....to claim of amortization of premium paid for leasehold land. In the year under consideration, the Ld.CIT(A) vide para no 6.1 of the order dismissed the ground raised by the assessee as "not pressed". The Assessee is therefore now before us. We find this issue was the subject matter before the Tribunal in the earlier assessment years in assessee's own case in A.Ys. 2000-01 to 2002-03 and the issue was decided by the co-ordinate Bench of the Tribunal against the assessee by holding as under : "14. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to claim of amortization of premium paid for leasehold land. We find that identical issue of amortization of premium on leasehold land arose in assessee's own case in A.Yrs. 2000-01 and 200102. The issue was decided against the assessee by the coordinate Bench of the Tribunal by holding as under : 8.1 The Ld. AR of the assessee fairly submitted that this issue has been decided against the assessee in assessment years 1998-99 and 1999-2000 by the Tribunal. We observe that this issue has been considered by the Co-ordinate Bench in assessment years 1998-99 a....
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....der this head to the extent of Rs. 26.55 lacs. 12. Briefly stated the relevant facts include that the assessee takes work contracts from the clients and earns contract income. At the time of entering into the contract, raising invoices of sale and the timeline for payment schedule is agreed upon. The assessee receives the payments as per the schedule. Notwithstanding the above, regarding the income recognition, the assessee follows Accounting Standard 7 (AS 7) and the Percentage Completion Method for recognizing the taxable income, when the said contracts spread over many years i.e. Contracts in Progress (CIP). At times, the assessee receives more sales receipts which is much higher than the income duly recognized based on the above principle of percentage completion method -cum- AS 7. Taxability of such excess receipts is the matter of litigation. Explaining the said excess, the assessee submitted that it consistently followed the method of AS-7 - cum- percentage completion method over the years and the said excess is eventually taxed on completion of the contract. The percentage completion method followed by the assessee i....
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....assessee relying on percentage completion method and AS-7. The CIT(A) disallowed the selective approach of the Assessing Officer. The relevant lines from para 10 of the order of the CIT(A) are extracted as under :- "10. .......... In this case the A.O. has adopted a selective approach in modifying the revenue recognition without any proper basis. The A.O. has adopted the formula of invoices raised/ Total contract value only in respect of projects which started during the year and which have negative CIP as on 31.03.2004 for determining stage of completion. In respect of all other contracts the A.O. has not interfered. Therefore, the approach taken by the A.O. is without any logic and cannot be upheld. The appellant gets relief of Rs. 345.35 lacs." 14. On the other issues of the need of adjustment of estimated cost on account of warranty cost, the CIT(A) decided the issue in favour of the assessee as per the discussion given in para 12 of the order of the CIT(A). For the sake of completeness, the said para is extracted hereunder :- "12. I have carefully considered the facts of the case. Provisions of warrant....
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....tment in the past and in case of one of the group concerns at the level of ITAT too. The appellant has changed the revenue recognition on the basis of percentage cost incurred with reference to the total cost of the project as per revised AS7 guidelines which was effective for the contracts signed after 1/4/2003. The sales are recognised on the basis of invoices raised as the goods are despatched from the factory on which excise and other duties are required to be paid. Since contract work is completed, in more than one year, the revenue recognition is made as per AS7. Since sales are some times higher than the cost of the work completed, negative CIP is shown. The A.O has selectively rejected the working of negative CIP in respect of contract entered into during the year 2003-04. As held in the preceding paras this approach of the A.O is without any logic and therefore cannot be upheld. As regards adjustment in cost on account of warranty expenses to the action of the A.O fails while in respect of freight received the action of the A.O. is upheld. The learned Counsel of the Appellant was asked to give the working of disallowance on account of Negative CIP which is as under: Neg....
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....ted the AO to allow deduction for crystallized liability of Rs. 4,86,48,820/- which was the issue before him. The action of the AO in allowing deduction in respect of STIP for AY 2003-04 was consequential to the disallowance made by him while completing the assessment for AY 2003-04. The disallowance made by the AO in AY 2003-04 has been upheld vide para 30-34. The Tribunal has however directed that deduction should be allowed for amounts paid under the Scheme. This is what the AO has done in AY 2004-05. The AO should therefore be directed to allow deduction for Rs. 4,86,48,820/- in place of deduction for Rs. 23.21 lacs directed to be allowed by the CIT(A). The ground of the Department needs to be consequentially dismissed." 19. Further, referring to the changes in accounting brought by the AS-7 applicable to the period from 01.04.2003 onwards, ld. Counsel submitted that till the last year, the positive or negative contract-wise conclusions were shown as profit equalization adjustment and the same effect is now achieved by reflecting the difference as negative CIP or positive CIP, as the case may be. In effect, the method of accounti....
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....nue receipts. AO therefore held that the provision of Rs. 4,53,93,679/- cannot be allowed. He accordingly disallowed the same and made its addition. Aggrieved by the order of AO, assessee carried the matter before CIT(A), who granted partial relief to the Assessee by holding as under : "7.2. I find that the issue has elaborately been dealt with by my predecessor in appellant's case in appeal for A.Y. 2002-03, wherein it was held by him that although, in principle, the appellant cannot be found fault with for having followed Accounting Standard-7 in the matter of revenue recognition and accordingly, making provisions for equalization, its actual working is not above scrutiny. He held that the appellant was not justified in omitting to recognize revenue wherever completion was less than 33% of the total project or where the contracts were less than Rs. 25 lacs. The Ld.CIT(A) also disapproved the appellant's act of further scaling down towards contingencies/unforeseeable losses. The facts of the case during this year are identical to those in A.Y. 2002-03 and I find no reason to form a view other than that of my predecessor. Accordingly, the Assessing Officer is directe....
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....nstitute of Chartered Accountants of India (ICAI). The Revenue in cross appeal for assessment year 2000-01 has also raised this issue as ground No.1. The assessee is manufacturing boilers and heat transfer equipments on contract basis. These contracts are spread over a period of more than one year. The assessee is recognizing income of the projects, on project completion method. The assessee raises invoice on the client as per schedule of payments. The bills raised are always more than the revenue that should be recognized on the basis of project completion method. The adjustment is required to be made to adjust excess billing. The adjustment is made in accordance with AS 7 by creating a provision 'Contribution Equalization Provision'. The Assessing Officer rejected this method of making adjustment by the assessee. In the first appeal, the Commissioner of Income Tax (Appeals) partly accepted the claim of the assessee. Against the finding of the Commissioner of Income Tax (Appeals), both, the assessee and the Revenue have come in appeal. 9.1 We observe that similar issue had come up in the appeal of the assessee and the Revenue for assessment years 1998-99 and 1999-20....
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....e identical to that of earlier years and since in earlier years, the issue has been decided by Co-ordinate Bench of the Tribunal in assessee's favour, we therefore following the reasoning of the decision of the Co-ordinate Bench of the Tribunal in assessee's own case for earlier years and for similar reasons, allow the ground of assessee and thus the assessee's ground No.2 is allowed and Revenue's ground No.2 is dismissed." 22. From the above discussion and the arguments made out by the ld. Counsel for the assessee, we find the AS-7 which existed prior to letter dated 01st April, 2003 continues to remain the same; but for minor changes. There are minor changes in relation to the computational issues. However, there is no change so far as "cost based" percentage completion method in concerned. Therefore, the computation of "recognition income" is concerned, the order of the CIT(A) is fair and reasonable and the same does not call for any interference. Accordingly, relevant grounds stand allowed in favour of the assessee. 23. Further, so far as adjustments made by the Assessing Officer to the estimated cost is concerned, the CIT(A) already ....
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....that the expenses pertaining to prior years aggregating to Rs. 2,76,870/- are not allowable and accordingly disallowed the same. Aggrieved by the order of AO, assessee carried the matter before Ld. CIT(A), who decided the issue against the Assessee by holding as under : "8.3 The submission has been considered. In principle, I agree with the appellant's view that expenditure is deductible in the year in which liability to pay arises. However, in the case under consideration, as stated by the appellant, the amount in question represents the commission remitted during the year to foreign parties on the sales that have taken place in earlier years. Since the commission is linked with the sales, the liability to pay commission has arisen in the respective years in which the sales have taken place and therefore, it cannot be allowed as deduction from the income of this year. The commission cannot be considered as deductible during this year on the ground that the same has been remitted during the year. Accordingly, this ground of appeal fails." Aggrieved by the order of Ld.CIT(A) assessee is now in appeal before us. 16. Before us, Ld. AR reite....
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....same is decided in favour of the Revenue. Considering the commonness of the facts as well as the settled legal proposition, we are of the opinion that the issue should be decided in favour of the Revenue for the year under consideration also. Thus, ground No.3, raised in appeal by the assessee is dismissed. 28. Ground No. 4 relates to "liquidated damages". The Assessing Officer discussed this issue vide Para 7 of the assessment order and the Ld. CIT(Appeals) dealt with this issue vide Para 19 of the appellate order. 29. The Ld. Counsel for the assessee submitted that this issue is squarely covered by the decision of the Pune Bench of the Tribunal in assessee's own case in ITA No.1055 & 1056/PUN/2009 for the assessment year 2003-04 dated 12.03.2019. 30. The Ld. DR for the Revenue placed reliance on the order of the Assessing Officer. 31. We have heard both the sides and perused the Para 12 to 25 of the Tribunal's order in assessee's own case wherein this issue was decided in favour of the assessee. For the sake of completeness, the same is extracted as under: "22. Ground No.5 of Assessee's appeal and Ground No.3 of Revenue's appeal is ....
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....n written off in the books of accounts. He accordingly denied the claim and made addition of Rs. 200.26 lacs. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who in principle agreed with the claim of Assessee but however directed the AO to verify the Assessee's claim to the extent supported by the clause of Liquidated damages as per contract and decide accordingly. The relevant findings of CIT(A) are as under: "The submission has been carefully considered by me. The appellant company has also furnished before me the partywise details of liquidated damages of Rs. 200.26 lakhs. It has also filed sample copies of purchase orders of a few customers of the appellant company containing clause of Liquidated Damages according to which penalty at the prescribed rate is leviable in case of delay in supply of goods ordered. On perusal of these documents, in principle, I agree with the claim of the appellant company that the liquidated damages, arising out of the terms of the purchase orders, schedule, are allowable as business expenditure. The cases relied upon by the Assessing Officer while disallowing the liquidated damages of ....
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....en an accrual of liability and the customer enforcing the right vested by deducting the sum from the payments which are otherwise due to the Assessee. He further submitted that AO has confused the issue of claim of liquidated damages with the issue of claim of bad debts and that the claim of bad debts has been accepted by him. He further submitted that the reliance placed by AO in the case of N. Sundareswaran Vs CIT reported in 226 ITR 142 is misplaced as the facts are distinguishable from the facts of the present case as in that case the contract did not contain provision for liquidated damages and had only dealt with the case where the matter was to be referred to Arbitration. He further submitted that the facts in the case of CIT Vs. Seshasayee Industries Ltd.(242 ITR 691) are distinguishable and therefore not applicable to the present facts of the Assessee. He thereafter submitted that the expenditure has been incurred during the course of business and is for the purpose of business more so when CIT(A) has accepted the allowability of claim of liquidated damages as business expenditure. He further submitted that Hon'ble Apex Court in the case of SA Builders (288 ITR 1) has held....
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....d has been held to include such expenditure as a prudent businessman incurs for the purpose of business. The expenditure incurred though not under any legal obligation but still it is allowable as a business expenditure if incurred on the grounds of commercial expediency and the method of recognition is followed from year to year. The assessee is following the said method in earlier years and no disallowance has been made. Before us, no material has been placed by the Revenue that the expenditure is not a genuine expenditure or has been incurred to benefit any group concerns. Considering the totality of the facts we are of the view that the expenditure is allowable. Thus, the ground of Assessee is allowed and that of Revenue is dismissed." From the above, it is evident that the Pune Bench of the Tribunal has decided this issue in favour of the assessee. Now, it is a settled law that such expenditure is allowable as business expenditure if it is incurred on the grounds of "commercial expediency". Commercial expediency is a term of wide import and has been held to include such expenditure as a prudent businessman incurs for the purpose of business. The expenditu....
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.... as well and that it cannot be said that the machineries were used wholly and exclusively for manufacturing the energy saving machineries. He accordingly held that Assessee was only eligible for normal depreciation of 25% on such machineries. He accordingly disallowed the claim of additional depreciation of Rs. 17,25,103/-. Aggrieved by the order of AO, assessee carried the matter before Ld CIT(A), who following the order of his predecessor for A.Y 2002-03, upheld the order of AO by observing as under : "12.3 This issue has elaborately been dealt with by my predecessor who while adjudicating upon this issue in assessee's appeal for AY. 2002-03 observed as follows: I have carefully considered the ground raised by the appellant and the arguments of the Ld.Authorised Representative. First coming to plant No.11 i.e., absorption cooling division, which manufactures heat pumps, the stand taken by the Assessing Officer will have to be confirmed. Entry No.3(iii)(C)(c) specifically deals with heat pumps. It provides for depreciation on heat pumps at the rate of 100%. This entry will not apply to the appel....
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....The appellant was also asked to submit copies of brochures, pamphlets as may be available with regard to the specifications and functioning of these products. The details / evidences thus called for have not been furnished. In the circumstances, I have to hold that the appellant has not been able to substantiate that these products are in the nature of renewal energy devices being air/gas/fluid heating systems. It is also clear from entry 3(xiii) that all the sub-items figuring in this entry, including sub-entry (r), have to be in the nature of renewal energy devices. The starting words viz. 'renewal energy devices being' qualify all the sub-items including (r). This would indicate that even the 'machinery and plant used in the manufacture of any of the above sub-items' will themselves have to be in the nature of renewal energy devices. Or else, (r) would have come as a separate entry and not as a sub-item in entry No.3(xiii). Nothing has been adduced to show that the plants and machineries in respect of which depreciation at the higher rate has been claimed are in the nature of renewal energy devices. For these reasons, I do no....
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....100% depreciation on its plant and machinery in Plant No.3, Plant No.4, Plant No.8, Plant No.10 and Plant No.11. In the first appeal, the Commissioner of Income Tax (Appeals) accepted the contentions of the assessee in respect of all the plants except Plant No.11. The assessee has come in second appeal with respect to the claim of depreciation @ 100% in respect of item of Plant No.11. Whereas, the Revenue in its appeal has assailed the findings of the Commissioner of Income Ta the Commissioner of Income Tax (Appeals) in respect of all the plants except Plant No.11. 11.2 Similar claims were made by the assessee in respect of Plant No. 11 and the Revenue in respect of other plants (excluding Plant No. 11). The issue was decided by the Tribunal in assessee's own case for assessment years 1998-99 and 1999-2000 as under :- "35. Now, we may first take-up assessee's claim for depreciation 100% with respect to the plant & machinery used in the manufacture of air/gas/fluid heating systems. In this context, it is clear noted that having regard to the entry 3(xiii)(r) read with 3(xiii)(e) of the Depreciation Table annexed to the Rules, plant & machinery used for ....
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....arties have admitted that the facts of the case in the present ground are identical to that of earlier years, we therefore following the decision of the Co-ordinate Bench of the Tribunal in assessee's own case for A.Y 2002-03 and for similar reasons hold that assessee is eligible to claim depreciation @ 80% with respect to plant and machinery used Plant Nos.4 and 8 in the manufacture of air / gas / fluid systems but is not eligible for 100% depreciation in respect of plant and machinery used in the manufacture of heat pumps. Thus, the ground of assessee is partly allowed. From the above, it is evident that the claim of depreciation with respect to impugned Plant & Machinery is allowable protonto. Considering the commonness of the facts as well as the settled legal proposition, we are of the opinion that the Assessing Officer needs to be directed to follow the said order of the Tribunal (supra). Accordingly, ground No.5 raised in appeal by the assessee is partly allowed. 36. Ground No.6 relates to the Short Term Incentive Plan (STIP) of Rs. 4,86,48,820/- on account of provision for performance incentive payable to employees. The Assessing ....
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....) or 43B of the Act and the entire provision not be disallowed as it was not incurred during the year. Assessee inter-alia submitted that for promoting growth and prosperity of the assessee, a policy for paying an annual incentive to all the employees was formulated. The quantum of annual incentive was to be based on the performance of each division and also of each employee of that Division. It was further submitted that the Payment of Bonus Act does not apply to such payments as those employees were drawing salary in excess of Rs. 3,500/- pm. It was further submitted that the unpaid amount out of the scheme was reversed in the next year and offered to tax. The submissions made by the Assessee were not found acceptable to AO. AO was of the view that the Scheme that was formulated was to be implemented only after the close of financial year and there was no STIP policy during the year more so as the scheme was approved by the Board of Directors on 28.05.2003. He further noted that the amounts were disbursed to the employees after the close of financial year and it was included in form 16 of the concerned employees during F.Y 2003-04. He therefore concluded that there was no incenti....
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....nbsp; I therefore, uphold the action of the Assessing Officer in disallowing provision for short term incentive plan of Rs. 4,63,70,760/-. The disallowance is confirmed." Aggrieved by the order of CIT(A), Assessee is now before us. 32. Before us, Ld AR reiterated the submissions made before AO and Ld.CIT(A) and further submitted that even in the immediately preceding financial year the Assessee did have a scheme for payment of incentives to it employees but however in the year under consideration a modified scheme was introduced which was based on the performance of the Division and performance of each individual employee of the Division. He submitted that the performance which was the benchmarked for payment related to FY 2002-03. He pointing to the resolution of the Committee which is placed in the paper book submitted that the committee merely observed that the amount of compensation payable under STIP was in line with the payment which was given earlier and therefore approved the same and therefore it cannot be said that the scheme was approved for the first time. He further submitted that the tax with reference to the amount was deducted u/s 192 of the ....
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....instant year. Hence, we find no merit in claim of assessee. But the assessee is entitled to deduction of amounts, if any paid under the proposed scheme. In the result, the ground No.7 of the Assessee is partly allowed." It is evident from the Tribunal's order (supra), there is direction that the assessee is entitled to deduction of amounts, if any paid under the proposed scheme. The Ld. Counsel for the assessee filed Copy of Short Term Incentive Plan for FY 2003-04 and Copy of Board Resolution dated 05.09.2003 which is placed at 328 to 333 of the Paper book. In the instant case, the Ld. CIT(Appeals) vide Para 33 of his order has observed as under: "32. I have carefully considered the facts of the case as well as the reply of the appellant. The STIP scheme has been approved by the company Board on 28.05.2003 i.e. during the previous year relevant to the assessment year..................." 40. Considering the totality of facts and circumstances of the case, the direction of Tribunal's order in assessee's own case and observation of the Ld. CIT(A) to the effect that the STIP scheme has been approved by the Company Board on 28.05.200....
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....written off now recovered, premium of forward contracts, other receipts and Export Incentives under Explanation (baa). It is also clear that the Assessing Officer as well as the Ld. CIT(Appeals) did not clarify the matter corresponding with the decisions of the Hon'ble Supreme Court of India as mentioned above as Explanation (baa). 45. Considering the totality of facts and circumstances, we are of the view that this issue needs certain clarification in response to the Explanation (baa) as well as the decisions of the Hon'ble Supreme Court. Accordingly, we remit this issue back to the file of Assessing Officer for fresh adjudication after considering the Hon'ble Supreme Court decision as mentioned above. The Assessing Officer shall provide reasonable opportunity of hearing to the assessee in accordance with set principles of natural justice. Hence, ground No.7 and its sub grounds are allowed for statistical purposes. 46. In the result, appeal of the assessee is partly allowed for statistical purposes. ITA No.1803/PUN/2012 ( By Revenue) A.Y. 2004-05 47. In ITA No.1803/PUN/2012, the Revenue has raised following grounds: &n....
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....y the assessee, on account of trading exports in the total turnover for the purpose of computing deduction u/s. 80HHC. 7(b) Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in adopting the figure as per report in Form 10CCAC and not the figure as per accounts submitted by the assessee, on account of manufacturing exports in the total turnover for the purpose of computing deduction u/s. 80HHC. 8. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in not reducing 90% of the lease rental from the eligible profit for the purpose of computing deduction u/s.80HHC. 9. Whether on the facts and circumstances of the case, the CIT(A) was justified in holding that the profits eligible for deduction u/s.80HHC of the Act can be reduced by the amount of deduction allowed u/s.80IB of the Act. 10. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 27.70 lacs made u/s 14A being proportionate interest attributable to the exempt income without assigning any reason for granting relief to the assessee. 11. Whether on the facts and ....
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....s not found acceptable to AO and also noted that the order of CIT(A) has not been accepted by the Revenue and appeal has been filed before the Tribunal. He thereafter made addition of Rs. 1.53 crores. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who deleted the addition by holding as under : "It is seen that the issue involved in this ground of appeal is squarely covered by the order of CIT(A) in the case of the appellant in assessment years 2001-02 and 2002-03. In the year under consideration, the facts of the case are identical to those in earlier assessment year viz A.Y. 2002-3 and the Assessing Officer, has made the additions of Rs. 1,53,21,302/- merely on the basis of addition made on this score in A.Y. 2002-03 in order to keep the issue alive. After careful consideration, I am inclined to agree with the finding of my predecessor that the addition of Rs. 1,53,21,302/- with reference to the subject leases was without any basis. Accordingly, the addition of Rs. 1,53,21,302/- is directed to be deleted." Aggrieved by the order of CITA(A), Revenue is now before us. 67. Before us. Ld DR supported the order of AO. Ld A....
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..... 41.1. AO noticed that Assessee had incurred expenses of Rs. 11,40,130/- under the head of public relation expenses. AO noticed that the expenses included expenses on account of small gifts, lunch with guests etc. AO was of the vie that Assessee had not established the reasonableness and exclusivity of the expenses for the purposes of business. He accordingly disallowed Rs. 50,000 as being non verifiable in nature. AO also noticed that assessee had incurred expenses under the head of Membership and subscription, garden expenses, miscellaneous expenses and house magazine which were clubbed under miscellaneous expenses. AO was of the view that since the reasonableness and genuineness of the aforesaid expenses were not fully verifiable, he disallowed 5% of total expenses of Rs. 51,55,605/- resulting into disallowance of Rs. 2,57,780/-. Similarly with respect to vehicle expenses, AO disallowed Rs. 725168/- (being 5% of the vehicle expenses as being not incurred for the purpose of business. With respect to foreign travel expenses he noted that out of the expense of Rs. 3,11,62,875/-, Rs. 16,30,830/- was towards miscellaneous expenses which was disallowe....
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....urt of Gujarat in the case of Sayaji Iron & Engg. Co. (supra), hold that no disallowance of vehicle expenses on account of being personal in nature is called for in the present case. As far as the disallowance of other expenses on adhoc basis is concerned, we find that AO has not pointed out any expenses which are not for the purpose of business. Further it is not in dispute that the assessee's books of accounts are regularly maintained, audited and no discrepancies have been pointed out by the Auditor or the Revenue. The disallowance has been made on adhoc basis. Before us, assessee has submitted that no such adhoc disallowance has been made in subsequent years in scrutiny proceedings and this fact has not been controverted by Revenue. Considering the totality of the aforesaid facts, we are of the view that no disallowance of expenses on adhoc basis is called for in the present case and thus the ground of the assessee is allowed." 44. Before us, no distinguishing feature in the facts of the case under consideration and that of earlier years has been pointed out by the revenue. Before us, the submission of Ld AR that in subsequent ....
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....2 the identical issue was decided by tribunal in assessee's favour. He further submitted that the issue was not challenged by the Department in AY 2002-03. He thus supported the order of CIT(A). 71. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to disallowance of additional medical expenses. We find that CIT(A) while deciding the issue in assessee's favour had relied upon the order of his predecessor for AY 2002-03. Before us, Ld AR submitted that in AY 2002-03 CIT(A) on identical facts had decided the issue in assessee's favour and the issue was not agitated by the Revenue. The aforesaid contention of the Ld AR has not been controverted by the Revenue. We further find that identical issue in AY 2002-03 was decided in Assessee's favour. In view of the aforesaid fact, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed." From the above, it is evident that the Tribunal has decided the issue in favour of the assessee. Respectfully, following our decision, ground No.6 raised in appeal by the Revenue is dismissed. 61. Ground No.7(a) and 7....
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....sed the case record and heard the rival contentions. We are of the considered view that since addition of lease rentals has been deleted by the Ld. CIT(A) and Ground No.3 of Revenue's appeal has been decided in favour of the assessee, ground No.8 would not survive and liable to be dismissed. Accordingly, ground No.8 raised in appeal by the Revenue is dismissed. 68. Ground No.9 relates to the profits eligible for deduction u/s.80HHC of the Act can be reduced by the amount of deduction allowed u/s.80IB of the Act. 69. The Ld. Counsel for the assessee submitted at the outset that Ld. CIT(A) has allowed the claim of the assessee by following the decision the Hon'ble Bombay High Court in the case of Associated Capsules Ltd. reported in 332 ITR 421 wherein it has been held that where deduction is allowable u/s.80-IA(1) then deduction under other provisions of heading C of Chapter VIA has to be restricted to the profits of the business that remains after excluding the profits allowed as deduction section 80-IA so that the total deduction allowed under the heading C does not exceed the profits of the business. 70. The Ld. DR for the Revenue has placed reliance on....
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....ime. Interest paid during the year was Rs. 40 Lacs which includes interest on cash credit of Rs. 77,297/-, post shipment credit Rs. 22,35,764/- and other bank interest of Rs. 16,86,939/-. Thereafter, the Ld. Counsel for the assessee has depicted the position of own funds and borrowed funds which is as under: Rs. Crores. 31.03.03 31.03.04 Share capital 71.79 23.83 Reserves and Surplus 319.17 346.70 Total own funds 390.66 370.53 Borrowed funds 0.00 0.00 Investments  ....