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2017 (9) TMI 1832
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....sed the following grounds of appeal:- 1.0 Disallowance of Expenses u/s 14A - Rs. 25,000/- The learned CIT (A) erred on facts and in law in disallowing Rs. 25,000 out of the dividend income u/s 14A. -He failed to appreciate that the assessee company did not incur any expenditure attributable for earning dividend. 2.0 Disallowance out of Aircraft Expenses - Rs. 3,01,008/- The learned CIT (A) erred in holding that the aircraft were used for non business purposes when it was averred before him that the aircraft are jointly owned with other companies and there is o element of personal use at all. The details of flights (Logbook) were submitted at the time of assessment. 3.0 Prior period expenses - Rs. 42,70,888/- The learned CIT (A) erred on facts and in law in not allowing deduction of Rs. 42,70,888/- on account of expenses related to earlier year rightfully claimed by the assessee. He failed to appreciate that the liability for these expenses crystallized during the year. Alternately, he should have allowed the expenses in respective years. 4.0 Bad debts and irrecoverable balances written off - Rs. 93,66,115/- ....
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....expenses and consider the submissions made in these regards. He ought to have followed executive instructions issued by the Central Board of Direct Taxes regarding use of telephones by employees. 9.0 Repairs expenditure treated as capital expenditure - Rs. 44,27,538/- The learned CIT (A) erred on facts and in law in disallowing expenditure in nature of repairs and maintenance as capital expenditure. He failed to appreciate that neither new asset was acquired nor there was any enduring benefit. The expenditure for renovation and interior decoration of the existing office premises constitute repairs and maintenance expenditure and is allowable as deductible revenue expenditure u/s 30 and 31 of the Income tax Act, 1961. 10.0 Loss on forward contract cancellation loss - Rs. 46,583/- The learned CIT (A) erred on facts and in law in disallowing loss incurred on cancellation of forward contract relating to foreign exchange liability as a speculation loss. He failed to appreciate the common practice prevalent in the business. The learned CIT (A) also misdirected himself and failed to properly appreciate the issue. 11.0 Disallowance out of advert....
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....ability accruing during the year. He ought to have appreciated that although the company changed its method of accounting for leave encashment liability during the year, it did not claim expenditure of Rs. 12.11 crs, which is relatable to earlier years. The liability of Rs. 2.12 crs has clearly crystallized during the year and is an expense for the year. he ought to have followed the decision of the apex court in Bharat Earth Movers case (245 ITR 428). 16.0 Profit u/s 115JB: The learned CIT (A) erred on facts and in law in computing profit u/s 115JB. He failed to appreciate that as per the scheme of amalgamation of the company with Shivaji Works Ltd. (SEL) sanctioned by the BIFR, the company is not liable to pay minimum alternates tax till all the carriedforward unabsorbed losses of SWL are fully absorbed. He failed to appreciate that the order of the BIFR is "directory" and is not a mere recommendation and as per CBDT notification it is binding on him. He further failed to appreciate that under section 32(1) of the SICA, orders passed by the BIFR have overriding effect over the Income Tax Act. He failed to appreciate the arguments advanced by the assessee. ....
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....st the disallowance of deduction on account of prior period expenses totaling Rs. 42,70,888/-. 8. The assessee for the year under consideration had claimed deduction on account of prior period expenses to the extent of Rs. 65,74,160/-. The Assessing Officer asked the assessee to establish that the liability in respect of said expenditure had got crystallized during the year. The Assessing Officer held that in the absence of any documentary proof or any cogent evidence, none of the liabilities could be said to have got crystallized during the year ending 31.03.2001. The assessee had claimed TDS of Rs. 9 lakhs and Sales Tax of Rs. 1,41,890/- which was held to be not allowable deduction. The Assessing Officer was of the view that where the assessee was following mercantile system of accounting, all these expenses should have been debited in the respective years. 9. The CIT(A) allowed prior period expenses of Rs. 23,03,270/-. In respect of remaining prior period expenses which included TDS of Rs. 9 lakhs, Sales Tax of Rs. 1,41,890/- and Octroi of Rs. 4,010/- and other expenses, the CIT(A) upheld the disallowance at Rs. 42,70,880/-. 10. The assessee is in appeal against t....
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....by the assessee, though booked as prior period expenses, merits to be allowed in the hands of assessee. Accordingly, the ground of appeal No.3 is partly allowed. 14. The issue in ground of appeal No.4 is on account of two accounts i.e. under the head bad debts and irrecoverable balances written off of Rs. 93,66,115/-. The first sub-head is bad debits written off of Rs. 19,02,884/- and the second is debit balances written off of Rs. 93,66,115/-. In respect of first subissue, the assessee had written off sum of Rs. 19,02,884/- which was due from Mysore Kirloskar Ltd. (MKL) sick company, which was referred to BIFR. The assessee had raised debit notes on the said concern for recovery of common aviation pool expenses and since the same were not recovered, it was written off as the said income was offered to tax in earlier years. The Assessing Officer had disallowed the claim of assessee. The CIT(A) however, restores this issue back to the file of Assessing Officer to verify whether the amount has been written off. 15. The learned Authorized Representative for the assessee fairly pointed out that the issue has been restored back to the file of Assessing Officer but the Assess....
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....also rejected. Now, before us, the learned Authorized Representative for the assessee has restricted its claim in respect of sales tax amount paid on 30.01.2000. The learned Authorized Representative for the assessee pointed out that the said amount was paid in earlier years and the claim has been written off during the year and the same merits to be allowed. In view of the contention of assessee, where the claim is written off, we allow the deduction on account of Rs. 30 lakhs and the balance disallowance is confirmed in the hands of assessee. The ground of appeal No.4 is thus, partly allowed. 22. The next issue raised by way of ground of appeal No.5 is the disallowance out of club expenses of Rs. 1 lakh. 23. The authorities below had treated the entrance fees paid to the PYC Hindu Gymkhana as capital expenditure. 24. The learned Authorized Representative for the assessee in this regard pointed out that the said issue is covered in favour of assessee by the decision of Hon'ble High Court of Gujarat in Gujarat State Export Corporation Ltd. Vs. CIT (1994) 209 ITR 649 (Guj). 25. We find that the issue is squarely covered by the ratio laid down by the Hon'ble High Co....
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....ew assets altogether had come into existence and hence, the expenditure was not capital in nature. The Assessing Officer on the other hand, observed that the expenses had created a number of new assets and also there was substantial overhauling and renovation. The Assessing Officer held the expenses to be capital in nature as the said expenditure was not recurring expenditure in the nature of normal repairs and maintenance. 30. The CIT(A) upheld the order of Assessing Officer, against which the assessee is in appeal. 31. The perusal of details which are reproduced at page 14 of the assessment order reflects renovation and interior decoration of various portions being carried out by the assessee including providing of furniture work in board room, video conference room, visitors room, etc. The assessee also provided automatic gates and security cabins. The nature of expenditure incurred by the assessee reflects the same to be in the nature of repairs and maintenance and merits to be allowed in the hands of assessee. The expenditure incurred on security cabins and also cabin for computer gate pass system are temporary in nature and are also to be allowed as revenue in nat....
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....nditure of capital in nature. The remaining expenditure not being of capital in nature, would be allowed. Accordingly, directions were issued by the CIT(A). 36. The assessee is aggrieved by non-passing of consequent order by the Assessing Officer and hence, in appeal. The second part of expenses was for presentation expenses, guest expenses and general expenses and he upheld the disallowance @ 5% made by the Assessing Officer. However, in respect of licence expenses, the CIT(A) held that the same are to be allowed in entirety. The assessee before us has pointed out that the CIT(A) has erred in remitting the issue back to the file of Assessing Officer for verification of entire expenditure on product advertisement and sales promotion when he himself convinced with the major portion of expenditure was revenue in nature. Further, the assessee is also in appeal against 5% disallowance made out of guest expenses, presentation of articles and general expenses being not wholly and exclusively were incurred for the purpose of business. The learned Authorized Representative for the assessee is aggrieved by the said order of CIT(A); in the first instance, for no appeal effect be allowed t....
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.... The assessee also filed a copy of letter dated 20.01.2001 of M/s. Oil India Ltd., wherein damages of Rs. 1.56 crores had been worked out and demanded. The assessee also furnished the copies of vouchers, statements, correspondence with the concerned parties in respect of balance liquidated damages paid by the assessee. The CIT(A) in view of the letter received from M/s. Oil India Ltd., wherein the actual liquidated damages were of the order of Rs. 1,49,97,482/-, held the same as admissible and the disallowance to that extent was deleted. The remaining amount of Rs. 6,64,552/- represented interest on mobilization advance. The CIT(A) noted that as per purchase order, mobilization advanced was interest free and it had to be seen as to why M/s Oil India Ltd. demanded interest on the said mobilization advance. In the absence of complete details being filed by the assessee, the matter was restored to the file of Assessing Officer to call for relevant particulars and decide the same. 41. In respect of balance liquidated damages, the assessee filed evidences in respect of certain items and the CIT(A) held that in view of the evidences filed for Rs. 3,41,724/-, Rs. 5,44,987/-, 1,45,....
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.... 44. The learned Departmental Representative for the Revenue on the other hand, relied on the ratio laid down by the Hon'ble Supreme Court in Haji Aziz and Abdul Shakoor Bros. Vs. CIT (1961) 41 ITR 350 (SC), wherein liquidated damages paid were not allowed. He also placed reliance on the ratio laid down by the Hon'ble High Court of Delhi in Rohtak Textiles Mills Vs. CIT (supra), which was relied on by the Assessing Officer. 45. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is in respect of liquidated damages provided by the assessee in its books of account. The case of assessee before us is that in view of it taking up turnkey projects and as per the conditions of purchase order placed, the project has to be completed within stipulated period and in case the same is not so completed, then the assessee is liable to pay liquidated damages. Further, in case other conditions of the purchase order are not complied with by the assessee, then also as part of purchase order itself, there is a clause that the purchaser may at his discretion withhold any payments until the whole of stores has been supplied and he may also de....
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....nds of assessee in entirety. We find no merit in the orders of authorities below in allowing the liquidated damages only to the extent where the amount has been paid and in not allowing the balance. In any case, the said liquidated damages are relatable to the business undertaken by the assessee and are not for infraction of law. Hence, there is no merit in disallowing any part of expenditure. Reliance placed upon by the learned Departmental Representative for the Revenue on the decisions of Hon'ble Supreme Court are misplaced as in both the cases, damages were paid on account of infraction of law and hence, were held to be not allowable as expenditure in the hands of said assessee. However, in the present case, liquidated damages are paid by the assessee on account of violation of terms of contract entered into with the parties to whom the goods have been supplied by the assessee. There is no infraction of law in such cases and accordingly, we find no merit in the orders of authorities below in this regard. Reversing the order of CIT(A), we direct the Assessing Officer to allow the claim of assessee also on account of provision made of Rs. 20,82,139/-. The ground of appe....
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.... the excess cost of fuel consumption and also non-availability of power. 52. The learned Departmental Representative for the Revenue relying on the order of Assessing Officer at page 22 of assessment order also referred to the observations of CIT(A) in para 22 of the appellate order. 53. We have heard the rival contentions and perused the record. The issue arising in the present appeal is against the disallowance made on account of amounts debited under the head 'Sales and service charges' of Rs. 18,85,000/-. The assessee had debited the provision for expenses in respect of its unit at Nashik. The assessee claimed that as per contract / agreement, it was obliged to reimburse the value of certain excess i.e. on account of fuel consumption and / or consumption of lube oil. The assessee admittedly, has filed the agreement but the findings of CIT(A) are that the assessee had failed to give any details to show that it had violated the said terms and conditions. Further, the assessee was asked to clarify as to when the reimbursements were actually made but the said details were also not furnished. The CIT(A) has challenged the very factum of liability having been discharged a....
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....f Earned Leave had arisen in the accounting period itself and the assessee claimed the same to be allowable as business expenditure notwithstanding the fact that the same would be quantified and discharged at a future date. As per Accounting Standard 15, it was mandatory to make the said provision. However, the Assessing Officer was of the view that the facts in the case of Bharat Earth Movers (supra) were at variance and where the assessee has not maintained any separate fund and even had not credited the provision amount to the individual employees account, then the liability to pay the leave encashment to the employees could by no means be recorded as having accrued. The Assessing Officer relied on the ratio laid down by the Hon'ble High Court of Karnataka in CIT Vs. Motor Industries Co. Ltd. (1998) 229 ITR 137 (Kar), wherein it was held that the provision for leave encashment was a component liability and hence, not deductible. The learned Authorized Representative for the assessee also referred to the provisions of section 43B of the Act which had been amended w.e.f. assessment year 2002-03 to allow deduction on account of leave encashment only on actual payment basis. A....
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....ment in its books of account. However, the provision made for earlier years was not claimed as deduction in the Profit and Loss Account which totaled to about Rs. 12 crores. The assessee only claimed the provision made for leave encashment due to the employees only for the year under consideration at Rs. 2.11 crores. The case of assessee was that the said provision was made in respect of amounts due to the employees for the year under consideration itself and hence, was to be allowed as deduction in its hands under section 37(1) of the Act. The Revenue on the other hand, noted that the assessee in earlier years was making the payments of leave encashment and was claiming the said expenditure on actual basis. The authorities below rejected the claim of assessee in this regard and held that where no amount has been paid by the assessee on account of leave encashment, there is no merit in making the provision for leave encashment. The assessee had declared the said change in practice in its Balance Sheet filed for the year under consideration. As per Note 18 of Schedule 21, the assessee had declared that accrued liability of Rs. 142.31 millions on account of privileged leave enc....
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....sing Officer shall accordingly, allow the same. The ground of appeal No.15 raised by the assessee is thus, allowed. 65. Now, coming to the next ground of appeal i.e. 16 which is against determination of book profits under section 115JB of the Act. 66. Brief facts relating to the issue are that the assessee had in the return of income not computed the book profits under section 115JB of the Act though the final result as per Profit and Loss Account was income of Rs. 41,33,26,000/-. The assessee had not made the said computation on the ground that in view of overriding directions of the Board for Industrial and Financial Reconstruction (BIFR) under the scheme of amalgamation of M/s. Shivaji Works Ltd. (CWL), loss making company, observed that the assessee was under no obligation to pay Minimum Alternate Tax (MAT) until brought forward losses of the amalgamation company had not been fully set off. The Assessing Officer on the other hand, observed that section 115J or 115JB of the Act did not allow any exception with reference to take over of loss making concern, hence he proposed to compute the adjusted book profits at Rs. 41.50 crores. In response thereto, the assessee re....
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.... 68. The assessee is in appeal against the said order of CIT(A). 69. After taking us through the factual aspects of case, reliance was placed on the order of Tribunal relating to assessment year 1999-2000 with special reference to para 16 and it was pointed out that the issue now stands covered by the ratio laid down by the Hon'ble Bombay High Court in assessee's own case. 70. The learned Departmental Representative for the Revenue on the other hand, relied on the order of CIT(A). 71. The learned Authorized Representative for the assessee also took us through the calculation of book profits from assessment year 1999-2000 onwards and the adjustment to be made on account of losses of amalgamating company. He also pointed out that in case this issue was decided in favour of assessee, the other issues raised on strictly without prejudice would become academic in nature. 72. We have heard the rival contentions and perused the record. The limited issue which arises for adjudication under this ground of appeal is whether the assessee is liable to be assessed on the book profits determined as per section 115JB of the Act. The case of assessee is that it had taken over the loss....
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.... we hold that the order of BIFR is binding upon the Revenue authorities and effect of the same is to be allowed in the hands of assessee. Accordingly, the book profits under section 115JB of the Act cannot be taxed till unabsorbed losses of SWL are adjusted. In this regard, the assessee has filed the calculation sheet before us. However, for the limited purpose of verifying the stand of assessee, we remit this issue back to the file of Assessing Officer for limited purpose of determining the availability of losses and till the same are not fully adjusted, then the assessee cannot be taxed on book profits under section 115JB of the Act. The Assessing Officer is directed to allow reasonable opportunity of hearing to the assessee in this regard and pass the order within period of six months. Accordingly, the balance issues raised on without prejudice basis become academic. In view thereof, the ground of appeal No.16 is allowed. 75. The Revenue in ITA No.884/PUN/2006, relating to assessment year 2001- 02 has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case, and in law, the CIT (A) erred in deleting the addition of Rs. 29,51,493/-....
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....ked out the remuneration / commission which could be paid to the Directors at 11% of the profits determined under section 349 of the Companies Act at Rs. 3,46,48,000/-. The same was however, restricted to Rs. 2,81,28,000/- being the amount actually paid. The Assessing Officer found that the profit of Rs. 34,64,80,000/- determined under section 349 of the Companies Act, which was the basis for calculating eligible remuneration / commission, included tax free dividend of Rs. 3,63,56,418/-, which was claimed as exempt under section 10(33) of the Act. Hence, the Assessing Officer proposed to disallow the claim towards remuneration / commission in the same ratio as the tax free dividends bore to the profit. The assessee pointed out that there was no bar under the Income Tax Act to claim remuneration / commission, etc. where the same was within the limits prescribed under the Companies Act. He also pointed out that the actual payments were less than the eligible amounts. However, the Assessing Officer rejected the same and out of claim towards remuneration / commission of Rs. 2.81 crores, he made disallowance of Rs. 29,51,493/-. 78. The CIT(A) held that it was not disputed by th....
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..... 18,17,821/-. The Revenue is in appeal against the said relief granted by the CIT(A) and pointed out that disallowance at Rs. 25,000/- was very low. We find no merit in the plea of learned Departmental Representative for the Revenue in this regard, where the assessee has received only 20-21 dividends warrants during the relevant year. In the entirety of the above said facts and circumstances, we uphold the order of CIT(A) and dismiss the ground of appeal No.2 raised by the Revenue. 82. The issue in ground of appeal No.3 is against deletion of addition of Rs. 1,03,342/- made on account of penal interest. The assessee had claimed to have paid the said interest on account of delay in payment of interest on secured debentures to UTI and claimed the same to be compensatory in nature. The Assessing Officer however, held the payments to be penal in nature as there was no reasonable cause in the said delay. Before the CIT(A), the assessee explained that it had issued 4 lakh shares (19% secured redeemable nonconvertible debentures on private placement to LIC, UTI, etc.). The said securities in respect of debentures were required to be credited on or before 31.12.1992. But they wer....
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....aid by the assessee was Rs. 1.20 crores. The CIT(A) observed that where the assessee had given the assignment to M/s. Kirloskar Consultant Ltd. to explore avenues for and possibility of enhancing its business and market prospects, then the same is business advance and no part of interest is to be disallowed. The CIT(A) thus, deleted the disallowance of Rs. 19,20,000/-. 84. The issue raised vide present ground of appeal is squarely stands covered by the ratio laid down by the Hon'ble Supreme Court in SA Builders Ltd. Vs. CIT(A) & Anr. (2007) 288 ITR 001 (SC), wherein it has been held that in case the assessee makes advances for business purposes, then no part of interest on interest bearing funds is to be disallowed. Following the same parity of reasoning, we hold that where the assessee had entered into specific agreements with M/s. Kirloskar Consultants Ltd. in order to explore new avenues to enhance its business and also to increase its market conditions and had made the said advances in line with the agreement, then the said advance having been made during the course of carrying on of its business and against such advances, no part of interest relatable to interest....
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....of assessee's shares (in 1993) and partly as a part of amalgamation scheme of Shivaji Works Ltd.; further investment in Kirloskar Power Supply Company Ltd. of Rs. 14.49 crores, bonds of Rs. 8 crores was out of long term capital gains under section 54EA of the Act. Accordingly, he found no merit in the order of Assessing Officer. 87. The Revenue is in appeal against the order of CIT(A) and the learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer. 88. The assessee pointed out that the investments during the year were only Rs. 25 crores and not Rs. 75 crores as noted by the Assessing Officer. Our attention was drawn to the list of investments, wherein it has increased from Rs. 163 crores to Rs. 188 crores. He further pointed out that where the borrowings had come down by about Rs. 50 crores, then how it could be inferred that borrowed funds were utilized for making the said investments. Our attention was drawn to the Balance Sheet at pages, 20, 24 and 25 of the Paper Book. 89. We have heard the rival contentions and perused the record. The sole basis for making the aforesaid disallowance of interest expenses in the hands of ass....
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.... is thus, allowed for statistical purposes. 92. The issue in ground of appeal No.7 raised by the Revenue is against deletion of part of liquidated damages. The said issue has already been adjudicated by us along with the assessee's ground of appeal No.12 and accordingly, the ground of appeal No.7 is dismissed. 93. The issue in ground of appeal No.8 is against deletion of addition of Rs. 7,20,000/- paid to Smt. Aarti Kirloskar for the work done of development of internet. The said internet developed by Smt. Aarti Kirloskar was meant for communication amongst the employees, dealers, customers. It was a medium for sharing information on products, services purposes, etc. Further, the assessee claimed that remuneration payable to her as consultant was approved by the Company Law Board at Rs. 60,000/- per month. However, the Assessing Officer did not accept the said claim of assessee and allowed only to the extent of 1/5th. The CIT(A) noted that the assessee had engaged Smt. Aarti Kirloskar as the consultant since 01.04.1998. He also noted that she was to set up a web initiative department with an objective to digitize information and move towards ebusiness. The CIT(A) held t....
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..... 11,51,176/- on account of expenses related to earlier years rightfully claimed by the assessee. He failed to appreciate that the liability for these expenses crystallized during the year. Alternatively, he should have allowed the expenses in the respective years. 3.0 Bad Debts and irrecoverable balances written off - Rs. 55,55,487. The learned CIT (A) erred on facts and in law in disallowing irrecoverable debit balances as written off under section 36(1)(vii) of the Act when the assessee has claimed amount of Rs. 54,55,487/- under section 28 of the Act. The learned AO further erred in allowing himself to be misguided with nature of claim u/s 28 and bad debts u/s 36. He failed to appreciate the written and oral arguments put before him. 4.0 Vehicle Expenses - Rs. 113862 The learned CIT (A) erred in facts and in law in arbitrarily disallowing 2% of the expenditure incurred on Vehicles under section 37(1) amounting to Rs. 5693115/- as non business expenditure. He failed to appreciate that as per service conditions applicable to senior officers, company allows them to use company‟s vehicles for office work and any incidental personal use is t....
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....on made for liquidated damages/ late delivery charges as unascertained liability. He failed to appreciate that these charges were paid or provided on commercial terms of contract in the course of business and were not paid for any infraction or breach of law. 9.0 Legal & professional expenses - Rs. 480000/- The learned CIT (A) erred on facts and in law in holding that out of legal & professional fees, fees paid to Kirloskar Institute of Advanced Management Studies (Rs. 6,00,000/-) are in the nature of deferred revenue expenditure. He further erred in spreading the expenditure over a period of five years instead of allowing it in the current year without appreciating the method of accounting consistently followed by the assessee, the treatment given in the accounts and particularly when admittedly there is no provision in the Act to defer the expenditure. He thus exceeded his authority by going beyond the statute books. The disallowance is also based on estimates, surmises, conjectures and is without any basis and is untenable in law. 10.0 Disallowance out of Repairs - Rs. 2,07,728/- The learned CIT (A) erred on facts and in law in treating ....
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....of appeal against the assessee. 98. The second issue raised by the assessee is in respect of prior period expenses for which, the details have been filed at page 99 of the Paper Book. The perusal of said details reflect certain expenses to be booked on account of raw material imported, ONM expenses and its testing analysis charges, etc. The assessee claimed that the bills for the same were received during the year under consideration and hence, the same were booked accordingly. We have already decided this issue in assessment year 2001-02 and following the same parity of reasoning, we hold that since the liability for expenses was crystallized during the year, then the said expenses are to be allowed as prior period expenses in the hands of assessee. 99. The issue in ground of appeal No.3 raised by the assessee is not pressed and hence, the same is dismissed as not pressed. 100. The issue in grounds of appeal No.4, 5 and 6 is against disallowance out of vehicle expenses, lease rent on car and telephone expenses. The assessee had raised similar grounds of appeal No.6, 7 and 8 in assessment year 2001-02, wherein we have allowed the claim of assessee holding that no disallowa....
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....stence. We find merit in the plea of assessee and expenditure is held to be revenue in nature incurred for the purpose of business and hence, is to be allowed in the hands of assessee. The ground of appeal No.10 is thus, allowed. 106. Now, coming to ground of appeal No.11, wherein the disallowance is made out of miscellaneous expenses for non-business expenses. The CIT(A) had disallowed 5% of the said miscellaneous expenses for non-business purposes. We find no merit in the order of CIT(A), where the assessee is a limited company and no disallowance can be made for personal use. Accordingly, we reverse the order of CIT(A) and allow the claim of expenditure of Rs. 4,75,207/-. 107. The ground of appeal No.12 is in respect of applicability of section 115JB of the Act i.e. exemption from MAT as per BIFR order. The first issue raised vide ground of appeal No.12a is identical to the issue raised in assessment year 2001-02 vide ground of appeal No.16 (first part) and following the same parity of reasoning, we direct the Assessing Officer to verify the claim of assessee that the losses from amalgamating company are still available in its hands and if that is so, then no tax is to be ....
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....d confirmed the addition of Rs. 1 lakh on account of administrative and managerial expenses for earning tax free dividends under section 14A of the Act. Similar issue arose before the Tribunal in assessment year 2001-02 vide ground of appeal No.2 raised by the Revenue and following the same parity of reasoning, we dismiss the ground of appeal No.2 raised by the Revenue. 111. The issue in ground of appeal No.3 is against deletion of addition of Rs. 31,85,000/- which was disallowed by the Assessing Officer being interest free advances made to sister concern. Similar issue has been decided by us in assessment year 2001-02 vide ground of appeal No.4 raised by the Revenue and following the same parity of reasoning, we dismiss the ground of appeal No.3 raised by the Revenue. 112. The issue in ground of appeal No.4 is against deletion of addition of Rs. 1,07,61,723/- on account of interest relatable to investment made in bonds and shares which were exempt under section 10(33) of the Act. The learned Authorized Representative for the assessee in this regard, pointed out that there was no outgo of money as the fresh investments were because of re-structuring. Further, the assess....
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....liability. He also failed to appreciate that the law in this regard is settled by the Supreme Court in Indo Nippon Chemical Co.‟s case. 3.0 Issues relevant for computation of income u/s 115JB of the Act The learned CIT (A) erred on facts and in law in computing profit u/s 115JB on following grounds : 3.1 Unabsorbed depreciation of Shivaji Works Ltd.-Rs. 14,81,51,440/- The learned CIT (A) failed to appreciate that as per the scheme of amalgamation of the company with Shivaji Works Ltd. (SWL) sanctioned by the BIFR, the company is not liable to pay minimum alternate tax till all the carried-forward unabsorbed losses of SWL are fully absorbed. He failed to appreciate that the order of the BIFR is "directory" and is not a mere recommendation and as per CBDT notification it is binding on him. He further failed to appreciate that that under section 32(1) of the SICA, orders passed by the BIFR have overriding effect over the Income Tax Act. The CIT (A), therefore, erred in disallowing unabsorbed depreciation of SWL while computing profit u/s 115JB of the Act. 3.2 Capital receipts credited to Profit & Loss Account - Rs. 32,95,359/- ....
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....d the same would not have any impact on the profit for the year. 119. In view of the proposition laid down by the Hon'ble Bombay High Court and the issue being settled by the Hon'ble Supreme Court in CIT Vs. Indo Nippon Chemicals Ltd. (supra), we find no merit in the orders of authorities below, where the assessee is consistently following exclusive method of valuing its stock, which in turn, is not affecting its profit, then there is no merit in making any adjustment on account of un-utilized CENVAT credit at the end of year. Accordingly, we reverse the findings of CIT(A) in this regard and delete the addition of Rs. 18,90,099/-. The ground of appeal No.2 raised by the assessee is thus, allowed. 120. The issue in ground of appeal No.3 raised by the assessee is against computation of book profits under section 115JB of the Act. The issue arising is as in earlier years. However, change in the year under consideration as against unabsorbed losses, the assessee for the year under consideration has pointed out the availability of unabsorbed depreciation of SWL to the extent of Rs. 14.81 crores. Following our parity of reasoning as in the paras hereinabove in relation to....
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....e, deferred sales tax liability. He also observed that any payment of sales tax liability was of revenue account and therefore, any reduction in such liability could also result in revenue receipt. The Assessing Officer thus, treated the same as revenue receipt. 124. The CIT(A) allowed the claim of assessee holding as under:- "6. I considered the appellant‟s explanation and material available on record. It is contended by the appellant that it was only the payment at discount at net present value (NPV) of the future liability to pay the outstanding sales tax amount. It is stated that such payment at a discounted value cannot be treated as remission or cessation of liability so as to attract the provisions of section 41(1). In fact, it was only a premature payment of the sales tax outstanding amount which was treated as loan. The appellant has cited the Special Bench decision in the case of Sulzer India Ltd. (2010) 134 TTJ (Mumbai)(SB) 385 in its support. It is noted that in this decision of the Special Bench, it was held that such premature payment of the deferred sales tax liability at its discounted value or at NPV cannot be treated as remission or cessation of ....
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.... and the same was not paid by the assessee, hence, no merit in the order of Assessing Officer in treating the difference as remission between loan and the actual payment as taxable under section 41(1) of the Act. The payment at net present value of future liability cannot be treated as remission or cessation of liability under section 41(1) of the Act, at best it is premature payment of sales tax outstanding amount, which was treated as loan by the assessee. 126. We find the issue raised in the present appeal is also covered by the order of Special Bench decision in the case of Sulzer India Ltd. Vs. JCIT (2010) 134 TTJ (Mumbai) (SB) 385, which has been confirmed by the Hon'ble Bombay High Court in CIT Vs. Sulzer India Ltd. (2014) 369 ITR 717 (Bom) and also by the decision of Hon'ble High Court of Delhi in CIT Vs. Virtual Soft Systems Ltd. in ITA Nos.216/2011, 398/2011, 403/2011, 404/2011 and 680/2011. Following the same parity of reasoning, we find no merit in the ground of appeal No.1 raised by the Revenue and the same is dismissed. 127. Now, coming to the second issue which is raised by way of grounds of appeal No.2 and 3 i.e. against the order of CIT(A) in deleting ....
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....uidance Note issued by the Institute of Chartered Accountants of India. It was not actually the part of lease rental income. It was explained that the same was only a book entry to ensure that the lease income was accounted on a uniform basis over the lease-period, the same being the difference between the capital recovery component considered in the lease rentals and depreciation. The appellant has also stated that in the earlier A.Y. 2001-02 also, it was not considered as income, whereas in the A.Yrs. 99- 2000 and 2000-01 when it was having a debit balance, it was not claimed as deduction. It was thus stated that actually only the lease rental amount of Rs. 3,50,44,140/- was in fact receivable from KFIL as per agreement but it was not accounted for during the year. The appellant has cited the ITAT Delhi Bench decision in the case of Goodwill India Ltd Vs DCIT (2008) 114 ITD 665 which is also on the same ratio that the leas equalization charges as per ICAI Guideline are not to be considered for computing lease rental income under the I.T. Act. The Tribunal observed that even the ICAI was of the view that this method was meant only for recognizing the net income in respect of a fin....
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....the book profit u/s.115JB at Rs. 37,48,48,466/- in this year. On the other hand, in A.Y. 2004-05, the returned income was Rs. 82,40,49,730/- as per normal computation, and the assessment was completed at the total income as per normal computation itself, at Rs. 97,73,78,448/- The returned income of Rs. 82.40 crores for A.Y. 2004-05 was inclusive of the lease rental income for A.Y. 2001-02 to 2003-04 which was not accounted for in these years; but has been taken into account while computing this total income in A.Y. 2004-05. 14. Having carefully considered the facts and circumstances of the case as discussed above, I find no reason for adding the lease rental income of Rs. 3,50,44,140/- in this year and the same is directed to be deleted. Ground No.3 is therefore, held as allowed." 131. The Revenue is in appeal against the order of CIT(A) and has pointed out that where the income had accrued during the year, then the same merits to be added in the hands of assessee. 132. The learned Authorized Representative for the assessee on the other hand, referred to the Notes to accounts, Sr.No.16 at page 49 of Paper Book attached to the Balance Sheet, wherein it was pointed out....
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....r, the total assessed income of the assessee after inclusion of lease rental of Rs. 3.50 crores as well as lease equalization charges of Rs. 2.69 crores was only Rs. 88,45,760/-, because of brought forward losses for which, set off was allowed by the Assessing Officer in the assessment year. The assessment was made at book profit under section 115JB of the Act at Rs. 37.48 crores in assessment year 2003-04, on the other hand, in assessment year 2004-05, the returned income was Rs. 82,40,49,730/-, as per normal computation of income and the assessment was completed on total income of as per normal computation itself. In the totality of the above said facts and circumstances, where the assessee has paid taxes in assessment year 2004-05 on the said lease rentals on receipt basis, we find no merit in the grounds of appeal No.2 and 3 raised by the Revenue and the same are dismissed. 134. The Revenue is also in appeal against the order of re-assessment passed under section 147 of the Act vide ITA No.543/PUN/2012, relating to assessment year 2003-04 and has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was ....
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....mount u/s 115JB." 136. The CIT(A) held that he had already decided the issue on account of lease rental and lease equalization charges vide his order dated 22.12.2011 and has held that neither lease equalization of Rs. 2.69 crores nor the lease rental of Rs. 3.50 crores were liable to be added to the income of this year. Consequently, the same could not be added to the book profits for the year under consideration as not having been accounted for as income in this year. Consequently, the CIT(A) held that there is no need to adjudicate the issue of reopening under section 147/148 of the Act. 137. The Revenue is in appeal against the order of CIT(A). 138. The learned Departmental Representative for the Revenue pointed out that in view of the ratio laid down by the Hon'ble High Court of Delhi in CIT Vs. Sain Processing & Weaving Mills (P) Ltd. (2010) 325 ITR 565 (Del), the said items of income though not considered in the Profit and Loss Account but the same needs to be added to the profit for the purpose of computation of book profits under section 115JB of the Act in the re-assessment proceedings. 139. The learned Authorized Representative for the assessee on the other h....
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....penses relating to dividend income on an ad-hoc basis u/s 14A. He failed to appreciate that the investments on which dividend were received were very old and were not acquired out of borrowing. The assessee company did not incur any expenditure attributable for earning dividend. The CIT (A) could not point out any expenditure directly attributable for earning the tax free income and arbitrarily made ad-hoc disallowance of Rs. 50,000/- and no nexus of the expenditure with the tax free income was established. 2.0 Disallowance out of Aircraft Expenses - Rs. 4,25,448/- The learned CIT (A) erred in holding that the aircraft were used for nonbusiness purposes when it was averred before him that the aircraft are jointly owned with other companies and there is no element of personal use at all. The details of flights (statement in lieu of logbook) were submitted at the time of assessment. 3.0 Bad debts and irrecoverable balances written off - Rs. 53,18,440/- The learned CIT (A) erred on facts and n law in disallowing irrecoverable debit balances as written off under section 36(1)(vii) of the Act when the assessee has claimed amount of Rs. 53,18,440/- und....
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....iss the ground of appeal No.1 raised by the assessee. 144. The issue in ground of appeal No.2 is against disallowance out of aircraft expenses of Rs. 4,25,448/-. Similar issue has arisen in assessment years 2001- 02 and 2002-03 vide ground of appeal No.1 and following the same parity of reasoning, this ground of appeal is decided against the assessee. 145. The issue in ground of appeal No.3 is against allowability of debit balances written off of Rs. 53,18,440/- is not pressed and hence, the same is dismissed as not pressed. 146. The next issue raised vide ground of appeal No.4 is against disallowance out of advertisement and publicity expenses of Rs. 47,86,632/-. We find similar issue has been addressed by us vide ground of appeal No.11 in assessment year 2001-02 and ground of appeal No.7 in assessment year 2002-03. Following the same parity of reasoning, we remit this issue back to the file of Assessing Officer to carry out verification exercise. However, we uphold the disallowance of 5% out of expenditure on guest expenses, presentation expenses and article & general expenses. No disallowance is to be made out of liaison expenses. The ground of appeal No.4 raised ....