TaxTMI 
TaxTMI 
2018 (4) TMI 1754
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.... sustaining the additions and disallowance made by the Learned Assessing Officer, is based on irrelevant considerations, against natural justice, contrary to facts, arbitrary, erroneous and bad in law. 2. Disallowance under "Peripheral Development Expenses" Rs. 56,27,609/- a. That on the facts and in the circumstances the case, the order of the learned CIT (Appeals) in partly sustaining the disallowance of Rs. 56,27,609/- under 'Peripheral Development Expenses' is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law. b That the aforesaid expenditure of Rs. 56,27,609/- having been incurred by the assessee incurred wholly and exclusively for the purpose of its business the sustaining the disallowance by the learned CIT(Appeals) is on mis-appreciation of facts, arbitrary, erroneous and bad both on facts and in law. c. That the learned CIT(Appeals) has erred in holding that the aforesaid Rs. 56,27,609/- is not business expenditure are in the nature of donations / charity and not connected with the running of business. d. That in similar facts and circumstances, in the past years, in assesse....
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....Chapter XVII-B of the Act for the same and hence the sustaining of the disallowance u/s. 40(a)(7a) of the Act is not justified, without jurisdiction, erroneous and bad in law. 4. Disallowance of Additional Deprecation u/s.32(l)(iia) of the Act - Rs. 44,82,76,006/- a. That the learned CIT (Appeals) has mis-appreciated the facts and his sustaining of disallowance of Rs. 44,82,76,006/- under 'Additional Deprecation u/s.32(l)(iia) of the I.T Act is contrary to facts, erroneous and bad, both in the eye of law and on facts. b. That on the facts and in the circumstances the case, the learned CIT(Appeals) ought to have allowed the claim of Addl. Depreciation of Rs. 44,82,76,006/- u/s.32(i)(iia) of the Act. 5. Disallowance of Provision for Leave Encashment'u/s.43B(f) of the Act -Rs. 7,11,48,731/- That on the facts and in the circumstances the case, the sustaining of the disallowance of Rs. 7,11,48,731/- u/s.43B(f) of the Act by the learned ClT(Appeals) is erroneous and bad in law. 6. Expenditure on 'departmental meetings, official lunch & dinner and Company guests' - Rs. 43,12,439/-. ....
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....ively for the purpose of its business, the sustaining of the disallowance by the learned CIT(Appeals) is arbitrary, excessive, erroneous and bad in law. 9. Disallowance under "Prior period adjustments" - Rs. 2,45,25,765/- a. That the learned CIT(Appeals) has mis-appreciated the facts and his sustaining of Rs. 2,45,25,765/- under "Prior period adjustments"' is contrary to facts, arbitrary, erroneous and bad, both in the eye of law and on facts. b. That the learned AO having accepted the credits under the nomenclature "Prior period adjustments", the learned CIT(Appeals) is unjustified and has erred in not allowing the debits under the said "Prior period adjustments" c. That without prejudice to Grounds (a) to (c) above, assuming but not admitting that the said amount of Rs. 2,45,25,765/- is for past years, it is submitted that the rates of Income tax for the assessment under consideration being either equal to or lower than the rates in the past assessment years, as the expenses debited under the said 'Prior period expenditure' are otherwise allowable in the past years, the aforesaid amount o....
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....allowances. 5. Against the additions made by the AO, the assessee filed an appeal before the CIT(A). In the appellate proceedings the assessee reiterated the submissions made before the AO and filed detailed written submissions. The CIT(A) after considering the submissions of assessee and findings of AO has partly allowed the appeal of the assessee. 6. Against the order of CIT(A), both the assessee and Revenue are in appeal before the Tribunal. 7. First ground with respect to the disallowance made by the AO and confirmed by the CIT(A) under Peripheral Development Expenses, in the assessment proceedings, the AO observed that the peripheral development claimed by the assessee are not incurred wholly and exclusively for the business purpose and disallowed the claim. In appeal the CIT(A) has partly allowed the peripheral development expenses and sustained the disallowance to the extent of Rs. 56,27,609/- 8. Before us, ld. AR submitted that the peripheral expenditure was incurred through corporate office at Bhubaneswar amounting to Rs. 56,27,609/-. The CIT(A) has categorised that the peripheral development expenditure does not cover as per the Govt. of Odis....
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....ccordingly, in the interest of justice, we remit this issue to the file of AO to verify the nature of expenditure incurred on the peripheral areas and decide the same on merits. This ground of appeal is allowed for statistical purposes. 11. Next ground is with respect to disallowance of wheeling charges for non-deduction of TDS under section 40(a)(ia) and 194C of the Act. 12. The AO found that the assessee has paid wheeling charges of Rs. 4,37,24,505/- to GRIDCO without deduction of TDS under the provisions of Section 194C. The assessee explained that wheeling charges are paid as per the tariff fixed by the GRIDCO for the transmission of power from its captive power plant to Damanjodi and power transmission charges does not attract the provisions of Section 194C and no deduction is made, whereas the AO found the wheeling charges are clearly subject to provisions of Section 194C as there was a contractual payment and made addition. 13. On appeal, the CIT(A) did not accept the submissions of the assessee and confirmed the findings of the AO. 14. Before us, ld. AR emphasized that the assessee has paid wheeling charges to GRIDCO and the TDS provisions under Sect....
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....on of Chapter-XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of Section 201, then for the purpose of this sub-clause it shall be deemed that the assessee has deducted and paid the tax on which sum of the date of furnishing of return of income by the resident payee referred to in the said proviso." 17. We found the above provision is effective retrospectively as per the decision of Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd. [2015] 61 taxmann.com 45 (Delhi) held that the proviso added u/s.40(a)(ia) of the Income Tax Act,1961 was retrospective in operation and the assessee is entitled to the benefit of the same. Accordingly, if the assessee substantiates with evidence that GRIDCO has offered the income in their income tax assessment, the assessee cannot be treated as "assessee in default". Accordingly, we are of the opinion that the matter needs to be examined and we remit this disputed income to the file of the AO and the assessee shall cooperate and submit the income tax particulars in the assessment proceedings for early disposal of the case and this ground of appeal o....
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....al submissions, we find that on a plain reading of section 31(1)(iia) inserted by the Finance Act, 2002, it is dear that both acquisition and installed of plant or machineries should take place after 31.3.2002 to enable the assessee to claim additional depreciation of 15% if it achieves substantial expansion by way of increase in the installed capacity by not less than 25% in the previous year. The RPU unit as contended by the assessee though acquired by the assessee on amalgamation which the amalgamated company had started commencement of installation of the said unit. The assessee also contended before us that to start the unit, many plant & machinery were acquired and installed after 1.4.2002 (during F.Y. 2002-03 and 2003-04) enabling the Unit to become operative and capable o manufacturing rolled products for commercial purpose. Such submission was also made before 'the authorities below but we find that assessing authorities have not examined this aspect of the case whether any such plant and machinery acquired and installed after 1.4.2002 in the said plant by the assessee. Therefore, finding force in the contention of Id A.R. of the assessee, we restore this issue o the file ....
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.... "19.1 The DR also agreed with the submission of ld. AR of the assessee. In the circumstances of the case, we set aside the order of the CIT(A) and remit the matter to the file of the Assessing officer to re-adjudicate the issue in the light of the Hon'ble Supreme Court decision. Hence, this ground is allowed for statistical purposes. 20. In the result, appeal for the assessment year 2008-09 is partly allowed for statistical purposes." 29. We considering the ratio of the decision and the facts to the present case, remit this issue to the file of the AO to examine and allow the claim and this ground of appeal is allowed for statistical purposes. 30. The assessee has raised the ground No.6, 7 & 8 in respect of disallowance of expenditure on departmental meetings, official lunch and dinner and company guests and the ground with regard to expenditure on ceremonial expenses, other staff welfare expenses and cultural activities and also disallowance under other miscellaneous expenses. 31. The AO found that the expenses claimed by the assessee are not covered under any other head of miscellaneous expenses, therefore, disallowed 20% of such other e....
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....AO that no details were fled in respect of the Smelter Unit, CPP, Delhi and Kolkata Offices. Since, full details were not furnished with proper evidence, the AO observed that total expenditure has not been incurred- wholly and exclusively for the purposes of business. It was in this backdrop that the Assessing Officer, for the first time, has disallowed 30% of the total claim for the assessment year 2006-07, which comes to Rs. 38,23,448 on estimate basis. In the first appeal, Id CIT(A) confirmed the action of the Assessing Officer on the ground that full details were not furnished. In the assessment year 2005-06, the AO did not disallow the expenses under this head. However, Id CIT(A) suo-moto, without giving any notice for enhancement, disallowed 30% on estimate basis. Aggrieved, assessee is in further appeal before us. 45. It was submitted by Id A.R. that while disallowing 30% of the total claim, no adequate opportunity was provided to the assessee for furnishing the particulars. He submitted that the AO has not pointed, out a single instance for disallowing the same. He submitted that keeping in view the size and the nature of business of the assessee company and....
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....ssessment years. 48. The next common issue relating to both the assessment years is with respect to disallowance under "ceremonial expenses, other staff welfare expenses and cultural activities" on estimate basis. 49. Facts in brief are that for assessment year 2005-06 and 2006-07, the assessee has claimed Rs. 50,06,926 and Rs. 88,89,753, respectively towards expenses under "ceremonial expenses, other staff welfare expenses and cultural activities". During the course of assessment proceedings, the Assessing Officer noticed that some sample details relating to expenditure incurred in corporate office were produced. In the absence of full details, the AO disallowed 30% of the total claim made by the assessee for the assessment year 2006-06. However, he did not disallow in the assessment year 2005-06. In the first appeal, Id CIT(A) restricted the disallowance Rs. 5,00,000 for A.Y. 2006-07, However, in A.Y. 2005-06, Id CIT(A) without giving any enhancement notice disallowed' RiS.3,00,000/-. Aggrieved, assessee is in appeal before us. 50. At the time of hearing, Id counsel for the assessee submitted that the expenses incurred by the as....
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....te the addition and allow this ground of appeal of the assessee. 37. Ground No.9 is with respect to confirmation of disallowance made by the AO under prior period adjustments. 38. The AO found that many of the expenses were not accounted for in the earlier years for unspecified reasons and further observed that the non-accounting of the same in earlier year/s was due to inadvertent mistakes and, therefore, disallowed the claim. In appeal the CIT(A) confirmed the disallowance made by the AO. 39. Aggrieved by the order of CIT(A) the assessee is in appeal before the Tribunal. 40. Ld. AR's contention that the CIT(A) has erred in overlooking the facts that this prior period adjustments has accrued to the assessee due to crystallization of the claim and the ld. AO has not considered the prior period income for set off and made disallowance. 41. Contra, ld. DR supported the orders of lower authorities. 42. We have heard rival submissions and perused the material available on record. We found that the terminology prior period adjustment refers to the expenditure which was not accrued during the year but pertaining to earlier year but crystallized. The ld. AR e....
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....rlier years but the AO has not brought on record these facts that the assessee has not disclosed. Whereas ld. AR before us prayed that the assessee is eligible to write off the claim as they are pertaining to earlier years and prayed for an opportunity before the AO. We find strength in the submissions of the ld AR. Accordingly, we remit this issue to the file of AO and this ground of appeal of the assessee is allowed for statistical purposes. 47. Ground No.11 relates to disallowance of Electricity Duty u/s.43B of the Act. The AO on perusal of financial statements found that the assessee has debited a sum of Rs. 131,32,65,663/- in the profit and loss account on account of electricity duty and the remaining was paid before due date of filing of return. Since the assessee disputed an amount of Rs. 47,35,67,572/-, the same was deposited in a designated bank account as per the direction of the Hon'ble High Court and the assessee claimed deductions u/s.43B of the Act and the balance amount of Rs. 12,93,46,730/- was disallowed. The AO is of the opinion that the remaining amount of Rs. 47,35,67,572/- deposited in the bank as per the Direction of the Hon'ble Odisha High Court does not c....
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.... 3. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in deleting the addition of Rs. 9,23,77,013/- made by the AO on account of potreling expenses. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in deleting the addition of Rs. 7,62,83,499/- made by the AO on account of Peripheral Development expenses. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in law as well as on facts in deleting the addition of Rs. 24,23,10,044/- made by the AO on account of gift coupens to employees. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in not accepting the examination of findings made by the AO on the issue. 7. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceeding. 52. Ground No.1 relates to disallowance on account of loss on valuation of non-moving stores and spares. The AO disallowed the entire claim of the assessee on account of d....
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....e, the loss in the value of such stores and spares would not get reflected in the commercial profits. The ITAT relied on various decisions in 243 ITR 284, 51 ITR 329, etc. and also the decision of the Hon'ble Supreme Court in the case of Chainrup Sampatram vs. CIT(24 ITR 481). It was held in these decisions that, if an item is lying in the inventory either unsold or unutilised, if there is a change in the intrinsic value, an assessee can revalue such assets, and claim the loss on account of revaluation as a charge against profits. The ITAT consequently allowed the claim for the years before it. In the subsequent orders in ITA No.511 and 512/CTK/2005 for AATs.19992000- and 2002-03, the ITAT reiterated their decision in para-4 & 5 of the order dt.17.07.07. As mentioned earlier, from A. Y.97-98 there was a change in the valuation of obsolete and non-moving stores and spares and the company started including only 5% of the original cost of such spares in the dosing stock. This was taken note of in the assessment and appellate orders for the subsequent periods. The order of the IT AT for A.Ys. 99-00 and 02-03 takes into account the issue of revaluation in the backdrop of the new for....
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....d the decision of Hon'ble Supreme Court in the case of Chainrup Sampatram Vs. CIT, 24 ITR 481. Accordingly, we dismiss this ground of Revenue. 57. Ground No.2 is with respect to disallowance made by the AO on account of payment to benevolent scheme. The company made payments aggregating to Rs. 22,76,054/- to the members of the families of persons who died while in service. The AO disallowed the claim applying the provisions of section 40A(9) of the Act. In appeal, the CIT(A) followed the orders of Tribunal for the assessment years 1997-98, 1998-99, 19992000, 2001-02 and 2002-03 and allowed the deduction towards the claim. The observation of the CIT(A) on this ground is as under :- "3. Ground No.3 relates to disallowance of payment under benevolent scheme for Rs. 22,76,054/-. The company had made payments aggregating Rs. 22,76,054/- to the members of the families of persons who died while in service. The AO disallowed the claim applying the provisions of section 40A(9). This was consistent with the stand of the Department for the earlier years. The issue has been decided in favour of the appellant for the AYs 1997-98, 1998-99 and 2000-01 by the ITAT in the orders dt.3....
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....he assessee observing as under :- 4.2 I have considered the matter. This issue has come up for consideration in earlier assessments also. The CIT(A)-II, Bhubaneswar, in the case of the appellant for AY 2004-05, vide order dt.31.03.2008 in ITA No.0250/06-07 has elaborately discussed this issue before deleting the disallowance. The operative part of his order for AY 2004-05 is reproduced below: "8.2 During the proceedings, the learned Representative pointed out that a similar issue had come up in the assessment for A. Y. 01-02. For more or less identical reasons, as those given by the AO in the assessment order for A. Y. 04-05, the expenditure was treated as capita/ expenditure in the assessment order for 01-02. In his appellate order in ITA No.0010/04-05 dt.29.7.04, the CIT(A)-II in para-12 has held that the expenditure is revenue in nature. In doing this, the CIT(A) also took note of the order of the IT AT 'E' Bench, Calcutta dt. 19.9.01 in ITA No.l41(Cal)/1997 in the case M/s. Indian Aluminium Co. Ltd. In that case, the CIT had issued an order u/s.263 directing the AO to treat expenditure on 'pot relining and restart expenses' as capital ex....
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....te the disallowance of pot relining expenses of Rs. 12,48,65,503/-." In view of the foregoing, the disallowance of Rs. 9,23,77,013/- for this year is also deleted, as the facts are identical. Ground No.4 is therefore, allowed. 61. Before us, the ld. DR relied on the order of AO, whereas ld. AR of the assessee supported the order of CIT(A). 62. We have heard rival submissions and perused the material on record. We find that as per the AO the expenditure claimed by the assessee on account of pot relining is capital in nature, whereas the CIT(A) relied on the order of his predecessor for the earlier assessment year i.e. A.Y.2004-05 and allowed in favour of the assessee. On perusal of the observations of the CIT(A) in this regard, we find no error in the order of CIT(A) and accordingly the same is upheld and dismiss this ground of appeal of the Revenue. 63. In ground No.4, the grievance of the Revenue is that the CIT(A) has erred in deleting the addition made by the AO on account of peripheral development expenses. 64. Facts relating to this ground are that the AO disallowed Rs. 8,19,11,108/- on account of peripheral development expenses. In appeal th....
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....) for AY 1997-98 is reproduced below: "13.1. From the details of staff welfare expenses furnished, the AO found that the appellant has incurred an expenditure of Rs. 278.31 lakhs towards gift coupons given to the employees. The appellant contended before the AO that the gift coupons were given to maintain cordial and harmonious relationship with the employees and the expenses are allowable u/s 37(1) of the I. T. Act. The AO did not accept the above contention holding that the payment is in the form of gift which is outside the terms of payment of salary and other emoluments. The expenditure is to be treated as application of a part of the profit for the year for non business purpose. The AO disallowed the claim of Rs. 278.31 lakhs.. 13.2 In the written submissions filed the appellant Company has contended that it issued 'Gift Tokens' which can be utilized in exchanging for articles/things of daily use in specific shops to its employees in order to maintain cordial and harmonious relationship with its employees and also as an incentive to encourage the employees to attend to work more diligently and for better performance. Copies of the releva....
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....ement of section 37(1) and the addition is deleted. The facts are identical in this year also. The expenditure is clearly incurred wholly and exclusively for the purpose of business and has to be allowed as a deduction u/s.37(1) of the Act. The disallowance of Rs. 24,23,10,444/- is therefore, deleted. Ground No.6 is allowed. 69. Ld. DR relied on the order of AO, whereas ld. AR relied on the order of CIT(A). 70. We have heard rival submissions and perused the material available on record. We find that the AR of the assessee submitted that the expenditure was incurred wholly and exclusively for the purpose of business, since the gift coupons were linked to the performance of the individuals and the organisation. However, the AO disallowed the claim of the assessee because the payments made by the assessee were in the nature of ex-gratia payments. The CIT(A) held that the expenditure is clearly incurred wholly and exclusively for the purpose of business and has to be allowed as a deduction u/s.37(1) of the Act. We find that the similar expenditures were claimed in the earlier years and the Revenue has accepted the same. In our considered view the CIT(A) has righ....
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....the circumstances the case, the order of the learned CIT (Appeals) in partly sustaining the disallowance of Rs. 4,16,65,787/- under 'Peripheral Development Expenses' is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law.. b. That the aforesaid expenditure of Rs. 4,16,65,787/- having been incurred by the assessee incurred wholly and exclusively for the purpose of its business the sustaining the disallowance by the learned CIT(Appeals) is on mis-appreciation of facts, arbitrary, erroneous and bad both on facts and in law. c. That the learned CIT(Appeals) in holding that the aforesaid Rs. 4,16,65,787/- is not spent in connection with running of business and in violation of Govt, of Odisha notification is on mis-appreciation of facts, arbitrary, erroneous and bad both on facts and in law. d. That in similar facts and circumstances, in the past years, in assessee's own case, the Hon'ble ITAT having decided that the aforesaid expenditure are fully allowable, the learned CIT (Appeals)'s order in not allowing the same is, arbitrary, erroneous and bad both on facts and in law. e. That without prejudice to Gr....
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....888/- a. That the learned CIT(Appeals) has mis-appreciated the facts and his sustaining of addition/ disallowance of Rs. 4,85,17,888/- under "Prior period adjustments"' is contrary to facts, arbitrary, erroneous and bad, both in the eye of law and on facts. b. That the learned Assessing Officer having accepted the credits under the nomenclature "Prior period adjustments", the learned CIT(Appeals) is unjustified and has erred in not allowing the debits under the said "Prior period adjustments" c. That without prejudice to Grounds (a) to (c) above, assuming but not admitting that the said amount of Rs. 4,85,17,888/- is for past years, it is submitted that the rates of Income tax for the assessment under consideration being either equal to or lower than the rates in the past assessment years, as the expenses debited under the said 'Prior period expenditure' are otherwise allowable in the past years, the aforesaid amount of Rs. 4,85,17,888/-, even though debited to the P/L account of the current year ought to be allowed. 8. Disallowance of amounts written off in respect of claims/receivables -Rs. 58,35,505/- ....
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....isallowed by the learned Assessing Officer u/s.40(a)(ia) of the Act in the re-assessments order is arbitrary, erroneous, and bad, both in the eye of law and on facts, the learned CIT(Appeals) ought to have deleted the same. 12. Levy of Interest U/s 220(2) of the Act Rs. 3,66,043/-. That on the facts and in the circumstances the case, the dismissal of the Ground in respect of charging of Interest Rs. 15,56,64,564/- and Rs. 43,07,985/- u/s. 234B and 220(2), (subsequently modified to Rs. 3,66,043 U/s 220(2) by AO vide order U/s 154 dated 11.03.2014) of the Act respectively by the learned CIT(Appeals) is arbitrary, erroneous and bad, both in the eye of law and on facts. 13. That the appellant craves leave, to add, supplement, modify the grounds here-in-above before or at the hearing of the appeal. 74. Brief facts of the case are the assessee is a public sector company wherein 87.15% of the shares are owned by the Government of India. The company is in the business of mining of bauxite, extraction of alumina from the ore and then production of aluminium and filed the return of income on 31.10.2008 declaring total income of Rs. 24....
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....-, TDS provisions are applicable and TDS have been made wherever applicable. In view of the same, the AO is directed to find out, on the basis of information furnished by the appellant, the cases where tax has been deducted and in such cases no addition u/s.40(a)(ia) can be made. However, no tax is deductible in respect of Management Development-Travel Outside India for Rs. 33,57,317/- and Management Development -Travel in India for Rs. 4,49,27,425/- since the same is on account of expenses incurred in travelling . Further, the amount of Rs. 7,20,250/- relates to expenses in respect of Management Development in house Faculty members, Rs. 14,02,657/- relates to Management Development in house for purchase of materials, Rs. 30,73,649/- relates to Management Development Expenses on TQM/ISO/BS and Rs. 6,70,919/- relates to Management Development Expenses on Rajabhasa on which no tax is deductible being for purchase of materials or on account of expenses. Accordingly, no addition u/s.40(a)(ia) can be made in respect of the aforesaid items. The AO is accordingly directed to recompute the addition u/s.40(a)(ia)." 78. We found that the direction of CIT(A) to....