TaxTMI 
TaxTMI 
2016 (8) TMI 1478
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.... purpose of business. 2(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming the disallowance of Consultancy Charges amounting to Rs. 8,40,000/- by holding that the said expenditure is capital in nature. 2(b) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) failed to appreciate the fact that the expenditure on account of consultancy charges amounting to Rs. 8,40,000/- is of revenue nature in view of the decision of IT AT in the appellant's own case on an identical issue. 2(c) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in holding that the nature of expense is distinct from expenditure incurred in earlier years inspite of the fact that there is no material change in the nature of expenses. 2(d) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) failed to appreciate the fact that by incurring the said expenditure no new assets or advantage of enduring nature was brought into existence. 2(e) That on the facts and in the circumstances of the case and without prejudice to Ground No. 2(a), 2(b), 2(c) and 2(d) taken here....
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....aid amount of Rs. 28,71,804/- only represented interest income of a contingent nature at the stage of provisional assessment or otherwise, the accrual of which could be said to take place only in further pending proceedings and hence as such, was completely outside the purview of taxability as per the provisions of the Income-tax Act, 1961. 6(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming disallowance of the proportionate amount of Premium paid on Leasehold Land of Rs. 21,07,945/- written off during the year as revenue expenditure by treating the same as capital expenditure. 6(b) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) failed to appreciate the fact that the Premium paid on Leasehold Land, essentially bears the character of rent paid in advance which does not entail acquisition of any asset. 7(a) That on the facts and in the circumstances of the case, having disallowed premium on leasehold land in respect of Unit Gaj-1 in computing taxable income, the Ld. CIT(Appeals) has grossly erred in confirming deduction of the same in computing profits of Unit Gaj-1 and in the process....
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....to be reduced in computing Book Profit, the Ld. CIT(Appeals) erred in not directing the A.O. to exclude brought forward losses, while computing book profits for the year as was held by his predecessor in the same order. 10(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in granting exclusion of export profit as computed under the provisions of the Act in computing the book profit for the purpose of section 115JA of the Act instead of allowing deduction for export profits as per profit computed under the provisions of Companies Act. 10(b) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in not directing to compute deduction u/s 80HHC based on profit of the business as per the accounts prepared under the Companies Act in computing the book profit for the purpose of section 115JA of the Act. 11 That on the facts and circumstances of the case, the Ld. CIT(Appeals) was not justified in confirming the non-exclusion of Capital Profit on sale of investment amounting to Rs. 4,97,27,379/- (Net) from the net profit in computing Book Profit as per provision of section 115JA of the Act. 1....
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.... and the CIT(A) after considering the case partly allowed the appeal of assessee vide its order dated 10.01.2005. Aggrieved by the decision of the CIT (A), the assessee filed the present appeal before us on the grounds mentioned here in above. Ground No. 1(a) & 1(b): 3. This ground relates to disallowance of expenditure incurred for Pooja/function expenses amounting to Rs. 29,87,781/-. 3.1 We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. As per ld. AR , the afore mentioned expenditure has been incurred for performing daily Pooja in plants, celebration of republic day, independence day, etc. The same was claimed as business expenditure but the ld. AO while passing order of assessment has held that the expenses are of non business nature and disallowed the same. The ld. AR submitted that the disallowance made by the AO was only on the basis that in the earlier years i.e. 1998-99 the similar expenditure were disallowed. It was further argued by ld. AR that this ground is covered by the order of Hon'ble ITAT Mumbai Bench in assessee's own case in AY 1988-99....
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....o argued by ld. AR that similar ground was allowed by Hon'ble ITAT in assessee's own case for AY 1995-96, 1996-97, 1997-98. In this respect our attention was drawn to page no. 5 &7 and para 8-11 in supplementary paper book at page no. 53-55. 8. The fourth ground raised by the assessee is as follows: "4(a) That on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the disallowance of Consultancy charges amounting to Rs. 5,40, 000/ - by holding that the said expenditure is capital in nature. 4(b) That on the facts and in the circumstances if the case, the Ld. CIT(A) failed to appreciate the fact that the expenditure on account of consultancy charges amounting to Rs,5,40,OOO/- is of revenue in nature in view a/the decision of ITAT in the appellant's own case on an identical issue 4((c) That on the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate the fact that by incurring the said expenditure, 110 new assets or advantage of enduring nature was brought into existence." This issue is covered in favour of the assessee in assessee's own case in ITA No.2292/M/94 for A.Y. 1990-91 in which it has....
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....as the circumstances and nature of that case are similar to that of previous year and hence service charges to the extent of Rs. 97,512/- is in the nature of revenue expenditure and hence this ground of revenue's appeal is dismissed." 4.2 In view of the afore mentioned decision of Hon'ble ITAT in favour of assessee, while adhere to the principles of judicial consistency and while respectfully following the decision of co-ordinate Bench we allow the issue in favour of assessee and additions mad by AO and sustain by CIT(A) are deleted. Ground No.4(a) & 4(b): 5. This ground relates to disallowances of expenses on account of noncomplete fees as business expenditure amounting to Rs. 50,00,000/- 5.1 We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Ld. AR representing the assessee submitted that the assessee has entered into an agreement with Mr. D.K. Modi for : (i) Transfer of control and management in Modi Cements Ltd. (ii) Resigning as Managing Director (iii) Getting his nominees resign from the board and (iv) For not carrying on the business of ma....
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.... submitted that in intimation u/s 143(1)(a) for A.Y. 1996-97, interest u/s 244A was granted at Rs. 28,06,140/- in the return of income, the said amount was excluded from the computation of total income since the assessment was in progress and the said interest was not attained finality. Therefore, ld.CIT(A) upheld the order of the AO. 7.2 We have considered the order of CIT(A) and the CIT(A) has discussed the facts and has relied upon the decision in the case of Saffron Trading Co. (P) Ltd. vs. ACIT (2003) 84 ITD 70 (Mum). 7.3 In our view CIT(A) has rightly upheld the orders passed by AO wherein it has been categorically mentioned that the interest received on the revenue issued by the department is taxable in the year of receipt an in the present case the assessee has received the interest income during the previous year relevant to assessment year 1998-99 and even of taxable of interest cannot be postponed in the dies of finality of the proceedings. It was rightly held by AO as well as CIT(A) that interest received on the refund u/s 244(A) is treated as income received during the year and taxed accordingly. Hence, we see no reasons to interfere or deviate from the findings reco....
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....of the said order passed by ITAT which is now annexed in supplementary paper book of page no. 56-57. 10.2 Therefore the issue with regard to truck hire charges are set aside to the file of the AO for fresh decision and the issue of interest income and bill discounting are also set aside to the file of the AO to verify the nexus between the earnings from money deployed our of unutilized funds and interest on borrowed funds. Further the AO is also directed to reduce the actual expenditure incurred and tax only the net income under the head of 'Income from Other Sources'. Ground No.9(a) to 9(c): 11. This ground relates to non allowance of exclusion of the profits of Himachal unit as per the books in computing the Book Profit u/s 115JA amounting to Rs. 58,57,93,526/- 11.1 We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Ld. AR representing the assessee has claimed exclusion of profit computed as per books of Himachal Pradesh Unit located in backward area in computing Book Profit u/s 115JA in terms of clause (v) of the Explanation to Sec.115JA but the AO hel....
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....7 ITD 111 (Bom). Ld. AR further argued that CIT(A) has also erroneously upheld the order passed by AO. Ld. AR argued that the Hon'ble ITAT Mumbai Bench in assesse's own case for A.Y. 1997-98 in ITA No.1859/Mum/04 in this respect our attention was drawn to page no. 7-8 at para 2.6 to 2.6.1 of supplementary paper book page no. 24- 25. Therefore, considering afore mentioned facts, this ground raised by assessee is allowed. Ground No.11 13. This ground relates to non-exclusion of profit on sale of investment in computing Book Profit u/s 115JA amounting to Rs. 4,97,27,379/-. 13.1 We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Ld. AR representing the assessee submitted that during the year, the assessee has claimed exclusion of profit (net of loss) on sale of investments in computing Book Profit u/s 115JA ld. AR further submitted AO while relying on the decision of CIT vs. Veekaylal Investments Co. (P) Ltd. (2001) 249 ITR 597 (Bomb). Ld. AR further argued that CIT(A) has also erroneously upheld the order passed by AO. Ld. AR argued that the issue is covered....
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....n there is no provision of deduction of capital profit in computing book profit. Thus, following the provisions of the act, the ground is decided against the appellant." 13.3 After considering the afore mentioned detailed order we are of the view that the CIT(A) has passed judicial orders there is no reason to interfere or deviate into the order passed by the CIT(A) and upheld by the AO. Therefore, this issue is decided against the assessee. Ground No.12 14. This ground relates to imposition of interest u/s 234C amounting to Rs. 64,854/- 14.1 We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Ld. AR representing the assessee submitted that as per the ld. AR the assessee is not liable to file the return of income for the assessment year under consideration, and assessee is not liable to pay interest u/s 234C. It is argued by ld. AR that the AO impose interest without assigning any reason. Ld. AR further argued that CIT(A) has also erroneously upheld the order passed by AO. Ld. AR relied upon the decision of Bombay Gymkhana Ltd vs. ITO (2008) 115 TTJ 639 (....
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....ly we set aside this issue to the file of the AO. 16.4 With this direction this additional ground is treated as allowed. In the net result, the appeal filed by the assessee is partly allowed. ITA No. 2654/Mum/2005 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of community welfare expenses of Rs. 146,39,374/-." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance on account of Temple expenses of Rs. 5,89,535/-." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of mines prospecting charges of Rs. 15,79,162/-." 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of foreign exchange loss of Rs. 157,16,034/-. 5. "The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." Ground No.1 17. This ground relates to deletion of disallowance of Community Welfare Expenses amounting to Rs. 1,46,39,374/-. 17.1 We have heard the counsels for both the ....
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....ssee in assessee's own case by Hon'ble ITAT and our attention was drawn to ITA No. 2690/Mum/1993 for assessment year 1989-90 para 6 page no. 14-17 of paper book page no.57-60. "6. The fifth ground pertains by CIT(A)'s action in confirming the disallowance in respect of temple inauguration expenses of Rs. 8,33,943/-. 6.1 It was submitted by the ld. Counsel of the assessee that the company had constructed a temple called Radhakrishna Temple near the factory. It was stated that in the year of account the said temple was inaugurated and puja functions had taken place for 10 days. It was pointed out that the temple was constructed at a cost of Rs. 71.91 lakhs and its inauguration expenditure was incurred for the welfare of the employees and it included expenses like purchase of puja materials, dakshina/fees paid to pundits and other expenses like distribution of Prasad to all the employees, expenditure of flowers etc. in this regard the ld. Counsel adverted our attention to details of Temple Inauguration Expenses given at page 110 of the paper book. These details are reproduced as under- Amount (Rs.) Mandap Decoration etc 1,33,210 Prasad Distribution 82,067 Electric....
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....at to arrive at the conclusion that the expenditure was dictated solely by business consideration, one has to consider nature of the business, the way it is conducted and any likelihood of the business being adversely affected or its interest being promoted by the refusal or the incurring of the expenditure as the case may be. The ld. Counsel of the assessee submitted that the said decision squarely and favourably applies to the assessee's case. It was pointed out in the instant case the assessee was carrying on the business of manufacturing cement in a remote area, where no facilities for social and other recreation of the workers are available. It was stated that the impugned expenditure was incurred for boosting up the morale of the employees of the purpose of the assessee's business. 6.6 In this context, we would like to refer to the decision of Punjab & Haryana High "Court in the case of Atlas Cycle Industries (supra) wherein it was held that "No curb can be placed on the discretion of the assessee to provide the type of recreation which, according to it, would best advance the interest of its business. If the recreation provided, even if it is in the nature of a religio....
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....osses. The judgement of Hon'ble Bombay High Court in Kolhapur Sugar Mills Ltd's case does fortify our view. But we are of the view that some reasonable expenses on travelling and transportation have to be allowed as pundits and some employees for the function were called for from outside stations. In our view it will meet the ends of justice if disallowance of Rs. 3,00,000/- is made out of travelling and transportation expenses. Thus, the total disallowance under this head is restricted to Rs. 4,01,436/-(i.e. 1,01,436+3,00,000) which will result in a relief of Rs. 4,32,507/- to the assessee. The assessee, therefore, partly succeeds on this issue." 18.3 We dismiss this ground of appeal. Ground No.3 19. This ground relates to deletion of disallowance of Mines Prospecting expenses amounting to Rs. 15,79,162/-. 19.1 We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. 19.2 Ld. AR submitted that mines prospecting expenses has been incurred for identifying deposits of limestone at various mining locations. The same has been claimed as revenue expenditure u/s 37....
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....The appeal of the revenue fails on this issue as well." In view of the above, quarry development expenses are treated as revenue expenditure and are allowed. The assessee succeeds on this ground. Other two expenses viz market research and development expenses of Rs. 8,18,712/- and advertisement of corporate image of Rs. 85,39,801/- the assessee has placed reliance on three decisions (supra). The assessing officer have treated them as capital expenditure and so confirmed by the CIT(A) vide para 15 and 15.1 of his order. Since the business of the assessee has commenced during this year, the expenditure on quarry development expenses, will be treated as revenue expenditure, following the 19.3 Therefore, we dismiss this ground of appeal. Ground No.4 20. This ground relates to deletion of disallowances of Foreign Exchange Loss amounting to Rs. 1,57,16,034/-. 20.1 We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Ld. DR appearing on behalf of revenue supported the order passed by AO and submitted that foreign exchange fluctuation loss is notional or anticipated loss c....