TaxTMI 
TaxTMI 
2016 (8) TMI 1478
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.... expenditure was incurred wholly and exclusively for the 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 circumstance....
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....f the case and without prejudice to ground no. 5(a) taken hereinabove, the Ld. CIT(Appeals) failed to take cognizance of the fact that the said 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....
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....s of the case, without prejudice to Ground No. 9(a) and 9(b) taken here in above, having held, by following the decision taken by his predecessor in A. Y. 1997-98 that the profit computed u/s 80IA is 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 ....
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.... the assessee, the AO passed the order of assessment thereby making disallowances and consequently making several additions under different heads vide order dated 15/03/2001. Aggrieved by the order of AO, assessee preferred appeal before the CIT(A) 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 disallowan....
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....ncy and service charges. Ld. AR submitted that the AO while following the order of earlier years had disallowed the expenditure by treating the same as capital nature. It was further argued by ld. AR that CIT(A) has sustained the said disallowance erroneously. It was also 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 c....
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....und No.3 of the appeal reads as under: On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in holding that the payment of Rs. 97,512/- made to Shri Hirani as Revenue expenditures." After hearing both the parties and on perusal of the paragraphs 9 and 10 of the order passed in ITA No.4189/B/96 for the A.Y. 1992093, 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....
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....and sustain by CIT(A) are deleted. We allow this ground. Ground No.5(a)& 5(b): 7. This ground relates to non-exclusion of Interest u/s 244A received during the year amounting to Rs. 28,71,804/-. 7.1 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 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....
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....d "income from other sources". 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. 1995- 96, 1996-97, 1997-98 as set aside the issue to the file of the AO for fresh decision and to verify the nexus between the earnings. Our attention was drawn to operative para of ITA No.942/Mum/2004 for A.Y. 1995-96 at page no.8-9 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. 5....
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....rd 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 in computing book profit u/s 115JA, the assessee has claimed exclusion of deduction u/s 80HHC by considering the profit as per books of accounts but the ld. AO while following the decision of Royal Cushion Vinyl Products Ltd. vs. DCIT (1993) 47 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 t....
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....) 46 ITR 144 (SC) and Sutlej Cotton Mills Ltd. -vs.- CIT (1979} 116 ITR 1 (SC). As regards the decision relied upon by the A.O., the appellant submitted that the said decision was in relation to an investment company, which has no application in the case of the appellant. 16.3 I have perused the submission made by the appellant and the relevant provisions of the Act. Provision of Sec.115JA specifies the items to be added back and to be deducted. In the said section 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 ....
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.... After considering the rival submissions and appreciating the cited judgements we are other considered view that the assessee could not be denied the benefit of amended provision once it fulfill the conditions stipulated in the relevant provision and therefore in view of section 80IA (2) the assesse is entitled to view the option of claiming deduction u/s 80IA on generation of power for assessment year 1999-2000 onwards. However the issue on merits needs to be considered by the AO, accordingly 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 mine....
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....on expenses, etc performed in the temple situate inside the factory premises. The same has been incurred for the general welfare of employees and to boost up their morale in order to run the business more efficiently and economically. Hence the same has been claimed as business expenditure. Ld. AR further submitted that the AO has disallowed the expenditure following the orders of earlier years. It was further argued that CIT(A) has rightly deleted the addition. Ld. AR submitted that the said ground has already been decided in favour of assessee 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 a....
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....f the Bombay High Court in the case of Kolhapur Sugar Mills Ltd. (supra) and also N. Sirur and Co. Pvt. Ltd. vs. CIT (1977) 109 ITR 432 (Bom), wherein the Bombay High Court relied on the decision of Calcutta High Court in the case of Andrew Yule & Co. Ltd. vs. CIT (1963) 49 ITR 57(Cal.) 6.5 the ld. Counsel of the assessee has replied that the decision of Kolhapur Sugar Mills Ltd. (supra) is not relevant in the present context. In the said case the expenditure was incurred for food and entertainment of labourers working in the assessee's own sugar factory. In the case of Andrew Yule & Co. (supra) the Hon'ble Calcutta High Court has held that 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 manufacturi....
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....as since qua non in temple inauguration function. We further find that assessee has incurred huge expenses of Rs. 3,79,499/- on travelling and transportation in connection with temple inauguration. The details of such expense are not available on records. But during the course of hearing it was stated by the ld. Counsel that these expenses included expenses for air tickets of pundits and other guests and employees who were invited to attend the tempele inauguration function. We are of the opinion that such lavish expenditure on air tickets etc. was not dictated by considerations o commercial or business expediency particularly when the assessee was suffering huge losses. 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+3,0....
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.... 35(1). Further the said expenditure was incurred for extracting raw material and not for acquiring any asset of enduring benefit or advantage. In this context, we rely on the decision of apex court in the case of Empire Co. Ltd. (supra) wherein it was held that if the advantage consists merely in facilitating the assessee's trading operation, the expenditure would be on revenue account. Respectfully, following the said decision and other decisions relied upon by the ld. Counsel; we hold that the said expenditure can in no way be treated as capital in nature. We, therefore, confirm the order of CIT(A) who has held that the impugned expenditure is revenue expenditure allowable u/s 37(1). The assessing officer has not discussed the issue at all. 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 treate....