TaxTMI 
TaxTMI 
2019 (12) TMI 1272
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....96/2016-17/(A)-17 for assessment years 2002-03,2008-09 to 2014-15. As the issues raised in all these appeals are interconnected, these are disposed of by this common order. 2. Shri R. Vijayaraghavan, Advocate represented on behalf of the Assessee and Mr. M. Srinivasa Rao, JCIT represented on behalf of the Revenue. 3. In the Revenue's appeal, the Revenue has raised four issues. The first issue being in Ground No.2.1 to 2.13 against the action of the learned CIT(A) in treating the non-compete fee paid by the assessee to Mr. B.H. Kothari as deferred revenue expenditure as against capital as held by the Assessing Officer. At the time of hearing, it was fairly agreed by both the sides that the issue was now squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case in the Assessment Years 2003-04, 2005-06, 2006-07 & 2007-08 in I.T.A. Nos.1348 and 1349/Mds/2008, 558/Mds/2009, 289 & 290/Mds/2012 dated 13.06.2016, wherein in page 39 of the said order in paragraphs 16 to 16.7, the Co-ordinate Bench of this Tribunal has held as follows: "16. The next common issue raised in the appeals of the Revenue for the assessment years 2006-07 an....
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...., there is a decision of Hon'ble Chennai ITAT in the case of Orchid Chemicals & Pharmaceuticals Vs ACIT 137 TTJ 373 and also one more decision of Hon'ble ITAT Chennai in the case of ITO Vs Seafil Leasing 124 TTJ 531 ITAT, Chennai. I am of the considered opinion that these decisions have similarities to the facts and circumstances of the present case and hence this expenditure may be allowed as deferred revenue expenditure for a period of 10 years. This decision of mine is in commensurate with the method adopted by the appellant himself for the purposes of maintenance of books of accounts by the appellant. In other words, the Assessing Officer is directed to treat the non-compete fees paid as deferred revenue expenditure and allow 1/l0th of the expenditure as deduction for every year. Since this issue is there for both the assessment years, this decision is applicable for both the assessment years in question." 16.6 Over and above, the Hon'ble Jurisdictional High Court in the case of Carborandum Universal Limited v. JCIT (supra) has held as under: "5. This leaves us with the third question as regards the nature of expenditure on the noncompete fee paid to U....
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....ng or divulging any information relating to the knowhow, trade practices, etc. The agreement was to be effective for a period of five years from the date of the agreement. 7. On 29.04.1996, yet another agreement was entered into between the assessee and the said U.Mohanrao, former Chairman and Managing Director of Cutfast Abrasive Tools Limited, as by way of a non-compete agreement that the said U.Mohanrao shall not, in any manner, assist any third party, or sell or render advise or act as a Consultant in respect of the products, namely, coated and bonded abrasives, current range of products of the Electrominerals Division of CATL and cloth processing for coated abrasives. In consideration of the said agreement, the said U.Mohanrao was paid a sum of Rs. 1,75,00,000/- towards non-compete fee. On 14.10.1996, there was a supplementary agreement between the assessee and the said U.Mohanrao, which contemplated inclusion of other products, namely, coated and bonded abrasives, current range of products of the Electrominerals Division of CATL and also all other electromineral products, used or capable of being used in the manufacture of abrasive products (both bonded and coated), ....
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....l or revenue head. Making particular emphasis on the fact that the expenditure incurred was more in the field of indefinite income earning operation and not in the context of strengthening the income earning structure, he submitted that the Tribunal and the Authorities below committed a serious error in looking at the enduring benefit concept for the purpose of rejecting the assessee's case. 10. Referring to the decision reported in [1980] 124 ITR 1 (Empire Jute Co. Ltd. Vs. Commissioner of Income Tax (S.C.)), he submitted that the expenditure incurred was for the exploitation of a commercial asset; hence was revenue in character. Even where an expenditure is incurred by obtaining an advantage of enduring benefit, it may, nonetheless, be on revenue account and the test of enduring benefit may break down. He further submitted that what is material herein is to consider the nature of advantage in a commercial sense. If the advantage is in the field of facilitating the assessee's business operation more effectively or more profitably leaving the fixed capital untouched, the expenditure would be on revenue account. 11. Referring to the decision reported in [19....
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....t may be a revenue payment from the point of view of the payer and a capital payment from the point of view of the receiver and vice versa. Thus whether an expenditure is capital or revenue has to be determined with regard to the nature of the transaction and other relevant factors. Referring to the decision reported in [1965] 58 ITR 241 (PC) (Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd.), the Apex Court pointed out that "there may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. ... What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an inde....
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....as to be considered in the background of the facts of each case, that "the idea of "once for all" payment and "enduring benefit" are not to be treated as something akin to statutory conditions; nor are the notions of "capital" or "revenue" a judicial fetish. " - [1989] 177 ITR 377 (Alembic Chemical Works Co. Ltd.). 18. Going by the above-said principle, if one looks at the decision reported in [1991] 191 ITR 249 (Chelpark Company Ltd. Vs. Commissioner of Income Tax), one may find that the decision that the expenditure was a capital expenditure and hence not deductible, rested in the context of the peculiar facts of the case; the partnership with which the assessee had the noncompete agreement got dissolved immediately after the payment of the non-compete fee and the potential competitor had vanished. On these facts, this Court observed that, whatever the assessee had paid for was of permanent or enduring quality, in the sense that competition had been totally eliminated and protection had been acquired for the business of the assessee as a whole. We do not find that the Revenue could draw any support from the said decision of this Court, it being one based on the facts of ....
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....08 and thus, the ground raised by the Revenue is dismissed." 4. It was however submitted by the learned Departmental Representative that the Revenue has not accepted the decision of the Co-ordinate Bench of this Tribunal. He vehemently supported the order of the Assessing Officer. 5. We have considered the rival submissions and perused the materials available on record. 6. As it is noticed, the issue is squarely covered by the decision of the Coordinate Bench of this Tribunal in the assessee's own case in the earlier Assessment Years referred to supra and it is noticed that the learned CIT(A) has followed judicial discipline in following the decision of the Co-ordinate Bench of this Tribunal, we find no reason to interfere in the order of the learned CIT(A) on this issue. Consequently, Ground No.2.1 to 2.3 of the Revenue's appeal stands dismissed. In respect of Ground No.3.1 and 3.2, it was submitted that the ground was against the action of the learned CIT(A) in deleting the disallowance made u/s.40A(9) in respect of the assessee's contribution to the benevolent fund. It was fairly agreed by both the sides that the issue was squarely covered by the decision of th....
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....he case of India Pistons Repco v. IAC 26 ITD 413), the ld. CIT(A) directed the Assessing Officer to allow contribution made by the assessee to benevolent fund by observing as under: "5. I have carefully considered the facts of the case, case laws and the submissions of the Id. AR. It is clear that Memorandum of Settlement was executed in terms of section 18(1) of the Industrial Dispute Act, 1947 and is binding on both the parties i.e. the employer and the workmen. The contribution to the benevolent fund was made in terms of clause 3 of the said Memorandum of Settlement. Thus the fund was not created suomote by the appellant but was based on the Memorandum of Settlement between the employer and the workmen in terms of section 18(1) of the Industrial Dispute Act, 1947. The case relied by the Ld. AO supra is also not applicable to the case in hand as it pertained to payment of commission to managing agent. It was held in the said case by the Hon'ble Supreme Court that in view of section 326 of the Companies Act, 1956, which contained an absolute prohibition against the appointment or reappointment of a managing agent before approval of the Central Government was obtained,....
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....e rival submissions and perused the materials available on record. 8. As it is noticed that the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal referred to supra and it is noticed that the learned CIT(A) has followed judicial discipline in following the decision of the Co-ordinate Bench of this Tribunal, we find no reason to interfere in the order of the learned CIT(A) on this issue. Consequently, Ground Nos.3.1 and 3.2 of the Revenue's appeals stands dismissed. 9. In Ground Nos.4.1 and 4.2 of the Revenue's appeal against the action of the learned CIT(A) in deleting the provision of gratuity, it was submitted by the learned Authorized Representative that the issue was squarely covered in favour of the assessee by following the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case referred to supra, wherein in page 15 to 20 of the said order in paragraphs 9 to 10 it has been held as follows: "9. With regard to the assessment year 2005-06, the only effective ground raised in the appeal of the assessee is with regard to confirmation of disallowance of provisions for gratuity. 9.1 The assessee has made ....
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....visions of section 40A(7)(b) of the Act. It was the submission of the assessee that claim should be allowed under the provisions of section 40A(7)(b) which is a specific provision and hence the same overrides section 43B of the Act, as section 43B is only general provision. The Assessing Officer rejected the contentions of the assessee and disallowed the provision for gratuity holding that unless the said provision is paid, it is not allowable in view of the provisions of section 43B of the Act. On appeal, the Commissioner of Income Tax (Appeals) allowed the claim of the assessee and deleted the disallowance observing that similar issue has been allowed in assessee's own case for the assessment years 2005-06 and 2006-07. 3. Departmental Representative vehemently supports the order of the Assessing Officer in disallowing the provision for gratuity submitting that since the said amount is only a provision and not paid is hit by the provisions of section 43B of the Act. 4. Counsel for the assessee relied on the order of the Commissioner of Income Tax (Appeals). He further submits that the Revenue in earlier years accepted the decision of the Commissioner of Income Ta....
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....ra) held as under:- "Section 40A(7) of the Income-tax Act, 1961, was introduced by the Finance Act, 1975, with retrospective effect from April 1, 1973, and section 43B was introduced by the Finance Act, 1983, with effect from April 1, 1984. Section 40A says that the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of the Act relating to the computation of income under the head "Profits and gains of business or profession". Similarly, section 43B opens with a non obstante clause. Section 40A(7) provides that in cases covered by the provisions of clause (a) no deduction shall be allowed in respect of any provision whether called as such or by any other name made by the assessee for the payment of gratuity of his employees on their retirement or on termination of their employment for any reason. However, clause (b) of section 40A(7) clearly provides that to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year clause (a) will not apply....
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....a deduction of a sum constituting the provision towards an approved gratuity fund, the said provision will take precedence over a comparatively general provision like s. 43B. Secondly, s. 40A(7)(a) which disallows deduction of any provision of gratuity to employees on their retirement is itself made subject to s. 40A(7)(b) which allows such deduction as long as it is made towards an approved gratuity fund. There is no dispute that in the instant case the provision made is towards contribution to an approved gratuity fund. Therefore the claim by the assessee for deduction on this score was clearly justified. We are accordingly of the opinion that no substantial question of law arises in this regard as well." 8. Respectfully following the said decisions, we uphold the order of the Commissioner of Income Tax (Appeals) in deleting the disallowance made for approved gratuity funds. 9. In the result, appeal of the Revenue is dismissed." 9.5 After considering the ratio laid down by the Hon'ble Kerala High Court and the Hon'ble Delhi High Court, the Coordinate Bench of the Tribunal in the case of ACIT v. Tyco Sanmar Ltd. (supra) decided the issue in favour of the....
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....ate Tribunal for the earlier Assessment Years, wherein the Assessing Officer has allowed the assessee's claim. This being so and also considering the fact that the learned CIT(A) has followed the judicial discipline in following the order of the Tribunal in the assessee's own case referred to supra, we find no reason to interfere in the order of the learned CIT(A). Consequently, Ground Nos.4.1 and 4.2 of the Revenue's appeals stands dismissed. 14. In respect of Ground No.5, it was submitted by the learned Departmental Representative that the issue was against the action of the learned CIT(A) in deleting the provision for gratuity when computing the book profits u/s.115 BBG of the Act. It was fairly agreed by both the sides that the issue was fairly covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case referred to supra, wherein in page 37 at paragraphs 15 to 15.3 it has been held as follows in favour of the assessee. "15. The next common ground raised in the appeals of the Revenue for the assessment years 2004-05 and 2005-06 is that the learned CIT(A) is erred in holding that the provision for gratuity made on actuarial basis shoul....
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....is dismissed." It was further submitted by the learned Departmental Representative that the Revenue has not accepted the orders of the Co-ordinate Bench of this Tribunal and consequently, vehemently supported the order of the Assessing Officer. 15. We have considered the rival submissions and perused the materials available on record. 16. As it is noticed that the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case referred to supra and as it is noticed that the learned CIT(A) has followed the judicial discipline by following the decision of the Co-ordinate Bench of this Tribunal in the assessee's own case referred to supra, we find no reason to interfere in the order of the learned CIT(A) on this issue. Consequently, Ground No.5 of the Revenue's appeal for the Assessment Year 2008-09 2009-10, 2010-11, 2011-12, 2013-14 and 2014-15 stands dismissed. This issue is not there in the appeal for the Assessment Year 2012-13. 17. In the result, the appeals of the Revenue stands dismissed. 18. Coming to the assessee's appeals, it was submitted by the learned Authorized Representative that the common issue in all....
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....ause (a)." It was a submission that in any case till 01.04.2018, the legislation did not wish to tax carbon credits. It was further a submission that provision of Section 115BBG cannot be made retrospective in operation either. It was further a submission that the fact the provision of Section 115BBG is being introduced also shows that the intention of the legislature is not to tax the receipts of the said carbon credits as regular business income at all. It was further a submission that the addition made by the Assessing Officer and as confirmed by the learned CIT(A) treating the receipts on the sale of carbon credits as revenue may be deleted. 19. In reply, the learned Departmental Representative vehemently supported the order of the learned Assessing Officer and the learned CIT(A). 20. It was a submission that the order of the Tribunal in the case of Apollo Tyres Limited was a right interpretation and the receipts was liable to be treated as revenue receipts only. 21. We have considered the rival submissions and perused the materials available on record. 22. A perusal of the provision of Section 115BBG clearly shows the intention of the legislature to bring the in....
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....icals Limited for the Assessment Year 2014-15 as also the decision of the Hon'ble Jurisdictional High Court in the case of M/s. Brakes India Limited vs. The Deputy Commissioner of Income Tax, Chennai in T.C.A. No.551 of 2013 dated 14.03.2017 and had directed the Assessing Officer to allow the additional depreciation on the plant and machinery installed in the second half of the financial year preceding the Assessment Years 2013-14 and 2014-15. It was a submission that the Revenue has not challenged these findings. It was further a submission that the learned CIT(A) had not considered the identical ground for the Assessment Year 2012-13 raised by the assessee. It was a submission that the issue having being held in favour of the assessee by the learned CIT(A) for the Assessment Years 2013-14 and 2014-15, the similar findings may be granted for the Assessment Year 2012-13 also. The learned Authorized Representative drew our attention to the Ground No.14 raised by the assessee before the learned CIT(A) which relates to the claim of additional depreciation. 24. In reply, the learned Departmental Representative vehemently supported the order of the Assessing Officer. 25. We hav....