TaxTMI 
TaxTMI 
2014 (7) TMI 1338
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....stments are the same as in earlier years. The details of prior period adjustments appear in Schedule 19 of the printed Annual accounts. As per this schedule, the assessee has debited an amount of Rs. 176.34 lacs. The assessee adjusts the debit and credit entries and only the net amount is taken to P.L. Account. The AO did not accept this method of accounting. It has been stated by the AO that the assessee has taken steps in separately addling back certain items of prior period expenses on selective basis, like adding back the depreciation to the extent of Rs. 10.84 lacs. It was claimed by the assessee that the above expenses had crystallized during the year under consideration and therefore, the same allowable. It has been observed by the AO that it is only because of non-receipt of expenses details from various units of the assessee or other reasons, the items mentioned in Schedule 19 remains to be adjusted even though they patently pertain to earlier years. While computing the income of a particular assessment year, this type of adjustments on estimate basis is not permissible, since income of a particular year is not influenced by items pertaining to other years unless the liabi....
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.... The appellant has claimed prior period expenses of Rs. 176.34 lacs as per Schedule 19 of the Annual Accounts. Out of the above, the appellant has added back an amount of Rs. 10.84 lacs in respect of depreciation. In respect of this issue, the Hon'ble IT AT Jodhpur Bench, Jodhpur vide its decision dated 30-09-2002 in the case of appellant for the assessment year 1992-93 (TTA 693 (JP)/1998-99) has held as under:- "From the above legal position as enunciated by Hon'ble Courts and also the principle of accountancy, when the assessee is following mercantile system of accounting deduction for liability can be allowed only when the year in which it arose or only in the year to which it pertained or during the year when it was crystallized or quantified or determined. The principle of following a particular system which is not as per the provision of accountancy and not as per the provisions of law cannot be allowed to persist. It was also held in the case of CIT v. British India Ltd. (1991) 188 ITR 44 (SC) that even if the assessee had adopted a regular system of accounting it was the duty of the AO to consider that the correct profits and gain could be deduced fro....
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.... submissions and considered them carefully. After considering the submissions and perusing the material on record, we find that proper facts of the case have not been appreciated by the lower authorities. There is no dispute that during the year under consideration the assessee company was held by the Government of India and so was subjected to C & AG audit over and above the normal statutory audit under the Companies Act. The company has also been subjected to a separate tax audit under section 44AB of the Act. The company had submitted its return on 30.1.1998 declaring income of Rs. 201,58,70,180/- The assessment was completed on 1.3.2001 on an income of Rs. 249,00,98,883/- by the Additional Commissioner of Income-tax. Various disallowances were made by the Assessing Officer including the disallowance of Rs. 1,65,50,475/- on account of prior period expenses. We noted that one of the contentions of the Assessing Officer was that the concerned liability had crystallized during the year had not been found to be factually correct. This, according to the Assessing Officer, supported by the fact that the assessee had debited depreciation and included in the column of debit which was no....
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.... assessee before applying the text of those cases. The Ld. Counsel of the assessee has tried to distinguish the various cases considered by the Tribunal while rejecting the ground for assessment year 1997-98. However, now we cannot comment/should not comment on the finding given by the Tribunal for assessment year 1997-98. However, the fact remains that the Jodhpur Bench has allowed the identical issue for assessment years 1993-94 to 1995-96. We are also of the view that since these expenses were crystallized during the year under consideration for the reason that they were not approved by the appropriate authorities in the relevant year when these expenses were incurred. However, as stated above, these expenses were approved in this year, therefore, they were claimed during the year under consideration. Accordingly, we are of the considered view that these expenses are allowable as allowed in the past also. However, as stated by Ld. A/R, no details were filed before the AO during the assessment proceedings, therefore, we restore the issue to the file of the Assessing Officer to consider those details which will be filed by assessee and then allow if he feels that they are allowabl....
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....c.) dated 6th August, 1997." It was submitted by the assessee that Degana Mines was closed during the year on account of non-profitability. The AO has noted the observation given in the Directors report as under- "Your Company had taken over Degana Tungsten Mine from the Rajasthan State Tungsten Development Corporation, a Govt., of Rajasthan Enterprise in 1991, the poor metal content, accompanied by a crash in the internal price and the inadequate tariff, rendered in operation of this mine, your Board approved, to closure of the mine. The employees who had not opted for voluntary retirement scheme of the company have been suitably deployed in other operating units of the company. All the usable equipment has since been shifted to other units and the necessary statutory formalities have already been initiated. The mine will be handed over to the Govt., of Rajasthan in due course of time as per the applicable provisions." It has been observed by the AO that Degana Unit which was hither to run by the assessee as one of the units for production of Tungsten in contrast to its normal business activity of production of lead/zinc ....
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....gana unit were written off as a result of this closure and shown as extraordinary items. Out of above, the assessee has claimed a deduction of Rs. 304.81 lacs from item No. (i), (iii) & (iv). The assessee has not claimed deduction for item No. (ii), provision for fixed assets/terminal depreciation. It has been stated that the assessee company is carrying on the business of mining beneficiation, search, prospect, get, win, sell dispose deal, smelt etc. in minerals and metals and alloys of all kinds. The company is carrying on the business though its mining and manufacturing units at various places, central sales office at Delhi and registered office at Udaipur. The Board of Directors is in overall control of entire business activity carried out by the company. There is a common fund from which necessary capital and working funds are supplied to the various units. It has been stated that even if different books of account are maintained and the transactions inter se between the different units were recorded in those books of account, that circumstances would be insignificant once it was found that ultimately there was a common profit and loss account and balance sheet.....
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....nterprise in 1991. The poor metal content, accompanied by a crash in the international price and the inadequate tariff, rendered the operation of this mine uneconomical. In the absence of supportive measure to sustain the operation of this mine, your Board approved, to closure of the mine. The employees who had not opted for voluntary retirement scheme of the company have been suitably deployed in other operating units of the company. All the usable equipment has since been shifted to other units and the necessary statutory formalities have already been initiated. The mine will be handed over to the Govt., of Rajasthan in due course of time as per the applicable provisions." It has been stated by the appellant that the following balances in the books of Degana unit have been written off as a result of this closure and shown as extraordinary items:- Out of above, the assessee has claimed a deduction of Rs. 304.81 lacs for item Nos. (i), (iii) & (iv). The appellant has not claimed the deduction for item No. (ii) relating to provision for fixed assets/terminal depreciation amounting to Rs. 150.87 lacs which has been added back in the comput....
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.... as per the applicable provisions. Therefore, the concerned unit was not handed over to the Govt., of Rajasthan in the F.Y. 1997-98 relevant to A.Y. 1998-99. Therefore, although the mine has been closed by the appellant company, it has not yet been transferred to Govt., of Rajasthan. Therefore, the above claim in any case is premature. In view of the above facts, the AO was justified in disallowing the deduction claimed of Rs. 3,04,81,750/-. Accordingly, the addition made of Rs. 3,04,81,750/- on account of above disallowance is confirmed.' 13. The Ld. Counsel of the assessee who appeared before the Tribunal, placed reliance on the written submissions placed on record. 14. On the other hand, the Ld. D/R has placed reliance on the orders of the Assessing Officer and Ld. CIT(A). This appeal was heard on 9.2.2012. Thereafter Ld. Counsel of the assessee requested to re-fix the case by letter dated 17.4.2012 as they want to file further written submissions. The case was re-fixed on 8.5.2012 on which date the Ld. Counsel of the assessee filed an additional written submissions on this point which were taken into consideration. Advance copy of the same was given to Ld. D/R who has....
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....siness entity which stands closed down during the year by writing off of all its assets, both fixed assets and stock in trade, which cannot be allowed as a set off from normal profit of the assessee from its remaining business of mining, manufacturing/production of metal and their concentrates, as it has no nexus with the other activities of the assessee and this does not constitute expenses as such but it is only notional write off of assets in the books of the assessee just to tamper with the profit of the business to its advantage. While holding so, reliance has been placed by the AO on the decisions Hon'ble Supreme Court and various High Courts in CIT v. Gemini Cashew Sales Corpn. [1967] 65 ITR 643 (SC), J.R. Mehta v. CIT [1980] 126 ITR 476/4 Taxman 522 (Bom.) and Venkatesa Colour Works v. CIT [1977] 108 ITR 309 (Madras). As stated above, the ld. CIT(A) has also confirmed the action of the AO. 16. After considering these facts and submissions of the assessee, we noticed that the action of the AO treating this unit as distinct from other business activity, in our considered view is not correct. The assessee had various mining units i.e. Zawer Mines (Rajasthan), Rampura Da....
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....7 Taxman 351 (Raj.), CIT v. Udaipur Distillery Co. Ltd. [2004] 268 ITR 451/134 Taxman 616 (Raj.), Bansidhar (P.) Ltd. v. CIT [1981] 127 ITR 65/5 Taxman 158 (Guj.), CIT v. J & S (P.) Ltd. [1992] 193 ITR 572/[1991] 54 Taxman 513 (Delhi), CIT v. MGF India Ltd. [2005] 272 ITR 191 (Delhi) and various more mentioned in the written submission. After going through these decisions, we are of the view that the assessee is entitled for various expenses chimed in the Profit & Loss account on account of Degana Unit as Degana Unit is a part of composite unit. Since Assessing Officer has disallowed the claim of the assessee treating the same as a separate and distinct unit and we have held that this is not a separate and distinct and therefore these expenses are allowable. However, we feel that nature of these expenses are to be considered by the AO as the same has not been taken into consideration. Therefore, to consider the allowability of these expenses, we restore the issue to the file of the AO for allowing the same. There are two other type of expenses also. We feel that those expenses should also be taken into consideration by the AO afresh as no detailed reasoning have been given by the A....
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....During the course of appellate proceedings it has been submitted by the appellant that it had incurred the following expenditure on Mine Development: (i) An expenditure of Rs. 568.07 lacs on development of mines under production which has been debited to profit and loss account in Schedule 14 relating to "Manufacturing & Other expenses". (ii) An expenditure of Rs. 125.28 lacs on extension of existing mines as presented in Schedule 4.1 of the annual accounts. This is being amortised in the profit and loss account as per accounting policy III(d)(ii) of the company. It has been stated that the A.O. has disallowed both these amounts by giving the finding that the expenditure on development of mines is allowable u/s. 35E of the Act. It has also been stated that as the expenditure is allowable u/s. 35E, the same is not allowable for deduction u/s. 37(1) of the I.T. Act, 1961. It has been stated by the appellant that no claim has been made u/s. 35E in respect of these expenditure on development of mines incurred during the year. Further Section 35E of the I.T. Act, 1961 allows claim of expenditure on mine development incurred before the commenc....
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....125.28 lacs on extension of existing mines as presented in Schedule 4.1 of the annual accounts. This expenditure has been claimed in the computation of total income. The A.O. has disallowed both those amounts by holding that the above expenditure is allowable u/s. 35E of the IT. Act, 1961 and therefore the same cannot be allowed as a deduction u/s. 37(1) of the I.T. Act, 1961. It has been pointed out by the appellant that the Mine Development Expenses of Rs. 568.07 lacs have been incurred for continuation of excavation of minerals from the mines which are already in production. This expenditure is a recurring expenditure incurred for continuation of mines under production. In the case of CIT v. J.A. Trivedi Brothers [1979] 117 ITR 983 the Hon'ble Bombay High Court has held that the expenditure incurred for earth digging is an integral part of profit earning process when it is incurred while the business is going on. Since, such expenditure is not for initial outlay or for the purpose of extension of business, the same is allowable as revenue expenditure. Since the above expenditure of Rs. 568.07 lacs has been incurred in respect of the mines which ....
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....on the order of AO. It was further submitted that similar issue was involved for assessment year 1997-98. Tribunal has set aside this issue to the file of AO with direction to determine the deduction afresh in the manner as has been directed in assessee's own case in Tribunal's order dated 30.3.2009 for A.Y. 1996-97. 22. On the other hand, the ld. A/R of the assessee stated that ld. CIT(A) has allowed the issue in favour of the assessee following the order of Tribunal for assessment year 1996-97 and, therefore, order of ld. CIT(A) does not suffer from any infirmity. It was further submitted that for assessment year 1997-98 the AO has allowed the claim of the assessee for 1996-97 as per direction given by the Tribunal and this fact has been admitted by the department as in column No. 4 of the chart filed by ld. D/R it has been stated 'allowed as per the direction given by the IT AT'. Therefore, the order of ld. CIT(A) does not suffer from any infirmity. 23. After considering the orders of the AO and ld. CIT(A) and submissions of both the parties, we find no infirmity in the finding of ld. CIT(A) as ld. CIT(A) has allowed the issue in favour of the assessee foll....
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....'ble Uttarakhand High Court in the case of the above decision has not been accepted by the department and an appeal has been filed before the ITAT. The AO therefore, disallowed the balance amount of Rs. 8,82,69,155/- and added the same to the total income. 4.1 During the course of appellate proceedings it has been submitted by the appellant that it has claimed the deduction of the following amounts as per schedule 18 of the Annual Accounts. It has been stated that in A.Y. 1996-97 the Ld. CIT(A) has allowed the claim of the assessee. Further the Hon'ble ITAT in its order for the A.Y. 1996-97 has allowed the relief to the assessee. In view of this it has been requested to delete the disallowance." 26. After considering the submissions, the ld. CIT(A) has given his finding in para 4.2 as under:-- "4.2 I have considered the observations of the AO and the contentions of the appellant. In the A.Y. 1996-97, the ld. CIT(A) has allowed the above claim except in respect of amounts relating to loss on sale of fixed assets, deferred revenue expenditure and write off lease hold land. The Hon'ble ITAT Jodhpur Bench vide its order dated ....
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....o. 3 is against deleting disallowance of welfare expenses under section 40A(9) of Rs. 3.5 crore. 31. The brief facts discussed by ld. CIT(A) in para 5 and 5.1 at pages 12 and 13 of his order are as under:-- "5. The fourth ground of appeal is regarding the disallowance of Rs. 3,50,00,000/- u/s. 40A(9) of the IT. Act, 1961. It has been stated by the AO that in tax audit report the auditor has not pointed out any expenses which are disallowed u/s. 40A(9) of the I.T. Act, 1961 as was pointed out in the report for the A.Y. 1996-97. During the course of assessment proceedings, it was contended by the assessee that contribution to various funds, clubs, canteen, company cooperative society etc. do come within the ambit of welfare expenses and therefore, these are allowable as such. In view of the past history of the case where this amount have been disallowed, the AO did not accept the contention of the assessee. It has been observed by the AO that the contribution to welfare funds, schools, clubs, community centre, cooperative society, canteen and other welfare activities come under the provisions of Section 40A for which no details were furnished by the assessee. It has....
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....ntentions of the appellant. The Hon'ble ITAT Jaipur Bench vide its order in ITA No. 1128/JP/94 dated 24-02-1998 in the case of appellant for the assessment year 1990-91 has held as under:- " We have examined the facts of this ground of appeal and have perused the material relied upon. Undisputedly, the expenditure in question was made as per the agreement with the staff union and therefore, directly connected with the smooth running of the business of the assessee. It is also quite clear from the facts that the assessee has no direct or indirect control over the utilization of these funds as bulk of the fund viz. welfare fund Rs. 29,24,048/- and grant to central schools Rs. 3,84,435/- were directly related to the welfare activities of the staff and also getting admission to the children of the staff members in central school. It is also beach of the agreement worked out under the Industrial Disputes Act, the assessee could have been punished as per Section 29 of the Act. It is also worth noting here that the decision of the Madras and Hyderabad Bench relied upon by the assessee are fully applicable to the facts of this case. Under the circumstances, we have no he....
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....the total income. 6.1 During the course of the appellate proceedings, it has been submitted by the appellant that the ld. CIT(A) has decided the above matter in favour of the assessee in assessment year 1996-97. It has therefore, been requested to delete the addition made." 38. After considering the submissions, the ld. CIT(A) following his order for assessment year 1996-97 allowed the claim of the assessee recording his finding in para 6.2 as under:-- "6.2 I have considered the observations of the AO and the contentions of the appellant. The ld. CIT(A) vide his order No. 519/IT/98-99, dated 30-06-1999 for the assessment year 1996-97 has deleted the addition on this point. It has been observed by the ld. CIT(A) that "in the present case the realization of interest is not based on realistic manner because recovery of principal amount itself is doubtful". It has therefore, been held by the ld. CIT(A) that the income did not accrue to the appellant. The ld. CIT(A) therefore, deleted the addition. Respectfully following the above decision of the ld. CIT(A) for the assessment year 1996-97, the addition made of Rs. 60,00,000/- on account of accrued intere....
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....AO that the assessee did not furnish the relevant details relating to feasibility report expenses. From whatever details furnished as mentioned above, these are not different than the expenses of the nature incurred during last year. For example, payment to MECON for Zinc Smelter Dabari of Rs. 5,80,000/- ad Rs. 5,50,000/- totalling to Rs. 11,30,000/- and the amount of Rs. 74,11,505/- paid to LURGI INDIA for Roaster Plant for feasibility study. It has been observed by the AO that the above expenditure which has been incurred are heavy capital expenditure. It has been stated by the AO that the ld. CIT(A) has allowed the assessee's claim for technical feasibility report expenses where the major expenses were for mining consultancy. However, this decision has not been accepted by the Department. An appeal has been filed before the Hon'ble ITAT. It has been stated by the AO that by incurring expenses the assessee is going to increase its income earning capacity in terms of its output and quality. In view of the above, the AO treated these expenditure as capital expenditure. Accordingly, the AO did not allow the deduction of Rs. 1,14,16,681/-. 7.1 During the course....
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.... (vii) CIT v. Sesha Sayee Bros (P.) Ltd. [1981] 127 ITR 218 (Mad.) (viii) Hindustan Aluminium Corpn. Ltd. v. CIT [1986] 159 ITR 673 (Cal.) (ix) CIT v. Graphite India Ltd. [1996] 221 ITR 420 (Cal.) (x) CIT v. Karnataka State Industrial & Investment Development Corpn. [ 1987] 163 ITR 657 (Kar.) (xi) Dy. CIT v. Rajasthan Processors India Ltd. 20 TW 571 (xii) CIT v. Coromandal Fertilizers [2001] 247 ITR 417 (AP) In view of the above, it has been requested to allow the deduction of Rs. 1,14,16,681/-." 44. Thereafter, ld. CIT(A) allowed the claim of the assessee by recording his finding in para 7.2 at pages 17 to 19 by giving following finding:-- 7.2 I have considered the observations of the AO and the contentions of appellant. The details of feasibility report expenses were sent to the AO vide this office letter dated 3-07-02 for submitting his report in accordance with Rule 46-A of I.T. Rules. In this regard, the Jt. CIT, Range 1, Udaipur vide his letter dated 7-8-2003 has stated as under:- "the AO has also given the details of entire expenditure in the ....
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....1) by the ld. CIT(A) in assessment year 1997-98. It has been pointed out by the appellant that item No. 2 of Rs. 74,11,505/- pertaining to M/s. Lurgi India relates to existing Roaster Plant and the feasibility study was being carried out for augmentation of plant efficiency by Oxygen enrichment. Therefore, it is not "a new unit or extension of business. It has been submitted that other items as mentioned above and items where expenses are less than Rs. 5.00 lacs have not been incurred prior to commencement of business as the assessee is an existing company. These have also not been incurred for extension of existing unit or for setting up a new unit. It has been stated by the appellant that these therefore, do not of all within the scope of Section 35D and are allowable u/s. 37(1) of the IT. Act, 1961. In my appellate order No. 268/IT/UDR/1999-2000 dated 17-02-04 in the case of the appellant for the assessment year 1997-98 by following the decision of the Hon'ble ITAT, Jodhpur Bench in ITA No. 639/JP/98 dated 30-09-02 in the case of the appellant for the year 1992-93 I have held that the feasibility report expenditure incurred during that year is allowable as a deduction u/s. 3....
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....e. However, department has filed appeal against the order of ld. CIT(A) on 13.5.2010. 46. On the other hand, the ld. A/R stated that appeal of the department against the order of ld. CIT(A) who allowed the appeal after direction of the Tribunal is pending. Therefore, there is no infirmity in the order of ld. CIT(A). Accordingly the same is liable to be confirmed. 47. After considering the submissions and perusing the material on record, we find that ld. CIT(A) was justified in allowing the claim following the decision of Tribunal for A.Y. 1997-98 decided by Jodhpur Bench on 13.9.2002. For A.Y. 1997-98, the issue was sent back to the file of ld. CIT(A) and again the ld. CIT(A) has allowed the claim of the assessee. Therefore, for this reason also the order of ld. CIT(A) does not suffer from any infirmity. Accordingly we confirm the order of ld. CIT(A) for the year under consideration. 48. Ground No. 6 is against deleting the addition of Rs. 25,99,76,000/- made on account of under valuation of stock of Zinc concentrate. 48.1 The brief facts of the case are that during the year, the assessee company changed the method of valuation of Zinc and lead concentrate and work in p....
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....rates) as 31.3.1998 has been valued at cost or net realizable value whichever is lower. The said change has resulted in decrease in inventory and profit by Rs. 2599.76 lacs as disclosed in note No. 9(i) and 9(ii) in the Notes of Accounts to the Financial Statements of the company. It has been stated that the company started valuing the concentrate on weighted average cost or net realizable value for the reason that company is regularly selling concentrate in the market. In such case if is not correct to value the same as Raw material. As far as Work in progress is concerned, the net realizable value of the final product i.e. lead ingot etc. is lower to its cost to the company. In such cases, where it is known that the value which is appearing in the books is not going to realize, it is not prudent to value the work in progress at cost. It has been stated that in accordance with the principles followed in the revised mandatory Accounting Standard on "Valuation of Inventories" it has valued the WIP at net realizable value which is much lower to the cost. It has been submitted that the revised mandatory Accounting Standard on "Valuation of Inventories" suggest the method of valuation ....
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....ra 9.2 at pages 27 to 29 of his order. '9.2 I have considered the observations of the A.O. and the contentions of the appellant. During the year the appellant has changed the method of valuation of closing stock of Zinc/Lend concentrate and work in progress. In view of the above change in the method of valuation of closing stock and WIP the profit of the company has been reduced by Rs. 2599.76 lacs. In this connection in the Tax Audit Report, the Auditor has commented as under: (ii) In the following cases the company has made change in method of valuation of stock as compared to the method employed in the immediately preceding previous yean- (A) In case of valuation of closing stock of concentrates other than bulk and bought out concentrates from weighted average cost to weighted average cost or net realizable value whichever is lower has resulted in decrease in inventory as well as profits of the company by Rs. 1050.05 lakh. (B) In case of accounting policy 1(e) and 1(I) regarding valuation of work-in-process from weighted average cost to weighted average cost or net realizable value whichever is lower has resulted in....
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....by ICAI and the same is not in dispute either in Auditors Report or in the assessment order. It has been pointed out by the appellant that it is consistently following the changed method adopted by it in succeeding years. It has been stated by the appellant that the A.O. has made a reference to the order of the Ld. CIT(A) for the A.Y. 1996-97. In this regard it has been pointed out by the appellant that the order of Ld. CIT(A) has been reversed on this issue by the Hon'ble ITAT vide its order dated 24.4.02 in ITA No. 446(JP)/99 and the addition made on account of undervaluation of stock on the allegation of change in method of valuation has been deleted. Therefore the addition cannot be sustained on this basis. In the case of CIT v. Dalmia Cement (Bharat) Ltd. [1995] 215 ITR 441 the Hon'ble Delhi High Court has held that irrespective of the basis adopted for valuation of stocks in the earlier years, the assessee has the option to change the method of valuation of the closing stock at cost or market price, whichever is lower, provided the change is bona fide and followed regularly thereafter. Keeping in view the above facts and the facts stated by the appellant it is clear t....
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....ions of the ld. AR, it was mentioned that they have changed the method of accountancy for valuation of the closing stock from the year under consideration only and this method has been consistently followed in future year after year, whereas in the earlier year the assessee had followed the method of net realizable value at the London Metallic Exchange price and not at the domestic price and the method was not approved by the Hon'ble Supreme Court. If the same method is adopted during the year under consideration then as per the decision of Hon'ble Supreme Court, the issue has to be decided against the assessee. The ld. DR on the other hand has stated that the facts are similar in the year under consideration as well as for the assessment years 1996-97 and 1997-98. The factual aspect has to be examined at the end of the AO on this issue whether the same method is adopted as was adopted for the assessment years 1996-97 and 1997-98 or a different method is adopted. The change of method is not bar either on the fads or in the eye of law as held by various Courts. The decision of Hon'ble Delhi High Court in the case of CIT v. Dalmia Cement (Bharat) Ltd. [1995] 215 ITR 441/8....
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....at case were entirely different than the facts of the case of the assessee. It has been stated by the appellant that in view of the above decision of Hon'ble IT AT Jaipur Bench in the case of Wolkem India Ltd., the expression 'total turnover' will not include sales tax since the expression export turnover did not include the same. In view of the above, it has been stated that the AO was not justified in including the sales tax to the amount of total turnover for calculating the deduction u/s. 80HHC." 51. After considering the submissions, the Ld. CIT(A) allowed the issue in favour of the assessee by recording his finding in para 11.2 at pages 30 & 31 as under:-- '11.2 I have considered the observation of the AO and the contentions of the appellant. This issue has now been decided by the Hon'ble High Court of Rajasthan in the case of CIT v. Wolkem India Ltd. (2003) 132 Taxman 7. In this case, the Hon'ble Rajasthan High Court has held as under:- "it is now well settled that the incidence of sales tax is really on the consumer and it is in substance a tax imposed on the goods on the occasion of sale. The statutory liability, how....
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....es is liable to be restored to the file of the A.O. or liable to be confirmed? 2. Whether on the facts and in the circumstances of the case, the issue in respect of disallowance of Rs. 304.82 lacs out of extra ordinary items relating to the amount written off as a result of the closure of Degana Tungsten Mine Unit is liable to restored back to the file of the A.O. or liable to confirmed? 3. Whether on the facts and in the circumstances of the case, the issue in respect of deleting the disallowance of Rs. 6,88,62,383/- being the Mine Development Expenses is liable to be deleted or to be set aside to the file of the ld. CIT(A)? 4. Whether on the facts and in the circumstances of the case, the issue in respect of deleting the disallowance of Rs. 3.50 crores made by the A.O. u/s. 40A(9) of IT Act is liable to be deleted or to be set aside to the file of the A.O.? We also request your good-self that if the above mentioned questions are not suitable then you may frame the questions as you think fit. Sanjay Arora, Member (A) 56. I have perused the proposed order by my ld. brother, JM in the captioned appeals, and also discussed the sam....
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.... and does not on account of practicability, cover all the ledger accounts every year), finding no definite basis for the same except a vague explanation from the assessee-company that the amount is as per the excise records, causes a reconciliation spanning the past few years. To find that no such value is in fact receivable or recoverable; the corresponding stores having been in fact consumed in the assessee's operations over the preceding years, i.e., as per assessee's own and relevant (excise) records. The amount is accordingly written off in accounts as a prior period expense. What more or clearer indictment of the assessee's case could there be? There is, firstly, no binary transaction, i.e., with any third party, for there to be even a remote prospect of a dispute or scope for crystallization of the liability, which argument constitutes or forms the fulcrum of the assessee's case. In fact, it is not a case of a liability at all, but only of statement of an item of a current asset at its realizable amount in the final accounts. In fact, the assessee has itself disallowed depreciation, debited at Rs. 10.84 lacs to prior period expenses, and claimed only the bala....
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....inancial control, to be effective, seeks to cause a proper examination, stipulating the hierarchy in the organization (suitably defined) at which it would be finally sanctioned, so that higher (again, defined) amounts are comprehensively reviewed, both in terms of being cost efficient (by ensuring competitive bargains) as also by way of cost-benefit analysis. However, once the expenditure is already incurred and the corresponding goods or services delivered, only the course as suggested by the terms of the agreement/contract would prevail, so that the stated control/post facto examination is of little value, except for providing guidance for future. In any case, whatever be its value to the organization, which I consider peripheral at best, seeking approval under the circumstances is only an internal procedure that has no bearing on either the incurring of the expenditure or its claim as a deduction in the computation of income under the Act. In fact, even accountancy does not recognize the same: mandating, rather, booking of all known losses and liabilities, even as the 'provision' in its respect in accounts has to be informed and based on best available information. It....
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....d component or the disputed part of the liability that can be said to have 'arisen' or 'accrued' in the year of its settlement, and not the entire of it. Reference in this regard be made to the decision in the case of CIT v. Kishore Chand Shivcharan Lal [2004] 266 ITR 37/138 Taxman 256 (All.). 56.4 Continuing further, it is interesting to note that while AS-I notified u/s. 145 of the Act, so that it forms part of the income-tax law, prescribes provision for all known losses and liabilities. As such, the disputed component also stands to be provided for and claimed in the first instance itself. The case law in the matter, however, advocate claim of the disputed liability in the year of its settlement/resolution [refer: CIT v. Swadeshi Cotton & Flour Milk (P.) Ltd. [1964] 53 ITR 134 (SC). This is as the same involves compromise and give and take, ostensibly only in the interest of business. And where under the process of law, i.e., through a tribunal or court, it is only upon its award/decision that the respective rights of the parties can be said to have been determined and/or ascertained. The source case law on the subject, which the decision in the case of Swade....
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...., has arisen in the assessee's case from year to year, (also refer para 1.5) 56.5 Reference to the decisions by the tribunal has been up to now scrupulously avoided in view of the inconsistency in the decisions by the tribunal, so that it became incumbent to firstly examine the issue de hors the same, i.e., on first principles. In fact, even here I find that the tribunal has for the immediately two preceding years, i.e., assessment years 1996-97 and 1997-98, rejected the assessee's claim, drawing on the same, i.e., the first principles, citing the decisions in the case of Swadeshi Cotton & Flour Milk (P.) Ltd. (supra); S.M. Ziaddin v. CIT [1993] 203 ITR 136/71 Taxman 580 (Mad.); Mysore Spg. & Mfg. Co. Ltd. (supra) [affirmed by hon'ble Apex Court in CIT v. Mysore Spg. & Mfg. Co. Ltd. [1970] 78 ITR 4 (SC), and which have nowhere been rebutted by the assessee. The tribunal notes that the decision in the case of Nagri Milk Co. Ltd. (supra) has been held as no longer representing good law in the case of J.K. Woollen Manufacturers Ltd. (supra); Escorts (Agents) (P.) Ltd. v. CIT [1971] 80 ITR 61 (Delhi) in view of the judgment by the Apex Court in Swadeshi Cotton & Flour Mi....
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....ua the present case is not understood and the reliance becomes misplaced. Finally, the decisions, inter alia, in the case of J.K. Woollen Manufacturers (P.) Ltd. (supra) and Escorts (Agents) (P.) Ltd. (supra), holding the decision in the case of Nagri Mills Co. Ltd. (supra) as no longer representing good law were not cited before the hon'ble court. 56.6 The impugned claim is, thus, sustainable neither on facts nor in law nor on precedence. In fact, it may be emphasized that the matter of accrual or otherwise (of an income or liability) being the matter of fact, the mere finding of fact that it has not accrued or arisen during the relevant year is itself sufficient to meet the assessee's challenge. This is as the law can be applied only on or qua a defined set of facts. The elaborate discussion, which for most part dwells on facts, became necessary only in view of the inconsistency in the tribunal's view in the assessee's own case as well as of it leading to a difference of opinion in the tribunal itself (for the current year). 56.7 In the result, Ground # 1 of the assessee's appeal is dismissed. II. Extraordinary Items (Rs. 3,04,81,750/-) 57.1 This i....
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....report dated 1-09-1998, that the Mine had yet to be transferred to the Government of Rajasthan, i.e., as at the year-end. How could then any expenditure in its respect arise for being claimed? The claim was, thus, premature and also inchoate as it could not be presumed that no value in its respect is realizable, i.e., from the transferee. The disallowance was confirmed on this basis. Aggrieved, the assessee is in appeal. 57.2. Without doubt, prospecting for and mining of tungsten ore cannot be said to be a distinct business for a company in the business of mining of ores and production of metals and alloys, even as opined by us during the hearing itself. That the company may be doing so principally in Zinc metal, in which its expertise may lie, is another matter. In fact, even if it were to be a separate business, the losses of one business are required and entitled to be set off against the income of another in the computation of the assessee's total income under the Act. How does, one may ask, it therefore matter if the Tungsten Unit constitutes a separate business or not? The issue, thus, is not whether or not the same constitutes a separate or distinct business, and whic....
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....se, it would therefore need to be seen if it is of revenue nature. This is as, if not so, it would not be deductible even if it is held as having been incurred for the purpose/s of the business. This is as capital expenditure or capital loss, though incurred for or sustained in, as the case may be, business, would not yet stand to be allowed either u/s. 37(1) or u/s. 28 of the Act. As regards 'purpose', though the assessee has not supported its case with facts and figures, as where the Degana Mines are shown to be operating at a loss, with little prospect of a turn around, no doubt has been expressed by the Revenue with respect to the closure decision, taken ostensibly only in business interest. Each of the three expenses comprising the claim under reference would therefore be required to be examined from that standpoint. A. Capital work-in-progress (CWTP, Rs. 59.37 lacs): This, as the name suggests, is just that, i.e., work, capital in nature, incomplete or under progress as at the year-end, so that it has yet not fructified into a complete asset, not to speak of a functional one. The ld. AR, on being questioned in its respect during hearing, submitted that he would fur....
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....ation (at Rs. 150.86 lacs), also forming part of its total claim for extraordinary items, which is under reference. Here it would be pertinent to state that a revenue expense would, even otherwise, i.e., irrespective and independent of the closure, stand to be deducted; the assessee having not discontinued its business. However, the claim/s under reference arises only on account of the write off, i.e., it could not have been claimed but for the write off, so that it is not revenue expenditure per se. The write off implies a loss of value, i.e., something which is perceived as of value, realizable in the course of business, i.e., an asset, by definition. The write off of an asset signifies loss of value to that extent. The question, therefore boils down to, and what is relevant, is whether the asset written off is a revenue or a capital asset; the latter being defined under section 2(14) of the Act, so that any asset other than a capital asset, would be by definition a revenue asset. With regard to a capital asset, the claim on its write off would be akin to a claim for terminal depreciation, while qua a revenue asset the question would have to be further examined as to whether t....
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....ted as impending the completion of the statutory formalities, and which is understandable. The question is not of the assessee's legal right on the relevant assets, but their value to it as a going concern in view of its decision to exit the said Undertaking (Degana Mines). There is nothing to show that the legal transfer of the Mines is to be at a value. In fact, where so, the assessee would not have transferred its men & material to the extent these could be redeployed, to its other Units, as the realizable value from the Govt., where so, would only be on the basis of it being a going concern, if not a profitable venture, and in any case, stand to increase substantially on that count. In fact, the closure sanction or the terms of engagement would contain a provision/s to this effect, which should have been called for by the Revenue from the assessee where it doubts the basis of the claim/s made. We are not, it may be clarified, averse to a remission, but there should be some basis for doubting the assessee's claims or at least a prima facie case against it made out. However, another and more important question remains, and that is as to the nature of the expenditure. T....
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....ty concerns, either removing the defect/s or replacing them, and which may entail discarding the goods recalled as these do not meet the environmental or quality standards/specifications. But for the reason that, having decided not to operate the relevant Mines, it no longer holds any value for the assessee. Thus, though continuing to be the assessee's property, it cannot be regarded as its stock-in-trade, but as any other capital asset belonging to it. The relevant part of section 2(14) of the Act, defining capital asset, reads as under: "2. Definitions. - In this Act, unless the context otherwise requires,- (14) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession" The said goods are, thus, only a capital asset in terms of section 2(14) of the Act, and the loss arising on their relinquishment, a loss of capital, as it would be for any other capital asset, whether representing an erstwhile 'fixed' or 'current' as....
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....e to the organization, implying a business loss. A deduction, either way, ensues. From another stand point, the changed circumstances of the debtor necessitate the debt being revalued, with its realizable value warranting a write off in whole or in part and, thus, a claim as a business deduction in its respect to the creditor to that extent. In other words, the said write off (of a trade debt) is only on account of its - a current asset - revaluation, and is independent of the decision, if any, to close the business (or a unit) of which it is (or was) a part, and which (decision) would not impact the legal rights between the parties in terse already accrued. The current assets of a business, it may be appreciated, are only valued at net realizable value, reasonably estimated, unless, of course, it exceeds cost, as these are primarily liquid and realizable over the current term, so that the loss of value is by definition a business loss. In fact, the same premises obtains and guides the deeming of a trade liability as a profit of the business u/s. 41(1) on its remission; the same being again independent of whether the business continues to exist in the relevant year or not. Furth....
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.... at a consideration as against nil value in case of relinquishment - which the present case is of, would, thus, be of little value or relevance. The loss on relinquishment of the erstwhile trade asset, even though arising in the course of business, is only a capital loss assessable u/s. 45 of the Act. In fact, it would lead to a corresponding capital receipt for the transferee, as where it deems it fit to operate the said Unit, and assuming it places the same or similar values on the different assets. This is as, as afore-said, the said assets constitute an essential part of the capital (both fixed and working) structure or profit making apparatus of the said Undertaking. Without doubt the loss in the instant case is not on account of any deterioration in the quality or decline in the market price (reckoned at net realizable value), which though no doubt would be a business loss u/s. 28 of the Act, but on account of relinquishment or discarding the goods, which immediately prior thereto were a part of the assessee's stock-in-trade, together with other capital assets of its erstwhile enterprise, on its closure. In a given cases it may be at a profit/gain, which though would a....
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.... facts and in law. On facts, the issue stands delineated only on the basis of the respective cases of both the parties (refer para 2.2 supra). Qua law, the powers of the appellate tribunal are of the widest amplitude, case law on which is legion, and for which reference, inter alia, is made to the decisions in the case of CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC) and ITO v. M.K. Mohammed Kunhi [1969] 71 ITR 815 (SC) 57.5 In result, the assessee's Ground No. 3 is dismissed, i.e., in the afore-said terms. III. Mine Development Expenses (Rs. 6,88,62,383/-) 58.1 This disallowance concerns Ground #1 of the Revenue's appeal. This expenditure, also claimed per write off at Rs. 91.39 lacs under the head 'Mine Exploration & Development Expenses', the subject matter of the assessee's Ground # 3, discussed supra, forms the subject matter of the Revenue's appeal (vide Ground # 1) as well; the AO having disallowed it at Rs. 6,88,62,383/-, which has since been allowed by the ld. CIT(A), so that the Revenue is in appeal before the tribunal. The said sum itself comprises of two separate claims, i.e., for Rs. 568.07 lacs and Rs. 125.28 lacs. The t....
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....rectly per the computation of income. In addition, for the current year, another sum of Rs. 91.39 lacs represents write off in respect of Degana Mines on closure of the said unit. The assessee's claim for the current year, thus, has three components. 58.3 In respect of the assessee's claim for ME&D expenses, the tribunal for the immediately preceding year (i.e., A.Y. 1997-98, in ITA No. 249/JU/2004 dated 24/7/2009), following its order for the A.Y. 1996-97 (in ITA No. 46/JU/2004 dated 30-03-2009) for Rs. 131.03 lacs (i.e., at net of depreciation component of Rs. 3.59 lacs), remanded the matter back to the file of the AO to consider the assessee's claim in its respect u/s. 35E, i.e., on the parameters of the said section, with particular reference to the year of commencement of production (refer para 32). The ld. CIT(A) has allowed the assessee's claim in its respect at Rs. 568.07 lacs as also for Rs. 120.56 lacs (i.e., for Rs. 125.29 lacs less depreciation of lis. 4.73 lacs), holding the same to be a valid claim u/s. 37(1) of the Act, while, as afore-stated, disallowed the third amount of Rs. 91.39 lacs as capital expenditure. Qua the second component (Rs. 125.29....
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.... production commences, there is no question of any expenditure on prospecting and, thus, any expenditure eligible for deduction u/s. 35E, being incurred. Any expenditure on further development on or extension of the said mines would necessarily have to be examined from the stand point of being either capital or revenue expenditure. Improvements in methods are intrinsic to any business, so that what is relevant is not the factum of improvement per se but whether it results in any enduring benefit or advantage to the business in the capital field. The AO accordingly shall consider this aspect as well. The tribunal in fact has dealt with this matter in sufficient detail per its order for A.Y. 1996-97 in the assessee's case (ITA No. 46/JU/2004 supra), making specific reference to ss. 35E(5) and 35E(8) as also the decision by the hon'ble jurisdictional high court in the case of CIT v. Pioneer Minerals [1992] 107 CTR (Raj.) 230, and which the AO shall draw upon; his decision being necessarily required to be consistent with law as well as, both with that by the tribunal and across different years. In fact, the assessee ought to, but has not, stated as to how the AO has applied him....
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....pe of which is defined per section 35E(5) of the Act, and includes an expenditure which proves to be abortive. There are no clear findings by the first appellate authority in respect of this expenditure, and both the sides, i.e., the assessee and the Revenue, have a point. Without doubt, capital expenditure, where so, would not cease to be so where incurred in respect of a Unit in production. Capital expenditure, i.e., one which by definition yields an advantage or benefit of an enduring nature in the capital field, is not a function of time, so that it could be incurred either before or after the commencement of commercial production. In my view, as afore-stated, there is lack of proper factual determination, so that the matter would warrant being restored back to the file of the first appellate authority for a decision on merits. The matter is of continuing relevance and significance, so that proper opportunity to both the sides, including placing on record any material they may wish to rely upon, including case law, in advancing or rebuttal, shall be caused to be so by the ld. CIT(A) in adjudicating the matter, which he shall by issuing specific findings of the fact and in accor....
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....ppellate order for us to locate the same, nor has the assessee brought the same on record or clarified this aspect (which forms the sole basis on which relief has been allowed to it by the first appellate authority) before us. Further, where is the question of the tribunal deciding this matter in May, 1999 if it had already decided the same earlier, to which, assuming so, there ought to be some reference (as also the reasons leading to it coming up for adjudication again), to which there is none in its order of May, 1999. As such, it is clear that the tribunal has under the similar circumstances confirmed the disallowance, finding the assessee unable to substantiate its claim; the onus of which is clearly on it. 61.3 No doubt, the ld. AR before us stated that all the details are in possession of the assessee, and were in fact also adduced. More importantly, the argument alludes to the principle that there could be no precedent on facts, and whether the assessee has been able to prove an expense is a matter of fact, so that it may or should not be guided by precedent. And, the expenditure, the revenue nature and business purpose of which is not in doubt, allowed. True, just becau....
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....therefore, incumbent upon us to see as to how, the facts' being similar, the tribunal has adjudicated the matter for those years, i.e., for assessment years 1996-97 and 1997-98. The tribunal for the assessment year 1996-97 (in ITA No. 449/JDP/1999, dated 18-05-2009) at para 16 in para 24 has held as under: "24. Having heard the parties and on careful perusal of the record and considering the peculiar facts and circumstances of this case, we find it reasonable to set aside the issue and restore the matter back to the file of the assessing authority for taking a decision afresh in accordance with law. Needless to add he shall pass a speaking order on each and every item assigning reason for taking decision in accordance with law. Reasonable and effective opportunity shall be allowed and due regard shall be given to the direction as are contained in order of High Court on identical issues in assessee's own case." For the assessment year 1997-98 (in ITA No. 249/JU/2004, dated 24-07-2009), deciding the Revenue's Ground No. 5 before, the tribunal again considered it fit and proper to restore the matter back to the file of the AO for a decision in accordance ....
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..... Essentially the assessee has legal right to recover the interest. When the assessee has legal right to claim, income can be said to have accrued under the mercantile system of accounting adopted by the respondent-assessee. Further more the assessee placed no material on record to show that the principal sum has become bad. We, therefore, set aside his order and allow ground in appeal." 63.2 Nothing to suggest any change in the facts and circumstances of the case has been brought on record by the assessee, even as it has not succeeded for the two immediately preceding years as well, besides stating that the total amount assessed as income on this count by the Revenue up to assessment year 1998-99, i.e., the current year, aggregates to Rs. 348 lacs. That by itself would be of no moment; the tribunal noting for the preceding year, and which forms the basis of its order, that the assessee has not been able to exhibit that even the principal sum had become doubtful of recovery, so that contractually the amount was legally due to the assessee, even as held by the hon'ble jurisdictional High Court in the case of SMS Investment Corpn. (P.) Ltd. v. CIT [1993] 203 ITR 1001/[1994] 72....
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....cord) is, and particularly in view of the finding that the facts of the instant case are not determinate, of no consequence. The decision reiterates the principle that income-tax is a tax on real income, so that where real income has not in fact accrued, no tax in law could be levied. That represents trite law, for which the hon'ble High Court cites the decision in the case of Godhra Electricity Co. Ltd. v. CIT [1997] 225 ITR 746/91 Taxman 351 (SC) and CIT v. Goyal M.G. Gases (P.) Ltd. [2008] 303 ITR 159/[2007] 163 Taxman 541 (Delhi), quoting from the former. However, as clarified by the hon'ble court itself therein (para 6), the same stands rendered in the facts of the case, which find discussion therein. As such, in ratio, the decision must be considered as affirming that no real income in the facts of the case had accrued, dismissing the Revenue's appeal as not raising any substantial question of law. In the facts of that case, a liability of Rs. 617 lacs (including interest up to 31/3/1999 for Rs. 267 lacs, which stood offered to tax) was settled for Rs. 480 lacs vide one-time settlement dated 15/12/2003. It was under these circumstances that the hon'ble court f....
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....A.Y. 1996-97 (vide order in ITA No. 46/JU/2004, dated 30.3.2009), and a decision in light thereof, as well as the law as explained by the hon'ble courts of law, as in the case of CIT v. Pioneer Minerals (supra), or warrants being allowed as claimed, i.e., under section 37(1) of the Act, in full? 4. Whether the issue qua the disallowance under section 40A(9) of the Act (at Rs. 350 lakhs) is to be set aside for passing a speaking order in accordance with law after considering the facts of the case, as also decided by the Tribunal for immediately two preceding years, or is to be allowed in the facts and circumstances of this year? THIRD MEMBER ORDER R.S. Syal, Member (A) (As a Third Member) 64. The Hon'ble President has nominated me u/s. 255(4) of the Income-tax Act, 1961 (hereinafter also called as 'the Act') to render opinion on the difference between the Members who initially heard the present appeals but differed in their respective opinions. Before proceeding with the matter, it is relevant to note that both the learned Members, apart from differing on the merits of the case, also could not be in unison in making reference u/s. 255(4) of th....
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....Ys. 1996-97 and 1997-98. 67. Before proceeding to deal with the matter, it is necessary to point out that section 255(4) of the Act deals with the situation when there is difference in opinion on any point or points between the Members of a bench. In such a case, the Members state point on which they differ by referring the matter to the President of the Tribunal for hearing on such point(s) by one or more of the other Members of the Tribunal. This sub-section further provides that "such point or points shall be decided according to opinion of majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it." A bare perusal of this provisions indicates that the point of difference between the Members is decided by the majority view by taking into consideration the opinion expressed by the Third Member nominated by the President and also the members who initially heard the appeal and differed in their respective conclusions. This shows that a Third Member has no option but to agree with either of the two views taken by the members, who initially heard the appeal, so as to form a majority view. In the like manner, the parties appearing ....
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....owance has been made by considering the details of such expenses. The tribunal has considered the details of such expenses and then decided against the assessee. Since the Assessing Officer in the instant year did not examine the details of such expenses and simply disallowed by relying on the Tribunal orders for the A.Ys. 1996-97 and 1997-98, the view taken by the learned CIT(A) for sustaining such disallowance, cannot be accepted. In my considered opinion, the deductibility of expenses needs to be tested on the touchstone of the principle laid down by the Tribunal in its order for the A.Y. 1995-96 in respect of each item of expenditure claimed under the head 'prior period expenses'. As the Assessing Officer has failed to examine the details of expenses, in my considered opinion, the view taken by the learned J.M. needs to be upheld with a direction to the AO to consider the deductibility of expenses as per the view taken by the Tribunal for A.Y. 1995-96. I therefore, answer the question in negative by holding that the learned CIT(A) was not justified in sustaining the disallowance of prior period expenses. As such I agree with the view taken by the learned J.M. in restori....
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.... than there can be no bar on allowing deduction of expenses in respect of a closed business against the income of other businesses, when it is a case of composite business Both the learned Members have also agreed that it was a case of composite business and hence the deductibility of expenses could not be marred by such considerations. It is observed that the Assessing Officer has based the disallowance of expenditure simply on the ground that it was in respect of written off amounts of a closed business and hence not deductible. In view of the above decision of the tribunal, the foundation for the AO's view, does not stand. The AO did not examine the details of such expenses as to whether these were capital or revenue. Since the stand taken by the Assessing Officer has been rejected by both the learned Members, in my considered opinion, the proper course should be to restore the matter to the file of the Assessing Officer for considering the deductibility or otherwise of such amounts as per law. It is simple and plain that the Appellate Authorities are required to adjudicate upon the orders of the authorities having original jurisdiction which appreciate the material and then....
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....icer for deciding it in conformity with the decision taken by the Tribunal for the A.Y. 1996-97. 75. I have heard the rival submissions and perused the relevant material on record. It is observed that the learned J.M. has relied on the order passed by the Tribunal for the A.Y. 1996-97 in deleting the addition. However, on perusal of the Tribunal order for A.Y. 1996-97, it is seen that the Tribunal did not delete the disallowance as made by the Assessing Officer but restored the matter to the file of the Assessing Officer for taking a fresh decision in conformity with the directions given by it. As the learned A.M. has also restored the matter to the file of learned CIT(A)/Assessing Officer, I find myself in agreement with the view taken by the learned A.M. in restoring the matter to the authorities below. The obvious reason is that for the immediately preceding two years, the Tribunal has restored the matter and the ld. AM has followed such view. There can be no question of deviating from the opinion expressed by the Tribunal on this issue in earlier years. As the orders of the tribunal for earlier two years have not been modified by the Hon'ble High Court, I would prefer to....
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.... in following the precedents by remitting the matter for fresh decision to be decided in conformity with the view expressed by the Tribunal for immediately two preceding assessment years. I therefore, agree with the view taken by the learned A.M. and hold that the learned CIT(A) was not justified in deleting the disallowance of Rs. 3.50 crores made by the Assessing Officer U/s. 40A(9) of the Act. 79. The Registry of the Tribunal is directed to list this matter before the Division bench for passing an order in accordance with the majority view. ORDER T.R. Meena, Member (A) 80. The ITA No. 224/JU/2004 filed by the assessee as well as cross appeal No. 298/JU/2004 by the Revenue are against the order dated 29/02/2004 of the learned CLT.(A), Udaipur for the A.Y. 1998-99. The effective grounds of assessee's appeal as well as the Revenue are as under: Grounds of ITA No. 224/JU/2004 "1. Under facts and circumstances of the case, learned Commissioner of Income-tax, Udaipur has erred in making disallowance of alleged prior period expenses of Rs. 1,65,50,474/-. 2. Under the facts and circumstances of the case, learned Commissioner of Income-tax....
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..../2012 and was sent for approval of the learned Accountant Member but the learned Accountant Member dissented from the order of the learned Judicial Member and passed a separate order on 17/10/ 2012 and finally difference of opinion were arise between them on following grounds of appeal. (i) Prior period expenses from assessee's appeal. (ii) Disallowance of extraordinary items from assessee's appeal. (iii) Mine Development Expenses from Revenue's appeal, (iv) Welfare expenses U/s. 40A(9) of the IT Act from the Revenue's appeal. 82. Both the learned Members were framed their question of differences, which is also reproduced as under- Questions framed by the learned J.M. 1. Whether on the facts and in the circumstances of the case, the issue in respect of disallowance of Rs. 1,65,50,475/- on account of prior period expenses is liable to be restored to the file of the A.O. or liable to be confirmed? 2. Whether on the facts and in the circumstances of the case, the issue in respect of disallowance of Rs. 301.82 lacs out of extraordinary items relating to the amount....
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....hs and Rs. 120.55 lakhs, is, in the facts and circumstances of the case, to be made considering it as a single claim, or separately? (b) Whether, in any view of the matter, the said issue warrants being set aside back to the file of the A.O. for considering the factual aspects of the case as well as the decision by the Tribunal for the immediately two preceding years, particularly for A.Y. 1996-97 (vide order in ITA No. 46/JU/2004, dated 30.3.2009), and a decision in light thereof, as well as the law as explained by the Hon'ble courts of law, as in the case of CIT v. Pioneer Minerals [1992] 107 CTR (Raj.) 230, or warrants being allowed as claimed, i.e. under section 37(1) of the Act, in full? 4. Whether the issue qua the disallowance under section 40A(9) of the Act (at Rs. 350 lakhs) is to be set aside for passing a speaking order in accordance with law after considering the facts of the case, as also decided by the Tribunal for immediately two preceding years, or is to be allowed in the facts and circumstances of this year? 83. The differences of opinion between both the learned Members were referred to the learned Third Member, who has summari....
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....gsten Ore Capital work in progress Mine Development Expenses Rs. 154.06 lacs Rs. 59.36 lacs Rs. 91.39 lacs Document 2 (i) Tungsten Ore Rs. 154.06 lacs (ii) Provision for fixed assets/terminal depreciation Rs. 150.87 lacs (iii) Capital work in progress Rs. 59.36 lacs (iv) Mine Development Expenses Rs. 91.39 lacs Rs. 455.68 lacs Document 3 (i) Tungsten Ore (ii) Provision for fixed assets/terminal depreciation (iii) Capital work in progress (iv) Mine Development Expenses Rs. 154.06 lacs Rs. 150.87 lacs Rs. 59.36 lacs Rs. 91.39 lacs Rs. 455.68 lacs Document 4 Sl No. Name of Expenditure 1. Salary & Wages Amount in Lakh (Rs.) 55.25 2. Stores & Spares 19.02 3. Depreciation 4.73 4. Contractors Payments 0.70 5. Others Total 45.49 125.29 Remarks Includes salary & wages of regular employees of the company employed for continuous mine development work/extraction work. Includes consumption of consumable stores & spares in the activity of mine development & extraction. Being depreciation of the fixed assets used for the purpose of mine developme....
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....es in respect of fesibility study 1,73,860.00 4. Charges for feasibility study for Roster Plant - paid to Lurgi India 1,54,000.00 5. 5. RSMM Ltd. consultancy fees for feasibility study Compressive documents cost paid to power product association India for feasibility study 1,15,057.00 6,500.00 7. GEO Technical for soil investigation 1,38,730.00 8. Paid to RR, Labs, Bubneshwar for feasibility study 1,00,000.00 9. Paid to HCT, Hyderabad for feasibility study 1,00,000.00 10. Reimbursement of Foreign travelling expenses in respect of various feasibility studies 8,89,381.00 11. Reimbursement of inland travelling in respect of various feasibility studies 1,82,135.00 12. Xerox charges in respect of various feasibility studies 13. Local conveyance, telephone and misc. expenses in respect of various feasibility exp. 14. Paid to Lurgi India for Roaster Plant for feasibility study 15. Trailing disposal - Rajpura Darbia Zawar Mines/ Rampur Agucha Paid to National Environmental Engg. Nagpur 3,225.00 11,688.00 74,11,505.00 10,00,000.00 1,14,16,681.00 Document 9 55 SL Party's ....