TaxTMI 
TaxTMI 
TaxTMI 
2021 (6) TMI 68
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.... were heard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts. ITA No. 3885/Del./2011 & 3942/Del./2011 2. First we take up, appeal of the assessee (ITA No. 3885/Del/2011) and cross appeal of the Revenue (ITA No. 3942/Del/2011) for assessment year 2006-07. 3. The assessee originally raised 14 grounds in its appeal, however during the course of the hearing, the assessee on 31/03/2015, submitted seven (7) condensed/concise grounds, as under: 1. Original ground no. 1 to 3 and 13 & 14;- a. It is contended that non acceptance of the revised return filed by the Corporation with in the time limit prescribed u/s 139(5) is unlawful. b. It is contended that the CIT(Appeal) has made wrong conclusion that the revised return should have been filed before the completion of the processing u/s 143(1). 2. Original ground no.4 & 5:- a. It is contended that the CIT(A) had erred in not accepting the contention of the appellant with regard to the applicability of provisions of u/s 36(l)(xii) while appellant fulfills all the conditions laid down in this section and accordingly eligible for deduction. 3. Original ground no. 6 to 8:- ....
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....ying the provisions of section 115JA of the IT Act. 2 Whether both on the facts and on law, Non-schedule VI Companies are Exempt from the provisions of the Minimum Alternate Tax (MAT), since such Non- schedule VI Companies are not required under the proviso to Section 211(2) of the Companies Act to prepare their Profit & Loss Account in accordance with Schedule VI of the Companies Act, 1956. 3. Whether both on facts and on law for the purpose of computing the Book Profit under section 115JA of the Income Tax Act, the Profit & Loss Account; prepared in accordance with the provisions of the Appellant's Regulatory Act viz. the Warehousing Corporations Act, 1962 read with Central Warehousing Corporation Rules, 1963 and Central Warehousing Corporation (General Regulations), 1965 shall be taken as the basis for computing the Book Profit under section 115JA of the Income Tax Act. 3.2 The grounds raised by the Revenue in the appeal are reproduced as under: 1. The Ld.CIT(A) has erred on facts and in law in deleting addition of Rs. 40205550/- on account of disallowance of provision for Productive Link Incentive ignoring that the assessee failed to substantiate its claim with any docum....
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....or gratuity (Rs. 63759797/-), provision for bad and doubtful debts(Rs. 89686802/-), provision for wealth tax(Rs. 662044/-), provision for leave encashment(Rs. 54227950/-) and provision for PLI (Rs. 40205550/-) ignoring the fact that provisions of section 115JB clauses (a) to (f) are applicable in this case. 8. The Appellant craves leave for reserving the right to amend, modify, alter, add or forego anyground(s) of appeal at any time before or during the hearing of this appeal. 4. Briefly stated facts of the case are that the assessee is a Government of India undertaking, established under section 3 of the Warehousing Corporation Act, 1962 and for the purpose of the Income- tax Act,1962 ( in short the Act) , it is deemed to be a company within the meaning of the Act. It is an authority constituted under the law for the purpose of warehousing and marketing of commodities / agricultural products. The assessee derived its income from letting out of godowns or warehouses for storage, processing or facilitating/marketing of commodities. In financial year 1984, the assessee diversified its operation and started new line of business of running Container Freight Stations (CFS) and Inland....
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....uploaded the said revised return electronically on 01/04/2008. As per the provisions of the Act, i.e. Section 139(5), an assessee can revise its return of income, within one year from the end of the relevant assessment year (i.e. 31/03/2008) or before completion of the assessment, whichever is earlier. The Ld. Assessing Officer ignored the revised return of income filed by the assessee. According to the Ld. CIT(A), the intimation under section 143(1) was sent on 28/03/2008, which is in the nature of the assessment, and therefore, the revised return of income filed thereafter on 31/03/2008, was not valid in terms of section 139(5) of the Act. 6.2 Further, the condensed ground No. 6 of the appeal of the assessee relates to claim for allowing provision of Post-retirement Medical Benefit, which was claimed under revised return of income. 6.3 Before us, the Learned counsel of the assessee referred to paper-book page 16, which is return of income filed for the assessment year 2019-20 and submitted that provision for Postretirement Medical Benefit has been added back while computing the income and claimed on the basis of the actual amount paid. Accordingly, the learned counsel submitte....
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....w. 7.3 The learned DR, on the other hand, submitted that expenditure claimed in profit and loss account has been allowed by the Assessing Officer subject to the provisions of the Act and all expenditure cannot be allowed to deduct merely on the ground the same has been debited in the profit and loss account of the assessee. 7.4 We have heard rival submissions and perused the relevant material on record. The section 36(1)(xii) of the Act during relevant period is reproduced as under: "36(1)(xii) any expenditure (not being in the nature of capital expenditure) incurred by a corporation or a body corporate, by whatever name called, constituted or established by a Central, State or Provincial Act for the objects and purposes authorized by the Act under which such corporation or body corporate was constituted or established." 7.4.1 The above provision was inserted in the Act by way of Finance Act 2003. In the notes on finance bill for 2003 related to provision of the Direct Tax, purpose of proposing the above provision has been explained as under: "MEASURES FOR RATIONALISATION AND SIMPLIFICATION Deduction for expenditure incurred by entities established under any Central, State....
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....d details were ever filed before the Assessing Officer or the Ld. CIT(A). The assessee has never contested deduction under above provision in earlier years. Even in subsequent assessment year i.e. AY 2007-08, the assessee has not pressed this ground of Cross Objection. Thus, it is evident that ground in current year has been raised in casual manner without any detail of actual amount eligible under the above provision. The claim of the assessee before the Assessing officer was that all expenditures have been incurred for the object and purpose of the Central Warehousing Act. The Ld. CIT(A) also rejected the claim of the assessee. 7.6 In our opinion, it is for the assessee to substantiate, whether particular expenditure has been incurred for the objects and purpose of the Central Warehousing Act, 1962. In absence of any such detail of the claim of deduction under section 36(1)(xii) of the Act, no useful purpose will be served in restoring the matter back to the file of the Assessing Officer. We accordingly dismissed this ground of the appeal of the assessee. 8. The condensed ground No. 3 (three) of the appeal of the assessee and ground No. 5 (five) of the appeal of the Revenue rel....
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....y the assessee and even salary of Managing Director(s) of the State Warehousing Corporations is also fixed in consultation with the assessee Corporation. Thus, according to the learned Counsel, the warehousing business of the State Warehousing Corporations (SWC) is conducted through the assessee Corporation and, therefore, expenses in holding shares of those SWCs are deductible against business income of the assessee. The learned Counsel submitted that shares in the State Warehousing Corporation are a tool in assessee corporation's trade. The learned Counsel relied on the decision of the Hon'ble Supreme Court in the case of State Bank of Patiala, which was given alongwith the Civil Appeal in the case of Maxopp Investment Ltd Vs CIT, 402 ITR 640. The learned Counsel further submitted that the investments in State Warehousing Corporation are legacy investment and no borrowed funds have been utilized. No decision was required as to period of holding or valuation since same is as per the statutory mandate and shares are not valued and cannot be traded. The learned Counsel submitted that in the assessment year 2002-03 and 2005-06, the issue has been restored to the file of the Assessing....
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...., all the High Courts, whether it is the Delhi High Court on the one hand or the Punjab and Haryana High Court on the other hand, have agreed in providing this interpretation to section 14A of the Act. The entire dispute is as to what interpretation is to be given to the words 'in relation to' in the given scenario, viz. where the dividend income on the shares is earned, though the dominant purpose for subscribing in those shares of the investee company was not to earn dividend. We have two scenarios in these sets of appeals. In one group of cases the main purpose for investing in shares was to gain control over the investee company. Other cases are those where the shares of investee company were held by the assessees as stock-in-trade (i.e. as a business activity) and not as investment to earn dividends. In this context, it is to be examined as to whether the expenditure was incurred, in respective scenarios, in relation to the dividend income or not. 34. Having clarified the aforesaid position, the first and foremost issue that falls for consideration is as to whether the dominant purpose test, which is pressed into service by the assessees would apply while interpreting Se....
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....o force. The aforesaid intent was expressed loudly and clearly in the Memorandum explaining the provisions of the Finance Bill, 2001. We, thus, agree with the view taken by the Delhi High Court, and are not inclined to accept the opinion of Punjab & Haryana High Court which went by dominant purpose theory. The aforesaid reasoning would be applicable in cases where shares are held as investment in the investee company, may be for the purpose of having controlling interest therein. On that reasoning, appeals of Maxopp Investment Limited as well as similar cases where shares were purchased by the assessees to have controlling interest in the investee companies have to fail and are, therefore, dismissed. 36. There is yet another aspect which still needs to be looked into. What happens when the shares are held as 'stock-in-trade' and not as 'investment', particularly, by the banks? On this specific aspect, CBDT has issued circular No. 18/2015 dated November 02, 2015. 37. This Circular has already been reproduced in Para 19 above. This Circular takes note of the judgment of this Court in Nawanshahar case wherein it is held that investments made by a banking concern are pa....
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....tain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share and Stock Brokers P Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. 40. We note from the facts in the State Bank of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules and holding that section 14A of the Act would be applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT(A) disallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by the ITAT. Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclus....
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....pplicable to the impugned assessment year, hence, the matter has to be reconsidered in the light of the aforementioned decision of Hon'ble Delhi High Court in the case of Maxopp Investment-Limited vs. CIT (supra) as the said decision of Hon'ble Delhi High Court was not available when learned CIT (A) has decided the issue. We, therefore, restore this issue to the file of Assessing Officer for re-determination of the disallowance u/s 14A. We direct accordingly. This issue of disallowance u/s 14A is considered to be allowed for statistical purposes in the manner aforesaid." 8.6 The identical issue in AY 2005-06 (ITA No. 2918/Del/2009) has been restored by the ITAT to the file of the Assessing officer observing as under: "6. We have heard both the counsel and perused the records. We find that Hon'ble Mumbai High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DOT in ITA No. 626 of 2010 234 CTR 1 has overruled the STAT decision of Daga Capital Management (Supra) and held that Rule 8D has been notified on 24.3.2008 and will be applicable only from Assessment year 2008-09. 6.1 Front the above, we find that Rule 8D would not be applicable. However, the Hon'ble Mu....
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.... held that the failure of the assessee to produce documents during the course of hearing can lead to an adverse inference to the effect that if produced they would have gone against assessee in terms of section 114 of the Evidence Act, 1872. This case had gone to the Supreme Court wherein the Apex Court returned the case to the High Court, as reported in 267 ITR 381 (SC) but did not comment upon the presumption raised u/s 114 of the Evidence Act. Thus, in such circumstances, when the assessee has not produced the primary bills/vouchers, it deserves to fail. As such, the assessee deserves to fail in ground of appeal No. 9." 9.1 The learned Counsel before us referred to page 84 of the paper-book, which is computation of income for the purpose of the Act and submitted that entire depreciation claimed in books of accounts was added back and the depreciation of Rs. 28,28,45,181/-as per the provisions of the Act was only claimed. The learned Counsel submitted that this issue might be restored back to the file of the Assessing Officer for verification of the claim of the assessee. 9.2 The Learned DR, on the other hand, relied on the order of the Assessing Officer but did not object to ....
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.... the joint ventures. The Learned Counsel of the assessee has not disputed taxing the same following mercantile system and therefore we are not going into the aspect whether those receipt should be taxable on cash basis . The income from joint-venture once considered on mercantile basis in the year under consideration, same income cannot be taxed by the Assessing Officer on cash basis in subsequent years at the time of receipt. Accordingly, the issue in dispute is restored to the file of the Assessing Officer for adjudication after verification of the documentary evidence including audited accounts of the joint ventures under reference. The ground No. 5 of the appeal of the assessee is accordingly allowed for statistical purposes. 11. Regarding additional grounds challenging the applicability of provision of section 115JA of the assessee, the learned Counsel of the assessee submitted that the grounds raised being legal and no investigation of the fresh facts required, the additional ground raised by the assessee might be admitted. Supporting the grounds the Learned Counsel submitted that Minimum Alternate Tax (MAT) is not applicable over the assessee being a nonschedule six compan....
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....its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of schedule 6 to the companies act, 1956 ( 1 of 1956)." 11.3 The said Schedule VIof Companies Act,1956 has provided instruction for preparing profit and loss account for the financial year and balance sheet at the financial year end. The relevant section 211 of the Companies Act, 1956 specifying the form and content of the balance-sheet is reproduced as under for ready reference: "211. Form and contents of balance-sheet and profit and loss account.-(1) Every balance-sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the Form set out in Part I of Schedule VI. or as near thereto as circumstances admit or in such other form as may be approved by the Central Government either generally or in any particular case ; and in preparing the balance-sheet due regard shall be had as far as may be to the general instructions for preparation of balancesheet under the heading. "Notes" at the end of that Part: Provided that nothing contained in thi....
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....in the case of any company, any matters which are not required to be disclosed by virtue of the provisions contained in Schedule VI or by virtue of a notification issued under sub-section (3) or an order issued under sub-section (4)" .............................................. " 11.4 The sub section (2) of section 211 of the Companies Act, 1956 has specifically excluded application of preparing profit and loss account as per schedule VI to the insurance and banking companies, or companies engaged in the generation or supply of the electricity or any other class of the company specified. The sub-section (3) has specified requirement of issue of notification by the Central Government for exemption from the requirement of schedule VI of the Companies Act, 1956. Even being specifically asked for, no such notification issued by the Central Government was produced before us by the Learned Counsel of the assessee. The Learned Counsel also failed before us to explain about any deviation in the manner of computation of profit and loss and balance sheet for the year under consideration in terms of instruction in schedule VI of Companies Act, 1956. The guidelines prescribed in the Cent....
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....s and creditors or upon the sufficiency of his procedure in auditing the accounts of the Corporation and may enlarge or extend the scope of the audit or direct that a different procedure in audit may be adopted or direct that any other examination may be made by the auditor if in the opinion of the appropriate Government public interest so requires. (7) A Warehousing Corporation shall send a copy of every report of the auditor to the Comptroller and Auditor-General of India and to the Central Government at least one month before it is placed before the shareholders. (8) Notwithstanding anything hereinbefore contained in this section, the Comptroller and Auditor- General of India may, either of his own motion or on a request received in this behalf from the appropriate Government, undertake in respect of a Warehousing Corporation such audit and at such time as he may consider necessary: (9) The Comptroller and Auditor-General of India and any person authorised by him in connection with the audit of the accounts of a Warehousing Corporation shall have the same rights, privileges and authority in connection with such audit as the Comptroller and Auditor-General has in connection....
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....ity computed in accordance with the PLI scheme framed by the Corporation keeping in view the Government guidelines duly approved by the Board of Directors. It was submitted that provision was being made in earlier years also and have been allowed by the Department except for the assessment years 2004-05 and 2005-06. The Ld. CIT(A) has deleted additions made by the Assessing Officer observing as under: "11. I have considered the order of the Ld. AO and the submissions made by the Ld. AR of the assessee. Going through the order for A.Y. 2004-05 of my ld. Predecessor in Appeal No. 365/06-07, it was held in para 2.2 as under: "2.2 Considering the arguments of ld. AR and on going through the observations of the A.O., I find that the A.O. had disallowed the PLI amount Rs. 2,74,83,334/- with the observation. "Since the provision for PLI made was an unascertained liability, the same has been added back to the income of the assessee." On the contrary, in respect of PLI expenditure Rs. 2,74,83,334/- ld. A.R. brought to my notice that provisions for Productive Link Incentive (PLI) was made in accordance with CWC Employees Productive Link Incentive Scheme, 1998, which was formulated as per....
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....It is undisputed that liability of PLI has been allowed by the Assessing Officer in the case of the assessee except for assessment year 2004-05 to 2005-06. The Ld. CIT(A) has deleted the addition in all the three assessment years. The counsel submitted that in the AYs 2004-05 and 2005-06, no appeal was filed by the Revenue in absence of COD (Committee of Disputes) approval.The page 141 of the paper-book shows calculation of corporate productivity index for PLI for financial year 2005-06 i.e. relevant to assessment year under consideration, which is reproduced as under: CENTRAL WAREHOUSING CORPORATION (A GOVT. OF INDIA UNDERTAKING) Calculation of corporate productivity index for PLI for the year 2005-2006 S.No. Productivity Indicator Actual Values for Last Four Years Weight Target Basis Target Value for CPI 2001-02 2002-03 2003-04 2004-05 2005-2006. 1 Return on Capital Employed 12.713 6.417 4.511 7.515 30 Best of Past 4 Years 12.713 13.595 30.416 2 Value Added to Employee Cost 1.825 1.463 1,491 1.643 30 Best of Past 4 Years 1.825 1.792 29.458 3 . Capacity Utilization 79.298 66.008 59.293 66.835 20 Best....
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....om balance-sheet of the assessee that special (SPL) Dunnage has been treated as capital asset and depreciation has been claimed on the same, however, in the profit and loss account, a sum of Rs. 69,44,300/-was claimed as revenue expenditure on account of expenses made for purchase of ordinary Dunnage. The Assessing Officer noted that both the dunnage were used by the company for the same purpose i.e. to prevent the storage from floor seepage. The assessee submitted that special dunnage was having longer life whereas the ordinary dunnage being a shorter life debited as revenue expenditure. According to the Assessing Officer, no evidence/supporting documents in respect of this claim of shorter life of the ordinary dunnage were furnished by the assessee and therefore he rejected the claim of the assessee for allowing the expenditure as revenue in nature holding that method of accounting followed by the assessee is arbitrary and without any basis. Before the Ld. CIT(A), the assessee explained that accounts of the assessee company have been accepted by the Comptroller and Auditor General of India (CAG) and, therefore, comment regarding arbitrariness of the method of accounting were mis....
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....gy in respect of ordinary Dunnage, they are treating the expenditure for one year and debiting the same to the profit and loss account to claim it as revenue expenditure. It is also not in dispute that the Revenue has been accepting the capitalization of special Dunnage and allowing depreciation @ 16% per annum over the period of life expectancy of such Dunnage. 12. Having regard to this fact that the life expectancy is taken as the determining factor for the separate treatment to the Dunnage, we do not find any illegality or irregularity in the view taken by the ld. CIT(A) that because of the single use within a year in respect of ordinary Dunnage, the expenditure thereon has to be taken as revenue expenditure and no addition on that score could be made. This finding of the ld. CIT(A) cannot be said to be illegal or irregular or perverse. We, therefore, find the ground no. 1 of the appeal of the Revenue as devoid of merits." 13.5 Respectfully following the finding of the Tribunal (supra), we do not find any error or perversity in the order of the Ld. CIT(A) and accordingly, we uphold the same. The ground No.2 of the appeal of the Revenue is dismissed. 14. Grounds No. 3 of the ....
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....the head 'Quality Improvement expenses' are in the nature of the capital or revenue. The lower authorities have not appreciated the details of expenses furnished by the assessee. The Ld. CIT(A) has also decided the issue following his predecessor without examining the expenditure incurred in the year under consideration. Under the account head of 'Quality Improvement expenses', the assessee has incurred various expenses details of which are available on page 153 to 164 of the paper-book. The details include unit-wise expenses as well as nature of the expenses which include expenses on labour, lamination, purchase of the cleaning material, expenses related to ISO audit, supply of various construction and miscellaneous material. All these expenses need to be looked into from the angle that same are in the nature of the capital expenditure or in the nature of the revenue expenditure. In view of the facts and circumstances and in the interest of the justice, we feel it appropriate to restore this issue to the file of the Learned Assessing Officer for deciding afresh after affording adequate opportunity of being heard to the assessee. The ground no. 3 of the appeal of Revenue is accord....
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....ssee, on the other hand, submitted that detail in respect of the expenses was already filed by the assessee before the Assessing Officer alongwith letter dated 22/11/2008. The Learned Counsel also referred to notes to the accounts i.e. note 7(a) and (b), available on page 69 of the paperbook. The Learned Counsel fairly accepted that the issue in dispute in the assessment year 2005-06 has been restored to the file of the Assessing Officer. 15.4We have heard rival submission of the parties on the issue in dispute. The issue is whether the part of overhead charges on monitoring of the capital expenditure of construction, could be charged to revenue expenditure. The claim of the assessee that same have been charged to revenue expenses, following regular accounting practice whereas according to the Revenue in absence of details of expenses actually incurred, no expenditure can be allowed as revenue expenditure only on the ad-hoc accounting practice. We find that the Tribunal in ITA No. 2918/Del./2009 for assessment year 2005-06 has restored the identical issue to the file of the Assessing Officer after examining the nature of the expenses. The relevant finding of the Tribunal is repro....
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.... consignment. According to the Assessing Officer, the assessee is following Mercantile system and therefore income has to be booked as and when it is accrued to the assessee. The Assessing Officer noted that even if the importer decided not to get his cargo released, the warehousing charges is payable to the assessee Corporation from the auction proceeds of the cargo. Accordingly, the learned Assessing Officer made addition for the amount of Rs. 7,24,44,000/-for bonding warehouse on accrual basis. The Ld. CIT(A) following the finding of his predecessor that there was uncertainty in the income of the bonded warehouse, he deleted the addition made on this account. 16.2Before us, the learned DR submitted that the assessee cannot be allowed for both cash and Mercantile system of accounting i.e. mixed accounting system. He submitted that the assessee follows Mercantile system of accounting and accordingly the income is taxable whenever it is accrued or received whichever is earlier and thus income of bonded warehouse is liable to be assessed in the year under consideration. 16.3On the other hand, the Learned Counsel of the assessee concurred that there cannot be mixed accounting syste....
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....rovision for leave encashment at Rs. 5,42,27,950/- and provision for PLI of Rs. 4,02,05,550/-. For working out book profit as per section 115JB of the Act, the Assessing Officer added these provisions to the book profit shown by the assessee in the books of accounts. Before the Ld. CIT(A), the assessee claimed that provision for payment of the gratuity and leave encashment was created as per the actuarial valuation and therefore those were ascertained liabilities. The Ld. CIT(A) accordingly held that there was no scope for making any addition for those provisions under section 115JB of the Act. Regarding wealth tax provisions, it was submitted by the assessee that it was an exact amount of the liability and which has been added back in the computation being inadmissible in nature. The Ld. CIT(A) following the finding of his predecessors in assessment year 2003-04, 2004-05 and 2005-06 deleted the addition. As far as provision of PLI is concerned, the Learned CIT(A) deleted the addition in view of the holding the same as ascertained liability while adjudicating additions under regular provisions of the Act. The addition for provision of bad and doubtful debt was deleted following the....
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....e AO who disallowed the Depreciation claimed at 100% on assets costing less then Rs. 5,000/- by estimating it at 5%of the total depreciation, since details of assets costing less than Rs. 5,000/- were not produced. (iii) In deleting addition of Rs. 19,76,364/- made by the AO who disallowed social obligation expenditure as not related to business activities. (iv) In deleting the addition of Rs. 78,434/- made by the AO who disallowed social improvement expenses as being capital in nature. (v) In deleting the addition made at Rs. 25,37,000/- accrued on account of share of income from PSWC by accepting the assessee's claim the this was offered to tax in the year of receipt by ignoring the fact that the assessee was following mercantile system of accounting. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing appeal. 19.1 The cross objection raised by the assessee are reproduced as under: Cross objection of the assessee: 1. It is contended that the Appellant is entitled and covered by revision of section 36(1)(xii). Accordingly, all expenditure other than the capital ex....
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....22.2 Before us, the Learned DR submitted that corporate social responsibility expenses are not allowable in terms of Explanation-2 to section 37 of the Act. 22.3 The Learned Counsel of the assessee on the other hand submitted that expenses have been incurred as per direction of the Ministry to meet the social obligations of the assessee Corporation. He referred to the detail of the expenses placed on page 248 of the paper-book and submitted that Explanation-2 to section 37 of the Act has been effective from 01/04/2015 only and not in the year under consideration. 22.4 We have heard rival submission of the parties on the issue in dispute. According to the Revenue, the expenses are disallowable in view of the Explanation -2 to section 37 of the Act. The relevant Explanation is reproduced as under: "General. 37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or pr....
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....nder: (i) The Grounds of appeal raised by the Revenue in ITA No. 3440/Del/2014 are as under: The DCIT, Circle - 3(1), New Delhi is hereby directed to file appeal in the abovementioned case before the 1TAT, New Delhi on the following ground of appeal. 1. On the facts and in the circumstances of the case, the CIT(A) has erred in: (i) Deleting the addition of Rs. 66,01,019,/- made on account of disallowance of SLP Dunnage, treating it as Revenue Expenditure instead of capital Expenditure as held by the AO. (ii) Deleting the addition of Rs. 14,42,792/- made on account of disallowance of Quality improvement Expenses by holding it as Revenue Expenditure instead of capital Expenditure as held by the AO. (iii) Restricting the disallowance of Rs. 4,17,16,650/- u/s 14A to 5% of the exempted income thereby allowing a relief of Rs. 39,57,454/- to the assessee. (iv) Allowing Social Obligation Expenditure of Rs. 17,75,000/- as a deduction by treating it as expenditure related to business activities of the assessee. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of the ap....
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....unabsorbed overhead expense are revenue expenses and fully allowable as in the past. 4. It is contended that the AO has erred in adding a sum of Rs. 282351000/- as income of the Bonded warehouse. 4.01 It is contended that the aforesaid Bonded income has neither accrued to the corporation in the previous year nor is capable of being quantified, hence does not qualify as income. 5. It is contended that the AO had erred in disallowing Rs. 1557766/- as interest on service tax which has wrongly been taken as penalty. 6. It is contended that the Appellant Corporation not being a schedule VI Company, the provisions of Section 115 JB are not applicable. 6.01 The computation of book profit without prejudice to the above contention is wrong and requires revision. 7. It is contended that the charge of interest under section 234B and 234D is wrong and requires revision. 8. It is contended that the withdrawal of interest, earlier allowed u/s 244A, is wrong, as no such withdrawal of interest is warranted in the instant case. 9. It is contended that the AO and the CIT (Appeals) have not quantified the earlier Brought Forward Losses and unobserved depreciation which will exactly be....
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....wing our finding in assessment year 2006-07, these ground of the appeal of the Revenue are dismissed. 30. The ground No.1(ii) of the appeal of the Revenue for AY 2008- 09 and Ground No. 2 of the appeal of the Revenue for AY 2010- 11 are identical to the ground No. 3 (three) of the appeal of the Revenue in assessment year 2006-07, thus these grounds are accordingly allowed for statistical purposes following our finding in assessment year 2006-07. 31. The ground No. 1(iii) (three) of the appeal of the Revenue for AY 2008-09 , the cross objection No. 1 (one) of the assessee for AY 2008-09 and Ground no. 1 of the appeal of the Assessee for AY 2009-10 and Ground No. 1 and 2 of the Cross objection for AY 2010-11 are related to disallowance under section 14A of the Act read with Rule 8D of the Rules. The identical grounds of the Revenue and the assessee in assessment year 2006-07 have been restored to the file of the Assessing Officer for deciding afresh in the light of the recent decisions of the Hon'ble courts. Accordingly, the respective grounds for AY 2008-09 ; 2009-10 and 2010-11 are restored to the file of the Assessing Officer for deciding in accordance with law. The respective ....
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....y the Assessing Officer. No justification was submitted by the assessee before the Assessing Officer for allowing this expenditure. The assessing officer held same to be in the nature of the penalty by the service tax department for default on the part of the assessee and accordingly, he disallowed the expense in terms of Explanation-1 1 to section 37(1) of the Act. The Learned CIT(A) upheld the disallowance observing as under: "5.9.3 The courts of law of the country have time and again held that the nomenclature of penalty etc does not determine whether it is penal or compensatory in nature. Whenever, any statutory impost is paid by the assessee by way of damages or penalty or interest, not withstanding nomenclature of impost as given by statues, one has to find out as to whether it is compensatory or penal in nature. Further, where ever such impost is found to .be of composite nature, authorities are obliged to bifurcate the two components of imposts and give deduction to that component which is compensatory in nature and refuse to give deduction to that component which is penal in nature. This has been held in the case of CIT V. Catholic Syrian Bank Ltd. (2004) 265 ITR 177 (K....
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....041 (SC). The Learned DR on the other hand relied on the order of the lower authorities. 36.2 We have heard rival submission of the parties on the issue in dispute. The issue involved is whether interest paid on delayed deposit of the service tax is in the nature of the compensatory or in the nature of the penalty. If it is in the nature of penalty, then it is liable to be disallowed in terms of Explanation- 1 to section 37(1) of the Act. The Hon'ble Supreme Court in the case of Lachmandas Mathura (supra) held that interest paid on sales tax is compensatory in the nature. The finding of the Hon'ble Supreme Court is reproduced as under: "2. While granting special leave to appeal the appeal has been confined to question Nos. 1 and 2 only. The High Court has proceeded on the basis that the interest on arrears of sales-tax is penal in nature and has rejected the contention of the assessee that it is compensatory in nature. In taking the said view the High Court has placed reliance on its Full Bench decision in Saraya Sugar Mills (P) Ltd. vs. CIT 1978 CTR (All)(FB) 329 : (1979) 116 ITR 387 (All) (FB) : TC 17R.797. The learned counsel appearing for the appellantassessee states that th....