TaxTMI 
TaxTMI 
2021 (11) TMI 374
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.... and Chiplun. The main raw material is sugar cane molasses and other raw materials are urea, phosphoric acid, caustic soda, soda ash, vitamins, antifoaming agent, emulsifier, magnesium sulphate, water etc. Bakers Yeast manufactured by the assessee is sold in three forms (a) Fresh Yeast, (b) Active Dry Yeast and (c) Instant Dry Yeast. Fresh yeast is highly perishable and needs to be stored under continuous refrigeration. Fresh yeast is transported in refrigerated trucks. Instant Dry yeast can be stored at room temperature and is mainly used by bakers in areas that are not easily accessible by road and where refrigerated storage facilities are not available. Temperature is very important for production and survival of the yeast. During the process of production, the assessee requires both heat and cooling power. For this purpose, the assessee also generates Steam Power from Biogas Boilers and Cooling Power from Cooling Towers set up at its power generation undertakings at Sandila and Chiplun. Assessee claimed commencement of production of Steam Power, Cooling Power from Cooling Tower and Cooling power from Ammonia Absorption Refrigeration plant at Sandila as on 31.01.2000, 22.03.1997....
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....benefit of erstwhile Section 84 of the Act could be claimed as from the material available on record and it was established by the assessee that actual production started after 01.04.1958. The said decision relied on by the AO is inapplicable. 34. The assessee submitted Factory Inspector's Certificate in respect of Cooling Power and Steam Power undertakings at Sandila and of Cooling Power generation and Steam Power generation undertakings at Chiplun and that these power generation undertakings are separate and distinct from the yeast manufacturing unit. The power produced in these power generation undertakings are used for captive consumption in the yeast manufacturing unit. The assessee has separate plant and machinery for its Steam Power generation undertaking and Cooling Power generation undertakings which is distinct and separate from the yeast manufacturing unit. In this regard the assessee relied on Factory Inspector's certificates dated 08.11.2006, a copy of which is enclosed. Further this fact has also been appreciated by the AO who in the last few paras of the remand report stated as under: "The Assessee has submitted the copy of factory inspector's certi....
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....king is dependent on the existing unit, will not deprive the new undertaking the status of a separate and distinct identity. It all depends on the nature of the technology and the mechanism of production. In CIT vs. Chanda Diesels 216 ITR 639 (BOM), Hon'ble Bombay High Court examined the meaning of 'Industrial Undertaking' in the context of a claim of section 80HH of the Act and held that if a new industrial unit is established as a part of an existing industrial establishment and if the newly established unit is itself an integrated independent unit in which new plant and machinery is put up and that by these is capable of production of goods independently, the said unit could be classified as a newly established industrial undertaking for the purpose of deduction under Section 80HH. Hon'ble Madras High Court in another case CWT vs P. Devasahayam 236 ITR 885, interpreted an industrial undertaking as an undertaking engaged in the business of generation or distribution of electricity or any other form of power. 37. The AO has taken an objection that the power generation unit is a part of a larger undertaking and assessee's power generation undertakings are not independent u....
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.... approval required for carrying on business of generation of steam power and cooling power and hence it is incorrect for the AO to contend that it did not obtain the requisite permissions. In fact the AO not been able to state what permission was necessary because in fact no such permission was required for undertakings generating steam power and cooling power. The assessee relied on a judgement of Hon'ble Allahabad High Court in the case of CIT vs Hanuman Rice Mills (275 ITR 79), wherein it was held that "Following the decision in CIT v. Sultan and Sons Rice Mill [2005] 272 ITR 181 (All.), it was to be held in the instant case that the Tribunal was legally correct in allowing the assessee's claim under sections 80J and 80HH. These provisions do not require that the industrial undertaking should be registered under the Factories Act, 1948 to qualify for the deductions under the said provisions." 39. The assessee's contention that the AO erred in taking the recourse to accounting standards (AS) for segment reporting. There is no requirement in the entire Section of 80-IA of the Act for reporting of a separate segment in the Accounts. Accounting Standards are prescribed ....
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....ar. We deem it fit and appropriate to sustain the findings of the Ld. CIT(A) and accordingly ground Nos. 1, 2 & 3 raised by the Revenue are dismissed. 6. With regard to Ground No. 4, the relevant facts are the Assessing Officer observed during the assessment proceedings from tax audit report that the disallowance u/s 43B Rs.1,27,63,330/- is added in computation of income and this is on account of liability incurred during the previous year but not paid on or before due date of filing return of income. It is submitted before AO that as per Clause 21(1)(a) of the tax audit report pre-existing liability on the first day of the previous year and was not allowed in the assessment of any preceding year and paid during the year is allowable. The assessee has paid bonus ex-gratia of Rs.34,52,000/- which is allowable during the year. After considering the submissions of the assessee, the Assessing Officer observed that the assessee can claim the relief of Rs.34,52,000/-only by filing the revised return of Income. Since the assessee has not filed revised return of income the same cannot be entertained at this stage. 7. Aggrieved with the above order the assessee preferred an appeal bef....
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.... recovery plant and that the profit and gains of these undertaking are eligible for deduction /s. 80IA it is seen that the profit derived by them as computed by been maintained for these undertakings. The P&L account and balance sheet of the under taking have been prepared on the basis of notation sale and by allocating certain expenses from consolidated accounts, some by the process of identification as relating to the undertaking and some or an estimate basis no scientific basis had been provided for these estimates. As already noted the so-called refrigeration energy, steam energy and ammonia produced by these undertaking have been consumed entirely by the other business of the assessee. According to sub- section (8) of section 80IA, therefore the profit and gains of the eligible business are required to be computed on the basis of the price, the refrigeration energy and steam energy would ordinarily fetch in the open market. The assesses was, therefore required to furnish instance of sale of refrigeration energy and steam energy and should have computed the profit on such sale, which has not been done. According to the assessee, as compared to the rates charged by the ....
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....e assessee. 11. Aggrieved, the assessee is in appeal before us, raising following the grounds of appeal: 1. On the facts and the circumstances of the case and in law the CIT(A) erred in passing an order dated 04.02.2020 under Section 250 of the Income Tax Act 1961, by failing to appreciate the orders of the Hon'ble Tribunal decided in favour of the Appellant for AY 2005-06 to AY 2008-09 and for AY 2009-10 to AY 2012-13. Hence, there is gross violation of judicial discipline as the orders passed by the Hon' ble Tribunal are binding on the lower authorities. 2. On the facts and in the circumstances of the case and in law the CIT(A) erred by passing an order under Section 250 of the Income Tax Act, 1961 by following the order of his predecessor, when, such order was set aside and appeals of the Assesee were allowed by the Hon'ble Income Tax Appellate Tribunal for AY 2005-06 to AY 2008-09 and for AY 2009-10 to AY 2012-13. A copy of the Hon ble Tribunal's order for AY 2005-06 to AY 2008- 09 was submitted on 12.02.2018 along with written submission. The Hon'ble Tribunal's order for AY 2009-10 to AY 2012-13 was submitted to CIT(A) on 21.01.2020....
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.... "(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." 68. Perusal of the above provision shows that for purposes of calculating the deduction under Section 80-IA of the Act, the profits of the eligible business must be worked out as it were the only source of an assessee's income. Therefore, the the AO by applying the net profit percentage of the assessee's yeast manufacturing business for arriving at profits u/s 80-IA in respect of Cooling Power and Steam Power generation undertakings is contrary to Section 80IA(5) of the Act and is therefore baseless and deserves to be set aside. When the ....
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....isallowing club expenses amounting to Rs. 1,02,051/- when such expenses were wholly and exclusively for the Appellant's business. 2. On the facts and in the circumstances of the case and in law the CIT(A) erred in assuming that "the Auditor has flagged the club expenses as being personal in nature', whereas a perusal of the audit report suggests that the expenses were incurred as business expense. 3. On the facts and in the circumstances of the case and in law the CIT(A) erred in not considering a legal question and very important submission made by the Appellant during the course of Appellate proceedings, on 'limited scrutiny', when such question is about jurisdiction and goes to the root of this scrutiny assessment. 16. Brief facts, relating to the above grounds of appeal are, at the time of assessment, the Assessing Officer observed from the note forming the part of the audit report that the assessee has debited Rs.1,02,051/- in the profit and loss account as expenditure incurred in the clubs. The AO observed that the expenditure on clubs is on personal entertainment, accordingly, he was of the view that no personal expense to be debited in t....
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....equired to be disclosed as personal expenses by the Tax Auditor in clause 21(a) under the heading "Personal Expenditure" and the same are then required to be disallowed under section 37(1). 7. The Tax Auditor has not disclosed any expenses incurred for utilizing club services as personal expenses itself indicate that the expenses are not personal expenses. 8. This indicates that the expenses incurred at club are wholly and exclusively for the purpose of the business and thus the disallowance made by the Assessing Officer should be deleted." 18. After considering the submissions of the assessee, the Ld. CIT(A) dismissed the appeal of the assessee with the following observations : "6.4 As to club expenses, it is noteworthy that whether a particular expenditure is to be allowed as "revenue" expenditure in the hands of the assessee will depend upon the facts of each individual case and no straitjacket formula can be adopted for deciding the issue. In the case of the assessee, the Auditor has flagged the club expenses as being personal in nature. The assessee did not furnish any evidence even before me that the Club expenses were in respect of business even....
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....llant has been claiming club expenses from 1986 onwards which has been allowed in all the previous years and in the subsequent year as well. The Appellant submits that A.Y.2014- 15 (Current Assessment Years) is the first year where this disallowance has been made. The Ld. CIT(A) in impugned order at para 6.4 wrongly and falsely held that Auditor has flagged the club expenses to be personal in natures whereas on contrary the Auditor has held it to be business expenditure. The relevant extract of the Audit Report is reproduced in picture form : The Appellant also relies on the decision of the Co-ordinate Bench in the case of Dy. Commissioner of Income Tax vs. M/s. Deloitte Touche Tohmatsu (ITA no.3017/Mum/2016) wherein Hon'ble ITAT held that expenditure incurred towards club and hotel membership fees is an allowable expense under Section 37(1) of the Income Tax Act. Hon'ble ITAT in the case of ISGEC Heavy Engineering Ltd. V/s. The DCIT/ITA NO. 798/Chd/2019 held as under with regard to Club expenses: "13. In the present case also the Assessee has incurred the expenses on account of club membership fees for the employees and to entertain customers, so, these w....
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....raised by the assessee is allowed. Ground No. 3 is dismissed as not pressed. 22. In the net result, the appeal filed by the Revenue in AY 2013-14 is dismissed and appeal filed by the assessee in AY 2013-14 is allowed. The appeal filed by the assessee in AY 2014-15 is partly allowed. Order pronounced in the open Court on 25/10/2021. ============= Document 1 (b) Details of contributions received from employees for various funds as referred to in section 36(1)(va): Annexure-5 Se Nature of fund Sums received from employees Due date The actual amount paid No. payment (a) Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure etc Capital expenditure Personal expenditure Advertisement expenditure in any souvenir, brochure, tract, pamphlet or the like, published by a political party Expenditure incurred at dubs being entrance fees and subscription N Nil (Refer note no 6) Annexure- Expenditure incurred as clubs being cost for dub services and facilities used Expenditure by way of penalty or fine ....