TaxTMI 
TaxTMI 
2022 (5) TMI 104
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....Upon hearing the parties, we find that this issue stands decided against the assessee by the co-ordinate bench of this Tribunal for the assessment year 2000-01, by holding as under:- "5. After hearing both the parties and perusing the material available on record, we observe that in this case the Co-ordinate Bench in assessee's own case in A. Y 1988-89 has decided the issue in favour of the assessee in ITA No. 2423/Mum/1992 vide order dated 27. 07. 2004 whereas, the issue has been decided against the assessee in all subsequent years commencing from AY 1994-95 to 1999-00. Since all the assessment years right from AY 1994-95 to 1999- 00 the issue is decided against the assessee, we, therefore, respectfully following the decisions of the Coordinate Benches from AY 1994-to 1999-00 uphold the order of CIT(A) on this issue by dismissing the ground raised by the assessee. " 5. The facts and circumstances are stated to be identical. Therefore, consistent with the earlier orders of the co-ordinate bench of this Tribunal, we dismiss the ground raised by the assessee. 6. Ground 2 pertains to disallowance of Rs. 3,00,00,000/- towards non compete fees treated as revenue in nature....
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....se what has been received is a consideration for giving up the right to use the profit generating apparatus of one of the businesses of the company. It is pertinent to note that vide para (c) and (f) of Clause III of our Memorandum of Association we are authorised to carry on the business of manufacturing, marketing, selling and servicing of the products in respect of which we have entered into the Joint Venture agreement with M/s Sharp Corporation, Japan. We enclose the relevant pages of the Memorandum of Association as Annexure 7. 2. By virtue of the cooperation agreement entered into by us we have agreed to abstain ourselves from indulging into any such activity. Therefore, the receipt ofRs. 3 croresfor restricting ourselves from entering into any competitive business, which otherwise we are authorised to, is nothing but a capital receipt in our hands and liable to be taxed. To support our view we rely on the decision of the Supreme Court in Kettlewell Bullen & Co, Ltd. v. CIT (53 ITR 261). The assessee in that case was carrying on the business of managing agencies of 6 companies. On termination of one of its agencies, the assessee received a compensation for l....
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....R 283) (SC): TC 13R. 1253 accepted the said principle and held that the compensation paid for agreeing to refrain from carrying on competitive business in the commodities in respect of the agency terminated or for loss of goodwill was prima facie of the nature of a capital receipt. " iii) Saroj Kumar Poddar v. JCIT (77 ITD 326) (Annexure 7. 3): The Hon'ble Calcutta Tribunal opined as follows: "A capital receipt may be of various natures. When a capital asset is transferred, the receipt arising thereby is of the nature of capital receipt. Such receipt would, however, be taxable by way of being capital gains from transfer of capital assets. When there is a loss of the capital structure of a particular assessee or drying up of a source of income, any compensation received by the assessee for such loss would also have to be treated as capital receipt. At the same time again, another type of capital receipt would be constituted by receipts arising out of restrictive covenants as in the present case. All the decisions with regard to this type of receipt go to hold that such a receipt cannot be treated as revenue receipt or even as a casual receipt and hence, cannot ....
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....rical, information technology, software development and telecommunication businesses of L & T and its subsidiary and associate companies. (ii) In consideration of the aforesaid representation, the parties have agreed to cause the JVCO to pay L&T a lump sum of Indian Rupees 30 Million. (iii) This payment shall be effected by JVCO to L & T at the time of commencement of business by the JVCO. " 9. From the above, Assessing Officer observed that from the wording of clause (i) of the Cooperation Agreement, it becomes abundantly clear that the restriction for non competing business design cover the business pertaining to electrical products, information technology, software development and telecommunications. Further, he observed that even the subsidiary and associate companies are also exempt from restrictive clause of the Cooperation Agreement. From the above facts of the case, he noticed that L&T Ltd is not actively involved in marketing, selling and servicing electronic products in India whereas business of such nature are being carried out by the associate companies, further, the subsidiaries are associate companies are not restricted to carry out the business w....
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.... Japan. Earlier, assessee had entered into a joint venture agreement for the purpose of setting up a joint venture in India with the object of importing, marketing, selling service in India certain electronic and other equipments. As per the above referred Cooperation Agreement, assessee has received a payment from the joint venture company in consideration for not setting up or undertaking or even assisting in setting up of any business in India of selling, marketing and trading of electronic office products. This is in order to not to compete with the business of the joint venture company for a period of 7 years from the date of joint venture agreement. The receipt of Rs. 3 crores by the assessee for non compete fees is a capital receipt in pursuance to Cooperation Agreement entered by the assessee which puts a restriction on the assessee to indulge in any business which results in competition with the business of the joint venture company. It is a well settled law that where the receipt is on account of giving up the source of income, then the same has to be treated as capital receipts, not liable to tax. In the present case, what has been received is a consideration for giving ....
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.... record that it is in the interest of the assessee not to venture into the operations of the new joint venture company. In order to avoid any loss, which assessee may suffer due to non compete, the joint venture partner agreed to compensate the same. It is nowhere connected with the day to day running of the assessee company as perceived by the tax authorities that it is a compensation for the loss incurred by the assessee. Therefore, we are not in agreement with the tax authorities that it is compensation for allowing the facilities or widespread network in marketing or selling the products of the joint venture. and it is only a non compete fees paid by the joint venture partner to restrict the assessee not to curtail the development of the new joint venture company. Therefore, we are inclined to allow the claim of the assessee and we observe that Hon'ble Supreme Court in the case of Guffick Chem Pvt Ltd (supra), has held as under:- "7. Two questions arose for determination, namely, whether the amounts received by the appellant for loss of agency was in normal course of business and therefore whether they constituted revenue receipt? The second question which arose before....
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....rder to put an end to the litigation, Parliament stepped in to specifically tax such receipts under non-competition agreement with effect from 1. 4. 2003. 8. For the above reasons, we set aside the impugned judgment of the Karnataka High Court dated 29. 10. 2009 and restore the order of the Tribunal. Consequently, the civil appeal filed by the assessee is allowed with no order as to the costs. " 15. Respectfully following the above decision, we allow the ground raised by the assessee. 16. Ground 3 pertains to addition under section 40A(9) being contribution to Utmal Employees Welfare Fund (Rs. 1,00,000/-). 17. Upon hearing the parties, we find that this issue also stands decided against the Revenue by the co-ordinate bench of this Tribunal for the assessment year 2000-01, by holding as under:- "8. After hearing both the parties and perusing the material available on record, we find that the issue is squarely coved in favour of the assessee by the decision of the Coordinate Bench of the Tribunal in assessee's own case for the A. Y 1994-95 to 1997-98 and 1999-2000. Since the facts are materially same, therefore, we are inclined to set aside the order of CIT....
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....ns to disallowance of expenditure on computer software. "16. After hearing the rival parties and perusing the material on record, we observe that the issue is squarely coved in favour of the assessee by the decision of Coordinate Bench in assessee's own case in ITA No. 6257/Mum/2011 A. Y 1999-2000 and others vide order dated 28. 03. 2018, wherein, the coordinate Bench vide para 8. 4 of the order has allowed the appeal of the assessee by observing and holding as under: 8. 4 We have heard the rival submissions, and perused the relevant materials on record. In Raychem RPG Ltd. (supra), it is held that where enterprise resource planning (ERP) package software facilitated assessee's trading operations or enabling management to conduct assessee's business more efficiently or more profitably but it was not in nature of profit-making apparatus, software expenditure was allowable as revenue expenditure. In CIT v. Amway India Enterprises (2012) 346 ITR 341 (Delhi), it has been held that the purchase of software is a revenue expenditure. In CIT v. Asahi India Safety Glass Ltd. (2012) 346 ITR 329(Delhi), it is held that the extent of expenditure cannot be a decisive f....
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....om) and CIT v. Reliance Utilities & Power Ltd. [2009] 313 ITR 340 (Bom) held as under : "15. It is clear that for the first time in the case of HDFC Bank Ltd. (supra) that this Court took a view that the presumption which has been laid down in Reliance Utilities & Power Ltd. (supra) with regard to investment in tax free securities coming out of assessee's own funds in case the same are in excess of the investments made in the securities (notwithstanding the fact that the assessee concerned may also have taken some funds on interest) applies, when applying Section 14A of the Act. Thus, the decision of this Court in HDFC Bank Ltd. (supra) for the first time on 23rd July, 2014 has settled the issue by holding that the test of presumption as held by this Court in Reliance Utilities and Power Ltd. (supra) while considering Section 36(1)(iii) of the Act would apply while considering the application of Section 14A of the Act. The aforesaid decision of this Court in HDFC Bank Ltd. (supra) on the above issue has also been accepted by the Revenue in as much as even though they have filed an appeal to the Supreme Court against that order on the other issue therein viz. broken per....
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..... Sunderam Iyengar & Sons Ltd. (supra). wherein the assessee used to receive deposits in the course of its trading transaction on sale of Coca Cola in glass bottles of, etc. which are refundable on return of the said bottles. wherein the order of the Supreme Court has held that liability needs to be treated as income of the assessee u/s 41(1) of the Act. The ld. CIT(A) in the appellate proceeding affirmed the order of AO by holding that the said takeover of deferred sales tax liability to be paid in future is taxable u/s 28(iv) of the Act, by relying on the decision of CIT(A) Vs. Sundaram Iyangar & Sons Ltd. , (supra) and also the decision of the Jurisdiction High Court in the case of Solid Container Ltd. , Vs. DCIT (supra). In this case, we note that the A. O made addition u/s 41(1) of the Act, while in the appellate proceeding, ld. CIT(A) upheld the said addition u/s 28(iv) of the Act and not u/s 41(1) of the Act. The arguments of the Ld. counsel before us are that the said assignment of sales tax liability by the assessee is neither income u/s 41(1) of the Act nor benefit or perqs 28(iv) of the Act. In defense of his arguments the Ld. CIT(A) relied on the decision of Cable Corpo....
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....he assessee continues to be liable to pay the said amount and thus as for as the Sales-Tax Department is concerned, there is no remission or cessation of a liability. The case of the assessee finds support from the decision of the Apex Court in CIT vs. S. I. Group India Ltd. , (Supra) wherein the Apex Court held that when the Sales-tax Department has not accepted the pre-payment, it cannot be a case of cessation or remission of a liability. In the present case also, the assignment has not been accepted by the Sales-tax Department and, therefore, there is no question of cessation or remission of the liability. Besides the 38 deemed loan from the Sales-tax Department is not a loss or expenditure or a trading liability and, therefore, the provision of section 41(1) of the Act is not applicable. The sales-tax originally collected by the assessee was an expenditure which has been allowed to the assessee by treating it as a deemed loan. Once the said amount has been treated as a loan, it loses its characteristic of sale-tax liability. Such deemed loan is not a loss or expenditure or a trading liability and, hence, does not come within the ambit of section 41(1) of the Act. 38. Similarly ....
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.... course of trading transaction and the same is chargeable to tax as trading receipts when the said amount becomes the assessee's own money. The Apex Court further held that because of the trading transaction, the assessee has become richer to the extent of the amount transferred to Profit & Loss Account and, hence, the amount so transferred is to be treated as income of the assessee. In the present facts are distinguishable and, therefore, the decision of the Apex Court is not applicable as the Supreme Court was neither concerned with section 28(iv) or section 41(1) of the Act, but with the issue of whether the amount received by an assessee in the course of a trading transaction, should be treated as income of the assessee or not. In the present case, the 41 allegation of the Assessing Officer and the Commissioner of Income-tax (Appeals) is that the provision of section 41(1) or section 28(iv) of the Act is applicable which issue is not there before the Hon'ble Supreme Court. Further, the Supreme Court has held that the amount is treated as income of the assessee as the assessee had become richer by the amount which is transferred to the Profit & Loss Account. In the present case,....
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....ance (trading liabilities) and, accordingly, the High Court held that the assessee therein had received a benefit in respect of a trading liability which came within the ambit of section 41(1) of the Act whereas in the present case, there is no question of any benefit being received by the Appellant as the appellant has discharged the net present value of a future liability not can the present case be said to be of remission or cession of the liability. Therefore, this decision is clearly inapplicable to the facts of the present case. In the case of CIT vs. ICC India Pvt. Ltd. (supra), the Hon'ble High Court has held that share application amount was a capital receipt and was never received towards trading purpose and, therefore, the question of applicability of section 41(1) does not arise. The High Court has, therefore, dismissed the appeal of the Revenue. Although the High Court has noted that if the loan was received for trading purposes, the provision of section 41(1) of the Act may be applicable; however, as the fact in the present case was not a case of receipt of loan towards 44 the trading purposes, the High Court has not considered whether other conditions of section 41(1....
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....he file of the assessing officer and direct him to follow the direction as has been issued by the co-ordinate for the assessment year 2000-01. 32. Ground 9 pertains to re-computation of deduction under section 80IA by applying lower market value to 'power' generated by Captive power plant while determining profit of Captive Power Plant. 33. We find that this issue has been deliberated and decided by the coordinate bench of this Tribunal for A. Y. 2000-01 in ITA No. 3076/Mum/2012 and the Tribunal, vide order dated 29/10/2020 dealt with the issue as under:- "45. The facts are that the Assessing Officer has held that deduction under section 801A o! the Act for the captive power plant has to be allowed by taking the rate at which the Gujarat Electricity Board purchases the electricity from the consumers which was at Rs. 2. 95 per unit as opposed to the rate at which the Gujarat Electricity Board supplies electricity to the consumers which was at the rate of Rs. 3. 35, on the basis of which the Appellant had claimed the deduction. 46. The Commissioner of Income-tax (Appeals) confirmed the assessment order by holding that correct rate to be applied for computing d....
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....ses the electricity. Similar view has been taken by the Chhattisgarh High Court in the cases of Godavari Power & Ispat Ltd. ,(supra) and the madras High Court in Tamil Nadu Petrol Products Ltd. (supra). The revenue relied on the decision of Calcutta High Court in the case of CIT vs. ITC Ltd. , which is against the assessee but the same has been considered by the jurisdictional High Court in the case of Reliance Industries Ltd. (supra) and has not been followed. Since the issue is covered by the decision Bombay high Court, we are inclined to set aside the order of CIT(A) on by allowing the ground raised by the assessee. The AO is directed accordingly. " 34. The facts and circumstances are stated to be identical. Therefore, consistent with the decision of the co-ordinate bench of this Tribunal, we allow the ground raised by the assessee. The Assessing Officer is directed to follow the jurisdictional High Court judgement in the case of Reliance Industries Ltd (supra). 35. Ground 10 of the assessee pertains to rejection of claim for deduction under section 80IA in respect of Captive Power Generating (DG) Units. 36. We have heard the parties on this issue. The Ld. AR submitted ....
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....01, which has been dealt with by the coordinate bench of this Tribunal, as under:- "53. The assessee has challenged vide ground no. 10 the order of CIT(A) wherein the ld. CIT(A) has confirmed the adjustments/additions for the purpose of computing book profit u/s 115JA of the Act as made by the /AO on account of (i) Disallowance u/s 14A(ii) Reduction of deduction u/s 80IA relating to profits of power generation operation from captive power plants (iii) Disallowance u/s 80-IA relating to profits of power generation operation through DG Sets and (iv)Disallowance of deduction of tax paid u/s 115-O on distributed profits. 54. The facts are that the assessee computed book profits u/s 115JA of the Act after considering relevant adjustments for profits derived by Captive Power Plants, profits derived by DG units, profits eligible for deduction u/s 80HHC. No adjustment was done for u/s 14A since there was no expenditure attributable to exempt income. The Assessing Officer disallowed a sum of Rs. 9,92,34,000 /- under section 55 14A by treating the same as expenditure incurred for earning tax free income arrived at in a notional manner after assuming that the investment in t....
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....eneration operation from captive power plants, the ld. CIT(A) held that since appellant has relied on the arguments put forth in earlier ground on this matter and the action of AO has already been confirmed as such, there is no scope for interference in the matter in view of the provision for making such adjustment in section 115JA. Similar claim of appellant had not be entertained for AY 1999-2000 on identical facts of the case, following the same, the addition made was upheld. c) On the Disallowance of Deduction of tax paid u/s 115-O ld. CIT(A) held that, the appellant itself added back the said amount of tax payable under section 115-O of the Act on distribution of dividend to the book profit. It neither in the original or any revised return changed its own stand. In such a situation, in view of the decision of Hon'ble Apex Court 57 in Goetze India Ltd. (supra), such claim cannot be entertained and the ground in this regard is, therefore, dismissed. " 56. After hearing rival contentions and perusing the material on records, we find that the issue is covered by the decision of the coordinate bench decision in assessee's own case in AY 1999-00. The issue of adjus....
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....Bangalore undertaking as 'slump sale' by the AO in AY 1998-99. 46. Upon hearing the parties we find that this additional ground is also covered by the earlier decision of the co-ordinate bench of this Tribunal. The co-ordinate bench, held as under : "65. After hearing the parties and perusing the decision of the tribunal in AY 1998-99 has granted relief to the assessee by treating the transfer of Bangalore undertaking as a 'slump sale'. Hence, the consequential reduction in Depreciation by the Department in all subsequent years needs to be eliminated. We are therefore directing the AO accept the depreciation as calculated by the assessee. The additional ground is allowed. " 47. Consistent with the earlier decision of this Tribunal, we allow the additional ground 2 raised by the assessee and direct the assessing officer to accept the depreciation as calculated by the assessee. ITA No. 6878/Mum/2012 48. The Revenue has raised four effective grounds of appeal, in this appeal, all of which are squarely covered by the earlier decisions of the Tribunal from assessment years (1994-95 to 1997-98;1994-95 to 1999- 2000; 1994-95 to 2000-01) 49. The first ground....
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.... the Revenue. 52. Ground 3 pertaining to expenditure relating to power lines is also covered in favour of the assessee by the Tribunal of the Tribunal for the assessment year 1997-98 in ITA No. 2891/Mum/2001 & 4299/M/2001 vide order dated 18/10/2013. The Tribunal, while dismissing the ground of the Revenue, has held as under:- "19. Ground no. 10 with its sub ground relates to the deletion of the addition of Rs. 12,27,07,980/- on account of contribution for laying power line at Kovaya and Tadpatri Cement Plants. This issue has been discussed by the Assessing Officer at para 24 on page 19 of his order. The CTT(A) deleted the addition vide para 21 on page 14 of his order. Similar findings of the CIT(A) was confirmed by the Tribunal in ITA. tJo. 2863/Mum/2000 in assessee's own case at para 49 to 51 on page 16 of its order, wherein the Tribunal has followed its earlier decisions in ITA No. 4265 4892/Mum/98. Facts and circumstances being identical, respectfully following the decision of the Tribunal in the assessee's own case, ground no. 10 with its sub ground is dismissed. " 53. Consistent with the above order of the Tribunal, we dismiss the ground raised by the Reven....
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....t the Transfer of Bangalore undertaking as slump sale by the AO. 61. After hearing the parties, we find that this issue is akin to additional ground 2 of the assessee raised for A. Y. 2001-02, which we have decided in favour of the assessee. Consistent with the same, we direct the assessing officer to accept the depreciation as calculated by the assessee. This ground succeeds. 62. Ground 5 pertains to disallowance under section 14A of Rs. 9,37,00,000/- solely on account of interest. This is akin to ground 6 of assessee's appeal for A. Y. 2001-02, which we have already allowed. Therefore, for the reasons stated therein, we allow this ground of the assessee. 63. Ground 6 pertains to treatment of extinguishment of sales tax deferred loan liability as revenue receipt (Rs. 40,07,32,147/-). This ground is akin to ground 7 of appeal for A. Y. 2001-02. 64. We have already taken a decision in favour of the assessee against this ground for A. Y. 2001-02. Therefore, for the reasons appended therein, we allow this ground raised by the assessee. 65. Ground 7 alongwith its sub grounds (a) to (c) pertains to deduction under section 80HHC. This ground is similar to ground 8 coupled ....
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....on under section 80HHE under section 115JA needs to be computed on the basis of profit as per P&L instead of business income computed as per normal provisions of the Act. 73. The Ld. DR before us relied upon the orders of the lower authorities whereas the Ld. Senior Counsel for the assessee relied upon the judgement of the Hon'ble Supreme Court in the cases Ajanta Pharma vs CIT 327 ITR 305 (SC) and CIT vs Bhari Information Technology Systems Pvt Ltd 340 ITR 593 (SC) for the proposition that section 115JA is a self contained code and applied notwithstanding any provision in the Act. Section 115JB is the successor section to section 115JA. Section115JB continues to remain a self contained code. And that if the dichotomy between "eligibility" of profits and "deductibility" of profits was not kept in mind section 115JB would cease to be a self contained code. 74. We find that the Hon'ble Supreme Court in the case of Ajanta Pharma vs CIT (supra) held that the Appellate Tribunal was right in holding that 100 per cent of the export profits earned by the assessee as computed under section 80HHC(3) was eligible for reduction under clause (iv) of the Explanation to section 115JB. We al....
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....lating to assessee's claim for deduction on account of expenditure of Rs. 17,04 ,98,906/- incurred on setting up of new cement plan is similar to the one involved in earlier years which has already been decided by the Tribunal in assessee's favour vide its order dated 31. 10. 2007 (supra) by recording the following observations in para 19. 4. "9. 4 The fourth ground is against the order of the CIT(A)allowing the expenditure of Rs. 2, 05,58, 677/- made on account of expenses incurred on setting up of new cement plant. The assessee itself has capitalized various items of capital expenditure incurred by it in setting up the new cement plant. The expenditure under dispute related to various expense of revenue nature like establishment charges, overheads, etc. The assessee is already in the business of manufacturing cement. Therefore, this running and revenue expenses incurred by the assessee in the -course of carrying on of the business need to be treated as revenue expenses, and therefore, the CIT(A) is justified in accepting the claim of the assessee and deleting the disallowance made by the Assessing Authority. For the assessment year 1982-83, the very same issue wa....