TaxTMI 
TaxTMI 
2022 (5) TMI 104
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....tands 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 and charged to tax. 7. Brief facts relating to this ground a....
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....ating 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 loss of profits. The observations of the court are reproduced hereunder: "On an analysis of these cases w....
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....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 be subjected to tax. " iv) We also place reliance on the judgnent of the Madras High Court in the case of CIT v. Saraswathi Publicities (132 ITR 207) wherein it was he....
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....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 which are directly competing with the business model of the joint venture. He observed that this is a major lacunae in the Cooperation Agreement which points out that in reality, the substance of the transaction is f....
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....ooperation 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 up the right to use the profit generating apparatus of one of the businesses of the assessee company. Further, he submitted that vide para (c) and (f) of clause 3 of the Memorandum of Association, the assessee is authorised to carry on the business of market....
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....y 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 this Court was whether the amount received by the assessee (compensation) on the condition not to carry on a competitive business was in the nature of capital receipt? It was held that the compensation received by the assessee for loss of agency was a revenue receipt whereas compensation received for refraining from carrying on competitive busin....
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....e 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(A) on this issue and direct the A. O to allow the deduction of Rs. 1,00,000/- towards contribution to Utmal Employees Welfare Fund. Accordingly the ground No. 2 raised by the assessee is allowed. " 18. The facts and circumstances are stated to be identical. Therefore, consistent with the earlier orders of the co-ordinate bench of this Tribunal, we allow the ground raised....
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....he 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 factor in determining its nature and 14 treatment in books of account not conclusive. The Hon'ble High Court held that the software expenses were not to create new asset or a new source of income but to upgrade the system and thus the software expenditure is revenue expenditure. Facts being identical, we follow the ratio laid down in the above decisions and hold that the expenditure incurred by the asses....
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.... 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 period interest, no appeal has been preferred by the Revenue on the issue of invoking the principles laid down in Reliance Utilities & Power Ltd. (supra) in its application to Section 14A of the Act. " 23. Since the facts before us are materially same, we therefore respectfully following the decision of Coordinate Bench delete the disallowance of Rs. 9,92,34,000/-u/s 14A towards interest. Accordingly, the ground no. 5 raised by the assesse....
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....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 Corporation of India Ltd. , Vs. DCIT(supra). In the present case, we find that provisions of Sec. 41(1) of the Act are not applicable as the necessary conditions as envisaged in the said section are not fulfilled namely the assessee has (i) not obtained any amount in respect of loss or expenditure; (ii) nor any benefit in respect of trading liability by way of remission or cessation. The first 36 condition of obtaining an amount is obviously not applicable as the....
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....se 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 the difference of Rs. 51. 61 Crores arising out of assignment of sales tax liability of Rs. 71. 34 Crores to be paid in future date at its present value of Rs. 19. 73 Crores has not resulted in any benefit or perquisites and thus not covered by the provisions of section 28(iv) of the Act as section 28(iv) proposes to tax 'benefit' or 'perquisite' arising from business of the assessee. In the present case the pre-payment of a deferred sales-tax loan liability....
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....e 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, the assessee has discharged its complete obligation by paying the net present value of the obligation and, therefore, there is no question of the assessee either becoming richer or poorer on such transaction. The Apex Court in the cases of Balkrishna Industries Ltd. (supra) and Mahindra & Mahindra Ltd. (supra) has specifically dealt with the provisions of section 41(1) and section 28(iv) of the Act and, therefore, the said decisions are applicable to the ca....
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....efore, 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) are fulfilled or not. In the case of Indian Seamless Steels & Alloys Ltd. vs. ITO (supra). The Tribunal in paragraph 16 of the order has noted that the assessee therein has transferred its deferral sales-tax loan to third party for a consideration which is higher than the amount payable to the Sales-tax Deptt. The Tribunal has further noted that the assessee therein has sold its 'sales-tax incentive' and what it has received is not sales-tax benefit but sa....
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....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 deduction under section 801A of the Act is the rate at which the Electricity Board purchases the. electricity and not the rate at which the Electricity Board sells the electricity. 47. The Appellant submits that the issue is now settled by the decision of the jurisdictional High Court in the case of CIT vs. Reliance Industries Ltd, 102 taxmann. com 372 in favour of the Appellant. In the said case, on identical facts, Court has held that deduction under section 80IA of the Act is t....
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....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 that the issue covered by the order of the Tribunal for A. Ys 1999-2000 & 2000- 01. We find that the Tribunal in its order for A. Y. 2000-01 at paragraphs 49 to 52 has decided the issue in favour of the assessee. The findings of the co-ordinate bench are as under:- "49. The issue raised in 9th ground of appeal is against the order of ld. CIT(A) confirming the rejection of claim of the 53 appellant for deduction u/s 80-IA in respect of its Captive power Generating (DG) units. 50. The facts in brief....
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....G 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 tax free bonds and shares/units of mutual funds were made partly out of borrowed fund. The AO has also made adjustments for the same amount while calculating book profits u/s 115JA. The assessee, in terms of the provisions of Section 115JA of the Act and in particular Clause IV of the Explanation u/s 115JA, had reduced from its book profits an amount being the profits derived by an undertaking of the assessee from the business of generation and distribution of Power. In computing the book profits under section 115JA, the AO did not allow the deducti....
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....lant 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 adjustments made under section 14A of the Act will not survive as we have deleted the addition under section 14A in our decision in ground no. 7 (supra). Moreover the issue is also covered by the decision of the coordinate bench in AY 19999-00 vide para 12. 1. Similarly the issue of profits derived from DG sets not allowed as reduction from book profit u/s 80-IA is covered in favour of the assessee by the same decision of the coordinate bench in AY 1999- 00 vide para no. 12. 2. Therefore the adjustments on account of disallowance under section 14A and profits derived from DG sets not all....
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....t 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 in this appeal pertains to disallowance of expenditure relating to club membership. We find that this issue is squarely covered by the decision of the co-ordinate bench in assessee's own case for A. Y. 1997-98 in ITA Nos. 2891/M/2001 & 4299/M/2001 and the Tribunal vide order dated 08/10/2013 held as under:- "Ground no. 1 relates to the club* membership expenses at Rs. 69,70,827/-. This issue has been considered by the Assessing Officer at para 8 on page 5 of his order. The CrT(A) has considered this grievance of the assessee at para 5 on page 3 of order. Similar issue was considered by the Tribunal in assessee'....
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.... 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 Revenue. Ground 3 fails. 54. Ground 4 in Revenue's appeal pertains to expenses on setting up of new cement plants amounting to Rs. 2,47,46,113/-. 55. After hearing the parties, we find that the issue has already been decided by the Tribunal in assessment year 2000-01 in favour of the assessee by observing as under:- "71. After perusing the records before us and hearing the rival contentions , we find that issue is settled in favour of the assessee by the decisions of the coordinate benches in assessee own case right from AY 1994-95 to 1999-00 which were upheld by the Hon'ble High Court. SLP filed by the Revenue on this issue were also dismissed by the....
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....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 with its sub grounds (a) to (c). 66. We have already taken a decision on these grounds for A. Y. 2001-02. Therefore, for the reasons appended therein, we restore this ground to the file of the assessing officer. The assessing officer is directed to follow the direction issued by us for A. Y. 2001-02. This ground is allowed for statistical purpose. 67. Ground 9 pertain 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. This ground is akin to ground 9 of assessee's appeal for A. Y. 2001-02, which we have decided in favour of the assesse. Therefore, consistent wi....
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....d 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 also find that the above ratio laid down by the Hon'ble Apex Court squarely applies to the case on hand. Therefore, we allow the additional ground 2 raised by the assessee. ITA No. 2284/Mum/2013 (Revenue's Appeal AY 2002-03) 75. Ground 1 in this appeal is general in nature and does not require adjudication, therefore it is dismissed. 76. Ground 2 in this appeal pertains to expenditure relating to club membership. Identical ground has been decided by us in assessment year 2001-02 which has been dismissed. Therefore, for the reasons stated therein, ground 2 of the Revenue is dismissed. 77. Ground 3 in revenue's appeal pertains to amount provided in valuing work-in-progress. This issue is identical to....