TaxTMI 
TaxTMI 
2016 (1) TMI 1491
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....comes etc. can be summarised as under: AY. ROI filed on Returned income Asstt. Dt . Assessed Income `CIT(A)order 1997-98 01.12.1997 Rs.29.74crores 31.03.2000 Rs.42,68,98,539/- 13.05.2000 1998-99 30.11.1998 Rs.68,80,21,410/- 19.02.2001 Rs.71,64,65,150/- 02.06.2004 1999-00 31.12.1999 Rs.1,08,11,58,622/- 20.02.2002 Rs.1,10,25,69,240/- 04.06.2004 ITA/5238/M/2003: AY-1997-98 : 2.First ground of appeal, raised by the assessee, deals with upholding the disallowance on account of incremental liability (Rs.3,21,03,537/-)for payment of pension created on an actuarial basis. It was brought to our notice that while deciding the appeal for the AY.1995-96(ITA/ 498/ Mum/2003,dt.25.09.2013)Tribunal had dealt with the same issue.We would like to reproduce the relevant portion of the said order and it reads as under:- "36. Ground no. 6 relates to the disallowance of Rs.3,90,12,431/- on account of incrementalliability for payment of pension under the Voluntary retirement scheme (VRS) created on an actuarial basis in computing the assessee's total income. The AO has discussed this issue on....
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....ound is about disallowance of Rs.22,73,715/-,being 1/5th of the foreign travelling expenses. During the assessment proceedings, AO held that details of foreign travel expense were not furnished. Following the order for the year 1995-96,he made the disallowance of 25% of foreign travel expenses . Before the FAA, it was argued that the details of foreign travel expenses were furnished as annexed to the return of Income. A copy of the same was also filed before the FAA,during the hearing of the appeal. He held that the details filed by the assessee contained the name of the persons who undertook the foreign travel expenses, places visited, period of visit and purpose of visits.Further, during the hearing of the appeal papers were filed along with the sample copies of the tour reports as submitted by the touring officers. He held that the details contained certain foreign visits which were to Kathmandu, Nepal against which the only purpose 'given was 'Business discussion',that expenses of such visits totaled to Rs.7,70,051.He held that some of the visits were personal in nature,that the foreign travel expenses could not be allowed in full as claimed by the assessee.Following the orders....
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....10,37,656/- 50% disallowed of Rs.5,18,828 39. 39. Both parties agreed that similar issue has been decided by the Tribunal in assessee's own case in A.Y. 1991-92, 1992-93 and 1993-94. We have carefully considered the order of the Tribunal for A.Y. 1993-94 in ITA No.334/Mum/1997. We find that identical facts have been considered by the Tribunal at para 48 of its order. We find that the Tribunal has directed the AO to allow the business meeting expenses and expenses of AGM and the Tribunal has confirmed disallowance of Rs. 2 lakhs out of total canteen expenses which come to around 40% of the total canteen expenses disallowed. Lunch expenses on employees during the course of outdoor duty has been fully allowed u/s 37(3) of the Act. Respectfully following the findings of the Tribunal (Supra), we direct the AO to allow the lunch expenses on employees during the outdoor duty, business meeting expenses, expenses on AGM fully and we confirmed disallowance of Rs.85,000/- out of the total canteen expenses of 2,18,004/-. Ground no. 8 is partly allowed." Respectfully, following the above Tribunal order Ground No.3,raised by the assessee, is partly al....
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.....2091 & 2077/B/94 order dated 17.12.02 wherein it was held as under: "3. The second ground is that the CIT(A) erred in deleting the addition of Rs. 51,375/- made on account of entertainment expenses incurred on foreign nationals. This issue is discussed in page 6, paras 9 & 10 of the assessment order. The brief facts in this connection are that the assessee incurred expenditure in respect of visitors to India, in connection with its business. Such expenditure amounted to Rs. 51,375/-. The assessee furnished the details of such expenditure. The Assessing Officer took the view that the expenditure represented hospitality extended to the visitors and therefore, disallowed the same as entertainment expenses. On appeal the CIT(A) noted that the foreign visitors had come to India for the purpose of attending Board meeting, general discussion, finance, reporting etc. The assessee contended that this expenditure cannot therefore, be considered to be entertainment expenditure. An order of the Bombay Bench of the Tribunal in the case of R H Windsor India Ltd vs ITO was relied upon the CIT(A), finding that the facts of the present case are nearly similar, held that the expendit....
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....ement of the assessee to interest u/s.244A on the amount of Self Assessment (SA)tax paid by it. The Tribunal had dealt with the said issue in its order dated 09/06/2004 (ITA /5848/ Mum/2000 for AY.19998-99).The relevant portion of the said order dated 09/ 06/2004 reads as under :- "This is Revenue's appeal directed against the order of the learned CIT(A)-X, Mumbai dated 11.10.2000 for Assessment Year 1998-99. The grounds of appeal raised by the revenue are as under :- " On the facts in the circumstances of the case, the learned CIT(A) erred in fact and in law, by directing the A.O. to pay to the assessee's interest u/.s.244A -on processing the return u/s. 143(1) (a) even on the amount of self-assessment tax paid by the assessee u/s.140A of the Act in as much as: i)On the facts and in the circumstances of the case and in law, the learned CIT(A) lost sight of the fact that the Explanation to clause (b) of' section 244A(1) on which explanation the learned CIT(A) placed reliance, refers to the excess payment; of tax made by the assessee in response to the demand made of him by the A.O. vide notice u/s.156 of the Act. And ii)The learned C....
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....e the FAA, the assessee contended that Demerger was not a sale-transaction, that consequently no money was payable as defined u/s.41(4) of the Act, that no adjustment was to be made to WDV of block of assets while computing depreciation claims. It further argued that what was required to be reduced from the block was money value received from the sale of assets. It relied on the decision of Kasturi & Sons(237ITR24) of the Hon'ble Supreme Court wherein the Hon'ble Court had defined the words "moneys payable" and had held that the phrase included actual currency form and not money's worth.It was, therefore,contended that since no money in actual currency was received by the assessee on account of demerger, no adjustment was required to be done to the WDV with reference to assets in question.It further submitted that reliance placed by the AO with regard to the treatment given by another assessee in its own case was irrelevant and also that the observation made by the AO that the assessee had fraudulently claimed excess depreciation was wholly unjustified,that it had fully disclosed the stand taken by it in the return filed. After considering the submissions of the assesee and ....
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....t character,that the provisions of section 43(6) were not applicable to the facts of the case.He relied upon the cases of Kasturi & Sons(supra),Motors and General Stores(66ITR692)and Bharat Bijlee Ltd.(46taxmann.com 257). The DR supported the order of the FAA.The DR stated that entire chemical business was not transferred, that only one division was transferred , that the AO had made enquiry with other concern, that he found that the assets were taken on book value, that requirement of ownership of assets was a must, that it was not a case of slump sale, that the cases relied upon by the assessee were distinguishable on facts. 8.3.We find that in the case of Kasturi & Sons(supra)the Hon'ble Apex Court has interpreted the phrase money's worth and applicability of section 41(2)of the Act as under: " 19. We are unable to accept the contention that the word `money' should be interpreted as `money's worth'. The reasons given by us earlier are sufficient and we need not add to them. The reason for introducing a fiction in S.41 (2) of the Act as explained in Bipinchandra Maganlal & Co. Ltd. (41 I.T.R. 290) quoted in Artex Manufacturing Co. (1997) 6 S.C.C. 437 that ....
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....the assessee In other words, the business of both the companies were complimentary. ` "The directors of both the companies thought that it would be advantageous if both the companies are amalgamated Accordingly, a scheme of amalgamation was evolved It was submitted that the legal expenses incurred in connection with the said amalgamation are in the nature of revenue expenditure The ITO did not agree nor did the AAC On further appeal, the Tribunal upheld the assessee's contention It disagreed with the Revenue's contention that inasmuch as the said amalgamation resulted in acquisition of the other company by the assessee, which acquisition was in the nature of acquisition of a capital asset, the legal expenses incurred in that behalf partake the nature of capital expenditure.The Tribunal was of the opinion thatas both the companies were carrying on complimentary business and their amalgamation was necessary for the smooth and efficient conduct of the business, it is an expenditure laid out wholly and exclusively for the purpose of the business of the assessee In view of the said finding and also in view of the decision of this Court in Bombay Steam Navigation Co (1953) (P) Ltd Vs CIT....
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.... above decision of the Hon'ble Apex Court, first ground is decided against the AO. 10.Second ground is with regard to directing the AO to substitute the WDV of the transferred assets by the WDV of the book value of such assets and at the same time reduce the value of such assets from block of assets before allowing the assessee to claim depreciation. While deciding the issue with regard to non eligibility of the assessee for depreciation on merger (GOA-8),we had adjudicated it in its favour.Following the same second ground,raised by the AO,stands dismissed. 11.Next ground of appeal deals with deleting the disallowance of advertisement and publicity expenses, amounting to Rs.42.99 lakhs. 11.1. During the course of hearing the representatives of both the sides agreed that identical issue stands decided against the AO by the orders of the Tribunal for earlier AY.s.(1991-92 to 1996-97),that the Hon'ble Bombay High Court had upheld the order of the Tribunal for the AY.1996-97. 1. ......we find that the issue pertains to allowance of advertising and publicity expenses. The Commissioner (Appeals) held in favour of the assessee . In appeal preferred by revenue, learned Tr....
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....xpenditure as revenue expenditure, following the findings of his predecessors,the C1T(A) directed the AO to delete the entire disallowance.However,at the same time he directed the AO to withdraw the depreciation allowed.Aggrieved by this revenue is before us.The ld.DR strongly supported the findings of the AO, Counsel for the assess strongly relied upon the decision of the Hon'ble Delhi High Court in the case of Asahi India safety glass limited 245 CTR 529.We have considered the rival submissions and perused the orders of the lower authorities. It is not in dispute that the expenditure has been incurred on application software The Hon'ble Delhi High Court in the case of Asahi Safety Glass ltd.(Supra) has held that application software arc of revenue in nature as the AO has not doubted that the expenses were on application software therefore respectfully following the decision of the Hon' ble Delhi High Court, findings of the CIT(A) are confirmed. Appeal of the revenue is dismissed." Following the same,ground no.1 filed by the AO,is decided against him.As the ground has been decided in favour of the assessee, so, first ground of CO become infructuous." Respectfully follo....
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.... reliance was placed by the departmental authorities as well as the ld.DR before us, the factory costs, which are undisputedly to be considered as part of the cost of the product, were not included in the closing stock valuation. It is for this reason that the Supreme Court held that the method adopted by the assessee in that case was not an acceptable or sound method from which the true profits could be deducted. It is in this context,that they held that a method of valuation of closing stock has been adopted by,it is erroneous or unsound or unacceptable or is against accouning or commercial practice,the same can be discarded.In case, this principle is not attracted because the incurring expenses on freight or cartage outward or packing expenses purposes of transporting the goods have not added any stock.They are post manufacturing expenses are to be as selling expenses.Normally, the manufacturing are debited to the manufacturing account whereas the expenses are debited to the profit & loss account.According to the Advanced Accounts by R.N.Carter (1939 Rev.Edn.,Page-32),carriage inwards increases the cost of the goods purchased and is hence debited to trading account whereas carri....
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....damental feature of an assessment cannot be lightly tinkered with as held by the Supreme Court in the case of Radhasaomi Satsang Sabha (1993 ITR 321)." The same, was followed in ITA.No.7458/Mum/1997.The learned Departmental Representative did not dispute the same. In view of discussion, we are not inclined to interfere with the finding of The same is upheld." In the year 1994-95 and 1995-96 identical issue was decided against the AO.Respecfully following the order of the Tribunal for earlier years, ground no.4,filed by the AO stands dismissed. Ground no.3 of CO is treated as infructuous." Respectfully following the above Ground No.5 is dismissed. 14.Expenditure incurred by the assessee on transit houses maintained by it is the subject matter of sixth Ground of appeal. While deciding the appeal, filed by the assessee, the FAA deleted the disallowance of Rs.6.88 lakhs made by AO u/s.37(4) of the Act. 14.1.We find that while deciding the appeal for the AY 1991-92 to 1996-97 the Tribunal had partly allowed the expenditure incurred by the assessee on transit houses, that the food and beverages expenditure were allowed by the Tribunal,that the other expenses we....
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....arlier years.Ground no.6 is allowed in favour of the AO,in part." Respectfully following the above we decide Ground No.6 in favour of the AO,in part. 15.Ground No.7 deals with direction given by FAA to AO to exclude the sales tax (Rs.13.84 crores and excise duty (Rs.25.97 crores) for the purpose of computing deduction u/s. 80HHC of the Act. 15.1.The DR and the AR agreed that while deciding the appeals for AY 1991-92 to 1996-97 the Tribunal had upheld the order of the then FAA.s who had given similar direction the then AO.s. The AR further relied upon the cases of Sudershan Chemicals Industries Ltd. (245 ITR 769)and Laxmi Machine Works (296ITR667). 15.2.The Hon'ble Apex Court and the Jurisdictional High Court have in the cases of Laxmi Machine Works and Sudershan Chemical Industries Ltd.(supra),held that sales tax and excise duty cannot be included for the purpose of computing the 80HHC deduction. Respectfully following the above mentioned two judgments, we dismiss Ground No.7. C.O./249/Mum/2004,AY-1997-98 : 16.First Ground of the Cross Objection(C.O.)is about expenditure incurred for amalgama - tion/demerger.While deciding Ground No.1,we have dismissed appeal of t....
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....imated freight component in the closing stock (Rs. 6.41 lakhs and Rs.8.29 lakhs) v.)Exclusion of sales taxes, excise duty and sale of scrape for computing the 80HHC deduction (Rs.13.84 crores +Rs.27.15crores+Rs.75.15 lakhs and Rs.20.36 crores +Rs.36.17 crores +Rs.86.37 lakhs ) 21.2.While deciding the cross-appeals for the earlier AY.,we have dealt with all the above five issues.Following the orders of those appeals,we dismiss all the five grounds,raised by the AO,for both the years. 22.Now,we would take up the independent grounds raised by the AO for the above referred two AY.s. First we would deal with Ground of appeal No.7 (GOA-7) for the AY.1998-99 and it deals with granting interest u/s.244A of the Act on SA paid by the assessee. While deciding the identical ground for the AY.1997-98(Ground 7),we had allowed the appeal filed by the assessee. Following the same, seventh ground for AY.1998-99 stands decided against the AO. 23.Ground No.5 for the same year is about incremental liability on account of VRS, amounting to Rs.3.09 Crores in respect of workers who had retired in the earlier years from the assessee is unit at Bhandup. While adjudicating the first ground....
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....estrict the disallowance to 0.05% of the exempt income.Ground of appeal No.8 is decided in favour of the AO,in part. CO/112/M/2015-AY.1998-99: 25.The assessee has raised four Grounds of appeal in its C.O.While dealing with Ground No.1,3,4 and 5 raised by the AO,we have decided all the issue against the AO.Therefore, Grounds of CO stand statistically allowed. 26.Now we would deal with the independent grounds taken by the AO for the AY.1999- 2000.First independent ground raised by the AO,deals with expenditure incurred on computer soft ware,amounting to Rs.25.54 lakhs.The AO treated the said expenditure as capital expendi -ture,whereas the FAA held that the expenditure was revenue in nature.While deciding identical ground for the AY.1997-98,we have held that expenditure incurred for computer software was revenue expenditure.Following the same we dismiss ground No.4,raised by AO. 27.Second independent Ground(GOA-7)is about deleting the disallowance of 2% made by the AO,on the tax free interest and dividend income.While deciding the identical issue for earlier year,we have restricted disallowance to 0.05%.Ground No.7 is partly allowed in favour of the AO. 28.The next Gro....