TaxTMI 
TaxTMI 
2023 (6) TMI 665
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....ved on the assessee. The assessee is engaged in the production and sales of Viscose Staple Fibre, Chemicals, Cement, and the production of Sponge Iron and Textile. The Assessing Officer ("AO"), vide order dated 26/03/2004, passed u/s 143(3) of the Act, assessed the total income of the assessee at Rs. 494,59,33,333, after making certain additions/disallowances to the income declared by the assessee. The learned CIT(A), vide impugned order granted partial relief to the assessee. Being aggrieved, both, the assessee as well as the Revenue are in appeal before us. ITA no.4754/Mum./2004 Assessee's Appeal - A.Y. 2003-04 3. In its appeal, the assessee has raised the following grounds:- The appellant prefers an appeal against the order of the Commissioner of Income Tax (Appeals)- XXVI [hereinafter referred as "CIT (A)"] on the following amongst other grounds each of which is without prejudice to any other. 1. Disallowance under section 43B: 1.1 The CIT (A) erred in not allowing the amounts paid or written back during the previous year amounting to Rs. 1.30,00,904/-, which had already been disallowed in the past under clause (c), (d) and (e) of section 43B....
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....71) and Alfa Laval India Ltd. (133 Taxman 740). 4.8 The CIT (A) erred in upholding the action of the AO in adjusting loss on export of traded goods against profit on export of manufactured goods, while calculating deduction under section 80 HHC. 5. Appropriation of Head Office expenses 5.1 The CIT (A) erred in confirming the AO's action in appropriating Head Office expenses and reducing the amount of allowable deduction u/s 80O. 5.2 The CIT (A) failed to appreciate that Head Office expenses cannot be reduced from the receipts while computing allowable deduction u/s. 80O. 5.3 Without prejudice to the above, the CIT (A) failed to appreciate that even if head office expenses are to be reduced from gross receipts for computing allowable deduction u/s. 80O, such expenses can only be a certain percentage of the gross receipts eligible for deduction u/s. 80O and not the total turnover of the division. 6. Long Term Capital Loss 6.1 The CIT (A) erred in upholding the action of the AO in reducing long term capital on sale of equity shares of MRPL from Rs. 328,24,90,776/- to Rs. 314,11,35,651/-. 6.2 The CIT (A) ought ....
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....d assessee's claim of deduction u/s 43-B of the Act in respect of liabilities disallowed in earlier years which are paid/written back in the current year. The A.O. found that in the computation of income an amount of Rs. 10.85 crores has been considered as disallowance u/s 43-B (a) of the Act by the assessee itself. However, an amount of Rs. 1.31 crores was not considered as disallowance u/s 43-B of the Act falling under clause (b) to (d). The contention of the assessee was that the amount of Rs. 1.31 crores which falls under clauses (b) to (d) of section 43-B of the Act which are not payable as on 31-3- 2001 cannot be covered by the provisions of section 43-B of the Act. However, the A.O. did not agree with this explanation and made the disallowance. The ld. CIT(A) by his impugned order, confirmed the order of the A.O. and the assessee is in appeal before us. 3. At the outset, the ld. Counsel for the assessee contended that the issue is covered by the decision of the Tribunal in earlier years i.e assessment years 1993-94 to 1998-99 and 2000-01 in assessee's own case, copy of which was placed on record. We find that similar issue was considered by the Tribunal in A.Y. 2000....
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....sessee and held that the payments made for obtaining membership is not allowable expenditure and the payments made towards annual renewal fees and expenditure incurred at Clubs for the business purpose is allowable expenditure, but not the payment made for obtaining membership. The AO further held that by such payment, the assessee got the right to use the facilities of the Club which is the advantage of enduring nature. Accordingly, the AO disallowed the payment towards Club Membership fees of Rs. 8,48,100. The AO further accepted the alternative contention of the assessee and allowed depreciation considering it it as intangible asset. 10. The learned CIT(A), vide impugned order, granted partial relief to the assessee and directed the A.O. to disallow only the entrance fees as capital in nature and allow all other expenditures as revenue expenditure. Being aggrieved, the assessee is in appeal before us. 11. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee's own case for the assessment year 2002-03 cited supra, by following the decisi....
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....rest on refund should not be taxed. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee and held that there is nothing in the Act to wait for such taxation till the matter reaches the stage of finality. Being aggrieved, the assessee is in appeal before us. 15. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide order dated 14/12/2021, passed in assessee's own case for the assessment year 2002-03 cited supra, by following the decision rendered in the preceding year, observed as under:- "15. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "7. The assessee is also aggrieved for taxing of interest received from Income Tax Department amounting to Rs. 13,64,09,609/-. We find that similar issue has been dealt with by the Tribunal in A.Y. 1993-94 in ITA No. 1523/Mum/1997 vide para ....
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....ating from the record, are: During the year under consideration, the assessee claimed deduction under section 80HHC of Rs. 7,78,77,192 and furnished Form no.10CCAC along with the return of income. From the perusal of the working, it was observed that the assessee has not reduced the interest income of Rs. 39,32,84,366 while computing the profit of the business for the purpose of deduction under section 80HHC of the Act. Accordingly, the assessee was asked to show cause as to why 90% of the above receipt be not reduced from the profit of the business for the purpose of deduction under section 80HHC of the Act. In response thereto, the assessee submitted that the interest paid during the previous year is Rs. 168.41 crore, and, therefore, only net interest should be reduced from business profit. The AO, vide order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that only gross interest is to be reduced for the purpose of section 80HHC of the Act. 20. The learned CIT(A), vide impugned order, dismissed the ground taken by the assessee. Being aggrieved, the assessee is in appeal before us. 21. Having considered the submissions of ....
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.... following the decision of honourable Supreme Court (supra). We accordingly direct the A.O. to exclude the excess of interest income over interest expenditure from the eligible profit of the company while computing deduction u/s 80HHC of the Act. 19. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y. 2001-02 is respectfully followed, we order accordingly." 22. We also find that in the preceding assessment years, the coordinate bench, followed the decision of the Hon'ble Supreme Court in ACG Associate Capsule Pvt. Ltd. v/s CIT, [2012] 343 ITR 89 (SC), wherein it was held that for computation of profit of business for the purpose of deduction under section 80HHC of the Act, only 90% of net interest or net rental income is to be reduced under clause (1) of Explanation (baa) to section 80HHC of the Act. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in the facts and law was alleged in the relevant assessment year. Since in the present case, it is an accepted fact that interest paid during the year is Rs. 168.41 crore....
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....sessee's appeal. 28. The issue arising in grounds no.4.5, 4.6 and 4.7 raised in assessee's appeal is pertaining to the reduction of miscellaneous receipts from the profit of business while calculating the deduction under section 80HHC of the Act. 29. The brief facts of the case pertaining to the issue, as emanating from the record, are: The AO, vide assessment order passed under section 143(3) of the Act, reduced 90% of the miscellaneous receipts of Rs. 11,47,54,429, credited to the Profit & Loss Account for the purpose of computation of deduction under section 80HHC of the Act. 30. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 31. The learned Sr. Counsel, appearing for the assessee, during the hearing, by referring to Page-41 of the paper book submitted that these miscellaneous receipts are in respect of various items. The learned Sr. Counsel further submitted that these receipts are in the nature of rebate on sales tax, refund of mineral area development cess, sundry balance returned back, scrap sales, sale of empty cement bags, plastic barrel, scrap barrel, was....
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....ssee that these receipts are in relation to operations carried out by the assessee and, therefore, should not be excluded while computing deduction under section 80HHC of the Act. In the Chart filed during the course of the hearing, the assessee provided the following details of these receipts:- Statement of Misc. Receipts Sr. no. Units Amount (Rs.) 1. Rebate on sales tax 1.69 crore 2. Refund of Mineral Area Development Cess 2.83 crore 3. Sundry balances written back 52.36 lakh 4. Scrap sales 18.56 lakh 5. Sale of empty cement bag, plastic barrel, scrap barrel, waste oil 23.37 lakh 6. Insurance claim and recovery Rs. 28.02 lakh 7. Deposit forfeited Rs. 19.01 lakh 8. Discount Rs. 20.84 lakh 9. Recovery of water charges 17.25 lakh 10. Freight Recovery 11.31 lakh 11. Liquidated damages 37.51 lakh 12. Recovery of packing charges 1.02 crore 13. Other misc. expenses 4.66 crore 14. Net misc. expenses incurred Misc. ....
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....eded to reduce 90% of miscellaneous receipts amounting to Rs. 11,47,54,429, from the profit while computing deduction under section 80HHC of the Act. During the hearing, these receipts have been categorised in various categories as noted above, however, it is evident that the Revenue has not examined the relation of such receipts with the business of the assessee. In this regard, it is pertinent to note that in CIT v/s Bangalore Clothing Co., [2003] 127 Taxman 637 (Bom.), the Hon'ble Jurisdictional High Court held that the AO has to ascertain whether the receipts were part of operational income and for that the Department will have to consider the Memorandum and Articles of Association of the company, nature of the business, nature of the activity and such other tests. The Hon'ble Court further held that just looking at the nomenclature without any further enquiry into the nature of the business, Explanation (baa) cannot be invoked, since the nomenclature may not be accurate. The relevant findings of the Hon'ble Jurisdictional High Court, in the aforesaid decision, are as under:- "8. We do not find any merit in the argument advanced on behalf of the Department. In this cas....
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....usiness of the Company and whether receipts like interest, commission, etc. accrues as a part of the main business activity or whether they accrue out of incidental business. In the case of K.K. Doshi & Co. (supra), the assessee had received Rs. 19.60 lakhs as service charges. It was held that the service charges of Rs. 19.60 lakhs did not have the element of turnover because the charges were received for a seasonal activity which was not an integral part of the manufacturing activity. Therefore, the test to be applied in all such matters is, whether interest, service charges, commission accrues out of the main business activity of the Company and whether they were Operational Income. The case of K.K. Doshi & Co. (supra) shows that service charges of Rs. 19.60 lakhs did not represent Operational Income and, therefore, it came within Explanation (baa). However, we find that the Department just looks at the nomenclature of the receipt and if it finds that the nomenclature is rent, interest, commission then without any further inquiry into the nature of business, the Department invokes Explanation (baa) which is not the purpose and the object of that Explanation. In the present case, ....
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.... not wish to interfere with the finding of fact recorded by the Tribunal. As stated above, if the receipt of labour charges (job-work charges), interest, commission etc. accrues by way of operating income then it falls outside Explanation (baa). In the present case, the receipt accrued from manufacturing activity. The Tribunal has found that job processing activity was linked to the manufacturing activity of the assessee. In the circumstances, on facts, the judgments cited by the Department do not apply to this case. Lastly, we may point out that, in this case, there is no challenge to the findings of facts recorded by the Tribunal in relation to the processing activity forming part of the manufacturing activity of the assessee." 37. Therefore, in view of the above, before applying the ratio laid down by the aforesaid decisions, relied upon by the assessee, it is relevant to examine each and every receipt under the broad head of „Miscellaneous Receipts‟ in light of the decision of the Hon'ble Jurisdictional High Court in Bangalore Clothing Co. (supra) and for this purpose, we remand this issue to the file of the AO for de novo adjudication. We further direct that if ....
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....agreed that the coordinate bench of the Tribunal in assessee's own case in Grasim Industries Ltd. (supra), vide order dated 14/12/2021, for the assessment year 2002-03 dismissed similar ground filed by the assessee, inter-alia, in view of the decision of Hon'ble Supreme Court in IPCA Laboratories, 266 ITR 521 (SC). Therefore, in view of the above, we dismiss ground No. 4.8 raised by the assessee in the present appeal. 41. The issue arising in grounds No. 5.1 and 5.2, raised in assessee's appeal, is pertaining to the allocation of head office expenditure and reducing the same from deduction under section 80-O of the Act. 42. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee has claimed a deduction of Rs. 6,00,362, under section 80-O of the Act. The total turnover of the ED & D unit for the previous year was Rs. 20.58 crore. Therefore, the AO, vide assessment order passed under section 143(3) of the Act, allocated the head office expenses of Rs. 9,05,520 (being 0.44% of the turnover) against royalty income of Rs. 30,01,812 and computed the deduction under section 80-O to Rs. Nil (20% of Rs. ....
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....estimated the expenses and allocated head office expense to the various units which had claimed benefits u/s. 8OHH,801, 80M and 80-0 of the Act. Since the nexus between the head office and the individual units cannot be denied and since the assessee did not give details so as to give better allocation of these expenses to various units, the CIT(A) upheld the action of the AO. Aggrieved with such order of the CIT(A), the assessee is in appeal before us. 25.2 After hearing both the sides, we find the AO has only allocated the expenses but no income was allocated. We find the co-ordinate Bench of the Tribunal in the case of M/s. Procter & Gamble India Ltd. Vs. DCIT, vide ITA No. 5466/Mum/99 order dated 27th November, 2006 for the A.Y. 1990-91 has held that head office expense allocated to the units are not to be taken into consideration for computing the income of the assessee eligible for deduction u/s. 801 and also u/s 8OHH. Similarly we find the Bangalore bench of the ITAT in the case of Wipro GE Medical Systems Ltd. Vs. DCIT reported in 81 TTJ 455 has held that there is no need for allocation of any expenses when the expenses are directly connected with periods. Following....
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.... bonds other than capital-indexed bonds issued by the Government of India. The assessee further submitted that in the present case, long-term capital gain was from the sale of equity shares and not from the sale of debenture as mentioned in the said proviso. Therefore, the said proviso is not applicable in assessee's case. The AO vide order passed under section 143(3) of the Act did not agree with the submissions of the assessee and held that third proviso is applicable. Accordingly, long-term capital loss on the sale of 9,53,79,023 shares was computed considering the date of conversion of FCD, i.e. 26/12/1998 as the date of acquisition of equity shares. Accordingly, long-term capital loss for the year was reduced from Rs. 328,24,90,776 to Rs. 314,11,35,651 by applying the third proviso to section 48(ii) of the Act. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and upheld the findings of the AO. Being aggrieved, the assessee is in appeal before us. 48. We have considered the submissions of both sides and perused the material available on record. The assessee acquired 9,53,79,023 nos. of 7% unsecured FCD of Mangalore and Petroc....
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....corollary, it would be but logical to reckon the date of acquisition of the convertible debentures as the date of acquisition of such shares received on conversion of convertible debentures. Now examining the factual matrix herein, the assessee was allotted 27160 convertible debentures of TELCO Limited on 20.12.2001 which were converted into equal number of shares on 31.3.2002. The assessee sold the said shares between 23.12.2002 to 10.3.2003 in different lots. This shall result in long term capital gains as the shares shall be deemed to have been held for a period exceeding 12 months by the assessee." 49. Thus, respectfully following the aforesaid decision, we are of the considered view that in the present case, the date of acquisition of debentures, i.e. 27/06/1997, be considered as the date of acquisition of the equity shares for the computation of long-term capital loss. As a result, ground no.6, raised in assessee's appeal is allowed. 50. The issue arising in ground No. 7, raised in assessee's appeal, is pertaining to claim for additional depreciation under section 32(1)(iia) of the Act. 51. The brief facts of the case pertaining to the issue, as emanating from the re....
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....d before 31st March 2005, but installed after 31st March 2005 ?" 53. While deciding the aforesaid substantial question of law in favour of the taxpayer, the Hon'ble Gujarat High Court observed:- "7. Applying law laid down by the Hon'ble Supreme Court in the aforesaid decisions to the facts of the case on hand, if the submission on behalf of the Revenue is accepted, in that case it will lead to an absurd and unjust result and the purpose and object of granting the additional depreciation will be frustrated. If the contention on behalf of the Revenue is accepted, in that case, the assessee shall never get the additional depreciation as provided under Section 32(1)(iia) of the IT Act. In the facts and circumstances of the case, the twin conditions of the acquired and installed shall never be satisfied in a year and therefore, the assessee shall never get any depreciation. The purpose and object of granting additional depreciation under Section 32(1)(iia) of the IT Act is stated hereinabove i.e. to encourage the industries by permitting the assessee setting up the new undertaking/installation of new plant and machinery and to give a boost to the manufacturing sector by ....
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....legal issue, which can be decided on the basis of material available on record, we are of the view that the same can be admitted for consideration and adjudication in view of the ratio laid down by the Hon'ble Supreme Court in NTPC Ltd vs CIT: [1998] 229 ITR 383 (SC). Having heard the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee's own case in Grasim Industries Ltd (supra), vide order dated 14/12/2021, for the assessment year 2002-03, decided the similar issue in favour of the assessee, following the decision rendered in preceding years, by observing as under:- "40. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "The next grievance relates to the disallowance of royalty and interest on royalty u/s 43B of the Act treating it as tax. The issue is now settled by various orders of the Tribunal in....
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.... "37. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y.2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "28. In the additional ground, the assessee has also taken ground regarding sales tax exemption benefit being capital receipt not chargeable to tax. We find that a similar issue has been restored back by the Tribunal in A.Y. 2000-01 in assessee's own case to the file of the A.O. to decide after considering the decision of Special Bench in the case of DCIT vs. Reliance Industries Ltd., 88 ITD 273 (Mum). Respectfully following the said decision of the Tribunal, we restore this issue back to the file of the A.O. for deciding the same in the light of the findings of the Tribunal in assessee's own case for A.Y. 1999-2000 in ITA No. 5631/Bom/2002, wherein the Tribunal at para No. 26.1 on page 11 has restored the issue back to the file of the A.O. to decide the issue afresh after considering the decision in the case of Special Bench of t....
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....the same is to be excluded while computing the taxable income of the assessee in India. In this regard, reliance was placed upon the decisions of the coordinate bench of the Tribunal in assessee's own case in the preceding assessment years, wherein it was held that income of the foreign branch office is not taxable in India as per the relevant tax treaty. During the hearing, the learned Sr. Counsel, appearing for the assessee, submitted that sub-section (3) was inserted in section 90 of the Act vide Finance Act 2003, w.e.f. 01/04/2004, and therefore, the change in legal provision is not applicable to the year under consideration. As a result, Notification No. 91 of 2008, dated 28/08/2008 issued by the Central Government in the exercise of powers conferred by section 90(3) of the Act, whereby the meaning of the term "may be taxed" used in the tax treaty was clarified, is also not applicable to the year under consideration. On the other hand, the learned DR submitted that this issue be remanded to the file of the AO to examine whether taxes have been paid in Egypt. 65. Having considered the submissions of both sides, we find that as per Article 11(2) of the India- UAR (Egypt) DTAA....
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....ntracting State that is country of source then country of resident i.e., India is precluded from including the same income in India; * Thirdly, the Hon'ble Supreme Court in Azadi Bachao Andolan (supra), has approved the reasoning of R.M. Muthaiah (supra) in an entirely different context, therefore, it cannot be held that the Hon'ble Supreme Court has carved out any express law on the phraseology of "may be taxed"; * Fourthly, in P.V.A.L. Kulandagan Chettiar (supra's) the Hon'ble Supreme Court has specifically refrained from giving any such interpretation of "may be taxed" and affirmed the decision of High Court on a different reasoning and grounds. Thus, this decision does not carve out any express law on the phrase "may be taxed"; and * Lastly, the Hon'ble Supreme Court in Turquoise Investments & Finance Ltd. (supra) has not only confirmed the decision of R.M. Muthaiah (supra) but also decision of the M.P. High Court, wherein extensively reliance was placed on the decision of S.R.M. Firm (supra). Thus, this decision of the Hon'ble Supreme Court in a way has confirmed the entire reasoning of the S.R.M. Firm (supra) which, in our opinion, is slightly diffe....
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...., the additional ground filed by the assessee vide application dated 23/01/2013, is allowed. 68. In the result, the appeal by the assessee is partly allowed for statistical purposes. ITA no.5978/Mum./2004 Revenue's Appeal : A.Y. 2003-04 69. The Revenue, in its appeal, has raised the following grounds:- "1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs. 10,89,50,144/- made under clauses (b) to (f) of section 43B of the Income-tax Act, ignoring the provisions of section 43B of the Act as a whole and without taking into consideration a harmonious construction of various provisions of the said section. Further, the meaning of the word 'payable', as applicable to the provisions of section 43B(b), (c), (d), (e) & (f), was also ignored. 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs. 17,94,238/- towards contribution to local organisations, relying upon the CIT(A)'s orders in the assessee's own case for the AYrs. 1999-2000, 2001-02 & 2002-03 which have been contested by the department in further appeal before....
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....wed the same. 8. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to exclude the amount of sales tax and excise duty from the total turnover for the purpose of computation of deduction u/s.80HHC of the Act relying upon the decision of the Bombay High Court in the case of Sudarshan Chemicals Industries Ltd. (245 ITR 769) which has been contested by the department by way of SLP. 9. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that no amount of head office expenses can be apportioned to the units eligible for deduction u/s.80-IA, relying upon the orders of the CIT(A) in the assessee's own case for the AYrs.1996-97 to 2002-03, which have been contested by the department in further appeal before the ITAT. 10. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow deduction u/s.80-1A in respect of Vikram Power Unit, relying upon the orders of the CIT(A) in the assessee's own case for the AYrs 1998-99 to 2002-03, which have been contested by the department in further appeal befor....
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..... The appellant, prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 14. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 70. The issue arising in ground no.1, raised in Revenue's appeal, is pertaining to disallowance made under clause (b) to (f) of section 43B of the Act. 71. The brief facts of the case pertaining to the issue, as emanating from the record, are: In the computation of income, an amount of Rs. 27,55,08,330, has been considered as disallowance under section 43B(a) of the Act by the assessee. However, an amount of Rs. 10,89,50,144, was not considered as disallowance under section 43B falling under clause (b) to (f). The assessee contends that the amount of Rs. 10,89,50,144, which falls under clause (b) to (f) of section 43B of the Act and which is not payable as on 31/03/2003, cannot be covered by provision of section 43B of the Act. During the assessment proceedings, the assessee submitted that the issue has been decided in its favour by the coordinate bench of the Tribunal for the assessment year 1993-94 and the reference application filed b....
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....w us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in the relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.1, raised in Revenue's appeal is dismissed. 75. The issue arising in ground no.2, raised in Revenue's appeal, is pertaining to the disallowance of contribution to local organisations. 76. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee made contributions amounting to Rs. 17,94,238 to various local organizations located in and around the areas where the plants/offices of the assessee company are situated. During the assessment proceedings, the assessee submitted that such contributions are not in the nature of charity but are made purely for business consideration. It was further submitted that such contributions are necessary for maintaining a good relationship and to earn the goodwill of the local population which ensures ....
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....ged by the Department before the Hon'ble High Court on this issue. Respectfully following the order of the Tribunal and Hon'ble High Court in assessee's own case, we do not find any reason to interfere with the order of the ld. CIT(A)." 53. Respectfully following the above decision, we sustain the order passed by the Ld.CIT(A) and dismiss the Ground No. 2 raised by the revenue. We order accordingly." 79. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.2, raised in Revenue's appeal is dismissed. 80. The issue arising in ground no.3, raised in Revenue's appeal, is with regard to disallowance on account of rural development expenditure. 81. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the year under consideration, the assessee incurred expenditure of Rs. 64,21,953, towards rura....
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....in the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly." 84. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in the relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.3, raised in Revenue's appeal is dismissed. 85. The issue arising in ground no.4, raised in Revenue's appeal, is pertaining to disallowance made on account of exchange rate fluctuation loss. 86. The brief facts of the case pertaining to the issue, as emanating from the record, are: In the year under consideration, the assessee's annual accounts show exchange fluctuation loss of Rs. 83,68,690. The assessee was asked to give details and break-up of the loss. From the details, it was observed that there is an actual loss of Rs. 50,35,076, and the loss was due to the conversion of assets and liabilities on 31/03/2003, which is Rs. 33,33,614. In this regard, the assessee submitted that....
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....on to interfere with the order of the ld. CIT(A) deleting the disallowance made on account of exchange fluctuation loss on conversion of trading assets and liabilities on balance sheet date." 66. Respectfully following the above decision, we sustain the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly." 88. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.4, raised in Revenue's appeal is dismissed. 89. The issue arising in ground no.5, raised in Revenue's appeal, pertaining to the deduction claimed in respect of payments on account of Provident Fund (P.F) / Employees State Insurance Corporation Scheme (ESIC) made after the due date but within the grace period. 90. The brief facts of the case pertaining to the issue, as emanating from the record, are: During the assessment proceedings,....
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....l difficulty as well as the submission that the delay was not intentional or was not to defraud the revenue because by delaying the payments by a few days the assessee was not to get any benefit rather was putting it to the risk of serious penal consequences, as envisaged in sections 43B, 2(24)(x) read with the provisions of section 36(1)(va) which no prudent person would like to do, have got force. We, therefore, are of the opinion that in the light of our decision for liberal interpretation of the provisions of the relevant sections, as observed earlier, by following the decision of the Hon'ble Supreme Court, the delay in depositing the amounts in question being under a bona fide belief and for want of funds can be said to be due to reasonable cause and, therefore, there was no justification in disallowing the assessee's claim for payments of contributions towards, EPF, EFPF, Administrative Charges, Insurance Fund and ESIS by invoking the provisions of section 43B and in making addition of contribution on account of employee's contribution towards EPF, EFPF by treating the same as assessee's deemed income under section 2(24)(x) because the same should have been al....
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...., is pertaining to the disallowance of expenditure incurred for making advertisement films. 95. The brief facts of the case pertaining to the issue, as emanating from the record, are: For the year under consideration, the assessee incurred expenditure on advertisement film. During the assessment proceedings, the assessee was asked to furnish the details of expenditure incurred on the production of advertisement films. The assessee was also asked to explain as to why the expenditure incurred on the production of advertisement films should not be treated as capital expenditure. In response thereto, the assessee submitted that it incurred an expenditure of Rs. 95,24,532, on the production of advertisement films. The AO, vide order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and disallowed the expenditure on the production of advertisement films by observing as under:- "15.3. The submissions of the assessee was duly considered but it was found unacceptable. Assessee is not in the business of production of feature films, rather the films have been used for advertisement. The airtime on T.V. or radio is allowed as expenditure in ....
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....old film. Thus, it is clear that the production of ad film does not involve any advertisement at all. Assessee is not in the business of films and sale thereof. Therefore, the cost of production of ad film cannot be held to be revenue expenditure for assessee. By incurring this expenditure, assessee has acquired a capital asset, which can be exploited for the business purpose of assessee, namely advertisement: 15.5. In this regard, Hon'ble Bombay High Court had an occasion to consider a similar case in the case of CIT vs. Patel International Films Ltd. (1976) 102 ITR 209 (Bom.). In this case the assessee company which was engaged in processing and printing of movie films, processing and printing laboratory. Subsequently, it purchased a film processed in the laboratory to serve as a model for exhibition to induce confidence in its customers by way of advertisement and claimed the amount spent on the purchase of film as business expenditure. It was held in this case that the asset was not the stock-in-trade of assessee and it had not been purchased for purposes of exhibition as normally understood. The asset that was acquired by the assessee was a capital asset to be use....
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....imilar issue has been decided by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd., 124 ITR 1 (SC). Accordingly, we do not find any infirmity in the order of the ld. CIT(A) deleting the disallowance by observing that advertisement film was made only for advertisement and its useful life is very short and such films do not add to the capital structure of the company." 95. Respectfully following the above decision, we do not find any reason to interfere with the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. We order accordingly." 98. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in relevant assessment year. This issue is recurring in nature and has been decided in favour of the assessee in the preceding years. Therefore, respectfully following the judicial precedent in assessee's own case cited supra, ground no.6, raised in Revenue's appeal is dismissed. 99. The issue arising in ground no.7, raised in Revenue's appeal, is pertaining to the disallowance of professional fees paid in connection with software development and imp....
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....business.?" 2. As regards the first question, ITAT relying upon on its order in the assessee's own case relating to Assessment year 2001-02 held that the software expenditure was a revenue expenditure. The appeal filed by the Revenue for the assessment year 2001 and 2002 has been dismissed for want of removal of office objections and thus the order passed by the ITAT for the Assessment year 2001-2002 has attained finality. Moreover, the Tribunal in its order relating the assessment year 2001-02 has allowed expenditure as revenue expenditure by recording thus: "7. When we apply this functional test suggested by the Special Bench of the Tribunal, we find that impugned software does not form part of the profit making apparatus of the assessee and hence the same is to be disallowed a revenue expenditure. We hold so because we find that the business of the assessee company is that of manufacturing of telecommunication and power cable accessories and trading in oil retracing system and other products and impugned software is an Enterprises Resources Planning (ERP) package and hence it facilitate the assessee's trading operations or enabling the management to con....
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....fice was deducted from the eligible profits of respective units. 108. The learned CIT(A), vide impugned order, directed the Assessing Officer to exclude the allocation of Head Office expenses to the respective units claiming deduction under section 80IA of the Act by following the decision rendered in assessee's own case in the preceding years. Being aggrieved, the Revenue is in appeal before us. 109. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench, vide order dated 14/12/2021, passed in assessee's own case for the assessment year 2002-03, while following the decision rendered in the preceding year, decided the similar issue in favour of the assessee, by observing as under:- "109. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "54. The issue in ground No. 18 pertains to the apportionment of hea....
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....observing as under:- "113. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee for the A.Y. 2001-02 in favour of the assessee. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 4083/Mum/2003 dated 22.10.2014 held as under: - "Ground No. 19 of Revenue's appeal pertains to deduction u/s 80-IA of the Act in respect of Vikram Power Unit amounting to Rs. 3,58,74,158/-. 57. The ld. CIT(A) has dealt with this issue at page 16-17, para 24 of his order. We found that the issue has been decided by the Tribunal in assessee's own case in its favour in assessment years 1998-99 to 2000-01. Furthermore, the Department is not in appeal against the Tribunal order on this issue before the Hon'ble High Court for A.Y. 1998-99. Respectfully following the order of the Tribunal, we do not find any infirmity in the order of the ld. CIT(A) for allowing deduction u/s 80IA of the Act in respect of Vikram Unit amounting to Rs. 3,58,74,158/-." 114. Respectfully following the above decision, we do not find any reason to interfere with the....
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....ee with the Government of India. The assessee further submitted that the income offered for tax by the assessee includes income from the rail system and the assessee has the option to claim deduction under section 80-IA of the Act for any ten consecutive years out of twenty years beginning from the assessment year 2000-01. Therefore, the assessee has opted for claiming deduction under section 80-IA from the assessment year 2003-04 onwards. The assessee further submitted that it fulfils all the conditions as are provided in sub-section (4) and has also filed along with its return of income Form 10CCB duly audited by an accountant as per the provisions of section 80-IA(7) of the Act. 118. The AO, vide order passed under section 143(3) of the Act, did not agree with the submissions of the assessee and held that the rail system of the assessee is not a profit centre but it is a cost centre and it is part of cement unit situated at Rawan. The AO further held that the assessee does not maintain separate books of account for the rail system. All the assets of the rail system have been acquired by the assessee at different point in time and were capitalised with the different block of a....
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....uthority within the meaning of section 80-IA (4) applicable for the financial year 1999-2000 of a date prior to September 1999. The learned DR further submitted that the assessee has constructed a private siding for captive usage which cannot be termed as a public infrastructure facility within the meaning of section 80-IA(4) of the Act and therefore, the assessee is not eligible for claiming deduction under section 80-IA of the Act as applicable for the assessment year 2000-01. The learned DR also submitted that no agreement was entered into by the assessee as required under section 80-IA(4) of the Act as applicable for the financial year 1999-2000. The learned DR also filed a written submission on 06/06/2023, wherein the arguments are summed up in para 15 as under:- "15. To sum up - a. It is the undisputed fact that the assessee made operational alleged rail system from Sep. 1999. b. The income offered for tax by assessee company includes income from rail system. The assessee has option to claim deduction u/s 80-IA for any consequent assessment years out of 20 years beginning from AY 2000-01. The assessee has opted for claiming deduction u/s 80-IA from ....
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.... appellant company duly entered into an agreement with Southern East Railway, which is a part of Government of India. It was submitted that there was option available u/s 801A with the appellant to claim deduction for any 10 consecutive years at its own choice. The appellant has opted for claiming the deduction from AY2003-04 onwards. The income offered for tax by the appellant includes income from Rail System. 16.5 The appellant further submitted that the Rail System is a 'Profit Centre'. The Rail System is engaged in business of providing transportation facility to the cement plant, profit of which is embedded in the profit of the appellant company as a whole. By developing this infrastructure facility, there has been a saving in transportation cost and all over profits of the Company has increased due to such savings. All the businesses of the appellant company are interconnected. interlaced and there is common management, funds and control. Profits of the Rail System are embedded in the overall profit of the company. In support of contention that treatment of a transaction in books of account cannot govern the tax statement, the appellant relied on the decision....
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....ny which is a company registered in India. The appellant has entered into an agreement with the Central Government for operating and maintaining the new infrastructure facility. It has started operating and maintaining the infrastructure facility after 1st April 1995. 16.10 The appellant submitted that there is no basis on which the Assessing Officer has mentioned that the legislature's intention was to cover organisations like Konkan Railway, Delhi Metro Corporation, etc. There is no such specific mention in the Act. The appellant relied on the decision of the Bajaj Tempo Ltd vs CIT 156 ITR 188(SC). 16.11 Regarding maintenance of separate books of account, the appellant submitted that there is no such condition for grant of tax holiday benefit. Although separate books of account are not maintained, profit of the eligible business has been computed based on the memorandum books of account and other details maintained by the appellant. The Balance Sheet and Profit & Loss account of the eligible business has been audited by the Chartered Accountant. The appellant has filed along with its Return of Income the form No. 10CCB, duly audited, as per the provisions of....
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....s subsidiary company in UltraTech cement Ltd v/s DCIT, in ITA No. 1412/Mum./2018, etc., vide order dated 14/12/2021, by the coordinate bench of the Tribunal. 124. In the assessment order, the AO held that in the present case, the rail system does not have any agreement with the authorities mentioned above. On the contrary, the learned DR though agreed that the assessee has entered into an agreement with South-Eastern Railway administration on 10/04/2000 for the Rail System at Rawan District, Raipur, however, submitted that the same is subsequent to the commencement of operations on 25/09/1999. The learned DR also submitted that since the infrastructure facility was made operational during the financial year 1999-2000, therefore, the claim of benefit under section 80-IA for the alleged infrastructure facility is to be examined as per the provisions of the Act relevant for the financial year 1999-2000. The learned DR also submitted that as per the provisions of section 80-IA (4)(i)(b) of the Act, as applicable for the financial year 1999-2000, such undertaking was required to be transferred to the Central Government, State Government, local authority or such other statutory body. ....
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....rity or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995:" 126. We find that all the aforesaid conditions are satisfied in the present case for claiming deduction under section 80-IA of the Act. As regards the submission of the learned DR that the assessee has constructed a private siding for captive use, we find that similar submission was rejected by the coordinate bench of the Tribunal in the case of assessee's subsidiary company in UltraTech cement Ltd (supra), vide order dated 14/12/2021. Further, even though the agreement was entered on 10/04/2000, and the operations commenced in September 1999, it is pertinent to note that the parties to the agreement have honoured the said agreement, and the rights granted therein were not revoked for this reason and the said agreement was still valid in the year under consideration. In view of the aforesaid findings and respectfully following the decision of the coordinate bench cited supra, we find no ....
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....fice was submitted. I find that total funds available as on 31.3.2003 were of Rs. 3597.71 crores. Investment made in shares of other companies as on 31.03.2003 was of Rs. 1796.05 crores. Interest expense for the financial year ended on 31.03.2003 was Rs. 77,50,647/-. Therefore, the proportionate disallowances out of interest are worked out at Rs. 38,69,281/- i.e. Rs. 1796.05 / 3597.71 x 77,50,647/- = 38,69,281/- and the same is disallowed as expenses incurred for earning dividend income while computing deduction u/s 80M of the I.T. Act." 129. As a result, the AO reduced the deduction under section 80M of the Act to Rs. 31,92,65,173. The learned CIT(A), vide impugned order, following the judicial precedents in assessee's own case deleted the aforesaid disallowance made by the A.O. on an estimate basis. Being aggrieved, the Revenue is in appeal before us. 130. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal, vide consolidated order dated 17/03/2004, while deciding a similar issue in assessee's own case in Grasim Industries Ltd. v/s DCIT, ITA no.7593/Mum./ 1997 (for A.Y. 1990-91), ITA....