TaxTMI 
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2023 (11) TMI 336
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....nd are being disposed off by a single consolidated order for the sake of convenience. 3. At the outset itself it was pointed out by the ld. Counsel for the assessee that the majority of the issues raised in all appeals before us have already been adjudicated by the ITAT in the case of the assessee in the immediately preceding year, i.e. AY 2005-06, in its order passed in ITA Nos.1747/Ahd/2009 and 1657/Ahd/2015 dated 30.11.2022. Copy of the order was placed before us. A tabular detail was also filed before us pointing out the relevant paragraphs of the ITAT order of the immediately preceding year where the different issues raised were dealt with by the ITAT. Appeal pertaining to Assessment Year 2006-07 was first taken up for hearing. ITA No. 830/Ahd/2011 for AY 2006-07 4. Ground No.1 - 1.2 raised by the assessee, it was pointed out, related to the disallowance of project expenses treating them as capital expenditure. The said grounds raised in Ground Nos. 1 to 1.2 read as under:- "1. The Learned C.I.T. (A) has grossly erred in law and on facts in confirming disallowance of revenue Expenditure incurred on Lignite project at Bhavnagar of Rs. 3131748 on Lignite project at Tadkesh....
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....xisting industrial undertaking. The ld.CIT(A), we have noted, has confirmed, disallowance of project expense, as made by the AO in this regard, rejecting the assessee's contentions that it was a vertical integration of the existing business of the assessee, stating that generation of electricity requires various other machineries and equipments which are admittedly not manufactured by the assessee, and therefore, the power project cannot be said to be expansion of the assessee's existing business. The relevant findings of the Ld.CIT(A) at para 5.2 of his order is as under: "5.2 I have considered the facts of the case and the submissions of the Ld.A.R. carefully. It is seen that the Akrimota Power Project is entirely a new project which is being set up by the appellant. During the relevant period it was in the process of construction and had not started the generation of electricity. The Ld.A.R's claim that the project is an expansion of appellant's existing business is breft of reasoning. The appellant is engaged in excavation of Lignite which is one of the various inputs used for generation of electricity. Further, the generation of electricity requires various other mac....
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....that the project under reference was entirely a new project and the construction thereof was not completed during the relevant period. Further the Ld.A.R. has not brought on record supporting facts to show that the project was an expansion of appellant's existing business. It is a well settled position of law that the expenditure incurred on interest for the money borrowed for setting up a new industrial undertaking is not deductible before its completion. In these circumstances, the A.O. has rightly rejected the appellant's claim for deduction under the provisions of sec.36(1)(iii) of the Act." The claim of depreciation was also disallowed with respect to machineries employed in setting up these projects for identical reason. 14. We shall first deal with the project expenses disallowed vis-àvis power projects and two lignite projects and also claim of depreciation on assets visà- vis these projects, all of which are disallowed for the same reasons, that were all treated as new undertaking of the assessee and not an expansion of existing business, since these projects had not commenced operations. 15. The proposition of law with regard to identifying whe....
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....) of the Act. 8. In the instant case, the Tribunal has returned the finding that there is a unity of control and management, in respect of the ferro alloys plant as well as the sugar plant and there is also intermingling of funds and dove7 tailing of businesses. In these circumstances it cannot be said that the respondent/assessee had not commenced its business and hence, interest would have to be capitalized in terms of the ratio of the judgment in the case of Challapalli Sugars Ltd (supra). If that is not so then, the only other conclusion that is possible on these facts, is that, the interest was paid by the respondent/assessee on borrowed capital for the purposes of business. That being the case, in our view, the Tribunal correctly allowed the financial charges i.e., interest paid to the extent of Rs 3,50,83,472/- as deduction under Section 36(1)(iii) of the Act. 9. These being the findings of fact, we do not consider it fit to interfere with the impugned judgment of the Tribunal. Accordingly, we hold that there is no question of law, much less a substantial question, which arises for consideration. In the result, the appeal is dismissed." 16. Now, having said so, we find....
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....enditure incurred prior to the commencement of the business were treated as not allowable. In these facts and circumstances, the decision was rendered by the Hon'ble Apex Court holding that the different nature of the business was not a determinative factor for the purpose of deriving whether it is a new business or expansion of exiting business only. On the contrary, it is the unity of management and control and handling of funds which would determine the same. In the case of these projects, the issue has certainly not been examined from this angle. 18. We have also noted that the impugned appeal before us relates to Asst.Year 2005-06 which is more than 17 years old. No purpose, we find, will be achieved by restoring back to the file of the Revenue authorities for deciding this issue on this parameter. On the contrary, interest of justice could be well served by examining the facts from audited annual accounts of the impugned year, which have been placed before us in the paper book which clearly reveal the fact that all these projects were being undertaken under the same management with common control and funds, and there is nothing in the audited balance sheet disclosing any fa....
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.... cases are similar." 8. The learned Counsel for the assessee pointed out that the amount paid to the Sales Tax Authority had consistently been stated to be in the nature of interest for late payment of sales tax as per Section 47(4)(a) of the Gujarat Sales Tax Act. This was stated before the Assessing Officer which finds mention at paragraph no. 5 of the Assessment Order and was reiterated before the learned CIT(A), which finds mention at paragraph No. 5.2 of the order of the ld. CIT(A). He pointed out that the Hon'ble Apex Court in the case of Lachmandas Mathuradas Vs. CIT, reported in [2002] 122 Taxman 828 (SC), had held interest on arrears of sales tax to be compensatory in nature and allowable as deduction in computing profits of the business. 9. The ld. DR, however, relied on the order of the ld. CIT(A) drawing our attention to his findings to the effect that "after insertion of the Explanation to Section 37 of the Act ,which was inserted by Finance Act, 1998, the payment of interest due to late payment of taxes cannot be allowed as a deduction because by any stretch of imagination it cannot be said that it is a public policy of the Government to encourage delayed payment of....
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....iod expenses crystalized during the year and directing him to allow all such prior period expenses, was upheld by the ITAT. Our attention was drawn to paragraph Nos. 26 to 29 of the order as under:- "26. Ground No.4 raised by the assessee is against order of the ld.CIT(A) upholding rejection of claim of prior period expenses amounting to Rs. 67,37,949/-. The ground reads as under: 4. In facts and circumstances of the case, Your Appellant most respectfully submits that the Ld. A.O. erred in rejecting claim of Rs. 67,37,9497- being the amount of prior period expenses even through the said expenditure had, materialized and Crestaiised during this Financial Year and Ld. CIT (A) further erred in rejecting the claim by sending / restoring the matter back on the file of Id. A.O. Your Appellant further submits that both the authorities have failed to follow Hon. ITAT's Judgment in appellant's own case in prior years, in appeals for A.Y. 1989-90 & A. Y. 1995-96. 27. As transpires from orders of authorities below the assessee's claim of prior period expenses had been disallowed by the Assessing Officer (AO) since the assessee could not justify his claim to the said expenses dur....
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....fore us, either on facts or on law. In view of the same, we restore this issue back to the Assessing Officer to adjudicate the same afresh in accordance with the direction of the ITAT in its order passed for AY 2005-06 (supra). Grounds of appeal Nos. 3-3.1 are allowed for statistical purposes. 15. Ground No.4-4.2, it was pointed out, related to the issue of disallowance made of expenses relating to the earning of exempt income, as per the provisions of Section 14A of the Act. The said grounds read as under:- "4. That the Learned A.O. has erred in making an addition of Rs. 5929382/- U/s.14A of the Act, and Learned C.I.T.(A) has further erred in directing the Learned A.O. to make the disallowance U/s.14A as per Rule 8D, even though the Rule 8D becomes effective from 24.03.2008. 4.1 That both the lower authorities have failed to appreciate the facts that Investment in Tax Free Bonds, Equity Shares & Mutual Funds when made were out of own Capital and free Reserves, as there was no borrowed funds when Investments were made, and that the nexus betweenthe Investments & borrowed funds was not established, and thus has erred in applying Rule 8D, even when the Rule 8D is applicable w.e....
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....e into existence by IT Rules 2008 Dated 24/03/2008. Your Appellant further submits that both the lower authorities have failed to appreciate the facts that investments made in Tax Free Bonds, Equity Shares or Mutual Funds were out of own Capital & free .reserves and not out of borrowed funds." 57. As transpires from orders of the authorities below, the assessee during the impugned year had earned dividend income to the tune of Rs. 65,35,060/- and interest on tax free bonds of Ahmedabad Municipal Corporation of Rs. 1,26,20,421/-. The assessee had shown investment of Rs. 71,71,47,000/- as on 31.3.2005. In response to the query raised by the AO asking details of interest bearing funds utilized for investment in exempt income, the assessee filed reply stating that the investments were out of own interest free funds of the assessee. The AO however worked out disallowance of interest at Rs. 77,487/- and administrative expenses of Rs. 22,72,560/-accordingly disallowing of a sum of Rs. 23,50,047/- under section 14A of the Act. 58. Before the ld.CIT(A), the assessee contended that it had deployed its own interest free funds for the purpose of making impugned investment which were more t....
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.... Development Corpn 37 taxmann.com 254, the Hon'ble Gujarat High Court has held that department is expected to establish a nexus between interest bearing funds borrowed and those invested by the assessee respondent and only when it was shown that interest free funds were not available with the assessee, that question would arise of fastening tax liability on assessee. 60. The ld.DR, on the other hand, relied on the order of the ld.CIT(A). 61. We have heard both the sides. Vis-à-vis the issue of disallowance of expenses under section 14A of the Act, we agree with the ld.counsel for the assessee that invocation of Rule 8D is applicable for the purpose of computing the amount of expenditure to be disallowed only w.e.f. Asst.Year 2007-08, when said Rule were brought into force and section 14A of the Act also specifies the invocation of the said rules. This proposition was laid down by the Hon'ble High Court in the case of Godrej Boycee (supra) also. Further it is a settled law that where sufficient interest free funds are available the presumption is that the investments have been made out of such funds calling for no disallowance of interest under section 14A of the Act. Hon....
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....lent or there was a consideration other than business or is of a personal nature, the expenditure cannot be disallowed. Asian Tools & Plastics Co. Ltd. Vs. C.I.T. (551 ITR 392) not followed. The mere fact that it is also for instance motivated by Charity would not justify disallowance. Godavari Sugar Mills Vs. CIT (191 ITR 311) is also not followed." 20. The facts relating to the issue are that contributions made by the assessee to Index B and to Govt. of Gujarat for- celebrating Gujarat Gaurav Day and Sharad Utsav were disallowed by the AO treating them to be non-business in nature, rejecting assesses contention that these expenses were meant for advertisement of the assesses business. Ld.CIT(A) confirmed the disallowance finding that the assessee was unable to substantiate its explanation that these expenses were by way of advertisement expenses. He further noted that these expenses had been incurred on the specific request of the concerned authorities of Government of Gujarat and/ or were in the nature of donations. Therefore he held that they were not incurred for the business of the assessee and rightly disallowed by the AO. 21. The ld. Counsel for the assessee pointed out t....
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....fit it had derived from the such expenditure. The relevant findings of the Ld.CIT(A) at page 38-39 para 20.2 of his order is as under: "20.2 I have considered the facts of the case and the submissions of the Ld.A.R. carefully. It is seen that the Ld.A.R. neither during the assessment proceedings nor during the appellate proceedings filed any details to establish that the impugned expenses were incurred for the purposes of the business of the appellant. It is also clear from the submissions that how such expenses have helped the appellant in its business of mining during the relevant period. Further it is also not clear the laboratory stated to be set up from the funds provided by the appellant were used by it for its business. If the said laboratory was used during the relevant period, then what kind of reports were obtained therefrom by the appellant. It has not come out in the submissions of the Ld.A.R, therefore, under these circumstances the A.O. has rightly disallowed the claim of the appellant for expenses amounting to Rs. 53,84,000/-. In view of this I do not find any justification to interfere in the findings of the A.O. accordingly. As a result, the ground taken by the a....
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....xpenditure under section 37(1) of the Act." 22. The Ld.DR however relied on the order of the Ld.CIT(A) and pointed out that the facts in the present case were different from that in A.Y 2005-06 and the decision of the ITAT in that year could not be followed therefore for deciding the present issue. 23. We have heard both the parties, have gone through the order of the authorities below. We are not impressed with the contention of the Ld.Counsel for the assessee that the issue of allowability of payments made by the assessee to Index B and govt. Of Gujarat for celebrating Gujarat Gaurav Day and Sharad Utsav is squarely covered by the order of the ITAT in the A.Y 2005-06. As rightly pointed out by the Ld.DR,the facts in A.Y 2005-06 were completely different . The assessee in the said case was found to have made payment to Office of Commissioner of Geology & Mining, Gandhinagarfor setting up of laboratory for research and testing in the field of mining, which was found to be for the benefit of assesses business of mining minerals.In this backdrop of facts the payment made to the Office of Commissioner of Geology & Mining, Gandhinagarwas held allowable as incurred for the business of....
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.... We are in complete agreement with the Ld.CIT(A) that these expenses are nothing but donations made by the assessee. These expenses have not been incurred for the purpose of business of the assessee. They are merely contributions made to these entities. That some benefit would accrue to the assessee is only incidental. The purpose of incurring the expenditure is definitely not for the business of the assessee. The same have therefore, we hold, rightly been disallowed by the Ld.CIT(A). the facts being found to be different from A.Y 2005-06, the contention of the assessee that the issue is covered by the order of the ITAT in A.Y 2005-06 is rejected. Grounds of appeal Nos.5 & 5.1 are accordingly dismissed. 25. Ground Nos. 6 & 6.1 relates to disallowance of expenses for non deduction of tax at source in terms of Section 40(a)(ia) of the Act . The said grounds read as under:- "6. That the Learned C.I.T. (A) has erred in confirming the addition of Rs. 156036/-being the amount paid to ATIRA U/s.40(a)(ia) as Tax was not deducted and has failed to appreciate that ATIRA is an Approved Scientific Research Association wholly exempt from Income Tax under section 10(21) read with section 24(....
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....DS on the above amount does not arise at all. Since there is no requirement of TDS, question of disallowance under section 40(a)(ia) for non deduction of tax also does not arise. Moreover, as seen from the correspondence with the Ministry of Finance by the assessee-company way back in December, 1996 and February, 1997 it can be noticed that the Central Board of Direct Taxes also insisted on verifying the deployment of funds and the assessee vide the letter dated February 7, 1997 enclosed the auditor's certificate certifying the attached statement showing the deployment of funds equivalent to US$ 40.22 million and corresponding invoices for import of capital goods for the hot rolled coils project of the company out of euro convertible bonds issue of US$ 75.00 million. They also placed on record the approval of the Reserve bank of India for the purpose of financing the put option under euro convertible bonds issue of USD 75 million. After examining the relevant certificates the Central Board of Direct Taxes Foreign Tax Division vide letter dated March 12, 1997 granted the approval under section 10(15)(iv)(c). Therefore, the contention of the assessee now made at the time of payme....
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....the assessee has pointed out that this issue was linked to the issue in Ground No.1 raised by the assessee wherein the expenses incurred in these projects were treated as capital in nature and disallowed. He pointed out that the income earned accordingly was treated as income from other sources since the projects were yet to commence operation. 30. The ld. Counsel for the assessee pointed out that this issue was dealt with by the ITAT in the immediately preceding year, i.e. AY 2005-06 vide order dated 30.11.2022, cited by the ld. Counsel for the assessee, in paragraph nos. 19 & 20 of the order holding the income to be in the nature of income from business. The relevant findings of the Tribunal for AY 2005-06 in ITA No. 1747/Ahd/2009 read as under:- "19. In view of the above, we hold that all three projects i.e. Akrimota Power Projects, Lignite projects at Bhavnagar and Tadkeshwar are nothing but the continuation of existing projects of the assessee only, and all its expenses incurred therefore in the setting up of these, prior to the commencement of the business in these projects, are to be treated as revenue expenses. Accordingly, the claim of project expenses vis-à-vis ....
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....oid taxation by claiming depreciation. 35. The ld. Counsel for the assessee submitted that identical issue was dealt with by the ITAT in assessee's own case for the Assessment Year 2005- 06 vide order dated 30.11.2022 at paragraph Nos. 36-38 of the order holding that the assessee was entitled to claim depreciation on leased assets. Our attention was drawn to paragraph Nos. 36 to 38 of the order which reads as under:- "36. We have heard the rival contentions and gone through the orders of the authorities below as also the case laws referred to before us. After considering the entire facts relating to the issue, we are perplexed with the apparently contradictory stand taken by the Revenue on the impugned issue before us. As is evident, the Revenue had held the lease and buy back arrangement of the assessee with GSRTC to be ingenuine and colorable device while denying claiming of depreciation thereon of the assessee holding that the assessee was not the owner of buses allegedly leased to GSRTC.Having so found the lease and buy back arrangement to be ingenuine the Revenue has thereafter subjected to tax lease rent from the same arrangement on accrual basis as opposed to the assess....
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....de on account of depreciation of leased assets of Rs. 69,58,066/-. Ground of appeal No.8 is allowed. 37. Ground No. 9 pertains to disallowance of claim of expenditure incurred for excavation of river diversion amounting to Rs. 3,28,32,791/- treating it to be capital in nature, which in turn was upheld to the extent of 80% by the ld.CIT(A). The said ground reads as under: "9. In Facts and circumstance of the case, Your Appellant respectfully submits that LD AO has further erred in disallowing claim of Rs. 32832791/- in respect of expenses incurred for excavation of River Diversion holding that the Expenditure was incurred giving benefit of enduring nature and hence treated as Capital Expenditure and rejected the claim and Hon. CIT(A) further erred in holding that the said expenditure was for a continuous benefit and thereby directing Ld. AO to allow only 20% of such expenditure in each of the five consecutive years. Your Appellant most respectfully submits that the Ld. AO and also Hon. CIT(A) have failed to appreciate the fact that the said expenditure was incurred for removal of disadvantage or obstacle in its regular, mining business and therefore it was, wholly allowable as....
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....ital account. The ratio settled by the Hon'ble apex court in the case of Empire Jute(supra) will therefore squarely apply in the facts of the present case. Accordingly therefore, we hold, that the impugned expenditure is to be treated as revenue in nature. 55. The decision of the Hon'ble Bombay High court in the case of Taparia Tools (supra) relied upon by the Ld.CIT(A) while holding the claim of expenditure to be on capital account ,has been pointed out by the Ld.Counsel to have been reversed by the Hon'ble Supreme Court. The Ld.DR did not controvert the same. The Decision of the Hon'ble apex court in the case of Madras Industrial Investment Corp.(supra) also relied upon by the Ld.CIT(A) is we find distinguishable on facts where the issue before the Hon'ble Apex Court was allowability of discount on issue of debentures, which it was held was to be allowed proportionately over the period of holding of the debentures. The issue therefore did not relate to capital/revenue expenditure. This issue was also there in Taparia Tools(supra) where the Hon'ble Bombay High Court held likewise but the said decision was reversed by the Hon'ble apex court subsequently . In view of the above w....
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....Rs. 66,53,47,522/- was denied on the ground that the project commenced operations in October 2005, though assessee claimed commencement in March 2005 when trial runs were done which contention was rejected by the authorities below. 44. The claim to additional depreciation of Rs. 67,24,96,232/- on Plant and Machinery deployed in the said Akrimota project was denied holding that Power did not qualify as article or thing manufactured by the assessee to make it eligible for additional depreciation. 45. At the time of hearing, the ld. Counsel for the assessee submitted that this issue was dealt with by the ITAT in assessee's own case for the immediately preceding assessment year, i.e. Assessment Year 2005-06, vide paragraph Nos.21-25 of the order dated 30.11.2022 wherein the ITAT held as under:- "21. Now we take up the issue denial of claim of depreciation in all the projects. Depreciation on assets used in implementation of the project of Lignite extraction at Bhavnagar and Tadkeshwar, having also been denied finding the projects to be new and in which business activity was yet to commence, we delete the disallowance of depreciation with respect to these projects since we have he....
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....e beard both the parties and we find that the assessee's case for claiming depreciation rests entirely on the fact that it had conducted trial run of its machinery during the impugned year. The Revenue does not dispute the allowability of claim of depreciation on the machinery on the basis of trial run conducted. The contention/basis for denying depreciation is refuting the claim of any trial run conducted by the assessee. We have noted from the arguments and submissions made before us, and even from the order of the ld.CIT(A) that the assessee had substantiated carrying on trial run, by pointing out that the power generated during the trial run had been sold to GEB which was evidenced by copy of invoices issued by the GEB, meter reading confirmed by the GEB and fact that power generation from the plant being reported in the newspaper. All these evidences filed by the assessee having been dealt with by the authorities below, they have clearly chosen to ignore all these very valid evidences. On the contrary, they have arrived at a finding of no trial run for generation of power according to their own whims and fancies ,that there is a huge gap between trial run and production of p....
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....diately preceding year in ITA No. 1747/A/2009 A.Y 2005-06, at para 35 of the order, ruling in favour of the assessee as under:- "35. He also drawn to para 15-15.5 of the order taxing lease rental and interest on delayed rentals on accrual basis rejecting assesses claim of accounting for on receipt basis as under: "15. The ground No.8 of appeal is regarding taxing of interest and lease rent receivable amounting to Rs. 8,93,10,033/-. The A.O. from the perusal of Directors report found that the statutory auditors of the appellant had observed that "certain items of income are accounted on cash basis as stated in accounting policy No.1(A) in Schedule XVI which is not in accordance with Accounting Standard AS 9 "Revenue Recognition" ". In continuation of such note the A.O. found that the appellant had not accounted for lease rental amounting to Rs. 5,37,26,160/- and delayed interest thereon amounting to Rs. 3,27,89,873/- receivable from G.S.R.T.C. during the relevant period. He further found the appellant did not account for the interest accrued on loan to GIIC amounting to Rs. 27,94,000/-. In response to queries raised by the A.O. in this regard, it was explained on behalf of the a....
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....rovided relying on the on the decision of Hon'ble Supreme Court in the case of Uco Bank v CIT 237 ITR 889 . The Learned assessing officer has not accepted the contention of your appellant and has made the addition of Rs. 27,94,000/-." 15.3 I have considered the facts of the case and the submissions of the Ld.A.R. carefully. It is an admitted fact that the appellant is following mercantile system of accounting. The provisions of sec. 145 of the Act are very clear in this regard after its amendment w.e.f. 1.4.1997, that an assessee has to follow either cash system of accounting or the mercantile system of accounting. The hybrid system of accounting is not permissible now. Under the mercantile system of accounting the income has to be recognized on accrual basis only. It may be pointed out that the appellant's main plea regarding non inclusion of impugned income is that M/s.G.S.R.T.C. was not in a position to pay its due. However, such plea is against the facts which emerged after close analysis of the affairs of the appellant company made by the A.O. The appellant in the F.Y.2005-06 itself debited the accounts of G.S.R.T.C. on 31.3.2006 with a amount of Rs. 11.83 crore on a....
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....assessment year 1978-79. The Tribunal held that what was waived by the assessee was income which had already accrued to it according to the method of accounting regularly employed by it. On a reference: Held, that the taxability is attracted not only when income was actually received but also when it accrued. Income accrues when it falls due, that is to say when it becomes legally recoverable, irrespective of whether it is actually received or not and accrued income is that income which the assessee has a legal right to receive. Therefore, the income by way of interest, waived by the assessee, was includible in its total income for the assessment years 1977-78 and 1978-79." 15.5 The reliance placed by the Ld.A.R. on the decision of Hon'ble Supreme Court in the case of UCO Bank Ltd 237 ITR 887 is of no help to the appellant as same has been rendered in respect of the sticky advances in the banking business. Therefore, in view of the above, the ground taken by the appellant is hereby dismissed." He further drew our attention to para 18-18.3 of the order denying claim of bad debts on account of unrecoverable lease rentals as under: "18. The 11th ground of appeal is directe....
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....is also placed on the decision of the Hon'ble Gujarat High Court in the case of Dhall Enterprise and Engineers Pvt. Ltd Vs. CIT 295 ITR 481 has held that "under clause (vii) of section 36(1) of the Income-tax Act, 1961, the requirement for allowing deduction on account of bad debt is that the bad debt should be written off as irrecoverable. Merely debiting the amount is not sufficient. The requirement is that the assesses should also prove that the debt has become bad in that particular year."(emphasis supplied). 18.3 Therefore, the appellant has to prove two vital points for claiming a deduction u/s.36(1)(vii) with regard to bad debt namely the debt has become bad, and it became bad during the relevant period. The debt claimed by the appellant in respect of G.S.R.T.C does not fulfill the conditions as laid down by the Hon'ble Gujarat High Court in the case of Dhall Enterprise and Engineers Pvt. Ltd. In view of this the appellant's claim of bad debt amounting to Rs. 11,75,96,456/- is hereby Rejected. The disallowance made by the A.O. is therefore, hereby confirmed." 51. Ld.DR fairly agreed that the issue was decided in favour of the assessee in the immediately preced....
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....tals .This is evident from the fact that the assessee had written off lease rentals of earlier years unrecovered of Rs. 11.75 Crs. Therefore even as per the accrual system of accounting the assessee was not required to account for lease rentals which were not certain of recovery and the method therefore adopted by the assessee of accounting for such income on cash basis was, we hold, justified . The addition made of Rs. 8,93,10,033/- on account of lease rental income and interest on delayed rentals accordingly is directed to be deleted. 41. Taking up now the last aspect of claim of bad debts with respect to lease rentals written off amounting to Rs. 11,75,96,450/-, we find that the same was denied for the reason that the assessee had failed to establish that the debts had become bad. The facts on record however we find are to the contrary. As discussed above the assessee in the impugned year had not accounted for lease rental income of approx. 5.36 Crs for the reason that its recovery was not possible as GSRTC was not paying up the said amount. Along with the same there was interest accrued on delayed lease rentals totaling 3.28 crs which again the assessee had not accounted fo....
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....see amounting to Rs. 60,00,000/-. The ld. Counsel for the assessee, at the outset itself, pointed out that the Hon'ble Karnataka High Court in the case of PCIT Vs. J.J. Glastronics (P.) Ltd., reported in [2022] 139 taxmann.com 375 (Karnataka), has held that the amounts disallowed under Section 14A of the Act could not be added to net profit while computing book profit under Section 115JB of the Act. He further pointed out that ITAT, Mumbai Bench in the case of Rashtriya Chemicals & Fertilizers Ltd. Vs. CIT, reported in [2018] 91 taxmann.com 104 (Mumbai-Trib.), has held that Fringe Benefit Tax not being part of income-tax cannot be added back for arriving at Book Profits under Section 115JB of the Act. He, therefore, stated that both the amounts added back by the Assessing Officer to the Book Profits, i.e. relating to disallowance of expenses made under Section 14A of the Act and FBT paid by the assessee stand covered in favour of the assessee by the judicial decisions. 59. The ld. DR was unable to bring to our notice any contrary decision on the issue. 60. In view of the same, we hold that the disallowance made under Section 14A of the Act amounting to Rs. 59,29,382/- is not requ....
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....o.1 raised therein relates to the disallowance of expenditure incurred on lignite project, holding it as new project treating it as capital expenditure. The issue raised by the assessee, it was common ground,isidentical to the issue raised by the assessee in its appeal bearing No.830/Ahd/2011, Ground No.1 (supra), which has allowed in favour of the assessee, following the decision of ITAT in assessee's own case for the immediately preceding year, i.e. AY 2005-06.Our findings in this regard are at para 4-6 of the order.In view of the same, and respectfully following the decision of the Co-ordinate Bench in assessee's own case for the immediately preceding year, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance relating to the project expenses at Bhavnagar. Ground of appeal No.1 is thus allowed. 65. Ground No.2 reads as under: "2. In facts & Circumstances of the case. Your Appellant, most respectfully submits that the Ld. Assessing officer has erred by disallowing the net expense of Rs. 1,07,06,250/- as Prior Period expense, holding that same cannot be allowed as the expenditure as it pertains to earlier year instead of v....
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....er erred by Confirming such addition & not treating such as Advertisement Expense. The Ld. CIT(A) has further erred by not following the ratio as specified by the High Court in the case of Asian Tools & Plastic Co. vs. CIT 53 ITR 392 and Godavari Sugar Mills vs. CIT 191 ITR 311." 70. Ground no.4 raised by the assessee relates to the disallowance of expenditure being advertisement expenditure by treating it as contribution to Government and not eligible business expenses. The aforesaid issue raised by the assessee , it was contended, was similar to the issue raised by the assessee in its appeal bearing No.830/Ahd/2011, Ground No.5 (supra), and also in assessee's appeal for AY 2005-06 in ITA No. 1747/A/2009 which stands adjudicated vide order dated 30/11/22. 71. We have noted from the facts of the case before us that the contributions made by the assessee to the commissioner, Geology and Mining, Index B and to various advertisement agencies like The Hindu, The Pioneer, The Statesmanetc. for information to all factories in respect of Product and services of GMDC. This fact finds mention at para 7 of the assessment order as under:- "7. Contribution to Government Bodies:- Rs. 76,63,....
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....e orders of the authorities below denying it for the reason that assessee not dealing it branded products it was not required to advertise its products. As long as the incurrence of the expenditure is not in dispute and there is also no dispute that it is for the purpose of business of the assessee, the claim cannot be denied by the Revenue gauging its necessity.The claim to expenses for advertisement in dailies is therefore allowed. Ground of appeal No. 4 is partly allowed. 73. Ground No.5 reads as under: "5. In facts & Circumstances of the case, Your Appellant, most respectfully submits that the Ld. Assessing officer has erred by making addition of Rs. 85,75,046/- by rejecting the claim of depreciation on leased assets to G.S.R.T.C by observing that the appellant has no ownership right on assets leased to G.S.R.T.C. The Ld. Assessing Officer on the other side has further erred by taxing entire lease rental and not restricting the taxability to the extent of Interest amount of the lease rentals. The Ld. CIT(A) has further erred by confirming such additions and not restricting the taxability to the extent of Interest amount of the lease rentals." 74. Ground no.5 raised by the ....