TaxTMI 
TaxTMI 
2023 (8) TMI 1422
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....case of extinguishment of asset and hence not taxable. The AO did not accept the claim of the assessee. However, the AO assessed the same as income under the head Income from other sources. The Ld CIT(A) directed the AO to assess the above said amount under the head "Capital gains". 4.1 We heard the parties on this issue and perused the record. We notice that an identical issue has been examined by the co-ordinate bench in the assessee's own case in AY 1995-96 in ITA No.3493/Mum/1999, vide its order dated 20-01-2021. In the above said year, the Ld CIT(A) had allowed the claim of the assessee and hence the revenue had filed appeal before the Tribunal. The co-ordinate bench, by following the decision rendered by Hon'ble Supreme Court in the case of CIT vs. Grace Collis (2001)(248 ITR 323)(SC) has reversed the decision of Ld CIT(A). We notice that the surplus arising on redemption of treasury bills his held to be taxable under the head Capital gains in the assessee's own case in AY 1996-97 also. Accordingly, we direct the AO to assess the above said amount as Capital gains in this year also. 5.0 The Ld A.R did not press ground no.2. Accordingly, it is dismissed as not pressed. 6.0 ....
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.... is not liable to be disallowed. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance. 9. Ground no.7 and 8 urged by the assessee relates to the deduction claimed u/s 80HHC of the Act. At the time of hearing, the Ld A.R did not press these grounds and accordingly, they are dismissed as not pressed. 10. Ground no.9 urged by the assessee relates to the deduction claimed by the assessee u/s 80-O of the Act. The assessee claimed a deduction u/s 80-O of the Act a sum of Rs.1,96,608/- calculated @ 50% of royalty amount of Rs.3,93,216/- received by the assessee from a Columbian company. The AO rejected the above said claim with the following observations:- "The agreement filed only talks about import of CKD Kits into Columbia. Further the amended provisions of section 80-O only provide for deduction u/s 80-O in respect of the drawing, design, invention, patent and trade mark outside India. In the circumstances, it would appear clear that the amount received is not for any of these purposes. Therefore the deduction claimed is not allowable." The Ld CIT(A) confirmed the disallowance without much discussion. 10.1 We heard t....
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.... above said clause would show that the assessee has received technical knowhow fee for supplying a set of drawings for such parts/components and also for providing information about characteristics of material to be used in the manufacture of such parts/components. In the instant case, the assessee has given license to assemble its scooter models. When the Licensee prefers to manufacture certain parts/components on its own, the assessee permits the same and accordingly supplies the drawings relating to those parts and collects technical know how fee. The Licensee is bound to manufacture those parts/components in accordance with those designs only. Otherwise, the same will not fit into Scooter when the scooter is assembled. Hence, we are unable to find any reason to say that the said payment will not fall under the category of "consideration received for the use of patent, invention, design" mentioned in sec. 80-O of the Act. Accordingly, we are of the view that the technical knowhow fee received by the assessee would fall under the category of "royalty", as defined in sec.80-O of the Act and it is eligible for deduction u/s 80-O. Accordingly, we set aside the order passed by Ld CIT....
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.... ---------------- 28,60,480 &....
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.... 13. We shall now take up the appeal filed by the revenue. 14.0 The Ground no.1 raised by the revenue relates to the disallowance of Rs.43,43,676/- relating to GDR issuing expenses. The assessee had issued GDR of USD 109,999,983 in the financial year relevant to AY 1995- 96. The expenses incurred to the tune of Rs.11,71,99,600/- was claimed by the assessee u/s 37(1) in AY 1995-96, which was rejected. In the alternative, the assessee claimed the same as deduction u/s 35D of the Act. The said claim was not considered, since the expansion of undertaking was not completed in that year. In AY 1997-98, in ITA No.5030/Mum/2021 dated 13-04-2023, the co-ordinate bench allowed the claim of the assessee following the decision rendered by Ahmedabad bench of Tribunal in the case of Gujarat Narmada Valley Fertilisers Co. Ltd vs. DCIT (ITA No.1463/ Ahd/2007), i.e., it was held that the assessee is eligible for deduction u/s 35D of the Act in respect of this expenditure. U/s 35D of the Act, this expenditure is allowable in installments. Hence the assessee has claimed proportionate amount in this year. Since the co-ordinate bench has held it to be allowable u/s 35D of the Act, following the said d....
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....reated the above said expenses as Capital in nature in the books of account, but claimed the same as revenue expenditure for income tax purposes. This is a recurring issue. The co-ordinate bench has decided this issue in favour of the assessee by confirming the decision rendered by Ld CIT(A) in holding that the expenditure incurred in purchase of dies and moulds are allowable as revenue expenditure in AY 1990-91. The said decision is being followed year after year. In AY 1997-98 also in ITA No.5030/Mum/2001 dated 13.04.2023, the Tribunal has upheld the identical decision taken by Ld CIT(A). Consistent with the view taken by the co-ordinate benches year after year, we confirm the order passed by Ld CIT(A) in holding that the expenditure incurred on Dyes and Moulds is allowable as deduction. 17.0 Ground no.4 urged by the revenue relates to decision of Ld CIT(A) in holding that the penalty charges received from machinery suppliers amounting to Rs.30,06,738/- is capital receipt. This is also a recurring issue. In AY 1997-98 (supra), the Tribunal has followed the decision rendered in AY 1995-96, wherein it was held that the penalty charges received from machinery suppliers is capital i....
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....ipt of similar nature' mentioned in the definition of 'profits of business' given in clause (baa) of Explanation to sec.80HHC of the Act. Accordingly, we do not find any infirmity in the decision rendered by Ld CIT(A) on this issue. 20.0 Ground no.7 raised by the revenue relates to the decision of Ld CIT(A) in holding that the Excise duty receipts should be excluded from 'Total turnover' for the purpose of computing deduction u/s 80HHC of the Act. In AY 1995-96, the co-ordinate bench has held that the Excise duty receipts should be excluded from Total turnover and in this regard, it has placed reliance on the decision rendered by Hon'ble Supreme Court in the case of CIT vs. Laxmi Machine works (290 ITR 667). The said decision was followed in AY 1997-98 also. Accordingly, following the above said decisions rendered by the co-ordinate benches in the assessee's own case in the earlier years, we are of the view that the Ld CIT(A) was justified in holding that the excise duty receipts shall not form part of total turnover for the purposes of computing deduction u/s 80HHC of the Act. 21.0 Ground no.8 raised by the revenue relates to the deduction allowed u/s 80HHC of the Act on the for....
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....s legally correct, but it is the duty of the assessee to prove that the said expenses got crystallized during the year relevant to AY 1998-99. Hence the direction of Ld CIT(A) that the expenses debited to Profit and Loss account, if not allowed in the earlier year, should be allowed is not in accordance with the established legal principles. Accordingly, we modify the order passed by Ld CIT(A) and direct the AO to allow expenses which have crystallized during the year under consideration. It is the responsibility of the assessee to prove that the said expenses got crystallized during the year under consideration. 24.0 Ground no.11 raised by the revenue relates to disallowance of interest expenses relatable to exempt income. The AO noticed that the assessee has borrowed funds and paid interest thereon. The assessing officer took the view that common funds have been used to make investments and accordingly disallowed proportionate interest expenses. The ld CIT(A) noticed that own funds available with the assessee was more than the value of investments. Accordingly, he held no disallowance out of interest expenses is called for. 24.1 We heard the parties and perused the record. We n....
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....dent only for the reason that there was concurrent finding of both Ld CIT(A) and the Tribunal that it has been incurred for the purposes of business. However, the jurisdictional high court has clarified that the case needs to be decided on its own facts primarily considering the business expediency. It was further held that this kind of claim is to be allowed only if it is connected with the business of the assessee. 25.3 In the instant case, we notice that the Managing director Shri Rahul Bajaj has visited Netherland & UK for attending India Growth fund Board Meeting. The Board resolution with regard to the expenses to be incurred on wife of Shri Rahul Bajaj reads as under:- "Further Resolved that air-fare and other expenses in connection with the above visit (including those of Smt. Bajaj) be and are hereby authorized to be borne by the Company." We notice that the Board resolution did not bring out any business expediency. Further, the assessee has also not proved existence of any commercial or business expediency in incurring the foreign travel expenses of wife of M D except producing copy of Board resolution, in which also, no reason was given. There should not be any dou....