TaxTMI 
TaxTMI 
2019 (10) TMI 1584
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....iture just because the same has been capitalised in the books of accounts and merely because his predecessors have confirmed the disallowance from A.Y. 2003-04 till A.Y. 2005-06, and ignoring the factual and legal position as submitted by Appellants during appeal proceedings vide Appeal petition, Written Submissions made vide letter dt. 25.03.2010 and the decisions of Supreme ' Court/High Court which are binding on him. 2. Additions of Notional amount u/s. 14A towards expenditure to earn tax free income-Rs. 13,24,00,000/- The CIT(A) erred* in confirming the Additions of Notional amount u/s. 14A made by the Respondent, towards expenditure to earn tax free income, calculated as per Rule 8D, without considering Appellant's submissions made vide Appeal petition and written submissions dt. 25.03.2010, ignoring the factual position as submitted stating that, Investments made in Joint Venture companies are in fact strategic vestment made during 1986 to 1996 out of surplus funds and not out of borrowings and that there is no direct expenditure incurred to earn the Impugned Tax Free Income. The CIT(A) also erred in not considering the certificate dt. 14.09.2009 by the Tax audi....
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....the subject previous year. 5. Deduction towards Provision for leave encashment-Rs. 12,88,66,150/- Appellants submit that on the facts and in the circumstances of the case and on a true and proper interpretation of the provisions of Section 43B of Income Tax Act, 1961, the Respondent erred in disallowing the impugned legitimate deduction on technical ground that the claim has been lodged during Assessment proceedings and without filing the revised return u/s. 139(5) of the Income Tax Act, 1961. CIT(A) erred in confirming the above disallowance disregarding Appellants contentions/submissions based on facts and legal positions, submitted vide Appeal petition and written submission dt, 25.03.2010, mentioning that the claim lodged on the basis of Calcutta High Court decision in case of Exide Industries Ltd. and Another Vs. Union of India and other (292 ITR 383) has now been stayed by the Supreme Court and hence the ground is dismissed pending final decision of Supreme Court on constitutional validity of the amendment made to section 43B(f). 6. Profit on Sale of Oil Bonds of Rs. 4,77,50,000/- Appellants submit that on the facts and in the circumstances of the case, Respondent erred....
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....) has further overlooked the fact that the VREP-II unit is nothing but extension of the old undertaking. 2. The Ld. CIT(A) has further erred in directing to allow the claim of deduction u/s./80IB in respect of Silvassa new Blending Plant. 2.1 The Ld. CIT(A) has further overlooked the fact that the assessee was not engaged in manufacturing or production of articles. 3. The Ld. CIT(A) has further erred in directing to allow interest u/s. 244A on payment of self assessment tax. 4. The Ld. CIT (A) has further erred in directing to allow interest from 1st day of April of the assessment year overlooking the fact that the delay in filing TDS certificates is attributable to the assessee. 4. The brief facts of the case are that the assessee is a public sector company, filed its return of income on 27-11-2006 declaring total income at Nil and book profit computed u/s. 115JB at Rs. 245,80,571/-, for the assessment year 2006-07. Subsequently, on 04-10-2007, the assessee filed a revised return of income revising the income to Nil and income u/s. 115JB to Rs. 177,33,02,827/-. The assessing officer, in his assessment order passed u/s. 143(3) dated 29-12-2008, determined total income unde....
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....efinery & Petrochemicals P. Ltd., decided identical issue in favour of the assessee. We also find that the Tribunal in ITA No. 649/Mum/2009 for AY 2004-05 has decided the issue in favour of the assessee by following its own decision for AY 2003-04 in ITA No. 2736/Mum/2007. The relevant part of the order of Tribunal in AY 2003-04 in ITA No. 2736/Mum/2009 is extracted below: 14. We have considered the rival contentions of the parties and perused the material available on record. The Hon'ble Guwahati High Court in CIT vs. Bongaigon Refinery & Petro Chemicals P. Ltd. (222 ITR 208) while dealing with almost on similar grounds base on similar facts held that expenditure as incurred on construction of Railway Track and siding is revenue expenditure and not a Capital expenditure. Thus, respectfully following the decision of Hon'ble Gujarat High Court, this ground of appeal is allowed in favour of assessee. Therefore, consistent with the earlier decision of the Tribunal, we decide the issue in favour of the assessee and against the revenue. The assessing officer is directed to allow the expenditure, as claimed. Ground 1 of the assessee is accepted. 8. Ground 2 relates to disallo....
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.... and gone through the orders of authorities below. The Hon'ble jurisdictional High Court in CIT vs. Central Bank of India reported in 264 ITR 0522 (Bom). Held that the deduction u/s. 80M has to be calculated with reference to the amount of interest computed in accordance with the provisions of the Act after deducting interest on money borrowed for earning such income and not with reference to full amount of dividend received by the assessee, the Hon'ble Court further held that there is no scope for any estimate of expenditure being made and further no scope of Notional Expenditure on pro-rata basis for disallowance unless the fact of particular case so warranted. Hence, considering the decision of Hon'ble jurisdictional High Court and the fact that assessee has invested Rs. 4.72 Crore out of surplus fund and the investment was made during the FYs-1995-96, 1996-97 and 1999-2000. The assessee has made no expenses in relation to dividend income. Neither the AO nor the ld. CIT(A) brought on record the actual expenditure, if any incurred by assessee in relation to dividend income. The assessee is claiming throughout that the amount of investment was out of surplus available ....
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.... or not. The question has to be decided according to the principle of law and not in accordance with the Accounting practice. The Hon'ble Apex Court held that Accounting Practices cannot be override section 56 or any other provisions of the Act. The assessee incurred expenses on various personnel/employee in the project for supervision and monitoring the various project and marketing allocation and refineries which is certainly allowable as business expenditure u/s. 37(1) of the Act. Expenses were made on account of salary, Dearness Allowance (DA), Conveyance Expenses, postal charges, bank charges, rent for housing accommodation, Motorcar etc. which is certain of revenue expenditure. Thus, the Ground No. 8 raised by the assessee is allowed. 13. Considering the facts that on similar set of facts the Tribunal allowed the similar relief to the assessee, therefore, respectfully following the same, we find that this ground of appeal is covered in favour of the assessee and against the revenue. In the result this ground of appeal is allowed in favour of the assessee. 14. Ground No. 4 relates to provision toward post retirement medical benefits. The ld. AR for the assessee submits t....
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....refore, well founded. We shall also, refer to the case of Bharat Earth Movers Ltd. vs. CIT reported in 245 ITR 428, wherein the Hon'ble Supreme Court has held that leave encashment is not a contingent liability. Taking the same cue, that post retirement medical benefit is also a liability which gets attached to the company the moment, the service contract is signed, we hold that the revenue authorities erred in disallowing the provision under this head. Having held so in principle, neither we have been able to gather the year wise breakup of the Actuarial valuation made by the Actuary as on 31.03.1997, nor the Senior Counsel, was able to apprise us on the valuation, pertaining to the year under consideration. 10. Taking into account the above reason, we deem it fit to restore the issue to the file of the AO, who shall call for the year wise valuation and then allow the claim accordingly. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to allow the claim of provision after verification of the Actuary's report pertaining to the current year." Therefore, respectfully following the order of earlier years, we set-aside the matter to the file ....
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.... power to entertain the new grounds of appeal. Respectfully following the decision of Hon'ble Apex Court which has a binding precedent by virtue of Article 141 of the Constitution of India, we admits the grounds of appeal raised by the assessee and restore this ground of appeal to the file of AO to reconsider it afresh and pass order in accordance with law. Thus, this ground of appeal is allowed for statistical purpose." 19. Considering the aforesaid persistent decisions of Tribunal in all AYs and respectfully following the orders of earlier years, we set-aside the matter to the file of AO to reconsider it afresh, and pass order in accordance with direction in earlier years. Thus, this ground of appeal is allowed for statistical purpose. In the result, this ground of appeal is allowed for statistical purpose. 20. Ground No. 6 relates to treatment of profit on sale of oil bonds. The Ld. AR of the assessee submits that during 2000s, Govt. of India was compensating the loss incurred in sale of Controlled Petroleum Products (at below the Market Price) through issuance of oil bonds, i.e. instead of cash settlement it was done through issuance of bonds. To that extent of bonds rece....
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....oner of income Tax negatived the claim of the assessee. But on second appeal, the Appellate Tribunal accepted the contention that the subscription to the Government loan was conducive to its business and that the loss arose in the course of the business, and that therefore, the assessee was entitled to a deduction of the loss claimed by it. But the High Court on a reference to it at the instance of the revenue held that the loss was a capital loss. The High Court was of the view that the factual substratum of the case had been misconceived by the Appellate Tribunal and that it was, therefore, entitled to re-examine the evidence and arrive at its own findings of fact. Under these facts and circumstances the Hon'ble Apex Court held that the Appellate Tribunal found that having regard to the sequence of events and the close proximity of the investment with the receipt of Government orders the conclusion was inescapable that the investment was made in order to further the sales of the assessee and boost its business. In the circumstances, the Appellate Tribunal held that the investment was made by way of commercial expediency for the purpose of carrying on the assessee's busine....
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....same was added back to the total income. The CIT(A) echoed the assessment order. However, the Tribunal held that the claim of the assessee for deduction of unrealized loss due to foreign exchange fluctuation as on the last date of the previous year was deductible. The said order of the Tribunal was upheld by the Hon'ble High Court. On further appeal by the department, the Hon'ble Supreme Court held that the loss suffered by the assessee is on revenue account towards foreign exchange difference as on the date of balance sheet and is an item of expenditure deductible u/s. 37(1). It further observed than an enterprise has to report outstanding liability relating to import of raw material using closing rate of foreign exchange and any difference, loss or gain, arising on conversion of said liability at closing rate should be recognized in profit and loss account for reporting period. From the judgment of the Hon'ble Supreme Court it can be clearly deduced that unrealized loss due to foreign exchange fluctuation in foreign I.T.A. No. 7223/Mum/2011 currency transactions on revenue item as on the last date of the accounting year is deductible. 9. ITAT, in the case of Kotak M....
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....nt accounting year. The assessee revalued its foreign exchange loans in foreign exchange on revenue account, on capital account and for general purposes outstanding as on 31-3-1991, and claimed the differences I.T.A. No. 7223/Mum/2011 between their respective amounts in Indian currency as on 31-3-1990 and 31-3-1991 as revenue loss under section 37(1) in respect of loans used in revenue account. The assessee also treated the similar difference in foreign exchange as an increased liability u/s. 43A. The AO allowed the deduction claimed u/s. 37(1), taking into consideration the increased foreign exchange liability and repaid in the accounting year for the purpose of depreciation. He did not however, allow the claim for foreign exchange loss on loans both in relation to capital as well as revenue account which were outstanding on the last day of accounting year. On appeal, the CIT(A) affirmed the view of AO in relation to deduction u/s. 37 of the interest on loans outstanding on the last day of the accounting year but allowed the benefit of increased liability for computation u/s. 43A in relation to loss outstanding on the last day of the accounting year. Hence, the assessee as well as....
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....ent of the Hon'ble Apex Court in Patnaik & Co. Ltd. Vs. CIT (supra), we decide the issue in favour of the assessee and against the revenue. Ground 6 of the appeal of the assessee succeeds. 26. Ground No. 7 relates to deduction for feasibility study expenses. The ld.AR of the assessee submits that the assessee claimed expenditure of Rs. 19,80,000/- for detailed feasibility study for yield and energy improvement in CDU-II/VDU at Vizag Refinery and Rs. 25,23,580/- for pre-feasibility study for LPG-Cavern Project. The ld AR for the assessee submits that this ground of appeal was raised as additional ground of appeal before ld CIT(A). The ld. CIT(A) held that the power to entertain new/additional ground of appeal is available before the Tribunal and not CIT(A). The Ld.AR of the assessee was fair enough in submitting that in AY 2003-04, the Tribunal by following its own order for AY 2001-02 has decided the issue against the assessee. The Ld.AR further submitted that though the tribunal decided the issue against the assessee, but there the assessee raised the issue for the first time before the Tribunal, so not being on record, the Tribunal held that it could not entertain any new gr....
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....ved that the Factories Act, Central Excise Act, Sales-tax Act, Indian Explosives Act do not recognize VREP-II as separate unit. Additional capacity of VREP-II is treated at par with that of new refinery. VREP-II is only an expansion of old undertaking in its own term as required u/s. 80IB(1). Legislature did not intent to cover expansion and had it been intended, the wording would have been similar to that of section 80-IC. On appeal the ld. CIT(A) accepted the claim of the assessee. The ld CIT(A) while allowing relief to the assessee held that CBDT has accepted & notified all substantial expansion of refinery of PSU Oil companies vide notification No. 66 of 2008 : dated 30-05-2008. The assessee was allowed the claim consistently till AY 2005-06. The VREP-II was running as independent unit, capable of processing of crude oil independently even if the old unit was non-functional. The Ld.AR further submitted that the issue is covered in favour of the assessee by the decision of Tribunal for the assessment year 2005-06 in ITA No. 699/Mum/2009 order dated 23-11-2016. On the other hand the ld. DR for the revenue supported the order of the AO. 30. We have considered the rival submission....
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....r section 80 IB. This ground of appeal is allowed. 53. We have seen that the ld Commissioner (Appeals) granted the relief after considering the entire fact related with the claim of assessee. We do not find any reason to differ with the finding of learned Commissioner (Appeals). Thus this ground of appeal is dismissed. 31. Considering the decision of the Tribunal, we find that this ground of appeal is covered in favour of the assessee. No variance in facts for the year under consideration is brought to our notice. Therefore, consistent with the earlier decision of the Tribunal, we direct the assessing officer to allow is deduction of section 80IB in respect of VREP-II unit to the assessee. In the result this ground of appeal raised by revenue is dismissed. 32. Ground No. 2 relates to deduction u/s. 80IB in respect of Silvassa Lube Blending Plant. The Ld.AR for the assessee submitted that the refinery produces Base Oil known as Lube Oil Base Stock (LOBS). The Base stock is then blended with additives to make various finished lubricants and greases. HPCL has set up a Lube Blending Plant at Silvasa (backward area) in A.Y. 2000-01. The assessing officer has denied the claim u/s. 80....
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....ut it is a complete manufacturing activity by itself to produce various lubricants. The reply/explanation furnished by the assessee was not accepted by the assessing officer. The AO disallow the deduction u/s. 80IB(4) by taking view that no manufacturing or production of articles are done by assessee in terms of section 80IB(2)(iii) of the Act. Before, ld CIT(A) the assessee explained that the assessee is manufacturing the distinct product which different from the raw material used by the assessee. The assessee also explained the facts as submitted to the AO. The ld CIT(A) allowed relief to the assessee by holding that the assessee is manufacturing lubricants from Lube Oil base stock, which is considered as manufacturing activity under Central Excise Act. We have noted that the end product manufactured by assessee as explain hereinabove is quite distinct and is a commercially different article than the major input rectified, which is fit for consumption/use for commercial use. That the changes made in input result in a new and different article is recognized in the trade as such. Hence, the assessee, in the instant case, satisfied the requirement, that it manufactured or produced a....