TaxTMI 
TaxTMI 
2020 (3) TMI 1463
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....ration declaring total income at Rs. 111,60,078,183/- under the normal provisions of the Act. The return was processed u/s 143 (1) of the Act and the AO passed assessment order determining the total income of the assessee at Rs. 1966,49,96,120/- under the normal provisions of the Act after making various additions and disallowances. In the first appeal, the Ld. CIT (A) partly allowed the appeal filed by the assessee against the assessment order. Still aggrieved, the assessee is in appeal before the Tribunal. 2. The assessee has challenged the impugned order passed by the Ld. CIT (A) by raising the following effective grounds: 1. "Disallowance of Expenditure incurred on facilities put up but ownership lying with others/statutory authorities - Rs. 8,20,74,865/-. Appellant submit that on the facts and in the circumstances of the case and on a true and proper interpretation of the provisions of Section 37 (1) of the Income Tax, 1961, CIT (A) erred in confirming the disallowance of Rs. 8,20,74,865/- being expenditure incurred on putting up facilities such as Railway Siding, the ownership of which lie with others/statutory authorities. The respondent has err....
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.... based on actuarial valuation as on 31.3.07 and such liability based on actuarial valuation is permitted as expenditure as held in by Supreme Court in the case of BEML (112 Taxman 61) It is pertinent to note that such actuarial valuation is arrived at following a statistical model considering various factors like NPV, mortality rate, remaining service in the Corporation etc. and therefore is an ascertained liability. 4. Disallowance of Provision for leave encashment - Rs. 28,30, 00, 000/-: 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 confirming the disallowance of the AO, of legitimate business expenditure, merely by following his Order of the earlier year in Appellant's case. In the earlier year, the respondent has denied the deduction on the ground that although the Calcutta High Court has struck down the constitutional validity of the provisions of 43B(f) in case of Exide Industries Lid and Another Vs. Union of India and other (292 TTR 383), it has now been stayed by the Supreme Court. Whereas, the liability to....
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....ore it is actually received; ii. whether the same system is Mowed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide. iii whether the assesses has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; iv whether the assessee has been consistent and definite in making entries in the account Cooks in respect of losses and gains; v. whether the method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards. VI. whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation. It is pertinent to note that consistent with Accounting Standard 11 issued by the ICAI and in terms of paragraph 36 of the said AS, the premium incurred on Forward Exchange Contract is booked as a 'Revenue Expenditure' and therefore to be allowed as a permissible deduction under 37(1) of the Act. The Appellant craves leave to rely on the Information and explanation given to ....
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....e business of the assessee, the expenditure is inevitably is a business expenditure. The AO while making the disallowance by following the order of AY 2003-04 to AY 2005-06, wherein it was held the expenditure is capital in nature. The ld CIT(A) confirmed the action of the AO. The Ld.AR further submitted that the issue is squarely covered by the decision of the Tribunal for the assessment years 2003-04 to 2004-05 (copy of which is placed in the paper book), vide order dated 23-11- 2016. The Ld. DR, on the other hand, relied upon the orders of authorities below. 7. We have considered the rival contentions and also perused the material placed before us. Perusal of the record shows that the AO while making the disallowance by following the order of AY 2003-04 to AY 2005-06, wherein it was held the expenditure is capital in nature. The ld CIT(A) confirmed the action of the AO. We find that in assessee's own case for AYs 2003-04 to 2004-05 in ITA Nos.2736/Mum/2007, 649/Mum/2009; 1186/Mum/2009 and 699/Mum/2009, vide order dated 23-11-2016, wherein the Tribunal, by following the decision of Gauhati High Court in CIT v/s Bongaigaon Refinery & Petrochemicals P. Ltd, decided identic....
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....e in assessee's appeal aforesaid, however, supported the order passed by the Ld. CIT (A). 8. We have perused the material on record in the light of the submission made by the Ld. counsel. As pointed out by the Ld. counsel, this issue is covered by the decision of the coordinate Bench in assessee's own case for the AY 2006-07 aforesaid. The findings of the coordinate Bench read as under:- 12. We have considered the rival submissions of the parties and have gone through the order of the lower authorities. We have seen that in assessee's own case for AY 2003-04 to 2005- 06 on similar set of facts passed the following order: 18.We have considered the rival contention of the parties and gone through the order of authorities below. We have seen that AO has treated the Administrative Expenses incurred on Engineering Project and the ld. CIT(A) while considering this ground of appeal concurred with the finding of AO. 19.The Hon'ble Supreme Court in Tuticorin alkali Chemicals and Fertilizers Ltd. vs. CIT (227 ITR 172(SC) held that when the question is whether a receipt of money is taxable or not, or whether certain deduction from receipt are permissible in law or not. Th....
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.... including the order passed by the coordinate Bench. The coordinate Bench has decided the identical issue in assessee's appeal pertaining to the AY 2006-07 holding as under:- "15. We have considered the rival submission of the parties have seen the order of the lower authorities. We have noted that this is recurring issue from the AY 1996-97 onwards and on identical grounds of appeal, the Tribunal in AY 2003-04 in ITA No.2736/Mum/2007, vide order dated 23.11.2016, by following the orders of the earlier years passed the following order: 6.We have considered the rival contention of the parties and gone through the order of authorities below and the order passed by the Coordinate Bench in assessee's own case, we find that similar issue had come up consideration before this Tribunal in AY 1997-98 and again in AYs 2000- 01, 2001-02 and 2002-03 and the Co-ordinate Bench vide order dated 16.01.2013 in ITA Nos. 8575, 8576 & 5885/Mum/2004 for AYs 2000-01, 2001-02 and 2002-03 respectively made the following order: "9. We have heard the arguments of the two sides and perused the impugned orders and the material placed before us. The post retirement medical benefit i....
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.... year 2006-07 and the Bench has set aside the issue to the file of AO for deciding afresh by following the decision of the coordinate Benches in assessee's own cases pertaining to the earlier years. Hence, respectfully following the decision of the coordinate Bench, we set aside the matter to the file of AO to verify the Actuarial Valuation Report and allow the claims of the assessee in accordance with the order dated 16.01.2013. Accordingly, we allow this ground of appeal for statistical purposes. 14. Vide Ground No. 4, the assessee has challenged the action of the Ld. CIT (A) in confirming the disallowance of Rs. 28,30,00,000/- being provision for Leave Encashment. The Ld. counsel for the assessee pointed out that this issue is identical to Ground No. 5 of the assessee's appeal, ITA No. 5378/Mum/2010 for the AY 2006-07 decided by the Mumbai Tribunal. Since, the Tribunal has set aside the identical issue to the file of the AO for reconsider and decide the same afresh in assessee's appeal pertaining to the AY 2006-07 aforesaid, this issue may be decided accordingly.. 15. The Ld. DR admitted the fact stated by the assessee, however, supported the order passed by the Ld. CIT (A....
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....ical issue to the file of the AO to reconsider the same in assessee's own case for the assessment year 2006-07. Hence, respectfully following the decision of the coordinate Bench, we set aside the matter to the file of AO to verify the Actuarial Valuation Report and allow the claims of the assessee in accordance with the order dated 16.01.2013. Accordingly, we allow this ground of appeal for statistical purposes. 18. Vide Ground No. 5, the assessee has challenged the action of the Ld. CIT (A) in treating the loss on sale of oil bonds as a capital loss amounting to Rs. 20,02,40,600/-. The Ld. counsel for the assessee pointed out that this issue is identical to Ground No. 6 of the assessee's appeal, ITA No. 5378/Mum/2010 for the AY 2006-07 decided by the Mumbai Tribunal. Since, the Tribunal has decided the identical issue in favour of the assessee in assessee's appeal pertaining to the AY 2006-07 aforesaid, the findings of the Ld. CIT (A) are liable to be set aside. 19. The Ld. DR admitted the fact that this issue is covered in favour of the assessee by the decision of the ITAT aforesaid, however, supported the order passed by the Ld. CIT (A). 20. We have perused the materia....
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....onsideration of above rival submissions of both the sides and careful perusal of the relevant material placed before us, we note that the Department has not agitated the issue of loss on sale of investments/fertilizer's bonds suffered by the assessee during the year under consideration, but the main controversy revolves on the issue of loss recorded by the assessee on diminution of the fertilizer's bonds in the hand at the end of the year which was shown as other current assets (trade) under the head "current assets, loans and advances". The ld. AR has also drawn our attention towards order of ITAT Mumbai, 'D' Bench in the case of Reliance Industries Ltd. Vs. CIT (2014)-TIOL-160-ITATMUM and submitted that it is a well accepted principle that the assessee is entitled to adjust the actual cost of imported assets as acquired in foreign currency on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates then in the same manner loss on fertilizer's bonds given to the assessee by the Government of India under compulsion which were received by the assessee unwillingly under commercial expediency then the loss arising on account of flu....
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....up at the end of the financial year. The assessee booked the expected loss in such contracts on MTM basis. The assessee thus claimed a loss as calculated on MTM basis claiming that he was following this practice consistently. That it was also as per recognized Accounting Standard. AO rejected the claim on the ground that the derivative contracts were not stock in trade as there was no cost of acquisition. He finally held that the loss on account of "MTM" basis was thus a notional loss and was contingent in nature and could not be allowed to be set off against taxable income. On appeal, the ld. CIT(A) allowed the same by agreeing with the contention of the assessee that such loss on such valuation which is called "MTM" has to be allowed even though it may appear to be a notional loss. The Tribunal while confirming order of ld. CIT(A) and allowing the said loss placed reliance on the decision of Hon'ble Apex Court in the case of Woodward Governor India (P.) Ltd. (supra) and also the decision of Tribunal in the case of Edelweiss Capital Ltd V/s ITO in ITA No.5324/Mum/2007 (AY- 2004- 05) dated 10.11.2010 and the decision in the case of Ramesh Kumar Damani V/s Addl.CIT in ITA No.144....
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....count of fluctuation in the rate of exchange in terms of section 43A. On appeal by the department, the Hon'ble High Court reversed the decision of the Tribunal on both the issues. On further appeal to the Apex Court, the decision of the High Court was reversed and it was held that (a) that the loss claimed by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance-sheet was allowable as an expenditure u/s 37(1), and (b) that the assessee was entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates, pending actual payment of the liability u/s 43A, prior to its amendment by Finance Act, 2002. 11. In view of above decisions, it is clear that the loss due to foreign exchange fluctuation in foreign currency transactions in derivatives has to be considered on the last date of accounting year and it is deductible u/s 37(1) of the Act. Therefore, in allowing the said claim of the assessee by AO, the action of the AO is in consonance with the decisions of the Hon'ble Apex Court and also the view taken by the Tri....
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....orward Exchange Contract is booked as a revenue expenditure therefore allowable deduction u/s 37 of the Act. The Ld. counsel placing reliance on the judgment of the Hon'ble Supreme court in the case of Woodward Governor India (P) Ltd. submitted that the Ld CIT(A) has though held that the provisions of section 43(A) are not attracted to the extent of assets acquired within India, however, erred in confirming that since the expenditure is capital in nature therefore, the assessee is entitled for depreciation only. 24 On the other hand, the Ld. DR supporting the order passed by the Ld. CIT(A) submitted that there is no infirmity in the order to interfere with. We have perused the material on record including the order relied upon by the Ld counsel for the assessee. The Ld CIT(A) has partly allowed this ground of appeal holding as under: " 15.4........ However, I direct the AO to verify the authenticity and correctness of this claim made before me, while giving effect to this order. In view of this discussion, I consider it proper and appropriate to hold that the entire sum should be capitalized treating the same as capital in nature. But however, the AO should allow deprec....
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....the case and in law, the Ld. CIT (A) erred in directing to allow the claim of deduction u/s 10B in respect of VREP-II Unit." 3.1 The Ld. CIT (A) has further overlooked the fact that the VREP-II unit is nothing but extension of the old undertaking. 3.2 The Ld. CIT (A) has further erred in directing to allow the claim of deduction u/s 80IB (4) in respect of Silvassa new Blending Plant. 2. Vide ground No 1 the revenue has challenged the action of the Ld. CIT(A) in directing the AO to allow addition of de-capitalized assets and thereby allowing depreciation of Rs. 3,29,87,815/- The assessee decapitalized certain assets in the assessment year 2007-08 and capitalized in the assessment year 2009-10 based on advice from statutory auditors. During assessment proceedings, the assessee made claim for reduction in Book depreciation which was disallowed by the AO on the ground that net profit is maintained as per P & L. However, reduction in tax depreciation claim was accepted. In the first appeal, the Ld. CIT(A) decided the issue in favour of the assessee holding as under: "5.4 I have considered the AO's orders as well as the appellant's A/R submission made during....
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....cept that portion, which suits the department in more collection of tax due to lesser claim of depreciation and deny corresponding claim of depreciation in reduction of book depreciation, which necessarily the appellant's has to do. We do not find any reason to interfere with the findings of the Ld. CIT(A) as the same is based on the settled principles of law and as per the evidence. Hence, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. 6. Vide ground No.2 the revenue has challenged the action of the Ld. CIT(A) restoring the issue of disallowance u/s 14A of the Act for recomputed the disallowance holding that the provisions of Rule 8D of the Income Tax Rules cannot be applied retrospectively. The Ld. counsel relying on the order of the Ld. CIT(A) submitted that since the findings are in accordance with the settled law, there is no infirmity in the order of the Ld. CIT(A). 7. On the other hand the Ld. DR supported the assessment order passed by the AO. 8. We have perused the material on record in the light of the submissions made by the Ld. counsel. As pointed out by the Ld. counsel for the assessee, the CIT(A) has rightly restore....
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....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 submissions and perused the material placed before us. We find that the in a....
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....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." 13. We notice that the Coordinate Bench has decided the identical issue in favour of the assessee in appeal filed by the revenue ITA No. 5705/MUM/2010 in assessee's case pertaining to the assessment year 2006-07. Since the findings of the Ld. CIT(A) are in accordance with the decision of the coordinate Bench, we do not find any reason to interfere with the order of the Ld. CIT(A). Hence, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal of the re....
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....udgements:- 1. Vinbros & Co Ltd. v/s ITO 110 ITD185 2. Oracle Software Ltd. SLP (c) 4719/2008 3. Ester Lube-Technologies v/s ITO ITA No.14/Mum/2012 33. On the other hand the ld DR for the revenue supported the order of the AO. 34. We have considered the rival submissions and perused the material placed before us. We have also deliberated on the various case law relied by the ld. AR for the assessee. In the return of income the assessee claimed deduction of 80IB(4) of Rs. 6.30 Crore. The AO asked the assessee to justify its eligibility u/s 80IB(4). The assessee filed its reply dated 3.12.2008. In the reply the assessee stated that the assessee owned two refineries at Mumbai and Vishakhapatnam. In the process of refining of crude and manufacturing of various petroleum product at the refinery, one of the by product manufactured is Reduced Crude Oil (RCO). This RCO is further processed to manufacture Lube Oil Base Stock (LOBS), as well as Asphalt. Asphalt id further processed at the refinery. The LOBS product at Lubes refinery, is only a base oil and an input for production of Lubricants and Greases manufactured at Blending plants. The LOBS ....