TaxTMI 
TaxTMI 
2016 (7) TMI 1696
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....R) agreed that the issue stands decided against the assessee by the order of the Tribunal for the earlier years. We would like to reproduce relevant portion of the order of the Tribunal for A.Y. 1997-98 and same reads as under: - "5. Ground No. 3 relates to the disallowance of commission paid amounting to Rs. 2,40,16,498/-.The Assessing Officer has considered this issue at para 13 on page 7 of his order and the grievance of the assessee was considered by the CIT(A) at para 8 page 3 of his order. Similar disallowance has been considered by the Tribunal at para 8 & 9 of its order in ITA No. 2200/M/2000, wherein it has followed the Tribunal order for A.Y. 1994-95 in ITA Nos. 4265 & 4892/Mum/98. Facts being identical, respectfully following the decision of the Tribunal in the assessee's own case in earlier years, finding of the CIT(A) are confirmed. Ground No. 3 is accordingly dismissed." Respectfully following the above order of the Tribunal, we decide the first ground of appeal against the assessee. 3.Second ground is about addition made under section 40A(9) in respect of contribution to Marine Navy Officers Welfare Fund (Rs.8.85 lakhs) and Utmal Employees Welfare Fund (Rs. 1 lak....
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....p sum consideration of Rs. 186.10 crores, that the profit on sale and transfer of the above undertaking of Rs. 108.19 crores was disclosed in the books of accounts. The assessee gave detailed breakup in its explanation and claimed that it had treated the undertaking is a capital asset and had worked out long-term capital loss as under It was further argued that the decision was the difference between the slump price and the indexed cost of acquisition and improvement of the undertaking, that the written down value of the assets was transferred was reduced and no depreciation had been claimed on such assets.It enclosed a certificate from the statutory auditors giving detailed working of the cost of acquisition and improvement. It was argued that the undertaking, a capital asset, was transferred as a whole along with all its rights and privileges for a lump sum consideration, that no individual value to its assets and liabilities was assigned, that the income arising from such transfer had to be taxed under the head income from capital gains. The assessee referred to the provisions of section 50 B of the Act and the definition of slump sale, as provided in the section 2(42C) of the A....
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....Bangalore division, that the details of plant and machinery, building, land, current assets and liabilities were maintained separately, that the balance sheet and audit report was also prepared separately for that unit, that the balance sheet of Bangalore unit as on 31/03/1998 showed that the entire unit was not transferred on 01/02/1998, that the assessee had separate and identifiable blocks of assets for each unit, that the sale proceeds which were attributable to the blocks of assets of the Bangalore unit could be better nine on some rational basis and any excess, as determined in accordance with the provisions of section 50, could be brought to tax. Referring to the provisions of section 2 (24), he held that the profits embedded in the whole or portion of the lump sum price not attributable to the sale of stock in trade had to be taxed under the head capital gains, that sale of stock in trade was to be taxed as business income. Finally he held that there was no sale of business as a whole and that only a part of a line of business was sold. He referred to the demarcation of the consideration of Rs.186.10 crores in the case of LTK Ltd. i.e. the purchaser and observed that it had....
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....fute the finding of the AO in that regard, that there was no sale of entire business, that it was sale of fixed assets and current assets and the lump sum consideration of Rs. 186 corrodes was partly attributable to depreciable assets and partly to land and partly to net current assets, that it was all the more apparent from the fact that the said transfer excluded engine division, marketing division etc., that it was claimed that transaction was made for a lump sum consideration, that the books of accounts at the end of the purchases contradicted the claim made by the assessee, that the AO had brought on record the facts that prove that it was an itemised sale of the assets, that the facts of the case of Artax Manufacturing Company (supra) were applicable to the facts of the case, that the AO had assessed the JV company also, that he could attribute the values individually to various assets, based on a location made in the books of the purchaser company, that the allocation was based on the valuation report dated 11/05/1998, that the assessee had never disputed the facts regarding the valuation report, that the facts born from the records of the purchaser were the clinching eviden....
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....e from capital gains.Referring to the CBDT circular NO.63, dated 16/08/1971, the AR argued that the amount of capital gain had be ascertained by deducting, from the amount of compensation the aggregate of cost of acquisition of undertaking and the cost of any improvements thereto, that merely because the assessing officer had also assessed the LTK he could not attribute the values individually to various assets based on the allocation made in the books of the purchaser company, that the allocation was done in the books of the transferee based on the valuation report dated 11/05/1998, that in the hands of the purchaser the apportionment of purchase consideration among various types of assets had to be made, that it had to book the assets and the liabilities, that the accounting treatment given by LTK was in accordance with AS-10, that LTK had apportioned the consolidated consideration among various fix and current assets based on the values report, that there was no material available to the AO to draw the conclusion that assessee had sold itemized assets, that the valuation report dated 11/05/1998 was obtained by LTK, that merely because a valuation of landed building was done by t....
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....its/undertaking in respect of which even the benefit under section 80-I had been allowed in the past, that the AO had admittedly indicated that Bangalore unit was engaged in manufacture of construction equipment and that was one of the businesses of the company, that it was not necessary for the company to sell all its division forming part of manufacturing business undertaking, that the sale of a going concern could legitimately relate to the manufacturing facilities only, that in case of the assessee the marketing function was always forming part of overall marketing activities of the company. He referred to the pages 256-278 of the paper book and relied upon the cases of PNB Finance Ltd.(307ITR57), Electric Control Gear Manufacturing Company (227 ITR 278) and Novartis India Ltd.(64SOT84).He fairly conceded that the loss claimed by the assessee for with regard to slump sale was not allowable.The DR contended that the whole unit was not sold as a going concern, that other units like marketing unit remained with the assessee, that purchaser JV had the assessee as one of the partners, that facts of the case Artex were clearly applicable, that it was a colorable device to reduce the ....
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....ed goods which was worked out at Rs. 3.48 crores and held the difference of Rs. 6.90 crores chargeable as capital gains. The FAA affirmed this holding that the net worth of the unit was ascertained by evaluating each asset and liability and the sale price being determined on the basis of each asset and liability it could not be asserted that the assets were not acquired at any cost. The Tribunal held that this was not a sale of itemised assets and it was hence not possible to compute any chargeable capital gain on the sale of the undertaking as a going concern. On appeal the Hon'ble Court held that the agreement in pursuance of which the undertaking was transferred by the assessee made it clear that the assessee was transferring to the purchaser the undertaking/business as a running business/going concern together with its assets and liabilities, that the under-taking/business comprised besides immovable property and movable property(including plant and machinery), current assets including raw materials, stock-in-trade and book debts, the benefits of all pending contracts, engagements and orders, all licences and other permissions and approvals required from the State and the Cent....
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.... Lordships on the same day, viz., July 8, 1997. The judgment in Artex Manufacturing Company [1997] 227 ITR 260 (SC) was delivered earlier and later on, the same day, the judgment in Electric Control Gear Manufacturing Company [1997] 227 ITR 278 has been delivered. Based on the facts in each case, their Lordships have taken a view that section 41(2) is applicable in the case of Artex Manufacturing Company [1997] 227 ITR 260 (SC) and similarly their Lordships have held that the provisions of section 41(2) of the Act is not applicable to the facts involved in Electric Control Gear Manufacturing Company [1997] 227 ITR 278. 10. In view of these two judgments, we have to find out whether the facts in the present case are similar to the case in Artex Manufacturing Company [1997] 227 ITR 260 (SC) or Electric Control Gear Manufacturing Company [1997] 227 ITR 278. If the case in hand is similar to that of Artex Manufacturing Company [1997] 227 ITR 260 (SC), we have to reverse the finding of the Tribunal as well as the Commissioner of Income-tax (Appeals), and if the judgment in Electric Control Gear Manufacturing Company [1997] 227 ITR 278 could be made applicable to the present case base....
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.... show-cause notice to the assessee. The assessee submitted that no part of the price of Rs.42. 50 crores was attributable to any particular asset including any depreciable asset and, so, the provisions of section 50(2) were not attracted. It also contended that it was an old concern for more than 36 months, its transfer would give long-term capital gain. The AO held that the capital gains on the depreciable asset were to be treated as short-term capital gains and required the assessee to quantify the consideration received by it for sale of tangible and intangible assets but the assessee did not furnish the information. Accordingly, he took the written down value of the assets of the lamp division at Rs. 5,15,75,131 as declared by the assessee out of which he segregated the value of land and applied indexation. Consequently, he computed the short-term capital gains at Rs. 36,89,23,393. The FAA confirmed the order passed by the Assessing Officer holding that the assessee had merely made a unit sale, i.e., sale of its lamp division which was a part of its overall business concern and that the assessee still continued as a business concern, that the assessee was not treating that unit....
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....nd assets relating thereto at the Plant on the terms and conditions set forth herein;" The definitions provided in the BTA would be beneficial to resolve the issue. The agreement has defined Benefit Plans, Business Transfer Approvals and Current Liabilities as under :- "Benefit Plans" means all superannuation, provident fund, gratuity, profit sharing, retirement, deferred compensation, bonus, severance or termination payment, disability, hospitalization, medical insurance, life insurance, life insurance and other benefit plans, programs, policies or arrangements with respect to the Transferred Employees. "Business Transfer Approvals" shall mean all approvals, authorizations, permission, consents and licenses from government authorities in India and L&T's shareholders necessary to transfer the L&T Transferred Business to JVC. "Current Liabilities" means the liabilities of L&T including but not limited to credits, loans and advances payment, pre-payment (if any) which shall be assumed by JVC on the Final Closing Date." At page-283 of the PB L&T assets of L&T have been defined as under :- "L&T Assets" means all of the assets used in or otherwise related to....
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.....It is found that the said unit was allowed 80I deduction in earlier years. It proves that is was not dependent on other divisions located at Banglore.It is not the case of the AO that the other units were not doing their businesses independently or they were inseparably linked with the unit sold by the assessee.In fact they were catering the need of all other divisions.As an independent unit, earth moving manufacturing unit, was a separate business having its own assets and liabilities.The assessee had transferred that division to JV for a lump sum amount.While doing so, depereciation was not claimed on the assets transferred. It is also found that the entire plot of land of the earth moving equipments manufacturing unit was transferred to JV, none of the assets located at any other plant was transferred by the assessee.In our opinion, the transfer deed executed on 19.03.98 for transfer of land and building was only for the purpose of conveyance and registration of immovable property, that the said transfer deed did not contain any specific value for transfer of plot of land and building, that the value declared by it was for the purpose of stamp duty and registration. We find th....
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....ced from the profits of business During the course hearing before us, the AR and the DR stated that issue of inclusion on scrap sales in the total turnover(Rs.1701.62 lakhs) was decided in favour of the assessee by the Tribunal in A.Y. 1997-98 as under: - "7. Ground nos. 5 & 6 relate to the claim of deduction u/s. 80HHC and 80HHE of the Act. These grounds have three components: a) Inclusion of scrap sales and other items of miscellaneous income in the total turnover. Similar issue has been considered by the Tribunal in ITA No.2200/Mum/2000 at para 31 on page 11 of its order, wherein the Tribunal has followed its own order in the assessee's own case for A.Y. 1994-95 in ITA nos. 4265 & 4892/Mum/98. Facts being identical, respectfully following the decision of the Tribunal in assessee's own case, we direct the Assessing Officer to give relief accordingly as claimed under part (a) herein above. b) Set off of loss of export of trading goods against profit on export of manufactured goods. Similar issue has been considered by the Tribunal in ITA No 2200/Mum/2000 at para 32 on page 11 of its order, wherein the Tribunal has followed its own order in the assessee's own case for A.Y. ....
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.... A.Y. 1997-98. We find that at page 9 of the order (para 22), the Tribunal has decided the issue as follows: "22. Ground nos. 13 to 15 relates to the claim of deduction u/s. 80HHC and 80HHE of the Act. The Assessing Officer has discussed this issue at para 26 on page 21 of his order. The CIT(A) has allowed the appeal of the assessee vide para 25 & 26 on page 15 of his order. We find that the Tribunal had an occasion to consider similar grievance in assesee's own case in ITA No.2200/M/2000. The Tribunal considered this issue at para 29 on page 10 of its order. We find that the Tribunal has followed the earlier orders of the Tribunal in assessee's own case in ITA No.4265 & 4892/Mum/98 as also in ITA No. 987/Mum/98. Facts and issues being identical, respectfully following the decision of the Tribunal in assessee's own case, ground no.13, 14 & 15 are accordingly dismissed." Respectfully following the above order, part of the issue involved is allowed in favour of the assessee. 8. The next item is set off of losses on export trading goods against profit on export of manufactured goods.The AR of the assessee fairly conceded that the Tribunal has dismissed the appeal of the assessee ....
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....order of FAA.We have heard the rival submission and material before us.We find that the issue decided by the Tribunal in the case of Honda Seil Power Products(supra)did not deal with the issue raised before us.We would like to reproduce the question raised in the appeal and same reads as under: "That, on the facts and in the circumstances of the case, the learned Commissioner of Income Tax(Appeals)-IV, Calcutta erred in law as well as on facts in holding that the Assessing Officer was not justified in adding back Rs. 90,80,314 under section 40A(3) while processing the return under section 143(1)(a) and in that view directed the Assessing Officer to delete the said disallowances by passing order under section 154 of the Income-tax Act, 1961." In our opinion, the above referred case is of no help to the assessee. In the case of Sharda Gums (supra)issue of interest income has been decided.It does not deal with the other items. Thus, the cases relied upon by the assessee are of little help to the resolve the issue.But, on the other hand the stand taken by the departmental authorities is also defective.We find that the AO and the FAA have relied upon the case of K K Doshi(supra)that....
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....ed retrospectively. Referring to the decision of the Daga Capital Investment Ltd. (26 SOT 603), the FAA held Rule 8D as well as the provisions of sub sections (2) and (3) were retrospective in operation, that all direct and indirect expenses relatable to exempted income. Accordingly he directed the AO to work out the disallowance after examining the working submitted by the assessee. 10.2. Before us the AR started that in A.Y. 1997-98 the FAA has deleted the adhoc addition of 5% made by the AO in respect of expenses related to dividend income and interest on tax free bonds, that the Tribunal confirmed the deletion in respect of expenses related to dividend income, that the Tribunal had disallowed the expenses relating to interest on tax free bonds @ 2%, that strategic investments made by the assessee, should be excluded for 14A disallow - ance.The DR relied upon the order of the FAA. 10.3. We have heard the rival submissions and perused the material before us.We find that while deciding the appeal for the AY.1997-98, the Tribunal had disallowed the expenses relating to interest on tax free bonds @ 2%, and had held that strategic investments made by the assessee, should be exclude....
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....ng business carried on by the assessee, the assessee-company was in fact exploring the prospectus of new units. Those units were not ultimately successful; we can say that they were all aborted projects. Therefore, those expenses are to be treated in the nature of loss of capital instead of revenue expenditure deductible in computing the income of the running business. Even though the items of expenditure may be in the nature of revenue expenses per se, those expenses were incurred not in connection with the business carried on by the assessee-company but those expenses were incurred for the business which were proposed by the assessee-company to commence and carry on. This line of distinction cannot overlooked. Therefore, in the light of the statutory provision governing the subject, we hold that this expenditure cannot be allowed and the lower authorities have rightly disallowed the expenditure incurred in connection with the projects not materialized. This ground is also dismissed. 6.19 The twelfth ground raised by the assessee is against the disallowance under Rule 6D on per employee per trip basis. The Bombay High Court in the case CIT Vs. Aorow India Ltd. [229 ITR 325] has....
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....ical, respectfully following the decision of the Tribunal in the assessee's own case, findings of the CIT(A) are confirmed. Ground No. 5 with its sub ground is accordingly dismissed." Respectfully following the above, ground No. 1 is decided against the AO. 15. Next ground of appeal is about expenditure on construction of jetty.We find that this issue stands decided in favour of the assessee by the Tribunal in ITA No. 4299/Mum/2001 for AY.1997-98, wherein it was held as under: "13. Ground No. 4 relates to the deletion of the addition made on account of expenditure on construction of jetty at Gujarat Cement Plat Rs.9,58,53,000/-. This issue has been discussed by the Assessing Officer at para 15 of page 8 of his order and the same has been considered by the CIT(A) at para 10 page 4 of his order. Similar disallowance was considered by the Tribunal in the assessee's own case in ITA No. 2863/Mum/2000 at para 42 and 43 on pages 14 & 15 of its order, wherein the Tribunal has followed its findings in assessee's own case for A.Y. 1994-95 in ITA Nos. 4265 & 4892/Mum/98. Facts and issues being identical, respectfully following the decision of the Tribunal, findings of the CIT(A) are c....
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....ssessee's own case in ITA No. 2863/Mum/2000 at para 46 at page 15 of its order, wherein the Tribunal has followed the findings in the assessee's own case for A.Y. 1994-95 in ITA Nos. 4264 & 4892/Mum/98. Facts and issues being identical, respectfully f9ollowng the decision of the Tribunal in thease's own case the findings of the CIT(A) are confirmed. Ground 7 with its sub grounds is accordingly dismissed." Respectfully following the above, ground No. 5 is decided against the AO. 19. Sixth ground of appeal is about charges, including commitment charges, in respect of borrowings made for cement projects(Rs.5.61crores).Representatives of both the sides agreed that the issue stands decided against the AO by the Tribunal order for the AY.1997-98 (supra). We are reproducing the relevant portion of the order wherein it was held as under: - "16. Ground No. 7 with its sub ground relates to the deletion of the addition of Rs.71,87,42,880/-on account of interest and commitment charges in respect of borrowings made for Cement Projects. The disallowance has been made by the Assessing Officer at para 22 on page 15 of his order and the CIT(A) has deleted the additions as discussed at para 17 ....