TaxTMI 
TaxTMI 
TaxTMI 
2025 (5) TMI 2190
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....36(1) (va) of the Income Tax Act, 1961 (in short the 'Act') disallowed the deduction claimed. Learned First Appellate Authority confirmed the disallowance. 5. Before us, learned counsel appearing for the assessee fairly conceded that the issue is covered against the assessee by virtue of the decision of the Hon'ble Supreme Court in case of Checkmate Service Pvt. Ltd. vs. CIT [2022] 143 taxmann.com 178 (SC). 6. Learned Departmental Representative (DR) agreed with the aforesaid submission of learned counsel for the assessee. 7. Having considered rival submissions, we are of the view that the issue in dispute is squarely covered against the assessee by the decision of the Hon'ble Supreme Court in case of Checkmate Services Pvt. Ltd. (Supra). Accordingly, we uphold the disallowance. This ground is dismissed. 8. In Ground No.3, assessee has contested the disallowance of expenses incurred of Rs.5,03,37,991/- towards SAP-ERP expenses by treating as capital expenditure. 9. Briefly the facts are, in the year under consideration, the assessee had claimed deduction of an amount of Rs.5,03,37,991/- towards implementation of SAP-ERP. Though, the assessee had claimed the expenses ....
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....e do not see that such findings of the Tribunal are vitiated in law. All that the Tribunal has done earlier and now is that in the case of this Assessee simply because the exercise carried out by it does not result in loss of revenue and there could not be any prohibition for the same, allowed it. That is how the Assessing Officer's order is set aside. We do not see how any larger controversy or question arises for our consideration. Mr.Pinto would refer to Section 57 of the Income Tax Act, 1961 in that regard and submit that this course would be adopted by other Assessees as well and in that event the order passed by this Court would come in the way of the Revenue in investigating and probing such exercise by other Assessees. 4. We do not see how this order can be cited as precedent inasmuch as the Assessee before the Tribunal and before us paid interest to the Income Tax Department amounting to Rs.10,26,906/- . The Assessee claimed that this was business expenditure and this should have been allowed. The Assessee has received the interest of Rs.1,07,57,930/-. It was submitted that the amount of interest paid by the Assessee should have been allowed to be set off agai....
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....assessee submitted that issue has been decided in favour of the assessee in A.Ys. 2005-06 and 2007-08. Though, learned D.R. accepted the aforesaid factual position, however, he dutifully relied upon the observation of the AO and learned First Appellate authority. 18. Having considered rival submissions and perused the materials on record. We find identical issue came up for consideration before the Coordinate Bench in an appeal of the assessee for A.Y. 2007-08 (Supra). While deciding the issue, the Bench has held as under: "19. Having considered rival submissions, we find, while deciding assessee's appeal against the order passed order u/s. 263 of the Act in A.Y. 2005-06, the Tribunal vide order dated 11.03.2011 passed in ITA No. 3104/Mum/2008 has not only quashed the revision order but has held as under: "6. We have heard both the sides, perused the records and gone through the orders of the authorities below. The Rajasthan Government gave an option to the assessee availing the benefit under the scheme to repay the loan liability even before the stipulated repayment date. Pursuant to the government offer, the assessee company opted to make repayment of loan li....
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....pplication of law; will satisfy the requirement of the order being erroneous. In the same category full orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income Tax Officer has ....
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....ound No.6 is concerned, learned counsel appearing for the assessee submitted that as the AO has granted the desired relief to the assessee vide rectification order dated 17.12.2012, the ground has become infructuous. 21. Keeping in view such submission of the assessee, we dismiss the ground. 22. In ground No.7, the assessee has raised the issue of disallowance of employee's stock option cost amounting to Rs.4,89,82,986/-. 23. Briefly the facts are, while verifying the computation of income filed by the assessee, the Assessing Officer noted that though the assessee had added an amount of Rs.4,89,82,986/- to profit as per books towards employees' compensation cost under ESOS scheme, however, in the note to the computation of income the assessee had claimed that employee's stock option cost is allowable as deduction. Further, in course of assessment proceeding, the assessee furnished employees' stock option scheme and made detailed submission justifying the claim of deduction. However, relying upon the decision of the Coordinate Bench in case of Ranbaxy Laboratory Pvt. Ltd., the Assessing Officer rejected assessee's claim. Learned First Appellate Authority upheld the decision....
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.... by the decisions of the Tribunal in assessee's own case in A.Y. 2005-06 and 2007-08. 29. He drew our attention to the relevant observations of the Tribunal in the orders passed in A.Ys. 2005-06 and 2007-08. Though learned DR agreed that the issue has been decided in favour of the assessee in A.Ys. 2005-06 and 2007-08, however, he submitted that the decision taken by the Tribunal in earlier assessment years should not be followed and the matter may be referred to Special Bench. 30. Having considered rival submissions and perused the materials on record. We are of the view that identical issue stands decided in favour of the assessee by the decisions of the Tribunal in A.Y. 2005-06 and 2007-08. While deciding the issue in A.Y. 2007-08, the Tribunal has held as under:- "8. We have considered rival submissions and perused the materials on record. We have also applied our mind to the decisions relied upon. It is observed, identical issue came up for consideration before Coordinate Bench in A.Y. 2005-06. While dealing with the issue, the coordinate Bench in ITA No.3517/Mum/2006, dated 04.07.2023 has held as under: "23. We have considered the submissions of both s....
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....the purposes of this sub-section "written down value of the block of assets" shall have the same meaning as in clause (c) of subsection (6) of section 43. 26. Section 43(6)(c) of the Act reads as under:- "(c) in the case of any block of assets,- (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted,- (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year; (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; and (C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduced- (a) by the amount of depreciation actually allowed to him under this Act ....
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....y the Economic Administration Reforms Commission (Report No. 12, para 20), the existing system in this regard requires the calculation of depreciation in respect of each capital asset separately and not in respect of block of assets. This requires elaborate book-keeping and the process of checking by the Assessing Officer is time consuming. The greater differentiation in rates, according to the date of purchase, the type of asset, the intensity of use, etc., the more disaggregated has to be the record-keeping. Moreover, the practice of granting the terminal allowance as per section 32(1)(iii) or taxing the balancing charge as per section 41(2) of the Income-tax Act necessitate the keeping of records of depreciation already availed of by each asset eligible for depreciation. In order to simplify the existing cumbersome provisions, the Amending Act has introduced a system of allowing depreciation on block of assets. This will mean the calculation of lump sum amount of depreciation for the entire block of depreciable assets in each of the four classes of assets, namely, buildings, machinery, plant and furniture. 28. Further, as per section 43(6)(c)(i)(B) of the Act, the writt....
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....d for this reason, we say that there is no loss to revenue either." 29. Thus, in view of the above, once the property forms part of the block of assets, carving out the depreciation for the said property and disallowing the same goes against the spirit of allowing depreciation on the entire block of depreciable assets. Before concluding, we may note that in this appeal the Revenue has not disputed the claim of deduction under section 24 of the Act in respect of the property which forms part of the block of assets. Thus, merely because the Revenue has accepted the claim of deduction under section 24 of the Act doesn't mean that the property which forms part of the block of assets will cease to be so. Therefore, the disallowance of depreciation of Rs. 45,681 made by the AO is deleted. As a result, ground No. 4 raised in assessee's appeal is allowed." 9. Keeping in view the parity in factual position and also the fact that the issue has been decided in assessee's own case, we respectfully follow the decision of the Coordinate Bench, as referred to above, and direct the Assessing Officer to allow the claim of depreciation. This ground is allowed." 31. We do not fin....
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....itted that as per Rule-4, there is no such condition prescribed by the Board. Proceeding further, he submitted, when the statutory provisions do not vest jurisdiction on the approving authority to impose fresh conditions other than conditions already provided under the provision, the approving authority cannot issue the approval imposing conditions other than those prescribed in the statutory provision. In support of such contention, he relied upon the decision of the Hon'ble Supreme Court in the case of Continental Construction Ltd. vs. CIT [1992] 195 ITR 81 (SC). 37. Per contra, learned Departmental Representative (DR) submitted, only the contribution paid or payable are to be allowed. 38. We have considered rival submissions and perused the materials on record. Undoubtedly, the Commissioner of Income Tax has granted separate approvals to employees' gratuity fund and provident fund created by the assessee. However, while granting approval, the CIT has observed that the expenses borne by the assessee for administration of the funds/trusts shall not be allowed as deduction while computing the profit and gains from business. The issue arising for consideration, is whether the ....
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....do. Its approval cannot be tentative or provisional or qualified. It cannot be hedged in with conditions and restrictions of the nature set out in the Board's letter. It cannot limit the relief to certain assessment years only; it cannot restrict or enlarge the scope of the relief that can be granted under the section. The assessment years for which relief is available, the extent of the receipts that qualify for deduction and all other incidents flow from the language of the section." 41. Applying the ratio laid down by the Hon'ble Supreme Court referred to above, we hold that the disallowance made by the AO is unsustainable. Accordingly, we direct the AO to delete the disallowance. This ground is allowed. 42. In Ground No.11, the assessee has contested the disallowance of deduction claimed u/s. 80IA of the Act in respect of other income. 43. Having heard the parties, we find that it is recurring dispute between the parties from earlier assessment years. While deciding the issue in the latest order passed in assessee's case in A.Y. 2007-08(Supra), the Coordinate Bench has held as under: "30. Having considered rival submissions and perused the materials on rec....
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....A.Y. 1999-2000, the AO added back the expenditure claimed amounting to Rs.1,18,34,608/- treated it as capital expenditure. In the current assessment year, the assessee had sold the shares of SDCCL. While computing capital gain, assessee had claimed the expenditure incurred at the time of acquisition of shares as cost of acquisition. However, deduction claimed has not been allowed to the assessee. 50. We have considered rival submissions and perused the materials on record. In principle, we accept the submission of learned counsel for the assessee that while computing capital gain on sale of shares, cost of acquisition of shares has to be allowed as deduction u/s. 48 of the Act. Therefore, AO is directed to factually verify assessee's claim based on facts and material on record and allow deduction towards cost of acquisition, if has not been allowed in any other assessment year. Ground is allowed for statistical purposes. 51. In addition to main ground, assessee has raised three additional grounds. Considering the fact that additional grounds raised do not require investigation into freshs facts and can be decided based on facts and material available on record, we admit the a....
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....inst the assessee. This ground is dismissed. 56. In additional Ground No.2, the assessee has raised the issue of disallowance of Rs.94,34,608/- on being cost of acquisition of SDCCL shares on sale of which the assessee has declared capital gain in the impugned assessment year. This ground is identical to Ground No.13 divided by us earlier, hence, does not require separate adjudication. 57. In additional Ground no.3, the assessee has raised the issue of taxability of subsidy received from the Central Government under Technology Upgradation Fund Scheme (TUF) as revenue receipt. 58. We have considered rival submissions and perused the materials on record. It is observed, this is a recurring issue between the parties. While deciding the issue in earlier assessment years, the Tribunal has taken a view favourable to the assessee. In the latest order passed for A.Y. 2007-08 (Supra), the Tribunal, while deciding the issue has held as under: "47. Having considered rival submissions and perused the materials on record, we find, identical issue came up for consideration before the Tribunal in assessee's own case in Assessment Year 2005-06 (Supra). While deciding the issue, t....
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....y under technology upgradation fund scheme is capital receipt. The coordinate bench held as under:- "8. Ground No. 11: 11. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in directing to treat the interest subsidy of Rs. 15,23,25,727/- as capital in nature." 38.1 In ground No.11 the Revenue has assailed the findings of CIT(A) in holding interest subsidy from Technology Up gradation Fund(TUF) Rs. 15,23,25,727/- as capital in nature. The ld. Authorized Representative for the assessee submitted that the Hon'ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd. in DB Income Tax appeal No.31/2019 decided on 19/09/2019 has held subsidy received under TUF as capital in nature. Similar view has been taken by Mumbai Tribunal in the case of ACIT vs. SVG Fashions Ltd. in ITA No.704/Mum/2016 for assessment year 2012-13 decided on 17/07/2018. The ld. Authorized Representative for the assessee to further buttress his submissions placed reliance on the following decisions: - (1) CIT vs. Gloster Jute Mills Ltd.,96 taxmann.com 303 (2) CIT vs. Sshyam Lal Bansal, 200 Taxman 14 (P&H) 38.2 The ld. Author....
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....itional grounds raised by the assessee vide application dated 06/04/2015 are allowed." 48. Facts being identical, respectfully following the decision of the Coordinate Bench, we direct the Assessing Officer to delete the addition. 59. Finding parity in facts, we respectfully follow the view expressed by the Coordinate Bench in earlier assessment years and direct the AO to delete the addition. This ground is allowed. 60. In additional Ground No.4, the assessee has claimed deduction of Rs.27,74,87,168/- representing payment of education cess. 61. We have heard the parties and perused the materials on record. At the outset, learned counsel appearing for the assessee submitted that in assessee's own case, the issue has been decided against the assessee in A.Ys. 2005-06 and 2007-08. It is observed, while deciding identical issue in the latest order passed in A.Y. 2007-08 (supra) the Coordinate Bench has held as under: "50. Before us, learned counsel appearing for the assessee submitted that as per Section 40(a)(ii) tax levied on the profits or gains of business and profession or assessed as proportion of or otherwise on the basis of such profits or gains canno....
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....gh an additional ground. Consistent with the view taken therein, we dismiss the ground raised by the assessee. This ground is dismissed." 62. Respectfully following the decision of the Coordinate Bench, we disallow assessee's claim by dismissing this Ground. 63. In the result, appeal is partly allowed. ITA No. 6758/Mum/2011 (Revenue's Appeal) A.Y. 2008-09 64. In Ground No.1, the Department has contested the deletion of disallowance made u/s. 43B of the Act in respect of certain payments aggregating to Rs.46,45,04,024/- stated to be covered under Clauses (b) to (f) of Section 43B of the Act. 65. Having considered rival submissions and perused materials on record, we find, this is a recurring issue between the parties for past many assessment years. In the latest order passed for A.Y. 2007-08 (Supra), the Tribunal, while deciding the issue, has held as under:- "59. Before us, it is a common point between the parties that the issue is squarely covered in favour of the assessee by the decisions of the Tribunal in its own case in past assessment years. 60. Having considered rival submissions, we find, it is a recurring issue continuing since AY 1986-87 o....
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....s a common point between the parties that the issue is squarely covered by the earlier decisions of the Tribunal and Hon'ble Jurisdictional High Court in assessee's own case. 69. Having considered rival submissions, we find, this is a recurring issue between the parties from AY 1998-99 onwards. We have further observed that the Tribunal has taken a consistent view and decided the issue in favour of the assessee up to AY 2005-06 (Supra). 70. Respectfully following the consistent view of the Coordinate Benches, we uphold the decision of learned First Appellate Authority. This Ground is dismissed. 73. Respectfully following the decision of the Coordinate Bench, we dismiss the ground raised. 74. In Ground No.4, Revenue has contested the deletion of disallowance of Rs.1,00,26,098/- representing cost of production of advertisement films. 75. Before us, it is a common point between the parties that the issue has been decided in favour of the assessee in earlier assessment years. 76. Having considered rival submissions and perused materials on record, we find, while deciding the issue in the latest order passed for A.Y. 2007-08 (Supra) the Coordinate Bench has....
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....ition of Rs.2,68,74,193/-. 83. Briefly the facts are, on 04.12.2007, assessee had entered into a share purchase agreement with M/s Cimpor Inversiones S.A. (CISA) for sale of its equity holding Shri Digvijay Cement Company Ltd. (SDCCL). After execution of share purchase agreement CISA transferred funds equivalent to the sale proceeds of the share in an offshore Escrow Account. Before the actual transfer of shares, certain actions were to be taken by CISA and the assessee. On completion of all such actions, the parties were required to inform each other and such date of notification is referred as 'unconditional date' in the Share Purchase Agreement (SPA). The said notification was issued on 18.03.2008 and the shares were transferred to CISA on 18.03.2008. The assessee received sale consideration along with the sale consideration interest of Rs.2,68,74,193/- for the period from 07.01.2008 to 17.03.2008 from escrow agent. Though, the assessee accounted for the interest income in its books of account and offered it to tax, however, before the Assessing Officer assessee submitted that the interest income is capital in nature. Hence, should not be made taxable. The AO, however, did no....
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....lease agreement till the date of consent decree can be said; to be capital in nature. The learned Senior DR has heavily relied on the decision of the apex court in the case of Dr. Shamlal Narula v. CIT 53 ITR 151 (SC) for the proposition that interest on compensation is always revenue in nature. On the other hand, the learned Counsel for the assessee has relied on the Kerala High Court decision in the case of Periyar & Pareekanni Rubber Ltd. (supra) and A.P. High Court decision in the case of J.D. Italia (supra). According to him, interest up to the date of determination of mesne profit would be in the nature of damages and therefore, capital in nature while the interest received after such date would be revenue in nature since it would be deprivation of use of money. 51. We are in agreement with the contention of the learned Counsel for the assessee. The hon'ble A.P. High Court as well as the Kerala High Court in the cases referred to by the assessee's counsel have considered this issue. The judgement of hon'bie Supreme Court in the case of Dr. Shamlal Narula (supra) was referred to and considered by the above High Courts. The hon'ble Kerala High Court in ....
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....Annamma Alexander (supra), the hon'ble Kerala High Court again considered this issue. Their Lordships made a distinction between "interest proper" and "damages by way of interest" by approving the view of the author Law of Income Tax by A.C Sampath Iyengar, Seventh Edition, Volume I page 518, which is reproduced, even at the cost of repetition, as under: If the quality of the claim for interest is compensation, for this reason that the claimant has been deprived of the use of the money and has not had his money at the due date, if would be income in his hands. It may be regarded either as representing the profit he might have made if he had had the use of the money in time, or, conversely, the loss he had suffered, because he had not had that use. If on the other hand, the claim is for toss of property or loss of goods, or some other injury to capital and the element of interest comes in by way of estimating the compensation to be granted for such capital loss or capital injury, then, the receipt would be capital. In view of the above, the High Court held that interest up to the date of award of mesne profits is nothing but damages for deprivation of use and o....
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....eipt not chargeable to tax. However, if any interest is received by the assessee beyond that period then, it would be revenue receipt chargeable to tax." 86. Further in case of Fujitsu Ltd. vs. ACIT (Supra), the Coordinate Bench has held as under: "18. Now coming to the taxability of interest received on the compensation arising out of an Arbitral Award in the sum of Rs 2,80,03,480/-, though the assessee had voluntarily offered the same to tax in the return of income, the same, in our considered opinion, would not be chargeable to tax at all, in view of the decision of Hon‟ble Supreme Court in the case of CIT vs Govinda Choudhary & Sons reported in 203 ITR 881 (SC) wherein it was held that such interest is only an accretion to the asesssee‟s receipts from the contracts. It is obviously attributable and incidental to the business carried on by it. The Hon‟ble Supreme Court specifically made an observation in Para 6 of its order that interest can be assessed under the head „income from other sources‟ only if it cannot be brought within one or the other of the specific heads of charge. We find it difficult to comprehend how the interest receip....
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....in place at different point of time. The AO further observed that in A.Ys. 2004-05, 2005-06 and 2006-07, identical claim made by the assessee was rejected in assessment proceeding. Thus, following the decision taken in past assessment years the AO disallowed assessee's claim of deduction. The disallowance was contested before learned First Appellate Authority. Having found that while deciding the appeals for A.Ys. 200304 to 2007-08, the First Appellate Authority had allowed the claim, he followed the view taken in those assessment years and allowed assessee's claim. 93. Before us, learned Departmental Representative (DR) submitted that in September, 1999, when the assessee furnished Form No.10CCB, there was no agreement with the Indian Railway. He submitted agreement with the Indian Railways was entered in the year 2000. 94. Drawing our attention to Section 80IA of the Act, he submitted that the claim of eligibility has to be examined in the year of initial operation. He submitted, since in the year of initial operation, the assessee did not fulfil the conditions, deduction could not have been allowed to the assessee. Thus, he submitted, the decision of the Tribunal in earlie....