9911796707
|
Home
Issues Involved:
1. Inclusion of Renovation & Modernisation (R&M) levy and Research & Development (R&D) levy in the income. 2. Nature of R&M and R&D levies as capital receipts. 3. Disallowance of prior period expenditure. 4. Disallowance of provision for doubtful advances. 5. Disallowance of guest house expenditure. 6. Entitlement to interest under section 244A. Issue-Wise Detailed Analysis: 1. Inclusion of Renovation & Modernisation (R&M) Levy and Research & Development (R&D) Levy in the Income: The primary contention was whether the R&M and R&D levies collected by the assessee should be included in its income. The assessee argued that these levies were collected on behalf of the Government and were diverted at source by an overriding title, thus not forming part of the income. The CIT(A) and the Tribunal rejected this argument, holding that the levies were collected as part of the business operations and retained by the assessee for its use, thus constituting application of income rather than diversion at source. The Tribunal noted that the levies were intended to generate financial resources for the assessee's own use and were not required to be passed on to the Government. Consequently, the levies were considered taxable revenue receipts. 2. Nature of R&M and R&D Levies as Capital Receipts: The assessee alternatively argued that the levies were in the nature of capital receipts and hence not liable to tax. The Tribunal rejected this argument, stating that the receipts were collected along with the tariff in the ordinary course of business and their ultimate application did not change their character from being business receipts to capital receipts. The Tribunal upheld the CIT(A)'s finding that the levies were not capital receipts. 3. Disallowance of Prior Period Expenditure: The assessee contested the disallowance of Rs. 11.04 lakhs as prior period expenditure. The Tribunal upheld the CIT(A)'s decision, noting that there was no evidence to suggest that the expenses were incurred during the year under appeal. The bills related to the prior financial year, and the assessee failed to provide supporting documents for the expenses claimed. 4. Disallowance of Provision for Doubtful Advances: The Tribunal addressed the disallowance of Rs. 12.29 lakhs for provision for doubtful advances. The CIT(A) had disallowed the provision on the grounds that the assessee did not satisfy the conditions laid down in section 36(1)(vii) read with section 36(2) of the Act. The Tribunal, however, accepted the assessee's contention that the advances were given to canteens for day-to-day expenses and their non-recovery did not mean they were not utilized. The Tribunal allowed the assessee's claim for deduction of the provision for doubtful advances. 5. Disallowance of Guest House Expenditure: The Tribunal considered the disallowance of guest house expenditure of Rs. 18.35 lakhs. The assessee argued that the guest houses were essentially transit houses for employees and should not be disallowed. The Tribunal restored the issue to the CIT(A) for fresh examination in light of the decision of the Hon'ble Bombay High Court in Greaves Cotton & Co. Ltd. v. CIT. 6. Entitlement to Interest under Section 244A: The assessee sought specific directions for the allowance of interest under section 244A up to the date of adjustment of the refund. The Tribunal noted that the CIT(A) had already directed the Assessing Officer to do the needful in accordance with law. The Tribunal saw no reason to interfere with this direction and dismissed the ground, allowing the assessee to make submissions before the Assessing Officer. Conclusion: The Tribunal dismissed the grounds related to the inclusion of R&M and R&D levies in income and their nature as capital receipts. It confirmed the disallowance of prior period expenditure but allowed the provision for doubtful advances. The issue of guest house expenditure was remanded for fresh examination, and the direction regarding interest under section 244A was upheld. The appeal was partly allowed.
|
