2016 (10) TMI 413 - HC - Income Tax

Allowability of share issue expenses incurred - whether expenses incurred are for raising capital for purchase of plant and machinery should be capitalized and depreciation be allowed on the same - Held that - The issues raised herein stand concluded against the Revenue by order of this Court in The Commissioner of Income Tax VI Versus M/s. Glaxo India Ltd. 2013 (2) TMI 789 - BOMBAY HIGH COURT Accrual of Income - Advance license receivable - whether to be taxed in the year in which the benefits actually accrue after the imports are effected and not in the year in which the licence is granted tot he licensee/assessee? - Held that - The issue now stands concluded by the decision of the Apex Court in Commissioner of Income Tax Vs. Excel Industries Ltd. (2013 (10) TMI 324 - SUPREME COURT ) wherein held income does not accrue in the year of export but in the year in which the imports are made.Even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is therefore not the income of the assessee. Disallowance of penalty paid to Central Excise Authorities- Held that - The issue raised herein stands concluded against the revenue by the decision of this Court in International Fisheries Ltd. ( 2010 (3) TMI 291 - BOMBAY HIGH COURT ) wherein held as there was no breach of the provisions of the Sales Tax Act as such and it was justifiably held to be eligible for deduction..

Issues:
1. Capitalization of share issue expenses for purchase of plant and machinery.
2. Treatment of expenditure on consumables like diesel, oil, and coal.
3. Taxation of advance license receivable.
4. Treatment of interest on DPEA liability.
5. Disallowance of penalty paid to Central Excise Authorities.
6. Deduction under section 80M on dividend income.
7. Treatment of expenses in earning dividend for deduction under section 80M.
8. Payments made to Glaxo Sports Club under Section 40A(9).
9. Disallowance for deduction under sections 80I and 80IA.
10. Treatment of expenditure under Voluntary Retirement Scheme.
11. Allocation of Head Office Administrative expenses and interest cost for deduction under Section 80I/80IA.

Analysis:

1. Capitalization of Share Issue Expenses:
The Tribunal held that share issue expenses incurred for raising capital for plant and machinery should be capitalized. The appellant challenged this decision under Section 260A of the Income Tax Act, 1961. However, the Court refused to entertain the issue as it was previously concluded against the Revenue in a similar case for A.Y. 1995-96.

2. Treatment of Consumables Expenditure:
Regarding the treatment of expenditure on consumables like diesel, oil, and coal, the Tribunal allowed the entire expenditure as a business expense, even if not fully consumed during the relevant year. This decision was based on a previous court ruling, and the Court did not entertain the issue as it was already settled against the Revenue.

3. Taxation of Advance License Receivable:
The Tribunal's decision to tax the advance license receivable in the year benefits accrue after imports, rather than when the license is granted, was supported by a Supreme Court decision. The Court did not find any substantial question of law in this matter and did not entertain the issue.

4. Interest on DPEA Liability:
The Tribunal allowed the interest on DPEA liability as expenditure on a year-to-year basis. The Court noted that a similar issue was decided in favor of the assessee for A.Y. 1996-97, and therefore, did not entertain this question as it did not raise a substantial question of law.

5. Disallowance of Penalty Paid to Central Excise Authorities:
The Tribunal's decision to delete the disallowance of penalty paid to Central Excise Authorities was based on a court ruling. The Court found that the issue was settled against the Revenue and did not entertain it.

6. Deduction under Section 80M on Dividend Income:
The Tribunal directed to allow deduction under section 80M on the entire dividend income received, without considering the expenses involved in earning the dividend. The Court refused to entertain this issue as it was previously decided against the Revenue.

7. Treatment of Expenses in Earning Dividend for Deduction under Section 80M:
The Tribunal's decision to not estimate expenses incurred in earning dividend and to allow deduction under section 80M on the entire dividend income was challenged. The Court did not entertain this issue as it was already concluded against the Revenue.

8. Payments to Glaxo Sports Club under Section 40A(9):
The Tribunal held that payments made to Glaxo Sports Club did not fall under Section 40A(9) of the Income Tax Act. The Court did not find any substantial question of law in this matter and did not entertain the issue.

9. Disallowance for Deduction under Sections 80I and 80IA:
The Tribunal directed the Assessing Officer to consider the disallowance made on a proportionate basis for the purpose of deduction under sections 80I and 80IA. The Court noted that the deduction cannot exceed what was claimed by the assessee and refused to entertain this issue.

10. Treatment of Expenditure under Voluntary Retirement Scheme:
The Tribunal deleted the expenditure claimed for payment under the Voluntary Retirement Scheme, considering it as revenue in nature. The Court did not entertain this issue as it was previously settled against the Revenue.

11. Allocation of Head Office Administrative Expenses:
The Tribunal's decision to not allocate Head Office Administrative expenses and interest cost to the Nasik Units for deduction under Section 80I/80IA was challenged. The Court did not find any substantial question of law in this matter and dismissed the appeal.

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