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1994 (3) TMI 154

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..... T(A) has erred in allowing remuneration of Rs. 27,48,773 to sales/field organisers for sale of cement." 5. Having heard both the parties, we find that this issue came up for consideration before the Tribunal in assessee's own case for asst. yr. 1983-84 in ITA No. 493/Del/1987 and for asst. yr. 1984-85 in ITA No. 6136/Del/1987. The Tribunal after discussing this issue at length at paragraph 5 of its order dt.28th Feb., 1991in ITA No. 6136/87, allowed assessee's contention. Facts being the same, we do not find any substance in this ground. This ground is hereby rejected. 6. The next ground in Revenue's appeal is as under: "3. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the disallowance of Rs. 3,95,845 made under s. 40A(8) by holding that fixed deposits received from public were secured by virtue of a floating charge on the movable assets on the company." 7. Having heard both the parties, we find that this issue came-up for consideration before the Tribunal in assessee's own case in asst. yr. 1979-80 in ITA No. 483/Del/84 and in asst. yr. 1984-85 in the above cited appeal. The facts being the same for this year also, we do not find a .....

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..... As against this, the learned counsel for the assessee relied on the order of the Tribunal for asst. yr. 1984-85. 12. We have considered the rival submissions and have gone through the details given at pp. 15-16 of the order of the CIT(A). The CIT(A) has discussed each and every item of expenditure elaborately in his order and given a finding of fact that all the expenditure incurred by the company was measure of staff welfare to maintain cordial relationship with the staff to help the staff and workers in various aspects. This view was taken by the Tribunal in assessee's own case for asst. yr. 1984-85. There is no material available on record to take a different view in the matter. So far as the decision cited by the learned Departmental Representative is concerned, it is distinguishable on facts. In view of this, the ground is hereby rejected. 13. The next grievance of the Revenue is as under: "6. On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that payment of Rs. 2,90,558 to M/s Lafarge Conseils and Rs. 2,25,000 to M/s Holtec Pvt. Ltd. was a revenue expenditure allowable to the assessee." 14. Having heard both the parties, we find th .....

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..... On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that the word 'motor car' in s. 37(3B) will not include 'jeep' and thereby reducing disallowance under s. 37(3A) of the IT Act." 20. The case of the Department is that the jeep is motor car within the meaning of s. 37(3A). Therefore expenditure incurred was rightly considered under this section. The learned Departmental Representative relied on the decision of Madras High Court in the case of Crompton Engg.Co.(Madras) Ltd. vs. CIT (1991) 92 CTR (Mad) 207 : (1992) 193 ITR 483 (Mad) and the decision of Kerala High Court in the case of Commr. of Agrl. IT vs. Good HopePlantation(1988) 69 CTR (Ker) 146 : (1988) 170 ITR 173 (Ker). As against this, the learned counsel for the assessee submitted that the word "jeep" cannot be taken as a motor car because the technical word assigned to jeep cannot be construed to motor car to bring the same within the purview of s. 37(3A). Reliance was placed on the decision of Tribunal in the case of Kudos International vs. IAC (1987) SOT 137 (Bom) (FB) and also on the decision of the Tribunal in assessee's own case in asst. yr. 1984-85. 21. We have considered the .....

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..... 's own case in asst. yr. 1984-85 in the above noted ITA No. Facts relating to this issue are similar to the facts involved in asst. yr. 1984-85. Therefore, for the reasons given in that order we do not find any substance in this ground. This ground is hereby rejected. 30. The next grievance in Revenue's appeal is as under: "13. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting addition of Rs. 10,88,042 in respect of undervaluation of DBM Dust." 31. One of the products of the assessee's unit is dead burnt Magnesite (DBM). This was uniformly valued as a closing stock in all the earlier years. The method was the raw material cost plus packing charges. Prior to 1984-85 the assessee was producing magnesite by a particular method which involved heat in a very high degree. Later, they discontinued this method and adopted the one where there was lesser heat involved. This resulted in increased percentage of silica in the by-product of DBM. Now DBM is used mainly as raw-material in the preparation and manufacture of fire bricks. Because of change in the method they found that the by-product contained silica ranging from 5% to 15%. With the consen .....

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..... over and 5% of the increase in the export turnover as compared to last year. The Assessing Officer came to the conclusion that deduction under s. 80HHC has been claimed in respect of export of basmati rice which is an agricultural produce. Therefore, he disallowed the claim. 39. When the matter came before the CIT(A), the CIT(A) deleted this addition holding that rice is a finished product which is obtained after processing which involved de-husking, shelling of paddy resulting in brown rice, milling for removal of bran from rice and polishing the resultant rice, seiving for separating/removing the brokens and then finally packing the product. He was of the view that the paddy is an agricultural produce but basmati rice is a finished product which is not an agricultural produce. 40. We have heard both the parties and have gone through the order of the CIT(A). We are in agreement with the view taken by the CIT(A) on this point. Our view is supported by the decision in the case of South Arcot Distt. Co-operative Supply & Marketing Society Ltd. vs. CIT (1974) 97 ITR 500 (Mad). We, therefore, do not find any substance in this ground. The ground is hereby rejected. 41. The next griev .....

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..... circumstances of the case, the learned CIT(A) has erred in holding that the claim of assessee under s. 35(1)(ii) of the IT Act could not be taken as a colourable device for reducing the tax liability." The assessee-company paid an amount of Rs. 50 lakhs to M/s Dalmia Institute of Scientific and Industrial Research. The Assessing Officer disallowed the claim for the following reasons : (i) The appellant-company has not obtained any services from M/s DISIR related to the business of the appellant-company. (ii) The amount paid is not established to be an expenditure of the appellant-company. (iii) The amount paid is mere donation without any service being rendered. (iv) The Dalmia Institute of Scientific and Industrial Research has admitted that they did not carry out any research work specifically on behalf of the Dalmia Cement (Bharat) Ltd. and as such no project report or any research paper was prepared by the Institute. (v) The Council of Management of the Institute including Shri M.H. Dalmia, R.H. Dalmia and Shri J.H. Dalmia who are brothers of Shri Y.H. Dalmia, president of the assessee-company and other members of the board of management was Shri P.L. Pasricha who is an e .....

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..... s a matter of fact that each and every stock under various heads shown in the balance-sheet and in the bank tally in respect of date and value. Therefore, he deleted the addition. 54. The learned Departmental Representative invited our attention to the discrepancy noted by the Assessing Officer in lime stone and pointed out that the CIT(A) has not discussed it at length. However, the learned counsel for the assessee pointed out from the paper book pages 133 and 642 of the paper book that these items are exactly the same and they are tallying with each other in terms of weight and value. This was taken note of by the CIT(A). Therefore, there is no difference. 55. We have considered the rival submissions and have gone through the material available on record as well as paper book pp. 133 and 642. We find that in the balance-sheet the stock has been bracketed into various sub-headings which are directly and closely linked with the main heading. The statement and the balance-sheet were completed after filing the statement with the bank. Therefore, this created confusion in the mind of the Assessing Officer. Each and every item had been discussed by the CIT(A). Therefore we agree with .....

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..... also not a technical personal to select the plant & machinery. 61. When the matter came before the CIT(A), he deleted the addition holding that Shri Y.H. Dalmia has sufficient experience in the line of cement industry, having spent major portion of his career in this line of business. Therefore, tour expenses are relatable to the business of the assessee-company. 62. Having heard both the parties, we agree with the view taken by the CIT(A) on this issue. We do not find any material to take a different view in the matter. This ground is hereby rejected. 63. The next grievance in Revenue's appeal is as under: "22. On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that expenses of Rs. 2,35,200 on shifting of power line were allowable as revenue expenditure. The assessee-company claimed expenditure incurred on shifting of power line. The assessee was having a regular electricity supply from Tamil Nadu Electricity Board. The Transformer as well as the electricity line was located inside the factory premises of the assessee-company. The company was to construct conveyors belt for stacker reclaimer plant. The electricity supply line as well as .....

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..... rough the order passed by the CIT(A) in detail. We agree with the view taken by the CIT(A) and do not find any material to take a different view in the matter. Therefore, this ground is hereby rejected. 69. The next grievance in Revenue's appeal is as under: "24. On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that expenses on criminal proceedings at Rs. 23,750 were incurred wholly and exclusively for the purposes of the business." The assessee-company at its Salem Works had supplied magnesite powder to a customer M/s Industrial Mineral & Chemical Ltd. (IMCL) but the supply was rejected by the IMCL being not in accordance with the sample. The assessee-company agreed to refund the full sale price, provided the goods were returned to it by the customer at its own cost. Thereupon instead of returning the goods, the customer lodged a criminal complaint against the assessee. When the matter came before the Hon'ble Bombay High Court, it was held that this was a plain transaction of sale of goods in which the company tried its best to satisfy the customer. Therefore, criminal proceedings were quashed. Expenditure incurred on this litigation wa .....

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..... evious year." These grounds are interconnected, therefore, for the sake of convenience, they are disposed of together. The Assessing Officer made following disallowance: . Rs. "1. D.A. Arrears--Factory 61,963 2. D.A. Arrears--Quarry 18,197 3. Heat & Heavy equipment allowance. 10,518 4. Arrears out of arbitration award--factory. 1,15,841 5. Arrears out of arbitration award--quarry. 20,460 6. Educational allowance 3,960 7. Difference due to increment paid. 5,175 . 2,36,114 The Assessing Officer has given following reasons for making the disallowance: (i) D.A. Arrear--factory--According to the IAC (Asst.) the assessee's claim that it was required to pay the D.A. arrear w.e.f. 11th July, 1983 is not supported by the letter from the Govt. of India. (ii) Regarding heat & heavy equipment allowance the IAC (Asst.) is of the opinion that from the office order dt.15th Oct., 1985the liability has arisen from July, 1983 and the assessee cannot claim the deduction for the same in this previous year. (iii) Regarding the claim of the assessee for payments of Rs. 1,15,841 and Rs. 20,460 on account of arrears arising during the year is not acceptable because liability does no .....

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..... nder continuous process which resulted in high temperature developed in the furnace. The air which is blown in the furnace from the motorised fan under high pressure gets heated up inside the furnance and through a conduit pipe into the vertical roller mill for drying up the ground limestone therein. During the year under consideration the company purchased two new motors costing Rs. 37,233 and has claimed 100% depreciation on the WDV. The IAC (Asst.) rejected the claim of the assessee on the following two grounds: (i) The addition is in respect of motor coal-fixed furnace and not on account of fludized bed boiler and (ii) 100% depreciation is not available regarding old items coming from last year and no explanation has been given by the appellant company. The CIT(A) allowed 100% depreciation on machinery. 78. The learned Departmental Representative relied on the order of the Assessing Officer. As against this, the learned counsel for the assessee relied on the order of the CIT(A). 79. We have considered the rival submissions and have gone through the factual aspect of the matter mentioned in the order of the CIT(A) at paragraph 46.2 to 46.4. We are of the opinion that the ass .....

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..... nce in Revenue's appeal is as under: "31. On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that the telephone exchange installed by the assessee was not an office appliance and was entitled for ESA, additional depreciation and investment allowance." 86. Having heard both the parties, we find that similar issue came up for consideration before the Tribunal in assessee's own case in ITA No. 5363/Del/87 for asst. yr. 1981-82, which is placed at paper book page 124 and the Tribunal has discussed this matter at paragraphs 5 to 7 of its order dt.2nd Sept., 1987. The facts relating to this issue are similar, therefore, for the reasons given in that order, we do not find any substance in this ground. Therefore, this ground is rejected. 87. The next grievance in Revenue's appeal is as under: "32. On the facts and in the circumstances of the case, the learned CIT(A) has erred in allowing investment allowance and additional depreciation on a water cooler." The assessee-company installed water cooler in its cement factory at Dalmiapuram and incurred an expenditure of Rs. 13,223. The assessee-company claimed investment allowance of Rs. 3,306 and ad .....

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..... ee-company imported two diesel generating sets of (i) 5000 KVA and (ii) 2500 KVA from Wartsils of Finland during the year under consideration. The installation of the first one was completed and D.G. set commissioned in December, 1983. The installation of second set DG 2500 KVA was completed and it was commissioned in April, 1984. The cost of two D.G. sets was partly financed by indigenous resources and partly by foreign currency loans in Japanese Yen 27,09,04,566 (equivalent to Indian Rs. 1,19,69,244 average rate of exchange being Rs. 0.0441 per Japanese Yen and Swiss Franc 46,562 (equivalent to Indian Rs. 2,26,054) average rate of exchange being Rs. 48,549 per Swiss Franc arranged and obtained through ICICI. The aggregate cost including the foreign currency loan of the first diesel generating set installed and commissioned in 1983 amounted to Rs. 1,73,48,189 as shown in the fixed asset schedule and the depreciation chart filed with the IAC for the accounting year 1983. The aggregate cost of the second diesel generating set installed and commissioned in April, 1984 amounted to Rs. 93,66,211 as shown in the fixed asset schedule and the depreciation chart filed with the IAC (Asst.) .....

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..... s. 33, which makes it clear that investment allowance is allowable. Reliance in this connection, was placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Arvind Mills Ltd. (1992) 101 CTR (SC) 91 : (1992) 193 ITR 255 (SC). 97. We have considered the rival submissions and have gone through the decision of the Hon'ble Supreme Court in the case of CIT vs. Arvind Mills Ltd. The Hon'ble Supreme Court observed as under: "Sec. 43A was specifically introduced in the IT Act, 1961, to provide for the treatment of the situation created by the devaluation of the rupee. It specifically enacts that the amount of increase or decrease in the liability due to exchange rate fluctuation should be adjusted against the actual cost or the capital expenditure or the cost of acquisition only in relation to the five provisions of the Act referred to in the section. Where the terms of sub-s. (1) are fulfilled in any case, it is mandatory to take the actual cost, capital expenditure or cost of acquisition at the higher or lower figure for the purposes of the provisions mentioned therein irrespective of whatever might have been the position independent of the section. The non obstante .....

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