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TMI Blog2001 (11) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance as similar payment/contributions by assessee-employer, made in asst. yr. 1990-91 were also disallowed by him. The learned authorised representative of assessee has contended that the issue is covered in assessee s favour by the Jaipur Tribunal s order dt. 24th Feb., 1998, in ITA No. 1128/Jp/1994 for asst. yr. 1990-91, in assessee s own case, whereby the Tribunal held the said expenditure as allowable. As against this the learned Departmental Representative of Revenue has not raised any material argument before us. Considering the facts and circumstances of the case, the facts being identical, find the issue squarely covered by the above-mentioned order of the Jaipur Tribunal rendered in assessee s own case for asst. yr. 1990-91, wherein the Tribunal has, in para 4 of its order, held these payments incurred for staff welfare activities, being pursuant to arguments (sic-agreements) with the staff union, and connected with the smooth running of assessee s business, the assessee having no direct or indirect control over the utilisation of these funds and that a breach worked out under Industrial Disputes Act would have rendered the assessee punishable, to be allowable and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessee may not, justifiably be precluded from the same. In taking this view, we are supported by Vijay Kumar Jain vs. CIT (1975) 99 ITR 349 (P H) and J.K. Oil Mills Co. Ltd. vs. CIT 1976 CTR (All) 133 : (1976) 105 ITR 53 (All). However, as the issue has not been decided by the learned CIT(A) on merits, and rather we consider it just and proper to restore this issue to the learned CIT(A) for deciding the same on merits. We order accordingly. 7. Ground No. 5 disputes the disallowance of Rs. 12,86,75,345 being assessee s claim for interest on bonds. The learned authorised representative of assessee has contended that the AO has held that this expenditure has been held as capital expenditure in assessee s books of accounts and has also provided for depreciation thereon. He has contended that it is admittedly interest allowable in respect of long-term borrowing taken for setting up a new plant with new technology at Chanderia known as Chanderia Zinc Smelter. He has contended that the AO made the disallowance holding that the expenses including interest on borrowed funds, which were used to bring an asset into existence, represented capital expenditure. He has contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. vs. CIT 1974 CTR (SC) 309 : (1975) 98 ITR 167 (SC) is a direct authority on this issue and the AO has relied on the same. 8. We have considered the rival contentions, the relevant material on record as also the relevant material on record. In assessee s own case for asst. yr. 1991-92, Tribunal, Jaipur has already allowed similar interest in identical circumstances. Jaipur Tribunal has also considered 1974 CTR (SC) 309 : (1975) 98 ITR 167 (SC) cited by learned Departmental Representative of Revenue and relied upon by AO, and has held to be distinguishable on facts inasmuch as the cited case was in respect of a new business undertaking whereas the case of assessee was of a running business. Jaipur Tribunal has, in drawing its conclusion, followed Veecumsees vs. CIT (1996) 133 CTR (SC) 500 : (1996) 220 ITR 185 (SC) : (1998) 86 Taxman 243 (SC). As such, the facts being identical, we find the issue covered by the aforesaid decision of Tribunal Jaipur and so we respectfully follow the aforesaid decision and accordingly delete this disallowance. 9. Ground No. 5 disputes the disallowance of Rs. 1,42,529 representing prior period expenses. The learned authorised representative of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by a running business and not incurred for the establishment of a new business. It has been contended that the assessee was already in the business of lead and zinc mining for several years and Cominco was appointed to help and provide guidance in respect of lead refining plant. The expenditure was incurred by a growing concern in the course of its normal operation with a view to do business more efficiently and more economically, and the same did not create any new profit-earning capacity and so it was entirely revenue in nature. He has relied on: 1. CIT vs. Indian Aluminium Corpn. of India Ltd. (1973) 92 ITR 563 (Cal); 2. CIT vs. India Carbon Ltd. (1997) 137 CTR (Gau) 517 : (1996) 221 ITR 264 (Gau); and 3. Sayaji Industries Ltd. vs. Dy. CIT (2000) 68 TTJ (Ahd) 851 : (1998) 100 Taxman 110 (Mgz) (Ahd). 12. As against the above, the learned Departmental Representative of Revenue has contended that the citation referred to by learned authorised representative of assessee are distinguishable on facts. He has contended that in the instant case, the expenditure represents payment by way of damages relating to cancellation of contract for installation of plant for performan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to get ride of its contractual liability has also to be capital in nature. He also noted that all other payments made to Cominco Canada (contractor) have been capitalised. Besides the payments made to the new company to whom contract was given after cancelling contract with Cominco were also capitalised. In the circumstances he held this expenditure of Rs. 158.77 lacs as of capital nature. However, the perusal of record reveals that the assessee s zinc smelter plant at a new place Chanderia is a new unit of assessee s existing business. Had the Chanderia Zinc Smelter plant been a new business, the position would have been different and the conclusion drawn by learned CIT(A) could have been viewed supportively, but the position being that it is a new unit of existing business of assessee, and no new asset having been acquired by assessee as a result of payment of damage for cancellation of contract, the said expenditure cannot appropriately be treated as capital expenditure but has to be treated as revenue expenditure. We may, in this regard, refer to a decision of Hon ble Gujarat High Court, in CIT vs. Alembic Glass Industries Ltd (1976) 103 ITR 715 (Guj). with advantage. Besides, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkers. He has contended that the assessee has to keep peace so as to maintain smooth relations with the workers. He has relied upon CIT vs. Taj Mahal Hotel 1973 CTR (SC) 480 : (1971) 82 ITR 44 (SC). 16. As against the above the learned Departmental Representative of Revenue has contended that the assessee has acquired new assets by incurring the expenditure of Rs. 6,33,878 as detailed in the assessment order, and so the expenditure is of capital nature. He has supported the orders of authorities below. 17. We have considered the rival contentions was material on record as also the cited decisions. In (1971) 82 ITR 44 (SC), the assessee was running hotel and the expenditure was incurred on installing sanitary and pipeline fittings in one of its branches. As such the said fittings were held to fall within the definition of plant as given in s. 10(5) of IT Act, 1922, so that development rebate under s. 10(2)(vib) was allowable thereon. In our view the citation being in respect of a hotel building and on allowability of development rebate is distinguishable from the case in hand on facts, inasmuch as wash basins having been provided in the residential quarters of the workers do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the baddebt written off could not be claimed by assessee before AO in computation of income due to inadvertence and the default was not deliberate. He has contended that every year the assessee is creating provision in its books of account but not claiming the same against its profits while filing returns. He has contended that let this matter go to AO and let him verify as to what is assessee s way of accounting in this regard. He has contended that in asst. yr. 1990-91 the Tribunal has remitted similar issue to AO for verification of assessee s contention. He has referred to para 5 of Tribunal s order for asst. yr. 1990-91 in this regard. He has also contended that as regards the issue of additional tax under s. 143(1A), the same is consequential and is a legal ground. He has also contended that the CIT(A) has coordinate jurisdiction with AO, and that correction can be made at the level of CIT(A) if there was failure to arrive at correct income at assessment stage. 22. As against the above the learned Departmental Representative of Revenue has contended that the learned CIT(A) was not satisfied with the assessee's explanation that the assessee s omission for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interference therein is required in view of the decision of the Hon ble jurisdictional High Court in the case of Prem Agencies vs. CIT (1988) 67 CTR (Raj) 11 : (1988) 173 ITR 110 (Raj). Considering the rival contentions, the facts and circumstances of the case as also the cited decision, we find no fault with the impugned order of learned CIT(A) on this count and we do not consider it proper to interfere therewith. We accordingly make no interference therein. 25. Ground No. 13 disputes the learned CIT(A) s order in setting aside various additions/disallowance made by AO to be considered afresh. Both the sides have relied on their same arguments as made on ground No. 12, discussed above. Considering the rival contention and the facts and circumstances of the case we find no merit in the ground and so we decline to interfere with the same. 26. Ground No. 14 disputes the learned CIT(A) s order in not deleting levy of (i) additional tax, (ii) interest under s. 234B and (iii) interest under s. 220(2) of the Act. 27. As regards the issue of additional tax, the learned authorised representative. of assessee has not raised any argument on it in this ground as the same has already bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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