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TMI Blog2004 (7) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... g the addition of Rs. 1,76,433. 4.The learned CIT(A) erred in confirming the disallowance of Rs. 1,00,000 as contingent expenses . 5.The learned CIT(A) erred in confirming the disallowance of Rs. 2,59,419 by holding it to be interest paid on borrowals for payment of tax. 6.The learned CIT(A) erred in holding that interest of Rs. 7,46,107 on deposits required to be placed with the banks is income chargeable to tax under the head Other sources and not Business ." 3. Ground of appeal No. 2 was not pressed by the ld. counsel of the assessee and hence the same is rejected. 4. Apropos ground of appeal No. 1, the ld. counsel of the assessee contended that the CIT(A) was not justified in confirming the disallowance of Rs. 90,520 representing fees paid to the Registrar of Companies and stamp duty in connection with the issue of bonus shares. The ld. counsel contended that such expenditure is allowable as revenue expenditure. In support of his contentions the ld. counsel relied upon the decision of Bombay High Court in the case of Bombay Burmah Trading Corpn. Ltd. v. CIT [1984] 145 ITR 793 , which was followed by the same court in the case of CIT v. General Insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Supreme Court in the case of Brooke Bond (India) Ltd. ( supra ) has no application to the facts of the instant case. We, therefore, delete the disallowance of Rs. 90,520 sustained by the CIT(A). 8. Apropos ground of appeal No. 3, the ld. counsel of the assessee contended that the point at issue stands covered in favour of the assessee by the decision of Bombay High Court in the case of CIT v. Allana Sons (P.) Ltd. [1995] 216 ITR 690 and also by various decisions of the Tribunal. 9. On the other hand, the ld. DR contended that there should be no grievance as the ld. CIT(A) has followed the decision of Bombay High Court in the case of Allana Sons (P.) Ltd. ( supra ). The ld. DR pointed out that out of disallowance of Rs. 8,04,666 made by the Assessing Officer under rule 6B, the ld. CIT(A) has sustained the disallowance to the extent of Rs. 1,76,433. 10. In his rejoinder, the ld. counsel of the assessee contended that Rule 6B of IT Rules does not apply in the present case as the articles presented by the assessee did not carry any logo or insignia of the assessee company and hence the expenditure was not on advertisement. 11. We have given a careful conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee reiterated the same arguments as were made before the CIT(A). It was stated by the assessee that as the bills from all the allied branches were not received, the provision of Rs. 1,00,000 was made on estimate basis. The ld. counsel contended that liability was incurred during the year of account as the services were received by the assessee in the year of account. It was submitted that only quantification of the amount was done subsequently as the bills were received after the close of the accounting period. The ld. counsel referred to the decision of Hon ble Supreme Court in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102. 14. On the other hand, the ld. DR contended that liability had arisen in the succeeding year as bills for the services rendered to the assessee were received by the assessee only in the subsequent year. The ld. DR further contended that there is no proof of rendering of services during the year of account. It was also submitted by the ld. DR that the assessee s claim that in the subsequent year no such claim was made needs verification. The ld. DR vehemently contended that rendering of services during the year of account being not su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm, there is no liquidity left with the assessee. When the assessee withdraws amount from its OD account, the debit balance increases. The bank gives the OD facility to meet the working capital of the assessee and not for payment of income-tax. When the assessee withdrawn funds from the current account, the debit balance increases and thereby there is a commitment increase in the interest expenditure. The interest expenditure incurred by the assessee additionally for payment of advance tax is a disallowable expenditure. The assessee has quantified this interest without prejudice, which amounts to Rs. 2,59,419. However, in view of the reasons discussed above, the same is disallowed, since the interest expenditure incurred on borrowing for payment of advance tax is not an allowable deduction. Therefore, the interest amount of Rs. 2,59,419 is added to the total income of the assessee." The ld. CIT(A) confirmed the disallowance made by the Assessing Officer by observing as under "The above submissions of the appellant cannot be accepted. The Assessing Officer in the assessment order has clearly pointed out that the bank has given overdraft facilities to make the payment of advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal passed in the preceding and succeeding assessment years. The ld. counsel reiterated that in respect of some of the assessment years the Tribunal has dismissed the departmental appeal on identical facts. By referring to page 49 of the Assessing Officer s order, the ld. counsel pointed out that net profit as per profit and loss account was Rs. 1,79,78,244 and hence the total income referred to by the ld. DR is not relevant. 21. We have given a careful consideration to the rival submissions in the light of the material placed before us. In fact during the course of hearing, the ld. counsel of the assessee stated that he has no objection if the issue is restored to the file of the Assessing Officer for readjudication of the issue as per the directions of the Tribunal for the assessment year 1992-93 given in ITA No. 9320/M/95. We find that the Tribunal vide its order dated 2-5-2003 passed in ITA No. 8207/B/95 for the assessment year 1991-92 had followed its aforecited order for assessment year 1992-93 and restored the matter back to the file of the Assessing Officer. We, therefore, set aside the order of the authorities below on this point and restore the matter back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and not 90 per cent of the gross interest." The point at issue is, therefore, restored to the file of the Assessing Officer with the direction to dispose of the same in the light of the above observation of the Special Bench. 25. The following additional grounds of appeal have been raised by the assessee 1."The appellant prays for exclusion of sales tax of Rs. 2,51,98,558 (Annexure-A to the order of assessment) for qualifying deduction under section 80HHC of the Act. 2.The appellant prays for exclusion of Rs. 4,82,92,000 (P. 18 of the order of assessment and Annexure A to the order of assessment) from turnover for quantifying deduction under section 80HHC of the Act." 26. It was stated that the aforesaid additional grounds arise out of the order of the Assessing Officer and, therefore, they should be admitted for hearing. On the other hand, the ld. DR contended that the additional grounds raised by the assessee do not arise out of the CIT(A) s order and hence they should not be admitted for hearing. In his rejoinder, the ld. counsel of the assessee by relying upon the judgment of Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that excise duty and sales tax are not includible in total turnover for the purposes of computation of deduction under section 80HHC. The ld. DR could not dispute the contention raised by the assessee. We, therefore, allow the additional ground of appeal No. 1 raised by the assessee. 29. Apropos additional ground of appeal No. 2, the ld. counsel of the assessee contended that other income of Rs. 4,82,92,000 (details of which are available at page 18 of the assessment year) should be excluded from the total turnover for quantifying deduction under section 80HHC. It was stated that such other income is not includible in total turnover though it is a part of business income. On the other hand, the ld. DR relied upon the order of the Assessing Officer. 30. Having considered the rival submissions, we find that the Assessing Officer has held in his order that "Since the money has been received from the activity related to the business and the assessee itself has shown this income as business income, it is very difficult to hold that this do not fall part of the turnover. Therefore, the other income of Rs. 490.53 lakhs excluding dividend and property income and intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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