9911796707
TMI Blog2012 (8) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... s [2007 (4) TMI 202 - SUPREME COURT]that excise duty and sales tax were includible in the "total turnover", which was the denominator in the formula contained in section 80HHC(3) as it stood in the material time - against revenue. Deduction of 90% of the entire incomes credited to the P 76 lakhs as Misc. Expenses when the AO sought to disallow part of the expenses not pertaining to the business which the learned CIT(A) reduced heavily - to put a bar on such practice, a token disallowance has been made by the CIT(A) - against assessee. Disallowance of the loss claimed on revaluation of non- moving stores & spares - CIT deleted it - Held that:- If an item is lying in the inventory either unsold or unutilised, if there is a change in the intrinsic value, an assessee can revalue such assets, and claim the loss on account of revaluation as a charge against profits as decided in vs. CIT [1953 (10) TMI 2 - SUPREME COURT]- in favour of assessee. Dis allowance of addition of payment under benevolent Scheme - CIT deleted it - Held that:- Deleted by ITAT, Cuttack Bench in assessee’s own case for the AYs 1993-94 to 1998-99 & 2000-01. thus follow the same - decided in favour of assessee. Additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the assessee being ITA No.191/CTK/2008, wherein the assessee has raised the following grounds of appeal. "1. "Peripheral Development Expenses" a. That the learned Commissioner of Income Tax (Appeals) ought have allowed the whole of ₹3,70,67,437 under 'Peripheral Development Expenses' as allowable expenses. b. Without prejudice to (a) above, the learned Commissioner of Income Tax (Appeals) has mis-appreciated the facts and the sustaining of disallowance ₹2,19,57,648 under 'Peripheral Development Expenses' is unjustified, erroneous, and bad both on facts and in law. 2. Deduction u/s 8OHHC of the I.T Act a. That the order of the learned Commissioner of Income Tax (Appeals) in sustaining exclusion of ₹3,88,04,379 under "Other income" in computing "Profits of the business" for deduction under section 8OHHC of the I.T Act is on mis-appreciation of facts and unjustified, erroneous, and bad both on facts and in law. b. That the learned Commissioner of Income Tax (Appeals) has mis-appreciated the facts and his conclusion regarding exclusion of 'Receipts on account of Shortage of Finished goods under Other income' of ₹96,83,878 on pro-rata basis, in compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed under the broad head "Peripheral Development Expenses". The Assessing Officer examined in details of such expenditure and disallowed a sum of ₹ 3,70,67,473 and added the same to the total income of the assessee. On appeal, the learned CIT(A) , however, partly allowed relief on this count thereby sustaining of disallowance ₹2,19,57,648 under 'Peripheral Development Expenses'. 6.1. The learned AR of the assessee contended that the issue is covered in favour of the assessee by the decision of the ITAT, Cuttack in assessee's own case in ITA Nos.66-68,459,511,512/CT/2003 dt.30.11.2005 for the AYs 1994-95 to 1998-99 & 2000-01, ITA No. 400/CTK/2005 dt.8.9.2006 for the Assessment Year 2001-02, ITA Nos.514 & 515/CTK/2005 for AYs 1999-2000 and 2002-03. The learned AR of the assessee furnished the copies of the above orders of the Tribunal in shape of a Paper Book. On carefully going through the said orders, we find that the very nature of expenditure claimed by the assessee under the head "Peripheral Development Expenses" as in the present case on hand being contribution as suggested by the Committee being a Government Body, the ITAT, Cuttack Bench has held such expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT v. Lakshmi Machine Works (290 ITR 667). 7.3. However, in respect of deduction of 90% of the entire incomes credited to the P & L account of ₹1,94,77,57,108 for the purpose of deduction u/s.80HHC, before the learned CIT(A) the assessee furnished the details of the entire "other income" of ₹1,94,77,57,108 under various heads, from which the learned CIT(A) found that the assessee did not apply clause (baa) below Section 80HHC (4C) in respect of the receipts totaling to ₹47,13,38,303 as per the details given by him in paragraph 17.4 of his order. Section 80HHC(1) provides that a deduction under the section would be allowed to the extent specific in sub-section 1B, against the income 'derived by the assessee from the export of such goods or merchandise. There are four provisos below Section 80HHC which prescribe adjustments to the profits of the business. The term 'profits from the business' has been defined in clause (baa) below Section 80HHC(4C). Item 1 below the clause provides for exclusion of 90% of various receipts like profit and sale of import entitlement, commission, interest, rent or 'any other receipt of a similar nature'. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2003-04 in assessee's own case, vide para 28 at page 13, has allowed some items similar to present appeal in favour of the assessee. He further relied on the decision of Hon'ble Supreme Court in the case of ACG Associated Capsules (P) Ltd (2012) 205 TAXMAN 136 (SC) and also the decision in the case of CIT v. M/s.Pfizer Ltd (2011 330 ITR 62 (Bombay). Therefore, he sought for restoring the issue to the file of the Assessing Officer to consider the same in the light of the above decision of the I.T.A.T. and also the judicial pronouncement as relied on by him before the Tribunal. After hearing both the parties and going through the order of the Tribunal in the case of the assessee for earlier year stated supra, we set aside the impugned order of the learned CIT(A) on this issue and direct the Assessing Officer to decide the same as raised by the assessee before us in the light of the decision of the ITAT and also the judicial pronouncements of Hon'ble Supreme Court and Bombay High Court referred to above. 8. As regards the issue raised in ground No.3 , the facts are that the Assessing Officer found in the expenses claimed by the assessee under the head "Miscellaneous Expenses" inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that interest paid on compensation has to be allowed just as any interest on borrowed funds is allowed u/s. 36(1)(iii), is also not correct. Sec.36(1)(iii) provides a deduction for interest paid on capital borrowed for the purpose of business. Proviso to Section 36(1)(iii) makes it clear that interest relatable to the period ending with the date on which the asset was put to use, cannot be allowed as deduction. The deduction is only in respect of interest borrowed for the purpose of business. In this case, the interest is paid on additional compensation paid in acquisition of land. Such interest payment will not fall u/s.36 (1)(iii). The disallowance is therefore upheld." 8.2. Before us, the learned AR of the assessee submitted that the assessee, a public sector undertaking acquired land since 1982 through Government of Orissa and started business operations by setting up Mines, Alumina Refinery, Captive Power Plant, Aluminum Smelter and other facilities as required from 1986 onwards. Post capitalization of Land, Building, other Fixed Assets, any interests paid/payable including interest on Land compensation have been charged to Profit & Loss A/c and allowed as revenue expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire plant and machinery was installed during the previous year. Section 32(1)(iia), before amendment by Finance Act, 2005 provided that in the case of Plant and machinery (other than ship and aircraft), acquired and installed after 31.3.2002 by an assessee engaged in the business of manufacture or production of articles or things, additional depreciation @15% of the actual cost would be allowed. Therefore, the learned CIT(A) was of the view that the plant and machinery should both have been acquired and installed after 31.3.2002. The learned CIT(A) observed that the process of installation had been commenced by M/s.International Aluminium Products Ltd., much before the date of amalgamation and as such, the assessee is not entitled to additional depreciation u/s.32(1)(iia) and thus upheld the finding of the Assessing Officer in this regard. 9.1. Before us, the learned AR of the assessee contended that vide order dt.17.2.2009 in ITA No.189/CTK/2006 for the Assessment Year 2003-04, ITAT, Cuttack Bench in the case of the assessee has decided such similar issue against the assessee and the assessee has filed appeal before Hon'ble Orissa High Court and it is pending. However, he ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere acquired and installed after 1.4.2002 (during F.Y. 2002-03 and 2003-04) enabling the UNIT to become operative and capable of manufacturing Rolled products for Commercial purpose. Such submission was also made before the authorities below but we find that the assessing authorities have not examined this aspect of the case whether any such plant and machinery acquired and installed after 1.4.2002 in the said plant by the assessee. Therefore, finding force in the contention of the learned AR of the assessee, we restore this issue to the file of the Assessing Officer for reconsideration in the light of above observation and allow the claim of additional depreciation u/s.36(1)(iia) on the plant and machinery acquired and installed after 1.4.2002 enabling the Unit to become operative and capable of manufacturing RPU for commercial purpose. 10. Ground No.5 relates to disallowance of ₹ 14,42,083 under "Prior Period adjustments". 10.1. Having heard both the parties and perusing the material made available to the record, the amount of ₹ 14,42,083 was the expenses relates to payment for hiring of helicopter from Govt. of Orissa for visit of Minister from 17.4.2002 to 21.4.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as travel expenses, board meeting expenses, payment of hotel bills, taxi hired for the audit committee are clearly for business purpose. He further observed that payments to clubs are for subscription for corporate membership. However, he observed that a few expenses such as payment for scholarship, purchase of mobile etc., are not directly for business purpose. Based on these findings, the learned CIT(A) restricted the disallowance at ₹ 3,00,000. 11.2. Heard both the parties and perused the material made available before the Tribunal. Considering the facts and circumstances, we are of the considered view that the accounting procedures adopted by the assessee should not leave a room for the assessee to park majority of the expenses to the tune of ₹ 76 lakhs as Misc. Expenses when the Assessing Officer sought to disallow part of the expenses not pertaining to the business which the learned CIT(A) reduced heavily but without getting into the controversy of nexus to the assessee's business and the nature of expenses sustained disallowance of ₹ 3,00,00. We are also unable to satisfy ourselves insofar as the details furnished do require consideration individually w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT(A) directed the Assessing Officer to allow the loss of ₹ 3,28,37,525 as deduction by observing in paragraph 5.3 to 5.5 of his order, which is reproduced as under : "5.3 It was pointed out by the learned Representative that this issue had come up in the assessment orders for earlier years also. In fact, this dispute had been in existence, right from A.Y.93-94 and onwards. Similar disallowances made were upheld by the CIT(A) up to A.Y.02-03. The issue came up before the Hon'ble ITAT, Cuttack Bench, Cuttack for A.Ys. 94-95 to 98-99 and for 2000-01 in ITA Nos.66 to 68 -- 459, 511,512/CTK/2003. The ITAT has dealt with the issue in paragraphs 2 to 19 of the order dt.30.11.05. The ITAT went into the genesis of this issue and also examined all aspects of the issue including the legal precedents. It was noted that, after going through the accounts for the F.Y.92-93, the C&AG gave a detailed audit memo to the company. The C&AG pointed out that various items of stores and spares had been lying surplus, unutilised and not issued for long periods of time, exceeding 3 years. It is therefore natural that such stores and spares would have lost their intrinsic worth, since they had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.10.06. The minutes of the meeting have been communicated in No.COD/56/2006 dt.31.10.06. In para-6, the COD declined to accord permission to the Department to approach the High Court, since no substantial questions of fact and law were involved. 5.5. Respectfully following the two decisions of the ITAT, Cuttack Bench, mentioned above, the AO is directed to allow the loss of Rs.3,28,37,525/- as a deduction." 16. As regards ground No.2 raised by the Revenue deletion of the addition of ₹ 21,62,380 made under the head "payment under benevolent Scheme", we find that the assessee had made payments aggregating ₹ 21,62,380 to the members of the families of persons who dies while in service. The Assessing Officer disallowed the same under the provisions of Section 40A(9). In appeal, the learned CIT(A) has deleted the said addition by following the decisions of the ITAT, Cuttack Bench in assessee's own case in Consolidated order dt.30.11.2005 in ITA Nos.66-68/459/511/512/CTK/2003 for the AYs 1993-94 to 1998-99 & 2000-01, order dt.8.9.2006 in ITA Nos.400 and 528/CTK/2005 for the Assessment Year 2001-02 and dt.17.7.2007 in ITA Nos.511,512,514 and 515/CTK/2005 for the Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee produced a letter dt.8.1.2004 from the Executive Director (Teams) addressed to the assessee. It was on this basis, it was contended by the assessee that the payment was only for the purpose of promoting the public image and the brand value of the assessee-company and they are not donations made to an approved institution. Considering the submissions of the assessee weighing with the material evidence produced before him, the learned CIT(A) deleted the addition of ₹85,00,000 for the reasons discussed in paragraphs 13.2 to 13.5 of his order, which is reproduced as under : "13.2. ……………….Regarding the payment of Rs.85 lakh to the Sports Authority of India, it is seen that a payment of Rs.50 lakh was initially made on for sponsoring various athletes and sports persons for training for participation in the Athens Olympic Games, 2004. These sportspersons were to represent India in various disciplines, such as Ms. Anjali Bhagwat (Shooter) and Shri Anil Kumar, (Discus Thrower), Mr. Md. All Qamar (Boxer) and Mr. Tibor Gonczol, Foreign Coach (Shooting). Two letters received from the Sports Authority of India seeking financial supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles that the question in the present case is to be considered. As submitted by the assessee and accepted by the Appellate Tribunal, it cannot be disputed that the staging and sponsoring of the tournaments and the reports in the newspapers day after day about the D.C.M. Tournaments would certainly bring the name of the D.C.M. Group into prominence with the consequent advertising value for the company. The view of the ITO, which was rightly rejected by the AAC and the Appellate Tribunal, that the holding of the tournaments does not have any connection with the business of the assessee, and that the readers of the reports in the news papers would not be connecting in their minds the name of the tournament with the name of the company, is not sound. Continuous and persistent reference to the letters "D.C.M." meaning Delhi Cloth Mills naturally make it almost a household expression, and the same would get impressed in the minds of the readers of the reports in the newspapers and other advertisement media. Further, as submitted on behalf of the assessee and accepted by the Appellate Tribunal, the holding of the tournaments by the D.C.M Group provides opportunities to the employee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
