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TMI Blog2012 (9) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no justification for the assessee to vary from the regular accounting principle of valuing stock & ITO is justified under s. 145 to reject the books of accounts and determine the correct profits and gains - if any change or reduction in the amount of interest refund to the assessee u/s. 244A, the same has to be taken into account u/s. 154 of the Act - against assessee. Disallowance u/s. 40A(3) - the payments were made to employees to purchase tickets & furniture - Held that:- As the payments for purchase of tickets are concerned, the same is not in violation of section 40A(3) but payments made to buy furniture is in violation of Sec. 40A(3) therefore A.O. is directed to restrict the disallowance to 20% of Rs. 24,000 - partly in favour of assessee. Exclusion from taxable profits the sales tax exemption benefit - Additional ground submitted by assessee - Held that:- Adjudication of the ground will require going into the incentive scheme framed by the U.P. Government which was not available before the lower authorities, the issue is restored to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er considering the submissions and the documents submitted by AO in support of its claim partly allowed the appeal. 6. The assessee is in appeal before us against the order of Ld. CIT(A). The Senior Counsel for the assessee filed a detailed chart showing grounds of appeal which have been dealt by the AO and the Ld. CIT(A) and by the ITAT Mumbai in its earlier year s orders in assessee s own case. 7. Ground No. 1 relates to disallowance of expenses at Rs. 1,75,308/- made u/s. 6D by the AO and confirmed by Ld. CIT(A). We find that similar issue was there before Tribunal in the assessment year 1992-93, 1993-94, 1994-95 and 1995-96. 8. During the year the assessee has debited an amount of Rs. 5,75,53,123/- to Profit and Loss account under the head Travelling expenses which includes fare, lodging and boarding charges and other related expenses. The assessee has itself disallowed in the computation of income an amount of Rs. 1,07,863/-. The disallowance by the assessee is based on the decision of ITAT in the case of S.V. Ghatalia in ITA No. 3294/B/91. The claim of the assessee was disregarded by the AO who went on to calculate the disallowance as per provisions of Rule 6D for diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been followed by the Tribunal in the earlier years appeals in assessee s own case. Respectfully following the decision of the Hon ble Supreme Court and the Tribunal, finding of the Ld. CIT(A) are confirmed. This ground of the appeal is dismissed accordingly. 15. Ground No. 5 relates to restricting the disallowance of entertainment expenses incurred on employees to 25%. The assessee in the computation of income on its own has disallowed an amount of Rs. 34,55,235/- by way of entertainment expenses. However, the AO noted that the assessee has not considered the following expenses to work out the disallowance u/s. 37(2) of the I.T. Act. i) 50% of expenditure incurred in hotels Clubs, etc. as incurred on employees Rs. 25,21,555/- ii) Expenditure on Press conferences/Sale dealers conferences Rs. 18,27,429/- ------------------- Total Rs. 43,48,984/- ========== Thus, the AO considered the total amount of disallowance u/s. 37(2) at Rs. 38,97,110/- being in excess of limits laid down u/s. 37(2) of I.T. Act. 16. When the matter was taken up before the Ld. CIT(A), the Ld. CIT(A) following his findings for the preceding assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed similar disallowance accordingly following his own order, Ld. CIT(A) confirmed the disallowance. 22. Before us, the Senior Counsel submitted that the Tribunal in the earlier assessment year has allowed the claim of the assessee. 23. We have perused the orders of the Tribunal in assessee s own case for earlier assessment year. We find that in the earlier assessment year, the Tribunal had restored the matter to the file of AO. The AO in his order giving effect and allowed the claim of the assessee. The facts being identical, the claim of the assessee for the year under consideration is also allowed. 24. Ground No. 8 relates to without prejudice claim of the assessee in respect of Rs. 4 crores incurred on premium on redemption of Nonconvertible debentures as Revenue expenditure. 25. The Senior Counsel at the very outset pointed out that in the earlier year the claim of the assessee has been accepted by the Tribunal and the expenditure has been allowed as expenditure. 26. We have perused the orders of the Tribunal. We find that in the preceding assessment year, the Tribunal in ITA No. 3207/M/02 for assessment year 1995-96 have discussed this issue at page No. 6 para 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected by AO who held that as the interest was withdrawn in March, 1998, the contention of assessee may be considered only in the assessment year 1998-99 and not in the year under consideration. 33. When the matter was agitated before the Ld. CIT(A) at page-11 para 17.2 of his order, he rejected the claim of assessee holding that the principles laid down by the Hon ble Supreme Court in the case of CIT Vs British Paints India Ltd. 188 ITR 44 squarely applied to the case of the assessee company. We find that similar issue had come to the Tribunal in assessee s own case for assessment years 1998-99 and 1999-2000 in ITA Nos. 6668 6669/M/03 the Tribunal had at page-4 while decided in ground No. 2 of those appeals found that the issue is covered by the decision of the Special Bench of the Tribunal in the case of Avada Trading Co. Vs ACIT reported in 104 TTJ 83 and accordingly followed the decision of the Special Bench. As the facts and issues are identical, respectfully following the decision of Special Bench of the Tribunal and the Tribunal, we do not find any merit or substance in the ground taken by the assessee. Accordingly, the said is rejected. However as has been observed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in earlier assessment years starting from assessment years 1992-93 to 1995-96 and 1998-99 and 1999-2000. We also find that while deciding the appeal in ITA Nos. 6668 6669/Mum/2003 pertaining to assessments 1998-99 1999- 2000 the Tribunal while adjudicating on ground No. 4 on page-8 para-16 has held that on identical issue the Tribunal had allowed the claim in earlier years. Respectfully following the order of the Tribunal in assessee s own case, as facts being identical, we allow the claim of the assessee for year under consideration. Ground No. 13 is allowed. 41. Ground No. 14 relates to disallowance of Rs. 28,140/- u/s. 40A(3) of I.T. Act. 42. After perusing the orders of lower authorities, we find that following expenses have been reported by the auditor in the Tax Audit report who have been made in cash during the previous year under consideration. Date of payment Amount (Rs) Particulars Reasons 11.4.1995 10,950/- Ex-gratia payment to Mr. K.C. Maheshwari Exployee Payment was urgently needed. 15.4.95 Advance against LTA Mr. R.K. Vaishnavi These payments were made to ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude from taxable profits, the sales tax exemption benefit of Rs. 2,42,58,647/- which is included in sales and which is taxed in the assessment order as part of profits of the business and b) To treat the same as capital receipt not chargeable to tax. 47. The Senior Counsel stated that the assessee had neither claimed any exemption in the return of income filed nor the lower authorities granted such exemption. It was further pointed out that the Special Bench of ITAT in the case of DCIT Vs Reliance Industries Ltd. 88 ITD 273 has held that subsidy granted by Government to set up Industry in a backward area would be in the nature of capital receipt and cannot be treated as Revenue receipt. The Senior Counsel concluded that this decision squarely applies to the facts of the assessee s case. 48. The Ld. Departmental Representative strongly objected to the admission on this additional ground. The main contention of the Ld. DR is that in the garb of taking additional grounds, the assessee is taking altogether a new plea which was never raised before the lower authorities. To substantiate his submission, the Ld. DR relied upon the decisions of Hon ble Supreme Court in the case of N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admit the additional ground raised by the assessee. Respectfully following the decision of the Tribunal mentioned herein above, the issue is restored to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee. Therefore, the additional ground raised by the assessee is allowed for statistical purpose. 53. In the result, the appeal filed by the assessee is partly allowed. ITA No. 6836/Mum/2002 A.Y. 1996-97-Revenue s Appeal 54. The issue raised in ground No.1 is identical with issue raised by ground No. 5 in ITA No. 6421/M/02 for assessment year 1996-97 at paras 15 to 17. While deciding the issue in assessee s appeal, the Tribunal has followed the decision taken in assessment year 1994-95 in ITA No. 2326/M/01. Therefore, respectfully following the decision of the Tribunal in earlier assessment years, we confirm the order of Ld. CIT(A). This ground of the Revenue is dismissed. 55. Ground No. 2 is identical with the issue raised by ground No. 6 in ITA No. 6421/M/02 for assessment year 1996-97 at paras 18 to 20. While deciding the assesse s appeal, the Tribunal has followed the decision in assessee s own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O further noticed that the assessee has also debited Rs. 1,08,06,154/- towards construction of access road and laying of 132KV transmission line and claimed it as Revenue expenditure. When questioned by AO on the allowability of the claimed expenses, the assessee relied upon the judgement of Hon ble Supreme Court in the cases of CIT Vs Associated Cement companies Ltd 172 ITR 257 and L.H. Sugar Factory and Oil Mills (P) Ltd Vs CIT 125 ITR 293 and claimed that the expenditure should be deductible as revenue expenditure. However, the AO relied upon the decision of Hon ble Bombay High Court in the case of Modella Woollens Ltd. Vs CIT 120 ITR 726 in which case the Hon ble Bombay High Court has given a clear finding that the expenditure incurred for the construction of a pucca approach road to factory premises is not a deductible revenue expenditure and have to be regarded as capital expenditure. The AO accordingly disallowed the expenditure of Rs. 1,08,06,154/-. 63. When the matter was argued before the Ld. CIT(A), the CIT(A) following his own order in assessee s own case for assessment year 1995-96 allowed the expenditure as revenue expenditure. 64. Before us, the Ld. DR pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgued before the Ld. CIT(A), the Ld. Counsel pointed out that similar matter was argued for the preceding assessment year 1995-96. The Ld. CIT(A) held that since he has allowed the issue on identical facts, the claim of interest paid on borrowed capital as deductible expenditure in the immediately preceding year, he allowed the expenses for the year under consider also. 68. The Ld. DR relied upon the finding of AO. The Ld. Senior Counsel pointed out that the facts and issue are identical with the facts and issue of earlier assessment years 1995-96, 1998-99 and 1999-2000. 69. We have heard the rival submissions and perused the orders of lower authorities and the order of Tribunal for the relevant preceding assessment year as pointed out by the Senior Counsel. We find that while deciding the appeal in ITA Nos. 6668 and 6669/M/03 for assessment years 1998-99 and 1999-2000 and ITA Nos 6762 63/M/03 for the same assessment year, the Tribunal relied upon the decision of the Hon ble Supreme Court in the case of DCIT Vs Core Health Care Ltd. 298 ITR 194 and in the case of Grasim Industries Ltd. 64 TTJ 357(Mum ITAT) decided the appeal in favour of assessee. Respectfully following the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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