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TMI Blog2012 (12) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... vered against the assessee by the decision of the Tribunal in assessment year 1994-95 in assessee's own case in ITA No.282/M/00 in which the Tribunal following the decision in earlier year confirmed the disallowance. The facts in this year are identical. Therefore, respectfully following the decision of the Tribunal in earlier year (supra), we confirm the order of CIT(A). 3. The second dispute is regarding disallowance of provision for contractual liability towards 3rd party manufacturers/ convertors in relation to excise duty payable amounting to Rs.61,44,628/-. The assessee was is engaged in the business of manufacturing and sale of malted foods, cocoa based products including confectionary which were being manufactured at its own factory as well as under agreement with third party manufacturers/converters at their factories. In respect of products manufactured at company's own factory, excise duty is paid on the basis of company's wholesale trade price less permissible deductions in the nature of post manufacturing expenses (PME) incurred by the company on freight, octroi, additional sales tax etc. The third party manufacturers converters were initially paying excise duty on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as pending in dispute and therefore, the same had not been incurred during the year. Facts this year are identical and, therefore, respectfully following the decision of the Tribunal in the year 1994-95 (supra), we confirm the order of CIT(A)disallowing the claim. 4. The third dispute is regarding addition of Rs.70,10,096/- on account of sale of milk fat outside the books of account. During the survey under section 133A conducted at the business premises of the assessee in assessment year 1998-99 discrepancies had been noted in the quantity of milk fat produced. The cost of differential quantity has been added to the taxable income of the assessee company. The assessee explained that it purchased cow milk from the subsidiary M/s. Induri Farm Limited. The excess fat content over desired content was extracted and sold to outside parties. The milk fat generated and sold was recorded in excise register as the same as excisable item. AO however did not accept the explanation and following the decision in earlier year made the addition which in appeal was confirmed by CIT(A) following the decision in earlier year aggrieved by which, assessee is in appeal before the Tribunal. 4.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regarding disallowance of interest paid to the Income tax department. The assessee had adjusted the interest paid against the interest received on refund. The interest paid to Income tax department is not allowable as deduction. This view is supported by the Third Member decision of the Tribunal in the case of Dy. CIT vs. Sandvik Asia Ltd. (2011) 133 ITD 126 (Pune)(TM). 6. The fifth dispute is regarding inclusion of miscellaneous income including sales tax and excise duty refund in the total turnover. The assessee had excluded these receipts from the total turnover while computing deduction under section 80HHC. The AO however included the same in the total turnover which in appeal was confirmed by the CIT(A) and aggrieved by which the assessee is in appeal before the Tribunal. 6.1 After hearing both parties, we find that this issue is covered by the decision of the Tribunal in assessee's own case in assessment year 1995-96 in ITA No.1641/M/2003 dated 8.10.2010. The Tribunal in the said year noted that the miscellaneous income which included trade discounts, miscellaneous sales, sales tax, excise duty etc. had to be included in the total turnover except the sales tax an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sale had also been made as composite unit. No bifurcation had been made by the assessee in assessment year 2000-01 and in earlier years and bifurcation was made only in 2001-02 to claim the benefit of deduction. The AO therefore asked the assessee to explain as to why the land and building should not be treated as a composite unit and capital gain be treated as short term capital gain under section 50 of the Income Tax Act as depreciation had been claimed in earlier years. The assessee submitted that it had not claimed depreciation in the earlier year. The depreciation had been claimed and allowed inadvertently due to oversight in assessment years 1982-83 to 1988- 89 and 2000-01 and amount involved was small. It was also submitted that income from the building had been assessed as house property income. The AO however observed that even if the income had been computed as house property income, property had been held by the assessee as business asset which was not let out and depreciation on which had been claimed. He, therefore computed short term capital gain under section 50 of the Income Tax Act which came to Nil and which resulted into disallowance of excess depreciation of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gain from sale of land and building. The assessee had purchased property in the year 1973. The assessee while computing capital gain had bifurcated the property into two parts i.e. land and building and long term capital gain had been computed in respect of both parts separately and claimed exemption under section 54 EC in view of capital gain invested in NABARD bonds. The AO has not accepted the method of computation adopted by the assessee and computed capital gain under section 50 treating land and building as composite unit on which depreciation had been claimed. The approach adopted by the AO has been accepted by CIT(A) which has been disputed by the assessee. 8.4 On careful consideration of all aspects of the matter, in our view, the approach adopted by authorities below can not be accepted. The provisions of section 50 can be applied in the case of depreciable assets. The land is not a depreciable asset and, therefore capital gain has to be computed in respect of land separately as long term capital gain. The bifurcation of land and building into separate part for the purpose of capital gain has been upheld by several High Courts including the Hon'ble High Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is regarding deduction under section 35 DDA in respect of certain expenses which include a sum of Rs.1.50 lacs made to consultant in connection with framing of the scheme and Rs.96,540/- incurred towards gifts and incentives and Rs.1,67,000/- as incentives to ex-employees who opted for VRS scheme. Any expenditure incurred by way of payment to an employee at the time of voluntary retirement is allowable as deduction under section 35DDA. Therefore sum of Rs.96,540/- which had been paid to employees at the time of voluntary retirement, in our view will be allowable as deduction under section 35DDA. Payment of Rs.1,67,000/- to exemployees made however is not eligible for deduction. The payment to consultants though may not be allowable under section 35DDA of the Act, it can be considered as expenditure incurred wholly and exclusively in connection with the business or on commercial expediency. The assessee has included Rs.1.50 lacs for deduction under section 35DDA which means the deduction has been claimed over a period of time whereas the same could have been claimed and allowed under section 37 of the Act wholly in the relevant year. Therefore, making the claim in respect of payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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