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TMI Blog2013 (1) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... aste expenses - Held that:- Assessee is engaged in manufacturing of Denim cloth in the said EOU, which results in cotton waste also - the cost of packing material for such packing of cotton waste is debited to the waste expenses and the amount received from the customers is credited to this account and net excess is shown in the profit and loss account. This sale is directly related to the activities carried out by the assessee and, is, therefore, derived from the undertaking of EOU. Thus, this income is directed to be included in the computation for exemption under Section 10B being derived from the said unit - issue allowed in favour of the assessee. Bonus on spare purchase from W.Schlafhorst A.G. & Co., Germany From 1.11.99 to 30.10.00 - Held that:- From the perusal of the order of the AO as well as CIT(A), it is not clear whether the purchase for stores was on revenue account or not. If it is on the revenue account, then it is derived from the profit and gain from the EOU. Therefore this issue is restored back to the file of the AO to consider it afresh after giving due opportunity to the assessee - in favour of assessee for statistical purposes. Project expenses - revenue v/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Supreme Court in the case of Al- Kabeer Exports Limited Vs. CIT [2012 (2) TMI 119 - SUPREME COURT OF INDIA]. Disallowance u/s Sec.37(1) - damages or penalty or interest - Held that:- Similar issue was there in the earlier year also for the assessment year 2001-02, wherein the Tribunal set aside this issue to the file of the Assessing Officer to re-examine the exact nature of payments whether these are compensatory or penal in nature - as decided in Prakash Cotton Mills Pvt. Limited Versus Commissioner of Income-Tax [1993 (4) TMI 3 - SUPREME COURT] and Standard Batteries Ltd. vs. CIT [1994 (4) TMI 2 - SUPREME COURT] whatever is paid to the Govt. authorities, though known as penalty, but if the same is of compensatory nature, then the same, strictly speaking, is not penalty and has to be allowed as business expenditure - remit the matter back to the file of AO for re-examination. X X X X Extracts X X X X X X X X Extracts X X X X ..... h the records, it is seen that these items have no connection with the industrial undertaking and are not derived from "profits and gains" of the undertaking, therefore, the finding given by the CIT(A) that it is to be excluded from the computation of income under Section 10B of the Act, is confirmed. Thus, this issue is decided against the assessee. (iv) Regarding Stores Miscellaneous Sale for sums amounting to Rs.8,01,900/- in Century Denim Unit, learned CIT(A) has given a finding that the store miscellaneous sale is in respect of various store purchases during the year and is not in respect of the manufacturing activity of the assessee company and, therefore, the same is not required to be considered as income from industrial undertaking. Learned Counsel submitted that this issue has not been properly discussed by the Assessing Officer as well as CIT(A). He, therefore, submitted that the matter should be reexamined. On the merits, he submitted that the sale of miscellaneous store items purchased during the year relates to manufacturing activities of the assessee. After going through the order of the CIT(A), we find that this issue has been decided by the CIT(A) at page 13 in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider it afresh after giving due opportunity to the assessee. This issue is allowed for statistical purposes. (vii) Regarding amount of settlement of cancellation of sale contract of M/s Sudacot Trading S.A. for supply of 200 MT Greek Cotton, Contract No.1010/GR for sum amounting to Rs.9,55,562/-. The learned counsel at the time of hearing, did not press for this issue. Accordingly, the same is treated as dismissed being not pressed. In the result, ground No.1 is partly allowed for statistical purposes as per the findings given on various issues as above. 4. In ground No.2, the assessee has challenged the finding of the CIT(A) in affirming the action of the Assessing Officer by treating the forfeiture of employees security deposit of Rs.51,327/- as income of the assessee. 4.1 At the time of hearing, learned counsel, at the outset, fairly admitted that this issue is covered against the assessee by the order of this Tribunal in assessee's own case in ITA No.3926/M/2005 for the assessment year 2001-02 vide order dated 16-5-2012. In this case the Tribunal followed its earlier decision. 4.2 After going through the order of the preceding year, we find that this issue stands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue has been decided by the ITAT in assessee's own case in I.T.A. Nos. 3925 & 4170/Mum/2005 in assessment year 2000-01, in paras 26, 27, 28 and 29 as under: "26. Before us, the ld. counsel of the assessee submitted that the issue is covered in favour of the assessee by the order of Tribunal in earlier year and in this regard he specifically referred to para 19 of the order of Tribunal in ITA No.9329/Mum/2004. 27. On the other hand, the ld. D.R. submitted that the Hon'ble Bombay High Court in the of CIT vs. J.K. Chemicals Ltd. (supra) and other decisions relied on by the CIT(A) has clearly held that such project expenses are not allowable. 28. In the rejoinder, the Id. counsel of the assessee pointed out that In the case of J.K. Chemicals Ltd. the issue was regarding expenditure incurred for project report for setting up a new unit, whereas in the case before us the expenditure is in the form of salary, travelling and misc. expenditure, which is of revenue nature. He also furnished a copy of the order of Bombay High Court In ITA No.4218 of 2009 wherein the Revenue had taken this issue before the Hon'ble Bombay High Court and which was ultimately decided in favour of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.4, the assessee has challenged the disallowance of penalty/fine of Rs.1,03,700/- consisting of more than 12 kinds of penalties and fines as given in page 17 & 18 of the appellate order. 6.1 At the outset, learned counsel submitted that this issue stands covered against the assessee in assessee's own case in ITA No.3926/2005 for the assessment year 2001-02. 6.2 After going through the order of the CIT(A) as well as the order of the Tribunal, we find that this issue has come up for consideration in the earlier years also before the Tribunal in the assessment year 2001-02. The Tribunal after following its earlier decision has confirmed these penalties/fines. Since the nature of penalties and fines are same, hence, we do not find any reason to deviate from the precedence of the earlier orders. Accordingly, we uphold the disallowance on the amount of penalties and fines aggregating to Rs.1,03,700/-. Thus, this ground is decided against the assessee. 7. In ground No.5, the assessee has challenged the disallowance of Rs.1,80,291/- being amount pertaining to written off on leasehold land in various division. 7.1 Learned counsel submitted that this issue has been restored to the file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in the earlier assessment year. The Tribunal in the assessment year 2001-02, has noted that this issue has been decided against the assessee in the preceding year and, therefore, there is no reason to disturb such finding. Accordingly, the disallowance was upheld. 9.2 Thus, following the earlier years precedence, this issue is decided against the assessee. Accordingly, ground No.7 stands dismissed. 10. In ground No.8, the assessee has challenged disallowance of interest paid on Income Tax of Rs.11,135/-. As fairly admitted by learned Senior Counsel appearing on behalf of the assessee that such an interest paid on Income Tax cannot be held to be derived from activities carried out by the EOU. Otherwise also, there is no merit in such a claim. Accordingly, the same stands dismissed. 11. In ground No.9, the assessee has challenged the disallowance of interest paid to SSI units of Rs.2,87,630/-. Learned counsel fairly admitted that this issue stands covered against the assessee in assessee's own case in the earlier assessment year. After going through the order passed by the Tribunal in assessment year 2001-02, we find that the Tribunal has recorded a finding that this issue stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue has been restored back to the Assessing Officer after following the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT, [2010] 328 ITR 81 (Bom) in the earlier years. After going through the order of the Tribunal in the assessment year 2001-02, we find that this matter has been restored to the file of the Assessing Officer after observing and holding as under :- "32. We find that the ITAT has restored the issue back to the AO to be decided on the basis of the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs DCIT, reported in 328 ITR 81. Therefore, we set aside the order of the CIT(A) and remit the matter back to the file of the AO to recompute the disallowance u/s 14A in the light of the decision of the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co.Ltd. vs DCIT (supra). Ground no. 10 is allowed for statistical purposes." 14.2 Thus, in this year also this matter is restored back to the file of the Assessing Officer to work out some reasonable basis for disallowance in view of the decision laid down by the Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nexus between the investment and the self-owned funds by way of cash fund flow statement to the satisfaction of the Assessing Officer." 2. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to restrict the disallowance to Rs.1,03,700/- without appreciating that in view of the explanation to Sec.37(1) any expenditure incurred by an assessee for any purpose which is an offence of which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction will be allowable in respect of such an expenditure. 3. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow the foreign travel expenses of Mrs.S.D.Birla, wife of Shri B.K.Birla, Chairman of the company without appreciating the fact that it was not an expenditure incurred wholly and exclusively for the business of the assessee. 4. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow depreciation on account of addition to Plant & Machinery being provision for Custom Duty on Airjet loom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowable in respect of such an expenditure. 41. This issue has been dealt with by the Tribunal in I.T.A. Nos. 3925 & 4170/Mum/2005 in assessment year 2000-01, in paras 69, 70 and 71 which read as under: "69. Before us, it was submitted that the amounts dL1lowed by the CIT(A) are basically of compensatory nature and therefore the same should have hen allowed. In this regard , reliance was placed on the decisions of Hon'ble Supreme Court in the case of Prakash Cotton Mills Pvt. vs. CIT (201 ITR 684) (SC) and Standard Batteries Ltd. vs.CIT (211 ITR 444) (SC). 70. On the other hand, the id. D.R relied on the order of CIT(A). 71. After considering the rival submissions, we find that the Hon'ble Supreme Court in the cases of Prakash Cotton Mills Pvt. Ltd. (supra) and Standard Batteries Ltd. vs. CIT (supra) has observed that whatever is paid to the Govt. authorities, though known as penalty, but if the same is of compensatory nature, then the same, strictly speaking, is not penalty and has to be allowed as business expenditure. The Hon'ble Court has given the „ample of penalty paid for delayed payment of Salestax which was held to be compensatory nature. Since no details have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee by the order of the tribunal for the assessment year 2001-02. The relevant observation of the Tribunal are as under :- "46. Ground No. 4 is that the CIT(A) erred in directing the assessing Officer to allow depreciation of Rs. 57,756/- on account of addition to plant & machinery being provision for custom duty on Airjet looms and Auto corner without appreciating that the same are covered by the provisions of section 43B. 47. In assessment year 2000-01, in ITA No. 4170/Mum/2005 in paras 77 and 78 and in the earlier years, the ITAT has been deciding the issue against the revenue and in favor of the assessee, respectfully following the decisions taken by the ITAT in the preceding years, we decide the issue against the department. Ground no. 4 is dismissed." Thus, following the binding precedence of the Tribunal order of the earlier years, this issue is decided in favour of the assessee and consequently, ground No.4 raised by the department is dismissed. 16.6 Ground No.5 raised by the department in its appeal is similar to ground No.1 as above and, therefore, in view of the finding given therein, this issue is treated as allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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