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TMI Blog2014 (5) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... f bonus shares is Revenue expenditure - the assessee has made payment to the ROC in relation to issue of bonus shares – thus, the AO is directed to allow the expenses – Decided in favour of Assessee. Disallowance of foreign travel expenses - Preliminary studies for implementation of Fertilizer Project – Disallowance of Sundry contributions u/s. 40A(9) of the Act - Held that:- As decided in assessee’s own case for the earlier year, the matter is remitted back to the AO to allow depreciation on the foreign travel expenses added to the cost of the machinery – Decided in favour of Assessee. Disallowance of foreign exchange fluctuation loss - Disallowance of investment allowance on increase in liability on account of foreign exchange fluctuation loss – Disallowance of expense on fish and prawn culture – Part disallowance of Delhi expenses - Held that:- As decided in assessee’s own case for the earlier year, it has been held that the assessee has been allowed depreciation on foreign exchange fluctuation loss – thus, the AO is directed to allow depreciation as per law also the AO is directed to allow the investment allowance on exchange loss treated as capital expenditure – thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end of the accounting year – thus, there was no reason to interfere in the order of the CIT(A) – Decided against Assessee. Disallowance of Customs fine - Imported spares from customs – Held that:- If the amount so paid is found to be not a penalty or something akin to penalty due to the fact that the amount paid by the assessee was in exercise of the option conferred upon him under the very law or scheme concerned then one has to regard such payment as business expenditure of the assessee, allowable u/s. 37 of the Act – Relying upon CIT Vs Ahmedabad Cotton Mfg. Co. Ltd [1993 (10) TMI 1 - SUPREME Court] vis-à-vis Sec. 125 of the Customs Act - what has been paid by the assessee is a fine to prevent confiscation of its spare parts which were required for its business – thus, the payment deserves to be allowed as deduction u/s. 37(1) of the Act – thus, the AO is directed to allow the deduction. Disallowance of depreciation and extra shift allowance – Disallowance of expenses – Expenses treated as capital expenses – Disallowance of expenses on soil investigation and effluent outfall - Held that:- Following the assessee’s own case of the earlier assessment year, it has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41/- 5. It is the say of the Ld. Counsel that similar issue came up for hearing before the Tribunal in assessee s own case in ITA Nos. 5181 5452/M/02 pertaining to A.Y. 1985-86. 6. We have carefully perused the order of the Tribunal (supra). We find that this issue has been decided vide para-16 onwards. The finding of the Tribunal is at para-20 page-9 of its order. Expenses under the first two items i.e. Salaries wages and repairs and renovation expenses has been confirmed by the Tribunal. As regards, the disallowance of food expenses to the tune of Rs. 8.31.941/-, we find that the Tribunal has followed the decision in the case of Tata Engineering Locomotive Co. Ltd. Vs DCIT in ITA No. 5449/M/1998 and has set aside the issue of disallowance of food expenses to the file of the AO to decide the same afresh in the light of the decision of the Tribunal in the case of TELCO. Facts and issues being identical, we accordingly confirm the additions under the heads salaries and wages to staff Rs. 4,77,809/- and repairs and renovation charges to Rs. 2,37,017/- and restore the issue back to the file of the AO as regards expenses on food to the tune of Rs. 8,31,941/-, the AO is dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow depreciation on the foreign travel expenses added to the cost of the machinery. Facts being identical, respectfully following the decision of the Tribunal (supra), we direct the AO to allow depreciation as per law. This ground of the assessee is accordingly allowed. 13. Ground No. 4 relates to disallowance of Bhanwad prospecting survey expenses of Rs. 59,366/-. 14. The Ld. Counsel for the assessee pointed out that the assessee has been allowed deduction u/s. 35(E) of the Act. Considering this fact, the grievance of the assessee becomes otiose. Ground No. 4 is accordingly dismissed. 15. Ground No. 5 relates to the disallowance of foreign exchange fluctuation loss of Rs. 33,89,396/- and further disallowance of investment allowance on increase in liability on account of foreign exchange fluctuation loss. 16. This issue has been discussed by the AO at page-5 para-11 of his order and the same has been confirmed by the Ld. CIT(A) at page-26 para-9 of his order. 17. The Ld. Senior Counsel pointed out that this issue has been decided in favour of the assessee in assessee s own case in ITA No. 4194 4137/M/01 for A.Y. 1984-85. We find that the assessee has been allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in assessee s own case for A.Yrs 1981-82 1982-83 in ITA No. 1579/M/98 and allowed the deduction. Facts being identical, respectfully following the decision of the Tribunal (supra) in assessee s own case, we direct the AO to allow the expenses of Rs. 2,22,508/-. This ground of the assessee is accordingly allowed. 24. Ground No. 8 relates to the part disallowance of Delhi expenses to the extent of Rs. 75,000/- out of total disallowance of Rs. 2,00,000/- made by the AO. 25. The AO has discussed this issue at para-19, page-8 of his order and the same issue has been partly allowed by the Ld. CIT(A) vide para-11, page-41 of his order. 26. We find that a similar issue has come up for hearing before the Tribunal in assessee s own case in A.Y. 1985-86 in ITA No. 5181/M/02 which has been discussed by the Tribunal at para-80 to 84 of its order. We find that the Tribunal has followed the earlier decision of the Tribunal in assessee s own case in ITA Nos. 4194 4137/M/01 for A.Y. 1984-85 and allowed the deduction of the assessee. In the absence of any distinguishing feature brought on record, we respectfully , following the order of the Tribunal , direct the AO to allow the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account in the year under consideration. 32. We have considered the rival submissions and perused the orders of the lower authorities. We have also the benefit of the order of the Hon ble Gujarat High Court (supra). We find that the Hon ble Gujarat High Court has held that merely because an expense relates to a transaction of an earlier year, it does not become a liability payable in the earlier year unless it can be said that the liability is determined and crystallized in the year in question on the basis of maintaining account on the mercantile basis. In each case, when the accounts are maintained on mercantile basis, it has to be found in respect of any claim whether such liability was crystallized and quantified during the previous year as required to be adjusted in the books of account of that previous year. Considering the facts on record, we find that the liabilities under the aforesaid heads have crystallized during the year under consideration. These expenses cannot be disallowed as deduction merely on the basis that accounts are maintained on mercantile basis and that it relates to a transaction of the previous year. As the liabilities have been accepted by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 1985-86 at para-75 of its order has held that interest on electricity deposit is neither duty nor tax, therefore, it is out of the scope of the Section 43B of the Act. Facts being identical, respectfully following the decision of the Tribunal in assessee s own case, the AO is directed to delete the addition of Rs. 11,55,597/-. 38. As regards Mineral Rights Tax of Rs. 55,55,738/-, the AO has discussed this issue at page-10, para-23 of his order wherein the AO sought explanation from the assessee as to why Rs. 55,55,738/- should not be disallowed u/s. 43B of the Act to which the assessee contended that this amount is outstanding on account of payment of Mineral Rights tax. According to the assessee, this amount was a part of the cost of the minerals to the assessee and was as such not hit by the provisions of section 43B of the Act. It was also pointed out that this amount of Rs. 55,55,738/- comprises of Rs. 21,11,379/- payable by the assessee to the Government on the limestone mined by the company itself and an amount of Rs. 34,44,359/- payable by the company to the merchants from whom the lime stone was purchased by the company. It was pleaded before the AO that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, by not paying the said amount to the Government, the assessee has retained public fund with itself. As the assessee itself has agreed to pay the MRT on the limestone purchased by it and as it has not discharged the liability till the end of the accounting year, we do not find any reason to tamper with the findings of the Ld. CIT(A). The disallowance in respect of Mineral Right tax to the tune of Rs. 55,55,738/- is accordingly confirmed. Ground No. 11 is dismissed. 43. Ground No. 12 relates to disallowance of premium on redemption of debentures of Rs. 9,64,286/- made during the year though relating to assessment years 1983-84, 1984-85 1985-86. 44. The AO has discussed this issue at page-11, para-24 of his order. Findings of the Ld. CIT(A) can be found at page-9, para-6 of his order. The lower authorities have not allowed the provision for premium on redemption of debentures made during the year as the same pertain to earlier assessment year. A similar issue has been decided by us in ground No. 9 of this order where we have directed the AO to allow the expenses as the liability has been crystallized during the year under consideration following the decision of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49. We have considered the rival submissions and perused the orders of the lower authorities and the material evidence brought on record. It is not in dispute that the assessee has imported spare parts. It is also not in dispute that on those spare parts, the assessee was made to pay a fine of Rs. 2,00,000/- to the custom authorities. It is the say of the Counsel that u/s. 125 of the Customs Act, what has been paid by the assessee is a fine to avoid confiscation of its goods i.e. spare parts which were urgently needed for its business. In examining the claim of an assessee that the payment made by such assessee is a deductible expenditure u/s. 37, although called penalty all that is to be seen is whether the law or scheme under which the amount was paid required such payments to be made, as penalty or as something akin to penalty, that is imposed by way of punishment for breach or infraction of the law or the statutory scheme. If the amount so paid is found to be not a penalty or something akin to penalty due to the fact that the amount paid by the assessee was in exercise of the option conferred upon him under the very law or scheme concerned then one has to regard such payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT Vs Indian Turpentine 75 ITR 533 and also the decision of Madras High Court in the case of Jagadeeshchandran 75 ITR 697. Respectfully following the decision of the Tribunal, we restore this issue back to the file of the AO. The AO is directed to decide this issue afresh as per the findings given in assessee s own case for A.Y. 1984-85. This part of the ground is allowed for statistical purposes. 55. As regards depreciation on ship Veer Varuna amounting to Rs. 44,30,500/-, we find that a similar issue came up for hearing in assessee s own case before the Tribunal in A.Y. 1985-86 vide ITA No. 7455/M/02. The issue relates to ground No. 2 of that appeal. We find that the Tribunal in that case has followed the earlier decision of the Tribunal in assessee s own case for A.Y. 1984-85 and direct the AO to allow depreciation. Respectfully following the decision of the Tribunal in assessee s own case, we direct the AO to allow depreciation on Ship Veer Varuna. This part of the ground is accordingly allowed. 56. Ground No. 17 relates to disallowance of expenses of Rs. 2,14,592/- treating the same as capital expenditure. 57. This issue has been considered by the AO at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the disallowance made by the AO on account of expenses reimbursed to Tata Services Ltd. from Rs. 2,00,000/- to Rs. 75,000/-. 63. This issue has already been discussed in assessee s appeal vide ground No. 8. Therefore this ground of the Revenue is dismissed. 64. Ground No. 3 relates to allowance of Rs. 2,06,619/- being expenditure incurred on incentive bonus to the workers. 65. The AO has discussed this issue at page-4, para-6 of his order and the Ld. CIT(A) has allowed the appeal vide para-20, page-67 of his appellate order. The issue stands covered in favour of the assessee by the order of the Tribunal in assessee s own case in A.Y. 1984-85 vide ITA No. 4194/M/01 and A.Y. 1985-86 vide ITA No. 5181/M/02. In A.Y. 1984-85 the Tribunal has decided this issue at para-54 of its order wherein the Tribunal has allowed the incentive bonus paid to the workers. Similarly for A.Y. 1985-86 while deciding ground No. 6 of that appeal, the Tribunal has taken a similar view as taken in A.Y. 1984-85 and deleted the additions made in respect of incentive bonus to workers. Facts being identical, respectfully following the decision of the Tribunal in assessee s own case, findings of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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