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TMI Blog2014 (8) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... use – Held that:- CIT(A) has rightly directed the AO to examine and verify the claim of the assessee and to disallow 50% claim of the assessee for depreciation in respect of those items which were used for less than 180 days in the present year - Regarding the opening balance also, he has directed the AO to verify the record of the assessment year 2001-02 and recompute the depreciation allowable by allowing 100% depreciation on opening WDV arrived at as on 01.04.2001 - The directions of the CIT(A) are in line with the provisions of 2nd proviso to clause (ii) of sub section (1) of section 32 of the Act – Decided against Assessee. Payment of gratuity under LIC scheme u/s 43B – Invocation of section 40A(7) – Held that:- Deduction is allowable if the provision is for the purpose of payment of a sum by way of any contribution towards approved gratuity fund – relying upon Shree Sajjan Mills Ltd. Vs Commissioner of Income-tax [1985 (10) TMI 2 - SUPREME Court] - the amount paid was nothing else but gratuity and merely because the scheme had been mentioned as Gratuity Insurance Assurance Scheme, it does not make any difference and the provisions of section 40A(7) would be attracted as the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g harmonious relationship and welfare of the employees, which is nothing but business expenditure – the order of the CIT(A) is upheld – Decided against revenue. Bad and Doubtful Debts, Advances and others written off u/s 36(1)(vii) – Held that:- CIT(A) rightly decided that in addition to writing off the debt, the assessee has to establish that the amount of debt was taken into account in computing the income of the assessee of the previous year in which it is written off or of an earlier year – as the assessee could not establish that the amount was considered as income by the assessee in the previous year or in any earlier year - as per sub section (2) of section 36, deduction is not allowable to the assessee u/s 36(1)(vii) of the Act – Decided against Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year involved is 2002-03 after insertion of the provisions of section 35DDA inserted with effect from 01/04/2001. Hence, this judgment of Hon'ble Bombay High Court is not applicable in the present case. 5.3 The second judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Delhi High Court rendered in the case of Commissioner of Income-tax Vs Dinesh Kumar Goel [2011] 331 ITR 10 (Del). In this case, the issue in dispute before the Hon'ble Delhi High Court was that as to whether the tuition fees received in advance is accrued income in the year of receipt although the services are to be rendered in the subsequent year. Under these facts, it was held by Hon'ble Delhi High Court that the fees relating to next year cannot be said to have accrued to the assessee. This judgment is not applicable in the present case because in the present case, there is no dispute regarding accrual of income and we have seen that the decision of the authorities below is in line with the provision of section 35DDA of the Act. Hence, no interference is called for in the order of CIT(A) on this issue. Accordingly, this ground of the assessee is rejected. 6. Ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 125 of the written submissions) on the opening WDV of ₹ 10,50,147/- as depreciation is allowable @ 100% on the opening value of ₹ 10,50,147/-. Since as per the claim the amount was allowable @ 100% in the previous assessment year i.e. A.Y. 2001-02, and Explanation 5 states that the provisions of sub-section (1) of section 32 shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income and as the Explanation is clarificatory in nature and, therefore, has retrospective effect, the Assessing Officer shall examine the record of A.Y. 2001-02 and recompute the depreciation allowance by allowing 100% depreciation on opening WDV arrived at as on 01.04.2001. The Assessing Officer shall further verify the amount pertaining to the period of use equal to 180 days or more and allow the depreciation of ₹ 9,05,138/- instead of ₹ 4,19,641/- allowed by him if after verification the period of use is found to be 180 days or more. This ground of appeal is accordingly partly allowed." 9.1 From the above Paras from the order of CIT(A), we find that CIT(A) has directed the Assessing Officer to examine and verify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved Gratuity fund or not. As per the judgment of Hon'ble Apex Court rendered in the case of Shree Sajjan Mills Ltd. Vs Commissioner of Income-tax [1985] 156 ITR 585 (SC), it was held that the amount paid was nothing else but gratuity and merely because the scheme had been mentioned as Gratuity Insurance Assurance Scheme, it does not make any difference and the provisions of section 40A(7) would be attracted as the fund had not been recognized by the Department. It was held that the Tribunal was not justified in upholding the deletion of the addition. It is also noted by CIT(A) that the deduction is not allowable u/s 36(1)(v) either and the same is not allowable u/s 36(1)(v) also because deduction is allowable u/s 43B of the Act. He has held that the disallowance made by the Assessing Officer is justified and on this basis, he has confirmed the disallowance. 14. Learned A.R. of the assessee could not show before us that payment of premium to LIC is payment to approved gratuity fund. Hence, on this issue also, we do not find any reason to interfere in the order of CIT(A). Ground No. 3 is rejected. 15. Ground No. 4 is as under: "4. Because, the learned lower authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns made. The appellant follows the mercantile system of accounting and as the grant of ₹ 100 Lakhs had been sanctioned, it had accrued to the assessee as it was entitled to receive the same. Therefore, the same should have been included in its income instead of treating only a part of it as income. The expenses are allowable as and when they are incurred. Hence, this ground of appeal is hereby rejected and the addition of ₹ 50,00,000/- is confirmed." 18.1 From the above Paras from the order of CIT(A), it is seen that grant of ₹ 100 lac was sanctioned on 21/08/2001 but only ₹ 50 lac was disbursed initially and balance was to be disbursed on utilization of the first ₹ 50 lac and on furnishing of utilization certificate duly audited. It is noted by CIT(A) that on receipt of utilization certificate, the balance amount was disbursed as per letter dated 10/04/2002 and the draft was received by the assessee on 15/04/2002. A grant which was received in the next assessment year cannot be utilized in the present year and as per the matching principle, this grant should be considered as income in the next year. Hence, on this issue, we reverse the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned D.R. of the Revenue could not controvert this finding of CIT(A) and therefore, we do not find any reason to interfere in the order of CIT(A). 24. In the result, the appeal of the Revenue stands dismissed. 25. Now we take up the appeal of the assessee for assessment year 2003-04 i.e. I.T.A. No.36/Lkw/2013 arising out of assessment order passed by Assessing Officer u/s 143(3) read with section 263 of the Act. 26. In this appeal the assessee has raised the following grounds: "1. Because the learned CIT(Appeals) has erred in overlooking the policy followed by the appellant company relating to Prior Period Adjustment A/c and in making addition of ₹ 79,92,018/-. 2. That the Assessing Officer erred in not understanding the accounting policy adopted by the appellant, AS-5 as issued by the Institute of Chartered Accountants of India and not accepting the judicial pronouncement as held in Case of Bharat Earth Movers Ltd. v/s CIT (2000) 112 Taxman 61 (SC) and CIT Delhi-II v/s Khaitan Fertilizers & Chemicals Ltd. (2008) 175 Taxman 195 (Delhi)." 27. It was submitted by Learned A.R. of the assessee that these expenses although pertain to earlier year have crystalliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as from the order of CIT(A), it is seen that a clear finding is given by CIT(A) that the assessee is claiming expenses for the year under consideration solely on the grounds the vouchers concerned were passed in the current year and he has also given a finding that in none of the cases, it can be said that the liability arose in the year under consideration. Before us also, it could not be shown by Learned A.R. of the assessee that these liabilities have crystallized during the present year. Hence, on this issue, we do not find any reason to interfere in the order of CIT(A). 30. In the result, the appeal of the assessee stands dismissed. 31. Now we take up the appeal of the assessee for assessment year 2003-04 i.e. I.T.A. No.87/Lkw/2011, which is arising out of the original assessment order passed by the Assessing Officer u/s 143(3) of the Act on 28/03/2006. 32. In this appeal, the assessee has raised the following grounds: "1. Because, the learned lower authorities failed to appreciate that the appellant was entitled for 100% of depreciation on electric vehicles irrespective of the period to which it is put to use. 2. Because, the Learned CIT(Appeals) has erred in over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and balance was received in assessment year 2003-04 and since grant received in assessment year 2003-04 could not be utilized in assessment year 2002-03, it was held by us that this amount of ₹ 50 lac should be considered income for assessment year 2003-04. In assessment year 2003-04, it is noted by CIT(A) in Para 4.7 and 4.7.1 of his order that out of sponsored grant of ₹ 200 lac, ₹ 100 lac was received by the assessee in the present year and the same was offered to tax and balance ₹ 100 lac was shown by the assessee as current liability in the balance sheet. Hence, it is seen that this ₹ 100 lac was not received in the present year and when the grant is not received, the same cannot be utilized in the present year and therefore, on the basis of matching principle, this grant should be taken as income in the year of receipt because only after receipt of the grant, it can be utilized and if the assessee does not utilize even after receipt, then the same should be taxed in the year of receipt irrespective of the fact that the expense was not incurred but when the grant itself has not been received, it should not be taxed as income. Accordingly, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and employees' welfare. It is contended that the appellant had incurred an expense of ₹ 1087639/- on account of interest subsidy paid to the employees on house building loan taken by them from various financial institutions and the same were debited in Profit and Loss Account in Schedule 15. The said interest subsidy was given on account of the fact that as per policy of the company, the company was required to give house building loan to its employees at an interest rate of 6.5%, but due to paucity of funds the company could not honour its commitments hence, the company allowed its employees to borrow house building loan and the interest exceeding 6.5% as paid to the financial institutions was reimbursed to the employees. Accordingly, the same was treated as expense of the company. 4.5.1 I have considered the assessment order and the grounds of appeal. The Assessing Officer has examined the issue in the context of commercial expediency and has held that the interest subsidy cannot be allowed as a business expenditure. It has been held in the case of Amarjothi Pictures v. CIT [1968] 69 ITR 755 (Mad.)/CIT vs. Gobald Motor Service (P.) Ltd. [1975] 100 ITR 240 (Mad.) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for assessment year 2004-05 i.e. I.T.A. No.91/Lkw/2012. In this appeal the assessee has raised the following grounds: "1. Because, the Learned CIT(Appeals) has erred in overlooking the provisions of sec.43B relating to disallowance of ₹ 2,11,99,639/- on account of payment of gratuity paid under the scheme of LIC but disallowed the said amount by invoking the provisions of sec.40A(7) of the I.T. Act. 2. Because, the learned lower authorities treated the grant for electric vehicle of ₹ 1,00,00,000/- as its income in assessment year 2003-04 whereas the appellant had considered the said amount in the books of account as its income in assessment year 2004-05, accordingly the said income of ₹ 1,00,00,000/- was treated as income twice in assessment years 2003-04 & 2004-05 hence the lower authorities erred in treating the amount of ₹ 1,00,00,000/- as income in assessment year 2003-04. 3. Because, the Learned CIT(A) has erred in overlooking the provisions of sec. 36(l)(vii) of the Income Tax Act, 1961 by disallowing ₹ 623660/- on account of Bad and Doubtful Debts, Advances and others written off." 43. Regarding ground No. 1, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom.) 137 ITR and in the case of Tamil Nadu Minerals Ltd. Vs. JCIT (ITAT, Chennai) 05 ITD 294. 2. Ld. CIT (A) has erred in law and facts in deleting the addition of ₹ 7,33,446/- on account of benevolent expenses relying on the decision in the case of CIT Vs. E.I.D. Parry India Limited (1999) 105 Taxman 153/240 ITR 253 (Mad.) They have failed to appreciate that the assessee failed to prove that the expenses are wholly for the purpose of business. The decisions in the case of Goodlas Nerolac Paints Ltd. Vs. CIT (Bom.) 137 ITR and in the case of Tamil Nadu Minerals Ltd. vs. JCIT (I.T.A.T.), Chennai 05 ITD 294 are therefore applicable to the facts of the case." 49. Both the sides agreed that this issue is identical to the issue raised by the Revenue in assessment year 2003-04. In assessment year 2003-04, this issue was decided in favour of the assessee and accordingly on similar line, this issue is decided in favour of the assessee in the present year also. 50. In the result, the appeal of the Revenue stands dismissed. 51. Now we take up the appeal of the Revenue for assessment year 2005-06 i.e. I.T.A. No.61/Lkw/2011. In this appeal, the Revenue has raised the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the following grounds: "1. The CIT(A) has erred in law and on facts in deleting the addition of ₹ 3,75,236/- on account of "interest subsidy on house building loans" relying on the decision in the case of CIT vs. E.L.D. Parry India Limited (1999) 105 Taxman 153/240 ITR 253 (Mad). He failed to appreciate that the said expenses are not wholly for the purpose of business and are not allowable. In doing so he failed to follow the decision in following cases: (a) Goodlas Nerolac Paints Ltd. vs. CIT (Bom) 137 ITR (b) Tamil Nadu Minerals Ltd. vs. JCIT (I.T.A.T. Chennai) 05 ITD 194 2. The CIT(A) has erred in law arid on facts in deleting the addition of ₹ 2,73,82,796/- made by A.O. out of gratuity paid under LIC Scheme. The Ld. CIT(A) failed to appreciate that the payment related to an earlier year and since no provision had been made by the assessee in that year, the payment was not allowable as deduction as per the provision of section 40A(7)(b) of the I.T. Act. Reliance in this regard is placed on following judgments: (a) CIT Vs. Laxmi Sugar & Oil Mills Ltd (1993) 70 taxman 378 (Allahabad). (b) Sajjan Mills Ltd. Vs CIT (1985) 23 Taxman 37 (SC). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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