9911796707
TMI Blog2015 (6) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... t on term deposit - CIT(A) deleted the addition - Held that:- In the present case, this is not the case of the Assessing Officer that corresponding amount is appearing in the liability side of the balance sheet but it is apparent from Schedule-12 that the assessee has shown corresponding amount as income. The amount of income shown under both these heads i.e. royalty received and interest on term deposit is higher than the amount shown in the balance sheet under the head ‘other current assets’ on account of royalty receivable and interest accrued on term deposit. It means that entire income under these heads were accounted for as income and that part of these two income, which were receivable at the end of the year, were shown in the balance sheet under the head ‘current assets’ and therefore, it cannot be said that the assessee has not shown these two items as income in the present year. - Decided against revenue. Deduction u/s 35(2AB) - CIT(A) mentioning that no in house scientific research has been carried out by the appellant - Held that:- As decided in assessee's own case for assessment year 2005- 06 and 2006-07 [2015 (2) TMI 894 - ITAT LUCKNOW] merely getting approval from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction should be allowed. The Assessing Officer should pass necessary order as per law as per above discussion after providing proper opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of Prior Period Adjustment - Held that:- The total disallowance made by the Assessing Officer included ₹ 796.41 lac on account of gratuity and ₹ 275.82 on account of leave encashment. Regarding these two amounts, we find that the provisions of section 43B are also applicable and therefore, it is necessary to find out as to whether the assessee has made payments in the present year or not in respect of these two amounts of gratuity and leave encashment. Therefore, we set aside the order of learned CIT(A) and restore the matter back to the file of the Assessing Officer for fresh decision. Regarding other amounts we find that a clear finding has been given by CIT(A) that the assessee has not pressed the claim of expenses for financial year 2004-05. Regarding interest and penalties on taxes he has given a finding that the same is not allowable under the Income-tax Act and therefore, the claim relating to earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Disallowance of gratuity paid under LIC scheme - CIT(A) deleted the addition - Held that:- Since the issue is covered against the assessee by the Tribunal decision in assessee’s own case for assessment year 2002-03 and 2003-04 we do not find any reason to take a contrary view. - Decided in favour of revenue. Addition on account of "interest subsidy on house building loans” - CIT(A) deleted the addition - Held that:- As in assessee’s own case for assessment year 2002-03 and 2003-04, this issue was decided in favour of the assessee and it was held that the interest subsidy to the employees is for maintaining harmonious relationship and welfare of the employees, which is nothing but business expenditure. Respectfully following this Tribunal decision in assessee’s own case, we hold that in the present year also, this disallowance is not justified. - Decided against revenue. Addition on account of royalty receivable and interest accrued in term deposits - CIT(A) deleted the addition - Held that:- from the above Para from the order of CIT(A), we find that a clear finding is given by him that the amount shown by the assessee under the head current assets on account of royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the rival submissions. Regarding ground No. 1 in respect of validity of reassessment proceedings, we find that this issue was decided by learned CIT(A) as per Para No. 4(4) to 4(6) of his order, which are reproduced below for the sake of ready reference:- 4(4)(i) I find from the reasons recorded by the AO as reproduced above and the observations of the CIT(A) as reproduced above that there were no directions as such of the CIT(A). In my opinion, the observation made by CIT(A) in the order dated 30.07.2010 (supra) could not be described as a direction. The CIT(A) has observed that ''the AO is however free to take action u/s 147 of the I. T. Act, 1961 in respect of all the three amounts of the same have escaped assessment after following the procedure established by Law in this regard . In my considered view, the above observation of the CIT(A) could not be held as a direction. A similar issue has been decided by the Hon'ble Supreme Court in the case of Rajinder Nath V. CIT. The head note is as under: That the observation that the ITO was free to take action to assess the excess in the hands of the crossobjection owners could not be described as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 4(5)(ii) The AO has initiated action under section 147 read with section 148 of the Act by service of notice on 29.03.2011. In the instant case an order under section 143(3) of the Act for the impugned assessment year 2004-2005 was passed originally on 22.12.2006. Thereafter, a notice was issued under section 154 of the Act to assess the three aforesaid amounts relating to deduction under section 35(2AB) of the Act of ₹ 35,87,808/- (wrongly mentioned as section 80R of the Act in computation of income as a typographical error), royalty receivable of ₹ 27,88,443/- and interest accrued on deposits of ₹ 8,57,73,905/-. The appellant has filed a letter dated 28.07.2007 explaining the reasons for which the additions aforesaid could not be made and claiming that the deduction claimed under section 35(2AB) of the Act was correctly claimed and royalty receivable and interest accrued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 147 is also applicable because it is undisputed that the original assessment was completed by the Assessing Officer for the present year u/s 143(3) and four years from the end of the relevant assessment year has already elapsed before issuing notice u/s 148 of the Act. Moreover, as per the provisions of section 150(2), the provisions of sub section (1) of section 150 are not applicable if it is found that at the time when the order of CIT(A) was passed, the reassessment was time barred under any other provision of the Act. In the present case, the order of CIT(A) is dated 30/07/2010 and therefore, as per the provisions of the first proviso to section 147, reassessment was time barred at that point of time because of the provisions of first proviso to section 147 because four years from the end of the relevant assessment year has already expired on 31/03/2009 and the order of the CIT(A) is dated 30/07/2010. Under these facts, even if it is held that there is direction of CIT(A), as required under sub section (1) of section 150, the provisions of sub section (1) of section 150 cannot be invoked as per the per the provisions of sub section (2) of section 150 of the Act and under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee has not shown these two items as income in the present year. The finding of CIT(A), on this issue, is contained in Para No. 6(1) to 6(2) of his order, which are reproduced below for the sake of ready reference:- 6(1) Ground of appeal number 3 relates to an addition of ₹ 27,88,443/- on account of royalty receivable and ₹ 8,29,85,462/- on account of interest accrued on term deposits aggregating ₹ 8,57,73,905/-. The AO has made the additions for the amounts mentioned in current assets in the balance sheet on the ground that the amount is taxable as per mercantile system of accounting. The appellant has filed written submissions which are placed on record. It is stated that as per double entry system of accounting an entry shown in current assets itself means that there is corresponding entry in the profit and loss account. 6(2)(i) I have examined the facts and circumstances of the case. I have considered the findings of the AO and the submissions of the appellant. The details of royalty account as submitted by the appellant are as under- Opening balance as on 01.04.2003 74,28,940/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have considered the rival submissions. We reproduce the relevant Para of the Tribunal order i.e. Para No. 6.2 7 from paper book pages 249 and 250, which are as under: 6.2 From the above paras from the order of CIT(A) in assessment year 2006-07, we find that he has given a clear finding that the assessee has failed to justify his claim of inhouse scientific research carried out and therefore, no deduction under section 35(2AB) is admissible to the assessee. In assessment year 2009-10 also, this issue was decided by the Tribunal against the assessee in I.T.A. No.90/Lkw/2013 dated 13/11/2013 and Para 4 of this Tribunal order is reproduced below for the sake of ready reference:- 4. We have considered the rival submissions, perused the material available on record and have also gone through the orders of the authorities below. We find that the claim of the assessee was rejected by the authorities below on the basis that the assessee has not separately shown expenditure for in-house research development. As per the details, it is seen that there is no expenditure incurred for any salary for any person who was there to carry out in-house research development. From t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis and to this extent, he has allowed deduction of interest on borrowed funds also, which has been computed by him at ₹ 44,01,512/- as against ₹ 1,07,62,911/- paid by the assessee to banks. The disallowance made by the Assessing Officer was ₹ 63,61,399/- being the difference in these two figures. Since the assessee could not establish that borrowings were for business purposes, deduction is not allowable u/s 36(1)(iii) of the Act and moreover, u/s 57(iii) also, deduction is already allowed by the Assessing Officer to the extent of interest income and entire interest expenditure cannot be allowed because it could not be established by the assessee that the borrowing was made for making investment in FDR by showing direct nexus between the borrowing from bank and making FDR in bank. Considering all these facts, we do not find any reason to interfere in the orders of the authorities below. Accordingly, ground No. 2 is rejected. Regarding various judgments, cited by Learned A.R. of the assessee, we find that the facts in these case are different and therefore, these judgments do not render any help to the assessee in the present case. 14. Since no difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that in that year, the issue was restored back to the Assessing Officer for fresh decision. The relevant Para of the Tribunal order is Para 7, which is reproduced below for the sake of ready reference:- 7. We have considered the rival submissions, perused the material available on record and have also gone through the orders of the authorities below. We find that in view of this Factory Order Part-II dated 20/01/2001, available on page 34 of the paper book, it cannot be said that the expenses incurred by the assessee company on account of death relief to the employee, is not business expenditure and, therefore, the disallowance made by the Assessing Officer and confirmed by Learned CIT(A) on this basis is not justified. But still we feel that the details of collection from the employees and the contribution by the employer are to be examined by the Assessing Officer because the same was not examined by him in view of his outright rejection of the assessee s claim. Though the details were brought on record before us but the same could not be reconciled and therefore, we feel it proper that for this limited aspect, the matter should go back to the file of the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/- on account of prior period adjustments. The AO disallowed the amount shown in schedule 18 of the accounts on the ground that these were not related to the year under consideration. The appellant has filed written submissions which are placed on record. It is stated that the AO has not appreciated the accounting. 12(2) I have examined the facts and circumstances of the case. I have considered the findings of the AO and the submissions of the appellant. I find that the amount of ₹ 12,04,18,481/- comprises as under Gratuity 7,96,41,289/- Leave encashment 2,75,82,804/- Expenses for F.Y 2004-2005 12,23,927/- Depreciation 12,34,061/- Repairs and maintenance 24,702/- Interest and penalties on taxes 10,82,942/- Deposit with sales tax 5,022/- Fringe Benefit tax (-)8,68,498/- Cess on turnover (-)2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is allowable only in the year of payment. Hence, on these two aspects, we set aside the order of CIT(A) and restore the matter back to the file of the Assessing Officer for fresh decision after providing adequate opportunity of being heard to the assessee. 25. Regarding other amounts being expenses of financial year 2004-05 ₹ 12.23 lac, depreciation ₹ 12.34 lac, repairs maintenance ₹ 0.24 lac, interest and penalties on taxes ₹ 10.82 lac, deposit with Sales Tax ₹ 0.05 lac and material adjustment ₹ 107.39 lac, we find that a clear finding has been given by CIT(A) that the assessee has not pressed the claim of expenses for financial year 2004-05. Regarding interest and penalties on taxes ₹ 10.82 lac, he has given a finding that the same is not allowable under the Income-tax Act and therefore, the claim relating to earlier years is not allowable. Regarding the claim of ₹ 107.39 lac on account of material adjustment, he has given a finding that the assessee has not filed any detail other than that it relates to resale. In the absence of any detail regarding this claim, the same is not allowable. Deposit with Sales Tax is also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. R. of the assessee supported the order of learned CIT(A). 34. We have considered the rival submissions. This issue was decided by learned CIT(A) as per Para 6(3) and 6(4) of his order, which are reproduced below for the sake of ready reference:- 6(3) It appears that the AO has restricted the allowability of expenses with regard to terminology adopted in the books of accounts. The shortages in spares and general store are an allowable expenditure even if it cannot strictly be said to be a bad and doubtful debt. It is trite law that the terminology adopted is not a criterion to decide the allowability. Similarly, evaporation losses of petrol and diesel in appellant owned pumps are an allowable expenditure. These are losses incurred during the course of business and are therefore allowable. However, I do not find how earnest money security deposit and writing off of debtors could be allowed as a bad debt particularly because it has not been shown that the amount has been considered in income in the current or earlier years. 6(4) In view of discussion above, the disallowance made by the AO is restricted to ₹ 1,97,815/- ( ₹ 1,80,942/- + ₹ 16,873/-), w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year and since no provision had been made by the assess that year, the payment was not allowable as deduction as per provision of section 40A(7)(b) of the I.T. Act. 39. Learned A. R. of the assessee supported the order of learned CIT(A). He also fairly conceded that this issue is covered against the assessee by the Tribunal order for assessment year 2005-06 2006-07 in I.T.A. No.88 89/Lkw/2011 dated 06/02/2015. He submitted that the copy of this Tribunal order is available on pages 245 to 263 of the paper book. He drawn our attention to Para 19 to 22 of the Tribunal order and pointed out that the Tribunal has followed another Tribunal decision in assessee s own case in I.T.A. No.86 87/Lkw/2011 dated 21/08/2014. 40. Learned D.R. of the Revenue supported the assessment order. 41. We have considered the rival submissions. First we reproduce Para 19 to 22 of the Tribunal order from pages 260 261 of the paper book which are as under: 19. Ground No. 5 is as under: 5. Because, the Learned CIT(Appeals) has erred in overlooking the provisions of sec.43B relating to disallowance of ₹ 2,27,73,012/- on account of payment of gratuity paid under the scheme o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount has been made as per the provisions of section 40(ia) of the Income Tax Act. 24. It was submitted by Learned A.R. of the assessee that this issue is covered in favour of the assessee by the same Tribunal decision in assessee s own case i.e. for assessment year 2002-03 and 2003-04 in I.T.A. No.86 87/Lkw/2011 dated 21/08/2014. He drawn our attention to Para 40.1 of this Tribunal order. 25. Learned D.R. of the Revenue supported the orders of the authorities below. 26. We have considered the rival submissions. We find that as per Para 40.1 in assessee s own case for assessment year 2002-03 and 2003-04, this issue was decided in favour of the assessee and it was held that the interest subsidy to the employees is for maintaining harmonious relationship and welfare of the employees, which is nothing but business expenditure. Respectfully following this Tribunal decision in assessee s own case, we hold that in the present year also, this disallowance is not justified. This ground is allowed. 46. Respectfully following this Tribunal decision, we decide this issue in favour of the assessee and accordingly ground No. 4 is rejected. 47. Ground No. 5 is as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, we do not find any reason to interfere in the order of CIT(A). Ground No. 5 is rejected. 50. In the result, the appeal of the Revenue stands partly allowed. 51. Now we take up the appeal of the assessee for assessment year 2008-09 i.e. I.T.A. No.626/Lkw/2012. In this appeal the assessee has raised the following grounds: 1. Because, the learned CIT (Appeals) has erred in law as well as on facts in not allowing the deduction of ₹ 10,50,617/- as claimed by the appellant u/s 35(2AB) of the IT Act by mentioning that no in house scientific research has been carried out by the appellant. 2. Because, the Learned CIT(A) did not apply his mind in understanding the concept of Benevolent expenses and erred in facts and law in making the disallowance of ₹ 5,44,100/- on the same basis as in the preceding year. 3. That the appeal to the above extent is against facts and laws. 52. It was fairly agreed by both the sides that ground No. 1 of the assessee is identical to ground No. 1 of the assessee for assessment year 2007-08 and similarly ground No. 2 in the present year is identical to ground No. 4 of the assessee s appeal for assessment year 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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