9911796707
TMI Blog2011 (12) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's appeal is general in nature and therefore does not require any adjudication. 4 Ground nos.2.1, 2.2 and 2.3 of the assessee's appeal are not pressed, therefore, the same are dismissed, as not pressed. Ground nos.3.1 and 3.2 as well as Ground nos.6 and 7 of the assessee's appeal are also not pressed and hence the same are dismissed, as not pressed. Remaining Ground nos.4, 5, 8 to 16 are as under:- [4] In law and in the facts and circumstances of the appellant's case, the Ld. CIT (A) has erred in confirming the disallowance of Rs. 10.50 lakhs incurred on feasibility study to convert molten Ammonium Nitrate Melt manufactured by the appellant in to prill form. While doing so, he has not appreciated that the appellant is already engaged in the business of fertilizers and chemicals and therefore, conversion of molten Ammonium Nitrate Melt manufactured in to prill form is not a new business and that it is expansion of existing business. In this connection, the appellant relied on the decision of CIT(A) in its own case in A.Y. 1986-87 and following decisions: i. CIT v. Jyoti Electric Motors Ltd. [2002] 255-ITR-345 (GUJ) ii. CIT v. Graphite India Ltd. [1996] 221-ITR-420 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of capital expenditure in connection with the expansion plan of the appellant and since there was some time to commence expansion/extension of projects, the appellant had temporarily deployed part of proceeds of GDR issue in the units of UTI. [11.1] In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in confirming the disallowance of Rs. 900,10,279/-being the amount of deduction claimed u/s. 36(1) (iii) in respect of money borrowed for expansion of existing business. While doing so, he has also erred in not following the order of CIT(A) in the case of the appellant for the A.Y. 1998-99 and the decision of the Gujarat High Court in the case of Core Healthcare Ltd. (251-ITR-61) (Guj) and Alembic Glass Industries Ltd. (103-ITR-715) (Guj) [11.2] In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in reaching the conclusion that the amendment to section 36(1) (iii) is applicable retrospectively and therefore, applicable to the period prior to the A.Y. 2004-05 as well. [11.3] Without prejudice to above, In law and in the facts and circumstances of the appellant's case, the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cements. [1(b)] The CIT(A) failed to appreciate the legal principles, that onus u/s 36(1)(iii) lies on the assessee to prove that each loan is used for the purposes of the business and there is no presumption in law that it is own capital or surplus funds that were diverted for non-business purposes, as settled in the case of Kishanchand Chellaram vs. CIT 114 ITR 654 (Bom), R Dalmia vs. CIT 133 ITR 169 (Delhi), CIT vs. M S Venkateshwaran 222 ITR 163 (Mad), K Somasundaram & Brothers vs. CIT 238 ITR 939 (Mad) and CIT vs. Motor General Finance Ltd. 254 ITR 449 (Delhi) which was confirmed in principle by the Supreme Court in the case of Motor General Finance vs. CIT 267 ITR 381 (SC). [2(a)] On the facts and in the circumstances of the case, the CIT(A) erred in allowing the expenses of Rs. 38,32,725/- on protecting the assets of M/s Gujara Narmada Auto Ltd. (GNAL), a sister concern of the assessee, without appreciating the legal position that a subsidiary company is a separate legal entity and the business of the subsidiary cannot be considered to the business of the assessee as settled in the case of Phaltan Sugar Works Ltd. vs. CWT 208 ITR 989, 993 (Bom) followed in 215 ITR 582 (Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the AO. 8 Before us, the learned counsel for the assessee, Mr. M P Sarda, argued that one of the products manufactured by the assessee is Ammonium Nitrate which is in liquid form. To have value addition in the existing unit, it was decided to carry out feasibility study to convert Molten Ammonium Nitrate melt into Prilled Form with additional investment. M/s Tata Economic Consultancy Services (Mumbai) was appointed to carry out market feasibility and M/s Uhde India Ltd. was appointed to prepare techno economic feasibility report for the said project. Both the parties completed their respective assignments and reports were submitted. The project was not found viable since the profit margin was very low and it was decided not to pursue the project. Since the assessee is already manufacturing Ammonium Nitrate in the liquid form and feasibility study for manufacturing Prilled Ammonium Nitrate is nothing but expenditure for extension of existing business and therefore allowable as revenue expenditure. On similar issue in assessee's own case for AY 1986-87, the ITAT Ahmedabad Bench has allowed the claim of expenditure incurred by the assessee. 9 The learned DR, on the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal has upheld the order of the lower authorities in excluding 90% under clause (baa) of section 80HHC of the Act on the gross receipts from interest income of rent, hire charges, interest on bonds and debentures and fertilizers and urea subsidy received from the Government of India. The learned DR accordingly supported the orders of both the authorities below. 14 We have heard the rival contentions and perused the facts of the case. As regards the decision of the Hon'ble Supreme Court in the case of Sahaney Steel and Press Works Ltd. (supra) where it has been mentioned that the payments in the nature of subsidy from public funds, if made to the assessee to assist him to carry on the trade or business, they are trade receipts. If the purpose is to assist the assessee in carrying out the business operations, such subsidy must be treated as assistance for the purpose of the trade and are of revenue in nature and would have to be taxed accordingly. The facts in the case of Sahaney Steel & Press Works Ltd. (supra) are not applicable in the present case. In the present case, even if the decision in the case of Sahaney Steel and Press Works (supra) is followed, there is no disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in excluding 90% under clause (baa) of Section 80HHC of the Act on these gross receipts from interest income of rent, hire charges interest on bonds and debentures and fertilizers & urea subsidy received from the Govt. of India. However, we are in full agreement with the alternative contention of the assessee that only the net amount of the above receipts should be excluded under clause (baa) of Section 80HHC of the Act and not the gross receipts in view of the decision of Hon'ble Delhi High Court in the case of CIT v. Shri Ram Honda Power Equipments and Others (2007) 289 ITR 475 (Del). Accordingly,"this issue of the assessee's appeal is partly allowed." In the circumstances and facts of the case and following the order of the Tribunal mentioned hereinabove, we dismiss Ground no.5 of the assessee's appeal. 15 As regards Ground no.8 of the assessee's appeal, the facts are that the assesses company had claimed expenditure of Rs. 3400.90 lakhs on account of consumption and replacement of stores and spares. On verification of these details it was noticed by the Assessing Officer that certain expenditures were capital in nature. Expenditure to the tune of Rs. 2,65,39,230/- r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest cost NCDs, as deduction u/s 37(1) of the Act in the statement of total income, although it treated the said expenditure as deferred revenue expenditure in its books of account over a period of 5 (five) years thereby debiting Rs. 67,48,391/- to the P&L Account for the previous year. The assessee submitted the explanation which was not accepted by the AO and accordingly disallowed the claim of the assessee. This action of the AO was confirmed by the learned CIT(A). 21 It was argued by the learned counsel for the assessee that the company had incurred Rs. 1,02,34,103/- towards pre-payment of premium expenses of 16.54% term loan of Rs. 73.50 crores from IDBI for its Synthesis Gas Generation Unit (SGGU). The assessee had claimed interest on such loan till date as deduction u/s. 36(1)(iii) of the Income tax Act which had been allowed also. It was added that as there was a general reduction in the interest rates on borrowings in the market, the assessee felt that the rate of interest payable to the IDBI was more than the prevailing market rate. In order to reduce the heavy interest burden, the assessee negotiated with the IDBI to roll over the same term loan at lower interest rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,391 (Rs.29,4,0,357 in respect of A.Y. 2000-01 plus Rs. 38,08,034 of A.Y. 2003-04) debited to P&L Account has been added to the total income. As the said premium for repayment was in the nature of financing charges and was incurred for the purpose of business, the entire amount of the premium was claimed by the assessee as business expenditure u/s. 36(1)(iii)/37(l) of the Income tax Act although the same had been amortized in the books of account over a period of 5 years. It was further argued that the facts in the present case are different to the facts in the decisions relied upon by the AO. 22 The learned DR, on the other hand, argued that the incidental expenditure incurred on substitution high interest cost and payment towards premium is a liability for the future years and cannot be allowed in the impugned year. He relied upon the decisions of various courts of law as referred in the AO's order. 23 We have heard the rival contentions and perused the facts of the case. The assessee as a part of that debt restructuring program has incurred expenditure towards pre-payment of premises expenses for restructuring loan at lower interest rate. Such pre-payment of the amount which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at cost of Acetic Acid Expansion Project was Rs. 188.31 crores whereas the net proceeds of GDR issue was Rs. 182.95 crores (191.72 crores being gross proceeds - 8.77 crores being expenses). Further from the proceedings for A.Y. 2001-02 it was noticed that Rs. 128.93 crores was invested in UTI Unit 65 scheme out of the GDR issue proceeds and since this investment was 70% of the GDR issue process, 70% of the expenses of Rs. 87.73 lacs written off in that year by the assessee amounting to Rs. 62 lacs was disallowed u/s. 14A as the dividend income in respect of UTI was exempt under the Act. It is mentioned by the Assessing Officer that excluding the investment in UTI the amount invested towards the cost of project is Rs. 54.02 crores ( 182.95 crores - Rs. 128.93 crores) and 2.5% of such cost works out to Rs. 1.35 crores. Therefore 10 % of this amount of Rs. 1.35 crores at Rs. 13.5 lacs was allowed by the Assessing Officer under section 35D. 25 The learned CIT(A) confirmed the action of the AO. 26 The learned counsel for the assessee argued that the assessee has been allowed the identical claim since 1995-96 by the Income-tax Department and it is only in the impugned year where the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a code by itself. It makes no distinction between money borrowed to acquire a capital asset or a revenue asset. All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account. Unlike section 37 which expressly excludes an expense of a capital nature, section 36(1)(iii) emphasizes the user of the capital and not the user of the asset which come into existence as a result of the borrowed capital. The Legislature has, therefore, made no distinction in section 36(1)(iii) between "capital borrowed for a revenue purpose" and "capital borrowed for a capital purpose". An assessee is entitled to claim interest paid on borrowed capital provided that the capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed. "Actual cost" of asset has no relevancy in relation to section 36(1)(iii). The proviso inserted in section 36(1)(iii) by the Finance Act, 2003, with effect from April 1, 2004, will operate prospectively. Held accordingly, that the assessee was entitled to deduction under section 36(1)(iii) prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances under which the assets were given on lease, the assessee stated during the reassessment proceedings for A. Y. 2000-01 as under: "Indian Railways was facing acute shortage of railway wagons in general and for movement of fertilizers in particulars. Thus in order to get priority allotment of wagons for movement of fertilizers, manufactured by the company, under guaranteed clearance of traffic, as per the own your wagon scheme of railways, company had given on lease 34 wagons to western railways. Further in order to prevent substantial loss due to power dips as well as to achieve economy on power cost, NCPL, a subsidiary of GNFC Ltd., decided install captive power plant (CPP). However, since production at NCPL had not established till that time, NCPL was not in a position to finance the cost of proposed CPP. GNFC purchased the equipments for CPP for NCPL and the same was given on lease basis to NCPL. CNFC accounted lease rent for these assets during respective assessment years and credited it to the profit & loss account- and consequently included in total income." It was argued by the learned counsel for the assessee that the Income-tax Department had allowed deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Therefore, in the circumstances and facts of the case, the arguments made by the learned DR cannot be accepted and following the rule of consistency, the assessee deserves to be allowed the claim and we direct the AO accordingly to allow the claim of the assessee. The order of the learned CIT(A) is reversed. Thus, Ground no.12 of the assessee's appeal is allowed. 36 As regards Ground no.13, the facts are that the assessee has written off an amount of Rs. 1,38,743/- and has claimed as an expenditure. The AO did not allow the same, which action of the AO was confirmed by the learned CIT(A). 37 We have heard the rival contentions and perused the facts of the case. We concur with the views of the learned CIT(A) that the assessee has not submitted the details of such debts and also the fact that this was actually a trade debt. In the absence of details, the assessee could not be justified in debiting as a trade debt and therefore in the circumstances and facts of the case, we find no infirmity in the order of the learned CIT(A). Thus, Ground no.13 of the assessee's appeal is dismissed. 38 In the result, the appeal of the assessee in ITA no.1464/Ahd/2007 for AY 2003-04 is partly al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the claim of the assessee. 47 We have heard the rival contentions and perused the facts of the case. We concur with the views of the learned CIT(A) that the expenditure on the said items does not result in new self contained items and therefore the same is revenue in nature. Moreover, the expenditure on such items does not give any enduring benefit to the assessee. In the circumstances and facts of the case, we find no infirmity in the order of the learned CIT(A) who has rightly allowed the claim of the assessee. Thus, Ground no.3 of the Revenue's appeal is dismissed. 48 As regards Ground no.4 of the Revenue's appeal, the brief facts are that the assessee has incurred expenses on salary and other expenses for the information and technology business. The assessee has entered into a verbal agreement with Infinium (India) Ltd. and M/s TIW-USA. As per this agreement, they jointly and equally finance the capital, operating costs and share the revenues of alliance business activities related to V-sat & International Gateway. The AO observed that the assessee had to share 50% of such expenses with Infinium (India) Ltd. which the assessee had not considered to have incurred as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 TTJ 369, no notional disallowance can be made in respect of expenditure for the purpose of section 14A. Accordingly, we find no infirmity in the order of the learned CIT(A) who has rightly deleted the addition on the same basis. Thus, Ground no.6 of the Revenue's appeal is dismissed. 55 In the result, the appeal of the Revenue in ITA no.1373/Ahd/2007 for AY 2003-04 is dismissed. ITA no.1463/Ahd/2007 for AY 2000-01:- 56 Now, we take up the appeal of the assessee in ITA no.1463/Ahd/2007 for AY 2000-01. Ground nos.3, 9 and 10 were not pressed by the learned AR appearing for the assessee. Therefore, the same are dismissed, as not pressed. 57 Ground no.11 in this appeal is general in nature and therefore does not require any adjudication. As regards Ground no.8 which is with respect to initiation of penalty proceedings and, therefore, does not arise from the impugned order of the learned CIT(A) and accordingly, does not require any adjudication. The other grounds i.e. Ground nos.1, 2, 4 to 7 are reproduced as under:- [1] In law and in the facts and circumstances of the appellant's case, the Learned CIT (A) has erred in holding that the Assessing officer was justified in reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not appreciating that the GDR issue made by the appellant was mainly for the purpose of capital expenditure in connection with the expansion plan of the appellant and since there was some time to commence expansion/extension of projects, the appellant had temporarily deployed part of proceeds of GDR issue in the units of UTI. [7] In law and in the facts and circumstances of the appellant's case, the Learned CIT (A) has erred in confirming the disallowance of depreciation of Rs. 14,91,87,864/- claimed on certain assets given on lease. While doing so, he has erred in reaching to the conclusion that the lease transaction is a mere financial arrangement, without appreciating the facts of the case. [7.1] Without prejudice to above, the Learned CIT (A) has erred in not directing the Assessing Officer to exclude the principal portion of lease rent from the income of the appellant and include only the interest portion in the income of the appellant. 58 As regards Ground no.1 in assessee's appeal, the facts are that the assessee is company engaged in the business of manufacturing of fertilizers, various chemicals for industrial use and in information technology business. Origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aims for change in retention price on account of variation in the cost. The AO has examined all the details u/s 80HHC and then restricted the deduction after making above adjustment. Therefore, no income chargeable to tax has escaped assessment and the re-assessment proposed based on the change of opinion on same set of facts available at the time of passing the order u/s 143(3), is not warranted. The learned AR made similar submissions before the learned CIT(A) as well. Both the authorities did not appreciate the submissions of the assessee. Accordingly, the learned CIT(A) confirmed the action of the AO in reopening the assessment. 60 We have heard the rival contentions and perused the facts of the case. We concur with the views of the learned CIT(A) who has relied upon decisions of various courts of law with specific reference to the decision of the Hon'ble Gujarat High Court in the case of Praful Chunilal Patel vs. ACIT 236 ITR 832 in which it has been held that where the AO had overlooked something at the first assessment, there can in our opinion be no question of any change of opinion when the income was chargeable to tax is actually taxed as it ought to have been under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- by the AO. The learned CIT(A) confirmed the action of the AO. 69 We have heard the rival contentions and perused the facts of the case. The facts are identical to the facts in assessee's own case for AY 2003-04 where the issue has been decided by us in Ground no.10 in ITA no.1464/Ahd/2007 hereinabove. Following the same, Ground no.2 of the assessee's appeal is allowed. 70 As regards Ground no.7 of the assessee's appeal, the facts are that the AO made a disallowance of depreciation of Rs. 14,91,87,864/- claimed on certain assets given on lease. The learned CIT(A) confirmed the action of the AO. 71 We have heard the rival contentions and perused the facts of the case. The facts are identical to the facts in assessee's own case for AY 2003-04 where the issue has been decided by us in Ground no.12 in ITA no.1464/Ahd/2007 hereinabove. Following the same, Ground no.2 of the assessee's appeal is allowed. 72 In the result, the appeal of the assessee in ITA no.1463/Ahd/2007 is partly allowed. ITA no.3111/Ahd/2008 for AY 2000-01:- 73 Now, we take up the appeal of the assessee for AY 2000-01 in ITA no.3111/Ahd/2008, which is arising from the order of the learned CIT(A)-VI, Baroda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the assessee is allowed for statistical purpose. ITA no.4007/Ahd/2007 for AY 2004-05:- 77 Now, we take up the appeal of the assessee in ITA no.4007/Ahd/2007 for AY 2004-05. Ground no.9 in this appeal is general in nature and does not require any adjudication. The remaining grounds are as under:- [1.1] In law and in the facts and circumstances of the appellant's case, the Learned CIT(A) has erred in up-holding the addition made by the Learned A. 0. in respect of notional interest income of Rs. 3,58,19,000/- on loan given to Gujarat State Investment Ltd. [GSIL for short]. The addition was up-held on the assumption that a right to receive that interest from GSIL to whom the appellant had advanced a loan during the A.Y. 1994-95, had accrued to the appellant this year. The Learned CIT(A) has erred in not appreciating the fact that no interest income has been accrued or earned by the appellant during the year and no interest is therefore, to be taxed. [1.2] Without prejudice to the foregoing, in law and in facts and circumstances of the appellant's case, the Learned CIT(A) has erred in arriving at the quantum of the interest income allegedly earned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same. [6] In law and in the facts and circumstances of toe appellant's case, the learned CIT(A) has grossly erred in disallowing deduction of depreciation amounting to Rs. 1,20,92,362 on the assets leased by the appellant to Western Railways and Narmada Chematur Petrochemicals Ltd. [7] The Learned CIT(A) has erred in upholding the action of the Learned A.O. in disallowing Rs. 1,48,541 being bad debts written off irrevocably in the books of account. [8] The Learned CIT(A) has erred in directing the Learned A.O. to disallow of donation given out of interest bearing funds. The CIT(A) has erred in not appreciating the fact of the case that these C donations were given considering the business expediency and as a socially responsible corporate. [9] The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal. 78 As regards Ground nos. 1.1, 1.2 and 1.3, the brief facts are that the assessee company had advanced interest bearing loan to Gujarat State Investments Ltd.(GSIL) in A.Y. 1994-95 carrying interest @ 17%. The appellant had been accounting for and offering in its return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end previous year. Accordingly it is held that the interest income of Rs. 3,58,19,000 was to the assessee and was added to the total income. 79 The learned CIT(A) for the reasons mentioned in his order held that the interest income of Rs. 3,58,19,000/- was accrued to the assessee and therefore observed that the AO was justified in bringing to tax the accrued interest income of Rs. 3,58,19,000/-. 80 We have heard the rival contentions and perused the facts of the case. There is no dispute to the fact that the Award of the Arbitrator was passed in the present case in September, 2006. The arguments made by the learned AR before the learned CIT(A) and before us that the interest accrued upto the end of the impugned year has already been provided in the books of account upto 30th September, 2004 and the balance was outstanding as on 31-03-2004 was Rs. 21.07 crores. Therefore, the more interest had been shown as accrued in the books of account taking into account the interest accrued during the year. This is also not in dispute that the Award had been passed only on 30th September, 2006. Therefore, it cannot be said that the interest had not been accrued to the assessee company in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003-04 where identical issue has been decided by us in ITA No.1464/Ahd/2007 vide Ground no.10 hereinabove. Following the same, Ground no.5 in this appeal is allowed. 88 As regards Ground no.6 of the assessee's appeal, the brief facts are that the AO made a disallowance of deduction of depreciation of Rs. 1,20,92,362/- on the assets leased by the assessee to Western Railways and Narmada Chematur Petrochemicals Ltd. The learned CIT(A) confirmed the action of the AO. 89 We have heard the rival contentions and perused the facts of the case. The identical issue has arisen in the assessee's own case for AY 2003-04 in ITA no.1464/Ahd/2007 and vide Ground no.12, the issue has been decided by us hereinabove in the said appeal. Following the same, the order of the learned CIT(A) is reversed. Thus, Ground no.6 of the assessee's appeal is allowed. 90 As regards Ground no.7 of the assessee's appeal, the brief facts are that the AO disallowed Rs. 1,48,541/- being bad debts written off irrevocably in the books of account. The learned CIT(A) confirmed the action of the AO. 91 We have heard the rival contentions and perused the facts of the case. The identical issue has arisen in the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st for appropriate period on such funds would stand confirmed. Thus, Ground no.8 of this appeal is dismissed. 94 In the result, the appeal of the assessee in ITA no.4007/Ahd/2007 is partly allowed. ITA no.3993/Ahd/2007 for AY 2004-05:- 95 Now, we take up the appeal of the Revenue in ITA no.3993/Ahd/2007 for AY 2004-05. The grounds raised by the Revenue are as under:- [1.(a)] On the facts and in the circumstances of the case, the CIT(A) erred in deleting the disallowance of Rs. 4,33,13,600/- made out of the interest claimed u/s. 36(1)(iii) on account of diversion of borrowed funds to subsidiary and associate concerns, by merely relying on the appellate orders for earlier years (which have been contested by the Department), without appreciating that each year's income-tax proceedings are independent and the matter had to be decided on merits in the light of the principles settled by authoritative jurisdictional pronouncements. [1.(b)] The CIT(A) failed to appreciate the legal principle, that onus u/s. 36(1)(iii) lies on the assessee to prove that each loan is used for the purposes of the business and there is no presumption in law that it is own capital or surplus funds that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssues raised in the aforesaid grounds be set aside and that of the A.O. be restored. 96 As regards Ground nos.1(a) and 1(b), the brief facts of the case are that the AO made a disallowance of Rs. 4,33,13,600/- out of interest claimed u/s 36(1)(iii) on account of diversion of borrowed funds to subsidiary and associate concerns. The learned CIT(A) after appreciating the facts and submissions made by the learned AR of the assessee, allowed the claim of the assessee. 97 We have heard the rival contentions and perused the facts of the case. Similar issue has arisen in the assessee's own case for AY 2003-04 in ITA no.1464/Ahd/2007 which has been decided by us hereinabove. The relevant para 41 reads as under:- "41. We have heard the rival contentions and perused the facts of the case. We concur with the views of the learned CIT(A) and the decision of the Tribunal Ahmedabad Bench in assessee's own for AY 1995-96 as referred to in the order of the learned CIT(A) vide para 5.2.3 and therefore we find no infirmity in the order of the learned CIT(A). Thus, Ground no.1 of the Revenue's appeal is dismissed." Therefore, following the aforesaid order, we dismiss Ground no.1 of the Revenue's app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1464/Ahd/2007 which has been decided by us vide Ground no.4 in the said appeal hereinabove. Therefore, following the same, we find no infirmity in the order of the learned CIT(A) who has rightly deleted the addition made by the AO. Thus, Ground no.4 of the Revenue's appeal is dismissed. 106 As regards Ground no.5 of the Revenue's appeal, the facts are that the AO did not allow deduction u/s 80HHC. The learned CIT(A) directed the AO to exclude sales tax and excise duty as part of turn turnover while working out the deduction u/s 80HHC of the Act. 107 We have heard the rival contentions and perused the facts of the case. The issue at present is covered by the decision of the Special Bench of ITAT Calcutta in the case of IFB Agro Industries 83 ITD 96 wherein it has been held that deduction u/s 80HHC on export profit should be computed on the basis of the export turnover and total turnover exclusive of the receipt of Excise Duty and Sales-tax. This issue is also covered by the decision of the Hon'ble Bombay High Court in the case of Sudarshan Chemicals Ltd. 245 ITR 769. Therefore, in view of the decision of the Hon'ble Bombay High Court and the Special Bench of the ITAT referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that donation was given out of borrowed funds. It is submitted that it be so held now. [7] In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in confirming the disallowance of advances written off amounting to Rs. 9,38,376/-. In the facts & circumstances of the case it is submitted that the CIT(A) ought to have allowed the same under section 28 / 37 of the Act. It is submitted it be so held now. 111 As regards Ground no.2 in the appeal, the brief facts are that the AO made an addition of Rs. 2,75,61,076/- in respect of interest receivable from GSIL and the action of the AO was confirmed by the learned CIT(A). 112 We have heard the rival contentions and perused the facts of the case. The identical issue has been dealt with by us in assessee's own casse for AY 2004-05 in ITA no.4007/Ahd/2007 hereinabove. Therefore, our order in ITA no.4007/Ahd/2007 will apply on the present issue and accordingly Ground no.2 is allowed for statistical purpose. 113 In Ground no.4, the brief facts are that the AO made a disallowance of Rs. 1,96,43,453/- out of consumption of stores and spares on the ground that the same are of capital i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed down its business since 1990 and thus the decree could not be executed. Since there was no hope of recovery of the advances the same were written of as bad debts. Similarly in the case of Mardia Chemicals also the assessee had made advance payment for purchase of material and as the material supplied by them was of substandard quality, the company had to sell it in the market at a lower price then given to Mardia Chemicals. Mardia Chemicals did not accept the claim of the company and had not paid back the excess payment made to them in spite of repeated attempts by the assessee company. Since Mardia Chemicals has closed down their business and was referred to BIFR and also in April, 2004 the Hon'ble Supreme Court had allowed the ICICI Bank to sell the assets of Mardia Chemicals to recover their due the assessee company had no hope of recovering the advances paid to them and thus was written off. The AO did not accept the contention of the assessee and was of the view that as the assessee had filed legal cases against these parties and there is still hope of recovery of the advances and thus it cannot be said that the advances are irrecoverable. He thus added Rs. 9,38,376/- t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and there is no presumption in law that it is own capital or surplus funds that were diverted for non-business purposes. as settled in the case of Kishanchand Chellaram vs CIT 114 ITR 654 (Bom), R Dalmia vs. CIT 133 ITR 169 (Mad), CIT vs. M S Venkateshwaran 222 ITR 163 (Mad), K Somasundaram & Brothers vs. CIT 238 ITR 939 (Mad) and CIT vs. Motor General Finance Ltd. 254 ITR 449 (Del) which was confirmed in principle by the Supreme Court in the case of Motor General Finance vs. CIT 267 ITR 381 (SC). 2(a) On the facts and in the circumstances of the case, the CIT(A) erred in allowing the expenses of Rs. 5,46,794/- on protecting the assets of M/s. Gujarat Narmada Auto Ltd, (GNAL) a sister concern of the assessee, without appreciating the legal posit company is a separate legal that a subsidiary company is a separate legal entity and the business of the subsidiary cannot be considered to the business of the assessee as settled in the case of Phaltan Sugar Works Ltd. vs. CWT 208 ITR 989, 993 (Bom) followed in 215 ITR 582 (Bom) and 216 ITR 479, 481 (Bom). 2(b) Without prejudice, the CIT(A) erred in not considering the fact that a liquidator was appointed by the High Court who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the same, we dismiss Ground no.2 of the Revenue's appeal. 128 As regards Ground no.3 in the Revenue's appeal, the brief facts are that the AO made a disallowance of Rs. 2,99,40,437/- out of repairs and maintenance treating the same as capital expenditure. The learned CIT(A) deleted the addition to the extent of Rs. 1,59,73,789/- for the reasons mentioned in his order. 129 We have heard the rival contentions and perused the facts of the case. The identical issue came up in the assessee's own case for AY 2003-04 in ITA no.1464/Ahd/2007 which has been decided by us hereinabove vide Ground no.3 in the said appeal. Therefore, following the same, we dismiss Ground no.3 of the Revenue's appeal. 130 In Ground no.4 of the Revenue's appeal, the brief facts are that the AO did not allow deduction of Rs. 6,25,000/- being payment for Information and Technology Related Services paid to M/s Infinium (India) Ltd. treating the same as deriving benefit of enduring nature. The learned CIT(A) allowed the claim for the reasons mentioned in his order. 131 We have heard the rival contentions and perused the facts of the case. The identical issue came up in the assessee's own case for AY 2003-04 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
