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TMI Blog2015 (12) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees had opted for VRS as per the scheme of the assessee. Accordingly the expense to be made towards VRS to those staff has become definite expense. Although the payment of VRS was due in future date. Therefore the AO has disallowed the expenditure and same was confirmed by Ld. CIT(A) as it was not due for payment in the year under consideration. However, we find that this Tribunal has decided in assessee's own case where the expenses for VRS was allowed and keeping a consistent view we reverse the orders of authorities below. - Decided in favour of assessee. Disallowance of excessive depreciation - CIT(A) deleted the addition - Held that:- For determining the capital gain, from the full value of the consideration received or accruing as a result of transfer of capital asset, cost of acquisition of asset as well as cost of any improvement of such asset is to be reduced/. If cost of improvement of a particular asset cannot be ascertained than capital gain cannot be computed. While taking this view, we derive support from the decision of Hon'ble Apex Court in the case of B.C. Srinivasa Setty 1981 (2) TMI 1 - SUPREME Court ) relied upon by the Ld. Counsel for the assessee. The IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee for the different assessment year, therefore for the sake of convenience, we heard all these appeals together and disposing the issues involved by this common order. Let us take the assessee's appeal in ITA No. 850/Kol/2007 A.Y. 1996-97 3. The first issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of the AO for the liability on account of leave encashment which has been crystallized although has not fallen due for payment as on 31st March, 1996. 4. Briefly stated facts are that during the year assessee has debited its profit and loss account by an amount of ₹ 4.90 crores towards provision for leave salary. On question raised by Assessing Officer on the allowabilty of said provision for leave salary as deduction, the assessee submitted that liability on account of leave salary has been worked out on the basis of leave lying to the credit of each member of the staff as on 31st March, 1996. Assessee further submitted that this amount has not fallen due for payment as on 31st March, 1996 but the liability for the same, has been crystallized. So under mercantile system of accounting, it should be considered as accrued liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the provision for leave encashment as contingent liability. Contingent liability is potential obligation that may be incurred depending on the outcome of a future event. A contingent liability is one where the outcome of an existing situation is uncertain, and this uncertainty will be resolved by a future event. From the above discussion we understand that the liability is certain for the provision of the leave encashment. It is not a contingent liability because the employees are very much entitled for getting the leave encashed as per the policy of the company. We find from the judgment of Hon'ble Supreme Court in the case of Bharat Earth Movers 245 ITR 428 (SC) has allowed this kind of expenditure u/s 37(1) of the Act. The relevant extract of the order is produced below:- Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Year in which deductible - Assessment year 1978-79 - Whether if a business liability has definitely arisen in accounting year, deduction should be allowed although liability may have to be quantified and discharged at a future date but what should be definite is incurring of liability - Held yes - Provision was made by assessee-compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above monthly payment, you will also be paid the following amount on the date as mentioned below:- Amount Date Rs.96195/- Apr.2000 Rs.96195/- Apr. 2001 Rs.96195/- Apr. 2002 The aforesaid amount(s) has been calculated on the basis of your Basic Wage/Salary and Dearness Allowance as of Feb95. The above mentioned amount will accrues and become due to you on the dates shown against them and each amount will be paid to you on or after the day following the date of accrual. It is expressly agreed between the company and yourself that you will have no right, interest or claim whatsoever in respect of any of these amounts until the date due to you. It should be clearly understood that consequent upon your acceptance of this offer, the tenure of your employment with us shall cease with effect from 2 Apr. 95 The AO found that on cessation of monthly payment, the staff will be paid the following payments on the dates as mentioned below:- Amount Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. ITAT, Kolkata C Bench Rallis India Ltd. v. DCIT Ld. AR also submitted that this Tribunal's order in assessee's own case in ITA No. 851/Kol/2008, 1018/Kol/2007 1640/Kol/2008 for AYs 2000-01 and 2001-02, involving the exactly similar facts where the decision was in favour of assessee. From the aforesaid discussion, we find that during the year 735 employees had opted for VRS as per the scheme of the assessee. Accordingly the expense to be made towards VRS to those staff has become definite expense. Although the payment of VRS was due in future date. Therefore the AO has disallowed the expenditure and same was confirmed by Ld. CIT(A) as it was not due for payment in the year under consideration. However, we find that this Tribunal has decided in assessee's own case where the expenses for VRS was allowed and keeping a consistent view we reverse the orders of authorities below. Hence this ground of assessee's appeal is allowed. 9. In the result, assessee's appeal is allowed. Coming to Revenue's appeal in ITA No. 1021/Kol/2007 A.Y. 1996-97 10. First issue raised by Revenue is that Ld. CIT(A) erred in allowing the excessive depreciation for an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-, therefore, AO held that the excess depreciation has been claimed by assessee for an amount of ₹ 13,77,12,314/-( 15,06,49,470- 1,29,37,156) and he disallowed, added to the total income of the assessee. Aggrieved, assessee preferred appeal before Ld. CIT(A) who deleted the addition made by AO by observing as under:- The appellant claimed depreciation of ₹ 13.77 crores which is disallowed by the AO. The AO disallowed the depreciation since the sale consideration of the fertilizer and fibre units, is reduced from block of assets and the block is reduced to nil. Hence, depreciation is disallowed. As per the decision of the ITAT in the Corromondal Fertilizer, the WDV of the unit sold, is to be reduced from block of assets. Depreciation is allowable on the balance value of the block of assets relating to the business units which are not sold and used by the appellant for business. In the appellant's case, the WDV of the assess belonging to fertilizer and fibre division is to be reduced from block of assets and depreciation is required to be allowed on the assets used by the appellant for the business. The AO is directed to examine the details and to allow depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking, specially when undertaking has so many intangible asset, like trade mark, licence, goodwill etc. We entirely agree with the above conclusion of the ITAT, Hyderabad bench. In view of above, we respectfully following the decision of Hyderabad Bench in the case of Coromandel Fertilisers Ltd. (supra) uphold the order of the Ld. CIT(A) and dismiss the revenue's appeal . Taking a consistent view in assessee's own case and the decision of ITAT Hyderabad Bench in the case of Coromandel Fertilisers (supra), we confirm the order of Ld. CIT(A) and this ground of Revenue's appeal is dismissed. 12. Next ground raised by Revenue in this appeal is that Ld. CIT(A) has erred in holding the consideration received on sale proceed of assessee's agro chemical undertaking is not liable to tax as Short Term Capital Gain (STCG for short) u/s 50 of the Act or as Long Term Capital Gains (LTCG for short). During the year under consideration assessee has sold its agro chemical undertaking for a value of ₹ 30 crores on which assessee earned profit and same was declared as LTCG after adjusting the brought forward loss under head 'LTCG'. The AO during the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that for the working of capital gain from the full value of the sale consideration received or accruing as a result of transfer of capital asset, cost of acquisition of asset as well as cost of any improvement of such asset is to be reduced. If cost of improvement of a particular asset cannot be ascertained than capital gain cannot be computed. While taking this view, he derive support from the decision of Hon'ble Supreme Court in the case of B.C.Srinivasa Setty 128 ITR 294 relied upon by the him. The ITAT Hyderabad Bench in the case of Coromandel Fertilisers Ltd. 90 ITD 439 (Hyd) (supra) held that it is not possible to determine the cost of improvement of an undertaking, especially when undertaking has so many intangible asset like trade mark, licence, goodwill etc. We entirely agree with the above conclusion of the ITAT Hyderabad Bench in the case of Coromandel Fertilisers Ltd. (supra) hence, we uphold the order of Ld. CIT(A) and dismiss the Revenue's appeal. 14. Next ground raised by Revenue in this appeal is that Ld. CIT(A) erred in treating the deemed recovery of ₹ 16,88,335/- as the actual recovery thereby erred in deleting the demand. 15. During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing out of trading activities for the purposes of allowing claim u/s 80I/80IA thereby erred in reducing the claim made by the Appellant. The ground of appeal raised by the Revenue are as under:- 1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deducting the amount of ₹ 1,24,20,000/- u/s. 80-O. He opined that the convertible foreign exchange brought by assessee in India for technical knowhow services will be eligible for deduction u/s. 80-O. Here the AO was justified in stating that there is no foreign exchange earning which the assessee has claimed on account of income from commission on indenting business. 2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred I allowing deduction of excise and customs duty of ₹ 559.15 lacs u/s/. 43B. This liability is a part of closing stock, excise duty paid after 31.3-96 has been debited to P L A/c. for the A.Yr. 197-98. Hence, deduction u/s/ 43B in respect of excise duty paid can be allowed only after withdrawing the amount debited on account of excise duty payment for A.Yr. 197-98. 19. First we take up assessee's appeal in ITA No. 2048/Kol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the issue of notice for rectification and passing of orders under section 154 to rectify the intimation and to make additions and disallowances to the income indicated therein has been agitated by taxpayers before Courts and Tribunals in various cases. It has been pleaded that when once regular assessment is taken up for scrutiny and notice issued under sections 142 and 143 of the Act, the Assessing Officer has no jurisdiction or authority to rectify the intimation and to enlarge the amount of income as well as tax and interest specified therein. The reason for such a plea is that the intimation gets superseded the moment notice under section 142(1) read with section 143(2) is issued for scrutiny assessment. The analogy for this plea is drawn from the fact that a notice for reassessment issued under sections 147 and 148 of the Income-tax Act has the effect of superseding the assessment already made on the assessee and thereby removing the finality to the assessment already made, whether or not it is the subject-matter of further proceedings in appeal, revision etc. and therefore intimation does not survive after the issue of notices under section 142(1) and 143(2) which culminate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowances through rectification proceedings under section 154 and assessment proceedings under section 143 by the same Assessing Officer for the same assessment year against the same assessee cannot be permitted nor can be justified in law. The Punjab Haryana High Court has reiterated the same view again in the recent case of CIT vs. Haryana State Handloom Handicrafts Corpn. Ltd. (2011) 336 ITR 699 (P H). 20.3 The Karnataka High Court in CIT vs. Manjit Singh Sachdeva (2009) 310 ITR 357 (Kar) has also held that no action for rectification is permissible to modify the Intimation after regular assessment is taken up under section 143(2). The Supreme Court in CIT vs. Gujarat Electricity Board (2003) 181 CTR (SC) 28 : (2003) 260 ITR 84 (SC) has also made it clear that the intimation issued under section 143(1)(a) cannot be the subject-matter of proceedings in rectification under section 154 when once the regular assessment under section 143 is taken up against the assessee as the intimation would cease to operate on assessment being made under section 143(3). To the same effect is also the judgment of the Allahabad High Court in CIT vs. Pradeshiya Industrial Investment Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. 5) The ld. CIT(A) has erred in disallowing provision for royalty and technical know-how fees amounting to ₹ 18,83,500 on the ground that from such provision no tax has been deducted at source and paid to the Government. 6) The ld. CIT(A) failed to appreciate that payment of royalty and technical know-how fees amounting to ₹ 18,83,500 had not become due on as 31st March 1998 and as such the question of deduction of tax at source and payment thereof to the Government did not arise. 7) The ld. CIT(A) has erred in not allowing the liability which has crystallized during the assessment year 1998/99 for VRS compensation of ₹ 18,50,00,000 8) The ld. CIT(A) failed to appreciate that on signing of the severance agreements by the employees opting for voluntary retirement the liability towards payment of the total compensation to such optees arises and the same is allowable in accordance with the Supreme Court decision. 9) The ld. CIT(A) failed to appreciate that the act that payment of compensation would be made in future cannot negate the fact that liability towards payment of the total compensation has crystallized during the year. 10) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that depreciable will be allowed on the WDV as appearing at the yearend and he disallowed the claim of assessee under the head 'capital gain / loss' as a result of sale of undertaking. The AO also found that same practice was followed by Revenue in case of assessee in earlier years. So, AO has disallowed the same and added to total income of assessee. Aggrieved, assessee preferred appeal before Ld. CIT(A) who has upheld the action of AO by observing as under:- 7. I have carefully considered the submission of the appellant company in respect of the above two related material grounds. Similar issue came up I appeal No. 44/CIT(A)-X/Cir.10/05-06 for assessment year 1999-2000. In my order dated 1/9/05 the matter was elaborately discussed in para 10, page 5-7. After having duly considered the submission, merit and facts of the case at length, the issue was decided against the appellant company thereby upholding the AO's order in this regard. The present two material issues being absolutely identical, ground no. 2-5 are dismissed following the aforesaid order. 28. Being aggrieved by this order of Ld. CIT(A) assessee preferred appeal before us. 29. We have he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee with the Ld. CIT(A) that the Assessing Officer was not justified in applying the provisions of Section 50 of the Income Tax Act. We find that this Tribunal was decided in favour of assessee. Similar issue was raised in the assessment year 96-97 in ITA No. 850/kol/2007 where the relief has been granted to the assessee. From the aforesaid discussion and respectfully following the decision of this Tribunal in assessee's own case for AY 1994-95 in ITA No. 1020/Kol/2007 dated 29.12.2008 and keeping the constant view in the instant case, hence, we allow this ground of assessee's appeal. 30. Next grounds No. 7 to 10 raised by assessee in this appeal which reproduced as under:- 7) The ld. CIT(A) has erred in not allowing the liability which has crystallized during the assessment year 1998/99 for VRS compensation of ₹ 18,50,00,000/- 8) The ld. CIT(A) failed to appreciate that on signing of the severance agreements by the employees opting for voluntary retirement the liability towards payment of the total compensation to such optees arises and the same is allowable in accordance with the Supreme Court decision. 9) The ld. CIT(A) failed to appreciate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he new millennium. However, the AO found that as a result of these changes, the life of the computer has got a new lease of life otherwise entire computer system would have become scrap. The AO also noted that there were 3 years left for the for the millennium year to come and there was no immediate requirement to incur the up-gradation cost. Accordingly the AO held that expenditure amounting to ₹ 1.05 crores has, in fact, introduced in new computer equipment capable of working in the new millennium and hence, the expense thus incurred is treated as capital expenditure. Therefore, AO disallowed the said sum and added it to the total income of assessee. Aggrieved, assessee preferred appeal before Ld. CIT(A) who deleted the addition made by AO. 37. Being aggrieved by this order of Ld. CIT(A) Revenue preferred appeal before us. 38. We have heard rival contentions of both the parties and perused the materials available on record. Ld. DR vehemently relied on the order of Assessing Officer whereas Ld.AR relied on the order of Ld. CIT(A). Before us Ld. AR submitted that business of assessee is located in different place of the country and most of the expenditure incurred on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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