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TMI Blog2015 (12) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee to the account of Escorts Limited (Parent Company) by a book entry. We also take note that the Permanent Account Number (PAN) of Mr. Satish Lamba was furnished before the CIT (A) and complete details including address of Mr. Lamba was furnished to the Assessing Officer. Therefore, we find that the said sum of ₹ 2 crores has been advanced against the agreement to sale of land from Mr. Satish Lamba ; and since sale has not taken place due to procedural delay and clearance from Haryana Urban Development Authority, the sale has not been executed and the assessee has rightly shown the said amount of ₹ 2 crores as advance. Therefore, we do not find any infirmity in the order of CIT (A) deleting the said addition made by the AO and uphold the order of the CIT (A) on this issue - Decided in favour of assessee. Addition on account of royalty expenditure - CIT (A) deleted the disallowance - Held that:- This issue has already been decided in favour of the assessee by the Tribunal for assessment year 2004-05 and the same was followed by the CIT (A) in this relevant assessment year to conclude the expenditure is of a revenue nature - Decided in favour of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same was disclosed itself by the assessee as a contingent liability. We find that there is no impact in the Profit & Loss account since the assessee had not claimed any deduction on that score. Therefore, we find that AO could not have made any disallowance on this issue - Decided in favour of assessee. - ITA No.1860/Del./2011 - - - Dated:- 16-10-2015 - SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER For The Assessee : Shri R.M. Mehta, Advocate For The Revenue : Smt. Parwinder Kaur, Senior DR ORDER PER A.T. VARKEY, JUDICIAL MEMBER : This appeal, at the instance of the revenue, is directed against the order of the Commissioner of Income-tax (Appeals)-XIII, New Delhi dated 11.02.2011 for the assessment year 2007-08. 2. The assessee company was engaged in the business of manufacturing, trading and renting of construction and material handling equipments. The return of income was e-filed on 25.10.2007 declaring an income of ₹ 23,83,41,236/-. The return was processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter the Act ) and a demand of ₹ 4,30,820/- was worked out to be payable. Meanwhile, it is seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 37(1) of the Act and the assessee was asked to show-cause why the same should not be disallowed. The assessee replied that there was no expenditure during this assessment year under the head development expenses . The details of the debits showing the nature of expenses were filed and it was reiterated that during the year under consideration, the said sum of money was only the amount written off. The AO did not accept the assessee s arguments because in earlier years too, the disallowance had been made on this issue and accordingly, he made a disallowance of ₹ 24,88,741/- on account of development expenses, whereas the claim of assessee was only to the tune of ₹ 19,31,554/-. 7. The ld. CIT (A), after considering the submissions of the counsel, observed that this issue is covered by the order of the ITAT for AY 2002- 03 and also by the orders passed by his predecessors for other assessment years. He observed that the AO had not pointed out any change in facts in the year under appeal as compared to the preceding assessment years and accordingly, ordered deletion of the disallowance made by the AO at a figure of ₹ 24,88,741/-. 8. Ld. DR relied on the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing depreciation, a sum of ₹ 19,49,054/- was added back to the income of the assessee. It was submitted before the Assessing Officer that the CIT(A) has allowed similar claim of the assessee for assessment year 2002-03. However, the A.O. has mentioned that the said order of the CIT(A) has not been accepted by the Revenue and an appeal has been filed against that order. The CIT(A) has admitted the claim of the assessee following the order of the CIT(A) for assessment year 2002-03 and for assessment year 200102. The revenue is aggrieved, hence, in appeal. At the outset, it was submitted by Ld. Counsel that for assessment year 2002-03 similar ground of revenue has been dismissed following the order of the Tribunal in assessee s own case for assessment year 2001-02 and he has produced before us the copy of the said order and it was pleaded that the issue is covered by the said order of the Tribunal dated 8 th October, 2007 passed in I.T.A. No.4185/Del/2005. Copy of the said order was also given to Ld. DR. The contents of the said order is as under:- This appeal has been filed by the Revenue against the order of Commissioner of Incometax( Appeals) dated 4.8.2005 by taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure was allowable as revenue expenditure. In view of the aforesaid discussion, we reverse the orders of the lower authorities and allow the claim of the assessee on this issue. 6. In view of the aforesaid legal position, we find no infirmity in the order passed by the Commissioner of Income-tax(Appeals) deleting the disallowance made by the Assessing Officer. We, therefore, confirm the order of Commissioner of Income-tax (Appeals). 4. In the result, the appeal of the Revenue stands dismissed. Pronounced in the open court during the course of hearing on 8th October, 2007. 3. In this view of the situation, after hearing both the parties, we find that the issue is covered in favour of the assessee by the aforementioned order of the Tribunal for assessment year 2001-02 and 2002-03 and this ground of the Revenue is dismissed. 5. Since the issue is covered by the decision of ITAT in assessee s own case for the Assessment Year 2001-02 to 2003- 04 and the facts of the case are identical to the facts of earlier years, respectfully following the decision of ITAT in assessee s own case, we confirm the order of Ld. CIT(A). The facts remaining the same this yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mba, r/o 1F/31, BP, NIT, Faridabad for proposed sale of 5 acre of industrial land belonging to the assessee which is located at 219, Sector 58, Ballabgarh. He submitted that the total consideration was settled at ₹ 2 crores, however, the sale deed could not be executed during the relevant assessment year for want of necessary transfer approvals and the said transaction was still pending for execution. Therefore, since execution of the sale is pending final execution, this amount had been treated as advance. The ld. AR further submitted that the said property was jointly owned by the assessee with its parent holding company, namely, M/s Escorts Limited. He submitted that in November 2005 both the joint owners negotiated with Mr. Satish Lamba for the sale of the entire land for a total consideration of ₹ 11Crores and out of which ₹ 9 Crores was received as advance which came in equal shares to the joint owners, namely, a sum of ₹ 4.50 crores each. He submitted that the said sum of ₹ 4.50 crores was received by the assessee on 28.10.2005 vide three separate cheques. Thus, according to ld. AR, the actual receipt of the sum was in AY 2006-07 and not in AY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was entitled to receive a sum of ₹ 2.00 crores only as against the sum of ₹ 4.50 crores credited in its books of accounts in the preceding assessment year (i.e. AY 2006-07). Since the approval of Haryana Urban Development Authority (HUDA) for execution of conveyance deed had not been received yet, the amount of ₹ 2 Crores still remained as an advance against sale of land in books of the assessee. We also find that during the year under consideration i.e. AY 2007-08, there was no physical receipt of money in the books of the assessee and all that had happened was that a sum of ₹ 2.50 crores was transferred by the assessee to the account of Escorts Limited (Parent Company) by a book entry. We also take note that the Permanent Account Number (PAN) of Mr. Satish Lamba was furnished before the CIT (A) and complete details including address of Mr. Lamba was furnished to the Assessing Officer. Therefore, we find that the said sum of ₹ 2 crores has been advanced against the agreement to sale of land from Mr. Satish Lamba ; and since sale has not taken place due to procedural delay and clearance from Haryana Urban Development Authority, the sale has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure by following the decision of Hon ble jurisdictional High Court in the case of J.K. Synthetics Ltd. reported in 309 ITR 371. Accordingly, he pleaded to uphold the order of the CIT (A) on this issue. 17. We have heard the rival submissions and perused the material on record. After going through the order of the CIT (A) and the submissions of the ld. AR for the assessee, we find that this issue has already been decided in favour of the assessee by the Tribunal in ITA No.2221/Del/2009 for assessment year 2004-05 and the same was followed by the CIT (A) in this relevant assessment year. Since the ld. DR could not bring to our notice any change in facts to persuade us to take a different view, we are respectfully following the order of the co-ordinate Bench for AY 2004-05, so we do not find any infirmity in the order of the CIT (A) and we uphold the same. It is ordered accordingly. Ground No.3 is rejected. 18. Ground No.4 is regarding deletion of addition of ₹ 2.5 crores on account of Section 35AB of the Act. The AO observed in this regard that as per Schedule 13 (Sales Administration) to the P L account, a sum of ₹ 4,31,38,834/- was claimed on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a fair, reasonable and incidental basis to its subsidiary group companies since the latter are not in a position to incur such expenditure independently on their own. As per the agreement which has been placed on record, the nature of services which are being rendered are in the field of knowledge Expensive (both technical managerial) of the corporate heads of Escorts Limited in the areas of Finance, Legal IR. The genuineness of the expenditure is not in doubt since the AO himself has allowed 1/6th of the expenditure with the further findings that the balance will be allowed in subsequent assessment years. On the aforesaid facts, I am of the view that the expenditure of ₹ 3.00 crores incurred by the appellant is not in the nature of acquiring technical know-how and therefore, does not attract the provisions of section 35AB of the Act and is allowable in full in assessment year 20. Ld. DR relied on the order of the Assessing Officer and emphasized that the case of the assessee is squarely covered with the Explanation to Section 35AB of the Act and pleaded that the ld CIT (A) s order be set aside and the order of the AO be restored. 21. On the other hand, ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the agreement for the same had been named as Managerial Guidance Agreement . For the sake of clarity, we reproduce the relevant part of the agreement, as reproduced by the AO in his order, as under :- This refers to the detailed discussions we had with you with regard to the Management Guidance to b3 provided to Escorts Construction Equipment Limited (ECEL). You had appreciated that since ECEL, IS on the growth path is on a turn around phase, the involvement of the Corporate Heads of Escorts Limited (EL) in the areas of Finance, legal and IR would provide the requisite impetus to the growth of ECEL. You had also appreciated that the said Corporate Heads including the Promoters have spent lot of time/in reviewing the progress and advising ECEL on sorting out the various issues that have come in the way of growth of ECEL. This involves lot of managerial time and for which the Corporate Office of Escorts Limited need to be compensated. It has, therefore, unanimously been decided that ECEL shall be made available continuous knowledge and expense (both technical and managerial) of EL. For the time and efforts to be dedicate and the timely guidance to be provided to ECEL by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany had utilized the funds in its business operations during the period in which these dues were delayed; and no portion of this amount was on account of penalty levied for infringement of any laws. After taking note the said reply, the AO observed that payment made on account of interest on delayed payment of tax was nothing but the interest paid for the late deposit of TDS deducted on account of interest on FBT and interest on Service Tax, therefore, the interest is penal in nature and was not allowable under any provisions of the Act. Accordingly, the AO disallowed the same and added it to the income of the assessee. 24. The ld. CIT (A) took note of the fact from a perusal of assessment order itself that the AO himself had stated that the payment made was on account of interest on delayed payment of tax for ₹ 1,07,550/- was nothing but interest paid for late deposit of TDS, interest on FBT and interest on service tax, however, the AO concluded that the interest paid was penal in nature and was not allowable under any provision of the Act . In this view of the matter and on perusal of the submissions made by the assessee, the ld. CIT (A) held that the interest paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance from year to year does not legally empower the Assessing Officer to invoke Section 41(1) and that there has to be actual evidence on record to be brought by the A.O. about a remission or cessation of liability taking place. No such evidence has been brought on record by the Assessing Officer. In this view of the matter the addition of ₹ 10 lakhs made on estimated basis stands deleted. 28. Ld. DR submitted that the assessee has not furnished any documentary evidence before the AO as well as before the CIT (A) to prove the identity/creditworthiness/genuineness of the sundry creditors. Therefore, in the interest of justice and to be fair to assessee also, let this issue be restored back to the file of the AO, for de-nova adjudication and let the assessee be given opportunity to file the evidences to prove the identity of the sundry creditors. 29. Ld. AR for the assessee reiterated the submissions made before the CIT (A) that for making the addition u/s 41 (1) of the Act, the onus of proving that the assessee had received some benefit in respect of a trading liability by way of remission or cessation thereof was squarely on the AO. He submitted that no such exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks and the disclosure itself indicated that it was a contingent liability (not provided for). Ld. AR further submitted that for a disallowance to be made, it was to be first ascertained whether the assessee had claimed any deduction on that account and then only the disallowance could be considered. The disallowance u/s 43B came into operation only if the assessee claimed any statutory dues as deduction in computing its income under the head Business . He, therefore, pleaded to uphold the order of the CIT (A). 35. We have heard both the sides and perused the material on record. We find that this amount represents unpaid sales tax liability and the same was disclosed itself by the assessee as a contingent liability. We find that there is no impact in the Profit Loss account since the assessee had not claimed any deduction on that score. Therefore, we find that AO could not have made any disallowance on this issue. Accordingly, we find that there is no infirmity in the order of the CIT (A) on this issue and the same is upheld. This ground is rejected. 36. Ground No.8 is general in nature and does not require any adjudication. 37. In the result, the appeal of the revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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