9911796707
TMI Blog2016 (1) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... if the borrowed funds were diverted for making advances to subsidiary companies, this Tribunal is of the considered opinion that there cannot be any addition of notional interest since it is not the case of the Revenue that the subsidiary companies had misused the funds for any other purpose. In other words, since the subsidiary companies used the funds for their business this Tribunal is of the considered opinion that in view of the judgment of the Apex Court in S.A Builders (2006 (12) TMI 82 - SUPREME COURT) there cannot be any addition in the hands of the assessee. A bare reading of the order of the CIT(A) shows that similar addition was made by the Assessing Officer in assessment years 2003-04 and 2004-05. The CIT(A), however, deleted the addition correctly - Decided against revenue Computation of book profit u/s 115JB - Held that:- While entering into an agreement with M/s Trishul Investment Pvt. Ltd. assigning the sales tax liability, the assessee has taken the amount as income and it was charged to the Profit & Loss Account. Therefore, when the assignment was cancelled, the income which was already credited in the books of account and charged to the Profit & Loss Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is modified and the Assessing Officer is directed to allow depreciation on the entire cost of ₹ 364 crores. - Decided in favour of assessee Disallowance of provision for leave encashment - Held that:- Sec. 43B(f) clearly says that the amount payable by the assessee as an employer in lieu of any leave at the credit of his employee cannot be allowed unless it is actually ‘paid’. In this case, admittedly, the amount is not ‘paid’ and remains to be ‘payable’. Therefore, it cannot be allowed u/s 43B(f) of the Act. - Decided against assessee Claim of the assessee for depreciation @ 25% - Franchise rights acquired by the assessee of Chennai Superking - Held that:- When the intangible asset was introduced for the first time, the cost of block of asset was increased to ₹ 364 crores and it may not be right to say that the assessee is entitled for depreciation only to the extent of amount paid by the assessee during the year under consideration. This Tribunal is of the considered opinion that the value of block of asset was increased to the extent of cost of asset introduced irrespective of the amount paid by the assessee during the year under consideration. When the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of investment, income from which does not form part of the total income, shall be disallowed. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to disallow 0.5% of the average value of investment, the income from which does not form part of the total income.- Decided partly in favour of assessee. Disallowance of lease rent paid by the assessee u/s 40(a)(ia) - Held that:- It is not in dispute that the assessee has taken heavy earth moving equipment on lease from M/s SERI Infrastructure Finance Ltd. and paid a sum of ₹ 11,16,400/-. However, no tax was deducted. The assessee claims that it is not an operational lease but it is only a finance lease. In the case of finance lease, assessee would borrow money and the asset would be purchased in the name of the assessee . The fact remains that the asset was acquired on right to use basis, therefore, what was paid by the assessee is in the nature of rent. Hence, this Tribunal is of the considered opinion that the assessee has to deduct tax while making the payment to M/s SERI Infrastructure Finance Ltd.. Therefore, the CIT(A) has rightly confirmed the addition made by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding, the reason for the conclusion reached therein shall be reflected in the assessment order itself. The Assessing Officer is expected to discuss each and every issue arises for consideration and record his own reasoning in the assessment order so as to enable the appellate/revisional authority to appreciate the reason on which the claim was allowed. Since no such exercise was done by the Assessing Officer, the CIT has rightly exercised his power u/s 263 of the Act. Hence, this Tribunal do not find any reason to interfere with the order of the CIT. Accordingly, the same is confirmed. - Decided against assessee Disallowance of lease rental on non deduction of tds - Held that:- whether it is a finance lease or operational lease, the assessee is expected to deduct tax. Since the asset was acquired for right to use basis, hence, the payment has to be construed in the nature of rent, therefore, the assessee is very much liable to deduct tax u/s 194I of the Act. This Tribunal do not find any reason to interfere with the order of the CIT(A).- Decided against assessee Disallowance made on brought forwarded losses consequent to amalgamation - Held that:- As rightly submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke the Revenue s appeal in I.T.A.No.1343/Mds/2010 for assessment year 2007-08. 3. The first ground of appeal is with regard to addition made by the Assessing Officer on account of reversal of income arising on cancellation of sales tax assignment. 4. Shri S. Bharath, ld. Departmental Representative submitted that the assessee-company engaged itself in manufacture and sale of cement. The company is also engaged in real estate, property development and generation of wind power. During the year under consideration, M/s Visaka Cement Industry Ltd. merged with the assessee-company with effect from 1.7.2006 pursuant to a scheme of amalgamation framed u/s 391 of the Companies Act. The amalgamation was approved by the Madras High Court by judgment dated 25.7.2007. According to the ld. DR, M/s Visaka Cement Industry Ltd. applied sales tax deferral scheme framed by Government of Andhra Pradesh. Under the deferral scheme, the sale tax collected was required to be remitted to the Government after a period of 14 years in the State of Andhra Pradesh. Similarly the assessee-company has also availed deferral scheme of Government of Tamilnadu and the sales tax collected was deferred for a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement entered into with M/s Trishul Investments Pvt. Ltd. Mere existence of an arrangement between the assessee and M/s Trishul Investments Pvt. Ltd. to write off the obligation of M/s Trishul Investments Pvt. Ltd. would not bind the assessee to hold that the payment was made wholly and exclusively for the purpose of business of the assessee. According to the ld. DR, the CIT(A) is not justified in deleting the addition made by the Assessing Officer. 5. On the contrary, Shri R. Vijayaraghavan, ld. Counsel for the assessee submitted that the assessee-company, admittedly, engaged in manufacture and sale of cement. In pursuance to the judgment of the Madras High Court dated 25.7.2007, M/s Visaka Cement Industry Ltd. was amalgamated with assessee-company with effect from 1.7.2006. It is also an admitted fact that both assessee-company and M/s Visaka Cement Industry Ltd. availed itself sales tax deferral scheme for a period of 12 years and 14 years respectively. The assessee-company as well as M/s Visaka Cement Industry Ltd entered into another agreement with M/s Trishul Investments Pvt. Ltd. assigning the liability/obligation of payment of sales tax to Government of Tamilnadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the sales tax arose during the financial years 2010- 11 to 2019-20 by virtue of the deferral scheme, therefore, merely because the agreement entered into between the assessee and M/s Visaka Cement Industry Ltd with M/s Trishul Investments Pvt. Ltd. was cancelled, the liability will not arise for the year under consideration. The CIT(A), however, found that the profit of the assessee-company shall be debited with the amount of income recognized in the earlier years upon sanction of the scheme of amalgamation. The CIT(A) in fact, extracted the relevant clause from the agreement. The CIT(A) further found that the difference between the deferral amount and the net present value of the assigned amount was shown as income and offered to taxation. If that is so, this Tribunal is of the considered opinion that the reversal of the amount on cancellation of such assignment consequent upon the amalgamation of M/s Visaka Cement Industry Ltd with assessee-company is only a loss in the course of normal business, therefore, as rightly found by the CIT(A), it has to be allowed. The loss resulted to the assessee is due to cancellation of assignment of sales tax deferred. Since the profit resultin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re reading of the order of the CIT(A) shows that similar addition was made by the Assessing Officer in assessment years 2003-04 and 2004-05. The CIT(A), however, deleted the addition. This Tribunal in I.T.A.Nos.778 779/Mds/2008 dated 15.7.2009 has confirmed an identical order of the CIT(A). In fact, the CIT(A), by following the decision of this Tribunal in assessee s own case for the assessment years 2003-04 and 2004-05 and the judgment of the Apex Court in S.A Builders(supra) allowed the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed. 11. The next ground of appeal is with regard to computation of book profit u/s 115JB of the Act. 12. Shri S. Bharath, ld. DR submitted that the assessee has reduced a sum of ₹ 294,05,22,507/- being the reversal of income arising on cancellation of sales tax assignment agreement. According to the ld. DR, the assessee claimed the reduced amount as revenue expenditure. Since the reversal of income on cancellation of the assignment does not arise during the year under consideration and it has to be considered only when the amount was due fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reversed and it was considered to be a loss in the business, therefore, it has to be deducted while computing the book profit u/s 115JB of the Act. Therefore, as rightly submitted by the ld. Counsel, the judgment of the Apex Court in Apollo Tyres Ltd (supra) supports the case of the assessee. This Tribunal do not find any infirmity in the order of the CIT(A) and accordingly, the same is confirmed. 15. In the result, the appeal of the Revenue in I.T.A.No. 1343/Mds/2010 is dismissed. 16. Now coming to assessment year 2008-09, first we take Revenue s appeal I.T.A.No.604/Mds/2012. 17. The first ground is with regard to interest on the advances made to subsidiary companies to the extent of ₹ 20.08 crores. 18. We heard the ld. DR and the ld. Counsel for the assessee. 19. The Assessing Officer found that the borrowed funds were advanced to subsidiary companies and no interest was charged. Accordingly, the Assessing Officer computed notional @ 6% on the advances made to subsidiary companies. While hearing the appeal of the Revenue for assessment year 2007-08 in I.T.A.No. 1343/Mds/2010 in the earlier part of this order, this Tribunal found that the subsidiary companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores paid during the year under consideration. The franchise rights was acquired after 30th September, 2007 therefore, the depreciation on ₹ 36.4 crores was computed at ₹ 4.55 crores. The Assessing Officer accordingly, disallowed the excess claim of depreciation on franchise rights to the extent of ₹ 40.95 crores. 22. On the contrary, Shri R. Vijayaraghavan, ld. Counsel submitted that the assessee-company was a successful bidder of Chennai Superking franchisee for a period of 10 years. The assessee is entitled to exploit the right for a period of 10 years. Admittedly, the franchise rights is an intangible right and entitled for depreciation @ 25%. This is not in dispute. The only dispute is whether the depreciation is allowable on the entire amount of ₹ 364 crores or ₹ 36.4 crores. According to the ld. Counsel, the assessee has claimed the depreciation @ 25% at ₹ 45.50 crores on the entire amount of ₹ 364 crores. However, the Assessing Officer disallowed the claim of the assessee to the extent of ₹ 40.95 crores by taking cost of franchise rights at ₹ 36.4 crores. 23. According to the ld. Counsel, when the assessee becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1), depreciation has to be allowed on the cost of asset and not on the amount paid or payable during the year under consideration. Therefore, the CIT(A) has rightly allowed the claim of the assessee. 25. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee is a successful bidder for franchise rights of Chennai Superking. The cost of the franchise rights is ₹ 364 crores which has to be paid in 10 years @ 36.4 crores per annum. The assessee is entitled for depreciation on the franchise right being an intangible asset under Explanation (3) to sec. 32(1) of the Act. This is not in dispute. The only dispute is whether the assessee is entitled for depreciation on the cost of the franchise rights or on the amount paid during the year under consideration. We have gone through the provisions of sec. 32 of the Act. Sec. 32(1) clearly says that in case of an asset used for generation or generation and distribution of power, depreciation has to be allowed on the actual cost of the asset at the rate prescribed. In case of block of assets, depreciation has to be allowed on the written down value at the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee claimed ₹ 16,70,21,000/- as provision for leave encashment. However, the Assessing Officer disallowed the claim of the assessee u/s 43B(f) of the Act which was confirmed by the CIT(A). The ld. Counsel submitted that the Apex Court in the case of Bharat Earth Movers Ltd vs CIT, 245 ITR 428, allowed the claim of the assessee with regard to provision for leave encashment. In order to nullify the effect of judgment in Bharat Earth Movers Ltd, the Parliament introduced sub clause (f) in section 43B with effect from 1.4.2002 by Finance Act, 2001. The constitutional validity of sec. 43B(f) was challenged before the Calcutta High Court in Exide Industries Ltd vs Union of India, 292 ITR 470. The Calcutta High Court in fact struck down sub-clause(f) of section 43B as unconstitutional. The ld. Counsel further submitted that even though the Apex Court stayed operation of the judgment of the Calcutta High Court in Exide Industries Ltd (supra), on identical set of facts, the other benches of the Tribunal are remanding the matter back to the file of Assessing Officer to decide afresh after the judgment of the Apex Court which is pending against the judgment of the Calcutta High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he light of the judgment of the Apex Court which may be delivered in the case of Exide Industries Ltd (supra). With the above observation, the order of the CIT(A) on this issue is confirmed. 31. The next ground of appeal is with regard to franchise rights acquired by the assessee of Chennai Superking. 32. Shri R. Vijayaraghavan, ld. Counsel submitted that the CIT(A) found that depreciation has to be allowed on the payment made by the assessee for a particular year and it does not enjoy the benefit over a period of time, therefore, depreciation is allowable only for the first year and for the rest of the years, the payment has to be allowed u/s 37 of the Act. Referring to the provisions of sec. 32 of the Act, the ld. Counsel submitted that depreciation has to be allowed on the written down value of the block of assets therefore, there is no question of allowing the same as revenue expenditure. Referring to the assessment order, the ld. Counsel submitted that the Assessing Officer himself accepted that the franchise rights acquired by the assessee is block of assets on which depreciation is allowable @ 25%. Therefore, the CIT(A) ought to have allowed the claim of the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed an appeal before the Apex Court and the Apex Court has stayed operation of the judgment of the Calcutta High Court. In those circumstances, this Tribunal is of the considered opinion that the order of the CIT(A) is confirmed. However, the assessee is at liberty to move the Assessing Officer after the judgment of the Apex Court in the case the provisions of sec. 43B(f) is declared to be unconstitutional. If such an application is made, the Assessing Officer shall consider the same after the judgment of the Apex Court and dispose of the same on merit. 38. The next ground of appeal is with regard to depreciation on the asset of IPL Franchise rights. 39. We heard the ld. Counsel for the assessee and the ld. DR. 40. This issue is also elaborately considered in the earlier part of this order. Since the cost of asset was to be taken into consideration for granting of depreciation, this Tribunal is of the considered opinion that the entire cost has to be taken irrespective of the payment made by the assessee during the year under consideration. Accordingly, the order of the lower authority is set aside and the Assessing Officer is directed to allow depreciation on the IPL fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the benefit may be on the psychological and mental field rather than for business purposes, therefore, the CIT(A) has rightly disallowed the claim of the assessee. 44. We have considered the rival submissions on either side and also perused the material available on record. The assessee specifically claims that the vastu consultant suggested to perform homams on different occasions at different places for increasing the production and profitability of the company and also to improve harmony among the workers. As rightly submitted by the ld. Counsel for the assessee, vastu is depending upon the belief of the individuals like astrology. The CIT(A) found that performing pooja would benefit basically on the psychological and mental field rather than subjective in the nature of business. The assessee claims that M/s Rishi Vidhya Consultants Pvt. Ltd. performed the following services: Nature and services rendered by M/s Rishi Vidhya Consultants Pvt. Ltd to all our plants and colonies:- 3. They had visited all Plants/Colonies and suggested us to perform special yagnams and homams to increase the production and profitability and improve the harmony amongst the worke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the considered opinion that, performing poojas as suggested by M/s Rishi Vidhya Consultants Pvt. Ltd is only for the purpose of business. Therefore, the services rendered by M/s Rishi Vidhya Consultants Pvt. Ltd are only for the purpose of business. Once the assessee believes that the expenditure incurred by the assessee would increase the production and profit and also improve the harmony among the workers of the company, this Tribunal is of the considered opinion that there is no reason the disallow the claim of the assessee. However, the claim of ₹ 2,50,00,000/- is highly excessive. Irrespective of the belief and faith, the payment shall be reasonable. This Tribunal is of the considered opinion that vastu is just like astrology and the opinion of an expert in the field may be one of the guiding factors. Therefore, the payment for such opinion shall not be unreasonable and arbitrary. The claim of ₹ 2,50,00,000/- is highly excessive and unreasonable. However, this Tribunal is of the considered opinion that the claim to the extent of ₹ 50,00,000/- may be reasonable. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.160/Mds/2015, the first issue arises for consideration is with regard to notional expenditure u/s 14A. 54. Shri R. Vijayaraghavan, ld. Counsel for the assessee submitted that the assessee invested in the shares of other companies from its own funds. The assessee has not diverted any borrowed funds for making investment in other companies, therefore, according to the ld. Counsel, no expenditure was incurred for earning the exempted income. The Assessing Officer by applying rule 8D of Income-tax Rules, calculated the expenditure at 0.5% of the average investment. According to the ld. Counsel, since the assessee used its own funds, there is no question of any disallowance u/s 14A of the Act. 55. On the contrary, Shri S. Bharath, ld. DR submitted that there is no material available on record with regard to availability of assessee s own funds. The assessee has made huge investment in the shares of other companies for earning the exempted income. In fact, the assessee earned ₹ 2,11,76,000/- in assessment year 2010-11 and ₹ 1,65,32,000/- in assessment year 2011-12. According to the ld. DR, while making investment, the assessee has to necessarily utilize the manpower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority at this stage. However, the assessee is at liberty to move the Assessing Officer after the judgment of the Apex Court if they are so advised. If such an application is made before the Assessing Officer, the Assessing Officer shall pass order in conformity with the order of the Apex Court in Exide Industries Ltd (supra). With the above observation, the order of the CIT(A) is confirmed. 59. The next issue arises for consideration is depreciation on the cost of IPL franchise rights. 60. We heard the ld. Counsel for the assessee and the ld. DR. The Assessing Officer restricted the depreciation on the amount actually paid for the year under consideration. The assessee claimed depreciation on the total cost of ₹ 364 crores. As already discussed in the earlier part of this order, depreciation has to be allowed on the cost of the asset and not on the amount paid by the assessee. Since the franchise rights is also one of the capital asset on which depreciation has to be allowed u/s 32 of the Act, this Tribunal is of the considered opinion that the Assessing Officer has to allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year after year on the ground that it is for business purpose. For the assessment year 2009-10, the assessee has made a payment of ₹ 2,50,00,000/- to M/s Rishi Vidhya Consultants Pvt. Ltd. In the earlier part of this order, this Tribunal allowed the claim of the assessee to the extent of ₹ 50,00,000/- on the ground that it would depend upon the individual belief of the businessman and when the services rendered were not doubted, no disallowance can be made. However, such a huge payment cannot be made year after year. When the assessee claims that payment of ₹ 2,50,00,000/- was made for assessment year 2009- 10, it is not known why such a huge payment of ₹ 75 lakhs was made to Dr. K. Venkatesan for the same services. The assessee is expected to incur certain expenditure on the belief that the art of vastu may increase the productivity or profit of the assessee. However, claiming such expenditure year after year cannot be for business purpose. Therefore, this Tribunal is of the considered opinion that payment for ₹ 75 lakhs for the year under consideration to Dr. K. Venkatesan cannot be considered to be for business purpose. Therefore, the CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the rival submissions on either side and also perused the material available on record. It is not in dispute that the assessee has taken heavy earth moving equipment on lease from M/s SERI Infrastructure Finance Ltd. and paid a sum of ₹ 11,16,400/-. However, no tax was deducted. The assessee claims that it is not an operational lease but it is only a finance lease. In the case of finance lease, assessee would borrow money and the asset would be purchased in the name of the assessee . The fact remains that the asset was acquired on right to use basis, therefore, what was paid by the assessee is in the nature of rent. Hence, this Tribunal is of the considered opinion that the assessee has to deduct tax while making the payment to M/s SERI Infrastructure Finance Ltd.. Therefore, the CIT(A) has rightly confirmed the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed. 70. The next issue for consideration is with regard to addition of expenditure attributable to earning exempt income while computing the book profit u/s 115JB of the Act. 71. Since the disallowance unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranchise rights elaborately. This Tribunal found that the assessee is entitled for depreciation u/s 32(1) of the Act on the total cost of the asset irrespective of the payment made during the year under consideration. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A) and accordingly, the same is confirmed. 79. In the result, the appeal of the Revenue I.T.A.No. 238/Md/2015 stands dismissed. 80. Now coming to assessment year 2011-12, in assessee s appeal I.T.A.No.161/Mds/2015, the first ground is with regard to disallowance of expenses u/s 14A of the Act. 81. We heard ld. Counsel for the assessee and ld. DR. The Assessing Officer disallowed a sum of ₹ 1,65,32,000/- u/s 14A of the Act. The contention of the ld. Counsel is that the assessee is having sufficient interest free funds for making investment in the shares of other companies, therefore, there is no question of any disallowance u/s 14A of the Act. For the assessment year 2009-10, the Assessing Officer has disallowed 0.5% of the average investment as notional expenditure by following limb (iii) of Rule 8D of the Income-tax Rules. During the year under consideration rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rights at ₹ 364 crores. 86. The next issue is with regard to disallowance of ₹ 63,75,000/- paid to Dr. K. Venkatesan. 87. Shri R. Vijayaragavan, ld. Counsel for the assessee submitted that the assessee has paid ₹ 63,75,000/- to Dr.K.Venkatesan for conducting certain rituals in the business premises of the assessee. We find that an identical issue was considered for assessment year 2010-11 in respect of the payment made to the very same Dr.K.Venkatesan to the extent of ₹ 75 lakhs. Since the assessee has also paid a sum of ₹ 2,50,00,000/- to M/s Rishividya Consultants Pvt. Ltd., the payment of another sum of ₹ 63,75,000/- for the very same services may not be justified. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the disallowance of ₹ 63,75,000/- is confirmed. 88. The next ground is with regard to disallowance of ₹ 2,50,00,000/- said to be paid to M/s Rishividya Consultants Pvt. Ltd. 89. According to the ld. Counsel, M/ Rishividya Consultants Pvt. Ltd provided vastu service and suggested the rituals and poojas to be performed in the premises of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 98. Coming to Revenue s appeal I.T.A.No.239/Mds/2015, the first issue arises for consideration is disallowance of notional interest. 99. As discussed in the earlier part of this order, the CIT(A) has allowed the claim of the assessee by following the order of this Tribunal in assessee s own case for assessment years 2003-04 and 2004-05. The only contention of the ld. DR is that the Department s appeal is pending before the High Court against the order of this Tribunal. Admittedly, the assessee made investment in the subsidiary companies, therefore, there is no question of any disallowance of interest on notional basis. This Tribunal is of the considered opinion that mere pendency of appeal before the High Court is not a reason to take a different view when the facts are identical to that of the assessment years 2003-04 and 2004-05. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed. 100. The next issue for consideration is with regard to depreciation on IPL franchise rights. 101. As discussed earlier, the assessee is entitled for depreciation on the cost of IPL franchise rights irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement and the entire amount of ₹ 60 crores was to be paid in advance. Accordingly, the assessee-company, in fact, paid ₹ 30 crores each on 19.1.2011 and 20.1.2011 and debited the same to the Profit Loss Account. However, while computing the taxable income, the assessee claimed only ₹ 1,59,38,000/- out of ₹ 60 crores paid, being the proportionate expenditure for the year under consideration. However, the Assessing Officer disallowed the claim of the assessee. According to the Assessing Officer, the entire claim of advertisement expenses paid to M/s Kalaignar TV Pvt. Ltd. is not a genuine transaction. According to the ld. Counsel, the assessee is engaged in the business of manufacture and sale of cement in various brand names. For marketing various brands of cement needs substantial advertisement in the country through electronic media. Therefore, the assessee decided to advertise its product through M/s Kalaignar TV Pvt. Ltd. hence, the amount claimed by the assessee has to be allowed. 105. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, there was an agreement between the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see filed appeal I.T.A.No.925/Mds/2012 against the order of the Administrative Commissioner passed u/s 263 of the Act. 108. Shri R. Vijayaraghavan, ld. Counsel for the assessee submitted that the assessee-company converted OCDs/warrants into shares and the premium on the issue was credited to securities premium account to the extent of ₹ 10952.36 lakhs and the premium payable on the converted debentures to the extent of ₹ 5901.08 lakhs was debited to the same account. This was treated as release of reserve and claimed as deduction. The Assessing Officer allowed the claim of the assessee. However, the CIT found that the order of the Assessing Officer allowing the deduction to the extent of ₹ 59,01,08,369/- is erroneous and it has to be withdrawn. Similarly, a sum of ₹ 50,66,58,000/- was claimed as deduction towards employees benefits superannuation fund and leave encashment as release of reserve which was debited to reserves account. The Assessing Officer allowed the claim of the assessee. However, the CIT found that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. The assessee has also claimed unabsorbed loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason on which the claim was allowed. Since no such exercise was done by the Assessing Officer, the CIT has rightly exercised his power u/s 263 of the Act. Hence, this Tribunal do not find any reason to interfere with the order of the CIT. Accordingly, the same is confirmed. 112. In the result, the assessee s appeal I.T.A.No.925/Mds/2012 is dismissed. 113. Coming to I.T.A.No.159/Mds/2015, the assessee has filed this appeal against the consequential order passed by the Assessing Officer subsequent to the revisional order u/s 263 of the Act. 114. The first issue arises for consideration is with regard to disallowance of lease rental. 115. The Assessing Officer disallowed a sum of ₹ 1,16,87,205/- being the lease rental paid for acquisition of capital asset on right to use basis. According to the ld. Counsel, it is only a finance lease, therefore, tax need not be deducted. This Tribunal is of the considered opinion that whether it is a finance lease or operational lease, the assessee is expected to deduct tax. Since the asset was acquired for right to use basis, hence, the payment has to be construed in the nature of rent, therefore, the assessee is very much lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Account is not correct. The ld. Counsel further submitted that since the amount was withdrawn from the reserves as transitional arrangement being the first year of the new Accounting Standard and the net amount was carried to the Profit Loss Account, the CIT(A) found that the claim of the assessee to reduce ₹ 50.66crores while computing the book profit is as per law. 120. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee-company withdrawn a sum of ₹ 50.66 crores by reducing the same from the reserve and details of such withdrawal are available at Schedule 2 of the Balance Sheet. After withdrawal of the amount of ₹ 50.66 crores, the same was set off against the employee benefits of the current financial year and the net amount was carried to the Profit Loss Account. The details of the outstanding liabilities are available at Schedule 8 of the Balance Sheet. Therefore, as rightly found by the CIT(A) the assessee-company effectively debited the above employees benefit to the extent of ₹ 50.6 crores in the Profit Loss Account by setting off against the employee benefits o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets have been incorporated in the books of account of the assessee which is permissible as per Accounting Standard-14 u/s 211(3C) of the Companies Act. This process of accounting resulted in debit balance in the Profit Loss Account of the amalgamating company. However, the same was not reflected in the combined entity. The assessee has claimed that brought forward losses and depreciation of ₹ 40.55 crores pertaining to M/s Visaka Cement Industries Ltd has to be allowed in the hands of the assessee. Referring to the order of the CIT(A), the ld. Counsel submitted that the amounts carried forward as unabsorbed losses and depreciation will not get reduced or neutralized on account of revaluation, therefore, the CIT(A) has rightly allowed the claim of the assessee. 124. We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that M/s Visaka Cement Industries Ltd. amalgamated with the assesseecompany. Once M/s Visaka Cement Industries Ltd amalgamated with the assessee-company, the entire assets and liabilities included the unabsorbed losses and depreciation has to be taken into consideration while compu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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