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TMI Blog2011 (3) TMI 1630X X X X Extracts X X X X X X X X Extracts X X X X ..... own case for AY 2001-02 submitted that this issue stands decided against the assessee - HELD THAT:- In view of the decision of the Tribunal in assessee s own case in the immediately preceding assessment year on the same issue we hold that the CIT(A) is justified in confirming the disallowance of amortization of the premium paid for leasehold land. The ground raised by the assessee is accordingly dismissed. Disallowance of Inventory Written off - In absence of production of other details as to why the inventory has been written off and noting that the list contains certain items which cannot become obsolete, the Assessing Officer disallowed the claim - HELD THAT:- Admittedly, the reasons for such write off was not available before the AO or before the CIT(A) and filed for the first time before us. We, therefore, in the interest of justice, deem it proper to restore the matter back to the file of the AO. Ground of the assessee is accordingly allowed for statistical purpose. Disallowance of Set off of Loss in Computing Book Profit u/s 115JB - As per AO, assessee company has simply twisted the computation of figures of brought forward loss and unabsorbed deprecation so as to increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RT] expenditure incurred by the assessee on the cost of power line for independent feeder, incurred prior to commencement of production has to be treated as part of plant and machinery being necessary for commencement of production and has to be capitalized. Therefore, ground raised by the revenue is dismissed. Manufacturing and Trading Expenses and Other Expenses - in spite of number of opportunities granted, the assessee failed to file the details called for - AO observed that the auditors have not quantified the expenses incurred by way of fine/penalty - HELD THAT:- It is the settled proposition of law that for claiming any expense; onus is always on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer that such expenditure is wholly and exclusively for the purpose of business. However, in the instant case, the assessee admittedly has not discharged the onus cast on it. The CIT(A) has correctly held that such claims have to be either allowed or disallowed in toto. In absence of furnishing of full details before the Assessing Officer, in our opinion the order of the CIT(A) restricting the disallowance to 5% on the above items is justified.Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee, referring to the statement of total income, a copy of which is placed at page 67 of the paper book, drew the attention of the Bench to the closing Modvat credit balance of ₹ 15,287,989/- and the opening Modvat Credit balance of ₹ 23,550,477/-. Referring to the details of Modvat credit availed or utilized during the year ended on 31.3.2004, which is the attachment-8 to the audit report and a copy of which is placed at page 31 of the paper book, he submitted that opening and closing modvat credit as stated in the computation of income are already there in the audit report. 4.1 Referring to clause (b) of the tax audit report, copy of which is placed at page 29 of the pear book, he drew the attention of the Bench to the notes given by the auditors. He submitted that since all these details were filed along with the return of income which are already available before the Assessing Officer, he should have allowed the claim of the assessee. He submitted that most of the records, in the meantime were destroyed due to flood. 4.2 In his alternate contention, he submitted that the matter should be set aside to the file of the Assessing Officer for fresh adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the assessee is accordingly allowed for statistical purpose. 7 In grounds of appeal no.2, the assessee has challenged the order of the CIT(A) in confirming the disallowance of amortization of the premium paid for the leasehold land amounting to ₹ 20,16,264/- 7.1 The ld counsel for the assessee, at the outset, referring to the order of the Tribunal in assessee's own case for Assessment Year 2001-02 submitted that this issue stands decided against the assessee where the Tribunal, following the decision of the Special Bench of the Tribunal in the case of Mukund Ltd reported in 106 ITD 23 has dismissed the ground raised by the assessee. He however, submitted that in the case of DCIT vs Sun Pharmaceuticals reported in 24 DTR 262 similar issue has been decided in favour of the assessee. 8 After hearing both the sides and in view of the decision of the Tribunal in assesse's own case in the immediately preceding assessment year on the same issue we hold that the CIT(A) is justified in confirming the disallowance of amortization of the premium paid for leasehold land amounting to ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled for the first time before us. We, therefore, in the interest of justice, deem it proper to restore the matter back to the file of the Assessing Officer to go through the reasons given by the assessee justifying the write off of stores and spares. The Assessing Officer shall decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. This ground of the assessee is accordingly allowed for statistical purpose. 14 Grounds of appeal no 5 relates to adhoc disallowance of expenses. Since this ground has got bearing with the grounds of appeal nos 2 & 3 by the revenue, this ground is being decided along with grounds of appeal no2 & 3 of the revenue. 15 Grounds of appeal no.6 relates to disallowance of set off of loss in computing book profit u/s 115JB. 15.1 Facts of the case, in brief, are that the Assessing Officer, on perusal of the Form No.29B filed along with the return of income, noted that the assessee company has computed the tax payable u/s 115JB of the I T Act amounting to ₹ 82,50,802/-. He noted that the assessee, while working out the book profit has committed the following mistake: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in appeal here before us. 17 The ld counsel for the assessee, referring to the decision of the coordinate Bench of the Tribunal in the case of Amline Textiles P Ltd vs ITO reported in 27 SOT 152 (Mum) submitted that the lower of the solitary figures of the unabsorbed depreciation or loss brought forward for all the earlier years taken together was to be reduced for the purpose of computing book profit u/s 115JB of the I T Act. Therefore, computation made by the assessee was correct and the order of the CIT(A) should be set aside on this issue. 17.1 Referring to page 60 of the paper book, which is the computation of book profit u/s 115JB, he drew the attention of the Bench to the computation made by the assessee and submitted that the same is correct. 17.2 The ld DR, on the other hand, fairly conceded that this issue stands covered in favour of the assessee by the decision of the Tribunal cited by the ld counsel for the assessee. 18 After considering the rival submissions made by both the parties, and relying on the decision of the Tribunal in the case of Amline Textiles P Ltd.,(supra), we hold that aggregate amount of unabsorbed deprecation or brought forward losses of the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld counsel for the assessee, referring to the Significant Accounting Policies attached to the audit report, drew the attention of the Bench to clause (v), copy of which is placed at page 25 of the paper book which reads as under: "Contributions to Provident Fund are deposited with Regional Provident Fund Commissioner and contribution to Group Gratuity-cum-life insurance and superannuation scheme are funded with the Life Insurance Corporation of India. Liability for gratuity and leave encashment is provided on the basis of actuarial valuation." 21.1 Referring to the same, he submitted that it is crystal clear from the note that liability for gratuity and leave encashment is provided on the basis of actuarial valuation. He submitted that in the earlier years, the appeal of the assessee was dismissed solely on the ground that the assessee has not quantified the loss on the basis of such actuarial valuation. However, since during this year, quantification has been made on the basis of actuarial valuation; therefore, in view of the decision of the Hon'ble Supreme Court in the case of BEML (supra), the liability for gratuity and leave encashment cannot be considered as unascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed. ITA No.849/Mum/2009( By the revenue) 24 Grounds of appeal no.1 by the revenue reads as under: "On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in deleting the disallowance of depreciation of ₹ 45,96,328/- on electric feeder lines ignoring the fact that the assessee was not the owner of the feeder lines as also the title of the feeder lines vests with the MSEB." 24.1 Facts of the case, in brief, are that the Assessing Officer observed from the depreciation chart and the notes appended to it that in the block of "plant & Machinery" the assessee company has included an amount of ₹ 4,35,80,000/- paid to MSEB for providing Electric Feeder lines to the company's plant. It is further mentioned that the title of the Feeder lines (the assets) vests with MSEB and the assessee company has claimed depreciation as it has exclusive right of use of the electric feeder lines. According to the Assessing Officer , since the ownership of the electric feeder lines do not vest with the assessee company, claim of depreciation over the same contravenes the conditions laid down in sec. 32(1) of the I T Act. He, therefore, asked the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strongly relied on the order of the Assessing Officer . The ld counsel for the assessee, on the other hand, relied on the order of the CIT(A) and the order of the Tribunal in assessee's own case for Assessment Year 2001- 02. He also relied on the decision of the Hon'ble Supreme Court in the case of Mysore Minerals Ltd vs CIT reported in 239 ITR 775. 28 We have considered the rival arguments made by both the parties, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited by both the parties before us. We find identical issue had come up before the Tribunal in assessee's own case for the Assessment Year 2001-02. We find the Tribunal, after considering various decisions, dismissed the ground raised by the revenue by holding as under: "Having heard both the parties and having considered their rival contentions, we find that the assessee company was incorporated on 1st July 1995 and started installing plant and machinery during the FY 97-98 and the amount of ₹ 4,35,80,000/- was paid for providing electric feeder line to the company's plant during FY 96-97. Thus, it is ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to submit the details called for, the allowability of various expenses debited to P&L account cannot be verified. He noted that the total expenditure incurred by the assessee under the heads 'manufacture and trading expenses' and 'other expenses' is ₹ 1,08,26,45,000/- and ₹ 31,14,25,000/- respectively. He, therefore, disallowed an amount of ₹ 6,97,03,500/- on adhoc basis being 5% of manufacturing and trading expenses and other expenses. 29 In appeal, it was submitted that disallowance of expenses @ 5% of the total claim was highly unjustified because the Auditors have not doubted any claim made by the assessee. It was submitted that either the assessee itself or the Assessing Officer under other head has already disallowed the provision for doubtful debts of ₹ 2,25,00,000/-; obsolete stores written off of ₹ 1,20,00,000/- and from excise duty on finished goods of ₹ 1,28,74,000/-. Therefore, the disallowance made by the Assessing Officer is misconceived. 30 Based on the arguments offered by the assessee, the CIT(A) noted that the assessee has not explained either before the Assessing Officer or even before him as to why the Tax Auditors have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case, the assessee admittedly has not discharged the onus cast on it. Therefore, the contention of the assessee that the entire expenses should have been allowed by the CIT(A() is not correct. At the same time, the disallowance of 5% on adhoc basis by the Assessing Officer on expenses such as provision for doubtful debts, excise duty on finished goods, insurance, power and fuel, lease rentals, rent, rates and taxes, exchange gain/loss etc., cannot be disallowed @ 5% on adhoc basis. The CIT(A) has correctly held that such claims have to be either allowed or disallowed in toto. 33.1 However, in absence of full supporting details in case of expenses such as miscellaneous expanse, commission, general expenses, legal and professional fees and other manufacturing expenses etc., leakage of revenue is possible. In absence of furnishing of full details before the Assessing Officer, in our opinion the order of the CIT(A) restricting the disallowance to 5% on the above items is justified. In this view of the matter, the order of the CIT(A) on this issue is upheld. Grounds of appeal nos 2 & 3 by the revenue and the grounds of appeal no. 5 by the assessee are dismissed 34 In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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