9911796707
TMI Blog2012 (8) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... Birla consultancy and software services - disallowance u/s 80I/80IA - disallowance of interest u/s 36(1) - disallowance u/s 40A(3) - development allowance on the increased cost of PandM due to exchange fluctuation - exchange fluctuation loss - ITA No. 5630/Mum/2002, ITA No. 1865/Mum/2003 - - - Dated:- 10-8-2012 - G. E. Veerabhadrappa (President) and Vijay Pal Rao (Judicial Member) For the Petitioner : J. D. Mistry, Madhav Agrarwal For the Respondent : Subhacham Ram ORDER Vijay Pal Rao (Judicial Member) 1. These cross appeals are directed against the order dated 03/09/2002 of CIT(A) for the assessment year 1998-99. 2. In appeal ITA no. 5630/Mum/2002, the assessee has raised ground no.1 as under: Legal and Professional Charges as capital in nature: The CIT (A) erred on facts and in the circumstances of the case and in law in upholding the action of the AO in treating expenditure of ₹ 4,24,000/- incurred towards legal and professional charges as capital in nature. The CIT (A) failed to appreciate that these expenses are of revenue nature and ought to have deleted the disallowance. 2.1 We have heard the learned Sr. counsel of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44,448/-. This ground is common for AY 1997-98 also. 10.1 The AO disallowed interest on welfare cess, electricity duty and surface rent u/s 43B The CIT(A) has confirmed the action of the AO disallowing the interest on these items. 10.2 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. For the Assessment Year 1995-96, the Tribunal has considered and decided the issue regarding disallowance of interest on welfare cess, electricity duty and surface rent in paras 13 to 13.3 as under: 13. Ground no.12 reads as follows: The ld CIT(A) erred on facts and in law in upholding the action of AO in disallowing the interest on welfare cess, surface rent and electricity duty u/s 43,B as detailed hereunder: Welfare cess Surface rent Elect. Duty total 84177 340666 2851010 3275853 13.1. In AY 1994-95 assessee's own case in ITA No. 3698/Mum/99, vide order dated 13th February, 2009, identical issue came up for consideration before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered and decided by this Tribunal in assessee's own case for the assessment year 1996-7 and 1997-98 in paragraph 11 to 11.2 as under: 11. Ground no.5 is regarding Royalty and interest u/s 43B and this ground is common for AY 1997-98 also. 11.1 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in para 25 and 25.2 as under: 25. Ground No. 20 of the assessee reads as follows: The learned CIT(A) erred on facts and in law and/or erred in misdirecting herself on facts and in law in upholding the action of AO in disallowing the Royalty (i.e. cost of raw material) and interest thereon of ₹ 2,50,12,572 u/s 43B. Royalty 19824125 Interest on Royalty 5188447 2,50,12,572 The appellant prays that the said amount be allowed as deduction and it be held that sec.43B cannot be applied so as to disallow the sum of ₹ 2,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same as tax. Therefore, the order of the CIT(A) on this issue is set aside and the ground raised by the assessee is allowed The facts being identical in the present assessment .year, respectfully following the decision of the Tribunal, we direct that the disallowance sustained by the CIT(A) be deleted. Ground No.20 of the assessee is allowed. 11.2 We further note that for the said assessment year the revenue has not raised any issue in the appeal filed before the Hon'ble jurisdictional High Court. Accordingly, following the earlier order of the Tribunal, we decide this issue in favour of the assessee. 4.2 Following the earlier orders of this Tribunal, we decide this issue in favour of the assessee and against the revenue. 5. Ground number 4 is as under: Contribution to State Govt.: 4.1 The CIT (A) erred on facts and in law in upholding the action of the AO in treating amount of ₹ 21,54,290/- being contribution to State Government for construction of regulator-cum-bridge as capital in nature. 4.2 The CIT (A) erred in falling to follow the order of the CIT (A)-XII for AY 1994-95 wherein contribution was allowed as revenue deduction and oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and disallowed the expenditure. The Hon'ble Apex Court dismissing the appeal of the revenue, held that the expenditure so incurred was in the course of carrying on of the assessee's business and therefore, deductible as a revenue expenditure. The Hon'ble Apex Court followed their own decision reported in 125 ITR 293 (SC). In our opinion, this judgment supports the case on hand in favour of the assessee. 32.7 In the case of CIT vs Excel Industries Ltd 122 ITR 995 (Bom), the assessee a manufacturer of chemicals set up a new unit and required a large quantity of electrical energy which had to be obtained from the electricity board. The electricity board charged the assessee for the overhead service line in excess of 30 metres. Under these facts the Hon'ble Apex Court held that the assessee did not acquire any capital asset or an enduring benefit or advantage and the object of making the payment was purely one of commercial expediency. This judgement also supports the case on hand. 32.8 In the case of CIT vs Navsari Cotton and Silk Mills Ltd 135 ITR 546 (Guj), the assessee made a contribution to the municipality for providing a pipeline through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the contributor too, is a beneficiary. In fact, we need and should look forward for more of this kind of acts. 32.11 In view of the above, we hold that the warding off a recurring revenue expenditure by one time contribution retains the character of a revenue expenditure only and that the CIT(A) was justified in deleting the addition by holding that the expenditure in question is purely on revenue field. Ground 5 of the revenue fails. 5.2 Since the revenue has not challenge the findings of this Tribunal; therefore, following the earlier order of this Tribunal in assessee's own case, we decide this issue in favour of the assessee and against the revenue. 6. The alternative plea of the assessee is regarding depreciation has become infructuous and accordingly, rejected. 7. Ground number 5 of the assessee is as under: Interest received from Income Tax Department: 5.1 The learned CIT (A) erred in upholding the action of the AO in taxing interest of ₹ 20,39,570/- received form Income Tax Department during the previous year. 5.2 The CIT (A) failed to appreciate that it is not disputed that the same amount was not irrevocably granted to the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not find any reason to interfere with the order of the ld CIT(A), qua this issue hence, upheld. 7.2 Following the earlier order of this Tribunal, we decide this issue against the assessee and in favour of the revenue. However, if subsequently the refund and the interest is withdrawn, then the same should be reduced from the total income of the assessee. 8. Ground number 6 of the assessee is as under: Deduction u/s 80 0: 6.1 The CIT (A) ought to have held that deductions available to the appellant u/s 80 0 amounted to ₹ 35,78,506/-, as claimed by the appellant Company in the return of income. 6.2 The appellant pray that the deduction under section 80 0 be allowed at the amounts arrived at without any reduction for allocated head office expenses. 6.3 Insofar as allocation of head office expenses of ₹ 14,00,000/- and the consequent reduction of section 80 0 deduction, the CIT (A) ought to have categorically held that no such allocation and reduction could be made. 6.4 Without prejudice, the CIT (A) erred in failing to follow the order of her predecessor without any reason whatsoever wherein allocation of head expenses was reduced to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT (A)'s order that deduction u/s 80 HHC of the Act is to be computed for the Company as a whole is upheld, then the CIT (A) erred in including inter-unit/inter-divisional transfers of ₹ 436.22 crores as part of the total turnover. 10.1 We have heard the learned senior counsel as well as the ld DR and considered the relevant material on record. An identical issue raised in the additional grounds for the assessment year 1996-97 and 97-98 was considered and decided by this Tribunal in assessee's own case in paras 30 and 30.1 as under: 30 As regards the additional ground no.1 pertaining to deduction u/s 80HH on gross interest the Sr ld counsel for the assessee has submitted that this issue has been decided by the Hon'ble Supreme Court in the case of ACG Associated Capsules vs CIT vide decision dated 8.2.2012; therefore, the deduction u/s 80HH should be allowed on the gross interest received. 30.1 Since this ground has been raised by the assessee first time in view of the decision of the Hon'ble Supreme Court; therefore, it requires verification and examination at the level of the AO. Accordingly, we remit this issue to the record of the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee by the judgement of Hon'ble jurisdictional High Court rendered in the case of Sudarshan Chemicals Industries Ltd. (supra). Respectfully following the same, this aspect of the matter is decided in favour of the assessee. Regarding the first aspect of the matter i.e., regarding exclusion of inter-division transfer from total turnover, we find that this issue is covered in favour of the assessee by the judgement of the Tribunal rendered in assessee's own case for A. Y. 1990-91 to 1992-93. In para No. 152 of the judgement, this has been held by the Tribunal that interdivision transfer has to be excluded as that would amount to double addition in the figure of total turnover. Respectfully following this judgement, this aspect of the matter is also decided in favour of the assessee. This ground No. 26(ii) stands allowed. 22.2 Respectfully following the decision of the Tribunal in assessee's own case we set aside the order of the CIT(A) and direct the AO to exclude the interdivision transfer from the total turnover. 27.5 In view of the above, the claim of the assessee is directed to be accepted. Ground no. 24 is allowed. 11.1 Ld Sr. counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is following the mercantile system of accounting and since there is no provision in the Act to exclude the accrued interest considering the events in the subsequent years, the same cannot be excluded. 27.6 We find the Hon'ble Madras High Court in the case of CIT vs Tamil Nadu Mercantile Bank Ltd., reported in 291 ITR 137 has held as under Held, dismissing the appeal, that even though section 18 of the Act was deleted, the assessee was taxable for interest on securities only on specified dates, when it became due for payment, in view of the third proviso to section 145(1) of the Act, which was in force during the relevant assessment yews.' 27.7 Respectfully following the decision of the Hon'ble Madras High Court cited above, this ground raised by the assessee is allowed 19.2 We further note that when this issue was not raised before the Hon'ble jurisdictional High Court by the Revenue, the same was not pressed as recorded by the Hon'ble High Court in para 5 as under: 5 As regards question (1) is concerned, counsel for the revenue states that he is not pressing the said questions, the ITAT has followed the decision of the Madras High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of honourable jurisdictional High Court in case of CIT vs Paul Brothers reported in 216 ITR 548 has held that deduction under section 80IA in respect of Vikram Power unit could not be denied during the assessment year under consideration when the claim was allowed in the earlier years. However, the Commissioner of Income Tax(Appeals) concurred with the view of the Assessing Officer on the point of calculation of profit earned from Vikram Power unit by reducing the sale price of power sold by the Vikram Power unit at ₹ 2 per unit. 14. Before us, the ld senior counsel of the assessee has submitted that this issue is covered by the decision of this Tribunal in case of West Coast Paper Mills Ltd., reported in 103 ITD 19(Mum) as well as in case of Sri Velayudhaswamy Spinning Mills P Ltd reported in 12 ITR (Trib) 35 (Chennai). 14.1 On the other hand, the learned D.R has relied upon the orders of the Assessing Officer and the Commissioner of Income Tax(Appeals). 15. We have considered the rival submissions as well as the relevant material on record. The dispute before us is limited only with respect to the sale price of electricity unit for captive consumption. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , both the assessee and the revenue are aggrieved. The grievance of the revenue is that the deduction under section 80-IA should not be on the average rate of actual consumption of the electricity from KSEB when the assessee itself has sold electricity to TNSEB at the rate of ₹ 2.62 per unit. The assessee's grievance is that the CIT(A) was not justified in holding that the element of tax should not be included in the computation of transfer price and he also erred, according to the assessee, in directing to give a pro rata allocation of indirect expenses of the company for the purpose of computation of the profit of the power generating Units. We have considered the submissions of the parties on this issue and are unable to find any merit in them. The Assessing Officer's adoption of the rate at which it sold the power to TNSEB cannot be accepted since the Units themselves are working at Dandeli in the State of Karnataka and the cost of generation of power in Tamil Nadu and Karnataka are different. Apart from that, the assessee has paid to KSEB for purchase of the power and the CIT(A) has correctly come to a reasonable conclusion that the transfer price should be on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant prays that the Assessing Officer be directed to allow interest u/s 244A on refund arising out of self assessment tax from the date of payment of self assessment tax. 19. The first additional ground regarding sale tax exemption benefit, being capital receipt. 20. We have heard the ld Sr. counsel as well as the net D.R. and considered the relevant material on record. An identical issue has been considered and decided by this Tribunal in assessee's own case for the assessment year 1995- 96 in para of 35.2 as under: 35.2 On this objection, the learned counsel for the assessee brought to our notice the decision of the Hon'ble Delhi High court in the case of Jai Parobolic Springs Ltd. vs. CIT 306 ITR 42(Del) wherein the Delhi High court has held that the power of the Tribunal to entertain the additional ground is not in any way restricted in view of the decision of the Hon'ble Supreme Court in the case of Goetz India Ltd. In view of the above, we admit additional ground for adjudication. We are, however, of the view that for adjudication of the additional ground, the Assessing Officer has to examine the scheme under which the subsidy was received and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation claimed on shops etc. at Bhiwani without appreciating the fact that these shops are not business assets. 3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing depreciation on false ceiling treating the same as plant without appreciating the fact that false ceiling is an integral part of building and does not form part of plant and machinery. 4. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting an amount of ₹ 5.26 crores which was added by the Assessing Officer on account of proportionate premium ignoring, inter-alia, the ratio laid down in the case of Shri Sajan Mills Ltd. (156 ITR 585)(SC), while deciding the issue of proportionate premium payable on redemption of bonds. 5. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow 75% of remuneration paid to lady employees Smt.Taramani Mandalia and Smt. Induben I. Parikh and 100% of remuneration paid to Smt.Sumitra Devi Mandelia ignoring the fact that no details of services rendered by them had been filed. 6. On the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 48,89,340/- on rural development and medical help, expenses by way of help of ₹ 1,48,285/-, expenses on contribution to local organisation ₹ 10,47,331/-, expenses on air fare and rail fare of ₹ 8,81,593/-, payment of penalty and interest of ₹ 76,777/-, payment to Sangeet Kala Kendra of ₹ 8,000/- and expenses of ₹ 5,08,634/- for logo without appreciating that the same is not incurred in connection with the assessee's business. 12. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s.801/801A of the Income-tax Act without appreciating the fact that head office of the assessee company is a controlling unit which manages the affairs of all units of the company and, therefore, proportionate expenses of the head office are rightly reduced by the Assessing Officer from the profits of the assessee. 13. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow deduction u/s.80-O of the Income-tax Act on gross receipts and not on net receipts without appreciating the fact that the said deduction is allowable with ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed for the purpose of the assessee's business in respect of the year in which the asset is acquired or installed or first put to use and the assessee has not fulfilled these conditions. 20. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow the deduction u/s.801A on Vikram Power Unit without appreciating that Vikram Power Unit is not an independent unit and, therefore, not eligible for the deduction u/s.801 separately. 21. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that exchange rate fluctuation loss of ₹ 58,92,079/- is a trading loss without appreciating the fact that the same does not pertain to business of the assessee. 24. Ground number 1 is regarding depreciation on Intake Well, Telphers, Storage Tank, Lagoon Tank, Effluent Tankt. 25. We have heard the ld Sr counsel for the assessee as well as the ld DR and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by this Tribunal in assessee's own case for the assessment year 1986-87 and in all subsequent years upto asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and against the revenue. 25.1 Following the earlier order of this Tribunal, we decide this issue in favour of the assessee and against the revenue. Accordingly, this ground of the revenue's appeal is rejected. 26. Ground no.2 of the revenue's appeal is regarding depreciation on shops at Bhiwani. 27. We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 35 to 35.3 as under: 35 Ground no.3 raised by the revenue reads as under: 3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of depreciation claimed on shops, etc., at Bhiwandi without appreciating the fact that these shops are not business assets. 35.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been considered and deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the earlier years. For the assessment years 1996/97 and 1997-98, this Tribunal has considered and decided this issue in paras 36 to 36.2 as under: 36 Ground no.4 raised by the revenue reads as under: 4. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing depreciation on false ceiling treating the same as plant without appreciating the fact that false ceiling is an integral part of building and does not form part of plant and machinery. 36.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the Assessment Year 1994-95 in paras 37 as under: 37. Grounds 10 and 13 of the revenue pertains to depreciation on Intakewell, storage tank and effluent tank at the rate applicable to plant and machinery and false ceiling. This issue also figured in the appeal for the assessment years 1990-91 and 1993-94 and the Tribunal found that the assessee's claim was accepted in the earlier years by following the decision of the Andhra Pradesh High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been considered and decided by the Tribunal in assessee's own case for the Assessment Year 1995-96 in paras 45 to 45.1 as under: 45. The issue of disallowance of proportionate premium payable on redemption of bonds has been decided in. favour of the assessee in its own case vide ITA No.3698and 3100/M/99 for the A.Y 1994-95, order dated 13/2/2009, vide para 29, which is reproduced hereunder: 29. The second ground taken by the revenue pertains to proportionate premium paah1e on redemption of debentures/bonds. This issue stands settled in favour of the assessee by the judgmental the Hon'ble Apex Court in the case of Madras Industrial investment Corporation Ltd. vs. CIT 225. ITR 802(SC). We also find that for the AYs 1986-87 to 1989-90, identical issue was decided by Mumbai Bench 'J' of the Tribunal in assessee's own case in ITA Nos. 939/Mum/1993 and ors and vide order dated 22nd March, 2007 by following the above judgment of the Hon'ble Apex Court Ground No.2 of revenue fails. 45.1 Respectfully following the above decision of the Co-ordinate bench this issue is decided in favour of the assessee. 38.3 Accordingly, following the earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has considered and decided this issue in paras 42 to 42.2 as under: 42 Ground nos 11 to 14 raised by the revenue read as under: 11. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of foreign travel expenses of Mr.Pattabi, Mr.Thoruram, Mrs.Jain and Mrs.Saboo amounting to ₹ 2,88,166/- without appreciating the fact that the object of the tour was to purchase machinery and hence, the expenses are capital in nature. 12. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing relief on account of foreign travel expenses of Mr. and Mrs. A.V. Birla amounting to ₹ 1,90,893/- without appreciating the fact that the object of the tour was to purchase machinery and hence, the expenses are capital in nature. 13. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing relief on account of foreign travel expenses of Mrs.Jajoo amounting to ₹ 2,54,593/- without appreciating the fact that the object of the tour was to purchase machinery and hence, the expenses are capital in nature. 14. On the facts and in the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld depend on the facts and circumstances of each case. In the instant case, there is no dispute about the fact that the visit of the Managing Director was for the purpose of business. There is also no dispute that there was a running business It was not a case of business which was in the process of establishment. The business of the assessee was already going on and it was in connection with the running business that some more plant or machinery were intended to be purchased. If the visit was either to take a decision whether it was suitable for its business or not for any other such purpose, we do not think that it will convert the expenditure incurred on the Managing Director's visit into an expenditure of a capital nature. In a given case where a decision is taken to purchase the machinery and the purchase has in fact been made in pursuance of such decision, it may be possible for the Revenue to contend that the expenditure should be added to the cost of the machinery but in a case where a decision is taken not to purchase the machinery it would not be possible to treat the expenditure on the visit as part of the cost of any machinery because no machinery, as such is purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and adjudicated from para 10 to 10.5 of this order while adjudicating ground No.9 of assessee's appeal. Accordingly groimd:No.7 (a) and (b) are disposed as per the observation contained in 10 to 10.5 of this order. The observations and findings therein are applicable to this ground of appeal. 42.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we dispose off these grounds in similar terms. 32.2 Accordingly, the travelling expenses relating to ground no.6 disallowance on account of capital in nature are allowed in favour of the assessee whereas the foreign travelling expenses covered under ground no.7 are disallowed and decided the issue in favour of the revenue. 33. Ground no. 8 is regarding legal charges in connection with land matter. 33.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 43.1 and 42.2 as under: 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs vs. UOI and Ors 173 ITR 708 (AP) no disallowance can be made u/s. 43B. On the other hand, according to the assessing officer, whether the amount has become payable or not, the disallowance has to be made by virtue of Explanation 2 to section 43B of the Act. We find that the contention of the assessee has been upheld by the Tribunal in its order for assessment years 1986-87 to 1989-90, 1990-91 and 1993-94. However, we find that no details are available on the records provided to us as to what is the amount disallowed under different clauses of the disallowance agitated before. With regard to payment covered under clause (b) of section 43B we hold that the same may be allowed if it is paid within the grace period provided under the concerned statute, in view of the judgement o the Hon'ble jurisdictional High Court in the case of ACIT vs. Pamwi Tissues Ltd. 215 CTR (Born) 150. With regard to the other two items of disallowance, we direct the assessing officer to consider the same in the light of the Andhra Pradesh High Court Judgment in the case of and Srlkakollu Subbarao and Co (supra). This ground of 'the revenue is treated as allowed, for statistical purposes. 53.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl. No Name Amt (Rs) Total Amt (Rs) (a) VC Fees for feasibility report of captive power plant Coal Dashing plant 91,430 200000 291430 (b) NVC Feasibility report of captive power plant Fee for TEPS for splitting location on grinding units. 91430 225000 316430 (c) V SC Fees for feasibility report of power plant 137140 (d) Chem Retainer ship fees App. Fees Advt project profile etc Foreign travel exp 150000 546315 974395 167071 (e) ESM Paid to Dalal consultant for MDF board project 317025 (f) HO Intt.on CC limit utilised for new cement project 156507 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order for the assessment year1993-94 confirmed the addition. 116. The learned counsel for the assessee pointed that in the assessment year 1993-94 the Tribunal has allowed the assessee 'S appeal The Tribunal taking note of the fact that there was common management and contro4 common fluids, inter-connection, interdependence of units on each other, it was held that the assessee was carrying on same business. 117. The learned DR relied on his argument with reference to ground No. 14 arid inter-alia relied on. the decision of the Hon'ble Bombay High Court in the case of Ciba of India Ltd. V. CIT (202 ITR 1). 118. We have considered the submissions of both the parties and have also perused the records of the case. As noted earlier, the Tribunal has held that test of same business is fulfilled in the present case. From the AO's observation, as noted earlier, it is clear that he has not disputed that the expenditure was for expansion of business. The assessee deserves to succeed in view of various judicial pronouncements noticed with reference to ground No. 14 and further discussions with reference to Ground No. 18(1990-91). These grounds are allowed.' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) Sales tax penalty/interest on late payment of sales tax and penalty for excise mater. Rs.1,06,149/- g) Contribution to diner s and other clubs. Rs.15,659/- h) Agricultural income tax. Rs.8,700/- 47.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that the issue in 19(a), (b) and (c) raised in this appeal has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in para 19 to 20.1 as under: 19. Ground No. 15 of the assessee reads as follows: The learned CIT(A) erred on facts and in law and/or erred in misdirecting herself on facts and in law in upholding the section of Assessing Officer in disallowing other business expenses of ₹ 2,72,950 as detailed hereunder treating the same as non-business expenses. Grasilene Exp. By various vicarious officers PULP/M 31,528 Rural Development Exp. HPF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NCS Medical help to others 16106 ESM Conveyance to anti dumping and duty personnel 1155 192263 13.2 We find the CIT(A) upheld the action of the Assessing Officer. After going through the nature of expenses we find no. satisfactory evidence was brought to our notice that the expenditure incurred by the assessee on account of the above items is wholly and exclusively for the purpose of business. It is the settled proposition of law that for claiming any expenditure the onus is always on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer that the expenditure incurred is wholly and exclusively for the purpose of business. In the instant case the assessee failed to discharge the burden cast on it. We, therefore, do not find any infirmity in the order of the CIT(A) confirming such disallowance. The ground raised by the assessee is accordingly dismissed. 19.2 It is not in dispute before us that the facts in the present Assessment year are identical t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2o09, identical issue came up for consideration before the ITAT wherein the ITAT held as follows '15. Grounds of peal to 18 relates to the order of the CIT(A) in upholding the disallowance of sundry expenses of ₹ 2,24775/- disallowed by the Assessing Officer on account of contribution to local originations 15.1 After hearing both the sides, we find similar issue had come up before the Tribunal in assessee' own case for the A.Ys. 1986-87 to 1989-90. We find the Tribunal vide its consolidated order dated 22nd March, 2007 had decided the issue in favour of the assessee by observing as under: We have considered the rival submissions, perused the materials on record and have gone through the Tribunal judgement relied upon by learned counsel of the assessee. In those years, the Tribunal has decided the issue in favour of the assessee by following the Tribunal judgement in case of Hindustan Petroleum Corporation Ltd. vs. DCIT, 96 ITD186 (Mum). No difference in. facts could be pointed out by learned DR of the revenue and hence, by respectfully following this Tribunal judgement and also judgement of Hon'ble jurisdictional High Court, this issue is decided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year also, the assessee did not file the req1ired evidence to substantiate that these expenses were incurred wholly and exclusively for the purpose of business. In view of the above, do riot find any ground to interfere with the order of CIT(A). Consequently, ground no. 19 is dismissed. 47.6 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue against the assessee and in favour of the revenue. 47.7 As regards ground no.19(f) we have heard the ld DR and ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 24.1 and 24.2 as under: 24.1 From the details of sums involved we find that the following sums are purely compensatory payments: 3. Sales tax penalty (Rewari depot) (Truck moved without challan] 4. Excise and taxation deptt. Punjab (wrong CST not mentioned on dispatch documents.) 5. Sales tax penalty at Faridabad (truck moved without challan) 24.2 We are of the view that item 3, 4 and 5 being purely compensatory in nature they cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd decided this issue in paras 48 to 48.2 as under: 48. Ground nos 20 and 21 raised by the revenue read as under: 20. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s.801/801A of the Income Tax Act without appreciating the fact that head office of the assessee company is a controlling unit which manages the affairs of all units of the company and, therefore, proportionate expenses of the head office are rightly reduced by the Assessing Officer from the profits of the assessee. 21. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow deduction uls.80M of the Income Tax Act on the entire amount of dividend earned without reducing the expenses ignoring the fact that deduction uls.80M is to be allowed on net dividend after deducting related expenses from gross dividend and, inter-alia, ignoring the decision of Calcutta High Court in the case of CIT vs. United India Fire and General Co.Ltd., (161 ITR 295) and also ignoring the fact that the Assessing Officer had reasonably estimated the expenses at ₹ 50 lakhs. 48.1 The CIT(A) thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt material on record. At the outset, we note that this issue is covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of Laxmi Machines Works reported in 290 ITR 667. The Tribunal in assessee's own case for the AY 1995-96 has also considered and decided this issue in para 27.3 to 27.5. 27.3 Ground No. 23 is with regard to excluding excise duty from the total turnover, which deserves to be allowed in view of the decision in the case of Sudarshan Chemical Ltd. 245 ITR 769 (Born). In view of the above, ground No. 23 is allowed. 27.4 In respect of Ground No. 24, the ITAT in AY 1994-95 in assessee's own case (supra) dealt with the similar issue in paragraph 22 to 22.2, which are as follows: 22. Grounds of appeal Nos. 28 and 29 are as under: 28. In the event that the CIT(A)'s order that deduction u/s. 80HHC of the Act is to be computed by considering all units of the appellant as a whole is upheld, then the CIT(A) erred in including inter-unit and inter-divisional transfers of ₹ 338.41 crores as part of total turn over, which results in the same figure being counted as a number of times and hence depriving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and against the revenue. 43. Ground no. 16 is regarding disallowance of interest u/s 36(1). 43.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 52 to 52.4 as under: 52 Ground no.26 raised by the revenue reads as under; 26. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of ₹ 24, 10,56,673/- being the interest liability relating to construction period without appreciating the fact that the said amount represents interest paid by the assessee on loan taken for establishing seven new units before completion of the construction and, therefore, the assessee's claim does not qualify for deduction as revenue expenditure u/s.36(1)(iii) of the I.T. Act. 52.1 The Assessing Officer disallowed the claim of interest of ₹ 24,10,56,673/- being the liability relating to construction period and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), we do not find any merit in the arguments of the revenue. The judgments of the jurisdictional High Court relied upon by the assessee also supports its case. Ground No.8 is rejected. 52.4 Accordingly, respectfully following the order of the Tribunal, we decide this issue in favour of the assessee and against the revenue. 43.2 Therefore, following the earlier orders of this Tribunal, we decide this issue in favour of the assessee and against the revenue. 44. Ground no. 17 is regarding disallowance u/s 40A(3). 44.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 53 to 53.2as under: 53. Ground no.27 raised by the revenue reads as under: 27. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s 40A(3) of ₹ 29,442/- being 20% of cash payments, without justifying that the same falls unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Accordingly, the profit is taxable in India. 54.2 On appeal, the CIT(A) held that the assessee would get the benefit of article 7 of the Indo USA DTAA as the business is being carried out through a PE within the meaning of article 5. 55. Before us, the ld DR has relied upon the order of the Assessing Officer and on the other hand, the ld Sr counsel for the assessee has relied upon the decision of the Hon'ble Supreme Court in the case of Deputy Commissioner of Income-tax v. Torqouise Investment and Finance Ltd. reported in 300 ITR 1 as well as in the case of Union of India v. Azadi Bachao Andolan reported in 263 ITR 706. 56. We have considered the rival contention as well as the relevant material on record. We do not agree with the arguments of the Assessing Officer that the income of the Branch Office of the assessee would be taxable in USA as well as in India when the said Branch Office is treated as PE within the meaning of Article 5 of the Indo-US DTAA. The Assessing Officer has also accepted the proposition that if the transactions are at ALP, then, the benefit of Article 7 of the DTAA is available to the assessee. Accordingly, we do not find any e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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