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TMI Blog2011 (8) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... ADA TRADING CO. (P.) LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, SPL. CIRCLE 18 (1) [ 2006 (1) TMI 465 - ITAT MUMBAI] , where it was viewed that the assessee would not be remediless, if any change or reduction in the amount of interest refund u/s 244A in future; in that eventuality, the assessment can be rectified u/s 154 and therefore, the apprehension and the contention of the assessee was found baseless by the Special Bench. Therefore, respectfully following the decision of the Special Bench of the Tribunal, we do not find any merit or substance in the ground taken by the assessee; accordingly, the same is rejected. However, as observed by the Special Bench, if any change or reduction in the interest, refund to the assessee u/s 244A, the same has to be taken into account u/s 154 - Decision in favour of Assessee. Depreciation of Rollover Charges - Revenue or Capital in Nature? - Assessee s claim for roll over charges was disallowed by the department being capital in nature - HELD THAT:- In view of the decision of the jurisdictional High Court in assessee's own case EDELWEISS CAPITAL LTD., MUMBAI VERSUS INCOME TAX OFFICER 3 (1) (1) , MUMBAI 2012 (10) TMI 223 - I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets not owned - Revenue or Capital Expenditure? - HELD THAT:- Since this is a consequential relief sought by the assessee in case the expenditure incurred on the assets not owned by the assessee claimed as revenue expenditure but such expenditure has already been held by the Tribunal in AY 1995- 96 as capital in nature. -Decision in favour of Assessee. Interest Expenses for period prior to commencement of business - Deduction u/s 36(1)(iii) - Assessee claimed amount being interest paid on capital borrowed funds for its new project. Assessee capitalized and showed the interest under capital work-in progress in the books of account; however, has claimed as deductible revenue expenditure in computing the profits and gains of business u/s 36(1)(iii) - HELD THAT:- We find that the facts of this issue are para-material to Assessment Year 1995- 96. Since the Tribunal has adjudicated the issue after considering all the decisions including the decision of the jurisdictional High Court in the case of Tata Chemicals Ltd reported in 256 ITR 395, where it was held that, The only requirement of the sec. 36(1) is that the capital should be borrowed for the purpose of business and the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ld CIT(A) has erred in confirming ₹ 28,095/- worked out by appellant based on revised working excluding roll over charges allowed by ITAT as revenue expenditure in Assessment Year 1987-88. The Assessing Officer be directed to allow the revised amount of depreciation of R. 28,095/- on roll over charges and to reduce the total income accordingly. 4. On the facts and in the circumstances of the case and in law, the AO has erred in making the disallowance of ₹ 29,74,188/- u/s 40A(9) being expenditure incurred on payment made to schools at Veraval and Malkhed wherein children of the employees of the appellant company are studying and ld CIT(A) has erred in confirming the disallowance. The Assessing Officer be directed to allow the expenditure of ₹ 29,74,188-and to reduce the total income accordingly. 5. On the facts and in the circumstances of the case and in law, the Assessing Officer has erred in reducing the claim of deduction u/s 35D from ₹ 1,21,22,566/- to ₹ 11,39,989 on the ground that tax is not deducted at source on an amount of ₹ 10,98,25,771/- and ld CIT(A) has erred in confirming the action of the Assessing Officer. The Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel has pointed out that in the earlier years for AY 1992-93 to 1995-96, the Tribunal restored back the issue to the record of the AO. He has further submitted that the AO has allowed the claim of the assessee in the order giving effect for the AY 1992-93 to 1995-96. On the other hand, the ld DR has relied upon the orders of the lower authorities. 5. At the outset, we note that a similar issue came before the Tribunal for AY 1994-95 and vide order dated 31.7.2008, the issue of disallowance on account of rural development expenses was restored to the record of the AO. The AO in the order giving effect dated 19.2.2009 allowed the claim of the assessee. Accordingly, the claim of the assessee for the AY under consideration is also to be allowed, if the claim is identical on the facts as it was in the earlier years. Accordingly, we restored this issue to the record of the AO for limited purposes to verify, if the facts in respect of the claim of rural development expenses are identical as to the earlier years, then the same shall be allowed. 6. Ground no.2 is regarding the disallowance of ₹ 20,54,935/- being interest u/s 244A of the Act. 6.1 The assessee has received i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tifiable under section 154 of the Act. In our opinion, if the basis, on which income was assessed is varied or ceases to exist, then such assessment would become erroneous and can be rectified. This can be explained with an exampi.e. For instance, land in a village belonging to various persons is acquired by Government for some development works and the compensation is awarded by the Collector with interest, if any. But one of the land holders challenges the acquisition proceedings in the High Court and later on succeeds as the acquisition is declared illegal. By virtue of such High Court order, such compensation has to be returned and Government will have to restore the land to the villagers. Therefore, if capital gain has been assessed in the hands of some of the persons where lands were acquired, such assessment would become patently erroneous, as the basis itself has ceased to exist. Such assessment would, therefore, amount to mistake, which, in our opinion, can be rectified. Similarly, any income assessed may become non-taxable by virtue of retrospective amendment and consequently, erroneous assessment can be rectified. Therefore, in our humble opinion, if the interest granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicating the appeal of the revenue. The Hon ble High Court in para 5 of its order has held as under: 5 During the course of the hearing of the appeal, the attention of the Court has been drawn to the judgment of the Supreme Court in ACIT, Vadodara v Elecon Engineering Co Ltd. It is common ground between counsel appearing on behalf of the Revenue and counsel appearing on behalf of the assessee that the assessee had pad a sum of ₹ 6.89 lacs to the bank as roll over charges for repayment of the principal amount of foreign exchange loans taken for capital investments in its High Tech division. This statement of fact also appears in the original order of assessment dated 30 th March 1994, pertaining to Assessment Year 1991-92. In view of the factual position, the issue would be covered against the assessee by the judgment of the Supreme Court in the case of Elecon Engineer. This position is fairly not disputed on behalf of the assessee. In view of the aforesaid position, the contention of the revenue in so far as this ground is concerned would have to be accepted and the appeal would have to be allowed to that extent. The question of law raised in question G is accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r towards setting up or formation of or as contribution to any fund/ trust, company, association of persons, body of individuals, society registered under the Societies Registration Act or other institution for any purpose except wheresum is so paid for the purposes and to the extent provided for under clause (iv) or clause (v) of sub section (1) of section 36 or as required by or under any other law for the time being in force. The assessee argued that provisions of section 40A(9) were not applicable and the expenditure was allowable as revenue expenditure under section 37(1). CIT(A) however following the decision in assessment year 1994-95 confirmed the disallowance. Aggrieved by the said decision the assessee is in appeal. 2.9.1 We have heard both the parties in the matter. We find that the same issue had been considered by the tribunal in assessee s own case in assessment year 1994-95 in ITA No.2326/M/2001. In that year also disallowance had been made under section 40A(9) in respect of payments made to Indrayan School. The tribunal however following the decision in A.Y.1992-93 and 1993-94 allowed the claim. Facts this year are identical. Therefore following the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed is allowable as revenue expenses in the eyar in which it is incurred, as it is held by Hon ble ITAT in AY 1995-96 that such expenditure is capital in nature the appellant claims that expenditure he added to the cost of fixed ass and depreciation on the same be allowed. The Assessing Officer be directed to allow the claim consequential depreciation on the said expenditure of ₹ 9,96,08,1334 (8,49,13,250 and ₹ 1,19,94,884 and reduce the total income accordingly. 26.1 The assessee has also filed additional evidences in the shape of copy of sales tax exemption scheme and copy of exemption certificate (eligibility certificate) in support of the additional ground no.1. The assessee has also filed a letter dated 24.8.2007 for admission of the additional evidences. 27. We have heard the ld senior counsel of the assessee as well as ld DR and considered the relevant material on records. The additional ground no.1 regarding the taxability of sales tax exemption benefit availed by the assessee, though, has been raised by the assessee for the first time before us; however, the same issue was already considered and decided by the Tribunal in assessee s own case for AY 1995- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the AO as the same was included in the total sale figure of ₹ 928.36 crores. This claim of the assessee has not been controverted before us by the revenue. Therefore the fact that the assessee had availed sales tax exemption which had been shown as part of the sales was already on record before the lower authorities. In view of the decision of the Special Bench of the tribunal in case of DCIT Vs Reliance Industries Ltd. (supra) which held that sales tax subsidy granted by the State Government was of the nature of capital receipt and could not be taxed, a legal question does arise in case of the assessee whether the sales tax exemption received by the assessee from the U.P.Government was taxable or not. Such question has a direct bearing on computation of tax liability of the assessee. Therefore in our view the legal question raised by the assessee as an additional ground has to be admitted. The adjudicatability of the ground is different from the admissibility of additional ground. In case, for adjudicating a ground already admitted, some more material is required the tribunal can always restore the issue to the file of AO for passing a fresh order after considering al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered under section 35D. Since the expenditure has already been allowed on pro rata basis over a 9 year period the ground raised by the assessee has become infructuous and the same is dismissed as infructuous. Accordingly, we restore this additional ground no.2 to the record of the Assessing Officer to examine and decide the same as per law. ITA No.6762/M/003 (by the revenue) 30. The revenue has raised only ground as under: On the facts and circumstances of the case and in law, the ld CIT(A) erred in holding that interest expenses for the period prior to commencement of business, amounting to ₹ 37,60,46,864/- attributable to borrowing utilized for creating fixed assets in a new line of business was deductible u/ 36(1)(iii) of the I T act. 30.1 The assessee claimed a sum of ₹ 37,60,46,864/- being interest paid on capital borrowed funds for its new project/expansion namely white cement JST(Flax), JST (RCM),JSI (Halol), Birla Periclase (Magnesia), Rajasheee Syntex (Yarn) and Rayon Caustic) etc. The assessee capitalized and shown the interest under capital work-in progress in the books of account; however, has claimed as deductible revenue ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances are identical for the AY under consideration to the AY 1995-96. He has further submitted that the CIT(A) has adjudicated the issue after considering the various decisions of the Supreme Court, High Courts as well as the Tribunal. 31.3 He has relied upon the decision of the Hon ble Supreme Court in the case of DCIT vs Core Health Care Ltd reported in 298 ITR 194 and submitted that when the assessee borrowed capital for the business, which is carried on by the assessee, the interest is allowable. He has also relied upon the decision of the Hon ble Supreme Court in the case of Waterfall Estate Ltd vc CIT reported in 219 ITR 563 and submitted that various projects/divisions are set up at different places and at different point of time as well as managed by local units; however, controlled by the Head office of all the division/projects then, it will be considered as expansion of the business, and not setting up of the new business. He has further submitted that identical issue has been adjudicated and decided by the Tribunal in assessee s own case for AY 1995-96. 32. We have heard the rival contentions and perused the relevant material on record. At the ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case we find that all the units are under the direct control and supervision of the board of directors and thus have a common business administration. Though the employees and funds are separately allocated for different units they are depended upon the head office for raising of funds and employees are transferable from one unit or another. There is also intertransfer of funds. There is centralized finance sell for looking after accounts, finance, funds management, information, secretarial matters and taxation matters for all the unit. Though separate profit and loss account and balance sheets are prepared for different units, these are only to ensure compliance with local laws and for claim of deduction under section 80IA/ 80HHC etc which are separately allowable in respect of each unit. Similar situation has already been considered by the tribunal in case of Grasim Industries Ltd. (64 TTJ 357). In that case the assessee was producing viscose staple fibre, rayon, caustic soda, cement, textiles, heavy engineering machinery and chemicals. The assessee had raised funds for setting up of two cement units at Raipur and Shambupura and steel unit at Vikramspat Salav. The tribunal he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant on roll over charges and ld CIT(A) has erred in confirming Rs, 17,267/- as revenue expenditure. The Assessing Officer be directed to allow the revised amount of depreciation of ₹ 17,267/- on roll over charges and to reduce the total income accordingly. 3. On the facts and in the circumstances of the case and in law, the AO has erred in making the disallowance of ₹ 23,48,193/- u/s 40A(9) being expenditure incurred on payment made to schools at Veraval and Malkhed wherein children of the employees of the appellant company are studying and ld CIT(A) has erred in confirming the disallowance. The Assessing Officer be directed to allow the expenditure of ₹ 23,438,193/-and to reduce the total income accordingly. 4. Without prejudice to the claim of the appellant that the debenture issue expenditure incurred by the appellant during the previous years relevant to AY 1988-89 and 1989-90 is revenue expenditure, it is held in those years that the said expenditure is not revenue expenditure, the appellant claims that the expenditure be capitalized to the actual cost of fixed assets and deprecation be allowed on the same accordingly. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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