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TMI Blog2016 (5) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed 20 per cent. with regard to advertisement, sales promotion and product development expenses under section 37(1) for the assessment year 2004-05 for the inability of the assessee to provide direct evidence to establish that these expenses wholly and exclusively incurred for the purpose of business. We find that the disallowance has been restricted to 20 per cent. without any rhyme and reason. Therefore, the disallowance of expenses is not apparently clear. Under these circumstances, in the interest of justice and fairness, we feel it deem and proper to restrict the disallowance to 5 per cent. of the above disallowances made by the authorities below. We, accordingly, set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to restrict the disallowance to 5 per cent. only - Decided in favour of assessee partly Denial of benefit of MAT under clause (vii) of section 115JB on the ground that the assessee has himself paid MAT - Held that:- This issue squarely covered by the decision of the Income-tax Appellate Tribunal Cuttack Bench in the assessee's own case for the assessment year 2005-06 wherein, it has been held that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partake of the character of payment intended either directly or indirectly to meet the actual cost of the assets. Therefore, the question of not including in the written down value of the Central Government investment subsidy of ₹ 15,00,000 does not arise. The assessee further stated that the Department in the past has made no objection with regard to this issue. The Assessing Officer examined this issue from the point of view of the applicability of Explanation 10 to section 43(1) and observed that any kind of subsidy received should have been reduced from the cost of capital asset while computing depreciation and since the assessee had not done so it was examined whether this deduction can be done now. The first question which the Assessing Officer brought out in his order is what should be the treatment of an amount received as a subsidy or grant or contribution of capital nature and to this aspect, the Assessing Officer brought Explanation 10 to the definition of actual cost under section 43(1), which provides that where a portion of the cost of an asset is met directly or indirectly by the Central Government or the State Government, or any authority established unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the hon'ble Supreme Court in the case of CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC). The learned Commissioner of Income-tax (Appeals) noted that the decision of the hon'ble Supreme Court was pronounced on September 14, 1994, and Explanation 10 to section 43(1) was inserted with effect from April 1, 1999. Since the decision relates to a prior period before the amendment of the Act, the ratio of the decision of the hon'ble Supreme Court in the case of CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC) will not be applicable in view of the specific amendment by insertion of Explanation 10 to section 43(1) of the Act. In view of this, the learned Commissioner of Income-tax (Appeals) upheld the disallowance in regard to excess claim of depreciation made by the Assessing Officer. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the assessee is in further appeals before us. 6. At the time of hearing, learned counsel for the assessee reiterated the submissions made before the authorities below and stated that the issue is squarely covered by the decision of the hon'ble Supreme Court in the case of CIT v. P. J. Chemicals Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the 'actual cost' we should prefer the reasoning of the majority of the High Courts to the one found acceptable by the High Court of Punjab and Haryana (paragraph H at page 841 of the Report). This case was dealing with the law as it existed in the assessment year 1983-84. On the basis of the provisions in the statute book prior to the introduction of the Explanation with effect from the assessment year 1999- 2000. In the instant case now under appeal subsidy was first received from the year 1987-88 relevant to the assessment year 1988-89 that is when the amendment had not come in force. The decision in CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC) also relates to an assessment year prior to the coming into effect of the Explanation. But the decision relate to the year 1987-88 when the assessee first received the subsidy. Thus the aforesaid decision in CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC) is fully applicable to the year under the consideration in this appeal. The learned authorised representative contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) ₹ 1,56,431 towards share maintenance expenses. (iii) ₹ 2,61,386 towards miscellaneous expenses. 10. In ground No. 5 for the assessment year 2005-06, the assessee has objected to the confirmation of disallowance of expenses as under : (i) ₹ 1,17,783 towards share maintenance expenses. (ii) ₹ 2,35,613 towards miscellaneous donation. 10.1 Since the issue common to both the assessment years, they are disposed as under : 11. Facts are that the Assessing Officer noticed that during the year 2004-05, the assessee has debited the profit and loss account with an amount of ₹ 9,25,611 under the head advertisement, sales promotion and product development . During the course of the assessment proceedings, the assessee was asked to furnish the details of advertisement, sales promotion and product development expenses. In response, the assessee submitted the ledger account of this expenditure. On examination of the ledger account, the Assessing Officer noticed that several expenses are related to gifts, dinner charges, diaries, entertainment expenses and so on. The assessee was asked to establish the fact that the expenditure was incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 37(1) for the assessment year 2004-05 for the inability of the assessee to provide direct evidence to establish that these expenses wholly and exclusively incurred for the purpose of business. We find that the disallowance has been restricted to 20 per cent. without any rhyme and reason. Therefore, the disallowance of expenses is not apparently clear. Under these circumstances, in the interest of justice and fairness, we feel it deem and proper to restrict the disallowance to 5 per cent. of the above disallowances made by the authorities below. We, accordingly, set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to restrict the disallowance to 5 per cent. only. Ground No. 4 for the assessment year 2004-05 and ground No. 5 for the assessment year 2005-06 is partly allowed. 15. Ground No. 4 for the assessment year 2007-08 relates to denial of benefit of MAT under clause (vii) of section 115JB on the ground that the assessee has himself paid MAT. 16. Facts are revealed from the order of the learned Commissioner of Income-tax (Appeals) is that the assessee states that the determination of MAT profit at ₹ 5,47,03,040 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative submitted that the matter regarding BIFR has been considered by the learned Commissioner of Income-tax in his order under section 263 dated March 31, 2010, for the assessment year 2005-06, which was a subject matter of appeal before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal has held that the assessee is not liable to be taxed under section 115JB and quashed the order under section 263. A copy of the said order of the Tribunal is filed by the assessee in the paper book before us. Therefore, the matter regarding taxability of MAT is a covered matter in favour of the assessee, vide order dated April 4, 2011 (supra). The learned authorised representative also submitted that the Department is not authorised in law to take the advantage of the ignorance or mistake of the assessee and collect tax offered which is not legally payable. For the proposition, the learned authorised representative relied on the following judicial pronouncements : (i) Unichem Laboratories Ltd. v. Collector of Central Excise [2002] 145 ELT 502 (SC)-The Assessing Officer cannot assess an amount which is not taxable in law. (ii) Deputy CIT v. Justice Dilip Kumar Seth [2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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