9911796707
TMI Blog2016 (9) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... 1780 of 2008 30.04.2008 3054/Ahd/2007 2002-03 1.1 Since the matters challenged a common order, we have taken up these matters for hearing together and they are being disposed of by way of this common judgement and order. We propose to discuss each appeal one by one. TAX APPEAL NO. 1773 OF 2008 2. The following question of law was raised for consideration by this Court: Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the CIT(A), allowing the prior period expenses of Rs. 4,63,09,000/- paid in respect of earlier years even though the assessee followed mercantile system of accounting? 2.1 By the impugned order, the Tribunal has dismissed the appeal filed by the revenue against the order of CIT(A) whereby he had deleted the disallowance of Rs. 4,63,09,000/- being the expenses pertaining to earlier years. The Assessing Officer while perusing the profit and loss account found that the assessee had debited expenses relating to previous year. The assessee had claimed that these items were ascertained/quantified during the current year but the Assessing Officer held that since the assessee followed mercan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53 or in the assessment year corresponding to the accounting year 1952, that is in the assessment year 1953-54, should be a matter of no consequence to the Department; and one should have thought that the Department would not fritter away its energies in fighting matters of this kind. But, obviously, judging from the references that come up to us every now and then, the Department appears to delight in raising points of this character which do not affect the taxability of the assessee or the tax that the Department is likely to collect from him whether in one year or the other. 4. The point raised for determination turns on the words used in section 10, sub-section (2), clause (x), which allows a deduction in respect of bonus and section 10(5). Now, in section 10(2)(x), what is allowable as a deduction is "any sum paid to an employee as bonus". By itself this contemplates actual payment; but section 10(5) defines the word "paid" which appears in sub-section (2) as meaning "actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under this section". Therefore, an actual payment is not necessary for the purpose of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. In our opinion, the amount was rightly allowable in the assessment year 1952-53 and the Tribunal came to the correct conclusion." 3. In the above view of the matter, no elaborate reasons are required to be given as the controversy already stands concluded. It is amply clear that the only dispute is with regard to the year in which the amount should be allowed. We agree with the view adopted by the Tribunal and accordingly the question raised is answered in favour of assessee and against the revenue. Tax Appeal No. 1773 of 2008 is accordingly dismissed. TAX APPEAL NO. 1774 OF 2008 4. The following question of law was raised for consideration by this Court: (A) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in deleting the disallowance of Rs. 26,57,00,000/- by holding that the sales Tax exemption granted by the Government of Gujarat is capital receipt - exempt from tax instead of revenue receipt as treated by the Assessing Officer? (B) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in allowing deduction of Rs. 1,53,66,656/- being contribution made to various organizations witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as claimed by the assessee. The Tribunal also allowed deduction u/s 80HHC while computing the book profit u/s 115JA. 4.3 Mr. Parikh, learned advocate for the revenue submitted that though the assessee was granted exemption of payment of sales tax liability by the State, it did not mean that the receipt had undergone the change in the nature of receipt. He submitted that sales tax exemption was only an incentive and therefore the Tribunal has erred in deleting the disallowance. He submitted that the Tribunal erred in not considering the fact that the contributions made by the assessee to various organisations are in the form of donations and not connected with the business obligations. He submitted that the expenditure in form of payment to GEB and MECON(I) Ltd. was of capital nature and since the assessee itself had capitalized the same in its books of account, there was no question of allowing the same as revenue expenditure. He submitted that the assessee had no taxable income under the normal provisions of the Income Tax Act and therefore the claim of deductionu/s 80HHC of the Act was not allowable. 4.4 Mr. Soparkar, learned Counsel appearing for the assessee submitted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of boilers taken on lease from M/s ICICI / Ms ICICI Securities and Finance Co. Ltd. (I-SEC) without appreciating that the assets sold were never physically transferred to the buyers and the transactions of sale and lease back were merely on paper and it was actually in the nature of finance transaction and what is allowable is only interest and sales tax and not repayment of principal amount of loan? (B) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the CIT(A) deleting the disallowance of Rs. 120344127/- on account of deduction u/S.36(1)(iii) claimed by the assessee, without appreciating that the assessee itself had capitalized the said expenses in its books of account and treated the same as part of actual cost of assets? (C) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the expenditure of Rs. 21.96 crores, capitalized by the assessee in its books of account as revenue expenditure instead of treating the same as capital expenditure by the Assessing Officer? (D) Whether, on the facts and in the circumstances of the case, the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and their families. The CIT(A) deleted the disallowance by observing that the expenditure included payment to regional office clubs and mainly to sports boards and officer's and ladies club, a theatre society and education society and thus such payments were in the nature of staff welfare. The Tribunal upheld the order of CIT(A). 6.5 The Tribunal also upheld the decision of CIT(A) allowing the provision for doubtful debts while computation of book profit u/s 115JA of the Act deleting the addition made by the Assessing Officer. 6.6 Mr. Parikh, learned advocate for the revenue submitted that the Tribunal has erred in confirming the orders passed by the CIT(A) and thereby deleting the additions and/or disallowance made by the Assessing Officer. 6.7 Mr. Soparkar, learned Counsel appearing for the assessee submitted that so far as issue no. 1 is concerned, the Tribunal deleted the disallowance following the decision of the Tribunal in the assessee's own case for the assessment years 1995-96 and 1996-97. The said decisions of the Tribunal came to be confirmed by this Court vide Tax Appeals No. 236 and 237 of 2001 and therefore the said issue stands concluded in favour of assessee. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Section 36(1)(iii). Thus, the decision of the Bombay High Court in Calico Dyeing & Printing Works (supra) and the judgment of the Supreme Court India Cements Ltd. (supra) have been given with reference to the borrowings made for the purposes of a running business, while the decision of the Supreme Court in Challapalli Sugars Ltd. (supra) was given with reference to the borrowings which could not be treated as made for the purposes of business as no business had commenced in that case. Therefore, there is no inconsistency between the above decisions." 7.2 In the aforesaid case, the Apex Court has observed that the Legislature has made no distinction in Section 36(1)(iii) between 'capital borrowed for a revenue purpose' and capital borrowed for capital purpose' and an assessee is entitled to claim interest paid on borrowed capital provided that capital is used for business purpose irrespective of what may be result of using such borrowed capital. This answers the question raised in the present appeal and therefore question (B) is accordingly answered in favour of assessee. 7.3 So far as issue no. 3 is concerned, the same has already been concluded by question no. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and advances or the debtors from the assets side of the balance sheet, the Explanation to Section 115JA and JB is not at all attracted. Therefore, after the Explanation the assessee is now required not only to debit the P and L account but simultaneously also reduce the loans and advances or the debtors from the assets side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is -5- shown as net of the provisions for the impugned bad debt. This Court in the case of THE COMMISSIONER OF INCOME TAX VS. M/S. JUPITER BIO-SCIENCE LTD., vide dated 3.8.2011 reported in 353 ITR 113 has held the assessee is liable to pay advance tax as per the amended provisions of Section 115JB of the Act for the relevant period. However, he is not liable to pay interest on the amount due as per the amended provisions. However, he has not paid the advance tax as per the provisions existing prior to the amendment. Hence, he is liable to pay interest on the said amount deducting the difference of the tax paid. The Apex Court in the case of BHARAT EARTH MOVERS VS. COMMISSIONER OF INCOME TAX REPORTED IN (2000) 245 ITR 428 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the Appellate Tribunal was right in allowing the expenditure of Rs. 1473.84 lacs being payment to GAIL and expenditure on cell membranes as 'revenue expenditure' instead of treating the same as 'capital expenditure' by the Assessing Officer ? [D] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in allowing deduction u/s. 80HHC while computing the book profit u/s. 115JB without appreciating that the assessee has no taxable income under normal provisions of the Act and no deduction u/s. 80HHC was allowed, and hence the assessee is not eligible for deduction u/s. 80HHC while computing the book profit u/s. 115 JB of the Act ? [E] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in allowing the expenditure of Rs. 1214.12 lacs being payment to L&T as 'revenue expenditure' instead of treating the same as 'capital expenditure' by the Assessing Officer ? 11.1 The assessee had claimed sales tax exemption granted by Govt. of Gujarat as capital receipt exempt from tax. The Assessing Officer disallowed the claim of the assesee which was confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture' by the Assessing Officer ? [B] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the order of the CIT (A) deleting the disallowance of Rs. 1,70,90,808/= in respect of boiler taken on lease from M/s. ICICI / M/s. ICICI Securities & Finance Co. Limited [I-SEC], without appreciating that the assets sold were never physically transferred to the buyers and the transactions of sale and lease back were merely on paper and it was actually in the nature of finance transaction and what is allowable is only interest and sales-tax and not repayment of principal amount of loan ? [C] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the order of the CIT (A) deleting the addition of Rs. 36,27,823/- u/s. 40A (9) of the Act on account of contribution to staff welfare institutions without appreciating that the contributions made to staff welfare institutions are expressly hit by the provisions of Section 40A (9) of the Act ? [D] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the order of the CIT (A) deleting the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the figure of unascertained liability of provision for doubtful debts? 14. This sole question raised in the present appeal has already become academic and therefore is not being answered by us. Appeal therefore stands disposed of accordingly. TAX APPEAL NO. 1779 OF 2008 15. The following questions of law were raised for consideration by this Court: [A] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in allowing the expenditure of Rs. 1094.91 lacs on the installation/replacement of Cell Membrane of Cholr Alkai Plant as 'revenue expenditure' instead of treating the same as 'capital expenditure' by the Assessing Officer ? [B] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding that order of the CIT (A) deleting the disallowance of Rs. 16520287/= in respect of boilers taken on lease from Messrs. ICICI / Messrs. ICICI Securities & Finance Company Limited [I-SEC], without appreciating that the assets sold were never physically transferred to the buyers and the transactions of sale and lease back were merely on paper and it was actually in the nature of finance tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
