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TMI Blog2016 (9) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the aforesaid judgment was rendered when Section 35D was not on the statute book and this provision had altered the legal position, the High Court still chose to follow the said judgment. It is here where the High Court went wrong as the instant case is to be decided keeping in view the provisions of Section 35D of the Act. In any case, it warrants repetition that in the instant case under the very same provisions benefit is allowed for the first two Assessment Years and, therefore, it could not have been denied in the subsequent block period. We, thus, answer question No. 1 in favour of the assessee holding that the assessee was entitled to the benefit of Section 35D for the Assessments Years in question. Deduction for payment of bonus by the assessee to its employees - Whether deduction on account of payment of bonus to the employees of the assessee is not eligible under Section 36 of the Act, as it is hit by Section 40A(9) of the Act? - Held that:- The amount paid by way of bonus is one such expenditure which is allowable under clause (ii) of sub-section (1) of Section 36. There is no dispute that this amount was paid by the assessee to its employees within the stipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imarily due to improvements in the process sdeveloped inhouse, resulting in a significant reduction in the batch processing time. The additional plant and machinery required to support the increase in capacity would include additional raw material storage facilities, chilling plant and laboratory facilities aggregating to ₹ 95 lakhs. (2) Ranitidine Expansion: The installed capacity of the Ranitidine plant at Cuddalore is proposed to be increased from 60 tpa to 180 tpa in two phases. In the first phase, the capacity is proposed to be increased to 120 tpa by installation of additional plant and machinery. The cost of this phase, including construction of a modern administration block at Cuddalore, is estimated at ₹ 286 lakhs. 6. The assessee incurred a sum of ₹ 45,51,890/- towards the aforesaid share issue expenses and claimed 1/10th of the aforesaid share issue expenses each year under Section 35D of the Act from the Assessment Years 1995-96 to 2004-05. The Assessing Officer on the same set of facts allowed the claim of the assessee (1/10th of the share issue expenses under Section 35D of the Act) for the initial Assessment Year being the Assessment Year 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis that the expenditure is capital in nature relying on Brook Bond India Ltd. case (supra) 10. In the aforesaid backdrop, the assessee again claimed amortization of expenditure under Section 35D of the Act for the Assessment Year 2001-02 which was disallowed for the same reason. However, the assessee's appeal before the CIT (A) succeeded as CIT(A) allowed that expenditure. The order of CIT(A) was affirmed by the Income Tax Appellate Tribunal (hereinafter referred to as ITAT )as well. However, the High Court has reversed the order of the ITAT thereby reinstating the view taken by the Assessing Officer and disallowed the amortization of the expenditure under Section 35D of the Act. 11. Insofar as claim of bonus is concerned, in the return filed by the assessee for the Assessment Year 2001-02 it was mentioned by the assessee that it had paid bonus to its employees to the tune of ₹ 96,08,002/- in the said Financial Year and, therefore, it claimed deduction under Section 35(2AB) of the Act. However, invoking the provisions of Section 40A(9) of the Act the said expenditure is disallowed on the ground that it was not paid in cash to the concerned employees. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l verification of the factory premises. He was satisfied that there was expansion of the facilities to the industrial undertaking of the assesseee. It is on this satisfaction that for the Assessment Year 1996-97 also the expenses were allowed. Once, this position is accepted and the clock had started running in favour of the assessee, it had to complete the entire period of 10 years and benefit granted in first two years could not have been denied in the subsequent years as the block period was 10 years starting from the Assessment Year 1995-96 to Assessment Year 2004-05. The High Court, however, disallowed the same following the judgment of this Court in the case of Brook Bond India Ltd (supra). In the said case it was held that the expenditure incurred on public issue for the purpose of expansion of the company is a capital expenditure. However, in spite of the argument raised to the effect that the aforesaid judgment was rendered when Section 35D was not on the statute book and this provision had altered the legal position, the High Court still chose to follow the said judgment. It is here where the High Court went wrong as the instant case is to be decided keeping in view the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the income referred to in section 28- (i) .... (ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission. 16. Section 43B, however, mandates that certain deductions would be allowed only on actual payment. This provisions, which is relevant for our purpose reads as under: 43B. Certain deductions to be only on actual payment 4 Notwithstanding anything contained in any other provision of this Act, a deduction other- wise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or] (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or] (c) any sum referred to in clause (ii) of sub- section (1) of section 36,] or] (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State indu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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