9911796707
TMI Blog2006 (6) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... d a deduction under section 43B of the Act towards payment of ₹ 2.50 Crores on the basis of copy of challan enclosed with the return. As per Challan, the amount was deposited under the head Miscellaneous and further it was narrated in the challan that, deposit is being made under Protest in pursuance of Investigations being carried out by DGAE, New Delhi. In the circumstances of the case when the DOAE, New Delhi raised the demand during the financial year, printed booklet was printed on 26-6-1998. The assessee company had deposited the amount of ₹ 2.50 Crores under Protest which has been shown in the balance sheet as Advance . As per order of DOAE, New Delhi, the assessee company has deposited the alleged amount of ₹ 2.50 Crores under Protest. The Tribunal (CEGAT) set aside the order passed by the DOAE. The assessee claimed the advance so paid under protest as deductible expenses under section 43B of the Act treating the same as regular Excise duty payment. The Assessing Officer did not accept the Explanation of the assessee and the Assessing Officer was of the view that the assessee has made the payment on 14-3-1998 during the relevant financial year but the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice of DG, Anti Evasion, New Delhi was set aside. The Department s Civil appeal against this order vide No. D-8526/2001 was later on dismissed by the Supreme Court by their order dated 10-9-2001. This payment of ₹ 2.5 Crores was then adjusted by the Department against the regular liability of excise duty on manufacturing of goods by the appellant for the year in which it was refunded. Therefore, this payment is certainly not of any accrued/determined liability and it is only an advance payment/deposit made during the accounting period. The Assessing Officer was thus justified in not considering it as a determined/accrued liability and not allowing it on payment basis under section 43B of the Income-tax Act. This disallowance is therefore, confirmed. 5. The ld. Counsel for the assessee argued that the payment of ₹ 2.50 crores made on 19-3-1998 is an allowable expenditure under section 43B, though the said demand raised had been held to be invalid and quashed by the Supreme Court vide civil Appeal No. D/8526 of 2001 dated September 10, 2001. In such a situation the amount can be brought to tax under section 41(1) when the liability ceased. He has relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ridges containing blades etc. in their factories conforming strictly to the drawings, specifications and instructions provided by the assessee. For this purpose assesses was required to supply packing and materials like labels, cartoons, boxes etc. and the ownership of these material given to job workers would remain with the assessee and the job workers were required to submit them a inventory statement relating to stock of materials regularly and assessee was entitled to inspect the factory premises of the job workers at any time to verify the stock of materials supplied by them and also to check the quality and specification of the final products manufactured by the job workers. In consideration of the job work, done by the job workers, the assessee paid job charges worked out on the basis of 1000 units of the products manufactured by job workers and the Central Excise duty payable on them by job workers. At the time of clearance of finished goods the job workers pay central excise duty at a price based on the value of the components, parts and packaging materials supplied by the assessee company plus job charges including profit margin of the job workers. 8. Show cause notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no justification for adopting the method of valuation provided under rule 6(b)(ii ) of the Central Excise Valuation Rules, 1975 because the goods were not consumed captively. The price of the goods was very well known when it was entered the market stream and the same represented the intrinsic value of the goods in which all the considerations have been entered. (These facts had been taken from the Civil Appeal Order No. D/8526/2001 dated 10-9-2001 of Hon ble Supreme Court of India where civil appeal filed by Central Excise Department, New Delhi was dismissed). Ultimately, dismissing the said civil appeal the Hon ble Supreme Court had given a finding as under : In view of our findings, we find no reason for upholding any duty as confirmed by the ld. Commissioner and do not approve appropriation made of amounts paid voluntary or otherwise. We cannot find any reason of cause to invoke penalty clauses as are being determined in this impugned order before us. The same was, therefore, required to be set aside. In view of our findings we would set aside the order of demand of duty and or appropriation of the amounts and penalties as imposed, and would remit the cases of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (Sales Tax) Act, 1941, and the rules framed thereunder there is an obligation on the part of every registered dealer (and one has to be a registered dealer if his sales are beyond a certain limit) to pay tax on all sales in certain specified manner. The liability to pay sales tax is not dependent upon assessment or demand but is an obligation to pay the tax either annually, quarterly or monthly, as the case may be, under the particular rule guiding the particular dealer. 12. By reading the above decision, it is very clear that the assessee had made the sales during the year and actual liability under the Bengal Finance (Sales Tax) Act, 1941 had arisen on the assessee, for which the assessee made a provision in its books of account. Though the said actual liability was not paid by the assessee in that case and the Hon ble Calcutta High Court in that case had held that such liability to pay sales tax is not dependent upon the assessment or demand but is an obligation to pay the tax either annually, quarterly or monthly as the case may be under the particular rule guiding the particular dealer. This decision of Hon ble Calcutta High Court, in fact, goes against the assessee, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me on the ground that the liability to pay these amounts had been incurred by them in the relevant previous year, it was to stop this mischief that section 43B was inserted (Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677, 682-831 (SC). The relevant part of the decision of the Apex Court in the case of Allied Motors (P.) Ltd. (supra) is as under: However, any sum payable in clause (a ) of section 43B was open to the interpretation that the amount payable in a particular year should also be statutorily payable under the relevant statute in the same year. Explanation 2 was, therefore, added by the Finance Act, 1989, with retrospective effect from April 1, 1984, for the purpose of removing any ambiguity about the term any sum payable under clause (a) of section 43B . 15. It appears that the assessee has made the payment of ₹ 2.50 crores to the excise department only on the issue of show cause notice dated 2-1-1998. What amount has been mentioned in the show cause notice has not been put in record by either parties. Show cause notices dated 3-4-1998 and 4-5-1998 were also issued has been gathered by us from the record available before us. Therefore, no order till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Indian Smelting Refining Co. Ltd. (supra) where the facts of the case and the decision of the Apex Court is as under : The assessee company engaged in the manufacture of ingots, billets and castings, was liable to pay excise duty on its products which it was paying regularly. For the assessment year 1980-81, the excise authorities felt that the excise duty paid by the assessee had not been correctly calculated. Accordingly, three show cause notices were issued asking the assessee to show cause as to why demand should not be made for payment of ₹ 90,22,783. The assessee did not admit any liability and showed cause accordingly. No adjudication was made during the relevant previous year nor any demand was raised against the assessee. The adjudication was made much later in December, 1982, when the cause shown by the assessee was accepted and the proceedings initiated by the above three show cause notices were dropped. However, the assessee made a provision for a sum of ₹ 90,22,800 in its accounts of the accounting year 1979 itself on the basis of the show cause notices and claimed deduction in respect thereof in the computation of its income The ITO allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies cannot be said that the assessee had made the payment for the statutory liability on the assessee for the impugned year. The said payment is therefore cannot be allowed as a deduction under section 43B of the Act. The assessee had argued that entries in the books of account are not determinative of profit loss of the assessee and he has relied upon the decisions in the following cases: 1.State Bank of India v. CIT [1986] 157 ITR 67 1 (SC) 2.CIT v. Mughal Lines Ltd. [1962] 46 ITR 590 (Bom.) We have considered the reliance placed by the ld. Counsel for the assessee but as discussed earlier and we have upheld the decision of lower authorities that the assessee has not incurred any liability during the year or in the earlier years, therefore, the said payment of ₹ 2.50 crores to the excise department is not an allowable deduction under section 37(1) read with section 43B of the Act. The assessee had shown the said payment of ₹ 2.50 crores as advance in its books of account, does not prove that the assessee has incurred the actual liability during the impugned year or in the earlier years. Therefore, in the circumstances and facts of the case, the amount of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounting. Accounting Standard 11 issued by the Institute of Chartered Accountants of India, New Delhi also requires that the exchange loss arising on account of restatement of the current/trading liability has to be charged to profit loss account of the year in which the exchange loss has arisen. 3. Several decisions also support the case of assessee where it was held that if the exchange difference is allowed on revenue account and as a result of trading activity, it has to be allowed as revenue expenditure in the year in which such liability accrues if the method of accounting followed is mercantile. ONGC v. Dy. CIT 261 ITR 1 (Delhi)(AT-SB) Bhel v. Dy. CIT 98 TTJ 565 (Del.) Sutlej Cotton Mills Ltd. v. CIT 116 ITR 1 (SC) CIT v. Martin Harris (P.) Ltd. 154 ITR 460 (Cal.) CIT v. U.B.S. Publishers Distributors 147 ITR 114 (All.) CIT v. International Combustion India (P.) Ltd. 137 ITR 184 (Cal.) 4. The principles laid down for allowing a business loss is explained at page 1436 to 1439 of the commentary of Chaturvedi and Pitthisaria 5th addition. For allowing a business loss following principles are applicable: (i)A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement of the assessee and as per clause 7 of this agreement, the assessee shall repay the principal amount borrowed in half year installments and first instalment shall be due six months after the date of remittance of loan together with interest payable in the manner and the rate mentioned in clause 6 of the agreement. Therefore, it is clear that the money has been borrowed by the assessee for financing long term working requirement and any repayment of the same with interest is not on revenue account. Since the liability cannot be ascertained for a part period at the end of the financial year, therefore, the liability on account of foreign exchange fluctuation is impossible to be ascertained and it will not arise at the end of financial year until the period of six monthly rests corresponds to end of financial year which is not the case of the assessee. The decision cited by ld. Counsel for the assessee are not applicable in the present case. Therefore, the liability on account of foreign exchange fluctuation arises only by the period of six monthly rests from the date of remittance expires. Hence, the ld. CIT(A) and Assessing Officer was justified in not allowing the liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue account on account of fluctuation of foreign exchange rate. He did so by following the assessment order for an earlier year, wherein it was held (bat such loss was a notional loss. The was upheld by the Commissioner (Appeals). On further appeal: Held, that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v ) whether the method adopted by the assessee for making entries in the books both in respect of losses an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the Companies Act, 1956. They were duly audited by the Comptroller and Auditor-General of India and further approved and endorsed by Parliament. In the case of the assessee the event , i.e., the change in the value of foreign currency in relation to Indian currency had already taken place in the current year. Therefore, the loss incurred by the assessee was a fait accompli and not a notional one. The assessee s claim of loss on account of fluctuation in foreign currency rate was allowable. 25. In the present case the assessee has been following a consistent method of accounting on the basis of principles of commercial sense and maintaining mercantile system of accounting. The assessee is maintaining mercantile system of accounting in accordance with accounting standard II issued by Institute of Chartered Accountant of India which came into effect on or after 1-4-1987, para 23 and 25(a) of the said accounting standard reads as under : 23. At each balance sheet date, there may be items of foreign currency assets and liabilities, i.e., items to be received or paid in foreign currency, in respect of transactions not settled within the same accounting period. An e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the income of the assessee. In view of above discussions, we hold that the foreign exchange fluctuation loss is an allowable expenditure and accordingly we reverse the order of ld. CIT(A) on this issue. Thus ground no. 2 of the assessee is allowed. 27. In Ground no. 3, the assessee is aggrieved that the ld. CIT(A) erred in confirming disallowance of ₹ 13.00 lacs out of domestic traveling expenses. 28. The brief facts of this ground are contained at page 3 and 4 of Assessing Officer s order as under : The assessee company has debited a sum of ₹ 12995765 on a/c of local traveling and ₹ 11509042 on a/c of traveling and accommodation abroad. Since all the vouchers are not verifiable, therefore, the assessee was asked to explain as to why disallowance out of them should not be made as done in the earlier years. The assessee has furnished photo copies of some of the vouchers for test check. But the minute details such as the name of the employees who traveled abroad, destination of journey, purpose of journey, tour report and its relevancy to the business carried on by the assessee-company has not been furnished. Facts and circumstances of the case are id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore they could not be examined. After the receipt of the remand repot a hearing was given to the appellant on 19-2-2003 but on that date only the counsel of the appellant Shri P.C. Parwal attended the hearing without any material or evidence in his possession. He was also told about this fact. He, however, argued that similar disallowances have been made in past but they have been deleted subsequently by the CIT(Appeals). During assessment year 1993-94 no disallowance was made because the disallowances made in assessment year 1992-93 of ₹ 2.5 lacs and ₹ 3.00 lacs respectively were deleted/reduced by the CIT (Appeals). In assessment year 1996-97 again a disallowance of ₹ 1,97,345 has been made out of the total traveling expenses of ₹ 2.96 crores but the assessee is in appeal against this disallowance. He, therefore, argued that the disallowance made by the Assessing Officer of ₹ 13,00,000 out of domestic traveling should be deleted. I have considered the facts of the case and the arguments of both the sides. This is a case where in spite of being given the specific opportunities to produce the details in regard to domestic traveling expenses dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted by ld. CIT(A), the disallowance cannot be made, even if details are not produced before lower authorities. 30. The arguments of ld. Counsel for the assessee are not convincing because the assessee had incurred total expenditure of ₹ 1,29,95,765 and assessee has not furnished the details of expenses amounting to ₹ 1,04,57,687. In such circumstances it is not possible for the Assessing Officer to find out the genuineness of the expenditure in spite of the fact that the assessee had been given opportunities time and again. The assessee was given opportunity to furnish the details by the Assessing Officer during the course of preparation of remand report but the assessee did not bother to furnish the details. The ld. CIT(A) also gave an opportunity to the assessee but the assessee had failed to give any convincing Explanation before the CIT(A) but argued that no additions have been made in the past and therefore, addition should not be made during the year. Such type of Explanation do not make the expenditure genuine when it is not possible for the authorities below to find out whether the expenses have been incurred wholly and exclusively for the purpose of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business tours to avoid taxes in its hands and also in the hands of employees. Further the assessee company failed to establish the outcome of these overseas tours as no tour report in support have been furnished. Looking to the above facts, a disallowance of ₹ 10 lacs is made being not wholly and exclusively for business purpose. Accommodation overseas: Details of overseas accommodation exceeding ₹ 10,000 amounting to ₹ 35,27,360 out of total expenses of ₹ 66,22,767 have been furnished by the assessee along, with certain bills vouchers in support. On scrutiny of bill dated 17-10-1997 it appears that Mr. Mrs. S. Gopal have enjoyed the accommodation. The remaining detail of accommodation has been supported by only City Bank credit note made by the assessee-company and these are not supported by the ills of hotels issued to the concerned visitors. In absence of the bills, it cannot be decided whether the employee enjoyed the accommodation independently or along with his/her spouse. Details of ₹ 30,95,216 (below ₹ 10,000) has not been supported by the evidences. In these circumstances, a disallowance of ₹ 10 lacs is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total expenses on overseas traveling and accommodation amounting to ₹ 1,15,09,042. The assessee has pointed out many defects i.e. the assessee has taken the figures of traveling expenses without the discount given by the traveling agent, photo copies of booking order in some cases have not been furnished, expenses on spouse of employees have also been incurred by the assessee, expenses below ₹ 10,000 amounting to ₹ 9,36,620 for which there is no detail furnished, the assessee in the opinion of Assessing Officer had incurred expenses on LIC to European countries but had given colour of business tours to avoid taxes. The assessee has not given any explanation in this regard. As regards accommodation expenses exceeding ₹ 10,000 the assessee has submitted the details of expenses for amount of ₹ 35,27,360 out of total expenses of ₹ 66,22,576. No bills were submitted for verification of the genuineness of balance of the expenditure. The Assessing Officer has made a disallowance of ₹ 20 lacs i.e 10 lacs each on traveling and accommodation. The assessee did not submit the details to the Assessing Officer even during the remand proceedings and even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account and this disallowance is confirmed . 38. The ld. Counsel for the assesses has argued and placed on record the written submissions as under : The assessee has debited the amount of bad debt to profit Loss account. The debit to profit loss account is in respect of identified and specified party. Hence the claim of assessee is allowable under section 36(1)(vii). Reliance is placed on following cases : CIT v. General Insurance Corporation 254 ITR 204 (Bom.): Under section 36 of the Income-tax Act, before any claim for allowance for a bad debt is established, it must appear that the concerned bad debt is written off as irrecoverable in the account books of the assessee. This requirement is a condition for the grant of claim for bad debt allowance. If the debit entries posted by the assessee indicate that bad debt has been written off as irrecoverable in the accounts of the assessee, then the statutory condition stands fully complied with. If the assessee has posted entries in the profit and loss account and the corresponding entries are posted in the bad debt reserve account, it would be sufficient compliance with the provisions of the statutory requirement for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... left to his prudence, and it is sufficient compliance for claiming debts as bad debt under section 361(1)(vii). Similar issue for disallowance of bad debt has come up before Hon ble ITAT in assessee s own case for assessment year 1991-92 in ITA No. 1441/JP/1996 dated 12-5-2005 (PB 42-43, (para 54-58) where Hon ble ITAT set aside the issue with the direction to the Assessing Officer to obtain party-wise details of debtors and allow the claim after verification. Thus Hon ble ITAT has accepted that debit to the profit loss account is sufficient compliance and therefore the claim made by the assessee be directed to be allowed. 39. After hearing the parties, we find that the assessee company debited a sum of ₹ 25,21,567 in the P L account. The Assessing Officer found that the amount has not been held to be irrecoverable but a provision has been made in the books of account. Accordingly, he inferred that such amount has not become bad and since the fact and circumstances in this regard, in his opinion, was same as in the assessment year 1996-97 where such bad debts had been disallowed, he did not accept this claim of bad debt and added this amount in the income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er s as under : The assessee has incurred expenses on repair and maintenance in building amounting to ₹ 20,87,417. The assessee filed the summary alongwith few sample bills. Perusal of bill filed it is found that the bill raised by M/s. R.K. Agencies dated 5-2-1998 amounting to ₹ 8,46,680 includes the following amounts. P/L new tarfelt as per ISL approved grade ₹ 155100 P/L constructing temporary sheds/stores Metering room areas I/C all civil work like Buck work. Plastering painting A.C. Sheet rooting with M.S. angle from etc. ₹ 149250 P/Replacing M.S. grideses channels, fees Angles, beams with new whenevers stru Changes are proposed layout plan. ₹ 382550 From the study of the bills raised it appears that the work done by the M/s. R.K. Agencies is not revenue nature and it is of capital nature as it is evident from the description of the work done. Therefore, a sum of ₹ 5 lacs out of the above is disallowed and added back in the income. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not change the fact of the case and, therefore, ld. CIT (A) is not justified in confirming the addition made by the Assessing Officer and same is directed to be deleted. Thus ground no. 6 of the assessee is allowed. 47. In Ground no. 7, the assessee is aggrieved that the ld. CIT(A) erred in confirming disallowance of ₹ 6.00 lacs out of Canteen expenses and Employees Welfare Expenses. 48. We have head the parties, the facts of the case are that the assessee has debited a sum of ₹ 25,34,062 under the head Canteen Expenses and ₹ 35,26,856 under the head Employees Welfare Expenses. The assessee had filed the details of total expenses which was month-wise and no vouchers have been produced for the verification of such expenses as claimed by the assessee. From the perusal of month-wise details, the Assessing Officer observed that the canteen expenses claimed in the month of April were ₹ 96,003 whereas these expenses for the month of March were ₹ 3,47,740 and similar trend was there in respect of Employees Welfare expenses and no explanation or vouchers were produced for verification of genuineness of expenses and accordingly the Assessing Officer dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omments. The audit report is not on record before us for verification and even if the auditor has not made any adverse comments on the expenses, that does not mean that the auditor has given the certification of genuineness of each and every expense incurred by the assessee company. The auditor s report is not a certification to the accounts of the assessee-company. The assessee has not given a logical Explanation to the variation of expenses incurred in the month of April, 1997 amounting to ₹ 96,003 and ₹ 3,47,740 incurred in the month of March, 1998. The assessee has not put on record any system of internal control on these expenses with which the lower authorities or we could peruse the matter. Assessee s explanation that the production of vouchers will not serve the purpose of the Assessing Authority cannot be said to be a logical explanation . Though the Assessing Officer has not made any comparison of expenses incurred under this head with the expenses incurred in the immediately last year. Looking to the circumstances of the case and non production of vouchers by the assessee and in the absence of any cogent or logical explanation, a possible leakage of expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h bills on a separate account for which the Assessing Officer has not found any defect in the purchase account and as argued by ld. Counsel for the assessee that such bills/vouchers for purchase of stores and spares were verifiable by the Assessing Officer at the time of assessment proceedings. The movement of the goods from one point to another point is an internal procedure which of course to find out the complete genuineness should have been produced before the Assessing Officer We find no leakage of any revenue in the said procedure and in the absence of any defect found by the Assessing Officer in the purchases of the stores and spares, we are of the view that the authorities below are not justified in making the disallowance under this head and therefore, we reverse the order of ld. CIT(A) who has wrongly sustained the additions made by the Assessing Officer on this issue. Thus we allow ground no. 8 of the assessee. 55. In Ground no. 9, the assessee is aggrieved that the ld. CIT(A) erred in confirming disallowance of ₹ 8.00 lacs out of Lost Revenue Expenses. 56. We have heard the parties. The facts of this case are as per page 7 of the Assessing Officer s order as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the remand report that the lost revenue expenses include loss of goods in transit from the production point to the distribution point. This claim of the appellant is not at all supported by the details of the loss at various points and the reasons for the same. No vouchers have been kept to ascertain the exact quantum of this loss. If a claim has been made by the appellant then it can be allowed only if it is established by the appellant with the help of acceptable evidences. The appellant in this case has failed to discharge the onus cast upon it in regard to the claim of loss of goods in transit. The Assessing Officer therefore was justified in making the disallowance of ₹ 8.00 lacs on lump-sum basis out of the lost revenue expenses. This disallowance is neither excessive nor unreasonable and is rather justified on facts, it is, therefore, confirmed. 58. After perusal of the facts, we find that assessee has incurred expenditure on advertisement and sales promotion which in fact was a lost revenue expense amounting to ₹ 1,13,98,940 which according to the Assessing Officer in the remand report was an expense on loss of goods in transit i.e. loss of goods wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign exchange fluctuation ₹ 30.31,455 (ii) On account of provision of bad and doubtful debts ₹ 25,21,567 (iii) On account of provision of uncertain liability of loss on sale of fixed assets ₹ 85,64,381 61. The ld. Counsel for the assessee vide his written submission argued as under: Section 115JA provides that where the total income of an assessee being a company computed under the Act is less than 30 per cent of its books profit, the total income of such assessee shall be deemed to be an amount equal to 30 per cent of such booksprofit. For this purpose profit and loss account is to be prepared in accordance with Part II III of schedule VI of Companies Act, 1956. Explanation to section 115JA provides that books profit means the net profit as shown in the profit loss account for the relevant previous year prepared under sub-section (2), as increased by : (a) the amount of Income-tax paid or payable, and the provision therefore, or (b) the amounts carried to any reserves by whatever name called; or (c) the amount or amounts set aside to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances not being a reserve within the meaning of clause 7(2) of Part III of Schedule VI to the Companies Act, clause (b ) of the Explanation is also not applicable to it. India Pistons Ltd. v. Dy. CIT [2004] 140 Taxman 611 (Mad.): If the provision for bad and doubtful debts is an ascertained liability, the amount cannot be added back to the net profit for determining the book profit under section 115J. Eicher Motor Ltd. v. Dy. CIT [2004] 1 SOT 1 (Indore): Provision for bad and doubtful debts which is not in nature of contingent liability described in clause (c ) to section 115(1A), cannot be added back while computing book profits under section 115J. The provision for loss on sale of fixed asset is provision made for in the diminution in the value of specified assets. In schedule 16, it is shown as loss on sale of fixed assets (including provision). The Assessing Officer has considered the entire claim as provision for loss. The provision for loss is made only in respect of those assets which has impaired. This is made as per the accounting principles and practices duly audited by the statutory auditor. Hence such loss claimed in the books cannot be a subject matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company has included the claim under the head Considered doubtful in the schedule to the balance sheet. The assessee company failed to establish supplier advances or for the purpose of business or not and are connected with the business activities or not. Similarly the assessee has not established the relationship with the persons who have been shown as employees advances. As regards capital advance of ₹ 4,60,722, same is not of revenue in nature and during the course of assessment proceedings the A/R of the assessee had admitted that capital advances are not allowable. The A.R of the assessed had filed the details zone-wise had not part-wise and therefore it cannot be ascertained whether the nature of debt qualify for deduction or not In such circumstances the Assessing Officer disallowed the claim of the assessee amounting to ₹ 39,80,335 and added the same to the income of the assessee. 67. The ld. CIT (A) confirmed the action of the Assessing Officer for the reasons mentioned at page 3 to 5 of his order. 68. After perusal of the facts, we are of the view that any dad debt or part thereof which is written off as irrecoverable in the accounts of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1990-91 the Tribunal has disallowed such claim and therefore, the claim during the year should also be disallowed. The Assessing Officer accordingly disallowed the sum of ₹ 43,85,378 and added the same to the income of the assessee. 72. The ld. CIT (A) confirmed the action of the Assessing Officer vide page 5 to 7 of his order. 73. After perusal of the facts, we find that facts in this case are similar to assessee s own case for the assessment year 1998-99 in I.T.A No. 273/JP/03 of even date, where the claim of the assessee has been allowed. Therefore following the decision in assessee s own case for the assessment year 1998-99 (supra), we allow the claim of the assessee in ground no. 2. Thus ground no. 2 of the assessee is allowed. 74. In Ground no. 3, the assessee is aggrieved that the ld. CIT(A) erred in confirming the disallowance of ₹ 2.50 lacs on ad hoc basis out of the Travelling Expenses. 75. We have heard the parties. The facts of the case are as per para 7 and 8 of Assessing Officer s order as under: 7. The assessee company has debited a sum of ₹ 34296199 under the head traveling and conveyance expenses which includes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her expenses alongwith expenses incurred on foreign travel for the family of the person who visited foreign country have not been produced before the Assessing Officer Therefore in such circumstances, leakage of revenue cannot be ruled out Hence, Assessing Officer is justified in making lumpsum disallowance for ₹ 2,50,000 out of total exercises of ₹ 34,73,670 incurred on foreign traveling expenses and ₹ 4,73,535 on foreign accommodation expenses. We, therefore, confirm the decision of the ld. CIT (A) on this issue. Thus ground no. 3 of the assessee is dismissed. 78. In Ground no. 4, the assessee is aggrieved that the ld. CIT(A) erred in confirming the disallowance of ₹ 1.00 lac out of Staff Welfare Expenses. 79. We have heard the parties. The assessee has not furnished the vouchers/bills of staff welfare expenses and, therefore, the Assessing Officer disallowed a sum of ₹ 1.00 lac on this account to be income of the assessee. The ld. CIT (A) confirmed the action of the Assessing Officer. 80. After perusal of the facts, we find that the assessee has not submitted the details/vouchers of staff welfare expenses during the assessment proceedings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany was asked to show cause as to why should not the common service exp. be treated as other income for the purpose of section 80HHC of the Income-tax Act. By Sr. No. 10 of the order sheet entry of even date, the assessee was required to file justification regarding inclusion of other income for calculation of deduction under section 80HHC. Sh. Jai Kumar Tejwani appeared on 28-5-2001 and furnished the written submission vide letter dated 28-5-2001 and explained that the other income should be dealt as per provision of section 8HHC(4A)(baa) of the Income-tax Act, 1961 as per the note at point No. 2 already submitted vide letter dated 22-5-2001. However, at point No. 16 in the letter dated 28-5-2001 in respect of realization under the head common services expenses, it has been submitted that the assessee company recovered a certain amount on agreed terms and conditions and the same are reduced from the total expenses. In support of its contentions photo copies of certain agreements were also enclosed. On perusal of agreement held between assessee company and Gillette diversified operation Pvt. Ltd. (Oral B Division) New Delhi, it is seen that it was for payment of rent of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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