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TMI Blog2018 (6) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of assessee Expenses under the head Donation in the nature of sports promotion expenses and community development expenses - allowable as business expenditure - Held that:- the appellant has not been able to bring out any evidence to show as to how were these expenses ‘wholly and exclusively laid out for the purpose of business’ - thus this ground of appeal of the assessee is dismissed. Disallowance on account of arrear of salary - AO disallowed the same on the ground that the same was not an ascertained and had not crystallised during the year - Held that:- We find that this issue has been decided in favour of the assessee by this bench of the Tribunal in assessee’s own case for the assessment year 2004-05 wherin held AO has taken the view that the claim of the assessee falls in the category of unascertained liability, which in our view, is not correct. In the instant case, there is certainty about the liability, but the exact quantification could be known to the assessee in the future upon finalisation of the wage agreement. We find support for this view from the decision rendered by the Mumbai bench of Tribunal in the case of TATA communications Ltd Vs. JCIT [2013 (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial to the interest of Revenue and vide order dated 05.10.2006 directed the AO to make fresh assessment. Accordingly, the AO passed the fresh assessment order dated 27.12.2007 wherein additions on account of installation expenses, slurry at Gidi washery, arrear salary, transfer of free issue of coal, social overhead were made and passed order u/s.143(3)/263 of the Act. 4. Aggrieved by the assessment order, the assessee has filed an appeal with the CIT(A). In the appellate proceedings the assessee argued the grounds and reiterated the submissions made before the AO. The CIT(A) after considering the submissions of assessee and the findings of AO and partly allowed the appeal of the assessee. 5. Aggrieved by the order of CIT(A), the Revenue has filed an appeal before the Tribunal. 6. Ld. DR before us submitted that the CIT(A) has erred in allowing the installation expenditure treating the same as Revenue Expenditure. Ld.DR further submitted that the AO was correct in making the disallowances. 7. Contra, ld.AR relied on the order of CIT(A) and supported his arguments with respect to the grounds and also covered decisions in respect of asessee s own case. 8. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nchi wherein the Ld. Commissioner of Income Tax, Ranchi had held the order u/s. 143(3) of the Income Tax Act, 1961 to be erroneous and prejudicial to the interest of revenue on several counts, one of them being the lower valuation of the closing stock. I have perused the 263 order. The Commissioner of Income Tax, Ranchi in his 263 order had stated that the closing stock consisted of E grade coal while the appellant had valued it as G grade coal leading to lower income. He, however, had stated that the same was accepted by the Assessing Officer without verification meaning that it was expected of the Ld. Assessing Officer to conduct verification to assess the correctness of accounts. [ 10. 6] Be that as it may, vide order u/s.263 the order u/s.143(3) was set aside. In the order pursuant to the 263 order the Ld. Assessing Officer ought to have given his own findings. He has stated that the appellant had applied the value of G grade coal to E grade coal. Why does the Ld. Assessing Officer think that the coal should have been valued as E grade is not given in the order. I have gone through the letter of the appellant filed before the Ld. Assessing Officer dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted for in accordance with Accounting Standard (AS) 10, Accounting for Fixed Assets. Measurement of Inventories 5. Inventories should be valued at the lower of cost and net realisable value. 10.7 In the case of Sanjeev Woollen Mills v CIT 279 ITR 434 (SC) the Hon ble Supreme Court has held that: - To attract section 145 it is necessary that- ( c) the assessee has computed the income in accordance with the method of accounting regularly employed by the assessee; and ( d) provided where the accounts are correct and complete to the satisfaction of the Assessing Officer, but ( e) the method employed is such that in the opinion of the Assessing Officer the income cannot be deduced therefrom, then the Assessing Officer may adopt a different method of computation of the income as he may determine. [Para 9] The assessee may employ whichever basis of valuation of stock in hand, but it must adhere to that consistently year after year. Casual departure of valuation of trading stock in hand at cost or market value is not permissible. The method adopted for maintaining the accounts should be definite method of valuation which is fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal and the appeal is heard finally. 13. The assessee has raised the following grounds:- 1. For that Ld.CIT(Appeals) has erred in not appreciating that the Expenses incurred under the head Donation were in the nature of sports promotion expenses and community development expenses and as such were allowable as business expenditure. The expenses confirmed is unjustified and uncalled for. 2. For that in respect of the expense under the head 'Arrear of Salary' Ld. CIT(A) failed to take into consideration the fact that consequent to the Board's Decision, communicated vide letter dated 31.07.2002, a provision was quantified and incorporated in respect of arrear salary payable to executives below Board Level and not in respect of wages of workmen which was governed by National Wage Agreement. 2.1 For that Ld. CIT(Appeals) failed to appreciate that the appellant was duty bound to make payment to its executive employees, once a decision was taken by the Board of the parent holding company. The same was a ascertained liability. 2.2 For that Ld. CIT(A) has erred in confirming the provision for the entire period from 01.0.1997 to 31.08.2001 (more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prayed for allowing this ground. On the other hand, ld.DR relied on the orders of lower authorities. 14. We have heard rival submissions and perused the material available on record. We find that the assessee could not substantiates its claim before both the authorities below. The CIT(A) while dealing with the disputed issue has observed as under :- 7.4 I have considered the submissions of the appellant and have also perused the assessment order. The arguments advanced by the appellant, if accepted would mean that any expense that is incurred for any purposes (for charitable or otherwise) would qualify as legitimate business expenses. This would include donations for holding of football tournaments of clients and transporters. In the case of DCM (supra) the facts were that the assesse had made a donation for a tournament that it was organising under its brand name. Accordingly, it was held that the assessee in organising football and hockey tournaments was an allowable deduction under section 10(2)(xv). The Hon ble HC had gone on the logic that the staging and sponsoring of the tournaments and the reports in the newspapers day after day about the D.C.M. tournaments would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. 17. We have heard rival submissions and perused the material available on record. We find that this issue has been decided in favour of the assessee by this bench of the Tribunal in assessee s own case for the assessment year 2004-05 vide order dated 03.12.2014 in ITA No.186/Ran/2008, wherein the Tribunal held as under :- 3. The first issue relates to the disallowance of claim relating to Adhoc provision of pending wage revision. The assessee had provided a sum of ₹ 1708.24 lakhs on account of adhoc provision made towards interim relief pending finalisation of NCWA-VII (National Coal Wage Agreement-VII). The quantum of liability was determined at 10% of basic pay of non executive employees and the same was approved by the Board of Directors. Accordingly, the assessee provided for the above said amount and claimed the same as expenditure. The assessee contended before the AO that the Accounting Standard notified by the CBDT u/s 145(2) (reported in 218 ITR (St.) 1) provides that the known liabilities should be provided for in the accounts, even though the amount could not be ascertained with certainty. Further, the assessee also placed reliance on the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Mumbai bench of Tribunal in the case of TATA communications Ltd Vs. JCIT (2013)(32 taxmann.com 197), wherein the Hon'ble President was one of the parties. Accordingly, we confirm the order of Ld CIT(A) on this issue. Respectfully following the judicial decision, we allow this ground of appeal of the assessee. 18. On the third disputed issue of disallowance on account of transfer of free issue of coal, the AO observed that expenses claimed by the assessee is to be gratuitous in nature and therefore, not wholly and exclusively laid out for the purpose of business and disallowed the same. On appeal, the CIT(A) upheld the action of AO observing that the decision had turned on the existence of an agreement between the workers and the management and for a period of ninemonths, no such agreement is existed, against which the assessee is in appeal before the Tribunal. 19. Before us ld.AR submitted that as per the National Coal Wage Agreement, Coal India Ltd. and its subsidiaries were contractually bound to supply free coal to the employees in the collieries. Thus, it was a contractual obligation enforceable in law under the Indian Contract Act and the Industrial Disp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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