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TMI Blog2018 (6) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... following the same, we confirm the order of CIT(A) and this issue of assessee’s appeal is dismissed. Inclusion import duty to the income of the assessee - Held that:- As the facts circumstances are exactly identical in this year, respectfully following the Tribunal’s order in earlier years, we direct the AO to exclude the import duty entitlements from the total income of the assessee. This issue of the assessee’s appeal is accordingly allowed. Disallowance on Pooja expenses - Held that:- Tribunal in the assessee's own the A.Y. 1997-98 and 2003-04 has decided a similar issue in favour of the assessee. Disallowing the claim of payment made to relatives of deceased employees - Held that:- Respectfully following the Tribunal’s order in earlier years, we direct the AO to allow the claim of payment made to relatives of deceased employees. This issue of the assessee’s appeal is accordingly allowed. Disallowing expenses relatable to exempt income - Held that:- We find that the Tribunal in earlier years also remanded the matter back to the file of the AO with directions to decide a reasonable disallowance by following the decision in the case of Godrej & Boyce Manufacturing Company Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) ought to have appreciated that interest on advances to MEIL was to accrue only after all the dues of the financial institutions had been paid and that the question of comparing the interest paid with the interest receivable from MEIL did not arise in the present year. 3. The learned Commissioner (Appeals) ought to have appreciated that the advances to Ibiza Industries Ltd., Mafatlal S.A. Intex Ltd., Mafatlal V.K. Intex Ltd., Repal Apparel P. Ltd., Silvia Apparel Ltd., Sushmita Holdings Ltd., were for the purpose of the business of the appellant. 4. The learned Commissioner (Appeals) ought to have appreciated that the Assessing Officer was not justified in charging to tax notional interest of ₹ 1,63,12,256 which had not at all accrued to the appellant. 5. The learned Commissioner (Appeals) further erred in not considering the fact that as the amount due from MEIL had been written off by the appellant as on March 31, 1991, the said amounts were not outstanding during the relevant previous year 2000-01, hence no disallowance ought to have been made for the relevant assessment year. 6. The learned Commissioner (Appeals) erred in relying on the decision of the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emitted back in terms of the Tribunal's decision. 5. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the Tribunal consistently set aside the issue to follow the precedent laid down by Hon'ble Supreme Court in the case of S.A. Builders 288 ITR 1 (SC). On same reasoning, we set aside this issue to the file of the AO. This issue is allowed for statistical purposes. 6. The next issue in this appeal of assessee is against the order of CIT(A) confirming the addition of valuation of closing of finished goods. For this assessee has raised the following ground:- "Valuation of closing stock 7. The learned Commissioner (Appeals) erred in confirming addition of estimated amount of ₹ 25,00,000 on account of valuation of closing stock of finished goods." 7. We are of the view that this issue has to be allowed in favour of assessee by giving direction in regard to alternative claim that the addition to closing stock of finished goods made by the AO should be given consequential effect to the opening stock of next year also. We find that the Tribunal in ITA No.4029/Mum/2009 for assessment year 2003-04 vide order dated 29.4.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er years and Tribunal in ITA No.4597/Mum/2015 for assessment year 2009-10 vide order dated 21.10.2015 has adjudicated the issue in para Nos.15 & 16 as under: " 15. The facts with regard to disallowance of interest on securities of ₹ 15,840/- are that the AO noticed that the assessee has received interest on securities of ₹ 15,840/- and since the assessee did not receive receipt thereof from the State Government, the assessee did not mentioned it in the profit and loss account Therefore, the assessing officer did not allow deduction thereof and added the same to the total income of the assessee. The Id. CIT(A) following the precedent laid down for the AYs 1991-92 to 1993-94, 1997-98 and 1998-99 confirmed the addition made by the AO. 16. Before the Tribunal, the Id.AR could not bring any material to show that the addition made by AO and confirmed the Ld.CIT(A) is contrary to law, An identical issue had come up before the Tribunal in assessee's own case fir the assessment years 1998-99, 1997-98,1995-96,1994-95,1993-94 'and, 1991-92 and the Tribunal has confirmed the views taken by the tax authorities below. Therefore, respectfully, following the Tribunal orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly allowed. 17. The next issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance on Pooja expenses of ₹2,30,445/-. For this, assessee has raised following ground Nos.12 & 13: "Pooja expenses 12. The learned Commissioner (Appeals) erred in confirming disallowance in respect of pooja expenses of ₹ 2,30,445. 13. The learned Commissioner (Appeals) erred in not considering fact that in the Income-tax Appellate Tribunal order dated June 9, 1998 in the case of erstwhile Mafatlal Fine and Spg. & Mfg. Co. Ltd. for the assessment year 1987-88, such expenses on pooja were allowed as deduction." 18. At the outset, the learned Counsel for the assessee stated that the Tribunal in assessee's own case for assessment year 1998-99 in ITA No.4596/Mum/2005 vide order dated 22.8.2014 has decided the issue in favour of assessee allowing the claim of Pooja expenses. The Tribunal vide para 8 if the order has allowed the claim as under: "8. In Grounds No. 19 and 20, the assessee has agitated the decision of the Ld CIT(A) in confirming the disallowance made by the AO in respect of pooja ₹ 2,82,289/-. It is observed that the Tribunal in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to have appreciated that the learned Assessing Officer had not established any nexus and therefore the expenditure of ₹ 50,70,804 cannot be set off against the dividend income." 23. At the outset, the learned Counsel for the assessee stated that the Tribunal in ITA No.4597/Mum/2005 for assessment year 1999-2000 in assessee's own case vide order dated 21.10.2015 has set aside the issue to the file of the AO to decide a reasonable disallowance by following the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Company Limited Vs. DCIT (2010) 328 ITR 81 (Bom). The Tribunal observed in para 42 as under: "42. We have heard both the pasties and perused the record. We find that the assessee earned dividend income and claimed that the interest paid on borrowed funds for making investment is expenditure. We find that as per the provisions of section 14A the assessee cannot claim expenditure of interest for earning exempt income which is not forming part of the total income. Obviously, the assessee borrowed the funds from outside and invested it. The assessee also earned dividend income and claimed expenditure as deductible business expenditure. On p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT(A) confirming the action of the AO in not excluding the CFC grant received in pursuant to the Montreal Protocol for phasing out production of refrigerant gases. For this assessee has raised following ground No.19: "CFC Grant 19. The learned Commissioner (Appeals) erred in confirming the action of the Assessing Officer in not excluding the CFC grant of ₹ 17,48,87,557 received pursuant to the Montreal Protocol for phasing out production of Refrigerant gases." 26. Briefly stated facts are that the assessee company is engaged in the business of manufacture and trading of fabrics, dies and chemicals. The AO during the course of assessment proceedings noticed from the accounts of the assessee that it has received grant of ₹1,748.89 lakhs pursuant to Montreal Protocol for phasing out production of refrigerant gases. According to AO, the assessee has transferred this grant to the capital account i.e. capital reserve account No.3 vide note No.40 of the statement of total income. The AO required the assessee to explain as to why this is not taxable. The assessee explained before the AO that the grant is in the nature of capital receipt and therefore, the assessee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld." Aggrieved, now assessee is in second appeal before Tribunal. 28. Before us, the learned Counsel for the assessee Shri Girish Dave along with Ms Kadambari Dave argued that this grant received by assessee pursuant to Montreal Protocol for phasing out production of refrigerant gases was transferred to the capital reserve account No.3 and the assessee while computing total income included the same in the total income. But the assessee by Note No.14 to the statement of total income claimed the same in the nature of capital receipt and therefore, excluded from the total income, while computing taxable income. It was now claimed before us that the Finance Act, 2002 has inserted clause (va) to section 28 of the Act with effect from 1.4.2003 i.e. for and from assessment year 2003-04 and hence this kind of receipt was not taxable during the previous years, relevant to assessment year 2003-04. It was explained that this grant was given for phasing out of production of refrigerant gases and assessee has phased out the production of refrigerant gases pursuant to the receipt of the above grant. This grant was not given for reducing the production cost but was given for phasing out the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onment and Forests, Government of India was entered into on 25.8.2000, whereby obligation casted upon the beneficiaries by Government of India reads vide clause 2 as under: 2. The Beneficiary agrees to abide by the obligations casted upon it in Government Order No.11/7/99-OC dated 2.3.2000 and its annexures as mentioned below:- i) Implement the CFC Production Sector gradual phase out Project in accordance with the Annual Program for each Program year from 1999 to 2010 as stated in Annexure I of the Government Order No.11/7/99-OC dated 2.3.2000. ii) Comply with all laws and regulations relating to CFC phase out including the Govt. Order (Appendix A) and the Ozone Depleting Substance (ODS) (Regulation), Rules, 2000. iii) Prepare quarterly progress reports on their monthly CFC, production and semi-annual progress reports reflecting the overall project implementation status to be submitted to the Project Management Unit. Ministry shall verify the information provided through periodic plant inspections and any other methods it deems necessary, as part of its ongoing monitoring responsibilities. iv) Prior to the closure of CFC production plants following the cessation of both C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Section 28(iv). Say for instance, a gift voucher is issued, enabling the holder of the voucher to have dinner in a restaurant, it is a benefit of perquisite, which has a monetary value. If the holder of the voucher is entitled to transfer it to someone else for a monetary consideration, it becomes a perquisite convertible into money. But, irrespective of whether it is convertible into money or not, it should have a monetary value so as to attract Section 28(iv). A monetary transaction, in the true sense of the term, can also have a value. Any number of instances where a monetary transaction confers a benefit or perquisite that would have a value, can be conceived of. There may be cases where an incentive is granted by the supplier, waiving a portion of the sale price or granting a rebate or discount of a portion of the price to be paid, when the payments scheduled over a period of time, are made promptly. It is needless to point out that in such cases, the prompt payment of money itself brings forth a benefit in the form of an incentive or a rebate or a discount in the price of the product. We do not know why it should not happen in the case of waiver of a part of the loan. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grant to the appellant- assessee. The grant was only of a sum of ₹ 1.84 crores a appraised by the technical reviewer of the World Bank, as against ₹ 3.2 crores cost of the plant. There was no correlation whatsoever between lease rentals paid by the assessee and the grant. The grant was made in public interest to protect the environment from ODS. The grant had nothing to do with the setting up of the industry or its economics or profitability. Accordingly, the grant received by the assessee was capital receipt and not liable to tax. 34. In view of the above facts, legal position and the decision of co-ordinate Bench of this Tribunal in the case Bharat Seats Ltd., we are of the view the grant received by the assessee from Multilateral Fund set up under Montreal Protocol signed by various countries to protect environment is in public interest to protect environment from Ozone Depleting Substance (ODS) and this grant has nothing to do with setting up of industry or its economics or profitability and hence this is capital receipt not liable to tax in India. Accordingly, we allow this issue of assessee's appeal. 35. The last issue in this appeal of the assessee is as r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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