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TMI Blog2019 (4) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee company way back in the year 1992-93 and because of restructuring of the company in the year 1995, the project of Mushroom and Floriculture activities was transferred to the new sister company called M/s. Yule Agro Industries Ltd. in the year 1995-96 so it cannot be called as loan/advance but in effect merely transfer of the assets and liabilities consequent upon restructuring. So, the entire value of the expenditure which has been incurred on the projects way back in the year 1992-93 was subsequently transferred to the M/s. Yule Agro sister company in the year 1995 due to the restructuring cannot be strictly termed as loan/advance and, therefore, question of notional interest as computed by the AO is unsustainable and has been rightly deleted by the CIT(A) which we confirm. This ground of revenue s appeals is dismissed. Liquidated damages claimed - HELD THAT:- CIT(A) has relied on the order of the Hon ble Allahabad High Court in the case of Central Trading Agency Vs. CIT [ 1964 (3) TMI 120 - ALLAHABAD HIGH COURT] wherein the Hon ble High Court allowed the expenses incurred for liquidated damages under the head commercial expediency and also the decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, has been allowed, therefore, the action of the CIT(A) deleting the addition need not to be interfered for this additional reason also as stated above. The revenue s ground of appeal is, therefore, dismissed. Prior period expenses - HELD THAT:- Expenses of such nature which though relates to earlier period had crystalised in the year under consideration either due to change of law with retrospective effect like bonus or till finalization of sales tax case or settlement with trade union with retrospective effect in respect to fee, allowance etc. or receipt of final bill after the cut-off date of the assessment years. The CIT(A) has duly considered the magnitude and the scale of operations of the assessee company and observed that many of the expenses could not be correctly estimated and there could arise exigencies which require calibration/correction and, therefore, taking note of the fact that these expenses are crystallized in this assessment year under consideration, the CIT(A) has given relief which according to us, does not require any interference from our part and we confirm the same. Therefore, this ground of appeal of the revenue for the assessment years under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal of revenue is allowed for statistical purposes. - I.T.A. Nos. 676/Kol/2014, ITA Nos. 1737, 1882 And 1883/Kol/2016 - - - Dated:- 20-3-2019 - Shri P. M. Jagtap, Vice President And Shri A. T. Varkey, JM] For The Appellant : Shri C. J. singh, Addl. CIT, Sr. DR For The Respondent : Shri A. K. Bandyopadhyay, FCA ORDER Per Shri A.T.Varkey, JM These are revenue s appeals against the separate orders of Ld. CIT(A), Kolkata for AYs 2008-09 to 2011-12. 2. Though we note that there are different grounds raised in these different assessment years, we note there are nine (9) grounds in all and some are common to different assessment years, so we are going to deal with common grounds raised in assessment years together. 3. For AYs. 2008-09 and 2009-10 the revenue appeals are against the action of Ld. CIT(A) in allowing the nursery expenses claimed by the assessee. 4. Brief facts for AY 2008-09 is taken into consideration. Brief facts of the case are that the assessee is a Public Sector Undertaking having its corporate and register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r administrative expenses in the Telepara Unit. Thus, from the details furnished by the assessee in respect to this claim of expenditure, the Ld. CIT(A) concluded that the payments made were in the nature of salaries and wages paid regularly to the employees of the assessee and some administrative expenses were incurred to maintain the infrastructure facility of the unit. The Ld. CIT(A) took note of the fact that the M/s. YAIL could not carry out any activity from the said unit and to keep the unit running, the expenditure was incurred by the assessee, which according to Ld. CIT(A), was administrative expenses and as such expenses are incidental to the assessee s business and, therefore, even though the assessee has not earned any income from unit, the incidental expenditure incurred by the assessee could not be disallowed and the Ld. CIT(A) was pleased to allow the claim of the assessee. Moreover, it was brought to our notice that output of the Telepara Unit was being transferred to other gardens within the same group/company. We note that the assessment is on the assessee as an entity in its entirety. From a perusal of the audited accounts (para 7 in schedule 20), we note tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company on account of Mushroom and Floriculture activities initiated and carried out by Tea Division from 1992-93 and subsequently transferred to the new company M/s. Yule Agro Industries Ltd. when it was later incorporated in the month of April, 1995. According to assessee, the Mushroom and Floriculture activity was initiated by the Tea Division of Andrew Yule Co. Ltd. (assessee) and was transferred to the new company styled as M/s. Yule Agro Industries Ltd. and this was done based on commercial prudence and expediency. 8. The Ld. CIT(A) noted that assessee during the AY 1996-97 took a decision that the Mushroom and Floriculture projects which were being pursued by the assessee from the AY 1993-94 need to be transferred to M/s. Yule Agro industries Ltd. (hereinafter M/s. Yule Agro) so that the said company would be carrying out the aforesaid projects. Pursuant to the said decision taken by the assessee, all expenditure which were incurred by the assessee upto 31.03.1996 was transferred to M/s. Yule Agro and was shown in the books of the assessee under the head loans and advances in the assessment year under consideration. Correspondingly, therefore, M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 2,51,03,000/- in the P L Account being incurred towards the liquidated damages and penalty. The AO noted from the details submitted pursuant to his notice that this amount reflects a portion of the contractual value of the goods which is recoverable from contract. According to AO, the same has arisen due to the late delivery of goods even though the assessee pleaded before the AO that these expenses were incurred in ordinary course of business activity. According to AO, other than the evidence provided in the accounts and by pointing out certain provisions in the contract, no other material were placed on record wherefrom it can be substantiated that the same was paid by the assessee company. Accordingly, the AO disallowed the deduction claimed by the assessee and added back the amount of ₹ 2,51,03,000/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved, the revenue is before us. 11. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO disallowed the liquidated damages on the ground that the evidence to substantiate the claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was able to produce the copy of the voucher and the copy of the cheque received from the said party which depicted that the liquidated damages have been deducted. For giving relief to the assessee the Ld. CIT(A) has relied on the order of the Hon ble Allahabad High Court in the case of Central Trading Agency Vs. CIT 56 ITR 561 (All) wherein the Hon ble High Court allowed the expenses incurred for liquidated damages under the head commercial expediency and also the decision of the Hon ble Madras High Court in the case of CIT Vs. Indane Bislers 91 ITR 427 (Mad). Our attention was drawn to the copies of the contract and other details and we agree with the Ld. CIT(A) that it was an inbuilt condition of the contract that in case of late delivery of goods, percentage of consideration as liquidated damages would be deducted by the customer while making payment. It is noted that the payment was made to the assessee by the parties while it was carrying on its business, and the deduction of payment made by the parties were as per the contractual terms and so, it is an allowable deduction and we confirm the order of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were incurred by the assessee company for maintenance and replacement of tea bushes in its existing garden, the same cannot be said to have created an enduring benefit which can be termed capital in nature and as accordingly, the expenses claimed by the assessee company was allowed as revenue expenditure. We note that the Ld. CIT(A) while giving relief to the assessee has relied on the Hon ble Calcutta High Court decision in the case of Tasati Tea Ltd. Vs. CIT (2003) 262 ITR 388 (Cal) wherein the Hon ble High court has held as under: As we understand from the expression used in Rule 8(2), it applies only in respect of replacement of useless or dead plants in an area, which is already under cultivation and not abandoned earlier. It cannot be stretched to a stage prior to the replacement of the useless or dead bushes. The maintenance of Nursery for the purpose of raising bushes to be utilized for replantation of dead or useless bushes within the plantation area does not come under Rule 8(2). It is the replantation of dead or useless bushes within the plantation area that comes within the scope and ambit of rule 8(2). This cannot be extended to a stage prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors. According to AO, some creditors replied and some creditors did not respond. So, according to AO, on verification, he found that there is discrepancy of ₹ 2,47,65,498/- and since the assessee could not explain the discrepancy, he added back the same to the total income as unexplained cash credit u/s. 68 of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved, the revenue is before us. 17. We have heard rival submissions and gone through the facts and circumstances of the case. The reasons given by the AO to make the addition is not repeated for the sake of brevity. During the appellate stage, the Ld. CIT(A) has taken note that out of the nine sundry creditors eight of them have responded to the notice issued by the AO u/s. 133(6)/131 of the Act and only one party did not respond to the notice of the AO. We note that only the party named M/s. ABB Global Ind Services ltd. has not responded and all other eight sundry creditors have responded. We note that the assessee is a Public Sector Undertaking of the Govt. of India and its accounts are audited by statutory auditor as well as by CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on credit. Implicitly the nature and source of the amount credited has also to be taken as having been explained satisfactorily. Also it has to be taken that the amount credited is not a cash credit in the sense that some monies have been received by the assessee but the credit represents a mere liability payable by the assessee in future. Under accounting principles, a liability can only be brought into account by making a credit entry in the books of account in favour of the person to whom the money is payable. Thus, there is a marked difference between the credit representing a liability payable by the assessee and a credit representing monies received from another person. It is because of this distinction a liability for purchase which has been credited in the account of the supplier cannot be added u/s. 68 of the Act. More so, when the purchase has been accepted as genuine and a deduction, therefore, has been allowed, therefore, the action of the Ld. CIT(A) deleting the addition need not to be interfered for this additional reason also as stated above. The revenue s ground of appeal is, therefore, dismissed. 19. The next ground of appeal of revenue is against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld arise exigencies which require calibration/correction and, therefore, taking note of the fact that these expenses are crystallized in this assessment year under consideration, the Ld. CIT(A) has given relief which according to us, does not require any interference from our part and we confirm the same. Therefore, this ground of appeal of the revenue for the assessment years under consideration is dismissed. 21. Next ground of appeal of the revenue is against the action of the Ld. CIT(A) in deleting the disallowance made by the AO u/s. 14A of the Act for AY 2010-11. Brief facts of the case are that the AO noted that assessee has earned dividend income which is exempt. However, when he verified the records it came to his notice that the non-tea division of the assessee did not make proper disallowance u/s. 14A of the Act, therefore, he disallowed u/s. 14A of the Act in respect to non-tea division read with Rule 8D(2)(ii) of the Rules of an amount of ₹ 77,48,695/- and Rule 8D(2)(iii) of 0.5% of ₹ 14,64,04,000/- i.e ₹ 73,20,020/- thus, made total addition of ₹ 84,80,715/-. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income. 23. Since we have already taken note that the Ld. CIT(A) has not adjudicated this issue at all, in the interest of justice and fair play, we set aside the order of Ld. CIT(A) and remand this matter back to the file of the AO to recompute the disallowance u/s. 14A read with Rule 8D as per law laid by the Tribunal in REI Agro Ltd., supra, and in accordance to law. Therefore, this ground of appeal of revenue is allowed for statistical purposes. 24. Next ground of appeal of the revenue is against the action of the Ld. CIT(A) in deleting the disallowance made by the AO under bad debt written off in respect of AY 2010-11. Brief facts are that the AO noted that as per schedule 19 (P L Account) other expenses included bad debt written off of ₹ 1,13,05,600/- relating to non-tea division which the assessee claimed as an allowable expenditure. According to AO, from the details filed it could not be established whether the same was offered to tax in earlier years, therefore, he disallowed the entire amount and added back to the total income of the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 3,47,500/- deducted by SAIL due to dispute in delivery of goods as discussed above. Taking note of the fact that the bad debt written off by assessee had been offered by the assessee to tax in the earlier years as business income, we find no infirmity in the order of the Ld. CIT(A) and decline to interfere in the order of the Ld. CIT(A) and dismiss this ground of appeal of revenue. 26. Next ground of appeal of revenue is against the action of Ld. CIT(A) in deleting the addition made by the AO in respect of sundry receipt of tea division for AYs 2010-11 and 2011-12. Brief facts for AY 2010-11 are that the AO noted that the assessee company has offered as income a sum of ₹ 75,70,746/- being sundry receipt on account of Tea Division and applied Rule 8 on the said income. According to AO, there is nothing on record to show that this income was earned for growing and manufacturing of tea. Therefore, AO was of the opinion that the entire 100% of the income is to be considered as central income, and, therefore, he added back 60% of ₹ 75,70-,756/- which comes to ₹ 45,42,448/- which was added to the income of the assessee. Aggrieved, the assessee prefe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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