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TMI Blog2014 (3) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as hotels were not available in these places, expenditure on the same is allowable as revenue expenditure. The learned CIT (A) further erred in not accepting appellant's contention that expenses specifically allowable uls, 30 to 36 cannot be disallowed as per provisions of Section 37(4) as well as that Section 37(4) is limited to disallow maintenance expenses and not the running expenses. Ground of Appeal No. 2 {page 30 of CIT (A)'s Order} Recovery of Guest House Expenses considered under Rule 6D - Rs. 10, 35, 637 The learned CIT (A) erred in rejecting appellant's claim that recoveries made in respect of Guest House expenses should be treated as travelling expenses, on which Rule 6D should apply and expenses proportionately disallowed and not the entire disallowance of recoveries as 'Guest House Expenses.' Ground of Appeal No. 3 {Page 31 of CIT (A)s Order} Disallowance under Rule 6B with respect to Calendars and Diaries- Rs. 3, 51, 374 The learned CIT (A) erred in disallowing expenditure on Diaries and Calendars on the ground that the same has Company's logo fixed on it, hence has advertisement value. Ground of Appeal No. 4 {Page 32 of CIT (A)s Order} Tea and Coff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CIT (A)'s Order} Rs. 9, 12, 577 The learned CIT (A) erred in disallowing the contribution on the ground that they are covered by the provisions of Section 40A(a). Ground of Appeal No. 13 {Page 90 of CIT (A)'s Order} Contributions to various Institutions- Rs. 19, 68, 131 The learned CIT (A) erred in disallowing contributions to institutions on the ground that such expenditure was not incurred for the purposes of the business, having failed to understand the scenario that establishes nexus between the contributions made and the business of the appellant. Ground of Appeal No. 14 {Page 103 of CIT (A)'s Order} Fees paid to Consultants for Feasibility Studies - Rs. 50, 22, 577 The learned CIT (A) erred in disallowing Rs. 50, 22, 577being fees paid to the Consultants for carrying out feasibility studies on the ground that it constitutes capital expenditure. Ground of Appeal No. 15 {Page 108 of CIT (A)'s Order} Immovable Assets in Bhutan- Rs. 36, 27, 770 The learned CIT(A) committed a gross error in law and on facts by allowing depreciation only on the expenditure undertaken and not allowing the same as revenue expenditure. Ground of Appeal No. 16 {Page 114 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Works General Office 86, 599 Air-conditioning of works Pay Counter 82, 000 Air-conditioning of Accounts and ETS extension 85, 137 Air-conditioning for Test House 46, 213 29, 47, 901 Investment Allowance @ 25% 7, 36, 975 Ground of Appeal No. 21 {Pages 212 of CIT (A)'s Order} Expenses incurred in connection with the increase in Authorised Capital. Rs. 26, 77, 500 SThe learned CIT (A) erred in disallowing expenses incurred in connection with the increase in Authorised Capital. Ground of Appeal No. 22 {Pages 213 of CIT (A)'s Order} Bad Debts Written Off Rs. 8, 90, 038 The learned CIT (A) erred in not allowing dues from Government agencies on the ground that no evidence was produced. Ground of Appeal No. 23 {Page 116 of CIT (A)s Order} Expenditure incurred on Darjelling Holiday Home- Rs. 7, 13, 192 The learned CIT(A) erred in not considering expenditure of Rs. 7, 13, 192 incurred on Darjeeling Holiday home for Assessment Year 1987-88. Ground of Appeal No. 24 Disallowance of Annual General Meeting Expenses- 24, 528 The learned CIT(A) erred in not considering expenditure at Annual General Meeting. Ground of Appeal No. 25 The learned CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of entertainment expenditure, hence disallowing the same. Ground of Appeal No. 6 {Page 36 of CIT (A)s Order} Disallowance of expenditure on Tea and Coffee served to visitors u/s. 37(2A) - Rs. 2, 25, 000 The learned CIT(A) erred in disallowing the expenditure on beverages served to visitors on the ground that the same constitutes to entertainment expenditure. Ground of Appeal No. 7 {Page 41 of CIT (A)'s Order} Expenditure on business meetings and conferences of employees- Rs. 38, 14, 314 The learned CIT (A) erred in holding that the expenditure incurred on the business meetings and conferences as entertainment expenditure incurred under the provisions of Section 37(2A) of the Income-tax Act. Ground of Appeal No. 8 {Page 44 of CIT (A)'s Order} Payments to Clubs - Rs. 21, 75, 252 The learned CIT (A) erred in treating payments to Clubs as entertainment expenditure covered under the provisions of Section 37(2A). Ground of Appeal No. 9 {Page 45 of CIT (A)s Order} Expenditure on Food at Employees' Get-together- Rs. 23, 34, 755 The learned CIT(A) erred in confirming disallowance of estimated expenditure of Rs. 2, 50, 000 on food at employees' get-togeth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order} Expenditure incurred on Darjelling Holiday Home- Rs. 2, 64, 301 The learned CIT(A) erred in treating Darjeeling Holiday Home as Guest House rejecting appellant's contention that the same is covered by the second proviso to Section 37(4) hence not to be treated as a Guest House. Ground of Appeal No. 18 {Pages 119 to 141 of CIT (A)'s Order} Disallowance of Investment Allowance on Town Division Assets- 26, 46, 095 The learned CIT(A) erred in disallowing the investment allowance on Town Division Assets on the ground that they are not part of an industrial undertaking and not play a role in the manufacturing process:- Rs. Surgical Instruments & Medical Appliances- 11, 58, 553 X-Ray & Therapeutic Apparatus 4, 00, 093 Pumps 28, 949 Electric Light & Fan Installation 2, 86, 055 Computers 2, 59, 088 Sanitary Works 52, 58, 499 Other Plant & Machinery 58, 39, 238 Total 1, 32, 30, 475 Investment Allowance @ 25% 26, 46, 095 Ground of Appeal No. 19 {Page 143 of CIT (A)'s Order} Investment Allowance on Foreign Exchange Fluctuations 20, 43, 424 The learned CIT (A) erred in disallowing Investment Allowance on foreign exchange fluctu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt of Rs. 4, 37, 97, 762 from Ahmedabad Advance Mills should not be taxed if the corresponding payments from Assessment Years 1985-86, 1986-87 and 1987-88 are held on capital account by the Income-tax Appellate Tribunal on appeal by the Income-tax Department. Since the payments, if disallowed, the receipts should not be taxed. Ground of Appeal No. 2{Page 24 of CIT(A)'s Order} Expenditure on maintenance of certain Buildings Rs. 1, 64, 54, 159 The learned CIT (A) erred in rejecting the claim of the appellant that certain buildings were maintained at far flung places due to business expediency and as hotels were not available in these places, expenditure on the same is allowable as revenue expenditure. The learned CIT (A) further erred in not accepting appellant's contention that expenses specifically allowable uls, 30 to 36 can not be disallowed as per provisions of Section 37(4) as well as that Section 37(4) is limited to disallow maintenance expenses and not the running expenses. Ground of Appeal No. 3 {page 30 of CIT (A)'s Order} Recovery of Guest House Expenses considered under Rule 6D - Rs. 9, 53, 502 The learned CIT (A) erred in rejecting appellant's claim th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and erred a treating the same as non-business expenditure. Ground of Appeal No. 11 {Page 80 of CIT (A)s Order} Contribution to Tata Sports Club Rs. 2, 34, 155 The learned CIT(A) erred in holding that contribution of Tata Sports Club is covered by the provisions of Section 40A(a). Ground of Appeal No. 12 {Page 90 of CIT (A)'s Order} Contributions to various Institutions in Jamshedpur- Rs. 34, 48, 101 The learned CIT (A) erred in disallowing contributions to institutions on the ground that such expenditure was not incurred for the purposes of the business, having failed to understand the scenario that establishes nexus between the contributions made and the business of the appellant. Ground of Appeal No. 13 {Page 104 of CIT (A)'s Order} Fees paid to Consultants for Feasibility Studies - Rs. 13, 98, 349 The learned CIT (A) erred in disallowing Rs. 13, 98, 349 being fees paid to the Consultants for carrying out feasibility studies on the ground that it constitutes capital expenditure. Ground of Appeal No. 14 {Page 115 of CIT (A)'s Order} Rs. 5, 00, 000 The learned CIT (A) erred in disallowing the adhoc amount of Rs. 5, 00, 000 under Rule 6D in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT(A) has committed error in recording some facts in his Order. The appellant craves leave to produce before the honourable ITAT correct facts at the time of hearing. The Appellant craves leave to add to, alter or amend the above grounds of appeal. Grounds raised by the AO for the same AY. s read as under: ITA/3982/Mum/2003/-AY. 1987-88: 1."On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 192, 06, 869/- as deduction on account of provision for leave salaries." 2."On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow 20% of initial contribution as deduction in the year in which the initial contribution was made to the approved superannuation fund." 3." On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to give deduction of Rs. 2, 24, 54, 561/- on account of guaranteed payment to Ahmedabad Advance Mills Ltd. ' 4." On the facts and in the circumstances of the case and in law, the learned CITIA I has erred in directing the A. O. to allow Rs. 84, 045/- on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 95, 544/- on account of payment for holiday plan at hotels as guest house expenses." 4." On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 50, 000/- ton account of contribution to Tata Services for maintenance of Horniman Circle of gardens as an advertising campaign." 5." On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to exclude the sales tax, excise duty etc. from the total turnover for the purpose of calculating deduction u/s. 80HHC." 6."On the facts and circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 83, 87, 445/- on account of investment allowance." 7."On the facts and circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow investment allowance on various items of plant and machinery i. e. computers, oscilloscope, water cooling plants, telephone systems, plant & machinery, Electrical Machinery, railway sider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-1987-88, G. 2-1989-90, 90-91 Guest House Expenses considered under Rule 6D G. 2-1987-88, G. 3-1989-90, 90-91 Disallowance under Rule 6B of the Rules, for Calendars and Diaries G. 3-1987-88, G. 4-1989-90, 90-91 Disallowance of AGM Expenses of the shareholders G. 4-1987-88, G. 5-1989-90, 90-91 Disallowance of expenditure on Tea and Coffee:(visitors) G. 5-1987-88, G. 6-1989-90, 90-91 Expenditure on business meetings and conferences G. 6-1987-88, G. 7-1989-90, 90-91 Disallowance of expenditure on payments made to Clubs G. 7-1987-88, G. 8-1989-90, 90-91 Expenditure incurred on Employees'Get-togethers G. 8-1987-88, G. 9-1989-90. Disallowance of Tata Steel Rural Development Society Expenditure G. 11-1987-88, 89-90, G. 10-1990-91 Contributions to Steel Plants' sport Board and Tata Sports Board G. 12-1987-88, G. 11-1990-91 Contributions to various Institutions at Jamshedpur G . 1 3 - 1 9 8 7 - 8 8 , G . 1 2 - 1 9 8 9 -90, 90-91 Fees paid to Consultants for Feasibility Studies G. 14-1987-88, 89-90, G. 13-1990-91 Payments in Cash in excess of Rs. 2, 500/- G . 1 6 - 1 9 8 7 - 8 8, G. 15-1989-90 Investment allowance on town division assets G. 17-87/88, G. 18-89/90, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Return Returned Income (Rs.) Dates of assessment Assessed Income Dt. of orders of CIT(A) 1987-88 31. 07. 1987 17, 76, 36, 040/- 30. 03. 1990 23, 48, 31, 360/- 21. 02. 2003 1989-90 29. 12. 1989 46, 80, 30, 490/- 31. 03. 1992 18, 46, 78, 860/- 21. 02. 2003 1990-91 31. 12. 1990 47, 82, 54, 150/- 15. 03. 1993 60, 09, 78, 460 21. 02. 2003 ITA/3965, 3966 and 3967/Mum/2003/-AY. 1987-88, 1989-90 and 1990-91: 3. First we would take up the appeals filed by the assessee. First common ground of appeal is about Expenditure on maintenance of certain Buildings. Amounts involved for the AY. s1987-88, 1989- 90, 1990-91are Rs. 98. 04 lakhs, Rs. 1. 42 Crores and Rs. 1. 64 Crores respectively. AO. s had disallow -ed the said expenditure u/s. 37(4)of the Act and the FAA confirmed their orders. Before us, AR conceded that issue was decided against the assessee, by the order of the Tribunal for the AY. 1986-87(ITA/3964/Mum/2003 and ITA/3980/Mum/2003-dated. 19. 02. 2014). We find that issue was dismissed, as same was not pressed for the last AY. Following the order for that year, we decide G. 1 for AY. 1987-88 and G. 2 for 1989-90 and 1990-91 against the assessee. 4. G. 2/3 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount allowable under Rule 6D would get reduced in a case where the lodging or boarding and lodging were provided, that the notional recoveries attributable to employees in respect of the guest house had been rightly not allowed as reduction from the guest house expenses by the AO. Finally, disallowance mentioned above was upheld by the FAA. 4. 2. Before us, representatives of both the sides agreed that issue in covered in favour of the assessee by the order of the Tribunal delivered for the AY. 1986-87(supra). We find that issue of recovery of Guest House Expenses has been dealt by the Tribunal for the previous AY as under: "4. 2. Before us, Before us representatives of both the sides admitted that the issue was decided in favour of the assessee by the Tribunal while adjudicating Appeal for the AY. 1985-86. We find that Tribunal in its order dated 27. 02. 2009(supra), in paragraphs 12-13, has held as under: As far as ground No. 4 is concerned, on similar issue the Hon'ble ITAT, Mumbai in assessee's own case in A. Y. 1992-93 in I. T. A. No. 7121/Mum/96 has held as follows: 'Admittedly recoveries have been made from the parent departments of the company whose persons utilised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us was that the products of the company being iron and steel, the giving of diaries and calendars even with the logo of the assessee contained therein cannot be said to be in the nature of advertisement calling for invocation of Rule 6B of the Income-tax Rules read with the provisions of section 37(3A), 3(3) and (3C) of the Act. We are of the view that in the light of the decision of the Hon'ble Bombay High Court in the case of Allana Sons Pvt. Ltd. , 216 ITR 690 (Bom) holding that presentation articles bearing the logo of the assessee would fall within the ambit of Rule 6B as expenditure in the nature of advertisement, the argument of the learned counsel for the assessee cannot be accepted. Ground No. 5 is accordingly dismissed." Following the order of the last AY., with regard to the issue of expenditure incurred for Calendars and Diaries, we dismiss the G. 3/4 of the appeals filed by the assessee for the AY. under appeals. 6. Next ground is in respect of disallowance of Annual General Meeting Expenses of the share - holders(G. 4-1987-88, G. 5-1989-90, 1990-91). AO. s had made disallowances of Rs. 32, 571/-, Rs. 79, 247/- and Rs. 65, 944/-respectively for the AY. s un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance made by the AO u/s. 37 (2A)/37(2)is upheld. To sum up, the expenditure incurred on serving tea, coffee & soft drinks to the shareholders at the Annual General Meeting is treated as entertainment expenditure. The action of the AO is upheld. ' 18. In view of the above decision of the Hon'ble Karnataka High Court, we confirm the order of the CIT(A) and dismiss ground No. 6 of the assessee." Following the above G. 4 and G. 5, for the AY. 1987-88 and remaining two AY. s, stand dismissed. 7. G. 5/G. 6. for the AY. s under appeal are about disallowance of expenditure on Tea and Coffee served to visitors. While framing assessments for the AY. s under appeal, AO. s found that that the entertainment expenditure quantified by the auditors did not include the expenditure on tea, coffee, food or other beverages provided to the visitors either in office or in factory, that the assessee-company did not include such expenses in the entertainment expenditure. He estimated the expenditure on tea, coffee etc. to visitors and treated the same as entertainment expenditure u/s. 37(2A)of the Act. The AO. s further observed that considering the size of the assessee, the estimates made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of appeal is about Expenditure on business meetings and conferences(G. 6-AY. 1987-88, G. 7-AY. 1989-90 &1990-91)u/s. 37(2A) of the Act and the amounts involved are Rs. 18. 37 lakhs, Rs. 38. 14 lakhs and Rs. 66. 26 lakhs for the respective for the assessment-years. 8. 1. In the appellate proceedings, FAA held that the assessee had conducted business meetings at hotels with the employees, that there was no doubt that the expenditure was incurred for the purpose of the business, that the expenditure was not incurred in the office but was paid to the hotels, that it was clear from the Expl. 2 to section 37(2A)/37(2) that the expenditure incurred on the hospitality of employees was excluded from the definition of the entertainment expenditure provided the expenditure is incurred in office/factory or other place of their work, that in the case under appeal the expenditure was incurred in the hotels, that the expenditure incurred on entertainment at hotels attributable to employees could not be brought under the expression other place of their work, that the expression had to be interpreted in the context in which other words preceding the expression were used, that the other words u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of every kind by the assessee to any person but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work." It is clear from the above Explanation 2 to section 37(2A)/37(2) that the expenditure incurred on the hospitality of employees gets excluded from the definition of the entertainment expenditure provided the expenditure is incurred in office, factory or other place of their work. In the present case, it is an accepted position that the expenditure was incurred in the hotels. The assessee's contention is iotels fall within the meaning of "other place of their work". I am unble to agree with the interpretation given by the appellant. Explanation 1 and 2 to section 37(2A) it can be seen that the expenditure incurred by the employees forms part to definition of entertainment expendi - ture. Explanation 2 does not treat expenditure on food or beverages provided by the assessee to the employees in office, factory or other place of their work as entertainment expenditure. The expenditure was not incurred either in office or in factory. The expenditure incurred on entertainment at hotels attributable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. O. is directed to examine and allow if the assessee is able to furnish the evidence of rent paid to the hotels or restaurants which was included in the business meetings and conferences expenditure. To sum up, the expenditure incurred on the business meetgs and conferences at the hotels falls within the definition of entertainment expenditure. The additions made by the AO are sustained subject to submission and verification of evidence of rent paid." 28. We agree with the reasoning given by the CIT(A) in the light of the provisions of Explanation 2 to section 37(2A) of the Act. We have also considered the decisions relied upon by the learned counsel for the assessee. The decision of Hon'ble Calcutta High Court in the case of Chemcrown (I) Ltd. (supra) is distinguishable as follows:The employees and customers participated in the entertainment whereas in the case of the assessee the employees alone participated. 29. The decision in the case of Expo Machinery Ltd. (supra) by Hon'ble Delhi High Court is also distinguishable as follows: It was a case of employees participation while entertaining guests and the issue of place of work in the context of Explanation 2 to section 37( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , AR admitted that issue was covered against the assessee, by the order of the earlier year. We find that identical issue was considered by the Tribunal in paragraphs no. 24, 27 and 30 of the order for the AY. 1985-86(supra). We have already mentioned that the Tribunal had dismissed the ground pertaining to entertainment, including the expenditure incurred in clubs for employeesemployers' meetings, therefore following the same ground no. 9 is dismissed." Following the above, we decide the dismiss G. 7/G. 8 for the AY. 1987-88, 1989-90 and 1990-91 against the assessee. 10. Next common ground of appeal is about Expenditure incurred on Employees'Get-togethers(G . 8-AY. 1987-88 and G. 9 for 1989-90). AOs found that in the Tax Audit reports, auditors had quantified the expenditure on employees get-togethers and picnics but the same was not treated as entertainment expenditure u/s. 37(2A) of the Act, on the plea that the said expenditure was incurred on conveyance as well as on food. As the assessee did not quantify the expenditure on employees get-togethers and picnics attributable to food and beverages, the AOs estimated the expenditure on food and beverages and disallowed Rs. 2. 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration, as business expenditure u/s. 37(1) of the Act, that the assessee had claimed that it had incurred expenditure on payment to TSRDS amounting to Rs. 1. 68 Crores, Rs. 1. 81Crores and Rs. 2. 03Crores respectively for the years under appeal. AO. s were of the opinion that payments made to TSRDS were not admissible as same were not incurred wholly and exclusively for the purpose of business of the company, that the expenditure incurred on various activities like village link road, drinking water project, irrigation facilities, vocational training etc. had no nexus with the business carried on by the assessee. 11. 1. Against the order of the AO assessee preferred an appeal before the FAA. After considering the submissions of the assessee, he held that the assessee had given contributions to TSRDS that was an independent entity registered under the Societies Act, that the expenditure incurred by the assessee had no direct nexus with the business carried on by it, that the assessee was engaged in the business of manufacture of steel and the expenditure was incurred for the activities which had no direct nexus with the business carried on by it. Relying upon the judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to it on a long term basis by the Government of Bihar. As all the facilities of the Works, sites for the associate companies, residence sites for its own employees and their dependents and sites for the business community were to be located on its own land, the assessee had to provide all the facilities of a Municipality like, power, water, sanitation, hospitals, playgrounds, clubs, reading rooms, dispensaries, community welfare centres, cultural assistance, etc. In the Lease Agreement finalised with the Bihar Government the assessee was under an obligation to provide aji the civic amenities in Jamshedpur and, therefore, the assessee had to continue these obligations which it had undertaken earlier on its own, in the absence of a Municipality in a large township like Steel City of Jamshedpur. With the increase in the number of people residing in Jamshedpur, the assessee found it difficult to cope with all the services of civic amenities and it has, therefore, encouraged senior officers of the company and other leading citizens in Jamshedpur to set up voluntary organisations registered under the Societies Act or other charitable institutions to undertake activities in the field ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t orders of the Tribunal delivered in the case of the assessee as well as TELCO should be followed. In our views, MOU makes the facts and circumstances of the case peculiar. We find that Hon'ble jurisdictional High Court has, in its order dated 26. 12. 2012, dismissed the appeal filed by the department filed for AY. 1985-86(IT Appeal No. 3176 of 2010) where similar issue of contribution to various institutions was decided in favour of the assessee by the Tribunal. (Ground no. B and F). As far as discharging of social responsibility is concerned Voltas Ltd. had to be considered the guiding case. As in that case there was no MOU with the workers, so, considering the peculiarity of facts of the case, as against the matter of Voltas, we decide the issue in favour of the assessee." Following the order for the AY. 1986-87 we decide the issue of payments to TSRDC in favour of the assessee for all the three AY. s 12. Contribution of Rs. 9. 12 lakhs and Rs. 2. 34 lakhs to Steel Plants' sport Board and Tata Sports Board during the AY. 1987-88 and AY. 1990-91 is the subject matter of G. 12 and G. 11 for the respective AY. sDuring the assessment proceedings AO. s held that the contributions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contributions to various Institutions at Jamshedpur contributions to various Institutions at Jamshedpur. During the assessment proceedings AO. s found that the assessee had made contributions of Rs. 19. 68 lakhs, Rs. 49. 96 lakhs and 34. 48 lakhs during the AY. sunder appeal respectively. Assessee contended that the said contributions were made to various institutions for discharging its civic, social obligations to maintain the township of Jamshedpur. AO. s did not accept the contention of the assessee and held that the contributions were given for the welfare of the employees and such contributions which were given to them were hit by the provisions of section 40A(9) because the payments were made in the capacity of an employer, that if it was taken that the institutions to whom contributions were given were providing civic amenities to the city of Jamshedpur then also the contributions would be liable for disallowance because the employees were major beneficiaries of the contributions, that if the benefit of the contributions was for the city of Jamshedpur at large then these contribution were in the nature of charity. They disallowed the claim made by the assessee. 13. 1. Deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal at paragraph 38 has held as under: "We have perused the details of the expenses. A sum of Rs. 10 lakhs was paid for modernisation project phase-I. A sum of Rs. 2 lakhs and Rs. 3 lakhs was paid for project report for feasibility of plastic lines and coated pipes and revamping the ERW Mill respectively. In AY. 1968-69 in I. T. A. No. 2068/Bom/74-75 the Hon'ble ITAT in assessee's own case considered expenditure on report for increasing production capacity and future development. After elaborate discussion, the Tribunal came to the conclusion that expenditure was not a capital expenditure and allowed deduction of same as a revenue expenditure. Facts and circumstances being identical in this year, respectfully following the decision of the Tribunal, we hold that the expenditure in question has to be allowed as a deduction being a revenue expenditure. Ground No. 12 is allowed." Following the above, we decide Ground no. 16, before us, in favour of the assessee. In view of the above, G. 14/G. 13 for the AY. s under appeal are decided in favour of the assessee . 15. Issue of payments in Cash, in excess of Rs. 2, 500/-, is the subject matter of next ground of appeal(G. 16-1987- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was installed in the electricity division , that it had produced electricity and used such electricity in its manufacturing process, that the assessee also sold the power to other group companies and residents of Jamshedpur and derived substantial revenues from selling the power, that the assessee had not identify the P&M which were used for the purpose of generation and distribution of power, that the P&M was used for the purpose of bringing water from the rivers for manufacturing purpose and also for the purpose of supply of water to the town wherein the residential quarters are located, that the P&M was partly used for the purpose of manufacture of steel and partly for the purpose of supply of water to the residential quarters, that the investment allowance was admissible on the P&M which was used for the purpose of manufacture. 16. 1. In the appellate proceedings, FAA held that the assessee had submitted the details of plant and machinery which were installed in the electricity division, that the value of the plant and machinery used for generation and distribution of electricity was quantified and furnished during the assessment proceedings, that the assessee was entitled f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial undertaking, that such plant & machinery had no link with the manufacturing process. As a result, he upheld the order of the AO of not allowing the investment allowance u/s. 32A of the Act. He further held that the AO. s had not allowed extra shift allowance on the above assets installed in hospital, club etc. , that from the perusal of the depreciation table in Part I, Appendix I it transpired that the X-Ray, Electro therapeutic apparatus and accessories thereto came in the category of N. E. S. A. , that the other items used in hospital and club, airport etc. like air-conditioning plant, electrical light and fan etc. were also covered by N. E. S. A, that the AOs' action of not allowing the extra shift allowance had to be endorsed. Discussing the claim made by the assessee for the investment allowance on the sanitary works installed in the town division, FAA held that the P&M was used for the purpose of disposal of the waste material from the residences of the citizens of Jamshedpur to the central effluent treatment plant, that the P&M was installed in residential accommodation and it was not entitled for investment allowance, that as per the provisions of the proviso to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Hon'ble Mumbai ITAT in appellant's own case for assessment years 1981-82 and 1982-83. 45. The assessee has an integrated Steel Plant at Jamshedpur to manufacture steel. It has also set up a township in the process of setting up the manufacturing facilities for producing steel. The township is an integrated part of Works of the assessee. The background of setting up of the township has been fully elaborated while dealing with ground No. 14. In respect of depreciation and investment allowance the assessee made the following claim. (I)Investment allowance, additional depreciation and extra-shift allowance allowed on plant and machinery classified under the heading "Town Division" X X X The Assessing Officer disallowed the claim for deduction on the following grounds:Plants and machineries are installed in Town Division and serve the residential premises/office accommodation and as they fall under the exclusion Clause of section 32(l)(iia), additional depreciation is not allowed. The Assessing Officer disallowed investment allowance on the ground that the Town Division provides residential facilities to the workers and staff of the assessee company well as other re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, should be wholly used for the purpose of the business carried on by him and should be the machinery or plant specified in subsection (2). Subsection (2) stipulates that the plant and machinery should be installed in an industrial undertalcing for the purpose of business of manufacture or production of any article or thing other than the articles or things specified in the Eleventh Schedule. No deduction by way of investment allowance is allowable in respect of (i) any machinery or plant installed in any office premises or any residential accommodation including a guest house, (ii) any office appliances, (iii) any road transport vehicles, (iv)any ship or plant and machinery in respect of which development rebate was or is allowable and any machinery or plant, the whole of the actual cost of which is allowed as a deduction in computing the total income. According to CIT(A) each and every item of plant and machinery is not eligible for investment allowance even though it may be used for the purpose of business. According to the CIT(A) plant and machinery installed in industrial undertaking should have any nexus with the business of manufacture or production of any article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word "industrial undertaking" was not employed in section 33. In my view, by employing the word "industrial undertaking", the scope has been restricted in section 32A of the I. T. Act. With utmost respect, I submit that the Hon'ble ITAT, D-Bench, Mumbai for assessment year 1981-82 and 1982-83 in the appellant's case did not consider the significance of the word "industrial undertaking" in section 32A. Thus, the context in which the Hon'ble ITAT treated the hospital and other facilities as part of the manufacturing process was different in assessment years 1968-69 to 1971-72. A similar condition did not exist in the assessment years under consideration. As observed earlier, the machinery and plant must have a close nexus with the business of manufacture or production of any article or thing. The Hon'ble Calcutta High Court in Technico Enterprises Put. Ltd. (supra), Machinery Manufacturing Corporation (supra), Pieco Electronics Ltd. (supra) held that the plant and machinery must be inextricably connected with the production of the article or thing on which investment allowance is claimed. In my view, the aforesaid judgments of the Calcutta High Court lay down the proposition that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the computer was not used for manufacture or production of any article by the assessee and hence the assessee was not entitled to investment allowance On the other hand, the decisions relied on by the ld counsel of the assessee do assist the case of the ass essee In the case of Tnveni Tissues Ltd (supra), the Hon'ble Calcutta High Court has held that the assessee, who was manufacturing tissue papers was entitled to investment allowance on motors, electnc installations, underground cables, overhead cables and airconditioning machines. In the case of Visveswarayya Iron and Steel Ltd. (supra), the locomotives and railway sidings provided at places of manufacturing activity for transport of articles out of or into factory were held to be plant entitled to investment allowance. We feel that we need not discuss each and every case relied on by the assessee, particularly when a view has been taken by the ITAT, Bombay Bench, in assessee's own case for the assessment years 1968-69 to 1971-72. In heir order dated 13-10-1976, it has been held by the Tribunal that main works and the township formed an integral part of the whole industrial complex, one of which cannot exist without th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are issue expense. The expenses were disallowed by the AO in the AY. s1987-88, 1989-90 and 1990-91. 18. 1. Relying upon the matters of the Hon'ble supreme Court in the case of Brooke Bond India Ltd. (225ITR798)and Punjab State Industrial Development Corporation Ltd. (225ITR792), FAA held that the expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital was directly related to the expansion of the capital base of the company and was a capital expenditure even though it might incidentally help in the business of the company and in the profit making, that the action of the AO was as per the provisions of law. 18. 2. Before us, AR agreed that after the judgments of Hon'ble Apex Court issue has to be decided against the assessee. Following the order of the Hon'ble Supreme Court we dismiss G. 21 and G. 18 of the AY. s mentioned above. 19. Investment allowance on Foreign Exchange Fluctuation(FEF)is the subject matter of G. 19 for both the AY. si. e. 1987-88, 1989-90. During the assessment proceedings AO found that the assessee had claimed FEF of Rs. 13. 75 lakhs and 20. 43 lakhs respectively for the AY. s under appeal. He found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 43A(1) commences with a non obstante clause which overrides all the other provisions of the Act and must there-fore, be given full and proper effect by, inter alia, altering the actual cost for the purposes of section 32A as well. If the Legislature had intended that section 43A(1) was not to apply to section 32A, when introducing section 32A it would have introduced a non obstante clause or added to the exclusions in section 43A(2). It is submitted that there is nothing to suggest that section 43A is not to apply to section 32A and in fact every canon of interpretation demands that section 43A is applicable to section 32A. CIT v. Gujarat State Fertilizers Co. Ltd. [2003] 259 ITR 526 (Guj) [FB]. The only argument of the Revenue is that investment allowance under section 32A is a one time allowance which had been allowed in the earlier year and therefore, no further investment allowance can be granted by applying section 43A. The Revenue's stand is clearly untenable as had the Legislature intended to exclude one time allowances, section 43A(2) would become redundant. Further, the Legislature has expressly referred to the one time allowance in section 43A(1) itself such as sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision in Khatau Makanji's case [1996] 222 ITR 472 (Bom) being a judgment per incuriam, CIT v. Modu Timblo (Individual) [1994] 206 ITR 647 (Bom), and passed sub silentio and being inconsistent with the earlier decisions of this court and of the Supreme Court is erroneous and cannot be used by the Revenue to deprive the assessee of the benefit of investment allowance on the increased loan liability consequent upon the depreciation of the Indian currency in the foreign exchange market. In the light of the above discussion, it must be held that the Revenue erred in holding that the said investment allowance was not available in respect of the enhanced liability due to the fluctuation in the foreign exchange market. The issue must accordingly be answered in the affirmative in favour of the assessee and against the Revenue. ." We find that in the above matter judgment of Khatau Mukanji Spinning & Weaving Mills (supra), relied upon by the FAA, has been reversed. Respectufully following the judgment of the Hon'ble jurisdictional High Court, delivered in the matter of Associated Bearing Co. Ltd. (supra), we decide G. 19 for both the AY. s, in favour of the assessee . 20. Next gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eded to rely upon another judgment of the Jaipur Bench of the Tribunal in the case of Rajasthan Financial Corporation v. Deputy CIT [1997] TW-501, holding that the expenditure incurred for raising capital through bonds in business was revenue in nature and it was held that since in the present case the assessee had incurred expenses of Rs. 44 lakhs on issuance of debentures being a loan, in our considered opinion, there is no basis for not allowing deduction for the entire sum and thus this addition was deleted. We have gone through the judgment in Brooke Bond India Ltd. 's case [1997] 225 ITR 798 (SC) and find that that was a case where the registration fee to the tune of Rs. 1, 50, 000 was paid to the Registrar of Companies for increasing the share capital of the company, while in the case of India Cements Ltd. [1966] 60 ITR 52, the matter related to the borrowing of Rs. 40 lakhs from a financial institution, which loan was secured by a charge on the fixed assets of the company. The Hon'ble Supreme Court in this judgment considered various aspects of the matter including the previous English judgments and couple of judgments of the English courts based on the English In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee argued relying upon the judgment of the Calcutta High Court in CIT v. East India Hotels Ltd. reported in [2001] 252 ITR 860, that the expenditure incurred even in raising loan by convertible debenture would also be admissible as revenue expenditure. The Calcutta High Court had adopted the reasoning that con-version of debentures results in repayment of loan and issuance of shares. This is one aspect of the matter. In our view, the other more important aspect of the matter is that the Hon'ble Supreme Court in India Cements' case [1966] 60 ITR 52 has clearly excluded this aspect from consideration by holding that it is irrelevant to consider the object with which the loan was obtained. The debentures when issued is a loan and, therefore, whether it is convertible or nonconvertible does not militate against the nature of the debenture, being loan and, therefore, the expenditure incurred would be admissible as revenue expenditure. Thus, we do not find any error in the finding of the learned Tribunal on this aspect also. Consequently, question No. 2 also as framed, is required to be and is answered against the Revenue and in favour of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6(supra). We find that the question of deemed perquisites was dealt by the Tribunal as under: "34. It is not in dispute that in A. Y. 1988-89 and several assessment years similar issue had come up for consideration in assessee's case before the ITAT and the Tribunal in I. T. A. No. 3222/Bom/92 by following the decision of the Hon'ble Bombay High Court in the case of Lubrizol India Ltd. , 187 ITR 25 (Bom) was pleased to uphold such disallowance. We are of the view that the estimate of disallowance u/s. 40A(5) as made by the CIT(A) is proper and has to be upheld. Ground No 11 is therefore, dismissed. Following the above, we confirm the order of the FAA and dismiss ground no. 11." Considering the above we direct that disallowance for all the three AY. sshould be restricted to 25%. As the FAA has already followed the decision of the Tribunal for AY. 1988-89, so we decide ground no. G. 9 for the AY. 1987-88 against the assessee . 23. Next ground deals with expenditure, amounting to Rs. 4, 58, 110/-, incurred on conversion of Partly Convertible Debentures in to shares (G. 10). Before us, AR fairly conceded that similar issue was decided against the assessee in the AY. 1986-87 by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90, 038/-due from the government departments /officials as bad debts. He stated that no evidence was produced to establish that the debts had become bad during the previous year. The assessee submitted before the AO that there was no hope of recovery, but he did not accept the contention of the assessee on the ground that the amounts due were from the Govt. and semi government organisations and the recovery was possible. In the appellate proceedings, FAA held that the arguments of the assessee were vague and general in nature, that no trouble was taken by the assessee to recover the dues from the government departments and officers. He upheld the order of the AO. 25. 1. AR stated that issue of bad debts from government agencies was decided in favour of the assessee by the Tribunal while adjudicating the appeal for previous AY. We find that identical issue has been dealt by the Tribunal in the order for the AY. 1986-87(supra)as under: 25. 2. Before us, AR and DR agreed that issue is covered in favour of the assessee by the order of the Tribunal delivered for earlier AY. (supra). We find that issue of bad debts had been dealt in the AY. 1985-86, by the Tribunal as under : 58. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Jethabhai Hiiji v/s. CIT, 120 ITR 792 wherein the following principles have been laid down: proceedings taken are pending in the year for which the claim for bad debt is made and they subsequently end in a decree in favour of the assessee. It was therefore, submitted that the bad debts of Rs. 25, 53, 593 written off be allowed as deduction. 60. We are of the view that the write off of the debt as bad has to be construed as a bonafide write off. It was based on commercial providence. In the light of the principles laid down by the Hon'ble Bombay High Court we direct that the deduction claimed be allowed. Ground No. 18 is allowed." We find that Hon'ble Bombay High Court has dismissed the appeal of the department vide its order dated 26. 04. 2012 wherein order of the Tribunal for the AY. 1985-86 was challenged and issue of writing off of debts was agitated before the Hon'ble Court. (IT Appeal no. 3176 of 2010- question of law no. E). Following the above ground no. 24 is allowed" Following the order for the last AY. G. 22 for the AY. 1987-88 is decided in favour of the assessee. 26. Last ground of appeal for the year deals with Disallowance of expenditure, amounting to Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charging the assessee 's obligation to provide civic amenities at Jamshedpur. But, finally he held that in absence of evidence claim made by the assessee had to be rejected. 28. 1. Before us, AR argued that similar contributions were allowed by the Tribunal in earlier years. He referred to the order of the Tribunal for AY. 1986-87(supra)in this regard. DR supported the order of the FAA. 28. 2. We have heard the rival submissions and perused the material before us. We find that out of the total expenditure of Rs. 71, 99, 185/-claimed by the assessee, AO had allowed Rs. 21, 17, 000/-, that the assessee had not produced any evidence before the AO or the FAA to support its claim for the remaining amount. Even if it is agreed, in principle, that contribution made by it were for discharging civic duties, the assessee has to prove the fact of incurring of expenditure. As it has failed to substantiate the claim made by it, so, in our opinion FAA was justified in rejecting its appeal. Before us, also fact of incurring of expenditure was not established. Therefore, confirming the order of the FAA, we decided ground no. G. 23 for the year under appeal against the assessee. 29. Last ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights issue were credited to the cash credit account from April to June, 1988. Finally, he upheld the order of the AO. 29. 2. Befor us, AR submitted that assessee had its own funds of Rs. 801. 62 Crores, that it had made investment of Rs. 234. 44 Crores only during the year under appeal, that borrowed funds were not used for making investment. He referred to the balance sheet of the AY. 1989-90. He relied upon the decisions of Reliance Utilities & Power Ltd. (313 ITR 340), Munjal Sales Corporation(298 ITR 298), Dhirajlal Morarji(50 SOT496), Bayer Bio Science (P. ) Ltd. (20 taxmanann. Com 79), Jindal iron & Steel Company Limited(57 SOT 317), Hindustan Construction Co. Ltd. (140 ITD 642), Woolcnmbers of India Limited(134 ITR 2I9) and East India Pharmaceutical Works Ltd. (224 ITR 627). DR supported the order of the FAA. 29. 3. We have the rival submissions and perused the material before us. We find that in the balance sheet, filed by the assessee for the year under consideration, funds available under the heads 'capital', 'reserves and surplus' and 'subscription received' is more than Rs. 800 Crores, that investments made by the assessee in purchasing units of UTI is much less th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsing the order of the FAA, we decide G. 24 in favour of the assessee. 3965/Mum/2003, AY. -1987-88, 3966/Mum/2003, AY. -1989-90, 3867/Mum/2003, AY. -1990-91, 30. First ground of appeal for all the three assessment years is about direction issued by the FAA to the AO, s to allow deduction on account of provision for leave salaries for the AYs. 1987-88, 89- 90 and 1990-91, amounting to Rs. 1, 92, 06, 869/-, Rs. 6, 03, 06, 370/-and Rs. 6, 12, 80, 864/-resepective - ly. Assessee, during the years under appeal, had made payment towards leave salary and had also made provisions for leave salary. AO. s were of the opinion that the provision made by the assessee for salary on accrual basis was not an ascertained liability. They disallowed the provision made of account of leave salary of Rs. 1. 92Crores, Rs. 6. 03Crores, and Rs. 6. 12 Crores, made by the assessee, for assessment-years in question. In appellate proceedings, FAA allowed the appeal filed by the assessee and directed the AO to allow the claim made under the head 'provision for leave salary'. 30. 1. Before us, DR and AR agreed that submitted that while deciding the appeal for the AY. 1986-87(supra), Tribunal had rejected the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the Sirpur Paper Mills (237 ITR 41), that in view of the said decision the assessee was entitled to claim the entire initial contribution to the ASF as deduction. 31. 1. Before us, DR agreed that the issue was decided in favour of the assessee by the order of the Tribunal delivered for the AYs. 1986-87(supra). AR submitted that for the AY. 1992-93(supra) similar issue was decided against the AO by the Tribunal. We find that same issue was dealt by the Tribunal in the order for the AY. 1986-87(supra)as under: "30. 3. We have heard the rival submissions and perused the material before us. We find that the issue of contribution to ASF has been dealt by the Tribunal while passing order for the AY. 1985- 86 making following observations: "101. After hearing both the sides, we find the issue stands covered in favour of the assessee and against the Revenue by the decision of the Tribunal in assessee's own case vide I. T. A. No. 7083/Bom/96 order dated 27th, December, 2004. We find the Tribunal at para 4 of the order has held as under: "4. Ground No. 2 disputes the Ld. CIT(A)'s order in directing to allow the entire amount of Rs. 2, 43, 471/- being initial contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra)for the AY. 1985-86. We find that in its order Tribunal had held as under: "112. After hearing both the sides, we find this issue stands covered in favour of the assessee by the decision of the Tribunal in assessee's own case vide I. T. A. No. 7083/Bom/96 order dated 27th December, 2004 for the A. Y. 1992-93. We find the Tribunal in the said order has given a finding that the assessee satisfies all the requisite conditions as provided in Explanation r. w. second proviso to subsection (4) of section 37 as existing at the relevant time and, therefore, the assessee is found to be entitled to deduction. Accordingly, the ground raised by the Revenue was dismissed. Respectfully following the decision of the Tribunal in assessee's own case and in absence of any contrary material brought to our notice this ground by the Revenue is dismissed. Respecfully, following the above, Ground no. 4 is decided against the AO." In view of the above we decide ground no. 3 for AY. 1987-88 and Ground no. 4 for AY. 1989-90 and 1990-91 against the AO. 33. Issues of Investment allowance and Extra shift allowance on town division, (G. 7 for AY. 1987- 88, G. 6 for the AY. 1989-90 and G. 5 for AY. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held as under: 2. 12. We have given a careful consideration to the rival . submissions in the light of the material presented before us. The decisions relied on by the ld. D R are, in our opinion, distinguishable in facts, The decision in the case of ACC Ltd. (supra) relates to develop - ment rebate and-not to additional depreciation. in the case of Machinery Manufacturing Corpn. Ltd. (supra), investment allowance on Fire Extinguishers and Time-Office equipment was denied as it was held that such items are not plant and machinery which are installed for the purpose of business of construction, manufacture or production article or thing. In the case of Pieco Electronics and Electronics Ltd. (supra), the investment allowance on the new equipment installed in the canteen was denied. In Technico Enterprises (P) Ltd. (supra), it was held that the computer was not used for manufacture or production of any article by the assessee and hence the assessee was not entitled to investment allowance. On the other hand, the decisions relied on by the Id. Counsel of the assessee do assist the case of the assessee. In the case of Triveni Tissues Limited (supra), the Hon'ble Calcutta High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess, that same was part of the operational integration, whereas AO was of the opinion that P&M were installed in stock yards were not used directly in the manufacturing process. He made a disallowance of Rs. 2, 14, 659/-, for the AY. 1987-88. Before us, DR agreed that issue has already been decided by the Tribunal in the appeal for the earlier year. In the order of the Tribunal for the AY. 1986-87, (supra)issue of investment allowance on P&M of stock yard has been decided as under: "We find that while deciding the identical issue for the AY. 1985-86, Tribunal had held as under: 134. After hearing both the sides, we fmd the issue stands covered in favour of the assessee by the decision of the Tribunal in assessee's own case in I. T. A. No. 548/Bom/88 order dated 4. 6. 1993 for the A. Y. 1982-83 wherein the Tribunal at para 4 of the order has discussed the issue and following the decision of the Tribunal in assessee's own case for the A. Y. 1981-82 allowed the claim of the assessee on account of investment allowance on railway sidings at stock yard. We find the Tribunal vide order dated 15th December, 1994 in R. A. No. 2202/Bom/93 has dismissed the Reference Application by the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time computer 9, 55, 53 1 (iv)Equipment for lighting security road in factory in Adityapur 4, 83, 150 (v)Weigh bridge at loading station 90, 742 45, 58, 283 25% thereon 11, 39, 570 138. While doing so he relied on the. decision of the Hon'ble Rajasthan High Court in the case of Trinity Hospital, reported in 225 ITR 178 wherein the plant and machinery installed in hospital was found to be eligible for investment allowance. 139. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 140. After hearing both the sides and in view of our detailed discussion at grounds of appeal No. 7 by the impugned appeal(para 130), we do not find any infirmity in the order of the CIT(A) granting investment allowance on the above assets. the ground raised by the Revenue is accordingly dismissed." Respectfully following the above order, we decide ground no. 9 against the AO." After considering the above we are dismissing Ground by the AO. s with regard to investment allowance, extra shift allowance for various items of P&M including the P&M installed at stock yard and town division. 36. Next ground of appeal is about contribution to Tata Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed that the issue of contribution to AAML was decided against the AO by the Tribunal in the earlier AY. We find the issue in question was dealt by the Tribunal for the AY. 1985-86 as under: "108. We have considered the rival submissions made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We find the Assessing Officer disallowed the amount of Rs. 1, 33, 90, 133/- on account of guaranteed payment to AAML on the ground that such payment was in the nature of a capital payment. Further, the agreement entered into with a Tata group concern incurring huge losses could be a conduit to transfer the profits from the assessee company to minimise the loss and therefore, is a colourable device. However, we find the assessee paid the shortfall in the minimum guaranteed amount in the initial three years and during the 4th and 5th year has earned more operative profit which has been offered to tax. We find in the initial three years the assessee has paid a sum of Rs. 6. 11 crores whereas in the A. Ys. 1988-89, 1989-90 and 1990-9 1 the assessee received a sum of Rs. 8. 31 crores and offered the same for taxation. Thus there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions of the assessee. Finally, the estimation made by the AO towards perquisites was deleted . 33. 2. Before us, DR and AR agreed that issue was covered by the order of the Tribunal delivered for the preceding AY. We find that at paragraph 45 of the said order matter was decided against the AO. We also find that the FAA has given a categorical finding of fact that certain facilities were not provided to the CMD and rent was collected from him. Thererfore, upholding his order we decide ground no. 5 against the AO." Following the order for the earlier year, we decide ground no. 5 against the AO. 39. Last ground of appeal for the year 1987-88 is about expenditure incurred on fees to consultants for feasibility studies, amounting to Rs. 68. 03 lakhs. We find that in the appeal for the AY. 1986- 87, filed by the assessee-company, Tribunal has dealt the issue as under: "Ground No 12 reads as follows "The learned CIT(A) erred in holding that expenditure of Rs. 15, 00, 000 incurred on technoeconomic feasibility studies was capital in nature." 36. The assessee carries on the business of manufacturing iron and steel. It has got its factories in the States of Bihar and Oriss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided against the AO. 40. One of the common ground for the AYs. 1989-90 and 1990-91, raised by the AO, is about direction given by the FAA to exclude sales tax, excise duty from total turnover for the purpose of calculating deduction for 80HHC of the Act. During the assessment proceedings AO excluded sales tax, excise duty from the total turnover, while computing the 80HHC deduction . Assessee preferred an appeal before the FAA. After considering the submissions of the assessee and the assessment order, he held that both the items could not be excluded from the total turnover. 40. 1. Before us, DR and the AR submitted that issue was decided in favour of assessee by the decisions delivered by the Hon'ble Supreme Court in the cases of Catapharma (India) P. Ltd. (292ITR694) and Lakshmi Machine Works(290 ITR 667). We find that in the case of Cataphar - ma (India) P. Ltd. (supra) Hon'ble Apex Court has held as under: "While calculating the deduction under section 80HHC(3)(b) of the Income-tax Act, 1961, for computing the "total turnover" of exports out of India of trading goods, excise duty and sales tax are not to be included. The object of the Legislature in enacting section 80H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own in the return of income, that the AO had arbitrarily and without giving any reason estimated a sum of Rs. 1. 25 crores on capital account out of repairs, that similar addition was deleted by the FAA in AY. 1984-85. After considering the submissions FAA held that an identical issue had arisen in assessment year 1988-89, that the then FAA had deleted the addition. Following the said order he held that the disallowance were ad hoc in nature and without any basis, that AO had not mentioned in the assessment order what kind of repairs he had disallowed, that it was a well settled principle of law that so long as the repairs brought into existence any new asset or changed the character of the old assets in such a way that it would become unrecognisable the repairs could not be construed as capital expenditure. He deleted the addition made by the AO. 41. 2. Before us, DR supported the order of the AO, and the AR supported the order of the FAA. 41. 3. We have heard the rival submissions and perused the material before us. We find that while holding that the assessee had incurred capital expenditure, AO has not given any details of the items that were of capital nature. Without gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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