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TMI Blog2013 (10) TMI 1535X X X X Extracts X X X X X X X X Extracts X X X X ..... .2004. Since the appeals arise out of the same order, we are passing a consolidated orders for the sake of convenience and brevity. Assessment Year 2000-01 ITA No. 5421/Mum/2005: Assessee s appeal: The following grounds have been taken: (1) That, on the facts and in the circumstances of the case and in law, the learned Assistant Commissioner of Income Tax (herein after referred to as ACIT) has erred in making disallowance of ₹ 5,85,508/-being rural development expenditure incurred by the appellant and learned Commissioner of Income Tax (Appeals) (herein after referred to as CIT (A)) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the claim of ₹ 5,85,508/-and to reduce the total income accordingly. (2) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing ₹ 12,950/being depreciation claimed by the appellant on roll over charges and learned CIT (A) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the Depreciation of ₹ 12,950/- on roll over charges and to reduce the total income accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction under section 35D on debenture issue expenditure and to reduce the total income accordingly. (6) Without prejudice to the claim of the appellant that the deduction claimed under section 36(1)(iii) for interest on loans taken for new projects/ expansion / modernization during assessment years 1994-95 to 1999-2000 is revenue expenditure, however, if it is held in those years that the said expenditure is not revenue expenditure ,the appellant claims that the said expenditure be capitalized to the actual cost of fixed assets and depreciation be allowed on the same and to reduce the total income accordingly . 3. Ground no. 1 pertains to disallowance of ₹ 5,85,508/-, being expenditure incurred on rural development. 4. At the time of hearing, the Senior Counsel submitted that the issue has been in continuance since assessment year 1992-93. When the issue reached the ITAT, it was restored to the AO and in all the subsequent years, the issue has been held by the ITAT in favour of the assessee. The Senior Counsel submitted that last in the series of orders has been in ITAs No. 6668 6669/Mum/2003, wherein the coordinate Bench in the assessee s own case directed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was disallowed by the AO, wherein, he held the same to be of capital in nature. The issue was taken up before the CIT(A), who allowed the expenses incurred on printing work, certification work, postage, printing, Advertising, stationary, traveling and other miscellaneous expenses, but disallowed the rest, as there was no cogent reason to allow the same . 18. The AR pointed out that the issue pertains to buy back of shares and has nothing to do with the capital restructuring of the capital base of the company. He placed reliance on the decision of Bombay High Court in Burmah Trading Corpn. Ltd. vs CIT reported in 145 ITR 793 and on the decision of Hon ble Bombay High Court in the case of CIT vs Hindalco Industries Ltd., wherein the Hon ble Bombay High Court held, It must be clarified that the expenditure does not include the price paid to the shareholders for buying back the shares. It merely relates to the expenditure incurred in connection with the carrying out of the buy back scheme. The buy back however, would not in any manner enhance the capital structure of the respondent. If anything there is an outflow of capital. As we noted earlier, the respondent ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed, the alternate ground becomes infructuous. Hence the ground raised is rejected. 28. In addition to the above ground, the assessee has raised an additional ground in ITA 5421 of 2005 reads as under: 1. On the facts and circumstances of the case and in law, the Appellant prays that the ( AO ) be directed to: i. Exclude from taxable profits, the sales tax exemption benefit of ₹ 7,55,70,408/-, which is included in Sales and which is taxed in the assessment order as part of profits of the business; and ii. To treat the same as capital receipt not chargeable to tax . The AR pointed out that in earlier years as well, the issue was taken up as additional ground and the issue had been restored to the file of the AO. He, therefore, prayed, like wise, the additional ground be admitted. 29. DR strongly objected to the allowability of additional ground. 30. On hearing and on going through the orders of the preceding years, the coordinate Bench has allowed the admission of additional ground and we find that the same has been restored to the file of the AO. 31. For the sake of continuance and in the interest of justice, we also admit the additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR, placed reliance on the orders of the revenue authorities. 36. On going through the orders of the coordinate Benches in assessee s own cases and in ITA No. 6668 6669/Mum/2003, the coordinate Bench relied on the decision pertaining to assessment year 1995-96 in ITA No. 3207/Mum/2002, wherein it was held, 2.9 The ground No.9 is regarding disallowance of ₹ 19,05,496/- under section 40A (9). The said expenditure had been incurred by the assessee on payment made to schools at Veraval and Malkhed wherein the children of the employees of the company were studying. The AO disallowed the expenditure under section 40A(9). The said section provides that no deduction could be allowed in respect of any sum paid by the assessee as an employer towards setting up or formation of or as contribution to any fund/ trust, company, association of persons, body of individuals, society registered under the Societies Registration Act or other institution for any purpose except wheresum is so paid for the purposes and to the extent provided for under clause (iv) or clause (v) of sub section (1) of section 36 or as required by or under any other law for the time being in force. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture. 46. The AR, pleaded that the decision of the CIT(A) is as per law and is now squarely covered by the decision of ACIT vs Grind Well Worton Ltd. in ITA No. 5512/Mum/2007, where one of us was party to the order, it was held, In the present case, we are concerned with a case where debentures redeemed much prior to the period for which they were issued. In other words, the contractual terms of issue of the debentures were not fulfilled and there was a novation of contract between the Assessee and the debenture holders. In such circumstances, we are of the view that the year in which the expenditure in the form of premium redemption of debentures should be allowed. We order accordingly. Gr. No.4 raised by the Assessee is allowed . 47. We find that the issue is squarely covered by the decision in the case of Grind Well (supra), we, therefore, respectfully following the decision of the coordinate Bench, sustain the order of the CIT(A) and reject the decision of the AO on the issue. 48. Ground no. 4 is rejected. 49. Ground no. 5 pertains to allowance of expenditure on acquisition of marketing and technical know-how of ₹ 18,67,22,219/- as revenue expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and in law, the learned Assistant Commissioner of Income Tax (herein after referred to as ACIT) has erred in making disallowance of ₹ 5,72,764/- being rural development expenditure incurred by the appellant and learned Commissioner of Income Tax (Appeals) (herein after referred to as CIT (A)) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the claim of ₹ 5,72,764/- and to reduce the total income accordingly. (2) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing ₹ 9,731/- being depreciation claimed by the appellant on roll over charges and learned CIT (A) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the Depreciation of Rs. ₹ 9,731/- on roll over charges and to reduce the total income accordingly. (3) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing ₹ 19,20,39,222/- being deduction claimed by the appellant under section 80HHC [read with Circular No. 680 dated 21.2.1994] from MAT income as per provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 pertains to disallowance of ₹ 5,72,764/- being rural development expenditure. 61. This issue has been dealt with by us in ITA No. 5421/Mum/2005, wherein, we have allowed the expenditure. Relying on our own decision, as taken by us, we allow the ground, wherein we set aside the order of the CIT(A) on this issue and the AO is directed to delete the addition. 62. Ground no. 1 is thus allowed. 63. Ground no. 2 pertains to disallowance of ₹ 9,713/- being depreciation on roll over charges. 64. The expenditure has been allowed as revenue expenditure, thus this ground becomes infructuous in so far as the instant appeal is concerned. 65. Ground no. 2 is thus, rejected. 66. Ground no. 3 pertains to disallowance of ₹ 19,20,39,222/- being deduction claimed under section 80HHC on MAT provisions. 67. At the time of hearing, the Senior Counsel submitted that the issue is squarely covered by various decision, as referred to in the synopsis filed. The Senior Counsel further submitted that in the latest decision in the case of CIT vs Bhari Information Tech. Sys. P. Ltd., reported in 340 ITR 593, Hon ble Supreme Court held, In the present case, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses towards NCD as revenue expenses and expenses incurred towards FCDs have been allowed under section 35D. 76. The ground is, rejected as not pressed. 80. Ground no. 6 pertains to depreciation on interest capitalization on loan. 77. The ground was taken as an abundant caution. Since the issue has been decided by various decision by the coordinate Bench in the case of the assessee in various years, allowing the expense under section 36(1)(iii) and also we have held the issue in this order itself in ITA No. 5421/Mum/2005, following the same, we hold that in the instant appeal, the ground is infructuous, hence rejected. 78. In addition to the above, the assessee has raised additional grounds of appeal, which are as follows: 1. On the facts and in the circumstances of the case and in law, the learned AO ought to have allowed 100% of the export profit as deduction under section 80HHC from book profits (ignoring the subsection (1B) of section 80HHC), calculated on the basis of adjusted books profits under section 115JB . 79. Additional Ground no. 1: The issue is identical as that in assessment year 2000-01, wherein we have restored the issue back to the file of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income computed as per the proviso to section 8OHHC(3). The appellant has relied on the detailed submissions made to the AO and following judgments i) ACIT vs. Prathiba Syntex (106 Taxmann 32) ii) Avon Cycles vs. ACIT (59 TTJ 75) iii) A.M.Moosa vs. ITO (54 TTA 193) iv) Vishal Exports Overseas Ltd., Mumbai vs. ITO (ITAT I Bench in ITA No. 1 248/Mum12002 judgment dated 28.1.2003). v) CIT vs Smt T.C.Usha (132 Taxmann 297) vi) M/s. Lalsons Enterprises, New Delhi vs. DCIT 10.3 The appellant also stated that the Judgment of Hon ble Supreme Court was on the interpretation of application of sub-section 3 itself and not on the provision to sub-section 3. It was pointed out that the order the Hon ble ITAT Special Bench in case of Lalson Enterprises applies to the facts of the case. Whereas the AO relied upon the Hon ble ITAT Bench, Indore judgment in case of Prestige Foods Ltd., and Hon ble Supreme Court decision in case of IPCA Laboratories Ltd. vs CIT. 10.4 I have carefully considered the submissions made by the appellant and the AO. I am in agreement with the appellant that the judgment of the Hon ble Supreme Court in the case of IPCA Laboratories L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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