9911796707
TMI Blog2018 (4) TMI 1829X X X X Extracts X X X X X X X X Extracts X X X X ..... he sake of convenience, we shall first consider the facts and grounds raised in assessee's appeal for the assessment year 2010-2011 in ITA No.352/CTK/2016 as under :- That the Order dated 09.06.2016 passed by the Learned Commissioner of Income Tax (Appeals) [in short "CIT(Appeals)"], in so far as sustaining the additions and disallowance made by the Learned Assessing Officer, is based on irrelevant considerations, against natural justice, contrary to facts, arbitrary, erroneous and bad in law. 1. Disallowance under "Peripheral Development Expenses" Rs. 2,53,69,895/- a. That on the facts and in the circumstances of the case, the Order of the learned CIT(Appeals) in partly sustaining the disallowance of Rs. 2,53,69,895/- under 'Peripheral Development Expenses' incurred through Corporate Office of the asseseee is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law. b. That the aforesaid expenditure of Rs. 2,53,69,895/- is incurred by the assessee wholly and exclusively for the purpose of its business. Sustaining of the disallowance by the learned CIT(Appeals) is on mis-appreciation of facts, arbitrary, erroneous and bad both on fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order and sustaining the disallowance of 4,70,61,000/- is unjustified, arbitrary, erroneous and bad in law. c. That the assessee having already added sum of Z 2,07,503 u/s.14A of the Act in the computation of income (returned income), Rule 8D is not applicable and the addition of 4,72,68,503 u/s.14A of the Act is unjustified, arbitrary, contrary to facts, erroneous and bad in law. d. The assessee's computation of the aforesaid Rs. 2,07,503/- u/s.14A of the Act is based on its books of accounts and is worked out in a reasonable and fair manner and the learned lower authorities have mis-appreciated/misconstrued the same and the disallowance u/s. 14A of the Act is incorrect, arbitrary, erroneous and bad in law. e. That the learned CIT(Appeals) holding that the aforesaid Rs. 2,07,503/- has no basis and purely adhoc' is incorrect, contrary to facts, arbitrary and erroneous and bad, both in the eye of law and on facts. 4. Additions Under Trial Operation expenses - Rs. 45,37,74,074/- a. That on the facts and in the circumstances of the case, the sustaining of the addition of Rs. 45,37,74,074/- under 'Trial Operation expenses' by the learned CIT(Appeals) is arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts. b. That the aforesaid Rs. 12,75,994/- under Claims, receivables, advances, shortages etc. written off being revenue/trading loss, the same ought to be allowed. c. That the learned CIT(Appeals) has mis-appreciated the facts and has erred in holding that the aforesaid is on capital account. d. That the learned CIT(Appeals) stating that no explanation has been offered during the appeal proceedings in respect of the aforesaid addition of Rs. 12,75,994/- is incorrect, contrary to facts, arbitrary and erroneous. 7. Disallowance u/s.40(a)(i) of the Act - Rs. 4,36,594/- That on the facts and in the circumstances of the case, the sustaining of the addition! disallowance of Rs. 4,36,594/- u/s.40(a)(i) of the Act by the learned CIT(Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. That the Assessee having not violated any provisions of section 195 of the Act, there ought not be any addition/ disallowance u/s.40(a)(i) of the Act and the disallowance of the said Rs. 4,36,5942/- is contrary to facts, arbitrary, unjustified, erroneous and bad in law. c. That the learned CIT(Appeals) stating that no explanation has been offered in respect of the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness activities and income earned from that should be treated as income from business is contrary to facts, arbitrary, erroneous and bad in law. bad, both in the eye of law and on facts. c. That the assessee having maintained its accounts and disclosed the investments in the Balance sheet under long term investments and having rightly computed its income under the head Capital Gains, Long term Capital Gains of Rs. 63,57,13,500/- and Short term Capital Gains of Rs. 1,89,869/-, the treatment of the aforesaid as 'Business income' by the learned AO and confirmation of the same by the learned CIT(Appeals) is based on irrelevant considerations, arbitrary, erroneous and bad, both in the eye of law and on facts. d. That in similar facts and circumstances in the past years, the assessee's above method having been accepted by the IT Department, the learned AO as well as the learned CIT(Appeals) are not justified and are erroneous in treating the aforesaid Capital Gains, both Long term Capital Gains of Rs. 63,57,13,5001- and Short term Capital Gains of Rs. 1,89,869/- as 'Business income' of the assessee. e. That without prejudice to Ground (a) to (d) above, in any ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these funds have been utilized as per the instructions of Government Notification and if so shall be allowable as deduction u/s.35AC of the Act and therefore, expenditure claimed by the assessee does not comply the provisions of Section 37 of the Act and disallowed the claim. 4. On appeal, the CIT(A) having considered the submissions and findings of the assessee has restricted the addition to the extent of Rs. 2,53,69,895/- considering the fact that the expenditure incurred by the assessee was not covered within the notification and held as under :- "3.2 I have considered the matter. The AO disfavours the amounts spent on charity in the guise of peripheral development expenditure. He refers to provisions of section 35AC where deductions on social projects are allowable. He has rightly stated that providing PCR vans to the Commissioner of Police cannot be called as peripheral development expenditure. However, disallowance of entire claim of expenditure as not relating to business is not correct as the assesssee is entitled to claim of deduction on periphery development expenses within the guidelines. By merely providing the nomenclature to expenditure as periphery development exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. They are in the nature of donations, charity and not connected to running of business. Such expenditure is also not for periphery development in the districts of Angul and Koraput and not in accordance with the aforesaid Notifications of Govt. of Odisha. In view of the same, the amount of Rs. 2,53,69,895/-, relating to the corporate office, out of the total amount of Rs. 13,83,79,264/- is correctly disallowed. There is no finding that the balance expenditure under the head peripheral development expenditure categorized as, refinery (Damanjodi) for Rs. 5,10,56,852/-, Smelter(Angul) for Rs. 5,08,90,800/- and CPP(Captive Power Plant) for Rs. 1,10,61,717/-, totaling to Rs. 11,30,09,369/- is not in accordance with the aforesaid Notifications and it appears that the same is correctly claimed as periphery development expenditure. Accordingly, the disallowance of Rs. 13,83,79,264/- is restricted to Rs. 2,53,69,895/- and thus, the assessee gets a relief of Rs. 11,30,09,369/-." 5. On further appeal before us, ld. AR submitted in respect of disallowance that the assessee has incurred the expenditure in the corporate office and also referred to the expenses claimed. Such expenditure was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on record. We find that the arguments of the ld. AR are supported with the evidence that the expenditure claimed by the assessee has been incurred wholly and exclusively for business purposes but the AO has to verify the claim as to whether the peripheral expenditure in the corporate office is for the particular area of the employees or as a whole. Since we have already decided the issue in earlier assessment years in ITA No.343/CTK/2015 and other connected appeals, order dated 23.04.2018, and the observations of the Tribunal in earlier years are as under :- "10. We have heard rival submissions and perused the material on record. The assessee has claimed the peripheral expenditure of Rs. 8,19,11,108/- and the AO has made the additions without considering the nature of expenditure and its benefit to the assessee. The CIT(A) after verifying the facts and considering the submissions made by the assessee in this regard granted the relief but restricted peripheral expenditure in respect of other areas other than the expenditure incurred through corporate office. Ld. AR referred to the paper book and the nature of expenditure incurred by the corporate office. Ld. AR submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is pending before the higher appellate authorities and matter has not reached at its finality. On appeal, the CIT(A) confirmed the action of AO. 10. On further appeal, ld. AR of the assessee before us submitted that the issue under consideration is squarely covered by the order of this Tribunal in assessee's own case for A.Y. 2006-07 and 2007-08 in ITA Nos. 233, 234/CTK/2011 dated 20.07.2012 and in ITA Nos. 66-68, 459, 511-512/CTK/2003 dated 20.11.2005 in respect of A.Y. 1994-95 to 199899 and 2000-01. Ld. AR further stated that the interest liability is as per Statute and has been charged to the Profit & Loss account on accrual basis and comply the per mercantile system of accounting, and is allowable u/s 37 of the Act and prayed that addition by the lower authorities be deleted 11. Contra, ld. DR relied on the order of lower authorities. 12. We have heard rival submissions and perused the material available on record. We find that the issue under consideration is covered by the order of the Tribunal in assessee's own case for the assessment year 2006-07 & 2007-08 in ITA No.233 & 234/CTK/2011, order dated 20.07.2012 and also for the assessment year 2005-06 in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act for disallowance is not attracted. 7. It is pertinent to mention here that the ITAT Cuttack Bench in the case of NALCO in the combined order dated 30-11-2005 has held that interest on disputed Electricity Duty are allowable u/s.37 of the Act and further the interest on Electricity Duty, even if a statutory liability, the same do not fall under the ambit of Section 43B of the Act and therefore, even if such interest is not paid the same is not to be disallowed under section 43B. 8. Following the reasoning given hereinabove with regard to the interest on delayed payment of electricity bill, we direct the AO to allow interest on the water bill. We direct accordingly." We respectfully follow the above orders of the Tribunal and direct the AO to allow the claim of the assessee on account of interest on disputed Govt. duty (Electricity duty and water charges) and this ground of assessee is allowed. 13. Ground No.3 relates to disallowance u/s.14A of the Act. The AO has made the disallowance of Rs. 4,72,68,503/- by invoking the provisions of Section 14A r.w.Rule 8D, observing that the disallowance made suomoto by the assessee is very less compared to the administrative and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court has held as under: "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 20022003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable" * Further reliance in this regard is placed on following judgments: (a) Delhi High Court in the case of H.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We have heard rival submissions and perused the material available on record. We find that the AO while computing the disallowance under clause (iii) of Rule8D has computed 0.5% of the average investments held by the assessee company in whole, which includes the investments in equity shares and long-term debt funds as well, income from which has not been claimed as exempt by the assessee. Ld. AR submitted that on similar circumstances for the assessment 2011-2012, the First Appellate Authority has deleted the additions made by the AO u/s.14A applying rule 8D. The Hon'ble Delhi High Court in the case of H.T. Media Ltd. v. Pr. CIT in ITA No. 548, 549/2015 dated 23.08.2017, wherein the Hon'ble High Court has held as under :- "32. The question regarding the failure of the AO to record his dissatisfaction with the correctness of the Assessee's claim regarding administrative expenses of Rs. 3 lakhs arises in ITA 349 of 2015. Mr Raghvendra Singh is not entirely right in his submission that there is no question framed about the failure by the AO to record his satisfaction. In ITA 349 of 2015, the question framed by this Court by the order dated 15th October 2015 is in fact in two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the provisions of sub-section (2) of Section 14A and Rule 8D of the Rules are in operation and therefore, will strictly be adhered to by the Assessee. In para 3.6 of the assessment order, after discussing Section 14A(1) read with Rule 8D and referring to the decision of the Bombay High Court in Godrej and Boyce Mfg. Co. Ltd v. DCIT (supra), the AO simply stated that "in view of the facts and circumstances and legal position on the issue as discussed above, I am satisfied that the Assessee had incurred expenses to manage its investments which may yield exempt income, and Assessee grossly failed to calculate such expenses in a reasonable manner to ascertain to ascertain the true and correct picture of its income and expenses." 37. In the considered view of this Court, the above observations of the AO in the assessment order are of a broad general nature not with particular reference to the facts of the case on hand. 38. The Court is also unable to agree with Mr. Singh that on this aspect there are concurrent findings of both the CIT (A) as well as the ITAT. The CIT (A) disallowed the exempt expenses by merely repeating what the AO had stated about the cost that is built into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance amounting to Rs. 45,37,74,074/- alleging that the said expenditure incurred by the assessee till commercial production starts, could not be claimed as revenue expenditure and has to be capitalized. On appeal, the CIT(A) has sustained the disallowance made by the AO holding that since trial run expenditure is pre-commercial production expenditure, the AO was correct in not allowing the same as revenue expenditure. 19. On further appeal before us, ld. AR of the assessee submitted that during the year under consideration, assessee company has claimed an amount of Rs. 45,37,74,074/- under the head Trial Operation expenses and the assessee has produced the details before both the authorities below. He further submitted that the AO as well as the Ld. CIT(A), however, have rejected the claim of assessee alleging that the said expenditure has been incurred prior to the commercial production, and thus, has to be capitalized. Ld. AR submitted that the power generated by the assessee company in the trial run is transferred to the Smelter unit of the company, which is then used for commercial production of aluminium, and the revenue generated from sale of such products is taken for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany was new and depreciation was allowed. Following the aforesaid decision the Tribunal directed the Assessing Officer to verify the period of use and restrict depreciation to 50% if the Assessing Officer found that the machinery was used for less then 180 days during the year under consideration. 8. In facts of the present case, we find that the issue is no longer res integra in view of the decision of Industrial Solvents & Chemicals (P.) Ltd. (supra). We have no hesitation in holding that the Order of the Tribunal cannot be faulted inasmuch as the jurisdictional High Court has already held that once plant commences operation and even if product is substantial and not marketable, the business can said to have been set up. Mere breakdown of machinery or technical snags that may have developed after the trial run which had interrupted the continuation of further production for a period of time cannot be held ground to deprive the assessee of the benefit of depreciation claimed. 9. Other question proposed by the Revenue is in relation to computation of book profit under Section 115 JA of the Income Tax Act. The Assessing Officer had held that the provision is toward unexpected l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly claimed the said expenditure during the year under consideration. It is a settled law that prior period expenses are to be allowed in the year in which the said expenditure has crystallized. Reliance in this regard is placed on following judgments: Delhi High Court in the case of CIT v. Modipon Ltd. [2011] 334 ITR 102 Gujarat High Court in the case of Pr. CIT v. Adani Enterprises Ltd. in ITA No. 566 of 2016 dated 20.07.2016 Bombay High Court in the case of CIT v. Mahanagar Gas Ltd. in ITA No. 1978 of 2011 dated 10.06.2013 Further, it is important to note that the AO has on one hand included the prior period income in the taxable income of the assessee, and on the other hand has disallowed the prior period expenditure of Rs. 21.07 Crores. It is a settled law that the disallowance of prior period expense has to be computed by netting off the prior period income against the prior period expenditure. Reliance in this regard is placed on the recent judgment of Hon'ble ITAT Mumbai in the case of M/s Mazagaon Dock Ltd. v. ITO in ITA No. 5034/Mum/2011 dated 01.02.2016, wherein the Hon'ble Tribunal on similar set of facts has held as under: "16. The next common issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & loss account is looked into, there is net credit of the prior period income amounting to Rs. 71.55 crores. Thus, the prior period income offered by the assessee was more by Rs. 71.55 crores than the prior period expenses claimed in the year under consideration. The Assessing Officer has assessed the prior period income and disallowed prior period expense. He cannot adopt different yardstick for assessing the income and allowing the expenditure. Considering the totality of the above facts, we do not find any justification to interfere with the order of the learned CIT(A) in this regard. The same is sustained and ground no.2 of the Revenue's appeal is rejected." It is further submitted that the disallowance merely on the ground that the expenses pertain to earlier year should not be resorted to when tax rate are same for both the years.In this regard, reliance is being placed on the judgment of Delhi High Court in the case of CIT vs. Dinesh Kumar Goel 331 ITR 10 (Del) where a similar issue was being examined and court in Para 30 has made a reference to an old judgment of Bombay High Court in the case of CIT vs. Nagri Mills Company Ltd. 33 ITR 681 (Bom.) and also of Delhi H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r period expenses and passed the order on merits and the ground of appeal is allowed for statistical purposes. 23. Ground No.6 relates to disallowance of amounts written off in respect of claims, receivables, advances, shortages etc. The AO has made the impugned disallowance of Rs. 12,75,994/- alleging that no supporting documents and evidences in this regard were filed by the assessee. On appeal, the Ld. CIT(A) has sustained the disallowance made by the AO holding that the assessee could not claim the written off of the advances when they were not a part of income of earlier years. 24. On further appeal, ld. AR of the assessee submitted as under :- * During the year under consideration, an amount of Rs. 12,75,994/- has been claimed by the assessee company as write off of claims, receivables, advances, shortages, etc. * Complete details with regard to these expenses was filed before the AO as well as the Ld. CIT(A), which are enclosed at PB 610 - 616. * The write-off was made by the assessee company of the advances paid to suppliers / contractors, which are normal advances in the course of business of the assessee company, and thus, the same should be allowed to be claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. 28. Ground No.8 relates to provision for leave encashment. The AO has made the disallowance of Rs. 18,85,04,549/- u/s 43B(f) of the Act on account of provision for leave encashment, alleging that the same is allowable only if the said expenditure has actually been paid by the assessee. On appeal, the Ld. CIT(A) has sustained the disallowance made by the AO holding that the decision of the Calcutta High Court in the case of Excide Industries Ltd. v. Union of India [2007] 292 ITR 470 has been stayed by the Apex Court. 29. On further appeal before us, ld. AR of the assessee submitted as under :- "During the year under consideration, assessee company has debited an amount of Rs. 18,85,04,549/- in its Profit & Loss account towards leave encashment. The said amount has been computed on a scientific basis and therefore, is allowable deduction u/s 37(1) of the Act. It is submitted that the Finance Act, 2001 made an amendment to section 43B of the Act by inserting clause (f) in the said section, whereby leave encashment was also included in the scope of section 43B However, the validity of the aforesaid amendment was challenged before the Hon'ble Calcutta High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. 20. In the result, appeal for the assessment year 2008-09 is partly allowed for statistical purposes." 29. We considering the ratio of the decision and the facts to the present case, remit this issue to the file of the AO to examine and allow the claim and this ground of appeal is allowed for statistical purposes." Respectfully following the order of the Tribunal and we restore this issue to the file of AO to examine and allow the claim of the assessee and we allow this ground of appeal of the assessee for statistical purposes. 32. Ground No.9 relates to disallowance u/s.43B of the Act made under Electricity Duty & Water Charges. The AO has made the disallowance of Rs. 3,43,72,917/- alleging that the amount of electricity duty not paid by the assessee is liable to be disallowed as per the provisions of section 43B of the Act. On appeal, the CIT(A) has sustained the disallowance made by the AO by relying upon the order of his predecessors in assessee's case for A.Y. 2007-08 and 2008-09. 33. On further appeal, before us ld. AR of the assessee submitted as under :- * During the year under consideration, assessee has debited an amount of Rs. 140,71,26,619/- in its Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the decision of the coordinate bench of the Tribunal in assessee's own case for earlier year, we dismiss this ground of appeal of the assessee. We follow the judicial precedence and uphold the order of the CIT(A) and dismiss this ground of appeal of assessee. 36. Ground No.11 relates to treatment of capital gain income as business income. The AO has treated the short-term and long-term capital gain earned by the assessee for Rs. 1,89,869/- and Rs. 63,57,39,500/- respectively as business income of the assessee. The CIT(A) has affirmed the action of the AO by stating that frequent transactions entered into in stocks / shares / mutual funds by the assessee as well as the substantial amount involved in these transactions, reflects that the income earned from these transactions should be taxed as business income of the assessee. 37. Aggrieved by the order of the CIT(A), assessee is in further appeal before us and the ld. AR submitted as under :- "During the year under consideration, assessee company has earned long-term capital gain amounting to Rs. 63,57,13,500/- and short-term capital gain amounting to Rs. 1,89,869/-. The said amounts of capital gain income have been ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, it is a settled law that units of mutual fund are special category investments and any gain arising on sale of mutual funds is long-term capital gain. Reliance in this regard is placed on the judgment of Delhi High Court in the case of Yama Finance Ltd. v. ACIT in ITA No. 1658 of 2010 dated 01.04.2014 Therefore, considering the facts of assessee's case and the judicial precedents in this regard, the action of the Ld. CIT(A) in sustaining the action of the AO is bad in law, and thus, liable to be reversed. 38. On the other hand, ld. DR relied on the order of lower authorities. 39. We have heard rival submissions and perused the material available on record. We find that the main object of the assessee is manufacturing and assessee being a public sector company has enough funds and made investment in the mutual funds and on redemption the income is offered under the capital gain and the main object being the business and the maximum income is established through the direct business operations and not from the financial transaction. The investment has been made with the mutual funds/liquid funds/ closed ended funds and encashment on redemption/maturity. Further, the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following- a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income, (b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest has to be calculated. This ground of appeal is allowed. 41. Thus, ITA No.352/CTK/2016 is partly allowed for statistical purposes. 42. Now we shall take up appeals of the assessee for assessment years 2011-2012 & 2012-2013 in ITA Nos.374/CTK/2014 and 353/CTK/2016. 43. Ground No.8 in ITA No.374/CTK/2014 and ground No.6 in ITA No.353/CTK/2016 have not been pressed by the ld. AR of the assessee at the time of hearing, therefore, both the grounds are dismissed as not pressed. 44. Ground No.3 in appeal for assessment year 2011-12 and ground No.2 in appeal for assessment year 2012-2013 are relating to disallowance of interest on disputed Govt. Duty (Electricity Duty and Water Charges). 45. We have already decided this issue in the appeal of the assessee for assessment year 2010-2011, wherein relying on the order of Tribunal in assesee's own case for the assessment year 2005-06 in ITA No.286/CTK/2013, we have directed the AO to allow the claim of the assessee. Following the reasoning given in the above appeal, we allow this ground raised in both the appeals for the assessment year 2011-2012 & 2012-2013 and direct the AO to allow the claim of assessee interest on disputed Govt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO has made the disallowance of Rs. 5,00,33,596/- stating that the loss claimed on account of diminution in the value of non-moving stores and spares should be restricted to 25% of the original cost, instead of 95% as claimed by the assessee. On appeal, the Ld. CIT(A) has restricted the impugned disallowance made by the AO. 55. On further appeal, ld. AR of the assessee submitted that the assessee company is consistently following the accounting policy of revaluing the non-moving inventory of stores and spares at 5% of the cost, and the loss on account of such revaluation is claimed as revenue expenditure. Ld. AR also submitted that during the year under consideration, the disallowance made by the AO has been restricted by the Ld. CIT(A). The issue under consideration is covered by the order of this Hon'ble Tribunal in assessee's own case for earlier years. To support the contention, ld. AR relied on the following judicial decisions :- (a) ITAT Cuttack in assessee's case in ITA Nos. 66-68, 459, 511512/CTK/2003 dated 20.11.2005 in respect of A.Y. 1994-95 to 1998-99 and 2000-01; (b) ITAT Cuttack in assessee's case in ITA Nos. 511, 512/CTK/2005 dated 17.07.2007 in respect of A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessee's own case and allow the claim of loss on account of value of non-moving stores and spares. Accordingly, this ground of appeal is allowed. 58. Ground No.1 raised in the assessment year 2012-2013 relates to disallowance under peripheral development expenses. We have decided the issue in appeal of the assessee for assessment year 2010-2011 wherein we have remitted the disputed issue to the file of AO to verify the nature of expenditure incurred on peripheral areas and decide on merits. Accordingly, we follow the reasoning given in the aforesaid appeal and restore this issue to the file of AO in terms of our observation in the appeal for assessment year 2010-2011. This ground of appeal is allowed for statistical purposes. 59. Ground No.3 raised in the assessment year 2012-2013 relates to disallowance u/s.14A of the Act. We have decided the issue in appeal of the assessee for assessment year 2010-2011 wherein we have restored the issue to re-examine and apply the provisions of section14A r.w.rule 8D of. Accordingly, we follow the reasoning given in the aforesaid appeal and restore this issue to the file of AO in terms of our observation in the appeal for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2012-2013 as under :- "5.2. I have considered the matter. I have gone through the arguments of the AO for concluding that the assessee was liable to deduct tax at source u/s.195(1), detailed submissions of the assessee, relevant decisions and various facts on record. The dispute has arisen when the assessee purchased raw materials, components, spares parts and construction materials from nonresident concerns for a total cost of Rs. 256.92 crores, apart from other purchases like capital goods. As per provisions of sec.135(-1) of the Act, any person responsible for paying (Payer) to a Non- Resident or Foreign Company (Payee) any interest or 'any other sum chargeable under the provision of the Act', is required to deduct tax at source. The provision applies to all the Payers, including individual and HUF. The only specific exclusion provided is in respect of payment of dividend which is exempt by virtue of payment of Dividend Distribution Tax. The scope of the provision is wide and therefore, the implications thereof have far-reaching effect in large numbers of cases as the number of such payments has increased manifold with the development of the economy and growth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to decide whether the income is chargeable in the hands of the Payee or not, the litigation on the obligation to make TDS continues, even after the decision of the Apex .Court in Transmission Corporation of A. P. Ltd and particularly in view of interpretation of this judgment by the Hon'ble Karnataka High Court in the case of CIT (International Taxation) v. Samsung Electronics Co. Ltd, [2009] 185 Taxman 313 (Kar.)/ [2010] 320 ITR 209. The AO is of the opinion that the decision of the A P High Court in the case of transmission Corporation of A. P. Ltd. v. CIT, which was approved by the Supreme :,Court in 239 ITR 587 (SC) is applicable and accordingly the assessee was liable to deduct tax u/s.195(1). In this case the AO may have considered that the person making payments to a non-resident cannot take a unilateral decision that the payments made by him are not sums chargeable to income tax, and therefore he cannot make such payments without deducting tax at source unless he gets the concurrence of the Assessing Officer as provided in section 195(2) or an exemption certificate under section 195(3). However, as per the High Court's decision the obligation of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 195(1). The Hon'ble Supreme Court has observed that every remittance would not result in deduction of tax but only in respect of the amount taxable under the provisions of the Income Tax Act. The application u/s.195(2) is required only when the remitter has no doubt that tax is deductible but not sure of the amount of tax to be deducted. In case no tax is deductible on the remittance, no application u/s.195(2) or no certificate u/s.197 is necessary. The Hon'ble Supreme Court in GE India Technology Cen. (P) Ltd. v. CIT (supa), observed as under: "10. ... In Transmission Corpn. of A.P. Ltd.'s case (supra) it was held that TAS was liable to be deducted by the payer on the gross amount if such payment included in it an amount which was exigible to tax in India. It was held that if the payer wanted to deduct TAS not on the gross amount but on the lesser amount, on the footing that only a portion of the payment made represented "income chargeable to tax in India", then it was necessary for him to make an application under section 195(2) of the Act to the ITO(TDS) and obtain his permission for deducting TAS at lesser amount. Thus, it was held by this Court that if the payer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in the case of GE India Technology Cen.(P) Ltd. v. CIT (supra), it is the clear that if the payment is made to a non-resident, which is not a taxable income in India, then no tax is required to be deducted u/s.195. Accordingly, the disallowance of Rs. 256,92,00,000/- made u/s.40(a)(i) made by the AO is hereby deleted. Similarly, for the assessment year 2011-2012, the CIT(A) has deleted the addition of Rs. 337,32,00,000/- made u/s.40(a)(i) of the Act relying on the decision of the Tribunal in case of Paradeep Phosphates Pvt. Ltd. (supra) and GE India Technology Centre Pvt. Ltd. (supra). 68. Against the deletion of addition, the Revenue is in appeal before us and relied on the order of AO. 69. On the other hand, ld. AR relied on the order of CIT(A). 70. We have heard rival submissions and perused the material available on record. Prima facie, we found in the instant case, the amounts have been paid towards purchase of raw material, etc. on principal to principal basis and the assessee has procured the goods from the non-resident seller at its own cost after making payments on CIF basis. The raw material is sold by the non-resident seller in foreign soil, hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial available with the assessee, then merely because quantification of the same is done in a subsequent year it cannot be said that the provision made for the said liability on a reasonably estimate basis was not allowable deduction.... The revenue had pointed out that the assessee should have made the provisions in the respective years. However, for arriving at the provision there should be some basis available to the assessee and that was in the form of settlements reached for pay revisions of its executives and also by employer NTPC and BHEL which were also made available to the assessee before 31.03.2001." In the appellant's own case for the A/Y.2006-07 and A/Y.2007-08, the Hon'ble ITAT, Cuttack in their order dated 20.07.2012, ITA No.233 & 234/CTK/2011 has decided the matter in favour of the appellant company. The relevant portion of the order of the ITAT is quoted below : "Provision for the pay revision is provided on the basis of labourers executing the work and labour union in the industrial sectors. The enhanced pay bill which will be assigned to them later can be provided for by the assessee in view of it not being contingent but accrued on the basis of services rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nition of the Pay Revision Committee, for revision of pay scales w.e.f. 1.1.2007. This is not a contingent liability. In the case of ACIT vs. NTPC in ITA 4246/Del/2011 order dt. 23.11.2011, the Tribunal at page 6 para 7 onwards held as follows. "7. We have carefully considered the submissions and perused the records. We find that Hon'ble Apex Court in the case of Bharat Earth Movers vs CIT has held that 'if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied, the liability is not a contingent one. The liability is in presenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. 8. Applying the ratio from the aforesaid case law in the present case, we find that wage revision was due w.e.f. 1.1.2007 and the order under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tending meeting, seminars and conferences and payments were also made to institutions like Administrative Staff College, Govt. of India and others; which do not attract the TDS provisions. The AO had not segregated exactly which amount requires TDS. There is also ambiguity regarding under what provisions of the section the TDS are to be done. The entire training expenses cannot be for technical services and therefore cannot be construed that TDS should be done as per the Section 194J of the Act. Under such circumstances, ,the expenses claimed by the appellant should not be disallowed and provisions of section 40(a)(ia) should not be attracted. The AO is directed to delete the same. From the observation of the CIT(A), we find that findings given by the CIT(A) has just and proper, to which our interference is not required. Accordingly, we uphold the same and dismiss the ground of appeal of Revenue. 78. Ground No.5 in the assessment year 2011-2012 relates to disallowance made on account of prior period expenses. 79. Ld. DR before us relied on the order of AO, whereas ld. AR relied on the order of CIT(A). 80. We have heard rival submission and perused the material available on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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