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TMI Blog2009 (5) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.128,21,65,627/- made u/s 43B of the Income Tax Act. 1.1 That the learned Commissioner of Income Tax (Appeals) was neither correct nor was justified either on facts or in law in sustaining the disallowance of Rs. 125,43,38,014/-, out of the aforesaid alleged disallowance made and representing the amount of Excise Duty actually paid on purchase of components of finished products, which has either been consumed or remained part of closing stock. 1.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the aforesaid payments made were an allowable deduction u/s 43 B of the Income Tax Act, in the year of payment irrespective of the fact that goods had been manufactured or not and, thus ought to have been allowed as such, while computing the total income. 1.3 That similarly the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in sustaining a disallowance of Rs. 2,57,34,337/-, being the amount of Sales Tax paid actually paid in respect of the components purchased by the assessee company, which has either been consumed or remained part of closing stock. 1.4 That further the learned Commissioner of Income Tax (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant was an allowable deduction, since it undisputedly represented the unrecoverable amounts from customers to whom sales had been made in earlier years and, therefore, in such a situation, neither in law and, nor on fact, it could be held that the amount had not been assessed as income in earlier years. 3.3 That the disallowance sustained by the learned Commissioner of Income Tax (Appeals) is based on misappreciation of the relevant provisions of law and the factual substratum of the case. 3.4 That in any case and without prejudice the amount was an allowable business loss for the instant assessment year. 4. That the learned Commissioner of Income Tax (Appeals) has further erred in directing the AO to add to the WDV of assets a sum of Rs. 1,06,90,002/- instead of Rs. 4,27,60,007/- on account of foreign exchange fluctuation in respect of fixed assets. It is therefore prayed that the various disallowances sustained by the learned Commissioner of Income Tax (Appeals) be directed to be deleted and, the appeal of the appellant company be allowed. The appellant prays leave to add, amend, alter, delete or forego any of the grounds either before or during the course of hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excess claim of consumption of stock at Rs.33,39,91,012 when maintenance of adequate stock records. frequent verification of physical stock balance at the end of the year with the balance obtaining from the stock records were missing in assessee s case. 9. Whether on the Facts and iii the circumstances of the case the learned CIT (Appeals) was justified in allowing MODVAT on input difference at Rs.46,00,00.000/- on account of excessive unexplained consumption of material and when payment partakes the character of penalty. 10. Whether, on the facts and in the circumstances of the case the learned CIT (Appeals) was justified in allowing Loss on a/c of foreign exchange Fluctuation at Rs.2,08,10,944/- in view of decision in the case of Indian Overseas Bank Vs. CIT 151 ITR 446 Tena Agencies Vs CIT 180 ITR 102 . 11. Whether, on the facts and in the circumstances of the case, the learned CIT(Appeals) was justified in allowing claim of Rs.36,09,047 out of Rs.75,19,975/- on account of depreciation on enhanced liability when the liability arises when assessee agrees to pay the duty. 12) Whether on the facts and hi the circumstances of the case. the learned CIT (Appeals) was ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Special Bench of this Tribunal in the case of Glaxo Smithkline Consumer Healthcare Ltd. reported in 107 ITD (SB) 343 (SB) (Chd) and the corresponding ITR citation is 299 ITR (AT) 1 wherein it has been held that the unutilized MODVAT credit is not an allowable deduction since such credit does not amount to payment of duty. It was fairly, thus, agreed by both the sides that this issue would be held against the assessee in view of the decision of Hon ble Special Bench referred to, supra. 5. We have considered the submissions. In view of the decision of the special Bench of this Tribunal in the case of Glaxo Smithkline Consumer Healthcare Ltd referred to, supra, the ground No.1.1 and 1.2 of assessee s appeal stands dismissed. 6. In Ground No.1.3 the assessee has challenged the disallowance u/s 43B in regard to sales-tax paid. It was fairly agreed by both the sides that this issue has been held against the assessee in the case of the assessee itself for the assessment year 1999-2000 in ITA No.1240/Del/2003 which is also reported in 92 ITD 119 wherein it has been held that the sum paid for the purchase of inputs would be allowable in the year when the adjustments is made on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that if the assessee has written off the bad debts in its accounts, it is entitled to the claim u/s 36(1)(vii). 12. Respectfully following the decision of the Hon ble jurisdictional High Court in the case of Autometers Ltd. and in the case of Morgan Securities and Credits Pvt. Ltd. referred to supra the AO is directed to grant the assessee the benefit of deduction of bad debt as claimed. In the circumstances, Ground No.3 to 3.4 of the assessee s appeal stands allowed. 13. In ground No.4, the assessee has challenged the action of the CIT (A) in directing the AO to add to the WDV of the assets a sum of Rs.1,06,90,002/- instead of Rs.4.27.60,007/- on account of foreign exchange fluctuation in respect of the fixed assets. At the time of hearing it was submitted that the assessee does not wish to press the said ground. Consequently, Ground No.4 of the assessee s appeal is dismissed as not pressed. Revenue s Appeal 14. It was fairly agreed in regard to Ground No.1 which was against the disallowance of the claim u/s 43B on account of the Customs Duty on import for which export has been made by the end of the year, that the issue was covered by the decision of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Co-ordinate Bench of this Tribunal in the assessee s own case for assessment year 2000-01 the revenue s appeal stands dismissed. 19. In regard to Ground No.6 which is against the local sales-tax paid under protest, it was fairly agreed that this issue was squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee s own case for assessment year 2000-01 referred to supra wherein it has been held that since the sales-tax has been paid the sum is allowable u/s 43B of the Act. Respectfully following the decision of the Co-ordinate Bench of this Tribunal in the assessee s own case for assessment year 2000-01 this ground of the revenue s appeal stands dismissed. 20. In regard to Ground No.7 which is against the allowance of Excise Duty paid, it was fairly agreed by both the sides that this issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee s own case for assessment year 2000-01 wherein it has been held that since the payment of Excise Duty has been paid the same is allowable u/s 43-B of the Act. Respectfully following the decision of the Co-ordinate Bench in the assessee s case for assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man 60. Respectfully following the decision of the Hon ble jurisdictional High Court as also the decision of the Coordinate Bench of this tribunal, the issue raised in the revenue s appeal stands dismissed. 25. In regard to ground No.11, which is against the action of the CIT (A) in deleting the disallowance of depreciation of Customs Duty paid and capitalized on the plant and machinery, it was fairly agreed by both the sides that this issue was squarely covered by the decision of the Co-ordinate Bench in which the Tribunal in the case of assessee for assessment year 1999-2000 in ITA No.1240/Del/03 for the assessment year 1998-99 in ITA No.973/Del/99 wherein the Tribunal has deleted the disallowance. Respectfully following the decision of the Co-ordinate Bench of this Tribunal in the assessee s own case for assessment year 1999-2000 and 1998-99, the findings of the CIT (A) on this issue stands confirmed and the ground as raised by the Revenue stands dismissed. 26. In regard to ground No.12 which is against the deletion of disallowance of interest paid by invoking the provisions of Section 14A, it was clearly agreed by both the sides that this issue would have to be restored t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by invoking the provisions of Section 40(a)(i) of the Act. Ld. AR also relied upon the Circular No.786 dated 07.02.2000 and Circular No.23 dated 23.07.69 wherein it has been held that the commission paid to non-resident for services rendered outside India are not chargeable to tax in India. In reply, the Ld. DR submitted that the assessee was duty bound to make the necessary claim u/s 195 before the AO and obtained the necessary certificate for nil deduction and this having not being done, the provisions of Section 40(a) (i) of the Act apply. 30. We have considered the rival submissions. A perusal of the provisions of Section 195 clearly shows that the deduction of tax is liable to be made by a person responsible for paying to the non-resident any sum chargeable under the provisions of this Act. The words chargeable under the provisions of this Act clearly shows that the payment which is made by the assessee to the nonresident is liable to be taxed in India in the hands of the non-resident. Here it is noticed that the commission has been paid to the agents for the sale of the vehicles and re-imbursement of advertisement expenses incurred outside India. Obviously, these expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 CTR 258. In the circumstances, Ground No.15 of the Revenue s appeal stands dismissed. 33. In regard to Ground No.16, which was against the action of the CIT (A) in deleting the disallowance of depreciation of exchange rate variation paid and capitalized, it was fairly agreed that this issue was squarely covered by the decision of the jurisdictional High Court of Delhi in the case of Woodward Governor India Pvt. Ltd. reported in 162 Taxman 60 as also the decision of this Tribunal in the revenue s appeal in the assesee s own case in ITA No.2414/Del/03 for the assessment year 1999-2000 wherein also similar ground has been dismissed. Respectfully following the decision of the Co-ordinate bench of this Tribunal as also the decision of jurisdictional High court of Delhi in the case of Woodward Governor India Pvt. Ltd. referred to supra, the findings of the CIT (A) on this issue stands confirmed. 34. In regard to the issue of the expenditure on club membership, which is ground No.17 in the revenue s appeal, it was submitted by the Ld. AR that the Membership of the club had been taken for business reasons so as to develop relationship with prospective customers and for holding bus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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