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TMI Blog2023 (8) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court in the case of CIT vs. Grace Collis [ 2001 (2) TMI 9 - SUPREME COURT] has reversed the decision of Ld CIT(A). We notice that the surplus arising on redemption of treasury bills his held to be taxable under the head Capital gains in the assessee s own case in AY 1996-97 also. Accordingly, we direct the AO to assess the above said amount as Capital gains in this year also. Methodology to be adopted for computing eligible profits for the purpose of computing deduction u/s 80IA - whether the depreciation is required to be deducted or not for computing eligible profits for the purposes of sec. 80IA? - HELD THAT:- We notice that the co-ordinate benches are consistently holding that the depreciation is required to be deducted. Accordingly, we reject this ground of the assessee. Deduction claimed u/s 80IA - whether the duty drawback and interest income are eligible for deduction u/s 80IA? - HELD THAT:- The co-ordinate bench has dealt with identical issues in the assessee s own case in AY 1997-98.[ 2023 (4) TMI 1288 - ITAT MUMBAI] and the Tribunal has held that the assessee is eligible for deduction u/s 80IA in respect of both the income referred above as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scooter is assembled. Hence, we are unable to find any reason to say that the said payment will not fall under the category of consideration received for the use of patent, invention, design mentioned in sec. 80-O of the Act. Accordingly, we are of the view that the technical knowhow fee received by the assessee would fall under the category of royalty , as defined in sec.80-O of the Act and it is eligible for deduction u/s 80-O. Thus allow the claim of the assessee. Nature of expenses - expenditure incurred on repairs of building - Submission of the assessee that the above said expenses have been incurred on repair and maintenance of existing structures and it did not result in any benefit of enduring nature - HELD THAT:- These expenses should be treated as part of repairs carried on by the assessee. The item of expenses mentioned in (c) above relates to purchase of Stainless Steel Garbage Chute for disposal of waste food at General Canteen. Since it is placed in the General canteen, the useful period of life of this item will be less and accordingly it will not have the benefit of enduring nature. Accordingly, we are of the view that this expenditure should also be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the co-ordinate benches year after year, we confirm the order passed by CIT(A) in holding that the expenditure incurred on Dyes and Moulds is allowable as deduction. Nature of receipt - penalty charges received from machinery suppliers - HELD THAT:- Tribunal has followed the decision rendered in AY 1995-96 wherein it was held that the penalty charges received from machinery suppliers is capital in nature. In this regard, the Tribunal has followed the decision rendered in AY 1993-94, wherein it was decided in favour of the assessee following the decision rendered by Hon ble Andhra Pradesh High Court in the case of Barium and Chemicals Ltd [ 1987 (2) TMI 18 - ANDHRA PRADESH HIGH COURT] Expenditure incurred on jigs and fixtures is allowable as deduction as revenue expenditure. Computation of deduction u/s 80HHC - CIT(A) had directed that the income by way of technical knowhow, insurance claim, miscellaneous receipts, sundry credit balance, provision for doubtful debts written back, provision no longer required shall form part of profits of business for the purpose of computation of deduction u/s 80HHC - HELD THAT:- The technical Knowhow fees received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the decision rendered by Hon ble Bombay High Court in the case of HDFC Bank Ltd [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] The jurisdictional Bombay High Court has held in the above said case that the interest disallowance u/r 8D(2)(ii) of I T Rules is not called for when the own funds available with the assessee is in excess of the value of investments. In our view, the ratio of the said decision shall apply to the facts of the present issue. Accordingly, we confirm the order passed by Ld CIT(A) on this issue. Disallowance of expenses incurred by the assessee on foreign travel by the wife - DR submitted that the foreign travel expenses incurred for wife of Managing director is not related to the business and hence the AO has rightly disallowed the same - HELD THAT:- We notice that the Board resolution did not bring out any business expediency. Further, the assessee has also not proved existence of any commercial or business expediency in incurring the foreign travel expenses of wife of M D except producing copy of Board resolution, in which also, no reason was given. There should not be any doubt that this is a factual aspect and the facts prevailing in each foreign trip has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We notice from the order passed in AY 1995-96 by the co-ordinate bench that the Tribunal has followed the decision rendered by Hon ble Supreme Court in the case of CIT vs. General insurance Corporation [ 2006 (9) TMI 116 - SUPREME COURT] is allowable as deduction, since the issue of bonus shares is mere reallocation of company s funds from Reserves to Capital. Accordingly, we uphold the order passed by Ld CIT(A). - Shri B.R. Baskaran (AM) Shri Rahul Chaudhary (JM) For the Assessee : Shri Percy Pardiwala Ms. Vasanti Patel For the Department : Shri Ankush Kapoor ORDER Per B.R.Baskaran (AM) :- These cross appeals are directed against the order passed by Ld CIT(A)- 27, Mumbai and they relate to the assessment year 1998-99. 2. The assessee company is engaged in the business of manufacture and sale of two wheelers and 3 wheeler vehicles under the brand name of Bajaj . 3. We shall first take up the appeal filed by the assessee. 4.0 The Ground no.1 contested by the assessee relates to the taxability of Rs.1,03,55,590/-, being the surplus received on redemption of treasury bills. The assessee offered the same under the head capital gains , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the case of CIT vs. Meghalaya Steels Ltd (2016)(383 ITR 217)(SC). Following the order passed by the co-ordinate bench, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow deduction u/s 80IA of the Act in respect of duty draw and interest income. 8. Ground no.6 urged by the assessee relates to the issue whether the wealth tax payment is eligible for deduction while computing total income. We notice that this issue has been decided in favour of the assessee in the earlier years by the Tribunal, wherein the decision rendered by Delhi bench of Tribunal in the case of Punj Sons (P) Ltd vs. DCIT (2002)(74 TTJ 596)(Delhi) has been followed. The Delhi bench of Tribunal has taken the view that the tax chargeable with reference to the value of any particular asset of business or profession is not covered by the disallowable prescribed u/s 40(a)(iia) of the Act. In the present case, it is the submission of the assessee that the wealth tax is chargeable with reference to the value of certain business assets. The decision so rendered by Delhi bench of Tribunal has been followed in the assesee s own case in AY 1995-96 in ITA No.3493/Mum/1999 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee to delete any part from CKD pack, meaning thereby the LICENSEE shall manufacture those parts by itself. In that case, the assessee shall provide the LICENSEE a set of drawings for such parts/components and characteristics of materials to be use in the manufacture of such parts/components. For supplying the drawings, the assessee has collected technical knowhow fee from the above said licensee, on which the deduction u/s 80-O has been claimed. 10.3 The case of tax authorities is that the payment so received by the assessee was not in respect of the drawing, design, invention, patent and trade mark outside India. However, we notice that the Agreement entered between both the parties clearly provides that the technical knowhow fee is received for supplying the drawings. The relevant clause 5 reads as under:- 5. It is further agreed that should the LICENSEE request BAJAJ to delete any part, component or process from such CKD packs, BAJAJ will provide the LICENSEE as part of Engineering Services a set of drawings for such parts/components and characteristics of materials to be used in the manufacture of such parts/components. For such deletion/s from CKD packs the LI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------ 17,91,320 Providing S S Chute for disposal of wast Food at General Canteen ----- 2,38,284 ---------------- 28,60,480 =========== Accordingly, the Ld CIT(A) directed the AO to delete the balance amount of disallowance and sustain the addition in respect of above said expenses after allowing depreciation @ 10%. 11.1 We heard the parties on this issue and perused the record. It is the submission of the assessee that the above said expenses have been incurred on repair and maintenance of existing structures and it did not result in any benefit of enduring nature. Accordingly, the Ld A.R submitted that these expenses should be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted in that year. In AY 1997-98, in ITA No.5030/Mum/2021 dated 13-04-2023, the co-ordinate bench allowed the claim of the assessee following the decision rendered by Ahmedabad bench of Tribunal in the case of Gujarat Narmada Valley Fertilisers Co. Ltd vs. DCIT (ITA No.1463/ Ahd/2007), i.e., it was held that the assessee is eligible for deduction u/s 35D of the Act in respect of this expenditure. U/s 35D of the Act, this expenditure is allowable in installments. Hence the assessee has claimed proportionate amount in this year. Since the co-ordinate bench has held it to be allowable u/s 35D of the Act, following the said decision of co-ordinate bench, we direct the AO to allow eligible amount relatable to this year as deduction u/s 35D of the Act in this year. 15.0 The Ground no.2 raised by the revenue relates to the disallowance of depreciation claimed on assets taken on lease on 26.3.1996. In AY 1996- 97, the AO disallowed the claim of depreciation by holding that it was a pure financial transaction clothed as lease transaction. Following the same, the AO disallowed depreciation claimed in the current year, i.e. AY 1998-99 also. The Ld CIT(A) allowed the claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical decision taken by Ld CIT(A). Consistent with the view taken by the co-ordinate benches year after year, we confirm the order passed by Ld CIT(A) in holding that the expenditure incurred on Dyes and Moulds is allowable as deduction. 17.0 Ground no.4 urged by the revenue relates to decision of Ld CIT(A) in holding that the penalty charges received from machinery suppliers amounting to Rs.30,06,738/- is capital receipt. This is also a recurring issue. In AY 1997-98 (supra), the Tribunal has followed the decision rendered in AY 1995-96, wherein it was held that the penalty charges received from machinery suppliers is capital in nature. In this regard, the Tribunal has followed the decision rendered in AY 1993-94, wherein it was decided in favour of the assessee following the decision rendered by Hon ble Andhra Pradesh High Court in the case of Barium and Chemicals Ltd (168 ITR 164). Consistent with the view taken in the earlier year, we uphold the decision rendered by Ld CIT(A) on this issue. 18.0 Ground no.5 raised by the revenue relates to the disallowance of expenses incurred on jigs and fixtures amounting to Rs.4.93 crores. The assessee treated the above said expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Total turnover and in this regard, it has placed reliance on the decision rendered by Hon ble Supreme Court in the case of CIT vs. Laxmi Machine works (290 ITR 667). The said decision was followed in AY 1997-98 also. Accordingly, following the above said decisions rendered by the co-ordinate benches in the assessee s own case in the earlier years, we are of the view that the Ld CIT(A) was justified in holding that the excise duty receipts shall not form part of total turnover for the purposes of computing deduction u/s 80HHC of the Act. 21.0 Ground no.8 raised by the revenue relates to the deduction allowed u/s 80HHC of the Act on the foreign exchange difference of Rs.6,98,808/- in export turnover. Both the parties agreed that the AO did not exclude this amount while computing total turnover for the purpose of sec. 80HHC of the Act. However, the Ld CIT(A) held that the same is required to be included in the export turnover. The Ld DR relied upon the decision rendered by the Special bench of ITAT in the case of Prakash I. Shah (306 ITR (AT) 1(SB) and submitted that the Special bench has held that the deduction u/s 80HHC is not allowable on foreign exchange fluctuation. 21.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that the said expenses got crystallized during the year under consideration. 24.0 Ground no.11 raised by the revenue relates to disallowance of interest expenses relatable to exempt income. The AO noticed that the assessee has borrowed funds and paid interest thereon. The assessing officer took the view that common funds have been used to make investments and accordingly disallowed proportionate interest expenses. The ld CIT(A) noticed that own funds available with the assessee was more than the value of investments. Accordingly, he held no disallowance out of interest expenses is called for. 24.1 We heard the parties and perused the record. We notice that the view taken by Ld CIT(A) gets support from the decision rendered by Hon ble Bombay High Court in the case of HDFC Bank Ltd (366 ITR 505)(Bom). The jurisdictional Bombay High Court has held in the above said case that the interest disallowance u/r 8D(2)(ii) of I T Rules is not called for when the own funds available with the assessee is in excess of the value of investments. In our view, the ratio of the said decision shall apply to the facts of the present issue. Accordingly, we confirm the order passed by Ld CIT(A) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for attending India Growth fund Board Meeting. The Board resolution with regard to the expenses to be incurred on wife of Shri Rahul Bajaj reads as under:- Further Resolved that air-fare and other expenses in connection with the above visit (including those of Smt. Bajaj) be and are hereby authorized to be borne by the Company. We notice that the Board resolution did not bring out any business expediency. Further, the assessee has also not proved existence of any commercial or business expediency in incurring the foreign travel expenses of wife of M D except producing copy of Board resolution, in which also, no reason was given. There should not be any doubt that this is a factual aspect and the facts prevailing in each foreign trip has to be examined. Accordingly, the decision taken by the Tribunal in AY 1986-87 may not be relevant. We notice that the Ld CIT(A) has also not brought out the business or commercial expediency in incurring expenses on foreign trips of wife of M D, but deleted the addition on the basis of quantum of expenditure, status of the M D and approval by Board. These are not the proper reasons for allowing this type of expenditure, as held by the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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