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TMI Blog2024 (2) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure and not capital expenditure, allowed the claim of the assessee. Accordingly, respectfully following the decision of the co-ordinate Bench, we also hold that amount of ₹853.85 lacs of advertisement expenditure is revenue expenditure. The learned Assessing Officer is directed for deletion/ disallowance after taking into consideration if any depreciation is allowed on that, accordingly, ground no.2 of the appeal is allowed. Allocation of sales commission expenditure while computing eligible income for deduction u/s 80IB - The commission allocated to Section 80IB unit, has been upheld by the learned CIT (A). However, if that amounts to double disallowance, it requires to be deleted. In view of this, we restore the ground of the appeal to the file of the AO to verify the claim of double disallowance. Non-granting of credit on dividend income received from foreign company - CIT (A) has directed AO to verify the provisions of law and also the Double Taxation Avoidance Agreement between India and Malaysia and if the credit claim is allowable to the assessee, same may be considered - HELD THAT:- We do not find any infirmity in the order of the learned CIT (A) in g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly additional ground number 3 of the appeal is allowed. Accrual of income - exclusion of the amount of retention money included in sales since the same is not accrued during the year, in computing the total income under the normal provisions of the act - HELD THAT:- The identical issue arose in case of the assessee for assessment year 2006 07 [ 2023 (12) TMI 969 - ITAT MUMBAI] wherein this ground is decided in favour of the assessee. Therefore we also direct the learned assessing officer, respectfully following the decision of the coordinate bench in assessee's own case for the earlier year, to examine the sum of retention money offered for taxation in the sale for this year and if the claim is found to be correct, to reduce the same from the income for this year and to include the same as income in the year in which the retention price reaches finality. Accordingly ground raised additional ground of appeal is allowed. Nature of expenses - payment made to clubs - AO held that the entrance fee paid to clubs is a capital expenditure not allowable as business expenditure and disallowed the aggregate sum - CIT A deleted the addition - HELD THAT:- We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed. - SHRI PRASHANT MAHARISHI, AM AND SHRI SANDEEP SINGH KARHAIL, JM For the Assessee : Shri Gunjan Kakkad, AR For the Revenue : Shri Di l ip K. Shah, DR ORDER PER PRASHANT MAHARISHI, AM: 01. ITA No.4793/Mum/2011 is filed by Blue Star Ltd (assessee /appellant) and ITA No. 5551/Mum/2011 is filed by the Asst. Commissioner of Income Tax, Circle 1(1), Mumbai (the learned Assessing Officer) in cross appeals for A.Y. 2007-08 against the appellate order passed by the Commissioner of Income-tax (Appeals)-1, Mumbai [the learned CIT (A)] dated 25th March, 2021, wherein the appeal filed by the assessee against the assessment order dated 14th December, 2009, passed by the Asst. Commissioner of Income Tax, Range-1(1), Mumbai, under Section 143(3) of the Act, was partly allowed. Therefore, both the parties are aggrieved and are in appeal before us. 02. In ITA No.4793/Mum/2011, the assessee has raised following grounds of appeal:- 1. We beg to refer to the above appeal, which is yet to be disposed off by the Hon'ble Tribunal. In this regard, we would humbly request for inclusion of the enclosed additional grounds of appeal which does not require any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... talled and put by the appellant during the Previous Year 2006-07 relevant to the instant Assessment Year. However, claim for balance 10% additional depreciation in respect of eligible assets of Rs. 9,25,07,148/- installed and put to use for less than 180 days in the Previous Year 2005-06 was advertently not claimed by the appellant. Hence, claim for balance 10% additional depreciation amounting to Rs. 92,50,715/- on such assets should be allowed to the appellant in the instant Assessment Year. 5.0 CBDT, vide Circular No. 91/58/66-ITI(19) dated 18-051967, has clarified that the effect of the omission of the word 'cess' from Sec. 40(a)(ii) of the Act is that only taxes paid are to be disallowed. Following the same analogy, only the taxes paid are to be disallowed u/s 115-0(5) and 40(a)(ic) in the case of Dividend Distribution Tax and Fringe Benefit Tax respectively. 5.1 In view of the aforesaid circular, Education Cess amounting to Rs. 55,47,946/-on Income Tax, Dividend Distribution Tax and Fringe Benefit Tax debited to the P L Account by the appellant during the previous year relevant to the Assessment Year under consideration should be allowed as deduction in comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... location. In the original appeal filed on 15-06-2011, vide Ground No. 4, the appellant had erroneously urged that the Ld. AO be directed to delete further allocation of Rs. 1,70,53,142/- while computing deduction u/s 80IC, since the appellant has already allocated Rs. 3,98,00,000/-as sales commission expenses. 8.1 The appellant amends the aforesaid Ground No. 4 of original appeal filed on 15-06- 2011 and urges that the Ld. AO be directed to add sales commission expenses of Rs. 3,98,00,000/- being already allocated by the appellant to the eligible HP unit in computing deduction u/s 80-IC and thereby deleting the double allocation of such expenses. 9.0 Prayer: 9.1 In view of the above, the appellant most respectfully prays for admission of the enclosed additional grounds of appeal in the appeal pending before your goodself. Your appellant also most respectfully craves leave to add, to amend, modify, rescind, or alter the additional ground either before or at the time of hearing of the appeal. 03. In ITA No.5551/Mum/2011, the Revenue has raised following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) is ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er allowing deduction u/s. 801B of the IT Act, 1961 ? 8. Whether on the facts and in the circumstances of the case, and in law, the learned CIT (A) has justified in directing the Assessing Officer to allocate 50% of the depreciation on assets of Head office in the ratio of turnover of the HP unit while determining eligible profit for deduction u/s 80IC of the Income-tax Act, 1961 (the Act), 1961. 9. Whether on the facts and in the circumstances of the case, and in law, the learned CIT (A) has justified in allowing appeal to the assessee and directing not to allocate travelling expenses amounting to ₹2,31,29,544/- to the HP unit while determining profit eligible for deduction u/s 80IC of the IT Act,1961? 04. The brief facts of the case shows that assessee is a company engaged in the business of Air conditioning and Refrigerators Systems such as central air conditioning plant, water coolers, deep freezers and other electrical and medical equipments. The assessee filed its return of income on 5th November, 2007, declaring total income of ₹48,62,52,472/-. This return was picked up for scrutiny by issuing notice under Section 143(2) of the Income-tax Act, 1961 (the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 12.57 crores instead of ₹20.07 crores. On appeal before the learned CIT (A) following his own order held that the learned Assessing Officer was directed to allocate 50% of depreciation on assets of head office in the ratio of turnover of Himachal Pradesh Unit for computation of deduction under Section 80IC of the Act. With respect to the allocation of advertisement expenses, he upheld the allocation of the learned Assessing Officer subject to certain modifications; therefore, against the order of the learned CIT (A), the assessee is aggrieved. This is challenged as per ground no.1. 07. The learned Authorized Representative submitted that this issue is covered in favour of the assessee by the decision of ITAT in assessee s own case for A.Y. 2001-02 in ITA No.3363/Mum/2005. It was further stated that identical issue has been decided in ITA No.4792/Mum/2011, for A.Y. 2006-07, wherein ground no.1 at para no.8 is identical. He referred to paragraph no.15 of the coordinate bench wherein the claim was allowed. Accordingly, he submitted that this ground needs to be allowed in favour of the assessee. 08. The learned Departmental Representative vehemently supported the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and have perused the material placed on record. after considering the facts of the case, we notice that the assessee company on its own has allocated 50% corporate expenses including advertisement expenses of Head Office in ratio of Turnover of Dadra unit to total Turnover of the assessee company. The allocation made by the assessee company is duly certified by a technical person Chartered Accountant. The revenue has failed to point out any cogent reasons and material for a different allocation of expenditure in addition to the allocation made by the assessee. Since there is no cogent material on evidence available on record, we are of the considered view that the allocation in respect of Head Office corporate expenses and advertisement expenses made by the assessee are required to be accepted. The Assessing Officer is directed to accept the allocation of the expenses as per the allocation of the expenses by the assessee. The Assessing Officer need not make any further allocation in this regard for computation of deduction u/s. 80IB. As regard the depreciation on assets at Head Office, we notice that the assessee has allocated 50% corporate expenses as the same were found related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Commissioner of Income tax (Appeals). 014. The ld DR vehemently supported appellate order. 015. We have carefully considered the rival contentions and perused the orders of the lower authorities as well as the order of the co-ordinate Bench for A.Y. 200607, wherein in paragraph no. 17 to 20, following the decision of the Hon'ble Bombay High Court, it was held that such advertisement expenditure are revenue expenditure and not capital expenditure, allowed the claim of the assessee. Accordingly, respectfully following the decision of the co-ordinate Bench, we also hold that amount of ₹853.85 lacs of advertisement expenditure is revenue expenditure. The learned Assessing Officer is directed for deletion/ disallowance after taking into consideration if any depreciation is allowed on that, accordingly, ground no.2 of the appeal is allowed. 016. Ground no.3 of the appeal of the assessee is regarding allocation of sales commission expenditure while computing eligible income for deduction under Section 80IB of the Act. It is the claim of the learned Authorized Representative that the same amounts to the double addition. He submitted that as per paragraph no.12 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4B and 234C of the Act which are consequential in nature and therefore, same are dismissed. 022. Assessee has raised three additional grounds of appeal as per letter dated 18 December 2015. 023. The first Additional ground of appeal on deduction in respect of provision for leave encashment. Same was not pressed in view of the decision of the Hon'ble Supreme Court in Union of India Vs. Exide Industries Ltd. 425 ITR 1. Therefore, same ground is not admitted and dismissed. 024. The second additional ground is with respect to the incorrect computation under section 145A of the act. The claim of the assessee is that it is following exclusive method of accounting for Cenvat credit in the books of account and hence opening inventory, purchases and closing inventory are recorded net of cenvat credit. As per section 145A, purchases sales and value of inventory should be adjusted to include the amount of any tax duty cess or fee actually paid or incurred to bring the goods to the place of present location and condition. Accounting standard 2, guidance note on accounting treatment for cenvat and guidance note on tax audit issued by the Institute of chartered accountants of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the claim for balance 10% additional depreciation amounting to ₹ 9,250,715/ on such assets are claimed. 027. We have carefully considered the contentions of the assessee as well as the arguments of the parties. We find that the assessee is eligible for additional depreciation under section 32 (1) (iia) on the assets purchased and put to use for less than 180 days in the previous year of ₹ 92,507,148/ . However as assets are used for less than 180 days only 10 % of additional depreciation is allowed. The balance 10% of the additional depreciation is allowable to the assessee in the next year. We do not find any infirmity in the claim of the assessee. The claim of the assessee is also supported by several judicial precedents. Accordingly additional ground number 3 of the appeal is allowed and Ld assessing officer is directed to grant the additional depreciation to the assessee at the rate of 10% on the assets purchased in earlier financial year which was put to use for less than 180 days in that year. Accordingly additional ground number 3 of the appeal is allowed. 028. Assessee has also raised an additional ground of deduction of education cess on income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the other unit being capital in nature in computing the total income under the normal provisions of the act. The brief fact shows that the during the previous year the appellant has availed sales tax incentive by way of exemption of local sales tax and Central sales tax in respect of goods manufactured or processed by its eligible manufacturing unit set up in Dadra where the backward area exemption scheme is available. Identical issue arose in case of the assessee for assessment year 2006 07 w herein as per paragraph number 21 24, this issue is decided and the matter is restored back to the file of the learned assessing officer. With similar direction, respectfully following the decision of the coordinate bench in assessee's own case, the additional ground is restored to the file of the learned AO. 032. Accordingly, appeal filed by the assessee is partly allowed with above directions. 033. Now we come to the appeal of the learned assessing officer. 034. The first ground of appeal is with respect to the deleting the disallowance of ₹ 2,425,312/ on account of payment made to clubs. The learned assessing officer is of the view that entrance fees paid to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred for earning the said income. The learned assessing officer applied the provisions of rule 8D and made a disallowance of ₹ 830,696/ . The learned CIT A held that the rule 8D does not apply to the impugned assessment year and therefore directed the learned assessing officer to make disallowance on reasonable basis in accordance with the decision of the honourable Bombay High Court in 328 ITR 81. The learned assessing officer is aggrieved with the above direction. 039. On hearing both the parties we find that there is no infirmity in the direction of the learned CIT A that rule 8D cannot apply to the impugned assessment year and the assessing officer has to make disallowance on reasonable basis. Identical issue arose in case of the assessee for assessment year 2006 07 wherein the coordinate bench has also upheld such direction of the learned CIT A. There is no change in the facts and circumstances of the case and therefore respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2006 07 we find no infirmity in the direction of the learned CIT A. Accordingly ground number 2 of the appeal of the learned asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the depreciation of head office assets. As the reasoning given by the learned CIT A in following the decision of the coordinate bench in assessee's own case for earlier years, we do not find any infirmity in the order of the learned CIT A in following the decision of the coordinate bench in assessee's own case for earlier years. Accordingly, ground number 4 and 6 of the appeal are dismissed. 042. Ground number 5 of the appeal is with respect to accepting the allocation of travelling expenses. The fact shows that the assessee while computing the profits eligible for deduction under section 80 IB of the act allocated travelling expenses directly incurred by the eligible units and various regions. Further 50% of the travelling expenses of ₹ 16,319,625/ incurred by the head office were also located to the eligible units in the ratio of turnover of eligible unit to total turnover of the company. The learned assessing officer rejected the above allocation and allocated total travelling expenses of ₹ 228,490,000 incurred by the assessee in ratio of turnover of eligible unit to the total turnover of the company. The learned CIT A following the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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