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TMI Blog2011 (9) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... of convenience. ITA No. 5059/Mum/2003 (AY-1999-2000)(by Revenue) 2. Briefly stated facts of the case are that the assessee company is engaged in the business of manufacturing and sale of textile and DMT. The assessee filed return declaring loss of Rs. 14,15,83,588/-. However, the assessment was completed at an income of Rs. 21,58,69,320/- vide order dated 20.3.2002 passed u/s 143(3) of the Income Tax Act, 1961(in short the Act). On appeal, the ld. CIT (A) while partly allowing the appeal allowed substantial relief to the assessee. 3. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 4. Ground No. 1 taken by the Revenue reads as under : 1. On the facts and in circumstances of the case and in law, the ld. CIT (A) has erred in deleting the disallowance made u/s 14A of the Act for the expenditure related to exempted income 5. The brief facts of the above issue are that the assessee was asked to furnish the explanation in respect of expenditure incurred on income exempt under Chapter III shown at Rs. 2,12,98,955/- so as to reduce the said expenditure from the exempt income. In reply, it was submitted that the investments were made from internal accrual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. The ground taken by the Revenue is, therefore, allowed. 9. Ground No. 2 taken by the Revenue reads as under: 2. On the facts and in circumstances of the case and in law, the ld. CIT (A) has erred in directing the AO to allow the expenditure of Rs. 14.95 crores incurred on Voluntary Retirement Scheme treating the same as revenue expenditure 10. Brief facts of the above issue are that the AO observed that the assessee was asked to explain as to why Voluntary Retirement Scheme expenditure of Rs. 14.95 crores should not be treated as capital expenditure. In response, it was inter alia submitted by the assessee that the assessee-company paid a sum of Rs. 14.95 crores to its employees under Voluntary Retirement Scheme. The same is treated as Deferred Revenue Expenditure in accounts. However, for income tax purpose the same is treated as revenue expenditure and fully deducted off in the year of payment itself. The reliance was also placed by the assessee in the case of Sasson J.David Co. P.Ltd. V/s CIT 118 ITR 261, 271 (SC) and CIT V/s Assam Oil Co .Ltd 154 ITR 647 (Calcutta). However, the AO observed that the assessee has made payment to its employees for increasing the profitabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowable deduction. 15. In M/s Godrej GE Appliances, Ltd. (supra), Their Lordships following the decision of the Hon ble Supreme Court in the case of Indian Cable V/s Workmen reported in AIR 1972 Supreme Court 2195, wherein it has been held that such expenditure was allowable u/s 37(1) of the Income Tax Act and was not an expenditure of capital expenditure, dismissed the Revenue s appeal. 16. Respectfully following the above decisions, we are of the view that the expenditure relating to Voluntary Retirement Scheme is a revenue expenditure and allowable u/s 37(1) of the Act. Accordingly, we are inclined to uphold the order of the ld. CIT (A) in deleting the addition made by the AO. The ground taken by the Revenue is, therefore, rejected. 17. Ground No. 3 of the Revenue s appeal reads as under: 3. On the facts and in circumstances of the case and in law, the ld. CIT (A) has erred in deleting the addition made on account of disallowance of premium on debenture redemption and interest on secured premium notes. 18. The brief facts of the above issue are that the AO observed that the assessee has claimed deduction u/s 37(1) of the Act in respect of premium on debenture redemption of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, in fact, pertains to the entire period of seven years during which the funds borrowed by way of SPN were utilized. The assessee did utilize the funds by way of SPN during the first three years. However, this does not mean that the funds in the first three years were interest-free. It is only in view of the terms and conditions of SPN that the interest (premium) was payable from the fourth year onwards. The view is fortified by the ratio of Madras Industrial Investments Corporation Ltd. (supra) and therefore, the amount of Rs. 8.14 crores claimed by the assessee is an allowable deduction. Though the expenditure has been shown as a provision, it is a provision for known and ascertained liability which was proportionately spread over the period of the debentures. In all the earlier years as well as subsequent years, except for the assessment year 1999-2000, the claim of the assessee had been allowed by the AO himself and in the assessment year 1999-2000 the claim of the assessee had been allowed by the CIT(A). In view of the above discussion, the CIT (A) had rightly been directed the AO to allow deduction amounting to Rs. 8.14 crores. The same is upheld. In the absence of any dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e foreign training of the appellants employees at the War Wick University. Thus, these expenses have been incurred by the appellant for procuring the consultancy services for improvement of the various aspects of its textile business i.e. operational management, marketing, production, planning and control and quality improvement, man-power, reduction, minimizing the cost etc. The appellant had also relied upon some judgments regarding the admissibility of these expenses which are as under : CIT vs-Aluminium Corpn.of India Ltd.92 ITR 563 (Calcutta) Expenditure incurred in calling foreign technicians to examine the process of working the plant and suggesting improvement, which resulted in substantial rise in the production is a revenue expenditure CIT-vs- Praga Tools Ltd. 157 ITR 282(AP.) Expenses by way of consultancy fees for improving quality of products is revenue expenditure Hindustan Aluminium Corp. Ltd. -vs- CIT 159 ITR 673 (Calcutta) Expenditure incurred in sending some of the employees to USA for practical training and experience in running the factory held allowable While making such disallowance the assessing officer is predominantly guided by the accounting entries relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure, we are of the view that the ld. CIT (A) was fully justified in deleting the disallowance made by the AO. The ground taken by the Revenue is, therefore, rejected. 27. Ground No. 5 reads as under : 5. On the facts and circumstances of the case and in law, the ld. CIT (A) has erred in holding that the lease equalization charges cannot be added back to the book profit by way of adjustment under the provisions of section 115JA of the I.T. Act. 28. Brief facts of the above issue are that the AO inter alia observed that the assessee was asked to explain as to why lease equalization charges should not be added back to the profit of the business under the provisions of section 115JA of the Act. In reply, the assessee-company vide letter dated 13.2.2002 has put forward the same argument as of the last year. The AO for the same reasons as discussed in detail for the assessment year 1998-99 added the sum of Rs. 3,36,00,000/- to the book profit as per section 115JA of the Act. On appeal, the ld. CIT (A) following the appellate order for the assessment year 1997-98 held that lease equalization charges cannot be added back to the book profit by way of adjustment as mentioned u/s 115JA o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al component. They do not fall within the categories enumerated in clauses (a) to ((f) of Explanation to Section 115JA(2) 16. In line with the ratio laid down by the co-ordinate bench of the Tribunal, we confirm the order of the CIT (A) in holding that the said lease equalization amount is not be to added to the profits of the business as the same falls outside the scope of Explanation to Section 115JA of the Act. Hence, the ground of appeal raised by the Revenue is dismissed. 23. The issue in ground No. 2 raised by the Revenue is identical to the issue raised by way of ground No. 3 in Assessment Year 1997-98. In line with our observations in the paras hereinabove with regard to the lease equalization adjustment amount, we are in conformity with the order of the CIT (A) and dismiss the ground of appeal raised by Revenue. In the absence of any distinguishing feature brought on record by the Revenue, we respectfully following the consistent view of the Tribunal hold that the lease equalization amount is not to be added to the profit of the business as the it falls outside the scope of Explanation to Section 115JA of the Act. Accordingly, we are inclined to uphold the order of the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of Ground No. 2, paragraph 21 in respect of Ground No. 3 and 4, paragraph 26 in respect of Ground No. 5 and paragraph 31 in respect of Ground No. 6 of this order while upholding the order passed by the ld. CIT (A) on the above issues reject the grounds taken by the Revenue. ITA No. 1624/Mum/2005 (AY : 2000-01) (by assessee) 35. Ground Nos. 1 to 3 taken by the assessee read as under : 1. The ld. CIT (A) erred in confirming the disallowance u/s 14A made by AO in respect of expenditure in connection with exempt income for Rs. 10,00,000/-. The appellant contends that there is no expenditure incurred in connection with the exempt income which is liable for disallowance u/s 14A. 2. The ld. CIT (A) erred in holding that in case there is negative export profit as per computation under clause (a), (b) and ( c) of subsection (3) of section 80HHC the appellant would not be entitled to deduction as per proviso of section. 3. The ld. CIT (A) erred in holding that since the profit computed u/s 80HHC(3)(a),(b) or (c) are negative therefore the appellant is not eligible for deduction as per proviso of the section and nothing can be reduced from book profit u/s 115JA of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he does not want to press the above grounds which was not objected to by the ld. DR. 43. That being so and in the absence of any supporting materials placed on record by the learned counsel for the assessee, the grounds taken by the assessee are, therefore, rejected being not pressed. ITA No. 4548/Mum/2006(AY : 2002-03)(by Revenue) 44. Ground Nos. 1 to 3 taken by the Revenue read as under : 1. The ld. CIT (A) erred in canceling the disallowance of Rs. 1,00,000/- on account of deduction of interest on secured premium notes without appreciating the facts brought on record by the AO. 2. The ld. CIT (A) erred in canceling the disallowance of Rs. 1,89,00,000/- which was claimed under the head Nav Nirman Expenses and were claimed as deferred revenue expenditure. 3. The ld. CIT (A) erred in holding that the lease equalization charges of Rs. 4.68 crores cannot be added back to the book profit by way of adjustment under the provisions of section 115JA. 45. At the time of hearing, both the parties have agreed that the facts of the above case and issues raised by the Revenue are similar to the grounds raised in the Revenue s appeal for the assessment year 1999-2000, therefore, the plea tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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