9911796707
TMI Blog1993 (9) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the sale of import entitlement amounting to Rs. 23,30,465." The assessee is an exporter of cycles and its parts. During the relevant accounting period, it made exports worth Rs. 5,13,17,334. In connection with exports made, the assessee earned an income of Rs. 23,30,465, which the assessee excluded from taxable income on the ground that it was a capital receipt not liable to tax. It was noted by the ld. IAC that in the past also, the assessee had taken such stand. However, such receipt was said to have been treated as revenue and subjected to tax. It was also mentioned by the ld Assessing Officer that there were judicial pronouncements which had held that amounts received by way of import entitlements were obtained directly in accordance with business and the value of the sale constituted profits and gains of business of the assessee within the meaning of section 28(iv). Thus the addition of the above amount was made in the assessable income, with the following observations :--- "In view of the ITAT's decisions dated 28-1-1987 in the case of the assessee-company for the assessment year 1983-84, and High Court's decisions cited above. I hold that the amount realised by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd will have operation from retrospective effect. The law will be settled on the issue only after the passing of the Finance Bill. We thus consider it in the interest of justice and fair play, that this issue be remitted back to the file of the ld. CIT (Appeals) for having a second look after the Finance Bill is passed and the provision under the Finance Bill takes the shape of statute. The ld. first appellate authority will decide the issue afresh, after taking into consideration all the facts, circumstances, findings and the statute at the relevant time. We direct accordingly. 7. The second ground raised by the assessee is to the following effect :--- "That the ld. CIT (Appeals) has erred in sustaining an addition of Rs. 7,400 by applying the provisions of section 40A(3) of the IT Act, ignoring the fact that the amounts were covered by the exceptions mentioned in rule 6DD(j) of the Income-tax Rules." It was noted during assessment proceedings by the ld. IAC(A) that the assessee had made payments in cash on 21-2-1983 to M/s Ludhiana Sales Corporation of Rs. 3,650 and another payment of Rs. 3,750 on 15-1-1983 to M/s Bawa & Co. These two sums, put together, gave a figure of Rs. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. We are thus satisfied that the assessee has not been able to make out a case where cash payments were at all justified or necessary. There is, therefore, clear contravention of the section and the conditions under rule are not satisfied. We thus see no justification to interfere and the finding under challenge is, therefore, confirmed. 11. In ground No. 3, the assessee challenges only confirmation of the disallowance of sales tax. The other items mentioned in the ground are rejected, since not pressed. It was noted by the ld. IAC(A), after perusal of the balance-sheet, that an amount of Rs. 24,53,232 collected by the assessee on account of sales tax was not deposited with the Govt. The amount in fact was being shown under the head 'Current liability'. The Assessing Officer noted that according to the ratio in the case of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542 (SC), sales-tax collected was part of trading receipts and thus part of gross profit. It was submitted before the ld. IAC(A) on behalf of the assessee that the ratio in the case supra was laid down by the Hon. Supreme Court in a different context. Mention was also made of the ratio in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in confirming the disallowance of Rs. 2,500 which was by way of advertisement in souvenir and contribution to employees of Punjab National Bank." The ld. IAC, while examining the 'Advertisement Expenses Account', noted that the assessee had debited for advertisement in the Souvenirs issued by some social organisations :--- Rs. (a) Yangya Smaj, New Delhi, 28-2-1983 500 (b) Inner Wheel Club, Delhi, 3-3-1983 500 (c) Jos Cabral (p, Lai - Goa), 3-3-1984 500 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 64,761 wrongly treating the expenditure in the nature of entertainment expenditure." Entertainment expenses amounting to Rs. 72,937 was debited to the 'Sales Promotion Expenses', as noted in the audit report. The ld. IAC also noted some more items of this nature and thus made a total disallowance of Rs. 78,634 under section 37(2), with the following observations :--- "It is thus clear that the expression 'entertainment expenditure', according to section 37(2) of the IT Act, includes expenditure on provision of hospitality of every kind. The expression 'entertainment expenditure' engulfs in its fold the expenditure incurred in providing accommodation in hotels to dealers and representatives, as has been held by the Hon'ble Karnataka High Court in the case of Mysodet Pvt. Ltd. v. CIT 163 ITR 848. The Hon'ble Pb. & Hr. High Court has already held in the case of Khem Chand Bahadur Chand 131 ITR 336 that the expenditure on tea, cold drinks, meals etc incurred by an assessee for its customers is an expenditure of entertainment nature and is disallowable under section 37(2). Respectfully following the decisions of the Hon'ble High Courts mentioned above, the total expenditure of Rs. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to the Employees' Union of New Bank of India for business consideration and the amount was allowable." A ground is seen to have been taken before the ld CIT (Appeals) against disallowance of Rs. 1,500 out of miscellaneous expenses as contribution to the employees union of New Bank of India, in which the appellant was maintaining bank account. It was argued on behalf of the assessee before the ld CIT (Appeals) that there was no personal element involved and the expenditure was allowable. In the opinion of the ld. IAC (Appeals) no business expediency was involved. On behalf of the assessee before the ld CIT (Appeals), mention was made of the order of the ITAT in the case of National Rayon Corpn. v. ITO [1986] 17 ITD 1208 (Bom.) where such expenditure was said to have been held allowable. Copy of the Tribunal's order was not made available and the ld CIT (Appeals) refused to interfere. The present ground before us is against that action. 22. After having heard the rival submissions and persuing the record, it is seen that the assessee contributed Rs. 1,500 to the employees union of the New Bank of India, where it was having accounts. There appears to be a direct nexus between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven to dealers under the Scheme should be included while working out the disallowance under section 37(3A). Details of items relatable to the sum of Rs. 77,243 are described at pages 2 and 3 of the assessment order. The disallowance was thus made by the ld IAC, after detailed discussion, with the following observations :--- "It will thus be seen that the assessee has absolutely no record to prove as to for what consideration the gifts were allegedly given to the dealers. The assessee-company has not recorded the names and addresses of the dealers. their visits to the factors, the sales made to them etc. In the circumstances, I am afraid, the expenditure on gifts allegedly made to the dealers cannot be held to be wholly and exclusively laid out for the purposes of assessee's business within the meaning of section 37(i). Alternatively, the expenditure in question is covered under section 37(2) read with Explanation 2 as the expenditure in question is in the nature of expenditure on provision of hospitality. According to Explanation 2, entertainment expenditure includes expenditure on provision of hospitality of every kind by the assessee to any person, whether by way of provision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the submissions made before her on behalf of the assessee, confirmed the ld IAC's action, with the following observations : "15.2. I do not agree with the appellant's version as looking on all the items mentioned under ESA, it is seen all items are specifically mentioned and pipeline means all pipelines not related to specific industry and under item 6 there is after hydraulic works, comma and pipelines and sluices are independent. It will further also be clear while writing each item from 1 to 7 which mention e.g. item No. 7 'Locomotives, rolling stocks, tramways and railways' used by concerns, excluding railway concerns. Similarly, calculating machines in all concerns. Therefore, item No. 6 'Hydraulic Works, pipelines and sluices' means no extra shift allowance available wherever they may be used. Considering these facts, the IAC's not allowing extra shift allowance is confirmed." 29. The assessee's present ground before us is against that action. The ld D.R. once again repeated the submissions made before the revenue authorities. On behalf of the revenue, the ld Sr. D. R. supported the finding under challenge. 30. Rival submissions have been heard and record carefully per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der is as under :--- "16. 1. It was further pointed out to the appellant that the depreciation has been wrongly given on this account on the basis of plant and machinery while it should have been allowed as part of the building account. The appellant has given in writing that he has no objection to allowing depreciation as part of building account. The IAC is directed to withdraw the depreciation given @ 15% and allow it at the rate of building account and to that extent the income will stand enhanced. No investment allowance is allowed on electric installation is shown in unit No. 2. As far as unit No. 1 is concerned the electric installation is shown at Rs. 14,293. It is further seen that as far as the electric installation in unit No. 1 is concerned, the value of each item is less than Rs. 5,000 and 100% depreciation is allowable and thus no investment allowance will be allowable as per section 32A(1)(d). The IAC is directed to allow 100% depreciation on these items while addition on account of investment allowance is confirmed. Opportunity was given to both the parties on this ground and they have no objection to such a position of law this claim is rejected for investment all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s : "I have carefully considered the assessee's explanation but do not incline to accept the same. The fact remains and admittedly so that the assessee-company has not physically identified the stock of iron scrap as on 30-6-1983 and its value taken into account in the financial accounts. If is further found that the cash sales of scrap as recorded in the cash sale day book from cash memo Nos. 6901 to 7000 and cash memos Nos. 7376 to 7600 have not been found accounted for. The assessee-company has no satisfactory explanation for these missing cash memos except saying that these cash memos were not used at all. The assessee-company has, however, failed to substantiate its contention. In the circumstances, I hold that some sale of scrap has not been accounted for by the assessee-company in its books of a/cs. I estimate the value of such sale of scrap at Rs. 3 lakhs." 36. This addition was also contested by the assessee. The ld CIT (Appeals) noted that there was no quantitative details of raw material consumed or scrap left with the assessee. It was submitted on behalf of the assessee that a comparative chart of sale of scrap was filed before the ld IAC. The sale of scrap was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee-company has claimed deduction in respect of foreign commission under clause (iv) of section 35B(i)(b) which permits deduction in r/o expenditure incurred wholly and exclusively on maintenances outside India of such goods, services or facilities. The expenditure on foreign commission incurred by the assessee-company can neither be said to be expenditure on maintenance outside India of a branch, office or agency. While holding this, I get support from the Hon'ble Madras High Court decision in the case of CIT v. Southern Sea Foods (P.) Ltd. 140 ITR 855. The facts of the aforesaid case, in brief, are that the assessee-company had engaged the services of another company 'M' for the purposes of procuring orders for foreign buyers in r/o export of Prawns and Shrimps to the foreign countries and paid Rs. 14,737 by way of commission. Sub-clause (iv) dealt with expenditure that wholly and exclusively incurred on maintenance outside India of a branch, office or agency for the promotion of the sale outside India of such goods or services or facilities and in the instant case there was no question of the assessee maintaining any branch or office or even an agency for sale promoti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adras High Court. The finding under challenge is seen to have been recorded without caring for the facts and the Board's circular supra. Besides that, the issue was also required to be gone into in accordance with the finding of the Special Bench in the case of J.H. & Co. v. Second ITO [1982] 1 SOT 150 (Bom.). Since this issue is not seen to have been decided by the ld first appellate authority in the manner it should have been, we are also not in a position to take up the issue at our hand. It is considered proper and in the fitness of things that the issue should travel back to the file of the ld CIT (Appeals) for decision afresh, after collecting the material and keeping in view the relevant circulars and finding of the Special Bench of the ITAT. The ld CIT (Appeals) will as well keep in view the ratio in the case of CIT v. Pooppally Foods [1986] 161 ITR 729 (Ker). We direct accordingly. 42. Ground No. 12 raised before us is to the following effect :--- "That the ld CIT (Appeals) has erred in not allowing proper deduction under section 80J." This ground is rejected as not pressed. 43. Ground No. 13 taken on behalf of the assessee is as under :--- "That the ld CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s conclusion from the ratio in the case of S. Warriam Singh Cold Stores wherein some of the relevant observations are as under :--- "A plain reading of the provisions of section 32A(2)(b)(ii) of the Act shows that the words 'production' and 'manufacture' occurring therein are not in any manner qualified by the 'article' or 'thing' being marketable or being a commercial commodity. The concept of marketability is a whole unwarranted intrusion into this provision. A cold storage plant fulfils the condition of product an article or thing first and the thing produced is later on used for carrying in the business of preservation of articles and goods. The language of the relevant section will be fully satisfied, if in the production of an end product, several intermediate articles are produced. It will be obviously not possible to say that the Legislature intended to grant investment allowance only in respect of machinery and plant used in the last process and no investment allowance will be available in respect of the intermediate processes of manufacture, which may be producing any article or thing." In the light of above discussion, we vacate the finding under challenge and hold tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Therefore these conclusions should not be taken as precedent for any other assessment year. 2. Ground No. 1 taken up in the original grounds of appeal and the additional ground of appeal admitted by the Bench Z order bearing ITA No. 257 of 1988 for this assessment year dated 9-2-1990 require consideration together. This is so because both the grounds are covered by the judgment of the Special Bench of the Tribunal in the case of Gedore Tools (India) (P.) Ltd. Ground No. 1 regarding exemption of profits earned on sale of import entitlement amounting to Rs. 23,30,465, therefore, in accordance with the judgment of the Special Bench is to be decided against the assessee. On that very principle, the additional ground of appeal admitted by the Bench involving an amount of Rs. 47,36,771 as cash compensatory support has to be allowed an amount deleted from the total income in terms of the ratio of the Special Bench in the case of Gedore Tools (India) (P.) Ltd. I do not see any reason why these grounds should not be determined in accordance with the law as on the date of hearing available to both the sides. I am of the firm conviction that a Judge should not and cannot wait on events th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed once over. According to him, this has been rectified by the Assessing Authority under section 154 and, therefore this issue is not open. All this has been disposed of by my learned Brother in para 14 which speaks for itself. However, if one goes through the judgment of the Andhra Pradesh High Court in the case of Srikakollu Subba Rao & Co. relied on by the assessee and mentioned in paras 13 and 14 by my learned Brother as not supporting the assessee, it becomes clear that no doubt the newly inserted provision in section 43B is applicable for the assessment year 1984-85 but in order to apply the provisions not only should the liability to pay sales-tax or duty be incurred in the accounting year but the amount also should be statutorily payable in the accounting year. It was held in that case that the sales-tax payable for the month of March 1984 could not be disallowed under section 43B. These observations were made by the Hon'ble Court after reference to various judgments including the judgment of the Hon'ble Supreme Court in the case of Om Parkash Agarwal v. Giri Raj Kishori [1987] 164 ITR 376. 5. It is also seen that on behalf of the Revenue judgments of the Tribunal in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88 appearing at pages 31 to 44 of the assessee's paper book, held that the expenditure was admissible under section 37(1) as expense towards sales promotion. In fact the Commissioner of Income-tax (Appeals) in his impugned order while dealing with this issue has followed that judgment of the Tribunal to hold that the expenditure is covered by section 37(1) and not by section 37(2) of the Act. But thereafter, he has made an observation that, "this should be added while computing 37(3A)". This shows that the Commissioner of Income-tax (Appeals)'s observation is a contradiction in terms because on one hand he is following the order of the Tribunal and on the other he is superseding the judgment of the Tribunal and saying that the amount should be considered under section 37(3A). He could not do so. The order of the Tribunal holding that it is an expenditure under section 37(1) has to be followed because there is no change in the facts of the case. Therefore, this amount should be allowed as a deduction. 7. In ground No. 8, the grievance of the assessee is that the Commissioner of Income-tax (Appeals) erred in not allowing extra shift allowance on pipeline fittings amounting to Rs. 7, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected with the mere observation that, "the prohibition in the rule is clear. The situation does appear to be without any doubt on confusion". To my mind, this is not the type of disposal of such a complicated ground that is expected of us. The provision of this fiscal statute are so vexed and varied that the interpretation thereof is a rich source of vexatious litigation. Therefore, it cannot be said that the rules are clear and the section is clear. One has to give the interpretation of the relevant provisions by a speaking order irrespective of the fact that it favours either party. In doing so, however, the set principles of canons of construction must be kept in view. 10. Rule 5 of the Income-tax Rules, 1962 provides that subject to the provisions of the statute mentioned therein, depreciation in respect of buildings, machinery, plant and furniture etc. shall be calculated at the percentages specified in the second column of the Table in Part I of Appendix I to these rules on the actual cost etc. or as the case may be, the written down value of such assets which are used for the purposes of the business or profession of the assessee at any time during the previous year. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributed to Legislature even in subsidiary legislation. It is thus clear that what is contained in item (6) is a prohibition only on hydraulic works, hydraulic pipelines and hydraulic sluices. This is necessarily an interpretation which has to be based on the principles of ejusdem generis. Therefore, I do not see any reason why the assessee should be denied the extra shift allowance because of entry No. (6) which has been relied on by the authorities below and discussed above. 11. Unfortunately, I do not have the benefit of the reasons for the conclusion drawn on this issue by my learned Brother. But so far as the lower authorities are concerned their reasons were apparently misconceived and they do not also appreciate the context in which the claim was made. Unfortunately the claim has been rejected merely treating it as a claim for depreciation without recording the background on which it was made. Before the Bench, the claim of the learned Counsel for the assessee was that there was no controversion of this claim that there was new plant and machinery worth Rs. 36,00,000 installed and to make it functional, the pipelines were installed. It is part of plant and machinery and depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs and gave a relief of Rs. 1 lac. The reason on which such an addition has been sustained is the absence of details about the quantity of material, the sale, opening and closing stocks. To my mind this approach does not accord with what has been done by the assessee earlier and accepted by the Revenue for a number of years. For the year under appeal, nothing new has happened. The only thing that happened was that the Assessing Authority was alarmed by the fact that the sale of scrap for the year under appeal was only Rs. 38,13,979 as compared to sale of scrap amounting to Rs. 43,80,405 in the preceding year. He, therefore, proceeded to find out the reasons for it. The assessee explained the reasons and it appears also at the appellate stage pointed out to the missing cash memos having been found out and projected. However, the authorities below rejected an explanations and because the sale was less than the earlier year, attempted to bring it at par by making an addition of Rs. 3 lacs. This to my mind has no factual or legal justification. There is nothing that prohibits an assessee following a mercantile system of accounting to have an exception about a particular item to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons contained in the proposal for amendment of law lying before the Parliament, if as and when enacted, as held by the Judicial Member? 2. Whether, on the facts and in the circumstances of the case, the addition on account of sales-tax amounting to Rs. 24,53,232 collected by the assessee should be confirmed in view of the provisions of section 43B of the Income-tax Act, 1961 as held by the Judicial Member or this issue be sent back for fresh consideration by the Assessing Authority for the reasons recorded by the Accountant Member. 3. Whether, on the facts and in the circumstances of the case, the observations of the Commissioner of Income-tax (Appeals) that the sum of Rs. 77,243, " should be added while computing section 37(3A)" should be confirmed as held by the Judicial Member or these observations should be deleted as held by the Accountant Member for the reasons recorded in his order of dissent? 4. Whether, on the facts and in the circumstances of the case, the disallowance of extra shift allowance on pipeline fittings amounting to Rs. 7,21,412 made by the Assessing Authority should be confirmed as held by the Judicial Member or extra shift allowance should be granted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Member or the entire amount should be deleted as held by the Accountant Member?" The matter has now been referred to me under section 255(4) of the Income-tax Act, 1961 for my opinion on those points. 2. Insofar as the first point of difference of opinion is concerned, the relevant facts are that the assessee who is engaged in the manufacture of cycles, the cycle parts and accessories had exported its products worth about Rs. 5.13 crores and received under the schemes formulated by the Government to encourage exports, import entitlements which when termed to account yielded a sum of Rs. 23,30,465. The assessee claimed that this sum was in the nature of a capital receipt and not liable to income-tax. When its plea for exemption was not accepted, the matter was carried in appeal to the Tribunal. Before the Tribunal, the assessee repeated its contentions. In support of this, reliance was placed upon a decision of the Special Bench 'A' of the ITAT in the case of Gedore Tools India (P.) Ltd. In this case, there were three categories of amounts involved for adjudication as to whether they are taxable under the Indian Income-tax Act as revenue receipts. One is cash compensatory sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that date must be the view expressed by the Special Bench referred to above and not the law that was going to come into effect in future provided this amendment was carried by the Parliament and received the assent of the President. 4. That was how the point of difference of opinion arose which was referred to me. It will be seen from the point of difference of opinion that on the issue of exigibility of import entitlements, there was no difference of opinion between the Members but yet this was referred to me as a Third Member as if there was a difference of opinion on this issue. Since there was no difference of opinion on this point, I cannot but say that I will not as a Third Member be able to express my opinion except reiterate that both the members agreed that the import entitlements are liable to tax and accordingly that should be implemented. 5. As regards the taxability of the CCS, as I mentioned earlier, the view of the Accountant Member was that he should follow the view expressed by the Special Bench and not be concerned about the proposed legislation pending in the Parliament. But as it transpired, the learned Judicial Member wrote his order on 22-5-1990 while the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed amendment suggested in the Finance Bill pending in the Parliament for passage could not be relied upon to decide the issue ignoring the decision of the Andhra Pradesh High Court referred to above when that was the law ruling on the date when the appeal before the Tribunal came to be decided. There was no other decision of any other High Court available taking the contrary view also. Therefore, the Tribunal held that the effect of the decision of Andhra Pradesh High Court must be given. The opinion expressed by the Bench in that case, as I said earlier is totally inapplicable to the facts of this case because by the time the learned Accountant Member recorded his differing opinion the Legislation had already come into force with retrospective effect. That was the law that ought to have been applied even according to the decision in Kelvinator of India Ltd.'s case, to decide this case. Applying this ruling, the learned Accountant Member should have said that the law having been amended with retrospective effect and that law being applicable the proper course should have been to remit the case to the first appellate authority for a fresh disposal. I am, therefore, of the opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and the entire amount though added as part of the trading receipts should simultaneously be allowed as a deduction so that there would be no effect on the income. There were observations made by the Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. that an assessee would claim deduction only when paid to the Government. This observation was relied upon by the Department in support of their view as amounting to holding the same thing as was held in the case of Kedarnath Jute Mfg. Co. Ltd. But the assessee contended that these observations were by way of obiter dictum and, therefore, should not be relied upon. According to the IAC (Asst.) the Punjab & Haryana High Court in the case of Sirsa Industries v. CIT [1984] 147 ITR 238 had clearly laid down the principle that the amount of sales-tax though should be included as trading receipt, would be allowed only when paid as a deduction. The assessee then alternatively contended that of the amounts added as income in the earlier years on account of sales-tax collections a sum of Rs. 17,65,203 was paid during the year and that sum should be allowed as a deduction on the ground of payment as the same was already included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fiscal statute of the provision, the view in favour of the assessee should be preferred and applied. As against the two judgments of the Tribunal against the assessee, there was one judgment of the High Court in favour of the assessee. The High Court judgment should have been followed but having thus analysed and discussed the issue instead of straightway applying the High Court decision and holding in favour of the assessee to allow the deduction, he felt that "since some of the facets of the issue needed clarification the entire matter needs reconsideration by the assessing authority, keeping in view his observations about the judgment of the Andhra Pradesh High Court, mentioned supra". Thus he set aside the order for reconsideration and decision by the assessing authority. Thus the difference of opinion arose which is referred to me. 10. The learned representative for the assessee Shri Aggarwal relied upon a decision of the IT AT. Ahmedabad Bench in Chandulal Venichand v. ITO [1991] 38 ITD 138 and stated that since the facts in the case before the Ahmedabad Bench and the facts before me are identical or nearly identical, the opinion expressed therein must be followed here by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Sanghi Motors, that the said proviso would be applicable only from the assessment year 1988-89 and subsequent years and would not be applicable to the earlier assessment years. Then the Tribunal noticed that after the decision of the Delhi High Court in the case of Sanghi Motors, the same controversy again came up before the Patna High Court in the case of Jamshedpur Motors Accessories Stores v. UOI where in it was held that the benefit of the proviso inserted by the Finance Act would be available to the back assessment years 1984-85 onwards and, therefore, it should be considered as explanatory of the existing legal position and not prospective in operation. The Bench was thus confronted with the situation where there was a consistent view of the Ahmedabad Bench and on Patna High Court decision In favour of the assessee and a Special Bench decision of the Delhi High Court against the assessee. The Bench then decided that in view of this conflicting judicial opinion, it should prefer to follow the consistent view taken by the Ahmedabad Benches, particularly because there was no decision of the Gujarat High Court which was the jurisdictional High Court expressin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as introduced that was sought to be removed. Therefore, the interpretation placed by the Ahmedabad Bench appear to be more rational and justified. No contrary view taken by the jurisdictional High Court of Punjab and Haryana has been brought to my notice. I, therefore, hold following the decision of the Ahmedabad Bench that the assessee is entitled to the deduction and the disallowance in toto without further verification is not justified or proper. I, therefore, agree with the learned Accountant Member that on this matter, the authorities below should have the opportunity to examine the facts of the case to find out as to when the payments were made and if the payments were made in such a way as to conform to the provisions of the concerned Sales-tax Act as in the case of Ahmedabad Bench and also if the payments were made before furnishing of the return under section 139(1), there should be no difficulty in allowing the assessee's claim. Thus I am inclined to agree with the view expressed by my learned brother, the Accountant Member. 12. The facts relating to the third difference of opinion are found to be little curious and they are as under : The assessee with a view to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before the Tribunal. 14. The learned Judicial Member held that the nature of this expenditure was sales promotion and therefore, covered by section 37(3B) of the Income-tax Act and justified the action of the Commissioner in including this sum for purposes of section 37(3A). But the learned Accountant Member was of a totally different opinion. After tracing the history of this sum and the grounds that led to its allowance by the CIT, the observation at the end of the paragraph held that while the CIT(Appeals) was on one hand following the order of the Tribunal and allowing the claim, on the other hand was superseding the very judgment of the Tribunal by saying that the amount should be considered under section 37(3A) of the IT Act which it could not be done. Having seen this contradiction, he gave this categorical direction: "The order of the Tribunal holding that it is an expenditure under section 37(1) has to be followed because there is no change in the facts of the case. Therefore, this amount should be allowed as a deduction". To put it differently, the learned Accountant Member said the entire amount should be allowed as a deduction and no part of it should be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, there was no justification for disallowing items such as TVs, cycle, cardigans, safarisuit, pullovers, silk shirts and thermic jugs etc. and directing the allowance as per Rule 6B. Apparently, the items which are distributed in order to promote sales and on the basis of actual sales, cannot be termed as advertisement expenses. The same are to be treated more of expenses towards sale promotion. The contention of the assessee is, therefore, ordered to be allowed." [Emphasis supplied] It will thus be seen that the finding of the Tribunal in the earlier year was that this expenditure was in the nature of sale promotion. When CIT observed that following the order of the Tribunal, she would allow the expenditure under section 37(1) and when gave the observation that this expenditure should be computed for the purposes of section 37(3A) he was only following the order of the Tribunal for the earlier assessment year by giving full effect to all the aspects. One aspect is that it should be allowed as expenditure under section 37(1). The other aspect is that it being found to be sales promotion expenses, due consideration should be given to it under the relevant provision made for it unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion, though there was scope for further examination. 18. Now I go to the 4th point of difference of opinion which deals with the justification of the disallowance of extra shift allowance on pipeline fittings amounting to Rs. 7,21,412. Prima facie it appear that pipeline fittings could be considered as part of the machinery installed for the purpose of manufacture and if there was proof to show that the machinery had worked extra shift there should be no difficulty in allowing the extra shift allowance. The claim of the assessee for extra shift allowance was disallowed by the CIT in the following terms : "15.2 I do not agree with the appellant's version as looking on all the items, mentioned under ESA, it is seen all items are specifically mentioned and pipeline means all pipelines not related to specific industry and under item 6 there is after hydraulic works, comma and pipelines and sluices are independent. It will further also be clear while writing each item from 1 to 7 which mention e.g. item No. 7 'Locomotives, rolling stocks, tramways and railways' used by concerns, excluding railway concerns. Similarly, calculating machines in all concerns. Therefore, item No. 6 'Hydr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is the use of the expression pipelines in item 6 meaning pipelines installed anywhere for any purpose. I do not think that that is the view of the Legislature. The word "pipelines" used in item 6 after the expression "Hydraulic works" must mean only Hydraulic pipelines just like hydraulic sluices. The conjunction "and" used after the word "pipelines" and before the word "sluices" strongly suggest that both pipelines and sluices must be such as to have something to do with or related to hydraulic works. If pipelines become a part of the machinery as in this case, that cannot be said to be pipelines used in item No. 6 to disallow the extra shift allowance. I, therefore, agree with the view of the learned Accountant Member and hold that the assessee is entitled to the extra shift allowance. 19. The last point of difference of opinion is about whether any addition on account of sale of scrap was called for and if so whether it could be limited to Rs. 2 lacs as against the addition of Rs. 3 lacs made by the IAC (Assessment). 20. The accounts of the assessee showed sales of scrap during the year at Rs. 38,13,979 as against the sales of Rs. 43,80,405 shown in the immediately pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been not accounted for were never issued at all. They were only blank. Even though they were shown that evidence was either not considered adequately or ignored. That circumstance could not have been considered as compelling to reject the turnover shown and make an addition. He also found that in the subsequent years, the turnover of the scrap was much more at Rs. 42 lacs which was accepted. He, therefore, saw no justification in disturbing the results this year and he opined that the addition should be deleted in toto. 23. After perusing the orders of the learned Brothers and the records and after hearing the arguments of both the sides, I am inclined to agree with the view expressed by the learned Accountant Member. Non-maintenance of stock record for scrap though a defect but it is impossible of execution. The scrap is generated almost daily and it depends upon several factors like the workmen's efficiency, the fatigue of the machines, the quality of the material used, the purpose for which it is used, the filings, cuttings, rejections, breakages and several other factors. These factors can never be uniform. They vary from circumstance to circumstance, day to day and year ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
