TMI Blog2011 (4) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... tical purposes Voluntary Retirement Scheme - AO held that expenditure incurred under the Voluntary Retirement Scheme of the assessee company for its employees was of capital nature and was not allowable as it has resulted in a benefit of enduring nature - no infirmity in the order of the Learned CIT (A), issue is covered in favour of the assessee by the judgment of the Hon’ble Supreme Court in the case of Bhor Industries Ltd., ground of the Revenue is also dismissed Write off of loans and advances - AO noticed that assessee has claimed write off of loans and advances but these are not bad debts as the same are not trade debts and since the assessee is not in the business of money lending. These write offs were in the nature of partial write off of housing loan to employee, write off of security deposits insurance claims loans recoverable from ex-employees and miscellaneous recoverables etc - Departmental Representative could not point out a single instance where the advances written off were not made during the course of, and as incidental to, business of the assessee. As long as amounts written off have been in the course of, and as incidental to, assessee’s business activities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the orders of the Tribunal in assessee s own case for the assessment years 1989-90 to 1997-98. Copies of these orders have been placed on record. In view of this and respectfully following the orders of the Tribunal, we uphold the order of the CIT (A) in disallowing the deduction of Rs. 18,01,341 on pro-rata premium on leasehold land. 5. This ground is thus dismissed. 6. The second ground is an alternate ground to the one considered above, wherein, the argument of the assessee is that the entire premium needs to be considered as cost of building and plant so as to allow depreciation thereon. Since the issue is considered against the assessee in ground No.1, accordingly, this ground is also dismissed. 7. Ground No.2 is thus dismissed. 8. Ground No.3 relates to disallowance of license and process technology fees of Rs. 7,92,00,396. This ground was not pressed, therefore, same is dismissed as not pressed. 9. In Ground No.4, the assessee is aggrieved by the CIT (A) s action in not allowing Rs. 1,00,83,271 claimed by the assessee towards cost of catalyst issues. 10. Facts in brief are that during the course of assessment proceedings, the Assessing Officer noticed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 199 7-98, copy of which is placed on record. We, therefore, confirm the disallowance made by the authorities below. 18. Ground No.7 is thus dismissed. 19. Ground No.8 9 is against confirmation of disallowance of expenditure of Rs. 17,58,270 incurred on purchase of property time share in a holiday resort. Both the grounds were not pressed, therefore, dismissed as not pressed. 20. Ground No.10 11 is against CIT (A) s confirming the disallowance for the loans and advances of Rs. 2,50,000 given to Samarat Housing and Leasing written off during the year. 21. Learned counsel for the assessee fairly agrees that the ld CIT (A) has been quite fair in reducing the quantum of disallowance to Rs. 2,50,000 out of Rs. 50,18,059. He, accordingly, did not press this ground. In view of this, Ground No.10 11 is dismissed as not pressed. 22. Ground Nos.12 to 14 relate to confirmation of disallowance of expenditure of Rs. 87,14,824 were not pressed, therefore, same are dismissed as not pressed. 23. Ground No.15 relates to the disallowance of fees of Rs. 3,65,51,614 paid for restructuring the assessee s business. 24. Having considered the rival contentions and having p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed as revenue expenditure out of the income of the existing business of the assessee. 34. Having considered the rival contentions and having perused the material on record, we find that this issue is covered against the revenue by the decision of the Tribunal in assessee s own case for the assessment years 1992-93 to 1997-98. Respectfully following the same, this ground is dismissed. 35. In Ground No.3, the Assessing Officer has taken the following grievance: On the facts and in the circumstances of the case and in law, the ld CIT (A) has erred in directing the AO to exclude the amount of Rs. 31,10,688 on account of write back of commission payable to M/s. Gwalior Transmissions System Ltd from the total income of the assessee. 36. Facts in brief are that the assessee appointed M/s. Gwalior Transmission Systems Limited for a period of one year from 1.4.1994 subject to review every year to promote sale of rubber chemicals to M/s. J.K. Industries Limited. The AO noticed that the agreement entered with Gwalior Transmission systems Limited was not renewed beyond one year. The assessee could not produce any evidence regarding the services rendered. It was in backdro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the assessee. 43. The short reason for which this disallowance, in respect of stamp duty expenses on amalgamation of Polyfins Industries Limited with the assessee company, was made by the Assessing Officer on the ground that it has resulted in an advantage of enduring nature, and, as such, is capital expenditure in nature. In appeal, however, CIT(A) deleted the disallowance by relying upon Hon ble Supreme Court s judgment in the case of CIT Vs Bombay Dying Manufacturing Co Ltd (219 ITR 521). The Assessing Officer is not satisfied and is in appeal before us. 44. Having heard the rival contentions and having perused the material on record, and having noted that the Assessing Officer has not disputed that amalgamation was necessary for smooth and necessary conduct of business, we find that the issue in appeal is squarely covered by Hon ble Supreme Court s judgment in the case of Bombay Dying Manufacturing Co Ltd (supra) wherein Their Lordships have, inter alia, observed as follows : .. , the Tribunal upheld the assessee s contention. It disagreed with the revenue s contention that inasmuch as the said amalgamation resulted in acquisition of the other compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal has recorded a finding that the acquisition of Nawrosjee Wadia Ginning Pressing Company was necessary for the smooth and efficient conduct of the assessee s business. Following the ratio of the aforementioned decisions of the Court, we hold that the expenditure incurred towards professional charges of the Solicitors firm for the services rendered in connection with the said amalgamation was in the course of carrying on of the assessee s business and, therefore, deductible as revenue expenditure. 45. In this view of the matter, we confirm the action of the CIT (A) on this issue as well and decline to interfere in the matter. 46. Ground No. 5 is thus dismissed. 47. Ground No.6 reads as under:- On the facts and in the circumstances of the case and in law, the ld CIT (A) has erred in deleting the addition of Rs. 29,40,41,392 made by the AO, ignoring the facts that the expenditure incurred under the voluntary retirement scheme of the assessee company for its employees brought enduring benefit to the assessee and was thus of capital nature and was not allowable. 48. Briefly stated the material facts are like this. The Assessing Officer noticed that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long as amounts written off have been in the course of, and as incidental to assessee s normal business activities, the loss so incurred is admissible as business loss. The CIT (A) was, therefore, quite justified in his conclusions and the same do not call for any interference from us. We decline to interfere in the matter. 54. Ground No. 7 is thus dismissed. 55. The appeal of the Assessing Officer is thus partly allowed in the terms indicated above. ITA No.5296/M/03: A.Y. 1999-2000 56. We now take up ITA No. 5296/Mum/03 i.e. assesee s appeal against CIT (A) s order for the assessment year 1999-2 000. 57. Ground No.1 relates to CIT (A) s decision disallowing the deduction of pro-rata premium on leasehold land Rs. 17,92,470. In line with our decision in respect of Ground No.1 in assessee s own case for the assessment year 1998-99, we confirm the disallowance and dismiss this ground. 58. Ground No.1 is thus dismissed. 59. The second ground has been taken without prejudice to first ground. It is to the effect of that the CIT (A) erred in treating the entire premium as cost of building and plant and allowing depreciation thereon. This ground is also dismissed in line with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter alia, in the light of the above decision of the coordinate bench. 63. Ground Nos. 3 to 6 are thus allowed for statistical purposes in the terms indicated above. 64. Ground Nos.7 to 10 relate to disallowance of royalty of Rs. 66,49,146 paid to M/s. Goechst AG, Germany are dismissed as not pressed. 65. Ground No.11 is similar to Ground No.4 for the assessment year 1998-99 and it relates to the cost of catalyst issues. As was done in the assessment year1998-99, we restore this issue to the file of the AO with the same direction. Hence, this ground is treated as allowed for statistical purposes. 66. Ground No.12 relates to the disallowance of Rs. 69,87,908 being prior year expenditure net of prior year s income. This issue is decided in favour of the assessee in A.Y. 1998-99. In line with our decision, while we uphold the grievance of the assessee in principle, we may also clarify that while allowing the assessee s claim, the AO may verify that there is no double claim made by the assessee. 67. Ground No.12 is thus allowed. 68. Ground No.13 is that the CIT (A) erred in holding that expenditure of Rs. 69,87,908 is not crystalised during the year relevant to assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) and decline to interfere. 81. Ground No.1 is thus dismissed. 82. In Ground No.2, the revenue has taken the following grievance: On the facts and in the circumstances of the case and in law, the CIT (A) erred in deleting the disallowance of Rs 13,53,36,928 in respect of interest on capital work in progress 83. Having considered the rival contentions and having perused the material on record, we find that this issue is covered against the revenue by the decision of the Tribunal in assessee s own case for the assessment years 1992-93 to 1997-98. Respectfully following the same, this ground is dismissed. 84. In Ground No.3, the Assessing Officer has taken the following grievance: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of Rs 2,48,20,708 being amount of expenditure on making a new road, water pipe line and overhead transmission lines which were to be property of MIDC and MSEB. 85. Having heard the rival contentions and having perused the material on record, we find that similar issue had come up for consideration in assessee s own case for the assessment years 1993-94 to 1997-98, wherein, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partial write off of housing loan to employee , write off of security deposits insurance claims loans recoverable from ex-employees and miscellaneous recoverables etc. When matter was carried in appeal, CIT (A) gave partial relief in respect of this claim for deduction by observing that as advances were given during the course of normal business and loss was incidental to the business, the same is allowable under section 28. The Assessing Officer is not satisfied and is in appeal before us. 93. Having heard the rival contentions and having perused the material on record, we see no reasons to interfere in the conclusions arrived at by the CIT (A) on this issue either. Learned Departmental Representative could not point out a single instance where the advances written off were not made during the course of, and as incidental to, business of the assessee. As long as amounts written off have been in the course of, and as incidental to, assessee s business activities, the loss so incurred is admissible as business loss. The CIT (A) was, therefore, quite justified in his conclusions and the same donot call for any interference from us. We decline to interfere in the matter. 94. Groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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