TMI Blog2013 (3) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in favour of the assessee. It was held that the Excise Duty payable should not be added to the closing stock. Accordingly, this ground of the Revenue is dismissed. Interest on amount advanced to subsidiary company - held that:- In our opinion, the assessee used its own non interest bearing funds and there is no cost to the assessee and it is a business decision taken by the assessee to make an investment in subsidiary company and that even if it is resulted in no income to the assessee, the notional interest cannot be disallowed on the reason that the assessee should have used its non interest bearing funds for the purpose of its own business purpose instead using borrowed funds for its business. Regarding Depreciation on goodwill - held that:- The true nature of the assets which are acquired by the assessee is business and commercial rights which is nothing but goodwill on which the assessee is entitled for depreciation u/s. 32(1)(ii) of the Act. There is no dispute in this case regarding the payment of Rs. 14,55,21,444 and the total value of the tangible assets is lesser than Rs. 5,57,38,146 and this is nothing but intangible assets in the form of technical knowhow, cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved gratuity fund. Since the Group Gratuity Scheme is not approved by the CIT, according to the Revenue, it cannot be allowed. However, the contention of the assessee is that in view of the judgement of the Madras High Court in the case of Premier Cotton Spinning Mills Ltd. (supra) and the judgement of the jurisdictional High Court in the case of Warner Hindustan Ltd. (supra), it has to be allowed. 5. We have carefully gone through the judgement of the jurisdictional High Court in the case of Warner. Hindustan Ltd. (supra). In the case before the jurisdictional High Court, the Provident Fund was not approved by the CIT. The Andhra Pradesh High Court after referring to the judgement of the Bombay High Court in Tata Iron Steel Co. Ltd. v. D.V. Bapat, ITO (1975) 101 ITR 292, and the judgement of the Supreme Court in Metal Box Company of India Ltd. vs. The Workmen (1969) 73 ITR 53, held that the amount paid towards an unapproved gratuity fund can be deducted under sec. 37 of the I.T. Act, though not under sec. 36(1)(v). In view of this judgement of the jurisdictional High Court, in our opinion, even if any payment is made to an unapproved gratuity fund, it has to be allowed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such loans were out of interest bearing fund is not correct. The investment made in the assessment year under consideration is only a carried forward investment. As such, the CIT(A) deleted the addition by following the order of the Tribunal in assessee's own case in 487/H/2006 and 537/H/2009 for the assessment years 2002- 03, to 2005-06 order dated 30.9.2010. Against this the Revenue is in appeal before us. 9. We have heard both the parties and perused the material available on record. As seen from the order of the CIT(A) similar issue came up for consideration before this Tribunal in assessee's own case for the assessment years 2002-03 to 2005-06 wherein this issue was decided in favour of the assessee by holding as follows: "6. We have heard both the parties and perused the material on record. If the assessee diverted its interest bearing funds to the sister concern for any purpose other than business purpose, then this impugned interest to be disallowed. In other words, if the assessee used the sister concern as a conduit to divert interest bearing funds to the personal advantage any director or relative of directors of the assessee company, then this interest to be di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2000-01 2001-02 2002-03 (b) Funds available for utilization after Considering the impugned investment (Rs. in lakhs) 151.21 135.66 29.27 (c) Loans from banks 109.58 84.96 (d) Investment made in fixed assets 236.38 179.74 18.94 (e) Investment made in 195.00 56.35 M/s. Suvision 7. In our opinion, the assessee used its own non interest bearing funds and there is no cost to the assessee and it is a business decision taken by the assessee to make an investment in subsidiary company and that even if it is resulted in no income to the assessee, the notional interest cannot be disallowed on the reason that the assessee should have used its non interest bearing funds for the purpose of its own business purpose instead using borrowed funds for its business. The assessing officer cannot sit in the arm chair of the business men and decide what the assessee has to do to maximize his profit. In our opinion, the judgement relied by the assessee's counsel in the case of M/s SA Builder cited supra supports the assessee's claim. Accordingly this ground taken by the assessee is allowed." 10. In view of the above order of the Tribunal, this issue is decided against the Revenue and in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T.A. No. 218/Hyd/06 for A.Y. 2002-03 wherein the Tribunal vide its order dated 4.11.2009 held as follows: "15. In the present case, consequent upon amalgamation of CPL with APPM, the market share of assessee company has increased substantially, as submitted by the assessee counsel it was increased from a level of 98500 metric tons of 174000 MT per annum i.e., an increase of 75,500 MT. Further the brands of the CPL viz. (1) Azurwove/Azurlaid (2) Color Printing (3) Newsprint (4) Manilla Board (5) Kraft have become the brands of the assessee company. Further, on amalgamation unit APPM had commissioned a single street state of art technology Pulp Mill of 550 MT per day in the year 2006. The pulp mill was operating at capacity of 425 tons per day before amalgamation. After meeting the captive consumption of about 290 MT per day in unit APPM, the surplus is transferred to Unit CP to manufacture value added papers and to elevate the status of the Mill from a B grade to A grade one. Further, as an environmentally sound measure to dispose of black liquor generated in the unit CP in the Rice Straw Pulping process, the assessee transferring the concentrated black liquor to unit APPM for fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer is justified in granting the depreciation on goodwill while completing the assessment u/s. 143(3) of the IT Act and CIT is not justified in invoking the provisions of s. 263 on this issue. Further, the provision of s. 263 could be invoked by the CIT if the circumstances specified therein viz., (1) the order is erroneous (2) by virtue of the order being erroneous, prejudice has been caused to the interest of the revenue, exist. For invoking the provision s. 263, both the conditions precedent for exercising the jurisdiction are conjunctive or not disjunctive. In the instant case, the Assessing Officer followed one course of action which is permitted by law and that is resulted in loss to the revenue, that cannot be said erroneous so far as prejudicial interest of the revenue. For this purpose, we place reliance on the judgement of Hon'ble Supreme Court of India in the case of CIT vs. Green World Corporation (181 Taxman 111) (SC). Further, the CIT cannot direct the Assessing Officer to initiate the penalty proceedings u/s. 271(1)(c) of the IT Act, since he has himself has no power to initiate the penalty proceedings. If the Assessing Officer is of the opinion that penalty to be im ..... X X X X Extracts X X X X X X X X Extracts X X X X
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