TMI Blog2016 (8) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Parliament vide Finance Act, 2000 and only the ambiguity has been removed vide Finance Act, 2003 so as to bring clarity. In our humble view, whatever rights had accrued to the assessee in view of the ambiguity in the provisions at the time of their insertion vide Finance Act, 1999, the same had been taken away/clarified immediately by removing the ambiguity through amendment made vide Finance Act, 2000. Hence, without going into the details of the facts of the various case laws, we have no hesitation to hold that the proposition laid therein cannot be applied to the facts and circumstances of the case in hand. These grounds are accordingly decided against the assessee Disallowance of interest expenses u/s.14A - Held that:- Sufficient and justified to attribute expenses equivalent to 1% of the dividend received as expenses attributable to earning of exempt income u/s.14A. Deferred sales tax liability being the difference between the payment of net present value against the future liability credited by the assessee under the capital reserve account in its books of account was a capital receipt and could not be termed as remission/cessation of liability and, consequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 29.12.2010 169.18 crores 16.10.2012 2010-11 27.09.2010 410.94 crores 22.02.2013 420.20 crores 26.06.2013 ITA/8488/Mum/2011-AY- 2008-09 (Assessee s Appeal) : 2. First ground of appeal is about depreciation on assets acquired on Demerger.During the course of hearing before us,Authorised Representative(AR)and the Departmental Representa -tive(DR)agreed that identical issue was decided by the Tribunal in the earlier years(ITA Nos.4540-42/Mum/11,AY.s2005-06 to 2007-08).It is found that the Tribunal has dealt the issue as follow: 3. During the course of hearing before us,Authorised Representative(AR)and the Depart - mental Representative(DR)agreed that identical issue was decided by the Tribunal in the earlier years(ITA Nos.4538-39/Mum/11,AY.s 2003-04 and 2004-05).We find that except for the amount involved with regard to depreciation,the assessee had raised the identical grounds for two earlier AY.s.and the Tribunal had decide the issue as under :- 17. We have considered the rival contentions and have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets as appearing in the books of account and the words appearing after the amendment made vide Finance Act, 2000 i.e. the written down value of the assets as appearing in the books of account , and if the contention of the assessee is to be accepted, then, the words appearing before amendment and after amendment made vide Finance Act 2000, will give the same meaning, resulting to inference that the legislature has not made any amendment in the said section and the said amendment will become meaningless and rendered redundant. However, in our view, the Parliament has not made a futile exercise in amending the relevant provisions vide Finance Act, 2000. Hence, we agree with the view taken by the Ld. AO after referring to the memorandum explaining the provisions of Finance Bill, 1999 that provisions relating to the demerger of companies were introduced based on certain principles one of which was that the demergers should be tax neutral and should not attract any additional tax liability. The value of the assets of the demerged company should be the same when transferred to the resulting company. The amendment made by Finance Act, 2003 w.e.f. 01.04.2004, in our view, is curative a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken away any such right which was accruing to the assessee before such omission. In fact, the curative amendment was made by the Parliament vide Finance Act, 2000 and only the ambiguity has been removed vide Finance Act, 2003 so as to bring clarity. In our humble view, whatever rights had accrued to the assessee in view of the ambiguity in the provisions at the time of their insertion vide Finance Act, 1999, the same had been taken away/clarified immediately by removing the ambiguity through amendment made vide Finance Act, 2000. Hence, without going into the details of the facts of the various case laws, we have no hesitation to hold that the proposition laid therein cannot be applied to the facts and circumstances of the case in hand. These grounds are accordingly decided against the assessee. Respectfully following the above,we decide the effective Ground of appeal (GOA,1-3)against the assessee. Considering the above,Ground no.1 is decided against the assessee. 3. The assessee had raised four additional grounds for the year under consideration,vide its letter dated 30.12.2015.After considering the material available on record,we are of the opinion that additional g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the FAA in respect of non-applicability of provision of section 14 A to dividend subjected to tax under section 115-O/115-R of the Act, that the FAA did not adjudicate the said ground, that while filing the appeal before the Tribunal above ground was in inadvertently not taken, that during the year under appeal approximately 95% of the investments made by the assessee were in its group companies/subsidiaries.Referring to the order of the Tribunal in the case of the Garware Wall ropes Ltd (65SOT86),the assessee stated that above decision was rendered after the filing of the appeal, that the issue involved was legal one, that there was reasonable and sufficient cause for not raising the issue earlier.During the course of hearing before us,the AR made the same submission that are part of the letter of the assessee dated 22/02/2016.DR left the issue of admission of additional grounds to the discretion of the Bench. 7. After considering the material available on record,we are of the opinion that additional grounds raised by the assessee are legal in nature.Hence,same should admitted. We find that while deciding the appeal,the FAA had not adjudicated the issue raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of the assessee,the AO made a disallowance of ₹ 17.42 crores under the head interest expenditure,invoking the provisions of section 14A of the Act.He further held that exempt dividend income could not have been earned without incurring of indirect expenses i.e.administrative and managerial expenses.He made disallowance of 60.90 lakhs under the head indirect expenses. 12. Aggrieved by the order of the AO the aa preferred an appeal before the FAA and made detailed submission.After considering the assessment order and the submission of the assessee ,the FAA held that while completing the assessments for the AY.s 07-08 and 2008-09 the AO himself had stated that assessee had not used borrowed funds for making investment and that the assessee had made investment from his own funds,that the Tribunal while deciding the appeals for the AY.s 1998-99 to 2001-02 had held that Department could not establish nexus between the borrowing and the investment in the dividend earning shares, that the Tribunal had indirectly held that no investments were made out of borrowings, that no expenses could be attributed to earning of dividend income, that prior to AY 98-99 the AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the rival submissions and carefully perused the orders of the lower authorities and the material evidences brought on record. It is not in dispute that the assessee has taken benefit of the scheme offered by the, Government of Maharashtra. As provided in Circular No.496 dated 25.09.1987 and Circular No.674 'dated 29.12.1993 issued by the CBDT, although the sales tax collected from the customers is a trading receipt, on account of deferral scheme, the same is deemed to have been paid. As a result, it amounts to discharge of the ability to pay sales tax. Once the liability is discharged the unpaid deferrals assumes a character of loan. In the light of the above Circulars of the CBDT, 'sales' tax collected by the assessee, which is not paid into the Government Treasury yet deemed to have been paid is nothing but the loan granted by the Governmerit to the assessee . Therefore, such a loan cannot be treated as a trading liability. Facts 'on record show that during the year under consideration the Government of Maharashtra introduced the Net Present Value (NPV) under Maharashtra Act No.XX of 2002 Rule 31D of BST Rules 1959 notified vide Govt. Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he money immediately which was receivable from 1-5-2003 to 1-5-2008. The amount of ₹ 337.13lakhs was actually paid to SICOM on 30-10- 2002, Thus, it did not satisfy the condition of actual remission in praesenti. It was a simple case of collecting the amount at net present value which was due later on and even the formula for collecting the net present value was also given by the SICOM and the amounts had been paid as per that formula, Therefore, such payment of net present value of a future liability could not be classified as remission or cessation of the liability so as to attract the provisions of section 41(l)(a) [Para l08} Considering facts in totality, in the light of the aforesaid decision of the Tribunal Special Bench which has been rightly followed by the CIT(A), we do not find any reason to interfere with the findings of the CIT(A). For the reasons stated above, it was to be held that the deferred sales tax liability being the difference between the payment of net present value against the future liability credited by the assessee under the capital reserve account in its books of account was a capital receipt and could not be termed as remission/cessation of li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -4 are allowed in its favour,in part. 10. Grounds no.4-6 pertain to expenditure incurred on brand improvement.It was brought to our notice that the Tribunal,while deciding the appeal for the AY.2009-10 in the case of Godrej Industries Ltd.(ITA/3428 3737/Mum/2013,dtd. 1.06.2016),a sister concern,had held as under: 3. Ground No.1: In this ground, the assessee has challenged the action of the lower authorities in holding that expenditure incurred on brand improvement was capital in nature. During the course of assessment proceedings it was noted by the Assessing Officer that assessee was engaged in the business of manufacturing / processing / trading in industrial chemicals. It was noted by the Assessing Officer that assessee shared expenses with its other group companies on account of payment made to M/s Interbrand, a company engaged in creation and developments of brands and claimed the said expenditure as revenue expenditure. It was held by the Assessing Officer that the said expenditure was not revenue expenditure and it was capital expenditure for the reasons that change in the brand / logo symbolised Godrej's new corporate identity and the refurbishment of its master ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal is dismissed. A.O's order of allowing depreciation on the above expenditure is upheld. 5. While deciding this appeal, the ld.CIT(A) relied upon his earlier order passed in the case of other group companies of the assessee, viz. M/s Godrej Boyce Mfg. Co Ltd for A.Y. 2009-10. It was brought to our notice that the appeal of the said company is still pending and this issue was open for adjudication by us. 6. During the course of hearing, ld.counsel of the assessee made vehement' arguments to contend that the impugned expenses are revenue expenses. It was submitted that Godrej is an old brand and may be more than 100 years'old. The expenses incurred during the year, through M/s. Interbrand are for renewal and improvement. Our attention was drawn on the copy of the agreement with M/s. Interbrand to show the scope of services for which the payment was made. It was submitted that perusal of the agreement clearly shows that it was mentioned therein that Godrej brand already existed and what was required was to make desired improvement in the name. It was submitted that no new asset had come into creation. Finally reliance was placed on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital expenditure, twin conditions are must, viz. (i) there should be benefit of enduring nature; (ii) the expenditure must give rise to creation of new capital asset. The observations of Hon ble Supreme Court were reiterated in subsequent judgment in the case of Alembic Chemical Works Ltd vs CIT 177 ITR 377 (SC) and thereafter many judgments came from various courts from all over the country wherein similar views were taken. In the facts of the case before us, admittedly, there is no creation of new asset Thus, the impugned expenditure cannot be held to be a capital expenditure. Similar view has been taken by Hon'ble Murnbai Bench of ITAT in the case of Fine Jewellery (India) Ltd vs ACIT (supra) as has been relied upon by the ld.counsel wherein it has been held that expenditure incurred by the assessee on creation of brand was allowable as revenue expenditure u/s 37(1) of the Income-tax Act. The ld.counsel also relied upon other judgements from Mumbai Bench in the case of Brightest Circle Jwellery Pvt Ltd (ITA No.4511/Mum/2011 dated 11th May, 2012) which has been authored by one of us, i.e. Hon'ble JM, wherein identical issue was involved and after discussing the entire la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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