TMI Blog2019 (10) TMI 1584X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 [ 2016 (11) TMI 1751 - ITAT MUMBAI] the Tribunal on similar set of facts as held disallowance of section 14A was restricted as per the tax Auditors certificate, we direct the AO to verify the fact if the disallowance under section 14A was restricted as per tax Auditors certificate in AY 2010-11 to 201213 and restrict the disallowance to Rs. 53.70 lakhs. In the result this ground of appeal is allowed. Allowability of Establishment expenses - Nature of expenses - reliance on particular treatment is given in the books of account - assessee submits that the expenses are in the nature of salary, dearness allowances, postage, Bank charges, stationary etc in relation to employee of project department who monitors various projects in the existing line business - HELD THAT:- We have seen that in assessee's own case for AY 2003-04 to 2005-06 [ 2016 (11) TMI 1751 - ITAT MUMBAI] on similar set of facts Accounting Practices cannot be override section 56 or any other provisions of the Act. The assessee incurred expenses on various personnel/employee in the project for supervision and monitoring the various project and marketing allocation and refineries which is certainly allowab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to foreign exchange fluctuation in foreign currency transactions in derivatives has to be considered on the last date of accounting year and it is deductible u/s. 37(1). Decided in favour of assessee. Additional ground of appeal before ld CIT(A) - Deduction for feasibility study expense - CIT(A) held that the power to entertain new/additional ground of appeal is available before the Tribunal and not CIT(A) - HELD THAT:- We have noted that the assessee raised the additional ground of appeal before the ld. CIT(A), which was not allowed by him by taking view that only Tribunal is entitled to admit the additional ground of appeal. In our view the decision of ld CIT(A) was not in consonance with the decision of Hon'ble Bombay High Court in Pruthwi Broker and shareholder [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] therefore, we admit the additional ground of appeal raised by the assessee. We are in principal accepting that the claim of the feasibility study expenses is allowable expenses. However, keeping in view that the assessee has raised this issue for the first appellate stage, therefore, we deem it appropriate to restore this issue to the file of AO to verify the expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of submissions of TDS instead of 01.04.2006. It was claimed that the TDS amount is also to be treated as advance tax as paid u/s. 199. The ld CIT(A) after considering the submissions agreed with the contention of the assessee. CIT(A) while directing the AO has clearly held that section 244(1)(a) clearly prescribed the calculation of interest on advance tax and TDS from 1st day of the April of the assessment year. No contrary fact is brought to our notice to take the other view. In the result we affirm the order of ld CIT(A) is affirmed and the ground of appeal raised by the revenue is dismissed. - HON'BLE JUDGES SHAMIM YAHYA, MEMBER (A) AND PAWAN SINGH, MEMBER (J) For the Appellant : P.J. Pardiwalla and Aarti Sathe For the Respondents : B. Sriniwas, CIT, DR ORDER PAWAN SINGH, MEMBER (J) 1. These are cross appeals filed by the assessee and the revenue. The appeals arise out of the order of the ld. Commissioner of Income-tax (Appeals)-I, Mumbai for the Assessment Year 2006-07. 2. The assessee, in its appeal (ITA No. 5378/M/2010) has raised the following grounds of appeal: 1. Disallowance of Expenditure incurred on Facilities put up bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnization and upgradation projects in Appellants' existing line of business. The CIT(A) erred in confirming the disallowance made by Respondent merely by following the predecessors' orders and on the ground that the expenditure has been capitalized in the books of account of the Appellants, assuming that the income from the projects on which the expenditure have been incurred has not been disclosed till now and disregarding the contentions and submissions made by the Appellants vide their Appeal petition and written submission dt. 25.03.10, during appeal proceedings. 4. Provision towards Post Retirement Medical Benefit-Rs. 4,28,00,000/-: CIT(A) erred in confirming the disallowance made by the Respondent towards the claim of Provision for Post retirement medical benefits, by merely following the predecessors decision holding that it represents future liability and hence a contingent liability, disregarding Appellants contentions/submissions vide Appeal petition and Written Submissions dt. 25.03.2010 during Appeal proceedings to the effect that, the subject provision has been made based on actuarial valuation as on 31.3.05 and 31.3.06 and working out the Company' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses-Rs. 45,03,580/- Appellants submit that on the facts and in the circumstances of the case and a true and proper interpretation of the provisions of Section 37(1) of income Tax Act, 1961, the CIT(A) erred in disallowing the Additional claim lodged during Appellate proceedings, on the ground that only the Tribunal has the power to entertain the new ground and this power cannot be resumed to be available to CIT (A) as per the decision of Supreme Court in case of Goetz India Ltd. Vs. CIT (284 ITR 323). Appellants submit that as per the decision of Supreme Court in the case of Goetz India Ltd. Vs. CIT, wherever the assessee makes mistakes/has omitted to lodge legitimate claim, the Appellate Authority (be it first Appellate Authority or second Appellate Authority i.e. Tribunal) has wide powers to entertain even the new ground not urged before lower authority. Appellants refer to and rely upon the following decisions: Case Laws on allow/ability of additional claim by ITAT: a) National Thermal Power Corporation Ltd. Vs. CIT (229 ITR 383) (SC) b) Goetz India Ltd. Vs. CIT (284 ITR 323) Case Laws on Merits of the Claim: a) CIT vs. Jyoti Electric Motors Ltd. (255 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure on facilities put up by assessee by ownership vests with other statutory authorities. The Ld.AR appearing for the assessee submitted that during the relevant period the assessee incurred expenses on railway siding which is essential for loading, transportation and unloading of petrol/diesel/LPG wagons which are essential for carrying on the business of the assessee and the ownership vests with the railway authorities. But since the expenditure was incurred for the smooth running of the business of the assessee, the expenditure is inevitably is a business expenditure. The AO while making the disallowance by following the order of AY 2003-04 to AY 2005-06, wherein it was held the expenditure is capital in nature. The ld CIT(A) confirmed the action of the AO. The Ld.AR further submitted that the issue is squarely covered by the decision of the Tribunal for the assessment years 2003-04 to 2004-05 (copy of which is placed in the paper book), vide order dated 23-11-2016. The Ld. DR, on the other hand, relied upon the orders of authorities below. 7. We have considered the rival contentions and also perused the material placed before us. Perusal of the record shows that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olved is AY 2006-07. The Ld.AR of the assessee further relied upon the order of the Tribunal for AYs 2003-04 to 2005-06 in ITA Nos. 2736/Mum/2007, 649/Mum/2009; 1186/Mum/2009 and 699/Mum/2009, vide order dated 23-11-2016 has decided the issue in favour of the assessee. The ld AR for the assessee submits that in ld CIT(A) in AY 2006-07 by following the order of AY 2007-08 restricted the disallowance as per tax Auditors certificate for the purpose of disallowance under MAT. The ld AR for the assessee also submitted that ld CIT(A) in AY 2010-11 by following the order of his predecessor for AY 2011-12 2012-13 allowed the relief to the assessee and restricted the disallowance as per the tax Auditors certificate. It was prayed that the disallowance may be restricted to the disallowance made on the basis of tax Auditor's certificate. The Ld. DR, on the other hand, relied upon the orders of the lower authorities. 9. We have considered the rival submissions and perused the authorities cited before us. We have noted that during the year the assessee received dividend from two Joint Venture Companies, i.e. MRPL HINCOL of Rs. 30,42,41,018/-. The assessee made suo moto disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates to establishment expenses. The ld AR for the assessee submits that the expenses are in the nature of salary, dearness allowances, postage, Bank charges, stationary etc in relation to employee of project department who monitors various projects in the existing line business. Though it was charges to work in progress in Books, it is allowable as business expenditure. The AO disallowed by following the order for AY 2003-04 to 2005-06 taking view that once particular treatment is given in the books of account it shall be binding unless it is proved to be erroneous or contrary to the concept of the legal position. The ld AR for the assessee submits that Tribunal in assessee's own case allowed similar relief to the assessee in AY 2003-4 to 2005-06 dated 23.11.2016. On the other hand the ld. DR for the revenue supported the view taken by the lower authorities. 12. We have considered the rival submissions of the parties and have gone through the order of the lower authorities. We have seen that in assessee's own case for AY 2003-04 to 2005-06 on similar set of facts passed the following order: 18. We have considered the rival contention of the parties and gone through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001-02 2002-03 and order dated 23.11.2016 for AY 2003-04 to AY 2005-06. On the contrary the ld. DR for the revenue supported the order of the lower authorities. 15. We have considered the rival submission of the parties have seen the order of the lower authorities. We have noted that this is recurring issue from the AY 1996-97 onwards and on identical grounds of appeal, the Tribunal in AY 2003-04 in ITA No. 2736/Mum/2007, vide order dated 23.11.2016, by following the orders of the earlier years passed the following order: 6. We have considered the rival contention of the parties and gone through the order of authorities below and the order passed by the Coordinate Bench in assessee's own case, we find that similar issue had come up consideration before this Tribunal in AY 1997-98 and again in AYs 2000-01, 2001-02 and 2002-03 and the Co-ordinate Bench vide order dated 16.01.2013 in ITA Nos. 8575, 8576 5885/Mum/2004 for AYs 2000-01, 2001-02 and 2002-03 respectively made the following order: 9. We have heard the arguments of the two sides and perused the impugned orders and the material placed before us. The post retirement medical benefit is a provision, which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure was claimed during the assessment proceedings. The basis of deduction was the decision of Kolkata High Court in Exide Industries (254 ITR 428), wherein the provision of section 43B (f) was stuck down being arbitrary and unconscionable. The AO disallowed it by taking view that the claim was made after expiry of period of limitation for filing revised return under section 139(5). The Ld. DR relied upon the order of lower authorities. 18. We have considered the rival submissions of the parties have seen the order of the lower authorities. We have noted that this is recurring issue from the AY 1996-97 onwards and on identical grounds of appeal, the Tribunal in AY 2003-04 in ITA No. 2736/Mum/2007, vide order dated 23.11.2016, by following the orders of the earlier years passed the following order:- 45. Ground No. 6 relates with the deduction on Leave Encashment u/s. 43B of the Act. Ld. AR of assessee argued that the lower authorities has not considered the claim of the assessee holding that the claim was filed without filing the revise return of income. On the other hand ld DR for Revenue supported the order of authorities below. 46. We have considered the rival contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments towards compensation for under recovery by oil companies in four sensitive products, i.e. LPG, SKO, Ms. HSD and the resulting gain/loss on sale of oil bonds was to improve liquidity position. The assessee has always shown the said receipts in its trade account. There was no investment made by assessee to acquire these bonds; hence, the same are not capital asset as envisaged in section 2(47) of the Act. The Ld.AR further submitted that re-assessment notice was issued to HPCL giving reasons that there has been omission in assessing it as capital gain and therefore, he has proposed to assess as business income. The Ld.AR of the assessee submits that the issue stands covered in favour of the assessee by the following decisions:- 1. Patnaik Co. Ltd. vs. CIT 161 ITR 365(SC) 2. CIT vs. Gujarat State Fertilizers Chemicals Ltd. (2018) 409 ITR (Guj) 3. DCM Shriram Consolidated Ltd. ITA No. 1836/Del/2012 ord. dt 20-05-2015 22. The Ld. DR, on the other hand, relied upon the orders of authorities below. 23. We have considered the rival submissions and perused the material placed before us. We find that the Hon'ble Supreme Court in the case of Patnaik Co. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on diminution of the fertilizer's bonds in the hand at the end of the year which was shown as other current assets (trade) under the head current assets, loans and advances . The ld. AR has also drawn our attention towards order of ITAT Mumbai, 'D' Bench in the case of Reliance Industries Ltd. Vs. CIT (2014)-TIOL-160-ITAT-MUM and submitted that it is a well accepted principle that the assessee is entitled to adjust the actual cost of imported assets as acquired in foreign currency on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates then in the same manner loss on fertilizer's bonds given to the assessee by the Government of India under compulsion which were received by the assessee unwillingly under commercial expediency then the loss arising on account of fluctuation in the market rate of bonds at the end of year can be considered as ascertain losses and allowable as a business expenditure. In this order ITAT Mumbai held as under: 8. We have carefully considered the order of ld. Commissioner of Income Tax and the submissions of ld. Representatives of the parties. We have also carefully considered the cases cited bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as there was no cost of acquisition. He finally held that the loss on account of MTM basis was thus a notional loss and was contingent in nature and could not be allowed to be set off against taxable income. On appeal, the ld. CIT(A) allowed the same by agreeing with the contention of the assessee that such loss on such valuation which is called MTM has to be allowed even though it may appear to be a notional loss. The Tribunal while confirming order of ld. CIT(A) and allowing the said loss placed reliance on the decision of Hon'ble Apex Court in the case of Woodward Governor India (P.) Ltd. (supra) and also the decision of Tribunal in the case of Edelweiss Capital Ltd. V/s. ITO in ITA No. 5324/Mum/2007 (AY-2004-05) dated 10.11.2010 and the decision in the case of Ramesh Kumar Damani V/s. Addl.CIT in ITA No. 1443/Mum/2009 (AY-2006-07) dated 26.11.2010. Copies of which are placed in the compilation of case laws at pages 76 to 84 and pages 85 to 90 respectively. 10. We also observe that similar issue was considered by Hon'ble Apex Court in the case of ONGC Ltd. (supra). The assessee a public sector undertaking was engaged in the capital intensive exploration and prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of foreign exchange as on the date of the balance-sheet was allowable as an expenditure u/s. 37(1), and (b) that the assessee was entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates, pending actual payment of the liability u/s. 43A, prior to its amendment by Finance Act, 2002. 11. In view of above decisions, it is clear that the loss due to foreign exchange fluctuation in foreign currency transactions in derivatives has to be considered on the last date of accounting year and it is deductible u/s. 37(1) of the Act. Therefore, in allowing the said claim of the assessee by AO, the action of the AO is in consonance with the decisions of the Hon'ble Apex Court and also the view taken by the Tribunal in the cases cited hereinabove (supra). Hence, the view taken by AO to allow loss of Rs. 43.78 crores while making assessment u/s. 143(3) on account of derivative contract outstanding is not an erroneous view taken by AO, nor the action of AO is prejudicial to the interest of revenue. Hence, the order of Commissioner of Income Tax u/s. 263 of the Act to hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the assessee raised the additional ground of appeal before the ld. CIT(A), which was not allowed by him by taking view that only Tribunal is entitled to admit the additional ground of appeal. In our view the decision of ld CIT(A) was not in consonance with the decision of Hon'ble Bombay High Court in Pruthwi Broker and shareholder (supra), therefore, we admit the additional ground of appeal raised by the assessee. We are in principal accepting that the claim of the feasibility study expenses is allowable expenses. However, keeping in view that the assessee has raised this issue for the first appellate stage, therefore, we deem it appropriate to restore this issue to the file of AO to verify the expenses and allow in accordance with law. Needless to order that before passing the order the AO shall grant opportunity to the assessee to file relevant evidences to substantiate its claim. In the result this ground of appeal is allowed for statistical purpose. 28. In the result the appeal of the assessee is partly allowed. ITA No. 5705/Mum/2010 by Revenue (AY 2006-07) 29. Ground 1 relates to deduction u/s. 80IB pertaining to VREP-II Unit. The brief facts are that dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price of inter-unit transfer. The AO further concluded that the assessee was required to submit average processing cost in CDU and the same works out to be Rs. 36.24/MT. The AO accordingly took Rs. 14400.79/mt as the transfer price of MT VGO. And inter-unit transfer was calculated at Rs. 1204.19 crore reducing the net profit of the VERP II of Rs 664,51,07,775/-. The ld CIT(A) while considering this ground of appeal concluded as under: 10.6 I have carefully considered the submission of ld AR and gone through the facts brought before me. As I filed, the AO has mentioned the market price in his order and has not disputed the same. Since the market price is lower than the value adopted by the appellant there is no reduction of cost resulting in inflation of the profit of the eligible unit and thereby a claim of deduction under section 80I. In fact by adopting the value which is substantially higher than the market price, the appellant has increased its cost, reduced the profits of eligible unit and thereby has claimed a lesser reduction under section 80 IA then what could have been calculated if market price of the product was adopted. In such a scenario there was no region for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following judgments:- 1. Vinbros Co. Ltd. v/s. ITO 110 ITD 185 2. Oracle Software Ltd. SLP (c) 4719/2008 3. Ester Lube-Technologies v/s. ITO ITA No. 14/Mum/2012 33. On the other hand the ld DR for the revenue supported the order of the AO. 34. We have considered the rival submissions and perused the material placed before us. We have also deliberated on the various case law relied by the ld. AR for the assessee. In the return of income the assessee claimed deduction of 80IB(4) of Rs. 6.30 Crore. The AO asked the assessee to justify its eligibility u/s. 80IB(4). The assessee filed its reply dated 3.12.2008. In the reply the assessee stated that the assessee owned two refineries at Mumbai and Vishakhapatnam. In the process of refining of crude and manufacturing of various petroleum product at the refinery, one of the by product manufactured is Reduced Crude Oil (RCO). This RCO is further processed to manufacture Lube Oil Base Stock (LOBS), as well as Asphalt. Asphalt is further processed at the refinery. The LOBS product at Lubes refinery, is only a base oil and an input for production of Lubricants and Greases manufactured at Blending plants. The LOBS (finished good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1989. On the other hand the ld. DR for the revenue relied upon the order of AO. 36. We have considered the rival submissions and perused the material available on record. We have seen that the ld CIT(A) has directed the AO to follow the CBDT Circular No. No. 549 dated 31-10-1989. The Hon'ble Bombay High Court in Stockholding Corporation of India Ltd. Vs. CIT [2015] 53 taxmann.com 106 Bom held that tax paid on self assessment would fall under section 244A(1)(b), i.e. a residuary clause covering refunds of amount not falling under section 244A(1), therefore, interest is payable on refund on excess amount paid on self assessment tax. Considering the decision of Jurisdictional High Court we do not find any infirmity in the order passed bt. ld CIT(A), which we affirm. In the result this ground of appeal raised by the revenue is also dismissed. 37. Ground 4 relates to directions to CIT(A) to allow interest from 1st April of the assessment year overlooking the fact that the delay in filing TDS certificates was attributable to the assessee. The Ld.AR for the assessee submits that subsequent to filing of return of income, assessee submitted the following further TDS certificates:- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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