2006 (2) TMI 241 - AT - Income Tax

Issues Involved:

1. Disallowance under section 43B of the Act.
2. Claim of bonus amounting to Rs. 1,91,987.
3. Charging of interest under section 234B.
4. Deletion of disallowance under section 43B on account of bottling fee.
5. Deletion of addition under section 43B on account of additional sales tax demand.
6. Deletion of addition under section 40A(2)(a) on account of lease rental.
7. Deletion of addition on account of Dharmada receipts.

Issue-wise Detailed Analysis:

1. Disallowance under section 43B of the Act:
The assessee claimed an expenditure of Rs. 1,45,58,464 as interest liability on unpaid bottling fees. The Assessing Officer disallowed Rs. 62,38,464 under section 43B, treating the interest as part of the bottling fee. The Tribunal, referencing the Hon'ble High Court's judgment in CIT v. Udaipur Distillery Co. Ltd., concluded that bottling fee is not covered under section 43B, and consequently, the interest on such bottling fee cannot be disallowed under this section. Thus, the Tribunal directed the deletion of this disallowance.

2. Claim of bonus amounting to Rs. 1,91,987:
The Assessing Officer initially disallowed the bonus claim, but the CIT(A) restored the matter for further examination. Subsequently, the Assessing Officer allowed the claim, rendering this ground infructuous.

3. Charging of interest under section 234B:
The assessee denied liability for interest under section 234B. The Tribunal noted that the assessee did not press this ground and requested consequential relief, which was accordingly ordered.

4. Deletion of disallowance under section 43B on account of bottling fee:
The Revenue appealed against the deletion of Rs. 1,39,28,685 under section 43B. The Tribunal noted that the earlier disallowance of Rs. 1.24 crores under section 43B had been reversed by the Tribunal, and the Hon'ble Jurisdictional High Court's decision in Udaipur Distillery Co. Ltd.'s case, which excluded bottling fee from section 43B, was binding. Therefore, the Tribunal upheld the addition of Rs. 1.39 crores made by the Assessing Officer, reversing the CIT(A)'s deletion.

5. Deletion of addition under section 43B on account of additional sales tax demand:
The Tribunal examined the deletion of Rs. 30,29,985 by the CIT(A) and noted that the liability arose in the year under appeal due to the finalization of sales tax assessments of earlier years. However, the Tribunal emphasized that post-insertion of section 43B, the deduction of sales tax is contingent on actual payment, not merely the incurrence of liability. The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to reconsider the disallowance under section 43B, ensuring reasonable opportunity for the assessee to be heard.

6. Deletion of addition under section 40A(2)(a) on account of lease rental:
The Tribunal reviewed the deletion of Rs. 32,63,112 by the CIT(A) and noted that the lease rental agreement had been consistently followed in previous years without dispute. The Tribunal found no justification for deviation from the earlier stand and upheld the CIT(A)'s decision to allow the assessee's claim for lease rental.

7. Deletion of addition on account of Dharmada receipts:
The Tribunal upheld the CIT(A)'s deletion of Rs. 6,35,825, referencing the Hon'ble Supreme Court's decision in CIT v. Bijli Cotton Mills (P.) Ltd., which characterized Dharmada receipts as non-taxable. The Tribunal found that the sale bills clearly earmarked Re. 1 as Dharmada, and the customers' acceptance of these bills confirmed the nature of the receipts as Dharmada.

Conclusion:
Both appeals were partly allowed, with the Tribunal providing a detailed analysis and directions on each issue, ensuring adherence to legal precedents and statutory provisions.

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