TMI Blog1984 (11) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vaish urged that since the inception of the company it was felt that some suitable and workable arrangement was necessary for imparing education in English media to the children of the employees of the company; that with this humanitarian view, the General Manager of the assessee company, Dr. M.R. Jain approached the M.M.M.D.C.S. to start an English medium school; the major expenses for running the same to be borne by the assessee company whose employees were main beneficiaries of the said facility and that as a result of the said negotiation the M.M.M.D.C.S. under-took to set up an English medium school run on public school lines, which was named as "Dayawati Modi Public School", Modinagar. In support of this stand Mr. Vaish relied on the copies of the minutes of the M.M.M.D.C.S. dt. 20th Jan., 1973 ; the minutes of the M.M.M.D.C.S.'s meeting held on 8th April, 1973 and the affidavits dt. 24th July, 1976 of Dr. M.R. Jain, Plant Manager of the assessee-company and dt. 19th Jan., 1978 of Mr. V.V. Chabra, Accountant of M.M.M.D.C.S. These arguments are contravened by the Department representative, who has relied on the orders of the tax authorities. 4. We have given consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee towards the contraction of the building of the school. The said letter does not seems to support the plea of the assessee that the payment in question made by the assessee to the M.M.M.D.C.S. was not in the nature of donation. 5. To sum up, we find that the amount in question was initially debited in the books of the assessee as donation. The school is not being run excessively for the benefit of the employees of the assessee company. The children of the employees of the other companies of the Modi Group are equally entitled as other to the admission to the said school and other institution also, which are run by the M.M.M.D.C.S. at Modinagar. The said school is one of the many institutions run by the M.M.M.D.C.S. and the expenditure relating to these institutions is incurred by the M.M.M.D.C.S. from its won consolidated fund generating primary by donations from organisations of the Modi Group including the assessee company. It is, therefore, established that the fund provided by the assessee company to the M.M.M.D.C.S. in the year under consideration was not used exclusively for the purpose of the school, which in term cannot be said to have been run exclusively for the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uest house of the company w.e.f. 16th June, 1973. The case of the assessee before the ITO was that between 2nd March, 1973 to 15th June, 1973 the said accommodation was kept vacant for the possible use of the same by the Mr. A.R. Swearinjen and only when it was known that he was not resuming his duty, the said accommodation was converted ITO guest house w.e.f. 16th June, 1973. This case of the assessee was not acceptable to ITO. According to him the said bungalow was used as a guest house immediately after Mr. Swearinjen left India on 2nd March, 1973. He accordingly has held that the expenses incurred by the assessee on rent, depreciation of furniture and electricity for the peirod 2nd March, 1973 to 15th June, 1973 were the expense relating to the running of the said guest house and so were disallowable. 9. Aggrieved by the said order of the ITO the assessee has brought the matter by way of appeal before the CIT (Appeals) who has agreed with the ITO. He has noticed that the expanses incurred by the assessee in respect of the use of the said bungalow w.e.f. 16th June, 1973 have been added back by the assessee itself in terms of s. 37(3) of the Act. No evidence was furnished by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 1/2 months come to Rs. 635. To say in other words, there was extensive use of lights in the bungalow during this period of 3 ½ months. That clearly displace the case set up by the assessee before the tax authorities. We, therefore, agree with the CIT(A) disallowing the rent, electricity charges and depreciation of furniture as claimed by the assessee for the period 2nd March, 1973 to 15th June, 1973. Presumably during the period, as from 16th June, 1973 the bungalow was used as a guest house by the assessee. Whatever be, it is not proved on record that the above expenditure in the shape of rent, electricity charges and depreciation of furniture was an expenditure incurred wholly and exclusively for the purpose of the business of the assessee. We hold likewise. 11. Vide agreement dt. 24th Nov., 1972 executed between Dr. Mithu Kothari and the assessee, the former was engaged as medical adviser on retainership basis for a period of ten years w.e.f. 10th Nov., 1972. In terms of the said agreement the assessee had advanced to Dr. Kothari a loan of Rs. 70,000 for the purchase of certain medical apparatus etc. She was to receive a retainer free of Rs. 600 per month, which was to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s established beyond any shadow of doubt that doctor Kothari while practising in Bombay was available for treatment of the employees of the assessee company who numbered about ten every month. Doctor Kothari also gave the names of some of those employees. In view of the categorical statement of doctor Kothari to the effect that she was functioning as the medical consultant of the assessee company in accordance with the said agreement, there is no reasons to disbelieve the case set up by the assessee. The retainer fee deduction of Rs. 7200 should be allowed in full and so also of the motor car maintenance expenses. In reply the Departmental Representative has relied on the order of the tax authorities. 14. We have given consideration to the above arguments. We have also gone through the statement of doctor Kothari recorded on 4th Sep., 1978 and 10th Feb., 1977, at pp. 27, 28 and 31 to 33 of the paper book, filed by the assessee. The bio-data of Dr. Kothari is at paper Nos. 29 and 30 of the said paper book and aforesaid agreement dt. 24th Nov., 1972 is at pp. 25 and 26. On going through the statements of Dr. Kothari as also the aforesaid agreement dt. 24th Nov., 1972, we are satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect from 14th May, 1971 Mr. Taverner shifted his residence from Sterling Apartment to another building known as Elcid Building. The ITO following his assessment orders for the asst. yrs. 1972-73 and 1973-74 disallowed the expenditure pertaining to the said flat on the ground that the same was being used as guest house and so the said expenditure was disallowable under s. 37(3) of the Act. The expenditure involved total Rs. 75,055 consisting of the expenditure of Rs. 48,971 and the depreciation of Rs. 26,084. The ITO while so holding disagreed with the stand of the assessee that the said flat was not being used as a guest house. The CIT (Appeals) has agreed with the ITO. In the appeal before the Tribunal the ld. counsel for the assessee Mr. O.P. Vaish has urged that the said flat was not being used as a guest house as has been held by the Tribunal (Delhi Bench (D) New Delhi in ITA NO. 1402/1977-78 for the asst. yr. 1972-73), decided on 21st April, 1983. In reply the Departmental Representative has relied on the orders of the tax authorities. 16. We have considered the above arguments of the parties. The factual position in the year under consideration is the same as in asst. yr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. We have heard both the ld. counsel for the assessee Mr. O.P. Vaish and the Departmental Representative. At the hearing it was an admitted position that the claim of the assessee for weighted deduction under s. 35B of the Act was allowed by the AAC for asst. yr. 1973-74 and that there was no appeal by the Departmental against that order. The reasons given by the AAC are in paragraphs 63-64 of his order dt. 17th Feb., 1978. For the reasons stated by the AAC with which we agree we hold that the assessee is entitled to weighted deduction under s. 35B of the Act in respect of this expenditure. Since the assessee has allowed deduction under s. 35B of the Act it would not be entitled to the deduction of Rs. 5,000 under s. 37 of the Act. We hold likewise. 20. The assessee claimed deduction of Rs. 864 on account of expenses incurred in connection with the seminar organised by the Textile Association of Ahmedabad. The ITO disallowed the said expenditure on the ground that it was not necessary for the assessee to incur the said expenditure and further the expenditure being in the nature of the entertainment expenditure was to be disallowed in view of the decision of the Allahabad High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion made on the advice of Mr. I.T. Gupta, Sales Secretary and covered provision for discount upto the period ending 28th Feb., 1974; that the assessee had been charging Rs. 4 per kg. over the agreed price which was being disputed and a provision of Rs. 2,19,640 had been made for meeting the contingencies that could possibly arise on account of refund of price demanded by the customers relating to the extra price paid by them. The assessee, however, admitted by the ITO that no payment out of the said amount had been made in the year under consideration nor was it demanded during the year. The ITO by treating the provision as a provision and in view of the ratio of the decision of the Supreme Court in CIT vs. Swadeshi Cotton and Flour Mills Ltd. (1964) 53 ITR 134 (SC) and other decision disallowed the claim of the assessee for the deduction of the said amount, claimed by the assessee. This view of the ITO has been upheld by the CIT (A). 27. We have heard the ld. counsel for the assessee MR. O.P. Vaish and the Departmental Representative. From the facts as stated above it is not disputed that no actual liability had occurred in the year under consideration on account of any claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea, coffee, snacks etc. at its Delhi Office. The ITO disallowed the entire said expenditure on the ground that the same was an expenditure in the nature of entertainment. The CIT (Appeals) restricted the disallowance to Rs. 9,386, the balance being the expenditure pertaining to the staff members of the assessee. 32. We have heard both the ld. counsel for the assessee MR. O.P. Vaish and the Departmental Representative. For the reasons stated in paragraph 30 above, we uphold the order of the CIT (Appeals) on this point also. 33. In the year under consideration the assessee incurred an expenditure of Rs. 11,658 pertaining to petty items including amounts spent by the employees while on tour etc. in connection with the business of the assessee company including Rs. 42 in respect of punchsheel bungalow upto 15th June, 1973. Since the details of the expenditure so incurred were not available, the ITO disallowed Rs. 5,000 out of the said expenditure. The CIT (Appeals) has upheld the said disallowance by observing that full details of the said expenditure were not available nor was the said expenditure verifiable. 34. We have heard both the ld. counsel for the assessee and the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The expenditure as is clear from the details are nothing but of repairs and maintenance. Merely because an amount of Rs. 57,000 has been spent on these repairs, it cannot be said that any endeavour benefit has accrued to the assessee. The repairs in question were effected to secure a proper discharge of the affluent from the plant of the assessee. The said expenditure is, therefore, laid out wholly and exclusively for the purpose of the business of the assessee. It may be added that in the appeal of the assessee for asst. yr. 1972-73 the Tribunal in I.T.A. No. 1402/Del/1977-78 had restored a similar matter to the ITO to verify the nature of the ownership of the nala, and the ITO after the matter went back, had allowed the said expenditure as a revenue expenditure. This decision of the ITO r/w the order of the Tribunal support our above view. We hold likewise. 39. The assessee company had floated a public issue of its shares, part of which had been under-written by U.P. State Industrial Development Corporation, hereinafter referred to as UPSIDC, who in turn had entered into an agreement with M/s Patiala Flour Mills, whereby the later had agreed to purchase from the former certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure incurred in prosecuting a civil proceeding is as to the nature and purpose of the legal proceeding in relation to the assessee's business and could not be affected by the final outcome of that proceeding. If the expenditure was laid out for the purpose of the business wholly and exclusively, that is reasonably and honestly incurred to promote the interest of the business, the same is to be allowed. Applying the law laid down by the Supreme Court to the facts of the present case we find that the assessee had to incur the expenditure because it was arrayed as a defendant in a dispute pertaining to the shares of the assessee company. To protect the name of the assessee the said expenditure was incurred honestly and reasonably with the object of promoting the interest of the business of the assessee, inasmuch as the shares of the assessee company were involved. The said expenditure is, therefore, allowable as revenue expenditure. 41. The ITO on perusal of the seized documents notices that goods worth Rs. 6,33,334 had been imported from LURGI of West Germany as per S. S. Alkama. Out of the total consignment so import, goods worth Rs. 1,52,923 constituted classified it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which gets reflected in the P L A/c is not a business loss in the commercial sense and being penalty for a infraction of law is not a normal incident of the business. We draw force for our above view from the ratio of decisions reported as Hari Aziz Abdul Shakoor Bros. vs. CIT (1961) 41 ITR 350 (SC), CIT vs. Mihir Textiles Ltd. (1976) 104 ITR 167 (Guj) and in the case of Raghubir Prasad Gupta vs. CIT (1979) 120 ITR 789 (Cal). We, therefore, set aside the impugned orders of the CIT (Appeals) and the ITO in this behalf and restore the matter to the file of the ITO to decide the matter afresh in accordance with law and in the light of our above observations and after permitting the assessee to lead evidence, if any, in this behalf. 43. Ground No. 20, read as under, will be dealt with ground No. 8, in the appeal by the revenue bearing I.T.A. No. 447/Del/82 in the later part of this order: "That the learned CIT(A), on the facts and in the circumstances of the case and in law, erred in holding that estimated rent be computed where the quarters are given rent free to employee of Government and other agencies whose presence near the factory premises is essential for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure so incurred in connection with the travelling of the foreign technicians and visitors, was met by the assessee. To say in other words the factual position in the year under consideration it similar to that in asst. yr. 1973-74, which came up for consideration of the Tribunal (Delhi Bench 'D', New Delhi) in ITA No. 822/Del/1978-79, asst. yr. 1973-74. For the reasons stated therein with which we agree, we hold that the expenditure of Rs. 3,623 actually disallowed by the CIT (Appeals) (wrongly mentioned by him at Rs. 2,623) has been laid out wholly and exclusively for the purpose of the business of the assessee. It is, therefore, allowable revenue expenditure. We hold likewise. 49. The assessee had incurred a total expenditure of Rs. 20,046 including Rs. 2,931 incurred on account of directors' participation in M.B.O. seminar held at Ashoka Hotel on 18/19th Jan., 1974. The ITO allowed a sum of Rs. 11,082 as permissible business expenditure and assessed the balance amount of Rs. 8,964 because in his opinion the said expenditure was in the nature of entertainment expenditure. The said sum of Rs. 8,964 consisted of Rs. 8,923 incurred on lunches and a sum of Rs. 250 was paid for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. As such and for the reasons stated by the CIT (Appeals), with which we agree, we uphold the order of CIT (Appeals) on the point at issue. 53. The claim of the assessee for deduction on sales-tax liability of the order of Rs. 5,41,238 has been disallowed both by the ITO and the CIT (Appeals), who in support of his view has relied on the Special Bench decision of the Tribunal at Bombay in ITA No. 3643/Bom/1974-75 in the case of M/s Amar Dye Chemicals Ltd. vs. ITO reported in (1983) 3 SOT 384 (Bom) (SB). 54. We have heard both the ld. counsel for the assessee Mr. O. P. Vaish and the Departmental Representative. For the reasons stated in the aforesaid Special Bench of the Tribunal in the case of M/s Amar Dye Chemicals Ltd. and the decision of the Calcutta High Court in 1983, Tax Law Reporter, 1075, we uphold the order of the CIT (Appeals) on the point of issue. 55. In the result, the appeal of the assessee is partly allowed for statistical purpose. I.T.A. No. 447 ( Del )/1982 56. As already stated this appeal is by the revenue. The assessee company manufactured crimped yarn during the year under consideration. The Excise Department, it appears, has ordered that ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Courts in favour of the assessee on the point at issue, there was, according to the ITO, no decision of the Allahabad High Court to support it. 60. Aggrieved by the said disallowance, the assessee brought the matter by way of appeal before the CIT(Appeals), who after referred to the ratio of the decision of the Supreme Court in the case of Kedar Nath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC), which was followed by the Allahabad High Court in J.K. Synthetics Ltd. vs. CIT 256 : (1976) 105 ITR 864 (All) and of the Calcutta High Court in CIT vs. Century Enka Ltd. (1981) 130 ITR 267 (Cal) has held that the assessee was entitled to the deduction of Rs. 33,80,958. The excise duty, according to the CIT (Appeals), on NSFY had became payable in terms of the letter dt. 13th March, 1973 of the Superintendent, Customs Excise, which was received in the year under consideration. The assessee maintained its account on mercantile basis. The fact that the assessee was disputing the said levy, which would be only the material when the dispute is finally settled in favour of the assessee and until such a decision was available, the claim for deduction of the liability in question as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contesting the said liability in the aforesaid Writ, has provided for the said liability. It is not necessary that a regular demand notice should be issued for the aforesaid amount of Rs. 33,80,958. The fact that he assessee was challenging the validity of the liability in the Writ petition and the Hon'ble High Court has granted the stay will not make any difference in the assessee claiming the deduction of the statutory liability in question as business expenses. The assessee could still legitimately claim deduction in respect of the said business liability, even if such liability had not been quantified or paid or even if such liability was being disputed. This is clear from the ratio of the decision of the Supreme Court in the case of Kedar Nath Jute Mfg. Co. Ltd. and of the Allahabad High Court in the case of J.K. Synthetics Ltd.. The view taken by us also find support from the aforesaid earlier decision of the Tribunal in the case of the assessee for asst. yr. 1972-73. It is not correct to urge that s. 43B added w.e.f. 1st April, 1984 is procedural and so has retrospective effect for the year under consideration. The said provision is in sum and substance a substantive provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at we have stated hereinbefore, came to the conclusion that the assessee has utilised its borrowed funds for advancing loans to the aforesaid parties without charging any interest. He estimated the interest on the sums advanced to the aforesaid three parties at 12-1/2per cent and on the basis he made the impugned addition of Rs. 2,02,560. 64. Aggrieved by the said disallowance the assessee brought the matter by way of appeal before the CIT (Appeals), who after referring to various decisions, including that of the Bombay High Court in CIT vs. Bombay Samachar Ltd., Bomay (1969) 74 ITR 723 (Bom) noticed that the facts with regard to the impugned disallowance of deduction on account of interest were exactly similar to those obtaining in the case of the assessee for asst. yr. 1973-74 and the CIT (Appeals) deleted the above addition made by the ITO by observing as under: "The facts with regard to the impugned disallowance of deduction on account of interest are exactly similar to the facts which had obtained in this behalf in the asst. yrs. 1973-74. From the details of the interest paid during the year, as furnished on behalf of the appellant, it is seen that interest paid on bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, as rightly pointed out by the CIT (Appeals), the interest paid on overdrafts by the assessee amounted to Rs. 8,839 only and that the rest of the interest paid by the assessee on the borrowed funds pertain to long term borrowings effected or by way of security deposit from dealers. The assessee had also substantial bank deposits. It cannot, therefore, be said that the monies borrowed during the year had been utilised in grating advances to the aforesaid three parties without charging interest. As stated hereinbefore there appears to be no doubt that the borrowed funds were utilised for the purposes of the assessee's business. We, therefore, on the facts and in the circumstances of the case, agree with the CIT(Appeals) that no part of the interest paid on borrowed funds can be disallowed in the assessment of the assessee for the year under consideration. 66. Admittedly, the assessee was charging as "charity" one rupee per carton of the yarn sold. The amount so collected during the year stood at Rs. 1,87,677, which was accounted for in a separate charity account. The said amount, according to the assessee, did not form part of its sale proceed. This was, however, not acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. For the reasons stated therein,with which we agree, we uphold the order of the CIT(Appeals) on the point at issue. This view of ours finds support from the ratio of the decision of the Supreme Court in the case of Bijli Cotton Mills (P) Ltd.. 70. The ITO in the assessment of the assessee has disallowed Rs. 3,17,204 on account of contribution made by the assessee to the Staff Superannuation Fund. The said disallowance was made on the ground that the assessee had not given any calculations to show that the said contribution had been made in accordance with the rules. 71. Aggrieved by the said disallowance, the assessee brought the matter by way of appeal before the CIT(Appeals), who following the order of the Tribunal in the case of the assessee for asst. yr. 1971-72 and of the AAC for asst. yr. 1973-74 dt. 17th Feb., 1978 has deleted the above addition made by the ITO. 72. In the appeal before the Tribunal, the Departmental Representative has urged that the above amount represented the provision and not the payment made to the said Superannuation fund. The deduction claim can be allowed if it falls within the four corners of s. 36 (1) (iv) of the Act r/w r. 88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the CIT(Appeals), who following the decision of the Tribunal (Delhi Bench 'D' New Delhi) in ITA Nos. 1956 1823 (Del)/78-78 (asst. yr. 1971-72) decided on 20th Jan., 1981) has deleted the above addition made by the ITO. The CIT(Appeals) has also noticed that the facts in the case of the assessee are similar to that which were in the case of the assessee's sister concern M/s Modi Industries Ltd., wherein also deletion like the one made by the ITO in the present case, was deleted. 76. In the appeal before the Tribunal, the Departmental Representative has urged that the CIT(Appeals) has erred in deleting the above addition rightly made by the ITO which is duly supported by the decisions relied upon by him. In reply, the ld. counsel for the assessee has relied on the order of the CIT(Appeals). 77. We have given consideration to the above arguments. The facts relating to dispute involved in this ground are that the assessee in the course of manufacture wind the yarn on cops attached to the plant. The yarn is solid as such on the cops with the stipulation that the cops would remain the property of the assessee company. The purchasers are under the obligation to return them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . yr. 1971-72 bearing ITA Nos. 2194 2195/75-76 and C.O. No. 250 (Del)/1975-76, as also the ratio of the decision of the Punjab Haryana High Court in Nauharchand Chananram vs. CIT (1971) 82 ITR 189 (P H), of the Supreme Court in New Savan Sugar and Gur Refining Co. Ltd. vs. CIT (1969) 74 ITR 7 (SC) and of the Madhya Pradesh High Court in CIT vs. National Newsprint Paper Mills Ltd. 1978 CTR (MP) 106 : (1978) 114 ITR 388 (MP) has directed the ITO to assessee the income of Rs. 6,000 as business income as disclosed by the assessee and to make consequential adjustment to the computation of the assessee's income with regard to the deduction for repairs, depreciation etc. 80. We have heard both ld. counsel for the Departmental Representative and the ld. counsel for the assessee, Mr. Vaish. The factual position in the year under consideration is the same as came up before the Tribunal on the earlier occasion for asst. yr. 1971-72. The arguments by the parties are on the same lines which were canvassed before the Tribunal on the earlier occasion. We have perused the aforesaid earlier order of the Tribunal. For the reasons stated therein, with which we agree, uphold the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paper Mills Ltd., we uphold the order of the CIT(Appeals) on this point also. 85. We now come to the next ground raised by the revenue which is intimately connected with Ground No. 20 in the appeal by the assessee bearing ITA No. 446 (Del)/1982. The assessee has built a number of quarters. Most of these are allotted by the assessee to its employees. In the year under consideration, "A" Type quarter was allotted to employee of Hydle Department of the Government of Uttar Pradesh. Three "B" Type quarters were also allotted to the employees of the said Hydle Department. One such quarter was allotted to an employee of the Telephone Department. 10 other quarter of Type-C were allotted to the Hydle Department and one to the Telephone Department. The stand of the assessee was that no rent was charged from these Government employees, because the presence of these employees in these quarters made available to them the facility of utilising their services at all odd times. The letting out of these quarters to these persons, without charging any interest, was for the furtherance of the business of the assessee company. This was not acceptable to the ITO, who following the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the (Delhi Bench 'C' Delhi) in ITA Nos. 1993/Del/75-76 (asst. yr. 1970-71) has urged that the dominant purpose of letting out of the accommodation was to enable the assessee to carry on its business more efficiently and smoothly and the activity of letting had a definite nexus with the business that the assessee was carrying on. The income, if any, was business income it could not be income under the head "Income from house property". As such, no notional income as required to be assessed under that head, can be taxed in the hands of the assessee. Since the income, if any, from letting out could be business income and in fact and practice no interest has been charged, nothing can be added to total income of the assessee under the head "Income from business". 88. We have given consideration to the above arguments. The quarters in question were constructed by the assessee for and letting out to its employees alone. As such the income therefrom being incidental to the assessee's business had to be treated as business income, the dominant purpose being to enable the assessee to carry on its business more efficiently and smoothly and in this way, there was a definite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue expenditure. He, therefore, allowed the entire amount as a deduction, but declined to allow development rebate thereon as, in his opinion, the said expenditure was revenue expenditure. 92. Aggrieved by the aforesaid assessment order, the assessee brought the matter by way of appeal before the CIT(Appeals). It was urged before him by the assessee that the cops, constituted an integral part of the assessee's plant and machinery, because its manufacturing process could not, in the absence of the said cops being attached to the drawtwist machines, be carried on so as to take on the yarn coming out of the extruders. It was also pointed out of the assessee that the cops had been held to be capital asset and development rebate was allowed thereon in the assessee's own assessments up to asst. yr. 1972-73. On that very same basis development rebate should be allowed on cops purchased in the year under consideration also. Support was sought by the assessee from the decision of the Gujarat High Court in Amrut Mills Ltd. vs. CIT (1966) 59 ITR 507 (Guj) and the decision dt. 1st Nov., 1980 in the order of the Tribunal (Delhi Bench 'D', Delhi) bearing ITA No. 2193 (Del)/1975-76 for asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plant machinery of the assessee company Independently, these cops are also cover by the definition of the expression "plant" appearing in s. 43(5) of the Act. This view of ours finds supports from the ratio of the following decisions; CIT vs. Jai Drinks (Pvt.) Ltd. (1980) 15 CTR (Raj) 17 : (1980) 125 ITR 662 (Raj). CIT vs. National Air Products Ltd. (1980) 18 CTR (Del) 300 : 126 ITR 196 (Del). Therefore the expenditure to purchase the cops in the year under consideration is capital expenditure and the assessee is entitled to the development rebate on the cost of these cops. This view of ours finds support from the aforesaid decisions of the Tribunal in the case of the assessee for asst. yr. 1970-71 and 1971-72 respectively dt. 1st Nov., 1980 and 20th Jan., 1981 in ITA No. 2193 (Del)/75-76 and ITA No. 1823 (Del) 1977-78. We, therefore, uphold the order of the CIT(Appeals) on this point also. 95. The next ground raised by the revenue pertains to the deduction allowed to the assessee under s. 80J of the Act in regard to Unit-B, which was installed by the assessee company in the accounting period relevant to the asst. yr. 1973-74 and in which further expansions were ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons stated in the aforesaid earlier order of the Tribunal in the case of the assessee, with which we agree, and respectfully following the ratio of the aforesaid decisions of the Supreme Court, relied upon by the CIT(Appeals), we uphold the order of the CIT(Appeals) on this point also. 101. Ground No. 12 by Departmental reads as under: "On the facts and in the circumstances of the case, the CIT(Appeals)-VIII, New Delhi has erred in directing the ITO to verify the cost of 'Plant Machinery' of other items on which development rebate has been claimed, and to allow the development rebate thereon in accordance with the law". 102. We have heard both the Departmental Representative and the ld. counsel for the assessee. The ground raised by the Revenue is a general ground. The direction by the CIT(Appeals), which is challenged by the revenue, is to allow development rebate in accordance with the earlier order of the Tribunal. The allowance of development rebate on item of Rs. 68,609 the cost of each of which was less than Rs. 750 and or items of Rs. 7,83,866 the cost of each of which exceeded Rs. 750, See in this connection para 9 of the order of the Tribunal dt. 1st Nov., 1980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h related to the value of the appreciation in the foreign currency balance held by the company with the First National City Bank, Frankfurt, West Germany. This amount of Rs. 30,493 is the subject matter of ground No. 14. According to the ITO, the said current account was being utilised by the assessee company for the purchase of its stores. The balance amount in the said current account in the year under consideration was held by the assessee company for its current business needs. As such the increase on account of additional rupees arising from appreciation of the foreign currency balance in question was revenue receipt. The same could not go to increase the capital reserve. 109. Aggrieved by the said assessment order the assessee brought the matter by way of appeal before the CIT(Appeals). He has held that the said foreign currency account was kept by the assessee for the purpose of the purchasing plant machinery and the spare part thereof. The said bank account was not being operated for carrying out any trading operation as such, because the company was not selling any of its products nor was it running any services in Germany or anywhere outside India. The transactions r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was like the claim on account of the excise duty, which the excise authorities have proposed to levy and which was being disputed. Like the excise duty payable, this amount on account of fee payable to the Textile Committee was allowable revenue expenditure. 114. We have heard both the Departmental Representative and the ld. counsel for the assessee. We find that a similar point had come up for consideration of the Tribunal (Delhi Bench 'D' New Delhi) in I.T.A. No. 1582 (Del)/77-78 (asst. yr. 1972-73). The factual position in the year under consideration is similar to that in asst. yr. 1972-73. The argument canvassed by the parties are on the same lines which were canvassed before the Tribunal on the earlier occasion. We have perused the aforesaid earlier order of the Tribunal. Its not in dispute that the Textile Committee has been constituted by the Government of India under the Textile Committee Act, 1963 and in terms of s. 12 of the said Act and item 4(b) of s. 21(1) made under the said Act, the said assessee was under the statutory liability to pay a sum of Rs. 58,483 to the Textile Committee by way of fees. Although the payment of the said fee is disputed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame from the total commission payments, came to the conclusion that the balance sum of Rs. 26 lakhs and odd claimed to have been paid by the assessee to SSC was not a genuine payment and it was also hit by the provisions of s. 40A(2) of the Act. 116. Aggrieved by the said addition, the assessee brought the matter by way of appeal before the CIT(Appeals). He notice that the point at issue had come up for consideration before the Tribunal (Delhi Bench 'D', New Delhi) in the case of the assessee bearing that ITA No. 1956(Del)/1978-79 (asst. yr. 1971-72). The appeal was before the Tribunal against the reassessment order. He also noticed tat a similar point had come up for consideration of the AAC for asst. yr. 1973-74, which order on the point at issue, as in clear from the order of the Tribunal (Delhi Bench 'D', New Delhi) in I.T.A. No. 858 (Del)/78-79 for asst. yr. 1973-74, has been upheld. He also noticed, as brought out in the order, that the facts in the year under consideration were similar to those in the aforesaid asst. yr. 1971-72 and 1973-74. CIT(Appeals) has further stated that the ITO in spite of an opportunity given vide remand order dt. 16th April, 1980, has not brough ..... X X X X Extracts X X X X X X X X Extracts X X X X
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