TMI Blog1994 (3) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. (1977) 106 ITR 424 (Guj), held that the expenditure incurred would be covered by the expression "hospitality" to guests and does not fall within the definition of "entertainment" or "advertisement". As against this, the learned Departmental Representative, Shri Home Raikhan, supported the action of the CIT(A). 4. We have considered the rival submissions. We find that the facts involved in this year are similar to the facts of earlier year. Therefore, respectfully following the Tribunal's order in the case of Mangalam Cement Ltd., we decide the issue in favour of assessee. The order of the CIT(A) on this point is set aside. 5. The next ground 1(b) is that the CIT(A) erred in not allowing the deduction claimed by the assessee-company out of business entertainment expenditure of Rs. 4,00,138 on the provision of lunches, dinners, etc., at parties and get togethers in hotels and restaurants, etc. The learned counsel for the assessee submitted that this issue came up for consideration before the Tribunal in ITA No. 4782/Del/85 for asst. yr. 1981-82 and subsequently in ITA No. 493/Del/87 for asst. yr. 1983-84. The Tribunal decided this matter in favour of assessee and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred on gift articles presented to various persons in theSalemunit, details of which are given at page 33 of the CIT(A)'s order. The Assessing Officer was of the view that the destination of the articles is not available in the assessee's record. Therefore, the claim of the assessee cannot be allowed and he also mentioned that the articles presented to the customers, suppliers can be taken as expenditure on entertainment. He, therefore, disallowed this expenditure. The CIT(A) confirmed the same and also pointed out that the names of the recipients have not been given by the assessee. So, the articles presented to the customers, suppliers, etc., was for the purpose of entertainment. 12. The learned counsel submitted that the cost of each item cited in the list of items is quite nominal and looking to the vast business of the assessee-company, distribution of gift articles on the eve of new year is just in line in the trade industries. These items were presented to the company's customers, suppliers and other businessmen associated in general in the normal course of business in a customary way. It is impossible to keep the particulars of the parties to whom the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) 37 ITD 335 (Del)], we are of the opinion that the assessee is entitled for deduction under s. 80-I for the reasons given in the said order. This ground is decided in favour of the assessee. 17. The next grievance in assessee's appeal is that the CIT(A) erred in disallowing the claim of the company for deduction under s. 80HH of the IT Act, 1961 for a sum of Rs. 51,75,042. Having heard both the parties, we find that this issue has to be decided in favour of the assessee in view of the decision of the Tribunal in assessee's own case IAC vs. Dalmia Cement (P) Ltd. We, therefore, set aside the order of the CIT(A) on this ground and direct the Assessing Officer to allow the same. 18. The next grievance in assessee's appeal is that the CIT(A) erred in upholding the disallowance of the claim of the company for deduction of a sum of Rs. 2,82,79 being its accrued liability during the relevant previous year for payment of pension to its senior executives under the "Dalmia Cement Executives Pension Scheme". The assessee debited an amount of Rs. 3,82,599 representing contribution made by the assessee towards pension scheme. The assessee-company is having a pension scheme and the pension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld the disallowance of Rs. 8,98,587. 22. Regarding expenditure incurred on publication of statutory notices/advertisements and staff recruitment advertisements, etc., and expenditure on advertisement for sale of certain old and discarded assets mentioned at (c) and (d) are concerned, we find that this issue has to be decided against the assessee keeping in view the Tribunal's order in assessee's own case IAC vs. Dalmia Cement (P) Ltd. We, therefore, confirm the disallowance made by the CIT(A). So far as the expenditure incurred on insurance premium in respect of motor vehicles is concerned, we are of the opinion that this issue has to be decided in favour of the assessee following the order of the Tribunal in the case of Enkay (I) Rubber Co. (P) Ltd. vs. IAC (1992) 40 ITD 114 (Del). This issue was also considered by the Bombay High Court in the case of Chase Bright Steel Ltd. vs. CIT (1989) 75 CTR (Bom) 60 : (1989) 177 ITR 124 (Bom). Respectfully following these two decisions, we set aside the order of the CIT(A) on this ground and direct the Assessing Officer to allow expenditure incurred on insurance premium in respect of motor vehicles as business expenditure. This ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on f.o.r. destination sales and the manufacturer was also permitted to include packing charges, excise duty, etc., in the price. The impact of the Cement Control Order, 1982 on the scheme of exclusion provided under r. 6(c) of the Tamil Nadu Gen. ST Rules, 1959 was a matter of continuous controversy. Pending decision by the Supreme Court in the appeal from Ramco Cement Distribution Co. (P) Ltd. vs. State of Tamil Nadu (1982) 51 STC 171 (Mad) on a question whether sales-tax could be levied on packing charges and freight, the assessee who marketed cement, informed their non-Governmental buyers that they were compelled to provide for sales-tax liability on freight and packing charges, and collected a deposit for this purpose from the buyers. During the previous year the socalled security deposit of Rs. 9,58,967 and Rs. 16,51,516 as levy of sales-tax on freight element and packing charges was collected in cement sales. The two amounts are included in the amounts of Rs. 19,79,401 (freight element) and Rs. 75,08,383 (packing charges element) in the balance sheet of the company as security deposits to cover possible levy of sales-tax on freight element and packing charges in cement sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng charges and freight being ultimately held to be not justified by the Hon'ble Supreme Court. This is a contingency deposit collected on a refundable basis and has been separately ledgerised in the buyer's account and the buyers are treated as depositors. Therefore, the view taken by the CIT(A) on the basis of decisions of Supreme Court in the cases of Chowringhee Sales Bureau P. Ltd. and Sinclair Murray Co. P. Ltd. is not justified. It was pointed out that in the case of Chowringhee Sales Bureau P. Ltd. the company has collected sales-tax and credited it separately in its account books under the sales-tax collection account and did not pay the amount of sales-tax to the actual owner of the goods. In such circumstances the decision was taken that it is a trading receipt. It was pointed out that the Hon'ble Supreme Court further observed per curium the appellant would, of course, be entitled to claim deduction of the amount as and when it pays it to the State Government. Therefore, this itself is a distinguishing feature from the case of the assessee. Similarly the case of Sinclair Murray Co. P. Ltd. is also distinguishable on the facts. It was also pointed out that in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose from the buyers. Therefore, the assessee with the consent of the parties has been collecting sales-tax on packing charges and freight and in each of the invoice following footnote is added: "Security deposit towards possible levy of sales-tax on packing charges and freight refundable in the event of the levy of sales-tax on packing charges and freight being ultimately held to be not justified." The contingency deposit which is collected on refundable basis is also separately ledgerised in the parties' account and these parties are treated as depositors. Therefore, when the amount is credited in the separate party's account and held as a deposit, the parties are treated as depositors, the money so collected by way of deposit on the express understanding or undertaking as in these cases, the assessee held the money as a mere custodian, and on the fulfilment of the condition became a trustee for the depositors. It is sufficient to state that when once the tax authorities determined that the proceeds of the sales in question were not within the taxable turnover of the assessee-company, the beneficial ownership became vested in the depositors and the company ceased to have any r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners are holding the moneys as a mere custodian and on the fulfilment of the condition become a trustee for the depositors. At this juncture, learned Government advocate for Taxes, Mr. R. Lokapriya, invited the attention of this Court to the decision reported in Abdul Quader Co. vs. STO (1964) 15 STC 403 (SC), which also lays down that any amount collected by way of tax by any person otherwise than in accordance with the provisions of the Act, must be paid over to the Government and in default of such payment, the said amount would be recovered from such person as if it were arrears of land revenue. The said decision is also an authority for the proposition that if a dealer has collected anything from a purchaser which is not authorised by the taxing law, that is a matter between him and the purchaser, and the purchaser may be entitled to recover the amount from the dealer and that if the money so collected is not due as a tax, then the State cannot by law make it recoverable simply because it has been wrongly collected by the dealer. As already stated, in the instant case before us, the money has been collected by way of deposit by the petitioners to meet the contingency if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g receipt in the hands of the assessee. Therefore, this ground is allowed. 29. The next grievance in assessee's appeal is that the CIT(A) erred in upholding the addition of Rs.9,442 representing unclaimed balances in the account of sundry creditors being suppliers/customers, etc., unilaterally written back by the company in its P L account of the relevant previous year. Connected with this ground is upholding of addition of Rs. 4,533 being unclaimed wages/bonus unilaterally written back by the company in its P L account of the relevant previous year. We find that this issue came up for consideration before the Tribunal in assessee's own case in ITA No. 5707/Del/87 for asst. yr. 1984-85, where the Tribunal vide its order dt.28th Feb., 1991observed as under: "9. We have considered the rival submissions. We find that these unclaimed balances in the same form were the subject-matters of appeal before the Tribunal. The Tribunal following the decision of the Bombay High Court in the case of CIT vs. Batliboi Co. Pvt. Ltd. (1984) 41 CTR (Bom) 388 : (1984) 149 ITR 604 (Bom) held that the amount representing advance received in excess are taxable whereas the amount already charged to P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at by the interim order the Hon'ble Delhi High Court has given a direction to pay maintenance charges and cooling facility charges, therefore, whatever amount has been actually paid in this year is an allowable deduction. Keeping in view the finding given by the Tribunal a sum of Rs. 75,623 will be disallowed and the amoutns of Rs. 36,937 and Rs. 37,500 paid in accordance with the directions of the Hon'ble Delhi High Court towards the office maintenance charges and cooling facility charges are allowed as deduction. We, therefore, modify the order of the CIT(A) to this extent and direct the Assessing Officer to allow the same in accordance with the direction of the Hon'ble Delhi High Court. This ground is partly allowed. 31. The next grievance in assessee's appeal is that the CIT(A) erred in upholding the disallowance of extra shift depreciation of Rs. 8,604 under s. 32(1) of the IT Act, in respect of the three welding transformers acquired and installed at the company's cement factory at Dalmiapuram. In the cement factory three transformers at an aggregate cost of Rs. 45,891 were acquired by the company and installed in the workshop in the cement factory and claimed ESA depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's appeal relates to charging of interest under s. 216 of the IT Act. The IAC (Asst.) charged interest under s. 216 of the IT Act amounting to Rs. 6,11,667 which is being agitated by the assessee before us. The assessee-company paid advance tax in respect of asst. yr. 1985-86 as follows: Date of filing estimate Income estimated Advance tax instalment as per estimate (net of TDS) Date of payment of advance tax Amount of payment of advance tax Remarks . Rs./Lakhs Rs . Rs . 11.6.1984 60.00 6,17,000 12.6.84 6,17,000 . 13.9.1984 100.00 12,82,000 13.9.84 12,82,000 . . . . 13.9.84 6,65,000 Relates to shortfall in 1st Instalment . . . 10.12.84 12,82,000 . 14.1.1985 369.00 59,31,667 15.1.85 70,59,279 (i) paid to meet shortfall in instalments due in Sept., 84 and Dec. 84. . . . . . (ii) Further request made for adjustment of refund under s. 141A for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-company for 12 months only. He also did not agree with the assessee that the installation of plant atSalemwas in the mind of the assessee while filing the estimate in the months of Sept. and Dec., 1984. Thus, he held that the estimate filed by the assessee was not bona fide. 36. Before the CIT(A) the assessee made following points in nutshell: (1) The estimate filed in June, 1984 was based on the current trend of profits and expected installation and commissioning of the Magnesite Beneficiation plant at Salem Works of the company and the Stacker Reclaimer Plant in Dalmiapuram Works of the company which would have entitled the company to substantial deduction on account of depreciation and investment allowance to the extent of Rs. 10 crores. (2) The second estimate furnished in Sept., 1984 was at a higher figure of income because the cement retention price of levy cement was raised w.e.f.18th July, 1984by Rs. 40 per M.T. (3) The Dec., 1984 instalment of advance-tax was also paid on the basis of Sept., 1984 estimate as the order of the ITO permitting change in the accounting year had not been issued uptil Dec., 1984 rather it was received on 31st Dec., 1984. Consequent upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest subject to the fact that such adjustment has been made before the instalment has become due. However, he upheld the levy of interest under s. 216 on the company to the extent of Rs. 4,35,185 for the reasons given in his order at paragraph 59.8 and 59.9, holding that the company had not produced evidence regarding the basis on which it had framed its estimate of advance tax payable in the first instalment, that the technical note referred to by the company indicated that it was in a position to know that the Magnesite Beneficiation plant at Salem and the Stacker Reclaimer Plant at Dalmiapuram were not in a position to be installed and commissioned during the relevant previous year and that it was inconceivable that during the last three months period in the extended previous year of 15 months the company could have a profit to the extent of Rs. 3 crores, representing the difference between the higher estimate of advance tax furnished by it in the last instalment and the estimates of advance tax furnished by it in the first two instalments. 37. The learned counsel for the assessee very vehemently argued that the CIT(A) had failed to appreciate the factual background in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of the equipment was expected to be commenced in May, 1984 and completed by Aug., 1984. Therefore, it was reasonably expected that the plant would be completed and commissioned before31st Dec., 1984and in any event, beforethe 31st March, 1985. However, the indigenous supplier of the equipment unexpectedly fell behind schedule which became clear to the company in March, 1985 that it would not be possible to complete the erection and commissioning of the Stacker Reclaimer Plant by the end of March, 1985. Therefore, the company furnished a revised estimate in March, 1985 in which deduction on account of depreciation and investment allowance in respect of Stacker Reclaimer Plant was dropped. In view of these facts, the company was under bona fide belief and thus furnished two estimates of advance tax and not revised it upward in Dec., 1984. Reliance was placed on the following decisions: (1) Hind Products Pvt. Ltd. vs. CIT (1979) 12 CTR (Bom) 40 : (1980) 121 ITR 903 (Bom) (2) CIT vs. Elgin Mills Co. Ltd. (1980) 123 ITR 712 (All) As against this, the learned Departmental Representative relied on the order of the CIT(A). 38. We have considered the rival submissions and have go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sarily make the estimate, with regard to income an untrue income. Whether, a person had knowingly filed a false estimate or he had reason to believe that the estimate is untrue in a question which has to be determined on the material appearing in each case. But once the assessee has produced on record the material on which he has based his estimate, then the burden will be on the Revenue to show as to why a finding must be recorded in its favour that the estimate was untrue or that the assessee had reason to believe that the estimate was untrue. The time with reference to which the knowledge of the assessee of his belief that the estimate was being filed correctly is the point of time when the same is filed. Subsequent events may not have much to do with the knowledge of the assessee at the time of filing of the estimate unless it is possible to say that the subsequent event which resulted in profits were such that they could be reasonably foreseen by the assessee." A perusal of the ratio laid down by the Hon'ble Allahabad High Court and Hon'ble Bombay High Court would go to show that the question whether there was justification to make estimate or whether it was an underestimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the estimate filed by the assessee in Jan., 1985 after dropping deduction on account of depreciation and investment allowance in relation to Magnesite Beneficiation Plant project at Salem and revised estimate of advance tax filed in March, 1985 dropping the deduction on account of depreciation and investment allowance in respect of Stacker Reclaimer Plant project at Dalmiapuram was bona fide reason for framing the estimate of advance tax in Sept., 1984 and not revising upwards in Dec., 1984. The CIT(A) on the basis of internal note dt.23rd July, 1985reproduced in his order at paragraph 59.7, held that the claim of the assessee is not bona fide, overlooking the fact that this note was prepared in July, 1985 subsequent to the happening which had already taken place and it gives narration of that. As per the ratio laid down by the Hon'ble High Courts cited above, we have to see the bona fide of the assessee at the time of furnishing of estimate of advance tax. If the basis is proper and justification shown is reasonable, it cannot be said that it is an underestimate. In view of our above discussion, we are of the opinion that estimate furnished by the assessee was reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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