TMI Blog2003 (7) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... n31st July, 1988. On an application by the assessee, the AO allowed time upto31st Aug., 1988, for filing the return of income. As the audit of the accounts could not be completed, the assessee again moved an application for extension of time for filing the return upto30th Sept., 1988. However, the same was rejected by the AO. The assessee filed its return of income on29th Sept., 1988. The AO, therefore, invoking the provisions of s. 80 of the Act held that as the return of income was not filed within time allowed under s. 139(1) or within the time allowed by him, the determined loss will not be allowed to be carried forward and set off against the income of the subsequent years. On appeal, the CIT(A) upheld the findings of the AO against which the assessee is in appeal before us. 6. It is argued by the learned CIT that the AO/CIT(A) were legally wrong in denying the claim of the assessee. It was stated that prior to 1st April, 1989, s. 80 provided that no loss which has not been determined in pursuance of a return filed within the time allowed under s. 139(1) or within such further time as may be allowed shall be carried forward and set off against the income of the subsequent ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowing the deduction on account of net refund of excise duty but also in withdrawing the deduction allowed by the AO. 9. Briefly, the facts of the case are that the assessee is the manufacturer of various items which were subject to Central excise duty. The assessee claimed that one item, namely, prescol glue manufactured by it was covered under tariff item 68 of the Central excise tariff on which a particular rate of excise duty was leviable. However, the Asstt. Collector of Central Excise held that this item manufactured by the assessee was covered under item 15-A on which the higher rate of excise duty was leviable. The assessee filed a writ petition before the High Court of Delhi on24th Oct., 1978. The High Court directed the assessee to clear the goods by furnishing bank guarantee to the Central Excise Department every month of the extra amount which was leviable on the assessee due to such classification. The assessee followed the same and started clearing the goods by furnishing the requisite bank guarantee in favour of the Central Excise Department. 10. The assessee also preferred an appeal before the Collector(Appeals) of Central Excise who accepted the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a case of refund. It was only a case of release of bank guarantee. It was also stated that merely because assessee has credited the amount to its P L a/c, it will not make the same as the income of the assessee. While relying on the decision Chief CIT vs. Kesaria Tea Co. Ltd. (2002) 173 CTR (SC) 394 : (2002) 254 ITR 434 (SC), Polyflex (India) (P) Ltd. vs. CIT (2002) 177 CTR (SC) 93 : (2002) 257 ITR 343 (SC), CIT vs. Polyflex (India) (P) Ltd. (2001) 171 CTR (Kar) 419 : (2001) 251 ITR 527 (Kar), CIT vs. Smithkline Beecham Consumer Brands Ltd. (1997) 143 CTR (P H) 167 : (1997) 226 ITR 764 (P H), Union of India Anr. vs. J.K. Synthetics Ltd. (1993) 199 ITR 14 (SC), the learned counsel stated that the entries in the books of account were not decisive factor in coming to the conclusion whether the particular amount was taxable or not. Learned counsel further stated that there was no cessation of liability in the year under consideration. As mentioned earlier, the Collector, Central Excise, had accepted the claim of the assessee but the said decision was not acceptable to the Central Excise Department against which the appeal was preferred before the CEGAT. Thus, no finality has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the assessee, the assessee had challenged the same before the Hon ble Supreme Court, the same was still pending. During the pendency of the appeal before the Hon ble Supreme Court, the assessee thought it fit to offer the same for taxation and ultimately the same was also offered for taxation under KVSS. A copy of the order issued by the Collector, Central Excise is also on record. Under these circumstances, we hold that as there was no cessation of liability, the provisions of s. 41(1) of the Act were not applicable. We also hold that sustaining any addition in the year under consideration, will amount to double taxation as the same has already been taxed by the Department in the asst. yr. 1998-99. Under these circumstances, the addition sustained by the CIT(A) is not justified and the same is deleted. This ground of appeal is allowed. 13. Ground No. 4 raised by the assessee is against not allowing depreciation on pro rata basis for a period of 15 months. 14. As mentioned earlier, the assessee s accounting period was calendar year which consisted of 12 months. However, on an application made by the assessee, the AO granted permission to change the previous year endin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the previous year, the AO has inter alia, put a condition that the depreciation will be allowable on pro rata basis for 15 months, but if such direction was against the provisions of law, the same could not be binding on the AO. We find that prior to2nd April, 1987, there was a proviso under r. 5(1) of the IT Rules, 1962. This proviso provided that the depreciation will be allowed on pro rata basis. However, such proviso was omitted w.e.f.2nd April, 1987. Consequently, in the year under consideration, no such pro rata depreciation was allowable to the assessee. As regards, learned counsel s observations to the effect that the insertion of Schedule was only procedural, does not find force, the law maker did not provide any such concession on or after 2nd April, 1987. Under these circumstances, we hold that the CIT(A) has rightly upheld the findings of the AO to the effect that depreciation for the period of 12 months, only was allowable to the assessee. This ground of appeal raised by the assessee is, therefore, dismissed. 17. Ground No. 5 raised by the assessee is against the finding of the CIT(A) to the effect that the assessee was entitled to depreciation on mould @ 33.33 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO held the entire amount as entertainment expenditure and disallowed the same. On appeal, the CIT(A) also upheld the findings against which the assessee is in appeal before us. 22. It is argued by the learned counsel that the expenditure in purchase of crockery does not involve any entertainment expenditure. This expenditure related to publicity for moulding power from which the crockery is manufactured. The expenses relate to the gift items whose value was less than Rs. 50. While relying on the decisions of Hon ble Delhi High Court in CIT vs. Associated India Exports (1992) 107 CTR (Del) 170 : (1991) 188 ITR 125 (Del) and CIT vs. Modi Spinning Weaving Mills Co. Ltd. (1993) 202 ITR 708 (Del), the learned counsel stated that where the gifted items do not maintain any logo of the assessee and the value of each item was below the prescribed price, no disallowance under r. 6B was warranted. The learned counsel also relied on the decision of Hon ble Bombay High Court in the case of CIT vs. Allana Sons (P) Ltd. (1993) 114 CTR (Bom) 448 : (1995) 216 ITR 690 (Bom). In nutshell, the learned counsel pleaded that the disallowance made by the AO was not justified. On the other hand, learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verify the facts and in case the payment has been made within the grace period, he will allow deduction of the same. This ground of appeal is decided with above directions. 27. Ground of appeal Nos. 10, 11 and 12 have not been pressed, hence the same are dismissed. 28. Ground No. 13 related to the disallowance out of motor car expenses. The assessee is a company and there cannot be any disallowance on account of personal user of the car in the case of a company. The issue is squarely covered in favour of the assessee by the decision of the Delhi Bench of the Tribunal reported in Dy. CIT vs. Haryana Oxygen Ltd. (2001) 73 TTJ (Del) 575 : (2001) 76 ITD 32 (Del). Concurring with the same, we hold that the disallowance sustained by the CIT(A) is not justified and the same is deleted. 29. Ground No. 14 related to the disallowance out of miscellaneous expenses. When the AO had disallowed a sum of Rs. 50,000 on ad hoc basis without pointing out any specific reasons, the appeal was filed. The CIT(A) also confirmed the same against which the assessee is in appeal before us. 30. We find that the similar disallowance was made by the AO which was adjudicated by the Tribunal in the asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. Keeping these facts in view, the disallowance of Rs. 1,50,000 out of Rs. 1,69,470 cannot be said to be reasonable. We, therefore, restrict the disallowance to Rs. 50,000 and delete the addition of the balance amount. The assessee gets partial relief in this ground of appeal. 37. Ground No. 19 has not been pressed, hence the same is dismissed. 38. The appeal filed by the assessee is partly allowed. 39. Now, we will take up the appeal directed by the Revenue. 40. In ground No. (a), the Revenue has challenged the deletion of the addition of Rs. 30,34,414 on account of excise duty refund credited to P L a/c on accrual basis. 41. Briefly, the facts of the case are that on the basis of the Hon ble Supreme Court decision in some other cases relating to the levy of Central excise, the assessee made a claim of refund of Rs. 30,34,414 before the Central excise authorities. However, the same was not received by the assessee on the ground that it was prematured. During the course of assessment proceedings, the AO held that such amount has accrued to the assessee and as it was following mercantile system of accounting, it could have offered the same for taxation. The actual receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the asst. yrs. 1982-83, 1984-85, 1985-86 and 1986-87. The Revenue is in appeal before us against the findings of the CIT(A). 47. After hearing the rival submissions, we find no force in the ground raised by the Revenue. As the issue is covered by the order of the Tribunal in the earlier years, we dismiss the ground of appeal raised by the Revenue. 48. In ground No. (d), the Revenue has challenged the decision of the addition of Rs. 82,272 made by the AO under s. 36(1)(iii) for not charging interest on advance given to (sic) consultants and Novica Investment. 49. The AO noted that the advances to these two concerns have been made out of interest-bearing borrowed funds. As no interest was charged on such advances, the AO calculated interest on such advances at Rs. 82,272 and disallowed the same out of interest payable by the assessee. On appeal, the CIT(A) deleted the addition by observing that the AO has failed to prove the nexus between the borrowings of the funds on interest and advancing the same to sister-concerns without interest. Though, he observed that the assessee has failed to prove that there was any business dealing with these two concerns, but he dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Arun Brar, director, has visitedJapanfor exploring technical collaboration for manufacturing of injection, moulding machine and other items. The AO held that the expenditure of Rs. 63,141 incurred on theJapanvisit of Shri Arun Brar was capital in nature and not allowable. On appeal, the same was allowed by the CIT(A) against which the Revenue is in appeal before us. 56. We have heard the rival submissions. We find that the assessee was already manufacturing and dealing with the same product for which Shri Arun Brar has visited abroad. During his visit, he explored the possibility of technical collaboration for manufacturing of similar items. Any expenditure for modernization or upgradation of the technology of the existing product cannot be said to be capital expenditure. It is settled law that where an expenditure is incurred for setting up of a new factory or a new line of business, such expenditure will be capital expenditure. But where the expenditure is incurred for keeping oneself abreast of the latest technique of his business or for foreign collaboration it has to be held as revenue expenditure. Our views find support from the decision reported in CIT vs. S. Krishna R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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