TMI Blog2002 (4) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1 of s. 9 of the Metal Corporation (Nationalisation and Miscellaneous provisions) Ordinance, 1976 (No. 12 of 1976), the Central Government being satisfied that Hindustan Zinc Ltd., a Government company, is willing to comply with such terms and conditions as the Central Government may think fit to impose, hereby directs that the undertaking of Metal Corporation and the right, title, and interest of the Metal Corporation in relation to its undertaking which are vested in the Central Government under sub-s. (1) of s. 7 of the ordinance aforesaid shall instead of continuing to vest in the Central Government vest in Hindustan Zinc Ltd. on the 3rd day of August, 1976." The appellant-company had to pay an amount of Rs. 122.79 lakhs under the said notification on account of deprivation of management of the undertaking of Metal Corporation of India for the period 10th Jan., 1966 to 1st Aug., 1976, and a further amount of Rs. 198 lakhs for the acquisition of the undertaking w.e.f. 2nd Aug., 1976. The appellant-company was directed to charge the amount payable for deprivation of management of the undertaking to revenue expenditure as the appellant-company has been appointed administrator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough special legislation, viz. The Metal Corporation of India (Acquisition of Undertaking) Act, 1965 w.e.f. 22nd Oct., 1965. (b) Holdings of the acquired company comprised: (i) Zawar Mines in Rajasthan. (ii) Lead Plant at Tundoo (Bihar), including Delhi Calcutta Office. (iii) Zinc Smelter under construction at Dabari (Rajasthan). (c) To own and manage the said undertaking, the Government in terms of s. 12 of the Companies Act, 1956, formed the appellant-company. (d) Having a separate entity even after the acquisition of its undertaking, M/s Metal Corporation of India challenged the validity of the MCI Act, 1965 before the Punjab High Court, holding it to be violative of Art. 31(2) of the Constitution. The Supreme Court upheld this view. (e) Following this decision of the apex Court, a fresh Ordinance was issued on 12th Sept., 1966 repealing the MCI Act, 1965. This was later replaced by an Act of Parliament, the Metal Corporation of India (Acquisition of Undertaking) Act, 1966. (f) After the passing of the said Act, an offer of compensation was made to Metal Corporation of India Ltd. The company rejected the offer, also challenging the vires of the 1966 Act. (g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) from 22nd Oct., 1965 to 9th Jan., 1966, and the appellant, Hindustan Zinc Ltd. from 10th Jan., 1966 to 2nd Aug., 1976 vide Government notification. (n) During this period of appointment, the appellant put assets of MCI to use in its business activity and earned profit/losses thereupon. These have been accounted for in books of account and tax paid wherever payable thereon. Both the authorities below, it is submitted, have failed to correctly appreciate the factual position in this matter. It is also submitted, that case laws as relied upon by the AO are clearly distinguishable on facts. In the Assam Bengal Cement case, the issue before the Hon ble Supreme Court was regarding acquisition of lease rights which certainly were acquired as capital assets. In the aforementioned case of Regent Oil Company, the House of Lords adjudicated upon payments made to secure exclusive sales stations. Such acquisition was held to be a permanent asset therein. Facts therefore, do not harmonise with those of the appellant. The AO has referred to approval of principles laid down in the case of Sun Newspapers Ltd. There is no dispute in the broad principles laid down in the said judgment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental Representative relied upon the orders of authorities below. 5. We have considered the rival submissions. As laid down in s. 10 and 11 of the 1976 Act, the Metal Corporation was paid Rs. 320 lakhs as compensation by the Central Government for acquiring the undertaking, as per the following details: (i) For the deprivation of the management of Metal Corporation of India from 22.10.1965 to 2.8.1976 @ Rs. 11.39 lakhs per annum 122.790 (ii) For the acquisition of the undertaking of Metal Corporation of India 198.000 (Rupees in lakhs) 320.790 The AO and the CIT(A) held that the deprivation charges paid by the appellant for taking over the management of the Metal Corporation of India Ltd. was in the nature of capital expenditure. The CIT(A) has also directed the AO to allow depreciation as per rules. The AO had relied upon the judgments of Assam Bengal Cement Co. vs. CIT, Regent Oil Co. Ltd. vs. Stricks and Sun Newspapers Ltd. vs. Federal, Commr. of Income-tax. The learned Authorised Representative has successfully distinguished the facts of these cases and we agree with him that the facts of these cases do not synchronise with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y fixed sum agreed between the parties as part of the purchase price of the undertaking. It was held that the payment of percentage was in the nature of a revenue expenditure and not capital expenditure. After having perused the facts of the case and various case laws on the subject we hold that the total deprivation charges of Rs. 122.79 lakhs @ 11.39 lakhs per annum was in the nature of revenue expenditure as the appellant had taken over the business and management of Metal Corporation of India during the period of litigation before final acquisition for which payment of Rs. 198 lakhs had separately been paid. However we find that the AO has not examined this issue from this angle, that, to treat these expenses as revenue expenses. Therefore, we restore this issue to the AO for fresh consideration and re-adjudication and he is directed to take into account the following factors while deciding this issue afresh; (1) The whole of the deprivation charges should be allowed during the year under appeal if the same had been quantified or determined during the year under consideration i.e. asst. yr. 1977-78. (2) In case these expenses had not been quantified during the asst. yr. 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel that fees paid for legal opinion will not fall within the ambit of s. 80VV and it has to be allowed under the provisions of s. 37(1) being an expenditure incurred wholly and exclusively for the purpose of business. Therefore, we set aside the orders of the AO and the CIT(A) on this issue and we direct the AO to allow the deduction for Rs. 39,250 to the appellant. 11. Ground No. 1(iii) relates to interest receivable and not provided for by the assessee in the books of account. The observations of the AO on this issue are at p. 18 para 15 of the assessment order and those of the CIT(A) at p. 4 para 4 of the order. 12. The facts of the case are that the appellant-company has a policy of charging interest on late payment from customers. The appellant-company has started showing interest on receipt basis instead of on accrual basis. The AO is of the opinion that this should be assessed on accrual basis as there cannot be departure in respect of a particular item of expenditure. On the other hand, the CIT(A) had confirmed the order of the AO on the ground that the appellant could not prove that the principal or the interest thereon was irrecoverable. 13. The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. vs. CIT Anr. (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC). The appellant has raised the following additional grounds before the CIT(A). 20.1 Ground No. 3(i): This ground pertains to a claim for deduction of an amount additionally claimed by the Rajasthan State Electricity Board. This matter was put forth as an additional ground before the learned CIT(A), who had discussed this issue at p. 6 para 8 of the order, and refused to consider the assessee s claim because the issue had not been raised during the assessment. 20.2 Ground No. 3(ii): Another additional ground raised before the CIT(A) was for the non-allowance of bad debts written off. 20.3 Ground. No. 3(iii): This ground is regarding plant building for higher depreciation. 20.4 All the additional grounds raised before the CIT(A) had not been admitted by him on the ground that these issues had not been raised during assessment proceedings. We agree with the view of the learned counsel that the power of the CIT(A) is co-terminus with that of the ITO. 21. We have heard the rival submissions. We find that this issue has already been decided by this bench of the Tribunal in ITA No. 706/Jp/1990 for asst. yr. 1978-79 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
