TMI Blog2001 (3) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... 43B, disallowance of Rs. 2,86,070 being depreciation on R D assets, sustained the addition of Rs. 8,889 under s. 40A(2)(b) and disallowance of Rs. 97,350 and Rs. 30,000 out of public relation expenses, and staff welfare expenses respectively. 5. We have heard the arguments of both the sides and also perused the record and have also gone through the written submission furnished by the learned authorised representative of assessee. 5.1. First we take up ITA No. 1546/Jp/1995 being Revenue's appeal for asst. yr. 1992-93. The sole ground raised by Revenue disputes the deletion of disallowances under s. 43B, the learned Departmental Representative of Revenue has contended that the AO had rightly disallowed the deductions in respect of contributions by the assessee-employer in respect of P.F., EPF, DLI and DSI, etc. as the same were made beyond due date. He has contended that the due date in respect of ESI contribution was 21st of next month while the due date in respect of other contributions was 15th of next month. He has contended that the omission of the words "during the previous year", from second proviso w.e.f. 1st April, 1989, the rigour has become more effective. He has thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Employees P.F. Scheme and the relevant Act. Similarly (1997) 63 ITD 182 (Mumbai) is also supportive of the assessee in this respect. No contrary decision has been cited by the other side. Considering the legal position as emanating from the above cited decisions and also considering the facts and circumstances of the case including the fact that the payments have been made within the accounting year we find no fault with the impugned order of the learned CIT(A) in deleting the disallowances made by AO. We, therefore, decline to interfere with the same. 7. Now we take up ITA No. 1561/Jp/1995 for asst. yr. 1992-93. Ground No. 1 disputes the disallowance of Rs. 6 lacs under s. 43B on account of unpaid bottling fees. The learned authorised representative of assessee has contended that it was not the fees as contemplated under s. 43B(a). He has contended that in order that it should be a fee, there should have been a character of tax or duty etc. He has cited CIT vs. Varas International (P) Ltd. (1997) 142 CTR (Cal) 369 : (1997) 225 ITR 831 (Cal) and Udaipur Distillery Co. Ltd. vs. Dy. CIT 21 Tax World 805 (Jp). It has been contended in the written submission of the learned au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porting in para 29 wherein Tribunal Delhi has observed that "there is no suggestion in the Supreme Court judgment that furnishing of bank guarantee by paying full amount of duty does not amount to payment of duty". As such the said citation is distinguishable on facts. It has also been held by Tribunal, Delhi in the aforesaid case of Nuchem Plastic Ltd. vs. Dy. CIT that the fact that interest on FDRs pledged with bank was assessed in assessee's hand does not militate against the view that the expression 'actually paid' used in s. 43B stood satisfied when assessee paid money to bank for bank guarantee. In Tribunal, Jaipur has also held that furnishing of bank guarantee for the unpaid amount of customs duty in compliance of the order of the Hon'ble Supreme Court has to be treated as amount actually paid under s. 43B. As such considering all the facts and circumstances of the case as also the legal position emanating from the above quoted judicial pronouncement, we are of the view that the unpaid amount of bottling fee has, on furnishing of the bank guarantee, to be treated as actual payment and accordingly the deduction in respect of the same is allowable and cannot be denied under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be available. 10. We have considered the rival contentions, the material on record as also the cited decision. From the perusal of depreciation chart, placed on pp. 47 and 48 of paper book we find that these assets have been included in the block of assets and the depreciation of Rs. 3,45,401 in respect of building is mentioned in the above chart under the Head B. 'Building' at serial No. 9, column Nos. 6 and 8. Similarly the depreciation of Rs. 7,416 in respect of plant and machinery as mentioned in the chart under the Head C-last item in column 6 and 8, and depreciation of Rs. 5,280 in respect of laboratory equipment under the Head 'H'-Laboratory in column No. 6 and 8. The amendment regarding depreciation which became operative w.e.f. 1st April, 1988 is applicable to the asst. yr. 1988-89 onwards and so the same will apply to asst. yr. 1992-93 involved in this appeal also. This amendment has introduced the concept of "block of assets" as contained in s. 32(1)(ii). Again s. 43(6)(c) speaks of the W.D.V. of block of assets. The term block of assets has been defined in s. 2(11). As seen above the R D asset, has neither been closed nor discarded as yet and the same is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentative of Revenue has contended that the order of AO is quite elaborate. He has also referred to para 3 on p. 3 of CIT(A)'s order. He has relied on the orders of the authorities below. 12. We have considered the rival contentions, the material on record as also the cited decisions. In (1975) 100 ITR 155 (All) the Hon'ble Allahabad High Court has held as under: "Replacement of worn out parts does not by itself bring in a new asset. In considering the nature of an expenditure one should consider the productive unit as a whole and not pick out parts therein which are new. If the productive unit to the assessee remains the same but a part of it which has become unsuitable for its use is replaced by something which makes it possible for the existing set up to function efficiently the cost incurred on such replacement would be revenue expenditure." In CIT vs. Bharat Cinema (1980) 15 CTR (P H) 283 : (1980) 121 ITR 165 (P H) the expenditure incurred on repairs/replacement of false ceiling in cinema building was treated as revenue expenditure. In CIT vs. Eagle Theatres (1985) 48 CTR (Del) 226 : (1987) 165 ITR 93 (Del) expenditure on replacement of electric wiring in cinema buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of Rs. 2,86,070 on research and development assets. The learned authorised representative of assessee has contended that this ground is common with the assessee's appeal No. 1561/Jp/1995 for asst. yr. 1992-93. He has contended that the chart of depreciation has been furnished on pp. 33 to 35 of paper book. In the written statement of learned authorised representative of assessee furnished before CIT(A) (pp 1 and 2 of paper book of assessee) it has been contended that the company has not closed down R D division and it has got complete establishment at its disposal to keep the entire assets in working condition. As against this the learned Departmental Representative of Revenue has reiterated his same arguments as raised by him on similar issue in ITA No. 1561/Jp/1995 discussed by us above. 16. We have considered the rival contentions as also the material placed on record. From the perusal of the record we find that these R D assets and their depreciation stand included in the block of assets as is evident from the chart of depreciation placed on pp. 33 to 35 of paper book of assessee. As we have already decided a similar issue above in ITA No. 1561/Jp/1995 and the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decidendi of the Hon'ble Supreme Court decision in CIT vs. Shoorji Vallabhdas Co. The Tribunal has held that the sale by the assessee to M/s Sona Distilleries Ltd. at cost price is based on business expediency and that the assessee was also purchasing some material from the said company at cost price and that to effect economy during the year making bulk purchases in a combined way the Tribunal has deleted such addition in the aforesaid judgment. We respectfully follow the aforesaid judgment and accordingly delete the addition. 19. Ground No. 4 disputes the disallowance of Rs. 97,350 out of public relation expenses, expenditure of Rs. 30,000 out of staff welfare expenses and treating both the amounts aggregating to Rs. 1,27,350 as an entertainment expenses as against Rs. 50,020 pointed by the auditors. The learned authorised representative of assessee has contended that the AO has treated the total amount of public relation expenses being Rs. 97,350 as entertainment expenses. He has contended that the details of these expenses have been given on pp. 53 to 57 of paper book He has contended that the AO has treated a sum of Rs. 30,000 out of staff welfare expenses to be entertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s placed on pp. 53 to 57 of assessee's paper book reveal that a sum of Rs. 45,501 is shown to have been spent on liquor and Rs. 2,438 on gifts. The plea of assessee in M/s furnished before CIT(A) has been that the company has to distribute free samples of liquor and sometimes the bottles are given by way of gift, and so it should be considered as discount in the sale and not as an entertainment expenses. It has also been contended therein that the gift expenses are Rs. 2,438 and these are in the shape of discount to the customers and not to the public at large and by these gifts there is no entertainment to anybody. It has been contended that the expenses are towards gift of small items along with sale of liquor bottles. The above two amounts aggregate to Rs. 47,939 (Rs. 45,501 + 2,438). The above aggregate leaves the balance of about Rs. 49,411. As such considering all the fact and circumstances of the case we are of the view that out of total public relation expenses of Rs. 97,350 a sum of Rs. 50,000 may on estimate basis, be reasonably treated as entertainment expenses. 21. Thus, in our view a total sum of Rs. 80,000 (Rs. 30,000 + Rs. 50,000) should be treated as entertainment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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