TMI Blog1998 (5) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting year of the assessee for the assessment year 1987-88 ended on 30th June, 1986. The Assessing Officer added a sum of Rs. 44,58,044 being the difference between provision made for customs duty and the amount actually payable by the assessee as per the judgment of the Supreme Court. But the CIT(Appeals) vide his order dated 21-11-1988 had held that the judgment of the Supreme Court did not have the effect of cancelling the levy and deleted the addition for the assessment year 1985-86. The A.O. again included the said amount of Rs. 44,58,044 in the assessee's total income for the asst. year under consideration, i.e., 1987-88 because the Government had issued a notification on 19-12-1985 and abolished the auxiliary duty and fixed the import duty at Rs. 550 per metric ton only. The A.O. further noticed that the Central Board of Excise and Customs (CBEC for short) had issued a circular dated 10-2-1986 intimating that the effective rate of customs duty would be Rs. 550 only from 1-3-1981 to 18-12-1985, and this notification has the effect of cancelling the auxiliary duty. The A.O. considered that as a result of the Supreme Court's judgment and notification of the Government date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thereafter a notification was issued on 19-12-1985 by the Government of India determine the duty at Rs. 850 per MT. A Departmental Circular to this effect was issued by the CBEC on 10-2-1986 stating that the customs duty in respect of imported newsprint would be Rs. 550 per MT for period 1-3-1981 to 18-12-1985, It is stated by the ld. counsel that no notification cancelling customs duty was issued. It is argued that notification dated 19-12-1985 merely laid down the basis of the levy of customs duty on imported newsprint. After the issue of the said notification, a demand notice on the basis of the revised rate was issued by the Customs Department on 13-10-1988 and in pursuance of such demand notice, the assessee remitted a sum of Rs. 89,99,979 on 12-2-1987 and also a sum of Rs. 2,33,589 was paid on 21-4-1987 in compliance with a further demand notice. It is submitted by the ld. counsel for the assessee that the assessee had written back a sum of Rs. 71,54,172 in its accounts relevant to the asst. year 1989-90 and after adjusting the earlier disallowance under sec. 43B, a net amount of Rs. 45,28,383 was offered for assessment in the asst. year 1989-90. The ld. counsel pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any of the petitioners is liable to pay any deficit amount by way of duty, such deficit amount shall be paid by such petitioner within four months from the date on which a notice of demand is served on such petitioner by the concerned authority. It is clear from the above order of the Supreme Court that the Government of India was directed to reconsider within six months the entire question of levy of customs duty and auxiliary duty on newsprint used for printing newspapers, periodicals, etc., with effect from 1-3-1981. Therefore, as on 6-12-1984 the liability of the assessee to pay customs duty, etc., has no ceased because the matter regarding payment of customs duty was to be considered by the Government. As a result of the directions of the Supreme Court, the Government of India has issued notification dated 19-12-1985 and the CBEC also issued a departmental circular on 10-2-1986 determining the customs duty in respect of imported newsprint. The relevant portion of the Notification dated 19-12-1985 and circular issued by CBEC dated 10-2-1986 are as follows : "Government of India, Ministry of Finance (Deptt. of Revenue) Notification dated 19-12-1985. in exercise of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of demand was issued by the Customs authority on 13-10-1986 is not correct. The Customs authority by issuing the notice of demand had given effect to the notification dated 19-12-1985 issued by the Government of India and Circular dated 10-2-1986 of CBEC. A notice of demand does not have the effect of cessation or remission of liability of the assessee. The liability of an assessee ceases only under Notification dated 19-12-1985 of the Government of India read with circular of the Customs Authority dated 10-2-1986. We are, therefore, of the opinion that the CIT(A) was justified in confirming the addition of Rs. 44,58,044 made to the total income of the assessee for the asst. year 1987-88 after making necessary adjustments regarding claim, if any, disallowed under sec. 43B earlier while determining the amount assessable. Therefore, the first ground raised by the assessee is dismissed. 7. We may mention here that the benefit in respect of cessation of customs liability by way of remission or cessation thereof has to be taxed in the asst. year 1987-88 because the assessee obtained the benefit in the accounting year relevant to the asst. year 1987-88 and if the assessee did not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding before the City Civil Court, Madras as C.S. No. 202 of 1990. It is further stated that Sri Mohandas, Proprietor of Kanmani Co. passed away and necessary application was filed before the High Court to implead his legal heirs to enable the assessee to proceed with the suit. It is stated that since the chances of recovery of the amount are bleak, the sum of Rs. 1,98,831 has rightly been claimed and is allowable as bad debt in computing the assessee's income for the year under appeal. The ld. Departmental Representative, on the other hand, strongly supported the orders of the authorities below and urged that since the hope of recovery of the amount due from the debtor has not yet been extinguished, the disallowance should be upheld. 12. We have considered the rival submissions and carefully perused the material on record. Under sec. 36(2) no deduction for bad debt is allowable unless such debt or part thereof had been taken into account in computing the assessee's income for the previous year in which the amount of such debt or part thereof is written off, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as business expenditure in computing the assessee's income. The ld. counsel relied on the decision of A-Bench of the Tribunal, Mumbai in the case of Traders (P.) Ltd. v. Dy. CIT [IT Appeal No. 6410 (Mum.) of 1990, dated 7-4-1997] (Assessment year 1983-84) and filed a copy of the said order, in support of his arguments. The ld. DR., on the other hand, supported the orders of the lower authorities and stated that contribution of Rs. 10 lakhs made by the assessee is a voluntary contribution and hence is only in the nature of donation and cannot be allowed under section 37 of the Act because, such a voluntary contribution cannot be stated to be wholly and exclusively for the purposes of the assessee. 15. We have considered the matter. The assessee has made contribution of Rs. 1 0 lakhs to B.D.G. Foundation, Madras (Foundation, for short). The objects of the Foundation are as under : "(i) Institute an Award in the name of late B.D. Goenka for excellence, enterprise, and innovation in journalism. (ii) Set up College and Training Centre for elementary, middle level and advanced training in journalism as well as for communication research. (iii) establish a media reference-cum-do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issible deduction, there must be a direct and intimate connection between the expenditure and the business, ie., between the expenditure and the character of the assessee as a trader, and not as owner of assets, even if they are assets of the business. 17. In the case of Voltas Ltd. v. CIT [1994] 207 ITR 47 (Bom.), the assessee claimed deduction for donations to the Tata Refugee Relief Project. The Hon'ble Mumbai High Court held that there was nothing to show any business expediency in making the payment of Rs. 75,000 to the Tata Refugee Relief Project. No nexus had been established by the assessee between the donation and its business. It was held that the amount was not deductible under sec. 37(1) of the Act. 18. Similarly in the case of Jaswant Trading Co. v. CIT [1995] 212 ITR 24 (Raj.) the assessee claimed deduction for donation to various institutions like Rotary Club, a sewa mandal, a trust and to the Chief Minister's Drought and Flood Relief Fund and claimed deduction of the same as business expenditure under section 37. The Tribunal found that since there was no scheme or provision for relief to the affected employees of the assessee due to floods, there was no nexus b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Hon'ble Supreme Court in the case of Travancore Titanium Products Ltd, Bombay High Court's decision in Voltas Ltd.'s case and in the case of Jaswant Trading Co. relied on by us in paras 16, 17 and 18 of this order, could not be considered by the Mumbai Bench of the Tribunal. We, therefore, with respect, differ from the view expressed by the Mumbai Bench of the Tribunal in the case of Traders (P.) Ltd., relied upon by the ld. counsel for the assessee. 21. The ld. counsel for the assessee also relied on the Supreme Court's decision in the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. v. CIT[1997] 223 ITR 101. In that case the assessee was carrying on business of exporting rice from the State of Andhra Pradesh. Rice could not be exported without the assessee's obtaining a permit from the District Collector. The permits were given only if payments were made to the A.P. Welfare Fund, West Godavari. In this context the Hon'ble Supreme Court held that the payment to such a fund which was openly made by all the millers and which fund was being used for public benefit could not be regarded as being opposed to public policy. It was further held by their Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The A.O. found that during 1984-85 the assessee had paid some amounts to one Industrial Commercial Services, another firm consisting the directors of the assessee-company as partners, towards wastage removal charges. Under an agreement the assessee had agreed to pay Rs. 50,000 per month towards maintenance and security charges. According to the A.O. it is the duty of the owner of the building NPBST to maintain the building and in fact NPBST is undertaking the maintenance and security service for Express Towers, Mumbai. The A.O. further noticed that though the agreement was entered into on 9-3-1985, no service charges have been provided for the period 9-3-1985 to 30-6-1985 in the assessment year 1986-87 and the entire services charges for the said period has been claimed only during the asst. year 1987-88. The A.O. thus came to the conclusion that an amount of Rs. 1,50,000 paid to NPBST as services charges for the period April to June 1985 did not pertain to the asst. year under consideration. According to the A.O. this arrangement of service and security charges is only an arrangement to benefit the directors in an indirect manner. According to the A.O. the amount claimed as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same time the assessee has given Rs. 12,00,000 to the service contractor at 6% interest which is very low. In our opinion the CIT(A) was justified in considering this factor for the purpose of considering the assessee's claim regarding reduction of service charges. The CIT(A) was also justified in excluding Rs. 60,000 out of the total amount of Rs. 6 lakhs on account of advance of Rs. 12 lakhs paid by the assessee at low rate of interest at 6% to the service contractor. We, therefore, hold that there is no infirmity in the action of the CIT(A) in this regard. As regard the sum of Rs. 1,50,000 the same is for the period 1st April to 30th June, 1985 and is not relevant for the asst. year 1987-88. Therefore, in our opinion, the CIT(A) was justified in working out the admissible deduction of Rs. 5,40,000 in para 10.2 of his appellate order. This ground raised by the assessee is therefore, rejected. 28. The sixth ground raised is regarding deduction in respect of sales-tax collections at Rs. 2,61,089. We find that this ground does not arise out of the order of the A.O. and therefore, it has to be dismissed as infructuous. 29. The last ground is regarding depreciation of Rs. 2,64,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
