TMI Blog2004 (6) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ( c ), Ground No. 18( a ) Ground No. 19, Ground No. 25, Ground No. 27( a ), Ground Nos. 29( c ) ( f ), and Item ( iii ) of Ground No. 30( a ). Therefore, the aforesaid grounds are dismissed. The remaining grounds in assessee s appeal are dealt with hereunder: Ground No. 3 : "That on the facts and in the circumstances of the case, the learned CIT(A) has erred in law in upholding the disallowance of Rs. 2,00,000 out of the expenses claimed under the head Gifts Presents." 1. The Assessing Officer disallowed Rs. 5,00,000 on estimate out of the total expenditure on Gifts Presents amounting to Rs. 10,73,994. The CIT(A) has discussed this issue vide paras 4.5 4.6 at pages 7 8 of his appellate order. 2. The Department is also in appeal vide Ground No. 1 in ITA No. 4807/D/92 for the assessment year under appeal. 3. The AR has fairly conceded that similar issue has been considered by the Appellate Tribunal in the Assessment Year 1986-87 by its order dated 10-1-2003 in assessee s appeal as well as in departmental appeal separately. The assessee s appeal as well as the departmental appeals have been dismissed in the Assessment Year 1986-87. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has relied on the order of the authorities below. 9. After hearing both the parties and perusing the information filed by the AR, we agree with the AR that the shortage is quite negligible. Hence, assessee deserves to succeed on this ground. The disallowance of Rs. 12.89 lakhs is deleted. Ground No. 6 : "That on the facts and in the circumstances of the case, the learned CIT(A) has erred in law in upholding the disallowance of Rs. 1,77,128 under section 38 of the I.T. Act, 1961." 10. The AR states that the Department is also in appeal vide Ground No. 28 in ITA No. 4807/D/92 for the assessment year under reference. The ground of appeal by the assessee is against treating the expenditure on rent etc. of premises hired for residential use of employees as perquisite for the purpose of disallowance under section 40A(5) of the Act. The Assessing Officer treated 75 per cent of the expenditure as disallowable under section 40A(5) whereas the CIT(Appeals) restricted the same to 50 per cent. 11. After hearing the rival parties we find that the issue under reference has been considered by the ITAT in earlier years. In the immediately preceding assessment year the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Book. 16. In the Assessment Year 1986-87 the CIT(Appeals) himself has deleted the 50 per cent disallowance made by the Assessing Officer out of retainership expenses. However, the Department s appeal before ITAT against deletion of 50 per cent of the retainership fee had been dismissed vide ITAT s order dated 10-1-2003 in ITA No. 5625/Del./91 vide paras 38 to 40 at page 6 of the appellate order. 17. The DR has relied on the Assessing Officer s order. 18. After hearing the rival parties and perusing the appellate orders with which we agree, we delete the disallowance of retainership fee of Rs. 60,000 paid to Mr. H.P. Agrawal. Similarly with regard to conveyance expenses paid to Mr. H.P. Agrawal the disallowance made by the Assessing Officer is deleted following the appellate order for the immediately preceding assessment year 1986-87 whereby vide Ground No. 6(b) and paras 34 to 36 at page 5 of the appellate order in assessee s own case in ITA No. 5623/D/91 the issue has been considered. Ground No. 8(b) : "That on the facts and in the circumstances of the case, the learned CIT(A) has erred in law in disallowing the following expenses out of expenses claimed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that by incurring the expenditure on decorative items, mattresses, etc. it did not derive any enduring advantage. He also relied on the Kerala High Court decision in CIT v. P. Veeriah [1995] 211 ITR 244. 24. The DR relied on orders of the authorities below. 25. We are in agreement with the assessee s counsel that cost of mattresses; wooden elephant pieces, payment to floweriest, etc. are not in the nature of capital expenditure, hence, the disallowance of Rs. 57,838 in respect of the aforementioned items is deleted. Ground No. 11 : "That on the facts, circumstances and legal position of the case, the learned CIT(A) has erred in law in holding that the proportionate expenditure in respect of "debenture issue expenses" attributable to investment of Rs. 7.10 crores is capital expenditure and would not qualify for deduction under section 37 of the Income-tax Act." 26. This ground is against the disallowance of Rs. 1,51,970 on account of debenture issue expenses. The CIT (A) has considered the issue vide para 14, page 30 of his order and following his appellate order for the Assessment Year 1986-87, he has directed the Assessing Officer to work out the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in the hands of the assessee as revenue receipts. 31. The DR has relied on the order of the CIT (Appeals). 32. After considering the rival submissions, we are of the opinion that the addition of Rs 2,29,327 made by the CIT (Appeals) is not called for and is deleted particularly keeping in view the Hon ble Supreme Court decision in Groz-Beckert Saboo Ltd s case ( supra ). Ground No. 13 : "That on the facts and in the circumstances of the case, the learned CIT(A) has erred in law in upholding the non-allowance of deduction admissible under section 80HHC of the Income-tax Act, 1961." 33. This ground is against non allowance of eligible deduction under section 80HHC of the Act. The AR submitted that admittedly the statutory reserve was created for Rs. 4 lakhs. Also a certificate in prescribed form was filed before the CIT (Appeals) in Form No. 10CCAB. The CIT (Appeals) has rejected the claim of the assessee on the ground that a prescribed certificate in Form No. 10CCAB had not been filed either along with the return of income or even at the time of hearing before the Assessing Officer. Therefore, the Assessing Officer was justified in disallowing the claim for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case, the learned CIT(A) has erred in law in disallowing Rs. 43,975 out of Rs. 63,020 being expenses incurred on Annual General Meeting and Extra Ordinary General Meeting of the Shareholders of the appellant company." 38. The similar issue came up for consideration in the immediately preceding assessment year 1986-87. This year the CIT(A) has disallowed the expenditure by following his own order for the assessment year 1986-87. The matter was considered in the assessment year 1986-87 by the Appellate Tribunal vide page 14, paras 72 to 74 of appellate order dated 10-1-2003 in appellant s own case where the similar expenditure incurred on Annual General Meeting has been held as deductible business expenditure on the ground that such meetings are held in compliance of the statutory requirements under the Company Law. It has been argued that the extraordinary general meeting is also held in compliance with the statutory requirements of the Company Law. Hence, the entire expenditure of Rs. 43,975 be allowed as admissible business deduction. 39. The DR has relied on the order of the CIT (Appeals). 40. Following the appellate order for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Ground of Appeal being Ground No. 20( c ) taken before him with regard to allowance of expenses attributable to employees participation out of entertainment expenses in view of Explanation 2 to section 37(2A) of the I.T. Act, 1961." 46. The assessee has contended that the expenditure incurred on entertainment was also towards employees participation and the reasonable proportion of such expense be allowed and excluded for the purpose of disallowance under section 37(2A) read with Explanation 2. The CIT (Appeals) has dismissed the claim on the ground that no details of employees participation in respect of entertainment expenses incurred were filed. 47. In this connection reliance has been placed on the jurisdictional High Court s decision in the case of CIT v. Expo Machinery Ltd. [1991] 190 ITR 576 (Delhi) wherein the High Court had held that in the case of composite expenditure it was necessary to resort to an estimate in ascertaining that part of the expenses incurred on food and beverages of employees which is excluded from the purview of section 37(2A) of the Act. It further held that 35% of the entertainment expenses allowed by the Appellate Tribunal towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court decision in the case of CIT v. British Bank of Middle East , [2001] 251 ITR 217 . He has submitted that in the Assessment Year 1986-87 the assessee had submitted that only 25 per cent of actual expenditure on gas, electricity, water be attributed as perquisite on a fair estimation basis and balance 75 per cent be allowed as admissible business deduction in the hands of the assessee company. 51. The DR has relied on the orders of authorities below. 52. We have perused the appellate order for the Assessment Year 1986-87 ( supra ) where the similar issue has been considered vide paras 65 to 69 at page 10 of the appellate order in assessee s own case with which we agree and accordingly restore the issue back to the file of the Assessing Officer to decide it in accordance with the law after giving an opportunity of being heard. Ground Nos. 20(a) (b) : "( a )That on the facts and in the circumstances of the case the learned CIT(A) has erred in law in ignoring the plea of the appellant that the expenditure on account of repairs and maintenance and depreciation on assets is not to be considered for the purposes of disallowance under section 40A(5)/40( c ) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Year 1986-87 we set aside the issue under consideration to the file of the Assessing Officer with the directions to verify the factual statements made by the assessee including the various orders placed on record and decide the issue after providing an opportunity of being heard to the assessee. Ground Nos. 21 (a) (b) : "( a )That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law in holding that the telephone facility provided by the Appellant company at the residence of the two directors/employees was a perquisite in their hands. ( b )Without prejudice to the Ground No. 22( a ) here-in-above, the learned Commissioner of Income-tax (Appeals) has erred in law in holding that the actual expenditure incurred on telephone provision at the residence of directors should be considered for the purpose of disallowance under section 40A(5) of the Income-tax Act, 1961." 57. This ground is against the CIT (A) s order in holding that the telephone facility provided at the residence of the two director employees was a perquisite in their hands and accordingly section 40A(5) was applicable for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 10(5) of the Act. He upheld the disallowance made by the Assessing Officer in absence of the details of actual expenditure incurred by the recipient of the LTA. 63. The AR has submitted that there is a specific exclusion of the value of any travel concession or assistance referred to in clause (5) of section 10 in view of clause ( i ) of 2nd proviso to section 40A(5) of the Act. He has further stated that under clause ( i ) of the 2nd proviso to section 40A(5), it is the nature of the payment which has been received by or due to an individual and not the actual expenditure incurred by the individual, if any, i.e. the conditions for exemption are limited to an individual in his personal assessment only. 64. It has also been stated at Bar that in personal assessment of Mr. Rajan Nanda to whom the said LTA was given, the LTA amount had been originally added by the Assessing Officer in his personal assessment but later on while giving appeal effect the same was deleted. 65. The DR has relied on the orders of the authorities below. 66. We are in agreement with the assessee s counsel and hold that in view of the specific provisions the LTA has to be excluded for wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly to be added to the cost of Medical Centre as and when constructed. 73. We agree with the order of the CIT (Appeals). However, in view of the alternate ground of the assessee that depreciation be directed to be allowed on the said amount added to the cost of Medical Centre, we direct the Assessing Officer to allow depreciation on Rs. 8,500. 74. The 3rd item of Rs. 1,29,996 represents the expenditure incurred in connection with the Founders day celebrations. It has been claimed as revenue expenditure. However, the authorities below have treated the same in the nature of entertainment expenses. It has been submitted by the AR that the Founder s day is celebrated once in a year by the Management as well as employees of the assessee company. He has contended that the break up of such expenditure is given in statement of facts filed before the CIT (A), vide item ( vi ) under Ground No. 26. In this connection he has filed the copy of Statement of facts filed before the CIT (A) along with the appeal memo and is contained an Annexure C in the Paper Book. At page 11 of the Annexure C the nature of the expenditure of Rs. 1,29,996 is given which is comprised of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the Assessment Year 1983-84 (refer to page 139 of the paper book) whereby following the appellate order for the Assessment Year 1982-83 the Tribunal held that when the turnover of the assessee is very substantial the books of account though maintained by experts and checked by auditors may not properly reflect a correct state of affairs. It was also observed by the Tribunal that in the case like this where huge transactions are involved it may not be possible to make all adjusts during the accounting year. According to the Tribunal the real test was whether the adjustments were bona fide or not. 79. The DR has relied on the orders of authorities below and has agreed that the issue is covered in favour of assessee in earlier years. 80. Respectfully following the orders of earlier year(s), the disallowance of Rs. 62,250 is deleted. Ground No. 26 : "That the learned CIT (A) has erred in law in upholding the action of the Assessing Officer in rejecting the claim of the appellant regarding deduction of Sur-tax liability while computing total income. 81. This ground is against rejection of the claim of sur-tax liability while computing total income. This AR fairly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Commission Discount to dealers but restoring the issue to the Assessing Officer." 88. This ground is against the restoration of the issue to the Assessing Officer regarding disallowance of Rs. 51,63,000 being 20 per cent of Rs. 2,58,16,877 on account of Commission Discount paid to dealers. The Assessing Officer has discussed the matter under the head Commission Discount vide para 73 at page 48 of the assessment order. 89. The AR submits that the Commission paid to dealers is in the nature of discount, service charges, overriding commission etc. etc. He further submits that perusal of page 54 of the assessment order where the Assessing Officer has given the figures of total Commission for the Assessment Years 1982-83 to 1987-88 would reveal that in past only the Commission paid to third parties on Government sales has been the subject-matter of dispute and the Commission/Discount paid to dealers/stockist had not been subjected to any such proportionate disallowance in earlier years. He has also submitted that in the immediately subsequent Assessment Year 1988-89 the Commission paid to dealers/stockist has been disallowed at the rate of 20 per cent of such expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of the business, the revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure. He has also placed reliance on the recent jurisdictional Delhi High Court decision in the case of ARJ Securities Printers ( supra ) for the proposition that where a fundamental aspect permeating has been found as a fact one way or the other and the parties have allowed that position, it would not be at all appropriate to allow the position to be changed. 92. The DR has relied on the orders of the authorities below. 93. We have heard both the parties and found that there has neither been any disallowance in earlier years of this nature nor in subsequent years except in the immediately subsequent assessment year 1988-89 that so on the same basis as in the Assessment Year 1987-88. The bona fide and genuineness of the expenditure is not under challenge. The Assessing Officer has in our opinion incorrectly disallowed ad hoc 20 per cent of the expenditure. Respectfully following the jurisdictional High Court decisions and the decisions of the Apex Court c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in not allowing Investment Allowance on LPG 10 Ton capacity tank, Effluent treatment plant and Misc. Plant Machinery worth Rs. 1,50,804, Rs. 27,80,378 and Rs. 24,766 respectively." 97. Ground No. 30( a ) relates to claim of investment allowance in respect of LPG 10 Ton capacity tank (Rs. 1,50,804), Effluent treatment plant (Rs. 27,80,378) and Misc. Plant Machinery (Rs. 24,766). The issue regarding allowability of investment allowance in respect of Misc. Plant Machinery (Rs. 24,766) as stated in the beginning of the appellate order has not been pressed and accordingly dismissed. 98. The Assessing Officer has disallowed the claim vide annexure to the assessment order. The CIT(A) has held that LPG tank cannot be treated as plant and accordingly the action of the Assessing Officer in disallowing investment allowance on LPG tank confirmed. He also confirmed the disallowance of investment allowance on Effluent treatment plant. 99. The AR has submitted that the Effluent treatment plant is for disposal of waste containing cyanide particles and other chemicals, which arise during the course of manufacturing activities before discharging the said waste in sewage to av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we hold that the assessee is entitled for investment allowance on LPG tank (10 ton capacity) and Effluent treatment plant as claimed. 103. Ground No. 30 : ( b )That on the facts, circumstances and legal position of the case, the learned authorities below have erred in rejecting the claim of investment allowance with respect to increase due to difference in exchange rate capitalized in relation to plant machinery acquired and/or installed during the earlier year(s). 104. By way of this ground the assessee has objected to the rejection of its claim of investment allowance on account of increase in cost of plant Machinery due to foreign exchange variation in relation to assets acquired/installed during the earlier year(s). 105. The department is also in appeal vide Ground No. 27 in ITA No. 4807/Del./92 whereby it has objected to the directions of CIT (Appeals) to allow investment allowance on the value of plant machinery on account of variation in exchange rates. 106. The Assessing Officer has rejected assessee s claim on the ground that the investment allowance on exchange variation in respect of plant Machinery installed in previous year is not admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions : 1. CIT v. Gujarat State Fertilizer Co. Ltd. [2003] 259 ITR 526 (Guj.) 2. Southern Asbestos Cement Ltd. v. CIT [2003] 259 ITR 631 (Mad.) following its earlier decision in CIT v. Chengalvaranyan Co-operative Sugar Mills Ltd. [2000] 242 ITR 440 (Mad.) 109. The AR has further submitted that in view of the said High Courts decisions, the Appellate Tribunal should allow the investment allowance on the entire exchange fluctuation and not be restricted to only exchange variation in respect of machinery installed during the year under appeal. In this connection he has also placed reliance on the jurisdictional Delhi High Court judgment in the case of All India Lakshmi Commercial Bank Officer s Union v. Union of India [1984] 150 ITR 1 3 wherein the Court has held that the Income-tax authorities acting anywhere in India have to respect the law laid down by a High Court whether of the State in which they are functioning or of a different State in the absence of any contrary decision of any other High Court. 110. The DR has relied on the orders of the authorities below and has not referred to any contrary decisions to the Gujarat and Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal appeal on similar ground has been considered and dismissed vide paras 18 to 23 at pages 3 4 of the appellate order dated 10-1-2003 in ITA No. 5625/Del./91. 116. This ground has been dealt with along with assessee s Ground No. 3 in ITA No. 4773/D/92 whereby the assessee s as well as departmental appeals on this ground have been dismissed. Ground No. 2 : "On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 13,56,310 on account of Dealers contribution to EDDAL." 117. This ground is against deletion of addition of Rs. 13,56,310 being dealers contribution to EDDAL. 118. The DR has relied on the orders of the Assessing Officer. 119. The issue is covered by our appellate order dated 10-1-2003 ( supra ) in departmental appeal and relying on the order of the ITAT in earlier year with which we agree we dismiss this ground and uphold the order of the CIT(A). Ground Nos. 3(i), (ii) (iii) : ( i )On the facts and in the circumstances of the case of CIT(A) has erred in directing to bifurcate the expenditure on account of debenture issue in the ratio of 27.90 to 7.10. ( ii )in allowing the proportionate exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground. Ground No. 5 : "On the facts and in the circumstances of the case, the CIT(A) has erred in holding that the interest of Rs. 1,20,040 payable by the assessee to GIDC is revenue expenditure in terms of explanation 8 to section 43 of the Income-tax Act, 1961. 125. This ground is against deletion of disallowance of Rs. 1,20,040 being interest paid to GIDC. The DR has placed reliance on Assessing Officer s order whereas the AR has placed reliance on CIT(A) s order for the year under appeal. The CIT(A) has deleted the disallowance of Rs. 1,20,040 following the appellate order for the assessment year 1986-87. The CIT(A) s order for the assessment year 1986-87 has been upheld by the Appellate Tribunal vide its order dated 10-1-2003 ( supra ) vide paras 118 to 120 at pages 16 17 of the appellate order in departmental appeal and the departmental appeal on this ground has been dismissed with which we agree. We accordingly dismiss this ground of the revenue. Ground No. 6 : "On the facts and in the circumstances of the case the CIT(A) has erred in deleting a sum of Rs. 39,268 on account of interest paid to HUDA." 126. This ground is against the deletion of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from foreign countries was an allowable deduction without appreciating the facts that the interest payable was not part of the normal charges but is penal in nature." 133. This ground is against disallowance of interest of Rs. 2,22,934 paid to CWC. Admittedly, this ground is covered by our order for the Assessment Year 1986-87 whereby the departmental appeal on this issue was dismissed. We uphold the order of the CIT (A) and dismiss the departmental grounds on this point. Ground No. 9 : "On the facts and in the circumstances of the case, the CIT(A)has erred in holding that cash allowance like HRA, Soft furnishing allowance etc. do not constitute perquisite for computing the disallowance under section 40A(5) of the Income-tax Act." 134. This ground is against CIT(A) s order holding cash allowances do not constitute perquisite for the purpose of disallowance under section 40A(5) of the Act. Admittedly, this ground is covered vide appellate orders for the assessment year 1986-87 and also of the appellate order in assessee s own case for the assessment years 1984-85 and 1985-86. The relevant text of the ITAT s order for the assessment year 1984-85 and 1985-86 are cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate order. 141. Relying on the appellate order for the assessment year 1986-87 with which we agree we dismiss this ground and uphold the order of the CIT (Appeals). Ground No. 12 : "On the facts and in the circumstances of the case, the CIT(A) has erred in holding that the expenses of membership of the Club were allowable under section 37(1) of the Income-tax Act, 1961 without appreciating the fact that the expenses were not incurred wholly and exclusively for the purpose of business." 142. This ground is against deletion of disallowance of club membership expenses. The DR has relied on the Assessing Officer s order whereas the AR has relied on CIT (A) s order. 143. It has been stated by the AR that similar issue had come up for consideration vide paras 57 to 59 at page 8 of the appellate order dated 10-1-2003 in departmental appeal for the assessment year 1986-87 whereby the departmental appeal on this ground stands dismissed. 144. We have perused the order of the appellate Tribunal for the assessment year 1986-87 and uphold the order of CIT(A). This ground is dismissed accordingly. Ground No. 13 : "On the facts and in the circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,990 on account of cash assistance and duty draw back taxed on accrual basis. The CIT(A) has failed to appreciate that as per provision of sub-section ( iiib ) and ( iiic ) inserted in section 28 by the Finance Act, 1990 with retrospective effect cash assistance and duty draw back as assessable even when they are receivable or repayable." 153. This ground is against the CIT (A) s order where he deleted the addition of Rs. 1,44,990 on account of cash assistance and duty draw back taxed by the Assessing Officer on accrual basis. The CIT (A) has considered the issue vide paras 24.2 and 245.3 at pages 63 64 of his appellate order and has deleted the addition following his appellate order for the assessment year 1986-87. The order of CIT (A) stands confirmed by the ITAT in assessment year 1986-87 vide paras 28 to 32 at page 5 of the appellate order in departmental appeal. 154. Relying on the appellate order for the earlier assessment years, we dismiss the departmental appeal and uphold the order of the CIT(A). Ground No. 16 : "On the facts and in the circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 2,00,000 made to the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct." 161. This ground is against the deletion of disallowance of Rs. 8,89,332 being expenditure incurred on viability, feasibility and market research studies in respect of alleged new projects against dividend income under section 57(3) of the Act. The Assessing Officer had disallowed the expenditure holding the same to be of capital nature. 162. In this connection it was contended that the assessee company held 14,01,300 equity shares in Escorts Transmissions Ltd. (subsequently known as Escorts Herion Ltd.) a subsidiary company of the assessee company. The assessee company had 98 per cent shares of Escorts Transmissions Ltd. which was engaged in the production of hydraulic pumps, hydraulic cylinders and crank shafts, etc. 163. The issue has been considered in details by the CIT(A) vide item ( i ), para 27 at pages 67 to 71 of his appellate order. The AR submits that the CIT (A) had considered every aspect of the matter and came to the conclusion that the expenses incurred on viability, feasibility and market research studies by the assessee is held to be for the purpose of earning dividend income. 164. The DR has placed reliance on the order of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the CIT (A). 171. It is contended that such payments were made wholly, exclusively and necessarily during the course of business with a view to enable the assessee company to improve its business relations and prospects. It was further contended that according to the policy practice of the assessee company, it requires that its executive become members of the club and participate in its activities with the intention to establish and maintain good business contacts which is in the long term interest of the company s business. 172. The DR has relied on the order of the Assessing Officer whereas the AR has relied on the order of CIT(A). After hearing the assessee, the CIT(A) had restored the issue to the file of Assessing Officer holding that participation of employees in the club activities definitely promotes cause of the assessee company and as such expenses on membership fee only (Emphasis supplied) will be an admissible deduction under section 37(1). 173. We have heard both the parties and perused the order of CIT (A). No interference is called for on the CIT(A) s order on the ground under reference and accordingly revenue s ground against deletion of Rs. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 4,52,024, Rs. 1,47,712 Rs. 10,48,214. 180. The CIT (A) has considered the issue vide page 99, para 40.3, of his appellate order. The CIT(A) following the earlier year, directed the Assessing Officer to allow depreciation as claimed in respect of medical center building and flats at Bangalore but rejected the claim of depreciation in respect of flats at Bombay. Being aggrieved, the assessee filed an appeal before the Tribunal being Ground No. 29( a ) in ITA No. 4773/Del./92 for the assessment year under consideration and the Department came up in appeal in respect of the allowance of depreciation by CIT(A) on account of medical center building and flats at Bangalore. 181. The DR has relied on the order of the Assessing Officer. The AR has contended that the issues as raised in assessee s ground being Ground No. 29( a ) and revenue s ground being Ground No. 22 are covered by the Appellate orders of earlier years. Further, the issue has since been settled by the Hon ble Supreme Court in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 . 182. We have perused the order of the Hon ble Supreme Court and also the appellate orders for earlier years with whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred an appeal being Ground No. 29( f ) before the ITAT in ITA No. 4773/Del./92 and the Department has come up in appeal against the direction to allow 10 per cent of depreciation instead of 5 per cent. In assessee s appeal, the ground has not been pressed meaning thereby that the assessee has finally restricted its claim to 10 per cent depreciation on launches and barges as against 15 per cent taken by it earlier. The CIT(A) while allowing depreciation at the rate of 10 per cent as against 5 per cent vide para 40.7 at pages 111-112 has followed the appellate orders of earlier years. 189. The DR has relied on the order of the Assessing Officer and did not state that in earlier years, the ITAT has allowed depreciation only at the rate of 5 per cent as allowed by the Assessing Officer. The AR relied on the order of CIT(A). 190. We have perused the appellate order of CIT(A) and do not find any infirmity in that order. We, therefore, dismiss the Departmental ground and uphold the CIT(A) s order on this ground. Ground No. 25 : "On the facts and in the circumstances of the case the CIT(A) has erred in directing to allow investment allowance on the following items : ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paras 98-100 at page 14 of the appellate order dated 10-1-2003 in ITA No. 5625/Del./91. 196. Following the appellate orders of earlier years, this ground is dismissed and the order of CIT(A) is upheld. Ground No. 27 : "On the facts and in the circumstances of the case the CIT(A) has erred in directing to allow investment allowance on the notional increase in the value of plant and machinery on account of variation in the exchange rates." 197 This ground is against the direction of CIT(A) to allow investment allowance on the notional increase in the value of plant machinery on account of variation in the exchange rate. The assessee is also in appeal vide Ground No. 30( b ) in ITA No. 4773/Del./92 for the assessment year under consideration. 198. We have already considered the issue while dealing with the assessee s appeal. In view of our decision in assessee s appeal vide Ground No. 30( b ), we dismiss the Departmental appeal in question. Ground No. 28 : "On the facts and in the circumstances of the case the CIT(A) has erred in holding that only 50 per cent of the expenses on account of rent etc. of premises in the F.E. Division and for the purpose of b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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