TMI Blog2012 (12) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... fat was subject to excise duty and it was recorded in the excise register. The assessee had given detailed breakup of the cans. Even if the weight of each can was taken as same i.e. 50Kg. the total weight of fat on basis of production log sheet was 417476 Kg and as per excise register the same was at 470674 Kg - as on the days the discrepancy was noted, there was no mention of milk fat cans produced in the production log sheet. Order of CIT(A)set aside and addition made is deleted - in favour of assessee. Interest paid to the Income tax department - disallowance - Held that:- Assessee had adjusted the interest paid against the interest received on refund. The interest paid to Income tax department is not allowable as deduction the view supported in the case of Dy. CIT vs. Sandvik Asia Ltd. [2011 (6) TMI 563 - ITAT, PUNE]. Inclusion of Miscellaneous income sales tax and excise duty refund in the total turnover - Held that:- Miscellaneous income which included trade discounts, miscellaneous sales, sales tax, excise duty etc. had to be included in the total turnover except the sales tax and excise duty which did not contain an element of turnover as decide in the case of CIT vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12,63,378/- on renovation of the building in assessment year 2001-02, thus considering the nature of building and substantial expenditure incurred it has to be considered as expenditure on total renovation and thus capital in nature & allowing depreciation of the same. - ITA No. : 975/Mum/2005 - - - Dated:- 25-5-2012 - D.K. AGARWAL, SHRI RAJENDRA SINGH, JJ. Appellant by : Shri J.P. Bairagra Respondent by : Shri Pravin Verma O R D E R PER RAJENDRA SINGH, AM: This appeal by the assessee is directed against the order dated 3.11.2004 of CIT(A) for the assessment year 2001-02. The assessee in this appeal has raised disputes on several grounds which have been dealt with in the succeeding paras. 2. The first dispute is regarding the disallowance of expenses of Rs.1,24,201/- incurred by the assessee on rural development in the villages near the assessee s factory. Facts in brief are that the AO disallowed these expenses holding that there was no nexus with the business carried on by the assessee. CIT(A) confirmed the disallowance following the decision in earlier years. Aggrieved by the said decision assessee is in appeal. 2.1 We have heard both pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was payable. Since the said dispute was not settled in the year under consideration, the assessee company retained the liability in respect of the disputed amount to the extent of Rs.61,44,628/- in view of its contractual obligations towards the third party manufacturers/ converters by reducing its sales to that extent and crediting the accounts of the third party manufacturers/converters. In the result, the sales were shown less to that extent in the Profit Loss Account and in effect, deduction was claimed on account of provision for liability towards contractual obligation to the third party manufacturers/ converters in computing the total income which was disallowed by the AO following decision in earlier year. In appeal the CIT(A) has confirmed the disallowance following the appellate order in the earlier year, aggrieved by which the assessee is in appeal before the Tribunal. 3.1After hearing both the parties, we find that this issue had been adjudicated by the Tribunal in assessment year 1994-95 in ITA No.282/M/00. In the said year, the Tribunal noted that the assessee was following mercantile system of accounting as per which contractual liability accrued on the date of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it could not be the same in all the cases. Further, on the days the discrepancy was noted, there was no mention of milk fat cans produced in the production log sheet. The Tribunal therefore saw no justification for making addition as there was no evidence of any unaccounted sale outside the books. The Tribunal, therefore, deleted the addition. In the present year, addition has been made following the decision in earlier year. We, therefore, respectfully following the decision of the Tribunal in the earlier year (supra), set aside the order of CIT(A) and delete the addition made. 5. The fourth dispute is regarding addition of Rs.30,26,788/- on account of interest paid to the Income tax department. The AO noted that the assessee had received interest on Income tax refund and had also paid interest of Rs.30,26,788/- to the Income tax department which the assessee had adjusted against receipt and net payment of Rs.9951/- was claimed as deduction. AO assessed the interest received as income from other sources and payment made to the Income tax department was disallowed which in appeal was confirmed by CIT(A) aggrieved by which, assessee is in appeal before the Tribunal. 5.1 We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the profit of business as per Explanation (baa). However the said decision of the Hon'ble High Court has not been up held by the Hon'ble Supreme Court who in the case of ACG Associated Capsules Ltd. (343 ITR 89), have recently held that 90% of net receipts have to be reduced as per Explanation (baa). We, therefore, set aside the order of CIT(A) and hold that 90% of net interest income is required to be reduced after deducting expenses incurred having nexus with earning of interest income. The issue is thus restored to AO for working out 90% of net interest income after allowing opportunity of hearing to the assessee. 8. The seventh dispute is regarding computation of capital gain on sale of land and building. The assessee during the year had transferred land and building at Colaba for a consideration of Rs.8.00 crores vide agreement dated 30.10.2010 to F.C. Allana Ltd. The said property had been purchased in the year 1973. The assessee computed long term capital gain separately in respect of land and in respect of building treating building as non depreciable asset. The capital gain was claimed as exempt under section 54EC as assessee had made investment in NABARD Bonds. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and and building portion had been separately shown in the balance sheet and that the assessee had not claimed any depreciation on land. Even in respect of the building, depreciation in some of the years had been got allowed only inadvertently. It was also submitted that the bifurcation of land and building for the purpose of computation of capital gain has been upheld by several High Courts including the Hon'ble High Court of Bombay in case of CIT vs. Citibank N.A. (261 ITR 570) in which it has been held that bifurcation of land and building was necessary for the purpose of computation of capital gain as land was not depreciable asset and not covered under section 50 of the Income tax Act. The ld. AR also submitted that he had no objection if the provisions of section 50 were applied only in respect of building portion. It was also submitted that the provisions of section 54 EC were applicable in case of short term capital gain computed under section 50 in case asset was a long term asset. The ld. Departmental Representative on the other hand supported the orders of authorities below and placed reliance on the findings given in the respective orders. 8.3 We have perused the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue is thus restored to the file of AO. 9. The eighth dispute is regarding disallowance of payment to consultants, gifts etc. The AO noted that the assessee had made certain payments in connection with voluntary retirement scheme (VRS). The deduction allowable under section 35 DDA as per tax audit report was Rs.33,78,498/- whereas assessee had made claim of Rs.37,92,038/-. The excess claim of Rs.4,13,540/- was on account of payment of Rs.1.50 lacs to consultants, gifts of Rs.96,450/- and incentives/difference amount Rs.1,67,000/- paid to ex-employees who had opted for VRS in the earlier years. The assessee submitted that these expenses had been incurred in the ordinary course of business and should be allowed as deduction. AO however, did not agree with the assessee and disallowed the claim which in appeal was confirmed by CIT(A) aggrieved by which the assessee is in appeal before the Tribunal. 9.1 Before us, the ld. AR submitted that under provisions of section 35 DDA, any expenditure incurred by way of payment to employees in connection with voluntary retirement scheme (VRS) has to be considered as deduction. The ld. DR on the other hand placed reliance on the orders of autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s revenue expenditure. The ld. DR on the other hand supported the orders of authorities below and argued that expenditure incurred on renovation of building should be treated as capital expenditure. 10.2 We have perused the records and considered the rival contentions carefully. The dispute is regarding allowability of expenses incurred on repair/renovation of the building as revenue expenditure. The assessee had incurred a sum of Rs.2,40,612/- on construction of cycle stand which is obviously a new and independent asset and therefore, the expenditure has rightly been treated as capital expenditure. As regards the repair/renovation of the buildings, the AO has treated the expenditure as capital following the judgment of Hon'ble Supreme Court in the case of Ballimal Naval Kishore vs. CIT (supra), in which it has been held that expenditure incurred on total renovation of the building has to be treated as capital expenditure. The assessee has incurred an expenditure of Rs.3,57,500/- on redevelopment of Cadbury House and considering the smallness of the amount involved this could not be considered as expenditure on total renovation of the building and, therefore, said expenditure ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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