TMI Blog2013 (5) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... that Modvat credit on account of excise duty was not includable in the valuation of closing stock, thus direct the AO to delete the additions. In favour of assessee. Disallowance of third party commission paid during the previous year - Held that:- Tribunal in assessee's own case has confirmed the disallowances made by the CIT(A) on the ground that if details of payment of commission are not coming from the assessee, such payments made in respect of contract awarded by Public Sector companies, to held as expenses incurred against public policy and therefore not entitle to be deducted in the light of the proviso to Sec. 37. Against assessee. Disallowance of pre-operative expenses - Held that:- It is found that as per the accounting practice of the assessee company, pre-operative expenditure incurred by the unit were accounted for in capital work-in-progress in the books of the unit and subsequently transferred to the head office for the capitalization. Thus it is not in dispute that the expenditure of Jharsuguda Cement works, amount works out to Rs. 24,94,727/- which should have been claimed in A.Y. 1994-95. Ground is partly allowed. Disallowance of claim for depreciation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change loss - Held that:- The issue now stand covered in favour of the assessee by the decision of Woodward Governor India Pvt. Ltd [2009 (4) TMI 4 - SUPREME COURT] wherein held that loss suffered by the assessee on account of fluctuation in the rate of foreign exchange has on the date of the balance sheet is an item of expenditure u/s. 37(1). Disallowance of Rs. 15,00,000/- out of Conference expenses treating the same as in the nature of entertainment expenditure - Assessee submitted that Conference expenses represents expenditure incurred on holding seminars and conferences of stockists and distributors and therefore deserves to be allowed - Held that:- However, after the amendment to provisions of Sec. 37(2) such expense do have an element of entertainment, thus direct the AO to reduce the disallowance by 50%. The assessee will get a relief of Rs. 7,50,000/- accordingly. - I.T.A. No.2200/Mum/2000, I.T.A. No.2890/Mum/2001, I.T.A. No.2803/Mum/2000, I.T.A. No.3533/Mum/2001 - - - Dated:- 1-5-2013 - Shri H. L. Karwa And Shri N. K. Billaiya, AM,JJ. For the Petitioner : Shri S. D. Srivastava For the Respondent : : Shri J. D. Mistry Shri Madhur Agarwal ORDER Per N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing the findings of his predecessor in earlier years. We find that similar issue came up for hearing before the Tribunal in A.Y. 1990-91 to 1994-95. A perusal of the order of the Tribunal in ITA Nos 4265/M/98 4892/M/2000 for A.Y. 1994-95 show that the Tribunal has considered similar issue vide ground No. 6 at para-49 of its order. We find that the Tribunal has followed the decision of the Bench in assessee's own case in ITA No. 987/M/98 relating to A.Y. 1990-91 wherein the Tribunal on the basis of the judgement of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs CIT 288 ITR 01 has allowed the expenditure incurred by the assessee towards Community Welfare and Rural Development Programme in computing the taxable income. Facts and circumstances being identical, respectfully following the decision of the Tribunal, we direct the AO to allow the expenditure. Ground No. 2 is accordingly allowed. 6. Ground No. 3 relates to the grievance that the Ld. CIT(A) erred in not deleting the addition of Rs. 195.28 lacs made by the AO in respect of Modvat credit. 7. The Ld. CIT(A) has considered this disallowance at para-13 14 of his appellate order and confirmed the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, the Ld. CIT(A) confirmed the additions made by the AO. We find that similar issue came up before the Tribunal in assessee's own case for A.Y. 1990-91 to 1994-95. A perusal of the order of the Tribunal in A.Y. 1994-95 show that the Tribunal has considered the similar issue vide ground No. 4 of that appeal wherein the Tribunal has followed the earlier decisions of the Bench in assessee's own case and decided the issue in favour of the assessee. Respectfully following the decision of the Tribunal in assessee's own case, we direct the AO to delete the impugned addition of Rs. 1.28 crores. Ground No. 5 is accordingly allowed. 12. Ground No. 6 relates to addition u/s. 40A(9) of the Act in respect of an amount of Rs. 2,83,200/- contributed to Marine Navy Officers Welfare Fund. 13. The Ld. CIT(A) has discussed this addition at para-24 of his order wherein he has followed the findings of his predecessor in assessee's own case in earlier years and confirmed the addition of Rs. 2,83,200/-. Similar issue come up for Tribunal in assessee's own case for earlier years i.e. 1990-91 to 1994-95. A perusal of the order of the Tribunal for assessment year 1994-95 shows that similar issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 3,12,10,035/- 4) Tadpatri, A.P cement works Rs. 25,31,347/- 19. Similar additions came up before the Tribunal in assessee's own case in A.Y. 1982-83 and A.Y. 90-91 to 1994-95. We find that the Tribunal has considered similar issue at para-16 17 of its order wherein the Tribunal has considered earlier decision in assessee's own case for A.Y. 1982-83 wherein the very same issue was considered by the Tribunal and was decided in favour of the assessee. The Tribunal has further observed at para-17 of its order that expenditure in question incurred during the year under consideration on setting up of new cement plant was revenue and same was accepted by the Ld. CIT(A) after necessary verification and accordingly the Tribunal decline to interfere with the impugned order of the Ld. CIT(A). The Tribunal thereafter followed the decision of the Bench in assessee's own case dt. 31.10.2007 for A.Y. 1982-83. Facts and circumstances being identical, respectfully following the decision of the Tribunal, we direct the AO to allow expenditure claimed in respect of Hirmi, Pipavav and Tadpatri cement works. 20. Before closing, as regards expenditure incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. Ground No. 10 is accordingly allowed. 27. Ground No. 11 relates to the disallowance of claim for depreciation of Rs. 69.02 crores in respect of certain assets given on lease by the assessee. The issue relates to the purchase of assets and immediately leased back the same to the vendors in three different sale and lease back transactions relating to Tata Chemicals Ltd., Madhya Pradesh State Electricity Board and Dattar Switch Gear Ltd. Assets totaling to Rs. 13604.92 lakhs were purchased from these three companies and immediately given on lease back to them. The assessee has claimed depreciation amounting to Rs. 69.02 crores in respect of these leased assets. After considering various judicial pronouncement, the Ld. CIT(A) confirmed the disallowance of depreciation of Rs. 69.02 crores. 28. The issue relating to the claim of depreciation vis- -vis sale and lease back of assets has been considered by Mumbai Special Bench of the Tribunal in the case of IndusInd Bank Ltd. Vs ACIT 135 ITD 165. However, this entire controversy has been set at rest by the decision of the Hon'ble Supreme Court in the case of I.C.D.S. Ltd. Vs CIT 350 ITR 527 wherein the Apex Court has allowed dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. As regards claim relating to part (c) of these grounds are concerned, we find that it has been decided against the assessee by the Tribunal in assessee's own case for A.Y. 1994-95 in ITA Nos. 4265 4892/M/98. While deciding ground No. 7 of that appeal, the Tribunal has followed the decision of the Bench in assessee's own case wherein the Bench has relied upon the decision of the Hon'ble Supreme Court in the case of Ipca Laboratories 266 ITR 521. Respectfully following the said judicial pronouncement, we confirm the order of the Ld. CIT(A) on this issue. Part (c) of ground Nos. 12 13 is accordingly disallowed. 33. Ground No. 14 relate to disallowance of depreciation on certain assets at the appellant's cement works on the ground that depreciation was allowable only when the concerned unit commenced production. 34. This issue has been elaborately considered by the Ld. CIT(A) as discussed by him at para-69 of his appellate order. The claim of depreciation has been disallowed on the ground that the business has not commenced at Gujarat Cement Works and Andhra Pradesh Cement Works and part depreciation is allowed on Hirmi Cement project. Similar issue has come up for hearing b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es could not be avoided. It was further explained that the truck owners could not accept cheque but demand cash. Considering all these facts, the Ld. CIT(A) deleted the addition made by the AO. 40. Before us, the Ld. DR supported the findings of the AO. The Ld. Senior Counsel reiterated what has been submitted before the AO. A perusal of the explanation given by the assessee show that it is covered by the exception provided under Rule 6-DD(j) as it stood at that point of time. After considering the facts in the light of the exception provided under Rule 6-DD(j) prior to 1.12.1995, we do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 2 is accordingly dismissed. 41. Ground No. 3 relates to addition made to closing stock on account of unutilized Modvat credit amounting to Rs. 195.28 lakhs. This disallowance have been considered by the Ld. CIT(A) at para-13 14 of the appellate order. Similar issue came up for hearing before the Tribunal in assessee's own case for A.Y. 1994-95 wherein the Tribunal at para-9 of its order has considered the decision of the Bench in assessee's own case for A.Y. 1988-99 to 1993-94 allowed the relief to the assessee. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existing cement business of the assessee company was accepted by the Ld. CIT(A) who rejected the view of the AO that these are pre-operative expenses. The Ld. Senior Counsel pointed out that similar issue came up for hearing before the Tribunal in assessee's own case for A.Y. 1994-95. 48. We have carefully perused the order of the Tribunal for A.Y. 1994- 95 in ITA Nos. 4265 4892/M/98. We find that at para-24, page-11 of its order, the Tribunal has decided this issue in favour of the assessee wherein the Tribunal has followed the decision in Revenue's appeal. Facts and issues being identical, respectfully following the decision of the Tribunal in assessee's own case, interest on borrowed funds for Hirmi Cement units is directed to be allowed. This ground of the Revenue is dismissed. 49. Ground No. 7 relates to expenses incurred towards laying power lines of the Nasik Glass Works to the tune of Rs. 1.80 crores. 50. This issue has been discussed by the Ld. CIT(A) at para 43, page 61 of his order. It was explained to the Ld. CIT(A) that the assessee has incurred this expenditure towards cost of laying power lines at Nasik Glass works. Rs. 1.80 crores were contributed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration but also likely to be incurred in future on the basis of the outstanding liability of loan as on the last day of the previous year relying on the decision of the Hon'ble Jurisdictional High Court in the case of Padamji Pulp Paper Mills ltd 210 ITR 97. The Ld. CIT(A) found that the AO has refused to accept the contention of the assessee on the ground that the department has not accepted the decision of the Jurisdictional High Court (supra) and has filed SLP before the Supreme Court. However, the Ld. CIT(A) followed the decision of the Jurisdictional High Court and allowed the appeal. 56. Before us, the Ld. Counsel for the assessee pointed out that the issue now stand covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of CIT Vs Woodward Governor India Pvt. Ltd. 312 ITR 254 wherein the Hon'ble Supreme Court has held that loss suffered by the assessee on account of fluctuation in the rate of foreign exchange has on the date of the balance sheet is an item of expenditure u/s. 37(1) of the Act. Respectfully following the decision of the Hon'ble Supreme Court, we direct the AO to allow the claim of foreign exchange loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crap sales as part of the total turnover (b) 90% of gross interest income and other miscellaneous receipts was included from profits of business instead of reducing 90% of net interest (c) Loss on export of trading goods was set off against profit on export of manufactured goods and (d) indirect cost attributable to trading exports were reckon inclusive of sales and administrative overheads interest brokerage. 68. At the very outset, the Ld. Senior Counsel submitted that he is not pressing issue relating to part (d) of both the grounds i.e. ground No. 6 7. Parts D of both the grounds are accordingly dismissed. 69. The decision of the Tribunal in assessee's own case in ITA Nos. 4265 4892/M/98 for A.Y. 1994-95, we direct the AO to give relief to the assessee as claimed under part (a) (b). 70. As regards claim relating to part (c) of these grounds are concerned, we find that it has been decided against the assessee by the Tribunal in assessee's own case for A.Y. 1994-95 in ITA Nos. 4265 4892/M/98. While deciding ground No. 7 of that appeal, the Tribunal has followed the decision of the Bench in assessee's own case wherein the Bench has relied upon the decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest u/s. 234B of the Act, 1961. This is mandatory. The AO is directed to charge interest as per law while giving appeal effect to our order. 78. In the result, the appeal filed by the assessee is partly allowed. ITA No 3533/Mum/2001 - 1996097 - Revenue's appeal 79, Ground No. 1 relates to fees paid for entrance, life membership and corporate membership to club amounting to Rs. 42,34,029/-. 80. The issue involved is identical with the issue at page-12, para-37 in ITA No. 2863/M/2000 for A.Y. 1995-96 in Revenue's appeal, therefore, on similar lines, similar reasons, the appeal filed by the Revenue in ITA No. 3533/M/01 for assessment year 1996-97 is dismissed. 81. Ground No.2 relates to addition made to closing stock on account of unutilized Modvat credit amounting to Rs. 913.99 lakhs. 82. The issue involved is identical with the issue at page-14, para-41 in ITA No. 2863/M/2000 for A.Y. 1995-96 in Revenue's appeal, therefore, on similar lines, similar reasons, the appeal filed by the Revenue in ITA No. 3533/M/01 for assessment year 1996-97 is dismissed. 83. Ground No. 3 relates to addition of Rs. 2.26 crores being excise duty liability in respect of Stock of finished g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own case for A.Y. 1994-95 in ITA Nos. 4265 4892/M/98. While deciding ground No. 7 of that appeal, the Tribunal has followed the decision of the Bench in assessee's own case wherein the Bench has relied upon the decision of the Hon'ble Supreme Court in the case of Ipca Laboratories 266 ITR 521. Respectfully following the said judicial pronouncement, Part (c) of ground Nos. 6, 7 8 are accordingly decided against the assessee. 93. Ground No. 9 relates to disallowance of pre-operative expenses amounting to Rs. 18,72,70,197/-. 94. The issue involved is identical with the issue at page-7, paras-17 to 21 in ITA No. 2200/M/2000 for A.Y. 1995-96 in assessee's appeal, therefore, on similar lines, similar reasons, the appeal filed by the Revenue in ITA No. 3533/M/01 for assessment year 1996-97 is partly allowed. 95. Ground No. 10 relates to interest on borrowed funds for Hirmi Cement unit amounting to Rs. 8.92.08,798/-. 96. The issue involved is identical with the issue at page-15 16, para-46 to 48 in ITA No. 2863/M/2000 for A.Y. 1995-96 in Revenue's appeal, therefore, on similar lines, similar reasons, the appeal filed by the Revenue in ITA No. 3533/M/01 for assessment year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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