TMI Blog2013 (9) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... on for payment of bonus - Assessing Officer had made similar disallowance in respect of claim of bonus payment in the assessment year 2002-03, i.e., provision created for the year ending March 31, 2001 was paid during the year relevant to the assessment year 2002-03 and was claimed in that year - Held that:- Simply because the assessee has not claimed a particular deduction, it cannot be said to be a colourable device - The deduction relates to payment of bonus which has actually been paid in the present year and deduction has been claimed as per section 43B. Such deduction has been claimed on consistent basis in the year of payment and, therefore, no adverse inference should have been taken - Decided against Revenue. Bebts and advances written off - Held that:- t the advances of ₹ 28,67,407 given for acquisition of capital assets is liable to be disallowed as "capital loss" and the advances of ₹ 2,32,93,575 given for acquisition of revenue items is allowable under section 37 of the Act as current expenses. - I. T. A. Nos. 430 /Coch/ 2006and 378 /Coch/ 2009 - - - Dated:- 24-8-2012 - Order The order of the Bench was delivered by B. R. Baskaran (Accountant Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 059 (Rs. 64,40,068 less depreciation Rs. 8,05,009). However, the learned Commissioner of Income-tax (Appeals) presumed that the ownership of these assets will change hands from dealer to dealer and the assessee shall not have any right over these assets once they were erected in the dealers' premises. Accordingly, he deleted the said disallowance by treating the same as a sales or publicity expenses. However, from the rival submissions made, it transpires that the ownership of these assets would continue to remain with the assessee only. Hence, the view of the learned Commissioner of Income-tax (Appeals) is contrary to the facts. Learned counsel placed reliance on the common order dated September 9, 2009 rendered by this Bench in the assessee's own case in I. T. A. Nos. 538/Coch/2005, I. T. A. No. 273/Coch/05 and I.T.A. No. 25/Coch/04 and submitted that the Tribunal has considered an identical issue in paragraphs 21 to 23 of the said order and has taken the view that the expenditure incurred on renovation of the showrooms is revenue expenditure. We have carefully considered the Tribunal's order relied upon by the learned authorised representative. In the said order, the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that production in the unit had not started, and so much so expenditure in the nature of interest on borrowed capital was in the nature of capital expenditure which goes to increase the capital outlay. The next issue is the assessee's claim for deduction of expenditure incurred for the debentures issued for raising the loan. The Assessing Officer disallowed this claim also as in the nature of capital expenditure because it was incurred for raising loan for setting up the plant. Both claims were allowed in the first appeal and the Tribunal confirmed the same. Senior counsel for the Revenue contended that since production had not commenced in the plant being set-up with the borrowed capital expenditure is not allowable under section 36(1)(iii) of the Act read with Explanation 8 to section 43(1) of the Income-tax Act. According to counsel under the proviso to section 36(1)(iii) interest cannot be allowed on the amount borrowed for acquisition of capital asset for period beginning from the date of acquisition till the asset was put to use. It is further contended that as per the Explanation 8 provided in section 43(1), interest on borrowed capital used for acquisition of asset will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. However, we find merit in the action of the Assessing Officer. In our view, the expenditure incurred towards entrance fee/subscription can be termed as business expenditure. With regard to the cost of services, it is the responsibility of the assessee to show the commercial expediency in incurring the same. In the absence of the same, the Assessing Officer was justified in disallowing the sum of Rs. 1,48,212 referred supra. Accordingly we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore the addition made by the Assessing Officer. The next issue relates to the claim of deferred sales tax payment of Rs.3,85,29,891. The assessee was allowed to defer the payment of sales tax for its Kalamassery unit under the BIFR scheme. During the assessment years 1996-97 to 2002-03, the assessee-company treated the sales tax/purchase tax so deferred as "deemed payment" and claimed the same as deduction under section 43B of the Act. For this purpose, the assessee placed reliance on Circular No. 674 dated December 29, 1993 ([1994] 205 ITR (St.) 190) and Circular No. 496 dated September 25, 1987 ([1988] 169 ITR (St.) 53) issued by the Central Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the proviso to section 43B, if the provision created for a particular financial year is paid on or before the due date for filing the return of income, then the said payment can be claimed as deduction in the year in which the provision was created, if the assessee furnishes the evidence of such payment along with the return of income. The Assessing Officer noticed that the assessee had paid the bonus out of the provision created during the year ending March 31, 2002 before the due date for filing the return of income for the assessment year 2002-03. Accordingly, the Assessing Officer opined that the assessee should have claimed the said payment in the assessment year 2002-03 itself, as per the proviso to section 43B referred supra. He further held that the assessee has adopted colourable device to reduce the incidence of tax by shifting the claim of bonus payment to the assessment year 2003-04. Accordingly, he disallowed the claim of bonus payment of Rs. 3,75,44,731. The learned Commissioner of Income-tax (Appeals), by following his own decision in the assessment year 2002-03, allowed the claim of the assessee. We notice that the Assessing Officer had made similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance made in the immediately preceding year was confirmed by the Tribunal in I. T. A. No. 426/ Coch/2006. By following the said order of the Tribunal, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore the addition made by the Assessing Officer. The next issue relates to the reduction of proportionate head office expenses from the profit of DG power generation unit for the purpose of computation of deduction under section 80-IA of the Act. The assessee claimed a deduction of Rs. 13,79,90,488 under section 80-IA of the Act in respect of the DG power generation unit located at Limda (Baroda). The Assessing Officer noticed that the assessee-company did not allocate a portion of expenses incurred in its head office while computing the profit, which according to the Assessing Officer should have been allocated. Accordingly, he worked out the proportionate expenses at Rs. 1,92,61,930 and reduced the same from the profit of DG power generation unit. The learned Commissioner of Income-tax (Appeals) set aside the said order of the Assessing Officer. It was submitted before us that the Assessing Officer had made similar reduction in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the advance given for acquisition of revenue items amounting to Rs.2,32,93,575, the assessee gets support from the decision of the hon'ble Delhi High Court in the case of Mohan Meakin Ltd. v. CIT [2012] 348 ITR 109 (Delhi) wherein the High Court, by following the decisions held that the trade advances written off can be allowed as deduction under section 37 of the Act. (a) Chenab Forest Co. v. CIT [1974] 96 ITR 568 (J K) ; (b) CIT v. Mysore Sugar Co. Ltd. [1962] 46 ITR 649 (SC); and (c) CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC). In the case of Mysore Sugar Co. Ltd. [1962] 46 ITR 649 (SC), the hon'ble apex court had an occasion to discuss the nature of losses and the following observations made by the hon'ble Supreme Court in that case are very much relevant here (page 653) : "To find out whether an expenditure is on the capital account or on revenue, one must consider the expenditure in relation to the business. Since all payments reduce capital in the ultimate analysis, one is apt to consider a loss as amounting to a loss of capital. But this is not true of all losses, because losses in the running of the business cannot be said to be of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation or not and decide the issue accordingly. We shall now take up the appeal numbered as I. T. A. 378/Coch/09. The only issue urged in this appeal by the Revenue is whether the learned Commissioner of Income-tax (Appeals) is justified in holding that the DG power generation units I and II installed by the assessee-company for captive power consumption constituted an "undertaking" in terms of sub-section (4)(iv) of section 80-IA of the Act. The Assessing Officer rejected the claim of deduction under section 80-IA of the Act by holding that the DG power generation units I and II cannot be termed as an "undertaking" for the purpose of section 80-IA of the Act. The learned Commissioner of Income-tax (Appeals) allowed the claim by following his own order in the immediately preceding year. During the course of hearing, the learned authorised representative brought to our notice that the Tribunal has considered this issue in the assessee's own case in the assessment year 2002-03 in I. T. A. Nos. 429/Coch/2006 and 377/Coch/2009 and decided the same in favour of the assessee. We notice that the Tribunal has considered an identical issue in the assessee's own case in its order r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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