TMI Blog2014 (2) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... the guest house of the company - the AO is directed to allow the deduction of amount received from parent departments as expenditure in the nature of travelling expenses and in accordance with Rule 6D of the IT Rules – Decided in favour of Assessee. Disallowance made under Rule 6B of the Rules – Expenditure on Calendars and Diaries – Held that:- The decision in Commissioner Of Income-Tax Versus Allana Sons Private Limited [1993 (4) TMI 13 - BOMBAY High Court] followed - presentation articles bearing the logo of the assessee would fall within the ambit of Rule 6B as expenditure in the nature of advertisement – Decided against Assessee. Disallowance of Annual General Meeting Expenses – Held that:- As decided in assessee’s own case for the previous assessment years - the definition of entertainment expenditure was inserted by the Finance Act, 1983 with retrospective effect from 1. 4. 1976 - the expenditure incurred on serving tea, coffee and soft drinks is covered by the Explanation 2 to section 37(2A)/(37(2) - In the Explanation 2 it is stipulated that the expenditure on provision of hospitality of every kind by the assessee to any person whether by way of provision of food or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y (TSRDS) expenditure – Disallowance of Annual Contribution to Steel Plants' Sports Board and Tata Sports Club - Contributions to various Institutions - Contribution to the society for sports and stadium – Contribution made to Beldih and United clubs Held that:- The decision in TELCO ITA/6003 to 6008/Mum/98 followed – the payments were made keeping in mind business expediency viz. , to have a motivated work force – thus, the expenditure in question has to be allowed as a deduction u/s. 37(1) – MOU makes the facts and circumstances of the case peculiar – thus, the deduction is to be allowed – Decided in favour of Assessee. Disallowance u/s 35D of the Act - Fees paid to consultants for feasibility studies – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the expenditure incurred on report for increasing production capacity and future development – thus, the expenditure was not a capital expenditure and allowed deduction of same as a revenue expenditure –Decided in favour of Assessee. Disallowance of allowances - Investment Allowance and Extra Shift Allowance on Town Division assets, investment allowance on various items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the Hon'ble High Court while filing appeal for that AY – the whole of initial contribution to the ASF was deductible u/s. 36(1 )(iv) in computing the business income of the assessee in the year of contribution itself, that there was no provision in the Act which stipulated disallowance of a part of the contribution to ASF and spreading over the balance amount over a period of five years - Decided against Revenue. Deduction on account of guarantee amount paid to Ahmedabad Advance Mills Ltd. (AAML) – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the assessee in terms of the agreement entered into a commercial transaction and thereby incurred expenses in first three years, that commercial expediency compelled the assessee to make the payment, that the sums paid by the assessee to AAML were admissible as deduction - the transactions with the AAML were in the revenue field – Decided against Revenue. Payment for holiday plan at hotels as guest house expenses u/s 37(4) of the Act – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the assessee had employed mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt allowance on railway sidings at stock yard allowed - in absence of any contrary material brought to notice against the decision of the Tribunal- there was no infirmity in the order of the CIT(A)allowing the investment allowance on the plant and machinery installed by the assessee in the stock yard – Decided against Revenue. - ITA No. 3964/Mum/2003, ITA No. 3981/Mum/2003 - - - Dated:- 19-2-2014 - Sh. Rajendra And Amit Shukla,JJ. For the Petitioner : Shri Dinesh Vyas Milin Thakore For the Respondent : Shri S. D. Srivastava ORDER Per Rajendra, AM. Challenging the order dt. 21. 02. 2003 of the CIT(A)-II, Mumbai, assessee-company and the Assessing Officer (AO) have filed Cross appeals. Assessee has raised following Grounds of Appeal: Ground of Appeal No. 1 The learned CIT(A) has committed error in recording some facts in his order. The appellant craves leave to produce before the honourable ITAT correct facts at the time of hearing. Ground of Appeal No. 2 {Page 10 of CIT (A)'s Order} The CIT (A) erred in denying deduction of Rs. 2. 96 crores in respect of accrued leave salaries which was paid during Assessment Year 1986-87. The CIT (A) erred in not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41 of CIT (A)'s Order} Expenditure on business meetings and conferences- Rs. 7, 19, 354 The learned CIT (A) erred in holding that the expenditure incurred on the business meetings and conferences as entertainment expenditure incurred under the provisions of Section 37(2A) of the Income- tax Act. Ground of Appeal No. 9 {Page 42 of CIT (A)'s Order} Disallowance of expenditure on payments made to Clubs - Rs. 4, 92, 255 The learned CIT (A) erred in treating payments to Clubs as entertainment expenditure covered under the provisions of Section 37(2A) Ground of Appeal No. 10 {Page 45 of CIT (A)s Order} Expenditure incurred on Employees'Get-togethers - Rs. 2, 25, 000 The learned CIT (A) erred in holding that the expenditure incurred on employees' get-togethers on the ground that the same is covered as entertainment expenditure. Ground of Appeal No. 11 {Page 49 of CIT (A)'s Order} Disallowance under Rule 40A (5) in respect of deemed perquisites- Rs, 13, 00, 000 The learned CIT (A) erred in giving partial relief with respect to expenses incurred on Company owned accommodation on the ground that they are deemed perquisites to be calculated u/s. 40A (5) Ground of Appeal No. 12 { ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks Machinery 2, 88, 180 Hospital Equipment 55, 14, 161 Computers 15, 97, 345 Air-conditioning Plant 14, 141 2, 53, 59, 598 Investment Allowance @ 25% 63, 39, 900 Extra Shift Allowance: Water Works (Opening balance) 1, 29, 27, 717 Other Plant Machinery (Water Works) 1, 68. 42, 001 2, 97, 69, 718 Extra Shift Allowance 44, 65, 458 The learned CIT (A) further erred in not following the Orders of the Honourable Mumbai Income-tax Appellate Tribunal in the Appellants own case for Assessment Years 1981-82 and 1982-83 on identical issues. Ground of Appeal No. 19. {Pages 149 to 156 of CIT (AYs Order} Investment Allowance on various items of Plant and Machinery - Rs. l0, 22, 133 The learned CIT (A) erred in not allowing investment allowance on following plant and machinery:- Works Division: Platform Weighing Scale 28, 590 Aircraft battery charger analyser 1, 30, 528 Computers 9, 24, 706 Water Cooling Plant 9, 950 Telephone System 11, 18, 175 Collieries: Surgical instruments 7, 25, 404 Ore Mines Quarries: Surgical instruments 2, 13, 874 X-Ray Machines 7, 03, 978 Rs. West Bokaro Collieries: Surgical instruments 1, 02, 302 Street Lights 87, 081 Overh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumption of the same. Ground of Appeal No. 27 {Page 212 of CIT (A)s Order} Restriction of 80HHC deduction Rs. 10, 36, 888 The learned CIT (A) erred in not allowing full deduction u/s. 80HHC as the spirit of the Section was not interpreted properly. Ground of Appeal No. 28 Bad Debts Written Off Rs. 11, 09, 997 The learned CIT (A) erred in not considering appellant's claim of deductibility of bad debts written off. The Appellant craves leave to add to, alter or amend the above grounds of appeal. ' ITA No. 3981/Mum/2011, AY. -1986-87: In his appeal, AO has raised following grounds: "1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow Rs. 2, 69, 62, 561/-as deduction on account of provision for leave salaries. ' 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to allow 20% of initial contribution as deduction in the year in which the initial contribution was made to the approved superannuation fund. ' 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A. O. to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued leave salaries which had been claimed as a deduction, that the assessee had a deduction of Rs. 2. 96 Crores in respect of the liability ascertained in earlier years and paid during the year, that it had made similar claims in AY. 1985-86, that in that year similar claim made by the assessee was rejected. Following the order for the preceding AY. , AO disallowed the claim of the assessee for accrued leave, wages, salaries, amounting to Rs. 2, 96, 74, 305/-. 2. 1. Against the order of the AO assessee preferred an appeal before the First Appeal Authority (FAA). After considering the submissions of the assessee and the assessment order he held that the action of the AO was justified. 2. 2. Before us, Authorised Representative(AR) submitted that assessee was following cash system of accounting with regard to salary, but from last AY. it switched over to mercantile system, that Tribunal had allowed a sum of Rs. 16, 19, 94, 974/-(Rs. 19. 16 Crores-Rs. 2. 96 Crores) while deciding the appeal, filed by the assessee, for the AY. 1985-86, that remaining amount of Rs. 2, 96, 74, 305/- should be allowed for the year under appeal, that sum was attributable to leave encashment, that same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, we dismiss it as not pressed. 4. Next Ground of appeal pertains to Recovery of Guest House Expenses considered under Rule 6D of the Income-tax Rules, 1962(Rules), amounting to Rs. 4, 10, 354-. During the assessment proceedin- gs AO found that the assessee maintained guest houses at Jamshedpur mines and collieries, and Kharagpur, that it collected service charges for providing lodging or boarding and lodging to the suppliers and business associates, that in the case of the employees a book entry was passed, that the assessee had debited the expenditure incurred on the employees in respect of service charges i. e, lodging or boardihg and lodging charges to the travelling expenses account and credited to the guest house expenses account, that it did not recover any sum from the employees and only a book entry was passed. Considering the above facts the AO held that there was no reduction in its liability by the notional recovery and as a result, he did not allow the assessee to set off the notional recovery attributable to the employees against the guest house expenses. However, the service charges for using the guest house by the suppliers and business associates, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company. Assuming the situation of non-existence of the guest house of the company in that place, then, such employees would have stayed in a hotel or guest house run by third parties and made payments to them for use of their facilities and accordingly payments made to outside parties would have been treated as travelling expenses incurred by the company for its business. Therefore, the user of guest house facilities pro vi ci ed by the company to the employees of the company in connection with discharge of their official duties does not alter the basic character of the expenditure. Ultimately such expenses are connected with the travelling by such employees and, therefore, should be treated accordingly, irrespective of the fact that such employees stayed in the guest house of the company. In view of the above facts and circumstances, we direct the AO to allow the deduction of amount received from parent departments as expenditure in the nature of travelling expenses ;and in accordance with Rule 6D of the IT Rules. Thus this ground of the assessee is accepted. ' 13. In view of the above, we direct that the addition to the extent of recoveries made by the assessee be allowed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed. ' 6. Next Ground of appeal is about Disallowance of Annual General Meeting Expenses of Rs. 24, 656/-. During the assessment proceedings AO found that in the Tax Audit report the expenditure incurred on the entertainment was quantified by the auditors u/s. 44AB, that the expenditure incurred on serving tea, coffee and soft drinks to the shareholders at the annual general meeting was not included in the entertainment expenditure. He held that the expenditure incurred on the entertainment of the shareholders formed part of the definition of entertainment expenditure under Explanation to section 37(2A)/37(2) of the Act. 6. 1. Against the order of the AO assessee preferred an appeal before the FAA. After considering the submissions of the assessee, he held that under section 37(2A)/37(2) of the Act any expenditure incurred by an assessee in excess of the amounts stipulated in this section had to be disallowed, that the maximum amount admissible towards entertainment expenditure u/s. 37(2A) was Rs. 50, 000/- , that the definition of entertainment expenditure was inserted by the Finance Act, 1983 with retrospective effect from 1-4-1976, that the expenditure incurred on serving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Mysore Minerals Ltd 162 ITR 562 did not approve the ratio laid down in Bangalore Turf Club on the ground that the Explanation 2 to subsection (2A) of section 37 was not there in the statute when the judgment in the case of Bangalore Turf Club was delivered. Thus, the Karnataka High Court overruled its own decision in Bangalore Turf Club in the case of Mysore Minerals Ltd. (supra). Hon'ble Karnataka High Court has categorically stated that the expenditure incurred at the general body meeting is covered by the Explanation 2 to section 37(2A) and the relevant portion from the judgment is reproduced as under Respectfully following the judgment of the Karnataka High Court in the case of Mysore Minerals Ltd. (supra)the disallowance made by the AO u/s. 37(2A)/37(2)is upheld. To sum up, the expenditure incurred on serving tea, coffee soft drinks to the shareholders at the Annual General Meeting is treated as entertainment expenditure. The action of the AO is upheld. ' 18. In view of the above decision of the Hon'ble Karnataka High Court, we confirm the order of the CIT(A) and dismiss ground No. 6 of the assessee. ' Respectfully following the above, ground no. 6 filed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure, calling for disallowance. 21. It is not in dispute before us that in AY. 1981-82 in I. T. A No. 1791/Bom/35 in assessee's case the Tribunal held that disallowance of 25% of entertainment expenses on this ground would be reasonable. We, therefore, restrict the disallowance to Rs. 75, 000/-instead of Rs 1 lakh. This ground of appeal is thus partly allowed. ' Respectfully following the orders for the earlier years, 1981-82 and 1985-86, we direct the AO to restrict the disallowance to 25% of the expenditure incurred for the year under appeal. Ground no. 7 is allowed in part. 8. Next Ground of appeal relates to disallowance of expenditure on business meetings and conferences of the employees, u/s. 37(2A)of Rs. 7. 19 lakhs. 8. 1. In the appellate proceedings FAA held that the assessee had conducted business meetings at hotels with the employees, that there was no doubt that the expenditure was incurred for the purpose of the business, that the expenditure was not incurred in the office but was paid to the hotels, that it was clear from the Expl. 2 to section 37(2A)/37(2) that the expenditure incurred on the hospitality of employees was excluded from the definition of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect from 1st, April, 1976. The relevant expression "other place of their work" in Explanation 2 is as follows: "For the removal of doubts it is hereby declared that for the purpose of this subsection . . . entertainment expenditure includes expenditure on provision of hospitality of every kind by the assessee to any person but does not include expenditure on food or beverages provided by the assessee to his employees in office, factory or other place of their work. " It is clear from the above Explanation 2 to section 37(2A)/37(2) that the expenditure incurred on the hospitality of employees gets excluded from the defmition of the entertainment expenditure provided the expenditure is incurred in office, factory or other place of their work. In the present ease, it is an accepted position that the expenditure was incurred in the hotels. The assessee's contention is iotels fall within the meaning of "other place of their work". I am unble to agree with the interpretation given by the appellant. Explanation 1 and 2 to section 37(2A) it can be seen that the expenditure incurred by the employees forms part to definition of entertainment expenditure. Explanation 2 does not treat e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establish the fact expenditure incurred on business meetings and conferences contained the rent paid for the halls in the hotels. In the absence of evidence, I refrain myself from giving any finding on this argument. However, keeping in mind ;the principles of natural justice, the A. O. is directed to examine and allow if the assessee is able to furnish the evidence of rent paid to the hotels or restaurants which was included in the business meetings and conferences expenditure. To sum up, the expenditure incurred on the business meetgs and conferences at the hotels falls within the definition of entertainment expenditure. The additions made by the AO are sustained subject to submission and verification of evidence of rent paid. " 28. We agree with the reasoning given by the CIT(A) in the light of the provisions of Explanation 2 to section 37(2A) of the Act. We have also considered the decisions relied upon by the learned counsel for the assessee. The decision of Hon'ble Calcutta High Court in the case of Chemcrown (I) Ltd. (supra) is distinguishable as follows:The employees and customers participated in the entertainment whereas in the case of the assessee the employees alone p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und pertaining to entertainment, including the expenditure incurred in clubs for employees- employers' meetings, therefore following the same ground no. 9 is dismissed. 10. Next Ground of appeal is related to expenditure on food at employees get together. AO found that in the Tax Audit report auditors had quantified the expenditure on employees get-togethers and picnics but the same was not treated as entertainment expenditure u/s. 37(2A) on the plea that the said expenditure was incurred on conveyance as well as on food. As the assessee did not quantify the expenditure on employees get-togethers and picnics attributable to food and beverages, the AO estimated the expenditure on food and beverages and disallowed the same treating it as entertainment expenditure u/s. 37(2A)/37(2) of the Act. 10. 1. Against the order of the AO assessee preferred an appeal before the FAA. After considering the submissions of the assessee, he held that the expenditure estimated by the AO was towards food and beverages incurred by the assessee on employees'get-togethers and picnics, that the expenditure incurred fell within the meaning of Explanation 2 to section 37(2A)/37(2) of the Act. He upheld t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate proceedings FAA, held that an identical issue came up for the consideration of the ITAT, Mumbai Bench 'A' in the assessee's own case for AY. 1988-89 (ITA/3222/Bom/192 dtd. 25. 01. 2002), that in AY. 1988-89 the expenses incurred towards maintenance of property, sweeper, wages, repairs, depreciation, soft furnishings etc. were quantified at Rs. 59. 20 lakhs, that the then FAA had sustained the disallowance of Rs. 18 lakhs out of the said amount, that the ITAT had confirmed the order of the FAA. Following that order he restricted the disallowance at Rs. 13 lakhs. 11. 2. Before us, AR admitted that issue was dismissed by the Tribunal in the order passed for AY. 1985-86(supra). We find that the question of deemed perquisites was dealt by the Tribunal as under: "34. It is not in dispute that in A. Y. 1988-89 and several assessment years similar issue had come up for consideration in assessee's case before the ITAT and the Tribunal in I. T. A. No. 3222/Bom/92 by following the decision of the Hon'ble Bombay High Court in the case of Lubrizol India Ltd. , 187 ITR 25 (Bom) was pleased to uphold such disallowance. We are of the view that the estimate of disallowance u/s. 40A(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... water project, irrigation facilities, vocational training etc. had no nexus with the business carried on by the assessee. 13. 1. Against the order of the AO assessee preferred an appeal before the FAA. After considering the submissions of the assessee, he held that the assessee had given contributions to TSRDS that was an independent entity registered under the Societies Act, that the expenditure was incurred by TSRDS on village link roads, drinking water projects, mobile dispensaries, family planning, irrigati - on facilities, veterinary dispensaries, educational activities, vocational training, community forestry, contribution to school building etc. , that the assessee gave contribution to TSRDS and the expenditure was in turn incurred by TSRDS on behalf of the assessee, that the expenditure incurred by the assessee had no direct nexus with the business carried on by the assessee, that the assessee was engaged in the manufacture of steel and the expenditure incurred had no direct nexus with the business carried on by it. Relying upon the judgments of the jurisdictional High Court in Standard Mills Co. Ltd. (209ITR85) and Voltas Ltd. (207ITR47) held that the expenditure incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he township over a period of years on land of about 25 sq. km. leased to it on a long term basis by the Government of Bihar. As all the facilities of the Works, sites for the associate companies, residence sites for its own employees and their dependents and sites for the business community were to be located on its own land, the assessee had to provide all the facilities of a Municipality like, power, water, sanitation, hospitals, playgrounds, clubs, reading rooms, dispensaries, community welfare centres, cultural assistance, etc. In the Lease Agreement finalised with the Bihar Government the assessee was under an obligation to provide aji the civic amenities in Jamshedpur and, therefore, the assessee had to continue these obligations which it had undertaken earlier on its own, in the absence of a Municipality in a large township like Steel City of Jamshedpur. With the increase in the number of people residing in Jamshedpur, the assessee found it difficult to cope with all the services of civic amenities and it has, therefore, encouraged senior officers of the company and other leading citizens in Jamshedpur to set up voluntary organisations registered under the Societies Act or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the terms and conditions of the MOU we are of the opinion that orders of the Tribunal delivered in the case of the assessee as well as TELCO should be followed. In our views, MOU makes the facts and circumstances of the case peculiar. We find that Hon'ble jurisdictional High Court has, in its order dated 26. 12. 2012, dismissed the appeal filed by the department filed for AY. 1985-86(IT Appeal No. 3176 of 2010) where similar issue of contribution to various institutions was decided in favour of the assessee by the Tribunal. (Ground no. B and F). As far as discharging of social responsibility is concerned Voltas Ltd. had to be considered the guiding case. As in that case there was no MOU with the workers, so, considering the peculiarity of facts of the case, as against the matter of Voltas, we decide the issue in favour of the assessee. 14. Next Ground of appeal pertains to disallowance of Annual Contribution to Steel Plants' Sports Board and Tata Sports Club amounting to Rs. 5. 69 lakhs. AO held that the above contributions were not admissible as deduction u/s. 37(1) of the Act, because the contributions were not made wholly and exclusively for the purpose of business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were given to them were hit by the provisions of section 40A(9) because the payments were made in the capacity of an employer, that if it was taken that the institutions to whom contributions were given were providing civic amenities to the city of Jamshedpur then also the contributions would be liable for disallowance because the employees were major beneficiaries of the contributions, that if the benefit of the contributions was for the city of Jamshedpur at large then these contribution were in the nature of charity. He disallowed the claim made by the assessee. 15. 1. Deciding the appeal filed by the assessee, FAA held that that significant contributions made by the were to Jamshedpur Notified area Committee All India Football Association, Merry Hospital, Jamshedpur, Trade Workers' Union, Loyola School, that on a perusal of the above contributions it was evident that the assessee had given a general and vague explanation about them, that it did not establish the direct nexus between the contributions and the business, that in the absence of such a nexus, it could not be presumed that the contributions were made for the purpose of the business, that the contributions made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the slag cement project, that the AO had rightly treated a sum of Rs. 2, 75, 107/- as capital expenditure, that a sum of Rs. 1, 40, 000/- was paid for techno economic feasibility report for slaked lime and water addition facilities at sinter plant, that the sinter plant was a part of the assessee's works for sizing and sintering of iron ore, that the study was undertaken to improve the efficiency in the existing trading operations, that the expenditure was incurred in connection with the existing trading operations and the expenditure incurred is in the revenue field, that Fee of Rs. 17, 500/-was paid to Tata Consultancy Services for conducting a feasibility study on elevator industry was conducted, that the study had no relationship with the existing business and the assessee intended to start a new product line, that the expenditure incurred was in the capital field, that Rs. 22, 180/- was paid to Tata Consulting Engineers for conducting a feasibility study of PVC plant based on calcium carbonate route, that the PVC was a new product and had nothing to do with the existing product line of the assessee, that the expenditure incurred was in the capital field. 16. 2. Before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meat and groceries and the same may be submitted AO for verification. 17. 2. Before us, AR and DR agreed that the similar issue was dismissed by the Tribunal while deciding the appeal of the assessee, for the AY. 1985-86(supra). Following last AYs. order we decide ground no. 17 against the assessee. 18. Grounds of Appeal 18, 19 and 20 are about Disallowance of Investment Allowance and Extra Shift Allowance on Town Division assets(Rs. 63. 39 lakhs and Rs. 44. 65 lakhs), investment allowan- ce on various items Plant and Machinery(P M-Rs. 10. 22 lakhs)and Investment Allowance on items of P M of Tubes Division. 19. During the assessment proceedings, AO held that the town division provided residential facilities to the employees as well as to other residents of the township, that various assets were installed by the assessee in the town division in various assessment years, that the assets were installed in the residential accommodation, that as per the provisions of section 32A(1)(a) of the Act any P M installed in any residential accommodation was not eligible for investment allowance, that as per the said section the P M installed in any industrial undertaking for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir- conditioning plant were installed at the hospital, that a part of the air-conditioning plant and electrical light and fans were used at the airport, clubs, hospital and the training institute, that the assessee was not entitled to claim investment allowance on certain P M, including Platform Weighing Scale, Aircraft battery charger analyser, ComputersWater Cooling Plant, Telephone System, Surgical instruments-(Ore Mines Quarries), X-Ray Machines-(West Bokaro) Street Lights, Overhead Wires. For the similar reasons he denied benefit of Extra Shift Allowance. Similar treatment was given by him to the P M of the Tube division, amounting to Rs. 3. 03lakhs. 20. FAA held that the assessee had submitted the details of plant and machinery which were installed in the electricity division, that the value of the plant and machinery used for generation and distribution of electricity was quantified and furnished during the assessment proceedings, that the assessee was entitled for investment allowance u/s. 32(2)(b)(i) of the Act, that as per the provisions of the section if the plant and machinery was installed for the purpose of business of generation or distribution of electricity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e investment allowance on the P M attributable to the manufacturing process and not to allow investment allowance on the plant and machinery which was used for the residential purposes. 20. 1. a. With regard to the P M installed in hospital, FAA held that the assessee was running a hospital in Jamshedpur and the activities of the hospital were grouped under the heading town division, that the AO had given a categorical finding that the electrical light and fans were installed at the hospital and the airport, that the assessee did not produce any evidence against the finding given by the AO, that the electrical light and fans installed at airport and hospital are grouped under the heading plant and machinery installed in hospital for the year under appeal, that the surgical instruments, X-Ray and electro therapy apparatus, and air-conditioning plant were installed at the hospital. A part of the air-conditioning plant and electrical light and fans were also installed at the airport, clubs, hospital and the training institute. FAA compared the provisions of section 33and 32A and held that any machinery or plant having a link in the total process of the operational integration should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e upheld the action of the AO. He also held that the assessee was not entitled for the additional depreciation because the conditions for allowing the additional depreciation were similar to investment allowance. About the extra shift allowance on Computer systems, FAA held that same was not admissible as the rules were very clear in this regard. With regard to investment allowance of Rs. 4, 25, 003/-on telephone system, FAA held that the assessee did not explain where the telephone system was installed, that the assessee had classified the telephone system under the town division which basically dealt with the residential facilities, that no investment allowance could be given on the P M installed in residential accommodation, that the action of the AO was to be upheld. 20. 2. Before us, AR submitted that similar issues of investment allowance/extra shift allowance and were discussed in details by the Tribunal while passing order for the AY. 1985-85 at paragraphs no. 17-24 of the order, that Tribunal had met all the arguments raised by the FAA in earlier years. DR submitted that matter might be decided on merits. We have heard the rival submissions and perused the material bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or power generation, water works machinery for supply of water, sanitary machinery for drainage system in the Town Division etc. The assessee on its own excluded plant and machinery installed in the residential/office accommodation for claiming investment allowance. The application of 32A(2)(iii), in fact, would cover plant and machinery installed 'own Division within the meaning of "industrial undertaking". The Assessing Officer, in his assessment order, has tried to the meaning to be imputed to "industrial- undertaking" to only manufacturing plant and machinery. "Industrial Undertaking" would cover all facets of business and, in short, refers to an organisation carrying on manufacturing activity. What is required to be seen is whether the plant and machinery is used for the purpose of business of construction, manufacture or production of any article or thing. It is not required to be established that the plant and machinery are directly used in the manufacturing process. This has been establish - ed recently by the Bombay High Court in the case of CIT vs. Jayanand Khira Company Pvt. Ltd. , 170 ITR 31, where it was held that the expression "for the purpose of business of constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Del) 48. The assessee had placed reliance before the CIT(A)on the decision of ITAT 'D' Bench in assessee's case in I. T. A. No. 8116 81l7/Bom/91 dated 5. 3. 2002 for A. Y. 198 1-82 and 1982-83 wherein the ITAT had taken a view that assets of Township Division formed part of the manufacturing process of the assessee. On the above decision of the ITAT, the learned CIT(A) held as follows: "The Hon'ble ITAT 'D' Bench, Mumbai relied on the decision of Hon'ble ITAT, Bombay Bench in the assessee's own case for assessment year 1968-69 to 1971-72. 1 have perused this order of the Hon'ble ITAT, Bombay Bench dated 13. 10. 76. The Hon'ble ITAT, Bombay Bench for assessment year 1968-69 to 1971-72 in turn relied on the earlier order of the ITAT. The question involved in assessment year 1968-69 to 1971-72 was whether a particular plant and machinery formed an integral part of a priority industry or not. Thus, the issue involved in those years was higher development rebate claim. In the context of allowing higher development rebate, ITAT, Mumbai Bench held that "the plant and machinery installed even for providing the necessary facilities to the employees, their dependents and others which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for deduction on account of extra shift allowance (ESA) was disallowed for the reason that the items of assets in respect of which ESA was claimed were not the items of assets listed in Part-I, Appendix-I to the Income-tax Rules, 1962 for which ESA was to be allowed. The CIT(A), however, allowed the following claim for deduction: XXX 50. For the very same reasons as given above, additional depreciation was allowed on the above two items. According to the CIT(A) the condition for grant of additional depreciation investment allowance was same and hence he granted additional depreciation on the above two items of plant and machinery. Aggrieved by the order of the CIT(A), the assessee has raised Ground No. 15 before the Tribunal. 51. We have heard the rival submissions. In A. Y. 1981-82 and 1982-83, the Tribunal dealt with an identical issue in the case of the assessee in I. T. A. No. 8116 8117/Bom/91. The Tribunal has discussed the issue at length including the case laws relied upon by the CIT(A)in order and has held as follows: "We have given a careful consideration to the rival submissions in the light of the material presented before us. The decisions relied on by the Ld. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation, extra shift allowance and investment allowance are admissible to the assessee on the plant and machinery in the Town Division. Therefore, no interference is called for in the order of the CIT(A). The appeal of the revenue fails on this issue. " 52. We are of the view that the Tribunal has considered all aspects of the case as discussed by the CIT(A). We, therefore, following the order of the Tribunal, direct the AO to allow the claim of the assessee. Gr. No. 15 is allowed. " 20. 3. We find that Hon'ble Bombay High Court has dismissed the appeal filed by the CIT-2, Mumbai on 26. 04. 2012, wherein order of the Tribunal for the AY. 1985-86 was challenged and issues of extra shift allowance, investment allowance and additional depreciation were agitated before the Hon'ble Court. (IT Appeal no. 3176 of 2010-question of law no. C and D). After considering the above and following the order of the Tribunal for the AY. 1985-86, we decided ground no. 18, 19, 20 in favour of the assessee. 21. Ground No. 21 is about Contribution to the society for sports and stadium at Calcutta. AO found that the assessee had contributed a sum of Rs. 10 lakhs to Society for sports and stad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to Rs. 2. 26, 532/-. During the year under appeal the assessee had contributed a sum of Rs. 2. 26 lakhs and 2 lakhs as contribution to Beldih and United clubs. He treated the contributions as expenditure not incurred for the purpose of business. 22. 1. In the appellate proceedings FAA held that he was not able to agree with the contention of the assessee, that the reasons given in connection with issue of contribution to Calcuttta Society were equally applicable, that the action of the AO had to be upheld. 22. 2. Before us, AR argued that the citizens of Jamshedpur had established Beldih and United club, that the main objectives of the club were to provide sports and cultural activities to the members, that the contribution was made because the assessee was under an obligation to provide all these facilities to the citizens of Jamshedpur by spending through the medium of those clubs, that it indirectly reduced the direct expenditure on such activities. 22. 3. We have heard the rival submissions and have perused the material before us. We find that Hon'ble jurisdictional High Court has dismissed the appeal filed by the department wherein order of the Tribunal for the AY. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted before the AO that there was no hope of recovery, but he did not accept the contention of the assessee on the ground that the amounts due were from the Govt. and semi government organisations and the recovery was possible. 25. 1. In the appellate proceedings, after considering the submissions of the assessee, FAA held that the arguments of the assessee were vague and general in nature, that no trouble was taken by the assessee to recover the dues from the government departments and officers, that o evidence was been brought on record to prove that the amounts were not recoverable, that in the absence of evidence, the AO was justified in not allowing the dues as bad debts. 25. 2. Before us, AR and DR agreed that issue is covered in favour of the assessee by the order of the Tribunal delivered for earlier AY. (supra). We find that issue of bad debts had been dealt in the AY. 1985-86, by the Tribunal as under : 58. Facts of the case, in brief, are that all the land in the township of Jamshedpur is leased by the Government of Bihar to the assessee and the assessee has constructed houses, bungalows, flats, etc. , for its employees on such land. A few private parties engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, submitted that the bad debts of Rs. 25, 53, 593 written off be allowed as deduction. 60. We are of the view that the write off of the debt as bad has to be construed as a bonafide write off. It was based on commercial providence. In the light of the principles laid down by the Hon'ble Bombay High Court we direct that the deduction claimed be allowed. Ground No. 18 is allowed. " We find that Hon'ble Bombay High Court has dismissed the appeal of the department vide its order dated 26. 04. 2012 wherein order of the Tribunal for the AY. 1985-86 was challenged and issue of writing off of debts was agitated before the Hon'ble Court. (IT Appeal no. 3176 of 2010-question of law no. E). Following the above ground no. 24 is allowed. 26. Ground of appeal no. 26 is about Depreciation on rolling mills. Before us, AR did not press the ground, as claim was allowed by the Tribunal vide its order for the AY. 1985-86(supra). Therefore, we decide Ground no. 26 against the assessee and it stands dismissed as not pressed. 27. Next Ground deals with restriction of claim made u/s. 80HHC of the Act. During the assessment proceedings, AO found that the assessee-company had claimed deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO to give an opportunity to the assessee for creating reserve and take necessary action accordingly. Ground is allowed in favour of the assessee, in part. 28. Last ground of appeal is about bad debts(Rs. 11. 09 lakhs)written off. As per the AR specific ground was taken by the assessee before the FAA about the bad debts, but he did not adjudicate the same. DR agreed that said ground remained to be decided. We find that the assessee had raised the ground about disallowance of written off amount, but FAA has not given decision about it. Therefore, in the interest of justice, we remit back the matter to the file of the FAA for fresh adjudication. He will afford a reasonable opportunity of hearing to the assessee. Ground no. 28 is allowed for statistical purposes. As a result, appeal filed by the assessee is allowed, in part. 3981/Mum/2011AY. 1986-87: 29. First ground of appeal is about direction issued by the FAA to the A. O. to allow Rs. 2, 69, 62, 561/- as deduction on account of provision for leave salaries. As stated earlier, assessee during the year appeal assessee had made payment towards leave salary and had also made provisions for leave salary. AO was of the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contribution to the ASF included initial contribution. According to the AO, 20% of the initial contribution to the ASF was not admissible as deduction. As a result, he allowed remaining 80% of the initial contribution as deduction, in five equal instalments, by relying on the CBDT's notification dated 21. 10. 1965. 30. 1. In the appellate proceedings before the FAA, assessee submitted that the whole of initial contribution to the ASF was deductible u/s. 36(1 )(iv) in computing the business income of the assessee in the year of contribution itself, that there was no provision in the Act which stipulated disallowance of a part of the contribution to ASF and spreading over the balance amount over a period of five years. The assessee relied on the judgment of the Hon'ble Apex court delivered in the case of Sirpur Paper Mills(237 ITR41). After considering the submissions of the assessee, he held that the issue was covered by the judgment of the Sirpur Paper Mills(supra), that in view of the said decision the assessee was entitled to claim the entire initial contribution to the ASF as deduction. He directed the AO to allow 20% of the initial contribution to the ASF. 30. 2. Before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement, the assessee made payment of Rs. 2. 52 Crores to it and claimed it as a deduction, that the assessee had agreed to run the two plants of the AAML, that it agreed to carry on all the operations of AAML and it was entitled to 10% of the operating profit as its remuneration, that there was another condition stating that in the event of operating profit per month was negative or less than Rs. 35 lakhs, the assessee was to make good to AAML such an amount as to give AAML a minimum operating profit of Rs. 35 lakhs; where the operating profit exceeded Rs. 35 lakhs but was less than Rs. 40 lakhs, 90% of such profits in excess of Rs. 35 Iakhs but less than Rs. 40 lakhs would be utilised for recouping the amounts made good by the assessee to AAML as cost, that the agreement further stipulated in the event of operating profit for any particular month exceeded Rs. 40 lakhs the remuneration to the assessee would be the excess of operating profits over Rs. 40 lakhs, that for the year under appeal the assessee made payments representing shortfall in the operating profits of AAML. According to the AO, the contribution made by the assessee on account of shortfall in the operating pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the deal with AAML to the extent of Rs. 2. 2 crores from A. Ys. 1985-86 to 1990-91. Further nothing has been brought on record that the agreements are false or untrue or that the payments made are excessive or non-genuine or false. In this view of the matter and in view of the elaborate discussion by the CIT(A) on this issue while deleting the disallowance, we do not find any infirmity in the same and therefore, the same is upheld. The ground raised by the Revenue is accordingly dismissed. " Respectfully following the above order, we decide Ground no. 3 against the AO. 32. Next Ground is about payment for holiday plan at hotels as guest house expenses. During the assessment proceedings AO found that the assessee made payments towards Holiday plan at various hotels. The assessee submitted before him that the payments were made to hotels in respect of rooms availed by the employees on holiday and such expenditure would come within the second proviso to section 37(4). He observed that no fixed room or accommodation was reserved in a particular hotel for a period exceeding 182 days and no recovery was made from the employees. The AO held that the payments made to various hotels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered on 27. 02. 2009(supra)for the AY. 1985-86. We find that in its order Tribunal had held as under: "112. After hearing both the sides, we find this issue stands covered in favour of the assessee by the decision of the Tribunal in assessee's own case vide I. T. A. No. 7083/Bom/96 order dated 27th December, 2004 for the A. Y. 1992-93. We find the Tribunal in the said order has given a finding that the assessee satisfies all the requisite conditions as provided in Explanation r. w. second proviso to subsection (4) of section 37 as existing at the relevant time and, therefore, the assessee is found to be entitled to deduction. Accordingly, the ground raised by the Revenue was dismissed. Respectfully following the decision of the Tribunal in assessee's own case and in absence of any contrary material brought to our notice this ground by the Revenue is dismissed. Respecfully, following the above, Ground no. 4 is decided against the AO. 33. Ground no. 5 pertains to direction given by the FAA to the AO to allow Rs. 93, 306/- on account of remuneration to Chairman and Managing Director. In the returns of income, the assessee company had computed the remuneration to chairman a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bution towards such beautification of the garden the assessee along with the other companies was allowed to put up their logos in and around the garden. Thus, the assessee submitted before AO that the expenditure was incurred on advertisement campaign, but, AO did not accept the same and disallowed the expenses. 34. 1. While deciding the appeal by the assessee, FAA held that an identical issue came for the consideration of the ITAT in the case of the assessee before Bench 'A', Mumbai for assessment year 1988-89 (ITA No. 3222/Bom/92), that ITAT had allowed the expenditure as deduction by relying on the judgment of the Hon'ble Rajasthan High Court in the case of Kamal Co. 203 ITR 1038. Following the judgment of the ITAT for the A. Y. 1988-89 in the case of the assessee, he directed the AO to allow the advertisement expenditure incurred by the assessee as deduction. 34. 2. Representatives of both the sides agreed that the issue is covered by the order of the Tribunal for the AY. 1988-89. Considering the facts narrated by the FAA, we are not inclined to interfere with his order. Ground no. 6 is decided against the AO. 35. Grounds no. 7-9 are about Investment allowance and Extra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as it was held that such items are not plant and machinery which are installed for the purpose of business of construction, manufacture or production article or thing. In the case of Pieco Electronics and Electronics Ltd. (supra), the investment allowance on the new equipment installed in the canteen was denied. In Technico Enterprises (P) Ltd. (supra), it was held that the computer was not used for manufacture or production of any article by the assessee and hence the assessee was not entitled to investment allowance. On the other hand, the decisions relied on by the Id. Counsel of the assessee do assist the case of the assessee. In the case of Triveni Tissues Limited (supra), the Hon'ble Calcutta High Court has held that the assessee, who was manufacturing tissue papers, was entitled to investment allowance on motors, electric installations, underground cables, overhead cables and air conditioning machines. In the case of Visveswarayya Iron and Steel Ltd. (supra) the locomotives and railway sidings provided at places of manufacturing activity for transport of articles out of or into factory were held to be 'plant' entitled to investment allowance. We feel that we need not disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83 wherein the Tribunal at para 4 of the order has discussed the issue and following the decision of the Tribunal in assessee's own case for the A. Y. 1981-82 allowed the claim of the assessee on account of investment allowance on railway sidings at stock yard. We find the Tribunal vide order dated 15th December, 1994 in R. A. No. 2202/Bom/93 has dismissed the Reference Application by the Department. Similarly we find the Tribunal in assessee's own case vide I. T. A. No. 549/Bom/88 order dated 4. 6. 1993 for the A. Y. 19983-84 has allowed the claim of investment allowance on railway sidings stock yard amounting to Rs. 6, 20, 602/-. We may further mention that the Tribunal also rejected the Reference Application filed by the Revenue in IT A No 677/Bom/90 Respectfully following the consistent decision of the Tribunal in assessee's own case and in absence of any contrary material brought to our notice against the decision of the Tribunal, we do not find any infirmity in the order of the CIT(A)allowing the investment allowance on the plant and machinery installed by the assessee in the stock yard. " Respectfully, following the above we decide ground no. 8 against the assessee. 37. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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