TMI Blog2014 (7) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... case for the previous year has been followed, AO disallowed the claim regarding right to use technical know-how u/s 37(1) and also denied the claim for 1/6th u/s 35AB – the AO is directed to allow the expenses and also, the AO is directed to allow deduction for entire amount of excise duty and custom duty paid by the assessee irrespective of the excise duty and custom duty included in the valuation of assessee’s closing stock at the end of the accounting year - Decided in favour of Assessee. Disallowance of telephone and telegram expenses on guest house – Held that:- The decision in Britannia Industries Limited Versus Commissioner of Income-Tax And Another [2005 (10) TMI 30 - SUPREME Court] followed - expenditure towards rent, repairs, maintenance of guest house used in connection with business is to be disallowed u/s. 37(4) because this is a special provision overriding the general provision – Decided against Assessee. Entertainment expenses deduction for employees accompanying guest — 25% allowed against the claim of 50% - CIT(A) erred in allowing only 25% as against the Appellants claim of 50% towards Entertainment expenses towards employees accompanying the guests – Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO on account of leave encashment, being the basis for making the addition under this head. 4. Aggrieved, the assessee is now before the ITAT. 5. Before us, the Senior Counsel submitted that since the very basis itself has been knocked off, the reason to sustain the disallowance does not survive. He also submitted that the department has not filed any appeal against the decision of the CIT(A) on leave encashment. 6. The Senior Counsel, further pointed out that post retirement medical benefit comes along the service contract, therefore, the liability on the company becomes final and ascertained, the moment an employee signs service agreement with the company. He further pointed out that not only, it is the policy of the company, but it is direction from the Government of India. He drew our attention to the office Memorandum dated 26.11.2008, no. 2 (70)/08-DPE(WC) issued by Ministry of Heavy Industries Public Enterprises (APB 37 and relevant portion at pages 45 reverse side), wherein point (v) reads, Superannuation Benefits: CPSEs would be allowed 30% of Basic Pay as Superannuation benefits, which may include Contributory Provident Fund (CPF), Gratuity, Pensio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e valuation and then allow the claim accordingly. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to allow the claim of provision after verification of the Actuary s report pertaining to the current year. Ground no. 2: Right to use technical know how - Disallowance of 100% claim u/s 37(1) and allowance of 1/6th u/s 35 AB : ₹ 4,33,49,942/- The CIT(A) erred in Confirming the disallowance of ₹ 4,33,49,942/- towards right to use technical know how u/s 37(1) and allowing only 1/6th u/s 35AB. 11. In the course of assessment proceedings, the AO noticed that the assessee had claimed ₹ 5,20,19,930 on account of Technical know how fee u/s 37(1). The AO, disagreed to the claim u/s 37(1), but he considered the expense to be allowed on deferred basis u/s 35AB to be spread over in 6 years. He, therefore, allowed ₹ 86,69,988 and disallowed the balance of ₹ 4,33,49,942. The AO, however, did not allow ₹ 86,69,988, as the issue was disputed by the assessee in appeal and the AO was categorical in observing, the said claim will be considered for allowance as and when the matter becomes final at the appellate stage . 12. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the issue is covered by the order of the coordinate Bench of ITAT at Mumbai, for the years covering assessment years 1992-93 to 1995-96 in Para 13, the Tribunal held: 13. We have considered the rival submissions as well as relevant material on the court. At the outset, we note that for the assessment year 1989-90 in order reported in 96 ITD 186, this Tribunal has considered and decided it this issue in para 12 and 13 as under: 12. In the second ground of appeal, the assessee is aggrieved that the CIT (A) erred in confirming the partial disallowance of excise / custom duty paid during the year and included in the closing inventory under section 43B, thereby ignoring the ratio of Gujarat High Court in the Lakhanpal National Ltd. vs. ITO [1986] 162 ITR 240. Learned representative fairly agree that the issue is now covered in favour of the assessee, by Hon ble Supreme Court s judgment in the case of Berger Paints India Ltd. v. CIT [2004] 266 hr 99. Respectfully following the same, we uphold the contention of the assessee and direct the Assessing Officer to allow deduction for entire amount of excise duty and custom duty paid by the assessee irrespective of the excise dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the year towards stores and spares to be written off claimed u/s 37(1). 28. In the year under consideration, the assessee had made a provision for write off of ₹ 64,66,500 pertaining to store and spares. According to the AR, in a company where there is a lot of wear and tear at regular and fast intervals, these spares and stores articles had become obsolete and unusable and it was necessary, for the company to write them off. Therefore, in accordance with the decision of the management, the provision was made during the year and claimed. The revenue authorities treated this to be a contingent liability and disallowed the claim. 29. It was pointed out by the Senior Counsel that in the year, when the amount was actually written off, i.e. assessment year 1998-99, no deduction was claimed. The Senior Counsel relied on the decisions of Bharat Earth Movers, Vijaya Bank, TISCO and pleaded that the provision was rightly claimed by the assessee. 30. The DR relied on the orders of the revenue authorities. 31. We have heard the arguments and perused the order of the revenue authorities. We find that nowhere in the order of the revenue authority there is an objection to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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