TMI Blog2014 (8) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in respect of those items which were used for less than 180 days in the present year - Regarding the opening balance also, he has directed the AO to verify the record of the assessment year 2001-02 and recompute the depreciation allowable by allowing 100% depreciation on opening WDV arrived at as on 01.04.2001 - The directions of the CIT(A) are in line with the provisions of 2nd proviso to clause (ii) of sub section (1) of section 32 of the Act – Decided against Assessee. Payment of gratuity under LIC scheme u/s 43B – Invocation of section 40A(7) – Held that:- Deduction is allowable if the provision is for the purpose of payment of a sum by way of any contribution towards approved gratuity fund – relying upon Shree Sajjan Mills Ltd. Vs Commissioner of Income-tax [1985 (10) TMI 2 - SUPREME Court] - the amount paid was nothing else but gratuity and merely because the scheme had been mentioned as Gratuity Insurance Assurance Scheme, it does not make any difference and the provisions of section 40A(7) would be attracted as the fund had not been recognized by the Department - the deduction is not allowable u/s 36(1)(v) either and the same is not allowable u/s 36(1)(v) also becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) is upheld – Decided against revenue. Bad and Doubtful Debts, Advances and others written off u/s 36(1)(vii) – Held that:- CIT(A) rightly decided that in addition to writing off the debt, the assessee has to establish that the amount of debt was taken into account in computing the income of the assessee of the previous year in which it is written off or of an earlier year – as the assessee could not establish that the amount was considered as income by the assessee in the previous year or in any earlier year - as per sub section (2) of section 36, deduction is not allowable to the assessee u/s 36(1)(vii) of the Act – Decided against Assessee. - ITA Nos.86 & 87/LKW/2011, ITA No.91/Lkw/2012, ITA No.36/Lkw/2013, ITA Nos.58 to 62/LKW/2011, ITA No.118/Lkw/2013 - - - Dated:- 21-8-2014 - Sunil Kumar Yadav and A K Garodia, JJ. For the Appellant : Shri V B Bhargava, FCA For the Respondent : Shri Ajay Kumar, DR ORDER First we take up the appeal of the assessee for assessment year 2002-03 i.e. I.T.A. No.86/Lkw/2011. 2. First ground of appeal is as under: 1. Because, the Learned Commissioner of Income tax (Appeals) erred in law as well as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 35DDA were not on statute book. In the present case, the assessment year involved is 2002-03 after insertion of the provisions of section 35DDA inserted with effect from 01/04/2001. Hence, this judgment of Hon'ble Bombay High Court is not applicable in the present case. 5.3 The second judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Delhi High Court rendered in the case of Commissioner of Income-tax Vs Dinesh Kumar Goel [2011] 331 ITR 10 (Del). In this case, the issue in dispute before the Hon'ble Delhi High Court was that as to whether the tuition fees received in advance is accrued income in the year of receipt although the services are to be rendered in the subsequent year. Under these facts, it was held by Hon'ble Delhi High Court that the fees relating to next year cannot be said to have accrued to the assessee. This judgment is not applicable in the present case because in the present case, there is no dispute regarding accrual of income and we have seen that the decision of the authorities below is in line with the provision of section 35DDA of the Act. Hence, no interference is called for in the order of CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as ₹ 1,05,014/- in the statement showing calculation of depreciation on electric vehicles on page 125 of the written submissions) on the opening WDV of ₹ 10,50,147/- as depreciation is allowable @ 100% on the opening value of ₹ 10,50,147/-. Since as per the claim the amount was allowable @ 100% in the previous assessment year i.e. A.Y. 2001-02, and Explanation 5 states that the provisions of sub-section (1) of section 32 shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income and as the Explanation is clarificatory in nature and, therefore, has retrospective effect, the Assessing Officer shall examine the record of A.Y. 2001-02 and recompute the depreciation allowance by allowing 100% depreciation on opening WDV arrived at as on 01.04.2001. The Assessing Officer shall further verify the amount pertaining to the period of use equal to 180 days or more and allow the depreciation of ₹ 9,05,138/- instead of ₹ 4,19,641/- allowed by him if after verification the period of use is found to be 180 days or more. This ground of appeal is accordingly partly allowed. 9.1 From the above Paras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y contribution towards approved gratuity fund. Hence, it has to be seen as to whether in the present case, the payment is for an approved Gratuity fund or not. As per the judgment of Hon'ble Apex Court rendered in the case of Shree Sajjan Mills Ltd. Vs Commissioner of Income-tax [1985] 156 ITR 585 (SC), it was held that the amount paid was nothing else but gratuity and merely because the scheme had been mentioned as Gratuity Insurance Assurance Scheme, it does not make any difference and the provisions of section 40A(7) would be attracted as the fund had not been recognized by the Department. It was held that the Tribunal was not justified in upholding the deletion of the addition. It is also noted by CIT(A) that the deduction is not allowable u/s 36(1)(v) either and the same is not allowable u/s 36(1)(v) also because deduction is allowable u/s 43B of the Act. He has held that the disallowance made by the Assessing Officer is justified and on this basis, he has confirmed the disallowance. 14. Learned A.R. of the assessee could not show before us that payment of premium to LIC is payment to approved gratuity fund. Hence, on this issue also, we do not find any reason to interf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to treat it as income. Apart from this the expenses against this grant had been incurred during F.Y. 2002-03. 4.10.1 I have considered the submissions made. The appellant follows the mercantile system of accounting and as the grant of ₹ 100 Lakhs had been sanctioned, it had accrued to the assessee as it was entitled to receive the same. Therefore, the same should have been included in its income instead of treating only a part of it as income. The expenses are allowable as and when they are incurred. Hence, this ground of appeal is hereby rejected and the addition of ₹ 50,00,000/- is confirmed. 18.1 From the above Paras from the order of CIT(A), it is seen that grant of ₹ 100 lac was sanctioned on 21/08/2001 but only ₹ 50 lac was disbursed initially and balance was to be disbursed on utilization of the first ₹ 50 lac and on furnishing of utilization certificate duly audited. It is noted by CIT(A) that on receipt of utilization certificate, the balance amount was disbursed as per letter dated 10/04/2002 and the draft was received by the assessee on 15/04/2002. A grant which was received in the next assessment year cannot be utiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of CIT(A) and it is settled position that if liability relating to earlier year has crystallized in the present year then the same is allowable in the present year. Learned D.R. of the Revenue could not controvert this finding of CIT(A) and therefore, we do not find any reason to interfere in the order of CIT(A). 24. In the result, the appeal of the Revenue stands dismissed. 25. Now we take up the appeal of the assessee for assessment year 2003-04 i.e. I.T.A. No.36/Lkw/2013 arising out of assessment order passed by Assessing Officer u/s 143(3) read with section 263 of the Act. 26. In this appeal the assessee has raised the following grounds: 1. Because the learned CIT(Appeals) has erred in overlooking the policy followed by the appellant company relating to Prior Period Adjustment A/c and in making addition of ₹ 79,92,018/-. 2. That the Assessing Officer erred in not understanding the accounting policy adopted by the appellant, AS-5 as issued by the Institute of Chartered Accountants of India and not accepting the judicial pronouncement as held in Case of Bharat Earth Movers Ltd. v/s CIT (2000) 112 Taxman 61 (SC) and CIT Delhi-II v/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of day to day expenses. It is beyond comprehension how it could be said that the liability arose in the current year under consideration when the work concerned was done/completed in the earlier years. The examination above reveals that the appellant is claiming the expenses in the year under consideration solely on the ground that the vouchers concerned were passed in the current year as in none of the cases above it can be said that the liability arose in the year under consideration. The AO has also examined the issue in detail and has come to a correct conclusion that the liability of the expenses cannot be said to have arisen in the year under consideration. The expenses claimed relate to earlier years and are therefore not allowable in the year under consideration solely on the ground that the voucher for the concerned expenses was cleared by the authorities concerned in the year under consideration. In view of above, I do not find the expenses allowable. The disallowance of ₹ 79,92,018/- (Rs.39,99,702/- for the assessment year 2004-2005) is confirmed. The ground of appeal is rejected. 29.1 From the above Paras from the order of CIT(A), it is seen that a cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same which were raised by the assessee in assessment year 2002-03 and hence, these issue may be decided on similar line. As per ground No. 1, the assessee is disputing the disallowance of depreciation of electric vehicles to the extent of 50% on the basis that these vehicles were used for less than 180 days. On this issue, we have confirmed the order of CIT(A) in assessment year 2002-03 and on the same line, in the present year also, this ground of the assessee is rejected. 34. As per ground No. 2, the assessee is disputing disallowance of ₹ 1,63,05,942/- on account of payment of gratuity under the scheme of LIC which was disallowed by the Assessing Officer. In assessment year 2002-03, this issue was decided by us against the assessee. Accordingly, in this appeal also, this ground is decided against the assessee. Ground No. 2 is rejected. 35. Regarding ground No. 3 of the appeal, while deciding this issue in assessment year 2002-03, we have held that the grant should be considered as income in next year on the basis of matching principle. In that year, out of total grant sponsored of Rs. One crore, ₹ 50 lac was received in assessment year 2002-03 and balance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs. CIT (Bom.) 137 ITR and in the case of Tamil Nadu Minerals Ltd. Vs. JCIT (ITAT, Chennai) 05 ITD 294. 2. Ld. CIT (A) has erred in law and facts in deleting the addition of ₹ 8,33,550/- on account of benevolent expenses relying on the decision in the case of CIT Vs. E.I.D. Parry India Limited (1999) 105 Taxman 153/240 ITR 253 (Mad.) They have failed to appreciate that the assessee failed to prove that the expenses are wholly for the purpose of business. The decisions in the case of Goodlas Nerolac Paints Ltd. Vs. CIT (Bom.) 137 ITR and in the case of Tamil Nadu Minerals Ltd. vs. JCIT (I.T.A.T.), Chennai 05 ITD 294 are therefore applicable to the facts of the case. 39. Learned D.R. of the Revenue supported the assessment order whereas Learned A.R. of the assessee supported the order of learned CIT(A). 40. We have considered the rival submissions. We find that this issue has been decided by CIT(A) as per Para 4.5 4.5.1 of his order which are reproduced below for the sake of reference: 4.5 Ground no. 5 pertains to the disallowance of ₹ 1087639/- on account of interest subsidy to the employees for maintaining harmonious relationship and em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, after providing for the salary or remuneration of the employer and the employees and other prior charges such an interest on capital, depreciation, reserves, etc. a part of it should in all fairness go to the employees. Further, it is held in CIT v. E.I.D. Parry India Ltd. [1999] 105 Taxman 153/240 ITR 253 (Mad.) that provision of assistance to employees for acquiring houses are allowable deductions under section 37(1) of the Incometax Act, 1961. Hence in view of these judicial pronouncements, the ground of appeal is allowed and the disallowance of ₹ 1087639/- is hereby deleted. 40.1 From the above Paras from the order of CIT(A), we find that the disallowance was made by the Assessing Officer on the basis that the interest subsidy cannot be allowed as business expenditure. In the facts of the present case, we are of the considered opinion that the interest subsidy to the employees is for maintaining harmonious relationship and welfare of the employees, which is nothing but business expenditure and hence, we decline to interfere in the order of CIT(A) on this issue. 41. In the result, the appeal of the Revenue stands dismissed. 42. Now we take up the appeal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee of the previous year in which it is written off or of an earlier year. It is noted by CIT(A) that the assessee has failed to establish this aspect. Before us also, Learned A.R. of the assessee could not establish that the amount in question was considered as income by the assessee in the previous year or in any earlier year. Hence, as per sub section (2) of section 36, deduction is not allowable to the assessee u/s 36(1)(vii) of the Act. Hence, on this issue, we decline to interfere in the order of CIT(A). 47. In the result, the appeal of the assessee stands dismissed. 48. Now we take up the appeal of the Revenue for assessment year 2004-05 i.e. I.T.A. No.60/Lkw/2011. In this appeal, the Revenue has raised the following grounds: 1. Ld. CIT (A) has erred in law and facts in deleting the addition of ₹ 7,33,087/- on account of interest subsidy on house building loans relying on the decision in the case of CIT Vs. E.I.D. Parry India Limited (1999) 105 Taxman 153/240 ITR 253 (Mad.). He failed to appreciate that the said expenses are not wholly for the purpose of business and are not allowable. Reliance is being placed in the case of Goodlas Ner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue for assessment year 2006-07 i.e. I.T.A. No.62/Lkw/2011. In this appeal the Revenue has raised the following grounds: 1. Ld. CIT (A) has erred in law and facts in deleting the addition of ₹ 6,84,150/- on account of benevolent expenses relying on the decision in the case of CIT Vs. E.I.D. Parry India Limited (1999) 105 Taxman 153/240 ITR 253 (Mad.) They have failed to appreciate that the assessee failed to prove that the expenses are wholly for the purpose of business. The decisions in the case of Goodlas Nerolac Paints Ltd. Vs. CIT (Bom.) 137 ITR and in the case of Tamil Nadu Minerals Ltd. vs. JCIT (I.T.A.T.), Chennai 05 ITD 294 are therefore applicable to the facts of the case. 55. It was agreed by both the sides that this issue is identical to the only issue raised by the Revenue in assessment year 2005-06. In assessment year 2005-06, this issue was decided in favour of the assessee and against the Revenue and accordingly, in the present year also, this issue is decided in favour of the assessee. 56. In the result, the appeal of the Revenue stands dismissed. 57. Now we take up the appeal of the Revenue for assessment year 2009-10 i.e. I.T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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