TMI Blog2015 (5) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... has considered the issue and has also followed the decision of Indian Aluminium Cables Ltd. (No. 1) [1989 (1) TMI 14 - DELHI High Court ]. It is further noticed that the fact that the loan was taken for which the immovable property of the sister concern of the assessee has been pledged was for the purpose of the business of the assessee is not in dispute. Obviously, if the property of the sister concern of the assessee is pledged for the business purpose of the asses see, the sister concern is entitled to be given a guarantee commission/ commission charges. In the circumstances, the finding of the Commissioner of Income-tax (Appeals) as confirmed by ITAT are correct. - Decided in favour of assessee. Disallowance of maintenance of guest house - ITAT confirming order of CIT(A) in deleted addition - Held that:- The Commissioner of Income-tax (Appeals) and the Tribunal concurrently concluded that the expenditure was incurred for maintenance of the place for the employees who visited the factory for official purposes for the purpose of business. In the light of the aforesaid findings, no infirmity is found in the order of the Commissioner of Income-tax (Appeals) and the Tribunal del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue is, thus, rejected. - Decided in favour of assessee. - ITA No.609 of 2009 (O&M) - - - Dated:- 22-9-2014 - MR. AJAY KUMAR MITTAL AND MR. FATEH DEEP SINGH, JJ. For the Appellant : Mr. Tejinder K. Joshi, Advocate JUDGMENT Ajay Kumar Mittal J.- 1. This order shall dispose of I. T. A. Nos. 609 to 613 and 615 of 2009 as, according to the learned counsel for the appellant- Revenue, all the appeals arise out of one consolidated order dated March 27, 2009, passed by the Income-tax Appellate Tribunal, Delhi Bench I , New Delhi (in short, the Tribunal ) relating to the assessment years from 1994-95 to 1999-2000. In all, five substantial questions of law arise for consideration in I. T. A. No. 609 of 2009. I. T. A. Nos. 611 to 613 of 2009 would be covered by the decision in I. T. A. No. 609 of 2009 as the question(s) claimed therein are similar. However, one additional question regarding the addition of ₹ 47,32,919 made by the Assessing Officer on account of the late deposit of the employees' contribution to ESI and PF has been claimed in I. T. A. No. 615 of 2009 and in I. T. A. No. 610 of 2009, an additional question relating to the disallowance of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 3,735 made by the Assessing Officer on account of 'inauguration expenses' as per the provisions of section 37(2A) of the Income-tax Act, 1961, disregarding the fact that such expenses are not allowable as per the provisions of section 37(2A) of the Income-tax Act, 1961 ? E. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in confirming the order of the Commissioner of Income-tax (Appeals) in deleting the addition of ₹ 30,26,723 made by the Assessing Officer on account of the trading addition without appreciating the magnitude of defects pointed out by the Assessing Officer on this score ? 3. A few facts relevant for the decision of the controversy involved as narrated in I. T. A. No. 609 of 2009 may be noticed. The return declaring the net loss of ₹ 4,71,39,320 was filed on November 30, 1994. The first revised return was filed on December 12, 1994, declaring the net loss of ₹ 4,71,98,910. The second revised return was filed on February 22, 1996, declaring the net loss of ₹ 4,75,57,488. The assessment was completed under section 143(3) of the Act, vide order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit rate of 52 per cent. instead of 51.7 per cent. shown by the assessee after rejecting the book results declared in the MDF division was deleted by the Commissioner of Income-tax (Appeals) which order was affirmed by the Tribunal. Hence, the instant appeals by the Revenue. 4. We have heard the learned counsel for the appellant-Revenue and perused the record. 5. In order to effectively adjudicate the appeals, it would be essential to notice the relevant findings given by the authorities below on each issue separately. A. Share capital expenses 6. The Assessing Officer made disallowance of ₹ 2,97,924 claimed under section 35D of the Act in respect of capital raising expenses being one-tenth of ₹ 29,79,237 on the ground that these were not covered under the said provision. It was recorded thus : 14. In the fourth revised statement of computation of income/loss filed on November 18, 1996, the assessee has claimed the deduction under section 35D with the remarks that without prejudice to their claim of expenditure in the respective assessment year pending before the Income-tax Appellate Tribunal and the Commissioner of Income- tax (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowable under section 37. The full allowability has not been pressed. 7.2. I have carefully considered the written submissions of the appellant and find that the one-tenth of the expenditure is allowable in view of the cases referred to above. Therefore, I delete the dis allowance of ₹ 2,97,924 in this regard. 8. The Tribunal upheld the order passed by the Commissioner of Income- tax (Appeals) holding thus : 17. In regard to the issue of the expenses incurred on the raising of the share capital, which is ground No. 4 in I. T. A. No. 3756 for the assessment year 1994-95, ground No. 11 in I. T. A. No. 2049 for the assessment year 1995-96, it was submitted that the Commissioner of Income-tax (Appeals) erred in directing allowance of one-tenth of the said expenditure by invoking the provisions of section 35D of the Act. In the reply, learned authorised representative vehemently supported the order of the Commissioner of Income-tax (Appeals). 18. We have considered the rival submissions. We have also perused the orders of the Commissioner of Income-tax (Appeals). It is noticed that this issue is squarely covered by the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission pertains to the period relevant to the assessment year 1993-94 also. On the next date of hearing, i.e., January 17, 1997, the assessee has not filed any document regarding the guarantee commission as per the note-sheet dated January 17, 1997. On January 27, 1997, the assessee has stated that the photo copy of the letter dated September 24, 1993, received from the party has been submitted, vide letter dated January 10, 1997, but no agreement for payment of guarantee commission has been filed. Without any agreement for the payment of guarantee commission the same could not be allowed as a business expenses. There is no explanation as to why the asset have not been used as collateral security by M/s. Nuchem Investment (P.) Ltd. for raising loan for themselves. Part of the payment period is not relevant to this assessment year. In view of these facts, the guarantee commission paid to M/s. Nuchem Investment (P.) Ltd. of ₹ 3,60,000 is dis allowed. Moreover, the payment is also covered by the provisions of section 40A(2)(b) of the Income-tax Act as M/s. Nuchem Investment (P.) Ltd. is the sister concern of this group. 10. The Commissioner of Income-tax (Appeals) deleted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the learned authorised representative submit ted that the assessee had taken a loan for which the assessee's sister concern, M/s. Nuchem Pvt. Ltd. had pledged their land as collateral security. For this, the assessee had given a guarantee commission/ commitment charges. It was also his submission that this issue had been allowed for the assessment year 1993-94 in the assessee's own case in the security assessment passed under section 143(3) of the Act. He vehemently supported the order of the Commissioner of Income-tax (Appeals). 20. We have considered the rival submissions. It is noticed that the Commissioner of Income-tax (Appeals) has considered the issue and has also followed the decision of the hon'ble jurisdictional High Court in the case of Indian Aluminium Cables Ltd. (No. 1) [1990] 184 ITR 516 (Delhi). It is further noticed that the fact that the loan was taken for which the immovable property of the sister concern of the asses see has been pledged was for the purpose of the business of the assessee is not in dispute. Obviously, if the property of the sister concern of the assessee is pledged for the business purpose of the asses see, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer has not denied that the expenditure is only for employees and that the expenditure has been incurred for maintenance of place, which has been used for the purpose of staying of employees of the company, who has visited the factory for official business purposes. The addition made for the expenditure incurred for the accommodation for employees for business purposes is, therefore, deleted. The assessee gets relief of ₹ 37,767. 14. The Tribunal upheld the deletion in the following terms : 25. In regard to the issue of the disallowance of the maintenance expenses of the guest house, which is ground No. 9 in I. T. A. No. 3756 for the assessment year 1994-95, it was submitted by the learned Departmental representative that the Commissioner of Income-tax (Appeals) erred in deleting the said addition. In reply, the learned authorised representative submitted that the addition had been made on the ground that the expenditure had been incurred for the maintenance of the place for the staying of the company's employees for the business of the assessee-company. It was his sub mission that the Commissioner of Income-tax (Appeals) had rightly deleted the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. In regard to the issue of the disallowance of the inauguration expenses which is ground No. 14 in I. T. A. No. 3756 for the assessment year 1994-95, it was fairly agreed by both the sides that the issue was squarely covered by the decision of this Tribunal in the assessee's own case for the assessment year 1993-94, referred to para graph, wherein paragraph 92 of the said order, the issue has been held against the Revenue. Respectfully following the decision of this Tribunal in the assessee's own case for the assessment year 1993-94, the finding of the Commissioner of Income-tax (Appeals) on this issue stands upheld. In view of the finding of fact recorded by the Commissioner of Income-tax (Appeals) and, the Tribunal deleting the addition, no error is noticed in the approach adopted by them which may require intervention of this court. E. Trading additions 17. The Assessing Officer made an addition of ₹ 30,26,723 on account of trading addition by applying the gross profit rate of 52 per cent. instead of 51.7 per cent shown by the assessee after rejecting book results declared in the MDF division. The Commissioner of Income-tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 756 for the assessment year 1994-95, it was fairly agreed that this issue was covered by the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment year 1993-94, referred to supra wherein para graphs 76-80 of the said order this issue has been decided in favour of the assessee and the finding of the Commissioner of Income-tax (Appeals) on this issue has been upheld. Respectfully following the decision of this Tribunal in the assessee's own case for the assessment year 1993-94, the finding of the Commissioner of Income-tax (Appeals) on this issue stands upheld. The Commissioner of Income-tax (Appeals) and the Tribunal have followed the earlier decision in the case of the assessee for the assessment year 1993-94 which was not shown to have been upset by any higher court. Thus, the approach of the Commissioner of Income-tax (Appeals) and the Tribunal cannot be faulted on this deletion. 19. The findings recorded by the Commissioner of Income-tax (Appeals) and upheld by the Tribunal on all the issues are based on appreciation of evidence on record which have not been shown to be illegal or perverse in any manner. Only an effort ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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