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TMI Blog2015 (6) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner of Incometax- II, Lucknow was duly taken u/s 151 of the Incometax Act by the Assessing Officer for re-assessment proceedings. The Ld. CIT(A) failed to follow the decision of Hon'ble Delhi High Court in the case of the Central India Electric Supply Co. vs. ITO. Similarly, the Ld. CIT(A) failed to follow the view expressed by the Hon'ble Allahabad High Court in the case of Ajay Kurnar Maheshwari vs. ITO writ Tax No. 540 of 2001 (2006). 2. The CIT(A) has erred in law and on facts of the case in deleting the addition of Rs. 8,57,73,905/- by the A.O. under heads Royalty Receivable and accrued interest. The Ld. CIT(A) failed to appreciate the facts that the assessee is following the Mercantile system of accounting and also overlooked the decision of Hon'ble Apex Court in the case of M/s New India Mining Corp. Pvt. Ltd. vs. CIT 243 ITR 640 (2000)." 3. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). 4. We have considered the rival submissions. Regarding ground No. 1 in respect of validity of reassessment proceedings, we find that this issue was decided by learned CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, even when they initiated in consequence of or to give effect to any finding or direction contained in the appellate order, if such initiation of reassessment proceedings is barred by any other provision of the Act. It therefore needs to be examined whether the proceedings under section 147 of the Act which were initiated after the expiry of more than 4 years from the end of the relevant assessment year are initiated validly in view of the proviso to section 147 of the Act which provide that no action can be taken unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year as under - Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding has been given by CIT(A) that the observations of CIT(A) in his order dated 30/07/2010 in course of proceedings u/s 154 were not directions as such of CIT(A). That order of CIT(A) is available on pages 16 to 21 of the paper book and as per this order, it is held by learned CIT(A) that there is no patent mistake apparent from record and both the issues are debatable and therefore, the Assessing Officer was not justified in rectifying the total income u/s 154 of the Act since the issues were debatable. Although there is observation of CIT(A) that the Assessing Officer is free to take action u/s 147 after following the procedure established by law in this regard, this observation of CIT(A) cannot be considered as a direction of CIT(A) to the Assessing Officer to initiate proceedings u/s 147 as per the requirement of section 150(1) of the Act. Hence, in the facts of the present case, section 150(1) cannot be invoked in the present case. In the present case, the first proviso to section 147 is also applicable because it is undisputed that the original assessment was completed by the Assessing Officer for the present year u/s 143(3) and four years from the end of the relevant ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has to be equal and therefore, as a consequence, if an item is appearing on asset side of the balance sheet, it has to be accepted that it has been considered in the credit side of the balance sheet or profit & loss account. In the present case, this is not the case of the Assessing Officer that corresponding amount is appearing in the liability side of the balance sheet but it is apparent from Schedule-12 that the assessee has shown corresponding amount as income. The amount of income shown under both these heads i.e. royalty received and interest on term deposit is higher than the amount shown in the balance sheet under the head 'other current assets' on account of royalty receivable and interest accrued on term deposit. It means that entire income under these heads were accounted for as income and that part of these two income, which were receivable at the end of the year, were shown in the balance sheet under the head 'current assets' and therefore, it cannot be said that the assessee has not shown these two items as income in the present year. The finding of CIT(A), on this issue, is contained in Para No. 6(1) to 6(2) of his order, which are reproduced below for the sake of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in law as well as on facts in confirming the deduction of Rs. 13,14,245/- as claimed by the appellant u/s 35(2AB) of the IT Act by mentioning that no in house scientific research has been carried out by the appellant." 9. Both the sides agreed that this issue is covered against the assessee by the Tribunal decision in assessee's own case for assessment year 2005- 06 and 2006-07 in I.T.A. No.88 & 89/Lkw/2011 dated 06/02/2015. It was submitted by Learned A.R. of the assessee that the copy of the Tribunal order is available on pages 245 to 266 of the paper book and in particular, our attention was drawn to Para No. 6.2 & 7 of the Tribunal order. 10. We have considered the rival submissions. We reproduce the relevant Para of the Tribunal order i.e. Para No. 6.2 & 7 from paper book pages 249 and 250, which are as under: "6.2 From the above paras from the order of CIT(A) in assessment year 2006-07, we find that he has given a clear finding that the assessee has failed to justify his claim of inhouse scientific research carried out and therefore, no deduction under section 35(2AB) is admissible to the assessee. In assessment year 2009-10 also, this issue was decided by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal decision in assessee's own case for assessment year 2005-06 and 2006-07 and our attention was drawn to Para No. 11.1 of the Tribunal order, which is reproduced below for the sake of ready reference:- "11.1 From the above paras from the order of CIT(A), we find that CIT(A) has followed his own order for assessment year 2006-07 and the relevant portion for assessment year 2006-07 has been reproduced by him in Para 4.2 of the present year, as reproduced above. We also find that in the assessment order, the Assessing Officer has held that the interest received on deposit with bank is to the extent of 6.75% on average basis and to this extent, he has allowed deduction of interest on borrowed funds also, which has been computed by him at Rs. 44,01,512/- as against Rs. 1,07,62,911/- paid by the assessee to banks. The disallowance made by the Assessing Officer was Rs. 63,61,399/- being the difference in these two figures. Since the assessee could not establish that borrowings were for business purposes, deduction is not allowable u/s 36(1)(iii) of the Act and moreover, u/s 57(iii) also, deduction is already allowed by the Assessing Officer to the extent of interest income and ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as per the provisions of section 36(2). We, therefore, decline to interfere in the order of CIT(A). Ground No. 3 is rejected. 18. Ground No. 4 is as under: "4. Because, the Learned CIT(A) did not apply his mind in understanding the concept of Benevolent expenses and erred in facts and law in confirming the disallowance of Rs. 8,30,750/-." 19. Both the sides agreed that this issue is covered by the Tribunal decision in assessee's own case for assessment year 2009-10 in I.T.A. No.90/Lkw/2013 dated 13/11/2013, copy of which is available on pages 267 to 271 of the paper book. We find that in that year, the issue was restored back to the Assessing Officer for fresh decision. The relevant Para of the Tribunal order is Para 7, which is reproduced below for the sake of ready reference:- "7. We have considered the rival submissions, perused the material available on record and have also gone through the orders of the authorities below. We find that in view of this Factory Order Part-II dated 20/01/2001, available on page 34 of the paper book, it cannot be said that the expenses incurred by the assessee company on account of death relief to the employee, is not business expenditure an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the judgment of Hon'ble Delhi High Court rendered in the case of CIT IV New Delhi vs. Insilco Ltd. [2009] 179 Taxman 55 (Delhi), copy of which is available on pages 125 to 142 of the paper book. 23. Learned D. R. of the Revenue supported the orders of the authorities below. 24. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) as per Para 12.1 to 12.3 of his order, which are reproduced below for the sake of ready reference:- "12(1) Ground of appeal number 9 relates to addition of Rs. 12,04,18,481/- on account of prior period adjustments. The AO disallowed the amount shown in schedule 18 of the accounts on the ground that these were not related to the year under consideration. The appellant has filed written submissions which are placed on record. It is stated that the AO has not appreciated the accounting. 12(2) I have examined the facts and circumstances of the case. I have considered the findings of the AO and the submissions of the appellant. I find that the amount of Rs. 12,04,18,481/- comprises as under - Gratuity 7,96,41,289/- Leave encashment 2,75,82,804/- Expenses for F.Y 2004-2005 12,23,927/- De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the payment is not made, no deduction should be allowed even if it was otherwise allowable because as per section 43B, deduction is allowable only in the year of payment. Hence, on these two aspects, we set aside the order of CIT(A) and restore the matter back to the file of the Assessing Officer for fresh decision after providing adequate opportunity of being heard to the assessee. 25. Regarding other amounts being expenses of financial year 2004-05 Rs. 12.23 lac, depreciation Rs. 12.34 lac, repairs & maintenance Rs. 0.24 lac, interest and penalties on taxes Rs. 10.82 lac, deposit with Sales Tax Rs. 0.05 lac and material adjustment Rs. 107.39 lac, we find that a clear finding has been given by CIT(A) that the assessee has not pressed the claim of expenses for financial year 2004-05. Regarding interest and penalties on taxes Rs. 10.82 lac, he has given a finding that the same is not allowable under the Income-tax Act and therefore, the claim relating to earlier years is not allowable. Regarding the claim of Rs. 107.39 lac on account of material adjustment, he has given a finding that the assessee has not filed any detail other than that it relates to resale. In the absence of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). 34. We have considered the rival submissions. This issue was decided by learned CIT(A) as per Para 6(3) and 6(4) of his order, which are reproduced below for the sake of ready reference:- "6(3) It appears that the AO has restricted the allowability of expenses with regard to terminology adopted in the books of accounts. The shortages in spares and general store are an allowable expenditure even if it cannot strictly be said to be a bad and doubtful debt. It is trite law that the terminology adopted is not a criterion to decide the allowability. Similarly, evaporation losses of petrol and diesel in appellant owned pumps are an allowable expenditure. These are losses incurred during the course of business and are therefore allowable. However, I do not find how earnest money security deposit and writing off of debtors could be allowed as a bad debt particularly because it has not been shown that the amount has been considered in income in the current or earlier years. 6(4) In view of discussion above, the disallowance made by the AO is restricted to Rs. 1,97,815/- ( Rs. 1,80,942/- + R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en made by the assess that year, the payment was not allowable as deduction as per provision of section 40A(7)(b) of the I.T. Act." 39. Learned A. R. of the assessee supported the order of learned CIT(A). He also fairly conceded that this issue is covered against the assessee by the Tribunal order for assessment year 2005-06 & 2006-07 in I.T.A. No.88 & 89/Lkw/2011 dated 06/02/2015. He submitted that the copy of this Tribunal order is available on pages 245 to 263 of the paper book. He drawn our attention to Para 19 to 22 of the Tribunal order and pointed out that the Tribunal has followed another Tribunal decision in assessee's own case in I.T.A. No.86 & 87/Lkw/2011 dated 21/08/2014. 40. Learned D.R. of the Revenue supported the assessment order. 41. We have considered the rival submissions. First we reproduce Para 19 to 22 of the Tribunal order from pages 260 & 261 of the paper book which are as under: "19. Ground No. 5 is as under: "5. Because, the Learned CIT(Appeals) has erred in overlooking the provisions of sec.43B relating to disallowance of Rs. 2,27,73,012/- on account of payment of gratuity paid under the scheme of LIC but disallowed the said amount by invoking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted by Learned A.R. of the assessee that this issue is covered in favour of the assessee by the same Tribunal decision in assessee's own case i.e. for assessment year 2002-03 and 2003-04 in I.T.A. No.86 & 87/Lkw/2011 dated 21/08/2014. He drawn our attention to Para 40.1 of this Tribunal order. 25. Learned D.R. of the Revenue supported the orders of the authorities below. 26. We have considered the rival submissions. We find that as per Para 40.1 in assessee's own case for assessment year 2002-03 and 2003-04, this issue was decided in favour of the assessee and it was held that the interest subsidy to the employees is for maintaining harmonious relationship and welfare of the employees, which is nothing but business expenditure. Respectfully following this Tribunal decision in assessee's own case, we hold that in the present year also, this disallowance is not justified. This ground is allowed." 46. Respectfully following this Tribunal decision, we decide this issue in favour of the assessee and accordingly ground No. 4 is rejected. 47. Ground No. 5 is as under: "5. The CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,30,24,678/- on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partly allowed. 51. Now we take up the appeal of the assessee for assessment year 2008-09 i.e. I.T.A. No.626/Lkw/2012. In this appeal the assessee has raised the following grounds: "1. Because, the learned CIT (Appeals) has erred in law as well as on facts in not allowing the deduction of Rs. 10,50,617/- as claimed by the appellant u/s 35(2AB) of the IT Act by mentioning that no in house scientific research has been carried out by the appellant. 2. Because, the Learned CIT(A) did not apply his mind in understanding the concept of Benevolent expenses and erred in facts and law in making the disallowance of Rs. 5,44,100/- on the same basis as in the preceding year. 3. That the appeal to the above extent is against facts and laws." 52. It was fairly agreed by both the sides that ground No. 1 of the assessee is identical to ground No. 1 of the assessee for assessment year 2007-08 and similarly ground No. 2 in the present year is identical to ground No. 4 of the assessee's appeal for assessment year 2007-08 and the same can be decided on similar line in the present year also. 53. We have considered the rival submissions. We find that the issue involved in the present year in gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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