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Novartis India Ltd (as successor to Hindustan Ciba Geigy Ltd) , Mumbai Versus The Dy. Commissioner of Income-tax –Spl Range -23, Mumbai

2015 (7) TMI 534 - ITAT MUMBAI

Disallowance of lunch expenses to personnel on outdoor duty - Held that:- In the assessment year 1992-93, the Tribunal following earlier order for AY 1991-92 has upheld the disallowance of lunch expenses to the extent of ₹ 2 lakhs. Whereas, in the assessment year 1995-96, the Tribunal has held that lunch expenses incurred for the employees during the course of outdoor duties is to be allowed u/s 37(3) and accordingly, following the same, we direct the AO to allow the lunch expenses of the .....

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r 1995-96, we direct the AO to delete the said addition. - Decided in favour of the assessee.

Disallowance for total expenses and air fares of foreign visitors in India - Held that:- A mistake has been crept in the order of the Tribunal, wherein, it has been noted that the said ground is not pressed, which fact is not correct. Accordingly, we rectify the same and hold that such expenses are to be allowed as similar disallowances have been deleted by the Tribunal not only in the assess .....

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he time of the provision is made and payment is made on later date upon the receipt of the bill. Such a claim of provision has been made as assessee was following mercantile method of accounting. If there was some excess provision as compared to the actual payment made to the assessee in the later year then same needs to be added back. The Ld. CIT(A) after confirming the said addition had directed the AO to consider this aspect in the subsequent year by reducing the income offered by the assesse .....

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eady given for consequential relief in the next year. This year, no different stand can be taken.

Disallowance on account of expenses pertaining to the assessment year 1993-94, which were actually incurred in the year under consideration and there was short provision made in the earlier year - Held that:- We feel persuaded to agree with the contention of the Ld. Sr. Counsel that, if the excess provision is being disallowed on the ground that actual bills for which payment has been mad .....

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More so, in the wake of the fact that in AY 1993-94, the Tribunal has dismissed this point raised by the assessee in Miscellaneous Application, as fairly pointed out by the Ld. Sr. Counsel. Accordingly, we decline to interfere with the conclusion of the Tribunal

VRS expenses in respect of Bhandup unit works and Head office employees - Held that:- In this year the only issue was that of incremental liability towards payment of pension under VRS Scheme. There was no need for any actuar .....

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, this has already been examined by the Ld. CIT(A); secondly, in this year it has incurred only incremental liability; and lastly, the Tribunal in AY 1995-96has already modified the similar finding. Accordingly, the present Miscellaneous Application filed by the assessee is allowed. - Miscellaneous Application 132/Mum/2013 to 133/Mum/2013 - Dated:- 10-7-2015 - Shri G S Pannu and Shri Amit Shukla, JJ. For the Petitioner : Shri J D Mistri For the Respondent : Shri Vivek Perampura ORDER PER AMIT SH .....

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ue No. 1: Non-disposal of grounds 6(i) which pertains to disallowance of lunch expenses to personnel on outdoor duty for sum aggregating to ₹ 6,34,988/-. 4. Before us, the Ld. Sr. Counsel, Shri J D Mistri submitted that there were various disallowances of expenses which were raised in Ground no. 6 out of which, three expenses have been dealt by the Tribunal. However, the disallowance of lunch expenses to personnel on outdoor duty have not been adjudicated. He further submitted that in the .....

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penses to the extent of ₹ 2 lakhs. Whereas, in the assessment year 1995-96, the Tribunal has held that lunch expenses incurred for the employees during the course of outdoor duties is to be allowed u/s 37(3) and accordingly, following the same, we direct the AO to allow the lunch expenses of the employees incurred on the outdoor duty. Thus, this issue is decided in favour of the assessee. 6. Second issue relates to Foreign Travel expenses. The Ld. Senior Counsel pointed out that the Tribun .....

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us and, therefore, it was held that the said ground is not pressed. In fact, the said grounds were stated to be covered by the decision of the Tribunal order in assessee s own case right from the assessment year 1991-92 to 1993-94. 7. After hearing both the parties, it is noticed that the assessee vide Ground No. 3(a) has challenged that the Ld. CIT(A) has erred in disallowing ₹ 19,94,623/-, being 20% of total foreign travelling expenses on the ground that they are capital in nature. In Gr .....

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t this issue has been decided by the Tribunal not only in the earlier years but also in the assessment year 1995-96 wherein, the Tribunal vide para No. 37 has deleted the said addition after following the earlier years orders of the Tribunal. Thus, respectfully following the earlier years precedence and also the order for the assessment year 1995-96, we direct the AO to delete the said addition. Accordingly Ground no. 3(a) is allowed. 9. Issue No. 3, which is with regard to Ground No. 4 challeng .....

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order of the Tribunal for the assessment year 1992-93 and 1993-94. If the said ground is allowed then Ground no. 4(b) and 4(c) would become infructuous. We find that a mistake has been crept in the order of the Tribunal, wherein, it has been noted that the said ground is not pressed, which fact is not correct. Accordingly, we rectify the same and hold that such expenses are to be allowed as similar disallowances have been deleted by the Tribunal not only in the assessment years 1992-93 and 1993- .....

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final position emerged in the subsequent year, the provision so made for some expenses turned out to be more whereas the provision made for other expenses turned out to be short. The excess provision was written back by the assessee in the subsequent years which was offered to tax by the assessee in the subsequent year. In the year under consideration, the AO, however, disallowed the amount of provision for expenses made by the assessee in excess and confirming the said addition made by the AO, .....

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e direction given by the learned CIT(Appeals) inasmuch as the excess provision written back has been excluded by him from the total income of the assessee. He, however, has contended that no deduction has been allowed by the AO in the subsequent year on account of short provision made in the year under consideration for which payment was made in the subsequent year on the ground that the same represented expenses pertaining to assessment year 1994- 95. He has contended that the assessee thus has .....

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issue. 6. We have considered the rival submissions and perused the relevant material on record. It is observed from the relevant portion of the learned CIT(Appeals) impugned order (para No. 18 to 22) that the issue as regards the short provision was neither specifically raised by the assessee nor considered by the learned CIT(Appeals) although the details furnished by the assessee at page No. 94 and 95 of his paper book show that there was a case of short provision made for certain expenses. It .....

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ee s own case for assessment year 1993-94 and uphold the impugned order of the learned CIT(Appeals) on this issue. Ground No. 1 of the assessee s appeal is accordingly dismissed . 24. The issue raised in ground No. 11 of the assessee s appeal relates to the disallowance of ₹ 63,93,929/- made by the AO and confirmed by the learned CIT(Appeals) on account of expenses pertaining to assessment year 1993- 94. 25. During the year under consideration, a sum of ₹ 63,93,929/- was claimed by t .....

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wed the claim of the assessee on this issue on the ground that this amount represented expenses pertaining to assessment year 1993- 94 which could not be allowed in 1994-95. 26. We have heard the arguments of both the sides on this issue and also perused the relevant material on record. Although the learned counsel for the assessee has contended before us that as a result of stand taken by the authorities below on this issue, the assessee is not in a position to get the deduction on account of g .....

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the learned CIT(Appeals) confirming the disallowance made by the AO on this issue. Ground No.11 of the assessee s appeal is accordingly dismissed . 8. Regarding this issue, the Ld. Senior Counsel submitted that assessee s claim was that the AO has erred in disallowing its claim for the year end provision of expenses, based on estimates for which actual bills were not received, on the ground that the actual expenditure in the subsequent year is less than the provisions made in the year. Based on .....

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AY 1994-95 was more than the amount of provision made in 1993-94, therefore, the excess amount was claimed as deduction for the year. Both the aforesaid claims of the assessee have been denied by the Tribunal. In this regard, assessee s case before the Tribunal was as under: a) Under mercantile system of accounting a provision for expense has to be made in respect of an service/goods received during the previous year but which bill is not received at the time of provision and payment is to be m .....

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sessee in the later year. Similarly, if the provision made in year 1 is lesser than the actual payment/ expenditure incurred in year 2, no disallowance can be made in year 2 in respect of the actual expenditure claimed which was in excess of the provision made in year 1 by the assessee. c) It was not the case of the Revenue that the Applicant ought not to have made a provision in respect of a particular expenditure, but, the issue was with respect to quantification of the amount for which the pr .....

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consideration covered by ground No. 2 and actual payment/expenditure in excess of the provision for the earlier years covered by ground no. 14 ought to have been allowed. d) In the alternative it was urged by the Applicant that the same principles to be applied to short provision and excess provision and thereby deduction should be granted in respect of short provision of ₹ 8,229,109/- details of which were available before the Tribunal at page 1 of the Paper book. 11. He submitted that th .....

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ial of deduction in respect of either excess provision or short provision. In that year, the factual position was that there was an excess provision in the earlier year i.e. in AY 1991-92 and the actual expenditure incurred in 1992-93 was less than the amount of provision, therefore, in this background, such a disallowance made by the AO was not disputed. In AY 1992-93, the assessee has reversed the provision for expenses and offered the excess provision so reversed to tax. The Tribunal order fo .....

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e Tribunal. On the other hand, Ld. DR submitted that since similar issue has been dismissed by the Tribunal in the Miscellaneous Application for the AY 1993-94, therefore, this issue needs to be dismissed. We have considered the rival submissions and also the relevant finding given by the Tribunal in the impugned order. In Ground No. 1, the assessee had mainly challenged the adding back of the amount of provisions of expenses as on year end based on estimates for which actual bills were not rece .....

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ack. The Ld. CIT(A) after confirming the said addition had directed the AO to consider this aspect in the subsequent year by reducing the income offered by the assessee in that year to the amount of the excess provision written back to avoid double taxation. So far as addition on this account is concerned, the finding of the Tribunal in para 5 & 6 cannot be disturbed, because if such an excess provision has been added back and directions have been given to the AO that he should reduce the in .....

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tion and there was short provision made in the earlier year, though we feel persuaded to agree with the contention of the Ld. Sr. Counsel that, if the excess provision is being disallowed on the ground that actual bills for which payment has been made is less than the provision and same should be added in the year of excess provision, then on same logic it has to be held that if the assessee s actual payment is more than the provisions made, then assessee should be granted deduction in respect o .....

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the Tribunal 13. Fifth issue relates to depreciation in respect of Kandla plant. In this regard, the Ld. Senior Counsel submitted that while giving appeal effect, the AO has allowed the depreciation, therefore, this issue is not pressed. Accordingly, we dismiss Point No. 5 (i.e. fifth issue) raised by the assessee in the present Miscellaneous Application. 14. In view of the finding given above, the assessee s Miscellaneous Application is treated as partly allowed. 15. Now, we will come to MA No .....

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the liability is well supported by actuarial valuation. However, after holding so, the Tribunal has restored back the matter to the file of the AO following the Tribunal order for the AY 1993-94 with a direction that the AO should examine and verify the Actuarial Valuation Certificate and the agreement between the assessee and the employees. He submitted that the Ld. CIT(A) had already allowed the deduction claimed by the assessee after reviewing and examining the relevant agreement and held th .....

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e CIT(A) had an occasion to review the agreement and there is a specific finding to that effect by the Ld. CIT(A) in his order. Further, the issue of quantum of provision of VRS liability was involved in the AY 1993-94, whereas in the assessment year 1994-95, the matter was only of incremental liability, which has not been disputed by the AO in the assessment order. He further pointed out that the Tribunal for the assessment year 1995-96 in the MA order has accepted this fact after observing and .....

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