TMI Blog2011 (12) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr No. Appeal no. By Assessee Appeal no. By Revenue Date of Order of CIT(A) Asst. Year 1 1463/A/2007 - 30-01-2007 2000-01 2 1464/A/2007 1373/A/2007 30-01-2007 2003-04 3 4007/A/2007 3993/A/2007 31-08-2007 2004-05 4 2400/A/2007 2401/A/2007 30-04-2008 2005-06 5 3111/A/2008 - 02-06-2008 2000-01 2 First of all, we take up the appeal of the assessee in ITA no.1464/Ahd/2007 for Assessment Year 2003-04 for the sake of convenience. The assessee has raised as many as 16 grounds of appeal in this appeal. 3 Ground no.1 of the assessee s appeal is general in nature and therefore does not require any adjudication. 4 Ground nos.2.1, 2.2 and 2.3 of the assessee s appeal are not pressed, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm of loan. While doing so, he has failed to appreciate that revenue expenditure which is incurred wholly and exclusively for the purpose of business must be fully allowed in the year in which it is incurred and it cannot be spread over a number of years even though the assessee has written off in its books over number, of years. In this connection, he has failed to follow the decisions in the following cases: i. Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82-ITR-363 (SC) ii. Tuticorin Alkali Chemicals Fertilizers Ltd. v. CIT [1997] 227-ITR-172 (SC) iii. CIT v. Madras Auto Service (P) Ltd., Etc. [1998] 233- ITR-468 (SC) iv. CIT v. Bhor Industries Ltd. [2003] 264-ITR-180 (BOM) [10] In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in confirming the deduction u/s. 35D to the extent of ₹ 13,50,000/- as against the claim of ₹ 87,73,000/- made by the appellant. He has erred in upholding the views of the Assessing Officer and not appreciating that the GDR issue made by the appellant was mainly for the purpose of capital expenditure in connection with the expansion plan of the appellant and since there was some tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the initiation of penalty proceedings u/s. 271(l)(c) of the Income Tax Act, 1961. [15] In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in not dealing with the grounds relating to levying interest u/s. 234B, 234C and 234D of the Income Tax Act, 1961. [16] The appellant craves leave to add, alter, amend and/or withdraw any of the grounds or ground either before or at the time of appeal hearing. 5 The Revenue has raised the following grounds of appeal in ITA no.1373/Ahd/2007 for AY 2003-04:- [1(a)] On the facts and in the circumstances of the case, the CIT(A) erred in deleting the disallowance of ₹ 8,00,14,405/- made out of the interest claimed u/s 36(1)(iii) on account of diversion of borrowed funds to subsidiary and associate concerns, by merely relying on the appellate orders for earlier years (which have been contested by the Department)m, without appreciating that each year s income-tax proceedings are independent and the matter had to be decided on merits in the light of the principles settled by authoritative jurisdictional pronouncements. [1(b)] The CIT(A) failed to appreciate the legal principles, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction u/s 80HHC. [6] The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal:- The order of the CIT(A) on the issues raised in the aforesaid grounds be set aside and that of the AO be restored. 6 As regards Ground no.4, the brief facts are that the assessee claimed an expenditure of ₹ 10.50 lakhs incurred towards preparing feasibility report for setting up of 200 MTD Prilled Ammonium Nitrate Project. On detailed study, the Project was found to be not viable and it was decided not to pursue the project and expenditure of ₹ 10.50 lakhs so incurred was claimed as revenue expenditure. The AO did not accept the explanation of the assessee for the reason that the assessee had engaged private firms to explore possibility of new business and the advantage available to the assessee company could have been of enduring nature and cannot be said to be of revenue in nature. The AO, relying upon decisions of various courts of law, disallowed the claim of the assessee and added ₹ 10.50 lakhs to the income of the assessee. 7 The learned CIT(A) confirmed the action of the AO. 8 Before us, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e argued that the Government sets the price at which the fertilizer is sold to the farmers and also sets retention price i.e. the realization that the manufacturer is entitled. The difference between the two is the subsidy but for the Government policy, the assessee would have sold the fertilizer at market price and, therefore, the subsidy is nothing but reimbursement of sale price not charged to the farmers. Accordingly, it is a part of the total turnover which cannot be excluded as other income while computing the deduction u/s 80HHC of the Act. The learned counsel for the assessee relied upon the decision of the Hon ble Supreme Court in the case of Sahaney Steel and Press Works Ltd. vs. CIT (1997) 228 ITR 253. 13 The learned DR, on the other hand, relied upon the decision of the ITAT D-Bench in the assessee s own case for AYs 1998-99 and 2002-03 in ITA Nos.1009, 1010 and 1293/Ahd/2006, dated 12-12-2008 with specific reference to para-18 of the order in which it has been held that the receipts constituting independent income having no nexus with exports were required to be deducted from business profit under clause (baa). Therefore, in the said order the Tribunal has upheld th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that receipts by way of brokerage, commission, interest, rent charges, etc., formed part of the gross total income being business profits. But for the purpose of working out the formula and in order to avoid distortion in arriving at the export profit? clause (baa) stood inserted to say that although incentive profits and independent incomes constituted part of the gross total income, they had to be excluded from gross total income because such receipts had no nexus with the export turnover. Processing charges, which are part of gross total income, form an item of independent income like rent, commission, brokerage, etc., and, therefore, 90 per cent of the processing charges has also to be reduced from the gross total income to arrive at the business profits and, therefore, it has also to be included in the total turnover in the formula for arriving at the business profits in terms of clause (baa) of the Explanation to section 80HC(3). While arriving at the export profits under section 80HHC(3) as it stood in the assessment year 19930-94 processing charges are to be included in the total turnover. In this view, we uphold the order of the lower authorities in excluding 90% un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependent turbine and, therefore, enduring benefit will arise to the assessee. 19 We have heard the rival contentions and perused the facts of the case. On perusal of the assessment order in which it has been written that Rotor Assembly is a part of X-701 Turbine, was broken and was required to be replaced by new Rotor to run Turbine. Its justification was given before the AO also. Similarly, that the gas chromatograph, the matter requires examination whether the parts so replaced are independent machine or are parts which require to be fitted in place of broken parts of the Turbine. The clear findings are required to be given by the AO which are not available in the order of the AO Therefore, it will be in the fitness of justice if the matter is remanded to the file of the AO who will examine the issue and decide the same de novo but by affording reasonable opportunity of being heard to the assessee. Thus, Ground no.8 of the assessee s appeal is allowed for statistical purpose. 20 As regards Ground no.9 of the assessee s appeal, the brief facts are that the assessee company has claimed deduction of ₹ 1,02,34,103/- towards incidental expenditure incurred on substitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so been paid to IDBI during the year on 15-3-2000. Further it is stated that the assessee had also issued 10,00,000 redeemable debentures of ₹ 666.70 lakhs to Unit Trust of India (UTI) in 1998. As per the clause No 15 of the Debenture Trust Deed, the assessee had an option to repurchase the debentures prior to the date of its redemption. During the previous yea- the assessee has exercised its option of repurchasing the debenture and paid premium of ₹ 23,80,000 to UTI on 27-5-2003. It was further submitted that since the premium paid to IDBI and UTI are in relation to the loans borrowed for the purpose of business, the premium of ₹ 1,02,34,103 [IDBI ₹ 76,54,102 plus UTI ₹ 23,80,000] has been claimed and is allowable as deduction under section 36(1)(iii)/37(l) of the Act. It was further submitted that in the books of accounts of F.Y. 1999-2000 and F.Y. 2002-03 relevant to A.Y. 2000-01 and A.Y. 2003-04 respectively, the said premium of ₹ 1,02,34,103 was considered as revenue expenditure and was amortized over a remaining period payment, commencing from the previous year in which payment was i.e. A.Y. 2000-2001 and A.Y. 2003-04. As the said premium h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acetic Acid Expansion Project and collected ₹ 191.72 crores inclusive of premium. The company incurred expenditure of ₹ 8.77 crores for this issue. It was submitted by the assessee in assessment proceedings that subscribed and paid up capital of the company increased to ₹ 146.48 crores and that coupled with debenture and long term borrowings of ₹ 583.77 crores the total capital employed was ₹ 730.25 crores and 2.5 % of such capital employed is ₹ 18.26 crores. It was further stated that the cost of project of Ascetic Acid Expansion project was ₹ 188.31 crores and that the said project was commissioned on 30.5.1995. It was stated that the expenditure of ₹ 8.77 crores was less than 2.5 % of the cost of the project and capital employed and thus the assessee was entitled to deduction of ₹ 87.7 lakhs as claimed u/s. 35D. The Assessing Officer was of the view that GDR issue was admittedly in connection with the extension of industrial undertaking and only the incremental capital employed which is attributable to the new project should be considered as capital employed. The increase in share capital and debenture between 31.3.1994 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,10,279/- as deduction u/s. 36(1)(iii) in respect of money borrowed for expansion of business for the acetic acid plant expansion which had commenced production during the year i.e. 1.11.2002. It is mentioned that the assessee company had capitalized this interest in its books of account but claimed the same as revenue expenditure as per the statement of income. In assessment proceedings it was submitted that there was complete interlacing, interdependence and interconnection between the existing business operation and new plant and that in earlier years i.e. AY 1998-99 Department had allowed such deduction. The AO relying upon the decisions of various courts of law, was of the view that the amendment to section 36(1)(iii) is clarificatory in nature and is applicable to the impugned assessment year 2003-04 also. Accordingly, the interest of ₹ 9,00,10,279/- capitalized in the books of account was disallowed and depreciation of ₹ 1,12,51,285/- at the rate of 12.5% was allowed leading to net addition of ₹ 7,87,58,994/-. 30 The learned CIT(A) confirmed the action of the AO. 31 The issue in hand is directly covered by the decision of the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been given on lease; Assets particulars FY Amount Rs. 1 Wagons 1995-96 93937200 2 Captive power plant 1999-00 312990556 3 Plant machinery incinerator 1998-99 26333260 4 Plant Machinery -SAT NOX unit 1998-99 54679889 During the year, the company earned the lease rent of ₹ 12,51,30,606/-, which has been credited to the Profit and loss account and shown as income. Further, as per accounting guidance note, an amount of ₹ 1,21,41,524 being lease equalization amount has been debited to the profit loss account. The company is maintaining the lease equalization account for the assets given on lease in order to comply with the accounting standard and guidance note issued by the Institute of chartered Accountant of India In order the justify its claim of depreciation the assessee raised various contentions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not have any right. The assets so leased thereafter will be used by the assessee for its own purpose. The allegations made by the AO at pages 43 and 44 of his order are without any basis and had been written in the order on conjectures and surmises. Though the assets had been duly acquired on the specification of the lessee. It cannot be said that it will not be used for the purpose and use of the assessee i.e. the lessor. The insurance has been taken by the lessee on behalf of the lessor. It is not a finance lease since the period of lease does not start from the date of finance of the assets but at a later date. 34 On the other hand, the learned DR relied upon the order of the AO as pages 43 and 44 and in specific relied upon the decision of the Hon'ble Supreme Court in the case of Asea Brown Boveri Ltd. vs. Industrial Finance Corporation, dated 27-10-2004 which has been placed on record. 35 We have heard the rival contentions and perused the facts of the case. As regards reliance on the decision of the Hon'ble Supreme Court in the case of Asea Brown Boveri Ltd. (supra) by the learned DR, the arguments of the learned DR that the assessee had purchased the equip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Tribunal Ahmedabad Bench in assessee s own case for AY 1995-96 as referred to in the order of the learned CIT(A) vide para 5.2.3 and therefore we find no infirmity in the order of the learned CIT(A). Thus, Ground no.1 of the Revenue s appeal is dismissed. 42 As regards Ground no.2 of the Revenue s appeal, the facts are that the AO made a disallowance of ₹ 38,32,725/- being the expenditure incurred for protecting the assets of wholly owned subsidiary i.e. M/s Gujarat Narmada Auto Ltd. The learned CIT(A) deleted the addition made by the AO. Since on identical issue for AYs 1996-97 to 2002-03, the disallowance was deleted by the learned CIT(A) in assessee s own case. 43 We have heard the rival contentions and perused the facts of the case. It was pointed out by the learned counsel for the assessee that the present issue is covered by the decision of the Tribunal Ahmedabad Bench in assessee s own case for AY 2002- 03. 44 After hearing both the parties, we are of the view that the issue in hand is covered by the decision of the Tribunal Ahmedabad Bench in the assessee s own case referred hereinabove. Therefore, we find no infirmity in the order of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee from Infinium (India) Ltd. In the absence of any claim by Infinium (India) Ltd., the AO was not justified in making the lump sum disallowance. Therefore, we find no infirmity in the order of the learned CIT(A) who has rightly deleted the addition made by the AO. Thus, Ground no.4 of the Revenue s appeal is dismissed. 51 As regards Ground no.5 of the Revenue s appeal, the facts are that the AO did not allow deduction of ₹ 15,287/- claimed u/s 80HHC of the Act, which action of the AO was reversed by the learned CIT(A) vide para 10.3 of his order. 52 We have heard the rival contentions and perused the facts of the case. The issue at present is covered by the decision of the Special Bench of ITAT Calcutta in the case of IFB Agro Industries 83 ITD 96 wherein it has been held that deduction u/s 80HHC on export profit should be computed on the basis of the export turnover and total turnover exclusive of the receipt of Excise Duty and Sales-tax. This issue is also covered by the decision of the Hon ble Bombay High Court in the case of Sudarshan Chemicals Ltd. 245 ITR 769. Therefore, in view of the decision of the Hon ble Bombay High Court and the Special Bench of the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 36(1)(iii) in respect of money borrowed for expansion of various projects. While doing so, he has also erred in not following the order of CIT(A) in the case of the appellant for the A.Y. 1998-99 and the decision of the Gujarat High Court in the case of Core Healthcare Ltd. (251-ITR-61) (Guj) and Alembic Glass Industries Ltd. (103-ITR-715) (Guj) [4.1] In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in reaching the conclusion that the amendment to section 36(1) (iii) is applicable retrospectively and therefore, applicable to the period prior to the A.Y. 2004-05 as well. [5] In law and in the facts and circumstances of the appellant's case, the Learned CIT(A) has erred in confirming the disallowance of Premium of ₹ 1,47,01,785/- paid on prepayment of loan and allowing the deduction over the term of loan. While doing so, he has failed to appreciate that revenue expenditure which is incurred wholly and exclusively for the purpose of business must be fully allowed in the year in which it is incurred and it cannot be spread over a number of years even though the assessee has written off in its books over number of years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,48,15,517/- worked out u/s. 115JA of the Act was more than total income computed in accordance with the other provisions of the I.T. Act this income was considered for the purpose of taxability. Subsequently the assessment was reopened vide issue of notice u/s. 148 dated 31-3-2005 after recording the reasons for the same. In response to notice u/s. 148 the assessee company filed its return of income on 28.4.2005 wherein the total income was declared at ₹ 9,02,17,380/- and book profit u/s 115JA at ₹ 19,48,15,516/-. Reassessment u/s 143(3) r.w.s. 147 was completed on a total income of ₹ 31,24,66,240/-. The reasons recorded for reopening the assessment are reproduced as under:- In this case, return of income declaring total income of ₹ 10,08,83,801/- was filed on 29.11.2000 claiming deduction u/s. 80HHC of ₹ 2,97,902/-. The assessment u/s. 143(3) of the Act was completed on 31.3.2003 at the total income of ₹ 30,25,19,600/-, accepting the deduction u/s. 80HHC as claimed by the assessee company. As it appears from the 24th Annual Report, 1999-2000 that the assessee has received subsidy of ₹ 24979.01 lacs which remained to be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s appeal, the brief facts are that the AO made a disallowance of deduction u/s 80HHC by holding the disallowance of the Fertilizer subsidy from the computation of profit for the purpose of deduction u/s 80HHC. 62 The learned CIT(A) confirmed the action of the AO vide para 5.3 of his order. 63 We have heard the rival contentions and perused the facts of the case. The facts are identical to the facts in assessee s own case for AY 2003-04 where the issue has been decided by us in Ground no.5 in ITA no.1464/Ahd/2007 hereinabove. Following the same, Ground no.2 of the assessee s appeal is dismissed. 64 As regards Ground no.4, the brief facts are that the AO made a disallowance of ₹ 5,99,23,697/- being the amount of deduction claimed u/s 36(1)(iii) in respect of money borrowed for expansion of various projects. The learned CIT(A) confirmed the action of the AO. 65 We have heard the rival contentions and perused the facts of the case. The facts are identical to the facts in assessee s own case for AY 2003-04 where the issue has been decided by us in Ground no.11 in ITA no.1464/Ahd/2007 hereinabove. Following the same, Ground no.2 of the assessee s appeal is all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT (A) has erred in not directing the Assessing Officer to exclude capital component out of lease rent income offered to tax as depreciation on leased assets was not allowed by the Assessing Officer. [3] In law and in the facts and circumstances of the appellant's case, the Learned CIT(A) has erred in observing that the right forum against the order of the CIT(A) is ITAT. [4] The appellant craves leave to add, alter, amend and/or withdraw any of the grounds or ground either before or at the time of appeal hearing. 74 The brief facts are that the assessee moved a rectification application u/s 154 of the Act before the AO. The assessee had given certain assets on lease to Western Railways and NCPL, for which depreciation was claimed. The depreciation was disallowed by the AO terming the same as finance lease and not operating lease. Concurrently, the AO has also not excluded capital component of ₹ 1,55,51,381/-. In short, ₹ 2,19,79,400/- being interest portion only ought to be included in assessee s income. The AO rejected the application u/s 154 of the Act, since the disallowance of depreciation on leased assets have been confirmed by the learned CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant's returned income by that amount, no matter that his stand vis-a-vis accrual of income in the form of interest of that amount on the loan to GSIL comes to be disapproved. The learned CIT(A) ought to have appreciated that he had no jurisdiction to make such alternative disallowance/addition - once based on the suggestion that income of a certain amount had accrued to the appellant and, failing that, on the other suggestion, that the appellant deserved to be disallowed expenditure to that very extent. He ought further to have appreciated that even on the utterly untenable stand of Learned A.O., there could be no question for him to adopt the same measure of 17% per annum for disallowing interest expenditure which, as he very well knew, was the rate of interest originally applicable to the loan granted to GSIL and which rate was admittedly considerably higher than the average rate of interest on the appellant's borrowings this year. [2] In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in disallowing deduction of ₹ 1,456 claimed by the appellant u/s. 80HHC of the Income-tax Act, 1961. [3] In law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 was not disclosed in the return, it was submitted by the assessee that till A.Y. 2002-03 the assessee company had expectation of receiving the interest from GSIL. However considering the fact that no interest was received from GSIL the board of directors resolved not to accrue the interest. Without prejudice it was submitted that an arbitration proceeding was filed against GSIL towards recovery of and the arbitrator has directed GSIL to make payment of interest assessee company @ 11.5 % as against 17%. It is claimed that as against 11.5% the assessee company had been offering interest @ 17% A.Y. 2002- 03 and it had already offered more interest to tax that actually receivable. The company felt that no interest amount be taxed for A.Y. 2004-05. Decision of ITAT in its own case for A.Y. 1992- 93 to 1994-95 and the decision of Supreme Court in the case of CIT vs. M/s. Shoorji Vallabhdas Co. - 46 ITR 144 and Godhra Electricity Co. Ltd. vs. CIT -225 ITR 746 were relied upon. The Assessing Officer on the other hand was of the view that the interest accrued to assessee during the year under consideration as the assessee is following mercantile system of accounting and further as per s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee before us are examined by the AO from the records produced by the assessee that the interest upto the end of the impugned year has already been provided / accrued in excess, then no interest income is required to be accrued during the year. The AO is directed to decide the issue de novo as directed above but by affording opportunity of being heard to the assessee. Thus, Ground no.1 of the assessee s appeal is allowed for statistical purpose. 81 As regards Ground no.2 of the assessee s appeal, the brief facts are that the AO disallowed deduction of ₹ 1456/- claimed by the assessee u/s 80HHC of the Act. This action of the AO was confirmed by the learned CIT(A). 82 We have heard the rival contentions and perused the facts of the case. On similar facts, an identical issue has been decided by us in assessee s own case for AY 2003-04 in ITA no.1464/Ahd/2007 hereinabove vide Ground no.5 therein. Following the same, Ground no.2 of this appeal of the assessee is dismissed. 83 As regards Ground no.3 of the assessee s appeal was not pressed by the learned AR of the assessee at the time of hearing. The same is therefore dismissed, as not pressed. 84 As regards Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal is dismissed. 92 In Ground no.8 of the assessee s appeal, the brief facts of the case are that the it is noted by Assessing Officer that donations amounting to ₹ 1,21,00,000 was made by the appellant and the appellant was asked to furnish details of source of such donations. In response thereto the assessee has submitted that donations were made to various parties out of his own fund and profit generated during the year. Since the copy of bank statement was not furnished the Assessing Officer concluded that interest bearing funds has been utilized for giving donations and interest @ 10% on such donations amounting to ₹ 12,10,000 was disallowed. 93 The learned CIT(A) confirmed the action of the AO. 94 We have heard the rival contentions and perused the facts of the case. We find no infirmity in the order of the learned CIT(A). There are two issues which merit attention in regard to this ground mere is no dispute that the donations were made by the appellant during the previous year in 80G approved funds and the Assessing Officer also allowed the deduction to the extent of ₹ 55 lacs. In the language of section 80G there is no mention that the donat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad), K. Somasundaram Brothers V/s. CIT 238 ITR 939 (Mad.) and CIT V/s. Motor General Finance Ltd. 254 ITR 449 (Del), which was confirmed in principle by the Supreme Court in the case of Motor General Finance V/s. CIT 267 ITR 381 (SC). [2.(a)] On the facts and in the circumstances of the case, the CIT(A) erred in allowing the expenses of ₹ 14,63,659/- on protecting the assets of M/s. Gujarat Narmada Auto Ltd. (GNAL), a sister concern of the assessee, without appreciating the legal position that a subsidiary company is a separate legal entity and the business of the subsidiary cannot be considered to the business of the assessee as settled in the case of Phaltan Sugar Works Ltd. V/s. CWT 208 ITR 989, 993 (Bom.) followed in 215 ITR 582 (Bom.) and 216 ITR 479, 481 (Bom,). [2.(b)] Without prejudice, the CIT(A) erred in not considering the fact that a I liquidator was appointed by the High Court who was in actual possession of the assets of GNAL and was responsible for protecting the same and hence there was no obligation on the assessee to incur such expenditure. [3] On the facts and in the circumstances of the case, the CIT(A) erred in deleting to the extent of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red on protecting the assets of wholly owned subsidiary i.e. M/s Gujarat Narmada Auto Ltd. The learned CIT(A) deleted the addition made by the AO, since on identical issue for AYs 1996-97 to 2002-03, the disallowance was deleted by the learned CIT(A) in assessee s own case. 99 We have heard the rival contentions and perused the facts of the case. It was pointed out by the learned counsel for the assessee that the present issue is covered by the decision of the Tribunal Ahmedabad Bench in assessee s own case for AY 2002- 03. 100 After hearing both the parties, we are of the view that the issue in hand is covered by the decision of the Tribunal Ahmedabad Bench in the assessee s own case referred to hereinabove. Therefore, we find no infirmity in the order of the learned CIT(A) who has rightly allowed the claim of the assessee. Thus, Ground no.2 of the Revenue s appeal is dismissed. 101 As regards Ground no.3 of the Revenue s appeal, the brief facts are that the AO has treated certain expenditure on account of repairs and maintenance by holding the same as replacement of existing parts. The AO treated the said expenditure as independent expenditure of enduring in nature and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 108 Ground no.6 in the Revenue s appeal is general and does not require any adjudication. 109 In the result, the appeal filed by the Revenue in ITA no.3993/Ahd/2007 for AY 2004-05 is dismissed. ITA no.2400/Ahd/2008 for AY 2005-06:- 110 Now, we take up the appeal of the assessee in ITA no.2400/Ahd/2008 for AY 2005-06. Ground no.1 is general in nature and does not require any adjudication. Ground no.3 has not been pressed by the learned counsel for the assessee and therefore the same is dismissed, as not pressed. The remaining grounds i.e. Ground nos.2, 4, 5, 6 and 7 of the appeal are as under:- [2] The learned CIT(A) has erred in upholding the additions of ₹ 2,75,61,076/- in respect of interest receivable from GSIL. It is submitted that on the facts and circumstances of the appellant s case the CIT(A) ought to have deleted the same. It is submitted it be so held now. Without prejudice to above, if interest on accrual basis is held to be taxable then it may be directed to be allowed as deduction in the years of it s write off. [4] In law and in the facts of the circumstances of the appellant s case the learned CIT(A) has erred in confirming disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have heard the rival contentions and perused the facts of the case. The issue at present is identical to the issue in assessee s own case for AY 2003-04 in ITA no.1464/Ahd/2007 which has been decided by us hereinabove. Our order in ITA no.1464/Ahd/2007 will be applicable on the present issue and accordingly the ground is allowed for statistical purpose. 115 As regards Ground no.5, the brief facts are that the AO made a disallowance of depreciation amounting to ₹ 90,69,271/- on the assets leased by the assessee to Western Railways and NCPL, which action of the AO was confirmed by the learned CIT(A). 116 We have heard the rival contentions and perused the facts of the case. The identical issue has arisen in assessee s own case for AY 2003-04 which has been dealt with by us hereinabove in ITA no.1464/Ahd/2007. The order hereinabove shall be applicable in the present ground of the assessee. Accordingly, Ground no.5 of the assessee is allowed. 117 As regards Ground no.6, the brief facts are that the AO made a disallowance in respect of interest expenses amounting to ₹ 4,26,548/- on the ground that the donation was given out of borrowed funds, which action of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) confirmed the action of the AO. 121 We have heard the rival contentions and perused the facts of the case. We concur with the views of the learned CIT(A) that both the amounts written off by the assessee are not in the nature of bad debts but could be categorized as business loss but the business loss has not crystallized yet. The business loss could be ascertainable only after the decision of the Court / BIFR. Though in case of Mardia Chemicals it is mentioned that Supreme Court has directed ICICI to sell the assets, it is not clear as to what was actual recovery for the assessee. The business loss would be allowable only in the assessment year in which the recovered amount is determined. There is a distinction in allowability of bad debts and business loss. The bad debt is allowable if all the conditions as stipulated in section 36(1)(vii) are satisfied. On the other hand, conditions for allowability of business loss have not been laid down in the Act and in our view the business loss could be allowed in the year in which the quantum is finally ascertained. Therefore, the advances written off are not allowable in the instant assessment year. Therefore, in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual possession of the assets of GNAL and was responsible for protecting the same and hence; there was no obligation on the assessee to incur such expenditure. [3] On the facts and in the circumstances of the case, the CIT(A) erred in deleting the addition to the extent of ₹ 1,59,73,789/-, from the total disallowance of ₹ 2,99,40,437/- made out of repairs and maintenance expenses treating the same as capital expenditure. The CIT(A) has erred in not appreciating the replacement of existing parts or restoration are not covered by 'current repairs' referred to in section 31(i) and are of capital nature as settled in the case of Ballimal Naval Kishore vs. CIT 224 ITR 414 (SC). [4] On the facts and in the circumstances of the case, the CIT(A) erred in allowing deduction of ₹ 6,25,000/- being payment for information Technology Related Services paid to M/s. Infinium (India) Ltd.; treated as expenses deriving benefit of enduring nature. [5] On the facts and in the circumstances of th in deleting the addition of ₹ 45,54,465/- which is covered u/s 14A of the Act. [6] The appellant craves leave to add to, amend or alter the above grounds as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue came up in the assessee s own case for AY 2003-04 in ITA no.1464/Ahd/2007 which has been decided by us hereinabove vide Ground no.4 in the said appeal. Therefore, following the same, we dismiss Ground no.4 of the Revenue s appeal. 133 In Ground no.5 of the Revenue s appeal, the brief facts are that the AO made a disallowance of ₹ 45,54,465/- u/s 14A of the Act. The learned CIT(A) allowed the same for the reasons mentioned in his order. 133 We have heard the rival contentions and perused the facts of the case. The identical issue came up in the assessee s own case for AY 2003-04 in ITA no.1464/Ahd/2007 which has been decided by us hereinabove vide Ground no.6 in the said appeal. Therefore, following the same, we dismiss Ground no.5 of the Revenue s appeal. Thus, the appeal filed by the Revenue in ITA no.2401/Ahd/2008 is dismissed. 134 In the result, the appeals of the assessee in - (i) ITA no.1463/Ahd/2007 Partly allowed (ii) ITA no.1464/Ahd/2007 Partly allowed (iii) ITA no.3111/Ahd/2008 Allowed for statistical purpose (iv) ITA no.4007/Ahd/2007 Partly allowed (v) ITA no.2400/Ahd/2007 Partly allowed and appeals of the Revenue in (i) ITA no.1373/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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