TMI Blog2012 (8) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore the addition made by the Assessing Officer. Claim of deferred sales tax payment - Held that:- The facts surrounding this claim were not clearly brought out on record. In any case, the claim for deduction made by the assessee would depend upon the outcome of the decision taken in the earlier years. Accordingly, this aspect requires verification. If the claim of deemed payment had been disallowed in the earlier years, then the assessee is entitled for deduction of the amount referred supra. Accordingly, we restore this issue to the file of the Assessing Officer with the direction to examine the claim of the assessee afresh Claim of deduction of Bonus - Held that:- Simply because the assessee has not claimed a particular deduction, it cannot be said to be a colourable device as envisaged by the decision of McDowell's case [1985 (4) TMI 64 - SUPREME Court ]. The deduction relates to payment of bonus which has actually been paid in the present year and deduction has been claimed as per section 43B. Such deduction has been claimed on consistent basis in the year of payment and, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Since both appeals relate to the same assessment year, they were heard together and are being disposed of by this common order. 2. The facts relating to the case are stated in brief. The assessee is a public limited company engaged in the business of manufacture and sale of tyres, tubes and flaps. The assessment in the hands of the company was originally completed under section 143(3) of the Act. Subsequently the assessment was reopened by issuing notice under section 148 of the Act and the order was passed under section 143(3) read with section 147 of the Act. The assessee challenged both assessment orders before the learned Commissioner of Income-tax (Appeals) and got partial relief. The Department is aggrieved by the relief so granted and hence they are in appeal before us. 3. We shall first take up the appeal numbered as I. T. A. 430/Coch/06. The first issue in that appeal relates to the claim of expenditure of ₹ 56,35,059 incurred on renovation of showrooms as revenue expenditure. The assessee spent a sum of ₹ 64,40,068 in purchasing equipments, viz., wheel balancer, wheel aligner, wheel changer and tyre changer and the said equipments were given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y different and accordingly the decision of the Tribunal relied upon by the assessee, in our view, is not applicable. Further we notice that the assessee would continue to be the owner of these equipments, though they were installed in the premises of the dealer. Hence, we are of the view that they have to be considered as the capital assets of the assessee-company. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore the disallowance made by the Assessing Officer. 6. The next issue relates to the disallowance of ₹ 3,53,95,231 incurred by the assessee on account of interest and processing charges on availing loan from International Finance Corporation, Washington for the purpose of setting up of a new industrial undertaking for manufacture of truck tyres. The assessee capitalised the same in the books of account, but claimed it as revenue expenditure in the income-tax return. The Assessing Officer treated the abovesaid amount as capital expenditure and accordingly disallowed the said claim. The learned Commissioner of Income-tax (Appeals), however, deleted the said disallowance by following the decision of the ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy CIT v. Core Health Care Ltd. [2008] 298 ITR 194 (SC) and the other in Deputy CIT v. Gujarat Alkalies and Chemicals Ltd. [2008] 299 ITR 85 (SC) and contended that both items of expenditure are allowable. We have gone through the judgments of the Supreme Court and we notice that the issues are covered in favour of the assessee. The first decision entitles the assessee to deduction of interest paid on borrowed capital used in the acquisition of asset even though the asset is not put to use during the previous year relevant for the assessment year. In the next decision above referred the expenditure in the form of finance charges incurred for availing the loan which is similar to expenditure on debenture issue incurred by the assessee is seen allowed by the Supreme Court. Following these two decisions, we answer question No. (iii) above referred in favour of the assessee and against the Revenue. 8. We notice that the decision rendered by the learned Commissioner of Income-tax (Appeals) on this issue is in accordance with the decision of the jurisdictional High Court and hence we do not find any reason to interfere with the same. 9. The next issue relates to the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2001-02. Learned counsel for the assessee submitted that the assessee-company has actually made the payment of ₹ 3,85,29,891 during the year under consideration and accordingly prayed that the same be allowed under section 43B of the Act on payment basis. 11. There should not be any dispute that, if the claim of deferred sales tax amount as deemed payment has been allowed in the earlier years, then the actual payment made during the year cannot be allowed as deduction again. Learned counsel has submitted that the Tribunal has restored the identical issue to the file of the Assessing Officer for the assessment year 2001-02. It is not clear whether the Tribunal allowed the claim of deemed payment in the assessment years 1996-97 to 2000-01 and 2002-03. Thus, in our view, the facts surrounding this claim were not clearly brought out on record. In any case, the claim for deduction made by the assessee would depend upon the outcome of the decision taken in the earlier years. Accordingly, this aspect requires verification. If the claim of deemed payment had been disallowed in the earlier years, then the assessee is entitled for deduction of the amount referred supra. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... och/2006 and 377/Coch/2006 in its order dated October 5, 2010. 57. The proviso to section 43B gives further concession that if payment in respect of any of the items referred to in section 43B is made in a particular year before the due date of filing of the income tax return, then such claim can be made in the earlier year also for which return is due to be filed. This seems to be only a further concession and cannot be read as a restriction that necessarily deduction has to be claimed in the earlier year which Assessing Officer had interpreted. We fail to understand as to how the Assessing Officer has referred to the decision of McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) by observing that in earlier year, i.e., the assessment year 2001-02 there was a loss and that is why the assessee has not claimed any deduction. Even if it is a case of loss, such loss would have been carried forward to next year and allowed accordingly. Simply because the assessee has not claimed a particular deduction, it cannot be said to be a colourable device as envisaged by the decision of McDowell's case. The deduction relates to payment of bonus which has actually been paid in the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the amount of interest to the file of the Assessing Officer. The copy of the order of the Tribunal in I. T. A. No. 429/Coch/2006 and 377/ Coch/2009 are placed in the paper book and the Tribunal has discussed this issue in paragraphs 58 to 63 of its order. 19. By following the order of the Tribunal referred supra, we also hold that an ad hoc reduction of ₹ 12 lakhs towards head office expenses and also the interest expenditure attributable to the DG power generation unit would meet the ends of justice. Accordingly, we set aside the issue of determination of interest expenditure to the file of the Assessing Officer. The order of the learned Commissioner of Income-tax (Appeals) stands modified accordingly. 20. The next issue relates to the claim of debts and advances written off . The assessee claimed a deduction of ₹ 8,74,73,974, out of which a sum of ₹ 6,13,12,992 related to the trade debts. The remaining amount consisted of the following two groups : Advances given for acquisition of capital assets ₹ 28,67,407 Advances given for acquisition of revenue items ₹ 2,32,93, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? If money be lost in the first circumstance, it is a loss of capital, but if lost in the second circumstance, it is a revenue loss. In the first, it bears the character of an investment, but in the second, to use a commonly understood phrase, it bears the character of current expenses. 24. By following the test laid down by the hon'ble Supreme Court, we hold that the advances of ₹ 28,67,407 given for acquisition of capital assets is liable to be disallowed as capital loss and the advances of ₹ 2,32,93,575 given for acquisition of revenue items is allowable under section 37 of the Act as current expenses. Accordingly, the order of the learned Commissioner of Income-tax (Appeals) stands modified. 25. The last issue in the appeal numbered as I. T. A. 430/Coch/2005 relates to the nature of provision for bonus and leave encashment for the purposes of computation of book profit under section 115JB of the Act. The Assessing Officer treated the provision of bonus (Rs. 38,22,370) and the provision for leave encashment (Rs. 27,74,176) as unascertained liability for the purpose of computation of book profit under section 115JB of the Act. The learned Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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