TMI Blog2014 (4) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the extent of recoveries made by the assessee be allowed as a deduction - Decided in favour of assessee Disallowance of AGM Expenses of the shareholders under appeal u/s.37(2A) / 37 (2) - Held that:- We decide the issue of Disallowance of AGM Expenses of the shareholders against the assessee for all as the expenditure incurred on serving tea, coffee and soft drinks is covered by the Explanation 2 to section 37(2A)/(37(2). In the Explanation 2 it is stipulated that the expenditure on provision of hospitality of every kind by the assessee to any person whether by way of provision of food or beverages or in any other manner, whatsoever, would be entertainment expenditure.The sweep of the words entertainment expenditure found in the Explanation 2 to section 37(2A)is wide and broad to cover every expenditure on provision of hospitality of every kind to any person other than the employees at the place of their work. Decided against assessee Payments to TSRDC, contributions to TSRDS that was an independent entity registered under the Societies Act, in favour of the assessee Contributions to Tata Sports Board allowed in favour of the assessee Contributions to various I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies all the requisite conditions as provided in Explanation r.w. second proviso to subsection (4) of section 37 as existing at the relevant time and, therefore, the assessee is found to be entitled to deduction. Accordingly, the ground raised by the Revenue was dismissed. - Decided in favour of assessee Exclusion of sales tax, excise duty for 80HHC deduction - Held that:- While calculating the deduction under section 80HHC(3)(b) of the Income-tax Act, 1961, for computing the “total turnover” of exports out of India of trading goods, excise duty and sales tax are not to be included. The object of the Legislature in enacting section 80HHC was to confer a benefit on profits accruing with reference to export turnover. Just as commission received by an assessee is relatable to exports and yet it cannot form part of “turnover”, excise duty and sales tax also cannot form part of the “turnover” for the purposes of section 80HHC. Just as interest, commission, etc., do not emanate from the “turnover” so also excise duty and sales tax do not emanate from such turnover. Since excise duty and sales tax do not involve any such turnover, such taxes have to be excluded. Foreign Travel Expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same has Company s logo fixed on it, hence has advertisement value. Ground of Appeal No.4 {Page 34 of CIT (A)s Order} Disallowance of annual General Meeting Expenses ₹ 87,240 The learned CIT(A) erred in treating expenditure at Annual General Meeting in the nature of entertainment expenditure, hence disallowing the same. Ground of Appeal No.5 {Page 36 of CIT (A)s Order} Disallowance of expenditure on Tea and Coffee served to visitors u/s.37(2A) ₹ 3,00,000 The learned CIT(A) erred in disallowing the expenditure on beverages served to visitors on the ground that the same constitutes to entertainment expenditure. Ground of Appeal No.6 {Page 41 of CIT (A) s Order} Expenditure on business meetings and conferences Rs.23,67,008 The learned CIT (A) erred in holding that the expenditure incurred on the business meetings and conferences as entertainment expenditure incurred under the provisions of Section 37(2A) of the Incometax Act. Ground of Appeal No.7 {Page 44 of CIT (A) s Order} ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure. Ground of Appeal No.14 {Page 115 of CIT (A) s Order} Disallowance under Rule 6DTravelling Expenses ₹ 6,50,000 The learned CIT(A) erred in confirming adhoc disallowance of ₹ 6,50,000 in respect of travelling expenses of Auditors, Technicians and Consultants. Ground of Appeal No.15 {Page 116 of CIT (A) s Order} Expenditure incurred on Darjeeling Holiday Home ₹ 3,08,000 The learned CIT(A) erred in treating Darjeeling Holiday Home as Guest House rejecting appellant s contention that the same is covered by the second proviso to Section 37(4) hence not to be treated as a Guest House. Ground of Appeal No.16 {Page 219 of CIT (A) s Order} Expenditure on topographical survey for construction of Railway Bridge ₹ 12,00,000 The learned CIT(A) erred in disallowing expenditure on topographical survey for construction of Railway Bridge on the ground that the same is capital in nature. Ground of Appeal No.17. The learned CIT(A) has committed error in recording some facts in his Order. The appellant craves leave to produce before the honourable ITAT correct at the time of hearing. ITA No. 3969/Mum/2003 Ground of Appeal No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontributions to institutions on the ground that such expenditure was not incurred for the purposes of the business, having failed to understand the scenario that establishes nexus between the contributions made and the business of the appellant. Ground of Appeal No.8 {Page 93 of CIT (A)s Order} Foreign Travel Expenses ₹ 3,50,486 The learned CIT (A) erred in disallowing foreign travel expenses on the ground that the same was in the nature of capital expenditure and appellant had given no clarification whether the expenditure on Chess Federation was on employees. Ground of Appeal No.9 {Page 105 of CIT (A) s Order} Fees paid to Consultants for Feasibility Studies ₹ 24,94,882 The learned CIT (A) erred in disallowing ₹ 24,94,882 being fees paid to the Consultants for carrying out feasibility studies on the ground that it constitutes capital expenditure. Ground of Appeal No.10 {Page 109 of CIT (A) s Order} Expenditure on Immovable Assets in Bhutan ₹ 85,574 The learned CIT(A) erred in treating expenditure on immovable assets in Bhutan as the one in capital field from which the appellant has derived enduring benefit. Ground of Appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,50,64,202 The learned CIT (A) erred in rejecting the claim of the appellant that certain buildings were maintained at far flung places due to business expediency and as hotels were not available in these places, expenditure on the same is allowable as revenue expenditure. The learned CIT (A) further erred in not accepting appellant s contention that expenses specifically allowable uls,30 to 36 can not be disallowed as per provisions of Section 37(4) as well as that Section 37(4) is limited to disallow maintenance expenses and not the running expenses. Ground of Appeal No.2 {page 30 of CIT (A) s Order} Recovery of Guest House Expenses considered under Rule 6D ₹ 56,45,446 The learned CIT (A) erred in rejecting appellant s claim that recoveries made in respect of Guest House expenses should be treated as travelling expenses, on which Rule 6D should apply and expenses proportionately disallowed and not the entire disallowance of recoveries as Guest House Expenses. Ground of Appeal No.3 {Page 34 of CIT (A)s Order} Disallowance of annual General Meeting Expenses ₹ 1,98,161 The learned CIT(A) erred in treating expenditure at Annual General Meeting in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Section 37(2A) of the Income tax Act. Ground of Appeal No.12{Page 226 of CIT (A) s Order} Contribution of Institute for Miners Metal Workers. 16,00,000 The learned CIT(A) erred in not allowing contribution to Institute for Miners Metal Workers and setting the same aside to the Assessing Officer to determine whether actual training was imparted to employees of the appellant. Ground of Appeal No.13 The learned CIT(A) has committed error in recording some facts in his Order. The appellant craves leave to produce before the honourable ITAT correct facts at the time of hearing. The Appellant craves leave to add to, alter or amend the above ground of appeal. In their appeals, AO.s. have raised following grounds for above referred three AY.s. ITA No. 3985/Mum/2003,AY-1991-92: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A.O.to allow ₹ 9,36,00,000/-as deduction on account of provision for leave salaries. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A.O.to allow 20% of initial contribution as deduction in the year in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tels as guest house expenses. 4.On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the A.O. to allow ₹ 1,35,435/on account of foreign travel expenses. The appellant prays that the order of the CIT (A) on the above grounds be set aside and that of the ITO/AC/DC be restored.The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. From the above it is clear that most of the issue are common for all the three AY.s.For sake of convenience, we are arranging them in a tabular form: Issue Ground no (G.) AY. Appeals by the Assessee Expenditure on maintenance of certain Buildings G.1-1991-92,1994-95,1995-96 Guest House Expenses considered under Rule 6D G.2-1991-92,1994-95,1995-96 Disallowance of AGM Expenses of the shareholders G.4-1991-92,G.3-1994-95,1995-96 Expenditure on business meetings and conferences G.6-91-92,G.4-94-95,G.11-95-96 Disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dates of filing of returns,incomes returned,dates of assessment,assessed incomes,dates of orders of the CIT(A)can be summarised as under : AY. Dts.of filing of Return Returned Income (Rs.) Dates of assessment Assessed Income Dt. of orders of CIT(A) 1991-92 30.12.1991 94.63 Crores 23.03.1994 1,41,46,96,420/ 21.02.2003 1994-95 30.11.1994 (-)3,16,82,64,010/ 09.05.1996 2,53,15,57,413/ 21.02.2003 1995-96 30.11.1995 242,65,59,783/ 31.03.1997 172,4451,523/ 21.02.2003 ITA/3968,3969 and 3970/Mum/2003/-AY.1991-92,1994-95 and 1995-96: 2.First we would take up the appeals filed by the assessee.First common ground of appeal is about Expenditure on maintenance of certain Buildings.Amounts involved for the AY.s1991-92,199495,1995-96 are ₹ 1.84 Crores,Rs.3.25 Crores and ₹ 3.50 Cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd lodging to the suppliers and business associates,that in the case of the employees, no cash was collected and a debit note was raised,that the procedure adopted by the AO was correct,that the notional recoveries were book entries only,that the assessee debited the notional guest house expenses to the travelling expenses account and credited the same to guest house expenses account,that the assessee had quantified the disallowance under Rule 6D for all the three AY.s,that the amount allowable under Rule 6D would get reduced in a case where the lodging or boarding and lodging were provided,that the notional recoveries attributable to employees in respect of the guest house had been rightly not allowed as reduction from the guest house expenses by the AO.Finally,disallowance mentioned above was upheld by the FAA. 3.2.Before us,representatives of both the sides stated that issue in covered in favour of the assessee by the order of the Tribunal delivered for the AY.s.1987-88,1989-09 and 1990-91 (supra).We find that issue of recovery of Guest House Expenses has been dealt by the Tribunal for the earlier AY.s. as under: 4.2.Before us,Before us representatives of both the sides a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal u/s.37(2A) / 37 (2)of the Act and the FAA had upheld their orders. 4.1.AR agreed that issue was decided against the assessee by the Tribunal in the orders for earlier AY.s.We find that in the order for the AY.s.1987-88,1989-09 and 1990-91 (supra),Tribunal had decided the issue as under: 17.The very same issue arose for consideration in assessee s own case in A.Y. 1988-89 in I.T.A. No.3222/ Mum/92 and this Tribunal has taken a view that serving of tea,coffee arnd soft drinks to shareholders at Annual General Meeting is not expenditure in the nature of entertainment by following the ruling to that effect in the case of CIT vs. Mysore Minerals Ltd.,126 ITR 437(Kar). The learned CIT(A)has,however, distinguished the decision in the case of Mysore Minerals Ltd. (supra) as follows: The definition of entertainment expenditure was inserted by the Finance Act,1983 with retrospective effect from 1.4.1976. In my view, the expenditure incurred on serving tea, coffee and soft drinks is covered by the Explanation 2 to section 37(2A)/(37(2). In the Explanation 2 it is stipulated that the expenditure on provision of hospitality of every kind by the assessee to any person whether by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was clear from the Expl.2 to section 37(2A)/37(2) that the expenditure incurred on the hospitality of employees was excluded from the definition of the entertainment expenditure provided the expenditure is incurred in office/factory or other place of their work, that in the case under appeal the expenditure was incurred in the hotels, that the expenditure incurred on entertainment at hotels attributable to employees could not be brought under the expression other place of their work,that the expression had to be interpreted in the context in which other words preceding the expression were used, that the other words used were office/or factory, that other place of their work had to be similar to office/factory, that normally, the said expression included places such as mine, work site, drilling-site, godown etc., that the expression did not include expenditure incurred at a place other than the place at which an employee normally works, that words other place of work should be akin to office or factory and it could not be taken to include hotel or restaurant, that the assessee did not place any evidence to establish the fact that the expenditure incurred on business meetings c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hotels.The assessee s contention is iotels fall within the meaning of other place of their work . I am unable to agree with the interpretation given by the appellant. Explanation 1 and 2 to section 37(2A) it can be seen that the expenditure incurred by the employees forms part to definition of entertainment expenditure. Explanation 2 does not treat expenditure on food or beverages provided by the assessee to the employees in office, factory or other place of their work as entertainment expenditure.The expenditure was not incurred either in office or in factory. The expenditure incurred on entertainment at hotels attributable to employees cannot be brought under the expression other place of their work . This expression has to be interpreted in the context in which other words preceding the expression were used. The other words used are office or factory . In my view, other place of their work has to be similar to office or factory . Normally, the expression other place of their work includes places such as mine, work site, drilling site, godown etc. But certainly the expression does not include expenditure incurred at a place other than the place at which an em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 37(2A) of the Act. We have also considered the decisions relied upon by the learned counsel for the assessee.The decision of Hon ble Calcutta High Court in the case of Chemcrown (I) Ltd. (supra) is distinguishable as follows:The employees and customers participated in the entertainment whereas in the case of the assessee the employees alone participated. 29.The decision in the case of Expo Machinery Ltd. (supra) by Hon ble Delhi High Court is also distinguishable as follows: It was a case of employees participation while entertaining guests and the issue of place of work in the context of Explanation 2 to section 37(2A) was not considered by the Hon ble Court. In the present case the employees alone participated in the entertainment and there were no customers and guests. 30.We, therefore, confirm the order of the CIT(A) and dismiss ground Nos. 8 to 10. Respectfully following the above we decide ground no.8 against the assessee. Following the above G.6/G.7 for the AY.s1987-88,1989-90 and 1990-91 respectively are decided against the assessee -company. Considering the orders for the earlier years (supra)we decide the issue against the assessee-company. 6.Disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o various institutions by the assessee ,the Tribunal has decided the matte; in the order for the AY.1985-86;as under: 40. Ground No. 14 of the assessee reads as follows: The learned CIT(A) erred in disallowing contributions to institutions on the ground that such expenditure was not incurred for the purposes of the business, having failed to understand the scenario that establishes nexus between the contributions made and the business of the appellant. 41.The Assessing Officer disallowed contributions aggregating to ₹ 11,31,700 to the following institutions engaged in various activities in the med of sports, education and cultural promotions on the ground that the contribution were made for the purpose of labour welfare and that the the provisions of section 40A(9) are attracted. X X X The Assessing Officer further held that alternatively the contributions are liable for disallowance as being in the nature of charity. The background under which these expenses has to be incurred by the assessee is as follows: 42.The assessee had set up its Works in 1907 in the virgin forest areas of the Singhbhum-District, had to develop the township over a period of years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the contention of the learned DR before us that in the earlier decisions of the Tribunal, the decision of the Hon ble Bombay High Court in the case of Voltas Ltd. Vs. CIT, 207 ITR 47 (Bom) has not been considered. In the case of Voltas Ltd. (supra), the Hon ble Bombay High Court has held that there was no nexus between expenses and business of the assessee.In the aforesaid decision the Hon ble Court laid emphasis on business expediency in making a payment. On facts the Court found no business expediency in making the payment.In the case of the assessee we are of the view that the payments were made keeping in mind business expediency viz.,to have a motivated work force.In the light of the peculiar facts in assessee s case,the expenditure in question has to be allowed as a deduction u/s. 37(1).The provisions of section 40A(9) in our view would not apply because the payments in question were not made by the assessee in his capacity as an employer. We, therefore, direct that the deduction as claimed by the assessee be allowed, Ground No. 14 is allowed. We have perused the MOU signed by the assessee with the workers union. Considering the terms and conditions of the MOU we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent fund or an approved gratuity fund or approved superannua tion fund or for the purposes of and to the extent required by or under any other law,that the contributions were given to Tata Sports Club in the capacity of an employer for the benefit of the employees as well as others,that the annual contribution to Steel Plants Sports Board was an independent organisation managing the affairs of the board with its own budget, that the purpose of creation of the association was to create and train athletes of national standard,that the objective had no relevance in carrying on the business of the assessee,that the contribution made by the it was an application of income. Finally,he confirmed the disallowance made by the AO.Before us,AR submitted that similar issue was decided in favour of the assessee ,by the Tribunal,in the appeal for the earlier three assessment years i.e.1987-88,1989-90 and 1990-91.DR also consented that the issue is decided by the Tribunal for earlier years.We find that in the earlier years order(supra),issue is decided as under: 12.2.We find that,following the order for allowing expenditure to TSRDC,Tribunal had decided the issue of payment to Steel Plants S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us,AR argued that issue is covered in favour of the assessee-company by the orders of the earlier years-AY.s.1987-88,1989-09 and 1990-91(supra). 13.2.Before us,AR and DR took the same stand that they had taken for the earlier two grounds of appeal.We have decided grounds no.11-12 in favour of the assessee.Following the same ground no.13 is also allowed, as the facts of the ground are identical to earlier grounds. Following the above we decide the issue of payment of contributions to various Institutions at Jamshedpur in favour of the assessee for all the three AY.s. 9.Next common ground of appeal(G.12-1991-92,G.9-1994-95)is about Fees paid to Consultants for Feasibility Studies.AO.s found that the assessee had paid ₹ 4.83 lakhs and ₹ 24.94 lakhs to the consultants for conducting feasibility studies for the years under appeal.AO.s were of the opinion that the expenditure was incurred in connection with the expansion of the industrial undertaking, that same was capital expenditure,that the expenditure incurred on prepa -ration of feasibility/ project reports in connection with the expansion of industrial undertakings or in connection with the setting up of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AYs. under appeal,incurred by the assessee under the head expenses for issuing right-shares. 10.1.Relying upon the matters of the Hon ble supreme Court in the case of Brooke Bond India Ltd.(225ITR798)and Punjab State Industrial Development Corporation Ltd.(225ITR792),FAA held that the expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital was directly related to the expansion of the capital base of the company and was a capital expenditure even though it might incidentally help in the business of the company and in the profit making,that the action of the AO was as per the provisions of law. 10.2.Before us,AR fairly conceded that that after the judgments of Hon ble Apex Court issue has to be decided against the assessee.Following the order of the Hon ble Supreme Court we dismiss G.13 and G.10 of the AY.s mentioned above. 11.Issue of contributions to Institute for Metal and Mineral Workers(IMMW) has also arisen in last two AYs.only-(G.17-1994-95,G.12-95-96) and the amounts involved are ₹ 7.50 lakhs and ₹ 16 lakhs.During the assessment proceedings AO.s found that the assessee had made contributions to I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up the grounds of appeals of AY.1991-92. 12.Ground 3 for that AY.deals with disallowance of ₹ 1.47 lakhd under Rule 6B of the Rules,for calendars and diaries.AR agreed that the disallowance confirmed by the FAA with regard to diaries and calendars was upheld by the Tribunal for earlier years. 12.1.We would like to reproduce the orders for the AY. AY.s.1987-88,1989-09 and 1990-91 (supra),wherein the issue has been dealt as under: 5.1.We find that the identical issue has been decided against the assessee by the Tribunal, while adjudicating upon the appeal for the last AY,as under: 5.2.Before us,Authorised Representative(AR)fairly conceded that the issue is decided against the assessee by the order passed by the Tribunal for last AY.We find that deciding the issue for AY.1985-86, the Tribunal has dealt the issue of diaries and calenders,in paragraph no.15 as under: The contention of the learned counsel for the assessee before us was that the products of the company being iron and steel,the giving of diaries and calendars even with the logo of the assessee contained therein cannot be said to be in the nature of advertisement calling for invocation of Rule 6B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he identical issue,Tribunal had partly allowed the appeal filed by the assessee.We have heard the rival submissions and perused the material before us.We find that in the AY.1985-86,Tribunal had dealt the issue as under: 20.The AO estimated a sum of ₹ 1lakh as the probable expenditure out of entertainment expenditure quantified by the auditors in their report, incurred by the assessee on providing tea and coffee served to the visitors.The estimate made by the AO was confirmed by the CIT(A).According to the RevenueExplanation 2 to subsection (2A) of section 37 provides that every hospitality provided by an assessee for any person other than the employee even in office, factory or other place of work would be entertainment expenditure,calling for disallowance. 21.It is not in dispute before us that in AY.1981-82 in I.T.A No.1791/Bom/35 in assessee s case the Tribunal held that disallowance of 25% of entertainment expenses on this ground would be reasonable.We,therefore, restrict the disallowance to ₹ 75,000/-instead of ₹ 1 lakh.This ground of appeal is thus partly allowed. Respectfully, following the orders for the earlier years,1981-82 and 1985-86,we dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had dismissed the ground pertaining to entertainment,including the expenditure incurred in clubs for employeesemployers meetings,therefore following the same ground no.9 is dismissed. Following the above,we decide the dismiss G.7/G.8 for the AY.1987-88,1989-90 and 1990-91 against the assessee. As we have already decided the issue against the assessee in the appeals for the earlier years,so,following the same we dismiss ground no.7 for the year 1991-92. 15.Last ground of appeal for the year is about Expenditure on Partly Convertible Debenture(G.8). During the assessment proceedings,AO had disallowed the claim of ₹ 27.51 lakhs made by the assessee in this regard.FAA upheld the order of the AO. 15.1.Before us,AR and DR agreed that issue of expenditure incurred on partly convertible debenture for AY.1989-90 and 1990-91 was decided by the Tribunal in favour of the assessee.We find that Tribunal has dealt the issue under consideration as under in those AY.s: Before us, representatives of both the sides agreed that the issue is covered in favour of the assessee by the orders of the Tribunal delivered in the matter of group concerns. Further, AR relied upon the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax law in England and India.Not only this, the Hon'ble Supreme Court further proceeded to examine a number of cases decided by various High Courts like Kerala, Andhra Pradesh, Calcutta, Bombay, etc., and had gone to the extent of holding that some of the judgments were wrongly decided. Then, the Hon'ble Supreme Court proceeded to hold as under (page 63) : 10.To summarise this part of the case, we are of the opinion that : (a) the loan obtained is not an asset or advantage of an enduring nature ; (b) that the expenditure was made for securing the use of money for a certain period ; and (c) that it is irrelevant to consider the object with which the loan was obtained. Thus,it was held that the expenditure incurred in procuring the loan was revenue expenditure within section 10(2)(xv) of the old Income-tax Act, which corresponds to section 37 of the present Act. By going through the said judgment, it further transpires that the hon'ble Supreme Court also proceeded to examine the aspect of purpose of raising loan and its immediate or subsequent utilisation for different purpose and examined that even if a loan is raised for purchasing raw material and after raisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court,we decide G.10/9 for the AY.1989-90 and 1990-91 in favour of the assessee. We are deciding the ground no. 8 in favour of the assessee,following the judgment of the Hon ble Rajasthan High Court(supra). Now we would take up the exclusive grounds of appeal raised by the assessee for the year 1994-95: 16.First of them is Foreign Travel Expenses(G.8).During the assessment proceedings,AO found that the assessee had claimed ₹ 3.50 lakhs under the head Foreign Travel Expenses,that out of the said amount ₹ 1.67 lakhs were incurred for foreign travel of the employees to Saudi Arabia,that the assessee had claimed that the employees were sent to Saudi Arabia for setting up a pigment project.As the details were not furnished before the AO,he disallowed the claim.FAA confirmed the order of the FAA. 16.1.Before us,AR did not press the ground for ₹ 1.67 lakhs.We have already mentioned the fact of not pressing of part of ground no.8 by the AR,in the earlier part of our order.Assessee is in appeal for the other part of the expenditure,amounting to ₹ 2.37 lakhs,incurred by it for sending delegation to Russia to play chess league matches.AO was of the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of business was wider in scope than the words for the purposes of earning of profit , that the assessee was under legal and contractual obligation as per the memorandum of settlement(MOS)between the assessee and the Tata Workers Union to incur expenditure on community development and Bustee improvement for improving the facilities such as roads, electricity, drinking water, sanitation etc..He referred to the decisions of the Tribunal delivered in the matters of group concerns where similar kind of expenditures were allowed. 17.3.We have heard the rival submissions and perused the material before us.We find that the expenditure on digging of tube wells was not claimed under the head payment made to TSRDS.We have allowed the similar kind of expenditures incurred by the assessee while discussing the ground of appeal dealing with contribution made to TSRDS.We have held that expenditure incurred by the assessee has to be allowed in view of the MOS signed by it with the workers.Following our orders for the years under appeal as well as for the earlier years, we allow the ground of appeal no.15 filed by the assessee for the AY.1994-95. 18.Last ground of appeal is about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is because profit/loss is embedded in the closing stock. While anticipated loss is taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into account, as no prudent trader would care to show increase in profits before actual realization. This is the theory underlying the rule that closing stock is to be valued at cost or market price whichever is lower.The expression any expenditure has been used in section 37 of the Income-tax Act, 1961, to cover both expenses incurred as well as an amount which is really a loss even though such amount has not gone out from the pocket of the assessee. Respectfully following the above judgment of the Hon ble Apex Court, we decide the issue in favour of the assessee. ITA No. 3985,3986and 3987/Mum/2003,AY-1991-92,1994-95 and 1995-96: 19. In the appeals filed by the AO.s. first common ground of appeal is about provision of leave salary of ₹ 9.36 Crores,Rs.7.92 Crores and ₹ 16.98 Crores for the years under consideration. Assessee, during the years under appeal, had made provisions for leave salary. AO.s were of the opinion that the provision made by it for salary on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY.s. 1991-92,1994-95and 1995-96 deals with 20% of initial contribution to approved superannuation fund(ASF).During the assessment proceedings, AO.s found that the assessee had made contribution the ASF, that the contribution to the ASF included initial contribution for the AYs. concerned. According to the AO.s,20% of the initial contribution to the ASF was not admissible as deduction.As a result, they allowed remaining 80% of the initial contribution as deduction, in five equal instalments, by relying on the CBDT s notification dated 21. 10. 1965. 20.1.In the appellate proceedings, FAA held that the issue was covered by the judgment of the Sirpur Paper Mills(237 ITR41),that in view of the said decision the assessee was entitled to claim the entire initial contribution to the ASF as deduction.We find that in our order for the AY.s. 198788,1989-90 and 1990-91(supra),we had decided the issue in following manner: 31.1.Before us,DR agreed that the issue was decided in favour of the assessee by the order of the Tribunal delivered for the AYs.1986-87(supra).AR submitted that for the AY.1992-93(supra) similar issue was decided against the AO by the Tribunal.We find that same issue w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments towards Holiday plan at various hotels. AO.s observed that no fixed room or accommodation was reserved in a particular hotel for a period exceeding 182 days and no recovery was made from the employees, that the payments made to various hotels for holiday plan were covered by the provisions of section 37(4) of the Act. They made disallowances as stated earlier, for the AY.s under appeal. After considering the assessment order and the submissions of the assessee in this regard, FAA deleted the additions. 21.1.We find that the issue is covered against the AO by the order for the AY.s 1987-88, 1989-90 and 1990-91(supra).Tribunal has decided the issue, in that order, as under: 32.2.Before us, representatives of both the sides agreed that issue was covered against the AO by the order of the Tribunal delivered on 27.02.2009(supra)for the AY.1985-86.We find that in its order Tribunal had held as under: 112.After hearing both the sides, we find this issue stands covered in favour of the assessee by the decision of the Tribunal in assessee s own case vide I.T.A. No.7083/Bom/96 order dated 27th December,2004 for the A.Y. 1992-93.We find the Tribunal in the said order has giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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