TMI Blog2010 (4) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in confirming disallowance of ₹ 1,59,50,000/- being contribution to GACL Employees Welfare Trust Fund . It is submitted that contribution so made is an allowable revenue expenditure u/s 37(1) of the Act. It be held now and disallowance made be deleted. 4. The learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance of ₹ 3,18,340/- being contribution to GACL Employees Benevolent Fund. It is submitted that contribution so made is an allowable revenue expenditure u/s 37(1) of the Act. It be held now and disallowance made be deleted. 5. The learned Commissioner of Income Tax (Appeals) has erred in confirming expenditure of ₹ 14,18,62,240/- incurred for replacement of Membrane Cell as of Capital nature on the ground that expenditure incurred bring enduring benefit and treated the same in the nature of capital expenditure. Your appellant submits that expenses incurred being of revenue nature, CIT (A) is not justified in treating the same of capital expenditure. It be held now and the Assessing Officer be directed to allow the same as claimed. 6. The learned Commissioner of Income Tax (Appeals) has erred in confirming disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the surrounding circumstances and not mere the recitals in the documents that determines its character and the transaction of finance could not be converted into a transaction of hiring merely by making documents to give it the colour of hiring, and also overlooking the law settled in CIT vs Durga Prasad More 82 ITR 540 (SC), Juggilal Kamlapal vs CIT 73 ITR 702 (SC) and McDowell Co LTD vs CTO 154 ITR 171 (SC) on substance versus form in tax proceedings. (e) The CIT(A) failed to appreciate that the profit had to be determined according to the accepted accounting practice as held in the case of P.M. Mohammed Meerakhan vs CIT 73 ITR 735 (SC) and a departure can be made from such accounting practice only where there is a conflict with the principles of law as held in the case of Tuticorin Alkali Chemicals Fertilizers Ltd. vs. CIT 227 ITR 172 and, since the treatment of this transaction in the books of the assessee was in conformity with the accepted accounting practice as also the substance of the transaction, which only is relevant for income-tax proceedings, the CIT(A) was not justified in going against the entries in the assessee's own books of account, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deemed total income under section 115JB, by ignoring the language of clause (iv) of the Explanation below section 115JB(2) referring to amount of profits eligible for deduction u/s 80HHC as computed under section 80HHC(3) subject to the conditions specified in section 80HHC which includes the condition laid down in Explanation (baa) below section 80HHC. (b) The CIT(A) erred in placing an interpretation which is discriminatory between an assessee paying tax on the normal total income and an assessee paying tax on the deemed total income under section 115JB, making only the latter entitled to benefit unintended in the letter as well as the scheme of the Act. 5.(a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in cancelling the interest charged u/s 234B and 234C on the basis of deemed total income under section 115JB totally disregarding sub-section (5) of section 115JB, clearly providing that all other provisions of the Act shall apply to a company covered by this provision, thus, removing the scope of dispute in this regard that arose in relation to section 115J, which was not having such enabling provision. (b) The Id CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of financial lease,allowed only interest of ₹ 5,82,54,095/- and added the principal amount of ₹ 9,61,12,494/- to the total income besides observing that in principle, the assessee was entitled to depreciation of ₹ 2,40.28,123/-, the ownership of the assets being with the assessee. 3 On appeal, the ld. CIT(A) allowed the claim for deduction of ₹ 9,61,12,494/-,following the order dated 15-11-2000 of the ld. CIT(A) for the AY 1991-92,upheld by the ITAT vide their order dated 24-5-2006 in ITA No.745/Ahd/2001. 4 The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). Before us, both the parties agreed that the issue is squarely covered by the decision dated 24-05-2006 of the Tribunal in the assessee s own case for AY 1991-92 in ITA No.745/Ahd/2001. The ld. AR also pointed out that the Revenue have accepted the decision of the ld. CIT(A),deleting a similar disallowance in the AY 2004-05.The ld. DR did not dispute this submission on behalf of the assessee. 5. We have heard both the parties and gone through the facts of the case as also the decision relied upon. Undisputedly, a co-ordinate Bench in the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts can in no way be said to be in respect of a liability. 8. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). Both the parties agreed that issue is squarel covered by the decision of Hon ble Supreme Court in CIT Vs. HCL Comet,305 ITR 409(SC). 9. We have heard both the parties and gone through the facts of the case as also the decision relied upon. We find that Hon b le Supreme Court in their decision dated September 23, 2008, in the case of CIT v. HCL Comnet Systems Service Ltd. , civil appeal no.. 5800 of 2008 on the issue of addition of provision for bad and doubtful debts while determining book profits, held as under: As stated above, the said Explanation has provided six items, i.e., Item Nos.(a) to (f) which if debited to the profit and loss account can be added back to the net profit for computing the book profit. In this case, we are concerned with Item No. (c) which refers to the provision for bad and doubtful debt. The provision for bad and doubtful debt can be added back to the net profit only if Item (c) stands attracted. Item (c) deals with amount(s) set aside as provision made for meeting liabilities, other than ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before us any material suggesting that this provision is for meeting any liability, whether ascertained or not. Even the Assessing Officer has also not given any finding that the provision made by the assessee for diminution in the value of investments is unreasonable or incorrect. At the time of hearing before us also, the Revenue has not brought on record any evidence to prove that the provision made by the assessee for diminution in the value of investments is unreasonable or excessive. 9.2 In view of the foregoing, we do not find any justification to interfere with the order of the ld. CIT(A),holding that the provision made for doubtful debts and diminution in investments can in no way be said to be in respect of a liability . Therefore, we do not find any merit in the ground nos. 2 3 raised by the Revenue and accordingly, these grounds are dismissed. 10. Ground no. 4 in the appeal of the Revenue relates to deduction u/s 80HHC of the Act while determining book profits u/s 115JB of the Act. The AO noticed that the assessee claimed deduction of ₹ 46,05,652 u/s. 80HHC while computing book profits u/s.115JB of the Act. Since the income determined under the normal pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns that deduction under section 80HHC should be computed on the adjusted book profit. Sections 115J, 115JA and 115JB come into operation, as the regular profits has been substituted by the book profit. Once the substitution is over, there is no way to go back to the normal computation process of statutory profit, which has already been overwhelmed by sections 115J, 115JA and 115JB. This reconciles the alleged incompatibility pointed out by the Revenue that the deduction available to an assessee under Chapter VI-A is subject to section 80AB. Therefore, we find that the deduction under section 80HHC in a case of MAT assessment is to be worked out on the basis of the adjusted book profit and not on the basis of the profit computed under the regular provisions of law applicable to the computation of profit and gains of business or profession. 13.1 However, subsequently, Hon ble Bombay High Court in their aforesaid decision in Ajanta Pharma Ltd.(supra) overruled the decision in the case of Syncome Formulations (I) Ltd.(supra), holding as under: 23. Until s. 115JB was introduced, the whole of the profits computed under s. 80HHC were eligible for reduction for computing the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee's do not dispute this. Their argument is that reduction must be of the whole of the book profits computed under sub-s. (3) or (3A) of s. 80HHC. The object of s. 80HHC as originally introduced was to exempt the whole of the export profits. By virtue of sub-s. (1B) introduced w.e.f. 1st April, 2001 the deduction is only a percentage of the export profits as allowed therein and no reduction after 1st April, 2005. This benefit of reduction was initially not made available to MAT companies, but the benefit was extended from 1st April, 1989. 26. It is then sought to be contended that the expression conditions in cl. (iv) of Expln. 1 of s. 115JB cannot be referable to sub-s. (1B) of s. 80HHC as sub-s. (1B) is not a condition but in the nature of computation. We have referred to the dictionary meaning of the word conditions . Even if we accept that sub-s. (1B) of s. 80HHC is not a condition and proceed on that footing, nevertheless it is impossible of reading s. 80HHC(3) or (3A) independent of s. 80HHC(1B). To our mind, the language is clear. The literal meaning does not in any way defeat the object of the section and/or lead to an absurdity. The object of s. 115JB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of understanding in the Finance Bill, 2000 which we have earlier reproduced. It only says that export profits under s. 80HHC and others are kept out of the purview of the provision during the period of phasing out of deductions available under the provisions. At the same time, in the Notes of Clauses it is clearly stated that the profits will be as reduced by the certain adjustments which are eligible for deduction under s. 80HHC. The profits eligible for deduction are export profits in terms of s. 80HHC(1B). There is nothing in the Finance Minister's speech of 29th Feb., 2000, [(2000) 159 CTR (St) 1 : (2000) 242 ITR (St) 1] to hold otherwise. We have earlier referred to rules of construction as set out in the judgments earlier quoted. The Notes of Objects and Reasons is only an aid to construction. That aid to construction is only when the literal reading leads to ambiguous result or absurdity. To our mind considering the literal language there is no absurdity or ambiguity being caused or any mischief sought to be remedied. The language used in s. 115JB is deduction available under s. 80HHC. It is difficult to conceive of any rational reason as to why the legislature should ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e possible. The only view as explained earlier is that the MAT companies are entitled to the same deduction of export profits under s. 80HHC as any other company involved in export in terms of s. 80HHC(1B). Once that be the case, this argument is also devoid of merit. 13.2 The ld. AR while referring the decision in the case of Glenmark Laboratories Ltd.(supra) contended that decision of Special Bench has not been fully overruled by the Hon ble Bombay High Court. Since the ld. CIT(A) did not have the benefit of the views in the aforecited decisions and thus, could not record any findings on the pleas now raised on behalf of the assessee before us on their claim for deduction u/s 80HHC of the Act while determining book profits u/s 115JB of the Act , we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the issue of claim for deduction u/s 80HHC of the Act in terms of clause (iv) of the explanation to sec. 115JB of the Act in accordance with law in the light of various judicial pronouncements including the aforecited decisions, after allowing sufficient opportunity to both the parties . Needless to say that whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon ble Karnataka High Court in the case of Kwality Biscuits Ltd. [2000] 243 ITR 519, in the context of provisions of sec. 115J of the Act, later affirmed by the Hon ble Supreme Court in CIT v. Kwality Biscuits Ltd. 284 ITR 434 (SC) and concluded that interest u/s 234B 234C of the Act is leviable while computing income in terms of provisions of sec. 115JA of the Act. A similar view has been taken in the case of .M/s. Kanel Oil and Export Industries Limited (supra) as also in a recent decision by the Hon ble Karnataka High Court in the case of CIT Vs. Brindavan beverages Ltd.,321 ITR 197(Kar.). Earlier also, Hon ble Karnataka High Court in the case of Jindal Thermal Power Company Ltd. Vs. DCIT Another,286 ITR 182(Kar) after considering their own decision in the case of Kwality Biscuits Ltd. v. CIT [2000] 243 ITR 519, held in the context of levy of interest u/s 234B 234C of the Act while computing income in terms of provisions of sec. 115JB of the Act that The Central Board of Direct Taxes Circular No. 13/2001 was issued on 18 November 9, 2001, regarding the liability for payment of advance tax under the new MAT provisions of section 115JB of the Act and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the total income computed under the provisions of sec. 115JB of the Act, is liable to advance tax and in the event of default in relevant provisions of payment of advance tax, levy of interest u/s 234B 234C of the Act is mandatory. In this view of the matter, the findings of ld. CIT(A) are reversed and the order of the AO is restored. Therefore, ground no.5 in the appeal of the Revenue is allowed. ITA No.4461/Ahd/2007[ Assessee]: 17 Ground no.1 in the appeal of the assessee, being general in nature, does not require any separate adjudication and is therefore, dismissed. 18. Ground no.2 relates to disallowance of claim for amortization of lease hold land expenses of ₹ 3,36,224/-.The AO noticed that the assessee claimed an amount of ₹ 3,36,224/-towards amount amortised in the books for land taken on lease from GIDC for 99 years. Since the payment was made for securing right of possession and peaceful enjoyment of the land for 99 years, the AO concluded that payment being for a right ,providing enduring benefit, was capital in nature. 19. On appeal, it was admitted on behalf of the assessee that a similar issue had been decided against the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following terms:- 10. As regards Ground No.(4) (5), the Assessing Officer disallowed the contribution of ₹ 1,59,50,000/- and ₹ 3,18,340/-made by the company to GACL Employees Welfare Trust and the Benevolent Fund respectively stating that u/s.40A(9) such deductions are expressly prohibited and also that the ITAT in its order for a.y. 94-95 95-96 had upheld the disallowance. Before me, the appellant has fairly admitted that the issue stands decided against it in earlier years. 11. I have considered the submissions. In view of the orders of the ITAT on the issue against the appellant for a.y. 94-95 95-96 dated 25-8-2000, the disallowance is confirmed. 24. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A).Both the parties agreed that the issue is squarely covered by the decision dated 25-09-2009 of the Tribunal in the assessee s own case for AY 1999-2000 2000-01 in ITA nos.569 570/Ahd/2004.. 25. We have heard both the parties and gone through the facts of the case as also the aforesaid order of the Tribunal in the assessee s own case in ITA nos. 569 570/Ahd/2004,where it was held:- 14 We have heard both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d similar expenditure on remembraning as revenue expenditure in the AY 1993-94 and 1995-96 . However, the AO rejected the contentions of the assessee on the ground that the company earned an advantage of enduring benefit from the same and therefore, expenditure was capital in nature. Accordingly, depreciation was allowed. 28. On appeal, the ld. CIT(A) dealt with the issue as under:- 12 ..Before me, the appellant has fairly admitted that the issue stands decided against it by the order of the ITAT. However, it has argued that it places strong reliance on the decision in the case of CIT v. Saravana Spg. Mills P. Ltd., (2007) 163 Taxman 196 (SC). 13. I have considered the rival submissions. In view of the fact that the issue stands decided against the appellant by the ITAT on the basis of the peculiar facts and circumstances existing in the appellant's own case. It is also observed that the ratio of the CIT v. Saravana Spg. Mills P. Ltd. (supra) cannot be applied due to the existence of peculiar and different facts in the appellant's case. Under the circumstances, the disallowance made by the Assessing Officer of ₹ 14,18,62,240/- is confirmed. 29. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different conclusion. But if the question is already decided on the basis of the facts and there is no change in that factual position, it cannot be reopened. In the instant case, as observed by us hereinabove, the fact was brought to the notice of the respondent authority by the petitioners that litigation was going on between the parties and the receiver was appointed by the High Court of Bombay. That fact was also accepted by the Department for the assessment year 1978-79 and even for the year 1982-83 in respect of a number of appeals filed by other co-owners as also by some of the petitioners. In our opinion, there was no good and justifiable cause to take a different view when some appeals came before a different officer without there being any change in the factual position and when the earlier decision was not challenged by the Department. 11.1 The aforesaid decision has been followed by the Hon ble jurisdictional High Court in their subsequent decision in Lalludas Children Trust Vs, CIT,251 ITR 50(Guj) .Similar view has been taken in the other decisions relied upon on behalf of the assessee as also in several cases including in Arihant Builders Developers Investors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions made before the AO. However, no details in this regard have been furnished to show that these have not been debited to the P L Account. 15. I have considered the rival submissions. It is observed that the Auditors have pointed out the expenditure incurred in cash and shown the same in the audit report u/s. 40A(3). The Auditors appear not to have qualified this by saying that the payments in question has been in the nature of advance. The appellant has also not led any evidence to show that these are in the nature of advances and have been recouped subsequently. Under the circumstances, the disallowance made is confirmed. 33. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. AR on behalf of the assessee reiterated their submissions before the lower authorities while the ld. DR supported the findings of the ld. CIT(A) 34. We have heard both the parties and gone through the facts of the case. We find that the ld. CIT(A) upheld the disallowance on the ground that the assessee did not place any evidence before him that the amount was in the nature of advance and had not been debited to the profit and loss account. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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