TMI Blog2016 (9) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Addition for provisions made for bad and doubtful debts - Held that:- As in the case of Yokogawa India Ltd. (2011 (8) TMI 766 - KARNATAKA HIGH COURT ), the Karnataka High Court has held that while computing book profits, provisions made for bad and doubtful debts cannot be added back in accordance with Explanation (c ) to Section 115JB(1) as same is not an ascertained liability. In that view o the matter, we are of the opinion that the Tribunal was justified in confirming the order of CIT(A) deleting the addition. We do not see any reason for interference and therefore we answer the question in favour of assessee and against the revenue MAT computation - payment to L & T towards excise duty - Held that:- CIT(A) directed to allow the expenditure on payment to L & T towards excise duty as revenue expenditure and the remaining expenditure incurred on payment to GAIL and expenditure on cell membranes were held as capital expenditure. On further appeal by the assessee before the Tribunal, the Tribunal directed to allow the entire expenditure as revenue expenditure but directed to allow the same on deferment basis as claimed by the assessee. The Tribunal also allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal has dismissed the appeal filed by the revenue against the order of CIT(A) whereby he had deleted the disallowance of ₹ 4,63,09,000/- being the expenses pertaining to earlier years. The Assessing Officer while perusing the profit and loss account found that the assessee had debited expenses relating to previous year. The assessee had claimed that these items were ascertained/quantified during the current year but the Assessing Officer held that since the assessee followed mercantile system of accounting only such expenses are allowable which pertain to the financial year relevant to the assessment year under consideration. 2.2 Mr. Parikh, learned advocate appearing for the revenue submitted that the decision of the Tribunal is erroneous as the same is disregarding the fact that in the mercantile system of accounting followed by the assessee, such expenses which are pertaining to different years are not allowable. 2.3 Mr. Soparkar, learned Senior Counsel assisted by Mr. Amit K. Mathur and Mrs. Swati Soparkar, learned advocates for the assessee supported the impugned order and submitted that the issue involved in the present appeal is now squarely covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x), which allows a deduction in respect of bonus and section 10(5). Now, in section 10(2)(x), what is allowable as a deduction is any sum paid to an employee as bonus . By itself this contemplates actual payment; but section 10(5) defines the word paid which appears in sub-section (2) as meaning actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under this section . Therefore, an actual payment is not necessary for the purpose of this deduction; it is sufficient if the liability to bonus is incurred according to the method of accounting upon the basis of which the profits or gains are computed. Now, considering that the profits or gains are computed on the mercantile basis, the amount of bonus for the year 1951 would properly be treated under the mercantile system as an expense for the year 1951. It appears to us to be a matter of little consequence that in point of fact no entry was made in the account of that year making a provision for the bonus, because obviously such an entry could only be made after the conclusion of that year when the profits of that year were known, and, therefore, the liability for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court: (A) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in deleting the disallowance of ₹ 26,57,00,000/- by holding that the sales Tax exemption granted by the Government of Gujarat is capital receipt - exempt from tax instead of revenue receipt as treated by the Assessing Officer? (B) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in allowing deduction of ₹ 1,53,66,656/- being contribution made to various organizations without appreciating the finding of the Assessing Officer that the contributions made by the assessee are in the form of donations not connected with the business obligation of the assessee? (C) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the expenditure of ₹ 2309.37 lacs being payment made to GEB and MECON (I) Ltd. as revenue expenditure instead of treating the same as capital expenditure by the Assessing Officer? (D) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing deduction u/S.80HHC while computing the book p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donations and not connected with the business obligations. He submitted that the expenditure in form of payment to GEB and MECON(I) Ltd. was of capital nature and since the assessee itself had capitalized the same in its books of account, there was no question of allowing the same as revenue expenditure. He submitted that the assessee had no taxable income under the normal provisions of the Income Tax Act and therefore the claim of deductionu/s 80HHC of the Act was not allowable. 4.4 Mr. Soparkar, learned Counsel appearing for the assessee submitted that issue no. 1 is covered by the decision of the Apex Court dated 19.04.2016 wherein the Apex Court relying on the case of Commissioner of Income Tax, Madras vs. Ponni Sugars and Chemicals Ltd. reported in [2008] 9 SCC 337 and Commissioner of Income Tax vs. Meghalaya Steels Ltd reported in [2016] 3 SCALE 192. He submitted that this Court in Tax Appeal No. 226 of 2010 and allied matters has already answered the said issue in favour of the assessee. 4.5 So far as issue no. 2 is concerned, he submitted that the issue is already covered by a decision of the Apex Court in the case of Sri Venkata Satyanarayana Rice Mill Contractors C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/S.36(1)(iii) claimed by the assessee, without appreciating that the assessee itself had capitalized the said expenses in its books of account and treated the same as part of actual cost of assets? (C) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing the expenditure of ₹ 21.96 crores, capitalized by the assessee in its books of account as revenue expenditure instead of treating the same as capital expenditure by the Assessing Officer? (D) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the CIT(A) deleting the addition of ₹ 35,30,234/- u/S.40A(9) of the Act on account of contribution to staff welfare institutions without appreciating that the contributions made to staff welfare institutions are expressly hit by the provisions of Section 40A(9) of the Act? (E) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the CIT(A) directing not to add provision for doubtful debts amounting to ₹ 25,69,14,000/- while calculating book profit u/S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Tribunal has erred in confirming the orders passed by the CIT(A) and thereby deleting the additions and/or disallowance made by the Assessing Officer. 6.7 Mr. Soparkar, learned Counsel appearing for the assessee submitted that so far as issue no. 1 is concerned, the Tribunal deleted the disallowance following the decision of the Tribunal in the assessee s own case for the assessment years 1995-96 and 1996-97. The said decisions of the Tribunal came to be confirmed by this Court vide Tax Appeals No. 236 and 237 of 2001 and therefore the said issue stands concluded in favour of assessee. 7. Having gone through the decisions of this Court rendered in Tax Appeals No. 236 237 of 2001 which has been confirmed by the Apex Court by order dated 09.09.2011 vide SLP (CC) No. 14461 of 2011, we find that issue no. 1 raised in the present appeal stands concluded. For the reasons stated in the said appeals it is not possible to state that the impugned order of the Tribunal gives rise to any question of law so as to warrant interference. Question no. 1 accordingly stands answered in favour of assessee and against the revenue. 7.1 So far as issue no. 2 is concerned, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.2 In the aforesaid case, the Apex Court has observed that the Legislature has made no distinction in Section 36(1)(iii) between capital borrowed for a revenue purpose and capital borrowed for capital purpose and an assessee is entitled to claim interest paid on borrowed capital provided that capital is used for business purpose irrespective of what may be result of using such borrowed capital. This answers the question raised in the present appeal and therefore question (B) is accordingly answered in favour of assessee. 7.3 So far as issue no. 3 is concerned, the same has already been concluded by question no. (C ) in Tax Appeal No. 1774 of 2008 and therefore we do not propose to discuss the same again. Therefore the said question also stands answered in favour of assessee. 7.4 So far as issue no. 4 is concerned, Mr. Soparkar submitted that the issue is already covered by a decision of this Court in the case of Gujarat State Export Corporation Limited vs. Commissioner of Income Tax reported in [1994] 209 ITR 649 (Gujarat). 8. We have heard both the learned counsel and perused the record. We have also gone through the decisions cited before us. The Tribunal has follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MMISSIONER OF INCOME TAX VS. M/S. JUPITER BIO-SCIENCE LTD., vide dated 3.8.2011 reported in 353 ITR 113 has held the assessee is liable to pay advance tax as per the amended provisions of Section 115JB of the Act for the relevant period. However, he is not liable to pay interest on the amount due as per the amended provisions. However, he has not paid the advance tax as per the provisions existing prior to the amendment. Hence, he is liable to pay interest on the said amount deducting the difference of the tax paid. The Apex Court in the case of BHARAT EARTH MOVERS VS. COMMISSIONER OF INCOME TAX REPORTED IN (2000) 245 ITR 428 (SC) has held that an assessee who is maintaining the accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, -6- regard being had to the accepted principles of commercial practice and accountancy. It is not as if such deduction is permissible only in case of amounts actually expended or paid. The liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Act and no deduction u/s. 80HHC was allowed, and hence the assessee is not eligible for deduction u/s. 80HHC while computing the book profit u/s. 115 JB of the Act ? [E] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in allowing the expenditure of ₹ 1214.12 lacs being payment to L T as 'revenue expenditure' instead of treating the same as 'capital expenditure' by the Assessing Officer ? 11.1 The assessee had claimed sales tax exemption granted by Govt. of Gujarat as capital receipt exempt from tax. The Assessing Officer disallowed the claim of the assesee which was confirmed by the CIT(A) on appeal. The Assessing Officer disallowed payment on account of contribution made to various organisations. The assesee had also claimed to have incurred expenditure being payment to GAIL and expenditure on cell membranes and had capitalized the same in the books of account. The assessee considered the whole expenditure as deferred expenditure and claimed the proportionate expenditure. The assessee while computing the book profit u/s 115JA of the Act had claimed a sum of ₹ 123395000/- as eligible amount of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finance transaction and what is allowable is only interest and sales-tax and not repayment of principal amount of loan ? [C] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the order of the CIT (A) deleting the addition of ₹ 36,27,823/- u/s. 40A (9) of the Act on account of contribution to staff welfare institutions without appreciating that the contributions made to staff welfare institutions are expressly hit by the provisions of Section 40A (9) of the Act ? [D] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the order of the CIT (A) deleting the addition of ₹ 1,92,75,000/= being expenses pertaining to earlier years without appreciating that in the mercantile system of accounting followed by the assessee, such expenses which are pertaining to different year is not allowable ? [E] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in allowing the expenditure of ₹ 1214.12 lacs being payment to L T as 'revenue expenditure' instead of treating the same as 'capital expenditure' by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure of ₹ 1094.91 lacs on the installation/replacement of Cell Membrane of Cholr Alkai Plant as 'revenue expenditure' instead of treating the same as 'capital expenditure' by the Assessing Officer ? [B] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding that order of the CIT (A) deleting the disallowance of ₹ 16520287/= in respect of boilers taken on lease from Messrs. ICICI / Messrs. ICICI Securities Finance Company Limited [I-SEC], without appreciating that the assets sold were never physically transferred to the buyers and the transactions of sale and lease back were merely on paper and it was actually in the nature of finance transaction and what is allowable is only interest and sales-tax and not repayment of principal amount of loan ? [C] Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the order of the CIT [A] deleting the addition of ₹ 36,55,590/= u/s. 40A (9) of the Act on account of contribution of staff welfare institutions without appreciating that the contributions made to staff welfare institutions were expressly ..... 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