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1983 (12) TMI 322 - ITAT AHMEDABAD

1983 (12) TMI 322 - ITAT AHMEDABAD - TMI - IT Appeal Nos. 2488 (AHD.) of 1982 and 77 (AHD.) of 1983 - Dated:- 16-12-1983 - K.T. THAKORE, ACCOUNTANT MEMBER AND K.R. DIXIT, JUDICIAL MEMBER. P.N. Malik for the Appellant. J.P. Shah for the Respondent. ORDER Per Shri K.T. Thakore, Accountant Member - This set of two appeals filed by the revenue and the assessee respectively relate to the assessment year 1978-79. As these appeals relate to the same assessee and the same assessment year they are dispos .....

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The assessee incurred an expenditure of ₹ 14,855 in connection with the distribution of dry fruits on Diwali and New Year s Day. The ITO disallowed the said expenditure as treating the same as in the nature of entertainment expenditure. 3. In appeal the Commissioner (Appeals) following his decision for the assessment year 1977-78 deleted the said addition. 4. Being aggrieved the revenue has come up in appeal before us. Our attention was drawn to the decision of the Tribunal in the assessee .....

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f business and has no element of entertainment as held by the ITO. 5. The next contention relates to allowance of expenditure of ₹ 2,57,705 as sales promotion expenditure. The revenue has challenged the decision of the Commissioner (Appeals) on the ground that the said expenditure was not of revenue nature in any case the said expenditure was hit by rule 611 of the Income-tax Rules, 1962 ( the Rules ). The assessee claimed a deduction of ₹ 3,61,624 under the head Sales promotion expe .....

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ing his decision in the earlier years as also the decision of the Tribunal (to which we shall presently refer) deleted the said addition. 7. Being aggrieved the revenue is in appeal before us. Our attention was drawn to the decision of the Tribunal in the assessee s own case for the assessment year 1970-71 in IT Appeal No. 439 (Ahd.) of 1975-76, read with C.O. No. 87 (Ahd.) of 1975-76 decided on 24-4-1976. In that decision, the Tribunal had considered an identical issue. We have perused the said .....

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ceeded ₹ 50 each totalling to ₹ 1,88,941 out of ₹ 2,39,111 was hit by the said rule. The Commissioner (Appeals) in appeal deleted the said disallowance for the same reasons as set out in the earlier paragraphs. We also do not find any reason to interfere with the decision of the Commissioner (Appeals) for the reasons set out earlier relating to the assessee s claim in regard to the sale promotion expenses. We may add that in regard to both the items of expenditure the decision .....

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Commissioner (Appeals) disagreed with the view, in appeal and held that the said expenditure was allowable in light of the decision of the Tribunal, Bombay Bench. 10. Before us it was contended on behalf of the revenue that in view of the decision of the Bombay High Court in the case of Kolhapur Sugar Mills Ltd. v. CIT [1979] 119 ITR 387 the claim was not allowable. The learned departmental representative relied on the said decision of the Bombay High Court to support the disallowance as made b .....

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ready allowed substantial expenditure as staff welfare expenditure and the labourers having been paid well with regard to wages and bonus there was no need for incurring the said expenditure to keep the labourers in good humour. In our opinion. the expenditure incurred towards popja is essentially as staff welfare expenditure and in absence of any other material like the one placed in Kolhapur Sugar Mills Ltd. s case (supra), we are inclined to uphold the decision of the Commissioner (Appeals) p .....

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unt relating to maintenance expenditure of Woodland Flat provided, for residence by the assessee to the said managing director. 13. The matter was carried in appeal before the Commissioner (Appeals) who following the decision of their Lordships of the Kerala High Court in the case of CIT v. Travancore Tea Estates Co. Ltd. [1980] 122 ITR 557 deleted the said amount in computing the said disallowance. 14. Being aggrieved the revenue is in appeal before us. The learned departmental representative s .....

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s) is directly on the point and it is held in the said decision that expenditure on maintenance or repairs does not amount to perquisite unless special repair was undertaken to suit the convenience of the employee. It may be pointed out that though the decision of the Full Bench was rendered at a later date it has not overruled the decision in Travancore Tea Estates Co. Ltd. s case (supra). Therefore, in absence of any material to show that the expenditure incurred towards maintenance was of a s .....

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course of amalgamation proceedings the assessee-company had incurred an expenditure to the extent of ₹ 35,899. The ITO was of the view that the said expenditure was. of capital in nature and rejected the contention that placed by the assessee that the main purpose of amalgamation was to carry on the business more efficiently and economically under a single control. It was also pointed out that the said expenditure was incurred in order to effect internal economies to ensure better utilisat .....

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upheld the claim of the assessee and deleted the said disallowance. 18. Before us the learned departmental representative submitted that in view of the decision in Raza Buland Sugar Co. Ltd. v. CIT [1980] 122 ITR 817 (All.) the said expenditure was clearly of capital in nature. Shri Shah on the other hand relied on the decision referred to by the Commissioner (Appeals) as stated above. 19. We have considered the rival submissions and have referred to various decisions cited by both the sides. In .....

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he decision of the Supreme Court referred to above does not appear to have been considered. Therefore, we hold that the Commissioner (Appeals) was justified in holding that the amalgamation expenses were of revenue in nature and thereby deleting the said disallowance. 20. Now we turn to the appeal filed by the assessee. The grievance Of the assessee that the Commissioner (Appeals) was not justified, on facts of the case, in holding that the assessee was not entitled to any relief under section 8 .....

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e initial assessment year for claim under section 80J was 1975-76. Thus, T. Maneklal was granted relief under section 80J for the assessment year 1978-79 for the third succeeding assessment year on the basis of the claim made by it for the assessment year 1978-79. After the amalgamation the assessee, the amalgamated company also made a claim for relief under section 80J in respect of the said undertaking. The ITO refused to entertain the claim for the assessment year 1978-79 on the ground that t .....

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supra) was clearly misplaced. The said decision had no application. That apart T. Maneklal had already availed of relief for the assessment year 1978-79. The circular of the CWT [reproduced at para 15.1 of the Commissioner (Appeals) s order] had also no application. Thus, the Commissioner (Appeals) was of the view that T. Maneklal having obtained relief for the assessment year 1978-79 was not entitled to further relief in the hands of the assessee after amalgamation. In this view of the matter, .....

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. Now after amalgamation the previous year to be followed for the assessment year 1979-80 would be the financial year. Now all that the assessee s claim was that the relief that was due under section 80J for the period 1-6-1977, i.e., after amalgamation up to the end of the previous year, viz., 31-3-1978 should be allowed in the hands of the assessee. Section 80J provides for relief to an industrial undertaking for the initial year and for four successive assessment years. Thus, the said sectio .....

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mpanies. The mere fact that the same assessment years are involved in the hands of the two companies, viz., T. Maneklal and the assessee should not be the basis for determining the relief due to the assessee. In effect the - assessee was not claiming double relief at all but what was claimed was the continuity of relief or to put it differently the loss of relief due to the industrial undertaking as a result of amalgamation. The learned departmental representative on the other hand relying on th .....

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for assessment year 1978-79 relief would be allowed to both the companies which was not contemplated under section 80J. 23. We have considered the rival submissions. It may be stated at the outset that the unit in question is an industrial undertaking which is exigible to relief under section 80J. In fact such relief was granted in the hands of T. Maneklal which owned the unit for the assessment year 1975-76 on the basis of the initial year and such relief was allowed in the hands of the said co .....

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: "(1A ) amalgamation , in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that- (i)all the property of the amalgamating company or companies immediately before the ama .....

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algamation the unit owned by T. Maneklal became property of the assessee-company. The assessee-company in its own assessment is entitled to relief under section 80J in respect of the said unit, as successor company, in the light of the instructions of the CBDT referred to earlier. The assessee-company in our opinion could claim relief under section 80J on the basis of the previous year followed by it in respect of the profits of the undertaking which is now owned by it and that is only after the .....

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rsy in this regard had come up before the Tribunal, Bombay Bench in case of Tyresole Concessionaries ( P.) Ltd. v. ITO [1982] 1 SOT 119 to which one of us (the Accountant Member) was a party. In that case also both the companies followed different previous years and the question arose for consideration was whether the amalgamated company on amalgamation was entitled to benefit of unabsorbed development rebate which was carried forward in the hands of the amalgamated company. The reasons set out .....

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e been chargeable has been specifically excluded under the scheme of amalgamation. The provisions therefore have to be so construed as to make available the benefits if they are so available rather than denying the same. The construction sought to be placed on behalf of the revenue would result in loss of benefit for a portion of the year to the assessee-company and the profits relating to the said period, viz., 1-6-1977 to 31-3-1978 would be excluded from relief under section 80J altogether. Si .....

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ion 80J (old section 84) must be so construed as to advance the cause of relief due to the assessee rather than witholding the same. In light of the above discussion, therefore, we are inclined to uphold the claim of the assessee. 24. The last contention raised in the assessee s appeal relates to chargeability of interest under sections 215 and 139(8) of the Act. The ITO levied interest under section 139(8) amounting to ₹ 1,21,618 and ₹ 4,69,390 under section 215. The assessee s clai .....

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Shri Shah s submission at the outset was that levy of interest was illegal. Inasmuch as in the draft order which the assessee has sent to the IAC there was no mention thereof. Thus, the direction to levy interest under section 139(8)/215 was contained in the final order which would amount to amendment of the draft order approved by the IAC which was not permissible under section 144B proceedings. In other words, according to Shri Shah, it was not open to the ITO to make any amendment in the draf .....

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