TMI Blog2009 (2) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure incurred related to the salary and wages, power and fuel, travelling expenses, insurance and miscellaneous expenses. 2.1.1 After hearing both the parities, we find that this issue is covered by the decision of the Tribunal in assessee's own case in assessment year 1996-97 in ITA No. 6269/M/99. In the said year, the Tribunal following the decision in assessment year 1986-87 in assessee's own case in which similar pre-operative expenditure relating to steel division at Nasik had been allowed as revenue expenditure. Facts this year are identical. Therefore respectfully following the decision of Tribunal in assessment year 1996-97 (supra), we set aside the order of CIT(A) and allow the claim of the assessee. 2.2 The ground No. 1(b) relates to allowability of pre-operative expenditure relating to the Gopal Nagar unit. The learned AR for the assessee did not press this ground of appeal at the time of hearing of the appeal. This ground is therefore dismissed as not pressed. 2.3 The ground No. 2 is regarding allowability of trial run expenditure incurred in connection with cold rolled grain oriented steel project at Nasik, amounting to ₹ 2.69 crores. This t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 35AB were not applicable and the payment was allowable as deduction u/s.37 of the IT Act. CIT(A) has held that the transaction would be covered by the provision of section 35AB and the deduction would be allowed at 1/6th of the gross amount in the year under consideration. Aggrieved by the said decision, the assessee is in appeal. 2.5.1 After hearing both the parties, we find that the issue is covered against the assessee by the decision of Tribunal in assessee's own case in assessment year 1994-95 in ITA No. 2600/M/98 in which the Tribunal held that since the payment was for technical know how fees, the same was covered by the provision of section 35AB and assessee would be entitled to deduction of only 1/6th of the gross amount payable as per the agreement. The Tribunal has followed the said decision is assessment year 1996-97. Facts this year are identical. Therefore respectfully following the decision of the Tribunal (supra), we confirm the order of CIT(A). 2.6 The dispute raised in ground No. 5 is regarding the annual value of the property called J K House at Warden Road, Mumbai. The Municipal ratable value of the property was ₹ 1,05,375/-. Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one steel and the interest paid on borrowed fund in connection with said unit had been claimed as deduction. The Tribunal allowed the claim treating the new unit as an extension of the existing steel division. The said decision of the Tribunal was followed in assessment year 1996-97 in which similar claim had been made. Facts this year are identical as the assessee had set up a new unit as an extension of the existing steel division. Therefore respectfully following the decision of the Tribunal (supra), we set aside the order of CIT(A) and allowed the claim of the assessee. 2.8 The dispute raised in ground No. 7 is regarding disallowance of expenses incurred on foreign travel of the spouses of the employers. The assessee had manufacturing plants in Kenya, Indonesia and England. The travelling expenses of spouses of the employees working on deputation in these countries had been borne by the assessee company and the same had been claimed as expenditure which was disallowed by the Assessing Officer as not incurred for the purpose of business. The order of Assessing Officer was confirmed by the CIT(A). Aggrieved by the said decision, the assessee is in appeal. 2.8.1 After hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records and considered the matter carefully. The dispute is regarding addition on account of prior period expenses debited in the profit and loss account while computing the book profit. The Assessing Officer had disallowed the expenses fully whereas CIT(A) has allowed part of such expenses pertaining to the year ending March, 1998 which had been debited in the account of the subsequent year. We agree with the submissions of the Learned AR that in view of the judgment of Hon'ble Supreme Court in case of Apollo Tyres (supra) the revenue authorities could not tinker with the profit computed under the Companies Act and only prescribed adjustments as provided in the Explanation to section 115JA(2) could be made. There is no provisions in the Explanation for the making any addition on account of prior period expenses which are ascertained liabilities. We therefore set aside the order of the CIT(A) and allow the claim of the assessee. 2.11 The dispute raised in ground No. 9(b) is regarding adjustment on account of debenture redemption reserves of ₹ 1880.30 lacs debited in the profit and loss account. The Assessing Officer added the amount to the net profit while computing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal (supra), we set aside the order of CIT(A) and delete the addition made. 3. We now take up the appeal of the revenue in ITA No. 446/M/2003. In this appeal, the revenue has raised disputes on seven grounds. 3.1 The first dispute is regarding disallowance of technical know how fees. The facts of the case are already mentioned in para 2.5 while dealing with the appeal of the assessee on the same issue. The assessee had claimed the entire amount as revenue expenditure but the Assessing Officer had disallowed the same treating it as capital expenditure. In appeal CIT(A) held that the payment would be covered u/s.35AB and the assessee would be entitled to deduction of 1/6th of the gross amount as per the said section. We have already upheld the decision of the CIT(A) vide para 2.5.1 of this order. The appeal of the revenue on this point is therefore dismissed. 3.2 The dispute raised in ground No. 2(a) is regarding addition due to closing stock valuation. The assessee had been following the direct cost method of valuation. In the assessment for the relevant year, the Assessing Officer rejected the method and followed full cost method resulting into addition or ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property called JK House at Warden Road, Mumbai. We have already dealt with the same issue while dealing with ground No. 5 of the appeal of the assessee and have upheld the decision of CIT(A) that the annual value has to be computed on the basis of standard rent to be determined adopting rate of return of 12% on land and investment in building. The appeal of the revenue on this point is therefore dismissed. 3.5 The dispute raised in ground No. 4 is regarding deduction on account of payment made in connection with training. The assessee had entered into technical know how agreement with M/s. Fretalli Piaconza of Italy in assessment year 1994-95 for a total consideration of US $ 9 lacs payable in 4 equal quarterly installments of US$ 75,000/- in three years. In the relevant assessment year, the assessee also paid a sum of ₹ 2,19,212 to the Italian company as training fees in addition to stipulated technical know how fees. This was disallowed by the Assessing Officer but in appeal CIT(A) fully allowed the claim following the decision taken in the earlier year. Aggrieved by the said decision, the revenue is in appeal. 3.5.1 We have heard both the parties, perused the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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