TMI Blog2017 (5) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention based on the interpretation of the expression 'derived from' can have no application to the case where the provisions of Section 80-IA get attracted - Decided in favour of assessee. Computation of Minimum Alternate Taxation (MAT) u/s 115JA - Entitled for consequential relief in computing income tax payable u/s. 115JA specifically when the assessee company did not distribute the power and the plant was set up for manufacturing of fertilizer and the power plant was a part of fertilizer unit of the company - Held that:- Issue is squarely covered by the decision of Supreme Court in the case of Commissioner of Income-tax Vs. DCM Shriram Consolidated Ltd.- (2015 (2) TMI 759 - SUPREME COURT) wherein it has been held that it is quite evident that assessee's CPPs can as a matter of principle derive profits which is in point of fact embedded in the ultimate profit earned on the sale of the final product. - Assessee is entitled to reduce from its book profits, the profits derived from its CPPs, in determining tax payable for the purposes of Section 115JA of the Act. - Decided in favour of assessee. Cancelling the rectification order under Section 154 and deleting the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is crediting the Retention Price Subsidy in the books of accounts and such subsidy is included in the accounts approved in General Body Meeting, the same cannot be excluded from the book profit. One has to consider the method of accounting being followed by the assessee consistently. Accordingly we hold that the debit in respect of Retention Price Subsidy on account of notification dated 15.04.2009 is allowable. - Decided in favour of the assessee. Addition in respect of fees paid to a consultant for drafting the shareholders agreement - Held that:- The appellant company has incurred expenditure of ₹ 11.62 lakhs in connection with drafting of stock subscription and share holders agreement for acquiring stock/equity shares of Novasoft Information Technology Corporation , USA. The Expenditure is directly relatable to the acquisition of shares/equity of another company but not in relation to the share capital of the appellant company. Hence, it can not be directly considered as capital expenditure. If the shares so acquired have been treated as non-trade investment, then it would have added to the cost of shares (being asset). However, on perusal of balance sheet, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax by the Income-tax Officer did not represent the income which had really accrued to the assessee-Company during the relevant previous years - Decided in favour of assessee MAT computation - AO jurisdiction - Held that:- Assessing officer while computing the income under Section 115J has only the power of examining whether the books of account are certifies by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The assessing officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the assessing officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J. Allowable business expenditure - Held that:- The true test for qualification of expenditure under Section 37 of the Act is that it should be incurred wholly and exclusively for the purposes of business and the expenditure should not be towards capital account. In the instant case, as discussed above, the admission fee paid towards corporate membership is an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 80IA? (iii) Whether under the facts and in thecircumstances of the case and in law the Tribunal was justified in holding that the assessee company is entitled for consequential relief in computing income tax payable u/s. 115JA specifically when the assessee company did not distribute the power and the plant was set up for manufacturing of fertilizer and the power plant was a part of fertilizer unit of the company? 2.I.1.a The first issue regarding expenditure which are incurred by the Director while going with his wife is covered by the decision of Calcutta High Court in the case of Kesoram Industries Cotton Mills Ltd. Vs. CIT- 191 CIT 518 (Cal) and of Kerala High Court in the case of CIT Vs. Apollo Tyres Ltd.- 237 ITR 706 (Ker.) which is sought to be relied by the Tribunal and also followed by the jurisdictional High Court in the case of M/s Chambal Fertilizers Chemicals Ltd. Vs. DCIT (Asstt.), Spl. Range, Kota- Tax Appeal No.296/JP/1999 decided on 24.02 .2005. 2.I.2.b In that view of the matter, the issue No.(i) is required to be answered in favour of the assessee and against the revenue. 2.I.2 In so far as issue no.(ii) in allowing 100% deduction u/s.80IA spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no order as to costs. 2.I.3.a In that view of the matter, the issue is answered in favour of the assessee and against the revenue. 2.I.3.b Accordingly, the appeal stands dismissed. II. DB ITA No.203/2008 admitted on 23.10.2008 Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the order of the CIT(A) in cancelling the rectification order under Section 154 and deleting the interest levied u/s.234C? 3.II.1 With regard to this issue the Tribunal in para 6 of its order has observed as under: 6. After considering the arguments advanced by the parties, we find the first appellate order is comprehensive and reasoned one though unnecessary repetitions could have been avoided in the first appellate order. The ld. CIT (A) has held the order under section 154 dated 30.3.2004 as invalid on several reasons to which we fully agree with. First reason is that charging of interest under section 234C on 30.3.2004 under section 154 was change of opinion as the AO on earlier occasion on 12.11.99 had withdrawn the same passing an order on the application of the assessee moved under section 154. Thereafter even in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India. In that view of the matter, the assessee was not liable to pay advance tax for these two dates, held the Tribunal. Any way since the issue of charging of interest under section 234C of the Act under the facts and circumstances of the present case was debatable one and hence the AO was not justified in charging the same by passing an order under section 154 of the Act. The Hon ble Supreme Court in the case of CIT vs. Hero Cycles Pvt. Ltd, 220 ITR 463 (SC) was pleased to hold that the condition precedent for initiating the proceedings under section 154 the mistake should be glaring and obvious and it should not be debatable and, therefore, even if there are two views on the issue the proceedings under section 154 cannot be initiated. Under these circumstances, the ld. CIT(A) has rightly treates the rectification order under section 154 dated 30.3.2004 as invalid one and has rightly been cancelled. The first appellate order is thus upheld. 3.II.1.a In that view of the matter, we are in complete agreement with the view taken by the CIT(A) and the Tribunal and therefore, the issue is required to be answered in favour of the assessee and against the department. 3.II.1.b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1.a In that view of the matter, the issue is required to be answered in favour of the assessee and against the revenue. 4.III.2. In so far as issue No.(ii) is concerned, it is covered by the decision on issue No.(iii) of appeal No.866/2008 which reads as under: I.5 Regarding issue No.(iii), whether the assessee company is entitled for consequential relief in computing income tax payable u/s. 115JA specifically when the assessee company did not distribute the power and the plant was set up for manufacturing of fertilizer and the power plant was a part of fertilizer unit of the company, is concerned, this issue is squrely covered by the decision of Supreme Court in the case of Commissioner of Incometax Vs. DCM Shriram Consolidated Ltd.(2014) 368 ITR 720, wherein it has been held as under: The High Court in the impugned order has relied upon the decision of the six-judge Bench of this Court in Tata Iron and Steel Co. Ltd. v. State of Bihar : [1963] 48 ITR (SC) 125. The proposition of law propounded in TISCO [1963] 48 ITR (SC) 125 has rightly been applied by the High Court in the facts and circumstances of the case. The view taken by the High Court, therefore, is in conform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income Tax Appellate Tribunal under section 254 of the Income Tax Act, 1961. There shall be no order as to costs. 5.IV.1.a In that view of the matter, the issues No.(i) and (ii) are required to be answered in favour of the assessee and against the department. 5.IV.2. So far as issues No.(iii) and (iv) are concerned, the Tribunal while considering the case has observed as under: 6.8 We have heard both the parties. The AO has added the deduction on account of Retention Price Liability under Clause (c) and (b) of explanation (1) to Section 115JB of the Act. Clause (c) of explanation (1) to Section 115 JB refers to the amount or amounts set aside for provision made for meeting liabilities other than ascertain liabilities. Clause (b) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Subsidy credited be not treated as part of the book profit. If the assessee is crediting the Retention Price Subsidy in the books of accounts and such subsidy is included in the accounts approved in General Body Meeting, the same cannot be excluded from the book profit. One has to consider the method of accounting being followed by the assessee consistently. Accordingly we hold that the debit in respect of Retention Price Subsidy on account of notification dated 15.04.2009 is allowable. 5.IV.2.a The Supreme Court in the case of Godhra Electricity Co. Ltd. Vs. Commissioner of Income-tax- (1997) 225 ITR 746 (SC) has observed as under: 6.Under the Act income charged to tax is the income that is received or is deemed to be received in India in the previous year relevant to the year for which assessment is made or on the income that accrues or arises or is deemed to accrue or arise in India during such year. The computation of such income is to be made in accordance with the method of accounting regularly employed by the assessee. It may be either the cash system where entries are made on the basis of actual receipts and actual outgoings or disbursements or it may be the merc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Ltd. v.Commr. of Income-tax, Bombay City-I [1965]57ITR521(SC) (supra) this Court has said: Income-tax is a tax on the real income, i.e., the profits arrived at on commercial principles subject to the provisions of the Income-tax Act. 17. In that case the Court has approvedthe following principle laid down by the Bombay High Court in H.M. Kashiparekh Co. Ltd. v. Commr. of Income-tax AIR1961 Bom 84 (supra) (Para 15 of AIR): The principle of real income is not to be so subordinated as to amount virtually to a negation of it when a surrender or concession or rebate in respect of managing agency commission is made, agreed to or given on grounds of commercial expediency, simply because it takes place some time after the close of an accounting year. In examining any transaction and situation of this nature the Court would have more regard to the reality and specialty of the situation rather than the purely theoretical or doctrinaire aspect of it. It will lay greater emphasis on the business aspect of the matter viewed as a whole when that can be done without disregarding statutory language. 18. In State Bank of Travancore v. Commr.of Income-tax, Kerala [1986]158I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich decree was affirmed by the appellate Court and the learned single Judge of the High Court and it is only on December 3, 1968 that the Letters Patent Appeals filed by the assessee-Company were allowed by the Division Bench of the High Court and the said suits were dismissed. But appeals were filed against the said judgment by the consumers in this Court and the same were dismissed by the judgment of this Court dated February 26, 1969. Shortly thereafter, on March 19, 1969, the Under Secretary to the Government of Gujarat wrote a letter advising the assesseeCompany to maintain the status quo for the rates to the consumers for at least six months and the Chief Electrical Inspector was directed to go through the accounts of the assessee-Company from year to year and to report to the Government about the actual position about the reasonable returns earned by the assessee-Company. On May 16, 1969 another representative suit (Suit No. 118 of 1969) was filed by the consumers wherein interim-injunction was granted by the Court and which was finally decreed in favour of the consumers on June 23, 1974. It would thus appear that after the decision was taken by the assessee-Company to enha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the Income-tax Officer did not represent the income which had really accrued to the assessee-Company during the relevant previous years. The High Court, in our opinion, was in error in upsetting the said view of the Tribunal. 5.IV.2.b Therefore, issues No.(iii) and (iv) are required to be answered in favour of the assessee and against the department. 5.IV.3 In so far as issues No.(v) (vi) are concerned, the Tribunal has in para 8.4 8.5 observed as under: 8.4 The ld. CIT (A) after considering the submissions upheld the addition by observing as under: I have considered the argument of the appellant and submission of the AO and perused the assessment order as well as the relevant records. It is an undisputed fact that the appellant company has incurred expenditure of ₹ 11.62 lakhs in connection with drafting of stock subscription and shareholders agreement for acquiring stock/equity shares of Novasoft Information Technology Corporation, USA. The expenditure is directly relatable to the acquisition of share/equity of another company but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital expenditure. If the shares so acquired have been treated as non-trade investment, then it would have added to the cost of shares (being asset). However, on perusal of balance sheet, it is seen that these shares have been treated as trade investment and accordingly the expenditure so incurred may be considered as allowable revenue expenditure. However, by virtue of provisions of Section 145A the direct expenses or fees (by whatever name called) incurred in acquiring the traded items will have to be added for the purpose of valuation of closing stock for determining the income chargeable under the heads profit and gains of the business. Accordingly, for determining income from profits and gains of the business, same is directed to be added in view of the discussion made above. 5.IV.3.b In that view of the matter, the issues No.(v) (vi) are required to be answered in favour of the assessee and against the department. 5.IV.4 Accordingly, the appeal stands dismissed. V. In DB ITA No.378/2011 admitted on 16.11.2016 (i)Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the addition of ₹ 6,29,04,907 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby every company will to have to pay a minimum corporate tax on the profits declared by it in its own accounts. Under this new provision, a company will pay tax on at least 30% of its book profit. In other words, a domestic widely held company will pay tax of at least 15% of its book profit. This measure will yield a revenue gain of approximately ₹ 75 crores. 8. The above Speech shows that the income tax authorities were unable to bring certain companies within the net of income-tax because these companies were adjusting their accounts in such a manner as to attract no tax or very little tax. It is with a view to bring such of these companies within the tax net that Section 115J was introduced in the IT Act with a deeming provision which makes the company liable to pay tax on at least 30% of its book profits as shown in its own account. For the said purpose, Section 115J makes the income reflected in the companies books of accounts as the deemed income for the purpose of assessing the tax. If we examine the said provision in the above background, we notice that the use of the words in accordance with the provisions of Part II and III of Schedule VI to the Companies A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture intended the assessing officer to reassess the company's income, then it would have stated in Section 115J that income of the company as accepted by the assessing officer . In the absence of the same and on the language of Section 115J, it will have to held that view taken by the tribunal is correct and the High Court has erred in reversing the said view of the tribunal. Therefore, we are of the opinion, the assessing officer while computing the income under Section 115J has only the power of examining whether the books of account are certifies by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The assessing officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the assessing officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115J. 6.V.1.a Therefore, the issue is answered in favour of the assessee. 6.V.2 In so far as issue No.(ii) is concerned, the Tribunal has held as under: 11.6 We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red for initiating the chemical process for the maufacture of a product. The expenditure incurred on the consumption of a consumable item is Revenue. Since the assessee was following consistent method of accounting, therefore the AO should not have deviated from the consistent method which has been followed. There is no change in the facts and circumstances of the case. The Mumbai Tribunal in the case of Sanghi Motors (P) Ltd vs. ACIT, 2010-TIOL-477_ITAT directed the AO to adopt Annual Letting Value as per earlier years on the principle of consistency. The Hon ble P II High Court in the case of CIT vs. Haryana Tourism Corp. Ltd, 327 ITR 26 held that rental income taxed as income from house property in earlier years cannot be changed without reason. We therefore, feel that on the principal consistency, the ld. CIT(A) was justified in deleting the disallowance of ₹ 1.69 crores. 6.V.2.a While considering the case, the Tribunal has also considered the judgment of Punjab and Haryana High Court in the case of CIT vs. Haryana Tourism Corp. Ltd. 327 ITR 26 and has observed that in the previous year same practise was followed by the Company and was accepted by the department. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision for payment of interest amounting to ₹ 5,050 on sales tax collections withheld by the assessee and utilised for the purpose of its own business was not admissible as deduction in computing its total income. The question was, therefore, answered in the negative. We agree with the view taken by this court in the above referred Rajasthan Central Stores (P.) Ltd.'s case. In the result, the above mentioned question of law referred to us is answered in the affirmative and against the Revenue. 6.V.4.b Therefore, the issue No.(vi) is decided in favour of the assessee and against the revenue. 6.V.5 The appeal stands dismissed. VI. In DB ITA No.11/2012 admitted on 16.11.2016 i) Whether under the facts and circumstances of the case and in law the Tribunal was justified in upholding the order of CIT(A) by deleting the addition of ₹ 72,06,690/- made on account of depreciation on catalyst not allowable under Section 32 and Income Tax Rules? ii) Whether under the facts and in thecircumstances of the case and in law the Tribunal was justified in upholding the order of the CIT(A) by deleting the addition of ₹ 4,01,93,109/- made u/s 115 JB on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom house property in earlier years cannot be changed without reason. We therefore, feel that on the principal consistency, the ld. CIT(A) was justified in deleting the disallowance of ₹ 1.69 crores. V.7 While considering the case, the Tribunal has also considered the judgment of Punjab and Haryana High Court in the case of CIT vs. Haryana Tourism Corp. Ltd. 327 ITR 26 and has observed that in the previous year same practise was followed by the Company and was accepted by the department. V.8 In that view of the matter, the view taken by the Tribunal is just and proper. V.9 Accordingly, this issue is answered in favour of the assessee and against the department. 7.VI.2 Regarding issue No.(ii), the issue is squarely covered by the decision on issue No.(i) of Appeal No.378/2011 which reads as under: V.1 In so far as issue No.(i) as to whether under the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the addition of ₹ 6,29,04,907 made u/s 115 JB on account of sales tax collected and converted into loan is concerned, it is squarely covered by the decision in the case of Apollo Tyres Ltd. Vs. Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory auditors and will have to be approved by the company in its General Meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and satisfy that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Inspite of all these procedures contemplated under the provisions of the Companies Act, we find it difficult to accept the argument of the Revenue that it is still open to the assessing officer to re-scrutinize this account and satisfy himself that these accounts have been maintained in accordance with the provisions of the Companies Act. In our opinion, reliance placed by the Revenue on Sub-section (1A) of Section 115J of the IT Act in support of the above contention is misplaced. Sub-section (1A) of Section 115J does not empower the assessing officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company. The said sub-section, as a matter of fact, mandates the company to maintain its account in accordance with the requirements of the Companies Act which mandate, according to us, is bodily lifted from the Companies Act into the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this point alone, the additon deserve to be deleted. 7.2.1 Other submissions made were broadly same as made in A.Y. 02-03. 7.VI.3.a The Tribunal in para 10.1 has observed as under: 10.1 The third ground of appeal of the revenue is that the ld. CIT(A) has erred in deleting the addition of ₹ 1,74,42,151/- in respect of donation paid to DAV Trust. 7.VI.3.b More particularly, the expenses which are incurred given to the institution is less than 10% of the total income. Even if the donation exceeds 10% of the total income, it will not make any difference to any trust. We are in complete agreement with the view taken by the Tribunal. 7.VI.3.c Therefore, the issue is answered in favour of the assessee and against the department. 7.VI.4 Regarding issue No.(iv), this issue is squarely covered by the issue No.(iv) (v) of Appeal No.378/2011 which reads as under: V.10 With regard to issue No.(iv) (v), the Tribunal in para 16.3 has observed as under: 16.3 Following the decision of the Tribunal in the case of assessee in earlier assessment year, we hold that the ld. CIT(A) was justified in deleting the addition of ₹ 1.12 crores. V.11 Therefore, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 5 years only i.e. Up to 2002-03 as per section 115 JAA(3) and Circular No. 763? 8.VII.1 Regarding issue No.(i), this issue is squarely covered by the decision in issue No.(ii) of Appeal No.866/2008 which reads as under: I.3 In so far as issue no.(ii) in allowing 100% deduction u/s.80IA specifically when the assessee company itself claimed deduction @ 30% u/s. 80IA, is concerned counsel for the appellant has taken us to the order of CIT (A) and contended that the view taken by the Tribunal is required to be reversed. However, the issue is now covered by the decision of Madras High Court in the case of Tamilnadu Petro Products Ltd. Vs. Assistant Commissioner of Income-tax- (2011) =388 ITR 643 (Madras), wherein it has been held as under: 7. In our considered opinion, the said contention can have no application to the case on hand. In as much as we dealt with the issue in the light of Section 80-IA and in particular Sub-clause (iv) of the said section which provides for the benefit even in respect of electricity generation plant established by the Assessee and the income derived from such enterprise of the Assessee, it will have to be held that the Assessee fully com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod. If the quantum of Retention Price Subsidy is made available to the assessee before finalization of the accounts then the assessee can make adjustment for such price subsidy against Retention Price Subsidy already credited in the books of account. The liability is therefore, ascertained liability. Similarly Hon ble Apex Court in the case of Appollo Tyres Ltd. vs. CIT, 255 ITR 273 held that the AO has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its accounts in a manner provided by the Companies Act and the same is to scrutinized and certified by the statutory auditors and will have to be approved by the company and its General meeting. The AO has only power to make adjustment as provided in explanantion. The amount set aside for making the ascertained liability cannot be added to the book profit. Hence, sub clause (c) to explanation (1) of Section 115 JB is not applicable. The amount so debited is not a reserve to be covered under sub-clause (d) to explanation 1 of Section 115JB of the Act. We do not agree with the contention ld. AR the Retention Price Subsidy credited be not treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere must have been entries made in its books in the accounting year in respect of the amount of commission. In our judgment, we would not be justified in attaching any particular importance in this case to the fact that the company followed mercantile system of accounting. They would not have any particular bearing in applying the principle of real income in the facts of this case. 15. The said view was approved by this Court inCommr. of Income-tax v. Birla Gwalior (P) Ltd. [1973]89ITR266(SC) (supra) where the assessee maintained its accounts on the mercantile system. In that case this Court, after referring to the decision in Morvi Industries Ltd. v. Commr. of Income-tax [1971]82ITR835(SC) , which was also a case where the accounts were maintained on mercantile system, has said: Hence it is clear that this Court in Morvi Industries case did emphasise the fact that the real question for decision was whether the income had really accrued or not. It is not a hypothetical accrual of income that has got to be taken into consideration but the real accrual of the income. [P. 273] (of ITR): (at P. 2491 of AIR) 16. In Poona Electric Supply Co. Ltd. v. Commr. Of Income-tax, Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dixit of the assessee which would then become a value judgment only. What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view of real income taking the probability or improbability of realisation in a realistic manner and dovetailing of these factors together but once the accrual takes place, on the conduct of the parties subsequent to the year of closing an income which has accrued cannot be made 'no income'. |p. 1541 (of ITR): (at p. 788 of AIR) 7. If the matter is examined in the light of the aforementioned principles laid down by this Court, it must be held that even though the assesseeCompany was following the mercantile system of accounting and had made entries in the books regarding enhanced charges for the supply made to the consumers, no real income had accrued to the assessee-Company in respect of those enhanced charges in view of the fact that soon after the assessee-Company decided to enhance the rates in 1963 representative suits (Civil Suits Nos. 152 of 1963 and 50 of 1964) were filed by the consumers which were decreed by the trial Court and which decree was affirmed by the appellate Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the consumers and during the pendency of the said suit the undertaking of the assessee-Company was taken over by the Government of Gujarat under the Defence of India Rules, 1971 and subsequently it was transferred to the Gujarat State Electricity Board and, as a result, the assessee-Company was not in a position to take steps to recover the enhanced charges. 9. The question whether there was real accrual of income to the assessee-Company in respect of the enhanced charges for supply of electricity has to be considered by taking the probability or improbability of realisation in a realistic manner. If the matter is considered in this light, it is not possible to hold that there was real accrual of income to the assessee-Company in respect of the enhanced charges for supply of electricity which were added by the Income-tax Officer while passing the assessment orders in respect of the assessment years under consideration. The Appellate Assistant Commissioner was right in deleting the said addition made by the Income-tax Officer and the Tribunal had rightly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the facts and in the circumstances of the case and in law the Tribunal was justified in holding the donation of ₹ 18,81,134/- made to DAV trust was incurred wholly and exclusively for the purpose of business of the assessee? iv)Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in upholding the order of the CIT(A) by deleting the addition of 112 lakhs on account of interest accrued on the inter-corporate deposit? v)Whether the findings of the Tribunal are perverse in reversing the findings of the CIT(A) and allowing the deduction of ₹ 34,77,91,343/- u/s 80IA to captive power plant on DG Set when the power consumption was by the assessee only? vi)Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in reversing the findings of the CIT(A) and deleting the addition of ₹ 60,92,55,017/- made on account of downward impact of Retention Price Subsidy? vii)Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in allowing the Retention Price Subsidy specifically when it was an unascertained liability and represented rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue No.(i) of Appeal No.378/2011 which reads as under: V.1 In so far as issue No.(i) as to whether under the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the addition of ₹ 6,29,04,907 made u/s 115 JB on account of sales tax collected and converted into loan is concerned, it is squarely covered by the decision in the case of Apollo Tyres Ltd. Vs. Commissioner of Income Tax- (2002) 255 ITR 0273, wherein it has been observed as under: 5. For deciding this issue, it is necessary for us to examine the object of introducing Section 115-J in the IT Act which can be easily deduced from the Budget Speech of the then Hon. Finance Minister of India made in the Parliament while introducing the said Section which is as follows: It is only fair and proper that the prosperous should pay at least some tax. The phenomenon of so-called zero-tax highly profitable companies deserves attention. In 1983, a new Section 80VVA was inserted in the Act so that all profitable companies pay some tax. This does not seem to have helped and is being withdrawn. I now propose to introduce a provision whereby every company will to have to pay a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above contention is misplaced. Sub-section (1A) of Section 115J does not empower the assessing officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company. The said sub-section, as a matter of fact, mandates the company to maintain its account in accordance with the requirements of the Companies Act which mandate, according to us, is bodily lifted from the Companies Act into the IT Act for the limited purpose of making the said account so maintained as a basis for computing the company's income for levy of income-tax. Beyond that, we do not think that the said sub-section empowers the authority under the Income-tax Act to probe into the accounts accepted by the authorities under the Companies Act. If the statute mandates that income prepared in accordance with the Companies Act shall be deemed income for the purpose of Section 115J of the Act, then it should be that income which is acceptable to the authorities under the Companies Act. There can not be two incomes one for the purpose of Companies Act and another for the purpose of income tax both maintained under the same Act. If the legislature intended the assessing officer to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal. VI.7 Therefore, the issue is answered in favour of the assessee and against the department. 9.VIII.3.a Therefore, this issue is answered in favour of the assessee and against the department. 9.VIII.4 In so far as issue No.(iv) is concerned, this issue is squarely covered by the issue No.(iv) of Appeal No.378/2011 which reads as under: V.10 With regard to issue No.(iv) (v), the Tribunal in para 16.3 has observed as under: 16.3 Following the decision of the Tribunal in the case of assessee in earlier assessment year, we hold that the ld. CIT(A) was justified in deleting the addition of ₹ 1.12 crores. V.11 Therefore, we are in complete agreement with the view taken by the Tribunal. V.12 Accordingly, this issue is answered in favour of the assessee and against the department. 9.VIII.4.a Therefore, this issue is answered in favour of the assessee and against the department. 9.VIII.5 Regarding issue No.(v), this issue is squarely covered by the issue No.(ii) of Appeal No.866/2008 which reads as under: I.3 In so far as issue no.(ii) in allowing 100% deduction u/s.80IA specifically when the assessee company itself claimed deduction @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Retention Price Subsidy as per notification dated 15-04-02, therefore, the excess so credited was debited in the P L account. The assessee is required to follow the accounting standards in case of any event which occurs after balance sheet before the finalization of the accounts. The assessee is required to make adjustment. The ld. CIT (A) has held that such adjustment is correct but it should have been made in the subsequent assessment year before notification i.e. after the date of the end of the accounting year. Thus it is clear that such liability was an ascertained liability. In the case of Bharat Earthmovers Ltd., 245 ITR 428, the Hon ble Supreme Court has held that liability of leave encashment is admissible deduction because the liability is ascertained, though it may not be quantified on scientific method. If the quantum of Retention Price Subsidy is made available to the assessee before finalization of the accounts then the assessee can make adjustment for such price subsidy against Retention Price Subsidy already credited in the books of account. The liability is therefore, ascertained liability. Similarly Hon ble Apex Court in the case of Appollo Tyres Ltd. vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialise. [ 14. This principle is applicable whether theaccounts are maintained on cash system or under the mercantile system. If the accounts are maintained under the mercantile system what has to be seen is whether income can be said to have really accrued to the assessee-Company. In H.M. KashiParekh and Co. Ltd. v. Commr. of Income-tax [1960]39ITR706(Bom) , the Bombay High Court had said (Para 10 of AIR): Even so, (the failure to produce account losses) we shall proceed on the footing that the assessee-Company having followed the mercantile system of account, there must have been entries made in its books in the accounting year in respect of the amount of commission. In our judgment, we would not be justified in attaching any particular importance in this case to the fact that the company followed mercantile system of accounting. They would not have any particular bearing in applying the principle of real income in the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ems in its application to every situation, it must depend upon the facts and circumstances of each case. When and how does an income accrue and what are the consequences that follow from accrual of income as well-settled. The accrual must be real taking into account the actuality of the situation. Whether an accrual has taken place or not must, in appropriate cases, be judged on the principles of real income theory. After accrual, non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted. In determining the question whether it is hypothetical income or whether real income has materialised or not, various factors will have to be taken into account. It would be difficult and improper to extend the concept of real income to all cases depending upon the ipse dixit of the assessee which would then become a value judgment only. What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view of real income taking the probability or improbability of realisation in a realistic manner and dovetailing of these factors together but once the accrual takes place, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Defence of India Rules, 1971 and the undertaking was subsequently transferred to the Gujarat State Electricity Board. It is no doubt true that the letter addressed by the Under Secretary to the Government of Gujarat to the assesseeCompany had no legally binding effect but one has to look at things from practical point of view. [See : R.B. Jodha Mal Kuthiala v. Commr. of Income-tax, Punjab [1971]82ITR570(SC) ] The assesseeCompany, being a licensee, could not ignore the direction of the State Government which was couched in the form of an advice, whereby the assesseeCompany was asked to maintain the status quo for at least six months and not to take steps to recover the dues towards enhanced charges from the consumers during this period. Before the expiry of the period of six months the subsequent suit had been filed by the consumers and during the pendency of the said suit the undertaking of the assessee-Company was taken over by the Government of Gujarat under the Defence of India Rules, 1971 and subsequently it was transferred to the Gujarat State Electricity Board and, as a result, the assessee-Company was not in a position to take steps to recover the enhanced charges. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not was indicated by the Supreme Court in Setabganj Sugar Mills Ltd. v. CIT [1961]41ITR272(SC) , as under (p. 274) : The question whether, on the application of the settled tests, different ventures carried on by an individual or a company form the same business is a mixed question of law and fact. Certain principles are applied to determine whether on the facts found, a legal inference can be drawn that the different ventures constitute separate businesses or viewed together, can be said to constitute the same business. These principles were stated by Rowlatt J. in Scales v. George Thompson and Co. Ltd. [1927] 13 TC 83. The learned judge observed: '.the real question is, was there any interconnection, any interlacing, any interdependence, any unity at all embracing those two businesses.' The learned judge also observed that what one has to see was whether the different ventures were so interlaced and so dovetailed into each other as to make them into the same business. These principles have to be applied to the facts, before a legal inference can be drawn that a particular business is composed of separate businesses, and is not the same one. 6. This was reit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areperverse in reversing the findings of the CIT(A) and allowing the deduction of ₹ 15,68,49,789 u/s 801A to captive power plant on DG Set when the power consumption was by the assessee only? iv) Whether the findings of the Tribunal areperverse in allowing the welfare fund contribution of ₹ 10.00 lac u/s 43B (b) instead of considering it to be a donation u/s 80G? v) Whether the findings of the Tribunal areperverse in allowing depreciation of ₹ 27,53,678/- on the basis of additional evidence admitted by the CIT(A) in violation of Rule 46A? vi) Whether the findings of the Tribunal areperverse in deleting the disallowance of ₹ 27,53,678/- on account of depreciation when in the absence of any evidence it was disallowed on the basis that the assets were not put to use for more than 180 days during the year? 11.X.1 Regarding issue No.(i), the Bombay High Court in the case of SI Group India Ltd. Vs. Assistant Commissioner of Income Tax Anr., (2010) 326 ITR 0117 has held as under: 8. In order that the provisions of Sub-section(1) should be attracted the first requirement is that an allowance or deduction must have been made in the assessment for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challan prescribed under the Sales Tax Act which constituted the lawful mode of making payment and the payment which was made to SICOM would nonetheless have to follow the procedure prescribed under the Act. The Tribunal was of the view that the decision of the assessing authority and of the Deputy Commissioner of Sales Tax not to give credit to the payment made to SICOM would have to be upheld, but left it open to the assessee to procure a valid document under the scheme which would be considered for relevant period for relevant deferred amount . 10. The net result of the order of the Sales TaxTribunal dated 8 February 2008 is to uphold the decision of the assessing authority declining to grant credit of the payment made by the assessee to SICOM towards discharge of the deferred sales tax liability. As a matter of fact, on 22 July 2008 a notice of demand was issued under Section 38 of the Bombay Sales Tax Act of 1959 to the assessee by the Deputy Commissioner of Sales Tax, Navi Mumbai in the total amount of ₹ 1,33,13,555/-. Having regard both to the order passed by the Sales Tax Tribunal on 8 February 2008 and the notice of demand issued on 22 July 2008, it is not possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent the entire liability to pay tax/loan stood discharged. Again it is not a benefit conferred on an assessee. Therefore, Section 41(1) of the Act is not attracted to the facts of this case. Hence, the Tribunal was justified in holding that there is no liability to pay tax. Under these circumstances, we do not see any error committed by the Tribunal in passing the impugned order. The substantial question of law is answered in favour of the assessee and against the revenue. 11.X.1.b Therefore, this issue is answered in favour of the assessee and against the department. 11.X.2 Regarding issue No.(ii), this issue is squarely covered by issue No.(iii) of Appeal No.11/2012 which reads as under: VI.4 In so far as issue No.(iii) is concerned, the CIT(A) in para 7.2 has observed as under: 7.2 before me, it was submitted on behalf of the appellant as follows: At the outset, we wish to mention that the entire finding of the L d Assessing Officer is best on the findings in assessment year 2002-03. L d CIT(appeals) has allowed the similar claim for donation to DAV trust for the Assessment year 2002-03 vide order no. 14/2005-06 dated 14.12.2006, hence on this point alone, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and against the department. 11.X.4 Regarding issue No.(iv), the documentary proof produced before the CIT (A) were approved by the Tribunal in para 9.5 which reads as under: 9.5 We have heard both the parties. A sum of ₹ 10.00 lacs was not allowed u/s 43B of the Act in the case of the amalgamating company. The welfare fund society is a Registered Charitable Trust. There was an agreement between National Maritime Board (India) representatives of Indian National Ship Owners Association and Unions Representing Indian rating vide which it was mandatory on the part of the ship owners employers to contribute to National Maritime Board (India) towards welfare fund as specified in the agreement. Section 43B(b) refers to any sum payable by the assessee as an employer by way of contribution to any fund for the welfare of the employees. In view of Section 43B, the amount is allowable in the year in which it is paid. In the earlier year, it has not been allowed and has been added back in view of Section 43B of the Act. Thus a sum of ₹ 10.00 lacs is allowable on payment u/s 43B(b) of the Act. Hence, the Ground No. 7 of the revenue is dismissed. 11.X.4.a Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or trading liability incurred by the assessee. The liability of the assessee to pay sales tax is undisputedly a trading liability in respect of which an allowance or deduction had been made under Section 43B. However, under Clause (a) of Sub-section (1) it is inter alia required that the assessee ought to have obtained some benefit in respect of such trading liability by way of remission or cessation thereof . This postulates that there must be a remission or cessation of the trading liability and that consequently a benefit must enure to the assessee. In the present case, the dispute between the assessee and the Revenue is as to whether there was a remission or cessation of the liability on account of sales tax. 9. The assessee had collected an amount of ₹ 1.79 Crores towards sales tax dues during the period 1 May 1999 and 31 March 2000. Under the package scheme of incentives announced by the Government of Maharashtra in 1993 the sales tax dues had to be paid in five installments commencing from April 2010. SICOM as the implementing agency quantified, according to the assessee, the net present value of the deferred liability of the assessee at ₹ 50.44 lacs which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that there was a remission or cessation of liability. Since the record before the Court does not disclose that there was a remission or cessation of liability, one of the requirements spelt out for the applicability of Section 41(1) (a) has not been fulfilled in the facts of the present case. 11. In the view that we have taken it is notnecessary for the Court to address itself to the wider issue as to whether the assessee, in paying the net present value of the deferred sales tax liability should be regarded as having obtained any benefit within the meaning of Clause (a) of Sub-section (1) of Section 41. The aforesaid issue is kept open to be adjudicated upon at the appropriate stage in appropriate proceedings. 12. The Tribunal, in our view, was in error inproceeding on the basis that there was a remission or cessation of liability. The attention of the Tribunal was drawn to the order passed by the Sales Tax Tribunal. The fact that the order of the Sales Tax Tribunal was placed for consideration before the Income Tax Appellate Tribunal emerges from the order of the Tribunal itself. Consistent with the order passed by the Sales Tax Tribunal which continues to hold the field ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alyst not allowable as per Section 32 and Income Tax Rules? iii) Whether under the facts and in thecircumstances of the case and in law the Tribunal was justified in upholding the order of CIT(A) and allowing the donation of ₹ 20,73,099/- made to DAV trust not allowable u/s 40A (9) also being incurred wholly and exclusively for the purpose of business of the assessee? iv)Whether the Tribunal was legally justified in holding that the club expenses of ₹ 6,99,281/- incurred by the assessee for the membership of its employees were allowable u/s 37 being incurred for the purpose of business? v)Whether the findings of the Tribunal are perverse in allowing club expenses which were actually a reimbursement of expenses incurred by the individual employees of the company and were in the nature of personal expenses being not incidental to the business? 13.XII.1 Regarding issue No.(i), this issue is squarely covered by the issue No.(ii) of Appeal No.866/2008 which reads as under: I.3 In so far as issue no.(ii) in allowing 100% deduction u/s.80IA specifically when the assessee company itself claimed deduction @ 30% u/s. 80IA, is concerned counsel for the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od which has been followed. There is no change in the facts and circumstances of the case. The Mumbai Tribunal in the case of Sanghi Motors (P) Ltd vs. ACIT, 2010-TIOL-477_ITAT directed the AO to adopt Annual Letting Value as per earlier years on the principle of consistency. The Hon ble P II High Court in the case of CIT vs. Haryana Tourism Corp. Ltd, 327 ITR 26 held that rental income taxed as income from house property in earlier years cannot be changed without reason. We therefore, feel that on the principal consistency, the ld. CIT(A) was justified in deleting the disallowance of ₹ 1.69 crores. V.7 While considering the case, the Tribunal has also considered the judgment of Punjab and Haryana High Court in the case of CIT vs. Haryana Tourism Corp. Ltd. 327 ITR 26 and has observed that in the previous year same practise was followed by the Company and was accepted by the department. V.8 In that view of the matter, the view taken by the Tribunal is just and proper. V.9 Accordingly, this issue is answered in favour of the assessee and against the department. 13.XII.2.a Therefore, this issue is answered in favour of the assessee and against the department. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... define the term 'capital expenditure' in the abstract or to lay down any general and satisfactory test to discriminate between a capital and a revenue expenditure. Some of the broad principles deduced were that, outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment and; expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence as asset or an advantage for the enduring benefit of a trade. The expression 'enduring benefit' or 'of a permanent character' were introduced to make it clear that the asset or the right acquired must have enough durability to justify its being treated as a capital asset. The Court observed to the following effect: This synthesis attempted by the Full Bench of the Lahore High Court truly enunciates the principles which emerge from the authorities. In cases where the expenditure is made for the initial outlay or for extension of a business or a substantial replacement of the equipment, there is no doubt that it is capital expenditure. A capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that too for a limited period. Such expenses are for running the business with a view to produce the benefits to the assessee. Consequently, it cannot be treated as capital asset. Therefore, the reasoning given by Delhi, Bombay and Gujarat High Courts in respect of members of Clubs is based upon correct enunciations of the principles of law as delineated above in the judgments of the Supreme Court. 13.XII.4.a The Bombay High Court in the case of American Express International Banking Corpn. Vs. Commissioner of Income Tax- (2002) 258 ITR 601 (Bombay) has observed as under: In view of the judgment of this court in the case of Otis Elevator Co. (India) Ltd. v. CIT [1992] 195 ITR 682 question no. 6 is answered in the affirmative i.e. in favour of the assessee and against the department i.e. section 40A(5) is not applicable for disallowance of expenses incurred by the assessee in respect of Club Membership subscription fees, which is held to be business expenditure and not a perquisite. 13.XII.4.b The Delhi High Court in the case of Commissioner of Income-tax Vs. Samtel Color Ltd.- (2010) 326 ITR 425 (Delhi) has held as under: 5.1 The expenditure incurred towards admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the issues No.(iv and v) are answered in favour of the assessee and against the department. 13.XII.5 The appeal stands dismissed. XIII. DB ITA No.141/2012 admitted on 16.11.2016 i) Whether the Tribunal was legally justified in treating the incentive of ₹ 1,74,49,093/received on pre payment of deferred sales tax liability as capital receipt and loan instead of revenue receipt ignoring the book entries made by the assessee? ii) Whether under the facts and in the circumstances of the case and in law the Tribunal was justified in reversing the findings of the CIT(A) by deleting the addition of ₹ 1,74,49,093/- on account of sales tax collected and converted into loan as revenue receipt? 14.XIII.1 Both these issues are squarely covered by the issue No. (i) of Appeal No.65/2012 which reads as under: X.1 Regarding issue No.(i), the Bombay High Court in the case of SI Group India Ltd. Vs. Assistant Commissioner of Income Tax Anr., (2010) 326 ITR 0117 has held as under: 8. In order that the provisions of Sub-section(1) should be attracted the first requirement is that an allowance or deduction must have been made in the assessment for any year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed under the Sales Tax Act which constituted the lawful mode of making payment and the payment which was made to SICOM would nonetheless have to follow the procedure prescribed under the Act. The Tribunal was of the view that the decision of the assessing authority and of the Deputy Commissioner of Sales Tax not to give credit to the payment made to SICOM would have to be upheld, but left it open to the assessee to procure a valid document under the scheme which would be considered for relevant period for relevant deferred amount . 10. The net result of the order of the Sales TaxTribunal dated 8 February 2008 is to uphold the decision of the assessing authority declining to grant credit of the payment made by the assessee to SICOM towards discharge of the deferred sales tax liability. As a matter of fact, on 22 July 2008 a notice of demand was issued under Section 38 of the Bombay Sales Tax Act of 1959 to the assessee by the Deputy Commissioner of Sales Tax, Navi Mumbai in the total amount of ₹ 1,33,13,555/-. Having regard both to the order passed by the Sales Tax Tribunal on 8 February 2008 and the notice of demand issued on 22 July 2008, it is not possible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability to pay tax/loan stood discharged. Again it is not a benefit conferred on an assessee. Therefore, Section 41(1) of the Act is not attracted to the facts of this case. Hence, the Tribunal was justified in holding that there is no liability to pay tax. Under these circumstances, we do not see any error committed by the Tribunal in passing the impugned order. The substantial question of law is answered in favour of the assessee and against the revenue. X.3 Therefore, this issue is answered in favour of the assessee and against the department. 14.XIII.1.a Therefore, both the issues are answered in favour of the assessee and against the department. 14.XIII.2 The appeal stands dismissed. XIV. DB ITA No.142/2012 admitted on 16.11.2016 i) Whether under the facts and circumstances of the case and in law the Tribunal was justified in upholding the order of the CIT(A) and deleting the addition of ₹ 74,64,626/- made on account of depreciation on catalyst not allowable as per Section 32 and Income Tax Rules? ii) Whether under the facts andcircumstances of the case and in law the Tribunal was justified in upholding the order of the CIT(A) and deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the catalyst is between two to five years. Catalyst is required for initiating the chemical process for the maufacture of a product. The expenditure incurred on the consumption of a consumable item is Revenue. Since the assessee was following consistent method of accounting, therefore the AO should not have deviated from the consistent method which has been followed. There is no change in the facts and circumstances of the case. The Mumbai Tribunal in the case of Sanghi Motors (P) Ltd vs. ACIT, 2010-TIOL-477_ITAT directed the AO to adopt Annual Letting Value as per earlier years on the principle of consistency. The Hon ble P II High Court in the case of CIT vs. Haryana Tourism Corp. Ltd, 327 ITR 26 held that rental income taxed as income from house property in earlier years cannot be changed without reason. We therefore, feel that on the principal consistency, the ld. CIT(A) was justified in deleting the disallowance of ₹ 1.69 crores. V.7 While considering the case, the Tribunal has also considered the judgment of Punjab and Haryana High Court in the case of CIT vs. Haryana Tourism Corp. Ltd. 327 ITR 26 and has observed that in the previous year same practise was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 643 (Madras), wherein it has been held as under: 7. In our considered opinion, the said contention can have no application to the case on hand. In as much as we dealt with the issue in the light of Section 80-IA and in particular Sub-clause (iv) of the said section which provides for the benefit even in respect of electricity generation plant established by the Assessee and the income derived from such enterprise of the Assessee, it will have to be held that the Assessee fully complied with the requirements prescribed under Section 80IA in order to avail the benefits provided therein. Therefore, the contention based on the interpretation of the expression 'derived from' can have no application to the case where the provisions of Section 80-IA get attracted. I.4 In that view of the matter, the issue No.(ii) is required to be answered in favour of the assessee and against the revenue. 15.XIV.3.a Therefore, this issue is answered in favour of the assessee and against the department. 15.XIV.4 Regarding issue No.(iv) (v), these issues are squarely covered by the issue No.(iv) (v) of Appeal No.140/2012 which reads as under: XII.7 Regarding issue No.(iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on where expenditure is incurred while the business is going on and is not incurred either for extension of the business or for the substantial replacement of its equipment. Such expenditure can be looked at either from the point of view of what is acquired or from the point of view of what is the source from which the expenditure is incurred. If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business it is properly attributable to capital and is of the nature of capital expenditure. If on the other hand it is made not for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits it is a revenue expenditure. If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is more so in view of the Tribunal's findings that it was the assessee which nominated the employee who would avail the benefit of the corporate membership given to the assessee. 5.2 The other hurdle for qualification of the expenditure under Section 37 of the Act is that expenditure incurred should not be on capital account. The Assessing Officer came to the conclusion that the expenditure was of a capital nature based on a fallacious reasoning that the expenditure was of an enduring nature and hence on a capital account. It is well settled that an expenditure which gives enduring benefit is by itself not conclusive as regards the nature of the expenditure. We may add that even lump sum payment, which was the case in the instant matter, is not decisive as regards the nature of the payment. See observations in Empire Jute Co. Ltd. v. CIT [1980]124ITR1(SC) as also the judgment of the Division Bench of this Court in CIT v. J.K. Synthetics ITR Nos. 139/1988 and 202/1989. The true test for qualification of expenditure under Section 37 of the Act is that it should be incurred wholly and exclusively for the purposes of business and the expenditure should not be towards capital ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that that was exactly what happened in the present case. In other words, the Tribunal's finding on the facts was that the assessee had charged only the net price and that there was no discount or rebate given to the purchasers. The bona fides of the transaction are not in dispute. In these circumstances and in view of the finding of the Tribunal as to what happened between the seller and the purchaser in the present case, it has to be held that there was no expenditure which could be disallowed by reference to Section 40A(2) (a). In this view, it is unnecessary to go into the concept of commission or rebate discussed in Harihar Cotton Pressing Factory v. CIT [1960]39ITR594(Bom) . The result is that the question referred to this court in each of the years is answered in the negative and against the revenue. The assessee will be entitled to its costs. Counsel's fee ₹ 500 one set. 15.XIV.5.a Madhya Pradesh High Court in the case of commissioner of Income Tax Vs. Udhoji Shrikrishnadas- (1983) 139 ITR 0827 has observed as under: 5. The Tribunal's finding is that in addition to the payment of 10% of commission to the firm of M/s. Lalchand Shyamsunder, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 crores clearly justifies giving a trade discount of 11% to the sister concern as compared to 3% to the others. Further, there is no rationale or basis or any logic of the authorities below in unilaterally deciding a disallowance by reducing the entitlement from 11% as claimed by the assessee to 3% (by the Assessing Officer), 8% (by the CIT(A) and 5% (by the ITAT). This ad hoc rough and ready method without any basis to support the same especially when in para 12 the Tribunal has accepted the contentions of the assessee that there was justification in allowing a higher discount than as given to other domestic customers. 11. Lastly, we fail to understand how theprovisions of Section 40-A(2)(b) are, at all, applicable in the facts of the present case. Section 40A(2)(a) runs as under: (2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in Clause (b) of this sub-section, and the (Assessing) Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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