TMI Blog2017 (1) TMI 1607X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. CIT(A)-XXVII, Mumbai and for the sake of convenience are clubbed together, heard together and are being disposed of in this consolidated order. ITA No.3360/Mum/2005 2. Ground No.1 raised in respect of disallowance of Pooja/function of ₹ 26,17,767/-. 3. After hearing rival contentions and perusing the records, we find that an identical issue has been raised by the assessee and decided in ITA No.2486/Mum/2005(AY-1999-2000) vide order dated 30.6.2016 by the Co-ordinate Bench of the Tribunal in favour of the assessee following the earlier years and also followed in the subsequent year. The ld.DR also appeared fairly agreed to this. The Tribunal while deciding the issue in favour of the assessee has observed and held as under : 5. Ground No.1 raised in respect of disallowance of Pooja/function of ₹ 11,31,515/-,We have seen that similar disallowance was made against the assessee in AY 1988-89 and AY 1989-90. The co-ordinate bench of this Tribunal while dealing with the similar issue in assessee‟s own case for AY 1988-89 held as under: The fifth ground is regarding disallowance of Pooja Expenses of ₹ 61,984/-. According to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the CIT (A) was not justified in confirming the disallowance of charges for service amounting ₹ 1,93,000/- by holding that the expenditure is capital in nature. 2(b) That on the facts and in the circumstances of the case and without prejudice to Ground No.2(a), taken hereinabove, having held that the impugned expenditure is capital in nature, the CIT (A) erred in not allowing depreciation on the same. 5. We find from the record that an identical issue has been raised by the assessee in ITA No.2486/Mum/2005(supra) and has been decided by the Co-ordinate Bench of the Tribunal in favour of the assessee vide para 6 of the order following the earlier years and was followed in the subsequent years. The relevant portion of the order, for the sake of convenience, is reproduced below : 6. Ground No.2 and 3, for our consideration are disallowance of consultancy charges of ₹ 11,10,000/- and service charges of ₹ 1,66,160/-,. The Ld AR of the assessee argued that similar disallowance in respect of consultancy fee was made against the assessee in AY-1990-91. And disallowances of service charges were made in AY 1992-93. However, on appeal th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of assessee, hence both the Grounds are allowed in favour of assessee. 6. Respectfully following the decisions of the coordinate bench as facts being identical we allow the ground no.2 and 3 of this appeal in favour of the assessee. 7. Grounds of appeal no.4 (a) and (b) are as under : 4(a) That on the facts and in the circumstances of the case, the CIT (A) was not justified in confirming the disallowance of the claim with regard to Employees Stock Option Expenses amounting to ₹ 7,73,665/-; 4(b) That on the facts and in the circumstances of the case, the ld.CIT(A) erred in holding that Employees Stock Option Expenses amounting to ₹ 7,73,665/- is a notional figure and a contingent liability 8. We find that an identical issue had come up before the Tribunal in assessee‟s own case in ITA No.3359/Mum/2005 (AY-2000-01) and the co-ordinate Bench of the Tribunal has decided the issue in favour assessee vide order dated 21.10.2016, para 31 of the said order which is reproduced below: 31. The ground no.4 is related with the disallowance of ESOP Expenses of ₹ 2,44,57,408/-. We have seen that this ground of appeal is squarely covered in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio laid down in the case of Sitalpur Sugar Works, V/s CIT 949 ITR 1) (SC), Hardilla Chemicals V/s CIT (218 ITR 598) and CIT V/s Serikells Glass Work (P) Ltd, dismissed the appeal of the assessee on this issue by upholding the action of the AO treating the said expenditure as capital expenditure. Further aggrieved by the decision of the ld.CIT(A), the assessee is in appeal before us. 12. The ld.AR submitted vehemently submitted before bench thatthe FAA has dismissed the ground raised by the assessee by relying on the decisions as stated supra which were clearly distinguishable on facts. The ld counsel for the assessee submitted that assessee incurred expenses on dismantling the plant to replace the same with new plant in order to upgrade and enhance the capacity of the plant. The ld AR submitted that in the case of Sitapur Sugar Works Ltd (supra) was distinguishable on facts as in the said case the entire factory was shifted to another site however in the present case only a part of plant was dismantled with the object of installing new plant to upgrade and enhance the production capacity. The ld counsel argued that in the case of JCIT Vs ITC Ltd (2008)112ITD0057(Cal)SB, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital nature. In the case of Seiakella Glass Works (supra) it was held that expenses incurred on periodical repairs and maintenance are of revenue nature. However in the present case only a part of plant was dismantled with the object of installing new plant to upgrade and enhance the production capacity. The case of the assessee find support from the decision of Alembic Chemicals Works Co Ltd Vs CIT (1989) 177 ITR 377(SC), DCIT Vs Escorts Tractors Ltd (2004)(23) CCH 0036 (Delhi). In the case of Alembic Chemicals Works Co Ltd Vs CIT it has been held that expenditure incurred for better conduct and improvement of existing business should be allowed as revenue expense. In DCIT Vs Escorts Tractors Ltd it has been held that expenditure on dismantling of existing floor and reflooring is of revenue nature. In view of facts as stated hereinabove and ratio in the decision relied upon by the assessee we are inclined to direct the AO to allow the expenditure as deduction u/s 37 of the Act. In result the ground raised by the assessee is allowed. 14. Grounds of appeal no.6 reads as under : 6 That on the facts and in the circumstances of the case, the CIT (A) was not justified in estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused the materials placed before us including the orders of authorities below. We find that the order of the FAA is correct and does not required to be interfered with at our end as a reasonable disallowance was sustained by the FAA. The ld AR also relied on the order of FAA. No disallowance can be made in our view merely on the ground that similar disallowance was made in earlier year and the assessee has not challenged the same. Accordingly the ground raised by the assessee is dismissed. 19. Grounds of appeal no.7(a) and (b) reads as under : That on the facts and in the circumstances of the case, the CIT (A) was not justified in confirming the decision of the AO in assessing interest income of ₹ 9,25,71,358/-. And Truck hire charges of ₹ 75,02,298/- (net) as income under the head income from other sources That on the facts and in the circumstances of the case, and without prejudice to ground no.7(a) taken hereinabove, having held that the said income were to be assessed under the head income from other sources , the ld. CIT(A) ought to have allowed the actual expenditure incurred to earn the aforesaid income 20. The ld.AR at the time of hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business. The rate of interest income invariably lower than the rate of interest paid in the money borrowed and hence the net income is either Nil or negative. 17. The ld. Counsel further submitted that from the Audited accounts (Paper book page 8 at page 10) read with page 13, it could be seen that the impugned interest income is merely part recoupment of interest expenditure debited to P L a/c. The Ld. Counsel further submitted that lending money and bill discounting of Memorandum of Association (Clause La 49)(Paper book page 102 104) and hence income arising therefrom in the course of business is assessable a business Income. He relied on the decision in the cases of Plast Ltd Vs CIT (237 ITR 454) (SC). CIT Vs Tirupati Woollen Mills Ltd. (193 ITR 252) (Cal) and Lakshmi Silk Mills Ltd 20 ITR 451(SC). 18. Ld. Counsel submitted that instead of considering ₹ 2,000/- on adhoc basis as expenditure incurred to earn the said income, the actual expenditure incurred to earn the aforesaid income is to be excluded 19. The Ld. Departmental Representative relied on the order of the Ld. CIT(A). 20. We have heard both the parties. In order to verify the nexus between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s. 37(1) of the Act and the details of which are available at page 6 28 of Paper Book. We have seen the page no. 6 28 of Paper Book wherein the assessee has shown the premium of lease hold land of ₹ 20,92,371/.The AO while making assessment has concluded that expenditure incurred on acquiring lease hold right in the land as resulted in advantage having enduring benefit and the same was treated as capital expenditure. The CIT(A) while considering it, confirmed the order of AO holding that acquiring lease hold right is a capital expenditure. AR of the assessee fairly conceded that this issue is covered against the assessee in special bench in case of ITAT, Mumbai titled as JCIT vs. Mukund Ltd. (2007) 106 ITD 231 (Mum)(SB).We have perused the order of AO and Ld. CIT(A) as discussed above and considered the submissions of Ld AR of the assessee, wherein he has fairly conceded that this issue is covered against the assessee as referred above, hence, keeping in view the order of ITAT Mumbai JCIT vs. Mukund Ltd. (2007) 106 ITD 231 (Mum)(SB), this ground of appeal is dismissed. 25. Since the Tribunal has decided similar issue against the assessee and we therefore respectf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 43B of excise duty payable on stock of finished goods as on 31.03.1999 of ₹ 1,32,58,505/-, details of which are available on page no. 37 45 of Paper Book, the AO while making the assessment concluded that in case of Melmould CorporationVs. CIT (1993) 202 ITR 789 (Mum) held that unutilized MODVAT credit balance shall be added to the closing stock. The CIT(A) while dealing with this ground concluded the unutilized MODVAT credit at the end of year should be added to the income of assessee. However, corresponding adjustment in the opening stock should also be made. AR of the assessee argued that unutilized balance of MODVAT credit is nothing but excise duty paid on inputs to be utilized on future dispatch of finished goods. The said credit is not related to the closing stock of raw-material and should not be added to the closing stock and relied upon 14 DTR 206 Mum, HawkinsCookers Ltd. vs. ITO, CIT vs. Godrej Boyce Mfg. Co. Ltd. (2008) 2 DTR 36(Bom) , DCIT vs. Venus Wire Industries Ltd. (2006) 99 TTJ 561 (Mum) DCIT vs. M/s Axis Electrical Components (I) (P) Ltd. (2011-TIOL-351-ITAT, Mum) and argued that the decision of Melmould Corporation vs. CIT 202 ITR 789 (Bom) is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Act. 29. At the time of hearing, both the parties agreed that issue raised in these grounds have been decided by the Co-ordinate Bench of the Tribunal in assessee‟s own case in ITA No.2486/Mum/2005(AY-1999-2000) vide order dated 30.6.2016. Therefore, the ld.AR prayed that by following the decision of Tribunal in assessee‟s own case, this issue be decided in favour of the assessee. 30. After going through the decision relied upon by the assessee and facts of the issue, we find that the issue stands covered in favour of the assessee by the decision of the Tribunal in assessee‟s own case (supra) following the decision in earlier years and this also following in subsequent years. For the sake of convenience we reproduce relevant findings of the Tribunal order as under: 12. Ground No. 9 for our consideration is non-allowance of exclusion of deduction u/s. 80HHC computed on profit of the business as per account prepared under Companies Act, in computing book profit u/s. 115JA of the Act. The assessee claimed exclusion of deduction u/s. 80HHE in computing book profit u/s. 115JA. The AO while making assessment followed the order of earlier years and denie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle of consistency this Ground is also allowed in favour of assessee. Following the coordinate bench decision as stated hereinabove , we allow this ground of the assessee‟s appeal. 31. Ground of appeal no.12 taken by the assessee is as under : 12. That on the facts and circumstances of the case, the ld. CIT(A) was not justified in confirming the non-exclusion of capital profit on sale of investment amounting to ₹ 38,53,74,456/- from the net profit in computing book profit as per the provisions of section 115JB. 32 The ld.AR very fairly conceded across the bar that an identical issue had come up before this Tribunal in assessee‟s own case in ITA No.2486/Mum/2005(supra) and the coordinate bench has decided this issue against the assessee. 33. We find from the decision in the case of assessee in ITA No.2486/Mum/2005 (supra) vide para 13, the Tribunal has decided this issue against the assessee. Accordingly, we dismiss this ground of appeal. 34. Ground no.13 is in respect of charging of interest u/s 234C amounting to ₹ 11,85,264/-. 35. We have heard the rival submissions and perused the material placed before us. We find that the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case and in law, the CIT(A) erred in directing to make an adjustments in the opening stock as adjustment s.145A; 10. The appellant prays that the order of ld. CIT(A) on the above grounds be set aside and that of the AO be restored . 38. With regard to the ground no.1 of revenue‟s appeal, the ld.AR submitted that an identical issued had raised by the revenue in ITA No. 2653/Mum/2005 (AY-1999-2000) against the assessee and the issue taken by the revenue was dismissed by the co-ordinate bench of the Tribunal vide its order dated 30.5.2016 and therefore prayed the Bench that the similar view be taken in this appeal also. The ld. AR also drew our attention to page 236 of the assessee‟s paper book at para 15 of the Tribunal order. The ld. DR did not controvert the submissions of the assessee. 39. After hearing both the parties and on perusal of the Tribunal order passed in ITA No.2653/Mum/2005 (supra), we find that the issue raised by the revenue in this appeal stands covered against the revenue and in favour of the assessee. For the sake of conveniences, we reproduce the observations and finding of the Tribunal order as under : 15. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and undeniable nexus between incurring of expenses and smooth running of assessee‟s business. Further, as the plant of the company is situated in a remote area, it is quite natural that the company will provide basic facilities to the nearby village. The fact that many of the employees and indirect support people (ancillary services) came from the local village is to be taken note of. It was held by the Hon‟ble Supreme Court in the case of Sri Venkata Satyanarayan Rice Mills Contractors Co. (supra) that what is to be seen is not whether it was compulsory for the assessee to make the payment or not but whether it was expended out of commercial expediency. The ld. Counsel of the assessee also argued that the Delhi High Court in the case of Delhi Cloth General Mills Co. Ltd. (supra) even held that expenditure incurred for conducing directly related to the business of the assessee. 5.8 In view of the aforesaid findings the impugned expenditure is held to be allowable business expenditure u/s. 37(1) of the Act. At this juncture, it will not be out of place to mention that similar disallowances were also attempted by Revenue in other cases and Bombay Tribunal vide its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /M/93 vide its order dated 20.12.2002 for assessment year 1989-90. b) ITA No. 2419/M/94 vide its order dated 4.8.2003 for assessment year 90-91. c) Empire Jute Co. Ltd. Vs. CIT (1980) 124 ITR 1 (SC). d) CIT Vs. Ananda Bazar Patrika (P) Ltd. (1990) 184 ITR 542 (cal). e) CIT vs. Berger Paints (India) Ltd. (No.s 2) (2002) 254 ITR 503 (cal). Vide para 17.3 of its order dated 20.12.2002, the Tribunal for the assessment year 89-90 in ITA No. 2690/M/93heldas under: 17.3 We have considered the rival submissions in the light of material placed before us. It is a fact that assessee‟s business had started during the preceding year and it had already started extracting limestone from the mines. The impugned expenses are to be incurred on year to year basis and cannot be said to be incurred prior to commencement of business. Since the business had already commenced, the same will not be covered by the provisions of section 35(1). Further, the said expenditure was incurred for extracting raw material and not for acquiring any asset of enduring benefit or advantage. In this context, we rely on the decision of apex court in the case of Empire Jute Co. Ltd. (supra) wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank of India 218 ITR 371 and CIT vs. V.S. Dempo Co. deleted the disallowance. Ld. AR for assessee further argued that this issue (ground) is squarely covered in favour of assessee by the decision of CIT vs. Woodward Governor (I). Pvt. Ltd. 312 ITR 254, Oil and Natural Gas Corporation vs. CIT 322 ITR 18 (SC) and DCIT vs. Bank of Bahrain Kuwait (2010) 41 SOT 290 (Mum) (SB). In case of Oil and Natural Gas Corporation(supra) the Hon‟ble Apex Court has held as under: Loss on account of fluctuation in the rate of foreign exchange as on the date of balance sheet in respect of loans taken for revenue purposes is allowable as expenditure u/s.37(1), notwithstanding the fact that liability has not been discharged in the year of fluctuation Hence, keeping in view the order of Hon‟ble Apex Court (supra) this ground is squarely covered in favour of assessee. Hence, this ground of appeal raised by the Revenue is dismissed. Following the decision of the coordinate bench we are inclined to dismiss ground taken by the revenue. 48. Ground No.5 taken by the revenue is in respect of deletion of disallowance of expenses on powerline and marine structures amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills (P) Ltd (2015) 370 ITR 194 (All); F) CIT V/s Saw Pipes Ltd (2008) 300 ITR 35 (Del) G) Mafatlas Fines Spg. And Mfg Co.Ltd V/s CIT (1993) 69 Taxman 385 (Bom); H) CIT V/s Excel Industries Ltd (1980) 122 ITR 995 (Bom) I) Hindustan Times Ltd V/s CIT (1980) 122 ITR 977 (Del) On the basis of these submissions and case law the ld AR prayed that the order passed by the ld.CIT(A) be confirmed. 52. We have heard the rival submissions and perused the material placed before us including the orders of authorities below and case relied upon by the ld.AR. We find that the issue raised by the revenue in this appeal stands covered in favour of the assessee and against the revenue by the decision of Hon‟ble Gujarat High Court in the case of Gujarat Mineral Devp.Corp.(supra); which is affirmed by the Hon‟ble Supreme Court and reported in (2001) 249 ITR 787. We find that the Hon‟ble Gujarat High Court has decided the issue vide para 14 of the order as under : 14. Applying the test laid down by the Supreme Court in Empire Jute Co.'s case [1980] 124 ITR 1 to the facts before us, it is clear that even if securing electric supply for a period of seven years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a similar ground taken by the assessee in its appeal bearing ground No.6. We have already confirmed the decision of the FAA on the issue and therefore following our decision therein, we dismiss the ground taken by the revenue. 54. Ground No.7 is in respect of deletion of expenses on Gujarat Earthquake relief amounting to ₹ 18,67,738/-. 55. During the course of assessment proceedings, the AO observed that the assessee has debited an amount of ₹ 18,67,378/- in the profit and loss account towards Gujarat Earthquake relief and claimed deduction u/s 37(1) of the Act on the ground that these expenses were incurred to cater socio-economic cause. The AO called for the explanation from the assessee as to how these expenditure was eligible for deduction u/s 37(1) of the Act. The assessee replied that during the major earthquake on 26.1.2001 so many people were affected and the assessee company provided relief and rehabilitation to the general public who was suffering from the natural calamity and the assessee-company incurred expenses. The assessee submitted that expenses of similar nature having socio-economic value incurred by it in earlier years under the head Communit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is covered in his favour by the decision of Hon‟ble Apex Court in CIT V/s Lakshmi Machine Works (2007) 290 ITR 667. The Hon‟ble Apex Court held that sales tax and excise duty do not have any element of turnover‟. Excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are relatable to exports, the formula u/s 80HHC would become unworkable. Hence, excise duty and sales tax cannot form part of turnover‟ for the purpose of computing deduct9on u/s 80HHC. Thus, following decision of Hon‟ble Apex Court, this ground of appeal raised by the revenue is dismissed 59. We find from the record and the decision relied upon by the assessee that this ground is decided by the Tribunal against the revenue in assessee‟s own case (supra), therefore, here also being same facts and circumstances of the case do not take different view than the view so taken by the Tribunal earlier. Resultantly, ground taken by the revenue stands dismissed. 60. Ground taken by the revenue in ground no.9 pertains adjustment of opening stock under section 145A of the Act. 61. This ground is identica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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