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TMI Blog2017 (11) TMI 1841X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2004-05) 2. Before us, at the outset, Ld.Counsel for the assessee submitted that the assessee raised 3 grounds in this appeal and the Ground No.1 relating to validity of re-opening of the assessment u/s.148 of the Act and Ground No.3 relating to deduction available u/s.80HHC of the Act, are 'not pressed'. On hearing the parties, the said Ground Nos.1 and 3 are dismissed as 'not pressed'. That leaves ground No.2 to be adjudicated and the same reads as under : "2. The learned CIT(A) erred in facts and law in adding a sum of Rs. 3,59,65,000/- (being job work charges Rs. 19,85,000/-, Scrap sale Rs. 3,27,99,000/- and sundry sale Rs. 11,81,000/-) to the total turnover for the purpose of section 80HHC and reducing the deduction available u/s 80HHC." 3. From the above, it is evident that the above ground relates to the manner of computation and allowability of deduction on certain receipts for the year under consideration u/s.80HHC of the Act. It has 3 limbs, (i) Job work charges, (ii) Scrap sales and (iii) Sundry sales. 4. It is the claim of the Ld.AR before us, that the issues relating to job work charges and sundry sales again are 'not pressed'. Accordingly, that part of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted the said ground relates to disallowances made by the AO out of the claim on account of Aircraft expenditure. This is an issue coming up for adjudication almost every assessment year in this case. AO's disallowed 15% of the claim debited to the Profit and Loss Account consistently towards the personal use of the Aircraft by the Director and their family members. The issue came up for adjudication by the Tribunal in earlier years including that of ITA.No.546/PUN/2004 for the A.Y 2000-01 and ITA No.1039/PUN/2000 for A.Y. 1995-96. The issue was decided against the assessee in all the years. 12. On hearing both the sides and considering the fair admission of the issue by the Ld.Counsel for the assessee, we are of the opinion, this ground for this year also has to be decided against the assessee. Accordingly, the ground No.3 is dismissed, and the same is in favour of the Revenue. 13. Ground No.1 relates to the LD charges amounting to Rs. 50,01,417/-disallowed by the AO. 14. At the outset, Ld.Counsel submitted that this is a covered issue in favour of the assessee vide ITA.No.857 & 884/PUN/2006 for the A.Y. 2001-02. Filing a copy of the said order of the Tribunal for the A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,49,97,482/-, held the same as admissible and the disallowance to that extent was deleted. The remaining amount of Rs. 6,64,552/- represented interest on mobilization advance. The CIT(A) noted that as per purchase order, mobilization advanced was interest free and it had to be seen as to why M/s Oil India Ltd. Demanded interest on the said mobilization advance. In the absence of complete details being filed by the assessee, the matter was restored to the file of Assessing Officer to call for relevant particulars and decide the same. 41. In respect of balance liquidated damages, the assessee filed evidences in respect of certain items and the CIT(A) held that in view of the evidences filed for Rs. 3,41,724/-, Rs. 5,44,987/-, 1,45,0721- and Rs. 5,25,067/-, allowability towards the payment of liquidated damages had arisen during the relevant previous year and the same was held to be allowable. In respect of last item i.e. of Rs. 20,82,1401-, the assessee had only made the provision, even before any demand was raised by the concerned party. Since it was not known as to whether the demands were actually received or not, the CIT(A) held that the assessee was not justified in mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival contentions and perused the record. The issue which arises in the present appeal is in respect of liquidated damages provided by the assessee in its books of account. The case of assessee before us is that in view of it taking up turnkey projects and as per the conditions of purchase order placed, the project has to be completed within stipulated period and in case the same is not so completed, then the assessee is liable to pay liquidated damages. Further, in case other conditions of the purchase order are not complied with by the assessee, then also as part of purchase order itself, there is a clause that the purchaser may at his discretion withhold any payments until the whole of stores has been supplied and he may also deduct recovery from the supplier liquidated damages. The major item of expenditure relates to damages of Rs. 1.56 crores claimed by and paid to MIs. Oil India Ltd. The assessee was duty bound to complete the said project within stipulated period and since the assessee could not fulfill the same, M/s. Oil India Ltd. vide letter dated 20.01.2001 demanded damages of Rs. 1.49 crores. In view of the understanding between the parties, the claim of Rs. 1.49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Revenue on the decisions of Hon'ble Supreme Court are misplaced as in both the cases, damages were paid on account of infraction of law and hence, were held to be not allowable as expenditure in the hands of said assessee. However, in the present case, liquidated damages are paid by the assessee on account of violation of terms of contract entered into with the parties to whom the goods have been supplied by the assessee. There is no infraction of law in such cases and accordingly, we find no merit in the orders of authorities below in this regard. Reversing the order of CIT(A), we direct the Assessing Officer to allow the claim of assessee also on account of provision made of Rs. 20,82,139/-. The ground of appeal No.12 raised by the assessee is thus, allowed and the ground of appeal No.7 raised by the Revenue is dismissed." 16. Considering the above, we are of the view that the matter should be remanded to the AO's file for applying the said legal proposition on the issue under consideration. In principle, the ground is allowed in favour of the assessee. The AO shall grant reasonable opportunity of being heard to the assessee in accordance with the set principles of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed (supra). On hearing both the parties, we allow the prayer of the Ld.Counsel and direct the CIT(A) to adjudicate the issue fresh in the light of our finding in the said case after granting reasonable opportunity of being heard to the assessee. Accordingly, Ground No.3 is allowed for statistical purposes. 23. Regarding the "capital nature of the advisory fee" (Ground No.4) paid by the assessee, Ld.Counsel submitted that the said expenditure never results in the benefit of any enduring nature. Therefore, the same constitutes Revenue expenditure. According to the Ld.AR for the assessee, a similar issue came up before the Tribunal and the Tribunal has already decided the issue in favour of the assessee holding such expenses as Revenue in nature. Relying on the order of the Tribunal in the assessee's own case for the A.Y. 1991-92, Ld.Counsel submitted the said issue was decided in assessee's favour vide ITA No.262/PUN/1995. After going through the same, we find this issue also should re-visit to the file of CIT(A) for examining the facts and to decide the same in the light of the order of the Tribunal for A.Y. 1991-92 after granting reasonable opportunity of being heard to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of Rs. 5.59 crores. We find the decision is relatable to the present assessment year. Therefore, the same is extracted as under : "4. So far as question (b) is concerned, the Tribunal in its impugned order dated 17.9.2010 while applying the decision of this court in the matter of Godrej(supra) has disallowed the expenditure only to the extent of 2% of the total exempt income earned by the respondent- assessee on the basis its order dated 27.2.2009 for the assessment year 2002-2003 and order dated 10.9.2009 for the Assessment Years 2003-2004 and 2004-2005 wherein disallowance was restricted to 2% of the exempt income. Further; the Tribunal has remanded the matter to the AO to verify the disallowance claimed and restrict the disallowance only to the extent to 2% of the total exempt income. We find no fault with the order of the Tribunal." 29. As such, Ld. AR has not made out any specific and sustainable case or argument why the said ratio cannot be applied to this case. Considering the same, we are of the opinion, that it is now binding on our Benches that the disallowance in this case should be restricted to 2% of the exempt income. Therefore, we find it relevant to give a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Accordingly, we remand this issue also to the file of the CIT(A) for fresh adjudication. Accordingly, this ground is allowed for statistical purposes. Otherwise, on facts CIT(A) restricted disallowance 2 lakhs on ad-hoc basis and the timing of this decision is anterior to the said jurisdiction High Court judgment in the case of Godrej Agrovet Ltd (supra). CIT(A) shall grant reasonable opportunity of being heard to the assessee. Accordingly, this ground is allowed for statistical purposes. 36. Regarding the "disallowance of prior period expenses", Ld.Counsel submitted the CIT(A) omitted this ground while adjudication of the appeal. Therefore, this ground needs to re-visit to the file of the CIT(A). Further, he submitted the CIT(A) may be directed to adjudicate this issue in the light of the orders of the Tribunal in the assessee's own case for the A.Y 2000-01 vide ITA No.546 & 503/PUN/2004. We order accordingly. Accordingly, this ground is allowed for statistical purposes. 37. In the result, appeal of the assessee is partly allowed for statistical purposes. ITA No. 692/PUN/2014 (BY Revenue for A.Y. 2006-07) 38. In this appeal of the revenue, there are 3 issues for adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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