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2019 (9) TMI 443

..... not been paid. Besides, the assessee had also claimed an additional leave liability on account of adoption of AS-15 prescribed by ICAI regarding recognition of liability. We note that the Hon`ble Calcutta High Court has struck down provision of section 43B(f) of the Act, while deciding the case of Exide Industries vs. Union of India [2007 (6) TMI 175 - CALCUTTA HIGH COURT] We note that based on the identical facts, the Coordinate Bench of ITAT Kolkata in the case of SICPA Vs. DCIT [2017 (3) TMI 1383 - ITAT KOLKATA], has remitted the matter back to the file of the assessing officer. Therefore, we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of the ld AO. Therefore, we set aside the order of ld CIT(A) and remit this issue back to the file of the assessing officer to pass order based on the outcome of the main appeal on merits by the Hon’ble Supreme Court as stated [2008 (9) TMI 921 - SC ORDER] MAT computation - whether transitional liabilities of gratuity and leave encashment as per provisions of AS-15, which is debited to General Reserve in the Balance Sheet, can be adjusted while computing book profit under section 11 .....

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..... rovided for pursuant to the clarification issued by the Expert Advisor Committee of the ICAl, accrued during the relevant previous year and is allowable deduction in computing income for the said year, notwithstanding that such liability may relate to the earlier years. Therefore, we direct the assessing officer to allow the claim of the assessee in respect of lease rent Disallowance u/s 43B - employees’ share of contribution towards PF and ESI, if it is paid before filing of return of income then it would be a sufficient compliance of the Act. Accordingly, we dismiss the ground No.1 raised by the Revenue. Depreciation on account of River Embankment under the block of assets building - HELD THAT:-Respectfully following the decision of the Coordinate Bench in the assessee's own case, the ld CIT(A) deleted the disallowance of depreciation . That being so we decline to interfere on the order passed by the ld CIT(A), his order on this issue is hereby accepted and grounds of appeals raised by the Revenue is dismissed. Payment of lumpsum royalty as ‘Capital Expenditure' - HELD THAT:- The assessment for AY 2007-08 was framed u/s 143(3),in that year the Assessing Office .....

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..... note that the downward adjustment proposed by the TPO was in gross violation of the provisions of second proviso to Section 92CA of the Income-tax Act, 1961. Without prejudice to the assessee's claim for use of multiple year data for determining PLI of the comparables, making functional & working capital adjustments to the PLI and the manner in which PLI was worked out by the Transfer Pricing Officer, at the very onset it is submitted that going by TPO's own computation of the arm's length value of the transactions, the arm's length price was within the prescribed range of +/- 5% of the actual transaction amount. Arm's length value the transactions as computed by the TPO at ₹ 2,44,31,005/- is within the permitted range for variation of +/ -5% of the actual value of the transaction. However in the order passed u/s 92CA(2) and the impugned order u/ s 143(3) neither the TPO nor the AO took into consideration the provisions of Section 92C of the Income-tax Act, 1961 and failed to appreciate that since the actual value of the transactions was within the permitted variation from the arm's length price so determined, the downward adjustment of ₹ 4, .....

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..... eeare as follows: 1.The learned Commissioner of Income-tax(Appeals)Vl, Kolkata [hereinafter referred to as the "CIT-(Appeals)"] erred in confirming the decision of learned Assessing Officer in not allowing a deduction of ₹ 82,71,000/- in respect of provision made in book of accounts and debited to Profit & Loss Account towards ascertained leave liability for the AY 2008-09 on the basis of actuarial valuation report following mandatory AS-15 ( Revised 2005 ) prescribed by ICAI, on the ground that such expenditure come within ambit of the provisions of Section 43B(f) of the Income-tax Act,1961(hereinafter referred to as 'the Act"), having failed to appreciate that provision made in book of accounts towards leave liability is in the nature of general trade liability and therefore, the same was allowable u/s 37 having regard to the ratio of the decision of the Hon ble Supreme Court in the case of Bharat Earth Movers Ltd. Vs. CIT reported in 245 ITR 428 (SC) and decision of the Hon'ble Calcutta High in the case of Excide Industries Ltd. Vs. Union of India reported in292 ITR 470 (Cal. HC). 2. The learned CIT (Appeals) erred in confirming the decision of l .....

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..... firming the decision of learned Assessing Officer in assessing ₹ 37,682,692/- (Consideration ₹ 39,190,000 Minus 15,07,308/- VAT deposited) as income chargeable under the head long term capital gains accruing on transfer of 'Trade Marks' without appreciating that "Trade Mark" being a self generated asset and cost of improvement was not determinable and hence it could not be brought to tax under the head Capital Gains" having regard to the decision of the Hon'ble Pune Tribunal in the case of "lnstitute For Micronutrient Technology Vs. Dy. ClT reported in 43 taxmann.com 426 (Pune. Trib). 7. The learned CIT (Appeals) erred in confirming the decision of learned Assessing Officer relying upon the CBDT Circular No. 338 , dated 18.02.1998 issued for inserting intangible asset i.e"a right to manufacture, produce, or process any article or thing "under Sec 55 (2)(a) and under Sec 55(1)(b) by Finance Act, 1997. 8. The learned CIT (Appeals) erred in not appreciating that in the assessee's case there was transfer of "Trade Mark", CBDT Circular No.14/2001, dated 09.11.2001 was applicable issued for changes made by Finance Act, 2 .....

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..... assessee relate to disallowance of provision for leave liability of ₹ 82,71,000/- and disallowance of Transitional Liability for leave provided, in the books of accounts at ₹ 85,34,740/-,and the said leave liability adjusted in the opening general reserve as per para 143 to 145 of AS-15 (Revised 2005). Thus, not allowing total leave encashment provision to the assessee at ₹ 1,68,05,740/- (₹ 82,71,000 +₹ 85,34,740). 6. Brief facts qua the issue are that the assessee in the revised computation filed with the revised return of income has claimed deduction of Leave encashment at ₹ 85,34,740/-. The amount has been claimed as deduction, although the same have not been debited in the Profit & Loss account and the same have been adjusted against reserve & surplus as per the transitional provisions of Accounting Standard-15 issued by the Institute of Chartered Accountants of India. The assessee has further submitted that such sum should be allowed by invoking the provisions of section 43B of the Act. Besides, a sum of ₹ 82,71,000/-, being a current year leave liability, has been debited in the Profit & Loss account. Although both the afo .....

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..... ip;………………………. (f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee, shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. Provided that nothing contained in this section shall apply in relation to any sum referred to in clause ( a) or clause (c) of clause (d) or clause (e) or clause (f) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. …………………………………………. Explanation 3B.-For the removal of doubts, it is hereby declared that where .....

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..... pex Court ruling in case of Bharat Earth Movers. Although the Hon'ble apex Court vide order dated 08.09.2008 in SLP(C) CC No.12060/2008 "stayed" the judgment of the Hon'ble Calcutta High Court. Counsel further submitted that the Kolkata Benches of the Tribunal have in the following cases remanded the matter back to the file of the assessing officer to decide the issue afresh: (i)Universal Cables Ltd. vs. DCIT: 68 SOT 307 (Kol-Trib) (ii) CESC vs. DCIT (ITA 1304 & 1187/Ko1l2014. 9. On the other hand, ld DR for the Revenue submitted before the Bench that issue under consideration in the case of Exide Industries Ltd. vs. Union of India 292 ITR 470 (Cal) (supra), was the very legality of section 43B(f) of the Act. Therefore, the stay of Hon ble High Court order in case of Exide Industries Ltd (supra) has wider ramification and its scope is not limited only to the parties to the suit. Therefore, the order of the High Court in case of Exide Industries Ltd (supra) is at present not operational. Rather, the provision of section 43B(f) of the Act is to be considered to be in force in view of interim order of Hon ble Supreme Court. Considering this legal position, the in .....

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..... Bench of ITAT Kolkata in the case of SICPA Vs. DCIT 186 TTJ 289 (Kol-trib), has remitted the matter back to the file of the assessing officer. Therefore, we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of the ld AO. Therefore, we set aside the order of ld CIT(A) and remit this issue back to the file of the assessing officer to pass order based on the outcome of the main appeal on merits by the Hon ble Supreme Court as stated (supra). 11. Ground No. 5 raised by the assessee is as follows: 5. The learned CIT (Appeals) erred in confirming the decision of learned Assessing Officer in not allowing 'Transitional Liability' provided in book of accounts and adjusted against Opening General Reserve as per Para 143 to 145 of AS-15 (Revised 2005), towards ascertained leave liability ₹ 85,34,000/- and towards ascertained gratuity liability ₹ 3,32,38,000/- done by an outside actuary under mandatory AS-15 (Revised 2005) on employee benefits issued by ICAI, on the ground that such expenditures had not been debited in Profit and Loss Account for the financial year and cannot be reduced from current year s profit for co .....

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..... ere adjusted against general reserve in the schedule of reserves and surplus appearing in the balance sheet and not debited to the profit and loss account, the same had necessarily to be reduced from the net profit shown in the profit and loss account for arriving at the book profit in terms of section 115JB of the Act. 15. Per contra, ld DR for the Revenue submitted before us that an item of expense which has not pass through the profit and loss account should not be used for computation of book profit under section 115JB of the Act. That is, it is mandatory condition that an item of expense should be debited in the profit and loss account to be qualified for adjustment to compute the book profit as per the scheme of section 115JB of the Act. In the assessee s case under consideration, the assessee has not debited liability of gratuity of ₹ 3,32,28,000/- and leave encashment of ₹ 85,34,000/- in the profit and loss account. The assessee has adjusted these liabilities in the general reserve, which is accumulated profit of the assessee in previous years, therefore, the assessee is not entitled to reduce the book profit under section 115JB of the Act. The Ld DR also submit .....

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..... Paper Industries Ltd. vs. CIT: ITA No. 298 of 2004.(Cal) held that Notes to the Financial Statement are an integral part of the accounts and have to be read as part thereof and the AO can compute the book profit under section 115JA of the Act, taking into account the amount mentioned in the notes to accounts of these financial statements. The same view has been upheld by the Hon ble Delhi High Court in the case of CIT vs. Sain Processing & Weaving Mills (P) Ltd. : 325 ITR 565 (Del). The Hon ble Delhi High Court in the case of CIT vs. Khaitan Chemicals & Fertilizers Ltd: 307 ITR 150 (Del.), allowed adjustment for prior period and extra ordinary expenses shown separately in the profit and loss account while computing book profit under section 115JA of the Act. The Court noted that although the Accounting Standard (AS-5) indicated two approaches for accounting for prior period expenses, i.e., (i) the normal approach is to include prior period items in the determination of net profit or loss for the current period, (ii) the alternative approach is to show such items in the statement of profit and loss after determination of current net profit or loss. The Hon ble Court held as .....

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..... find out what is net profit one has to look into the books of accounts maintained by the company and the profit and loss account prepared on the basis of such books of account. What is shown in the printed balance sheet is for the benefit of the shareholders as it will not reflect the true state of affairs and that cannot be made the basis for levying tax under the Act. This is precisely what the Tribunal has held. Neither under the Companies Act nor under the Income-tax Act, this concept of deferred expenditure is recognized. That is a pathology used by the chartered accountants to show to the shareholders that the company has made profit though it has not earned profits. In other words, it is nothing but a window dressing and the authority should not be misled or guided by this balance sheet which is prepared to satisfy the shareholders. It is the profit and loss account prepared on the basis of the books of accounts as contemplated in Part 11 of Schedule VI which should form and assist to find out what is the profit earned and on that profit, tax is levied. " On the identical facts, the Coordinate Bench of Kolkata in the case of J.K. Lakshmi Cement Ltd. vs. ACIT: ITA No. 12 .....

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..... part of the audited financials, liability on account of leave encashment which was not debited to the profit & loss account. The said liability was, however, claimed as deduction for the purpose of computation of book profit under section 115JB of the Act. The Assessing Officer denied the claim of such reduction on the ground that the same was never debited to the profit & loss account. On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer. The Pune Bench of the Tribunal following the law laid down by the Hon'ble Delhi High Court in the case of CIT vs. Sain Processing & Weaving Mills (P) Ltd. : 325 ITR 565 (Del), reversing the order of the lower authorities held as under: 12. In view of decision of Delhi High Court in the case of CIT vs. Sain Processing & Weaving Mills (P.) Ltd. [2009) 176 Taxman 448 once it is clear that the information towards incremental liability of leave encashment, which has not been provided in the Profit & Loss account, is otherwise disclosed in the Notes to the accounts, it would clearly fall within the ambit of Explanation 1 of the second proviso to section 115JB which defines 'book profits' to mea .....

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..... et profit as per the profit and loss account prepared in accordance with Part II of Schedule VI to the Companies Act, 1956 is the starting point for computation of book profit under section 115JB of the Act. Where the profit and loss account is not strictly drawn up in accordance with Part II of Schedule VI to the Companies Act, 1956, the same is first to be adjusted to bring the same in line with the relevant provisions of the Companies Act; thereafter the adjustments enumerated in various clause of Explanation 1 to section 115JB of the Act are to be carried out. In that view of the matter, where the adjustment is of the kind to align the net profit as per the profit and loss account in accordance with Part II of Schedule VI to the Companies Act, 1956, the same has to be carried out, notwithstanding that such adjustment may not be within the scope of various clauses of Explanation 1 to the said section. As indicated in the accounting standard, in either case, the objective is to indicate the effect of such items on the current profit or loss. The fact that the assessee adopted the alternative approach of showing such items in the statement of profit and loss after determination of .....

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..... book profit u/s 115JB of the Act for minimum alternate tax. The learned counsel submitted before us that this issue is squarely covered by the judgment of the Special Bench of the ITAT in the case of ACIT vs Vireet Investments (P) Ltd. 165 ITD 27 (Del Trib) (SB). Therefore, section 14A disallowance is not considered while computing book profit under section 115JB of the Act. However, ld DR for the Revenue nevertheless relied on the stand taken by the assessing officer. 23. We have given a careful consideration to the rival submissions and perused the material available on record, we note that the provisions relating to adjustments by way of increase and decrease to the net profit shown by the assessee in Profit & Loss Account, are very explicit in section 115JB of the Act. The items which are to be added to the net profit have been listed out in Explanation 1 to that section. The learned AO should adhere to that list and cannot travel beyond these items. Since there is no mention of Section 14A in the said Explanation 1 to Section 115JB, the same cannot be added to re-determine the quantum of "Book Profit". The provisions of section 115JB relating to computation of b .....

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..... ,718,000/-" disclosed under the head "Prior Period Items" in audited financials being impact on recognition of rent increases over the lease term on a straight line basis for business operating lease agreements entered on or after April, I 2001 and still in force, quantified pursuant to clarification issued by Expert Advisory Committee of ICAI on mandatory AS-19 (Leases -2001), which was neither claimed in Income Tax Return due to misconception/ not properly instructed nor issue of allow ability under the normal provisions of the Act was raised before lower authorities, however issue towards deduction of said amount for computation of book profit u/s 115JB was raised before AO, not allowed and subsequently decided in favour of assessee by CIT (Appeals) . We note that Revenue is in appeal before us on the same identical issue, vide ground No. 5 raised by Revenue in ITA No. 77/Kol/2014 for A.Y. 2008-09. Therefore, we also adjudicate ground No.5 raised by the Revenue along with assessee s additional ground under consideration. 26.The facts of the case which can be stated quite shortly are as follows: This issue relates to non- allowance of deduction on account of operat .....

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..... ccountants of India had issued a clarification in respect of mandatory Accounting Standard-19 on accounting of operating lease rent expense. Pursuant to the said clarification the assessee was required to recognize in its annual audited accounts the scheduled rent increments over the lease term on a straight line basis in respect of all existing operating lease agreements remained in force on or after 2001. The assessee adopted the method prescribed in the Accounting Standard-19 for accounting of operating leases in the relevant year under consideration since the relevant clarification to AS-19 was issued by ICAI only in the relevant year. The assessee therefore had to compute the impact of such straight-lining of lease rent from 01.04.2001 up to 31.03.2007 which was determined at ₹ 39,718,000/- and the same was accounted under the head 'Prior Period Expenses' in the Profit &Loss account. A further sum of₹ 40,647,000/- was determined as the current year's expense on account of straight-lining of lease rent which was debited to the Profit &Loss account. In the return of income filed for the A.Y. 2008-09, the assessee inadvertently added back both prio .....

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..... he determination of accounting income. Since the income-tax law does not lay down any such rules, the tax authorities are not required to examine the computation of the valuation of inventories and its effect on computation of income. However, in case of depreciation on assets, different rules& accounting guidelines are laid down in the Accounting standards vis-a-vis Income-tax Act, 1961. Accordingly, in such cases the provisions & rules laid down in I.T Act, 1961 & I.T. Rules, 1962 are to be followed. The Apex Court observed that under Section 211 of the Companies Act, 1956 every company is mandatorily required to prepare its accounts in accordance with the Accounting Standard, presented by the Central Government in consultation with National Advisory Committee on Accounting Standards and at present the Accounting Standards prescribed by the Institute is deemed to be the Accounting Standards which are to be complied by all the companies. The Supreme Court therefore accorded judicial recognition to the accounting standards issued by ICAI and the profits determined in accordance with the accounting guidelines laid down by the prescribed accounting standards was held to b .....

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..... the assessee company. In light of the law down by the Apex Court since there are no contrary or specific provisions in the Income-tax Act, 1961 in respect of accounting of lease rentals, the expenditure of ₹ 40,647,000/- so recognized in the Profit &Loss account is deductible while computing profits of the business. We note that ld CIT(A) has rightly held that assessee is entitled to claim deduction of ₹ 40,647,000/- on account of lease rent, observing the following: 13.4. I have considered the facts of the case. The assessee had taken several assets on operating lease basis. In certain agreements, there was clause for scheduled increase in lease rent. Earlier, the assessee was not taking into account such scheduled increase while debiting the least rent. However, ICAI issued AS-19 for accounting of operating lease and a clarification relevant to the issue was issued in the year under consideration. As a consequence, the assessee had to compute impact of straight-lining of lease rent from 01.04.2001 to 31.03.2007 which was determined at ₹ 3,97,18,000/- and the same was accounted under the head ' prior period expenses'. For the current year, a further s .....

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..... Ltd. 284 ITR 323, though he has not specifically mentioned the same. However, in the said decision itself, Hon ble Supreme Court has clarified that the bar on claiming a deduction not claimed in the return does not apply on the appellate authority. In the decisions in the case of National Thermal Power Co Ltd. (supra) and Jute Corporation India Ltd. (supra) Hon ble Supreme Court has held that appellate authority has power even to admit a claim not made in the proceedings before the lower authority. Power of CIT(A) to consider claim not made in the return has also been upheld in the decision of Delhi High Court in the case of CIT vs Jindal Saw Pipes Ltd. 328 ITR 338 and by Bombay High Court in the case of CIT vs Pruthvi Brokers and Shareholders P. Ltd. 349 ITR 336. It is also noted, that jurisdictional bench of tribunal, in the case of DCIT, Circle-50, Kolkata vs Ramesh Chandra Kedia ITA No. 2072/Kol/2007, has held after considering various decisions, including in the case of Goetze India Ltd. (supra) that CIT(A) has power to admit additional ground claiming relief not claimed in the return and without filing revised return, even if the same results in assessed income going below t .....

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..... officer was deleted by the CIT(A) for which the Revenue is in appeal before us, vide S. No. 4 of Grounds of Appeal. The amount of ₹ 39,718,000/- was not claimed deduction while computing income under the normal provisions of the Act. The same is being raised by way of additional ground for the first time before this Tribunal. We note that the amount of ₹ 39,718,000/- represents liability accrued during the year on account of change in the method of accounting for lease rentals pursuant to adoption of AS-19 issued by the Institute of Chartered Accountant of India. Although, the said amount represents the incremental liability of lease rent payable for the period 1.04.2001 to 31.03.2007, the same having accrued during the relevant previous year is allowable deduction notwithstanding that the liability may relate to earlier years. For this, we rely on the Judgment of Hon ble Delhi High Court in the case of CIT vs. Whirlpool of India Ltd.: 242 CTR 245, allowed deduction for incremental liability for warranty on the basis of actuarial valuation relating to sales made in the earlier years, holding as under: "20. The legal principle delineated in the aforesaid judgment w .....

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..... ation issued by the Expert Advisor Committee of the ICAl, accrued during the relevant previous year and is allowable deduction in computing income for the said year, notwithstanding that such liability may relate to the earlier years. Therefore, we direct the assessing officer to allow the claim of the assessee in respect of lease rent of ₹ 3,97,18,000/-. 35. In the result, the additional ground raised by the assessee is allowed. 36. Now we take Revenue s appeal in ITA No. 77/Kol/2015, for AY 2008-09. 37. Ground No.1 raised by the Revenue is as follows: That on facts and circumstances of the case Ld. CIT(A)-VI, Kolkata is not justified deleting the disallowance of ₹ 2,38,21,194/- for delayed contribution to PF with considering the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Gujarat Road Development Corporation Ltd., Appeal No. 637 of 2013, which is favorable to the Department. 38. We note that issue raised by the Revenue in ground No. 1 above, is no longer res integra. Regarding disallowance of sum of ₹ 2,38,21,194/- being the employees contribution towards PF which was deposited by the employer after their respective due dates. The Asses .....

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..... ₹ 78,002/- on account of River Embankment under the block of assets building. 41. The brief facts qua the issue are that the assessee has claimed depreciation on a river bank embankment and renovation thereof. The AO was of the view that a river bank embankment is neither building nor road, bridge, culvert etc. The business requirement of such embankment was also not clarified. Consequently, depreciation of ₹ 78,002/- was disallowed by AO. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the CIT(A) who has deleted the addition made by the AO. Aggrieved, the Revenue is in appeal before us. We have heard both the parties and perused the material available on record, we note that the assessee is engaged in the business of manufacture of footwear. The factory of the assessee is located on the banks of river Ganges. In order to protect its factory building from floods, damp, erosion and/or any other forms of water damages, the assessee incurred expenses for river embankment and its renovation. Such costs were incurred wholly and exclusively for the business purposes of the assessee Since the costs incurred on river embankment .....

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..... er was of the view that mode of payment for the period does not determine the nature of particular transaction and the relevant transaction can be considered as capital or revenue from a perusal of the relevant document, in connection thereof. On a perusal of the agreement with Wolverine Worldwide INC it was observed that the facility obtained by the assessee from the technical agreement was to help the assessee to run the business in a more competent manner. The payment has been made for availing the technical know-how and technical expertise and the use of the brand so owned by the provider which is mentioned in detail in sections II, III & IV of the agreement with such assessee. The AO further noted that since the pronouncement of technical know-how and technical expertise bestowed upon the assessee an enduring benefit, hence these expenses of ₹ 3,87,80,185/-should be treated as capital expenditure. 44. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who is deleted the addition. Aggrieved, the Revenue is in appeal before this Tribunal. 45. At the outset, the ld Counsel submits that similar disallowance on .....

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..... ta does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasoning, in the absence of any material change justifying the Revenue to take a different view of the matter - and, if there was no change, it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of lncome-tax in the earlier proceedings, a different and contradictory stand should have been taken." We are of the view that the above cited precedents on principle of consistency are squarely applicable to the assessee under consideration. We note that in the immediate preceding year i.e. AY 2007-08 the assessee had made similar royalty payments. The assessment for AY 2007-08 was framed u/s 143(3),in that year the Assessing Officer .....

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..... e same on the ground that the same was not permissible as per explanation to section 115JB of the Act. We note that assessee claimed adjustment of ₹ 5,02,54,168/- in respect of prior period items comprising of impact of lease rent equalization of ₹ 3,97,18,000/- and gratuity expenses of earlier years of ₹ 1,05,36,000/- ,while computing book profit u/s 115JB of the Act. We note that assessing officer did not allow adjustment of the said sum of ₹ 5,02,54,168/- while computing book profit under section 115JB of the Act on the ground that the said amount was not debited to the profit and loss account. We note that ld CIT(A) held that the net profit was worked out after debit on account of prior period items and no adjustment to the profit as per the profit and loss account could be made unless specifically provided under any of the clauses of Explanation to section 115JB of the Act as held by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT: 225 ITR 273 . We note that this issue is covered in favour of the assessee by the decision of the Hon'ble Delhi High Court in the case of CIT vs. Khaitan Chemicals & Fertilizers Ltd: 307 ITR 150 .....

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..... not correct in disallowing such debit. The adjustment made by the Assessing Officer on the prior period items is accordingly deleted. We do not find any infirmity in the order of ld CIT(A), his order on this issue is hereby upheld and grounds of appeals raised by the Revenue is dismissed. 51. Ground No. 5 relates to deduction of ₹ 4,06,47,000/- on account of operating rent equalization amount. The additional ground raised by the assessee in his appeal in ITA No. 2255/Kol/2014 is identical to the ground No. 5 raised by the Revenue in its appeal, ITA No. 77/Kol/2015, therefore we have already adjudicated this ground along with additional ground of assessee s appeal, vide para No. 30 and 31 of this order. 52. Ground No. 6 raised by the Revenue relates to exemption of ₹ 6,64,638/- on account of dividend income ignoring the fact that the assessee has never claimed such amount in its return of income. We heard both the parties and perused the material available on record we note that the assessee had credited dividend income ₹ 6,64,638/- on which exemption u/s 10(34) of the Act had not been claimed. However, the said income was exempt from tax in view of section 10(34) .....

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..... t this issue stands squarely covered in favour of assessee by the decision of the jurisdictional Kolkata Bench of ITAT in assessee's own case in various earlier assessment years. One of the orders of the Kolkata Bench in assessee's case on the issue of allowability of contribution to BWSBS is reported in 85 ITD 257. Copy of which is also placed before the bench. It is further material to mention that the Department's appeal against the order of the Kolkata Tribunal has been dismissed by the Calcutta High Court which is reported in 167 CTR 14. In the circumstances and following the orders of the jurisdictional High Court and ITAT, Kolkata in assessee's own case, we note that the disallowance of ₹ 59,54,147/- deserves to be deleted. Therefore, we do not find any infirmity in the order of ld CIT(A) in deleting the aforesaid addition, hence we confirm the order passed by the ld CIT(A) and dismiss the ground raised by Revenue. 56. Ground No. 9 raised by the Revenue relates to transfer pricing adjustment of ₹ 4,50,658/- 57. We heard both the parties and perused the material available on record, we note that ground No.9 raised by the Revenue is related to addit .....

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..... these factors are applied there shall be no difference in the PLI of the assessee vis-a-vis the comparables. 59. We note that the TPO however rejected both the contention and working of PLI, as made by the assessee. The TPO proceeded to make independent computation of the PLI of the comparables and also that of the assessee. On perusal of the Transfer Pricing Order dated 31.10.2011, it will be noted that the TPO determined the PLI of the comparables at 7.47% and that of the assessee at 6.55%. Based on the PLI of the comparables, the arm's length value of the transactions was determined at ₹ 2,44,31,005/-. In the TPO's view the arm's length value of payments made to AEs on account of import of chemicals, TSA fees and spare parts is at ₹ 2,44,31,005/- and not the actual transaction amount of ₹ 2,48,81,663/-. Accordingly, the difference of ₹ 4,50,658/ - was the downward adjustment proposed by the Transfer Pricing Officer. We note that the downward adjustment of ₹ 4,50,658/ - proposed by the TPO was in gross violation of the provisions of second proviso to Section 92CA of the Income-tax Act, 1961. Without prejudice to the assessee's claim f .....

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..... .e. OP/OC of the assessee was determined by the TPO at 6.55% whereas the PLI of the comparable was 7.47%. Out of the total operating cost, the value of the transactions with the AEs was ₹ 2,48,81,663/-. The arm's length value as determined by the TPO was ₹ 2,44,31,005/-. Applying the benefit accorded to the assessees in the second proviso to Section 92CA, it is clearly evident that the arm's length price is within the permitted variation of + (-) 5% from the actual value of transactions and therefore the impugned addition of ₹ 4.50,658/- has rightly been deleted by the ld CIT(A) observing the following: 7.2. I have considered the facts of the case. The ALP for cost of goods and services computed by the TPO was of ₹ 2,44,31,005/- on the basis of arithmetical mean of PLI of eight comparables, whereas the transaction amount was of ₹ 2,48,81,663/-. The computation of ALP is to be made in accordance with the provision of section 92C of the Income Tax Act, 1961. The provision, as it stood in the year under consideration, stipulates that:- "where more than one price is determined by the most appropriate method, the arm's length price shall be .....

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..... onnection with the transfer of the capital asset is required to be reduced from the sales consideration for the purpose of computing capital gains. The payment of VAT was imperative in the transaction for sale of the trademark; without payment of VAT, the transfer of trademark could not be effected. In that view of the matter, such payment being expenditure incurred wholly and exclusively in connection with the transfer of trademark was required to be deducted from the sale consideration. In view of the aforesaid, it is submitted that the CIT(A) was right in allowing deduction of V AT paid in connection with transfer of a capital asset. In view of the aforesaid, the order passed by the CIT(A) deleting the aforesaid disallowance deserves to be upheld. 65. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that in the year under consideration the assessee had sold one of its registered trademark' Hawaii' for a consideration of ₹ 3,91,9 .....

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..... on 55 which deals with 'cost of improvement'. Meaning thereby an assessee is entitled to claim deduction in respect of both 'cost of improvement' and 'expenditure incurred wholly and exclusively in connection with transfer' of brand name whose 'cost of acquisition' is taken at NIL under the provisions of Section 55(2)(a) of the Income-tax Act, 1961.There is no provision in the Chapter - IV 'Computation of Capital Gains' which prohibits the assessee to claim deduction in respect of 'cost of improvement' and 'expenditure incurred wholly and exclusively in connection with transfer' whose cost of acquisition is deemed to be NIL. It is therefore submitted that the basic premise of the Assessing Officer based on which he alleged that the assessee was not entitled to claim deduction in respect of VAT paid as 'cost of improvement' and/ or 'expenditure incurred wholly and exclusively in connection with transfer' is found to be false. We note that in terms of the statutory provisions of State Value Added Tax Act, assessee was legally obliged to pay VAT ₹ 15,07,308/- which it had paid. Levy of VAT was a direct incid .....

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..... s been developed by the assessee itself, its cost of acquisition was nil. However, in its computation of capital gain the assessee had, from the consideration received, reduced the amount of VAT. It is clear that VAT have been paid in respect of sale of the assessee's trade-mark. The assessee was statutorily required to pay VAT on the sale consideration received. Therefore, the expenditure was directly related with transfer of the asset namely trade-mark. I do not agree with the assessing officer's view that the expenditure on VAT was not related to transfer of trade-mark. Rather, the VAT was directly related to sale of trade-mark and was to be necessarily paid. Thus, this is an expenditure directly related to transfer of asset and hence deductible from sale of consideration in view of clause (i) of section 48. The disallowance of ₹ 15,07,308/- is accordingly deleted. That being so, we decline to interfere in the order passed by ld CIT(A), his order on this issue is hereby accepted and grounds of appeal raised by the Revenue is dismissed. 66. In the result the appeal filed by the Assessee is allowed and the appeal filed by the Revenue is dismissed. Order pronounced in .....

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