TMI Blog2020 (1) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed by the assessee in the return of income towards administrative expenses. Accordingly, the ground No.1 of original grounds and additional grounds 1 2 raised by the assessee and ground No.1 of revenue are partly allowed. Disallowance u/s.40(a)(ia) - Non deduction of TDS on provisions of interest made at the end of the year - HELD THAT:- As decided in own case for A.Y.2008-09 regular return bonds being transferable on simple endorsement and delivery and the relevant registration date being a date subsequent to the closure of books of account, the assessee could not have ascertained the payees at the point of time when the provision for interest accrued but not due was made. Accordingly, no tax was required to be deducted at source in respect of the provision for interest payable made by the assessee which reflected provision for 'interest accrued but not due' in a situation where the ultimate recipient of such 'interest accrued but not due' could not have ascertained at the point of time when the provision is made - In the case under consideration, the assessee had made provisions but had not received the bills, that in the subsequent year the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion thereon - HELD THAT:- We find that there is no dispute that assessee company had incurred an expenditure on corporate advertisements to maintain its corporate image which in turn resulted in increased sale of products of the assessee. The assessee claimed the same as revenue expenditure where as the ld. AO treated the same as brand building expenditure and accordingly considered it as capital in nature and granted depreciation. This action was upheld by the ld. CIT(A). We find that the reliance placed by the ld. AR on the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Asian Paints India Ltd. [ 2016 (11) TMI 258 - BOMBAY HIGH COURT] on the impugned issue squarely addresses the dispute in favour of the assessee. Expenses incurred for making advertisement films - treated as a capital or revenue expenditure - HELD THAT:- What is to be examined is the nature of advantage obtained in the commercial sense by incurring the expenditure. If the expenditure consists of merely facilitating the assessee to carry on business more profitably leaving the fixed capital untouched, it would be on revenue account. The entire expenditure, the Court observed, has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -10 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-24, Mumbai in appeal No.CIT(A)-LTU/Addl. CIT-LTU/190/2011-12 dated 24/01/2014 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 01/11/2011 by the ld. Addl. Commissioner of Income Tax, LTU (hereinafter referred to as ld. AO). Disallowance u/s.14A of the Act Ground No.1 of original grounds of appeal and Additional Grounds 1 2 of assessee appeal Ground No.1 of Revenue appeal 2. We have heard rival submissions. We find that the additional ground raised by the assessee deserves to be admitted as it goes to the root of the matter and accordingly, the same is taken up for adjudication alongwith the original grounds of appeal. We find that the assessee had derived dividend income of ₹ 16,81,44,106/- and claimed the same as exempt in the return of income. We find that the assessee had made voluntary disallowance u/s.14A of the Act in the sum of ₹ 83,04,00,000/- worked out as under:- Interest on specific borrowings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ============ 2.2. During the appellate proceedings, the assessee made a plea that it had made the entire investments out of its own funds and internal accruals and gave details of availability of own funds as on 31/03/2009 as under:- Particulars Rs.(In Crores) Share Capital 95.01 Share Warrants 377.41 Reserves and Surplus 3649.24 Deferred Tax Liabilities 180.24 Accumulated Depreciation 1813.95 ======= Total 6115.85 ======= 2.3. The assessee pleaded that it has various manufacturing units situated at Gujarat, West Bengal, Uttar Pradesh and Tamil Nadu. It was also pleaded that it is having a separate corporate finance division. It was submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,683,178 - 8,683,178 8,683,178 . Statutory and tax audit fees Repair Buildings 231,707 - 231,707 . 231,707 Repair Others 13,842,728 - 13,842,728 13,842,728 Rent 1,255,493 - 1,255,493 1,255,493 Rates Taxes 3,622,956 2,750,000 872,956 872,956 ₹ 27.50 lacs towards wealth tax provision already disallowed Insurance 830,527 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23,101 . 23,101 Entertainment Exp. 211,832 . 211,832 . 211,832 Training Recruitment Exp 58,708 58,708 58,708 Membership Fee 2,200,327 *. 2,200,327 _ 2,200,327 Books Periodicals 129,383 . 129,383 129,383 Legal Professional charges 31,475,551 14,667,421 16,808,130 16,808,130 ₹ 1.46cr specific to inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 76,324,359 26,100,697 50,223,662 43,220,563 7,003,099 2.6. We find that the ld. CIT(A) on verification of the aforesaid tabulation had observed as under:- I have carefully examined the submissions made by the assessee on 22/01/2014 in continuation with the earlier submissions, with regard to exclusion of items of expenditure that were not directly or indirectly related to earning exempt income and found that the expenses with respect to Printing Stationary of ₹ 49,20,462/-, postage of ₹ 40,33,372/-, courier changes of ₹ 17,99,943/-, expenses on VAT of ₹ 13,792/-, listing fee of ₹ 6,75,993/-, advertisement expenses of ₹ 8,32,765/- and loss on fixed assets of ₹ 18,622/-, the contentions of the assessee are correct that these expenses will not have any connection with the earning of exempt income. With regard to expenses on Audit fee of ₹ 86,83,178/-, the contention of the assessee cannot be accepted for the reason that the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Rule 8D(2)(iii) is arrived at as under:- Net Expenses: ₹ 12,50,08,837/- Add: Bad debts provisions ₹ 2,77,26,000/- Less: Printing and stationary ₹ 49,00,462/- Postage Rs. 17,99,943/ Courier Charges Rs. 6,75,993/- VAT paid Rs. 13,792/- Sale of assets Rs. 18,622/- Audit fee 50% Rs. 43,41,586/- Advertisement Rs. 8,32,765/- Less: Legal and Professional charges ₹ 1,68,08,130/- Disallowance u/s 14A ₹ 11,92,91,169/- It is, therefore, held that the disallowance under section 14A of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that this issue has already been decided by this Tribunal in favour of the assessee in ITA No.3033/Mum/2012 dated 09/12/2015 for A.Y.2008-09 in assessee s own case wherein it was held as under:- 6.Ground No.2 is about disallowance of ₹ 4.83crores u/s.40(a)(ia) of the Act towards provisions made for expenses at the year end. 6.1.Before us,representatives of both the sides agreed that Tribunal had in the AY.2007- 08(supra)had decided the issue in favour of the assessee.We would like to reproduce the order for that year: 5.Next Ground is regarding disallowance of ₹ 1,33,57,668/- u/s. 40(a)(ia) towards provision made for expenses at the year-end as per best estimates. Before us,representatives of both the sides agreed that Tribunal had in the AY.2006- 07(supra)had decided the issue in favour of the assessee in following manner: 3.2.We have heard the rival submissions and perused the material before us.We find that the AO had invoked the provisions of section 40(a)(ia),though he has also discussed the principles of contingent liability,while making the disallowance.We find that FAA has passed a non- speaking order and ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in assessee s own case in ITA No.3033/Mum/2012 dated 09/12/2015 for A.Y.2008-09. But we find that though the Hon ble Calcutta High Court in the case of Exide Industries Ltd. vs Union of India reported in 292 ITR 470 (Cal) had struck down the provisions of Section 43B Clause (f) of the Act as unconstitutional, the revenue had carried the matter further to the Hon ble Supreme Court which initially in Special Leave to appeal (Civil) CC12060/2008 dated 08/09/2008 had held as under:- The petition was called on for hearing today. Upon hearing the Counsel, the Court made following order. Issue Notice In the meantime, there shall be stay of the impugned judgment, until further orders. 4.1. Later, the Hon ble Supreme Court in Special Leave to Appeal (Civil) No.(s) CC22889/2008 dated 08/05/2009 had held as under:- The petition was called on for hearing today. Upon hearing the Counsel, the Court made following order. Delay condoned Leave granted. Upon hearing the final disposal of the Civil Appeal, the department is restrained from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were acquired and put to use by the assessee in the earlier assessment years for less than 180 days. The assessee had claimed the remaining portion of additional depreciation in the year under consideration. We find that this issue has already been held in favour of the assessee by the decision of the Hon ble Jurisdictional High Court in the case of PCIT vs. Godrej Industries Ltd. in Income Tax Appeal No.511/2016 dated 24/11/2018 wherein the operative portion of the judgement is as under:- 5. Having heard Counsel for the Revenue and for the Assessee, we notice that the Assessee's claim of additional depreciation arises out of clause (iia) of subsection 1 of Section 32 of the Act. Clause (ii) of subsection 1 of Section 32 of the Act recognizes the depreciation on block of assets. Clause (iia) grants additional depreciation in case of acquisition and installation of new machinery or plant by an Assessee after 31st March, 2005, the Assessee being engaged in business of manufacture or production of an article or things. 6. We may also notice that the second proviso to clause (ii) of Subsection 1 of Section 32 of the Act, would restrict Assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This would necessarily mean that the balance 10 per cent additional deduction can be availed of in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent deduction which shall be allowed. It has been consistently held by this Court, as well as the apex court, that the beneficial legislation, as in the present case, should be given liberal interpretation so as to benefit the assessee. In this case, the intention of the legislation is absolutely clear, that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, in our view, has rightly held, that additional depreciation allowed under Section 32(1)(iia) of the Act is a onetime benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the mind of the Assessing Officer, stands removed by virtue of the Legislature, incorporating in the Statute, the necessary clarificatory amendment. 10.3 . . . . . . . 11. We may only indicate that during the course of the arguments, our attention was drawn to the Memorandum explaining the provisions in Finance Bill, 2015 whereby, the aforementioned amendment was brought about. 11.1. The relevant part of the memorandum is extracted hereafter: . To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the balance 50 per cent of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year. This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 11.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 747/- Ground No.6 of Original Grounds of appeal. 7. We have heard rival submissions. We find that there is no dispute that assessee company had incurred an expenditure on corporate advertisements to maintain its corporate image which in turn resulted in increased sale of products of the assessee. The assessee claimed the same as revenue expenditure where as the ld. AO treated the same as brand building expenditure and accordingly considered it as capital in nature and granted depreciation. This action was upheld by the ld. CIT(A). We find that the reliance placed by the ld. AR on the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Asian Paints India Ltd., reported in 243 Taxman 348(Bom) on the impugned issue squarely addresses the dispute in favour of the assessee. The question raised before the Hon ble Jurisdictional High Court is as under:- (B) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the disallowance made by the Assessing Officer on expenditure on Corporate Brand‟ building, treating such expenditure as revenue in nature? 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture incurred for making advertisement films was that when the same was incurred in respect of an ongoing business of the Assessee, it is Revenue. On the other hand, when the expenditure is incurred in respect of a brand which is to be used in a business which is yet to be commenced, it is capital expenditure. In this case also, the expenditure on corporate advertisement films is in respect of ongoing business. The expenditure for advertisement of a brand or corporate name of an existing ongoing business is in the nature of maintaining the brand and/or corporate image and it is not for creation of a brand. Further, the test of enduring benefit urged by the Revenue was considered by the Apex Court in Empire Jute Co. Ltd. vs. CIT 124 ITR 1 to hold that it is not a conclusive test in all cases so that such expenditure is always on capital account. The Court observed that what is to be examined is the nature of advantage obtained in the commercial sense by incurring the expenditure. If the expenditure consists of merely facilitating the assessee to carry on business more profitably leaving the fixed capital untouched, it would be on revenue account. The entire expenditure, the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me infructuous in view of the relief already granted to the assessee in A.Y.2008-09. We find that this Tribunal in assessee s own case in A.Y.2008-09 in ITA No.3178/Mum/2012 dated 09/12/2015 had already held that expenditure incurred towards catalysts to the tune of ₹ 6.69 Crores should be allowed as revenue expenditure. Accordingly, there cannot be any claim of depreciation on this very same expenditure during the year under consideration. Hence, the ground No.8. raised by the assessee is dismissed as infructuous. 10. The ground No.9 raised by the assessee is with regard to chargeability of interest u/s.234D of the Act which is consequential in nature. 11. The ground No.10 raised by the assessee is with regard to initiation of penalty proceedings u/s.271(1)(c) of the Act, which would be premature for adjudication at this stage. Additional Ground 12. We find that the assessee has raised additional ground No.3 for A.Y.2009-10 challenging the action of the ld. AO in treating the interest subsidy received under Technology Upgradation Fund Scheme (TUFS) as revenue receipt amounting to ₹ 8,34,26,992/-. We find that si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l ground No.4 raised by the assessee is allowed. 14. In the result, appeal of the assessee is allowed for statistical purposes. ITA No.2963/Mum/2014 (Revenue Appeal) 15. The ground No.2 raised by the revenue is with regard to deletion of depreciation on goodwill amounting to ₹ 1,11,98,382/-. We find that this issue has already been decided in favour of the assessee in assessee s own case by the order of this Tribunal in ITA No.3033/Mum/2012 dated 09/12/2015 wherein it was held as under:- 11.Ground No.9 deals with disallowance of depreciation on goodwill on acquisition of Madura garments Division. As agreed by the AR and the DR, the issue has been dealt with by the Tribunal, while deciding the appeal for the AY.2006-07(supra).Paragraph 6 of the said order reads as under: 6.Next ground is about disallowance of depreciation on goodwill on acquisition of Madura Garments Division ongoing concern basis. We find that in the earlier identical issue had been decided in favour of the assessee as following: 3.1.We find that sum of ₹ 3.33 crores,₹ 2.50 crores and ₹ 1.87 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X
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