TMI Blog2015 (11) TMI 1799X X X X Extracts X X X X X X X X Extracts X X X X ..... ion disallowed - AR contended that the liability was disallowed without any basis, that the AO/FAA had not disputed the crystallization of the liability that the same was allowable - HELD THAT:- We find that the assessee had claimed deduction for the provisions made under the head pension liability, that the figure was arrived at as per the actuarial valuation. We are of the opinion that after the decision of Bharat Earth Movers, [ 2000 (8) TMI 4 - SUPREME COURT] the issue of crystallised liability has been decided conclusively by the Hon ble Supreme Court. Decided in favour of the assessee . Disallowance u/s. 40(a)(ia) towards provision made for expenses at the year-end as per best estimates - HELD THAT:- Assessee had made provisions but had not received the bills, that in the subsequent year the provisions made by it were offered for taxation. Considering these facts and following the orders of the Tribunal in the case of Mahindra Mahindra Ltd. [ 2013 (9) TMI 522 - ITAT, MUMBAI] Industrial Development Banking Company [ 2006 (7) TMI 248 - ITAT BOMBAY-H] we decide ground no. 2 in favour of the assessee. Deduction u/s. 80IA ad 80IB on account of allocation of head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e carbon credit is not even directly linked with power generation. On the sale of excess carbon credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal. Addition made on account of general expenses incurred on buy back of shares - Expenditure on issuance of bonus shares is revenue expenditure. See GENERAL INSURANCE CORPORATION [ 2006 (9) TMI 116 - SUPREME COURT] - ITA No. 3703/M/2011, 3634/M/2011 - - - Dated:- 24-11-2015 - Sh. Rajendra, Accountant Member And Amit Shukla, Judicial Member For the Petitioner : Shri J. D. Mistri For the Respondent : Shri E. Sankaran-CIT(DR) ORDER Per Rajendra, A. M. Challenging the order of CIT(A)-Mumbai, dated 17. 2. 2011, the assessee and Assessing Officer (AO) have filed cross appeals for the above mentioned Assessment Year, raising various grounds of appeal/additional grounds. Assessee-company, is engaged in the business of manufacturing of Rayon, carbon black and insulators etc. It filed its return of income on 27. 10. 2007, declaring income of ₹ 2, 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontractual liability which is payable only if the employees resigns or retired from the services. We also find that the Hon ble Calcutta High Court in the case of Excide Industries Ltd. (supra) has struck down Sec. 43B(f) being arbitrary, unconscionable and dehors the Apex Court decision in the case of Bharat Earth Movers 245 ITR 428. It is relevant to state that the Tribunal in the case of CIT Vs Universal Medicare in ITA No. 6191/M/08, has followed the decision of the Hon ble Supreme Court in the case of Bharat Earth Movers and directed the AO to allow the amounts so claimed. Respectfully following the afore discussed decisions, we direct the AO to allow the claim of provisions for leave salary. Ground No. 6 is accordingly allowed. Respectfully following the above, grounds no. 4, 2 and 2 for the AY. s. under appeal are decided in favour of the assessee-company. In view of the above, ground no. 4 is decided in favour of the assessee. Respectfully, following the earlier years decision, Ground no. 1 is decided in favour of the assessee . 3. The second ground is regarding disallowance u/s. 14A in respect of other expenses. During the assessment proceedings, the AO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rystallization of the liability that the same was allowable. He referred to the case of Metal Box (73 ITR 53) and Bharat Earth Movers(245 ITR428). The Departmental Representative(DR)supported the order of the FAA. 4. 2. We find that the assessee had claimed deduction for the provisions made under the head pension liability, that the figure was arrived at as per the actuarial valuation. We are of the opinion that after the decision of Bharat Earth Movers, (supra), the issue of crystallised liability has been decided conclusively by the Hon ble Supreme Court. We would like to reproduce the relevant portion of the judgment of the Hon ble Apex Court and the same reads as under:- The law is settled : if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability on the assessee having been imported, the liability would be an accrued liability and would not convert into a conditional one merely because the liability was to be discharged at a future date. There may be some difficulty in the estimation thereof but that would not convert the accrued liability into a conditional one ; it was always open to the tax authorities concerned to arrive at a proper estimate of the liability having regard to all the circumstances of the case. Applying the abovesaid settled principles to the facts of the case at hand we are satisfied that the provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary. Respectfully following the above judgment, Ground No. 4 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Industrial Development Banking Company (supra), we decide ground no. 2 in favour of the assessee. Following the above, ground no. 5 is decided in favour of the assessee . 6. Ground no. 6 is regarding reduction of deduction u/s. 80IA ad 80IB of ₹ 33, 66, 055/- on account of allocation of head office expenses. The AR and the DR, before us, agreed that the issue stands decided in favour of the assessee by the order of the Tribunal for the AY. 2006- 07(supra). We will like to reproduce the relevant portion of the said order and same reads as under: 5. Next ground is about reduction of deduction, amounting to ₹ 31. 32 Lakhs on account of allocation of Head Office (HO) expenses. During the assessment proceedings, the AO found that the assessee had claimed deduction, u/s. 80IA of the Act, in respect of Power Plant of Rayon Division (17. 31 Crores) and Power Plant at Hitech Carbon and Chemical (₹ 5. 79 Crores), that it had not apportioned any HO expenses in respect of the above units. He directed the assessee to explain the reason for not considering the HO expenses in working the profits of the above units. In its reply, dated 18. 11. 2008, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read as under: 19. Ground No. 9 reads as under: On the facts and in the circumstances of the cases and in law, the learned AO has erred in reducing the exemption u/s. 10B i) by ₹ 75, 083/- on account of allocation of Head Office expenses to 100% export oriented unit and; ii) by ₹ 32, 289/- on account of allocation of expenses of another division namely, Global Export Marketing to 100% export oriented unit and iii) by ₹ 25, 943/- on account of interest income earned by 100% export oriented unit; and the CIT(A) has erred in confirming the above disallowance. The learned AO be directed to increase the exemption u/s. 10B and reduce the total income and reduce the book profit u/s. 115JB accordingly. 20. We find that an identical issue has been considered by the Tribunal in the case of Grasim Industries in ITA Nos. 5630/M/02 1865/M/03. The Tribunal in the case of Procter Gamble Hygiene Health Care Ltd. in ITA Nos. 1499/M/05 and 1500/M/05 have again considered a similar issue at para-54 of its order directed the AO not to reduce the claim of deduction u/s. 80IB of the Act by allocating Head Office expenses to profits derived from eligible units. Respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was deliberated upon by the Tribunal while deciding the appeal for earlier AY. We are reproducing the relevant paragraph of that order and same reads as under: 18. Ground No. 8 reads as under: That, on the facts and in the circumstances of the case and in law, the learned AO has erred in disallowing depreciation of ₹ 3, 33, 86, 719 claimed by the appellant on goodwill of ₹ 20. 35 crores acquired on acquisition of Madura Garments division from Madura Coasts Ltd. on a going concern basis and learned CIT (A) has erred in confirming the order of the learned AO. The learned AO be directed to allow the depreciation on goodwill and to reduce the total income accordingly. 18. 1. We find that this issue has already been allowed in assessee s own case in ITA No. 5421/ M/05 for A. Y. 2000-01. Respectfully following the decision of the Co ordinate Bench, we direct the AO to allow the claim of depreciation on Goodwill. Ground No. 8 is accordingly allowed. Following the above order of the Tribunal for earlier years, ground no. 5, 9, and 3 for the AY. 2003 -04, 2004-05, 2005-06 are decided in favour of the assessee. In view of the above, ground no. 6 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers (349ITR336) However, the AO cannot accept a fresh claim without a revised return. The assessee had requested the FAA for relief. In our opinion the FAA was not justified to reject the claim on that ground. Now, coming to the merits of the case as to whether the incentive received by the assessee could be treated as capital receipt or not we would like to mention that the assessee had made the claim relying upon the decision of the Special Bench in the case of Reliance Industries. We find that the matter had travelled to the Hon'ble Supreme Court and it was restored back to Hon ble High Court with certain directions. Therefore, we are of the opinion that in the interest of justice, the matter should be restored back to the file of the FAA who would analyse the provisions of the scheme in light of the decision of the Hon ble Apex Court. As a result, ground no. 9 stands partly allowed. 9. Ground No. 10 is with regard to sale of certified emission reduction(CER) ₹ 6, 95, 29, 718/- treated as revenue receipts and liable to tax and to treat the same as capital receipt not chargeable to tax. 9. 1. During the assessment proceedings vide its letter dt. 25. 3. 2009 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal. Respectfully following the above judgment, Ground No. 10 is decided in favour of the assessee. 10. Ground No. 12 regarding interest charged u/s. 234D is consequential in nature and hence is not being adjudicated. 11. The Assessee has raised also raised three additional grounds. After going through the application made by it for admitting them, we find that those grounds are legal in nature and needs no new facts to be investigated. Hence, we are admitting them. First two grounds deal with disallowance made u/s. 14A. 11. 1. Before us the AR relied upon the cases of HDFC Bank Ltd. (2014-TIOL-1274-HCMUM- IT); Reliance Utilities Power Ltd. (313 ITR 340); InterGlobe Enterprises (IA No. 1362 1032/Del/2013);EIH Associated Hotels (ITA No. 1503/Mds/2012). The DR stated that matter could be decided on merits. 11. 2. While deciding the Ground of appeal No. 2 we have sent back the issue of disallowance u/s. 14A of the Act to the file of the AO. Following the same, we are restoring the issue of interest expenditure also to the file of the AO. 12. Addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 deal with deletion of unutilised Modvat Credit in closing stock and amounts involved are ₹ 5. 04 crores, ₹ 7. 15 crores and ₹ 7. 03crores respectively for the AY. s. concerned. 16. 1. Before us, DR and AR agreed that the issue has been already decided in favour of the assessee by earlier years order including the order for the AY. 2002-03. We find that while deciding the identical issue for the immediate previous assessment year, theTribunal had dismissed the appeal of the AO. Besides, the issue of MODVAT credit has been finally settled by the case of Indo Nippon Chemicals Co. Ltd. (261ITR275)by the Hon ble Apex Court. Here is the decision of the Hon ble Court: It is not open to the Assessing Officer to treat outgoings as income under section 145 of the Income-tax Act, 1961. Whatever method the Assessing Officer adopts after invoking section 145, it has to be consistent with accepted principles of accountancy. The assessees, which were manufacturing units, were liable to excise duty on the goods manufactured by them. Under the Modvat scheme the assessees credit for the got excise duty already paid on the raw materials purchased by them and utilise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee , held that expenses on the right issue was not in the normal course of business, that it had not debited the same to the P L account. Finally, he rejected the claim made by the assessee. 15. 1. During the appellate proceedings the FAA held that similar additions had been deleted by his predecessors while deciding the appeal for 2000-01. 15. 2. Before us, the DR stated that matter could be decided on merits. AR stated that issue pertained to issue of bonus shares and not of buy back of shares, that the ground taken by the AO was factually incorrect. He relied upon the order of the Tribunal for the AY 2000-01(para No. 16-21). He also referred to the judgment of GIC(286 ITR232). 15. 3. We find that the issue of allowability of expenditure of Bonus shares has been dealt with in the case of GIC(supra). The Hon ble Court has dealt the issue as under: 19. The Andhra Pradesh High Court has in Vazir Sultan Tobacco Co. Ltd. v. CIT [1990] 184 ITR 70, taken the view that the expenditure incurred on the issue of bonus shares was capital in nature because the issue of bonus shares led to an increase in the company s capital base. 20. The observations and co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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