TMI Blog2012 (8) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... awing the power sanctioned to it which the HPSEB has levied as peak load infringement charges. These are nothing but electricity charges but paid for additional drawal of power than the sanctioned load at that particular point of time. The amounts are compensatory in nature and not penalty for surcharge violation. The same cannot be disallowed by invoking Explanation to section 37(1). In view of this, we direct AO to allow the amount. Ground is allowed. Sales tax incentive - power tariff freeze - Electricity duty - Road Transport subsidy as capital receipt - MAT - HELD THAT:- We are of the view that so far as the exclusion of these items from book profits under section 115JB is concerned, we find that even though there are Coordinate Bench decision in favour of assessee, this precedence no longer hold good law in view of the Special Bench decision of this Tribunal in the case of Rain Commodities [ 2010 (7) TMI 794 - ITAT HYDERABAD] . Respectfully following the Coordinate Bench decision in assessment year 1998- 99 which in turn followed the above Special Bench decision, we reject the grievance of assessee and uphold the stand of the authorities on this issue. The grounds are rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of Sahney Steel Press Works Ltd, vs. CIT (1997) 228 ITR 253 (SC). The CIT (A) confirmed this treatment given by AO as assessee did not press the issue at that point of time. This issue was decided in favour of assessee by the orders from 1991-92 by ITAT in following appeals: AY 91-92 in ITA No.1105/M/97 AY 92-93 in ITA No.3961/M/97 AY 93-94 in ITA No.6901/M/97 AY 94-95 in ITA No.3055/M/98 AY 96-97 in ITA No.3783/M/00 AY 97-98 in ITA No.3298/M/01 AY 98-99 in ITA No.6289/M/01 ITA No.6289 6320/Mum/2003 for AY 1998-99 vide Para 5 it was decided as under: 5. Learned counsel refers to paper book pages 267 to 273 (Para 9), which contain order of the ITAT in assessee's own case, wherein, identical claim for the assessment years 1991-92 to 1996-97 has been decided in favour of the assessee. He also refers to the decision of the ITAT Mumbai (SB) in the case of DCIT vs. Reliance Industries Ltd. 88 ITD 273 (SB)(Mum), wherein, it has been held that if a subsidy is given for setting up or expansion of industry, it will be capital irrespective of source of funds or mode of disbursement. Reliance was made to the decision of Hon'ble Supreme Court's judgment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes us through the nature of subsidy and points out that the subsidy in question is exactly the same as was in the case of Assam Asbestos Limited. In both these cases, the transport subsidy received by the assessee was central transport subsidy, as against HP state transport subsidy receipt in the case of Steel Strips Limited (supra). Learned counsel thus submits that a decision in the context of a different subsidy scheme, i.e. decision in the case of Steel Strips Ltd (supra), will have no application in the matter. We are thus urged to follow the earlier decisions of the coordinate benches in assessee's own case, and not be influenced by coordinate bench decision in the case of HP state transport subsidy scheme . 3.2 Respectfully following the same, we hold transport subsidy as capital receipt not taxable as revenue receipt. This exclusion is supported by the fact that the incentive is capital in nature and do not have any income character in view of the Purpose Test and principles laid down by the Hon'ble ITAT Mumbai Special Bench in DCIT vs. Reliance Industries Ltd (2004) 88 ITD 273 (Mum)(SB) in which it was clarified that if a subsidy is given for setting up or expans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/2000 and the Tribunal has decided the issue in favour of the assessee. Learned Departmental Representative, however, relies upon the stand of the authorities below and justifies the same. Having heard both the sides, we find that the issue in respect of power tariff issue was allowed by the Tribunal for the assessment year 1996-97, observing as follows: We find from the order of this Tribunal in assessee's own case for A.Y. 1996-97 (supra) that power tariff freeze incentive was directed to be treated as capital receipt vide Para 6.1 of the order. The Tribunal had followed the decision of Mumbai Special Bench in the case of DCIT v. Reliance Industries, 88 ITD 273 for coming to this decision. Respectfully following this, we direct that power freeze incentive be treated as capital receipt in the impugned year also. Thus ground No.7 is allowed. 42. Similarly, we also find that issue in respect of sales tax subsidy was allowed by the Tribunal, observing as follows It was pointed out by the learned A.R. that identical ground was allowed by this Tribunal in assessee's own case for A.Y. 1996-97 referred supra. We find from Para 21 of this order that sales tax exemption availed wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limestone from the mines located in the forest area. It was submitted that as this amount had been expended in the normal course of the business of the company, the same is deductible. The AO did not accept the assessee's contention and treated the amount as capital expenditure. The assessee carried the matter in appeal but without any success. The assessee is in further appeal before us. 9. The main thrust of learned counsel's arguments is that afforestation was carried out as a part and parcel of the process of extraction of limestone from the mines located in the forest area. Our attention is invited to the provisions of Forest (Conservation) Act 1980, and it is submitted that unless the assessee makes payment of these afforestation costs, he would not be allowed to carry out the business activity of extracting limestone. It is also pointed out that while the expenses are incurred wholly and exclusively for the purposes of business, these expenses neither result in creation of any asset for the assessee nor in transfer of ownership of any assets. Our attention is then invited to Hon'ble Supreme Court's judgment in the case of CIT Vs. Kirkel Coal Co (77 ITR 530) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing on the actual mining operation carried out. It is an independent activity which is for the purpose of maintaining the lease rights which are capital assets. As regards coordinate bench's decision in the case of Orissa Forest Corporation (supra), learned Departmental Representative submitted that in the said case assessee was engaged in the business as a forest corporation, and such decision in the case of a forest corporation's case can not be compared with a case in the assessee is engaged in business of extracting limestone. There is no direct link between assessee's business and the expenses so incurred. The link, if at all, is far fetched and all the relevant facts have not even been placed before the Assessing Officer, save and except for generalized submissions about the nature of expenses. We are urged to reject the grievance of the assessee or at best remit the matter to the file of the Assessing Officer for verification of all the factual elements embedded in assessee's submissions. In rejoinder, learned counsel submits that what is to be seen is whether the motivation of incurring this expenditure is wholly and exclusively for the purposes of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll established. 8. It was laid down in Anglo-Persian Oil Company v. Dale 16 TC 253, that it was the object of the expenditure alone that counted. It was not necessary that the expenditure should have the result of bringing an asset into existence. The fact that the expenditure had in fact resulted in the coming into existence of some advantage which would endure for several years was not of consequence. 9. The Supreme Court in Bombay Steam Navigation (1953) (P.) Ltd. v. CIT [1965] 56 ITR 52, laid down the test in these words: Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the Tribunal had been right in disallowing the expenditure. In its exhaustive judgment the High Court said that if the main object, purpose and nature of the transaction was to affect the income-earning machinery or structure as such and not only to make the inflow of more funds available then the expenditure would be on the capital side. It was true that the alteration in the capital structure by raising the share capital would make more funds available, but that was not decisive. The essential object and purpose of incurring the expenditure and the resultant fact was the fundamental change in the income- earning machinery or structure. It was the resultant advantage obtained by incurring the expenditure, along with the purpose and object of incurring the expenditure, which was the guide to answering the question. 12. Our attention was drawn by Mr. Dastur to the judgment of the Supreme Court in Patnaik Co. Ltd. v. CIT [1986] 161 ITR 365, whose facts are noteworthy. The assessee dealt in automobiles and spare parts. It had subscribed to certain Government loans and had sustained a loss when re- selling them. It claimed the loss as a revenue loss. The Tribunal found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/Bom/92 v) AY 89-90 ITA 68/Bom/93 vi) AY 90-91 ITA 1926/Bom/95 vii) AY 91-92 ITA 647/Mum/97 7.3 It was further submitted that assessee s claim was supported by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Tata Chemicals Ltd (2002) 256 ITR 395 (Bom.) in which while allowing the interest on borrowings gas held that the decisive test is unity of control which is indicated by the inter-lacing, interdependence and inter connection between the businesses and the dovetailing of one into the other. Further the learned Counsel relied on the following case laws: i) Setabganj Sugar Mills Ltd vs. CIT (1961) 41 ITR 272 (SC) ii) CIT vs. Prithvi Insurance Co. Ltd (1967) 63 ITR 632 (SC) iii) Produce Exchange Corp. Ltd vs. CIT (1970) 77 ITR 739 (SC) iv) DCIT vs. Core Health Care Ltd (2008) 298 ITR 194 (SC) v) L.K. Trust vs. CIT (2009) 222 CTR 214 (SC) vi) Jt. CIT vs. United Phosphorus Ltd (2008) 299 ITR 9 (SC) vii) ACIT vs. Arvind Polycot Ltd (2008) 299 ITR 12 (SC) viii) Dy. CIT vs. Gujarat Alkalies Chemicals Ltd 299 ITR 85 (SC) 7.4 Considering the submissions and facts of the case, respectfully following the principles laid down in the above cases and by the Coordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich were not deposited soon after the receipt by the Regional Provident Fund Commissioner. Both the payments of ₹ 2,04,297/- and ₹ 2,06,182/- were realized on 31-07-1998 and 2-11-1998 respectively i.e. within the due date of filing of returns. According to AO assessee violated the provisions of section 36(1)(iv)(va) by not depositing the payment on time. The learned CIT (A) confirmed on the reason that the cheque was not encashed within 15 days from the due date of payment, both the payments were considered as delayed payments. 9.2 After considering the rival arguments, we allow the claim of assessee on the reason that the second proviso to section 43B has been omitted by the finance act 2003 which was held to be retrospective in nature as held by the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd (2009) 319 ITR 306 (SC). Similar issue has been decided in favour of assessee in CIT vs. AIMIL Ltd Ors (2010) 229 CTR 418 (Del). Considering the principles laid down therein, we direct AO to allow the amount as claimed. 10. Ground No.8 pertains to addition of sales tax refund of ₹ 99,615/- which was not pressed. Hence treated as withdrawn. 11. Groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low assessee s claim. We also hope that the Revenue will not make similar disallowances in later years as it has accepted the decision of the ITAT in earlier years. Ground is considered allowed. 13. Ground No.12 Non Exclusion of payment/reversals of expenses disallowed under section 43B in prior years. 13.1 During the instant assessment year assessee had paid/reversed the amounts in respect of bonus, sales tax and entry tax pertaining to earlier years i.e. assessment year 1995-96 to 1998-99. These expenses were disallowed due to their non-payment in the relevant assessment years. The said amount has been claimed for the first time before the CIT (A). 13.2 Since assessee has not claimed the said payment/reversal in the return of income and since no revised return has been filed to claim the same, the said claim was not allowed by the CIT (A). 13.3 It was submitted that the appellate authorities has abundant powers to admit and dispose off additional grounds as held by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd vs. CIT (1998) 229 ITR 383 (SC). It was further submitted that identical claims in assessee s own case has been restored to the file of AO by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture as the payment is not penal in nature but compensatory in nature. Accordingly additional ground is considered allowed. 15. Ground No.14. Claim for provision of additional gratuity and gratuity on sold units on accrual basis. 15.1 In the return, following the stand adopted by the Revenue in earlier years, assessee had offered provision for additional gratuity for employees retired during the year and credited on sold units. However, the ITAT finally allowed the deduction in earlier years on provisional basis. During the year the amount involved was ₹ 3,79,09,331/-. 15.2 The learned Counsel referred to the orders in assessment year 1996-97 to 1998-99 and submitted that identical additional grounds have been admitted and allowed in favour of assessee. Further in assessment year 1990-91 and 1993-94 the issue was allowed in favour of assessee and Revenue has not challenged before the High Court, hence attained finality. Considering the merits of the case and the reasons given in detail from Para 23 to 31 in ITA No.6289 and 6320/Mum/2003 for assessment year 1998- 99, this additional ground is to be admitted and allowed in favour of assessee. In assessee s own case the Coordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Pradesh Incentives Scheme 1991, for setting up new unit in HP. The purpose of these incentives was to promote growth of industries and generation of employment. In the income tax return, power tariff incentive was excluded in computing total income but sales tax incentive was excluded. Exclusion of both was omitted in computation of book profits. At the assessment stage, Assessing Officer took the view that power tariff incentive was to make business more profitable and in appeal CIT(A) confirmed the same. Aggrieved, assessee is in further appeal before us. 16.4 As far as computation of income under the normal provisions of the Act is concerned, learned representatives agree that identical issue had come up for consideration before the Tribunal in assessee's own case for the assessment year 1996-97 in ITA NO.3783/M/2000 and the Tribunal has decided the issue in favour of the assessee. Learned Departmental Representative, however, relied upon the stand of the authorities below and justifies the same. Having heard both the sides, we find that the issue in respect of power tariff issue was allowed by the Tribunal for the assessment year 1996-97, observing as follows: We find fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits under section 115JB is concerned, we find that even though there are Coordinate Bench decision in favour of assessee, this precedence no longer hold good law in view of the Special Bench decision of this Tribunal in the case of Rain Commodities (Supra). Respectfully following the Coordinate Bench decision in assessment year 1998- 99 which in turn followed the above Special Bench decision, we reject the grievance of assessee and uphold the stand of the authorities on this issue. The grounds are rejected. 18. Ground No.17 pertains to non exclusion of Dividend Distribution Tax and transfer to Debenture Redemption Reserve in computing book profit under section 115JA. 18.1 It was fairly admitted that an identical additional ground was admitted and claim was allowed in favour of assessee by the ITAT for assessment year 1997-98 in ITA No.3298/Mum/2001 (Para 40- 42 and 43-44) and in assessment year 1998-99 in ITA No.6289M/2003 (Para 49-51). 18.2 After considering the rival submissions, we are of the view that assessee s ground is to be allowed. Respectfully following the precedent on the issue in assessee s own case by the Coordinate Bench for assessment year 1998-99, we allow the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit Loss A/c and was included in the taxable income. On the fees received, assessee omitted to claim relief under section 91 in respect of tax deducted at Saudi Arabia. 20.2 In view of the decision of the Coordinate Bench on identical issue in earlier years, more preferably assessment year 1998-99 in ITA No.6289/Mum/2003 vide Paras 52 to 55, we allow assessee s contention and direct AO to allow the relief under section 91 in respect of tax deducted at Saudi Arabia. It was held as under: 52. Ground No.10 relates to relief granted u/s.91 in respect of tax deducted on the fees received from Yanbu Cement Company ltd., Saudi Arabia. 53. Learned representative of the assessee pointed out that the assessee has received an amount of ₹ 25.33 crores being fees from project from Yanby Cement Corporation, Saudi Arabia, net of tax deducted at source in the said country. The assessee has omitted to claim relief u/s.91 in respect of tax deducted at Saudi Arabia, which was opposed by learned D.R. Learned counsel also pointed out that on similar issue for the assessment years 91-92 to 97-98, the matter was remitted to the file of the AO for considering the allowability of deduction. 54. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - AY 89-90 ITA 68/Bom/1993 Para 15-17 - AY 90-91 ITA 1926/Bom/1995 Para-2-3 - AY 91-92 ITA 647/Mum/1997 Para 13-15 23.2 Since this issue is elaborately discussed and allowed in favour of assessee in Ground No.5 above, we do not see any reason to interfere with the order of the CIT (A) which is in accordance, not only on the facts of the case, but also on provisions of law. Accordingly this ground is rejected. 24. Ground No.3 pertains to allowance of service connection charges paid to UPSEB as revenue expenditure. 24.1 Service connection charges and expenses for extension of power transmission lines were paid to UPSEB for Tikaria Unit at Uttar Pradesh. It was the contention of AO that similar disallowances were made in preceding assessment years though disallowances were deleted by CIT (A) in those years, departmental appeals before ITAT are pending for disposal. The learned CIT (A) deleted the disallowances following the appellate orders for assessment year 1991-92 to 1997-98. 24.2 It was submitted that the Revenue s appeals were rejected by the ITAT - AY 91-92 ITA 647/M/97 Paras 9-12 - AY 92-93 ITA 3239/M/97 Para 9 - AY 94-95 ITA 2934/M/98 Para 2-3 - AY 95-96 ITA 2344/M/99 Para 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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