TMI Blog2013 (1) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... ustrialization. Assessee had received subsidy in relation to one of its unit at Gagal, Bilaspur Dist. Himachal Pradesh which had started production in the year 1982-83. The subsidy was based on volume of incoming raw-material and outward transit of cement. The assessee had been declaring subsidy received as capital receipt. The AO however, had been treating the subsidy as revenue receipt and adding to the total income which had also been upheld by CIT(A). The AO in this year following the decision of earlier year treated subsidy as capital receipt and added to the total income which was confirmed by CIT(A) aggrieved by which the assessee is in appeal before the Tribunal. 2.2 We have heard both parties, perused the records and considered the matter carefully. We find that the same issue has been decided by the Tribunal in assessee s own case in earlier years. In the immediate preceding year also i.e. assessment year 1999-00 also, similar addition had been made by the AO and confirmed by CIT(A) which had been deleted by the Tribunal in ITA No. 7594/Mum/2004 for assessment year 1999-00. The Tribunal had followed the order in the earlier year in which the claim had been allowed foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of CIT(A) and allow the claim of the assessee. 4. The third dispute is regarding allowability of claim of deduction of Rs. 4,53,19,214/- on account of additional gratuity paid. The claim has been disallowed by the AO following the decision in earlier years on the ground that the amount could be paid by the assessee in pursuance of rules framed under company law and not under the provisions of Gratuity Act. The AO held that the claim was not allowable under section 37(1) which was upheld by CIT(A) aggrieved by which, assessee is in appeal before the Tribunal. 4.1 At the time of hearing of appeal before us, the ld. AR for the assessee did not press this ground and, therefore, the ground raised by the assessee is dismissed as not pressed. 5. The fourth ground is regarding claim of deduction on account of compensatory charges paid by the assessee to the State Government for not carrying out mining; payment made to State authorities for use of diesel, oil for purposes other than power generation and payment of interest on delayed payment of TDS. The AO had disallowed these claims holding that the same were penal in nature for violation of laws, which was confirmed by CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee. 6.1 The fifth dispute is regarding disallowance of railways and insurance claims written off by the assessee amounting to Rs. 41,96,766/-. The assessee had written off unsettled railway and insurance claims as these were not recoverable and accordingly claimed as deduction. The AO observed that settlement of claim had become final in the earlier years when the claim could have been made as deduction. It was accordingly held by him that the claim was not admissible in this year. CIT(A) agreed with the AO that the claim pertained to the earlier year and, therefore the claim could not be allowed this year. Aggrieved by the decision of CIT(A), the assessee is in appeal before the Tribunal. 6.1 Before us, the ld. AR for the assessee submitted that the claim has to be allowed as bad debt as the same had been actually written off as irrecoverable. He placed reliance on the judgment of Hon'ble Supreme Court in the case of TRF Ltd. vs. CIT(323 ITR 397). He also referred to the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Phalton Sugar Works Ltd. (162 ITR 622) in which it has been held that where a liability arising out of contractual obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income. The AO did not accept the claim. It was observed by him that the expenditure had been claimed in connection with the new project for setting up a totally different business and therefore not allowable as revenue expenditure. CIT(A) agreed with the AO that claim was capital in nature and accordingly confirmed the disallowance. Aggrieved by the decision of the CIT(A) the assessee is in appeal before the us. 7.1 Before us, the ld. AR submitted that the new project was under the control of the same management and common funds were utilized for management and administration. It was only an expansion of the existing business and therefore expenditure had to be allowed as revenue in nature. He placed reliance on the judgment of Hon'ble High Court of Delhi in the case of Jay Engineering Works Ltd. vs. CIT (311 ITR 405). He also referred to the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Tata Chemicals Ltd. (256 ITR 395). The ld. CIT-DR on the other hand submitted that it was not clear as to when the expenditure had been incurred and how it was treated in the books of account. It was pointed out that in this year, project had only been sold and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of business. The present case is not regarding allowability of interest. This is regarding allowability of expenditure incurred for setting up a new project to augment the profit earning apparatus of the existing business and therefore, judgment cited is not applicable. The matter in our opinion requires fresh examination as full facts relating to the project are not on record. We, therefore, set aside the order of CIT(A) and restore the matter to AO for passing a fresh order for necessary examination in the light of observations made above and after allowing opportunity of hearing to the assessee. 8. Ground No. 7 (a) and 7(b) relating to claim of deduction; ground No. 8 relating to claim of deduction under section 80HHC; grounds No. 9(a), 9(b) and 9(c) relating to claim of deduction under section 80IA and 80IB were not pressed before us by the ld. AR. As the grounds were not pressed, these are dismissed as not pressed. 9. The assessee has also raised additional grounds before the Tribunal being ground Nos. 10 to 16. In the ground No. 10, the assessee has claimed deduction on account of interest on borrowings amounting to Rs. 16,29,09,000/- and upfront fee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Tribunal following the decision of the Tribunal in earlier years allowed the claim of the assessee. The Tribunal has followed the judgment of the Hon'ble High Court of Bombay in the case of CIT vs. Tata Chemicals Ltd. (256 ITR 395) in which it has been held that in considering the claim of interest on borrowings the decisive test was unity of control indicated by interlacing, interest-dependence and inter-connection between businesses and dove-tailing of one into the other. Therefore, the expansion had been considered as part of the same business and claim of deduction has been allowed. The facts in this year are identical and, therefore, respectfully following the decision of the Tribunal in assessment year 1999-00 (supra), the claim of deduction on account of interest is allowed. The upfront charges and commitment charges have been claimed as deduction following the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Associated Cement Company Ltd. (249 ITR 3). These charges have been paid in connection with borrowings for the expansion of the business which was part of the same business. The claim is, therefore, allowed. 10. The next additional ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. As for the merit, the assessee in the return of income following the stand adopted by the revenue authorities, had offered the provision for additional gratuity for employees retired during the year and gratuity on sold units as income. But since the claim had been disallowed in the earlier year, the assessee raised the additional ground before the Tribunal. The Tribunal in the assessment year 1999- 00 in ITA No. 7594/M/2004 has allowed the claim of the assessee by admitting additional ground as identical claim had been allowed by the Tribunal in the earlier years. Therefore, following the decision in the earlier years, the claim of deduction of additional gratuity for employees retired during the year and gratuity on sold units on accrual basis has to be allowed. We, accordingly allow the claim of the assessee. 12. The additional ground raised as the ground No. 13 is regarding treatment of sales tax incentive, electricity duty, road transport subsidy and profit on sale of fixed assets and investments while computing book profit under section 115JA. The assessee in the computation of book profit had not excluded these receipts which according to it are pure capital receipts w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In case the receipts under reference have been shown as part of the P/L Account prepared under the Companies Act, the AO has no power to exclude the same while computing book profit. The judgment cited by the ld. AR is distinguishable and not applicable to the facts of the present case. In the case of Padmaraje R Kardambande (supra), the issue was regarding nature of receipt whether capital or revenue under normal provisions of the Act whereas we are concerned with, computation of book profit under section 115JA which is a separate code and therefore the case is not applicable. In case of Indo Rama Synthetics (supra), the Hon'ble Supreme Court was concerned with the adjustment made as provided in Explanation to section 115JB(2). In terms of clause (i) of the Explanation amount withdrawn from reserve created earlier was required to be reduced from book profit if such amount had been credited to the P/L Account. The Hon'ble Supreme Court held that the amount withdrawn from revaluation reserve could be reduced from book profit only if the amount withdrawn had been added back in the year of creation of re-valuation reserve. Thus the Hon'ble Supreme Court was concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tax audit report of that year. The said provision had been disallowed by the AO in the assessment year 1999-2000 under section 143(3). Out of the said provision, an amount of Rs. 34,85,730/- had been written back by the assessee in assessment year 2000-01. As the provision had been disallowed in assessment year 1999-00, the write back in assessment year 2000-01 in relation to the said provision is not chargeable to tax. The assessee however in the return of income had not reduced the amount written back from total income and additional ground has been raised at the level of the Tribunal. The additional ground being question of law which does arise on the basis of facts on record was admitted by the Tribunal after hearing both the parties. The assessee had written back part of the provision as income in assessment year 2000-01 as the provision had been claimed as deduction in P/L account. Since the provision was disallowed by AO in assessment year 1999-2000, no amount in relation to the said provision can be assessed as income in assessment year 2000- 01 as provisions of section 41(1) will not apply. We, therefore allow the claim of the assessee. 15. The additional ground raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same issue has already been decided by the Tribunal in assessment year 1999-2000 in ITA No. 7644/M/2004 in which the Tribunal following the decision of earlier years allowed the claim of the assessee. The facts this year are identical and, therefore respectfully following the decision of the Tribunal in earlier years (supra), we confirm the order of CIT(A) in allowing the claim of the assessee. 17. The second dispute is regarding allowability of VRS expenditure of Rs. 29,09,85,056/-. VRS expenditure had been incurred to rationalize workforce for better performance and amount had been paid in accordance with scheme approved u/s. 10(10C). The assessee had therefore claimed the expenditure as deduction. The AO however did not allow the claim and treated the same as capital in nature on the ground that the payment had resulted into enduring benefit to the assessee. CIT(A) however allowed the claim following the decision of the Tribunal in assessment year 1999-2000 aggrieved by which the revenue is in appeal before the Tribunal. 17.1 We have heard both the parties, perused the records and considered the material available on record. We find that this is a recurring issue which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t client sites for manufacture of RMC. These structures were not on the land belonging to the assessee. The claim has not been made in one year but has been spread over the entire project period and allowed on the basis of yearly production in the ratio of total cost of structure divided by total contracted production for the entire period. In our view the claim made by the assessee is reasonable and has to be allowed. The assessee had no advantage in the capital field as the structures had been erected on land belonging to other parties. The claim is therefore allowable. We, therefore, see no infirmity in the order of CIT(A) in allowing the claim of the assessee made on prorata basis. The order of CIT(A) is accordingly upheld. 19. The fourth dispute is regarding allowability of expenditure incurred on construction of stadium amounting to Rs. 20.00 lacs. The assessee made contribution on request made by Government of Himachal Pradesh for construction of stadium. The AO disallowed the claim as having no connection with assessee s business based on the decision taken in earlier assessment year CIT(A) however following the decision in assessment year 1997-98, held that expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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