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TMI Blog2024 (2) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... be disposed off by the Hon'ble Tribunal. In this regard, we would humbly request for inclusion of the enclosed additional grounds of appeal which does not require any further investigation of facts. 2. In the computation of total income for the instant Assessment Year, the appellant has disallowed under clause (f) to section 43B, provision for leave encashment of Rs. 1,83,72,108/created during the year and not paid on or before the due date of filing of return. The same should be considered as allowable deduction in computing the total income in view of the decision of Hon'ble Calcutta High Court in the case of Exide Industries Ltd vs.- Union of India (2007) 292 ITR 470 (Cal). 3. The appellant follows exclusive method of accounting for Cenvat Credit in the books of account and hence, opening inventory, purchases and closing inventory are recorded net of Cenvat Credit. As per Sec. 145A (i.e. inclusive method), purchase, sales and value of inventories should be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred to bring the goods to the place of its location and condition. In view of Accounting Standard 2 'Valuation of Inventories, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited to the P & L Account by the appellant during the previous year relevant to the Assessment Year under consideration should be allowed as deduction in computing total income. 6.0 The appellant undertakes contracts for erection and commissioning of air conditioning system, wherein certain percentage of the bill raised by the appellant is retained by the parties as retention money to be paid after successful completion of the contract or on fulfillment of certain predetermined conditions mentioned therein. The appellant has no right to receive the said money by virtue of the terms of the contract & also has no right to enforce payment till the completion of contract or fulfillment of predetermined conditions for claiming the retention money. Thus, the said amount has not accrued as income to the appellant during the year under consideration and shall be excluded in the computation of income in view of judicial decisions of High Courts. In the instant assessment year, the appellant inadvertently omitted to claim exclusion from total income in respect of retention money of Rs. 2,78,63,957/- included in sales from contract business recognized during the previous year 2006-07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11, the Revenue has raised following grounds of appeal:- "1. "Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) is right in deleting the disallowance of Rs. 24,25,312/- on account of payment to Clubs in the light of Kerala High Court reported in 294 ITR 559 (Ker.) as held that entrance fees paid to Club is capital expenditure ?" 2. "Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) is right in restoring the issue of disallowance of Rs. 8,30,696/- u/s. 14A as per rule 8D to the Assessing Officer's file and directing that disallowance to be as per immediate preceding year in the light of observation of jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT 234 ITR 1 (Bom.) as the decision of Hon'ble Bombay High Court is not accepted by the Department?". 3. "Whether on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has justified in allowing appeal to the assessee and directing to allocate the Corporate expenses @50% as against 100% allocated by the Assessing Officer @100% for the purpose of determining the eligible profit for deduction u/s. 801B of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of Rs.48,62,52,472/-. This return was picked up for scrutiny by issuing notice under Section 143(2) of the Income-tax Act, 1961 (the Act) on 18 September 2008. Subsequently, CIT-1, Mumbai vide order dated 12th February, 2009 authorized Addl. Commissioner of Income Tax, 1(1), Mumbai to discharge the functions of the learned Assessing Officer for this assessment year. Accordingly, the learned Addl. CIT passed the assessment order under Section 143(3) of the Act wherein the total income of the assessee was determined at Rs.64,61,23,750/-. The assessee preferred the appeal before the learned CIT (A), who partly allowed the appeal of the assessee. 05. First, we come to the appeal of the assessee in ITA No.4793/Mum/2011. 06. The first ground of appeal is with respect to the allocation of advertisement expenses amounting to Rs.9,19,64,000/-. The assessee has claimed deduction under Section 80IB of the Act, of Rs.24.03 crores in respect of Dadra Unit and Rs.20,07,00,000/- in respect of Himachal Pradesh Unit. The learned Assessing Officer on examination of the claim noted that the computation of deduction furnished by the assessee shows that assessee has not allocated head office dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee. 08. The learned Departmental Representative vehemently supported the order of the learned CIT (A) and the learned Assessing Officer stating that the learned Assessing Officer has not accepted the order of the co-ordinate bench. 09. We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that identical issue has been considered by the coordinate Bench in the appeal of the assessee for A.Y. 2006-07, dated 30th November, 2023, wherein paragraph no.15-16, the coordinate Bench has considered and allowed this ground. We also find that the ground is identical except the change in the amount. The co-ordinate Bench has considered this issue as under:- "15. We have heard the rival submissions and perused the materials available on record. It is observed that the assessee company has incurred advertisement expenses on account of publication of quarterly, half yearly and annual result, public notice, company meeting etc. These expenses are said to enhance sale of the product of the assessee company and according to the Revenue are directly benefitting the eligible units by increasing the customer base for sale of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice that the assessee has allocated 50% corporate expenses as the same were found related to Dadra unit. The assessee should have followed the consistency when the assessee on its own has allocated 50% corporate expenses. We are of the view that the deprecation on assets of Head Office is also required to be allocated in the same proportion. We find that disallowance on account of deprecation of Head Office is warranted. The Assessing Officer is directed to calculate the disallowance amount by adopting source basis and ratio as adopted by the assessee for considering Head Office expenses. The Assessing Officer is directed according. 16. As this issue has been dealt with by the co-ordinate bench and as there is no change in circumstances, we deem it fit to respectfully follow the said decision. Therefore, ground no. 1 raised by the assessee is allowed." 010. In view of the above findings respectfully following the decision of the coordinate Bench for A.Y. 2006-07, we allow the ground no.1 of the appeal of the assessee. 011. Ground no.2 of the appeal is with respect to the treatment of advertisement expenses in the nature of brand building expenses and consequently, considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he double addition. He submitted that as per paragraph no.12 of the order of the learned CIT (A), the assessee did not press this ground of appeal, however, it was submitted that it has resulted into double disallowance of the same expenditure when further expenditure is allocated. 017. The learned Departmental Representative stated that if it amounts to double disallowance of expenditure, the learned Assessing Officer may be directed to verify the same and if it amounts to double disallowance, it requires to be rectified. 018. We have carefully considered the rival contentions and perused the orders of the lower authorities. The commission allocated to Section 801B unit, has been upheld by the learned CIT (A) vide paragraph no.12 of his order. However, if that amounts to double disallowance, it requires to be deleted. In view of this, we restore the ground no.3 of the appeal to the file of the learned Assessing Officer to verify the claim of double disallowance. 019. The ground no.4 is also connected with the same and assessee has raised an additional ground no.7 on this issue itself. Therefore, all these grounds are restored back to the file of the learned Assessing Officer wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitute of chartered accountants of India has stated that assessee cannot follow inclusive method of accounting and adjustment made under section 145A will have no impact on profit and loss account. However in the computation of income for the assessment year the assessee has offered to tax a sum of Rs. 3 20,82,000/- under section 145A based on reporting in clause number 12 (b) read with the revised annexure IIA of the tax audit report. Therefore in view of the explicit provisions of section 145A as explained and guidance note on tax audit, adjustment in only the value of the opening and closing stock in isolation is contrary to the provisions of the said section which requires an adjustment in the value of opening stock, purchases, sales and closing stock. If adjustments on all counts under section 145A made then net effect of the said adjustment would be nil. Thus, the amount offered by the assessee of Rs. 32,082,000/- is erroneously offered to tax in the computation of income. 025. On careful consideration of the facts we find that the additional ground is arising out of the facts available on record, no fresh facts are required to be investigated and it is merely a correction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come tax, dividend distribution tax and fringe benefit tax, it was not pressed during the course of hearing and therefore same is dismissed. 029. Assessee has also raised additional ground no 5 with respect to the exclusion of the amount of retention money included in sales since the same is not accrued during the year, in computing the total income under the normal provisions of the act. As the assessee is engaged in the contract business of erection and commissioning of air-conditioning system whereby certain percentage of bill raised is retained by the parties as retention money. During the year under consideration sales bills credited to the profit and loss account by the appellant includes a retention money amounting to Rs. 27,863,957. The fact clearly shows that a certain percentage of bills raised retained by the parties as retention money to be paid after successful completion of the contract or on fulfillment of certain predetermined conditions mentioned in the order itself. Since sales are booked on percentage completion method, the amount of retention money is already included in the sale. The said amount does not accrue as income to the appellant and the same needs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital expenditure. The brief facts of the case shows that the assessee has incurred Rs. 54,056/- towards the entrance fee and Rs. 2,371,256/- towards subscription paid to the club. The assessee claimed the same as a business expenditure under the provisions of section 37 (1) of the act. The learned assessing officer relying on the decision of the honourable Kerala High Court held that the entrance fee paid to clubs is a capital expenditure not allowable as business expenditure and disallowed the aggregate sum of Rs. 2,425,312. The learned CIT - A deleted the addition following the decision of order of the coordinate bench in assessee's own case for assessment year 94-95 and 95-96 wherein the identical disallowance was deleted. The learned assessing officer is aggrieved with the same. 035. The learned departmental representative vehemently contested that the entrance fee paid to the club is a capital expenditure and cannot be allowed under section 37 (1) of the act. 036. The learned authorised representative stated that now the honourable Supreme Court has decided this issue in case of CIT versus United Glass Manufacturing Co Ltd (2012 -TIOL-102 - SC - IT) wherein it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und number 3 on allocation of 50% of the head office expenses as against 100 % allocated by the learned assessing officer to the eligible unit is connected to the ground number 1 of the appeal of the assessee where the coordinate bench has already decided this issue in favour of the assessee holding that 100 % t of the head office expenses cannot be allocated to the eligible unit while claiming deduction under section 80 IB of the act. The facts clearly show that the assessee has claimed deduction under section 80 IB of the act in respect of a manufacturing unit situated in backward area. According to the computation of eligible income, the assessee has claimed 50% of corporate expenses related to the eligible units in the ratio of turnover of eligible units to total turnover of the company. The learned assessing officer rejected the above allocation and held that hundred percent of the head office expenses in the ratio of turnover of eligible unit to the total turnover of the company should have been considered as an expenses of the eligible unit. Accordingly the order was passed. On appeal before the learned CIT - A, he followed the order of the income tax appellate Tribunal in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 - 04 directed the AO to not to allocate any further travelling expenses over and above expenses already allocated by the assessee. As the learned CIT - A has followed the decision of the coordinate bench in assessee's own case, no reasons were shown by the learned departmental representative to deviate from the same. Accordingly we confirm the order of the learned CIT - A in accepting the allocation of travelling expenses made by the assessee of Rs. 16,319,625 of the head office which were allocated to the eligible unit in the ratio of turnover of those units to the total turnover of the company. Accordingly, ground number 5 of the appeal is dismissed. 043. Ground number 7 is with respect to the allocation of 50% of the head office expenses as against hundred percent allocated by the AO to the eligible units four which deduction is claimed under section 80 IC of the act. Ground number 8 is with respect to the 50% depreciation on head offices assets and ground number 9 is related to the allocation of travelling expenses. All these grounds are identical to ground number 3 - 6 of the appeal of the learned assessing officer where the contention was with respect to the deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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