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TMI Blog2024 (3) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the amount provided in valuing work-in-progress of construction contracts since to that extent profit of the assessee company got reduced." 3. Shri Ajay Chandra representing the Department submitted that assessee is engaged in execution of civil projects. The assessee while determining work-in-progress (WIP) in respect of construction work valued the same after reduction of certain amounts on account of various adverse factors. The assessee in the past made similar adjustment to the WIP. Such reduction was treated as provision for contingent liability and was disallowed in the past . In the impugned assessment year the facts are identical and the manner of computation of WIP by the assessee is similar to earlier Assessment Years. The Assessing Officer following the view taken in the earlier Assessment Years allowed deduction of Rs. 2,35,91,996/- i.e. difference between closing and opening construction WIP. The CIT(A) deleted the disallowance. The ld. Departmental Representative vehemently supported the assessment order and prayed for reversing the findings of CIT(A) on this issue. 4. Per contra, Shri J.D.Mistry appearing on behalf of the assessee vehemently supported the find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the decision of Co-ordinate Bench in assessee's own case in the preceding Assessment Years we find no merit in the ground raised by the Revenue in its appeal. Hence, the solitary ground raised by the Revenue in its appeal is dismissed. 6. In the result, appeal of the Revenue is dismissed. ITA NO.3451/MUM/2013-A.Y.2003-04: 7. The assessee in its appeal has raised as many as 10 grounds and two additional grounds. The grounds / additional grounds of appeal are taken up for adjudication in seriatim as under. 8. Shri J.D.Mistry, Sr. Advocate appearing on behalf of the assessee stated at the outset that majority of the issues raised in appeal by the assessee have already been considered and decided by the Tribunal in assessee's own case in the preceding Assessment Years. Ground No.1- Disallowance of Commission -Rs. 46,20,000/-: 9. During the period relevant to the assessment year under appeal the assessee paid an amount of Rs. 46,20,000/- to various parties in respect of contracts received from Government Departments/Public Sector Undertakings. The said commission was paid for varied services including liaisoning with the customers for providing feed back on the tenders, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 40A(9) of the Act. The CIT(A) upheld the findings of the Assessing Officer. The ld.Counsel for the assessee pointed that this issue has been decided by the Tribunal in ITA No.6908/Mum/2012(supra). The Co-ordinate Bench following the order of Tribunal in assessee's own case for preceding Assessment Year allowed assessee's contribution towards Utmal Employees Welfare Fund. We find that this issue has been recurring since Assessment Year 1994-95. In preceding Assessment Years, the Tribunal has consistently allowed contribution towards said Fund.. The facts being similar in the impugned assessment year, ground No.2 of appeal is allowed for parity of reasons. Ground No.3 - Reduction in depreciation claim arising on account of refusal to treat transfer of Bangalore Undertaking as "Slump Sale" - Rs. 5,16,16,863/- 14. In the period relevant to assessment year 1998-99, the assessee transferred its construction equipment manufacturing undertaking to its associate concern M/s. L&T Komatsu Ltd. The assessee treated the above sale as slump sale. The Assessing Officer disregarded assessee's transaction as slump sale and determined sale price of various assets separately. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.14A of the Act solely on account of interest expenditure. The contention of the assessee is that assessee is having own funds sufficient to cover the investments. It is no more res-integra that where the assessee is having mixed bag of; own interest free funds and borrowed interest bearing funds, it shall be presumed that the assessee has made investments from own interest free funds. Similar disallowance made by Assessing Officer in Assessment Year 2001-02 & Assessment Year 2002-03 was deleted by the Co-ordinate Bench . We deem it appropriate to restore this issue to Assessing Officer for the limited purpose of verification of availability of assessee's own funds matching investments. In the result, ground No.4 of appeal is allowed with aforesaid directions. Ground No.5- Extinguishment of Sales Tax deferred loan liability treated as revenue receipts - Rs. 7,66,41,506/- : 17. The ld.Counsel for the assessee submits that as per the scheme of Maharashtra Sales Tax Department, the payment of Sales Tax collected by the assessee was initially deferred for payment to the Sales Tax Department for the period specified in the scheme. Subsequently, the assessee was entitled to pre-pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction on sale of Coca Cola in glass bottles of, etc. which are refundable on return of the said bottles. wherein the order of the Supreme Court has held that liability needs to be treated as income of the assessee u/s 41(1) of the Act. The ld. CIT(A) in the appellate proceeding affirmed the order of AO by holding that the said takeover of deferred sales tax liability to be paid in future is taxable u/s 28(iv) of the Act, by relying on the decision of CIT(A) Vs. Sundaram Iyangam& Sons Ltd., (supra) and also the decision of the Jurisdiction High Court in the case of Solid Container Ltd., Vs. DCIT (supra). In this case, we note that the A.O made addition u/s 41(1) of the Act, while in the appellate proceeding, ld. CIT(A) upheld the said addition u/s 28(iv) of the Act and not u/s 41(1) of the Act. The arguments of the Ld. counsel before us are that the said assignment of sales tax liability by the assessee is neither income u/s 41(1) of the Act nor benefit or perqs 28(iv) of the Act. In defense of his arguments the Ld. CIT(A) relied on the decision of Cable Corporation of India Ltd., Vs. DCIT(supra). In the present case, we find that provisions of Sec. 41(1) of the Act are not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o remission or cessation of a liability. The case of the assessee finds support from the decision of the Apex Court in CIT vs. S.I. Group India Ltd., (Supra) wherein the Apex Court held that when the Sales-tax Department has not accepted the pre-payment, it cannot be a case of cessation or remission of a liability. In the present case also, the assignment has not been accepted by the Sales-tax Department and, therefore, there is no question of cessation or remission of the liability. Besides the deemed loan from the Sales-tax Department is not a loss or expenditure or a trading liability and, therefore, the provision of section 41(1) of the Act is not applicable. The sales-tax originally collected by the assessee was an expenditure which has been allowed to the assessee by treating it as a deemed loan. Once the said amount has been treated as a loan, it loses its characteristic of sale-tax liability. Such deemed loan is not a loss or expenditure or a trading liability and, hence, does not come within the ambit of section 41(1) of the Act. 38. Similarly the difference of Rs. 51.61 Crores arising out of assignment of sales tax liability of Rs. 71.34 Crores to be paid in future date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The Apex Court further held that because of the trading transaction, the assessee has become richer to the extent of the amount transferred to Profit & Loss Account and, hence, the amount so transferred is to be treated as income of the assessee. In the present facts are distinguishable and, therefore, the decision of the Apex Court is not applicable as the Supreme Court was neither concerned with section 28(iv) or section 41(1) of the Act, but with the issue of whether the amount received by an assessee in the course of a trading transaction, should be treated as income of the assessee or not. In the present case, the allegation of the Assessing Officer and the Commissioner of Income-tax (Appeals) is that the provision of section 41(1) or section 28(iv) of the Act is applicable which issue is not there before the Hon'ble Supreme Court. Further, the Supreme Court has held that the amount is treated as income of the assessee as the assessee had become richer by the amount which is transferred to the Profit & Loss Account. In the present case, the assessee has discharged its complete obligation by paying the net present value of the obligation and, therefore, there is no question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h came within the ambit of section 41(1) of the Act whereas in the present case, there is no question of any benefit being received by the Appellant as the appellant has discharged the net present value of a future liability not can the present case be said to be of remission or cession of the liability. Therefore, this decision is clearly inapplicable to the facts of the present case. In the case of CIT vs. ICC India Pvt. Ltd. (supra), the Hon'ble High Court has held that share application amount was a capital receipt and was never received towards trading purpose and, therefore, the question of applicability of section 41(1) does not arise. The High Court has, therefore, dismissed the appeal of the Revenue. Although the High Court has noted that if the loan was received for trading purposes, the provision of section 41(1) of the Act may be applicable; however, as the fact in the present case was not a case of receipt of loan towards the trading purposes, the High Court has not considered whether other conditions of section 41(1) are fulfilled or not. In the case of Indian Seamless Steels & Alloys Ltd. vs. ITO (supra). The Tribunal in paragraph 16 of the order has noted that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diary and associate companies and customers treated as business income by the assessee was reduced from the profits and gains of the business. There should be no reduction of interest for computing profits u/s. 80HHC of the Act. The ld.Counsel for the assessee pointed that this issue has been decided by the Tribunal in assessee's own case in preceding Assessment Years and recently in appeal for Assessment Year 2001-02 and Assessment Year 2002-03. 20. We find that the Co-ordinate Bench while deciding the appeal for Assessment Year 2001-02 and Assessment Year 2002-03 following the decision of Tribunal in assessee's own case in ITA No.3076/Mum/2012 for Assessment Year 2001-02 restored the issue back to the file of Assessing Officer. Both sides are unanimous in stating that the facts relating to Assessment Year under appeal on this issue are identical, hence, respectfully following the decision of Co-ordinate Bench we restore this issue back to the file of Assessing Officer with similar directions. (b) Set off of loss on export of trading goods against profits on export of Manufactured goods:- 21. The ld.Counsel for the assessee fairly stated that this issue has been decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue has not placed on record any material to controvert the submissions of the assessee, hence, following the decision of Co-ordinate Bench, we restore sub-ground (c) to the Assessing Officer for parity of reasons. (d) Reduction of profits in respect of projects eligible for deduction u/s. 80HHB of the Act. 24. We find that this issue was also considered by Co-ordinate Bench in the preceding Assessment Year and was restored to the Assessing Officer. Both sides are unanimous in stating that the facts relevant to the issue are identical to the facts in appeal for Assessment Year 2001-02. Hence, following the decision of Co-ordinate Bench, the issue in sub-ground (d) is also restored to the Assessing Officer. 25. In the result, ground No.6 is partly allowed for statistical purpose. Ground No.7 - Deduction u/s. 80HHE of the Act: 26. The assessee has claimed deduction of Rs. 23,93,457/- u/s. 80HHE of the Act .In ground No.7 of appeal assessee has assailed computation of deduction u/s. 80HHE. The assessee has assailed recomputation u/s. 80HHE on multiple grounds: (a) Reduction on 90% of gross interest; (b) Reduction of 90% of Miscellaneous Income received from profits of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under:- "1. On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer (AO) ought to have computed the deduction u/s 80HHC of the Act in determining the Book Profit u/s 115JA on the basis of "profit as per the profit and loss account" instead of "profits of business and profession computed under the normal provisions of the Act" while determining tax liability u/s 115JA of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer (AO) ought to have computed the deduction u/s 80HHE of the Act in determining the Book Profit u/s 115JA on the basis of "profit as per the profit and loss account" instead of "profits of business and profession computed under the normal provisions of the Act" while determining tax liability u/s 115JA of the Act." 31. The ld.Counsel for the assessee submits that for adjudication of additional grounds no fresh documents are required to be furnished. These grounds can be decided on the basis of documents already on record. The Assessing Officer has already granted deduction on the basis of profits of business and profession under normal provisions of the Act. By virtue of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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