Income Tax Appellate Tribunal - Cochin
Harrisons Malayalam Ltd. vs Asstt. Cit on 11 May, 2007
ORDER
Riyaz S. Padvekar, J.M.
1. This group of five appeals are preferred by one and the same assessee and these appeals relate to the assessment years 1995-96 to 1999-2000 respectively. As most of the issues are identical and facts are common, hence these appeals are disposed of by this common order for the sake of convenience.
2. We have heard the learned CAs Shri M.K. Ananthanarayanan and Shri P.R. Krishna Kumar for the assessee and the learned Departmental Representative Smt. A.S. Bindhu for the revenue. The assessee has filed paper book along with the written submissions. The learned Departmental Representative. has also filed written submissions. We have carefully considered their arguments as well as the written submissions and now proceed to decide these appeals as under.
3. The first issue which arises for our consideration is in respect of addition of the income from value added grades of rubber. This issue had come for the consideration of this Tribunal in assessee's own case for the assessment year 1994-95 in ITA No. 08 (Coch.)/2005, dated 2-2-2007. The assessing officer noted that rule 7 of the Income-tax Rules provides for determining the part of the income which is chargeable to income-tax in the case of an income which is partially agricultural and partially business. The assessing officer therefore, worked out the income from value added grades of rubber treating it partially agricultural and partially business income. The assessee has challenged the said addition by filing Writ Petition in the Hon'ble High Court of Kerala taking the contention that the assessee has paid the State agricultural income-tax and hence, the income from value added grades of rubber cannot be again subjected to income-tax under the Central Act. The Hon'ble High Court has decided the issue in favour of the assessee directing the assessing officer not to proceed with action in view of the Circular No. 5/2003, dated 22-5-2003 issued by the Central Board of Direct Taxes. In sum and substance, regarding the treatment of the income from value added grades of rubber certain directions have been by the Hon'ble High Court, more particularly, in the assessment year 1994-95 and the Writ Petition filed by the assessee in respect of the assessment framed under Section 143(3) in the assessment years 1996-97 and 1997-98 have been disposed of on the identical directions. As far as the assessment years 1995-96 and 1998-99 are concerned, the learned CA submitted that hearing of the Writ Petition is over but the orders are awaited. We have also heard the learned Departmental Representative on this issue. The learned Departmental Representative fairly conceded that with certain directions, the Hon'ble High Court has decided this issue in favour of the assessee. We are, therefore, of the opinion that as far as assessment years 1996-97 and 1997-98 are concerned, the grounds taken by the assessee, on this issue are in fructuous and we, therefore, dismiss the said grounds as in fructuous. As far as assessment years 1995-96 and 1998-99 are concerned as the orders of the Hon'ble High Court are awaited, we consider it fit to restore this issue back to the file of the assessing officer with a direction that after the decision of the Hon'ble High Court of Kerala on the Writ Petition filed by the assessee in respect of the assessment framed under Section 143(3) for the assessment years 1995-96 and 1998-99, he should decide the same afresh after giving a reasonable opportunity of being heard to the assessee as per the principles of natural justice.
4. As far as the assessment year 1999-2000 is concerned, the learned CA submitted that as per the instructions of the assessee in this particular assessment year, he is not pressing this issue. As the assessee has not pressed this issue i.e., income from value added grades of rubber in the assessment year 1999-2000, the same is dismissed as not pressed.
5. The next issue is regarding the sale of scrap, salvage material, etc. This issue is arising in the assessment years 1995-96,1996-97,1997-98 and 1998- 99. It was noticed by the assessing officer from the details filed in respect of the miscellaneous income that certain incomes were relating to rubber, more specifically rent, scrap material, sale of old tyres, cash rebate, R&D sale, etc. The assessing officer made an addition to the income of the assessee under the head "Total income from rubber". The learned CA for the assessee submitted that the said income was earned in the rubber estate and assessed under the Kerala Agricultural Income Tax Act vide order under Section 39(3) of the Kerala Agricultural Income Tax Act. The learned CA also referred to paper book page Nos. 62, 63, 69, 70, 79, etc., wherein the copies of the assessment framed under Kerala Agricultural Income-tax Act are placed. It is further argued that the said income is already subjected to tax treating it as agricultural income under the said enactment and hence, the same cannot be brought to tax under the Central Act. He further argued that the expenses relating to the said income were also not claimed or allowed under the Central Income Tax Act and expenses relating to the said income were treated as related to agricultural income. He, therefore, submitted that the assessing officer was not justified in making the addition in respect of the income relating to the sale of scrape, salvage material, etc., and the same may be deleted.
6. We have heard the learned Departmental Representative on this issue and also considered the written submissions of the learned Departmental Representative. The assessee has filed paper book wherein copies of the assessment orders under the State Agricultural Income Tax Act as per following details:
Sr. No. Page No. of PB Asst. Year
1. 64
to 80 1995-96
2. 93 to 96 1996-97
3. 100 to 103 1997-98
7. In respect of the assessment year 1998-99, the assessee has filed a separate paper book which is placed at page Nos. 31 to 50. On the perusal of this assessment order framed under the Kerala State Agricultural Income Tax Act, it is seen that the income from the sale of scrap, salvage material etc., which relates to the rubber has been treated as agricultural income and brought to tax: There cannot be double taxation in respect of this income. We, therefore, direct the assessing officer' to delete the addition made in respect of the miscellaneous income relating to the rubber in the assessment years 1995-96, 1996-97, 1997-98 and 1998-99. Thus, the grounds taken by the assessee on this issue are allowed.
8. The next issue is regarding the disallowance made by the assessing officer and enhanced by the Commissioner (Appeals) under Section 14A of the Act relating to the investment in tax-free bonds. In the assessment year 1995-96 when the assessee challenged the impugned order of the assessing officer on the different additions, it was noticed by the Commissioner (Appeals) that the assessing officer has not disallowed any expenditure incurred for earning the income from tax-free bonds. It is further noted by the Commissioner (Appeals) that the assessing officer did not deduct from the said interest income from the tax-free bonds the expenditure by way of interest incurred by the assessee on the interest bearing funds invested in tax free bonds. The Commissioner (Appeals) was of the opinion that as per newly inserted Section 14A with retrospective effect, any expenditure incurred by the assessee for earning tax free income is not deductible. The Commissioner (Appeals) therefore, issued notice of enhancement to the assessee for disallowance of proportionate interest claimed by the assessee in the profit and loss account on the ground that interest bearing funds have been utilised for investment in bonds. The assessee objected the disallowance by taking the contention that the company's core business activity is cultivation and production of rubber and tea and borrowings are made by the company only for its business purposes. The assessee denied having borrowed any amount for the purpose of making investment in tax free bonds. The Commissioner (Appeals) was of the opinion that the assessee was not able to prove that it has not made investment from the borrowed funds. In the opinion of the Commissioner (Appeals), investments have been made out of business funds and in consequence of the diversion of the business funds, has resulted in increased interest burden on the business and decreased business income. The Commissioner (Appeals) was further of the opinion that if the invested funds had been utilised in paying of the loans then the assessee would have required to bear low interest on the borrowed funds and consequently, there would have been increase in the profits. The Commissioner (Appeals) has also taken into consideration the decisions relied on by the assessee in the case of CIT v. Central Bank of India which was in the context of Section 80M. The Commissioner (Appeals) placed his heavy reliance on the decision of the Hon'ble High Court of Kerala in the case of CIT v. V.I. Baby & Co. . Finally, he held that the proportionate disallowance in respect of the interest claimed by the assessee relating to the borrowed funds should be disallowed under Section 14A. After considering the income as well as investment in ITI Bonds, MTNL Bonds, NTPC Bonds and IRFC Bonds, the Commissioner (Appeals) directed the assessing officer to make the disallowance of Rs. 1,10,11,526.9. In respect of the assessment year 1996-97, for the identical reasons as given in the assessment year 1995-96, the Commissioner (Appeals) directed the assessing officer to make the following disallowances in respect of the assessment years 1996-97, 1997-98 and 1998-99:
Sr. No. Asst. Year Disallowance directed by the Commissioner (Appeals) u/s 14A
1.
1996-97 Rs. 1,24,97,957
2. 1997-98 Rs. 1,47,59,239
3. 1998-99 Rs. 1,24,97,957
4. 1999-2000 Rs. 1,24,54,942
10. We have heard the learned CA for the assessee and the learned Departmental Representative for the revenue. The learned CA submitted that the reliance placed by the Commissioner (Appeals) on the decision of the Hon'ble High Court of Kerala in the case of V.I. Baby & Co. (supra) is totally misplaced as in that case there was withdrawal of heavy funds by the partners which were given to the relatives of the partners and admittedly there were heavy debit balances in the capital accounts of the partners and hence, the facts of that case are totally distinguishable as compared to the facts of the present case. It is further, argued that for assessment year 1995-96 no disallowance was made by the Assessing Officer but for the first time, the disallowance was made by the Commissioner (Appeals). In, respect of the assessment years 1996-97 to 1999-2000, the Commissioner (Appeals) has enhanced the disallowance by enhancing the income of the assessee. It is further argued that the major investment made by the assessee is in IRFC bonds and the said investment is amounting to Rs. 8,30,82,192 and that investment is made in the financial year 1993-94. He further submitted that the investment in the bonds of ITI, MTNL and NTPC bonds were made in the financial year 1989-90 and no investment is made in the previous year relevant to the assessment years 1995-96 to 1999-2000. It is further argued that the borrowings made by the company are only for the business purposes and not a single rupee is borrowed for the purpose of making investment in tax free bonds. The learned CA referred to the balance sheet for the year ending 31 -3 -1994 which is placed at page 109 of the paper book and submitted that the assessee has acquired fixed assets amounting to Rs. 614.22 lakhs which is more than the increase in the additional borrowings made during previous year amounting to Rs. 330.55 lakhs. The learned CA also referred to the cash-flow statement which is placed at page 109 of the paper book. He further argued that as per proviso to Section 14A, if the assessments are completed before 1-4-2001, then it should not be disturbed or amended to increase the tax liability of the assessee by invoking Section 14A. He further argued that no identity is made as the Commissioner (Appeals) himself admits that all the funds of the assessee are merged together in the bank account. The learned CA vehemently submitted that from the position of the reserve with the assessee, it is clear that the assessee had substantial, funds to make the investment and moreover, no disallowance can be made if the cissessee has utilised the surplus funds for making the investment. The learned CA heavily relied on the decisions in the case of Maruti Udyog Ltd. v. Dy. CIT and in the case of Dhanalakshmi Bank Ltd. v. Asstt. CIT (2001) 12 SOT 625 (Cochin) and also the decision of the Hon'ble Supreme Court in the case of Sasoon J. David & Co. (P.) Ltd. v. CIT .
11. Per contra, the learned Departmental Representative has vehemently supported the order of the Commissioner (Appeals) and has also made written submissions on this issue.
12. We have heard the rival submissions of the parties. We have also carefully considered the written submissions of the parties and reasoning given by the Commissioner (Appeals). In this case, the major investment of the assessee is in IRFC bonds which is of Rs. 8,30,82,192. On the perusal of the balance sheet filed by the assessee on pages 106 and 107 of the paper book, it is seen that the said investment is made in the financial year 1993-94. In respect of the other investments in ITI bonds, MTNL bonds and NTPC bonds, the said investment was made in assessment year 1989-90. As per the directions of the Bench, the assessee has filed the reserve position in a chart form which is as under:
(Rs. In Thousands) Particulars Year ended 31st March 1989 1990 1991 1992 1993 1994 1995 Break up of Reserves & Surplus Capital Reserve 970 970 1,579,656 1,579,656 1,579,656 1,579,656 1,579,656 (sic) Capital Profits Reserve 9,554 20,322 31,122 32,975 32,975 32,975 32,975(sic) Proceeds of Rubber & Grevillea Trees Share Premium Reserve
-
-
-
-
350,012 502,359 504,3 (sic) Development Allowance Reserve 577 577 577 577 577
-
-
Investment Allowance Reserve 7,697 8,997 8,997 8,997 8,997 3,600 3,600(sic) Debenture Redemption Reserve
-
-
10,000 16,500 23,000 37,500 37,7 (sic) General Reserve 129,440 139,440 154,440 164,440 169,440 182,040 185,5 Surplus as per Profit & Loss Account 44,146 79,074 92,271 48,725 8,308 4,431 6,0 Total 198,884 255,880 1,883,563 1,858,370 2,179,465 2,342,561 2,349,9 Break up of Investments 55,488 100,105 90,140 84,218 412,998 585,754 590,7 From the perusal of the reserve position, it is seen that the general reserves of the assessee-company are substantial in addition to other specific reserves. We find force in the argument of the learned CA that surplus funds were available and hence the assessee has made the said investment out of the surplus funds. On the perusal of the reserve position of the assessee-company from the assessment years 1989-90 to 1999-2000, it is seen that there is an increase in the general reserves from Rs. 12,94,40,000 to Rs. 26,55,00,000.
13. Now, Section 14A is retrospective in operation and Section 14A clarifies the settled legal position in respect of the expenditure incurred for earning exempt or tax free income which is claimed by the assessee and these principles of disallowance had already got recognition in the earlier judicial pronouncements and the same principles are only codified by introducing Section 14A in the Income Tax Act.
14. An identical issue has come for the consideration in the case of Dhanalakshmi Bank Ltd. (supra) and this Tribunal has held as under:
10. Now, before the introduction of Section 14A, the Apex Court has dealt with this issue in the case of Rajasthan State Warehousing Corporation 242 ITR 450. In the said case also, the assessing officer had made disallowance of the expenditure which was referable to the non-taxable income being exempt under Section 10(29) of the Act. The Apex Court also referred to the judgment in the case of Indian Bank Ltd 56 ITR 77 (SC). The Apex court has laid down the following principles:
In view of the above discussion, the following principles may be laid down:
(i) if income of an assessee is derived from various heads of income, he is entitled to claim deduction permissible under the respective head whether or not computation under each head results in taxable income;
(ii) If income of an assessee arises under any of the heads of income but from different items, e.g., different house properties or different securities, etc., and income from one or more items alone is taxable whereas income from the other item is exempt under the Act, the entire permissible expenditure in earning the income from that head is deductible; and
(iii) in computing "profits and gains of business or profession" when an assessee is carrying on business in various ventures and some among them yield taxable income and the others do not the question of allowability of the expenditure under Section 37 of the Act will depend on:
(a) fulfilment of requirements of that provision noted above; and
(b) on the fact whether all the ventures carried on by him constituted one indivisible business or not; if th ey do, the entire expenditure will be a permissible deduction but if they do not, the principle of apportionment of the expenditure will apply because there will be no nexus between the expenditure attributable to the venture not forming an integral part of the business and the expenditure sought to be deducted as the business expenditure of the assessee.
11. As per the principles laid down by the Apex court in the case of 'Rajasthan State Warehousing Corpn. (supra), if the business carried on by the assessee constitutes one indivisible business, then the entire expenditure will be a permissible deduction and apportionment of the expenditure is not permissible.
12. After the judgment of the Apex Court in the case of Rajasthan State Warehousing Corpn. (supra), Section 14A was brought on the statute book and as stated hereinabove as explained by the CBDT in its Circular, the principles for disallowance of the expenditure relating to the exempt or non-taxable income were already there, but the said position has been made clear by virtue of introduction of Section 14A. It means that the principles laid down by the Apex court in the case of Rajasthan State Warehousing Corpn. (supra), still hold good law in respect of the introduction of Section 14A governing the disallowance of the expenditure, which is incurred for earning tax free income or in other words income which does not form part of the total income. Moreover, the ratio decidendi of Rajasthan State Warehousing Corpn.'s case (supra) could not be nullified even after introduction of Section 14A that, if the business of the assessee is indivisible one, then no disallowance can be made on proportionate basis and entire expenditure is allowable.
13. In the case of the assessee bank, it is an admitted position that the assessee is having the indivisible business and considering the nature of the business of the assessee the investment in the tax free bonds or investment in the shares may be in the nature of stock-in-trade. There is no identity in respect of the funds applied for investment in the tax free bonds or shares and funds which are applied for earning taxable income. The learned Counsel submitted that the assessee bank is also having the surplus funds and reserves from which the investment is made and that makes the case of the assessee that the funds applied for investment cannot be said to be interest or cost bearing funds alone.
14. The assessing officer has adopted the method which is not prescribed as per the provisions of Sub-section (2) of Section 14A. Moreover, we find that unless the method for working out diisallowance of the expenditure in case of an indivisible business is prescribed as provided in Sub-section (2) of Section 14A, no disallowance is permissible. We are, therefore, of the opinion that in spite of the introduction of Section 14A, the principles laid down by the Apex Court in the case of Rajasthan State Warehousing Corpn. {supra) still hold good law and as there is no clear identity in respect of the funds applied by the assessee for making the investment for earning the tax free income as well as taxable income and as assessee's business is indivisible one the method adopted by the assessing officer for making the disallowance is not a permissible method and assessing officer was not justified in making the disallowance from the expenditure of Rs. 2,75,77,410 in respect of the interest attributable to investment on tax free bonds and Rs. 90,60,850 in respect of the expenditure incurred for earning the dividend income. We, therefore, set aside the order of the Commissioner (Appeals) on this issue and direct the assessing officer to delete the said addition.
15. In this case also, there is no identity of the funds invested by the assessee. Moreover, from the reserve position, we find that the assessee is having surplus funds. We do not agree with the findings of the Commissioner (Appeals) that if the assessee has utilised the surplus funds for the repayment of the loans, then that would have increased the profit. In our opinion, the assessee is the best judge to decide the application of its funds. Moreover, it is not the case of the Commissioner (Appeals) or the assessing officer that the assessee has made some borrowings and invested the same in tax free bonds. In our opinion, there is no justification for making the disallowance. We, therefore, delete the addition made by disallowing expenditure under Section 14A and set aside the order of the Commissioner (Appeals) on this issue for all the assessment years. The relevant grounds taken by the assessee are allowed.
16. The next issue is in respect of the disallowance of fees paid to M/s. R.P.G. Enterprises Ltd. ('RPGEL' for short) and this issue arises in all the appeals before us. The learned CA submitted that the assessee is engaged in multiple business activities like tea and rubber cultivation by technology, structural, civil, mechanical and electrical engineering, trading in tea, coffee, spices and export of the same estate supplies and trading, clearing and shipping, air travel and air cargo. The assessee-company has entered into an agreement dated 8-8-1994 with M/s. RPGEL to acquire the non exclusive licence to use "RPG" Logo owned by RPGEL for the purpose of assessee's business including in relation to or upon its products, label, letter-head, brochure, pamphlets and advertisement materials, etc., the learned CA referred to the copy of agreement which is placed at pages 162 to 167 of the paper book. It is further argued that the said RPGEL has its objectives, development of code of conduct and creation of goodwill which could be suitably identified to the public mind and the logo "RPG" is having a high goodwill in the market. It is further submitted, that due to the use of the logo RPGEL provides the infrastructure for developing certain code of conduct and to operate and run the organization for promoting and monitoring standard industrial, commercial and trade practices in the pursuit of attainment of excellence in quality of their products and services. The costs of rendering the group resources were shared by the licensee companies and that enables the licensee company like the present assessee to avail the benefits of the group resources without incurring the full cost of such facilities. The total actual expenses of the corporate centre are shared by licensee company in relation to their size and profitability and the same are paid by the companies like the assessee's who are the licensees to RPGEL as a license fee. As per the agreement the licensees utilised the benefits of the expertise developed as a group resources by RPGEL in the important field like HRD, strategic planning, corporate finance, management information, taxation, quality management, project development, information technology and corporate governance, etc. The said RPGEL with group resources are having talented and highly qualified experts in diversified fields and assessee and other companies who are licensees availed, the expertise in the required field for the excellence in the corporate management as well as promoting business standards. He further submitted that if the assessee has to acquire this expertise, the cost of infrastructure will be 10 times more than the license fee paid and certainly it is in the nature of business expediency and the same is allowable. He further argued that the Commissioner (Appeals) has not disputed the nature of the expenses as capital or revenue. The only reservation of the Commissioner (Appeals) is that it is not an allowable expenditure. The learned CA relied on the following precedents:
(i) CIT v. Delhi Safe Deposit Co. Ltd (1982) 133 ITR 750 (SC).
(ii) Sasoon J. David & Co. Ltd. v. CIT .
(iii) Bombay Steam. Navigation Co. (1953) (P.) Ltd v. CIT .
(iv) CIT v. Malayalam Plantations Ltd. .
17. Per contra, the learned Departmental Representative supported the orders of the Commissioner (Appeals). The learned Departmental Representative also filed written submissions on this issue.
18. We have heard the rival submissions of the parties. We have also carefully considered the written submissions as well as arguments advanced by both the parties. We have also given thoughtful consideration to the precedents relied on by both the parties. The controversy in this case is in respect of a licence fee paid by the assessee to RPGEL. The assessee has filed copy of the agreement which is placed at pages 162 to 167 of the paper book. The Commissioner (Appeals) was of the opinion that as per the recital of the agreement, the only condition for use of "RPG" logo is the willingness and capability to abide by the code of conduct and to attain high standard of excellence and hence, for that no monetary payment is necessary for the use of "RPG" logo by the assessee. The Commissioner (Appeals) has noted that the assessee has not clarified the benefit of using a copy right logo, in a commercial transaction except by way of serving as an indication that the assessee concerned belongs to RPG group. The reasons given by the Commissioner (Appeals) in coming to the conclusion that the said payment is not covered in Section 32 are as under:
(iii) I have considered the objections of the appellant. The appellant has stated that it is one of the companies attached to the RPG Group entitled to have access to the common pool of facilities and expertise developed for all its licensee companies on a mere cost sharing basis. The share of cost is said to have been absorbed by the company on the basis of periodical payments made against debit notes issued on quarterly basis by RPGEL. The appellant has attached copies of ledger extracts of payments made. It is said that sharing of cost of common facilities will result in obvious cost savings and higher profitability. I have gone through the ledger extracts filed by the appellant. It contains the extracts from the general ledger of the appellant on or about the days on which the appellant has paid licence fees to M/s. RPGEL. I have already mentioned the particulars of payments made to M/s. RPGEL totalling to Rs. 11,50,000 as appearing in the ledger extracts filed by the appellant. But the crucial issue here is the basis on which the appellant has made these payments. When the appellant was asked about the basis of the above payments it is said that the appellant used to receive quarterly debit notes stating certain amounts to be paid by the appellant by way of contribution of licence fees for the use of the infrastructure developed by M/s. RPGEL. The appellant is not able to clarify why exactly the aforesaid payments were and what exactly was the basis on which the quantum of the payments made were determined. It is said that the payments to M/s. RPGEL were based on the turnover of the appellant. There is no rationale at all for such a basis because payment of such huge amount is not stipulated anywhere in the agreement. There is no linkage between the turnover of the appellant and the cost of services referred to already and provided to the appellant by M/s. RPGEL. No evidence has been produced to show that M/s. RPGEL has incurred any expenditure for which the appellant's share during the relevant previous year has amounted to the figure mentioned above. The appellant has no idea at all as to how the amount paid to M/s. RPGEL was determined. The appellant has not furnished any quantitative particulars of the No. of personnel deputed to M/s. RPGEL for training, of the appellant's share of the cost of training supported by verifiable particulars of the expenses, of the number of RPGEL staff who provided services to the appellant, the cost of such services, etc. The appellant has no evidence for the expenses allegedly incurred by M/s. RPGEL on behalf of the appellant, has no idea about what are the expenses for which the payments have to be made and above all does not know on what basis the payments made by the appellant have been worked out. In any case no evidence in this regard is seen in the departmental records and neither has any evidence been produced before me in the course of the appellate proceedings. The claim of the appellant is baseless and is not in accordance with the provisions of Section 37 of the Income Tax Act. Hence, the alleged expenditure of Rs. 11,50,000 paid to M/s. RPGEL is held to be not allowable on any account under Section 37 of the Act.
19. The short issue before us is whether the Commissioner (Appeals) is justified in holding that the payment made by the assessee as a licence fee to RPGEL is not an allowable expenditure under Section 37. In this case the assessee is making the payment to RPGEL group for use of the logo. RPGEL is providing in addition to the use of the logo the following services which are developed as group services and which are utilised by other licensees given in the group:
(i) Training of HML executives;
(ii) Recruitment of senior personnel;
(iii) Negotiation with financial institutions and banks;
(iv) Availing of the services of RPGEL personnel;
(v) Formulation of market strategies for assessee's products, etc.
20. The authorities below have not disputed the terms of the agreement but it appears from the reasons given by the Commissioner (Appeals) that the said payment was not required at all. The concept of business is changing due to globalization. The market strategies of the corporate organizations are also changing fast. If any business house is required to stand in the market, then it has to improve the quality of the products and improvement of the quality of the products as well as the market strategies will depend on lot of supporting infrastructure. The contention of the assessee is that RPGEL is one of the logo having goodwill in the market and use of goodwill gives an indication to the buyers and consumers that the assessee-company is having the back up of excellence with code of conduct and quality. In the changing scenario of globalization, one cannot go with the conservative concept of the early fifties. As far as HRD is concerned, it has gained importance in the industrial and business world. We find force in the argument of the learned CA that RPGEL is having the infrastructure which is used by the assessee-company for the development of its business. Whether any particular payment is on account of business expediency or not is to be considered for allowing the same under Section 37 of the Act.
21. Another aspect to be considered here is that Section 37 provides that any expenditure wholly and exclusively incurred for the purpose of business but it does not mean that the said expression contemplates that the said expenditure must be incurred necessarily for the purpose of business.
22. In the case of Sasoon J. David & Co. (P) Ltd. (supra), the Hon'ble Supreme Court has held that the expression "wholly and exclusively" used in Section 10(2)(xv) of Indian Income Tax Act, 1922 does not mean "necessarily". Ordinarily it is for the assessee to decide, whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profit then he can claim the deduction even though there was no compelling necessity to incur such expenditure (head notes). The principles laid down by the Hon'ble Supreme Court while interpreting Section 10(2)(xv) of the 1922 Act are squarely applicable to Section 37(1) of 1961 Act. In our opinion, the payments made by the assessee to RPGEL is an allowable expenditure under Section 37(1) of the Act. We, therefore, set aside the order of the Commissioner (Appeals) on this issue in all the assessment years before us and direct the assessing officer to delete the additions.
23. The next issue is regarding foreign travel expenses. The learned CA submitted that this issue is not pressed by the assessee as this issue has been decided by the IT AT, Cochin Bench against the assessee in the earlier assessment year. As this issue is not pressed by the assessee which is arising in assessment years 1995-96 to 1998-99, the relevant grounds are dismissed as not pressed.
24. The next issue is regarding expenditure on the guest house relating to rent and depreciation. The learned CA submitted that this issue is arising in the appeals for assessment years 1995-96,1996-97 and 1997-98 but as in view of the recent decision of the Hon'ble Supreme Court in the case of Britannia Industries Ltd. v. CIT this issue has to be decided against the assessee. In the decision of Hon'ble Supreme Court in the case of Britannia Industries Ltd (supra), this issue has been decided against the assessee and respectfully following the principles laid down by the Hon'ble Supreme Court in the said decision (supra), we dismiss the relevant grounds taken by the assessee on this issue in the assessment years 1995-96 to 1997-98.
25. The next issue is regarding penalty proceedings under Section 271(1)(c) of the Act. We have heard the parties. The learned CA for the assessee submitted that the assessing officer has initiated penalty proceedings, but he fairly conceded that no order has been passed levying any penalty. The learned Departmental Representative submitted that initiation of penalty proceedings cannot be challenged like an order levying the penalty. We find force in the argument of the learned Departmental Representative. The assessing officer has merely initiated the penalty proceedings and the assessee is challenging the initiation of penalty proceedings. In our opinion, the said grievance of the assessee is not tenable at all. We, therefore, dismiss the relevant grounds taken by the assessee in the assessment years 1995-96 to 1997-98.
26. The next issue is regarding the deduction under Section 80HHC and this issue is arising in the assessment year 1998-99. The learned CA submitted that the assessee is not pressing this issue. As the assessee has not pressed this issue, the relevant ground is dismissed as not pressed.
27. The next issue is regarding the levy of interest under Sections 234B and 234C. The learned CA submitted that this is a consequential ground. As this issue is consequential, the relevant grounds are dismissed as infructuous which are taken in assessment years 1998-99 and 1999-2000.
28. The next issue is in respect of disallowance of the premium on redemption of debentures. The assessing officer has made the disallowance of premium of Rs. 12,06,225 and this issue arises in the assessment year 1998-99. While framing the assessment for the assessment year 1998-99, the assessing officer made the disallowance of the premium of Rs. 12,06,225 in the computation of Kerala tea income and another disallowance of Rs. 2,07,900 in the computation of Tamil Nadu tea income which was paid by the assessee on redemption of debentures. The assessing officer made the disallowance on the reason that there v/as no contractual liability on the part of the assessee in this regard and the said payment was in the nature of ex gratia payment.
29. We have heard the learned CA for the assessee and the learned Departmental Representative for the revenue. The learned CA submitted that the assessee had availed itself secured loan for its working capital requirement by allotting non-convertible debentures to GIC Mutual Fund. It is further submitted that the said debentures were redeemable at a premium of 5 per cent on the face value in three instalments commencing from 16-12-1997. During the previous year relevant to the assessment year 1998-99, the assessee had made substantial profit and hence all the debentures were redeemed in one instalment in order to save the payment of interest which was very high going at 18.75 per cent. He further argued that the said debentures were allotted by the assessee on profit placement basis on 16-12-1991. The assessee has appointed State Bank of India, Securities and Services Division, Madras as a debenture trustee and it was decided to redeem the debentures in three annual instalments at the end of 6th, 7 th and 8th years from the date of allotment i.e., 16-12-1991 at a premium of 5 per cent payable with the instalment of redemption from the expiry of the sixth year onwards. Though it was decided to redeem the debentures in three instalments, the assessee decided to redeem the same in one instalment to save the cost of interest payment. It is argued that though the Commissioner (Appeals) has accepted the contention of the assessee that it was a contractual liability and admissible deduction under Section 37(1) of the Act, but he himself interpreted the decision of the Hon'ble Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. v. CIT and held that the assessee should have spread over the liability over the period of debentures i.e., for six years and he directed the assessing officer to allow 1 /6th of the total premium paid on redemption of the debentures to the assessee. The learned CA submitted that in Madras Industrial Investment Corpn. Ltd's case (supra), the assessee itself has treated the said premium as a deferred revenue expenditure, but the Hon'ble Supreme Court has categorically observed that if the expenditure is incurred during the year, then it should be allowed in the same year in its entirety in which it is incurred and it cannot be spread over a number of years even if the assessee has written it off in its books over a period of years. He, therefore, submitted that the directions of the Commissioner (Appeals) may be set aside and the entire expenditure may be allowed. Per contra, the learned Departmental Representative supported the order of the Commissioner (Appeals).
30. In this case, the facts are not in dispute. The only question is whether the Commissioner (Appeals) has rightly interpreted the decision of the Hon'ble Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. (supra). In that case, the company had made a public issue of debentures and issued the debentures by giving discount of 2 per cent redeemable after 12 years.The total discount was worked out at Rs. 3 lakhs but only written off Rs. 12,500 out of the total discount of Rs. 3 lakhs giving the proportionate amount of discount for the period of 6 months. In other words, the assessee itself has spread over the said expenditure proportionately for the period of 12 years which was the period of redemption. When the matter came before the Hon'ble Supreme Court, it is held as under:
The Tribunal, however, held that since the entire liability to pay the discount had been incurred in the accounting year in question, the assessee was entitled to deduct the entire amount of Rs. 3,00,000 in that accounting year. This conclusion does not appear to be justified looking to the nature of the liability. It is true that the liability has been incurred in the accounting year. But the liability is a continuing liability which stretches over a period of 12 years. It is, therefore, a liability spread over a period of 12 years. Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years. However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year. Thus in the case of Hindustan Aluminium Corp. Ltd v. CIT the Calcutta High Court upheld the claim of the assessee to spread out a lump sum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question.
31. In our opinion, the interpretation given by the Commissioner (Appeals) is not correct as in the case of Madras Industrial Investment Corpn. Ltd (supra), the Hon'ble Supreme Court allowed the assessee to spread over the expenditure. We are, therefore, of the opinion that the entire premium on redemption of debentures is allowable expenditure in the assessment year 1998-99. We, therefore, set aside the order of the Commissioner (Appeals) on this issue and direct the assessing officer to allow the entire expenditure.
32. The next issue is regarding the debt written off and this issue arises in the assessment years 1998-99 addition 1999-2000. The learned CA submitted that in the assessment year 1998-99, the assessing officer made the disallowance of Rs. 56,39,375 being the bad debts written off by the assessee. He further submitted that the said bad debts were consisting of the bad debts relating to the engineering division of Rs. 14,76,000 and bio-tech division of Rs. 41,63,375. The learned CA submitted that as far as bad debts which are in respect of the engineering division amounting to Rs. 14,76,000 and bio-tech division disallowed by the assessing officer and confirmed by the Commissioner (Appeals) are concerned, the same is not pressed. The assessee is pressing only the issue of bad debts of Rs. 41,63,375 relating to the bio-tech division. He further argued that the assessee-company had made the advances to the distributors suppliers on various locations for procuring hybrid seeds in connection with the seed business of the company. As per the trade practices, the advances are to be made to the farmers for acquiring seeds who were placed at various locations and remote areas. It is further argued that the said advances so made could be set off only against supplies to be made by them which they failed as agreed upon in view of crop failure. As there was no supply from the farmers and distributors and if there were no chances of recovery, hence the same were written off. The learned CA relied on the following precedents:
(i) CIT v. Mysore Sugar Co. Ltd. ;
(ii) CIT v. Inden Biselers ;
(iii) IBM. World Trade Corpn. v. CIT ;
(iv) A.W. Figgies & Co. (P.) Ltd. v. CIT .
33. Per contra, the learned Departmental Representative supported the orders of the authorities below.
34. We have heard the rival submissions of the parties. The assessing officer has noted that the assessee is engaged in a number of diverse activities and that includes bio-technology as one of the activities. The assessee has made the advances to various suppliers at various locations for procuring seeds in connection with the seeds business of the assessee and this fact is not disputed. The said advances were to be adjusted against the supplies made by them. The assessing officer was of the opinion that the written off advances cannot be treated as a bad debt and the assessee discontinued its business and the loss against the discontinued business also cannot be allowed. He, therefore, made the disallowance of Rs. 41,63,375 in bio-tech division. In appeal, the Commissioner (Appeals) was of the opinion that that the said amount had not been taken into account in computing the assessee's income in any previous year and hence, the requirements under Section 36(2)(i) are not fulfilled. As far as the claim of the assessee that the same is allowable under Section 37(1), the Commissioner (Appeals) was of the opinion that the payment was made as advance in an earlier year for supply of seeds in future years and hence, it cannot be said to be an expenditure incurred in the relevant previous year wholly and exclusively for the existing business of the assessee and rejected the assessee's claim in respect of bad debts, as well as loss under Section 37(1) also. In this case, it is not disputed that the assessee is also engaged in bio-tech activities. We will have to first examine whether it can be treated as a bad debt. As per the provisions of Section 36(2)(i), the said amount should have been taken into consideration while computing the income of the assessee in the earlier year. In our opinion, the Commissioner (Appeals) is right in holding that the condition for treating the said advance as bad debt is not fulfilled as admittely the said payment was in the nature of advances to the farmers and distributors. But the next question is whether the same is allowable as a business expenditure under Section 37(1). Now, we will have to examine this issue in the backdrop of the legal principles in the precedents relied on by the learned CA.
35. In the case of Mysore Sugar Co. Ltd. (supra), the appellant assessee was purchasing sugarcane from the sugarcane growers and it was manufacturing sugar. For acquiring sugarcane, advances were given to the farmers including sugarcane seedlings and fertilizers also. There was an agreement between the said assessee and the farmers that they would sell sugarcane exclusively to the assessee and advances were to be adjusted towards the price of the sugarcane. In that case also, due to drought, the assessee could not work its sugar mills and the farmers could not grow or deliver the sugarcane. On the facts of the said case the Hon'ble Supreme Court held that as far as the assessee was concerned, it was doing no more than making a forward arrangement for the next year's crop and paying an amount of advance out of the price so that the growing of the crop may not suffer due to want of funds in the hands of the growers and hence, it was a loss on the revenue side.
36. In the case of lnden Biselers (supra), again, the issue before the Hon'ble Madras High Court was whether the advance of the money by the assessee to the transport contractors to pay off his dues under the hire purchase agreement for the purchase of trucks which were to be adjusted against the freight charges was a loss. It was held that that was a trading loss incidental to the business.
37. In this case, the opinion of the Commissioner (Appeals) is that the expenditure cannot be allowed in this year as the advances were made in the earlier year. We have to consider the nature of the claim of the assessee that there was non-supply of seeds by the farmers and that could be ascertained by the assessee only in the previous year relevant to the assessment year 1998-99. We are, therefore, of the opinion that as otherwise the facts are not disputed the entire claim of loss towards the advances to the farmers and distributors for procuring seeds is an allowable expenditure in the assessment year 1998-99. We, therefore, set aside the order of the Commissioner (Appeals) on this issue and direct the assessing officer to allow the loss claimed by the assessee.
38. Now, the assessee has also claimed bad debt in the assessment year 1999-2000. The assessee has written off the bad debts amounting to Rs. 32,69,581. The assessee explained that there were old balances and debts relating to the various divisions of the company which could not be recovered from the respective debtors in spite of consistent effects made. In respect of the plantation division the assessee has written off Rs. 16,59,825 and in respect of the trading division, the assessee written off Rs. 2,88,253 which represented expenses incurred by the assessee on behalf of its subsidiary company. The assessing officer was of the opinion, that the conditions specified under Section 36(2)(i) of the Act are not fulfilled and that the so-called debts are recoverable from the assessee's own subsidiary company, which is still operational and therefore, the debts did not become irrecoverable. The assessing officer, therefore, made the disallowance of Rs. 19,48,178. The Commissioner (Appeals) confirmed the order of the assessing officer as he was of the opinion that the assessee had paid the said amounts to its subsidiary company and hence, it does not satisfy the requirement of Section 36(2)(i) of the Act.
39. The learned CA submitted that the said amounts represented the expenses incurred by the assessee towards salaries and wages, printing and stationery, travelling expenses, postage and telegrams, office expenses, statutory payments, etc., on behalf of the subsidiary company namely Harrison's Universal Flowers Ltd. It is further submitted that due to sufficient export and domestic orders for the subsidiary company, it could not carry on its business activities and said company was forced to suspend the entire operations to minimize the gravity of the huge accumulated losses. As the assessee could not recover the said amount from the subsidiary company it was written off.
40. Per contra, the learned Departmental Representative vehemently submitted that there is no force in the argument of the learned CA as admittedly it was in the nature of loan given to the subsidiary company and it has nothing to do with the business of the assessee-company. Moreover, it cannot be treated as a bad debt as it was not taken into consideration while determining the income of the assessee in any of the previous years preceding the assessment year 1999-2000 and that is a mandatory condition under Section 36(2)(ii) of the Act. It was, therefore, argued that the Commissioner (Appeals) has rightly disallowed the expenditure.
41. We have heard the rival submissions of the parties. The facts are not in dispute. Admittedly, the assessee has made the payment on behalf of its subsidiary company Harrisons Universal Flowers Ltd. In our opinion, it cannot be treated as a bad debt as admittedly it was in the form of advance or temporary loan to the subsidiary company. For claiming the deduction under Section 36(1)(ii), the conditions specified in Section 36(2)(i) should be satisfied. In our opinion, the Commissioner (Appeals) has rightly confirmed the order of the assessing officer on this issue. No interference is called for. We, therefore, confirm the disallowance.
42. The next issue is regarding contribution to Tea Trade Association and this issue emerges in the assessment year 1999-2000. We have heard the learned CA for the assessee and the learned Departmental Representative for the revenue. The assessing officer made the disallowance of Rs. 2,06,642 being the contribution to Tea Trade Association. The argument of the learned CA is that tea manufacturing and trading is one of the activities of the assessee and the assessee is a member of Tea Trade Association which providers various services to its members by representing the industrial and other trade matters of its members at various Government forums. In order to have an own building for the association to effectively carry on its activities for the common benefit of its members, it was decided by the general body of the Tea Trade Association that a building fund should be constituted and as per the resolution of the general body the assessee made the contribution and that is in the context of business expediency. The contention of the learned Departmental Representative is that it cannot be treated as a business expediency and it cannot be treated as an expenditure which fulfils the conditions specified under Section 37(1) of the Act.
43. We have heard the rival submissions of the parties. It is an admitted fact that tea business is one of the principal activities of the assessee. The assessee contributed the building fund in the capacity as a member of the Tea Trade Association. We have already referred to the decision of the Hon'ble Supreme Court in the case of Sasoon J. David & Co. (P.) Ltd. (supra), that the expression "wholly and exclusively" in Section 37(1) does not made "necessarily". In this case also, the association provides certain services to the assessee-company and also represents the grievances of the assessee in respect of its business before different forums and Government. In our opinion this expenditure can be treated as out of commercial expediency and an allowable expenditure. We, therefore, direct the assessing officer to allow the expenditure. In the result, the relevant ground taken by the assessee is allowed.
44. The next issue is indexation of capital gain which arises in the assessment year 1999-2000. We have heard the parties. The assessee has purchased 10 lakh units of 9 per cent IRFC bonds amounting to Rs. 8,30,82,192 in the month of March, 1994 which were transferred by the assessee and the assessee claimed long-term, capital loss on the sale of said bonds amounting at Rs. 1,96,15,776. The controversy is in respect of the indexation cost. By the Finance Act, 1997, proviso is added to Section 48(ii) of the Act with effect from 1-4-1998 which reads as under:
Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government.
By adding the proviso to Section 48(ii) of the Act, the benefit of indexation for computing the long-term capital gain is taken away in respect of the bonds and debentures for computing the long-term capital gain. In our opinion, there is no force in the argument of the learned CA that the proviso is not applicable. We, therefore, dismiss the ground taken by the assessee on this issue.
45. The assessee has also taken the issue in respect of carried forward capital loss. The learned CA submitted that it is a consequential ground and if the ground in respect of indexation of capital gain is allowed, then only it will have a bearing on the merits of this ground. As we have dismissed the ground in respect of indexation of capital gain on the sale of IRFC bonds, this issue also does not survive. Hence, the ground taken by the assessee on this issue stands dismissed.
46. The next issue in the assessment year 1998-99 is that the Commissioner (Appeals) was not justified in not allowing the capital loss in respect of 10,09,470 shares purchased by the assessee on 11-3-1998. The assessee has claimed capital loss on account of reduction in the value of investment amounting to Rs. 1,92,00,056 in wholly owned subsidiary company i.e., M/s. Harrisons Agro Products Ltd. as approved by the Hon'ble High Court of Kerala by order dated 6-4-1999. The assessing officer noted that in the original return of income filed by the assessee it had reserved its right to claim loss of Rs. 192 lakhs representing reduction in the value of investment in wholly owned subsidiary M/s. Harrisons Agro Products Ltd. whose operations were suspended in 1996. The assessee had filed a petition before the Hon'ble High Court for reduction in value of investment and as the same was pending, it was claimed that the said claim would be made on the receipt of the order of the Hon'ble High Court. The Hon'ble High Court of Kerala as per its order dated 6-4-1999 permitted the paid up capital of the company to be reduced from Rs. 3,07,66,000 i.e., 30,76,000 equity shares of Rs. 10 each to Rs. 15,38,300 i.e., taking the value of the equity shares at Re. 0.50 each with effect from 31-3-1998. In the accounts, the assessee had written off Rs. 192 lakhs representing the value of reduction in the value of investment held in M/s. Harrisons Agro Products Ltd. The assessing officer has not allowed the assessee's claim for the set off of capital of Rs. 1,92,00,056 or the carried forward capital loss of Rs. 2,47,00,909 without giving any reasons.
47. On appeal, the Commissioner (Appeals) was of the opinion that in the relevant previous year, the assessee has not declared and has also not assessed on any income under the head "Capital gains" and hence the assessee can only claim carry forward of the loss under the head "Capital gains" under Section 74 of the Act. As per the order of the Hon'ble High Court of Kerala dated 6-4-1999, the paid up equity share capital of the said company as stated earlier was reduced to Rs. 15,38,300 by taking the value of equity share at Re. 0.50 each with effect from 31-3-1998. For claiming, the said loss, the assessee has relied on the decision of the Hon'ble Supreme Court in the case of Kartikeya V. Sarabhaiv. CIT. After considering the contention of the assessee, the Commissioner (Appeals) held that there is no basis for allowing the capital loss in respect of 10,09,470 shares purchased by the assessee on 11-3-1998 by giving the following reasons:
(ii)(b) It is seen that as per the printed Balance Sheet as on 31-3-1997 the appellant owned 20,67,130 shares of Rs. 10 each in the company, M/s. Harrisons Agro Products Ltd. But the appellant has shown 30,76,600 shares as being owned by it as on 31-3-1998. When the appellant was asked about the increase in the number of shares owned, in the course of the appeal proceedings, the ARs of the appellant stated that the appellant had acquired 10,09,470 shares at the rate of Rs. 10 on 11-3-1998 from a foreign shareholder. It is seen that a special resolution had been passed at the extraordinary general meeting of M/s. Harrisons Agro Products Ltd. on 20-3-1998 to the effect that the nominal value of each equity share has to be reduced from Rs. 10 to Re. 0.50 because of the insufficiency of the available assets to represent the capital to the extent of Rs. 9.50 per share. It is on the basis of this resolution that the Kerala High Court had permitted reduction of equity capital for Rs. 10 to Rs. 0.50 per share. Therefore, it was considered very strange for the appellant to have acquired 10,09,470 equity shares at the rate of Rs. 10 from the foreign shareholder on 11-3-1998. The appellant was required to clarify how the value of one equity share was fixed at Rs. 10 as on 11-3-1998 while the concerned company had resolved on 20-3-1998 that one equity share had only a value of Re. 0.50. The appellant has not given any clarification in this regard. Further, the appellant was also required to clarify whether the RBI had permitted the purchase of shares at the above rate and the transfer of the purchase consideration to the foreign party. The appellant, has not clarified this point also, though the clarification by itself will not justify the genuineness of the appellant's claim in this regard. Under these circumstances, I hold that there is no basis for allowing the capital loss in respect of 10,09,470 shares purchased by the appellant on 11-3-1998. The appellant's claim for carry forward of capital loss is allowed only to the extent of capital loss in respect of 20,67,130 shares held by the appellant on 11-3-1998. The assessing officer is directed to determine loss in respect of these shares and carry forward the same to the subsequent assessment years as per law.
48. We have heard the learned CA for the assessee and the learned Departmental Representative for the revenue. The learned CA submitted that M/s. Harrisons Agro Products Ltd. ('HAPL' hereinafter referred to as ) had allotted 10,09,470 number of shares by converting the loan repayable to the assessee amounting to Rs. 1,00,95,211 on 11-3-1998. The learned CA referred to the paper book filed on 13-4-2007 and submitted that the said fact is clear from the register of members and share ledger of HAPL. He further argued that the Commissioner (Appeals) has come to the conclusion that the assessee has purchased from a foreign shareholder 10,09,470 shares on 11-3-1998, but in fact, 10,12,894 shares were purchased from the foreign shareholder i.e., Vanderhave Holding International B.V. Netherlands during 1996-97 relevant to the assessment year 1997-98. He further submitted that the Reserve Bank of India has "also approved the said transaction.
49. Per contra, the learned Departmental Representative supported the order of the Commissioner (Appeals).
50. In this case, it is not disputed that the Hon'ble High Court of Kerala permitted the reduction of equity capital from the face value of Rs. 10 to Re. 0.50 per share. The Commissioner (Appeals) was of the opinion that the assessee had acquired 10,09,470 equity shares on 11-3-1998, but in fact, the concerned company had resolved on 20-3-1998 that one equity share had only value of Re. 0.50. Now, the contention of the assessee is that the said equity share had been allotted by converting the loan repayable to the assessee. We find that this is a new fact brought before us. There was no occasion for the Commissioner (Appeals) to consider this fact before deciding the issue. Moreover, the assessee has for the first time filed the following documents before us:
(i) Copy of register of members;
(ii) Letter from the Reserve Bank of India dated 2-9-1996;
(iii) Statement of accounts of M/s. Harrisons Agro Products Ltd. for the financial year 1997-98.
We, therefore, consider it necessary to restore this issue to the file of the Commissioner (Appeals) to decide the same afresh considering the new facts stated by the assessee before us. The Commissioner (Appeals) should take into consideration the documents which are filed before us for deciding the issue this issue in respect of 10,09,470 shares allotted to M/s. Harrisons Agro Products Ltd. We, therefore, restore this issue to the file of the Commissioner (Appeals) for fresh consideration.
51.The assessee has also taken the ground in the assessment year 1998-99 in respect of disallowance of payment made to club, disallowance of payment made to staff club and disallowance of share issue expenses. The learned CA submitted that as per the instructions of the assessee, the said issues are not pressed. As the assessee has not pressed the above issues, the relevant ground stands dismissed.
52. In the result, the appeals of the assessee being ITA Nos. 104,105,106 and 10 (Coch.)/2005 are partly allowed and ITA No. 09 (Coch.)/2005 is partly allowed for statistical purposes.