Income Tax Appellate Tribunal - Mumbai
Iindian Reyon & Industries Ltd , vs Department Of Income Tax on 24 September, 2013
आयकर अपील य अ धकरण "आई" यायपीठ मंब
ु ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "I", MUMBAI
ी पी.एम. जगताप, लेखा सद य एवं ी ववेक वमा, या यक सद य के सम ।
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
AND SHRI VIVEK VARMA, JUDICIAL MEMBER
आयकर अपील सं. : 5421 /मम ु /2005, नधारण वष: 2000-2001
ITA No. : 5421/Mum/2005, AY 2000-2001
आयकर अपील सं. : 5422 /ममु /2005, नधारण वष: 2001-2002
ITA No. : 5422/Mum/2005, AY 2001-2002
Aditya Birla Nuvo Ltd. Vs Asst. Commissioner of Income
(Erstwhile Indian Rayon & Tax, Circle 3(2),
Industries Ltd.), Room No. 608, 6th Floor,
A4, Aditya Birla Center, Aayakar Bhavan, M.K. Road,
S K Ahire Marg, Mumbai -400 020
Worli,
Mumbai -400 030
थयी लेखा सं.:PAN: AAACI 1747H
अपीलाथ (Appellant) यथ (Respondent)
आयकर अपील सं. : 5561/मम ु /2005, नधारण वष: 2000-01
ITA No. : 5561/Mum/2005, AY 2000-01
आयकर अपील सं. : 5530/मम ु /2005, नधारण वष: 2001-02
ITA No. : 5530/Mum/2005, AY 2001-02
Asst. Commissioner of Income Vs Aditya Birla Nuvo Ltd.
Tax, Circle 3(2), (Erstwhile Indian Rayon &
Room no. 608, Aayakar Bhavan, Industries Ltd.),
M.K. Road, Mumbai -400 001 Mumbai -400 030
अपीलाथ (Appellant) यथ (Respondent)
Appellant-assessee by : Mr. J.D. Mistry, Senior Advocate
Respondent-revenue by : Mr. Santosh Kumar
सनवाई
ु क तार ख /Date of Hearing : 24-09-2013
घोषणा क तार ख /Date of Pronouncement : 09-10-2013
आ दे श
ORDER
ववेक वमा, या स:
PER VIVEK VARMA, JM:
Four appeals are being taken up, being cross appeals filed by the assessee and the department in assessment years 2000-01 and 2001-02. In both the assessment years, the Senior Counsel submitted fact charts/synopsis, giving brief description on the issues involved 2 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 and as to how the issues were dealt with by the revenue authorities and by the coordinate Benches of the ITAT, in the case(s) of the assessee, in the past. The DR also accepted the descriptions given in the fact sheets/synopsis to be correct. We, therefore, proceed on the details, as submitted in the fact sheet/synopsis.
2. The appeals have been filed by the assessee and the department against the order of CIT(A) III, Mumbai, dated 20.12.2004. Since the appeals arise out of the same order, we are passing a consolidated orders for the sake of convenience and brevity.
Assessment Year 2000-01 ITA No. 5421/Mum/2005: Assessee's appeal: The following grounds have been taken:
"(1) That, on the facts and in the circumstances of the case and in law, the learned Assistant Commissioner of Income Tax (herein after referred to as ACIT) has erred in making disallowance of Rs.5,85,508/-being rural development expenditure incurred by the appellant and learned Commissioner of Income Tax (Appeals) (herein after referred to as CIT (A)) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the claim of Rs. 5,85,508/-and to reduce the total income accordingly.
(2) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing Rs. 12,950/-
being depreciation claimed by the appellant on roll over charges and learned CIT (A) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the Depreciation of Rs. 12,950/- on roll over charges and to reduce the total income accordingly.
(3) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing Rs. 2,54,37,500/-being depreciation claimed by the appellant on goodwill of Rs. 20,35,00,000/-acquired on acquisition of 'Madura Garments' division from Madura Coasts Ltd. on a going concern basis and learned CIT (A) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the depreciation of Rs. 2,54,37,500/-on goodwill and to reduce the total income accordingly.
(4) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in treating the expenses of Rs. 98,69,185/-incurred for buy-back of shares as capital expenditure and learned CIT (A) has erred in treating the following expenses as capital expenditure.
Particulars Amount
(Rs)
Stock Exchange fees 2,00,000
3 Aditya Birla Nuvo Ltd. Erstwhile
Indian Rayon & Industries Ltd
ITAs No. 5421 & 5561/Mum/2005
ITAs No. 5422 & 5530/Mum/2005
DSP Merrill Lynch - Advisor 10,00,000
Times Bank-Collection/Payment Banker to offer 6,73,443
MCS-Registrar to officer 5,87,570
24,61,013
The learned ACIT be directed to allow entire expenses of Rs.98,69, 185/-incurred on buy- back of shares as revenue expenditure and to reduce the total income accordingly. (5) Without prejudice to the claim of the appellant that the debenture issue expenditure incurred by the appellant during the previous years relevant to assessment years 1988-89 and 1989-90 is revenue expenditure;, however; if it is held in those years that the said expenditure is not revenue expenditure ,the appellant claims that the said expenditure be capitalized to the actual cost of fixed assets and depreciation be allowed on the same accordingly .The learned ACIT be directed to allow the claim of depreciation on the said debenture issue expenditure and to reduce the total income accordingly. Without prejudice to the above; if it is held that said expenditure is neither a revenue expenditure nor capital expenditure which enhances the actual cost of fixed assets, the appellant alternatively claims that deduction Under section 35D be allowed on the said debenture issue expenditure. The learned ACIT be directed to allow the claim of deduction under section 35D on debenture issue expenditure and to reduce the total income accordingly.
(6) Without prejudice to the claim of the appellant that the deduction claimed under section 36(1)(iii) for interest on loans taken for new projects/ expansion / modernization during assessment years 1994-95 to 1999-2000 is revenue expenditure, however, if it is held in those years that the said expenditure is not revenue expenditure ,the appellant claims that the said expenditure be capitalized to the actual cost of fixed assets and depreciation be allowed on the same and to reduce the total income accordingly".
3. Ground no. 1 pertains to disallowance of Rs. 5,85,508/-, being expenditure incurred on rural development.
4. At the time of hearing, the Senior Counsel submitted that the issue has been in continuance since assessment year 1992-93. When the issue reached the ITAT, it was restored to the AO and in all the subsequent years, the issue has been held by the ITAT in favour of the assessee. The Senior Counsel submitted that last in the series of orders has been in ITAs No. 6668 & 6669/Mum/2003, wherein the coordinate Bench in the assessee's own case directed the AO to allow the expense, if the AO had allowed the same in assessment year 1992- 93, to give effect to the order of the coordinate Bench on the issue, 4 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 travelling to subsequent years upto 1995-96, facts being identical, as in the preceding years.
5. The Senior Counsel, submitted that the facts are identical, hence the same to be allowed, which has been held in ITAs No. 6668 & 6669/Mum/2003.
6. The DR placed reliance on the decisions of the revenue authorities.
7. We have gone through the arguments and the relevant portions of the orders in the case of the assessee, wherein, the issue has been decided in favour of the assessee We, therefore, respectfully following the orders cited before us, set aside the order of the CIT(A) on the issue, and direct the AO to allow the expenditure of Rs. 5,85,508/- incurred on rural development.
Ground no. 1 is allowed.
8. Ground no. 2 pertains to rollover charges of Rs. 12,950/- on depreciation.
9. The Senior Counsel submitted that the issue becomes infructuous, because, the expenditure has been allowed as a revenue expenditure in assessee's own case in ITA No. 6962/Mum/1995, and followed in ITAs No. 6421 & 6422/Mum/2002.
10. Since the issue has become infructuous, the ground is rejected.
11. Ground no. 3 pertains to claim of depreciation on goodwill.
12. At the time of hearing, the Senior Counsel submitted a synopsis, wherein, there was a mention of a number of decisions, which have held that depreciation has to be allowed on goodwill, which now has been rested by the Hon'ble Supreme court in the case of CIT vs Smifs 5 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 Securities Ltd. reported in 348 ITR 302, wherein the Hon'ble Supreme Court held that depreciation has to be allowed on goodwill.
13. The DR placed reliance on the orders of the revenue authorities.
14. We have heard the arguments. The issue is squarely covered by the decision of Hon'ble Supreme Court in the case of Smifs Securities (supra). We, therefore, set aside the order of the CIT(A) on the issue and direct the AO to allow the claim of depreciation on goodwill acquired from Madura Garments.
15. Ground no. 3 is, therefore, allowed.
16. Ground no. 4 pertains to expenses incurred on buy back of shares at Rs. 24,61,013/-, claimed as revenue expense.
17. It was pointed out that the assessee had claimed a total expenditure of Rs. 98,69,185/-. This was disallowed by the AO, wherein, he held the same to be of capital in nature. The issue was taken up before the CIT(A), who allowed the expenses incurred on printing work, certification work, postage, printing, Advertising, stationary, traveling and other miscellaneous expenses, but disallowed the rest, "as there was no cogent reason to allow the same".
18. The AR pointed out that the issue pertains to buy back of shares and has nothing to do with the capital restructuring of the capital base of the company. He placed reliance on the decision of Bombay High Court in Burmah Trading Corpn. Ltd. vs CIT reported in 145 ITR 793 and on the decision of Hon'ble Bombay High Court in the case of CIT vs Hindalco Industries Ltd., wherein the Hon'ble Bombay High Court held, "It must be clarified that the expenditure does not include the price paid to the shareholders for buying back the shares. It merely relates to the expenditure incurred in connection with the carrying out of the buy back scheme. ... The buy back however, would not in any manner enhance the capital structure of the respondent. If anything there is an outflow of capital. As we noted earlier, the respondent has not claimed a deduction qua the outflow. It has claimed a deduction in respect of the expenditure incurred in connection 6 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 with the process. There is no increase in the capital base of the respondent and the expenses incurred were in connection with the existing business of the company. That certainly is for the over all business of the company and liable to be allowed as revenue deduction.
The issue raised in question (D) does not give rise to the substantial question of law".
The AR, therefore, submitted that the entire expense of Rs. 98,69,185/- has to be allowed.
19. The DR placed reliance on the orders of the revenue authorities and pointed out, that on the amount of allowance allowed by the CIT(A), i.e. the balance Rs. 74,08,171/-, the department is in appeal before the ITAT (which is also being heard by us simultaneously).
20. We have heard the arguments of the contesting parties and have perused the bifurcation of expenses as provided by the AR and also the cases cited before us.
21. The fact that the expenditure is of revenue nature has not been disputed by the CIT(A), who has disallowed the same because according to the CIT(A), there were no cogent reasons. We have also perused the decision of Hon'ble Bombay High court in Hindalco (supra), wherein a succinct distinction has been made by the Hon'ble Bombay High Court. Respectfully following the same, we direct the AO to allow the entire expenditure of Rs. 98,61,185/- claimed as revenue on buy back of shares.
22. In the result, ground no. 4 is allowed.
23. Ground no. 5 is basically alternative grounds pertaining to expenses on NCD and FCDs. At the time of hearing, the Senior Counsel submitted that both parts of the ground has become infructuous, because, expenses of NCDs has been allowed as revenue expenditure and expenses of FCDs have been allowed under section 35D. Hence the alternative grounds are not pressed.
24. Since the ground is not pressed, it is rejected as not pressed.
7 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005
25. Ground no. 6 is an alternative ground wherein the assessee prayed that if the expenses are not allowed then depreciation be allowed on interest capitalization.
26. At the time of hearing, the AR submitted that the expenses has been allowed under section 36(1)(iii), hence the issue impugned in the appeal is infructuous, hence not pressed.
27. Since the issue has been allowed, the alternate ground becomes infructuous. Hence the ground raised is rejected.
28. In addition to the above ground, the assessee has raised an additional ground in ITA 5421 of 2005 reads as under:
"1. On the facts and circumstances of the case and in law, the Appellant prays that the ("AO") be directed to:
i. Exclude from taxable profits, the sales tax exemption benefit of Rs. 7,55,70,408/-, which is included in Sales and which is taxed in the assessment order as part of profits of the business; and ii. To treat the same as capital receipt not chargeable to tax".
The AR pointed out that in earlier years as well, the issue was taken up as additional ground and the issue had been restored to the file of the AO. He, therefore, prayed, like wise, the additional ground be admitted.
29. DR strongly objected to the allowability of additional ground.
30. On hearing and on going through the orders of the preceding years, the coordinate Bench has allowed the admission of additional ground and we find that the same has been restored to the file of the AO.
31. For the sake of continuance and in the interest of justice, we also admit the additional ground and direct the AO to adjudicate on the issue as per law and relying on the decisions of the DCIT vs Reliance Industries Ltd. reported in 82 TTJ 765 (Mum-SB), as done by the coordinate bench in ITAs No. 6668 & 6669/Mum/2003, needless 8 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 to mention that adequate and reasonable opportunity shall be given to the assessee to present its case.
32. Ground is allowed for statistical purposes.
In the result, ITA No. 5421/Mum/2005 is partly allowed.
ITA no. 5561/Mum/2005, Department appeal:
The department has raised the following grounds of appeal:
1. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition made under section.40A(9) of the Act of Rs. 16,66,132/-."
2. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in ignoring the decision of his predecessors for A.Y.1998-99 & 1999-2000 on identical issue."
3. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs.5,68,440/- made us/.14A."
4. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs. 4,54,06,220/- being 2/3 of total premium paid on pre-redemption of debentures."
5. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the expenditure incurred for acquisition of marketing and technical know-how of Rs.18,67,22,219/- is revenue expenditure."
6. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that expenditure of Rs. 98,69,185/- incurred for buy back of shares is revenue expenditure."
7. "The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored."
33. Ground 1 & 2 pertain to allowance of Rs. 16,66,132/- under section 40A(9), being expenditure paid to school. The Senior Counsel submitted that the issue has been there since 1993-94 onwards upto 1999-2000, and in all the years, the expenditure has been allowed by the coordinate Benches in its own cases (copies of ITAT orders placed in APB at pages 119 to 202, in the orders pertaining to assessment years 1998-99 and 1999-2000 in ITAs No. 6669 and 6669/Mum/2003).
34. The AR, therefore, submitted that the expenditure be allowed.
35. The DR, placed reliance on the orders of the revenue authorities.
9 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005
36. On going through the orders of the coordinate Benches in assessee's own cases and in ITA No. 6668 & 6669/Mum/2003, the coordinate Bench relied on the decision pertaining to assessment year 1995-96 in ITA No. 3207/Mum/2002, wherein it was held, ""2.9 The ground No.9 is regarding disallowance of Rs.19,05,496/-
under section 40A (9). The said expenditure had been incurred by the assessee on payment made to schools at Veraval and Malkhed wherein the children of the employees of the company were studying. The AO disallowed the expenditure under section 40A(9). The said section provides that no deduction could be allowed in respect of any sum paid by the assessee as an employer towards setting up or formation of or as contribution to any fund/ trust, company, association of persons, body of individuals, society registered under the Societies Registration Act or other institution for any purpose except wheresum is so paid for the purposes and to the extent provided for under clause (iv) or clause (v) of sub section (1) of section 36 or as required by or under any other law for the time being in force. The assessee argued that provisions of section 40A(9) were not applicable and the expenditure was allowable as revenue expenditure under section 37(1). CIT(A) however following the decision in assessment year 1994-95 confirmed the disallowance. Aggrieved by the said decision the assessee is in appeal.
2.9.1 We have heard both the parties in the matter. We find that the same issue had been considered by the tribunal in assessee's own case in assessment year 1994-95 in ITA No.2326/M/2001. In that year also disallowance had been made under section 40A(9) in respect of payments made to Indrayan School. The tribunal however following the decision in A.Y.1992-93 and 1993-94 allowed the claim. Facts this year are identical. Therefore following the decision of the tribunal (supra) we set aside the order of CIT(A) and allowed the claim of the assessee." 19 Therefore, respectfully following the order of the Tribunal in assessee's own case for Assessment Year 1995-96, we allow the claim of the assessee for the year under consideration also".
37. Since the issue is identical, we, therefore, respectfully following the decisions of the coordinate Benches in assessee's own case, sustain the order of the CIT(A).
38. Grounds no. 1 & 2 are rejected.
39. Ground no. 3 pertains to disallowance of expense at 1% under section 14A of the Income Tax Act.
10 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005
40. The AO had disallowed the expenditure @ 1% and the CIT(A) deleted the disallowance.
41. At the time of hearing, the Senior Counsel accepted the disallowance made by the AO @ 1% of exempt income.
42. The ground is, therefore, allowed.
43. Ground no. 4 pertained to deletion of Rs. 4,54,06,220/- being 2/3 of total premium on pre-redemption of debenture.
44. In the assessment proceedings, the AO accepted the expense to be revenue, but put a rider, that since the redemption is being made three years in advance, the expense shall be allowed on equated amounts spreading in three years. The AO therefore, concluded, that only 1/3 expenditure shall be allowed in the current year and balance to be allowed in subsequent two years.
45. The issue came up before the CIT(A), who following the decision of coordinate Bench at Chennai in the case of Overseas Sanmar Financial Ltd. reported in 86 ITD 602 and Bombay High Court in the case of CIT vs Bhor Industries Ltd. reported in 264 ITR 180, allowed the expenditure.
46. The AR, pleaded that the decision of the CIT(A) is as per law and is now squarely covered by the decision of ACIT vs Grind Well Worton Ltd. in ITA No. 5512/Mum/2007, where one of us was party to the order, it was held, "In the present case, we are concerned with a case where debentures redeemed much prior to the period for which they were issued. In other words, the contractual terms of issue of the debentures were not fulfilled and there was a novation of contract between the Assessee and the debenture holders. In such circumstances, we are of the view that the year in which the expenditure in the form of premium redemption of debentures should be allowed. We order accordingly. Gr. No.4 raised by the Assessee is allowed".
11 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005
47. We find that the issue is squarely covered by the decision in the case of Grind Well (supra), we, therefore, respectfully following the decision of the coordinate Bench, sustain the order of the CIT(A) and reject the decision of the AO on the issue.
48. Ground no. 4 is rejected.
49. Ground no. 5 pertains to allowance of expenditure on acquisition of marketing and technical know-how of Rs. 18,67,22,219/- as revenue expenditure.
50. In the assessment proceedings, the AO bifurcated the expenditures as technical know-how expenses and marketing know- how expenses at Rs. 14.05 crores and 5.61 crores respectively and allowed the same to be as deferred revenue expenses to be written off in 5 years.
51. The CIT(A) accepted the submissions of the assessee and allowed the same, placing reliance on the decision of Kedarnath Jute Manufacturing Co. Ltd. vs CIT, reported in 82 ITR 363 (SC) and the decision of Coordinate Bench in the case of Amar Raja Batteries Ltd. vs ACIT, reported in 272 ITR 17 (AT), wherein it has been held, "....that admittedly, the expenditure was in the revenue field. ....... Thus, the argument of the revenue was to be rejected. The entire advertisement expenditure for product launching was to be allowed in the assessment year xxxxx and accordingly the disallowance made by the AO on account of advertisement expenditure was deleted". The Senior Counsel submitted that once the expenditure is held to be revenue expenditure then it has to be allowed. The AR, therefore, supported the order of the CIT(A).
52. On the other hand, the DR placed heavy reliance on the order of the AO.
12 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005
53. We have heard the arguments and have perused the orders of the revenue authorities and we are of the view that the CIT(A) has rightly held that the expenditure has to be allowed, once it is held to be in revenue field.
54. We, therefore, sustain the order of the CIT(A) on the issue and reject the ground taken by the AO.
55. Ground no. 5 is rejected.
56. Ground no. 6 pertains to buy back of shares.
57. The issue has been dealt with in ITA No. 5421/Mum/2005, wherein, we have allowed the entire expenditure of Rs. 98,69,185/- as revenue expenditure, which includes the impugned expenditure of Rs. 74,08,172/-.
58. We, therefore, reject the ground of appeal.
In the result, the appeal filed by the department is partly allowed.
Assessment Year 2001-02 ITA no. 5422/Mum/2005 (Assessee's appeal):
59. At the time of hearing, the Senior Counsel placed before us a chart/synopsis mentioning the status of each ground, which had been dealt with and decided in the preceding year(s), which the DR also accepted to be correct. We, therefore, are proceeding on grounds briefly.
The assessee has raised the following grounds:
"(1) That, on the facts and in the circumstances of the case and in law, the learned Assistant Commissioner of Income Tax (herein after referred to as ACIT) has erred in making disallowance of Rs.5,72,764/- being rural development expenditure incurred by the appellant and learned Commissioner of Income Tax (Appeals) (herein after referred to as CIT (A)) has erred in confirming the order of the learned ACIT. The learned 13 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 ACIT be directed to allow the claim of Rs.5,72,764/- and to reduce the total income accordingly.
(2) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing Rs. 9,731/- being depreciation claimed by the appellant on roll over charges and learned CIT (A) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the Depreciation of Rs. Rs. 9,731/- on roll over charges and to reduce the total income accordingly.
(3) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing Rs. 19,20,39,222/- being deduction claimed by the appellant under section 80HHC [read with Circular No. 680 dated 21.2.1994] from MAT income as per provisions of Sec 115JB calculated based on book profit and learned CIT (A) has erred in confirming the order of the learned ACIT. The learned ACIT be directed to allow the deduction of Rs. 19,20,39,222/- claimed by the appellant under section 80HHC [read with Circular No. 680 dated 21.2.1994] and to reduce the total income under section 115JB accordingly.
(4) That, on the facts and in the circumstances of the case and in law, the learned ACIT has erred in charging interest of Rs. 7,28,052/- under section 234D of the Act and learned CIT (A) has erred in not deciding this issue in his appellate order. The learned ACIT be directed not to charge interest under section 234D of the Act and to reduce the demand accordingly.
(5) Without prejudice to the claim of the appellant that the debenture issue expenditure incurred by the appellant during the previous years relevant to assessment years 1988-89 and 1989-90 is revenue expenditure, however; if it is held in those years that the debenture issue expenditure is not revenue expenditure the appellant claims that the said expenditure be capitalized to the actual cost of fixed assets and depreciation be allowed on the same accordingly. The learned ACIT be directed to allow the claim of depreciation on the said debenture issue expenditure and to reduce the income computed as per provisions of MAT accordingly.
Without prejudice to the above, if it is held that said expenditure is neither a revenue expenditure nor capital expenditure which enhances the actual cost of fixed assets, the appellant alternatively claims that deduction Under section 35D be allowed on the said debenture issue expenditure. The learned ACIT be directed to allow the claim of deduction under section 35D on debenture issue expenditure and to reduce the total income accordingly.
(6) Without prejudice to the claim of the appellant that the deduction claimed under section 36(1)(iii) for interest on loans taken for new projects/ expansion / modernization during assessment years 1994-95 to 1999-2000 is revenue expenditure, however, if it is held in those years that the said expenditure is not revenue expenditure, the appellant claims that the said expenditure be capitalized to the actual cost of fixed assets and depreciation be allowed on the same and to reduce the total income computed as per provisions of MAT accordingly".
60. Ground no. 1 pertains to disallowance of Rs. 5,72,764/- being rural development expenditure.
14 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005
61. This issue has been dealt with by us in ITA No. 5421/Mum/2005, wherein, we have allowed the expenditure. Relying on our own decision, as taken by us, we allow the ground, wherein we set aside the order of the CIT(A) on this issue and the AO is directed to delete the addition.
62. Ground no. 1 is thus allowed.
63. Ground no. 2 pertains to disallowance of Rs. 9,713/- being depreciation on roll over charges.
64. The expenditure has been allowed as revenue expenditure, thus this ground becomes infructuous in so far as the instant appeal is concerned.
65. Ground no. 2 is thus, rejected.
66. Ground no. 3 pertains to disallowance of Rs. 19,20,39,222/- being deduction claimed under section 80HHC on MAT provisions.
67. At the time of hearing, the Senior Counsel submitted that the issue is squarely covered by various decision, as referred to in the synopsis filed. The Senior Counsel further submitted that in the latest decision in the case of CIT vs Bhari Information Tech. Sys. P. Ltd., reported in 340 ITR 593, Hon'ble Supreme Court held, "In the present case, we are concerned with section 80HHE which is referred to in the Explanation to section 115JA, clause (ix). In our view, the judgment of the Special Bench of the Tribunal in Syncome Formulations squarely applies to the present case. The Hon'ble Supreme Court, after upholding the decision of the Special Bench in Syncome Formulations, held, We see no reason to interfere with the judgment. ...." The Senior Counsel, therefore prayed that disallowance be deleted. He further submitted that in all fairness that the issue needs to be restored to the file of the AO, as there is no formal calculations done by the AO, on the 15 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 issue involved. On the other hand, the DR pleaded that the revenue authorities were correct in making the disallowance.
68. We have heard the arguments made by both the parties and the cases cited before us. The fact, as accepted by the DR as well was that the AO, has not made any calculations with regard to the impugned issue.
69. Now that the assessee has placed reliance on various decisions, including that of Hon'ble Supreme Court, we are of the considered opinion that the issue needs to be revisited by the AO in the light of the decision of Hon'ble Supreme Court in the case of Bhari Information Tech. Systems Pvt. Ltd. reported in 340 ITR 593.
70. As a result, the order of the CIT(A) is set aside on this issue and the AO is directed to recompute deduction under section 80HHC under MAT provisions as per law and keeping in view the decision of Bhari Information (supra).
71. The ground no. 3 is, therefore allowed for statistical purposes.
72. Ground no. 4 pertains to charge of interest under section 234D.
73. The charge is consequential, and has to be computed according to law, after giving effect to the instant orders. The assessee has pleaded in the relevant ground that the AO has not computed the interest as per law. We, therefore, direct the AO to recomputed in impugned interest as per law and per the decision rendered by the Hon'ble Bombay High Court in the case of Indian Oil Corp. reported in 78 DTR 361.
74. The ground is, allowed for statistical purposes.
75. Ground no. 5 are alternate grounds taken with respect of allowance of expenses incurred on NCD and FCD. In the synopsis filed and as submitted, the ground becomes infructuous, in so far as the 16 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 instant appeal is concerned as the revenue authorities have allowed expenses towards NCD as revenue expenses and expenses incurred towards FCDs have been allowed under section 35D.
76. The ground is, rejected as not pressed.
80. Ground no. 6 pertains to depreciation on interest capitalization on loan.
77. The ground was taken as an abundant caution. Since the issue has been decided by various decision by the coordinate Bench in the case of the assessee in various years, allowing the expense under section 36(1)(iii) and also we have held the issue in this order itself in ITA No. 5421/Mum/2005, following the same, we hold that in the instant appeal, the ground is infructuous, hence rejected.
78. In addition to the above, the assessee has raised additional grounds of appeal, which are as follows:
"1. On the facts and in the circumstances of the case and in law, the learned AO ought to have allowed 100% of the export profit as deduction under section 80HHC from book profits (ignoring the subsection (1B) of section 80HHC), calculated on the basis of adjusted books profits under section 115JB".
79. Additional Ground no. 1: The issue is identical as that in assessment year 2000-01, wherein we have restored the issue back to the file of the AO, as has been done in the preceding years by the coordinate Benches in the case of the assessee. For the sake of consistency, we restore the issue to the file of the AO, who shall adjudicate the issue afresh in light of the decisions of DCIT vs Reliance Industries Ltd. reported in 82 TTJ 765 (Mum SB), needless to mention that adequate and reasonable opportunity shall be given to the assessee to present its case.
80. Additional ground no. 2 pertains to computation of deduction under section 80HHC, ignoring subsection (1B) for the purposes of MAT provision.
17 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005
81. The ground does not emanate from the impugned order, we therefore, refrain from admitting the same at this stage.
82. Additional ground no. 2 is therefore rejected.
83. In the result, the appeal filed by the assessee is partly allowed.
ITA No. 5530/Mum/2005 (Department appeal):84. Ground no. 1 is deletion of disallowance under section 14A computed @ 1% of the exempt income by the CIT(A).
85. We have sustained the disallowance under section 14A in ITA no. 5561/Mum/2005. Following the same, we reverse the order of the CIT(A) and sustain the disallowance as computed by the AO at Rs. 4,56,257/-.
86. Ground no. 1 is therefore allowed.
87. Ground no. 2 pertains to deletion of Rs. 10,33,47,020/- under section 80HHC as per the provision of Section 115JB.
88. The DR submitted that the issue needs to be examined by the AO.
89. The AR contested the prayer of the DR, submitting that the case of Shirke Construction reported in 291 ITR 380 squarely applies on the issue, wherein, the Hon'ble Supreme Court of India, relying on the decision of P.R. Prabhakar vs CIT, reported in (2006) 6 SCC 86, explained the decisions rendered in IPCA Laboratory Ltd. and Induflex Products P Ltd.
90. We have heard the arguments, and the issue in question pertains to adjustment of deduction under section 80HHC computed 18 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 on income taken under section 115JB. The issue has been dealt with in detail by the CIT(A), wherein he has held, "10.2 I have carefully gone through the detailed submissions made by the appellant. The controversy involved is on the interpretation of proviso to sub section 3 section 8OHHC. As per the appellant if there is any loss suffered under the same sub section 3 of section 8OHHC, the same shall be ignored and deduction shall be allowed in respect of income computed as per the proviso to section 8OHHC(3). The appellant has relied on the detailed submissions made to the AO and following judgments
i) ACIT vs. Prathiba Syntex (106 Taxmann 32)
ii) Avon Cycles vs. ACIT (59 TTJ 75)
iii) A.M.Moosa vs. ITO (54 TTA 193)
iv) Vishal Exports Overseas Ltd., Mumbai vs. ITO (ITAT 'I' Bench in ITA No. 1 248/Mum12002 judgment dated 28.1.2003).
v) CIT vs Smt T.C.Usha (132 Taxmann 297)
vi) M/s. Lalsons Enterprises, New Delhi vs. DCIT
10.3 The appellant also stated that the Judgment of Hon'ble Supreme Court
was on the interpretation of application of sub-section 3 itself and not on the provision to sub-section 3. It was pointed out that the order the Hon'ble ITAT Special Bench in case of Lalson Enterprises applies to the facts of the case.
Whereas the AO relied upon the Hon'ble ITAT Bench, Indore judgment in case of Prestige Foods Ltd., and Hon'ble Supreme Court decision in case of IPCA Laboratories Ltd. vs CIT.
10.4 I have carefully considered the submissions made by the appellant and the AO. I am in agreement with the appellant that the judgment of the Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. does not apply to the facts of the instant case. On the contrary the proviso to sub- section 3 has been interpreted by the Hon'ble ITAT Special Bench in the case of Lalsons Enterprises. The Hon'ble Special Bench of ITAT has held that in case the computation of profit under sub-section 3 is negative then the application of proviso would have to be independent and that the deduction under section 8OHHC would be the amount worked out under proviso to sub-section 3 of section 8OHHC. Accordingly this ground of appeal is allowed".
91. We do not find any reason to deviate from the decision taken by the CTI(A), which we sustain, we, therefore, reject the ground taken by the department.
92. In the result, the appeal filed by the department is partly allowed.
To sum up:
Assessee's appeal in ITA 5421/Mum/2005 is partly allowed Revenue's appeal in ITA 5561/Mum/2005 is partly allowed.
Assessee's appeal in ITA 5422/Mum/2005 is partly allowed.
19 Aditya Birla Nuvo Ltd. Erstwhile Indian Rayon & Industries Ltd ITAs No. 5421 & 5561/Mum/2005 ITAs No. 5422 & 5530/Mum/2005 Revenue's appeal in ITA 5530/Mum/2005 is partly allowed.
Order pronounced in the open Court on 9th October, 2013.
Sd/- Sd/-
(पी.एम. जगताप) ( ववेक वमा)
लेखा सद य याईक सद य
(P.M. JAGTAP) (VIVEK VARMA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date: 9th October, 2013
त/Copy to:-
1) अपीलाथ /The Appellant.
2) यथ /The Respondent.
3) आयकर आयु त(अपील) -III/Con__Mumbai, / The CIT (A)- III Con__, Mumbai.
4) आयकर आयु त - 3/Con__, Mumbai /The CIT-3/Con__,, Mumbai,
5) वभागीय त न ध "आई" , आयकर अपील य अ धकरण, मंुबई/
6) गाड फाईल Copy to Guard File.
आदे शानसार ु /By Order / / True Copy / / [ उप/सहायक पंजीकार आयकर अपील य अ धकरण, मंुबई Dy./Asstt. Registrar I.T.A.T., Mumbai *च हान व. न.स *Chavan, Sr. PS