Income Tax Appellate Tribunal - Ahmedabad
The Arvind Mills Ltd, Ahmedabad vs Assessee on 17 April, 2013
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ सी, अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" C " BENCH, AHMEDABAD
BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER And
SHRI KUL BHARAT, JUDICIAL MEMBER
Sl. ITA No(s) Assessment Appeal(s) by
No(s). Year(s) Appellant vs. Respondent
Appellant (s) Respondent(s)
1. 2072/Ahd/2001 1995-96 The Arvind Mills ACIT
Ltd. Cir.1
Naroda Road Ahmedabad
Ahmedabad (Revenue)/
PAN:AABCA 2398D ITO Wd-2(3)
2. 66/Ahd/2002 1995-96 Revenue Assessee
3. 1041/Ahd/2002 1997-98 Assessee Revenue
4. 1331/Ahd/2002 1997-98 Revenue Assessee
5. 1713/Ahd/2002 1996-97 ITO Wd-2(3), Ahd Assessee
6. 2253/Ahd/2002 1999-2000 Revenue Assessee
Revenue by : Shri D.C.Patwari, CIT-D.R.
Assessee by : Shri S.N.Soparkar with
Shri P.M.Mehta
सनवाई
ु क तार ख / Date of Hearing : 17/4/2013
घोषणा क तार ख /Date of Pronouncement : 31/05/2013
आदे श / O R D E R
PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER :
Out of six appeals, two cross-appeals are filed by the assessee and Revenue for AY 1995-96. In AY 1996-97, only one appeal is filed by the Revenue. In AY 1997-98, there are two cross-appeals filed by the Assessee and the Revenue and remaining one appeal is filed by the Revenue for AY 1999-2000. All these appeals were heard together and ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000 -2- are being disposed of by way of this common order for the sake of convenience.
2. First we take up the appeals for AY 1995-96. The assessee's appeal is having ITA No.2072/Ahd/2001 and Ground Nos.1 & 2 of assessee's appeal are inter-connected which read as under:-
1. (a) In law, and in the facts and circumstances of the appellant's case, the learned Commissioner of Income Tax (Appeals) has erred in not allowing the entire amount of interest of Rs.1,74,60,000/- paid to Citi Corp. as interest accrued and paid during the previous year under section 36(1)(iii)/37 of the Act.
(b) The learned Commissioner of Income Tax (Appeals) further erred in upholding the view of the Assessing Officer and relying on the decision of the Supreme Court in the case of Madras Industrial Investment Corporation v. CIT (225 ITR
802) that interest for only 86 days in the case of debentures issued to Citi Corp. had accrued during the year and therefore the deduction should be limited to the claim of interest of Rs.27,50,110/-.
(c) The learned Commissioner of Income Tax (Appeals) failed to appreciate that decision of Madras Industrial Investment Corporation (225 ITR 802) is on facts of the case and on the issue of allowability of premium which accrued and became payable at the time of redemption of debentures.
(d) The Commissioner of Income Tax (Appeals) failed to appreciate that according to the terms of issue, the entire amount of interest of 17.46 accrued and was duly paid during the previous year and therefore ought to have been allowed as a deduction.
(e) The learned Commissioner of Income Tax (Appeals) ought to have appreciated that expenses incurred and paid in case of upfront interest was clearly allowable as per decisions of ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000 -3- M.P.High Court in the case of National Newsprint & Paper Mills Ltd. v. CIT (114 ITR 172), Supreme Court's decision in the case of Nonsuch Tea Estate Ltd. v. CIT (98 ITR 189), Bombay High court's decision in Calico Dyeing & Printing Works v. CIT (34 ITR 265). Gujarat High Court's decision in CIT v. Granulated Fertilizers & Seeds Pvt.Ltd. (137 ITR
400), Supreme Court's decision in the case of State of Madras v. G.J. Coehlo (53 ITR 186), Madras High Court's decision in the case of CIT v. A.Krishnaswamy Mudaliar & Ors. (53 ITR 123) & Supreme Court's decision I the case of Madras Industrial Investment Corpn. Ltd. v. CIT (225 ITR
802).
II. The entire amount of upfront paid to the Financial Institution ought to have been allowed on the ground of accrual of the same under section 36 and other applicable provisions of the Income-tax Act.
2.1. Ground No.3 of Revenue's appeal in ITA No.66/Ahd/2002 is also inter-connected and, hence, the same is reproduced below:-
3. The ld.CIT(A) has further erred in deleting the addition of Rs.32,41,16,432/- in respect of interest on debentures pertaining to ICICI Ltd.
3. The AO disallowed the part amount of interest paid by the assessee to CITI Corporation & ICICI Ltd. Being aggrieved, the assessee carried the matter before the ld.CIT(A) who had held that interest paid to Citi Corporation Investments and Securities Ltd. amounting to Rs.1,47,09,890/- is disallowable because payment of interest to this party is not covered by the provisions of section 43B of the Act. Regarding disallowance of interest payment to ICICI Ltd. amounting to Rs.32,41,16,423/-, it was deleted by the ld.CIT(A) by holding that since ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000 -4- interest payment to this party is covered by the provisions of section 43B of the Act and interest in question was actually paid by the assessee, in the present year, disallowance is not justified. Now, the assessee is in appeal for the disallowance of Rs.1,47,09,890/- confirmed by the ld.CIT(A), whereas the Revenue is in appeal for the disallowance of Rs.32,41,16,423/- deleted by the ld.CIT(A).
4. At the very outset, it was submitted by the ld.AR of the assessee that this issue is now covered in favour of the assessee by the judgement of Hon'ble Gujarat High Court rendered in the case of Mohit Marketing Ltd. vs. Dy.CIT in Tax Appeal Nos.157 & 328 of 2000 dated 21/04/2005. He submitted a copy of this judgement of Hon'ble Gujarat High Court. He also submitted that in that case also, facts were identical because in that case also, on each debenture, interest of Rs.62/- was paid upfront on the date of allotment and debenture was having face value of Rs.100/- and the redemption was to be made at par at the end of 6th year from the date of allotment. He submitted that in the present case also, the debenture issued was having face value of Rs.100/- and interest was paid @ Rs.38/- per debenture upfront on the date of allotment of debenture and the repayment was to be made after 3 years in the case of debenture issued to ICICI and 18 months for the debentures issued to Citi Corporation. He further submitted that hence, the facts are identical rather lesser amount of interest was paid by the assessee as compared to the facts in the case of Mohit Marketing Ltd.(supra). He further submitted that in that case also, disallowance was made by the AO out of interest payment. He also submitted that in that case, the Hon'ble ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000 -5- Gujarat High Court has duly considered the judgement of Hon'ble Apex Court rendered in the case of Madras Industrial Investment Corporation Ltd. vs. CIT reported as 225 ITR 802(SC). He also submitted that even after considering this judgement of Hon'ble Apex Court, it was held by the Hon'ble Gujarat High Court in that case that the assessee, i.e. the payer-company was entitled to deduction of interest paid by it on the debentures issued by it in the assessment under consideration, i.e. the year in which the debentures were issued.
5. As against this, it was submitted by the ld.DR of the Revenue that although the ld.CIT(A) has reproduced the relevant portion of the judgement of Hon'ble Apex Court rendered in the case of Madras Industrial Investment Corporation(supra) on page No.39 of his order but this judgement of Hon'ble Gujarat High Court is not a good law because it has considered this Hon'ble Supreme Court decision in a limited way, i.e. with regard to comparison of provisions under sections 36 & 37. He also submitted that the payment is of the nature of advance interest and as per matching principle, deduction should be allowed only of that interest portion which is related to the present year and not for the total payment.
6. We have considered the rival submissions, perused the material from record and gone through the orders of authorities below as well as the judgement of Hon'ble Gujarat High Court cited by ld.AR of the assessee rendered in the case of Mohit Marketing Ltd.(supra). We find that in that case also, the facts were identical because in that case also, ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000 -6- the debenture of Rs.100/- each were issued which were to be redeemed after six years and for the entire period of six years, interest payment was made upfront on the date of allotment @ Rs.62/- per debenture. Such payment was made on 24/03/1995, i.e. the date of allotment in that case, hence the funds were used in that case for only a few days during AY 1995-96. In spite of this, the assessee in that case claimed deduction for the entire amount of interest paid on the date of allotment. The argument on behalf of the Revenue was that this interest should accrue on day-to- day basis, but it was held by Hon'ble Gujarat High Court in that case in paragraph No.14 that this argument does not have merit in the light of the fact that the parties had specifically provided for a particular rate of interest as well as the manner of payment. It was further held that once, it is so, it is not possible to rewrite the same and state that interest would accrue or liability to pay interest to accrue over the entire period of debentures, i.e. six years. It is also held in the same paragraph that this is not possible and the entire interest payment made in the initial year of allotment cannot be artificially spread over the period of six years for the purposes of allowing deduction. No difference in facts could be pointed out by the ld.DR of the Revenue. His only argument was thus that this judgement of Hon'ble Gujarat High Court is not a good law because Hon'ble Gujarat High Court has considered the Hon'ble Supreme Court decision rendered in the case of Madras Industrial Investment Corporation(supra) in a limited way only but we do not find any force in the argument of ld.DR of the Revenue. Rather, it is not proper for us to say that Hon'ble Gujarat High Court had not considered the judgement of Hon'ble Apex Court rendered in the case of Madras Industrial ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000 -7- Investment Corporation(supra) in a proper manner. Hence, we are of the considered opinion that this issue is now fully covered in favour of assessee by the judgement of Hon'ble Gujarat High Court rendered in the case of Mohit Marketing Ltd. and therefore, no part of this interest expenditure is disallowable whether it is covered by 43B or not. Accordingly, ground Nos.1 & 2 of the assessee's appeal are allowed and ground No.3 of the Revenue's appeal is dismissed.
7. Assessee's appeal for AY 95-96 has only one more ground, i.e. ground No.3 which reads as under:-
III. (a)In law, and in the facts and circumstances of the appellant's case the learned Commissioner of Income Tax (Appeals) erred confirming the view of the Assessing Officer and not allowing the claim of expenditure amounting to Rs.40,09,204/- of the appellant company in respect of project expenses written off.
(b) The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the claim of project expenses of the appellant company was restricted to projects in existing line of business of the appellant company.
7.1. Brief facts regarding this issue till assessment stage are noted by the ld.CIT(A) in paragraph Nos.12 and 12.1 of his order which are reproduced below:-
12. Ground No.12 is with reference to the disallowance of the claim for expenditure of Rs.40,09,204/- in respect of project expenses written off. In para 10 of the assessment order assessing officer has observed that in the books, the appellant had written off project expenses amounting to Rs.1,04,72,708. Before the ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000 -8- assessing officer it was submitted that such expenses were written off in accordance with the broad larger decisions and the project expenses of Rs.40,09,204 of the two projects of Sri Lanka and Mauritious for establishing of facilities in those countries for manufacturing of denim from yarn supplied from India being related to the line of business of the company were required to be considered u/s.37 of the Act.
12.1 The claim was not accepted by the assessing officer stating that the assessee being a big corporate house it got advice available in the taxation matters, did not require any guidance or advice as suggested in its letter. The decisions relied upon by the appellant were found to be misplaced as they were not applicable to the facts. He stated that the appellant wanted to launch totally new projects in foreign countries for opening up new manufacturing facilities. Hence the contention of the appellant about admissibility of deduction u/s.37 of the said expenditure has no force and under section 37 an expense, if, capital in nature was not admissible as a deduction. He has referred to the decision of the case of CIT vs. Suhrid Geigy Ltd. 132 CTR 02 to support his action.
8. Being aggrieved, the assessee carried the matter in appeal before ld.CIT(A) but without success and now the assessee is in further appeal before us.
8.1. It was submitted by the ld.AR of the assessee that this issue is now covered in favour of the assessee by the ITAT "C" Bench Ahmedabad decision rendered in the case of DCIT vs. M/s.Inox Leisure Ltd. in ITA No.1984/Ahd/2009 dated 09/09/2011. He submitted a copy of the Tribunal's decision. He has drawn our attention to paragraph No.27 of the Tribunal's decision as per which this issue was decided by the Tribunal in favour of assessee.
ITA No.2072/Ahd/2001,66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000 -9- 8.2. Ld.DR of the Revenue supported the orders of the authorities below. Regarding the Tribunal's decision cited by the ld.AR of the assessee having been rendered in the case of M/s.Inox Leisure Ltd.(supra), it was submitted that the facts of that case are different and hence, this Tribunal's decision is not applicable in the present case. He also placed reliance on the judicial pronouncements in the case of Triveni Engineering Works Ltd. vs. CIT reported as (1998) 232 ITR 639 (Delhi.). DR of the Revenue has also placed reliance on a decision of Hon'ble Delhi High Court in the case of CIT vs. Priya Village Roadshows Ltd. reported as (2011) 332 ITR 594.
9. We have considered the rival submissions, perused the material from record and gone through the orders of authorities below and the judgements cited by both the sides. We find that in para-10 of the assessment order, the AO is making discussion regarding claim of the assessee for the expenses of Rs.1,04,72,708/- claimed by the assessee in respect of project expenses written off. On page 126 of the assessment order, the AO is making computation and there we find that no such disallowance is actually made by the AO. Thereafter, in para No.12 of the order of the ld.CIT(A), it is noted by the ld.CIT(A) that this expenditure of Rs.104.72 lacs being the amount of project expenses was in respect of two projects of Sri Lanka and Mauritious for establishing of facilities in those countries for manufacturing of denim from yarn supplied from India. Thereafter, in para-12.3 it is noted by the ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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ld.CIT(A) that the amount was spent in respect of projects in Sri Lanka and Mauritious could not be established. Before us, the only argument of ld.AR of the assessee is by way of reliance on one Tribunal's decision rendered in the case of M/s.Inox Leisure Ltd.(supra) in which the Tribunal has followed the judgements of H'ble Delhi High Court rendered in the case of Priya Village Roadshows Ltd. reported as (2011) 332 ITR 594 (supra) on which also, the reliance has been placed by ld.AR of the assessee before us. But before going to the judgements, the facts are to be established first that the impugned expenses were incurred in respect of projects in Sri Lanka and Mauritious because as per CIT(A)'s observations in para-12.3, this aspect could not be established by the assessee. Secondly, the assessee is also required to establish that the project for which the impugned expenditure were incurred is in existing line of business and the third aspect to be established is that the relevant project were abandoned and then only applicability of judgements cited by both the sides can be examined. Hence, we feel that in the interest of justice, this matter should go back to the file of CIT(A) for a clear finding regarding the facts as noted above and then he has to decide the issue afresh after examining the various judgements cited by both the sides before us. With these observations, we set aside the order on this issue and restore this matter back to file of CIT(A) for a fresh decision in the light of above discussion after providing adequate opportunity of hearing to both the sides. This ground of the assessee is allowed for statistical purposes.
ITA No.2072/Ahd/2001,66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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10. Now there is no more ground left with us in the appeal of the assessee for this year.
11. Ground No.1 of Revenue's appeal (ITA No.66/Ahd/2002) for AY 1995-96 reads as under:-
1. The ld.CIT(A) has erred in law and in facts in deleting the disallowance of claim of depreciation on Wind Turbine Generating Sets of Rs.24603203/-.
11.1. Ld.DR of the Revenue has supported the assessment order. He placed reliance on the Tribunal's decision rendered in the case of ACIT vs. Mohit K.Mehta reported as (2010) 3 ITR (Trib.) 580 (Bang.). He strongly supported the assessment order and submitted that the order of the CIT(A) on this issue should be reversed and that of the AO should be restored.
11.2 As against this, ld.AR of the assessee supported the order of the ld.CIT(A). He also placed reliance on the following judicial pronouncements:-
Sl.No(s) In the case of..... Reported in..... (1) Assistant Commissioner Of 251 ITR 133(Guj.) Income Tax Vs. Ashima Syntex Ltd.
(2) Commissioner Of Income Tax 56 DTR 414 (P&H) Vs. Shahbad Co-Operative Sugar Mills Ltd.
(3) Commissioner Of Income Tax 54 DTR 249 (Cal.) Vs. E.I.H. Ltd.
(4) Omkar Textile Mills (P) Ltd. 115 TTJ 716 (Ahd.) Vs. Income Tax Officer ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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12. We have considered the rival submissions, perused the material from record and gone through the orders of the authorities below as well as the judgements cited by both the sides. First of all, we want to reproduce the relevant paras of the order of the CIT(A) as per which this issue was decided by him in favour of the assessee. Those paras are para Nos.2.2 & 2.3 which are in the following terms:-
"2.2. I have considered the arguments of the learned counsel for the appellant and I have also gone through the assessment order and the relevant papers submitted alongwith the paper-book. The assessing officer has restricted the claim to 50% mainly for the reason that datewise readings were not furnished, commercial production of electricity had not started by 30/9/1994 as regular connection with GEDA was not available till that date and at best this was a case where the units were being test checked by obtaining temporary connection by ABS Industries. From the various papers filed it is seen that on 28/9/1994 the appellant had written to GEDA, Porbandar regarding installation of their Windfarm at Navadra and report of Electrical Inspector dated 30/9/1994 was also placed before the assessing officer. Vide letter dated 26/9/1994, the ABS Industries Ltd. had permitted the appellant to connect its transmission line to their transmission line until the final connection of the appellant was ready. A No Objection Certificate in this regard was also sent to Bharat Heavy Electrical Ltd. by M/s.ABS Industries. In fact, correspondence with GEDA has been made from 21/9/1994 in this regard and in the letter dated 21/9/1994 to GEDA it was also mentioned that they would like to connect their Windfarm through the transmission line of M/s.ABS Industries. Permission for this was also granted by the concerned authorities. All these show that the appellant was in a position to start this unit when a transmission line was available. The line for testing was charged on 29/9/1994 for commissioning on 30/9/1994. In fact, copies of all these letters were filed with assessing officer regarding 11 k.v. line for power ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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evacuation from Arvind Windfarm to sub-station at Lamba which was done using their own line together with that of M/s.ABS Industries Ltd. The appellant has also filed copy of bill of Ahmedabad Electricity Company Ltd. (AECL) which wass also filed before the assessing officer in which credit for power received by them in the month of September, 1994 was given. It has also been pointed out by the appellant that on 6/3/1998, in fact, Shri Bhui had stated clearly that six WTGS, i.e., WTGS Nos.1,2,3,5,8,9 were commissioned on 30/9/1994, WTGS Nos.4,6,7,10,11 and 12 were commissioned on 22/10/1994 and commissioning of all the 15 WTGS were completed exclusively by 28/10/1994. It was sated that the whole statement of Shri Bhui was not quoted properly and if it is correctly appreciated, it would be apparent that six WTGS were in act installed by 30/9/1994. The above discussion reflects that AECL had granted credit for electricity generated for the Windfarm in the month of September, 1994. Similarly, correspondence with GEDA and permission of M/s.ABS Industries Ltd. shows that production of electricity had started in the month of September, 1994. As is apparent, the appellant was using the line of ABS Industries with the permission of GEDA. Hence, it was immaterial whether a regular line of sub- station of GEDA was connected through the appellant's line, when the appellant was connected with GEDA sub-station through ABS Industries with permission form both of them. Of course, there is no doubt that generation of small amount of electricity could not be said to be exploitation of the asset on a commercial basis, however, it cannot be denied that the six WTGS have actually generated electricity in the month of September, 1994 though it may be only as a trial run, it cannot be said that the assets were not used for the purpose of business.
2.3. The position in law is that it is immaterial whether for how much time a particular asset was used and how much product was obtained for the purpose of depreciation. What is required is that the assets should be used for the purposes of business. Trial run of the machinery is obviously for the purpose of business and the appellant could not be denied the benefit of depreciation on the ground that the machinery was used for a very short duration for ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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trial run. It is a fact that the machinery was used and electricity was generated for which credit was also given by the AEC supply company/GEDA. Thus, there is definitely commencement of business by way of production of articles and thus the appellant is entitled to full depreciation as the units were used in the month of September, 1994 itself, i.e. 30/9/1994. The above view finds support from the decision of Honourable Gujarat High Court in the case of Asstt.Commisisoner of Income-tax vs. Ashima Syntex Ltd. 251 ITR 133. There are several decisions to this effect. In the case of CIT vs. Sarabhai Management Corpn. Ltd. 192 ITR 151 decided by the Honourable Supreme Court, it was sent hat the assessee was in the business of acquiring immovable properties and giving it on leave or license or lease with all amenities. A building was acquired in March, 1964 which was ready for service after renovation on 1st October, 1964. The building was given on leave and license on 1st May, 1964, i.e. in the next accounting year. It was held that the assessee was entitled to depreciation in the earlier year itself as business had commenced on 1/10/1964 as the property was made ready and the assessee was in a position to offer services. In the case of the appellant, the appellant was in a position to produce electricity which was produced in the month of September, 1994 itself though in a small measure. If the underlined principles enunciated in these two principles are applied, it would be clear that the appellant is entitled to depreciation for the full year, i.e. at the rate of 110%. I also find that in a group case M/s.Cibatul ltd., the learned CIT(A)-XII has considered a similar question and vide appellate order dated 26/12/1997, has allowed depreciation to Wind Turbine Unit. Considering this decision and the above mentioned facts, the disallowance made on account of depreciation on the six Wind Turbine Generation Sets amounting to Rs.2,46,03,203/- is therefore, directed to be deleted. (Relief - Rs.2,46,03,203/-)."
13. From the above paras of the order of the CIT(A), we find that a clear finding was given by the CIT(A) that the assessee was in a position to produce electricity which was produced in the month of September-
ITA No.2072/Ahd/2001,66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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1994 although in a small measure. On the basis of this fact, he has decided this issue in favour of assessee and it was held that for six Wind Turbine Generation Sets, the assessee is eligible for depreciation at full rate because the asset in question were used for more than 180 days.
13.1. Now we examine the applicability of the Tribunal's decision cited by ld.DR of the Revenue, i.e. the Tribunal decision rendered in the case of ACIT vs. Mohit K.Mehta(supra). In that case, the issue involved was decided against the assessee on the basis that where no power was generated from windmill in question and no such business was carried on in past, windmill could not be said to have been used for business so as to entitle the assessee for depreciation thereon. In the present case, the facts are totally different. There is no dispute even by the AO that the six windmill in question were used by the assessee during this year. The only dispute is whether the same were put into use on 28/09/1994 as claimed by the assessee and hence, full depreciation is to be allowed or whether the same were put into use in October-94 resulting in only ½ of the eligible depreciation to be allowed in the present year. Hence, this Tribunal decision cited by ld.DR of the Revenue is not applicable in the facts of the present case.
13.2. Now we examine the applicability of the judgement of Hon'ble Gujarat High Court cited by ld.AR of the assessee having been rendered in the case of ACIT vs. Ashima Syntex Ltd.(supra). In that case, it was held by Hon'ble Gujarat High Court that the term "use" has a wide connotation and even trial production of a machinery would fall within ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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the ambit of "used for the purpose of business". It was also held that the Statute does not prescribe a minimum time-limit for use of the machinery and hence the assessee cannot be denied the benefit of depreciation on the ground that the machinery was used for a very short duration for trial run. In the present case also, windmills were in fact used in the month of September-1994 and a small amount of electricity was also produced although it was very negligible. This finding of ld.CIT(A) could not be controverted by ld.DR of the Revenue and therefore, this judgement of Hon'ble Gujarat High Court cited by ld.AR of the assessee having been rendered in the case of Ashima Syntex Ltd.(supra) is squarely applicable and therefore, we do not find any reason to interfere in the order of the ld.CIT(A) on this issue by respectfully following this judgement of Hon'ble Jurisdictional High Court. Accordingly, ground No.1 of Revenue's appeal is rejected.
14. Ground No.2 of Revenue's appeal for AY 1995-96 reads as under:-
2. The ld.CIT(A) has further erred in allowing depreciation of Rs.30020284/- in respect of machinery purchased and leased by the assessee.
14.1. Brief facts regarding this issue till assessment stage are noted by the ld.CIT(A) in paragraph No.3 of his order which is reproduced below, for the sake of ready reference:-
"3. The third ground of appeal relates to disallowance of the claim for depreciation amounting to Rs.3,00,20,284/- in respect of the machinery purchased from and leased back to Prakash ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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Industries Ltd. (PIL). The appellant company had purchased from and leased back to PIL, Steel Rolling mills rolls costing Rs.3,00,20,284/- and claimed 100% depreciation thereon."
15. Being aggrieved, the assessee carried the matter in appeal before ld.CIT(A) who had deleted this disallowance by observing that the transaction is apparently genuine since the equipment was purchased by M/s.PIL from TISCO. Now the Revenue is in appeal before us.
16. It was submitted by ld.DR of the Revenue that no Remand Report has been obtained by the ld.CIT(A) from the AO on the evidences submitted by the assessee to counter the report of Investigation Wing. He also submitted that there is no complete proof regarding the existence of assets in question. He strongly supported the assessment order on this issue and submitted that the order of the CIT(A) should be reversed and that of the AO should be restored.
16.1. As against this, ld.AR of the assessee strongly supported the order of the CIT(A). He also placed reliance on the following judicial pronouncements:-
Sl.No(s) In the case of..... Reported
in...../unreported.....
(1) Indusind Bank Limited Vs. 135 ITD 165 (Mum.)
Additional Commissioner Of (SB)
Income Tax
(2) I.C.D.S. Ltd. Vs. Commissioner 350 ITR 527 (SC)
Of Income Tax
(3) Commissioner Of Income Tax 348 ITR 574 (Mad.)
Vs. High Energy Batteries
(India) Ltd.
ITA No.2072/Ahd/2001,
66,1041,1331,1713 & 2253/Ahd/2002
The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
- 18 -
(4) Deputy Commissioner Of 212 Taxman 417
Income Tax Vs. First Leasing (Mad.)
Co. Of India Ltd.
(5) Development Credit Bank Ltd. ITAT Mumbai Bench
vs. Dy.CIT ITA
Nos.3006/Mum/2001
& 4892/Mum/2003
order dated 20/03/2013
16.2 An alternative contention was raised by the ld.AR of the assessee that if it is held that depreciation is not allowable, then only interest portion should be taxed after reducing the principal portion from the total amount of lease rent received during the present year.
17. We have considered the rival submissions, perused the material from record and gone through the orders of the authorities below as also the judgements cited by ld.AR of the assessee. We find that this issue has been decided by ld.CIT(A) at paras 3.5 & 3.6 and these paras are reproduced below for the sake of convenience:-
"3.5. I have considered the arguments of learned counsel of the appellant and I have also gone through the assessment order and the case laws relied upon by the assessing officer as well as the appellant. I find that as far as the application of Explanation 3 and 4 to section 43(1) are concerned the matter is covered by my predecessor's order in the appellant's case for A.Y. 1994-95. My learned predecessor in the appellate order for A.Y. 1994-95 dated 14/11/2000 has held that explanation 3, 4 and 4A to section 43(1) were not applicable. The facts being identical, it is held that even for this year the assessing officer's action in invoking the explanation is not correct. As far as the letter of the assessing ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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officer dated 28/7/1999 is concerned it is seen that Directorate of Income-tax (Inv), Ludhiana was investigating certain cases where claim of 100% depreciation was made and it was found that M/s.Prakash Industries Limited (PIL) in collusion with certain other parties was engaged in sale and lease back transaction. M/s.PIL allegedly used to purchase machineries from some fake parties and used to engage in sale and lease back of the assets allegedly purchased from these parties. In fact, the said parties only used to give invoices and actually no equipment existed.
In letter dated 5/4/1999 of DI(Inv), Ludhiana in para 3 it is mentioned as under:-
"in the case of Arvind Mills, the transaction is different. Its sole and lease back transaction where Prakash Industries has purchased machinery from one of seven parties which are given as below and sold it to Arvind Mills and then leased back. This transaction is also relevant to F.Y. 1994- 95, A.Yr. 1995-96. It may be mentioned that the enquiries are against M/s.Prakash Industries and not Pioneer Engg. Thus, Pioneer Engg. reference was made only by UTI Bank as in their case they claim that purchases were made from Pioneer Engg. who has made VDIS at Ludhiana otherwise there are seven bougs fake parties whose name are being used by M/s.Prakash Industries Ltd. for showing the sale of Pollution Control Flameless Furnace Rolling Mills Rolls, transformers etc., on 2which 100% depreciation is claimed. These seven parties names are as under:-
1. Sahib Engg.
2. Pioneer Engg.
3. Ashish Engg.
4. A.S. Mechanical Ltd.
5. A.S. Forging
6. R.K.Video
7. Prime Softex In the case of first five, references were received from various parties but later two, we have been able to find anything while ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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going through the bank account of the other five parties. These two also found in fake names used by Prakash Industries Ltd.
Your line of enquiry has to be from whom the machinery was purchased and leased out to Prakash Industries Ltd.
3.6. Thus, as per the letter of Investigation Wing the line of enquiry was with an angle to see from whom the machinery was purchased and leased to M/s.Prakash Industries Limited. Apparently, if the equipment in question was purchased by M/s.PIL from the above mentioned seven parties, and if, in that respect sale and lease back transaction was entered through the appellant, there was every likelihood that the transaction would be sham one. From the details submitted during the course of assessment and at the appellate stage, it is noticed that sale and lease back transaction was entered in respect of Steel Rolling Mill rolls with M/s.PIL. The Chartered Engineer Mr.Guha from Delhi had physically verified these assets and valued them. Photographs of the equipments have also been produced on which "FIN" by Arvind Mills Ltd." is written. The equipment has also been insured by the New India Assurance Ltd. New Delhi. It shows that the equipments in question existed at the site of M/s.PIL. It is also seen from the papers filed that the assessing officer had also made enquiries through the Chartered Engineer. It is found that the equipment in respect of which sale and lease back transaction was entered through was purchased by M/s.PIL from M/s.Tata Iron & Steel Co. This fact is also evident from the certificate of Chartered Engineer. Hence, none of the seven fake parties were involved as far as this transaction was concerned. The appellant has stated that as these items were purchased by M/s.PIL, from a reputed concern like TISCO, there was no question of the transaction being sham. It has also been mentioned that in respect of recovery of lease rentals and dishonour of cheques cases are going on against M/s.PIL and the appellant also wanted to purchase similar type of structural steel items from M/s.PIL and to adjust the value against lease rental. Some material was also supplied by them. In response to assessing officer's query, the Chartered Engineer in his letter dated 23/3/1998 addressed to the assessing officer, had ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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again certified that the original bill of M/s.Tata Iron & Steel Co.Ltd. were also examined by him at the time of his visit to the site for the purposes of valuation. All these show that equipment was not purchased from any of the fake parties mentioned in the letter of Directorate of Income-tax(Inv), Ludhiana and as suggested by them when purchase was not through any of these parties, there was no question of treating the transaction as non genuine specially when even Court cases are going on in respect of these transactions. As discussed earlier, in view of the appellate order for A.Y. 1994-95 in the appellant's case Explanations to section 43(1) as invoked by the assessing officer are held to be inapplicable. As discussed, even the transaction is apparently genuine as the equipment was purchased by M/s.PIL from TISCO. Thus, it would not be proper to disallow the depreciation claimed on these assets in respect of which sale and lease back transaction was entered into. The claim of the appellant is, therefore, allowed. (Relief - Rs.3,00,20,284/-).
18. From the above paras of the ld.CIT(A), we find that so far the invoking of Explanations-3, 4, 4(a) to section 43(1) of the Act are concerned, it is held by the ld.CIT(A) that this aspect of the matter is covered in favour of the assessee by the order of the ld.CIT(A) in assessee's own case for AY 1994-95 and nothing has been brought on record by the ld.DR of the Revenue that this order of the CIT(A) for AY 1994-95 has been reversed by the Tribunal and, hence, on this aspect, we infer that either on this aspect, the order of the CIT(A) in AY 1994-95 was not disputed by the Revenue before the Tribunal in AY 1994-95 or Tribunal had decided this issue in favour of the assessee. Regarding second aspect of the matter that the purchase of equipments by PIL is a sham transaction and, therefore, the existence of the assets in question is not established, we find that a clear finding has been given by the ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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ld.CIT(A) that these assets in question were purchased by PIL from TISCO and not from any one or more of the seven parties which were examined by the Investigation Wing. This aspect was examined by the Chartered Engineer also and he has stated so in his report that he had verified the original bills of TISCO at the time of his visit of the site for the purpose of valuation. It is also stated by the ld.CIT(A) that in response to AO's query, the Chartered Engineer in his letter dated 23.03.1998 addressed to the AO had again certified that the original bills of TISCO were examined by him. When CIT(A)'s finding is on these very facts and since the letter dated 23/03/1998 written by the Chartered Engineer to the AO and verification report from Chartered Engineer were very much available before the AO, we do not find any merit in the arguments of the ld.DR of the Revenue that ld.CIT(A) should have obtained remand report from the AO in respect of evidences submitted by the assessee to counter the report of Investigation Wing. Since the assets in question were verified by the Chartered Engineer along with original bills of TISCO in favour of PIL, the existence of the assets in question cannot be doubted. Ld.DR of the Revenue could not controvert these findings of the ld.CIT(A) as given by him in paras 3.5 & 3.6 of his order which are reproduced above. Therefore, we do not find any reason to interfere in the order of the CIT(A) on this issue also. Ground No.2 of the Revenue is also rejected.
19. Ground No.4 of Revenue's appeal reads as under:-
ITA No.2072/Ahd/2001,66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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4. the ld.CIT(A) has further erred in allowing the claim of Rs.89461823/- of the assessee in respect of deferred revenue expenses.
19.1. At the very outset, it was submitted by the ld.AR of the assessee that this issue is covered in favour of the assessee by the ITAT "D"
Bench Ahmedabad order in assessee's own case for AY 1994-95, i.e. ITA No.216/Ahd/2001 dated 30/07/2010, copy of which is available on pages 86 to 188 of the paper-book. He also submitted that the relevant paras are paras 29 to 33 of this Tribunal order which are available on pages 121 to 130. Ld.DR of the Revenue supported the assessment order but he could not demonstrate that this issue is not covered in favour of the assessee by the Tribunal order in assessee's own case for AY 1994-
95. We have considered the rival submissions and we find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for AY 1994-95(supra). Ld.DR of the Revenue could not point out any difference in facts in the present year as compared to the facts in AY 1994-95 and, hence, no interference is called for in the order of the CIT(A). Accordingly, ground No.4 of the Revenue is also rejected.
20. Ground No.5 of Revenue's appeal reads as under:-
5. The ld.CIT(A) has further erred in allowing the claim of Rs.27396444/- in respect of disallowances made by the A.O. towards allocation of expenses of EOU.
20.1. Regarding this issue also, it was submitted by the ld.AR of the assessee that this issue is also squarely covered in favour of the assessee by the same Tribunal order in assessee's own case for AY 1994-95. He ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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also submitted that the relevant findings are contained in paras- 37 to 41 of this Tribunal order. Ld.DR of the Revenue has supported the assessment order but he could not point out as to how this issue for the present year is not covered in favour of the assessee by this Tribunal order in assessee's own case for AY 1994-95(supra).
21. We have considered the rival submissions. Since the ld.DR could not point out any difference in facts in the present year as compared to the facts in AY 1994-95, we do not find any reason to take a contrary view than taken by the Tribunal in AY 1994-95 and, hence, this ground No.5 of the Revenue is rejected.
22. Ground No.6 of the Revenue's appeal reads as under:-
6. The ld.CIT(A) has further erred in directing the A.O. to adopt the value of closing stock for A.Y. 94-95 as the value of the opening stock for this year and allowing deduction for the same.
23. At the very outset, it was submitted by the ld.AR of the assessee that this issue is covered in favour of the assessee by the same Tribunal order in assessee's own case for AY 1994-95(supra). Ld.DR of the Revenue supported the assessment order.
24. We have considered the rival submissions. We find that in the Tribunal order for AY 1994-95, it is held by the Tribunal that the AO is directed to consider the claim of the assessee for giving effect to the closing stock valuation in the subsequent assessment year, i.e. AY 1995- ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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96 because the valuation of closing stock for AY 1994-95, will be opening stock in the subsequent AY 1995-96. Since the Tribunal has already given direction in its order for AY 1994-95 that the addition made in the closing stock for AY 1994-95 should be considered as addition in opening stock for the subsequent assessment year, i.e. AY 1995-96, therefore, this issue is squarely covered in favour of the assessee by this Tribunal order for AY 1994-95(supra) and hence, there is no infirmity in the order of the CIT(A) on this issue. Ground No.6 of the Revenue is also hereby rejected.
25. Ground No.7 of Revenue's appeal reads as under:
7. The ld.CIT(A) has further erred in directing the A.O. to allow the claim of Rs.39756025/- u/s.43B disallowed by the A.O. 25.1. Brief facts regarding this issue till the assessment stage are noted by the ld.CIT(A) in paras 11 to 11.4 of his order and for the sake of ready reference, the relevant paras are reproduced below:-
11. Ground No.11 is against disallowance of claim under sec.43B of the Act, amounting to Rs.3,97,56,025/-.
11.1 In the return of income, the appellant had claimed deduction of this amount, details of which was as under:
Ashoka Mills Rs.
Interest payable to the Financial and Pertaining to A.Y. 1993-94 after deducting Rs.31,45,317 on account of the interest Waived by the Financial Institutions Pursuant to the order of BIFR 1,38,82,454 ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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Interest payable to the Financial Institutions And pertaining to A.Y. 1994-95 2,12,00,363 3,50,82,817 Other items 46,73,208 3,97,56,025 ======= 11.2. This issue has been discussed in para 8 of the assessment order. The assessing officer has stated that the appellant has claimed this amount u/s.43B on payment basis for outstanding liabilities pertaining to the period prior to amalgamation of Ashoka Mills Ltd. As per the rehabilitation scheme of BIFR the package of relief covered conversion of outstanding simple interest due as on 31-3-1994 into fully paid equity shares, at par, of Ashoka Mills Ltd. before the proposed merger. He has stated that during proceedings before BIFR the Bench observed that there was a letter dated 21-6-1995 from Director of Income-tax stating that the company did not require exemption u/s.41(1) and 43B of the I.T. Act. The promoters confirmed the position and accordingly they sought deletion of sub-para 4D.II of the Scheme. In view of the above it was held by the Assessing officer that all the debts and liabilities of Ashoka Mills Ltd. were taken over by Arvind Mills ltd. subject to clause (9). According to the BIFR Scheme, package of relief and concession, the outstanding simple interest payment of all institutions as on 31-3-1994 was to be converted into fully and equity shares, at par of the transferor company Ashoka Mills Ltd. before the proposed merger. Therefore, the appellant could not claim this deduction and also as the appellant admitted that it did not require any exemption u/s.43B. Therefore, it was an inadmissible claim as deemed date of conversion of such loan was prior to the date of proposed merger and hence outstanding interest did not remain a liability to be discharged subsequent to the date of merger. Besides this, Arvind Mills Ltd. has issued shares of face value of Rs.8,77,707 against which deduction u/s.43B for of Rs.3,50,82,817 was being claimed. As per the scheme this interest was to be converted into ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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share of Rs.100 each which meant 3,50,828 shares of Ashoka Mills Ltd which were to be converted into shares of Arvind Mills Ltd. in the ratio of 4:1. The Assessing Officer held that it could not be said to be for discharge of liability which stood discharged on allotment of shares of Ashoka Mills Ltd. on a date prior to the date of merger. The assessing officer, thereafter, referred to the entries passed on account of amalgamation and stated that no specific entry, incorporating interest liability of financial institutions which were claimed, could be noticed.
11.3. According to the assessing officer, in the Scheme of BIFR the appellant was given concession of non-payment of interest by way of conversion into equity to reduce the burden of escalation of interest and that concession could not be used for claiming such a huge deduction of Rs.3.5 crores, when the amount was being actually paid out of liquid fund of the appellant. The assessing officer has referred to the decision of the Supreme Court in the case of Madeva Upendra Saini (98 ITR 209) and stated that the word actually allowed cannot be stretched to mean notionally allowed or merely allowable on notional basis and on the basis of the said ratio once the word 'paid' is prefixed by the word 'actually', it means the real substantive and actual payment of cash/funds so as to reach the coffers/funds of the Government agency/institution. He has also referred to ITAT, Ahmedabad decision in 51 TTJ 681 in which it was held that furnishing of bank guarantee for payment of excise duty could not be treated as actual payment. The assessing officer did not accept that the claim of carry forward of unabsorbed depreciation and allowance of Ashoka Mills Ltd. which was based on calculation of Sec.42B and disallowed the claim.
11.4. Regarding the remaining amount of Rs.46,73,208 representing other statutory liabilities of Ashoka Mills Ltd. and broadly relating to payment of land revenue, municipal taxes and labour related payments and turnover tax for the financial year 1993-94 and earlier years, the A.O. has mentioned that the promoters of appellant company had themselves stated that the company did not require any exemption u/s.43B and accordingly ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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relevant para 4D.II of the scheme was deleted. Since it was categorically agreed as per the scheme sanctioned by the BIFR that the appellant would not be entitled to exemption u/s.43B in relation to liabilities of Ashoka Mills Ltd., the claim now pressed by the appellant was not admissible."
26. Being aggrieved, the assessee carried the matter in appeal before the CIT(A) who has deleted the addition and now the Revenue is in appeal before us.
27. Ld.DR of the Revenue supported the assessment order. He also submitted that for benefit u/s.43B of the Act, assessee before BIFR submitted that the assessee do not require benefit u/s.43B and hence, the order of the CIT(A) on this issue should be reversed and the order of the AO should be restored.
28. As against this, ld.AR of the assessee supported the order of the ld.CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal decision rendered in the case of Lustre Tiles Ltd. vs. Addl.CIT as reported in (2007)108 ITD 35 (Jp) and also by another decision of the Tribunal rendered in the case of CIT vs. E.H. Kathawala & Co. as reported in (1982) 9 Taxmann.com 77 (Bang).
29. We heard the rival submissions. We find that the case of AO is that although the assessee is eligible for deduction u/s.43B of the Act in respect of conversion of outstanding interest into loan on 31.3.94, i.e. before the date of merger but since there is a letter from Department to ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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BIFR dated 21/06/1995 stating that the company did not require exemptions u/ss.41(1) and 43B of the Act. It is also noted that the BIFR noted the promoters' stand also by confirming the position and accordingly sought deletion of sub para 4D.II of the scheme. On this basis, BIFR held that in view of this letter from the Directorate of Income-tax to the effect that the company do not require exemption u/s.43B and accordingly the relevant sub-para 4.DII of the scheme was deleted and hence, deduction is not allowable to the assessee u/s.43B of the Act. In this regard, we would like to observe that BIFR scheme is for granting various benefits to the sick companies and not for withdrawing any deduction which is available to such sick company under law. The letter of the assessee may be to the effect that the assessee does not require any extra benefit u/s.41(1) or 43B of the Act. But neither the letter of Directorate of Income-tax and nor any letter of the assessee can deny any benefit to the assessee for which the assessee is otherwise eligible under law. Now we examine the applicability of the judgements cited by ld.AR of the assessee. The first decision is the Tribunal decision of Jaipur Bench rendered in the case of Lustre Tiles Ltd.(supra). This Tribunal decision is about the admissibility of the claim of the assessee regarding deduction u/s.43B as per assessee's application u/s.154. In the present case, the claim of the assessee is not by way of any rectification application u/s.154 of the Act and hence, this Tribunal decision is not relevant in the present case, but at the same time we find that no other objection is raised regarding allowability of this deduction to the assessee except this that as per the letter of Directorate of Income- tax, the assessee does not require any benefit 43B or 41(1) of the Act ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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and this position was also confirmed by the assessee before BIFR. We have already discussed that BIFR is only to consider various extra benefits to be allowed to the assessee which is sick company, but not for curtailing any benefit allowable to the assessee as per law. Since there is no question raised by the ld.DR of the Revenue regarding allowability of the claim of the assessee as per law, the same cannot be denied to the assessee on the basis of a letter of Directorate Income-tax before BIFR which is also agreed by the assessee before BIFR. Hence, on this issue also, we do not find any reason to interfere in the order of the CIT(A). Therefore, ground No.7 of the Revenue is also rejected.
30. Ground No.8 of Revenue's appeal reads as under:
8. The ld.CIT(A) has further erred in holding that no expenses need to be deducted while computing the deduction u/s.80M.
30.1. Brief facts on this issue till the assessment stage are noted by the ld.CIT(A) in para-13 of his order which is reproduced below:-
"13. Ground No.13 relates to disallowance of the claim for deduction u/s.80M on account of estimate of administrative and management expenses of Rs.16,78,975. This point has been discussed in para 13 of the assessment order. The assessee had claimed deduction u/s.80M at Rs.94,91,193 in respect of the dividend from companies being 100% of dividend and at Rs.2,40,88,314 being 40% of the dividend from Unit Trust of India amounting to Rs.6,02,20,784. Thus the total deduction claimed was of Rs.3,35,79,507. The assessing officer has observed that this was with reference to the gross dividend received without adjustment on account of administrative and management expenses attributable to investment made and realization of ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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dividend. No proper details or bifurcation of such administrative and management expenses is available and hence the deduction u/s.80M is reduced on estimate basis by 5% being such administrative and management expenses to be deducted from the gross amount of dividend. Accordingly he has allowed deduction at Rs.3,19,00,532. He has supported his argument by reference to Supreme Court decision in the case of Distributors (Baroda) Pvt.Ltd. 155 ITR 120."
31. Being aggrieved, the assessee carried the matter in appeal before the CIT(A) who had deleted the disallowance and now the Revenue is in appeal before us.
32. Ld.DR of the Revenue supported the assessment order. He also placed reliance on the following case-laws:-
(a) CIT vs. Sarabhai & Sons (1994)75 Taxman 415(Guj.)
(b) CIT vs. Maganlal Chagalal (P)Ltd. (2006) 150 Taxman 146(Mum.) 32.1. As against this, ld.AR of the assessee supported the order of the CIT(A). He placed reliance on the decision of Special Bench of the Tribunal rendered in the case of Vidarbha Irrigation Development Corporation Vs. Joint Commissioner Of Income Tax Reported at 102 ITD 1 (Sb) (Mum.). He also placed reliance on another Tribunal decision rendered in the case of MMTC Ltd. Vs. Jt. Commissioner of Income Tax reported at (2007) 112 TTJ 15 (Delhi).
33. We have considered rival submissions, perused the material from record and also gone through the orders of the authorities below as also ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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the judgements cited by both the sides. Now this aspect is settled that for granting benefit u/s.80M only the net dividend is required to be taken into consideration. But he question still remains as to how much expenses is required to be reduced for the purpose of computing net dividend income. In the present case, the AO has considered that 5% expenses is incurred for earning dividend income in respect of administrative and management expenses and it is as per the estimate of AO without bringing any material on record as to how he had come to the conclusion that the expenses incurred are to the extent of 5% of dividend income. Ld.CIT(A) has deleted the entire deduction from dividend income and he has held that gross amount of dividend is eligible for deduction u/s.80M. The order of the ld.CIT(A) cannot be sustained in its entirety because it cannot be accepted that no expense was at all incurred for earning dividend income. We find that it is noted by the CIT(A) that there were eight dividend warrants and on this basis, ld.CIT(A) has come to the conclusion that this claim that no expense need to be deducted is to be allowed. But we are of the opinion that in addition to receiving eight dividend warrants, the decision making is also required as to whether the investment is to be retained or to be sold out and, therefore, some expenses had to be reduced from dividend income on account of administrative expenditure, etc. But in our considered opinion, estimate of the AO at 5% of the dividend income is excessive and considering the facts of the present case, we are of the opinion that 0.5% expenditure will be sufficient to take care of administrative and management expenses in respect of dividend income. Accordingly, we direct the AO to reduce 0.5% of dividend income, i.e. ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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Rs.3,35,79,507/- as expenses and after reducing such expenses from this amount of dividend income, the AO should allow deduction u/s.80M of the IT Act. This ground of the Revenue is partly allowed.
34. In the result, the appeal of the Assessee (in ITA No.2072/Ahd/2001) is allowed in the terms as indicated above, whereas appeal of the Revenue (ITA No.66/Ahd/2002) is partly allowed.
35. Now, we take up the appeal of the Revenue (ITA No.1713/Ahd/2002) for AY 1996-97. Ground No.1 reads as under:-
1. The ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.7780932/- on account of capital gains on sale of the business undertaking.
35.1. Brief facts on this issue till the assessment stage are that the assessee has sold its business undertaking Artex to Akir Textile Industrial Pvt.Ltd. for a consideration of Rs.467.97 lacs. The AO has stated that the assessee had offered long-term capital gains of Rs.3,57,64,969/- on sale of undertaking in the return of income but in the covering letter of the return, it was claimed by the assessee that this amount should not be treated as income under the head "long term capital gain" in view of the decision of Hon'ble Karnataka High Court rendered in the case of Syndicate Bank as reported in 155 ITR 681 (Kar.) During the course of assessment proceedings, reliance was also placed by the ld.AR of the assessee on the judgment of Hon'ble Apex Court rendered in the case of Shrinivas Shetty reported at 128 ITR 94. But the AO was not satisfied.ITA No.2072/Ahd/2001,
66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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As per para No.3.16 of the assessment order, the AO worked out the capital gain of the assessee on sale of land at Rs.3,38,01,081/- and capital gain on sale of building, plant & machinery at Rs.97,44,079/- totalling to Rs.4,35,45,880/-. The AO had noted that since the assessee has offered capital gain of Rs.3,57,64,948/-, the difference of Rs.77,80,932/- is added back to the total income.
36. Being aggrieved, the assessee carried the matter in appeal before the ld.CIT(A) who has deleted this addition and now the Revenue is in appeal before us. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A). He has placed reliance on a judgment of Hon'ble Apex Court rendered in the case of PNB Finance Ltd. vs. CIT reported at (2008)307 ITR 75(SC).
37. We have considered the rival submissions, perused the material from the record and gone through the orders of the authorities below as also the judgement cited by the ld.AR of the assessee. We find that in that case, the PNB Finance Ltd. which set up in 1895 was nationalized under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. During the relevant year, the assessee has received a compensation of Rs.10.20crores. This was calculated on the basis of capitalization of the last 5 years profits. Under thee facts, it was held by the Hon'ble Apex Court by reversing decision of Hon'ble Delhi High Court that section 45 of the IT Act is not applicable where the ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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computation provisions could not apply. It was also held that the banking undertaking inter-alia, included intangible assets, like tenancy rights, manpower and value of banking licence and it was not possible to ear-mark the compensation received by the assessee item-wise and, therefore, it was not possible to compute the capital gains and therefore the sum of Rs.10.20 crores was not taxable u/s.45 of the Act. In the present case, the assessee has received a consideration of Rs.467.97 lacs on sale of its business undertaking of Artex to Atir Textile Industrial Pvt.Ltd. The assessment year involved in the present case is also a period prior to 01/04/2000. Hence, this judgement of Hon'ble Apex Court cited by ld.AR of the assessee is squarely applicable on the facts of the present case and respectfully following the same, we are not inclined to interfere with the order of the CIT(A) and accordingly reject the ground No.1 raised by the Revenue.
38. Ground No.2 of Revenue's appeal reads as under:-
2. The ld.CIT(A) has further erred in deleting the disallowance of claim of interest of Rs.247654966/-.
38.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that the relevant para of the order of the ld.CIT(A) is para No.3 available on pages 10 & 11 of his order as per which he has decided the issue in favour of the assessee. He further submitted that ld.CIT(A) has followed his own order in its own case for AY 1995-96.
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39. We have considered the rival submissions, perused the material available on record and also gone through the orders of the authorities below. We find that the issue involved as per this ground No.2 of Revenue's appeal is regarding deletion of disallowance of the claim of the assessee for interest in respect of 65.50 lacs NCD issued to ICICI on 22/03/1996 where interest @ Rs.38.75 per debenture amounting to Rs.25,99,37,500/- was paid by the assessee and out of the same, interest of Rs.22,82,534/- was debited by the assessee to the P&L account and the balance was transferred to interest suspense account. In AY 1995-96 also, the similar issue was raised by the Revenue as per ground No.3 in that year which has already been decided by us in favour of assessee at para-6 above and, therefore, on the same line in the present year, this issue is decided in favour of assessee. Accordingly, ground No.2 of Revenue's appeal is rejected.
40. Ground No.3 of Revenue's appeal reads as under:
3. The ld.CIT(A) has further erred in allowing the claim of the assessee in respect of disallowance of deferred revenue expenses claimed at Rs.385714800/-.
40.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue is covered in favour of assessee by the Tribunal decision in assessee's own case for AY 1994-95 in ITA Nos. 216/Ahd/2001(Assessee's appeal) & 275/Ahd/2001(Revenue's appeal) dated 30/07/2010 (supra). He also submitted that in that year, the ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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assessee incurred (i) retrenchment compensation, (ii) technical audit fees and (iii) management service fees. He also submitted that the assessee debited only 1/5th of this expenses in books of account but entire expenses were claimed as deduction in return of income. He further submitted that in the present year also, the facts are same but the nature of expenses incurred in the present year also includes Advertisement Expenses and therefore, this Tribunal decision is squarely applicable. He also placed reliance on a judgement of Hon'ble Gujarat High Court rendered in the case of Deputy Commissioner Of Income Tax Vs. Core Healthcare Ltd. reported at (2009) 308 ITR 263 (Guj.).
41. We have considered the rival submissions, perused the material available on record and gone through the orders of the authorities below as also the judgement cited by the ld.AR of the assessee. We find that in AY 1994-95, similar issue was raised although the nature of expenses incurred by the assessee in that year was not including advertisement expense. It was held by the Tribunal in that year, that the entire expenditure is to be allowed in the year of incurring the expenditure. Hence, as per principle laid down by the Tribunal in that year, order of ld.CIT(A) is in line with that principle. Moreover, as per judgement of Hon'ble Jurisdictional High Court rendered in the case of DCIT vs. Core Healthcare Ltd.(supra), wherein it was held that advertisement expenses to create brand image is revenue expenditure. In the present case also, expenses in dispute is including expenses on account of retrenchment compensation, technical Audit Fees, Consultancy fees, advertisement ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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expenses and launching expenses. All other expenses excluding advertisement expenses are covered by the Tribunal decision in its own case for AY 1994-95, whereas the advertisement expense is covered in favour of assessee by the judgement of Hon'ble Jurisdictional High Court rendered in the case of Core Healthcare Ltd.(supra). Respectfully following these judgements, we decline to interfere in the order of the CIT(A) on this issue. Accordingly, ground No.3 of Revenue's appeal is rejected.
42. Ground No.4 of Revenue's appeal reads as under:
3. The ld.CIT(A) has further erred in directing to allow the claim of the assessee in respect of disallowance of interest of Rs.204297879/-.
42.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue was decided by the ld.CIT(A) as per para-5 of his order (at page 12) in which he has followed his own order in AYs 1992-93 & 1993-94. He further submitted that in both the years, the matter reached to the Tribunal and in ITA Nos.798 & 1154/Ahd/1999, and this issue was decided by the Tribunal in favour of assessee. Ld.DR of the Revenue could not point out any difference in facts in the present year as compared to AYs 1992-93 & 1993-94. We also find that the dispute in the present case is regarding disallowance of interest on borrowed funds utilized for the purpose of acquiring plant & machinery and other fixed assets which remained to be installed at the end of the ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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year. We find that a proviso was inserted u/s.36(1)(iii) by Finance Act, 2003 w.e.f. 01/04/2004 and as per this proviso, if the interest expenditure is incurred on borrowing for acquiring any assets, interest is not allowable till such asset was first put to use. Since this proviso is applicable from AY 2004-05, the same is not applicable in the present year and, therefore, no interference is called for in the order of CIT(A) for the reason that the same issue is covered in favour of assessee by the Tribunal order in assessee's own case for AYs 1992-93 & 1993-94. Ground No.4 of Revenue's appeal is rejected.
43. Ground No.5 of Revenue's appeal reads as under:-
5. The ld.CIT(A) has further erred in directing to allow the claim of the assessee in respect of disallowance for expenditure of Rs.31770083/- u/s.43B.
43.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue is identical to ground No.7 of Revenue's appeal in AY 1995-96.
44. We have considered the rival submissions and we find that in AY 1995-96 also, a similar issue was raised by the Revenue as per ground NO.7 and the same was decided by us in favour of the assessee at para 29 of this order above. Therefore, for this year also, this issue is decided in favour of assessee on similar line. Accordingly, ground No.5 is also rejected.
45. Ground No.6 reads as under:-
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6. The ld.CIT(A) has further erred in deleting the disallowance of Rs.12232000/- made by allocating the expenses to two EOUs.
45.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue is identical to ground No.5 raised by the Revenue in AY 1995-96.
46. We have considered the rival submissions and perused the material available on record. We find that similar issue was decided by us in AY 1995-96 in favour of assessee at para-21 of this order above and, therefore, on similar line, in the present year also, this issue is decided in favour of assessee. Ground No.6 of Revenue's appeal is also rejected.
47. Ground No.7 reads as under:-
7. The ld.CIT(A) has further erred in deleting the disallowance of administrative expenses of Rs.1162131/- out of dividend income.
47.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue is also identical to ground No.8 raised by the Revenue in AY 1995-96.
48. We have considered the rival submissions and we find that similar issue was decided by us in AY 1995-96 as per para 33 of this order above, and it was held by us in that year only 0.5% of dividend income should be considered as expenses incurred for earning such dividend ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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income and only that amount should be reduced from that dividend income to work out deduction allowable to the assessee u/s.80M of the IT Act. Accordingly, in the present year also, we direct the AO to compute the deduction allowable to the assessee u/s.80M on same line as per direction given by us in AY 1995-96. Thus, ground No.7 of Revenue's appeal is partly allowed.
49. In the result, appeal of the Revenue in ITA No.1713/Ahd/2002 for AY 1996-97 is partly allowed.
50. Now, we take up the appeal of the assessee (ITA No.1041/Ahd/2002) in AY 1997-98.
50.1. Ground No.1 of assessee's appeal reads as under:-
1.(a) In law, and in the facts and circumstances of the appellant's case, the learned Commissioner of Income Tax (appeals) erred in not allowing under section 36(1)(iii)/37 of the Act, the entire amount of interest of Rs.1,54,63,000/- paid to Citi Corp. as interest accrued and paid during the year.
(b) The learned Commissioner of Income Tax (Appeals) failed to appreciate that according to the terms of issue, the entire amount of interest of Rs.1,54,63,000/- accrued and was duly paid during the previous year and therefore ought to have been allowed as deduction.
(c) The learned Commissioner of Income Tax (Appeals) further erred in following the decision of CIT(Appeals)-I for Assessment Year 1995-96 wherein the CIT (Appeals)-I had rejected the claim of the appellant company relying on Supreme Court decision in the case of madras Industrial Investment Corporation v. CIT (225 ITR
802).
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(d) The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the decision of Madras Industrial Investment Corporation v. CIT (225 ITR 802) is on facts of the case and on the issue of allowability of premium which has accrued and became payable at the time of redemption of debentures.
(e) The learned Commissioner of Income Tax (Appeals) ought to have appreciated that expenses incurred and paid in case of upfront interest was clearly allowable as per decisions of M.P.High Court in the case of national Newsprint & Paper Mills Ltd. vs. CIT (114 ITR 172), Supreme Court decision in the case of Nonsuch Tea Estate Ltd. v. CIT (98 ITR 189), Bombay High Court's decision in Calico Dyeing & Printing Works v. CIT (34 ITR 265), Gujarat High Court's decision in Granulated Fertilizers & Seeds Private Ltd. (137 ITR 400), Supreme Court's decision in the case of State of madras v. G.J. Coehlo (53 ITR 186), Madras High Court's decision in the case of CIT v. A. Krishnaswamy Mudaliar & Ors. (53 ITR 123) and Supreme Court decision in the case of Madras Ind.Investment Corpn.Ltd. (225 ITR 802).
51. It was submitted by the ld.AR that this issue is identical to Ground No.1 in assessee's appeal for AY 1995-96(supra). The ld.DR supported the orders of the authorities below.
52. We have considered the rival submissions and we find that an identical issue was decided by us in favour of assessee for AY 1995-96 as per para-6 of this order above. No difference in facts has been pointed out by the ld.DR of the Revenue in the present year. Hence, we decline to take any contrary view in the present year than taken in AY 1995- 96(supra). Therefore, in the present year also, this issue is decided in favour of assessee on similar line. Ground No.1 of Assessee's appeal is allowed.
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53. Ground No.2 of assessee's appeal reads as under:-
II. (a) In law, and in the facts and circumstances of the appellant's case, the learned Commissioner of Income Tax (Appeals) erred in not accepting the appellant's claim of expenditure in respect of proposed merger of Calico Mills Limited with the appellant company.
(b) The learned Commissioner of income Tax (Appeals) failed to appreciate ratio laid down by Hon'ble Supreme Court in the case of CIT vs. Bombay Dying & Mfg. Co.Ltd. (219 ITR 521).
(c) The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the appellant company as well as Calico Mills Limited both are engaged in same line of business i.e. manufacturing and sale of textiles.
53.1. It was submitted by the ld.AR of the assessee that this issue was raised by the assessee before ld.CIT(A) by way of an additional ground which has been noted by the ld.CIT(A) as per para-14 of his order but the same was not admitted by the ld.CIT(A). He submitted that in the interest of justice, this matter should be restored to the file of ld.CIT(A) for the decision on merit after admitting this additional ground because this is a legal issue.
54. ld.DR of the Revenue has supported the order of the CIT(A).
55. We have considered the rival submissions. We find that it was submitted by the assessee before ld.CIT(A) that this claim has not been discussed in the assessment order and, therefore, in the ground of appeal, the assessee could not take specific ground for the same and, therefore ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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request was made that this additional ground may be admitted. Ld.CIT(A) had refused to admit this additional ground on this basis that there is no discussion for this claim in the assessment order. In our considered opinion, the additional ground is to be admitted and then decided on merit. Hence, we direct the ld.CIT(A) to admit this additional ground of the assessee and thereafter decide the same on merit after providing reasonable opportunity of being heard to both the sides. Therefore, this ground of the assessee stands allowed for statistical purposes.
56. In the result, this appeal of the assessee stands allowed in the terms as indicated above.
57. Now, we take up the appeal of the Revenue (ITA No.1331/Ahd/2002) for AY 1997-98.
57.1. Ground No.1 raised by the Revenue is as under:
1. The Ld.CIT(A) has erred in Law and on facts in deleting the disallowance of deferred revenue expenses amounting to Rs.143767213/-.
57.2 Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue is identical to ground No.4 of Revenue's appeal in AY 1995-96.
58. We have considered the rival submissions and we find that this issue is identical to ground No.4 of Revenue's appeal in AY 1995-96. In that year, this issue was decided by us in favour of assessee at para 19.1 ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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of this order above. Since no difference in facts could be pointed out by the ld.DR of the Revenue, we find no reason to take a contrary view, than taken by us in AY 1995-96(supra). Therefore, in the present year also, this issue is decided in favour assessee. Ground No.1 is rejected.
59. Ground No.2 of Revenue's appeal reads as under:-
2. The ld.CIT(A) has further erred in directing to delete the disallowance of interest u/s.36(1)(iii) amounting to Rs.240129512/-.
59.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue is identical to ground No.4 of Revenue's appeal in A.Y.1996-97(supra).
60. We have considered the rival submissions and we find that similar issue was decided by us in Revenue's appeal for AY 1996-97(supra), wherein while deciding ground No.4 of Revenue's appeal in that year as per para 42.1 of this order above. Since no difference in facts could be pointed out by ld.DR of the Revenue, we do not find any reason to take a contrary view than taken by us in AY 1996-97, therefore this issue is also decided in favour of assessee in the present year on similar line.
61. Ground No.3 of Revenue's appeal reads as under:-
3. The Ld.CIT(A) has further erred in allowing Rs.57756760/-
disallowed by the A.O. in respect of loan arrangement fees.
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61.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A). He also submitted that this issue is covered in favour of assessee as per judgment of Hon'ble Apex Court rendered in the case of India Cements Ltd. vs. CIT reported at (1966) 60 ITR (SC).
62. We have considered the rival submissions and we find that the issue regarding loan arrangement fees or any expenditure in respect of borrowing is eligible as Revenue Expenditure as per the judgement of Hon'ble Apex Court rendered in the case of India Cements Ltd.(supra), therefore we do not find any reason to interfere in the order of the CIT(A) on this issue. Accordingly, ground No.3 of the Revenue's appeal is also rejected.
63. Ground No.4 of Revenue's appeal reads as under:
4. The Lt.CIT(A) has further erred in directing to allow the claim of deduction u/s.43B of Rs.30,000/-.
63.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A). He also submitted that this issue is identical to ground No.7 in AY 1995-
96.
64. We have considered the rival submissions and we find that similar issue was decided by us in favour of assessee in AY 1995-96 while deciding ground No.7 of Revenue's appeal in that year as per para-29 of ITA No.2072/Ahd/2001, 66,1041,1331,1713 & 2253/Ahd/2002 The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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this order above. Since no difference in facts could be pointed out by the ld.DR, we find no reason to take any contrary view in the present year. Hence, this ground is also rejected.
65. Ground No.5 of Revenue's appeal is as under:
5. The Ld.CIT(A) has further erred in directing to delete the disallowance of Rs.12345080/- in respect of allocation of expenses of two EOUs.
65.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue is identical to ground No.5 of the Revenue's appeal in AY 1995-96(supra).
66. We have considered the rival submissions and we find that this issue is identical to ground No.5 raised by the Revenue in AY 1995-96 and while deciding ground No.5 of Revenue's appeal in that year as per para-21 of this order above, the issue was decided in favour of assessee. Since no difference in facts could be pointed out by the ld.DR, we find no reason to take any contrary view in the present year. Therefore, this ground is also rejected.
67. Ground No.6 of Revenue's appeal reads as under:-
6. The Ld.CIT(A) has further erred in directing to delete the disallowance of reduction of Rs.994650/- u/s.80M.ITA No.2072/Ahd/2001,
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67.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A). He also submitted that this issue is identical to ground No.8 raised by the Revenue in AY 1995-96.
68. We have considered the rival submissions and we find that similar issue was raised by the Revenue in AY 1995-96(supra) as per ground No.8 and while deciding ground No.8 of Revenue's appeal in that year as per para-33 of this order above, wherein we have held that 0.5% of dividend income eligible for deduction u/s.80M should be considered as expenses incurred for earning such dividend income and such expenses should be reduced from such dividend income, then work out the amount of deduction as per law to the assessee u/s.80M of the IT Act. In the present year also, we direct the AO accordingly. This ground of the Revenue is partly allowed.
69. In the result, Revenue's appeal, i.e. ITA No.1331/Ahd/2002 for AY 1997-98 is partly allowed.
70. Now, we take up remaining appeal of the Revenue (ITA No.2253/Ahd/2002) for AY 1999-2000.
70.1. Ground No.1 is a sunder:-
The ld.CIT(A) has erred in law and on facts in directing to delete the disallowance of claim for interest of Rs.1348042620/- paid in respect of borrowings used for the purpose of acquiring plant & machinery of the existing business which remained uninstalled at the end of the year.ITA No.2072/Ahd/2001,
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71. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A). He also submitted that this issue is identical to ground No.2 of Revenue's appeal for AY 1997-98.
72. We have considered the rival submissions and we find that identical issue was raised in AY 1997-98 as per Ground No.2 and while deciding the ground in that year at para-60 of this order above, we have decided this issue in favour of assessee.
73. We have also seen that the proviso inserted in section 36(1)(iii) of the Act is w.e.f. AY 2004-05 and, therefore, the same is not applicable in the present year. Hence, we do not find any reason to take a contrary view in the present year, therefore on the same lines as has been decided by us in AY 1997-98, in the present year also, this issue is decided in favour of assessee and the ground is hereby rejected.
74. Ground No.2 of Revenue's appeal reads as under:-
The ld.CIT(A) has further erred in directing to delete disallowance of claim for deduction of Rs.49108490/- being the expenditure incurred in respect of loan arrangement fees.
74.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that this issue is identical as per ground No.3 raised by the Revenue in AY 1997-98.
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75. We have considered the rival submissions and we find that the similar issue was raised by the Revenue as per ground No.3 in its appeal for AY 1997-98 and the same was decided by us in favour of the assessee at para-62 of this order above. Since no difference in facts could be pointed out by the ld.DR of the Revenue in the present year, we do not find any reason to take a contrary view in the present year and, hence, this ground of the Revenue is also rejected.
76. Ground No.3 of Revenue's appeal reads as under:-
The ld.CIT(A) has further erred in directing to delete disallowance of claim for deduction of Rs.1455578/- u/s.43B.
76.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that an identical issue was raised by the Revenue as per ground No.7 in AY 1995-96 and as per ground No.4 in AY 1997-98.
77. We have considered the rival submissions and we find that similar issue was decided by us in favour of assessee while deciding the Revenue's appeal in AYs 1995-96 & 1997-98 at paragraph Nos. 29 & 64 respectively of this order above. No difference in facts could be pointed out by the ld.DR of the Revenue in the present year and, hence, we do not find any reason to take a contrary view in the present year. Accordingly, this ground of the Revenue is also rejected.
78. Ground No.4 of Revenue's appeal reads as under:-
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The ld.CIT(A) has further erred in directing to delete the disallowance of expenses of Rs.4222036/- pertaining to two export oriented units.
78.1. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A).
He also submitted that similar issue was raised by the Revenue in AY 1997-98 as per ground No.5.
79. We have considered the rival submissions. We find that an identical issue had raised by the Revenue in AY 1997-98 as per ground No.5 and while deciding that issue in that year at para-66 of this order above, we have decided the same in favour of assessee. No difference in facts could be pointed out by the ld.DR and, hence, we do not find any reason to take a contrary view in the present year. This ground of the Revenue is also rejected.
80. Ground No.5 of Revenue's appeal reads as under:-
The ld.CIT(A) has further erred in allowing the claim of the assessee against disallowance of Rs.681878/- u/s.43B of the Act.
80.1 It is noted by the ld.CIT(A) in para-6 of his order that this disallowance was made by the AO u/s.43B of the Act in respect of PF, FPF and ESI for which payments were made by the assessee after statutory time limit. Ld.CIT(A) has deleted the disallowance by following various judicial pronouncements and now the Revenue is in appeal before us.ITA No.2072/Ahd/2001,
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81. Ld.DR of the Revenue has supported the assessment order, whereas ld.AR of the Assessee has supported the order of the ld.CIT(A). He also submitted that this issue is now covered in favour assessee by the judgement of Hon'be Apex Court rendered in the case of CIT vs. Alom Extrusions Ltd. reported at (2009) 319 ITR 306(SC).
82. We have considered the rival submissions and since this issue is squarely covered in favour of assessee by the judgement of Hon'ble Apex Court rendered in the case of Alom Extrusions Ltd.(supra), we do not find any reason to interfere with the order of the CIT(A) on this issue. Therefore, this ground of the Revenue is rejected.
83. In the result, the appeal of the Revenue for AY 1999-2000, i.e. ITA No.2253/Ahd/2002 is dismissed.
84. We summarize the result as under:-
(i) Assessee's appeal (ITA No.2072/Ahd/2001) for AY 1995-96 is allowed.
(ii) Revenue's appeal (ITA No.66/Ahd/2002)for AY 1995-96 is partly allowed.
(iii) Assessee's appeal (ITA No.1041/Ahd/2002) for AY 1997-98 is allowed.
(iv) Revenue's appeal (ITA No.1331/Ahd/2002) for AY 1997-98 is partly allowed.
(v) Revenue's appeal (ITA No.1713/Ahd/2002) for AY 1996-97 is partly allowed.
(vi) Revenue's appeal (ITA No.2253/Ahd/2002) for AY 1999-2000 is dismissed.
Sd/- Sd/-
( KUL BHARAT ) ( A.K. GARODIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 31/ 05 /2013
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
ITA No.2072/Ahd/2001,
66,1041,1331,1713 & 2253/Ahd/2002
The Arvind Mills Ltd. vs. ACIT (cross-appeals) AYs - 1995-96,1997-98,1996-97 & 1999-2000
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आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु त / Concerned CIT
4. आयकर आयु त(अपील) / The CIT(A)-XIV, Ahmedabad
5. वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
ु / BY ORDER, आदे शानसार स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation dated ...20&21.51.3(dictation-pad 96 pages attached with file)
2. Date on which the typed draft is placed before the Dictating Member 23.5.13.................. Other Member.....................
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which the fair order comes back to the Sr.P.S./P.S...31.5.13
6. Date on which the file goes to the Bench Clerk..................31.5.13
7. Date on which the file goes to the Head Clerk..................................
8. The date on which the file goes to the Assistant Registrar for signature on the order..........................
9. Date of Despatch of the Order..................