Income Tax Appellate Tribunal - Mumbai
Indian Rayon & Indus. Ltd., vs Department Of Income Tax on 8 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'I' MUMBAI
BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND
SHRI N.K. BILLAIYA (ACCOUNTANT MEMBER)
ITA Nos. 6421 & 6422/Mum/2002
Assessment Years-1996-97 & 1997-98
M/s. Indian Rayon & Industries Ltd., The Dy. CIT, Ward 3(2),
(Now known as M/s. Aditya Birla Nuvo Aayakar Bhavan,
Ltd., Mumbai-400 020
Corporate Finance Division, Vs.
A-4, Aditya Birla Centre,
S.K. Ahire Marg, Worli,
Mumbai-400 030
PAN-AAACI 1747H
(Appellant) (Respondent)
ITA No. 6836/Mum/2002
AND
ITA No. 41/Mum/2003
Assessment Years-1996-97 & 1997-98
The Dy. CIT, Ward 3(2), M/s. Indian Rayon & Industries
Aayakar Bhavan, Ltd.,
Mumbai-400 020 (Now known as M/s. Aditya Birla
Vs. Nuvo Ltd.,
Corporate Finance Division,
A-4, Aditya Birla Centre,
S.K. Ahire Marg, Worli,
Mumbai-400 030
C.O.No. 14 /Mum/2004
(Arising out of ITA No. 6836/Mum/2002
Assessment Year-1996-97
M/s. Indian Rayon & Industries Ltd., The Dy. CIT, Ward 3(2),
(Now known as M/s. Aditya Birla Nuvo Aayakar Bhavan,
Ltd., Mumbai-400 020
Corporate Finance Division, Vs.
A-4, Aditya Birla Centre,
S.K. Ahire Marg, Worli,
Mumbai-400 030
PAN-AAACI 1747H
(Cross Objector) (Respondent)
2 Aditya Birla Nuvo Ltd.,
C.O.No. 15 /Mum/2004
(Arising out of ITA No. 41/Mum/2003
Assessment Year-1997-98
M/s. Indian Rayon & Industries Ltd., The Dy. CIT, Ward 3(2),
(Now known as M/s. Aditya Birla Nuvo Aayakar Bhavan,
Ltd., Mumbai-400 020
Corporate Finance Division, Vs.
A-4, Aditya Birla Centre,
S.K. Ahire Marg, Worli,
Mumbai-400 030
PAN-AAACI 1747H
(Cross Objector) (Respondent)
Assessee by: Shri J.D. Mistry
Department by: Shri Subacham Ram
Date of Hearing : 8.06.2012
Date of pronouncement: 22.6.2012
ORDER
PER BENCH:
These cross appeals are filed by assessee and department and the Cross Objections are filed by the assessee for assessment years 1996-97 & 1997-98 against orders of Ld. CIT(A)-Central II, Mumbai dt. 25th September, 2002. Since issues are common in these appeals, these were heard together and are being disposed off through this consolidated order.
2. Firstly we take up appeal filed by assessee being ITA No. 6421/M/02.
3. The facts are that the assessee is a company engaged in manufacturing of divergent products ranging from Textiles to Cement and insulator to carbon black. The return of income for the year under consideration was filed on 29.11.1996 declaring total income at Rs. 59,68,19,288/-. The return was accompanied with Tax audit report, Profit and Loss Account, balance sheet and other documents. The return was revised on 30.3.1998.
3 Aditya Birla Nuvo Ltd.,
4. During the year, company commissioned three new Industrial Undertakings i.e. Power Plant II at Rajashree Cement, Malkhed, Grinding unit at Hotgi Sholapur of Maharashtra and Clinkerisation Unit at Malkhed in Karnataka. The return was processed and selected for scrutiny assessment. During the course of assessment proceedings, the Assessing Officer sought explanation on various issues and after considering the submissions, the AO completed the assessment on 31.12.1998 after making additions on various heads. The matter was taken by the assessee before the Ld. CIT(A).
5. The Ld. CIT(A) after considering the submissions and the documents submitted by AO in support of its claim partly allowed the appeal.
6. The assessee is in appeal before us against the order of Ld. CIT(A). The Senior Counsel for the assessee filed a detailed chart showing grounds of appeal which have been dealt by the AO and the Ld. CIT(A) and by the ITAT Mumbai in its earlier year's orders in assessee's own case.
7. Ground No. 1 relates to disallowance of expenses at Rs. 1,75,308/- made u/s. 6D by the AO and confirmed by Ld. CIT(A). We find that similar issue was there before Tribunal in the assessment year 1992-93, 1993-94, 1994-95 and 1995-96.
8. During the year the assessee has debited an amount of Rs. 5,75,53,123/- to Profit and Loss account under the head Travelling expenses which includes fare, lodging and boarding charges and other related expenses. The assessee has itself disallowed in the computation of income an amount of Rs. 1,07,863/-. The disallowance by the assessee is based on the decision of ITAT in the case of S.V. Ghatalia in ITA No. 3294/B/91. The claim of the assessee was disregarded by the AO who went on to calculate the disallowance as per provisions of Rule 6D for different units on the basis of per person per trip. The Ld. Senior Counsel fairly conceded that the issue was covered against the assessee by the judgement of Hon'ble High Court of Mumbai in the case of CIT Vs Arrow India ltd. 229 ITR 325 (Bom) and the 4 Aditya Birla Nuvo Ltd., decision of Tribunal in assessee's own case for the preceding assessment years. Respectfully following the findings of the Hon'ble Jurisdictional High Court and the Tribunal, we do not find any infirmity in the order of Ld. CIT(A). Accordingly, the order of the Ld. CIT(A) is upheld.
9. Ground Nos. 2, 12, 15, 16 & 17 have not pressed by the Senior Counsel. Therefore it is dismissed as not pressed.
10. Ground No. 3 relates to disallowance of Rs. 58,951/- under Rule 6D being travelling expenses incurred foreign citizens travelling in India. The assessee has disallowed Rs. 50,911/- in the computation of income. However, the AO invoked the provisions of Rule 6D and accordingly added Rs. 1,09,862/- calculated on the basis of present per trip being in excess of limits laid down Under Rule 6D. The same was confirmed by Ld. CIT(A).
11. The Senior Counsel pointed out that the issue is covered against the assessee by the decision of the Tribunal in assessee's own case in earlier assessment years. Respectfully following the said decision, we confirm the order of Ld. CIT(A) upholding the disallowance this year also.
12. Ground No. 4 relates to disallowance of guest house expenses u/s. 37(4) of Rs. 24,83,326/-. We find that in the computation the assessee has disallowed an amount of Rs. 7,53,891/- u/s. 37(4) of the I.T. Act under the head Guest House expenses . The AO pointed out that the assessee has not considered the following expenditure relating to guest house for calculating the disallowance.
A) Rent Rs. 14,24,947/-
B) Repairs Rs. 3,72,743/-
C) Depreciation Rs. 6,85,636/-
------------------
Rs. 24,83,326/-
==========
5 Aditya Birla Nuvo Ltd.,
13. The assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) at page 4 para-6 of his order held that similar disallowance made by AO in earlier assessment years were confirmed by himself accordingly Ld. CIT(A) confirmed the additions following his earlier years orders.
14. We find that the issue is settled by the judgement of the Hon'ble Supreme Court in the case of Britania Industries Ltd., 278 ITR 546 (SC) which has been followed by the Tribunal in the earlier years appeals in assessee's own case. Respectfully following the decision of the Hon'ble Supreme Court and the Tribunal, finding of the Ld. CIT(A) are confirmed. This ground of the appeal is dismissed accordingly.
15. Ground No. 5 relates to restricting the disallowance of entertainment expenses incurred on employees to 25%. The assessee in the computation of income on its own has disallowed an amount of Rs. 34,55,235/- by way of entertainment expenses. However, the AO noted that the assessee has not considered the following expenses to work out the disallowance u/s. 37(2) of the I.T. Act.
i) 50% of expenditure incurred in hotels
Clubs, etc. as incurred on employees Rs. 25,21,555/-
ii) Expenditure on Press conferences/
Sale dealers conferences Rs. 18,27,429/-
-------------------
Total Rs. 43,48,984/-
==========
Thus, the AO considered the total amount of disallowance u/s. 37(2) at Rs. 38,97,110/- being in excess of limits laid down u/s. 37(2) of I.T. Act.
16. When the matter was taken up before the Ld. CIT(A), the Ld. CIT(A) following his findings for the preceding assessment year where he had 6 Aditya Birla Nuvo Ltd., restricted the disallowance of expenditure on employees to 25% against 50% claimed by the assessee.
17. We find that when the matter travelled before the Tribunal in the assessment year 1995-96, the Tribunal has followed the decision taken in assessment year 1994-95 in ITA No. 2326/M/01. The Senior Counsel submitted that the facts for the year under consideration are identical with the facts of the preceding assessment year. Therefore, respectfully following the decision of the Tribunal in earlier assessment years, we confirm the order of Ld. CIT(A). The ground taken by the assessee is therefore partly allowed.
18. Ground No. 6 relates to disallowance of Rs. 13,70,572/- incurred towards Sales conference and Press conference.
19. The Ld. CIT(A) has dealt this issue at para 8.1 on page-5 of his order wherein he has followed his own decision in assessee's own case for assessment year 1995-96. When the matter was argued before ITAT, we find that the Tribunal has followed its own decision in assessee's own case for assessment year 1994-95 in ITA No. 2479/M/2000. We find that the Tribunal has followed the decision of Special Bench in the case of Lakhanpal National Ltd. VS ITO 69 ITD 9(SB) and allowed the expenditure.
20. We find that the facts for the year under consideration are identical, therefore respectfully following the decision of ITAT in assessee's own case for the preceding assessment year, we set aside the order of the Ld. CIT(A) and allow the claim of assessee. This ground of the assessee is allowed.
21. Ground No. 7 relates to disallowance of Rs. 5,07,261/- being rural development expenditure. During the year, the assessee has claimed an expenditure of Rs. 5,07,261/- as deduction on account of Rural development expenditure which comprises of Rs. 2,69,068/- was incurred at Veraval and an amount of Rs. 2,38,193/- at Malkhed. When the AO sought explanation, assessee submitted that these expenses were incurred for welfare and 7 Aditya Birla Nuvo Ltd., upliftment of the rural areas surrounding the factory site where workers of the assessee reside and claimed that such rural expenses are allowable u/s. 37(1) of the I.T. Act. The AO disallowed the claim of the assessee holding that similar disallowances were made in the earlier year also. When the matter was taken up before the Ld. CIT(A), CIT(A) held that as in the preceding assessment year, he has confirmed similar disallowance accordingly following his own order, Ld. CIT(A) confirmed the disallowance.
22. Before us, the Senior Counsel submitted that the Tribunal in the earlier assessment year has allowed the claim of the assessee.
23. We have perused the orders of the Tribunal in assessee's own case for earlier assessment year. We find that in the earlier assessment year, the Tribunal had restored the matter to the file of AO. The AO in his order giving effect and allowed the claim of the assessee. The facts being identical, the claim of the assessee for the year under consideration is also allowed.
24. Ground No. 8 relates to "without prejudice" claim of the assessee in respect of Rs. 4 crores incurred on premium on redemption of Non- convertible debentures as Revenue expenditure.
25. The Senior Counsel at the very outset pointed out that in the earlier year the claim of the assessee has been accepted by the Tribunal and the expenditure has been allowed as expenditure.
26. We have perused the orders of the Tribunal. We find that in the preceding assessment year, the Tribunal in ITA No. 3207/M/02 for assessment year 1995-96 have discussed this issue at page No. 6 para 2.7 wherein the Tribunal has followed its earlier years order. Respectfully following the decision of the Tribunal in earlier year, ground No. 8 is appears to be infructuous and accordingly dismissed.
27. Ground No. 9 relates to disallowance of Club expenses of Rs. 24,050/- being expenditure on food and drinks.
8 Aditya Birla Nuvo Ltd.,
28. During the course of assessment proceedings, the AO noticed that the assessee has claimed following expenses under the head payment to Clubs:
1) Membership and subscription Rs. 81,556/-
2) Others Rs. 24,050/-
----------------
Total Rs.1,05,606/-
=========
The AO considered these expenses totaling to Rs. 1,05,606/- to be in the nature of personal expenses and disallowed the claim of assessee.
29. When the matter was taken before the Ld. CIT(A), CIT(A) held that expenditure amounting to Rs. 24,050/- has already been considered as disallowance in entertainment expenditure and the disallowance of expenditure again would amount to double disallowance and accordingly directed the AO to delete the above disallowance after proper verification.
30. We find that in the earlier year also in the case of the assessee identical issue was there before the Tribunal wherein the Tribunal has confirmed the findings of Ld. CIT(A). Respectfully following the findings of Tribunal, on identical facts, this year also finding of Ld. CIT(A) are uphold.
31. Ground No. 10 relates to the grievance of the assessee in respect of interest amount of Rs. 1,40,02,326/- being interest receivable for A.Y. 1995- 96 u/s. 244A which has not been excluded by AO.
32. During the course of assessment proceedings, the assessee has claimed that it has received interest u/s. 244A amounting to Rs. 1,40,02,326/- for assessment year 1995-96 as per intimation u/s. 143(1)(a) which it has offered for tax in that year. Subsequently, when the said assessment was completed u/s. 143(3) and as there was additional payment of Rs. 8.26 crores, the interest allowed vide intimation u/s. 143(1)(a) was withdrawn. The assessee contented that since it has offered the interest in assessment 9 Aditya Birla Nuvo Ltd., year 1995-96, which was subsequently withdrawn by the department in March, 1998, the said interest amount of Rs. 1,40,02,326/- should be allowed as deduction in the computation of income for the year under consideration. The contention of assessee was rejected by AO who held that as the interest was withdrawn in March, 1998, the contention of assessee may be considered only in the assessment year 1998-99 and not in the year under consideration.
33. When the matter was agitated before the Ld. CIT(A) at page-11 para 17.2 of his order, he rejected the claim of assessee holding that the principles laid down by the Hon'ble Supreme Court in the case of CIT Vs British Paints India Ltd. 188 ITR 44 squarely applied to the case of the assessee company. We find that similar issue had come to the Tribunal in assessee's own case for assessment years 1998-99 and 1999-2000 in ITA Nos. 6668 & 6669/M/03 the Tribunal had at page-4 while decided in ground No. 2 of those appeals found that the issue is covered by the decision of the Special Bench of the Tribunal in the case of Avada Trading Co. Vs ACIT reported in 104 TTJ 83 and accordingly followed the decision of the Special Bench. As the facts and issues are identical, respectfully following the decision of Special Bench of the Tribunal and the Tribunal, we do not find any merit or substance in the ground taken by the assessee. Accordingly, the said is rejected. However as has been observed in the order of Tribunal as mentioned herein above, if any change or reduction in the amount of interest refund to the assessee u/s. 244A, the same has to be taken into account u/s. 154 of the Act.
34. Ground No. 11 relates to disallowance of depreciation on Roll over charges.
35. During the course of assessment proceedings, the assessee has claimed additional depreciation of Rs. 67,847/- on Roll over charges claimed as Revenue expenditure. In earlier assessment year the same was treated as capital expenditure. It was noticed by the AO that since the assessee has preferred appeals in earlier assessment years for the claim of said expenditure as revenue expenditure and as the matter is in dispute, the AO 10 Aditya Birla Nuvo Ltd., rejected the claim of assessee. The Ld. CIT(A) at page-12 in para 18.1 of his order held that the appeal filed by the assessee on this ground before ITAT was successful in assessment year 1986-87 wherein the Tribunal has held that the amount was revenue expenditure. The Ld. CIT(A) rejected the claim of depreciation and confirmed the finding of AO.
36. We find that similar issue has come up before the Tribunal in ITA No. 6962/M/1995 for assessment year 1991-92 wherein the Tribunal while deciding ground No. 5 of that appeal at page 4 in para-16 onwards held that this issue is covered in favour of the assessee by the Tribunal judgement in assessee's own case for assessment year 1990-91. Respectfully following the precedent, this ground of appeal is treated as infructuouse as the same has been claimed and allowed as revenue expenditure in earlier year.
37. Ground No. 13 relates to disallowance of Rs. 21,59,851/- being expenditure incurred on payment made to schools at Veraval and Malkhed.
38. During the course of assessment proceedings, the AO noticed that the assessee has paid total amount of Rs. 21,59,851/- to Indian Rayon School at Veraval and Malkhed and claimed it as business expenditure. The assessee claimed that since children of some of the employees studying in the said school, the payment should be allowed as business expenditure. However, the contention of assessee was not accepted by AO as similar disallowances in earlier years were confirmed by Ld. CIT(A).
39. When the matter was argued before the Ld. CIT(A), the CIT(A) followed his earlier order and confirmed the disallowance.
40. We find that similar matter had travelled before the Tribunal in earlier assessment years starting from assessment years 1992-93 to 1995-96 and 1998-99 and 1999-2000. We also find that while deciding the appeal in ITA Nos. 6668 & 6669/Mum/2003 pertaining to assessments 1998-99 & 1999- 2000 the Tribunal while adjudicating on ground No. 4 on page-8 para-16 has 11 Aditya Birla Nuvo Ltd., held that on identical issue the Tribunal had allowed the claim in earlier years. Respectfully following the order of the Tribunal in assessee's own case, as facts being identical, we allow the claim of the assessee for year under consideration. Ground No. 13 is allowed.
41. Ground No. 14 relates to disallowance of Rs. 28,140/- u/s. 40A(3) of I.T. Act.
42. After perusing the orders of lower authorities, we find that following expenses have been reported by the auditor in the Tax Audit report who have been made in cash during the previous year under consideration.
Date of Amount Particulars Reasons
payment (Rs)
11.4.1995 10,950/- Ex-gratia payment to Mr.Payment was urgently
K.C. Maheshwari Exployeeneeded.
15.4.95 Advance against LTA Mr. These payments were
R.K. Vaishnavi made to our
employees. The
25.4.95 11,000/-
Advance against LTA Mr. amounts were
K.N. Rao urgently needed by
them for buying
Advance against LTA tickets, etc. Also in all
29.4.95 21,000/-
Mr.B. Kasinath these cases, advance
was given against
2.5.95 15,000
Advance against LTA LTA, which was
Mr. N.K. Dwevedi subsequently adjusted
when employees
presented their Travel
bill. Hence, we would
like to submit that we
4.5.95 14,000
Advance against LTA have given advance
Mr. S.R. Upadhyay and not incurred
expenditure. Section
5.5.95 11,000
Advance against LTA 40A(3) speaks of
Mr. H.S. Somasekharppa payment made for
any expenditure.
5.5.95 15,750
Advance against LTA Mr.
H.S. Shekhawat
19.5.95 12,000 Reimbursement of soft The payments were
furnishing expenses of Mr. made to employees to
G. Jayaraman buy furniture. Since
12 Aditya Birla Nuvo Ltd.,
the shopkeeper did
Reimbursement of soft not accept payment
19.5.95 12,000
furnishing expenses of Mr. by cheque, the same
O.P. Taparia were given to
employees as cash.
Amount disallowed - 20% of Rs. 1,40,700 i.e. Rs. 28,140/-
43. The Ld. CIT(A) rejected the contention of the assessee and held that the payments are in contravention of provisions of Sec. 40A(3) and do not form under the exemptions given in Rule 6DD and accordingly confirmed the disallowance.
44. Before us, the Senior Counsel argued that the payments were made to employees to purchase tickets are not in violation of Sec. 40A(3) and payments made to buy furniture and fixtures were out of commercial expediency as the shop keepers did not accept payment by cheque.
45. We find force in the submission of Senior Counsel. So far as the payments for purchase of tickets are concerned, the same is not in violation of section 40A(3) but payments made to buy furniture is in violation of Sec. 40A(3) of the Act, therefore, we direct the A.O. to restrict the disallowance to 20% of Rs. 24,000/-. Ground No. 14 is, therefore, partly allowed.
46. In ground No. 18 the Senior Counsel drew our attention to letter dt.
th 24 August, 2007 by which assessee company has requested to raise the following additional grounds:
1) On the facts and circumstances of the case and in law, the appellant prays that the AO be directed :
a) Exclude from taxable profits, the sales tax exemption benefit of Rs. 2,42,58,647/- which is included in sales and which is taxed in the assessment order as part of profits of the business and
b) To treat the same as capital receipt not chargeable to tax.
13 Aditya Birla Nuvo Ltd.,
47. The Senior Counsel stated that the assessee had neither claimed any exemption in the return of income filed nor the lower authorities granted such exemption. It was further pointed out that the Special Bench of ITAT in the case of DCIT Vs Reliance Industries Ltd. 88 ITD 273 has held that subsidy granted by Government to set up Industry in a backward area would be in the nature of capital receipt and cannot be treated as Revenue receipt. The Senior Counsel concluded that this decision squarely applies to the facts of the assessee's case.
48. The Ld. Departmental Representative strongly objected to the admission on this additional ground. The main contention of the Ld. DR is that in the garb of taking additional grounds, the assessee is taking altogether a new plea which was never raised before the lower authorities. To substantiate his submission, the Ld. DR relied upon the decisions of Hon'ble Supreme Court in the case of National Thermal Power Vs CIT (1998) 229 ITR 383 and Goetze India Ltd., Vs CIT (2006) 284 ITR 323.
49. We have considered the rival submissions and perused the orders of Hon'ble Supreme Court. We find that in the case of National Thermal Power Co. Ltd. (supra), the Hon'ble Supreme Court has held that "undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee".
50. In the case of Goetze (India) Ltd. Vs CIT (supra) the Hon'ble Supreme Court has held that claim for deduction not made in the return cannot be entertained by the AO otherwise than by filing a revised return. However, in the same decision, the Hon'ble Supreme Court has further observed that "however, we make it clear that the issue in this case is limited to the power 14 Aditya Birla Nuvo Ltd., of AO and does not impinge on the power of the Tribunal u/s. 254 of the I.T. Act, 1961."
51. We find that similar addition ground was raised during the appeals of assessment years 1995-96, 1998-99 and 1999-2000 before the Tribunal. While deciding the appeal for A.Y. 1995-96 in ITA No. 3207/M/02, the Tribunal at para 2.13.5 has held that "the adjudicatability of the ground is different from the admissibility of additional ground. In case, for adjudicating a ground already admitted, some more material is required the Tribunal can always restore the issue to the file of AO for passing a fresh order after considering all the relevant facts. But on this ground, the assessee cannot be denied its right to raise the ground which arises on the basis of facts on record and which is relevant for determining the tax liability of the assessee correctly. We therefore, admit the additional ground raised by the assessee. Since adjudication of the ground will require going into the incentive scheme framed by the U.P. Government which was not available before the lower authorities, the issue is restored to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee.
52. The facts and circumstances being identical, we also admit the additional ground raised by the assessee. Respectfully following the decision of the Tribunal mentioned herein above, the issue is restored to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee. Therefore, the additional ground raised by the assessee is allowed for statistical purpose.
53. In the result, the appeal filed by the assessee is partly allowed.
ITA No. 6836/Mum/2002 -A.Y. 1996-97-Revenue's Appeal54. The issue raised in ground No.1 is identical with issue raised by ground No. 5 in ITA No. 6421/M/02 for assessment year 1996-97 at paras 15 to 17.
15 Aditya Birla Nuvo Ltd., While deciding the issue in assessee's appeal, the Tribunal has followed the decision taken in assessment year 1994-95 in ITA No. 2326/M/01. Therefore, respectfully following the decision of the Tribunal in earlier assessment years, we confirm the order of Ld. CIT(A). This ground of the Revenue is dismissed.
55. Ground No. 2 is identical with the issue raised by ground No. 6 in ITA No. 6421/M/02 for assessment year 1996-97 at paras 18 to 20. While deciding the assesse's appeal, the Tribunal has followed the decision in assessee's own case for the preceding assessment year and set aside the order of the Ld. CIT(A) and allowed the claim of the assessee. Respectfully following the decision in assessee's own case, we dismiss this ground raised by the Revenue.
56. Ground No. 3 is identical with the issue raised by ground No. 8 in ITA No. 6421/M/02 for assessment year 1996-97 at paras 24 to 26. While deciding the appeal in assesse's appeal, the Tribunal in ITA No. 3207/M/02 for assessment year 1995-96 have discussed this issue at page No. 7 para 2.7.1 wherein the Tribunal has followed its earlier year's order. Respectfully following the decision of the Tribunal in earlier year, we dismiss revenue's appeal.
57. In ground No. 4 relates to deletion of Rs. 99,87,962/- representing the value of unutilized Modvat embedded in closing stock.
58. It is seen that the AO has treated Rs. 99,87,962/- as under valuation of closing stock. The addition has been made because the AO has valued the closing stock on "gross of Modvat system" whereas the assessee has valued the closing stock adopting "net of Modvat system". The submissions of the assessee was rejected by the AO who made an addition of Rs. 99,87,962/-.
59. The Ld. CIT(A) deleted the addition following the ratio laid down by the decision of Hon'ble Jurisdictional High Court of Mumbai in the case of CIT Vs India Nippon Chemicals Ltd. ,112 Taxman 555.
16 Aditya Birla Nuvo Ltd.,
60. Before us, the Ld. Departmental Representative fairly conceded that now this issue is covered by the decision of the Hon'ble Supreme Court in the case of CIT Vs Indio Nippon Chemicals 261 ITR 275 (SC). We find that facts and issues are similar. Respectfully following the decision of the Hon'ble Supreme Court in the case of CIT Vs Indio Nippon Chemicals (supra), ground No. 4 is dismissed.
61. Ground No. 5 relates to deletion of disallowance of Rs. 11,88,730/- paid for laying transmission line and Rs. 1,08,06,154/- paid towards the construction of access road.
62. During the course of assessment proceedings, the AO found that the assessee has debited Rs. 11,88,730/- as payment made to MSEB for laying of transmission line at Hotgi plant at Solapur and claimed it as Revenue expenditure. The AO was of the opinion that since laying of transmission line is of an enduring nature the assessee will derive the benefits in long term for its business accordingly treated it as capital expenditure. The AO further noticed that the assessee has also debited Rs. 1,08,06,154/- towards construction of access road and laying of 132KV transmission line and claimed it as Revenue expenditure. When questioned by AO on the allowability of the claimed expenses, the assessee relied upon the judgement of Hon'ble Supreme Court in the cases of CIT Vs Associated Cement companies Ltd 172 ITR 257 and L.H. Sugar Factory and Oil Mills (P) Ltd Vs CIT 125 ITR 293 and claimed that the expenditure should be deductible as revenue expenditure. However, the AO relied upon the decision of Hon'ble Bombay High Court in the case of Modella Woollens Ltd. Vs CIT 120 ITR 726 in which case the Hon'ble Bombay High Court has given a clear finding that the expenditure incurred for the construction of a pucca approach road to factory premises is not a deductible revenue expenditure and have to be regarded as capital expenditure. The AO accordingly disallowed the expenditure of Rs. 1,08,06,154/-.
17 Aditya Birla Nuvo Ltd.,
63. When the matter was argued before the Ld. CIT(A), the CIT(A) following his own order in assessee's own case for assessment year 1995-96 allowed the expenditure as revenue expenditure.
64. Before us, the Ld. DR pointed out that in the immediately preceding assessment year i.e. A.Y. 1995-96, ITAT "I" Bench, Mumbai in ITA No. 3207& 3614/M/02 & C.O. No. 142/M/03 at page 25 para 3.6.3 to 3.6.7 on similar facts and circumstances and after considering the decision of Hon'ble Bombay High Court in the case of Modella Woollens Ltd. Vs CIT (supra), CIT Vs Associated Cement companies Ltd (supra), L.H. Sugar Factory and Oil Mills (P) Ltd Vs CIT(supra) CIT Vs Excel Industries Ltd 122 ITR 985 and also the decision of Hon'ble Supreme Court in the case of Empire Jute Co. 01 has held that the expenditure was capital in nature.
65. We have considered the orders of lower authorities and the order of Tribunal for A.Y. 1995-96. The Ld. Senior Counsel vehemently argued that the Tribunal while deciding the case fo A.Y. 1995-96 has not properly considered the judgement of the Hon'ble Supreme Court cited herein above. He argued that expenses deserved to be allowed as revenue expenditure following the judgementment of the Hon'ble Supreme Court in the cases cited herein above. We find that the Tribunal while deciding the issue for assessment year 1995-96 has considered what has been argued by the Senior Counsel before us. Respectfully following the finding of the Tribunal given in the immediately preceding assessment year i.e. 1995-96 we hold that the expenditure so claimed are capital in nature accordingly order of the Ld. CIT(A) is set aside and that of the AO is restored. Therefore ground No. 5 raised by the revenue is allowed.
66. Ground No. 6 relates to deletion of disallowance of interest for the period prior to commencement of business amounting to Rs. 6,65,28,237/-. While framing the assessment, the AO found that the assessee claimed interest on borrowed capital for its new project/expansion namely Rajshree Cement, J.S.T (Flax), J.S.T (R.C.M.) and Rajshree Syntex, Birle Penclase, 18 Aditya Birla Nuvo Ltd., Rayon Caustic, while cement capitalized shown under capital work-in- progress. The interest paid to the tune of Rs. 6,65,28,237/- was claimed as deductible revenue expenditure. The AO after discussing various judicial pronouncements and submissions of the assessee came to the conclusion that new operations do not constitute same business as interest have been paid on funds borrowed for the operations of the new project is not an allowable deduction u/s. 3636(1)(iii) of the I.T. Act.
67. When the matter was argued before the Ld. CIT(A), the Ld. Counsel pointed out that similar matter was argued for the preceding assessment year 1995-96. The Ld. CIT(A) held that since he has allowed the issue on identical facts, the claim of interest paid on borrowed capital as deductible expenditure in the immediately preceding year, he allowed the expenses for the year under consider also.
68. The Ld. DR relied upon the finding of AO. The Ld. Senior Counsel pointed out that the facts and issue are identical with the facts and issue of earlier assessment years 1995-96, 1998-99 and 1999-2000.
69. We have heard the rival submissions and perused the orders of lower authorities and the order of Tribunal for the relevant preceding assessment year as pointed out by the Senior Counsel. We find that while deciding the appeal in ITA Nos. 6668 and 6669/M/03 for assessment years 1998-99 and 1999-2000 and ITA Nos 6762 & 63/M/03 for the same assessment year, the Tribunal relied upon the decision of the Hon'ble Supreme Court in the case of DCIT Vs Core Health Care Ltd. 298 ITR 194 and in the case of Grasim Industries Ltd. 64 TTJ 357(Mum ITAT) decided the appeal in favour of assessee. Respectfully following the decision of Tribunal for the assessment year mentioned herein above in assessee's own case, ground No. 6 raised by the revenue is dismissed.
70. In the result, the appeal filed by the Revenue is partly allowed.
19 Aditya Birla Nuvo Ltd., C.O. No. 14/M/2004 filed by assessee for assessment year 1996-97
71. In the Cross objection Ground No. 1 raised by the assessee is an alternative ground by which the assessee has claimed expenditure of Rs. 4 crores incurred on premium on redemption of Non Convertible Debentures u/s. 35D of I.T. Act.
72. The Ld. Senior Counsel pointed out that NCD expenses have been allowed in the earlier assessment years. Therefore this ground become infructuous.
73. On this submission of Sr. Counsel and the perusal of the orders of Tribunal for the assessment year 1992-93 and 1995-96, we hold that ground No. 1 actually become infructuous accordingly it is dismissed.
74. Ground No. 2 is again an alternative ground which has been taken without prejudice to the ground taken in the appeal for assessment year 1995-96 that no addition made in the total income of that year on account of unutilized MODVAT credit.
75. The Ld. Senior Counsel was very considerate in pointing out that this ground is also infructuous as addition of closing stock in the assessment year 1994-95 has been deleted by the Tribunal.
76. We have gone through the Tribunal order and find that the issue raised in ground No. 2 is infructuous and accordingly dismissed.
77. Ground No. 3 relates to claim of depreciation on expenditure of Rs. 1,19,94,884/- incurred towards construction of access road. As the matter was restored back to the file of AO for the assessment year 1995-96, depreciation has been allowed and the claim of the assessee does not hold any water, therefore ground No. 3 is accordingly dismissed.
C.O. No. 15/M/2004 filed by assessee for assessment year 1997-98 20 Aditya Birla Nuvo Ltd.,
78. The issue raised in ground No.1 is identical with issue raised by ground No. 2 in C.O. No. 14/M/04 for assessment year 1996-97. Therefore it is infructuous and accordingly dismissed.
79. The issues involved are same that quantum may differ on similar lines, similar reason, the appeal filed by the assessee in ITA No. 6422/M/2002 for assessment year 1997-98 and the appeal filed by the Revenue in ITA No. 41/M/2003 for assessment year 1997-98 are partly allowed.
80. In the result, the appeals filed by the assessee and the appeals filed by the Revenue are partly allowed and the cross objections filed by the assessee are dismissed.
Order pronounced on this 22nd day of June,2012
Sd/- Sd/-
(B.R. MITTAL) (N.K. BILLAIYA )
Judicial Member Accountant Member
Mumbai, Dated 22nd June, 2012
Rj
Copy to :
1. The Appellant
2. The Respondent
3. The CIT-concerned
4. The CIT(A)-concerned
5. The DR 'I' Bench
True Copy
By Order
Asstt. Registrar, I.T.A.T, Mumbai
21 Aditya Birla Nuvo Ltd.,
Date Initials
1. Draft dictated on: 13.06.2012 Sr.
PS/PS
2. Draft placed before author: 15/18.06.2012 Sr.
PS/PS
3. Draft proposed & placed JM/AM
before the second member:
4. Draft discussed/approved by JM/AM
Second Member:
5. Approved Draft comes to the Sr.
Sr. PS/PS: PS/PS
6. Order pronounced on: Sr.
PS/PS
7. File sent to the Bench Clerk:
8. Date on which file goes to Sr.
the Head Clerk: PS/PS
9. Date on which file goes to AR
10. Date of dispatch of Order: