Income Tax Appellate Tribunal - Mumbai
Hindustan Ciba-Geigy Ltd, Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "I"
BEFORE SHRI N.V. VASUDEVAN (JM) & SHRI R.K. PANDA (AM)
I.T.A.No. 9566/Mum/95 (Assessment year : 1991-92)
DCIT Special Range-23 Vs. Hindustan Ciba Geigy Ltd.
Aayakar Bhavan Royal Insurance Building
M.K. Road 14, Jamshedji Tata Road
Mumbai-400 020. Churchgate
Mumbai-400 020.
APPELLANT RESPONDENT
I.T.A.No. 9679/Mum/95 (Assessment year : 1991-92)
Hindustan Ciba Geigy Ltd. Vs. DCIT Special Range-23
Royal Insurance Building Aayakar Bhavan
14, Jamshedji Tata Road M.K. Road
Churchgate Mumbai-400 020.
Mumbai-400 020.
APPELLANT RESPONDENT
C.O.No. 105/Mum/96 in I.T.A.No. 9566/Mum/95
(Assessment year : 1991-92)
Hindustan Ciba Geigy Ltd. Vs. DCIT Special Range-23
Royal Insurance Building Aayakar Bhavan
14, Jamshedji Tata Road M.K. Road
Churchgate Mumbai-400 020.
Mumbai-400 020.
CROSS OBJECTOR RESPONDENT
PAN/GIR No. : 43-002-CZ-6281
Assessee by : Shri J.D. Mistry
Department by : Shri Sanjiv Dutt
ORDER
PER BENCH :-
ITA No.9566/Mum/94 is an appeal by the Revenue while ITA No.9679/Mum/04 is an appeal by the Assessee and both these appeals are directed against the order of the CIT(A)-XXIII, Mumbai, relating to 2 A.Y.91-92. The Assessee has also filed a cross objection against the very same order of the CIT(A).
2. First we shall take up for consideration the appeal by the Revenue. Ground No. 1 raised by the revenue reads as follows :-
On the facts and circumstances of the case and in law, learned CIT(A) erred in deleting the disallowance amounting to Rs. 16,63,780/- made by the Assessing Officer under rule 6D by holding that incidental expenses connected to tour should not be included while computing the disallowance under prescribed rules.
3. In course of assessment proceedings, the Assessing Officer called upon the assessee to furnish full and complete details regarding travelling expenses. Under sub-section 3 to section 37 of the Act as it existed up to A.Y. 1997-98, any expenditure incurred by an assessee in connection with traveling by an employee or any other person including hotel expenses or allowance paid in connection with such traveling, shall be allowed as a deduction in computing total income only to the extent and subject to such condition, if any, as may be prescribed. Rule 6D of the Income Tax Rules imposed restriction on traveling expenses, inside India and outside the headquarters claimed as deduction is limited to travelling expenses actually incurred and daily allowance not existing a specified limit and depending upon whether the boarding or lodging facilities are available to the employees or to the other persons. In view of the aforesaid provisions, assessee had on its own submitted that a sum of Rs. 23,36,220/- is liable to be disallowed and the said sum was offered for taxation in the assessee's return of income. In reply to the query of the Assessing Officer regarding details of traveling expenses, the assessee submitted that there were large number of vouchers and therefore those vouchers could not be produced before the Assessing Officer. The Assessing Officer made a reference to the decision of Hon'ble Karnataka High Court in the case of M/s. Stumpp Schuelle & Shomappa Ltd., Vs. CIT, 192 ITR 152 and expressed the opinion that the disallowance made 3 by the assessee on its own was not sufficient. The Assessing Officer therefore disallowed a sum of Rs. 40,00,000/- out of domestic travelling expenses under rule 6D(ii) of the Rules.
4. Before learned CIT(A), the assessee submitted that decision of Hon'ble Karnataka High Court referred to by the Assessing Officer was a case with reference to expenses on traveling when no business of the assessee is conducted and was therefore not relevant to the case of the assessee. The Assessee relied on the decision of Hon'ble Calcutta High Court in the case of CIT Vs. Vidyut Metallics Ltd., 203 ITR 779 (Cal), wherein it was held that Rule 6D of the I.T. Rules read with section 37(3) of the Act, limits to expenditure incurred on tour to the extent of stay in hotels confining it to daily allowance referred to in rule 6D and does not extent to any other expenses incurred provided those expenses are wholly and exclusively made out for the purpose of business. Further reference was made to the decision of Special bench of the ITAT in the case of Sundaram Finance Ltd., 7 ITD 845, wherein it was held that Rule 6D does not cover expenses like telephone bills, secretarial assistance etc. The Assessee therefore submitted that disallowance made by the assessee was after taking into consideration ratio laid down in the aforesaid decision. Further it was submitted that adhoc addition of Rs. 16,63,780/- (Rs. 40,00,000 minus Rs. 23,36,220) is without any basis and totally unreasonable. On a consideration of the above submissions, learned CIT(A) deleted the addition made by the Assessing Officer observing as follows :-
"After due consideration I find sufficient force in the submissions of the learned counsel of the appellant. After considering the relevant facts and circumstances of the case I agree with the appellant that decision of Karnataka High Court in the case of Stumpp, Schuelle & Somappa Ltd. Vs. CIT reported in 190 ITR 152 cannot be made applicable in the case of the appellant on account of distinguishing facts as pointed out by learned A/R of the appellant. The case of the appellant in may view gets full support by the following judicial pronouncements relied upon by the appellant :4
CIT Vs. Gannon Dunkerly & Co. reported in 69 Taxman 563 (Bom) CIT Vs. Vidyut Metallics Ltd. reported in 203 ITR 779 (Cal) Decision of Special Bench of the Madras ITAT in the case of Sundaram Finance Ltd. Vs. IAC reported in 7 ITD 845.
The additional disallowance of Rs. 16,63,780/- has been made by the DC(IT) without pointing out a single inadmissible item on presumption on adhoc basis. The addition disallowance of Rs. 16,63,780/- made by the DC(IT) is therefore deleted being unjust."
5. Aggrieved by the aforesaid order of learned CIT(A), the revenue has raised Ground No. 1 before the Tribunal.
6. Before us, learned DR relied on the decision of Hon'ble Bombay High Court in the case of CIT Vs. Aorow India Ltd., 229 ITR 325, wherein Hon'ble Bombay High Court has held that ceiling of expenditure by an employee on traveling as laid in Rule 6D has to be computed on per trip basis and not on per person basis. According to him, the Assessing Officer should be directed to recompute the disallowance in the light of Hon'ble Bombay High Court decision referred to above.
7. The learned counsel for the assessee on the other hand submitted that the issue under consideration in this ground of appeal is totally different from what was decided by Hon'ble Bombay High Court in the case of Aorow India Ltd. (supra). It was submitted by him that the decision of Hon'ble Calcutta High Court in the case of Vidut Metallics Ltd. (supra) squarely covers the issue in favour of the assessee.
8. We have considered the rival submissions. Rule 6D of the Income Tax Rules 1962 read with section 37(3) of the Income Tax Act , limits of expenditure incurred on traveling to the extent of stay in hotel confining it to daily allowance referred to in Rule 6D and does not extend to any other expenditure incurred provided expenditure wholly and exclusively let out for the purpose of business. The Assessee had made the disallowance on its own by taking into consideration the above principles. The dispute, as rightly pointed out by learned counsel for the 5 assessee, is not as to whether disallowance has to be computed on a per trip basis or per day basis. In the circumstances, we are of the view that the learned CIT(A) was right in deleting the addition made by the Assessing Officer. We therefore confirm the order of learned CIT(A) and dismiss ground No. 1 raised by the revenue.
9. Ground No. 2 has been decided while deciding ground No. 4 of the assessee's appeal. For the reasons stated therein, this ground of appeal of the revenue is dismissed.
10. Ground No. 3 raised by the revenue reads as follows :-
On the facts and circumstances of the case and in law, learned CIT(A) erred in deleting the addition to the closing stock on account f Modvat credit amounting to Rs. 1,16,35,000/-.
11. The Assessing Officer added a sum of Rs. 1,16,35,000/- to the closing stock on account of Modvat credit. The main reason for doing so was that the closing stock had to be valued at cost and cost includes all payments made by the assessee including all indirect taxes. The assessee was following exclusive method of accounting, whereby all the components of inventory are valued excluding all forms of indirect taxes. The Assessing Officer, however, was of the view that this was not a proper method and he therefore made the aforesaid addition.
12. On appeal by the assessee, learned CIT(A) deleted the addition made by the Assessing Officer accepting assessee's contention that method of accounting followed by the assessee to debit purchase of raw materials net of excise duty and therefore closing stock was also to be required to be valued at cost net of excise duty. The Assessee also pointed out that if excise duty is added to the purchase as well as closing stock, effect on profit will be nil. The decision of Calcutta High Court in the case of Berger Paints India Ltd. Vs. CIT, 44 ITR 573 was also relied upon by the assessee. Accepting the contentions raised by the assessee, the learned CIT(A) deleted the addition made by the Assessing Officer.
613. Before us, it is not in dispute that the issue raised by the revenue in Ground No. 3 has to be dismissed in view of the decision of Hon'ble Supreme Court in the case of Indo Nippon Chemical Co. Ltd., 261 ITR 275 (SC). In the aforesaid decision, Hon'ble Supreme Court has held that whether the net method of valuation of inventory or gross method of valuation of inventory is followed by the assessee, that will not have any impact on the ultimate profits of the assessee and therefore addition to the value of closing stock by including excise duty was not proper. In view of the above, there is no merit in Ground No. 3 raised by the revenue and the same is dismissed.
14. Ground No. 4 raised by the revenue reads as follows :-
On the facts and circumstances of the case and in law, learned CIT(A) erred in holding that capital expenditure of Rs. 5,00,000/- incurred on computer software and support charges should be allowed under revenue head regarding the reasons assigned in the assessment order.
15. The Assessing Officer disallowed a sum of Rs. 5,00,000/- in respect of computer software and support charges and software charges. According to the Assessing Officer, expenditure was capital expenditure. Before learned CIT(A), assessee pointed out that all the details of computer software support charges and software charges were filed before the Assessing Officer. It was pointed out that software support charges for wang VS/65 were retainership fees paid for technical maintenance of the Wang Vs/65 systems and are akin to any other maintenance charges. It was argued that payments were not made for upgradation or enhancement of computer system. As regards like lotus, macro libraries, it was submitted that due to technological advances, these become outdated and had to be replaced by modern version and therefore the same cannot be treated as capital expenditure. It was also pointed out that such expenditure has been allowed as revenue 7 expenditure in the past. The learned CIT(A) deleted the addition made by the Assessing Officer accepting the contentions on behalf of the assessee.
16. Before us, learned DR submitted that question as to whether software expenses should be capital or revenue has to be tested by the Assessing Officer in the light of the Special bench decision in the case of Amway India Ltd., 111 ITD 112 (SB)(Del) and the issue should be remanded to the Assessing Officer for this purpose. The learned counsel for the assessee on the other hand reiterated the stand as was taken before learned CIT(A).
17. After considering the rival submissions, we are of the view that the order of learned CIT(A) has to be upheld. Going by the nature of expenses incurred by the assessee as explained before learned CIT(A), there was no justification to treat expenses as capital expenditure. Moreover, adhoc disallowance cannot be made in a case of this nature. In these circumstances, we are satisfied that the action of learned CIT(A) in deleting the addition made by the Assessing Officer was correct and calls for no interference.
18. Ground No. 5(a) raised by the revenue reads as follows :-
On the facts and circumstances of the case and in law, learned CIT(A) erred in deleting the disallowance of Rs. 25,00,000/- out of an amount of Rs. 3,91,82,174/- attributable to the expenditure claimed for buying time on Television for releasing the advertisement films etc. disregarding the fact that assessee had not submitted the details before the Assessing Officer.
This ground can be conveniently decided along with ground No. 9 of assessee's appeal which reads as follows :-
9(1) Learned CIT(A) erred in confirming the disallowance of Rs. 85,47,046/- being the expenditure incurred on promotion films, slides and TV films production by treating it as a capital expenditure on the ground that the films and slides have repeat value and are utilized for a considerably long time.8
The appellant submit that these expenses have been incurred on the yearly advertisement campaigns of the company for their various products. The marketing strategies adopted by the company, which are also in line with corporate policies and strategies adopted by competition in the market require these films and slides to be changed frequently in order to keep adapting to current developments and advertisements of competitors. The spots are also pulled out after some time as they tend to lose appeal and effect on consumers after repeated viewing.
The appellants therefore pray that the DCI be directed to allow them the above expenditure as a revenue item.
Without prejudice to the above, the appellants submit that the entire expenditure on advertisement and publicity is allowable under section 37(3) irrespective of whether it is capital or revenue in nature.
The appellant therefore pray that the DCI be directed to allow them the above expenditure u/s. 37(3).
Without prejudice to the above, the appellants prays that the DCI be directed to allow them a deduction of the above expenditure in the above year as the period of one or two years cannot be said to result in a benefit of an enduring nature assuming that the CIT(A) was right that the benefit was for a period of around 52 weeks. Without prejudice to the above, learned CIT(A) erred in not giving directions to the DCI to allow depreciation on the above expenditure, as per 'without prejudice' contention of the appellant. The appellants pray that the DCI be directed to allow them depreciation on Rs. 85,47,046/-
19. The assessee had incurred an expenditure of Rs. 85,47,046/- in connection with production of films and video cassettes and slides. Above films, video and slides were produced as routine yearly advertisement campaign for the assessee's products. According to the Assessing Officer, by producing films, the Assessee acquired advantage of enduring nature and therefore expenditure was capital expenditure. The Assessing Officer in this regard referred to the decision of Hon'ble Bombay High Court in the case of Patel International Films Ltd., 102 ITR 219; wherein It was held that expenditure incurred on film purchased processed for advertising purpose was capital expenditure.
920. The learned CIT(A) confirmed the order of the Assessing Officer on this issue. Against this disallowance assessee has raised Ground No. 9 before the Tribunal.
21. Apart from the above, the assessee also incurred a sum of Rs. 25,00,000/- for getting time slot and to release advertisements in various media. This was disallowed by the Assessing Officer because in his opinion the expenditure was capital expenditure and not revenue expenditure. The learned CIT(A), however, allowed the claim of the assessee for deduction holding that the expenditure was revenue expenditure. Against the order of learned CIT(A), the revenue has raised Ground 5(a).
22. We have heard the rival submissions. In assessee's own case, this issue had come up for consideration in A.Y. 1996-97. The Tribunal in ITA No. 2189/Mum/03 for A.Y. 1996-97 held that the aforesaid expenditure was revenue expenditure and had to be allowed as a deduction. The Tribunal also took into consideration the decision of Hon'ble Bombay High Court in the case of Patel International Films Ltd. (supra) referred to by the Assessing Officer in the assessment order in this assessment year. It is further noticed that as against the aforesaid order of the Tribunal, the revenue filed an appeal before Hon'ble High Court and such appeal was dismissed by Hon'ble High Court in Notice of Motion No. 3114 of 2007 in Income Tax Appeal No. 1644 of 2007 by order dated 26.2.2008. In view of the above, we are of the view that the order of the CIT(A) in so far as it relates to treating the expenditure on making advertisement films, videos and slides as capital expenditure cannot be sustained. Consequently, ground No. 9 raised by the assessee is allowed.
23. As far as ground No. 5(a) raised by the revenue is concerned, we are of the view that the said expenditure is purely revenue in nature, they were rightly allowed by learned CIT(A). We find no grounds to interfere 10 with the order of learned CIT(A) on this issue. Consequently, ground No. 5(a) raised by the revenue is also dismissed.
24. Ground No. 5(b) reads as follows :-
On the facts and circumstances of the case and in law, learned CIT(A) erred in deleting the addition of ` 1,43,498/- u/s. 6B by holding that the adhoc disallowance of ` 5,00,000/- out of advertisement and publicity expenses amounting to `. 6,79,35,710/- is inclusive of entertainment expenditure.
25. The Assessing Officer made an addition of Rs. 1,43,498/- being expenses incurred towards advertisements which according to the AO are not permissible as deduction in view of provisions Rule 6B of the I.T. Rules.
26. Before learned CIT(A), the assessee submitted that the Assessing Officer was not justified in invoking provisions of Rule 6B of the I.T. Rules read with section 37(3) of the Act. The Assessee submitted that the gift articles given did not bear name or logo of the company and in such cases, rule 6B(1) has no application. The Assessee relied on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Indian Aluminium Cables Ltd., 183 ITR 611.
27. The learned CIT(A), however, was of the view that as laid down by Hon'ble Himachal Pradesh High Court in the case of CIT Vs. Mohan Meakin Breweries Ltd., 192 ITR 134, expenses incurred for presentation items for suppliers and customers amounted to entertainment expenditure within the meaning of section 37(2(b) of the Act. The learned CIT(A) thereafter found that the assessee debited a sum of Rs. 7,74,175 in respect of gift articles under the head 'advertisement and publicity expenses' and the Assessing Officer had made adhoc disallowance of `. 5,00,000/- out of the aforesaid expenses. The learned CIT(A) therefore thought it fit to examine the aforesaid adhoc disallowance of `. 5,00,000/-. The learned CIT(A) dealt with the issue of disallowance of 11 `. 5,00,000/- at paragraph 44 of his order. In paragraph 44, learned CIT(A) held that the disallowance of `. 5,00,000/- also included disallowance of Rs. 1,43,498/- made on account of invocation of Rule 6B of the I.T. Rules. The learned CIT(A) restricted the adhoc disallowance of `. 5,00,000/- made by the Assessing Officer to `. 1,62,598/-. Since, disallowance of Rs. 1,43,498/- is already included in the amount of `. 1,62,598/- sustained by learned CIT(A), this addition was deleted by learned CIT(A). It may be mentioned here that in Ground No. 3(b) of the assessee's appeal, the assessee has challenged the action of learned CIT(A) in sustaining the disallowance of `. 1,62,598/- included 'advertisement and publicity expenses'. In our view, grievance projected by the revenue in this appeal cannot be sustained in the light of the findings of learned CIT(A) that sum of `. 1,43,498/- is already included in disallowance sustained by learned CIT(A) of `. 1,62,598/-. We therefore dismiss this ground of revenue as findings of learned CIT(A) could not be controverted.
28. Ground No. 6 raised by the revenue can be conveniently decided along with ground No. 10 of the assessee, which read as follows :
Ground No. 6 raised by the revenue :-
On the facts and circumstances of the case and in law, learned CIT(A) erred in holding that the deduction of `. 10,00,000/- out of the dividend income should be reduced to `. 1,23,584/- for the purpose of allowing deduction u/s. 80M disregarding the fact that it includes administrative and management expenses, interest on investment etc. as assigned the assessment order.
Ground No. 10 raised by the assessee reads as follows :-
The learned CIT(A) erred in upholding the deduction from dividend income made by DCI to the extent of 2% of dividend income on account of estimated administrative and management expenditure, for the purpose of calculating claim under section 80M. The appellant submit that no administrative or management expenses were incurred by them on the dividend income of `. 91,79,225/- received by them from Cibatual Limited and UTI 12 during the year. Only seven dividend cheques/warrants were received which were deposited along with the other cheques and therefore no expenditure was incurred on this account. Further, no estimate can be made on this account and only the actual expenditure incurred can be deducted from the dividend income for the purpose of working out the claim u/s. 80M.
The appellant therefore prays that the DCI be directed to allow them deduction u/s. 80M on the entire amount of dividend received during the year of `. 91,79,225/-
29. The grounds of appeal are against the action of Assessing Officer in deducting an adhoc amount of `. 10,00,000/- from the dividend income of `. 91,79,225/- received by the assessee on account of alleged administrative and interest charges on cost of funds and allowing deduction under section 80M of the I.T. Act on the balance amount. The above issue has been discussed in para 22 of the Assessment order. The assessee contended before learned CIT(A) that details of the dividend received in respect of which deduction has been claimed u/s. 80M are as under :-
CIBATUAL Final Dividend 1989-90 `. 6,60,000/-
CIBATUAL Interim Dividend `. 3,85,000/-
CIBATUAL dividend 1989-90 on 10 `. 25/-
equity shares of `. 10/- each
Unit Trust of India 1964 Scheme
45,19,000 units @ `. 1.60 per unit `.81,34,200/-
`.91,79,225/-
30. The Assessee submitted that shares of Cibatual Limited are old holdings and there was no interest charge on the same. It was also submitted that no administrative or management expenses were incurred on receiving the said dividend. It was pointed out that except 9,00,000 units all the other units were purchased during the earlier assessment years. The 9,00,000 units which were purchased during the A.Y. under reference were purchased out of accumulated sales proceeds and not out of alleged borrowings. Thus, there was no justification for estimating any expenditure in the nature of interest on alleged borrowed funds. The 13 assessee also furnished copy of bank statement as per Annexure 23 to show that the units were not purchased out of borrowed funds. The Assessee contended that units of UTI and shares of Cibatual limited were not purchased out of borrowed funds. The assessee did not incur any administrative charges for earning the dividend income. Thus, there was no justification for making the impugned addition of `. 10,00,000/. The same should therefore be deleted.
31. The learned CIT(A) held that the shares of Cibatual Limited were old holdings and therefore there was no interest charge on these shares. Similarly, the units were also purchased out of accumulated funds and not out of borrowings. Thus, there was no justification for reducing the dividend income while allowing deduction u/s. 80M of the I.T. Act on account of alleged interest charges. However, learned CIT(A) did not agree with the arguments of the learned AR that no administrative or management expenses were required to be incurred for earning of realizing the dividend on units and shares. According to the learned CIT(A) it was not a case of only realizing the cheques for dividend on units or shares as claimed by the assessee. The entire process of earning dividend income is not so simple as the assessee has tried to establish. According to the CIT(A), various activities are involved for earning the dividend income, such as handling and preserving of shares and unit certificates, maintenance of proper and relevant files, follow up action, collection and deposit of dividend etc. All these activities are not automatic. The general staff is utilized for all these purposes. Thus, a reasonable estimate regarding expenditure attributable to earning of dividend income is required to be made. After considering all the relevant facts and circumstances of the case and various activities involved in earning of the dividend income, the CIT(A) was of the view that it would be reasonable to estimate administrative and management expenditure at 2% of the dividend income. The administrative and management 14 expenditure was therefore estimated at 2% of the dividend income as against `. 10,00,000/- estimated by the Assessing Officer.
32. Aggrieved by the relief given by learned CIT(A), the Revenue has preferred ground No. 6 before the Tribunal. Aggrieved by the action of learned CIT(A) in reducing 2% administrative and management expenditure from the dividend eligible for deduction u/s. 80M of the Act, the assessee has raised ground No. 10 before the Tribunal.
33. We have heard the rival submissions. A perusal of the orders of the authorities shows that the disallowance has been made purely on adhoc basis. It has been held by Hon'ble Bombay High Court in the case of CIT Vs. General Insurance Corporation of India, 254 ITR 203 (Bom) that only expenses that are directly relatable to earning of dividend have to be reduced for the purpose of computing deduction u/s. 80M of the Act. As already stated there has been no identification of expenses directly relatable to earning of dividend. The disallowance on the basis of estimate cannot be sustained. We therefore direct that the deduction u/s. 80M as claimed by the assessee be allowed. Ground No. 10 of the assessee's appeal is accordingly allowed while Ground No. 6 raised by the revenue is dismissed.
34. Ground No. 7 raised by the revenue reads as follows :-
On the facts and circumstances of the case and in law, learned CIT(A) erred in holding that speculation loss on sale of units amounting to `. 14,62,500/- assessed under Explanation to section 73 of the I.T. Act should be allowed as short term capital loss which is contrary to the provision of section 32 read with section 32(ii)(2)(a) of the U.T. I. Act which clarifies the units of UTI shares for the purpose of I.T. Act.
35. The Assessing Officer treated the loss of `. 14,62,500/- on sale of units as speculative loss. The Assessing Officer has discussed this issue in para 23 of assessment order read with Annexure 4 thereof. Mainly the Assessing Officer has disallowed the loss on the ground that the 15 provisions of section 73 are applicable to the transaction and units of UTI are shares. Before CIT(A), the assessee contended that the loss was correctly worked out by the assessee as under :-
Purchase of 9,00,000 units of UTI on 28.5.90 @ Rs. 14.86 per unit `. 13374000 Add : Stamp charges as on 9,00,000 units `. 67500
------------------
`. 13441500 Less : proceeds of 9,00,000 units of UTI `. 11979000 Sold on 28.7.90 Loss `. 14,62,500/-
The above units were purchased on 28.5.1990 as evidenced by the purchase contract from Citibank. These units were sent for transfer to the UTI on 29.5.1990. A copy of acknowledgment received from UTI was enclosed as Annexure 23. The assessee contended before learned CIT(A) that the units were transferred in the name of Hindustan Ciba Geigy Ltd. as can be evidenced from the dividend counterfoil for dividend received on 9,00,000 units by the assessee company. It was argued that the assessee had made full payment for the purchase of units and also taken physical delivery thereof. Thus the above transaction was not a speculative transaction and the loss is a short term capital loss. The explanation to section 73 of the Act was not applicable since the assessee was not in the business of purchase and sale of shares. The explanation to section 73 is applicable only to purchase and sale of shares and does not apply to units of UTI as they are not shares. In this connection, a reference was also made to the provisions of section 32(3) of the UTI Act, 1963. The said provisions, according to the Assessee makes it is clear that a unit holder was a mere investor and not a shareholder of the UTI. The Assessee also submitted that similar issue has been decided in favour of the assessee by the appellate authorities in the following cases:-
1. Appollo Tyres Ltd., 43 ITD 464
2. Agro Chemicals Ltd.
3) Asea Brown Boveri Ltd.
4) Eternit Everest Ltd.
16It was further submitted that the unit holder is a mere investor and is not a shareholder of the UTI and this position in law further substantiated by the amendment to the proviso to section 2(42A) of the I.T. Act, 1961 vide Finance Act, 1964 which clearly brings out the fact that units of UTI are not shares. The Assessee submitted that in view of the above facts and the decision of the ITAT in the case of Appollo tyres Ltd. (supra), the Assessing Officer was not justified in applying provisions of explanation to section 73 in the case of the assessee by holding that units of UTI were shares. It was prayed that the Assessing Officer should therefore be directed to allow the loss of `. 14,62,500/- as claimed by the assessee.
36. The learned CIT(A) held that 9,00,000 units of UTI were purchased on 28.5.1990 as evidenced by the purchase contract from Citibank. The payment of stamp duty has also been confirmed by the bank. Full payment for purchase of these units was made and the assessee had also taken physical delivery thereof. These units were also sent for transfer to UTI on 29.5.1990. The units were transferred in the name of Hindustan Ciba Geiygy Ltd., which is evident from the dividend counterfoil for dividend received of 9,00,000 unit by the assessee company. The said units were sold on 28.7.1990 for `. 1,19,79,000/-. These facts are not disputed. The CIT(A) found that the controversy was therefore in a very narrow compass, viz., whether or not purchase and sale of units of UTI by the assessee company can be treated as purchase and sale of shares of other companies so as to apply the deeming provisions contained in Explanation to section 73 of the I.T. Act. In this connection, learned CIT(A) agreed with the submissions of the learned counsel for the assessee that section 32(3) of the UTI Act, 1963 merely states that for the purchases of the I.T. Act, 1961; (a) the distribution of income received by the unit holder shall be deemed to be income from dividends and (b) the Trust shall be deemed to be a company. The said deeming section is restricted in scope and does not deem units to be shares, for all purposes 17 under the I.T. Act. The CIT(A) held that legal fictions are only for a definite purchase and they are limited to the purposes for which they are created and the legal fiction should not be extended beyond their legitimate field. The CIT(A) in this regard relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Amarchand Shroff, 48 ITR 59 (SC), which has consistently been followed in 75 ITR 174 (SC), 86 ITR 2(SC) and 155 ITR 711 (SC). In the opinion of the learned CIT(A) the purpose of the deeming provision in section 32(3)(a) and (b), was with a view to regulate the taxability of income by way of distribution received by a specified unit holder from the UTI. He was of the view that the legal fiction has not been extended to the units as such for all purposes. The CIT(A) found sufficient force in the submissions of the assessee that the share holders are not unit holders on account of the different rights vested and enjoyed by them. Merely because income from units of the UTI are called dividend it would not mean that it is an income from the shares of a company. The Explanation annexed to section 73 of the I.T. Act creates only a legal fiction to the effect that loss from share dealing by certain companies shall be deemed to be loss from speculation business. In the case of the assessee company the loss has arisen on purchase and sale of units and not from dealings in shares of other companies. The CIT(A) therefore held that the Assessing Officer was not justified in applying explanation to section 73 of the I.T. Act. Accordingly the loss was directed to be treated as a business loss.
37. Before us, it is not in dispute that this issue has now been decided by the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. Vs. CIT, 255 ITR 273. The Hon'ble Supreme Court held that 'even though section 32(3) of the UTI Act, 1963 creates a fiction to make the UTI a deemed company and distribution of income received by the unit holder a deemed dividend for the purposes of the I.T. Act, by virtue of those provisions it cannot be said that section also makes the unit of the UTI a deemed share. The deeming provision in section 32(3) should be confirmed only to deeming the UTI a company and the income from units 18 a dividend. In the absence of any specific deeming provision in regard to the units as shares it would be erroneous to extend the provisions of section 32(3) for the purpose of holding the unit shares. It was accordingly held that buying and selling of units by the assessee company could not be treated as a speculative business. The Explanation to section 73 of the I.T. Act did not apply. Loss in buying and selling of units of the UTI was business loss not speculation loss. The decision of learned CIT(A) is in consonance with decision of Supreme Court . We therefore do not find any ground to interfere in the order of learned CIT(A). Consequently ground No. 6 raised by the revenue is also dismissed.
38. In the result, appeal by the revenue is partly allowed.
39. We shall now take up for consideration, the appeal by the Assessee. Ground No.1 raised by the Assessee reads as follows:
"The CIT(A) erred in upholding the disallowance mad by the DCIT, Special Range 23, Bombay in respect of depreciation amounting to `. 16,18,554/- claimed by the appellants on technical know-how fees on the ground that separate deduction u/s 35AB of the I T Act, 1961 was allowed thereon.
The Appellants submit that expenditure on technical know-how fees constitutes plant, and they are therefore entitled to depreciation thereon. The appellants further submit that neither sec. 32 nor sec. 35AB prohibits the claim for depreciation in a case where deduction u/s 35AB is also allowable.
The appellants pray that the DCI be directed to allow them the deprecation of ``. 16,18,554/- claimed by them on technical knowhow fees."
40. It was fairly submitted by the learned counsel for the Assessee that the aforesaid ground has to be decided against the Assessee in view of the decision of the Hon'ble Supreme Court in the case of Escorts Ltd; Godrej Soaps Ltd; J K Synthetic Ltd and Hindustan Computers Ltd vs Union of India reported in 199 ITR 43 (SC). In view of the above, Ground No.1 is dismissed.
1941. Ground No.2 raised by the Assessee reads as follows:
"The CIT(A) erred in confirming the DCI's action of disallowance of `. 2,54,844/- being the expenditure incurred on transit houses maintained by the appellants at Goregaon and Goa, as against contention that only ` 11,012/- is disallowable. In this connection, the appellants submit as under:
i) Expenses allowable u/s 28 to 36 of the Act are outside the purview of sec. 37(4) and hence cannot be disallowed u/s 37(4).
ii) Expenditure relating to canteen supply materials etc., are outside the purview of sec.37(4) since they do not relate to maintenance to transit houses.
iii) In view of the above, the appellants submit that the disallowance made by the DCI on this account be deleted."
42. The details of the expenses incurred at the transit house at goregoan and Goa are as follows:
Particualrs Goregaon( `) Goa ( `) Electricity, Fuel, Water, etc 25,000 20,130 Other expenses 814 0 Salaries 12,906 0 Total 38,720 20,130 Total Expenditure on transit House 58,850 ( 38,720 + 20,130) Less: Amounts recovered from the users 47,838 of the Transit House 11,012 Other expenses incurred contended not to be disallowable u/s 37(4) Rent/Lease Expenses 3,468 0 Insurance 2,193 317 Canteen Supply materials 3,244 147,512 Repairs 1,293 2,401 Service Charges/documentation charges 5,133 0 Depreciation as per I T Rules 10,803 19,630 26,134 169,860 Total 64,854 189,990
43. The whole of the above expenses were disallowed by the revenue authorities on the ground that they were expenses in connection with maintenance of guest house and therefore hit by the prohibition 20 contained in Sec.37(4) of the Act. It is not in dispute before us that in view of the decision of the Hon'ble Supreme Court in the case of Brittania India Ltd. Vs. CIT 278 ITR 546 (SC), any expenditure on maintenance of a guest house cannot be allowed as a deduction. The learned counsel for the Assessee however submitted that the expenses to the extent it relates to provision of food to employees would not fall within the meaning of the expression "expenditure incurred in maintenance of the guest house"
(See Canteen supply materials in the chart given above) within the meaning of Sec.37(4) of the Act and to that extent the disallowance has to be deleted. In this regard he relied on the decision of the ITAT Mumbai in the case of M/s.Tata engineering & Locomotive Co. Ltd. Vs. DCIT ITA No.7061/Mum/98 dated 19-4-2006 wherein identical issue has been considered. The learned D.R. however submitted that expenditure incurred on providing food would also be expenditure incurred in maintenance of a guest house.
44. We have considered the rival submissions. The ITAT Mumbai in the case of M/S.Tata engineering & Locomotive Co.Ltd. (supra) held as follows:
7. The ground no.2 pertains to disallowance sustained by the ld CIT(A) in respect of expenditure incurred by the assessee on Staff Inspection House treating the same to be guesthouse expenses. The fist item pertains to disallowance4 of telephone expenses of `. 4,79,617/-. The ld counsel for the assessee was fair enough to concede that this issue is to be decided against the assessee in view of the Supreme Court decision in the case of Britannia (India) Ltd vs CIT 278 ITR 546 Accordingly, the disallowance on account of telephone expenses stands confirmed.
8 The second item pertains to expenditure on food amounting to ` 39,35,002/- Both the sides agreed that this issue is covered in asessee's favour by the ITAT's order for the AY 93-94 referred to above. We find that this issue has been decided by the Tribunal at para 13 of the order in the following manner:
"We agree with this proposition that if expenditure are incurred on the staff employee to maintain the guesthouse, it is not allowable expenditure, as it is hit by the provisions of sec.47(4) of the I T Act. But, the expenditure incurred on food and beverages of inhabitants who stayed in the Inspection 21 House, cannot be called to have been incurred to maintain the guesthouse, though its allowability can be examined in the light of provisions of sec.37(2) of the Act. We are, therefore, of the view that the disallowance made by the Revenue authorities are not proper. We, however, restore this issue to the file of the AO to examine in the light of provisions of sec. 37(2) of the I T Act and if the assessee succeeds in proving that these expenses on food and beverages on its employees were incurred at the work place, it may be allowed as per Explanation 2 of sec. 37(2) of I T Act."
From the above, it may be seen that the Tribunal held that expenditure on food and beverages in respect of staff employed for maintenance of guesthouse will be in the nature of expenditure on maintenance of guesthouse and will be hit by sec. 37(4) of the Act. However, the expenditure on inhabitants will not be covered under the expenditure for maintenance of guesthouse even though the same can be considered u/s 37(2) or u/s 37(2A). This issue is, therefore, resorted back to the Assessing Officer to be considered and decided in the light of the observations made by the Tribunal, which have been reproduced above.
We are of the view that the issue in so far as it relates to expenditure on providing food and beverages has to be decided afresh by the Assessing Officer on the basis of the directions as given above by the Tribunal. We accordingly allow ground No.2 partly for statistical purposes.
45. Ground No.3(A), 3(B) and 3(c) raised by the Assessee reads as follows:
"3A. On the facts and in the circumstances of the case, the CIT(A) erred n holding that an amount of ` 9,00,000/- was in the nature of entertainment expenditure included in sales conference, business meeting expenses and canteen expenses.
In this connection, the appellants submit as under:
1. The above amount includes an amount of ` 2,20,000/- out of the total canteen expenditure. The appellants submit that the expenditure is not on entertainment and therefore no disallowance should be made. In any event, the estimate is highly excessive.
2. Without prejudice to the above, the CIT(A) erred in considering `. 92,85,039/- as total canteen expenses whereas the correct amount is `80,41,642/-. Therefore, the 22 approximate disallowance on this account at the rate of 2.5% applied by the CIT(A) ought to be `` 2,00,000/- only.
3. The expenditure on business meeting expenses and conference expenses relates almost entirely to in-house conferences of field staff to discuss marketing strategies, sales targets, consumer responses and other allied matters.
The purpose of such conferences thus relates to the sales and marketing polices and therefore no portion thereof can be disallowed as entertainment expenditure.
4. Without prejudice to (3) above, the disallowance of the entire amount incurred on business meetings and conferences is totally unwarranted.
5. Without prejudice the total of the amounts listed by the CIT(A works out to `` 8,76,276/- whereas he has directed that ` 9 lakhs be disallowed. The extra amount of ` 23,734/- should in any event be deleted.
6. Without prejudice to any of the above, the estimated disallowance of ` 9,00,000 is highly excessive and unreasonable.
The appellants pray that the DCI be given suitable directions in this regard.
B. The CIT(A) erred in upholding the disallowance made by the DCI to the extent of `` 1,62,596 being the alleged entertainment expenditure included in advertisement and publicity expenses.
In this connection, the appellants submit as under:
1. ` 1,62,598/- represents the total expenditure on gift articles which cost more than ` 200/- each. Out of this, only one item amounting to ` 2,740/- bear the company's logo. The disallowance on this item amounting to `` 2,540/- has been made by the appellants themselves.
2. The balance of ` 1,59,858/- represents items not bearing the company's logo and hence do not result in any advertising/entertainment.
3. Without prejudice to the above, out of ` 1,59,858/- ` 19,200/-
being the amount allowable per Rules 6B ought to be allowed.
The appellants submit that the DCI be given suitable directions in this matter.
C. The CIT(A) erred in confirming the disallowance made by the DCI of ` 87,000/- being the subscription paid to the cricket club of India for corporate membership on the ground that it is an expenditure on entertainment.
23The appellants submit that the subscription has been made to maintain, establish, develop and strengthen business contacts, connections etc., with a view to increasing the volume of business. There is no element of entertainment expenditure in the membership subscription fees paid.
Further, the CIT (A) erred in not considering the following decisions which were handed over to him at the time of the hearing and which are directly on this issue that the life membership fee/entrance fee paid for membership to the clubs is an allowable expenditure:
i) Asian Advertising v/s ITO -ITAT, Bombay reported in 26 BCAJ 877
ii) Gujarat State Export Corporation Ltd vs CIT - Gujarat High Court reported in 209 ITR 649 The appellants pray that the DCI be directe4d to delete this disallowance.
46. The assessee had claimed under the head sales conference and business meeting expenses a sum of ``. 13.04 lacs, under the head advertisement and promotional expenditure and Subscription to CCI, though for grant of membership as deduction. The AO found that only a small amount out of the above was considered as involving an element of entertainment and disallowed by the Assessee on its own. The AO noticed from the past records, that the assessee has not been disclosing the real quantum of the expenditure that is of a disallowable nature towards entertainment. Considering the past records and the details submitted by the assessee and taking note of the asessee's inability to give full and complete details of tea, coffee and pleasantries to the outsiders who visits office, the AO was of the view that it would be reasonable to make estimated disallowance under various heads. The AO also observed that there are expenses on symposium, other promotional expenditure and local sales promotion debited to advertisement and promotion account expenditure, sales conference and business meetings, amount debited to misc. expenditure a/c. Accordingly, the following amounts were disallowed by the AO.
24i) Out of sales conference and business meeting out of the total amount of ``. 13.04 lacs, a amount of ` 10 lacs.
ii) Out of the advertisement and promotional expenditure referred to above an amount of ` 5 lacs was disallowed.
iii)Subscription to CCI, though for grant of membership but the same is estimated and related expenditure, the expenditure of ` 87,000/ was disallowed."
47. Before CIT(A) the Assessee submitted and explained that the expenditure of Rs.13,04,404/- referred to by the Assessing Officer in para 20 of his order constituted of the following items:
i) Business Meeting - employees `1,08,647/-
ii) Business Meeting expenses ` 2,26,531/-
iii) Conference expenses ` 4,29,745/-
iv) Business meeting - Business Associates
-disallowed as Entertainment expenses
in ROI by the appellants ` 1,67,633/
v) Business Meeting - disallowed
u//r 6D in the ROI by the appellants. ` 27,240/-
vi) Conference expenses - disallowed u/r 6D
in the ROI by the appellants `3,44,608/-
----------------
``13,04,404/-
===========
47.1 The Assessee contended that the items appearing at Sr.No.4, 5 & 6 aggregating to `.5,39,341/- have already been offered by the appellant as entertainment expenditure in the computation of income. Thus, by making ad-hoc disallowance of ` 10,00,000/- the Assessing Officer has made an effective disallowances of ` 15,39,841/- whereas the total expenditure under this head was ` 13,04,404/- only. The Assessee submitted that this action by itself would show that the entire addition has been made in a most arbitrary and casual manner without any basis. The Assessee further contended that as per accounting procedures followed by the company inadmissible amount under various section of the I T Act were identified at the time of booking the entries 25 itself in order to obviate the necessity of undertaking a massive exercise subsequently. Under the accounting procedures followed by the company expenses on entertainment of business associates, clients, customers etc., are booked under business Meeting - Business Associates and disallowed as entertainment expenses. Expenses relatable to employees or purely on account of employees were not booked under this head. Similarly travel expenses which wee disallowable under Rule 6D amounting to ` 3,71,808/- were identified and added in the computation of income. The conference expenses related almost entirely to field staff to discuss sales and marketing policies and therefore, it was not in the nature of entertainment expenditure. The Assessee thus submitted that the entire disallowance of ` 10,00,000/- made by the Assessing Officer therefore deserves to be deleted.
47.2 As regards disallowance of Rs.5,00,000/- out of advertisement and publicity expenses on estimate basis the Assessee submitted that the disallowance out of advertisement and publicity expenses have been made at various places for example disallowance of ` 85,37,046/- has been made vide para 17 of the assessment order which has been agitated in ground no.16 of the appeal before CIT(A). Similarly, a sum of ` 25,000/- has been disallowed out of advertisement and publicity vide para 17of page 12 of the assessment order which has been agitated in ground no.17 of the appeal before CIT(A). It was submitted that considering these disallowances, which have been separately agitated, there was no justification for making further disallowance of `.5,00,000/- and therefore the disallowance should therefore be deleted. The Assessee further argued that there were only 4 promotional expenses like Promotional expenses involving charges for putting in tooth paste boxes, free offers, schemes and discounts to trade, tempo and van hire charges, display costs, door to door selling costs, leaflets, artworks, slides and other items of similar nature. Local sales promotion expenses are in the nature of shelf hire charges, display charges, banners, painting 26 charges etc. It was pointed out that in the subsequent asst. year full details of these expenses were also specifically called for by the DC(IT) and these were furnished by the assessee to the satisfaction of the DC(IT). Even in the earlier asst. Year the Assessing Officer has allowed the entire expenditure as admissible revenue deduction.
47.3 As regards disallowance of `.87,000/- paid to cricket club of India -Corporate Membership, the Assessee contended that the amount paid to cricket club of India is not entertainment expenditure as held in the following cases:
i) ITAT decision in CIT vs Maker Development Services Ltd 25 BCAJ 1230
ii) ITAT decision in the case of American Bureau of Shipping (AY 91-82, 82-93 and 83-84) The AR argued that in view of above fact and circumstances of the case and judicial pronouncements involved in favour of the assessee the entire addition of `.15,87,000/- made by the Assessing Officer deserves to be deleted.
48. The CIT(A) held as follows:
"42 I have considered the entire matter carefully. There is some force in the plea of the ld counsel of the appellant that by making an adhoc disallowance of ` 10,00,000/- out of total sales, conference and business meeting expenses amounting to ` 13,04,404/-, the Assessing Officer has made an effective disallowance of ` 15,39,841/-.This discrepancy has arisen because the appellant has itself offered disallowance on account of entertainment expenses amounting to ` 1,67,633/- in the computation of income filed. Besides that, it has been stated by the appellant that in the computation of income filed, the appellant has also offered disallowance of ` 3,71,848/ under Rule 6D in respect of item no.5 & 6 appearing on page no.45 of the present appellate order. As the Assessing Officer has proceeded to compute the total income in 27 Annexure 5 annexed to the asst order by taking business income as shown in the computation of income, the addition of `1,67,633/- and ` 3,71,848/- aggregating to ` 5,39,481/- offered by the appellant have already been taken into consideration and therefore, adhoc disallowance of ` 10,00,000/- cannot be justified as disallowance only out of sales, conferences and business meeting expenses. However, while making this disallowance in para 20 of the asst. order, the Assessing Officer has observed that the above disallowance was made considering the past record and for want of full and complete details in respect of tea, coffee and pleasantries offered to the outsiders who visit offices. The disallowance of ` 10 lacs made by the Assessing Officer is therefore, to be examined in wider perspective with reference to overall entertainment expenditure in the case of the appellant. The Assessing Officer has also made the above disallowances under the head entertainment. The disallowance was made, also to cover, entertainment expenditure on symposiums and other promotional expenditure debited to miscellaneous expenditure account. The appellant has not maintained any separate account in respect of tea, coffee and pleasantries offered to the outsiders who visit office. Obviously, the above expenditure is met out of canteen expenses. The fact that no such separate account has been maintained by the appellant is not disputed. In the past, a part of canteen expenditure had been disallowed by treating the same as entertainment expenditure. For example, for the asst year 1990-91, disallowance of ` ` 1,00,000/- was made out of canteen expenditure to cover the element of entertainment expenditure for providing tea, coffee etc., to customers. The above disallowance was confirmed by the CIT(A) vide order dated 11.11.1994 in the case of the appellant. After examining the relevant facts and circumstances of the case in the subsequent year also the DC(IT) has made disallowance of ` 4,64,252/- as entertainment expenditure which works out to about 5% of the total canteen expenditure. The facts and circumstances for the assessment year under reference are also the same. The AR was therefore given a specific opportunity to show as to why part of canteen expenditure should not be considered for disallowance as entertainment expenditure as the appellant has not maintained any separate account for offering tea, coffee and pleasantries to the outsiders who visit office. It was also made clear to the ld counsel of the appellant that the Assessing Officer has not separately quantified any specific amount in this connection by the relevant observations have been made in the assessment order 28 while making the impugned disallowance. In this connection, it was argued by the AR that the expenditure on tea and refreshments served to constituents of the business cannot be treated as entertainment expenditure. The disallowance made in this connection u/s 37(2A) of the I T Act in the case of ITO vs Uttam Road Ways Pvt Ltd was deleted by the Hon'ble ITAT Bombay Bench D by following the decisions of Gujarat and Bombay High Courts delivered in the case of CIT vs Patel International Film Ltd reported in 101 ITR 219.
43 After due consideration, I am not inclined to accept the plea of the ld counsel of the appellant that expenditure incurred for offering tea and coffee etc., to the outsiders/customers should not be treated as entertainment expenditure. During the asst year under reference, the appellant has claimed expenditure of ` 92,85,039/- under the head canteen expenditure as against ` 80,41,642/- claimed during the earlier year. In view of above discussion, in my opinion, it would be reasonable if a sum of ` 2,20,000/-, which is approx. 2.5% of the total canteen expenditure, is disallowed out of canteen expenses on account of expenditure for entertainment of customers. In view of above discussion, the total entertainment expenditure would work out as under:
Business meeting expenses ` 2,26,531/-
Conference expenses ` 4,29,745/-
Canteen expenses ` 2,20,000/-
` 8,76,276/-
While considering the above items, I have not taken into account the business meeting expenditure of ` 1,08,647.- which has been shown by the appellant specifically for the employees. However, there are items of expenditure debited under the head advertisement and publicity expenses like symposium and promotional expenses etc. In order to cover the miscellaneous inadmissible items of expenditure in the nature of entertainment, in my opinion, it would be reasonable if the total disallowance is estimated at ` 9,00,000/- (specific items aggregating to ``. 8,76,276/ by the DC(IT)
44. Out of advertisement and promotional expenditure an amount of ` 5,00,000/- has been disallowed as entertainment expenditure. In addition to above disallowance, the DC(IT) has also made disallowance of ` ` 1,43,498/ by invoking provisions of Rule 6B of 29 the I T Rules read with section 37(3) of the I T Act. The disallowance of ` 1,43,498/- has been agitated by the appellant in ground no.3 of the appeal. Thee disallowances are apparently overlapping. A perusal of the details of advertisement and publicity expenses recall that a sum of `. 7,74,175/- was spent by the appellant company on gift articles. The total of gift items costing more than ` 200/- each has been given by the appellant at ` 1,62,598/-. In my opinion, in view of the decision of the Hon'ble Himachal Pradesh High Court in the case of CIT vs Mohan Meaking Breweries Ltd reported in 192 ITR 134, the presentation items costing more than ` 200/- each aggregating to ` 1,62,598/ come within the ambit of entertainment expenditure. In this connection, it is relevant to note that the gift items included gold chain etc., worth ` 1,18,318/. These gifts were given to customers and business associates for which specific details have not been furnished. Considering these facts and circumstances of the case, it would be reasonable if the disallowance out of advertisement and promotional expenditure is restricted to ` 1,62,598/- as against ` 5,00,000/- made by the Assessing Officer. The excess thereof stands deleted. The above referred disallowances of ` ` 1,62,598/- is obviously inclusive of disallowance of ` 1,43,498/-. Thus, there is no need of making separate addition of ` 1,43,498/-. The disallowance of ` 1,43,498/- which has been agitated by the appellant in ground no.3 is therefore, deleted. For the earlier asst year similar disallowance made by the Assessing Officer u/r 6B of the I T Rules was deleted as the decision of the Hon'ble Himachal Pradesh High Court in the case of CIT vs Mohan Meaking Braveries Ltd reported in 192 ITR 134 was not available at that time. As regards payment of `. 87,000/- made to Cricket Club of India for corporate membership, I am of the view that the same cannot be treated as an admissible revenue expenditure. It was onetime payment for obtaining corporate membership. The Assessing Officer was therefore, fully justified in making the impugned disallowances. This disallowance is therefore, confirmed. In the result the disallowance of `. 10,00,000/- is reduced to ` 9,00,000/- and another addition of ` 5,00,000/- is reduced to ` 1,62,598/. The disallowance of ` 1,43,498/- (agitated in ground no3 of the appeal) is deleted as this amount s included in the above disallowance of ` 1,62,598/-. The resultant relief may be computed accordingly."30
49. Aggrieved by the order of the CIT(A) sustaining part of the disallowance made by the AO, the Assessee has preferred Ground No.3 (A) to (C) before the Tribunal.
50. We have heard the submissions of the learned Counsel for the Assessee who reiterated the stand as put forth before revenue authorities and further relied on certain judicial pronouncements and orders of ITAT. The learned D.R. relied on the order of the AO.
51. We have considered the rival submissions. As far as the disallowance of `.9,00,000/- sustained by the CIT(A) is concerned, the breakup of the same is as follows:
Business meeting expenses `.2,26,531
Conference expenses `.4,29,745
Canteen Expenses `.2,20,000
-----------------
Total `.8,76,276
-----------------
The Business and conference meeting was not with the employees. There were business meeting with the employees for which the Assessee incurred expenditure of `.1,08,647/-. According to the CIT(A) there were some expenditure under the head advertisement and publicity expenses like symposium and promotion expenses included in the above expenditure and therefore considering all facts, the CIT(A) sustained addition of `.9,00,000/-. In our view the disallowance of expenses on Business meeting and conference expenses cannot be disallowed as laid down in the following decisions on which reliance was placed by the learned counsel for the Assessee.
Lakhanpal National Ltd. Vs. ITO 69 ITD 9 (ahd.) (SB) Associate Marketing Agencies Vs. ITO 43 ITD 543 (Mad) Sharada Plywood Industries Ltd. Vs. CIT 238 ITR 354 (Cal) CIT Vs. Kirloskar Oil Engines Ltd. 157 ITR 762 (Bom) 31 The tribunal has considered all these decisions in the case of Cadbury India Ltd. Vs. DCIT ITA No.9910/Mum/92 order dated 18-10-2001 and has held that expenditure on conference and meetings cannot be disallowed as they are for the purposes of business and there is no element of entertainment to any outsider. In view of the aforesaid decisions, the disallowance sustained, in so far as it relates to expenditure on conference and business meeting is deleted.
52. As far as canteen expenses disallowed as entertainment expenditure is concerned, the same has been made by the CIT(A) for the reason that the Assessee has not maintained complete records regarding the expenditure incurred under this head to employees and outsiders and has also taken note of the past history of the Assessee's case. We are of the view that an adhoc disallowance of `.1,00,000/- on this count would be just and fair.
53. Regarding the disallowance of `.1,62,598 included in advertisement and publicity expenses as entertainment expenses, we find that the addition sustained by the CIT(A) relates to total value of gift items the details of the gift items are given at page-24 and 25 of the paper book. Out of the above the Assessee on its own had admittedly not claimed expenditure to the tune of `.1,43,498/-. The Assessee claimed deduction of only Rs.19,100/- and has further justified its claim on the ground that the items of gifts were of small value and did not contain the company's logo. Thus CIT(A) proceeded under an erroneous assumption that the entire expenditure of `.1,62,598/- had been claimed as deduction. We therefore find no basis for the order of CIT(A) in sustaining part of the disallowance made by the AO and therefore direct that the addition sustained by CIT(A) be deleted.
54. As far as disallowance of subscription fee paid to Cricket Club of India for corporate membership is concerned, we are of the view that the 32 same is revenue expenditure following the principles laid down by the Hon'ble Bombay High court in the case of Otis Elevator BHc 195 ITR 695 (Bom) and Hon'ble Gujarat High Court in the case of Gujarat State Export Corporation Ltd. 209 ITR 649 (Guj). Admittedly the membership was a corporate membership and ensures to the benefit of the Assessee and there is no personal element involved whatsoever.
Thus ground No.3(A) is partly allowed while Ground No.3(B) and 3(C) are allowed.
55. Ground No.4 (a) to 4(c) reads as follows:
4(a) The CIT(A) erred in upholding the disallowance in respect of foreign travel expenses to the extent of `. 12,87,799/- being 20% of the total foreign travel expenses of ` 64,38,993/- incurred by the appellants, on the grounds that some of the foreign visits were mainly for furtherance of the interests of the group and some were also for starting new business. In this respect, the appellants submit that the entire duration of all the foreign visits have been devoted to travelling for the company's business and were not in cone4nction with any new business or for any other purpose. The travels have been undertaken for discussions with parent company and other affiliate companies regarding worldwide trends, forecasts, exports, general management training (CEMTRAK), technical discussions, conferences, expansion of the company's existing lines of business, marketing strategies, management development issues (HRD) etc. The appellants submit that the expenses had been incurred wholly and exclusively for the purposes of their business and therefore ought to b allowed. The appellants pray that the DCI be directed to allow hem this amount of ` ` 12,87,799/-.
(b) Without prejudice to the above, the appellants submit that the disallowance of 20% of total foreign travel expenses is excessive and unreasonable. As per the appellants calculations, the total amount spent on all the travel identified by the DCI in Annexure 1 of his order works out to ` 7,43,829/- and therefore pray that the disallowance on this account should not exceed 20% of ` 7,43,829/- i.e. ` 1,48,766/- under any circumstances.33
© Without prejudice to the above, the appellants submit that full details of foreign travel expenses had been furnished to the DCI and the CIT(A) and disallowance if any, should be made on itemized basis and not on ad-hoc basis.
The appellants pray that the DCI be given suitable directions in this regard.
The above grounds of appeal are connected to Ground No.2 raised by the Revenue in its appeal, which reads as follows:
"On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in partly deleting the disallowance out of foreign travel expense amounting to `. 7,12,282/- disregarding the detailed reasons assigned in the assessment order."
55.1 The AO made a disallowance of an adhoc amount of ` 20,00,000/- out of foreign travel expenses incurred by the assessee. The impugned disallowance of ` 20,00,000/- has been made by the Assessing Officer on the ground that the expenses were not fully and exclusively incurred for the purpose of the business of the company besides being disallowable under Rule 6D(1) of the I T Act. It was further seen by the Assessing Officer that the assessee company was an affiliate of the Multi National M/s Ciba Geigy Ltd and most of the visits were at the instance of parent company of foreign share holders. The vision 2000 programme was also that of Ciba Geigy for which a number of discussions had taken place abroad. Besides this there were expenses on foreign visitors. The Assessing Officer was of the opinion that if the object of undertaking of tour was dominantly commercial then only the expenditure should qualify for deduction. If the advantage gained for the assesee's business, profession or vocation was secondary and was a remote consequence, the expenditure would not come within the exemption provisions. In this connection the Assessing Officer has placed reliance on CIT vs Dr B V Raman (59 ITR 20). The Assessing Officer also found that in some cases the expenditure was incurred for foreign travelling for starting manufacture of a new product which was not allowable as per the decision of Gujarat High Court in CIT vs McGaw Ravindra Laboratories 34 (India) Ltd., reported in 132 ITR401. A detailed discussion in this connection has been made by the Assessing Officer on the basis of details submitted in Annexure I to the assessment order. The Assessing Officer after considering the above referred facts and circumstances as mentioned in the assessment order and Annexure I, made adhoc disallowance of ` 20,00,000/- out of total expenditure on foreign travel amounting to ` 64,38,993/-.
55.2. It has been argued by the Assessee before CIT(A) that full details of expenses incurred on foreign travel have been furnished vide Annexure 28 to the return of income. The assessee also submitted copies of letters and supporting submitted to the RBI seeking its approval and also approval received from the RBI in connection with all the foreign travel vide their letter dated 18.3.1994 together with Annexure. The assessee also submitted the objective of the various foreign travel undertaken which costed the company a sum of ` 7,43,829/-. The Assessee pointed out that the purpose of these visit have been enumerated on page 3 of the Annexure I to the DC(IT)'s order. A perusal of these details would reveal that all the visits were entirely in connection with the purpose of the company's business and were not in connection with the purchase of plant and machinery or development of a new line of business and were not for the benefit of the parent company of the foreign shareholders and further that the entire duration was devoted to travelling or on company's business. It was pointed that on a perusal of the details furnished in respect of foreign travel submitted it can be seen that no travel was undertaken for vision 2000. The Vision 2000 was nothing but merely a statement of values to employees. It was argued that the DC(IT) has made a general observation that the expenses were capital in nature or not wholly and exclusively for the purpose of the business without specifically stating that which items were capital in nature and not for the purpose of the business. It was pointed out that from the details filed by the assessee it was clear that all the expenses were incurred for 35 the purpose of the business and were not of a capital nature. The assessee further contended that for the assessment years 1982-83 and 1983-84 the Assessing Officer has made adhoc disallowance of 15% of foreign travel expenses which was deleted by the CIT(A) in appellate proceedings. No such arbitrary or adhoc disallowance was made by the DC(IT) for the assessment years 1984-85 to 1990-91. It was therefore submitted that there is absolutely no justification whatsoever for such an arbitrary and adhoc disallowance for the asst.yaear 1991-92. The impugned disallowance of ` 20,00,000/- made by the Assessing Officer therefore deserves to be deleted. Without prejudice to the above the Assessee further contended that in any event disallowance of ` 20,00,000/- is most arbitrary and unsustainable as the total amount spent on the travel enumerated in Annexure-I to the Assessment Order works out to only ` 7,43,829/-.
55.3. On a consideration of the above submissions, the CIT(A) held as follows:
" I have considered the entire matter carefully. The issue regarding expenditure on foreign travel has been discussed in para 10 of the assessment order and te relevant factors and details have been given in Annexure I enclosed to the asst order of the DC(IT).A perusal of the details for the purpose of foreign visits enumerated on page 3 of Annexure I annexed to the DC(IT)'s order revealed that certain visits undertaken by the employees of the appellant company were for starting manufacture of a new product. Similarly the nature of some other visits undertaken by the official of the company do revel that it was mainly for providing business advantage to the parent company. For example, as per Sr no.9 the visit undertaken by Shri S G Male, which costed the appellant company a sum of ` 61,860/- was undertaken in respect of "new Tinopal CBD-X" project. Similarly as per Sr. 12 another visit was undertaken by Mr H A Monteiro which costed the appellant company a sum of ` 76,055/- was undertaken in respect of latest developments in various business segments and their influences on parent company's business in India. This visit was mainly undertaken for the development of the business of the parent company. The narration given in respect of visit of Mrs P Ram, 36 appearing on Sr no.14 also does not indicate that the visit was for conducting business of the appellant company. In view of above facts and various other factors as mentioned by the Assessing Officer in the asst order and also in Annexure I annexed to the present asst. order some disallowance was definitely warranted out of foreign travel expenditure. I also do not find any force in the alternate plea of the appellant that as the total amount spent on the travel enumerated above works out to ` 7,43,829/-, the disallowance of ` 20,00,000/- made by the DC(IT) is unsupportable. In this connection, I agree with AR of the appellant only to the limited extent that the estimation of disallowance made by the Assessing Officer was on the high side but the disallowance is not to be restricted with reference to only a sum of `.7,43,829/- as it was only a test check. In the present case the overall estimation of disallowance is required to be made with reference to foreign travel expenditure which is claimed at ` 64,38,993/-. The details given on page 3 of the Annexure I of the asst order clearly reveal the inadmissible nature of foreign visits in certain cases. Some of the visits were mainly for furtherance of the interests of the group as such and some visits were also for starting new business which cannot be allowed as a revenue expenditure. All the required details were not furnished by the appellant before the Assessing Officer. For example, the actual business conducted during the entire period of stay abroad. I agree that details in respect of day-to-day business conducted abroad cannot be possibly filed but when glaring instances of inadmissible expenditure debited under this head have been noticed some fair and reasonable estimation regarding disallowance of expenditure is essentially warranted. After taking into consideration the relevant facts and totality of the circumstances I am of the view that it would be reasonable if the disallowance out of total foreign travel expenditure is restricted to 20% of the total expenditure claimed by the appellant under this head. The excess thereof stands deleted. The Assessing Officer is therefore directed to compute the resultant relief by restricting the disallowance to 20% of the total foreign travel expenditure claimed by the appellant."
55.4. Aggrieved by the order of the CIT(A), the Assessee has raised the aforesaid grounds before the tribunal.
3756. We have heard the rival submissions. The disallowance has been made on the basis that the foreign travel was for the benefit of the parent company and that some of the visits pertained to acquisition of capital assets. The details given by the AO in this regard and the explanation of the Assessee regarding the said items are as follows:
Sr. Name Amount Purpose
No
1 Mr R C Hartland ` 24,423/- Group Company Heads Meet to
discuss latest implications &
repercussions of events and the
Gulf crises.
2 Mr A M Yeri ` 38,843/- Line Managers Meeting workshop
3 Dr (Mrs) P Ram ` 35,091/- General Management Training Kit.
(Training Programme) &
Discussions relating to corporate
communications.
4 Mrs K Singh & ` 63,455/- General Management Training Kit
Mr G V V Sarma & ` 63,055/- -Seminar for Senior Managers
Mr N Sukmar ` 64,015/-
5 Dr A B Vaidya ` 570/- Exchange released by RBI was
subject to repatriation of the
exchange and production of FIRC
in due course which was done.
6 Dr D S Nag ` 50,912/- Participating in Regional
Leadership Workshop & Divisional
Managers Meeting.
7 Shri S S Patel ` 42,649/- Organizational & HRD issues &
Management development
8 Mr R C Hartland ` 64,729/- Pending projects & business plan
9 Shri S G Kale ` 61,860/- Tinopal CBS-X Project.
10 Mr A K Bahl & - Travel not undertaken
Mr J M Smith
11 Mr F Quadros - Travel not undertaken
12 Dr H A Monteiro ` 76,055/- Latest developments in various
business segments and their
repercussion on Indian Business.
13 Dr A B Vaidya - Exchange released by RBI was
subject to repatriation of the
exchange & production of FIRC in
due course which was done.
14 Mr R Ram ` 79,299/- Conference covering
empowerment to negotiations,
communicating during corporate
restricting,
ethical communication, the
new consumer activism.
15 Mr H P Punwani ` 78,893/- Meeting of heads of Agrl.divn.
38
56.1 Perusal of the above details shows that none of the visit was for starting manufacture of a new produce. The allegation that the visits were for benefiting the parent company is again not correct. New Tinopal CBS-X is not a new project but the name of existing product of the Assessee. The disallowance has been made on assumptions and presumptions. The very basis on which the disallowance has been made is found to be not correct. In fact in AY 74-75, 64-65 76-77 and 77-78 similar disallowance of expenses has been deleted by the Tribunal. Copies of the said orders are in the paper book. In view of the above, we direct that the disallowance sustained by the CIT(A) be deleted. Ground No.4(a) is allowed and therefore Ground No.4(b) and (c) do not require any adjudication. Ground No.2 of the Revenue is dismissed.
57. In ground No.5(a), the Assessee has projected its grievance on the action of the revenue authorities in excluding interest income from the profits of the business while computing deduction u/s.80-HHC of the Act. The details of the interest income in dispute are as follows:
Particulars `
Interest on IDBI deposit 1,576,875
Interest ion Housing Loans 820,508
Interest on Overdue Accounts 10,585,684
Interest on extended credit 825,333
Interest on loans to personal 160,467
Other interest (details attached) 4,042,398
18,011,265
SUNDRY INTEREST RECIEVD - 31.3.1991
Income Tax interest u/s 244A -AY 1989-90 3,766,290
Maruti Gypsies Classic 8,614
MSEB Security Deposit Interest - Bhandup 17,848
Premier Auto 4,529
Interest on old dues - Goa:
Mandovi Plast ` 870
Mandovi Plast ` 435
Mandovi Plast ` 435 1,740
Income Tax Interest u/s 244(1A)received on 72,298
rectification/ 154 AY 1976/77
39
Income Tax Interest u/s 244(1A) received on 151,362
rectification/s 154 AY 1985-86
Income Tax Interest u/s 214 received -AY 1988-89 19,717
4,042,398
58. Before us, the learned D.R. relied on the decision of the Hon'ble Bombay High Court in CIT vs. Dresser Rand India (Bombay High Court) order dated April 29th, 2010, wherein it was held that Receipts with no nexus to exports have to be excluded for s. 80HHC deduction The Court held that Explanation (baa) to s. 80HHC defines the term "profits of the business" to mean business profits as reduced by 90% of .. "receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature". The Hon'ble Court noticed that the Tribunal took the view, on the basis of Bangalore Clothing 260 ITR 371 (Bom) that receipts towards recovery of freight, insurance, packing receipts, sales tax set off/refund and service income were "operational income" and not liable to be excluded under Expl (baa) to s. 80HHC. On appeal by the Revenue, the Hon'ble Bombay High Court held reversing the Tribunal: (i) The ratio of Ravindranathan Nair 295 ITR 228 (SC) is that Explanation (baa) to s. 80HHC required receipts constituting independent income having no nexus with exports to be reduced from business profits under clause (baa) so as to avoid distortion in the computation of export profits;(ii) In Bangalore Clothing Co 260 ITR 371 (Bom) it was held that If an item of income is closely linked with business operations and constitutes "operational income", it cannot be excluded under Explanation (baa) to s. 80HHC. This proposition is inconsistent with the law in Ravindranathan Nair and is no longer good law. The submission that Bangalore Clothing was impliedly approved in Baby Marine Exports 290 ITR 323 (SC) is not acceptable because that judgment turned on the fact that the export house premium was an integral part of the consideration for the sale realized by the assessee, a supporting manufacturer.
4059. Further reliance was placed on the decision In the case of CIT Vs. Asian Star, by the Hon'ble Bombay High Court in which the Hon'ble Court was dealing with the question, "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was correct in holding that net interest on fixed deposits in banks received by the Assessee Company should be considered for the purpose of working out the deduction u/s.80HHC and not the gross interest?" The Hon'ble Court held that for Expln.(baa) to s. 80HHC, netting of income from expenditure is not allowed. In that case the assessee claimed deduction u/s 80HHC on profits which included interest income of Rs. 3.25 crores. Under Explanation (baa) to s. 80HHC, 90% of the said interest income has to be reduced from the profits. The assessee claimed that the interest expenditure incurred by it having a nexus with the said interest income had to be netted off and only the balance, if any, could be subjected to the 90% reduction. The assessee proved that there was a nexus between the income and the expenditure. The claim was rejected by the AO though it was accepted by the CIT (A) and the Tribunal relying on Lalsons Enterprises 89 ITD 25 (Del) (SB). On appeal by the Revenue, the Hon'ble Bombay High court held reversing the Tribunal:(i) Explanation (baa) to s. 80HHC requires that ninety per cent of receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature have to be reduced from the profits. The reason why items like brokerage etc have to be excluded is because they do not possess any nexus with export turnover and their inclusion in profits would result in a distortion of the figure of export profits. However, as some expenditure might have been incurred in earning these incomes, an adhoc deduction of ten per cent from such income is allowed;(ii) Once Parliament has legislated both in regard to the nature of the exclusion and the extent of the exclusion, it would not be open to the Court to order otherwise by rewriting the legislative provision. The task of interpretation is to find out the true intent of a legislative provision and it is clearly not open to the Court to legislate by substituting a formula or provision other than what 41 has been legislated by Parliament. It is not open to say that something more than the 10% statutorily provided should also be allowed. In Shri Ram Honda Power Equip 289 ITR 475 the Delhi High Court has not adequately emphasized the entire rationale for confining the deduction only to the extent of ninety per cent of the excludible receipts and it cannot be followed; (iii) As regards the judgement of the Special Bench in Lalsons Enterprises "We are affirmatively of the view that ... the Tribunal ... has transgressed the limitations on the exercise of judicial power and .... has in effect legislated by providing a deduction on the ground of expenses other than in the terms which have been allowed by Parliament. That is impermissible".
60. The learned Counsel for the Assessee made a prayer that in so as far as the interest on overdue account receivable from customers of ` 1,05,85,684/- is in respect of sales effected by the Assessee, and therefore the same has to be considered as profits of business. In this regard, the learned counsel for the Assessee relied on the decision of the ITAT Mumbai in the case of Silvasa Industries Pvt. Ltd. Vs. DCIT ITA 462/Mum/02 order dated 10/5/02 wherein the Tribunal has taken the view that interest on overdue payment from customers has the same character as sale proceeds and therefore has to form part of the profits of the business for allowing deduction u/s.80-HHC of the Act.
61. We have heard the rival submissions. It is not clear from the details of interest income as to whether the interest on overdue amounts relates to the export sales. On the principle laid down by the Hon'ble Bombay High Court in the case of Dresser Rand (Supra), interest income cannot be considered as part of the business income for the purpose of allowing deduction u/s.80-HHC of the Act. However if the interest on overdue amounts relate to export sales then they may be considered as part of business profits. The AO is directed to verify this aspect and allow relief accordingly. In respect of other interest income, we do not find any 42 grounds to interfere in the order of the CIT(A). Thus Ground No.5(a) is partly allowed for statistical purposes.
62. The grievance projected by the Assessee in Ground No.5(b) and ground No.12 regarding exclusion of sales tax and excise duty from the total turnover and export turnover respectively has to be decided in favour of the Assessee in view of the decision of the Hon'ble Bombay High Court in the case of Sudarshan Chemicals Ltd. 245 ITR 769 (Bom) and Hon'ble Supreme Court in the case of Lakshmi Machine Works 290 ITR 667 (SC). Ground No.5(b) and 12 are accordingly allowed.
63. Ground No.6(a) to 6(c) reads as follows:
"1. The CIT(A) erred in confirming the disallowance made by the DCI of ` 5,50,000/- paid to M/s Sharad Shiledar &Associates on the ground that the expenditure incurred increased the value of the land and was ot incidental to the business of the appellants.
In this connection, the appellants submit that the above professional charges were paid by them in connection with the return statutorily required to be filed by them under section 6(1) of the Urban Land (Ceiling ®ulations) Act, 1976 (ULC Act) and obtaining clearance and order u/s 8(4) of the said Act. A copy of the revised order u/s 8(4) of the ULC Act and a note briefly explaining the relevant provisions of the ULC Act were submitted to the CIT(A) which clearly brings out the fact that the above expenditure was incurred solely for meeting the company's statutory obligations and hence are for the purpose of its business. Further, the appellants submit that the above expenditure has not resulted in any acquisition or improvement of an asset or in perfecting the title or getting rid of a defect in the title of any asset but has been incurred for successfully preserving and protecting the company's property from getting dissipated. Therefore, it has not increased the value of land. Merely because the Bhandup factory has subsequently closed does not mean that the expenditure is capital in nature.
The appellants pray that the DCI be directed to delete the disallowance of ` 5,50,000/-43
b) The CIT(A) further erred in not considering the appellants without prejudice contention that deduction u/s 35(1) ought to be allowed in respect of the expenditure pertaining to Goregaon where the appellants' Research Centre is located.
c) The CIT(A) ought to have directed the DCI to consider the above amount in working out the profit/capital gains arising when the land is sold.
The appellants pray that the DCI be given suitable directions in the matter."
63.1 The Assessee incurred expenditure of a sum of ` 5,50,000/- which was paid to M/s Sharad Shiledar &Associates. The said payment was made by the Assessee to the above firm of professionals who rendered professional services in connection with the return statutorily required to be filed by them under section 6(1) of the Urban Land (Ceiling ®ulations) Act, 1976 (ULC Act) and obtaining clearance and order u/s 8(4) of the said Act. Pursuant to their rendering professional services a revised order u/s 8(4) of the ULC Act was obtained. The Assessee claimed that the above expenditure was incurred solely for meeting the company's statutory obligations and hence are for the purpose of its business. Further, the assessee submitted that the above expenditure has not resulted in any acquisition or improvement of an asset or in perfecting the title or getting rid of a defect in the title of any asset but has been incurred for successfully preserving and protecting the company's property from getting dissipated. Therefore, it has not increased the value of land. Merely because the Bhandup factory (which was in existence on the land in question) has subsequently closed does not mean that the expenditure is capital in nature. The AO did not allow the claim of the Assessee for deduction as according to him the expenditure being one in connection with a capital asset was also capital in nature.
4463.2 After considering the relevant facts and circumstances, CIT(A) also did not accept the plea of the appellant that a sum of ` 5,50,000/- paid to M/s Sharad Shiledar & Associates for the work relating to Urban Land Ceiling Act u/s 8(4) for the land at Goregaon and Bhandup was a revenue expenditure. According to him the above expenditure was incurred on account of professional charges in respect of work relating to Urban Land Ceiling Act u/s 8(4) without which the sale of land was not possible. According to him the expenditure incurred has increased the value of land and was not incidental to the business of the assesseee. He therefore held that the Assessing Officer was therefore fully justified in not allowing the expenditure as a revenue expenditure relating to the business of the appellant.
63.2 The Assessee had raised an alternative pleas that deduction u/s 35(1) ought to be allowed in respect of the expenditure pertaining to Goregaon where the assessees' Research Centre is located and that the expenditure should be added to the cost of the capital asset as and when the property is sold and capital gain in computed on such sale. The CIT(A) held on this alternative plea of the assessee that in case the expenditure is treated as a capital expenditure the same should be allowed as a deduction if the land is sold in future in computing the capital gains/loss, that the claim was a premature relief sought by the assessee which cannot be allowed in the present appeal.
64. The learned counsel for the Assessee relied on the decision of the House of Lords in the case of In Morgan (Inspector of Taxes) v. Tate & Lyle Ltd. 26 I.T.R. 195 . The House of Lords in the aforesaid case held that expenditure incurred by a Company engaged in sugar refining, in a propaganda campaign to oppose the threatened nationalization of the industry was a sum wholly and exclusively laid out for the purpose of the Company's trade and was an admissible deduction from its profits for income- tax purposes. A Majority of the House held that the object of the 45 expenditure being to preserve the assets of the Company from seizure and so to enable it to carry on and earn profits, the expenditure was a permissible deduction under r. 3(a) of the Rules applicable to cases (1) & (2) of Sch. D of the Income-tax Act, 1918. The object of the petition filed by the Company was to secure a declaration that the order dated February 20, 1946 insofar as it sought to put restrictions upon the right of the Company to carry on its business in the manner in which it was accustomed to do was unauthorized and to prevent enforcement of that order: thereby the Company was seeking to obtain an order from the Court, enabling the business to be carried on without interference. Expenditure incurred in that behalf would without doubt be expenditure laid out wholly and exclusively for the purpose of the business of the Company.
65. Further reliance was placed on the decision of the Hon'ble Supreme Court in the case reported in 1967 AIR 444, Shree Meenakshi Mills Ltd., Madurai Vs. Commissioner Of Income-Tax, Madras wherein the Hon'ble Supreme Court approved its view in the case of Commissioner of Income-tax, Kerala v. Malaya lam, Plantations Ltd. 53 I.T.R. 140 wherein it was observed:
"The expression "for the purpose of the business" is wider in scope than the expression "for the purpose of earning profits". It's range is wide: it may take in not only the day to day running of a business, but also the rationalization of administration and modernization of its machinery: it may include measures for the preservation of the business or for the protection of its assets and property from expropriation coercive process or assertion of hostile title: it may also comprehend payment of statutory dues and taxes imposed as a precondition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business."
Expenditure incurred to resist in a civil proceeding the enforcement of a measure -legislative or executive, which imposes restrictions on the carrying on of a business, or to obtain a declaration that the measure is invalid would, if other conditions are satisfied, be admissible, in our 46 judgment, under s. 10(2)(xv) as a permissible deduction in the computation of taxable income.
66. The learned D.R. relied on the order of the CIT(A). We are of the view that the expenditure has to be allowed as a deduction on the basis of the principles laid down in the aforesaid two judicial pronouncements of the Hon'ble Supreme Court. The expenditure cannot be said to merely increase the value of the land. The expenditure had to be incurred to ensure that the land is not declared surplus and acquired under the Urban Land Ceiling laws. We therefore direct that the expenditure in question be allowed as a deduction. Thus ground No.6(a) is allowed. Ground No.6(b) and (c) do not require adjudication as they are alternate grounds.
67. Ground No.7 (1) to 7(4) raised by the Assessee reads as follows:
1.The CIT(A) erred in upholding the disallowance made by the DCI to the extent of ` 5,00,000/- being the alleged capital expenditure incurred by the appellants on the vision 2000 programme.
In this connection, the appellants submit that the Vision 2000 programme is a corporate is a corporate strategy tailored to effectively meet the challenge of change in an increasingly competitive and demanding business and social environment. The expenditure incurred in connection with this programme is partly on employee training and gearing them up for fulfilling the company's goal/vision. Part of it is on advertisement e.g printing of brochures etc. Thus it is evident that no part of the expenditure incurred on the Vision 2000 programme is of a capital nature.
The appellants therefore pray that the DCI be directed to delete the disallowance of ` 5,00,000/-
2. In any event the amount pertaining to advertisement is allowable u/s 37(3) irrespective of whether it is capital or revenue in nature.
3. Without prejudice to the above, the appellants submit that the disallowance of `. 5,00,000/- is excessive.
4. Without prejudice to the above, the appellants pray that the DCI be directed to allow them depreciation on the 47 aforesaid amount or any pat thereof which is considered to be capital in nature.
The appellants pray that the DCI be given suitable directions in the matter.
68 The AO disallowed a sum of ` 10,00,000/- on account of alleged advertisement and publicity expenditure on Vision 2000 programme. The Assessing Officer was of the opinion that the expenditure incurred by the assessee on Ciba-Geigy's vision 2000 programme was to build up the corporate image of the company and therefore, the expenditure in the nature of overall framework of the business of the company, the same was therefore not to be allowed as a revenue expenditure. In the opinion of the Assessing Officer the above expenditure was not incurred in the ordinary course of business but as part of the image building exercise of the assessee company. The same was therefore not admissible. On an estimated basis out of promotion and advertisement expenses an amount of `` 10,00,000/- was disallowed by the Assessing Officer besides the disallowance that was made in the case of foreign travel expenses on this account.
68.1 Before CIT(A), it was argued by the Assessee that Vision 2000 is merely a corporate policy and strategy stating the guiding philosophy of the company to its employees. In this connection a note on Vision 2000 by the Manager, Communications was also filed by the Assessee. The assessee also submitted a copy of the Brochure of the Vision. The Assessee further argued that it can be observed from the enclosed note that the expenditure was partly on employee training and gearing them up for fulfilling the company's goal/vision. Part of the expenditure on brochures could fall within the ambit of expenditure on advertisement and would be an allowable deduction. The assessee further submitted that it was self evident that the expenditure incurred on Vision 2000 was not a capital expenditure. In any event the amount of ` 10,00,000/- estimated by the DC(IT) was abnormally excessive and unreasonable. The Assessee further contended that Hon'ble Himachal Pradesh High 48 Court in the case of Mohan Makin Breweries reported in 118 ITR 101 has held that u/s 37(3), expenditure on advertisement was allowable as a deduction irrespective of the fact whether such expenditure is of capital or revenue nature. The Assessee contended that in view of above facts and decision of the Himachal Pradesh High Court in the case of Mohan Meakin Breweries reported in118 ITR 10q the expenditure of ` 10,00,000/-incurred by the assessee was permissible as a deduction.
68.2 After considering the submissions of both sides, the CIT(A) has given relief to the assessee by observing as follows :-
"30. After due considering I find some force in the submissions of the ld counsel of the appellant but the same cannot be accepted in its entirety. Although the expenditure was incurred for advertisement and publicity but vision 2000 programme was not an ordinary advertisement. It cannot be altogether denied that Vision 2000 programme was in the nature of building up the corporate image of the company for a long term period. This was an ordinary expenditure incurred by the appellant company in the course of day to day business but a partly it also related to the image building exercise of the assessee company Considering these facts the entire expenditure incurred by the appellant on advertisement and publicity on the vision 2000 programme cannot be treated as revenue expenditure. However, I find force in the submissions of the ld counsel f the appellant that the disallowance estimated at ` 10,000/- appears to be on the high side. After considering the expenditure incurred by the appellant and all the other facts and circumstances of the case, I am of the view that it would be reasonable if the disallowance is reduced to ` 5,00,000/- by treating the expenditure to that extent as capital expenditure. The excess thereof stand deleted. In the result, the appellant gets relief of ` 5,00,000/- on this score.
69. Still aggrieved, the Assessee has raised ground No.7 before the Tribunal. The learned counsel for the Assessee drew our attention to the note on vision 2000 a copy of which is placed at page 109-110 of the paper book. Our attention was drawn to the brochure brought out in this regard a copy of which is at page 111-116 of the paper book. He 49 argued that the expenditure was incurred as a routine training of the employees. It was submitted that brochure was brought out and the cost of such brochure cannot be treated as capital expenditure in view of the decision of the Hon'ble H.P. High Court in the case of Mohan Meakin's case [1979] 118 ITR 101. In the aforesaid case it was contended that the Tribunal had fallen into an identical and similar error in the matter of the assessee, a public limited company, carrying on the business of manufacture and sale of beer, Indian made foreign liquor and other beverages. The Tribunal had taken the view that the expenditure incurred by the assessee on the installation of neon-signs being an expenditure of capital nature was not allowable as a deduction under Section 37 of the Act. It is in this context the Himachal Pradesh High Court observed that the question whether it is of revenue or capital nature would not be the relevant consideration; but the relevant consideration would be the conditions and restrictions contemplated by Section 37(3) itself. The use of the non-obstante clause clearly excludes the considerations which are contemplated by Section 37(1) of the Act and, therefore, when once it is found that a particular deduction can be considered on account of expenditure, the said deduction squarely falls within Sub-section (3), leaving the situation as to whether the expenditure is of a capital nature or of a revenue nature as wholly irrelevant for consideration in the context. In our judgment, the situation would not be different if the same non-obstante clause is taken up for consideration as to be found in Section 37(3A) of the Act. The learned D.R. relied on the order of the CIT(A).
70. We have considered the rival submissions. In our view the expenditure in question cannot by any stretch of imagination termed as capital expenditure. A perusal of the contents of Vision 2000 brought out by the Assessee shows that it was a reinstatement of the corporate values. It teaches the work force of the organization leadership qualities, responsibility for environment, Social responsibility, customer relationship, quality and other aspects. In our view the plea of the 50 Assessee that it is an expenditure in the nature of employee training and motivating them to fulfill the Assessee's goal and vision has to be accepted. The same has to be treated as revenue expenditure. We direct accordingly. Ground No.7(1) is allowed. In view of the above, ground No.7(2) to (4) do not require any adjudication.
72. Ground No.8 raised by the Assessee reads as follows:
The CIT(A) erred in upholding the following disallowances by treating them as donations e by the DCI out of corporate development expenses:
Name of the party Amount ( ``)
1. Embassy of Switzerland 1,29,000
2. Neurological Society of India 50,000
3. Vasco Environment 20,000
Total 1,99,000
In this connection, the appellants submit as under:
(i) ``1,29,000/- was paid to the Embassy of Switzerand to develop and maintain cordial and harmonious working relations with the country which houses the headquarters of the Group. In the absence of an Indo-Swiss Chamber of Commerce, it is the Embassy which represents the interest of the Indo Swiss business relationships and the expenditure is akin to payments made by other corporate bodies to various Chambers of Commerce.
The appellants pray that the DCI be directed to allow them the sum of ` 1,29,000/- as a deduction.
(ii) ` 50,000/- was paid to the Neurological Society of India towards the Institution of a Hindustan Ciba-Geigy Gold Medal for the best paper on Epilepsy. The appellants are a leading manufacturer of pharmaceutical products for epilepsy. This payment was made to publicize the name of the company and its products amongst the medical fraternity and is therefore, in the nature of advertisement expenditure.
The appellant therefore pray that the DCI be directed to allow them the deduction of `. 50,000/-
(iii) ` 20,000/- was paid to Vasco Environment toward the Environment Protection Week held at Goa where the main plants of the company are situated. In line with Govt. Policy, the 51 company lays great emphasis on protection of the environment. The expenditure was also incurred to publicize the name of the company.
The appellant therefore pray that the DCI be directed to allow them the deduction of ` 20,000/-
73 The AO disallowed a sum of ` 4,99,000/- being the entire amount debited to corporate development account. Details of these expenses are reproduced as under:
Sl.no Vendor Description Amount
1 Assocn. Of Basic Mfgs of Share of production cost of 50,000
Pesticides video cassette on safety in
transportation of pesticides
2 Embassy of Switzerland 129
3 B V Patel - Pharmaceutical Donation (exempt u/s35) 250,000
Education Research Centre
4 Neurological Society of Institution of Hindustan 50,000
India Ciba-Geigy for best paper on
epilepsy
5 Vasco Environment Environmental Production 20,000
week
Total 4,99,000
While making the impugned disallowance the AO on page 11 of the asst order has stated that the assessee spent an amount of ` 4,99,000/- towards contribution to corporate development. The same was not allowable as revenue expenditure because expenditure appearing at Srl.No.1 was towards share of production cost of video cassette on safety in transportation of pesticides. The DC(IT) also observed that out of these an amount of ` 2,50,000/ was exempted u/s 35(1)(ii) which would be separately allowable subject to filing of receipt etc. Hence, the impugned disallowance was made.
73.1 Before CIT(A), it was that a sum of ` 50,000/- was paid to the Association of Basic Manufacturers of Pesticides represent the share payable by the company to the association of which it is a member, for producing a video cassette on safety in transportation of pesticides. The appellant company is a member of the association which likes a mini 52 Chamber of Commerce, protects and defends the interest of manufacturers of pesticides and took up their case with the Govt forums etc. as the need may arise from time to time. As a member of association the appellant was bound to pay such dues as the management of the association may deem necessary for these purposes. It was further submitted by the Assessee that the advertising cum general public awareness campaign highlights the safety measures involved and t be followed in transporting hazardous pesticides. The expenditure is a normal day-to-day running expenditure/advertisement expenditure and should therefore be allowed. As regards a sum of ` 1,29,000/- paid to Embassy of Switzerland, the Assessee submitted that it was to develop and maintain cordial and harmonious working relations with the country which houses the headquarters of the group. In the absence of an Indo-Swiss Chamber of Commerce, it was the Embassy which represents the interest of the Indo Swiss Business relationships and the expenditure was akin to payments made by other corporate bodies to various chambers of commerce and should therefore be allowed. As regards item no.3, the donation certificate has subsequently been furnished to the DC(IT) in order to enable him to rectify the order and this has been done. As regards a sum of ` 50,000/-, which was the payment to the Neurological Society of India towards the Institution of Hindustan Ciba-Geigy gold medal for the best paper on Epilepsy. The Assessee contended that it was a leading manufacturer of Pharmaceutical products for epilepsy. This payment was to publicize the name of the company amongst medical and pharmaceutical fraternity and is of the nature of recurring advertisement and publicity expenditure which should be allowed as business expenditure. As regards payment of ` 20,000/- to Vasco Environment towards the Environmental Protection week, the Assessee explained that the purpose of the Environmental week to be held in Goa where the main plants were situated, was to explain ecological importance to the community and was in the nature of advertisement and publicity. In this connection the 53 Assessee placed reliance on the decision of the Himachal Pradesh High Court in the case of Mohan Meakin Breweries reported in 118 ITR 101. The Assessee also placed reliance on the order of the CIT(A) in the appellant's own case for the asst year 1984-85 wherein the expenditure of the same nature disallowed by the DC(IT) as being in the nature of donation was allowed as a deduction.
73.2 The CIT(A) held as follows:
"32 I have considered the entire matter carefully. A sum of `` 50,000/- was paid by the appellant to the Association of Basic Manufacturers of Pesticides which was the share payable by the appellant company to the Association. The payment was made for making the video cassettes for advertising cum general public awareness campaign highlighting the safety measures involved. The same was therefore, an admissible expenditure. The disallowance to the extent of ` 50,000/- is therefore deleted. A sum of ` 1,29,000/- paid to the Embassy of Switzerland is apparently in the nature of donation. The payment is nothing to do with the business of the appellant company. The appellant company cannot be allowed to claim any payment made to Embassy of Switzerland as an admissible business expenditure simply because the headquarters of the group are situated at Switzerland. The expenditure incurred was in the nature of donation. The same was therefore, rightly disallowed by the Assessing Officer. Similarly, the other payments made to the Neurological Society of India and Vasco Environment amounting to ` 50,000/- and `. 20,000/- respectively were also in the nature of donation. The facts of the present case being different the earlier decision of CIT(A) for the asst. year 1984- 85 and the decision of the Himachal Pradesh High Court in the case of Mohan Meakin Breweries reported in 118 ITR 101cannot be made applicable in the case of the appellant. These disallowances are therefore, confirmed. In the result the appellant gets relief of only ` 50,000/- with reference to ground no.15 of the appeal."
74. Aggrieved by the action of CIT(A) in sustaining part of the disallowance made by the AO, the Assessee has raised the aforesaid grounds before the Tribunal. Before us the learned counsel for the 54 Assessee relied on the following observations of the Tribunal in the case of M/S.Glaxo Laboratories (I) Ltd. Vs. IAC ITA 694/Mum/1986:
"The next ground of appeal is that the CIT(A) erred in upholding the disallowance of ` 19,991/- being scholarships amounts paid by the assessee on the ground that the expenditure was not related to the normal business activities of the assessee. I have heard the parties to the dispute and in our opinion the claim of the assessee is not open to serious challenge. The expenditure in question has been incurred in the course of business carried on by the assessee. Though the motive could be altruistic or philanthropic, that will not go to change the character of the expenditure. We are not inclined to subscribe t the view of the revenue authorities that before a deduction could be allowed there should be a direct nexus between the expenditure and the business activities carried on by the assessee. If the expenditure is lead out in the course of business the same will have to be allowed as a deduction even if the nexus is not proximate. The findings of the CIT(A) are reversed."
Further our attention was also drawn regarding the correspondence in respect of the aforesaid donations with the aforesaid entities copies of which are available at pages 117 to 134 of the paper book. The learned D.R. relied on the order of the CIT(A).
75. We have considered the rival submissions. The payment of `.1,29,000 to Swiss Embassy is towards Swiss cultural programme organized in India in 1991. The events were Alpine Culture exhibition, Collegium Academicism and an exhibition of products made in Switzerland. It has been the stand of the Assessee that since there was no indo-Swiss chamber of commerce, the embassy would represent the interest of the indo-Swiss business relationship and hence the payment was made. The headquarters of the Assessee's parent company was in Switzerland. We are of the view that the aforesaid expenditure has no nexus with the business of the Assessee or earning of profit and cannot be allowed as a deduction. As far as the remaining items of expenditure are concerned, the payment to Neurological Society of India was a 55 sponsorship for a gold medal for best paper on epilepsy. It is connected with the business of the Assessee which is in the manufacture and sale of medicines. The payment to Vasco Environment is to support a project on preservation of environment. Even this payment has to be considered as payment in connection with the business of the Assessee which has a social responsibility to see that the environment is clean. We therefore direct that the deduction claimed to the above extent be allowed. Ground No.8 is thus partly allowed.
76. Ground No.9 and 10 have already been decided while deciding the grounds of appeal of the Revenue.
77. Ground No.11 (1) and 11(2) raised by the Assessee reads as follows:
11(1) The CIT(A) erred in upholding the DCI's stand f not allowing set off of short term capital loss of ` 6,00,670/- arising on sale of CHN Analyzers, against the business income.
In this connection, the appellants submit that they had purchased these analyzers in November 1988 for ` 1100,413/ for their business. These assets had not been installed and no depreciation had been claimed thereon These analyzers were sold in May 1990 for ` 4,99,743/-. Thus, a short term capital loss of `. 6,00,670/- arose. Under the provisions of sec. 71 as they stood at the relevant time, the appellants are entitled to set of this loss against their business income.
The appellants pray that the DCI be directed to allow them set off of the short term capital loss of ` 6,00,670./- against their business income.
(2) Without prejudice, the appellants submit that the loss of `` 6,00,670/- is a business loss and should therefore be allowed as a deduction against their business income.
The appellant pray that the DCI be given suitable directions in this regard.
77.1 The above ground of appeal is against the action of the revenue authorities in not allowing set off of short term capital loss of `` 6,00,670/-. While making the impugned disallowance the DC(IT) in para 23 on page 15 of his asst. order has discussed that it was a short 56 term capital loss of ` 6,00,670/- on purchase and sale of CHN Analyzers. This particular transaction has also to be seen from the angle that the assessee company was not a trader in CHN analyzers or other scientific instruments. These items of Plant & Machinery were sold by the appellant company even before installation of the same. The purpose of buying these items is only for either &D lab or the production units. The loss incurred on ths account was therefore created as a loss of capital and was not allowed as a charge against income of the year.
77.2 Before CIT(A), the Assessee contended that the assessee had purchased CHN analyzers for ` 11,00,413/ in November, 1988. As the same has not been installed the amount of ` 11,00,413/- was not capitalized in the books of account. As the assets were never installed or capitalized no depreciation on the same was claimed by the assessee. The CHN analyzers were ultimately disposed of by the assessee in May 1990 for ` 4,99,743/-. The assessee did not claim this loss as a trading loss but have claimed it as a short term capital loss as the same had arisen on the transfer of capital asst held for less than 36 months and on which no depreciation was ever claimed or allowed. The set off of such loss was clearly permissible u/s 71 of the I T Act, as it then stood, which permitted set off of such loss against the business income. In view of the specific provisions of sec.71, it was argued that the DC(IT) should be directed to allow set off of such loss against the business income.
77.3. The CIT(A) however rejected the claim of the Assessee and held as follows:
"55 After due consideration I do not find any force in the submissions of the ld counsel of the appellant. It is an admitted fact that the CHN analyzers which were purchased by the appellant in Nov 1988 for ` 11,00,413/ were sold subsequently without even installing the same. The assessee was also not dealing in CHN analyzers or other scientific instruments as a trader. The CHN analyzers were sold even before installation which shows that these were not business assets and had nothing to do with the 57 business of the appellant. In view of the above facts and circumstances of the case, I am unable to accept the plea of the appellant that the above short-term capital loss is admissible to the appellant against the business income. Short term capital loss can be allowed against short term capital gain. In the case of the appellant there was no income under the head short term capital gain and the transaction involved did not relate to the business of the appellant. The Assessing Officer was therefore, fully justified in disallowing the claim of the appellant in respect of set off of short term capital loss of ` 6,00,670/ This ground of appeal is therefore, decided against the appellant."
77.4. Before us, the same submissions as were made before CIT(A), were reiterated. We have considered the same and find no grounds to interfere with the order of the CIT(A). Short term capital loss could not be set off against business income as per the provisions of law as it existed at all times. We therefore confirm the order of CIT(A) on this issue.
78. Ground No.12 has already been decided while deciding Ground No. 5(b).
79. In the result, the appeal by the Assessee is partly allowed.
C.O. NO.105/MUM/96.
80. The grounds of cross objection read as follows:
1. The respondents submit that in the event it is held that foreign travel expenses of ` 7,12,202/ is disallowable, deprecation at the appropriate rate be allowed thereon.
2. The respondents submit that in case the DCI's action of enhancing the value of closing stock by ` 1,16,35,000/- on account of MODVAT credit is upheld, then the DCI should be directed to increase the value of the opening stock of the subsequent assessment year i.e. assessment year 199293 by a similar amount.
3. The Respondents submit that in case the DCI's action of enhancing the value of closing stock on account of MODVAT credit is upheld, 58 then the DCI should be directed to increase the value of the opening stock by ` 1,03,27,000/-being the addition that he had made to the closing stock of the earlier assessment year i.e. assessment year 1990-91 on this account.
4. The Respondents submit that in case it is held that ` 5,00,000/-
incurred on computer software and support charges is a capital expenditure, then the DCI should be directed to allow depreciation @ 25% thereon."
81. In view of the dismissal of the relevant grounds raised by the revenue in its appeal, the grounds raised in the cross objection do not require any adjudication. Consequently, the cross objection is dismissed.
82. In the result, appeal by the Revenue and Assessee are partly allowed and the cross objection by the Assessee is dismissed.
Order was pronounced on 4th Day of Nov, 2010.
Sd/- Sd/-
(N.V.VASUDEVAN) (R.K.PANDA)
Judicial Member Accountant Member
Place: Mumbai
Dated : 4th, Nov, 2010
Copy to :
1. The Assesse
2. The Respondent
3. The CIT(A)-concerned.
4. The CIT, concerned.
5. The DR concerned, Mumbai
6. Guard File
BY ORDER
True copy
ASSTT. REGISTRAR, ITAT, MUMBAI
PS/raj