Income Tax Appellate Tribunal - Mumbai
Grasim Industries Ltd., Mumbai vs Department Of Income Tax on 3 September, 2002
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI ' J ' BENCH
MUMBAI BENCHES, MUMBAI
BEFORE SHRI G E VEERABHADRAPPA,PRESIDENT & SHRI VIJAY PAL RAO, JM
ITA No. 5630/Mum/2002 (Assessment Year 1998-99)
&
ITA No.1865/Mum/2003 (Assessment Year 1998-99)
Grasim Industries Ltd Vs The Dy.Commr of Income Tax
Aditya Birla Centre Cir 6(3), Mumbai
A Wing 2nd Floor
S K Ahire Marg, Worli
Mumbai 400 030
(Appellant/Respondent ) (Respondent/Appellant)
PAN No. AAACG4464B
Assessee by Sh J D Mistry/Madhav Agrarwal
Revenue by Sh Subhacham Ram
Dt.of hearing 25th July 2012
Dt of pronouncement 10th, Aug 2012
PER VIJAY PAL RAO, JM
These cross appeals are directed against the order dated 03/09/2002 of CIT(A) for the assessment year 1998-99.
2 In appeal ITA no. 5630/Mum/2002, the assessee has raised ground no.1 as under:
Legal & Professional Charges as capital in nature:
The CIT (A) erred on facts and in the circumstances of the case and in law in upholding the action of the AO in treating expenditure of Rs.4,24,000/- incurred towards legal & professional charges as capital in nature. The CIT (A) failed to appreciate that these expenses are of revenue nature and ought to have deleted the disallowance.
2.1 We have heard the learned Sr. counsel of the assessee as well as the learned DR and considered the relevant material on record. An identical issue has been considered by this Tribunal for the assessment year 1996-97 and 1997-98 vide order 2 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 dated 16 May 2012 relating to the legal charges incurred by the assessee in connection with the land acquisition in para 43.1 and 43.2 as under:
"43.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that the issue raised in this appeal has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in para 12.1 as under:
"12.1 In Assessment Year 1994-95, in assessee's own case in ITA No.3698/Mum/99, vide order dated 13th Feb 2009, this Tribunal on an identical expenses, has held that they were capital in nature.
Following the same, we dismiss ground nho.11 of the assessee." 43.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue in favour of the revenue and against the assessee."
2.2 Respectfully following the earlier orders of this Tribunal, we decide this issue in favour of the revenue and against the assessee. The order of CIT(A) qua this issue, is upheld.
3 Ground number 2 of assessee's appeal is as under:
Disallowance u/s 43B- Interest on cess I duty / rent / tax:
The CIT (A) erred on facts and in law in upholding the action of the AO in disallowing interest on:
a. Welfare cess of Rs. 2,12,993/-;
b. Electricity duty of Rs. 1,19,18,299/-;
c. Surface rent of Rs. 3,40,666/-; and d. Service tax of Rs. 3,37,515/-
under section 43B.
3.1 We have heard the ld Sr. counsel of the assessee as well as the learned DR and considered the relevant material on record. At the outset, we note that an identical issue has been considered and decided by this Tribunal in assessee's own case for the assessment year 1996-97 and 1997-98 in paragraph 10 to 10.5 as under:3
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 "10 Ground no.4 reads as under:
Disallowance u/s 43B- Interest on cess/duty/rent/tax: The CIT (A) erred on facts and in law in upholding the action of the AO in disallowing interest on:
a. Welfare cess of Rs. 1,43,649/-;
b. Electricity duty of Rs. 45,01,676/-;
c. Surface rent of Rs. 3,40,666/-; and d. Entry tax of Rs. 9,44,448/-.
This ground is common for AY 1997-98 also.
10.1 The AO disallowed interest on welfare cess, electricity duty and surface rent u/s 43B The CIT(A) has confirmed the action of the AO disallowing the interest on these items.
10.2 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. For the Assessment Year 1995-96, the Tribunal has considered and decided the issue regarding disallowance of interest on welfare cess, electricity duty and surface rent in paas 13 to 13.3 as under:
"13. Ground no.12 reads as follows:
The ld CIT(A) erred on facts and in law in upholding the action of AO in disallowing the interest on welfare cess, surface rent and electricity duty u/s 43,B as detailed hereunder:
Welfare cess Surface rent Elect. Duty total
84177 340666 2851010 3275853
13.1. In AY 1994-95 assessee's own case in ITA No. 3698/Mum/99, vide order dated 13th February, 2009, identical issue came up for consideration before the ITAT wherein the ITAT held as follows:
"11. Grounds of appeal No. 12 relates to the order -of the CIT(A) in disallowing the interest on surface rent of Rs. 3,40,666/- and interest on electricity duty Rs. 23,12,255/- u/s. 43B of the Act.
11.1 After hearing both the sides, we find identical issue had come up before the Tribunal in assessee's own case for the A.Ys. 1986-87 to 1989-90. We find the Tribunal in the consolidated order dated 22' March, 2007 at para 20 of the order, after following the decision of the Tribunal in assessee's own case for the A.Ys. 1984-85 to 1985-86 has deleted such disallowance. Respectfully following the order of the Tribunal, in assessee's own case and in absence of any contrary material brought to our notice, the ground raised by the assessee is allowed."
13.2. Respectfully following the aforesaid decision of the Tribunal, we delete the disallowances sustained by the CIT(A) and allow ground No. 12. 4
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 10.3 Thus, as far as the issue regarding the disallowance of interest on welfare cess, electricity duty and surface rent u/s 43B, the same is covered by the order of the Tribunal for the Assessment Year 1995-96.
10.4 As regards the disallowance of interest on entry tax, the Sr ld counsel for the assessee has submitted that this issue is covered by the order of the Calcutta Bench of the Tribunal in the case of Fort Gloster reported in 252 ITR(AT) 100 (Cal). 10.5 Applying the similar analogy as in the case of interest on welfare cess, electricity duty and surface rent, we allow the claim of the assessee with regard to the interest on entry tax."
3.2 Following the earlier orders of this Tribunal, we allow the claim of the assessee raised in this ground.
4 The 3rd ground of the assessee's appeal is as under:
Disallowance u/s 43B -- Royalty and interest thereon:
3.1 The CIT (A) erred in failing to consider and deal with ground no. 9 before her concerning disallowance of royalty and interest thereon u/s 43B.
3.2 The CIT (A) ought to have held that royalty and interest thereon Rs.
4,95,09,086/- cannot be disallowed relying on section 43B and the same ought to be allowed as revenue expenditure.
4.1 We have heard the ld Sr. counsel for the assessee as well as the ld DR and considered the relevant material on record. We note that an identical issue was considered and decided by this Tribunal in assessee's own case for the assessment year 1996-7 and 1997-98 in paragraph 11 to 11.2 as under:
11 Ground no.5 is regarding Royality and interest u/s 43B and this ground is common for AY 1997-98 also.
11.1 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in para 25 and 25.2 as under:
25. Ground No. 20 of the assessee reads as follows:
" The learned CIT(A) erred on facts and in law and/or erred in misdirecting herself on facts and in law in upholding the action of AO in disallowing the Royalty (i.e. cost of raw material) and interest thereon of Rs. 2,50,12,572 u/s 43B.
Royalty 19824125
Interest on Royalty 5188447
2,50,12,572
5
Grasim Industries Ltd
ITA No. 5630/Mum/2002
&
ITA No.1865/Mum/2003
The appellant prays that the said amount be allowed as deduction and it be held that sec.43B cannot be applied so as to disallow the sum of Rs. 2,50,12,572/-.
25. 1 in AY 1994-95 in assessee's own case (supra), the Tribunal dealt with the issue in paragraphs 19 to 192., which read as follows:
19. .Grounds of appeal No. 25 relates to the order of the CIT(A) in upholding the action of the AO in disallowing royalty of Rs l,99,16,185/-
and interest on royalty amounting to Rs. 24,21,576/- disallowed u/s. 43B of the Act 19.1 After hearing both the sides, we find the Tribunal in assessee's own case for the AYs 1990-91 'and 1993-94 confirmed the disallowance following the decision of Hon'ble Supreme Court in the case of Goreylal Dubey reported in 232 1TR 246. The Hon'ble Supreme Court, following it own decision in the case of India Cements reported in 188 ITR 690, held that royalty is a tax. However, the Hon'ble Supreme Court in the case of State of West Bengal vs. Kesoram Industries. Ltd., reported in 266 ITR 721 at page 767of the order has held as under
"We have clearly pointed out the said error, as we are fully convinced in that regard and feel ourselves obliged constitutionally, legally and morally to do so, lest the said error should cause any further harm to the trend of further harm to the trend of jurisprudential thought cantering around the meaning of royalty. We hold that royalty is not tax. Royalty is paid to the owner of land who may be a private person and may not necessarily be the State. A private person owning the land is entitled to charge royalty but not tax. The lessor receives royalty as his income and for the lessee the royally paid is an expenditure incurred. Royalty cannot be tax. We declare that even in India Cement (1990) 1 SCC 12 it was not the finding of the court that royalty is a tax. A statement caused by an apparent topographical or inadvertent error in judgement of the court should not be misunderstood as declaration of such law by the court. We also record our express dissent with that part of the judgment in Mahalaxmi Fabric Mills Ltd., which says (vide Para 12 of (1995) Supp 1 SCC 642 report) that there was no "typographical error" in India Cement (1990) 1 8CC 12 and that the said conclusion that royalty is a tax logically flew from the earlier paragraphs of the judgement.
19.2 In view of the above decision of the Honb1e Supreme Court, we hold that royalty and interest thereon cannot be disallowed u s. 43B treating the same as tax. Therefore, the order of the CIT(A) on this issue is set aside and the ground raised by the assessee is allowed The facts being identical in the present assessment .year, respectfully following the decision of the Tribunal, we direct that the disallowance sustained by the CIT(A) be deleted. Ground No.20 of the assessee is allowed."
11.2 We further note that for the said assessment year the revenue has not raised any issue in the appeal filed before the Hon'ble jurisdictional High Court. Accordingly, following the earlier order of the Tribunal, we decide this issue in favour of the assessee."
6
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 4.2 Following the earlier orders of this Tribunal, we decide this issue in favour of the assessee and against the revenue.
5 Ground number 4 is as under:
"Contribution to State Govt.:
4.1 The CIT (A) erred on facts and in law in upholding the action of the AO in treating amount of Rs. 21,54,290/- being contribution to State Government for construction of regulator-cum-bridge as capital in nature.
4.2 The CIT (A) erred in falling to follow the order of the CIT (A)-XII for AY 1994- 95 wherein contribution was allowed as revenue deduction and ought to have deleted disallowance.
4.3 The CIT (A) ought to have held that the amount of Rs. 2 1,54,290/-
was an allowable deduction in computing the income of the appellant company.
4.4 Without prejudice, the CIT (A) ought to have allowed depreciation on the amount of Rs. 2 1,54,290/- being contribution to State Government for construction of regulator-cum-bridge." 5.1 We have heard the ld Sr. counsel for the assessee as well as the ld DR and considered the relevant material on record. The ld Sr. counsel has submitted that this issue was considered and decided by this Tribunal in assessee's own case for the assessment year 1994-95 and the revenue has not filed any appeal against the order of this Tribunal pertaining to this issue. He has referred the appeal filed by the revenue before the honourable High Court in ITA no. 2930 of 2010 and submitted that the revenue did not challenge the finding of this Tribunal on this issue in the appeal before the honourable High Court. The learned D.R. has not disputed this fact that the revenue has not challenge the finding of this Tribunal on this issue for the assessment year 1994-95 before the honourable High Court. This Tribunal for the 7 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 assessment year 1994 - 95 has considered and decided in para 32.5 to 32.11 as under:
"32.5 We have considered the rival contentions and perused the material placed before us. Both the parties before us agreed on the factual aspect of the matter. The only dispute that emerges is that it is the case of the revenue that by contributing towards the bridge built by the State Government for replacing annual recurring expenses towards piling up of cement bags to prevent sea water entering into the premises of the assessee during rainy season, the assessee derived benefit of an enduring nature whereas, as per the assessee, the contribution is towards replacement of the recurring revenue expenditure, which goes to the revenue field only. Now let us examine the issue with the help of case laws cited before us. 32.6 In the case of CIT vs Bombay Dyeing and Manufacturing Co Ltd reported in 219 ITR 521 (SC), a company was amalgamated with the assessee company and in that connection the assessee incurred certain expenditure towards professional charges paid to solicitors which was claimed by the assessee as revenue expenditure. The revenue authorities did not agree with the assessee and disallowed the expenditure. The Hon'ble Apex Court dismissing the appeal of the revenue, held that the expenditure so incurred was in the course of carrying on of the assessee's business and therefore, deductible as a revenue expenditure. The Hon'ble Apex Court followed their own decision reported in 125 ITR 293 (SC). In our opinion, this judgment supports the case on hand in favour of the assessee.
32.7 In the case of CIT vs Excel Industries Ltd 122 ITR 995 (Bom), the assessee a manufacturer of chemicals set up a new unit and required a large quantity of electrical energy which had to be obtained from the electricity board. The electricity board charged the assessee for the overhead service line in excess of 30 metres. Under these facts the Hon'ble Apex Court held that the assessee did not acquire any capital asset or an enduring benefit or advantage and the object of making the payment was purely one of commercial expediency. This judgement also supports the case on hand.
32.8 In the case of CIT vs Navsari Cotton & Silk Mills Ltd 135 ITR 546 (Guj), the assessee made a contribution to the municipality for providing a pipeline through the municipal land for the disposal of the effluents discharged by the company so as to guard against health hazards to the citizens was held to be a revenue expenditure. This judgment of the Hon'ble Gujarat High Court too, supports the case on our hand. 32.9 In the instant case, undisputedly, the assessee does not have any ownership or right over the bridge constructed by the State Government. The assessee contributed towards part of the expenditure for construction of a bridge to prevent the sea water entering into the factory premises of the assessee which naturally hurt the commercial interest of the assessee and for which the assessee was making a certain recurring expenditure annually in preventing the sea water entering into its premises. Replacement of annual recurring expenditure by one time contribution is revenue expenditure. Therefore, in our considered opinion, the expenditure did not bring any capital asset of an enduring benefit or advantage and the object of making the payment was purely one of commercial expediency. 32.10 Be that as it may be, let us step into another aspect of the matter. It is a fact that the AO held the impugned expenditure as capital in nature without considering it for depreciation. It is also a fact that no new asset came to the assessee out of the expenditure so capitalized by the AO. The Income-tax Act provides for writing off the 8 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 expenditure in whatever form it is in the accounts either over the years or in the year of incurring of such expenditure. So, this aspect of the matter also goes against the revenue. Now let us also examine whether the expenditure in question is laid out for the business of the assessee. The assessee contributed for a part of expenditure on a bridge constructed by the State Government across a river. The absence of the bridge caused lot of inconvenience to the assessee inasmuch as that during rainy season sea water entered into the premises of the assessee and the assessee was incurring recurring expenditure every year to pile the cement bags to stop the sea water entering into its premises. So it was squarely a need of the assessee too to get rid of such recurring inconvenience. It is not a case of stashing away money with a view to avoid the tax net, but a benevolent act; a benevolent act for helping out the governmental agency to make basic infrastructure for the public, where the contributor too, is a beneficiary. In fact, we need and should look forward for more of this kind of acts.
32.11 In view of the above, we hold that the warding off a recurring revenue expenditure by one time contribution retains the character of a revenue expenditure only and that the CIT(A) was justified in deleting the addition by holding that the expenditure in question is purely on revenue field. Ground 5 of the revenue fails."
5.2 Since the revenue has not challenge the findings of this Tribunal; therefore, following the earlier order of this Tribunal in assessee's own case, we decide this issue in favour of the assessee and against the revenue.
6 The alternative plea of the assessee is regarding depreciation has become infructuous and accordingly, rejected.
7 Ground number 5 of the assessee is as under:
" Interest received from Income Tax Department:
5.1 The learned CIT (A) erred in upholding the action of the AO in taxing interest of Rs. 20,39,570/- received form Income Tax Department during the previous year.
5.2 The CIT (A) failed to appreciate that it is not disputed that the same amount was not irrevocably granted to the appellant and no income can be taxed until the person becomes entitled to it absolutely or irretrievably.
5.3 Without prejudice, the appellant prays that as decided by the Tribunal in the appellant's own case any interest subsequently withdrawn by the Income Tax Department should not be taxed in the year under appeal and the same be excluded from the computation of total income of the appellant."9
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 7.1 We have heard the ld Sr. counsel for the assessee as well as the D.R and considered the relevant material on record. An identical issue was considered and decided by this Tribunal in assessee's own case for the assessment year 1996-97 and 1997-98 and para 13.1 to 14 as under:
"13.1 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. At the time of hearing of this appeal, the Sr ld counsel for the assessee has submitted that the benefit of the interest subsequently withdrawn as a result of appellate orders should be given to the assessee and the interest subsequently withdrawn should not be taxed. He has relied upon the decision of the Tribunal in the case of Avada Trading Co reported in 100 ITD
131. 13.2 We further note that for the AY 1993-94, the Tribunal has considered and decided a similar issue in ITA No 1523/Mum/1997 vide order dated in para 62 as under:
"62. We have heard the parties and considered the rival submissions. These refunds have been granted to the assessee in the year under consideration and therefore, they would partake the character of income of the assessee. If however, any refund has been found to be not refundable to the assessee and consequently the interest granted is withdrawn the same would not partake the character of income. We accordingly direct the AO to reduce from the taxability of the aforesaid interest c granted to the assessee, the amount which has been withdrawn subsequently. We direct accordingly."
14 As far as the taxability of interest granted u/s 244A of the Act is concerned, the same is assessable to tax in the year in which the refund has been granted along with the interest. However, if the subsequent refund and interest is withdrawn, then the same should be reduced from the total income of the assessee. We find that a similar direction has been given in para 20 by the CIT(A)while passing the impugned order. Therefore, we do not find any reason to interfere with the order of the ld CIT(A), qua this issue hence, upheld. "
7.2 Following the earlier order of this Tribunal, we decide this issue against the assessee and in favour of the revenue. However, if subsequently the refund and the interest is withdrawn, then the same should be reduced from the total income of the assessee.
8 Ground number 6 of the assessee is as under:
" Deduction uls 80 0:10
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 6.1 The CIT (A) ought to have held that deductions available to the appellant u/s 80 0 amounted to Rs. 35,78,506/-, as claimed by the appellant Company in the return of income.
6.2 The appellant pray that the deduction under section 80 0 be allowed at the amounts arrived at without any reduction for allocated head office expenses.
6.3 Insofar as allocation of head office expenses of Rs. 14,00,000/- and the consequent reduction of section 80 0 deduction, the CIT (A) ought to have categorically held that no such allocation and reduction could be made.
6.4 Without prejudice, the CIT (A) erred in failing to follow the order of her predecessor without any reason whatsoever wherein allocation of head expenses was reduced to the extent of 45% of the amount estimated by the A0."
8.1 We have heard the learned Sr counsel of the assessee as well as the learned DR and considered the relevant material on record. For the assessment year 1996-97 and 1997-98, this Tribunal has considered and decided an identical issue in para 15.2 to 15.4 as under:
"15.2 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. A similar issue has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 29.1 & 29.2 as under:
29.1 On a similar issue the Tribunal in assessee's own case in AY 1994-95(supra) in paragraphs 25 to 25.2 has held as follows:-, '25. In grounds of appeal No. 32 to 35, the assessee has challenged the order of the CIT(A) in allocating head office expenses and thereby reducing the quantum of deduction available to the assessee under the following provisions:
Section Rs.
8OHH 14,20,000
801 5,54,600
80M 7,50,000
80-0 3,50,000
30,74,600
25.1 Facts of the case, in brief, are that the AO estimated the expenses and allocated head office expense to the various units which had claimed benefits u/s. 8OHH,801, 80M and 80-0 of the Act. Since the nexus between the head office and the individual units cannot be denied and since the assessee did not give details so as to give better allocation of these expenses to various 11 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 units, the CIT(A) upheld the action of the AO. Aggrieved with such order of the CIT(A), the assessee is in appeal before us.
25.2 After hearing both the sides, we find the AO has only allocated the expenses but no income was allocated. We find the co-ordinate Bench of the Tribunal in the case of M/s. Procter & Gamble India Ltd. Vs. DCIT, vide ITA No. 5466/Mum/99 order dated 27th November, 2006 for the A.Y. 1990-91 has held that head office expense allocated to the units are not to be taken into consideration for computing the income of the assessee eligible for deduction u/s. 801 and also u/s 8OHH. Similarly we find the Bangalore bench of the ITAT in the case of Wipro GE Medical Systems Ltd. Vs. DCIT reported in 81 TTJ 455 has held that there is no need for allocation of any expenses when the expenses are directly connected with periods. Following the decision f the coordinate bench of the Tribunal and the decision of the Bangalore Bench of the Tribunal, we are of the considered opinion that there is no necessity for allocating the head office expenses to the units claiming deduction u/s.
8OHH, 801, 80M and 80-0. The order of the CIT(A) on this issue is accordingly set aside and the grounds raised by the assessee are allowed. 29.2 Respectfully following the aforesaid decision of the Tribunal, these grounds, namely 27 to 30 A, are allowed".
15.3 The Sr ld counsel for the assessee has pointed out that the revenue has not filed any appeal on this issue against the order of the Tribunal. 15.4 Therefore, respectfully following the earlier order of the Tribunal, we decide this issue in favour of the assessee."
8.2 Following the earlier order of this Tribunal to decide this issue in favour of the assessing and against the revenue.
9 The alternative plea raised in ground no.6.4 has become infructuous and hence rejected.
10 Ground number 7 is as under:
Deduction u/s 80 HHC:
7.1 The learned CIT (A) erred in upholding the AO's view that deduction u/s 80 HHC of the Act is to be computed for the Company as a whole and rejecting the contention of the appellant that the deduction u/s 80 HHC is to be computed separately in respect of each individual Unit carrying on the activity of export.
7.2 The learned CIT (A) erred in upholding the action of the AO in reducing income of Rs. 34.79 crores from business income for computing deduction u/s 8OHHC.12
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 7.3 In the event the CIT (A)'s order that deduction u/s 80 HHC of the Act is to be computed for the Company as a whole is upheld, then the CIT (A) erred in including inter-unit / inter-divisional transfers of Rs. 436.22 crores as part of the total turnover."
10.1 We have heard the learned senior counsel as well as the ld DR and considered the relevant material on record. An identical issue raised in the additional grounds for the assessment year 1996-97 and 97-98 was considered and decided by this Tribunal in assessee's own case in paras 30 & 30.1 as under:
"30 As regards the additional ground no.1 pertaining to deduction u/s 80HH on gross interest the Sr ld counsel for the assessee has submitted that this issue has been decided by the Hon'ble Supreme Court in the case of ACG Associated Capsules vs CIT vide decision dated 8.2.2012; therefore, the deduction u/s 80HH should be allowed on the gross interest received.
30.1 Since this ground has been raised by the assessee first time in view of the decision of the Hon'ble Supreme Court; therefore, it requires verification and examination at the level of the AO. Accordingly, we remit this issue to the record of the AO to consider and decide the same as per law after considering the contention of the assessee and after giving reasonable opportunity of being heard to the assessee. "
10.2 In view of the decision of honourable Supreme Court in case of ACG Associated Capsules reported in 67 DTR (SC) 205, the Explanation to section 80 HHC to be applied on net interest and not on gross interest. Accordingly, we direct the AO to apply clause (baa) in respect of interest receipt by following the decision of honourable Supreme Court(supra).
11 As regards the deduction under section 80 HHC to be computed for the assessee company as a whole, the said issue has been considered and decided by this Tribunal in assessee's own case for the assessment year 1995- 96 in para 27.4 and 27.5 as under:
27.4 In respect of Ground No. 24, the ITAT in AY 1994-95 in assessee's own case (supra) dealt with the similar issue in paragraph 22 to 22.2, which are as follows:
"22. Grounds of appeal Nos. 28 and 29 are as under:13
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003
"28. In the event that the CIT(A)'s order that deduction u/s. 8OHHC of Act is to be computed by considering all units of the appellant as a whole is upheld, then the C1T(A) erred in including inter-unit and inter divisional transfers of Rs. 338.41 crores as part of total turnover, which results in the same figure being counted as a number of times and hence depriving the deduction u/s. 8OHHC.' "29. In the alternative the learned CIT(A) ought to have held that deduction u/s. 8OHHC of the Act be computed on the basis of considering all units which had exports together." 22.1 Alter hearing both the sides, we find similar issue had come up before the Tribunal in assessee's own case and the Tribunal in its consolidated order for A.Ys. 1986-87 to 1989-90 order dated 22' March, 2007 at para 154 of the order has held as under:
"We have considered the rival submissions, perused the materials on record and have gone through the orders of authorities below. We find that there are two aspects involved exclusion of inter division transfer from total turnover while computing deduction u/s. 8OHHC. Second aspect is regarding exclusion of excise duty from total turnover for the same purpose.
Second aspect of the matter regarding exclusion of excise duty from total turnover for computing deduction u/s. 8OHHC is covered in favour of the assessee by the judgement of Hon'ble jurisdictional High Court rendered in the case of Sudarshan Chemicals Industries Ltd. (supra). Respectfully following the same, this aspect of the matter is decided in favour of the assessee.
Regarding the first aspect of the matter i.e., regarding exclusion of inter-division transfer from total turnover, we find that this issue is covered in favour of the assessee by the judgement of the Tribunal rendered in assessee's own case for A. Y. 1990-91 to 1992-93. In para No. 152 of the judgement, this has been held by the Tribunal that inter- division transfer has to be excluded as that would amount to double addition in the figure of total turnover. Respectfully following this judgement, this aspect of the matter is also decided in favour of the assessee. This ground No. 26(ii) stands allowed.
22.2 Respectfully following the decision of the Tribunal in assessee's own case we set aside the order of the CIT(A) and direct the AO to exclude the inter- division transfer from the total turnover."
27.5 In view of the above, the claim of the assessee is directed to be accepted. Ground no. 24 is allowed."
11.1 Ld Sr. counsel for the assessee has submitted that the revenue did not press this issue before the honourable High Court in the appeal ITA no. 417 of 2010 as well as in ITA no. 2930 of 2004 for the assessment year 1995-96 and 1994-95 respectively. This issue has been decided in favour of the assessee by this Tribunal and the 14 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 revenue did not press this issue before the honourable High Court; therefore, the findings of this Tribunal have attained the finality. Accordingly, following the earlier order of this Tribunal, we decide this issue in favour of the assessee and against the revenue 12 The Ground 8 of the assessee is as under:
Interest on securities:
The learned CIT (A) ought to have held that interest notionally computed on a per day basis on securities amounting to Rs. 2,27,01,488/- cannot be taxed, as the said interest had not accrued i.e. interest was not due for payment on 31.3.98 and no right to receive interest vested in the appellant as on that date.
12.1 We have heard the learned senior counsel as well as the ld D.R and considered the relevant material on record. At the outset, we note that an identical issue was considered and decided by this Tribunal in assessee's own case for the assessment year 1996-97 and 1997-98 in para at 19.1 to 19.3 as under:
19.1 We have heard the Sr ld Counsel for the assessee as well as the ld DR and considered the relevant material on record. At the outset, we note that this issue has been considered and adjudicated by the Tribunal in assessee's own case for the Assessment Year 1995-96 in para 27.5 to 25.7 as under:
"27.5 We have considered the rival submissions made by both the sides, perused the orders of AO and the CIT(A) and the various decisions cited before us. There is no dispute to the fact that the assessee is following the 'mercantile system of accounting and has provided in the books accrued interest of Rs. 32,36,992/- on such securities. It is the contention of the assessee that the interest on such securities should not be taxed during this year since it has sold the said securities in the next year before the due date of payment of interest and has offered for capital gain tax and that no interest has been received during the year on such securities, therefore, the same should be deducted from the total income in the computation However according to the Revenue since the assessee is following the mercantile system of accounting and since there is no provision in the Act to exclude the accrued interest considering the events in the subsequent years, the same cannot be excluded.
27.6 We find the Hon'ble Madras High Court in the case of CIT vs Tamil Nadu Mercantile Bank Ltd., reported in 291 ITR 137 has held as under 15 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 "Held, dismissing the appeal, that even though section 18 of the Act was deleted, the assessee was taxable for interest on securities only on specified dates, when it became due for payment, in view of the third proviso to section 145(1) of the Act, which was in force during the relevant assessment yews.' 27.7 Respectfully following the decision of the Hon'ble Madras High Court cited above, this ground raised by the assessee is allowed"
19.2 We further note that when this issue was not raised before the Hon'ble jurisdictional High Court by the Revenue, the same was not pressed as recorded by the Hon'ble High Court in para 5 as under:
"5 As regards question (1) is concerned, counsel for the revenue states that he is not pressing the said questions, the ITAT has followed the decision of the Madras High C Court in CIT vs Mercantile Bank reported in 291 ITR 137(Mad)."
19.3 Accordingly, this issue is decided in favour of the assessee and against the revenue."
12.2 Following the earlier order of this Tribunal, we decide this issue in favour of the assessee and against the revenue.
13 Ground number 9 raised by the assessee is as under:
Deduction u/s 801A:
9.1 The CIT (A) erred in holding that the profits of Vikram Power Unit for the purpose of section 801A of the Act amounted to Rs. 4,17,62,000/-.
She ought to have held that the said profits amounted to Rs. 9,60,78,619/-.
9.2 The CIT (A) erred in upholding the action of the AO that for computing profits of Vikram Power Unit the provisions of section 80 IA (9) could be invoked.
9.2 Assuming for the sake of argument that section 80 IA could be invoked, the CIT (A) ought to have held that the transfer rate of the power considered by the appellant is the correct transfer rate in view of the provisions of sub-section (9) of section 80 IA of the Act. 9.4 Without prejudice, the CIT (A) failed to appreciate that the alleged power purchase price of MSEB Rs. 2 per unit considered by the AO is an estimate / guess work and without any evidence / support. 9.5 Without prejudice, the CIT (A) failed to appreciate that in case the rate of purchase of power by MSEB is to be considered as market value then the rate of Rs. 2 per unit is erroneous.
16
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 13.1 During the year under consideration the assessee has shown an income of Rs. 8.29 crores as profit of Vikram Power Unit and claimed the same as exempt under section 80IA. The Assessing Officer held that the Vikram Power Unit is not a separate industrial undertaking and is only a part of Vikram Ispat unit and represents an extension of the said Vikram Ispat unit by backward integration. The Assessing Officer further observed that the basic requirement for generation of power of Vikram Power unit is steam which is taken from Vikram Ispat unit. Thus, the Assessing Officer held that for the year under consideration, the Vikram Power unit did not have independent boilers to generate its own steam and was completely dependent on Vikram Ispat unit for the same. Accordingly, the Assessing Officer disallowed the claim of the assessee under section 80IA.
13.2 On appeal, the Commissioner of Income Tax(Appeals) by following the decision of honourable jurisdictional High Court in case of CIT vs Paul Brothers reported in 216 ITR 548 has held that deduction under section 80IA in respect of Vikram Power unit could not be denied during the assessment year under consideration when the claim was allowed in the earlier years. However, the Commissioner of Income Tax(Appeals) concurred with the view of the Assessing Officer on the point of calculation of profit earned from Vikram Power unit by reducing the sale price of power sold by the Vikram Power unit at Rs. 2 per unit. 14 Before us, the ld senior counsel of the assessee has submitted that this issue is covered by the decision of this Tribunal in case of West Coast Paper Mills Ltd., reported in 103 ITD 19(Mum) as well as in case of Sri Velayudhaswamy Spinning Mills P Ltd reported in 12 ITR(Trib) 35e(Chennai).
17
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 14.1 On the other hand, the learned D.R has relied upon the orders of the Assessing Officer and the Commissioner of Income Tax(Appeals). 15 We have considered the rival submissions as well as the relevant material on record. The dispute before us is limited only with respect to the sale price of electricity unit for captive consumption. The assessee has claimed the deduction on the basis of sale price as electricity sold to Maharashtra Electricity Board (MSEB). The authorities below have reduced the sale price by Rs. 2 for the purpose of computation of deduction under section 80 IA.
15.1 At the outset, we note that an identical issue has been considered and decided by this Tribunal in the case of West Coast Paper Mills Ltd (supra) in para 7 as under:
"7. That leaves us with the issue relating to the rate to be adopted for the unit of power generated and supplied to the paper division, which would impact the profit to be determined for the purpose of section 80-IA of the Act. The assessee adopted the rate at which KSEB supplied power to industrial user which the Assessing Officer considered to be purely a notional rate and has no semblance or reality. These rates, according to the Assessing Officer, were unrealistic as KSEB is not expected to purchase power from the assessee and it is also unrealistic to expect KSEB to purchase power from the assessee at a future date at the same rate on which it supplies power to the other industrial users and it is also not the fact that the assessee has sold any power to KSEB in any future year. The CIT(A) asked the assessee to submit an alternative calculation based on the average actual per unit cost of power purchased from KSEB by the paper division. According to this calculation, the average price for the unit of power consumed worked out to Rs. 4.74 per unit. The assessee was asked to furnish copies of electricity bills received for one month on a sample basis. On examination of the bills, the CIT(A) directed the Assessing Officer to examine the electricity bills on which the assessee has based its working of the transfer price and recalculate the price to be adopted after excluding elements of tax or levy which may form part of the total amount billed. After excluding such amount, the price per unit of power would be determined which would be adopted as the transfer price of the power generated by the assessee. The other important issue which the CIT(A) found that in the profit and loss account of the industrial undertaking there is no mention about indirect costs such as managerial remuneration, administrative overheads, etc., which also needs to be considered for the purpose of arriving at the profit of the eligible Unit. On these findings, both the assessee and the revenue are aggrieved. The grievance of the revenue is that the deduction under section 80-IA should not be on the average rate of actual consumption of the electricity from KSEB when the assessee itself has sold electricity to 18 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 TNSEB at the rate of Rs. 2.62 per unit. The assessee's grievance is that the CIT(A) was not justified in holding that the element of tax should not be included in the computation of transfer price and he also erred, according to the assessee, in directing to give a pro rata allocation of indirect expenses of the company for the purpose of computation of the profit of the power generating Units. We have considered the submissions of the parties on this issue and are unable to find any merit in them. The Assessing Officer's adoption of the rate at which it sold the power to TNSEB cannot be accepted since the Units themselves are working at Dandeli in the State of Karnataka and the cost of generation of power in Tamil Nadu and Karnataka are different. Apart from that, the assessee has paid to KSEB for purchase of the power and the CIT(A) has correctly come to a reasonable conclusion that the transfer price should be on the basis of average price paid by the assessee during the whole year to KSEB minus certain extraneous charges such as electricity duty, etc., which is not connected with the business of the assessee. Therefore, the CIT(A) has correctly and reasonably directed the allocation of the indirect expenses for the purpose of arriving at the income of the eligible unit and we decline to disturb such direction of the CIT(A). Accordingly, the grounds raised both by the assessee and the revenue should be taken to have been rejected."
15.2 Further, a similar view has been taken by the Chennai Benches of this Tribunal in case of Sri Velayudhaswamy Spinning Mills P Ltd (supra). Accordingly, following the order of this Tribunal, we decided this issue in favour of the assessee and against the revenue.
16 Ground number 10 in assessee's appeal is as under:
" Debenture Redemption Premium:
The CIT (A) erred in not directing the AO to allow debenture redemption premium actually paid during the previous year amounting to Rs. 2.17 crores in the event Department's stand that debenture redemption premium is allowable on payment basis and not on accrual basis is upheld by the appellate authorities."
16.1 We have heard the learned senior counsel as well as the learned DR and considered the relevant material on record. The ld Sr. counsel has submitted that since the proportionate premium on debenture redemption has been allowed by this Tribunal in the earlier years; therefore, this issue has become infructuous and may be dismissed as not pressed.
19
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 17 We find that in the earlier year, this Tribunal has allowed proportionate premium on debenture redemption and therefore, only proportionate amount is to be allowed and accordingly, this ground raised by the assessee has become infructuous and hence the same is dismissed, being not pressed. 18 The assessee has also filed the following additional grounds:
1. On the facts and circumstances of the case and in law, the Appellant prays that the Assessing Officer be directed to:
i. Exclude from taxable profits, the sales tax exemption benefit of Rs 34 crores, which is included in Sales and which is taxed in the assessment order as part of profits of the business; and ii. To treat the same as capital receipt not chargeable to tax.
2. On the facts and circumstances of the case and in law, the Appellant prays that the Assessing Officer be directed to allow interest u/s 244A on refund arising out of self assessment tax from the date of payment of self assessment tax.
19 The first additional ground regarding sale tax exemption benefit, being capital receipt.
20 We have heard the ld Sr. counsel as well as the net D.R. and considered the relevant material on record. An identical issue has been considered and decided by this Tribunal in assessee's own case for the assessment year 1995- 96 in para of 35.2 as under:
35.2 On this objection, the learned counsel for the assessee brought to our notice the decision of the Hon'ble Delhi High court in the case of Jai Parobolic Springs Ltd. Vs. CIT 306 ITR 42(DeL) wherein the Delhi High court has held that the power of the Tribunal to entertain the additional ground is not in any way restricted in view of the decision of the Honble Supreme Court in the case of Goetz India Ltd. In view of the above, we admit additional ground for adjudication. We are, however, of the view that for adjudication of the additional ground, the Assessing Officer has to examine the scheme under which the subsidy was received and thereafter give conclusion regarding claim made by the assessee. We are, therefore, of the opinion that the 20 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 matter should be remanded to the Assessing Officer with a direction to the Assessing Officer to examine the claim of the assessee after affording opportunity of being heard to the assessee and decide the issue. We order accordingly. For statistical purpose the additional ground of assessee is allowed."
20.1 Since in the earlier year, the issue was remitted to the record of the Assessing Officer for considering the claim of the assessee; accordingly, the issue raised in the additional ground is remitted to the record of the Assessing Officer for considering and examining the same.
21 The second additional ground is regarding interest under section 244-A on the refund out of self-assessment tax on the date of payment.
21.1 We have heard the ld Sr counsel for the assessee as well as the ld DR and considered the relevant material on record. The learned Sr counsel for the assessee has relied upon the decision of honourable Karnataka High Court in case of Vijaya bank reported in 338 ITR 489 as well as decision of honourable Delhi High Court in case of Commissioner of Income-tax v. Sutlej Industries Ltd. reported in 325 ITR 331. He has also referred various decisions of this Tribunal in support of his contention. 22.2 Though, on principle, we find merits in the contention of the ld Sr counsel for the assessee; however, since the issue has been raised for the first time before us and therefore, the same is required to be considered by the Assessing Officer. Accordingly, we remit this issue to the record of the Assessing Officer for considering the same in the light of decisions relied upon by the ld Sr counsel for the assessee. ITA No.1865/Mum/2003 (AY 1998-99) (By the revenue) 23 The revenue has raised following grounds in this appeal: 21
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003
1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow depreciation in respect of Intake Well, Telphers, Storage Tank, Lagoon Tank, Effluent Tank holding them as plant ignoring the fact that these are integral part of the building and, as such, rate of depreciation is allowable at the rate applicable to building.
2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of depreciation claimed on shops etc. at Bhiwani without appreciating the fact that these shops are not business assets.
3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing depreciation on false ceiling treating the same as plant without appreciating the fact that false ceiling is an integral part of building and does not form part of plant and machinery.
4. On the facts and in the circumstances of the case and in law, the CIT(A) errsd in deleting an amount of Rs.5.26 crores which was added by the Assessing Officer on account of proportionate premium ignoring, inter-alia, the ratio laid down in the case of Shri Sajan Mills Ltd. (156 ITR 585)(SC), while deciding the issue of proportionate premium payable on redemption of bonds.
5. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow 75% of remuneration paid to lady employees Smt.Taramani Mandalia and Smt. Induben I. Parikh and 1 OO% of remuneration paid to Smt.Sumitra Devi Mandelia ignoring the fact that no details of services rendered by them had been filed.
6. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the allowance of foreign travel expenses as per rule 6D of the I.T.Rules, 1962 in the cases of Shri P. Malhani of Rs.83,272/-, Shri M.C. Bagrodia - Rs.2,30,117/-, Shri S.K.Jain - Rs.l,84,395/-, Shri B.K.Singh - Rs.1,13,001/-
and Shri Vikram Ispat of Rs.7,53,722/- without appreciating the fact that the object of the tour was to purchase machinery and hence, the expenses are capital in nature.
7. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of foreign travel expenses in the case of Smt. V.M. Sand, Shri Toruram, Smt. Jam and Shri SuvratJain ofRs.3,07,513/- , Shri S.B. Agrawal, Shri S.K.Gupta and Shri Prakash Bhargava of Rs.6,46,373/- and Smt.C.P.Jajoo of Rs.68,085/- without appreciating the fact that the assessee did not furnish information on tour reports and the said expenditure is not incurred in connection with the assessee's business.
8. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition on account of legal charges of Rs. 14,25,603/- incurred by the assessee in connection with land without appreciating the fact that these legal expenses are incurred on petition related to such land 22 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 acquired years before and, therefore, are in the nature of capital expenditure.
9. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance made u/s.43B(b), (c) & (d) of the Income- tax Act ignoring the provisions of section 43B of the Act as a whole and without taking into consideration the harmonious construction of various provisions of the said section. Further, the meaning of the word 'payable', as applicable to the provisions of section 43B(b), (c) & (d) was also ignored.
10. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 1,35,34,273/- being capital expenditure on project expenses disallowed on the ground that the said new project is a part of the assessee's business, ignoring the fact that disallowance made by the Assessing Officer was on account of capital nature of expenditure and not on the øroiind that the nroiect did not form Dart of the business of the sgecPe
11. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance expenses of Rs.48,89,340/- on rural development and medical help, expenses by way of help of Rs. 1,48,285/-, expenses on contribution to local organisation Rs. 10,47,331/-, expenses on air fare and rail fare of Rs.8,81,593/-, payment of penalty and interest of Rs.76,777/-, payment to Sangeet Kala Kendra of Rs.8,000/- and expenses of Rs.5,08,634/- for logo without appreciating that the same is not incurred in connection with the assessee's business.
12. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s.801/801A of the Income-tax Act without appreciating the fact that head office of the assessee company is a controlling unit which manages the affairs of all units of the company and, therefore, proportionate expenses of the head office are rightly reduced by the Assessing Officer from the profits of the assessee.
13. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow deduction u/s.80-O of the Income-tax Act on gross receipts and not on net receipts without appreciating the fact that the said deduction is allowable with reference to income and not with reference to gross receipts.
14. Without prejudice to the contention in Ground No.22, the CIT(A) erred in fact while holding that the CIT(A)-XII, Mumbai had directed the AO in his appellate order for Assessment Year 1995-96 that the deduction should be allowed on the basis of net receipts and not on gross receipts without appreciating the correct fact that the CIT(A)-XII has restricted the deductible expenditure at Rs.5 lacs as against Rs. lilacs taken by the Assessing Officer.
15. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to exclude from the turnover the amounts of excise duty and sales-tax relying on the decision of the Hon'ble Mumbai High Court in the case of Sudarshan Chemical Inds. (245 ITR 769) 23 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 which has not been accepted by the department and agitated by way of SLP."
16. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs.15,96,12,266/- being the interest liability relating to construction period without appreciating the fact that the said amount represents interest paid by the assessee on loan taken for establishing seven new units before completion of the construction and, therefore, the assessee's claim does not qualify for deduction as revenue expenditure u/s.36(1)(iii) of the I.T.Act.
17. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s.40A(3) of Rs. 22,502/-, being 20% of cash payments, without justifying that the same falls under the exceptions provided under rule 6DD(j) of I.T.Rules, 1962.
18. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition being profits of the USA Branch of M/s.Birla Consultancy & Software Services without appreciating that the transaction is not at a arms length and the branch is not functioning as an independent unit.
19. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing development allowance on the increased cost of the plant and machinery due to exchange fluctuation without appreciating the provisions of section 32A of the Income-tax Act in as much as the deduction u/s.32A is to be allowed if the 'asset' is owned by the assessee and is wholly used for the purpose of the assessee's business in respect of the year in which the asset is acquired or installed or first put to use and the assessee has not fulfilled these conditions.
20. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow the deduction u/s.801A on Vikram Power Unit without appreciating that Vikram Power Unit is not an independent unit and, therefore, not eligible for the deduction u/s.801 separately.
21. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that exchange rate fluctuation loss of Rs.58,92,079/- is a trading loss without appreciating the fact that the same does not pertain to business of the assessee."
24 Ground number 1 is regarding depreciation on Intake Well, Telphers, Storage Tank, Lagoon Tank, Effluent Tankt.
25 We have heard the ld Sr counsel for the assessee as well as the ld DR and considered the relevant material on record. At the outset, we note that this issue 24 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 has been considered and decided by this Tribunal in assessee's own case for the assessment year 1986-87 and in all subsequent years upto assessment year 1997- 98. For the assessment years 1996-97 and 1997-98, this Tribunal has considered and decided this issue in paras 33 to 33.2 as under:
"33 First ground raised in this appeal reads as under:
"On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow depreciation in respect of Intake Well, Teiphers, StorageTank, Acid Tank, Lagoon Tank, Effluent Tank, Lime Storage Tank, False Ceiling, etc., holding them as plant ignoring the fact that these are integral part of the building and, as such, rate of depreciation is allowable at the rate applicable to building."
33.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the Assessment Year 1995-96 in para 38 as under:
"38. We have carefully perused and considered the rival submissions, facts of the case and the relevant records. In the course of present appellate proceedings, id. AR submitted that the issue of depreciation in respect of Intake Well, Teiphers, Storage Tank, Acid Tank, Lagoon Tank, False Ceiling, etc has .been decided in favour of the assessee by the Co-ordinate Bench of the Tribunal in assessee's own case in ITA No.7593/Mum/97 A.Y. 1990-91, ITA No. 1523/M/97 A.Y. 1993-94, ITA Nos 939/M/93 and others for A.Y 1986-87 to 89-90 and ITA no.3698 & 3100/M/99 for A.Y 1994-95. The assessee has filed copies of the Tribunal orders in the paper book submitted by it. The id DR was fair enough to affirm the contention of Id. AR. We have carefully perused the above Tribunal orders and found that this issue is decided in favour of the assessee by the Coordinate Benches. Respectfully, following the above orders of the Co-ordinate Benches, this issue is decided in favour of the assessee and against the revenue. Therefore, ground no.1(a) of the revenue is rejected."
33.2 We further note that the revenue did not press this issue before the Hon'ble High Court in the appeal filed for Assessment Year 1995-96 as the question 'k' raised before the Hon'ble High Court was dismissed being not pressed. Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue in favour of the assessee and against the revenue."
25.1 Following the earlier order of this Tribunal, we decide this issue in favour of the assessee and against the revenue. Accordingly, this ground of the revenue's appeal is rejected 25 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 26 Ground no.2 of the revenue's appeal is regarding depreciation on shops at Bhiwani.
27 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 35 to 35.3 as under:
"35 Ground no.3 raised by the revenue reads as under:
"3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of depreciation claimed on shops, etc., at Bhiwandi without appreciating the fact that these shops are not business assets."
35.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the Assessment Year 1995-96 in paras 40 as under:
"40. The issue raised by the revenue in ground No.1 (c) is that the learned CIT(A)has erred in deleting the disallowance of depreciation claimed on shops etc., at Bhiwandi without appreciating the fact that these shops are not business assets. The ld AR in the course of present appellate proceedings submitted that the issue in question has decided in favour of the assessee by various Co-ordinate Benches in assessee's own case in ITA No.7593/M/97 A.Y. 1990-91, ITA No.1523/M/97 A.Y. 1993-94, ITA Nos.939/M/93 and others for A.Y 1986-87 to 89-90 and ITA No.3698 & 3100/M/99 for A.Y 1994-95. The ld DR was fair enough to concede this contention of the id A.R. We have carefully perused the above Tribunal orders and found that this issue is decided in favour of the assessee by the Co-ordinate Benches. Respectfully following the orders of the Co-ordinate Benches, this issue is decided in favour of the assessee and against the revenue. Therefore, this ground of the revenue is rejected."
35.2 We further note that this issue raised by the revenue before the Hon'ble High Court for the AY 1995-96 but the same was dismissed vide para 4 as under:
"4. As regards question (h) & (1) are concerned, counsel for the revenue states that the ITAT has answered the questions in favour of the assessee by relying upon the decision in the assessee's own case for Assessment Year 1990-91. The appeal filed by the revenue against the order of the 1TAT for AY 1990-91 has been dismissed by this Court on the ground of delay. Thus, the 26 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 order of the ITAT for AY 1990-91 has attained finality. In these circumstances, questions (h) & (I) cannot be entertained."
35.3 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue in favour of the assessee and against the revenue." 27.1 Since the issue is covered in favour of the assessee and against the revenue by the earlier orders of this Tribunal; accordingly, we decide this issue against the revenue and in favour of the assessee.
28 Ground no.3 raised by the revenue is regarding depreciation on false ceiling. 29 After considering the rival submissions and relevant material on record, we note that this issue has been considered and decided by this Tribunal for the earlier years. For the assessment years 1996/97 and 1997-98, this Tribunal has considered and decided this issue in paras 36 to 36.2 as under:
"36 Ground no.4 raised by the revenue reads as under:
4. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing depreciation on false ceiling treating the same as plant without appreciating the fact that false ceiling is an integral part of building and does not form part of plant and machinery.
36.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the Assessment Year 1994-95 in paras 37 as under:
"37. Grounds 10 and 13 of the revenue pertains to depreciation on Intake-
well, storage tank and effluent tank at the rate applicable to plant & machinery and false ceiling. This issue also figured in the appeal for the assessment years 1990-91 and 1993-94 and the Tribunal found that the assessee's claim was accepted in the earlier years by following the decision of the Andhra Pradesh High Court in the case of CIT vs Warner Hindustan Ltd 117 ITR 15, Orissa High Court decision in the case of CIT V. Electrosteel Castings Ltd 130 TTR 25. Bombay High Court decision in the case of Siemens India Ltd vs CIT 217 ITR 622 and the Tribunal's decisions in ITA No.7397/Bom/88 dt. 2-5-3-97 for asst.year- 73-74 for Intake well, in ITA No.2890/Bom/88 dt. 4-1-96 for asst.year 72-73 for telpher in ITA No.250/Indore/76 -77 order dt. 10-5-93 for asstt. Year 68- 69 by applying the functional test. Quoting from the Tribunal order for assessment year 1973-74, the Tribunal held that the observations in that order would apply to all the tanks in issue as they are all connected and used for the continuous supply and disposal of water, acid, lime coal etc. As regards 27 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 false ceiling also, applying the functional test it was held that it was not a mere ceiling of ordinary nature but a ceiling to provide control of the temperature and humidity, which is very essential to avoid breakage of the fibre and yarn. Respectfully following the earlier order of the Tribunal we do not see any infirmity in the order of the CIT(A direct the assessing officer to allow depreciation on all these items by treating them as plant and machinery. Grounds 10 and 13 are rejected."
36.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue against the revenue and in favour of the assessee." 29.1 Following the earlier orders of this Tribunal in assessee's own case, we decide this issue against the revenue and in favour of the assessee. 30 Ground no.4 in revenue's appeal is regarding proportionate premium payable on redemption of bonds.
30.1 This issue is common in both the appeals. Since the proportionate premium payable on redemption of bonds has been allowed by this Tribunal for the earlier years; therefore, by following the earlier orders of this Tribunal for the Assessment Years 1996-97 and 1997-98, this Tribunal has considered and decided this issue in paras 38.1 to 38.3 as under:
38.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. The Sr ld counsel for the assessee has submitted that the amount of Rs. 6.42 croroes mentioned in this ground is not correct and the correct amount is Rs. 5.46 crores.
38.2 At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the Assessment Year 1995-96 in paras 45 to 45.1 as under:
"45. The issue of disallowance of proportionate premium payable on redemption of bonds has been decided in. favour of the assessee in its own case vide ITA No.3698& 3100/M/ 99 for the A.Y 1994-95, order dated 13/2/2009, vide para 29, which is reproduced hereunder:
29. The second ground taken by the revenue pertains to proportionate premium paah1e on redemption of debentures/bonds. This issue stands settled in favour of the assessee by the judgmental the Hon'ble Apex Court in the case of Madras Industrial investment Corporation Ltd. vs. CIT 225. ITR 802(SC). We also find that for the AYs 1986-87 to 28 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 1989-90, identical issue was decided by Mumbai Bench 'J' of the Tribunal in assessee's own case in ITA Nos. 939/Mum/1993 & ors and vide order dated 22nd March, 2007 by following the above judgment of the Hon'ble Apex Court Ground No.2 of revenue fails."
45.1 Respectfully following the above decision of the Co-ordinate bench this issue is decided in favour of the assessee."
38.3 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue against the revenue and in favour of the assessee." 30.2 Following the earlier order of this Tribunal, we decide this issue against the revenue and in favour of the assessee.
31 Ground no.5 is regarding remuneration paid to Lady Employees. 31.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 39.1 &39.2 as under:
39.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the Assessment Year 1995-96 in para 46.1 as under:
"46.1. The id. D.R placed reliance on the assessment order. However, ld AR contended that the revenue has not filed appeal on this ground in respect of assessment year 1990-91, 1993-94 and 1994-95. Therefore, to maintain consistency on identical grounds, the revenue cannot turn its back in accepting the issue in some of the assessment years and raising the same in appeal in respect of present assessment year. There is force in the contention made by the Id. 'A.R'. Therefore, to maintain reasonable consistency on similar facts and circumstances of the case, the issue is decided in favour of the assessee and against the revenue as the principle of consistency has been upheld on plethora of decisions."
39.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue against the revenue and in favour of the assessee." 29
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 31.2 Following the earlier order of this Tribunal, we decide this issue against the revenue and in favour of the assessee.
32 Ground no. 6 & 7 regarding foreign travelling expenses. 32.1. We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 42 to 42.2 as under:
"42 Ground nos 11 to 14 raised by the revenue read as under:
11. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of foreign travel expenses of Mr.Pattabi, Mr.Thoruram, Mrs.Jain and Mrs.Saboo amounting to Rs.2,88,166/- without appreciating the fact that the object of the tour was to purchase machinery and hence, the expenses are capital in nature.
12. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing relief on account of foreign travel expenses of Mr. & Mrs. A.V. Birla amounting to Rs. 1,90,893/- without appreciating the fact that the object of the tour was to purchase machinery and hence, the expenses are capital in nature.
13. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing relief on account of foreign travel expenses of Mrs.Jajoo amounting to Rs.2,54,593/- without appreciating the fact that the object of the tour was to purchase machinery and hence, the expenses are capital in nature.
14. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs.2,88,166/- paid to Mr.Pattabi, Mr.Tharuram, Mrs.Jain and Mrs. Saboo and disallowance of Rs.1,90,893/- paid to Mr. and Mrs.A.V. Birla, and disallowance of Rs.2,54,593/- to Mrs.Jajoo without appreciating that the said payments by the assessee on foreign travels of these persons are not incurred wholly and exclusively for the purpose of the business and, therefore, 20% deductible from the assessee's total income.
42.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that the issues 30 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 raised in this appeal have been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 10.1 to10.5 and 52.1 as under:
10. 1 In respect of disallowance made treating the expenditure as capital in nature and for various reasons listed in 9(a) in ground of appeal, it is in dispute that in assessee's own case in AY 1994-95 in ITA No. 3698/Murn/99, vide order dated 13th February, 2009 the Hon'ble ITAT held as follows:
'9.8 As regards the expenditure incurred by the assessee on account of foreign travel expenses of the remaining persons amounting to Rs. 3,01,366/- which was treated by the Assessing Officer as capital in nature and confirmed by the CIT(A), we find the Hon'ble Bombay High Court in the case of Bralco Metal industries Pvt. Ltd. Vs. CIT, reported in 206 ITR 477 (at page 483) has held as under:
'In the instant case, we do not find any serious controversy in regard to the fact that the expenditure in question was business expenditure. The only contention of the revenue is that it is an expenditure of capital nature because the purpose of the visit of the managing director was to inspect and to take a trial run of the capital equipment purchased by the assessee company. In other words, according to the Revenue, the visit related to the purchase of' the machinery which was a capital equipment and as such, this expenditure should form part of the price of the machinery and should not be treated as a revenue expenditure. We have carefully considered the above submission. In a given case, the above contention of the revenue may carry weight and require serious consideration but that is not so in all cases. It would depend on the facts and circumstances of each case. In the instant case, there is no dispute about the fact that the visit of the Managing Director was for the purpose of business. There is also no dispute that there was a running business It was not a case of business which was in the process of establishment. The business of the assessee was already going on and it was in connection with the running business that some more plant or machinery were intended to be purchased. If the visit was either to take a decision whether it was suitable for its business or not for any other such purpose, we do not think that it will convert the expenditure incurred on the Managing Director's visit into an expenditure of a capital nature. In a given case where a decision is taken to purchase the machinery and the purchase has in fact been made in pursuance of such decision, it may be possible for the Revenue to contend that the expenditure should be added to the cost of the machinery but in a case where a decision is taken not to purchase the machinery it would not be possible to treat the expenditure on the visit as part of the cost of any machinery because no machinery, as such is purchased. In such an event, either it may be disallowed altogether or it may be allowed treating it was a revenue expenditure. In our opinion having regard to the facts and circumstances of the present case it is difficult to hold that the expenditure incurred by the managing director on the foreign tour can be held to be an expenditure of capital nature. It may be apposite to observe that the dividing line between capital expenditure and revenue expenditure, which was held by the courts to be thin all throughout has become much thinner and thinner by a catena of decisions of the Supreme Court rendered during the last few years. Applying above ratio to the facts of the present case, we are of the clear opinion that the Tribunal was not justified in holding the expenditure on the tours of its managing director was capital expenditure 31 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 and in disallowing the claim of the assessee for deduction under section 37(1) of the Act. In that view of the matter, we answer question No. I in the affirmative, Le., in favour of the assessee and against the Revenue.' 10.2 In view of the above, the expenses listed in ground 9(a) are directed to be allowed as revenue expenditure.
10.3 In respect of expenses listed in 9(b) in the ground of appeal, referred to above, the Tribunal held non-submission of tour reports was sufficient to disallow those expenses.
10.4 Before us, 'the learned counsel for the assessee submitted that before the Cit(A), the assessee had submitted the purpose for which the foreign tour was undertaken by the aforesaid persons and the CIT(A) & AO did not dispute those facts It was also submitted that the CIT(A) should have called for the required details and ascertained views of the Assessing Officer and allowed the claim if the purpose of visit is found to be wholly and exclusively for the purpose of business.
10.5 We have considered the submissions of the learned counsel for the assessee. We have also perused paragraphs at page 6 to 12 of the ClT(A's order and we find that in respect of additions sustained by the CIT(A), no details of the purpose of visits are available. Under these circumstances, we are of the view that the disallowances sustained by the CIT(A) is proper and calls for no interference. Consequently, Ground No. 9 is partly allowed.
52.1 The Issue 'pertaining to foreign travel expenses has been considered and adjudicated from para 10 to 10.5 of this order while adjudicating ground No.9 of assessee's appeal. Accordingly groimd:No.7 (a)& (b) are disposed as per the observation contained in 10 to 10.5 of this order. The observations and findings therein are applicable to this ground of appeal."
42.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we dispose off these grounds in similar terms."
32.2 Accordingly, the travelling expenses relating to ground no.6 disallowance on account of capital in nature are allowed in favour of the assessee whereas the foreign travelling expenses covered under ground no.7 are disallowed and decided the issue in favour of the revenue.
33 Ground no. 8 is regarding legal charges in connection with land matter.32
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 33.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 43.1 & 42.2 as under:
43.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that the issue raised in this appeal has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in para 12.1 as under:
"12.1 In Assessment Year 1994-95, in assessee's own case in ITA No.3698/Mum/99, vide order dated 13th Feb 2009, this Tribunal on an identical expenses, has held that they were capital in nature. Following the same, we dismiss ground nho.11 of the assessee."
43.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue in favour of the revenue and against the assessee. 33.2 Following the earlier order of this Tribunal, we decide this issue against the assessee and in favour of the revenue.
34 Ground no.9 is regarding disallowance u/s 43B (b)(c) & (d). 34.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 45.1 & 45.2 as under:
"45.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that the issue 33 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 raised in this appeal has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in para 53.1 & 53.2 as under:
53.1. As far as ground No.8 is concerned , it was brought to the notice of the Bench that the issue is covered in favour of the assessee, by various decisions of the Co-ordinate Bench in the assessee's own case and in the appeal filed by the revenue for the A.Y 1993-94. The issue has been decided in favour of the assessee vide para 41 of the order for the A.Y 1994-95, in assessee' own case 'vide ITA No.3698&3100/M/99. 1994-95, order dated 13/2/2009.
41. The last issue in this appeal pertains to disallowance u/s 43B(b), 43B(c) and 43B(d). The claim of the assessee is that these payments did not become payable during the year and therefore, in view of the Andhra Pradesh High Court judgment in the case of Srikakollu Subbarao & Co. & Ors vs. UOI & Ors 173 ITR 708 (AP) no disallowance can be made u/s. 43B. On the other hand, according to the assessing officer, whether the amount has become payable or not, the disallowance has to be made by virtue of Explanation 2 to section 43B of the Act. We find that the contention of the assessee has been upheld by the Tribunal in its order for assessment years 1986-87 to 1989-90, 1990-91 and 1993-94. However, we find that no details are available on the records provided to us as to what is the amount disallowed under different clauses of the disallowance agitated before. With regard to payment covered under clause (b) of section 43B we hold that the same may be allowed if it is paid within the grace period provided under the concerned statute, in view of the judgement o the Hon'ble jurisdictional High Court in the case of ACIT vs. Pamwi Tissues Ltd. 215 CTR (Born) 150. With regard to the other two items of disallowance, we direct the assessing officer to consider the same in the light of the Andhra Pradesh High Court Judgment in the case of & Srlkakollu Subbarao & Co(supra). This ground of 'the revenue is treated as allowed, for statistical purposes."
53.2 Respectfully following the above decision the ground of the revenue is treated as allowed, for statistical purpose The Assessing Officer is directed to follow the observations and findings as reproduced above". 45.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we direct the Assessing Officer to decide this issue in terms of the earlier order of this Tribunal."
34.2 Following the earlier order of this Tribunal, we decide this issue against the revenue and in favour of the assessee.
35 Ground no.10 is regarding disallowance of project expenses. 35.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue 34 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 46.1 & 46.2 as under:
"46.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that the issue raised in this appeal has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in para 17 & 17.1 as under:
"17. In AY 1994-95 in assessee's own case in ITA No. 3698/Mum/99, vide order dated 13th February, 2009, identical issue came up for consideration before the ITAT wherein the ITAT held as follows:
12. In grounds of appeal No. 13, the assessee has challenged the order of the CIT(A) in confirming the disallowance of Rs. 28,89,242/- treating the same as expenditure related to new project/capital expenditure. In grounds of appeal No. 14, the assessee has taken an alternate ground that if the above expenditure is treated as capital in nature then depreciation should be allowed to the assessee as per law. Similarly in grounds of appeal No. 15, the assessee has further submitted that out of the total expenditure of Rs. 8,89,242/-, an amount of Rs. 25,72,217/- relates to business already in existence and, therefore, an amount of Rs. 25,72,217/- should be allowed as business expenditure.
12.1 Facts of the case, in brief, are that the Assessing Officer has disallowed an amount of Rs. 28,89,242, the details of which are as under:
Sl.No Name Amt Total
(Rs) Amt
(Rs)
(a) VC 91,430
Fees for feasibility report of
captive power plant 200000 291430
Coal Dashing plant
(b) NVC
Feasibility report of captive 91430
power plant Fee for "TEPS 225000 316430
for splitting location on
grinding units.
( c) V SC
Fees for feasibility report of 137140
power plant
(d) Chem
Retainer ship fees 150000
App. Fees Advt project 546315
profile etc 974395 167071
Foreign travel exp
35
Grasim Industries Ltd
ITA No. 5630/Mum/2002
&
ITA No.1865/Mum/2003
(e) ESM
Paid to Dalal consultant for 317025
MDF board project
(f) HO
Intt.on CC limit utilised for 156507
new cement project
288924
12.2 In. appeal, the CIT(A) confirmed the disallowance of expenditure of Rs. 28,89,242/- made by the Assessing Officer. Aggrieved with such order of the CIT(A), the assessee is in appeal before us.
12.3 After hearing both the sides, we find similar issue had come up before the Tribunal in assessee's own case for the A.Ys. 1990-91 to 1992-93. We find the Tribunal vide I.T.A. Nos. 7593 to 7595/Mum/97 order dated 17th March, 2004 at para 114 to 118 of the order has held as under:
114. Ground No. 22(1990-91), ground No. 25(1991-92) & ground No. 24 (1992-
93) are that the learned CIT(A) erred on facts and in law in upholding the action of the AO in disallowing the project expenses aggregating to Rs.
16,17,213/-, Rs. 17,92,938/- & Rs. 23,52,205/-for the assessment years 1990- 91, 1991-92, 1992-93 respectively treating the same as expenditure of capital nature. The facts are that in the Chemical Division, Nagda the assessee had incurred an amount of Rs. 16,I7213/- and grouped the various expenses under the head 'New Project Expenses' which are detailed herein below:
1990-91 1991-92 1992-93
(Amt Rs. (Amt Rs) Amt (Rs)
Retainer 2,95,500 1,83,000 3,36,500
ship fee
Application 6,18,743 12,27,78 9,50,541
, advt 7
profile &
other exp
Foreign 7,02,970 3,82,151 10,65,16
travel 4
16,17,21 17,92,93 23,52,20
3 8 5
The assessee's claim was that these expenses are allowable as revenue expenditure as the new project related to existing business activities and for the expansion of its existing business. It was further pointed out that this expenditure was allowed as revenue expenditure by the learned CIT(A) in the assessment year 1986-87. The Assessing Officer observed as under:
'Even if the new project is an expansion of the company's existing business, any expenditure incurred due to it will be capital in nature."
115. The learned CIT(A) following his order for the assessment year1993-94 confirmed the addition.
116. The learned counsel for the assessee pointed that in the assessment year 1993-94 the Tribunal has allowed the assessee 'S appeal The Tribunal taking 36 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 note of the fact that there was common management and contro4 common fluids, inter-connection, interdependence of units on each other, it was held that the assessee was carrying on "same" business.
117. The learned DR relied on his argument with reference to ground No. 14 arid inter-alia relied on. the decision of the Hon'ble Bombay High Court in the case of Ciba of India Ltd. V. CIT (202 ITR 1).
118. We have considered the submissions of both the parties and have also perused the records of the case. As noted earlier, the Tribunal has held that test of same business is fulfilled in the present case. From the AO's observation, as noted earlier, it is clear that he has not disputed that the expenditure was for expansion of business. The assessee deserves to succeed in view of various judicial pronouncements noticed with reference to ground No. 14 and further discussions with reference to Ground No. 18(1990-91). These grounds are allowed.' 12.4 Respectfully following the decision of the Tribunal in assessee's own case and considering the fact that in the A.Y. 1993-94 where the Tribunal has held that the business is one and the same business for which department has not gone in appea1 before the Hon'ble High Court, therefore, the grounds raised by the assessee on this issue are allowed. Since the assessee succeeds on grounds of appeal No. 13 and 15 the alternate ground of the assessee in grounds of appeal No. 14 that in case of the expenditure is disallowed then the same should be capitalised and depreciation should be granted, does not require. any adjudication and the same is dismissed."
17.1 It is not in dispute before us that the nature of expenditure is identic1 in the present assessment year and that the ratio laid down in the earlier assessment year would apply to the present assessment year. Respectfully following the decision of the Tribunal referred to above, we direct that the claim made by the assessee be accepted. Thus, ground no.13 is allowed."
46.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue in favour of the assessee and against the revenue."
35.2 Following the earlier order of this Tribunal, we decide this issue against the revenue and in favour of the assessee.
36 Ground no.11 is regarding other expenses.
36.1 As regards the expenses by way of helps to employees and literary help to journalists upto 50% and contribution to local organisation. These items are covered by the order of the Tribunal in assessee's own case for the earlier years. For the 37 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 Assessment Year 1996-97, and 1997-98, this issue has been considered and decided by this Tribunal in paras 47 to 47.8 as under:
47 Ground no.19 raised by the revenue on account of the following::
a) Other business expenditure Rs. 24,24,377/-
b) Rural development expenses Rs. 6,15,989/-
c) Expenses by way of help Rs 60,674/-
Library help to journalists (50% of total exp.Rs. 37,650/-)
d) Contribution to local organisation Rs. 12,86,908/-
e) Expenses on air & rail fare for persons connected with company Rs.13,86,808
f) Sales tax penalty/interest on late payment of sales tax and penalty for excise mater.1,06,149/-
g) Contribution to diner's and other clubs. Rs 15,659/-
h) Agricultural income tax. Rs 8,700/-
47.1 We have heard the ld DR as well as the Sr ld counsel for the assessee and considered the relevant material on record. At the outset, we note that the issue in 19(a), (b) & (c) raised in this appeal has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in para 19 to 20.1 as under:
19. Ground No. 15 of the assessee reads as follows:"
The learned CIT(A) erred on facts and in law and/or erred in misdirecting herself on facts and in law in upholding the section of Assessing Officer in disallowing other business expenses of Rs. 2,72,950 as detailed hereunder treating the same as non-business expenses.
GRASILENE
Exp. By various vicarious officers 31,528
PULP/M
Rural Development Exp. 81,304
HPF
Exp on fruits 19820
Exp. At Delhi office 5061
Petty Exp 710 25,591
CHEM
Medical help to others 58,100
PAC
Medical help to others 15,000
CS MEMBRANCE CELL
Medical help to others 46,427
BTM
Nagar Veopar Mandal 15,000
2,72,950
======
The appellant prays that the expenses of Rs. 2,72,950 be allowed as revenue exp u/s 37(1) of the act or otherwise holding them as having been incurred for the appellant's business."38
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 19.1 In AY 1994-95 in assessee's own case in ITA No. 3698/Murn/99, vide order dated .13th February, 2009, identical issue came up for consideration before the ITAT wherein the ITAT held as follows:
13. Grounds of appeal No. 16 relates to the action of the CIT(A) in confirming the disallowance other than business, expenses of Rs. 1,92,263/- disallowed by the Assessing Officer treating the same as non-business expenses.
13.1 After hearing both the sides, we find the Assessing Officer disallowed an amount of Rs. 1,92,263/- claimed by the assessee company treating the same as non business expenditure, the details of which are as under:
Amount Total Amt
(Rs) (Rs)
Grasilene 36551
Exp. By various offices
Pulp/M 72475
Rural Devp Exp
HPF
Exp On fruits 10545
Exp. At Delhi office 7499
Petty exp 1055 19099
Chem
Medical help to others 44877
Sangeet Kala Kendra 2000 46877
NCS 16106
Medical help to others
ESM
Conveyance to anti 1155
dumping & duty personnel
192263
13.2 We find the CIT(A) upheld the action of the Assessing Officer. After going through the nature of expenses we find no. satisfactory evidence was brought to our notice that the expenditure incurred by the assessee on account of the above items is wholly and exclusively for the purpose of business. It is the settled proposition of law that for claiming any expenditure the onus is always on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer that the expenditure incurred is wholly and exclusively for the purpose of business. In the instant case the assessee failed to discharge the burden cast on it. We, therefore, do not find any infirmity in the order of the CIT(A) confirming such disallowance. The ground raised by the assessee is accordingly dismissed."
19.2 It is not in dispute before us that the facts in the present Assessment year are identical to the facts as it prevailed in the earlier assessment year decided by the Tribunal and that the ratio laid down by the tribunal aforesaid would apply to the present assessment year. Respectfully following the -aforesaid decision of the Tribuna1, we uphold the order of the CIT(A) and dismiss ground no. 15 of the assessee 20 Ground no. 16 of the assessee reads as follows:39
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 The ld CIT(A) erred on facts and in law in upholding the action of Assessing Officer in disallowing exp. by way of help of Rs. 1,15,564 as detailed hereunder:
Sundry help to employee &
Dependents . 83,964
Literary help to journalists 29,850
Financial & medical help 1,750
1,15,564
The appellant prays that the disallowance made in respect of. exp. by way of help be deleted and it be held that the same is allowable u/s 37(1)/28 of the Act.'
20.1 In AY 1994-95 in assessee's own case (supra), the issue with regard to expenses on literary help to journalists was decided against the assessee holding that the same was not wholly and exclusively for the purpose of business of the assessee. With regard to help to employees and financial and medical help, in AY 1994-5 in assessee's own case (supra), this Tribunal allowed the claim of the assessee. Respectfully following the decision of the Tribunal, we direct that sundry help to employee & other dependents and financial & medical help expenses be allowed while literary help to journalists be disallowed. Ground No. 16 is, thus, partly allowed. 47.2 Accordingly, following the earlier orders of the Tribunal in assessee's own case, the issue of other business expenditure and Rural development expenditure is decided against the assessee and the expenditure of sundry help to employees and dependents is to be allowed but the Literary help to journalists is disallowed. 47.3 As regards ground no.19(d), we have heard the ld DR as well as Ld Sr counsel for the assessee. We note that this issue has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 21.1 to 21.2 as under:
21.1 In ÀY 1994-95 in assessee's own case in 1TA No. 3698/Mum/99, vide. order dated 13th February, 2o09, identical issue came up for consideration before the ITAT wherein the ITAT held as follows '15 Grounds of peal to 18 relates to the order of the CIT(A) in upholding the disallowance of sundry expenses of Rs 2,,24775J- disallowed by the Assessing Officer on account of contribution to local originations 15.1 After hearing both the sides, we find similar issue had come up before the Tribunal in assessee' own case for the A.Ys. 1986-87 to 1989-90. We find the Tribunal vide its consolidated order dated 22nd March, 2007 had decided the issue in favour of the assessee by observing as under:
"We have considered the rival submissions, perused the materials on record and have gone through the Tribunal judgement relied upon by learned counsel of the assessee. In those years, the Tribunal has decided the issue in favour of the assessee by following the Tribunal judgement in case of Hindustan Petroleum Corporation Ltd. Vs. DCIT, 96 lTD186 (Mum). No difference in. facts could be pointed out by 40 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 learned DR of the revenue and hence, by respectfully following this Tribunal judgement and also judgement of Hon'ble jurisdictional High Court, this issue is decided in favour of the assessee in these two years. Respective grounds of the assessee stands allowed in both these years.' 15.2 Respectfully following the decision of the Tribunal in assessee's own case, and in absence of any contrary material brought to our notice, this ground by the assessee is allowed."
21.2 Respectfully following the decision of the Tribunal, we direct the Assessing Officer to allow the claim of the assessee in this regard. Ground no. 17 is, accordingly, allowed.
47.4 Accordingly this issue is decided in favour of the assessee and against the revenue.
47.5 As regards ground no.19(e) we have heard the ld DR and ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 23.1 and 23.2 as under:
23.1 In AY 1994-95 in assessee's own case (supra), this Tribunal dealt with an identical issue and held as under:-
"17. Grounds of appeal No. 20 relates to the order of the CIT(A) in confirming the disallowance of Rs. 91,182/- by the Assessing Officer on account of rail/air fare of persons connected with the company's business as non business expenditure.
17.1 After hearing both the sides, we find the Assessing Officer disallowed an amount of Rs. 91,182/- being the expenditure on rail/ air fare of different persons other than the employees of the company on the ground that the same is non business expenditure. In appeal, the learned CIT(A) confirmed the addition. Aggrieved with the order of CIT(A) the assessee is in appeal before us.
17.2 We have considered the rival arguments. It is the settled proposition of law that for claiming any expenditure as business expenditure, the onus is always on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer that the expenditure incurred is wholly and exclusively for the purpose of business. in the instant case the assessee has failed to prove the expenditure incurred on account of various persons other than the employees of the company that the same is wholly and exclusively for the purpose of business. Therefore, we find no infirmity in the order of the CIT(A) in sustaining this addition. The ground raised by the assessee is accordingly dismissed."
23.2 In the present assessment year also, the assessee did not file the req1ired evidence to substantiate that these expenses were incurred wholly and exclusively for the purpose of business. In view of the above, do riot find any 41 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 ground to interfere with the order of CIT(A). Consequently, ground no. 19 is dismissed.
47.6 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue against the assessee and in favour of the revenue. 47.7 As regards ground no.19(f) we have heard the ld DR and ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 24.1 & 24.2 as under:
"24.1 From the details of sums involved we find that the following sums are purely compensatory payments:
3. Sales tax penalty (Rewari depot) (Truck moved without challan]
4. Excise & taxation deptt. Punjab (wrong CST not mentioned on dispatch documents.)
5. Sales tax penalty at Faridabad (truck moved without challan) 24.2 We are of the view that item 3, 4 & 5 being purely compensatory in nature they cannot be considered as expenditure which are illegal falling within the ambit of Explanation to section 37(1) of the Act. To this extent, the disallowance sustained by the CIT(A) is directed to be deleted. Thus, ground No. 19A partly allowed."
47.8 Accordingly, following the earlier orders of the Tribunal in assessee's own case, we decide this issue in favour of the assessee and against the revenue. 36.2 Accordingly, by following the earlier orders of the Tribunal, we allow the expenses in respect of helps to employees and contribution to local organisation in favour of the assessee and against the revenue; whereas the Literary help to journalists is decided in favour of the revenue and against the assessee. 37 Next issue regarding rural development and medical help. 38 We have heard the ld DR as well as Ld Sr counsel for the assessee and considered the relevant material on record. The ld Sr counsel has relied upon the following decisions:
i) Srivenkat Satyanarayan 223 ITR 101 (SC)
ii) Mysore Kirloskar - 166 ITR 836(Kar)
iii) Eastern Invesgtment 20 ITR 170 (Mad)
iv) HPCL 96 ITD 186 (Mum)
42
Grasim Industries Ltd
ITA No. 5630/Mum/2002
&
ITA No.1865/Mum/2003
38.1 The ld DR has relied upon the order of the Assessing Officer. We note that the expenditure has been incurred by the assessee for rural development and for the benefit of the people residing nearby the plant area and other people directly and indirectly connected with the business of the assessee. 39 Once the expenditure has been incurred, which is in connection with the business of the assessee, then the same is allowable in view of the decision of the Hon'ble Supreme Court in the case of Srivenkat Satyanarayan (supra) as well as the decision of the Hon'ble Karnataka High Court in the case of Mysore Kirloskar and the decision of the Hon'ble Madras High Court in the case of Madras Refinery (supra) as relied upon by the ld Sr counsel for the assessee. Accordingly, we decide this issue in favour of the assessee and against the revenue.
40 Ground no. 12 is regarding disallowance u/s 80I/80IA. 40.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 48 to 48.2 as under:
48 Ground nos 20 & 21 raised by the revenue read as under:
20. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s.801/801A of the Income Tax Act without appreciating the fact that head office of the assessee company is a controlling unit which manages the affairs of all units of the company and, therefore, proportionate expenses of the head office are rightly reduced by the Assessing Officer from the profits of the assessee.
21. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to allow deduction uls.80M of the Income Tax Act on the entire amount of dividend earned without reducing the expenses ignoring the fact that deduction uls.80M is to be allowed on net dividend after deducting related 43 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 expenses from gross dividend and, inter-alia, ignoring the decision of Calcutta High Court in the case of CIT Vs.United India Fire and General Co.Ltd., (161 ITR 295) and also ignoring the fact that the Assessing Officer had reasonably estimated the expenses at Rs.50 lakhs.
48.1 The CIT(A) though disallowed the claim u/s 80-O and 80HH by reducing the proportionate head office expenses; however, the claim of deduction u/s 80M was allowed without reducing the head office expenses. Therefore, both the assessee and the revenue are in appeal. The assessee also raised this issue in ground no. 8 in its appeal.
48.2 We have heard both the parties and considered the relevant material on record. This issue has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 29.1 and 29.2 which have been reproduced by us while deciding the ground no.8 of the assessee's appeal in the foregoing paragraphs (15.1 to 15.4). Accordingly, we decide this issue against the revenue and in favour of the assessee."
40.2 Therefore, following the earlier order of this Tribunal, we decide this issue in favour of the assessee and against the revenue.
41 Ground nos.13 - 14 regarding disallowance u/s 80-O
41.1 This issue of revenue's appeal does not arise from the impugned order of the ld Commissioner of Income Tax(Appeals) because the ld Commissioner of Income Tax(Appeals) has allowed the deduction on the basis of net receipts instead of gross receipts. Accordingly, there is no grievance to the revenue against the findings of the ld CIT(A) and hence this issue is dismissed.
42 Ground no.15 is regarding exclusion of excise duty and sales tax from total turnover for the pur4psoe of deduction u/s 80HHC.
42.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. 44
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 50 to 50.2 as under:
"50 Ground no.24 raised by the revenue reads as under:
24. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to exclude from the turnover the amounts of excise duty and sales tax relying on the decision of the Hon'ble Mumbai High Court in the case of Sudarshan Chemical Industries (245 ITR 769) which has not been accepted by the department and agitated by way of SLP.
50.1 We have head the ld DR as well as ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue is covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of Laxmi Machines Works reported in 290 ITR 667. The Tribunal in assessee's own case for the AY 1995-96 has also considered and decided this issue in para 27.3 to 27.5.
"27.3 Ground No. 23 is with regard to excluding excise duty from the total turnover, which deserves to be allowed in view of the decision in the case of Sudarshan Chemical Ltd. 245 ITR 769 (Born). In view of the above, ground No. 23 is allowed.
27.4 In respect of Ground No. 24, the ITAT in AY 1994-95 in assessee's own case (supra) dealt with the similar issue in paragraph 22 to 22.2, which are as follows:"
22. Grounds of appeal Nos. 28 and 29 are as under:
28.In the event that the CIT(A)'s order that deduction u/s. 80HHC of the Act is to be computed by considering all units of the appellant as a whole is upheld, then the CIT(A) erred in including inter-unit and inter-divisional transfers of Rs. 338.41 crores as part of total turn over, which results in the same figure being counted as a number of times and hence depriving the deduction u/s. 8OHHC.
29. In the alternative the Learned Cfl'(A) ought to have held that deduction u/s.
8OHHC of the Act be computed on the basis of considering all units which had exports together.' 22.1 After hearing both the sides, we find similar issue had come up before the Tribunal in assessee's own case and the Tribunal in its consolidated order for AYs. 1986-87 to 1989-90 order dated 22nd March, 2007 at para 154 of the order has held as under:
"We have considered the rival submissions, perused the materials on recxrd and have gone through the orders of authorities below We find that there are two aspects involved. One aspect is regarding exclusion of inter division transfer from total turnover while computing deduction u/s. 8OHHC. Second aspect is regarding exclusion of excise duty from total turnover for the same purpose.
Second aspect of the matter regarding exclusion of excise duty from total turnover for computing deduction u/s 80HHHC is covered in favour of the assessee by the judgment of Hon'ble Jurisdictional High Court rendered in the case of Sudarshan 45 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 Chemicals Industries Ltd(supra). Respectfully following the same, this aspect of the matter is decided in favour of the assessee.
Regarding the first aspect of the matter i.e., regarding exclusion of inter-division transfer from total turnover, we find that this issue is covered in favour of the assessee by the judgement of the Tribunal rendered in assessee's own case for A.Y. 1990-91 to 1992-93. In para No. 152 of the judgement, this has been held by the Tribunal that inter-division transfer has to be excluded as that would amount to double addition in the figure of total turnover. Respectfully following this judgment, this aspect of the matter is also decided in favour of the assessee. This ground No. 26(ii) stands allowed.
22.2 Respectfully following the decision of the Tribunal in assessee's own case we set aside the order of the CIT(A) and direct the Assessing Officer to exclude the inter- division transfer from the total turnover."
27.5 In view of the above the claim of the assessee is directed to be accepted. No. 24 is allowed."
50.2 Accordingly, this issue is decided in favour of the assessee and against the revenue."
42.2 Therefore, following the earlier orders of this Tribunal, we decide this issue in favour of the assessee and against the revenue.
43 Ground no. 16 is regarding disallowance of interest u/s 36(1). 43.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 52 to 52.4 as under:
"52 Ground no.26 raised by the revenue reads as under;
26. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs.24, 10,56,673/- being the interest liability relating to construction period without appreciating the fact that the said amount represents interest paid by the assessee on loan taken for establishing seven new units before completion of the construction and, therefore, the assessee's claim does not qualify for deduction as revenue expenditure u/s.36(1)(iii) of the I.T. Act.
52.1 The Assessing Officer disallowed the claim of interest of Rs. 24,10,56,673/- being the liability relating to construction period and the Assessing Officer held that the capital has not been borrowed for the purpose of the assessee's existing business 46 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 and therefore, the interest on such borrowed capital is not allowable. On appeal, the CIT(A) allowed the claim of the assessee by following the orders for the AY 1995-
96. 52.2 We have head the ld DR as well as ld Sr counsel for the assessee and considered the relevant material on record. The ld DR has relied upon the order of the Assessing Officer and submitted that the capital borrowed was utilized for construction of new unit and the expenditure of interest cannot be allowed as the new unit did not commence its business. On the other hand Ld Sr counsel for the assessee has submitted that for the AY 1994-95, this issue has been considered and decided by the Tribunal in favour of the assessee. He has further submitted that the appeal filed by the revenue did not press this issue before the Hon'ble High Court; accoridngly, the order of the Tribunal has attained the finality.
52.3 We note that this issue has been considered and decided by the Tribunal in assessee's own case for the AY 1994-95 in paras 35.6 as under:
"35.6 We have considered the rival submissions and perused the material placed before us. It is not in dispute that the facts and circumstances are identical to that of the assessment year 1993-94. The Tribunal in the year took a decision in favour of the assessee. The Tribunal in its findings had met with each and every objection of the assessing officer with regard to the business carried on by the asscssee. the management pattern, funds employed, maintenance of accounts, etc. and came to the conclusion that having regard to the common management and control, common funds, inter-connection and inter-dependence, etc. of the units on each other, the assessee was carrying on "same business" and, therefore, payment of interest would be a revenue expenditure. We find the Hon'ble Supreme Court in the case of Dy. Commissioner of income Tax Vs. Core Health Care Ltd. 298 TTR 194 has held that allowance of interest has to be made even if machinery is not used in the year of business. Consistent with the earlier finding recorded by the Tribunal in assessee's own case for assessment year 1993-94 on the very same issue, as well as the decision of Hon bie Supreme Court in the case of Core Health Care Ltd. (supra), we do not find any merit in the arguments of the revenue. The judgments of the jurisdictional High Court relied upon by the assessee also supports its case. Ground No.8 is rejected."
52.4 Accordingly, respectfully following the order of the Tribunal, we decide this issue in favour of the assessee and against the revenue." 43.2 Therefore, following the earlier orders of this Tribunal, we decide this issue in favour of the assessee and against the revenue.
44 Ground no. 17 is regarding disallowance u/s 40A(3). 44.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. 47
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 53 to 53.2as under:
"53 Ground no.27 raised by the revenue reads as under:
27. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s 40A(3) of Rs. 29,442/- being 20% of cash payments, without justifying that the same falls under the exceptions provided under rule 6DD(i) of I T Rules 1962 53.1 We have head the ld DR as well as ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has been considered and decided by the Tribunal in assessee's own case for the AY 1995-96 in paras 33 as under:
"33 Ground nos 33 & 34 relates to disallowance made u/s 40A3) of the act. We are of the view that in the light of clear mandate in section 40A(3), the disallowance is warranted and calls for no interference. Consequently, ground nos. 33 & 34 are dismissed."
53.2 Accordingly, respectfully following the order of the Tribunal, we decide this issue in favour of the revenue and against the assessee." 44.2 Therefore, following the earlier orders of this Tribunal, we decide this issue in favour of the revenue and against the assessee.
45 Ground no.18 is regarding disallowance of profits of the USA branch of M/s Birla consultancy and software services.
45.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. At the outset, we note that this issue has also been considered by this Tribunal in the earlier years in assessee's own case. For the assessment years 1996 - 97 and 1997-98, this Tribunal has considered and decided this issue in paras 54 to 56 as under:
"54 Ground no.28 raised by the revenue reads as under:
28. On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition being profits of the USA Branch of MIs.Birla Consultancy & Software Services without appreciating that the transaction is not at a arms length and the branch is not functioning as an independent unit.48
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 54.1 The assessee claimed that the profit of USA branch of MIs. Birla Consultancy & Software Services are not taxable in India as per DTAA between Indo USA. The Assessing Officer had made an addition stating that the income has to be taxed in both the countries and the benefit as per para 7 of DTAA is not available to the assessee. The Assessing Officer held that the profit of USA branch of the assessee, resident in India, shall be taxed in USA only, if the transactions are at ALP and the branch function has an independent unit. Thus, the Assessing Officer was of the view that this is not so in the case of the assessee. Accordingly, the profit is taxable in India. 54.2 On appeal, the CIT(A) held that the assessee would get the benefit of article 7 of the Indo USA DTAA as the business is being carried out through a PE within the meaning of article 5.
55 Before us, the ld DR has relied upon the order of the Assessing Officer and on the other hand, the ld Sr counsel for the assessee has relied upon the decision of the Hon'ble Supreme Court in the case of Deputy Commissioner of Income-tax v. Torqouise Investment and Finance Ltd. reported in 300 ITR 1 as well as in the case of Union of India v. Azadi Bachao Andolan reported in 263 ITR 706. 56 We have considered the rival contention as well as the relevant material on record. We do not agree with the arguments of the Assessing Officer that the income of the Branch Office of the assessee would be taxable in USA as well as in India when the said Branch Office is treated as PE within the meaning of Article 5 of the Indo-US DTAA. The Assessing Officer has also accepted the proposition that if the transactions are at ALP, then, the benefit of Article 7 of the DTAA is available to the assessee. Accordingly, we do not find any error or illegality in the order of the CIT(A), qua this issue 45.2 Therefore, following the earlier orders of this Tribunal, we decide this issue in favour of the assessee and against the revenue.
46 Ground no.19 is regarding development allowance on the increased cost of P&M due to exchange fluctuation.
46.1 Regarding the development allowance on increased cost of P&M due to exchange fluctuation, no such ground has been raised by the assessee before the Commissioner of Income Tax (Appeals) and accordingly, no finding on this issue has been given by the Commissioner of Income Tax (Appeals) against the impugned order; therefore, it does not arise from the impugned order of the Commissioner of Income Tax(Appeals). Accordingly, the same is dismissed. 49
Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 47 Ground no.20 is regarding deduction u/s 80IA to Vikram Power Unit. 47.1 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant material on record. The ld Sr counsel for the assessee has submitted that the Assessing Officer has disallowed the claim of the assessee in the 5th year of the claim. He has further contended that in the earlier year, the claim of the assessee was allowed by the Assessing Officer and therefore, in view of the decision of the Hon'ble Jurisdictional High Court in the case of Paul Brothers, reported in 216 ITR 548(Bom), the claim of the assessee cannot be disallowed for this year with out disturbing the earlier assessment.
48 We find force in the contention of the ld Sr counsel that when the claim of the assessee was allowed in the earlier year, then in the 5th year of the claim, the Assessing Officer cannot disallow the claim of the assessee without disturbing the earlier assessments. Accordingly, in view of the decision of the Hon'ble jurisdictional High Court, we do not find any reason to interfere with the order of the ld Commissioner of Income Tax(Appeals), qua this issue 49 Ground no.21 is regarding exchange rate fluctuation loss. 50 We have heard the ld DR as well as the ld Sr counsel for the assessee and considered the relevant. At the outset, we note that this issue is covered by the decision of the Hon'ble Supreme Court in the case of Wood Ward Governor India P Ltd reported in 312 ITR 254.
50.1 The Assessing Officer has disallowed the claim of the assessee on the ground that this is not actual loss incurred but has resulted as a result of conversion of foreign exchange asset and liabilities at the rate prevalent on 31.3.1998. Since the 50 Grasim Industries Ltd ITA No. 5630/Mum/2002 & ITA No.1865/Mum/2003 exchange fluctuation loss pertains to the business operations i.e. to import raw material and spare parts, export sale proceed receivable etc., and it is incurred in respect of trading asset/liabilities in the normal course of business, which are part of circulating capital or working capital; therefore, the same is allowable in view of the decision of the Hon'ble Supreme Court in the case of Wood Ward Governor India P Ltd (supra). Accordingly, we do not find any error or illegality in the impugned order of the ld Commissioner of Income Tax (Appeals), qua this issue. 51 In the result, the appeals filed by both the assessee as well as the revenue are partly allowed.
Order pronounced in the open court on the 10th, day of Aug 2012.
Sd/- Sd/-
( G E VEERABHADRAPPA ) ( VIJAY PAL RAO )
President Judicial Member
Place: Mumbai : Dated: 10th, Aug 2012
Raj*
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT
4 CIT(A)
5 DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai