Income Tax Appellate Tribunal - Pune
Alfa Laval India Ltd. vs Dy. Commissioner Of Income Tax on 2 February, 2007
Equivalent citations: [2008]298ITR333(PUNE)
ORDER
K.G. Bansal, Accountant Member
1. This appeal of the assessee arises out of the order of the CIT (Appeals)-III, Pune, passed on 17.03.2003. The corresponding assessment order was passed by the Assistant Commissioner of Income- tax, Circle-8, Pune, on 10.07.2002, under the provisions of Section 143(3) of the Income-tax Act, 1961 (for short the Act). The other appeals in this case were sought to be consolidated on 10.8.2006 by obtaining the order of the Senior Member. However, the learned Counsel for the assessee made a statement at the Bar that he had informed the Senior Member that this appeal may be heard independent of the other appeals. Therefore, we proceed to decide this appeal.
2. Ground No. 1 is against the findings of the learned CIT (Appeals) that the assessee was not entitled to deduct a sum of Rs. 4.25 lakh in computing the income, being a contribution made to Alfa Laval Education Trust, in view of the provisions contained in Section 40A(9) of the Act. It was mentioned that he erred in not following the decision of the Hon'ble Andhra Pradesh High Court in the case of Wazir Sultan Tobacco Co. Ltd. v. CIT , and that of the CIT (Appeals) in assessee's own case for assessment years 1987-88 to 1998-99. In the course of hearing before us, the learned Counsel for the assessee fairly conceded that this issue has been decided against the assessee n earlier years by the Hon'ble ITAT, Mumbai Bench "F", Mumbai, in ITA Nos. 3211 & 3212/Mum/2000 for assessment years 1997-98 and 1998-99, a copy of which was placed in the paper book on pages 6 to 11. Paragraph 14 of the order deals with this issue, wherein it is mentioned that this very issue was considered by the Tribunal in the case of the assessee for assessment year 1995-96. In that order it was held that the deduction is not permissible in view of the provision contained in Section 40A(9) of the Act and, consequently, the appeals of the revenue for assessment years 1997-98 and 1998-99 were allowed. Respectfully following that decision, this ground is dismissed.
3. Ground No. 2 is against the finding of the learned CIT(A) that the assessee was not entitled to deduct a sum of Rs. 26,06,513/-, being ESI dues in respect of earlier years on the ground that the same were prior- period expenses and the aforesaid liability did not accrue in the previous year relevant to assessment year 2000-01. It was mentioned that the liability accrued in financial year 1999-00. The liability accrued because of the failure of various contractors engaged by the assessee in depositing the ESI dues with the relevant authority, thereby, resulting in devolution of the liability on the assessee as the principal employer. Therefore, the impugned amount was allowable under the provisions of Section 37(1) of the Act.
4. In the course of hearing before us, the learned Counsel pointed out that the assessee had employed a contractor for carrying out the repairs. The contractor failed to discharge its liability in respect of the ESI dues. In view thereof, an enquiry was instituted in the case of the assesses on 14.10.1999 by the ESI authorities. Based upon the intimation received from the authorities about the institution of the inquiry, the assessee made a provision in its accounts for the liability in financial year 1999-00. After completing the enquiry, the Deputy Director, Employees' State Insurance Corporation, passed an order on 29.5.2000 in which the assessee was fastened with a liability of Rs. 15,95,438/- and interest amounting to Rs. 5,90,740/-. The assessee, being one of the principal employers, was ordered to pay the aforesaid amount along with interest @ 15% for each day of further default from the date of the order till the date of payment within a period of 15 days from the date of the order. In pursuance of this order, a sum of Rs. 22,06,513/- was paid by the assessee on 29.06.2000.
5. The Assessing Officer referred to the tax audit report filed along with the return of income, in which it was mentioned that expenditure of Rs. 26,06,513/-, being ESI dues in respect of earlier years, has been incurred anc the same has not been added back in the statement of total income. It was represented before him that the liability was incurred in this year and even otherwise the same is admissible on payment basis under the provisions of Section 43B of the Act. The Assessing Officerdid not accept the aforesaid contention on the ground that the relevantdemand notices were dated 29.05.2001 and 16.06.2000, the datesfalling in the previous years relevant to assessment years 2001-02 and2002-03 respectively. The expenses had been recognized as previousyears' expenses in the audit report. Therefore, the expenses were heldnot to be deductible in the computation of income of this year. Beforethe learned CIT (Appeals) it was represented that the Inspector made theenquiry and inspection in the financial year 1999-00 and the demand waspaid in the subsequent financial year. Therefore, it was contended that ifthe liability was not deductible in this year, it may be, without prejudiceto the claim of the assessee for this year, allowed in the next financialyear.
6. The learned CIT (Appeals) furnished the details of the liabilities in paragraph 3.3 of his order. It was pointed out that the liability pertained to the years 1993-94, 1994-95 and 1995-96, aggregating to Rs. 15,95,438/-. Interest of Rs. 6,11,075/- was also charged. The assessee had not made any provision in the accounts for the liabilities of assessment years 1996-97 and 1997-98. A provision aggregating to Rs. 4.00 lakh was made in the accounts of this year for these liabilities on an estimated basis. He held that as the order was made by the Deputy Director on 29.5.2000, and the notice of demand for liabilities of A. Ys1996-97 and 1997-98 was issued on 29.05.2001, the liability did notaccrue in the financial year 1999-00. Therefore, he came to theconclusion that the liabilities were not in respect of this year butearlier years and, accordingly, the order of the Assessing Officer wasconfirmed.
7. Coming to the legal issue, the learned Counsel relied upon the decision of Hon'ble Gujarat High Court in the case of Saurashtra Cement & Chemical Industries Ltd. v. CIT . One of the questions before the Hon'ble Court was whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the expenditure of Rs 39,823/- was not allowable in the year in question on the ground that the liability had arisen in the years 1968-69 to 1973-74? From the statement of the case and the order of the Tribunal, it appeared that the contention of the assessee was that the expenditure in dispute was incurred in the year under consideration because it was quantified in the relevant previous year and the CIT (Appeals) merely stated that when the expenses related to-earlier accounting years, how the expenses could be quantified in the year under consideration. The Tribunal affirmed the disallowance by observing that the books were maintained on mercantile basis and, therefore, there was no justification in claiming the expenses in the yearunder appeal. However, the Hon'ble Court pointed out that if anyliability, though relating to the earlier year, depends upon making ademand and its acceptance by the assessee and such liability had actually been claimed and paid in the later previous years, it cannot bedisallowed as deduction merely on the ground that accounts weremaintained 011 mercantile method. The ratio of the decision is that in acase where the accrual of the liability depends upon making ademand and its acceptance, then, it can be allowed in the year ofacceptance provided that the demand is paid in that year. Such is notthe case here. No doubt, the assessee was liable to pay the dues. Theliability arose partly on account of failure of the contract and partlybecause of the failure of the assessee to deposit the dues in the relevantyears. The past liability was fastened on the assessee as principalemployer and it depended upon its acceptance by the assessee. Thedemand was made on 29.5.2000 and paid on 29.6.2000. Both thesedates do not fall in the year under consideration. The rest of theliability was demanded in the financial year 2002-03 and paid in thatyear. Therefore, the ratio of the aforesaid case does not advance the case of the assessee, but goes against the assessee.
8. Further, the learned Counsel relied on the decision of Hon'ble Bombay High Court in the case of CIT v. United Motors (India) Ltd. (1990) 181 1TR 347. The question in that case was whether on the facts and in the circumstances of the case, the amount of Rs. 76,680/- was deductible as expenditure in the assessment for the accounting period relevant to assessment year 1972-73? The terms and conditions of the service of wcrkmen employed by the assessee were governed by the award. The Trade Unions gave a notice to the assessee terminating the award with effect from two months thereafter. This fact was taken notice of and a provision of Rs. 1.00 lakh was made in the books for the impending liability. The negotiations between the employer and the union resulted in settlements on 02.05.1972 and 06.10.1972. Ln pursuance thereof, a sum of Rs. 28,600/- was paid to the workmen in May and June, 1972 as salaries. Later on ad-hoc payments were made amounting to Rs. 48,000/- pursuant to the said settlements. These amounts were claimed as deductible in computing the income. The ITO rejected the claim that the payment was made after the close of the concerned accounting year, as the liability was not ascertained during the year.
9. The AAC confirmed the order of the ITO. The ITAT took a contrary view. It was pointed out that the impugned payiinents were made as salaries and dearness allowances pertained to the year under consideration and, therefore, the expenditure was deductible. The Hon'ble Court pointed out that the award that governed the terms and conditions of service of the assessee's workmen was terminated, a fact of which the notice was taken of by the directors and a provision of Rs. 1.00 lakh was made in the accounts for the impending liability. At that stage, it was difficult to quantify the liability on an exact basis as negotiations were going on. The provision was not allowed. Instead the quantified liability of Rs. 76,680/-, though it was discharged subsequent to the close of the previous year, must be allowed as deduction. In other words, the ratio of the decision is the difficulty in estimation of the liability does not convert an accrued liability into a contingent liability, and it is allowable in the year in which it accrued. Having considered this case, we are of the view that the ratio propounded by Hon'ble Bombay High Court is not applicable to the facts of the case. The liability ir question was partly the liability of the contractor. The liability could, accrue to the assessee on its acceptance by the assessee and as pointed out by Hon'ble Gujarat High Court in the case of Saurashtra Cement & Chemical Industries Ltd., such a liability could have been allowed only in the year of its acceptance and payments. The liability for A.Ys 1996-97 and 1997-98 also did not accrue in this year as demand notices were received much later. Therefore, in terms of the aforesaid decision, the aforesaid liabilities could be allowed in the respective years or the year or years in which it was quantified.
10. As against the aforesaid, the case of the learned D.R. was that the contractor in this case was a connected concern, namely, M/sSakanson Pvt. Ltd., as borne out by the order of the Deputy Director onpage 2. Therefore, it was pointed out that it cannot be said that theassessee was totally unaware of non-payment by the sister concern.The assessee had not made provisions in earlier years, as borne outby the order of the learned CIT (Appeals) in paragraph 3.3. Therefore, itwas his case that either these liabilities were deductible in the years inwhich the provisions ought to have been made, namely, assessmentyears 1996-97 and 1997-98 or in the year in which the liability wasactually fastened on the assessee, namely, assessment years 2001-02 and 2002-03.
11. We have considered the facts of the case and rival submissions. It is a matter of fact that the impugned liability was partly that of M/s Sakanson Pvt. Ltd., a sister concern and partly that of the assessee. In absence of discharge of the liabilities, enquiries were conducted and finally an order was passed on 29.5.2000. The liability as per that order was to be paid within 15 days, but was actually paid by the assessee on 29.6.2000. It is no doubt true that the assessee made a provision in accounts for the year 1999-00 on the basis of the enquiry letter received from the competent authority of the ESIC, yet, it cannot be sad that the liability was quantified or paid by the assessee in that year. To our mind, the facts of Saurashtra Cement and Chemical Industries Ltd. are nearer to the facts of the instant case, in which it was held that earlier years' expenses could be allowed in mercantile method of accounting in the year in which the liability is accepted and paid. According to us, that year is not assessment year 2000-01. Same is the case in respect of liability of A. Ys 1996-97 and 1997-98. Therefore, we are of the view that the learned CIT (Appeals) was right in holding that the impugned liability was not deductible in computation of income of this year. In so far as the deductibility of the expenditure in subsequent assessment year 2001-02 and 2001-02 is concerned, the issue is not before us in this appeal. The assessee may take up the matter in the appeal of the appropriate year(s). In the result, this ground is dismissed.
12. Ground No. 3 is against the finding of the learned CIT (Appeals) that an amount of Rs. 24,04,066/-, received under Special Capital Incentive Scheme, has to be reduced from the written down value of the plant & machinery, in view of the provision contained in Explanation 10 to Section 43(1) of the Act. It is mentioned that he erred in not appreciating that the aforesaid Explanation is prospective in nature, applicable only in respect of grants which become due and receivable from financial year 1998-99, while in the assessee's case the incentive accrued in the financial year 1995-96, though it was disbursed in the financial year 1999-00.
13. In the course of hearing before us, the learned Counsel relied upon the order of Hon'ble IT AT, Pune Bench "B", Pune, in the case of Kolhapur Zilla Sahakari Dudh Utpadak Sangh Ltd., Kolhapur v. The Asstt. Commissioner of Income-tax, Central (Circle) Kolhapur, in ITA Nos. 401 to 405/PN/05 for assessment years 1996-97 to 2000-01, a copy of which was filed before us. It may be mentioned here that the undersigned was a party to that order and the present ld. Counsel had represented that assessee before us. Paragraphs 16.1 to 16.8 on pages 42 to 47 of that order deal with the similar issue, raised in that case. For the sake of ready reference, these paragraphs are reproduced below:
16.1 The grounds of appeal for this year are also similar to the grounds of appeal in appeal No. 401/PN/05 except for chenge in the amounts under different points of addition. The assessee has also taken up a new ground that the learned CIT(A) erred in confirming the disallowance of depreciation of Rs. 20,05,480/- on buildings and Rs. 1,44,44,830/- on machinery, totaling to Rs. 1,64,50,310/-, in relation to capital subsidy, allegedly pertaining to buildings and machinery on the basis of assumed bifurcation made by the AO. This issue has been discussed by the learned CIT(A) in paragraphs 16 to 18 of his order. It is mentioned that the assessee signed an agreement with National Dairy Development Board (hereinafter called the NDDB) on 20.04.94, for loan to be used for expansion and addition to chilling center. Simultaneously, NDDB granted subsidy by way of agreement signed on 20.04.94 of an amount of Rs. 16.62 crore. The assessee received subsidy amount of Rs. 7,78,34,115/- up to 31.03.99, as the close of the relevant previous year. As per the agreement of subsidy, it was given for machinery required for the project. On perusal of accounts, it was found that assets of the value of Rs. 33,18,20,381/- were transferred to the fixed asset account in this year. In the course of assessment proceedings, it was informed to the AO that the aforesaid fixed assets of Rs. 33,18,20,391/- included the subsidy component of Rs. 7,78,34,115/-. However, bifurcation of the impugned amount of subsidy in terms of buildings and machinery was not provided. The AO made such allocation on prorata basis and issued a show cause notice as to why such allocated amounts should not be reduced from the cost for the purpose of deduction of depreciation. The assessee relied on the decision of ITAT, Pune Bench, Pune, apparently in its own case for AY 1989-90, to the effect that the subsidy could not be reduced from the cost. The assessee also placed reliance on the judgments of Gujarat, Bombay and Madhya Pradesh High Courts in the cases reported at 258 ITR 780, 122 Taxman 335 and 177 CTR 15. The AO, after considering these cases, reduced the allocated amounts from the cost of building and machinery in view of Explanation 10 to Section 43(1) This resulted in disallowance of depreciation of Rs. 1,64,50,310/- and Rs. 97,49,656/- for AYs 1999-00 and 2001-02 respectively.
16.2. It was represented before the learned CIT(A) that the impugned subsidy was received towards acquisition of fixed assets and the dispute pertains only to appropriation of the subsidy towards the cost of building and cost of machinery. Reliance was placed on various cases referred to before the AO and also on the case of CIT v. PJ Chemicals Ltd. 210 ITR 830 (SC).
16.3 The leaned CIT(A) considered these matters. It was pointed by him that the impugned subsidy was received from NDDB for acquisition of building and machinery till FY 1993-99. The assessee did not submit any bifurcation or allocation of the subsidy towards the cost of building and machinery or plant either before the AO or before him, which ought to have been done as the information was within the specific knowledge of the assessee. In view thereof, he held that pro-rata allocation made by the AO was reasonable. He further mentioned that pro-rata allocation of subsidy has to be reduced from the cost in terms of the statutory provisions contained in Explanation 10 below Section 43(1) of the Act. According to him, this Explanation, inserted by Finance (No. 2) Act, 1998, with effect from 01.04.99, supercedes the judgment relied upon by the assessee. This Explanation provides that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement by whatever name called, then, so much of the cost as is relatable to such subsidy, grant or reimbursement will not be included in the actual cost of the asset to the assessee. Thus, it was only that cost, which was actually paid or payable by the assessee, that forms the cost Under Section 43(1) and consequently, the cost for the purpose of deduction of depreciation. Accordingly, he upheld the order of the AO in this behalf.
13.4. Before us, the learned Counsel of the assessee posed a question whether Explanation 10 to Section 43(1) was applicable prospectively or retrospectively. It was his view that if it operates prospectively, then, the decision has tc go in favour of the assesse He posed another question whether cost of asset can change from time to time. It was his case that subsidy received after 01.04.99 only can be deducted from the cost (emphasis supplied). However, if the subsidy has been received earlier, then, the cost of the asset can not be reduced in the proceedings of the assessment year 1999-00. In this connection, he referred to paragraph 10.5 of the AO's letter dated 30.08.04, addressed to the learned CIT(A), in which if is stated that the assessee received subsidy from NDDB. As per the balance sheet of the assessee, subsidy Of Rs. 5,29,25,342/-, Rs. 2,35,60,296/-, Rs, 13,94,089/-and Rs. 9,527/- was received in financial years 1995-96, 1996-97, 1997-98 and 1998.-99 respectively. As per the agreement dated 20.04.1987, project grant was to be provided in the form of money to purchase specific machinery or equipment required for the project. The case of the learned Counsel was that if the provisions of aforesaid Explanation 10 are prospective in nature, then, the subsidy cannot be reduced from the actual cost. As against the aforesaid, the learned DR did not make any specific argument. He merely relied on the order of the learned CI (A).
13.5 We have considered the facts of the case and submissions made before us. Explanation 10 below Section 43(1) was inserted by Finance (No. 2) Act, 1998, with effect from 01.04.99. Explanation was inserted to nullify partly the effect of judicial pronouncements that nature of subsidy has to be looked into before holding it to be of revenue or capital in nature and even capital subsidies do not go to reduce the cost of an asset. It provided that where a portion of the cost of asset acquired by the assessee has been met directly or indirectly by the Central Government, a State Government, any authority established under law, or any other person in the form of subsidy or grant or reimbursement, then, so much of the cost is relatable to the subsidy or grant or reimbursement shall not be included in the actual cost of the asset of the assessee. The impact of this statutory amendment is that while calculating the cost, the subsidy, grant or reimbursement received shall not be included in the actual cost of the asset of the assessee.
13.6. The first question posed by the learned Counsel was whether the amendment is substantive in nature or procedural in nature. A substantive provision affects rights and liabilities of the person by increasing or decreasing his liability. The application of Explanation 10 leads to reduction in cost of an asset to the assessee, resulting in lowering the amount of deduction by way of depreciation in computation of his income. It is not merely procedural in nature. Therefore, we are of the view that Explanation 10 is substantive in nature and contents. The impact of this decision is that it operates prospectively unless otherwise provided in the Act. The Act provides that this provision shall come into force with effect from 01.04.99, which means that it is applicable to the assessment for AY 1999-2000 and onwards.
13.7 the second question posed by the learned Counsel was whether the cost of an asset can change from time to time. We have a statutory provision in Section 43A of the Act regarding consequence of a change in rate of exchange on the cost of an asset in respect of a foreign exchange denominated asset. The section provides that the cost shall be increased or decreased depending upon the increase or decrease in the liability on account of fluctuation in rate or rates of foreign exchange. By now law is well settled that such change should be reckoned from year to year, depending upon the rate of exchange at the close of the previous year. Therefore, in view of this statutory provision, we are of the view that the cost of an asset can change to year to year depending upon the circumstances of the case. However, the question before us is whether subsidy received before 01.04.98, which was not taken into account in earlier years for the purpose of the cost, in absence of Explanation 10, has to be taken into account for determining the cost in assessment year 1999-01. The provision came into effect from 01.04.1999. There s no mention in thelExplanation that it shall be applicable in respect of subsidy etc. received after 31.04.1998. According to us, the plain meaning of the effective date is that it is applicable to the proceedings of assessment year 1999-00. The authorities below are of the further view that the cost of an asset may change in assessment year 1999-00, even if the subsidy had been received prior to 01.04.1998.
13.8 We have considered the submissions made before us. We find that Explanation 9 was also inserted in the Act by Finance (No. 2) Act, with effect from 01.04.1994. Thus, this Explanation was made operative retrospectively. Such retrospective operation was made in a specific manner. The Explanation uses the words "For the removal of doubts, it is hereby declared". Further, Explanation 8 was inserted in the Act by Finance Act, 1986, with effect from 01.04.1974. Thus, this Explanation was made operative retrospectively. This Explanation also uses the expressions "For the removal of doubts, it is hereby declared" and "shall be deemed never to have been included". Such or similar words or expressions are not found in Explanation 10. We may also examine the contents of Board Circular No. 772, dated 23 December, 1998, being Explanatory Notes on direct taxes provisions contained in Finance (No. 2) Act, 1998, (1999) 235 ITR 35 (Statutes). It has been explained that the Explanation 9 is applicable in respect of an asset acquired on or after 1st day of March, 1994. No such explanation is not furnished in respect of Explanation 10. It is also clarified that Explanation 9 will apply retrospectively in relation to A.Y. 1994-95 and subsequent years; and Explanation 10 will apply in relation to A.Y. 1999-00 and subsequent years. We find that both Explanations were inserted by the same Finance Act, but they are quite different in contents. Thus, we are of the view that Explanation 10 does not operate retrospectively. It is applicable to the A.Y. 1999-00. Thus, the subsidy received in the previous year relevant to A. Y. 1999-00 only is not to be included in the actual cost (emphasis supplied). Thus, the result of this discussion is that thik ground of appeal is partly allowed.
14. As against the aforesaid, the learned D.R. referred to paragraphs 4.2 and 4.3 of the order of the learned CIT (Appeals). It is mentioned that the special capital incentive had accrued to the assessee in financial year 1995-96 when eligibility certificate was issued by SICOM on 15.9.1995. The amount was received in this year and, therefore, acjustment was made in the book value of plant and machinery in this year. Since the incentive accrued in financial year 1995-96, it was argued that provisions of the aforesaid Explanation 10 were not applicable. The learned CIT(Appeals) pointed out that the assessee made adjustment in the bqok value of plant & machinery on receipt basis and mercantile basis was not followed for this purpose. In view thereof, it was held that the aforesaid provision was applicable to the facts of this case. The case of the learned DR was that the cost or the WDV can change from year to year, depending upon the date of actual receipt of the subsidy, just as cost or the W.D.V. can change from year to year depending upon the rate of conversion of the foreign exchange on the last date of the previous year.
15. We have considered the facts of the case and rival submissions. We are of the view that the issue in this case is identical with the issue in the case of aforesaid Kolhapur Zilla Dudh Udpadak Sangh, This is so in spite of the additional argument taken by the ld. counsel that the incentive accrued in the financial year 1995-96. In that order, it was held that the provision contained in Explanation 10 does not operate retrospectively. It is applicable to the assessment year 1999-00 and onwards. On the basis of this finding, it was further held that the subsidy received in the previous year relevant to assessment year 1999-00 only is not to be included in the actual cost. The facts of the instant case are that the incentive of Rs. 24,04,066/- was received in the relevant previous year and the book value of the assets was also adjusted in this year on acccunt of the incentives. The depreciation was deducted in earlier years without reckoning the aforesaid incentive and w.d.vs were calculate d accordingly from year to year. Consequently, the effect of the incentive on cost or the w.d.v. has to be given in this year on receipt of the incentive, the reason being that the cost has been met by the other person in this year. The decision in the case of aforesaid Kolahapur Zilla Sahakari Dudh Utpadak Sangh Ltd. is also against the assessee for A.Y. 1999-00 onwards. Respectfully following that decision, it is held that the learned CIT (Appeals) was right in invoking the provisions of Explanation 10 to reduce the cost or the WDV of the asset and allowed depreciation on the reduced cost or WDV, as the case may be. In result, ground no. 3 is dismissed.
16. Ground No. 4, against disallowance of pro-rata amortization of lump sum lease rent amounting to Rs. 25,826/-, was not pressed by the learned Counsel before us, as this issue was decided against the assessee in earlier years by the Tribunal. In view thereof, this ground is dismissed as not pressed.
17. Ground No. 5 is against the finding of the learned CIT(Appeals) in which ad-hoc disallowance of Rs. 25,000/- was confirmed in respect of expenditure incurred for earning dividend income of Rs. 1,05,86,142/-, in computation of book profit Under Section 115JA of the Act.
17.1 Before as, the learned Counsel relied on the decision of Hon'ble Bombay High Court in the case of CIT v. General Insurance Corporation of India (No 1) . The decision in that case was that no portion of the expenditure incurred on account of salary paid to staff, stamp duty, transfer fee and safe custody etc. could be directly relatable to earning of the dividend for the purpose of computing deduction Under Section 80M. In view of this case, it was argued that the ad-hoc attributation of expenditure of Rs. 25,000/- to the earning of dividend income was not justified. The learned D.R. did not raise any argument in this behalf Relying on the decision of Hon'ble Bombay High Court in the case of Greneral Insurance Corporation of India (supra), it is held that no such expenditure could have been attributed to the earning of exempt income by way of dividend. Thus, this ground is allowed.
18. Ground No. 6, regarding setting off of the unabsorbed depreciation against the profits and gains of the business of the current year for the purpose of deduction Under Section 80H.HC, was not pressed by the learned Counsel before us. In any case, under Section 32 of the Act, unabsorbed depreciation of earlier years partakes the character of depreciation of the current year and it becomes the depreciation of the current year. Thus, on merits also, the ground is not maintainable. Thus, this ground is dismissed.
19. Ground nos. 7 and 8 are general and residuary in nature. In absence of my argument raised or any specific ground taken in pursuance of these grounds, no decision is required from us. Thus, these grounds are dismissed. In the result, the appeal is partly allowed.