Gillete India Ltd., Alwar vs Department Of Income Tax

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 737/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 1996-97

The ACIT cuke M/s. Gillette India Ltd. Circle- 2 Vs. SPA-65A, Industrial Area Alwar Bhiwadi LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACI 3924 J vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by :Smt. Neena Jeph, JCIT -DR fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal, CA

lquokbZ dh rkjh[k@ Date of Hearing : 21/05/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 17/07/2015

vkns'k@ ORDER PER R.P. TOLANI, JM

This is an appeal filed by the Revenue against the order of the ld.

CIT(A), Alwar dated 7-06-2012 for the assessment year 1996-97 raising

following grounds.

''1. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting addition of Rs. 84,419/- made by the Assessing Officer being unclaimed credit balance written back unilaterally.

2. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting addition of 2 ITA No. 737/JP/2012 ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

Rs. 1,50,000/- made by the Assessing Officer by disallowing out of traveling expenses.

3. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in restricting the addition made by the Assessing Officer out of Entertainment expenditure to Rs. 18,025/- instead of Rs. 36,050/-.

4. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting addition of Rs.12,643/-/- made by the Assessing Officer by disallowing out of Rates and Taxes.

5. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting addition of Rs. 3,27,811/- made by the Assessing Officer by disallowing out of Trade Subscription Expenes.

6. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting addition of Rs. 50,000/- made by the Assessing Officer by disallowing out of staff welfare expenses.

7. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting addition of Rs. 20,000/- made by the Assessing Officer by disallowing out of legal expenses.

8. That the ld. CIT(A) has erred in law as well as on the facts and circumstances of the case in deleting addition of Rs. 53,91,089/- made by the Assessing Officer out of depreciation claimed by the assessee company.

9. Deleted addition of Rs., 2,05,62,000/- made by the Assessing Officer by disallowing out of VRS payment.''

2.0 During the course of hearing, the ld. DR relied on the order of the

AO.

3 ITA No. 737/JP/2012

ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

3.0 Ld. Counsel for the assessee contends that most of the grounds are

covered in favor of the assessee by earlier orders in its own cases.

Apropos Ground No. 1 of the Revenue ld. CIT(A) granted relief by

following his predecessor's order for the assessment year 1995-96 by

following observation .

''4.3 I have gone through the assessment order as well as submissions made by the A.R. and cases relied upon. I find that in the assessee's own case in A.Y. 1995-96 the addition made on this account has been deleted by my ld. predecessor, in appeal No. 65/98-99 dated 05- 05-2011, after considering the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Id. Mohd. Nizamuddin in 212 CTR 31 in which it has been held that Explanation 1 to Section 40(1)(a) is effective from 01- 04-97 and cannot be given a retrospective effect. Following the decision of my predecessor for A.Y. 95-96, the addition of Rs. 87,419/- made by the AO for A.Y. 96-97 is deleted and this ground is allowed.''

3.1 It has not been disputed that this unilateral liability writing off as

per existing law i.e. prior to its amendment w.e.f. 01-04-1997 recognized

that unilateral writing off cannot be treated as cessation of liability u/s

41(1).

3.2 After hearing both the parties and perusing the materials available

on record, we find no infirmity in the order of the ld. CIT(A) which is

based on Hon'ble Rajasthan High Court judgement in the case of Mohd.

Nizamuddin (supra). Thus Ground No. 1 of the Revenue is dismissed.

4.0 Apropos Ground No. 2, ld. Counsel for the assessee contends that

the ld. CIT(A) has deleted the disallowance by following observations. 4 ITA No. 737/JP/2012

ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

''5.3 I have gone through the assessment order as well as submission made by ld. LD. AR. I find that on the same issue the addition made in A.Y. 95-96 has been deleted by my ld. predecessor, after considering the submissions of the A.R. that the telephone expenses and laundry expenses were only reimbursement of expenses and their quantum was not much and no such disallowance were made in the past. The appellant has made the disallowances out of traveling expenses in excess of Rule 6D. Since the facts remain the same in his assessment year, considering the submissions made by the A.R. that the quantum of such expenses, as admitted by the AO, are not much and such expenses are otherwise allowable being for the purpose of business and following the order of the my ld. predecessor, the addition of Rs. 1,50,000/- on adhoc basis out of domestic traveling expenses is deleted. This ground is allowed.''

4.1 After hearing both the parties, we are of the view that the expenses

in question relate to reimbursement of expenses. It has not been disputed

that facts are similar to assessment year 1995-96 wherein assessee's

similar claim has been accepted. In view thereof, we find no infirmity in

the order of the ld. CIT(A) which is sustained. Thus Ground No. 2 of the

Revenue is dismissed.

5.0 Adverting to Ground No. 3, the ld. Counsel for the assessee

contends that assessee claimed 30% of the expenditure under the head

entertainment expenditure pertaining to its employees as reasonable.

However, in assessee's own case for assessment year 1990-91, ITAT held

20% of entertainment expenditure pertaining to employees as reasonable.

Following the order of ITAT, the ld. CIT(A) restricted the disallowance

to 20% by following observations.

5 ITA No. 737/JP/2012

ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

''7.3 I have gone through the assessment order as well as submissions additional evidence by the A.R. I find that the disallowance u/s 37(2) should be worked out by taking 20% of the entertaining expenditure as pertaining to the employees in view of the decision of Hon'ble ITAT Jaipur Bench cited above by the A.R. of the appellant. Accordingly, the expenditure disallowed u/s 37(2) comes to Rs. 1,39,203/- and since the appellant has already added a sum of Rs. 1,21,178/- in the return of income the balance amount of Rs. 18,025/- needs to be added to the income of the appellant. In view of above, the addition is sustained at Rs. 18,025/- and the appellant gets relief of Rs. 18,526/-.''

5.1 We have heard the rival contentions and perused the materials

available on record. We find no infirmity in the order of the ld. CIT(A) on

this issue as the allocation of 20% as against 30% of assessee is based on

ITAT judgment in assessee's own case. This ground no. 3 of the Revenue

is dismissed.

6.0 Coming to Ground No. 4 of the Revenue pertaining to deletion of

addition of Rs. 12,643/- out of Rates and Taxes, the ld. CIT(A) deleted

the addition by following observations.

''10.3 I have gone through the assessment order as well as submissions made by the A.R. I find that this issue has been decided in A.Y. 1995-96 by my ld. predecessor in favour of the assessee by holding that the professional tax paid is allowable as business expenses u/s 37(1). Following the same, the addition of Rs. 12,643/- is deleted.''

6.1 After hearing both the parties and perusing the materials available

on record, we are of the view that it is a settled proposition that the

professional taxes paid by the assessee is allowable as business 6 ITA No. 737/JP/2012 ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

expenditure. Therefore, we uphold the order of the ld. CIT(A) on this

issue and hence Ground No. 4 of the Revenue is dismissed.

7.0 Apropos Ground No. 5 of the Revenue pertains to deletion of

addition of Rs. 50,000/- out of Trade Subscription Expenses wherein it is

contended by the ld. AR of the assessee that the same issue is covered in

favour of the assessee by ITAT judgment for the assessment year 1991-92

and Ground No. 8 of the Revenue pertaining to depreciation is covered by

ITAT order for the assessment year 2004-05 in assessee's own case.

Respective observations of the ld. CIT(A) pertaining to Ground No. 5 and

8 of the Revenue are as under:-

''11.3 I have gone through the assessment order as well as submissions made by the A.R. I find that this issue has been decided in favour of the assessee by the Hon'ble ITAT in ITA No. 144/JP/1996 dated 12-04-2005 for A.Y. 1991-92 and following this decision the addition made in A.Y. 1995-96 has been deleted by my ld. predecessor. In view of above, the addition made at Rs. 3,27,811/- is deleted. This ground is allowed.

''14.3 I have gone through the assessment order as well as submissions made by the A.R. I find that the ld. AO has disallowed the depreciation on the assets of ER-110 project relying on the assessment made in A.Y. 1995-96 by holding that depreciation was not allowable on assets which were not used for the purpose for the business. The ld. AO has computed the depreciation as per I.T. Act at Rs. 168,983,156/- whereas in the assessment order depreciation has been allowed at Rs. 163,592,067/-

I find that the ld. AO has computed depreciation on office equipment @ 10% as against the claim @ 25% made by the appellant in its return of income. The AO has not given any reason 7 ITA No. 737/JP/2012 ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

in the assessment order in this regard. It appears that the rate of 10% has been applied by following assessment order of A.Y. 1995-

96.

I find that my ld. predecessor has decided the issue of depreciation on the assets of ER-110 plant in favour of the assessee for A.Y. 1995-96, in view of the decision of Hon'ble ITAT for A.Y. 1994-95 and for A.Y. 2003-04 in ITA No. 188/JP/07 dated 9-08-10 where it was held that in block concept of depreciation the expression ''used for the purpose of business'' only means that the assessee had used the plant and machinery for the purpose of business in earlier years. The depreciation has been allowed on this plant during the A.Y. 1995-96 as the plant was used in earlier year and temporarily dismantled and again capitalized during F.Y. 1994095 and 1995-96. Further it has been directed to allow depreciation 2 25% on office equipment in view of the order of Hon'ble ITAT in A.Y. 1991-92 para 34 (ITA No. 1441/JP/1996).

Relying on the order of my predecessor for A.Y. 1995-96 in the case of the appellant, it is held that the depreciation is allowable on the assets of the ER-110 Razor Project 2 25% as claimed by the appellant and the disallowance made by the AO on this account is deleted. Further, it is also held that Department is allowable @ 25% on the office equipment as against 10% allowed by the AO. I find from the assessment record that the claim of depreciation has been rectified by the AO as per order dated 29- 09-2000 and depreciation has been allowed for Rs. 168,650,412/-. The AO is directed to re-compute the depreciation in light of above directions and rectifications already made in the assessment order as per record.''

7.1 After hearing both the parties and pursing the materials available

on record, we find that both these issues are covered by the ITAT orders

(supra) in assessee's own case. Therefore, we find no infirmity in the

order of the ld. CIT(A) which is sustained. In view thereof, Ground Nos.

5 and 8 of the Revenue are dismissed.

8 ITA No. 737/JP/2012

ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

8.0 Apropos Ground No. 6 of the Revenue relating to staff welfare

expenses wherein the ld. Counsel for the assessee relied on the order of

the ld. CIT(A) which is as under:-

''12.3 I have gone through the assessment order as well as submissions additional evidence by the A.R.. I find that similar addition in the A.Y. 1995-96 has been deleted by my ld. predecessor on the ground that addition has been made on assumptions and the appellant has furnished reasonable explanation. The A.R. of the appellant has submitted that the expenditure is on employees during office hours and the appellant has debited entertainment expenditure under a separate head. The tax auditor has also verified the expenditure and there is no adverse comment from him. Therefore, any exemption that part of the expenditure relates to entertainment / customers guest is not correct. I find that separate disallowance has already been made regarding entertainment expenses and the estimated addition of Rs. 50,000/- is without proper basis or merit. Therefore, this addition of Rs. 50,000/- is deleted.''

8.1 After hearing both the parties and perusing the materials available

on record, we see no infirmity in the order of the ld. CIT(A) inasmuch as

similar addition was disallowed in assessment year 1995-96 besides

separate disallowance of part of the expenditure in this behalf has been

made while dealing with Ground No. 6. In view thereof, the order of the

ld. CIT(A) is upheld. Thus Ground No. 6 of the Revenue is dismissed.

9.0 Apropos Ground No. 7 pertaining to legal fees, we see no infirmity

in the order of the ld. CIT(A) as similar expenses have been deleted by 9 ITA No. 737/JP/2012 ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

his ld. predecessor in A.Y. 1995-96. We find that legal expenses are

clearly allowable Revenue expenditure. Hence, Ground No. 7 of the

Revenue is dismissed.

10.0 Apropos Ground No. 9, ld. Counsel for the assessee contends that

the ld. CIT(A) has allowed the expenditure as VRS expenditure as the

same has been incurred prior to amendment of 01-04-2001 by following

observations.

''16.3 I have gone through the assessment order as well as submissions made by the appellant. I am inclined to agree with the submissions of the A.R. that the provision regarding amortization of expenditure incurred under Voluntary Retirement Scheme has been inserted in the I.T. Act w.e.f. 01-04-2001 as Section 35DDA and this provision has prospective application. I find that the expenditure on VRS is allowable otherwise u/s 37(1) of the Act. Therefore, the addition made by the AO, of Rs. 205,62,000/-, is found to be without any basis or merit and is deleted. This Ground is allowed.''

10.1 It is further pleaded that the same issue has been decided in favour

of the assessee by ITAT, Jodhpur Bench in the case of P.I. Industries vs.

ACIT, 106 ITD 401 (Jodh.) and this ITAT judgement has been affirmed

by Hon'ble Rajasthan High Court in the case of CIT vs. P.I. Industries

Ltd. 321 ITR 601 (Raj.). Since the issue is squarely covered in favour of

the assessee by the judgement of Hon'ble Rajasthan High Court in the

case of CIT vs. P.I. Industries Ltd. (supra) holding that'' Payment made 10 ITA No. 737/JP/2012 ACIT, Circle- 2, Alwar vs. M/s. Gillette India Ltd.

by assessee by way of terminal benefits in implementing a VRS floated

by it and approved u/s 10(10C) is allowable revenue expenditure.''. In

view thereof, we see no infirmity in the order of the ld. CIT(A) which is

upheld. Thus Ground No. 9 of the Revenue is dismissed.

11. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open court on 17/07/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 17th JUL, 2015

*Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- The ACIT, Circle- 2, Alwar

2. izR;FkhZ@ The Respondent- M/s. Gillette India Ltd.,Bhiwadi

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr@ CIT (A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No.737/JP/2012)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar