J.K. Synthetics Ltd., Kanpur vs Assessee

M/s J. K. Synthetics Ltd., Vs. A.C.I.T., Kamla Tower, Range-4, Kanpur. Kanpur. PAN: AAACJ4988M (Appellant) (Respondent)

ITA No.486/LKW/2010 Assessment year:1990-91

A.C.I.T., Vs. M/s J. K. Synthetics Ltd., Range-4, Kamla Tower, Kanpur. Kanpur. PAN: AAACJ4988M (Appellant) (Respondent)

Assessee by Shri Rakesh Garg, Advocate Revenue by Dr. Anand Kumar Agarwal, C.I.T., D. R. Date of hearing 27/04/2015 Date of pronouncement 26/06/2015

ORDER

PER A. K. GARODIA, A.M.

These are cross appeals filed by the assessee and the Revenue, which are directed against the order of CIT(A)-1, Kanpur dated 30/04/2010 for assessment year 1990-91.

2. First we take up the appeal of the Revenue i.e. I.T.A. No.486/Lkw/2010.

2 3. Ground No. 1 is as under:

"1. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.83,69,631/- on account of Proportionate premium on redemption of debenture without appreciating the fact that no premium was payable before expiry of 7 years."

4. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by various Tribunal orders in assessee's own case for assessment year 1985-86 and 1986-87 and copy of which are available in the paper book.

5. We have considered the rival submissions. We find that the issue in the present year in respect of proportionate premium on redemption of debenture is squarely covered in favour of the assessee by the judgment of Hon'ble Apex Court rendered in the case of Madras Industrial Development Corpn. Ltd. vs. CIT 225 ITR 802 wherein it was held that discount of debentures is revenue expenditure allowable proportionately over the period of debentures. Respectfully following this judgment of Hon'ble Apex Court, we decline to interfere in the order of CIT(A) on this issue. Ground No. 1 is rejected.

6. Ground No. 2 is as under.

"2. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in allowing the prospecting expenditure under section 35E."

7. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned 3

CIT(A). He also submitted that this issue is covered in favour of the assessee by various Tribunal orders in assessee's own case for assessment year 1983-84 and 1985-86, copy of which are available in the paper book.

8. We have considered the rival submissions. We find that this issue has been decided by learned CIT(A) as per Para 5 of his order and in this Para, learned CIT(A) has reproduced a chart containing details of total amount claimed by the assessee of Rs.5,03,487/-. This detail contains details of 10 different years for which deduction is claimed by the assessee in the present year to the extent of 1/10th of the total amount incurred by the assessee in respective years. The Assessing Officer has allowed deduction of Rs.2,17,718/- in respect of five such years and disallowed the balance amount of Rs.2,85,769/-. The CIT(A) has given a clear finding that the disallowance in earlier years has been allowed by the Tribunal in assessee's own case for assessment year 1985-86 in I.T.A. No.5850 dated 21/10/94. These findings of CIT(A) could not be controverted by Learned D.R. of the Revenue and therefore, it is admitted position that the issue in dispute is covered in favour of the assessee by the Tribunal order in earlier year and since no difference in facts could be pointed out by Learned D.R. of the Revenue, we do not find any reason to take a contrary view in the present year. Accordingly, Ground No. 2 is rejected.

9. Ground No. 3 is as under:

"3. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in allowing the debentures issue expenditure without appreciating the facts that the assessee had issued these debentures to part finance capital cost of company's tyre cord and naylon units as well as to part finance company's normal capital expenditure."

4 10. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the judgment of Hon'ble Apex Court rendered in the case of India Cements Ltd. vs. CIT [1966] 60 ITR 52 (SC) and also by the Tribunal order in assessee's own case for assessment year 1985-86, copy of which is available on pages 188 to 198 of the paper book.

11. We have considered the rival submissions. We find that the issue is covered in favour of the assessee by the judgment of Hon'ble Supreme Court in the case of India Cements Ltd. vs. CIT (Supra). Respectfully following the same, we decline to interfere in the order of CIT(A) on this issue. This ground is rejected.

12. Ground No. 4 is as under:

"4. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in allowing the 100% equity issue expenses."

13. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

14. We have considered the rival submissions. We find that this issue is now squarely covered against the assessee and in favour of the Revenue by the judgment of Hon'ble Supreme Court rendered in the case of Brooke Bond India Ltd. vs. CIT [1997] 225 ITR 798 (SC). This judgment of Hon'ble Supreme Court is dated 27/02/97 whereas the assessment order is dated 21/04/1995 and hence, reference was not made by the Assessing Officer to this judgment and disallowance was made by him on some different basis but once the judgment has been rendered by Hon'ble Apex Court and the 5

matter is covered against the assessee by this judgment, the relief allowed by learned CIT(A) without considering that judgment is not proper and therefore, the order of CIT(A) on this issue cannot be sustained. We, therefore, reverse the order of CIT(A) and restore that of the Assessing Officer by following this judgment of Hon'ble Apex Court. Accordingly, ground No. 4 is allowed.

15. Ground No. 5 is as under:

"5. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.3,03,681/- on account of foreign tour expenses without appreciating the fact that tax auditors reported these expenses were of capital in nature."

16. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and relevant page is available on pages 123 to 125 of the paper book.

17. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

18. Ground No. 6(a) is as under:

"6(a) That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.2,00,000/- on account of depreciation on other assets on the guest houses without appreciating 6

the facts that the assessee had not produced any details in respect of assets at Guest Houses."

19. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that the disallowance has been confirmed by the Tribunal in assessee's own case for assessment year 1988-89 in I.T.A. No.2633/Del/94, copy of which is available on pages 26 to 27 of the paper book.

20. We have considered the rival submissions. Since Learned A.R. of the assessee has fairly conceded that the issue in dispute is covered in favour of the Revenue in assessee's own case, we reverse the order of CIT(A) and restore that of the Assessing Officer. This ground is allowed.

21. Ground No. 6(b) is as under:

"6(b) That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.9,02,000/- on account of maintenance expenses of other guest house except for Kota Guest House without appreciating the facts that the assessee did not maintain the books in respect of guest houses except for Kota Guest House."

22. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and relevant pages are available on pages 113 to 114 of the paper book.

23. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own 7

case for assessment year 1985-86 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

24. Ground No. 6(c) is as under:

"6(c) That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.13,94,081/- on account of Mess expenses ignoring that the expenditure hit by provisions contained u/s 37(4) of the I. T. Act."

25. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1982-83 in I.T.A. No.53/Del/86 and relevant pages are available on pages 287 to 288 of the paper book.

26. We have considered the rival submissions. We find that the issue regarding mess expenses of guest house is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1982-83 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

27. Ground No. 7 is as under:

"7. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in allowing the relief of Rs.12,66,211/- on account of entertainment expenditure ignoring that these expenses hit by provisions contained u/s 37(2A) of the I.T. Act."

8 28. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and relevant pages are available on pages 117 to 118 and 121 to 122 of the paper book.

29. We have considered the rival submissions. We find that relief has been allowed by learned CIT(A) to the extent of 50% of expenses incurred by the assessee by following a Tribunal decision in assessee's own case for assessment year 1987-88 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

30. Ground No. 8 is as under:

"8. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in allowing relief of Rs.34,55,544/- being the disallowance on account of proportionate interest on the interest free loans to M/s J. K. Satoh when the Assessing Officer has established that the advances had been made to the subsidiary company out of bank overdraft."

31. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1984-85 in I.T.A. No.749/Del/88 and relevant pages are available on pages 296 to 299 of the paper book.

32. We have considered the rival submissions. We find that on this issue regarding notional interest on advances made to J. K. Satoh Agricultural 9

Machines Ltd., addition has been deleted by CIT(A) as per Para 11 of his order by following the Tribunal order in assessee's own case for assessment year 1984-85 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

33. Ground No. 9 is as under:

"9. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in holding the know-how fee of Rs.37,38,838/- as revenue expenditure."

34. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

35. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) by following the order of CIT(A) for assessment year 1987-88. We have decided the appeal of the Revenue for assessment year 1987-88 in I.T.A. No.369/Lkw/2010 dated 18/06/2015. This issue was raised by the Revenue in that year also as per ground No. 13, which was decided by us as per Para 48 of the Tribunal order, which is reproduced below for the sake of ready reference:-

"48. We have considered the rival submissions, perused the material available on record and gone through the orders of the authorities below and the Tribunal decision cited by Learned A.R. of the assessee. We find that this issue has been discussed by the Assessing Officer in Para 12 on page No. 51 & 52 of the paper book. In this Para, it is noted by the Assessing Officer that this claim has been made by the assessee u/s 35AB and the assessee has paid and capitalized this technical knowhow amounting to Rs.2,24,33,031/-. The Assessing Officer has also noted that this amount has been debited to 10

capital work in progress. The disallowance was made by the Assessing Officer on the basis that since the assessee has capitalized the whole amount in books, the amount of technical knowhow is essentially a capital expenditure and is in capital work in progress. In our considered opinion, 1/6 th of such expenses incurred for technical knowhow is allowable u/s 35AB in the year of incurring the expenditure and in this manner 1/6th of such amount is allowable in the succeeding five years also but it has to be ensured that the assessee is not claiming depreciation also on this expenditure capitalized by the assessee. Hence, to ensure that the assessee is not claiming double deduction in respect of this expenditure, first by claiming u/s 35AB and again by claiming depreciation on such expenses, we feel it proper that the matter should go back to the file of the Assessing Officer to verify this aspect. Hence, we set aside the order of CIT(A) on this issue and restore this matter to the file of the Assessing Officer for fresh decision. The assessee has to establish before the Assessing Officer that no depreciation was claimed and allowed and respect of this expenditure of Rs.224,33,031/- and Rs.,30,60,737/- incurred by the assessee under the head technical knowhow fees and capitalized. The assessee has to satisfy that no such depreciation was claimed in the present year or in any succeeding year and if the assessee is able to do so, no disallowance should be made in the present year as has been claimed by the assessee to the extent of 1/6 th of these two expenses being Rs.37,38,838/- and Rs.5,43,436/-. With these observations, this ground is allowed for statistical purposes."

36. As per above Para, we find that the issue was restored by the Tribunal to the file of the Assessing Officer for fresh decision with the direction that the assessee should establish before the Assessing Officer that no depreciation was claimed and allowed in respect of this expenditure of Rs.2,24,33,031/-. Accordingly, in the present year also, we set aside the order of CIT(A) and restore the matter to the file of the Assessing Officer for fresh decision with similar directions as were given by us in assessment year 1987-88 as per Para No. 48 of the order reproduced above. With 11

these observations, this ground of Revenue is allowed for statistical purposes.

37. Ground No. 10(a) is as under:

"10(a) That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in restricting the disallowance up to the extent 50% on account of expenses on Kamla Retreat ignoring that these expenses are hit by section 37(4) and 37(5) of the Act."

38. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and relevant pages are available on pages 112 to 113 of the paper book.

39. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) as per Para 13(a) of his order and 50% relief was allowed by him and as per Tribunal order in assessee's own case for assessment year 1985-86 also, similar relief was allowed by the Tribunal. Since Learned D.R. of the Revenue could not point out any difference in facts in the present year, we do not find any reason to take a contrary view. This ground is rejected.

40. Ground No. 10(b) is as under:

"10(b) That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in restricting the disallowance of Rs.1,00,000/- on account of expenses related to Kamla Retreat."

12 41. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and 1988-89 and relevant pages are available on pages 113 to 114 of the paper book.

42. We have considered the rival submissions. We find that this issue regarding ad hoc disallowance out of other expenses of Kamla Retreat is covered in favour of the assessee by both the Tribunal orders cited by Learned A.R. of the assessee in assessee's own case for assessment year 1985-86 and 1988-89. Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

43. Ground No. 11 is as under:

"11. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in holding that surplus receipts over refunds in the cops deposits account was not the income of the assessee and thereby deleting the addition of Rs.31,47,981/-."

44. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and 1988-89 and relevant orders are available in paper book.

45. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by both the Tribunal orders cited by Learned A.R. of the assessee in assessee's own case for assessment year 13

1985-86 and 1988-89. Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

46. Ground No. 12 is as under:

"12. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the disallowance of Rs.4,12,886/- on account of Air-Craft Expenses even though the assessee could not provide the details of persons who traveled and purpose of visit and place of travel in spite of specific opportunity given."

47. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by Tribunal orders for various years such as assessment year 1981-82, 1982 - 83, 1983-84, 1985-86, 1986-87 and 1989-90 and relevant orders are available in paper book.

48. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by Tribunal orders for various years such as assessment year 1981-82, 1982083, 1983-84, 1985-86, 1986-87 and 1989-90. Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

49. Ground No. 13 is as under:

"13. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.1,64,842/- on account of guest house maintained in Kamla Castle at Mussorie even though no details of the expenditure were produce before him and as such, the relief given is without basis."

14 50. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by Tribunal orders for various years such as assessment year 1983-84, 1984-85, 1985-86, 1986-87 and 1988-89 and relevant orders are available in paper book.

51. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by in favour of the assessee by Tribunal orders for various years such as assessment year 1983-84, 1984-85, 1985- 86, 1986-87 and 1988-89. Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

52. Ground No. 14 is as under:

"14. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.2,38,09,910/- ignoring that these expenses report at capital expenditure by the special tax auditors."

53. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

54. We have considered the rival submissions. We find that this issue has been decided by learned CIT(A) as per Para 21 of his order appearing on pages 28 to 30 of his order, which is reproduced below for the sake of ready reference:-

"21. Ground No.18: Capital Expenditure Debited to Profit & Loss A/c.- Rs.2,38,09,100/-.

15 This issue has been dealt with by the AO in his order at pages 45 & 46. The facts of the case are that in the report of Spl. Auditors, they have pointed out certain items of capital expenditure which were debited by the appellant in their Profit and Loss A/c. The total of those items comes to Rs.2,31,63,516/-, which was disallowed by AO.

In appeal, learned counsel for the appellant has placed before me bifurcation of Rs.2,31,63,516/- as under:

S.No Particulars of head Amount (Rs) 1. Repairs & plant & machinery 12682673 2. Telephone expenses 355250 3. Repairs to building 6389883 4. Staff training expenses 5067 5 Freight & Handling 543838 6 Transport Expenses 1001

7 Gardening Expenses 54517

8 Commitment Charges 230239

9 Revenue Stamp Papers 5100

10 Expenses on Raising Loan 125000

11 Insurance Premium 3881

12 Store Consumption 1593235

13 Computer Maintenance 29205

14 Employees Welfare Expenses 31453

15 License fee 3676

16 Office Maintenance 44073

17 Technical Consultancy 592506

18 Others 472919

Total 23163516

He further argued that disallowances have been solely rested upon report of the Spl. Tax Auditors. He also stated that item-

16 wise detailed reply was given to the Sp. Tax Auditors as well as to the AO for each and every items of revenue expenditure debited to Profit & Loss A/c. He stated that as evident from discussion in the impugned assessment order, it becomes clear that learned AO has not gone into merits of the expenses claimed and only basing upon the report of the Spl. Auditors , disallowed the same being of capital nature and by doing so, he had also not allowed depreciation as well. He also mentioned that learned AO has also failed to bring any cogent material or factor contrary to the explanation put on record by the appellant with a view to discharge burden of proof which was upon Ld. AO, disallowance has been made by treating expenditure of perfect revenue nature as capital.

In the appellant own case for assessment year 1994-95, my predecessor had vacated the disallowance at Para 40.ii, page 35-36 and Para 44.iii page 37. He also stated that in A.Y.1987- 88, in appellants' appeal before me, I have also allowed entire expenses except the expenses relating to replacement of Plant & Machinery at pages 53 to 56, Para 47.

I have considered the facts of the case as well as arguments of the appellant. Following order passed by my predecessor in A.Y. 1994-95 as well as by me, in the appellant own case for the A.Y.1987-88, the expenses relating to replacement of plant and machinery amounting to Rs.1,26,82,673/- out of the total claim of appellant for Rs.2,31,63,516/- is disallowed in view of the decision in the case of CIT(A) Vs. Sri Mangarkarasi Mills (SC) (2009), the appellant gets relief of balance amount of Rs.1,04,80,843/-(Rs.2,31,63,516 (-) Rs.1,26,82,673). The AO is also directed to allow depreciation on Rs.1,26,82,673/-. (Relief-

Rs. 1,04,80,843/-)

The appellant also stated that there has been a double addition of Rs.6,18,807/- under the head "Touring Expenses" and Rs.26,787/- under the head "Travelling Expenses" as reported by spl. Tax auditors in Annexure '1A' of their report. The Assessing Officer is, therefore, further directed to examine the claim of the appellant and if there is double disallowance made, the same be deleted/rectified."

17 54.1 From these paras from the order of CIT(A), we find that out of total expenses of Rs.2,38,09,910/-, the relief was allowed by the CIT(A) for Rs.1,04,80,843/-. The nature of expenses for which relief was allowed by CIT(A) is telephone expenses, repairs/renovation of building, staff training expenses, freight and handling, transport expenses, insurance premium, office maintenance etc. and a clear finding has been given by learned CIT(A) that these expenses are of revenue in nature. Considering the nature of expenses, we are of the considered opinion that no interference is called for in the order of CIT(A) on this issue because these expenses cannot be stated to be capital expenditure. Hence, we decline to interfere in the order of CIT(A). Ground No. 14 is rejected.

55. Ground No. 15 is as under:

"15. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the disallowance of Rs.7,86,456/- on account of Articles intended for presentation ignoring the fact that no details were filed by the assessee."

56. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1984-85, 1988-89 and 1989-90 and relevant pages are available in paper book.

57. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1984-85, 1988-89 and 1989-90 and Learned D.R. of the Revenue could not point out any difference in facts in the present 18

year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

58. Ground No. 16 is as under:

"16. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in holding that depreciation on Railway Siding be calculated treating it as Plant & Machinery instead of part of roads."

59. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1988-89 and 1989-90.

60. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1988-89 and 1989-90 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

61. Ground No. 17(a) is as under:

"17(a) That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in allowing 100% depreciation on Machinery for energy conservation while such machinery was not directly covered by this type of Plant & Machinery as mentioned in I. T. Rules be calculated treating it as Plant & Machinery instead of part of roads."

62. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned 19

CIT(A). He also submitted that in assessment year 1994-95, the Tribunal vide combined order dated 29/09/2010 restored the matter back to the file of the Assessing Officer for re-examination in the light of the appellate decision for earlier years, copy of which is available on pages 247 to 248 of the paper book.

63. We have considered the rival submissions. We find that admittedly, in assessment year 1994-95, the Tribunal has restored the matter back to the file of the Assessing Officer for fresh decision and accordingly, in the present year also, we set aside the order of CIT(A) and restore the matter to Assessing Officer for fresh decision with the same directions as were given by the Tribunal in assessment year 1994-95 in its order dated 29/09/2010. Ground No. 17(a) is allowed for statistical purposes.

64. Ground No. 17(b) is as under:

"17(b) That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the disallowance of Rs.28,03,253/- on account of depreciation on amount of Foreign exchange rate fluctuation of Tary cod Unit even though the claim was hit by provisions of section 43A."

65. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1984-85.

66. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1984-85 and Learned D.R. of the Revenue could 20

not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

67. Ground No. 18(a) is as under:

"18(a) On the facts and in the circumstances of the case the Ld. CIT(A) has erred in reducing the addition of Rs.9,52,663/- to Rs.4,76,331/- on account of entertainment expenses ignoring the principles laid down in the case of CIT Vs. Yadav Transport Service 167 ITR 474 (RAJ.)"

68. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1993-94 and relevant pages are available on pages 179 to 180 of the paper book.

69. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1993-94 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

70. Ground No. 18(b) is as under:

"18(b) On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.5,90,380/- on account of presentation articles even though the expenditure hit by section 37(1) of the Act."

71. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned 21

CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1993-94 and relevant pages are available on pages 179 to 180 of the paper book.

72. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1993-94 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

73. Ground No. 18(c) is as under:

"18(c) On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.12,83,315/- even though no details of expenses were filed as well as these expenses were not meant wholly and exclusively for business purposes."

74. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1995-96 and relevant pages are available on page 262 of the paper book.

75. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1995-96 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

76. Ground No. 18(d) is as under:

22 "18(d) On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.4,56,391/- even though these expenses were not meant wholly and exclusively for business purposes."

77. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and relevant pages are available on page 180 and 181 of the paper book.

78. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

79. Ground No. 19 is as under:

"19. On the facts and in the circumstances of the case the Ld. CIT(A) was not correct in reducing the disallowance from Rs.22,07,155/- to Rs.4,49,045/- under the head "General Charges" for which no details were filed."

80. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1981-82, 1982-83 & 1985-86.

81. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1981-82, 1982-83 & 1985-86 and Learned D.R. 23

of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

82. Ground No. 20(a) is as under:

"20(a). On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the disallowance upto 50% i. e. Rs.3,72,566/- on account of Entertainment expenses on customary presentation even though the provisions of section 37(2A) is applicable."

83. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1981-82, 1982-83, 1993-94 & 1995-96. Copy of the order is available on paper book.

84. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1981-82, 1982-83, 1993-94 & 1995-96 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

85. Ground No. 20(b) is as under:

"20(b) On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the disallowance upto 70% i.e. Rs.6,45,618/- on account of customary presentation expenses even though the expenditure hit by section 37(2A) of the Act."

24 86. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86, 1993-94 & 1995-96. Copy of the order is available on paper book.

87. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86, 1993-94 & 1995-96 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

88. Ground No. 20(c) is as under:

"20(c) On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.1,36,869/- even though these expenses were not meant wholly and exclusively for business purposes."

89. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1983-84. Copy of the order is available in paper book.

90. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1983-84 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

25 91. Ground No. 20(d) is as under:

"20(d) On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the disallowance upto 70% i.e. Rs.12,53,760/- being expenses of entertainment in nature even though the expenditure hit by section 37(2A) of the Act"

92. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1993-94 and 1995-96. Copy of the order is available in paper book.

93. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1993-94 and 1995-96 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

94. Ground No. 20(e) is as under:

"21. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.1,57,969/- ignoring that no details were furnished even though specific opportunity was given."

95. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

96. We have considered the rival submissions. We find that it is noted by CIT(A) in Para 28(e) of his order that the Assessing Officer has 26

disallowed a sum of Rs.1,57,969/- stating that the amount was given to the employees of the company for expenditure and other ad hoc expenses for which no details/vouchers have been kept. He has also given a finding that in assessment year 1995-96, the CIT(A) has allowed similar claim of the assessee in that year. Before us, Learned D.R. of the Revenue did not bring any Tribunal order to show that the order of CIT(A) in assessment year 1995-96 has been reversed by the Tribunal. Hence, we do not find any reason to interfere in the order of CIT(A). This ground is rejected.

97. Ground No. 21 is as under:

"21. On the facts and in the circumstance of the case the Ld. CIT(A) has erred in law in deleting the disallowance of Rs.7,15,70,998/- ignoring the fact that section 350 of the Companies Act does not permit change in WDV of fixed assets on account of their revaluation as well as the WDV cannot be changed on account loss due to exchange rate fluctuations, because there is no section under the companies act permitting this on the lines of section 43A of the I.T. Act, 1961."

98. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1988-89 and 1989-90. Copy of the order is available on paper book.

99. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1988-89 and 1989-90. Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

27 100. Ground No. 22 is as under:

"22. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in allowing relief of Rs.19,57,470/- being the disallowance on account of proportionate interest on the interest free loans to M/s ASFL & M/s J. K. Satoh Agricultural Machines Ltd., while the Assessing Officer has established that the advances had been made to the subsidiary company out of bank overdraft."

101. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1984-85, 1985-86, 1988-89 & 1989-90. Copy of the orders are available in paper book.

102. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1984-85, 1985-86, 1988-89 & 1989-90. Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

103. Ground No. 23 is as under:

"23. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition on account of enhancement value of opening stock."

104. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A).

28 105. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) as per Para 31 of his order, which is reproduced below for the sake of ready reference:-

"31. Ground No.28: Enhancement of Opening Stock because of closing stock enhanced in A.Y. 1989-90

This issue has been discussed by AO in his order at page 87. The facts of the case are that the appellant has claimed enhancement of valuation of Opening stock because value of the closing stock was enhanced in the A.Yr. 1989-90 which became the opening stock of the year under consideration but the same was disallowed by AO on the ground that the issue has not become final and pending before appellate authorities. The facts remains that in the assessment order for the assessment year 1989-90, value of closing stock of raw-material and finished goods were enhanced by Rs.2,22,35,679/- at pages 295 to 305 of the order and the appellant claimed such enhanced value of closing stock as on 31.3.89, as opening stock as on 1.4.89 which was first day of the assessment year 1990-

91.

In appeal before me, the AR of the appellant stated that order in the appeal for A.Y. 1989-90 has, since, been passed and addition has been upheld, therefore he requested my intervention to issue orders for the revision of valuation of opening stock in the year in question.

I have considered the facts of the case as well as arguments placed before me. I have also gone through the order for the assessment year 1989-90 referred above. Since addition has been upheld by my predecessor in A.yr. 1989-90, the AO is directed to revise the value of opening stock by Rs.2,22,35,679/- for the year under appeal. The ground No. 28 is, therefore decided in favour of the appellant. (Relief - Directions)"

105.1 From the above Para from the order of CIT(A), it is seen that the claim of the assessee for enhancement in opening stock in the present year 29

is on the basis that in assessment year 1989-90, the closing stock was enhanced by the Assessing Officer. It is also noted by CIT(A) that the addition in that year has been upheld by learned CIT(A) in that year but it is not known as to whether such addition in assessment year 1989-90 was upheld by the Tribunal or not. Therefore, we feel it proper that this aspect has to be ascertained as to whether the addition was ultimately upheld by the Tribunal or not. Hence, we set aside the order of CIT(A) and restore the matter to the file of Assessing Officer for fresh decision. The assessee should submit copy of the Tribunal order for assessment year 1989-90 and if it is found that the addition in closing stock was upheld by the Tribunal then the assessee deserves relief in the present year but if the addition in assessment year 1989-90 has been deleted by the Tribunal then no relief is called for in the present year as has been claimed. The Assessing Officer should pass necessary order as per law after affording reasonable opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

106. Ground No. 24 is as under:

"24. That the Commissioner of Income Tax (Appeals)-!!, Kanpur has erred in law and on facts in directing the Assessing Officer to quantify amount of investment allowance even though no supporting documents in support of creation of necessary reserves under sub-section 4 of section 32A was produced by the assessee."

107. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1985-86. We find that the issue was decided by learned CIT(A) on the basis that the Assessing Officer is directed to quantify the assessee's claim 30

for investment allowance subject to deduction in the year of creation of necessary reserve by the assessee. Hence, it is seen that no actual relief has been allowed by CIT(A) but the assessee will get the relief in the year in which the reserve is created by the assessee as required u/s 32A of the Act. We do not find any infirmity in this decision of CIT(A). We, therefore, decline to interfere in the order of CIT(A).

108. Ground No. 25(a) is as under:

"25(a) That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.6,34,147/- on account of presentation of articles even though the expenditure hit by section 37(2A) of the Act."

109. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1988-89 in I.T.A. No.2633/Del/94 and relevant order is available on pages 25 and 26 of Part-I of the paper book. He also submitted that in assessment year 1993-94 to 1995-96 also, similar issue was decided by the Tribunal in favour of the assessee and deduction was allowed to the extent of 70% of the expenses on presentation articles.

110. We have considered the rival submissions. We find that in the present year, the CIT(A) has deleted the entire disallowance made by the Assessing Officer on account of presentation articles whereas in assessment year 1993-94 to 1995-96, disallowance was confirmed by the Tribunal to the extent of 30% of such expenses. Accordingly, in the present year also, we hold that the disallowance to the extent of 70% of the expenses should 31

be deleted and in this manner, we confirm the disallowance to the extent of 30% of the expenses. This ground is partly allowed.

111. Ground No. 25(b) is as under:

"25(b) That the Commissioner of Income Tax (Appeals)-!!, Kanpur has erred in law and on facts in deleting the disallowance upto 50% i.e. Rs.1,39,182/- being expenses of entertainment in nature even though the expenditure hit by section 37(2A) of the Act ."

112. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that in assessment year 1985-86 also, in I.T.A. No.5850/Del/91, the similar issue was before the Tribunal and the Tribunal upheld the disallowance to the extent of 50% and relief was allowed to the extent of 50% on the basis that such expenses is in respect of expenses for employees. He also submitted that in the present year, the CIT(A) has confirmed the disallowance to the extent of 50% and relief was allowed for 50% and therefore, there is no infirmity in the order of learned CIT(A).

113. We have considered the rival submissions. We find that the order of CIT(A) is in line with the Tribunal order in assessee's own case where relief was allowed to the extent of 50% of the expenses on the basis that such expenses are in respect of employees of the assessee. We do not find any reason to interfere in the order of CIT(A) on this issue. This ground is rejected.

114. Ground No. 26 is as under:

"26. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the disallowance of Rs.3,87,455/- on account of closing stock of Spare Parts even though the assessee could not 32

prove that all items charged under this head were routed through stores in spite of specific opportunity given."

115. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is squarely covered in favour of the assessee by the Tribunal order in assessee's own case in I.T.A. No.795/Del/87 for assessment year 1983-84 and copy of relevant order is available on pages 347 and 349 of the paper book.

116. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1983-84 in I.T.A. No.795/Del/1987 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

117. Ground No. 27 is as under:

"27. That the Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.44,284/- ignoring that these expenses did not relate to the business of the assessee."

118. Learned D. R. of the Revenue supported the assessment order whereas learned A. R. of the assessee supported the order of learned CIT(A). He also submitted that this issue is squarely covered in favour of the assessee by the Tribunal order in assessee's own case for assessment year 1993-94 and 1994-95 and copy of relevant order is available on pages 200 to 231 of the paper book.

119. We have considered the rival submissions. We find that this issue is covered in favour of the assessee by the Tribunal order in assessee's own 33

case for assessment year 1993-94 and 1994-95 and Learned D.R. of the Revenue could not point out any difference in facts in the present year and therefore, we do not find any reason to take a contrary view. This ground is rejected.

120. In the result, the appeal of the Revenue stands partly allowed.

121. Now we take up the appeal of the assessee for assessment year 1990-91 i.e. I.T.A. No.457/Lkw/2010.

"1. Foreign Travelling Expenses

Not allowing deduction of Rs.2,53,743/- being expenses on foreign travelling on the wives of the Directors of the Company by not appreciating the facts of the case and the judicial pronouncement relied upon by the appellant."

122. It was submitted by Learned A.R. of the assessee that this issue is identical to ground No. 2 in assessee's appeal for assessment year 1987-88 in I.T.A. No.336/Lkw/2010 and this appeal is already heard by the Tribunal and therefore, the issue in the present year may be decided in line with the decision by the Tribunal in assessment year 1987-88. Learned D.R. of the Revenue supported the order of CIT(A).

123. We have considered the rival submissions. We find that in assessment year 1987-88, ground No. 2(a) of the assessee's appeal was regarding disallowance of Rs.88,175/- being expenses on foreign travelling of the wives of the directors of the assessee company. In Para No. 216 of the Tribunal order, it was held by the Tribunal that the issue is covered in favour of the assessee by the Tribunal order in assessment year 1983-84 and 1984-85 and the Tribunal deleted the disallowance in that year. In the present year, Learned D.R. of the Revenue could not point out any difference in facts and therefore, in the present year also, we do not find 34

any reason to take a contrary view and therefore, in line with the Tribunal decision in assessee's own case for assessment year 1987-88, this issue is decided in favour of the assessee. This ground is allowed.

124. Ground No. 2 is as under:

"2. In-land Travelling Expenses

c) Not allowing Rs.24,790/- being expenses relating to the wives of the Directors/employees by not appreciating the facts of the case.

d) Not allowing the expenses of an order of Rs.7,40,300/-

holding it to be traveling expenses on guest as reported by Special Tax Auditors."

125. Learned A.R. of the assessee reiterated the same contentions, which were raised before learned CIT(A). Learned D. R. of the Revenue supported the order of learned CIT(A).

126. We have considered the rival submissions. We find that it is noted by learned CIT(A) on page No. 17 of his order that out of foreign travelling expenses in respect of four spouses of directors of the assessee company, the expenses of Rs.17,301/- regarding Mrs. R. Singhania is allowable otherwise also because she is a qualified Doctor and was looking after the hospital for employees at Kota plant of the assessee company. The CIT(A) has confirmed this disallowance in respect of expenses of Mrs. R. Singhania also but in our considered opinion, apart from being spouse of the director, Mrs. R. Singhania is an employee of the assessee company also and moreover while deciding the similar issue in assessment year 1987-88, it is held by the Tribunal in that year as per Para 216 of its order that this issue regarding travelling expenses of spouse of the directors is covered in favour of the assessee by the Tribunal order for assessment year 1983-84 and 1984-85. Since no difference in facts could be pointed out by Learned D.R. 35

of the Revenue, we delete this disallowance by respectfully following the Tribunal order. Accordingly ground No. 2(a) is allowed.

127. Regarding ground No. 2(b) of the appeal, Learned A.R. of the assessee reiterated the same contentions which were raised before the CIT(A). Learned D. R. of the Revenue supported the order of learned CIT(A).

128. We have considered the rival submissions. We find that it was the submission of the assessee before CIT(A) that although special tax auditors have reported the expenditure but it had not been termed by them of disallowable nature. We also find that on page No. 17 of the assessment order, the Assessing Officer has included this amount of Rs.7,40,300/- as disallowable because it is reported by special tax auditors. This is the claim of the assessee that this is not the finding of the special tax auditors that this much expenses of Rs.7,40,300/- is of disallowable nature and therefore, without pointing out any single reason for making disallowance, the disallowance made by the Assessing Officer on this basis alone that this is reported by special tax auditors that this much expenditure is incurred on guests is not justified and therefore, we delete this disallowance. Ground No. 2(b) is allowed.

129. Ground No. 3 is as under:

"3. Guest House Expenses

d) Confirming the addition of Rs.1,66,962/- on account of depreciation on guest house without appreciating that the depreciation on the assets in the guest house is of allowable nature as also not considering the judicial pronouncement pressed into service by the appellant.

36 (e) In confirming disallowance of a sum of Rs.1,00,000/-

on the ad hoc basis towards depreciation on other assets of guest house.

(f) In confirming disallowance of Rs.1,0,000/- towards other maintenance expanses of guest house."

130. It was submitted by Learned A.R. of the assessee that identical issue was raised by the assessee in its appeal for assessment year 1987-88 in I.T.A. No.336/Lkw/2010 as per ground No. 13(a) and 13(b) and since this appeal is already heard, this issue may be decided in line with the decision of the Tribunal in assessment year 1987-88. Learned D.R. of the Revenue supported the order of CIT(A).

131. We have considered the rival submissions. We find that in assessment year 1987-88 also, similar issue was raised by the assessee before the Tribunal and in that year, as per Para 263 of the Tribunal order, the disallowance on account of depreciation on guest house was confirmed in that year. Accordingly, ground No. 3(a) being disallowance of Rs.1,66,962/- on account of depreciation on guest house is confirmed in the present year also. Ground No. 3(a) is rejected.

132. In assessment year 1987-88, ground No. 13(b) regarding ad hoc disallowance of Rs.1,00,000/- being depreciation on other assets of guest house was decided by the Tribunal in favour of the assessee by following the Tribunal order in assessee's own case for assessment year 1985-86. Accordingly, in the present year also, the disallowance of Rs.1,00,000/- being depreciation on other assets of guest house is deleted and accordingly, ground 3(b) is allowed.

133. Regarding ground No. 3(c) i.e. in respect of ad hoc disallowance of Rs.1,00,000/- towards other maintenance expenses of guest house, 37

Learned A.R. of the assessee reiterated the same contentions which were raised before CIT(A). Learned D. R. of the Revenue supported the order of learned CIT(A).

134. We have considered the rival submissions. We find that it is noted by CIT(A) on page No. 20 of his order that it was the submission of Learned A.R. of the assessee before him that as against the disallowance made by the Assessing Officer of Rs.10.02 lac, the assessee has already offered the disallowance of Rs.1 lac and therefore, no further disallowance is justified. But it is noted by learned CIT(A) that as per the order passed by him in assessment year 1987-88, a further addition of Rs.1 lac will be appropriate and in this manner, he has confirmed the disallowance of Rs.1 lac out of total disallowance of Rs.10.02 lac. It could not be shown by Learned A.R. of the assessee that in assessment year 1987-88, any relief was allowed by Tribunal on this issue and therefore, the order of CIT(A) is in line with the order of CIT(A) in assessment year 1987-88, which is already upheld by the Tribunal on this issue and therefore, in the present year also, no interference is called in the order of learned CIT(A) on this issue. Ground No. 3(c) is rejected.

135. Ground No. 4 is as under:

"4. Entertainment Expenses

No allowing a sum of Rs.12,66,211/- being 50% of the expenses by wrongly treating the same as in the nature of Entertainment Expenses."

136. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 14 and therefore, in the present year also, this issue may be decided on similar line.

38 137. Learned D. R. of the Revenue supported the orders of the authorities below.

138. We have considered the rival submissions. We find that in assessment year 1987-88, this issue was decided by the Tribunal as per Para 270 of its order and it was held by the Tribunal in that year that since CIT(A) has upheld the disallowance of 50% of the expenses, his order is in line with the Tribunal order for assessment year 1985-86 and on this basis, the Tribunal rejected ground No. 14 in that year. Accordingly, in the present year also, this issue is decided against the assessee. This ground is rejected.

139. Ground No. 5 is as under:

"5. Kamla Retreat Expenses Confirming disallowance of Rs.1,45,058/- being 50% of the expenditure by wrongly treating the same as expenditure hit by section 37(4)/37(5) of the Act."

140. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 3 in that year and therefore, in the present year also, this issue may be decided on similar line.

141. Learned D. R. of the Revenue supported the order of learned CIT(A).

142. We have considered the rival submissions. We find that in assessment year 1987-88, this issue was decided by the Tribunal as per Para 223 of its order against the assessee by following the judgment of Hon'ble Apex Court rendered in the case of Britannia Industries Ltd. vs. CIT [2005] 278 ITR 546 (SC) and therefore, by respectfully following this 39

judgment of Hon'ble Apex Court, this issue is decided against the assessee. This ground is rejected.

143. Ground No. 6 is as under:

"6. Interest payable on additional retention price of Cement

Not allowing Rs.44,77,866/- towards interest payable on additional retention price of cement by not appreciating the facts of the ease."

144. It was submitted by Learned A.R. of the assessee that in assessment year 1987-88, this issue was decided by learned CIT(A) in favour of the assessee and against this decision of CIT(A), Revenue filed appeal before the Tribunal and this issue was raised by the Revenue in its appeal as per ground No. 41 and therefore, in the present year also, this issue may be decided on similar line.

145. Learned D. R. of the Revenue supported the order of learned CIT(A).

146. We have considered the rival submissions. We find that it is noted by the Tribunal in Para No. 139 of the Tribunal order for assessment year 1987-88 that no relief was allowed by CIT(A) and he has simply given a direction to the Assessing Officer that in case, the assessee gets relief from Hon'ble Allahabad High Court in assessment year 1982-83, consequential relief can be allowed and it was held that there is no infirmity in such direction of CIT(A). Accordingly, in the present year also, we give similar direction to the Assessing Officer that if the assessee gets relief from Hon'ble High Court in assessment year 1982-83, consequential relief can be allowed in the present year. Hence, we confirm the disallowance on this issue with these observations. Accordingly ground No. 6 is rejected along with these observations.

40 147. Ground No. 7 is as under:

"7. Rate and Taxes

Not allowing depreciation of Rs.51,622/- on WDV of the expenses offered as being capital expenditure under the head "Licence Fee" in earlier year."

148. Learned A.R. of the assessee reiterated the same contentions which were raised before learned CIT(A) whereas Learned D. R. of the Revenue supported the order of learned CIT(A).

149. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) as per Para 19 of his order on page No. 27 wherein it was noted by him that in assessment year 1989-90, the assessee had offered a sum of Rs.2,32,572/- being capital expenditure and on such capital expenditure, the assessee is claiming depreciation in the present year. In the assessment order, it is noted by the Assessing Officer on page No. 41 that in assessment year 1989-90, the CIT(A) has confirmed the disallowance of depreciation on such capital expenditure of Rs.2,32,572/-. We are of the considered opinion that merely because the assessee has incurred a capital expenditure, the depreciation cannot be allowed unless the assessee is able to establish that such capital expenditure has resulted into creation of a capital asset and what is the nature of such capital asset such as land, building, plant & machinery, furniture etc. and whether capital asset was put into use for business purpose in the relevant year. Unless the assessee is able to establish that the capital expenditure has resulted into creation of capital asset and such asset was put to use for business purposes, depreciation cannot be allowed. We do not find any reason to interfere in the order of CIT(A) on this issue because the assessee has not established these aspects. This ground is rejected.

41 150. Ground No. 8 is as under:

"8. Interest Paid

In not allowing a sum of Rs.1,05,733/- being the amount of genuine interest paid by appellant."

151. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 6 in that year and therefore, in the present year also, this issue may be decided on similar line.

152. Learned D. R. of the Revenue supported the order of learned CIT(A).

153. We have considered the rival submissions. We find that in assessment year 1987-88, this issue regarding confirmation of disallowance without appreciating that the payment of interest and withholding tax on interest paid to various foreign suppliers were neither penalty nor fine and they were compensatory in character. In that year, the issue was decided by the Tribunal against the assessee as per Para No. 239 in that year. Accordingly, in the present year also, this issue is decided in favour of the Revenue. This ground is rejected.

154. Ground No. 9 is as under:

"9. Capital Expenditure debited to Profit & Loss A/c

In confirming the disallowance of Rs.1,26,82,673/- being expenses incurred on repairs to Plant & Machinery held as capital expenditure by Special Tax Auditors without appreciating that the opinion of special tax auditors was not sacrosanct."

155. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as 42

per ground No. 12 in that year and therefore, in the present year also, this issue may be decided on similar line.

156. Learned D. R. of the Revenue supported the order of learned CIT(A).

157. We have considered the rival submissions. We find that in assessment year 1987-88, the issue in dispute was regarding disallowance of Rs.24,01,470/- without appreciating that the expenditure was allowable u/s 37(1). In that year, this issue was decided by the Tribunal against the assessee as per Para No. 261 by following the judgment of Hon'ble Apex Court rendered in the case of CIT vs. Sri Mangayarkarasi Mills P. Ltd. [2009] 315 ITR 114 (SC). Accordingly, in the present year also, this issue is decided against the assessee. This ground is rejected.

158. Ground No. 10 is as under:

"10. Cash payment in excess of Rs.10,000/-

Confirming disallowance of an order of Rs.4,11,645/- being genuine cash payment in excess of Rs.10,000/- though all these payments fall to be governed by second proviso to section 40A(3) and while simultaneously not following the judicial pronouncement pressed into service by the appellant."

159. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 10 in that year and therefore, in the present year also, this issue may be decided on similar line.

160. Learned D. R. of the Revenue supported the order of learned CIT(A).

161. We have considered the rival submissions. We find that in assessment year 1987-88, this issue was decided by the Tribunal as per 43

Para 253 of the Tribunal order and in that year, it is noted by the Tribunal that it was conceded by the assessee that this issue is covered against the assessee by the tribunal order for assessment year 1988-89. Accordingly, in the present year also, this issue is decided against the assessee. This ground is rejected.

162. Ground No. 11 is as under:

"11. Employees Welfare Expenses

(d) Not allowing a sum of Rs.5,29,257/- holding it to be Entertainment Expenses.

(e) Confirming disallowance of Rs.1,14,098/- as unconnected with business.

(f) Not allowing a sum of Rs.6,645/- towards depreciation on WDV on items capitalized in earlier years."

163. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 9 in that year and therefore, in the present year also, this issue may be decided on similar line.

164. Learned D. R. of the Revenue supported the order of learned CIT(A).

165. We have considered the rival submissions. We find that identical issue was raised in assessment year 1987-88 as per ground No. 9 and as per Para 251 of the Tribunal order and in that year, this issue was decided against the assessee. Accordingly, in the present year also, this issue is decided against the assessee. This ground is rejected.

166. Ground No. 12 is as under:

"12. Charges General

(a) Confirming disallowance of Rs.2,59,571/- (being 50% of Rs.5,19,141/-) holding it to be entertainment expenses.

44 (b) Confirming the disallowance of Rs.99,669/- by wrongly holding that no details/incomplete details were filed."

167. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 5 in that year and therefore, in the present year also, this issue may be decided on similar line.

168. Learned D. R. of the Revenue supported the order of learned CIT(A).

169. We have considered the rival submissions. We find that in assessment year 1987-88 while deciding ground No. 5 in that year, it was held by the Tribunal that 50% disallowance out of guest house expenses is justified and accordingly, in the present year also, part (a) of ground No. 12 is rejected in line with our decision for assessment year 1987-88.

170. Regarding part (b) of ground No. 12, we find that this disallowance of Rs.99,669/- was upheld by learned CIT(A) on the basis that in assessment year 1987-88, disallowance to the extent of 87.4% was deleted by him in assessment year 1987-88 and accordingly, in the present year also, CIT(A) has deleted disallowance to the extent of 87.4% of the expenses of Rs.12,39,508/- and only the disallowance to the extent of 12.6% was confirmed by him. Since the decision of CIT(A) is in line with the decision for assessment year 1987-88 and it is not shown by the assessee that in assessment year 1987-88, the Tribunal has allowed any relief to the assessee over and above the relief allowed by learned CIT(A), we do not find any reason to interfere in the order of CIT(A) on this issue. Accordingly part (b) of ground No. 12 is rejected.

171. Ground No. 13 is as under:

"13. Sales Promotion Expenses 45

(a) Not allowing Rs.1,65,585/- holding it to be entertainment expenses.

(b) Upholding disallowance of Rs.2,76,694/- (30% of total expenditure of Rs.9,22,312/-) being expenses on presentation of articles."

172. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 4 in that year and therefore, in the present year also, this issue may be decided on similar line.

173. Learned D. R. of the Revenue supported the order of learned CIT(A).

174. We have considered the rival submissions. We find that in assessment year 1987-88, the issue in dispute was regarding confirming disallowance of Rs.6,356/- holding it to be entertainment expenditure and deleted the disallowance of Rs.2,51,313/- being expenditure on presentation articles to the extent of 30% of the total expenditure. In the present year also, the issues in dispute are similar i.e. Disallowance of Rs.1,65,585/- by holding it to be entertainment expenditure and upholding disallowance to the extent of 30% of total disallowance. In assessment year 1987-88, the first issue was decided in favour of the assessee as per Para 277 of the Tribunal order in that year and part (b) of the disallowance was decided by the Tribunal against the assessee as per Para 230 of the Tribunal order in that year. Accordingly, in the present year also, part (a) of ground No. 13 is allowed whereas 13(b) is rejected.

175. Ground No. 14 is as under:

"14. Product Development Expenses

In not allowing Rs.1,73,977/- (being 50% of Rs.3,47,954/-) holding it to be Entertainment Expenses."

46 176. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 14 in that year and therefore, in the present year also, this issue may be decided on similar line.

177. Learned D. R. of the Revenue supported the order of learned CIT(A).

178. We have considered the rival submissions. We find that identical issue was raised in assessment year 1987-88 as per ground No. 14 and as per Para 270 of the Tribunal order, in that year, this issue was decided against the assessee. Accordingly, in the present year also, this issue is decided against the assessee. This ground is rejected.

179. Ground No. 15 is as under:

"15. Know-how / Technical Services Fee

In confirming the disallowance of Rs.53,37,580/- being expenditure on Know-how / Technical Services fee without appreciating the facts of the case in as much as Ld. CIT(A) has failed to appreciate that by no stretch of legal reasoning, expenditure could be termed as capital in nature."

180. It was submitted by Learned A.R. of the assessee that similar issue was raised by the assessee in its appeal for assessment year 1987-88 as per ground No. 1 in that year and therefore, in the present year also, this issue may be decided on similar line.

181. Learned D. R. of the Revenue supported the order of learned CIT(A).

182. We have considered the rival submissions. We find that identical issue was raised in assessment year 1987-88 as per ground No. 1 and as per Para 212 of the Tribunal order in that year, this issue was decided 47

against the assessee. Accordingly, in the present year also, this issue is decided against the assessee. This ground is rejected.

183. In the result, the appeal of the assessee stands partly allowed.

184. In the combined result, both the appeals are partly allowed.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:26/06/2015. *C.L.Singh

Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow Asstt. Registrar