APOLLO TYRES LIMITED V. THE ASSISTANT COMMISSIONER OF INCOME TAX

ITA/534/2009

AI Insights

The case involves multiple appeals related to the income tax assessments of Apollo Tyres Ltd. for the assessment year 1993-94. The appeals were filed by both the assessee and the Department of Income Tax against the orders of the Income Tax Appellate Tribunal, Cochin Bench, which had partially allowed the assessee's appeals against the assessments made by the Assistant Commissioner of Income Tax. The main issues revolved around the classification of certain expenditures and the timing of their recognition in the financial statements. The Tribunal's decisions were challenged in the High Court, which found no substantial questions of law and thus dismissed the appeals.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 766880 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 12-03-2019
• Assessment Year: misc
• Other Referred Cases: Swadeshi Cotton Mill Co. Ltd vs. CIT, Commissioner of Income Tax vs; Raj Motors Yad, Commissioner of Income Tax vs. Sanco Trans Ltd., Commissioner of Income Tax, Delhi vs. Woodward Governor India P.Ltd, Oil and Natural Gas Corporation Ltd, Dehradun, through Managing Director vs. Commissioner of Income Tax, Dehradun, Income Tax Officer Ward I, Division I vs. Diza Holdings (P)Ltd, Ramanand Sagar vs. Deputy Commissioner of Income-Tax and others
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: JOSEPH MARKOS; BINU MATHEW
• Keywords: Assessment Year; Capital receipt; Income tax appeal; Mercantile system; Professional fee; Revenue receipt
• Section: 147; 143(3); 260A

Judgement Text

" [CASE REPORTABLE] IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR.JUSTICE N.ANIL KUMAR TUESDAY ,THE 12TH DAY OF MARCH 2019 / 21ST PHALGUNA, 1940 ITA.No. 534 of 2009 AGAINST THE ORDER IN ITA 163/1997 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 28-03-2007 APPELLANT/RESPONDENT: APOLLO TYRES LIMITED 6TH FLOOR, CHERUPUSHPAM BUILDING, SHANMUGHAM ROAD, KOCHI - 31. BY ADVS. BY ADV. SHRI JOSEPH MARKOS (Sr.) SRI.BINU MATHEW SRI.B.J.JOHN PRAKASH SRI.JOSEPH KODIANTHARA (SR.) SRI.MATHEWS K.UTHUPPACHAN SRI.TERRY V.JAMES SRI.TOM THOMAS (KAKKUZHIYIL) SRI.V.ABRAHAM MARKOS RESPONDENT/APPELLANT: THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 11, NEW DELHI. PRESENTLY THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1) RANGE-1, ERNAKULAM. BY ADVS. SRI.CHRISTOPHER ABRAHAM, SC, INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.03.2019, ALONG WITH ITA.1075/2009, ITA.1329/2009, ITA.1347/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR.JUSTICE N.ANIL KUMAR TUESDAY ,THE 12TH DAY OF MARCH 2019 / 21ST PHALGUNA, 1940 ITA.No. 1075 of 2009 AGAINST THE ORDER IN ITA 6177/1996 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 28-03-2007 APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAX COCHIN. BY ADV. SRI.CHRISTOPHER ABRAHAM,SC. INCOME TAX DEPARTMENT RESPONDENT/APPELLANT: APPOLLO TYRES LTD CHERUPUZHPAM BUILDING,SHANMUGHAM ROAD, KOCHI. BY ADVS. BY ADV. SHRI JOSEPH MARKOS (Sr.) SRI.BINU MATHEW SRI.B.J.JOHN PRAKASH SRI.JOSEPH KODIANTHARA (SR.) SRI.K.P.ABDUL AZEES SRI.MATHEWS K.UTHUPPACHAN SRI.TERRY V.JAMES SRI.TOM THOMAS (KAKKUZHIYIL) SRI.V.ABRAHAM MARKOS THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.03.2019, ALONG WITH ITA.1329/2009, ITA.1347/2009, ITA.534/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 3 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR.JUSTICE N.ANIL KUMAR TUESDAY ,THE 12TH DAY OF MARCH 2019 / 21ST PHALGUNA, 1940 ITA.No. 1329 of 2009 AGAINST THE ORDER IN ITA 188/2001 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 28-03-2007 APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAX,COCHIN BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT RESPONDENT/APPELLANT: APPOLLO TYRES LTD, CHERUPUZHPAM BUILDING, SHANMUGHAM ROAD, KOCHI. BY ADV. SHRI JOSEPH MARKOS (Sr.) SRI.BINU MATHEW SRI.B.J.JOHN PRAKASH SRI.JOSEPH KODIANTHARA (SR.) SRI.MATHEWS K.UTHUPPACHAN SRI.TERRY V.JAMES SRI.TOM THOMAS (KAKKUZHIYIL) SRI.V.ABRAHAM MARKOS THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.03.2019, ALONG WITH ITA.1347/2009, ITA.1075/2009, ITA.534/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 4 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR.JUSTICE N.ANIL KUMAR TUESDAY ,THE 12TH DAY OF MARCH 2019 / 21ST PHALGUNA, 1940 ITA.No. 1347 of 2009 AGAINST THE ORDER IN ITA 163/1997 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 28-03-2007 APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX, COCHIN COCHIN. BY ADV SRI.CHRISTOPHER ABRAHAM, SC, INCOME TAX DEPARTMENT RESPONDENT/RESPONDENT: APOLLO TYRES LTD., CHERUPUSHPAM BUILDING, SHANMUGHAM ROAD, KOCHI. BY ADV. SHRI JOSEPH MARKOS (SR.) SRI.BINU MATHEW SRI.B.J.JOHN PRAKASH SRI.JOSEPH KODIANTHARA (SR.) SRI.MATHEWS K.UTHUPPACHAN SRI.TERRY V.JAMES SRI.TOM THOMAS (KAKKUZHIYIL) SRI.V.ABRAHAM MARKOS THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.03.2019, ALONG WITH ITA.1329/2009, ITA.1075/2009, ITA.534/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 5 JUDGMENT P.R. Ramachandra Menon, J. All these appeals pertain to the very same assessment year, ie. 1993-94 and relate to the very same Assessee, M/s. Appollo Tyres Ltd. I.T.Appeal No.534 of 2009 has been filed by the Assessee whereas the other three appeals have been filed by the Department. 2. The sequence of events reveals that the assessee is a Company engaged in the manufacture and sale of automotive tyres and tubes, having manufacturing plants in Kerala and Gujarat. Earlier, the Assessee was assessed to income tax for a short period with the Asst. Commissioner of Income Tax, Central Circle-II, New Delhi and now the assessment is at Cochin. 3. In respect of the assessment year 1993-94, the Assessee had filed return declaring a total income of Rs.40330000/- on 30.12.1993. Thereafter, revised return was filed on 29.03.1995 showing the total income I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 6 as Rs.3,72,30,437/- The Assessing Officer completed the assessment under Section 143(3) of the Income Tax Act on 22.03.1996, as per Annexure A order produced in the appeals filed by the Department. This was sought to be challenged by filing appeal before the Commissioner of Income Tax (Appeals) by the Assessee and after considering the merits involved, the appeal was allowed in part, as per Annexure B order dated 25.09.1996 (produced in the appeals filed by the Department). Met with the situation, both the Assessee and the Department filed appeals before the Income Tax Appellate Tribunal, Cochin Bench to the extent they were aggrieved. In the meanwhile, the assessment was re-opened under Section 147 of the Act, read with Section 143(3) of the Income Tax Act, vide Annexure C order dated 20.03.2000 fixing the total income at 14,70,65,440/-. This was sought to be challenged by the Assessee by way of appeal before the Commissioner of Income Tax (Appeals), which came to be dismissed as per Annexure D order dated 15.02.2001; in turn, giving rise to the challenge before the Income Tax Appellate I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 7 Tribunal. 4. The Tribunal considered all the three appeals together and passed a common verdict, as borne by Annexure E order dated 28.03.2007, virtually accepting the stand of the Assessee to the extent the relevant orders were impugned, except on one aspect. This made the Department to file three appeals to the extent they are aggrieved, whereas the Assessee has moved this Court by filing I.T.Appeal No.534 of 2009. 5. We heard Mr.Joseph Markose, the learned Sr. Counsel appearing for the Assessee and Mr. Christopher Abraham, the learned Standing Counsel for the Income Tax Department at length. 6. At the very outset, we would like to note that, though some questions have been suggested by the appellant/s to be considered while admitting the matter and ordering notice, no substantial question of law, as envisaged under Section 260A of the Act is seen framed by this Court. 7. I.T.Appeal No.1075 of 2009: (filed by the Department) The subject matter involved relates to the I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 8 expenditure shown by the Assessee to an extent of Rs.94,19,694/- for raising funds/loans by way of 'rights issue' of non-convertible debentures. In fact, the said amount was paid to M/s. J.M. Financial and Consultancy Services (P)Ltd. for the 'rights issue'. Out of the said amount, a sum of Rs.35 lakhs was towards placement fee, whereas a sum of Rs.56.50 lakhs was shown as professional fee. Eventhough, the 'rights issue' had been closed on 04.10.1991 pertaining to the assessment year 1992-93, the Stock Brokers raised their bill only on 10.03.1993, i.e., after the commencement of 1993-94 financial year. 8. The claim was rejected by the Assessing Officer for the reason that the amount in question was in respect of the preceding assessment year, i.e. 1992-93 and hence it should have been claimed in that year. On filing appeal, the Commissioner of Income Tax (Appeals) affirmed that the professional fee of Rs.56.50 lakhs was in respect of the assessment year 1992-93 and hence it was not liable to be allowed in respect of the year in question, i.e. 1993-94. With regard to the placement I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 9 charges of Rs.35 lakhs, the Commissioner (Appeals) directed the Assessing Officer to verify the position, whether the expenditure related to the issue of new 17% debentures or the earlier issue of 14% debentures; adding that if it related to 17% debentures, it was to be allowed or else if it related to the earlier 14% debentures, it was to be disallowed. On filing further appeals by the Assessee, the Tribunal held that the professional fee of Rs.56.50 lakhs was raised by M/s.J.M. Financial and Consultancy Services Ltd on 10.03.1993 and it being within the year of assessment (1993-94), it was held as allowable for the said year. 9. In respect of the remaining Rs.35 lakhs spent towards placement charges (towards 'rights issue' of non-convertible debentures), the matter was already remanded to the Assessing Officer for verification, which hence was not disturbed by the Tribunal. Despite the assertion made by the Assessee that the professional fee would be payable only when demand/bill is raised, it was repelled and the Assessing Officer, on remand, disallowed the amount again. The matter I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 10 ultimately came up before the Tribunal, where it was held that the Assessee had received the bills from M/s. J.M. Financial & Consultancy Services Ltd only on 10.03.1993 and since this was within the previous year of the assessment year 1993-94, the amount of Rs.56.50 lakhs was liable to be allowed as business expenditure; also holding that “if the liability was based upon some contractual obligation, it would arise only when it was ascertained”. It is the said decision of the Tribunal, that is sought to be challenged by the Department in I.T.A.No.1075 of 2009 suggesting the following questions as the 'substantial questions of law', for consideration of this Court: “1(a) Whether, on the facts and in the circumstances of the case and also in view of the fact that the debenture issue was closed on 04.10.91, the assessee, following mercantile system, is entitled to claim deduction in the assessment year 1993-94? (b) should not the assessee have claimed the deduction in the assessment year 1992-93? I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 11 10. The issue involved in ITA. 6177/Del/1996 filed before the Tribunal[forming the subject matter of consideration in I.T.A.No.1075 of 2009 has been considered by the Tribunal and held as follows: “36. xxxx xxxx xxxx In our considered opinion, there is no dispute about the fact that this is a contractual liability and not a statutory liability. Though the quantification or ascertainment of the liability in the case of a statutory liability cannot postpone its accrual, if the liability is based upon some contractual obligation it would arise only when it is ascertained. This view of ours is fortified by the decision of the Allahabad High Court in the case of Swadeshi Cotton Mill Co. Ltd vs. CIT (1980)125 ITR 33 (All). In our considered opinion, in this case on hand the liability under question is a contractual liability and the bill of M/s.J.M. Financial & Consultancy Services Ltd. is dated 10.3.1993 (assessment year 1993-94) are undisputed. When the assessee had received the bill from M/s. J.M. Financial & Consultancy Services Ltd. only during the assessment year 1993-94, there was no error on the part of the assesee in claiming the same as expenditure during the previous year relevant to the assessment year 1993-94 on receipt of such bill from M/s.J.M. Financial & Consultancy Services Ltd. In this view of the matter, we are inclined to allow the claim of the assessee in a sum of Rs.56.50 lacs. Thus, this ground of appeal of the assessee is allowed.” I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 12 11. According to the learned Sr. Counsel for the Assessee, there is no much relevance to the 'mercantile system of accounting' projected as the basis for raising the challenge by the Department. It is only in respect of the 'statutory payments', that provisions can be made in the relevant year, as it becomes due in that year; whereas in the case of 'contractual payments', it becomes due only when the demand is made. 12. In the instant case, the bill was raised by the Stock Brokers only on 10.03.1993 (within the assessment year 1993-94), though the 'rights issue' had been closed on 04.10.1991 (assessment year 1992-93). This being the position, it was rightly claimed by the Assessee in respect of the assessment year 1993-94. Reliance is sought to be placed on the verdicts in Commissioner of Income Tax vs; Raj Motors Yad [2006] 284 ITR 489 (All) and Commissioner of Income Tax vs. Sanco Trans Ltd. [[2006]284 ITR 51 (Mad)]. It is also pointed out by the learned Sr. Counsel that there is no dispute for the Department as to the genuineness of the I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 13 expenditure incurred by the Assessee and as such, the contention/challenge raised is rather hyper-technical. 13. In the light of the given set of facts and circumstances and also the judicial precedents as mentioned above, we are of the view that there was no need, necessity or occasion for the Assessee to have made any provision for meeting the expenses in the year 1992-93, as the demand from the Stock Brokers was raised only as per their bill dated 10.03.1993, accountable for the assessment year 1993-94. The finding and reasoning given by the Tribunal holding it in favour of the assessee and against the Department is within the four walls of law. We hold that no substantial question of law is raised to have the appeal preferred by the Department to be entertained by this Court. 14. The Department has filed I.A.No.1424 of 2016 seeking for permission to raise an additional ground and also raising an additional question as to: “whether, on the facts and in the circumstances of the case, the gains earned on cancellation of the Foreign I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 14 Exchange Forward Contract are capital receipts or revenue receipts”? This is mainly in the context of the course and proceedings before the Tribunal; when there was a difference of opinion among the members. Hence the matter was referred to the President of the Income Tax Appellate Tribunal, for constituting a Special Bench; where it was held that the same was 'capital receipt'. The said order of the President on the issue was incorporated by Reference into the common order passed by the Tribunal on 28.03.2007. 15. According to the learned Standing Counsel for the Department (who made submissions in support of I.A. for permission to raise additional ground), it is quite open for the Department to raise the said ground by virtue of the mandate of the proviso to sub-section (4) of Section 260A of the Income Tax Act, adding that once the substantial question of law is framed, it is open for the Court to hear the matter on other questions as well. Reliance is sought to be placed on the verdict passed by the Apex Court in Commissioner of Income-Tax vs. Mastek Ltd. [2013]358 ITR 252 (SC). As to the I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 15 additional ground raised, both from the part of the assessee and also the Revenue, it is seen that the said questions were permitted to be raised by the Tribunal being questions of law. The question is whether the amount/s in dispute mentioned by the Revenue/assessee is to be reckoned as 'capital receipt/capital expenditure)' or as 'revenue receipt/revenue expenditure'. It will be worthwhile to extract the course pursued by the Tribunal as revealed from paragraphs 21, 22 and 23 of Annexure-E Order in I.T.Appeal No.1075 of 2009. “21 . From the above two decisions, one by the Apex Court and the other one by the jurisdictional High Court, it is clear that the Tribunal is not confined only to the grounds raised before it in the appeal memorandum and is entitled to admit the additional grounds raised before it even though the same issue were not raised by the assessee before the Assessing Officer or the CIT (Appeals), as long as the grounds raised are legal grounds and no fresh facts are to be brought on record and the facts are already existed in the I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 16 files of the department. In the case of the present assessee also the same facts and circumstances prevail as regards the additional grounds raised before us. In this view of the matter, we are inclined to admit this additional ground of the assessee in respect of the claim of Rs.3,03,19,957/- being gains on cancellation of forward contracts, which is claimed to be of capital in nature, in view of the findings of the Special bench in respect of the related amount of Rs.11,06,49,739/-. 22. As regards the revenue's additional ground is concerned, in our considered opinion this has also got a direct link with the forward contracts taken to cover the interest portion of loan. Since we have admitted the assessee's additional ground on similar issue, on the receipt side, we are inclined to admit this additional ground also, which is on payments side. 23. Having admitted these additional grounds, we also heard the parties on the merits of the claims. However, in our considered view since this claim was made for the first time before the Tribunal by both the parties, there had I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 17 been no occasion for the Assessing Officer to deal with the issue, since the assessee itself had claimed them to be revenue receipt and revenue payment. Thus, the CIT (Appeals) had also no occasion to deal with this issue because no such grounds were raised before him. Therefore, in the interest of natural justice, we deem it and proper to restore these two additional grounds (one raised by the assessee and other raised by the revenue) in respect of gains/loss on account of roll over charges relating to the forward contracts (taken/cancelled in respect of interest portion of the loans taken by the assessee for purchase of plant and machinery) to the file of the Assessing Officer for fresh decision according to law. The Assessing Officer is directed to give effective opportunity of hearing to the assessee and the assessee shall also co-operate with the Assessing Officer by providing necessary details that would be required by him for deciding the issues. Thus, these two additional grounds, one by the assessee and the other by the revenue, are allowed for statistical purposes only. I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 18 16. It was noted by the Tribunal that additional ground was raised both by the Assessee and the revenue for the first time before the Tribunal; by virtue of which there was no opportunity for the Assessing Officer and the Commissioner of Income Tax (Appeals) to have it considered and hence left it to be decided by the Assessing Officer at the first instance. We find no illegality, irregularity or impropriety with the finding and reasoning given by the Tribunal and no interference is warranted with the direction given. 17. I.T.A.No.1347 OF 2009: This appeal arises from I.T.A.163/Del/1997 dealt with by the Tribunal. The Assessee had entered into a 'Technical Know-how Collaboration Agreement' with M/s. General Tyres International Company, USA on 26.01.1987, which got approval of the Government on 31.12.1987. It was valid for a period of 5 years from 26.01.1987. This expired on 26.01.1992, on which date, a renewal agreement was executed for a further period of five years from 26.01.1992 to 25.01.1997 and submitted for I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 19 approval of the Government. Approval was granted by the Government on 13.10.1993. The Assessee debited a sum of Rs.2,61,52,641/- towards royalty payable during the period 26.01.1992 to 31.03.1993. The Assessee claimed the said amount during the assessment year 1993-94, which came to be rejected by the Assessing Officer, stating that approval was given by the Government only on 13.10.1993, i.e. coming within the assessment year 1994-95. The appeal preferred by the Assessee was partly allowed by the Commissioner of Income Tax (Appeals) holding that it was mentioned in the Government letter dated 02.04.1993 that duration of the agreement shall be for a period of 5 years from expiry of the earlier agreement and hence the agreement became operative on the date of expiry of the earlier agreement itself, i.e. from 26.01.1992, though the approval was given by the Government only later on 13.10.1993. It was held that the approval related back to the effective date of agreement viz. 26.01.1992. The Commissioner of Income Tax (Appeals) also observed that, out of the total royalty amount of I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 20 Rs.2,61,52,641/-, a sum of Rs.49 lakhs was in respect of the period from 26.01.1992 to 31.03.1992 falling within the period of the assessment year 1992-93 and hence the said extent cannot be allowed as part of expenses of the assessment year 1993-94. The Commissioner of Income Tax (Appeals) virtually deleted the dis-allowance of Rs.2,12,52,641/- relatable to the period from 01.04.1992 to 31.03.1993. The Tribunal considered the facts and figures meticulously and found that the order passed by the Commissioner of Income Tax (Appeals) was not liable to be interdicted. It was accordingly, that the appeal preferred by the Revenue was dismissed. We hold that the finding and reasoning given by the Tribunal is correct and sustainable. 18. Another issue involved in the appeal is in relation to the expenditure claimed by the assessee towards payment of 'club membership fee' of Rs.3,02,841/-. It was contended by the Assessee that the membership fee was incurred for furtherance of business of the Assessee and since 'usage expense' was I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 21 not claimed, it was never to be treated as personal expense of the members. This plea was repelled by the Assessing Officer holding that the expenditure was of personal in nature. But, the version of the Assessee was accepted by the Commissioner of Income Tax(Appeals) in the appeal preferred by the Assessee, following similar orders passed in the Assessee's own case for the assessment years 1998-99 and 1991-92, whereby the additions made by the Assessing Officer had been deleted. 19. In the appeal preferred by the Revenue, the Tribunal noted that the decision of the Tribunal under similar circumstances in respect of the assessment year 1991-92 (in the Assessee's own case) had been accepted by the Revenue and that the said finding was supported by the decisions of other High Courts as well, which stood in favour of the Assessee. It was accordingly, that the order passed by the Commissioner of Income Tax (Appeals) in favour of the assessee was upheld and the appeal preferred by the Revenue was dismissed in relation to the challenge against 'club expenses'. I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 22 The finding arrived at by the Tribunal is well supported by reasons. The amount spent for acquiring membership in the Clubs stands on a different pedestal from the amounts incurred for availing materials supplied or service provided in the clubs. This Court finds that the said issue is to be answered in favour of the assessee. It is declared accordingly. 20. Another issue considered by the Tribunal is in respect of the claim of deduction of commission of Rs.40,38,168/- and Rs.26,980/- paid to M/s.Raunaq International Ltd., a sister concern of the assessee, which according to the Assessing Officer was an instance of 'diversion of funds' and that the deduction was against the decision of this Court in Commissioner of Income Tax vs. Premier Breweries [(2005) 279 ITR 51 (Ker.). The stand of the Assessing Officer was that the persons holding office in both the establishments were same or close relatives. But, in the appeal preferred by the Assessee, the Commissioner of Income Tax (Appeals) deleted the above additions, holding that there was no dispute as to the actual payment of I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 23 commission and that the details of export (through the sister concern/Raunaq International Ltd.) were produced before the Assessing Officer and the said Company (payee) had duly disclosed the said income in its account and satisfied the income tax. It was also observed that the Assessing Officer had no case that the agreement in this regard was not valid. Reliance was also placed on the various other supporting factors to hold that the allegation of diversion of income was wrong and misconceived. The finding of the Commissioner of Income Tax (Appeals) was affirmed by the Tribunal, leading to the dismissal of the appeal preferred by the Department (paragraph 48). This is a clear 'finding on fact' and the challenge raised by the Revenue in this appeal does not involve any substantial question of law. 21. Yet another question involved in this appeal is in respect of the depreciation claimed by the Assessee in terms of Section 43A of the Income Tax Act on the increased cost of the asset due to fluctuation in currency rate. In respect of the relevant I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 24 assessment year, the Assessee showed enhanced value of its capital assets of the plant and machinery to an extent of Rs.9,95,75,351/- in its books of accounts, being the amount of increase in liability due to fluctuation in the exchange rates of foreign currency. The Assessing Officer disallowed the depreciation, holding that the increase in liability was artificial and did not represent any actual payment during the year, by virtue of which it would not come within the purview of Section 43A of the Income Tax Act. However, the Commissioner of Income Tax (Appeals) took a stand in favour of the Assessee and held that the instance would clearly fall within the ambit of Section 43A and in turn directed the Assessing Officer to grant the relief, which was sought to be challenged by the Revenue before the Tribunal. It is brought to the notice of this Court that the issue stands squarely covered in favour of the Assessee, by virtue of the rulings rendered by the Supreme court in Commissioner of Income Tax,Delhi vs. Woodward Governor India P.Ltd [312 ITR 254 (SC) and Oil and Natural Gas Corporation I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 25 Ltd, Dehradun, through Managing Director vs. Commissioner of Income Tax, Dehradun. [322 ITR 180 (SC)]. In the light of the dictum laid down by the Apex Court, we are of the view that the challenge raised by the Revenue in I.T.Appeal No.1347 of 2009 is devoid of any merit and no substantial question of law is involved. 22. I.T.A. 1329 of 2009: The issue mainly pertains to the disputed payments stated as effected by the Assessee, to six concerns towards the advertisement charges during the relevant year. On receipt of some information from the office of the Department at New Delhi, that some of these concerns to whom advertisement charges were stated as given did not exist, notice under Section 148 of the Income Tax Act was issued to re-open the assessment and to disallow some portion of advertisement expenses. In the course of re-assessment proceedings, it was seen from the materials on record that the Assessee had furnished particulars of the parties to whom advertisement charges were given and as I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 26 to the publicity work involved, besides the particulars of the work done and payments made by 'account payee cheques'. It was substantiated that the cheques were honoured (having encashed by the parties) and never returned to the Assessee. But the summons issued under Section 131 of the Act to the aforesaid parties came to be returned unserved by the postal authorities, with the endorsement that there was no such company/concern, except in the case of one establishment by name “Business Wings”, who denied their involvement and the business transaction with the Assessee Company. This made the Assessing Officer to issue a letter to the bankers of the Assessee (State Bank of Patiala, New Delhi), whereupon photocopies of all the cheques which were encashed, were furnished by the Bank Manager, except the cheque for a sum of Rs.9,30,332/- stating that it was not traceable. Despite the factual aspects proved before the Assessing Officer, he disallowed the advertisement expenditure of Rs.76,63,510/-, which came to be affirmed by the Commissioner of Income Tax (Appeals) as well. I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 27 23. In the appeal preferred by the Assessee before the Tribunal, meticulous analysis was made as to the evidence produced, particularly as to the actual work executed. The Tribunal held that, merely because the summons issued to 5 parties were returned unserved and one party had denied the service rendered, it could not be said that the Assessee's claim of expenditure was bogus; more so since the summons issued by the Assessing Officer was more than 4 years after execution of the work and that the parties might have changed their office or discontinued the business; adding that there was no basis to presume the contrary; especially when the cheques were encashed, as confirmed by the Bank Manager. 24. According to the learned Standing Counsel for the Revenue, the Assessee has not discharged the burden of proof in terms of the verdict passed by this Court in Income Tax Officer Ward I, Division I vs. Diza Holdings (P)Ltd. , reported in [2002] 255 ITR 573 (Ker). 25. The learned Sr. Counsel for the Assessee I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 28 submits that the 'burden of proof' stands satisfied by the Assessee by giving particulars of the work and payments effected through 'account payee cheques'; which stands vindicated, by virtue of the materials produced by the Bank Manager and the version given by him on issuance of summons under Section 131 of the Income Tax Act before the Assessing Officer. The learned counsel submits that the decision rendered by this Court in (2002)255 ITR 573 (cited supra) stands on a different pedestal, in view of the difference in the factual context and that the Department has no case that no advertisement was ever effected. The payment effected by the petitioner stands proved in view of the encashment of cheques, as vouched by the Bank Manager and no further burden stands on the shoulders of the Assessee in this regard. Reliance is sought to be placed on the verdict of the Bombay High Court in Ramanand Sagar vs. Deputy Commissioner of Income-Tax and others [(2002) 256 ITR 134] 26. After hearing both the sides, we find that the materials produced before the Assessing Officer I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 29 clearly reveal that the amounts were paid by the Assessee by way of crossed cheques and that there was no dispute with regard to the works in relation to the publicity effected. So also, pursuant to the summons issued by the Assessing Officer, the Bank Manager had produced the details/records; asserting that all the cheques were encashed (also producing copies of the relevant cheques, except the Cheque for the amount aggregating to Rs.9,30,332/-, which could not be traced out). 27. In so far as there is no dispute as to the publicity effected and that the payment was effected through crossed cheques and further since all these cheques have been encashed, we are of the view that this is not a fit case where interference is to be made with the finding and reasoning given by the Tribunal. The omission/absence on the part of the Bank to produce the particulars in respect of the cheque for Rs.9,30,332/- (stating that the said cheque could not be traced out) by itself cannot be a ground to draw any adverse inference, as the other ingredients with I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 30 regard to the work involved, payment of publicity charges through crossed cheques and encashment of cheques by Bankers stand vindicated. That apart, the finding given by the Tribunal is purely a 'question of fact' and no substantial question of law is involved. 28. ITA. No.534 of 2009: Coming to I.T.A.No.534 of 2009, the factual position reveals that the Assessee had incurred 'roll over charges' amounting to Rs.3.10 crores for renewal/roll over of the foreign exchange forward contracts taken by the Assessee for repayment of foreign currency loans. Out of the total amount, a sum of Rs.0.80 crores was charged to the Profit and Loss Accounts (relating to interest portions) and Rs.2,30,67,615/- was shown as the capital expenditure, adding it to the cost of fixed assets in the Books of Accounts. However, in the return submitted by the Assessee, the roll over charge of Rs.2,30,67,615/- was shown as revenue expenditure, which came to be accepted by the Assessing Officer, whose order had become final. However, in the appeal preferred before the Tribunal in I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 31 connection with some other issues, an I.A. was moved by the Department for treating the 'roll over charges' of Rs.2,30,67,615/- as 'capital receipts' (in respect of the gains on cancellation of foreign exchange forward contacts), where a finding was rendered to treat the same as 'capital receipt' by the Special Bench of the Tribunal. 29. The contention of the Assessee is that, since the Assessing Officer himself had treated the 'roll over charge' as Revenue receipt, it was not proper for the Tribunal to have allowed the 'additional ground' and to have held that it was a 'capital receipt', virtually enhancing the income, which was not permissible, having no powers for the Tribunal in this regard; adding that such power is only vested with the Assessing Officer and the Commissioner of Income Tax (Appeals). The observation of the Tribunal in Annexure C order in this regard is discernible from paragraph 15.3, which is extracted below: “15.3 We find that the Assessing officer allowed the claim of Rs.2,30,67,615/- being roll over charges as revenue expenditure towards renewal of contracts for covering the I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 32 repayment of principal amount of loan taken for the purchase of machinery because the assessee company itself has claimed it so. However, the Special Bench has held that the profit arising out of the cancellation of the forward contracts taken for repayment of loan to the extent of Rs.11,06,49,739/- is to be treated as capital in nature. If, that is so, the roll over charges paid for renewal of such contracts also would amount to capital expenditure as rightly claimed by the department based on the decision of the Special Bench. In this view of the matter,we allow this additional ground of the revenue and direct the Assessing Officer to treat Rs.2,30,67,615/- as capital expenditure, while giving effect to this order. Thus this additional ground of appeal is allowed.” . 30. After hearing both the sides, we are of the view that the challenge raised by the Assessee does not constitute any substantial question of law coming within the purview of Section 260A of the Income Tax Act, to be entertained by this Court in the appeal. This Court is also aware of the present 'Litigation Policy' framed by the Government of India, Ministry of Finance as per the Circular No.3/2018 dated 11.07.2018 of the CBDT, Department of Revenue, which has been issued in supersession of the earlier Circular bearing I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 33 No.21/15 dated 10.12.2015. Paragraphs 3,5 and 12 of the said Circular are extracted below: “Henceforth, appeals/SLPS shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder” Sl.No. Appeals/SLPs in Income-tax matters Monetary Limit (Rs.) 1 Before Appellate Tribunal 2000000 2 Before High Court 5000000 3 Before Supreme Court 10000000 It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case. xx xx xx xx 5. The Assessing officer shall calculate the tax effect separately for every assessment year in respect of the disputed issues in the case of every assessee. If, in the case of an assessee, the disputed issues arise in more than one assessment year, appeal can be filed in respect of such assessment year or years in which the tax effect in respect of such assessment year or years in which the tax effect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of an assessment year or years in which the tax effect is less I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 34 than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeals shall be filed in respect of all such assessment years even if the tax effect is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which tax effect exceeds the monetary limit prescribed. In case where a composite order/judgment involves more than one assessee, each assessee shall be dealt with separately. 12. It is clarified that the monetary limit of Rs.20 lakhs for filing appeals before the ITAT would apply equally to cross objections under Section 253(4) of the Act. Cross Objections below this monetary limit, already filed, should be pursued for dismissal as withdrawn/not pressed. Filing of cross objections below the monetary limit may not be considered henceforth. Similarly, references to High Courts and SLPs/appeals before Supreme Court below the monetary limit of Rs.50 lakhs and Rs.1 crore respectively should be pursued for dismissal as withdrawn/not pressed. References before High Court and SLPs/appeals below these limits may not be considered henceforth.” 31. In paragraph 13 of the said Circular , it has been categorically stated that the Circular shall I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 35 apply to the SLPs/Appeals/Cross Objections/References to be made henceforth in Supreme Court/High Courts/Tribunal and it shall also apply retrospectively to pending SLPs/Appeals/Cross Objections/References. It is also given in crystal-clear terms in the said paragraphs that pending appeals below the specified tax limits in paragraph 3 may be withdrawn/not pressed. 32. Incidentally, it is brought to the notice of this Court that the word 'may” appearing in paragraph 13 of the said Circular gives only a discretion to the Department and it is open for the Department to pursue the matter, if it is so desired. But this issue came to be considered by the Apex Court in a common verdict dated 17.09.2018 in Civil Appeal No.7126 of 2008 and connected cases, wherein it was held, that in all the said appeals, the tax effect was less than Rs. one Crore and hence were covered by the Circular of the CBDT and in turn, all the said appeals were dismissed. 33. In the above facts and circumstances, we are of the firm view that in the above appeals preferred by both the Revenue and the assessee, no merit or I.T. Appeal Nos. 534, 1075, 1329 & 1347 OF 2009 36 substantial question of law is involved, to call for interference in terms of Section 260A of the Income Tax Act. The appeals fail and they are dismissed accordingly. Sd/-P.R. RAMACHANDRA MENON, JUDGE Sd/- N. ANIL KUMAR, JUDGE lk "