ACIT, Kanpur V. M/s. J.K. Synthetics Ltd., Kanpur

ITA 369/LKW/2010

• Counselvise Citation: 36923714 RSA 2010
• Duration Of Justice: 5 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-03-2015
• Assessment Year: 1987-1988
• Appeal Filed On: 26-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR ANAND KUMAR AGARWAL
• Keywords: Gift; Depreciation; Business expenditure; Opportunity of being heard; Proportionate interest; Notional interest; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 43B; 40A(3); 37(1); 37; 56

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.369/LKW/2010 ASSESSMENT YEAR:1987 - 88 A.C.I.T. - 4, KANPUR. VS. M/S J. K. SYNTHETICS LTD., E - 23, KAMLA NAGAR, JAYKAYLON COLONY, KANPUR. PAN:AAACJ4988M (APPELLANT) (RESPONDENT) ITA NO.336/LKW/2010 ASSESSMENT YEAR:1987 - 88 M/S J. K. SYNTHETICS LTD., E - 23, KAMLA NAGAR, JAYKAYLON COLONY, KANPUR. PAN:AAACJ4988M VS. A.C.I.T. - 4, KANPUR. (APPELLANT) (RESPONDENT) REVENUE BY DR. ANAND KUMAR AGARWAL, C.I.T., D. R. ASSESSEE BY SHRI RAKESH GARG, ADVOCATE DATE OF HEARING 23/03/2015 DATE OF PRONOUNCEMENT 1 8 /06/2015 O R D E R PER A. K. GARODIA, A.M. FIRST, WE TAKE UP THE REVENUES APPEAL IN ITA NO. 369/L/2010. 2. GROUND NO. 1 OF THE APPEAL IS AS UNDER: 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT SURPLUS RECEIPTS OVER REFUNDS IN THE COPS DEPOSITS ACCOUNT WAS NOT THE 2 INCOME OF THE ASSESSEE AND THEREBY DELETING THE ADDITION OF RS. 900,502/ - . 3. IT WAS FAIRLY CONCEDED BY THE LEARNED AR OF THE ASSESSEE THAT IN ITA NO. 8824/D/92 FOR A.Y. 1986 87 IN THE ASSESSEES APPEAL, THIS ISSUE WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE. THEREFORE, IN THE PRESENT YEAR, THIS GROUND OF THE REVENUE IS ALLOWED. 4. GROUND NO. 2 OF THE APPEAL IS AS UNDER: 2. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.5 5, 4 9 , 439 / - ON ACCOUNT OF PROPORTIONATE PREMIUM ON REDEMPTION OF DEBENTURE WITHOUT APPRECIATING THE FACT THAT NO PREMIUM WAS PAYABLE BEFORE EXPIRY OF 7 YEARS . 5. LEARNED D .R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 85 - 86 IN I.T.A. NO.5850/DEL/91. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF MADRAS INDUSTRIAL DEVELOPMENT CORPN. LTD. VS. CIT 225 ITR 802. RESPECTFULLY FOLLOWING THESE JUDGMENTS, WE HOLD THAT THERE IS NO INFIRMI TY IN THE ORDER OF CIT (A) ON THIS ISSUE BECAUSE HIS ORDER ON THIS ISSUE IS IN LINE WITH THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF MADRAS INDUSTRIAL DEVELOPMENT CORPN. LTD. VS. CIT (SUPRA). ACCORDINGLY, THIS GROUND OF THE REVENUE IS REJECT ED. 6. GROUND NO. 3 OF THE APPEAL IS AS UNDER: 3. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 181,144 / - ON ACCOUNT OF PURCHASE OF EQUIPMENTS FOR EXISTING 3 PROJECTS IGNORING THAT TH E EXPENDITURE WAS COVERED U/S 35AB OF THE I. T. ACT. 7. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 85 - 86 IN I.T.A. NO.5850/DEL/91. HE ALSO SUBMITTED THAT THE IMPUGNED EXPENSES ARE NOT FOR ACQUISITION OF TECHNICAL KNOWHOW BUT FOR TRAVELLING OF FOREIGN TECHNICIANS FOR NIMBAHERA PLANT I. E. EXISTING BUSINESS AND THEREFORE, RIGHTLY ALLOWED BY CIT (A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN PARA 7B OF HIS ORDER, A CLEAR FINDING IS GIVEN BY CIT (A) THAT THE EXPENSES ARE IN RESPECT OF TRAVELLING OF FOREIGN TECHNICIANS AND HENCE, NOT A CAPITAL EXPENDITURE AFTER CONSIDERING THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF EMPIRE JUTE CO. LTD. 124 ITR 1. LEARNED DR OF THE REVENUE COULD NOT POINT OUT ANY MISTAKE IN THIS ORDER OF CIT (A). SINCE, THE ORDER OF CIT (A ) ON THIS ISSUE IS IN LINE WITH THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF EMPIRE JUTE CO. LTD. (SUPRA), WE DECLINE TO INTERFERE IN HIS ORDER ON THIS ISSUE. ACCORDINGLY, THIS GROUND OF THE REVENUE IS ALSO REJECTED. 9 . GROUND NO. 4 OF THE APPEAL IS AS UNDER: 4. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 151,108 / - ON ACCOUNT OF EXPENSES TREATED TO BE COVERED U/S 35AB OF THE ACT. 10. LEARNED D.R. OF THE REVENUE SU PPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE 4 ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 85 - 86 IN I.T.A. NO. 5689/DEL/91 AS AVAILABLE ON PAGES 192 194 OF PART II OF THE PAPER BOOK. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN PARA 7B OF HIS ORDER, A CLEAR FINDING IS GIVEN BY CIT (A) THAT THE EXPENSES ARE IN RESPECT OF TRAVELLING OF TECHNICIAN S AND HENCE, NOT A CAPITAL EXPENDITURE AFTER CONSIDERING THE TRIBUNAL DECISION RENDERED IN THE CASE OF GOOD YEAR INDIA LTD. VS. ITO, 68 TTJ 300 (DEL.) (TM) LEARNED DR OF THE REVENUE COULD NOT POINT OUT ANY MISTAKE IN THIS ORDER OF CIT (A). SINCE, THE ORDER OF CIT (A) ON THIS ISSUE IS IN LINE WITH THE TRIBUNAL DECISION RENDERED IN THE CASE OF GOOD YEAR INDIA LTD. VS. ITO (SUPRA), WE DECLINE TO INTERFERE IN HIS ORDER ON THIS ISSUE. ACCORDINGLY, THIS GROUND OF THE REVENUE IS ALSO REJECTED. 12. GROUND NO. 5 OF THE APPEAL 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.54,728/ - ON ACCOUNT OF EXPENSES NOT RELATED TO YEAR UNDER CONSIDERATION. 13. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THE DETAILS OF THESE EXPENSES ARE AVAILABLE ON PAGE NO. 22 OF THE PAPER BOOK. FROM THOSE DETAILS, HE POI NTED OUT THAT THE AMOUNT OF RS.15,215/ - IS IN RELATION TO FOREIGN TOUR OF SHRI K. VISHWANATHAN AND THE SECOND AMOUNT OF RS.15 , 215/ - IS FOR FOREIGN TOUR OF SHRI R. K. SUDAN AND DURATION OF THESE TOURS WAS FROM 01/02/86 TO 17/02/86. REGARDING THE THIRD AMO UNT OF RS.24,478/ - , HE SUBMITTED THAT IN FACT , THE PROVISION OF RS.24,478/ - WAS MADE BY THE ASSESSEE IN THE BOOKS OF ACCOUNT FOR FINANCIAL YEAR 85 - 86 RELEVANT TO ASSESSMENT YEAR 86 - 87 AGAINST WHICH, IN THE PRESENT 5 YEAR, THE EXPENSES WAS ACTUALLY INCURRED T O THE EXTENT OF RS.24,415/ - ONLY AND, THEREFORE, IN THE PRESENT YEAR, THE ASSESSEE HAS CREDITED THE EXCESS PROVISION AMOUNT OF RS.63/ - AND, THEREFORE, THIS ADDITION ITSELF IS ON WRONG FACTS. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARDING THE FIRST TWO AMOUNTS OF RS.15,215/ - EACH IN RELATION TO FOREIGN TOUR OF TWO EXECUTIVES FOR THE PERIOD 01/02/86 TO 17/02/86, WE ARE OF THE CONSIDERED OPINION THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD T O SHOW THAT THESE EXPENSES HAVE CRYSTALLIZED IN THE PRESENT YEAR. WHEN THE EXPENSES WERE INCURRED IN PRECEDING YEAR AND NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT THESE EXPENSES HAVE CRYSTALLIZED DURING THE PRESENT YEAR, THERE IS NO JUSTIFICATION O F ALLOWING DEDUCTION FOR THESE EXPENSES IN THE PRESENT YEAR WHEN THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. HENCE, THE DELETION OF THESE AMOUNTS IS NOT PROPER. WE, THEREFORE, REVERSE THE ORDER OF CIT(A) REGARDING DELETION OF THESE TWO A DDITIONS AND RESTORE THAT OF THE ASSESSING OFFICER. FOR THE THIRD AMOUNT, WE FIND FORCE IN THE SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON WRONG FACTS. FROM THE DETAILS APPEARING ON PAGE NO. 22 OF TH E PAPER BOOK, WE FIND THAT IN FACT , THIS AMOUNT OF RS.24,478/ - HAS NOT BEEN DEBITED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT IN THE PRESENT YEAR. IN FACT , THIS AMOUNT WAS DEBITED BY THE ASSESSEE IN ASSESSMENT YEAR 86 - 87 AND IN THE PRESENT YEAR, THE AS SESSEE HAS WRITTEN BACK EXCESS PROVISION OF RS.63/ - . HENCE, ON THIS ASPECT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 5 OF THE REVENUE IS PARTLY ALLOWED RESULTING INTO REVERSAL OF THE RELIEF ALLO WED BY CIT(A) TO THE EXTENT OF RS.30,250/ - . 15. GROUND NO. 6 OF THE REVENUE IS AS UNDER: 6 6. 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 EXPENSE S ON KAMLA RETREAT IGNORING THAT THESE EXPENSES ARE HIT BY SECTION 37(4) AND 37(5) OF THE ACT. 16. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSES SMENT YEAR 85 - 86 IN I.T.A. NO.5850/DEL/91. HE SUBMITTED THAT THE RELEVANT PORTION OF THIS TRIBUNAL DECISION IS AVAILABLE ON PAGE NO. 112 TO 113 IN PART - I OF THE ASSESSEES PAPER BOOK CONTAINING TRIBUNAL ORDERS. 17. IN THE REJOINDER, IT WAS SUBMITTED BY LEARNED D.R. OF THE REVENUE THAT THERE IS ANOTHER TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 84 - 85 IN I.T.A. NO.492/DEL/88 AVAILABLE ON PAGE NO. 169 CONTAINING TRIBUNAL ORDERS. HE POINTED OUT THAT IN THIS ORDER, THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE BY FOLLOWING THE TRIBUNAL ORDER IN EARLIER YEARS. THEREAFTER , HE DRAWN OUR ATTENTION TO ANOTHER TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 81 - 82 IN I.T.A. NO.2545/DEL/85 PARTICULARLY PARA 4 AVAILABLE ON PAGE NO. 303 OF THE PAPER BOOK. HE POINTED OUT THAT AS PER THIS PARA OF THE TRIBUNAL ORDER, THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE BY FOLLOWING A TRIBUNAL ORDER FOR PRIOR ASSESSMENT YEAR. HE SUBMITTED THAT SINCE THE TRIBUNAL HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE IN ASSESSMENT YEAR 81 - 82 AND AGAIN IN ASSESSMENT YEAR 84 - 85, THE ISSUE SHOULD BE DECIDED AGAINST THE ASSESSEE OR THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE CIT(A). 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW 7 AND THE TRIBUNAL DECISIONS CITED BY BOTH THE SIDES. WE FIND THAT IN ASSESSMENT YEAR 81 - 82 AND 84 - 85, THE TRIBUNAL HAS U PHELD THE DISALLOWANCE OF EXPENSES INCURRED FOR KAMLA RETREAT EXPENSES TO THE EXTENT OF 50%. SIMILARLY IN ASSESSMENT YEAR 81 - 82 ALSO, THE ISSUE BEFORE THE TRIBUNAL WAS THAT AS TO WHETHER 50% OF THE EXPENSES OF A GUEST HOUSE KAMLA RETREAT IS ADMISSIBLE AS DEDUCTION. THIS ISSUE WAS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE. IN ASSESSMENT YEAR 85 - 86, 100% AMOUNT OF THE EXPENSES FOR KAMLA RETREAT GUEST HOUSE WAS DISALLOWED BY THE AUTHORITIES BELOW AND UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL THAT SU CH EXPENSES WOULD BE ALLOWED TO THE EXTENT OF 50% OF THE EXPENSES MADE OUT FOR KAMLA RETREAT. HENCE, IT IS SEEN THAT AS PER THESE ORDERS, IT WAS HELD THAT THE EXPENSES INCURRED FOR KAMLA RETREAT IS ALLOWABLE TO THE EXTENT OF 50% OF THE EXPENSES INCURRED I N THIS REGARD. IN THE PRESENT YEAR ALSO, AS PER PARA 8A OF THE ORDER OF CIT(A), IT IS SEEN THAT THE ASSESSEE HAS INCURRED AN AMOUNT OF RS.2,03,593/ - AS REGARD TO KAMLA RETREAT. THIS ENTIRE AMOUNT WAS DISALLOWED BY THE ASSESSING OFFICER BUT CIT(A) HAS RES TRICTED THE DISALLOWANCE TO 50% AND IN THIS MANNER , HE HAS ALLOWED RELIEF OF RS.1,01,796/ - . WE FIND THAT THIS RELIEF IS IN LINE WITH EARLIER TRIBUNAL ORDERS FOR THREE DIFFERENT PRECEDING YEARS. BUT IN ASSESSMENT YEAR 88 - 89, IN I.T.A. NO.2633/DEL/94 IN PA RA NO. 14 TO 18, THE TRIBUNAL HAS CONSIDERED THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS COMMISSIONER OF INCOME - TAX AS REPORTED IN [2005] 278 ITR 546 (SC) . IN THAT YEAR, IT WAS NOTED BY THE TRIBUNAL THAT CIT(A) HAS CONFIRMED THE ENTIRE DISALLOWANCE U/S 37(4)/37(5) OF THE ACT IN RELATION TO EXPENSES INCURRED FOR KAMLA RETREAT. THE TRIBUNAL ALSO NOTED THAT THERE ARE CONTRARY DECISIONS OF THE TRIBUNAL IN ASS ESSEES OWN CASE FOR ASSESSMENT YEAR 71 - 72 AND 85 - 86. THEREAFTER, IT WAS OBSERVED BY THE TRIBUNAL THAT WITH RESPECT TO NATURE OF KAMLA RETREAT I.E. WHETHER IT WAS A GUEST HOUSE OR NOT, THE ISSUE IS NOT CLEAR AND HENCE, THE TRIBUNAL RESTORED 8 BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION FOLLOWING A LATEST DECISION OF HON'BLE APEX COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. (SUPRA). WE FIND THAT THIS JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. (S UPRA), IS DATED 05/10/2005. ALL THE EARLIER TRIBUNAL ORDERS CITED BY BOTH THE SIDES UP TO ASSESSMENT YEAR 85 - 86 ARE OF EARLIER DATE AND THE LATEST ORDER IS DATED 21/10/94 IN I.T.A. NO.5850/DEL/91 FOR ASSESSMENT YEAR 85 - 86. HENCE, WE ARE OF THE CONSIDERED OPINION THAT THE LATEST TRIBUNAL DECISION IN I.T.A. NO.2633/DEL/94 DATED 30/06/09 SHOULD BE FOLLOWED BECAUSE IN THIS TRIBUNAL ORDER, THE TRIBUNAL HAS CONSIDERED A LATEST JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF BRITANNIA INDUSTRIES LTD. (SU PRA). HENCE, RESPECTFULLY FOLLOWING THIS TRIBUNAL DECISION FOR ASSESSMENT YEAR 88 - 89, WE RESTORE BACK THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW AFTER CONSIDERING THE LATEST DECISION OF HON'BLE APEX COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. (SUPRA) AND AFTER FINDING OUT AS TO WHETHER KAMLA RETREAT IS GUEST HOUSE OR NOT A S PER THIS JUDGMENT OF HON'BLE APEX COURT AND IF IT IS FOUND THAT KAMLA RETREAT IS GUEST HOUSE THEN NO PART OF THE EXPENDITURE INCURRED CAN BE ALLOWED AS PER THIS JUDGMENT OF HON'BLE APEX COURT. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO. 6 IS ALLOWED FOR STATISTICAL PURPOSES. 19. GROUND NO. 7 OF THE REVENUES APPEAL IS AS UNDER: 7. 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. 9 20. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). IN THIS REGARD , HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OW N CASE FOR EARLIER TWO ASSESSMENT YEARS I.E. ASSESSMENT YEAR 85 - 86 AND 88 - 89 AND THE RELEVANT PORTION OF THESE TWO TRIBUNAL DECISIONS CAN BE FOUND AT PAGE N O . 113 & 114 OF PART - I OF PAPER BOOK AND PAGE NO. 42 TO 44 OF PART - II OF THE PAPER BOOK. 21. WE HAV E CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT BOTH THESE TRIBUNAL DECISIONS, CITED BY LEARNED A.R. OF THE ASSESSEE, ARE OF AN EARLIER DATE BEFORE RENDERING OF JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. (SUPRA). WE HAVE ALR EADY RESTORED BACK THE ISSUE REGARDING ALLOWABILITY OF EXPENSES INCURRED IN RELATION TO KAMLA RETREAT TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN THE LIGHT OF THIS JUDGMENT OF HON'BLE APEX COURT AFTER FINDING OUT THE TRUE NATURE OF KAMLA RET REAT AS TO WHETHER IT IS GUEST HOUSE OR NOT. HENCE, ON THIS ISSUE, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN LINE WITH THE DECISION IN RESPECT OF GROUND NO.6 OF THE APPEAL RAISED BY THE REVENUE. ACCORDINGLY, GROUND NO. 7 IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 22. GROUND NO. 8 OF THE REVENUES APPEAL IS AS UNDER: 8. THAT THE CIT(A) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE UP TO 50% I.E. RS.63,567/ - ON ACCOUNT OF EXPENSES EVEN THOUGH THE EXPENDITURE HIT BY SECTION 37(2A) OF THE ACT. 23. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: 10 (I) BRIJ RAMAN DASS AND SONS VS COMMISSIONER OF INCOME - TAX [1976] 104 ITR 541 (ALL) (II) PHOOLCHAND GAJANAND VS COMMISSIONER OF INCOME - TAX (ALL) [1989] 178 ITR 535 (ALL) 24. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT ON THIS ISSUE, EARLIER FIVE TRIBUNAL DECISIONS ARE AVAILABLE I N PAPER BOOK ON PAGE NO. 277 OF PART - I AND PAGES 184 TO 186, 213 - 215 AND 263 TO 266 OF PART - I II. 25. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FIRST OF ALL , WE CONSIDER THE APPLICABILITY OF TWO JUDGMENTS CITED BY LEARNED D.R. OF THE REVENUE. 26. THE FIRST JUDGMENT CITED BY LEARNED D.R. OF THE REVENUE IS THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF BRIJ RAMAN DASS AND SONS VS COMMISSIONER OF INCOME - TAX (SUPRA). THIS JUDGMENT IS IN RELATION TO ASSESSMENT YEAR 69 - 70 WHEREAS AL L THE TRIBUNAL DECISIONS CITED BY LEARNED A.R. OF THE ASSESSEE ARE OF LATER DATE. MOREOVER, THE TRIBUNAL HAS ALLOWED RELIEF TO THE EXTENT OF 50% OF THE EXPENSES INCURRED ON THE BASIS THAT 50% OF THE EXPENSES SHOULD BE CONSIDERED AS INCURRED FOR THE EMPLOY EES OF THE ASSESSEE COMPANY WHO WERE ACCOMPANYING THE CUSTOMERS. HENCE, IT IS SEEN THAT AS PER THIS TRIBUNAL DECISION, RELIEF WAS ALLOWED ON THE BASIS THAT THE EXPENSES TO THE EXTENT OF 50% IS NOT INCURRED FOR CUSTOMER BUT THE SAME IS INCURRED FOR THE EMP LOYEES OF THE ASSESSEE COMPANY. FOR ANY EXPENDITURE INCURRED FOR EMPLOYEES REGARDING REFRESHMENT ETC, DEDUCTION IS ALLOWABLE. IN THE CASE OF BRIJ RAMAN DASS AND SONS VS COMMISSIONER OF INCOME - TAX (SUPRA), THE FACTS WERE DIFFERENT. IN THAT CASE, IT WAS NEVER A CLAIM OF THE ASSESSEE THAT 11 ANY PART OF THE EXPENDITURE WAS INCURRED FOR THE EMPLOYEES OF THE ASSESSEE. HENCE, THIS JUDGMENT IS NO T APPLICABLE IN THE PRESENT CASE. 27. SIMILARLY AS PER SECOND JUDGMENT RELIED BY LEARNED D.R. OF THE REVENUE IN THE CASE OF PHOOLCHAND GAJANAND VS COMMISSIONER OF INCOME - TAX (SUPRA), IT IS SEEN THAT IN THIS CASE ALSO, THIS WAS NEVER THE CLAIM OF THE ASSESSEE THAT ANY PART OF THE EXPENDITURE WA S INCURRED FOR EMPLOYEES OF THE ASSESSEE. HENCE, THIS JUDGMENT IS ALSO NOT APPLICABLE IN THE PRESENT CASE. 28. SINCE IN EARLIER YEARS, THE TRIBUNAL HAS ALLOWED RELIEF TO THE EXTENT OF 50% ON THE BASIS THAT EXPENSES TO THAT EXTENT WERE INCURRED FOR THE EMPLOYEES OF THE ASSESSEE COMPANY, WE FEEL THAT IN PRESENT YEAR ALSO, THE DISALLOWANCE SHOULD BE UPHELD TO THAT EXTENT AND CIT(A) HAS ALLOWED RELIEF TO THE EXTENT OF 50% ONLY. HENCE, ON THIS ISSUE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CI T(A) BECAUSE THIS ORDER OF CIT(A) IS IN LINE WITH THE TRIBUNAL DECISION FOR EARLIER YEARS. ACCORDINGLY, THIS GROUND OF REVENUE IS REJECTED. 29. GROUND NO. 9 OF THE REVENUES APPEAL IS AS UNDER: 9. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED N LAW AND ON FACTS IN DELETING THE DISALLOWANCE UP TO 70% I.E. RS.5,86,396/ - ON ACCOUNT OF ENTERTAINMENT EXPENSES ON CUSTOMARY PRESENTATION EVEN THOUGH THE PROVISIONS OF SECTION 37 IS APPLI CABLE. 30. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 85 - 86 IN I.T .A. NO.5850/DEL/91. HE ALSO SUBMITTED THAT AS PER THREE OTHER TRIBUNAL DECISIONS FOR ASSESSMENT 12 YEAR 93 - 94, 94 - 95 AND 95 - 96, THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. HE ALSO POINTED OUT THAT IN THESE YEARS, THE TRIBUNAL HAS A LLOWED RELIEF TO THE EXTENT OF 7 0% OF THE EXPENSES. 31. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE TRIBUNAL DECISIONS CITED BY LEARNED A.R. OF THE ASSESSEE. IN EARLIER YEARS, THE TRIBUNAL HAS ALLOWED RELIEF TO THE EXTENT OF 70% OF THE EXPENSES. IN THE PRESENT YEAR ALSO, THE CIT(A) HAS ALLOWED RELIEF TO THE EXTENT OF 70% ONLY AND HENCE, THE ORDER OF CIT(A) IS IN LINE WITH EARLIER TRIBUNAL DECISION S AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, THIS GROUND IS REJECTED. 32. GROUND NO. 10 OF THE REVENUES APPEAL IS AS UNDER: 10. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DIS ALLOWANCE OF RS.64,530/ - ON ACCOUNT OF PURCHASE OF TEST MATCH TICKETS AND MISC. EXPENSES ON GUESTS EVEN THOUGH THE ASSESSEE COULD NOT ESTABLISH THE NEXUS OF EXPENSES WITH THE BUSINESS. 33. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE ALSO SUBMITTED THAT AS PER TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 83 - 84 IN I.T.A. NO.397/LKW/87 AS PER PARA 19, IT WAS HELD THAT GIVING TICKETS FOR TEST MATCH IS ONLY FOR ENTERTAINING THE GUESTS AND THEREFORE, ALLOWING GUESTS TO SEE TEST MATCHES IS ENTERTAINMENT SIMPLY. ON THIS BASIS, THE TRIBUNAL DISALLOWED THE EXPENSES INCURRED FOR DISTRIBUTING TEST MATCH TICKETS. HE POINTED OUT THAT IN PRESENT YEAR ALSO, THIS AMOUNT O F RS.64,530/ - WAS INCURRED IN RELATION TO DISTRIBUTING TEST MATCH TICKETS TO THE CUSTOMERS OF RS.60,975/ - AND RS.2,855/ - BEING MISC. EXPENSES. 13 34. AS AGAINST THIS , LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 83 - 84, RELEVANT PORTION OF WHICH IS AVAILABLE ON PAGE NO . 321 OF PART - II OF THE ASSESSEES PAPER BOOK. 35. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL DECISION CITED BY LEARNED D.R. OF THE REVENUE. REGARDING THE TRIBUNAL DECISION CITED B Y LEARNED A.R. OF THE ASSESSEE, WE FIND THAT AS PER PARA 12 OF THIS TRIBUNAL DECISION FOR ASSESSMENT YEAR 83 - 84, THE ISSUE INVOLVED WAS REGARDING GIFT TO CUSTOMERS. THE NATURE OF GIFT WAS ALSO NOTED BY THE TRIBUNAL BEING GIFT LIKE DRY FRUITS ETC. AND THER E WAS NO EXPENSES INCURRED IN RELATION TO DISTRIBUTING TICKETS FOR TEST MATCH. HENCE, RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION CITED BY DR , WE REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. GROUND NO. 10 IS ALLOWED. 36. GROUN D NO. 11 OF THE REVENUES APPEAL IS AS UNDER: 11. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.36,504/ - ON ACCOUNT OF OUTSTANDING LIABILITY THAT THE ASSESSEE FAILED TO CLEAR THE PURPOSE OF THESE EXPENSES IN SPITE OF SPECIFIC OPPORTUNITY GIVEN. 37. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE DRAWN OUR ATTENTION TO PAGE NO. 25 OF THE ASSESSMENT ORDER AND POINTED OUT THAT NO DETAILS HAS BEEN FILED BY THE ASSESS EE WITH REGARD TO THIS PROVISION FOR RS.36,504/ - AS PER FIVE VOUCHERS. HE ALSO POINTED OUT THAT THIS FINDING IS ALSO GIVEN BY THE ASSESSING OFFICER THAT IN ABSENCE OF SUCH DETAILS, NO JUSTIFICATION IS POSSIBLE AND THEREFORE, THE SAME CANNOT BE ALLOWED. 14 38. LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 39. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THIS DISALLOWANCE WAS DELETED BY CIT(A) ON THE BASIS THAT THIS DISALLOWANCE IS AGAINST THE PAST HISTORY A ND ENTIRE EXPENDITURE IS SUCH WHICH IS NOT COVERED U/S 43B OF THE ACT. WE FAIL TO UNDERSTAND THIS LOGIC OF CIT(A) BECAUSE WHEN AS PER ASSESSMENT ORDER , NO DETAIL IS FURNISHED BY THE ASSESSEE, THE DISALLOWANCE CANNOT BE DELETED BY CIT(A) WITHOUT EXAMINING THE DETAILS WHICH WERE REQUIRED TO BE FURNISHED BY THE ASSESSEE. HENCE, ON THIS ISSUE ALSO, WE REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. GROUND NO. 11 IS ALSO ALLOWED. 40. GROUND NO. 12 OF THE REVENUES APPEAL IS AS UNDER: 12. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN REDUCING THE DISALLOWANCE FROM RS.24,30,326/ - TO RS.6,11,946/ - UNDER THE HEAD 'GENERAL CHARGES' FOR WHICH NO DETAILS WERE FILED. 41. IT WAS SUBMITTED BY LEARNE D D.R. OF THE REVENUE THAT IN THIS GROUND , THERE ARE SIX DIFFERENT DISALLOWANCES MADE BY THE ASSESSING OFFICER FOR DIFFERENT EXPENDITURES DEBITED BY THE ASSESSEE UNDER THE HEAD GENERAL CHARGES BUT THE SAME WERE DELETED BY CIT(A). HE SUPPORTED THE ASSESS MENT ORDER. 42. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THESE ISSUES ARE COVERED BY THE TRIBUNAL ORDER S IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 81 - 82, 83 - 84, 84 - 85, 85 - 86, 86 - 87 AND 93 - 94 TO 95 - 96. HE SUBMITTED THAT THESE ORDERS ARE AVAILABLE IN THE PAPER BOOK. 15 43. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT REGARDING ALLOWING OF RELIEF BY CIT(A) OF RS.2,41,676/ - , THE BASIS OF CIT(A) IS THAT OUT OF TOTAL EXPENSES INCURRED BY THE ASSESSEE OF RS.6,04,188/ - , IT WAS THE CLAIM OF THE ASSESSEE THAT ONLY 50% SHOULD BE DISALLOWED BECAUSE BALANCE SHOULD BE CONSIDERED AS EXPENSES INCURRED FOR EMPL OYEES. AGAINST THIS CLAIM, THE ASSESSING OFFICER ACCEPTED THAT ONLY 10% IS RELATED TO EMPLOYEES AND IN THIS MANNER , HE DISALLOWED 90% AMOUNT TO THE EXTENT OF RS.5,43,770/ - . THE CIT(A) HELD THAT 50% OF TOTAL EXPENSES COMPUTED TO RS.3,02,094/ - IS TO BE DIS ALLOWED AGAINST TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.5,43,37 0/ - . IN THIS MANNER, HE GRANTED RELIEF OF RS.2,41, 676/ - BEING THE BALANCE AMOUNT. IN OUR CONSIDERED OPINION ALSO, 50% OF THE EXPENSES INCURRED SHOULD BE CONSIDERED AS INCURRED FOR EMPLOYEES AND THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). ON THIS ASPECT, WE CONFIRM THE ORDER OF CIT(A). 43.1 THE SECOND DELETION BY THE CIT(A) IS OF RS.8,19,411/ - BEING THE EXPENSES INCURRED IN RESPECT OF PRESENTATION OF ARTICLES AND GIFTS. IT HAS BEEN EARLIER HELD BY US THAT ONLY 70% OF SUCH EXPENSES SHOULD BE ALLOWED. ACCORDINGLY, WE HOLD THAT OUT OF THIS EXPENDITURE OF RS.8,19,411/ - , 70% SHOULD BE ALLOWED AND THE DISALLOWANCE OF BALANCE 30% SHOULD BE SUSTAINED. W E HOLD ACCORDINGLY AND TO THIS EXTENT I.E. 30%, THE ORDER OF CIT(A) IS REVERSED. 43.2 THE THIRD ITEM OF DELETION IS OF RS.84,155/ - . THIS DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE BASIS THAT SOME EXPENSES WERE INCURRED THROUGH EMPLOYEES OF THE ASSESSEE FOR WHICH COMPLETE DETAILS WERE NOT AVAILABLE. ON PAGE NO. 39 AND 40 OF THE ASSESSMENT ORDER, WE 16 FIND THAT AS PER THE DETAILS FURNISHED BY THE ASSESSEE TO THE ASSESSING OFFICER REGARDING THESE EXPENSES, THE ASSESSEE HAS GIVEN ONLY THE NAME OF TH E DIVISION AND VOUCHER NUMBER. NO PARTICULAR HAS BEEN GIVEN AS TO FOR WHAT PURPOSE THESE EXPENSES WERE INCURRED. IN THE ABSENCE OF ANY DETAILS REGARDING THE EXPENSES INCLUDING NATURE OF THE EXPENSES, IT CANNOT BE FOUND OUT AS TO WHETHER THE SAME IS FOR B USINESS PURPOSE OR NOT. THE CIT(A) HAS DELETED THE DISALLOWANCE ON THE BASIS THAT THE DETAILS ARE ALREADY AVAILABLE IN HIS OPINION. FROM THE NATURE OF DETAILS AVAILABLE BEFORE THE ASSESSING OFFICER AS NOTED BY HIM ON PAGE NO. 40 OF THE ASSESSMENT ORDER , WE ARE OF THE CONSIDERED OPINION THAT WITH THESE DETAILS, THE EXPENSES CANNOT BE ALLOWED. WE REVERSE THE ORDER OF CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. 43.3 THE NEXT ITEM IS OF RS.1,45,803/ - ON ACCOUNT OF POOJA EXPENSES. T HE A SSESSING OFFICERS VERSION IS THAT POOJA EXPENSES CANNOT BE CONSIDERED AS EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. AS AGAINST THIS, CIT(A) HAS DELETED THIS DISALLOWANCE ON THE BASIS THAT THESE EXPENSES WERE INCURRED BY THE ASSESSEE TO KEEP HARMONIOUS RELATION WITH THE EMPLOYEES. WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) ON TH IS ISSUE. WE CONFIRM THE SAME. ON THIS ISSUE, RELIANCE WAS PLACED BY LEARNED D.R. OF THE REVENUE ON THE JUDGMENT OF HON'BLE CHHATTISGARH HIGH COURT RENDERED IN THE CASE OF HIRA FERRO ALLOYS LTD. VS DEPUTY COMMISSIONER OF INCOME - TAX (ASSESSMENT) [2010] 3 26 ITR 261. IN THIS CASE ALSO , THIS ARGUMENT WAS RAISED BEFORE THE HON'BLE HIGH COURT THAT THE COMPANY IS RUN BY THE MANAGEMENT AND LABOURERS AND THE EXPENDITURE ON POOJA ACTS AS MORALE BOOSTER FOR THE EMPLOYEES AND THUS IT IS CLEARLY ASSOCIATED WITH THE A SSESSEE S BUSINESS AND HENCE, ALLOWABLE U/S 37 OF THE ACT. BUT WHILE DECIDING THE ISSUE AS PER PARA 18, THE HON'BLE HIGH COURT HAS SIMPLY FOLLOWED ANOTHER JUDGMENT OF HON'BLE KARNATAKA 17 HIGH COURT RENDERED IN THE CASE OF SANGHAMESHWAR COFFEE ESTATES LTD. V S STATE OF KARNATAKA AS REPORTED IN [1986] 160 ITR 203 (KAR) AND THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF KOLHAPUR SUGAR MILLS LTD. VS COMMISSIONER OF INCOME - TAX AS REPORTED IN [1979] 119 ITR 387 (BOM) WITHOUT GIVING ANY FINDING ON THIS CONTENTION THAT SUCH POOJA EXPENSES ACT AS MORALE BOOSTER FOR THE EMPLOYEES AND LABOURERS. HENCE, IN OUR CONSIDERED OPINION, THIS JUDGMENT IS NOT CONCLUSIVE AND, THEREFORE, IN VIEW OF THE TRIBUNAL DECISION FOR VARIOUS EARLIER YEARS, WE DECLINE TO IN TERFERE IN THE ORDER OF CIT(A). 43.4 THE NEXT ITEM OF DISALLOWANCE DELETED BY CIT(A) IS OF RS.5,13,006/ - BEING EXPENSES ALLEGED TO BE NOT CONNECTED WITH BUSINESS. FROM THE ORDER OF CIT(A), WE FIND THAT IT IS NOTED BY CIT(A) THAT THIS AMOUNT OF EXPENSES I NCURRED OF RS.58,66,750/ - FOR DONATION AND OTHER EXPENSES NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE, SUCH AS CRICKET MATCH TICKET PURCHASE D FOR CUSTOMERS ETC. REGARDING ALLOWABILITY OF THE EXPENSES INCURRED WITH RESPECT TO CRICKET MATCH TICKETS PURC HASED FOR CUSTOMERS, WE HAVE ALREADY HELD THAT THE SAME IS NOT ALLOWABLE. FOR DONATION EXPENSES ALSO, DEDUCTION IS NOT ALLOWABLE AS BUSINESS EXPENSES. HENCE, ON THIS ISSUE, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF CIT(A) IS NOT SUSTAINABLE. HE NCE, WE REVERSE THE SAME AND RESTORE THAT OF THE ASSESSING OFFICER ON THIS ISSUE. 43.4 THE LAST ITEM OF DISALLOWANCE DELETED BY CIT(A) IS RS.14,329/ - ON ACCOUNT OF OUTSTANDING LIABILITY. 44. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 45. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT WAS THE CLAIM OF THE ASSESSEE BEFORE THE CIT(A) THAT THIS DISALLOWANCE WAS MADE BY THE 18 ASSESSING OFFICER WITHOUT GIVING ANY REASON. FROM THE ASSESSMENT ORDER ALSO, WE FIND THAT ON PAGE 49 OF THE ASSESSMENT ORDER, IT IS NOTED THAT OUTSTANDING LIABILITY IN CEMENT UNIT IS OF RS.14,329/ - AND BY MAKING THIS OBSERVATION ONLY , THE AMOUNT WAS INCLUDED FOR THE DISALLOWANCE OF RS.24,30,326/ - . HENCE, WE FIND FORCE IN THE SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE THAT THIS DISALLOWANCE OF RS.14,329/ - WAS MADE WITHOUT GIVING ANY REASON. WE ARE OF THE CONSIDERED OPINION THAT THE SAME WAS RIGHTLY DELETED BY CIT(A). GROUND NO. 12 IS PARTLY ALLOWE D AS INDICATED ABOVE. 46. GROUND NO. 13 OF THE REVENUES APPEAL IS AS UNDER: 13. 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/ - AND RS.5,43,4367 - AS REVENUE EXPENDITUR E. 47. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR 85 - 86 IN I.T.A. NO.5689/DEL/91 AND THE RELEVANT PORTION OF THE SAME IS AVAILABLE ON PAGE NO. 204 TO 207 OF THE ASSESSEES PAPER BOOK PART - II. 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 A SSESSING 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 CAPITAL WORK IN PROGRESS. THE 19 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 OU R 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 1/6 TH 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 DEPRECIATI ON 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 CAP ITALIZED. 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 E XTENT 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. 49. GROUND NO. 14 OF THE REVENUES APPEAL IS AS UNDER: 14. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.7,11,878/ - ON ACCOUNT OF AIR - CRAFT EXPENSES EVEN THOUGH THE ASSESSEE COULD NOT PROVIDE THE 20 DETAILS OF PERSONS WHO TRAVELED AND PURPOSE OF VISIT AND PLACE OF TRAVEL IN SPITE OF SPECIFIC OPPORTUNITY GIVEN. 50. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE AS PER VARIOUS TRIBUNAL DECISIONS IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 81 - 82 TO 83 - 84, 85 - 86, 86 - 87, 88 - 89 AND 89 - 90. HE FURTHER SUBMITTED THAT COPIES OF THESE TRIBUNAL ORDERS ARE AVAILABLE I N THE PAPER BOOK. 51. WE HAV E CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER PARA 15 OF HIS ORDER WHEREIN HE HAS STATED THAT THIS ISSUE IS ALREADY DECIDED IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS BY HIS PREDECESSOR AS WELL AS BY THE TRIBUNAL . LEARNED D.R. OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT YEAR. HENCE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THIS YEAR ON THIS ISSUE. THIS GROUND OF THE REVENUE IS REJECTED. 52. GROUND NO. 15 OF THE REVENUE S APPEAL IS AS UNDER: 15. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.14,42,283 / - ON ACCOUNT OF SUNDRY CREDIT BALANCE WRITTEN BACK IGNORING THE FACT THA T THESE EXPENSES RELATE TO EARLIER YEARS. 53. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE ALSO PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (I) COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. [1996] 22 2 ITR 344 (SC) (II) COMMISSIONER OF INCOME - TAX VS SUNDARAM INDUSTRIES LTD. [2002] 253 ITR 396 (MAD) (III) JAY ENGINEERING WORKS LTD. VS COMMISSIONER OF INCOME - TAX [2009] 311 ITR 299 (DEL) 21 54. LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). HE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUGAULI SUGAR WORKS (P.) LTD. AS REPORTED IN [1999] 236 ITR 518 (SC) AND A J UDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS WILLARD INDIA LTD. AS REPORTED IN [2008] 302 ITR 221 (ALL) . 55. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER THE AMENDMENT IN THE PROVISIONS O F SECTION 41(1) WITH EFFECT FROM 01/04/97, EVEN UNILATERAL ACT OF WRITING OFF CREDITORS BALANCE HAS BEEN BROUGHT WITHIN THE FOLD OF SECTION 41(1) OF THE ACT. HENCE, IT HAS TO BE ACCEPTED THAT EVEN IF ANY LIABILITY HAS BEEN WRITTEN BACK BY UNILATERAL ACT B Y AN ASSESSEE UP TO ASSESSMENT YEAR 96 - 97 THEN SUCH ACT OF THE ASSESSEE OF WRITING BACK THE LIABILITY IS NOT TAXABLE UP TO 96 - 97 BUT IN ASSESSMENT YEAR 97 - 98, THE SAME HAS TO BE TAXED BECAUSE AS PER THE AMENDED PROVISION S WITH EFFECT FROM 01/04/97, UNILATE RAL ACT OF WRITING BACK THE LIABILITY IS COVERED IN THE PROVISION S OF SECTION 41(1) OF THE ACT. WHEN THE ASSESSEE HAS WRITTEN BACK THE LIABILITY PRIOR TO THIS DATE , THE SAME WAS NOT LIABLE TO TAX TILL 31/03/97 THEN THE SAME HAS TO BE OFFERED FOR TAX BY TH E ASSESSEE IN A. Y. 97 - 98 BECAUSE THE LIABILITY STANDS WRITTEN BACK AND IT BECOMES TAXABLE BECAUSE OF THE AMENDMENT IN THE PROVISIONS OF SECTION 41(1) IN ASSESSMENT YEAR 97 - 98. HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) BUT WITH THE DIRECTION TH AT THE ASSESSING OFFICER SHOULD VERIFY AS TO WHETHER THIS AMOUNT OF RS.12,84,149/ - BEING SUNDRY CREDITORS BALANCE WRITTEN BACK HAS BEEN OFFERED TO TAX OR NOT IN ASSESSMENT YEAR 97 - 98 AND IF THE ASSESSEE HAS NOT SO OFFERED IT, HE SHOULD ENSURE THAT THIS AMO UNT WAS BROUGHT TO TAX IN THAT YEAR I.E. IN ASSESSMENT YEAR 97 - 98 IF IT IS NOT ALREADY DONE BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT FOR ASSESSMENT YEAR 97 - 98. 22 56. REGARDING VARIOUS JUDGMENTS CITED BY LEARNED D.R. OF THE REVENUE THAT THIS AMOUNT IS TAXABLE IN THE PRESENT YEAR ITSELF, WE FIND THAT THESE JUDGMENTS ARE NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. THE FIRST JUDGMENT IS THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. (SUPRA). IN THIS CASE, THE RECEIPT IN QUESTION WAS THE AMOUNT RECEIVED BY THE ASSESSEE AS DEPOSIT FROM CUSTOMERS IN COURSE OF BUSINESS WHICH WERE ORIGINALLY TREATED AS CAPITAL RECEIPT AND UNCLAIMED CREDIT BALANCE WHICH WERE TIME BARRED WERE WRITTEN BACK BY THE ASSESSEE TO THE PROFIT & LOSS ACCOUNT. UNDER THESE FACTS, IT WAS HELD BY HON'BLE APEX COURT THAT IF AN AMOUNT IS RECEIVED IN COURSE OF TRADING TRANSACTIONS, EVEN THOUGH IT IS NOT TAXABLE IN THE YEAR OF RECEIPT AS BEING OF CAPITAL NATURE, THE AMOUNT CHANGES ITS CHARACTER WHEN THE AMOUNT BECOMES ASSESSEES OWN MONEY. IN THE PRESENT CASE, THE FACTS ARE DIFFERENT. THE AMOUNT OF LIABILITY WRITTEN BACK BY THE ASSESSEE IS NOT ON ACCOUNT OF ANY RECEIPT FROM CUSTOMERS IN COURSE OF BUSINESS AND, THEREFORE, THIS JUDGMENT OF HON'BLE APEX COURT IS NOT APPLICABLE IN THE PRESENT CASE. 57. THE SECOND JUDGMENT CITED BY LEARNED D.R. OF THE REVENUE IS THE JUDGMENT OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUNDARAM INDUSTRIES LTD. (SUPRA). IN THIS CASE ALSO , THE DISPUTE WAS REGARDING SUNDRY CREDIT BALANCE OF THE CUSTOMERS AND WRITTEN BACK IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. UNDER THESE FACTS , HON'BLE MADRAS HIGH COURT FOLLOWED THE JUDGMENT OF HON'BLE APEX COURT REND ERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. (SUPRA). AS WE HAVE SEEN THAT IN THE FACTS OF THE PRESENT CASE, THE JUDGMENT OF COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. IS NOT APPLICABLE, AND THEREFORE, 23 FOR THE SAME REASONING , THIS JUDGMENT OF HON'BLE MADRAS HIGH COURT IS ALSO NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. 58. THE THIRD JUDGMENT CITED BY LEARNED D.R. OF THE REVENUE IS THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF JAY ENGINEERING WORKS LTD. VS COMMISSIONER OF INCOME - TAX (SUPRA). IN THIS CASE , HON'BLE DELHI HIGH COURT HAS SIMPLY FOLLOWED THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. IN PREFERENCE TO OTHER TWO JUDGMENTS OF HON'BLE APEX COURT RENDERED IN THE CASE OF CHIEF COMMISSIONER OF INCOME - TAX VS KESARIA TEA CO. LTD. AS REPORTED IN 254 ITR 434 (SC) AND 236 ITR 516 ON THE BASIS THAT SINCE THE JUDGMENTS OF HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. IS BY A LARGER BENCH OF THREE JUDGES, THE SAME SHOULD BE PREFERRED IN COMPARISON TO THESE TWO JUDGMENTS RENDERED BY A DIVISION BENCH OF TWO JUDGES OF HON'BLE APEX COURT. IN THIS JUDGMENT OF HON'BLE DELHI HIGH COURT, IT IS NOTED THAT IN THE CASE OF CHIEF COMMISSIONER OF INCOME - TAX VS KESARIA TEA CO. LTD. , HON'BLE SUPREME COURT HAS CONSIDERED BOTH THE EARLIER JUDGMENTS OF HON'BLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. AND COMMISSIONER OF INCOME - TAX VS SUGAULI SUGAR WORKS (P.) LTD. (SUPRA). EVEN AFTER CONSIDERING THE JUDGMENTS OF HON'BLE APEX COURT IN COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD., THE HON'BL E APEX COURT IN THE CASE OF CHIEF COMMISSIONER OF INCOME - TAX VS KESARIA TEA CO. LTD. DECIDED TO FOLLOW THE JUDGMENT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUGAULI SUGAR WORKS (P.) LTD. SINCE WE HAVE SEEN THAT THE JUDGMENT OF HON'BLE APEX COURT IN TH E CASE OF COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. IS NOT APPLICABLE BECAUSE OF DIFFERENCE IN FACTS, WE ARE OF THE CONSIDERED OPINION THAT IN THE PRESENT 24 CASE, THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF CHIEF COMMISSIONER OF INCOME - TAX VS KESARIA TEA CO. LTD. SHOULD BE FOLLOWED IN WHICH HON'BLE APEX COURT HAS ALREADY CONSIDERED THE JUDGMENT OF APEX COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SUNDARAM IYENGAR (T.V.) AND SONS LTD. RESPECTFULLY FOLLOWING THESE JUDGMENT S, WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNT IN QUESTION OF RS.12,84,849/ - IS NOT TAXABLE IN THE PRESENT YEAR BUT BECAUSE OF AMENDMENT IN SECTION 41(1), THE SAME SHOULD BE BROUGHT TO TAX IN THE YEAR 97 - 98 AS HAS BEEN DIRECTED BY US. 59. THE SECOND PART OF THIS GROUND IS REGARDING TAXATION OF RS.1,53,134/ - BEING GUESTHOUSE RECOVERIES (NET OF EXPENDITURE). ON THIS ISSUE ALSO , LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 60. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THIS ISSUE WAS DECIDED BY CIT(A) IN FAVOUR OF THE ASSESSEE ON THE BASIS THAT SIN CE THE EXPENSES INCURRED BY THE ASSESSEE ON GUESTHOUSE WERE NOT ALLOWED IN EARLIER YEARS, EXCESS RECOVERY ON ACCOUNT OF GUESTHOUSE EXPENSES SHOULD NOT BE BROUGHT TO TAX. IN OUR CONSIDERED OPINION, THIS STAND IS NOT SUSTAINABLE. REGARDING THE GUESTHOUSE E XPENSES INCURRED BY THE ASSESSEE, DISALLOWANCE IS AS PER SPECIFIC PROVISION S OF SECTION 37(4) OF THE ACT BUT ANY INCOME ON ACCOUNT OF GUESTHOUSE IS NOT EXEMPT UNDER ANY PROVISION S OF THE ACT. HENCE, ANY EXCESS RECOVERY HAS TO BE TAXED. HENCE, ON THIS ISS UE, WE REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. ACCORDINGLY, GROUND NO. 15 IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 61. GROUND NO. 16 IS AS UNDER: 16. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN ALLOWING RELIEF OF 25 RS,19,57,470/ - BEING THE DISALLOWANCE ON ACCOUNT OF PROPORTIONATE INTEREST ON THE INTEREST FREE LOANS TO 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. 62. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARN ED CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER TRIBUNAL DECISION FOR ASSESSMENT YEAR 84 - 85, 85 - 86 AND 88 - 89. HE ALSO SUBMITTED THAT THE COPIES ARE AVAILABLE IN THE PAPER BOOK. 63. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN ASSESSMENT YEAR 84 - 85, THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN I.T.A. NO.492/DEL/88. THE RELEVANT PARA IS PARA NO. 75. IN THIS PARA , THE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF INDIAN EXPLOSIVES LTD. VS COMMISSIONER OF INCOME - TAX [1984] 147 ITR 392 (CAL) . THIS FINDING IS ALREADY GIVEN BY THE TRIBUNAL THAT THE INVESTMENT WAS MADE IN ASSESSMENT YEAR 81 - 82 AND IN THAT YEAR , THE PROFITS WERE SUFFICIENT TO MAKE THESE INVESTMENTS. THE TRIBUNAL HAS GIVEN A CLEAR FINDING THAT THE CASH PROVIDED BY THE ASSESSEE IN ASSESSMENT YEAR 82 - 83 WERE UNDOUBTEDLY RS. 11.71 CRORES. THIS FINDING IS ALSO GIVEN THAT CASH PROVIDED HAS BEEN CREDITED TO BANK ACCOUNT WHICH IS MUCH MORE THAN THE INVESTMENT. UNDER THESE FACTS, THE TRIBUNAL DELETED THE DISALLOWANCE OF INTEREST IN THAT YEAR. IN THE ASSESSMENT ORDER, IT IS NOTED BY THE ASSESSING OFFICER THAT IN ASSESSMENT YEAR 83 - 84, THE ASSESSEE HAD INVESTED RS.108.75 LAC OUT OF BORROWED FUNDS FOR THE PURPOSE OF SHARES OF ASFL & J.K. SATOH AGRICULTURAL MACHINES LTD. THE ASSESSING OFFICER DISALLOWED THE INTEREST ON THIS INVESTMENT @18% OF THE INVESTMENT. HENCE, IT IS SEEN THAT THE DISALLOWANCE IS MADE BY THE ASSESSING OFFICER IN RESPECT OF INVESTMENT IN SHARES IN FINANCIAL YEAR 82 - 83 RELEVANT TO 26 ASSESSMENT YEAR 83 - 84. T HE TRIBUNAL HAS GIVEN A FACTUAL FINDING THAT THE INVESTMENT WAS OUT OF CASH PROFIT OF THAT YEAR AND THEREFORE, NO DISALLOWANCE OF INTEREST IS JUSTIFIED. WE DO NO T FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR. HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. THIS GROUND OF REVENUE IS REJECTED. 64. GROUND NO. 17 READS AS UNDER: 17. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE PROSPECTING EXPENDITURE UNDER SECTION 35E. 65. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. AS AGAINST THIS , LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SU BMITTED THAT THIS ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 85 - 86 IN I.T.A. NO.5850/DEL/91 AND RELEVANT PORTION IS AVAILABLE ON PAGE NO. 141 OF PART - I OF THE PAPER BOOK. 66. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT WAS HELD BY THE TRIBUNAL IN ASSESSMENT YEAR 85 - 86 THAT DEDUCTION IS ALLOWED TO THE ASSESSEE TO THE EXTENT OF 1/10 TH OF THE EXPENSES U/S 35E OF THE ACT. IN THE PRESENT YEAR, THE CLAIMED WAS MADE BY THE ASSESSEE OF RS.3,56,271/ - BEING 1/10 TH OF THE EXPENSES INCURRED FOR ASSESSMENT YEAR 81 - 82 TO ASSESSMENT YEAR 87 - 88 BUT THE ASSESSING OFFICER ALLOWED DEDUCTION TO THE EXTENT OF RS.75,526/ - ONLY AND DISALLOWED THE BALANCE AMOUNT OF RS.2,85,768/ - . THE REASON GIVEN BY THE ASSESSING OFFICER IS THA T THE AMOUNT CLAIMED BY THE ASSESSEE IN ASSESSMENT YEAR 82 - 83, 83 - 84, 84 - 85 AND 85 - 86 WERE NOT ALLOWED IN THE RESPECTIVE YEARS AND, THEREFORE, THE SAME ARE NOT ALLOWABLE IN THE PRESENT YEAR ALSO. THE CIT(A) HAS DELETED THIS DISALLOWANCE ON THE BASIS THAT THE CLAIM WAS ALLOWED BY THE TRIBUNAL IN ASSESSMENT YEAR 85 - 86. THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 85 - 86 IS AVAILABLE ON PAGE NO. 141 27 OF THE PAPER BOOK WHERE IT IS SEEN THAT OUT OF EXPENSES AMOUNTING TO RS.6,25,122/ - CLAIMED BY THE ASSESSEE, 1/10 TH WA S ALLOWED U/S 35E BY CIT(A). THE COPY OF TRIBUNAL ORDER FOR ASSESSMENT YEAR 85 - 86 IS AVAILABLE ON PAGE NO. 209 AND 210 PART - II OF THE ASSESSEES PAPER BOOK. A S PER THIS ORDER ALSO, IT WAS HELD THAT 1/10 TH OF THE CLAIM IS ALLOWABLE. BUT HERE THE TRIBUNAL IS TALKING ABOUT THE EXPENSES OF RS.6,25,122/ - , WHICH WAS CONSIDERED BY THE ASSESSING OFFICER AS UNVERIFIABLE. BUT CIT(A) HAS HELD THAT THE SAME IS UNVERIFIABLE. HENCE, FROM THESE TWO TRIBUNAL ORDERS AND THE ORDER OF CIT(A) , IT IS NOT COMING OUT AS TO W HETHER THE EXPENSES WERE ALLOWED IN THE YEAR IN WHICH IT IS STATED TO HAVE BEEN INCURRED I.E. ASSESSMENT YEAR 81 - 82 AND 83 - 84 TO 85 - 86. HENCE, ON THIS ISSUE, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER FOR FRES H DECISION AFTER EXAMINING THE FACTUAL ASPECT. WE WANT TO MAKE IT CLEAR THAT THE BURDEN IS ON THE ASSESSEE TO ESTABLISH BEFORE THE ASSESSING OFFICER THAT 1/10 TH OF EXPENSES WERE SO ALLOWED IN ASSESSMENT YEAR 81 - 82 AND 83 - 84 TO 85 - 86 AND IF THE ASSESSEE IS ABLE TO ESTABLISH THIS CONTENTION THEN NO DISALLOWANCE SHOULD BE MADE BUT OTHERWISE , THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURP OSES. 67. GROUND NO. 18 READS AS UNDER: 18. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN ALLOWING RELIEF OF RS.4,15,766/ - ON THE GROUND THAT THE AMOUNT REPRESENTED CONVERSION CHARGES & PROCESSING CHARGES IS NOT HIT BY SECTION 43B. 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 28 ASSESSEE BY THE TRIBUNAL DEC ISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 86 - 87 IN I.T.A. NO.721/LKW/93, RELEVANT PORTION OF WHICH IS AVAILABLE ON PAGE NO. 93 TO 96 OF PART - II OF THE ASSESSEES PAPER BOOK. 69. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT(A) IN PARA 21 THAT IN ASSESSMENT YEAR 86 - 87, THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.70,22,644/ - TOWARDS EXCISE DUTY PAYABLE ON CONVERSION CHARGES OUT OF WHICH ASSESSING OFFICER DISALLOWED RS.4,15,766/ - U/S 43B OF THE ACT ON ACCOUNT OF NON PAYMENT. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS THAT SINCE THE AMOUNT OF RS.4,15,766/ - HAS ALREADY BEEN TAXED IN ASSESSMENT YEAR 86 - 87, THE DEDUCTION IN RESPECT OF REVERSAL OF LIABILITY IN THE PRESENT YEAR OF RS.4,15,766/ - HAS TO BE ALLOWED. BUT WE FIND TH AT IN ASSESSMENT YEAR 86 - 87, THIS DISALLOWANCE OF RS.4,15,766/ - WAS DELETED BY CIT(A) AND WHEN SECOND APPEAL WAS FILED BEFORE THE TRIBUNAL, THE GROUND WAS DISMISSED BY THE TRIBUNAL AND THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. HENCE, THE FACTS STA ND THAT IN ASSESSMENT YEAR 85 - 86, THE AMOUNT STANDS ALLOWED AS PER THIS SUBSEQUENT ORDER OF CIT(A) AND THE TRIBUNAL IN ASSESSMENT YEAR 86 - 87 AND, THEREFORE, AS A CONSEQUENCE , NO DEDUCTION IS ALLOWABLE IN THE PRESENT YEAR BECAUSE THE LIABILITY FOR WHICH DED UCTION WAS ALLOWED FOR ASSESSMENT YEAR 86 - 87 HAS BEEN WRITTEN BACK AND, THEREFORE, HAS RIGHTLY BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER. ACCORDINGLY, THIS GROUND OF REVENUE IS ALLOWED. ORDER OF CIT(A) IS REVERSED AND THAT OF THE ASSESSING OFFICER IS RESTORED. 70. GROUND NO. 19 READS AS UNDER: 19. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN ALLOWING RELIEF OF RS.18,01,687/ - ON ACCOUNT OF EXCISE DUTY UNDER PROTEST IGNORING THE FACT THAT IT WAS AN ADMITTED LIABILITY AND NOT ALLOWABLE U/S 43B OF THE ACT. 29 71. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). LEARNED A.R. OF THE ASSESSEE ALSO PLACED RELIANCE ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF CI T VS. MARUTI SUZUKI INDIA LTD. AS REPORTED IN [2013] 81 DTR 152 (DEL) AND A DECISION OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SHRI RAM HONDA POWER EQUIPMENT LTD. AS REPORTED IN [2013] 352 ITR 481 (SC) . 72. WE HAVE CON SIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER ON PAGE NO. 68 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS PAID A SUM OF RS.18,01,681/ - AS EXCISE DUTY UNDER PROTEST TO EXCISE DEPARTMENT. HE HAS ALSO NOTED THAT THIS DUTY HAS BEEN PAID IN TERMS OF VARIOUS ORDERS PASSED BY EXCUSE AUTHORITIES. IT WAS CLAIMED BY THE ASSESSEE THAT SINCE THE AMOUNT WAS PAID BY THE ASSESSEE IN PRESENT YEAR, THE DEDUCTION IS TO BE ALLOWED U/S 43B OF THE ACT. THIS CLAIM WAS REJECTED BY THE ASSES SING OFFICER ON THE BASIS THAT SIMILAR AMOUNT WAS DISALLOWED IN ASSESSMENT YEAR 86 - 87 AND IN THAT YEAR , CIT(A) HAS DELETED THIS DISALLOWANCE BUT REVENUE FILED APPEAL BEFORE THE TRIBUNAL, WHICH WAS PENDING WHEN THE ASSESSMENT ORDER WAS PASSED. FOR THIS REA SON , THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM IN THE PRESENT YEAR. NOTHING HAS BEEN BROUGHT ON RECORD BEFORE US THAT IN APPEAL OF THE REVENUE THE DECISION OF CIT(A) HAS BEEN REVERSED BY THE TRIBUNAL. THE TRIBUNAL ORDER IN REVENUES APPEAL FOR ASSESS MENT YEAR 86 - 87 IN I.T.A. NO.721/DEL/93 DATED 28/03/2008 IS AVAILABLE ON PAGE NO. 89 TO 166 OF THE PAPER BOOK AND WE COULD NOT FIND ANY SUCH GROUND RAISED BY THE REVENUE. UNDER THESE FACTS, NOW WE EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS . SHRI RAM HONDA POWER EQUIPMENT LTD. (SUPRA) . AS PER THIS JUDGMENT, IT WAS HELD BY HON'BLE APEX COURT THAT EVEN AN AMOUNT LYING CREDITED IN MODVAT ACCOUNT 30 AT THE END OF THE ACCOUNTING YEAR IS ALLOWABLE. SINCE THIS IS NOT IN DISPUTE THAT THE AMOUNT OF EXCISE DUTY WAS IN FACT PAID BY THE ASSESSEE IN THE PRESENT YEAR, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS REJECTED. 73. GROUND NO. 20 READS AS UNDER: 20. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE EXCISE DUTY PAYABLE ON UNCLEARED GOODS CANNOT BE ADDED TO THE VALUATION OF OPENIN G STOCK AND THEREBY ALLOWING A RELIEF OF RS.5 CRORES. 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). LEARNED A.R. OF THE ASSESSEE ALSO SUBMITTED THAT THIS ISSUE IS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN ASSESSMENT YEAR 85 - 86 AND 86 - 87. 75. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 35 & 36 THAT IN ASSESSMENT YEAR 86 - 87 , AN AD HOC ADDITION OF RS.5 CRORE WAS MADE IN THE VALUE OF CLOSING STOCK OF UNCLEARED GOODS LYING IN STOCK AS ON 31/03/86. THE ASSESSEES CLAIM WAS THAT THIS AMOUNT SHOULD BE ADDED TO THE OPENING STOCK IN THE PRESENT YEAR. THE ASSESSING OFFICER FOUND THA T IN APPEAL, THE CIT(A) HAS DELETED THIS ADDITION OF RS.5 CRORE IN ASSESSMENT YEAR 86 - 87 AND FOR THIS REASON , THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM OF THE ASSESSEE. TRIBUNAL DECISION FOR ASSESSMENT YEAR 86 - 87 IN I.T.A. NO.721/DEL/93 IS AVAILABLE O N PAGE NO. 97 TO 105 OF PART - II OF THE PAPER BOOK. AS PER PARA 19, THE TRIBUNAL HAS CONFIRMED THE ORDER OF CIT(A) ON THIS ISSUE BY FOLLOWING THE TRIBUNAL ORDER IN ASSESSMENT YEAR 85 - 86. SINCE THE ADDITION ITSELF WAS DELETED IN 31 ASSESSMENT YEAR 85 - 86 BY TH E TRIBUNAL, THERE IS NO BASIS OF THE CLAIM OF THE ASSESSEE FOR ANY INCREASE IN OPENING STOCK OF THE PRESENT YEAR. HENCE, ON THIS ASPECT , WE REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. THIS GROUND OF THE REVENUE IS ALLOWED. 76 . GROUND NO. 21 READS AS UNDER: 21. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE EXCISE DUTY PAYABLE ON UNCLEARED GOODS CANNOT BE ADDED TO THE VALUATION OF CLOSING STOCK AND THEREBY ALLOWING A RELIEF OF RS.2,72,85,874/ - . 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 TRIBUNA L DECISION IN ASSESSMENT YEAR 84 - 85 & 86 - 87 AND COPY OF THESE ORDERS ARE AVAILABLE ON PAGE NO. 97 TO 105 & 281 TO 282 IN PART - II OF THE ASSESSEES PAPER BOOK. 78. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT CIT(A) HAS DELETED THIS ADDITION BY FOLLOWING THE TRIBUNAL ORDER IN I.T.A. NO.687. SINCE NO DIFFERENCE IN FACTS C OULD BE POINTED OUT BY LEARNED DR OF THE REVENUE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. THIS GROUND OF THE REVENUE IS REJECTED . 79. GROUND NO. 22 IS AS UNDER: 22. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE GUARANTEE CHARGES OF RS.2,60,939/ - AS REVENU E EXPENDITURE. 80. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED 32 CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE A LLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. N OIDA TOLL BRIDGE CO. LTD. AS REPORTED IN [2012] 80 DTR 379 (ALL). 81. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT CITED BY LEARNED A.R. OF THE ASSESSEE. WE FIND THAT DISPUTE IN THE PRE SENT CASE IS REGARDING GUARANTEE EXPENSES INCURRED BY THE ASSESSEE IN RESPECT OF GUARANTEE FURNISHED TO CUSTOM AUTHORITIES IN CONNECTION WITH IMPORT OF GOODS RS.71,184/ - , GUARANTEE FURNISHED TO PRESIDENT OF INDIA FOR IMPORT OF GOODS RS.99,755/ - AND GUARAN TEE FURNISHED TO RAJ INDUSTRIAL ENTERPRISES FOR PURCHASE OF PUMPS RS.90,000/ - TOTAL RS.2,60,939/ - . NOW IN THE LIGHT OF THESE FACTS, WE EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. N OIDA TOLL BRIDGE CO. LTD. (SUPRA). IN THIS CASE , THE ISSUE IN DISPUTE WAS REGARDING GUARANTEE CHARGES PAID AS PER AGREEMENT WITH IC&FS AND IDFC FOR GUARANTEE FOR PURCHASE OF DDB HOLDERS PURSUANT TO EXERCISE OF REDEMPTION OPTION. UNDER THESE FACTS, IT WAS HEL D BY HON'BLE ALLAHABAD HIGH COURT THAT THE EXPENSES INCURRED ARE OF REVENUE NATURE. IN THE PRESENT CASE, IT IS NOTED BY THE ASSESSING OFFICER ON PAGE NO. 73 OF THE ASSESSMENT ORDER THAT AMOUNT OF RS.11,040/ - WAS IN RESPECT OF IMPORT OF 21 MACHINES, RS.9,3 5,640/ - IS IN RESPECT OF IMPORT OF MACHINERY, RS.6,191/ - IN RESPECT OF CLEARANCE OF CAPITAL GOODS AND RS.90,000/ - FOR PURCHASE OF PUMPS. THESE FOUR ITEMS ARE CLEARLY ACQUISITION OF CAPITAL GOODS AND HENCE, ANY EXPENSES INCURRED IN RESPECT OF ACQUISITION O F FIXED ASSETS HAS TO BE CAPITALIZED AND SAME CANNOT BE ALLOWED AS REVENUE EXPENDITURE. THE REMAINING AMOUNTS ARE IN RESPECT OF CLEARANCE OF IMPORTED GOODS. SINCE THESE EXPENSES ARE IN RESPECT OF 33 GOODS, WHICH IS REVENUE EXPENDITURE, THE EXPENSES INCURRED ON GUARANTEE COMMISSION ON THOSE ITEMS IS ALLOWABLE. WE ORDER ACCORDINGLY. THIS GROUND OF REVENUE IS PARTLY ALLOWED. 82. GROUND NO. 23 IS AS UNDER: 23. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE OTHER PROFESSIONAL AND ACTUARIAL FEE OF RS.11,300/ - AS REVENUE EXPENDITURE. 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). 84. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) THAT THIS EXPENDITURE OF RS.6,600/ - IS INCURRED DURING THE COURSE OF BUSINESS OF THE ASSESSEE . THIS FINDING OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED DR AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). THIS GROUND OF THE REVENUE IS REJECTED. 85. GROUND NO. 24 IS AS UNDER: 24. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.34,06,213/ - ON ACCOUNT OF CLOSING STOCK OF SPARE PARTS EVEN THOUGH THE ASSESSEE COULD NOT PROVE THAT ALL ITEMS CHARGED UNDER THIS HEAD WERE ROUTED T HROUGH STORES IN SPITE OF SPECIFIC OPPORTUNITY GIVEN. 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). 34 87. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE SUM OF RS.816.58 LAC HAS BEEN CHARG ED TO PROFIT & LOSS ACCOUNT BEING REPAIRS TO PLANT & MACHINERY AS AGAINST RS.603.68 LAC IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE DETAILS. HE HAS GIVEN A FINDING THAT THE ASSESSEE HAS NOT PROVED THAT ALL THE ITE MS HAVE BEEN ROUTED THROUGH STORES EXCEPT THOSE WHICH HAVE BEEN SPECIFICALLY SO SHOWN. HE HAS ALSO NOTED THAT THE FACTUAL POSITION WAS SAME IN EARLIER YEAR AND THERE WAS NO CONSUMPTION REGISTER. HE HAS ALSO NOTED THAT SIMILAR ADDITION WAS MADE IN ASSESSM ENT YEAR 71 - 72 WHICH HAS BEEN UPHELD BY THE TRIBUNAL AND THE TRIBUNAL FOLLOWED THIS ORDER IN ASSESSMENT YEAR 75 - 76. THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE ON THE BASIS THAT 1/6 TH OF THE EXPENSES SHOULD BE CONSIDERED AS LYING IN CLOSING STOCK. THE ASSESSING OFFICER WORKED OUT SUCH CLOSING STOCK AT RS.56,12,890/ - . THE ASSESSING OFFICER NOTED THAT IN ASSESSMENT YEAR 86 - 87 RS.54,00,583/ - WAS DISALLOWED. THE ASSESSING OFFICER ALLOWED THE BENEFIT OF RS.54,00,583/ - FOR INCREASE IN OPENING STOCK OF THE PRESENT YEAR AND MADE NET ADDITION OF RS.2,12,370/ - ONLY BEING DIFFERENCE OF RS.56,12,890/ - MINUS RS.54,00,583/ - . THE DECISION OF CIT(A) ON THIS ISSUE AS PER PARA 24 ON PAGE 3 7 IS AS UNDER: 24. GROUND NO. 21 - CLOSING STOCK OF SPARE PARTS - REPAIRS TO MACHINERY - RS. 34,06,213/ - THE AO HAS MADE AN ADDITION TOWARDS CLOSING STOCK OF SPARE PARTS UNDER THE HEAD 'REPAIRS TO MACHINERY', AMOUNTING TO RS.56,12,890/ - FOR THE YEAR UNDER CONSIDERATION AND BY GIVING SET OFF OF OPENING BALANC E IN THE A.YR. 1986 - 87 AMOUNTING TO RS.54,00,583/ - , A NET ADDITION OF RS.2,12,307/ - WAS MADE BY HIM ON PAGES 76 TO 78 OF HIS ORDER. 35 THE LEANED COUNSEL FOR APPELLANT HAS STATED THAT THE APPELLANT HAS OFFERED A SUM OF RS.22,06,677/ - ON THE BASIS OF A FORMULA INDICATED BY ITAT IN APPEAL FOR THE YEAR 1993 - 94. THUS, APPELLANT HAS AGGRIEVED BY AN ADDITION OF RS.34,06,213/ - (56,12,890 - 22,06,677). THE LD. COUNSEL FOR THE APPELLANT ALSO STATED, THAT THIS ISSUE IS SQUARELY COVERED BY MY LEARNED PREDECESSORS' ORDERS IN THE APPELLANT OWN CASE FOR A.YRS. 1993 - 94 (PAGE 46 - 47), A.YR. 1994 - 95 (PAGE 37) AND A.YR. 1995 - 96 (PAGE 20) WHEREBY THE ADDITION MADE BY AO IS DELETED ON THE BASIS OF HON'BLE ITAT IN APPELLANTS OWN CASE IN ASSESSMENT YEAR 1983 - 84. BY AGREEING WITH THE S AME, THE ADDITION MADE BY AO IS DELETED. (RELIEF RS.34,06,213/ - ). 87.1 FROM THE ABOVE PARA OF CIT(A), WE FIND THAT WHEN THE ASSESSING OFFICER HAS MADE ADDITION OF RS.2,12,307/ - THEN HOW THE ASSESSEE CAN CLAIM RELIEF OF RS.3 4 , 06 ,634/ - AND CIT(A) CAN ALLOW SUCH RELIEF. WE, THEREFORE, REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. THIS GROUND OF THE REVENUE IS ALLOWED. 88. GROUND NO. 25 IS AS UNDER: 25. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.28,00,000/ - OUT OF THE CLAIM MADE FOR CONSUMPTION OF SPARE PARTS OTHER THAN FOR MACHINERY REPAIRS IGNORING THE FACTS THAT THE ITEMS WERE NOT SHOWN IN LOSING STOCK IN EARLIER YEARS. 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 ORDERS IN ASSESSEES OWN CA SE FOR ASSESSMENT YEAR 84 - 85, 85 - 86 AND 86 - 87. 90. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF EARLIER YEARS ASSESSMENT ORDERS. NOW WE FIND THAT IN ASSESSMENT YEAR 84 - 85, 85 - 86 A ND 86 - 87, THE 36 TRIBUNAL HAS DELETED SIMILAR ADDITION MADE BY THE ASSESSING OFFICER IN THOSE YEARS. SINCE LEARNED D.R. OF THE REVENUE COULD NOT POINT ANY DIFFERENCE IN FACTS IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESE NT YEAR. HENCE, RESPECTFULLY FOLLOWING THESE EARLIER TRIBUNAL ORDERS, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). THIS GROUND OF THE REVENUE IS REJECTED. 91. GROUND NO. 26 IS AS UNDER: 26. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED I N LAW AND ON FACTS IN DELETING THE GRATUITY LIABILITY OF RS.59,08,034 / - OF STEEL DIVISION TRANSFERRED TO OTHER COMPANY IGNORING THE FACT THAT NO PAYMENT OF GRATUITY HAD BEEN MADE U/S 43B B Y THE ASSESSEE. 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). 93. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE IN DISPUTE IS REGARDING A LLOWABILITY OF GRATUITY OF STEEL DIVISION OF THE ASSESSEE COMPANY FOR RS.59,08,034/ - . THIS IS THE CLAIM OF THE ASSESSEE THAT THIS LIABILITY OF J. K. S TEEL U NIT WAS TRANSFERRED BY THE ASSESSEE COMPANY TO RISHRA STEEL LTD. WITH EFFECT FROM 02/12/86 AND THE SAME WAS TAKEN OVER BY THE NEW COMPANY IN TERMS OF AGREEMENT DATED 27/11/96 AND THEREFORE, THE LIABILITY STANDS PAID AS ON 02/12/86 AND THEREFORE, DEDUCTION IS ALLOWABLE IN THE PRESENT YEAR U/S 43B OF THE ACT. IN THIS REGARD, WE FIND THAT AS PER THE PROVI SIONS OF SECTION 43B OF THE ACT, DEDUCTION IN RESPECT OF GRATUITY LIABILITY IS ALLOWABLE IN THE YEAR OF PAYMENT. NOW THE QUESTION IS WHETHER THE TAKING OVER OF THE GRATUITY LIABILITY BY DIFFERENT COMPANY AMOUNTS TO PAYMENT OF GRATUITY AS REQUIRED U/S 43B OF THE ACT. IN OUR CONSIDERED OPINION, IT CANNOT BE SAID THAT THE GRATUITY HAS BEEN PAID 37 BECAUSE THE EMPLOYEES, WHO WERE ENTITLED TO RECEIVE GRATUITY, HAVE NOT RECEIVED THE GRATUITY AND THEREFORE, FOR THE PURPOSE OF SECTION 43B, ONLY WHEN THE CONCERNED EMPLOYEE RECEIVED THE GRATUITY THEN ONLY IT CAN BE SAID THAT THE GRATUITY HAS BEEN PAID BY T HE ASSESSEE COMPANY BECAUSE IF DEDUCTION IS ALLOWED TO THE ASSESSEE UNDER THESE FACTS, HENCE WITHOUT ENSURING THAT THE CONCERNED EMPLOYEE HAS RECEIVED THE GRATUITY PAYMENT, DEDUCTION CANNOT BE ALLOWED TO THE ASSESSEE U/S 43B OF THE ACT. BUT THIS ASPECT OF MATTER WAS NEVER EXAMINED BY THE AUTHORITIES BELOW AS TO WHETHER THE TRANSFEREE COMPANY HAS PAID THE GRATUITY TO THE EMPLOYEES IN THE PRESENT YEAR OR IN ANY SUBSEQUENT YEAR AND THEREFORE, WE FEEL IT PROPER THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION. THE ASSESSEE SHOULD BRING EVIDENCE ON RECORD REGARDING PAYMENT OF GRATUITY TO THE CONCERNED EMPLOYEES BY THE TRANSFEREE COMPANY AND IF IT IS FOUND THAT THE GRATUITY WAS PAID BY THE TRANSFEREE COMPANY IN THE PRESENT YEAR TO THE EMPLOYEES, DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE COMPANY IN THE PRESENT YEAR BUT IF THERE IS NO SUCH PAYMENT IN THE PRESENT YEAR, THEN DEDUCTION IS NOT ALLOWABLE TO THE ASSESSEE IN THE PRESENT YEAR . HOWEVER, THE SAME SHOULD BE ALLOWED TO THE ASSESSEE COMPANY IN THE YEAR IN WHICH GRATUITY LIABILITY HAS BEEN PAID BY THE TRANSFEREE COMPANY TO THE EMPLOYEES TO THE EXTENT OF GRATUITY LIABILITY TRANSFERRED BY THE ASSESSEE COMPANY TO THE TRANSFEREE COMPANY AND IF THE AMOUNT IS PAID BY THE TRANSF EREE COMPANY IS MORE THAN THE GRATUITY LIABILITY TRANSFERRED THEN FOR SUCH EXCESS AMOUNT , DEDUCTION SHOULD BE ALLOWED TO THE TRANSFEREE COMPANY IN THE YEAR OF PAYMENT AND DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE COMPANY TO THE EXTENT OF GRATUITY LIABILI TY TRANSFERRED BY THE ASSESSEE COMPANY. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 38 94. 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 THAT THE GRATUITY LIABILITY OF RS.28,35,023/ - PAID TO EX - EMPLOYEE OF RAYON UNIT IGNORING THE FACT THAT THE BUSINESS IN RAYON UNIT HAD SINCE BEEN CLOSED. 95. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE ALSO SUBMITTED THAT AS PER ASSESSMENT ORDER, THE GRATUITY LIABILITY PERTAINS TO THE ASSESSMENT YEAR 1969 - 70 BUT SECTION 43B HAS COME INTO FORCE WITH EFFECT FROM 01/04/84 AND THEREFORE, IT CANNOT BE SAID THAT THE GRATUITY LIABILITY WAS NOT ALLOWED IN THE RELEVANT YEAR I.E. IN THE YEAR 1969 - 70. 96. LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT THERE IS NO DISPUTE THAT THE AMOUNT WAS PAID IN THE PRESE NT YEAR AND THEREFORE, THE SAME IS ALLOWABLE IN THE PRESENT YEAR U/S 43B OF THE ACT AND THIS IS NOT THE BASIS OF DISALLOWANCE BY THE ASSESSING OFFICER THAT IT WAS ALLOWED IN THE ASSESSMENT YEAR 1969 - 70 AND THEREFORE, NOT ALLOWABLE IN THE PRESENT YEAR. 97. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND FORCE IN THE SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE THAT GRATUITY LIABILITY IS ALLOWABLE ON PAYMENT BASIS U/S 43 B AND IT IS NOT IN DISPUTE THAT THE SAID LIABILITY WAS PAID BY THE ASSESSEE IN THE PRES ENT YEAR. THIS IS ALSO NOT A CASE OF THE ASSESSING OFFICER THAT THE SAME WAS ALLOWED IN THE YEAR 1969 - 70 AND THEREFORE, THERE IS NO REASON TO MAKE DISALLOWANCE OF THIS DEDUCTION IN THE PRESENT YEAR AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CI T(A) ON THIS ISSUE. GROUND NO. 27 IS REJECTED. 98. GROUND NO. 28 IS AS UNDER: 39 28. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A. O. 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. 99. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 100. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT CIT(A) HAS SIMPLY DIRECTED THE ASSESSING OFFICER TO QUAN TIFY THE AMOUNT OF INVESTMENT ALLOWANCE SUBJECT TO DEDUCTION IN THE YEAR OF CREATION OF NECESSARY RESERVE BY THE ASSESSEE AND WE DO NOT FIND ANY INFIRMITY IN THIS DIRECTION OF CIT(A) AND THEREFORE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. GROUND NO. 28 IS REJECTED. 101. GROUND NO. 29 IS AS UNDER: 29. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,66,306/ - ON ACCOUNT OF REVENUE STAMP AND STAMP PAPERS EVEN THOUGH THE ASSESSEE FAILED TO FURNISH THE REQUIRED DETAILS IN SPITE OF SPECIFIC OPPORTUNITY GIVEN. 102. 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 THA T LCS WERE OPENED FOR PROCUREMENT OF SPARES AND NOT FOR PLANT & MACHINERY AND THEREFORE, DEDUCTION IS ALLOWABLE. 103. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT(A) THAT THE AMOUNT IN DISPUTE WAS CHARGED BY EXPRESS BANK LTD. , DELHI AGAINST FOREIGN BILLS STAMPS ON VARIOUS LCS DEBITED BY THE BANK ON 09/09/1986. BASED ON THIS, THIS BASIS HAS BEEN GIVEN BY CIT(A) THAT THE 40 DETAILS SUBMITTED BY THE ASSESSEE ARE SELF - SUFFICIENT AND THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT PRODUCE THE EVIDENCE. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND DECLINE TO INTERFERE IN THE ORDER OF CIT(A). GROUND NO. 29 IS REJECTED. 104. GROUND NO. 30 IS AS UNDER: 30. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.60,608/ - ON ACCOUNT OF TRAVELING EXPENSES EVEN THOUGH THE ASSESSEE COULD NOT PROVE THAT THE DISALLOWANCE IN RESPECT OF COMPANY'S GUEST OVERLAPPED THE DISALLOWANCE UNDER RULE 6D. 105. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 106. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE DISALLOWANCE WAS DELETED BY CIT(A) ON THE BASIS THAT THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT ONCE THE ENTIRE AMOUNT HAS BEEN OFFERED FOR DISALLOWANCE, NO FURTHER DISALLOWANCE CAN BE MADE UNDER RULE 6D SINCE BOTH ARE MUTUALLY EXCLUSIVE. THIS FINDING OF CIT(A) DOES NOT CONTAIN ANY INFIRMITY AND T HEREFORE, WE DECLINE TO INTERFERE WITH THE ORDER OF CIT(A). GROUND NO. 30 IS REJECTED. 107. GROUND NO. 31 IS AS UNDER: 31. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN REDUCING THE ADDITION OF RS.3,61,686/ - T O RS.2,00,936/ - IGNORING THE PRINCIPLES LAID DOWN IN THE CASE OF CIT VS. YADAV TRANSPORT SERVICE 167 ITR 474 (RAJ.) 108. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED 41 CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1985 - 86. 109. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT TOTAL DISALLOWANCE MADE BY THE ASSESSIN G OFFICER WAS RS.4,01,873/ - AGAINST WHICH RELIEF WAS ALLOWED BY THE CIT(A) TO THE EXTENT OF 50% I.E. RS.2,00,936/ - AND THIS RELIEF WAS ALLOWED BY HIM BY FOLLOWING THE EARLIER ORDER OF CIT(A) IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1994 - 95 AND 1995 - 96. IN ASSESSMENT YEAR 1993 - 94, THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND THE ORDER OF CIT(A) IN THAT YEAR FOR DELETING 50% ADDITION WAS CONFIRMED BY THE TRIBUNAL. SINCE NO DIFFERENCE IN FACTS C OULD BE POINTED OUT BY LEARNED D.R., WE D O NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR. GROUND NO. 31 IS REJECTED. 110. GROUND NO. 32 IS AS UNDER: 32. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4,80,344/ - ON ACCOUNT OF PRESENTATION ARTICLES EVEN THOUGH THE EXPENDITURE HIT BY SECTION 37(1) OF THE ACT. 111. 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 ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1993 - 94, 1994 - 95 AND 1995 - 96. 112. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. LEARNED D.R. OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT YEAR AS COMPARED TO FACTS IN ASSESSMENT YEAR 1993 - 94, 1994 - 95 AND 1995 - 96 WHERE THE TRIBUNAL DECIDED THIS ISSUE IN FAVOUR OF T HE ASSESSEE AND 42 THEREFORE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR. GROUND NO. 32 IS REJECTED. 113. GROUND NO. 33 IS AS UNDER: 33. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.16,87,645/ - EVEN THOUGH THESE EXPENSES WERE NOT MEANT WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. 114. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LE ARNED CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1995 - 96. 115. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT LEARNED D.R. OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT YEAR. THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN WHICH THE TRIBUNAL HAS FOLLOWED ANOTHER ORDER. 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. GROUND NO. 33 IS REJECTED. 116. GROUND NO. 34 IS AS UNDER: 34. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,92,007/ - EVEN THOUGH THESE EXPENSES WERE NOT MEANT WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. 117. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF L EARNED CIT(A). HE ALSO SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE 43 ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1993 - 94, 1994 - 95 AND 1995 - 96. 118. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS I SSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1993 - 94, 1994 - 95 AND 1995 - 96 . SINCE NO DIFFERENCE COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. GROUND NO. 34 IS REJECTED. 119. GROUND NO. 35 IS AS UNDER: 35. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT EXPENSES AMOUNTING TO RS.16,408/ - INCURRED ON POOJA CEREMONIES ARE LEGITIMATE BUSINESS EXPENSES. 120. 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 ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1983 - 94, 1984 - 8 5 AND 1985 - 86. 121. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1983 - 84, 1984 - 85 AND 1985 - 86. SINCE NO DIFFERENCE C OULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. GROUND NO. 35 IS REJECTED. 122. GROUND NO. 36 IS AS UNDER: 44 36. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT EXPENSES AMOUNTING TO RS.84,405/ - RELATING TO OUTSTANDING LIABILITIES EVEN THOUGH THE ASSESSEE COULD NOT PRODUCE THE DETAILS IN SPITE OF SPECIFIC OPPORTUNITY GIVEN. 123. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED C IT(A). 124. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE DISALLOWANCE WAS MADE ON THE BASIS THAT THE LIABILITY IS OUTSTANDING BUT SECTION 43B IS NOT APPLICABLE FOR EMPLOYEE WELFARE EXPENSES AND THEREFORE, DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT PROPER. HENCE, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A). GROUND NO. 36 IS REJECTED. 125. GROUND NO. 37 IS AS UNDER: 37. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOW ANCE OF RS.65,36,204/ - ON ACCOUNT OF EXPENSES RELATING TO EARLIER YEARS EVEN THOUGH THEY WERE NOT ALLOWABLE IN VIEW OF THE PRINCIPLES OF ACCOUNTING SYSTEM OF THE ASSESSEE. 126. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A . R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 127. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT ON PAGES 45 & 46 OF HIS ORDER, A CLEAR FINDING HAS BEEN GIVEN BY LEARNED CIT(A) THAT THE LIABILITY HAS CRYSTALLIZED DURING THE PRESEN T YEAR AND THEREFORE, THE SAME IS ALLOWABLE IN THE PRESENT YEAR. LEARNED D.R. OF THE REVENUE COULD NOT CONTROVERT THIS FINDING OF LEARNED CIT(A). THEREFORE, WE DO NOT FIND ANY 45 REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. GROUND NO. 37 IS REJ ECTED. 128. GROUND NO. 38 IS AS UNDER: 38. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.49,53,763/ - ON ACCOUNT OF EXPENSES RELATING TO EARLIER YEARS (ADDITIONAL CLAIM) EVEN THOUGH THEY WERE NOT ALLOWABLE IN VIEW OF THE PRINCIPLES OF ACCOUNTING SYSTEM OF THE ASSESSEE. 129. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 130. WE HAVE CON SIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT WAS SUBMITTED BY ASSESSEE BEFORE LEARNED CIT(A) THAT DISALLOWED ITEMS ARE NUMEROUS AND THE QUANTUM IN MANY CASES IS MEAGER AND THEREFORE, THE DETAILS WERE FILED BEFORE HIM FOR THOSE ITEMS WHERE AMOUNT WAS RS. 50,000/ - OR MORE. THESE DETAILS WERE EXAMINED BY CIT(A) WHO HAS GIVEN A FINDING THAT THE CLAIM OF THE ASSESSEE IS IN ORDER AND SAME IS ALSO SUPPORTED BY AUDITORS REPORT IN THE YEAR OF EXPENDITURE. THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LE ARNED D.R. OF THE REVENUE AND THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. GROUND NO. 38 IS REJECTED. 131. GROUND NO. 39 IS AS UNDER: 39. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LA W AND ON FACTS IN ALLOWING RELIEF OF RS.27,42,687/ - BEING THE DISALLOWANCE ON ACCOUNT OF PROPORTIONATE INTEREST ON THE INTEREST FREE LOANS TO M/S J. K. SATOH AGRICULTURAL MACHINES LTD. WHEN THE ASSESSING OFFICER HAS ESTABLISHED THAT THE ADVANCES HAD BEEN M ADE TO THE SUBSIDIARY COMPANY OUT OF BANK OVERDRAFT. 46 132. 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 BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 84 - 85 TO 86 - 87 AND ALSO FOR ASSESSMENT YEAR 1994 - 95 AND 1995 - 96. 133. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS IS NOTED BY LEARNED CIT (A) THAT THE ISSUE REGARDING NOTIONAL INTEREST ON ADVANCE MADE TO M/S J. K. SATOH AGRICULTURAL MACHINES LTD. IS SQUARELY COVERED BY THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 84 - 85 TO 86 - 87 AND ALSO FOR ASSESSMENT YEAR 1994 - 95 AND 1995 - 96. THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. GROUND NO. 39 IS REJECTED. 134. GROUND NO. 40 IS AS UNDER: 40. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,60,000/ - ON ACCOUNT OF OTHER CONSULTANCY CHARGES EVEN THOUGH THE EXPENSES RELATED TO PRELIMINARY EXPENSES. 135. 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 BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1985 - 86. 136. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUAREL Y COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1985 - 86. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT 47 YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRA RY VIEW. GROUND NO. 40 IS REJECTED. 137. GROUND NO. 41 IS AS UNDER: 4.1 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.40,77,866/ - ON ACCOUNT OF INTEREST PAYABLE ON ADDITIONAL RETENTION PRICES OF CEMENT. 138. LEARNED D.R. OF THE REVENUE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE REVENUE BY THE TRIBUNAL ORDER IN THE CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEAR 1985 - 86 TO 1986 - 87. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT IN FACT , NO RELIEF WAS ALLOWED BY LEARNED CIT(A) BUT HE HAS GIVEN A DIRECTION THAT IF THE ASSESSEE GETS SUCCESS IN APPEAL FOR THE ASSESSMENT YEAR 1982 - 83 BEFORE HON'BLE ALLAHABAD HIGH COURT, RELIEF SHOULD BE GIVEN. 139. WE HAVE CONSIDER ED THE RIVAL SUBMISSIONS. W E ARE OF THE CONSIDERED OPINION THAT AS PER THE ORDER OF CIT(A), NO RELIEF WAS ALLOWED BY HIM 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. WE DO NOT FIND ANY INFIRMITY IN SUCH DIRECTION OF CIT(A). THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). THIS GROUND IS REJECTED. 140. GROUND NO. 42 IS AS UNDER: 42. THAT TH E COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT EXPENSES AMOUNTING TO RS.2,38,500/ - INCURRED ON RAISING LOANS FOR FINANCE A CAPITAL HOUSING PROJECT WAS OF REVENUE EXPENDITURE IN NATURE. 48 141. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 142. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON TH E BASIS THAT THIS AMOUNT OF RS.2,38,500/ - WAS PAID BY THE ASSESSEE IN RESPECT OF RAISING HOUSING LOAN FROM HDFC BANK. THE SAME WAS DELETED BY CIT(A) WITH THE CLEAR FINDING THAT THIS LOAN WAS NOT RAISED FOR THE HOUSING PROJECT OF THE ASSESSEE BUT THE SAME WAS RAISED IN NORMAL COURSE OF BUSINESS AND THEREFORE, DEDUCTION IS ALLOWABLE. THIS FINDING OF LEARNED CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND THEREFORE, WE DECLINE TO INTERFERE IN HIS ORDER. THIS GROUND IS REJECTED. 143. GROUND NO. 43 IS AS UNDER: 43. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE EXCESS PROVISIONS EXPENSES AMOUNTING TO RS.1,67,308/ - WRITTEN BACK WAS OF REVENUE EXPENDITURE IN NATURE. 144. LEAR NED 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 BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1986 - 87. 145. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1986 - 87. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. GROUND NO. 43 IS REJECTED. 49 146. GROUND NO. 44 IS AS UNDER: 45. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN REDUCING THE DISALLOWANCE FROM RS.73,31,830/ - TO RS.49,30,360/ - ON ACCOUNT OF CAPITAL EXPENDITURE DEBITED TO THE P. & L. A/C EVEN THOUGH THE SPECIAL AUDITORS IN THE REPORT U/S 142(2A) OF THE ACT HAD ASCERTAIN THE NATURE OF THESE EXPENSES AS CAPITAL EXPENDI TURE. 147. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 148. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 54 OF HIS ORDER THAT TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS OF RS.73,31,830/ - , WHICH INCLUDED AMOUNT IN RESPECT OF REPLACEMENT OF INSTRUMENTS / PLANT & MACHINERY AND BALANCE EXPENDITURE WAS IN RESPECT OF RENOVATION TO BUILDING, REPAIRS TO PLANT & MACH INERY AND THE TRAVELLING EXPENSES TO PURCHASE RAW MATERIAL AND NEW EQUIPMENTS FOR NEW PROJECTS, INSURANCE PREMIUM, GENERAL CHARGES, COMMITMENT CHARGES, PROFESSIONAL CHARGES ETC. THE CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS.24,01,470/ - IN RESPECT OF RE PLACEMENT OF INSTRUMENTS / PLANT & MACHINERY BUT HAS DELETED THE BALANCE AMOUNT OF RS.49,30,360/ - BY HOLDING THE SAME AS REVENUE EXPENDITURE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) AND THEREFORE, WE DECLINE TO INTERFERE IN HIS ORDER. THIS GROUND IS REJECTED. 149. GROUND NO. 45 IS AS UNDER: 45. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN REDUCING THE DISALLOWANCE FROM RS.2,50,000/ - TO RS.1,00,000/ - ON ACCOUNT OF DEPRECIATION ON OTHER ASSETS AS GUEST HOUSES AT KOTA, NIBHRA, JAIPUR AND DADARI EVEN THOUG H THE ASSESSEE COULD NOT 50 PRODUCE ANY RECORD/DETAILS IN SUPPORT OF ITS CLAIM IN SPITE OF SPECIFIC OPPORTUNITY GIVEN. 150. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT( A). 151. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 55 OF HIS ORDER THAT THE TAX AUDITORS HAVE GIVEN A FIGURE OF DEPRECIATION AMOUNTING TO RS.1,94,338/ - , WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AND THI S DISALLOWANCE WAS CONFIRMED BY CIT(A) ALSO. IN ADDITION TO THIS, THE ASSESSING OFFICER ALSO MADE DISALLOWANCE OF RS.2.5 LAC BASED UPON THE SPECIAL AUDITORS REPORT THAT THE DISALLOWANCE CANNOT BE WORKED OUT IN ABSENCE OF SEPARATE RECORDS AVAILABLE RELATI NG TO THE GUEST HOUSE OF THE ASSESSEE. AGAINST THIS DISALLOWANCE, IT WAS HELD BY LEARNED CIT(A) THAT DISALLOWANCE OF RS.1 LAC CAN BE APPROPRIATE AND DELETED THE BALANCE ADDITION OF RS.1.50 LAC. SINCE AD HOC DISALLOWANCE WAS MADE BY ASSESSING OFFICER, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) BECAUSE IN OUR CONSIDERED OPINION, THE PART DISALLOWANCE CONFIRMED BY CIT(A) IS REASONABLE. THIS GROUND IS REJECTED. 152. GROUND NO. 46 IS AS UNDER: 46. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN REDUCING THE DISALLOWANCE FROM RS.8,71,713/ - TO RS.1,00,000/ - ON ACCOUNT OF EXPENSES ON GUEST HOUSE (MESSING EXPENSES) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS SEPARA TELY FOR EACH GUEST HOUSE AND THE EXPENSES WERE HIT BY PROVISIONS OF SECTION 37(4) OF THE ACT. AS WELL AS SPECIAL AUDITORS HAS ALSO QUANTIFIED THE AMOUNT. 51 153. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSES SEE SUPPORTED THE ORDER OF LEARNED CIT(A). 154. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS WAS THE CLAIM OF THE ASSESSEE BEFORE THE CIT(A) THAT OUT OF TOTAL DISALLOWANCE OF RS. 8,71,713/ - , AN AMOUNT OF RS.8,26,619/ - IS ON ACCOUNT OF MESS ING EXPENSES AND THE SAME CANNOT BE CONSIDERED AS MAINTENANCE OF GUEST HOUSE AND ONLY BALANCE AMOUNT CAN BE CONSIDERED AS MAINTENANCE OF GUEST HOUSE. IT WAS ALSO SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSEE ITSELF HAS OFFERED RS.1 LAC UNDER THIS HEAD. W E ALSO FIND THAT SIMILAR EXPENSES HAVE BEEN ALLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1982 - 83. NO DIFFERENCE IN FACTS C OULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE AND THEREFORE, WE DECLINE TO INTERFERE IN HIS ORDER. THIS GROUND IS REJECTED. 155. GROUND NO. 47 IS AS UNDER: 47. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN REDUCING THE DISALLOWANCE FROM RS.6,00,000/ - TO RS.60,000/ - ON ACCOUNT OF OTHER MAINTENANCE EXPENSES ON GUE ST HOUSE EVEN THOUGH THE ASSESSEE COULD NOT FURNISH DETAILS THEREOF IN SPITE OF SPECIFIC OPPORTUNITY GIVEN. 156. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 157. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 57 OF HIS ORDER THAT THE ASSESSING OFFICER MADE AD HOC DISALLOWANCE OF RS.6 LAC TOWARDS OTHER EXPENSES OF GUEST HOUSE. HE HAS ALSO NOTED THAT IN ASSESSMENT YEAR 1986 - 87, SIMILAR DISALLOWANCE OF 52 RS.5 LAC WAS MADE AND AS AGAINST THE SAME , THE LEARNED CIT(A) HAS RESTRICTED THE DISALLOWANCE T O RS.50,000/ - ONLY IN THAT YEAR. IN THE PRESENT YEAR, THE CIT(A) HAS RESTRICTED THE DISALLOWANCE T O RS.60,000/ - AND GRANTED RE LIEF OF RS.5.40 LAC. WE FIND THAT THE SIMILAR DISALLOWANCE WAS DELETED BY THE TRIBUNAL IN ASSESSMENT YEAR 1986 - 87 . CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). THIS GROUND IS REJECTED. 158. GROUND NO. 48 I S AS UNDER: 48. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN REDUCING THE DISALLOWANCE FROM RS.6,21,807/ - TO RS.3,10,903/ - ON ACCOUNT OF ENTERTAINMENT EXPENDITURE EVEN THOUGH THE EXPENDITURE WAS HIT BY THE PRO VISIONS CONTAINED U/S 27(2A) OF THE I.T. ACT. 159. 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 BY THE TRIBUNAL DEC ISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1985 - 86. 160. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1985 - 86. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 161. GROUND NO. 49 IS AS UNDER: 49. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,69,990/ - ON ACCOUNT OF ARTICLES INTENDED 53 FOR PRESENTATION RELATING TO J. K. STEEL DIVISION IGNORING THE FACT THAT NO DETAILS WERE FILED BY THE ASSESSEE. 162. 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 BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1984 - 85 AND 1989 - 90. 163. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 198 4 - 8 5 AND 1989 - 90 . SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 164. GROUND NO. 50 IS AS UNDER: 50. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING DISALLOWANCE OF RS.1,01,408/ - ON ACCOUNT OF PAYMENT MADE TO CLUBS IGNORING THE FACT THAT THESE EXPENSES WERE REPORTED BY THE SPECIAL TAX AUDITORS INCURRED FOR NON - BUSINESS PURPOSES. 165. 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 BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YE AR 1993 - 94 AND 1994 - 95. 166. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1993 - 94 AND 1994 - 95. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN 54 THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 167. GROUND NO. 51 IS AS UNDER: 51. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,25,954/ - ON ACCOUNT OF GUEST HOUSE MAINTAINED IN KAMJA CASTLE AT MUSSORIE EVEN THOUGH NO DETAILS OF THE EXPEND ITURE WERE PRODUCE BEFORE HIM AND AS SUCH, THE RELIEF GIVEN IS WITHOUT BASIS. 168. 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 VARIOUS EARLIER YEARS I.E. ASSESSMENT YEAR 1985 - 86 AND 1986 - 87. HE SUBMITTED THAT IN ASSESSMENT YEAR 1988 - 89 IN I.T.A. NO.2633/DEL/94, THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN VIEW OF THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS. CIT 278 ITR 546 (SC) AND THEREAFTER, IN THE ORDER PASSED BY THE ASSESSING OFFICER AS PER THE DIRECTION OF THE TRIBUNAL, THE ASSESSING OFFICER ACCEPTED THAT THE KAMLA CASTLE IS NOT A GUEST HOUSE BUT A HOLIDAY HOME AND ALLOWED CLAIM OF THE ASSESSEE COMPANY VIDE ORDER DATED 31/12/2010. 169. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN ASSESSMENT YEAR 1 988 - 89, AS PER THE TRIBUNAL DIRECTION, THE ASSESSING OFFICER HAS EXAMINED THE APPLICABILITY OF JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. (SUPRA) AND AFTER THAT , HE ACCEPTED THAT KAMLA CASTLE IS NOT GUEST HOUSE BUT A HOLIDAY HOME. CONSIDERING ALL THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. THIS GROUND IS REJECTED. 55 170. GROUND NO. 52 IS AS UNDER: 52. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,23,898/ - ON ACCOUNT OF GUEST HOUSE MAINTAINED AT UDAIPUR EVEN THOUGH NO EVIDENCE HAS BEEN PRODUCE IN RESPECT OF IT'S CLAIM AND THE EXPENDITURE HIT BY PROVISIONS OF SECTION 37(4)/37(5). 171. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). LEARNED D. R. ALSO SUBMITTED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL DECISION IN I.T.A. NO.828/ALL/94 BY FOLLOWING THE DECISION OF HON'BLE APEX COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS. CIT 278 ITR 546 (SC). 172. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. LEAR NED D.R. OF THE REVENUE SUBMITTED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL DECISION IN I.T.A. NO.828/ALL/94 BY FOLLOWING THE DECISION OF HON'BLE APEX COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS. CIT (SUPRA) AND LEARNED AR OF TH E ASSESSEE COULD NOT POINT OUT ANY DEFECT IN THIS ARGUMENT OF THE LEARNED DR OF THE REVENUE. A CCORDINGLY WE DECIDE THE ISSUE AGAINST THE ASSESSEE IN LINE WITH THE TRIBUNAL ORDER CITED BY LEARNED D.R. OF THE REVENUE. THIS GROUND IS ALLOWED. 173. GROUND N O. 53 IS AS UNDER: 53. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.37,16,724/ - ON ACCOUNT OF CHANGE IN METHOD OF VALUATION OF CLOSING STOCK EVEN THOUGH THE UNDER VALUATION OF CLOSING STOCK WAS FOUND BY THE SPECIAL AUDITORS U/S 142(2A). 56 174. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 175. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE WAS DECIDED BY LEARNED CIT(A) ON THE BASIS THAT THIS IS SETTLED POSITION OF LAW THAT CLOSING STOCK HAS TO BE VALUED AT COST OR MARKET PRICE, WHICHEVER IS LOWER AND SINCE NO EXTRA COST WAS IN CURRED IN RESPECT OF MULTIPLE SHIFT, NO ADDITION CAN BE MADE IN VALUATION OF CLOSING STOCK ON THIS BASIS THAT DEPRECIATION WAS ADDED BY THE ASSESSEE IN VALUATION OF CLOSING STOCK ON SINGLE SHIFT BASIS. NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER AND LEARNED D.R. OF THE REVENUE THAT HE HAS CHARGED ANY EXTRA DEPRECIATION IN RESPECT OF MULTIPLE SHIFT WORKING. WHEN NO COST HAS BEEN INCURRED ON ACCOUNT OF DEPRECIATION FOR WORKING EXTRA SHIFT, NO ADDITION CAN BE MADE IN VALUATION OF CLOSING STO CK. HENCE, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. THIS GROUND IS REJECTED. 176. GROUND NO. 54 IS AS UNDER: 54. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERR ED IN LAW AND ON FACTS IN ALLOWING EXTRA SHIFT ALLOWANCE AMOUNTING TO RS.24,614/ - ON AIR - CONDITIONING MACHINERY OF THE CEMENT UNIT - L. 177. 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 DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1986 - 87. 57 178. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1986 - 87 . SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CO NTRARY VIEW. THIS GROUND IS REJECTED. 179. GROUND NO. 55 IS AS UNDER: 55. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN ALLOWING EXTRA SHIFT ALLOWANCE AMOUNTING TO RS.1,66,673/ - & RS.34,64,136/ - ON ENERGY CONSERVATION AND SAVING EQUIPMENTS RELATING TO WHITE CEMENT DIVISION WHILE SUCH MACHINERY AS THE ASSESSEE HAS INSTALLED WAS NOT DIRECTLY COVERED BY THIS TYPE OF PLANT & MACHINERY AS MENTIONED IN I. T. RULES. 180. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 181. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY LEARNED CIT(A) ON THE BASIS TH AT IN EARLIER YEARS, THE CIT(A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND 100% DEPRECIATION WAS ALLOWED BY HIM INSTEAD OF NORMAL DEPRECIATION AND EXTRA SHIFT ALLOWANCE AND REVENUE HAS NOT FILED APPEAL IN THOSE EARLIER YEARS AND THEREFORE, THE ST AND WAS ACCEPTED BY THE REVENUE. SINCE THERE IS NO DIFFERENCE IN FACTS, THE ISSUE STANDS SETTLED IN FAVOUR OF THE ASSESSEE AS PER THE ORDER OF CIT(A) IN ASSESSMENT YEAR 1985 - 86 AND 1986 - 87 AGAINST WHICH NO APPEAL HAS BEEN FILED BY THE REVENUE BEFORE THE T RIBUNAL . T HEREFORE, THE REVENUE CANNOT DISPUTE ON THIS ISSUE IN THE PRESENT YEAR. ACCORDINGLY, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. THIS GROUND IS REJECTED. 58 182. THE ABOVE DISCUS SION IS R EGARDING ALLOWING 100% DEPRECIATION ON ENERGY CONSERVATION AND SAVING EQUIPMENTS RELATING TO WHITE CEMENT DIVISION BY DELETING THE DISALLOWANCE OF RS.1,66,673/ - . T HIS PART OF GROUND NO. 55 IS REJECTED. 183. REGARDING THE SECOND PART IN RESPECT OF DELETION OF RS.64,34,136/ - FOR ALLOWING 100% DEPRECIATION ON ENERGY CONSERVATION AND SAVING EQUIPMENTS RELATING TO WHITE CEMENT DIVISION, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE T HAT IN ASSESSMENT YEAR 1994 - 95, THE TRIBUNAL HAS RESTORED THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE - EXAMINATION IN THE LIGHT OF THE APPELLATE DECISION IN EARLIER YEARS AND THE MATTER IS STILL PENDING BEFORE THE ASSESSING OFFICER. 184. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SINCE THE MATTER WAS RESTORED BACK BY THE TRIBUNAL TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION AND THE SAME IS STILL PENDING BEFORE THE ASSESSING OFFICER, WE FEEL IT PROPER THAT IN THE PRESENT YEAR ALSO , THIS ISSUE SHOULD GO TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN THE LIGHT OF HIS DECISION IN ASSESSMENT YEAR 1995 - 96 AND ACCORDINGLY ON THIS PART, WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OF FICER FOR FRESH DECISION AFTER RE - EXAMINING THE MATTER IN THE LIGHT OF THE APPELLATE DECISION IN EARLIER YEAR AS HAS BEEN DIRECTED BY THE TRIBUNAL IN THE ASSESSMENT YEAR 1994 - 95. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. THIS PART OF GROUND NO. 55 IS ALLOWED FOR STATISTICAL PURPOSES. 185. GROUND NO. 56 IS AS UNDER: 56. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE 59 ASSESSEE WAS ENTITLED TO ESA ON WDV OF PLANT & MACHINERY RELATING TO ACRYLIC DIVISION AMOUNTING TO RS.43,38,414/ - . 186. LEARNED D. R. OF THE REVEN UE 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 DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1983 - 84. 187. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1983 - 84. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LE ARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 188. GROUND NO. 57 IS AS UNDER: 57. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO ALLOW EXTRA SHIFT ALLOWANCE OF RS.1,01,78,196/ - ON TYRE CORD DIVISION NOTWITHSTANDING THE FACT THAT NO SEPARATE DEPRECIATION CHART AND OTHER DETAILS REGARDING EXTRA SHIFT WORKING WITH REGARD TO THE EXPANSION UNIT WERE FURNIS HED TO THE ASSESSING OFFICER IN SPITE OF SPECIFIC REQUISITION. 189. 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 DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1986 - 87. 190. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN ASSESSMENT YEAR 1985 - 86, THIS ISSUE WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION. ACCORDINGLY IN THE PRESENT YEAR ALSO, 60 WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION WITH SIMILAR DIRECTIONS AS WERE GIVEN BY THE TRIBUNAL IN ASSESSMENT YEAR 1985 - 8 6. THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 191. GROUND NO. 58 IS AS UNDER: 58. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN ALLOWING EXTRA SHIFT ALLOWANCE OF SSF (EXPANSION) UNIT AMOUNTING TO RS.52,56,119/ - EVEN THOUGH THE ASSESSEE COULD NOT FURNISH RELEVANT DETAILS IN RESPECT OF ITS CLAIM TO THE A. O. DESPITE AVAILING SUFFICIENT OPPORTUNITIES. 192. LEARNED D. R. OF THE REVENUE SUPPOR TED 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 DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1986 - 87. 193. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1986 - 87. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R . OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 194. GROUND NO. 59 IS AS UNDER: 59. THAT, THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THA T THE ASSESSEE WAS ENTITLED TO ESA ON AIR - CONDITIONING MACHINERY OF NAYLON DIVISION AMOUNTING TO RS.14,247/ - . 61 195. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). H E ALSO SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1983 - 84. 196. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1983 - 84. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 197. GROUND NO. 60 IS AS UNDER: 60. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.17,218/ - 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. 198. 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 I S COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1984 - 85. 199. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1984 - 85. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 62 200. GROUND NO. 61 IS AS UNDER: 61. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO ESA ON PLANT & MACHINERY OF PADARN POLYSTER DIVISION AMOUNTING TO RS.4,26,47,051/ - E VEN THOUGH THE ASSESSEE COULD NOT FURNISH EVIDENCE/DETAILS FOR PROVING THE EXTRA SHIFT WORKING IN RESPECT OF PADAM POLYSTER DIVISION DESPITE AVAILING SUFFICIENT OPPORTUNITIES. 201. 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 DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1985 - 86 AND 1986 - 87. 202. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1985 - 86 AND 1986 - 87. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 203. GROUND NO. 62 IS AS UNDER: 62. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN H OLDING THAT THE ASSESSEE WAS ENTITLED TO ESA ON AIR CONDITIONING MACHINERY OF PADAM POLYSTER DIVISION AMOUNTING TO RS.1,18,377/ - EVEN THOUGH THE ASSESSEE COULD NOT FURNISH EVIDENCE/DETAILS FOR PROVING THE EXTRA SHIFT WORKING IN RESPECT OF PADAM POLYSTER DI VISION DESPITE AVAILING SUFFICIENT OPPORTUNITIES. 204. 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 63 ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1983 - 84. 205. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FO R ASSESSMENT YEAR 1983 - 84. SINCE NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE IN THE PRESENT YEAR, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW. THIS GROUND IS REJECTED. 206. GROUND NOS. 63 & 64 ARE GENERAL IN NATURE AND NO SEPARATE ADJUDICATION IS REQUIRED. 207. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 208. NOW WE TAKE UP THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 1987 - 88 I.E. I.T.A. NO.336/LKW/2010. 209. GROUND NO. 1 IS AS UNDER: 1. TECHNICAL KNOW - HOW FEE NOT ALLOWING DEDUCTION OF RS.34,49,259/ - BEING 5/6 OF RS.41,39,111/ - WITHOUT APPRECIATING THAT THE EXPENDITURE WAS FOR IMPROVING PRODUCTIVITY AND PROFITABILITY OF THE APPELLANT, HENCE ESSENTIALLY THE SAME WAS REVEN UE IN NATURE. 210. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE EXPENDITURE IS OF REVENUE IN NATURE ALLOWABLE U/S 37 OF THE ACT BUT THE ASSESSING OFFICER HAS ALLOWED ONLY 1/6 TH BY INVOKING THE PROVISIONS OF SECTION 35AB OF THE ACT. HE SUBMITTED THAT FOR THE PRESENT EXPENSES IN DISPUTE, SECTION 37 IS APPLICABLE AND NOT 35AB OF THE ACT. HE SUBMITTED THAT TOTAL AMOUNT OF RS.41,39,111/ - HAS BEEN PAID TO M/S HOLDER BANK, 64 SWITZERLAND IN TERMS OF THEIR AGREEMENT DATED 06/06/19 85 AND TO NATIONAL COUNSEL FOR CEMENT & BUILDING MATERIAL. 211. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 212. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE PAYMENT IN QUESTION OF RS.41,39,111/ - WAS MADE BY THE ASSESSEE TO M/S HOLDER BANK, SWITZERLAND IN TERMS OF THEIR AGREEMENT DATED 06/06/1985 AND TO NATIONAL COUNSEL FOR CEMENT & BUILDING MATERIAL. THE ASSESSING OFFICER HAS ALSO NOTED THAT IN ASSESSMENT YEAR 1986 - 87, THE ASSESSING OFFICER ALLOWED 1/6 TH OF THE EXPENDITURE BY INVO KING THE PROVISIONS OF SECTION 35AB OF THE ACT AND THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER IN THAT YEAR. NOW BEFORE US, IT COULD NOT BE SHOWN BY LEARNED A.R. OF T HE ASSESSEE THAT IN ASSESSMENT YEAR 1986 - 87 , THE ORDER OF CIT(A) WAS REVERSED BY THE TRIBUNAL AND THEREFORE, THERE IS NO BASIS TO TAKE A CONTRARY VIEW IN THE PRESENT YEAR . HENCE , WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). THIS GROUND IS REJECTED. 213. GROUND NO. 2 IS AS UNDER: 2. FOREIGN TRAVELLING EXPENSES A) NOT ALLOWING RS.88,175/ - BEING EXPENSES ON FOREIGN TRAVELING 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. B) NOT ALLOWING THE EXPENSES OF AN ORDER OF RS.2,41,290/ - WHICH WAS RELATABLE TO ABANDONED PROJECTS WITHOUT CONSIDERING THE JUDICIAL PRONOUNCEMENT PRESSED INTO SERVICE BY APPELLANT. 214. IT WAS SUBMITTED BY LEARNED A.R. OF T HE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER FOR ASSESSMENT 65 YEAR 1983 - 84 AND 1984 - 85. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 215. REGARDING PART (A) OF GROUND NO. 2 IN RESPECT OF EXPENDITURE RELATING TO WIVES OF THE DIRECTORS INCURRED ON TRAVELLING OF THE DIRECTORS, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT IT WAS INCURRED FOR MODERNIZATION AND EXPANSION OF EXISTING PROJECTS. 216. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SINCE THE ISSUE IS COVER ED BY THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 1983 - 84 AND 1984 - 85 AND NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. THIS PART OF THE GROUND IS ALLOWED. 217. REGARDING PART (B) O F GROUND NO. 2 IN RESPECT OF DISALLOWANCE OF RS.2,21,290/ - RELATABLE TO ABANDONED PROJECTS, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE EXPENSES WERE INCURRED IN CONNECTION WITH THE PROJECTS WHICH HAVE BEEN ABANDONED AND ARE NO LONGER UNDER A CTIVE CONSIDERATION / IMPLEMENTATION. RELIANCE WAS PLACED BY HIM ON A JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF INDO RAMA SYNTHETICS INDIA LTD. VS. CIT [2011] 333 ITR 18 (DEL). 218. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 219. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT WAS HELD BY HON'BLE DELHI HIGH COURT IN THE ABOVE CASE THAT WHEN THE PROJECT WAS ABANDONED, NO NEW ASSET CAME TO BE CREATED AND THEREFORE, EXPENDITURE IS ALLOWABLE . R ESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE DELHI HIGH 66 COURT, WE HOLD THAT IN THE PRESENT CASE ALSO, THE EXPENDITURE IS ALLOWABLE. ACCORDINGLY, PART (B) OF GROUND NO. 2 IS ALLOWED. 220. GROUND NO. 3 IS AS UNDER: 3. KAMLA RETREAT EXPENSES CONFIRMING DISALLOWANCE OF ENTIRE EXPENDITURE OF RS.1,01,796/ - UNDER SEC. 37(4) / 37(5) OF THE ACT. 221. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 1985 - 86, 1988 - 89, 1989 - 90, 1993 - 94 AND 1995 - 96. 222. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 223. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN ASSESSMENT YEAR 1988 - 89, THE MATTER WAS RESTORED BACK BY THE TRIBUNAL TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION IN THE LIGHT OF THE JUDGMENT OF HON'BLE A PEX COURT RENDERED IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS. CIT [2005] 278 ITR 546 (SC) AND IN THE REMAND PROCEEDINGS, THE ASSESSING OFFICER ACCEPTED THAT KAMLA RETREAT IS BEING USED FOR BUSINESS PURPOSES AND THEREFORE, FOLLOWING THE TRIBUNAL ORDER, 50 % EXPENSES WERE ALLOWED BY HIM. IN THE PRESENT YEAR ALSO, THE CIT(A) HAS ALLOWED DEDUCTION TO THE ASSESSEE TO THE EXTENT OF 50% AND UPHELD THE DISALLOWANCE OF 50% AND THEREFORE, THE MATTER STANDS COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL DECISION IN 19 85 - 86, 1988 - 89, 1989 - 90, 1993 - 94 AND 1995 - 96. WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. THIS GROUND IS REJECTED. 224. GROUND NO. 4 IS AS UNDER: 67 4. SALES PROMOTION EXPENSES A) NOT ALLOWING RS.63,567/ - HOLDING IT TO BE ENTERTAINMENT EXPENSES. B) UPHOLDING DISALLOWANCE OF RS.2,51,313/ - BEING EXPENDITURE ON PRESENTATION OF ARTICLES BEING 30% OF THE TOTAL EXPENDITURE OF AN ORDER OF RS.8,37,709/ - . 225. REGARDING PARA (A) IN RESPECT OF DISALLOWANCE OF RS.63,567/ - , IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 1982 - 83, 1986 - 87 AND 1988 - 89. 226. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 227. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SINCE WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 1982 - 83, 1986 - 87 AND 1988 - 89 AND NO DIFFERENCE IN FACTS COULD BE POINTED OUT BY LEARNED D.R. OF THE REVENUE, WE HOLD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND UPHELD BY CIT(A) IS NOT JUSTIFIED. WE, THEREFORE, DELETE THE SAME. THIS PART OF GROUND NO. 4 IS ALLOWED. 228. REGARDING PART (B) IN RESPECT OF DISALLOWANCE OF RS.2,51,313/ - BEING EXPENSES INCURRED ON CUSTOMARY PRESENTATION TO THE EXTENT OF 30% OF RS.8,37,709/ - , IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT IN ASSESSMENT YEAR 1984 - 85, IT WAS HELD BY THE TRIBUNAL THAT EXPENDIT URE ON CUSTOMARY PRESENTATION IS FULLY ALLOWABLE. HOWEVER, HE CON CEDED THAT IN ANOTHER TRIBUNAL ORDER, THE TRIBUNAL ALLOWED 70% EXPENSES IN PRESENTATION OF ARTICLES. 68 229. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 230. W E HAVE CONSIDERED THE RIVAL SUBMISSIONS. SINCE AS PER THE LATEST JUDGMENT OF THE TRIBUNAL FOR ASSESSMENT YEAR 1988 - 89, IT WAS HELD BY THE TRIBUNAL THAT ONLY 70% OF THE EXPENDITURE ON PRESENTATION ARTICLE IS ALLOWABLE, WE DO NOT FIND ANY REASON TO TAKE A C ONTRARY VIEW AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. THIS PART IS REJECTED. 231. GROUND NO. 5 IS AS UNDER: 5. CHARGES GENERAL ( A ) CONFIRMING DISALLOWANCE OF RS.3,02,094/ - (RS.6,04,188/ - ( - ) RS.3,02,094/ - ) HOLDING IT TO BE ENTERTAINMENT EXPENSES. ( B ) CONFIRMING THE DISALLOWANCE OF ENTIRE EXPENDITURE OF RS.2,36,183/ - RELATING TO MESSING EXPENSES BY WRONGLY TREATING THE SAME AS EXPENDITURE IN THE NATURE OF MAINTENANCE OF GUEST HOUSE. 232. REGARDING PART (A) IN RESPECT OF DISALLOWANCE OF RS.3,02,094/ - BEING ENTERTAINING TO THE EXTENT OF 50% OF TOTAL EXPENDITURE, IT WAS HELD THAT ONLY 50% IS ALLOWABLE. SINCE THE ORDER OF CIT(A) IS IN LINE WITH THE TRIBUNAL ORDER, W E DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISS UE. THIS PART IS REJECTED. 233. REGARDING PART (B) IN RESPECT OF DISALLOWANCE OF RS.2,36,183/ - ON ACCOUNT OF GUEST HOUSE EXPENSES, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE EXPENSES ARE MESSING EXPENSES AND RELATION TO THE ASSESSEES EMPLOYEES AND GUESTS AT GUEST HOUSE BE LONGING TO THE ASSESSEE AND THEREFORE, THESE EXPENSES DO NOT CONSTITUTE THE EXPENDITURE IN THE NATURE OF MAINTENANCE OF GUEST HOUSE. 69 234. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 235. WE HAVE CONSIDERED THE RIVAL SUBMIS SIONS. WE FIND THAT THE EXPENSES IN QUESTION ARE IN RESPECT OF MESSING EXPENSES WHICH ARE NOT IN THE NATURE OF GUEST HOUSE MAINTENANCE AND THEREFORE, THESE EXPENSES ARE NOT HIT BY SUB SECTION (4) & (5) OF SECTION 37 . HENCE , DISALLOWANCE IS NOT JUSTIFIED. WE DELETE THE DISALLOWANCE. THIS PART IS ALLOWED. 236. GROUND NO. 6 IS AS UNDER: 6. INTEREST PAID IN CONFIRMING DISALLOWANCE OF A SUM OF RS.21,31,349/ - 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 AS MUCH AS THE AMOUNT OF RS.6.15,372/ - WAS NOT INTEREST BUT WITHHOLDING TAX ON INTEREST PAID TO FOREIGN SUPPLIERS. 237. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASS ESSEE THAT CIT(A) HAS RELIED UPON THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF BHARAT COMMERCE AND INDUSTRIES LTD. VS. CIT [1998] 230 ITR 733 (SC) BUT IN THAT CASE, THE ISSUE IN DISPUTE WAS REGARDING INTEREST PAID BUT IN THE PRESENT CASE THE INTEREST IS RELATABLE TO TDS AND THEREFORE, THIS JUDGMENT IS NOT APPLICABLE. HE FURTHER SUBMITTED THAT THE INTEREST EXPENDI TURE IS COMPENSATORY IN NATURE AND HENCE, DEDUCTION SHOULD BE ALLOWED. 238. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW. 239. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IT WAS HELD BY HON'BLE APEX COURT IN THE CASE OF BHARAT COMMERCE AND INDUSTRIES LTD. (SUPRA) THAT INTEREST PAID ON DELAYED PAYMENTS OF INCOME TAX IS NOT AN ALLOWABLE EXPENDI TURE U/S 36(1)(( I II) OF THE ACT BECAUSE IT IS NOT AN INTEREST 70 PAYMENT IN RESPECT OF CAPITAL BORROWED FOR BUSINESS PURPOSE. IT WAS ALSO HELD THAT DEDUCTION IS NOT ALLOWABLE U/S 37 OR 80B OF THE ACT. WE ARE OF THE CONSIDERED OPINION THAT MERELY BECAUSE THE INTEREST PAYMENT IS ON ACCOUNT OF DELAYED PAYMENT OF TDS AND WITHHOLDING TAX, THE SITUATION DOES NOT CHANGE AND THIS JUDGMENT IS SQUARELY APPLICABLE AND THEREFORE, RESPECTFULLY FOLLOWING THIS JUDGMENT, W E DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THI S ISSUE. THIS GROUND IS REJECTED. 240. GROUND NO. 7 IS AS UNDER: 7. PENALTY IN CONFIRMING THE DISALLOWANCE OF RS.3,13,153/ - BEING THE AMOUNT PAID UNDER CONTRACTUAL OBLIGATIONS AND ON A GROUND OTHER THAN THE GROUND OF DISALLOWANCE ADOPTED BY LD. AO WHILE SIMULTANEOUSLY ERRONEOUSLY HOLDING THE SAME TO BE PENAL IN NATURE, WITHOUT APPRECIATING THE FACTS OF THE CASE AND IN AS MUCH AS WHILE NOT APPRECIATING THAT THE AMOUNT PAID WAS NOT PENALTY FOR ANY STATUTORY VIOLATION BUT UNDER CONTRACTUAL OBLIGATION. 241. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE EXPENDITURE INCURRED RELATES TO PAYMENT FOR NON - FULFILLMENT OF CONTRACTUAL OBLIGATION AND THIS IS NOT IN THE NATURE OF PENALTY AND THEREFORE, DISALLOWANCE SHOULD BE DELETED. HE PLACED RELIA NCE ON A JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS. REGALIA APPARELS PVT. LTD. [2013] 352 ITR 71 (BOM). 242. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 243. WE HAVE CONSIDERED THE RIVAL SUBMISSI ONS. WE FIND THAT THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE BASIS THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE EXCEPT INTERNAL VOUCHERS. THE LEARNED CIT(A) HAS CONFIRMED THE DISALLOWANCE ON THE BASIS THAT IT IS IN THE NATURE OF PENALT Y. IT IS ALSO NOTED BY LEARNED CIT(A) THAT THIS PAYMENT HAS 71 BEEN MADE BECAUSE OF NON - FULFILLMENT OF CERTAIN CONDITIONS OF CONTRACT. IN THE LIGHT OF THESE FACTS, WE NOW EXAMINE THE APPLICABILITY OF JUDGMENT OF HON'BLE BOMBAY HIGH COURT CITED BY LEARNED A. R. OF THE ASSESSEE. IN THAT CASE, THE ASSESSEE DECI DED NOT TO HONOUR ITS COMMITMENT OF FULFILLING EXPORT ENTITLEMENT IN VIEW OF LOSSES . UNDER THESE FACTS, THE BANK GUARANTEE WAS ENCASHED BY EXPORT PROMOTION COUNCIL AND THE PAYMENT WAS RECORDED AS PENALTY . UNDER THESE FACTS, IT WAS HELD THAT THERE IS NO CONTRAVENTION OF ANY PROVISIONS OF LAW AND THEREFORE, THE EXPENDITURE IS ALLOWABLE. RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT, WE DELETE THE DISALLOWANCE. THIS GROUND IS ALLOWED. 244. GROUND NO. 8 IS AS UNDER: 8. BREAKAGE & TRANSIT LOSS IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS.15,355/ - BEING THE AMOUNT OF BREAKAGE AND TRANSIT LOSS AND WITHOUT APPRECIATING THAT THE SAID AMOUNT WAS A GENUINE BUSINESS LOSS. 245. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE DISALLOWANCE HAS BEEN CONFIRMED ON THE ALLEGED GROUND OF ASSESSEES FAILURE TO FILE EVIDENCE IN RESPECT OF THIS AMOUNT DESPITE OF THE FACT THAT COMPLETE DETAILS WERE ON RECORD OF THE ASSESSING OFFIC ER. HE ALSO SUBMITTED THAT THE AMOUNT OF RS.15,355/ - CLAIMED AS DEDUCTION IS BALANCING FIGURE VIZ. THE AMOUNT REMAINING AFTER RECOVERIES FROM EITHER THE INSURANCE COMPANY OR FROM THE PERSON RESPONSIBLE FOR BREAKAGE OR LOSS IN TRANSIT. HE SUBMITTED THAT UNDER THESE FACTS, THE DISALLOWANCE CONFIRMED BY CIT(A) IS NOT JUSTIFIED. 246. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 72 247. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE DECISION OF CIT(A) IS ON THE BASIS THAT THIS FACT THAT THE INSURANCE CLAIM WAS NOT ACCEPTED BY THE CONCERNED AUTHORITIES IS ITSELF AN EVIDENCE AGAINST THE CLAIM. HE HAS HELD THAT IF THE CLAIM IS PARTLY ACCEPTED, THE BALANCE IS NOT ACCEPTED BY THE AUTHORITIES FOR VALID REASONS. WE DO NOT FIND ANY REASON IN THESE OBJECTIONS OF CIT(A) BECAUSE NON INCURRING OF EXPENDITURE IS DIFFERENT THING AND NOT ACCEPTANCE OF CLAIM IS ALTOGETHER DIFFERENT. MERELY BECAUSE THE CLAIM HAS NOT BEEN ACCEPTED BY INSURANCE COMPANY PARTLY, IT DOES NOT MEAN THAT TH E EXPENDITURE WAS NOT INCURRED AND THEREFORE, NOT ALLOWABLE. CONSIDERING ALL THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE CONFIRMED BY CIT(A) IS NOT JUSTIFIED. THIS GROUND IS ALLOWED. 248. GROUND NO. 9 IS AS UNDER: 9. EMPLOYEES WELFARE EXPENSES ( A ) NOT ALLOWING A SUM OF RS.1,60,750/ - (RS.3.61,686/ - ( - ) RS.2,00,936/ - ) HOLDING IT TO BE ENTERTAINMENT EXPENSES. ( B ) CONFIRMING DISALLOWANCE OF RS.64,003/ - AS UNCONNECTED WITH BUSINESS. ( C ) CONFIRMING DISALLOWANCE OF RS.877/ - AS GUEST HOUSE EXPENSES. 249. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE B Y TRIBUNAL ORDER FOR ASSESSMENT YEAR 1988 - 89 AND 1989 - 90 WHEREIN IT WAS HELD THAT 50% OF THE EXPENSES ARE ALLOWABLE. 250. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 251. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE DISALLOWANCE HAS BEEN CONFIRMED TO THE EXTENT OF RS.1,60,750/ - BEING 40% 73 OF INSURANCE EXPENSES AND RS.64,003/ - TO THE EXTENT O F 25% OF EXPENSES NOT CONNECTED WITH THE BUSINESS. IT IS SEEN THAT MORE THAN 50% EXPENSES HAVE BEEN ALLOWED AND THEREFORE, AS PER THE TRIBUNAL ORDER, THE MATTER STANDS COVERED AGAINST THE ASSESSEE. WE, THEREFORE, DECLINE TO INTERFERE WITH THE ORDER OF CI T(A). THIS GROUND IS REJECTED. 252. GROUND NO. 10 IS AS UNDER: 10. CASH PAYMENT IN EXCESS OF RS.2,500/ - CONFIRMING DISALLOWANCE OF AN ORDER OF RS.62,07,361/ - BEING CASH PAYMENTS IN EXCESS OF RS.2,500/ - 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. 253. IT WAS FAIRLY CONCEDED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE T RIBUNAL DECISION FOR ASSESSMENT YEAR 1988 - 89. RESPECTFULLY FOLLOWING THIS TRIBUNAL DECISION, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). THIS GROUND IS REJECTED. 254. GROUND NO. 11 IS AS UNDER: 11. PROFIT ON SALE OF J.K. STEEL IN CONFIRMING THE ADDITION OF RS.34,25,931/ - BEING THE PROFIT ON SALE OF J.K. STEEL, AN UNIT OF APPELLANT, WITHOUT APPRECIATING THAT SECTION 41(2) WAS NOT APPLICABLE UNDER LAW IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND WHILE SIMULTANEOUSLY RELYING UPON JUDICIAL PRONOUNC EMENT, WHICH IS IN FAVOUR OF THE APPELLANT. 255. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE STEEL PLANT WAS SOLD BY THE ASSESSEE AS GOING CONCERN AMOUNTING TO SLUMP SALE FOR A LUMP SUM CONSIDERATION OF RS.60 LAC + STATUTORY LIABILITY OF T HE ASSESSEE HAVE BEEN TAKEN OVER BY PAYING COMPANY. HE ALSO SUBMITTED THAT THE 74 TRANSACTION OF SLUMP SALE BECAME TAXABLE U/S 50B OF THE ACT AND THEREFORE, SLUMP SALE IS NOT COVERED U/S 41(2) OF THE ACT. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE BOMBA Y HIGH COURT RENDERED IN THE CASE OF CIT VS. POLYCHEM LTD. [2012] 343 ITR 115 (BOM). 256. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 257. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THE CASE OF POLYCHEM LT D. (SUPRA), IT WAS HELD BY HON'BLE BOMBAY HIGH COURT THAT WHERE THE SLUMP SALE BEING TRANSFER OF BUSINESS AS GOING CONCERN AND NOT OF ITEMIZED ASSET, CAPITAL GAIN IS NOT CHARGEABLE. IN THE PRESENT CASE ALSO, THIS IS NOT THE CASE OF THE REVENUE THAT THIS I S SALE OF ITEMIZED ASSET. BY RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE BOMBAY HIGH COURT, WE HOLD THAT CAPITAL GAIN IS NOT CHARGEABLE IN THE PRESENT CASE IN RESPECT OF PROFIT ON SALE OF J. K. STEEL TO RISHRA STEEL LTD. THIS GROUND IS ALLOWED. 258. GROUND NO. 12 IS AS UNDER: 12. REVENUE EXPENSES TREATED AS CAPITAL IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.24,01,470/ - WITHOUT APPRECIATING THE EXPENDITURE WAS ALLOWABLE U/S. 37(1) OF THE ACT IF NOT ALLOWABLE AS CURRENT REPAIRS. 259. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF CIT VS. SRI MANGAYARKARASI MILLS P. LTD. [2009] 315 ITR 114 (SC) FOLLOWED BY LEARNED CIT(A) IS NOT APPLICABLE. HE PLACED RELIANCE ON THE JUDGM ENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF BHARAT GEARS LTD. VS. CIT [2011] 337 ITR 368 (DEL). 75 260. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 261. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THIS CASE , HON'BLE DELHI HIGH COURT HAS DULY CONSIDERED THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF SRI MANGAYARKARASI MILLS P. LTD. (SUPRA), WHICH WAS FOLLOWED BY LEARNED CIT(A) AND THEREAFTER , IT WAS HELD BY HON'BLE DELHI HIGH COURT THAT E XPENDITURE ON OVERHAULING AND RECONDITIONING OF MACHINERY IS NOT DEDUCTIBLE AS CURRENT REPAIR OR REVENUE EXPENDITURE. IN FACT, IN THIS CASE , HON'BLE DELHI HIGH COURT HAS FOLLOWED THIS JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF SRI MANGAYARKARASI MILLS P. LTD. (SUPRA) IN WHICH IT WAS HELD THAT REPLACEMENT OF OLD MACHINE TO NEW ONE WOULD CONSTITUTE THE BRINGING INTO EXISTENCE OF A NEW ASSET IN PLACE OF THE OLD ONE AND NOT REPAIR OF THE OLD EXISTING MACHINE. IT WAS ALSO HELD THAT REPLACEMENT OF PARTS OF A MACHINE CAN BE CONSTITUTED FOR THE VERY PURPOSE OF MAINTAINING THE ASSET. IN THE PRESENT CASE, THIS IS NOT THE CASE OF THE ASSESSEE THAT ONLY PART OF THE MACHINE WAS REPLACED. IN THE PRESENT CASE, A CLEAR FINDING IS GIVEN BY LEARNED CIT(A) THAT THIS AMOUNT OF RS. 24 ,0 1,470/ - IS THE AMOUNT RELATING TO THE REPLACEMENT OF PLANT & MACHINERY AND THIS FINDING COULD NOT BE CONTROVERTED BY LEARNED A.R. OF THE ASSESSEE AND EVEN AS PER THE JUDGMENT OF HON'BLE DELHI H IGH COURT CITED BY LEARNED A.R. OF THE ASSESSEE IN BHARAT COMMERCE AND INDUSTRIES LTD. (SUPRA), NO INTERFERE IS CALLED FOR IN THE ORDER OF CIT(A) ON THIS ISSUE. ACCORDINGLY, THIS GROUND IS REJECTED. 262. GROUND NO. 13 IS AS UNDER: 13. DEPRECIATION ON OTHER ASSETS AT GUEST HOUSE IN CONFIRMING THE ADDITION ON ACCOUNT OF DEPRECIATION ON GUEST HOUSE OF RS.2,94,338/ - WITHOUT APPRECIATING THAT 76 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. 263. REGARDING PART (A) IN RESPECT OF DISALLOWANCE OF RS.1,94,338/ - BEING DEPRECIATION ON GUEST HOUSE BUILDING, IT WAS FAIRLY CONCEDED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVO UR OF THE REVENUE AND AGAINST THE ASSESSEE AS PER TRIBUNAL ORDER IN ASSESSEES OWN FOR ASSESSMENT YEAR 1988 - 89 AND THEREFORE, THIS PART IS REJECTED. 264. REGARDING PART (B) IN RESPECT OF DISALLOWANCE OF RS.1,00,000/ - BEING AD HOC DISALLOWANCE ON OTHER ASS ETS OF GUEST HOUSE, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 1985 - 86. 265. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 266. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE DISALLOWANCE HAS BEEN CONFIRMED BY LEARNED CIT(A) TO THE EXTENT OF RS.1,00,000/ - ON AD HOC BASIS AND THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 1 985 - 86. RESPECTFULLY FOLLOWING THIS TRIBUNAL DECISION, WE DELETE THE DISALLOWANCE. THIS PART IS ALLOWED. 267. GROUND NO. 14 IS AS UNDER: 14. ENTERTAINMENT EXPENSES IN NOT ALLOWING THE SUM OF RS.3,10,903/ - BEING 50% OF THE EXPENDITURE BY WRONGLY TREATING THE SAME AS IN THE NATURE OF ENTERTAINMENT EXPENDITURE. 77 268. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 1985 - 86. 269. LEARNED D. R. OF THE RE VENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 270. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER TRIBUNAL ORDER FOR ASSESSMENT YEAR 1985 - 86, 50% DISALLOWANCE WAS CONFIRMED. IN THE PRESENT YEAR, LEARNED CIT(A) HAS CONFIRMED THE DI SALLOWANCE OF 50% OF TOTAL EXPENSES AND THEREFORE, THE ORDER OF CIT(A) IS IN LINE WITH THE TRIBUNAL ORDER FOR ASSESSMENT YEAR 1985 - 86. THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). THIS GROUND IS REJECTED. 171. GROUND NO. 15 IS AS UNDER: 15. CLOSING STOCK OF COPS NOT ALLOWING DEDUCTION OF RS.16,45,676/ - BEING EXCESS OF CLOSING STOCK (RS.2,76,09,382/ - ) OVER OPENING STOCK (RS.2,59,63,706/ - ) AS ALSO FAILING TO GIVE DIRECTION TO LD. AO TO ALLOW THE DEDUCTION. 272. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 1986 - 87 & 1988 - 89. 273. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 274. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE PRESENT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 1986 - 87 & 1988 - 89. LEARNED D.R. OF THE REVENUE COULD 78 NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE P RESENT YEAR. HENCE, WE NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THIS YEAR ON THIS ISSUE. THIS GROUND OF THE ASSESSEE IS ALLOWED. 275. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. 276. IN THE COMBINED RESULT, THE APPEAL OF THE REVENUE AND ASSESSEE 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: 1 8 /06/201 5 . *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