TATA IRON AND STEEL CO LTD, Mumbai V. DU COT SR 3(4), Mumbai

ITA 3964/MUM/2003

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75613 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 29-01-2014
• Assessment Year: 1986-1987
• Appeal Filed On: 22-05-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Assessee Lawyers: DINESH VYAS; MILIN THAKORE
• Keywords: Business income; Depreciation; Business expenditure; Charitable institution; Principle of natural justice; Additional depreciation; Retrospective amendment; Question of law; Bad and doubtful debts; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 37; 40A(3); 80HHC; 37(1)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - G BENCH. , !' !' !' !' , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & AMIT SHUK LA,JUDICIAL MEMBER /. ITA NO.3964/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1986-87 THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-400001 VS DCIT CENTRAL RANGE 34 MUMBAI. PAN: ( %& / APPELLANT) ( '(%& / RESPONDENT) /. ITA NO.3981/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1986-87 DCIT, CIRCLE - 2(2), AAYAKAR BHAVAN, R.NO. 545, 5 TH FLOOR, M.K.ROAD, MUMBAI-400020 VS THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET, MUMBAI-400001 PAN: ( %& / APPELLANT) ( '(%& / RESPONDENT) #) #) #) #) * * * * / ASSESSEE BY : SHRI DINESH VYAS & MILIN THAKORE + * / REVENUE BY : SHRI S.D.SRIVASTAVA # # # # + ++ + , , , , / DATE OF HEARING : 28-01-2014 -.$ + , / DATE OF PRONOUNCEMENT : 19-02-2014 # # # # , 1961 + ++ + 254 )1( / / / / ! ! ! ! ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM # # # # : CHALLENGING THE ORDER DT.21.02.2003 OF THE CIT(A)-I I,MUMBAI,ASSESSEE-COMPANY AND THE ASSESSING OFFICER (AO) HAVE FILED CROSS APPEALS.ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: GROUND OF APPEAL NO.1 THE LEARNED CIT(A) HAS COMMITTED ERROR IN RECORDING SOME FACTS IN HIS ORDER. THE APPELLANT CRAVES LEAV E TO PRODUCE BEFORE THE HONOURABLE ITAT CORRECT FACTS AT THE TIME OF HEARING. GROUND OF APPEAL NO.2 {PAGE 10 OF CIT (A)S ORDER} THE CIT (A) ERRED IN DENYING DEDUCTION OF RS.2.96 C RORES IN RESPECT OF ACCRUED LEAVE SALARIES WHICH WA S PAID DURING ASSESSMENT YEAR 1986-87. THE CIT (A) ERRED IN NOT RECOGNISING THE FACT THAT RS.2.96 CRORES REPRESENTED LEAVE SALARY LIABILITY I N RESPECT OF THE YEAR PRIOR TO ASSESSMENT YEAR 1985-8 6 WHEN THE METHOD OF CLAIM WAS CHANGED FROM CASH BASIS TO ACCRUAL BASIS.SINCE THIS AMOUNT PERTAINS T O PERIOD PRIOR TO ASSESSMENT YEAR 1985-86 , THE SAME SHOULD BE ALLOWED AS DEDUCTION ON PAYMENT BASIS IN THE ASSESSMENT YEAR 1986-87 WHEN IT WAS ACTUALLY PAID. GROUND OF APPEAL NO.3 {PAGE 24 OF CIT (A)S ORDER} EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS RS.90,20,020 2 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL C O. LTD. THE LEARNED CIT (A) ERRED IN REJECTING THE CLAIM OF THE APPELLANT THAT CERTAIN BUILDINGS WERE MAINTAIN ED AT FAR FLUNG PLACES DUE TO BUSINESS EXPEDIENCY AND AS HOTELS WERE NOT AVAILABLE IN THESE PLACES, EXPENDIT URE ON THE SAME IS ALLOWABLE AS REVENUE EXPENDITURE. TH E LEARNED CIT (A) FURTHER ERRED IN NOT ACCEPTING APPELLANTS CONTENTION THAT EXPENSES SPECIFICALLY A LLOWABLE ULS,30 TO 36 CAN NOT BE DISALLOWED AS PER PROVISIONS OF SECTION 3 7(4) AS WELL AS THAT SECTIO N 37(4) IS LIMITED TO DISALLOW MAINTENANCE EXPENSES AND NOT THE RUNNING EXPENSES. GROUND OF APPEAL NO.4 {PAGE 30 OF CIT (A)S ORDER} RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER R ULE 6D - RS.4 ,10,354 THE LEARNED CIT (A) ERRED IN REJECTING APPELLANTS CLAIM THAT RECOVERIES MADE IN RESPECT OF GUEST HOUS E EXPENSES SHOULD BE TREATED AS TRAVELLING EXPENSES, ON WHICH RULE 6D SHOULD APPLY AND EXPENSES PROPORTIONATELY DISALLOWED AND NOT THE ENTIRE DISAL LOWANCE OF RECOVERIES AS GUEST HOUSE EXPENSES. GROUND OF APPEAL NO.5 {PAGE 31 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 6B WITH RESPECT TO CALENDAR S AND DIARIES - RS.2,57 ,609 THE LEARNED CIT (A) ERRED IN DISALLOWING EXPENDITUR E ON DIARIES AND CALENDARS ON THE GROUND THAT THE SAME HAS COMPANYS LOGO FIXED ON IT , HENCE HAS ADVERTISEMENT VALUE GROUND OF APPEAL NO.6 {PAGE 34 OF CIT (A)S ORDER} DISALLOWANCE OF ANNUAL GENERAL MEETING EXPENSES - RS.24,656 THE LEARNED CIT (A) ERRED IN TREATING EXPENDITURE A T ANNUAL GENERAL MEETING IN THE NATURE OF ENTERTAINMENT EXPENDITURE, HENCE DISALLOWING THE SA ME. GROUND OF APPEAL NO.7 {PAGE 36 OF CIT (A)S ORDER} DISALLOWANCE OF EXPENDITURE ON TEA AND COFFEE SERVE D TO VISITORS U/S. 37(2A)- RS.2,00,000 THE LEARNED CIT (A) ERRED IN DISALLOWING THE EXPEND ITURE ON BEVERAGES SERVED TO VISITORS ON THE GROUND THAT THE SAME CONSTITUTES TO ENTERTAINMENT EXPENDIT URE. GROUND OF APPEAL NO.8 {PAGE 41 OF CIT (A)S ORDER} EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES- RS.7,19,354 THE LEARNED CIT (A) ERRED IN HOLDING THAT THE EXPEN DITURE INCURRED ON THE BUSINESS MEETINGS AND CONFERENCES AS ENTERTAINMENT EXPENDITURE INCURRED U NDER THE PROVISIONS OF SECTION 37(2A) OF THE INCOME - TAX ACT. GROUND OF APPEAL NO.9 {PAGE 42 OF CIT (A)S ORDER} DISALLOWANCE OF EXPENDITURE ON PAYMENTS MADE TO CLU BS - RS. 4,92,255 THE LEARNED CIT (A) ERRED IN TREATING PAYMENTS TO CLUBS AS ENTERTAINMENT EXPENDITURE COVE RED UNDER THE PROVISIONS OF SECTION 37(2A) GROUND OF APPEAL NO.10 {PAGE 45 OF CIT (A)S ORDER} EXPENDITURE INCURRED ON EMPLOYEESGET-TOGETHERS - RS.2,25,00 0 THE LEARNED CIT (A) ERRED IN HOLDING THAT THE EXPENDITURE INCURRED ON EMPLOYEES GET-TOGETHERS ON THE GROUND THAT THE SAME IS COVERED AS ENTERTAINMENT EX PENDITURE. GROUND OF APPEAL NO.11 {PAGE 49 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 40A (5) IN RESPECT OF DEEMED PERQUISITES- RS,13,00,000 THE LEARNED CIT (A) ERRED IN GIVING PARTIAL RELIEF WITH RESPECT TO EXPENSES INCURRED ON COMPANY OWNED ACCOMMODATION ON THE GROUND THAT THEY ARE DEEMED PE RQUISITES TO BE CALCULATED U/S.40A (5) GROUND OF APPEAL NO.12 {PAGE 53 OF CIT (A)S ORDER} EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE - RS.4, 58,110 THE LEARNED CIT (A) ERRED IN DISALLOWING THE EXPEND ITURE ON PARTLY CONVERTIBLE DEBENTURES (ATTRIBUTABL E TO CONVERTIBLE PORTION) ON THE GROUND THAT THE SAME IS CAPITAL EXPENDITURE GROUND OF APPEAL NO.13 {PAGE 79 OF CIT (A)S ORDER} DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE- RS.1,08,11,76 8 THE LEARNED CIT (A) FAILED TO APPRECIATE THE CIRCUM STANCES IN WHICH EXPENDITURE THROUGH THE MEDIUM OF TSRDS WAS INCURRED AND ERRED A TREATING THE SAME AS NON-BUSINESS EXPENDITURE. GROUND OF APPEAL NO.14 {PAGE 80 OF CIT (A)S ORDER} DISALLOWANCE OF ANNUAL CONTRIBUTION TO STEEL PLANTS SPORTS BOARD AND TATA SPORTS CLUB RS.5,69,619 THE LEARNED CIT (A) ERRED IN HOLDING THAT CONTRIBUT ION TO TATA SPORTS CLUB IS AND STEEL PLANT SPORTS BOARD COVERED BY THE PROVISIONS OF SECTION 40A(A). GROUND OF APPEAL NO.15 {PAGE 90 OF CIT (A)S ORDER} CONTRIBUTIONS TO VARIOUS INSTITUTIONS RS. 11,77,102 THE LEARNED CIT (A) ERRED IN DISALLOWING CONTRIBUTI ONS TO INSTITUTIONS ON THE GROUND THAT SUCH EXPENDI TURE 3 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL C O. LTD. WAS NOT INCURRED FOR THE PURPOSES OF THE BUSINESS, HAVING FAILED TO UNDERSTAND THE SCENARIO THAT ESTABLISHES NEXUS BETWEEN THE CONTRIBUTIONS MADE AN D THE BUSINESS OF THE APPELLANT. GROUND OF APPEAL NO.16 {PAGE 102 OF CIT (A)S ORDER} FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES - RS. 13,14,787 THE LEARNED CIT (A) ERRED IN DISALLOWING RS.13,14,7 87 BEING FEES PAID TO THE CONSULTANTS FOR CARRYING OUT FEASIBILITY STUDIES ON THE GROUND THAT IT CONSTITUT ES CAPITAL EXPENDITURE. GROUND OF APPEAL NO.17 {PAGE 114 OF CIT (A)S ORDER} PAYMENTS IN CASH IN EXCESS OF RS.2,500/- RS.3,33,106 THE LEARNED CIT (A) ERRED IN SETTING ASIDE SUCH PAY MENTS FOR VERIFICATION OF THE ASSESSING OFFICER AS THE SAME WAS NOT CLUBBED UNDER VARIOUS HEADS BY THE APP ELLANT. GROUND OF APPEAL NO.18 {PAGES 119 TO 141 OF CIT (A)S ORDER} DISALLOWANCE OF INVESTMENT ALLOWANCE. RS. 63,39,900 AND EXTRA SHIFT ALLOWANCE ON TOWN DIVISION R S. 44,65,458 THE LEARNED CIT (A) ERRED IN NOT ALLOWING INVESTMEN T ALLOWANCE ON THE FOLLOWING PLANT AND MACHINERY ON THE GROUND THAT THE SAME IS NOT FORMING PART OF THE MANUFACTURING PROCESS:- INVESTMENT ALLOWANCE : RS. OTHER PLANT & MACHINERY (WATER WORKS) 1,67,00,908 (PARTIAL) ELECTRIC LIGHT & FAN INSTALLATIONS 12,44,863 SANITARY WORKS MACHINERY 2,88,180 HOSPITAL EQUIPMENT 55,14,161 COMPUTERS 15,97,345 AIR-CONDITIONING PLANT 1 4,141 2,53,59,598 INVESTMENT ALLOWANCE @ 25% 63, 39,900 EXTRA SHIFT ALLOWANCE : WATER WORKS (OPENING BALANCE) 1,29,27,7 17 OTHER PLANT & MACHINERY (WATER WORKS) 1,68.42, 001 2, 97,69,718 EXTRA SHIFT ALLOWANCE 44,65,458 THE LEARNED CIT (A) FURTHER ERRED IN NOT FOLLOWING THE ORDERS OF THE HONOURABLE MUMBAI INCOME-TAX APPELLATE TRIBUNAL IN THE APPELLANTS OWN CASE FOR A SSESSMENT YEARS 1981-82 AND 1982-83 ON IDENTICAL ISSUES. GROUND OF APPEAL NO.19. {PAGES 149 TO 156 OF CIT (AYS ORDER} INVESTMENT ALLOWANCE ON VARIOUS ITEMS OF PLANT AND MACHINERY - RS.L0,22,133 THE LEARNED CIT (A) ERRED IN NOT ALLOWING INVESTMEN T ALLOWANCE ON FOLLOWING PLANT AND MACHINERY:- WORKS DIVISION : PLATFORM WEIGHING SCALE 28,590 AIRCRAFT BATTERY CHARGER ANALYSER 1,30,528 COMPUTERS 9,24,706 WATER COOLING PLANT 9,950 TELEPHONE SYSTEM 11,18,175 COLLIERIES : SURGICAL INSTRUMENTS 7,25,404 ORE MINES & QUARRIES : SURGICAL INSTRUMENTS 2,13,874 X-RAY MACHINES 7,03,978 RS. WEST BOKARO COLLIERIES : SURGICAL INSTRUMENTS 1,02,302 STREET LIGHTS 87,081 OVERHEAD WIRES 43,944 40,88,532 INVESTMENT ALLOWANCE @ 25% 10,22,133 4 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL C O. LTD. --------------- GROUND OF APPEAL NO.20 {PAGE 156 OF CIT (AYS ORDER} INVESTMENT ALLOWANCE ON ITEMS OF PLANT AND MACHINER Y IN THE WORKS OF TUBES DIVISION- RS.3,03,915. THE LEARNED CIT (A) ERRED IN NOT GRANTING INVESTMEN T ALLOWANCE ON THE FOLLOWING ITEMS OF PLANT & MACHINERY INSTALLED IN THE FACTORY OF TUBES DIVISIO N: RS. COMPUTER TERMINALS AT WORKS 9,08,634 WEIGHING MACHINE AT MEDICAL UNIT 6,632 ELECTRICAL EQUIPMENT FOR WORKS PERSONNEL OFFICE 17,552 ELECTRIC EQUIPMENT FOR WORKS CASH OFFICE 42,345 ELECTRICAL EQUIPMENT FOR WORKS TELEPHONE EXCHANGE 2,04,3 17 ELECTRICAL EQUIPMENT FOR ELECTRONIC LABORATORY 19,913 AUTOMATIC FIRE ALARM SYSTEM 16,265 12,15,658 INVESTMENT ALLOWANCE @ 25% 3,03,915 GROUND OF APPEAL NO.21 {PAGE 206 OF CIT (A)S ORDER} CONTRIBUTION TO THE SOCIETY FOR SPORTS & STADIUM AT KOLKATA- RS. 10,00,000 THE LEARNED CIT (A) ERRED IN DISALLOWING THE SAID C ONTRIBUTION ON THE GROUND THAT THERE WAS NO DIRECT NEXUS WITH THE BUSINESS CARRIED ON BY THE APPELLANT . GROUND OF APPEAL NO.22 (PAGE 206 OF CIT (A)S ORDER} CONTRIBUTION TO BELDIH AND UNITED CLUBS RS.2,26,532 THE LEARNED CIT (A) ERRED IN DISALLOWING SUCH CONTR IBUTION ON THE GROUND THAT IT IS NOT A BUSINESS EXPENDITURE. GROUND OF APPEAL NO.23 (PAGE 207 OF CIT (A)S ORDER} CONTRIBUTION TO XAVIER LABOUR RELATIONS INSTITUTE RS.2,00,000 THE LEARNED CIT (A) ERRED IN DISALLOWING CONTRIBUTI ON MADE TO XLRI ON THE GROUND THAT SUCH RESEARCH IS NOT RELATED TO THE BUSINESS OF THE ASSESSEE. GROUND OF APPEAL NO.24 {PAGE 208 OF CIT (AYS ORDER} PAYMENT OF EXCISE DUTY RS.7,20,748 THE LEARNED CIT (A) ERRED IN SETTING THE SAME ASIDE TO ASSESSING OFFICER TO VERIFY THE ALLOWABILITY U/ S.43B, ON THE STRENGTH OF PAYMENT MADE IN FINANCIAL YEAR 1 986-87 TO THE SOLICITORS. GROUND OF APPEAL NO.25 {PAGE 208 OF CIT (A)S ORDER} BAD AND DOUBTFUL WRITTEN OFF DUES FROM GOVERNMENT D EPARTMENTS - RS. 11,88,122 THE LEARNED CIT (A) ERRED IN NOT ALLOWING DUES FROM GOVERNMENT AGENCIES AS DEDUCTION ON THE GROUND THAT APPELLANTS ARGUMENT WAS VAGUE AND GENERAL IN NATURE. GROUND OF APPEAL NO.26 .1 PAGE 211 OF CIT (A)S ORDER} DEPRECIATION ON ROLLING MILL ROLLS RS.1,08,85,000 THE LEARNED CIT (A) ERRED IN NOT ALLOWING 100% DEPR ECIATION ON ROLLING MILL ROLLS AND SETTING ASIDE FO R ASSESSING OFFICER TO VERIFY CONSUMPTION OF THE SAME . GROUND OF APPEAL NO.27 {PAGE 212 OF CIT (A)S ORDER} RESTRICTION OF 80HHC DEDUCTION RS. 10,36,888 THE LEARNED CIT (A) ERRED IN NOT ALLOWING FULL DEDU CTION U/S.80HHC AS THE SPIRIT OF THE SECTION WAS NO T INTERPRETED PROPERLY. GROUND OF APPEAL NO.28 BAD DEBTS WRITTEN OFF RS. 11,09,997 THE LEARNED CIT (A) ERRED IN NOT CONSIDERING APPELL ANTS CLAIM OF DEDUCTIBILITY OF BAD DEBTS WRITTEN O FF. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEN D THE ABOVE GROUNDS OF APPEAL. ITA NO.3981/MUM/2011,AY.-1986-87: IN HIS APPEAL,AO HAS RAISED FOLLOWING GROUNDS: 5 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL C O. LTD. 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW RS.2,69,62,561/-AS DEDUC TION ON ACCOUNT OF PROVISION FOR LEAVE SALARIES. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW 20% OF INITIAL CONTRIBUT ION AS DEDUCTION IN THE YEAR IN WHICH THE INITIAL CONTRIBUTION WAS MADE TO THE APPROVED SUPERANNUATIO N FUND. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO GIVE DEDUCTION OF RS. 25,201, 460/- ON ACCOUNT OF GUARANTEED PAYMENT TO AHMEDABAD ADVANCE MILLS LTD. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 10,799/- ON ACCOUNT OF PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE EXPENSES. 5.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 93,306/- ON ACCOUNT OF REMUNERATION TO CHAIRMAN AND MANAGING DIRECTOR. 6.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW RS.10,16,000/- ON ACCOUNT OF CONTRIBUTION TO TATA SERVICES FOR MAINTENANCE OF HORNIMAN CIRCLE GARDENS AS AN ADVERT ISE CAMPAIGN. 7.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 83,23,124/- ON ACCO UNT OF INVESTMENT ALLOWANCE. 8.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 8,166/- ON ACCOUNT OF INVESTMENT ALLOWANCE ON PLANT AND MACHINERY INSTALLED AT STOCK YARDS. 9.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW INVESTMENT ALLOWANCE ON VARIOUS ITEMS OF PLANT AND MACHINERY I.E. MHZ DUAL OCSCILLOC COPY, LIGHTING OF SECURITY ROAD, COM PUTERS, WEIGH MACHINES, TELEPHONE SYSTEM ETC. IN VARIOUS DIVISIONS AS DISCUSSED BY THE CIT(A) IN PAR A 40 OF HIS ORDER. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) O N THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ITO/AC/DC BE RESTORED.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ASSESSEE-COMPANY ENGAGED IN THE BUSINESS OF MANUFAC TURING AND SALE OF IRON AND STEEL MATERIALS FILED ITS RETURN OF INCOME ON 31.07.1986 DECLARING INCOME AT RS.73.50 CRORES.AO FINALISED THE ASSESSMENT U/S.143(3)OF THE ACT,ON 30.03.1989 DETER MINING THE INCOME OF THE ASSESSEE AT RS.1,16, 53,27,340/-. 2. FIRST GROUND OF APPEAL IS ABOUT DENYING DEDUCTION O F RS.2.96 CRORES IN RESPECT OF ACCRUED LEAVE SALARIES WHICH WAS PAID DURING ASSESSMENT YEAR 1986 -87.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT IN THE P&L A/C.THE ASSESSEE HAD MADE A P ROVISION OF RS.24.04 CRORES IN RESPECT OF ACCRUED LEAVE SALARIES WHICH HAD BEEN CLAIMED AS A DEDUCTION,THAT THE ASSESSEE HAD A DEDUCTION OF RS.2.96 CRORES IN RESPECT OF THE LIABILITY ASCERTAI NED IN EARLIER YEARS AND PAID DURING THE YEAR,THAT IT HAD MADE SIMILAR CLAIMS IN AY.1985-86,THAT IN THAT YEAR SIMILAR CLAIM MADE BY THE ASSESSEE WAS REJECTED.FOLLOWING THE ORDER FOR THE PRECEDING AY., AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR ACCRUED LEAVE,WAGES,SALARIES, AMOUNTING TO RS.2,96, 74,305/-. 2.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT THE ACTION OF THE AO WAS JUSTIFIED. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING WITH REGARD TO SALARY,BUT FROM LAST AY.I T SWITCHED OVER TO MERCANTILE SYSTEM,THAT TRIBUNAL HAD ALLOWED A SUM OF RS.16,19,94,974/-(RS. 19.16 CRORES-RS.2.96 CRORES) WHILE DECIDING THE APPEAL,FILED BY THE ASSESSEE,FOR THE AY.1985-86 ,THAT REMAINING AMOUNT OF RS.2,96,74,305/- SHOULD BE ALLOWED FOR THE YEAR UNDER APPEAL,THAT SU M WAS ATTRIBUTABLE TO LEAVE ENCASHMENT,THAT SAME WAS ACTUALLY PAID,THAT IT SHOULD BE ALLOWED ON PAYMENT BASIS THOUGH IT PERTAINED TO EARLIER 6 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL C O. LTD. YEARS,THAT WHENEVER THERE WAS CHANGE IN ACCOUNTING SYSTEM SUCH PECULIAR CIRCUMSTANCES COULD ARISE,THAT IN A PARTICULAR YEAR ASSESSEE COULD GET BENEFITS OF ACCRUAL AND PAYMENT SYSTEM.HE RELIED UPON THE CASE OF WEST COAST SUGAR MILLS LTD.,DELIVE RED BY THE HONBLE BOMBAY HIGH COURT(59 TAXMAN 398).DEPARTMENTAL REPRESENTATIVE (DR) SUPPOR TED THE ORDER OF THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD MADE CLAI M ABOUT LEAVE SALARY ON PAYMENT BASIS AS WELL AS ON ACCRUAL BASIS.IN THE IMMEDIATE PRECEDING YEAR ,SIMILAR CLAIMS WERE MADE BY THE ASSESSEE AND CLAIM MADE ON PAYMENT BASIS WAS ALLOWED BY THE TRIB UNAL IN ITS ORDER 27.02.2009 (ITA/ 3938/ MUM/03 AND ITA/3980/MUM/03).IN THE MATTER OF WEST C OAST SUGAR MILLS LTD.(SUPRA)HONBLE HIGH COURT HAD DEALT WITH THE ISSUE OF BONUS PAID AND BO NUS ACCRUED IN THE SAME YEAR.AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES,HONBLE HIGH COUR T HELD AS UNDER: THE QUESTION WAS WHETHER THE ASSESSEE COULD CLAIM D EDUCTION ON BOTH CASH AND PROVISION BASIS. WHENEVER THERE IS CHANGE OF METHOD,SOMETHING OF THI S KIND IS BOUND TO HAPPEN IN THE YEAR OF CHANGE OF METHOD IN CASE THE ASSESSEE HAD CHANGED ITS METH OD FROM MERCANTILE TO CASH SYSTEM, IT MIGHT HAVE BEEN THAT IN THE YEAR OF CHANGE NO DEDUCTION COULD HAVE BEEN CLAIMED OR ALLOWED. HOWEVER, THAT WAS NO REASON FOR NOT ALLOWING THE CLAIM ON THE BAS IS OF CHANGED METHOD SO FAR AS THE CHANGE WAS CONCERNED AND ON THE EARLIER METHOD IF THE LIABILIT Y IN REGARD THERETO HAD NOT ALREADY BEEN ALLOWED AS DEDUCTION.ACCORDINGLY, THE ASSESSEE WAS ENTITLED TO THE DEDUCTION IN THE YEAR IN QUESTION BOTH AS REGARDS THE PROVISION FOR BONUS AS ALSO THE BONUS A CTUALLY PAID DURING THE PREVIOUS YEAR. RESPECTFULLY FOLLOWING THE ABOVE REFERRED JUDGMENTS OF THE HONBLE BOMBAY HIGH COURT AND THE ORDER OF THE TRIBUNAL FOR THE EARLIER AY.,WE DECIDE D GROUND NO.1 IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO ALLOW THE CLAIM OF LEAVE SALARY,AM OUNTING TO RS.2.96 CRORES,PAID DURING THE YEAR. 3. NEXT GROUND OF APPEAL PERTAINS TO EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS AMO UNTING TO RS.90,20,020/-.BEFORE US,AR DID NOT PRESS THE GROUN D.THEREFORE,DECIDING GROUND NO.2 AGAINST THE ASSESSEE,WE DISMISS IT AS NOT PRESSED. 4. NEXT GROUND OF APPEAL PERTAINS TO RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER RULE 6D OF THE INCOME-TAX RULES,1962(RULES),AMOUNTING TO RS .4,10,354-.DURING THE ASSESSMENT PROCEEDIN- GS AO FOUND THAT THE ASSESSEE MAINTAINED GUEST HOUS ES AT JAMSHEDPUR MINES AND COLLIERIES, AND KHARAGPUR,THAT IT COLLECTED SERVICE CHARGES FOR PRO VIDING LODGING OR BOARDING AND LODGING TO THE SUPPLIERS AND BUSINESS ASSOCIATES,THAT IN THE CASE OF THE EMPLOYEES A BOOK ENTRY WAS PASSED,THAT THE ASSESSEE HAD DEBITED THE EXPENDITURE INCURRED ON TH E EMPLOYEES IN RESPECT OF SERVICE CHARGES I.E, LODGING OR BOARDIHG AND LODGING CHARGES TO THE TRAV ELLING EXPENSES ACCOUNT AND CREDITED TO THE GUEST HOUSE EXPENSES ACCOUNT,THAT IT DID NOT RECOVE R ANY SUM FROM THE EMPLOYEES AND ONLY A BOOK ENTRY WAS PASSED.CONSIDERING THE ABOVE FACTS THE AO HELD THAT THERE WAS NO REDUCTION IN ITS LIABILITY BY THE NOTIONAL RECOVERY AND AS A RESULT,HE DID NOT ALLOW THE ASSESSEE TO SET OFF THE NOTIONAL RECOVER Y ATTRIBUTABLE TO THE EMPLOYEES AGAINST THE GUEST HOU SE EXPENSES.HOWEVER, THE SERVICE CHARGES FOR USING THE GUEST HOUSE BY THE SUPPLIERS AND BUSINESS ASSOCIATES, THE ASSESSEE RECEIVED CASH AND THE AO ALLOWED IT TO BE SET OFF AGAINST THE GUEST HOUSE EXPENSES UNDER FIRST PROVISO TO SECTION 3 7(4). THE ASSESSEE INCLUDED THE SERVICE CHARGES NOTIONALL Y COMPUTED FOR USING THE GUEST HOUSE IN THE TRAVELLING EXPENSES ACCOUNT.AT THE TIME OF QUANTIFI CATION OF THE DISALLOWANCE UNDER RULE 6D, THE EXPENDITURE WHICH WAS INCURRED AT THE GUEST HOUSE W AS ALSO INCLUDED IN THE DISALLOWANCE UNDER RULE 6D. 4.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.CONSIDERING THE MATERIAL AVAILABLE HE HELD THAT THE ASSESSEE PROVID ED GUEST HOUSES TO ITS EMPLOYEES AT VARIOUS PLACES,THAT IT COLLECTED CASH FOR PROVIDING LODGING OR BOARDING AND LODGING TO THE SUPPLIERS AND BUSINESS ASSOCIATES,THAT IN THE CASE OF THE EMPLOYE ES, NO CASH WAS COLLECTED AND A DEBIT NOTE WAS RAISED,THAT THE PROCEDURE ADOPTED BY THE AO WAS COR RECT,THAT THE NOTIONAL RECOVERIES WERE BOOK ENTRIES ONLY,THAT THE ASSESSEE DEBITED THE NOTIONAL GUEST HOUSE EXPENSES TO THE TRAVELLING EXPENSES 7 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL C O. LTD. ACCOUNT AND CREDITED THE SAME TO GUEST HOUSE EXPENS ES ACCOUNT.,THAT THE ASSESSEE,HAD QUANTIFIED THE DISALLOWANCE UNDER RULE 6D AT RS. 62,88,451/-,THAT AMOUNT IN QUESTION INCLUDED THE GUEST HOUSE RECOVERIES TO THE EXTENT OF RS.4,76,159/-,THAT THE AO HAD REDUCED THE DISALLOWANCE UNDER RULE 6D BY THAT AMOUNT AND ULTIMATELY DISALLOWED A SUM OF R S. 58,12,292/-,THAT RULE 6D WAS RELEVANT FOR THE PURPOSE OF ALLOWING THE DEDUCTION,THAT THE AMOU NT ALLOWABLE UNDER RULE 6D WOULD GET REDUCED IN A CASE WHERE THE LODGING OR BOARDING AND LODGING WERE PROVIDED,THAT THE NOTIONAL RECOVERIES ATTRIBUTABLE TO EMPLOYEES IN RESPECT OF THE GUEST H OUSE HAD BEEN RIGHTLY NOT ALLOWED AS REDUCTION FROM THE GUEST HOUSE EXPENSES BY THE AO. 4.2. BEFORE US,BEFORE US REPRESENTATIVES OF BOTH THE SID ES ADMITTED THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE ADJUDI CATING APPEAL FOR THE AY.1985-86.WE FIND THAT TRIBUNAL IN ITS ORDER DATED 27.02.2009(SUPRA),IN PA RAGRAPHS 12-13,HAS HELD AS UNDER: AS FAR AS GROUND NO. 4 IS CONCERNED, ON SIMILAR IS SUE THE HONBLE ITAT, MUMBAI IN ASSESSEES OWN CASE IN A.Y. 1992-93 IN I.T.A. NO. 7121/MUM/96 HAS HELD AS FOLLOWS: ADMITTEDLY RECOVERIES HAVE BEEN MADE FROM THE PARE NT DEPARTMENTS OF THE COMPANY WHOSE PERSONS UTILISED THE FACILITIES OF THE GUEST HOUSE IN THE COURSE OF OFFICIAL WORK RELATING TO THE BUSINESS OF THE COMPANY.ASSUMING THE SITUATION OF N ON-EXISTENCE OF THE GUEST HOUSE OF THE COMPANY IN THAT PLACE, THEN, SUCH EMPLOYEES WOULD H AVE STAYED IN A HOTEL OR GUEST HOUSE RUN BY THIRD PARTIES AND MADE PAYMENTS TO THEM FOR USE OF THEIR FACILITIES AND ACCORDINGLY PAYMENTS MADE TO OUTSIDE PARTIES WOULD HAVE BEEN TREATED AS TRAVELLING EXPENSES INCURRED BY THE COMPANY FOR ITS BUSINESS. THEREFORE, THE USER OF GUEST HOUS E FACILITIES PRO VI CI ED BY THE COMPANY TO THE EMPLOYEES OF THE COMPANY IN CONNECTION WITH DISCHAR GE OF THEIR OFFICIAL DUTIES DOES NOT ALTER THE BASIC CHARACTER OF THE EXPENDITURE.ULTIMATELY SUCH EXPENSES ARE CONNECTED WITH THE TRAVELLING BY SUCH EMPLOYEES AND, THEREFORE, SHOULD BE TREATED AC CORDINGLY, IRRESPECTIVE OF THE FACT THAT SUCH EMPLOYEES STAYED IN THE GUEST HOUSE OF THE COMPANY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES,WE DIRECT THE AO TO ALLOW THE DEDUCTI ON OF AMOUNT RECEIVED FROM PARENT DEPARTMENTS AS EXPENDITURE IN THE NATURE OF TRAVELL ING EXPENSES ;AND IN ACCORDANCE WITH RULE 6D OF THE IT RULES.THUS THIS GROUND OF THE ASSESSEE IS ACCEPTED. 13.IN VIEW OF THE ABOVE, WE DIRECT THAT THE ADDITIO N TO THE EXTENT OF RECOVERIES MADE BY THE ASSESSEE BE ALLOWED AS A DEDUCTION. GROUND NO. 4 OF THE ASSESSE E IS ALLOWED. RESPECTFULLY,FOLLOWING THE ABOVE GROUND NO.4 IS DEC IDED IN FAVOUR OF THE ASSESSEE. 5. NEXT GROUND IS ABOUT DISALLOWANCE MADE UNDER RULE 6 B WITH RESPECT TO CALENDARS AND DIARIES, AMOUNTING TO RS.2,57,609/-.DURING THE ASSESSMENT PR OCEEDINGS,AO FOUND THAT THE ASSESSEE PRESENTED THE CALENDARS AND DIARIES AND TREATED THE SAME AS T HE EXPENDITURE ON PUBLIC RELATIONS. HE MADE DISALLOWANCE UNDER RULE 6B IN RESPECT OF ARTICLES O F PRESENTATION INTENDED FOR ADVERTISEMENT COMPRISED OF COST OF DIARIES AND CALENDARS IN EXCES S OF THE PRESCRIBED LIMITS WITH THE LOGO OF THE ASSESSEE AND ALSO QUANTIFIED THE DISALLOWANCE. 5.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND THE ASSESSMENT ORDER HE HELD THAT THAT THE DIARIES AND CALENDARS WITH THE LOGO OF THE COMP ANY HAD ADVERTISEMENT VALUE,THAT THE DIARIES AND THE CALENDARS WERE THE PRESENTATION ARTICLES AS THE Y BORE THE LOGO OF THE COMPANY,THAT THE DIARIES AND CALENDARS WITH THE LOGO OF THE COMPANY CAME WITHIN THE PURVIEW OF RULE 6B.RELYING UPON THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE C ASE OF ALLANA SONS PVT. LTD. 216 ITR 690,HE UPHELD THE ACTION OF THE AO. 5.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR)FAIRLY CONCE DED THAT THE ISSUE IS DECIDED AGAINST THE ASSESSEE BY THE ORDER PASSED BY THE TRIBUNAL FOR LA ST AY.WE FIND THAT DECIDING THE ISSUE FOR AY.1985-86, THE TRIBUNAL HAS DEALT THE ISSUE OF DIA RIES AND CALENDERS,IN PARAGRAPH NO.15 AS UNDER: THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSES SEE BEFORE US WAS THAT THE PRODUCTS OF THE COMPANY BEING IRON AND STEEL,THE GIVING OF DIARIES AND CALENDARS EVEN WITH THE LOGO OF THE ASSESSEE CONTAINED THEREI N CANNOT BE SAID TO BE IN THE NATURE OF ADVERTISEMENT CALLING FOR INVOCATION OF RULE 6B OF THE INCOME-TA X RULES READ WITH THE PROVISIONS OF SECTION 37(3A), 3(3) AN D (3C) OF THE ACT.WE ARE OF THE VIEW THAT IN THE LI GHT OF THE 8 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL C O. LTD. DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF ALLANA SONS PVT. LTD., 216 ITR 690 (BOM) HOLD ING THAT PRESENTATION ARTICLES BEARING THE LOGO OF THE ASSESSEE WOULD FALL WITHIN THE AMBIT OF RULE 6B AS EXPENDITURE IN THE NATURE OF ADVERTISEMENT,THE ARGU MENT OF THE LEARNED COUNSEL FOR THE ASSESSEE CANNOT BE ACCEPTED. GROUND NO. 5 IS ACCORDINGLY DISMISSED. 6. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF ANNU AL GENERAL MEETING EXPENSES OF RS.24, 656/-.DURING THE ASSESSMENT PROCEEDINGS AO FOUND TH AT IN THE TAX AUDIT REPORT THE EXPENDITURE INCURRED ON THE ENTERTAINMENT WAS QUANTIFIED BY THE AUDITORS U/S.44AB,THAT THE EXPENDITURE INCURRED ON SERVING TEA, COFFEE AND SOFT DRINKS TO THE SHARE HOLDERS AT THE ANNUAL GENERAL MEETING WAS NOT INCLUDED IN THE ENTERTAINMENT EXPENDITURE.HE HELD T HAT THE EXPENDITURE INCURRED ON THE ENTERTAINMENT OF THE SHAREHOLDERS FORMED PART OF TH E DEFINITION OF ENTERTAINMENT EXPENDITURE UNDER EXPLANATION TO SECTION 37(2A)/37(2) OF THE ACT. 6.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT UNDER SECT ION 37(2A)/37(2) OF THE ACT ANY EXPENDITURE INCURRED BY AN ASSESSEE IN EXCESS OF THE AMOUNTS ST IPULATED IN THIS SECTION HAD TO BE DISALLOWED,THAT THE MAXIMUM AMOUNT ADMISSIBLE TOWARDS ENTERTAINMENT EXPENDITURE U/S. 37(2A) WAS RS. 50,000/- ,THAT THE DEFINITION OF ENTERTAINMENT EXPENDITURE W AS INSERTED BY THE FINANCE ACT, 1983 WITH RETROSPECTIVE EFFECT FROM 1-4-1976,THAT THE EXPENDI TURE INCURRED ON SERVING TEA, COFFEE AND SOFT DRINKS WAS COVERED BY THE EXPLANATION 2 TO SECTION 37(2A)/37(2),THAT THE SWEEP OF THE WORDS ENTERTAINMENT EXPENDITURE FOUND IN THE EXPLANATION 2 TO SECTION 37(2A) WAS WIDE AND BROAD TO COVER EVERY EXPENDITURE ON PROVISION OF HOSPITALITY OF EVERY KIND TO ANY PERSON OTHER THAN THE EMPLOYEES AT THE PLACE OF THEIR WORK.FOLLOWING THE JUDGEMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF MYSORE MINERALS LTD. (162 ITR 562),THE DISA LLOWANCE MADE BY THE AO U/S. 37(2A)/37(2) WAS UPHELD BY THE FAA. 6.2. BEFORE US,AR AND DR AGREED THAT THE TRIBUNAL HAD DE CIDED THE ISSUE AGAINST THE ASSESSEE IN AY.1985 -86.WE FIND THAT,TRIBUNAL HAD DEALT THE ISS UE IN PARAGRAHS16-18 OF THE ORDER OF EARLIER YEAR(SUPRA) AS UNDER : 16.GROUND NO. 6 RAISED BY THE ASSESSEE IS AS FOLL OWS: THE LEARNED CIT(A)ERRED IN TREATING EXPENDITURE A T ANNUAL GENERAL MEETING IN THE NATURE OF ENTERTAIN MENT EXPENDITURE,HENCE DISALLOWING THE SAME. 17.THE VERY SAME ISSUE AROSE FOR CONSIDERATION IN A SSESSEES OWN CASE IN A.Y. 1988-89 IN I.T.A. NO.322 2/ MUM/92 AND THIS TRIBUNAL HAS TAKEN A VIEW THAT SERV ING OF TEA,COFFEE ARND SOFT DRINKS TO SHAREHOLDERS AT ANNUAL GENERAL MEETING IS NOT EXPENDITURE IN THE NA TURE OF ENTERTAINMENT BY FOLLOWING THE RULING TO TH AT EFFECT IN THE CASE OF CIT VS. MYSORE MINERALS LTD., 126 ITR 437(KAR).THE LEARNED CIT(A)HAS,HOWEVER, DISTINGUISHED THE DECISION IN THE CASE OF MYSORE MI NERALS LTD. (SUPRA) AS FOLLOWS: - THE DEFINITION OF ENTERTAINMENT EXPENDITURE WAS IN SERTED BY THE FINANCE ACT,1983 WITH RETROSPECTIVE EFFECT FROM 1.4.1976. IN MY VIEW, THE EXPENDITURE I NCURRED ON SERVING TEA, COFFEE AND SOFT DRINKS IS COVERED BY THE EXPLANATION 2 TO SECTION 37(2A)/(37( 2). IN THE EXPLANATION 2 IT IS STIPULATED THAT THE EXPENDITURE ON PROVISION OF HOSPITALITY OF EVERY KI ND BY THE ASSESSEE TO ANY PERSON WHETHER BY WAY OF PROVISION OF FOOD OR BEVERAGES OR IN ANY OTHER MANN ER, WHATSOEVER, WOULD BE ENTERTAINMENT EXPENDITURE.THE SWEEP OF THE WORDS ENTERTAINMENT EX PENDITURE FOUND IN THE EXPLANATION 2 TO SECTION 37(2A)IS WIDE AND BROAD TO COVER EVERY EXPENDITURE ON PROVISION OF HOSPITALITY OF EVERY KIND TO ANY PERSON OTHER THAN THE EMPLOYEES AT THE PLACE OF THE IR WORK THE APPELLANT RELIED ON THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF BANGALORE TURF CLUB LTD 126 ITR 430.THE HONBLE KARNATAKA HIGH COURT IN A LATER JUDGMENT IN THE CASE OF MYSOR E MINERALS LTD 162 ITR 562 DID NOT APPROVE THE RATIO LAID DOWN IN BANGALORE TURF CLUB ON THE GROUN D THAT THE EXPLANATION 2 TO SUBSECTION (2A) OF SECTION 37 WAS NOT THERE IN THE STATUTE WHEN THE JU DGMENT IN THE CASE OF BANGALORE TURF CLUB WAS DELIVERED.THUS, THE KARNATAKA HIGH COURT OVERRULED ITS OWN DECISION IN BANGALORE TURF CLUB IN THE CASE OF MYSORE MINERALS LTD. (SUPRA). HONBLE KARN ATAKA HIGH COURT HAS CATEGORICALLY STATED THAT THE EXPENDITURE INCURRED AT THE GENERAL BODY MEETIN G IS COVERED BY THE EXPLANATION 2 TO SECTION 37(2A) AND THE RELEVANT PORTION FROM THE JUDGMENT I S REPRODUCED AS UNDER RESPECTFULLY FOLLOWING THE JUDGMENT OF THE KARNATAK A HIGH COURT IN THE CASE OF MYSORE MINERALS LTD.(SUPRA)THE DISALLOWANCE MADE BY THE AO U/S.37(2 A)/37(2)IS UPHELD.TO SUM UP, THE EXPENDITURE INCURRED ON SERVING TEA, COFFEE & SOFT DRINKS TO TH E SHAREHOLDERS AT THE ANNUAL GENERAL MEETING IS 9 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL C O. LTD. TREATED AS ENTERTAINMENT EXPENDITURE. THE ACTION OF THE AO IS UPHELD. 18.IN VIEW OF THE ABOVE DECISION OF THE HONBLE KAR NATAKA HIGH COURT, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS GROUND NO. 6 OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE,GROUND NO.6 FILED BY THE ASSESSEE STANDS DISMISSED. 7. NEXT GROUND OF APPEAL DEALS WITH DISALLOWANCE OF EX PENDITURE,ON TEA AND COFFEE SERVED TO VISITORS U/S.37(2A) OF THE ACT.WHILE FRAMING ASSESS MENT AO FOUND THAT THAT THE ENTERTAINMENT EXPENDITURE QUANTIFIED BY THE AUDITORS DID NOT INCL UDE THE EXPENDITURE ON TEA, COFFEE,FOOD OR OTHER BEVERAGES PROVIDED TO THE VISITORS EITHER IN OFFICE OR IN FACTORY,THAT THE ASSESSEE DID NOT INCLUDE SU CH EXPENSES IN THE ENTERTAINMENT EXPENDITURE.HE ESTIMA TED THE EXPENDITURE ON TEA, COFFEE ETC. TO VISITORS AT RS.2 LAKHS,AND TREATED THE SAME AS ENTE RTAINMENT EXPENDITURE U/S. 37(2A) OF THE ACT.THE AO FURTHER OBSERVED THAT CONSIDERING THE SIZE OF TH E ASSESSEE, THE ABOVE ESTIMATION TOWARDS THE ENTERTAINMENT EXPENDITURE WAS REASONABLE. 7.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.CONSIDERING THE RELEVANT MATERIAL HE HELD THAT THE EXPENDITURE INCU RRED BY THE ASSESSEE ON TEA, COFFEE ETC. SERVED TO THE VISITORS WAS COVERED BY EXPLANATION 2 TO SUB-SE CTION (2A) OF SECTION 37,THAT THE EXPLANATION 2 MADE IT CLEAR THAT THE EXPENDITURE ON PROVISION OF HOSPITALITY OF EVERY KIND BY THE ASSESSEE TO ANY PERSON OTHER THAN THE EMPLOYEES IN OFFICE, FACTORY OR OTHER PLACE OF THEIR WORK, WHETHER BY WAY OF PROVISION OF FOOD OR BEVERAGES OR IN ANY OTHER MANN ER, WHATSOEVER, WOULD BE ENTERTAINMENT EXPEND -ITURE,THAT THE EXPENDITURE INCURRED BY THE ASSESSE E ON TEA, COFFEE ETC. FORMED PART OF THE DEFINITION OF ENTERTAINMENT EXPENDITURE,THAT THE ESTIMATION OF EXPENDITURE BY THE AO WAS VERY REASONABLE AND IT DID NOT CALL FOR ANY INTERFERENCE. 7.2. BEFORE US,IT WAS SUBMITTED THAT,WHILE DECIDING THE IDENTICAL ISSUE,TRIBUNAL HAD PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT IN THE EARLIER AY.,TRIBUNAL HAD DEALT THE ISSUE AS UNDER: 20.THE AO ESTIMATED A SUM OF RS.1 LAKH AS THE PROB ABLE EXPENDITURE OUT OF ENTERTAINMENT EXPENDI - TURE QUANTIFIED BY THE AUDITORS IN THEIR REPORT, IN CURRED BY THE ASSESSEE ON PROVIDING TEA AND COFFEE SERVED TO THE VISITORS.THE ESTIMATE MADE BY THE AO WAS CONFIRMED BY THE CIT(A).ACCORDING TO THE REVENUE EXPLANATION 2 TO SUBSECTION (2A) OF SECTION 37 PROVIDES THAT EVERY HOSPITALITY PROVIDED BY AN ASSESSEE FOR ANY PERSON OTHER THAN THE EMPLOYEE EVEN IN OFFICE, FACTORY OR OTHER PLACE OF WORK WOULD BE ENTERTAINMENT EXPENDITURE,CALLING FOR DISA LLOWANCE. 21.IT IS NOT IN DISPUTE BEFORE US THAT IN AY.1981-8 2 IN I.T.A NO.1791/BOM/35 IN ASSESSEES CASE THE TRIBUNAL HELD THAT DISALLOWANCE OF 25% OF ENTERTAIN MENT EXPENSES ON THIS GROUND WOULD BE REASONABLE.WE,THEREFORE, RESTRICT THE DISALLOWANCE TO RS.75,000/-INSTEAD OF RS 1 LAKH.THIS GROUND OF APPEAL IS THUS PARTLY ALLOWED. RESPECTFULLY FOLLOWING THE ORDERS FOR THE EARLIER Y EARS,1981-82 AND 1985-86,WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 25% OF THE EXPENDITURE INCURRED FOR THE YEAR UNDER APPEAL.GROUND NO.7 IS ALLOWED IN PART. 8. NEXT GROUND OF APPEAL RELATES TO DISALLOWANCE OF EX PENDITURE ON BUSINESS MEETINGS AND CONFERE- NCES OF THE EMPLOYEES,U/S.37(2A)OF RS.7.19 LAKHS. 8.1. IN THE APPELLATE PROCEEDINGS FAA HELD THAT THE ASSE SSEE HAD CONDUCTED BUSINESS MEETINGS AT HOTELS WITH THE EMPLOYEES,THAT THERE WAS NO DOUBT T HAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF THE BUSINESS,THAT THE EXPENDITURE WAS NOT INCURR ED IN THE OFFICE BUT WAS PAID TO THE HOTELS,THAT IT WAS CLEAR FROM THE EXPL.2 TO SECTION 37(2A)/37(2) T HAT THE EXPENDITURE INCURRED ON THE HOSPITALITY OF EMPLOYEES WAS EXCLUDED FROM THE DEFINITION OF TH E ENTERTAINMENT EXPENDITURE PROVIDED THE EXPENDITURE IS INCURRED IN OFFICE/FACTORY OR OTHER PLACE OF THEIR WORK,THAT IN THE CASE UNDER APPEAL THE EXPENDITURE WAS INCURRED IN THE HOTELS,THAT THE EXPENDITURE INCURRED ON ENTERTAINMENT AT HOTELS ATTRIBUTABLE TO EMPLOYEES COULD NOT BE BROUGHT UNDE R THE EXPRESSION OTHER PLACE OF THEIR WORK,THAT THE EXPRESSION HAD TO BE INTERPRETED IN THE CONTEXT IN WHICH OTHER WORDS PRECEDING THE EXPRESSION 10 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. WERE USED,THAT THE OTHER WORDS USED WERE OFFICE/OR FACTORY,THAT OTHER PLACE OF THEIR WORKHAD TO BE SIMILAR TO OFFICE/FACTORY,THAT NORMALLY,THE SAID EX PRESSION INCLUDED PLACES SUCH AS MINE,WORK SITE, DRILLING-SITE,GODOWN ETC.,THAT THE EXPRESSION DID N OT INCLUDE EXPENDITURE INCURRED AT A PLACE OTHER THAN THE PLACE AT WHICH AN EMPLOYEE NORMALLY WORKS, THAT WORDS OTHER PLACE OF WORK SHOULD BE AKIN TO OFFICE OR FACTORY AND IT COULD NOT BE TAKEN TO INCLUDE HOTEL OR RESTAURANT,THAT THE ASSESSEE D ID NOT PLACE ANY EVIDENCE TO ESTABLISH THE FACT THAT T HE EXPENDITURE INCURRED ON BUSINESS MEETINGS & CONFERENCES CONTAINED THE RENT PAID FOR THE HALLS I N THE HOTELS. HE DIRECTED THE AO TO EXAMINE & ALLOW IF THE ASSESSEE IS ABLE TO FURNISH THE EVIDEN CE OF RENT PAID TO THE HOTELS OR RESTAURANTS WHICH WAS INCLUDED IN THE BUSINESS MEETING & CONFERENCES EXPENDITURE.FINALLY,HE SUSTAINED THE ADDITIONS MADE BY THE AO SUBJECT TO SUBMISSION AND VERIFICATI ON OF EVIDENCE OF RENT PAID. 8.2. BEFORE US, REPRESENTATIVES OF BOTH THE SIDES AGREED THAT WHILE ADJUDICATING THE APPEAL FOR THE AY.1985-85(SUPRA),TRIBUNAL HAD DECIDED THE MATTER A GAINST THE ASSESSEE-COMPANY.WE FIND THAT APPEAL FILED BY THE ASSESSEE WITH REGARD TO DISALLO WANCE OF EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES OF THE EMPLOYEES,WAS DEALT BY THE TRIBU NAL AS UNDER,IN PARAGRAPHS 27-30 AS UNDER : 27.WE HAVE CONSIDERED HIS SUBMISSIONS.ON THIS ISSUE THE LEARNED CIT(A) HAS HELD AS FOLLOWS: AS PER EXPLANATION 1 TO SECTION 37(2A), THE ENTERTAINM ENT EXPENDITURE INCLUDES THE AMOUNT OF ANY DIALLOWANCE IN THE NATURE OF ENTERTAINMENT ALLOWANC E PAID TO THE EMPLOYEE.FURTHER THE ENTERTAIN - MENT EXPENDITURE ALSO INCLUDES THE EXPENDITURE INCU RRED BY THE EMPLOYEE FOR THE PURPOSE OF BUSINESS OR PROFESSION.EXPLANATION 2 TO SECTION 37(2A) IS MA TERIAL FOR THE PURPOSE OF THE PRESENT ISSUE. EXPLANATION 2 TO SECTION 37(2A) WAS INTRODUCED BY T HE FINANCE ACT, 1983 WITH RETROSPECTIVE EFFECT FROM 1 ST ,APRIL,1976.THE RELEVANT EXPRESSION OTHER PLACE OF THEIR WORK IN EXPLANATION 2 IS AS FOLLOWS: FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED TH AT FOR THE PURPOSE OF THIS SUBSECTION ... ENTERTAINMENT EXPENDITURE INCLUDES EXPENDITURE ON P ROVISION OF HOSPITALITY OF EVERY KIND BY THE ASSESSEE TO ANY PERSON BUT DOES NOT INCLUDE EXPENDI TURE ON FOOD OR BEVERAGES PROVIDED BY THE ASSESSEE TO HIS EMPLOYEES IN OFFICE, FACTORY OR OTH ER PLACE OF THEIR WORK. IT IS CLEAR FROM THE ABOVE EXPLANATION 2 TO SECTION 37(2A)/37(2) THAT THE EXPENDITURE INCURRED ON THE HOSPITALITY OF EMPLOYEES GETS EXCLUDED FROM THE DEF MITION OF THE ENTERTAINMENT EXPENDITURE PROVIDED THE EXPENDITURE IS INCURRED IN OFFICE, FACTORY OR O THER PLACE OF THEIR WORK. IN THE PRESENT EASE,IT IS AN ACCEPTED POSITION THAT THE EXPENDITURE WAS INCURRED IN THE HOTELS.THE ASSESSEES CONTENTION IS IOTELS FALL WITHIN THE MEANING OF OTHER PLACE OF THEIR WO RK.I AM UNBLE TO AGREE WITH THE INTERPRETATION GIVEN BY THE APPELLANT. EXPLANATION 1 AND 2 TO SECT ION 37(2A) IT CAN BE SEEN THAT THE EXPENDITURE INCURRED BY THE EMPLOYEES FORMS PART TO DEFINITION OF ENTERTAINMENT EXPENDITURE.EXPLANATION 2 DOES NOT TREAT EXPENDITURE ON FOOD OR BEVERAGES PROVIDED BY THE ASSESSEE TO THE EMPLOYEES IN OFFICE, FACTOR Y OR OTHER PLACE OF THEIR WORK AS ENTERTAINMENT EXPENDITURE.THE EXPENDITURE WAS N OT INCURRED EITHER IN OFFICE OR IN FACTORY. THE EXPENDITURE INCURRED ON E NTERTAINMENT AT HOTELS ATTRIBUTABLE TO EMPLOYEES CANNOT BE BROUGHT UNDER THE EXPRESSION OTHER PLACE OF THEIR WORK. THIS EXPRESSION HAS TO BE INTERPRETED IN THE CONTEXT IN WHICH OTHER WORDS PRE CEDING THE EXPRESSION WERE USED. THE OTHER WORDS USED ARE OFFICE OR FACTORY. IN MY VIEW, OTHER PLACE OF THEIR WORK HAS TO BE SIMILAR TO OFFICE OR FACTORY. NORMALLY, THE EXPRESSION OTHER PLACE OF THEIR WORK INCLUDES PLACES SUCH AS MINE, WORK SITE, DRILLING SITE, GODOWN ETC. BUT CERTAINLY THE EXPRESSION DOES NOT INCLUDE EXPENDITURE INCURR ED AT A PLACE OTHER THAN THE PLACE AT WHICH AN EMPLOYE E NORMALLY WORKS. THE PRINCIPLE OF EJUSDEM GENERIC WARRANTS THAT OTHER PLACE OF WORK SHOULD BE AKIN TO OFFICE OR FACTORY AND IT CANNOT BE TAKEN TO INCLUDE HOTEL OR RESTAURANT. THE EXPENDITURE INC URRED BY THE APPELLANT WAS TOWARDS FOOD OR BEVERAGES. IN MY VIEW, THE EXPENDITURE INCURRED ON THE EMPLOYEES AT A PLACE OTHER THAN OFFICE OR FACTORY REQUIRES TO BE TREATED AS ENTERTAINMENT EXP ENDITURE. THE HOTEL OR RESTAURANT CANNOT BE TREATED AS ANY OTHER PLACE OF THEIR WORK. I AM ALSO NOT A BLE TO AGREE WITH THE CONTENTION THAT A LARGE NUMBER OF EMPLOYEES HAD ATTENDED THE BUSINESS MEETI NGS. AS OBSERVED EARLIER, THE SWEEP OF THE WORDS ENTERTAINMENT EXPENDITURE FOUND IN EXPLANATION IS W IDE AND BROAD TO COVER EVERY EXPENDITURE ON PROVISION OF HOSPITALITY OF EVERY KIND TO EMPLOYEES ALSO,PROVIDED THE EXPENDITURE IS NOT INCURRED IN OFFICE OR FACTORY OR ANY OTHER PLACE OF THEIR WORK WHERE AN EMPLOYEE NORMALLY DISCHARGES HIS DUTIES. IN MY VIEW, THE HOTEL CANNOT BE EQUATED WITH THE OT HER PLACE OF THEIR WORK. THE APPELLANT;RELIED ON TH E CIT(A)S ORDER FOR A.Y. 1988-89.I AM NOT ABLE TO AG REE WITH THE INTERPRETATION OF THE PROVISIONS GIVEN BY THE CIT(A) IN A.Y.1988-89. IN MY VIEW, THE EXPEN DITURE IS COVERED BY THE DEFINITION OF THE CTT(A) 11 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. ENTERTAINMENT EXPENDITURE.THE APPELLANT ; ALSO SUBM ITTED THAT IN A.Y.50% OF THE EXPENDITURE INCURRED ON THE BUSINESS MEETINGS AND CONFERENCES WAS TREATE D AS ENTERTAINMENT EXPENDITURE AND THE REMAINING EXPENDITURE WAS RENT PAID FOR THE HALLS IN HOTELS.T HE APPELLANT DID NOT PLACE ANY EVIDENCE,BEFORE ME T O ESTABLISH THE FACT EXPENDITURE INCURRED ON BUSINESS MEETINGS AND CONFERENCES CONTAINED THE RENT PAID FOR THE HALLS IN THE HOTELS.IN THE ABSENCE OF EVIDE NCE,I REFRAIN MYSELF FROM GIVING ANY FINDING ON THI S ARGUMENT. HOWEVER, KEEPING IN MIND ;THE PRINCIPLES OF NATURAL JUSTICE, THE A.O. IS DIRECTED TO EXAMINE AND ALLOW IF THE ASSESSEE IS ABLE TO FURNISH THE EV IDENCE OF RENT PAID TO THE HOTELS OR RESTAURANTS WH ICH WAS INCLUDED IN THE BUSINESS MEETINGS AND CONFERENC ES EXPENDITURE.TO SUM UP, THE EXPENDITURE INCURRED ON THE BUSINESS MEETGS AND CONFERENCES AT THE HOTELS FALLS WITHIN THE DEFINITION OF ENTERTAINMENT EXPENDITURE.THE ADDITIONS MADE BY THE AO ARE SUSTAINED SUBJECT TO SUBMISSION AND VERIFICATION OF EVIDENCE OF RENT PAID. 28.WE AGREE WITH THE REASONING GIVEN BY THE CIT(A) IN THE LIGHT OF THE PROVISIONS OF EXPLANATION 2 TO SECTION 37(2A) OF THE ACT. WE HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE.THE DECISION OF HONBLE CALCUTTA H IGH COURT IN THE CASE OF CHEMCROWN (I) LTD. (SUPRA) IS DISTINGUISHABLE AS FOLLOWS:THE EMPLOYEES AND CUSTOMERS PARTICIPATED IN THE ENTERTAINMENT WHEREAS IN THE CASE OF THE ASSESSEE THE EMPLOYEES A LONE PARTICIPATED. 29.THE DECISION IN THE CASE OF EXPO MACHINERY LTD. (SUPRA) BY HONBLE DELHI HIGH COURT IS ALSO DISTINGUISHABLE AS FOLLOWS: IT WAS A CASE OF EMPLOY EES PARTICIPATION WHILE ENTERTAINING GUESTS AND THE ISSUE OF PLACE OF WORK IN THE CONTEXT OF EXPLANATIO N 2 TO SECTION 37(2A) WAS NOT CONSIDERED BY THE HONBLE COURT. IN THE PRESENT CASE THE EMPLOYEES AL ONE PARTICIPATED IN THE ENTERTAINMENT AND THERE WERE NO CUSTOMERS AND GUESTS. 30.WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) A ND DISMISS GROUND NOS. 8 TO 10. RESPECTFULLY FOLLOWING THE ABOVE WE DECIDE GROUND N O.8 AGAINST THE ASSESSEE. 9. NEXT GROUND OF APPEAL IS ABOUT PAYMENT TO CLUBS.ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE IN THE TAX AUDIT REPORT,AO CAME TO THE CON CLUSION THAT THE PAYMENTS MADE TO CLUBS WERE IN THE NATURE OF ENTERTAINMENT EXPENDITURE AND DISALLO WED THE AMOUNT CLAIMED,U/S.37(2A)/37(2) OF THE ACT,UNDER THE HEAD PAYMENT TO CLUB. 9.1. IN THE APPELLATE PROCEEDINGS FAA HELD THAT THAT THE ASSESSEE DID NOT BRING ANY MATERIAL ON RECORD TO ESTABLISH THAT PAYMENTS TO CLUBS DID NOT CONTAIN THE EXPENDITURE IN THE NATURE OF ENTERTAINMENT EXPENDITURE,THAT THE PAYMENT MADE TO CLUBS COMPRISED MAINLY OF EXPENDITURE ON FOOD AND BEVERAGES,THAT THE EXPENDITURE ON FOOD AND BEVE RAGES INCURRED AT CLUBS HAS TO BE TREATED AS ENTERTAINMENT EXPENDITURE U/S.37(2A)/37(2)OF THE AC T,THAT THE EXPRESSSION ANY OTHER PLACE OF WORK USED IN THE EXPLANATION TO THE SAID SECTION DID NOT INCLUDE CLUBS. FOR THE REASONS GIVEN WITH REGARD TO ENTERTAINMENT EXPENDITURE,HE HELD THAT EXPENDITU RE INCURRED FOR EMPLOYEE-EMPLOYER MEETINGS IN THE CLUBS WAS IN THE NATURE OF ENTERTAINMENT EXPEND ITURE,THAT THE ASSESSEE DID NOT PLACE ANY EVIDENCE BEFORE HIM TO ESTABLISH THE FACT THAT THE EXPENDITURE INCURRED AT CLUBS CONTAINED THE EXPEN -DITURE INCURRED ON RENT.HOWEVER, AO WAS DIRECTED T O EXAMINE AND ALLOW, IF THE ASSESSEE WAS ABLE TO FURNISH THE EVIDENCE OF RENT PAID TO THE CLUBS.I N SHORT,ADDITIONS MADE BY THE AO WERE SUSTAINED SUBJECT TO SUBMISSION AND VERIFICATION OF EVIDENCE OF RENT PAID. 9.2. BEFORE US,AR ADMITTED THAT ISSUE WAS COVERED AGAINS T THE ASSESSEE,BY THE ORDER OF THE EARLIER YEAR.WE FIND THAT IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN PARAGRAPHS NO.24,27 AND 30 OF THE ORDER FOR THE AY.1985-86(SUPRA).WE HAVE ALREADY MENTIONED THAT THE TRIBUNAL HAD DISMISSED THE GROUND PERTAINING TO ENTERTAINMENT,INCLUDING TH E EXPENDITURE INCURRED IN CLUBS FOR EMPLOYEES- EMPLOYERS MEETINGS,THEREFORE FOLLOWING THE SAME GR OUND NO.9 IS DISMISSED. 10. NEXT GROUND OF APPEAL IS RELATED TO EXPENDITURE ON FOOD AT EMPLOYEES GET TOGETHER. AO FOUND THAT IN THE TAX AUDIT REPORT AUDITORS HAD QUANTIFIE D THE EXPENDITURE ON EMPLOYEES GET-TOGETHERS AND PICNICS BUT THE SAME WAS NOT TREATED AS ENTERTAINME NT EXPENDITURE U/S. 37(2A) ON THE PLEA THAT THE SAID EXPENDITURE WAS INCURRED ON CONVEYANCE AS WELL AS ON FOOD.AS THE ASSESSEE DID NOT QUANTIFY THE EXPENDITURE ON EMPLOYEES GET-TOGETHERS AND PICN ICS ATTRIBUTABLE TO FOOD AND BEVERAGES, THE AO ESTIMATED THE EXPENDITURE ON FOOD AND BEVERAGES AND DISALLOWED THE SAME TREATING IT AS ENTERTAINMENT EXPENDITURE U/S.37(2A)/37(2) OF THE A CT. 12 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. 10.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT THE EXPEND ITURE ESTIMATED BY THE AO WAS TOWARDS FOOD AND BEVERAGES INCURRED BY THE ASSESSEE ON EMPLOYEESGET -TOGETHERS AND PICNICS,THAT THE EXPENDITURE INCURRED FELL WITHIN THE MEANING OF EXPLANATION 2 T O SECTION 37(2A)/37(2) OF THE ACT.HE UPHELD THE ADDITION FOLLOWING THE DECISION TAKEN FOR EARLIER I SSUE. 10.2. BEFORE US,AR AND DR SUBMITTED THAT ISSUE WAS IDENTI CAL TO ISSUE NO.10 FOR THE AY.1985-86 AND THE DISALLOWANCE CONFIRMED BY THE FAA,WAS UPHEL D BY THE TRIBUNAL.WE FIND THAT GROUND NO.10 AND FACTS RELATED TO IT WERE DELIBERATED UPON BY TH E TRIBUNAL AS UNDER: 10. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE E XPENDITURE INCURRED ON EMPLOYEES GET- TOGETHERS ON THE GROUND THAT THE SAME IS COVERED AS ENTERTAINMENT EXPENDITURE. X X X X THE AO DISALLOWED THE CLAIM FOR DEDUCTION ON THE SA ME GROUND ON WHICH EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCE OF EMPLOYEES WERE DISALLOWE D.THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. FOR IDENTICAL REASONS GIVEN ABOVE, THE AO AND CIT(A ) DISALLOWED EXPENDITURE OF RS. 2,00,000/- ON PROVIDING FOOD AT EMPLOYEES GET-TOGETHER AND PICNIC S. THESE EXPENSES WERE ADMITTEDLY NOT INCURRED IN THE PLACE OF WORK. 30.WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) A ND DISMISS GROUND NOS. 8 TO 10. CONSIDERING THE FACT THAT THE ISSUE HAS BEEN ALREAD Y DECIDED AGAINST THE ASSESSEE IN THE IMMEDIATE PREVIOUS AY.,WE WANT TO CONFIRM THE ORDER OF THE FA A.GROUND NO.10 STANDS DISMISSED. 11. NEXT GROUND OF APPEAL PERTAINS TO DISALLOWANCE UNDE R SECTION 40A (5) OF THE ACT IN RESPECT OF DEEMED PERQUISITES.DURING THE ASSESSMENT PROCEEDING S AO FOUND THAT IN THE RETURNS OF INCOME,THE ASSESSEE HAD COMPUTED THE DISALLOWANCE UNDER SECTIO N 40A(5) WITH A NOTE THAT THE DISALLOWANCE WAS ESTIMATED BY IT ON ACCOUNT OF NON-AVAILABILITY OF INFORMATION READILY AT THE TIME OF FURNISHING OF THE RETURNS,THAT THE AUDITORS HAD ALSO NOT QUANT IFY THE DISALLOWANCE U/S. 40A(5).HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE ASSESSEE Q UANTIFIED THE DISALLOWANCE U/S. 40A(5). THE ASSESSEE WHILE COMPUTING THE PERQUISITES U/S. 40A(5 ) DID NOT INCLUDE THE EXPENSES INCURRED ON SOFT FURNISHINGS,MAINTENANCE OF RESIDENTIAL ACCOMMODATIO N AND THE CONVEYANCE.AO DIRECTED THE ASSESSEE TO FURNISH THE DETAILS IN RESPECT OF EXPEN SES INCURRED ON SOFT FURNISHINGS,CONVEYANCE AND MAINTENANCE OF RESIDENTIAL ACCOMMODATION.AS PER THE AO THE ASSESSEE DID NOT FURNISH THE DETAILS. BUT,HE CULLED OUT THE DETAILS OF SUCH EXPENSES INCU RRED ON THE MAINTENANCE OF ACCOMMODATIONS WHICH WERE GIVEN TO THE EMPLOYEES OTHER THAN THE MA NAGING DIRECTOR AND HE MADE DISALLOWANCE ACCORDINGLY. 11.1. IN THE APPELLATE PROCEEDINGS FAA,HELD THAT AN IDENT ICAL ISSUE CAME UP FOR THE CONSIDERATION OF THE ITAT,MUMBAI BENCH A IN THE ASSESSEES OWN CAS E FOR AY.1988-89 (ITA/3222/BOM/192 DTD. 25.01.2002),THAT IN AY.1988-89 THE EXPENSES INCURRE D TOWARDS MAINTENANCE OF PROPERTY,SWEEPER, WAGES, REPAIRS,DEPRECIATION,SOFT FURNISHINGS ETC. W ERE QUANTIFIED AT RS.59.20 LAKHS, THAT THE THEN FAA HAD SUSTAINED THE DISALLOWANCE OF RS.18 LAKHS O UT OF THE SAID AMOUNT,THAT THE ITAT HAD CONFIRMED THE ORDER OF THE FAA.FOLLOWING THAT ORDER HE RESTRICTED THE DISALLOWANCE AT RS.13 LAKHS. 11.2. BEFORE US,AR ADMITTED THAT ISSUE WAS DISMISSED BY T HE TRIBUNAL IN THE ORDER PASSED FOR AY. 1985-86(SUPRA).WE FIND THAT THE QUESTION OF DEEMED PERQUISITES WAS DEALT BY THE TRIBUNAL AS UNDER: 34.IT IS NOT IN DISPUTE THAT IN A.Y.1988-89 AND SEV ERAL ASSESSMENT YEARS SIMILAR ISSUE HAD COME UP FOR CONSIDERATION IN ASSESSEES CASE BEFORE THE ITA T AND THE TRIBUNAL IN I.T.A. NO.3222/BOM/92 BY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF LUBRIZOL INDIA LTD.,187 ITR 25 (BOM) WAS PLEASED TO UPHOLD SUCH DISALLOWANC E.WE ARE OF THE VIEW THAT THE ESTIMATE OF DISALLOWANCE U/S.40A(5) AS MADE BY THE CIT(A) IS PR OPER AND HAS TO BE UPHELD.GROUND NO 11 IS THEREFORE,DISMISSED. FOLLOWING THE ABOVE,WE CONFIRM THE ORDER OF THE FAA AND DISMISS GROUND NO.11. 12. NEXT ISSUE IS EXPENDITURE ON PARTLY CONVERTIBLE DEB ENTURE.THE ASSESSEE HAD ISSUED FULLY CONVERTIBLE BONDS IN AY.1981-82.THE EXPENSE DISALLO WED BY THE AO IN AY.1986-87 WAS IN RESPECT 13 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. OF 13 1/2 % FULLY CONVERTIBLE BONDS.TAX AUDIT REPORTS REVEALE D THAT THE EXPENSES WERE INCURRED BY THE ASSESSEE ON CONVERSION OF BONDS INTO SHARES.THE ASS ESSEE CLAIMED THE EXPENSES INCURRED ON CONVERSION OF BONDS INTO SHARES AS REVENUE EXPENDIT URE,WHEREAS THE AO TREATED THE SAME AS CAPITAL EXPENDITURE. 12.1. RELYING UPON THE MATTERS OF THE HONBLE SUPREME COU RT IN THE CASE OF BROOKE BOND INDIA LTD. (225ITR798)AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD.(225ITR792),FAA HELD THAT THE EXPENDITURE INCURRED BY A COMPANY IN CONNECTION WITH THE ISSUE OF SHARES WITH A VIEW TO INCREASE ITS SHARE CAPITAL WAS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY AND WAS A CAPITAL EXPENDITURE EVEN THOUGH IT MIGHT INCIDENTALLY HELP IN THE BUSINESS OF THE COMPANY AND IN THE PROFIT MAKING,THAT THE ACTION OF THE AO WAS AS PER THE PROVISIONS OF LAW. 12.2. BEFORE US,AR AND DR AGREED THAT AFTER THE JUDGMENTS OF HONBLE APEX COURT ISSUE HAS TO BE DECIDED AGAINST THE ASSESSEE.FOLLOWING THE ORDER OF THE HONBLE SUPREME COURT WE DISMISS GROUND NO.12. 13. GROUND OF APPEAL NO.13 IS ABOUT DISALLOWANCE OF TAT A STEEL RURAL DEVELOPMENT SOCIETY (TSRDS) EXPENDITURE.AS PER THE AO,ASSESSEE HAD CLAI MED EXPENDITURE ON RURAL DEVELOPMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION,AS BUSINESS EXP ENDITURE U/S. 37(1) OF THE ACT.THAT THE ASSESSEE HAD INCURRED EXPENDITURE ON VILLAGE LINK ROADS (10, 47,876/-),DRINKING WATER PROJECTS(RS.18.38 LAKHS),MOBILE DISPENSARY AND FAMILY PLANNING(15.52 LAKHS),IRRIGATION FACILITIES(10.98 LAKHS), VETE -RINARY/DISPENSARIES & A.L CENTRE(RS.7.28 LAKHS),ED UCATIONAL ACTIVITIES(RS.10.33LAKHS)VOCATIONAL TRAINING,(RS.18.30LAKHS),COMMUNITY FORESTRY (RS.12. 90 LAKHS),SCHOOL BUILDING (RS.1LAKHS), OTHER ACTIVITIES (RS.3.93LAKHS).HE WAS OF THE OPINION THA T EXPENDITURE WAS NOT ADMISSIBLE AS IT WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE COMPANY,THAT THE EXPENDITURE INCURRED ON ACTIVITIES LIKE VILLAGE LINK ROAD, DRIN KING WATER PROJECT, IRRIGATION FACILITIES, VOCATION AL TRAINING ETC.HAD NO NEXUS WITH THE BUSINESS CARRIED ON BY THE ASSESSEE. 13.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT THE ASSES SEE HAD GIVEN CONTRIBUTIONS TO TSRDS THAT WAS AN INDEPENDENT ENTITY REGISTERED UNDER THE SOCIETIE S ACT,THAT THE EXPENDITURE WAS INCURRED BY TSRDS ON VILLAGE LINK ROADS,DRINKING WATER PROJECTS ,MOBILE DISPENSARIES,FAMILY PLANNING,IRRIGATI - ON FACILITIES,VETERINARY DISPENSARIES, EDUCATIONAL ACTIVITIES, VOCATIONAL TRAINING, COMMUNITY FORESTRY , CONTRIBUTION TO SCHOOL BUILDING ETC.,THAT THE ASSES SEE GAVE CONTRIBUTION TO TSRDS AND THE EXPENDITURE WAS IN TURN INCURRED BY TSRDS ON BEHALF OF THE ASSESSEE,THAT THE EXPENDITURE INCURRED BY THE ASSESSEE HAD NO DIRECT NEXUS WITH THE BUSINE SS CARRIED ON BY THE ASSESSEE,THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF STEEL AND THE EXP ENDITURE INCURRED HAD NO DIRECT NEXUS WITH THE BUSINESS CARRIED ON BY IT.RELYING UPON THE JUDGMENT S OF THE JURISDICTIONAL HIGH COURT IN STANDARD MILLS CO.LTD.(209ITR85) AND VOLTAS LTD.(207ITR47) H ELD THAT THE EXPENDITURE INCURRED HAD NO NEXUS WITH THE BUSINESS CARRIED ON BY THE ASSESSEE, THAT IT WAS AN APPLICATION OF INCOME FOR A CHARITABLE OR PHILANTHROPIC CAUSE,THAT THERE WAS NO COMMERCIAL EXPEDIENCY ALSO IN INCURRING THE EXPENDITURE ON THE RURAL DEVELOPMENT,THAT THE DISAL LOWANCE MADE BY THE AO DID NOT CALL FOR ANY INTERFERENCE. 13.2. BEFORE US,AR SUBMITTED THAT EXPENDITURE WAS INCURRE D IN CONNECTION WITH THE PURPOSE OF THE ASSESSEES BUSINESS,THAT COMPANY WAS UNDER LEGAL OB LIGATION;AS PER THE MEMORANDUM OF SETTLEMENT BETWEEN THE ASSESSEE AND THE TATA WORKERS UNION;FO R INCURRING SAID EXPENDITURE AND TO PROVIDE FACILITIES, THAT EXPENDITURE INCURRED FOR DISCHARGI NG SOCIAL RESPONSIBILITIES HAS TO BE ALLOWED AS REVENUE EXPENDITURE. HE RELIED UPON THE ORDERS OF THE TRIBUNAL DELIVERED IN THE CASES OF TISCO(TATA STEEL)FOR THE AYS. 1968-69,1980-81AND1985-86(ITA/2068&2321/BOM/74-75,I TA/2046/BOM/1984,ITA/3938&3980/ MUM/2003).HE ALSO RELIED UPON THE ORDER OF THE TRIB UNAL PRONOUNCED IN THE CASE OF TELCO FOR THE AYS.1983-84,1984-85,1986-87 TO 1990-91(ITA/6003 TO 6008/MUM/98).DR SUPPORTED THE ORDER OF THE FAA. 14 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. 13.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT DEALING WITH THE ISSUE OF CONTRIBUTION TO VARIOUS INSTITUTI ONS BY THE ASSESSEE ,THE TRIBUNAL HAS DECIDED THE MATTE; IN THE ORDER FOR THE AY.1985-86;AS UNDER: 40. GROUND NO. 14 OF THE ASSESSEE READS AS FOLLOWS : THE LEARNED CIT(A) ERRED IN DISALLOWING CONTRIBUTI ONS TO INSTITUTIONS ON THE GROUND THAT SUCH EXPENDITURE WAS NOT INCURRED FOR THE PURPOSES OF TH E BUSINESS, HAVING FAILED TO UNDERSTAND THE SCENARIO THAT ESTABLISHES NEXUS BETWEEN THE CONTRIB UTIONS MADE AND THE BUSINESS OF THE APPELLANT. 41.THE ASSESSING OFFICER DISALLOWED CONTRIBUTIONS A GGREGATING TO RS.11,31,700 TO THE FOLLOWING INSTITUTIONS ENGAGED IN VARIOUS ACTIVITIES IN THE M ED OF SPORTS, EDUCATION AND CULTURAL PROMOTIONS ON THE GROUND THAT THE CONTRIBUTION WERE MADE FOR THE PURPOSE OF LABOUR WELFARE AND THAT THE PROVISIONS O F SECTION 40A(9) ARE ATTRACTED. X X X THE ASSESSING OFFICER FURTHER HELD THAT ALTERNATIVE LY THE CONTRIBUTIONS ARE LIABLE FOR DISALLOWANCE AS BEING IN THE NATURE OF CHARITY.THE BACKGROUND UNDER WHICH THESE EXPENSES HAS TO BE INCURRED BY THE ASSESSEE IS AS FOLLOWS: 42.THE ASSESSEE HAD SET UP ITS WORKS IN 1907 IN THE VIRGIN FOREST AREAS OF THE SINGHBHUM-DISTRICT, HAD TO DEVELOP THE TOWNSHIP OVER A PERIOD OF YEARS ON L AND OF ABOUT 25 SQ. KM. LEASED TO IT ON A LONG TERM BASIS BY THE GOVERNMENT OF BIHAR. AS ALL THE FACILI TIES OF THE WORKS, SITES FOR THE ASSOCIATE COMPANIE S, RESIDENCE SITES FOR ITS OWN EMPLOYEES AND THEIR DEP ENDENTS AND SITES FOR THE BUSINESS COMMUNITY WERE TO BE LOCATED ON ITS OWN LAND, THE ASSESSEE HAD TO PROVIDE ALL THE FACILITIES OF A MUNICIPALITY LIKE, POWER,WATER,SANITATION, HOSPITALS, PLAYGROUNDS, CLU BS, READING ROOMS,DISPENSARIES, COMMUNITY WELFARE CENTRES, CULTURAL ASSISTANCE, ETC. IN THE LEASE AGR EEMENT FINALISED WITH THE BIHAR GOVERNMENT THE ASSESSEE WAS UNDER AN OBLIGATION TO PROVIDE AJI THE CIVIC AMENITIES IN JAMSHEDPUR AND, THEREFORE, THE ASSESSEE HAD TO CONTINUE THESE OBLIGATIONS WHICH IT HAD UNDERTAKEN EARLIER ON ITS OWN, IN THE ABSENCE OF A MUNICIPALITY IN A LARGE TOWNSHIP LIKE STEEL CITY OF JAMSHEDPUR. WITH THE INCREASE IN THE NUMBER OF PEOPLE RESIDING IN JAMSHEDPUR, THE ASSESSEE FOUND I T DIFFICULT TO COPE WITH ALL THE SERVICES OF CIVIC AMENITIES AND IT HAS, THEREFORE, ENCOURAGED SENIOR OFFICERS OF THE COMPANY AND OTHER LEADING CITIZENS IN JAMSHEDPUR TO SET UP VOLUNTARY ORGANISATIONS REGIST ERED UNDER THE SOCIETIES ACT OR OTHER CHARITABLE INSTITUTIONS TO UNDERTAKE ACTIVITIES IN THE FIELD O F SPORTS, EDUCATION, MEDICAL RELIEF, CULTURAL PROMO TIONS, ETC.THE ASSESSEE FROM TIME TO TIME MADE CONTRIBUTIO NS TOWARDS EXPENSES OF SUCH INSTITUTIONS TO THE EXTENT THEY PROVIDE THE SERVICE TO THE PEOPLE OF JA MSHEAPUR, THE BURDEN TO PROVIDE SIMILAR CIVIC AMENITIES BY THE ASSESSEE IS REDUCED THE ASSESSEE H AD MADE CONTRIBUTIONS OF RS 11,31,700 TO THE INSTITUTIONS MENTIONED ABOVE DURING THE ACCOUNTING YEAR 1984-85 TO ACHIEVE THIS OBJECTIVETHE ASSESSING OFFICER REJECTED THE ASSESSEES CLAIM TH AT THESE CONTRIBUTIONS WERE MADE TO DISCHARGE ITS OBLIGATIONS TOWARDS CIVIC AMENITIES AND, THEREFORE, IT WAS AN ITEM OF BUSINESS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN THE ORDINARY COURSE OF BU SINESS. HE HELD THAT SINCE THE MAJOR BENEFICIARIES OF THE EXPENDITURE WERE THE COMPANYS EMPLOYEES, IT WA S AN ITEM OF LABOUR WELFARE EXPENDITURE. 43.ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. WE HAVE HEARD THE RIVAL SUBMISSIONS.IN A.Y.1968-69 ON AN IDENTICA L ISSUE, THE ITAT,MUMBAL IN I.T.A. NO.2068/BOM/74-75 WAS PLEASED TO HOLD THAT EXPENDIT URE WAS FOR WELFARE OF EMPLOYEES AND WAS, THEREFORE, ALLOWABLE AS DEDUCTION. IT WAS THE CONTE NTION OF THE LEARNED DR BEFORE US THAT IN THE EARLI ER DECISIONS OF THE TRIBUNAL, THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF VOLTAS LTD. VS. CIT, 207 ITR 47 (BOM) HAS NOT BEEN CONSIDERED. IN THE CASE OF VOLTAS LTD. (SUPRA), THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THERE WAS NO NEXUS BETWEEN EXPENSES AND BUSINESS OF THE ASSESSEE.IN THE AFORESAID DECISION THE HONBLE COUR T LAID EMPHASIS ON BUSINESS EXPEDIENCY IN MAKING A PAYMENT. ON FACTS THE COURT FOUND NO BUSINESS EXP EDIENCY IN MAKING THE PAYMENT.IN THE CASE OF THE ASSESSEE WE ARE OF THE VIEW THAT THE PAYMENTS WERE MADE KEEPING IN MIND BUSINESS EXPEDIENCY VIZ.,TO HAVE A MOTIVATED WORK FORCE.IN THE LIGHT OF THE PEC ULIAR FACTS IN ASSESSEES CASE,THE EXPENDITURE IN QUESTION HAS TO BE ALLOWED AS A DEDUCTION U/S. 37(1 ).THE PROVISIONS OF SECTION 40A(9) IN OUR VIEW WOULD NOT APPLY BECAUSE THE PAYMENTS IN QUESTION WE RE NOT MADE BY THE ASSESSEE IN HIS CAPACITY AS AN EMPLOYER. WE, THEREFORE, DIRECT THAT THE DEDUCTION AS CLAIMED BY THE ASSESSEE BE ALLOWED, GROUND NO. 14 IS ALLOWED. WE HAVE PERUSED THE MOU SIGNED BY THE ASSESSEE WITH THE WORKERS UNION.CONSIDERING THE TERMS AND CONDITIONS OF THE MOU WE ARE OF THE OPINION THA T ORDERS OF THE TRIBUNAL DELIVERED IN THE CASE OF 15 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. THE ASSESSEE AS WELL AS TELCO SHOULD BE FOLLOWED.IN OUR VIEWS,MOU MAKES THE FACTS AND CIRCUMSTANCES OF THE CASE PECULIAR. WE FIND THAT HO NBLE JURISDICTIONAL HIGH COURT HAS,IN ITS ORDER DATED 26.12.2012, DISMISSED THE APPEAL FILED BY THE DEPARTMENT FILED FOR AY.1985-86(IT APPEAL NO.3176 OF 2010) WHERE SIMILAR ISSUE OF CONTRIBUTIO N TO VARIOUS INSTITUTIONS WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL.(GROUND NO.B AND F) .AS FAR AS DISCHARGING OF SOCIAL RESPONSIBILITY IS CONCERNED VOLTAS LTD.HAD TO BE CONSIDERED THE GUIDI NG CASE.AS IN THAT CASE THERE WAS NO MOU WITH THE WORKERS, SO, CONSIDERING THE PECULIARITY OF FAC TS OF THE CASE,AS AGAINST THE MATTER OF VOLTAS,WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 14. NEXT GROUND OF APPEAL PERTAINS TO DISALLOWANCE OF A NNUAL CONTRIBUTION TO STEEL PLANTS SPORTS BOARD AND TATA SPORTS CLUB AMOUNTING TO RS.5.69 LAK HS.AO HELD THAT THE ABOVE CONTRIBUTIONS WERE NOT ADMISSIBLE AS DEDUCTION U/S.37(1) OF THE ACT, B ECAUSE THE CONTRIBUTIONS WERE NOT MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 14.1. IN THE APPELLANT PROCEEDINGS,FAA CONSIDERED THE SUB MISSIONS OF THE ASSESSEE AND HELD THAT THE CONTRIBUTIONS WERE COVERED BY SECTION 40A(9) OF THE ACT,THAT SECTION 40A(9) WAS ENACTED WITH A VIEW TO DISCOURAGING CREATION OF CERTAIN IRREVOCABL E TRUSTS OSTENSIBLY FOR THE WELFARE OF THE EMPLOYEES AND TRANSFER TO SUCH TRUST SUBSTANTIAL AM OUNTS BY WAY OF CONTRIBUTION,THAT WITH A VIEW TO DISCOURAGING CREATION OF SUCH TRUSTS, FUNDS, COMPAN IES, ASSOCIATION OF PERSONS, SOCIETIES ETC.,THE FINANCE ACT, 1984 HAD PROVIDED THAT NO DEDUCTION WO ULD BE ALLOWED IN THE COMPUTATION OF TAXABLE PROFITS IN RESPECT OF ANY SUMS PAID BY THE ASSESSEE AS AN EMPLOYER TOWARDS THE SETTING UP OR FORMATION OF OR A CONTRIBUTION TO ANY FUND, TRUST, COMPANY, ASSOCIATION OF PERSONS, BODY OF INDIVIDUALS OR SOCIETY OR ANY OTHER INSTITUTION FOR ANY PURPOSE EXCEPT WHERE SUCH SUM WAS PAID OR CONTRIBUTED TO A RECOGNISED PROVIDENT FUND OR AN AP PROVED GRATUITY FUND OR APPROVED SUPERANNUA - TION FUND OR FOR THE PURPOSES OF AND TO THE EXTENT REQUIRED BY OR UNDER ANY OTHER LAW,THAT THE CONTRIBUTIONS WERE GIVEN TO TATA SPORTS CLUB IN THE CAPACITY OF AN EMPLOYER FOR THE BENEFIT OF THE EMPLOYEES AS WELL AS OTHERS,THAT THE ANNUAL CONTRIB UTION TO STEEL PLANTS SPORTS BOARD WAS AN INDEPENDENT ORGANISATION MANAGING THE AFFAIRS OF TH E BOARD WITH ITS OWN BUDGET, THAT THE PURPOSE OF CREATION OF THE ASSOCIATION WAS TO CREATE AND TR AIN ATHLETES OF NATIONAL STANDARD,THAT THE OBJECTIV E HAD NO RELEVANCE IN CARRYING ON THE BUSINESS OF THE ASSESSEE,THAT THE CONTRIBUTION MADE BY THE ASSESSEE WAS AN APPLICATION OF INCOME.FINALLY,HE CO NFIRMED THE DISALLOWANCE MADE BY THE AO. 14.2. BEFORE US,AR MADE THE SAME ARGUMENTS THAT WERE MADE FOR THE GROUND NO.13.DR SUPPORTED THE ORDER OF THE FAA.FOLLOWING OUR ORDER FOR THAT G ROUND WE DECIDE GROUND NO.14 IN FAVOUR OF THE ASSESSEE. 15. GROUND NO.15 DEALS WITH CONTRIBUTIONS TO VARIOUS IN STITUTIONS,AMOUNTING TO RS.11.77 LAKHS. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD MADE CONTRIBUTIONS TO VARIOUS INSTITUTIONS AND IT WAS CONTENDED THAT THE VARIOUS CONTRIBUTIONS WERE MADE TO VARIOUS INSTITUTIONS FOR DISCHARGING ITS CIVIC, SOCIAL OBLIGATIONS TO MAINTA IN THE TOWNSHIP OF JAMSHEDPUR. AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE CO NTRIBUTIONS WERE GIVEN FOR THE WELFARE OF THE EMPLOYEES AND SUCH OF THE CONTRIBUTIONS WHICH WERE GIVEN TO THEM WERE HIT BY THE PROVISIONS OF SECTION 40A(9) BECAUSE THE PAYMENTS WERE MADE IN TH E CAPACITY OF AN EMPLOYER,THAT IF IT WAS TAKEN THAT THE INSTITUTIONS TO WHOM CONTRIBUTIONS WERE GI VEN WERE PROVIDING CIVIC AMENITIES TO THE CITY OF JAMSHEDPUR THEN ALSO THE CONTRIBUTIONS WOULD BE LIA BLE FOR DISALLOWANCE BECAUSE THE EMPLOYEES WERE MAJOR BENEFICIARIES OF THE CONTRIBUTIONS,THAT IF THE BENEFIT OF THE CONTRIBUTIONS WAS FOR THE CIT Y OF JAMSHEDPUR AT LARGE THEN THESE CONTRIBUTION WERE IN THE NATURE OF CHARITY.HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE. 15.1. DECIDING THE APPEAL FILED BY THE ASSESSEE,FAA HELD THAT THAT SIGNIFICANT CONTRIBUTIONS MADE BY THE WERE TO JAMSHEDPUR NOTIFIED AREA COMMITTEE ALL INDIA FOOTBALL ASSOCIATION,MERRY HOSPITAL, JAMSHEDPUR,TRADE WORKERS UNION,LOYOLA SCHOOL,THAT ON A PERUSAL OF THE ABOVE CONTRIBUTIONS IT WAS EVIDENT THAT THE ASSESSEE HAD GIVEN A GENERAL A ND VAGUE EXPLANATION ABOUT THEM,THAT IT DID NOT ESTABLISH THE DIRECT NEXUS BETWEEN THE CONTRIBUTION S AND THE BUSINESS,THAT IN THE ABSENCE OF SUCH A NEXUS, IT COULD NOT BE PRESUMED THAT THE CONTRIBUTI ONS WERE MADE FOR THE PURPOSE OF THE BUSINESS, THAT THE CONTRIBUTIONS MADE BY THE ASSESSEE WERE ON THE NATURE OF APPLICATION OF INCOME,THAT THE 16 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. CONTRIBUTIONS WERE HIT BY THE PROVISIONS OF SECTION 40A(9) OF THE ACT.FAA UPHELD THE ORDER OF THE AO. 15.2. BEFORE US,AR AND DR TOOK THE SAME STAND THAT THEY HAD TAKEN FOR THE EARLIER TWO GROUNDS.WE HAVE DECIDED GROUNDS NO.14-15 IN FAVOUR OF THE ASSE SSEE.FOLLOWING THE SAME GROUND NO.16 IS ALSO ALLOWED, AS THE FACTS OF THE GROUND ARE IDENTICAL T O EARLIER GROUNDS-THE ONLY DIFFERENCE IS THE NAMES OF THE INSTITUTIONS. 16. NEXT GROUND OF APPEAL PERTAINS TO DISALLOWANCE OF F EES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES, AMOUNTING TO RS.13.14 LAKHS. DURING THE ASSESSMENT PROCEEDINGS AO HELD THAT THE EXPENDITURE WAS INCURRED IN CONNECTION WITH THE EXPANSION OF THE IN DUSTRIAL UNDERTAKING,THAT IT WAS A CAPITAL EXPENDITURE,THAT THE EXPENDITURE INCURRED ON PREPAR ATION OF FEASIBILITY/PROJECT REPORT IN CONNECTION WITH THE EXPANSION OF INDUSTRIAL UNDERTAKING OR IN CONNECTION WITH THE SETTING UP OF A NEW UNIT WAS AN ADMISSIBLE DEDUCTION U/S.35D OF THE ACT. 16.1. IN APPELLATE PROCEEDINGS FAA HELD THAT RS.5 LAKHS W ERE PAID TO M.N.DASTUR & CO.FOR CONDUCT- ING TECHNO ECONOMIC FEASIBILITY REPORT FOR PRODUCIN G COLD ROLLED STRIPS,THAT THE STEEL WHICH WAS PRODUCED IN ASSESSEES WORKS WOULD BECOMES THE RAW MATERIAL FOR THE MANUFACTURE OF COLD ROLLED STRIPS IN THE AHMEDABAD ADVANCE MILLS LTD,THAT THE MANAGEMENT OF THAT COMPANY WAS TAKEN OVER BY THE ASSESSEE,THAT THE STUDY CONDUCTED BY THE CON SULTANT WAS IN RESPECT OF A NEW PRODUCT AND IT WAS A NEW LINE OF ACTIVITY AND NOT WITH REFERENCE T O THE EXISTING BUSINESS OPERATIONS,THAT IT RESULTED IN ENDURING BENEFIT,THAT PAMYMENT OF RS.5 LAKHS MAD E TO M.N.DASTUR & CO. FOR CONDUCTING FEASIBILITY STUDIES ON PRODUCTION OF STAINLESS STEE L SLABS,THAT IT WAS A NEW PRODUCT LINE, THAT THE ASSESSEE GOT THE EVALUATION OF LOCATION,CAPACITY,PR OCESS AND INPUTS AVAILABILITY FOR MANUFACTURE OF STAINLESS STEEL SLABS,THAT EXPENDITURE WAS INCURRED IN CONNECTION WITH THE ESTABLISHMENT OF A NEW PRODUCT LINE,THAT THE ASSESSEE DERIVED ENDURING BEN EFIT,THAT FEES/HOTEL AND TRAVEL EXPENSES PAID FOR TECHNO ECONOMIC FEASIBILITY REPORT BY HOLTEC ENGINE ERS PVT.LTD.FOR SLAG CEMENT PROJECT WAS INCURRED FOR A NEW PRODUCT AND A NEW PROJECT,THAT I T WAS NOT RELATED TO THE EXISTING TRADING OPERA - TIONS,THAT THE WASTE PRODUCED BY THE ASSESSEE BECAM E THE RAW MATERIAL FOR THE SLAG CEMENT PROJECT, THAT THE AO HAD RIGHTLY TREATED A SUM OF RS. 2,75,1 07/- AS CAPITAL EXPENDITURE,THAT A SUM OF RS. 1,40,000/- WAS PAID FOR TECHNO ECONOMIC FEASIBILITY REPORT FOR SLAKED LIME AND WATER ADDITION FACILITIES AT SINTER PLANT,THAT THE SINTER PLANT WA S A PART OF THE ASSESSEES WORKS FOR SIZING AND SINTERING OF IRON ORE,THAT THE STUDY WAS UNDERTAKEN TO IMPROVE THE EFFICIENCY IN THE EXISTING TRADING OPERATIONS, THAT THE EXPENDITURE WAS INCURRED IN CO NNECTION WITH THE EXISTING TRADING OPERATIONS AND THE EXPENDITURE INCURRED IS IN THE REVENUE FIELD,TH AT FEE OF RS. 17,500/-WAS PAID TO TATA CONSULTANCY SERVICES FOR CONDUCTING A FEASIBILITY S TUDY ON ELEVATOR INDUSTRY WAS CONDUCTED,THAT THE STUDY HAD NO RELATIONSHIP WITH THE EXISTING BUSINES S AND THE ASSESSEE INTENDED TO START A NEW PRODUCT LINE,THAT THE EXPENDITURE INCURRED WAS IN THE CAPIT AL FIELD,THAT RS. 22,180/- WAS PAID TO TATA CONSULTING ENGINEERS FOR CONDUCTING A FEASIBILITY S TUDY OF PVC PLANT BASED ON CALCIUM CARBONATE ROUTE,THAT THE PVC WAS A NEW PRODUCT AND HAD NOTHIN G TO DO WITH THE EXISTING PRODUCT LINE OF THE ASSESSEE,THAT THE EXPENDITURE INCURRED WAS IN THE C APITAL FIELD. 16.2. BEFORE US,AR SUBMITTED THAT SIMILAR ISSUE WAS DECID ED IN FAVOUR OF THE ASSESSEE IN THE PRECEDING AY. DR DID NOT CONTROVERT THE FACT.WE FIN D THAT IN THE AY.1985-86 ASSESSEE HAD PAID FEES FOR FEASIBILITY STUDY TO THE SAME CONSULTANT T O WHOM FESS WAS PAID DURING THE YEAR ALSO.WHILE DECIDING THE APPEAL, TRIBUNAL AT PARAGRAPH 38 HAS H ELD AS UNDER: WE HAVE PERUSED THE DETAILS OF THE EXPENSES.A SUM OF RS.10 LAKHS WAS PAID FOR MODERNISATION PROJECT PHASE-I.A SUM OF RS.2 LAKHS AND RS.3 LAKHS WAS PAID FOR PROJECT REPORT FOR FEASIBILITY OF PLASTIC LINE S AND COATED PIPES AND REVAMPING THE ERW MILL RESPECT IVELY.IN AY.1968-69 IN I.T.A. NO.2068/BOM/74- 75 THE HONBLE ITAT IN ASSESSEES OWN CASE CONSIDER ED EXPENDITURE ON REPORT FOR INCREASING PRODUCTION CAPACITY AND FUTURE DEVELOPMENT.AFTER EL ABORATE DISCUSSION, THE TRIBUNAL CAME TO THE CONCLUSION THAT EXPENDITURE WAS NOT A CAPITAL EXPEN DITURE AND ALLOWED DEDUCTION OF SAME AS A REVENUE EXPENDITURE.FACTS AND CIRCUMSTANCES BEING IDENTICAL IN THIS YEAR, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE HOLD THAT THE EXPENDITURE IN QUEST ION HAS TO BE ALLOWED AS A DEDUCTION BEING A REVENUE EXPENDITURE.GROUND NO. 12 IS ALLOWED. 17 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. FOLLOWING THE ABOVE,WE DECIDE GROUND NO.16,BEFORE U S,IN FAVOUR OF THE ASSESSEE. 17. NEXT GROUND IS ABOUT PAYMENTS IN CASH IN VIOLATION OF SECTION 40A(3) IN EXCESS OF RS.2,500/-. AO OBSERVED THAT THE ASSESSEE HAD VIOLATED THE PROV ISIONS OF SECTION 40A(3) OF THE ACT AND FOR THE SAID VIOLATION HE MADE A DISALLOWANCE OF RS. 3.33 LAKHS. 17.1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,F AA HELD THAT IN THE TAX AUDIT REPORT THE PAYMENTS MADE IN CASH EXCEEDING RS.2,500/- WERE QUA NTIFIED AT RS.3,58,983/-,THAT THE ASSESSEE HAD SUBMITTED BEFORE THE AO THAT THE PAYMENTS WERE MADE TO TRANSPORTERS IN CASH,THAT THE AO OBSERVED THAT THE ASSESSEE DID NOT PRODUCE THE RECEIPTS OF T HE PAYMENTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THAT AS AND WHEN THE ASSESSEE WOULD PRO DUCE THE EVIDENCE, THE ORDER WOULD BE RECTIFIED U/S.154 OF THE ACT,THAT THE CASH PAYMENTS WERE TOWA RDS HOTEL EXPENSES, SUNDRY PURCHASES, COST OF DIESEL,FREIGHT, TRANSPORT CHARGES AND MISCELLANEOUS EXPENSES,THAT THE ASSESSEE DID NOT QUANTIFY THE EXPENDITURE UNDER VARIOUS HEADS.HE DIRECTED THE ASS ESSEE IS DIRECTED TO QUANTIFY THE EXPENDITURE INCURRED BY IT UNDER THE HEADS WASHING EXPENSES,SU PPLY OF FOOD,MEAT AND GROCERIES AND THE SAME MAY BE SUBMITTED AO FOR VERIFICATION. 17.2. BEFORE US,AR AND DR AGREED THAT THE SIMILAR ISSUE W AS DISMISSED BY THE TRIBUNAL WHILE DECIDING THE APPEAL OF THE ASSESSEE,FOR THE AY.1985 -86(SUPRA).FOLLOWING LAST AYS.ORDER WE DECIDE GROUND NO.17 AGAINST THE ASSESSEE. 18. GROUNDS OF APPEAL 18,19 AND 20 ARE ABOUT DISALLOWAN CE OF INVESTMENT ALLOWANCE AND EXTRA SHIFT ALLOWANCE ON TOWN DIVISION ASSETS(RS.63.39 LA KHS AND RS.44.65 LAKHS),INVESTMENT ALLOWAN- CE ON VARIOUS ITEMS PLANT AND MACHINERY(P&M-RS.10.2 2 LAKHS)AND INVESTMENT ALLOWANCE ON ITEMS OF P&M OF TUBES DIVISION. 19. DURING THE ASSESSMENT PROCEEDINGS,AO HELD THAT THE TOWN DIVISION PROVIDED RESIDENTIAL FACILITIES TO THE EMPLOYEES AS WELL AS TO OTHER RESIDENTS OF T HE TOWNSHIP,THAT VARIOUS ASSETS WERE INSTALLED BY THE ASSESSEE IN THE TOWN DIVISION IN VARIOUS ASSESS MENT YEARS,THAT THE ASSETS WERE INSTALLED IN THE RESIDENTIAL ACCOMMODATION,THAT AS PER THE PROVISION S OF SECTION 32A(1)(A) OF THE ACT ANY P&M INSTALLED IN ANY RESIDENTIAL ACCOMMODATION WAS NOT ELIGIBLE FOR INVESTMENT ALLOWANCE, THAT AS PER THE SAID SECTION THE P&M INSTALLED IN ANY INDUSTRIA L UNDERTAKING FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION/MANUFACTURE/PRODUCTION OF ANY ARTICLE OR THING WAS ENTITLED FOR INVESTMENT ALLOWANCE, THAT THE TOWN DIVISION COULD NOT BE CONSIDERED AS A PART OF THE INDUSTRIAL UNDERTAKING,THAT IT SERVED ONLY THE EMPLOYEES OF THE ASSESSEE AND OTHER RESIDE NTS OF THE CITY AT LARGE.COMPARING THE PROVISIONS OF SECTION 32A AND 33 OF THE ACT,HE HELD THAT THE P LANT & MACHINERY IN THE TOWN DIVISION WAS NOT AN INTEGRAL PART OF THE MANUFACTURING PROCESS.GIVING D ESCRIPTION OF THE MACHINERY INSTALLED AND THE LOCATION OF THE P&M HE HELD THAT THE ASSETS WERE IN STALLED AND USED HAD NOTHING TO DO WITH THE MANUFACTURING ACTIVITIES OF THE ASSESSEE.AO FOUND T HAT THE ASSESSEE-COMPANY HAD A LICENCE TO MANUFACTURE ELECTRICITY,THAT IT HAD CLAIMED THAT EL ECTRICAL MACHINERY WAS INSTALLED IN THE ELECTRICITY DIVISION,THAT IT HAD PRODUCED ELECTRICITY AND USED SUCH ELECTRICITY IN ITS MANUFACTURING PROCESS,THAT THE ASSESSEE ALSO SOLD THE POWER TO OTHER GROUP COM PANIES AND RESIDENTS OF JAMSHEDPUR AND DERIVED SUBSTANTIAL REVENUES FROM SELLING THE POWER,THAT TH E ASSESSEE HAD NOT IDENTIFY THE P&M WHICH WERE USED FOR THE PURPOSE OF GENERATION AND DISTRIBUTION OF POWER,THAT THE P&M WAS USED FOR THE PURPOSE OF BRINGING WATER FROM THE RIVERS FOR MANUFACTURING PURPOSE AND ALSO FOR THE PURPOSE OF SUPPLY OF WATER TO THE TOWN WHEREIN THE RESIDENTIAL QUARTERS ARE LOCATED,THAT THE P&M WAS PARTLY USED FOR THE PURPOSE OF MANUFACTURE OF STEEL AND PARTLY FOR THE PURPOSE OF SUPPLY OF WATER TO THE RESIDENTIAL QUARTERS,THAT THE INVESTMENT ALLOWANCE WAS ADMISSIB LE ON THE P&M WHICH WAS USED FOR THE PURPOSE OF MANUFACTURE.HE DIRECTED TO THE AO TO SEGREGATE T HE VALUE OF THE P&M INTO TWO CATEGORIES AND TO ALLOW THE INVESTMENT ALLOWANCE ON THE P&M ATTRIBUTA BLE TO THE MANUFACTURING PROCESS.HE FURTHER HELD THAT THE ASSESSEE WAS RUNNING A HOSPITAL CALLE D TATA MAIN HOSPITAL AND THE ACTIVITIES OF THE HOSPITAL WERE GROUPED UNDER THE HEADING TOWN DIVISI ON,THAT THE AO GAVE A CATEGORICAL FINDING THAT THE ELECTRICAL LIGHT AND FANS WERE INSTALLED AT THE HOSPITAL AND THE AIRPORT,THAT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE AGAINST THE FINDING GIVEN BY T HE AO,THAT THE ELECTRICAL LIGHT AND FANS INSTALLED 18 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. AT AIRPORT AND HOSPITAL ARE GROUPED UNDER THE HEADI NG PLANT AND MACHINERY INSTALLED IN HOSPITAL FOR THE YEAR UNDER APPEAL,THAT THE SURGICAL INSTRUMENTS ,X-RAY AND ELECTRO THERAPY APPARATUS, AND AIR- CONDITIONING PLANT WERE INSTALLED AT THE HOSPITAL,T HAT A PART OF THE AIR-CONDITIONING PLANT AND ELECTRICAL LIGHT AND FANS WERE USED AT THE AIRPORT, CLUBS,HOSPITAL AND THE TRAINING INSTITUTE, THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM INVESTM ENT ALLOWANCE ON CERTAIN P&M,INCLUDING PLATFORM WEIGHING SCALE,AIRCRAFT BATTERY CHARGER AN ALYSER,COMPUTERSWATER COOLING PLANT, TELEPHONE SYSTEM,SURGICAL INSTRUMENTS-(ORE MINES & QUARRIES),X-RAY MACHINES-(WEST BOKARO) STREET LIGHTS,OVERHEAD WIRES.FOR THE SIMILAR REASON S HE DENIED BENEFIT OF EXTRA SHIFT ALLOWANCE. SIMILAR TREATMENT WAS GIVEN BY HIM TO THE P & M OF THE TUBE DIVISION,AMOUNTING TO RS.3.03LAKHS. 20. FAA HELD THAT THE ASSESSEE HAD SUBMITTED THE DETAIL S OF PLANT AND MACHINERY WHICH WERE INSTALLED IN THE ELECTRICITY DIVISION,THAT THE VALU E OF THE PLANT AND MACHINERY USED FOR GENERATION AN D DISTRIBUTION OF ELECTRICITY WAS QUANTIFIED AND FURN ISHED DURING THE ASSESSMENT PROCEEDINGS,THAT THE ASSESSEE WAS ENTITLED FOR INVESTMENT ALLOWANCE U/S. 32(2)(B)(I) OF THE ACT,THAT AS PER THE PROVISIONS OF THE SECTION IF THE PLANT AND MACHINERY WAS INSTA LLED FOR THE PURPOSE OF BUSINESS OF GENERATION OR DISTRIBUTION OF ELECTRICITY THEN INVESTMENT ALLOWAN CE HAD TO BE ALLOWED, THAT THE ASSESSEE HAD A LICENCE FOR GENERATION AND DISTRIBUTION OF ELECTRIC ITY,THAT THE ELECTRICITY DIVISION WAS AN INDUSTRIAL UNDERTAKING BY ITSELF ENGAGED IN THE GENERATION OR DISTRIBUTION OF POWER,THAT THE ASSESSEE HAD CLASSIFIED THE COST OF MACHINERY UNDER THE HEADING TOWN DIVISION BUT THAT DID NOT MEAN THAT THE PLANT AND MACHINERY WAS NOT USED FOR THE PURPOSE OF GENER ATION AND DISTRIBUTION OF ELECTRICITY.HE DIRECTED THE AO TO ALLOW INVESTMENT ALLOWANCE ON ELECTRICAL MACHINERY.WITH REGARD TO THE CLAIM OF EXTRA SHIFT ALLOWANCE ON THE ELECTRICAL MACHINERY,FAA HEL D THAT THE ASSESSEE WAS NOT ENTITLED FOR EXTRA SHIFT ALLOWANCE FOR THE SAID MACHINERY,THAT THE ELE CTRICAL MACHINERY APPEARED IN APPENDIX 1,PART I OF DEPRECIATION SCHEDULE.FOR CLARITYS SAKE,HE REPR ODU- CED THE DETAILS OF THE MACHINERY I.E. BATTERIES;X-RAY AND ELECTRO THERAPEUTIC APPARATUS A ND ACCESSORIES THERETO,SWITCHGEAR AND INSTRUMENTS,TRANSFORMERS AND OTHER STATIONARY PLANT ,WIRING AND FITTINGS OF ELECTRIC LIGHT AND FAN INST A -LLATIONS.FAA HELD THAT ON A COMBINED READING OF II I C(4)OF THE DEPRECIATION SCHEDULE IT WAS CLEAR THAT THE ASSESSEE-COMPANY WAS NOT ENTITLED TO EXTRA SHIFT ALLOWANCE. 20.1. IT WAS SUBMITTED,DURING THE APPELLATE PROCEEDINGS,T HAT WATER WAS DRAWN FROM RIVER SUBARNAREKHA,KHARKHAI RIVER AND DALMA LAKE FOR USIN G IN MANUFACTURING ACTIVITY AS WELL AS FOR SUPPLYING WATER TO THE TOWNSHIP OF JAMSHEDPUR,THAT PLANT AND EQUIPMENT WERE RECORDED AS PLANT AND MACHINERY OF THE TOWN DIVISION,THAT THE TRANSPO RTATION AND SUPPLY OF WATER FORMED AN INTEGRAL PART OF THE COMPANYS BUSINESS OF MANUFACTURING IRO N AND STEEL,THAT THE COMPANY SUPPLIED WATER TO OTHER INDUSTRIAL UNITS IN THE TOWNSHIP AND EARNED R EVENUES DURING THE YEAR. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,F AA HELD THAT THE P&M WAS USED FOR THE PURPOSE OF BRINGING WATER FROM THE RIVERS FOR MANUFACTURIN G PURPOSE AND ALSO FOR THE PURPOSE OF SUPPLY OF WATER TO THE TOWN WHEREIN THE RESIDENTIAL QUARTERS WERE LOCATED,THAT THE P&M WAS PARTLY USED FOR THE PURPOSE OF MANUFACTURE OF STEEL AND PARTLY FOR THE PURPOSE OF SUPPLY OF WATER TO THE RESIDENTIAL QUARTERS,THAT THE INVESTMENT ALLOWANCE WAS ADMISSIB LE ON THE PLANT AND MACHINERY WHICH WAS USED FOR THE PURPOSE OF MANUFACTURE.HE DIRECTED TO THE A O TO SEGREGATE THE VALUE OF THE P&M INTO TWO CATEGORIES AND TO ALLOW THE INVESTMENT ALLOWANCE ON THE P&M ATTRIBUTABLE TO THE MANUFACTURING PROCESS AND NOT TO ALLOW INVESTMENT ALLOWANCE ON TH E PLANT AND MACHINERY WHICH WAS USED FOR THE RESIDENTIAL PURPOSES. 20.1.A. WITH REGARD TO THE P&M INSTALLED IN HOSPITAL,FAA HE LD THAT THE ASSESSEE WAS RUNNING A HOSPITAL IN JAMSHEDPUR AND THE ACTIVITIES OF THE HO SPITAL WERE GROUPED UNDER THE HEADING TOWN DIVISION,THAT THE AO HAD GIVEN A CATEGORICAL FINDIN G THAT THE ELECTRICAL LIGHT AND FANS WERE INSTALLED AT THE HOSPITAL AND THE AIRPORT,THAT THE ASSESSEE D ID NOT PRODUCE ANY EVIDENCE AGAINST THE FINDING GIVEN BY THE AO,THAT THE ELECTRICAL LIGHT AND FANS INSTALLED AT AIRPORT AND HOSPITAL ARE GROUPED UNDE R THE HEADING PLANT AND MACHINERY INSTALLED IN HOSPIT AL FOR THE YEAR UNDER APPEAL,THAT THE SURGICAL INSTRUMENTS,X-RAY AND ELECTRO THERAPY APPARATUS,AND AIR-CONDITIONING PLANT WERE INSTALLED AT THE HOSPITAL.A PART OF THE AIR-CONDITIONING PLANT AND E LECTRICAL LIGHT AND FANS WERE ALSO INSTALLED AT THE AIRPORT,CLUBS, HOSPITAL AND THE TRAINING INSTITUTE. FAA COMPARED THE PROVISIONS OF SECTION 33AND 19 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. 32A AND HELD THAT ANY MACHINERY OR PLANT HAVING A L INK IN THE TOTAL PROCESS OF THE OPERATIONAL INTEGRATION SHOULD BE TAKEN AS MACHINERY OR PLANT P ERTAINING TO THE MANUFACTURING PROCESS,THAT THE P&M INSTALLED IN HOSPITAL, CLUBS,AIRPORT AND TRAINI NG INSTITUTE COULD NOT BE TREATED AS P&M HAVING A LINK IN THE TOTAL PROCESS OF THE OPERATIONAL INTEGR ATION OF STEEL MANUFACTURING,THAT THERE WAS NO DOUBT THAT THE FACILITIES PROVIDED HELP TO THE ASSE SSEE IN CARRYING ON THE BUSINESS,THAT THEY DID NOT HAVE ANY LINK IN THE OPERATIONAL INTEGRATION OF MAN UFACTURING PROCESS,THAT THE ASSESSEE WAS NOT ENTITLED FOR INVESTMENT ALLOWANCE ON THE P&M INSTAL LED IN THE HOSPITAL,CLUB,AIRPORT AND THE TRAINING INSTITUTE. FAA CONSIDERED THE DECISIONS DELIVERED B Y THE TRIBUNAL FOR THE AYS.1981-82 & 1982-83 AND HELD THAT TRIBUNAL HAD NOT CONSIDERED THE SIGNI FICANCE OF THE WORD INDUSTRIAL UNDERTAKING WHICH HAS BEEN EMPLOYED IN SECTION 32A. FINALLY,HE HELD THAT HOSPITAL,CLUB AND AIRPORT COUL D NOT BE CALLED INDUSTRIAL UNDERTAKING,THAT THE PLANT & MACHINERY INSTALLED AT THESE PLACES COULD N OT BE CALLED P&M INSTALLED IN AN INDUSTRIAL UNDERTAKING, THAT SUCH PLANT & MACHINERY HAD NO LIN K WITH THE MANUFACTURING PROCESS.AS A RESULT,HE UPHELD THE ORDER OF THE AO OF NOT ALLOWING THE INVE STMENT ALLOWANCE U/S.32A OF THE ACT. HE FURTHER HELD THAT THE AO HAD NOT ALLOWED EXTRA SHIFT ALLOWA NCE ON THE ABOVE ASSETS INSTALLED IN HOSPITAL, CLUB ETC.,THAT FROM THE PERUSAL OF THE DEPRECIATION TABLE IN PART I, APPENDIX I IT TRANSPIRED THAT THE X- RAY,ELECTRO THERAPEUTIC APPARATUS AND ACCESSORIES T HERETO CAME IN THE CATEGORY OF N.E.S.A.,THAT THE OTHER ITEMS USED IN HOSPITAL AND CLUB, AIRPORT ETC. LIKE AIR-CONDITIONING PLANT,ELECTRICAL LIGHT AND FA N ETC.WERE ALSO COVERED BY N.E.S.A,THAT THE A.OS ACT ION OF NOT ALLOWING THE EXTRA SHIFT ALLOWANCE HAD TO BE ENDORSED. DISCUSSING THE CLAIM MADE BY THE ASSESSEE FOR THE I NVESTMENT ALLOWANCE ON THE SANITARY WORKS INSTALLED IN THE TOWN DIVISION,FAA HELD THAT THE P& M WAS USED FOR THE PURPOSE OF DISPOSAL OF THE WASTE MATERIAL FROM THE RESIDENCES OF THE CITIZENS OF JAMSHEDPUR TO THE CENTRAL EFFLUENT TREATMENT PLANT, THAT THE P&M WAS INSTALLED IN RESIDENTIAL AC COMMODATION AND IT WAS NOT ENTITLED FOR INVESTMENT ALLOWANCE,THAT AS PER THE PROVISIONS OF THE PROVISO TO SECTION 32A OF THE ACT INVESTMENT ALLOWANCE COULD NOT BE ALLOWED FOR ANY MACHINERY/PL ANT INSTALLED IN ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATUR E OF A GUEST HOUSE.HE UPHELD THE ACTION OF THE AO.HE ALSO HELD THAT THE ASSESSEE WAS NOT ENTIT LED FOR THE ADDITIONAL DEPRECIATION BECAUSE THE CONDITIONS FOR ALLOWING THE ADDITIONAL DEPRECIATION WERE SIMILAR TO INVESTMENT ALLOWANCE. ABOUT THE EXTRA SHIFT ALLOWANCE ON COMPUTER SYSTEMS ,FAA HELD THAT SAME WAS NOT ADMISSIBLE AS THE RULES WERE VERY CLEAR IN THIS REGARD. WITH REGARD TO INVESTMENT ALLOWANCE OF RS.4,25,003/ -ON TELEPHONE SYSTEM,FAA HELD THAT THE ASSESSEE DID NOT EXPLAIN WHERE THE TELEPHONE SYSTEM WAS INSTALLED,THAT THE ASSESSEE HAD CLASSIFIED THE TELEPHONE SYSTEM UNDER THE TOWN DIVISION WHICH BASICALLY DEALT WITH THE RESIDENTIAL FACILITIES, THAT NO INVESTMENT ALLOWANCE COULD BE GIVEN ON THE P&M INSTALLED IN RESIDENTIAL ACCOMMODATION, THAT THE ACTION OF THE AO WAS TO BE UPHELD. 20.2. BEFORE US,AR SUBMITTED THAT SIMILAR ISSUES OF INVES TMENT ALLOWANCE/EXTRA SHIFT ALLOWANCE AND WERE DISCUSSED IN DETAILS BY THE TRIBUNAL WHILE PAS SING ORDER FOR THE AY.1985-85 AT PARAGRAPHS NO.17-24 OF THE ORDER,THAT TRIBUNAL HAD MET ALL THE ARGUMENTS RAISED BY THE FAA IN EARLIER YEARS.DR SUBMITTED THAT MATTER MIGHT BE DECIDED ON MERITS.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE ADJUDICAT ING THE ISSUE OF INVESTMENT ALLOWANCE AND EXTRA SHIFT ALLOWANCE ON VARIOUS ITEMS OF P&M TRIBUNAL HA S DEALT THE QUESTION AS UNDER: 44.GROUND NO 15 OF THE ASSESSEE READS AS FOLLOWS THE LEARNED CIT(A) ERRED IN NOT ALLOWING INVESTMEN T ALLOWANCE,ESA AND ADDITIONAL DEPRECIATION ON PLANT AND MACHINERY INSTALLED IN TOWN DIVISIONS WATER WORKS,SANITARY WORKS, HOSPITAL AND TECHNICAL AND TRAINING INSTITUTES WHICH ARE AN INTE GRAL PART OF THE WORKS AND FURTHER ERRED IN GIVING PARTIAL ALLOWANCE OF ADDITIONAL DEPRECIATION AND ES A ON OTHER PLANT AND MACHINERY. THE LEARNED CIT(A) FURTHER ERRED IN NOT FOLLOWING T HE ORDER OF THE HONBLE MUMBAI ITAT IN APPELLANTS OWN CASE FOR ASSESSMENT YEARS 1981-82 A ND 1982-83. 45. THE ASSESSEE HAS AN INTEGRATED STEEL PLANT AT J AMSHEDPUR TO MANUFACTURE STEEL. IT HAS ALSO SET UP A TOWNSHIP IN THE PROCESS OF SETTING UP THE MANUFAC TURING FACILITIES FOR PRODUCING STEEL. THE TOWNSHIP IS AN INTEGRATED PART OF WORKS OF THE ASSESSEE.THE BACKGROUND OF SETTING UP OF THE TOWNSHIP HAS BEEN 20 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. FULLY ELABORATED WHILE DEALING WITH GROUND NO. 14.I N RESPECT OF DEPRECIATION AND INVESTMENT ALLOWANCE THE ASSESSEE MADE THE FOLLOWING CLAIM. (I)INVESTMENT ALLOWANCE, ADDITIONAL DEPRECIATION AN D EXTRA-SHIFT ALLOWANCE ALLOWED ON PLANT AND MACHINERY CLASSIFIED UNDER THE HEADING TOWN DIVISI ON X X X THE ASSESSING OFFICER DISALLOWED THE CLAIM FOR DEDU CTION ON THE FOLLOWING GROUNDS:PLANTS AND MACHINERIES ARE INSTALLED IN TOWN DIVISION AND SERV E THE RESIDENTIAL PREMISES/OFFICE ACCOMMODATION AND AS THEY FALL UNDER THE EXCLUSION CLAUSE OF SECT ION 32(L)(IIA),ADDITIONAL DEPRECIATION IS NOT ALLOWED.THE ASSESSING OFFICER DISALLOWED INVESTMENT ALLOWANCE ON THE GROUND THAT THE TOWN DIVISION PROVIDES RESIDENTIAL FACILITIES TO THE WOR KERS AND STAFF OF THE ASSESSEE COMPANY WELL AS OTHE R RESIDENTS OF THE TOWNSHIP AND,THEREFORE, WOULD AMO UNT TO PLANT AND MACHINERY IN THE NATURE OF RESIDENTIAL/ OFFICE ACCOMMODATION. 46.BEFORE THE CIT(A), THE ASSESSEE CONTENDED AS FOL LOWS: THE ASSESSEE HAD ON ITS OWN EXCLUDED 4 ITEMS OF PLA NT AND MACHINERY WHICH HAVE BEEN INSTALLED IN THE RESIDENTIAL PREMISES/OFFICE ACCOMMODATION IN TH E TOWN DIVISION FOR THE PURPOSE OF CLAIMING ADDITIONAL DEPRECIATION. IT HAS CLAIMED ADDITIONAL DEPRECIATION ON THOSE ITEMS OF PLANT AND MACHINERY WHICH ARE INSTALLED IN THE TOWN DIVISION LIKE,ELECT RICAL MACHINERY FOR POWER GENERATION, WATER WORKS MACHINERY FOR SUPPLY OF WATER, SANITARY MACHI NERY FOR DRAINAGE SYSTEM IN THE TOWN DIVISION ETC. THE ASSESSEE ON ITS OWN EXCLUDED PLANT AND MAC HINERY INSTALLED IN THE RESIDENTIAL/OFFICE ACCOMMODATION FOR CLAIMING INVESTMENT ALLOWANCE. TH E APPLICATION OF 32A(2)(III), IN FACT, WOULD COVER PLANT AND MACHINERY INSTALLED OWN DIVISION W ITHIN THE MEANING OF INDUSTRIAL UNDERTAKING. THE ASSESSING OFFICER, IN HIS ASSESSMENT ORDER, HAS TRIED TO THE MEANING TO BE IMPUTED TO INDUSTRIAL- UNDERTAKING TO ONLY MANUFACTURING PLANT AND MACHIN ERY. INDUSTRIAL UNDERTAKING WOULD COVER ALL FACETS OF BUSINESS AND, IN SHORT, REFERS TO AN ORGA NISATION CARRYING ON MANUFACTURING ACTIVITY.WHAT IS REQUIRED TO BE SEEN IS WHETHER THE PLANT AND MACHIN ERY IS USED FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION, MANUFACTURE OR PRODUCTION OF ANY ARTI CLE OR THING. IT IS NOT REQUIRED TO BE ESTABLISHED THAT THE PLANT AND MACHINERY ARE DIRECTLY USED IN T HE MANUFACTURING PROCESS.THIS HAS BEEN ESTABLISH - ED RECENTLY BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JAYANAND KHIRA & COMPANY PVT. LTD., 170 ITR 31, WHERE IT WAS HELD THAT THE EXPRESSION FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION, MANUFACTURE OF PRODUCTION OF IS WIDER IN SCOPE THAN THE EXPRESSION FOR CONSTRUCTION, MANUFACTURE OR PRODUCTION. IT WAS ALSO BROUGHT TO CIT(A)S NOTICE THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1981-82, 1982-83 AND 1983-84 IT HAS BEEN CONSISTENT LY HELD THAT TRACTORS AND TRAILERS INSTALLED IN THE TOWN DIVISION, WHICH WERE IN THE NATURE OF EARTH MO VING MACHINERIES, WERE ELIGIBLE FOR INVESTMENT ALLOWANCE BY APPLICATION OF THE WIDER EXPRESSION AS EXPLAINED ABOVE. 47.THE CIT(A), HOWEVER, HELD AS FOLLOWS: THE INVESTMENT ALLOWANCE IS ADMISSIBLE U/S. 32A AND SUBSECTION (1) REQUIRES THAT THE PLANT AND MACHINERY SHOULD BE OWNED BY THE ASSESSEE, SHOULD B E WHOLLY USED FOR THE PURPOSE OF THE BUSINESS CARRIED ON BY HIM AND SHOULD BE THE MACHINERY OR PL ANT SPECIFIED IN SUBSECTION (2).SUBSECTION (2) STIPULATES THAT THE PLANT AND MACHINERY SHOULD BE I NSTALLED IN AN INDUSTRIAL UNDERTALCING FOR THE PURPOSE OF BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OTHER THAN THE ARTICLES OR THINGS SPECIFIED IN THE ELEVENTH SCHEDULE. NO DEDUC TION BY WAY OF INVESTMENT ALLOWANCE IS ALLOWABLE IN RESPECT OF (I) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION INCLUDING A GUEST HOUSE,(II) ANY OFFI CE APPLIANCES,(III) ANY ROAD TRANSPORT VEHICLES,(IV)ANY SHIP OR PLANT AND MACHINERY IN RES PECT OF WHICH DEVELOPMENT REBATE WAS OR IS ALLOWABLE AND ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION IN COMPUTING THE TOTAL INCOME.ACCORDING T O CIT(A) EACH AND EVERY ITEM OF PLANT AND MACHINERY IS NOT ELIGIBLE FOR INVESTMENT ALLOWANCE EVEN THOUGH IT MAY BE USED FOR THE PURPOSE OF BUSINESS.ACCORDING TO THE CIT(A) PLANT AND MACHINER Y INSTALLED IN INDUSTRIAL UNDERTAKING SHOULD HAVE ANY NEXUS WITH THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. IN THIS REGARD THE CIT(A) REFERRED TO THE FOLLOWING DECISIONS WHER EIN IT HAS BEEN LAID DOWN THAT INVESTMENT ALLOWANCE AND ADDITIONAL DEPRECIATION CAN BE ALLOWE D ONLY WHEN THE PLANT AND MACHINERY IS USED FOR THE BUSINESS OF MANUFACTURE OR PRODUCTION OF AN Y ARTICLE OR THING. (A) TECHNICO ENTERPRISES (P) LTD., 206 ITR 36 (CAL. ) (B) PEICO ELECTRONICS LTD., 201 ITR 477 (CAL) (C) MACHINERY MANUFACTURING CORPN. LTD., 198 ITR 55 9 (CAL.) (D) TRIBENI TISSUES LTD., 206 ITR 92 (CAL) 21 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. (E) CONTINENTAL DEVICE (I) LTD., 196 ITR 571 (DEL) 48.THE ASSESSEE HAD PLACED RELIANCE BEFORE THE CIT( A)ON THE DECISION OF ITAT D BENCH IN ASSESSEES CASE IN I.T.A. NO. 8116 & 81L7/BOM/91 DA TED 5.3.2002 FOR A.Y. 198 1-82 AND 1982-83 WHEREIN THE ITAT HAD TAKEN A VIEW THAT ASSETS OF TO WNSHIP DIVISION FORMED PART OF THE MANUFACTURING PROCESS OF THE ASSESSEE. ON THE ABOVE DECISION OF THE ITAT, THE LEARNED CIT(A) HELD AS FOLLOWS: THE HONBLE ITAT D BENCH,MUMBAI RELIED ON THE DE CISION OF HONBLE ITAT, BOMBAY BENCH IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1968-69 TO 1971-72. 1 HAVE PERUSED THIS ORDER OF THE HONBLE ITAT,BOMBAY BENCH DATED 13.10.76. THE HONB LE ITAT, BOMBAY BENCH FOR ASSESSMENT YEAR 1968-69 TO 1971-72 IN TURN RELIED ON THE EARLI ER ORDER OF THE ITAT. THE QUESTION INVOLVED IN ASSESSMENT YEAR 1968-69 TO 1971-72 WAS WHETHER A PA RTICULAR PLANT AND MACHINERY FORMED AN INTEGRAL PART OF A PRIORITY INDUSTRY OR NOT. THUS, THE ISSUE INVOLVED IN THOSE YEARS WAS HIGHER DEVELOPMENT REBATE CLAIM. IN THE CONTEXT OF ALLOWIN G HIGHER DEVELOPMENT REBATE, ITAT, MUMBAI BENCH HELD THAT THE PLANT AND MACHINERY INSTALLED EVEN FOR PROVIDING THE NECESSARY FACILITIES TO THE EMPLOYEES, THEIR DEPENDENTS AND OTHERS WHICH DOES N OT VISIBLY HAVE ANY CONNECTION WITH THE MANUFACTURING ACTIVITY,IS DIRECTLY NEEDED FOR THE R UNNING OF THE PRIORITY / INDUSTRY.WE THEREFORE DIRECT THE INCOME-TAX OFFICER TO ALLOW DEVELOPMENT REBATE AT HIGHER RATE OF 25% ON THE VALUE OF THE PLANT AND MACHINERY UNDER CONSIDERATIONDEFINITELY, THE S COPE OF EXPRESSION USED IN SECTION 33 FOR THE PURPOSE OF BUSINESS OF MANUFACTURE IS WIDER AND IN THAT CONTEXT, THE HONBLE ITAT,D BENCH IN ASSESSMENT YEAR 1968-69 TO 1971-72 HELD THAT THE PL ANT AND MACHINERY INSTALLED FOR PROVIDING NECESSARY FACILITIES TO THE EMPLOYEES FORMED AN INT EGRAL PART OF THE MANUFACTURING ACTIVITY.AS OBSERVED EARLIER, THE WORD INDUSTRIAL UNDERTAKING WAS NOT EMPLOYED IN SECTION 33.IN MY VIEW, BY EMPLOYING THE WORD INDUSTRIAL UNDERTAKING,THE SCO PE HAS BEEN RESTRICTED IN SECTION 32A OF THE I. T. ACT. WITH UTMOST RESPECT, I SUBMIT THAT THE HON BLE ITAT, D-BENCH, MUMBAI FOR ASSESSMENT YEAR 1981-82 AND 1982-83 IN THE APPELLANTS CASE DID NOT CONSIDER THE SIGNIFICANCE OF THE WORD INDUSTRIAL UNDERTAKING IN SECTION 32A.THUS, THE C ONTEXT IN WHICH THE HONBLE ITAT TREATED THE HOSPITAL AND OTHER FACILITIES AS PART OF THE MANUFA CTURING PROCESS WAS DIFFERENT IN ASSESSMENT YEARS 1968-69 TO 1971-72. A SIMILAR CONDITION DID NOT EXI ST IN THE ASSESSMENT YEARS UNDER CONSIDERATION. AS OBSERVED EARLIER, THE MACHINERY AND PLANT MUST H AVE A CLOSE NEXUS WITH THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE HONBLE CALCUTTA HIGH COURT IN TECHNICO ENTERPRISES PUT. LTD. (SUPRA), MACHINERY MANUFACTUR ING CORPORATION (SUPRA), PIECO ELECTRONICS LTD. (SUPRA) HELD THAT THE PLANT AND MACHINERY MUST BE INEXTRICABLY CONNECTED WITH THE PRODUCTION OF THE ARTICLE OR THING ON WHICH INVESTMENT ALLOWANCE IS CLAIMED. IN MY VIEW, THE AFORESAID JUDGMENTS OF THE CALCUTTA HIGH COURT LAY DOWN THE PROPOSITION THAT THE PLANT AND MACHINERY SHOULD BE AN INTEGRAL PART OF THE MANUFACTURING PROCESS AND MACH INERY ON WHICH INVESTMENT ALLOWANCE IS CLAIMED IS NECESSARY TO MAKE THE ASSESSEES MANUFACTURING U NIT IN A STATE OF OPERATIONAL INTEGRATION. L IN OTHER WORDS, ANY MACHINERY OR PLANT HAVING A LINK I N THE TOTAL PROCESS OF THE OPERATIONAL INTEGRATION SHOULD BE TAKEN AS MACHINERY OR PLANT PERTAINING TO THE MANUFACTURING PROCESS. 49.FOR THE VERY SAME REASONS AS GIVEN ABOVE, THE DE DUCTION ON ACCOUNT OF ADDITIONAL DEPRECIATION WAS ALSO DISALLOWED.THE CLAIM FOR DEDUCTION ON ACCO UNT OF EXTRA SHIFT ALLOWANCE (ESA) WAS DISALLOWED FOR THE REASON THAT THE ITEMS OF ASSETS IN RESPECT OF WHICH ESA WAS CLAIMED WERE NOT THE ITEMS OF ASSETS LISTED IN PART-I, APPENDIX-I TO THE INCOME-TAX RULES, 1962 FOR WHICH ESA WAS TO BE ALLOWED. THE CIT(A), HOWEVER, ALLOWED THE FOLLOWING CLAIM FOR DEDUCTION: X X X 50.FOR THE VERY SAME REASONS AS GIVEN ABOVE, ADDITI ONAL DEPRECIATION WAS ALLOWED ON THE ABOVE TWO ITEMS. ACCORDING TO THE CIT(A) THE CONDITION FOR GR ANT OF ADDITIONAL DEPRECIATION INVESTMENT ALLOWANCE WAS SAME AND HENCE HE GRANTED ADDITIONAL DEPRECIATION ON THE ABOVE TWO ITEMS OF PLANT AND MACHINERY.AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS RAISED GROUND NO. 15 BEFORE THE TRIBUNAL. 51.WE HAVE HEARD THE RIVAL SUBMISSIONS.IN A.Y. 1981 -82 AND 1982-83,THE TRIBUNAL DEALT WITH AN IDENTICAL ISSUE IN THE CASE OF THE ASSESSEE IN I.T. A.NO.8116 & 8117/BOM/91.THE TRIBUNAL HAS DISCUSSED THE ISSUE AT LENGTH INCLUDING THE CASE LA WS RELIED UPON BY THE CIT(A)IN ORDER AND HAS HELD AS FOLLOWS: WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PRESENTED BEFORE US.THE DECISIONS RELIED ON BY THE LD. DR ARE, IN OUR OPINION, DISTINGUISHABLE IN FACTS.THE DECISION IN THE CASE OF ACC LTD. (SUPRA) RELATES TO DEVELOPMENT REBATE AND NOT TO 22 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. ADDITIONAL DEPRECIATION, IN THE CASE OF MACHINERY M ANUFACTURING CORPN. LTD. (SUPRA) INVESTMENT ALLOWANCE ON FIRE EXTINGUISHERS AND TIME-OFFICE EQU IPMENT WAS DENIED AS IT WAS HELD THAT SUCH ITEMS ARE NOT PLANT AND MACHINERY WHICH ARE INSTALL ED FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION, MANUFACTURE OR PRODUCTION OF ARTICLE OR THING, IN T HE CASE OF PIECO ELECTRONICS LTD. (SUPRA) THE INVESTMENT ALLOWANCE ON THE NEW EQUIPMENT INSTALLED IN THE CANTEEN WAS DENIED. IN TECHNICO ENTERPRISES (P) LTD. (SUPRA),IT WAS HELD THAT THE C OMPUTER WAS NOT USED FOR MANUFACTURE OR PRODUCTION OF ANY ARTICLE BY THE ASSESSEE AND HENCE THE ASSESSEE WAS NOT ENTITLED TO INVESTMENT ALLOWANCE ON THE OTHER HAND, THE DECISIONS RELIED O N BY THE LD COUNSEL OF THE ASSESSEE DO ASSIST THE CASE OF THE ASSESSEE IN THE CASE OF TNVENI TISSUES LTD (SUPRA), THE HONBLE CALCUTTA HIGH COURT HAS HELD THAT THE ASSESSEE,WHO WAS MANUFACTURING TISSUE PAPERS WAS ENTITLED TO INVESTMENT ALLOWANCE ON MOTORS, ELECTRIC INSTALLATIONS, UNDERGROUND CABLES, OVERHEAD CABLES AND AIR-CONDITIONING MACHINES. IN THE CASE OF VISVESWARAYYA IRON AND STEEL LTD. (S UPRA), THE LOCOMOTIVES AND RAILWAY SIDINGS PROVIDED AT PLACES OF MANUFACTURING ACTIVITY FOR TR ANSPORT OF ARTICLES OUT OF OR INTO FACTORY WERE HEL D TO BE PLANT ENTITLED TO INVESTMENT ALLOWANCE. WE FE EL THAT WE NEED NOT DISCUSS EACH AND EVERY CASE RELIED ON BY THE ASSESSEE, PARTICULARLY WHEN A VIEW HAS BEEN TAKEN BY THE ITAT, BOMBAY BENCH, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1968-6 9 TO 1971-72. IN HEIR ORDER DATED 13-10-1976, IT HAS BEEN HELD BY THE TRIBUNAL THAT MAIN WORKS AND T HE TOWNSHIP FORMED AN INTEGRAL PART OF THE WHOLE INDUSTRIAL COMPLEX, ONE OF WHICH CANNOT EXIST WITHOUT THE OTHER. IT HAS BEEN HELD THAT THE PLANT AND MACHINERY INSTALLED EVEN FOR PROVIDING THE NECE SSARY FACILITIES TO THE EMPLOYEES WHICH DOES NOT APPARENTLY HAVE ANY CONNECTION WITH THE MANUFACTURI NG ACTIVITY IS DIRECTLY NEEDED FOR THE RUNNING OF THE PRIORITY INDUSTRY.WE, THEREFORE, HOLD THAT INVE STMENT ALLOWANCE IS ADMISSIBLE TO THE ASSESSEE ON THE PLANT AND MACHINERY IN THE TOWN DIVISION, PARTI CULARLY WHEN ON THE ITEMS LIKE LIGHT AND FAN INSTALLATIONS THE ASSESSEE HAD ITSELF NOT CLAIMED A NY INVESTMENT ALLOWANCE.WE,THEREFORE, HOLD THAT ADDITIONAL DEPRECIATION, EXTRA SHIFT ALLOWANCE AND INVESTMENT ALLOWANCE ARE ADMISSIBLE TO THE ASSESSEE ON THE PLANT AND MACHINERY IN THE TOWN DIV ISION.THEREFORE,NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). THE APPEAL OF THE REVENUE FAILS ON THIS ISSUE. 52.WE ARE OF THE VIEW THAT THE TRIBUNAL HAS CONSIDE RED ALL ASPECTS OF THE CASE AS DISCUSSED BY THE CIT(A). WE, THEREFORE, FOLLOWING THE ORDER OF THE T RIBUNAL, DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE.GR.NO. 15 IS ALLOWED. 20.3. WE FIND THAT HONBLE BOMBAY HIGH COURT HAS DISMISSE D THE APPEAL FILED BY THE CIT-2, MUMBAI ON 26.04.2012,WHEREIN ORDER OF THE TRIBUNAL FOR THE AY.1985-86 WAS CHALLENGED AND ISSUES OF EXTRA SHIFT ALLOWANCE,INVESTMENT ALLOWANC E AND ADDITIONAL DEPRECIATION WERE AGITATED BEFORE THE HONBLE COURT.(IT APPEAL NO.3176 OF 2010 -QUESTION OF LAW NO.C AND D). AFTER CONSIDERING THE ABOVE AND FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE AY.1985-86,WE DECIDED GROUND NO.18,19,20 IN FAVOUR OF THE ASSESSEE. 21. GROUND NO.21 IS ABOUT CONTRIBUTION TO THE SOCIETY F OR SPORTS AND STADIUM AT CALCUTTA.AO FOUND THAT THE ASSESSEE HAD CONTRIBUTED A SUM OF RS. 10 L AKHS TO SOCIETY FOR SPORTS AND STADIUM AT CALCUTTA.HE CALLED FOR DETAILS IN THIS REGARD AND H ELD THAT THE EXPENDITURE WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS. 21.1. AFTER PERUSING THE RECEIPT DATED 7-12-1985 ISSUED BY THE SOCIETY FOR SPORTS AND STADIUM, CALCUTTA,FAA HELD THAT IT WAS A CONTRIBUTION GIVEN BY THE ASSESSEE,THAT THE CONTRIBUTION WAS ONE OF THE FORMS OF ADVERTISEMENT,THAT THE CONTRIBUTION WA S MADE TO AN INDEPENDENT SOCIETY,THAT FOR MAKING A SUBSTANTIAL CONTRIBUTION ONE OF THE GATES OF THE STADIUM WAS NAMED AFTER THE ASSESSEE,THAT THE CONTRIBUTION WAS AN APPLICATION OF INCOME AND T HERE WAS NO DIRECT NEXUS WITH THE BUSINESS CARRIED ON BY THE COMPANY. 21.2. BEFORE US,AR SUBMITTED THAT THE AMOUNT IN QUESTION WAS IN THE NATURE OF ADVERTISEMENT AND PUBLICITY EXPENSES AND THE SAME SHOULD BE ALLOWED A S DEDUCTION,THAT THE CALCUTTA SOCIETY UNDERTOOK THE JOB OF CONSTRUCTING THE BIGGEST STADIUM IN ASIA FOR ACCOMMODATING 120000 PEOPLE,THAT ONE OF THE SCHEMES OF THE SOCIETY WAS TO NAME THE DIFFEREN T GATES AFTER THE NAMES OF DIFFERENT ADVERTISERS, THAT THERE WERE TWO PROMINENT GATES AVAILABLE AT RS . 10 LAKHS EACH AND THE COMPANY DECIDED TO TAKE UP ONE GATE SO AS TO ADVERTISE ITS NAME IN THE STAD IUM. AR SUBMITTED THAT THE AMOUNT IN QUESTION 23 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. WAS IN THE NATURE OF ADVERTISEMENT AND PUBLICITY EX PENSES AND THE SAME SHOULD BE ALLOWED AS DEDUCTION,THAT THE CALCUTTA SOCIETY UNDERTOOK THE J OB OF CONSTRUCTING THE BIGGEST STADIUM IN ASIA FOR ACCOMMODATING 120000 PEOPLE,THAT ONE OF THE SCHEMES OF THE SOCIETY WAS TO NAME THE DIFFERENT GATES AFTER THE NAMES OF DIFFERENT ADVERTISERS, THA T THERE WERE TWO PROMINENT GATES AVAILABLE AT RS. 10 LAKHS EACH AND THE COMPANY DECIDED TO TAKE UP ON E GATE SO AS TO ADVERTISE ITS NAME IN THE STADIUM,THAT EXPENDITURE INCURRED SHOULD BE ALLOWED ON THE SAME ANALOGY OF ALLOWING THE EXPENDITU -RE INCURRED FOR HORNIMAN CIRCLE OF MUMBAI. 21.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF THE ASSESSEE,SIMILAR CONTRIBUTION MADE BY I T TO OTHER INSTITUTIONS HAVE BEEN ALLOWED IN PAST.WE ALSO FIND THAT AO HAS FILED AN APPEAL ABOUT AMOUNT PAID TO TATA SERVICES ON MAINTENANCE OF HORNIMAN CIRCLE,MUMBAI.FOLLOWING THE ORDERS OF T HE TRIBUNAL FOR EARLIER YEARS,INCLUDING AY.1985-86,WE ALLOW THE GROUND NO.21. 22. NEXT TWO GROUND IS DEALS WITH CONTRIBUTION MADE BY THE ASSESSEE TO BELDIH AND UNITED CLUBS,AMOUNTING TO RS.2.26,532/-.DURING THE YEAR UN DER APPEAL THE ASSESSEE HAD CONTRIBUTED A SUM OF RS.2.26 LAKHS AND 2 LAKHS AS CONTRIBUTION TO BEL DIH AND UNITED CLUBS.HE TREATED THE CONTRIBUTIONS AS EXPENDITURE NOT INCURRED FOR THE PURPOSE OF BUSI NESS. 22.1. IN THE APPELLATE PROCEEDINGS FAA HELD THAT HE WAS NOT ABLE TO AGREE WITH THE CONTENTION OF THE ASSESSEE,THAT THE REASONS GIVEN IN CONNECTION WITH ISSUE OF CONTRIBUTION TO CALCUTTTA SOCIETY WERE EQUALLY APPLICABLE,THAT THE ACTION OF THE AO HAD TO BE UPHELD. 22.2. BEFORE US,AR ARGUED THAT THE CITIZENS OF JAMSHEDPUR HAD ESTABLISHED BELDIH AND UNITED CLUB,THAT THE MAIN OBJECTIVES OF THE CLUB WERE TO P ROVIDE SPORTS AND CULTURAL ACTIVITIES TO THE MEMBERS,THAT THE CONTRIBUTION WAS MADE BECAUSE THE ASSESSEE WAS UNDER AN OBLIGATION TO PROVIDE ALL THESE FACILITIES TO THE CITIZENS OF JAMSHEDPUR BY SPENDING THROUGH THE MEDIUM OF THOSE CLUBS,THAT IT INDIRECTLY REDUCED THE DIRECT EXPENDITURE ON SUC H ACTIVITIES. 22.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED T HE MATERIAL BEFORE US.WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT HAS DISMISSED THE APPEAL FILED BY THE DEPARTMENT WHEREIN ORDER OF THE TRIBUNAL FOR THE AY.1985-86 WAS CHALLENGED A ND ISSUE OF CONTRIBUTION TO CLUBS WAS AGITATED BEFORE THE HONBLE COURT.(IT APPEAL NO.3176 OF 2010 :DATED 26.04.2012,-QUESTION OF LAW NO.F). FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE YEAR 19 85-86,WE ALLOW THE APPEAL OF THE ASSESSEE WITH REGARD TO PAYMENT TO BELDIH AND UNITED CLUBS. 23. GROUND NO.23 IS ABOUT CONTRIBUTION TO XAVIER LABOUR RELATIONS INSTITUTE(XLRI).BEFORE THE AO,ASSESSEE CLAIMED THAT IT HAD CONTRIBUTED A SUM O F RS. 2 LAKHS TO XLRI AND SAME WAS CLAIMED AS DEDUCTION AS PER THE PROVISIONS OF THE SECTION 35( L)(III) OF THE ACT, BUT IT DID NOT PRODUCE THE EVIDENCE IN SUPPORT OF ITS CLAIM.AO OBSERVED THAT X LRI WAS ENGAGED IN THE MANAGEMENT RESEARCH IN THE FIELD OF SOCIAL SCIENCE AND THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTABLE BECAUSE SUCH RESEARCH WAS NOT RELATED TO THE BUSINESS OF THE ASSESSEE.HE DID NOT ALLOW THE DEDUCTION CLAIM MADE BY THE ASSESSEE. 23.1. IN THE APPELLATE PROCEEDINGS FAA HELD THAT THE ASSE SSEE DID NOT PRODUCE ANY EVIDENCE EITHER BEFORE THE AO OR BEFORE HIM IN SUPPORT OF PAYMENT O F RS.2 LAKHS TO XLRI,THAT IN THE ABSENCE OF EVIDENCE,NO DEDUCTION COULD BE ALLOWED U/S. 35(L)(I II) OF THE ACT. 23.2. BEFORE US,AR CONTENDED THAT XLRI CARRIED ON RESEARC H IN THE FIELD OF MANAGEMENT AND WAS RECOGNISED U/S. 35(L)(III) OF THE ACT,THAT THE ASSE SSEE COULD PRODUCE NECESSARY EVIDENCE.DR CONTENTED THAT ASSESSEE DID NOT PRODUCE ANY EVIDENC E BEFORE ANY AUTHORITY. 23.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.IN OUR OPINION CONTRIBUTION TO XLRI IS ALLOWABLE ON THE SAME PRINC IPLES THAT WE HAVE FOLLOWED IN ALLOWING THE EARLIER GROUNDS,BUT SAME IS SUBJECT TO PRODUCTION O F EVIDENCE OF PAYMENT OF CONTRIBUTION BY THE ASSESSEE. MATTER IS RESTORED BACK TO THE FILE OF TH E AO,FOR VERIFICATION.ASSESSEE IS DIRECTED TO PRODUCE NECESSARY DOCUMENTS BEFORE HIM.GROUND NO.23 IS ALLOWED,IN PART. 24. NEXT GROUND DEALS WITH PAYMENT OF EXCISE DUTY.BEFOR E US,AR DID NOT PRESS THE GROUND.GROUND 24 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. OF APPEAL NO.24 IS DECIDED AGAINST THE ASSESSEE AND STANDS DISMISSES,AS NOT PRESSED. 25. GROUND NO.25 PERTAINS TO BAD AND DOUBTFUL DEBTS WRI TTEN OFF.AO FOUND THAT THE ASSESSEE HAD CLAIMED A SUM OF RS.11,88,122/-DUE FROM THE GOVERNM ENT DEPARTMENTS/OFFICIALS AS BAD DEBTS.HE THAT NO EVIDENCE WAS PRODUCED TO ESTABLISH THAT THE DEBTS HAD BECOME BAD DURING THE PREVIOUS YEAR. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THERE WAS NO HOPE OF RECOVERY,BUT HE DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE A MOUNTS DUE WERE FROM THE GOVT.AND SEMI GOVERNMENT ORGANISATIONS AND THE RECOVERY WAS POSSI BLE. 25.1. IN THE APPELLATE PROCEEDINGS,AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,FAA HELD THAT THE ARGUMENTS OF THE ASSESSEE WERE VAGUE AND GENERA L IN NATURE,THAT NO TROUBLE WAS TAKEN BY THE ASSESSEE TO RECOVER THE DUES FROM THE GOVERNMENT DE PARTMENTS AND OFFICERS,THAT O EVIDENCE WAS BEEN BROUGHT ON RECORD TO PROVE THAT THE AMOUNTS WE RE NOT RECOVERABLE,THAT IN THE ABSENCE OF EVIDENCE,THE AO WAS JUSTIFIED IN NOT ALLOWING THE D UES AS BAD DEBTS. 25.2. BEFORE US,AR AND DR AGREED THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DELIVERED FOR EARLIER AY.(SUPRA).WE FIND T HAT ISSUE OF BAD DEBTS HAD BEEN DEALT IN THE AY. 1985-86,BY THE TRIBUNAL AS UNDER : 58.FACTS OF THE CASE, IN BRIEF, ARE THAT ALL THE LA ND IN THE TOWNSHIP OF JAMSHEDPUR IS LEASED BY THE GOVERNMENT OF BIHAR TO THE ASSESSEE AND THE ASSESSE E HAS CONSTRUCTED HOUSES, BUNGALOWS,FLATS, ETC., FOR ITS EMPLOYEES ON SUCH LAND. A FEW PRIVATE PARTI ES ENGAGED IN TRADE, COMMERCE AND CONTRACT WORK IN JAMSHEDPUR HAVE BEEN GIVEN SOME PLOTS OF LAND BY THE ASSESSEE FOR CONSTRUCTION OF RESIDENTIAL ACCOMMODATION.VARIOUS DEPARTMENTS OF THE CENTRAL AN D STATE GOVERNMENTS LIKE CENTRAL EXCISE, INCOME-TAX,SALES-TAX,POLICE,JUDICIAL OFFICIALS,DEPU TY COMMISSIONERSOFFICE STAFF, ETC.,HAVE REQUISITI -ONED THE ASSESSEES BUNGALOWS, HOUSES AND FLATS FO R RESIDENTIAL PURPOSES FOR THE OFFICERS OF THESE DEPARTMENTS. THE ASSESSEE HAD, IN ACCORDANCE WITH I TS SCALE OF CHARGING OF RENT FOR THE WATER CHARGES AND SEWAGE CHARGES, RAISED BILLS EITHER AGA INST THE SPECIFIC DEPARTMENTS OR THE SPECIFIC OFFICERS OCCUPYING THESE ACCOMMODATIONS. THE GOVERN MENT OFFICIALS IN SPITE OF REPEATED REMINDERS, IGNORED THE PAYMENT OF THE RENTAL AND OTHER CHARGES FOR THE ACCOMMODATIONS OCCUPIED BY THEM AND ON THEIR TRANSFERS, EVEN THE CONCERNED DEPARTMENTS DISOWNED THEIR LIABILITY ON THE GROUND THAT IT WAS THE LIABILITY OF THE CONCERNED OFFICERS TO PAY THE RENT AND THE OTHER CHARGES OF THE ACCOMMODATION. IN THESE CIRCUMSTANCES, THE ASSESSEE FOUND ITSELF IN A N UNENVIABLE POSITION OF TRACING THE GOVERNMENT OFFICERS WHO ARE TRANSFERRED FROM JAMSHEDPUR AND RA ISING CLAIMS ON THE OFFICERS WHO WERE IN OCCUPATION OF THE ACCOMMODATION WHO FLATLY REFUSE T O MEET THEIR OBLIGATIONS.IN THESE CIRCUMSTANCES, THE ASSESSEE HAD NO OTHER BUT TO WRITE OFF AS BAD A SUM OF RS. 25,53,593/- WHICH HAS BEEN ACCUMU- LATED OVER A LONG PERIOD IN THE PAST TO UPDATE ITS ACCOUNTS.THE ASSESSING OFFICER AND THE CIT(A) REFUSED TO ALLOW THE CLAIM OF THE ASSESSEE ON THE G ROUND THAT THE POSSIBILITY OF RECOVERY CANNOT BE RULED OUT AND THAT THE DUES WERE FROM GOVERNMENT DE PARTMENTS. 59.BEFORE US IT WAS SUBMITTED THAT IT IS ON THE GRO UND OF COMMERCIAL EXPEDIENCY THAT THE ASSESSEE HAS NOT SUED THE OFFICIALS OF THE CENTRAL AND THE S TATE GOVERNMENT OR THE CONCERNED DEPARTMENTS AND THE AMOUNT WHICH COULD NOT BE RECOVERED, HAVING BEEN CONSIDERED AS INCOME ON ACCRUAL BASIS IN THE PAST, IT HAD NO OTHER ALTERNATIVE BUT TO WRI TE OFF THIS AMOUNT AS IRRECOVERABLE DEBTS. IN THIS CONNECTION RELIANCE WAS PLACED ON THE DECISION OF T HE BOMBAY HIGH COURT IN JETHABHAI HIIJI V/S. CIT, 120 ITR 792 WHEREIN THE FOLLOWING PRINCIPLES H AVE BEEN LAID DOWN: PROCEEDINGS TAKEN ARE PENDING IN THE YEAR FOR WHICH THE CLAIM FOR BAD DEB T IS MADE AND THEY SUBSEQUENTLY END IN A DECREE IN FAVOUR OF THE ASSESSEE.IT WAS THEREFORE, SUBMITT ED THAT THE BAD DEBTS OF RS. 25,53,593 WRITTEN OFF BE ALLOWED AS DEDUCTION. 60.WE ARE OF THE VIEW THAT THE WRITE OFF OF THE DEB T AS BAD HAS TO BE CONSTRUED AS A BONAFIDE WRITE OFF. IT WAS BASED ON COMMERCIAL PROVIDENCE.IN THE L IGHT OF THE PRINCIPLES LAID DOWN BY THE HONBLE BOMBAY HIGH COURT WE DIRECT THAT THE DEDUCTION CLAI MED BE ALLOWED. GROUND NO. 18 IS ALLOWED. WE FIND THAT HONBLE BOMBAY HIGH COURT HAS DISMISSE D THE APPEAL OF THE DEPARTMENT VIDE ITS ORDER DATED 26.04.2012 WHEREIN ORDER OF THE TRIBUNAL FOR THE AY.1985-86 WAS CHALLENGED AND ISSUE OF 25 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. WRITING OFF OF DEBTS WAS AGITATED BEFORE THE HONBL E COURT.(IT APPEAL NO.3176 OF 2010-QUESTION OF LAW NO.E). FOLLOWING THE ABOVE GROUND NO.24 IS ALLOWED. 26.G ROUND OF APPEAL NO.26 IS ABOUT DEPRECIATION ON ROLL ING MILLS.BEFORE US,AR DID NOT PRESS THE GROUND,AS CLAIM WAS ALLOWED BY THE TRIBUNAL VIDE IT S ORDER FOR THE AY.1985-86(SUPRA).THEREFORE, WE DECIDE GROUND NO.26 AGAINST THE ASSESSEE AND IT STANDS DISMISSED AS NOT PRESSED. 27. NEXT GROUND DEALS WITH RESTRICTION OF CLAIM MADE U/ S.80HHC OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESSEE-COMPANY HAD CLAIMED DEDUCTION U/S.80HHC OF THE ACT, THAT IT HAD CREATED RESERVE TO THE EXTENT OF RS.40 LAKHS ONLY.HE RESTRICTED THE DEDUCTION TO THE EXTEN T OF RESERVE CREATED BY THE ASSESSEE. 27.1. BEFORE THE FAA,ASSESSEE CONTENDED THAT AN OPPORTUNI TY SHOULD BE GIVEN FOR CREATION OF THE RESERVE IN FUTURE AS IT WAS A BENEFICIAL PROVISION. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE THAT THAT THERE WAS NO ERROR IN THE COM PUTATION OF DEDUCTION U/S.80HHC OF THE ACT,THAT FOR AVAILING THE DEDUCTION U/S.80-HHC FOR AYS.1986- 87 TO 1988-89,IT WAS ESSENTIAL THAT AN AMOUNT EQUAL TO THE AMOUNT OF DEDUCTION CLAIMED U/S.80 HHC WAS TO BE DEBITED TO PROFIT AND LOSS ACCOUNT OF THE PREVIOUS YEAR IN RESPECT OF WHICH THE DEDUCT ION WAS TO BE ALLOWED AND CREDITED TO A RESERVE ACCOUNT TO BE UTILISED FOR THE PURPOSES OF THE BUSI NESS OF THE ELIGIBLE ASSESSEE,THAT THE AO HAD RESTRICTED THE DEDUCTION IN ACCORDANCE WITH THE PRO VISIONS OF THE ACT PREVAILING IN THE PREVIOUS YEAR.HE UPHELD THE ACTION OF THE AO. 27.2. BEFORE US,AR SUBMITTED THAT AN OPPORTUNITY SHOULD B E GIVEN TO THE ASSESSEE TO CREDIT FURTHER AMOUNT TO RESERVE ACCOUNT.HE RELIED UPON THE CASE O F KARIMJEE P.LTD.(271ITR564) AND SRI JAYAJYOTI & CO P.LTD.(252ITR895).DR SUPPORTED THE O RDER OF THE FAA. 27.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF KARIMJEE P.LTD.(SUPRA),THE ASSESSEE HAD EXP ORTED GOODS OUT OF INDIA IN RELATION TO WHICH IT WAS ENTITLED TO A DEDUCTION UNDER SECTION 80HHC OF THE INCOME-TAX ACT, 1961. THE ASSESSEE CREATED A RESERVE OF RS. 60,90,000.BUT OWING TO INCREASE IN COMPUTING THE PROFITS THE AO ALLOWED A DEDUCTION OF RS. 70,08,819.CIT,IN REVISION ISSUED N OTICE FOR DISALLOWING THE DIFFERENCE ; AND THE TRIBUNAL UPHELD THE ACTION OF THE COMMISSIONER HOLD ING THAT THE ASSESSEE HAD AMPLE OPPORTUNITY TO CREATE THE EXTRA RESERVE BUT HAD NOT DONE SO.ON APP EAL,HONBLE BOMBAY HIGH COURT HELD THAT NO QUESTION OF LAW AROSE AND THE QUESTION WHETHER THE ASSESSEE HAD NOT AVAILED OF THE OPPORTUNITY WAS A QUESTION OF FACT.DECIDING THE APPEAL FILED BY THE ASSESSEE,HONBLE THE SUPREME COURT ALLOWED THE ASSESSEE AN OPPORTUNITY TO CREATE THE RESERVE FOR T HE ADDITIONAL AMOUNT AND, ON COMPLIANCE, ALLOWED THE APPEAL HOLDING THAT THE ASSESSEE WAS ENTITLED T O THE DEDUCTION UNDER SECTION 80HHC. FOLLOWING THE JUDGMENT OF KARIMJEE P.LTD.(SUPRA),WE DIRECT THE AO TO GIVE AN OPPORTUNITY TO THE ASSESSEE FOR CREATING RESERVE AND TAKE NECESSARY AC TION ACCORDINGLY.GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE,IN PART. 28. LAST GROUND OF APPEAL IS ABOUT BAD DEBTS(RS.11.09 L AKHS)WRITTEN OFF.AS PER THE AR SPECIFIC GROUND WAS TAKEN BY THE ASSESSEE BEFORE THE FAA ABO UT THE BAD DEBTS,BUT HE DID NOT ADJUDICATE THE SAME. DR AGREED THAT SAID GROUND REMAINED TO BE DEC IDED. WE FIND THAT THE ASSESSEE HAD RAISED THE GROUND ABO UT DISALLOWANCE OF WRITTEN OFF AMOUNT,BUT FAA HAS NOT GIVEN DECISION ABOUT IT.THEREFORE,IN THE IN TEREST OF JUSTICE,WE REMIT BACK THE MATTER TO THE FILE OF THE FAA FOR FRESH ADJUDICATION.HE WILL AFFO RD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.GROUND NO.28 IS ALLOWED FOR STATISTICAL PU RPOSES. AS A RESULT,APPE AL FILED BY THE ASSESSEE IS ALLOWED,IN PART. 26 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. 3981/MUM/2011AY.1986-87: 29. FIRST GROUND OF APPEAL IS ABOUT DIRECTION ISSUED BY THE FAA TO THE A.O.TO ALLOW RS.2,69,62,561/- AS DEDUCTION ON ACCOUNT OF PROVISION FOR LEAVE SALA RIES.AS STATED EARLIER,ASSESSEE DURING THE YEAR APPEAL ASSESSEE HAD MADE PAYMENT TOWARDS LEAVE SALA RY AND HAD ALSO MADE PROVISIONS FOR LEAVE SALARY.AO WAS OF THE OPINION THAT THE PROVISION MAD E BY THE ASSESSEE FOR SALARY ON ACCRUAL BASIS WAS NOT AN ASCERTAINED LIABILITY.HE DISALLOWED THE PROVISION,AMOUNTING TO RS.2.69 CRORES,MADE BY THE ASSESSEE UNDER THE HEAD PROVISION TOWARDS LEA VE SALARY. 29.1. FAA,AFTER HEARING THE ASSESSEE,HELD THAT . 29.2. BEFORE US,AR SUBMITTED THAT TRIBUNAL VIDE ITS ORDER 27.02.2009(SUPRA)FOR THE AY.1985-86,HAD DECIDED THE ISSUE OF PROVISION FOR LEAVE SALARY IN FAVOUR OF THE ASSESSEE,THAT SIMILAR ISSUE HAD ARISE N IN THE AY.1992-93 ALSO AND THE APPEAL FILED BY THE AO AGAINST THE ORDER OF THE FAA WAS DISMISSED BY THE TRIBUNAL.DR SUPPORTED THE ORDER OF THE AO. 29.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE DECIDING THE SIMILAR ISSUE,FOR THE EARLIER AY.,ITAT HAD ALLOWED THE APPEAL OF THE ASSESSEE,THAT THE DEPARTMENT HAD NOT CHALLENGED THE ORDER OF THE TRIB UNAL BEFORE THE HONBLE HIGH COURT WHILE FILING APPEAL FOR THAT AY.,THAT SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE DECIDING THE APPEAL FOR THE AY.1992-93( ITA7083/MUM /1996,DATED.23.12.2004).WHILE DECIDING THE APPEAL FOR THE EARLIER AY.,TRIBUNAL HAS DEALT W ITH THE ISSUE OF PROVISION FOR LEAVE SALARY AS UNDER: 99.AFTER HEARING BOTH THE SIDES,WE FIND THE ISSUE S TANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VID E I.T.A.NO.7083/BOM/96 ORDER DATED 23 RD DECEMBER,2004 FOR THE A.Y.1992-93.WE FIND THE TRIBU NAL FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTHMOVERS LTD VS. CIT REPORTED IN 245 ITR 426 (SC) HAS DISMISSED THE GROUND RAISED BY THE REVENUE ON IDENTICAL ISSUES.RESPECTFULLY,FOLLOWING THE DECISIO N OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSEN CE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, THE ORDER OF THE CIT(A)ON THIS ISSUE IS UPH ELD. RESPECTFULLY FOLLOWING THE ORDERS OF THE COORDINATI NG BENCHES FOR AYS.1985-86 AND 1992-93,WE DECIDED GROUND NO.1 AGAINST THE AO. 30. NEXT GROUND OF APPEAL IS ABOUT THE DIRECTION GIVEN BY THE FAA TO THE A.O.TO ALLOW 20% OF INITIAL CONTRIBUTION AS DEDUCTION IN THE YEAR IN WHICH THE INITIAL CONTRIBUTION WAS MADE TO THE APPROVED SUPERANNUATION FUND.DURING THE ASSESSMENT PROCEEDIN GS,AO FOUND THAT THE ASSESSEE HAD MADE CONTRIBUTION OF RS.21,417/- TO THE APPROVED SUPERAN NUATION FUND(ASF),THAT THE CONTRIBUTION TO THE ASF INCLUDED INITIAL CONTRIBUTION.ACCORDING TO THE AO,20% OF THE INITIAL CONTRIBUTION TO THE ASF WAS NOT ADMISSIBLE AS DEDUCTION.AS A RESULT,HE ALLO WED REMAINING 80% OF THE INITIAL CONTRIBUTION AS DEDUCTION,IN FIVE EQUAL INSTALMENTS,BY RELYING ON T HE CBDTS NOTIFICATION DATED 21.10.1965. 30.1. IN THE APPELLATE PROCEEDINGS BEFORE THE FAA,ASSESSE E SUBMITTED THAT THE WHOLE OF INITIAL CONTRIBUTION TO THE ASF WAS DEDUCTIBLE U/S.36(1 )(I V) IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE IN THE YEAR OF CONTRIBUTION ITSELF,THAT TH ERE WAS NO PROVISION IN THE ACT WHICH STIPULATED DISALLOWANCE OF A PART OF THE CONTRIBUTION TO ASF A ND SPREADING OVER THE BALANCE AMOUNT OVER A PERIOD OF FIVE YEARS. THE ASSESSEE RELIED ON THE JU DGMENT OF THE HONBLE APEX COURT DELIVERED IN THE CASE OF SIRPUR PAPER MILLS(237 ITR41).AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT THE ISSUE WAS COVERED BY THE JUDGMENT OF THE S IRPUR PAPER MILLS(SUPRA),THAT IN VIEW OF THE SAID DECISION THE ASSESSEE WAS ENTITLED TO CLAIM THE ENT IRE INITIAL CONTRIBUTION TO THE ASF AS DEDUCTION.HE DIRECTED THE AO TO ALLOW 20% OF THE INITIAL CONTRIB UTION TO THE ASF. 30.2. BEFORE US,DR AGREED THAT THE ISSUE WAS DECIDED IN F AVOUR OF THE ASSESSEE.BY THE ORDERS OF THE TRIBUNAL DELIVERED FOR THE AYS.1985-85(SUPRA).AR SU BMITTED THAT FOR THE AY.1992-93(SUPRA) SIMILAR ISSUE WAS DECIDED AGAINST THE AO BY THE TRI BUNAL. 27 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. 30.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ISSUE OF CONTRIBUTION TO ASF HAS BEEN DEALT BY THE TRIBUN AL WHILE PASSING ORDER FOR THE AY.1985-86 MAKING FOLLOWING OBSERVATIONS: 101.AFTER HEARING BOTH THE SIDES,WE FIND THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE I.T.A. NO. 7083/BOM/96 ORDER DATED 27 TH ,DECEMBER, 2004. WE FIND THE TRIBUNAL AT PARA 4 OF THE ORDER HAS HELD AS UNDER: 4.GROUND NO.2 DISPUTES THE LD.CIT(A)S ORDER IN DI RECTING TO ALLOW THE ENTIRE AMOUNT OF RS. 2,43,471/- BEING INITIAL CONTRIBUTION OF ASSESSEE T O SUPERANNUATION FUND AS AGAINST 1/5TH OF 80% OF SUCH SUM ALLOWED BY ASSESSING OFFICER.THE LD. DR HA S RELIED ON THE ORDERS OF ASSESSING OFFICER.THE LD. AR OF ASSESSEE HAS CONTENDED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE VIDE THE JUDGMEN T OF HONBLE SUPREME COURT IN THE CASE OF CIT VS.SIRP UR PAPER MILLS,237 ITR 41.HE HAS CONTENDED THAT THIS CONTRIBUTION HAS ALSO BEEN ALLOWED IN A. Y. 1997-98.HE HAS CONTENDED THAT THE ISSUE IS ALSO COVERED IN 239 ITR 561 (BOM), CIT VS. BECK &CO. (IN DIA) LTD. HE HAS ALSO CONTENDED THAT THE ASSESSEES CLAIM HAS ALSO BEEN ALLOWED BY THE TRIBU NAL IN EARLIER YEARS FROM 77-78 TO 83-84,AND HAS GIVEN DETAILS THEREOF IN THE CHART FURNISHED BY HIM ON RECORD. AS SUCH, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE,WE FIND THE IMPUGNED ORDE R OF LD.CIT(A) TO BE QUITE PROPER AND JUSTIFIED AND SO WE UPHOLD THE SAME. 102.RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE REVE NUE AGAINST THE ORDER OF THE TRIBUNAL, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. IN VIEW OF THE ABOVE DISCUSSION GROUND NO.2 IS DECI DED AGAINST THE AO. 31. GROUND NO.3 DEALS WITH DEDUCTION OF RS.2,52,01,460/ -ON ACCOUNT OF GUARANTEE AMOUNT PAID TO AHMEDABAD ADVANCE MILLS LTD. (AAML).DURING THE ASSE SSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH THE (AA MLL) ON 29.3.1985,THAT IN TERMS OF THE AGREEMENT, THE ASSESSEE MADE PAYMENT OF RS. 2.52 CR ORES TO IT AND CLAIMED IT AS A DEDUCTION,THAT THE ASSESSEE HAD AGREED TO RUN THE TWO PLANTS OF TH E AAML,THAT IT AGREED TO CARRY ON ALL THE OPERATIONS OF AAML AND IT WAS ENTITLED TO 10% OF TH E OPERATING PROFIT AS ITS REMUNERATION,THAT THERE WAS ANOTHER CONDITION STATING THAT IN THE EVENT OF OPERATING PROFIT PER MONTH WAS NEGATIVE OR LESS THAN RS. 35 LAKHS, THE ASSESSEE WAS TO MAKE GOOD TO AAML SUCH AN AMOUNT AS TO GIVE AAML A MINIMUM OPERATING PROFIT OF RS. 35 LAKHS; WHERE THE OPERATING PROFIT EXCEEDED RS. 35 LAKHS BUT WAS LESS THAN RS. 40 LAKHS, 90% OF SUCH PROFITS IN EXCESS OF RS. 35 IAKHS BUT LESS THAN RS. 40 LAKHS WOULD BE UTILISED FOR RECOUPING THE AMOUNTS MADE GO OD BY THE ASSESSEE TO AAML AS COST,THAT THE AGREEMENT FURTHER STIPULATED IN THE EVENT OF OPERAT ING PROFIT FOR ANY PARTICULAR MONTH EXCEEDED RS. 40 LAKHS THE REMUNERATION TO THE ASSESSEE WOULD BE THE EXCESS OF OPERATING PROFITS OVER RS. 40 LAKHS,THAT FOR THE YEAR UNDER APPEAL THE ASSESSEE M ADE PAYMENTS REPRESENTING SHORTFALL IN THE OPERATING PROFITS OF AAML. ACCORDING TO THE AO, THE CONTRIBUTION MADE BY THE A SSESSEE ON ACCOUNT OF SHORTFALL IN THE OPERATING PROFIT OF AAML WAS NOT AN ALLOWABLE EXPENDITURE,THA T THE AGREEMENT PROVIDED FOR MAKING GOOD THE AMOUNT PAID EARLIER THEREFORE,THAT SAME COULD NOT B E CONSIDERED EXPENDITURE,THAT THE PAYMENT MADE TO AAML WAS IN THE NATURE OF CAPITAL EXPENDITURE BE CAUSE THE EXPENDITURE INCURRED WAS FOR ACQUISITION OF A SOURCE OF INCOME,THAT THERE WAS NO NEED TO MAKE ANY PAYMENT TO AAML AND THE PAYMENT DEFIED THE LOGIC. FINALLY THE AO CONCLUDED THAT THE PAYMENT MADE TO AAML WAS NOT BUSINESS EXPENDITURE. 31.1. AGAINST THE ORDER OF THE AO,ASSESSEE PREFERRED AN A PPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R HE HELD THAT,THE ASSESSEE IN TERMS OF THE AGREEMENT ENTERED INTO A COMMERCIAL TRANSACTION AND THEREBY INCURRED EXPENSES IN FIRST THREE YEARS,THAT COMMERCIAL EXPEDIENCY COMPELLED THE ASSE SSEE TO MAKE THE PAYMENT,THAT THE SUMS PAID BY THE ASSESSEE TO AAML WERE ADMISSIBLE AS DEDUCTIO N.HE DIRECTED THE AO TO ALLOW THE SAME FROM ASSESSMENT YEARS 1985-86 TO 1987-88 AND OBSERVED TH AT THE AO HAD TAXED THE SUMS RECEIVED FROM 28 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. AAML IN AYS.1989-90 AND 1990-91,THAT THE TRANSACTIO NS WITH THE AAML WERE IN THE REVENUE FIELD. 31.2. DR AND AR AGREED THAT THE ISSUE OF CONTRIBUTION TO AAML WAS DECIDED AGAINST THE AO BY THE TRIBUNAL IN THE EARLIER AY.WE FIND THE ISSUE IN QUE STION WAS DEALT BY THE TRIBUNAL FOR THE AY.1985- 86 AS UNDER: 108.WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF O F THE ASSESSEE. WE FIND THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS. 1,33,90,133/- ON ACCOU NT OF GUARANTEED PAYMENT TO AAML ON THE GROUND THAT SUCH PAYMENT WAS IN THE NATURE OF A CAPITAL PA YMENT. FURTHER, THE AGREEMENT ENTERED INTO WITH A TATA GROUP CONCERN INCURRING HUGE LOSSES COULD BE A CONDUIT TO TRANSFER THE PROFITS FROM THE ASSESSEE COMPANY TO MINIMISE THE LOSS AND THEREFORE, IS A CO LOURABLE DEVICE. HOWEVER, WE FIND THE ASSESSEE PAID THE SHORTFALL IN THE MINIMUM GUARANTEED AMOUNT IN THE INITIAL THREE YEARS AND DURING THE 4TH AND 5TH YEAR HAS EARNED MORE OPERATIVE PROFIT WHICH HAS BEEN OFFERED TO TAX. WE FIND IN THE INITIAL THREE YEARS THE ASSESSEE HAS PAID A SUM OF RS. 6.11 CRORE S WHEREAS IN THE A.YS. 1988-89, 1989-90 AND 1990- 9 1 THE ASSESSEE RECEIVED A SUM OF RS. 8.31 CRORES AND OFFERED THE SAME FOR TAXATION.THUS THERE IS A SURPLUS IN THE DEAL WITH AAML TO THE EXTENT OF RS. 2.2 CRORES FROM A.YS. 1985-86 TO 1990-91. FURTHER NOTHING HAS BEEN BROUGHT ON RECORD THAT THE AGREEME NTS ARE FALSE OR UNTRUE OR THAT THE PAYMENTS MADE ARE EXCESSIVE OR NON-GENUINE OR FALSE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE ELABORATE DISCUSSION BY THE CIT(A) ON THIS ISSUE WHILE DELETI NG THE DISALLOWANCE, WE DO NOT FIND ANY INFIRMITY I N THE SAME AND THEREFORE, THE SAME IS UPHELD. THE GRO UND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE ORDER,WE DECIDE GR OUND NO.3 AGAINST THE AO. 32. NEXT GROUND IS ABOUT PAYMENT FOR HOLIDAY PLAN AT HO TELS AS GUEST HOUSE EXPENSES. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE M ADE PAYMENTS TOWARDS HOLIDAY PLAN AT VARIOUS HOTELS.THE ASSESSEE SUBMITTED BEFORE HIM TH AT THE PAYMENTS WERE MADE TO HOTELS IN RESPECT OF ROOMS AVAILED BY THE EMPLOYEES ON HOLIDAY AND SU CH EXPENDITURE WOULD COME WITHIN THE SECOND PROVISO TO SECTION 37(4).HE OBSERVED THAT NO FIXED ROOM OR ACCOMMODATION WAS RESERVED IN A PARTICULAR HOTEL FOR A PERIOD EXCEEDING 182 DAYS AN D NO RECOVERY WAS MADE FROM THE EMPLOYEES. THE AO HELD THAT THE PAYMENTS MADE TO VARIOUS HOTEL S FOR HOLIDAY PLAN ARE COVERED BY THE PROVISIONS OF SECTION 37(4).HE MADE A DISALLOWANCE OF RS.10,799/-. 32.1. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBM ISSIONS OF THE ASSESSEE IN THIS REGARD,FAA HELD THAT THE ASSESSEE HAS RESERVED THE ROOM NIGHTS IN REPUTED HOTELS TO PROVIDE ACCOMMODATION TO ITS EMPLOYEES UNDER THE HOLIDAY PLAN,THAT THE SECON D PROVISO TO SECTION 37(4) EXCLUDED THE OPERATION OF CLAUSES (I) AND (II) IF THE GUEST HOUS E WAS MAINTAINED AS A HOLIDAY HOME THROUGHOUT THE PREVIOUS YEAR FOR THE PURPOSE OF EXCLUSIVE USE OF T HE EMPLOYEES OF THE ASSESSEE DURING THE LEAVE PERIOD OF THE EMPLOYEE IF THE EMPLOYER HAD NOT LESS THAN 100 WHOLE TIME EMPLOYEES IN THE BUSINESS OR PROFESSION CARRIED ON BY THEM,THAT IF ANY EXPEND ITURE WAS ALLOWABLE UNDER SUB-SECTIONS (1) AND (3) OF SECTION 37 BUT IF THAT EXPENDITURE RELATED T O MAINTENANCE OF A GUEST HOUSE, IT WOULD NOT BE AN ALLOWABLE DEDUCTION AND AN EXCEPTION WAS THAT WHERE THE GUEST HOUSE WAS MAINTAINED BY AN ASSESSEE HAVING MORE THAN 100 EMPLOYEES FOR THE PUR POSE OF BEING USED BY THE EMPLOYEES DURING THEIR HOLIDAYS,THAT THE HOLIDAY HOME MAINTAINED EXC LUSIVELY FOR THE EMPLOYEES WHILE THEY WERE ON LEAVE WAS NOT TREATED AS GUEST HOUSE,THAT EX PLANATION TO SECTION 3 7(4) STIPULATED THAT THE GUEST HOUSE SHOULD INCLUDE ACCOMMODATION HIRED OR RESERVED IN A HOTEL FOR A PERIOD EXCEEDING 182 DAYS,THAT THE ASSESSEE WAS NOT REQUIRED TO MAINTAIN A FIXED ROOM IN A HOTEL,THE WORDS USED IN THE EXPLANATION WERE RESERVED BY THE ASSESSEE,THAT THE ASSESSEE HAD RESERVED THE HOTEL ACCOMMODATION IN TH E FORM OF HOTEL NIGHTS THROUGHOUT THE PREVIOUS YEAR,THAT T HE SECOND PROVISO TO SECTION 37(4) DID NOT STIPULATE THAT A FIXED ROOM OR PLACE COULD ONLY QUA LIFY AS A HOLIDAY HOME,THAT THE HOLIDAY PLAN IN THE FORM OF HOTEL NIGHTS QUALIFIED FOR THE EXEMPTION IN SECOND PROVISO TO SECTION 37(4),THAT THE ASSESSEE HAD EMPLOYED MORE THAN 100 WHOLE TIME EMPL OYEES DURING THE PREVIOUS YEAR AND THE HOTELS WERE USED EXCLUSIVELY FOR THE BENEFIT OF THE EMPLOYEES WHILE ON LEAVE,THAT THE ASSESSEES CASE WAS COVERED BY THE SECOND PROVISO TO SECTION 3 7(4) AND THE EXPENDITURE INCURRED COULD NOT BE 29 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. CALLED AS EXPENDITURE INCURRED ON THE MAINTENANCE OF A GUEST HOUSE.FINALLY,HE DELETED THE ADDITION MADE BY THE AO. 32.2. BEFORE US,REPRESENTATIVES OF BOTH THE SIDES AGREED THAT ISSUE WAS COVERED AGAINST THE AO BY THE ORDER OF THE TRIBUNAL DELIVERED ON 27.02.2009(S UPRA)FOR THE AY.1985-86.WE FIND THAT IN ITS ORDER TRIBUNAL HAD HELD AS UNDER: 112.AFTER HEARING BOTH THE SIDES,WE FIND THIS ISSUE STANDS C OVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE I.T.A. NO.7083/BOM/96 O RDER DATED 27TH DECEMBER,2004 FOR THE A.Y. 1992-93.WE FIND THE TRIBUNAL IN THE SAID ORDER HAS GIVEN A FINDING THAT THE ASSESSEE SATISFIES ALL THE REQUISITE CONDITIONS AS PROVIDED IN EXPLANATION R.W. SECOND PROVISO TO SUBSE CTION (4) OF SECTION 37 AS EXISTING AT THE RELEVANT TIME AND, THEREFORE, THE ASSESSEE IS FOUND TO B E ENTITLED TO DEDUCTION.ACCORDINGLY, THE GROUND RAISED BY THE REVENUE WAS DISMISSED. RESPECTFULLY FOLLOWING THE DECISIO N OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE THIS GRO UND BY THE REVENUE IS DISMISSED. RESPECFULLY,FOLLOWING THE ABOVE,GROUND NO.4 IS DECI DED AGAINST THE AO. 33. GROUND NO.5 PERTAINS TO DIRECTION GIVEN BY THE FAA TO THE AO TO ALLOW RS. 93,306/- ON ACCOUNT OF REMUNERATION TO CHAIRMAN AND MANAGING DIRECTOR.I N THE RETURNS OF INCOME,THE ASSESSEE COMPANY HAD COMPUTED THE REMUNERATION TO CHAIRMAN A ND MANAGING DIRECTOR U/S.40(C) OF THE ACT, THAT IT HAD DISALLOWED THE REMUNERATION OVER AND AB OVE THE PERMISSIBLE LIMITS VOLUNTARILY UNDER THE SAID SECTION.ACCORDING TO THE AO, THE REMUNERATION TO CMD REQUIRED TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40A(5) OF THE ACT,TH AT THE MANAGING DIRECTOR WAS PROVIDED WITH FREE ELECTRICITY.HE QUANTIFIED THE VALUE OF THE FREE ELE CTRICITY AT RS.10,306/-.HE FURTHER OBSERVED THAT TH E CMD WAS PROVIDED ACCOMMODATION AND THE MAINTENANCE AND UPKEEP OF SUCH BUILDING WAS DONE BY THE ASSESSEE,THAT HE WAS PROVIDED A CAR BY THE ASSE SSEE,THAT THE COMPANY PROVIDED FURNITURE, AIR CONDITIONERS ETC. AT THE RESIDENCE OF THE MANAGING DIRECTOR.HE ESTIMATED THE VALUE OF THE PERQUISITES AT RS.50,000/-. 33.1. IN THE APPELLATE PROCEEDINGS,FAA HELD THAT THE ASS ESSEE HAD DENIED HAVING PROVIDED ANY FURNITURE OR AIR CONDITIONERS AT THE RESIDENCE OF T HE CMD,THAT THE POWER WAS SUPPLIED TO THE CMD FROM ITS OWN RESOURCES,THAT THE CAR WAS PROVIDED TO HIM FOR OFFICIAL PURPOSES ONLY,THAT THE ASSESSEE HAD PROVIDED ACCOMMODATION TO THE CMD BUT RENT WAS COLLECTED FROM HIM,THAT THE ASSESSEE HAD ADMITTED THAT ACCOMMODATION LET OUT TO HIM WAS MAIN TAINED BY IT,THAT THE AOS FINDINGS WERE NOT BASED ON THE EVIDENCE AND THERE WAS MERIT IN THE CO NTENTIONS OF THE ASSESSEE.FINALLY,THE ESTIMATION MADE BY THE AO TOWARDS PERQUISITES WAS DELETED . 33.2. BEFORE US,DR AND AR AGREED THAT ISSUE WAS COVERED B Y THE ORDER OF THE TRIBUNAL DELIVERED FOR THE PRECEDING AY.WE FIND THAT AT PARAGRAPH 45 OF TH E SAID ORDER MATTER WAS DECIDED AGAINST THE AO.WE ALSO FIND THAT THE FAA HAS GIVEN A CATEGORICA L FINDING OF FACT THAT CERTAIN FACILITIES WERE NOT PROVIDED TO THE CMD AND RENT WAS COLLECTED FROM HIM .THERERFORE,UPHOLDING HIS ORDER WE DECIDE GROUND NO.5 AGAINST THE AO. 34. NEXT GROUND OF APPEAL IS ABOUT CONTRIBUTION TO TATA SERVICES FOR MAINTENANCE OF HORNIMAN CIRCLE GARDENS AS AN ADVERTISING CAMPAIGN.DURING TH E ASSESSMENT PROCEEDINGS,AO FOUND THAT THE BEAUTIFICATION OF HORNIMAN CIRCLE GARDEN AND ITS SU RROUNDING OUTER CIRCLE AREA GARDEN WAS UNDERTAKEN BY THE ASSESSEE AND VARIOUS EXPENSES WER E INCURRED BY THE TATA GROUP OF COMPANIES,THAT THE ASSESSEES SHARE OF EXPENSES WAS RS.10,16,000/- FOR AY.UNDER APPEAL AND THEREAFTER THE ASSESSEE HAD INCURRED MAINTENANCE CHARGES.THE ASSES SEE SUBMITTED THAT AS A CONSIDERATION FOR CONTRIBUTION TOWARDS SUCH BEAUTIFICATION OF THE GAR DEN THE ASSESSEE ALONG WITH THE OTHER COMPANIES WAS ALLOWED TO PUT UP THEIR LOGOS IN AND AROUND THE GARDEN.THUS, THE ASSESSEE SUBMITTED BEFORE AO THAT THE EXPENDITURE WAS INCURRED ON ADVERTISEMENT CAMPAIGN,BUT,AO DID NOT ACCEPT THE SAME AND DISALLOWED THE EXPENSES. 34.1. WHILE DECIDING THE APPEAL BY THE ASSESSEE,FAA HELD THAT AN IDENTICAL ISSUE CAME FOR THE CONSIDERATION OF THE ITAT IN THE CASE OF THE ASSESS EE BEFORE BENCH A, MUMBAI FOR ASSESSMENT YEAR 1988-89 (ITA NO.3222/BOM/92),THAT ITAT HAD ALL OWED THE EXPENDITURE AS DEDUCTION BY RELYING ON THE JUDGMENT OF THE HONBLE RAJASTHAN HI GH COURT IN THE CASE OF KAMAL & CO. 203 ITR 30 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. 1038 . F OLLOWING THE JUDGMENT OF THE ITAT FOR THE A.Y. 1988 -89 IN THE CASE OF THE ASSESSEE,HE DIRECTED THE AO TO ALLOW THE ADVERTISEMENT EXPENDI TURE INCURRED BY THE ASSESSEE AS DEDUCTION. 34.2. REPRESENTATIVES OF BOTH THE SIDES AGREED THAT THE I SSUE IS COVERED BY THE ORDER OF THE TRIBUNAL FOR THE AY.1988-89.CONSIDERING THE FACTS NARRATED B Y THE FAA,WE ARE NOT INCLINED TO INTERFERE WITH HIS ORDER.GROUND NO.6 IS DECIDED AGAINST THE AO. 35. GROUNDS NO.7-9 ARE ABOUT INVESTMENT ALLOWANCE AND E XTRA SHIFT ALLOWANCE ON TOWN DIVISION, (GR.7),INVESTMENT ALLOWANCE ON P& M INSTALLED AT ST OCK YARD(GR.8)AND INVESTMENT ALLOWANCE ON VARIOUS ITEMS OF P&M(GR.9).FACTS RELATED TO THESE I SSUES HAVE BEEN ELABORATELY DISCUSSED AT PARAGR -APHS 18 TO 20.1.A OF OUR ORDER.DURING THE ASSESSME NT PROCEEDINGS,AO HAD MADE CERTAIN ADDITIONS UNDER THE HEADS INVESTMENT ALLOWANCE,EXTRA SHIFT AL LOWANCE,BUT IN THE APPELLATE PROCEEDINGS,FAA GAVE PARTIAL RELIEF TO THE ASSESSEE.AO HAS CHALLENG ED THAT PART OF HIS ORDER BEFORE US.GROUND 7 IS ABOUT ORDER OF THE FAA WHEREIN HE HAD ALLOWED INVES TMENT ALLOWANCE AND EXTRA SHIFT ALLOWANCE ON CERTAIN ITEMS P&M OF TOWN DIVISION AMOUNTING TO RS. 83.23 LAKHS.HE WAS OF THE OPINION THAT SUCH ITEMS HAD DIRECT RELATION WITH MANUFACTURING ACTIVI TIES. BEFORE US,DR AGREED THAT SIMILAR ISSUE HAD ARISEN I N THE EARLIER AY.ALSO AND THE TRIBUNAL HAD DISMISSED THE APPEAL FILED BY THE DEPARTMENT.WE FIN D THAT IDENTICAL ISSUE HAD ARISEN IN EARLIER AYS. ALSO.WHILE DEALING WITH THE ISSUE OF INVESTMENT AL LOWANCE AND EXTRA SHIFT ALLOWANCE ON TOWN DIVISION,TRIBUNAL,IN ITS ORDER FOR THE EARLIER AY.( SUPRA),HAS HELD AS UNDER : 127.FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DI SALLOWED INVESTMENT ALLOWANCE AMOUNTING TO RS. 13,45,893/- ON THE GROUND THAT THE ASSETS WERE INST ALLED AND USED IN TOWN DIVISION WHICH PROVIDED FACILITIES TO THE EMPLOYEES AND OUTSIDERS. X X X 128.IN APPEAL,THE CIT(A) FOLLOWING THE ORDERS OF TH E TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 1981-82 TO 1982-83 ALLOWED THE CLAIM OF THE ASSESSE E.AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 129.AFTER HEARING BOTH THE SIDES, WE FIND THE CIT(A ) WHILE ALLOWING THE CLAIM OF THE ASSESSEE HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSEES OW N CASE FOR THE A.YS. 1981-82 AND 1982-83. WE FIND THE TRIBUNAL VIDE I.T.A. NOS. 8116 & 8117/BOM/ 91 ORDER DATED 5 TH MARCH, 2002 HAS HELD AS UNDER: 2.12.WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE R IVAL .SUBMISSIONS IN THE LIGHT OF THE MATERIAL PRESENTED BEFORE US.THE DECISIONS RELIED ON BY THE LD.D R ARE, IN OUR OPINI ON,DISTINGUISHABLE IN FACTS,THE DECISION IN THE CASE OF A C C LTD (SUPRA) RELATES TO DEVELOPMENT REBATE AND - NOT TO ADDITIONAL DEPRECIATION. IN THE CASE OF MACHINERY M ANUFACTURING CORPN. LTD. (SUPRA), INVESTMENT ALLOWANCE ON FIRE EXTINGUISHERS AND TIME-OFFICE EQU IPMENT WAS DENIED AS IT WAS HELD THAT SUCH ITEMS ARE NOT PLANT AND MACHINERY WHICH ARE INSTALL ED FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION, MANUFACTURE OR PRODUCTION ARTICLE OR THING. IN THE CASE OF PIECO ELECTRONICS AND ELECTRONICS LTD.(SUPRA),THE INVESTMENT ALLOWANCE ON THE NEW EQU IPMENT INSTALLED IN THE CANTEEN WAS DENIED.IN TECHNICO ENTERPRISES (P) LTD. (SUPRA), IT WAS HELD THAT THE COMPUTER WAS NOT USED FOR MANUFACTURE OR PRODUCTION OF ANY ARTICLE BY THE ASSESSEE AND HE NCE THE ASSESSEE WAS NOT ENTITLED TO INVESTMENT ALLOWANCE. ON THE OTHER HAND, THE DECISIONS RELIED ON BY THE ID. COUNSEL OF THE ASSESSEE DO ASSIST THE CASE OF THE ASSESSEE. IN THE CASE OF TRIVENI TISSUE S LIMITED (SUPRA), THE HONBLE CALCUTTA HIGH COURT HAS HELD THAT THE ASSESSEE, WHO WAS MANUFACTURING T ISSUE PAPERS,WAS ENTITLED TO INVESTMENT ALLOWANCE ON MOTORS, ELECTRIC INSTALLATIONS, UNDERG ROUND CABLES,OVERHEAD CABLES AND AIR CONDITIONING MACHINES.IN THE CASE OF VISVESWARAYYA IRON AND STEEL LTD. (SUPRA) THE LOCOMOTIVES AND RAILWAY SIDINGS PROVIDED AT PLACES OF MANUFACTURING ACTIVITY FOR TRANSPORT OF ARTICLES OUT OF OR INTO FACTORY WERE HELD TO BE PLANT ENTITLED TO INVESTM ENT ALLOWANCE.WE FEEL THAT WE NEED NOT DISCUSS EACH AND EVERY CASE RELIED ON BY THE ASSESSEE, PART ICULARLY WHEN A VIEW HAS BEEN TAKEN BY THE ITAT, BOMBAY BENCH, IN A SSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1968-69 TO 1971-7 2.IN THIS ORDER DATED 13-10-1976, IT HAS BEEN HELD BY THE TRIBUNAL THAT MAIN WORKS AND THE TOWNSHIP FORMED AN 31 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. INTEGRAL PART OF THE WHOLE INDUSTRIAL COMPLEX, ONE OF WHICH CANNOT EXIST WITHOUT THE OTHER. IT HAS BEEN HELD THAT THE PLANT AND MACHINERY INSTALLED EV EN FOR PROVIDING THE NECESSARY FACILITIES TO THE EMPLOYEES WHICH DOES NOT APPARENTLY HAVE ANY CONNEC TION WITH THE MANUFACTURING ACTIVITY IS DIRECTLY NEEDED FOR THE RUNNING OF THE PRIORITY IND USTRY.WE, THEREFORE, HOLD THAT INVESTMENT ALLOWANCE IS ADMISSIBLE TO THE ASSESSEE ON THE PLAN T AND MACHINERY IN THE TOWN DIVISION,PARTICULARLY WHEN ON THE ITEMS LIKE LIGHT AND FAN INSTALLATIONS THE ASSESSEE HAD ITSELF NOT CLAIMED ANY INVESTMENT ALLOWANCE. WE, THEREFORE, HO LD THAT ADDITIONAL DEPREDATION, EXTRA SHIFT ALLOWANCE AND INVESTMENT ALLOWANCE ARE ADMISSIBLE T O THE ASSESSEE ON THE PLANT AND MACHINERY IN THE TOWN DIVISION.THEREFORE, NO INTERFERENCE IS CAL LED FOR IN THE ORDER OF THE CIT(A).THE APPEAL OF THE REVENUE FAILS ON THIS ISSUE. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE,WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ALLOWING INVES TMENT ALLOWANCE ON THE PLANT AND MACHINERY IN TOWN DIVISION.THE GROUND RAISED BY THE REVENUE IS A CCORDINGLY DISMISSED. CONSIDERING THE ABOVE,WE DECIDE GROUND NO.7 AGAISNT THE AO. 36. GROUND NO.8 DEALS WITH INVESTMENT ALLOWANCE ON P&M OF STOCK YARD.IN THE APPELLATE PROCEED- INGS,FAA ALLOWED THE APPEAL FILED BY THE ASSESSEE A ND HELD THAT THE PLANT AND MACHINERY INSTALLED BY THE ASSESSEE IN THE STOCK YARD HAD A LINK WITH T HE MANUFACTURING-PROCESS(PART OF THE OPERATIONAL INTEGRATION),WHEREAS AO WAS OF THE OPINION THAT P&M WERE INSTALLED IN STOCK YARDS AND SUCH MACHINES WERE NOT USED DIRECTLY IN THE MANUFACTURIN G PROCESS.BEFORE US,AR AGREED THAT ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN THE APPEAL FOR THE EARLIER YEAR. WE FIND THAT WHILE DECIDING THE IDENTICAL ISSUE FOR THE AY.1985-86,TRIBUNAL HAD HELD AS UNDER: 134.AFTER HEARING BOTH THE SIDES,WE FMD THE ISSUE S TANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A. NO.548/BOM/88 ORDER DATED 4.6.1993 FOR THE A.Y. 1982-83 WHEREIN THE TRIBUNAL AT PARA 4 OF THE ORDER HAS DISCUSSED THE ISSUE AND FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 1981-82 ALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF INVESTMENT ALLOWANCE ON RAIL WAY SIDINGS AT STOCK YARD.WE FIND THE TRIBUNAL VIDE ORDER DATED 15TH DECEMBER,1994 IN R.A. NO. 220 2/BOM/93 HAS DISMISSED THE REFERENCE APPLICATION BY THE DEPARTMENT.SIMILARLY WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE VIDE I.T.A.NO. 549/BOM/88 ORDER DATED 4.6. 1993 FOR THE A.Y. 19983 -84 HAS ALLOWED THE CLAIM OF INVESTMENT ALLOWANCE ON RAILWAY SIDINGS STOCK YARD AMOUNTING T O RS.6,20,602/-.WE MAY FURTHER MENTION THAT THE TRIBUNAL ALSO REJECTED THE REFERENCE APPLICATIO N FILED BY THE REVENUE IN IT A NO 677/BOM/90 RESPECTFULLY FOLLOWING THE CONSISTENT DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAI NST THE DECISION OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A)ALLOWING TH E INVESTMENT ALLOWANCE ON THE PLANT AND MACHINERY INSTALLED BY THE ASSESSEE IN THE STOCK YA RD. RESPECTFULLY,FOLLOWING THE ABOVE WE DECIDE GROUND N O.8 AGAINST THE ASSESSEE. 37. AS STATED EARLIER,DURING THE ASSESSMENT PROCEEDINGS ,AO DENIED INVESTMENT ALLOWANCE ON CERTAIN ITEMS OF ASSETS ON THE GROUND THAT THE ASSETS WERE NOT USED FOR THE PROCESS OF MANUFACTURING IRON AND STEEL AND THEY ARE IN THE NATURE OF OFFICE EQUI PMENTS COVERED BY THE PROVISO OF SECTION 31A(1) OF THE ACT.FAA HAD ALLOWED INVESTMENT ALLOWANCE ON SUCH ITEMS OF P&M THAT WERE NOT PART OF THE P&M OF TOWN DIVISION.BEFORE US,DR AND AR AGREED THA T THE TRIBUNAL HAD DECIDED THE SIMILAR ISSUE AGAINST THE AO WHILE PASSING ORDER FOR THE AY .1985-86.WE FIND THAT THE TRIBUNAL HAS HELD AS UNDER: 137.IN APPEAL, THE LEARNED CIT(A) HELD THAT INVESTM ENT ALLOWANCE IS NOT ADMISSIBLE ON THE PLANT AND MACHINERY INSTALLED IN ANY OFFICE PREMISES OR IN TH E RESIDENTIAL ACCOMMODATION.SIMILARLY INVESTMENT ALLOWANCE IS NOT ADMISSIBLE ON ANY OFFICE APPLIANCE S OR ROAD TRANSPORT VEHICLES. HOWEVER, ANY MACHINERY OR PLANT HAVING A LINK IN THE PROCESS OF THE OPERATIONAL INTEGRATION SHOULD BE TAKEN AS MACHINERY OR PLANT BELONGING TO THE MANUFACTURING P ROCESS.HE ACCORDINGLY HELD THAT INVESTMENT 32 ITA NOS. 3964 & 3981/MUM/2003 THE TATA IRON & STEEL CO . LTD. ALLOWANCE ON THE FOLLOWING PLANT AND MACHINERY HAS TO BE ALLOWED BECAUSE THEY FORM PART OF -THE OPERATIONAL INTEGRATION AND HAD LINK WITH THE MANUF ACTURING PROCESS. (RS.) (I)INTERCOM SYSTEM 14, 63,606 (II)NEW LINES FOR AUTO EXCHANGE 15,65,254 (III)REAL TIME COMPUTER 9,55,5 3 1 (IV)EQUIPMENT FOR LIGHTING SECURITY ROAD IN FACTORY IN ADITYAPUR 4,83,150 (V)WEIGH BRIDGE AT LOADING STATION 90,742 45,58,283 25% THEREON 11,39,570 138.WHILE DOING SO HE RELIED ON THE. DECISION OF TH E HONBLE RAJASTHAN HIGH COURT IN THE CASE OF TRINITY HOSPITAL, REPORTED IN 225 ITR 178 WHEREIN T HE PLANT AND MACHINERY INSTALLED IN HOSPITAL WAS FOUND TO BE ELIGIBLE FOR INVESTMENT ALLOWANCE. 139.AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 140.AFTER HEARING BOTH THE SIDES AND IN VIEW OF OUR DETAILED DISCUSSION AT GROUNDS OF APPEAL NO. 7 BY THE IMPUGNED APPEAL(PARA 130),WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) GRANTING INVESTMENT ALLOWANCE ON THE ABOVE ASSETS.THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE ORDER,WE DECIDE GR OUND NO.9 AGAINST THE AO. AS A RESULT,APPEAL FIELD BY THE ASSESSEE STANDS PAR TLY ALLOWED AND APPEAL OF THE AO IS DISMISSED. 0 1 #) 2 3 + / ! 1 4 + 56 7 #) , + # 4 + 56 . ORDER PRONOUNCED IN THE OP EN COURT ON 19 TH FEBURARY,2014 . ! + -.$ 8 9# 19 QJOJH QJOJH QJOJH QJOJH , 201 4 . + / : SD/- SD/- ( !' / AMIT SHUKLA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9# /DATE:19.02.2014. SK ! ! ! ! + ++ + ' ; ' ; ' ; ' ; <;$ <;$ <;$ <;$ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ = > , 4. THE CONCERNED CIT / = > 5. DR G BENCH, ITAT, MUMBAI / ;?/ ' # TH THTH TH , . . . 6. GUARD FILE/ / 0 (; (; (; (; ' ' ' ' //TRUE COPY// !# / BY ORDER, @ / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI