TATA IRON STEEL CO LTD, Mumbai V. DY CIT SR 34, Mumbai

ITA 3965/MUM/2003

• Counselvise Citation: 396519914 RSA 2003
• Duration Of Justice: 10 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 29-01-2014
• Assessment Year: 1987-1988
• 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: Capital asset; 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; 28; 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.3965/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1987-88 THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-400001 VS DCIT CENTRAL RANGE 34 MUMBAI. PAN: /. ITA NO.3982/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1987-88 DCIT, CIRCLE-2(2), AAYAKAR BHAVAN, R.NO. 545, 5 TH FLOOR, M.K.ROAD,MUMBAI-20 VS THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-01 PAN: /. ITA NO.3966/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1989-90 THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-400001 VS DCIT CENTRAL RANGE 34 MUMBAI. PAN: /. ITA NO.3983/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1989-90 DCIT, CIRCLE-2(2), AAYAKAR BHAVAN, R.NO. 545, 5 TH FLOOR, M.K.ROAD,MUMBAI-20 VS THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-01 PAN: /. ITA NO.3967/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1990-91 THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-400001 VS DCIT CENTRAL RANGE 34 MUMBAI. PAN: /. ITA NO.3984/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1990-91 DCIT, CIRCLE - 2(2), AAYAKAR BHAVAN, R.NO. 545, 5 TH FLOOR, M.K.ROAD,MUMBAI-20 VS THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-01 PAN: ( %& / APPELLANT) ( '(%& / RESPONDENT) 2 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3 984/MUM/2003 THE TATA IRON & STEEL CO. LTD. #) #) #) #) * * * * / ASSESSEE BY : SHRI DINESH VYAS & MILIN THAKORE + * / REVENUE BY : SHRI S.D.SRIVASTAVA # # # # + ++ + , , , , / DATE OF HEARING : 21-02-2014 -.$ + , / DATE OF PRONOUNCEMENT : 07-03-2014 # # # # , 1961 + ++ + 254 )1( / / / / ! ! ! ! ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER BENCH # # # # : CHALLENGING THE ORDER OF THE CIT(A)-II,MUMBAI ASSES SING OFFICERS(AO.S )AND THE ASSESSEE HAVE FILED CROSS APPEALS FOR THE ABOVE REFERRED THREE AY .S AS THE ISSUES INVOLVED IN THESE APPEALS ARE ALMOST IDENTICAL,SO SAME ARE BEING ADJUDICATED UPON BY A SINGLE COMMON ORDER.GROUNDS OF APPEAL FILED BY THE ASSESSEE FOR ALL THE THREE AY.SARE AS UNDER : ITA/3965/MUM/2003/-AY.1987-88: GROUND OF APPEAL NO.1{PAGE 24 OF CIT(A)S ORDER} EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS RS.98,04,701 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, EXPENDITURE ON THE SAME IS ALLOWABLE AS REVENUE EXP ENDITURE. THE LEARNED CIT (A) FURTHER ERRED IN NOT ACCEPTING APPELLANTS CONTENTION THAT EXPENSES SPEC IFICALLY ALLOWABLE ULS,30 TO 36 CAN NOT BE DISALLOW ED AS PER PROVISIONS OF SECTION 37(4) AS WELL AS THAT SECTION 37(4) IS LIMITED TO DISALLOW MAINTENANCE EXPENSES AND NOT THE RUNNING EXPENSES. GROUND OF APPEAL NO.2 {PAGE 30 OF CIT (A)S ORDER} RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER R ULE 6D - RS.10,35,637 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.3 {PAGE 31 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 6B WITH RESPECT TO CALENDAR S AND DIARIES RS .3,51,374 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.4 {PAGE 32 OF CIT (A)S ORDER} TEA AND COFFEE SERVED TO SHAREHOLDERS AT ANNUAL GEN ERAL MEETING- RS. 32,571 THE LEARNED CIT(A) ERRED IN DISALLOWING SUCH EXPENS ES ON THE GROUND THAT THEY ARE ENTERTAINMENT EXPENDITURE. GROUND OF APPEAL NO.5 {PAGE 36 OF CIT (A)S ORDER} DISALLOWANCE OF EXPENDITURE ON TEA AND COFFEE SERVE D TO VISITORS - RS. 2,25,000 THE LEARNED CIT(A) ERRED IN DISALLOWING THE EXPENDI TURE ON BEVERAGES SERVED TO VISITORS ON THE GROUND THAT THE SAME CONSTITUTES TO ENTERTAINMENT EXPENDIT URE. GROUND OF APPEAL NO.6 {PAGE 41 OF CIT (A)S ORDER} EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES OF EMPLOYEES- RS.18,3 7,532 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.7 {PAGE 44 OF CIT (A)S ORDER} PAYMENTS TO CLUBS - RS.3,42,076 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.8 {PAGE 45 OF CIT (A)S ORDER} EXPENDITURE ON FOOD AT EMPLOYEES GET-TOGETHER- RS. 2,50,000 THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF ESTIMATED EXPENDITURE OF RS. 2,50,000 ON FOOD 3 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3 984/MUM/2003 THE TATA IRON & STEEL CO. LTD. AT EMPLOYEES GET-TOGETHER AS ENTERTAINMENT EXPENDI TURE. GROUND OF APPEAL NO.9 {PAGE 49 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 40A(5)- RS. 15,00,000 THE LEARNED CIT(A) ERRED IN GIVING PARTIAL RELIEF W ITH 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.10 {PAGE 53 OF CIT (A)S ORDER} EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE - RS.3,23,050 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 AND REFERRING BACK TO THE ASSESSING OFFICER FOR VERIFICATION OF CLAIM MADE BY THE APPELLANT U/S.35D. GROUND OF APPEAL NO.11 {PAGE 78 OF CIT (A)S ORDER} DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE- RS.1, 68,99,294 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.12 {PAGE 80 OF CIT (A)S ORDER} RS.9,12,577 THE LEARNED CIT (A) ERRED IN DISALLOWING THE CONTRI BUTION ON THE GROUND THAT THEY ARE COVERED BY THE PROVISIONS OF SECTION 40A(A). GROUND OF APPEAL NO.13 {PAGE 90 OF CIT (A)S ORDER} CONTRIBUTIONS TO VARIOUS INSTITUTIONS- RS. 19,68,131 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 SCENARI O THAT ESTABLISHES NEXUS BETWEEN THE CONTRIBUTIONS MA DE AND THE BUSINESS OF THE APPELLANT. GROUND OF APPEAL NO.14 {PAGE 103 OF CIT (A)S ORDER} FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES - RS. 50,22,577 THE LEARNED CIT (A) ERRED IN DISALLOWING RS. 50,22, 577BEING FEES PAID TO THE CONSULTANTS FOR CARRYING OUT FEASIBILITY STUDIES ON THE GROUND THAT IT CONST ITUTES CAPITAL EXPENDITURE. GROUND OF APPEAL NO.15 {PAGE 108 OF CIT (A)S ORDER} IMMOVABLE ASSETS IN BHUTAN- RS. 36,27,770 THE LEARNED CIT(A) COMMITTED A GROSS ERROR IN LAW A ND ON FACTS BY ALLOWING DEPRECIATION ONLY ON THE EXPENDITURE UNDERTAKEN AND NOT ALLOWING THE SAME AS REVENUE EXPENDITURE. GROUND OF APPEAL NO.16 {PAGE 114 OF CIT (A)S ORDER} PAYMENTS IN CASH IN EXCESS OF RS. 2,500/- RS.6,35,198 THE LEARNED CIT(A) ERRED IN DISALLOWING SUCH PAYMEN TS WITHOUT CONSIDERING THE CONDITIONS UNDER WHICH THE SAME WERE MADE. GROUND OF APPEAL NO.17 {PAGES 119 TO 141 OF CIT (A)S ORDER} 1,25,13,773 THE LEARNED CIT(A) ERRED IN DISALLOWING THE INVESTM ENT ALLOWANCE ON FOLLOWING ITEMS INSTALLED IN TOWN DIVISION ON THE GROUND THAT THE SAME WERE INSTALLED IN RESIDENTIAL PREMISES AND HAD NO LINK WITH MANUFACTURING PROCESS:- INVESTMENT ALLOWANCE : RS. OTHER PLANT & MACHINERY 65,16,697 (PARTIAL ) ELECTRIC LIGHT & FAN INSTALLATIONS 10,36,044 SANITARY WORKS 1,42,36,708 TELEPHONE SYSTEMS 17,00,012 COMPUTERS 5,36,230 SURGICAL INSTRUMENTS AND MEDICAL APPLIANCES 2,58,18,342 AIR-CONDITIONING PLANT 2,11, 060 5,00,55,093 INVESTMENT ALLOWANCE @ 25% 1,25 ,13,773 GROUND OF APPEAL NO.18 {PAGE 133 OF CIT (A)S ORDER } INVESTMENT ALLOWANCE ON WATER WORKS IN TOWN DIVISIO N 47,28,309 THE LEARNED CIT (A) ERRED IN DISALLOWING EXTRA SHIF T ALLOWANCE ON THE MACHINERY EMPLOYED FOR WATER SUPPLY ON THE GROUND THAT IT IS USED AT RESIDENCES. GROUND OF APPEAL NO.19 {PAGE 143 OF CIT (A)S ORDER } INVESTMENT ALLOWANCE ON FOREIGN EXCHANGE FLUCTUATIO NS 13,75,532 THE LEARNED CIT (A) ERRED IN DISALLOWING INVESTMENT ALLOWANCE ON FOREIGN EXCHANGE FLUCTUATIONS IN 4 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3 984/MUM/2003 THE TATA IRON & STEEL CO. LTD. RESPECT OF PLANT & MACHIENRY INSTALLED DURING THE YEAR ON THE BASIS OF READING OF SECTION 43A(2), NOT CONNECTED WITH SECTION 32A IN ANY WAY. GROUND OF APPEAL NO.20 {PAGES 156 TO 162 OF CIT (A) S ORDER} DISALLOWANCE OF INVESTMENT ALLOWANCE ON VARIOUS ITE MS OF PLANT & MACHINERY 7,36,975 THE LEARNED CIT (A) ERRED IN DISALLOWING INVESTMENT ALLOWANCE ON THE GROUND THAT HOSPITAL EQUIPMENT HAS NO LINK WITH MANUFACTURING PROCESS AND OTHER MA CHINERIES WERE INSTALLED IN OFFICE:- RS. WORKS DIVISION : JEEPS AND TRAILER PUMPS FOR CONTROLLING FIRE. 2,56,104 COLLIERIES: SURGICAL INSTRUMENTS IN HOSPITAL 2,28,226 TELEPHONES 7,500 ORE MINES & QUARRIES: SURGICAL INSTRUMENTS AND MEDICAL APPLIANCES 6 9,157 WEST BOKARO COLLIERIES: SURGICAL INSTRUMENTS 3,20,184 X-RAY AND ELECTROTHERAPEUTIC APPARATUS 7,25,392 AIR-CONDITIONING :SERVICE BUILDING 5,971 500 MA X-RAY FACILITIES 63,415 STREET LIGHTING IN WORKERS COLONIES 9,72,093 TUBES DIVISION- WORKS: AIR-CONDITIONING PLANT FOR WORKS GENERAL OFFICE 86,599 AIR-CONDITIONING OF WORKS PAY COUNTER 82,000 AIR-CONDITIONING OF ACCOUNTS AND ETS EXTENSION 8 5,137 AIR-CONDITIONING FOR TEST HOUSE 46,213 29,47,901 INVESTMENT ALLOWANCE @ 25% 7,36,975 GROUND OF APPEAL NO.21 {PAGES 212 OF CIT (A)S ORDER} EXPENSES INCURRED IN CONNECTION WITH THE INCREASE I N AUTHORISED CAPITAL. RS.26,7 7,500 STHE LEARNED CIT (A) ERRED IN DISALLOWING EXPENSES INCURRED IN CONNECTION WITH THE INCREASE IN AUTHORI SED CAPITAL. GROUND OF APPEAL NO.22 {PAGES 213 OF CIT (A)S ORDER} BAD DEBTS WRITTEN OFF RS.8,90,038 THE LEARNED CIT (A) ERRED IN NOT ALLOWING DUES FROM GOVERNMENT AGENCIES ON THE GROUND THAT NO EVIDENCE WAS PRODUCED. GROUND OF APPEAL NO.23 {PAGE 116 OF CIT (A)S ORDER} EXPENDITURE INCURRED ON DARJELLING HOLIDAY HOME- RS. 7,13,192 THE LEARNED CIT(A) ERRED IN NOT CONSIDERING EXPENDI TURE OF RS. 7,13,192 INCURRED ON DARJEELING HOLIDAY HOME FOR ASSESSMENT YEAR 1987-88. GROUND OF APPEAL NO.24 DISALLOWANCE OF ANNUAL GENERAL MEETING EXPENSES- 24,528 THE LEARNED CIT(A) ERRED IN NOT CONSIDERING EXPENDI TURE AT ANNUAL GENERAL MEETING. GROUND OF APPEAL NO.25 THE LEARNED CIT(A) HAS NOT COMMITTED ERROR IN RECOR DING SOME FACTS IN HIS ORDER. THE APPELLANT CRAVES LEAVE TO PRODUCE BEFORE THE HONOURABLE ITAT CORRECT AT THE TIME OF HEARING. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEN D THE ABOVE GROUNDS OF APPEAL. ITA/3966/MUM/2003/-AY.1989-90: GROUND OF APPEAL NO.1{PAGE 17 OF CIT(A)S ORDER} RECEIPT OF RS. 3,68,79,085 FROM AHMEDABAD ADVANCE M ILLS- RS.98,04,701 THE APPELLANT STATES THAT THE RECEIPT OF RS. 3,68,7 9,085 FROM AHMEDABAD ADVANCE MILLS SHOULD NOT BE TAXED IF THE CORRESPONDING PAYMENTS FROM ASSESSMENT YEARS 1985-86, 1986-87 AND 1987-88 ARE HELD ON CAPITAL ACCOUNT BY THE INCOME-TAX APPELLATE TRIBUNA L ON APPEAL BY THE INCOME-TAX DEPARTMENT. SINCE THE PAYMENTS, IF DISALLOWED, THE RECEIPTS SHOULD NO T BE TAXED. GROUND OF APPEAL NO.2{PAGE 24 OF CIT(A)S ORDER} 5 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3 984/MUM/2003 THE TATA IRON & STEEL CO. LTD. EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS RS.1,42,65,802 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, EXPENDITURE ON THE SAME IS ALLOWABLE AS REVENUE EXP ENDITURE. THE LEARNED CIT (A) FURTHER ERRED IN NOT ACCEPTING APPELLANTS CONTENTION THAT EXPENSES SPEC IFICALLY ALLOWABLE ULS,30 TO 36 CAN NOT BE DISALLOW ED AS PER PROVISIONS OF SECTION 37(4) AS WELL AS THAT SECTION 37(4) IS LIMITED TO DISALLOW MAINTENANCE EXPENSES AND NOT THE RUNNING EXPENSES. GROUND OF APPEAL NO.3 {PAGE 30 OF CIT (A)S ORDER} RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER R ULE 6D - RS.9,53,502 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.4 {PAGE 31 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 6B WITH RESPECT TO CALENDAR S AND DIARIES - RS.2 ,21,294 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.5 {PAGE 34 OF CIT (A)S ORDER} DISALLOWANCE OF ANNUAL GENERAL MEETING EXPENSES- RS. 79,247 THE LEARNED CIT(A) ERRED IN TREATING EXPENDITURE AT ANNUAL GENERAL MEETING IN THE NATURE OF ENTERTAINMENT EXPENDITURE, HENCE DISALLOWING THE SA ME. GROUND OF APPEAL NO.6 {PAGE 36 OF CIT (A)S ORDER} DISALLOWANCE OF EXPENDITURE ON TEA AND COFFEE SERVE D TO VISITORS U/S. 37(2A) - RS. 2,2 5,000 THE LEARNED CIT(A) ERRED IN DISALLOWING THE EXPENDI TURE ON BEVERAGES SERVED TO VISITORS ON THE GROUND THAT THE SAME CONSTITUTES TO ENTERTAINMENT EXPENDIT URE. GROUND OF APPEAL NO.7 {PAGE 41 OF CIT (A)S ORDER} EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES OF EMPLOYEES- RS.38,1 4,314 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.8 {PAGE 44 OF CIT (A)S ORDER} PAYMENTS TO CLUBS - RS.21,75,252 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.9 {PAGE 45 OF CIT (A)S ORDER} EXPENDITURE ON FOOD AT EMPLOYEES GET-TOGETHER- RS. 23,34,755 THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF ESTIMATED EXPENDITURE OF RS. 2,50,000 ON FOOD AT EMPLOYEES GET-TOGETHER AS ENTERTAINMENT EXPENDI TURE. GROUND OF APPEAL NO.10 {PAGE 53 OF CIT (A)S ORDER} EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE ISSUE- RS.26,55,192 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 AND REFERRING BACK TO THE ASSESSING OFFICER FOR VERIFICATION OF CLAIM MADE BY THE APPELLANT U/S.35D. GROUND OF APPEAL NO.11 {PAGE 78 OF CIT (A)S ORDER} DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE- RS.1, 81,00,762 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.12 {PAGE 90 OF CIT (A)S ORDER} CONTRIBUTIONS TO VARIOUS INSTITUTIONS IN JAMSHEDPUR - RS. 49,96,503 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 SCENARI O THAT ESTABLISHES NEXUS BETWEEN THE CONTRIBUTIONS MA DE AND THE BUSINESS OF THE APPELLANT. GROUND OF APPEAL NO.13 {PAGE 93 OF CIT (A)S ORDER} FOREIGN TRAVEL EXPENSES - RS.7,00,000 THE LEARNED CIT (A) ERRED IN DISALLOWING FOREIGN TR AVEL EXPENSES ON THE GROUND THAT NO EVIDENCE WAS PRODUCED IN SUPPORT OF THE EXPENSES BEING REVENUE I N NATURE. GROUND OF APPEAL NO.14 {PAGE 103 OF CIT (A)S ORDER} 6 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3 984/MUM/2003 THE TATA IRON & STEEL CO. LTD. FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES - RS. 1,17,23,330 THE LEARNED CIT (A) ERRED IN DISALLOWING RS. 1,17,2 3,330 BEING FEES PAID TO THE CONSULTANTS FOR CARRYING OUT FEASIBILITY STUDIES ON THE GROUND THAT IT CONST ITUTES CAPITAL EXPENDITURE. GROUND OF APPEAL NO.15 {PAGE 114 OF CIT (A)S ORDER} PAYMENTS IN CASH IN EXCESS OF RS. 2,500/- RS.1,91,641 THE LEARNED CIT(A) ERRED IN DISALLOWING PAYMENTS IN EXCESS OF RS. 2,500 WITHOUT CONSIDERING THE SPECIA L SITUATION IN WHICH SUCH PAYMENTS WERE MADE. GROUND OF APPEAL NO.16 {PAGE 115 OF CIT (A)S ORDER} ADHOC DISALLOWANCE UNDER RULE 6D IN RESPECT OF TRAV ELLING EXPENSES OF OUTSIDERS ETC. RS.4,0 0,000 THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADHOC DIS ALLOWANCE OF RS. 4,00,000 IN RESPECT OF TRAVELLING EXPENSES OF AUDITORS, CONSULTANTS, FOREIGN TECHNICI ANS ETC. GROUND OF APPEAL NO.17 {PAGE 116 OF CIT (A)S ORDER} EXPENDITURE INCURRED ON DARJELLING HOLIDAY HOME- RS. 2,64,301 THE LEARNED CIT(A) ERRED IN TREATING DARJEELING HOL IDAY HOME AS GUEST HOUSE REJECTING APPELLANTS CONTENTION THAT THE SAME IS COVERED BY THE SECOND P ROVISO TO SECTION 37(4) HENCE NOT TO BE TREATED AS A GUEST HOUSE. GROUND OF APPEAL NO.18 {PAGES 119 TO 141 OF CIT (A)S ORDER} DISALLOWANCE OF INVESTMENT ALLOWANCE ON TOWN DIVISI ON ASSETS- 26,,46,095 THE LEARNED CIT(A) ERRED IN DISALLOWING THE INVESTM ENT ALLOWANCE ON TOWN DIVISION ASSETS ON THE GROUND THAT THEY ARE NOT PART OF AN INDUSTRIAL UNDE RTAKING AND NOT PLAY A ROLE IN THE MANUFACTURING PROCESS:- RS. SURGICAL INSTRUMENTS & MEDICAL APPLIANCES- 11,58,5 53 X-RAY & THERAPEUTIC APPARATUS 4,00,093 PUMPS 28,949 ELECTRIC LIGHT & FAN INSTALLATION 2,86,055 COMPUTERS 2,59,088 SANITARY WORKS 52,58,499 OTHER PLANT & MACHINERY 58,39,238 TOTAL 1,32,30,475 INVESTMENT ALLOWANCE @ 25% 26,46,095 GROUND OF APPEAL NO.19 {PAGE 143 OF CIT (A)S ORDER } INVESTMENT ALLOWANCE ON FOREIGN EXCHANGE FLUCTUATIO NS 20,43,424 THE LEARNED CIT (A) ERRED IN DISALLOWING INVESTMENT ALLOWANCE ON FOREIGN EXCHANGE FLUCTUATIONS IN RESPECT OF PLANT & MACHIENRY INSTALLED DURING THE Y EAR ON THE BASIS OF READING OF SECTION 43A(2), NOT CONNECTED WITH SECTION 32A IN ANY WAY. GROUND OF APPEAL NO.20 {PAGES 162 TO 167 OF CIT (A) S ORDER} DISALLOWANCE OF INVESTMENT ALLOWANCE ON VARIOUS ITE MS OF PLANT & MACHINERY 15,07,719 THE LEARNED CIT (A) ERRED IN DISALLOWING INVESTMENT ALLOWANCE CERTAIN ASSETS ON THE GROUND THAT THEY WERE INSTALLED IN OFFICE AND THEY DO NOT HAVE ANY C ONNECTION WITH THE MANUFACTURING PROCESS:- RS. WORKS DIVISION : TRAINING EQUIPMENT AT TRAINING INSTITUTE. 1,6 3,410 TRAINING EQUIPMENT AT TECHNICAL INSTITUTE. 3,74 ,060 TELEPHONE SYSTEMS 8,15,169 7,500 ORE MINES & QUARRIES: X-RAY AND ELECTRO THERAPEUTIC APPARATUS 147,48 5 WEST BOKARO: HOSPITAL EQUIPMENT 38,471 AIRCRAFTS 60,00,000 75,38,595 GROUND OF APPEAL NO.21 {PAGE 174 OF CIT (A)S ORDER } RIGHTS SHARE ISSUE EXPENSES 75,60,825 THE LEARNED CIT (A) ERRED IN TREATING EXPENSES INCU RRED ON RIGHTS SHARE ISSUE AS CAPITAL IN NATURE. 7 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3 984/MUM/2003 THE TATA IRON & STEEL CO. LTD. GROUND OF APPEAL NO.22 {PAGE 216 OF CIT (A)S ORDER } CONTRIBUTION TO IIT, KHARAGPUR 3,00,000 THE LEARNED CIT (A) ERRED IN DISALLOWING CONTRIBUTI ON PAID TO IIT ON THE GROUND THAT THE SAME WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. GROUND OF APPEAL NO.23 {PAGE 217 OF CIT (A)S ORDER } CONTRIBUTIONS RANKING AS BUSINESS EXPENDITURE 50,82,18 5 THE LEARNED CIT (A) ERRED IN HOLDING UP THE DISALLO WANCE ON THE GROUND THAT IT IS A NON-BUSINESS EXPENDITURE AND SETTING IT ASIDE TO THE ASSESSING O FFICER TO ASCERTAIN ITS ADMISSIBILITY U/S. 80G. GROUND OF APPEAL NO.24 {PAGE 218 OF CIT (A)S ORDER } RESTRICTION OF DEDUCTION U/S. 80M 3,17,90,663 THE LEARNED CIT (A) ERRED IN RESTRICTING THE DEDUCT ION U/S.80M BY NOT TAKING COGNIZANCE OF PROCEEDS OF RIGHTS SHARE ISSUE DUE TO WHICH INVESTMENT IN UNITS WAS MADE. GROUND OF APPEAL NO.25 THE LEARNED CIT(A) HAS NOT COMMITTED ERROR IN RECOR DING SOME FACTS IN HIS ORDER.THE APPELLANT CRAVES LEAVE TO PRODUCE BEFORE THE HONOURABLE ITAT CORRECT AT THE TIME OF HEARING. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEN D THE ABOVE GROUNDS OF APPEAL. ITA/3967/MUM/2003/-AY.1990-91: GROUND OF APPEAL NO.1{PAGE 17 OF CIT(A)S ORDER} RECEIPT OF RS. 4,37,97,762 FROM AHMEDABAD ADVANCE M ILLS. THE APPELLANT STATES THAT THE RECEIPT OF RS. 4,37,9 7,762 FROM AHMEDABAD ADVANCE MILLS SHOULD NOT BE TAXED IF THE CORRESPONDING PAYMENTS FROM ASSESSMENT YEARS 1985-86, 1986-87 AND 1987-88 ARE HELD ON CAPITAL ACCOUNT BY THE INCOME-TAX APPELLATE TRIBUNA L ON APPEAL BY THE INCOME-TAX DEPARTMENT. SINCE THE PAYMENTS, IF DISALLOWED, THE RECEIPTS SHOULD NOT BE TAXED. GROUND OF APPEAL NO.2{PAGE 24 OF CIT(A)S ORDER} EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS RS.1,64,54,159 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 37(4) AS WELL AS THAT SECTION 37(4) IS LIMITED TO DISALLOW MAINTENANCE EXPENSES AND NOT THE RUNNING EXPENSES. GROUND OF APPEAL NO.3 {PAGE 30 OF CIT (A)S ORDER} RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER R ULE 6D - RS.9,53,502 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.4 {PAGE 31 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 6B WITH RESPECT TO CALENDAR S AND DIARIES- RS.5,78,999 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.5 {PAGE 34 OF CIT (A)S ORDER} DISALLOWANCE OF ANNUAL GENERAL MEETING EXPENSES- RS. 65,944 THE LEARNED CIT(A) ERRED IN TREATING EXPENDITURE AT ANNUAL GENERAL MEETING IN THE NATURE OF ENTERTAINMENT EXPENDITURE, HENCE DISALLOWING THE SA ME. GROUND OF APPEAL NO.6 {PAGE 36 OF CIT (A)S ORDER} DISALLOWANCE OF EXPENDITURE ON TEA AND COFFEE SERVE D TO VISITORS U/S. 37(2A) - RS. 35,395 THE LEARNED CIT(A) ERRED IN DISALLOWING THE EXPENDI TURE ON BEVERAGES SERVED TO VISITORS ON THE GROUND THAT THE SAME CONSTITUTES TO ENTERTAINMENT EXPENDITURE. GROUND OF APPEAL NO.7 {PAGE 41 OF CIT (A)S ORDER} EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES OF EMPLOYEES- RS.66,2 6,495 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.8 {PAGE 44 OF CIT (A)S ORDER} 8 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3 984/MUM/2003 THE TATA IRON & STEEL CO. LTD. DISALLOWANCE OF EXPENDITURE ON PAYMENTS MADE TO CLU BS- RS.38 ,01,992 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.9 {PAGE 53 OF CIT (A)S ORDER} EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE ISSUE- RS.5,98,59,846 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 AND REFERRING BACK TO THE ASSE SSING OFFICER FOR VERIFICATION OF CLAIM MADE BY THE APPEL LANT U/S.35D. GROUND OF APPEAL NO.10 {PAGE 10 OF CIT (A)S ORDER} DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE- RS.2, 03,14,152 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.11 {PAGE 80 OF CIT (A)S ORDER} CONTRIBUTION TO TATA SPORTS CLUB RS. 2,34,1 55 THE LEARNED CIT(A) ERRED IN HOLDING THAT CONTRIBUTI ON OF TATA SPORTS CLUB IS COVERED BY THE PROVISIONS OF SECTION 40A(A). GROUND OF APPEAL NO.12 {PAGE 90 OF CIT (A)S ORDER} CONTRIBUTIONS TO VARIOUS INSTITUTIONS IN JAMSHEDPUR - RS. 34,48,101 THE LEARNED CIT (A) ERRED IN DISALLOWING CONTRIBUTI ONS TO INSTITUTIONS ON THE GROUND THAT SUCH EXPENDI TURE WAS NOT INCURRED FOR THE PURPOSES OF THE BUSINESS, HAVING FAILED TO UNDERSTAND THE SCENARIO THAT ESTAB LISHES NEXUS BETWEEN THE CONTRIBUTIONS MADE AND THE BUSINE SS OF THE APPELLANT. GROUND OF APPEAL NO.13 {PAGE 104 OF CIT (A)S ORDER} FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES - RS. 13,98,349 THE LEARNED CIT (A) ERRED IN DISALLOWING RS. 13,98, 349 BEING FEES PAID TO THE CONSULTANTS FOR CARRYING OUT FEASIBILITY STUDIES ON THE GROUND THAT IT CONSTITUT ES CAPITAL EXPENDITURE. GROUND OF APPEAL NO.14 {PAGE 115 OF CIT (A)S ORDER} RS. 5,00,000 THE LEARNED CIT (A) ERRED IN DISALLOWING THE ADHOC AMOUNT OF RS. 5,00,000 UNDER RULE 6D IN RESPECT OF TRAVELLING EXPENSES OF AUDITORS, TECHNICIANS, CONSU LTANTS ETC. GROUND OF APPEAL NO.15 {PAGE 116 OF CIT (A)S ORDER} EXPENDITURE INCURRED ON DARJELLING HOLIDAY HOME- RS. 3,05,717 THE LEARNED CIT(A) ERRED IN TREATING DARJEELING HOL IDAY HOME AS GUEST HOSUE REJECTING APPELLANTS CONTENTION THAT THE SAME IS COVERED BY THE SECOND P ROVISO TO SECTION 37(4) HENCE NOT TO BE TREATED AS A GUEST HOUSE. GROUND OF APPEAL NO.16 {PAGES 119 TO 141 OF CIT (A)S ORDER} DISALLOWANCE OF INVESTMENT ALLOWANCE ON TOWN DIVISI ON- 30,03,312 THE LEARNED CIT(A) ERRED IN DISALLOWING THE INVESTM ENT ALLOWANCE ON EQUIPMENT INSTALLED IN TOWN DIVISION ON THE GROUND THAT THEY HAVE NO LINK WITH THE MANUFACTURING PROCESS. THE LEARNED CIT(A) FURTH ER ERRED IN NOT GRATING INVESTMENT ALLOWANCE ON COMPUT ERS ON THE GROUND THE SAME WERE INSTALLED IN OFFICE :- RS. PLANT & MACHINERY (WATER WORKS) (PARTIAL) 1,40,53,604 PUMPS 25,075 COMPUTERS 6,21,669 SURGICAL & MEDICAL EQUIPMENT 3,16,212 TOTAL 1,50,16,560 INVESTMENT ALLOWANCE @ 25% 30,0 3,312 THE LEARNED CIT (A) ERRED IN NOT FOLLOWING THE JUDG MENTS OF THE HONBLE MUMBAI INCOME-TAX APPELLATE TRIBUNAL IN THE APPELLANTS OWN CASE FOR THE ASSESS MENT YEARS 1981-82 AND 1982-83 ON IDENTICAL ISSUES. GROUND OF APPEAL NO.17 {PAGES 167 TO 169 OF CIT (A) S ORDER} DISALLOWANCE OF INVESTMENT ALLOWANCE ON VARIOUS ITE MS OF PLANT & MACHINERY 27,25,433 THE LEARNED CIT (A) ERRED IN NOT GETTING INVESTMENT ALLOWANCE ON THE FOLLOWING ASSETS NOT CONSIDERING THE WIDER CONNOTATION OF WORDS MANUFACTURE OR PR ODUCTION ON THE GROUND THAT THE MACHINERY INSTALLED HAS NO LINK WITH THE MANUFACTURING PROCES S:- 9 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3 984/MUM/2003 THE TATA IRON & STEEL CO. LTD. RS. WORKS : COMPUTERS : PRINTER FOR TELECOMMUNICATION DEPARTMENT. 2,7 3,765 CAD SYSTEM FOR CENTRAL ENGINEERING DEPARTMENT 3, 02,000 ORE MINES & QUARRIES: COMPUTER SYSTEM 28,29,891 JHARIA COLLIERIES: EQUIPMENT IN THE TRAINING INSTITUTE 3,33,159 WEST BOKARO COLLIERIES: HOSPITAL EQUIPMENT 8,87,296 VARIOUS OTHER ITEMS 14,59,581 SALES & STOCKYARDS: COMPUTER SYSTEMS 75,41,471 1,36,27,163 INVESTMENT ALLOWANCE @ 25% 27,25,433 GROUND OF APPEAL NO.18 {PAGE 174 OF CIT (A)S ORDER} RIGHTS SHARE ISSUE EXPENSES RS. 17,47,221 THE LEARNED CIT(A) ERRED IN TREATING EXPENSES INCUR RED ON RIGHTS SHARE ISSUE AS CAPITAL IN NATURE. GROUND OF APPEAL NO.19 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. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEN D THE ABOVE GROUNDS OF APPEAL. GROUNDS RAISED BY THE AO FOR THE SAME AY.S READ AS UNDER: ITA/3982/MUM/2003/-AY.1987-88: 1. 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. 192,06,869/- AS DED UCTION 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 CONTRIBU TION 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. 2,24,54 ,561/- 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 CITIA I HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 84,045/- 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. 92,068/- 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.62,500/ ON ACCOUNT O F CONTRIBUTION TO TATA SERVICES FOR MAINTENANCE HORNIMAN CIRCLE GARDENS AS AN ADVERTISEMENT CAMPAIG N. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 1,43,92,223/- ON AC COUNT OF INVESTMENT ALLOWANCE. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 2,14,659/- ON ACCOU NT 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. SIGNATURE DRANBYER, PORTABLE OSCILLOSCOPE, TROLLY, COMPUTER SYSTEM, TELEPHONE SYSTEM, MICROPROCESSOR BASED COMPUTER SYSTEM, WEIGH BRIDGE/ WEIGH MACHINE, LIGHT FITTINGS, OVERHEAD 10 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. LINES, CABLING OVERHEAD, NELCO 5000 (COMPUTER) & AC ETC. IN VARIOUS DIVISIONS AS DISCUSSED BY THE CIT(A) IN PARA 40 OF HIS ORDER. 10. 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. 68,03,577/- ON ACCO UNT OF FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES. 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 T O AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA/3983/MUM/2003/-AY.1989-90: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 6,03,06,370/- AS DE DUCTION ON ACCOUNT OF PROVISION FOR LEAVE SALARIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW 20% OF INITIAL CONTRIBU TION 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 A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 95,544/- ON ACCOUNT OF PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE EXPENSES. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 50,000/- TON ACCOUN T OF CONTRIBUTION TO TATA SERVICES FOR MAINTENANCE OF HORNIMAN CIRCLE OF GARDENS AS AN ADVERTISING CAM PAIGN. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO EXCLUDE THE SALES TAX, EXCISE DUTY ETC. FROM THE TOTAL TURNOVER FOR THE PURPOSE OF CALCULATING DEDUCTION U/S. 80HHC. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 83,87,445/- ON ACCOUNT OF INVESTM ENT ALLOWANCE. 7. ON THE FACTS AND 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. COMPUTERS, OSCILLOSCOPE, WATER COOLING PLANTS, TELEPHONE SYSTE MS, PLANT & MACHINERY, ELECTRICAL MACHINERY, RAILWAY SIDERS, WEIGH BRIDGE & STORAGE TANKS ETC. I N VARIOUS DIVISIONS AS DISCUSSED BY THE CIT(A) IN PARA-40 OF HIS ORDER. 8. ON THE FACTS 2ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 125,00,000/- ON ACCOUN T OF EXPENDITURE ON REPAIRS. 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 T O AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA/3984/MUM/2003/-AY.1990-91: 1. 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. 6,12,80,864/- AS DE DUCTION ON ACCOUNT OF PROVISION FOR LEAVE SALARIES. 2. ON THE FACTS AND III THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW 20% OF INITIAL CONTRIBU TION 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 A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO. TO ALLOW RS. 1,38,523/- ON ACCOUN T OF PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE EXPENSES. 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 EXCLUDE THE SALES TAX, EXCISE DUTY ETC. FROM THE TOTAL TURNOVER FOR THE PURPOSE OF CALCULATING DEDUCTION U/S. 8OHHC. 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. 83,80,684/- ON ACCO UNT OF INVESTMENT ALLOWANCE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW INVESTMENT ALLOWANCE ON C OMPUTER SYSTEMS ETC. IN VARIOUS DIVISIONS AS 11 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. DISCUSSED BY THE CIT(A) IN PARA 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 T O AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. FROM THE ABOVE IT IS CLEAR THAT MOST OF THE ISSUE A RE COMMON FOR ALL THE THREE AY.S FOR SAKE OF CONVENIENCE,WE ARE ARRANGING THEM IN A TABULAR FORM : ISSUE GROU ND NO (G.) & AY. APPEALS BY THE ASSESSEE EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS G.1 -1987-88,G.2-1989-90,90-91 GUEST HOUSE EXPENSES CONSIDERED UNDER RULE 6D G.2- 1987-88,G.3-1989-90,90-91 DISALLOWANCE UNDER RULE 6B OF THE RULES,FOR CALENDA RS AND DIARIES G.3-1987-88,G.4-1989-90,90-91 DISALLOWANCE OF AGM EXPENSES OF THE SHAREHOLDERS G. 4-1987-88,G.5-1989-90,90-91 DISALLOWANCE OF EXPENDITURE ON TEA AND COFFEE:(VISI TORS) G.5-1987-88,G.6-1989-90,90-91 EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES G. 6-1987-88,G.7-1989-90,90-91 DISALLOWANCE OF EXPENDITURE ON PAYMENTS MADE TO CLU BS G.7-1987-88,G.8-1989-90,90-91 EXPENDITURE INCURRED ON EMPLOYEESGET-TOGETHERS G.8-1987-88,G.9 -1989-90. DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE G.11-1987-88,89-90,G.10-1990-91 CONTRIBUTIONS TO STEEL PLANTS SPORT BOARD AND TATA SPORTS BOARD G.12-1987-88,G.11-1990-91 CONTRIBUTIONS T O VARIOUS INSTITUTIONS AT JAMSHEDPUR G.13 - 1987 - 88,G.12 - 1989 - 90,90 - 91 FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES G. 14-1987-88,89-90,G.13-1990-91 PAYMENTS IN CASH IN EXCESS OF R S.2,500/ - G.16 - 1987 - 88,G.15 - 1989 - 90 INVESTMENT ALLOWANCE ON TOWN DIVISION ASSETS G.17-8 7/88,G.18-89/90,G.16-90/91 INVESTMENT ALLOWANCE ON FOREIGN EXCHANGE FLUCTUATIO N G.19-1987-88,89-90. INVESTMENT ALLOWANCE ON VARIOUS ITEMS OF PLANT AND MACHINERY G.20 - 1987 - 88,89 - 90,G.17 - 1990 - 91 RIGHT SHARE ISSUE EXPENSE G.21-1987-88,89-90,G.18-1990-91 RECEIPT FROM AHMEDABAD ADVACNE MILLS G.1 - 1989 - 90,90 - 91. EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE G.10-19 89-90,G.9-1990-91 EXCLUSIVE GROUNDS FOR AY.1987-88 DISALLOWANCE UNDER RULE 40A (5) IN RESPECT OF DEEMED PERQUISITES G.9 EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE G.10 DISALLOWANCE OF INV.ALLOWANCE AND ESA ON WATER WORKS G.18 BAD AND DOUBTFUL WRITTEN OFF DUES FROM GOVERNMENT D EPARTMENTS G.22 DISALLOWANCE OF AGM G.24 EXCLUSIVE GROUNDS F OR AY.1989 - 90 CONTRIBUTION OF IIT KHARGARPUR G.22-1988-89 CONTRIBUTIONS RANKING AS BUSINESS EXPENDITURE G.23- 1989-90 DEDUCTION U/S.80M G.24-1989-90 APPEALS BY THE AO PROVISION FOR LEAVE SALARY G.1-1987-88,1989-90,90-91 20% OF INITIAL CONTRIBUTION TO APPROVED SUPERANNUA TION FUND. G.2-1987-88,1989-90,90-91 PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE E XPENSES G.3-1987-88,G.4-1989-90,90-91 INVESTMENT ALLOWANCE & EXTRA SHIFT ALLOWANCE ON TOW N DIVISION G.7-1987-88,G.6-89-90,G.5-90-91 INVESTMENT ALLOWANCE ON VARIOUS ITEMS OF PLANT & MA CHINERY G.9-1987-88,G.7-89-90,G.6.90-91 MAINTENANCE OF HORNIMAN CIRCLE GARDENS G.6-87-88,G. 4-89-90. INVESTMENT ALLOWANCE ON PLANT & MACHINERY OF STOCK YARD G.8-1987-88. DEDUCTION ON ACCOUNT OF GUARANTEED PAYMENT TO AAML. G.3-1987-88. REMUNERATION TO CHAIRMAN AND MANAGING DIRECTOR G.5 - 1987 - 88. EXPENDITURE ON FEES TO CONSULTANTS FOR FEASIBILITY STUDIES G.10-1987-88. EXCLUSION OF SALES TAX,EXCISE DUTY FOR 80HHC DEDUCT ION G.5-1989-90,G.4-1990-91 EXPENDITURE ON REPAIRS G.8-1989-90. 12 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. D URING THE COURSE OF HEARING BEFORE US,AUTHRORISED R EPRESENTATIVE(AR)OF THE ASSESSEE DID NOT PRESS GROUNDS NO.15,23 AND 25 FOR THE AY.1987-88,GR OUNDS NO.13,16,17,AND 25 FOR THE AY. 1989-90, AND GROUNDS NO.14,15 AND 19 FOR THE AY.199 0-91,HENCE,SAME STAND DISMISSED AS NOT PRESSED. 2. ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURING AND SALE OF IRON AND STEEL MATERIALS.DETAILS OF DATES OF FILING OF RETURNS,INC OMES RETURNED,DATES OF ASSESSMENT,ASSESSED INCOMES,DATES OF ORDERS OF THE CIT(A)CAN BE SUMMARI SED AS UNDER : AY. DTS.OF FILING OF RETURN RETURNED INCOME (RS.) DATES OF ASSESSMENT ASSESSED INCOME DT. OF ORDERS OF CIT(A) 1987-88 31.07.1987 17,76,36,040/- 30.03.1990 23,48, 31,360/- 21.02.2003 1989 - 90 29.12.1989 46,80,30,490/ - 31.03.1992 18,46,78,860/ - 21.02.2003 1990 - 91 31.12.1990 47,82,54,150/ - 15.03.1993 60,09,78,460 21.02.2003 ITA/3965,3966 AND 3967/MUM/2003/-AY.1987-88,1989-90 AND 1990-91: 3. FIRST WE WOULD TAKE UP THE APPEALS FILED BY THE ASS ESSEE.FIRST COMMON GROUND OF APPEAL IS ABOUT EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS.AMO UNTS INVOLVED FOR THE AY.S1987-88,1989- 90,1990-91ARE RS.98.04 LAKHS,RS.1.42 CRORES AND RS. 1.64 CRORES RESPECTIVELY.AO.S HAD DISALLOW -ED THE SAID EXPENDITURE U/S.37(4)OF THE ACT AND TH E FAA CONFIRMED THEIR ORDERS. BEFORE US,AR CONCEDED THAT ISSUE WAS DECIDED AGAINS T THE ASSESSEE,BY THE ORDER OF THE TRIBUNAL FOR THE AY.1986-87(ITA/3964/MUM/2003 AND ITA/3980/M UM/2003-DATED.19.02.2014).WE FIND THAT ISSUE WAS DISMISSED,AS SAME WAS NOT PRESSED FO R THE LAST AY.FOLLOWING THE ORDER FOR THAT YEAR, WE DECIDE G.1 FOR AY.1987-88 AND G.2 FOR 1989 -90 AND 1990-91 AGAINST THE ASSESSEE. 4. G.2/3 FOR THE AY.S1987-88 AND 1989-90,90-91 DEALS W ITH RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER RULE 6D OF THE INCOME-TAX RULES,19 62(RULES),AMOUNTING TO RS.10.35 LAKHS,9.53 LAKHS AND 8.53 LAKHS,RESPECTIVELY FOR THE SAID AY.S DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESSEE MAINTAINED GUEST HOUSES AT JAMSHE DPUR MINES AND COLLIERIES, AND KHARAGPUR,THAT IT COLLECTED SERVICE CHARGES FOR PROVIDING LODGING OR BOARDING AND LODGING TO THE SUPPLIERS AND BUSINESS ASSOCIATES,THAT IN THE CASE OF THE EMPLOYE ES A BOOK ENTRY WAS PASSED,THAT THE ASSESSEE HAD DEBITED THE EXPENDITURE INCURRED ON THE EMPLOYEES I N RESPECT OF SERVICE CHARGES I.E, LODGING OR BOARDIHG AND LODGING CHARGES TO THE TRAVELLING EXPE NSES ACCOUNT AND CREDITED TO THE GUEST HOUSE EXPENSES ACCOUNT,THAT IT DID NOT RECOVER ANY SUM FR OM 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 RECOVERY 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 37(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 ACCOUNT AND CREDITED THE SAME TO GUEST HOUSE EXPENS ES ACCOUNT,THAT THE ASSESSEE HAD QUANTIFIED 13 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. THE DISALLOWANCE UNDER RULE 6D FOR ALL THE THREE AY .S,THAT THE AMOUNT ALLOWABLE UNDER RULE 6D WOULD GET REDUCED IN A CASE WHERE THE LODGING OR BO ARDING AND LODGING WERE PROVIDED,THAT THE NOTIONAL RECOVERIES ATTRIBUTABLE TO EMPLOYEES IN RE SPECT OF THE GUEST HOUSE HAD BEEN RIGHTLY NOT ALLOWED AS REDUCTION FROM THE GUEST HOUSE EXPENSES BY THE AO.FINALLY,DISALLOWANCE MENTIONED ABOVE WAS UPHELD BY THE FAA. 4.2. BEFORE US,REPRESENTATIVES OF BOTH THE SIDES AGREED THAT ISSUE IN COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DELIVERED FO R THE AY.1986-87(SUPRA).WE FIND THAT ISSUE OF RECOVERY OF GUEST HOUSE EXPENSES HAS BEEN DEALT BY THE TRIBUNAL FOR THE PREVIOUS AY AS UNDER: 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 ISS UE 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 TH E SITUATION OF NON-EXISTENCE OF THE GUEST HOUSE OF THE COMPANY IN THAT PLACE, THEN, SUC H EMPLOYEES WOULD HAVE 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 HOUSE FACILITIES PROVIDED BY THE COMPANY TO THE EMP LOYEES OF THE COMPANY IN CONNECTION WITH DISCHARGE OF THEIR OFFICIAL DUTIES DOES NOT AL TER THE BASIC CHARACTER OF THE EXPENDITURE.ULTIMATELY SUCH EXPENSES ARE CONNECTED WITH THE TRAVELLING BY SUCH EMPLOYEES AND, THEREFORE, SHOULD BE TREATED ACCORDINGLY, IRRE SPECTIVE 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 DEDUCTION OF AMOUNT RECE IVED FROM PARENT DEPARTMENTS AS EXPENDITURE IN THE NATURE OF TRAVELLING EXPENSES ;A ND 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 ASSESSEE IS ALLOWED. RESPECTFULLY,FOLLOWING THE ABOVE GROUND NO.4 IS DECIDED IN FAVOUR OF THE ASSE SSEE. CONSIDERING THE ABOVE ISSUE OF GUEST HOUSE EXPENSES IS DECIDED IN FAVOUR OF THE ASSESSEE. 5 .NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE UNDER RULE 6B OF THE RULES,FOR CALENDARS AND DIARIES(G.3 FOR AY.1987-88 AND G.4 FOR THE REMAININ G TWO AY.S).ASSESSEE-COMPANY HAD CLAIMED EXPENDITURE OF RS.3,51,374/-,RS.2,21,294/-AND RS.5, 78,999/-FOR THE RESPECTIVE AY.S AND SAME WAS DISALLOWED BY THE AO.S.FAA CONFIRMED THE ORDER OF T HE AO.S. 5.1. WE FIND THAT THE IDENTICAL ISSUE HAS BEEN DECIDED A GAINST THE ASSESSEE BY THE TRIBUNAL, WHILE ADJUDICATING UPON THE APPEAL FOR THE LAST AY,AS UND ER: 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 ASSE SSEE 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 THEREIN CANNOT BE SAID TO BE IN THE NATUR E OF ADVERTISEMENT CALLING FOR INVOCATION OF RULE 6B OF THE INCOME-TAX RULES READ WITH THE PROVISIONS OF SECTION 37(3A), 3(3) AND (3C) OF THE ACT.WE ARE OF THE VIEW THAT IN THE LIGHT OF THE DEC ISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ALLANA SONS PVT. LTD., 216 ITR 690 (BOM) HO LDING THAT PRESENTATION ARTICLES BEARING THE 14 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. LOGO OF THE ASSESSEE WOULD FALL WITHIN THE AMBIT OF RULE 6B AS EXPENDITURE IN THE NATURE OF ADVERTISEMENT,THE ARGUMENT OF THE LEARNED COUNSEL F OR THE ASSESSEE CANNOT BE ACCEPTED. GROUND NO. 5 IS ACCORDINGLY DISMISSED. FOLLOWING THE ORDER OF THE LAST AY.,WITH REGARD TO THE ISSUE OF EXPENDITURE INCURRED FOR CALENDARS AND DIARIES,WE DISMISS THE G.3/4 OF THE APPEALS FIL ED BY THE ASSESSEE FOR THE AY.UNDER APPEALS. 6. NEXT GROUND IS IN RESPECT OF DISALLOWANCE OF ANNUAL GENERAL MEETING EXPENSES OF THE SHARE - HOLDERS(G.4-1987-88,G.5-1989-90,1990-91).AO.S HAD M ADE DISALLOWANCES OF RS.32,571/-, RS. 79,247/- AND RS.65,944/-RESPECTIVELY FOR THE AY.S U NDER CONSIDERATION U/S.37 (2A)/37(2) OF THE ACT AND THE FAA HAD UPHELD THEIR ORDERS. 6.1. AR AGREED THAT ISSUE WAS DECIDED AGAINST THE ASSESS EE BY THE TRIBUNAL IN THE ORDERS FOR EARLIER TWO AY.SWE FIND THAT IN THE ORDER FOR THE AY.1985-8 6(ITA/ /MUM/) TRIBUNAL HAD HELD AS UNDER: 17.THE VERY SAME ISSUE AROSE FOR CONSIDERATION IN ASSESSEES OWN CASE IN A.Y. 1988-89 IN I.T.A. NO.3222/ MUM/92 AND THIS TRIBUNAL HAS TAKEN A VIEW THAT SERVING OF TEA,COFFEE ARND SOFT DRINKS TO SHAREHOLDERS AT ANNUAL GENERAL MEETING IS NOT EXPEN DITURE IN THE NATURE OF ENTERTAINMENT BY FOLLOWING THE RULING TO THAT EFFECT IN THE CASE OF CIT VS. MYSORE MINERALS LTD.,126 ITR 437(KAR). THE LEARNED CIT(A)HAS,HOWEVER, DISTINGUISHED THE DE CISION IN THE CASE OF MYSORE MINERALS LTD. (SUPRA) AS FOLLOWS: - THE DEFINITION OF ENTERTAINMENT EXPENDITURE WAS I NSERTED BY THE FINANCE ACT,1983 WITH RETROSPECTIVE EFFECT FROM 1.4.1976. IN MY VIEW, THE EXPENDITURE INCURRED 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 KIND BY THE ASSESSEE TO ANY PERSON WHETHER BY WAY OF PROVISION OF FOOD OR BEVER AGES OR IN ANY OTHER MANNER, WHATSOEVER, WOULD BE ENTERTAINMENT EXPENDITURE.THE SWEEP OF THE WORDS ENTERTAINMENT EXPENDITURE FOUND IN THE EXPLANATION 2 TO SECTION 37(2A)IS WIDE AND B ROAD TO COVER EVERY EXPENDITURE ON PROVISION OF HOSPITALITY OF EVERY KIND TO ANY PERSO N OTHER THAN THE EMPLOYEES AT THE PLACE OF THEIR 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 KAR NATAKA HIGH COURT IN A LATER JUDGMENT IN THE CASE OF MYSORE MINERALS LTD 162 ITR 562 DID NOT APPROVE THE RATIO LAID DOWN IN BANGALORE TURF CLUB ON THE GROUND THAT THE EXPLANA TION 2 TO SUBSECTION (2A) OF SECTION 37 WAS NOT THERE IN THE STATUTE WHEN THE JUDGMENT IN THE C ASE 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 KARNATAKA HIGH COURT HAS CATEGORICALLY STATED THAT THE EXPENDITURE INCURRED AT THE GENERAL BODY MEETING IS COVERED BY THE EXPLANATION 2 TO SECTION 37(2A).RESPECTFULLY FOLLOWING THE JUDGME NT OF THE KARNATAKA HIGH COURT IN THE CASE OF MYSORE MINERALS LTD.(SUPRA)THE DISALLOWANCE MADE BY THE AO U/S. 37 (2A)/37(2)IS UPHELD.TO SUM UP, THE EXPENDITURE INCURRED ON SERVI NG TEA, COFFEE & SOFT DRINKS TO THE SHAREHOLDERS AT THE ANNUAL GENERAL MEETING IS TREAT ED 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 . FOLLOWING THE ABOVE G.4 AND G.5,FOR THE AY.1987-88 AND REMAINING TWO AY.S,STAND DISMISSED. 7. G.5/G.6.FOR THE AY.S UNDER APPEAL ARE ABOUT DISALLO WANCE OF EXPENDITURE ON TEA AND COFFEE SERVED TO VISITORS.WHILE FRAMING ASSESSMENTS FOR TH E AY.S UNDER APPEAL,AO.S FOUND THAT THAT THE ENTERTAINMENT EXPENDITURE QUANTIFIED BY THE AUDITOR S DID NOT INCLUDE THE EXPENDITURE ON TEA, COFFEE,FOOD OR OTHER BEVERAGES PROVIDED TO THE VISI TORS EITHER IN OFFICE OR IN FACTORY,THAT THE ASSESSEE-COMPANY DID NOT INCLUDE SUCH EXPENSES IN T HE ENTERTAINMENT EXPENDITURE.HE ESTIMATED THE EXPENDITURE ON TEA,COFFEE ETC.TO VISITORS AND T REATED THE SAME AS ENTERTAINMENT EXPENDITURE U/S.37(2A)OF THE ACT.THE AO.S FURTHER OBSERVED THAT CONSIDERING THE SIZE OF THE ASSESSEE,THE ESTIMATES MADE BY THEM TOWARDS THE ENTERTAINMENT EX PENDITURE WERE REASONABLE. 15 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 7.1. AGAINST THE ORDER OF THE AO.S ASSESSEE PREFERRED AN APPEAL 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 EXPL.2 TO SUB-SECTION ( 2A) OF SECTION 37,THAT THE EXPL.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 MANNER, WHATSOEVE R,WOULD BE ENTERTAINMENT EXPENDITURE, THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON TEA,COF FEE ETC.FORMED PART OF THE DEFINITION OF ENTERTAI -NMENT EXPENDITURE,THAT THE ESTIMATES OF EXPENDITUR E BY THE AO.S WERE VERY REASONABLE AND SAME 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 AY.1985-86,TRIBUNAL H AD DEALT THE ISSUE AS UNDER: 20.THE AO ESTIMATED A SUM OF RS.1LAKH AS THE PROBA BLE EXPENDITURE OUT OF ENTERTAINMENT EXPENDITURE QUANTIFIED BY THE AUDITORS IN THEIR REP ORT, INCURRED 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 SU BSECTION (2A) OF SECTION 37 PROVIDES THAT EVERY HOSPITALITY PROVIDED BY AN ASSESSEE FOR ANY P ERSON OTHER THAN THE EMPLOYEE EVEN IN OFFICE, FACTORY OR OTHER PLACE OF WORK WOULD BE ENTERTAINME NT EXPENDITURE,CALLING FOR DISALLOWANCE. 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.S TO RESTRICT THE DISALLOWANCE TO 25% OF THE EXPENDITURE INCURRED (RS.2.25LAKHS,RS.2.75LAKHS, RS. 35, 395/-)FOR THE AY.S1987-88,1989-90,1990-91.GROUND NO .5/6,FOR THE AY.S UNDER CONSIDERATION ARE ALLOWED IN PART. 8. NEXT GROUND OF APPEAL IS ABOUT EXPENDITURE ON BUSIN ESS MEETINGS AND CONFERENCES(G.6-AY. 1987-88,G.7-AY.1989-90 &1990-91)U/S.37(2A) OF THE A CT AND THE AMOUNTS INVOLVED ARE RS. 18. 37 LAKHS, RS.38.14 LAKHS AND RS.66.26 LAKHS FOR THE RESPECTIVE FOR THE ASSESSMENT-YEARS. 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 NO T INCURRED IN THE OFFICE BUT WAS PAID TO THE HOTELS,THAT IT WAS CLEAR FROM THE EXPL.2 TO SECTION 37(2A)/37(2) THAT THE EXPENDITURE INCURRED ON THE HOSPITALITY OF EMPLOYEES WAS EXCLUDED FROM THE DEFINITION OF THE ENTERTAINMENT EXPENDITURE PROVIDED THE EXPENDITURE IS INCURRED IN OFFICE/FACT ORY OR OTHER PLACE OF THEIR WORK,THAT IN THE CASE UNDER APPEAL THE EXPENDITURE WAS INCURRED IN THE HO TELS,THAT THE EXPENDITURE INCURRED ON ENTERTAINMENT AT HOTELS ATTRIBUTABLE TO EMPLOYEES C OULD NOT BE BROUGHT UNDER THE EXPRESSION OTHER PLACE OF THEIR WORK,THAT THE EXPRESSION HAD TO BE I NTERPRETED IN THE CONTEXT IN WHICH OTHER WORDS PRECEDING THE EXPRESSION WERE USED,THAT THE OTHER W ORDS USED WERE OFFICE/OR FACTORY,THAT OTHER PLACE OF THEIR WORKHAD TO BE SIMILAR TO OFFICE/FAC TORY,THAT NORMALLY,THE SAID EXPRESSION INCLUDED PLACES SUCH AS MINE,WORK SITE,DRILLING-SITE,GODOWN ETC.,THAT THE EXPRESSION DID NOT INCLUDE EXPENDITURE INCURRED AT A PLACE OTHER THAN THE PLAC E AT WHICH AN EMPLOYEE NORMALLY WORKS, THAT WORDS OTHER PLACE OF WORK SHOULD BE AKIN TO OFFIC E OR FACTORY AND IT COULD NOT BE TAKEN TO INCLUDE HOTEL OR RESTAURANT,THAT THE ASSESSEE DID NOT PLACE ANY EVIDENCE TO ESTABLISH THE FACT THAT THE EXPENDITURE INCURRED ON BUSINESS MEETINGS & CONFERE NCES CONTAINED THE RENT PAID FOR THE HALLS IN THE HOTELS.HE DIRECTED THE AO TO EXAMINE & ALLOW IF THE ASSESSEE IS ABLE TO FURNISH THE EVIDENCE OF RENT PAID TO THE HOTELS OR RESTAURANTS WHICH WAS IN CLUDED IN THE BUSINESS MEETING & CONFERENCES EXPENDITURE.FINALLY,HE SUSTAINED THE ADDITIONS MADE BY THE AO SUBJECT TO VERIFICATION OF EVIDENCE OF RENT PAID. 8.2. BEFORE US,AR AGREED THAT THE ISSUE WAS DECIDED AGAI NST THE ASSESSEE BY THE ORDER OF THE 16 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. TRIBUNAL FOR EARLIER AY. WE FIND THAT IDENTICAL ISS UE FOR AY.1986-87 WAS DEALT BY THE TRIBUNAL AS UNDER: 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 ISS UE 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 MATERIAL FOR THE PURPOSE OF THE PRESENT ISSUE. EXPLANATION 2 TO SECTION 37(2A) WAS INTRODUC ED BY THE FINANCE ACT, 1983 WITH RETROSPECTIVE EFFECT FROM 1ST,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 DEFINITION OF THE ENTERTAINMENT EXPENDITURE PROVIDED THE EXPENDITURE IS INCURRED IN OFFICE, FAC TORY OR OTHER PLACE OF THEIR WORK. IN THE PRESENT CASE,IT IS AN ACCEPTED POSITION THAT THE EXPENDITUR E WAS INCURRED IN THE HOTELS.THE ASSESSEES CONTENTION IS IOTELS FALL WITHIN THE MEANING OF OT HER PLACE OF THEIR WORK.I AM UNBLE TO AGREE WITH THE INTERPRETATION GIVEN BY THE APPELLANT. EXPLANAT ION 1 AND 2 TO SECTION 37(2A) IT CAN BE SEEN THAT THE EXPENDITURE INCURRED BY THE EMPLOYEES FORMS PAR T TO DEFINITION OF ENTERTAINMENT EXPENDI - TURE.EXPLANATION 2 DOES NOT TREAT EXPENDITURE ON FO OD OR BEVERAGES PROVIDED BY THE ASSESSEE TO THE EMPLOYEES IN OFFICE, FACTORY OR OTHER PLACE OF THEI R WORK AS ENTERTAINMENT EXPENDITURE.THE EXPENDITURE WAS NOT INCURRED EITHER IN OFFICE OR IN FACTORY. THE EXPENDITURE INCURRED ON ENTERTAINMENT AT HOTELS ATTRIBUTABLE TO EMPLOYEES C ANNOT BE BROUGHT UNDER THE EXPRESSION OTHER PLACE OF THEIR WORK. THIS EXPRESSION HAS TO BE INT ERPRETED IN THE CONTEXT IN WHICH OTHER WORDS PRECEDING 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 O FFICE 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 EXPENDITU RE INCURRED AT A PLACE OTHER THAN THE PLACE AT WHICH AN EMPLOYEE NORMALLY WORKS. THE PRINCIPLE OF EJUSDEM GENERIC WARRANTS THAT OTHER PLACE OF WORK SHOULD BE AKIN TO OFFICE OR FACTORY AND IT CA NNOT BE TAKEN TO INCLUDE HOTEL OR RESTAURANT. THE EXPENDITURE INCURRED BY THE APPELLANT WAS TOWARDS F OOD OR BEVERAGES. IN MY VIEW, THE EXPENDITURE INCURRED ON THE EMPLOYEES AT A PLACE OTHER THAN OFF ICE OR FACTORY REQUIRES TO BE TREATED AS ENTERTAINMENT EXPENDITURE. THE HOTEL OR RESTAURANT CANNOT BE TREATED AS ANY OTHER PLACE OF THEIR WORK. I AM ALSO NOT ABLE TO AGREE WITH THE CONTENT ION THAT A LARGE NUMBER OF EMPLOYEES HAD ATTENDED THE BUSINESS MEETINGS. AS OBSERVED EARLIER , THE SWEEP OF THE WORDS ENTERTAINMENT EXPENDITURE FOUND IN EXPLANATION IS WIDE AND BROAD TO COVER EVERY EXPENDITURE ON PROVISION OF HOSPITALITY OF EVERY KIND TO EMPLOYEES ALSO,PROVIDE D THE EXPENDITURE IS NOT INCURRED IN OFFICE OR FACTORY OR ANY OTHER PLACE OF THEIR WORK WHERE AN E MPLOYEE NORMALLY DISCHARGES HIS DUTIES. IN MY VIEW, THE HOTEL CANNOT BE EQUATED WITH THE OTHER PL ACE OF THEIR WORK. THE APPELLANT ;RELIED ON THE 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 EXPENDITURE IS COVERED BY THE DEFINITION OF THE CTT(A) ENTERTAINMENT EXPENDITURE.THE APPELLANT ; ALSO SUBMITTED THAT IN A.Y.50% OF THE EXPENDITURE INCURRED ON THE BUSINESS MEETINGS AND C ONFERENCES WAS TREATED AS ENTERTAINMENT EXPENDITURE AND THE REMAINING EXPENDITURE WAS RENT PAID FOR THE HALLS IN HOTELS.THE APPELLANT DID NOT PLACE ANY EVIDENCE,BEFORE ME TO ESTABLISH THE F ACT EXPENDITURE INCURRED ON BUSINESS MEETINGS AND CONFERENCES CONTAINED THE RENT PAID FOR THE HAL LS IN THE HOTELS.IN THE ABSENCE OF EVIDENCE,I REFRAIN MYSELF FROM GIVING ANY FINDING ON THIS ARGU MENT. 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 17 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. EVIDENCE OF RENT PAID TO THE HOTELS OR RESTAURANTS WHICH WAS INCLUDED IN THE BUSINESS MEETINGS AND CONFERENCES EXPENDITURE.TO SUM UP, THE EXPENDITURE INCURRED ON THE BUSINESS MEETGS AND CONFERENCES AT THE HOTELS FALLS WITHIN THE DEFINITI ON 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 CONSIDER ED THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE.THE DECISION OF HONBLE CA LCUTTA HIGH 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 T HE EMPLOYEES ALONE 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 EXPLAN ATION 2 TO SECTION 37(2A) WAS NOT CONSIDERED BY THE HONBLE COURT. IN THE PRESENT CASE THE EMPLOYEE S ALONE 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. FOLLOWING THE ABOVE G.6/G.7 FOR THE AY.S1987-88,198 9-90 AND 1990-91 RESPECTIVELY ARE DECIDED AGAINST THE ASSESSEE -COMPANY. 9. G.7 FOR THE AY.1987-88 AND G.8 FOR THE AY.S1989-90, 90-91ARE ABOUT DISALLOWANCE OF EXPENDI- TURE ON PAYMENTS MADE TO CLUBS AND THE AMOUNTS INVO LVED ARE RS.3.42 LAKHS, RS.21.75 LAKHS AND RS.38.01 LAKHS RESPECTIVELY FOR THE YEARS UNDER APP EAL.ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE IN THE TAX AUDIT REPORTS,AO.S CAME TO THE CONCLUSION THAT THE PAYMENTS MADE TO CLUBS,AS INDICATED EARLIER,WERE IN THE NATURE OF ENTERTAINME NT EXPENDITURE.HE DISALLOWED THE SAID AMOUNTS, CLAIMED,U/S.37(2A)/37(2) OF THE ACT,BY THE ASSESSEE -COMPANY.IN THE APPELLATE PROCEEDINGS FAA HELD THAT THAT THE ASSESSEE DID NOT BRING ANY MATER IAL ON RECORD TO ESTABLISH THAT PAYMENTS TO CLUBS DID NOT CONTAIN THE EXPENDITURE IN THE NATURE OF EN TERTAINMENT EXPENDITURE,THAT THE PAYMENT MADE TO CLUBS COMPRISED MAINLY OF EXPENDITURE ON FOOD AN D BEVERAGES,THAT THE EXPENDITURE ON FOOD AND BEVERAGES INCURRED AT CLUBS HAS TO BE TREATED AS EN TERTAINMENT EXPENDITURE U/S.37(2A)/ 37(2)OF THE ACT,THAT THE EXPRESSION ANY OTHER PLACE OF WORK USED IN THE EXPLANATION TO THE SAID SECTION DID NOT INCLUDE CLUBS. FOR THE REASONS GIVEN WITH REGAR D TO ENTERTAINMENT EXPENDITURE,HE HELD THAT EXPENDITURE INCURRED FOR EMPLOYEE-EMPLOYER MEETINGS IN THE CLUBS WAS IN THE NATURE OF ENTERTAINMENT EXPENDITURE,THAT THE ASSESSEE DID NOT PLACE ANY EVIDENCE BEFORE HIM TO ESTABLISH THE FACT THAT THE EXPENDITURE INCURRED AT CLUBS CONTAIN ED THE EXPENDITURE INCURRED ON RENT.HOWEVER,HE DIRECTED THE AO TO EXAMINE AND ALLOW,IF THE ASSESS EE WAS ABLE TO FURNISH THE EVIDENCE OF RENT PAID TO THE CLUBS.IN SHORT,ADDITIONS MADE BY THE AO WERE SUSTAINED SUBJECT TO SUBMISSION AND VERIFICATION OF EVIDENCE OF RENT PAID. 9.1. AR FAIRLY CONCEDED THAT THE ISSUE WAS DECIDED AGAIN ST THE ASSESSEE BY THE ORDER FOR THE AY. 1986-87 (SUPRA).WE FIND THAT TRIBUNAL,WHILE ADJUDIC ATING UPON THE IDENTICAL ISSUE FOR THE EARLIER AY.,HAS HELD AS UNDER: 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. FOLLOWING THE ABOVE,WE DECIDE THE DISMISS G.7/G.8 F OR THE AY.1987-88,1989-90 AND 1990-91 AGAINST THE ASSESSEE. 10. NEXT COMMON GROUND OF APPEAL IS ABOUT EXPENDITURE INCURRED ON EMPLOYEESGET-TOGETHERS(G .8-AY.1987-88 AND G.9 FOR 1989-90).AOS FOUND THAT I N THE TAX AUDIT REPORTS,AUDITORS HAD QUANTIFIED THE EXPENDITURE ON EMPLOYEES GET-TOGETHE RS AND PICNICS BUT THE SAME WAS NOT TREATED AS ENTERTAINMENT EXPENDITURE U/S.37(2A) OF THE ACT,ON THE PLEA THAT THE SAID EXPENDITURE WAS INCURRED 18 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. ON CONVEYANCE AS WELL AS ON FOOD.AS THE ASSESSEE DI D NOT QUANTIFY THE EXPENDITURE ON EMPLOYEES GET-TOGETHERS AND PICNICS ATTRIBUTABLE TO FOOD AND BEVERAGES, THE AOS ESTIMATED THE EXPENDITURE ON FOOD AND BEVERAGES AND DISALLOWED RS.2.50 LAKHS AND RS.23.34 LAKHS TREATING THE SAME AS ENTERTAINMENT EXPENDITURE AS PER THE PROVISIONS FOR SECTION 37(2A)/37(2) OF THE ACT. AGAINST THE ORDER OF THE AO.S ASSESSEE PREFERRED APPEALS BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT THE EXPENDITURE ESTIMATED BY THE AO.S WERE TOWARDS FOOD AND BEVERAGES INCURRED BY THE ASSESSEE ON EMPLOYEESGET-TOGETHERS AND PICNICS,THAT THE EXPENDITURE INCURRED FELL WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 37(2 A)/37(2) OF THE ACT.HE UPHELD THE ADDITION FOLLOWING THE DECISION TAKEN FOR EARLIER ISSUE. 10.1. DURING THE COURSE OF HEARING BEFORE US,AR CONCEDED THAT ISSUE OF EXPENDITURE INCURRED ON EMPLOYEESGET-TOGETHERS AND PICNICS HAS BEEN DECIDE D AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR THE AY.1986-87(SUPRA).WE FIND THAT TRI BUNAL HAS DEALT THE ISSUE AS UNDER: 10.2.BEFORE US,AR AND DR SUBMITTED THAT ISSUE WAS I DENTICAL 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 COVERE D 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 WE RE DISALLOWED.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-TOGET HER AND PICNICS. 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 FAA.GROUND NO.10 STANDS DISMISSED. FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE EARLIER AY.1986-87,WE DISMISS G.8 AND G.9 FOR THE AY.1987-88AND 1989-90 FILED BY THE ASSESSEE . 11. G.11OF 1987-88 AND 89-90 AND G.10 OF 1990-91 DEAL W ITH EXPENDITURE ON PAYMENT TO TATA STEEL RURAL DEVELOPMENT SOCIETY(TSRDS).AS PER THE A O.S,ASSESSEE HAD CLAIMED EXPENDITURE ON RURAL DEVELOPMENT IN THE ASSESSMENT YEARS UNDER CON SIDERATION,AS BUSINESS EXPENDITURE U/S. 37(1) OF THE ACT,THAT THE ASSESSEE HAD CLAIMED THAT IT HA D INCURRED EXPENDITURE ON PAYMENT TO TSRDS AMOUNTING TO RS.1.68 CRORES,RS.1.81CRORES AND RS.2. 03CRORES RESPECTIVELY FOR THE YEARS UNDER APPEAL.AO.S WERE OF THE OPINION THAT PAYMENTS MADE TO TSRDS WERE NOT ADMISSIBLE AS SAME WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS OF THE COMPANY,THAT THE EXPENDITURE INCURRED ON VARIOUS ACTIVITIES LIKE VIL LAGE LINK ROAD, DRINKING WATER PROJECT, IRRIGATION FACILITIES, VOCATIONAL TRAINING ETC.HAD NO NEXUS WI TH THE BUSINESS CARRIED ON BY THE ASSESSEE. 11.1. 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 A SSESSEE HAD GIVEN CONTRIBUTIONS TO TSRDS THAT WAS AN INDEPENDENT ENTITY REGISTERED UNDER THE SOCI ETIES ACT,THAT THE EXPENDITURE INCURRED BY THE ASSESSEE HAD NO DIRECT NEXUS WITH THE BUSINESS CARR IED ON BY IT,THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF STEEL AND THE EXPEND ITURE WAS INCURRED FOR THE ACTIVITIES WHICH HAD NO DIRECT NEXUS WITH THE BUSINESS CARRIED ON BY IT. RELYING UPON THE JUDGMENTS OF THE JURISDICTIONAL HIGH COURT IN STANDARD MILLS CO. LTD.(209ITR85) AND VOLTAS LTD.(207ITR47),HE HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE HAD NO NEXUS W ITH THE BUSINESS CARRIED ON BY IT,THAT IT WAS AN APPLICATION OF INCOME FOR A CHARITABLE OR PHILANTHR OPIC CAUSE,THAT THERE WAS NO COMMERCIAL EXPEDIENCY ALSO IN INCURRING THE EXPENDITURE ON THE RURAL DEVELOPMENT,THAT THE DISALLOWANCE MADE BY THE AO DID NOT CALL FOR ANY INTERFERENCE. 19 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 11.2. BEFORE US,AR SUBMITTED THAT ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL FOR THE AY.1986-87(SUPRA),THAT WHILE DECID ING THE ISSUE TRIBUNAL HAD CONSIDERED THE ORDERS OF TISCO(TATA STEEL)FOR THE AY.S 1968-69,198 0-81AND1985-86(ITA/2068&2321/BOM/74 75, ITA/ 2046/BOM/1984,ITA/3938& 3980/MUM/2003)AND TELCO FOR THE AY.S1983-84,1984- 85,1986-87 TO 1990-91(ITA/6003 TO 6008/MUM/98).DR S UPPORTED THE ORDER OF THE FAA.WE FIND THAT ISSUE BEFORE US,HAS BEEN DECIDED BY THE TRIBUN AL,WHILE ADJUDICATING THE APPEAL FOR AY.1986- 87, IN THE FOLLOWING MANNER: 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 I NSTITUTIONS 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 T HE PURPOSE OF LABOUR WELFARE AND THAT THE THE PROVISIONS OF 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 UN DER 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 LAND OF ABOUT 25 SQ. KM. LEASED TO IT ON A LONG TERM BASIS BY THE GOVERNMENT OF BIHAR. AS ALL THE FACILITIES OF THE WORKS, SITES FOR THE ASSOCIATE COMPANIES, RESIDENCE SITES FOR ITS OWN EM PLOYEES AND THEIR DEPENDENTS AND SITES FOR THE BUSINESS COMMUNITY WERE TO BE LOCATED ON ITS OWN LA ND, THE ASSESSEE HAD TO PROVIDE ALL THE FACILITIES OF A MUNICIPALITY LIKE, POWER,WATER,SANI TATION, HOSPITALS, PLAYGROUNDS, CLUBS, READING ROOMS,DISPENSARIES, COMMUNITY WELFARE CENTRES, CULT URAL ASSISTANCE, ETC. IN THE LEASE AGREEMENT FINALISED WITH THE BIHAR GOVERNMENT THE ASSESSEE WA S UNDER AN OBLIGATION TO PROVIDE AJI THE CIVIC AMENITIES IN JAMSHEDPUR AND, THEREFORE, THE ASSESSE E 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 P EOPLE RESIDING IN JAMSHEDPUR, THE ASSESSEE FOUND IT DIFFICULT TO COPE WITH ALL THE SERVICES OF CIVIC AMENITIES AND IT HAS, THEREFORE, ENCOURAGED SENIOR OFFICERS OF THE COMPANY AND OTHER LEADING CI TIZENS IN JAMSHEDPUR TO SET UP VOLUNTARY ORGANISATIONS REGISTERED UNDER THE SOCIETIES ACT OR OTHER CHARITABLE INSTITUTIONS TO UNDERTAKE ACTIVITIES IN THE FIELD OF SPORTS, EDUCATION, MEDIC AL RELIEF, CULTURAL PROMOTIONS, ETC.THE ASSESSEE FROM TIME TO TIME MADE CONTRIBUTIONS TOWARDS EXPENS ES OF SUCH INSTITUTIONS TO THE EXTENT THEY PROVIDE THE SERVICE TO THE PEOPLE OF JAMSHEAPUR, TH E BURDEN TO PROVIDE SIMILAR CIVIC AMENITIES BY THE ASSESSEE IS REDUCED THE ASSESSEE HAD MADE CONTR IBUTIONS 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 THAT THESE C ONTRIBUTIONS 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 WAS 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.1968-69ON AN ID ENTICAL 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 EARLIER DECISIONS OF THE TRIBUNAL, THE DECISION OF THE HONBLE 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 W AS NO NEXUS BETWEEN EXPENSES AND 20 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. BUSINESS OF THE ASSESSEE.IN THE AFORESAID DECISION THE HONBLE COURT LAID EMPHASIS ON BUSINESS EXPEDIENCY IN MAKING A PAYMENT. ON FACTS THE COURT FOUND NO BUSINESS EXPEDIENCY IN MAKING THE PAYMENT.IN THE CASE OF THE ASSESSEE WE ARE OF THE V IEW THAT THE PAYMENTS WERE MADE KEEPING IN MIND BUSINESS EXPEDIENCY VIZ.,TO HAVE A MOTIVATED W ORK FORCE.IN THE LIGHT OF THE PECULIAR 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 WERE NOT MADE BY THE ASSESSEE IN HIS CAPACITY AS AN EMPL OYER. WE, THEREFORE, DIRECT THAT THE DEDUCTION AS CLAIMED BY THE ASSESSEE BE ALLOWED, GROUND NO. 14 I S 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 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 GU IDING CASE.AS IN THAT CASE THERE WAS NO MOU WITH THE WORKERS, SO, CONSIDERING THE PECULIARITY O F FACTS OF THE CASE,AS AGAINST THE MATTER OF VOLTAS,WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSE E. FOLLOWING THE ORDER FOR THE AY.1986-87 WE DECIDE TH E ISSUE OF PAYMENTS TO TSRDC IN FAVOUR OF THE ASSESSEE FOR ALL THE THREE AY.S 12. CONTRIBUTION OF RS.9.12 LAKHS AND RS.2.34 LAKHS TO STEEL PLANTS SPORT BOARD AND TATA SPORTS BOARD DURING THE AY.1987-88 AND AY.1990-91 IS THE S UBJECT MATTER OF G.12 AND G.11 FOR THE RESPECTIVE AY.SDURING THE ASSESSMENT PROCEEDINGS AO .S HELD THAT THE CONTRIBUTIONS WERE NOT ADMISSIBLE AS DEDUCTION U/S.37(1) OF THE ACT, AS TH E EXPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 12.1. 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 IRREVOC -ABLE 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, COM PANIES, 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 OBJECTIVE HAD NO RELEVANCE IN CARRYING ON THE BUSIN ESS OF THE ASSESSEE,THAT THE CONTRIBUTION MADE BY THE ASSESSEE WAS AN APPLICATION OF INCOME.FINALL Y,HE CONFIRMED THE DISALLOWANCE MADE BY THE AO.BEFORE US,AR SUBMITTED THAT SIMILAR ISSUE WAS DE CIDED IN FAVOUR OF THE ASSESSEE ,BY THE TRIBUNAL,IN THE APPEAL FOR THE YEAR 1986-87. 12.2. WE FIND THAT,FOLLOWING THE ORDER FOR ALLOWING EXPEN DITURE TO TSRDC,TRIBUNAL HAD DECIDED THE ISSUE OF PAYMENT TO STEEL PLANTSSPORT BOARD AN D TATA SPORTS BOARD IN FAVOUR OF ASSESSEE, WHILE ADJUDICATING APPEAL FOR THE YEAR 1986-87.FOLL OWING THE ORDERS FOR THE EARLIER AY,WE DECIDE THE GROUND NO.G.12 AND G.11FOR THE AY.1987-88 AND A Y.1990-91 IN FAVOUR OF THE ASSESSEE . 13. NEXT GROUND OF APPEAL(G.13- 1987-88 AND G.12-.1989- 90,1990-91)IS ABOUT CONTRIBUTIONS TO VARIOUS INSTITUTIONS AT JAMSHEDPUR CONTRIBUTIONS TO VARIOUS INSTITUTIONS AT JAMSHEDPUR.DURING THE 21 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. ASSESSMENT PROCEEDINGS AO.S FOUND THAT THE ASSESSEE HAD MADE CONTRIBUTIONS OF RS.19.68 LAKHS, RS.49.96 LAKHS AND 34.48 LAKHS DURING THE AY.SUNDER APPEAL RESPECTIVELY.ASSESSEE CONTENDED THAT THE SAID CONTRIBUTIONS WERE MADE TO VARIOUS INSTITU TIONS FOR DISCHARGING ITS CIVIC, SOCIAL OBLIGATIONS TO MAINTAIN THE TOWNSHIP OF JAMSHEDPUR. AO.S DID NO T ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE CONTRIBUTIONS WERE GIVEN FOR THE WELF ARE OF THE EMPLOYEES AND SUCH CONTRIBUTIONS WHICH WERE GIVEN TO THEM WERE HIT BY THE PROVISIONS OF SECTION 40A(9) BECAUSE THE PAYMENTS WERE MADE IN THE CAPACITY OF AN EMPLOYER,THAT IF IT WAS TAKEN THAT THE INSTITUTIONS TO WHOM CONTRIBUTIONS WERE GIVEN WERE PROVIDING CIVIC AMENI TIES TO THE CITY OF JAMSHEDPUR THEN ALSO THE CONTRIBUTIONS WOULD BE LIABLE FOR DISALLOWANCE BECA USE THE EMPLOYEES WERE MAJOR BENEFICIARIES OF THE CONTRIBUTIONS,THAT IF THE BENEFIT OF THE CONTRI BUTIONS WAS FOR THE CITY OF JAMSHEDPUR AT LARGE THEN THESE CONTRIBUTION WERE IN THE NATURE OF CHARI TY.THEY DISALLOWED THE CLAIM MADE BY THE ASSESSEE. 13.1. DECIDING THE APPEAL FILED BY THE ASSESSEE,FAA HELD THAT THAT SIGNIFICANT CONTRIBUTIONS MADE BY THE WERE TO JAMSHEDPUR NOTIFIED AREA COMMITTEE, MERRY HOSPITAL,JAMSHEDPUR,TRADE WORKERS UNION,LOYOLA SCHOOL, ALL INDIA FOOTBALL ASSOCIATION ,THAT ON A PERUSAL OF THE ABOVE CONTRIBUTIONS IT WAS EVIDENT THAT THE ASSESSEE HAD GIVEN A GENERA L AND VAGUE EXPLANATION ABOUT THE ISSUE BEFORE HIM,THAT IT DID NOT ESTABLISH THE DIRECT NEXUS BETW EEN THE CONTRIBUTIONS AND THE BUSINESS,THAT IN THE ABSENCE OF SUCH A NEXUS, IT COULD NOT BE PRESUMED T HAT THE CONTRIBUTIONS WERE MADE FOR THE PURPOSE OF THE BUSINESS, THAT THE CONTRIBUTIONS MAD E BY THE ASSESSEE WERE ON THE NATURE OF APPLICATION OF INCOME,THAT THE CONTRIBUTIONS WERE H IT BY THE PROVISIONS OF SECTION 40A (9) OF THE ACT.FAA UPHELD THE ORDER OF THE AO.S. 13.2. BEFORE US,AR AND DR TOOK THE SAME STAND THAT THEY H AD TAKEN FOR THE EARLIER TWO GROUNDS OF APPEAL.WE HAVE DECIDED GROUNDS NO.11-12 IN FAVOUR O F THE ASSESSEE.FOLLOWING THE SAME GROUND NO.13 IS ALSO ALLOWED, AS THE FACTS OF THE GROUND A RE IDENTICAL TO EARLIER GROUNDS. 14. G.14 FOR AY.S1987-88,1989-90 AND G.13 FOR AY.1990-9 1 DEAL WITH FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES(RS.50.22 LAKHS,RS.1.17 CROR ES AND RS.13.98 LAKHS).DURING THE ASSESSMENT PROCEEDINGS AO.S HELD THAT THE EXPENDITURE WAS INCU RRED IN CONNECTION WITH THE EXPANSION OF THE INDUSTRIAL UNDERTAKING,THAT SAME WAS CAPITAL EXPEN DITURE,THAT THE EXPENDITURE INCURRED ON PREPA - RATION OF FEASIBILITY/PROJECT REPORTS IN CONNECTION WITH THE EXPANSION OF INDUSTRIAL UNDERTAKINGS OR IN CONNECTION WITH THE SETTING UP OF A NEW UNITS WA S AN ADMISSIBLE DEDUCTION U/S. 35D OF THE ACT.IN APPELLATE PROCEEDINGS,UPHOLDING THE ORDER OF THE AO,FAA HELD THAT THE EXPENDITURE INCURRED WAS IN THE CAPITAL FIELD.BEFORE US,AR AND DR AGREED THE IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER FOR THE AY.198 6-87.WE FIND THAT IN THE EARLIER AY.,ISSUE OF EXPENDITURE INCURRED FOR MAKING PAYMENTS TO CONSULT ANTS FOR FEASIBILITY STUDIES,HAS BEEN DEALT IN FOLLOWING MANNER: 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 FIND THAT IN THE AY.1985-86 ASSESSEE HAD PAID FEES FOR FEASIBILITY STUDY TO THE SAME CONSULTANT TO WHO M FESS WAS PAID DURING THE YEAR ALSO.WHILE DECIDING THE APPEAL,TRIBUNAL AT PARAGRAPH 38 HAS HE LD 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 A ND RS.3 LAKHS WAS PAID FOR PROJECT REPORT FOR FEASIBILITY OF PLASTIC LINES AND COATED PIPES AND REVAMPING THE ERW MILL RESPECTIVELY.IN AY.1968-69 IN I.T.A. NO.2068/BOM/74 -75 THE HONBLE ITAT IN ASSESSEES OWN CASE CONSIDERED EXPENDITURE ON REPORT FOR INCRE ASING PRODUCTION CAPACITY AND FUTURE DEVELOPMENT.AFTER ELABORATE DISCUSSION, THE TRIBUNA L CAME TO THE CONCLUSION THAT EXPENDITURE WAS NOT A CAPITAL EXPENDITURE AND ALLOW ED 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 EXPENDIT URE IN QUESTION HAS TO BE ALLOWED AS A DEDUCTION BEING A REVENUE EXPENDITURE.GROUND NO. 12 IS ALLOWED. FOLLOWING THE ABOVE,WE DECIDE GROUND NO .16,BEFORE US,IN F AVOUR OF THE ASSESSEE. 22 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. IN VIEW OF THE ABOVE,G.14/G.13 FOR THE AY.S UNDER A PPEAL ARE DECIDED IN FAVOUR OF THE ASSESSEE . 15. ISSUE OF PAYMENTS IN CASH,IN EXCESS OF RS.2,500/-,I S THE SUBJECT MATTER OF NEXT GROUND OF APPEAL(G.16-1987-88,G.15-1989-90).DURING THE ASSESS MENT PROCEEDINGS AO.S OBSERVED THAT THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 40A (3)OF THE ACT AND FOR THE SAID VIOLATION HE MADE A DISALLOWANCE OF RS.6.35 LAKHS AND RS.1.91 L AKHS FOR THE AY.1987-88 AND AY.1989-90 RESPECTIVELY.AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE,FAA HELD THAT IN THE TAX AUDIT REPORTS THE PAYMENTS MADE IN CASH EXCEEDING RS.2,50 0/- WERE QUANTIFIED.HE DIRECTED THE ASSESSEE AND THE AO CARRY OUT NECESSARY VERIFICATION IN THIS REGARD. BEFORE US,AR CONCEDED THAT THE IDENTICAL ISSUE WAS WAS DISMISSED BY THE TRIBUNAL WHILE DECIDING THE APPEAL OF THE ASSESSEE,FOR THE AY. 1986-876(SUP RA).FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE LAST AY.S,WE DECIDE GROUND NO.15 AGAINST THE AS SESSEE-COMPANY. 16. ISSUE OF INVESTMENT ALLOWANCE ON TOWN DIVISION ASSE TS IS THE SUBJECT MATTER OF (G.17 OF AY. 1987-88,G.18 OF AY.1989-90 AND G.16 OF AY.1990-91) AND THE AMOUNTS INVOLVED ARE RS.1.25 CRORES,RS.26.46 CRORES,AND RS.30.03 LAKHS.DURING TH E ASSESSMENT PROCEEDINGS,AO.S HELD THAT THE TOWN DIVISION PROVIDED RESIDENTIAL FACILITIES TO TH E EMPLOYEES AS WELL AS TO OTHER RESIDENTS OF THE TOWNSHIP,THAT VARIOUS ASSETS WERE INSTALLED BY THE ASSESSEE IN THE TOWN DIVISION IN VARIOUS AY.S, THAT THE ASSETS WERE INSTALLED IN THE RESIDENTIAL A CCOMMODATION,THAT AS PER THE PROVISIONS OF SECTION 32A(1)(A) OF THE ACT ANY PLANT AND MACHIERY (P&M)INSTALLED IN ANY RESIDENTIAL ACCOMMOD -ATION WAS NOT ELIGIBLE FOR INVESTMENT ALLOWANCE, T HAT AS PER THE SAID SECTION THE P&M INSTALLED IN ANY INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF BUSIN ESS OF CONSTRUCTION / MANUFACTURE/PRODUCTION OF ANY ARTICLE OR THING WAS ENTITLED FOR INVESTMENT AL LOWANCE,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 RESIDENTS OF THE CITY AT LARGE.COMPARING THE PROVISIONS OF SECTION 32A AND 33 OF THE ACT,THEY HELD THAT THE PLANT & MACHINERY IN THE TOW N DIVISION WAS NOT AN INTEGRAL PART OF THE MANUFACTURING PROCESS.GIVING DESCRIPTION OF THE MAC HINERY INSTALLED AND THE LOCATION OF THE P&M HE HELD THAT THE ASSETS WERE INSTALLED AND USED HAD NOTHING TO DO WITH THE MANUFACTURING ACTIVITIES OF THE ASSESSEE.AO.S FOUND THAT THE ASSESSEE-COMPAN Y HAD A LICENCE TO MANUFACTURE ELECTRICITY,THAT IT HAD CLAIMED THAT ELECTRICAL MACHINERY WAS INSTAL LED IN THE ELECTRICITY DIVISION ,THAT IT HAD PRODUCED ELECTRICITY AND USED SUCH ELECTRICITY IN I TS MANUFACTURING PROCESS, THAT THE ASSESSEE ALSO SOLD THE POWER TO OTHER GROUP COMPANIES AND RESIDEN TS OF JAMSHEDPUR AND DERIVED SUBSTANTIAL REVENUES FROM SELLING THE POWER,THAT THE ASSESSEE H AD 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 PU RPOSE 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. 16.1. IN THE APPELLATE PROCEEDINGS,FAA HELD THAT THE ASSE SSEE HAD SUBMITTED THE DETAILS OF PLANT AND MACHINERY WHICH WERE INSTALLED IN THE ELECTRICI TY DIVISION,THAT THE VALUE OF THE PLANT AND MACHINERY USED FOR GENERATION AND DISTRIBUTION OF E LECTRICITY WAS QUANTIFIED AND FURNISHED DURING THE ASSESSMENT PROCEEDINGS,THAT THE ASSESSEE WAS EN TITLED FOR INVESTMENT ALLOWANCE U/S. 32 (2) (B) (I) OF THE ACT,THAT AS PER THE PROVISIONS OF THE SE CTION IF THE PLANT AND MACHINERY WAS INSTALLED FOR THE PURPOSE OF BUSINESS OF GENERATION OR DISTRIBUTI ON OF ELECTRICITY THEN INVESTMENT ALLOWANCE HAD TO BE ALLOWED, THAT THE ASSESSEE HAD A LICENCE FOR GENERATION AND DISTRIBUTION OF ELECTRICITY,THAT THE ELECTRICITY DIVISION WAS AN INDUSTRIAL UNDERTAKING BY ITSELF ENGAGED IN THE GENERATION OR DISTRIBUTION OF POWER,THAT THE ASSESSEE HAD CLASSIF IED 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 GENERATION AND DISTRIBUTION OF ELECTRICITY.HE DIREC TED THE AO TO ALLOW INVESTMENT ALLOWANCE ON ELECTRICAL MACHINERY.WITH REGARD TO THE CLAIM OF EX TRA SHIFT ALLOWANCE ON THE ELECTRICAL MACHINERY, 23 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. FAA HELD THAT THE ASSESSEE WAS NOT ENTITLED FOR EXT RA SHIFT ALLOWANCE FOR THE SAID MACHINERY,THAT THE ELECTRICAL MACHINERY APPEARED IN APPENDIX 1,PAR T I OF DEPRECIATION SCHEDULE.HE DIRECTED TO THE AO TO SEGREGATE THE VALUE OF THE P&M INTO TWO C ATEGORIES AND TO ALLOW THE INVESTMENT ALLOWANCE ON THE P&M ATTRIBUTABLE TO THE MANUFACTUR ING PROCESS. HE FURTHER HELD THAT THE ASSESSEE WAS RUNNING A HOS PITAL CALLED TATA MAIN HOSPITAL AND THE ACTIVITIES OF THE HOSPITAL WERE GROUPED UNDER THE H EADING TOWN DIVISION,THAT THE AO.S GAVE A CATEGORICAL FINDING THAT THE ELECTRICAL LIGHT AND F ANS WERE INSTALLED AT THE HOSPITAL AND THE AIRPORT,THAT THE ASSESSEE DID NOT PRODUCE ANY EVIDE NCE AGAINST THE FINDING GIVEN BY THE AO.S,THAT THE ELECTRICAL LIGHT AND FANS INSTALLED AT AIRPORT AND HOSPITAL ARE GROUPED UNDER THE HEADING PLANT AND MACHINERY INSTALLED IN HOSPITAL FOR THE YEAR UN DER APPEAL,THAT THE SURGICAL INSTRUMENTS,X-RAY AND ELECTRO THERAPY APPARATUS,AND AIR-CONDITIONING PLANT WERE INSTALLED AT THE HOSPITAL,THAT 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 EN TITLED TO CLAIM INVESTMENT ALLOWANCE ON CERTAIN P&M.FOR THE SIMILAR REASONS,HE DENIED BENEFIT OF EX TRA SHIFT ALLOWANCE.SIMILAR TREATMENT WAS GIVEN BY HIM TO THE P & M OF THE TUBE DIVISION. 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 I NVESTMENT ALLOWANCE U/S.32A OF THE ACT.HE FURTHER HELD THAT THE AO.S HAD NOT ALLOWED EXTRA SH IFT ALLOWANCE ON THE ABOVE ASSETS INSTALLED IN HOSPITAL, CLUB ETC.,THAT FROM THE PERUSAL OF THE DE PRECIATION TABLE IN PART I,APPENDIX I IT TRANSPIRED THAT THE X-RAY,ELECTRO THERAPEUTIC APPARATUS AND AC CESSORIES THERETO 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 FAN ETC.WERE ALSO COVERED BY N .E.S.A,THAT THE AOS ACTION OF NOT ALLOWING THE EXTRA SHIFT ALLOWANCE HAD TO BE ENDORSED.DISCUSSING THE CLAIM MADE BY THE ASSESSEE FOR THE INVESTMENT ALLOWANCE ON THE SANITARY WORKS INSTALLE D IN THE TOWN DIVISION,FAA HELD THAT THE P&M WAS USED FOR THE PURPOSE OF DISPOSAL OF THE WASTE M ATERIAL FROM THE RESIDENCES OF THE CITIZENS OF JAMSHEDPUR TO THE CENTRAL EFFLUENT TREATMENT PLANT, THAT THE P&M WAS INSTALLED IN RESIDENTIAL ACCOMMODATION AND IT WAS NOT ENTITLED FOR INVESTMEN T ALLOWANCE,THAT AS PER THE PROVISIONS OF THE PROVISO TO SECTION 32A OF THE ACT INVESTMENT ALLOWA NCE COULD NOT BE ALLOWED FOR ANY MACHINERY/PLANT INSTALLED IN ANY RESIDENTIAL ACCOMM ODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST HOUSE.HE UPHELD THE ACTION OF THE AO.S.HE ALSO HELD THAT THE ASSESSEE WAS NOT ENTITLED FOR THE ADDITIONAL DEPRECIATION BECAUSE TH E CONDITIONS FOR ALLOWING THE ADDITIONAL DEPRECIATION WERE SIMILAR TO INVESTMENT ALLOWANCE.A BOUT THE EXTRA SHIFT ALLOWANCE ON COMPUTER SYSTEMS,FAA HELD THAT SAME WAS NOT ADMISSIBLE AS TH E RULES WERE VERY CLEAR IN THIS REGARD.WITH REGARD TO INVESTMENT ALLOWANCE ON TELEPHONE SYSTEM, FAA HELD THAT THE ASSESSEE DID NOT EXPLAIN WHERE THE TELEPHONE SYSTEM WAS INSTALLED,THAT THE A SSESSEE 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 RE SIDENTIAL ACCOMMODATION, THAT THE ACTION OF THE AO.S WAS TO BE UPHELD. 16.2. BEFORE US,AR SUBMITTED THAT WHILE DECIDING THE APPE AL FOR THE AY.1986-87,TRIBUNAL HAD DISCUSSED,THE ISSUES OF INVESTMENT ALLOWANCE AND EX TRA SHIFT ALLOWANCE AND DEPRECIATION ON VARIOUS ASSETS OF TOWN DIVISION AND OTHER P&M,IN LE NGTH AND HAD DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE .WE FIND THAT IN THE ORDER FOR THE EAR LIER AY.,TRIBUNAL HAS HELD AS UNDER: 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 WHI LE ADJUDICATING THE ISSUE OF INVESTMENT 24 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. ALLOWANCE AND EXTRA SHIFT ALLOWANCE ON VARIOUS ITEM S OF P&M TRIBUNAL HAS 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 TO WN DIVISIONS WATER WORKS,SANITARY WORKS, HOSPITAL AND TECHNICAL AND TRAINING INSTITUTES WHIC H ARE AN INTEGRAL PART OF THE WORKS AND FURTHER ERRED IN GIVING PARTIAL ALLOWANCE OF ADDITIONAL DEP RECIATION AND ESA 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 MANU FACTURING FACILITIES FOR PRODUCING STEEL. THE TOWNSHIP IS AN INTEGRATED PART OF WORKS OF THE ASSE SSEE.THE BACKGROUND OF SETTING UP OF THE TOWNSHIP HAS BEEN FULLY ELABORATED WHILE DEALING WI TH GROUND NO. 14.IN RESPECT OF DEPRECIATION AND INVESTMENT ALLOWANCE THE ASSESSEE MADE THE FOLL OWING 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 SECTION 32(L)(IIA),ADDITIONAL DEPRECIATION IS NOT ALLOWED.THE ASSESSING OFFICER D ISALLOWED INVESTMENT ALLOWANCE ON THE GROUND THAT THE TOWN DIVISION PROVIDES RESIDENTIAL FACILITIES TO THE WORKERS AND STAFF OF THE ASSESSEE COMPANY WELL AS OTHER RESIDENTS OF THE TOW NSHIP AND,THEREFORE, WOULD AMOUNT 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 THE TOWN DIVISION FOR THE PURPOSE OF CLAIMING ADDITIONAL DEPRECIATION. IT HAS CLAIMED AD DITIONAL DEPRECIATION ON THOSE ITEMS OF PLANT AND MACHINERY WHICH ARE INSTALLED IN THE TOWN DIVIS ION LIKE,ELECTRICAL MACHINERY FOR POWER GENERATION, WATER WORKS MACHINERY FOR SUPPLY OF WAT ER, SANITARY MACHINERY FOR DRAINAGE SYSTEM IN THE TOWN DIVISION ETC. THE ASSESSEE ON ITS OWN EXCL UDED PLANT AND MACHINERY INSTALLED IN THE RESIDENTIAL/OFFICE ACCOMMODATION FOR CLAIMING INVES TMENT ALLOWANCE. THE APPLICATION OF 32A(2)(III), IN FACT, WOULD COVER PLANT AND MACHINE RY INSTALLED OWN DIVISION WITHIN THE MEANING OF INDUSTRIAL UNDERTAKING. THE ASSESSING OFFICER, IN HIS ASSESSMENT ORDER, HAS TRIED TO THE MEANING TO BE IMPUTED TO INDUSTRIAL-UNDERTAKING T O ONLY MANUFACTURING PLANT AND MACHINERY. INDUSTRIAL UNDERTAKING WOULD COVER ALL FACETS OF BUSINESS AND, IN SHORT, REFERS TO AN ORGANISATION CARRYING ON MANUFACTURING ACTIVITY.WHAT IS REQUIRED TO BE SEEN IS WHETHER THE PLANT AND MACHINERY IS USED FOR THE PURPOSE OF BUSINESS OF CO NSTRUCTION, MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. IT IS NOT REQUIRED TO BE ESTABLIS HED THAT THE PLANT AND MACHINERY ARE DIRECTLY USED IN THE MANUFACTURING PROCESS.THIS HAS BEEN ESTABLI SH -ED RECENTLY BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JAYANAND KHIRA & COMPANY PVT. L TD., 170 ITR 31, WHERE IT WAS HELD THAT THE EXPRESSION FOR THE PURPOSE OF BUSINESS OF CONSTRUC TION, MANUFACTURE OF PRODUCTION OF IS WIDER IN SCOPE THAN THE EXPRESSION FOR CONSTRUCTION, MANUFAC TURE OR PRODUCTION. IT WAS ALSO BROUGHT TO CIT(A)S NOTICE THAT IN ASSESSEES OWN CASE FOR ASS ESSMENT YEARS 1981-82, 1982-83 AND 1983-84 IT HAS BEEN CONSISTENTLY HELD THAT TRACTORS AND TRA ILERS INSTALLED IN THE TOWN DIVISION, WHICH WERE IN THE NATURE OF EARTH MOVING MACHINERIES, WERE ELI GIBLE 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 MACHIN ERY OR PLANT SPECIFIED IN SUBSECTION (2).SUBSECTION (2) STIPULATES THAT THE PLANT AND MA CHINERY SHOULD BE INSTALLED IN AN INDUSTRIAL UNDERTALCING FOR THE PURPOSE OF BUSINESS OF MANUFAC TURE OR PRODUCTION OF ANY ARTICLE OR THING OTHER THAN THE ARTICLES OR THINGS SPECIFIED IN THE ELEVENTH SCHEDULE. NO DEDUCTION BY WAY OF INVESTMENT ALLOWANCE IS ALLOWABLE IN RESPECT OF (I) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE 25 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. PREMISES OR ANY RESIDENTIAL ACCOMMODATION INCLUDING A GUEST HOUSE,(II) ANY OFFICE APPLIANCES,(III) ANY ROAD TRANSPORT VEHICLES,(IV)ANY SHIP OR PLANT A ND MACHINERY IN RESPECT OF WHICH DEVELOPMENT REBATE WAS OR IS ALLOWABLE AND ANY MACHINERY OR PLA NT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION IN COMPUTING THE TOTAL INCOM E.ACCORDING TO 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 A ND MACHINERY 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 WHEREIN IT HAS BEEN LAID DOWN THAT INVESTMENT ALLOWANCE AND ADDITIONAL DEPRE CIATION CAN BE ALLOWED ONLY WHEN THE PLANT AND MACHINERY IS USED FOR THE BUSINESS OF MANUFACTU RE OR PRODUCTION OF ANY 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) (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 DO ES NOT 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 CONSIDERATIONDEFINIT ELY, THE SCOPE OF EXPRESSION USED IN SECTION 33 FOR THE PURPOSE OF BUSINESS OF MANUFACTURE IS WIDER AND IN THAT CONTEXT, THE HON BLE ITAT,D BENCH IN ASSESSMENT YEAR 1968-69 TO 1971-72 HELD THAT THE PLANT AND MACHINERY INSTALLED FOR PROVIDING NECESSARY FACILITIES TO THE EMPLOYEES FORMED AN INTEGRAL 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 UNDERTAK ING,THE SCOPE HAS BEEN RESTRICTED IN SECTION 32A OF THE I. T.ACT.WITH UTMOST RESPECT, I SUBMIT T HAT THE HONBLE ITAT, D-BENCH, MUMBAI FOR ASSESSMENT YEAR 1981-82 AND 1982-83 IN THE APPELLAN TS CASE DID NOT CONSIDER THE SIGNIFICANCE OF THE WORD INDUSTRIAL UNDERTAKING IN SECTION 32A.TH US, THE CONTEXT IN WHICH THE HONBLE ITAT TREATED THE HOSPITAL AND OTHER FACILITIES AS PART O F THE MANUFACTURING PROCESS WAS DIFFERENT IN ASSESSMENT YEARS 1968-69 TO 1971-72. A SIMILAR COND ITION DID NOT EXIST IN THE ASSESSMENT YEARS UNDER CONSIDERATION. AS OBSERVED EARLIER, THE MACHI NERY AND PLANT MUST HAVE A CLOSE NEXUS WITH THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY AR TICLE OR THING. THE HONBLE CALCUTTA HIGH COURT IN TECHNICO ENTERPRISES PUT. LTD. (SUPRA), MA CHINERY MANUFACTURING 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 WHIC H 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 MANUFAC TURING PROCESS AND MACHINERY ON WHICH INVESTMENT ALLOWANCE IS CLAIMED IS NECESSARY TO MAK E THE ASSESSEES MANUFACTURING UNIT IN A STATE OF OPERATIONAL INTEGRATION. L IN OTHER WORDS, ANY M ACHINERY OR PLANT HAVING A LINK IN THE TOTAL PROCESS OF THE OPERATIONAL INTEGRATION SHOULD BE TA KEN 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 26 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 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 FOL LOWING 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 FO R GRANT 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 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 ASS ESSEE IN THE CASE OF TNVENI TIS SUES LTD (SUPRA), THE HONBLE CALCUTTA HIGH COURT HAS HELD THAT THE ASSESSEE,WHO WAS MANUFACTUR ING TISSUE PAPERS WAS ENTITLED TO INVESTMENT ALLOWANCE ON MOTORS, ELECTNC INSTALLATIONS, UNDERGR OUND 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 MANUFACTU RING ACTIVITY FOR TRANSPORT OF ARTICLES OUT OF OR INTO FACTORY WERE HELD TO BE PLANT ENTITLED TO INVE STMENT ALLOWANCE. WE FEEL THAT WE NEED NOT DISCUSS EACH AND EVERY CASE RELIED ON BY THE ASSESS EE, PARTICULARLY WHEN A VIEW HAS BEEN TAKEN BY THE ITAT, BOMBAY BENCH, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1968-69 TO 1971-72. IN HEIR ORDER DATED 13-10-1976, IT HAS BEEN HELD BY TH E TRIBUNAL THAT MAIN WORKS AND THE TOWNSHIP FORMED AN INTEGRAL PART OF THE WHOLE INDUSTRIAL COM PLEX, ONE OF WHICH CANNOT EXIST WITHOUT THE OTHER. IT HAS BEEN HELD THAT THE PLANT AND MACHINER Y INSTALLED EVEN FOR PROVIDING THE NECESSARY FACILITIES TO THE EMPLOYEES WHICH DOES NOT APPARENT LY HAVE ANY CONNECTION WITH THE MANUFACTURING ACTIVITY IS DIRECTLY NEEDED FOR THE RUNNING OF THE PRIORITY INDUSTRY.WE, THEREFORE, HOLD THAT INVESTMENT ALLOWANCE IS ADMISSIBLE TO THE ASSESSEE ON THE PLANT 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, HOLD THAT ADDITIONAL DEPRECIATION, 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 CALL ED 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 ASSESSE E. 27 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. FOLLOWING THE ORDER FOR THE AY.1986-87,WE ALLOW THE APPEAL FILED BY THE ASSESSEE AND G.17 OF AY. 1987-88, G.18 OF AY.1989-90 AND G.16 OF AY.1990 -91ARE DECIDED IN ITS FAVOUR. 17. NEXT COMMON GROUND OF APPEAL(G.20-1987-88,1989-90,G .17-1990-91) ARISING FOR ALL THE THREE YEARS IS ABOUT INVESTMENT ALLOWANCE ON VARIOUS ITEM S OF P&M.FOLLOWING OUR ORDER FOR THE G.17/18/16 FOR THE AY.S1987-88,1989-90 AND 1990-91, WE DECIDE G.20/G.17 FOR THESE YEARS IN FAVOUR OF THE ASSESSEE,AS THE ISSUE OF INVESTMENT A LLOWANCE ON CERTAIN ITEMS OF P&M WAS DECIDED IN FAVOUR OF THE ASSESSEE BY US,WHILE WE HAD DECI DED THE APPEAL FOR THE YEAR 1986-87(SUPRA). 18. LAST COMMON ISSUE(G.21-1987-88,1989-90,G.18-1990-91 )FOR ALL THE THREE AY.S PERTAINS TO EXPENSES INCURRED IN CONNECTION WITH INCREASE IN AU THORISED SHARE CAPITAL/RIGHT SHARE ISSUE EXPENSE.THE EXPENSES WERE DISALLOWED BY THE AO IN T HE AY.S1987-88,1989-90 AND 1990-91. 18.1. RELYING UPON THE MATTERS OF THE HONBLE SUPREME COU RT IN THE CASE OF BROOKE BOND INDIA LTD.(225ITR798)AND PUNJAB STATE INDUSTRIAL DEVELOPM ENT 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 REL ATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY AND WAS A CAPITAL EXPENDITURE EVEN THOUGH I T MIGHT INCIDENTALLY HELP IN THE BUSINESS OF THE COMPANY AND IN THE PROFIT MAKING,THAT THE ACTIO N OF THE AO WAS AS PER THE PROVISIONS OF LAW. 18.2. BEFORE US,AR AGREED THAT AFTER THE JUDGMENTS OF HON BLE APEX COURT ISSUE HAS TO BE DECIDED AGAINST THE ASSESSEE.FOLLOWING THE ORDER OF THE HON BLE SUPREME COURT WE DISMISS G. 21 AND G.18 OF THE AY.S MENTIONED ABOVE. 19. INVESTMENT ALLOWANCE ON FOREIGN EXCHANGE FLUCTUATIO N(FEF)IS THE SUBJECT MATTER OF G.19 FOR BOTH THE AY.SI.E.1987-88,1989-90.DURING THE ASSESSM ENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD CLAIMED FEF OF RS.13.75 LAKHS AND 20.43 LAKHS R ESPECTIVELY FOR THE AY.S UNDER APPEAL.HE FOUND THAT ASSESSEE HAD CLAIMED THAT DUE TO FEF TH ERE WAS INCREASE IN VALUE OF P&M AND SAME SHOULD BE ALLOWED WHILE COMPUTING THE TAXABLE INCOM E OF THE ASSESSEE FOR THE RESPECTIVE YEARS.AO DID NOT AGREE WITH THE ASSESSEE AND REJEC TED ITS CLAIM.IN THE APPELLATE PROCEEDINGS,FAA RELIED UPON THE JUDGMENT OF KHATAU MUKANJI SPINNING & WEAVING MILLS(222ITR472)AND UPHELD THE ORDER OF THE AO. 19.1. BEFORE US,AR SUBMITTED THAT DETAILS OF INCREASE IN VALUE OF P&M ON ACCOUNT OF FEF WAS GIVEN TO THE AO VIDE NOTE 10 OF ANNUAL ACCOUNTS FOR THE FINANCIAL YEAR ENDING ON 31.03. 1987, THAT THE DECISION OF KHATAU MUKANJI SPINNING & WEAV ING MILLS(SUPRA)WAS HELD TO BE PER INCURI - UM.HE RELIED UPON THE CASES OF ASSOCIATED BEARING C O.LTD.(286ITR341),GUJARAT STATE FERTILISER (259 ITR526) AND GUJARAT SIDHI CEMENT LIMITED(307IT R393). 19.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ISSUE OF FEF HAS BEEN DECIDED BY THE HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF ASSOCIATED BEARING CO.LTD.(SUPRA)IN FOLLOWING MANNER: SECTION 43A PROVIDES THAT IN THE CIRCUMSTANCES SET OUT THE AMOUNT BY WHICH THE LIABILITY IS INCREASED OR REDUCED BY A CHANGE IN THE RATE OF EXC HANGE AT ANY TIME AFTER THE ACQUISITION OF THE ASSETS SHALL BE ADDED OR DEDUCTED FROM THE ACTUAL C OST OF THE ASSETS AS DEFINED IN SECTION 43(1). IN DRAFTING THE PROVISION IN THIS MANNER, THE SECTION AUTOMATICALLY APPLIED TO ALL ALLOWANCES BASED ON ACTUAL COST AS DEFINED IN SECTION 43(1) OF THE ACT. IT IS POINTED OUT THAT THERE WAS THEREFORE NO NEED TO SPECIFY ALL THE ALLOWANCES INDIVIDUALLY AND NO S UCH SPECIFICATION OF ALLOWANCES HAS BEEN MADE. FOR EXAMPLE, EVEN DEPRECIATION GRANTED UNDER SECTIO N 33(2) HAS NOT INDIVIDUALLY BEEN MENTIONED. THIS VIEW IS SUPPORTED BY THE FACT THAT WHERE THE L EGISLATURE INTENDED TO EXCLUDE THE ALLOWANCE BASED ON ACTUAL COST SUCH AS DEVELOPMENT REBATE UND ER SECTION 33, A SPECIFIC EXCLUSION HAD TO BE MADE BY SECTION 43A(2). IN CONTRADISTINCTION, SECTI ON 43A(1) MENTIONS OTHER ALLOWANCES INTENDED TO BE VARIED WHICH WERE NOT BASED ON ACTUAL COST SU CH AS SECTIONS 35(1)(IV), 35A, 36(1)(IX) OR FOR THE PURPOSES OF SECTION 48. IT IS POINTED OUT THAT IT WAS NECESSARY TO INDIVIDUALLY MENTION THESE ALLOWANCES ONLY BECAUSE THEY WERE NOT AUTOMATICALLY VARIED SINCE THEY WERE NOT BASED ON ACTUAL COST AS DEFINED UNDER SECTION 43(1). 28 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. IT IS SUBMITTED THAT SECTION 43A(1) COMMENCES WITH A NON OBSTANTE CLAUSE WHICH OVERRIDES ALL THE OTHER PROVISIONS OF THE ACT AND MUST THERE-FORE, BE GIVEN FULL AND PROPER EFFECT BY, INTER ALIA, ALTERING THE ACTUAL COST FOR THE PURPOSES OF SECTIO N 32A AS WELL. IF THE LEGISLATURE HAD INTENDED THAT SECTION 43A(1) WAS NOT TO APPLY TO SECTION 32A, WHE N INTRODUCING SECTION 32A IT WOULD HAVE INTRODUCED A NON OBSTANTE CLAUSE OR ADDED TO THE EX CLUSIONS IN SECTION 43A(2). IT IS SUBMITTED THAT THERE IS NOTHING TO SUGGEST THAT SECTION 43A IS NOT TO APPLY TO SECTION 32A AND IN FACT EVERY CANON OF INTERPRETATION DEMANDS THAT SECTION 43A IS APPLI CABLE TO SECTION 32A. CIT V. GUJARAT STATE FERTILIZERS CO. LTD. [2003] 259 ITR 526 (GUJ) [FB]. THE ONLY ARGUMENT OF THE REVENUE IS THAT INVESTMENT ALLOWANCE UNDER SECTION 32A IS A ONE TIME ALLOWANCE WHICH HAD BEEN ALLOWED IN THE EARLIER YEA R AND THEREFORE, NO FURTHER INVESTMENT ALLOWANCE CAN BE GRANTED BY APPLYING SECTION 43A. T HE REVENUES STAND IS CLEARLY UNTENABLE AS HAD THE LEGISLATURE INTENDED TO EXCLUDE ONE TIME AL LOWANCES, SECTION 43A(2) WOULD BECOME REDUNDANT. FURTHER, THE LEGISLATURE HAS EXPRESSLY R EFERRED TO THE ONE TIME ALLOWANCE IN SECTION 43A(1) ITSELF SUCH AS SECTIONS 35(1)(IV), 35A ETC. THERE IS, THEREFORE, NOTHING TO SUGGEST THAT ONE TIME ALLOWANCES ARE TO BE EXCLUDED. IN FACT, THERE ARE SEVERAL REASONS TO SHOW THAT ONE TIME ALLOWANCES ARE TO BE INCLUDED.FOR INSTANCE, SECTION 32A ITSELF PROVIDES THAT INVESTMENT ALLOWANCE MAY BE AVAILED OF DURING THE PERIOD OF EIGHT YEARS (CIT V. GUJARAT STATE FERTILIZERS CO. LTD. [2003] 259 ITR 526 (GUJ) [FB]). SECTION 43A(1) IN EXPRESS TERMS APPLIES WHENEVER TH ERE IS AN INCREASE OR DECREASE IN LIABILITY DUE TO A CHANGE IN THE RATE OF EXCHANGE AT ANY TIME AFT ER THE ACQUISITION OF THE ASSET. THE SECTION EXPRESSLY PROVIDES THAT SUCH VARIATION DURING THE P REVIOUS YEAR SHALL BE ADDED TO OR REDUCED FROM, INTER ALIA, THE ACTUAL COST. (CIT V. GUJARAT STATE FERTILIZERS CO. LTD. [2003] 259 ITR 526 (GUJ) [FB]). IN FACT IT IS SUGGESTED THAT SECTION 43A COU LD APPLY AS A RESULT OF VARIATION IN THE RATE OF EXCHANGE AT ANY TIME AND NOT MERELY DURING THE EIGH T YEARS WITHIN WHICH INVESTMENT ALLOWANCE MUST BE AVAILED OF. SECTION 43A IS A BENEFICIAL PROVISION WHICH SHOULD BE LIBERALLY CONSTRUED SO AS TO FURTHER ITS OBJECT AND SHOULD BE GIVEN FULL EFFECT TO. THE INTERPRETAT ION SUGGESTED BY THE DEPARTMENT WOULD NULLIFY ITS OBJECT AND RENDER THE SAME OTIOSE.THE DEPRECIATION UNDER SECTION 32 IS ALSO BASED UPON ACTUAL COST AS DEFINED UNDER SECTION 43(1) OF THE ACT AND THE DEPARTMENT HAS ACCEPTED IN THIS VERY CASE THAT THE DEPRECIATION CAN BE VARIED BY APPLYING SEC TION 43A(1). THERE IS NO REASON WHY SECTION 43A(1) SHOULD BE APPLIED TO VARY DEPRECIATION BUT N OT INVESTMENT ALLOWANCE (CIT V. BAKER MERCER INDIA P. LTD. [1992] 196 ITR 667 (BOM), PADAMJEE PU LP AND PAPER MILLS LTD. V. CIT [1994] 210 ITR 97 (BOM), CIT V. MOTOR INDUSTRIES CO. LTD. [198 8] 173 ITR 374 (KARN) AND CIT V. WIDIA (INDIA) LTD. [1992] 193 ITR 475 (KARN)).THE DECISIO N OF THE BOMBAY HIGH COURT IN KHATAU MAKANJI SPG. AND WVG. CO. LTD. V. CIT [1996] 222 IT R 472 REFERRED TO BY THE REVENUE CAN BE DISTINGUISHED SINCE THERE WAS NO CONSIDERATION OF T HE ISSUES ARISING AND THE SAID JUDGMENT SETS OUT NO REASON WHATSOEVER FOR ARRIVING AT ITS CONCLUSION . FURTHER, THE LATEST DECISION OF THE SUPREME COURT IN CIT V. SHRI AMBIKA MILLS LTD. [1993] 201 ITR (ST.) 63, WHEREIN THE SUPREME COURT APPROVED THE GUJARAT HIGH COURTS VIEW ON THE MERIT S OF THAT CASE SUPERSEDES THE DECISION OF THE BOMBAY HIGH COURT IN KHATAU MAKANJIS CASE [1996] 2 22 ITR 472.THE SAID DECISION IN KHATAU MAKANJIS CASE [1996] 222 ITR 472 (BOM) BEING A JUD GMENT PER INCURIAM, CIT V. MODU TIMBLO (INDIVIDUAL) [1994] 206 ITR 647 (BOM), AND PASSED S UB SILENTIO AND BEING INCONSISTENT WITH THE EARLIER DECISIONS OF THIS COURT AND OF THE SUPREME COURT IS ERRONEOUS AND CANNOT BE USED BY THE REVENUE TO DEPRIVE THE ASSESSEE OF THE BENEFIT OF I NVESTMENT ALLOWANCE ON THE INCREASED LOAN LIABILITY CONSEQUENT UPON THE DEPRECIATION OF THE I NDIAN CURRENCY IN THE FOREIGN EXCHANGE MARKET.IN THE LIGHT OF THE ABOVE DISCUSSION, IT MUS T BE HELD THAT THE REVENUE ERRED IN HOLDING THAT THE SAID INVESTMENT ALLOWANCE WAS NOT AVAILABLE IN RESPECT OF THE ENHANCED LIABILITY DUE TO THE FLUCTUATION IN THE FOREIGN EXCHANGE MARKET. THE ISS UE MUST ACCORDINGLY BE ANSWERED IN THE AFFIRMATIVE IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE. . WE FIND THAT IN THE ABOVE MATTER JUDGMENT OF KHATA U MUKANJI SPINNING & WEAVING MILLS (SUPRA),RELIED UPON BY THE FAA,HAS BEEN REVERSED.RE SPECTUFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT,DELIVERED IN THE MATTER OF ASSOCIATED BEARING CO.LTD.(SUPRA), WE DECIDE G.19 FOR BOTH THE AY.S,IN FAVOUR OF THE A SSESSEE . 29 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 20. NEXT GROUND OF APPEAL IS ABOUT RECEIPT FROM AHMEDAB AD ADVANCE MILLS(G.1-1989-90,1990- 91).DURING THE HEARING BEFORE US,IT WAS SUBMITTED T HAT PAYMENT TO AHMEDABAD ADVACNE MILLS HAD BEEN ALLOWED IN EARLIER AY.S,THAT IN VIEW OF THAT G ROUND DID NOT SURVIVE,THAT IN THE EVENT IT WAS HELD BY HIGHER JUDICIAL FORUMS THAT PAYMENT OF AHME DABAD ADVACNE MILLS WERE NOT DEDUCTIBLE AS CAPITAL IN NATURE RECEIPTS SHOULD NOT BE TAXED.WE F IND THAT THE ASSESSEE IS ASKING US TO DEAL WITH THE SITUATION THAT MAY ARISE IN FUTURE.WE ARE NOT I N A POSITION TO DEAL WITH SUCH EVENTUALITY. THEREFORE,G.1,FOR BOTH THE AY.S,IS BEING DISMISSED AS INFRUCTUOUS. 21. LAST COMMON GROUND FOR THE LAST TWO AY.SPERTAINS TO EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE(G.10-1989-90,G.9-1990-91).ASSSESSEE HAD C LAIMED EXPENDITURE OF RS.26.55 LAKHS AND RS.5.98 CRORES UNDER THE HEAD EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE FOR THE AY.S UNDER APPEAL.AO REJECTED THE CLAIM MADE BY THE ASSESSEE . IN THE APPELLATE PROCEEDINGS,FAA UPHELD THE ORDER OF THE AO(PG.50-53,PARAGRAPH 22-22.2).BEFORE US, REPRESENTATIVES OF BOTH THE SIDES AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBNAL DELIVERED IN THE MATTER OF GROUP CONCERNS.FURTHER,AR RELIED UPON THE JUDGMENT OF SECURE METERS (321ITR611) DELIVERED BY THE HONBLE RAJASTHAN HIGH COURT. 21.1. WE FIND THAT IN THE CASE OF SECURE METERS(SUPRA)ISS UE OF EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE HAS BEEN DEALT WITH IN FOLLOWING MANNER: COMING TO THE SECOND QUESTION, THE LEARNED TRIBUNA L IN THIS REGARD HAS HELD THAT THE DECISION OF THE HON'BLE SUPREME COURT IN BROOKE BOND INDIA LTD. V. CIT REPORTED IN [1997] 225 ITR 798 IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE BEC AUSE THAT WAS A SITUATION IN WHICH EXPENDITURE ON ISSUE OF SHARES WAS HELD TO BE INELIGIBLE FOR DEDUC TION,WHILE THE ASSESSEE HAS ISSUED DEBENTURES FOR WHICH RS. 44 LAKHS WAS CLAIMED AS DEDUCTION AND IT WAS CONSIDERED THAT THIS ASPECT IS SETTLED BY SEVERAL DECISIONS OF VARIOUS HIGH COURTS AND IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN INDIA CEMENTS LTD. V. CIT REPORTED IN [1966] 60 ITR 52, THAT A LOAN IS NOT AN ASSET OR ADVANCE OF ENDURING NATURE AND THE PURPOSE OF TAKING LOAN IS T OTALLY AN IRRELEVANT CONSIDERATION AND HENCE THE DEDUCTION ON ACCOUNT OF INTEREST ON LOANS CANNOT BE DENIED. THEN, THE LEARNED TRIBUNAL ALSO PROCEEDED TO RELY UPON ANOTHER JUDGMENT OF THE JAIP UR BENCH OF THE TRIBUNAL IN THE CASE OF RAJASTHAN FINANCIAL CORPORATION V. DEPUTY CIT [1997 ] TW-501, HOLDING THAT THE EXPENDITURE INCURRED FOR RAISING CAPITAL THROUGH BONDS IN BUSIN ESS WAS REVENUE IN NATURE AND IT WAS HELD THAT SINCE IN THE PRESENT CASE THE ASSESSEE HAD INCURRED EXPENSES OF RS. 44 LAKHS ON ISSUANCE OF DEBENTURES BEING A LOAN, IN OUR CONSIDERED OPINION, THERE IS NO BASIS FOR NOT ALLOWING DEDUCTION FOR THE ENTIRE SUM AND THUS THIS ADDITION WAS DELET ED. WE HAVE GONE THROUGH THE JUDGMENT IN BROOKE BOND IN DIA LTD.'S CASE [1997] 225 ITR 798 (SC) AND FIND THAT THAT WAS A CASE WHERE THE REGISTRATIO N FEE TO THE TUNE OF RS. 1,50,000 WAS PAID TO THE REGISTRAR OF COMPANIES FOR INCREASING THE SHARE CAP ITAL OF THE COMPANY, WHILE IN THE CASE OF INDIA CEMENTS LTD. [1966] 60 ITR 52, THE MATTER RELATED T O THE BORROWING OF RS.40 LAKHS FROM A FINANCIAL INSTITUTION, WHICH LOAN WAS SECURED BY A CHARGE ON THE FIXED ASSETS OF THE COMPANY. THE HON'BLE SUPREME COURT IN THIS JUDGMENT CONSIDERED V ARIOUS ASPECTS OF THE MATTER INCLUDING THE PREVIOUS ENGLISH JUDGMENTS AND COUPLE OF JUDGMENTS OF THE ENGLISH COURTS BASED ON THE ENGLISH INCOME TAX ACT AND PROCEEDED TO DRAW DISTINCTION BE TWEEN THE INCOME TAX LAW IN ENGLAND AND INDIA.NOT ONLY THIS, THE HON'BLE SUPREME COURT FURT HER PROCEEDED TO EXAMINE A NUMBER OF CASES DECIDED BY VARIOUS HIGH COURTS LIKE KERALA, ANDHRA PRADESH, CALCUTTA, BOMBAY, ETC., AND HAD GONE TO THE EXTENT OF HOLDING THAT SOME OF THE JUDG MENTS WERE WRONGLY DECIDED. THEN, THE HON'BLE SUPREME COURT PROCEEDED TO HOLD AS UNDER (PAGE 63) : '10.TO SUMMARISE THIS PART OF THE CASE, WE ARE OF T HE OPINION THAT : (A) THE LOAN OBTAINED IS NOT AN ASSET OR ADVANTAGE OF AN ENDURING NATURE ; (B) THAT THE EXPENDITURE WAS MADE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD ; AND (C) THAT IT IS IRRELEVANT TO CONSIDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINED.' THUS,IT WAS HELD THAT THE EXPENDITURE INCURRED IN P ROCURING THE LOAN WAS REVENUE EXPENDITURE WITHIN SECTION 10(2)(XV) OF THE OLD INCOME-TAX ACT, WHICH CORRESPONDS TO SECTION 37 OF THE PRESENT 30 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. ACT. BY GOING THROUGH THE SAID JUDGMENT, IT FURTHER TRANSPIRES THAT THE HON'BLE SUPREME COURT ALSO PROCEEDED TO EXAMINE THE ASPECT OF PURPOSE OF RAISI NG LOAN AND ITS IMMEDIATE OR SUBSEQUENT UTILISATION FOR DIFFERENT PURPOSE AND EXAMINED THAT EVEN IF A LOAN IS RAISED FOR PURCHASING RAW MATERIAL AND AFTER RAISING THE LOAN THE COMPANY FIN DS IT UNNECESSARY TO BY RAW MATERIAL AND SPENDS THE AMOUNT ON CAPITAL ASSET, STILL IT CANNOT BE SAID TO BE CAPITAL EXPENDITURE, AS IT WAS HELD THAT THE PURPOSE FOR WHICH THE NEW LOAN WAS REQUIRE D WAS IRRELEVANT TO THE QUESTION AS TO WHETHER THE EXPENDITURE FOR OBTAINING LOAN WAS REVENUE OR C APITAL EXPENDITURE. WE ARE TOLD THAT RELYING ON THIS JUDGMENT MANY OF THE HIGH COURTS OF THE COUNTR Y HAVE CONSISTENTLY TAKEN THE VIEW THAT THE EXPENDITURE INCURRED IN ISSUING ANY DEBENTURES AND RAISING LOAN ON DEBENTURES IS ADMISSIBLE OBVIOUSLY BECAUSE THE DEBENTURE IS ALSO A LOAN. AT THIS STAGE IT WAS CONTENDED BY THE LEARNED COUNS EL FOR THE REVENUE THAT A DISTINCTION SHOULD BE DRAWN BETWEEN THE CONVERTIBLE AND NON-CONVERTIBLE D EBENTURES INASMUCH AS IF THE DEBENTURE IS CONVERTED INTO SHARES THEN IT PARTAKES OF THE CHARA CTER OF CAPITAL AND IN THAT EVENT THE EXPENDITURE WOULD NOT BE REVENUE EXPENDITURE AND WOULD BE CAPIT AL EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE INFORMS THAT THOUGH IT HAS NOT COME ON REC ORD SO FAR BUT AS A MATTER OF FACT THE DEBENTURES ISSUED WERE OF CONVERTIBLE NATURE. THEN, THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED RELYING UPON THE JUDGMENT OF THE CALCUTTA HIGH COUR T IN CIT V. EAST INDIA HOTELS LTD. REPORTED IN [2001] 252 ITR 860, THAT THE EXPENDITURE INCURRED E VEN IN RAISING LOAN BY CONVERTIBLE DEBENTURE WOULD ALSO BE ADMISSIBLE AS REVENUE EXPENDITURE.THE CALCUTTA HIGH COURT HAD ADOPTED THE REASONING THAT CON-VERSION OF DEBENTURES RESULTS IN REPAYMENT OF LOAN AND ISSUANCE OF SHARES.THIS IS ONE ASPECT OF THE MATTER. IN OUR VIEW, THE OTHER MORE IMPORTANT ASPECT OF THE MATTER IS THAT THE HON'BLE SUPREME COURT IN INDIA CEMENTS' CASE [1966] 60 ITR 52 HAS CLEARLY EXCLUDED THIS ASPECT FROM CONSIDERATION BY HOLDING THAT IT IS IRRELEVANT TO CONSIDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINED.THE DEBENTURES WHEN ISSUED IS A LOAN AND, THEREFORE, WHETHER IT IS CONVERTIBLE OR NON- CONVERTIBLE DOES NOT MILITATE AGAINST THE NATURE OF THE DEBENTURE, BEING LOAN AND, THEREFORE, THE EXPENDITURE INCURRED WOULD BE ADMISSIBLE AS REVENUE EXPENDITURE. THUS, WE DO NOT FIND ANY ERROR IN THE FINDING OF THE LEARNED TRIBUNAL ON THIS ASPE CT ALSO. CONSEQUENTLY, QUESTION NO. 2 ALSO AS FRAMED, IS REQUIRED TO BE AND IS ANSWERED AGAINST T HE REVENUE AND IN FAVOUR OF THE ASSESSEE. RESPECTFULLY,FOLLOWING THE ORDER OF THE HONBLE RAJ ASTHAN HIGH COURT,WE DECIDE G.10/9 FOR THE AY.1989-90 AND 1990-91 IN FAVOUR OF THE ASSESSEE . 22. NOW WE WOULD TAKE UP THE GROUNDS THAT ARE AY.S SPEC IFIC. FIRST,WE WILL DISCUSS THE SPECIFIC GROUNDS RAISED FOR AY.1987-1988-G.9 FOR THAT YEAR I S ABOUT DISALLOWANCE MADE UNDER RULE 40A (5) IN RESPECT OF DEEMED PERQUISITES. 22.1. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT IN THE RETURNS OF INCOME,THE ASSESSEE HAD COMPUTED THE DISALLOWANCE UNDER SECTION 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 QUANTIFY THE DISALLO WANCE U/S. 40A(5).HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS,THE ASSESSEE QUANTIFIED THE DISALLOWANCE U/S. 40A(5) OF THE ACT.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 REQUIRED DETAILS. BUT,HE CULLED OUT THE DETAILS OF SUCH EXPE NSES INCURRED ON THE MAINTENANCE OF ACCOMMOD - ATIONS WHICH WERE GIVEN TO THE EMPLOYEES,OTHER THAN THE MANAGING DIRECTOR AND HE MADE DISALLOWANCE OF RS.15 LAKHS.IN THE APPELLATE PROCEE DINGS FAA,HELD THAT AN IDENTICAL ISSUE CAME UP FOR THE CONSIDERATION OF THE ITAT,MUMBAI BENCH A IN THE ASSESSEES OWN CASE FOR AY. 1988- 89(ITA/3222/BOM/192 DTD. 25.01.2002),THAT IN AY.198 8-89 THE EXPENSES INCURRED TOWARDS MAINTENANCE OF PROPERTY,SWEEPER, WAGES, REPAIRS,DEP RECIATION,SOFT FURNISHINGS ETC. WERE QUANTIFI - ED,THAT THE THEN FAA HAD SUSTAINED THE DISALLOWANCE IN PART,THAT THE ITAT HAD CONFIRMED THE ORDER OF THE FAA.FOLLOWING THAT ORDER,HE PARTIALLY ALLOWED THE APPEAL FILED BY THE ASSESSEE . BEFORE US,REPRESENTATIVES OF BOTH THE SIDES,AGREED THAT ISSUE OF DISALLOWANCE OF PERQUISITES U/S.40 31 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. A(5)WAS ADJUDICATED UPON BY THE TRIBUNAL WHILE DECI DING THE APPEAL FOR THE AY.1986-87 (SUPRA).WE FIND THAT TRIBUNAL HAS DECIDED THE ISSUE IN THE SAID ORDER AS UNDER : 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 SE VERAL ASSESSMENT YEARS SIMILAR ISSUE HAD COME UP FOR CONSIDERATION IN ASSESSEES CASE BEFORE THE ITAT AND THE TRIBUNAL IN I.T.A. NO.3222/BOM/92 BY FOLLOWING THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF LUBRIZOL INDIA LTD.,187 ITR 25 (BOM) WAS PLEASED TO UPHOLD SUCH DISALLOWANCE.WE ARE OF THE VIEW THAT THE ESTIMATE OF DISALLOWANCE U/S.4 0A(5) AS MADE BY THE CIT(A) IS PROPER AND HAS TO BE UPHELD.GROUND NO 11 IS THEREFORE,DISM ISS ED. FOLLOWING THE ABOVE,WE CONFIRM THE ORDER OF THE FAA AND DISMISS GROUND NO.11. CONSIDERING THE ABOVE WE DIRECT THAT DISALLOWANCE F OR ALL THE THREE AY.SSHOULD BE RESTRICTED TO 25%.AS THE FAA HAS ALREADY FOLLOWED THE DECISION OF THE TRIBUNAL FOR AY.1988-89,SO WE DECIDE GROUND NO.G.9 FOR THE AY.1987-88 AGAINST THE ASSESS EE . 23 .NEXT GROUND DEALS WITH EXPENDITURE,AMOUNTING TO RS .4,58,110/-,INCURRED ON CONVERSION OF PARTLY CONVERTIBLE DEBENTURES IN TO SHARES (G.10).B EFORE US,AR FAIRLY CONCEDED THAT SIMILAR ISSUE WAS DECIDED AGAINST THE ASSESSEE IN THE AY.1986-87 BY THE TRIBUNAL.WE FIND THAT FOLLOWING THE JUDGMENTS OF BROOKE BOND INDIA LTD.(225ITR798)AND P UNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD.(225ITR792),TRIBUNAL HAD DECIDED TH E IDENTICAL ISSUE AGAINST THE ASSESSEE. THEREFORE, WE DISMISS G.10 FILED BY THE ASSESSEE ,F OR THE AY.1987-88. 24. ISSUE OF DISALLOWANCE OF INVESTMENT ALLOWANCE AND E SA ON WATER WORKS(RS.47.28 LAKHS) IS THE SUBJECT MATTER OF G.18 FOR THE AY.1987-88.DURIN G THE ASSESSMENT PROCEEDINGS,AO HAD HELD THAT INVESTMENT ALLOWANCE AND EXTRA SHIFT ALLOWANCE WAS NOT AVAILABLE ON MACHINERY SUPPLYING WATER AS SAME WAS NOT DIRECTLY RELATED TO MANUFACTU RING ACTIVITIES OF THE ASSESSEE . DURING THE APPELLATE PROCEEDINGS IT WAS SUBMITTED T HAT WATER WAS DRAWN FROM RIVER KHARKHAI, RIVER SUBARNAREKHA AND DALMA LAKE FOR USING IN MANU FACTURING 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 TRANSPORTAT ION AND SUPPLY OF WATER FORMED AN INTEGRAL PART OF THE COMPANYS BUSINESS OF MANUFACTURING IRON 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 MANU FACTURING 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 PA RTLY FOR THE PURPOSE OF SUPPLY OF WATER TO THE RESIDENTIAL QUARTERS,THAT THE INVESTMENT ALLOWANCE WAS ADMISSIBLE ON THE PLANT AND MACHINERY WHICH WAS USED FOR THE PURPOSE OF MANUFACTURE.HE DI RECTED TO THE AO TO SEGREGATE THE VALUE OF THE P&M INTO TWO CATEGORIES AND TO ALLOW THE INVEST MENT ALLOWANCE ON THE P&M ATTRIBUTABLE TO THE MANUFACTURING PROCESS AND NOT TO ALLOW INVESTME NT ALLOWANCE ON THE PLANT AND MACHINERY WHICH WAS USED FOR THE RESIDENTIAL PURPOSES. WE FIND THAT IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE IN THE APPEAL FOR AY.1986- 87(SUPRA), WHILE DECIDING THE ISSUE OF INVESTMENT A LLOWANCE AND ESA OF TOWN DIVISION.FOLLOWING THE SAID ORDER,G.18 IS DECIDED IN FAVOUR OF THE ASS ESSEE . 25. G.22 IS ABOUT BAD AND DOUBTFUL WRITTEN OFF DUES FRO M GOVERNMENT DEPARTMENTS.AO FOUND THAT THE ASSESSEE HAD CLAIMED A SUM OF RS.8,90,038/-DUE FROM THE GOVERNMENT DEPARTMENTS /OFFICIALS AS BAD DEBTS.HE STATED THAT NO EVIDENCE WAS PRODUCE D TO ESTABLISH THAT THE DEBTS HAD BECOME BAD DURING THE PREVIOUS YEAR. THE ASSESSEE SUBMITTED BE FORE THE AO THAT THERE WAS NO HOPE OF RECOVERY,BUT HE DID NOT ACCEPT THE CONTENTION OF TH E ASSESSEE ON THE GROUND THAT THE AMOUNTS DUE WERE FROM THE GOVT.AND SEMI GOVERNMENT ORGANISATION S AND THE RECOVERY WAS POSSIBLE.IN THE 32 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. APPELLATE PROCEEDINGS,FAA HELD THAT THE ARGUMENTS O F THE ASSESSEE WERE VAGUE AND GENERAL IN NATURE,THAT NO TROUBLE WAS TAKEN BY THE ASSESSEE TO RECOVER THE DUES FROM THE GOVERNMENT DEPARTMENTS AND OFFICERS.HE UPHELD THE ORDER OF THE AO. 25.1. AR STATED THAT ISSUE OF BAD DEBTS FROM GOVERNMENT A GENCIES WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE ADJUDICATING THE AP PEAL FOR PREVIOUS AY.WE FIND THAT IDENTICAL ISSUE HAS BEEN DEALT BY THE TRIBUNAL IN THE ORDER F OR THE AY.1986-87(SUPRA)AS UNDER: 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 ASSESSEE HAS CONSTRUCTED HOUSES, BUNGALOWS,FLATS, ETC., FOR ITS EMPLOYEES ON SUCH LA ND. A FEW PRIVATC PARTIES ENGAGED IN TRADE, COMMERCE AND CONTRACT WORK IN JAMSHEDPUR HAV E BEEN GIVEN SOME PLOTS OF LAND BY THE ASSESSEE FOR CONSTRUCTION OF RESIDENTIAL ACCOMM ODATION.VARIOUS DEPARTMENTS OF THE CENTRAL AND STATE GOVERNMENTS LIKE CENTRAL EXCISE, INCOME-TAX,SALES-TAX,POLICE,JUDICIAL OFFICIALS,DEPUTY COMMISSIONERSOFFICE STAFF, ETC.,H AVE REQUISITIONED THE ASSESSEES BUNGALOWS,HOUSES AND FLATS FOR RESIDENTIAL PURPOSES FOR THE OFFICERS OF THESE DEPARTMENTS. THE ASSESSEE HAD, IN ACCORDANCE WITH ITS SCALE OF C HARGING OF RENT FOR THE WATER CHARGES AND SEWAGE CHARGES, RAISED BILLS EITHER AGAINST THE SPE CIFIC DEPARTMENTS OR THE SPECIFIC OFFICERS OCCUPYING THESE ACCOMMODATIONS. THE GOVERNMENT OFFI CIALS IN SPITE OF REPEATED REMINDERS, IGNORED THE PAYMENT OF THE RENTAL AND OT HER CHARGES FOR THE ACCOMMODATIONS OCCUPIED BY THEM AND ON THEIR TRANSFERS, EVEN THE C ONCERNED DEPARTMENTS DISOWNED THEIR LIABILITY ON THE GROUND THAT IT WAS THE LIABILITY O F THE CONCERNED OFFICERS TO PAY THE RENT AND THE OTHER CHARGES OF THE ACCOMMODATION. IN THESE CI RCUMSTANCES, THE ASSESSEE FOUND ITSELF IN AN UNENVIABLE POSITION OF TRACING THE GOVERNMENT OFFICERS WHO ARE TRANSFERRED FROM JAMSHEDPUR AND RAISING CLAIMS ON THE OFFICERS WHO W ERE IN OCCUPATION OF THE ACCOMMODATION WHO FLATLY REFUSE TO MEET THEIR OBLIG ATIONS.IN THESE CIRCUMSTANCES, THE ASSESSEE HAD NO OTHER BUT TO WRITE OFF AS BAD A SUM OF RS. 25,53,593/- WHICH HAS BEEN ACCUMULATED OVER A LONG PERIOD IN THE PAST TO UPDAT E ITS ACCOUNTS.THE ASSESSING OFFICER AND THE CIT(A) REFUSED TO ALLOW THE CLAIM OF THE AS SESSEE ON THE GROUND THAT THE POSSIBILITY OF RECOVERY CANNOT BE RULED OUT AND THAT THE DUES W ERE FROM GOVERNMENT DEPARTMENTS. 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 STATE GOVERNMENT OR THE CONCERNED DEPARTMENTS AND THE AMOUNT WHICH COULD NO T BE RECOVERED, HAVING BEEN CONSIDERED AS INCOME ON ACCRUAL BASIS IN THE PAST, IT HAD NO OTHER ALTERNATIVE BUT TO WRITE OFF THIS AMOUNT AS IRRECOVERABLE DEBTS. IN THIS CON NECTION RELIANCE WAS PLACED ON THE DECISION OF THE BOMBAY HIGH COURT IN JETHABHAI HIIJ I V/S. CIT, 120 ITR 792 WHEREIN THE FOLLOWING PRINCIPLES HAVE BEEN LAID DOWN: PROCEEDIN GS TAKEN ARE PENDING IN THE YEAR FOR WHICH THE CLAIM FOR BAD DEBT IS MADE AND THEY SUBSE QUENTLY END IN A DECREE IN FAVOUR OF THE ASSESSEE.IT WAS THEREFORE, SUBMITTED THAT THE B AD 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 PROV IDENCE.IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE HONBLE BOMBAY HIGH COURT WE DIREC T THAT THE DEDUCTION CLAIMED 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 TRIBUNA L FOR THE AY.1985-86 WAS CHALLENGED AND ISSUE OF WRITING OFF OF DEBTS WAS AGITATED BEFORE T HE HONBLE COURT.(IT APPEAL NO.3176 OF 2010- QUESTION OF LAW NO.E). FOLLOWING THE ABOVE GROUND NO.24 IS ALLOWED 33 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. FOLLOWING THE ORDER FOR THE LAST AY.G.22 FOR THE AY .1987-88 IS DECIDED IN FAVOUR OF THE ASSESSEE. 26. LAST GROUND OF APPEAL FOR THE YEAR DEALS WITH DISAL LOWANCE OF EXPENDITURE,AMOUNTING TO RS.24,528/-,INCURRED FOR AGM. 26.1. BEFORE US,AR AGREED THAT EXPENDITURE INCURRED FOR A GM WAS DISALLOWED BY THE TRIBUNAL WHILE DECIDING THE APPEAL FOR THE AY.1986-87.WE FIN D THAT AT PARAGRAPH 6(PG.8-9)OF THE SAID ORDER ISSUE IS DECIDED AGAINST THE ASSESSEE COMPANY.FOLLO WING THAT ORDER,WE DISMISS GROUND NO.24 FOR THE AY.1987-88. 27. OUT OF THREE EXCLUSIVE GROUNDS OF APPEAL FOR THE AY .1989-90,FIRST GROUND IS ABOUT CONTRIBUTION OF IIT KHARGARPUR OF RS.3,00,000/-(G.2 2).DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD MADE A CONTRIBUTION OF RS.3 LAKHS TO IIT SITUATED AT KHARGARPUR.HE WAS OF THE OPINION THAT THE EXPENDITU RE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE .IN THE APPELLATE PROCEEDINGS FAA CONFIRMED THE ORDER OF THE AO,AS HE WAS ALSO OF THE OPINION THAT THERE WAS NO RELATION BETWEEN THE CONTRIBUTION MADE AND THE BUSINESS OF THE ASSESSEE . 27.2. BEFORE US,AR SUBMITTED THAT IIT KHARAGPUR WAS CARRY ING OUT RESEARCH WORK JOINTLY WITH THE ASSESSEE IN THE FIELD OF METALLURGICAL,THAT THE AS SESSEE WAS RECRUITING ENGINEERS FROM THE INSTITUTION EVERY YEAR, THAT CONTRIBUTION MADE BY T HE ASSESSEE TO OTHER INSTITUTIONS HAD BEEN ALLOWED BY THE TRIBUNAL IN EARLIER AY.SDR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 27.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE DECIDING THE APPEAL FOR THE AY.1986-87(SUPRA)CONTRI BUTION MADE BY THE ASSESSEE TO XAVIER LABOUR RELATIONS INSTITUTE(XLRI),JAMSHEDPUR HAS BEE N ALLOWED WITH A CONDITION THAT ASSESSEE WOULD PRODUCE NECESSARY DOCUMENTS IN THIS REGARD.FO LLOWING THE SAME PRINCIPLE,WE ALLOW G.22 FOR THE AY.1989 -1990. 28. IN THE NEXT GROUND ISSUE PERTAINS TO CONTRIBUTIONS RANKING AS BUSINESS EXPENDITURE,AMOUNTING TO RS.50.82 LAKHS(G.23).DURING THE ASSESSMENT PROCE EDINGS AO FOUND THAT THE ASSESSEE HAD CLAIMED AND EXPENDITURE OF RS.71.99 LAKHS FOR VARIO US CONTRIBUTIONS MADE DURING THE YEAR.HE CALLED FOR THE DETAILS IN THIS REGARD AND AFTER CON SIDERING THE SAME,HE HELD THAT THE ASSESSEE HAD NOT PRODUCED EVIDENCE ABOUT THE CONTRIBUTIONS MADE BY IT FOR RS.50.82 LAKHS.HE ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.21.17 LAKHS.IN THE APPELLATE PROCEEDINGS,FAA HELD THAT THE CONTRIBUTIONS MADE BY THE ASSESSEE WERE NOT DIFFER ENT FROM THE CONTRIBUTIONS TO VARIOUS INSTITUTIONS IN DISCHARGING THE ASSESSEE S OBLIGAT ION TO PROVIDE CIVIC AMENITIES AT JAMSHEDPUR. BUT,FINALLY HE HELD THAT IN ABSENCE OF EVIDENCE CLA IM MADE BY THE ASSESSEE HAD TO BE REJECTED. 28.1. BEFORE US,AR ARGUED THAT SIMILAR CONTRIBUTIONS WERE ALLOWED BY THE TRIBUNAL IN EARLIER YEARS.HE REFERRED TO THE ORDER OF THE TRIBUNAL FOR AY.1986-87(SUPRA)IN THIS REGARD.DR SUPPORTED THE ORDER OF THE FAA. 28.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT OUT OF THE TOTAL EXPENDITURE OF RS.71,99,185/-CLAIMED BY T HE ASSESSEE,AO HAD ALLOWED RS.21,17,000/-, THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE BE FORE THE AO OR THE FAA TO SUPPORT ITS CLAIM FOR THE REMAINING AMOUNT.EVEN IF IT IS AGREED,IN PR INCIPLE,THAT CONTRIBUTION MADE BY IT WERE FOR DISCHARGING CIVIC DUTIES,THE ASSESSEE HAS TO PROVE THE FACT OF INCURRING OF EXPENDITURE.AS IT HAS FAILED TO SUBSTANTIATE THE CLAIM MADE BY IT,SO,IN O UR OPINION FAA WAS JUSTIFIED IN REJECTING ITS APPEAL.BEFORE US,ALSO FACT OF INCURRING OF EXPENDIT URE WAS NOT ESTABLISHED.THEREFORE,CONFIRMING THE ORDER OF THE FAA,WE DECIDED GROUND NO. G.23 FOR THE YEAR UNDER APPEAL AGAINST THE ASSESSEE. 29. LAST GROUND OF APPEAL FOR THE AY.1989-90 DEALS WITH DEDUCTION U/S.80M OF THE ACT (G.24). DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF 34 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. RS.17.31 CRORES,THAT IT HAD PURCHASED UNITS COSTIN G RS.56 CRORES DURING THE PREVIOUS YEAR.HE DIRECTED THE ASSESSEE TO EXPLAIN THE SOURCE OF INV ESTMENT IN UNITS OF UTI.ASSESSEE SUBMITTED THAT THE INVESTMENT IN UNITS OF UTI IN LAST YEAR WAS RS. 127.53 CRORES AND AFTER SALES DURING THE YEAR, THE INVESTMENT IN UNITS AT THE END OF THE ACCOUNTIN G YEAR WAS RS. 186.04 CRORES, THAT THE NET ACCRETION TO THE INVESTMENT IN UTI UNITS WAS ABOUT RS. 56 CRORES,THAT IT HAD MADE AN INVESTMENT OF RS. 50 CRORES ON 3L.07.1988 IN 3.78 CRORE UNITS OF UNIT TRUST OF INDIA,THAT IN APRIL, 1988 TO JUNE, 1988 IT HAD RECEIVED RIGHTS EQUITY SHARE CAPITAL CA LL MONEY AND THE SAME WAS CREDITED TO THE CASH CREDIT ACCOUNT,OUT OF WHICH INVESTMENT IN UNITS WAS MADE. THUS, THE ASSESSEE CONTENDED THAT THE INVESTMENT IN UNITS WAS OUT OF THE RIGHTS EQUITY SH ARE CAPITAL TO THE EXTENT OF RS. 50 CRORES. THE REMAINING BALANCE OF RS. 6 CRORES AS PER THE ASSESS EE,WAS MADE OUT OF SURPLUS FUNDS IT HAD.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ,AO HEL D THAT UNITS WERE PURCHASED FROM BORROWED FUNDS.HE CALCULATED INTEREST ON THE OVERDRAFT OF RS .50 CRORES FOR THE PERIOD 7.1.88 TO 15.3.89 @ 16.5% WHICH WORKED OUT TO RS.5,15,62,500/-. AS PER THE AO,THE INTEREST ON THE BORROWED FUNDS,DEPLOYED IN THE UNITS OF UTI,WAS QUANTIFIED A T TO REDUCED FROM THE DIVIDEND INCOME AND THE BALANCE WAS TO BE CONSIDERED FOR DEDUCTION U/S 80M OF THE ACT. 29.1. IN THE APPELLATE PROCEEDINGS FAA,THE ASSESSEE CONT ENDED THAT IT HAD RECEIVED SHARE CAPITAL DURING APRIL, 1988 TO JUNE, 1988 AND INVESTED THE S AME IN JULY, 1988 IN UNITS OF UTI,THAT NO BORROWED FUNDS WERE DEPLOYED IN PURCHASING THE UNI TS OF UTI.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ,FAA HELD THAT THE ASSESSEE HAD IN VESTED A SUM OF RS. 50,00,02,800/- ON 1.8.88 IN THE UNITS OF UTI,THAT THE BANK ACCOUNT HAD SHOWN AN OVERDRAFT OF RS.64.55 CRORES ON 1.8.88. THAT PRIOR TO INVESTMENT IN UNITS OF UTI THE BANK ACCOUN T OF THE ASSESSEE HAD REFLECTED OVERDRAFT OF RS. 14.8 CRORES,THAT THE FINDING OF THE AO ABOUT THE IN VESTMENT MADE OUT OF THE BORROWED FUNDS WAS CORRECT,THAT THERE WAS NO MERIT IN THE CONTENTION O F THE ASSESSEE THAT THE PROCEEDS FROM THE RIGHTS ISSUE WERE CREDITED TO THE CASH CREDIT ACCOUNT FROM APRIL TO JUNE, 1988.FINALLY,HE UPHELD THE ORDER OF THE AO. 29.2. BEFOR US,AR SUBMITTED THAT ASSESSEE HAD ITS OWN FUN DS OF RS.801.62 CRORES,THAT IT HAD MADE INVESTMENT OF RS.234.44 CRORES ONLY DURING THE YEAR UNDER APPEAL,THAT BORROWED FUNDS WERE NOT USED FOR MAKING INVESTMENT.HE REFERRED TO THE BALAN CE SHEET OF THE AY.1989-90.HE RELIED UPON THE DECISIONS OF RELIANCE UTILITIES & POWER LTD.(31 3 ITR 340),MUNJAL SALES CORPORATION(298 ITR 298),DHIRAJLAL MORARJI(50 SOT496),BAYER BIO SCIENCE (P.) LTD.(20 TAXMANANN. COM 79), JINDAL IRON & STEEL COMPANY LIMITED(57SOT317),HINDUSTAN CO NSTRUCTION CO. LTD.(140 ITD 642), WOOLCNMBERS OF INDIA LIMITED(134 ITR2I9) AND EAST I NDIA PHARMACEUTICAL WORKS LTD.(224 ITR627).DR SUPPORTED THE ORDER OF THE FAA. 29.3. WE HAVE THE RIVAL SUBMISSIONS AND PERUSED THE MATER IAL BEFORE US.WE FIND THAT IN THE BALANCE SHEET,FILED BY THE ASSESSEE FOR THE YEAR UNDER CON SIDERATION,FUNDS AVAILABLE UNDER THE HEADS CAPITAL,RESERVES AND SURPLUS AND SUBSCRIPTION RECEIVED IS MORE THAN RS.800 CRORES,THAT INVESTMENTS MADE BY THE ASSESSEE IN PURCHASING UNI TS OF UTI IS MUCH LESS THAN THE FUNDS AVAILABLE WITH IT.WE FIND THAT WITH REGARD TO AVAIL ABILITY OF INTEREST BEARING AND INTEREST FREE FUND,IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (SUPRA),HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO AN AS SESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT TH E SAME TIME THE ASSESSEE HAD RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST-FREE FUNDS AVAIL- ABLE. IN OUR OPINION, TH E SUPREME COURT IN EAST INDIA PHARMACEUTICAL WORKS LTD. V. CIT [1997] 224 ITR 627 HAD THE OCCASI ON TO CONSIDER THE DECISION OF THE CALCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD. [1982] 134 ITR 219 WHERE A SIMILAR ISSUE HAD ARISEN. BEFORE THE SUPREME COURT IT WAS ARGUED THAT IT SHO ULD HAVE BEEN PRESUMED THAT IN ESSENCE AND TRUE CHARACTER THE TAXES WERE PAID OUT OF THE PROF ITS OF THE RELEVANT YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUSINESS A ND IN THESE CIRCUMSTANCES THE APPELLANT WAS ENTITLED TO CLAIM THE DEDUCTIONS. THE SUPREME COURT NOTED THAT THE ARGUMENT HAD CONSIDERABLE FORCE, BUT CONSIDERING THE FACT THAT THE CONTENTION HAD NOT BEEN ADVANCED EARLIER IT DID NOT REQUIRE 35 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. TO BE ANSWERED. IT THEN NOTED THAT IN WOOLCOMBERS O F INDIA LTD.S CASE [1982] 134 ITR 219 THE CALCUTTA HIGH COURT HAD COME TO THE CONCLUSION THAT THE PROFITS WERE SUFFICIENT TO MEET THE ADVANCE TAX LIABILITY AND THE PROFITS WERE DEPOSITE D IN THE OVER DRAFT ACCOUNT OF THE ASSESSEE AND IN SUCH A CASE IT SHOULD BE PRESUMED THAT THE TAXES WE RE PAID OUT OF THE PROFITS OF THE YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUS INESS. IT NOTED THAT TO RAISE THE PRESUMPTION, THERE WAS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRINCIPLE, THEREFORE, WOULD BE THAT IF THERE AR E FUNDS AVAILABLE BOTH INTEREST-FREE AND OVER DRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST- FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. RESPECTFULLY,FOLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT,WE ARE OF THE OPINION THAT ADDITION MADE BY THE AO WAS NOT JUSTIFIED.AS T HE INTEREST FREE FUND WERE FAR MORE THAN THE INVESTMENT,SO,IT HAS TO BE PRESUMED THAT INVESTMENT WAS MADE BY THE ASSESSEE -COMPANY FROM THE INTEREST FREE FUNDS ONLY.REVERSING THE ORDER OF THE FAA,WE DECIDE G.24 IN FAVOUR OF THE ASSESSEE. 3965/MUM/2003,AY.-1987-88,3966/MUM/2003,AY.-1989-90 ,3867/MUM/2003,AY.-1990-91, 30. FIRST GROUND OF APPEAL FOR ALL THE THREE ASSESSMENT YEARS IS ABOUT DIRECTION ISSUED BY THE FAA TO THE AO,S TO ALLOW DEDUCTION ON ACCOUNT OF PROVIS ION FOR LEAVE SALARIES FOR THE AYS.1987-88,89- 90 AND 1990-91,AMOUNTING TO RS.1,92,06,869/-,RS.6,0 3,06,370/-AND RS.6,12,80,864/-RESEPECTIVE - LY.ASSESSEE,DURING THE YEARS UNDER APPEAL,HAD MADE PAYMENT TOWARDS LEAVE SALARY AND HAD ALSO MADE PROVISIONS FOR LEAVE SALARY.AO.S WERE OF THE O PINION THAT THE PROVISION MADE BY THE ASSESSEE FOR SALARY ON ACCRUAL BASIS WAS NOT AN ASCERTAINED LIABILITY.THEY DISALLOWED THE PROVISION MADE OF ACCOUNT OF LEAVE SALARY OF RS.1.92CRORES,RS.6.03CRO RES,AND RS.6.12 CRORES, MADE BY THE ASSESSEE,FOR ASSESSMENT-YEARS IN QUESTION.IN APPELL ATE PROCEEDINGS,FAA ALLOWED THE APPEAL FILED BY THE ASSESSEE AND DIRECTED THE AO TO ALLOW THE CL AIM MADE UNDER THE HEAD PROVISION FOR LEAVE SALARY. 30.1. BEFORE US,DR AND AR AGREED THAT SUBMITTED THAT WHI LE DECIDING THE APPEAL FOR THE AY. 1986-87(SUPRA),TRIBUNAL HAD REJECTED THE GROUND RAI SED BY THE AO.WE WOULD LIKE TO REPRODUCE THE ORDER OF THE TRIBUNAL FOR THE AY.1986-87,WITH R EGARD TO THE ISSUE OF PROVISION FOR LEAVE SALARY. 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 D ECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE DECIDING THE APPEAL FOR THE AY.1992-93(ITA708 3/MUM/1996,DATED.23.12. 2004). WHILE DECIDING THE APPEAL FOR THE EARLIER AY.,TRIBUNAL HA S DEALT WITH 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 C ASE VIDE I.T.A.NO.7083/BOM/96 ORDER DATED 23RD DECEMBER,2004 FOR THE A.Y.1992-93.WE FMD THE TRIBUN AL FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BH ARAT EARTHMOVERS LTD VS. CIT REPORTED IN 245 ITR 426 (SC) HAS DISMISSED THE GROU ND RAISED BY THE REVENUE ON IDENTICAL ISSUES.RESPECTFULLY,FOLLOWING THE DECISION OF THE T RIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, THE ORDER OF THE CI T(A)ON THIS ISSUE IS UPHELD. RESPECTFULLY FOLLOWING THE ORDERS OF THE COORDINATI NG BENCHES FOR AYS.1985-86 AND 1992-93,WE DECIDED GROUND NO.1 AGAINST THE AO. CONSIDERING THE ABOVE WE DECIDE THE ISSUE OF PROVIS ION FOR LEAVE SALARY AGAINST THE AO FOR ALL THE THREE AYS. 31. NEXT COMMON GROUND OF APPEAL IS ABOUT THE DIRECTION GIVEN BY THE FAA TO THE AO.S TO ALLOW 36 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 20% OF INITIAL CONTRIBUTION AS DEDUCTION IN THE YEA R IN WHICH THE INITIAL CONTRIBUTION WAS MADE TO THEAPPROVED SUPERANNUATION FUNDS(ASF).DURING THE AS SESSMENT PROCEEDINGS,AO.S FOUND THAT THE ASSESSEE HAD MADE CONTRIBUTION THE ASF,THAT THE CON TRIBUTION TO THE ASF INCLUDED INITIAL CONTRIBUTION FOR THE AYS. CONCERNED.ACCORDING TO TH E AO.S,20% OF THE INITIAL CONTRIBUTION TO THE ASF WAS NOT ADMISSIBLE AS DEDUCTION.AS A RESULT,THE Y ALLOWED REMAINING 80% OF THE INITIAL CONTR - IBUTION AS DEDUCTION,IN FIVE EQUAL INSTALMENTS,BY R ELYING ON THE CBDTS NOTIFICATION DATED 21.10.1965.IN THE APPELLATE PROCEEDINGS,FAA HELD TH AT THE ISSUE WAS COVERED BY THE JUDGMENT OF THE SIRPUR PAPER MILLS(237 ITR41),THAT IN VIEW OF T HE SAID DECISION THE ASSESSEE WAS ENTITLED TO CLAIM THE ENTIRE INITIAL CONTRIBUTION TO THE ASF AS DEDUCTION. 31.1. BEFORE US,DR AGREED THAT THE ISSUE WAS DECIDED IN F AVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DELIVERED FOR THE AYS.1986-87(SUPRA).AR SU BMITTED THAT FOR THE AY.1992-93(SUPRA) SIMILAR ISSUE WAS DECIDED AGAINST THE AO BY THE TRI BUNAL.WE FIND THAT SAME ISSUE WAS DEALT BY THE TRIBUNAL IN THE ORDER FOR THE AY.1986-87(SUPRA)AS U NDER: 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 TRIBUNAL 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 27TH,DECEMBER, 2004. WE FIN D 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 T HIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE VIDE THE JUDGMENT OF HONBLE SUPREME COURT IN THE C ASE OF CIT VS.SIRPUR 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. (INDIA) LTD. HE HAS ALSO CONTENDED THAT THE ASSESSEES CLAIM HAS AL SO BEEN ALLOWED BY THE TRIBUNAL IN EARLIER YEARS FROM 77-78 TO 83-84,AND HAS GIVEN DETAILS THEREOF I N THE CHART FURNISHED BY HIM ON RECORD. AS SUCH, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE,WE FIND THE IMPUGNED ORDER 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 REVENUE 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. FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE AY.1986 -87,WE DECIDE GROUND NO.2 OF ALL THE THREE AYS.AGAINST THE AO. 32. NEXT GROUND (G.4-1987-88,G.3-1989-90,1990-91)IS ABO UT PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE EXPENSES.DURING THE ASSESSMENT PROCE EDINGS AO.S FOUND THAT THE ASSESSEE MADE PAYMENTS TOWARDS HOLIDAY PLAN AT VARIOUS HOTELS.AO. S OBSERVED THAT NO FIXED ROOM OR ACCOMMODATION WAS RESERVED IN A PARTICULAR HOTEL FO R A PERIOD EXCEEDING 182 DAYS AND NO RECOVERY WAS MADE FROM THE EMPLOYEES.FINALLY,THEY H ELD THAT THE PAYMENTS MADE TO VARIOUS HOTELS FOR HOLIDAY PLAN ARE COVERED BY THE PROVISIO NS OF SECTION 37(4).THEY MADE A DISALLOWANCE OF RS.84,045/-,RS.95,544/-AND RS.1,38,523/-FOR THE AYS.UNDER APPEAL.AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSE E IN THIS REGARD,FAA DELETED THE ADDITIONS MADE BY THE AO.S.WE FIND THAT THE ISSUE IS COVERED AGAINST THE AO BY THE ORDER FOR THE AY.1986- 87(SUPRA).TRIBUNAL HAS DECIDED THE ISSUE,IN THAT OR DER,AS UNDER: 37 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 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 ISSU E STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE I.T.A. NO.7083/BOM/96 ORDER DATED 27TH DECEMBER,2004 FOR T HE 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 P ROVISO TO SUBSECTION (4) OF SECTION 37 AS EXISTING AT THE RELEVANT TIME AND, THEREFORE, TH E ASSESSEE IS FOUND TO BE ENTITLED TO DEDUCTION.ACCORDINGLY, THE GROUND RAISED BY THE REVENUE WAS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE THIS GROUND BY THE REVENUE IS DISMISSED. RESPECFULLY,FOLLOWING THE ABOVE,GROUN D NO.4 IS DECIDED AGAINST THE AO. IN VIEW OF THE ABOVE WE DECIDE GROUND NO.3 FOR AY.1 987-88 AND GROUND NO.4 FOR AY.1989-90 AND 1990-91 AGAINST THE AO. 33. ISSUES OF INVESTMENT ALLOWANCE AND EXTRA SHIFT ALLO WANCE ON TOWN DIVISION,(G.7 FOR AY.1987- 88,G.6 FOR THE AY.1989-90 AND G.5 FOR AY.1990-91),I NVESTMENT ALLOWANCE ON P&M INSTALLED AT STOCK YARD(G.8FOR THE AY.1987-88)AND INVESTMENT ALL OWANCE ON VARIOUS ITEMS OF P&M(G.9 FOR THE AYS.1987-88,,G.7 FOR THE AY.1989-90 AND G.6 FOR THE AY.1990-91)HAVE BEEN DEALT BY THE FAA IN HIS COMMON ORDER FOR THE AYS.UNDER APPEAL.FA CTS RELATED TO THESE ISSUES HAVE BEEN ELABORATELY DISCUSSED IN THE EARLIER PART OF OUR OR DER.DURING THE ASSESSMENT PROCEEDINGS,AO HAD MADE CERTAIN ADDITIONS UNDER THE HEADS INVESTMENT A LLOWANCE,EXTRA SHIFT ALLOWANCE,BUT IN THE APPELLATE PROCEEDINGS,FAA GAVE PARTIAL RELIEF TO TH E ASSESSEE.AO.S HAVE CHALLENGED THAT PART OF HIS ORDER BEFORE US. 33.1. FAA HAD ALLOWED INVESTMENT ALLOWANCE AND EXTRA SHIF T ALLOWANCE ON CERTAIN ITEMS P&M OF TOWN DIVISION AMOUNTING TO RS.1,43,92,223/-,RS.83,8 7,445/-AND RS.53,80,874/-.HE WAS OF THE OPINION THAT SUCH ITEMS HAD DIRECT RELATION WITH MA NUFACTURING ACTIVITIES.REPRESENTATIVES OF BOTH THE SIDES AGREED THAT THE ISSUE OF INVESTMENT ALLOW ANCE AND EXTRA SHIFT ALLOWANCE ON CERTAIN ITEMS OF TOWN DIVISION HAS BEEN DECIDED AGAINST THE AO IN THE ORDER OF THE TRIBUNAL DELIVERED FOR THE AY.1986-87(SUPRA).WE FIND THAT ISSUE UNDER CONSIDER ATION HAS BEEN DEALT BY THE TRIBUNAL IN THE EARLIER AY.AS UNDER: BEFORE US,DR AGREED THAT SIMILAR ISSUE HAD ARISEN IN THE EARLIER AYS.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 INVESTMEN T ALLOWANCE 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 INSTALLED AND USED IN TOWN DIVISION WHICH PROVIDED FACILITIES TO THE EMPL OYEES 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 A SSESSEE.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 OWN CASE FOR THE A.YS. 1981- 82 AND 1982-83. WE FIND THETRIBUNAL VIDE I.T.A. NOS . 8116 & 8117/BOM/91 ORDER DATED 5TH MARCH, 2002 HAS HELD AS UNDER: 38 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 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 OPINION, DISTINGUISHABLE IN FACTS,THE DECISION IN THE CASE O F ACC LTD.(SUPRA) RELATES TO DEVELOP - MENT REBATE AND-NOT TO ADDITIONAL DEPRECIATION. IN THE CASE OF MACHINERY MANUFACTURING CORPN.LTD.(SUPRA),INVESTMENT ALLOWANCE ON FIRE EXTI NGUISHERS AND TIME-OFFICE EQUIPMENT WAS DENIED AS IT WAS HELD THAT SUCH ITEMS ARE NOT P LANT AND MACHINERY WHICH ARE INSTALLED FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION, MANUFA CTURE OR PRODUCTION ARTICLE OR THING. IN THE CASE OF PIECO ELECTRONICS AND ELECTRONICS LTD.( SUPRA),THE INVESTMENT ALLOWANCE ON THE NEW EQUIPMENT INSTALLED IN THE CANTEEN WAS DENIED.I N TECHNICO ENTERPRISES (P) LTD.(SUPRA),IT WAS HELD THAT THE COMPUTER WAS NOT U SED 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 ON BY THE ID. COUNSEL OF THE ASSESSEE DO ASSIST THE CASE OF THE ASSESSEE. IN THE CASE OF TRI VENI TISSUES LIMITED (SUPRA),THE HONBLE CALCUTTA HIGH COURT HAS HELD THAT THE ASSESSEE, WHO WAS MANUFACTURING TISSUE PAPERS,WAS ENTITLED TO INVESTMENT ALLOWANCE ON MOTORS, ELECTRI C INSTALLATIONS, UNDERGROUND CABLES,OVERHEAD CABLES AND AIR CONDITIONING MACHINE S.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 OU T OF OR INTO FACTORY WERE HELD TO BE PLANT ENTITLED TO INVESTMENT ALLOWANCE.WE FEEL THAT WE NE ED NOT DISCUSS EACH AND EVERY CASE RELIED ON BY THE ASSESSEE, PARTICULARLY WHEN A VIEW HAS BEEN TAKEN BY THE ITAT, BOMBAY BENCH, IN SSESSEES OWN CASE FOR THE ASSESSMENT YEA RS 1968-69 TO 1971-72.IN THIS ORDER DATED 13-10-1976, IT HAS BEEN HELD BY THE TRIBUNAL THAT MAIN WORKS AND THE TOWNSHIP FORMED AN INTEGRAL PART OF THE WHOLE INDUSTRIAL COM PLEX, ONE OF WHICH CANNOT EXIST WITHOUT THE OTHER. IT HAS BEEN HELD THAT THE PLANT AND MACH INERY INSTALLED EVEN FOR PROVIDING THE NECESSARY FACILITIES TO THE EMPLOYEES WHICH DOES NO T APPARENTLY HAVE ANY CONNECTION WITH THE MANUFACTURING ACTIVITY IS DIRECTLY NEEDED FOR T HE RUNNING OF THE PRIORITY INDUSTRY.WE, THEREFORE, HOLD THAT INVESTMENT ALLOWANCE IS ADMISS IBLE TO THE ASSESSEE ON THE PLANT AND MACHINERY IN THE TOWN DIVISION,PARTICULARLY WHEN ON THE ITEMS LIKE LIGHT AND FAN INSTALLATIONS THE ASSESSEE HAD ITSELF NOT CLAIMED A NY INVESTMENT ALLOWANCE. WE, THEREFORE, HOLD THAT ADDITIONAL DEPREDATION, EXTRA SHIFT ALLOW ANCE AND INVESTMENT ALLOWANCE ARE ADMISSIBLE TO THE ASSESSEE ON THE PLANT AND MACHINE RY IN THE TOWN DIVISION.THEREFORE, NO INTERFERENCE IS CALLED 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 I NVESTMENT ALLOWANCE ON THE PLANT AND MACHINERY IN TOWN DIVISION.THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. CONSIDERING THE ABOVE,WE DECIDE GROUND NO.7AGAISNT THE AO. IN VIEW OF ABOVE,WE DECIDE THE ISSUE OF INVESTMENT ALLOWANCE AND EXTRA SHIFT ALLOWANCE ON CERTAIN ITEMS OF TOWN DIVISON,AGAINST THE AO. 34. NEXT GROUND DEALS WITH INVESTMENT ALLOWANCE ON P&M OF STOCK YARD.IN THE APPELLATE PROCEEDINGS,FAA ALLOWED THE APPEAL FILED BY THE ASS ESSEE AND HELD THAT THE PLANT AND MACHINERY INSTALLED BY THE ASSESSEE IN THE STOCK-YARD HAD A L INK WITH THE MANUFACTURING-PROCESS,THAT SAME WAS PART OF THE OPERATIONAL INTEGRATION,WHEREAS AO WAS OF THE OPINION THAT P&M WERE INSTALLED IN STOCK YARDS WERE NOT USED DIRECTLY IN THE MANUFACTU RING PROCESS.HE MADE A DISALLOWANCE OF RS.2,14,659/-,FOR THE AY.1987-88.BEFORE US,DR AGREE D THAT ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN THE APPEAL FOR THE EARLIER YEAR.IN THE ORDER OF THE TRIBUNAL FOR THE AY.1986-87, (SUPRA)ISSUE OF INVESTMENT ALLOWANCE ON P&M OF STOC K YARD HAS BEEN DECIDED AS UNDER: 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 C ASE IN I.T.A. NO.548/BOM/88 ORDER DATED 4.6.1993 FOR THE A.Y. 1982-83 WHEREIN THE TRI BUNAL AT PARA 4 OF THE ORDER HAS 39 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. DISCUSSED THE ISSUE AND FOLLOWING THE DECISION OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 1981-82 ALLOWED THE CLAIM OF THE ASSESSEE ON ACCOUNT OF INVESTMENT ALLOWANCE ON RAILWAY SIDINGS AT STOCK YARD.WE FIND THE TRIBUNAL VIDE ORDER DATED 15TH DECEMBER,1994 IN R.A. NO. 2202/BOM/93 HAS DISMISSED THE REFERENCE APPLICATION BY THE DEPARTMENT. SIMILARLY WE FIND THE TRIBUNAL IN ASSESSEES OWN CA SE VIDE I.T.A.NO. 549/BOM/88 ORDER DATED 4.6. 1993 FOR THE A.Y. 19983-84 HAS ALLOWED T HE CLAIM OF INVESTMENT ALLOWANCE ON RAILWAY SIDINGS STOCK YARD AMOUNTING TO RS.6,20,602 /-.WE MAY FURTHER MENTION THAT THE TRIBUNAL ALSO REJECTED THE REFERENCE APPLICATION FI LED BY THE REVENUE IN IT A NO 677/BOM/90 RESPECTFULLY FOLLOWING THE CONSISTENT DE CISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BR OUGHT TO OUR NOTICE AGAINST THE DECISION OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF THE CIT(A)ALLOWING THE INVESTMENT ALLOWANCE ON THE PLANT AND MACHINERY INSTALLED BY THE ASSESSEE IN THE STOCK YARD. RESPECTFULLY,FOLLOWING THE ABOVE WE DE CIDE GROUND NO.8 AGAINST THE AO. CONSIDERING THE ABOVE,ISSUE OF INVESTMENT ALLOWANCE ON STOCK-YARD-MACHINERY AND PLANT IS DECIDED AGAINST THE AO. 35. AS STATED EARLIER,DURING THE ASSESSMENT PROCEEDINGS FOR THE AYS. UNDER APPEAL,AO.S HAD 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 THE Y ARE IN THE NATURE OF OFFICE EQUIPMENTS COVERED BY THE PROVISO OF SECTION 32A(1) OF THE ACT .FAA HAS ALLOWED INVESTMENT ALLOWANCE ON SUCH ITEMS OF P&M THAT WERE NOT PART OF THE P&M OF TOWN DIVISION. WE FIND THAT IDENTICAL ISSUE WAS DETERMINED BY THE TRIBUNAL IN THE EARLIER AY.IN FOLLOWING MANNER: BEFORE US,DR AND AR AGREED THAT THE TRIBUNAL HAD DE CIDED THE SIMILAR ISSUE AGAINST THE AO WHILE PASSING ORDER FOR THE AY.1985-86.WE FIND THAT THE T RIBUNAL 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 PREMISE S OR IN THE RESIDENTIAL ACCOMMODA - TION.SIMILARLY INVESTMENT ALLOWANCE IS NOT ADMISSIB LE ON ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES. HOWEVER, ANY MACHINERY OR PLANT HAVING A LINK IN THE PROCESS OF THE OPERATIONAL INTEGRATION SHOULD BE TAKEN AS MACHINER Y OR PLANT BELONGING TO THE MANUFACTURING PRDCESS.HE ACCORDINGLY HELD THAT INVE STMENT ALLOWANCE ON THE FOLLOWING PLANT AND MACHINERY HAS TO BE ALLOWED BECAUSE THEY FORM PART OF -THE OPERATIONAL INTEGRATION AND HAD LINK WITH THE MANUFACTURING PRO CESS. (RS.) (I)INTERCOM SYSTEM 14,63,606 (II)NEW LINES FOR AUTO EXCHANGE 15,65,254 (III)REAL TIME COMPUTER 9,55,53 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 W HEREIN THE 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. 40 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 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. AFTER CONSIDERING THE ABOVE WE ARE DISMISSING GROUN D BY THE AO.S WITH REGARD TO INVESTMENT ALLOWANCE,EXTRA SHIFT ALLOWANCE FOR VARIOUS ITEMS O F P&M INCLUDING THE P&M INSTALLED AT STOCK YARD AND TOWN DIVISION. 36. 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.62,500 /-,AND RS.50,000/-FOR AY.1987-88 AND AY.1989-90 RESPECTIVELY.BEFORE THE AO IT WAS SUBMIT TED THAT AS A CONSIDERATION FOR CONTRIBUTION TOWARDS SUCH BEAUTIFICATION OF THE GARDEN THE ASSES SEE ALONG WITH THE OTHER COMPANIES WAS ALLOWED TO PUT UP THEIR LOGOS IN AND AROUND THE GAR DEN,THAT THE EXPENDITURE WAS INCURRED ON ADVERTISEMENT CAMPAIGN.HOWEVER,AO DID NOT ACCEPT TH E SAME AND DISALLOWED THE EXPENSES. 36.1. 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 ALLO WED THE EXPENDITURE AS DEDUCTION BY RELYING ON THE JUDGMENT OF THE HONBLE RAJASTHAN HI GH COURT IN THE CASE OF KAMAL & CO.(203 ITR1038) . FOLLOWING THE JUDGMENT OF THE ITAT FOR THE A.Y. 198 8-89 IN THE CASE OF THE ASSESSEE, HE DIRECTED THE AO TO ALLOW THE EXPENDITURE INCURR ED BY THE ASSESSEE FOR THE MAINTENANCE OF HORNIMAN CIRCLE,MUMBAI FOR BOTH THE AYS.WE FIND THA T THE ISSUE OF EXPENDITURE FOR MAINTAINING THE MONUMENT HAS BEEN DECIDED AGAINST THE REVENUE,B Y THE ORDER OF THE TRIBUNAL DELIVERED FOR THE AY.1986-87 AND AY.1988-89.IN THE ORDER FOR THE AY.1 986-87 TRIBUNAL DECIDED THE ISSUE AS UNDER: 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. FOLLOWING THE ABOVE WE DECIDE THE GROUND OF MAINTEN ANCE OF HORNIMAN CIRCLE,MUMBAI,AGAINST THE AO. 37. NOW,WE WOULD DEAL WITH THE REMAINING GROUNDS OF APP EALS RAISED BY THE AO FOR YEAR 1987- 88.GROUND NO.3 IS ABOUT DEDUCTION ON ACCOUNT OF GUA RANTEED PAYMENT TO AAML.WE FIND THAT SAME ISSUE HAD BEEN ADJUDICATED UPON BY THE TRIBUNA L,WHILE DECIDING THE APPEAL FOR THE LAST AY (SUPRA).WE WOULD LIKE TO REPRODUCE THE RELEVANT PAR T OF THE ORDER DEALING WITH THE ISSUE UNDER CONSIDERATION: 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 QUESTION 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 O N BEHALF OF THE ASSESSEE. WE FIND THE ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS. 1,33 ,90,133/- ON ACCOUNT OF GUARANTEED PAYMENT TO AAML ON THE GROUND THAT SUCH PAYMENT WAS IN THE NATURE OF A CAPITAL PAYMENT. FURTHER, THE AGREEMENT ENTERED INTO WITH A TATA GROUP CONCERN INCURRING HUGE LOSSES COULD BE A CONDUIT TO TRANSFER THE PROFITS F ROM THE ASSESSEE COMPANY TO MINIMISE THE LOSS AND THEREFORE, IS A COLOURABLE DEVICE. HOWEVER , WE FIND THE ASSESSEE PAID THE SHORTFALL 41 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. IN THE MINIMUM GUARANTEED AMOUNT IN THE INITIAL THR EE YEARS AND DURING THE 4TH AND 5TH YEAR HAS EARNED MORE OPERATIVE PROFIT WHICH HAS BEE N OFFERED TO TAX. WE FIND IN THE INITIAL THREE YEARS THE ASSESSEE HAS PAID A SUM OF RS. 6.11 CRORES 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 WI TH 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 AGREEMENTS 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 TH E ELABORATE DISCUSSION BY THE CIT(A) ON THIS ISSUE WHILE DELETING THE DISALLOWANCE, WE DO N OT FIND ANY INFIRMITY IN THE SAME AND THEREFORE, THE SAME IS UPHELD. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE ORDER,WE DECIDE GR OUND NO.3 AGAINST THE AO. FOLLOWING THE ABOVE,WE DECIDE GROUND NO.7 AGAINST T HE AO. 38. NEXT GROUND OF APPEAL IS ABOUT REMUNERATION TO CHAI RMAN AND MANAGING DIRECTOR.WE FIND THAT IDENTICAL ISSUE WAS DECIDED AGAINST THE AO IN THE A PPEAL FOR THE AY.1986-87(SUPRA) IN THE FOLLOWING MANNER: 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 DI RECTOR.IN THE RETURNS OF INCOME,THE ASSESSEE COMPANY HAD COMPUTED THE REMUNERATION TO C HAIRMAN AND MANAGING DIRECTOR U/S.40(C) OF THE ACT, THAT IT HAD DISALLOWED THE REMUNERATION OVER AND ABOVE 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 SECTI ON 40A(5) OF THE ACT,THAT THE MANAGING DIRECTOR WAS PROVIDED WITH FREE ELECTRICITY.HE QUAN TIFIED THE VALUE OF THE FREE ELECTRICITY AT RS.10,306/-.HE FURTHER OBSERVED THAT THE CMD WAS PR OVIDED ACCOMMODATION AND THE MAINTENANCE AND UPKEEP OF SUCH BUILDING WAS DONE BY THE ASSESSE E,THAT HE WAS PROVIDED A CAR BY THE ASSESSEE,THAT THE COMPANY PROVIDED FURNITURE, AIR C ONDITIONERS ETC. AT THE RESIDENCE OF THE MANAGING DIRECTOR.HE ESTIMATED THE VALUE OF THE PER QUISITES 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. FOLLOWING THE ORDER FOR THE EARLIER YEAR,WE DECIDE GROUND NO.5 AGAINST THE AO. 39. LAST GROUND OF APPEAL FOR THE YEAR 1987-88 IS ABOUT EXPENDITURE INCURRED ON FEES TO CONSULTANTS FOR FEASIBILITY STUDIES,AMOUNTING TO RS. 68.03 LAKH S.WE FIND THAT IN THE APPEAL FOR THE AY.1986- 87,FILED BY THE ASSESSEE-COMPANY,TRIBUNAL HAS DEALT THE ISSUE AS UNDER: GROUND NO 12 READS AS FOLLOWS THE LEARNED CIT(A) ERRED IN HOLDING THAT EXPENDITU RE OF RS. 15,00,000 INCURRED ON TECHNO- ECONOMIC FEASIBILITY STUDIES WAS CAPITAL IN NATURE. 36.THE ASSESSEE CARRIES ON THE BUSINESS OF MANUFACT URING IRON AND STEEL. IT HAS GOT ITS FACTORIES IN THE STATES OF BIHAR AND ORISSA. IT ALSO OWNS A BEAR INGS DIVISION MANUFACTURING BEARINGS AT KHARAGPUR AND TUBES DIVISION MANUFACTURING VARIOUS TYPES OF TUBES AT JAMSHEDPUR. THE ASSESSEE IS THE LARGEST PRIVATE SECTOR COMPANY IN INDIA WITH A TURNOVER EXCEEDING RS. 1000 CRORES AND 42 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. ASSETS EXCEEDING RS. 700 CRORES.ACCORDING TO THE AS SESSEE IT HAS TO RELY ON VARIOUS FEASIBILITY REPORTS PREPARED BY PROFESSIONAL CONSULTANTS LIKE M /S. M.N. DASTUR & COMPANY, TATA ECONOMIC CONSULTANCY SERVICES ETC. TO PROVIDE WITH BASIC TOO LS IN THE FORM OF SUCH STUDIES TO ENABLE IT TO RUN THE INDUSTRIAL UNDERTAKING. THE FEASIBILITY STUDIES HELP IN THE DAY TO DAY RUNNING OF THE BUSINESS, IN DECISION MAKING, IMPROVING THE PRODUCTIVITY AND PRO DUCTION METHODS AND IMPROVING PROFITABILITY OF EXISTING PLANTS. DURING THE PREVIOUS YEAR THE ASSESSEE HAD MADE PAYM ENTS OF RS.13 LAKHS TO M/S.M.N. DASTUR & CO.AND RS.2 LAKHS TO TATA ECONOMIC CONSULTANCY SERV ICES FOR CARRYING OUT SUCH FEASIBILITY STUDIES.AS FEASIBILITY STUDIES WERE IN THE NATURE O F ENABLING THE ASSESSEE TO IMPROVE AND MAINTAIN THE WORKING OF THE BUSINESS, IT WAS SUBMITTED THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION OF PS. 15 LAKHS AS AN ITEM OF REVENUE EXPENDITURE. 37.THE AO DISALLOWED THE CLAIM FOR DEDUCTION ON THE GROUND THAT THE EXPENDITURE WAS CAPITAL IN NATURE. THE CIT(A) CONFIRMED THE ORDER OF THE ASSES SING OFFICER. HENCE, GROUND NO. 12 BY THE ASSESSEE BEFORE THE TRIBUNAL. 38.WE HAVE PERUSED THE DETAILS OF THE EXPENSES.A SU M 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 LINES AND COATED PIPES AND REVAMPING THE ER W MILL RESPECTIVELY.IN AY.1968-69 IN I.T.A. NO.2068/BOM/74-75 THE HONBLE ITAT IN ASSESSEES OW N CASE CONSIDERED EXPENDITURE ON REPORT FOR INCREASING PRODUCTION CAPACITY AND FUTURE DEVEL OPMENT.AFTER ELABORATE DISCUSSION, THE TRIBUNAL CAME TO THE CONCLUSION THAT EXPENDITURE WA S NOT A CAPITAL EXPENDITURE AND ALLOWED DEDUCTION OF SAME AS A REVENUE EXPENDITURE.FACTS AN D CIRCUMSTANCES BEING IDENTICAL IN THIS YEAR, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL , WE HOLD THAT THE EXPENDITURE IN QUESTION HAS TO BE ALLOWED AS A DEDUCTION BEING A REVENUE EXPENDITU RE.GROUND NO. 12 IS ALLOWED. RESPECTFULLY,FOLLOWING THE ORDERS FOR EARLIER AYS., WE DECIDE THE ISSUE OF FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES,IS DECIDED AGAINST THE AO. 40 .ONE OF THE COMMON GROUND FOR THE AYS.1989-90 AND 1 990-91,RAISED BY THE AO,IS ABOUT DIRECTION GIVEN BY THE FAA TO EXCLUDE SALES TAX,EXC ISE DUTY FROM TOTAL TURNOVER FOR THE PURPOSE OF CALCULATING DEDUCTION FOR 80HHC OF THE ACT.DURING T HE ASSESSMENT PROCEEDINGS AO EXCLUDED SALES TAX, EXCISE DUTY FROM THE TOTAL TURNOVER,WHIL E COMPUTING THE 80HHC DEDUCTION .ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,HE HELD THAT BOTH THE ITEMS COULD NOT BE EXCLUDED FROM THE TOTAL TURNOVER. 40.1. BEFORE US,DR AND THE AR SUBMITTED THAT ISSUE WAS DE CIDED IN FAVOUR OF ASSESSEE BY THE DECISIONS DELIVERED BY THE HONBLE SUPREME COURT IN THE CASES OF CATAPHARMA (INDIA) P. LTD. (292ITR694) AND LAKSHMI MACHINE WORKS(290 ITR 667). WE FIND THAT IN THE CASE OF CATAPHAR - MA (INDIA) P. LTD.(SUPRA) HONBLE APEX COURT HAS HE LD AS UNDER: WHILE CALCULATING THE DEDUCTION UNDER SECTION 80HH C(3)(B) OF THE INCOME-TAX ACT, 1961, FOR COMPUTING THE TOTAL TURNOVER OF EXPORTS OUT OF IN DIA OF TRADING GOODS, EXCISE DUTY AND SALES TAX ARE NOT TO BE INCLUDED. THE OBJECT OF THE LEGISLATURE IN ENACTING SECTION 8 0HHC WAS TO CONFER A BENEFIT ON PROFITS ACCRUING WITH REFERENCE TO EXPORT TURNOVER. JUST AS COMMISSION RECEIVED BY AN ASSESSEE IS RELATABLE TO EXPORTS AND YET IT CANNOT FORM PART OF TURNOVER, EXCISE DUTY AND SALES TAX ALSO CANNOT FORM PART OF THE TURNOVER FOR THE PURPOSES OF SECTION 80HHC. JUST AS INTEREST, COMMISSION, ETC., DO NOT EMANATE FROM THE TURNOVER SO ALSO EXCISE DUTY AND SALES TAX DO NOT EMANATE FROM SUCH TURNOVER. SINCE EXCISE DUTY AND S ALES TAX DO NOT INVOLVE ANY SUCH TURNOVER, SUCH TAXES HAVE TO BE EXCLUDED. RESPECTFULLY,FOLLOWING THE ABOVE DECISION OF HONBL E SUPREME COURT,WE DECIDE G.5 FOR AY. 1989-90 AND G.4 FOR 1990-91 AGAINST THE AO. 41. GROUND NO.8 FOR THE AY.1989-90 DEALS WITH EXPENDITU RE INCURRED ON REPAIRS,AMOUNTING TO RS. 1.25 CRORES.DURING THE ASSESSMENT PROCEEDINGS AO FO UND THAT THE ASSESSEE HAD CLAIMED REPAIRS IN THE PROFIT AND LOSS ACCOUNT UNDER TWO HEADS-REPA IRS TO BUILDINGS (RS.9.37 CRORES) AND REPAIRS TO MACHINERY(RS.110.65 CRORES).HE DIRECTED THE ASSE SSEE TO FURNISH THE DETAILS OF REPAIRS TO THE 43 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. MACHINERY EXCEEDING RS. ONE LAKH AND REPAIRS TO BUI LDINGS EXCEEDING RS. 50,000/-. IN RESPONSE, THE ASSESSEE FILED DETAILS OF THE REPAIRS OF THE ST EEL DIVISION. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF INDIVIDUAL PAYMENTS EXCEEDING RS.10 LAKHS FOR GENERAL REPAIRS IN THE STEEL DIVISION.AO RELIED ON THE ASSESSMENT ORDER FOR THE ASSESSMENT Y EAR 1987-88 AND ASSUMED THAT THE CAPITAL EXPENDITURE WAS RECORDED BY THE ASSESSEE IN THE FOR M OF REPAIRS.HE ESTIMATED THE CAPITAL EXPENDITURE FROM REPAIRS AT RS.1.25 CRORES,BUT DID NOT ALLOW THE DEPRECIATION ON IT. 41.1. IN THE APPELLATE PROCEEDINGS IT WAS SUBMITTED BEFOR E THE FAA THAT AT THE TIME OF RECORDING THE ENTRIES DUE CARE WAS TAKEN TO SEGREGATE THE CAP ITAL EXPENDITURE/FROM THE REVENUE EXPENDITURE, THAT AT THE TIME OF PASSING THE ENTRY ITSELF PROPER ANALYSIS WAS MADE BY THE COMPANY,THAT AT REGULAR INTERVALS THE EXPENDITURE WAS SCRUTINISED AND AMOUN TS RELATING TO CAPITAL EXPENDITURE WERE TRANSFERRED TO CAPITAL ACCOUNT AND THERE WAS A CONT INUOUS INTERNAL AUDIT FOR SUCH VERIFICATION,THAT THE STATUTORY AUDITORS ALSO SCRUTINISED THE VOUCHER S IN GREAT DETAIL,THAT AT THE TIME OF TAX AUDIT, DETAILED CHECKING WAS CARRIED OUT AND CAPITAL ITEMS DEBITED TO REVENUE WERE REPORTED UNDER THE CLAUSE (IV) OF THE FORM 3CD,THAT THE ASSESSEE-COMPA NY ADDED BACK SUCH ITEMS ON ITS OWN IN THE RETURN OF INCOME,THAT THE AO HAD ARBITRARILY AND WI THOUT GIVING ANY REASON ESTIMATED A SUM OF RS 1.25 CRORES ON CAPITAL ACCOUNT OUT OF REPAIRS,THAT SIMILAR ADDITION WAS DELETED BY THE FAA IN AY. 1984-85.AFTER CONSIDERING THE SUBMISSIONS FAA HELD THAT AN IDENTICAL ISSUE HAD ARISEN IN ASSESSMENT YEAR 1988-89,THAT THE THEN FAA HAD DELET ED THE ADDITION.FOLLOWING THE SAID ORDER HE HELD THAT THE DISALLOWANCE WERE AD HOC IN NATURE AN D WITHOUT ANY BASIS,THAT AO HAD NOT MENTIONED IN THE ASSESSMENT ORDER WHAT KIND OF REPAIRS HE HAD DISALLOWED,THAT IT WAS A WELL SETTLED PRINCIPLE OF LAW THAT SO LONG AS THE REPAIRS BROUGHT INTO EXI STENCE ANY NEW ASSET OR CHANGED THE CHARACTER OF THE OLD ASSETS IN SUCH A WAY THAT IT WOULD BECOME U NRECOGNISABLE THE REPAIRS COULD NOT BE CONSTRUED AS CAPITAL EXPENDITURE.HE DELETED THE ADD ITION MADE BY THE AO. 41.2. BEFORE US,DR SUPPORTED THE ORDER OF THE AO,AND THE AR SUPPORTED THE ORDER OF THE FAA. 41.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE HOLDING THAT THE ASSESSEE HAD INCURRED CAPITAL EXPE NDITURE,AO HAS NOT GIVEN ANY DETAILS OF THE ITEMS THAT WERE OF CAPITAL NATURE.WITHOUT GIVING AN Y REASON NO DISALLOWANCE CAN BE MADE.BUT,THE AO HAS DONE IT-HE HAS MADE A DISALLOWANCE OF RS.1.2 5 CRORES UNDER THE HEAD REPAIRS.IN OUR, OPINION BY DELETING ADDITION,MADE BY THE AO,FAA HAS CHOSEN A RIGHT AND LEGAL PATH.WE DO NOT FIND ANY INFIRMITY IN HIS ORDER.THEREFORE,UPHOLDING HIS ORDER,WE DECIDE GROUND NO.8 AGAINST THE AO. AS A RESULT,APPEALS FIELD BY THE ASSESSEE STAND PAR TLY ALLOWED AND APPEALS OF THE AO ARE DISMISSED. 0 1 #) 2 3 + / 4 ! 1 5 + 67 8 #) , + 4 # 5 + 67 . ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH,2014 . ! + -.$ 4 9# 7 EKPZ EKPZ EKPZ EKPZ , 201 4 . + / : SD/- SD/- ( !' / AMIT SHUKLA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9# /DATE: 07.03.2014. SK ! ! ! ! + ++ + ' ; ' ; ' ; ' ; <;$ <;$ <;$ <;$ / COPY OF THE ORDER FORWARDED TO : 44 ITA NOS. 3965, 3966 & 3967/MUM/2003 & 3982, 3983 & 3984/MUM/2003 THE TATA IRON & STEEL CO. LTD. 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, @ / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI