TAT IRON & STEEL CO LTD, Mumbai V. DY CIT SR 24, Mumbai

ITA 3969/MUM/2003

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78668 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 29-01-2014
• Assessment Year: 1994-1995
• Appeal Filed On: 22-05-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SRIVASTAVA
• Assessee Lawyers: DINESH VYAS
• Keywords: Capital asset; Business expenditure; Principle of natural justice; Retrospective amendment; Additional evidence; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 37; 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.3968/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1991-92 THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-400001 VS DCIT CIRCLE 2(2) AAYAKAR BHAVAN, R.NO.5D, M.K.ROAD,MUMBAI-400020 PAN: ( %& / APPELLANT) ( '(%& / RESPONDENT) /. ITA NO.3969/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1994-95 THE TATA IRON & STEEL CO . LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-400001 VS DCIT CIRCLE 2(2) AAYAKAR BHAVAN, R.NO.5D, M.K.ROAD,MUMBAI-400020 ( %& / APPELLANT) ( '(%& / RESPONDENT) /. ITA NO.3970/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1995-96 THE TATA IRON & STEEL CO. LTD. BOMBAY HOUSE, 24, HOMI MODY STREET,MUMBAI-400001 VS DCIT CIRCLE 2(2) AAYAKAR BHAVAN, R.NO.5D, M.K.ROAD,MUMBAI-400020 /. ITA NO.3985/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1991-92 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 ( %& / APPELLANT) ( '(%& / RESPONDENT) /. ITA NO.3986/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1994-95 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 ( %& / APPELLANT) ( '(%& / RESPONDENT) /. ITA NO.3987/MUM/2003, # # # # $ $ $ $ / ASSESSMENT YEAR-1995-96 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 ( %& / APPELLANT) ( '(%& / RESPONDENT) 2 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. #) #) #) #) * * * * / ASSESSEE BY : SHRI DINESH VYAS + * / REVENUE BY : SHRI S.D.SRIVASTAVA # # # # + ++ + , , , , / DATE OF HEARING : 28-03-2014 -.$ + , / DATE OF PRONOUNCEMENT : 02-04-2014 # # # # , 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 UPO N BY A SINGLE COMMON ORDER.GROUNDS OF APPEAL FILED BY THE ASSESSEE FOR ALL THE THREE AY.S.READ A S UNDER : ITA NO. 3968/MUM/2003 GROUND OF APPEAL NO.1{PAGE 24 OF CIT(A)S ORDER} EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS RS.1,84,38,225 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.2 {PAGE 30 OF CIT (A)S ORDER} RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER R ULE 6D - RS.11,12,710 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.1,47,600 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 34 OF CIT (A)S ORDER} DISALLOWANCE OF ANNUAL GENERAL MEETING EXPENSES- RS. 87,240 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.5 {PAGE 36 OF CIT (A)S ORDER} DISALLOWANCE OF EXPENDITURE ON TEA AND COFFEE SERVE D TO VISITORS U/S.37(2A)- RS. 3,00,000 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- RS.23,67,008 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.38,81,319 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 53 OF CIT (A)S ORDER} EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE - RS.27,51,402 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. 3 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. GROUND OF APPEAL NO.9 {PAGE 78 OF CIT (A)S ORDER} DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE- RS.2, 00,71,106 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.10 {PAGE 80 OF CIT (A)S ORDER} CONTRIBUTION TO TATA SPORTS CLUB RS.2,50,000 THE LEARNED CIT (A) ERRED IN HOLDING THAT CONTRIBUT ION TO TATA SPORTS CLUB IS COVERED BY THE PROVISION S OF SECTION 40A(A). GROUND OF APPEAL NO.11 {PAGE 90 OF CIT (A)S ORDER} CONTRIBUTIONS TO VARIOUS INSTITUTIONS IN JAMSHEDPUR RS. 25,54,500 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 ESTABLISHES NEXUS BETWEEN THE CONTRIBUTIONS MADE AN D THE BUSINESS OF THE APPELLANT. GROUND OF APPEAL NO.12 {PAGE 105 OF CIT (A)S ORDER} FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES - RS. 4,83,584 THE LEARNED CIT (A) ERRED IN DISALLOWING RS. 4,83,5 84 BEING FEES PAID TO THE CONSULTANTS FOR CARRYING OUT FEASIBILITY STUDIES ON THE GROUND THAT IT CONSTITUT ES CAPITAL EXPENDITURE. GROUND OF APPEAL NO.13 {PAGE 109 OF CIT (A)S ORDER} EXPENDITURE ON IMMOVABLE ASSETS IN BHUTAN- RS. 4,99,898 THE LEARNED CIT(A) ERRED IN DISALLOWING EXPENDITURE INCURRED ON IMMOVABLE ASSETS IN BHUTAN ON THE GROUND THAT THE SAME IS CAPITAL EXPENDITURE. GROUND OF APPEAL NO.14 {PAGE 115 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 6D- TRAVELLING EXPENSES- RS. 6,50,000 THE LEARNED CIT(A) ERRED IN CONFIRMING ADHOC DISALL OWANCE OF RS. 6,50,000 IN RESPECT OF TRAVELLING EXPENSES OF AUDITORS, TECHNICIANS AND CONSULTANTS. GROUND OF APPEAL NO.15 {PAGE 116 OF CIT (A)S ORDER} EXPENDITURE INCURRED ON DARJEELING HOLIDAY HOME- RS. 3,08,000 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.16 {PAGE 219 OF CIT (A)S ORDER} EXPENDITURE ON TOPOGRAPHICAL SURVEY FOR CONSTRUCTIO N OF RAILWAY BRIDGE- RS. 12,00,000 THE LEARNED CIT(A) ERRED IN DISALLOWING EXPENDITURE ON TOPOGRAPHICAL SURVEY FOR CONSTRUCTION OF RAILWA Y BRIDGE ON THE GROUND THAT THE SAME IS CAPITAL IN NA TURE. GROUND OF APPEAL NO.17. 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 AT TH E TIME OF HEARING. ITA NO. 3969/MUM/2003 GROUND OF APPEAL NO.1{PAGE 24 OF CIT(A)S ORDER} EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS RS.3,25,05,866 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.2 {PAGE 30 OF CIT (A)S ORDER} RECOVERY OF GUEST HOUSE EXPENSES- RS.42,16,108 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 34 OF CIT (A)S ORDER} DISALLOWANCE OF ANNUAL GENERAL MEETING EXPENSES- RS. 1,45,674 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.4 {PAGE 41 OF CIT (A)S ORDER} 4 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES OF EMPLOYEES- RS. 4,63,114 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.5 {PAGE 78 OF CIT (A)S ORDER} DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE- RS.2, 93,37,620 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.6 {PAGE 80 OF CIT (A)S ORDER} CONTRIBUTION TO TATA SPORTS CLUB RS.3,88,654 THE LEARNED CIT (A) ERRED IN HOLDING THAT CONTRIBUT ION TO TATA SPORTS CLUB IS COVERED BY THE PROVISION S OF SECTION 40A(9). GROUND OF APPEAL NO.7 {PAGE 90 OF CIT (A)S ORDER} CONTRIBUTIONS TO VARIOUS INSTITUTIONS IN JAMSHEDPUR RS. 85,00,889 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 ESTABLISHES NEXUS BETWEEN THE CONTRIBUTIONS MADE AN D THE BUSINESS OF THE APPELLANT. GROUND OF APPEAL NO.8 {PAGE 93 OF CIT (A)S ORDER} FOREIGN TRAVEL EXPENSES - RS.3,50,486 THE LEARNED CIT (A) ERRED IN DISALLOWING FOREIGN TR AVEL EXPENSES ON THE GROUND THAT THE SAME WAS IN TH E NATURE OF CAPITAL EXPENDITURE AND APPELLANT HAD GIV EN NO CLARIFICATION WHETHER THE EXPENDITURE ON CHES S FEDERATION WAS ON EMPLOYEES. GROUND OF APPEAL NO.9 {PAGE 105 OF CIT (A)S ORDER} FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES - RS. 24,94,882 THE LEARNED CIT (A) ERRED IN DISALLOWING RS. 24,94, 882 BEING FEES PAID TO THE CONSULTANTS FOR CARRYING OUT FEASIBILITY STUDIES ON THE GROUND THAT IT CONSTITUT ES CAPITAL EXPENDITURE. GROUND OF APPEAL NO.10 {PAGE 109 OF CIT (A)S ORDER} EXPENDITURE ON IMMOVABLE ASSETS IN BHUTAN- RS. 85,574 THE LEARNED CIT(A) ERRED IN TREATING EXPENDITURE ON IMMOVABLE ASSETS IN BHUTAN AS THE ONE IN CAPITAL FIELD FROM WHICH THE APPELLANT HAS DERIVED ENDURING BENEFIT. GROUND OF APPEAL NO.11 {PAGE 115 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 6D- TRAVELLING EXPENSES- RS. 6,75,000 THE LEARNED CIT(A) ERRED IN CONFIRMING ADHOC DISALL OWANCE OF RS. 6,75,000 IN RESPECT OF TRAVELLING EXPENSES OF AUDITORS, TECHNICIANS AND CONSULTANTS. GROUND OF APPEAL NO.12 {PAGE 116 OF CIT (A)S ORDER} EXPENDITURE INCURRED ON DARJEELING HOLIDAY HOME- RS. 4,36,073 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). GROUND OF APPEAL NO.13 {PAGE 174 OF CIT (A)S ORDER} RIGHTS SHARE ISSUE EXPENSES - RS.3,76,24,336 THE LEARNED CIT (A) ERRED IN TREATING EXPENSES INCU RRED ON RIGHTS SHARE ISSUE AS CAPITAL IN NATURE. GROUND OF APPEAL NO.14{PAGE 223 OF CIT (A)S ORDER} INTEREST CAPITALIZED ON SETTING UP OF CEMENT PLANT- 25,32,00,000 THE LEARNED CIT(A) ERRED IN DISALLOWING INTEREST CA PITALIZED ON CEMENT PLANT ON THE GROUND THAT IT IS A NEW BUSINESS AND NOT EXPANSION OF EXISTING BUSINESS OF STEEL. GROUND OF APPEAL NO.15{PAGE 224 OF CIT (A)S ORDER} EXPENDITURE OF DIGGING OF TUBEWELLS - 10,50,000 THE LEARNED CIT(A) ERRED IN DISALLOWING EXPENDITURE ON DIGGING OF TUBEWELLS IN THE VILLAGES SURROUNDIN G SUKINDA MINES ON THE GROUND THAT THE SAME WAS PHILA NTHROPIC IN NATURE AND NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. GROUND OF APPEAL NO.16{PAGE 225 OF CIT (A)S ORDER} LOSS ON REVALUATION OF FOREIGN CURRENCY CONVERTIBLE BONDS- 1,80,00,000 THE LEARNED CIT(A) ERRED IN DISALLOWING THE LOSS ON REVALUATION OF FOREIGN CURRENCY CONVERTIBLE BONDS ON THE GROUND THAT THE SAME WAS A NOTIONAL LOSS, WH ICH HAD NOT CRYSTALLIZED. GROUND OF APPEAL NO.17 CONTRIBUTION OF INSTITUTE FOR MINERS & METAL WORKER S EDUCATION. 7,50,000 THE LEARNED CIT(A) ERRED IN NOT CONSIDERING APPELLA NTS CONTENTION THAT CONTRIBUTION MADE FOR TRAINING OF EMPLOYEES IS DEDUCTIBLE AS REVENUE EXPENDITURE. 5 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. GROUND OF APPEAL NO.18 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 GROUND OF APPEAL. ITA NO. 3970/MUM/2003 GROUND OF APPEAL NO.1{PAGE 24 OF CIT(A)S ORDER} EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS RS.3,50,64,202 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.2 {PAGE 30 OF CIT (A)S ORDER} RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER R ULE 6D - RS.56,45,446 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 34 OF CIT (A)S ORDER} DISALLOWANCE OF ANNUAL GENERAL MEETING EXPENSES- RS. 1,98,161 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.4 {PAGE 78 OF CIT (A)S ORDER} DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE- RS.2, 99,10,700 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.5 {PAGE 80 OF CIT (A)S ORDER} CONTRIBUTION TO TATA SPORTS CLUB RS.3,50,000 THE LEARNED CIT (A) ERRED IN HOLDING THAT CONTRIBUT ION TO TATA SPORTS CLUB IS COVERED BY THE PROVISION S OF SECTION 40A(A). GROUND OF APPEAL NO.6 {PAGE 90 OF CIT (A)S ORDER} CONTRIBUTIONS TO VARIOUS INSTITUTIONS. RS.1,79,22,695 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 ESTABLISHES NEXUS BETWEEN THE CONTRIBUTIONS MADE AN D THE BUSINESS OF THE APPELLANT. GROUND OF APPEAL NO.7 {PAGE 109 OF CIT (A)S ORDER} EXPENDITURE ON IMMOVABLE ASSETS IN BHUTAN- R S. 2,74,374 THE LEARNED CIT(A) ERRED IN TREATING EXPENDITURE ON IMMOVABLE ASSETS IN BHUTAN AS THE ONE IN CAPITAL FIELD FROM WHICH THE APPELLANT HAS DERIVED ENDURING BENEFIT. GROUND OF APPEAL NO.8 {PAGE 115 OF CIT (A)S ORDER} DISALLOWANCE UNDER RULE 6D- TRAVELLING EXPENSES- RS. 7,00,000 THE LEARNED CIT(A) ERRED IN CONFIRMING ADHOC DISALL OWANCE OF RS. 7,00,000 IN RESPECT OF TRAVELLING EXPENSES OF AUDITORS, TECHNICIANS AND CONSULTANTS. GROUND OF APPEAL NO.9 {PAGE 116 OF CIT (A)S ORDER} EXPENDITURE INCURRED ON DARJEELING HOLIDAY HOMES- RS. 1,97,850 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). GROUND OF APPEAL NO.10 {PAGE 174 OF CIT (A)S ORDER} RIGHTS SHARE ISSUE EXPENSES - RS.1,89,86,431 THE LEARNED CIT (A) ERRED IN TREATING EXPENSES INCU RRED ON RIGHTS SHARE ISSUE AS CAPITAL IN NATURE. GROUND OF APPEAL NO.11 {PAGE 41 OF CIT (A)S ORDER} EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES OF EMPLOYEES- RS.27,02 ,017 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.12{PAGE 226 OF CIT (A)S ORDER} 6 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. CONTRIBUTION OF INSTITUTE FOR MINERS & METAL WORKER S. 16,00,000 THE LEARNED CIT(A) ERRED IN NOT ALLOWING CONTRIBUTI ON TO INSTITUTE FOR MINERS & METAL WORKERS AND SETT ING THE SAME ASIDE TO THE ASSESSING OFFICER TO DETERMIN E WHETHER ACTUAL TRAINING WAS IMPARTED TO EMPLOYEES OF THE APPELLANT. GROUND OF APPEAL NO.13 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 GROUND OF APPEAL. IN THEIR APPEALS, AO.S. HAVE RAISED FOLLOWING GROUN DS FOR ABOVE REFERRED THREE AY.S. ITA NO. 3985/MUM/2003,AY-1991-92: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW RS.9,36,00,000/-AS DEDUC TION ON ACCOUNT OF PROVISION FOR LEAVE SALARIES. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW 20% OF INITIAL CONTRIBUT ION AS DEDUCTION IN THE YEAR IN WHICH THE INITIAL CONTRIBUTION WAS MADE TO THE APPROVED SUPERANNUATIO N FUND. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 1,50,000/- ON ACCOU NT 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 SALES TAX AND EXCISE DUTY FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80HHC. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) O N THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ITO/AC/DC BE RESTORED.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO. 3986/MUM/2003,AY-1994-95 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW RS.7,92,23,433/-AS DEDUC TION ON ACCOUNT OF PROVISION FOR LEAVE SALARIES. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW 20% OF INITIAL CONTRIBUT ION AS DEDUCTION IN THE YEAR IN WHICH THE INITIAL CONTRIBUTION WAS MADE TO THE APPROVED SUPERANNUATIO N FUND. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 15,78,178/- ON ACCO UNT OF PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE EXPENSES. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) O N THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ITO/AC/DC BE RESTORED.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO. 3987/MUM/2003,AY-1995-96 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW RS.16,98,99,242/-AS DEDU CTION ON ACCOUNT OF PROVISION FOR LEAVE SALARIES. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O.TO ALLOW 20% OF INITIAL CONTRIBUT ION AS DEDUCTION IN THE YEAR IN WHICH THE INITIAL CONTRIBUTION WAS MADE TO THE APPROVED SUPERANNUATIO N FUND. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 40,85,564/- ON ACCO UNT OF PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE EXPENSES. 7 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW RS. 1,35,435/- ON ACCOU NT OF FOREIGN TRAVEL EXPENSES. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) O N THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ITO/AC/DC BE RESTORED.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 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 FOR M: ISSUE GROU ND NO (G.) & AY. APPEALS BY THE ASSESSEE EXPENDITURE ON MAINTENANCE OF CERTAIN BUILDINGS G.1 -1991-92,1994-95,1995-96 GUEST HOUSE EXPENSES CONSIDERED UNDER RULE 6D G.2- 1991-92,1994-95,1995-96 DISALLOWANCE OF AGM EXPENSES OF THE SHAREHOLDERS G. 4-1991-92,G.3-1994-95,1995-96 EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES G. 6-91-92,G.4-94-95,G.11-95-96 DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE G.9-1991-92,G.5-94/95,G.4-95/96 CONTRIBUTIONS TO TATA SPORTS BOARD G.10-1991-92,G. 6-94/95,G.5-95/96 CONTRIBU TIONS TO VARIOUS INSTITUTIONS AT JAMSHEDPUR G.11-1991-92,G.7-94/95,G.6-95/96 FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES G. 12-1991-92,G.9-1994-95 RIGHT SHARE ISSUE EXPENSE G.13-1994-95,G.10-1995-96 CONTRIBUTIONS TO INSTITUTE FOR METAL AND MINERAL WORKERS G.1 7 - 1994 - 95 , G.12 - 95 - 96 EXCLUSIVE GROUNDS FOR AY.1991-92 DISALLOWANCE UNDER RULE 6B OF THE RULES,FOR CALENDA RS AND DIARIES G.3 DISALLOWANCE OF EXPENDITURE ON TEA AND COFFEE:(VISI TORS) G.5 DISALLOWANCE OF EXPENDITURE ON PAYMENTS MADE TO CLU BS G.7 EXPENDITURE ON PARTLY CONVERTIBLE DEBENTURE G.8 EXCLUS IVE GROUNDS FOR AY.1994-95 FOREIGN TRAVEL EXPENSES G.8 EXPENDITURE OF DIGGING OF WELL G. 15 LOSS ON VALUATION OF FOREIGN CURRENCY CONVERTIBLE B ONDS G.16 APPEALS BY THE AO PROVISION FOR LEAVE SALARY G.1-1991-92,1994-95,95-96 20% OF INITIAL CONTRIBUTION TO APPROVED SUPERANNUAT ION FUND. G.2-1991-92,1994-95,95-96 PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE E XPENSES G.3-1991-92,G.4-1994-95,95-96 EXCLUSION OF SALES TAX,EXCISE DUTY FOR 80HHC DEDUCT ION G.4-1991-92 FOREIGN TRAVEL EXPENSES G. 4 - 1995 - 96 DURING THE COURSE OF HEARING BEFORE US,AUTHRORISED REPRESENTATIVE(AR)OF THE ASSESSEE DID NOT PRESS GROUNDS NO.13-17FOR THE AY.1991-92,GROUNDS NO.8(PAR T)10,11,12,14 AND 18FOR THE AY.1994-95, AND GROUNDS NO.7,8,9 AND 13 FOR THE AY.1995-96,HENC E,SAME STAND DISMISSED AS NOT PRESSED. ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURING AND SALE OF IRON AND STEEL MATERIALS. DETAILS OF DATES OF FILING OF RETURNS,INCOMES RETUR NED,DATES OF ASSESSMENT,ASSESSED INCOMES,DATES OF ORDERS OF THE CIT(A)CAN BE SUMMARISED AS UNDER : AY. DTS.OF FILING OF RETURN RETURNED INCOME (RS.) DATES OF ASSESSMENT ASSESSED INCOME DT. OF ORDERS OF CIT(A) 1991-92 30.12.1991 94.63 CRORES 23.03.1994 1,41 ,46,96,420/- 21.02.2003 1994-95 30.11.1994 (-)3,16,82,64,010/- 09.05.1996 2 ,53,15,57,413/- 21.02.2003 1995-96 30.11.1995 242,65,59,783/- 31.03.1997 172,4451,523/- 21.02.2003 ITA/3968,3969 AND 3970/MUM/2003/-AY.1991-92,1994-95 AND 1995-96: 2. 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.S1991-92,1994- 95,1995-96 ARE RS.1.84 CRORES,RS.3.25 CRORES AND RS .3.50 CRORES RESPECTIVELY.AO.S HAD DISALLOW - ED THE SAID EXPENDITURE U/S.37(4)OF THE ACT AND THE FAA CONFIRMED THEIR ORDERS. 8 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. BEFORE US,AR CONCEDED THAT ISSUE WAS DECIDED AGAINS T THE ASSESSEE,BY THE ORDER OF THE TRIBUNAL FOR THE AY.S.1987-88,1989-09 AND 1990-91(ITAS/ 3965,396 6 AND 3967/MUM/2003 07.03.2014).WE FIND THAT ISSUE WAS DISMISSED,AS SAME WAS NOT PRESS ED FOR THE LAST AY.FOLLOWING THE ORDER FOR THAT YEAR,WE DECIDE G.1 FOR ALL THE THREE AY.S. AGAINST THE ASSESSEE. 3. COMMON GROUND OF APPEAL(G.2)FOR THE ALL THE AY.S D EALS WITH RECOVERY OF GUEST HOUSE EXPENSES CONSIDERED UNDER RULE 6D OF THE INCOME-TAX RULES,1962(RULES),AMOUNTING TO RS.11.12 LAKHS, 42. 16 LAKHS AND 56.45 LAKHS,RESPECTIVELY FO R THE SAID AY.S UNDER APPEAL.DURING THE ASSESSMENT PROCEE -DINGS,AO.S FOUND THAT THE ASSESS EE MAINTAINED GUEST HOUSES AT JAMSHEDPUR MINES AND COLLIERIES, AND AT KHARAGPUR,THAT IT COLL ECTED SERVICE CHARGES FOR PROVIDING LODGING OR BOARDING AND LODGING TO THE SUPPLIERS AND BUSINESS ASSOCIATES,THAT IN THE CASE OF THE EMPLOYEES A BOOK ENTRY WAS PASSED,THAT THE ASSESSEE HAD DEBITED THE EXPENDITURE INCURRED ON THE EMPLOYEES IN RESPECT OF SERVICE CHARGES I.E, LODGING OR BOARDING AND LODGING CHARGES TO THE TRAVELLING EXPENSES ACCOUNT AND CREDITED TO THE GUEST HOUSE EXPENSES AC COUNT,THAT IT DID NOT RECOVER ANY SUM FROM THE EMPLOYEES AND ONLY A BOOK ENTRY WAS PASSED.CONSIDER ING THE ABOVE FACTS THE AO HELD THAT THERE WAS NO REDUCTION IN ITS LIABILITY BY THE NOTIONAL R ECOVERY AND AS A RESULT,HE DID NOT ALLOW THE ASSESSEE TO SET OFF THE NOTIONAL RECOVERY ATTRIBUTA BLE TO THE EMPLOYEES AGAINST THE GUEST HOUSE EXPENSES.HOWEVER, THE SERVICE CHARGES FOR USING THE GUEST HOUSE BY THE SUPPLIERS AND BUSINESS ASSOCIATES,THE ASSESSEE RECEIVED CASH AND THE AO AL LOWED IT TO BE SET OFF AGAINST THE GUEST HOUSE EXPENSES UNDER FIRST PROVISO TO SECTION 37(4).IT IN CLUDED THE SERVICE CHARGES NOTIONALLY COMPUTED FOR USING THE GUEST HOUSE IN THE TRAVELLING EXPENSE S ACCOUNT.AT THE TIME OF QUANTIFICATION OF THE DISALLOWANCE UNDER RULE 6D,THE EXPENDITURE WHICH WA S INCURRED AT THE GUEST HOUSE WAS ALSO INCLUDED IN THE DISALLOWANCE UNDER RULE 6D. 3.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEALS 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 THE DISALLOWANCE UNDER RULE 6D FOR ALL THE THREE AY.S,T HAT THE AMOUNT ALLOWABLE UNDER RULE 6D WOULD GET REDUCED IN A CASE WHERE THE LODGING OR BOARDING AND LODGING WERE PROVIDED,THAT THE NOTIONAL RECOVERIES ATTRIBUTABLE TO EMPLOYEES IN RESPECT OF THE GUEST HOUSE HAD BEEN RIGHTLY NOT ALLOWED AS REDUCTION FROM THE GUEST HOUSE EXPENSES BY THE AO.F INALLY,DISALLOWANCE MENTIONED ABOVE WAS UPHELD BY THE FAA. 3.2. BEFORE US,REPRESENTATIVES OF BOTH THE SIDES STATED THAT ISSUE IN COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DELIVERED FOR THE AY.S .1987-88,1989-09 AND 1990-91 (SUPRA).WE FIND THAT ISSUE OF RECOVERY OF GUEST HOUSE EXPENSES HAS BEEN DEALT BY THE TRIBUNAL FOR THE EARLIER AY.S. 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 THE SITUATION OF N ON-EXISTENCE OF THE GUEST HOUSE OF THE COMPANY IN THAT PLACE, THEN, SUCH EMPLOYEES WOULD H AVE STAYED IN A HOTEL OR GUEST HOUSE RUN BY THIRD PARTIES AND MADE PAYMENTS TO THEM FOR USE OF THEIR FACILITIES AND ACCORDINGLY PAYMENTS MADE TO OUTSIDE PARTIES WOULD HAVE BEEN TR EATED AS TRAVELLING EXPENSES INCURRED BY THE COMPANY FOR ITS BUSINESS. THEREFORE, THE USE R OF GUEST HOUSE FACILITIES PROVIDED BY THE COMPANY TO THE EMPLOYEES OF THE COMPANY IN CONNECTI ON WITH DISCHARGE OF THEIR OFFICIAL 9 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. DUTIES DOES NOT ALTER THE BASIC CHARACTER OF THE EX PENDITURE.ULTIMATELY SUCH EXPENSES ARE CONNECTED WITH THE TRAVELLING BY SUCH EMPLOYEES AND , THEREFORE, SHOULD BE TREATED ACCORDINGLY, IRRESPECTIVE OF THE FACT THAT SUCH EMP LOYEES STAYED IN THE GUEST HOUSE OF THE COMPANY.IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCE S,WE DIRECT THE AO TO ALLOW THE DEDUCTION OF AMOUNT RECEIVED FROM PARENT DEPARTMENT S AS EXPENDITURE IN THE NATURE OF TRAVELLING EXPENSES ;AND IN ACCORDANCE WITH RULE 6D OF THE IT RULES.THUS THIS GROUND OF THE ASSESSEE IS ACCEPTED. 13.IN VIEW OF THE ABOVE, WE DIRECT THAT THE ADDITIO N TO THE EXTENT OF RECOVERIES MADE BY THE ASSESSEE BE ALLOWED AS A DEDUCTION. GROUND NO. 4 OF THE 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. FOLLOWING THE ORDERS FOR THE EARLIER AY.S,WE DECIDE GROUND NO.2 FOR ALL THE THREE AY.S IN FAVOUR OF THE ASSESSEE. 4. THIRD COMMON GROUND OF APPEAL(GROUND NO.4 FOR 1991- 92 AND GROUND NO.3 FOR1994-95AND1995- 96)IS ABOUT DISALLOWANCE OF AGM EXPENSES OF THE SHA REHOLDERS.AO.S HAD MADE DISALLOWANCES OF RS.87,240/-,RS.1,45,674/- AND RS.1,98,161/-RESPECTI VELY FOR THE AY.S UNDER APPEAL U/S.37(2A) / 37 (2)OF THE ACT AND THE FAA HAD UPHELD THEIR ORDERS. 4.1. AR AGREED THAT ISSUE WAS DECIDED AGAINST THE ASSESS EE BY THE TRIBUNAL IN THE ORDERS FOR EARLIER AY.S.WE FIND THAT IN THE ORDER FOR THE AY.S.1987-88 ,1989-09 AND 1990-91 (SUPRA),TRIBUNAL HAD DECIDED THE ISSUE 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 BROA D TO COVER EVERY EXPENDITURE ON PROVISION OF HOSPITALITY OF EVERY KIND TO ANY PERSON OTHER THAN THE EMPLOYEES AT THE PLACE OF THEIR WORK THE APPELLANT RELIED ON THE JUDGMENT OF THE KARNATAKA H IGH COURT IN THE CASE OF BANGALORE TURF CLUB LTD 126 ITR 430.THE HONBLE KARNATAKA HIGH COURT IN A LATER JUDGMENT IN THE CASE OF MYSORE MINERALS LTD 162 ITR 562 DID NOT APPROVE THE RATIO LAID DOWN IN BANGALORE TURF CLUB ON THE GROUND THAT THE EXPLANATION 2 TO SUBSECTION (2A) O F SECTION 37 WAS NOT THERE IN THE STATUTE WHEN THE JUDGMENT IN THE CASE OF BANGALORE TURF CLUB WAS DELIVERED.THUS, THE KARNATAKA HIGH COURT OVERRULED ITS OWN DECISION IN BANGALORE TURF CLUB IN THE CASE OF MYSORE MINERALS LTD. (SUPRA). HONBLE KARNATAKA HIGH COURT HAS CATEGORICALLY STAT ED THAT THE EXPENDITURE INCURRED AT THE GENERAL BODY MEETING IS COVERED BY THE EXPLANATION 2 TO SECTION 37(2A). RESPECTFULLY FOLLOWING THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CAS E OF MYSORE MINERALS LTD.(SUPRA)THE DISALLOWANCE MADE BY THE AO U/S. 37 (2A)/37(2)IS UP HELD.TO SUM UP, THE EXPENDITURE INCURRED ON SERVING TEA, COFFEE & SOFT DRINKS TO THE SHAREHOLDE RS AT THE ANNUAL GENERAL MEETING IS TREATED AS ENTERTAINMENT EXPENDITURE. THE ACTION OF THE AO IS UPHELD. 18.IN VIEW OF THE ABOVE DECISION OF THE HONBLE KAR NATAKA HIGH COURT, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS GROUND NO. 6 OF THE ASSESSEE . FOLLOWING THE ABOVE G.4 AND G.5,FOR THE AY.1987-88 AND REMAINING TWO AY.S,STAND DISMISSED. CONSIDERING THE ABOVE WE DECIDE THE ISSUE OF DISALL OWANCE OF AGM EXPENSES OF THE SHAREHOLDERS AGAINST THE ASSESSEE FOR ALL THE THREE AY.S. 10 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. 5. EXPENDITURE ON BUSINESS MEETINGS AND CONFERENCES(G. 6-91-92,G.4-94-95,G.11-95-96)IS THE NEXT COMMON ISSUE INVOLVED IN ALL THE THREE AYS.AO.S HAD DISALLOWED RS.23.67LAKHS,RS.4.63LAKHS AND RS.27.02 LAKHS UNDER THE SAID HEAD FOR THE YEARS CO NCERNED. 5.1. IN THE APPELLATE PROCEEDINGS,FAA HELD THAT THE ASSE SSEE HAD CONDUCTED BUSINESS MEETINGS AT HOTELS WITH THE EMPLOYEES,THAT THERE WAS NO DOUBT T HAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF THE BUSINESS,THAT THE EXPENDITURE WAS NOT INCURR ED IN THE OFFICE BUT WAS PAID TO THE HOTELS,THAT IT WAS CLEAR FROM THE EXPL.2 TO SECTION 37(2A)/37(2) T HAT THE EXPENDITURE INCURRED ON THE HOSPITALITY OF EMPLOYEES WAS EXCLUDED FROM THE DEFINITION OF TH E ENTERTAINMENT EXPENDITURE PROVIDED THE EXPENDITURE IS INCURRED IN OFFICE/FACTORY OR OTHER PLACE OF THEIR WORK,THAT IN THE CASE UNDER APPEAL THE EXPENDITURE WAS INCURRED IN THE HOTELS,THAT THE EXPENDITURE INCURRED ON ENTERTAINMENT AT HOTELS ATTRIBUTABLE TO EMPLOYEES COULD NOT BE BROUGHT UNDE R THE EXPRESSION OTHER PLACE OF THEIR WORK,THAT THE EXPRESSION HAD TO BE INTERPRETED IN THE CONTEXT IN WHICH OTHER WORDS PRECEDING THE EXPRESSION WERE USED,THAT THE OTHER WORDS USED WERE OFFICE/OR FACTORY,THAT OTHER PLACE OF THEIR WORKHAD TO BE SIMILAR TO OFFICE/FACTORY,THAT NORMALLY,THE SAID EX PRESSION INCLUDED PLACES SUCH AS MINE,WORK SITE,DRILLING-SITE,GODOWN ETC.,THAT THE EXPRESSION DID NOT INCLUDE EXPENDITURE INCURRED AT A PLACE OTHER THAN THE PLACE AT WHICH AN EMPLOYEE NORMALLY WORKS, THAT WORDS OTHER PLACE OF WORK SHOULD BE AKIN TO OFFICE OR FACTORY AND IT COULD NOT BE TA KEN TO INCLUDE HOTEL OR RESTAURANT,THAT THE ASSESSE E DID NOT PLACE ANY EVIDENCE TO ESTABLISH THE FACT TH AT THE EXPENDITURE INCURRED ON BUSINESS MEETINGS & CONFERENCES 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 EVIDEN CE OF RENT PAID TO THE HOTELS OR RESTAURANTS WHICH WAS INCLUDED IN THE BUSINESS MEETING & CONFERENCES EXPENDITURE.FINALLY,HE SUSTAINED THE ADDITIONS MADE BY THE AO SUBJECT TO VERIFICATION OF EVIDENCE OF RENT PAID. 5.2. BEFORE US,AR AGREED THAT THE ISSUE WAS DECIDED AGAI NST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR EARLIER AY.S.WE FIND THAT IDENTICAL ISSUE,FOR T HE AY.S.1987-88,1989-09 AND 1990-91(SUPRA),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 ISSU E THE LEARNED CIT(A) HAS HELD AS FOLLOWS: AS PER EXPLANATION 1 TO SECTION 37(2A), THE ENTERTAINM ENT EXPENDITURE INCLUDES THE AMOUNT OF ANY DIALLOWANCE IN THE NATURE OF ENTERTAINMENT ALLOWANC E PAID TO THE EMPLOYEE. FURTHER THE ENTERTAIN - MENT EXPENDITURE ALSO INCLUDES THE EXPENDITURE INCU RRED BY THE EMPLOYEE FOR THE PURPOSE OF BUSINESS OR PROFESSION.EXPLANATION 2 TO SECTION 37(2A) IS MA TERIAL FOR THE PURPOSE OF THE PRESENT ISSUE. EXPLANATION 2 TO SECTION 37(2A) WAS INTRODUCED BY T HE FINANCE ACT, 1983 WITH RETROSPECTIVE EFFECT FROM 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 DEF INITION OF THE ENTERTAINMENT EXPENDITURE PROVIDED THE EXPENDITURE IS INCURRED IN OFFICE, FACTORY OR O THER PLACE OF THEIR WORK. IN THE PRESENT CASE,IT IS AN ACCEPTED POSITION THAT THE EXPENDITURE WAS INCURRED IN THE HOTELS.THE ASSESSEES CONTENTION IS IOTELS FALL WITHIN THE MEANING OF OTHER PLACE OF THEIR WO RK.I AM UNBLE TO AGREE WITH THE INTERPRETATION GIVEN BY THE APPELLANT. EXPLANATION 1 AND 2 TO SECT ION 37(2A) IT CAN BE SEEN THAT THE EXPENDITURE INCURRED BY THE EMPLOYEES FORMS PART TO DEFINITION OF ENTERTAINMENT EXPENDITURE.EXPLANATION 2 DOES NOT TREAT EXPENDITURE ON FOOD OR BEVERAGES PROVIDED BY THE ASSESSEE TO THE EMPLOYEES IN OFFICE, FACTORY OR OTHER PLACE OF THEIR WORK AS ENTERTAINMENT EXPENDITURE.THE EXPENDITURE WAS N OT INCURRED EITHER IN OFFICE OR IN FACTORY. THE EXPENDITURE INC URRED ON ENTERTAINMENT AT HOTELS ATTRIBUTABLE TO EMPLOYEES CANNOT BE BROUGHT UNDER THE EXPRESSION O THER PLACE OF THEIR WORK. THIS EXPRESSION HAS TO BE INTERPRETED IN THE CONTEXT IN WHICH OTHER WOR DS 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 11 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. OFFICE OR FACTORY. NORMALLY, THE EXPRESSION OT HER PLACE OF THEIR WORK INCLUDES PLACES SUCH AS MINE, WORK SITE, DRILLING SITE, GODOWN ETC. BUT CER TAINLY THE EXPRESSION DOES NOT INCLUDE EXPENDITURE INCURRED AT A PLACE OTHER THAN THE PLACE AT WHICH A N EMPLOYEE NORMALLY WORKS. THE PRINCIPLE OF EJUSDEM GENERIC WARRANTS THAT OTHER PLACE OF WORK SHOULD BE AKIN TO OFFICE OR FACTORY AND IT CANNOT BE TAKEN TO INCLUDE HOTEL OR RESTAURANT. THE EXPENDITURE INCURRED BY THE APPELLANT WAS TOWARDS FOOD OR BEVERAGES. IN MY VIEW, THE EXPENDIT URE INCURRED ON THE EMPLOYEES AT A PLACE OTHER THAN OFFICE OR FACTORY REQUIRES TO BE TREATED AS EN TERTAINMENT EXPENDITURE. THE HOTEL OR RESTAURANT CANNOT BE TREATED AS ANY OTHER PLACE OF THEIR WORK . I AM ALSO NOT ABLE TO AGREE WITH THE CONTENTION THAT A LARGE NUMBER OF EMPLOYEES HAD ATTENDED THE B USINESS 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 EV ERY KIND TO EMPLOYEES ALSO,PROVIDED THE EXPENDITURE IS NOT INCURRED IN OFFICE OR FACTORY OR ANY OTHER PLACE OF THEIR WORK WHERE AN EMPLOYEE NORMALLY DISCHARGES HIS DUTIES. IN MY VIEW, THE HOT EL CANNOT BE EQUATED WITH THE OTHER PLACE OF THEIR WORK. THE APPELLANT ;RELIED ON THE CIT(A)S ORDER F OR A.Y. 1988-89.I AM NOT ABLE TO AGREE 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) ENTERTAINME NT EXPENDITURE.THE APPELLANT ; ALSO SUBMITTED THAT IN A.Y.50% OF THE EXPENDITURE INCURRED ON THE BUSINESS MEETINGS AND CONFERENCES WAS TREATED AS ENTERTAINMENT EXPENDITURE AND THE REMAINING EXPE NDITURE WAS RENT PAID FOR THE HALLS IN HOTELS.THE APPELLANT DID NOT PLACE ANY EVIDENCE,BEF ORE ME TO ESTABLISH THE FACT EXPENDITURE INCURRED ON BUSINESS MEETINGS AND CONFERENCES CONTAINED THE RENT PAID FOR THE HALLS IN THE HOTELS.IN THE ABSENCE OF EVIDENCE,I REFRAIN MYSELF FROM GIVING AN Y FINDING ON THIS ARGUMENT. HOWEVER, KEEPING IN MIND ;THE PRINCIPLES OF NATURAL JUSTICE, THE A.O. I S DIRECTED TO EXAMINE AND ALLOW IF THE ASSESSEE IS ABLE TO FURNISH THE EVIDENCE OF RENT PAID TO THE HO TELS OR RESTAURANTS WHICH WAS INCLUDED IN THE BUSINESS MEETINGS AND CONFERENCES EXPENDITURE.TO SU M UP, THE EXPENDITURE INCURRED ON THE BUSINESS MEETINGS AND CONFERENCES AT THE HOTELS FALLS WITHIN THE DEFINITION OF ENTERTAINMENT EXPENDITURE.THE ADDITIONS MADE BY THE AO ARE SUSTAINED SUBJECT TO S UBMISSION AND VERIFICATION OF EVIDENCE OF RENT PAID. 28.WE AGREE WITH THE REASONING GIVEN BY THE CIT(A) IN THE LIGHT OF THE PROVISIONS OF EXPLANATION 2 TO SECTION 37(2A) OF THE ACT. WE HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE.THE DECISION OF HONBLE CALCUTTA H IGH COURT IN THE CASE OF CHEMCROWN (I) LTD. (SUPRA) IS DISTINGUISHABLE AS FOLLOWS:THE EMPLOYEES AND CUSTOMERS PARTICIPATED IN THE ENTERTAINMENT WHEREAS IN THE CASE OF THE ASSESSEE THE EMPLOYEES A LONE PARTICIPATED. 29.THE DECISION IN THE CASE OF EXPO MACHINERY LTD. (SUPRA) BY HONBLE DELHI HIGH COURT IS ALSO DISTINGUISHABLE AS FOLLOWS: IT WAS A CASE OF EMPLOY EES PARTICIPATION WHILE ENTERTAINING GUESTS AND THE ISSUE OF PLACE OF WORK IN THE CONTEXT OF 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. CONSIDERING THE ORDERS FOR THE EARLIER YEARS (SUPRA )WE DECIDE THE ISSUE AGAINST THE ASSESSEE- COMPANY. 6. DISALLOWANCE OF TATA STEEL RURAL DEVELOPMENT SOCIET Y EXPENDITURE(TSRDS)-G.9-1991-92,G.5- 1994-95,G.4-1995-96)IS THE NEXT COMMON GROUND OF AP PEAL FOR THE YEARS UNDER CONSIDERATION.AS PER THE AO.S,ASSESSEE HAD CLAIMED EXPENDITURE ON RU RAL DEVELOPMENT IN THE ASSESSMENT YEARS UNDER CONSIDERATION,AS BUSINESS EXPENDITURE U/S. 37(1) OF THE ACT,THAT THE ASSESSEE HAD CLAIMED THAT IT HAD INCURRED EXPENDITURE ON PAYMENT TO TSRDS AMOUNTING TO RS.2CRORES,RS.2.93CRORES AND RS.2.99 CRORES 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 PURPOSE OF BUSINESS OF THE ASSESSEE,THAT THE EXPENDITURE INCUR RED ON VARIOUS ACTIVITIES LIKE VILLAGE LINK ROAD, DRINKING WATER PROJECT, IRRIGATION FACILITIES, VOCA TIONAL TRAINING ETC.HAD NO NEXUS WITH THE BUSINESS CARRIED ON BY THE ASSESSEE. 12 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. 6.1. AGAINST THE ORDER OF THE AO.S,ASSESSEE PREFERRED AN APPEAL 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 IT HAD NO DIRECT NEXUS WITH THE BUSINESS CARRIED ON BY IT,THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF STEEL AND THE EXPENDITURE WAS INC URRED FOR THE ACTIVITIES WHICH HAD NO DIRECT NEXUS WITH THE BUSINESS CARRIED ON BY IT.RELYING UP ON THE JUDGMENTS OF THE JURISDICTIONAL HIGH COURT IN STANDARD MILLS CO. LTD.(209ITR85) AND VOLT AS LTD.(207ITR47),HE HELD THAT THE EXPENDITU -RE INCURRED BY IT HAD NO NEXUS WITH THE BUSINESS C ARRIED ON BY IT,THAT IT WAS AN APPLICATION OF INCOME FOR A CHARITABLE OR PHILANTHROPIC CAUSE,THAT THERE WAS NO COMMERCIAL EXPEDIENCY ALSO IN INCURRING THE EXPENDITURE ON THE RURAL DEVELOPMENT, THAT THE DISALLOWANCE MADE BY THE AO DID NOT CALL FOR ANY INTERFERENCE. 6.2. BEFORE US,AR SUBMITTED THAT ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL FOR THE EARLIER AY.S. I.E. 1987-88,1989-09 AND 1990 -91(SUPRA).DR SUPPORTED THE ORDER OF THE FAA. WE FIND THAT ISSUE BEFORE US,HAS BEEN DECIDED BY TH E TRIBUNAL,WHILE ADJUDICATING THE APPEALS FOR AY.1987-88,1989-09 AND 1990-91(SUPRA) IN THE FOLLOW ING 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 INSTITUTI ONS BY THE ASSESSEE ,THE TRIBUNAL HAS DECIDED THE MATTE; IN THE ORDER FOR THE AY.1985-86;AS UNDER: 40. GROUND NO. 14 OF THE ASSESSEE READS AS FOLLOWS : THE LEARNED CIT(A) ERRED IN DISALLOWING CONTRIBUTI ONS TO INSTITUTIONS ON THE GROUND THAT SUCH EXPENDITURE WAS NOT INCURRED FOR THE PURPOSES OF TH E BUSINESS, HAVING FAILED TO UNDERSTAND THE SCENARIO THAT ESTABLISHES NEXUS BETWEEN THE CONTRIB UTIONS MADE AND THE BUSINESS OF THE APPELLANT. 41.THE ASSESSING OFFICER DISALLOWED CONTRIBUTIONS A GGREGATING TO RS.11,31,700 TO THE FOLLOWING INSTITUTIONS ENGAGED IN VARIOUS ACTIVITIES IN THE M ED OF SPORTS, EDUCATION AND CULTURAL PROMOTIONS ON THE GROUND THAT THE CONTRIBUTION WERE MADE FOR THE PURPOSE OF LABOUR WELFARE AND THAT THE 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 UNDER WHICH THESE EXPENSES HAS TO BE INCURRED BY THE ASSESSEE IS AS FOLLOWS: 42.THE ASSESSEE HAD SET UP ITS WORKS IN 1907 IN THE VIRGIN FOREST AREAS OF THE SINGHBHUM-DISTRICT, HAD TO DEVELOP THE TOWNSHIP OVER A PERIOD OF YEARS ON LAND OF ABOUT 25 SQ. KM. LEASED TO IT ON A LONG TERM BASIS BY THE GOVERNMENT OF BIHAR. AS ALL THE F ACILITIES OF THE WORKS, SITES FOR THE ASSOCIATE COMPANIES, RESIDENCE SITES FOR ITS OWN EMPLOYEES AN D THEIR DEPENDENTS AND SITES FOR THE BUSINESS COMMUNITY WERE TO BE LOCATED ON ITS OWN LAND, THE A SSESSEE HAD TO PROVIDE ALL THE FACILITIES OF A MUNICIPALITY LIKE, POWER,WATER,SANITATION, HOSPITAL S, 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 PEOP LE 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 CITIZENS IN JAMSHEDPUR TO SET UP VOLUNTARY ORGANISATIONS REGISTERED UNDER THE SOCIETIES ACT OR OTHER CHARITA BLE INSTITUTIONS TO UNDERTAKE ACTIVITIES IN THE FIE LD OF SPORTS, EDUCATION, MEDICAL RELIEF, CULTURAL PROM OTIONS, ETC.THE ASSESSEE FROM TIME TO TIME MADE CONTRIBUTIONS TOWARDS EXPENSES OF SUCH INSTITUTIONS TO THE EXTENT THEY PROVIDE THE SERVICE TO THE PEOPLE OF JAMSHEAPUR, THE BURDEN TO PROVIDE SIMILAR CIVIC AMENITIES BY THE ASSESSEE IS REDUCED THE ASSESSEE HAD MADE CONTRIBUTIONS OF RS 11,31,700 TO THE INSTITUTIONS MENTIONED ABOVE DURING THE ACCOUNTING YEAR 1984-85 TO ACHIEVE THIS OBJECTIVETH E ASSESSING OFFICER REJECTED THE ASSESSEES CLAIM THAT THESE CONTRIBUTIONS WERE MADE TO DISCHAR GE ITS OBLIGATIONS TOWARDS CIVIC AMENITIES AND, THEREFORE, IT WAS AN ITEM OF BUSINESS EXPENDITURE I NCURRED WHOLLY AND EXCLUSIVELY IN THE ORDINARY COURSE OF BUSINESS. HE HELD THAT SINCE THE MAJOR BE NEFICIARIES OF THE EXPENDITURE WERE THE COMPANYS EMPLOYEES, IT WAS AN ITEM OF LABOUR WELFARE EXPENDI TURE. 43.ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. WE HAVE 13 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. 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 BUSINESS OF THE ASSESSEE.IN THE AFORESAID DECISION THE HONB LE COURT LAID EMPHASIS ON BUSINESS EXPEDIENCY IN MAKING A PAYMENT. ON FACTS THE COURT FOUND NO BUSIN ESS EXPEDIENCY IN MAKING THE PAYMENT.IN THE CASE OF THE ASSESSEE WE ARE OF THE VIEW THAT THE PA YMENTS WERE MADE KEEPING IN MIND BUSINESS EXPEDIENCY VIZ.,TO HAVE A MOTIVATED WORK FORCE.IN T HE 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 EMPLOYER. WE, THEREF ORE, DIRECT THAT THE DEDUCTION AS CLAIMED BY THE ASSESSEE BE ALLOWED, GROUND NO. 14 IS ALLOWED. WE HAVE PERUSED THE MOU SIGNED BY THE ASSESSEE WITH THE WORKERS UNION.CONSIDERING THE TERMS AND CONDITIONS OF THE MOU WE ARE OF THE OPINION THA T ORDERS OF THE TRIBUNAL DELIVERED IN THE CASE OF THE ASSESSEE AS WELL AS TELCO SHOULD BE FOLLOWED.IN OUR VIEWS,MOU MAKES THE FACTS AND CIRCUMSTANCES OF THE CASE PECULIAR. WE FIND THAT HO NBLE JURISDICTIONAL HIGH COURT HAS,IN ITS ORDER DATED 26.12.2012, DISMISSED THE APPEAL FILED BY THE DEPARTMENT FILED FOR AY.1985-86(IT APPEAL NO.3176 OF 2010) WHERE SIMILAR ISSUE OF CONTRIBUTIO N TO VARIOUS INSTITUTIONS WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL.(GROUND NO.B AND F).AS FAR AS DISCHARGING OF SOCIAL RESPONSIBILITY IS CONCERNED VOLTAS LTD.HAD TO BE CONSIDERED THE GUIDI NG CASE.AS IN THAT CASE THERE WAS NO MOU WITH THE WORKERS, SO, CONSIDERING THE PECULIARITY OF FAC TS OF THE CASE,AS AGAINST THE MATTER OF VOLTAS,WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 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 CONSIDERING THE ORDERS FOR THE EARLIER YEARS(SUPRA) ,ISSUE OF PAYMENT TO TSRDC IS DECIDED IN FAVOUR OF THE ASSESSEE FOR ALL THE THREE YEARS. 7. NEXT COMMON GROUND OF APPEAL DEALS WITH CONTRIBUTIO NS TO TATA SPORTS BOARD(G.10-1991-92,G. 6-1994-95,G.5-1995-96) AND THE AMOUNTS INVOLVED ARE RS.2.50LAKHS,RS.3.88 LAKHS AND RS.3.50 LAKHS RESPECTIVELY.DURING THE ASSESSMENT PROCEEDING S 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. 7.1. IN THE APPELLANT PROCEEDINGS,FAA CONSIDERED THE SUB MISSIONS OF THE ASSESSEE AND HELD THAT THE CONTRIBUTIONS WERE COVERED BY SECTION 40A(9) OF THE ACT,THAT SECTION 40A(9) WAS ENACTED WITH A VIEW TO DISCOURAGING CREATION OF CERTAIN IRREVOCABL E TRUSTS OSTENSIBLY FOR THE WELFARE OF THE EMPLOYEES AND TRANSFER TO SUCH TRUST SUBSTANTIAL AM OUNTS BY WAY OF CONTRIBUTION,THAT WITH A VIEW TO DISCOURAGING CREATION OF SUCH TRUSTS, FUNDS, COMPAN IES, ASSOCIATION OF PERSONS, SOCIETIES ETC.,THE FINANCE ACT, 1984 HAD PROVIDED THAT NO DEDUCTION WO ULD BE ALLOWED IN THE COMPUTATION OF TAXABLE PROFITS IN RESPECT OF ANY SUMS PAID BY THE ASSESSEE AS AN EMPLOYER TOWARDS THE SETTING UP OR FORMATION OF OR A CONTRIBUTION TO ANY FUND, TRUST, COMPANY, ASSOCIATION OF PERSONS, BODY OF INDIVIDUALS OR SOCIETY OR ANY OTHER INSTITUTION FOR ANY PURPOSE EXCEPT WHERE SUCH SUM WAS PAID OR CONTRIBUTED TO A RECOGNISED PROVIDENT FUND OR AN AP PROVED GRATUITY FUND OR APPROVED SUPERANNUA - TION FUND OR FOR THE PURPOSES OF AND TO THE EXTENT REQUIRED BY OR UNDER ANY OTHER LAW,THAT THE CONTRIBUTIONS WERE GIVEN TO TATA SPORTS CLUB IN THE CAPACITY OF AN EMPLOYER FOR THE BENEFIT OF THE EMPLOYEES AS WELL AS OTHERS,THAT THE ANNUAL CONTRIB UTION TO STEEL PLANTS SPORTS BOARD WAS AN INDEPENDENT ORGANISATION MANAGING THE AFFAIRS OF TH E BOARD WITH ITS OWN BUDGET, THAT THE PURPOSE OF CREATION OF THE ASSOCIATION WAS TO CREATE AND TR AIN ATHLETES OF NATIONAL STANDARD,THAT THE OBJECTIV E HAD NO RELEVANCE IN CARRYING ON THE BUSINESS OF THE ASSESSEE,THAT THE CONTRIBUTION MADE BY THE IT WAS AN APPLICATION OF INCOME.FINALLY,HE CONFIRMED THE D ISALLOWANCE MADE BY THE AO.BEFORE US,AR SUBMITTED THAT SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE ,BY THE TRIBUNAL,IN THE APPEAL FOR THE EARLIER THREE ASSESSMENT YEARS I.E.1987-88,1989 -90 AND 1990-91.DR ALSO CONSENTED THAT THE 14 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. ISSUE IS DECIDED BY THE TRIBUNAL FOR EARLIER YEARS. WE FIND THAT IN THE EARLIER YEARS ORDER(SUPRA),ISS UE IS DECIDED AS UNDER: 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 AND TA TA SPORTS BOARD IN FAVOUR OF ASSESSEE, WHILE ADJUDICATING APPEAL FOR THE YEAR 1986-87.FOLLOWING THE ORDERS FOR THE EARLIER AY,WE DECIDE THE GROUND NO.G.12 AND G.11FOR THE AY.1987-88 AND AY.19 90-91 IN FAVOUR OF THE ASSESSEE FOLLOWING THE SAME WE DECIDE GROUND NO.10,GROUND NO .6-AND GROUND NO.5FOR AY.S.1991-92, 1994-95 AND 1995-96 IN FAVOUR OF THE ASSESSEE. 8. CONTRIBUTIONS TO VARIOUS INSTITUTIONS AT JAMSHEDPUR IS SUBJECT MATTER OF GROUND NO.11 FOR AY. 1991-92,GROUND NO.7FOR AY.1994-95 AND GROUND NO.6 F OR AY.1995-96.DURING THE ASSESSMENT PROCEEDINGS AO.SHAD MADE DISALLOWANCE OF RS.25.54 L AKHS,RS.85LAKHS.AND RS.1.79 CRORES RESPECTI- VELY FOR THE YEARS UNDER APPEAL.ASSESSEE CONTENDED THAT THE SAID CONTRIBUTIONS WERE MADE TO VARIOUS INSTITUTIONS FOR DISCHARGING ITS CIVIC, SOCIAL OBLI GATIONS TO MAINTAIN THE TOWNSHIP OF JAMSHEDPUR. AO.S DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE CONTRIBUTIONS WERE GIVEN FOR THE WELFARE OF THE EMPLOYEES AND SUCH CONTRIBUTIONS WHI CH WERE GIVEN TO THEM WERE HIT BY THE PROVISIONS OF SECTION 40A(9) BECAUSE THE PAYMENTS W ERE MADE IN THE CAPACITY OF AN EMPLOYER,THAT IF IT WAS TAKEN THAT THE INSTITUTIONS TO WHOM CONTR IBUTIONS WERE GIVEN WERE PROVIDING CIVIC AMENITIES TO THE CITY OF JAMSHEDPUR THEN ALSO THE C ONTRIBUTIONS WOULD BE LIABLE FOR DISALLOWANCE BECAUSE THE EMPLOYEES WERE MAJOR BENEFICIARIES OF T HE CONTRIBUTIONS,THAT IF THE BENEFIT OF THE CONTRI -BUTIONS WAS FOR THE CITY OF JAMSHEDPUR AT LARGE TH EN THESE CONTRIBUTION WERE IN THE NATURE OF CHARITY.THEY DISALLOWED THE CLAIM MADE BY THE ASSES SEE. 8.1. DECIDING THE APPEAL FILED BY THE ASSESSEE,FAA HELD THAT THAT SIGNIFICANT CONTRIBUTIONS MADE BY THE WERE TO JAMSHEDPUR NOTIFIED AREA COMMITTEE, MER RY 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 GENERAL A ND 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 MADE BY THE ASSESSEE WERE ON THE NATURE OF APPLICATION OF INCOME,THAT THE CONTRIBUTIONS WERE HIT BY THE PROVI SIONS OF SECTION 40A (9) OF THE ACT.FAA UPHELD THE ORDER OF THE AO.S.BEFORE US,AR ARGUED THAT ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE-COMPANY BY THE ORDERS OF THE EARLIER YEARS-AY.S.1987-88,198 9-09 AND 1990-91(SUPRA). 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. FOLLOWING THE ABOVE WE DECIDE THE ISSUE OF PAYMENT OF CONTRIBUTIONS TO VARIOUS INSTITUTIONS AT JAMSHEDPUR IN FAVOUR OF THE ASSESSEE FOR ALL THE TH REE AY.S. 9. NEXT COMMON GROUND OF APPEAL(G.12-1991-92,G.9-1994- 95)IS ABOUT FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES.AO.S FOUND THAT THE ASSESSEE H AD PAID RS.4.83 LAKHS AND RS.24.94 LAKHS TO THE CONSULTANTS FOR CONDUCTING FEASIBILITY STUDIES FOR THE YEARS UNDER APPEAL.AO.S WERE OF THE OPINION THAT THE EXPENDITURE WAS INCURRED IN CONNECTION WIT H THE EXPANSION OF THE INDUSTRIAL UNDERTAKING, THAT SAME WAS CAPITAL EXPENDITURE,THAT THE EXPENDI TURE 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 WAS AN ADMISSIBLE DED UCTION U/S.35D OF THE ACT. 9.1. IN THE APPELLATE PROCEEDINGS,UPHOLDING THE ORDER OF THE AO.S,FAA HELD THAT THE EXPENDITURE INCURRED WAS IN THE CAPITAL FIELD.WE FIND THAT IDEN TICAL ISSUE HAS BEEN DECIDED BY US,WHILE ADJUDICATING THE APPEALS FOR THE EARLIER THREE AY.S .I.E.-AY.S.1987-88,1989-09 AND 1990-91(SUPRA)IN THE FOLLOWING MANNER: 15 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. BEFORE US,AR AND DR AGREED THE IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER FOR THE AY.1986-87.WE FIND THAT IN THE EARLIER AY., ISSUE OF EXPENDITURE INCURRED FOR MAKING PAYMENTS TO CONSULTANTS 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 MODERNI - SATION 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 R EVAMPING 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 INCREASING PRO DUCTION 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 FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE,G.14/G.13 FOR THE AY.S UNDER A PPEAL ARE DECIDED IN FAVOUR OF THE ASSESSEE . FOLLOWING OUR ORDERS FOR THE EARLIER YEARS, WE DECI DE THE ISSUE OF PAYMENT OF FEES TO THE CONSULTANTS FOR CONDUCTIONG FEASIBILITY REPORT IN FAVOUR OF THE ASSESSEE. 10. RIGHT SHARE ISSUE EXPENSE IS THE SUBJECT MATTER OF THE APPEAL FOR THE AY.1994-95(G.13)AND AY. 1995-96(G.10).AO.S HAD DISALLOWED RS.3.76 CRORES AN D RS.1.89 CRORES RESPECTIVELY FOR THE AYS. UNDER APPEAL,INCURRED BY THE ASSESSEE UNDER THE HEA D EXPENSES FOR ISSUING RIGHT-SHARES. 10.1. 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 CONNE CTION WITH THE ISSUE OF SHARES WITH A VIEW TO INCREASE ITS SHARE CAPITAL WAS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY AND WAS A CAPITAL EXPENDITURE EVEN THOUGH IT MIGHT INCIDENTALLY HELP IN THE BUSINESS OF THE COMPANY AND IN THE PROFIT MAKING,THAT THE ACTION OF THE AO WAS AS PER THE PROVISIONS OF LAW. 10.2. BEFORE US,AR FAIRLY CONCEDED THAT THAT AFTER THE JU DGMENTS OF HONBLE APEX COURT ISSUE HAS TO BE DECIDED AGAINST THE ASSESSEE.FOLLOWING THE ORDER OF THE HONBLE SUPREME COURT WE DISMISS G.13 AND G.10 OF THE AY.S MENTIONED ABOVE. 11. ISSUE OF CONTRIBUTIONS TO INSTITUTE FOR METAL AND M INERAL WORKERS(IMMW) HAS ALSO ARISEN IN LAST TWO AYS.ONLY-(G.17-1994-95,G.12-95-96) AND THE AMOU NTS INVOLVED ARE RS.7.50 LAKHS AND RS. 16 LAKHS.DURING THE ASSESSMENT PROCEEDINGS AO.S FOUND THAT THE ASSESSEE HAD MADE CONTRIBUTIONS TO IMMW AND SAME WERE CLAIMED AS BUSINESS EXPENDITURE U/S.37(1) OF THE ACT.AO OBSERVED THAT THE ASSESSEE COULD NOT ESTABLISH THAT EXPENDITURE WAS I NCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS CARRIED OUT BY IT,THAT BENEFIT FROM THE INSTITUTION WOULD ACCRUE NOT ONLY TO THE ASSESSEE,BUT ALSO TO ITS BUSINESS RIVALS,THAT THERE WAS NO NEXUS BETWEEN THE EXPENDITURE AND BUSINESS. 11.1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,F AA HELD THAT THE ASSESSEE HAD NOT SUBMITTED BEFORE THE AO THAT THE CONTRIBUTION TO IM MW WAS MADE TOWARDS THE TRAINING OF THE WORKERS,THAT NO EVIDENCE WAS PRODUCED BEFORE THE AO .FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE HE DIRECTED THE ASSESSEE TO PRODUCE THE EVIDENCE BEFOR E THE AO TO SUBSTANTIATE THE FACT THAT THE CONTRIBUTION WAS TOWARDS TRAINING OF THE WORKERS AN D THAT SAME WAS NOT A GENERAL CONTRIBUTION OR DONATION.HE DIRECTED THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE AND DECIDED THE ISSUE ON MERITS. 11.2. BEFORE US,AR SUBMITTED THAT IMMW,CALCUTTA WAS INVOL VED IN PROMOTION OF CULTURAL,SOCIAL AND VOCATIONAL TRAINING PROGRAMMES FOR MINES AND METAL WORKERS,THAT TRAINING COURSES WERE CONDUCTED FOR LONG/SHORT DURATIONS FOR VARIOUS SUBJECTS LIKE LABOUR LAW,SAFETY AND HEALTH,THAT THE EXPENDITURE 16 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. WAS INCURRED FOR TRAINING OF WORKERS,THAT CONTRIBUT IONS TO VARIOUS OTHER INSTITUTIONS WAS ALLOWED ON SIMILAR BASIS.DR SUPPORTED THE ORDERS OF THE FAA. 11.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAD RESTORED BACK THE MATTER TO THE FILE OF THE AO FOR MAKING VERIFICATION,AS THE DETAILS WERE FILED BEFORE HIM FOR THE FIRST TIME.IN OUR OPINION,FAA HA D TAKEN A RIGHT DECISION.RULE 46A OF THE INCOME -TAX RULES,1962 CLEARLY STIPULATES THAT FAA SHOULD NOT ADMIT ANY ADDITIONAL EVIDENCE WITHOUT AFFORDING AN OPPORTUNITY TO THE AO TO EXAMINE THE C LAIMS MADE BEFORE THE FAA FOR THE FIRST TIME. WE FIND THAT ASSESSEE HAD NOT MADE ANY SUBMISSION A S TO WHY IT COULD NOT FURNISH THE DETAILS BEFORE THE AO.IN THESE CIRCUMSTANCES,IF THE FAA FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE,HAD DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM AFTER VERI FICATION,NO FAULT CAN BE FOUND WITH HIS ORDER. THEREFORE,UPHOLDING HIS ORDER,WE DISMISS THE GROUND S,RAISED BY THE ASSESSEE,WITH REGARD TO CONTRIBUTIONS TO IMMW. NOW WE WOULD TAKE UP THE ISSUE THAT ARE EXCLUSIVE T O ONE PARTICULAR ASSESSMENT YEAR.FIRST WE WILL TAKE UP THE GROUNDS OF APPEALS OF AY.1991-92. 12. GROUND 3 FOR THAT AY.DEALS WITH DISALLOWANCE OF RS. 1.47 LAKHD UNDER RULE 6B OF THE RULES,FOR CALENDARS AND DIARIES.AR AGREED THAT THE DISALLOWAN CE CONFIRMED BY THE FAA WITH REGARD TO DIARIES AND CALENDARS WAS UPHELD BY THE TRIBUNAL FOR EARLIE R YEARS. 12.1.WE WOULD LIKE TO REPRODUCE THE ORDERS FOR THE AY. AY.S.1987-88,1989-09 AND 1990-91 (SUPRA),WHEREIN THE ISSUE HAS BEEN DEALT AS UNDER: 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 DECISION O F THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ALLANA SONS PVT. LTD., 216 ITR 690 (BOM) HOLDING TH AT PRESENTATION ARTICLES BEARING THE 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 FOR THE ASSESSEE CA NNOT 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. CONSIDERING THE ABOVE,WE DECIDED THE GROUND NO.3 AG AINST THE ASSESSEE. 13. NEXT GROUND FOR THE SAME AY.IS ABOUT DISALLOWANCE O F EXPENDITURE INCURRED ON TEA AND COFFEE OFFERED TO THE VISITORS(G.5).WHILE FRAMING ASSESSME NTS FOR THE AY UNDER APPEAL,AO FOUND THAT THAT THE ENTERTAINMENT EXPENDITURE QUANTIFIED BY THE AUD ITORS 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 TREAT ED THE SAME AS ENTERTAINMENT EXPENDITURE U/S. 37(2A)OF THE ACT. 13.1. 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 17 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. 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 ESTIMATES OF EXPENDITURE BY THE AO WAS VERY REASONA BLE AND SAME DID NOT CALL FOR ANY INTERFERENCE. AR,SUBMITTED THAT IN THE EARLIER YEARS THE ISSUE WA S PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE.WE FIND THAT WHILE DECIDING THE APPEAL FOR THE EARLIER ASSESSMENT YEARS,WE HAVE HELD THAT DISALLOWANCE SHOULD BE RESTRICTED TO 25% OF THE TOTAL EXPENDITUR E INCURRED.WE HAVE HELD AS UNDER : 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 REVENUEEXPLANATION 2 TO SUBSECTION (2A) OF S ECTION 37 PROVIDES THAT EVERY HOSPITALITY PROVIDED BY AN ASSESSEE FOR ANY PERSON OTHER THAN T HE EMPLOYEE EVEN IN OFFICE, FACTORY OR OTHER PLACE OF WORK WOULD BE ENTERTAINMENT EXPENDITURE,CA LLING 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. FOLLOWING THE ABOVE,WE DIRECT THE AO TO RESTRICT TH E DISALLOWANCE ON ACCOUNT OF TEA COFFEE SERVED TO THE VISITORS @25%.GROUND OF APPEAL NO.5 IS ALLO WED IN PART. 14. NEXT GROUND (G.7)PERTAINS TO DISALLOWANCE OF EXPEND ITURE OF RS.38.81 LAKHS ON ACCOUNT OF PAYMENTS MADE TO CLUBS.ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE IN THE TAX AUDIT REPORT, AO CAME TO THE CONCLUSION THAT THE PAYMENTS MADE TO CLUBS,WERE IN THE NATURE OF ENTERTAINMENT EXPENDITURE.HE DISALLOWED THE SAID AMOUNT,CLAIMED,U /S.37(2A)/37(2) OF THE ACT. 14.1. IN THE APPELLATE PROCEEDINGS FAA,HELD THAT THAT THE ASSESSEE DID NOT BRING ANY MATERIAL ON RECORD TO ESTABLISH THAT PAYMENTS TO CLUBS DID NOT CONTAIN THE EXPENDITURE IN THE NATURE OF ENTERTAIN- MENT EXPENDITURE,THAT THE PAYMENT MADE TO CLUBS COM PRISED MAINLY OF EXPENDITURE ON FOOD AND BEVERAGES,THAT THE EXPENDITURE ON FOOD ETC.INCURRED AT CLUBS HAD TO BE TREATED AS ENTERTAINMENT EXPENDITURE U/S.37(2A)/ 37(2)OF THE ACT,THAT THE EX PRESSION ANY OTHER PLACE OF WORK USED IN THE EXPLANATION TO THE SAID SECTION DID NOT INCLUDE CLU BS.FOR THE REASONS GIVEN WITH REGARD TO ENTERTAINMENT EXPENDITURE,HE HELD THAT EXPENDITURE INCURRED FOR EMPLOYEE-EMPLOYER MEETINGS IN THE CLUBS WAS IN THE NATURE OF ENTERTAINMENT EXPENDITUR E,THAT IT DID NOT PLACE ANY EVIDENCE BEFORE HIM TO ESTABLISH THE FACT THAT THE EXPENDITURE INCURRED AT CLUBS CONTAINED THE EXPENDITURE INCURRED ON RENT.HOWEVER,HE DIRECTED THE AO TO EXAMINE AND ALL OW,IF THE ASSESSEE WAS ABLE TO FURNISH THE EVIDENCE OF RENT PAID TO THE CLUBS.IN SHORT,ADDITIO NS MADE BY THE AO WERE SUSTAINED SUBJECT TO SUBMISSION AND VERIFICATION OF EVIDENCE OF RENT PAI D. 14.2. AR FAIRLY CONCEDED THAT THE ISSUE WAS DECIDED AGAIN ST THE ASSESSEE BY THE ORDER FOR THE AY.S. 1987-88,1989-90 AND 1990-91(SUPRA).WE FIND THAT TRI BUNAL,WHILE ADJUDICATING THE IDENTICAL ISSUE FOR THE EARLIER AY.S. 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 THE EX PENDITURE 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. 18 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. AS WE HAVE ALREADY DECIDED THE ISSUE AGAINST THE AS SESSEE IN THE APPEALS FOR THE EARLIER YEARS,SO,FOLLOWING THE SAME WE DISMISS GROUND NO.7 FOR THE YEAR 1991-92. 15. LAST GROUND OF APPEAL FOR THE YEAR IS ABOUT EXPENDI TURE ON PARTLY CONVERTIBLE DEBENTURE(G.8). DURING THE ASSESSMENT PROCEEDINGS,AO HAD DISALLOWED THE CLAIM OF RS.27.51 LAKHS MADE BY THE ASSESSEE IN THIS REGARD.FAA UPHELD THE ORDER OF THE AO. 15.1. BEFORE US,AR AND DR AGREED THAT ISSUE OF EXPENDITUR E INCURRED ON PARTLY CONVERTIBLE DEBENTURE FOR AY.1989-90 AND 1990-91 WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE.WE FIND THAT TRIBUNAL HAS DEALT THE ISSUE UNDER CONSID ERATION AS UNDER IN THOSE AY.S: BEFORE US, REPRESENTATIVES OF BOTH THE SIDES AGREE D 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) DELI VERED 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 BECAUSE THAT WAS A SITUATION IN WHICH EXPENDITURE ON ISSUE OF SHARES WAS HELD TO BE INELIGIBLE FOR DEDUCTION,W HILE THE ASSESSEE HAS ISSUED DEBENTURES FOR WHICH RS. 44 LAKHS WAS CLAIMED AS DEDUCTION AND IT WAS CO NSIDERED THAT THIS ASPECT IS SETTLED BY SEVERAL DECISIONS OF VARIOUS HIGH COURTS AND IT HAS BEEN HE LD BY THE HON'BLE SUPREME COURT IN INDIA CEMENTS LTD. V. CIT REPORTED IN [1966] 60 ITR 52, T HAT A LOAN IS NOT AN ASSET OR ADVANCE OF ENDURING NATURE AND THE PURPOSE OF TAKING LOAN IS TOTALLY AN IRRELEVANT CONSIDERATION AND HENCE THE DEDUCTION ON ACCOUNT OF INTEREST ON LOANS CANNOT BE DENIED. T HEN, THE LEARNED TRIBUNAL ALSO PROCEEDED TO RELY UPON ANOTHER JUDGMENT OF THE JAIPUR BENCH OF THE TR IBUNAL IN THE CASE OF RAJASTHAN FINANCIAL CORPORATION V. DEPUTY CIT [1997] TW-501, HOLDING TH AT THE EXPENDITURE INCURRED FOR RAISING CAPITAL THROUGH BONDS IN BUSINESS WAS REVENUE IN NATURE AND IT WAS HELD THAT SINCE IN THE PRESENT CASE THE ASSESSEE HAD INCURRED EXPENSES OF RS. 44 LAKHS ON I SSUANCE OF DEBENTURES BEING A LOAN, IN OUR CONSIDERED OPINION, THERE IS NO BASIS FOR NOT ALLOW ING DEDUCTION FOR THE ENTIRE SUM AND THUS THIS ADDITION WAS DELETED. 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 REGISTRATION FE E 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 VARIOUS A SPECTS OF THE MATTER INCLUDING THE PREVIOUS ENGLISH JUDGMENTS AND COUPLE OF JUDGMENTS OF THE EN GLISH COURTS BASED ON THE ENGLISH INCOME TAX ACT AND PROCEEDED TO DRAW DISTINCTION BETWEEN THE I NCOME TAX LAW IN ENGLAND AND INDIA.NOT ONLY THIS, THE HON'BLE SUPREME COURT FURTHER PROCEEDED T O 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 JUDGMENTS WERE WRONGLY DEC IDED. 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 IRR ELEVANT 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 ACT. BY GOING THROUGH THE SAID JUDGMENT, IT FURTHER TRANSPI RES THAT THE HON'BLE SUPREME COURT ALSO PROCEEDED TO EXAMINE THE ASPECT OF PURPOSE OF RAISING LOAN AN D 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 FINDS IT UNNECESSARY T O BY RAW MATERIAL AND SPENDS THE AMOUNT ON CAPITAL ASSET, STILL IT CANNOT BE SAID TO BE CAPITA L EXPENDITURE, AS IT WAS HELD THAT THE PURPOSE FOR 19 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. WHICH THE NEW LOAN WAS REQUIRED WAS IRRELEVANT TO T HE QUESTION AS TO WHETHER THE EXPENDITURE FOR OBTAINING LOAN WAS REVENUE OR CAPITAL EXPENDITURE. WE ARE TOLD THAT RELYING ON THIS JUDGMENT MANY OF THE HIGH COURTS OF THE COUNTRY HAVE CONSISTENTLY TAKEN THE VIEW THAT THE EXPENDITURE INCURRED IN ISSUING ANY DEBENTURES AND RAISING LOAN ON DEBENTUR ES 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 LEARNE D COUNSEL FOR THE ASSESSEE ARGUED RELYING UPON THE JUDGMENT OF THE CALCUTTA HIGH COURT IN CIT V. EAST INDIA HOTELS LTD. REPORTED IN [2001] 252 ITR 860, THAT THE EXPENDITURE INCURRED EVEN 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 ASPEC T 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 OBJEC T 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 ASPECT ALSO. CONSEQUENTLY, QUESTIO N NO. 2 ALSO AS FRAMED, IS REQUIRED TO BE AND IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE A SSESSEE. 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. WE ARE DECIDING THE GROUND NO. 8 IN FAVOUR OF THE A SSESSEE,FOLLOWING THE JUDGMENT OF THE HONBLE RAJASTHAN HIGH COURT(SUPRA). NOW WE WOULD TAKE UP THE EXCLUSIVE GROUNDS OF APPEA L RAISED BY THE ASSESSEE FOR THE YEAR 1994-95: 16. FIRST OF THEM IS FOREIGN TRAVEL EXPENSES(G.8).DURIN G THE ASSESSMENT PROCEEDINGS,AO FOUND THAT THE ASSESSEE HAD CLAIMED RS.3.50 LAKHS UNDER T HE HEAD FOREIGN TRAVEL EXPENSES,THAT OUT OF THE SAID AMOUNT RS.1.67 LAKHS WERE INCURRED FOR FOREIGN TRAVEL OF THE EMPLOYEES TO SAUDI ARABIA,THAT THE ASSESSEE HAD CLAIMED THAT THE EMPLOYEES WERE SE NT TO SAUDI ARABIA FOR SETTING UP A PIGMENT PROJECT.AS THE DETAILS WERE NOT FURNISHED BEFORE TH E AO,HE DISALLOWED THE CLAIM.FAA CONFIRMED THE ORDER OF THE FAA. 16.1. BEFORE US,AR DID NOT PRESS THE GROUND FOR RS.1.67 L AKHS.WE HAVE ALREADY MENTIONED THE FACT OF NOT PRESSING OF PART OF GROUND NO.8 BY THE AR,IN THE EARLIER PART OF OUR ORDER.ASSESSEE IS IN APPEAL FOR THE OTHER PART OF THE EXPENDITURE,AMOUNT ING TO RS.2.37 LAKHS,INCURRED BY IT FOR SENDING DELEGATION TO RUSSIA TO PLAY CHESS LEAGUE MATCHES.A O WAS OF THE OPINION THAT THE EXPEN -DITURE INCURRED BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF BUSINESS.IN THE APPELLATE PROCEEDINGS FAA HELD THAT THE ASSESSEE DID NOT CLAIM THE EXPENDITURE WAS INCURRED ON ITS EMPLOYEES,THAT AO WAS FULLY JUSTIFIED IN HOLDING THAT THE EXPENDITURE WAS NOT I NCURRED FOR THE PURPOSES OF BUSINESS. 16.2. BEFORE US,AR SUBMITTED THAT FAA HAD ALLOWED THE EXP ENDITURE INCURRED BY THE ASSESSEE UNDER THE SAME HEAD FOR THE YEAR 1995-95,THAT CHESS DELEG ATION WAS SENT TO RUSSIA.DR SUPPORTED THE ORDER OF THE FAA.WE HAVE HEARD THE RIVAL SUBMISSIONS.WE F IND THAT FAA HAS CLEARLY GIVEN A FINDING OF FACTS IN BOTH THE AY.S I.E.IN 1994-95 AND 1995-96 A BOUT PARTICIPATION BY EMPLOYEES OF THE ASSESSEE,THAT IN THE YEAR UNDER CONSIDERATION ASSES SEE DID NOT CLAIM THAT THE EMPLOYEE HAD GONE TO RUSSIA,THAT EVEN BEFORE US NO EVIDENCE WAS PRODUCED TO ESTABLISH THE FACT OF PARTICIPATION BY THE EMPLOYEE OF THE ASSESSEE,WHEREAS IN THE SUBSEQUENT YEAR,FAA HAS HELD THAT THE EMPLOYEE HAD PARTICIPATED IN INTERNATIONAL TOURNAMENT. THUS,THER E IS DIFFERENCE IN THE SUBMISSIONS MADE BY IT AND THE FINDING GIVEN BY THE FAA.IN OUR OPINION,IN ABSE NCE OF A VALID CLAIM BY THE ASSESSEE,FAA HAD 20 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. RIGHTLY REJECTED THE APPEAL OF THE ASSESSEE WITH RE GARD TO FOREIGN TRAVEL EXPENSES FOR THE AY.1994- 95.THEREFORE,CONFIRMING HIS ORDER,WE DECIDE GROUND NO.8 (IN PART)AGAINST THE ASSESSEE. 17. EXPENDITURE ON DIGGING OF WELL,AMOUNTING TO RS.10.5 0 LAKHS,IS THE SUBJECT MATTER OF THE GROUND OF APPEAL NO.15.DURING THE ASSESSMENT PROCEEDINGS A O FOUND THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.10,50,902/- ON THE DIGGING OF TUB E WELLS IN THE VILLAGES SURROUNDING THE SUKINDA CHROMITE MINE AREAS.AO WAS OF THE OPINION THAT EXPE NDITURE WAS NOT INCURRED FOR THE BUSINESS PURPOSES AND HENCE NOT ALLOWABLE. 17.1. IN THE APPELLATE PROCEEDINGS,FAA HELD THAT EXPENDIT URE INCURRED BY THE ASSESSEE STOOD PARAMETERIA TO THE OTHER CONTRIBUTIONS MADE BY THE ASSESSEE,THAT IT WAS APPLICATION OF INCOME,THAT IT HAD NOT ESTABLISHED DIRECT NEXUS BETWEEN THE EXPEND ITURE INCURRED AND THE BUSINESS CARRIED ON BY IT.HE UPHELD THE ORDER OF THE AO. 17.2. BEFORE US,AR SUBMITTED THAT THE MINES WERE SITUATED IN REMOTE AREAS INHABITED BY ADIVASIS, THAT IN ORDER TO EARN THEIR GOODWILL THE ASSESSEE H AD DUG THE TUBE WELLS FOR MAINTAINING A HARMONIOUS RELATIONSHIP AND FOR SMOOTH CONDUCT OF B USINESS,THAT THE EXPRESSION FOR THE PURPOSES OF BUSINESS WAS WIDER IN SCOPE THAN THE WORDS FOR THE PURPOSES OF EARNING OF PROFIT,THAT THE ASSESSEE WAS UNDER LEGAL AND CONTRACTUAL OBLIGATION AS PER T HE MEMORANDUM OF SETTLEMENT(MOS)BETWEEN THE ASSESSEE AND THE TATA WORKERS UNION TO INCUR EXPEN DITURE ON COMMUNITY DEVELOPMENT AND BUSTEE IMPROVEMENT FOR IMPROVING THE FACILITIES SUCH AS RO ADS,ELECTRICITY,DRINKING WATER,SANITATION ETC..HE REFERRED TO THE DECISIONS OF THE TRIBUNAL DELIVERED IN THE MATTERS OF GROUP CONCERNS WHERE SIMILAR KIND OF EXPENDITURES WERE ALLOWED. 17.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE EXPENDITURE ON DIGGING OF TUBE WELLS WAS NOT CLAIME D UNDER THE HEAD PAYMENT MADE TO TSRDS.WE HAVE ALLOWED THE SIMILAR KIND OF EXPENDITURES INCUR RED BY THE ASSESSEE WHILE DISCUSSING THE GROUND OF APPEAL DEALING WITH CONTRIBUTION MADE TO TSRDS.W E HAVE HELD THAT EXPENDITURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED IN VIEW OF THE MOS SIGNE D BY IT WITH THE WORKERS.FOLLOWING OUR ORDERS FOR THE YEARS UNDER APPEAL AS WELL AS FOR THE EARLI ER YEARS,WE ALLOW THE GROUND OF APPEAL NO.15 FILED BY THE ASSESSEE FOR THE AY.1994-95. 18. LAST GROUND OF APPEAL IS ABOUT LOSS ON VALUATION OF FOREIGN CURRENCY CONVERTIBLE BONDS, AMOUNTING TO RS.1.80 CRORES(G.16).DURING THE ASSESS MENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD ISSUED 2.25% FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB)OF $100 MILLIONS,THAT SAME WERE CONVERT ED IN TO RUPEES IN FEBRUARY1994 @31.37 PER DOLLAR,ON 31.03.94 BONDS WERE REVALUED AT RS.31.55 PER DOLLAR,THAT THERE WAS INCREASE IN THE VALUE OF LOAN OF RS.1.80 CRORES DUE TO CHANGE IN THE DOLLAR RATES.AO HELD THAT THE BONDS WERE TO BE CONVERTED IN TO GDR,THAT DURING THE YEAR UNDER APPEAL THERE WAS NO CONVERSION OF BONDS IN TO GDR,T HAT LOSS CLAIMED BY THE ASSESSEE WAS CONTINGENT AND PREMATURE. 18.1. IN THE APPELLATE PROCEEDINGS,ASSESSEE SUBMITTED THA T THE PROCEEDS OF 100 MILLION DOLLAR WERE INVESTED IN TEMPORARY SHORT TERM INSTRUMENTS AND WE RE USED FOR REDUCING BANK BORROWINGS/INTER CORPORATE DEPOSITS,THAT THERE WAS REDUCTION OF INTE REST ON CASH CREDIT BORROWINGS,THAT IT HAD INCREASED THE PROFITABILITY OF THE COMPANY,THAT THE LIABILITY WAS REVENUE IN NATURE.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,FAA HELD THAT BONDS WERE TO BE CONVERTED IN TO GDR,THAT SAME WERE TO BE CONVERTED IN TO SHARES IN TURN,THAT ASSE SSEE HAD REVALUED THE CLOSING RATE OF RUPEES VIS-- VIS DOLLAR AND HAD PROVIDED FOR INCREASED FOR INCRE ASED LIABILITY,THAT THE LIABILITY WAS CONTINGENT IN NATURE,THAT THE ASSESSEE HAD NOT DISCHARGED THE LIA BILITY IN THE YEAR UNDER APPEAL,THAT LOAN WAS NOT SETTLED IN THE YEAR,THAT THE ACTION OF THE AO WAS T O BE UPHELD. 18.2. BEFORE US,AR SUBMITTED THAT LIABILITY WAS REVENUE I N NATURE,THAT MONEY IN QUESTION WAS USED FOR REDUCING THE INTEREST ON BORROWINGS.HE RELIED U PON THE JUDGMENT OF HONBLE APEX COURT DELIVERED IN THE CASE OF WOODWARD GOVERNOR INDIA P. LTD.(312ITR254).DR SUPPORTED THE ORDER OF THE FAA. 18.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE HONBLE SUPREME COURT HAS DEALT THE ISSUE OF FLUCTU ATION IN THE RATE OF FOREIGN EXCHANGE IN THE MATTER OF WOODWARD GOVERNOR INDIA P. LTD.(SUPRA)AS UNDER: 21 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. LOSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF FLUCTU ATION IN THE RATE OF FOREIGN EXCHANGE AS ON THE DATE OF THE BALANCE-SHEET IS AN ITEM OF EXPENDITURE UNDER SECTION 37(1) OF THE INCOME-TAX ACT, 1961.FOR VALUING THE CLOSING STOCK AT THE END OF A PARTICULAR YEAR, THE VALUE PREVAILING ON THE LAST DATE IS RELEVANT. THIS IS BECAUSE PROFIT/LOSS IS EM BEDDED IN THE CLOSING STOCK.WHILE ANTICIPATED LOSS IS TAKEN INTO ACCOUNT, ANTICIPATED PROFIT IN THE SHAPE OF APPRECIATED VALUE OF THE CLOSING STOCK IS NOT BROUGHT INTO ACCOUNT, AS NO PRUDENT TRADER WOULD CA RE TO SHOW INCREASE IN PROFITS BEFORE ACTUAL REALIZATION. THIS IS THE THEORY UNDERLYING THE RULE THAT CLOSING STOCK IS TO BE VALUED AT COST OR MARK ET PRICE WHICHEVER IS LOWER.THE EXPRESSION 'ANY EXPEND ITURE' HAS BEEN USED IN SECTION 37 OF THE INCOME-TAX ACT, 1961, TO COVER BOTH 'EXPENSES INCUR RED' AS WELL AS AN AMOUNT WHICH IS REALLY A 'LOSS' EVEN THOUGH SUCH AMOUNT HAS NOT GONE OUT FRO M THE POCKET OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF THE HO NBLE APEX COURT,WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. ITA NO. 3985,3986AND 3987/MUM/2003,AY-1991-92,1994- 95 AND 1995-96: 19. IN THE APPEALS FILED BY THE AO.S.FIRST COMMON GROU ND OF APPEAL IS ABOUT PROVISION OF LEAVE SALARY OF RS.9.36 CRORES,RS.7.92 CRORES AND RS.16.9 8 CRORES FOR THE YEARS UNDER CONSIDERATION. ASSESSEE,DURING THE YEARS UNDER APPEAL,HAD MADE PRO VISIONS FOR LEAVE SALARY.AO.S WERE OF THE OPINION THAT THE PROVISION MADE BY IT FOR SALARY ON ACCRUAL BASIS WAS NOT AN ASCERTAINED LIABILITY.THEY DISALLOWED THE PROVISION MADE OF ACC OUNT OF LEAVE SALARY. 19.1. IN APPELLATE PROCEEDINGS,FAA ALLOWED THE APPEAL FIL ED BY THE ASSESSEE AND DIRECTED THE AO TO ALLOW THE CLAIM MADE UNDER THE HEAD PROVISION FOR LEAVE SALARY.BEFORE US,REPRESENTATIVES OF BOTH THE SIDES AGREED THAT ISSUE OF LEAVE SALARY WAS DEC IDED AGAINST THE AO IN EARLIER AY.S.WE FIND THAT IN THE ORDERS FOR THE AY.S.1987-88 AND OTHER TWO AY .S.(SUPRA),WE HAVE DECIDED THE ISSUE AS UNDER: 30.1. BEFORE US,DR AND AR AGREED THAT SUBMITTED THAT WHILE DECIDING THE APPEAL FOR THE AY. 1986- 87(SUPRA),TRIBUNAL HAD REJECTED THE GROUND RAISED BY THE AO.WE WOULD LIKE TO REPRODUCE THE ORDER OF THE TRIBUNAL FOR THE AY.1986-87,WITH REGARD TO THE ISSUE OF PROVIS ION 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 DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHILE DECIDING THE APPEAL FOR THE AY.1992-93(ITA7083/MUM/ 1996,DATED.23.12. 2004). WHILE DECIDING THE APPEAL FOR THE EARLIER AY.,TRIBUNAL HAS DEALT W ITH THE ISSUE OF PROVISION FOR LEAVE SALARY AS UNDE R: 99.AFTER HEARING BOTH THE SIDES,WE FIND THE ISSUE S TANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VID E I.T.A.NO.7083/BOM/96 ORDER DATED 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 BHARAT EARTHMOVERS LTD VS. CIT REPORTED IN 245 ITR 426 (SC) HAS DISMISSED THE GROUND RAISED BY THE REVENUE ON IDENTICAL ISSUES. RESPECTFULLY, FOLLOWING THE DECIS ION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF A NY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, THE ORDER OF THE CIT(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. FOLLOWING THE ORDERS FOR THE EARLIER YEARS,GROUND N O.1 FOR ALL THE THREE AY.S.IS DECIDED AGAINST THE AO. 20. GROUND NO.2 FOR THE AY.S. 1991-92,1994-95AND 1995-9 6 DEALS WITH 20% OF INITIAL CONTRIBUTION TO APPROVED SUPERANNUATION FUND(ASF).DURING THE ASS ESSMENT 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 CONTRIB -UTION AS DEDUCTION,IN FIVE EQUAL INSTALMENTS,BY RE LYING ON THE CBDTS NOTIFICATION DATED 21. 10. 22 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. 1965. 20.1. IN THE APPELLATE PROCEEDINGS,FAA HELD THAT THE ISSU E WAS COVERED BY THE JUDGMENT OF THE SIRPUR PAPER MILLS(237 ITR41),THAT IN VIEW OF THE S AID DECISION THE ASSESSEE WAS ENTITLED TO CLAIM THE ENTIRE INITIAL CONTRIBUTION TO THE ASF AS DEDUC TION.WE FIND THAT IN OUR ORDER FOR THE AY.S. 1987- 88,1989-90 AND 1990-91(SUPRA),WE HAD DECIDED THE IS SUE IN FOLLOWING MANNER: 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 TRIBUNAL.WE FIND THAT SAME ISSUE WAS DEALT BY THE TRIBUNAL IN THE ORDER FOR THE AY.1986-87(SUPRA)AS UNDER: 30.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ISSUE OF CONTRIBUTION TO ASF HAS BEEN DEALT BY THE TRIBUN AL WHILE PASSING ORDER FOR THE AY.1985-86 MAKING FOLLOWING OBSERVATIONS: 101.AFTER HEARING BOTH THE SIDES,WE FIND THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE I.T.A. NO. 7083/BOM/96 ORDER DATED 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 THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE VIDE THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CI T VS.SIRPUR PAPER MILLS,237 ITR 41.HE HAS CONTENDED THAT THIS CONTRIBUTION HAS ALSO BEEN ALLO WED 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 ALSO BEEN ALLOWED BY THE TRIBUNAL IN EARLIER YEARS FROM 77-78 TO 83- 84,AND HAS GIVEN DETAILS THEREOF IN THE CHART FURNI SHED BY HIM ON RECORD. AS SUCH, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE,WE FIND THE IMP UGNED 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 REVE NUE AGAINST THE ORDER OF THE TRIBUNAL, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. IN VIEW OF THE ABOVE DISCUSSION GROUND NO.2 IS DECI DED AGAINST THE AO. FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE AY.1986 -87,WE DECIDE GROUND NO.2 OF ALL THE THREE AYS . AGAINST THE AO. CONSIDERING THE ABOVE GROUND NO.2 IS DECIDED AGAINS T THE AO FOR THE AY.S.1991-92,1994-95 AND 1995-96. 21. LAST COMMON GROUND FOR ALL THE THREE AY.S,IS ABOUT PAYMENT FOR HOLIDAY PLAN AT HOTELS AS GUEST HOUSE EXPENSES OF RS.1.50 LAKHS,RS.15.78 LAKHS,RS.1 .50 LAKHS. DURING THE ASSESSMENT PROCEEDINGS AO.S FOUND THAT THE ASSESSEE HAD MADE PAYMENTS TOWA RDS HOLIDAY PLAN AT VARIOUS HOTELS.AO.S OBSERVED THAT NO FIXED ROOM OR ACCOMMODATION WAS RE SERVED IN A PARTICULAR HOTEL FOR A PERIOD EXCEEDING 182 DAYS AND NO RECOVERY WAS MADE FROM TH E EMPLOYEES,THAT THE PAYMENTS MADE TO VARIOUS HOTELS FOR HOLIDAY PLAN WERE COVERED BY THE PROVISIONS OF SECTION 37(4) OF THE ACT.THEY MADE DISALLOWANCES AS STATED EARLIER,FOR THE AY.S U NDER APPEAL.AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE IN THIS R EGARD,FAA DELETED THE ADDITIONS. 21.1. WE FIND THAT THE ISSUE IS COVERED AGAINST THE AO BY THE ORDER FOR THE AY.S 1987-88, 1989-90 AND 1990-91(SUPRA).TRIBUNAL HAS DECIDED THE ISSUE,I N THAT ORDER,AS UNDER: 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(SUPRA)FOR THE AY.1985-86.WE FIND THAT IN ITS ORDER TRIBUNAL HAD HELD AS UNDER: 23 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. 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 THE A.Y. 1992-93.WE FI ND THE TRIBUNAL IN THE SAID ORDER HAS GIVEN A FINDING THAT THE ASSESSEE SATISFIES ALL THE REQUISITE CONDITIONS AS PROVIDED IN EXPLANATION R.W. SECOND PROVISO TO SUBSECTION (4) O F SECTION 37 AS EXISTING AT THE RELEVANT TIME AND, THEREFORE, THE ASSESSEE IS FOUND TO BE EN TITLED TO DEDUCTION.ACCORDINGLY, THE GROUND RAISED BY THE REVENUE WAS DISMISSED. RESPECTFULLY FOLLOWING T HE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF A NY 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. FOLLOWING THE ORDERS OF THE TRIBUNAL FOR EARLIER YE ARS,WE DISMISS GROUND NO.3 FOR ALL THE AY.S. 22. GROUND NO.4 FOR THE AY.1991-92 IS ABOUT EXCLUSION O F SALES TAX,EXCISE DUTY FOR 80HHC DEDUC - TION.DURING THE ASSESSMENT PROCEEDINGS,AO EXCLUDED SALES TAX, EXCISE DUTY FROM THE TOTAL TURNOVER, WHILE COMPUTING THE 80HHC DEDUCTION.ASSESSEE PREFER RED AN APPEAL BEFORE THE FAA.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,HE HELD THAT BOTH THE ITEMS COULD NOT BE EXCLUDED FROM THE TOTAL TURNOVER. 22.1. BEFORE US,AR CONCEDED THAT ISSUE WAS DECIDED IN FAV OUR OF ASSESSEE BY THE DECISIONS DELIVERED BY THE HONBLE SUPREME COURT IN THE CASES OF CATAPH ARMA (INDIA) P. LTD. (292ITR694) AND LAKSHMI MACHINE WORKS(290 ITR 667).WE FIND THAT IN THE CASE OF CATAPHARMA(INDIA) P.LTD. (SUPRA) HONBLE APEX COURT HAS HELD 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 COMMISSI ON RECEIVED BY AN ASSESSEE IS RELATABLE TO EXPORTS AND YET IT CANNOT FORM PART OF TURNOVER, EXCISE D UTY 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 T AX DO NOT EMANATE FROM SUCH TURNOVER. SINCE EXCISE DUTY AND SALES TAX DO NOT INVOLVE ANY SUCH T URNOVER, SUCH TAXES HAVE TO BE EXCLUDED. RESPECTFULLY,FOLLOWING THE ABOVE DECISION OF HONBL E SUPREME COURT,WE DECIDE G.4 FOR AY.1991- 92 AGAINST THE AO. 23. GROUND NO.4 FOR THE AY.1995-96 IS ABOUT FOREIGN TRA VEL EXPENSES.WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE FOR THE EARLIER ASSESSMENT YE AR WITH REGARD TO THE FOREIGN TRAVEL EXPENSES,WE HAVE DISCUSSED THE FACTS (PARAGRAPHS 16 TO 16.2)FOR THE BOTH THE AY.S.WE FIND THE IN THE YEAR UNDER APPEAL,FAA HAS GIVEN A CLEAR FINDING OF FACT THAT T HE EMPLOYEE HAD PARTICIPATED IN CHESS TOURNAME NT.ACCORDINGLY,HE HAD ALLOWED THE EXPENDITURE INCUR RED BY THE ASSESSEE.IN OUR OPINION,HIS ORDER DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.THEREFORE, CONFIRMING HIS ORDER,WE DISMISS GROUND NO.4,FILD BY THE AO. AS A RESULT,APPEALS FIELD BY THE ASSESSEE STAND PAR TLY ALLOWED & APPEALS OF THE AO STAND DISMISSED. 0 1 #) 2 3 + / 4 ! 1 5 + 67 8 #) , + 4 # 5 + 67 . ORDER PRONOUNCED IN THE OP EN COURT ON 2 ND APRIL,2014 . ! + -.$ 4 9# 2 VIZSY VIZSY VIZSY VIZSY , 201 4 . + / : 24 ITA NOS. 3968, 3969, 3970, 3985, 3986 & 3987/MUM/20 03 THE TATA IRON & STEEL CO. LTD. SD/- SD/- ( !' / AMIT SHUKLA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9# /DATE: 02.04.2014. SK ! ! ! ! + ++ + ' ; ' ; ' ; ' ; <;$ <;$ <;$ <;$ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ = > , 4. THE CONCERNED CIT / = > 5. DR G BENCH, ITAT, MUMBAI / ;?/ ' # TH THTH TH , . . . 6. GUARD FILE/ / 0 (; (; (; (; ' ' ' ' //TRUE COPY// !# / BY ORDER, @ / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI