HINDUSTAN PETROLIUM CORPN LTD, Mumbai V. JT CIT SR56, Mumbai

ITA 4435/MUM/2003

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79266 (ITAT-MUMBAI)
• Duration Of Justice: 11 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 07-11-2013
• Assessment Year: 1996-1997
• Appeal Filed On: 05-06-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: KALPESH TURALKAR
• Section: 43B; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NOS.4435 & 4436/M/2003 ASSESSMENT YEARS: 1996-97 & 1998-99 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 17, JAMSHEDJI TATA ROAD, MUMBAI 400 020 PAN: AAACH1118B VS. JT. COMMISSIONER OF INCOME TAX SPECIAL RANGE 56, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. AARTI SATHE & SHRI KALPESH TURA LKAR REVENUE BY : SHRI A.C. TEJPAL DATE OF HEARING : 07.05.2014 DATE OF PRONOUNCEMENT : 25.06.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: BOTH THE ABOVE NOTED APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS OF THE COMMISSIONER OF INCOME T AX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] DATED 21.02.03 & 27.02.03 RELEVANT TO ASSESSMENT YEARS 1996-97 & 1998-99 RESPECTIVELY. A S THE FACTS AND ISSUES INVOLVED IN BOTH THE APPEALS ARE SIMILAR IN NATURE, HENCE THE SAME ARE BEING DISPOSED OF WITH THIS COMMON ORDER. FOR THE SAKE O F CONVENIENCE FACTS HAVE BEEN TAKEN FROM ITA NO.4435/M/2003. ITA NO.4435/M/2003 (A.Y.1996-97 ) : THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF AP PEAL: 1. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 37(1) OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF RS.4,59,90,540/-, BEING THE PROVISION FOR THE POST RETIREMENT MEDICAL BENEFITS OF THEIR EMPLOYEES MADE IN ACCORDANCE WITH ACCOUNTING STANDARD 15 OF T HE ICAI, BY ERRONEOUSLY ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 2 TREATING THE SAME AS CONTINGENT LIABILITY AND NOT I S AN ASCERTAINED LIABILITY. THE PROVISION HAVING BEEN MADE BASED ON THE ACTUARI AL VALUATION, AS AN ASCERTAINED LIABILITY AND IS DEDUCTIBLE IN TERMS OF SUPREME COURT DECISION IN THE CASE OF BADRIDAS DAGA VS. CIT (34 ITR 10), META L BOX INDIA LTD. VS. THEIR WORKMEN (73 ITR 53) AS WELL AS DECISION OF TH E TRIBUNAL IN THE CASE OF ITO VS. WANSON INDIA LTD. (5) ITO 102 AND VOLTAS LT D. VS. DCIT (61 ITJ 543). 2. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 37(1) READ WITH SECTION 35B OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMI NG THE DISALLOWANCE OF RS.2,20,16,234/- BEING THE EXPENDITURE INCURRED FOR ACQUIRING THE RIGHT TO USE THE KNOW-HOW OBTAINED FROM M/S. EXXON RESEARCH & EN GG. CO., USA THEREBY IGNORING THE DECISION OF SUPREME COURT IN THE CASE OF ALEMBIC CHEMICALS WORKS CO. LTD. (177 ITR 377) AND WAVIN INDIA LTD. A S WELL AS GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VS. SUHRID GEIGY LTD. (220 ITR 153). 3. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 37(1) OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1 ,04,30,000/- BEING THE EXPENDITURE INCURRED BY THE APPELLANTS ON THE IMPLE MENTATION OF WELFARE PROJECTS UNDER THE 20 POINT PROGRAMME OF THE GOVT. OF INDIA, AT THE INSTANCE OF THEIR ADMINISTRATIVE MINISTRY AND ALSO IN DISCHA RGE OF THEIR SOCIAL OBLIGATION AS A CORPORATE CITIZEN IN THE PUBLIC SEC TOR, THEREBY DISREGARDING THE RATIO OF THE DECISION OF SUPREME COURT IN THE C ASE OF SHRI VENKATA SATYANARAYANA RICE MILLS VS. CIT (223 ITR 101). 4. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 43B O F THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF APPE LLANTS' CLAIM FOR DEDUCTION OF RS.9,71,76,526/-, BEING EXCISE AND CUS TOMS DUTIES PAID DURING THE YEAR AND INCLUDED IN THE VALUE OF THE CLOSING I NVENTORY OF RAW MATERIALS AND FINISHED GOODS, DISREGARDING THE DECISION OF BO MBAY HIGH COURT DECISION IN THE CASE OF CIT VS BPCL (252 ITR 43). 5. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPEL INTERPRETATION OF THE SECTION 37(4) OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF RS.13,80,316/- BEING THE EXPENDITURE INCURRED ON MAINTENANCE AND REPAIRS , PROPERTY TAXES AND TELEPHONES OF THE GUEST HOUSE MAINTAINED BY THE APP ELLANTS, DISREGARDING THE BOMBAY HIGH COURT DECISION IN THE CASE OF OCEAN CAR RIERS (211 ITR 357) AS WELL AS IN THE CASE OF RAJA BAHADUR MOTILAL MILLS P UNE LTD.(212 ITR 175). 6. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 37(2) OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF RS.1,26,320/- BEING THE EXPENDITURE INCURRED ON THE ENTERTAINMENT OF TH E BUSINESS ASSOCIATES OF THE APPELLANTS OVERLOOKING THE DECISION OF TRIBUNAL IN THE CASE OF SOFTEK PVT. LTD. ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 3 VS. ITO (32 ITD 540). 7. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 80HH, 80I/80IA OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.11,40,25,000/- BEING THE CLAIM FOR DEDUCTION OF PROFITS OF THE NEW LPG BOTTLING PLANTS COMMISSIONED BY THE APPELLANTS AS N EW INDUSTRIAL UNITS THEREBY DISREGARDING THE OPINION GIVEN BY DEPT. OF LEGAL AFFAIRS IN APPELLANTS' OWN CASE. 2. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT MOST OF THE ISSUES TAKEN BY THE ASSESSEE IN ITS GROUNDS OF APPE AL HAVE ALREADY BEEN DEALT WITH/ADJUDICATED BY THE TRIBUNAL IN THE OWN CASES O F THE ASSESSEE FOR EARLIER ASSESSMENT YEARS. HE HAS FURTHER PRODUCED A CHART IN THIS RESPECT. HE HAS FURTHER SUBMITTED THAT THE ISSUES INVOLVED IN THE A BOVE GROUNDS OF APPEAL ARE REQUIRED TO BE LOOKED INTO IN THE LIGHT OF THE DECI SIONS OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR EARLIER YEARS. 3. THE LD. D.R. HAS ALSO FAIRLY ADMITTED THAT EXCEP T THE ISSUE TAKEN VIDE GROUND NO.5 THE OTHER ISSUES ARE COVERED BY THE EAR LIER DECISIONS OF THE TRIBUNAL IN THE OWN CASES OF THE ASSESSEE FOR EARLI ER ASSESSMENT YEARS. 4. NOW, WE DISCUSS ALL THE GROUNDS TAKEN BY THE ASS ESSEE SEPARATELY AS BELOW: GROUND NO.1 5. GROUND NO.1, AS REPRODUCED ABOVE, IS RELATING TO DISALLOWANCE OF RS.4,59,90,540/- BEING THE PROVISION FOR THE POST R ETIREMENT MEDICAL BENEFITS OF THEIR EMPLOYEES. LD. A.R. OF THE ASSESSEE HAS BROU GHT OUR ATTENTION TO THE ORDER OF THE TRIBUNAL DATED 26.09.12 IN THE OWN CAS E OF THE ASSESSEE IN ITA NO.1294/M/01 FOR EARLIER ASSESSMENT YEAR 1997-98, T O SUBSTANTIATE THAT THE SIMILAR ISSUE RAISED VIDE GROUND NO.1 IN THE PRESEN T APPEAL HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE HAS RESTORED THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO ALLOW THE CLAIM ON THE BASIS OF ACTUARIAL REPORT. THE LD. DR ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 4 HAS ALSO FAIRLY ADMITTED THAT THE ISSUE HAS BEEN DE CIDED IN FAVOUR OF THE ASSESSEE IN THE EARLIER ASSESSMENT YEAR. THE RELEVA NT FINDINGS OF THE TRIBUNAL ON THE ISSUE, FOR THE SAKE OF REFERENCE, ARE REPROD UCED BELOW : 9. WE HAVE HEARD THE ARGUMENTS OF THE TWO SIDES AN D PERUSED THE IMPUGNED ORDERS AND THE MATERIAL PLACED BEFORE US. THE POST RETIREM ENT MEDICAL BENEFIT IS A PROVISION, WHICH HAS BECOME A MUST FOR ALL THE CONCERNS, SPECI ALLY WHERE THERE ARE HEALTH HAZARDS. IT IS BECAUSE OF THESE REASONS, THE GOVERN MENT HAS NOTIFIED THAT POST RETIREMENT MEDICAL BENEFIT BE ALLOWED. WE HAVE SEEN FROM THE PAPERS APPENDED IN THE APB THAT A SERVICE CONTRACT IS WORDED IN SUCH A WAY THAT THESE BENEFITS ARE INTEGRAL PART OF THE CONTRACTS AND THE LIABILITY GE TS ATTACHED, THE MOMENT A SERVICE CONTRACT IS SIGNED, INDUCTING A NEW EMPLOYEE. THE A RGUMENT OF SENIOR COUNSEL IS, THEREFORE, WELL FOUNDED. WE SHALL ALSO, REFER TO TH E CASE OF BHARAT EARTH MOVERS LTD. VS CIT REPORTED IN 245 ITR 428, WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT LEAVE ENCASHMENT IS NOT A CONTINGENT LIABILITY. TAK ING THE SAME CUE, THAT POST RETIREMENT MEDICAL BENEFIT IS ALSO A LIABILITY WHIC H GETS ATTACHED TO THE COMPANY THE MOMENT, THE SERVICE CONTRACT IS SIGNED, WE HOLD THA T THE REVENUE AUTHORITIES ERRED IN DISALLOWING THE PROVISION UNDER THIS HEAD. HAVING H ELD SO IN PRINCIPLE, NEITHER WE HAVE BEEN ABLE TO GATHER THE YEAR WISE BREAKUP OF T HE ACTUARIAL VALUATION MADE BY THE ACTUARY AS ON 31.03.1997, NOR THE SENIOR COUNSE L, WAS ABLE TO APPRISE US ON THE VALUATION, PERTAINING TO THE YEAR UNDER CONSIDERATI ON. 10. TAKING INTO ACCOUNT THE ABOVE REASON, WE DEEM I T FIT TO RESTORE THE ISSUE TO THE FILE OF THE AO, WHO SHALL CALL FOR THE YEAR WISE VA LUATION AND THEN ALLOW THE CLAIM ACCORDINGLY. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE CLAIM OF PROVISION AFTER VERIFI CATION OF THE ACTUARYS REPORT PERTAINING TO THE CURRENT YEAR. 6. LD. A.R. OF THE ASSESSEE HAS FURTHER BROUGHT OU R ATTENTION TO THE ORDER OF THE TRIBUNAL DATED 16.01.13 IN ITA NOS.8575/M/04, 8 576/M/04 & 5825/M/05 FOR ASSESSMENT YEARS 2000-01, 2001-02 & 2002-03 RES PECTIVELY WHEREIN THE SIMILAR ISSUE HAS BEEN ACCORDINGLY DECIDED IN FAVOU R OF THE ASSESSEE. ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 5 THE LD. D.R. COULD NOT BRING BEFORE US ANY CONTRARY FACT OR CASE LAW WHICH MAY JUSTIFY DEPARTURE FROM THE ABOVE FINDINGS OF THE TR IBUNAL GIVEN ON THE ISSUE IN EARLIER ASSESSMENT YEARS. ACCORDINGLY, THE GROUND N O.1 IS ALLOWED IN FAVOUR OF THE ASSESSEE BY WAY OF REMANDING THE ISSUE BACK TO THE AO FOR THIS YEAR ALSO WITH A DIRECTION TO ALLOW THE CLAIM ON THE BASIS OF ACTUARIAL REPORT IN ACCORDANCE WITH THE DIRECTION GIVEN BY THE TRIBUNAL IN THE OWN CASES OF THE ASSESSEE FOR EARLIER ASSESSMENT YEARS AS DISCUSSED ABOVE. GROUND NO.2 7. GROUND NO.2, AS REPRODUCED ABOVE, IS RELATING TO THE DISALLOWANCE OF RS.2,20,16,234/- BEING THE EXPENDITURE INCURRED FOR ACQUIRING THE RI GHT TO USE THE KNOW-HOW UNDER SECTION 37(1) READ WITH SECTION 35B OF THE INCOME TAX ACT. THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTEN TION TO THE ORDER OF THE TRIBUNAL DATED 31.07.12 IN THE OWN CASE OF THE ASSE SSEE IN ITA NO.2124/M/99 FOR EARLIER ASSESSMENT YEAR 1992-93 AND ITA NOS.585 6 TO 5858/M/99 FOR EARLIER ASSESSMENT YEARS FROM 1993-94 TO 1995-96 AN D SUBMITTED THAT THE SIMILAR ISSUE, RAISED VIDE GROUND NO.2 IN THE PRESE NT APPEAL, HAS ALREADY BEEN DECIDED BY THE SAID DECISION IN FAVOUR OF THE ASSES SEE. THE RELEVANT PORTION OF THE SAID DECISION OF THE TRIBUNAL DATED 31.7.2012 R ELATING TO THE ISSUE IN CONSIDERATION ARE REPRODUCED AS UNDER: 9.1 THE LEARNED SENIOR COUNSEL HAS SUBMITTED THAT FOR THE ASSESSMENT YEAR 1993-94 THE ASSESSING OFFICER DISALLOWED THE C LAIM REGARDING RIGHT TO USE TECHNICAL KNOW-HOW UNDER SECTION 37(1) AND A LSO DENIED THE CLAIM FOR 1/6TH UNDER SECTION 35AB ON THE GROUND THAT THE ASSESSEE IS IN APPEALS. THUS, THE LEARNED SENIOR COUNSEL HAS SUBMITTED THAT IF THE CLAIM UNDER SECTION 35AB IS ALLOWED FOR 1/6TH OF THE AMOUNT, TH EN THE ASSESSEE DOES NOT PRESS THE ALLOWANCE OF THE CLAIM AT 100% UNDER SECTION 37(1). 9.2 THE LEARNED A.R. HAS NO OBJECTION, IF THE GROUN D NUMBER 1 FOR THE ASSESSMENT YEAR 1993-94 IS DISMISSED AS NOT PRESSED . 10. ACCORDINGLY, WE DISMISS THE GROUND NUMBER 1 FOR THE ASSESSMENT YEAR 1993-94 BEING NOT PRESSED AND THE ASSESSING OF FICER IS DIRECTED TO ALLOW THE CLAIM UNDER SECTION 35AB TO THE EXTENT OF 1/6TH OF THE AMOUNT FOR ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 6 THE ASSESSMENT YEAR 1993-94, 1994-95 AND 1995-96 AS IT WAS ALLOWED IN THE FIRST YEAR. 8. RESPECTFULLY FOLLOWING THE ABOVE DECISION, FOR THE SAKE OF CONSISTENCY, WE DIRECT THE AO TO ALLOW THE CLAIM UNDER SECTION 35AB TO THE EXTENT OF 1/6TH OF THE AMOUNT FOR THE CURRENT ASSESSMENT YEAR ALSO. GROUND NO.3 9. GROUND NO.3, AS REPRODUCED ABOVE, IS RELATING TO DI SALLOWANCE OF EXPENDITURE ON 20 POINT PROGRAMME. THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENT ION TO THE VARIOUS ORDERS OF THE TRIBUNAL IN THE OWN CASES OF THE ASSE SSEE FOR EARLIER ASSESSMENT YEARS I.E. A.Y.1888-89, 1989-90, 1991-92 & 1992-93 ETC. WHEREIN THE CO- ORDINATE BENCH OF THE TRIBUNAL HAS CONSISTENTLY FOL LOWED A VIEW AND DECIDED THE SIMILAR ISSUE, RAISED VIDE GROUND NO.3 IN THE P RESENT APPEAL, IN FAVOUR OF THE ASSESSEE. THE LD. D.R. COULD NOT BRING BEFORE U S ANY CONTRARY FACT OR CASE LAW WHICH MAY JUSTIFY DEPARTURE THERE FROM. 10. ACCORDINGLY, FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH OF THE TRIBUNAL IN THE OWN CASES OF THE ASSESSEE FOR THE E ARLIER ASSESSMENT YEARS I.E. A.Y.1888-89, 1989-90, 1991-92 & 1992-93 ETC., GROUN D NO.3 OF THE ASSESSEE IN THE PRESENT APPEAL IS ALSO ALLOWED IN FAVOUR OF THE ASSESSEE ACCORDINGLY. GROUND NO.4 11. GROUND NO.4, AS REPRODUCED ABOVE, IS RELATING T O PARTIAL DISALLOWANCE OF EXCISE/CUSTOM DUTY PAID DURING THE YEAR AND INCLUDE D IN CLOSING INVENTORY U/S 43B. THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENT ION TO THE ORDER OF THE TRIBUNAL DATED 03.01.05 IN THE OWN CASE OF THE ASSE SSEE IN ITA NO.6663/M/97 AND ITA NO.1562/M/1996 FOR ASSESSMENT YEARS 1991-92 AND 1992-93 ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 7 RESPECTIVELY AND SUBMITTED THAT IN THE SAID DECISIO N, THE TRIBUNAL, WHILE RELYING UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF LAKHANPAL NATIONAL LTD. VS. ITO 162 ITR 240, HAS HELD THAT T HE CIT(A) ERRED IN CONFIRMING THE PARTIAL DISALLOWANCE OF EXCISE/CUSTO M DUTY PAID DURING THE YEAR AND INCLUDED IN THE CLOSING INVENTORY UNDER SECTION 43B, THEREBY IGNORING THE RATIO OF HONBLE GUJARAT HIGH COURT IN LAKHANPAL N ATIONAL LTD. VS. ITO (SUPRA). HE FURTHER SUBMITTED THAT THE ISSUE IS NO W COVERED IN FAVOUR OF THE ASSESSEE BY HONBLE SUPREME HIGH COURTS JUDGMENT I N THE CASE OF BERGER PAINTS INDIA LIMITED VS. CIT 266 ITR 99. 12. ACCORDINGLY, GROUND NO.4 IS ALLOWED IN FAVOUR O F THE ASSESSEE DIRECTING THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR THIS YEAR ALSO AS PER THE DIRECTION GIVEN BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESS EE FOR THE EARLIER ASSESSMENT YEARS I.E. ASSESSMENT YEARS 1991-92 AND 1992-93 IN ITA NO.6663/M/97 AND ITA NO.1562/M/1996 RESPECTIVELY. GROUND NO.5 13. GROUND NO.5, AS REPRODUCED ABOVE, IS RELATING T O ADDITIONAL DISALLOWANCE OF REPAIRS & MAINTENANCE, TELEPHONE AND TELEGRAM EX PENSES, PROPERTY TAX OF GUEST HOUSE. THE LD. A.R. OF THE ASSESSEE HAS BEEN FAIR ENOUGH T O ADMIT THAT THE ISSUE RAISED VIDE GROUND NO.5 IS DECIDED AGAINST THE ASSE SSEE BY THE CO-ORDINATE BENCH OF THE TRIBUNAL, IN THE CASE OF PLATINUM ASS ET MANAGEMENT LTD. DECIDED ON 20 FEBRUARY, 2014, RELYING UPON THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS. CIT (2005) 278 ITR 546 (SC) WHEREIN IT HAS BEEN HELD THAT EXPENDIT URE TOWARDS RENT, REPAIRS, MAINTENANCE OF GUEST HOUSE USED IN CONNECTION WITH BUSINESS IS TO BE DISALLOWED U/S. 37(4) BECAUSE THIS IS A SPECIAL PRO VISION OVERRIDING THE GENERAL PROVISION. ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 8 14. ACCORDINGLY, KEEPING IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF BRITANNIA INDUSTRIES LTD. VS. CIT (SUPRA) GROUND NO.5 OF THE APPEAL IS DISALLOWED. GROUND NO.6 15. GROUND NO.6, AS REPRODUCED ABOVE, IS RELATING T O THE SHORT ALLOWANCE OF ENTERTAINMENT EXPENSES RELATING TO EMPLOYEES ACCOMP ANYING GUEST. THE LD. A.R. OF THE ASSESSEE HAS STATED AT BAR THAT HE DOES NOT PRESS THE GROUND NO.6. THE GROUND NO.6 OF THE APPEAL OF THE ASSESSEE IS TH US DISMISSED BEING NOT PRESSED. GROUND NO.7 16. GROUND NO.7, AS REPRODUCED ABOVE, IS RELATING T O THE DEDUCTION UNDER SECTION 80HH/80I/80IA. THE LD. A.R. OF THE ASSESSEE HAS BROUGHT OUR ATTENT ION TO THE VARIOUS ORDERS OF THE TRIBUNAL IN THE OWN CASES OF THE ASSESSEE FOR E ARLIER ASSESSMENT YEARS I.E. A.Y.2000-01, 2001-02 & 2002-03 WHEREIN THE CO-ORDIN ATE BENCHES OF THE TRIBUNAL HAVE CONSISTENTLY TAKEN A VIEW IN FAVOUR O F THE ASSESSEE HOLDING THAT THE PROCESS OF BOTTLING THE LPG GAS WAS A PRODUCTIO N ACTIVITY FOR THE PURPOSE OF SECTIONS 80HH/80I/80IA. THE SAID VIEW HAS BEEN F OLLOWED IN THE SUBSEQUENT YEARS ALSO I.E. A.Y.1992-93, 1993-94, 1994-95 & 199 5-96. EVEN THE HONBLE BOMBAY HIGH COURT HAS ALSO UPHELD THE FINDINGS OF T HE TRIBUNAL ON THE ISSUE VIDE ORDER DATED 7.3.2013 (ITA NO. 2131, 2133, 2134 , &2135 OF 2012). THE LD. D.R. COULD NOT BRING BEFORE US ANY CONTRARY FAC T OR CASE LAW WHICH MAY JUSTIFY DEPARTURE FROM THE ABOVE VIEW FOR THE CURRA NT ASSESSMENT YEAR. 17. ACCORDINGLY, FOLLOWING THE DECISION OF THE CO-O RDINATE BENCHES OF THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEARS I.E. A.Y. 2000-01, 2001-02 & 2002- 03, 1992-93, 1993-94, 1994-95 & 1995-96 IN THE OWN CASES OF THE ASSESSEE ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 9 WHICH HAVE BEEN FURTHER UPHELD BY THE HONBLE HIGH COURT, GROUND NO.7 OF THE APPEAL IS ALSO ALLOWED ACCORDINGLY IN FAVOUR O F THE ASSESSEE. ITA NO.4436/M/2003 (A.Y 1998-99) 18. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 37(1) OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1 4,617,000, BEING THE PROVISION FOR THE POST RETIREMENT MEDICAL BENEFITS OF THEIR EMPLOYEES MADE IN ACCORDANCE WITH ACCOUNTING STANDARD 15 OF THE ICAI, BY ERRONEOUSLY TREATING THE SAME AS CONTINGENT LIABILITY AND NOT IS AN ASCE RTAINED LIABILITY. THE PROVISION HAVING BEEN MADE BASED ON THE ACTUAL VALU ATION, AS AN ASCERTAINED LIABILITY AND IS DEDUCTIBLE IN TERMS OF SUPREME COU RT DECISION IN THE CASE OF BADRIDAS DAGA VS. CIT (34 ITR 10), METAL BOX INDIA LTD. VS. THEIR WORKMEN (73 ITR 53) AS WELL AS DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. WANSON INDIA LTD. (5) ITO 102 AND VOLTAS LTD. VS. DCIT (61 ITJ 543). 2. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 37(1) READ WITH SECTION 35AB OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF 56,812,635 BEING THE EXPENDITURE INCURRED FOR ACQUI RING THE RIGHT TO USE THE KNOW-HOW OBTAINED FROM M/S. EXXON RESEARCH & ENGG. CO., USA THEREBY IGNORING THE DECISION OF SUPREME COURT IN THE CASE OF ALEMBIC CHEMICALS WORKS CO. LTD. (177 ITR 377) AND WAVIN INDIA LTD. A S WELL AS GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VS. SUHRID GEIGY LTD. (220 ITR 153). 3. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 37(1) OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2 4,524,063 BEING THE EXPENDITURE INCURRED BY THE APPELLANTS ON THE IMPLE MENTATION OF WELFARE PROJECTS UNDER THE 20 POINT PROGRAMME OF THE GOVT. OF INDIA, AT THE INSTANCE OF THEIR ADMINISTRATIVE MINISTRY AND ALSO IN DISCHARGE OF THEIR SOCIAL OBLIGATION AS A CORPORATE CITIZEN IN THE PUBLIC SECTOR, THEREBY D ISREGARDING THE RATIO OF THE DECISION OF SUPREME COURT IN THE CASE OF SHRI VENKA TA SATYANARAYANA RICE MILLS VS. CIT (223 ITR 101). 4. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 43B O F THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF APPE LLANTS' CLAIM FOR DEDUCTION OF RS.109,043,079, BEING EXCISE AND CUSTOMS DUTIES PAID DURING THE YEAR AND INCLUDED IN THE VALUE OF THE CLOSING INVENTORY OF R AW MATERIALS AND FINISHED GOODS, DISREGARDING THE DECISION OF BOMBAY HIGH COU RT DECISION IN THE CASE OF CIT VS. BPCL (252 ITR 43). ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 10 5. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.5,85,426/- REPRESENTING THE EXPENDITURE INCURRED ON THE REPAIR OF CRUDE DIS ALTER UNIT (CDU) AND ELEVATOR FOR THE FLUID CATALYST CRACKING UNIT (FCCU ) IN THE APPELLANTS' REFINERY AT VISAKH, WHICH COULD NOT BE CHARGED TO T HE P&L ACCOUNT CONCURRENTLY DUE TO DESTRUCTION OF RECORDS DURING A MAJOR FIRE AT THE VISAKH REFINERY ON 14.9.97. THE IMPUGNED DEBITS CAME TO B E KNOWN SUBSEQUENT TO THE FIRE AND ON RECONSTRUCTION OF THE RECORDS, IT WAS W RITTEN OFF IN THE FINANCIAL YEAR 1997-98. SINCE THE WRITE OFF WAS PURSUANT TO T HE RECONSTRUCTION OF THE RECORDS IT SHOULD BE TREATED AS THE LIABILITY CRYST ALLISED DURING THE FINANCIAL YEAR 1997-98 AND SHOULD HAVE BEEN ALLOWED. 6. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND THE CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF RS.3,35,10,000/- BEING THE VALUE OF STORES AND SPARES WRITTEN OFF IN ACCORDANCE WITH THE CONSISTENT PRINCIPLE OF VALUATION OF THE STORES AND SPARES. THE PROVISION WAS NECESSITATED DUE TO A MAJOR FIRE IN THE APPELLANTS' VISAKH REFINERY ON 14.9.97. THE RESPONDENT DID NOT ALLOW THE DEDUCTION EITHER I N THE YEARS OF MAKING PROVISION OR IN THE YEAR OF ACTUAL WRITE OFF, THERE BY CAUSING DOUBLE JEOPARDY. 7. THE APPELLANTS SUBMIT THAT ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE AND ON A PROPER INTERPRETATION OF THE SECTION 80HH, 80L/80LA OF THE INCOME TAX ACT, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.44,810,000 BEING THE CLAIM FOR DEDUCTION OF PROF ITS OF THE NEW LPG BOTTLING PLANTS COMMISSIONED BY THE APPELLANTS AS NEW INDUST RIAL UNITS THEREBY DISREGARDING THE OPINION GIVEN BY DEPT. OF LEGAL AF FAIRS IN APPELLANTS' OWN CASE. GROUND NO.1 19. THE ISSUE INVOLVED IN THIS GROUND RELATING TO T HE POST RETIREMENT MEDICAL BENEFIT IS IDENTICAL TO THE ISSUE RAISED ABOVE VIDE GROUND NO.1 IN ITA NO.4435/M/2003 FOR A.Y.1996-97. IN VIEW OF OUR OBS ERVATIONS AND FINDINGS GIVEN ABOVE, THE AO IS DIRECTED TO ALLOW THE CLAIM ON THE BASIS OF ACTUARIAL REPORT IN ACCORDANCE WITH THE DIRECTION GIVEN BY T HE TRIBUNAL IN THE OWN CASES OF THE ASSESSEE FOR EARLIER ASSESSMENT YEARS AS DIS CUSSED ABOVE. GROUND NO.2 20. THE ISSUE INVOLVED IN THIS GROUND RELATING TO T HE RIGHT TO USE TECHNICAL KNOWHOW DISALLOWANCE IS IDENTICAL TO THE ISSUE RAIS ED ABOVE VIDE GROUND NO.2 IN ITA NO.4435/M/2003 FOR A.Y.1996-97. IN VIEW OF OUR OBSERVATIONS AND ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 11 FINDINGS GIVEN ABOVE, THIS ISSUE IS DECIDED ACCORDI NGLY WITH A DIRECTION TO THE AO TO ALLOW THE CLAIM UNDER SECTION 35AB TO THE EXTENT OF 1/6TH OF THE AMOUNT FOR THE CURRENT ASSESSMENT YEAR ALSO. GROUND NO.3 21. THE ISSUE INVOLVED IN THIS GROUND RELATING TO T HE DISALLOWANCE OF EXPENDITURE ON 20 POINT PROGRAMME IS IDENTICAL TO T HE ISSUE RAISED ABOVE VIDE GROUND NO.3 IN ITA NO.4435/M/2003 FOR A.Y.1996-97. IN VIEW OF OUR OBSERVATIONS AND FINDINGS GIVEN ABOVE, THIS ISSUE I S ALSO ALLOWED IN FAVOUR OF THE ASSESSEE ACCORDINGLY. GROUND NO.4 22. THE ISSUE INVOLVED IN THIS GROUND RELATING TO T HE PARTIAL DISALLOWANCE OF EXCISE/CUSTOM DUTY PAID DURING THE YEAR AND INCLUDE D IN CLOSING INVENTORY U/S 43B IS IDENTICAL TO THE ISSUE RAISED ABOVE VIDE GRO UND NO.4 IN ITA NO.4435/M/2003 FOR A.Y.1996-97. IN VIEW OF OUR OBS ERVATIONS AND FINDINGS GIVEN ABOVE, THIS ISSUE IS ALSO ALLOWED IN FAVOUR O F THE ASSESSEE ACCORDINGLY. GROUND NO.5 23. GROUND NO.5, AS REPRODUCED ABOVE, IS RELATING T O REPAIR EXPENDITURE OF CDU AND FCCU NOT CHARGED TO P&L AS RECORDS DESTROYE D IN FIRE IN 1996-97. IT HAS BEEN SUBMITTED BY THE LD. AR THAT THE IMPUGNED DEBITS CAME TO THE KNOWLEDGE SUBSEQUENT TO THE FIRE AND ON RECONSTRUCT ION OF THE RECORDS, IT WAS WRITTEN OFF IN THE FINANCIAL YEAR 1997-98. SINCE TH E WRITE OFF WAS PURSUANT TO THE RECONSTRUCTION OF THE RECORDS IT SHOULD BE TREA TED AS THE LIABILITY CRYSTALLISED DURING THE FINANCIAL YEAR 1997-98 AND SHOULD BE ALLOWED. ON THE OTHER HAND THE LD. DR HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. AFTER CONSIDERATION OF THE MATTER, WE ARE OF THE VI EW THAT SINCE THE SAID LIABILITIES CLAIMED BY THE ASSESSEE WERE NEITHER IN CURRED NOR ACCRUED OR CRYSTALLIZED DURING THE RELEVANT ASSESSMENT YEAR AN D HENCE NOT ELIGIBLE FOR ITA NOS.4435 & 4436/M/2003 M/S. HINDUSTAN PETROLEUM CORPORATION LTD. 12 DEDUCTION. ACCORDINGLY THE GROUND NO. 5 IS DECIDED AGAINST THE ASSESSEE. GROUND NO.6 24. GROUND NO.6, AS REPRODUCED ABOVE, IS RELATING T O THE ISSUE OF STORES AND SPARES WRITTEN OFF. THE LD. A.R. OF THE ASSESSEE H AS STATED AT BAR THAT HE DOES NOT PRESS THE GROUND NO.6. THE GROUND NO.6 OF THE APPEAL OF THE ASSESSEE IS THUS DISMISSED BEING NOT PRESSED. GROUND NO.7 25. THE ISSUE INVOLVED IN THIS GROUND RELATING TO T HE DEDUCTION UNDER SECTION 80HH/80I/80IA IS IDENTICAL TO THE ISSUE RAISED ABOV E VIDE GROUND NO.7 IN ITA NO.4435/M/2003 FOR A.Y.1996-97. IN VIEW OF OUR OBS ERVATIONS AND FINDINGS GIVEN ABOVE, THIS ISSUE IS ALSO ALLOWED IN FAVOUR O F THE ASSESSEE ACCORDINGLY. 26. IN THE RESULT, SUBJECT TO OUR ABOVE OBSERVATION S, THE APPEALS OF THE ASSESSEE ARE HEREBY PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25.06.2014. SD/- SD/- (N.K. BILLAIYA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 25.06.2014. *A.K.PATEL COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.