PARLE PRODUCTS P. LTD, MUMBAI V. DCIT RG 9(2), MUMBAI

ITA 6737/MUM/2011

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4235 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 31-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARITIKYAN
• Keywords: Depreciation; Capital expenditure; Set aside
• Section: 43B; 80HHC; 37(1); 32; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI SHAMIM YAHYA, AM AND RAVISH SOOD, JM ITA NO.4902/MUM/2006 ( ASSESSMENT YEAR 2001-02 ) ITA NO.445/MUM/2009 ( ASSESSMENT YEAR 2004-05 ) ITA NO.446/MUM/2009 ( ASSESSMENT YEAR 2005-06 ) ITA NO.6734/MUM/2011 ( ASSESSMENT YEAR 2006-07 ) ITA NO.6735/MUM/2011 ( ASSESSMENT YEAR 2007-08 ) ITA NO.6737/MUM/2011 ( ASSESSMENT YEAR 2008-09 ) ITA NO.6190/MUM/2012 ( ASSESSMENT YEAR 2009-10 ) M/S. PARLE PRODUCTS PVT. LTD., V.S. KHANDEKAR MARG NORTH LEVEL CROSSING VILE PARLE (E) MUMBAI - 400057 VS. ACIT CEN CIR-25 AAYAKAR BHAVAN MUMBAI-400020 PAN/GIR NO. AAACP0486A APPELLANT ) .. RESPONDENT ) APPELLANT BY : SHRI KETAN VED RESPONDENT BY : SHRI ABI RAMA KARITIKYAN DATE OF HEARING : 18.12.2018 DATE OF PRONOUNCEMENT : 13 .03.2019 O R D E R PER BENCH: THE ABOVE INCOME TAX APPEALS WHERE ADJUDICATED BY T HE ITAT VIDE ORDER DATED 22/01/2018. 2. SUBSEQUENTLY VIDE ORDER DATED 30/07/2018 ITAT NO TED THAT CERTAIN GROUND WAS NOT ADJUDICATED. ACCORDINGLY, THE ITAT RECALLED THE ORD ER FOR CONSIDERING THE SECOND GROUND AS UNDER: 2 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. 4. FROM THE RECORD WE FOUND THAT IN THE RESPECTIVE APPEALS SO FILED, ASSESSEE HAS RAISED FOLLOWING GROUND NO.2 IN ALL THE YEARS UNDER CONSID ERATION. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING THE ACTION OF ASSESSING OFFICER IN REDUCING 90% OF THE GROSS INTE REST RECEIVED WHILE COMPUTING THE PROFITS OF THE BUSINESSES UNDER CLAUSE (BAA) O F THE EXPLANATION TO SECTION 80HHC OF THE INCOME-TAX ACT. HE ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO REDUCE 90% OF THE NET INTEREST RECEIVED WHILE COMPUTING THE DEDUCTION UNDER SECTIO N 80HHC. 5. SINCE THE ABOVE GROUND WAS NOT DECIDED IN ALL T HE YEARS UNDER CONSIDERATION, WE RECALL OUR ORDER WITH A LIMITED ISSUE ON DECIDING GROUND N O.2 IN ALL THE YEARS UNDER CONSIDERATION. 3. SUBSEQUENTLY VIDE ORDER DATED 10/10/2018, THE IT AT MODIFIED ITS EARLIER RECALL ORDER AS UNDER: THROUGH THESE CORRIGENDUM APPLICATIONS IT WAS POINT ED OUT THAT IN THE ORDER PASSED BY THE TRIBUNAL DATED 30/07/2018 DISPOSING THE VARIOUS MIS CELLANEOUS PETITIONS FILED BY THE ASSESSEE, THE TRIBUNAL HAVE RECALLED GROUND NO.2 IN ALL THE YEARS BY INADVERTENTLY STATING THAT GROUND NO.2 IN ALL YEARS PERTAIN TO COMPUTATIO N OF DEDUCTION U/S.80HHC, IN SO FAR AS THIS GROUND WAS NOT DISPOSED WHILE DECIDING THE APP EAL ON MERIT VIDE ORDER DATED 22/01/2018. 2. IT WAS POINTED OUT THAT GROUND NO.2 FOR EACH YEA R DID NOT PERTAIN TO COMPUTATION OF DEDUCTION U/S.80HHC, HOWEVER, DIFFERENT ISSUES W ERE RAISED IN GROUND NO.2 IN DIFFERENT YEARS WHICH READS AS UNDER: - ASSESSMENT YEAR ITA NO. (ORIGINAL APPEAL) MA NO. ISSUE RAISED IN THE 2 ND GROUND OF APPEAL 2001 - 02 4902/MUM/2006 184/MUM/2018 '2. THE LEARNED COMMISSIONER(APPEALS) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN REDUCING 90% OF THE GROSS INTEREST RECEIVED WHILE COMPUTING THE 'PROFITS OF THE BUSINESSES UNDER CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC OF THE INCOME- TAX ACT. HE ERRED IN NOT DIRECTING THE ASSESSING 3 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. OFFICER TO REDUCE 90% OF THE NET INTEREST RECEIVED WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC.' 2004-05 445/MUM/2009 185/MUM/2018 '2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING AN ADDITION OF RS. 7,22,61,702 REPRESENTING WRITE BACK OF SALES TAX LOAN UNDER SECTION 41(1) OF THE ACT.....' 2005-06 446/MUM/2009 186/MUM/2018 '2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING AN ADDITION OF RS. 4,94,55,511 REPRESENTING WRITE BACK OF SALES TAX LOAN UNDER SECTION 41(1) OF THE ACT.....' 2006-07 6734/MUM/2011 187/MUM/2018 '2. THE LEARNED COMMISSIONER(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 48,21,000 MADE BY THE ASSESSING OFFICER ON CONSTRUCTION OF VIEWING GALLERY IN THE CONTRACT MANUFACTURING UNITS ON THE BASIS THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE.' 2007-08 6735/MUM/2011 188/MUM/2018 '2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 20,00,000 MADE BY THE ASSESSING OFFICER ON CONSTRUCTION OF VIEWING GALLERY IN THE CONTRACT MANUFACTURING UNITS ON THE BASIS THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE.' 2008-09 6737/MUM/2011 189/MUM/2018 '2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE 4 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. DISALLOWANCE OF RS. 17,15,283 MADE BY THE ASSESSING OFFICER ON CONSTRUCTION OF VIEWING GALLERY IN THE CONTRACT MANUFACTURING UNITS ON THE BASIS THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE.' 2009 - 10 6190/MUM/2012 190/MUM/2018 '2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 23,63,092 MADE BY THE ASSESSING OFFICER ON CONSTRUCTION OF VIEWING GALLERY IN THE CONTRACT MANUFACTURING UNITS ON THE BASIS THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE.' 3. ACCORDINGLY, WE RECTIFY OUR ORDER DATED 30/07/ 2018 WITH A LIMITED ISSUE OF DECIDING GROUND NO.2 AS STATED ABOVE. WE DIRECT ACCORDINGLY. 4. PURSUANT TO THE ABOVE RECALL, WE HAVE HEARD THE ABOVE APPEALS ON THE GROUNDS RECALLED AS ABOVE. UPON HEARING BOTH THE COUNSEL AN D PERUSED THE RECORD, WE DEAL WITH THE ISSUES AS RECALLED ABOVE AS UNDER: (I) 4902/MUM/2006, A.Y. 2001-02:- 2 ND GROUND OF APPEAL AS ABOVE, REGARDING REDUCTION OF 90% GROSS INTEREST WHILE COMPUTING THE PROFITS OF THE BUSINESS UNDER CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC IT TRANSPIRES THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE APEX COURT IN THE CASE OF ACG ASSOCIATED CA PSULED PVT. LTD VS CIT 18 TAXMANN.COM 137. (HEAD NOTES ONLY) EXPLANATION (BAA) TO SECTION 80HHC STATES THAT P ROFITS OF THE BUSINESS MEANS THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE H EAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS REDUCED BY THE RECEIPTS OF THE NATURE MENTIONED IN CLAUSES (1) AND (2) OF THE EXPLANATION (BAA). THUS , PROFITS OF THE BUSINESS OF AN 5 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. ASSESSEE WILL HAVE TO BE FIRST COMPUTED UNDER THE H EAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IN ACCORDANCE WITH PROVISIO NS OF SECTION 28 TO 44D OF THE ACT. IN THE COMPUTATION OF SUCH PROFITS OF BUSINESS , ALL RECEIPTS OF INCOME WHICH ARE CHARGEABLE AS PROFITS AND GAINS OF BUSINESS UNDER S ECTION 28 OF THE ACT WILL HAVE TO BE INCLUDED. SIMILARLY, IN COMPUTATION OF SUCH PROF ITS OF BUSINESS, DIFFERENT EXPENSES WHICH ARE ALLOWABLE UNDER SECTIONS 30 TO 44D HAVE T O BE ALLOWED AS EXPENSES. AFTER INCLUDING SUCH RECEIPTS OF INCOME AND AFTER DEDUCTI NG SUCH EXPENSES, THE TOTAL OF THE NET RECEIPTS ARE PROFITS OF THE BUSINESS OF THE ASS ESSEE COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION FROM WHICH DEDUCTIONS ARE TO MADE UNDER CLAUSES (1) AND (2) OF EXPLANATION (BAA). [PA RA 9 ]. UNDER CLAUSE (1) OF EXPLANATION (BAA), NINETY PER CENT OF ANY RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES OR A NY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN ANY SUCH PROFITS ARE TO BE DEDUC TED FROM THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BU SINESS OR PROFESSION. THE EXPRESSION INCLUDED ANY SUCH PROFITS IN CLAUSE (1 ) OF THE EXPLANATION (BAA) WOULD MEAN ONLY SUCH RECEIPTS BY WAY OF BROKERAGE, COMMIS SION, INTEREST, RENT, CHARGES OR ANY OTHER RECEIPT WHICH ARE INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. THEREFORE, IF ANY QUANTUM OF THE RECEIPTS BY WAY OF BROKERAGE, COMMISSION, IN TEREST, RENT, CHARGES OR ANY OTHER RECEIPT OF A SIMILAR NATURE IS ALLOWED AS EXPENSES UNDER SECTIONS 30 TO 44D OF THE ACT AND IS NOT INCLUDED IN THE PROFITS OF BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, NINETY PER CE NT OF SUCH QUANTUM OF RECEIPTS CANNOT BE REDUCED UNDER CLAUSE (1) OF EXPLANATION ( BAA) FROM THE PROFITS OF THE BUSINESS. IN OTHER WORDS, ONLY NINETY PER CENT OF T HE NET AMOUNT OF ANY RECEIPT OF THE NATURE MENTIONED IN CLAUSE (1) WHICH IS ACTUALLY IN CLUDED IN THE PROFITS OF THE ASSESSEE IS TO BE DEDUCTED FROM THE PROFITS OF THE ASSESSEE FOR DETERMINING PROFITS OF THE BUSINESS OF THE ASSESSEE UNDER EXPLANATION (BAA) TO SECTION 80HHC [ PARA 10] EXPLANATION (BAA) HAS TO BE CONSTRUED ON ITS OWN LA NGUAGE AND AS PER THE PLAIN NATURAL MEANING OF THE WORDS USED IN EXPLANATION (B AA), THE WORDS RECEIPTS BY WAY OF BROKERAGE, COMMISSION, INTEREST, RENT, CHARGES O R ANY OTHER RECEIPT OF A SIMILAR NATURE INCLUDED IN SUCH PROFITS WILL NOT ONLY REFE R TO THE NATURE OF RECEIPTS BUT ALSO THE QUANTUM OF RECEIPTS INCLUDED IN THE PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON REFERRED TO IN THE FIRST PART OF THE EXPLANATION (BAA). ACCORDINGLY, IF ANY QUANT UM OF ANY RECEIPT OF THE NATURE MENTIONED IN CLAUSE (1) OF EXPLANATION (BAA) HAS NO T BEEN INCLUDED IN THE PROFITS OF BUSINESS OF AN ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, NINETY PER CENT OF SUCH QUANTUM OF THE RECEIPT CANNOT BE DEDUCTED UNDER EXPLANATION (BAA) TO SECTION 80HHC. [PARA 11] 6 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. THEREFORE, IF THE RENT OR INTEREST IS A RECEIPT CH ARGEABLE AS PROFITS AND GAINS OF BUSINESS AND CHARGEABLE TO TAX UNDER SECTION 28 OF THE ACT, AND IF ANY QUANTUM OF THE RENT OR INTEREST OF THE ASSESSEE IS ALLOWABLE A S AN EXPENSE IN ACCORDANCE WITH SECTIONS 30 TO 44D OF THE ACT AND IS NOT TO BE INCL UDED IN THE PROFITS OF THE BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, NINETY PER CENT OF SUCH QUANTUM OF THE RECEIPT OF RENT OR INTEREST WILL NOT BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BA A) TO SECTION 80HHC. IN OTHER WORDS, NINETY PER CENT OF NOT THE GROSS RENT OR GRO SS INTEREST BUT ONLY THE NET INTEREST OR NET RENT, WHICH HAS BEEN INCLUDED IN THE PROFITS OF BUSINESS OF THE ASSESSEE AS COMPUTED UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION, IS TO BE DEDUCTED UNDER CLAUSE (1) OF EXPLANATION (BAA) TO S ECTION 80HHC FOR DETERMINING THE PROFITS OF THE BUSINESS. [PARA 12] IN THE RESULT, THE APPEAL IS ALLOWED AND THE IMPUG NED ORDER OF THE HIGH COURT IS TO BE SET ASIDE. THE MATTER IS REMANDED TO THE ASSESSI NG OFFICER TO WORK OUT THE DEDUCTION FROM RENT AND INTEREST IN ACCORDANCE WITH THIS JUDGMENT . [PARA 17] RESPECTFULLY FOLLOWING THE ABOVE WE DECIDE THE ISSU E IN FAVOUR OF ASSESSEE. (II) 445/MUM/2009, A.Y.2004-05 446/MUM/2009, A.Y.2005-06 2 ND GROUND OF APPEAL AS ABOVE, REGARDING ADDITION REPR ESENTING WRITE BACK OF SALES TAX LOAN UNDER SECTION 41(1) OF THE ACT. IT TRANSPIRED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS BALKRISHNA INDUSTRIES 88 TAXMAN.COM 273 (HEAD NOTES ONLY) THE HIGH COURT TOOK INTO CONSIDERATION THE PROVISI ONS OF SECTION 41 AND THE CONDITIONS WHICH ARE REQUIRED TO BE SATISFIED FOR B RINGING A PARTICULAR RECEIPT AS 'INCOME' WITHIN THE AMBIT THEREOF AND FOUND THAT TH OSE CONDITIONS ARE NOT SATISFIED IN THE PRESENT CASE. THE HIGH COURT ALSO REPELLED THE CONTENTION OF THE REVENUE THAT THE ASSESSEE OBTAINED THE BENEFIT OF REDUCTION OF SALES TAX LIABILITY UNDER SECTION 43B AS PER THE CBDT CIRCULAR NO. 496, DATED 25-9-1987. THE RELEVANT PORTION OF THE DISCUSSION IN THIS BEHALF READS AS UNDER- THERE WAS PREMATURE PAYMENT OF SALES TAX ALREADY CO LLECTED. ITS REMITTANCE TO THE GOVERNMENT IS NOT COVERED BY SECTION 43. THEREFORE, SECTION 43B HAS NO APPLICATION. INSOFAR AS APPLICABILITY OF SECTION 41(1)(A), THERE ALSO THE APPLICABILITY IS TO BE CONSIDERED IN THE LIGHT OF THE LIABILITY. IT IS A L OSS, EXPENDITURE OR TRADING LIABILITY. IN THIS CASE, THE SCHEME UNDER WHICH THE SALES TAX LIA BILITY WAS DEFERRED ENABLES THE ASSESSEE TO REMIT THE SALES TAX COLLECTED FROM THE CUSTOMERS OR CONSUMERS TO THE 7 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. GOVERNMENT NOT IMMEDIATELY BUT AS AGREED AFTER 7 TO 12 YEARS. IF THE AMOUNT IS NOT TO BE IMMEDIATELY PAID TO THE GOVERNMENT UPON COLLE CTION BUT CAN BE REMITTED LATER ON IN TERMS OF THE SCHEME, THEN THE EXERCISE UNDERT AKEN BY THE GOVERNMENT OF MAHARASHTRA IN TERMS OF THE AMENDMENT MADE TO THE B OMBAY SALES TAX ACT, MAY RELIEVE THE ASSESSEE OF HIS OBLIGATION, BUT THAT IS NOT BY WAY OF OBTAINING REMISSION. THE WORTH OF THE AMOUNT WHICH HAS TO BE REMITTED AF TER 7 TO 12 YEARS HAS BEEN DETERMINED PREMATURELY. THAT HAS BEEN DONE BY FIND OUT ITS NPV. IF THAT IS THE VALUE OF THE MONEY THAT THE STATE GOVERNMENT WOULD BE ENT ITLED TO RECEIVE AFTER THE END OF 7 TO 12 YEARS, THEN, INGREDIENTS OF SUB-SECTION (1) OF SECTION 41 CANNOT BE SAID TO BE FULFILLED. THE OBLIGATION TO REMIT TO THE GOVERNMEN T THE SALES TAX AMOUNT ALREADY RECOVERED AND COLLECTED FROM THE CUSTOMERS IS IN NO WAY WIPED OUT OR DILUTED. THE OBLIGATION REMAINS. ALL THAT HAS HAPPENED IS AN OPT ION WAS GIVEN TO THE ASSESSEE TO APPROACH THE SICOM AND REQUEST IT TO CONSIDER THE A PPLICATION OF THE ASSESSEE OF PREMATURE PAYMENT AND DISCHARGE OF THE LIABILITY BY FINDING OUT ITS NPV. IF THAT WAS A PERMISSIBLE EXERCISE AND IN TERMS OF THE SETTLED LAW, THEN, WE DO NOT SEE HOW THE ASSESSEE CAN BE SAID TO HAVE BEEN BENEFITED AND AS CLAIMED BY THE REVENUE IS NOT THAT THE ASSESSEE HAVING PAID RS. 3.37 CRORES HAS OBTAIN ED FOR HIMSELF ANYTHING IN TERMS OF SECTION 41(1), BUT THE ASSESSEE IS DEEMED TO HAV E RECEIVED THE SUM OF RS. 4.14 CRORES, WHICH IS THE DIFFERENCE BETWEEN THE ORIGINA L AMOUNT TO BE REMITTED WITH THE PAYMENT MADE. THIS CANNOT BE TERMED AS DEEMED PAYME NT AND BY THE STATE TO THE ASSESSEE. THE TRIBUNAL HAS FOUND THAT THE FIRST REQ UIREMENT OF SECTION 41(1) IS THAT THE ALLOWANCE OR DEDUCTION IS MADE IN RESPECT OF TH E LOSS, EXPENDITURE OR A TRADING LIABILITY INCURRED BY THE ASSESSEE AND THE OTHER RE QUIREMENT IS THE ASSESSEE HAS SUBSEQUENTLY OBTAINED ANY AMOUNT IN RESPECT OF SUCH LOSS AND EXPENDITURE OR OBTAINED A BENEFIT IN RESPECT OF SUCH TRADING LIABI LITY BY WAY OF A REMISSION OR CESSATION THEREOF. AS RIGHTLY NOTED BY THE TRIBUNAL , THE SALES TAX COLLECTED BY THE ASSESSEE DURING THE RELEVANT YEAR AMOUNTING TO RS. 7,52,01,378 WAS TREATED BY THE STATE GOVERNMENT AS LOAN LIABILITY PAYABLE AFTER 12 YEARS IN 6 ANNUAL/EQUAL INSTALMENTS. SUBSEQUENTLY AND PURSUANT TO THE AMEND MENT MADE TO THE 4TH PROVISO TO SECTION 38 OF THE BOMBAY SALES TAX ACT, 1959, TH E ASSESSEE ACCEPTED THE OFFER OF SICOM, THE IMPLEMENTING AGENCY OF THE STATE GOVERNM ENT, PAID AN AMOUNT OF RS. 3,37,13,393 TO SICOM, WHICH, ACCORDING TO THE ASSES SEE, REPRESENTED THE NPV OF THE FUTURE SUM AS DETERMINED AND PRESCRIBED BY THE SICOM. IN OTHER WORDS, WHAT THE ASSESSEE WAS REQUIRED TO PAY AFTER 12 YEARS IN 6 EQUAL INSTALMENTS WAS PAID BY THE ASSESSEE PREMATURELY IN TERMS OF THE NET PRESEN T VALUE (NPV) OF THE SAME. THAT THE STATE MAY HAVE RECEIVED A HIGHER SUM AFTER THE PERIOD OF 12 YEARS AND IN INSTALMENTS. HOWEVER, THE STATUTORY ARRANGEMENT AND VIDE SECTION 38, 4TH PROVISO DOES NOT AMOUNT TO REMISSION OR CESSATION OF THE AS SESSEE'S LIABILITY ASSUMING THE SAME TO BE A TRADING ONE. RATHER THAT OBTAINS A PAY MENT TO THE STATE PREMATURELY AND IN TERMS OF THE CORRECT VALUE OF THE DEBT DUE T O IT. THERE IS NO EVIDENCE TO SHOW THAT THERE HAS BEEN ANY REMISSION OR CESSATION OF T HE LIABILITY BY THE STATE GOVERNMENT.' [PARA 9] 8 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. THE AFORESAID APPROACH OF THE HIGH COURT IS WITHOUT ANY BLEMISH, INASMUCH AS ALL THE REQUIREMENTS OF SECTION 41(1) COULD NOT BE FULF ILLED IN THIS CASE. [PARA 10] RESPECTFULLY FOLLOWING THE ABOVE WE DECIDE THE ISSU E IN FAVOUR OF ASSESSEE. (III) 6734/MUM/2011, A.Y.2006-07 ISSUE OF VIEW GALLERY EXPENDITURE 6735/MUM/2011, A.Y. 2007-08 IN CO NTRACT MANUFACTURING UNITS 6737/MUM/2011, A.Y.2008-09 6190/MUM/2012, A.Y.2009-10 SINCE THE ISSUE IS COMMON WE ADJUDICATE THE SAME W ITH REFERENCE TO FACTS AND FIGURES FROM A.Y. 2006-07. ON THIS ISSUE THE A.O FOUND THAT ASSESSEE HAS INCUR RED HUGE EXPENDITURE AMOUNTING TO RS.48.21 LACS ON CONSTRUCTION OF A VIEWING GALLE RY IN CONTRACT MANUFACTURING UNITS, AO REJECTED THE ASSESSESS CLAIM THAT THE S AME SHOULD BE ALLOWED AS DEDUCTION FROM INCOME , UPON ASSESSEES APPEAL LD. CIT(A) NOT ED THAT THE ASSESSEE SUBMISSION AS UNDER: 8.1 IN COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FO UND THAT THE APPELLANT HAS INCURRED EXPENSES AMOUNTING TO RS.48.21 LACS ON CON STRUCTION OF A VIEWING GALLERY IN THE CMUS. THE APPELLANT HAD CLAIMED THE SAID EX PENDITURE AS DEDUCTION IN ITS RETURN OF INCOME. THE APPELLANT SUBMITTED THAT THE SAID EXPENDITURE HAS NOT RESULTED IN THE CREATION OF ASSET BELONGING TO THE COMPANY A ND IS IN THE NATURE OF ADVERTISEMENT/SALES PROMOTION SINCE IT PROMOTES THE COMPANYS PRODUCTS BY ALLOWING VISITORS TO OBSERVE THE PROCESS OF MANUFAC TURE OF BISCUITS. THEREFORE THE EXPENSES IS IN THE NATURE OF SALES PROMOTION EXPENS ES AND HENCE ALLOWABLE AS DEDUCTION UNDER SECTION 37(1) OF THE ITA. 8.2 THE APPELLANT FURTHER ARGUED THAT EVEN IF IT IS PRESUMED THAT THE EXPENDITURE RESULTS IN SOME ENDURING BENEFIT THE SAME WOULD BE DEDUCTIBLE IN THE CURRENT YEAR IF THE ADVANTAGE IS NOT IN THE CAPITAL FIELD AND MEREL Y ENABLES THE ASSESSEE TO CARRY ON HIS BUSINESS MORE EFFICIENTLY OR PROFITABLY. THE AP PELLANT HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: *CIT V. EMPIRE JUTE 124 ITR 1 (SC) * CIT V. ASSAM BENGAL CEMENT 27 ITR 34 (SC) * ALEMBIC CHEMICAL WORKS CO. LTD. V. CIT 177 ITR 37 7 (SC) 8.3 THE APPELLANT FURTHER RELIES ON THE FOLLOWING D ECISIONS WHEREIN IT WAS HELD THAT THE EXPENSES ON ADVERTISEMENT ARE DEDUCTIBLE IN THE YEAR IN WHICH IT IS INCURRED: *AMAR RAJA BATTERIES V. ACIT, 272 ITR 17, (ITAT HYD ERABAD BENCH * CORE HEALTH CARE LTD., 78 ITD 1 (ITAT AHMEDABAD T M BENCH) * SILICON INTERFACES PVT.LTD. V ITO, ITA NO. 7434/M UM/03, (ITAT MUMBAI BENCH) * CIT V. V BERGER PAINTS(INDIA)., 254 ITR 503, (CAL CUTTA HIGH COURT) 9 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. * GLAXO SMITH KLINE CONSUMER HEALTHCARE LTD. V. ACI T, 112 TT] 94 (ITAT CHANDIGARH BENCH). HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED. HE HELD THAT THE SAME WAS--- CAPITAL EXPENDITURE LIABLE FOR DEPRECATION HE HELD AS UNDER: 8.4 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND NOT INCLINED TO ACCEPT ITS CONTENTIONS. IT IS COMMON OCCURRENCE THAT VARIOUS G ROUPS, PERSONS VISIT WELL KNOWN INDUSTRIAL CONCERNS, FACTORY PREMISES LIKE THAT OF THE APPELLANT AS PART OF EDUCATIONAL PROGRAMMES. THEY SEE THE WHOLE MANUFACTURING PROCES S AS PART OF THE INDUSTRIAL VISIT. IF THE APPELLANTS LOGIC IS ACCEPTED, THEN E VEN THE PLANT & MACHINERY, HOUSED IN THE PREMISES WOULD BE TREATED AS ADVERTISEMENT I N NATURE AS SUCH VISITS LEAD TO SOME SORT OF ITS ADVERTISEMENT AND PUBLICITY. IT IS ALSO NOT CLEAR HOW A VIEWING GALLERY IN THE CONTRACT MANUFACTURING UNIT (CMU) ENABLES TH E APPELLANT TO CARRY OUT THE BUSINESS MORE EFFICIENCY OR PROFITABLY. LOOKING AT THE NATURE, QUANTUM OF EXPENDITURE AND THE ENDURING BENEFIT IT GENERATES, IT WILL BE FAIR AND REASONABLE TO TREAT THE SAME AS CAPITAL IN NATURE. THE ACTION OF THE ASSESSING OFFICER IS, THEREFORE, UPHELD ON THIS POINT. THE APPELLANT WOULD BE ENTITL ED TO DEPRECIATION AT APPROPRIATE RATE. 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. COUNSEL OF THE ASSESSEE CONTENDED THAT ASSESSEE HS CONSTRUCTED VIEWING GALL ERIES IN THE CONTRACT MANUFACTURING UNITS. HE SUBMITTED THAT ASSESSEE HAS NO OWNERSHIP RIGHTS UPON THE SAID CONSTRUCTION. HENCE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SAID EXPENDITURE CANNOT BE SAID TO BE CAPITAL EXPENDITURE IN THE HANDS OF THE ASSESSEE LI ABLE FOR DEPRECATION. HE SUBMITTED THAT SINCE THE ASSESSEE HAS CONSTRUCTED THE VIEWING GALL ERIES FOR THE PROMOTION OF BUSINESS AND FOR SMOOTH CONDUCT OF THE FUNCTIONING OF THE CONTRA CT MANUFACTURING UNIT AND PROPER SUPERVISION THEREOF THE SAME SHOULD BE ALLOWED AS R EVENUE EXPENDITURE. PER CONTRA LD. DR RELIED UPON THE ORDERS OF THE LD. CIT(A). 7. UPON CAREFUL CONSIDERATION WE FIND THAT THE INCO ME TAX LAW PROVIDING FOR CAPITAL EXPENDITURE LIABLE FOR DEPRECIATION IS CONTAINED UN DER SECTION 32 OF THE I.T. ACT. AS PER THE 10 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. PROVISIONS OF LAW OWNERSHIP THE PROPERTY IS SINE QU O NON FOR DEPRECIATION. HENCE SINCE THE ASSESSEE DOES NOT HAVE OWNERSHIP IT CANNOT BE TREAT ED AS CAPITAL EXPENDITURE IN THE HANDS OF THE ASSESSING LIABLE FOR DEPRECATION. THE SUBMIS SION OF THE ASSESSEE THAT THE SAID CONSTRUCTION ENABLES THE ASSESSEE TO CARRY ON HIS B USINESS MORE EFFICIENTLY AND PROFITABLY AND HENCE THE SAME SHOULD BE ALLOWED UNDER SECTION 37 OF THE I.T.ACT HAS CONSIDERABLE COGENCY. IN THIS REGARD WE ARE IN AGREEMENT WITH TH E SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT THE BENEFIT FROM THE SAID EXPENDI TURE MAY BE OF SOME ENDURING BENEFIT BUT, THE SAID EXPENDITURE WAS NECESSARY FOR THE BUS INESS TO THE CARRIED ON MORE EFFICIENTLY AND PROFITABLY. HENCE ON THE TOUCHSTONE OF FOLLOWIN G CASE LAWS THE ASSESSEE DESERVES TO SUCCEED. CIT V. EMPIRE JUTE 124 ITR 1 (SC) CIT V. ASSAM BENGAL CEMENT 27 ITR 34 ISC) ALEMBIC CHEMICAL WORKS CO. LTD. V. CIT 177 ITR 377 (SC) 9. ACCORDINGLY WE SET ASIDE THE ORDERS OF AUTHORITI ES BELOW AND DECIDE THE ISSUE IN FAVOUR OF ASSESSE. HENCE ALL THE GROUNDS AS CONSIDE RED ABOVE ARE DECIDED IN FAVOUR ASSESSEE. THE OVERALL DECISION OF THE APPEALS HAVE TO BE READ IN CONJUNCTION WITH THE ITAT ORDER PASSED EARLIER. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MARCH, 2019. SD/- SD/- (RAVISH SOOD) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 12.03.2019 THIRUMALESH, SR. PS 11 ITA NOS.445/MUM/2009 AND OTHER APPEALS PARLE PRODUCTS PVT.LTD. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI