ACIT, Kota V. MANGALAM CEMENT LTD., Kota

ITA 713/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2036 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA DHK
• Keywords: Capital asset; Gift; Depreciation; Business expenditure; Earning of tax free income; Corroborative evidences; Commercial expediency; Revised return; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 14A; 37(1); 80G; 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NOS. 354/JP/2014, 470/JP/2016 & 659/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11, 2011-12 & 2012-13. M/S MANGALAM CEMENT LIMITED, ADITYA NAGAR- 326520, MORAK, THE: RAMGANJMANDI DISTT: KOTA. CUKE VS. THE JCIT/ ACIT RANGE-1, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCM 6602 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NOS. 425/JP/2014, 616/JP/2016 & 713/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11, 2011-12, 2012-13. THE ACIT RANGE-1, KOTA. CUKE VS. M/S MANGALAM CEMENT LIMITED, ADITYA NAGAR- 326520, MORAK, THE: RAMGANJMANDI DISTT: KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCM 6602 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT(DR)) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05.05.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 29 /06/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS BUNCH OF SIX CROSS APPEALS PERTAINING TO THE D IFFERENT AY 2010-11, 2011- 12, 2012-13, BY THE ASSESSEE AND REVENUE AGAINST TH E DIFFERENT ORDERS OF LD. CIT(A) KOTA, DATED 27/03/2014, 18/03/2016 AND 17/05/2016 R ESPECTIVELY. SINCE THE COMMON GROUND ARE INVOLVED IN ALL THESE APPEALS. A LL THESE APPEALS WERE TAKEN UP 2 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. TOGETHER FOR HEARING AND BEING DISPOSED OFF BY CONS OLIDATED ORDER FOR THE SAKE OF BREVITY. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT CROSS APPEALS OF AY 2010-11 I.E. 354/JP/2014 AND 425/JP/2014 MAY BE TAKEN AS LEAD CASE. THEREFORE, FIRST WE TAKE UP THE ASSESSEE APPEAL IN ITA NO. 354/JP/2014 PERTAINING TO THE AY 2010-11. ITA NO. 354/JP/2014 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF `EXPENDITURE OF RS. 45 LACS INCURRE D BY THE ASSESSEE BY WAY OF CONTRIBUTION MADE TOWARDS CONSTRUCTION OF HOSPITAL TO MEDICARE RELIEF SOCIETY. COMMUNITY HEALTH CENTRE, RAMAGANJMANDI BY HOLDING THAT THE PAYMENT IS IN THE NATURE OF CHARIT Y/DONATION AND THE SAME CAN BE CLAIMED U/S 80G OF THE IT ACT AND NOT A S BUSINESS EXPENDITURE. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF CLAIM OF EXPENDITURE OF RS. 1,75,00 0/- OUT OF RS. 9,10,425/- MADE BY THE AO TOWARDS SOCIAL WELFARE BY HOLDING THAT SOME ELEMENT OF CHARITY IS INBUILT IN THESE EXPENDI TURE WHICH CAN BE CLAIMED ONLY U/S 80G OF THE IT ACT. 3. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT EXPENDITURE OF RS. 12, 89,767/- INCURRED ON ROADS A ND BOUNDARY WALL AND EXPENSES OF RS. 5, 50,798/- FOR COMMON PROPERTY WORK AT KOTA THERMAL POWER STATION IS TO BE ALLOWED OVER FIVE YE ARS AS PER FINDINGS GIVEN IN A. Y 09-10 AND THUS CONFIRMING THE DISALLO WANCE OF RS. 14, 72,452/-. 4. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OUT OF VARIOUS EXPENSES AS UNDER:- 3 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. EXPENSES DISALLOWED BY THE AO DISALLOWANCE OF THE EXPENSES CONFIRMED BY CIT (A) PARTICULARS OF EXPENSES AMOUNT CLAIMED % AMOUNT % AMOUNT STAFF WELFARE EXPENSES 92,40,937/- 50% 46,20,468/- 5% 4,62,047/- CHARGES GENERAL EXPENSES 22,89,094/- 20% 4,57,819/- 10% 2,28,909/- GIFT EXPENSES SALES 23,55,543/- 50% 11,77,771/- 50% 11,77,771/- PROMOTION EXPENSES 1,51,86,533/ - 20% 30,37,316/ - 10% 15,18,653/ - TAXI HIRING EXPENSES 17,49,041/- 20% 3,49,808/- 10% 1,74,904/- 5. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 7,27,956/- U/S 14A R.W.R 8D (2) IGNORING THAT THE ASSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE OR OTHER EXPENSES IN EARNING THE INCOME WHICH IS NOT CHARGEABLE TO TA X. 6. THE ASSESSEE CRAVES TO AMEND, ADD, ALTER, OR MOD IFY ANY OF THE GROUND OF APPEALS. 7. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 2 . BRIEFLY STATED THE FACTS ARE THAT, THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 31/12/2012. WHILE FRAMING THE ASSESSMENT THE AO DIS ALLOWED THE CLAIM OF 4 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. COMPENSATION PAID TO FARMERS OF RS. 49,01,986/-, CO NTRIBUTION MADE TO CONSTRUCTION TO HOSPITAL OF RS. 45,00,000/-, CONTRIBUTION ON ACC OUNT OF CONSTRUCTION OF ROAD OF RS. 1,00,00,000/-, DISALLOWANCE OF EXPENSES MADE ON ACC OUNT OF FLY ASH HANDLING SYSTEM OF RS. 1840565/- EXPENSES OUT OF STAFF WELFARE EXPE NSES OF RS. 46,20,468/-, DISALLOWANCE OUT OF CHARGES GENERAL EXPENSES OF RS. 4,57,819/-, DISALLOWANCE OF CLAIM OF EXPENDITURE OF RS. 1,75,000/- OUT OF RS. 9 ,10,425/- MADE BY THE AO TOWARDS SOCIAL WELFARE, GIFT EXPENSES OF RS. 11,77, 771/- OUT OF SALE PROMOTION EXPENSES OF RS. 30,37,316/-, GARDENING EXPENSES OF RS. 34,36,131/-, OUTSTANDING LIABILITIES OF RS. 2,22,17,547/-, PAYMENT OF DEMURR AGE 3,71,46,968/-, RAILWAY SIDING EXPENSES OF RS. 27,51,314/-, TAXI HIRING EXPENSES O F RS. 3,49,808/-, MINING RIGHTS EXPENSES OF RS. 79,39,737/-, FURTHER THE DISALLOWAN CE WAS MADE IN RESPECT OF CLAIM OF RS. 3,38,996/- ON ACCOUNT OF MINING RIGHTS AND B Y INVOKING THE PROVISION OF SECTION 14A OF RS. 84,05,723/-, AND DISALLOWANCE U/ S 36(1)(III) OF RS. 30,17,564/-. THUS, THE AO ASSESSED INCOME OF RS. 2,07,99,71,377/ -, AGAINST THE REVISED RETURNED INCOME AT RS. 196,31,05,295/-. 3. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEA L BEFORE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED TH E APPEAL. WHILE PARTLY ALLOWING THE APPEAL, THE LD. CIT(A) IN RESPECT OF DISALLOWAN CE OF COMPENSATION TO THE FARMERS DIRECTED THE AO TO ALLOW SUCH EXPENDITURE IN EQUAL 20 YEARLY INSTALLMENTS, HOWEVER, CONFIRMED THE DISALLOWANCE OF CONTRIBUTION MADE TO HOSPITALS. IN RESPECT OF, THE CONTRIBUTION MADE TOWARDS CONSTRUCTION OF ROADS SAM E WAS DELETED BY HOLDING IT AS THE REVENUE EXPENDITURE. IN RESPECT OF, THE DISALL OWANCE TOWARDS SOCIAL WELFARE 5 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. EXPENSES OUT OF TOTAL DISALLOWANCE OF RS. 9,10,425/ - THE LD. (CIT) SUSTAINED 20% AND REST OF THE DISALLOWANCE WAS DELETED. FURTHER THE LD. CIT(A), IN RESPECT OF, DISALLOWANCE OF FLYING ASH HANDLING SYSTEM EXPENDIT URE DIRECTED THE AO TO ALLOW 20% OF SUCH EXPENDITURE IN THE YEAR UNDER CONSIDERA TION. FURTHER, THE LD. CIT(A) IN RESPECT OF STAFF WELFARE EXPENSES, GENERAL CHARITY EXPENSES, GIFT EXPENSES, SALE PROMOTION EXPENSES, GARDEN EXPENSES ETC. AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) RESTRICTED THE DISALLOWANC E TO THE EXTENT OF 5% OF SUCH EXPENSES REST OF THE EXPENSES WERE DIRECTED TO BE DELETED. IN RESPECT OF GENERAL CHARGE EXPENSES 10% WAS SUSTAINED AND IN CASE OF GI FT EXPENSES 50% WAS SUSTAINED AND IN RESPECT OF SALE PROMOTION EXPENSES 10% WAS SUSTAINED AND THE ENTIRE GARDENING EXPENSES WAS DIRECTED TO BE DELETE D. HOWEVER, IN RESPECT OF TAXI HIRING CHARGES, THE LD. CIT(A) RESTRICTED THE DISAL LOWANCE TO RS. 1,74,904/-/ LD. CIT(A) IN RESPECT OF ADDITION OF RS. 2, 22,17,547/- IN RESPECT OF LIABILITY PENDING MORE THAN THREE YEARS DIRECTED THE AO TO DELETE THE SAME. FURTHER THE LD. CIT(A), IN RESPECT OF THE DISALLOWANCE OF CLAIM OF DEMURRAG ES OF RS. 3,71,46,968/- ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE DISALLOWA NCE. FURTHER THE LD. CIT(A) IN RESPECT OF THE RAILWAY EXPENSES DELETED THE DISALLO WANCE AND IN RESPECT OF MINING UTILIZATION EXPENSES THE LD. CIT(A) DELETED BOTH TH E ADDITIONS. IN RESPECT OF THE DISALLOWANCE MADE U/S 14A PARTLY SUSTAINED THE DISA LLOWANCE, AGAINST THIS ORDER, BOTH REVENUE AND ASSESSEE HAS FILED THE APPEALS. 6 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 4. GROUND NO. 1 , IS AGAINST CONFIRMATION OF DISALLOWANCE OF EXPEND ITURE OF RS. 45 LACS INCURRED BY THE ASSESSEE BY WAY OF CONTRIBU TION MADE TOWARDS CONSTRUCTION OF HOSPITALS BY THE MEDICARE RELIEF SOCIETY, COMMUN ITY HEALTH CENTRE. 4.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMIS SIONS AS MADE IN THE WRITTEN SUBMISSIONS. AT THE OUTSET, THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE SIMILAR CONTRIBUTION WAS ALLOWED BY THIS TRIBUN AL IN ITA NO. 361 & 419/JP/2012 FOR AY 09-10. 4.2 ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATIVES OPPOSED THE SUBMISSIONS AND SUBMITTED THAT THE CONTRIBUTION IS IN NATURE OF DONATION CANNOT BE TREATED AS AN EXPENDITURE INCURRED FOR THE PURPOSE OF THE BUSINES S OF THE ASSESSEE. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS STATED BY THE ASSESSEE THAT WHERE TH E CONTRIBUTION IS MADE BY THE ASSESSEE, THE HOSPITALS KEEPS CERTAIN BEDS RESERVED FOR THE EMPLOYEES OF THE ASSESSEE AND THE TREATMENT IS ALSO GIVEN ON PRIORIT Y BASIS. UNDER THESE FACTS, WE DO NOT SEE ANY REASON TO TAKE A DIFFERENT VIEW AS TAKE N BY THE CO-ORDINATE BENCH IN ITA NO. 319/JP/2012, ASSESSEES OWN CASE PERTAINING TO THE AY 2009-10. THEREFORE, WE DIRECT THE AO TO DELETE THE DISALLOWANCE. 5. GROUND NO. 2, IS AGAINST CONFIRMING THE DISALLOWANCE OF CLAIM OF EXPENDITURE OF RS. 1,75,000/- OUT OF RS. 9,10,425/- MADE BY THE AO. 5.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMI SSIONS AS MADE IN THE WRITTEN SUBMISSIONS. LD. COUNSEL SUBMITTED THAT THE ASSESSEE COMPANY CLAIMED SOCIAL WELFARE EXPENSES OF RS. 1,54,01,531/-. OUT O F THE SAME, RS. 45 LACS WAS IN 7 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. RESPECT OF CONTRIBUTION MADE FOR CONSTRUCTION OF HO SPITAL AT RAMGANJ MANDI AND RS. 1 CRORES WAS IN RESPECT OF CONTRIBUTION MADE FOR CO NSTRUCTION OF NEW RAILWAY OVER BRIDGE WITH APPROACH ROAD & BYE PASS. THE REMAININ G EXPENDITURE OF RS. 9,01,531/- WAS IN RESPECT OF CONTRIBUTION MADE TO GRAM PANCHAY AT TOWARDS ITS WELFARE FUND, REPAIR OF POLICE STATION AT MORAK/DARA, SUPPLY OF S WEETS FOR BUDHKHAN GRAM PANCHAYAT. HE SUBMITTED THAT THE SIMILAR GROUNDS W AS MADE IN THE EARLIER YEAR 2008-09 AND AY 2009-10, THE TRIBUNAL IN ITA NO. 81 & 173/JP/2012 FOR THE AY 2008-09, DELETED THE SIMILAR DISALLOWANCE. 5.2 ON THE CONTRARY, THE LD. DEPARTMENTAL REPRESENTATI VES SUPPORTED THE ORDER OF THE AO. HE SUBMITTED THAT LAW IS WELL SETTLED THE ASSESSEE IS REQUIRED DEMONSTRATE THAT THE EXPENDITURE WHICH IT IS CLAIMING WAS MADE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THESE EXPENSES WERE MADE ON AD HOC BASIS WHICH IN OUR CONSIDERED VIEW, IS NOT A JUSTIFIED WAY. THEREFORE , TAKING A CONSISTENT VIEW AS TAKEN BY THE CO-ORDINATE BENCHES IN EARLIER YEARS IN ASSE SSEES OWN CASE. WE DIRECT THE AO TO DELETE THE DISALLOWANCE. 6 . GROUND NO. 3 IS AGAINST CONFIRMING THE DISALLOWANCE TO RS. 14,7 2,452/- INCURRED ON ROADS AND BOUNDARY WALL, PROPERTY WORK AT KOTA THERMAL POWER STATION. 6.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMIS SIONS AS MADE IN THE WRITTEN SUBMISSIONS. HE SUBMITTED THAT DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE INCURRED TOTAL EXPENDITURE OF RS. 18,40,56 5/- COMPRISING OF EXPENDITURE OF 8 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. RS. 12,89,767/- ON ROADS & BOUNDARY WALL. THE EXPE NDITURE WAS CAPITALIZED BY ASSESSEE IN ITS BOOKS OF ACCOUNTS. HOWEVER, IN THE COMPUTATION OF TOTAL INCOME, THE SAME WAS CLAIMED AS REVENUE EXPENDITURE U/S 37(1) O F THE ACT. THE AO DISALLOWED THE ENTIRE EXPENDITURE OF RS. 18,40,565/- BY TREATI NG THE SAME AS CAPITAL IN NATURE. HOWEVER, THE LD. CIT(A) BY RELYING THE FINDING PERT AINING TO THE AY 2009-10 DIRECTED THE AO TO ALLOW 1/5 TH OF THE EXPENDITURE. THE LD. COUNSEL SUBMITTED THA T THE TRIBUNAL IN THE EARLIER YEAR 2009-10 DELETED THE DI SALLOWANCE EVEN OTHERWISE ALSO THE OBSERVATIONS OF THE LOWER AUTHORITIES IS INCORR ECT. IT IS TO BE NOTED THAT ACCOUNTING ENTRY IS NOT DECISIVE FOR CONSIDERING TH E ASSESSEES CLAIM. 6.2 ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 6.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE AO DISALLOWED THE CLAIM BY TREATING TH E SAME AS EXPENDITURE IS CAPITAL IN NATURE. IT IS UNDISPUTED FACT THAT IN THE BOOKS OF ACCOUNTS, THE ASSESSEE HAS TREATED THIS EXPENDITURE AS CAPITAL EXPENDITURE. T HE TRIBUNAL IN THE EARLIER YEAR DELETED THE DISALLOWANCE BY HOLDING AS UNDER:- 4.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE COPY OF THE AGREEMENT PLACED IN THE PAPER BOOK. WH EN THE AGREEMENT IS READ AS A WHOLE, IT BECOMES EVIDENT THAT THE SYSTEM WAS INSTALLED BY THE ASSESSEE TO GET THE FLY ASH, WHICH IS AN IMPORTANT COMPONENT FOR MANUFACTURING OF CEMENT ON A REGULAR BASIS. THUS T HE SYSTEM IS INSTALLED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS AND NO T FOR ACQUIRING THE CAPITAL ASSET. FURTHER, AS PER PARA 2.1 OF THE AGREEMENT, RRVUNL HAS ALLOWED THE ASSESSEE TO INSTALL THE SYSTEM ONLY FOR COLLECTION OF FLY ASH FREE OF COST, INITIALLY 9 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. FOR A PERIOD OF 5 YEARS, AND AS PER PARA 2.12 OF TH E AGREEMENT, THE SYSTEM BECOMES THE SOLE PROPERTY OF RRVUNL ON THE EXPIRY/T ERMINATION OF THE AGREEMENT. THUS, THE ENTIRE ARRANGEMENT HAS BENEFI TED THE ASSESSEE ONLY BY WAY OF FREE SUPPLY OF FLY ASH BY INCURRING THE EXPE NDITURE ON INSTALLATION OF THE SYSTEM WHICH BECOME THE PROPERTY OF RRVUNL. BY ALLOWING 20 % OF THE EXPENDITURE, THE AUTHORITIES HAVE ACCEPTED THAT THE EXPENDITURE IS REVENUE IN NATURE AND NOT A CAPITAL EXPENDITURE. THERE IS NO CONCEPT OF DEFERMENT OF EXPENDITURE IN THE IT ACT. WE ALSO FIND THAT THIS VERY ISSUE IS DECIDED BY THE ITAT CHENNAI BENCH IN CASE OF ACIT VS. CHETTINAND C EMENT CORPORATION LTD. 133 ITD 317 WHERE THE FINDING GIVEN AT PARA 33 OF T HE ORDER IS REPRODUCED AS UNDER:- WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBM ISSIONS. THERE IS NO DISPUTE THAT THE ASSESSEE HAD AN MOU WITH TNEB WHIC H CLEARLY SPECIFIED THE FLY ASH SYSTEM EQUIPMENT INSTALLED BY THE ASSESSEE TO BE THE PROPERTY OF THE TNEB. IT IS ALSO NOT DISPUTED THAT SILO WAS CONSTR UCTED IN THE PREMISES OF METTUR THERMAL POWER PLANT. THERE IS NO CASE FOR T HE REVENUE THAT METTUR THERMAL POWER PLANT WAS OWNED BY THE ASSESSEE. ASS ESSEE FOR THE PURPOSE OF COLLECTING THE FLY ASH HAD MADE A CONSTRUCTION I N A PROPERTY NOT OWNED BY IT ON A CONDITION AGREED WITH TNEB, THAT THE CONSTR UCTION AND THE EQUIPMENT WOULD BECOME LATTER'S PROPERTY. IF THAT BE SO, WE WONDER HOW IT COULD BE CONSIDERED AS CAPITAL ASSET OF THE ASSESSEE. JUST BECAUSE IT FACILITATED THE SMOOTH PROCUREMENT OF AN ESSENTIAL RAW MATERIAL, IT COULD NOT BE SAID THAT ANY ENDURING BENEFIT HAD COME TO THE ASSESSEE. ESP ECIALLY SO, WHEN THE EQUIPMENT BECAME THE PROPERTY OF ANOTHER COMPANY. NO DOUBT, HON'BLE APPEX COURT IN THE CASE OF MYSORE MINERALS LTD. (SU PRA) AND IN OTHER CASES RELIED ON BY THE REVENUE, HAS CLEARLY LAID DOWN THA T TEST OF ENDURING BENEFIT IS ONE OF THE CRITERIA TO BE CONSIDERED WHEN DECIDI NG THE NATURE OF EXPENSES, AS TO WHETHER IT WAS CAPITAL OR REVENUE. TO SAY TH AT THIS IS THE SOLE CRITERIA WHICH IS TO BE ADOPTED IS NOT CORRECT. IN OUR OPIN ION, THE CIT (A) HAD CORRECTLY RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF MADRAS AUTO SERVICES (P) LTD. (SUPRA) WHERE THEIR LORDSHIP HELD THAT WHEN AN ASSET WAS CREATED BUT IT BELONGED TO SOMEBODY ELSE, EVEN IF I T RESULTED IN ANY ENDURING BENEFIT, IT SHOULD BE STILL LOOKED UPON AS A REVENU E EXPENDITURE. EXPLANATION 1 TO S. 32 WAS CONSIDERED BY THE JURISDICTIONAL HIG H COURT IN THE CASE OF TVS LEAN LOGISTICS LTD (SUPRA) WHEREIN THEIR LORDSHIPS HELD THAT WHEN AN ASSESSEE HAD CONSTRUCTED A BUILDING ON A LEASEHOLD LAND, IT COULD NOT BE CONSIDERED THAT THERE WAS ANY ACQUISITION OF CAPITA L ASSET. WE FIND THAT THE 10 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. CIT (A) WAS JUSTIFIED IN HOLDING THAT THE EXPENDITU RE WOULD BE REVENUE IN NATURE. NO INTERFERENCE IS CALLED FOR. 4.7 CONSIDERING THE ABOVE DECISION AND ALSO THE VAR IOUS OTHER DECISIONS RELIED BY THE LD. AR, WE DO NOT AGREE WITH THE FIND ING OF THE LD. CIT (A) THAT THE ISSUE IS TO BE APPROACHED FROM COMMON-SENSE POI NT OF VIEW BY IGNORING THE LEGAL PROVISIONS OF THE ACT. THEREFORE, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE MADE BY HIM. THUS, GROUND NO. 2 OF TH E ASSESSEE'S APPEAL IS ALLOWED. 6.4 THE FACTS ARE IDENTICAL AS WERE IN THE YEAR 2009-1 0. THE REVENUE HAS NOT BROUGHT ANY OTHER CONTRARY BINDING PRECEDENTS BY TH E HONBLE HIGH COURT OF RAJASTHAN AGAINST THIS FINDING OF THE TRIBUNAL. TH EREFORE, TAKING A CONSISTENT VIEW, WE HEREBY DIRECT THE AO TO DELETE THE DISALLOWANCE. 7. GROUND NO. 4 , IS RELATED TO DISALLOWANCE OF VARIOUS EXPENSES I. E. STAFF WELFARE EXPENSE, CHARGES GENERAL EXPENSES, GIFT EXP ENSES, SALES PROMOTION EXPENSES ETC. 7.1 THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. HE SUBMITTED THAT IN RESPECT OF STAFF WELFARE EXPENSES, THE SIMILAR DISALLOWANCE WAS MADE BY THE AO IN RESPECT OF THE AY 2008-09. THE TRIBUNAL HAD DELETED SUCH DISALLOWANCE. THEREFORE, HE SUBMI TTED THAT AS THERE IS NO CHANGE INTO FACTS. THE DISALLOWANCE MADE AND CONFIRMED BY THE LD. CIT(A), MAY BE DELETED. 7.2 ON THE CONTRARY, THE LD. DEPARTMENTAL REPRESENTATI VES SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 11 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 7.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE FIND THAT THE TRIBUNAL IN RESPECT OF THE EXPENSES I.E. STAFF WELFARE EXPENSES, CHARGES GENERAL EXPENSES, GIFT EXPENSES S ALES AND PROMOTION EXPENSES IN AY 2009-10 IN ITA NOS. 361 & 419/JP/2012 DELETED TH E DISALLOWANCE BY OBSERVING AS UNDER:- 6.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. WE HAVE FOUND THAT THE AO HAS MADE THE DISALLOWANCE BY MAKING OBSERVATION THAT ASSESSEE HAS FAILED TO PROD UCE SUPPORTING EVIDENCE OR EXPENDITURE ARE EITHER PERSONAL IN NATURE OR NOT FO R BUSINESS PURPOSE OR COMPLETE DETAILS WERE NOT FILED. ON THE OTHER HAND, LD. AR CONTENDED THAT AO HAS MADE THE DISALLOWANCE ON ADHOC BASIS WITHOUT SPECIFYING THAT DETAILS OF WHICH EXPENDITURE REQUIRED BY THE AO IS NOT GIVEN. IT IS STATED THAT ALL EXPENSES ARE DULY SUPPORTED BY EVIDENCE AND THEREFORE SUCH ADHOC DISALLOWANCE IN U NJUSTIFIED. IT IS ALSO PLEADED THAT ONCE FBT IS PAID ON THE EXPENDITURE CLAIMED, T HE SAME CANNOT BE DISALLOWED IN THE TAX COMPUTATION FOR WHICH DECISION OF THE CO-OR DINATE BENCH IS RELIED UPON. WE AGREE WITH THE ARGUMENTS OF THE LD. AR THAT NO ADHO C DISALLOWANCE CAN BE MADE. WE NOTE THAT ASSESSEE HAS FILED THE COMPLETE DETAIL S OF EXPENDITURE AS REQUIRED BY THE AO. THE AO HAS NOT SPECIFIED ANY PARTICULARS E XPENDITURE WHICH IS FOR PERSONAL USE OR FOR NON-BUSINESS PURPOSE. IT IS A CASE OF A CORPORATE ENTITY WHERE THE CONTRIBUTION MADE TO GRAM PANCHAYAT FOR VARIOUS WEL FARE MEASURES AT A PLACE WHERE THE FACTORY OF ASSESSEE IS LOCATED AS A PART OF ITS SOCIAL OBLIGATION IS AN ALLOWABLE BUSINESS EXPENDITURE AS HELD IN VARIOUS CASES REFER RED IN GROUND NO.3 ABOVE. FURTHER, WE AGREE WITH THE CONTENTION OF THE ASSESS EE THAT ONCE FBT IS PAID THE EXPENDITURE CANNOT BE SUBJECT MATTER OF DISALLOWANC E AS HELD BY THIS BENCH IN CASE OF M/S NATURAL STATE & SANDSTONE EXPORTS (P) LTD. I N ITA NO. 1090/JP/10 DATED 04.02.2011. THE FINDING OF LD. CIT (A) THAT TO THE EXTENT THE EXPENDITURE IS DISALLOWED, FBT SHOULD NOT BE CHARGED IS THEREFORE NOT CORRECT. WE, THEREFORE, DELETE THE VARIOUS ADHOC DISALLOWANCES MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A). THUS, GROUND NO. 4 AND 5 OF ASSESSEE'S AP PEAL ARE ALLOWED AND THE SOLITARY GROUND RAISED BY THE REVENUE IN ITS APPEAL IS DISMI SSED. 12 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 7.4 THE REVENUE HAS NOT BROUGHT ANY CONTRARY, MATERIAL ON RECORDS SUGGESTING THAT THE FACTS ARE DIFFERENT. THEREFORE, TAKING A C ONSISTENT VIEW, THIS GROUND OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. THE AO IS DIR ECTED TO DELETE THE DISALLOWANCE OF EXPENSES I.E. STAFF WELFARE EXPENSES, CHARGES GENER AL EXPENSES, GIFT EXPENSES, AND PROMOTION EXPENSES. NOW, COMING TO THE TAXI HIRING EXPENSES, WE FIND THAT THE ASSESSEE HAD CLAIMED THAT THE EXPENDITURE WAS MADE FOR BUSINESS PURPOSES FROM THE DETAILS FURNISHEDBEFORE THE ASSESSING OFFICER. IT IS NOTICED THAT THE EXPENDITURE RELATED TO TAXI HIRING FOR DRM RAILWAY AND OTHER RA ILWAY EMPLOYEE IS ALSO BOOKED, IT IS NOT CLEAR WHETHER SUCH RAILWAY EMPLOYEE WERE ON OFFICIAL DUTY AND SUCH TAXI WAS HIRED IN INSPECTING THE RAILWAY SIDING IN THE ABSEN CE OF THE MATERIAL. WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) HAS RIGHTLY CONFIRM ED THE DISALLOWANCE OF 10% OF THE EXPENDITURE. THIS GROUND OF ASSESSEE APPEAL IS PARTLY ALLOWED. 8. GROUND NO. 5, IS AGAINST THE CONFIRMING OF RS. 9,27,956/- BY INV OKING THE PROVISION OF SECTION 14A. 8.1 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMIS SIONS AS MADE IN THE WRITTEN SUBMISSION. HE SUBMITTED THAT FROM THE PLA IN READING OF RULE 8D, IT IS EVIDENT THAT RECOURSE TO RULE 8D IS NOT AUTOMATIC. IT IS SUBMITTED THAT THE ASSESSEE CAN CLAIM THAT HAVING REGARD TO THE BOOKS OF ACCOUN TS, IT HAS NOT INCURRED ANY EXPENDITURE IN RELATION TO INCOME NOT FORMING PART OF HIS TOTAL INCOME. IF THE AO HAVING REGARD TO SUCH ACCOUNT IS NOT SATISFIED WITH THE CORRECTNESS OF THE ASSESSEES CLAIM, THEN ONLY HE CAN INVOKE SUB CLAUSE (2) OF RU LE 8D OF THE INCOME TAX RULE, 13 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 1962. THE CLAIM OF THE ASSESSEE IS THAT IT HAD NOT INCURRED ANY EXPENDITURE BY WAY OF PAYMENT OF INTEREST FOR MAKING INVESTMENT IN MUT UAL FUND. THIS IS SUBSTANTIATED FROM THE ACCOUNTS OF THE ASSESSEE IN AS MUCH AS ASS ESSEE HAS INCURRED EXPENSES OF RS. 15,29,296/- ON TERM LOAN TAKEN FROM SBI AGAINST MORTGAGE OF IMMOVABLE PROPERTIES & HYPOTHECATION THE CLAIM OF MOVABLE ASS ETS FOR INSTALLATION OF CAPTIVE POWER PLANT. THE LOAN WAS SQUARED UP IN JUNE 2009 AND THERE WAS NO OUTSTANDING TERM LOAN AS 31.03.2010. THE LOAN WAS FULLY UTILIZ ED FOR INVESTMENT IN P & M. HENCE, NO PART OF INTEREST PAID ON TERM LOAN IS DISALLOW ABLE U/S 14A R.W.R 8D OF THE INCOME TAX RULES, 1962. SIMILARLY, ASSESSEE HAS INCURRED INTEREST EXPENSE OF RS. 83,41,272/- ON SECURITY DEPOSITS OF RS. 1016.16 LAC S RECEIVED FROM 617 STOCKIEST FOR SECURING ITS DEBTS/STOCKS. AGAINST THIS INVESTMENT DEBTORS AND STOCKS AND OTHERS IS UTILIZED FOR WORKING CAPITAL REQUIREMENT OF THE BUS INESS. THERE IS NO RELATIONSHIP OF THESE DEPOSITS WITH INVESTMENT IN MUTUAL FUNDS. IT IS SUBMITTED THAT THERE IS NO RELATIONSHIP OF THESE DEPOSITS WITH INVESTMENT IN M UTUAL FUND. IT IS FURTHER CONTENDED THAT INVESTMENT IN MUTUAL FUND IS MADE OU T OF SURPLUS FUND WHICH IS EVIDENT FROM THE BALANCE SHEET AS THE ASSESSEE IS H AVING RESERVE AND SURPLUS OF RS. 360133.32 LACS WHEREAS INVESTMENT IN SHARE & MUTUAL FUNDS IS ONLY RS. 1950.11 LACS. THEREFORE, IT IS SUBMITTED THAT NO DISALLOWA NCE IN RESPECT OF INTEREST EXPENDITURE CAN BE MADE. TO BUTTRESS THESE CONTENT ION LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON VARIOUS CASE LAWS. IN SUPPORT OF PROPOSITION THAT FOR ATTRACTING THE PROVISIONS OF SECTION 14A OF THE ACT , THERE HAS TO BE A PROXIMATE CAUSE FOR DISALLOWANCE WHICH IS ITS RELATIONSHIP WI TH THE TAX EXEMPT INCOME, LD. 14 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. COUNSEL RELIED JUDGMENT OF HONBE SUPREME COURT REN DERED IN THE CASE OF CIT VS. WALFART SHARE & STOCK BROKERS PVT. LTD. 326 ITR 001 (SC). FURTHER RELIANCE IS PLACED ON THE JUDGMENTS OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TAIKSHA ENGINEERING INDIA LTD. (2015) 370 ITR, 338 (DEL), H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 366 ITR 0505 (BOMBAY), CIT VS. RELIANCE UTILITIES & POWER LTD. 313 ITR 340 (BOMBAY) AND THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SUZLON ENERGIES L TD. (2013) 355 ITR 630 (GUJ). 8.2 THE LD. DR OPPOSED THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE AND SUPPORTED THE ASSESSMENT ORDER. 8.3 WE HAVE HEARD THE RIVAL CONTENTIONS WE FIND MERIT INTO THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE PROVISIONS OF SECTION 14A CAN BE INVOKED IN THE EVENT OF THE AO IS NOT SATISFIED WITH THE CORRECTNE SS OF THE CLAIM OF THE EXPENDITURE RELATED TO THE EXEMPT INCOME. THE HONBLE SUPREME COURT IN THE RECENT JUDGMENT IN THE CASE OF CIT VS. GODREJ BOYCE VS CIT HAS HELD THAT PROVISION OF SECTION OF 14A CAN BE INVOKED WHEN THE AO IS DISSATISFIED WITH THE CLAIM OF EXPENDITURE RELATED TO THE EXEMPT INCOME. 8.4 IN THE PRESENT CASE THE LD. CIT(A) HAS RECOMPUTED THE DISALLOWANCE BY APPLYING RULE 8D. HE HAS DISALLOWED INTEREST EXPEN DITURE OF RS. 2,38,454/- AND ADMINISTRATIVE EXPENSES OF RS. 6,89,497/-. THE GRI EVANCE OF THE ASSESSEE IS THAT THE NO INTEREST EXPENDITURE IS RELATED TO THE EXEMPT IN COME. AS IT IS CLAIMED THAT THE ENTIRE INVESTMENT IN MUTUAL FUNDS HAVE BEEN MADE FR OM OWN FUND. THE LD. CIT(A) HAS NOT GIVEN ANY REASON AS TO WHY THE CONTENTION O F THE ASSESSEE IS NOT ACCEPTABLE. 15 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. REVENUE HAS NOT PLACED ANY MATERIAL REBUTTING THE C LAIM OF THE ASESSEE. THEREFORE, OUT OF DISALLOWANCE OF RS. 9,27,956/- A SUM OF RS. 2,38,454/- IS DELETED AND RS. 6,89,497/- IS SUSTAINED. THIS GROUND IS PARTLY ALL OWED. HENCE, THE APPEAL OF THE ASSESSEE IN ITA NO. 354/JP /2014 IS PARTLY ALLOWED. ITA NO. 425/JP/2014 9 . NOW WE TAKE UP REVENUES APPEAL IN ITA NO. 425/JP/2014 PERTAINING TO THE AY 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- 1. DIRECTING THE AO THAT COMPENSATION OF RS. 49,01 ,986/- PAID TO THE FARMERS IS TO BE ALLOWED OVER A PERIOD OF 20 YEARS, CONSEQUENTLY GIVING RELIEF OF RS. 2,45,099/- FOR THE CURRENT YEAR. 2. DELETING THE DISALLOWANCE OF RS. 1 CRORE ON ACCO UNT OF CONSTRUCTION OF ROAD. 3. DELETING THE DISALLOWANCE MADE BY THE AO ON ACCO UNT OF FLY ASH HANDLING SYSTEM BY DIRECTING THE AO TO ALLOW THESE EXPENSES OVER A PERIOD OF 5 YEARS, CONSEQUENT GIVING RELIEF OF 1/5 TH OF THE EXPENSES DURING THE YEAR: 4. REDUCING THE DISALLOWANCE FROM 50% TO 5% OUT OF STAFF WELFARE EXPENSES. 5. RESTRICTING HE DISALLOWANCE OF 10% AS AGAINST 20 % MADE BY THE AO OUT OF GENERAL CHARGES EXPENSES. 6. REDUCING THE DISALLOWANCE OUT OF SOCIAL WELFARE EXPENSES FROM RS. 9,10,425/- TO RS. 1,75,000/-, WITHOUT ANY VALID REA SON. 7. REDUCING THE DISALLOWANCE FROM 20% TO 10% OUT OF SALES PROMOTION EXPENSES. 8. DELETING THE DISALLOWANCE OF GARDENING EXPENSES OF RS. 34,36,131/- WITHOUT ANY VALID REASON. 9. DELETING THE ADDITION U/S 41(1) ON ACCOUNT OF UN EXPLAINED OUTSTANDING LIABILITIES OF RS. 2,22,17,547/- 10. DELETING THE DISALLOWANCE OF RS. 3,71,46,968/- MADE BY THE AO ON ACCOUNT OF PAYMENT OF DEMURRAGE. 11. DELETING DISALLOWANCE OF RS. 27,51,314/- MADE B Y THE AO ON ACCOUNT OF RAILWAY SIDING EXPENSES. 12. REDUCING THE DISALLOWANCE FROM 20% TO 10% MADE OUT OF TAXI HIRING CHARGES. 16 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 13. DELETING THE DISALLOWANCE OF RS. 79,39,737/- ON ACCOUNT OF MINING RIGHTS WITHOUT ANY VALID REASONS. 14. DELETING THE DISALLOWANCE OF RS. 3,38,996/- ON ACCOUNT OF MINING RIGHTS WITHOUT ANY VALID REASONS. 15. REDUCING ;THE DISALLOWANCE OF RS. 9,27,956/- FR OM RS. 84,05,723/- MADE U/S 14A; 16. DELETING THE DISALLOWANCE OF RS. 30,17,564/- MA DE BY THE AO U/S 36(1)(III); 17. THE APPELLANT CRAVES LIBERTY TO RAISE ADDITION AL GROUND AND TO MODIFY/AMEND THE GROUND OF APPEAL AT THE TIME OF HE ARING. 10. GROUND NO. 1, IS AGAINST DIRECTED THE AO TO ALLOW THE EXPENDITUR E IN 20 ANNUAL INSTALLMENTS OF COMPENSATION PAID TO THE FAR MERS. 10.1 LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ASS ESSMENT ORDER AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN GIVEN THE DIRECTION OR ALLOWING THE EXPENDITURE OVER A PERIOD OF 20 YEARS. 10.2 ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE AO DISALLOWED THE EXPENDITURE ON THE BASIS THAT THE EXPENDITURE WAS INCURRED TO PROTECT THE LONG-TE RM EXPLOITATION RIGHT OVER THE HUGE AREA OF MINING LAND IS OF CAPITAL IN NATURE AN D AS SUCH NOT BE ALLOWED U/S 37(1) OF THE ACT. LD. COUNSEL PLACED RELIANCE ON THE HON BLE DELHI HIGH COURT RENDERED IN THE CASE OF SHANKAR DAS SETHI & SONS VS. CIT 157 IT R 770 (DEL.), THE RELIANCE IN ALSO PLACED ON THE DECISION OF THE TRIBUNAL RENDERE D IN THE CASE OF ACIT VS. 144/JP/2014. 10.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) HAS GIVEN A FINDING ON FACT BY OBSERVING AS UNDER:- 17 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. IN MY OPINION, THE MAIN PURPOSE OF ACQUIRING THE L AND WAS TO EXTRACT LIME STONES WHICH IS THE RAW MATERIAL FOR ASSESSEE. AFT ER THE EXTRACTION THE LAND BECOMES UNUSABLE FOR ANY OTHER PURPOSE. THE ASSESSEE CANNOT USE THIS LAND PERPETUALLY AS IN THE CASE OF A NORMAL AGRICULTURAL OR RESIDENTIAL LAND, THIS LAND CAN BE USED TILL ITS DEPOSIT (I.E. LIME STONE) LASTS. THEREFORE, I AGREE WITH THE FINDING OF THE AO IN AY 2008-09 WHEREIN HE ALLOWED SUCH EXPENDITURE IN 20EQUAL INST ALLMENTS. CONSIDERING THE ABOVE, THE AO IS DIRECTED TO ALLOW THIS EXPENDITURE EQUALLY IN 20 YEARS INCLUDING THE CURRENT YEAR. THEREFORE, AD DITION OF RS. 46,56,887/- IS CONFIRMED. THE AO IS DIRECTED TO ALLOW EXPENDITURE OF RS. 2,45,099/-. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E AO HIMSELF HAD ALLOWED EXPENDITURE IN 20 EQUAL INSTALLMENTS IN AY 2008-09. IN THE YEAR UNDER APPEAL, THE REVENUE HAS NOT DEMONSTRATED THE CHANGE INTO THE FA CTS AND THE REASON FOR CHANGING THE STAND. THEREFORE, WE DO NOT SEE ANY R EASON TO INTERFERE INTO THE ORDER OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS G ROUND IS DISMISSED. 11. GROUND NO. 2 , IS AGAINST DELETING THE DISALLOWANCE OF RS. 1 CRO RE ON ACCOUNT OF CONSTRUCTION OF ROAD. 11.1 THE LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE EXPENDITURE INCURRED FOR THE END URING BENEFIT. THEREFORE, THE AO RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 11.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ISSUE IS COVERED AGAINST THE REVENUE BY THE JUDGMENT OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF EMPIRE JUTE CO. LTD. VS. CI T 124 ITR 0001. 18 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 11.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE FACTS REMAINS THAT THE ASSESSEE HAD CO NTRIBUTED TO THE RAJASTHAN GOVERNMENT FOR CONSTRUCTION OF NEW RAILWAY OVER BRI DGE. THIS FACILITATED THE TRANSPORTATION OF RAW MATERIALS TO THE FACTORY AND FLOW OF FINISHED GOODS TO THE MARKET. IT IS ALSO STATED THAT BY THIS THE DISTANC E IS ALSO REDUCED. THE CONTRIBUTION IS PURELY FOR BUSINESS PURPOSES. THE LD. CIT(A) HA S GIVEN A FINDING THAT THE CONSTRUCTION OF ROB WITH APPROACH ROAD RESULTED IN ENABLING THE ASSESSEE TO CARRY OUT ITS BUSINESS EFFICIENTLY AND PROFITABLY. IT DID NOT RESULT IN ANY ADVANTAGE IN THE CAPITAL FIELD AND THEREFORE THE EXPENDITURE IS REVE NUE IN NATURE. AS THE ASSESSEE HAS NOT ACQUIRED ANY MATERIAL ASSET. WE DO NOT SEE ANY FAULT IN THIS FINDING OF THE LD. CIT(A) AS THERE IS NO DISPUTE WITH REGARD TO THE FA CT THAT THE ASSESSEE HAS NOT ACQUIRED ANY CAPITAL ASSET GIVING ENDURING BENEFIT. IT WAS A CONTRIBUTION TOWARDS CONSTRUCTION OF RAILWAY OVER BRIDGE WHICH FACILITAT ED THE SMOOTH FLOW OF TRAFFIC INCLUDING THE TRANSPORTATION OF GOODS BY THE ASSESS SEE. THEREFORE, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 12. GROUND NO. 3 , IS AGAINST DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF FLY ASH HANDLING SYSTEM BY DIRECTING THE AO TO ALLOW THESE EXPENSES OVER A PERIOD OF 5 YEARS, CONSEQUENT GIVING RELIEF OF 1/ 5 TH OF THE EXPENSES DURING THE YEAR. THE PARTIES HAVE ADOPTED THE SAME ARGUMENT A S WERE ADOPTED IN ASSESSEES APPEAL QUA THE GROUND NO. 3. 19 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 12.1 THE GROUND NO. 3, WE HAVE DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL OF ASSESSEES OWN CASE. FOR THE SAME REASONING, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 13. GROUND NO. 4,5,6,7 AND 8 OF THE DEPARTMENT AND GROUND NO. 4 OF THE ASSESSEES APPEAL ARE RELATED TO THE DISALLOWANCE O F EXPENDITURE IN RESPECT OF STAFF WELFARE EXPENSES AND OTHER EXPENSES. THE PARTIES HA VE ADOPTED THE SAME ARGUMENT AS WERE IN ITA NO. 354/JP/2014 PERTAINING TO THE AY 2010-11. WE HAVE DECIDED THIS ISSUE, BY FOLLOWING THE DECISION OF THIS TRIBUNAL I N ITA NOS. 361 & 419/JP/2012 PERTAINING TO AY 2009-10. 13.1 WE HAVE HEARD THE RIVAL CONTENTIONS, SINCE WE HAVE ALREADY DECIDED THESE ISSUES IN FAVOUR OF THE ASESSEE IN ITA NO. 354/JP/2 014. FOR THE SAME REASONING, THESE GROUNDS OF THE REVENUES APPEAL ARE DISMISSED . HENCE, GROUND NOS. 4,5,6,7, AND 8 OF THE REVENUES APPEAL ARE DISMISSED. 14. GROUND NO. 9, IS AGAINST DELETION OF UNEXPLAINED OUTSTANDING LIA BILITIES. 14.1 LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORD ER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE AO HAS GIVEN FINDING THAT IN THE BUSINESS OF ANY DOCUMENTARY EVIDENCE WITH REGARD TO JUSTIFICATION O F THE OUTSTANDING LIABILITY CLAIM OF THE ASSESSEE CANNOT BE ALLOWED. HE SUBMITTED THAT UNDER THESE FACTS, LD. CIT(A) OUGHT NOT TO HAVE DELETED THE DISALLOWANCE. 14.2 ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSESSEE OPPOSED THE SUBMISSIONS AND REITERATED THE SUBMISSIONS AS MADE IN THE WRITT EN SYNOPSIS. LD. COUNSEL SUBMITTED THAT THE OUTSTANDING LIABILITIES OF RS. 2 ,22,17,547/- AS MENTIONED IN THE 20 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. ASSESSMENT ORDER INCLUDED AN AMOUNT OF RS. 1,28,60, 330/- TOWARDS LAND TAX WHICH WAS ALREADY DISALLOWED BY THE ASSESSEE U/S 43B OF T HE ACT IN THE ASSESSMENT YEAR 2007-08. IN RESPECT OF THE REMAINING AMOUNT OF RS. 93,57,217, THE UNPAID LIABILITY OF RETENTION MONEY OF CONTRACTOR IS RS. 2,90,504/- AND NOT RS. 24,39,981/- AS MENTIONED BY THE AO. THUS, THE CORRECT AMOUNT OF S UCH UNPAID LIABILITY REMAIN AT RS. 72,07,741/-. OUT OF THIS AMOUNT, RS. 34,82,022 /- IS WRITTEN BACK OR PAID IN AY 2011-12 AND 2012-13, LEAVING A BALANCE OF RS. 37,25 ,719/-. THE INDIVIDUAL EXPLANATION REGARDING ITS WRITE BACK/PAYMENT IN THE SUBSEQUENT YEARS/REASONS FOR NON-PAYMENT IS AT PB PAGE NO. 385-387. BEFORE THE L D. CIT(A), THE POSITION OF THE OUTSTANDING LIABILITY AS ON 11.05.2013 WAS GIVEN AC CORDING TO WHICH THE UNPAID AMOUNT OF RS. 31,99,758/-. LD. COUNSEL SUBMITTED T HAT SECTION 41(1) IS APPLICABLE WHERE ANY LOSS, EXPENDITURE OR TRADING LIABILITY HA S BEEN ALLOWED AS DEDUCTION AND SUBSEQUENTLY THERE IS A REMISSION OR CESSATION THER EOF OR SUCH AMOUNT IS UNILATERALLY WRITTEN BACK BY THE ASSEESSEE. IN THE PRESENT CASE, THERE IS NO SUCH REMISSION OR CESSATION NOR THERE IS ANY UNILATERAL WRITTEN BACK OF SUCH LIABILITY. AO HAS NOT BROUGHT ANY EVIDENCE THAT THE OTHER PARTY HAS WRITT EN OFF THESE AMOUNT IN THEIR BOOKS OF ACCOUNTS DURING THE YEAR. ONLY BECAUSE TH E LIABILITIES ARE OUTSTANDING FOR MORE THAN 3 YEARS, IT CANNOT BE PRESUMED THAT THE L IABILITY HAS CEASED TO EXIST DURING THE YEAR. HE SUBMITTED THAT, IT MAY BE NOTE D THAT DURING THE YEAR ALSO, ASSESSEE HAS WRITTEN BACK AN AMOUNT OF RS. 85,04,47 7/- WHICH WERE NOT PAYABLE AND OFFERED THE SAME FOR TAX U/S 41(1) OF THE ACT. THE FACT THAT ASSESSEE HAS NORMALLY WRITTEN BACK THE LIABILITIES IN PAST IS AL SO ACCEPTED BY THE AO. THUS, IN THE 21 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. ABSENCE OF REMISSION OR CESSATION OR ANY UNILATERAL WRITTEN BACK OF SUCH LIABILITY BY ASSESSEE, THE SAME CANNOT BE TREATED AS ASSESSEES INCOME U/S 41(1) OF THE ACT. LD. COUNSEL PLACED RELIANCE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. G.K. PATEL & CO. 212 TAMAN 384 (GUJ .) (HC). THE DECISION OF THE THIRD MEMBER OF THE TRIBUNAL IN THE CASE OF INCOME TAX OFFICER VS. R.B. SETH MOOLCHAND NEMICHAND (P.) LTD. 14 ITD 473 (JPR.)(TRI B.)(TM), OTHER JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. NITIN S. GARG 71 DTR 73 (GUJ.) (HC), AND JUDGMENT OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. SHRI VARDHAMAN OVERSEAS LTD. 69 DTR 379 (DE L.) (HC). 14.3 WE HAVE HEARD THE RIVAL CONTENTIONS, LD. CIT(A) DEL ETED THE DISALLOWANCE BY OBSERVING THAT LIABILITY INCLUDED LIABILITY OF RS. 1,28,60,330/- TOWARDS LAND TAX WHICH WAS ALREADY DISALLOWED BY THE ASSESSEE U/S 43B IN A SSESSMENT YEAR 2007-08. OUT OF THE REMAINING LIABILITY CERTAIN AMOUNT WERE PAID BY THE ASSESSEE IN SUBSEQUENT YEARS PART OF THE LIABILITY OF APPROXIMATELY OF RS. 29.6 5 LACS WAS WRITTEN BACK IN THE AY 2011-12, 2012-13. UNDER THESE FACTS, THE LD. CIT(A ) WAS OF THE VIEW THAT THESE LIABILITIES WERE NOT CEASED TO THE REGULATORY HAS N OT BROUGHT ANY MATERIAL EXCEPT THE OBSERVATION OF THE AO THAT THESE LIABILITIES WERE O UTSTANDING MORE THAN 3 YEARS. HOWEVER, THE ASSESSEE HAS ADMINISTRATIVE THAT MEASU RE PART OF THE LIABILITIES HAS BEEN WRITTEN BACK AND OFFERED FOR TAX IN OTHER YEAR S. UNDER THESE FACT, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED, THIS APPEAL OF THE REVENUE IS REJECTED. 22 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 15. GROUND NO. 10 , IS AGAINST DELETING THE DISALLOWANCE OF RS. 3,71, 46,968/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PAYMENT OF DEMURRAGE. 15.1 LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE OR DER OF THE ASSESSING OFFICER AND SUBMITTED THAT LD. CIT(A) WAS NOT JUSTI FIED IN DELETING THE DISALLOWANCE. LD. D/R SUBMITTED THAT THE AO MADE DISALLOWANCE ON THE BASIS THAT THE EXPENDITURE WAS IN THE NATURE OF FINE AND ALSO ON THE GROUND TH AT THERE WAS A CLAUSE INTO THE AGREEMENT WHICH INDEMNIFY/ MANDATED C & F AGENT TO INDEMNIFY THE ASSESSEE. 15.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS AND ALSO RELIED UPO N THE DECISION OF THE CIT(A) AND SUBMITTED THAT THE ISSUE IS NOT MORE RES INTEGRA IF THE ALLOWABILITY OF DEMURRAGES HAS BEEN DECIDED BY VARIOUS JUDGMENTS INCLUDING THE JUD GMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MAHALAXMI SUGAR MILLS CO. LTD. VS. CIT 157 ITR 683 (DEL.) (HC), HONBLE ALLAHABAD HIGH COURT IN THE CASE OF NANHOOM AL JYOTI PRASAD V. CIT 123 ITR 269 (ALL.) (HC) AND DECISION OF THE CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. NIKO RESOURCES LTD. 22 DTR 225 (AHD.)(TRIB .) AND ITO VS. BHAGWAN DASS (2012) 17 ITR (TRIB.) 446 (CHD.). 15.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HAS GIVEN A FI NDING ON FACT THAT THERE IS NO CLAUSE BY WHICH THE DEMURRAGES WAS REQUIRED TO BE P AID BY THE C & F AGENT NOT BY THE ASSESSEE. IT IS ALSO NOT BROUGHT ON RECORD BY THE REVENUE THAT THE ASSESSEE HAD CLAIMED SUCH EXPENDITURE FROM C & F AGENT. UNDER T HESE FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY FOLLOWED THE DECISI ON OF THE HONBLE DELHI HIGH COURT 23 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. IN THE CASE OF MAHALAXMI SUGAR MILLS CO. LTD. VS. C IT AND HONBLE ALLAHABAD HIGH COURT IN THE CASE OF NANHOOMAL JYOTI PRASAD VS. CIT (SUPRA). WE DO NOT SEE ANY MERIT INTO THE GROUND OF REVENUES APPEAL, SAME IS HEREBY AFFIRMED. THIS GROUND IS DISMISSED. 16 . GROUND NO. 11 IS AGAINST DELETING THE DISALLOWANCE OF RS. 27,51, 314/- MADE BY THE AO ON ACCOUNT OF RAILWAY SIDING EXPENSES. 16.1 LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE OR DER OF THE AO AND SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DELE TING THE DISALLOWANCE. HE SUBMITTED EVEN OTHERWISE ALSO SUCH EXPENDITURE WAS MADE FOR ENDURING BENEFIT. THEREFORE, THE AO HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 16.2 ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS AND SUBMITTED TH AT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT JUDGMENT OF THE HONBLE MADRAS HIGH COURT IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS IN THE CASE ISSUE WAS ALLOWABILITY OF EXPENDITUR E OF REPLACEMENT OF OLD MACHINERY BY NEW MACHINERY AND REPAIRS RENTED BUILDINGS. 16.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ISSUE WHICH REQUIRED TO BE ADJUDICATED IS WHETHER THE AO WAS JUSTIFIED IN DISALLOWANING THE CLAIM OF THE EXPENDITURE INCUR RED ON MAINTENANCE OF RAILWAY TRACK AT THE RAILWAY SIDING. THE AO WHILE DISALLOW ING THE EXPENDITURE AS RELIED UPON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF CIT VS. MADURA COATS 205 TAXMAN 357. THE CONTENTION OF THE ASSESSEE IS THAT THE JUDGMENT OF THE 24 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. HONBLE MADRAS HIGH COURT IS NOT APPLICABLE AS THE FACT IS THAT THE CASES WERE WITH REGARD TO REPLACEMENT OF OLD MACHINERY AND RENOVATI ON OF THE BUILDINGS. WE FIND THAT IN THE CASE OF CIT VS. MADURA COATS (SUPRA) TH E AO DISALLOWED THE CLAIM IN RESPECT OF REPLACEMENT OF AUTO CORNER ETC BY HOLDIN G THAT REPLACEMENT OF OLD MACHINERY CANNOT BE TREATED AS THE REVENUE EXPENDIT URE. THIS VIEW OF THE AO WAS UPHELD BY THE HONBLE HIGH COURT. IN THE PRESENT CA SE, IT IS NOT THE CASE OF REPLACEMENT OF OLD MACHINERY BY NEW MACHINERY AND R EPAIR OF RENTED BUILDINGS. IN THE PRESENT CASE THE EXPENDITURE IS INCURRED ON THE DAY TO DAY MAINTENANCE OF THE RAILWAY TRACKS AT THE RAILWAY SIDING. THEREFORE, W E DO NOT SEE ANY REASON TO INTERFERE INTO THE ORDER OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 17 . GROUND NO. 12 , IS AGAINST RESTRICTING THE DISALLOWANCE OUT OF TA XI HIRING CHARGES FROM 20% TO 10%. 17.1 LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE OR DER OF THE AO AND SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN DELE TING THE DISALLOWANCE. 17.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS AND SUBMITTED THAT THE DISALLOWANCE IS MADE ON ADHOC BASIS. 17.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FAC T THAT THE EXPENDITURE AS CLAIMED SHOULD BE EXPENDED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF THE BUSINESS. IN THE PRESENT CASE, THE AO HAS NOTED THAT THERE WAS NO SU PPORTING EVIDENCE IN THE 25 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. ASSESSEES APPEAL I.E. IN ITA NO. 354/JP/2015. WE HAVE AFFIRMED THE VIEW OF THE LD. CIT(A) BY CONFIRMING THE DISALLOWANCE OF EXPENDITUR E OF ACCOUNT OF TAXI HIRING TO THE EXTENT OF THE 10% OF THE TOTAL EXPENDITURE. THEREF ORE, FOR THE SAME REASONING, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 18. GROUND NOS. 13 & 14 ARE AGAINST DELETING THE DISALLOWANCE OF RS. 79,39,737/- AND RS. 3,38,996/- RESPECTIVELY, ON ACC OUNT OF MINING RIGHTS. 18.1 LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORD ER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LD. CIT(A) WAS NOT J USTIFIED IN DELETING THE DISALLOWANCE. HE SUBMITTED THAT THE AO DISALLOWED THE CLAIM BY HOLDING THAT THE EXPENDITURE IS OF CAPITAL IN NATURE. 18.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS AND SUBMITTED THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT IN THE AY 2008-09, THE AO DIRECTED TO ALLOW AN AMOUNT OF RS. 3,82,75,607/- IN 6 EQUAL INSTALLMENTS AND RS. 3,12,09,385 IN 20 INSTALLMENTS . ACCORDINGLY, AN AMOUNT OF RS. 79,39,737/- IS ALLOWABLE DURING THE YEAR UNDER APPE AL. SIMILARLY, IN AY 2009-10, THE AO HAS HELD THAT PAYMENT OF RS. 67,79,925/- TO THE FARMERS TOWARDS COMPENSATION OF LAND FOR MINING USE IS ALLOWABLE OVER 20 YEARS. THEREFORE, AN AMOUNT OF RS. 3,38,996/- IS ALLOWABLE DURING THE YEAR. SINCE, BO TH THESE AMOUNTS HAVE BEEN HELD TO BE ALLOWABLE TO ASSESSEE ON AMORTIZATION BASIS B Y THE AO. 18.3 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) DELETED THE DISALLOWANCE BY OBSERVING AS UNDER:- 26 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. I HAVE GONE THROUGH AOS FINDINGS AND ASSESSEES S UBMISSION. IN THE ASSESSMENT ORDER FOR AY 2008-09, THE AO HELD THAT AN AMOUNT OF RS. 3,82,75,607/- IS TO BE ALLOWED IN SIX EQUAL INSTALL MENTS. SIMILARLY, IN AY 2009- 10, THE AO HELD THAT A SUM OF RS. 67,79,925/- IS TO BE ALLOWED IN 20 YEARS. IN MY OPINION, FINDING OF ONE AO CANNOT BE DISTURBE D BY HIS SUCCESSOR. THE PROPER COURSE COULD BE TO INVOKE PROVISIONS OF SECT ION 263. THE SAME WAS NOT DONE BY THE AO, THEREFORE, HE SHOULD NOT HAVE D ISTURBED THE FINDING OF HIS PREDECESSOR. SECONDLY, WHILE DECIDING GROUND NO. 1 , I HAVE HELD THAT SIMILAR EXPENDITURE WAS ALLOWABLE IN 20 EQUAL INSTALLMENTS. CONSIDERING THE ABOVE, THE AO IS DIRECTED TO DELETE ADDITION OF RS. 79,39,737/- & RS. 3,38,996/-. 18.4 THE REVENUE HAS NOT DISPUTED THAT IN THE AY 2008-0 9, 2009-10 THE AO HAD ALLOWED THE CLAIM OF THE ASSESSEE IN 6 YEARLY INSTA LLMENTS AND 20 YEARLY INSTALLMENTS RESPECTIVELY. THE REVENUE HAS NOT POINTED OUT ANY CHANGE INTO FACTS AND CIRCUMSTANCES FOR TAKING A DIFFERENT STANDS. THERE FORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE ORDER OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 19. GROUND NO. 15 IS AGAINST REDUCING THE CLAIM OF RS. 9,27,956/- FR OM RS. 84,05,723/- MADE BY INVOKING THE PROVISION OF U/S 1 4A. 19.1 THE LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORDER OF THE AO. 19.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE HAVE ADOPTED THE SAME ARGUMENT AS WERE MADE IN ASSESSEES APPEAL IN ITA N O. 354/JP/2015. 19.3 WE HAVE HEARD THE RIVAL CONTENTIONS, THIS ISSUE WE HAVE DECIDED IN ASSESSEES APPEAL BY OBSERVING AS UNDER:- 27 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 8.2 WE HAVE HEARD THE RIVAL CONTENTIONS WE FIND MERIT INTO THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE PROVIS IONS OF SECTION 14A CAN BE INVOKED IN THE EVENT OF THE AO IS NOT SATISFIED WIT H THE CORRECTNESS OF THE CLAIM OF THE EXPENDITURE RELATED TO THE EXEMPT INCO ME. THE HONBLE SUPREME COURT IN THE RECENT JUDGMENT IN THE CASE OF CIT VS. GODREJ BOYCER VS CIT HAS HELD THAT PROVISION OF SECTION OF 14A CAN BE INVOKE D WHEN THE AO IS DISSATISFIED WITH THE CLAIM OF EXPENDITURE RELATED TO THE EXEMPT INCOME. 8.3 IN THE PRESENT CASE THE LD. CIT(A) HAS RECOMPUTED THE DISALLOWANCE BY APPLYING RULE 8D. HE HAS DISALLOWED INTEREST EXPEN DITURE OF RS. 2,38,454/- AND ADMINISTRATIVE EXPENSES OF RS. 6,89,497/-. THE GRIEVANCE OF THE ASSESSEE IS THAT THE NO INTEREST EXPENDITURE IS RELATED TO T HE EXEMPT INCOME. AS IT IS CLAIMED THAT THE ENTIRE INVESTMENT IN MUTUAL FUNDS HAVE BEEN MADE FROM OWN FUND. THE LD. CIT(A) HAS NOT GIVEN ANY REASON AS T O WHY THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. REVENUE HAS NOT PL ACED ANY MATERIAL REBUTTING THE CLAIM OF THE ASESSEE. THEREFORE, OUT OF DISALLOWANCE OF RS. 9,27,956/- A SUM OF RS. 2,38,454/- IS DELETED AND R S. 6,89,497/- IS SUSTAINED. THIS GROUND IS PARTLY ALLOWED. THEREFORE, TAKING A CONSISTENT VIEW, THERE IS NO CH ANGE INTO FACTS AND CIRCUMSTANCES. THIS GROUND OF THE REVENUES APPEAL IS REJECTED. 20. GROUND NO. 16 , IS AGAINST DELETION OF DISALLOWANCE OF RS. 30,17, 564/- MADE BY THE AO UNDER SECTION 36(1)(III) OF THE ACT. 20.1 LD. DEPARTMENTAL REPRESENTATIVES SUPPORTED THE ORD ER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE AO HAS OBSERVED THAT TOTAL INVESTMENT MADE BY THE ASSESSEE COMPANY FOR THE MUTUAL FUNDS WERE RS. 8,07 ,87,230/- AS ON 01/04/2009 WHICH WERE INCREASED TO 19,50,11,683/- AS ON 31/03/ 2010, THUS, THERE IS A HUGE INCREASE IN THE INVESTMENT WHICH DO NOT HAVE ANY NE XUS WITH THE BUSINESS PURPOSE 28 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. OF THE ASSESSEE COMPANY. HE SUBMITTED THAT HE OBSE RVED, ON THE ONE HAND THE ASSESSE COMPANY HAS RAISED LOANS, ON WHICH INTEREST @ 9% PER ANNUM HAS BEEN PAID AND ON THE OTHER HAND, THE BORROWED FUNDS HAVE BEEN UTILIZED FOR MAKING INVESTMENT IN THE MUTUAL FUNDS FOR EARNING DIVIDEND INCOME, WHICH IS EXEMPT FROM TAX. UNDER THESE FACTS, THE AO HAD DISALLOWED THE INTEREST OF RS. 30,17,564/- U/S 36(1)(III) OF THE ACT. 20.2 ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUPP ORTED THE ORDER OF THE LD. CIT(A) AND REITERATED THE SUBMISSIONS AS MADE IN TH E WRITTEN SUBMISSIONS. HE SUBMITTED THAT HAS STATED IN THE GROUND NO. 5 OF TH E ASSESSEES APPEAL AND GROUND NO. 15 OF THE REVENUES APPEAL, THE ENTIRE INTEREST EXPENDITURE WAS INCURRED FOR COMMERCIAL EXPEDIENCY ESSENTIALLY FOR THE PURPOSE O F BUSINESS OF ASSESSEE. HE SUBMITTED THAT THERE IS NO NEXUS ON BORROWED FUNDS, WITH THE INVESTMENT IN MUTUAL FUNDS. 20.3 WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS, WE FIND MERIT INTO THE OBSERVATION OF THE LD. CIT(A), THAT THE AO HAS NOT JUSTIFIED IN MAKING DISALLOWANCE FOR THE SAME ITEM BY INVOKING THE PROV ISION OF SECTION 14A AND ALSO THE PROVISION OF SECTION 36(1)(III). MOREOVER, THE ASS ESSEE HAS DEMONSTRATED THAT THE ENTIRE INVESTMENT INTO MUTUAL FUNDS WAS MADE OUT OF INTEREST FREE FUNDS. UNDER THESE FACTS, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE FINDING OF THE LD. CIT(A), SAME IS HEREBY AFFIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 21. GROUND NO. 17 , IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDI CATION. ITA NO. 470/JP/2016 : 29 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 22. NOW, WE TAKE UP ASSESSEES APPEAL IN ITA NO. 470/JP/2016 PERTAINING TO ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OUT OF VARIOUS EXPENSES AS UNDER:- EXPENSES DISALLOWED BY THE AO DISALLOWANCE OF EXPENSE CONFIRMED BY CIT(A) PARTICULARS OF EXPENSES AMOUNT CLAIMED % AMOUNT AMOUNT STAFF WELFARE EXPENSES 1,11,64, 033/ - 50% 55,82,016/ - 5,00,000/ - CHARGES GENERAL EXPENSES 26,67,043/ - 20% 5,33,409/ - 2,50,000/ - GIFT EXPENSES 28,60,604/ - 50% 14,30,302 14,30,302/ - SALES PROMOTION EXPENSE 88,45,407/ - 20% 17,69,080/ - 8,00,000/ - TAXI HIRING EXPENSES 21,77,479/ - 20% 4,35,495/ - 2,17,747/ - 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 6,66,297/- U/S 14A R.W.R. 8D(2) IGNORING THAT THE ASSESSEE HAS NOT INCURRED ANY INTEREST EXPENDITURE OR OTHER EXPENSES IN EARNING THE INCOME WHICH IS NOT CHARGEABLE TO TA X. 3. THE ASSESSEE CRAVES TO AMEND, ADD, ALTER, OR MOD IFY ANY OF THE GROUND OF APPEALS. 4. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 30 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 23. GROUND NO. 1 OF THE ASSESSEE IN THIS APPEAL RELATES TO DISALLOW ANCES OUT OF STAFF WELFARE EXPENSES, CHARGES GENERAL EXPENSES, G IFT EXPENSES, SALES PROMOTION EXPENSES, TAXI HIRING EXPENSES. 23.1 FACTS IN THIS CASE ARE IDENTICAL TO A.Y. 2010-11. WE HAVE ALREADY DECIDED THIS ISSUE IN ITA NO. 354/JP/2014 RELATING TO ASSESSMENT YEAR 2010-11 WHEREBY WE HAVE CONFIRMED THE ORDER OF THE LD. CIT (A) BY PARTLY AL LOWING THE GROUND OF THE ASSESSEE AS DISCUSSED IN DETAIL VIDE PARA 7.2 & 7.3 OF THIS ORDER ABOVE. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 24. GROUND NO. 2 OF THE ASSESSEE RELATES TO CONFIRMING THE DISALLOW ANCE OF RS. 6,66,297/- BY INVOKING THE PROVISIONS OF SECTION 14 A OF THE IT ACT. 24.1 THE RESPECTIVE REPRESENTATIVES HAVE BEEN HEARD AND SIMILAR ARGUMENTS HAVE BEEN ADVANCED AS MADE IN ITA NO. 354/JP/2014. WE HA VE ALREADY DEALT WITH THIS ISSUE IN THE ASSESSEES APPEAL IN ITA NO. 354/JP/20 14 FOR THE A.Y. 2010-11 IN PARA 8.2 TO 8.3 WHEREBY WE HAVE PARTLY ALLOWED THE GROUN D OF THE ASSESSEE BY GIVING RELIEF OF RS. 2,38,454/-. SINCE THE FACTS INVOLVED IN THIS GROUND IS EXACTLY SIMILAR, THEREFORE, ON THE SAME REASONING, WE PARTLY ALLOW T HE APPEAL OF THE ASSESSEE BY ALLOWING RELIEF OF RS. 1,51,263/- OUT OF DISALLOWAN CE OF RS. 6,66,297/- SUSTAINED BY THE LD. CIT (A). THE GROUND OF THE ASSESSEE IS PAR TLY ALLOWED. ITA NO. 616/JP/2016: 31 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 25. NOW, WE TAKE UP REVENUES APPEAL IN ITA NO. 616/JP/2016 PERTAINING TO THE AY 2011-12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, OF THE CASE, THE LD. CIT(A) HAS ERRED IN:- (I) DIRECTING THE AO THAT COMPENSATION OF RS. 53,44,198 /- PAID TO FARMERS IS TO BE ALLOWED OVER A PERIOD OF 20 YEARS, CONSEQU ENTLY GIVING RELIEF OF RS. 2,67,210/- FOR THE CURRENT YEAR? (II) HOLDING THE CONTRIBUTION OF RS. 15,00,000/- FOR CON STRUCTION OF HOSPITAL BUILDING AS RELATING TO BUSINESS OF THE ASSESSEE? (III) DELETING THE DISALLOWANCE OF RS. 12,00,436/- OUT OF SOCIAL WELFARE EXPENSES: (IV) REDUCING THE DISALLOWANCE FROM RS. 55,82,016/- TO R S. 5,00,000/- OUT OF STAFF WELFARE EXPENSES? (V) RESTRICTING THE DISALLOWANCE TO RS. 2,50,000/- AGAI NST 20% MADE OUT OF GENERAL CHARGE EXPENSE? (VI) REDUCING THE DISALLOWANCE FROM RS. 17,69,080/- TO R S. 8,00,000/- OUT OF SALES PROMOTION EXPENSES? (VII) DELETING THE DISALLOWANCE OF GARDENING EXPENSES OF RS. 32,94,347/-? (VIII) REDUCING THE DISALLOWANCE FROM 20% TO 10% MADE OUT OF TAXI HIRING CHARGES? (IX) DELETING THE ADDITION OF RS. 4,47,248/- MADE U/S 41 (1) ON ACCOUNT OF UNEXPLAINED OUTSTANDING LIABILITIES? (X) DELETING THE DISALLOWANCE OF RS. 5,82,90,611/- MADE U/S 37(1) ON ACCOUNT OF PAYMENT OF DEMURRAGE? (XI) DELETING THE DISALLOWANCE OF RS. 39,35,948/- MADE U /S 37(1) ON ACCOUNT OF RAILWAY SIDING EXPENSES? (XII) DELETING THE DISALLOWANCE OF RS. 79,39,737/- CLAIME D AS MINING RIGHTS? (XIII) DELETING THE DISALLOWANCE OF RS. 3,38,996/- CLAIMED AS MINING RIGHTS? (XIV) REDUCING THE DISALLOWANCE FROM RS. 52,45,149/- TO R S. 6,66,297/- MADE U/S 14A? (XV) DELETING THE DISALLOWANCE OF RS. 10,00,000/- MADE U /S 36(1)(III)? (XVI) THE APPELLANT CRAVES LIBERTY TO RAISE ADDITIONAL GR OUND AND TO MODIFY/AMEND THE GROUND OF APPEAL AT THE TIME OF HE ARING. 32 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 26. GROUND NO. 1 OF THE DEPARTMENT RELATES TO DIRECTING THE AO THAT COMPENSATION OF RS. 53,44,198 PAID TO THE FARMERS I S TO BE ALLOWED OVER A PERIOD OF 20 YEARS, CONSEQUENTLY GIVING RELIEF OF RS. 2,67,21 0/- FOR THE CURRENT YEAR. 26.1 WE HAVE ALREADY DEALT WITH THE SIMILAR ISSUE IN RE VENUES APPEAL IN ITA NO. 425/JP/2014 FOR THE A.Y. 2010-11 IN PARA 10.3 ABOVE , WHEREIN WE HAVE CONFIRMED THE ORDER OF THE LD. CIT (A) BY DISMISSING THE GROU ND OF THE DEPARTMENT. FACTS ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATION. WE, THE REFORE, FOR THE SAME REASONING, DISMISS THIS GROUND OF THE DEPARTMENT. 27. GROUND NO. 2 OF THE DEPARTMENT RELATES TO LD. CIT (A) HAS ERRED IN HOLDING THAT CONTRIBUTION OF RS. 15 LACS FOR CONSTRUCTION O F HOSPITAL BUILDING AS RELATING TO THE BUSINESS OF THE ASSESSEE. 27.1 FACTS ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATI ON. WE HAVE ALREADY DEALT WITH THE SIMILAR ISSUE IN GROUND NO. 1 IN ASSESSEE S APPEAL IN ITA NO. 354/JP/2014 FOR THE ASSESSMENT YEAR 2010-11 WHEREBY WE HAVE ALL OWED THE GROUND OF THE ASSESSEE. FOR THE SIMILAR REASONS MENTIONED IN PAR A 4.2 ABOVE IN THE ORDER IN ITA NO. 354/JP/2014, WE DISMISS THIS GROUND OF THE DEPA RTMENT. 28. GROUND NO. 3 OF THE DEPARTMENT RELATES TO DELETING THE DISALLOW ANCE OF RS. 12,00,436/- OUT OF SOCIAL WELFARE EXPENSES. 28.1 FACTS ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATIO N. WE HAVE ALREADY DEALT WITH THE SIMILAR ISSUE IN GROUND NO. 2 IN ASSESSEE S APPEAL IN ITA NO. 354/JP/2014 33 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. FOR THE ASSESSMENT YEAR 2010-11 WHEREBY WE HAVE ALL OWED THE GROUND OF THE ASSESSEE. FOR THE REASONS MENTIONED IN PARA 5.2 OF THIS ORDER ABOVE IN ITA NO. 354/JP/2014, WE DISMISS THIS GROUND OF THE DEPARTME NT. 29. GROUND NOS. 4 TO 8 OF THE DEPARTMENT RELATE TO REDUCING THE DISALLOWA NCES OF VARIOUS EXPENSES ON ACCOUNT OF STAFF WELFARE EXP ENSES, CHARGES GENERAL EXPENSES, SALES PROMOTION EXPENSES, GARDENING EXPEN SES AND TAXI HIRING CHARGES. 29.1 FACTS ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATI ON. WE HAVE DEALT WITH THESE ISSUES IN DEPARTMENTS APPEAL IN ITA NO. 425/ JP/2014 IN PARA 13.1 ABOVE. SINCE WE HAVE ALREADY DECIDED THESE ISSUES IN FAVOU R OF THE ASSESSEE IN ITA NO. 354/JP/2014, FOR THE SAME REASONING, THESE GROUNDS OF THE REVENUE ARE DISMISSED. HENCE, GROUND NOS. 4, 5, 6, 7 & 8 OF THE DEPARTMENT S APPEAL ARE REJECTED. 30. GROUND NO. 9 OF THE REVENUE RELATES TO DELETING THE ADDITION OF RS. 4,47,248/- MADE U/S 41(1) ON ACCOUNT OF UNEXPLAINED OUTSTANDING LIABILITIES. 30.1 FACTS ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATIO N. WE HAVE ALREADY DECIDED THIS ISSUE IN REVENUES APPEAL IN ITA NO. 425/JP/20 14 FOR THE A.Y. 2010-11 IN PARA NO. 14.3 ABOVE IN FAVOUR OF THE ASSESSEE, THEREFORE , FOR THE SAME REASONING, THIS GROUND OF THE DEPARTMENT IS REJECTED. 31. GROUND NO. 10 OF THE DEPARTMENT RELATES TO DELETING THE DISALLOW ANCE OF RS. 5,82,90,611/- MADE U/S 37(1) ON ACCOUNT OF PAYMENT OF DEMURRAGE. 34 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 31.1 FACTS IN THIS CASE ARE IDENTICAL TO A.Y 2010-11. WE HAVE ALREADY DECIDED THIS GROUND IN REVENUES APPEAL IN ITA NO. 425/JP/2014 F OR THE A.Y. 2010-11 IN PARA NO. 15.3 ABOVE IN FAVOUR OF THE ASSESSEE. SIMILAR IS TH E CASE FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, FOR THE REASONS GIVEN THEREIN, WE REJECT THIS GROUND OF THE REVENUE. 32. GROUND NO. 11 OF THE DEPARTMENT RELATES TO DELETING THE DISALLOW ANCE OF RS. 39,35,948/- MADE U/S 37(1) ON ACCOUNT OF RAILWAY SI DING EXPENSES. 32.1 FACTS ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATI ON. WE HAVE ALREADY DECIDED THIS GROUND IN REVENUES APPEAL IN ITA NO. 425/JP/2 014 FOR THE A.Y. 2010-11 IN PARA NO. 16.3 ABOVE IN FAVOUR OF THE ASSESSEE. SIMILAR I S THE CASE FOR THE ASSESSMENT YEAR 2011-12. THEREFORE, FOR THE REASONS GIVEN THEREIN, WE REJECT THIS GROUND OF THE REVENUE. 33. GROUND NOS. 12 & 13 OF THE DEPARTMENT RELATE TO DELETING THE DISALLOWANCES OF RS. 79,39,737/- AND RS. 3,38,996/- CLAIMED AS MINING RIGHTS. 33.1 FACTS ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATIO N. WE HAVE DEALT WITH THESE GROUNDS IN THE REVENUES APPEAL IN ITA NO. 42 5/JP/2014 FOR THE ASSESSMENT YEAR 2010-11 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN PARA 18.3 AND 18.4 ABOVE BY REJECTING THE GROUNDS OF THE REVENUE. SIM ILARLY, FOR THE REASONS MENTIONED THEREIN, WE DISMISS THESE GROUNDS OF THE DEPARTMENT. 35 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 34 . GROUND NO. 14 OF THE DEPARTMENT RELATES TO REDUCING THE DISALLOW ANCE FROM RS. 52,45,149/- TO RS. 6,66,297/- MADE U/S 14A. 34.1 THIS GROUND OF THE DEPARTMENT IS DECIDED BY US IN THE REVENUES APPEAL IN ITA NO. 425/JP/2014 FOR THE A.Y. 2010-11 IN FAVOUR OF THE ASSESSEE IN PARA 19.3 AND 19.4 BY DISMISSING THE GROUND OF THE DEPARTMENT. T HEREFORE, FOR THE SIMILAR REASONS MENTIONED THEREIN, WE REJECT THIS GROUND OF THE DEP ARTMENT. 35. GROUND NO. 15 OF THE DEPARTMENT RELATES TO DELETING THE DISALLOW ANCE OF RS.10,00,000/- MADE U/S 36(1)(III). 35.1 FACTS ARE IDENTICAL FOR THE YEAR UNDER CONSIDERATI ON. WE HAVE DEALT WITH THIS GROUND IN THE REVENUES APPEAL IN ITA NO. 425/JP/20 14 FOR THE ASSESSMENT YEAR 2010-11 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE IN PARA 20.3 ABOVE BY REJECTING THE GROUND OF THE REVENUE. SIMILARLY, FO R THE REASONS MENTIONED THEREIN, WE DISMISS THIS GROUND OF THE DEPARTMENT. 36. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED WHEREAS APPEAL OF THE DEPARTMENT IS DISMISSED. 37. NOW WE TAKE UP THE APPEALS OF THE ASSESSEE AND REV ENUE IN ITA NOS. 659/JP/2016 AND 713/JP/2016 FOR THE A.Y. 2012-13 . FIRST WE TAKE THE APPEAL OF THE ASSESSEE AS UNDER : ITA NO. 659/JP/2016 : THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 36 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF AO IN MAKING DISALLOWANCE OF RS. 96,84,975/- BY HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS ESTABL ISHMENT OF CLINKER GRINDING UNIT AT ALIGARH IS CAPITAL EXPENDITURE. T HE LD. CIT(A) HAS FURTHER ERRED ON FACTS AND IN LAW IN REJECTING THE ALTERNATIVE CLAIM OF THE ASSESSE FOR ALLOWING DEPRECIATION ON SUCH EXPEN DITURE. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OUT OF VARIOUS EXPENSES AS UNDER:- EXPENSES DISALLOWED BY THE AO DISALLOWANCE OF EXPENSE CONFIRMED BY CIT(A) PARTICULARS OF EXPENSES AMOUNT CLAIMED % AMOUNT AMOUNT STAFF WELFARE EXPENSES 1,16,16,930/ - 50% 58,08,465 / - 5,00,000/ - CHARGES GENERAL EXPENSES 35,62,806/ - 20% 7,12,561 / - 3 ,50,000/ - GIFT EXPENSES 38,64,865/ - 50% 19,32,432/ - 19,32,432/ - SALES PROMOTION EXPENSE 2,29,59, 454/ - 20% 45,91,890/ - 25 ,00,000/ - TAXI HIRING EXPENSES 26,15,365/ - 20% 5,23,073/ - 2,61,536 / - 3. THE ASSESSEE CRAVES TO AMEND, ADD, ALTER, OR MOD IFY ANY OF THE GROUND OF APPEALS. 4. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 38. GROUND NO. 1 OF THE ASSESSEES APPEAL RELATES TO CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS. 96,84,975/- BY HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS ESTABLISHMENT OF C LINKER GRINDING UNIT AT ALIGARH IS CAPITAL EXPENDITURE. THE LD. CIT (A) HAS FURTHER E RRED ON FACTS AND IN LAW IN 37 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. REJECTING THE ALTERNATIVE CLAIM OF THE ASSESSEE FOR ALLOWING DEPRECIATION ON SUCH EXPENDITURE. 38.1 THE BRIEF FACTS GIVING RISE TO THE GROUND OF APPEAL ARE THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF CEMENT. CLINKER IS BASIC INGREDIENT FOR MANUFACTURING CEMENT. THE BOARD IN ITS MEETING DT. 13.03.2011 APPROVED FOR SETTING UP A CLINKER GRINDING UNIT AT HARDWAGANJ, DISTRICT ALIGARH, UP FOR A TOTAL PROJECT COST OF RS.125 CRORES. ACCORDINGLY, NECESSARY APPLICATIO N WAS MADE TO UPSIDC LTD. FOR ALLOTMENT OF LAND AND TO UP STATE POLLUTION CONTROL BOARD FOR ENVIRONMENT CLEARANCE. THE POSSESSION OF THE LAND MEASURING 1,23,110 SQ. M TR. AT K-1, INDUSTRIAL AREA, ALIGARH WAS GIVEN ON 20.08.2011. 38.2 HOWEVER, BECAUSE OF NON ISSUE OF ENVIRONMENTAL CLEA RANCE FROM MINISTRY OF ENVIRONMENT AND FORESTS (MOEF), NO CONSTRUCTION AC TIVITY COULD BE STARTED. THEREFORE, THE ASSESSEE IN ITS BOARD MEETING DT. 07 .2.2012 (PB 1) DISCUSSED THE POSSIBILITY OF SETTING UP THE GRINDING UNIT AT THE EXISTING SITE AT MORAK AND ALSO ITS ECONOMIC VIABILITY CONSIDERING THE INCENTIVE SCHEME OF THE GOVERNMENT OF RAJASTHAN. THEREAFTER, THE BOARD IN ITS MEETING HELD ON 05.05. 2012 (PB 2) DECIDED TO SET UP CLINKER GRINDING UNIT AT MORAK. 38.3 THE COMPANY IN THE MEANWHILE HAS INCURRED EXPENDIT URE OF RS.96.85 LACS IN CONNECTION WITH THE CLINKER GRINDING UNIT AT ALIGAR H, THE DETAILS OF WHICH ARE AS UNDER:- 38 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. RATES AND TAXES RS.3,74,757/- LEASE RENT RS.1,12,852/- MGU INDUSTRIAL LAND MAINTENANCE RS.7,38,662/- SECURITY CHARGES RS.7,07,704/- BILL OF GANNON DUNKERLEY & CO. LTD. FOR RS.184.03 L ACS RS.77,51,000/- TOWARDS MOBILIZATION, SETTING UP OF FACILITY AND DEMOBILIZATION SETTLED FOR RS.77.51 LACS 38.4 IN VIEW OF THE SAID DECISION OF THE BOARD OF DIREC TORS FOR ABANDONING THE SETTING UP OF THE CLINKER UNIT AT ALIGARH, THE ABOV E EXPENDITURE OF RS.96.85 LACS WAS CHARGED TO P&L A/C AND CLAIMED AS DEDUCTION U/S 37( 1)/28 AS THE EXPENDITURE WAS INCURRED IN COURSE OF THE BUSINESS AND NO NEW ASSET WAS CREATED BY INCURRING SUCH EXPENDITURE. HOWEVER, THE AO BY RELYING ON THE DECI SION OF SUPREME COURT IN CASE OF SWADESHI COTTON MILLS 63 ITR 65 WHERE THE AMOUNT PAID FOR BREACH OF CONTRACT IN RESPECT OF PURCHASE OF TEXTILE MACHINERY WAS HELD T O BE NOT ALLOWABLE, DISALLOWED THE CLAIM OF THE ASSESSEE. 38.5 THE LD. CIT(A) AFTER RELYING ON THE VARIOUS CASE L AWS, CONFIRMED THE DISALLOWANCE BY HOLDING THAT EXPENSES OF RS.96,84,9 75/- INCURRED TOWARDS THE SETTING UP OF THE CLINKER GRINDING UNIT AT ALIGARH CANNOT BE ALLOWED AS REVENUE EXPENSES AND ARE TREATED AS CAPITAL IN NATURE. HE A LSO DID NOT ACCEPTED THE ALTERNATIVE CLAIM OF ASSESSEE THAT DEPRECIATION SHO ULD BE ALLOWED ON SUCH EXPENDITURE BY HOLDING THAT THE PROJECT DID NOT COM E INTO EXISTENCE AND AS SUCH THE EXPENSES CLAIMED BY THE APPELLANT DID NOT RESULT IN CREATION OF BUSINESS ASSET ON WHICH DEPRECIATION CAN BE CLAIMED. 38.6 NOW THE ASSESSEE IS IN APPEAL BEFORE US. 39 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 38.7 THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS AS MADE IN THE WRITTEN SUBMISSION. THE WRITTEN SUBMISSIONS SUBMITT ED BY THE ASSESSEE ARE PLACED ON RECORD AS UNDER :- 1. THE ISSUE IN THE PRESENT CASE IS WHETHER THE E XPENDITURE INCURRED BY THE ASSESSEE BY UTILIZING COMMON FUNDS FOR EXISTING BUSINESS ON A PROJECT WHICH IS ABANDONED IS ALLOWABLE DEDUCTION UNDER THE INCOM E TAX ACT OR NOT. FOR THIS PURPOSE, ONE IS TO EXAMINE WHETHER ANY BENEFIT HAS FLOWN TO THE ASSESSEE BY INCURRING SUCH EXPENDITURE. IF NOT, THE SAME IS TO BE ALLOWED AS A DEDUCTION WHEN A DECISION TO ABANDON SUCH PROJECT IS TAKEN. F OR THIS RELIANCE IS PLACED ON THE FOLLOWING CASES:- AJMER FOOD PRODUCTS PVT. LTD. VS. JCIT (2017) 145 D TR 57 (JAIPUR) (TRIB.) EXPENDITURE INCURRED BY THE ASSESSEE ON THE DEVELOP MENT OF A RESORT WHICH WAS EVENTUALLY ABANDONED AT THE STAGE OF WORK-IN-PROGRE SS DUE TO CHANGE IN THE GOVERNMENT POLICY DID NOT RESULT IN CREATION OF ANY NEW ASSET OR AN ADVANTAGE OF ENDURING NATURE AND THEREFORE, THE SAID EXPENSES WHICH HAVE BEEN WRITTE N OFF IN THE BOOKS OF ACCOUNT ARE ALLOWABLE AS REVENUE EXPENDITURE. INDO RAMA SYNTHETICS (I) LTD. VS. CIT (2011) 333 IT R 18 (DEL.) (HC) IN THIS CASE, THE ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF YARN AND POLYSTER. ON ACCOUNT OF GENERATION OF CASH SURPLUS, ASSESSEE COMMENCED SETTING UP OF A SPINNING AND WEAVING UNIT FOR MANUFACTURE OF FABRIC AND TEXTILE IN STATE OF KARNATAKA. IN RELATION TO SETTING UP OF THE SAID UNIT, THE ASSESS EE FROM TIME TO TIME INCURRED REVENUE EXPENDITURE IN THE NATURE OF SALARY, WAGES, REPAIRS , MAINTENANCE, DESIGN AND ENGINEERING FEE, TRAVELLING AND OTHER EXPENSES OF ADMINISTRATIV E NATURE. HOWEVER, THE SETTING UP OF THE SAID PROPOSED UNIT WAS ABANDONED AS THE ASSESSE E COULD NOT PROCURE THE ALLOTMENT OF THE REQUISITE LAND FROM THE GOVERNMENT OF KARNATAKA . ACCORDINGLY, THE PROJECT EXPENSES WERE CLAIMED AS DEDUCTION IN COMPUTATION OF INCOME U/S 37(1) OF THE ACT. THE AO DISALLOWED THE EXPENDITURE BY HOLDING THE SAME AS C APITAL IN NATURE. THE LD. CIT(A) AND HONBLE ITAT UPHELD THE DISALLOWANCE MADE BY THE AO . ON APPEAL, THE HONBLE HIGH COURT HELD THAT THE EXPENDITURE INCURRED WAS IN THE NATURE OF SALARY, WAGES, REPAIRS, MAINTENANCE, DESIGN AND ENGINEERING FEE, TRAVELLING AND OTHER EXPENSES OF ADMINISTRATIVE NATURE. INDUBITABLY, IN THE NORMAL COURSE, THESE EX PENSES WOULD BE TREATED AS REVENUE EXPENDITURE. THE UNIT, WHICH THE ASSESSEE PROPOSED TO SET UP, HAD INEXTRICABLE LINKAGE WITH THE EXISTING BUSINESS OF THE ASSESSEE. THE PRO POSED BUSINESS WAS NOT AN INDIVIDUAL BUSINESS BUT VERTICAL EXPANSION OF THE PRESENT BUSI NESS. THUS, TEST OF EXISTING BUSINESS WITH COMMON ADMINISTRATION AND COMMON FUND IS CLEAR LY MET. SINCE THE PROJECT WAS ABANDONED, NO NEW ASSET ALSO CAME TO BE CREATED. TH EREFORE, THE EXPENDITURE CONSTITUTED REVENUE EXPENDITURE. 40 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. CIT VS. TATA ROBINS FRASER LTD. (2012) 78 DTR 22 (J HARKHAND) (HC) IN THIS CASE, THE ASSESSEE ENTRUSTED THE STUDY AND DESIGN, DETAIL WORKING AND DRAWINGS OF A MULTI-STORIED (12 STORIED) BUILDING TO A PARTY. A FTER THE PRELIMINARY WORK WAS UNDERTAKEN, THE PROJECT WAS ABANDONED DUE TO ADVERS E SOIL AND OTHER ADVERSE CONDITIONS AT THE PROPOSED SITE. THE ASSESSEE INCURRED SOME EX PENDITURE ON THE PRELIMINARY WORK WHICH INCLUDED FEES PAID TO ARCHITECT, EXPENSES INC URRED ON OLD CAPITAL WIP AND COST OF DAMAGED CABINETS. THE SAID EXPENDITURE WAS CLAIMED AS REVENUE EXPENDITURE. THE AO REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT IT IS A CASE OF CAPITAL EXPENDITURE. IT WAS HELD THAT IT IS NOT IN DISPUTE THAT THE PROJECT COULD NOT BE ACCOMPLISHED BECAUSE OF THE REASON THAT THE PLACE WHERE IT WAS TO BE UNDERT AKEN HAD A POOR QUALITY OF SOIL AND ALL THE CONSTRUCTION ALREADY DAMAGED. THE OTHER ARTICLE S BOUGHT BY THE ASSESSEE ALSO GOT DAMAGED AND, THEREFORE, IN THAT FACT SITUATION, THE TRIBUNAL WAS FULLY JUSTIFIED IN HOLDING THAT SUCH EXPENDITURE WHICH MAY BE PRE-OPERATIONAL EXPENDITURE FOR A PROJECT CAN BE TREATED TO BE A REVENUE EXPENDITURE ACTUALLY AND NO T A CAPITAL EXPENDITURE. BINANI CEMENT LTD. VS. CIT & ANR. (2015) 118 DTR 61 / 233 TAXMAN 340 (CAL.) (HC) EXPENDITURE MADE FOR CONSTRUCTION/ACQUISITION OF NE W FACILITY SUBSEQUENTLY ABANDONED AT THE WORK-IN-PROGRESS STAGE WAS ALLOWABLE IN THE YEA R OF WRITE OFF AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. THERE WOULD HAVE BEEN NO OCCASION TO CLAIM THE DEDUCTION IF THE WORK-IN-PROGRESS HAD COM PLETED ITS COURSE. BECAUSE THE PROJECT WAS ABANDONED, THE WORK-IN-PROGRESS DID NOT PROCEED ANY FURTHER. THE DECISION TO ABANDON THE PROJECT WAS THE CAUSE FOR CLAIMING T HE DEDUCTION. THE DECISION WAS TAKEN IN THE RELEVANT YEAR. IT CAN THEREFORE BE SAFELY CO NCLUDED THAT THE EXPENDITURE AROSE IN THE RELEVANT YEAR. EXCEL INDUSTRIES LTD. VS. DCIT 86 TTJ 840 (MUM.) (T RIB.) THE COMPANY IS MANUFACTURING PHOSPHOROUS AND IN THE PROCESS OF MANUFACTURING THIS, SLAG IS PRODUCED AS CO-PRODUCT AT THE TIME OF FURNA CE TAPPING IN THE RATIO OF 1:8. IN ORDER TO ADD SUBSTANTIAL VALUE TO THIS CO-PRODUCT I.E., P HOSPHOROUS SLAG, THE COMPANY HAS DEVELOPED A TECHNOLOGY FOR THE MANUFACTURING OF HIG H ALUMINIUM REFRACTORY CEMENT WHICH WAS THE EXTENSION OF THE TECHNOLOGY USED FOR THE DEVELOPMENT OF CERAMIC TILES PROJECT. THUS, BOTH THE PROJECTS WERE CONCEIVED TO UTILIZE THE BI-PRODUCT I.E., PHOSPHOROUS SLAG AND ACCORDINGLY, IT CANNOT BE SAID THAT THE TW O PROJECTS WERE ALTOGETHER NEW PROJECTS. IN FACT, THE TWO PROJECTS WERE BASED ON E XTENSION OF EXISTING BUSINESS, BUT THE PROJECTS WERE LATER ON ABANDONED AND THE LOSS INCUR RED, IN THE CIRCUMSTANCES IS A REVENUE LOSS. ACCORDINGLY, THERE IS NO JUSTIFICATIO N ON THE PART OF THE LOWER AUTHORITIES TO DISALLOW THE AMOUNT 2. IN THE PRESENT CASE ALSO, THE ABOVE EXPENDITURE WAS INCURRED BY THE ASSESSEE BY UTILIZING COMMON FUNDS OF THE EXISTING BUSINESS. HOWEVER, THE PROJECT WAS 41 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. ABANDONED AND NO NEW ASSET WAS CREATED. THEREFORE, THE EXPENDITURE SO INCURRED IS ALLOWABLE U/S 37(1). THE DECISION RELIE D BY AO IN CASE OF SWADESHI COTTON MILLS 63 ITR 65 IS NOT APPLICABLE ON FACTS. IN THIS CASE, WHICH PERTAIN TO A.Y. 1949-50, ASSESSEE PAID RS.35,000/- FOR BREACH OF CONTRACT IN RESPECT OF PURCHASE OF TEXTILE MACHINERY. THE COURT HELD THAT PAYMENT WAS MADE TO AVOID A LARGER CAPITAL EXPENDITURE, PAYMENT WAS IN THE NATURE OF CAPITAL EXPENDITURE, IT WAS NOT FOR THE PURPOSE OF EARNING PROFIT NOR FOR FURTHERING, PROTECTING OR CONTINUING ITS BUSINESS WHICH WAS TO BE CARRIED ON FROM DAY TO DAY. THE PAYMENT WAS MADE WITH THE OBJECT OF AVOIDI NG AN UNNECESSARY INVESTMENT IN A CAPITAL ASSET AND THEREFORE THE SAM E WAS HELD TO BE A CAPITAL EXPENDITURE. IN THE ASSESSEES CASE, THE EXPENDITUR E WAS INCURRED IN FURTHERANCE OF ITS BUSINESS BUT THE PROJECT WAS ABA NDONED, THEREFORE, NO NEW ASSET CAME INTO EXISTENCE. HENCE, EXPENDITURE ON SU CH ABANDONED PROJECT IS AN ALLOWABLE DEDUCTION AS HELD IN THE CASES REFERRE D ABOVE. 3. THE VARIOUS CASE LAWS RELIED BY THE CIT(A) IS DISTI NGUISHABLE AS UNDER:- EID PARRY INDIA LTD. VS. CIT 257 ITR 253 (MAD.) IN THIS CASE ASSESSEE WAS IN THE BUSINESS OF MANUFA CTURE OF SUGAR. EXPENSES WERE INCURRED TO SET UP A NEW PROJECT FOR THE MANUFACTUR E OF 'METHANOL'. IT WAS FOUND THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF SET TING UP A NEW PROJECT. ON THIS FACTUAL ASPECT IT WAS HELD THAT THE EXPENDITURE WAS IN THE CAPITAL FIELD AND NOT IN THAT OF REVENUE. FACT THAT ASSESSEE SUBSEQUENTLY ABANDON ED THE PROJECT DOES NOT ON THAT SCORE CONVERT THE EXPENDITURE INTO REVENUE EXPENDIT URE. TRIVENI ENGINERRING WORKS LTD. VS. CIT 100 TAXMAN 1 9 (DELHI) (HC) IN THIS CASE, ASSESSEE SPENT SOME AMOUNT ON PROJECT REPORTS ON MANUFACTURING INSECTICIDE FORMULATION, AN ITEM TO BE USED FOR IMPROVING THE Q UALITY OF CANE PRODUCED IN THE AREA BY INDIVIDUAL AGRICULTURISTS AND SOCIETIES. HE ALSO SP ENT CERTAIN AMOUNT FOR SURVEY REPORT ON EXTRA MELKRAL ALCOHOL. THE ASSESSEE WANTED THESE RE PORTS TO PUT TO A BETTER USE ITS BY- PRODUCTS, NAMELY, MOLASSES. ON THESE FACTS, TRIBUNA L HELD THAT ALL THE THREE ITEMS OF EXPENDITURE WERE INCURRED WITH A VIEW TO MANUFACTUR ING NEW PRODUCTS AND UTILISING BY- PRODUCTS OF THE SUGAR UNITS AND THUS, THE QUESTION OF ALLOWANCE OF THESE EXPENSES AS BUSINESS EXPENSES DID NOT ARISE AS THEY WERE DEFINITELY OF C APITAL NATURE BEING EXPENSES PRELIMINARY TO MANUFACTURING THE VARIOUS PRODUCTS. THE HIGH COURT HELD THAT THE AMOUNT SPENT ON THE 42 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. PROJECT REPORTS WAS NOT FOR THE PURPOSE OF FACILITA TING THE ASSESSEES EXISTING TRADING OPERATIONS OR ENABLING MANAGEMENT AND CONDUCT OF TH E ASSESSEES BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING T HE FIXED CAPITAL UNTOUCHED. THE EXPENDITURE WAS ATTRIBUTABLE TO CAPITAL HAVING BEEN INCURRED WI TH A VIEW TO BRINGING AN ASSET OR ADVANTAGE INTO EXISTENCE AND HAVING ENDURING BENEFI T. MERELY BECAUSE THE PROJECT DID NOT MATERALISE, NATURE OF EXPENDITURE WOULD NOT CHANGE TO REVENUE. CIT VS. J.K. CHEMICALS LTD. 207 ITR 985 (BOM.) (HC) IN THE CASE ASSESSEE ENGAGED IN MANUFACTURE OF SING LE SUPER PHOSPHATE FERTILISER, INCURRED EXPENDITURE IN OBTAINING PROJECT REPORT FOR MANUFAC TURING TRIPLE SUPER PHOSPHATE TYPE THEREOF. ON THESE FACTS IT AS HELD THAT IF ONE BEAR S IN MIND THE FACT THAT THE ASSESSEE WAS ALREADY CARRYING ON THE BUSINESS OF MANUFACTURING F ERTILISERS, A MARKET SURVEY RELATING TO THE DEMAND FOR FERTILISERS INCLUDING SINGLE SUPER PHOSP HATE WHICH THE ASSESSEE WAS ALREADY MANUFACTURING AND TRIPLE SUPER PHOSPHATE WHICH WAS PROPOSED TO BE MANUFACTURED, CAN BE LOOKED UPON AS A MARKET SURVEY FOR THE MORE EFFICIE NT CONDUCT OF THE ASSESSEE'S EXISTING BUSINESS. THE EXPENSES INCURRED IN CONNECTION WITH SUCH A MARKET SURVEY CAN BE CONSIDERED AS REVENUE EXPENDITURE. IF, ON THE OTHER HAND, THE MARKET SURVEY WAS ENTIRELY FOR THE PURPOSE OF DETERMINING THE MARKETABILITY OF TRIPLE SUPER PH OSPHATE, WHICH THE ASSESSEE PROPOSED TO MANUFACTURE, THEN THIS MARKET SURVEY WOULD FORM AN INTEGRAL PART OF THE PROPOSED PROJECT. THE EXPENSES FOR SUCH A MARKET SURVEY WOULD FORM AN INTEGRAL PART OF THE EXPENSES INCURRED FOR THE PURPOSE OF DECIDING WHETHER TO SET UP THE P ROJECT AT RAJASTHAN OR NOT FOR THE MANUFACTURE OF TRIPLE SUPER PHOSPHATE. THE EXPENDIT URE FOR SUCH A MARKET SURVEY, CARRIED OUT EXCLUSIVELY FOR DETERMINING THE MARKETABILITY OF TR IPLE SUPER PHOSPHATE, WOULD THEREFORE CONSTITUTE CAPITAL EXPENDITURE. 4. IN ALL THE ABOVE CASES THERE WAS A MANUFACTURING OF A NEW PRODUCT. HOWEVER, IN THE PRESENT CASE, NO NEW PRODUCT IS BEI NG MANUFACTURED. THERE IS SETTING UP OF A CLINKER GRINDING UNIT WHICH IS B ASIC INGREDIENT FOR MANUFACTURING CEMENT. THE EXPENDITURE WAS INCURRED IN FURTHERANCE OF ITS EXISTING BUSINESS BUT THE PROJECT WAS ABANDONED, TH EREFORE, NO NEW ASSET CAME INTO EXISTENCE. THE EXPENDITURE WAS INCURRED B Y THE ASSESSEE BY UTILIZING COMMON FUNDS OF THE EXISTING BUSINESS. THE DELHI HIGH COURT IN CASE OF JAY ENGINEERING WORKS LTD. VS. CIT 311 ITR 405 HELD THAT WHERE THE NEW PROJECT UNDERTAKEN BY THE ASSESSEE CO MPANY WAS UNDER THE CONTROL OF SAME MANAGEMENT AND ADMINISTRATION AND M ANAGED FROM COMMON 43 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. FUNDS, IT WAS ONLY AN EXTENSION OF THE EXISTING BUS INESS AND THEREFORE, EXPENDITURE INCURRED ON THE NEW PROJECT CONSTITUTED REVENUE EXPENDITURE. 5. IN VIEW OF ABOVE, THE DISALLOWANCE MADE BY AO AN D CONFIRMED BY CIT(A) IS UNCALLED FOR AND THE SAME BE DELETED. 38.8 THE LD. D/R OPPOSED THE SUBMISSIONS AND SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 38.9 WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MATER IAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT THE LD. CIT (A) HAS GIVEN A FINDING OF FACT THAT A NEW UNIT HAS BEE N ESTABLISHED AND THE EXPENSES INCURRED IN ESTABLISHING A NEW UNIT ARE CAPITAL IN NATURE AND ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE INSISTED THAT IT IS AN EXTENSION TO THE EARLIER UNIT. WE DO NOT SEE ANY M ERIT INTO THE CONTENTION OF THE ASSESSEE AS ADMITTEDLY EVEN IF THE ASSESSEES NEW P ROJECTS ARE IN THE SAME LINE OF BUSINESS, EXPENSES RELATING TO NEW PROJECTS ARE CAP ITAL IN NATURE AND NOT ALLOWABLE AS REVENUE AS HELD BY THE HONBLE BOMBAY HIGH COURT IN CASE OF J.K. CHEMICAL LTD. 80 TAXMAN 19 (BOM.). WE, THEREFORE, FIND NO INFIRM ITY IN THE ORDER OF LD. CIT (A), THE SAME IS AFFIRMED. THE GROUND OF THE ASSESSEE IS DISMISSED. 39. GROUND NO. 2 OF THE ASSESSEE IN THIS APPEAL RELATES TO DISALLOW ANCES OUT OF STAFF WELFARE EXPENSES, CHARGES GENERAL EXPENSES, GIFT EXPENSES, SALES PROMOTION EXPENSES, TAXI HIRING EXPENSES. 44 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 39.2 FACTS INVOLVED IN THIS CASE ARE IDENTICAL TO A.Y. 2010-11. WE HAVE ALREADY DECIDED THIS ISSUE IN ITA NO. 354/JP/2014 RELATING TO ASSESSMENT YEAR 2010-11 WHEREBY WE HAVE CONFIRMED THE ORDER OF THE LD. CIT (A) BY PARTLY ALLOWING THE GROUND OF THE ASSESSEE AS DISCUSSED IN DETAIL VIDE PARA 7.2 & 7.3 OF THIS ORDER ABOVE. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOW ED. ITA NO. 713/JP/2016 : 40. NOW, WE TAKE UP REVENUES APPEAL IN ITA NO. 713/JP/2016 PERTAINING TO AY 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, OF THE CASE, THE LD. CIT(A) HAS ERRED IN:- (I) DELETING THE AO THAT COMPENSATION OF RS. 1,36,29,69 3/- PAID TO FARMERS IS TO BE ALLOWED OVER A PERIOD OF 20 YEARS, CONSEQUENTLY GIVING RELIEF OF RS. 6,81,485/- FOR THE CURRENT YEAR? (II) DELETING THE DISALLOWANCE OF RS. 2,45,909/-, 79,39, 737/- AND 3,38,996/- CLAIMED AS MINING RIGHTS? (III) DELETING THE DISALLOWANCE OF RS. 3,02,13,331/- MADE U/S 37(1) ON ACCOUNT OF PAYMENT OF DEMURRAGE? (IV) HOLDING THE CONTRIBUTION OF RS. 2,75,00,000/- FOR C ONSTRUCTION OF HOSPITAL BUILDING AS RELATING TO BUSINESS OF THE AS SESSEE? (V) DELETING THE DISALLOWANCE OF RS. 32,39,757/- OUT OF SOCIAL WELFARE EXPENSES: (VI) REDUCING THE DISALLOWANCE FROM RS. 58,08,465/- TO R S. 5,00,000/- OUT OF STAFF WELFARE EXPENSES? (VII) RESTRICTING THE DISALLOWANCE TO RS. 3,50,000 /- AGA INST 7,12,561/- MADE OUT OF GENERAL CHARGE EXPENSE? (VIII) REDUCING THE DISALLOWANCE FROM RS. 45,91,890/- TO R S. 25,00,000/- OUT OF SALES PROMOTION EXPENSES? (IX) DELETING THE DISALLOWANCE OF GARDENING EXPENSES OF RS. 41,15,727/-? (X) REDUCING THE DISALLOWANCE FROM RS. 5,23,073/- TO RS . 2,61,536/- MADE OUT OF TAXI HIRING CHARGES? (XI) DELETING THE DISALLOWANCE OF RS. 28,29,670/- MADE U /S 37(1) ON ACCOUNT OF RAILWAY SIDING EXPENSES? 45 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. (XII) DELETING THE ADDITION OF RS. 12,54,748/- MADE U/S 4 1(1) ON ACCOUNT OF UNEXPLAINED OUTSTANDING LIABILITIES? (XIII) THE APPELLANT CRAVES LIBERTY TO RAISE ADDITIONAL GR OUND AND TO MODIFY/AMEND THE GROUND OF APPEAL AT THE TIME OF HE ARING. 41. GROUND NO. 1 OF THE DEPARTMENT RELATES TO DIRECTING THE AO THAT COMPENSATION OF RS. 1,36,29,693/- PAID TO THE FARME RS IS TO BE ALLOWED OVER A PERIOD OF 20 YEARS, CONSEQUENTLY GIVING RELIEF OF RS. 6,81 ,485/- FOR THE CURRENT YEAR. 41.1 WE HAVE ALREADY DEALT WITH THE SIMILAR ISSUE IN RE VENUES APPEAL IN ITA NO. 425/JP/2014 FOR THE A.Y. 2010-11 IN PARA 10.3 ABOVE , WHEREIN WE HAVE CONFIRMED THE ORDER OF THE LD. CIT (A) BY DISMISSING THE GROU ND OF THE DEPARTMENT. WE, THEREFORE, DISMISS THIS GROUND OF THE DEPARTMENT FO R THE YEAR 2011-12. 42. GROUND NO. 2 OF THE DEPARTMENT RELATES TO DELETING THE DISALLOW ANCES OF RS. 2,45,909/-, RS. 79,39,737/- AND RS. 3,38,996/- CLAI MED AS MINING RIGHTS. 42.1 FACTS ARE IDENTICAL TO A.Y. 2010-11. WE HAVE DEALT WITH THIS GROUND IN THE REVENUES APPEAL IN ITA NO. 425/JP/2014 FOR THE ASS ESSMENT YEAR 2010-11 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN PARA 18.3 AND 18.4 ABOVE BY REJECTING THE GROUNDS OF THE REVENUE. SIMILARLY, FOR THE REA SONS MENTIONED THEREIN, WE DISMISS THIS GROUND OF THE DEPARTMENT. 43. GROUND NO. 3 OF THE DEPARTMENT RELATES TO DELETING THE DISALLOW ANCE OF RS. 3,02,13,331/- MADE UNDER SECTION 37(1) ON ACCOUNT O F PAYMENT OF DEMURRAGE. 46 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 43.1 WE HAVE ALREADY DECIDED THIS GROUND IN REVENUES A PPEAL IN ITA NO. 425/JP/2014 FOR THE A.Y. 2010-11 IN PARA NO. 15.3 A BOVE IN FAVOUR OF THE ASSESSEE. SIMILAR IS THE CASE FOR THE ASSESSMENT YEAR 2012-13 . THEREFORE, FOR THE REASONS GIVEN THEREIN, WE REJECT THIS GROUND OF THE REVENUE . 44. GROUND NO. 4 OF THE DEPARTMENT RELATES TO HOLDING THAT CONTRIBU TION OF RS. 2,75,00,000/- FOR CONSTRUCTION OF ROAD (WRONGLY MEN TIONED AS CONSTRUCTION OF HOSPITAL BUILDING) AS RELATING TO THE BUSINESS OF A SSESSEE. 44.1 THIS GROUND OF THE DEPARTMENT HAS ALREADY BEEN DIS CUSSED AND DECIDED IN FAVOUR OF THE ASSESSEE IN PARA 11.3 OF THE REVENUE S APPEAL FOR THE A.Y. 2010-11 IN ITA NO. 425/JP/2014, SUPRA. SINCE THE FACTS RELATE S TO A.Y. 2012-13 ARE EXACTLY THE SAME, WE DISMISS THIS GROUND OF THE REVENUE. 45 . GROUND NO. 5 OF THE DEPARTMENT RELATES TO DELETING THE DISALLOW ANCE OF RS. 32,39,757/- OUT OF SOCIAL WELFARE EXPENSES. 45.1 WE HAVE ALREADY DEALT WITH THE SIMILAR ISSUE IN GR OUND NO. 2 IN ASSESSEES APPEAL IN ITA NO. 354/JP/2014 FOR THE ASSESSMENT YE AR 2010-11 WHEREBY WE HAVE ALLOWED THE GROUND OF THE ASSESSEE. FOR THE REASON S MENTIONED IN PARA 5 OF THIS ORDER ABOVE IN ITA NO. 354/JP/2014, WE DISMISS THIS GROUND OF THE DEPARTMENT. 46. GROUND NOS. 6 TO 10 OF THE DEPARTMENT RELATE TO REDUCING /RESTRICTING THE DISALLOWANCES OF VARIOUS EXPENSES ON ACCOUNT OF STA FF WELFARE EXPENSES, CHARGES 47 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. GENERAL EXPENSES, SALES PROMOTION EXPENSES, GARDENI NG EXPENSES AND TAXI HIRING CHARGES. 46.1 FACTS INVOLVED IN THIS CASE ARE IDENTICAL TO A.Y. 2010-11. WE HAVE DEALT WITH THESE ISSUES IN DEPARTMENTS APPEAL IN ITA NO. 425/ JP/2014 IN PARA 13.1 ABOVE. SINCE WE HAVE ALREADY DECIDED THESE ISSUES IN FAVOU R OF THE ASSESSEE IN ITA NO. 354/JP/2014, FOR THE SAME REASONING, THESE GROUNDS OF THE REVENUE ARE DISMISSED. HENCE, GROUND NOS. 6, 7, 8, 9 & 10 OF THE DEPARTMEN TS APPEAL ARE REJECTED. 47 . GROUND NO. 11 OF THE DEPARTMENT RELATES TO DELETING DISALLOWANCE OF RS. 28,29,670/- MADE U/S 37(1) ON ACCOUNT OF RAILWAY SI DING EXPENSES. 47.1 WE HAVE ALREADY DECIDED THIS GROUND IN REVENUES A PPEAL IN ITA NO. 425/JP/2014 FOR THE A.Y. 2010-11 IN PARA NO. 16.3 A BOVE IN FAVOUR OF THE ASSESSEE. SIMILAR IS THE CASE FOR THE ASSESSMENT YEAR 2012-13 . THEREFORE, FOR THE REASONS GIVEN THEREIN, WE REJECT THIS GROUND OF THE REVENUE . 48. GROUND NO. 12 OF THE DEPARTMENT RELATES TO DELETING THE ADDITION OF RS. 12,54,748/- MADE UNDER SECTION 41(1) ON ACCOUNT OF UNEXPLAINED OUTSTANDING LIABILITIES. 48.1 WE HAVE ALREADY DECIDED THIS ISSUE IN REVENUES AP PEAL IN ITA NO. 425/JP/2014 FOR THE A.Y. 2010-11 IN PARA NO. 14.3 A BOVE IN FAVOUR OF THE ASSESSEE. THEREFORE, FOR THE SAME REASONING, THIS GROUND OF T HE DEPARTMENT FOR THE A.Y. 2012- 13 IS ALSO REJECTED. THE APPEAL OF THE DEPARTMENT I S DISMISSED. 48 ITA NO. 354/JP/2014 ALONG WITH 5 OTHER APPEALS. M/S MANGALAM CEMENT LTD., KOTA. 49. IN THE RESULT, APPEALS OF THE ASSESSEE IN ITA NOS. 354/JP/2014 & 470/JP/2016 ARE PARTLY ALLOWED AND ITA NO. 659/JP/2016 IS DISMISSED WHEREAS APPEALS OF THE REVENUE IN ITA NOS. 425/JP/2014, 616/JP/2016 AND IT A NO. 713/JP/2016 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, THE 29 TH DAY OF JUNE 2017. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHART ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 29/06/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S MANGALAM CEMENT LTD, KOTA. 2. THE RESPONDENT- THE JCIT/ACIT, RANGE-1, KOTA. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NOS. 354 & 425/JP/2014, 470 & 61 6/JP/2016 AND 659 &713 /JP/2016,) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR