Commissioner Of Income Tax – City-6 v. M/S. Grasim Industries Ltd

K IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1073 OF 2010 Commissioner of Income Tax – City-6.. Appellant Vs. M/s. Grasim Industries Ltd. .. Respondent. Mr. Suresh Kumar for the Appellant. Mr. J.D. Mistri, Senior advocate a/w Mr. A.K. Jasani for Respondent. CORAM: J.P. DEVADHAR & K.K. TATED, JJ.DATE: 12TH SEPTEMBER, 2011. P.C. 1In all 35 questions are raised by the Revenue in this Appeal. 2The Assessment Year involved herein is A.Y. 1988-1989. 3Since the questions raised in this Appeal are covered by one decision or the other, for the sake of convenience, the questions are set out in group and disposed off accordingly. (a)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in holding that expenses on tea, coffee, snacks etc. provided to the customers, suppliers, agents, contractors, technicians etc. did not constitute entertainment expenses within the meaning of section 37(2) of the I.T. Act read with clause (iii) of explanation thereto. (d)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenditure of Rs.5,000/- on providing tea, snacks etc., to the shareholders at the time of Annual General Meeting, although the same expenses were eligible for disallowance u/s. 37(2) read with explanation thereto, being in the nature of entertainment expenses? Counsel for the parties state that the aforesaid two questions stand answered against the Revenue by the decision of the Apex Court in the case of Commissioner of Income Tax vs. Patel Brothers and Company reported in 215 ITR 165. Hence, questions (a) and (d) cannot be entertained. 5Questions (b) and (ii) read thus: (b)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law inholding that the assessee is entitled to deduction of Rs.3,76,58,729/- representing extra depreciation claimed on account of revaluation of assets, even though clause (b) of explanation to section 115J of the Income Tax Act specifically provides for adding back such amount. (ii)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law holding that the premium amounting to Rs.60,00,976/- payable on redemption of debentures cannot be added to book profit for the purpose of section 115J of the Income Tax Act? Counsel for the Revenue states that the aforesaid questions stand answered against the Revenue by the decision of the Apex Court in the case of Appollo Tyre Ltd. vs. CIT reported in 255 ITR 273 SC. Hence, questions (b) and (ii) cannot be entertained. 6Question (c) reads thus: (c)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in deciding the issues without discussing the specific facts in various grounds of appeal for different assessment years and merely relying on ITAT’s earlier orders on similar issues, which amount to failure of duty and non-exercise of appellate powers by the Tribunal. In this connection, reliance is placed upon Punjab & Haryana High Court decision in the case of CIT vs. Abhishek Industries Ltd., (286 ITR 1). Counsel for the Revenue states that he is not pressing the question (c) as it is a general question. (e)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing interest of Rs.1,63,708/- on outstanding electricity tax disallowed by the A.O. u/s 43B of the Income Tax Act? (f)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in deleting the disallowance of Rs.1,60,247/- @ 75% of Rs.2,13,656/- being expenses incurred by the appellant on meetings and sales conferences, which were confirmed by the CIT (A), being in the nature of entertainment expenses? Counsel for the Revenue states that he is not pressing the question (c) as it is a general question. (e)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing interest of Rs.1,63,708/- on outstanding electricity tax disallowed by the A.O. u/s 43B of the Income Tax Act? (f)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in deleting the disallowance of Rs.1,60,247/- @ 75% of Rs.2,13,656/- being expenses incurred by the appellant on meetings and sales conferences, which were confirmed by the CIT (A), being in the nature of entertainment expenses? (g)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenses of Rs.4,000/- and Rs.1,46,606/- in respect of delegates of 6[th] Asia Oceania Congress of ENT Surgeon? (k)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing contribution to local organization given by the assessee amounting to Rs.70,756/- as admissible revenue expenditure u/s 37(1) of the Income Tax Act? (l)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing commission of Rs.54,020/- paid by the assessee’s Textile Division at Gwalior to M/s Dadawala & Co. Pilani? (o)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing depreciation on Intake Well, Telpher Plant, Acid Tank, Lagoon Tank, Effluent Treatment Plant, Lime Storage Tank and Water Storage Tank, treating them as plant ignoring the fact that the relevant units remained closed throughout the year? (t)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenses of Rs.1,60,632/- incurred towards statutory, internal and cost auditing? (w)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in confirming the order of CIT (A) to allow 25% of meeting and sales conferences expenses of Rs.2,13,658/- amounting to Rs.53,414/-? (y)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law allowing expenditure on account of contribution of Rs.13,637/- to various local organizations, although the same was of the nature of donation, disallowable as business expenditure? (z)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenditure of Rs.20,318/- incurred towards eatables during the Fabric Show even though the same is disallowable as entertainment expenses? In respect of these questions, the Counsel for the Revenue states that the ITAT has followed its judgment in the earlier years and the Revenue has accepted the decision of the ITAT for the earlier years, hence, he is not pressing those questions. Accordingly, the above questions are not entertained. 8Questions (h), (n) and (r) raised by the Revenue read thus: (h)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing project expenses of Rs. 5,42,572/- as business expenditure u/s 37(1) of the Income Tax Act? (n)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in restoring the issue of disallowance of interest of Rs.70,20,134/- paid to the I.T. Department to the file of A.O. for fresh adjudication? (r)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in restoring the issue regarding disallowance of interest of Rs.17,20,134/- paid to the Income Tax Department for fresh adjudication in accordance with Tribunal’s order in A.Y. 1976-77? Counsel for the Revenue states that the aforesaid questions have been restored by the ITAT to the file of Assessing Officer for fresh determination. (n)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in restoring the issue of disallowance of interest of Rs.70,20,134/- paid to the I.T. Department to the file of A.O. for fresh adjudication? (r)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in restoring the issue regarding disallowance of interest of Rs.17,20,134/- paid to the Income Tax Department for fresh adjudication in accordance with Tribunal’s order in A.Y. 1976-77? Counsel for the Revenue states that the aforesaid questions have been restored by the ITAT to the file of Assessing Officer for fresh determination. Since the ITAT has restored the issue to the file of the Assessing Officer, we are not inclined to entertain these questions. 9Questions (i) and (dd) read thus: (i)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing foreign travel expenses of Smt. Niharika Jain and Mrs. S.S. Maru amounting to Rs.49,848/-, foreign travel expenses of Mrs.Madelia amounting to Rs.47,360/- foreign travel expenses of Mrs.M.C.B. amounting to Rs.48,430/- and foreign travel expenses of Mrs.Sabu amounting to Rs.27,974/-? (dd)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing foreign travel expenses of Mrs. S.C.Jain and Mrs. I.S.Parekh, who had accompanied their husbands on foreign tour even though they were in no way connected with the assessee’s business? Counsel for the Revenue states that the above questions stand answered against the Revenue by the decision of this court in the case of CIT vs. Alfa India Ltd. reported in 282 ITR 445. Accordingly, questions (i) and (dd) cannot be entertained. 10Question (j) reads thus: (j)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing foreign travel expenses of employees amounting to Rs.55,156/-, Rs.93,306/- and Rs.15,763/- which were disallowed by CIT (A) as capital loss? Counsel for the Revenue states that the aforesaid question stands answered against the Revenue by the decision of this Court in the case of Commissioner of Income Tax vs. Century Spinning and Manufacturing Company Ltd. reported in 210 ITR 783. Accordingly, question (j) cannot be entertained. 11Question (m) reads thus: (m)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing salary, bonus and PF paid to Mrs.Taramani Madelia amounting to Rs.7,380/- allowing payment of Rs.7,380/- as salary and PF contribution paid to Smt. Induben Parikh and Smt.Sumitradevi Madelia and allowing payment of Rs.5,000/- as salary, bonus and PF paid to Ms. Niharika Jain? In view of the smallness of the Tax effect, counsel for the Revenue states that he is not pressing this question. Accordingly, question (m) cannot be entertained. 12Questions (p), (q), (s), (aa), (bb) and (ee) read thus: (p)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in confirming the order of the CIT (A) allowing an amount of Rs.16,992/- paid as remuneration to lady employees? (q)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing a sum of Rs.19,618/- paid as remuneration to lady employees, which was disallowed by the CIT (A)? (s)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenditure of Rs.1,64,754/- incurred on meals and breakfast to Reserve Police during labour trouble as business expenditure? (aa)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing the amount of expenditure covered by the provisions of section 43B, which had been paid on or before the due date for filing return of income u/s 139 of the I.T. Act? (q)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing a sum of Rs.19,618/- paid as remuneration to lady employees, which was disallowed by the CIT (A)? (s)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenditure of Rs.1,64,754/- incurred on meals and breakfast to Reserve Police during labour trouble as business expenditure? (aa)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing the amount of expenditure covered by the provisions of section 43B, which had been paid on or before the due date for filing return of income u/s 139 of the I.T. Act? (bb)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing depreciation on false ceiling of Weaving Dornier Loom Sheds-III and IV treating them as plant without appreciating that the same forms part of the building? (ee)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in holding that the limit of Rs.10,000/- for the purpose of disallowance u/s 40A(12) is to be applied in respect of each employee separately? Counsel for the Revenue states that the ITAT has answered the aforesaid questions in favour of the Assessee by following its decision in the case of Assessee for earlier years. He further states that the Appeals filed by the Revenue for those Assessment Years have been dismissed on the ground of delay and no further steps have been taken to get the delay condoned or restoration of the Appeals. Thus, the orders passed by the ITAT for the earlier years have attained finality. No case is made out for taking a contrary view. In these circumstances, the aforesaid questions cannot be entertained. 13Question (u) and (v) raised by the Revenue read thus: (u)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenditure incurred on gift articles presented to business associates without applying the provisions of Rule 6B of the Income Tax Rules ignoring the fact that the assessee had gained in terms of advertisement by distributing these articles even without assessee’s logo on them? (v)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenditure incurred on articles of presentation given to employees and their wards on the occasion of marriage ceremony ignoring the fact that such functions are in no way connected with the assessee’s business? Counsel for the Revenue states that the aforesaid questions stand answered against the Revenue by the decision of this court in the case of CIT vs. Allana Son Pvt. Ltd. reported in 216 ITR 690. Accordingly, the above questions cannot be entertained. 14Question (x) reads thus: (x)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing opening ceremony expenses of Rs.83,459/- incurred in respect of retail showroom although the same was capital in nature? Counsel for the Revenue states that he is not pressing this question as the decision of the Tribunal is based on finding of facts. 15Question (cc) reads thus: (cc)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing proportionate premium payable on the redemption of bonds amounting to Rs.60,00,976/- ignoring the fact that this expenditure is of capital nature? Counsel for the Revenue states that the aforesaid question stands answered against the Revenue by the decision of the Apex Court in the case of Madras Industrial Investment Corporation vs. CIT reported in 225 ITR 802 SC. Accordingly, question (cc) cannot be entertained. 16Question (ff) reads thus: (ff)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenses on Noon signs and Glow signs 12 40 itxa 1073.10.doc 15Question (cc) reads thus: (cc)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing proportionate premium payable on the redemption of bonds amounting to Rs.60,00,976/- ignoring the fact that this expenditure is of capital nature? Counsel for the Revenue states that the aforesaid question stands answered against the Revenue by the decision of the Apex Court in the case of Madras Industrial Investment Corporation vs. CIT reported in 225 ITR 802 SC. Accordingly, question (cc) cannot be entertained. 16Question (ff) reads thus: (ff)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing expenses on Noon signs and Glow signs 12 40 itxa 1073.10.doc amounting to Rs.13,90,585/- as business expenditure u/s 37(1) ignoring the capital nature of these expenses? This question is answered by the ITAT in favour of the Assessee by relying upon its decision in the case of Assessee for the Assessment Year 1982-1983. Counsel for the Revenue states that the Appeals filed by the Revenue against the decision of the ITAT in the earlier years have been dismissed by this court on the ground of delay and no steps have been taken to restore those Appeals. Thus, the order of the ITAT in the case of the Assessee for earlier years have attained finality. In these circumstances, the question (ff) cannot be entertained. 17Question (gg) reads as follows: (gg)Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing deduction u/s 80-I of the Income Tax Act in respect of Dornier Loom Shed No.V even though the conditions for deduction u/s 80-I had not been fulfilled? Counsel for the Revenue states that the aforesaid question stands answered against the Revenue by the decision of the Apex Court in the case of Textile Machinery Corporation vs. CIT reported in 107 ITR 195 SC. Accordingly, question (gg) cannot be entertained. 18Question (hh) reads as follows: (hh) Whether on the facts and in circumstances of the case, the Hon’ble ITAT are justified in law in allowing non-convertible debenture issue expenditure of Rs.16,97,648/- as revenue expenditure ignoring the fact that the same of capital nature. Counsel for the Revenue states that the similar question was answered by the Rajastan High Court in the case of CIT vs. Secure Meter Ltd. reported in 321 ITR 611 and that SLP filed by the Revenue against the decision of the Rajastan High Court has been dismissed by the Apex Court. Hence, question (hh) cannot be entertained. 19Accordingly, the present Appeal is disposed of with no order as to costs. (J.P. DEVADHAR, J.) (K.K. TATED, J.)