The Commissioner Of Income Tax v. M/S Gillette India Ltd

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 772 / 2008 The Commissioner Of Income Tax ----Appellant Versus M/S Gillette India Ltd. ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHURJudgment 22/05/2017 1.By way of this appeal, the appellant has assailed thejudgment and order of the learned Tribunal whereby the Tribunalhas partly allowed the appeal preferred by the assessee anddismissed the appeal of department. 2.This Court while admitting the matter framed the followingsubstantial questions of law:- “1. Whether under the facts and circumstances ofthe case and in law, the Tribunal was justified inallowing the fluctuation loss of Rs. 3,70,13,470/-on the basis of the Accounting Standard II and themethod of accounting followed by the respondentcompany? 2. Whether the findings of the Tribunal areperverse in allowing the foreign exchangefluctuation loss specifically when the same couldnot be ascertained at the end of the financial yearand when the liability was unpaid andunquantified? 3. Whether under the facts and circumstances ofthe case and in law the Tribunal was justified indirecting the Assessing Officer to consider the claimof Rs. 14,74,963/- on account of miscellaneousexpenses in the subsequent assessment years i.e.2002-03? 4. Whether under the facts and circumstances ofthe case and in law the Tribunal was justified indeleting the levy of interest charged under Section234D?” 3.Issue No. 1 & 2 are interconnected and are now covered bythe decision of this Court in case of assessee itself (Commissionerof Income Tax, Alwar vs. M/s Gillette India Ltd.) decided on 3[rd]May, 2017, more particularly in para 5 & 18 which reads asunder:- “5. Counsel for respondent Mr. Jhanwar hascontended that the issue No.1 & 2 are squarelycovered by the decision of Supreme Court in thecase of Commissioner of Income Tax vs.Woodward Governor India (P) Ltd. (2009) 312 ITR254 and both the issues with regard to fluctuationloss are to be decided in favour of the assessee. 18. Taking into account the judgment in appealNo.65/2008 the issues No.1 & 2 of fluctuation lossare decided in favour of the assessee, in view ofthe decision of Supreme Court in the case ofCommissioner of Income Tax vs. WoodwardGovernor India (P) Ltd. (supra). The issues No.3& 4 are also decided in favour of the assessee andissue no.5, in view of the decision of this Court inthe case of Commissioner of Income Tax vs. Dr.A.M. Singhi (supra) and in the case ofCommissioner of Income Tax vs. Lake PalaceHotels and Motels Pvt. Ltd. (supra), is decided infavour of the assessee. 4.Taking into consideration the above, the issues are requiredto be decided in favour of the assessee against the department. 5.Regarding issue No. 3, the Tribunal in para 11 observed asunder:- 18. Taking into account the judgment in appealNo.65/2008 the issues No.1 & 2 of fluctuation lossare decided in favour of the assessee, in view ofthe decision of Supreme Court in the case ofCommissioner of Income Tax vs. WoodwardGovernor India (P) Ltd. (supra). The issues No.3& 4 are also decided in favour of the assessee andissue no.5, in view of the decision of this Court inthe case of Commissioner of Income Tax vs. Dr.A.M. Singhi (supra) and in the case ofCommissioner of Income Tax vs. Lake PalaceHotels and Motels Pvt. Ltd. (supra), is decided infavour of the assessee. 4.Taking into consideration the above, the issues are requiredto be decided in favour of the assessee against the department. 5.Regarding issue No. 3, the Tribunal in para 11 observed asunder:- “11. After considering the rival submission, we findthat the lower authorities disallowed Rs. 1,59,396/-being security provided at residence of managingdirector and Rs. 32,470/- being dinner hosted atresidence of managing director on the ground thatthey are personal in nature and not relevant with thebusiness of the company. The ld. AR pointed out thatthe assessee is a public limited company and itsaccounts are audited and approved by theshareholders. The ld. AR further referred to section227(1A)(e) of Companies Act 1956 which cast a dutyon the Auditor to report whether personal expenseshas been charged to revenue. It was brought to outnotice that the Auditor has not raised any objectionas to these expenses are of personal nature and theshareholders has approved the accounts. We find thatproviding security services at the residence of themanaging director can’t be held to be the personalobligation of the managing director. The securityexpenses are incurred by the company in its owninterest for the purpose of the business and the sameare allowable u/s 37. At the most the AO of theManaging Director can treat such payment asperquisite in hands of the Managing Direcotor. Butthe said expenditure is held to be allowableexpenditure u/s 378(1) of the Act. However we findthat in respect of dinner expenses, assessee has notfurnished any explanation so as to establish thebusiness expendiency of such expenditure. Hencedisallowance of Rs. 32,470/- is confirmed. So far asdisallowance of Rs. 14,74,963/- is concerned, the ld.AR pointed out that the bill was raised on 14.2.2001which falls in the year under consideration but therendering of the services started during the year butcontinued in the next year also. He therefore pleadedthat part amount of the total bill, which is raisedduring the year can’t be disallowed. He furtherpointed out that the company has recovered thisamount from its parent company Gillete USA in A.Y.2002-03 by raising a debit note on 31.12.2001. Afterperusal of record, we find that the AO has alreadyallowed part of the total expenditure of Rs.25,29,909/-. Therefore since the expenses disallowedby the AO do not relate to the year underconsideration, disallowance of the same is confirmed.However we find force in the arguments of the ld. ARthat these expenses be allowed in the A.Y. 2002-03 inview of decision in case of Perfect Equipments vs.DCIT 85 ITD 50 (Ahd.) wherein it was held thatTribunal is competent to give direction for other yearseven if there is no appeal, if such directors arenecessary for disposal of appeal before them.Accordingly, we direct the AO to consider the claim of the assessee in the A.Y. 2002-03. thus ground no. 2of the assessee is partly allowed.” 6.We are in complete agreement with the view taken by theTribunal, the issue is answered in favour of the assessee againstthe department. 7.The fourth issue is covered by the decision of the SupremeCourt in the case of Commissioner of Income Tax vs. RelianceEnergy Ltd. (2013) 358 ITR 371 (SC), wherein the Supreme Court in para 4, 5 & 6 held as under:- the assessee in the A.Y. 2002-03. thus ground no. 2of the assessee is partly allowed.” 6.We are in complete agreement with the view taken by theTribunal, the issue is answered in favour of the assessee againstthe department. 7.The fourth issue is covered by the decision of the SupremeCourt in the case of Commissioner of Income Tax vs. RelianceEnergy Ltd. (2013) 358 ITR 371 (SC), wherein the Supreme Court in para 4, 5 & 6 held as under:- “4. Explanation [2] which has been inserted inSection 234D of the Act reads as under:-Section 234D of the Act reads as under:- “Explanation 2. For the removal of doubts, it ishereby declared that the provisions of this sectionshall also apply to an assessment yearcommencing before the 1[st] day of June, 2003 if theproceedings in respect of such assessment year iscomplete after the said date.”hereby declared that the provisions of this sectionshall also apply to an assessment yearcommencing before the 1[st] day of June, 2003 if theproceedings in respect of such assessment year iscomplete after the said date.” 5. The High Court was concerned with the appealrelating to the assessment year 1998-99. It isadmitted case that the assessment of that yearwas completed prior to 01.06.2003.relating to the assessment year 1998-99. It isadmitted case that the assessment of that yearwas completed prior to 01.06.2003. 6. Having regard to the legal position which hasbeen clarified by the Parliament by insertion ofExplanation (2) in Section 234D of the Act, in thepresent case, retrospectively of Section 234D doesnot arise.”been clarified by the Parliament by insertion ofExplanation (2) in Section 234D of the Act, in thepresent case, retrospectively of Section 234D doesnot arise.” 8.Taking into consideration the same decision, the issue isrequired to be answered in favour of the department against theassessee. 9.The appeal stands disposed off. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. A.Sharma/154