SIEMENS LTD,MUMBAI vs. JCIT SP RG 30, MUMBAI

The CIT(A) ought to have directed the AO to allow depreciation on machinery shifting charges of Rs. 1,00,29,640 treated as capital in nature.

At the outset, Ld. AR appearing on behalf of the assessee submitted before us that Ld. CIT(A) has treated 50% of such expenditure as incurred on the employees and hence to that extent cannot be treated as entertainment expenditure. He further M/s Siemens Ltd. submitted that this ground is squarely covered by the consolidate order of Coordinate Bench of Hon’ble ITAT for AY 1985-86 to AY 1988-89 in assessee’s own case on merits.

On the other hand, Ld. DR fairly conceded that this ground is covered by the order of ITAT.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT for AY 1985-86 to AY 1988-89 in assessee’s own case on merits, which is mentioned in para no. 3 to 5 of the said order.

Before us, Ld. AR submitted that Ld. CIT(A) has allowed relief only to the extent of 50% of such expenditure, whereas Coordinate Bench of ITAT has given relief to the extent of 85% in assessee’s own case for AY 1989-90 to AY 192-93. He further submitted that this ground is squarely covered by the consolidate order of Coordinate Bench of Hon’ble ITAT for AY 1989-90 to AY 1992-93 in assessee’s own case on merits.

On the other hand, Ld. DR fairly conceded that this ground is covered by the order of ITAT.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical M/s Siemens Ltd. ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT for AY 1989-90 to AY 1992-93 in assessee’s own case on merits, which is mentioned in para no. 7 & 8 of the said order. Therefore, respectfully following the decision of the coordinate bench of ITAT which is applicable mutatis mutandis in the present case, we allow this ground raised by the assessee.

Before us, Ld. AR submitted that this ground is squarely covered by the consolidate order of Coordinate Bench of Hon’ble ITAT for AY 1985-86 to 1988-89 and AY 1989-90 to 1992-93 in assessee’s own case on merits.

On the other hand, Ld. DR fairly conceded that this ground is covered by the order of ITAT.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT for AY 1985-86 to 1988-89 in para no. 6 to 8 of its order and also in AY 1989-90 to 1992-93 at page no. 40 of its order in assessee’s own case on merits. Therefore, respectfully following the decision of the coordinate bench of ITAT which is applicable mutatis mutandis in the present case, we allow this ground raised by the assessee.

Before us, Ld. AR submitted that this ground is squarely covered by the consolidate order of Coordinate Bench of Hon’ble ITAT for AY 1989-90 to AY 1992-93 in assessee’s own case on M/s Siemens Ltd. merits. He further submitted that in the said order the following expenses are held to be allowed:- Expense Para Pg.No Silver Jubilee 44 13 Marriage Gifts 50 15 Deutsche Schule [German School) 60 19 Staff Sports Club 61 19 Siemens Employees Co-op Society 60 19 He further submitted that other expenses towards employee welfare have been incurred only on account of business expediency and only towards employees. Hence the said expenditure cannot be treated as entertainment expenditure.

On the other hand, Ld. DR fairly conceded that this ground is covered by the order of ITAT.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by M/s Siemens Ltd. the Coordinate Bench of ITAT for AY 1989-90 to AY 1992-93 in assessee’s own case on merits, which is mentioned in para no. 11 & 12 of the said order at page no. 43 & 44 of the paper book. Therefore, respectfully following the decision of the coordinate bench of ITAT which is applicable mutatis mutandis in the present case, we allow this ground raised by the assessee.

Before us, Ld. AR submitted that Hon’ble Supreme Court in the case of CIT vrs. Indo Nippon Chemicals Co. Ltd. 261 ITR 275 (SC) has held that such adjustment to the value of closing stock is not permissible. He further submitted that these grounds are squarely covered by the consolidate order of Coordinate M/s Siemens Ltd. Bench of Hon’ble ITAT for AY 1989-90 to AY 1992-93 and AY 1993-94 to AY 1996-97 in assessee’s own case on merits.

On the other hand, Ld. DR fairly conceded that this ground is covered by the order of ITAT.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT for AY 1989-90 to AY 1992-93 in para no. 36 and AY 1993-94 to AY 1996-97 in para no. 9 in assessee’s own case on merits. We also notice the Hon’ble Supreme Court in the case of CIT vrs. Indo Nippon Chemicals Co. Ltd.(supra) has held that such adjustment to the value of closing stock is not permissible. Therefore, respectfully following the decision of the coordinate bench of ITAT and Hon’ble Supreme Court which is applicable mutatis mutandis in the present case, we allow these ground raised by the assessee.

Before us, Ld. AR submitted that interest on overdue outstanding is earned from debtors to whom sales have been made. He further submitted that since such income is directly arising from the activity of sale, income therefrom should be business income and relied upon the following case laws. i) CIT v. Vidyut Corporation 324ITR 221 [Bom) ii) ITAT's decision in the assessee's own case for AY 1993-94 to AY 1996-97 has decided this issue in favour of the assessee ii) ITAT's decision in Assessee’s own case for AY 1998-99. iv) ITAT's decision in Assessee's own case for AY 2000-01. M/s Siemens Ltd. He further submitted that loans were given by the assessee to its staff in the course of its business and interest earned on such loan should be regarded as business income. In this regard, relied upon the following case laws:- i) DCM Estates & Infrastructure Ltd v. DCIT 110 TTJ 605 (Del) ii) ITAT's decision in Assessee's own case for AY 1998-99 iii) ITAT's decision in Assessee's own case for AY 2000-01. He further submitted that miscellaneous interest income as well as income from UTI and HDFC has also been derived by the assessee in the course of carrying on its business and hence should be treated as business income.

On the other hand, Ld. DR relied upon the orders passed by the lower authorities.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT for AY 1993-94 to 1996-97 in para no. 15 and for AY 1998-99 in para no. 6 and AY 2000-01 in para no. 2.3 of its order in assessee’s own case has decided this issue in favour of the assessee on merits.

Before us, Ld. AR submitted that the total amount of loans and advances written off during the year stood at Rs. 60,19,238/- M/s Siemens Ltd. and before the settlement commission the assessee had itself disallowed an amount of Rs. 36,07,540 representing the amounts which had become irrecoverable on account of merger of Siemens Telematiks Ltd and Siemens Business Communication Systems Ltd with itself. However, the Settlement Commission made a disallowance to the extent of Rs. 50,00,000 out of the total write off of Rs. 60,19,238 i.e. allowed deduction of Rs. 10,19,238/-. He further submitted that on contrary to the Order of Settlement Commission, Assessing Officer has denied the deduction of Rs. 10,19,238/- for reasons which are irrelevant. He further submitted that disallowance has been made by the Assessing Officer despite Revenue arguing before the Settlement Commission that the said issue has to be decided in favour of the Appellant and brought to our notice a chart at page no. 97 of the paper book.

On the other hand, Ld. DR relied upon the orders passed by the lower authorities.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We notice that AO disallowed the loan and advances write off by the assessee and Assessment Order was passed on 24.03.2000. Subsequently, the assessee approached the Settlement Commission and Settlement Commission analyzed the plea of the assessee and directed that Rs. 50 lakhs is allowed as allowable written off amount. This direction of Settlement Commission was passed on 07.01.2008. But this piece of information was placed before Ld. CIT(A) and Ld. CIT(A) has disallowed the whole amount citing the findings of AO and in reference to Sec. 36(1)(vii) of the Act. In our view, the action of Ld. CIT(A) is not proper and the order passed by authority u/s 245D is binding on the Ld. CIT(A) and AO. Therefore, we are directing AO to allow the deduction as per the direction of Settlement Commission. Accordingly, ground raised by assessee is allowed.

Before us, Ld. AR submitted that write-off of the bad debts has been made before the transfer of the Telecommunications business. He relied upon the decision of the Madras High Court in case of South India Surgical Co Ltd v ACIT 287 ITR 62 is concerned in that case the debtor had acknowledged the debt but was unable to pay due to paucity of the funds. In the present case, in respect of the said debts, the debtors have withheld the payments in view of other commercial reasons. He further submitted that the party-wise details of amount written-off above Rs. 2 lakhs is at Pg 82 of the paper book. He further submitted that recovery has been made in a later year in respect of bad debt written off during the year it would result in double taxation. He further submitted that after the amendment in section 36(l)(vii) of the Act by the Direct Tax Laws (Amendment) Act, 1987 with M/s Siemens Ltd. effect from 01.04.1989, the only requirement in the said section for claiming a deduction is that the debt should be written off in the books of account which condition is fulfilled in the assessee's case. In this regard, relied upon the following case laws:- > TRF Ltd. v. C1T 323 ITR 397 (SC) > CIT v. Samara India Pvt. Ltd. 356 ITR 12 (Del) > ITAT's decision in assessee's own case for AY 1998-99 > ITAT's decision in assessee's own case for AY 2000-01.

On the other hand, Ld. DR relied upon the orders passed by the lower authorities.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that the identical ground raised in the present appeal has already been decided by the Coordinate Bench of ITAT for AY 1998-99 in para no. 8-9 and AY 2000-01 in para no. 6 of its order in assessee’s own case on merits. Therefore, respectfully following the decision of the coordinate bench of ITAT which is applicable mutatis mutandis M/s Siemens Ltd. in the present case, we allow these grounds raised by the assessee.

Before us, Ld. AR submitted that assessee has filed a rectification application before the Assessing Officer on 11.04.2000 and direction may be issued to him disposing of said application, which is at page no. 92 of the paper book. He further submitted that before Settlement Commission, revenue had urged that this deduction should be allowed, which is in 6th item at page no. 96 of the paper book.

On the other hand, Ld. DR relied upon the orders passed by the lower authorities.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. Since the assessee has filed rectification petition before AO on 11.04.2000. Even though the validity to disposal of the rectification petition is expired, therefore we still direct the AO to consider the plea of the assessee and rectify the mistake apparent on record. Accordingly, ground raised by the assessee is allowed for statistical purposes.

Before us, Ld. AR submitted that assessee had computed long term capital loss on transfer of TCM division as a slump sale. However, the Assessing Officer had treated the said transaction as an itemised sale of assets. He further submitted that before the CIT(A), the assessee submitted that assuming without admitting that the transaction was to be treated as that of itemised sale, sale consideration relatable to net current assets should work out to be at Rs. 29,10.42,153/- (from total consideration of Rs. 83,80,00,000, consideration as quantified by the Assessing Officer as relatable to depreciable assets, land, capital work-in-progress and capital advances of Rs. 54,69,57,847 has been reduced). Since the book value of the net current assets as on 30.09.1996 i.e. immediately before the transfer was Rs. 36,26,76,576, the assessee has incurred a business loss of Rs. 7,16,34,423 (Rs. 36,26,76,576 - Rs. 29,10,42,153). He further submitted that ld. CIT(A) has not accepted the assessee's claim as the Balance-sheet of the TCM division was not certified by the Auditors. He further submitted that there is no such requirement in the Act and the quantum of net current assets has been taken from the books of account and 24 M/s Siemens Ltd. not a single discrepancy has been pointed out by the CIT(A) in the amount of net current assets.

On the other hand, Ld. DR relied upon the orders passed by the lower authorities.

We have heard counsels for both the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We notice that assessee had transferred the Telecommunication division and incurred long term capital loss by treating the sale as slump sale, whereas the AO treated the same on the basis of itemized sale. Ld. CIT(A) refused to consider the alternate plea of the assessee to treat the net current asset after deducting the capital assets value from the sale consideration at Rs. 29,10,42,153/-. Since, there is no dispute with regard to sale consideration, in our view the value for net current asset can be ascertained by the AO or by any authority.