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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri Aby T. Varkey
M/s. Andrew Yule & Co. Ltd..........…………........................................................……………….…......Appellant Yule House 8, Dr. Rajendra Prasad Sarani Kolkata – 700 001 [PAN : AACCA 4245 Q] Vs. Deputy Commissioner of Income Tax, Circle-4(1), Kolkata……................….……....…....Respondent Appearances by: Shri Vijay Shankar, CIT D/R & Shri Supriyo Pal, JCIT Sr. D/R, appearing on behalf of the Revenue. Shri A.K. Bandopadhyay, Advocate, appeared on behalf of the assessee. Date of concluding the hearing : January 27th, 2020 Date of pronouncing the order : February 26th, 2020 ORDER Per J. Sudhakar Reddy, AM :-
All these appeals filed by the revenue are directed against separate but identical orders of the Learned Commissioner of Income Tax (Appeals) – 20, Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), for the Assessment Years 2002-03, 2003-04 & 2004-05.
As the issues arising in all these appeals are identical, they are heard together and disposed off by way of this common order.
The assessee is a public sector undertaking and is engaged in the business of manufacturing and sale of tea machinery and suppliers of electrical equipment, as well as growing and manufacturing of tea.
We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:-
I.T.A. No. 628/Kol/2018; Assessment Year 2002 Assessment Year 2002-03 5. Ground No. 1 & 2 are 2 are on the issue of disallowance of expenditure claimed on on the issue of disallowance of expenditure claimed on account of cold season expenses. The Assessing Officer at page 7 para 8, held as follows: account of cold season expenses. The Assessing Officer at page 7 para 8, held as follows: account of cold season expenses. The Assessing Officer at page 7 para 8, held as follows:- “The assessee as claimed an amount of 7,71,80,385 “The assessee as claimed an amount of 7,71,80,385/- on account of cold weather on account of cold weather expenses. Vide notice u/s 142(1) the assessee was showcaused and was asked to expenses. Vide notice u/s 142(1) the assessee was showcaused and was asked to expenses. Vide notice u/s 142(1) the assessee was showcaused and was asked to explain as to why the said expenses is allowable. In response the assessee stated that explain as to why the said expenses is allowable. In response the assessee stated that explain as to why the said expenses is allowable. In response the assessee stated that the said expenses has been incurred on account of material, s the said expenses has been incurred on account of material, salary, wages etc. and has alary, wages etc. and has been given the treatment of deferred revenue expense in the accounts of the company been given the treatment of deferred revenue expense in the accounts of the company been given the treatment of deferred revenue expense in the accounts of the company since the benefit is spread over a number of years. For reasons as stated in para 7, since the benefit is spread over a number of years. For reasons as stated in para 7, since the benefit is spread over a number of years. For reasons as stated in para 7, expenditure in the nature of deferred revenue expense is not expenditure in the nature of deferred revenue expense is not an allowable and an allowable and accordingly this amount of 7,71,80,385/ accordingly this amount of 7,71,80,385/- is added back to the composite income of the is added back to the composite income of the assessee.” 5.1. The grounds taken by the assessee before the ld. CIT(A) are as follows: The grounds taken by the assessee before the ld. CIT(A) are as follows: The grounds taken by the assessee before the ld. CIT(A) are as follows:- a) “That the Learned Assistant Commissioner of Income That the Learned Assistant Commissioner of Income-tax, erred o tax, erred on fact and in law by disallowing cold weather expenses incurred during the and in law by disallowing cold weather expenses incurred during the and in law by disallowing cold weather expenses incurred during the year by the Company amounting to Rs.7,71,80,385/ year by the Company amounting to Rs.7,71,80,385/- presuming that the presuming that the same as deferred revenue expenses. same as deferred revenue expenses. b) That the Learned Assistant of Income That the Learned Assistant of Income-tax should have appreciated that tax should have appreciated that the expenses already incurred during the year under assessment have expenses already incurred during the year under assessment have expenses already incurred during the year under assessment have been been been shown shown shown in in in the the the statement statement statement of of of deductions deductions deductions amounting amounting amounting to to to Rs.7,71,80,385/ Rs.7,71,80,385/- and Rs.6,25,41,025/- debited in the Profit & Loss A/c debited in the Profit & Loss A/c was added back while computing taxable income of the company as th was added back while computing taxable income of the company as th was added back while computing taxable income of the company as the same was already deducted from the taxable income of the previous same was already deducted from the taxable income of the previous same was already deducted from the taxable income of the previous Assessment Year. Assessment Year. c) Hence, the total addition of Rs.7,71,80,385/ Hence, the total addition of Rs.7,71,80,385/- for cold season expenses for cold season expenses wrongly made by the Learned Assistant Commissioner of Income wrongly made by the Learned Assistant Commissioner of Income wrongly made by the Learned Assistant Commissioner of Income-tax while computation of the composite while computation of the composite income of the Company may please income of the Company may please be directed to be deleted and accordingly taxable income to be be directed to be deleted and accordingly taxable income to be be directed to be deleted and accordingly taxable income to be recomputed.” 5.2. The ld. CIT(A) held as follows: The ld. CIT(A) held as follows:- 11.3.1. The appellant’s ground of appeal are self The appellant’s ground of appeal are self-explanatory. The appellant had suo explanatory. The appellant had suo-moto added back in the computation - as the amounts had already been deducted in the preceding AY 2001 as the amounts had already been deducted in the preceding AY 2001-02. Thus, here too - there is double there is double-addition. 5.3. Aggrieved the revenue is in appeal before us. Aggrieved the revenue is in appeal before us. 5.4. The ld. Counsel for the assessee The ld. Counsel for the assessee submitted that cold season expenses is a submitted that cold season expenses is a revenue expenditure and is debited to the profit and loss account of the year in which it revenue expenditure and is debited to the profit and loss account of the year in which it revenue expenditure and is debited to the profit and loss account of the year in which it 3 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd was incurred. As the economic benefit of such expenditure are obtained in the was incurred. As the economic benefit of such expenditure are obtained in the was incurred. As the economic benefit of such expenditure are obtained in the subsequent years, the expenditure claimed in t subsequent years, the expenditure claimed in the previous year is offered to tax in he previous year is offered to tax in that year by adding it back in the computation of income by adding it back in the computation of income. It is further submitted that the . It is further submitted that the action of the Assessing Officer has caused a double addition. action of the Assessing Officer has caused a double addition. On a perusal of the facts we On a perusal of the facts we find that the Assessing Officer has find that the Assessing Officer has disallowed the amount on the ground that this is a disallowed the amount on the ground that this is a deferred revenue expenditure deferred revenue expenditure. This view is not in accordance with law This view is not in accordance with law. On the issue whether this is a double addition or not, we restore the matter to the file of the whether this is a double addition or not, we restore the matter to the file of the whether this is a double addition or not, we restore the matter to the file of the Assessing Officer to examine the claim Assessing Officer to examine the claim of the assessee and dispose off the and dispose off the issue, in accordance with law. By adding back expenditure which was claimed in the year one to accordance with law. By adding back expenditure which was claimed in the year one to accordance with law. By adding back expenditure which was claimed in the year one to the income of the year two, in effect the assessee is not claiming expenditure in question the income of the year two, in effect the assessee is not claiming expenditure in question the income of the year two, in effect the assessee is not claiming expenditure in question at all. Such accounting system, i at all. Such accounting system, in our view is defective and confusing. When admittedly n our view is defective and confusing. When admittedly the assessee submits that cold season expenses incurred in a particular year is not the assessee submits that cold season expenses incurred in a particular year is not the assessee submits that cold season expenses incurred in a particular year is not allowable in that particular year allowable in that particular year as the benefit of the expenditure is derived in the as the benefit of the expenditure is derived in the subsequent year on matching pri subsequent year on matching principle, and hence, though claimed as a deduction in the and hence, though claimed as a deduction in the year in which it is incurred, is being offered to tax in the subsequent year year in which it is incurred, is being offered to tax in the subsequent year year in which it is incurred, is being offered to tax in the subsequent year. If expenditure has to be claimed on the basis of matching the concept with income earned, then, the has to be claimed on the basis of matching the concept with income earned, then, the has to be claimed on the basis of matching the concept with income earned, then, the same should be claimed in the subsequent Assessment Year in the subsequent Assessment Year when the income relatable when the income relatable to this expenditure is earned to this expenditure is earned or the claim should be made only in the year in which it is or the claim should be made only in the year in which it is incurred. The system of write back incurred. The system of write back in our opinion is not necessary because cold season in our opinion is not necessary because cold season expense is a revenue expenditure and has to be allowed in the year in which it is ue expenditure and has to be allowed in the year in which it is ue expenditure and has to be allowed in the year in which it is incurred as the assessee is a g incurred as the assessee is a going concern and as the expenditure has crystallised in ing concern and as the expenditure has crystallised in the year in which it was incurred. the year in which it was incurred. 5.5. In view of the above discussion, we set aside the matter to the f In view of the above discussion, we set aside the matter to the f In view of the above discussion, we set aside the matter to the file of the Assessing Officer for fresh adjudication in accordance with law, for the limited purpose Assessing Officer for fresh adjudication in accordance with law, for the limited purpose Assessing Officer for fresh adjudication in accordance with law, for the limited purpose of verifying if there was a double disallowance. If the assessee has suo moto disallowed of verifying if there was a double disallowance. If the assessee has suo moto disallowed of verifying if there was a double disallowance. If the assessee has suo moto disallowed the amount in his books or offered the same to tax the amount in his books or offered the same to tax in its computati in its computation of income, no separate disallowance or addition may be made. separate disallowance or addition may be made.
6. In the result, these ground grounds of the assessee are allowed for statistical purposes. allowed for statistical purposes.
7. Ground No. 3 is on the disallowance of expenditure incurred on the maintenance is on the disallowance of expenditure incurred on the maintenance is on the disallowance of expenditure incurred on the maintenance of young tea bushes.
4 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd 7.1. The entire expenditure in question relates to maintenance of tea bushes for re The entire expenditure in question relates to maintenance of tea bushes for re The entire expenditure in question relates to maintenance of tea bushes for re- plantation. This Bench of the Tribunal in assessee’s own case plantation. This Bench of the Tribunal in assessee’s own case for the Assessment Years for the Assessment Years 2008-09 to 2011-12 order dt. 20/03/2019, has considered the same issue and held as 12 order dt. 20/03/2019, has considered the same issue and held as 12 order dt. 20/03/2019, has considered the same issue and held as follows:- “12. Third ground of appeal of the revenue is against the action of the Ld. CIT(A) in 12. Third ground of appeal of the revenue is against the action of the Ld. CIT(A) in 12. Third ground of appeal of the revenue is against the action of the Ld. CIT(A) in allowing the expenses incurred by the assessee for maintenance of immature tea allowing the expenses incurred by the assessee for maintenance of immature tea allowing the expenses incurred by the assessee for maintenance of immature tea bushes (young tea bushes) for AYs 2008 bushes (young tea bushes) for AYs 2008-09 to 2011-12.
13. Facts of AY 2008-09 are 09 are taken into consideration. Brief facts of the case are that taken into consideration. Brief facts of the case are that the AO noted from the computation of income that the assessee has deducted the AO noted from the computation of income that the assessee has deducted the AO noted from the computation of income that the assessee has deducted Rs.31,24,547/- under West Bengal Garden and Rs.10,24,157/ under West Bengal Garden and Rs.10,24,157/- under the Assam Garden under the Assam Garden towards management of new tea bushes. Du towards management of new tea bushes. During the assessment proceeding, the ring the assessment proceeding, the assessee stated that the cost is related for plantation/nourishment of young tea plants assessee stated that the cost is related for plantation/nourishment of young tea plants assessee stated that the cost is related for plantation/nourishment of young tea plants and also allied cost like labour charge/manure etc. According to AO, Rule 8(2) allows and also allied cost like labour charge/manure etc. According to AO, Rule 8(2) allows and also allied cost like labour charge/manure etc. According to AO, Rule 8(2) allows the expenses for replanting only. According to the expenses for replanting only. According to AO, there is no provision for allowance AO, there is no provision for allowance of expenses in relation to new tea bushes for the purpose. Therefore, the entire amount of expenses in relation to new tea bushes for the purpose. Therefore, the entire amount of expenses in relation to new tea bushes for the purpose. Therefore, the entire amount was treated as capital expenditure and added back to the total income. Thus, an was treated as capital expenditure and added back to the total income. Thus, an was treated as capital expenditure and added back to the total income. Thus, an addition of Rs.41,48,704/ addition of Rs.41,48,704/- was made. On appeal, the Ld. CIT(A) allowed the the Ld. CIT(A) allowed the expenditure. Aggrieved, revenue is before us. expenditure. Aggrieved, revenue is before us.
14. We have heard rival submissions and gone through the facts and circumstances of 14. We have heard rival submissions and gone through the facts and circumstances of 14. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO has disallowed the expenditure on the ground that Rule the case. We note that the AO has disallowed the expenditure on the ground that Rule the case. We note that the AO has disallowed the expenditure on the ground that Rule 8(2) allows only for replanting and there is no provision for allowance of expenses in only for replanting and there is no provision for allowance of expenses in only for replanting and there is no provision for allowance of expenses in relation to young tea bushes, therefore, he has treated the entire expenditure as relation to young tea bushes, therefore, he has treated the entire expenditure as relation to young tea bushes, therefore, he has treated the entire expenditure as capital expenditure and added back the same with the total income. On appeal, it was capital expenditure and added back the same with the total income. On appeal, it was capital expenditure and added back the same with the total income. On appeal, it was brought to the notice of the Ld. CIT(A) that the entire expenditure relates to notice of the Ld. CIT(A) that the entire expenditure relates to notice of the Ld. CIT(A) that the entire expenditure relates to maintenance of young tea bushes for the purpose of re maintenance of young tea bushes for the purpose of re-plantation only in area already plantation only in area already under plantation and it is clearly allowable expenses under Rule 8(2) of the Rules. It under plantation and it is clearly allowable expenses under Rule 8(2) of the Rules. It under plantation and it is clearly allowable expenses under Rule 8(2) of the Rules. It was brought to the notice of the Ld. CIT(A) that the company has been claiming the notice of the Ld. CIT(A) that the company has been claiming the notice of the Ld. CIT(A) that the company has been claiming the expenditure consistently and this issue cropped up in AY 1998 expenditure consistently and this issue cropped up in AY 1998-99 in the case of 99 in the case of assessee's own case in ITA No. 2030/Kol/1996, the Tribunal by order dated 30.08.2004 assessee's own case in ITA No. 2030/Kol/1996, the Tribunal by order dated 30.08.2004 assessee's own case in ITA No. 2030/Kol/1996, the Tribunal by order dated 30.08.2004 has decided the case in fa has decided the case in favour of the assessee. The Ld. CIT(A) took note of the vour of the assessee. The Ld. CIT(A) took note of the Tribunal's order in assessee's own case wherein the Tribunal has held that the Tribunal's order in assessee's own case wherein the Tribunal has held that the Tribunal's order in assessee's own case wherein the Tribunal has held that the expenses incurred for maintenance in respect of immature tea bushes in the existing expenses incurred for maintenance in respect of immature tea bushes in the existing expenses incurred for maintenance in respect of immature tea bushes in the existing garden is to be allowed as revenue expe garden is to be allowed as revenue expenditure and it was further held that since the nditure and it was further held that since the expenses were incurred by the assessee company for maintenance and replacement of expenses were incurred by the assessee company for maintenance and replacement of expenses were incurred by the assessee company for maintenance and replacement of tea bushes in its existing garden, the same cannot be said to have created an enduring tea bushes in its existing garden, the same cannot be said to have created an enduring tea bushes in its existing garden, the same cannot be said to have created an enduring benefit which can be termed capital in n benefit which can be termed capital in nature and as accordingly, the expenses ature and as accordingly, the expenses claimed by the assessee company was allowed as revenue expenditure. We note that claimed by the assessee company was allowed as revenue expenditure. We note that claimed by the assessee company was allowed as revenue expenditure. We note that the Ld. CIT(A) while giving relief to the assessee has relied on the Hon'ble Calcutta the Ld. CIT(A) while giving relief to the assessee has relied on the Hon'ble Calcutta the Ld. CIT(A) while giving relief to the assessee has relied on the Hon'ble Calcutta High Court decision in the case of Tasati Tea Ltd. High Court decision in the case of Tasati Tea Ltd. Vs. CIT (2003) 262 ITR 388 (Cal) Vs. CIT (2003) 262 ITR 388 (Cal) wherein the Hon'ble High court has held as under: wherein the Hon'ble High court has held as under: "As we understand from the expression used in Rule 8(2), it applies only in "As we understand from the expression used in Rule 8(2), it applies only in "As we understand from the expression used in Rule 8(2), it applies only in respect of replacement of useless or dead plants in an area, which is already respect of replacement of useless or dead plants in an area, which is already respect of replacement of useless or dead plants in an area, which is already under cultivation under cultivation and not abandoned earlier. It cannot be stretched to a stage and not abandoned earlier. It cannot be stretched to a stage prior to the replacement of the useless or dead bushes. The maintenance of prior to the replacement of the useless or dead bushes. The maintenance of prior to the replacement of the useless or dead bushes. The maintenance of 5 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd Nursery for the purpose of raising bushes to be utilized for replantation of Nursery for the purpose of raising bushes to be utilized for replantation of Nursery for the purpose of raising bushes to be utilized for replantation of dead or useless bushes within the plantati dead or useless bushes within the plantation area does not come under Rule on area does not come under Rule 8(2). It is the replantation of dead or useless bushes within the plantation area 8(2). It is the replantation of dead or useless bushes within the plantation area 8(2). It is the replantation of dead or useless bushes within the plantation area that comes within the scope and ambit of rule 8(2). This cannot be extended to that comes within the scope and ambit of rule 8(2). This cannot be extended to that comes within the scope and ambit of rule 8(2). This cannot be extended to a stage prior to actual replacement or replantation." a stage prior to actual replacement or replantation."
We note that this issue has been dealt with by the Tribunal in assessee's own case note that this issue has been dealt with by the Tribunal in assessee's own case note that this issue has been dealt with by the Tribunal in assessee's own case for AY 1990-91 in ITA No. 2030/Kol/1996 vide order dated 03.08.2004, wherein vide 91 in ITA No. 2030/Kol/1996 vide order dated 03.08.2004, wherein vide 91 in ITA No. 2030/Kol/1996 vide order dated 03.08.2004, wherein vide para 12 the Tribunal held as under: para 12 the Tribunal held as under: "12. The learned counsel for the assessee stated that the "12. The learned counsel for the assessee stated that the expenses were incurred on maintenance in respect of immature tea bushes and since were incurred on maintenance in respect of immature tea bushes and since were incurred on maintenance in respect of immature tea bushes and since were incurred in the existing garden, is not that of capital nature. He stated that the incurred in the existing garden, is not that of capital nature. He stated that the incurred in the existing garden, is not that of capital nature. He stated that the other part of the expenses which were not spent on maintenance of immature other part of the expenses which were not spent on maintenance of immature other part of the expenses which were not spent on maintenance of immature tea bushes, were surrendered by the assessee company itself as that of capital , were surrendered by the assessee company itself as that of capital , were surrendered by the assessee company itself as that of capital nature. He argued that the issue is now well settled that the maintenance nature. He argued that the issue is now well settled that the maintenance nature. He argued that the issue is now well settled that the maintenance expenses on account of immature tea bushes in computing the tea business expenses on account of immature tea bushes in computing the tea business expenses on account of immature tea bushes in computing the tea business income of the assessee company are allow income of the assessee company are allowable expenses and placed reliance on able expenses and placed reliance on the decisions in 120 Taxman 645 (Cal) and 48 ITR 83 (SC). The learned DR has the decisions in 120 Taxman 645 (Cal) and 48 ITR 83 (SC). The learned DR has the decisions in 120 Taxman 645 (Cal) and 48 ITR 83 (SC). The learned DR has relied on the orders of the AO and the CIT(Appeals). We have considered the relied on the orders of the AO and the CIT(Appeals). We have considered the relied on the orders of the AO and the CIT(Appeals). We have considered the rival submissions. We find that the expenses were incurred for mai rival submissions. We find that the expenses were incurred for mai rival submissions. We find that the expenses were incurred for maintenance in respect of immature tea bushes in the existing garden and, therefore, the respect of immature tea bushes in the existing garden and, therefore, the respect of immature tea bushes in the existing garden and, therefore, the expenses are of revenue nature. The cases cited by the learned Counsel for the expenses are of revenue nature. The cases cited by the learned Counsel for the expenses are of revenue nature. The cases cited by the learned Counsel for the assessee support the case of the assessee. Since the expenses were incurred by assessee support the case of the assessee. Since the expenses were incurred by assessee support the case of the assessee. Since the expenses were incurred by the assessee company for maintenance of and replacement of tea bushes in its company for maintenance of and replacement of tea bushes in its company for maintenance of and replacement of tea bushes in its existing garden only, the same cannot be said to be that of an enduring benefit existing garden only, the same cannot be said to be that of an enduring benefit existing garden only, the same cannot be said to be that of an enduring benefit of capital nature and accordingly we hold that the expenses claimed by the of capital nature and accordingly we hold that the expenses claimed by the of capital nature and accordingly we hold that the expenses claimed by the assessee company are allowable as re assessee company are allowable as revenue expenditure. Accordingly, the issue venue expenditure. Accordingly, the issue is decided in favour of the assessee and the ground of appeal no. 7 is allowed." is decided in favour of the assessee and the ground of appeal no. 7 is allowed." is decided in favour of the assessee and the ground of appeal no. 7 is allowed." Respectfully following the decision of the Tribunal of this issue, cited supra, Respectfully following the decision of the Tribunal of this issue, cited supra, Respectfully following the decision of the Tribunal of this issue, cited supra, and since there is no change in facts or law we conf and since there is no change in facts or law we confirm the order of the Ld. CIT(A) and order of the Ld. CIT(A) and hence, this ground of appeal of revenue is dismissed.” hence, this ground of appeal of revenue is dismissed.”
8. Consistent with the view taken therein, we Consistent with the view taken therein, we uphold the order of the ld. CIT(A) on uphold the order of the ld. CIT(A) on this issue and dismiss this ground of the revenue. dismiss this ground of the revenue.
9. Ground No. 4 is against th Ground No. 4 is against the notional interest being allowed by the ld. CIT(A). e notional interest being allowed by the ld. CIT(A). 9.1. Notional interest cannot be brought to tax. This Bench of the Notional interest cannot be brought to tax. This Bench of the Notional interest cannot be brought to tax. This Bench of the Tribunal in the assessee’s own case, order dt. 22/03/2019 (supra), held as follows: assessee’s own case, order dt. 22/03/2019 (supra), held as follows:- “7. We have heard rival submissions and gone throug 7. We have heard rival submissions and gone through the facts and circumstances of the h the facts and circumstances of the case. We note that the AO has added 13% of Rs.128.78 lacs as notional interest which case. We note that the AO has added 13% of Rs.128.78 lacs as notional interest which case. We note that the AO has added 13% of Rs.128.78 lacs as notional interest which according to him has been given as loan to sister concern M/s. Yule Agro without adequate according to him has been given as loan to sister concern M/s. Yule Agro without adequate according to him has been given as loan to sister concern M/s. Yule Agro without adequate consideration. Before the Ld. CIT(A), it was consideration. Before the Ld. CIT(A), it was submitted by the assessee that the loan represents submitted by the assessee that the loan represents the expenditure of tea division of the company on account of Mushroom and Floriculture the expenditure of tea division of the company on account of Mushroom and Floriculture the expenditure of tea division of the company on account of Mushroom and Floriculture 6 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd activities initiated and carried out by Tea Division from 1992 activities initiated and carried out by Tea Division from 1992-93 and subsequently 93 and subsequently transferred to the new company M/s transferred to the new company M/s. Yule Agro Industries Ltd. when it was later incorporated . Yule Agro Industries Ltd. when it was later incorporated in the month of April, 1995. According to assessee, the Mushroom and Floriculture activity in the month of April, 1995. According to assessee, the Mushroom and Floriculture activity in the month of April, 1995. According to assessee, the Mushroom and Floriculture activity was initiated by the Tea Division of Andrew Yule & Co. Ltd. (assessee) and was transferred to was initiated by the Tea Division of Andrew Yule & Co. Ltd. (assessee) and was transferred to was initiated by the Tea Division of Andrew Yule & Co. Ltd. (assessee) and was transferred to the new company styled as M/s. Yule Agro Industries Ltd. and this was done based on any styled as M/s. Yule Agro Industries Ltd. and this was done based on any styled as M/s. Yule Agro Industries Ltd. and this was done based on commercial prudence and expediency. commercial prudence and expediency.
The Ld. CIT(A) noted that assessee during the AY 1996 8. The Ld. CIT(A) noted that assessee during the AY 1996-97 took a decision that the 97 took a decision that the Mushroom and Floriculture projects which were being pursued by the assessee from the AY Mushroom and Floriculture projects which were being pursued by the assessee from the AY Mushroom and Floriculture projects which were being pursued by the assessee from the AY 1993-94 need to be transferred to M/s. Yule Agro industries Ltd. (hereinafter M/s. 94 need to be transferred to M/s. Yule Agro industries Ltd. (hereinafter M/s. 94 need to be transferred to M/s. Yule Agro industries Ltd. (hereinafter M/s. Yule Agro) so that the said company would be carrying out the aforesaid projects. Pursuant to the said so that the said company would be carrying out the aforesaid projects. Pursuant to the said so that the said company would be carrying out the aforesaid projects. Pursuant to the said decision taken by the assessee, all expenditure which were incurred by the assessee upto decision taken by the assessee, all expenditure which were incurred by the assessee upto decision taken by the assessee, all expenditure which were incurred by the assessee upto 31.03.1996 was transferred to M/s. Yule Agro and was shown in th 31.03.1996 was transferred to M/s. Yule Agro and was shown in the books of the assessee e books of the assessee under the head 'loans and advances' in the assessment year under consideration. under the head 'loans and advances' in the assessment year under consideration. under the head 'loans and advances' in the assessment year under consideration. Correspondingly, therefore, M/s. Yule Ago reflected the said amount in its books of account Correspondingly, therefore, M/s. Yule Ago reflected the said amount in its books of account Correspondingly, therefore, M/s. Yule Ago reflected the said amount in its books of account under the head 'loan funds'. The Ld. CIT(A) has taken note t under the head 'loan funds'. The Ld. CIT(A) has taken note that this amount would not bear hat this amount would not bear any interest to be paid by the M/s. Yule Agro. The Ld. CIT(A) has gone through the relevant any interest to be paid by the M/s. Yule Agro. The Ld. CIT(A) has gone through the relevant any interest to be paid by the M/s. Yule Agro. The Ld. CIT(A) has gone through the relevant extracts of the annual accounts of the assessee and that of M/s. Yule Agro and after taking extracts of the annual accounts of the assessee and that of M/s. Yule Agro and after taking extracts of the annual accounts of the assessee and that of M/s. Yule Agro and after taking note of point no. 7 in schedule 20 of the note of point no. 7 in schedule 20 of the annual accounts for the year ended 31.03.2008 has annual accounts for the year ended 31.03.2008 has deleted the addition. We note that the loans represented the expenditure of Tea Division of deleted the addition. We note that the loans represented the expenditure of Tea Division of deleted the addition. We note that the loans represented the expenditure of Tea Division of the assessee on account of Mushroom and Floriculture activity from 1992 the assessee on account of Mushroom and Floriculture activity from 1992 the assessee on account of Mushroom and Floriculture activity from 1992- 93 and subsequently, the said activity w subsequently, the said activity was transferred to M/s. Yule Agro Industries Ltd. in 1995 as transferred to M/s. Yule Agro Industries Ltd. in 1995-96. It was brought to our notice that an amount of Rs.128.78 lacs was incurred by the Tea Division was brought to our notice that an amount of Rs.128.78 lacs was incurred by the Tea Division was brought to our notice that an amount of Rs.128.78 lacs was incurred by the Tea Division on the date of transfer. Further, it was brought to our notice that the M/s. Yule Agro on the date of transfer. Further, it was brought to our notice that the M/s. Yule Agro on the date of transfer. Further, it was brought to our notice that the M/s. Yule Agro Industries ltd. has gradually started under repaying the advance which stand reduced to d. has gradually started under repaying the advance which stand reduced to d. has gradually started under repaying the advance which stand reduced to Rs.117.83 lacs as on 31.03.2009. We note that the assessee has not charged any interest in its Rs.117.83 lacs as on 31.03.2009. We note that the assessee has not charged any interest in its Rs.117.83 lacs as on 31.03.2009. We note that the assessee has not charged any interest in its books of account for the amount in question, so the notional interest charged by the A books of account for the amount in question, so the notional interest charged by the A books of account for the amount in question, so the notional interest charged by the AO cannot be accepted. Moreover, we note that the expenditure has been incurred by the assessee cannot be accepted. Moreover, we note that the expenditure has been incurred by the assessee cannot be accepted. Moreover, we note that the expenditure has been incurred by the assessee company way back in the year 1992 company way back in the year 1992-93 and because of restructuring of the company in the 93 and because of restructuring of the company in the year 1995, the project of Mushroom and Floriculture activities was transf year 1995, the project of Mushroom and Floriculture activities was transferred to the new erred to the new sister company called M/s. Yule Agro Industries Ltd. in the year 1995 sister company called M/s. Yule Agro Industries Ltd. in the year 1995-96 so it cannot be called 96 so it cannot be called as loan/advance but in effect merely transfer of the assets and liabilities consequent upon as loan/advance but in effect merely transfer of the assets and liabilities consequent upon as loan/advance but in effect merely transfer of the assets and liabilities consequent upon restructuring. So, the entire value of the expendit restructuring. So, the entire value of the expenditure which has been incurred on the projects ure which has been incurred on the projects way back in the year 1992 way back in the year 1992-93 was subsequently transferred to the M/s. Yule Agro sister 93 was subsequently transferred to the M/s. Yule Agro sister company in the year 1995 due to the restructuring cannot be strictly termed as loan/advance company in the year 1995 due to the restructuring cannot be strictly termed as loan/advance company in the year 1995 due to the restructuring cannot be strictly termed as loan/advance and, therefore, question of notio and, therefore, question of notional interest as computed by the AO is unsustainable and has nal interest as computed by the AO is unsustainable and has been rightly deleted by the Ld. CIT(A) which we confirm. This ground of revenue's appeals is been rightly deleted by the Ld. CIT(A) which we confirm. This ground of revenue's appeals is been rightly deleted by the Ld. CIT(A) which we confirm. This ground of revenue's appeals is dismissed. 10. Consistent with the view taken therein, we dismiss this ground of the revenue. Consistent with the view taken therein, we dismiss this ground of the revenue. Consistent with the view taken therein, we dismiss this ground of the revenue.
Ground No. 5 is against the deletion of disallowance u/s 14A of the Act. und No. 5 is against the deletion of disallowance u/s 14A of the Act. und No. 5 is against the deletion of disallowance u/s 14A of the Act. 11.1. After hearing rival contentions, we direct the Assessing Officer to restrict the After hearing rival contentions, we direct the Assessing Officer to restrict the After hearing rival contentions, we direct the Assessing Officer to restrict the disallowance to 1% of the dividend income as Rule 8D of the Income Tax Rules, 1962 disallowance to 1% of the dividend income as Rule 8D of the Income Tax Rules, 1962 disallowance to 1% of the dividend income as Rule 8D of the Income Tax Rules, 1962 (‘1962’), is not applicable for the Assessment Year 2002 applicable for the Assessment Year 2002-03. The claim of the assessee 03. The claim of the assessee that the issue is covered in favour of the assessee vide the Tribunal’s order dt. that the issue is covered in favour of the assessee vide the Tribunal’s order dt. that the issue is covered in favour of the assessee vide the Tribunal’s order dt. 22/03/2019 (supra), is not correct. 22/03/2019 (supra), is not correct.
7 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd 12. In the result, this ground of the revenue is allowed in part. In the result, this ground of the revenue is allowed in part.
Ground No. 6, is against the deletion of disallowance made on account of Ground No. 6, is against the deletion of disallowance made on account of Ground No. 6, is against the deletion of disallowance made on account of deferred revenue expenses, by the ld. CIT(A). deferred revenue expenses, by the ld. CIT(A). 13.1. After hearing rival contentions, we find that the assessee claims that he had After hearing rival contentions, we find that the assessee claims that he had After hearing rival contentions, we find that the assessee claims that he had suo moto added back the write off made in the ac added back the write off made in the accounts as per the provisions of the Act. counts as per the provisions of the Act. The Assessing Officer held as follows: The Assessing Officer held as follows:- “The assessee has claimed an amount of 20,78,923/ “The assessee has claimed an amount of 20,78,923/- on account of deferred revenue on account of deferred revenue expenses. In response to the show cause notice the assessee stated that the said expenses. In response to the show cause notice the assessee stated that the said expenses. In response to the show cause notice the assessee stated that the said expense was incurred by the electrical division of the company a~ relates to incurred by the electrical division of the company a~ relates to incurred by the electrical division of the company a~ relates to development of a prototype item for utilization of the same in production process. It development of a prototype item for utilization of the same in production process. It development of a prototype item for utilization of the same in production process. It was further submitted that the expenditure incurred are deferred over a period of 5 was further submitted that the expenditure incurred are deferred over a period of 5 was further submitted that the expenditure incurred are deferred over a period of 5 years as per the accounting policy of the company. The claim of the assessee has ounting policy of the company. The claim of the assessee has ounting policy of the company. The claim of the assessee has been duly considered but the same is not found to be allowable. All expenses are been duly considered but the same is not found to be allowable. All expenses are been duly considered but the same is not found to be allowable. All expenses are either revenue or capital in nature. Revenue expenses are allowable as deduction either revenue or capital in nature. Revenue expenses are allowable as deduction either revenue or capital in nature. Revenue expenses are allowable as deduction and only certain capital expenses and only certain capital expenses are allowable under certain express provision of are allowable under certain express provision of the Act. Amortization of expense, as has been done by the assessee, is allowable only the Act. Amortization of expense, as has been done by the assessee, is allowable only the Act. Amortization of expense, as has been done by the assessee, is allowable only under specific situation which are explicitly provided u/s 35DDA. The instant case is under specific situation which are explicitly provided u/s 35DDA. The instant case is under specific situation which are explicitly provided u/s 35DDA. The instant case is not covered by this provision and not covered by this provision and the fact that the assessee has itself amortized this the fact that the assessee has itself amortized this expense is a clear indicator that the said expense is capital in nature. Being so, and expense is a clear indicator that the said expense is capital in nature. Being so, and expense is a clear indicator that the said expense is capital in nature. Being so, and also not being in the nature of expenses as allowable u/s 35DDA, this amortization also not being in the nature of expenses as allowable u/s 35DDA, this amortization also not being in the nature of expenses as allowable u/s 35DDA, this amortization Is not allowable under any sectio Is not allowable under any section of the Act Thus an amount of 20,78,923/- is n of the Act Thus an amount of 20,78,923/- is added back to the total income.” added back to the total income.”
13.2. The ld. CIT(A) deleted the same by observing as under: The ld. CIT(A) deleted the same by observing as under:- “10.3.1. The grounds of appeal are self The grounds of appeal are self-explanatory. The appellant itself had suo explanatory. The appellant itself had suo-moto added back in the computati added back in the computation. Thus, by the action of the ACIT AO- there has been made there has been made double addition.” Also, the ACIT AO had mixed up the issue. When the expenses were for prototype Also, the ACIT AO had mixed up the issue. When the expenses were for prototype Also, the ACIT AO had mixed up the issue. When the expenses were for prototype developed by the electrical division; the ACIT AO refers to section 35DDA which is about developed by the electrical division; the ACIT AO refers to section 35DDA which is about developed by the electrical division; the ACIT AO refers to section 35DDA which is about VRS.”
13.3. The ld. D/R submits that this claim of the assessee has to be examined. The ld. The ld. D/R submits that this claim of the assessee has to be examined. The ld. The ld. D/R submits that this claim of the assessee has to be examined. The ld. Counsel for the assessee has no objection in the matter being remanded to the file of the has no objection in the matter being remanded to the file of the has no objection in the matter being remanded to the file of the Assessing Officer for fresh adjudication, in accordance with law. Assessing Officer for fresh adjudication, in accordance with law.
In the result, we restore the matter to the file of the Assessing Officer for fresh sult, we restore the matter to the file of the Assessing Officer for fresh sult, we restore the matter to the file of the Assessing Officer for fresh adjudication, in accordance with law with a direction that no disallowance has to made, adjudication, in accordance with law with a direction that no disallowance has to made, adjudication, in accordance with law with a direction that no disallowance has to made, if the assessee had suo moto suo moto added back the amount in question while computing its while computing its 8 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd income. If the expenditure in question is deferred revenue expenditure the same is the expenditure in question is deferred revenue expenditure the same is the expenditure in question is deferred revenue expenditure the same is allowable in full in the year in which the assessee has incurred in the year in which the assessee has incurred such expenditure such expenditure.
15. In the result, appeal of the assessee in appeal of the assessee in ITA No. 628/Kol/2018; Assessment Year ITA No. 628/Kol/2018; Assessment Year 2002-03, is allowed in part.
I.T.A. No. 629/Kol/2018; Assessment Year 200 /Kol/2018; Assessment Year 2003-04 16. Ground No. 1, Liquidated damages. Ground No. 1, Liquidated damages. This issue is covered in favour of the assessee by the decision of the Tribunal in This issue is covered in favour of the assessee by the decision of the Tribunal in This issue is covered in favour of the assessee by the decision of the Tribunal in Assessment Year 2008 ITA Nos. 676/Kol/2014, Assessment Year 2008-09 & ITA Nos. 1737, 1882 & 09 & ITA Nos. 1737, 1882 & 1883/Kol/2016, Assessment Years 2009 1883/Kol/2016, Assessment Years 2009-10 to 2011-12, order dt. 20/03/2019 12, order dt. 20/03/2019, wherein it was held as under:- “9. Coming to the next issue i.e. the revenue has challenged the action of the Ld.
Coming to the next issue i.e. the revenue has challenged the action of the Ld.
9. Coming to the next issue i.e. the revenue has challenged the action of the Ld. CIT(A) in allowing the liquidated damages claimed by the assessee fo CIT(A) in allowing the liquidated damages claimed by the assessee for AYs 2008 r AYs 2008- 09 to 2011-12.
Facts of AY 2008-09 are taken into consideration. The AO noted that the 09 are taken into consideration. The AO noted that the 09 are taken into consideration. The AO noted that the assessee debited expenses of Rs.2,51,03,000/ assessee debited expenses of Rs.2,51,03,000/- in the P&L Account being incurred in the P&L Account being incurred towards the liquidated damages and penalty. The AO noted from the details towards the liquidated damages and penalty. The AO noted from the details towards the liquidated damages and penalty. The AO noted from the details submitted pursuant to his notice that this amount reflects a portion of the submitted pursuant to his notice that this amount reflects a portion of the submitted pursuant to his notice that this amount reflects a portion of the contractual value of the goods which is recoverable from contract. According to contractual value of the goods which is recoverable from contract. According to contractual value of the goods which is recoverable from contract. According to AO, the same has arisen due to the late delivery of goods even though the AO, the same has arisen due to the late delivery of goods even though the AO, the same has arisen due to the late delivery of goods even though the assessee pleaded before t assessee pleaded before the AO that these expenses were incurred in ordinary he AO that these expenses were incurred in ordinary course of business activity. According to AO, other than the evidence provided in course of business activity. According to AO, other than the evidence provided in course of business activity. According to AO, other than the evidence provided in the accounts and by pointing out certain provisions in the contract, no other the accounts and by pointing out certain provisions in the contract, no other the accounts and by pointing out certain provisions in the contract, no other material were placed on record wherefrom it material were placed on record wherefrom it can be substantiated that the same can be substantiated that the same was paid by the assessee company. Accordingly, the AO disallowed the deduction was paid by the assessee company. Accordingly, the AO disallowed the deduction was paid by the assessee company. Accordingly, the AO disallowed the deduction claimed by the assessee and added back the amount of Rs.2,51,03,000/ claimed by the assessee and added back the amount of Rs.2,51,03,000/ claimed by the assessee and added back the amount of Rs.2,51,03,000/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who w Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who w Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved, the revenue is before us. pleased to delete the same. Aggrieved, the revenue is before us.
11. We have heard rival submissions and gone through the facts and 11. We have heard rival submissions and gone through the facts and 11. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO disallowed the liquidated circumstances of the case. We note that the AO disallowed the liquidated circumstances of the case. We note that the AO disallowed the liquidated damages on the ground that the evidence to subs damages on the ground that the evidence to substantiate the claim of the tantiate the claim of the assessee was not filed before him. The Ld. CIT(A) has noted that on this issue the assessee was not filed before him. The Ld. CIT(A) has noted that on this issue the assessee was not filed before him. The Ld. CIT(A) has noted that on this issue the AO has not given proper opportunity to the assessee to produce the details to AO has not given proper opportunity to the assessee to produce the details to AO has not given proper opportunity to the assessee to produce the details to substantiate the claim. The Ld. CIT(A), therefore, called for the det substantiate the claim. The Ld. CIT(A), therefore, called for the details of the ails of the expenses incurred under the head 'liquidated damages' along with the copies of expenses incurred under the head 'liquidated damages' along with the copies of expenses incurred under the head 'liquidated damages' along with the copies of the contract entered into by the assessee. It was brought to the notice of the Ld. the contract entered into by the assessee. It was brought to the notice of the Ld. the contract entered into by the assessee. It was brought to the notice of the Ld. CIT(A) that the liquidated damages arose out of the contractual obligation CIT(A) that the liquidated damages arose out of the contractual obligation CIT(A) that the liquidated damages arose out of the contractual obligation towards the customers in relation to timely execution of the job work and terms the customers in relation to timely execution of the job work and terms the customers in relation to timely execution of the job work and terms and conditions of orders placed by the customers which include enforcement of and conditions of orders placed by the customers which include enforcement of and conditions of orders placed by the customers which include enforcement of the liquidated damages clause in the contract. It was brought to the notice of the the liquidated damages clause in the contract. It was brought to the notice of the the liquidated damages clause in the contract. It was brought to the notice of the 9 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd Ld. CIT(A) that whenev Ld. CIT(A) that whenever there is a late delivery of goods, the customers suo er there is a late delivery of goods, the customers suo- motu deduct certain amount at a percentage of consideration as per the terms motu deduct certain amount at a percentage of consideration as per the terms motu deduct certain amount at a percentage of consideration as per the terms and conditions of the order/contract agreed upon by both parties at the time of and conditions of the order/contract agreed upon by both parties at the time of and conditions of the order/contract agreed upon by both parties at the time of contract. Before the Ld. CIT(A), the list o contract. Before the Ld. CIT(A), the list of the liquidated damages incurred by the f the liquidated damages incurred by the assessee company was enclosed which is brought to our notice and placed in the assessee company was enclosed which is brought to our notice and placed in the assessee company was enclosed which is brought to our notice and placed in the paper book at page 5. It was brought to our notice that the late delivery of the goods was due to 5. It was brought to our notice that the late delivery of the goods was due to 5. It was brought to our notice that the late delivery of the goods was due to various reasons like the sudden trans various reasons like the sudden transport strike, Hartal, natural calamities etc. port strike, Hartal, natural calamities etc. and since there is a liquidated damages clause in the contract for timely delivery and since there is a liquidated damages clause in the contract for timely delivery and since there is a liquidated damages clause in the contract for timely delivery of goods between the parties and for delay caused the other party deduct the of goods between the parties and for delay caused the other party deduct the of goods between the parties and for delay caused the other party deduct the amount while making the payment to assessee. The Ld amount while making the payment to assessee. The Ld. CIT(A) noted after . CIT(A) noted after perusal of the relevant contract entered into by the assessee that if there is a perusal of the relevant contract entered into by the assessee that if there is a perusal of the relevant contract entered into by the assessee that if there is a delay in delivery of the goods by the assessee, then a percentage of the delay in delivery of the goods by the assessee, then a percentage of the delay in delivery of the goods by the assessee, then a percentage of the consideration agreed upon by both the parties at the time of contract would be consideration agreed upon by both the parties at the time of contract would be consideration agreed upon by both the parties at the time of contract would be debited which is shown as liquidated damages. We note that the Ld. CIT(A) has bited which is shown as liquidated damages. We note that the Ld. CIT(A) has bited which is shown as liquidated damages. We note that the Ld. CIT(A) has gone through the details of the liquidated damages and noted that the amounts gone through the details of the liquidated damages and noted that the amounts gone through the details of the liquidated damages and noted that the amounts have been deducted from the bills and has taken note that due to the late have been deducted from the bills and has taken note that due to the late have been deducted from the bills and has taken note that due to the late delivery of goods, the custo delivery of goods, the customers have reduced the price. The Ld. CIT(A) has mers have reduced the price. The Ld. CIT(A) has noted from the details submitted that the "liquidated damages" were deducted noted from the details submitted that the "liquidated damages" were deducted noted from the details submitted that the "liquidated damages" were deducted by the Tamilnadu Electricity Board and Damodar Valley Corporation. The Ld. by the Tamilnadu Electricity Board and Damodar Valley Corporation. The Ld. by the Tamilnadu Electricity Board and Damodar Valley Corporation. The Ld. CIT(A) also took note that the assessee was able to prov CIT(A) also took note that the assessee was able to provide confirmation of this ide confirmation of this fact from Tamilnadu Electricity Board; and in respect of Damodar Valley fact from Tamilnadu Electricity Board; and in respect of Damodar Valley fact from Tamilnadu Electricity Board; and in respect of Damodar Valley Corporation the assessee was able to produce the copy of the voucher and the Corporation the assessee was able to produce the copy of the voucher and the Corporation the assessee was able to produce the copy of the voucher and the copy of the cheque received from the said party which depicted that the copy of the cheque received from the said party which depicted that the copy of the cheque received from the said party which depicted that the liquidated damages have been deducted. For giving relief to the assessee the Ld. damages have been deducted. For giving relief to the assessee the Ld. damages have been deducted. For giving relief to the assessee the Ld. CIT(A) has relied on the order of the Hon'ble Allahabad High Court in the case of CIT(A) has relied on the order of the Hon'ble Allahabad High Court in the case of CIT(A) has relied on the order of the Hon'ble Allahabad High Court in the case of Central Trading Agency Vs. CIT 56 ITR 561 (All) wherein the Hon'ble High Court Central Trading Agency Vs. CIT 56 ITR 561 (All) wherein the Hon'ble High Court Central Trading Agency Vs. CIT 56 ITR 561 (All) wherein the Hon'ble High Court allowed the expenses inc allowed the expenses incurred for liquidated damages under the head urred for liquidated damages under the head commercial expediency and also the decision of the Hon'ble Madras High Court commercial expediency and also the decision of the Hon'ble Madras High Court commercial expediency and also the decision of the Hon'ble Madras High Court in the case of CIT Vs. Indane Bislers 91 ITR 427 (Mad). Our attention was drawn in the case of CIT Vs. Indane Bislers 91 ITR 427 (Mad). Our attention was drawn in the case of CIT Vs. Indane Bislers 91 ITR 427 (Mad). Our attention was drawn to the copies of the contract and other details and we to the copies of the contract and other details and we agree with the Ld. CIT(A) agree with the Ld. CIT(A) that it was an inbuilt condition of the contract that in case of late delivery of that it was an inbuilt condition of the contract that in case of late delivery of that it was an inbuilt condition of the contract that in case of late delivery of goods, percentage of consideration as liquidated damages would be deducted by goods, percentage of consideration as liquidated damages would be deducted by goods, percentage of consideration as liquidated damages would be deducted by the customer while making payment. It is noted that the payment was ma the customer while making payment. It is noted that the payment was ma the customer while making payment. It is noted that the payment was made to the assessee by the parties while it was carrying on its business, and the the assessee by the parties while it was carrying on its business, and the the assessee by the parties while it was carrying on its business, and the deduction of payment made by the parties were as per the contractual terms deduction of payment made by the parties were as per the contractual terms deduction of payment made by the parties were as per the contractual terms and so, it is an allowable deduction and we confirm the order of the Ld. CIT(A) and so, it is an allowable deduction and we confirm the order of the Ld. CIT(A) and so, it is an allowable deduction and we confirm the order of the Ld. CIT(A) and dismiss this ground of appeal
of the revenue. und of appeal of the revenue.”
17. Consistent with the view taken therein, we dismiss this ground of the revenue. Consistent with the view taken therein, we dismiss this ground of the revenue. Consistent with the view taken therein, we dismiss this ground of the revenue.
18. Ground No. 2, is on the issue of is on the issue of Prior period expenses. 18.1. This issue is covered in favour of the assessee by the decision of this Tribunal in This issue is covered in favour of the assessee by the decision of this Tribunal in This issue is covered in favour of the assessee by the decision of this Tribunal in the assessee’s own case ITA Nos. 676/Kol/2014, Assessment Year 2008 ITA Nos. 676/Kol/2014, Assessment Year 2008 ITA Nos. 676/Kol/2014, Assessment Year 2008-09 & ITA Nos.
10 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd 1737, 1882 & 1883/Kol/2016, Assessment Years 2009 1737, 1882 & 1883/Kol/2016, Assessment Years 2009-10 to 2011 10 to 2011-12, order dt. 20/03/2019, wherein it was held as under: rein it was held as under:- “19. The next ground of appeal of revenue is against the action of Ld. CIT(A) in 19. The next ground of appeal of revenue is against the action of Ld. CIT(A) in 19. The next ground of appeal of revenue is against the action of Ld. CIT(A) in allowing the prior period expenses claimed by the assessee for AYs 2009 allowing the prior period expenses claimed by the assessee for AYs 2009-10, 2010 10, 2010-11 and 2011-12.
Brief facts of AY 2009-10 is that during the asse 10 is that during the assessment proceedings, the AO from a ssment proceedings, the AO from a perusal of the accounts noted that prior period expenses to the tune of Rs.91.84 lacs perusal of the accounts noted that prior period expenses to the tune of Rs.91.84 lacs perusal of the accounts noted that prior period expenses to the tune of Rs.91.84 lacs has been debited in the accounts by the assessee company. According to AO, from a has been debited in the accounts by the assessee company. According to AO, from a has been debited in the accounts by the assessee company. According to AO, from a perusal of the tax audit report of the non perusal of the tax audit report of the non-tea division by Annexure - O, the amount of O, the amount of debit of prior period relating to Non tea division is Rs.44,45,091/ debit of prior period relating to Non tea division is Rs.44,45,091/- and Rs.16,95,838/ and Rs.16,95,838/- relating to West Bengal Garden and Rs.30,42,918/ relating to West Bengal Garden and Rs.30,42,918/- relating to Assam Garden was relating to Assam Garden was reflected, therefore, the AO was of the opinion that the reflected, therefore, the AO was of the opinion that these expenditures are not related se expenditures are not related expenses in the relevant AY 2009 expenses in the relevant AY 2009-10. So, the entire expenses under prior period 10. So, the entire expenses under prior period expenses was disallowed and added back to the total income. Aggrieved, the assessee expenses was disallowed and added back to the total income. Aggrieved, the assessee expenses was disallowed and added back to the total income. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased t preferred an appeal before the Ld. CIT(A), who was pleased to allow the same. o allow the same. Aggrieved, the revenue is before us. Aggrieved, the revenue is before us.
We have heard rival submissions and gone through the facts and circumstances of 20. We have heard rival submissions and gone through the facts and circumstances of 20. We have heard rival submissions and gone through the facts and circumstances of the case. The AO has disallowed the expenses on the reason that since these expenses the case. The AO has disallowed the expenses on the reason that since these expenses the case. The AO has disallowed the expenses on the reason that since these expenses are not related to the relevant assessment year, he disallowed the same. On appeal, the are not related to the relevant assessment year, he disallowed the same. On appeal, the are not related to the relevant assessment year, he disallowed the same. On appeal, the Ld. CIT(A) has gone through the details of the expenses item Ld. CIT(A) has gone through the details of the expenses item-wise and has reproduced wise and has reproduced the details which is given in Form No. 3CD annexure the details which is given in Form No. 3CD annexure - 9 which reveals that expenditure 9 which reveals that expenditure of Rs.10,42,572/- was on account of bonus, interest on late deposit of TDS was on account of bonus, interest on late deposit of TDS was on account of bonus, interest on late deposit of TDS Rs.11,40,201/-, interest on sales tax Rs.2,34,898/ , interest on sales tax Rs.2,34,898/-, ESI Rs.7,65,351/-, service tax , service tax Rs.62,441/-, Gratuity Rs.12,88,395/ , Gratuity Rs.12,88,395/-, food staff Rs.4,46,542/-, fee Rs.1,07,583/ , fee Rs.1,07,583/- etc. had accrued only in the AY 2009 accrued only in the AY 2009-10 and not of any earlier assessment year. Therefore, 10 and not of any earlier assessment year. Therefore, expenses of such nature which though relates to earlier period had crystalised in the s of such nature which though relates to earlier period had crystalised in the s of such nature which though relates to earlier period had crystalised in the year under consideration either due to change of law with retrospective effect like year under consideration either due to change of law with retrospective effect like year under consideration either due to change of law with retrospective effect like bonus or till finalization of sales tax case or settlement with trade union with bonus or till finalization of sales tax case or settlement with trade union with bonus or till finalization of sales tax case or settlement with trade union with retrospective effect in respect to fee, allowance etc. or receipt of final bill after the cut e effect in respect to fee, allowance etc. or receipt of final bill after the cut e effect in respect to fee, allowance etc. or receipt of final bill after the cut- off date of the assessment years. The Ld. CIT(A) has duly considered the magnitude and off date of the assessment years. The Ld. CIT(A) has duly considered the magnitude and off date of the assessment years. The Ld. CIT(A) has duly considered the magnitude and the scale of operations of the assessee company and observed that many of the the scale of operations of the assessee company and observed that many of the the scale of operations of the assessee company and observed that many of the expenses could not be correctly estimated and there could arise exigencies which could not be correctly estimated and there could arise exigencies which could not be correctly estimated and there could arise exigencies which require calibration/correction and, therefore, taking note of the fact that these require calibration/correction and, therefore, taking note of the fact that these require calibration/correction and, therefore, taking note of the fact that these expenses are crystallized in this assessment year under consideration, the Ld. CIT(A) expenses are crystallized in this assessment year under consideration, the Ld. CIT(A) expenses are crystallized in this assessment year under consideration, the Ld. CIT(A) has given relief which according to us, does not require any interference from our part which according to us, does not require any interference from our part which according to us, does not require any interference from our part and we confirm the same. Therefore, this ground of appeal
of the revenue for the and we confirm the same. Therefore, this ground of appeal of the revenue for the and we confirm the same. Therefore, this ground of appeal of the revenue for the assessment years under consideration is dismissed. assessment years under consideration is dismissed.
19. Consistent with the view taken there we dismiss Consistent with the view taken there we dismiss this ground of the revenue. this ground of the revenue.
20. Ground No. 3, is on the issue of allowability of is on the issue of allowability of Cold season expense. Cold season expense.
21. Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for the Assessment Year 2002 the Assessment Year 2002-03, we allow this ground of the revenue ground of the revenue for statistical purposes.
11 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd 22. Ground No. 4, is on the allowability of expenses for is on the allowability of expenses for Maintenance of young tea Maintenance of young tea bushes.
Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for the Assessment Year 2002-03, we dismiss the ground of the re 03, we dismiss the ground of the revenue.
Ground No. 5, is on the addition as income of is on the addition as income of Notional interest.
Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for the Assessment Year 2002-03, we dismiss this ground of appeal
of the revenue. 03, we dismiss this ground of appeal of the revenue. 03, we dismiss this ground of appeal of the revenue.
26. In the result, revenue’s appeal in ITA No. 629/Kol/2018; Assessment Year 2003 , revenue’s appeal in ITA No. 629/Kol/2018; Assessment Year 2003 , revenue’s appeal in ITA No. 629/Kol/2018; Assessment Year 2003- 04, is allowed in part. I.T.A. No. 630/Kol/2018; Assessment Year 200 /Kol/2018; Assessment Year 2004-05
27. Ground No. 1, is on the allowability of is on the allowability of Liquidated damages.
28. Consistent with the view taken by us while Consistent with the view taken by us while adjudicating the very same issue for adjudicating the very same issue for the Assessment Year 2003-04, we dismiss this ground of the revenue. 04, we dismiss this ground of the revenue.
29. Ground No. 2, is on the allowability of is on the allowability of prior period expenses.
30. Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for the Assessment Year 2003-04, we dismiss this ground of the revenue. 04, we dismiss this ground of the revenue.
31. Ground No. 3, is on the issue of allowability of is on the issue of allowability of cold season expenses. cold season expenses.
32. Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for the Assessment Years 2002- -03 and 2003-04, we set aside this ground of the revenue this ground of the revenue to the file of the Assessing Officer for fresh adjudication. the file of the Assessing Officer for fresh adjudication.
33. Ground No. 4, is on the allo is on the allowability of expenses on maintenance of young tea maintenance of young tea bushes.
34. Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for the Assessment Year 2002-03 and 2003 03 and 2003-04, we dismiss the ground of the revenue. 04, we dismiss the ground of the revenue.
35. Ground No. 5, on taxability of i on taxability of income being Notional Interest.
12 Assessment Year: 2002-03 ITA No. 629/Kol/2018 Assessment Year: 2003- Assessment Year: 2003-04 M/s. Andrew Yule & Co. Ltd 36. Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for Consistent with the view taken by us while adjudicating the very same issue for the Assessment Year 2002- -03 and 2003-04, we dismiss this ground of appeal of the 04, we dismiss this ground of appeal of the revenue.
37. Ground No. 6, is against the action of the ld. against the action of the ld. CIT(A) in deleting CIT(A) in deleting the disallowance made of bad debt written off off.
38. The assessee in this case has created a provision on a loan. As the same is not The assessee in this case has created a provision on a loan. As the same is not The assessee in this case has created a provision on a loan. As the same is not allowable under the Income Tax Act, it did not claim the same while computing allowable under the Income Tax Act, it did not claim the same while computing allowable under the Income Tax Act, it did not claim the same while computing income under the Income Tax Act. In other words, the provision in question was added back to Act. In other words, the provision in question was added back to Act. In other words, the provision in question was added back to the income of the assessee in year 1 (one) the income of the assessee in year 1 (one) i.e., the year it was created. In the subsequent . In the subsequent Assessment Year, the provision was written back on the ground that it w Assessment Year, the provision was written back on the ground that it w Assessment Year, the provision was written back on the ground that it was no longer required. The issue is as to whether such write back constitutes income for the purpose as to whether such write back constitutes income for the purpose as to whether such write back constitutes income for the purpose of computation of income tax. The ld. CIT(A) has held that, the write back of provision of computation of income tax. The ld. CIT(A) has held that, the write back of provision of computation of income tax. The ld. CIT(A) has held that, the write back of provision cannot be taxed as the same has not been claimed as an expense in the earlier cannot be taxed as the same has not been claimed as an expense in the earlier cannot be taxed as the same has not been claimed as an expense in the earlier Assessment Years. We find no infirmity in such a claim. In the result, this ground of the We find no infirmity in such a claim. In the result, this ground of the We find no infirmity in such a claim. In the result, this ground of the revenue is dismissed.
39. In the result, I.T.A. No. 630/Kol/2018; Assessment Year 2004 I.T.A. No. 630/Kol/2018; Assessment Year 2004 I.T.A. No. 630/Kol/2018; Assessment Year 2004-05, is allowed in part.
40. In the result, I.T.A. No. 628/Kol/2018; Assessment Year 200 /Kol/2018; Assessment Year 2002-03, is allowed in part. allowed in part. I.T.A. No. 629/Kol/2018; Assessment Year 200 /Kol/2018; Assessment Year 2003-04, is allowed in part. 04, is allowed in part. I.T.A. No. 630/Kol/2018; Assessment Year 2004 I.T.A. No. 630/Kol/2018; Assessment Year 2004-05, is allowed in part. , is allowed in part.
Kolkata, the Kolkata, the 26th day of February, 2020. .