M/S. BAJAJ AUTO LTD.,MUMBAI vs. ADDL. CIT. RG. - 3(1), MUMBAI

PER GAGAN GOYAL, A.M: These cross appeals by Assessee and Revenue are directed against the order of the Ld. CIT(A) – XXVII, Mumbai dated 29.11.2006 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2003-04 respectively. The revenue has raised the following grounds of appeal in for A.Y. 2003-04: -

& 1420/Mum/2007 M/s. Bajaj Auto Limited 6. “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to treat expenditure on jigs and fixtures amounting to Rs. 6,11,99,840/- as revenue in nature and to allow the same as revenue expenditure.” 7. “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to allow the claim of amount written off against lease hold land amounting to Rs. 42,10,566/- as a deduction from the profits and to reduce the total income to that extent” 8. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of foreign travel expenses of Mrs. Rupa Bajaj amounting to Rs. 1,72,455/- treating it as incurred wholly for the purpose of business.” 9. “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting thedisallowance made by the AO in respect of interest attributable to earning of exempt incomeamounting to Rs.5,51,121/- u/s.14A.” 10. “On the facts and in the circumstances of the case and in law, the Ld.ClT(A) erred in directing the AO to delete the disallowance of Rs. 5,51,121/- made u/s. 14A of the Act while computing book profit u/s. 115JB of the Act.” 11. “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in reducing the disallowance of administrative expenditure attributable to earning exempt income from Rs.1,27,24,625/- to Rs.2,41,422/-.” 12. “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance made by the AO in respect of prior period expenses amounting to Rs. 3,78,36,239/-.” 13. “On the facts and, in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance made by the AO u/s.40(a)(i) of the Act in respect of expenditure incurred in foreign currency amounting to Rs. 57,07,586/-.” 14. “On the facts and in the circumstances of the case and in law, the Ld.ClT(A) erred in directing the AO to allow expenses of electricity service connection charges amounting to Rs. 22,60,000/- and Rs. 90,00,000/- paid as MEDA service charges aggregating to Rs. 1,12,60,000/- as a revenue expenditure.” Relief in respect of 80HHC of the Act : 15. (i) “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to exclude excise duty and sales tax from the total turnover while & 1420/Mum/2007 M/s. Bajaj Auto Limited computing deduction u/s. 80HHC of the Act relying on the Bombay High Court in the case of CIT Vs. Sudarshan Chemicals Industries Ltd. 245 ITR 769." (ii) "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO not to exclude 90% of the technical know-how fees amounting to Rs. 1,00,30,883/- from the profits of the business while computing deduction u/s.80HHC of the Act.” 16. “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO that interest ought not to be attributable towards earning dividend income and deduction u/s. 80M of the Act ought to be granted without allocating any notional interest or expenditure.” 17. “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to apportion employees emoluments and miscellaneous expenses towards earning dividend income in the ratio of dividend income to the total income and arriving at the figure of Rs. 1,61,335/- and Rs. 55,735/-.” 18. “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to delete the disallowance of bad debts written off amounting to Rs. 1,50,43,318/-.” 19. "The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.” 20. “The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in not allowing deduction in respect of fines and penalties amounting to Rs. 18,100/- inspite of the fact that the said expenditure was incidental to the carrying on of the business and was not for deliberate infraction of law and accordingly ought to have been allowed as adeduction.

2. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the disallowance under section 14A of the Act of 3. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing the claim for deduction of wealth-tax paid during the relevant previous year amounting to Rs. 1 6,88,728/-.

4. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in rejecting the contention of the appellant to allow deduction under section 80-0 of the Act amounting to Rs. 9,168/- @ 20% of Rs. 45,855/- being royalty received under a technical know-how agreement with M/s. Auto Technica, Columbia.

5. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in treating expenses incurred in relation to purchase and upgradation of software amounting to Rs. 2,40,00,595/- as capital expenditure.

6. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the inclusion of the following while computing‘total turnover’ for the purpose of deduction under section 80HHC of the Act: (i) wind power generated captively consumed amounting to Rs. 30,13,33,504/- ; (ii) miscellaneous receipts in respect of scrap sales, miscellaneous scrap sales and sundry sales aggregating to Rs. 21 ,93,14,159/-.

7. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding that the entire Duty Entitlement Pass Book benefit credited to the Profit and Loss Account amounting to Rs. 53,39,52,123/- ought to be excluded while computing the ‘profits of the business’ for the purpose of deduction under section 80HHC of the Act.

8. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the inclusion of the following while computing‘indirect expenses’ attributable to the export of traded goods for the purpose of deduction under section 80HHC of the Act:

9. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in holding that the appellant is not entitled to deduction in respect of DEPB as per the third proviso to section 80HHC(3)(c) of the Act.

10. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in includingin the total income, DEPB benefit receivable amounting to Rs. 52,62,03,204/-.

11. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in confirming the disallowance in respect of pro-rata administrative expenses to the extent of Rs. 2,17,070/- as expenses incurred towards earning dividend income and income from mutual funds and accordingly, reducing the deduction under section 80M of the Act by Rs. 2,17,070/-.

12. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing the provision made by the appellant in respect of ‘Go for Gold Scheme’amounting to Rs. 2,00,00,000/-.

3. The brief facts of the case are that the assessee filed its return of income declaring total income at Rs. 712, 82, 56,200/- on 28.11.2003. The assessee is a Public Limited Company engaged in the business of manufacture and sale of 2 wheelers and 3 wheelers under the popular Brand name of Bajaj. The return was processed under section 143(1) of the Act on 24.03.2004 accepting the returned & 1420/Mum/2007 M/s. Bajaj Auto Limited income. The case of the assessee was subject to scrutiny assessment and order u/s. 143(3) of the Act was passed. The assessment was completed assessing the total income at Rs. 743, 74, 08,778/- after making certain disallowances/additions to the returned income of the Assessee.

4. The assessee being aggrieved with this order of the AO preferred an appeal before the Ld. CIT (A), who in turn partly allowed the appeal of the assessee. The assessee and the Revenue being aggrieved with this order of Ld. CIT (A) preferred the present appeals before us. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of both the sides along with grounds raised before us.

5. Ground No. 1 - Disallowance of Fines and Penalties: Rs. 18,100/- 6. The Ld. Counsel of the Assessee submitted that this Ground of Appeal is not pressed. Accordingly, the ground of appeal of the Assessee is dismissed and order of the Ld. CIT (A) is upheld.

7. Ground No. 2 - Disallowance of pro-rata administrative expenses under section 14A of the Act attributable to earning exempt income: Rs. 2, 41,422/- 8. The Ld. Counsel of the Assessee submitted that this Ground of Appeal is not pressed. Accordingly, the ground of appeal of the Assessee is dismissed and order of the CIT (A) is upheld.

9. Ground No. 3 - Disallowance of deduction claimed for wealth-tax paid: Rs. 16, 88,728/-.

& 1420/Mum/2007 M/s. Bajaj Auto Limited 10. The Ld. Counsel of the Assessee submitted that a sum of Rs 1,688,728/- is the amount payable as wealth tax as per the return of net wealth. It was submitted that the said amount is an allowable deduction u/s. 37 of the Act. In this connection, it was further submitted that the provisions of section 40(a) (iia) of the Act do not apply to this payment as the sum referred to in the said section is a tax paid on the entire value of the assets or the capital employed in any business but does not cover tax chargeable with reference to any particular asset and presently the wealth tax is charged on particular assets and not on the entire capital employed or assets of the business.

(a) ITAT – AY 2002-03 (ITA No.3043/Mum/2010) (b) ITAT – AY 2001-02 (ITA No.4236/Mum/05) (c) ITAT – AY 1999-00 (ITA No. 2125/Mum/05) (d) ITAT – AY 2000-01 (ITA No. 3055/Mum/05) (e) ITAT – AY 1998-99 (ITA No. 9564/Mum/2004) (f) ITAT – AY 1997-98 (ITA No. 5030/Mum/2001) (g) ITAT – AY 1996-97 (ITA No.

2000) (h) ITAT – AY 1995-96 (ITA No. 3493/Mum/1999)

& 1420/Mum/2007 M/s. Bajaj Auto Limited 14. This issue is recurring in nature and has been decided in favour of Assessee in A.Y. 1995-96 to 2002-03. We observe that facts of this year are similar to the previous year decided in favour of Assessee. For reference, we are reproducing the decision of Coordinate Bench in Assessee’s own case for A.Y. 2002-03 as under:-

“Ground No. 5: Disallowance of Wealth-tax paid to Rs. 17, 39,524/-: 22. During the course of assessment the AO noticed that assessee has claimed deduction of wealth-tax payment to the amount of Rs. 17, 39,524/- for A.Y. 2002-03. The AO has not allowed the claim of wealth Tax payment on the ground that allowability of such deduction is not specifically provided in Sec. 40 (a) (iia) of the Act.

& 1420/Mum/2007 M/s. Bajaj Auto Limited It is evident that same issue on identical facts has been adjudicated in favour of the assessee in the earlier years therefore following the decision of the ITAT we allow this ground of appeal of the assessee.”

15. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 3 raised by the Assessee is allowed.

16. Ground No. 4 - Disallowing deduction claimed under section 80-O of the Act in respect of 20% of royalty received: Rs. 9,168 17. The assessee has claimed deduction u/s. 80-O of the Act amounting to Rs. 9,168/- being 20% of Rs. 45,840/- being royalty under technical know-how agreement with M/s. Auto Technicia, Columbia. However, the Assessing officer was of the view that the amount received was not in the nature of drawing, designing, invention, patents and trademark, therefore, the deduction u/s. 80-O of the Act was declined.

(a) ITAT – AY 2002-03 (ITA No.3043/Mum/2010) (b) ITAT – AY 2001-02 (ITA No.4236/Mum/05) (c) ITAT – AY 1999-00 (ITA No. 2125/Mum/05)

22. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 4 raised by the Assessee is allowed.

23. Ground No 5 - Treating expenditure in respect of software expenses as capital in nature: Rs. 2, 40, 00,595/- & 1420/Mum/2007 M/s. Bajaj Auto Limited 24. The assessee has debited an amount of Rs. 2, 40, 00,595/- to the profit and loss account being expenditure incurred for the purchase and up gradation of various softwares. However, the assessing officer has treated the software expenses as capital expenditure and allowed depreciation @ 25% thereon.

25. The assessee filed the appeal before the ld. CIT (A). The ld. CIT (A) has sustained the action of the assessing officer for treating the software expenses as capital expenditure.

26. During the course of appellate proceedings before us at the outset the ld. Counsel submitted that software expenses are allowable as revenue expenditure u/s 37(1) of the Act. She also submitted that the decision of the Special Bench in the case of Amway India Enterprises 111 ITD 112 relied upon by the ld. CIT(A) was reversed by the Hon’ble Delhi High Court in the case of Amway India Enterprises (2012) 22 taxmann.com 22 (Delhi). The ld. counsel has also referred the decision of Asahi Safety Glass Ltd. vs. CIT (2011) 15 taxmann.com 382 (Delhi). The ld. Counsel also referred page no. 142-144 of the factual paper book and submitted that list placed in the paper book showed that all the software expenses are of the nature of revenue expenditure.

“32. Heard both the sides and perused the material on record. Without reiterating the fact as discussed above we have perused the page no. 193-195 pertaining to software expenses placed in the paper book it is noticed that most of the expenses are pertained to software maintenance charges and renewal of internet connections annual charges, purchase and up gradation of software etc. There are more than 50 transactions of small amount of such software expenses made by the assessee with the different parties as reflected in the details of software expenses referred above filed by the assessee. The assessee has demonstrated from the aforesaid submission that such software expenses are not of enduring nature and same were incurred for maintenance, up gradation and purchase and renewable of the existing software etc. We find that the lower authorities has not established that now such kind of software expenses have been treated of the nature of the capital expense. Further we have perused the decision of the Hon’ble Delhi High Court in the case of Amway India Enterprises (2012) as discussed supra has overruled the decision of special bench by holding that the expenditure of purchase of software application is revenue expenditure. We have also considered the decision of Hon’ble Delhi High Court in the case of Asahi India Safety Glass Ltd. Vs. CIT(2011) 15 taxmann.com 382 (Delhi) on the similar proposition wherein it is held that such software expenses were recurring in nature expended either to upgrade system or run system. In the light of the above facts and findings we consider that decision of ld. CIT(A) in sustaining the addition after relying on the special bench in case of Amway India Enterprises as discussed supra is not justified. Therefore, the claim of the assessee is allowed. This ground of appeal of the assessee is allowed.”

29. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 5 raised by the Assessee is allowed.

30. Ground No. 6(i) - Including wind power generated which was captively consumed in the total turnover while computing deduction under section 80HHC of the Act, Rs. 30, 13, 33,504/- & 1420/Mum/2007 M/s. Bajaj Auto Limited 31. During the course of assessment the assessing officer included the amount of Rs.30,13,33,504/- pertaining to wind power generated captively consumed as part of total turnover against the submission of the assessee that it did not form part of any goods sold by the assessee but represented only the cost of wind power generated which has been captively consumed. The assessee also submitted that same cannot be treated as part of turnover since it merely represents a credit in the wind will division which was ultimately set off as electricity charges in the manufacture division and consequently had no effect on the accounts of the assessee.

“60. After carefully considering the rival submissions, we find that the Tribunal, with regard to the exclusion of internal consumption of power for the total turnover, had & 1420/Mum/2007 M/s. Bajaj Auto Limited decided the same in favour of the assessee by holding that such an inclusion in the total turnover will result into double addition, because it is already included in the computation of the profit thus, respectfully following the earlier year’s order, we also hold that the internal consumption of power will not form part of the total turnover for the purpose of computing the relief under section 80HHC. Insofar as the exclusion of the scrap sale is concerned, though this issue has been decided against the assessee by the Tribunal in earlier years, however, the Hon'ble Supreme Court in its latest judgment in Civil Appeal no. 5592 of 2008, vide judgment and order dated 10th May 2014, rendered in CIT v/s Punjab Stainless Steel Industries, has held that sale proceeds of scrap cannot be included as part of the total turnover for the purpose of section 80HHC. The Hon'ble Supreme Court has discussed this exclusion of the scrap sales from the turnover in a very detail manner. Thus, respectfully following the aforesaid judgment of the Hon'ble Supreme Court, we set aside the impugned order passed by the learned Commissioner (Appeals) and direct the Assessing Officer to exclude the scrap sale from the total turnover while computing the deduction under section 80HHC. Thus, ground no.18 is treated as allowed.”

Following the decision of ITAT as referred supra we find that decision of ld. CIT(A) in sustaining of disallowance is not justified, therefore, after following the decision of ITAT this ground of appeal of the assessee is allowed.’

35. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 6(i) raised by the Assessee is allowed.

36. Ground No. 6(ii) - Including miscellaneous receipts in respect of scrap sales, miscellaneous scrap sales and sundry sales in the total turnover while computing deduction under section 80HHC: Rs. 21,93,14,159/-.

(a) ITAT – AY 2002-03 (ITA No.3043/Mum/2010) (b) ITAT – AY 1995-96 (ITA No. 3493/Mum/1999) (c) ITAT – AY 1996-97 (ITA No.

2000) (d) ITAT – AY 1997-98 (ITA No. 5030/Mum/2001)

‘44. heard both the sides and perused the material on record. The assessee claimed that such miscellaneous receipts do not form part of the sales of manufacture goods to represent cost of goods manufactured for the purpose of calculating the deduction u/s 80HHC and same ought to be excluded from total turnover. We have perused the decision of ITAT, Mumbai in the case of the assessee itself for A.Y. 1997-98 vide ITA No. 1781/Mum/2000. The relevant extract of the decision is reproduced as under: “5.2 A perusal of the impugned order shows that the Assessing Officer had Included scrap sales generated out of raw material used in manufacturing Rs. 43,92,32,708/, miscellaneous scrap sales consisting of packing material like empty barrels, steel covers, etc. amounting to Rs. 4,82,77,276/- and sundry sales not covered in Items above amounting to Rs. 2,44,358/- In the first appellate proceedings, the CIT(A) held that the sale of aforesaid items should be excluded from total turnover for the purpose of calculating deduction u/s. 80HHC of the Act, as in Assessment Year 1995-96 these very items were excluded from total turnover while computing deduction u/s 80HHC of the Act. In assessment year 1995-96, the assessee carried the issue in appeal before the Tribunal in & 1420/Mum/2007 M/s. Bajaj Auto Limited (supra). The Co-ordinate Bench after placing reliance on the decision rendered by Hon'ble Supreme Court of India in the case of CIT vs. Punjab Stainless Steel Industries Ltd. 364 ITR 144 decided the issue in favour of assessee. Since, in the impugned assessment year there is no distinguishing feature, we see no reason to take a different view. Consequently, additional ground No.1 of the appeal is allowed” Following the decision of ITAT this ground of appeal of the assessee is allowed.”

42. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 6(ii) raised by the Assessee is allowed.

43. Ground No. 8 - Including the following while computing Indirect cost in respect of traded goods in spite of the fact that the aforesaid costs have no connection with export activity

45. Ground No. 7 - Exclusion of entire benefit under Duty Entitlement Passbook scheme credited to the Profit and Loss Account while computing Profits of the Business for the purpose of computing deduction under section 80HHC of the Act, Rs. 53,39,52,123/- & 1420/Mum/2007 M/s. Bajaj Auto Limited 46. Ground No. 10 - Taxability of DEPB benefit receivable Ground No. 7 and Ground No. 10 pertains to taxability of DEBP Benefit and therefore the same are taken together for deciding the matter. The Assessee had credited an amount of Rs. 53, 39, 52,123 to the Profit and Loss Account being amount of export benefit accrued to the Assessee. However, it was submitted that only the profit on transfer of DEPB and the DEBP benefit utilized ought to be taxed and not the entire amount credited to the Profit and Loss Account. In this connection reliance was placed on the decision of the Supreme Court in the case of Excel Industries Limited [2013] 358 ITR 295 (SC).

49. On the other hand, the ld. D.R supported the order of lower authorities. This issue with respect to taxability of DEBP benefit was decided in favour of the Assessee in A.Y. 2002-03 (ITA No.3043/Mum/2010). We observe that facts of this year are similar to A.Y. 2002-03. For reference, we are reproducing the decision of Coordinate Bench in Assessee’s own case for A.Y. 2002-03 as under:-

“53. Heard both the sides and perused the material on record. The facts and findings on the issue of taxability is not fully discussed in the order of the assessing officer and the CIT & 1420/Mum/2007 M/s. Bajaj Auto Limited (A) therefore we restore this issue to the file of the assessing officer to decide the same after examination in accordance with the decision of Hon’ble Supreme Court in the case of Excel Industries Ltd. (2013) 358 ITR 295 (SC). Therefore this ground of appeal of the assessee is allowed for statistical purpose.”

50. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Accordingly, we direct the Assessing Officer to decide the appeal related to Ground No. 10 as per the decision of Hon’ble Supreme Court in the case of Excel Industries Ltd. (2013) 358 ITR 295 (SC).

51. Further, in respect of Ground No. 7, once it is decided that what amount of DEPB Benefit is taxable in the hands of the Assessee, 90% of only the said amount ought to be reduced while computing Profits of the Business for the purpose of computing deduction under section 80HHC of the Act.

52. Ground No. 11 - Disallowance of pro-rata administrative expenses as expenses incurred towards earning dividend income and income from mutual fund units and accordingly reducing deduction under section 80M of the Act: Rs. 2,17,070/-.

55. In the facts of the present case, the Assessing Officer has estimated expenditure incurred towards earning Dividend Income (Rs. 12,71,59,800) and Income from Mutual Fund Units (Rs. 4,39,28,580) as provided at page no. 28-29 of the Assessment Order. In view of the decision of the Hon’ble Bombay High Court in the case of Reliance Industries Ltd. [2017] 86 taxmann.com 24, we direct the Assessing Officer to not deduct any amount of expenditure from Dividend Income (Rs. 12,71,59,800) and Income from Mutual Fund Units (Rs. 4,39,28,580) and accordingly allow deduction under section 80M of the Act. The ground of appeal of the Assessee is accordingly allowed.

56. Ground No. 12 - Disallowance of the provision in respect of ‘Go for Gold Scheme’: Rs. 2 Crores.

& 1420/Mum/2007 M/s. Bajaj Auto Limited 57. The Ld. Counsel of the Assessee submitted that the appellant had launched a sales promotion scheme called “Go for Gold Scheme” wherein the payment of incentive was based on the number of vehicles purchased by the dealers. At the close of Financial Year 2002-03, the Assessee worked out that an amount of Rs. 2,37,70,500/- would be payable to the dealers under the said scheme, a detailed working of which was provided at page no. 156-158 of the paperbook. However, the Assessee only made a provision of Rs. 2,00,00,000 out of the estimated liability of Rs. 2,37,70,500 as the Assessee felt that the reported sales were inflated by the dealers in order to qualify for higher incentives under the said scheme and the assessee was to do a thorough investigation into it.

58. A verification procedure was initiated which was completed by October 2003 and major discrepancies were noted basis which the management of the Assessee decided that no payment would be made to the dealers under the said scheme and accordingly, the provision of Rs. 2 Crores provided was written back in F.Y. 2003-04 relevant to A.Y. 2004-05. The said provision written back to the Profit and Loss Account was accordingly offered to tax in A.Y. 2004-05.

59. In the Assessment Order, the Assessing Officer disallowed merely on the ground that the provision created is a contingent liability. On appeal the ld. CIT (A) has rejected the claim of the assessee. We have heard the rival contentions of both the parties. The Assessee had created provision which was substantiated by a detailed factual working as provided in the paperbook filed by the Assessee. Further, the reversal of provision in subsequent year was also offered to tax. The case of the Assessee would be covered by the decision of the Hon’ble Supreme Court in the case of Rotork Controls India (P.) Ltd. [2009] 314 ITR 62 (SC) wherein & 1420/Mum/2007 M/s. Bajaj Auto Limited the Hon’ble Supreme Court had held that provision for warranty created basis past trends is not a contingent liability and therefore should be allowed as a deduction.

Department’s Appeal - (A.Y. 2003-04) 62. Ground No. 1 - Allowing deduction under section 35D of the Act in respect of GDR issue expenses: Rs. 1, 17, 19,960

& 2899/Mum/2010 (Assessment year: 2002-03) “56.Heard both the sides and perused the material on record. The ld.Counselsubmittedthatidenticalfactandsimilarissuehasbeenconstantly decided in favour of the assessee in the case of the assessee itself in the earlier years by the ITAT, Mumbai and also referred some other decision of Hon’ble Court as under: (a)ITAT- AY 2001-02 (ITA Nos. 4236/Mum/05, Para no. 6-7, page no. 4-7) (b) ITAT -AY 1999-00 (ITA No. 2125/Mum/05, para no. 32, page no. 18-19) (c) ITAT - AY 2000-01 (ITA No. 3055/Mum/05, para no. 94, page no. 46) (d) ITAT -AY 1998-99 (ITA 8952/Mum/2004, para no. 14, pg. no 8) (e) ITAT -AY 1997-98 (ITA No. 5030/Mum/2001, para no. 51 to 52, Pg. no. 37 to 38) (f) CIT vs. Shree Synthetics Ltd. (162 ITR 819) (Madhya Pradesh High Court) (g) Gujarat Narmada Valley Fertilizers Co. Ltd. vs. DCIT (ITA No. 1463/Ahd/ 2007) (h) S.S.I. Limited vs. DCIT (85 TTJ 1049) (Chn)

& 1420/Mum/2007 M/s. Bajaj Auto Limited We have perused the decision of ITAT vide & 4372/Mum/2005. The extract of the relevant decision is reproduced asunder: “6. Considered the rival submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee in the A.Y. 1997-98. While deciding the issue, the Coordinate Bench of the Tribunal in ITA No. 5030/Mum/2001 dated 13.04.2023 held as under:- “48.With regard to Ground No.(k) which is in respect of allowing expenses on GDR issue as covered in section 35D, Ld. AR of the assessee submitted that Expenses amounting to ₹.11,71,99,600/- incurred in connection with issue of GDR of USD 109,999,983/- in the previous year relevant to A.Y.1995-96. Expenditure claimed u/s. 37(1) in A.Y. 1995-96 was disallowed relying on the decision of the Supreme Court in the case of Brooke Bond India Ltd. (225ITR795)-Alternative claim for deduction u/s. 35D not considered in A.Y. 1995-96 since expansion of industrial undertaking was not completed. Copy of Assessment Order for A.Y. 1995-96 is placed on record, Letter dated 11 February 2000 submitted before the Assessing Officer.

& 1420/Mum/2007 M/s. Bajaj Auto Limited 28. We have heard the rival contentions and perused the facts of the case. From the reading of the provisions contained in section 35D and the arguments of both the parties, we are of the view that there are no change in the facts as in the last 7 years and, therefore, relying upon the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT 193 ITR 321, it would not be at all appropriate to allow the position to be changed in a subsequent year. Therefore, in the circumstances and facts of the case, we direct the AO to allow the claim of the assessee and accordingly the order of the learned CIT (A)is reversed. Thus, Ground no.10 of the assessee’ appeal is allowed.”

66. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 1 raised by the revenue is dismissed.

67. Ground No. 2 - Depreciation allowed in respect of sale and lease back transaction with JCT Limited: Rs. 26, 95,019/-

68. Ground no. 2 raised by the revenue pertains to depreciation allowed by the CIT (A) in respect of sale and lease back transaction with JCT Limited. The assessee had entered into sale and lease back transaction with JCT Limited during the previous year relevant to the Assessment Year 1996-97 for lease of new Textiles Machineries amounting to Rs. 6,99,22,335/-. The assessee has claimed & 1420/Mum/2007 M/s. Bajaj Auto Limited depreciation @ 25% to the amount of Rs. 26, 95,019/- during the year under consideration. The Assessing Officer in A.Y. 1996-97 disallowed depreciation on the said asset. The said action of the Assessing Officer was followed in the year under consideration.

69. This issue is recurring in nature and has been decided in favour of assessee in A.Y. 1997-98 to 2002-03. We observe that facts of this year are similar to the other years decided in favour of assessee. For reference, we are reproducing the decision of Coordinate Bench in assessee’s own case in AY 2002-03 as under:- & 2899/Mum/2010 (Assessment year: 2002-03) “59.Heard both the sides and perused the material on record. The ld. Counsel has submitted that similar claim of depreciation in the case of the assessee has been allowed by the ITAT in the earlier years as under: (a)ITAT-AY 2001-02 (ITA No. 4236/Mum/05) (b)ITAT-AY 1999-00 (ITA No. 2125/Mum/05) (c) ITAT-AY 2000-01 (ITA No. 3055/Mum/05) (d) ITAT-AY 1998-99 (ITA No. 8952/Mum/2004) (e) ITAT - AY 1997-98 (ITA No. 5030/Mum/2001) We have perused the decision of ITAT vide 4236/Mum/2005.The relevant extract of the decision is reproduced as under: “10.Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee in the A.Y. 1997-98. While deciding the issue, the Coordinate Bench of the Tribunal in dated 13.04.2023, held as under: - “56. with regard to Ground no. (j) Which is in respect of holding that the lease agreement with JCT Ltd is genuine and the assessee company is entitled to depreciation on the assets leased to JCT Limited. Ld. AR of the assessee submitted that Lease agreement with JCT Limited dated 26 March 1996 – BAL purchased assorted items of equipments at the original cost of purchase,i.e.₹.6,92,22,335/- the assets were leased back to JCT. Further, he brought to our notice the decision of the Coordinate Bench in assessee’s own case for the Assessment Year 1996-97 and by referring to Para No. 24 he submitted that depreciation on & 1420/Mum/2007 M/s. Bajaj Auto Limited such assets claimed and allowed by the order of the Tribunal in the earlier year by dismissing the revenue ground in A.Y. 1996-97. During the year under consideration, BAL has claimed depreciation on the opening written down value of the block which includes the above assets. Once depreciation allowed in earlier year and such asset forms part of block of assets, depreciation ought to be allowed in subsequent years. For the above proposition he relied on the following case law:

(a)Director of Income-tax (International Taxation) - II v. HSBC Asset Management India Private Limited [2014] 47 taxmann.com 286 (Bombay)

(b) Commissioner of Income-tax 7 v. Sonic Biochem Extractions Private Limited (ITA No. 2088 of 2013) (Bombay)

(c) CIT V. G.N. Agrawal (Individual) 217 ITR 250

57. On the other hand, Ld. DR relied on the order of the Assessing Officer.

“25.3 We have heard the submissions made by rival sides and have examined the orders of authorities below. In the light of findings given by Assessing Officer to reject assessee's claim following points were considered by the CIT (A).

"(a) Whether the assessee can be said to have acquired ownership of the assets in question from the Electricity Boards for purpose of claiming depreciation.

(b) Whether the transactions entered into with the Electricity Boards were genuine lease transactions.

(c) Whether the transactions can be characterized as loan transactions against security of the assets in question

(d) Whether the transactions can be treated as hire-purchase agreements"

The CIT(A) after considering the facts of the case and lease agreement threadbare answered the first two issues in affirmative holding that the assessee had acquired the ownership of the assets purchased from Electricity Board and hence, eligible to claim depreciation on the said assets. The CIT (A) further held that the lease agreements with the State Electricity Board i.e. HSEB and PSEB are genuine lease transactions.

& 1420/Mum/2007 M/s. Bajaj Auto Limited As regards the issue raised in (c) & (d) above, the CIT(A) answered the question in negative holding that the transaction of purchase of assets from HSEB and PSEB and leasing it back to the State Electricity Board is not a hire purchase agreement nor it is a loan transaction against security of the assets. We, concur with the detailed and reasoned findings of the CIT (A) on this issue, they are not reproduced for the sake of brevity. The Hon'ble Supreme Court of India in the case of CIT vs. K.Y. Pillah & Sons, 63 ITR 411 and Hon'ble Delhi High Court in the case of CIT vs. Global Vantedge P. Ltd., 354 ITR 21 held that where the Tribunal concur with the view of CIT(A), the findings of CIT(A) need not be reproduced.

25.4 We find that in the case of CIT vs. Punjab State Electricity Board, wherein after the sale of asset the same asset was leased back to the Punjab State Electricity Board and the Electricity Board claimed deduction in respect of lease rental, the Department allege that sale of asset to third party and the same asset being taken on lease for claiming deduction in respect of lease rental is a colourable device to reduce tax liability and have denied the same. The Tribunal decided the issue in favour of the assessee holding the transaction of sale and lease back of asset as genuine. The Revenue carried the issue in appeal before the Hon'ble High Court raising following substantial question of law:

Whether on the facts and in the circumstances of the case, the income-tax Appellate Tribunal is legally correct in holding that in the present case/ no colourable device has been adopted by the assesses, even when the intention of the assessee behind drafting the agreements between the assessee and the financial institution was to reduce the tax liability artificially of both the parties and as such the ratio of the decision of the hon'ble apex court in the case of McDowell Ltd. v, CTO[1985]154 ITR 148(SC) has wrongly been, interpreted"

The Hon'ble High Court rejected the appeal of Revenue by holding as under:

& 1420/Mum/2007 M/s. Bajaj Auto Limited 4. It was further observed that the above principle had been approved in India in the Judgment of the Hon’ble Supreme Court in CWT Vs. A. Roman and Co. [1968] 67 ITR 11 (Mad) and the observations of Chinnappa Reddy J. in McDowell could not be treated as the ratio of the Judgment in view of opinions of majority to the effect (head note of 154 TR 148): Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges."

by the revenue is dismissed.”

11. Respectfully following the above decision and following the principle of consistency, the view taken by the Tribunal in A.Y.1997-98 is respectfully followed, accordingly, ground raised by the revenue is dismissed.” Following the decision of ITAT as referred supra we don’t find any error in the decision of ld.CIT (A), therefore, this ground of appeal of the revenue stand dismissed.”

& 2899/Mum/2010 (Assessment year: 2002-03) “62.Heard both the sides and perused the material on record. The ld. Counsel at the outset brought to our notice that similar issue on identical facts has been adjudicated in favour of the assessee by the ITAT constantly in the earlier years as under:

(b) ITAT-AY 1999-00 (ITA No. 2125/Mum/05)

(c) ITAT-AY 2000-01 (ITA No. 3055/Mum/05)

(d) ITAT-AY 1998-99 (ITA No. 8952/Mum/2004) e) ITAT-AY 1997-98 (ITA No 5030/Mum/2001)

(f) ITAT AY 1996-97 (ITA No. 1781/Mum/2000) (g) ITAT AY 1995-96 (ITA No. 3493/Mum/1999) (h) ITAT AY 1994-95 (ITA No. 6964/Mum/2014) (i) ITAT AY 1993-94 (ITA No.6963/Mum/2014) (j) CIT vs. TVS Motors Ltd [2014] 364 ITR 1 (Mad) (k) Malerkotla Steels & Alloys P Ltd (336 ITR 49) (P&H) (l) CIT vs. Sunbeam Auto Ltd [2012] ITA 351 of 2012 (Delhi)

We have perused the decision of ITAT vide ITA No. 4236/Mum/2005.The relevant extract of the decision is reproduced as under:

“34. During the course of assessment, the AO has disallowed the deduction of expenditure incurred on dies and moulds as revenue expenditure to the amount of Rs 28,04,53,641/-. The Ld. CIT (A) has allowed the claim of the assessee. We consider that similar issue on identical fact has been adjudicated by the coordinate bench of ITAT in the case of the assessee itself vide (A.Y. 1995-96), 1781/Mum/2000 (1996-97), 5030/Mum/2001(A.Y.1997-98), 8952/Mum/2004(1998-99).The relevant extract of the decision of the ITAT for A.Y.1997-98 vide is reproduced as under:-

16.0 Ground No.3 raised by the revenue relates to the disallowance of expenses incurred on Dies and Moulds amounting to Rs. 30.47 crores. The assessee treated the above said expenses as Capital in nature in the books of account, but claimed the same as revenue expenditure for income tax purposes. This is a recurring issue. The co- ordinate bench has decided this issue in favour of the assessee by confirming the decision rendered by Ld. CIT (A) in holding that the expenditure incurred in purchase of dies and moulds are allowable as revenue expenditure in A.Y.1990-91. The said decision is being followed year after year. In A.Y. 1997-98 also in dated 13.04.2023, the Tribunal has upheld the identical decision taken by Ld. CIT(A).Consistent with the view taken by the co-ordinate benches year after year, we & 1420/Mum/2007 M/s. Bajaj Auto Limited confirm the order passed by Ld. CIT(A) in holding that the expenditure incurred on Dies and Moulds is allowable as deduction.

74. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 3 raised by the revenue is dismissed.

75. Ground No. 4 - Including the lease rental income earned by leasing out the dies and moulds to the job workers / suppliers under the head ‘profits & gains of business’ as against the assessee’s declaring this income as ‘income from other sources’ and directing to allow the depreciation on these moulds and dies.

& 2899/Mum/2010 (Assessment year: 2002-03) “65.Heard both the side and perused the material on record. The ld. counsel submitted that similar issue on identical fact has been adjudicated by the ITAT, in the case of the assessee itself for the earlier years as under: (a) ITAT-AY 2001-02 (ITA No. 4236/Mum/05) (b) ITAT-AY 1999-00 (ITA No. 2125/Mum/05) (c) ITAT-AY 2000-01 (ITA No. 3055/Mum/05) (d) ITAT AY 1998-99 (ITA No. 8952/Mum/2004) (e) ITAT AY 1997-98 (ITA No. 5030/Mum/2001) (f) ITAT AY 1996-97 (ITA No. 1781/Mum/2000) (g) ITAT AY 1995-96 (ITA No. 3493/Mum/1999) (g) ITAT- AY 1994-95 (ITA No. 6964/Mum/2014) (i) ITAT - AY 1993-94 (ITA No.6963/Mum/2014) (j) CIT vs. Barium Chemicals Ltd. [1987] 168 ITR 164 (AP) We have perused the decision of ITAT vide ITA No. 4236/Mum/2005.The relevant extract of the decision is reproduced as under: “16. With regard to Ground No. 4 which is in respect of allowing penalty charges recovered from suppliers of capital goods as capital receipts, Ld. AR of the assessee brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench of this tribunal and decided the issue in favour of the assessee and against the revenue.”

& 1420/Mum/2007 M/s. Bajaj Auto Limited Following the decisions of ITAT as referred above; we don’t find any merit in this ground of appeal of the revenue therefore the same stand dismissed.”

82. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 5 raised by the revenue is dismissed.

83. Ground No. 6 - Allowing deduction of expenditure incurred in respect of jigs and fixtures as revenue expenditure: Rs. 6, 11, 99,840/-

84. Ground no. 6 raised by the revenue pertains to allowing deduction in respect of expenditure incurred on jigs and fixtures as revenue expenditure amountingtoRs.6,11,99,840/-. The Assessee had claimed a deduction of Rs. 6, 11, 99,840/- in the return of income filed in respect of jigs and fixtures. In view of the Assessee, jigs and fixtures represent a part of the Assessee’s plant and machinery and since jigs and fixtures purchased in the past when the plant and machinery was put to use for the first time had been capitalised, the cost of new jigs and fixtures used during the year represented only replacements either on account of wear and tear of jigs and fixtures. The expenditure on jigs and fixtures is in the nature of replacement of parts used in the manufacturing process and not acquisition of capital assets, and accordingly is eligible for deduction as revenue expenditure.

(a) ITAT-AY 2001-02 (ITA No. 4236/Mum/05) (b) ITATAY 1999-00 (ITA No. 2125/Mum/05) (c) ITATAYA 2000-01 (ITA No. 3055/Mum/05) (d) ITAT AY 1998-99 (ITA No. 8952/Mum/2004) (e) ITAT-AY 1997-98 (ITA No. 5030/Mum/2001) (f) ITAT AY 1996-97 (ITA No. 1781/Mum/2000) (g) ITAT AY 1995-96 (ITA No.3493/Mum/1999) (h) ITAT-AY 1994-95-(ITA No.6964/Mum/2014) (i) ITAT-AY 1993-94-(ITA No.6963/Mum/2014) (j) ITAT-AY 1991-92-(ITA No.6324/Mum/2010) (k) ITAT-AY 1990-91-(ITA No.6325/Mum/2010) (l) CIT vs. TVS Motors Ltd [2014] 364 ITR 1 (Mad) (Ratio applied)

(m) Malerkotla Steels & Alloys P Ltd [2011] 336 ITR 49 (P&H) (Ratio Applied) We find that this is recurring issue and same is decided in favour of theassesseebytheITATintheearlieryears.Therelevantextractofthedecision is reproduced as under: “20. With regard to Ground No. 5 which is in respect of allowing deduction of expenditure incurred in respect of jigs and fixtures as revenue expenditure, Ld.ARoftheassesseebroughttoournoticethattheissueinappealhasbeenconsideredbytheCo- ordinateBenchofthistribunalinassessee’sowncaseand decided the issue in favour of the assesse and against the department. Following the decision of ITAT as discussed above, we don’t find any merit in this ground of appeal the revenue therefore the same stand dismissed.

86. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 6 raised by the revenue is dismissed.

87. Ground No. 7 - Allowing deduction of amount written off against lease hold land amounting to Rs. 42, 10,566/-

88. Ground no. 7 raised by the revenue pertains to Ld. CIT (A) allowing deduction for premium written off in respect of leasehold land amounting to Rs. 42, 10,566/- in the profit and loss account. The assessee had taken land on lease for a period of 99 / 95 years from MIDC for setting up factories. The Assessee had upfront paid premium for obtaining the leasehold rights from MIDC. The Assessee has written off such lease premium paid over the period of the lease. Accordingly, during the year under consideration, the Assessee has debited an amount of Rs. 42, 10,566/- towards Amount written off against leasehold land. The Assessee submitted that annual rent payable as per the lease agreement is extremely low and cannot be considered as economical rent. Thus, premium paid is in effect advance rent and hence deduction should be allowed to the Assessee.

ITA Nos. 3043 & 2899/Mum/2010 (Assessment year: 2002-03) “13. Heard both the sides and perused the material on record. With the assistance of ld. representative we have perused the decision of ITAT Mumbai in the case of the assessee itself vide 28.11.2023. The relevant extract of the decision is reproduced asunder: “40.The assessee claim annual rent payable as per the lease agreement as deduction which was not allowed by the AO. However, the Ld. CIT (A) allowed the claim of the assessee. We find that similar issue on identical fact has been decided by the co-ordinate bench of ITAT in the case of assessee itself vide (A.Y. 1995-96), 1781/Mum/ 2000 (1996- 97),5030/Mum/2001 (A.Y. 1997-98), 8952/Mum/2004 (1998- 99).

41. Following the decision, we do not find any merit in the appeal of the revenue. Therefore, this ground of appeal of the revenue stand dismissed. Following the decision of the ITAT as referred (supra) we allow this ground of appeal of the assessee.”

90. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 7 raised by the revenue is dismissed.

91. Ground No. 8 –Allowing deduction in respect of foreign travelling expenses of wife of Managing Director: Rs. 1, 72,455/-

92. Ground no. 8 raised by the revenue pertains to Ld. CIT (A) allowing deduction in respect of foreign travelling expenses of wife of managing director while accompanying the managing director for his business meeting during his travelling abroad. This issue is recurring in nature and has been decided in favour of revenue in A.Y. 1998-99 to 2001-02. We observe that facts of this year are & 1420/Mum/2007 M/s. Bajaj Auto Limited similar to the other years decided against the assessee. For reference, we are reproducing the decision of Coordinate Bench in assessee’s own case for AY 2001- 02 as under:-

& 4372/MUM/2005 (Assessment year: 2001-02) “30. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the Revenue for the A.Y. 1998-99. While deciding the issue, the Coordinate Bench in dated 22.08.2023 held as under: - “25.0 Ground no.12 raised by the revenue relates to the disallowance of expenses incurred by the assessee on foreign travel by the wife of Managing Director along with him. The assessee had incurred a sum of Rs. 4, 11,981/- towards foreign travel expenses of Mrs. Rupa Bajaj, wife of Managing director. The AO disallowed the same. The Ld. CIT (A) noticed that the Managing director had travelled abroad for business purposes and Mrs Rupa bajaj has accompanied him to assist the managing director to discharge his social cum business obligations. The Ld. CIT (A) further noticed that similar expenditure incurred in AY 1986-87 has been allowed by the Tribunal. The Ld CIT(A) also relied upon the decision rendered by Hon’ble Kerala High Court in the case of CIT vs. Apollo Tyres Ltd (237 ITR 706) and the decision rendered by Mumbai bench of Tribunal in the case of Glaxo Laboratories Ltd (18 ITD 226). Accordingly, the Ld. CIT (A) deleted the disallowance. 25.1 The Ld. D.R submitted that the foreign travel expenses incurred for wife of Managing director is not related to the business and hence the AO has rightly disallowed the same. The Ld. A.R, however, submitted that the managing director has visited Netherlands and UK in connection with business meeting as a member of CII – CEO mission to UK for attending India Growth Fund Board meeting. His travel and his wife’s travel have been approved by the Board. He further relied upon the decision rendered by Hon’ble Bombay High Court in the case of Alfa Laval (I) Ltd (149 taxman 29) to contend that there is no requirement of making any disallowance. 25.2 We heard the parties on this issue and perused the record. We notice that the Hon’ble jurisdictional High Court in the case of Alfa Laval (I) Ltd has upheld the deletion of disallowance of expenses incurred on the foreign trips of company’s President only for the reason that there was concurrent finding of both Ld CIT(A) and the Tribunal that it has been incurred for the purposes of business. However, the jurisdictional high court has clarified that the case needs to be decided on its own facts primarily considering the business expediency. It was further held that this kind of claim is to be allowed only if it is connected with the business of the assessee. 25.3 In the instant case, we notice that the Managing director Shri Rahul Bajaj has visited Netherland & UK for attending India Growth fund Board Meeting. The Board resolution with regard to the expenses to be incurred on wife of Shri Rahul Bajaj reads as under:-

& 1420/Mum/2007 M/s. Bajaj Auto Limited “Further Resolved that air-fare and other expenses in connection with the above visit (including those of Smt. Bajaj) be and are hereby authorized to be borne by the Company.” We notice that the Board resolution did not bring out any business expediency. Further, the assessee has also not proved existence of any commercial or business expediency in incurring the foreign travel expenses of wife of M D except producing copy of Board resolution, in which also, no reason was given. There should not be any doubt that this is a factual aspect and the facts prevailing in each foreign trip has to be examined. Accordingly, the decision taken by the Tribunal in AY 1986-87 may not be relevant. We notice that the Ld CIT(A) has also not brought out the business or commercial expediency in incurring expenses on foreign trips of wife of MD, but deleted the addition on the basis of quantum of expenditure, status of the M D and approval by Board. These are not the proper reasons for allowing this type of expenditure, as held by the jurisdictional High Court. Accordingly, we set aside the order passed by Ld. CIT (A) on this issue and confirm the disallowance made by the AO.”

by the revenue is allowed.”

93. In view of the above, as the issue is recurring in nature and the Ld. AR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 8 raised by the revenue is allowed and decided against the assessee.

ITA Nos. 3043 & 2899/Mum/2010 (Assessment year: 2002-03) “16.During the course of appellate proceedings before us the ld. Counsel submitted that the Rule 8D cannot be applied in the case of the assessee since assessee has not borrowed any amount for making investment from which it has earned the exempt income. The assessee also submitted that it was having own funds of Rs. 28,655.77 crores against investment of Rs. 1,966 crores. He further submitted that assessee has borrowed funds of Rs. 626.09 crores out of which Rs. 588.96 crores represented sale tax deferral liability under the package scheme of incentives which was not interest bearing. The ld. Counsel also referred the decision of ITAT in the case of assessee vide & 1399/Mum/2005 & & 2655/Mum/2005 dated 28.11.2023 wherein similar issue has been adjudicated in favour of the assessee.

54. The Ld. CIT (A) has deleted the addition. After hearing both the sides and perusal of the material on record we find that the same issue on identical fact has been decided in favour of the assessee itself by the coordinate of ITAT for the A.Y. 1998-99 (ITA No. 8952/Mum/2004). The relevant extract of the decision of ITAT is reproduced as under:

& 1420/Mum/2007 M/s. Bajaj Auto Limited “24.0Groundno.11raisedbytherevenuerelatestodisallowanceofinterestexpensesrelatabletoex emptincome.TheAOnoticedthattheassessee has borrowed funds and paid interest thereon. The assessingofficertooktheviewthatcommonfundshavebeenusedtomakeinvestments and accordingly disallowed proportionate interest expenses. The ld. CIT (A) noticed that own funds available with the assessee was more than the value of investments. Accordingly, he held no disallowance out of interest expenses is called for. 24.1We heard the parties and perused the record. We notice that the view taken by Ld. CIT (A) get support from the decision rendered by Hon’ble Bombay High Court in the case of HDFC Bank Ltd (366 ITR 505)(Bom). The jurisdictional Bombay High Court has held in the above said case that the interest disallowance u/r 8D (2)(ii) of I T Rules is not called for when the own funds available with the assessee is in excess of the value of investments. In our view, the ratio of the said decision shall apply to the facts of the present issue. Accordingly, we confirm the order passed by Ld. CIT (A) on this issue.”

97. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 9 raised by the revenue is dismissed.

98. Ground No. 10 - Deleting the disallowance of Rs. 5, 51,121/- made under section 14A of the Act while computing book profit u/s. 115JB of the Act.

99. Ground no. 10 raised by the revenue pertains to Ld. CIT (A) deleting the disallowance made by the AO amounting to Rs. 5, 51,121/- under section 14A of the Act while computing book profit under section 115JB of the Act. In the & 1420/Mum/2007 M/s. Bajaj Auto Limited Assessment Order, the Assessing Officer computed disallowance under section 14A of the Act. The said disallowance was made while computing income under the normal provisions of the Act and also while computing book profits under section 115JB of the Act. In this regard, the Ld. Counsel of the Assessee placed reliance on the decision of the Special Bench of the Tribunal in the case of ACIT Vs. M/s. Vireet Investments Pvt Ltd. (165 ITD 27) (Delhi - Trib.) (SB)had held that the computation mechanism provided under Rule 8D(2) of the Rules cannot be made applicable for working out the disallowance under Clause(f) of Explanation 1 to Section 115JB (2) of the Act. The Ld. DR relied on the order of the Assessing Officer.

101. Ground No. 11 - Reducing the disallowance of administrative expenditure attributable to earning exempt income from Rs. 1,27,24,625/- to Rs. 2,41,422/-.

102. Ground no. 11 raised by the revenue pertains to reducing the disallowance of administrative expenditure attributable to earning exempt income from Rs. 1,27,24,625/- to Rs. 2,41,422/-. In the Assessment Order at para 10.20, the Assessing Officer had attributed different expenses towards earning exempt income and accordingly computed disallowance under section 14A of the Act. However, the CIT (A) directed the Assessing Officer to exclude expenses in the nature of power and fuel, repairs, rates and taxes, insurance as the said & 1420/Mum/2007 M/s. Bajaj Auto Limited expenditure would have no nexus with earning exempt income. The Learned Counsel of the Assessee submitted that though the Assessee believes that no expenditure was incurred for earning exempt income, the expenses considered by the CIT (A) to compute disallowance would sufficiently cover the expenditure incurred towards earning exempt income. The Ld. DR placed reliance on the decision of the Assessing Officer.

103. Heard both the parties and considering the facts of the case, the CIT(A) has right fully excluded expenditure in the nature of power and fuel, repairs, rates and taxes, insurance for computing disallowance under section 14A of the Act. Accordingly, we see no merit in the said ground. We uphold the direction of the CIT (A), and accordingly, the ground raised by the Revenue is dismissed.

104. Ground No. 12 - Allowing deduction for Prior period expenses: Rs. 3, 78, 36,239/-

105. Ground no. 12 raised by the revenue pertains to Ld. CIT(A) deleting the disallowance made by the AO in respect of prior period expenses amounting to Rs. 3,78,36,239/- During the year under consideration expenses pertaining to A.Y. 2002-03 were crystallized and accordingly the same was debited to profit and loss account of the year relevant to AY 2003-04. The Tax Auditor reported the same in Tax Audit Report as prior period expenses. The Assessee claimed deduction for such expenses in the year of debit i.e. AY 2003-04. The Assessing Officer however allowed deduction of such expenditure in AY 2002-03 as the expenditure pertained to AY 2002-03. The Ld. CIT(A) deleted the disallowance made in AY 2003-04 on the ground that prior period expenditure ought to be allowed as a deduction in the year of debit.

& 1420/Mum/2007 M/s. Bajaj Auto Limited 106. This issue is recurring in nature and has been decided in favour of assessee in A.Y. 1998-99, A.Y. 1999-00 and A.Y. 2002-03. We observe that facts of this year are similar to the other years decided in favour of assessee. For reference, we are reproducing the decision of Coordinate Bench in assessee’s own case for AY 2002- 03 as under:-

& 2899/Mum/2010 (Assessment year: 2002-03) “74.Heard both the sides and perused the material on record. During the course of appellate proceedings before us the ld. Counsel submitted that these expenses were crystallised during the year and accordingly, the same was debited to the profit and loss account for the year underconsideration.Healsoreferredthatsimilarissuewasdecidedinthecase of the assessee itself in the earlier year by the ITAT and in other cases by the various courts as under: (a) ITAT-AY 1999-00 (ITA No. 2125/Mum/05) (b) ITAT AY 1998-99 (ITA No. 8952/Mum/2004) (c) Maharashtra State Electricity Distribution Co. Ltd vs. DCIT (ITA NO.3383/ MUM/2019) (d) CIT vs. Nagri Mills Co. Ltd. [1958] 33 ITR 681 (Bom) (e) CIT vs. M/s. Vishnu Industrial Gases P. Ltd (ITR No. 229/1988) (Delhi High Court) (f) John Fowler (India) Pvt. Ltd. vs. THIS (ITA No. 4691/Mum/2005) (g) Escorts Limited vs. DCIT (ITA No.4673/Del/2005) (Delhi Tribunal) (h) Saurashtra Cement & Chemical Industries Ltd. vs. CIT *1995+ 213 ITR 523 (Gujarat)” We find that this is recurring issue and same is decided in favour of the assessee by the ITAT in the earlier years. The relevant extract of the decision is reproduced as under: “56. during the course of assessment assessee claimed expenditure amounting of Rs. 2, 29, 71,289/- pertaining to assessment year 1998-99 debited in assessment year 1999-2000. The AO has rejected the claim of deduction on the ground that this expenditure was not pertaining to the year under consideration. The ld. CIT (A) has allowed the claim of the assessee following the earlier years orders on the basis of which similar claim of expenditure were allowed.

107. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Accordingly deduction of prior period expenditure ought to be allowed in the year of debit. Resultantly, ground no. 12 raised by the revenue is dismissed. Correspondingly, as per the consistent basis on which prior period expenditure is being allowed in the year of debit, the prior period expenditure debited in AY 2004-05 which has been allowed by the AO in this year would need to be added back in case the same is allowed to the assessee in AY 2004-05 being the year of debit.

108. Ground No. 13 - Allowing deduction in respect of expenditure incurred in foreign currency where no TDS is deducted.

109. Ground no. 13 raised by the revenue pertains to deleting the disallowance made by the AO under section 40(a)(i) of the Act in respect of expenditure & 1420/Mum/2007 M/s. Bajaj Auto Limited incurred in foreign currency amounting to Rs. 57,07,586/-. During the year the assessee has incurred expenditure in foreign currency of Rs. 10, 50,842/- on which tax was not deducted at source. The assessing officer has disallowed the same u/s. 40(a) (i) of the Act. We find that assesse has incurred expenditure in foreign currency in respect of drawing and designing charges of Rs. 52,58,340/- and Materials consumed for R&D activity of Rs. 4,49,246/- on which TDS was not deducted. We find that ld. CIT (A) has considered this fact that in both the cases the payments were made to the parties who were non-resident and were not having any permanent establishment in India, therefore, no TDS was deducted.

& 2899/Mum/2010 (Assessment year: 2002-03) “77.Heard both the sides and perused the material on record. We find that assesse has incurred expenditure in foreign currency in respect of drawing and designing charges of Rs.6,35,107/-and annual maintenance contract for software related R&D activity of Rs. 4,15,735/- on which TDS was not deducted. We find that ld. CIT (A) has considered this fact that in both the cases the payments were made to the parties who were non-resident and were not having any permanent establishment in India, therefore, no TDS was deducted. We have also considered that similar issue on identical fact has been decided in favour of the assessee by the ITAT in the earlier years: (a) ITAT-AY 2001-02 (ITA No.3383/MUM/2019) (b) ITAT- AY 2000-01 (ITA No. 3055/Mum/05) In the aforesaid cases the ITAT held that since the payment were made to the non-resident who were having no business connection in India, therefore, appeal of the revenue was dismissed.

78. In view of above facts and findings wedon’t find any merit in this ground of appeal of the revenue therefore, the same stand dismissed.”

& 1420/Mum/2007 M/s. Bajaj Auto Limited 111. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 13 raised by the revenue is dismissed.

& 1420/Mum/2007 M/s. Bajaj Auto Limited 115. This issue is recurring in nature and has been decided in favour of assessee in A.Y. 1984-85 to 1987-88 and A.Y. 2002-03. We observe that facts of this year are similar to the other years decided in favour of assessee. For reference, we are reproducing the decision of Coordinate Bench in assessee’s own case for AY 2002- 03 as under:- & 2899/Mum/2010 (Assessment year: 2002-03) “81. Heard both the sides and perused the material on record. Assessee has incurred the aforesaid expenditure in connection with the electricity service connection charges and submitted that no capital asset was created out of such expenditure of Rs. 4,20,00,000/- and Rs.4,66,00,000/-paid to Maharashtra State Electricity Board(MSEB) and Maharashtra Energy Development Agency (MEDA) respectively. The company has installed windmills for captive consumption. The power generated is transported to MSEB grid. The MSEB in order to connect the locations of wind farms with the grid, lays cables for which it takes outright contribution. The cables laid down were property of MSEB. WehavealsoperusedthefollowingdecisionofITATreferredbytheld.Counsel which is reproduced as under: “(a) ITAT-A.Y.-1984-85 (b) ITAT-AY-1985-86- (ITA No. 7037/Bom/88) (c) ITAT-A.Y.-1986-87-(ITA No. 7058/Bom/88) (d) ITAT-A.Y.-1987-88- (ITA No. 49/Bom/1991) (e) CIT vs. Excel Industries (122 ITR 995) (Bom)” The extract of decision of ITAT pertaining to assessment year 1987-88vide which is reproduced as under: “55. We have carefully considered the arguments of both the sides and perused the material placed before us, from the perusal of the assessment order, it is evident that the AO has nowhere mentioned that the assessee is the owner of the extended electricity line to the assessee's unit. On the other hand the AO observed "the capital contribution was made for creating special EHV supply facilities to assessee's requirements. The expenditure is certainly in the nature of providing enduring advantage' over a period of several years". The learned DR has not brought on record any evidence to establish that the assessee is the owner of the electricity line from Aurangabad sub-station to the assessee's unit. The learned counsel for the assessee made a statement at Bar that the assessee is not the owner of the said electricity line and has not claimed any depreciation on this payment of Rs.1,40,00,000/. This statement & 1420/Mum/2007 M/s. Bajaj Auto Limited made at Bar remain uncontroverted. In view of these facts, we hold that the assessee is not the owner of the electricity line, for which the assessee made the payment of Rs.1, 40, 00,000/-.” After considering the above facts and finding we don’t find any reason to interfere in the decision of ld. CIT (A), therefore, this ground of appeal of the revenue stand dismissed.”

116. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 14 raised by the revenue is dismissed.

117. Ground No. 15(a) - Including excise duty and sales tax from the total turnover while computing deduction u/s.80HHC.

118. Ground no. 15(a) raised by the revenue pertains Ld. CIT(A) excluding the excise duty and sales tax from the total turnover while computing deduction under section 80HHC by relying on the Bombay High Court in the case of CIT Vs. Sudarshan Chemicals Industries Ltd. 245 ITR 769. This issue is recurring in nature and has been decided in favour of assessee in A.Y. 1995-96 to 1997-98 and A.Y. 1999-00. We observe that facts of this year are similar to the other years decided in favour of assessee. For reference, we are reproducing the decision of Coordinate Bench in assessee’s own case for AY 1999-00 and AY 2000-01 as under:-

& 1933/Mum/2005 & & 2655/Mum/2005 (Assessment year: 1999-00 & 2000-01) “106. Heard both the sides and perused the material on record. We find that identical issue on similar ground has been decided by the coordinate bench of the ITAT in favour of the assessee: a. ITAT – AY 1996-97- para 5 (Pg-4)

& 1420/Mum/2007 M/s. Bajaj Auto Limited b. ITAT – AY 1995-96 – para 10-14 (Pg. 5-12) c. ITAT – AY 1997-98 – Para 27-30 (Pg. 19-21) The relevant of extract of the decision of ITAT for A.Y. 1997-98 vide assessment year 1997-98 is reproduced as under: “5. The first issue raised by the assessee in appeal is against the exclusion of excise duty and sales tax from total turnover for the purpose of computing deduction u/s 80HHC of the Act. A perusal of the assessment order and the order of CIT (A) would show that per se assessee's eligibility to claim deduction u/s 80HHC is not disputed. It is only some of the components of total income from exports on which the assessee has claimed benefit of deduction u/s 80HHC of the Act that have been excluded by the Assessing Officer while computing the deduction. In Assessment Year 1995-96 similar ground was raised by the assessee before the Tribunal assailing exclusion of excise duty and sales tax from the total turnover while computing deduction u/s 80HHC of the Act. The Coordinate Bench in appeal by the assessee in ITA No.3144/Mum/1999(supra) decided this issue in favour of the assessee by placing reliance on the judgment rendered by Hon'ble Supreme Court of India in the case of CIT vs. Laxmi Machine Works, 290 ITR 667. The facts germane to the issue raised the present appeal are admittedly identical to the facts in Assessment Year 1995-96, therefore, following the decision of Co-ordinate Bench the ground No.1 raised in the appeal is allowed for parity of reasons.” Following the decision of ITAT as supra we don’t find any merit in this ground of appeal, therefore, the same stand dismissed.”

119. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 15(a) raised by the revenue is dismissed.

120. Ground No. 15 (b) - Excluding 90% of the technical know-how fees amounting to Rs.1, 00, 30,883/- from the profits of the business while computing deduction u/s.80HHC.

121. Ground no. 15(b) raised by the revenue pertains to Ld. CIT(A) not excluding 90% of the technical know-how fees amounting to Rs.1 ,00,30,883/- from the & 1420/Mum/2007 M/s. Bajaj Auto Limited profits of the business while computing deduction u/s.80HHC of the Act. This issue is recurring in nature and has been decided in favour of assessee in A.Y. 1995-96 to 2000-01. We observe that facts of this year are similar to the other years decided in favour of assessee. For reference, we are reproducing the decision of Coordinate Bench in assessee’s own case for AY 1999-00 and AY 2000-01 as under:-

& 1933/Mum/2005 & & 2655/Mum/2005 (Assessment year: 1999-00 & 2000-01) “58. During the course of assessment the assessing officer has reduced 90% of the following items from the profit of the business while computing the deduction u/s 80HHC. “a. Technical know-how: Rs.4, 57, 7,672 b. Insurance claims: Rs.37, 89,316 c. Miscellaneous receipts: Rs.50, 77, 36,264 d. Sundry Credit Balance: Rs.19, 18,654 e. Bill Discounting: Rs.1, 21, 32,226 f. Provision no longer required: Rs.15, 66, 62,368 However, the ld. CIT(A) has excluded the aforesaid items while computing the profit of the business holding that these items have direct nexus with the business activity of the assessee and are not specifically mentioned in explanation (baa), after following his order for assessment year 1998-99. During the course of appellate proceedings before us the ld. Counsel submitted that identical issue on similar fact for assessment year 1995-96 to 1998-99 has been adjudicated by the ITAT in favour of the assessee by the following pronouncements: a. ITAT- AY 1998-99 (ITA No.8952/Mum/2004 para 19, page 11) b. ITAT-AY 1997-98 (ITA No. 5030/Mum/2001, para no 31-34 page no. 22 to 26) c. ITAT-AY 1996-97 (ITA No. 1781/Mum/2000, para no. 18, pg. no. 14-16) d. ITAT-AY 1995-96 (ITA No. 3493/Mum/1999, para no. 7 pg. no.5)

& 1420/Mum/2007 M/s. Bajaj Auto Limited Respectfully, following the decision of ITAT as referred supra this ground of appeal of revenue is dismissed.” 122. In view of the above, as the issue is recurring in nature and the Ld. DR is not able to differentiate the findings of the Coordinate Benches with the facts and law of this year, we do not have any hesitation in following the findings of Coordinate Bench in this year also. Resultantly, ground no. 15(b) raised by the revenue is dismissed.

123. Ground No. 16 - Interest ought to be attributable towards earning dividend income and therefore deduction under section 80M of the Act ought to be granted by allocating interest expenditure. Ground No. 17 –Apportioning employee emoluments and miscellaneous expenses towards earning dividend income in the ratio of dividend income to the total income.

124. Ground no. 16 and 17 raised by the revenue pertains to attributing interest and administrative expenditure towards earning taxable dividend income and allowing deductions under section 80M after reducing deduction of the expenditure incurred from the taxable income. During the year under consideration, the Assessee has offered to tax Dividend Income (Rs. 12,71,59,800) and Income from Mutual Fund Units (Rs. 4,39,28,580) under the head Income from Other Sources as the said income was not exempt from tax in the year under consideration. The Assessee has not claimed any deduction for expenses against the said income.

125. In the Assessment Order, the Assessing Officer computed adhoc deduction of interest and administrative expenditure without proving that such expenditure was incurred wholly and exclusively for earning dividend income / income from & 1420/Mum/2007 M/s. Bajaj Auto Limited mutual fund units. The Assessing Officer accordingly, reduced the said expenditure while computing Income under the head ‘Income from Other Sources’ and accordingly, deduction under section 80M of the Act was allowed for the reduced amount. On appeal the ld. CIT (A) deleted such disallowance made by the Assessing Officer.

130. Ground no. 18 raised by the revenue pertains to deleting the disallowance of bad debts written off amounting to Rs.1, 50, 43,318/-. During the previous year relevant to the assessment year 2003-04, the assessee wrote off bad debts and other irrecoverable debit balances amounting to Rs.4, 11, 98,286/- by debiting the Profit and Loss Account. However, the Assessing Officer disallowed the bad debts written off in respect of interest receivable from three parties and added Rs.1,50,43,318/- to the total income of the assessee. This interest receivable had already been offered to tax in earlier years. In the Assessment Order, the Assessing Officer disallowed merely on the ground bad debt written as irrecoverable cannot be allowed, what can be allowed is only bad debts which have been written off.

131. The assessee’s appeal before the ld. CIT(A), the ld. CIT(A)allowed the claim of the assessee relying on the decision of the Special Bench of the Income-tax Appellate Tribunal, Mumbai in the case of DCIT vs. Oman International Bank 100 ITD 285 (SB).