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Special Bench of ITAT rules on 16 Important Tax issues

March, 29th 2008
Special Bench of ITAT rules on 16 Important Tax issues Vide a significant ruling AIT-2008-98-ITAT Special Bench of ITAT has decided the following 16 Questions referred to it. (1) That on the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in deleting addition of Rs.38,64,109/debited to year's revenue account as value of stores written off by holding that it is for the A.O. to prove that consumable stores had either not been used or individually costed less than Rs.5,000/ignoring, in the process, the findings in assessment that claim could not be established on record. (2) That, on the facts and in the circumstances of the case, the Hon 'ble CIT(A) has erred in deleting addition of Rs.5,00,000/- on account of building, furniture, fixture & fittings thereby contravening enunciation by the jurisdictional High Court to the defect that prohibition against guest house expenses stipulated in section 37(4) is absolute. (3) That, on the facts and in the circumstances of the case, the Hon 'ble CIT(A) has erred in deleting addition of traveling expenses disregarding the specific finding that assessee could not discharge the statutory onus of providing that the entire amount debited as expenses represented revenue expenditure laid out wholly and exclusively for purposes of business. (4) That, on the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in deleting addition of Rs.67,59,104/without requiring the expenses to controvert the finding that the amount represented outgoings in the form of entertainment expenses. (5) That, on the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in deleting the addition of Rs.1,45,48,3311- under the sub-head of payments to clubs disregarding the finding that no part of the expenditure could be shown to have any direct and intelligible nexus with business of the company as such. (6) That on the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in deleting addition of Rs.13,30,000/claimed as advertisement expenses when clearly the expenditure in question did not qualify to be treated as admissible revenue expenses of the company's business. (7) That, on the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in deleting addition of 'Repairs' when the order of assessment showed that material evidence to establish the claim had been omitted to be made available for A.D. 's scrutiny. (8) That, on the facts and in the circumstances of the case, the CIT(A) has erred in deleting addition of Rs.1,77,05,366/- basing his analysis on method of accounting thereby ignoring the fact that the provision represented purely contingent expenditure. (9) That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting addition of Rs.55,00,000/- by ascertaining capital or revenue nature of the expenses solely with reference to composition of the amount rather than the purpose each component of the expenditure was expected to serve. (10) That the ld. CIT(A) erred in law and on facts in summarily deleting addition u/s. 43B read with section 36(1) (Va) without appreciating that the statutory disallowance is essentially to be based on facts and that unlike the governmental liabilities of other nature covered by section 43B, option to claim deduction in the year of payment is not available under the law in regard to contribution to employees' provident & pension funds. (11) That, on the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in deleting the addition disallowances of Rs.2.5 crores under the head other staff welfare business by holding that the although the assessee could not furnish details of such expenses before the assessing officer in course of assessment in deleting addition of Rs.30,00,000/- on account of expenditure on fuel soft coke for staff and mill workers by holding the same as in nature of employees welfare expenses incurred on the basis of an agreement with workers in gross disregard to Rule 46A of the Income Tax Rules, 1962 as the assessee did not disclose the fact of the agreement with workers in course of assessment procedure & in deleting addition of Rs.4,00,000/- on account of school fees scholarship and educational tour expenses by holding that the expenditure were incidental to assessee's business. (12) That the ld. CIT(A) erred in law and on facts in deleting addition of miscellaneous expenses ignoring the trite law that a decision in regard to a different year can not be taken as an authority on facts. (13) That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting addition by holding that the onus of proof is, not on the assessee, but on the A.O. (14) That on the facts and in the circumstances of the case, the CIT(A) has erred in deleting addition applicable without appreciating that arm's length principle had been clearly shown to have been violated. (15) Ld. CIT(A) erred in law and on facts in directing adoption of total turnover net of excise duty for purposes of computation of admissible amount of deduction u/s. 80HHC which directly contradicts the law. (16) That, on the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in directing the A.O. top allow deduction u/s. 80HHC of the Income Tax Act, 1961 as per computation made by the assessee's auditor without pointing out any defect in the computation made by assessing officer. IN THE INCOME TAX APPELLATE TRIBUNAL: "SPECIAL" BENCH: KOLKATA (Before Shri G.D. Agarwal,V.P.(KZ), Shri. D.K. Tyagi, J. M. & Sri Jugal Kishore, A.M.) I.T.A. No. 1541/Cal/ 2000 Assessment Year: 1997-1998 Joint Commissioner of Income Tax, Special Range-16, Kolkata. -vs.- M/s. I.T.C. Ltd., Kolkata. Appellant by : Shri B.D. Kaler, Smt. Pallavi Agarwal and Shri Raja Ram Shah.. Respondent by: Shri R.N. Bajoria and Shri Rahul Mitra Special Bench considered the following questions :- (1) That on the facts and in the circumstances of the case, the Hon'ble CIT(A) has erred in deleting addition of Rs.38,64,109/debited to year's revenue account as value of stores written off by holding that it is for the A.O. to prove that consumable stores had either not been used or individually costed less than Rs.5,000/ignoring, in the process, the findings in assessment that claim could not be established on record. (2) That, on the facts and in the circumstances of the case, the Hon 'ble CIT(A) has erred in deleting addition of Rs.5,00,000/- on account of building, furniture, fixture & fittings thereby contravening enunciation by the jurisdictional High Court to the defect that prohibition against guest house expenses stipulated in section 37(4) is absolute.