Ms Mount Shivalik Brewereis Ltd. Vs DCIT (ITAT Chandigarh)
Conclusion: Foreign travelling expenses incurred by assessee-company for its Managing Director (MD) should be allowed as deduction as AO had no basis for holding the expenses incurred on the MD’s trip to Germany as excessive or personal.
Held: AO allowed foreign travelling expenditure incurred by managing director (MD) on his trip to Germany to a certain extent and the balance amount including foreign travelling expenses incurred on the trips undertaken to the UK by its Director was disallowed holding the same to be extravagant and some personal element was involved in the same. It was held no evidence to prove the visit of the MD to breweries in Edinburgh had been filed, nor any other evidence to prove that the trips were undertaken for a business purpose. Therefore, the claim of foreign travelling expenses incurred on the trip undertaken by the MD of the assessee company to the UK was rightly disallowed. However, with regard to expenses incurred for the trip undertaken to Germany, there was no basis either for holding the expenses incurred on the MD’s trip to Germany excessive or personal. AO could not deny the claim of expenditure on whims and fancies, therefore, the denial of the claim of expenditure incurred on the trip of the MD of assessee-company to Germany was unwarranted and uncalled for and the same was directed to be allowed to the assessee
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-2, Chandigarh (in short CIT(A) dated 31.12.2014 passed u/s 250(6) of the Income Tax Act, 1961 (in short referred to as ‘Act’).
2. At the outset, it was pointed out that this was the second round before the I.T.A.T. Drawing our attention to the order of the Ld.CIT(A) at para 2.1 it was pointed out that in the first round before the I.T.A.T. the issues relating to claim of depreciation on Effluent Treatment Plant (in short referred to as ‘ETP’) of Rs.20,84,484/- and foreign travelling expenses of Managing Director of Rs.14,21,898/- were restored to the file of the A.O. directing him to re-examine the issue and also directing the assessee to produce further evidence to substantiate its claim of depreciation on ETP to re-examine the claim of foreign travelling in the light of the details filed before the CIT(A). It was thereafter stated that both the above additions were re-affirmed by the A.O. and the same were confirmed by the CIT(A).
3. Aggrieved by the same the assessee has now come up in appeal before us. Taking up ground of appeal No.1 relating to disallowance of depreciation on ETP and which read as under:
“1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law in upholding the addition of Rs.20,80,484/- made on account of disallowance of depreciation on Effluent Treatment Plant which is arbitrary and unjustified.”
4. The Ld. counsel for assessee first took us through the order of the I.T.A.T. in the first round dated 24.9.2012 restoring the issue back to the A.O. Drawing our attention to paras 8 to 14 of the order wherein the issue was dealt with the Ld. counsel for assessee pointed out that the facts relating to the issue were that the assessee had shown an addition of Rs.41,60,961/- on account of addition to ETP on which depreciation was allowable @ 100%. But the assessee had claimed depreciation @ 50% only, having used it for less than 180 days. Thus depreciation of 20,80,484/- was claimed by the assessee on the ETP installed. It was thereafter pointed out that the A.O. had denied the said claim of the assessee by stating that the invoices of the purchases of the plant revealed that the purchases were made from November 2008 to March 2009 for the said ETP, which meant that the assessee was in the process of designing and installing the plant and, therefore, could not have put to use in the year. The matter was carried in appeal before the CIT(A) who upheld the addition. Thereafter drawing our attention to para 11 of the order the Ld. counsel for assessee pointed out that various purchase bills of the plant were placed before the I.T.A.T. and also clearance certificate issued by Punjab Pollution Control Board dated 20.2.2009 to prove that the assessee had already put the ETP to use. It was pointed out that after going through the certificate, the I.T.A.T. held that the said certificate was only a No Objection Certificate for release of additional power and the assessee must have approached the electricity authorities for release of power only thereafter and after which the plant could not have been operated and sine no further evidence was filed by the assessee to substantiate its claim of having put the ETP to use in the year itself, the matter was restored back to the A.O. for re-examination. The Ld. counsel for assessee thereafter drew our attention to the assessment order framed thereafter and pointed out that the assessee during the course of proceedings before the A.O. had filed additional documents as proof of having installed the ETP during the year as under:
i) Brewer and Engineer Certificate
ii) PSEB demand notice for increase in load
iii) PPCB clearance certificate dated 20.2.2009
iv) PPCB consent dated 26.2.2009
5. It was thereafter pointed out that the A.O. had rejected all the above evidences as not being sufficient to prove the assessee’s claim holding that brewer certificate was issued by Chief Engineer and Brewer of the assessee company and, therefore, could not be relied upon and rest of the evidences only showed that the assessee’s request for additional load had been proved and none of the documents gave a clear cut idea about the actual date when the plant was put to use. It was thereafter pointed out that the A.O. conducted his own enquiries by seeking information u/s 133(6) of the Act from the Additional Superintendent Engineer, Operation Division (PSPCL), Lalru, Punjab regarding the date on which the additional power load of 350.064 KW was actually sanctioned by PSEB (now PSPCL) to the assessee. It was pointed out from the order that the same was stated to have been granted to the assessee only on 20.5.2009. The said information was confronted to the assessee who stated in reply that new ETP had run on the existing power load available with the company. The A.O. dismissed this contention of the assessee stating that the assessee had never before raised this contention before any of the authorities i.e. the A.O., CIT(A) or even I.T.A.T. in the first round. He, therefore, held that since the load to run the plant was granted only in the next financial year, the assessee could not have possibility put to use the ETP in the impugned year. The depreciation claimed by the assessee of Rs.20,80,484/- was accordingly disallowed by the A.O. It was thereafter pointed out that the CIT(A) also upheld the disallowance for the same reason. Our attention was drawn to the findings of the Ld.CIT(A) at para 3.3 of his order as under:
“3.3 I have considered the facts of the issue. The appellant had produced certain documents before the Assessing Officer, which have rightly been rejected by the Assessing Officer, since these were not relevant to decide as to when the Effluent Treatment Plant was put to use. The certificate issued by the Brewer and Engineer of appellant company has rightly been rejected by the Assessing Officer, since it has been signed by the appellant’s own employee. The office of Additional Superintendent Engineer has confirmed that the additional power load was granted to the appellant only on 20.05.2009 and the Effluent Treatment Plant could not have been put into operation without the additional power load. The contention of the appellant is that the said plant was run on the existing power load, but it is not possible to run such a heavy plant without additional power load and the electricity department would not permit the same. Moreover, this argument was never taken in the original assessment proceedings or in the appellate proceedings. Therefore, it is held that the Assessing Officer has rightly disallowed the depreciation and her action in this regard is accordingly upheld. Ground of appeal No. 1 is dismissed.”
6. Thereafter the Ld. counsel for assessee made detailed submissions before us describing the nature of the business of the assessee of being manufacturing and sales of beer and that it its first ETP was installed in financial year 1972-73 when the first brewery was set up and thereafter its upgradation was done around 3-4 times. It was contended that the assessee has only one ETP and the addition made during the year was only by way of enhancing the capacity of ETP from 100 KLD to 156 KLD. It was pointed out that ETP was purchased from M/s Lars Enviro Pvt. Ltd. and put to use on 27.1.2009 as per the Chief Brewer certificate. The different components of the ETP were pointed out to us and that out of various components 3 were prefabricated while the balance was civil work done at the site of the assessee. The assessee thereafter contended that the average power load needed to run ETP plant was 70 KW and after installation of ETP on 27.1.2009 and its commissioning immediately after receiving the consent letter from PPCB on 20.2.2009, the ETP was put to use on the existing power load itself since this was off season of beer industry and extra load wasnot required on account of the low capacity production of beer during this period. It was pointed out that the increase in power load was thereafter made available on 27.5.2009. The written submissions to this effect were filed before us dated 5.9.20 18 as under:
Respectfully submit as under: –
1. Molson Coors India Pvt. Ltd., formerly known as Mount Shivalik Breweries Ltd., was incorporated on 31stOctober, 1972, and started business of Manufacturing/Sales of Beer at Bhankarpur, Derabassi.
2. That the first Effluent Treatment plant (hereinafter mentioned as ETP), was installed in Financial Year 1972-73, when the first brewery was set up in Bhankarpur and thereafter its upgradation was done around 3-4 times, as per the need of the plant.
3. That during the year under consideration, ETP was installed on 01.2009 and was commissioned immediately after receiving consent letter dated 20.02.2009 from Punjab Pollution Control Board. Since this period being Off Season for beer Industry, the existing power load was sufficient for the commissioning of new ETP plant. The increase in power load from 1164.844KW by 350.064 KW was made available on dated 27.05.2009, after receipt of sanction from PSEB.
4. That the unit has only one ETP, of which capacity was enhanced from 100 KLD to 156 KLD. (Kilo liters per )
5. That this ETP was purchased from M/s Lars Enviro Pvt. & had been installed & commissioned at Mount Shivalik Breweries Ltd, Bhankarpur and put to use on 27th January,2009. No trial run was required for this type of plant. That the average time required to install this plant around 5-6 months
6. Effluent Treatment Plant or ETP is one type of waste water treatment method which is particularly designed to purify industrial waste water. Its aim is to release safe water to environment from the harmful effect caused by the effluent
The quantity & quality of waste water generation fluctuates depending on operation like raw material handling, wort preparation, fermentation, water consumption, solid liquid separation, packaging etc.
The effluent discharged is highly organic & acidic in nature with high COD, BOD, consisting of easily biodegradable sugars, soluble starch, ethanol, volatile, fatty acid, suspended solids, yeast etc. which may pollute the water bodies considerably if drained as such. In order to meet requirements of CPCB/PPCB, ETP plant is installed which consists of following: Collection Tank
1. UASB Reactor
2. Primary clarifier
3. Aerobic Treatment Tank
4. Secondary Clarifier
5. Sand Filter
6. Activated Carbon Filter
7. Studge Drying Beds
That out of the above components of the plant Sand Filter and Activated Carbon is prefabricated and balance is civil work which is done at the site. Average power load needed to run the ETP plant is 70KW. That total area covered by this plant is around 3458 Square meters. The Dimensions of the components of ETP are as under: –
