2012 (5) TMI 507 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions for assessee, remits some issues to Assessing Officer

Deputy Commissioner of Income-tax, Haldwani Versus Raj Laxmi Stone Crusher (P.) Ltd.

Deputy Commissioner of Income-tax, Haldwani Versus Raj Laxmi Stone Crusher (P.) Ltd. - TMI Issues Involved:1. Disallowance under Section 40A(2)(b) of the Income Tax Act, 1961.2. Addition of legal fee as capital expenditure.3. Addition on account of illegal transportation.4. Addition on account of illegal stock.5. Disallowance under Section 40a(ia) for non-deduction of TDS on lease rent.6. Non-allowance of deduction under Section 80-IB.Detailed Analysis:1. Disallowance under Section 40A(2)(b):The Department contended that the CIT(A) erred in deleting the addition of Rs. 16,33,645/- made under Section 40A(2)(b) due to excessive payment for purchases from a sister concern. The assessee argued that the purchases were made at market rates and included considerations like delayed payments and freight savings. The CIT(A) accepted these arguments, noting that the purchase rate of Rs. 18.50 per qtl. was justified given the market price of Rs. 20 per qtl. at the time. The Tribunal upheld the CIT(A)'s decision, noting the proper consideration of market price, interest savings, and freight costs, and dismissed the Department's appeal.2. Addition of Legal Fee as Capital Expenditure:The Department challenged the deletion of Rs. 53,000/- added as capital expenditure for increasing the authorized share capital. The assessee claimed it as a regular business expense incurred after business commencement. The CIT(A) agreed, treating it as revenue expenditure. The Tribunal upheld this view, stating that expenses incurred post-business commencement for increasing share capital are revenue in nature, and dismissed the Department's appeal.3. Addition on Account of Illegal Transportation:The assessee contested the addition of Rs. 49,00,462/- based on alleged illegal transportation per the DM Nainital's order. The CIT(A) upheld the addition, relying on the official report. The Tribunal, referencing similar cases, remitted the issue back to the Assessing Officer for fresh adjudication, considering the final outcome of the survey by state authorities.4. Addition on Account of Illegal Stock:Similarly, the assessee disputed the addition of Rs. 45,89,133/- for illegal stock. The CIT(A) confirmed the addition based on official reports. The Tribunal, following precedent, remitted this issue back to the Assessing Officer for reconsideration after the final survey results, ensuring due process for the assessee.5. Disallowance under Section 40a(ia) for Non-Deduction of TDS:The assessee challenged the disallowance of Rs. 62 lakhs for non-deduction of TDS on lease rent payments. The CIT(A) upheld the disallowance, treating the payments as contractual under Section 194C. The Tribunal, however, found that the agreements were for leasing equipment, not works contracts, and cited similar cases where such payments did not attract TDS under Section 194C. The Tribunal allowed the assessee's appeal, reversing the disallowance.6. Non-Allowance of Deduction under Section 80-IB:The assessee argued for the deduction under Section 80-IB despite not claiming it in the original return. The CIT(A) denied the claim as it was not raised during assessment. The Tribunal, referencing judicial precedents, held that legitimate claims should be considered even if not initially made. It remitted the issue back to the Assessing Officer for proper adjudication as per law.Conclusion:The Tribunal dismissed the Department's appeal and allowed the assessee's appeal, remitting specific issues back to the Assessing Officer for fresh consideration.