2018 (12) TMI 287 - AT - Income Tax

Appeals allowed for various assessment years, directing reassessment on specific disallowances

The tribunal partially allowed the appeals for multiple assessment years, including AY 2006-07 to AY 2009-10, with various disallowances being restored to ... Disallowance of Foreign Travelling expenditure and Domestic Travel expenses - AO rejected the contentions of the assessee as the assessee failed to discharge its onus to prove that the expenses were incurred wholly and exclusively for the purposes of its business and only bald statements were made without any evidences being placed on record - Held that:- Disallowance of Foreign Travelling Expenses and Domestic Travelling Expenses is to be restored back to the file of AO for fresh adjudication on merits in accordance with law and we restore this issue back to file of AO for fresh adjudication after considering the submissions of the assessee, as while passing appellate order, CIT(A) has followed the appellate order passed by his predecessor for AY 2005-06 which itself was set aside by the tribunal. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The relevant explanations/evidences submitted by the assessee in its defence shall be admitted by the AO and adjudicated on merits in accordance with law. This ground of appeal number 1 filed by the assessee is allowed for statistical purposes. Penalties and fines disallowance - Held that:- The detail of said penalties are placed in paper book at page no. 106 to 118. On Perusal of these details which are placed in paper book filed with tribunal, we have observed that these expenses are toward traffic challan, interest, tax etc and in all fairness to both the parties, the matter need to be set aside and restored to file of the AO who shall analysis each and every claim of these expenses as claimed by the assessee. The onus is on the assessee to place all details before the AO and If these expenses are found to be penal in nature and hit by explanation 1 to section 37(1), the same shall be disallowed by the AO in set aside proceedings but if the same are found to be compensatory in nature the same shall be allowed by the AO. The complete details are not furnished by the assessee and the assessee is directed to provide details with respect to each of these expenses claimed by the assessee with cogent evidences to substantiate that these payments are not penal in nature. Thus, we are restoring this issue back to the file of AO for fresh adjudication after considering the submissions of the assessee. Disallowance of Vehicle Expenses - Held that:- Ihas to be restored back to the file of AO for fresh adjudication on merits in accordance with law and we restore this issue back to file of AO for fresh adjudication after considering the submissions of the assessee, as while passing appellate order, the learned CIT(A) has followed the appellate order passed by his predecessor for AY 2005-06 which itself was set aside by the tribunal. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. Expenses incurred for Pali Hill Bungalow owned by the assessee disallowed - part of the said Bungalow was used for residence of Directors and also perquisite value in the hands of the Directors as well expenses incurred by the assessee on behalf of the Directors was not yet determined - Held that:- Issue has to be restored back to the file of AO for fresh adjudication on merits in accordance with law and we restore this issue back to file of AO for fresh adjudication after considering the submissions of the assessee, as the learned CIT(A) followed the decision of his predecessor for AY 2005-06 which itself was set aside by the tribunal. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. Disallowance of deduction u/s. 80IA - Deduction not to be allowed unless return furnished - return filed beyond the time stipulated u/s 139(4) - Held that:- doctrine of supervening impossibility has to be pressed and proved by the assessee for which onus is on the assessee. If in every situation of dispute/litigation interse between tax-payer and/or between promoters, the claim of deduction u/s 80IA of the 1961 Act is allowed despite return of income being filed beyond time as stipulated u/s 139(1), then Section 80AC will become otiose. The said Section 80AC was a newly inserted section which was inserted by Finance Act, 2006 w. e. f. 01. 04. 2006 which has been specifically brought in by Parliament to grant exemption to those tax-payers who file their return within due date as prescribed u/s 139(1) and this is the first year when the said section is applicable. With the aforesaid observations, we are restoring this issue back to the file of the AO for fresh adjudication of the issue on merits in accordance with law. Claim of deduction u/s 80HHD - reserve has been utilized for purchase of fixed assets - Held that:- The onus is on the assessee to prove that the assessee is entitled for deduction u/s 80HHD of the 1961 Act and that it had met all the requirements of provisions of Section 80HHD and its case comes strictly within the four corners and parameters of the conditions as are stipulated under Section 80HHD of the 1961 Act. The onus is on the assessee to prove that the AO while framing assessment erred in adding back reserves to the tune of ₹ 1, 27, 79, 045/- during the impugned assessment year which reserved were created by the assessee in the financial year ended 31. 03. 2000 within provisions of Section 80HHD of the 1961 Act and the said reserve amount was utilised within time period as mandated u/s 80HHD for the purposes as are stipulated u/s 80HHD. With the aforesaid observations, we are restoring this issue back to the file of the AO for fresh adjudication of the issue on merits in accordance with law. Disallowance u/s. 43B - payment of additional property tax(Chennai) - Held that:- The assessee is entitled for this deduction toward additional property tax paid towards Hotel Pallava, Chennai as payment has been undisputedly made on 10. 12. 2008 and keeping in view provision of section 43B(a) this expenditure is to be allowed as deduction for AY 2009-10 as the payment is actually made by the assessee for this additional property tax by the assessee on 10. 12. 2008, as per facts emerging from records. We order accordingly. Issues Involved:1. Disallowance out of travelling expenses2. Disallowance of penalties and fine3. Disallowance out of vehicle expenses4. Disallowance of expenses incurred for Pali Hill Bungalow5. Claim for deduction u/s 80IA6. Disallowance u/s 14A r.w.s. 8D7. Non-consideration of expenses disallowed in earlier years and claimed as deductions in A.Y. 2006-078. Additional ground of appeal concerning claim of deduction u/s 80HHD9. Short deduction of TDS and non-applicability of provisions of Section 40(a)(ia)10. Disallowance u/s 43B of the 1961 Act with respect to payment of additional property tax (Chennai)Detailed Analysis:1. Disallowance out of travelling expenses:The tribunal noted that the AO disallowed Rs. 3,19,386/- on the grounds that the expenses related to the travel of spouses/family members of directors were not proven to be wholly and exclusively for business purposes. The CIT(A) upheld this disallowance based on previous decisions. The tribunal restored the issue to the AO for fresh adjudication, noting that the CIT(A) had followed a decision for AY 2005-06, which itself was set aside by the tribunal.2. Disallowance of penalties and fine:The AO disallowed Rs. 1,56,449/- for penalties and fines, considering them penal payments. The CIT(A) upheld this disallowance. The tribunal restored the issue to the AO for fresh adjudication, directing the AO to analyze each expense to determine if it is penal or compensatory in nature.3. Disallowance out of vehicle expenses:The AO disallowed Rs. 90,000/- for vehicle expenses, reasoning that personal use by directors was not ruled out. The CIT(A) upheld this disallowance based on previous decisions. The tribunal restored the issue to the AO for fresh adjudication, noting that the CIT(A) had followed a decision for AY 2005-06, which was set aside by the tribunal.4. Disallowance of expenses incurred for Pali Hill Bungalow:The AO disallowed Rs. 5,00,000/- for expenses related to the Pali Hill Bungalow, citing personal use by directors. The CIT(A) upheld this disallowance based on previous decisions. The tribunal restored the issue to the AO for fresh adjudication, noting that the CIT(A) had followed a decision for AY 2005-06, which was set aside by the tribunal.5. Claim for deduction u/s 80IA:The AO disallowed the claim of Rs. 75,85,911/- u/s 80IA due to the late filing of the return. The CIT(A) upheld this disallowance. The tribunal restored the issue to the AO for fresh adjudication, directing the assessee to prove that there was a supervening impossibility of performance due to litigation, which delayed the filing of the return.6. Disallowance u/s 14A r.w.s. 8D:The AO made a disallowance of Rs. 16,102/- u/s 14A. The CIT(A) restricted this to 10% of the dividend income. The assessee did not press this ground before the tribunal, and it was dismissed as not pressed.7. Non-consideration of expenses disallowed in earlier years and claimed as deductions in A.Y. 2006-07:The CIT(A) dismissed this ground as not pressed. The tribunal also dismissed it as not pressed.8. Additional ground of appeal concerning claim of deduction u/s 80HHD:The assessee raised an additional ground concerning the disallowance of Rs. 1,27,79,045/- u/s 80HHD. The tribunal admitted this ground and restored the issue to the AO for fresh adjudication, directing the AO to verify if the conditions of Section 80HHD were met.9. Short deduction of TDS and non-applicability of provisions of Section 40(a)(ia):The assessee did not press this ground for AY 2008-09, and it was dismissed as not pressed. The tribunal's decision for AY 2006-07 applies mutatis mutandis to AY 2008-09.10. Disallowance u/s 43B of the 1961 Act with respect to payment of additional property tax (Chennai):The assessee raised an additional ground for AY 2009-10 concerning the disallowance of Rs. 32,10,870/- for additional property tax paid on 10.12.2008. The tribunal allowed this deduction, noting that the payment was made and should be allowed as per Section 43B. The tribunal's decision for AY 2006-07 applies mutatis mutandis to AY 2009-10.Conclusion:The appeals for AY 2006-07, 2007-08, 2008-09, and 2009-10 are partly allowed for statistical purposes, with several issues restored to the AO for fresh adjudication.