2021 (11) TMI 83 - AT - Income Tax

Tribunal: Appeal Partly Allowed on Sales Tax Penalty, Cash Payments Disallowed.

BSCPL Infrastructure Ltd., Hyderabad. Versus Dy. Commissioner of Income-tax, Central Circle – 1 (3), Hyderabad.

The tribunal partly allowed the appeal for statistical purposes. It upheld the disallowance of sales tax penalty, reduced the disallowance for cash ... Disallowance towards sales tax penalty - assessee submitted that it is not a sales tax adjustment though it is mentioned as penalty - HELD THAT:- We observe that it is payment raised for the period from 4/2005 to 5/2007 for under-declared tax and imposed penalty vide order dated 30/07/2009 by the commercial tax department. Any penalty paid for violation of any law, is not allowable u/s 37 - Our view is supported by the decision of CIT Vs. Bharat Steel Tubes Ltd. [1995 (11) TMI 10 - DELHI HIGH COURT] - No infirmity in the action of CIT(A) in confirming the disallowance made by the AO on this account and accordingly, upholding the order of CIT(A), we dismiss the ground raised by the assessee on this issue. Disallowance towards cash payments to labour - HELD THAT:- We find that before the AO the assessee requested to confine the disallowance to the extent of 10%, but, the AO made the disallowance @ 15% of the cash portion of labour payments. On considering the totality of the facts and circumstances of the case, we restrict the disallowance 10% of the cash portion of labour payments and the AO is directed accordingly. Thus, this ground is partly allowed. Disallowance of interest on delay in remittance of TDS to the Govt. Treasury - AO noticed that the assessee claimed expenditure of interest on TDS - HELD THAT:- We observe that before the authorities the assessee submitted that the delay was caused in payment of TDS on account of paucity of funds whereas the revenue's grievance is that the assessee paid the interest for non-remittance of TDS to Govt. Account. Therefore, taking into consideration the request of the assessee that the issue may be remitted to AO for further verification, we remit the issue to the file of AO with a direction to verify whether the amount paid by the assessee towards delay or for non-remittance and decide the issue in accordance with law after providing reasonable opportunity of being heard to the assessee. The assessee is directed to substantiate its claim. Accordingly, this ground is treated as allowed for statistical purposes. Deduction u/s 80IA - additional ground raised by the assessee - HELD THAT:- Hon’ble Bombay High Court in the case of 'CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd [2012 (7) TMI 158 - BOMBAY HIGH COURT] has observed that the assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional clams before them. The appellate authorities have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The words 'could not have been raised' must be construed liberally and not strictly. There may be several factors justifying the raising of a new plea in an appeal and each case must be considered on its own facts. In view of this, the additional ground taken by the assessee is admitted for adjudication - since the facts relating to this issue have not been examined by the lower authorities, hence, this issue is restored to the file of the AO for adjudication of the same as per law. The assessing officer is also directed that while deciding the additional ground of appeal regarding claim of deduction as per u/s 80IA if the Income Tax Act. 1961, the assessing officer will consider the CBDT Circular No. 37 of 2016 dated 2nd November, 2016 issued vide F.No. 279/Misc./140/2015/ITJ also. The assessee is directed to appear before the A.O. with necessary documents to substantiate its claim of deduction as per u/s 80IA and further directed to avoid unnecessarily delay to dispose-off the case. Thus, this additional ground is allowed for statistical purposes. Issues Involved:1. Disallowance of Rs. 4,10,288 towards sales tax penalty.2. Disallowance of Rs. 35,28,444 towards cash payments to labor.3. Disallowance of Rs. 55,77,052 towards interest on delay in remittance of TDS.4. Additional ground regarding the claim of deduction under section 80IA.Issue-Wise Detailed Analysis:1. Disallowance of Rs. 4,10,288 towards Sales Tax Penalty:The AO disallowed the expenditure of Rs. 4,10,288 claimed by the assessee under section 37 towards sales tax penalty, stating it was not an allowable expenditure. The CIT(A) upheld this disallowance, noting that the penalty was for under-declared tax and not for delay in payment. The assessee argued that the amount was a sales tax adjustment and not a penalty. However, the tribunal observed that any penalty paid for violation of law is not allowable under section 37, referencing the Delhi High Court decision in CIT Vs. Bharat Steel Tubes Ltd. Consequently, the tribunal upheld the CIT(A)'s decision, dismissing the ground raised by the assessee.2. Disallowance of Rs. 35,28,444 towards Cash Payments to Labor:The AO proposed a disallowance of 15% of cash payments to labor, totaling Rs. 35,28,444, due to payments being made in cash in remote areas without banking facilities. The CIT(A) confirmed this disallowance. The assessee contended that the payments were necessary due to the remote locations and lack of banking facilities, and requested a reduction to 10%. The tribunal, considering the circumstances, restricted the disallowance to 10% of the cash portion of labor payments, directing the AO accordingly. Thus, this ground was partly allowed.3. Disallowance of Rs. 55,77,052 towards Interest on Delay in Remittance of TDS:The AO disallowed the interest expenditure on TDS amounting to Rs. 55,77,052, noting that the assessee had no objection to this addition. The CIT(A) upheld this disallowance, stating that non-remittance of TDS is a serious offense, and the interest paid was penal in nature. The assessee argued that the delay was due to a paucity of funds and requested the tribunal to remit the issue back to the AO for verification. The tribunal directed the AO to verify whether the amount was paid for delay or non-remittance and decide the issue in accordance with the law, allowing this ground for statistical purposes.4. Additional Ground regarding Claim of Deduction under Section 80IA:The assessee raised an additional ground for claiming deduction under section 80IA, which was omitted during the assessment and appellate stages. The tribunal admitted this additional ground, referencing the Bombay High Court's decision in 'CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd.' which allows raising new claims in appeal. The tribunal remitted the issue to the AO for adjudication, directing the AO to consider the CBDT Circular No. 37 of 2016 and to provide the assessee an opportunity to substantiate its claim. This additional ground was allowed for statistical purposes.Conclusion:The appeal was partly allowed for statistical purposes, with specific directions for the AO to re-examine certain issues. The tribunal upheld the disallowance of the sales tax penalty, reduced the disallowance for cash payments to labor, and remitted the issues of interest on TDS delay and the claim under section 80IA back to the AO for further verification and adjudication.