2024 (6) TMI 1288 - AT - Income Tax

Assessee wins partial relief on prior period expenses and TDS provisions under section 194I for foreign shipping payments

ITAT Visakhapatnam allowed assessee's appeal partially. Prior period expenses were permitted following consistent precedent where AO accepted prior period ... Addition towards prior period expenses - HELD THAT:- It has been consistently held in favour of the assessee by the ITAT, Visakhapatnam Bench for the earlier years in the assessee’s own case [2011 (2) TMI 1536 - ITAT VISAKHAPATNAM] for the AY 2002-03 in the assessee’s own case as held wherein AO has accepted the prior period income in this year but disallowed the prior period expenditure. This action of the assessing officer is not proper as he has to take into the account the status as a whole and not to make a pick and choose. We however, carefully examined the order of the Ld. CIT(A) and we find that the Ld. CIT(A) has adjudicated the issue in the light of judgment of the Delhi High Court in the case of Additional CIT vs. Jay Engineering Works Limited [1978 (2) TMI 94 - DELHI HIGH COURT] TDS u/s 194I - Disallowance u/s. 40(a)(ia) - demurrage charges - AR submitted that these expenditures are in the nature of payment made to shipping companies in foreign currency - HELD THAT:- From the submissions of the Ld. AR, we find that the payment are made to foreign shipping companies as demonstrated by the Ld. AR through the documents which are available. These are in the nature of detention charges paid to foreign shipping companies and therefore the Board Circular No. 723, dated 19/9/1995 is applicable. We therefore are of the view that invoking the provisions of section 194I in the case of the assessee is not valid in law and thereby we reject the grounds No. 4 & 5 raised by the Revenue on this issue. Denial of TDS credit - claim denied to the assessee since it is not reflecting in Form-26AS of the assessee for the impugned assessment year - HELD THAT:- As the Circular No 5/2013 wherein it was clearly clarified by the CBDT to allow and grant credit for TDS based on the original Form-16A submitted by the assessee even though it is not reflected in the Form-26AS. This instruction was issued by the CBDT to eliminate the hardships faced by the assessee in the initial assessment years during the implementation of Form-26AS. Therefore, we are inclined to remit the matter to the file of the Ld. AO and direct the assessee to produce the original Form-16A before the Ld. AO for verification. The Ld. AO is directed to verify the genuineness of the credit for TDS and thereby grant credit if it is found to be correct. Accordingly, Ground No.2 raised by the assessee is allowed for statistical purposes. Charging of interest u/s. 234C - HELD THAT:- From the submissions made by the Ld. AR we find that the Department of Defence Produce has granted a financial restructuring package to the assessee on 23/03/2011. The assessee has also failed to seek exemption from the waiver of interest with the appropriate authorities within the time limit specified. In the facts and circumstances of the case, we are of the view that there is no provision in the Act to grant waiver from levy of interest u/s. 234C of the Act. We therefore find no infirmity in the order of the Ld. CIT(A)-NFAC thereby dismiss this ground raised by the assessee. Issues Involved:1. Deletion of addition made towards prior period expenses.2. Disallowance of demurrage charges under section 40(a)(ia) of the Income Tax Act, 1961.3. Non-granting of credit for TDS.4. Charging of interest under section 234C of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Deletion of Addition Made Towards Prior Period Expenses:The Revenue filed appeals for multiple assessment years (AY 2009-10, 2011-12, 2012-13, 2013-14, and 2014-15) against the orders of the Ld. CIT(A)-NFAC, which deleted the additions made by the Assessing Officer (AO) towards prior period expenses. The Ld. CIT(A)-NFAC allowed the prior period expenses based on precedents set in the assessee's own cases for earlier years, where the ITAT Visakhapatnam Bench consistently held in favor of the assessee. The Tribunal upheld the Ld. CIT(A)-NFAC's decision, emphasizing the principle of consistency and dismissed the Revenue's grounds of appeal on this issue for all the relevant assessment years.2. Disallowance of Demurrage Charges Under Section 40(a)(ia):For AY 2011-12 and 2012-13, the AO disallowed demurrage charges under section 40(a)(ia) on the grounds that the assessee did not deduct tax at source as required under section 194I. The Ld. CIT(A)-NFAC deleted these disallowances, relying on the fact that the demurrage charges were paid to foreign shipping companies in foreign currency, and as per CBDT Circular No. 723, dated 19/9/1995, the provisions of section 194C and 195 would not apply. The Tribunal concurred with the Ld. CIT(A)-NFAC, stating that invoking section 194I was not valid in law, and dismissed the Revenue's grounds on this issue.3. Non-granting of Credit for TDS:In the cross-appeal for AY 2011-12, the assessee contested the non-granting of credit for TDS amounting to Rs. 9,08,06,937/-. The Ld. CIT(A)-NFAC denied the credit as it was not reflecting in Form-26AS. The Tribunal referred to CBDT Circular No. 5/2013, which allows TDS credit based on original Form-16A even if not reflected in Form-26AS. The Tribunal remitted the matter back to the AO to verify the genuineness of the TDS credit based on the original Form-16A and directed the AO to grant the credit if found correct.4. Charging of Interest Under Section 234C:The assessee also appealed against the charging of interest under section 234C for AY 2011-12, arguing that the advance tax liability arose due to a restructuring package granted after the due date for advance tax payments. The Tribunal noted that there is no provision in the Income Tax Act to waive interest under section 234C and upheld the Ld. CIT(A)-NFAC's decision to deny the waiver, dismissing the assessee's ground on this issue.Conclusion:The Tribunal dismissed the Revenue's appeals for all the assessment years concerning the deletion of prior period expenses and disallowance of demurrage charges. The assessee's cross-appeals were partly allowed for statistical purposes regarding the TDS credit issue, while the appeal concerning the waiver of interest under section 234C was dismissed. The cross-objections raised by the assessee were dismissed as infructuous.