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One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=762309 https://www.taxtmi.com/caselaws?id=762309 Deduction u/s 10AA - assessee has derived the profit of SEZ unit before depreciation and depreciation of that assessee unit - claim of the assessee is that for the purpose of claim of deduction u/s 10AA the business losses of the earlier year should not be reduced from the eligible profit - HELD THAT:- We find that now the honourable Supreme Court has decided this issue in case of Yokogawa India Ltd [ 2016 (12) TMI 881 - SUPREME COURT] wherein it has been held that the deduction u/s 10 A of the act is provision for deduction and the sale of deduction would be while computing the gross total income of the eligible undertaking and chapter IV of the act and not at the stage of computation of total income under chapter VI of the act. As in case of black Veatch consulting private limited [ 2012 (4) TMI 450 - BOMBAY HIGH COURT] has also held that deduction u/s 10 A in respect of eligible unit has to be allowed before setting off of brought forward depreciation and losses of non eligible units. Same is the view expressed in case of Techno Tarp and Polymers Private Limited [ 2015 (12) TMI 909 - BOMBAY HIGH COURT] Appeal of the assessee is allowed. Disallowance on delayed payment of tax deducted at source u/s 37 - HELD THAT:- We find that this amount of expenditure is incurred by the assessee being interest on late payment of tax deduction at source. We find that interest on late payment of tax deduction at source by the assessee is not shown before the lower authorities that how it has been incurred wholly and exclusively for the purposes of the business of the assessee. In fact, such interest is in infraction of the law of the provisions of the income tax act when tax deducted at source required to be deposited after collecting from third parties to the credit of Central Government is deposited late. It is penal in nature. In the case of CIT v. Chennai Properties Investment Ltd. [ 1998 (4) TMI 89 - MADRAS HIGH COURT] declared that the assessee s payment of interest u/s 201(1A) does not qualify as a business expense and cannot be seen as a compensatory payment. The payment of interest on late deposits of TDS assessed under Section 201(1A) is not an expense solely and exclusively expended for business purposes; hence it is not deductible u/s 37(1). Even if the deduction and remittance of TDS to the government are essential components of business operations, the assessee is nonetheless liable for this interest amount. This suggests that the assessee does not have the right to spend the money on the government s behalf. The character of the interest payment is determined by the sort of tax utilised to pay it. The several decisions of the coordinate benches cited before the learned CIT A does not hold water in view of the decision of the honourable Madras High Court specifically saying that such interest does not qualify as deductible expenditure. Computation of setting off of the business loss of the correct some - HELD THAT:- Claim of the assessee is that the business loss claimed by the assessee in its return of income should be allowed whereas the claim of the AO is that as per the past record only the claim of business loss is available. As the amount of claim of the business loss is dependent on the adjudication process of the appeal of the assessee for earlier years, we restore this issue back to the file of the learned assessing officer to determine the available set off of brought forward business losses and then grant it to the assessee in accordance with the law. Ground number 4 is allowed with above direction. Expenditure incurred on leasehold improvements - nature of expenditure - HELD THAT:- This ground of appeal is in consequence to the assessment and appellate proceedings arising out of the assessment year 2013 14 and not this impugned assessment year. In that year the claim of the assessee is that assessee has incurred total leasehold improvements expenditure out of which assessee considered as revenue expenditure spent on fixtures and the balance sum is capital expenditure. The learned assessing officer for that assessment year has considered the whole of the sum is capital expenditure and allowed depreciation at the rate of 5%. As this issue pertained to that year, the appeal of which pending before the learned CIT A. Therefore, the learned assessing officer is directed to consider the claim of the assessee if it is already decided in favour of the assessee by the appellate authority in accordance with the law. Accordingly ground number 5 of the appeal of the assessee is allowed with above direction. Case-Laws Income Tax Tue, 08 Oct 2024 00:00:00 +0530