TaxTMI 
TaxTMI 
2012 (10) TMI 88
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.... issue whether forward contract would fall under speculative transaction or constitute revenue expenditure." 3. The facts in brief are that assessee filed original return on 29-03-2001 declaring total loss of Rs.9,72,95,505/-. Subsequently, a revised return was filed on 30-03-2001 declaring loss of Rs.7,73,42,356/-. A notice u/s. 148 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') was issued and served upon the assessee in response thereto the assessee vide letter dated 21-11-2003 requested to consider revised return filed on 30-03-2001 as the return in response to notice u/s. 148 of the Act. Thereafter, a notice u/s 143(2) r.w.s. 142(1) of the Act was issued along with questionnaire and the assessment u/s. 143(3) r.w.s. 147 of the Act was framed vide order dated 23- 09-2004. The Assessing Officer disallowed the loss claimed by the assessee on account of cancellation of forward contract booked for import of material. The assessee feeling aggrieved by this order filed appeal before Ld. CIT(A) who after considering the submissions of the assessee and perusing the record deleted the addition made on account of disallowance of loss due to cancellation of for....
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.... find that the facts of the case in hand are identical with the facts of the case of the Friends and Friends Shipping Pvt Ltd (supra), in the case present case also the assessee has claimed business loss of Rs. 34,88,834/- as foreign exchange ratio difference on account of cancellation of forward contract booked for import of material. In this view of the matter, respectfully following the decision of Hon'ble Gujrat High Court in the case of Friends and Friends Shipping Pvt Ltd. (supra), this ground of Revenue's appeal is dismissed. 7. In the result, Revenue's appeal is dismissed. Now we take up Revenue's appeal in ITA No.6/Ahd/2010 (A.Y.99-00) 8. In the present appeal Revenue has raised following grounds of appeal:- "1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.10,17,696/- on account of late payment of employees contribution to PF. 1(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section36(1)(va) r.w.s. 2(24)(x) of the Act." ....
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....while deciding this issue in favour of the assessee has held as under:- "5. Ground No.4 relates to confirmation of disallowance of Rs.5,65,278/- being the delayed Provident Fund payment. After careful consideration of the submissions made in the written submissions and after hearing the learned DR, we find that the issue is duly covered in favour of the assessee by the decision of this Tribunal Ahmedabad Bench-D in the case of M/s JMC Projects (India) Ltd. v. DCIT [ITA No.4175/Ahd/2007] wherein vide order dated 28-03-2008, this Tribunal has held as under:- 'Moreover, Hon'ble ITAT "A" Bench, Ahmedabad in their order dated 10-08-2007 in ITA No.2262/Ahd/07 in the case of Sai Consulting Engineers I(P) Ltd. for assessment year 2004-05, relying upon the decision of the Delhi Bench of ITAT in the case of Addl CIT v. Vestas RRB India LT. (2005) 92 ITD 1 and the decision of ITAT Chennai Bench "A" (Special Bench) in the case of Kwalaity Milk Foods Ltd. 100 ITD 99 SB (Chennai), held that payment of employees' contribution having been made by the taxpayer being within the due date of filing of the return, deduction is allowable to the taxpayer. Even in terms of provisions of secti....
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....earned CIT(A) erred in deleting the addition of Rs.1,43,220/- on account of late payment of employees contribution to PF and ESI. 3(ii). The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s. 2(24)(x) of the Act." 15. Facts in brief are that return of income was declared loss of Rs.6,52,37,920/- was filed by assessee on 21-11-2000 subsequently case was selected for scrutiny. The Assessing Officer made various additions as under:- 1. Addition on a/c of excise duty on finished goods Rs.3,09,42,594 2. Addition on a/c of capital expense Rs. 22,95,488 3. Out of misc. expenses Rs. 6,35,014 4. Out of staff welfare expenses Rs. 3,06,580 5. Out of vehicle expenses Rs. 3,24,742 6. OUT of traveling expenses Rs. 2,31,450 7. Out of telephone expenses Rs. 50,000 8. Out of previous year expenses Rs.3,30,27,388 9. On account of PF & ESIC Rs. 1,43,220 10. Out of discount, commission & credit notes on sales Rs. 18,29,655 16. Against the above additions, as....
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....t making of any entry or absence of an entry cannot determine the rights and liabilities of parties. In other words, if the law does not lead to incurring of a liability, or does not lead to a corresponding right to insist on discharging such a liability any accounting practice (even if suggested by the Institute of Chartered Accounts of India) cannot lay down anything to the contrary. It is held by the Hon'ble court that excise duty is admittedly an indirect levy. The manufacturer does not effectively pay from his own pocket. The duty of central excise is collected by manufacturer by a manufacturer from the purchaser, whether wholesaler or retailer. Hence, at the time of removal of excisable goods the duty is recovered by the manufacturer from the purchaser and simultaneously paid to the Revenue. The point of time of removal of excisable goods is the point of time when the liability to pay central excise duty is incurred resulting in corresponding right under law in the Excise Department to take steps to effect recovery if the liability is not discharged, till that point of time the liability to pay duty of central excise cannot be stated to have been incurred in law as the same i....
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....e ground of Revenue's appeal is dismissed. 22. Next ground relates to deletion of add of Rs.1,43,220/- on account of late payment of employees' contribution. This issue we have already decided in Revenue's appeal in ITA No. 6/Ahd/2010 embodied in para-10 & 11 of this order there is no change into facts as circumstance in this year also, therefore following our discussion in ITA No.6/Ahd/2010, this ground of Revenue's appeal is dismissed. 23. In the result, Revenue's appeal is dismissed. Now we take up Revenue's appeal in ITA No.8/Ahd/2010 (A.Y.01-02) 24. The Revenue has raised following effective grounds of appeal:- "1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition U/s 40(a)(ia) of Rs.21,83,593/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source. 1(ii) The Ld. CIT(A) failed to appreciate that the Circular No.786 dtd.07.02.2000, in which he has relied upon on the above issues, has been withdrawn by the CBDT vide Circular No.7 of 2009 (F.No.500/135/2007-FTD-1), dtd. 22.10.2009. Further, on the issue of deduction of TDS on payments to Non-residents, recently ....
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....erial available on record. The assessee specifically pleaded before the learned CIT(A) that tax was not deducted because income tax is deductible at source only from payments which are chargeable to tax under Income Tax Act. It was submitted that the amount was paid for commission in foreign currency was not chargeable to tax in India because these payments represented business income of non-resident and that none of the payees have permanent establishment or business connection in India within the meaning of section 9 of the I.T. Act. It was also explained that nonresidents were not chargeable to tax in India due to various Double Taxation Agreements. It was also explained that payments were not for royalty or technical know-how and therefore, tax was not liable to be deducted. It was also submitted that the assessee did not deduct tax because of the existing circular issued by CBDT. Therefore, no disallowance could be made. The learned DR however, submitted that earlier Board circular relied upon by the assessee has been withdrawn with immediate effect vide subsequent circular dated 23.10.2009; therefore, earlier circulars would no longer survive. However, we do not agree with th....
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....n the circular existing at the time of assessment year under appeal and the view of the assessee has been accepted by the AO in assessment year 2005-06, therefore, the learned CIT(A) was justified in deleting the additions. We, therefore, do not find any perversity in the approach of the learned CIT(A). We confirmed his findings and dismiss both the appeals of the revenue." 27. It is noteworthy Ld. CIT(A) has decided this issue in para 7.3 of his order which is reproduced as under:- "I have considered submission of the appellant as well as facts of the case. Similar issue was remanded back to the AO for A.Y.A 2005-06 and AO through JT. CIT, Panchmahal Range confirmed that payment of commission in foreign currency does not come under the purview of TDS and therefore no Tax is required to be deducted. Considering said facts, circular of the Board and decisions relied upon by the appellant, disallowance of Rs.21,83,593/- is directed to be deleted." 28. From the above order of Ld. CIT(A) it is evident that he has relied upon the order passed in the case pertaining to assessment year 2005-06 wherein the Assessing Officer had submitted that in remand report that payment of commi....
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....s raised following grounds of appeal:- "1(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.10,34,262/- on account of late payment of employees contribution of PF. 1(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s. 2(24)(x) of the Act. 2(i) On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs.47,729/- on account of late payment of employees contribution to ESI. 2(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s. 2(24)(x) of the Act. 31. Ground Nos. 1(i) and 1(ii) are against the deletion of the addition made on account of late payment of employees contribution of PF. Similar ground was raised in ITA No.6/Ahd/2010 for the A.Y 1999-2000. Ld. Authorised Represen....
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....eady decided in ITA No.9/Ahd/2010 of Revenue's appeal, following our decision in ITA No.9/Ahd/2010, this ground of the appeal of the Revenue is also rejected. 36. In the result, Revenue's appeal is dismissed. Now we take up Revenue's appeal in ITA No.11/Ahd/2010 (A.Y.03-04) 37. The Revenue has raised following grounds of appeal:- "1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition u/s 40(a)(ia) of Rs.49,48,283/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition u/s 40(a)(ia) of Rs.16,66,673/- on account of professional fees paid in foreign currency without deduction of tax at source. 3. The Ld. CIT(A) failed to appreciate that the Circular No.786 dtd.07.02.2000, in which he has relied upon on the above issues, has been withdrawn by the CBDT vide Circular No.7 of 2009 (F.No.500/135/2007-FTD-1), dtd. 22.10.2009. Further, on the issue of deduction of TDS on payments to Non-residents, recently the Hon. Karnataka High Court in its judgment in the case of CIT (Internatio....
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....ahal Steel Ltd. Page 19 Taxation Vs. Samsung Electronics Co. Ltd. reported in TIOl 2009-TIOL- 629-HC-Kar-IT, relying upon the decision of Apex Court in the case of Transmission Corporation Ltd., Vs. CIT-2002-TIOl-471-SC-IT, has held that the obligation to deduct tax at source u/s 195 has nothing to do, with the actual liability of the non-resident to tax under the provision of the Act, including the quantum thereof. The payer in such circumstances should take resource to the provision of section 195(2) of the IT Act, if he is of the view that only a part of the payment made by him or no part thereof would bear the character of income in the hands of the non-resident. 3(i) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,01,487/- on account of late payment of employees contribution to ESI. 3(ii) The decision of Ld. CIT(A) is not acceptable, as the provisions of section 43B which applies to employer's contribution have no role in deciding the issue of allowability of employees contribution which are governed by section 36(1)(va) r.w.s 2(24)(x) of the Act." 41. The first effective ground is against the deletion of addit....
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....(A) erred in deleting the disallowance of excess payment of interest of Rs.35,27,425/- u/s. 40A(2)(b) of the Act. 2(ii) The Ld. CIT(A) failed to allow an opportunity to the Assessing Officer to verify the assessee's claim that liability to pay interest pertaining to past years got crystallized in the A.Y. 2005-06, which is in contravention to Rule 46A of the I.T. Rules 1962. 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in allow additional depreciation as claimed by the assessee ignoring the fact that he assessee has not made any claim for additional depreciation in the original return of income for A.Y. 2005-06. The first claim of this was made in the revised return of income and the claim was made at a time when the limitation for filing revised return had lapsed." 46. The first ground is against the deletion of addition u/s 40(a)(ia) of the Act of Rs.77,33,477/- on account of commission paid to foreign agents in foreign currency without deduction of tax at source. 47. We find that this identical ground was raised by Revenue in ITA No.8/Ahd/2010 in assessee's own case in respect of A.Y. 2001-02 and no change in facts and ....
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....pply on the facts of the present case as the issue of Circular No 7 of 2009 was not before the Hob'ble High Court. Respectfully following the decision of the Hon'ble Co-ordinate Bench in ITA No. 1443-1444/Ahd/2010, this ground of the Revenue's appeal is dismissed." Following our decision in ITA No. 8/Ahd/2010, this ground of Revenue's appeal is dismissed. 48. Next ground is raised against the deletion of disallowance of excess payment of interest amounting to Rs.30,27,425/- u/s40A(2)(b) of the Act. Ld. CIT-DR submitted that the order of Ld. CIT(A) is erroneous and submitted that Ld. CIT(A) did not give any opportunity to Assessing Officer to verify the assessee's claim that liability to pay interest pertaining to past years got crystallized in the year under consideration, which is in contravention to Rule 46A of the I.T Rules, 1962. He placed stay reliance on the assessment order. 49. On the contrary, Ld. Authorized Representative for the assessee submitted that the approach of the Assessing Officer is all through out remained erroneous. He submitted that proper working of rate of interest is 12% but not 21% as worked out by the AO. He relied on the order of Ld. CI....
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....advance as unsecured loan to the Company. Further, the interest on it was required to be paid from the date from which the amount was actually received by the appellant. Since the liability to pay the interest crystallized during the relevant previous year, appellant has paid interest for the period from which the loan was taken till the date of repayment i.e. for more than 12 months at an agreed rate of 12% only and not @ 21% as mentioned by AO in the said order. The appellant also furnished detailed working for the same and it is verified that interest is actually paid at 12% p.a. and not at 21%." 51. The contention of the Ld. CIT-DR is that the Assessing Officer was not afforded opportunity to verify the claim of the assessee that the liability to pay interest crystallized in the A.Y. 2005-06 which is in contravention to Rule 46A of IT Rules, 1962. After considering the submissions of the respective parties and all aspects of the matter in the interest of justice, we restore back the matter to the file of AO to verify the claim of the assessee that the liability to pay interest crystallized in the A.Y. 2005-06 and also working out of rate of interest. Therefore, this ground o....
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....rt of the JCIT, to the extent that if production as per the excise records has started in a previous. A.Y then both regular and additional depreciation should be allowable first in the A.Y. 2004-05, for the second half of the year, as noted in the excise duty record. Hence, it is not acceptable that the SS Wire Drawing plant and Billet Yard were both commissioned and put to use in A.Y. 2005-06 as claimed by the assessee because trail run and regular run were commissioned in the second half of the previous A.Y. 2004-05, even though these assets were capitalized in books on 01-04-2004.. It is not a material as to on what date the plant and machinery was put to use. Accordingly the AO is directed to allow depreciation and additional depreciation for later half of the year 2003-04, relevant for the A.Y 2004- 05 on SS Wire Drawing plant and Billet Yard and based on the closing WDV consider depreciation in this A.Y, if necessary after obtaining necessary clarifications from the appellant. Thus, this ground of appeal regarding depreciation and additional depreciation is disposed off accordingly." It is evident from the finding of Ld. CIT(A) that for the additional depreciatio....
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.... well as in law, the learned CIT(A) '"ld. CIT(A)" in sort] erred in confirming the following disallowances: (i) Disallowance of Rs.6,35,014/- being 1/3rd out of Miscellaneous Expenditure; (ii) Disallowance of Rs.3,06,580/- being 1/10th out of Staff Welfare Expenses; (iii) Disallowance of Rs.3,24,742/- being 1/10th out of Vehicle Running Expenses and related depreciation thereon' (iv) Disallowance of Rs.2,31,450/- being 1/10th out of Travelling Expenses; (v) Ad-hoc Disallowance of Rs.50,000/- out of Telephone Expenses; (vi) Disallowance of Rs.2,12,852/- being 1/10th out of discount on sales and Rs.1,16,803/- being 1/10th out of commission on sales." 59. All the grounds of CO have been decided by Ld. CIT(A) together therefore they are being taken up together for the sake of convenience. The Ld. Authorized Representative submitted that the disallowances in respect of misc. expenditure were restricted by Ld. CIT(A) to 50,000/- vide order dated 18-05-2004 for A.Y. 1998-99 and Hon'ble ITAT Ahmedabad in C.O. No.181/Ahd/2004 (arising out ITA No.2252/Ahd/2004) deleted the disallowances. On the contrary, Ld. CIT-DR relied upon the order....
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....12,715/-. Ld. Authorized Representative for the assessee relied upon the judgment of Hon'ble jurisdictional High Court in the case of CIT v. S.L.M. Maneklal Industries Ltd. (1997) 107 ITR 133 (Guj) and assessee has incurred the expenses for the encourage of working ability to its workers. On the contrary, Ld. CIT-DR could not controvert the submission of Ld. AR as he simply relied on the order of Ld. CIT(A). 64. We have heard the rival contentions perused the materials available on record. We find that the judgment cited by Ld. AR in the case of S.L.M. Maneklal Industries Ltd. (supra) and in view of the decision of Hon'ble jurisdictional High Court we allow the claim of assessee. This ground of assessee's CO is allowed. 65. Next ground is against payment to Shri Hindu Smashan Samiti as contribution of Rs.51,000/-. Ld. AR submitted that the said contribution was paid to said Samiti on humanitarian ground and he has cited a case law of Hon'ble jurisdictional High Court in the case of CIT v. Navsari Cotton & Silk Mills Ltd. (1982) 135 ITR 546 (Guj). On the other hand, Ld. CIT-DR supported the order of Ld. CIT(A). 66. We have heard the rival submissions perused the materials a....