TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 87
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....t Expenses & Service Charges u/s 40(a)(ia) of the Act though explained. The disallowance be deleted. 3. The Learned C.I.T. (Appeals)-VIII, Ahmadabad has erred in confirming Rs.11,22,513/- being Interest Expenses u /s 36(i)(iii) & Administrative Expenses of Rs. 20,000/- u/s. 14A of Act though explained. The disallowance be deleted." I.T.A. No. 2101 /Ahd/ 2008 (Revenue's Appeal) "1. The Ld. CIT (A) has erred in law and on the facts of the case in restricting the disallowance made on account of prior period expenses of Rs.1,17,138/- to Rs. 1,000/- only. 2. The Ld. CIT(A) has further erred in not appreciating the facts that the assessee is following mercantile system of accounting and as such the expenditure which had accrued in a particular year can be claimed and allowed in that particular year only and not in any year. 3. The Ld. CIT (A) has erred in law and on the facts in restricting the disallowance of interest expenses u/s 14A of the Act of Rs.56,77,827/- to Rs.11,22,513/- thereby granting relief to the assess to the tune of Rs.43,35,314/-. 4. The Ld. CIT(A) has further erred in relying on the evidences furnished before him by the assessee which were not produced or furnis....
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....e submissions of the A.R. carefully. From the breakup of the bill amount, it is seen that the service charges paid to Robinson which have been mentioned as delivery charges amount to Rs.57,750/- in total out of the amount of Rs.22,97,336/-. However, the contention of the A.R. cannot be accepted because of the CBDT circular No. 715 and I agree with the conclusion of the A.O. that it is a composite contract and therefore the appellant should have deducted tax at source on the entire payment of Rs.22,97,336/- and as TDs has not been deducted, the disallowance made u/s. 40(a)(ia) is held to be justified and the same is confirmed." 4. Now the assessee is before us. Ld. Counsel for the appellant contended that these payments are reimbursement of actual expenditure incurred on behalf of the assessee by Robinson Air Services. He filed copy of accounts. The assessee filed paper book which shows that these payments were reimbursement to Robinson Air Services towards payments made to the Custom Department. He further relied that these payments are not principal to principal but between assessee and principal agent and there is no profit element in these payments. He relied upon in case of CI....
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....ess. Accordingly, addition of Rs. 56,57,827/- was made u/s. 36(1)(iii) of the Act. Similarly, administrative expenses also disallowed at Rs. 20,000/- u/s.14A of the IT Act. 7. Being aggrieved by the order of the A.O., the assessee carried the matter before CIT(A) who had partly allowed the appeal by observing as under: "11. I have considered the submissions of the A.R. carefully. The A.R. has given details of investments of Rs. 4.41 crores and the year of investment and the source of investment. The A.R. has also filed copy of return of allotment in Form No.2 filed on 26.4.1996 with the Registrar of Companies, showing the amount of premium received of Rs.1.50 crores and share application money received to the tune of Rs.50 lakhs and ledger folio account for the financial year 1995-96 showing receipt of Rs.2.16 crores as share application money including share premium. The said amount has been invested in making investments in the shares of group companies i.e. Ferrometik Milacron India Ltd and other group companies. The A.R. has also stated that the appellant had invested Rs. 1.44 crores with Mamata USA, Inc, a wholly owned subsidiary and Rs.....
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....said working and the details filed by the A.R., I hold that the interest disallowance should be made to the tune of Rs.11,22,513/- as against the disallowance made by the A,O. of Rs. 56,57,827/-. Accordingly, relief to the appellant comes to Rs.45,35,314/-. As regards, disallowance of Rs.20,000/- towards proportionate administrative expenses incurred for earning dividend income the same is found to be reasonable and the same is therefore, confirmed. This ground is partially allowed." 8. Now the assessee and revenue are before us. Ld. Counsel for the appellant contended that these investments had been made since 1995-96. No new investment has been made during the year. These investments were made from reserve, surplus and profit generated from A.Y. 1995-96. The appellant has drawn our attention page nos. 134 to 155 of the paper book and claimed that investment in shares of Ferrometik Milacron India Limited face value of Rs. 2.16 crore were made from right issue to equity share holder in 1995-96 and investment in share of Mamata USA Inc. at Rs. 1.44 crore were made in 2003-04 from internal earning of Rs. 44.18 lacs and out of borrowing Rs.1 crore. Whatever borrowing made by the appe....
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....5. On this issue, the A.O. gave reasonable opportunity of being heard, which was replied by the assessee and considered by the A.O. The A.O. held that expenses were relevant to A.Y. 04-05 whereas the expenditure claimed during the current year. The assessee company followed mercantile system of accounting. Thus, prior period expenses are not allowable. Therefore, he made addition of Rs. 1,17,138/-. Ld. CIT(A) observed that the appellant had paid this amount on 24.06.2004. Thus, this amount is allowable u/s. 43B of the IT Act during the year under consideration, but Rs. 1,000/- pertained to penalty which is not allowable u/s. 37 of the IT Act. The Revenue again reiterated the facts of argument as observed in the assessment order and argued to confirm the addition whereas ld. Counsel for the appellant argued that these expenses had been crystallized during the year under consideration and accordingly, appellant had claimed these expenses. The fact is that his payments were outstanding for A.Y. 2004-05 which was paid in A.Y. 05-06 and allowable u/s. 43B of the IT Act. Thus, it is allowable u/s. 43B of the IT Act, which were paid before the due date of filing of return by the appellant....