TaxTMI 
TaxTMI 
2015 (3) TMI 570
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....acturing, trading and exporting Phyllium and other agro based products. Assessee filed its return of income for A.Y. 08-09 on 29.09.2008 declaring total income of Rs. 4,33,130/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 28.12.2010 and the total income was determined at Rs. 2,14,12,590/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who vide order dated 12.09.2011 granted partial relief to the Assessee. Aggrieved by the aforesaid order of CIT(A) Revenue as well as Assessee are now in appeal before us;- 5. The grounds raised by the Revenue reads as under:- 1. "1). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 25,56,814/- made by the Assessing Officer, on account of interest expenses: 2). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 2,60,700/- made by the Assessing Officer on account of stamp duty for pledge agreement and processing fees charged by bank. 3). The Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad has erre....
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....25,56,814/-. 7. On perusing the Balance Sheet, A.O noticed that Assessee had taken loan from bank and on account of interest to bank debited Rs. 33,95,149/-. AO also noticed that Assessee had also paid interest of Rs. 3,59,788/- to others. A.O also noticed that Assessee had advanced loans and advance of Rs. 2,04,28,883/- to Jyotindra Brothers and Rs. 28,14,882/- to Jyotindra Herbal Industries, both being specified parties u/s. 40A(2b). Assessee was asked to explain as to why proportionate interest expenses on the amount advanced to its sister concerns not be disallowed and was also asked to furnish the cash flow statement. In response to the query of the AO, Assessee inter alia submitted that the amount received from bank was against the security of goods and receivables and therefore it was not possible to siphon off the funds to provide interest free loans. It was further submitted that the amount that was advanced to its sister concerns was in the nature of trade advance for a very short term and was towards the purchase of goods. It was further submitted that the amount that has been advanced was out of the interest free capital and unsecured loan and the interest paid was f....
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....st pledge of goods. In case where the limits were in the nature of pledge, the banks keep the goods purchased out of the funds secured under its lock and key, therefore, it was not possible to siphon off the funds to provide interest free loans. She further submitted that Assessee was having sufficient interest free funds in the form of share capital and unsecured loan. She pointed to page 16 of the paper book to demonstrate that the aggregate capital and interest free unsecured loan was to the extent of Rs. 7.65 crore which was far in excess of the amount advanced. She further submitted that the cash flow statement was furnished before A.O. She also placed reliance on the decision of Hon'ble Gujarat High Court in the case of Raghuvir Synthetics 355 ITR 222 and the decision in the case of Bombay High Court in the case of Reliance Utilities 313 ITR 340. She thus supported the order of CIT(A). 10.We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to disallowance of interest. We find that AO in the order has noted that Assessee was asked to furnish the cash flow statement and Ld. DR before us has also submitted th....
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.... 2,60,700/- and added to the income. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:- 4.3 AO observed that out of the Bank charges debited by the appellant of Rs. 9,11,000/- an amount of Rs. 1,00,700/- was paid towards stamp duty and Rs. 1.6 lakhs was paid towards processing fee of the credit agreement with Dena Bank, He held that these expenses were in the nature of capital expenditure and hence disallowed the sum of Rs. 2,60,700/-. The contentions of the learned AR in brief are that the expenditure incurred was towards pledge agreement for borrowing of working capital from the Bank and therefore in the light of the decisions cited at 60 ITR-52(SC), 326 ITR-29(P&H), 48 DTR 452(Mum.) and Ahmedabad Tribunal's decision, the impugned disallowance is unwarranted. 4.4 I am inclined to accept the contentions of the appellant. Since the expenses were incurred towards the pledge agreement with the Bank for borrowing working capital, it cannot be said that any capital asset has come into existence. Therefore, the question of capitalizing the incidental expenses does not arise, Hence impugned disallowance is de....
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.... expenditure was for building a new road which was considered by him to be capital expenditure and therefore disallowed the same. AO however allowed depreciation on the expenditure treated as capital expenses. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under: 5.3 Having considered the contentions of the AR, I am inclined to agree with the AR. As seen from the assessment order AO was not able to controvert the contention of the appellant that the expenditure was only towards repairs and renovation. AO merely relied on the fact that the expenditure incurred was substantial compared to the w.d.v of the assets. I am of the view that the amount of expenditure alone does not alter the character of the expenditure. Therefore, AO is directed to allow the expenditure as Revenue expenditure. As the entire work of repairs and renovation was given on contract, making addition at the rate of 40% which works out to Rs. 3,03,770/- towards alleged labour charge payments In unwarranted. Thus, the entire disallowance of Rs. 16,7.1,475/- is deleted. AO is directed to withdraw the depreciation allowed on the said amount at the ra....
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.... but allowed depreciation on the same. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:- "6.2 In the assessment order, AO held the expenditure of Rs.l 1,34,240/- towards repair and reconditioning of Plant and Machinery was in the nature of capital expenditure. Accordingly, he disallowed the same and allowed depreciation on the said amount. The reasoning given by the Officer while making the disallowance is the same lines as discussed at para-5,2 of this order. Learned AR contended that the machineries purchased were part of the core or main machinery (and were not machinery put to use independently). Following the findings given by me at para-5.3, I hold that impugned disallowance is not sustainable. It is deleted. Simultaneously, AO is directed to withdraw the depreciation allowed on the said amount @ 15%, which worked out to Rs. 1,70,136/-. 20.Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 21. Before us, Ld. DR supported the order of AO and on the other hand Ld. AR supported the order of CIT(A). 22.We have heard the rival submissions and perused the material on record. We fin....
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.... was neither to a non resident ship owner nor to an agent of any non resident ship owners and therefore the payment does not come under the purview of CBDT Circular No. 723. He accordingly disallowed the expenditure u/s. 40(a)(ia) of the Act. With respect to payment of Rs. 6,67,159/- to Soham Logistic Pvt. Ltd. towards Terminal Handling Charges, A.O noted that TDS was deducted by the Assessee only on Rs. 91,789/- and further there was no evidence of deduction of TDS on the balance amount. He accordingly considered the expenses of Rs. 5,75,370/- made on account of Terminal Handling Charges on which no TDS was deducted to be not allowable u/s. 40(a)(ia) of the Act. He thus disallowed the aggregate payment of Rs. 80,42,054/- u/s. 40(a)(ia) of the Act. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A) who decided the issue by noting as under:- 7.3 As seen from para-8 of the assessment order, the AO observed that appellant deducted tax only of Rs. 9,61,583/- out of the payment made of Rs. 90,03,637/- to Soham Logistics Pvt. Ltd.( the clearing and forwarding agent of the appellant). Since no tax was deducted on the balance payment of Rs. 80,42,054/- it was disal....
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....it was not a case of short deduction of tax but the case was of no deduction of tax on certain items. The ld. D.R. further submitted that CIT(A) with respect to deduction of tax on ocean freight had remitted the issue to the file of A.O but as per provisions of Section251 of the Act, CIT(A) has no power to set aside the matter to AO. He thus supported the order of AO. Ld. A.R. on the other hand reiterated the submissions made before A.O and CIT(A). She further pointed to the breakup of charges paid to Soham Logistic Pvt Ltd which was placed at page 26 & 27 of the paper book. She also submitted that TDS was deducted wherever it was applicable. She further placed reliance on the decision in the case of Om Satya Exim Pvt. Ltd. vs. ITO (ITA No. 1335/A/2010) order dated 13th May, 2011, decision in the case of ACIT vs. P.P. Overseas ITA No. 733/Mum/2010 order dated 18.02.2011, decision of Hon'ble Gujarat High Court in the case of Gujarat Narmada Valley Fertilizers Co. Ltd. 35 Taxman.com 638 and the decision of Calcutta High Court in the case of S.K. Tekriwal G.A. No. 2069/A/2012. She also placed on record the copy of the aforesaid decisions. 26.We have heard the rival submissions and ....
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....of TDS from payment made to foreign shipping companies at para 5 notes as under: "There would, however, be cases where payments are made to shipping agents of non-resident ship-owners or charterers for carriage of passengers etc shipped at a port in India. Since the agent acts on behalf of the nonresident ship-owner or charterer, he steps into the shoes of the principal. Accordingly, provisions of section 172 shall apply and those of section 194C and 195 will not apply." On perusing the aforesaid circular, we are of the view that provision of section 194C & 195 of deduction of TDS to the agents would not apply only when the agent is a shipping agent of non-resident ship-owner or charterer and not otherwise. In the present case, in view of no material on record to demonstrate that Soham Logistic Pvt Ltd was agent of non-resident shipowners, we find that A.O was justified in disallowing the expenditure on Ocean freight u/s. 40(a)(ia) of the Act. (c) With respect to payment to Terminal handling charges, it is Assessee's submission that it has deducted the TDS but on the contrary it is A.O's observation that TDS was deducted only of Rs. 91,789/-, and no evidence of deduction o....
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....y proof of its claim of purchasing different quality and specification of seeds from Jyotindra Brothers. He therefore concluded that Assessee had purchased goods from Jyotindra Brothers at a higher rate. He thereafter worked out the payment of Rs. 63,51,462/- to be unreasonable out of the total purchases of Rs. 3.17 crores from Jyotindra Brothers and accordingly disallowed the same. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:- 1.2 As seen from the para-9 of the assessment order, AO observed that appellant made purchases of Rs. 3,17,57,310/- from M/s. Jyotindra Brothers,; a person falling under section 40A(2)(b); the purchases were made at much higher price compared to the purchases from other parties. Accordingly, he held that 20% of the purchase amount was to be disallowed u/s.40A(2)(b), which works out to Rs. 63,51,462/-. The contentions of the learned AR are that the quality of the goods purchased determine the price and therefore the comparison made was improper; the rate of purchases from Jyotindra Brothers compares well with the rate of purchases from Chokshi Shaileshkumar & Bros.; and keeping in v....
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....fore making the payment. It was also submitted by the Assessee that due to the constraint of production capacity, job work was entrusted to Jyotindra Industries and it was an exceptional circumstances which did not occur in earlier years. The submission of the Assessee was not found acceptable to the A.O. more so when Assessee did not furnish any documentary evidence to support its contention of the emergency situation. He also noticed that Assessee had not given any details of expenses date wise nor any documentary evidence like challans of sending and receiving the goods. He accordingly concluded that in the absence of proof of genuineness of expenses, the milling expenses cannot be allowed and accordingly disallowed Rs. 13 lac. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:- 9.3 The contentions of the learned AR in this regard are that all the necessary evidences were furnished to the AO; M/s. Jyotindra Industries is an Income-tax assessee; and making disallowance without any further enquiries was uncalled for. Appellant's contentions are tenable. Necessary details were furnished to the AO. Tax was d....
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....Further the exceptional reasons which necessitated the payment has also not been placed before us. We further find that CIT(A) has also not given any finding on the issues raised by A.O. In view of the these facts, we are of the view that A.O was fully justified in making the disallowance, we therefore uphold the action of A.O. and thus this ground of Revenue is allowed. 36.In the result, the appeal of Revenue is partly allowed We now take up C.O.NO. 4/AHD/2012 for A.Y. 2008-09 of Assessee. 37.The grounds raised by C.O. reads as under:- 1. Ld. CIT (A) erred in law and on facts in directing AO to verify bills issued for Inland Transport and Ocean Freight in support of the proposition advanced by the appellant that they were only reimbursement of expenses. Ld. CIT (A) ought to have granted relief claimed by the appellant rather than issuing direction to AO to examine when complete bill wise details were already submitted before AO during the assessment proceedings. 2. Ld. CIT (A) erred in confirming disallowance of Rs. 5,75,370/- made by AO out of Terminal Handling charges u/s 40(a)(ia) of the Act without taking into consideration submissions made by the appellant. Ld.....
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.... amount of Rs. 5,75,370/- on which TDS was not deducted as covered by provisions of Section 40(a)(ia) and accordingly disallowed the same. CIT(A) while deciding the issue has noted that before him. Ld. A.R. had fairly conceded about the non availability of details or evidence and he therefore upheld the disallowance made by A.O. Aggrieved by the order of CIT(A), Assessee is now before us. 42. Before us, ld. A.R. submitted that TDS wherever applicable was deducted and further relied on the decision in the case of CIT vs. S.K. Tekriwal (G.A. No. 2069/A/2012). Ld. D.R. on the other hand submitted that the decision of Hon'ble Calcutta High Court in the case of S.K. Tekriwal (supra) would not be applicable to the facts of present case as in the present case, the case was with respect to no deduction of tax whereas in the case before Hon'ble Calcutta High Court, the case was with respect short deduction of tax. He thus supported the order of A.O and CIT(A). 43.We have heard the rival submissions and perused the material on record. We find that A.O while disallowing the expenditure has noted that Assessee did not furnish any details in support of its claim of deduction of TDS. We fu....
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.....40A(2)(b) of the Act 8. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad ought to have upheld the order of the Assessing Officer. Ground no. 1 is with respect to disallowance of depreciation of BMW car. 46.During the course of assessment proceedings, A.O noticed that Assessee has purchased a BMW car and had claimed depreciation at 50%. The Assessee was asked to justify the claim of depreciation at 50% to which Assessee interalia submitted that 50% depreciation is allowable on new commercial vehicle as per the notification of CBDT. The submission of the Assessee was not found acceptable to the A.O, as he was of the view that BMW car was sports Luxury Seden which did not fall in the category of commercial vehicles and therefore disallowed the claim of 50% depreciation but however allowed the depreciation at the normal rate applicable to vehicles. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A) who deleted the addition by holding as under:- 3.2. I have considered the submissions made by the A. R. of the appellant and the observations of the assessing officer in the assessment order. In the....
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....conditions specified in the Act and the Rules have been met by the assessee. We also hold that, till such car is used by the assessee for its business purpose the assesses would get the depreciation at the rate of 40 per cent as per the IIIrd proviso to section 32 of . Thus, Ground Nos 1 to 3 of the assessee stand accepted. " The issue under consideration is identical to the issue decided upon in the above mentioned order, though the said judgment pertains to A.Y. 1999-2000. The observations of the AO at para-4 of the assessment order on the issue are general. Therefore in the light of the above mentioned order, I hold that the BMW car bought by the appellant does fall in the category of commercial vehicles and is entitled to depreciation @ 50% as against 7.5% allowed by the AO. Disallowance of depreciation of Rs. 5,72,512/- is not in accordance with law. It is deleted. This ground of appeal is allowed. 47.Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 48.Before us. Ld. D.R. submitted that the BMW car purchased by the Assessee cannot be considered as commercial vehicle entitled to 50% depreciation. He thus supported the order of A.O. The ld. A.R. on ....
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....bmissions of both the parties stated herein that the grounds being similar to that of A.Y. 2008-09, we for the similar reasons given hereinabove while deciding the appeal for Revenue for A.Y. 2008-09 and for similar reasons decide the grounds of the Revenue in similar manner. 52.In the result, the appeal of Revenue is partly allowed for statistical purpose. Now we take up C.O. NO. 218/AHD/2012 for A.Y. 2009-10 of Assessee. 53.The grounds raised by the C.O reads as under:- 1. Ld. CIT (A) has erred in law and on facts in upholding the disallowance of deduction u/s 80IB of Rs. 2,67,837/- by holding that the loss of earlier year ought to have been reduced. Ld. CIT (A) ought to have granted relief claimed by the assessee and allowed the deduction u/s 80IB. 2. Ld. CIT (A) has erred in not allowing the deduction u/s 80IB by relying on decisions of Hon'ble ITAT while decision of Hon'ble High Court being in favor of the assessee. 54.During the course of assessment proceedings, A.O noticed that Assessee has claimed deduction u/s 80IB to the extent of Rs. 69,29,936/- for unit-2. He also noticed that Assessee has incurred loss of Rs. 10,71,346/- during A.Y. 08-09 in Unit....