TaxTMI 
TaxTMI 
2015 (10) TMI 2429
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..... 4. The learned CIT (Appeals) further failed to appreciate that finance charges are not interest payment falling within the provisions of Section 2(28A) of the Act and hence cannot be disallowed under Section 40a(ia) of the Act. 5. Without prejudice, even if finance charge is to be held as interest, then, the payment to the parties mentioned have been paid within 3l March of the relevant financial year and thus the disallowance under Section 40a(ia) of the Act is uncalled for. 6. The learned CIT (Appeals) ought to have allowed the claim with regard to finance charge by relying on the decision of the Special Bench of ITAT, Visakhapatnam in the case of Merilyn Shipping Corporation & Transports vs. ACIT reported in (2012) 16 ITR (Tri) 1. 7. For these and such other grounds that may be urged at the time of hearing, the Appellant prays that the appeal may be allowed." 3. Ground No.1 is general in nature and calls for no specific adjudication. 4. Ground No.2 is regarding disallowance of additional depreciation u/s. 32(1)(iia) of the Act. 5. The assessee is engaged in the business of trading in iron ore and also carrying out mining activities as regards excavation, crushing, scree....
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.... the case of the assessee that it is not engaged in the business of manufacture and products of articles or goods, as required under the provisions of section 32(1)(iia) of the Act. He has further submitted that it is also not clear from the record as to whether any new plant & machinery purchased by the assessee is used for the purpose of carrying out the activities of excavation, crushing, screening or by hiring out the same, because the assessee is having diversified activities and earned revenue from various sources including hiring out the machineries. Thus, the ld. DR has submitted that when the AO has given a factual finding that the assessee is not in the business of manufacture or production of goods or articles, the decision relied upon by the assessee will not help the case of the assessee. 9. We have considered the rival submissions as well as relevant material on record. The claim of assessee in respect of additional depreciation has been denied by the AO on the ground that the assessee is not in the business of manufacture or production of goods or articles. Though the AO has recorded this fact that the assessee is in the activity of excavation, crushing and screenin....
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....aged in the mining business and is eligible for claiming additional depreciation u/s 32(1)(iia)of the Income-tax Act. Thus, assessee's appeal is allowed." 10. The relevant facts have not been examined by the AO as to the source of revenue earned by the assessee and for earning income from the activity of excavation, crushing and screening, whether the assessee has used newly acquired machinery on which the claim for additional depreciation has been made by the assessee. Accordingly, we are of the view that this issue requires a proper verification and examination of relevant facts at the level of the Assessing Officer and then, adjudication as per law by considering the decision of the coordinate Bench in the case of ACIT v. R. Prabhu (supra). Hence this issue is set aside to the record of the Assessing Officer for deciding the same afresh, after giving opportunity of hearing to the assessee. 11. Ground Nos. 3 to 6 are regarding disallowance u/s. 40(a)(ia) of the Act. During the course of assessment proceedings, the AO noticed that the assessee has paid interest/financial charges of Rs. 1,04,09,238 without deduction of tax as required u/s. 194C of the Act. Since the assessee fail....
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....ithout deduction of tax as required u/s. 194C of the Act: 1. SREI Infrastructure Ltd. Rs.69,82,902 2. Sundaram Finance Ltd. Rs. 24,972 3. Tata Motor Finance Ltd. Rs.34,01,364 Rs.1,04,09,238" 16. As regards the payment to Sundaram Finance Ltd. of Rs. 24,972, we find that the Department has granted exemption vide Certificate dated 18.4.2007 u/s. 197(1) of the Act to the said company. Therefore the assessee was not required to deduct any tax at source in respect of payment made to the said company. In view of the fact that the Department has already granted exemption to the said company, therefore, disallowance made by the AO u/s. 40(a)(ia) of the Act for want of tax deduction at source is not warranted. Accordingly, the same is deleted. 17. For the remaining two payments, the ld. AR has relied on decision of the Special Bench of the Tribunal in the case of Merilyn Shipping Corporation & Transports (supra). We further note that the coordinate Bench of this Tribunal in the case of Ananda Marakala (supra), while dealing with an identical issue, had in paras 25 to 30 held as under:- "25. The question is as to whether the amendment made as above is pro....
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.....1.4.2004. The Court considered the scheme of the Act and the historical background and the object of introduction of the provisions of S. 43B. The Court also referred to the earlier amendments made in 1988 with introduction of the first and second provisos. The Court also noted further amendment made in 1989 in the second proviso dealing with the items covered in S. 43B(b) (i.e., contribution to employees welfare funds). After considering the same, the Court was of the view that it was clear that prior to the amendment of 2003, the employer was entitled to deduction only if the contribution stands credited on or before the due date given in the Provident Fund Act on account of second proviso to S. 43B. The situation created further difficulties and as a result of representations made by the industry, the amendment of 2003 was carried out which deleted the second proviso and also made first proviso applicable to contribution to employees welfare funds referred to in S. 43B(b). "15. We find no merit in these civil appeals filed by the Department for the following reasons : firstly, as stated above, s. 43B (main section), which stood inserted by Finance Act, 1983, w.e.f. 1st April,....
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....ich related to asst. yr. 1984-85. The relevant accounting period ended on 30th June, 1983. The ITO disallowed the deduction claimed by the assessee which was on account of sales-tax collected by the assessee for the last quarter of the relevant accounting year. The deduction was disallowed under s. 43B which, as stated above, was inserted w.e.f. 1st April, 1984. It is also relevant to note that the first proviso which came into force w.e.f. 1st April, 1988 was not on the statute book when the assessments were made in the case of Allied Motors (P) Ltd. Etc. (supra). However, the assessee contended that even though the first proviso came to be inserted w.e.f. 1st April, 1988, it was entitled to the benefit of that proviso because it operated retrospectively from 1st April, 1984, when s. 43B stood inserted. This is how the question of retrospectivity arose in Allied Motors (P) Ltd. Etc. (supra). This Court, in Allied Motors (P) Ltd. Etc. (supra) held that when a proviso is inserted to remedy unintended consequences and to make the section workable, a proviso which supplies an obvious omission in the section and which proviso is required to be read into the section to give the section ....
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....ore us involves the principle of construction to be placed on the provisions of Finance Act, 2003. 16. Before concluding, we extract hereinbelow the relevant observations of this Court in the case of CIT vs. J.H. Gotla (1985) 48 CTR (SC) 363 : (1985) 156 ITR 323 (SC), which reads as under : "We should find out the intention from the language used by the legislature and if strict literal construction leads to an absurd result, i.e., a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction." 17. For the aforestated reasons, we hold that Finance Act, 2003, to the extent indicated above, is curative in nature, hence, it is retrospective and it would operate w.e.f. 1st April, 1988 (when the first proviso came to be inserted). For the....
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....he replacement of the words in the proposed and enacted provision from the words 'amount credited or paid' to 'payable' has held that it has to be concluded that provisions of Section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow expenditure which has been actually paid during the previous year, without deduction of TDS. 28. In CIT Vs. Sikandarkhan N.Tunvar & Others, TAX APPEAL NO. 905 of 2012 & others Dated02/05/2013, the Hon'ble Gujarat High Court held that in Merilyn Shipping 146 TTJ 1 (Viz) (SB,) the majority held that as the Finance Bill proposed the words "amount credited or paid" and as the Finance Act used the words "amounts payable", s. 40(a)(ia) could only apply to amounts that are outstanding as of 31st March and not to amounts already paid during the year. This view is not correct for two reasons. Firstly, a strict reading of s. 40(a)(ia) shows that all that it requires is that there should be an amount payable of the nature described, which is such on which tax is deductible at source but such tax has not been deducted or if deducted not paid before the due dat....