TaxTMI 
TaxTMI 
2014 (1) TMI 1756
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..... Commissioner of Income Tax (Appeals), is not justified in confirming the disallowance of interest expenses to the extent of Rs. 70,98,368/- and other expenses to the extent of Rs. 445814/- u/s 14A. Therefore, relief may please be allowed to the assessee. 4. That the Ld. Commissioner of Income Tax (Appeals) has erred in confirming disallowance of the exemption of agriculture income to the extent of 50% on estimated basis and treating the same as Income from Other Sources. 5. That the Ld. Commissioner of Income Tax (Appeals) grossly erred in law as well as facts in confirming disallowance u/s 40A(3) amounting to Rs. 46,800/-. Therefore same needs to be deleted. 6. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as facts in confirming the disallowance of Rs. 12,50,000/- incurred on account of filing fees for increase in authorized capital by treating the same as capital expenditure instead of revenue expenditure. 7. That the Ld. Commissioner of Income Tax (Appeals) has grossly erred in confirming disallowance of Rs. 20,000/- incurred on account of consent fee paid to Punjab Pollution Control Board by treating the same as capital expenditure instead....
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....the provisions of section 94(7) are not applicable because the assessee has mainly purchased units of daily dividend scheme, weekly dividend scheme. The ld. CIT(A) did not find force in the same and confirmed the disallowance. 5 Before us, the ld. counsel of the assessee referred to provisions of section 94 (7) and emphasized that this provision would come into operation only when a person buys or acquires units within a period of three months from the record date. Since the assessee has purchased units of daily dividend scheme, weekly dividend scheme and monthly dividend scheme, therefore, there cannot be record date in such schemes and as such this provision was not applicable. 6 On the other hand, the ld. DR for the revenue strongly supported the order of the Assessing Officer. 7 We have heard the rival submissions carefully. Section 94(7) reads as under: "Section 94(7) - Where - (a) any person buys or acquires any securities or unit within a period of three months prior to the record date; (b) such person sells or transfers - (i) such securities within a period of three months after such date; or (ii) such unit within a period of nine months after such date;} (c)....
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....uring assessment proceedings the AO noticed that the assessee has shown dividend income of Rs. 21.78 Lakhs. It was further noticed that the assessee has made investment to the tune of Rs. 13 crores. The Assessing Officer further noticed that the assessee has incurred interest expenditure, therefore, he invoked provisions of section 14A and made proportionate disallowance amounting to Rs. 7,09,83,677/- on account of interest and Rs. 4,45,814/- on account of expenditure. 10 On appeal, the ld. CIT(A) confirmed the addition by following the decision of Special Bench of the Tribunal in case of ITO Vs. M/s Daga Capital Management (P) Ltd, 119 TTJ 289 (Mum) (SB). 11 Before us, the ld. counsel of the assessee submitted that the assessee had sufficient surplus funds for making investments. In any case proportionate disallowance is not possible because Rule 8D was not applicable in the present Assessment year i.e. Assessment year 2005-06. In this regard he relied on the decision of Hon'ble Bombay High Court in case of Godrej & Boycee Mfg. Vs. DCIT, 328 ITR 81 (Bom). 12 On the other hand, the ld. DR for the revenue strongly supported the order of ld. CIT(A). 13 After considering the r....
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....the order of the ld. CIT(A). 19 Ground No. 5 - After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee has made certain payments in cash as under: "Page 19 of AO Name of Person to whom payment made Date Amount Jai Karni Bikaner Roadlines 27.122004 10,000 16,000 Against Invoice No. 173 dated 21.12.04 for Rs. 26,000/ - - -do- - 27.12.2004 10,000 16,000 Against Invoice No. 172 dated 21.12.04 for Rs. 26,000/ - - -do- - 20.01.2005 10,000 16,000 Against Invoice No. 209 dated 16.01.05 for Rs. 26,000/ - - -do- - 22.01.2005 15,000 10,470 Against Invoice of Rs. 26,000/ - af ter deduct ing TDS. - -do- - 22.01.2005 15,000 10,470 - -do- - - -do- - 25.01.2005 15,000 10,470 - -do- - - -do- - 29.01.2005 15,000 10,470 - -do- - - -do- - 27.12.2004 10,000 16,000 Against Invoice No. 174 dated 16.01.05 for Rs. 26,000/ - - -do- - 27.12.2004 10,000 16,000 Against Invoice No. 175 dated 16.01.05 for Rs. 26,000/ - Total 2,31,880 The assessee was asked to explain the reasons of cash payments exceeding Rs. 20,000 shown in the books by two vouchers of Rs. 10,000 and Rs. 16,000....
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....said expenditure may please be allowed to the assessee." According to the Assessing Officer once the payment involved Rs. 26,000 it was in the knowledge of the assessee that this would be violative of Section 40A(3) and therefore, intentionally two payments have been shown by two vouchers. He also distinguished the case law relied on by the assessee and made a disallowance @ 20% amounting to Rs. 46,800/-. 20 On appeal the submissions made before the Assessing Officer were reiterated. However, the ld. CIT(A) did not find any merit in the same by observing that the decision of Hon'ble Punjab & Haryana High Court in case of CIT Vs. Bal Krishan Jagdish Chand, 164 Taxman 459 is distinguishable because in that case there was no finding that part payment has been done deliberately 21 Before us, the ld. counsel of the assessee strongly relied on the decision of Hon'ble Punjab & Haryana High Court in case of CIT Vs. Bal Krishan Jagdish Chand (supra).He further submitted that due to non availability of cash or other reasons, the payments have to be made in part. 22 On the other hand, the ld. DR for the revenue strongly supported the order of the ld. CIT(A). 23 After considering....
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....ssee has debited a sum of Rs. 12,50,000/- for fees paid to the Registrar of Companies for filing of Form 5 for increase of authorized capital from 125 crore to 150 crore. In response to the query it was mainly explained that the fees was paid for the purpose of existing business and not for the new business. The share capital was required to be increased to meet the stipulation of financial institutions under the Corporate Debt Restructuring (CDR) scheme. Reliance was placed on the decision of Hon'ble Karnataka High Court in case of Hindustan Machine Tools Ltd. Vs. CIT, 175 ITR 220 (Kar) and Federal Bank Ltd Vs. CIT, 180 ITR 241 (Ker). 25 The Assessing Officer found no force in these submissions and observed that such expenditure has to be treated as capital expenditure in view of the decision of Hon'ble Supreme Court in case of Punjab State Industrial Development Corporation Ltd. Vs. CIT, 225 ITR 792 (S.C). 26 On appeal the order of Assessing Officer was confirmed by the ld. CIT(A) in view of the decision of Hon'ble Supreme Court. 27 Before us, the ld. counsel of the assessee reiterated the submissions made before the Assessing Officer. 28 On the other hand, the ld....
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....) Ltd. 209 CTR 167. 33 On the other hand, the ld. DR for the revenue supported the order of the ld. CIT(A). 34 After considering the rival submissions we find that similar expenditure was held to be allowable by Hon'ble Punjab & Haryana High Court in case of CIT Vs. Industrial Cables (India) Ltd. (supra) wherein pollution certificate was valid for 15 years but still the expenditure was held to be allowable. Following this decision we set aside the order of the Ld. CIT(A) and delete the addition. 35 Ground No. 8 - After hearing both the parties we find that some business promotion expenditure was disallowed by the Assessing Officer. Out of which some items have been allowed by the ld. CIT(A) which have not been challenged by the Revenue. Now the dispute is in respect of Rs. 5 lakhs paid to Government for conducting Indo Pak Games and Rs. 1 lakh was paid to Mother India Foundation. A sum of Rs. 5 lakh was disallowed by the Assessing Officer because no details were furnished. Further no tax was deducted u/s 40(a)(ia). In respect of addition for a sum of Rs. 1 lakh paid to Mother India Foundation, whole amount was disallowed. However, 50% deduction was allowed u/s 80G of Income ....
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....no tax was deducted. It was stated that the payment was made by way of reimbursement of expenses and therefore, the TDS provision was not applicable. It was noted that the assessee was selling goods to Chenab Textile and the goods were dispatched to the said party by different trucks. M/s Chenab Textile made freight payments. M/s Chenab Textile used to send a debit note against the assessee and the amount was paid to them without deduction of TDS. According to the Assessing Officer the freight payment was more than Rs. 50,000/- and therefore, provisions of section 194C was applicable. Since the assessee has not deducted the tax, therefore, this amount was disallowed. 41 On appeal it was mainly stated that payment was made to the TOU and no element of profit was involved therefore, tax was not deductible. Reliance was placed on the decision of Hon'ble Punjab & Haryana High Court in case of CIT Vs. United Rice Land Ltd., 322 ITR 594 (PH). 42 The ld. CIT(A) considered the submissions and did not find force in the same. He referred to the decision of Hon'ble Supreme Court in case of Associated Cement Co. Ltd. Vs. CIT, 201 ITR 435 (S.C) and confirmed the action of the Assessin....
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....educted and therefore, we set aside the order of the Ld. CIT(A) and delete the addition of Rs. 8,54,452/-. 47 Ground No. 11 - After hearing both the parties we find that during assessment proceedings the AO noticed that the assessee has attached a note along with the income tax return which read as under: " Note:1. The company has been granted sale tax exemption for a period of 10 years from 19.01.1999 to 18.01.2009 by the Excise & Taxation Deptt. The abovesaid sales tax exemption has been granted under the Industrial Incentive Scheme 1996 of Govt. of Punjab with a view to promote growth of industry in the state. This sales tax exemption is based upon the fixed capital investment. The amount has been set off against notional sales tax liability. The notional sales tax liability of Rs. 6,86,63,769/- in respect of sales of finished goods for the previous year 2004-05 being in the nature of subsidy is a capital receipt not liable to tax. As per legal advice and in view of the decision of the Tribunal in the case of DCIT vs. Reliance Industries Ltd. ITAT, Mumbai 'J' Special Bench 82 TTJ 765, and Hon'ble ITAT Delhi 'F' Bench in the case of Bhusan Steels & Strips Ltd. Vs. DCIT, 91 TTJ....
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....sing Officer did not find force in this submission and following the decision of Hon'ble Jurisdictional High Court in case of CIT V. Abhishek Industries Ltd. (supra) decided the issue against the assessee. Action of the Assessing Officer was confirmed by the ld. CIT(A). 48 Before us, the ld. counsel of the assessee reiterated the submissions made before the Assessing Officer. 49 On the other hand, the ld. DR for the revenue relied on the order of the ld. CIT(A). He also referred to the decision of CIT V. Abhishek Industries Ltd. (supra). 50 We have heard the rival submissions carefully. Since an identical issue has been decided by the Hon'ble Punjab & Haryana High Court in case of CIT V. Abhishek Industries Ltd. (supra), wherein it was held as under: "(ii) That the benefit under rule 4A of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 accrued for a period of 10 years from the date of production and the quantum was fixed at 300 per cent of the fixed capital investment for category A industries and 150 per cent of the fixed capital investment for category B industries to be availed of within 7 years. Besides this, there was no other document or mater....
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....r Assessment year 1999-2000 and Section 145A was introduced w.e.f. 1.4.1999. In that decision amended provision of the Act was not considered. The amended provision has been duly considered by the Hon'ble Delhi High Court in case of CIT Vs. Mahavir Alluminium Ltd. 297 ITR 77 (Delhi). This decision was followed by Hon'ble Bombay High Court in case of CIT V. Mahalaxmi Glass Works P Ltd. 318 ITR 116 (Bom). 55 On the other hand, the ld. counsel of the assessee strongly supported the impugned order and also relied on the decision of Hon'ble Punjab & Haryana High Court in case of CIT Vs. Nahar Spinning Mills Ltd. (supra). Alternatively he contended that if the value of excise duty etc. is held to be includible in the closing stock then the opening stock should also be held to be adjusted accordingly. 56 We have considered the rival submissions carefully. Section 145A of the Act reads as under:- "145A. Notwithstanding anything to the contrary contained in section 145,- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be- (i)in accordance....