TaxTMI 
TaxTMI 
2016 (12) TMI 863
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....(3) is not erroneous and prejudicial to the interests of the revenue. c) The learned CIT erred in facts and law in appreciating that the Id. Assessing Officer had already taken a view on the issues raised in revision proceedings and therefore, the initiation of revision proceedings u/s. 263 are invalid and bad in law. 2. Your appellant prays that- (i) Order passed u/s. 263 be treated as invalid and bad in law. (ii) Any other relief, as deemed fit in the matter, may be granted." 3. The Brief facts of the case are that the assessee is a company engaged in manufacture of LAM coke. The A.O. had passed an assessment order for the assessment year 2006-07 u/s 143(3) of the Act on 23rd December, 2008, which was found to be erroneous and prejudicial to the interest of the Revenue in the opinion of the learned CIT for various reasons as detailed in the show cause notice dated 11th March,2011 , which are reproduced here- under:- "Perusal of the assessment records for A.Y. 2006-07 reveals that the assessment made by the ACIT - 8(3)(OSD) u/s 143(3) dated 23.12.2008 is erroneous and prejudicial to the interest of revenue for the following reasons:-....
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....ssessee. It is also observed that the bunker shed has been classified as "Plant and Machinery" and depreciation has been claimed @ 15% amounting to Rs. 37,22,364/- However, the bunker shed is "Factory Building" eligible for 10% depreciation. Thus, the allowable depreciation works out to Rs. 24,81,576/-. As a result, excess depreciation of Rs. 12,40,788/- has been allowed to the assessee. Further, the Factory electrification has been classified as "Plant and Machinery" and depreciation has been claimed @ 15% amounting to Rs. 2,13,636/-. However, the factory electrification falls under the head" Furniture and Fixtures" eligible for depreciation @ 10%. Thus, the allowable depreciation works out to Rs. 1,42,424/- . As a result, excess depreciation of Rs. 71,212/- has been allowed to the assessee. To such extent, the assessment order is erroneous and prejudicial to the interest of the revenue. For the above reasons, as the assessment completed by the ACIT- 8(3)(OSD) for A. Yr. 2006-07 on 23.12.2008 is erroneous and prejudicial to the interest of revenue, you are hereby given this notice to show cause as to why the assessment made by the A.O. should not be modified/cancelled as ....
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....es Pvt. Ltd. 194C 2,683,992 Reimbursement of handling charges of Rs. 2,683,992/- to Balaji Coke Ind. Pvt. Ltd. In respect of the above facts, we wish to state as follows: (a) Your Honour may note that the assessee has reimbursed a sum of Rs. 16,04,512/- towards Ground Rent to M/s Visa Industries Ltd and Balaji Coke Industry Pvt. Ltd and not Rs. 3,494,512/- as mentioned. (b) The assessee had purchase raw material from Visa Industries Ltd and it was required to incur some expenses in respect of the clearance & storage of the goods. It was also agreed between the parties that the assessee company will reimburse the actual cost incurred by Visa Industries Ltd towards Ground Rent, Wharfage Charges and Stevedoring Charges. M/s Gautam Freight Pvt. Ltd has arranged the facility required for Visa Industries and Visa Industries have accordingly made the payment to Gautam Freight. Subsequently the assessee company has reimbursed the said cost to Visa industries based on the actual cost incurred by them for which they have raised a separate debit note with supporting for actual cost incurred by it. Since the assessee has only reimbur....
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....eimbursement is not of actual expenses, tax will have to be deducted at source even if the expenses claimed through a separate statement. (g) Attention is also invited to the judgment of Delhi Bench of ITAT in case of ITO vs. Dr. Willmar Schwabe India (P.) Ltd (2005) 1 SOT 71/95TTJ53 wherein it is held that reimbursement of expenses for which bill is separately raised did not attract the provisions of TDS. The same view is also taken by the Hon'ble Delhi Bench of ITAT in United Hotels Ltd vs. Income Tax Officer (2004) 93TTJ822. (h) Your Honour shall also appreciate that the assessee has submitted all the details and debit notes related to the reimbursement of the expenses during the assessment proceedings to assessing officer vide point no. 10 & 11 of our submission dated 21/11/2008. (i) In respect of the above, we are enclosing herewith the copies of Debit Notes raised by M/s Visa Industries Ltd and Balaji Coke Industry Pvt. Ltd or their sister concerns along with the relevant supporting to show that the parties have claimed only the actual amount charges to them by the ultimate service provider. (j) Also, Your Honour would appreciate that i....
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....gements directly with the contractors/payees and wherever the assessee has directly engaged any such service provider directly it has duly deducted the tax thereon. c. That reimbursement are on actual amounts paid by the supplier to the service providers and separate debit note, with supporting documents for rate charged are also supplied on which there is no profit element of the supplier included. d. In most of the case the suppliers have made payment for a larger quantities and taken reimbursement of your assessee only to the extent of quantities actually supplied to the assessee. e. That even as per the circular mentioned above and specific explanations in (j) and (k) above in respect of nature of deductions u/s. 194I and s. 194C there is no liability on your assessee to deduct tax. Your assessee was not required to deduct any tax on the amounts reimbursed and therefore to this extent there is no error in the order made by the Assessing Officer and there cannot be any annulment thereof or revision on the above count. B. The assessee has paid the Interest on unsecured loans of Rs. 839,272/- and on this interest TDS has been deducted @....
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....ome of the assets, that the same are erroneous and prejudicial to the interest of the revenue. In this regards, in respect of each of the observations, we have to submit as under- a) Your Honour has observed that Labour Quarters are classified as Factory Buildings and depreciation @ 10% has been claimed on the same instead of Residential Buildings on which depreciation @ 5% only is allowable. In this regards, we wish to state as follows: (i) The factory of the assessee is situated at the Kutch (Gujarat) and the assessee is manufacturing the LAM Coke. The process of manufacturing of LAM Coke requires running of furnace around the clock and the factory of the assessee company runs for 24 hours. The labourers are required to continuously watch the process and hence they have to present there all the time. (ii) Hence, to ease their presence, the labour quarters are located inside the factory premises. The assessee has provided quarters to the labours/workers for smooth running of the factory inside the factory premises itself. Hence, the labour quarters are not residential quarters provided to the labours but these are temporary accommodation for the working ....
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....ess of manufacturing LAM coke is carried out. Since the bunker shed is part of the whole plant, same is taken as part of plant and depreciation is claimed at the rate applicable to the plant, which in this case is 15%. Attention of Your Honour is also invited to the Annexure of Depreciation attached to Form No. 3CD where the Bunker Shed has been included as part of the plant only. (ii) The Bunker Shed has a very useful purpose in keeping the furnace running uninterrupted continuously without any interruption of the outside natural force. Further, it is not a building in the sense that any human being can enter it as it located exactly over the furnace. Thus, having regards to its function and its placement in overall manufacturing process, it has to be considered as part of the plant and accordingly depreciation is allowable at the same rate as Plant and Machinery. c) Your Honour has observed that Factory Electrification are classified as plant and Machinery and depreciation @ 15% has been claimed on the same instead of Furniture and Fittings on which depreciation @ 10% only is allowable. In this regards, we wish to state as follows- (i) We would like to ....
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.... your satisfaction on the points raised by your Honour in the show cause notice and that you shall drop the action initiated for revision proceedings. Should you still decide to proceed ahead with the revision proceedings by holding any view contrary to our submission, we request you to grant us further opportunity to controvert the same. Should you require any further clarification, explanation or elaboration on the above or any matter relating to our assessment, we shall gladly furnish the same. 3. Vide further submissions dated 29.03.2011, Ld. ARs of the assessee have stated as under: "Further to the our earlier submission dated 25/03/2011 and as discussed personally with Your Honour on the hearing on 25/03/2011 regarding TDS deducted by the ultimate payer, we are herewith enclosing the following documents of the few of the parties which is showing that TDS has been deducted by the ultimate payer: 1) Ledger Account of Coal Transportation in the books of Antai Balaji Ltd along with the TDS Certificate of TDS deducted on Rishi Shipping. 2) Ledger Account of Rishi Shipping in the books of Antai Balaji Limited showing the TDS deducted by ....
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.... under the heads of stevedoring, wharfage charges, transport charges, etc., which are otherwise covered under the TDS provisions of the IT Act. The A.O. has to further examine the nature of the actual business relationship between the assessee and the parties to whom such payments have been made and the terms and conditions of such business relationship, to exactly find out if the payments are actually contractual in nature or mere reimbursements as claimed by the assessee. Since the assessment order has not dealt with the applicability of provisions of sec.40(a)(ia) in the light of the TDS liability of the assessee on the above payments, the order has become erroneous and prejudicial to the interest of revenue to that extent. Therefore, the matter is set aside with the direction to the A.O. to examine this aspect afresh by considering all the relevant facts, so as to decide the applicability of TDS provisions and consequently the provisions of sec 40(a)(ia) to the aforesaid payments made by the assessee to the parties mentioned above. (b) It is noticed from the assessment records that the assessee has paid interest of Rs. 8,39,272/- on secured loans on which TDS has been ....
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.... Revenue and directions were issued to the A.O. to pass assessment order afresh after affording reasonable and adequate opportunity to the assessee, vide orders dated 30-03-2011 passed by learned CIT u/s 263 of the Act. 4. Aggrieved by the order dated 30-03-2011 passed by the ld. CIT u/s 263 of the Act, the assessee filed first appeal before the Tribunal. 5. The ld. Counsel for the assessee submitted that the ld. CIT invoked the provisions of section 263 of the Act and held that the assessment order passed by the AO on 23rd December, 2008 u/s 143(3) of the Act is erroneous and prejudicial to the interest of the Revenue. It was submitted that the said order of the ld. CIT passed u/s 263 is not sustainable in law as the order of the A.O. is neither erroneous nor prejudicial to the interest of the Revenue. The ld. Counsel submitted that the A.O. has examined the issues properly and due investigations were made by the AO before framing the assessment order dated 23.12.2008 passed u/s 143(3) of the Act. It was submitted that the assessee has factory situated at Kutch, Gujarat and the assessee is manufacturing of LAM Coke. It was submitted that with respect to the following payment....
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....s hence no TDS was required to be deducted . It was submitted that all these expenses were allowed by the AO in scrutiny assessment u/s 143(3) of the Act. The assessee relied upon several case laws to contend that no TDS was required to be deducted on merely reimbursement of expenses.It was also submitted that the AO while replying to audit objections has categorically stated that no TDS is required as it is merely reimbursement of expenses and hence the AO made an informed decision that keeping in view that these expenses are merely reimbursement in nature, no TDS was required to be deducted. The letter No. ACIT/Circle-8(3)/Audit objection/2009-10 dated 19-08-2009 is placed in file. It was submitted that with respect to usance interest of Rs. 5,75,177/- , the AO sought initiation of rectification proceedings u/s 154 of Act in his reply to audit objection. Thus, it was submitted that the assessment order dated 23.12.2008 passed by the AO u/s 143(3) of the Act is neither erroneous nor prejudicial to the interest of revenue. With respect to payment of interest on unsecured loans , it was submitted that the interest payments were made to individuals , and TDS was deducted correctly....
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....f the Act was invoked by learned CIT because of audit objections. The A.O. has categorically stated that no error had taken place and the audit objections was dismissed by the AO. The reply vide letter no ACIT/Circle-8(3)/Audit Objection/2009-10 dated 19.08.2009 from the A.O. to CIT-8, Mumbai is placed in file. With respect to the bunker, it is submitted that the assesssee is in the manufacture of LAM coke which is a continuous process and is also power intensive process. Bunker shed is constructed over the furnace and correctly classified as 'Plant'. The A.O. has examined the claim of the depreciation on the Bunker Shed as 'Plant and Machinery'. It was submitted that claim of the assessee for additional depreciation was disallowed by the AO. It was submitted that the assessee has in tax-audit report duly declared the same, hence, A.O. has examined the claim and allowed the depreciation which cannot be called as erroneous and prejudicial to the interest of Revenue. It was submitted that the AO dismissed the audit objection by holding that the bunker sheds were built by the assessee as part of the plant process so that the raw material does not spread out. The ld. Counsel also re....
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....course of assessment proceedings, the A.O. has made necessary enquiries with respect to the matters covered by the order of the CIT u/s 263 of the Act. Tax-audit report were also submitted by the assessee before the AO and it cannot be said that the A.O. has not gone through the tax audit report as being a statutory document, the AO is bound to go through the same before framing assessment . All the details were duly submitted before the A.O. by the assessee as set out in preceding para's and the AO has taken a decision based on his judgment which is a plausible view and in our considered view , finding of the AO were not perverse as rather the same were plausible view after considering material on record . The A.O. has arrived at the decision after examination and enquiry hence it cannot be said that the assessment order passed by the AO was erroneous so far it is prejudicial to the interest of the Revenue to be covered under the mandate of Section 263 of the Act for revising the concluded assessment. In our considered view, the assessment order of the A.O. is neither erroneous nor prejudicial to the interest of the Revenue. The ld. CIT has invoked the provisions of section ....