TaxTMI 
TaxTMI 
2017 (7) TMI 258
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....Assessing Officer has noticed in the memo of income that the assessee has reduced from the profits as per Profit and Loss Account an amount of Rs..1,02,74,318/- in the assessment year 2006-07 towards "Retention Money deducted from Sales" to arrive at the taxable income. Against the query raised by the Assessing Officer, vide its letter dated 20.10.2008 the assessee has submitted as under: "As per the agreement entered between Arjun Technologies (I) Ltd and various customers, 90% of the sale value to paid on or before the delivery of the machines. The balance 10% is payable (peg to receive) only after the successful performance of the machinery say 12 to 18 months. In the opinion of the company the 10% accrues only after the performance of the machine to the satisfaction of the customer. Our opinion is also upheld by Madras High Court and Supreme Court in various decisions. Hence, this amount is deducted in our Tax Memo. (Ref Madras High Court reported in 283 ITR 295 & 283 ITR 297)" The assessee was asked to furnish the list of customers who have withheld 10% of the invoice value as retention money. The assessee was also asked to furnish whether such retention money was ....
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.... (vi) For the contracts referred to in SI. No.1, 2, 4 & 5, the guarantee period has concluded in assessment year 2007-08. However, as admitted by the assessee, this sum shown as retention money has not been offered to tax even in assessment year 2007-08. In the same way, for the contracts referred to in SI. No.3 and 7, though the guarantee period has concluded in assessment year 2008-09, such sum shown as retention money has not been offered to tax in assessment year 2008-09. (vii) The return of income of the assessee company filed for earlier assessment years prior to the assessment in scrutiny now and the returns for the subsequent years were examined, It reveals that the assessee company has not made any such adjustment towards retention money in the Memo of Income in such years. In order words, except for the assessment year under scrutiny now, in all the other years, the assessee company has offered the entire sale value without reducing the so called retention money for taxation. Only for the year under scrutiny, the assessee has taken a different stand that the 'so called' retention money has not accrued to it since bank guarantee towards performance of....
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....e bank guarantee to the extent of 10% of the invoice value to ensure performance. Therefore, the balance 10% value retained and not brought to tax while computing the income of the assessee was rightly brought to tax and the same should be upheld. 5. Per contra, the ld. Counsel for the assessee strongly supported the order of the ld. CIT(A). 6. We have heard both sides, perused the materials available on record and gone through the orders of authorities below including the paper books filed by the assessee. As per the payment terms for supply and engineering services as given in page 80 of the paper book are reproduced as under: * 20% of the basic order value shall be released as an advance against an irrevocable advance Bank Guarantee in the prescribed format for the equivalent amount, within 30 days after submission of bank guarantee. The validity of the bank guarantee shall be until commissioning. * 70% of the basic order value plus 100% taxes & duties and freight will be paid on pro-rata basis within 15 days after receipt of material at site. * 10% of the basic order value will be released on completion of successful commissioning and submission....
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....t the taxable income. The receipts of retention money on 25.04.2006 and 19.06.2006 in S. No. 3 and 7 relate to the financial year 2006-07, which cannot be included to arrive at the taxable income for the financial year 2005-06 in view of the ratio laid down in the case of ACIT v. B.G.R. Energy Systems Ltd. in I.T.A. Nos. 1244 & 1513/Hyd/2011 & Ors dated 05.09.2013. Therefore, bringing all the retention monies received from the customers in S. No. 1 to 7 of the above table to arrive at the taxable income in the financial year 2005-06 is not correct. Accordingly, we direct the Assessing Officer to verify and include such receipts of retention money received in the particular financial year alone to arrive at the taxable income of financial year and if the assessee has not recognized as its income in the particular financial year, the same cannot be included. The above directions should be followed in all other assessment years since the Assessing Officer has simply followed earlier assessment order and made the disallowance in other assessment years. 7. The next ground raised in the appeal of the Revenue in assessment year 2006-07 is that the ld. CIT(A) has erred in deleting the d....
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.... ld. CIT(A) has erred in restricting the disallowance under section 14A to 5% of the exempt income earned by holding that invoking the provisions of Rule 8D is not in order. 8.1 The assessee has received an amount of Rs..5,03,300/- as dividend during the year which has been claimed as exempt under section 10(34) of the Act and the assessee has not declared any expenditure incurred for earning the dividend income. By invoking the provisions of section 14A r.w.s. Rule 8D, the Assessing Officer worked the expenditure to the extent of Rs..6,94,498/- and disallowed the same. 8.2 On appeal, the ld. CIT(A) restricted the disallowance to the extent of 5% of the exempt income earned by holding that invoking the provisions of Rule 8D is not in order. 8.3 After considering the rival submissions, we find that the assessment year under consideration is 2007-08 and therefore, the provisions of Rule 8D r.w.s. 14A has no application since the application of the provisions of Rule 8D has been notified with effect from 24.03.2008 and applicable with effect from the assessment year 2008-09 onwards only. Further, the Hon'ble Mumbai High Court in the case of Godrej & Boyce Mfg. Co. Ltd. v. DCI....
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..... Hence, since the assessee has deducted TDS only at 50% of the amount paid on the correct rate, the Assessing Officer disallowed other 50% and accordingly, an amount of Rs..25,74,193/- was added to the income of the assessee. 9.2 On appeal, after considering the submissions of the assessee that the agreement was made after 2005 and hence the rate of deduction would be 10.3% as per section 195 in line with the DTAA with France, the ld. CIT(A) has observed that the Assessing Officer was wrongly opined that the rate of TDS shall be 20% and deleted the disallowance made on this account. 9.3 After hearing both the parties, we find from the assessment order that the Assessing Officer has observed that the 'royalty charges' has been paid to non-resident namely Kadant Lamort, 39, Rue De La Fontaine Ludot, B.O. 46, 513 02, Vitry Le Francois, Cedex France. The assessee has filed copy of the DTAA entered into between the India and France. In this case, the Assessing Officer has not disputed over the residential status of the party to whom the royalty was paid by the assessee. Therefore, at this stage, the department cannot dispute over the residential status of the party. After examini....
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....he due date for filing of the return. On similar facts and circumstances, in the case of DCIT v. M/s. Diamond Engineering (Chennai) in I.T.A. No. 865/Mds/2016 dated 07.10.2016, the Coordinate Bench of this Tribunal has observed and held as under: "6. We have heard both sides, perused the materials available on record and gone through the orders of authorities below. The first issue relates to disallowance of Rs..2,09,62,709/- under section 36(1)(va) of the Act being employee's contribution made by the employer to PF and ESI. In the assessment order, the Assessing Officer has observed that the assessee has failed to remit the statutory welfare dues being Employee's Contribution to PF within the due dates stipulated. When the assessee was asked to explain, the assessee has submitted that due to paucity of funds, the contributions were paid late. Thus, the Assessing Officer made the disallowance since the assessee was not remitted the above contributions within the due dates. By reiterating the submissions as made before the Assessing Officer, before the ld. CIT(A), the assessee has contended that the remittance were made before the due date for filing of the return, the same....
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....5 and 1636/Mds/2014 dated 28.8.2014 held as follows: "5. Heard both sides. Perused orders of lower authorities and the decisions relied on before us. It is not in dispute that all these payments of provident fund Rs. 16,20,571/- and ESI Rs. 17,51,490/- were made beyond the grace period/due date allowed under Provident Fund & ESI Acts but before due date for filing of income-tax return. This issue has been decided in favour of the assessee by various High Courts following the decision of the Hon'ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd. (319 ITR 306), wherein the Hon'ble Supreme Court held that omission of second proviso to section 43B and amendment of first proviso by Finance Act, 2003 are curative in nature and are effective retrospectively and thus with effect from 1.4.1988 i.e. the date of insertion of first proviso. The co-ordinate Bench of this Tribunal considering a similar issue in the case of M/s.Venkateswara Electrical Industries P. Ltd. Vs. DCIT (supra) following the decision of Hon'ble Delhi High Court in the case of CIT Vs. Amil Ltd. (321 ITR 508) held that even the employees contribution to provident fund is to be allowed as ded....
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....date of insertion of first proviso. The Delhi High Court in the case of CIT V. Amil Ltd. reported in 321 ITR 508 held that if the assessee had deposited employee's contribution towards Provident Fund and ESI after due date as prescribed under the relevant Act, but before the due date of filing of return under the Income Tax Act, no disallowance could be made in view of the provisions of Section 43B as amended by Finance Act, 2003. 6. In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. Hence, following the abovesaid decisions, we find no reason to differ with the findings of the Tribunal. Accordingly, we find no question of law much less any substantial question of law arises for consideration in these appeals. Accordingly, both the Tax Case (Appeals) stand dismissed. No costs. Consequently, M.P.No.1 of 2015 is also dismissed." 7. Respectfully following the above decision of the Hon'ble High Court, we find no reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the Revenue is dismissed. 10.....
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.... that the Hon'ble Supreme Court has stayed the operation of the decision of the Hon'ble Calcutta High Court in the case of Exide Industries Ltd. 292 ITR 470 by holding that the assessee must pay tax as if section 43B(f) of the Act is on the statute book though the assessee is entitled to make a claim in its return and therefore, he pleaded that the order of the ld. CIT(A) should be reversed. 11.4 Per contra, the ld. Counsel for the assessee has submitted that the disallowance shall be confined to the amount only which was debited to the profit and loss account and therefore, the Assessing Officer was not justified in disallowing the entire amount. 11.5 We have heard both sides and gone through the orders of authorities below. No details were available on record. Before the ld. CIT(A), the assessee has submitted that the entire amount of Rs..19,67,943/- does not belong to the year under consideration as Rs..9,71,066/- was the opening balance and Rs..9,96,787/- along was debited under the year. In view of the above, the Assessing Officer is directed to examine and decide the issue afresh in accordance with law. 11.6 With regard to eligibility of claiming deduction of provisi....