TaxTMI 
TaxTMI 
TaxTMI 
2017 (9) TMI 301
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....ny are claimed as expenditure in that company and to disallow only when there is a double claim i.e., claim by the assessee company and subsidiary company: 2. The facts of the first issue for adjudication is with regard to disallowance of expenditure u/s 37(1) of the Income Tax Act [Act] amounting to Rs. 41,78,480/-. The Assessing Officer (AO) disallowed the said expenditure since the bills and evidences of the same are not in the name of the assessee-company. In the course of the first appellate proceedings, the Ld.AR submitted that the AO disallowed the expenditure like internet charges, electricity charges, consultant charges etc., without observing that all such expenditure was incurred wholly for the purpose of the Hill County project and the expenditure would therefore, be liable to be borne by the assessee. However, due to similarity of names of the other companies which are under the same management, suppliers/service providers by oversight raised such invoices on the names of the other entities. It was further submitted that all these payments have been made through regular banking channels of the assessee's bank accounts which can be verified from the bank statements....
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....2-05-2015 in para No. 7 as follows: "7. At the time of hearing, the learned representatives of both the sides have agreed that a similar issue was involved in the case of the assessee for the assessment year 2008-09 and vide its order dated 6.6.2014 (supra), the Tribunal has decided the same holding that the department cannot disallow the expenditure merely because there is a clerical error in the bills produced by the assessee towards the expenditure. It was held that if the expenditure is not claimed by M/s. Maytas Properties Ltd., it is fair to allow deduction towards business expenditure in the hands of the assessee. Accordingly, the issue was restored by the Tribunal to the file of the Assessing Officer to verify whether the same expenditure was claimed by M/s. Maytas Properties P. Ltd. and if it is found, on such verification that there is no such double claim, the Assessing Officer was directed by the Tribunal to allow the claim of the assessee of such expenditure. Respectfully following the said decision of the coordinate bench of this Tribunal in assessee's own case for assessment year 2008-09 on similar issue, we uphold the impugned order of the Dispute Resolution Panel,....
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....) and decided partly in favour of assessee. 3.2. We have heard the rival contentions and perused the material available on record. Admittedly in earlier year, similar issue in assessee's own case came up for consideration before this Tribunal in ITA No. 1404/Hyd/2013 dt. 06-06-2014 for the AY. 2008-09. In the said case, the Co-ordinate Bench of the Tribunal has decided the issue as under: "30. We have heard the arguments of both the parties, perused the record and gone through the orders of the revenue authorities. In our opinion the reason for disallowance is regarding genuineness of expenditure. According to the lower authorities most of the payments are self-generated, which have high bill value and being so it was disallowed. Incurring of expenditure was not doubted by the Department, but, only quantum of expenditure is doubted. The expenditure is wholly and exclusively laid out for the purpose of business, therefore, the entire expenditure cannot be disallowed. Since the bills are self-generated, there is no conclusive proof that 100% of the expenditure is genuine. Hence, considering the facts and circumstances of the case, we direct the AO to disallow 10% of cash expenditur....
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....pinion, if the facts are similar as in earlier year and the expenditure was incurred towards horticulture, then it falls under exceptions provided in Rule 6DD of IT Rules. There cannot be disallowance u/s. 40A(3) of the Act. On the other hand, the assessee has to prove thereafter that the expenditure was incurred wholly and exclusively for the purpose of business and falls under the purview of Section 37(1) of the Act. Accordingly, we direct the AO not to disallow any payments made by cross account payee cheque if the assessee is able to prove that it is incurred for the purpose of business of assessee. In case of expenses incurred in cash, the assessee is not only to prove the incurring of the expenditure for the purpose of business, it has to be proved that there is no inflation of expenditure. Since, it was held already on earlier occasion that there is a chance of inflating the expenditure by assessee by way of cash voucher, 10% of that cash expenditure is to be disallowed. With this, these grounds are partly allowed for statistical purposes. 4. Next ground of appeal is as follows: 5. The Ld. CIT(A) erred in directing the addition of Rs. 6,08,95,308/- which was disallowed by ....
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....the sister concern, then it is business decision taken by the assessee to make such an investment and even if it has resulted no income to the assessee, notional interest cannot be disallowed on the reason that assessee should have used its non-interest bearing funds for the purpose of business instead of using borrowed funds. The AO cannot sit in the arm chair of businessman and decide what the assessee has to do to maximize its profit. In our opinion, the judgment relied upon by the learned AR of the assessee in the case of SA Builders (supra) and also coordinate bench decision in the case of SSPDL Ltd. Vs. DCIT, 24 ITR(Trib.)(Hyd.) 290 also support the case of the assessee. Accordingly, this ground is allowed". 4.4. Now the contention of the DR is that the assessee has not proved commercial expediency to advance the money to the sister concern at free of interest. 4.5. On the contrary, Ld.AR submitted that it was in possession of customer advances to the tune of Rs. 635.50 Crores and CCD's worth Rs. 600 Croes which do not bear interest. Out of which the assessee advanced Rs. 625.85 Crrores for meeting its business requirements and such advances are for meeting its business req....
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....not gone into the money advanced to the sister concern as a measure of commercial expediency and only in such cases, no notional interest could be disallowed. With these observations, we remit the issue-in-dispute to the file of the AO with a direction to assessee to demonstrate that interest free funds are available with assessee as on date of advance to the sister concern and it is on account of commercial expediency so as to apply the ratio laid down by the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT [288 ITR 1] (SC) and Hero Cycles (P) Ltd., Vs. CIT [379 ITR 347] (SC). With these observations, we remit the issue-in-dispute to the file of AO for his consideration. This ground is partly allowed for statistical purposes. 5. The next ground in Revenue's appeal is as follows: 6. The ld. CIT(A) erred in directing to allow the payments made through banking channels that it bearer cheques etc. and disallow only 10% of the expenditure in respect of addition of Rs. 2,34,06,450/- made for non-submission of bills of expenditure. 5.1. The above ground is with regard to the disallowance of expenses amounting to Rs. 2,34,06,450/-. It is seen that the AO has disallow....
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.... 1404/Hyd/2013 dt. 06-06-2014. In the said case, the Co-ordinate Bench of the Tribunal has decided the issue as under: "17. We have heard both the parties and perused the material on record. The reason for disallowing this expenditure is that the special auditor made an observation that no supporting evidence for these payments for establishing genuineness of the payment has been filed. Before us, the learned AR submitted that these payments were made through cheques and out of total payment of Rs. 1,75,70,005/-, the DRP accepted the payment of Rs. 26,72,773/- as genuine and there is no reason for disallowing of Rs. 1,48,97,232/-. The payment has been by way of cheque and being so the expenditure is to be allowed. Considering the request of the assessee's counsel, we are inclined to direct the AO not to disallow the payments which are made by way of cheque and in respect of cash expenses there is every chance of inflating the same. Accordingly, we direct the AO to disallow 10% of cash expenses made by cash payments. This ground is partly allowed". 5.4. Further, similarly for AY. 2009-10 in ITA No. 1644/Hyd/2014 dt. 22-05-2015, the Tribunal held as follows: "40. As regards the is....
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....ty sector. It was further submitted that the claim of expenditure in any case was an annual estimate and the materiality of the expense was never in question. Reliance was also placed on a decision of the Delhi High Court in the case of CIT vs. Vishnu Industrial Gases. The AO was not inclined to consider this explanation and proceeded with the disallowance of Rs. 2,48,43,132/-. 6.2. The Ld.CIT(A) observed that as seen from the assessment order that in making the disallowance, the AO at para 11.2 considered that under the mercantile system of accounting expenditure pertaining to AY 2010-11 should be recognised only in AY 2010-11. Admittedly, the bills were for value received in an earlier accounting period. But they were accounted for as soon as they were received and paid for. It is seen from the order that the payments were made by cheque, and the genuineness of such expenditure was never an issue. It is in this context that the assessee's arguments on materiality of expenditure should be seen. It is not uncommon that ascertainment of a claim or its recognition in books or accounts spills over into a subsequent accounting period. While expenditure should normally be claimed i....
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....rom discharging its liabilities." 7.2. In appellate first proceedings, the arguments were reiterated in the written submissions. The Company also furnished in its Paper Book TDS certificates evidencing deduction at the end of the next accounting period, and account copies from its books recording the entries passed. 7.3. The CIT(A) observed that the provisions of Section 40(a)(ia) are primarily to help in the enforcement of compliance with TDS provisions. In so far as taxes relatable to a given transaction are realised the operation of the negative sanction contained in section 40(a)(ia) becomes redundant. A similar issue was considered by the Tribunal in the case of the assessee- company in ITA 1404/Hyd/2013. It endorsed a decision of the Cochin Bench in the case of Antony. DMundacakal Vs. ACIT in ITA No. 38/Cochin/2013, dated 29-11-2013 which relied, inter-alia on the Supreme Court decision in the case of Hindustan Coco-Cola Beverages Ltd. [293 ITR 226] wherein it was held that Revenue is not entitle to recover tax from payer if recipient has declared the payments in his return of income. It was, therefore, directed at para 56.2 that the AO should examine whether the recipient ....
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.... disclosed the same in their return of income and paid taxes thereon. Accordingly, we remit this issue to the file of AO for fresh consideration. This ground is partly allowed for statistical purposes. 8. The next ground of appeal in Revenue's appeal is as follows: 9. The ld. CIT(A) erred in deleting the addition made under section 40(a)(ia) for short deduction of tax, observing that short deduction of tax does not extract the provisions of section 40 (a)(ia) of the I.T. Act. 8.1. In this ground the Revenue challenges the allowance of Rs. 2,41,06,046/- u/s. 40(a)(ia) on account of short deduction of taxes. It is seen that the AO disallowed the above expenditure which is debited to Profit & Loss A/c u/s. 40(a)(ia) on the ground that TDS was short deducted. 8.2. The CIT(A) observed that the assessee is a Principal Contractor/Principal Employer who in turn has appointed a sub- contractor to execute the project. On the payments being made by assessee to sub-contractors, the assessee has deducted tax at source @1% but the AO disallowed the entire amount of the sub- contract expenditure on which TDS was deducted @ 1.133% though there is only short deduction of TDS. It was further urg....
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....ssing officer to delete the addition made of Rs. 41,78,480/- as such payments were made by the appellant through the banking channels for the purpose of appellant's business. 10. After hearing both the parties, we are of the opinion that this ground does not require any adjudication as the similar issue of Revenue appeal, discussed above, has been remitted to the file of AO for fresh consideration in para Nos. 2 to 2.5 of this order. Accordingly this ground is dismissed as infructuous. The next grounds of appeal are as follows: 3. The learned Commissioner of Income-Tax (Appeals) erred in not deleting the addition made of Rs. 8,61,52,185/-. The learned Commissioner of Income-Tax (Appeals) ought to have seen that no such addition could be made by the Assessing officer. 4. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the amounts were paid to MAYTAS Infra Ltd., which is separately assessed to tax. 5. Alternatively, the learned Commissioner of Income-Tax (Appeals) ought to have directed the Assessing officer to allow the amount in the year in which the TDS was paid to the credit of the Government. 6. The learned Commissioner of Income....
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....ue in Revenue appeal in ITA No. 1000/Hyd/2016, discussed above has been remitted to the file of AO for fresh consideration. Accordingly this ground is remitted to AO for fresh consideration. 16. The next grounds in Revenue's appeal is as follows: 4. The Ld. CIT(A) erred in deleting the addition of Rs. 1,42,02,401/- made u/s 40(a)(ia) of the IT. Act. a. The CIT(A) erred in deleting the addition of Rs. 1,00,00,000/- made u/s. 40(a)(ia) of the IT. Act on the ground that it is a mere provision and hence no tax is deductible at source. b. The CIT(A) ought to have enhanced the income, as the said expenditure is not an ascertained liability and its being a mere provision. 16.1. After hearing both the parties, we are of the opinion that as the similar issue in Revenue appeal in ITA No. 1000/Hyd/2016, discussed above has been remitted to the file of AO for fresh consideration. Accordingly this ground is remitted to AO on similar directions. 17. The next ground in Revenue's appeal is as follows: 5. The earned CIT(A) erred in deleting the addition made u/s40(a)(ia) for short deduction of tax, observing that short deduction of tax does not attract the provision of section 40(a)(ia) of t....