TaxTMI 
TaxTMI 
2018 (4) TMI 985
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....und Nos. 1 to 5 of the cross objection, the same are dismissed as not pressed. Ground No.1 in departmental appeal is general and need no adjudication. ISSUE No.1 : 4. On ground No.2, the Revenue challenged the order of the Ld. CIT(A) in deleting the addition of Rs. 29,03,991/- made by the A.O. on account of disallowance of Inland Haulage for export consignment, on which, TDS was not deducted. The assessee on ground No.6 of the cross-objection challenged the sustaining of addition of Rs. 3,22,666/- on the same issue. 4.1. The A.O. made the addition of Rs. 32,26,657/- on account of Inland Haulage on export consignment because the assessee has not deducted TDS on the same payment as per Section 194C of the I.T. Act. 4.2. The assessee challenged the addition before Ld. CIT(A). The submission of the assessee is reproduced in the appellate order in which the assessee briefly explained that all these Inland Haulage charges are in the nature of reimbursement of expenses paid to the Clearing and Forwarding Agents on behalf of assessee to the Shipping Company and thus, Inland Haulage charges are not liable to TDS. The A.O. disallowed the same by stating that these payments are ma....
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....ear, assessee started deducting TDS. Payments to C & F Agents are made who have made further payments to shipping agents. The Ld. CIT(A) also held that Rail Freight Charges are not exigible to TDS as per Notification of CONCORD. Therefore, Ld. CIT(A) deleted the addition by restricting the addition to 10%. The addition was, therefore, restricted to Rs. 3,22,666/- and assessee was granted relief of Rs. 29,03,991/-. Both parties are in appeal and cross objection. 5. After considering the rival submissions, we are of the view that entire addition is liable to be deleted. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that expenses are in the nature of reimbursement, therefore, assessee is not liable to deduct TDS. He has relied upon the decision of Hon'ble Gujarat High Court in the case of CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd., (2014) 361 ITR 192 (Guj.) in which it was held that no disallowance under section 40(a)(ia) related to reimbursement of expenses to C & F Agents can be made. He has submitted that SLP of the Department has been dismissed vide order dated 14th January, 2014. Copies of the same are ....
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.... The departmental appeal fails and cross objection of assessee is allowed. Issue No.1 decided in favour of assessee. ISSUE No.2 : 8. On ground No.3 of the departmental appeal, Revenue challenged the deletion of addition of Rs. 21,05,632/- made by A.O. on account of disallowance of freight payments to Consignment Agents without deduction of TDS. 8.1. The A.O. made the addition of the above amount on account of freight reimbursement to Consignment Agents. The assessee challenged the addition before the Ld. CIT(A) and written submissions of the assessee were reproduced in the appellate order in which the assessee briefly explained that assessee is engaged in the business of manufacturing of steel pipes, tubes and trading of H.R. Coils etc., The trading of H.R. Coils and various other items is done majorly by way of exports. Considering the quantum of export sales made during the year under consideration, services of various Consignment Agents are undertaken. In Consignment, the Agent incurs all the expenditure in connection with sales which were then either reimbursed to them or deducted from the gross amount of sales. In the instant case, the material for sale is supplied to....
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....f appeal of the Revenue. The Ld. D.R. submitted that assessee has incurred the expenses and documents have not been considered by the Ld. CIT(A). it is obligation of the assessee to deduct TDS on freight payment. 8.4. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that it was an obligation on the Consignment Agent to pay the freight charges, therefore, assessee is not liable to deduct TDS. Considering the facts of the case in the light of submissions of the parties and material on record, it is clear that these payments are freight payments to Consignment Agents. The services of various Consignment Agents are undertaken by assessee who incurred the expenses in connection with sales which are then reimbursed to them or deducted from the gross amount of sales. The actual payment of freight charges are made by the Consignment Agents. The assessee would get the sale proceeds net of these expenses. The Ld. CIT(A) was, therefore, justified in holding that freight payments are made by the Consignment Agents only and even the assessee may not aware of different transporters, shipping agents, therefore, it wo....
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....sidered as cost of acquisition of capital asset and are allowable as revenue expenditure. Further, expenses were incurred for acquisition of software or installation charges for leased line connectivity etc., for the purpose of upgrading the existing ERP Solution and, in view of high attrition and obsolescence of the technology, the same are allowable as revenue expenditure. The Ld. CIT(A), accordingly, deleted the addition. 9.3. The Ld. D.R. relied upon the order of the A.O. and submitted that ERP is capital expenditure. So, the expenses were capital in nature. 10. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that there is only improvement in the year. Software expenses are allowable expenditure. In case the expenses incurred on DG set are disallowed, depreciation may be granted to assessee. He has submitted that software expenses are revenue expenditure and relied upon decision of Hon'ble Delhi High Court in the case of CIT vs. Asahi India Safety Glass Ltd., (2012) 346 ITR 329 and CIT vs. Amway Enterprises (2012) 346 ITR 341. 11. After considering the rival submissions, we are of the view t....
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.... liabilities and the cost relating there to. The expenses are booked on crystallization of liability/when disputes are settled. In earlier year, same method have been accepted by the department. The Ld. CIT(A) accordingly deleted the addition. 13. The Ld. D.R. relied upon the order of the A.O. and submitted that the expenses pertain to F.Y. 2005-2006 which have been rightly disallowed by the A.O. 14. Learned Counsel for the Assessee, however, reiterated the submissions made before the authorities below. He has submitted that liability has actually crystalized during assessment year under appeal. Rate of tax is same. Therefore, it is a mere tax neutral exercise and relied upon decision of the Hon'ble Delhi High Court in the case of CIT vs. Dinesh Kumar Goel (2011) 331 ITR 10. 15. After considering the rival submissions, we do not find any merit in the departmental appeal. The assessee has given details of entire expenses which is reproduced in the appellate order which shows that the bills have been received in assessment year under appeal and settled. The liabilities to pay these expenses have, therefore, crystalized during assessment year under appeal. Same practice has b....
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....to show that same are properly vouched. Since the expenditure were incurred wholly and exclusively for the purpose of business, therefore, the same were correctly allowed as deduction. Ground No.6 of appeal of Revenue is dismissed. ISSUE NO.6 : 20. The Revenue on ground No.7 challenged the deletion of addition of Rs. 1 lakh on account of disallowance of bad debts. The assessee submitted before the Ld. CIT(A) that A.O. had disallowed a sum of Rs. 1 lakhs on account of bad debts written off which were receivable from Mr. Satyanarayana Gupta. It was submitted that the amount was written off in the books of account as same were outstanding for more than 4-5 years and hence, were irrecoverable. Copies of the accounts for this year and earlier years were filed in support of the contention. Ld. CIT(A), however, noted that the amount does not qualify as bad debt because it was advance paid for acquisition of capital asset. However, the amount is only loss to the assessee and would be an allowable expenditure under section 37 of the I.T. Act. This ground was allowed and addition was deleted. 21. The Ld. D.R. relied upon the order of the A.O. and Learned Counsel for the Assessee rei....
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....led confirmations, bank statements, income tax return and balance sheet. The balance sheet of these creditors show they are having sufficient funds to make investment in assessee company. If A.O. was not satisfied with the explanation of assessee, he could have verified the facts directly from the parties or ask the assessee to produce them before A.O. for examination. However, nothing have been done. All the loans have been taken through banking channel. The creditors have regular credit entries in the form of cash and cheque. The amounts given to the assessee have not been funded by cash transaction only. In respect of three creditors M/s. Biyani Traders Pvt. Ltd., M/s. Nirmal Pipes and M/s. Mangla Enterprises, it was also explained that they are trade creditors and assessee made substantial sales to them and these are the amounts received as security for allowing credit against sale to these parties. The details of the same are also noted in the appellate order. It was, therefore, explained that assessee proved identity of the creditors, their creditworthiness and genuineness of the transaction in the matter. 24. The Ld. CIT(A) noted that similar ground have been decided by h....
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.... 28. On ground No.9, Revenue challenged the deletion of addition of Rs. 17,99,822/- made by the A.O. on account of disallowance of expenses incurred through credit cards. 29. The A.O. disallowed expenses incurred through credit cards. The A.O. noticed that the Directors of the Company have incurred these expenses on their credit cards. The assessee explained that the credit card facility have been provided by the company to the Directors to facilitate payment of expenses to be made and incurred for and on behalf of company. Details of the same were filed. The A.O. however, did not accept the explanation of assessee and treated the same for non-business purposes and disallowed the same. The Ld. CIT(A) noted that he has deleted similar addition in A.Y. 2003-2004 to 2006-2007. Addition was accordingly deleted. 30. The Ld. D.R. relied upon the order of the A.O. 31. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that expenses were incurred for and on behalf of the assessee-company and order of the Ld. CIT(A) for earlier years have not been reversed. 32. After considering the rival submissions,....
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....d the interest as capital nature but failed to provide depreciation. The Ld. CIT(A) noted that assessee does not distinguish between source for the funds for different purposes and the entire liability on borrowed funds is charged to revenue account. The case of the Revenue is that this interest was incurred towards funds borrowed for specified capital asset which were clearly identifiable and hence, interest should be capitalized and should not be charged to revenue account. The Ld. CIT(A) accordingly dismissed this ground of appeal of assessee. However, the A.O. has directed to allow depreciation on the same. 35. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that Ld. CIT(A) has confirmed the disallowance being interest paid on bank loan on the ground that same has been utilised for the purpose of generator set. Disallowance is unjustified as the interest expenditure has been incurred for the money borrowed for the purpose of business. There is no dispute to the fact that same have been disallowed on the ground that expenditure is capital nature by applying proviso to Section 36(i)(iii) of the I.T. Act. However, this....
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.... the authorities below and direct the A.O. to allow deduction of the interest under section 36(1)(iii) of the I.T. Act to the assessee. Ground No.7 of the cross-objection of the assessee is allowed. No other issue is argued. 38. In the result, ITA.No.4638/Del./2013 of the Department is dismissed and C.O.No.03/Del./2014 of the assessee is partly allowed. ITA.No.4639/Del./2013 - Revenue Appeal & C.O.No.31/Del./2014 - Assessee A.Y. 2008-2009 39. The Departmental appeal as well as Cross Objection by assessee are directed against the order of the Ld. CIT(A)-1, New Delhi, dated 27th May, 2013, for the A.Y. 2008-2009. 40. The Learned Counsel for the Assessee did not press ground Nos. 1 to 6, 9 and 10 of the cross objection. The same are dismissed as not pressed. 41. Ground No.1 of Departmental appeal is general and need no adjudication. The Revenue on Ground No.2 challenged the deletion of addition of Rs. 15,26,417/- on account of disallowance of Inland Haulage for export consignment, on which, no TDS was deducted. On the same issue, assessee raised Ground No.7 in the Cross Objection, challenging the sustaining of part addition of Rs. 1,69,602/- on account of Inlan....
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....re Ld. CIT(A) that amount in question paid to HSEB towards enhancement of load as service connection charges. The same were duly taken to the asset side of the balance sheet by showing under the Head "Security Deposit" to HSEB. During the year under consideration it came to the knowledge of the assessee that the said amount was pending since long and thus, a request was made to HSEB for reversal of the same. It was informed by HSEB that the said amount was non-refundable and thus the same were taken to the P & L A/c and marked as expenditure. Copies of the relevant documents were filed on record. It was submitted that A.O. failed to appreciate that same is business expenditure. During the assessment year under appeal, specific exercise was carried out by the assessee wherein it contacted HSEB and asked for refund of the same. Since the Board has intimated assessee that it is nonrefundable, therefore, it was charged to P & L A/c. Since the amount is not recovered from the Electricity Board, therefore, it was claimed as deduction. The Ld. CIT(A) noted that while adjusting a portion of the deposit to bill raised by HSEB was net of the amount deducted/adjusted. Thus, electricity charge....
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....relevant book entries in the books of account. The Ld. CIT(A), therefore, correctly deleted the addition. Ground No.6 of appeal of Revenue is dismissed. ISSUE No.2 : 51. On ground No.7, the Revenue challenged the deletion of addition of Rs. 12,48,750/- on account of disallowance of excess depreciation. The A.O. disallowed Rs. 12,70,000/- being excess depreciation claimed. The assessee submitted before Ld. CIT(A) that there is a mistake in calculation because A.O. has added up Rs. 12,70,000/- as against Rs. 4,39,803/-. As regards the balance amount of Rs. 4,39,803/-, the Ld. CIT(A) confirmed the addition to the extent of Rs. 21,250/-. For the remaining amount, assessee explained that it had installed the S.S. Plant during the F.Y. 2007-2008 and capitalized the same on 29th February, 2008. The said plant was put to use immediately and S.S. coils totaling to 8.60 MT valuing Rs. 10.77 lakhs were purchased vide Bill No.647 dated 15th March, 2008 and were issued for various processes. This can be verified from the Excise records. Assessee, therefore, submitted that since asset has been owned by assessee and put to use for business purpose, therefore, assessee is entitled for deprec....
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....age expenses for export consignment. The assessee on Ground No.3 of cross objection, challenged the addition of Rs. 16,300/- on the same issue. On Ground No.3, Revenue challenged the order of Ld. CIT(A) in deleting the addition of Rs. 45,60,744/- on account of disallowance of freight payment to Consignment Agent. On ground No.4, Revenue challenged deletion of addition of Rs. 5,49,002/- on account of disallowance of expenses claimed as revenue expenditure. On Ground No.6, Revenue challenged the deletion of addition of Rs. 62,50,000/- on account of unexplained unsecured loans/trade deposits and disallowance of interest on the same amounting to Rs. 19,13,073/-. On Ground No.7, Revenue challenged the deletion of addition of Rs. 1,20,861/- on account of foreign travel expenses. On ground No.8, Revenue challenged the deletion of addition of Rs. 7,77,260/- on account of disallowance of expenses incurred through credit cards. 61. Learned Representatives of both the parties submitted that Ground Nos.2, 3, 4, 6 and 8 of the Departmental Appeal and Ground No.3 of the cross objection are same as have been considered in A.Ys. 2007-2008 and 2008-2009. They have also submitted that Ground No.7....
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....ount was received. The A.O. assessed the same income in A.Y. 2010-2011 in the order under section 143(3) of the I.T. Act. Therefore, same amount should not be added in two assessment years. The Ld. CIT(A) accepted the explanation of assessee because entitlement alone does not result in any gain. The assessee made a claim of refund on 21.09.2009 and was received thereafter. Therefore, it was correctly offered for taxation in subsequent A.Y. 2010-2011. The Ld. CIT(A), accordingly, deleted the addition. 63. The Ld. D.R. relied upon the order of the A.O. and submitted that assessee received letter on 10.11.2008 from Sales Tax authorities. Therefore, it should be added in the same year. 64. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below. 65. After considering the rival submissions, we do not find any merit in this ground of appeal of Revenue. The assessee explained that due to applicability of VAT Act, the assessee was directed to collect and deposit full amount of tax and then was eligible to claim the excess amount paid as refund. The assessee received letter from Sales Tax authorities on 10.11.2008 intimating ....
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....ty has made the payment. The assessee filed the confirmation of documents in support of the contention. The A.O. made the above addition because no formal agreement was produced. The A.O. however, ignored all the relevant material on record. Therefore, the addition is not justified. The discount was given under above compulsion because party was out of India. It was claimed as business loss. 68. The Ld. CIT(A) accepted the contention of assessee and held that it was a genuine transaction. No disallowance can be made because of non-production of former MOU. There is no material to prove or indicate that transaction was collusive in nature. The transaction has been put through Bankers of two sides, therefore, it was held as genuine transaction and addition was deleted. 69. The Ld. D.R. relied upon the order of the A.O. and submitted that no formal agreement was produced to offer discount. 70. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that all the relevant documents were filed in support of the explanation, therefore, addition was correctly deleted by the Ld. CIT(A). 71. After considering ....