TaxTMI 
TaxTMI 
2018 (5) TMI 57
X X X X Extracts X X X X
X X X X Extracts X X X X
....e meaning of section 37(1) of the Act? 3. Whether on the facts &, the circumstances of the case, Ld. CIT(A) was correct in deleting the addition of Rs. 24,10,639/- u/s 145A of the Act ignoring the fact that closing stock of the assessee has increased by way of the element of the excise duty paid during the year? 4. Whether on the facts & the circumstances of the case, Ld. CIT(A) was correct in deleting the disallowance of expenses of Rs. 11,52,000/- made u/ s 37(1) as the same was on account of violation of law and of penal nature?" 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessing Officer by invoking the provisions contained under section 14A of the Income-tax Act, 1961 (for short 'the Act') made disallowance of Rs. 4,07,852/-. AO further made disallowance of Rs. 15,22,874/- on account of Corporate Social Responsibility (CSR) expenses. AO made addition of Rs. 24,10,639/- u/s 145A of the Act being the difference of excise duty incurred on opening stock and closing stock. AO further made addition of Rs. 11,52,000/- on account of sales-tax return of being in violation of law. 3. Assessee carried the matter by way of an appeal befo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re has been introduced by virtue of .sub- section (2) of section 14A . Prior to that, the assessee was free to adopt any reasonable and acceptable method. So, even for the pre-rule 80 period, whenever the issue of section 14A arises before an Assessing Officer, he has, first of all, to ascertain the correctness of the claim of the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income under the Act. Even where the assessee claims that no expenditure has been incurred in' relation to income which does not form part of the total income, the Assessing Officer will have to verify the correctness of such claim. In case, the Assessing Officer is satisfied with the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, the Assessing Officer is to accept the claim of the assessee in so far as the quantum of disallowance under section 14A is concerned. In such eventuality, the Assessing Officer cannot embark upon a determination of the amount of expenditure for the purposes of section 14A(1). In case, the Assessing Officer is not, on the basis of the objective criteria and after giving the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... does not form part of the total income under the Act, which can only be invoked if the AO is not satisfied with the claim of the assessee. 12. Ld. CIT (A) has thrashed the issue in controversy in detail. The AO has failed to point out the defect in the computation made by the assessee to make suo motu disallowance of Rs. 10,86,161/-. So, when the AO has not brought on record any cogent reasons to reject the suo motu disallowance made by the assessee, further disallowance made by the AO is merely on the basis of surmises by giving mechanical interpretation to the provisions contained u/s 14A read with Rule 8D. 13. Moreover, disallowance u/s 14A cannot exceed the amount of exempt income as has been held by Hon'ble Delhi High Court in CIT vs. Holcim India Pvt. Ltd. - (2014) 90 CCH 081-DEL-HC, so we are of the considered view that the ld. CIT (A) has rightly deleted the disallowance made by the AO u/s 14A of the Act, hence ground no.1 is determined against the Revenue. GROUND NO.2 14. The Revenue challenged the deletion of disallowance of Rs. 14,85,571/- on account of CSR expenses. The ld. AR challenging the impugned order relied upon the order passed by AO who has disallowed the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 21. AO has made addition u/s 145A on account of 'excise duty on closing stock' over 'excise duty of opening stock', whereas it is settled principle of law that excise duty component has to be excluded from valuation of closing stock as has been held by Hon'ble Supreme Court in case cited as CIT vs. Hindustan Zinc Ltd. - 291 ITR 391 (SC). Hon'ble High Court of Bombay in case cited as CIT vs. Loknete Balasaheb Desai SSK Ltd. - 339 ITR 288 decided the issue in controversy as under :- "The expression 'incurred by the assessee' in section 145A (b) is followed by the words 'to bring the goods to the place of its location and condition as on the date of valuation'. Thus, the expression 'incurred by the assessee' relates to the liability determined as tax, duty, cess or fee payable in bringing the goods to the place of its location and condition of the goods. Explanation to section 45A(b) makes it further clear that the income chargeable under the head 'profits and gains of business' shall be adjusted by the amount paid as tax, duty, cess or fee. Therefore, the expression 'incurred' in section 115A(b) must be construed to mean the liabilit....