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2018 (8) TMI 1183
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....ht on record. 2. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 47,20,260/- u/s.37 of the Act, without properly appreciating the facts of the case and the material brought on record. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. 5. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary." 3. The first issue raised by the Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by the AO for Rs. 10,77,754/- u/s 194A r.w.s. 40(a)(ia) of the Act. 4. Briefly stated facts are that the assessee in the present case is a limited company and engaged in the business of Imports & Re-sale of Medical Electronics Equipment & Providing after sales & warranty services for the same. The assessee during the year has claimed interest expenses, which were paid to Non-Banking Financial Companies amounting to Rs. 10,77,754/- only. Howeve....
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....in Corp. It has been certified that the amount of interest paid to these companies has been considered in the computation of their taxable income and the companies have also filed their returns of income and paid the taxes due. The A.O in the remand report has objected to the furnishing of Form 26A stating that as per Rule 31ACB, the certificate of the accountant is to be furnished to the DG[Systems] or to a person authorized by him. A perusal of the relevant Rule shows that Rule 31ACB prescribing the furnishing of Form 26A to DGIT (Systems) or person authorized by DGIT (Systems] was substituted by the IT (Second Amdt] Rules, 2013, w.e.f. 19-2-2013. Prior to its substitution, rule 31ACB, as inserted by the IT (Eleventh Amdt.) Rules, 2012, reads as under: "31ACB. Form for furnishing certificate of accountant under the first proviso to subsection (1) of section 201. - The certificate from an accountant under first proviso to sub section (1) of section 201 shall be furnished in Form No. 26A." Thus, the requirement for furnishing certificate to DGIT(Systems) has been incorporated w.e.f. 19-2-2013 only and prior to amendment on 19-2-2013, ie during the year under consi....
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....n the argument of the ld. AR. There is an amendment in the 1st proviso to Sec. 201, wherein, if any payee has paid the taxes by offering/disclosing the said receipt in its return of income, then the payer (the assessee herein) should not be treated as assessee in default. The said proviso reads as under : Consequences of failure to deduct or Pay 201. (1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: [Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to....
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....h inserted by the Finance Act 2012 w.e.f. 1-4- 2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:- "Question: Whether the second proviso to Section 40(a)(ia) (inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not?" Held: Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for tax withholding lapse but it is a provision introduced to compensate any loss to the revenue in cases where deductor hasn't deducted TDS an amount paid to....
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.... in pursuance of the purchase order received from Central Medical Stores Organizations. However, the AO was of the view that the gift given by pharmaceutical and allied health sector industries to medical practitioners and their professional association is prohibited under the Medical Council Act, 1956. Accordingly, the expenses cannot be allowed under explanation to Section 37(1) of the Act. The AO in support of his claim placed reliance on the CBDT Circular No.5 of 2012 issued on 01.08.2012. Accordingly, the AO disallowed the expenses and added to the total income of the assessee. 9. Aggrieved, assessee preferred an appeal before ld. CIT(A). The assessee before the ld CIT(A) submitted that sales promotion expenses were incurred by supplying accessories to its actual customers/buyers and these were not supplied to any third party. The assessee furnishes the breakup of sales promotion expenses, which is reproduced as under: "(a) Government Sale (Accessories) : 3829092 These expenses include UPS, printer, spares, electrical, DVDs required for running and handling the machine. (b) Doctors/Hospitals Sales (Accessories) : 479094 These expenses ....
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.... is also seen that most of the expenses incurred is on account of sales made to Government hospitals. Most of these expenses pertain to the cost of accessories and peripherals supplied to customers and needed for the operation of the machines. Moreover, an similar addition on identical facts in the appellant's own case for Asst. Year 2010-11 was decided in favour of the appellant by the learned CIT(A)-VIII, Ahmedabad vide his order No. CIT(A)-VIII/DCIT/Cir-4/131/12-13 dated 11.10.2013. Respectfully following the decision of my predecessor and in view of the facts of the case, the addition of Rs. 47,20,260/- is deleted. Ground of appeal No.3 is accordingly allowed." Being aggrieved by the order of ld CIT(A) Revenue is in the second appeal before us. The ld. DR before us submitted that the activity of the assessee falls under the allied health sector industry. Therefore, the Circular is very much applicable to the assessee. The Circular was issued by CBDT dated 05/2012 but it was applicable retrospectively. In this regard, the ld DR relied on the judgment of Hon'ble High Court of Himachal Pradesh in the case of Confederation of Indian Pharmaceutical Industry (SSI) (having i....
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....to the Government hospitals. The ld. AR vehemently supported the order of Ld. CIT(A). 10. We have heard the rival contention and perused the material available on record. In the present case, the assessee has supplied certain products free of cost to the government hospitals and other hospitals, which were claimed as a deduction under the head sales promotion expenses. The AO was of the view that goods supplied to the doctors and other professional association free of cost are prohibited in terms of Circular No.5/2012 issued by CBDT dated 01.08.2012. However, the ld CIT(A) reversed the order of AO by observing that the assessee is not a pharmaceutical company. Therefore, the Circular issued by CBDT cannot be applied. The ld. CIT(A) also observed that the assessee had not supplied any item free of cost to the hospitals, but these items were representing part of the machinery and equipments supplied to various parties. Now the issue before us arises for our adjudication ase detailed as under: i. Whether the Circular No.5/2012 issued by CBDT is applicable retrospectively or prospectively. ii. Whether the assessee falls under the category of pharmaceutical co....
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....pitals in pursuance to the purchase order which is placed on the pages 23 to 28 of the PB. The relevant extract of the purchase order is reproduced as under : "SCHEDULE TO ACCEPTANCE OF TNEDER NO : CMSO/INST/F.196/2010-11 PLACE WITH: M/s. Esaote India (NS) Limited, B-604/704,Oxford Tower, Gurukul, Ahmedabad - 380 052, India Item No. Descriptions of Stores Quantity Rate Total 196.01 Color Dopper Sonography Machine. Brand : ESAOTE Model : MY LAB 20 PLUS 75 Nos. Euro 9900 Euro 742500 +Custom Duty @ 9.61% Rs.56,817=00 Rs.42,61,275=00 1 Disply-15" high resolution LCD Monitor, Non Interlace, Flicker Free Monitor a) 1024 or more number of channels b) Dynamic range > 150 c) Speckle reduction d) 4D upgradeability of the machine must be more than 25 volumes per second which is optional & price must be fixed. e) Application-Adomen, Obstetrics, Gynaecology, Cardiology, Urology, small parts 2 Broad Bank Multi Frequency Probe- Probe det....
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.... & place of Manufacturing of Supplied equipments otherwise stores will not be accepted by concern Consignee." In view of above, we hold that the circular as discussed above is not applicable to the case on hand. Similarly, the facts of the case are different with the order of Mumbai Tribunal in the case of Liva Healthcare Limited (supra) as relied on by the ld. DR. Accordingly no reliance can be placed on such order. The case relied on by the ld. DR in the case of Confederation of Indian Pharmaceutical Industry (supra) also does not support the Revenue. It is because this case does not talk about the applicability of the Circular issued by the CBDT rather it upheld the validity of the Circular issued by the CBDT. Thus, the argument of the ld DR is that the Circular is applicable with a retrospective date does not hold good. The relevant extract of the order is reproduced below: "The explanation to Section 37(1) makes it clear that any expenditure incurred by an assessee for any purpose which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession. The sum and substance of the circular is also the same. In case the asse....