TaxTMI 
TaxTMI 
2018 (12) TMI 287
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act respectively. Since common issues are involved, these appeals were heard together and disposed of by this common order. First, we shall take up appeal of the assessee for AY 2006-07. Since common issues are involved our decision for AY 2006-07 shall apply mutatis mutandis to the same issues in AY 2007-08, 2008-09 and 2009-10 respectively. 2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") for AY 2006-07 in ITA No. 369/Mum/2013, reads as under:- "On the facts and in law: 1. Disallowance out of travelling expenses : Rs. 3, 19, 386/- 1) The ld. CIT(A) erred in sustaining the disallowance of Rs. 3, 19, 386/- out of travelling expenses incurred by the appellant and that relying on the grounds taken by the ld. predecessor CIT(A) in A. Y. 2005-06. The appellants submits that since then the assessment for A. Y. 2005-06 has been set-aside by the Hon'ble ITAT. The appellant further submits that, in any case, the disallowance is excessive. 2. Disallowance of Rs. 1, 56, 449/- termed as penalties and fine: i) The ld. CIT(A) erred in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rred in failing to appreciate that the appellant had genuine and reasonable reason for its failure to furnish return of income in time and that a liberal view ought to have been taken as held by various courts. 6. Disallowance u/s 14A r. w. s. 8D: The ld. CIT(A) erred in upholding disallowance at 10% of dividend earned, whereas no disallowance u/s 14A r. w. s. 8D was justified. 7. Non-consideration of expenses disallowed in earlier years and claimed as deductions in A. Y. 2006-07, subject to the outcome in the pending assessments pursuant to ITAT orders for earlier years: i) The ld. CIT(A) erred in not considering the following disallowances/additions; a) Prior period expenses: Rs. 27, 40, 436/-. b) Non-deduction of TDS: Rs. 4, 48, 69, 244/-. c) Prior period adjustment (net): Rs. 31, 74, 810/-. ii) The appellant submits that the above claims are alternate claims and made without prejudice to the outcome in the pending assessments pursuant to the orders of the ITAT for earlier years. Your appellant craves leave to add to, alter, amend or delete all or any of the grounds of appeal on or before the date o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....006, 2007, 2008 and 2009 by 9th July, 2009 . After the audit was taken up in pursuance to aforesaid directions of the Hon'ble Supreme Court, the assessee finally filed return of income with Revenue declaring total income of Rs. 32, 01, 80, 474/- along with its letter dated 01. 12. 2009. The AO intimated to the assessee vide letter dated 10. 12. 2009 that there were some defects in the return of income filed by the assessee on 01. 12. 2009. The defects were removed by the assessee by filing fresh return of income on 24. 12. 2009 wherein the income declared was Rs. 33, 71, 53, 047/- . With this back ground, we now proceed to adjudicate this appeal filed by the assessee for AY 2006-07. 4. Disallowance of Foreign Travelling expenditure of Rs. 2, 19, 386/- and Domestic Travel expenses of Rs. 1, 00, 000/-, aggregating to Rs. 3, 19, 386/- . These expenses were disallowed by the AO on the grounds that spouses/family members of Directors have also travelled along with Directors and it could not be proved that the spouses/family members of Director's visit / expenses were wholly and exclusively connected with the business of the assessee. The assessee has only given bald statement that in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or AY 2005-06 was pleased to set aside and restore the matter back to the file of AO for fresh adjudication for AY 2005-06 in ITA no. 3840/Mum/2010, vide orders dated 07. 11. 2012. It was submitted that said orders of tribunal for AY 2005-06 is placed in paper book filed by the assessee with tribunal, at page no. 134 to 139 . It was submitted that in all fairness this issue should be restored back to the file of AO for fresh adjudication . Our attention was also drawn to page no. 140 to 145, wherein Form No. 35 dated 9th April 2014 ( filed with learned CIT(A) on 10-04-2014) for AY 2005-06, Grounds of appeal and Statement of Facts for AY 2005-06 filed before Ld. CIT(A) for AY 2005-06 to challenge the assessment framed in pursuance to the appellate order passed by the tribunal dated 07. 11. 2012 is placed, wherein this issue is claim to be adjudicated afresh by AO in pursuance to the directions of the tribunal vide assessment order dated 25. 02. 2014 u/s 143(3) read with Section 254 of the 1961 Act. The assessee has however not placed the said assessment order passed by the AO in pursuance to direction of the tribunal. 4. 4. The Ld. DR raised no objection to the restoration of thi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....only compensatory in nature. But the appellant has not substantiated its contentions with evidences. In view of this, addition is sustained. Ground No. 3 is dismissed. " 5. 3. The assessee has come in an appeal before the tribunal and it is contended before the tribunal that payments are compensatory in nature and are not paid for infringement of any law. The detail of said penalties are placed in paper book at page no. 106 to 118. On Perusal of these details which are placed in paper book filed with tribunal, we have observed that these expenses are toward traffic challan, interest, tax etc and in all fairness to both the parties, the matter need to be set aside and restored to file of the AO who shall analysis each and every claim of these expenses as claimed by the assessee. The onus is on the assessee to place all details before the AO and If these expenses are found to be penal in nature and hit by explanation 1 to section 37(1), the same shall be disallowed by the AO in set aside proceedings but if the same are found to be compensatory in nature the same shall be allowed by the AO. The complete details are not furnished by the assessee and the assessee is directed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed for company's business. The assessee submitted that part of the car running expenses were recovered from the Directors and the disallowance is excessive rather no disallowance is called for. The learned CIT(A) was pleased to dismiss the appeal of the assessee by following decision of his predecessor for AY 2005-06 and sustained disallowance of Rs. 90, 000/- as was made by the AO vide appellant order dated 31. 10. 2012, by holding as under:- " 7. 3 I have gone through the issue. I find that this issue is a repetitive issue. My predecessor has decided the issue in A. Y. 2005-06 against the appellant. Para 24 of the appellate order is extracted below: Ground of appeal number five is against addition of any amount of Rs. 90, 000/- on account personal use of vehicles. The auditors in their special auditors report stated that details of personal use of vehicles was not provided to them. Before assessing officer appellant contended that in terms of the ITAT order disallowance of an amount of Rs. 6, 600/- per directors should be adequate. Assessing Officer has categorically observed that the order relied upon by the appellant pertain to year 1990 and has no significan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ored back to the file of AO for fresh adjudication on merits in accordance with law and we restore this issue back to file of AO for fresh adjudication after considering the submissions of the assessee, as while passing appellate order, the learned CIT(A) has followed the appellate order passed by his predecessor for AY 2005-06 which itself was set aside by the tribunal. . Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The relevant explanations/evidences submitted by the assessee in its defence shall be admitted by the AO and be adjudicated on merits in accordance with law. The issue in this ground of appeal filed by the assessee is allowed for statistical purposes. We order accordingly. 7. The next issue concerns itself with the expenses incurred for Pali Hill Bungalow owned by the assessee which were disallowed by the AO to the tune of Rs. 5 lacs on the grounds that part of the said Bungalow was used for residence of Directors and also perquisite value in the hands of the Directors as well expenses incurred by the assessee on behalf of the Director....
X X X X Extracts X X X X
X X X X Extracts X X X X
....According to Assessing Officer property is not being used by appellant at all. This contention of assessing officer was controvented by appellant on the basis of an order of Hon'ble ITAT Mumbai where it has been confirmed that 25% of the property is being used for business of appellant company. No other evidence has either been filed before assessing officer or before me. It is necessary to look into the decision of Hon'ble ITAT. This decision was delivered as long back as 1986. More than 20 years in the past. The utilization of the property is a question of fact and is bound to be major change in the utilization of the property particularly because the family tree grows and therefore, leading to shortage of space. This is not a conjecture. This is a logical conclusion drawn from the fact that appellant is relying on an ITAT order which is 25 years old. To my mind there is no basis on which one can conclude that this situation has not changed in the last 25 years. Appellant ought to have brought on record detailed evidence that property is being used by the assessee for its own use. Since this has not been done, the objection cannot be accepted. As far as appellant's co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....udication in ITA No. 3840/Mum/2010 vide orders dated 07. 11. 2012 . The said order is placed in paper book at page number 134 to 139, filed with the tribunal . It was submitted that Ld. CIT(A) has followed the decision for AY 2005-06 and in all fairness this issue needs to be restored to the file of AO for fresh adjudication after considering the contention of the assessee. 7. 4 The learned DR did not objected to the restoration of this issue to the file of the AO for fresh adjudication on merits in accordance with law. 7. 5 After considering rival contentions and perusing the material on record, we are of the considered view that this issue of disallowance of Expenses relating to Pali Hill Bungalow, aggregating to Rs. 5, 00, 000/- has to be restored back to the file of AO for fresh adjudication on merits in accordance with law and we restore this issue back to file of AO for fresh adjudication after considering the submissions of the assessee, as the learned CIT(A) followed the decision of his predecessor for AY 2005-06 which itself was set aside by the tribunal. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....before the due date . The AO rejected the contentions of the assessee keeping in view clear and unambiguous provisions of Section 80AC of the 1961 Act wherein no exception has been provided as the return of income was not filed in time within due date as prescribed u/s 139(1) of the 1961 Act, the AO disallowed the claim of deduction u/s. 80IA, vide assessment order dated 30. 12. 2009 passed u/s 143(3) read with Section 147 of the 1961 Act. 8. 2 The matter reached Ld. CIT(A) at the behest of the assessee wherein the assessee filed first appeal against assessment order and the summarised contentions of the assessee as submitted before learned CIT(A) are as under:- " 9. 1 During the appellate proceedings, the appellant submitted that disallowance was made on technical ground that return of income was not filed by the due date u/s. 139(1), hence claim u/s. 80IA was rejected. Pursuant to the order dated 14. 5. 2009, of the Supreme Court audit could be completed on 11. 12. 2009 and return filed on 1. 12. 2009 followed by revised return on 24. 12. 2009. It was further submitted that section 80IA being a machinery provision, requires to be liberally interpreted in the special c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... A No. 3/2009 in connected petition (C) No. 92 of 2008 in connected petition (C) 149/2003 in CA no. 366/1998, vide orders dated 14th May, 2009, the Hon'ble Supreme Court was pleased to pass following orders: "Without prejudice to the rights and contentions of the parties appearing before us, we direct M/s. BSR & Co. to prepare and audit the accounts of the Company for the Financial Year 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008 and 2009 by 9th July 2009. The matter to come up on 13th July 2009, At this stage, we do not wish to pass any orders in terms of prayer clause (b) of the I. A. M/s. BSR & Co. is also directed to submit a status report on the account before the next date. It is made clear that the non-applicant, if so advised, may file a reply to the I. A before the next date of hearing. " It was submitted that it is only on the basis of audited accounts prepared and drawn by said firm M/s B S R & Company, Chartered Accountants pursuant to the directions as are contained in the aforesaid orders of the Hon'ble Supreme Court, the assessee was able to file return of income in the month of December 2009 and claim for deduction ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... provisions are to be strictly construed. 8. 5. The Ld. DR submitted that matter can be restored to file of AO 8. 6 We have considered rival contention and have perused the material on record. We have observed that the assessee has made a claim of deduction to the tune of Rs. 75, 85, 911/- u/s. 80IA of the 1961 Act with respect to the Wind Mills installed in Tamil Nadu . The assessee has admittedly filed return of income in the month of December 2009 which was admittedly beyond the time stipulated u/s 139(1) and also the return of income was filed beyond the time stipulated u/s 139(4) of the 1961 Act. There is no dispute that the return of income was not filed within the time prescribed u/s 139(1) of the 1961 Act. The assessee has submitted that its claim of deduction u/s 80IA was denied by Revenue in this year under consideration based on newly inserted provision in the 1961 Act wherein Section 80AC was inserted by Finance Act, 2006 wef 01. 04. 2006. The said Section clearly mandates that in order to grant deduction u/s 80IA, the return of income has to be filed within the due date as stipulated u/s 139(1) which undisputedly the assessee did not comply with. The Section 80AC....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... next date of hearing. " The assessee has taken a plea that there was a reasonable cause for not furnishing of its return of income in time as stipulated u/s 139(1) of the 1961 Act which was mainly the dispute/litigation between the assessee and/or its promoters/directors. The tribunal in the case of ITO v. S. Venkataiah reported in (2012) 22 taxmann. com 2(Hyd. ) while adjudicating appeal for AY 2008-09 has accepted reasonable cause for delay in filing of return of income beyond time stipulated u/s 139(1) for allowing deduction u/s 80IC despite in breach of Section 80AC of the 1961 Act. This matter went to Hon'ble Andhra Pradesh High Court at the behest of Revenue wherein the appeal of the Revenue was dismissed by Hon'ble Andhra Pradesh High Court on the grounds that it does not raises any substantial question of law. It is now settled by the Constitution Bench of Hon'ble Supreme Court in the case of Commissioner of Customs(Imports), Mumbai v. Dilip Kumar and Company & others in civil appeal no. 3327 of 2007 vide orders dated 30th July 2018 that exemption provisions are to be strictly construed. The conclusion arrived at by Hon'ble Supreme Court in the aforesaid decision are as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the claim of deduction u/s 80IA of the 1961 Act is allowed despite return of income being filed beyond time as stipulated u/s 139(1), then Section 80AC will become otiose. The said Section 80AC was a newly inserted section which was inserted by Finance Act, 2006 w. e. f. 01. 04. 2006 which has been specifically brought in by Parliament to grant exemption to those tax-payers who file their return within due date as prescribed u/s 139(1) and this is the first year when the said section is applicable. With the aforesaid observations, we are restoring this issue back to the file of the AO for fresh adjudication of the issue on merits in accordance with law. The assessee is directed to produce all relevant records concerning dispute /litigation as well relevant orders of Hon'ble Courts before the AO to prove supervening impossibility of performance. We order accordingly. 9. The ground number 6 concerns itself with disallowance under section 14A of the 1961 Act r. w. r. 8D of the Income Tax Rules, 1962. The disallowance was made by the AO of Rs. 16, 102/- u/s 14A of the 1961 Act. The assessee has received dividend income of Rs. 26, 134/- which was claimed as an exempt income u/s 10(34....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rse. The assessee has filed additional paper book containing 24 pages in which the assessee has filed audited financial statements for the financial year ended 31.03.2000 to 31. 03. 2005(PB/page 3-23) . The assessee has also filed summary of additions made to fixed assets from 31. 03. 2001 to 31. 03. 2011, as under to contend that the assessee did made purchases of fixed assets and finding of the AO is perverse:- Details Of additions to Fixed Assets (Amount in Rs. ) Financial Year ended AMBO AMMA AMAU DFK BFK Croissants Windmill Total 31/03/2001 2, 654, 991 1, 440, 662 86, 276 6, 565, 699 200, 472 25, 045 24, 075 10, 997, 220 31/03/2002 2, 627, 627 308, 103 63, 812 9, 146, 758 1, 394, 507 107, 646 - 13, 648, 453 31/03/2003 14, 426, 263 1, 820, 833 3, 298, 537 9, 434, 737 26, 124, 308 781, 651 - 55, 886, 329 31/03/2004 6, 132, 350 922, 998 577, 716 17, 843, 901 51, 039, 079 6, 696, 812 - 83, 212, 856 31/03/2005 2, 750, 909 1, 687, 542 417, 798 30, 151, 860 12, 099, 046 537, 523 3, 200 47, 647, 878 31/03....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 758 1, 394, 507 107, 646 - 13, 648, 453 31/03/2003 14, 426, 263 1, 820, 833 3, 298, 537 9, 434, 737 26, 124, 308 781, 651 - 55, 886, 329 31/03/2004 6, 132, 350 922, 998 577, 716 17, 843, 901 51, 039, 079 6, 696, 812 - 83, 212, 856 31/03/2005 2, 750, 909 1, 687, 542 417, 798 30, 151, 860 12, 099, 046 537, 523 3, 200 47, 647, 878 31/03/2006 2, 325, 569 1, 069, 150 1, 999, 541 16, 649, 655 5, 717, 782 372, 895 - 28, 134, 592 31/03/2007 2, 531, 413 5, 854, 894 2, 996, 961 3, 421, 367 11, 607, 363 136, 136 - 26, 548, 134 31/03/2008 36, 228, 072 3, 952, 290 182, 077 11, 436, 712 1, 601, 014 1, 229, 451 - 54, 629, 616 31/03/2009 3, 928, 045 6, 072, 068 2, 516, 027 8, 557, 827 8, 737, 462 1, 375, 590 - 31, 187, 019 31/03/2010 4, 357, 427 3, 238, 990 562, 240 4, 209, 611 2, 433, 299 1, 655, 754 - 16, 457, 321 31/03/2011 3, 079, 667 1, 636, 154 837, 115 216, 614 2, 634, 937 744, 305 - 9, 148, 792 &nbs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands overruled. " The onus is on the assessee to prove that the assessee is entitled for deduction u/s 80HHD of the 1961 Act and that it had met all the requirements of provisions of Section 80HHD and its case comes strictly within the four corners and parameters of the conditions as are stipulated under Section 80HHD of the 1961 Act. The onus is on the assessee to prove that the AO while framing assessment erred in adding back reserves to the tune of Rs. 1,27,79,045/- during the impugned assessment year which reserved were created by the assessee in the financial year ended 31.03.2000 within provisions of Section 80HHD of the 1961 Act and the said reserve amount was utilised within time period as mandated u/s 80HHD for the purposes a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h this additional ground of appeal is raised by the assessee . This is an additional ground of appeal which is raised by the assessee for AY 2009-10, as under: "On the facts and in the circumstances of the case and in law, the Assessing Officer erred in not allowing a deduction of Rs. 32,10,870/- for the payment made on 10.12.2008 as additional property tax in respect of the Hotel property at Chennai, which is allowable as deduction on payment basis u/s 43B of the Act in A. Y. 2009-10" The assessee has claimed to have made payment towards additional property tax to the tune of Rs. 32,10,870/- with respect to the hotel property-Pallava situated at Chennai and claim is made that the said expenditure is to be allowed on payment basis keeping in view provisions of Section 43B of the 1961 Act. This is fresh ground of appeal raised by the assessee and it is claimed that provision was made while preparing accounts for AY 2009-10 towards this hotel property tax(Hotel Pallava, Chennai) and the same was paid on 10th Dec, 2008 but due to mistake of the assessee, the same was not claimed. It was submitted that this claim for expenses were disallowed for AY 2008-09 as the payment was made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....med as allowable deduction. Vide order sheet noting dated 17/12/2010, the assessee was required to explain and furnish the proof of payment of property tax during the F. Y. 2007-08 relevant to current A. Y. or till the due date of filing of return for the current assessment year. The appellant has produced copy of payment of property tax to the tune of Rs. 32,10,870/- which was paid in the F. Y. 2008-09 (payment date 10/12/2008). The appellant has claimed that this quantum of property tax pertain to enhanced value of property tax by Municipal Authorities after survey action and hence the same is claimed as deductible expenses in the year of provision made. The appellant has also contended that this expenditure does not fall in the nature of items covered in section 43B of the I. T. Act. This claim of the appellant was not acceptable as the property tax fall under section 43B (a) of the Act which starts with 'any sum payable by assessee by way of tax, duty, cess or fee by whatever name called under any law for the time being enforced' and these wordings certainly takes care of the property tax. As the property tax payment is made on 10/12/2008, the amount of Rs. 32,10,870/- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 31,10,870/- is disallowed as per section 436 of the Act and added to the total income. " 2. In view of the above the appellant filed revised computation of total income vide letter dtd. 31.3.2011 during assessment proceedings of A. Y. 2009-10 and repeated the claim as under- "4. The assessment for A. Y. 2008-09 has been completed by the Addl. CIT_1(2) vide order dtd. 29.12.2010 wherein a disallowance of Rs. 32,10,870/- has been made for the additional property tax payable in respect of property at Chennai, on the basis that as the property tax was paid on 10.12.2008, it was not eligible for a deduction in the assessment for A. Y. 2008-09, and is to be allowed on payment basis u/s 43B in A. Y. 2009-10. 5. Accordingly we are making a claim of Rs. 32,10,870/- for the property tax paid on 10.12.2008, without prejudice, on payment basis u/s 43B in A. Y. 2009-10 for which we are filing a revised computation of income. " 3. The A. O. made the assessment for A. Y. 2009-10 on 30. 12. 2011 u/s 143(3) without dealing with the appellant's claim and did not allow the claim for deduction of the additional property tax of Rs. 32,10,870/- in respect of the Hotel property at Chen....