TaxTMI 
TaxTMI 
2019 (3) TMI 1581
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....sallowance u/s.14A r.w.r 8D of the Act. 3. That the Ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 1,38,752/- made on account of disallowance of prior period expenses. 4. That the Ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 21,12,302/- made u/s.41(1) of the Act being cessation of liabilities. 3. The first ground of appeal raised by the Revenue is that the ld. CIT-A erred in deleting the addition made by the AO on account of interest in respect of capital WIP. 4. During assessment proceeding, the AO found that the assessee had shown Rs. 37,74,543/- as capital work in progress (for short CWIP) but corresponding interest cost was not attributed to such CWIP. Accordingly, a clarification was sought from the assessee. 4.1 In response, the assessee submitted that machinery is kept ready for use and hence need not to capitalize. 4.2 However, the ld. AO disregarded the contention of the assessee by observing that the assessee company did not produce any material on record showing the CWIP whether any interest element was involved therein. 4.3 AO in support of his contention also relied on Punjab & Haryana High court in case of Po....
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....e audit accounts disclosed capital work in progress of Rs. 37,74,543/- which is absolutely distinct and different from the additions made to the gross block in the Column- A of Note-9 comprising of tenable assets forming part of audited accounts. Therefore, the AO has completely misled himself in believing that the appellant has claimed depreciation on capital work in progress as disclosed in the audited accounts. The above comparison of both the tables reveals that no such depreciation has been claimed on capital work in progress of Rs. 37,74,543/- as alleged. The decision which had been relied upon by the AO while making addition are therefore not applicable since both these decisions involved the capitalization of expenses prior to the assets having been put to use. In view of the above facts and discussion, the addition made by the A.O. cannot be sustained. The A. O. is directed to delete the same. The ground of the appellant is allowed.'' 7. Aggrieved by the order of learned CIT (A) the Revenue is in appeal before us. Both the learned DR and the AR before us relied on the order of authorities below as favorable to them. 8. We have heard the rival contentions and perused th....
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....leting the addition of Rs. 48,19,526/- made on account of disallowance u/s.14A r.w.r 8D of the Act. 10. AO found that assessee has shown investment in securities at Rs. 14,23,47,500/- as at 31/03/2011 and 31/03/2012 but did not make any disallowance u/s 14A r.w. Rule 8D of the Income Tax Rule. 10.1 On the question for the disallowance, the assessee submitted that it has not earned any exempt income nor claimed any exemption in respect of any income. Similarly, it has not incurred any expenditure nor claimed any expenditure in respect of any exempt income. Therefore, there is no need of invoking of the provision of section 14A of the ACT. The assessee also placed his reliance on Gujarat high court in case of Corrtech Energy Pvt. Ltd reported in 223 taxman 130 and contended that this decision is binding in the state of Gujarat. 10.2 Assessee also contended that it has own sufficient fund in the form of the share capital of Rs. 5.94 Crores and quasi-capital of Rs. 4.75 Crores as on 31/03/2011 & 31/03/2012. 10.3 However, AO disregarded the contention of the assessee by observing that it had taken a huge secured loan of Rs. 14,19,86,326/- and unsecured loan of Rs. 1,40,96,339/- ....
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....ot arise in view of the judgment of Hon'ble Gujarat High Court in the case of Corrtech Energy (P) Ltd reported in 372 ITR 97 wherein it was held as under: "4. Counsel for the Revenue submitted that the Assessing Officer as well as CIT(Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009-2010. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that subsection( 1) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made." In view of the above judgment, there is no ambiguity that there cannot be any disallowance under section 14A of the Act as made by the ....
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....gned prior period expenses were incurred in connection with the business of the assessee under section 37(1) of the Act. 20.1 The sole basis of the disallowances is that these expenses are pertaining to the period of earlier years. Therefore, the same was disallowed. However, we note that the assessee in the year under consideration and in the earlier years was paying the tax at the maximum marginal rate. As such there was no loss to the Revenue as the assessee was very much entitled to the deduction of such expenses in the earlier year. Thus merely the assessee omitted to claim the expenses in the earlier year cannot be a ground for the disallowance for the year under consideration. In this regard we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of Indian petrochemicals corporation Ltd (Supra) wherein it was held as under: "2.3 Mr. Soparkar, learned Senior Counsel assisted by Mr. Amit K. Mathur and Mrs. Swati Soparkar, learned advocates for the assessee supported the impugned order and submitted that the issue involved in the present appeal is now squarely covered by a decision of the Apex Court in the case of CIT v. Excel Industries Lt....
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.... 10(5). Now, in section 10(2)(x), what is allowable as a deduction is "any sum paid to an employee as bonus". By itself this contemplates actual payment; but section 10(5) defines the word "paid" which appears in subsection (2) as meaning "actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under this section". Therefore, an actual payment is not necessary for the purpose of this deduction; it is sufficient if the liability to bonus is incurred according to the method of accounting upon the basis of which the profits or gains are computed. Now, considering that the profits or gains are computed on the mercantile basis, the amount of bonus for the year 1951 would properly be treated under the mercantile system as an expense for the year 1951. It appears to us to be a matter of little consequence that in point of fact no entry was made in the account of that year making a provision for the bonus, because obviously such an entry could only be made after the conclusion of that year when the profits of that year were known, and, therefore, the liability for a bonus, and it could have been made at any time. The absence....
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....ed by Revenue is regarding the deletion of the addition of Rs. 21,12,302/- made u/s 41(1) of the Act being the cessation of liability. 22. Assessee has shown Rs. 21,12,302/- under the heading creditors consisting of 8 persons as on 31/0/2010, 31/03/2011 and on 31/03/2012. AO issued SCN to the assessee for making the disallowance under section 41(1) of the Act as payment till the date has not been made. 22.1 In response assessee submitted liability has not been ceased to exist and no benefit by way of cessation or remission in respect of any trading liability is obtained under the meaning of u/s 41(1). The assessee is still under the legal obligation to make the payment. Therefore, no presumption can be made for remission or cessation of liability. 22.2 The assessee in support of his contention also relied on the judgment of Hon'ble Gujarat high court in case of CIT vs. Bhogilal Ramjibhai Atara (222 Taxman 313). 22.3 However, AO disregarded the contention of the assessee and held that creditors had not been paid off even after three years. The facts of the case relied upon by the assessee is different. Moreover, it has not attained finality. AO also held that as per limitati....