TaxTMI 
TaxTMI 
2012 (1) TMI 370
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..... 275,850/-. (b) He erred in observing that the AO cannot be faulted for estimating the expenditure incurred in relation to the exempt income. 2. (a) The ld CIT(A) erred in confirming the disallowance of advances written off of Rs. 100,000/-. (b) He erred in observing that the appellant did not contest the fact that the amount was capital in nature and was not allowable as a bad debt. 3. The ld CIT(A) erred in confirming the disallowance of Rs. 272,628/- being repairs to factory building. 4. The ld CIT(A) erred in confirming the exclusion of 90% of following receipts from profit of business for the purpose of deduction u/s 80HHC of the I.T. Act, 1961: Nature of receipt Amount in Rs. Service charges 40,025,643 Sale of Manuals 615 Technical fees received from Revathi CP 1,500,000 Training charges 75,900 Professional fees received from Bhagwati Foundries 1,771,000 3. Before us, at the outset, the learned Counsel for the assessee did not press Ground No.1 of the appeal and, therefore, the same stands dismissed for non-prosecution. 4. The Assessing Officer disallowed an amount of R....
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....he assessee's paper book we find that assessee has during the period from April, 1999 to October 1999 made Inter Corporate Deposits totaling Rs. 4,08,23,117/-. The ICDs were made in about 15 companies. The interest earned on ICDs has been regularly offered to tax as business income. In this regard we have seen he assessment orders in assessee's case for AY 1999-2000 and 1998-99, wherein the interest income has been offered as business income and tax accordingly. In view of the above, we are of the view that the findings of the CIT(A) that assessee was engaged in the business of making ICDs has to be upheld. It is further seen that the company M/s Vitara Chemicals Ltd. became a sick company. The assessee filed a criminal complaint u/s 138 of the Negotiable Instrument Act against M/s Vitara Chemicals Ltd., but the same did not bare any result. M/s Vitara Chemicals was declared as sick company under the Sick Industries Special Provisions Act. In the above circumstances, we are of the view that the claim of the assessee that it had incurred a business loss to the extent of Rs. 48.00 lacs u/s 28 of the Act has to be accepted. Even otherwise as laid down by the Hon'ble Delhi Bench ....
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....impugned expenditure has not resulted in any enduring benefit to the assessee so as to constitute a capital expenditure. It was pointed out that the expenditure has not resulted in creation of any new asset and is, therefore, allowable as a revenue expenditure. In support of his arguments, reliance has been placed on the following judgments: (i) Standard Mills Co. Ltd. v. CIT 181 233(Bom); (ii) Addl. CIT v India United Mills Ltd 141 ITR 399(Bom). 11. On the other hand, the learned Departmental Representative, appearing for the Revenue, has pointed out that the expenditure in question was for erection of additional shed for LPG gas bank and therefore, the same has been rightly considered as a capital expenditure. 12. We have carefully perused the orders of the authorities below and also the submissions put-forth by the assessee, copies of which have been placed on record. The assertion of the assessee has been that an expenditure of Rs. 2,72,628/- classified as repairs to factory building, was incurred on repair work carried out at Dapodi factory to strengthen the existing shed for LPG gas bank and additional set of gas cylinders with the purpose of better pr....
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....Departmental Representative has defended the action of the lower authorities by pointing out that the impugned incomes do not constitute operational incomes and, therefore, the same have been rightly subjected to the exclusions prescribed in Explanation (baa) to section 80-HHC of the Act for calculating "profits of the business" for the purposes of computing deduction under section 80HHC of the Act. 16. We have carefully considered the rival stands. In so far as exclusion of 'Service Charges' from "profits of the business" as per Explanation (baa) to section 80HHC is concerned, the same has been considered by our coordinate Bench in the assessee's case vide its order dated 30.11.2010 (supra) in the following words: "10. As per the Revenue, these receipts did not form part of the main activities of the assessee and therefore they is not to be included in the eligible profits of th business for the purpose of deduction u/s 80HHC of the Ac. Accordingly, CIT(A) denied the benefit of deduction to the assessee. During the proceedings before us, relying on page 1 of the paper book, Ld. Counsel argued stating that the said amount stands excluded while computing the income charg....
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....he ld CIT(A) was justified in deleting the addition of Rs. 2,20,84,664/- made by AO on account payment of commission by the assessee, when the assessee had failed in his duty to show that the said commission payments were commensurate with the services rendered and also in ignoring the fact that in some cases the commission was paid even where the customers were govt. agencies which is against the public policy? 2. Whether on the facts and circumstances of the case and in law, the ld CIT(A) was justified in allowing additional evidence on the issue of commission paid without allowing the AO to present his point of view, more so when ample opportunity was provided to the assessee company during assessment proceedings for the relevant AY and the assessee company could not fully substantiate the payment of commission vis-à-vis commercial expediency, actual service rendered and lack of substantive proof like correspondence etc. in this regard? 3. Whether on the facts and circumstances of the case and in law, the ld CIT(A) was justified in ignoring the fact that the invoice submitted by the assessee company during assessment proceedings stated the procurement of....
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.... by the AO had confirmed the receipt of commission payment. The AO has not raised any serious questions regarding the veracity of the information received from these parties. Significantly, in no case payment was denied by any party (in some cases there was no response). The AO also acknowledges that the payments had been made through cheques. There is nothing to indicate that the parties to whom commission payments were made were related parties or that the payments were made other than on commercial consideration. Under the circumstances, in my view, it cannot be said that the appellants had failed to provide sufficient proof and justification for the commission payments. Accordingly, this Ground of appeal is allowed and the addition made is deleted." Being aggrieved by the deletion of the addition made by the Commissioner of Income-tax (Appeals), Revenue is in appeal before us. 21. Before us, the learned Departmental Representative has reiterated the reasons detailed by the Assessing Officer in support of the case of the Revenue, which have already been noted by us in para 19 above and are not being repeated for the sake of brevity. With regard to the order of the Commissi....
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....e company has customers spread all over India and in order to serve such customers at various locations, assessee appoints dealers for its various products, namely, compressors, construction and mining equipment, spares and accessories. It has been explained that the dealers also undertake direct sales and orders are also booked by the dealers and products are invoiced/supplied to the customers. On the latter activities of the dealer, assessee pays commission. It has also been explained that the dealers are mainly responsible for follow up for the quotations and to help the company in procuring the orders and also for effecting recoveries and collection of 'C' Form etc. Even with regard to the Government customers, assessee's personnel at the Regional offices are supported by the network of dealers who are based at a closer location to the customers' site. In such cases, the responsibility of the dealer is to provide necessary logistic and communication support to the assessee's staff. The warranty services of the product, which include regular service visits to ensure smooth operation of the equipment at the customer's site is also arranged through the dealer-engineer and as....
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....t even with regard to the verification exercise carried out by the Assessing Officer, we find nothing adverse so as to infer that the impugned commission payments were ingenuine. The Assessing Officer issued summons to 17 randomly selected parties, out of which 12 replies were received and 4 summons came back unserved. In relation to one party, no response was received in-spite of service of summons. With regard to such solitary party, learned counsel for the assessee referred to page 215 of the Paper book wherein necessary confirmation has been placed, though the party had not responded to the summons issued by the Assessing Officer. In fact the factual scenario of the verification exercise would reveal that overwhelming number of parties randomly chosen by the Assessing Officer has acknowledged the commission payments and in any case, there is no denial of the payment in any of the case. Considering the entirety of the facts and circumstances of the instant year as also the precedent in the assessee's own case wherein the practice of paying commission to dealers/agents, stand established, we find no reasons to interfere with the ultimate conclusion of the Commissioner of In....
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....l sides. We do not find any infirmity in the findings of the Commissioner of Income-tax (Appeals) on this aspect. The instant issue stands squarely covered in favour of the assessee and against the Revenue by the following judgments: (i) CIT v Varinder Agro Chemicals Ltd. 309 ITR 272 P&H); (ii) CIT v Sundaram Clayton Ltd. 321 ITR 69 (Mad) Respectfully following the aforesaid judgments, and the parity of reasoning given therein, we affirm the decision of the Commissioner of Income-tax (Appeals) and find no merit in the Revenue's Ground of appeal. This Ground is accordingly dismissed. 29. The next grievance of the Revenue in Ground No. 4 & 5 is that the Commissioner of Income-tax (Appeals) was not justified in deleting the disallowance of Rs. 21,91,994/- made by the Assessing Officer under section 36(1)(va) of the Act on account of late payment of employee's and employer's contribution to Provident Fund. The Assessing Officer made the disallowance on the ground that there was delay by the assessee in making payments of both employees' as well as employer's contribution to Provident Fund. Accordingly, for the last payment of employee's contribution towards Prov....
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....t due to paucity of time, warranty provision of Consolidated Pneumatics division, which was merged with the assessee company, could not be submitted. With regard to the claim of Provision of warranty, the assessee contended that warranty is an integral part of terms and conditions governing the contract for sale of assessee's product and, therefore, in the price of the product, the assessee included an element of cost of warranty. However, the Assessing Officer rejected the contentions of the assessee and added an aggregate amount of Rs. 86,14,839/- to the total income of the assessee. 33. In appeal, the Commissioner of Income-tax (Appeals) after considering the submissions of the assessee and applying the ratio laid down by the Hon'ble Supreme Court in the case of Rotork Controls India (P) Ltd 314 ITR 62 (SC) to the facts of the assessee's case, held that the assessee was justified in making the necessary provision on account of warranty in accordance with the practice consistently followed by it. The Commissioner of Income-tax (Appeals) accordingly deleted the addition made by the Assessing Officer on this count, against which Revenue is in appeal before us. 34. Before us, ....
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....ssioner of Income-tax (Appeals), in our view, made no mistake in deleting the impugned disallowance. Resultantly, this Ground is dismissed. 37. Ground No. 7 raised by the Revenue relates to the allowance of CST liability pertaining to assessment year 1992-93 in the year under consideration. On verification of the details of rates and taxes, the Assessing Officer found that the assessee had claimed under the head expenditure pertaining to 'earlier years' an amount of Rs. 10,50,000/- on account of CST dues for assessment year 1992-93. Since the expenses pertained to earlier years and the assessee followed mercantile system of accounting, the Assessing Officer rejected the claim of the assessee. He accordingly disallowed the said amount of Rs. 10,50,000/- and added back it to the total income of the assessee. 38. In appeal before the Commissioner of Income-tax (Appeals), the assessee submitted that the assessee claimed the amount of Rs. 10,50,000/- on account of CST dues paid for the financial year 1992-93 as the same was crystallized during the assessment year 2000-01. The Commissioner of Income-tax (Appeals) deleted the addition made by the Assessing Officer by holding ....
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.... stock. As per the Assessing Officer, the assessee failed to bring on record as to who had given approval and under what circumstances the stock was written off in the books of account. He also found that there was no correspondence or letters between the operating personnel of the assessee company with regard to reasons and basis of stock written off. The Assessing Officer was of the view that the fact that it was written off, if the inventory had not moved for 12-24 months established that it was a provision and since it was a provision, it was in the nature of an unascertained liability, which was not allowable. The Assessing Officer, therefore, held that as neither proper reasons nor evidences in support of the assessee's claim of the stock written off were made, the claim of the assessee was liable to be rejected. 42. Before the Commissioner of Income-tax (Appeals), assessee assailed the order of the Assessing Officer by contending that it had in fact submitted a detailed note on stock written off, process of identification and its disposal as scrap. However, the Assessing Officer was wrong in observing that the assessee had not submitted any evidence with regard to w....
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....of slow moving and non moving items. In support of the order of the Commissioner of Income-tax (Appeals), reliance was placed on the decision of the Hon'ble Delhi High Court in the case of CIT v HotlineTeletube & Components Ltd 175 Taxman 286 (Del). 45. We have carefully considered the rival submissions. In this case, the sum and substance of the dispute revolves around a provision made by the assessee in respect of diminution in value of stock of a sum of Rs. 2,17,38,129/-. On being asked to explain before the Assessing Officer, it was submitted that the provision was made on account of the diminution in value of obsolete and old non moving items of stock. The assessee pointed out that it was introducing new products in the market and in terms thereof, the stocks of old products and its spares and components do not get sold and therefore, on the basis of a consistent policy the value of such obsolete and slow moving stock is identified and provision made for its diminution. It was explained by the assessee that at the end of each year, age-analysis of the inventory is carried out and any material which does not move for a period of 12 to 24 months is written off at 50% of the b....