TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 1428
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.... be disallowed. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer proceeded to disallow the amount of Rs. 3,84,19,506, being expenditure incurred for earning the exempt income. The assessee challenged the disallowance before the learned Commissioner (Appeals). 4. The learned Commissioner (Appeals) following the Special Bench decision of the Tribunal, Mumbai Bench, in ITO v/s Daga Capital Management P. Ltd. [2008] 119 TTJ (Mum.) 289 (SB), directed the Assessing Officer to work out the disallowance under section 14A by applying rule 8D. 5. The learned Authorised Representative submitted, rule 8D brought into the statute by Finance Act, 2007, w.e.f. 1st April 2008, is applicable from assessment year 2008-09 and not to prior to assessment years. He submitted, the Tribunal, while deciding assessee's case for the assessment year 2004-05 on identical issue has restored the matter back to the file of the Assessing Officer for working out the disallowance under section 14A as per the law prevalent in the relevant assessment year. Therefore, he submitted, similar view may be taken in the impugned assessment year also. 6. Learned Departmental Rep....
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....istical purposes. 9. Ground no.(iii) is in relation to disallowance of non-compete fee paid to ex-directors. 10. The Assessing Officer, in the course of assessment proceedings, noticing that the assessee had paid non-compete fee of Rs. 4,00,327, to its ex-directors and also noticing that similar payment was disallowed in the earlier assessment years, called upon the assessee to explain why the expenditure claimed should not be disallowed. Though, the assessee justified its claim by stating that such expenditure is revenue in nature, however, the Assessing Officer rejecting such explanation of the assessee held that since the assessee by paying non-compete fee has acquired an asset of enduring nature, the expenditure is capital in nature, hence, not allowable. 11. The learned Commissioner (Appeals) also confirmed the disallowance. 12. The learned Authorised Representative fairly submitted, the issue has been decided by the Tribunal against the assessee in its own case for the assessment year 2004-05. 13. The learned Departmental Representative also agreed that the issue is decided against the assessee by the Tribunal in preceding assessment years. 14. We have considered ....
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....of assessee‟s appeal stands dismissed." Following the decision of the Coordinate Bench of the Tribunal in the assessee‟s own case for assessment years 2002-03 (supra) and 2003-04 (supra), we uphold the orders of the authorities below and against the assessee. Consequently, ground III of assessee‟s appeal is disallowed." 15. Therefore, respectfully following the consistent view of the Tribunal in assessee's own case, we uphold the disallowance made by the Assessing Officer. Ground no.(iii) is dismissed. 16. In ground no.(iv), assessee has challenged the disallowance of deduction claimed on account of payment made towards employee's contribution to PF/ESIC. 17. The Assessing Officer, during the assessment proceedings, on verifying the details submitted by the assessee found that the contribution made by the employees towards PF/ESIC were deposited by the assessee after the due date as prescribed under the respective statute. Therefore, he proposed to disallow the deduction claimed of Rs. 1,68,789. Though, the assessee objected to the proposed disallowance by stating that the payments made were within the grace period provided under the respective statute, h....
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....is different. The Hon'ble Jurisdictional High Court in CIT v/s Hindustan Organic Chemicals Ltd., Income Tax Appeal no.399 of 2012, judgment dated 11th July 2014, taking note of the aforesaid amendment made to section 43B, has held that if the employees contribution to PF is paid within the due date of filing of return of income under section 139(1), no disallowance can be made. The observation of the Hon'ble High Court in this regard is extracted herein below:- "5. We find no merit in the aforestated contention. Section 43B of the Income Tax Act 1961 was inserted in the Act with effect from 1st April 1984 by which the mercantile system of accounting with regard to tax, duty and contribution to welfare funds stood discontinued and under section 43B of the Act, it became mandatory for the Assessees to account for the aforestated items not on a mercantile basis but on a cash basis. This situation continued between 1st April 1984 and 1st April 1988 when Parliament again amended section 43B and inserted the first proviso thereto which inter alia laid down that in the context of any sum payable by the Assessee by way of tax, duty, cess or fee, if paid by the Assessee even afte....
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.... the amendments introduced by the Finance Act, 2003, put on par the benefit of deductions of tax, duty, cess and fee on the one hand with contributions to various Employee‟s Welfare Funds on the other. 8. The section referred to above viz. section 43B and the amendments thereto came up for consideration before the Hon'ble Supreme Court in the case of Commissioner of Income Tax v/s Alom Extrusions Ltd., reported in (2009) 319 ITR 306 (SC) when the Supreme Court inter alia held that the amendments to the said section brought about by the Finance Act, 2003 with effect from 1st April 2004 were retrospective in nature and would operate from 1st April 1988. The ITAT, relying upon the aforesaid judgment of the Supreme Court, has dismissed the Revenue's Appeal and confirmed the order passed by the CIT (Appeals). In this view of the matter and in view of the fact that the Supreme Court has expressly held that the amendments to section 43B that were brought about by the Finance Act, 2003 are retrospective in nature, we find that the ITAT was fully justified in deleting the addition of Rs. 1,82,77,138/- on account of delayed payment of Provident Fund of employees' contrib....
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....sidiary companies amounting Rs. 25,67,46,923, as compared to loans given as on 31st March 2002 amounting to Rs. 83,42,086. He further observed, the assessee has not charged any interest on such loans. He, therefore, called upon the assessee to explain why proportionate interest chargeable to such interest free advance should not be disallowed / added back. Though, the assessee objected to the proposed action of the Assessing Officer, however, the Assessing Officer rejecting the submissions of the assessee held that since 45.17% of the loans given to subsidiary is out of borrowed funds, interest attributable to such fund has to be charged @ 7.41% which worked out to Rs. 85,93,569. 25. The learned Commissioner (Appeals) also confirmed the disallowance by observing that the assessee has failed to establish the commercial expediency of advancing interest free loan to subsidiary. He also observed, in the absence of proper verification, it cannot be accepted that advance to the subsidiary companies was out of self-generated income and not from borrowed funds. 26. The learned Authorised Representative submitted before us that similar interest free advances were made to the subsidiary ....
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....th it to make interest free advance of Rs. 25,67,46,923. In fact, the learned Commissioner (Appeals) has also observed, advances have been made out of common funds available with the assessee which includes both self-generated funds and borrowed funds. As held by the Hon'ble Jurisdictional High Court in CIT v/s Reliance Utilities and Power Ltd. [2009] 313 ITR 340 (Bom), when mixed funds are available with the assessee, the presumption would be, the interest free advances have been made out of the interest free funds available with the assessee. Therefore, applying the ratio of the Hon'ble Jurisdictional High Court (supra), no notional disallowance / adding back of interest attributable to interest free advances can be made. The addition made is, therefore, deleted. Ground no.(v) is allowed. 29. In ground no.(vi), assessee has challenged disallowance of expenditure for software by treating it as capital expenditure. 30. The Assessing Officer, during the assessment proceeding, while verifying the details found that the assessee has claimed an expenditure of Rs. 10,90,678, on account of up-gradation of systems and replacement of monitors, printers, etc. The Assessing Offic....
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....sion of the Departmental Authorities on the issue of change of accounting method. 36. Brief facts are, during the assessment proceedings, the Assessing Officer on verifying the accounts noticed that the assessee has changed the method of valuation of stores and spares from first in first out (FIFO) to weighted average method. As a result, the profit for the year is increased by Rs. 1,18,505, whereas, corresponding adjustment was not carried out in the computation of income. Accordingly, he added back an amount of Rs. 1,18,505. 37. The learned Commissioner (Appeals) also upheld the decision of the Assessing Officer. 38. We have considered the submissions of the parties and perused the material available on record. As could be seen from the observations of the learned Commissioner (Appeals) in Para-13.2 of his order, he has not given any reasoning why assessee's claim is not acceptable. He has disposed off the ground raised by the assessee without passing a speaking order. Therefore, we restore this issue back to the file of the Assessing Officer for considering afresh after providing reasonable opportunity of being heard to the assessee. The Assessing Officer while deciding th....
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.... a Coordinate Bench of this Tribunal in the assessee‟s own case for A.Y. 2001-02 in its order in ITA No. 745/Mum/2005 dated 25.09.2006; wherein at paras 36 and 37 thereof it was held as under: - "36. With regard to ground no. 3, the learned D.R. contended that after introduction of section 145A, the element of un-utilized modvat has to be added to the value of the closing stock and therefore, it is argued that the learned CIT(A) was not justified in deleting the addition. The learned counsel for assessee contended that the valuation of closing stock is already in consonance with section 145A. He invited our attention to page 15 of the PB, which contains the working of the opening stock and closing stock. It is pointed out that section 145A was introduced with effect from assessment year 99-00 and the assessment year under appeal is 2001-02. In the earlier years, section 145A was already complied with and the element of excise duty/modvat were added to the closing stock and the same has been brought forward as opening stock in the present assessment year. Some adjustments have also been made in the value of the closing stock. It is argued that disputed sum of Rs. 8,38,262/-....
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....f cannot be allowed as the assessee could not prove that the debt has become bad. When the assessee preferred appeal before the learned Commissioner (Appeals) challenging the disallowance, the learned Commissioner (Appeals) deleted the addition after satisfying himself that the debts have actually been written-off in the books of account. 50. We have considered the submissions of the parties and perused the material available on record. As could be seen from Para-7 of the learned Commissioner (Appeals)'s order, he has given a categorical finding that the bad debt have been actually written-off in the books of account of the assessee. That being the case, in terms of the principles laid down by the Hon'ble Supreme Court in TRF Ltd. v/s CIT, 323 ITR 397 (SC), deduction claimed is allowable. As per the decision of the Hon'ble Supreme Court it is not necessary for the assessee to establish that the debt have actually become irrecoverable. We have also noted that the learned Commissioner (Appeals) in assessee's own case for subsequent year also has allowed the claim of bad debt. In view of the aforesaid, we do not find any infirmity in the order of the learned Commissioner (Ap....
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.... the Tribunal has decided the issue against the assessee by holding as under:- "17.3 We have heard the rival contentions and perused and carefully considered the material on record. We find, as submitted by the learned D.R., that this issue was considered and adjudicated in favour of the Revenue, by Coordinate Bench of this Tribunal in the assessee‟s own case for A.Y. 2003-04 in ITA No. 6580/Mum/2007 dated 10.08.2016 (supra), wherein at para 26 thereof it has been held as under:- "Ground No.4 relates to re-computation of book profits without making adjustment in respective provisions. The AO had adjusted the provisions on the ground that these were mere provisions and that the assessee had been writing back these provisions in various years which implies that these were unascertainable provisions and therefore required to be adjusted for computation of book profits. The assessee argued before the AO relying upon the decision of the Special Bench of ITAT Calcutta in the case of Usha Martin Industries, 105 TTJ 543 and the decision in the case of SCL Connect System reported in 292 ITR 294 that section 115JB of the Act envisages adjustment for provisions for liability where....