TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 98
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....assessee, were general in nature. The same therefore need no adjudication. 3. Ground No.2 raised by the assessee reads as under: "2. On the facts and circumstances of the case, the learned CIT(A) has erred , both on facts and in law in having confirmed the addition of Rs. 3,92,453/- made to the income of the appellant being the difference in the amounts of commission and interest received as per form No. 26AS and as accounted for in the books of accounts of the appellant." 4. Briefly stated, the issue relates to addition made on account of difference in income as reflected in the Annual statement of tax deducted at source of the assessee in Form No.26AS and that reflected in the books of the assessee, amounting to Rs. 3,92,453/-. Ld.Counsel for the assessee contended that despite pointing out the specific reason for the difference, the Ld.CIT(A) had upheld the addition without dealing with the specific factual submissions made before him. Ld.Counsel for the assessee contended that it was pointed out to the Ld.CIT(A) and even the Assessing Officer (A.0),that the assessee had earned commission income on sale of garments of a party made on consignment basis. That the assessee w....
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....books was shown in these two accounts was that the appellant was selling the goods of M/s Priority Marketing Put. Ltd. the on consignment basis. As per the arrangement with this company, the appellant was to receive commission on sales as also the vat paid on their behalf. A consolidated bill for the commission as well as vat charges was issued by the appellant to this supplier. However, instead of deducing TDS on commission only the supplier have deducted TDS on vat reimbursed in some cases because of oversight as a single bill for the commission and vat recoverable was raised by the appellant." 5. The Ld.Counsel for the assessee contended that the CIT(A) did not even consider the contention of the assessee and wrongly held that the assessee had not been able to explain the reason in the difference. Our attention was drawn to the findings of the Ld.CIT(A) at para 4.2 of the order as under: "4.2 I have examined the issue in detail. The Assessing Officer has rightly applied the section. The income is charged to tax in the year the right to that income has accrued or arisen as per section 5 of the Act. The Assessing Officer has taxed the amount in this year as mercantile system ....
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....en for acquiring of assets not put to use in the year under reference." 9. Brief facts relating to the issue are that the AO noted that the assessee had opened eight new stores during the year and done renovation/alteration in them and also furnished them. He further noted that the term loan has been taken from bank for the same on which interest had been paid and claimed as revenue expenditure. The AO noted that interest expenditure pertaining to loans used for acquiring new assets, had to be capitalized till the asset was put to use, as per the provisions of section 36(1)(iii) of the Act. Accordingly, the AO disallowed the proportionate interest paid on loans used for acquiring assets/shops not put to use during the year, which was calculated at Rs. 4,01,065/-. 10. The Ld.CIT(A) upheld the disallowance made by the AO. 11. Before us the Ld.Counsel for the assessee pointed out that identical disallowance had been made in the case of the sister concern of the assessee, M/s Kapsons Agencies Private Limited in A.Y 2010-11,2011-12 & 2013-14 and the matter had travelled upto the ITAT. It was pointed out that the said assessee had challenged the disallowance in ground No.2&3 of its....
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....ence as the appellant was following mercantile system of accounting whereas the liability to pay the same crystallized in the year under reference itself." 16. Brief facts relevant to the issue are that the AO on perusal of the Profit & Loss Account of the assessee and details attached thereto found that the assessee had claimed the following expenditures pertaining to preceding year: a) rent paid to M/s Alpha G. Corp. Development Pvt. Ltd. being for the month of March, 2010 amounting to Rs. 1,59,572/- and b) CAM charges paid to M/s Para Re-facilities for the month of March, 2010 amounting to Rs. 1,24,782/-. 17. The AO accordingly disallowed the said expenditure holding them to be prior period expenses. The same was upheld by the Ld.CIT(A) stating that the assessee was following mercantile system of accounting and therefore the prior period expenses could not be allowed. 18. Before us the Ld.Counsel for the assessee pointed out that identical disallowance had been made in the case of the sister concern of the assessee, M/s Kapsons Agencies Private Limited in A.Y 2011-12 and the matter had travelled upto the ITAT. It was pointed out that the said assessee had challenged ....
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....ee. 24. The Ld.CIT(A) upheld the addition reiterating the findings of the AO that no evidence regarding the business purpose of foreign trip were filed by the assessee. 25. Before us the Ld.Counsel for the assessee pointed out that identical disallowance had been made in the case of the sister concern of the assessee, M/s Kapsons Agencies Private Limited in A.Y 2011-12 and the matter had travelled upto the ITAT. It was pointed out that the said assessee had contested the disallowance in ground no.5 raised in the appeal filed in ITA No. 1011 /Chd/2017, which had been heard on 18.07.2019. It was contended that in the said case the assessee had pleaded that the though the assessee was not in possession of any direct evidence to prove the business purpose of the trip but at the same time considering the nature of the business of the assessee dealing in selling branded cloths, the Directors are required to make visit to foreign countries for reviewing the foreign market trends and for making purchases and visiting prospective suppliers of cloths and therefore the disallowance of the entire amount of foreign travel was totally unjustified. 26. Ld.Counsel contended that its argument....
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.... since it exceeded the amount on which TDS was deductible and vis-à-vis the payment made to Hotel Mountview, he stated that it was in the nature of work contract and, therefore, rejected the assessee's contention that it was not so. 32. Before us the Ld.Counsel for the assessee contended that he had made specific submissions before the Ld.CIT(A), who had passed the order without specifically dealing with the contention of the assessee thus passing a non speaking order on the issue. The Ld.Counsel for the assessee drew our attention to the submissions made before the CIT(A) reproduced at para 8.1 of the order as under: "Payment to Roshan Studios and Wire & Wireless amounting of Rs. 32,450/- and Rs. 38,913/- respectively have been made for photography/ providing of sound system at the time of opening of two stores of the appellant. There was no single contract with them and the amount paid was below the limit of Rs. 75,000/- on which TDS is required to be deducted as provided u/s 194C of the Act. Similarly, payment of Rs. 3,94,621 / - to Mount View has been made for booking of hall charges for organizing fashion show. This payment does not fall under the category of an....
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....asis for stating that TDS was deductible on total payment made to Rohan studios and every payment made was not to be considered separately as pleaded by the assessee. The order passed by the Ld.CIT(A), is, we find, not a reasoned and speaking order on the issue. Since the facts pleaded by the assessee need verification, we consider it fit to restore the matter back to the AO to verify the contentions of the assessee and thereafter adjudicate the issue in accordance with law. The ground of appeal No.6 is allowed for statistical purposes. 36. Ground No.7 raised by the assessee reads as under: "7. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs. 1,28,000/- made by the Assessing officer by invoking the provisions of section 40A(3) of the Act." 37. Brief facts relating to the issue are that the AO noted that the assessee had made payment for food and hospitality during cricket match on 30.3.2011 of Rs. 1,28,000/- in cash. He held that the same was in violation of section 40A(3) of the Act and accordingly, disallowed the same. The Ld.CIT(A) upheld the disallowance so made by the AO. 38. Before u....
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....A) upheld the disallowance made by the AO. 44. Before us the Ld.Counsel for the assessee contended that the payment had been made for acquiring the licence pertaining to music permission for three years and having incurred in the impugned year was allowable in the impugned year only. The Ld.Counsel for the assessee pointed out that this was not a capital expenditure and there were no provisions under the Act for deferment of revenue expenditure and the same had to be allowed in the year in which it was incurred. 45. The Ld. DR, on the other hand, relied upon the order of the authorities below. 46. We have heard the rival contentions. It is not disputed that the expenditure incurred on acquiring music permission for a period of three years, was in the nature of revenue expenditure of the assessee. It is not the claim of the Revenue that the impugned expenditure was a capital expenditure. On the contrary, we find that the Revenue has accepted that it was in the nature of revenue expenditure but on finding that the permission pertained to three years, the expenditure was spread over three years and the claim allowed accordingly. The Ld. DR has been unable to controvert the conte....
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....t to use in the year under reference." 53. The above ground relates to disallowance of an amount of 7,23,299/- u/s 36(1)(iii) of the Act being the amount of interest paid on bank loan taken for acquiring of asset not put to use in the year under reference. 54. It was common ground that the issue raised in the present ground was identical to that raised in ground No. 3 of assessee's appeal for A.Y 2011-12, in ITA No.1014/Chd/2017 . In view of the same, with the issue admittedly being identical to that raised in ground No.3 in ITA No.1014/Chd/2017, our decision rendered therein will squarely apply to the said ground also, following which we restore the issue back to the AO to decide the same afresh in accordance with our directions given at para 14 of our order above. The ground of appeal No.3 is allowed for statistical purposes. 55. Ground No.4 raised by the assessee reads as under: "4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in having confirmed the allowance of depreciation on electrical installations and fittings at 10% instead of 15% as claimed by the appellant thereby confirming an addition of Rs. 11,64,638....
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....nditure." 63. The issue raised in the above ground relates to disallowance of expenses on account of non deduction of taxes at source by applying the provisions of section 40(a)(ia) of the Act. The AO had made disallowance on account of the same of the following expenses: 1) Legal & Professional Fees = Rs. 75,000/- 2) AMC = Rs. 67,500/- Total = Rs.1,42,500/- 64. Before us at the outset itself the Ld.Counsel for the assessee pleaded that the facts of the case are that the assessee had deducted tax at source on both the expenses and deposited the same also in the Government Treasury. The Ld.Counsel for the assessee stated that the challans evidencing the deduction of tax at source on these payments and the deposit thereof in the Government Treasury was available with the assessee and drew our attention to the same filed in the Paper Book placed before us at page 5. Our attention was also drawn to the acknowledgement of statement of TDS, evidencing tax deducted on the impugned payment and deposited in the Government Treasury. It was contended that these documents were very relevant for deciding the issue and the Ld.Counsel for the assessee pleaded that t....
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.... the AO to decide the same afresh in accordance with our directions given at para 7 of our order above. The ground of appeal No.2 is allowed for statistical purposes. 72. Ground No.3 raised by the assessee reads as under: "3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the disallowance of an amount of Rs. 6,95,680/- under section 36(1)(iii) being the amount of interest paid on bank loan taken for acquiring of assets not put to use in the year under reference." 73. The above ground relates to disallowance of an amount of 6,95,680/- u/s 36(1)(iii) of the Act being the amount of interest paid on bank loan taken for acquiring of asset not put to use in the year under reference. 74. It was common ground that the issue raised in the present ground was identical to that raised in ground No. 3 of assessee's appeal for A.Y 2011-12, in ITA No.1014/Chd/2017 . In view of the same, with the issue admittedly being identical to that raised in ground No.3 in ITA No.1014/Chd/2017, our decision rendered therein will squarely apply to the said ground also, following which we restore the issue back to the AO to decide t....
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....e Act in as much as it is only the interest paid on capital borrowed for acquisition of assets not put to use in the year under reference which is required to be disallowed under the proviso and otherwise. As already submitted no capital was borrowed for the acquisition of these assets which were acquired by using its own funds which were available with the appellant by way of free reserves with it. Neither any term loan was raised from the bank nor any unsecured loan was raised by the appellant in the year under reference as will be evident from the copy of the balance sheet attached herewith. The accretion in the unsecured loans is only on account of interest payable to them on their loans. Copies of their accounts are also attached herewith for your ready reference and kind perusal." And at para 6.1 as under: "6.1 In appeal, the Ld. Counsel for the appellant made the following reply:- "This ground of appeal relates to the disallowance of a sum of Rs. 5,26,052/- out of the interest paid by the assessee on loans raised by the appellant by taking resort to the proviso to section 36(l)(iii) being the amount of interest required to the capitalized on the capital work in progr....
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.... 15% as claimed by the assessee as against 10% allowed by the revenue authorities. 83. It was common ground that the issue raised in the present ground was identical to that raised in ground No. 4 of assessee's appeal for A.Y 2012-13, in ITA No.1015/Chd/2017. In view of the same, with the issue admittedly being identical to that raised in ground No.4 in ITA No.1014/Chd/2017, our decision rendered therein will squarely apply to the said ground also, following which we dismiss the said ground in accordance with our directions given at para 57 of our order above. The ground of appeal No. 5 raised by the assessee is dismissed with the above directions. 84. Ground No.6 raised by the assessee reads as under: "6. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in having confirmed disallowance of an amount of Rs. 2,24,097/- being the amount of expenditure incurred on foreign travel of the Directors by treating the same as non business expenditure." 85. The above ground relates to claim of foreign travel expenses incurred on the directors of the assessee company amounting to Rs. 2,24,097/- which was entirely disallowed by the AO treating the same ....