TaxTMI 
TaxTMI 
2020 (3) TMI 620
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....The ld. CIT(A) has erred in law and on facts in holding that the Data Processing Equipment is part of computers and eligible for depreciation at 60%. 2. The ld. CIT(A) has erred in law and on facts in directing the AO to verify the facts and if the payee company has offered the interest of Rs. 2,61,55,578/- as income in their return of income, disallowance u/s.40(a)(ia) shall not survive. The ld.CIT(A) further erred in observing that the amendment made in Section 40(a)(ia) with effect from 01-04-2013 is applicable for A.Y. 2011-12 also. On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above since the assessee has failed to disclose his true income/book profit. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary. 3. The first raised by the Revenue in Ground No. 1 is that the learned CIT(A) erred in allowing the depreciation @ 60% on data processing ....
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....e and going through the assessment order observed that the items of the assets /equipments classified under the head data processing equipments are mainly representing the computers and other items which are part and parcel of the computers as these other items cannot be used without the use of the computers. 4.3. The learned CIT(A) also observed that the assessee was allowed depreciation at the rate of 60% on the items/block of assets classified under the head data processing equipments treating them as computers in the assessment framed under section 143(3) of the Act for the assessment year 2010-11. In view of the above, the ld. CIT-A deleted the disallowance made by the AO. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 5. The learned DR before us submitted that there is no clarity to the fact whether the items classified under the head data processing equipments represent computers and its connected devices. As such this fact was not verified in the assessment framed under section 143(3) of the Act for the assessment year 2010-11. Therefore, no reference can be made to the assessment order of the immediate preceding assessment w....
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....the learned CIT(A). 7.3. At the time of hearing, a query was raised from the Bench to the learned AR for the assessee whether the items of the addition under data processing equipments were verified by the authorities below during the assessment proceedings. The learned AR could not make any satisfactory reply. Accordingly, we in the interest of justice and fair play, expressed to set aside the finding of the learned CIT (A) to the AO to verify whether the items of addition are part and parcel of the computers. But at the time of dictation, we find that the learned CIT (A) has given very clear finding about the addition of the items under the head data processing equipments are computers/connected devices which was not controverted by the learned DR appearing for the Revenue. Therefore, we find that there is no justification to set aside the issue to the file of the AO for fresh adjudication of the items of addition for Rs. 1,18,73,028/- under data processing equipments. 7.4. We also note that the appeal was filed by the Revenue and the onus was on it to high lights the infirmities in the order of the ld. CIT-A but the ld. DR appearing on behalf of the Revenue failed to do so....
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....e at the end of financial year 31-3-2011 with respect to housekeeping expenses but the person to whom such amounts was to be paid were not known at that point of time. Hence, it (the assessee) was not liable to deduct the tax on such provisions. 8.4. The assessee further submitted that the provisions made at end of financial year were subsequently reversed in the immediate next year and offered to tax. Therefore, there is no tax effect for the provisions made in the year under consideration. 8.5. The assessee without prejudice to the above also claimed that in case the addition is confirmed for the year under consideration then it should be allowed the benefit of deduction for the amount of housekeeping expenses offered to tax in the immediate subsequent year. Interest Expenses of Rs. 2,61,55,578/- to M/s Arvind Life Style Brand Limited (in short ALBL). 8.6. The payee of such interest amount from the assessee has already recorded such amount in the books of accounts and offered the same to tax. Therefore, such expenses cannot be disallowed as per the amended provisions of section 40(a)(ia) of the Act. Interest Expenses of Rs. 2,32,890/- to Kotak Mahindra prime Lim....
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....ffered the same to tax was not applicable for the year under consideration. As such, the same was brought by the Finance Act 2012 with effect from 01-04-2013. 9. On the other hand, the assessee is in CO bearing No.17/Ahd/2016 against the confirmation of addition on account of Housekeeping and interest paid to Kotak Mahindra Prime Ltd. The relevant grounds raised in the CO are reproduced as under: 2. In law and in the facts and circumstances of the respondent's case, the learned CIT(A) has grossly erred in upholding the disallowance of deduction for Rs. 2,32,890 made by the learned Assessing Officer u/s.40(1)(ia). He ought to have appreciated, inter alia, that since the impugned amount had been paid by the respondent to Arvind Lifestyle Brands Ltd. in reimbursement of interest paid by it to Kotak Mahindra Primes Ltd. in respect of assets used by the respondent, it did not represent income in the hands of the payee viz., Arvind Lifestyle Brands Ltd. and, therefore, there could be no question for invoking Section 40(a)(ia) for making the impugned disallowance. 3. In law and in the facts and circumstances of the respondent's case, the learned CIT(A) has grossly err....
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....urpose of the verification. Therefore, we do not find any infirmity in the order of the learned CIT (A) so far as the direction provided to the AO. 13.2. Similarly, we also note that, the amendment made under the provisions of section 40(a)(ia) vide Finance Act, 2012 has been applicable retrospectively. In this regard we find support and guidance from the judgment of Hon'ble Delhi High Court in case of Ansal Land Mark Township (P) Limited (supra) wherein it was held as under: "9. It is seen that the second proviso to Section 40(a)(ia) was inserted by the Finance Act, 2012 with effect from 1st April 2013. The effect of the said proviso is to introduce a legal fiction where an Assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such Assessee is deemed not to be an assessee in default in terms of the first proviso to subsection (1) of Section 201 of the Act, then, in such event, "it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso". 11. The first proviso to Section 201(1) of the Act has been inserted to ....
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....the facts and circumstances of the present case. The appeal is dismissed." 14. In view of the above, we hold that such amendment under the provisions of section 40(a)(ia) of the Act though brought from the assessment year 2013-14 but it has been held applicable from retrospectively. Accordingly, we do not find any reason to interfere in the order of learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. 14.1. Regarding the issue raised by the assessee for the provisions created for housekeeping expenses, we find that the assessee itself before the learned CIT (A) has admitted the fact that the parties for creating the house keeping provisions were not identifiable. Accordingly we hold that these are contingent liabilities which are not based/computed/calculated in scientific manner. Thus, we do not find any infirmity in the order of the learned CIT (A). 14.2. Regarding the interest expenses of Rs. 2,32,890/- paid to ALBL with respect to car loan from Kotak Mahindra Prime Limited, we note that the learned AR for the assessee has not produced any documentary evidence suggesting that the impugned amount paid to ALBL represents the reimbursement of the expens....
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....pugned disallowance. 3. In law and in the facts and circumstances of the respondent's case, the learned CIT(A) has grossly erred in upholding the disallowance of Rs. 7,23,145 on account of provision for housekeeping expenses made by the learned Assessing Officer by invoking Section 40(a)(ia) (albeit, subject to acceptance of the respondent's alternative Ground for not subjecting the reversal of the provision in the immediately succeeding year to tax as income). The learned CIT(A) ought to have appreciated, inter alia, that the respondent was mandated to make the impugned provision in its books of account on the last day of the accounting year pursuant to the principle of matching costs with revenue and that in accordance with the generally accepted practice for such provisions, the same had been reversed on the first day of the following year and that therefore, there could be no question for invoking Section 40(a)(ia) in respect thereof. 4. In law and in the facts and circumstances of the respondent's case, the learned CIT(A) has grossly erred in upholding the disallowance of Rs. 3,61,368 made by the learned Assessing Officer by wrongly applying the p....
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....levy deserved to be cancelled. 8. In law and in the facts and circumstances of the respondent's case, the learned CIT(A) has grossly erred in dismissing Ground No. 16 of the respondent's appeal before him challenging the initiation of penalty proceedings u/s. 271(1)(c), on the ground that no penalty had been levied yet. He ought to have appreciated, inter alia, that in the peculiar facts and circumstances of the respondent's case, there being absolutely no warrant/justification for initiating the penalty proceedings, they deserved to be dropped, thereby saving both the appellant and the Department from long drawn unnecessary litigation. 9. The respondent craves leave to add, amend and/or alter the ground or grounds of Cross-objections either before or at the time of hearing. 16. The issue raised by the assessee in Ground No. 1 is general in nature. Therefore no separate adjudication is required for the same. Accordingly we dismiss the same. 17. The issue raised by the assessee in Ground Nos. 2 & 3 is against the disallowance of housekeeping expenses and interest expenses for Rs. 7,23,145/- and 2,32,890/- respectively by the AO which was subseq....
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....wed as deduction under section 37/28 of the Act. 21. On the other hand, the learned DR vehemently supported the order of the authorities below. 22. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessee cannot be allowed deduction for writing off such security deposit as bad debts for the reason that the conditions as specified under the provision section 36(2) have not been satisfied. 22.1. However, the fact has not been doubted by any of the authorities below that such expenses were not incurred by the assessee in the course of the business. As such, the assessee has taken two showrooms in 2 different cities for the purpose of its business. Accordingly, the security deposits were made in the course of its business activities. Therefore, any loss incurred for any activity carried out in the course of the business is eligible for deduction either under section 37 or section 28 of the Act. In this regard we find support and guidance from the judgment of Hon'ble Gujarat High Court in case of PCIT vs. Dishman Pharmaceuticals & Chemicals Ltd reported in 417 ITR 373 the rele....
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.... the disallowances of car depreciation amounting to Rs. 5,58,461/-. 24.1. During the course of assessment proceedings, the AO observed that the assessee is claiming depreciation of Rs. 5,58,461/- on a car which is owned by the director of the assessee company. Further the assessee also failed to submit any documentary evidences except copy of purchase of the car which was issued in the name of director and delivered at the residential address of the director. Thus the AO, in absence of any documentary evidence held that the car is not owned by the assessee and not used for the purpose of the business. Accordingly the AO disallowed the depreciation claimed by the assessee and added the same to the total income. Aggrieved assessee preferred an appeal before the learned CIT (A). 25. The assessee before learned CIT(A) submitted that the AO has made an assumption without any basis that the impugned car is owned by its Director. 25.1. The assessee further claimed that the impugned car has been purchased by it on hire purchase basis and also paying hire purchase installment on the same. But inadvertently the impugned car was registered in the name of Arvind Lifestyle Brand Lim....