TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 394
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....ic products for domestic as well as exports filed it return on 08.04.2011 declaring income at Rs. (-) 4,57,78,741/- and book profit u/s. 115JB of the Act at Rs. 50,82,397/-. Notice under section 143(2) dated 22.09.2011 was issued and served upon the assessee flowed by and further notice dated 18.05.2012 and a detail questionnaire under section 142(1) of the Act dated 23.08.2012. 3. During the course of assessment proceeding it was found that the assessee claimed Revenue expenses of Rs. 46,52,561/- which was paid to four parties by and under the bills issued within the period of 28.10.2008 to 01.03.2009. Since those expenses were not pertaining to the year under consideration i.e. for A.Y. 2011-12, the assessee was directed to explain as to why the same should not be disallowed being prior period expenses. As nothing was forthcoming from the assessee, observing those expenses had crystallized during the concerned Financial Year, taking into consideration mercantile system of accounting as followed by assessee, the Ld. AO did not find those expenses allowable during the year under consideration and thus disallowed the same and added to the total income of the assessee. 4. The case ....
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....le in nature. In this aspect we relied upon the judgment passed by the jurisdictional High Court in the matter of Deepak Fertilizers and Petrochemicals Corp. Ltd. vs. DCIT 116 ITD 372(Mum.) where principle of consistency were followed. Thus, we find no justification in disallowing such expenses as aforesaid by the authorities below. Hence, we delete the same. Assessee's appeal is, thus, allowed. ITA No. 2350/Ahd/2015 (Revenue's Appeal):- 8. The Revenue has filed the instant appeal with the following grounds:- "1. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 34,14,124/- made u/s. 40(a)(ia) of the Act, especially when the assessee has failed to bring any evidence of record that the payments made are covered under Circular No. 723 of 1995 and that the non-residents ship owners/charters had filed returns u/s. 172 of the Act. 2. The ld. CIT(A) has erred in law and on facts in holding that the provisions of sec. 40(a)(ia) are not attracted in case where tax has been deducted improperly /inadequately. 3. The ld. CIT(A) has erred in law and on facts in deleting the disallowance made of interest and insurance expenses claimed on vehicle. 4. The ld. ....
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....he Act is applicable. The appellant further relied on Hon'ble Gujarat High Court order dt. 25/06/2013 in the case of CIT-III Vs. Gujarat Narmada Valley Fertilizers company Ltd.(tax appeal no. 315 of 2013) and Hon'ble ITAT Ahmedabad order in the case of M/s. Om Satya Exim Pvt. Ltd. Vs. ITO ward-1(4), Surat (ITA no. 1335/Ahd/2010 order dt. 13/05/2011). From the verification of such bills it has been gathered that bills are raised to appellant with composite amount reflecting freight expenses in foreign currency i.e. US dollar converted into rupees of that date with other charges like terminal handling, documentation etc. in Indian rupees. The appellant's contention that payment in foreign currency by these parties to the non resident shipping company is on account of they are being agent and permitted by RBI guide line found to be justified in view of Board circular no. 723 dt. 19/09/1995 and ratio of various case laws relied on by appellant. The appellant deducted TDS out of the terminal handling charges, documentation charges etc. being paid to these parties treating them as contractual payment while payment, for non resident shipping company in foreign currency by these parties ....
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....on charges etc. It is further the case of the assessee that the assessee has duly deducted tax at source on terminal handling charges, documentation charges etc paid to these agents. However, the payment made to the non-resident shipping company in foreign currency by such agents is reimbursement of actual expenses and thus no tax is required to be deducted at source on the same as it appears from the records which has been duly taken care of by the Learned CITA. 11. It is relevant to mention that as per CBDT circular No. 723 dated 19.09.1995 since agents acts on behalf of the non-resident ship-owner he therefore steps into the shoes of the principal. Accordingly provision of Sec.172 shall apply and provisions of Sec.194C and Sec.195 would not apply. Having regard to the this particular aspect of the matter the Learned CIT(A) has deleted such disallowance made under section 40(a)(ia) of the Act. 12. Alternatively in the event the C&F agents have declared terminal handling charges, documentation charges etc. as income and pay tax thereon disallowance under section 40(a)(ia) is not called for. In this regard the assessee relied upon the judgement passed by the Hon'ble Delhi High Co....
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....t appears from the records and thus we uphold the same. Hence, this ground of appeal preferred by the Revenue is dismissed. Ground No.5 17. This ground is against the disallowance of expenses of Rs. 6,72,442/- for web designing and development has been challenged before us by the Revenue. 18. Heard the parties, perused the relevant materials available on record. 19. As it appears from the records that the Learned AO treated the said website design and development expenses of Rs. 8,96,589/- as capital in nature and allowed the precision on the same @ 25%, and therefore the impugned disallowance of Rs. 6 ,72,442/- were appeal against before the Learned CIT(A). 20. It is a common practice of the present business scenario that a company creates a website so as to display all the information about its products and such website needs to be updated at frequent intervals. Therefore, such expenditure needs to be incurred each and every year. We have further perused the ledgers and invoices which is on record before us commencing from page 186 to 199 of the paper book filed by the assessee before us, wherefrom, it appears that the payment to "BC Web Design P. Ltd." was for part of payme....
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....g revenue in nature, and relying upon the judgement passed by the jurisdictional High Court in the matter of PCIT vs. Zydus Wellness Ltd. reported in(2017) 81 taxmann.com 159(Guj.), we find no ambiguity in the order passed by the Learned CIT(A). Hence, we reject the ground of appeal preferred by the Revenue. Ground No.7: 23. This ground relates to disallowance of expenses paid to Triton Communication for making advertisement film at Rs. 30,20,703/-. 24. Heard the parties and perused the relevant materials available on record. 25. It appears that the AO treated expenses of Rs. 40,27,605/- incurred on "production of a commercial film" and its master copy as capital in nature and allowed depreciation on the same @ 25%. Accordingly, the disallowance of Rs. 30,20,703/- (Rs. 40,27,605*75%) has been made. The assessee incurred these expenses for an ad-film by availing the professional services of a model. Agreement with the model is also before us on r3ecord commencing from Pgs. 216-225 of the Paper Book. Clause 4 of the said agreement specified that the same is valid for a period of 12 months and it was to be exhibited only within the territory of India. The ad-film has also not bee....
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.... have carefully considered the documents relied upon by the appellant which is forming part of the records before us. We find that the assessee has also submitted break-up of exports with comparison, sample copy of bills issued to its sister concern along with ledgers of its sister concern and other parties. However, after careful consideration of the matter, we find that the AO failed to appreciate that difference in sales price could be on account of various factors such as, strength of the product, terms of payment, the concerned country being the final destination, stability of political conditions in those countries, quantity supplied, quality supplied, creditworthiness of parties, market conditions, risk factor, etc. After taking into account various factors as enlisted hereinabove, we find following flaws in the methodology adopted by AO:- Price charged to sister concern for various products are in the range of Rs. 318/- (Sr. No.1) to Rs. 2622.50 (Sr. No.13-14) whereas the average price charged from others for various products are in the range of Rs. 632.42 (Sr. No. 16) to Rs. 2,828.94/-(Sr. No.13); Range of the alleged under invoicing worked out by AO for various products....