TaxTMI 
TaxTMI 
2020 (5) TMI 259
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....lid material or legal evidence whatsoever on records, but the same is merely based on wrong suspicions and baseless presumptions. The impugned order deserves to be quashed. 5. The ld. Pr. CIT has erred in observing that the interest expenses and interest payment had not been properly verified by the ld. AO at the time of original assessment and purpose of the business needs was not examined and order was therefore erroneous and prejudicial. 6. The ld. Pr. CIT has erred in observing that the deduction u/s 80IB(A) had not been properly examined by the ld. AO as there is payment of rent also. The ld. Pr. CIT has erred in observing that the same is only partly acceptable. 7. The ld. Pr. CIT has further erred in making a general observation that the payment of Municipal Taxes and insurance had not been properly examined. 8. The ld. Pr. CIT has further erred in observing that the deduction of 100% income claimed in relation to Branch office income had not been fully examined. 9. The ld. Pr. CIT has further erred in observing that the Ld. AO has not properly examined the income shown from Handing and Transportation and Weigh Bridge Income. 10. The ld. Pr. CIT has further erred....
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..../s 263 of the Act because the assessment order passed by the learned Assessing officer has been made after detailed scrutiny of the books of account, after making enquiries, verification and examination of net interest, godown rent, municipal tax , insurance charges, depreciation, dunnage material expenses claimed and claim of deduction u/s 80IB (11A) for ware house receipts, handling, transportation and weigh bridge receipts and no claim of remuneration to working partners. As such your views that assessment was completed in undue haste and without making inquiries and investigation, so the order passed by the A.O. is erroneous and prejudicial to the interest of revenue is not correct and not justified. It seems that full facts have not been placed before your good self. Kindly permit us to elaborate the same. An order cannot be termed as erroneous unless it is not in accordance with law. If A.O. acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. In CIT Vs Gabriel India Ltd. (1993) 114 CTR (Bomb) 81 it was held by the High court ....
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....d to Profit and Loss as expenditure. In the course of assessment preceding the learned A.O. has accepted the claim of interest (Net) only after satisfaction that interest received is out of FDR with PNB and DCBL made for the purpose of Bank guarantee given to the NCDEX and other authorities. The interest received from advances to parties for short period for proper utilisation of surplus fund of the firm. TDS has been deducted by the parties on interest paid to the assessee firm. Interest paid on Term loan from DCBL, OD limit from Punjab National Bank and ICICI Bank and Unsecured loans from the parties. TDS has been deducted on interest paid to unsecured loans. ii) The A.O. has appraised the claim of interest paid on term loan, O.D. limit and unsecured loans after satisfying himself that these loans are for the purpose of warehousing activities of the assessee business. iii) While framing the assessment order learned A.O. has reviewed the reason for investment in FDR where in assessee earn lower interest than the interest paid on borrowed loans. The learned A.O. has accepted need of investment only after verification the fact that FDR is required for Bank guarantee to NCDEX....
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....encement of operation of each of the unit is different but the online submission of the audit report in form 10CCB is only in respect of Ist unit at Khara and no mentioning of other units situated at Boranada( Jodhpur) and Nokha is done therein. It is not understandable that how you have made a consolidated claim of 80IB in your computation of Rs. 2,11,31,163/-. 2. Since it is an established fact that no separate audit report in form 10CCB have been uploaded electronically by the firm in respect of two other units which claimed as your other undertakings doing eligible business just like the unit at khara, Bikaner and entitled for deduction on account of claim u/s 80IB, but the conditions for claiming deduction under section 80IB for these two units have not been fulfilled and please state why not any deduction of claim for these units under section 80IB situated at Nokha and Jodhpur, be disallowed? In due course of the assessment proceedings at various stages the assessee's A/R vide his detailed reply quoting various judicial pronouncements. The relevant portions of the submission of the A/R in regard to all the above three points are reproduced hereunder in order to testify h....
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....hed by the A/R as well as on the examination of books of accounts it was found that there is disproportionate claim of expenses under various heads keeping in view the nature and scale of business activities shown by the assessee under the head of Rental and Infrastructural income. Computation of net profit worked out or claiming deduction u/s 80IB reveals that gross receipts in respect of branch Office has been shown under the head of Rental and Infrastructure to the tune of Rs. NIL and Rs. 3,16,61,031/- respectively and in respect of Head office the same is shown at Rs. 16,10,13,701/- (0+16,10,13,701/-) and the gross receipt of Infrastructure come at Rs. 4,70,33,779/- (1,53,72,748+3,16,61,031) and the ratio between Rental income and Infrastructure income comes as 77.44:22.60. However on comparison of following expenses after bifurcation between Rental and Infrastructure receipts the different ratios are being noticed as per the following working:- 1. Fumigation Charges Against Rental Receipts - Rs. 20,07,559/- Against Infrastructure receipt - Rs. 6,48,483/- Ratio between the above two - 76:24 2. Godown Expenses Aga....
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....64.61 and total expenses claimed Rs. 14,37,77,947.95 so net profit remains in Rental account Rs. 1,72,35,753.18 on which assessee has not claimed any deduction u/s 80IB(11A). Your view that assessee has wrongly claimed deduction u/s 80IB (11A) on warehouse income which was taken on rent from third parties and further let out these warehouses. Hence assessee has wrongly claimed deduction u/s 80IB (11A) on those warehouses which are not owned by the assessee. Your view that A.O. has not verified and investigate the Godown rent paid at H.O. Rs. 10,15,93,864/- against which assessee has claimed deduction u/s 80IB (11A) is not correct because assessee has not claimed deduction u/s 80IB(11A) on this rental income. So your holding that order of A.O. is erroneous and prejudicial to the interest of revenue is not correct. (3) EXPLANATION IN RESPECT OF NON VERIFICATION OF MUNICIPAL TAX AND INSURANCE CHARGES Rs. 3,29,282/- AND 40,36,507/- RESPECTIVELY. In show cause notice your honour have stated that from appraisal of assessment record it is observed that assessee has claimed municipal tax and insurance charges Rs. 3,29,282/- and 40,36,507/- respectively. Assessment records neither kep....
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.... A.O. in his assessment order specifically stated that assess was queried regarding working and justification of the amount of the claim made u/s 80IB by the firm. In the assessment order A.O. held that " This year the assessee firm has claimed 25% of deduction u/s 80IB(11A) on its first unit stared commencing business at 18th KM Stone, NH-15, Khara from AY 2008-09, being the sixth year of the claim and in respect of other two undertakings situated at Nokha (year of commencement of business AY 2012-13) and Boranada, Jodhpur (year of commencement of business AY2009-10), the firm has claimed 100% of deduction u/s 80IB . ii) In the assessment order learned A.O. has specifically stated that "You are claiming three independent undertakings as according to you initial assessment year of commencement of operation of each of the unit is different but the online submission of the audit report in form 10CCB is only in respect of Ist unit at Khara and not mentioning of other units situated at Boranada (Jodhpur) and Nokha is done therein. It is not understandable that how you have made a consolidated claim of 80IB in your computation of Rs. 2,11,31,163/-. The assessee in his reply stated t....
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....t the Legislative intent is to encourage construction of godowns and warehouses with a view to providing storage of food grains. If we consider the entire combat of the scheme relating to the tax holiday provided by the Legislature, we find that the deductions are available under various provisions when the assessee has contributed something towards the infrastructure development of the country. The same views were expressed in the case of Shankar K. Bhanage, Mumbai Vs Department of Income Tax on 29 August, 2012 (INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH 'J' MUMBAI) Further in the case of A. P. State Warehousing Corporation V/s. Dy. Commissioner of Income-tax, Hyderabad (Income Tax Appellate Tribunal - Hyderabad- 24/01/2014) it was held that: "The insertion of sub-section (11A) is intended to encourage building of storage capacities, by providing that any undertaking engaged in integrated bulk handling, storage and transportation would be allowed hundred per cent deduction for the first five years and thirty per cent deduction for the next five years. Thus, Sec 80IB (11A) is applicable to income derived from the integrated business of handling, storage and transportati....
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.... INCOME TAX APPELLATE TRIBUNAL, PUNE BENCH "A", PUNE on dated-22/03/2013) the main reason for rejecting the claim of the assessee by ITO is that the assessee is not providing facility of transportation of food grains. In this connection authority said "The wordings transportation of food grains does not indicate that transportation has to be done by the assessee own trucks or transport system. The transportation of food grains may be through hired vehicles as well. The assessee should not be deprived of beneficial provisions of section 80IB (11A) of the Act because certainly he is engaged in the handling, storage and some part of transportation of food grains cannot be ruled out." It was held that taking over all situations under consideration and to encourage the storage of food grains at doorsteps of farmers. The storage of food grains in warehousing at door steps will certainly improve the economic conditions of farmers by ensuring them proper cost at proper time and they will also be saved perpetual exploitation of middle men. Such beneficial provisions should not be sacrificed for technical narrow interpretation of relevant provisions. Even minor transportation facility sh....
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....have been defined and classified on the basis of a data for the purpose of clarity and compilation of data. iv. In case of The DCIT, Circle-4, Ahemdabad V/s. Mahadev Pulses Pvt. Ltd., Kalupur (IN THE INCOME TAX APPELLATE TRIBUNAL AHMADABAD, 24/08/2016) "it was held that the Legislative intent is not to encourage transportation or handling of food grains but the Legislative intent is to encourage construction of godowns and warehouses with a view to providing storage of food grains". Hence in views of all the above orders and business activities carried by assessee firm it is clear that the present case is definitely covered under the eligibility criteria of section 80IB (11A). v. During the course of assessment proceeding the A.O. has accepted the claim of exempted income of handling and transportation only after detailed scrutiny of receipts and expenditure claimed their against. vi. Your honour has failed to consider that H.O. (Khara) has tractor shown in fixed assets schedule of which w.d.v. is Rs. 2,47,459.00 used for transportation of goods stored in warehouse. vii. Yours honour has not considered the fats that Branches have received handling and transportation recei....
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....air conditioner), vehicle, mobile, weighing scale, lab equipment and fire extinguisher having very nominal value required at ware houses. All these fixed assets are owned by the assessee and wholly used for ware housing business so assessee is entitled to claim depreciation on such assets. Balance sheet with schedules, Form No 3CD and Annexure of depreciation claimed are part of assessment record so your view that A.O. has not verified the records before allowing depreciation is neither correct nor tenable in the eyes of law. Hence your holding that order of A.O. is erroneous and prejudicial to the interest of revenue is not correct and not justified. (8) EXPLANATION IN RESPECT OF CLAIM OF DUNNAGE MATERIAL In show cause notice your honour have stated that on appraisal of Trading account assessee has claimed dunnage material of Rs. 23,10,287/-, in support of the claim no evidence is kept on assessment record. Dunnage material is capital expenditure and not consumed or wasted in a year but having some useful life over years. If part of the dunnage material is destroyed same is saleable as scrap. The A.O. has not enquired and verified before allowing the claim as expenditure. ....
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....tion to working partner or partners as the case may be. iii. Your honour has wrongly considered that provision of section 40(b)(v) of the Income Tax Act, 1961 mandatorily while it is discretionary for the assessee to have made such a claim. All partners of the firm were agreeing not to pay remuneration to working partners. iv. In case of TULSA RAM KANHIYALAL & SONS vs. INCOME TAX OFFICER , ITAT, JODHPUR 'SMC' BENCH, ITA No. 226/Jd/2008; Asst. yr. 2005-06 decision given in the favour of the assessee that the finding reached by learned CIT(A) that the assessee has circumvented the tax liability by not claiming the deduction on account of salary and interest to partners so as to take benefit of set off of brought forward losses will not result into tax evasion but was merely on legitimate tax planning done by the appellant. Keeping in view the overall conspectus of the case, no justification in the action of the learned CIT (A) in upholding the decision of learned Assessing authority in enforcing deduction of interest on capital and remuneration to working partners of the firm while computing the assessable income for the year under consideration. v. As per provision of section ....