AI Drafter 
TaxTMI 
TaxTMI 
2018 (4) TMI 1829
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....r and disposed of by this common order. For the sake of convenience, we shall first consider the facts and grounds raised in assessee's appeal for the assessment year 2010-2011 in ITA No.352/CTK/2016 as under :- That the Order dated 09.06.2016 passed by the Learned Commissioner of Income Tax (Appeals) [in short "CIT(Appeals)"], in so far as sustaining the additions and disallowance made by the Learned Assessing Officer, is based on irrelevant considerations, against natural justice, contrary to facts, arbitrary, erroneous and bad in law. 1. Disallowance under "Peripheral Development Expenses" Rs. 2,53,69,895/- a. That on the facts and in the circumstances of the case, the Order of the learned CIT(Appeals) in partly sustaining the disallowance of Rs. 2,53,69,895/- under 'Peripheral Development Expenses' incurred through Corporate Office of the asseseee is based on irrelevant considerations, contrary to facts, arbitrary, erroneous and bad in law. b. That the aforesaid expenditure of Rs. 2,53,69,895/- is incurred by the assessee wholly and exclusively for the purpose of its business. Sustaining of the disallowance by the learned CIT(Appeals)....
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....(Appeals) having fully deleted similar addition u/s. 14A of the Act, the Order of the learned CIT (Appeals) in ignoring/not following the order and sustaining the disallowance of 4,70,61,000/- is unjustified, arbitrary, erroneous and bad in law. c. That the assessee having already added sum of Z 2,07,503 u/s.14A of the Act in the computation of income (returned income), Rule 8D is not applicable and the addition of 4,72,68,503 u/s.14A of the Act is unjustified, arbitrary, contrary to facts, erroneous and bad in law. d. The assessee's computation of the aforesaid Rs. 2,07,503/- u/s.14A of the Act is based on its books of accounts and is worked out in a reasonable and fair manner and the learned lower authorities have mis-appreciated/misconstrued the same and the disallowance u/s. 14A of the Act is incorrect, arbitrary, erroneous and bad in law. e. That the learned CIT(Appeals) holding that the aforesaid Rs. 2,07,503/- has no basis and purely adhoc' is incorrect, contrary to facts, arbitrary and erroneous and bad, both in the eye of law and on facts. 4. Additions Under Trial Operation expenses - Rs. 45,37,74,074/- a. That on the fa....
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....he case, of the sustaining of the addition/disallowance of Rs. 12,75,994/- in respect of Claims, receivable, advances, shortages etc. written off by the learned CIT(Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. b. That the aforesaid Rs. 12,75,994/- under Claims, receivables, advances, shortages etc. written off being revenue/trading loss, the same ought to be allowed. c. That the learned CIT(Appeals) has mis-appreciated the facts and has erred in holding that the aforesaid is on capital account. d. That the learned CIT(Appeals) stating that no explanation has been offered during the appeal proceedings in respect of the aforesaid addition of Rs. 12,75,994/- is incorrect, contrary to facts, arbitrary and erroneous. 7. Disallowance u/s.40(a)(i) of the Act - Rs. 4,36,594/- That on the facts and in the circumstances of the case, the sustaining of the addition! disallowance of Rs. 4,36,594/- u/s.40(a)(i) of the Act by the learned CIT(Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. That the Assessee having not violated any provisions of section 195 of the Act, there ought not be....
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.... Capital Gains of Rs. 1,89,869/- totaling to Rs. 63,59,29,369/- as "Income from Business" by the learned CIT (Appeals) is arbitrary, erroneous, bad, both in the eye of law and on facts. b. That in the facts and circumstances of the case, the lower authority holding that the transactions of the assessee in mutual funds and shares and securities should be treated as business activities and income earned from that should be treated as income from business is contrary to facts, arbitrary, erroneous and bad in law. bad, both in the eye of law and on facts. c. That the assessee having maintained its accounts and disclosed the investments in the Balance sheet under long term investments and having rightly computed its income under the head Capital Gains, Long term Capital Gains of Rs. 63,57,13,500/- and Short term Capital Gains of Rs. 1,89,869/-, the treatment of the aforesaid as 'Business income' by the learned AO and confirmation of the same by the learned CIT(Appeals) is based on irrelevant considerations, arbitrary, erroneous and bad, both in the eye of law and on facts. d. That in similar facts and circumstances in the past years, the asses....
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.... notice, ld. AR of the assessee appeared from time to time and submitted the details. The AO on perusal of the profit and loss account found that the assessee has debited peripheral development expenses of Rs. 13,83,79,264/- and called for the details. The assessee has filed written submission referred by the AO at page 2 to 12 of the order and after considering the submissions of the assessee the AO was not satisfied whether these funds have been utilized as per the instructions of Government Notification and if so shall be allowable as deduction u/s.35AC of the Act and therefore, expenditure claimed by the assessee does not comply the provisions of Section 37 of the Act and disallowed the claim. 4. On appeal, the CIT(A) having considered the submissions and findings of the assessee has restricted the addition to the extent of Rs. 2,53,69,895/- considering the fact that the expenditure incurred by the assessee was not covered within the notification and held as under :- "3.2 I have considered the matter. The AO disfavours the amounts spent on charity in the guise of peripheral development expenditure. He refers to provisions of section 35AC where deductions on social p....
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.... Supply of 15 Nos Tata Sumo to Commissioner of Police Rs. 66,84,705/- Entry tax, road tax etc for above Tata Sumo Rs. 11,78,197/- Prana Krushna Parija Trust Rs. 6,50,000/- Renovation of Anand Bazar at Puri Rs. 25,00,000/- Financial assistance to Tara Tarini Temple Rs. 5,00,000/- Director sports & youth services Rs. 15,00,000/- The details of such expenses are as under: It is amply clear that the above expenses are not in the nature of business expenditure. They are in the nature of donations, charity and not connected to running of business. Such expenditure is also not for periphery development in the districts of Angul and Koraput and not in accordance with the aforesaid Notifications of Govt. of Odisha. In view of the same, the amount of Rs. 2,53,69,895/-, relating to the corporate office, out of the total amount of Rs. 13,83,79,264/- is correctly disallowed. There is no finding that the balance expenditure under the head peripheral development expenditure categorized as, refinery (Damanjodi) for Rs. 5,10,56,852/-, Smelter(Angul) for Rs. 5,08,90,800/- and CPP(Captive Power Plant) for Rs. 1,10,61,717/-, totaling to Rs. 11,30,09....
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....fication of the Order No. 33167 dated 21.08.2004 issued by the Revenue Department, Government of Odisha, whereby it has been clarified that the definition of peripheral area extends to the taluka or village where the activities of the company are carried on. * The expenditure incurred by the assessee is incurred in the defined periphery and has been incurred for business purposes only. Therefore, the addition made by the AO on this account is required to be deleted." 7. Contra, ld. DR relied on the order of AO. 8. We have heard rival submissions and perused the material on record. We find that the arguments of the ld. AR are supported with the evidence that the expenditure claimed by the assessee has been incurred wholly and exclusively for business purposes but the AO has to verify the claim as to whether the peripheral expenditure in the corporate office is for the particular area of the employees or as a whole. Since we have already decided the issue in earlier assessment years in ITA No.343/CTK/2015 and other connected appeals, order dated 23.04.2018, and the observations of the Tribunal in earlier years are as under :- "10. We have heard rival submissio....
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.... 82,40,53,232/- on account of interest on the disputed Government dues of electricity duty and water charges. The assessee company has challenged the levy of electricity duty and water charges before Hon'ble Orissa High Court. As per the Gazette Notification in this regard, the interest payable on these charges is 1.5% per month on electricity duty, and 2% on compound basis on water charges. The assessee has, therefore, debited the amount of interest in Profit & Loss account and claimed as business expenditure. However, the AO disallowed the claim of the assessee observing that similar claim of the assessee is pending before the higher appellate authorities and matter has not reached at its finality. On appeal, the CIT(A) confirmed the action of AO. 10. On further appeal, ld. AR of the assessee before us submitted that the issue under consideration is squarely covered by the order of this Tribunal in assessee's own case for A.Y. 2006-07 and 2007-08 in ITA Nos. 233, 234/CTK/2011 dated 20.07.2012 and in ITA Nos. 66-68, 459, 511-512/CTK/2003 dated 20.11.2005 in respect of A.Y. 1994-95 to 199899 and 2000-01. Ld. AR further stated that the interest liability is as per Statute and has....
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.... in the bank account as per the direction of the Hon'ble High Court. When interest on such deposit is brought to tax, there is no reason for disallowing interest payable to Government for non-payment of such duty in Government account. 6. The reasoning given by the AO for disallowing interest on non/delayed payment of water charges are that it was a contingent liability. We found that Tribunal in assessee's own case in earlier years had allowed this claim under similar circumstances and held that interest on unpaid electricity duty and water charges is fully allowable u/s.37 of the Act and provisions of Section 44A of the Act for disallowance is not attracted. 7. It is pertinent to mention here that the ITAT Cuttack Bench in the case of NALCO in the combined order dated 30-11-2005 has held that interest on disputed Electricity Duty are allowable u/s.37 of the Act and further the interest on Electricity Duty, even if a statutory liability, the same do not fall under the ambit of Section 43B of the Act and therefore, even if such interest is not paid the same is not to be disallowed under section 43B. 8. Following the reasoning given hereinabove with regard....
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..... * Section 14A(2) of the Act requires the AO to first examine the accounts of the assessee and then record his satisfaction in this regard, which has not at all been done by the AO in the present case. It is a settled law that the AO has to first examine the records of * the assessee, and only after arriving at the dissatisfaction as to the correctness of the claim of assessee in respect of expenditure incurred in relation to exempt income, that he can resort to the provisions of section 14A read with Rule 8D. * Reliance in this regard is placed on the decision of the Supreme Court in the case of Godrej & Boyce Manufacturing Company Ltd. v. DCIT [2017] 394 ITR 449, wherein the Apex Court has held as under: "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 20022003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of ....
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....(a) Delhi High Court in the case of ACB India Ltd. v. ACIT [2015] 374 ITR 108 (b) ITAT Delhi in the case of ACIT v. Vireet Investment (P.) Ltd. [2017] 58 ITR(Trib.) 313 (c) ITAT Mumbai in the case of Amrit Diamond Trade Centre Pvt. Ltd. v. CIT in ITA No. 2642/Mum/2013 dated 15.01.2016 * Therefore, the disallowance to be made, if any, has to be restricted to 0.5% of the Current Investments held by the assessee, which would work out as under: (a) Op. Current Investments Rs. 135.90 Crores (b) Cl. Current Investments Rs. 516.721 Crores (c) Avg. Current Investments Rs. 326.3105 Crores (d) 0.5% of Avg. Current Investments Rs. 1,63,15,525/- Thus, the disallowance, if any, has to be restricted to Rs. 1,63,15,525/-. 16. Contra, ld. DR supported the orders of lower authorities. 17. We have heard rival submissions and perused the material available on record. We find that the AO while computing the disallowance under clause (iii) of Rule8D has computed 0.5% of the average investments held by the assessee company in whole, which includes the investments in equity shares and long-term debt funds as well, income from w....
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.... mandatorily necessitated by Section 14A (2) of the Act read with Rule 8D (1) (a) of the Rules. 36. In para 3.2 of the assessment order, the AO records that, in answer to the query posed by the AO requiring it to produce calculation for disallowances, the Assessee "submitted that they have not incurred any expenditure for earning the dividend income." Thereafter, in para 3.3, the AO records "I have considered the submissions of the Assessee and found not to be acceptable." Thereafter, the AO proceeded to deal with the said provisions of Section 14A and Rule 8D and observed, in para 3.3.1, that making of investment, maintaining or continuing investment and time of exit from investment are well informed and well coordinated management decisions that, in relation to earning of income, are embedded in indirect expenses. It is then stated in para 3.4 that, in view of the above, the provisions of sub-section (2) of Section 14A and Rule 8D of the Rules are in operation and therefore, will strictly be adhered to by the Assessee. In para 3.6 of the assessment order, after discussing Section 14A(1) read with Rule 8D and referring to the decision of the Bombay High Court in Godrej an....
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.... expenses being disallowed, since there was a failure by the AO to comply with the mandatory requirement of Section 14 A (2) of the Act read with Rule 8D (1) (a) of the Rules and record his satisfaction as required thereunder, the question of applying Rule 8D (2) (iii) of the Rules did not arise. The question framed in ITA 549 of 2015 is answered accordingly. We found that in the instant case the AO could not make distinction between the equity shares and debt funds and calculated the disallowance, we are of the opinion this disputed issue has to be re-examined and apply the provisions of Section 14A r.w.rule 8D. Accordingly, we follow the ratio of judicial decision and restore this disputed issue to the file of the AO to re-examine and verify and apply the above provisions. This issue is allowed for statistical purposes. 18. Ground No.4 relates to addition under trial operation expenses. The AO has made the disallowance amounting to Rs. 45,37,74,074/- alleging that the said expenditure incurred by the assessee till commercial production starts, could not be claimed as revenue expenditure and has to be capitalized. On appeal, the CIT(A) has sustained the disallowance made by ....
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....enial of depreciation in respect of plant and machinery and that even if the same was to be used for trial production business of manufacture of 'Clinker', the assessee would be entitled to claim depreciation. The Tribunal also relied upon the decision of the Gujarat High Court in Asstt. CIT v. Ashima Syntex Ltd. [2002] 122 Taxman 230 which held that even trial production would fall within the ambit of "used for the purpose of business" and once used the assessee could not be deprived of the benefit of a claim for depreciation merely on the basis that the period of use was very short. 7. The Tribunal followed the decision of this Court in Industrial Solvents & Chemicals (P.) Ltd.'s case (supra) and held that once the plant commenced operations and a reasonable quantity of product is produced, the business is set up even if product was substandard and not marketable. In the case of Industrial Solvents & Chemicals (P.) Ltd. (supra), the Company was new and depreciation was allowed. Following the aforesaid decision the Tribunal directed the Assessing Officer to verify the period of use and restrict depreciation to 50% if the Assessing Officer found that the machin....
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....ear under consideration, assessee company has booked net prior period adjustment of Rs. 11.71 Crores, details of which are given in Schedule W at PB 60. The prior period expenditure incurred by assessee was Rs. 21.07 Crores, which was adjusted against the prior period income and the net adjustment of Rs. 11,71 Crores was included in the taxable income, as is evident from the Profit and Loss Account enclosed at PB 50. It is pertinent to note that similar disallowance was made by the AO in the case of assessee for A.Y. 2004-05, which was deleted by this Hon'ble Tribunal in ITA Nos. 191, 193/CTK/2008 dated 25.05.2012, relevant findings of the Tribunal being at Case law Page 14 - 15 in Para 10 - 10.1. Complete details with regard to prior period adjustments was submitted before the AO as well as the Ld. CIT(A), which is enclosed at PB 601 - 607. A perusal of the details clearly shows that the expenditure has crystallized during the year under consideration, and thus, the assessee has rightly claimed the said expenditure during the year under consideration. It is a settled law that prior period expenses are to be allowed in the year in which the said ....
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.... prior period income against the prior period expenditure. We further notice that the assessee has offered net income in assessment year 2007-08, i.e., the prior period income was more than the period expenditure." Further reliance in this regard is placed on the judgment of this Hon'ble Tribunal in the case of DCIT v. Airports Authority of India in ITA No. 3841/Del/ 2011 dated 16.03.2012 for A.Y. 2007-08, wherein Hon'ble Tribunal has held as under: "8. We have heard both the parties and perused the material placed before us. We find that with regard to prior period expenses also, the learned CIT(A) has recorded the finding that similar issue was decided by him for AY 2005-06 in favour of the assessee which was accepted by the Department. The facts of the year under consideration are admittedly identical. Moreover, it was pointed out by the learned counsel for the assessee that though the prior period expenses were to the tune of Rs. 9.24 crores but, the assessee has disclosed much more income of the prior period and, in fact, if the assessee's profit & loss account is looked into, there is net credit of the prior period income amounting to Rs. 71.55 crores.....
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.... of administrative expenses and other income and settlement of claims or crystallization of liability disclosed under prior period expenses adjustments as per the accounting disclosure. Ld. AR subsantiated the arguments with the paper book. Whereas the CIT(A) found that the liability has accrued in the earlier years and the assessee cannot claim the same in the current assessment year and also the reasons envisaged were not supported with the evidence for claim during the current financial year. We considering the material aspects and the concept of income and expenditure remit this disputed issue to the file of AO to verify the claims and grant the set off of prior period income against the prior period expenses and passed the order on merits and the assessee shall cooperate in submitting the information and this ground of appeal of the assessee is allowed for statistical purposes. We respectfully follow the judicial precedence and considering the material aspects of facts, remit this disputed issue to the file of AO to examine the claims and grant the set off of prior period income against the prior period expenses and passed the order on merits and the ground of appeal is all....
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....cie, it is not in dispute that the amount of said advances has been given during the course of business and for business purpose only, which has become irrecoverable. Ld. AR drew our attention to the pages 610 to 616 of the paper book and submitted that the assessee has filed all the details before both the authorities below. Since the said amount has been utilized for business purpose and has to be allowed either as a business expenditure u/s 37(1) of the Act, or as a business loss while computing the profits and gains u/s 28 of the Act, considering the submissions of ld. AR of the assessee, we are of the opinion that the issue requires further examination by the AO and restore to the file of AO and the assessee shall be provided adequate opportunity of hearing for submitting the details and we accordingly allow this ground of appeal for statistical purposes. 27. Ground No.7 relates to disallowance u/s.40(a)(i) of the Act and Ground No.10 relates to disallowance of claim of additional depreciation u/s.32(i)(iia) of the Act. Both the grounds have not been pressed by ld. AR of the assessee at the time of hearing. Accordingly, we dismiss ground Nos.7 & 10 as not pressed. 28. Gr....
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....CIT(A) in sustaining the addition made by the AO should be directed to be reversed." 30. Contra, ld. DR relied on the order of lower authorities. 31. We have heard rival submissions and perused the material on record. We found that the similar issue has been decided by the Tribunal in assessee's own case for the assessment years 2007-08 & 2008-2009 in ITA No.343 & 392/CTK/2015, order dated 23.04.2018, wherein the Tribunal has observed as under :- "28. We have heard rival submissions and perused the material on record. The assessee has made the provision for leave encashment and the provision was not added back in the computation of income. As the ld. AR submitted that the above issue is covered by the order of the coordinate bench of the Tribunal in the case of Baitarani Gramya Bank in ITA Nos.318 & 319/CTK/2013 for assessment years 2008-09 & 2009-10, wherein the Tribunal held as under :- "19.1 The DR also agreed with the submission of ld. AR of the assessee. In the circumstances of the case, we set aside the order of the CIT(A) and remit the matter to the file of the Assessing officer to re-adjudicate the issue in the light of the Hon'ble Supreme Court deci....
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....d against the assessee by the Tribunal in assessee's own case for the assessment years 2007-08 & 2008-2009 in ITA No.343 & 392/CTK/2015, order dated 23.04.2018, wherein the Tribunal observed as under :- "49. We have heard rival submissions and perused the material on record. The liability of Rs. 47,35,67,572/- under the provisions of Section 43B of the Act disallowed by the AO dealt by the Cuttack Bench of the Tribunal in assessee's own case and matter is pending before the Hon'ble High Court. We rely on the order of ITAT in ITA Nos.196&91/CTK/2010, order dated 29.06.2012, para 16 to 23 at pages 10 to 13. The relevant observations of the ITAT in this regard are as under :- "23. We have considered the rival submissions and have perused the material available on record. To set the controversy at rest, we are of the considered view that a disallowance u/s.43B has to be primarily when such electricity duty has been claimed as expenditure in the impugned assessment year. The assessee could not override the Hon'ble High Court directions. The expenditure remained unpaid for both the years in spite of these directions, therefore, was rightly brought to tax by the ld AO u/....
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....sessee company by way of capital gains is only about 4% of the total income of the assessee company, which clearly shows that the assessee company is engaged in the business of mining, manufacturing, generation and production of aluminium and not dealing in mutual funds / liquid funds. * Further, it is important to note that no such disallowance has been made by the AO in the case of assessee company in the preceeding years, whereby also the assessee was following the same policy and showing the income from such investments under the head capital gain. * Now, the CBDT, vide its Circular No. 6/2016 dated 29.02.2016 has also appreciated the fact that if the assessee desires to treat the income from listed shares and securities held for a period of more than 12 months as capital gain income, the same shall not be put to dispute by the AO. * Reliance in this regard is also placed on the following judgments, wherein also the ratio of the above Circular issued by the CBDT was followed: (a) High Court of Gujarat in the case of Pr. CIT v. Ramniwas Ramjivan Kasat [2017] 248 Taxman 484 (b) ITAT Mumbai in the case of Minal Deepak Mehta v. ACIT in I....
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....iness income and the Tribunal took the relevant facts into consideration and referred to the circular of the CBDT dated 29.2.2016 and held that the return should be taxed as capital gain, be it long term or short term, as the case may be, and not as a business income. 6. Whether to tax the income generated from the sale of shares as capital gain or business income is an issue of frequent dispute between the revenue and the assessees. The Courts in the past have had occasions to consider such issue and through judicial pronouncement various parameters have been laid down to check whether the sale of shares would lead to business income or capital gain. Despite several judicial pronouncements, the controversy did not subside. Each case would have to be considered individually leading to long drawn litigations. The CBTD therefore in order to reduce the litigations, issued the said circular dated 29.2.2016, relevant portion which reads as under:- 2. Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock-in-trade. The Central Board of Direct Taxes ('CBDT') has also, through Inst....
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....ntinue to apply on the transactions involving transfer of shares and securities." 7. Two things emerge from this circular. One is that the CBDT desires to obviate the difficulties of the assessees and simultaneously to reduce the litigation. In paragraph 3 of the circular, certain parameters have been laid down. Clause (b) thereof in particular provides that in respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. In other words, the Revenue would not pursue this issue if the necessary ingredients are satisfied, only rider being the stand taken by the assessee in a particular year would be followed in the subsequent years also and the assessee would not be allowed to adopt a contrary stand in such subsequent years. 8. The circular applies with full force in the present case. The Tribunal therefore correctly accepted the assessee's stand." We respectfully follow the decision of the Hon'ble High Court and we direct the AO to treat....
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....same reasoning given in the aforesaid appeal, we restore this issue to the file of AO to examine and allow the claim of assessee. Hence, this ground of appeal for both the assessment years under consideration are allowed for statistical purposes. 50. Ground No.6 in appeal for assessment year 2011-12 and ground No.4 in appeal for assessment year 2012-2013 are relating to treatment of long term capital gains and short term capital gains as income from business. 51. We have already decided this issue in the appeal of the assessee for assessment year 2010-2011, wherein relying on the judicial decisions, we have directed the AO to treat the income as capital gains not as business income. Following the same reasoning given in the above appeal, we allow this ground of assessee and direct the AO to treat the income as capital gains. 52. Ground No.7 in appeal for assessment year 2011-12 relates to disallowance u/s.43B of the Act under Electricity Duty & Water Charges. 53. We have already decided this issue in the appeal of the assessee for assessment year 2010-2011 in pra 34 of the order, wherein we have dismiss this ground of assessee relying on the Tribunal order for the asses....
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....39/-. We direct accordingly. The Grounds of appeal no.1 by the appellant is accordingly allowed." The Tribunal also in assessee's own case in ITA No.162&90/CTK/2010 for assessment year 2005-06 & 2006-07, order dated 29.06.2012, wherein the Tribunal has decided the issue in favour of the assessee. The observation of the Tribunal for the assessment year 2005-06 & 2006-07 are as under :- "9. The first ground raised in respective assessment year is with respect to loss in relation to non-moving stores and spares. This issue has been considered by the Tribunal in assessee's own case since assessment year 1994-95 by way of a combined order dated 30.11.2005 in ITA Nos.66-68/459/511/512/CTK/2003 for A.Ys. 199394 to 1998-99 and 2000-2001 and such disallowance was considered fit for deletion. Similarly for the assessment year 2001-02 upto assessment year 2004-05, the Tribunal was pleased to hold that the accounting loss on non-moving stores and spares was in accordance with the accounting policy of the assessee and on the basis of internal verification and, therefore, did not require any interference. The assessee functions with such magnitude of holding slow-moving stores and sp....
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....oss claimed on account of revaluation of non-moving stores and spares. 64. We have decided this issue in appeal of the assessee for assessment year 2011-2012 (ITA No.374/CTK/2014) in favour of the assessee and against the Revenue relying on the decision of the Tribunal in assessee's own case for the earlier assessment years. We follow the same reasoning given in the aforesaid appeal and we do not see any reason to interfere with the order of the CIT(A), who has passed a reasoned. Accordingly, we dismiss this ground of Revenue raised in both the years under consideration. 65. Ground No.2 in appeal for assessment years 2010-11 and 20122013 and ground No.1 in appeal for assessment year 2011-2012 are relating to disallowance on account of peripheral development expenses. 66. We have decided the issue in appeal of the assessee for assessment year 2010-2011 (ITA No.352/CTK/2016). Ld. DR in respect of partial relief granted by the CIT(A) could not bring on record any new material to take different view. Accordingly, we dismiss the ground of appeal of Revenue. 67. Ground No.3 in appeal for assessment year 2011-2012 and 2012-2013 relates to disallowance u/s.40(a)(i) of the Act. The....
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....er is required to make payment without TDS. These provisions are largely used by foreign banks operating in India for receiving payments from their customers without TDS. Section 195(6) was introduced by the Finance Act, 2008 (with effect from 1.4.2008) providing that the Payer shall furnish the information relating to payments of such sums in the prescribed form and manner. For this Rule 37BB was introduced and the procedure for making remittances is provided for which the certificate of Chartered Accountant in the prescribed Form 15CB is required to be obtained by the Payer before making remittance to the Payee (New Procedure for Remittance). Earlier, there was a requirement for obtaining certificate of Chartered Accountant for making remittance to the Non-Resident, but the same was operating under the Circulars issued by CBDT. The Apex Court in the case of Transmission Corporation of A.P. Ltd. (239 ITR 597) has held that the expression 'taxable income' used in sec. 195(1) applies to any sum payable to the NonResident even if such a sum is a trading receipt in the hands of the payee, if, the whole or part-t-hereof is chargeable to tax under the Act. Thes....
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.... income itself was not assessable in India, there was no requirement to make any application u/s.195(2). In any case, not making an application u/s.195(2) before remittance could at best be considered as a violation and would not attract the provisions of section 40(a)(i). It was held by the Hon'ble ITAT, Hyderabad, in the case of SOL Pharmaceuticals Ltd. v. ITO [2002] 83 ITD 72 (Hyd.) that Section 195(2) is attracted only in a case where at least a portion of the payment to non-resident is chargeable as income. If no portion is chargeable, then section 195(2) is not attracted. It was held by the Hon'ble ITAT, Madras, in the case of Indopel Garments (P.) Ltd. v. DCIT, 86 ITD 102 (Mad), that no tax was deductible from the commission paid to the non-residents. Where there is no chargeable income, it is not necessary for assessee to get concurrence of AO u/s. 195(2). In the case of Graphite Vicarb Ind. Ltd. v. ITO [1986] 18 ITD 58 (Cal.), it was held that section 195(2) envisages application for determining appropriate proportion of the sum which would be chargeable to tax; but does not envisage a case where the assessee claims that no profits of the....
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....igation to TDS". If one reads the observation of the Supreme Court, the words "such sum" clearly indicate that the observation refers to a case of composite payment where the payeer has a doubt regarding the inclusion of an amount in such payment which is exigible to tax in India. In our view, the above observations of this Court in Transmission Corpn, of A.P. Ltd.'s case (supra) which is put in italics has been completely, with respect, misunderstood by the Karnataka High Court to mean that it is not open for the payer to contend that if the amount paid by him to the non-resident is not at all "chargeable to tax in India", then no TAS is required to be deducted from such payment. This interpretation of the High Court completely loses sight of the plain words of section 195(1) which in clear terms lays down that tax at source is deductible only from "sums chargeable" under the provisions of the Income-tax Act, i.e., chargeable under sections 4, 5 and 9 of the Income-tax Act." In the instant case, the amounts have been paid towards purchase of raw material, etc. on principal to principal basis and the assessee has procured the goods from the non-resident seller at its o....
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.... is required to be deducted u/s.195 of the Act and deleted the addition. In view of the above, we do not see any reason to interfere in the order of CIT(A), who has passed a reasoned order and the same is upheld and the ground raised in both the appeals for assessment year 2011-2012 & 2012-2013 of Revenue is dismissed. 71. Ground No.2 in the appeal of Revenue for assessment year 201112 relates to deletion of addition made on account of provision for provisional salary claimed by the assessee u/s.37 of the Act. The AO stated that in case of the assessee the liability has not been actually arisen and it is merely anticipated and disallowed the same. On appeal, the CIT(A) deleted the addition observing as under :- "The appellant company submitted that it has charged to the P& L Account salary pending finalization of revision of wages/salary of its employees as wage revision for the non-executives was due since 01.01.2007. The appellant company also produced the copy of office memorandum of Govt. of India, dated 26.11.2011 regarding wage revision. The appellant further submitted that since the employees have rendered services during the accounting year, the liability has ac....
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....fficer in the impugned A/Ys against no loss to the revenue has been pointed out ...." In view of the above order of the ITAT, the above provision of Rs. 128,28,00,000/- for wage revision is to be allowed." 72. Ld. DR argued the grounds and relied on the order of AO and prayed for allowing the appeal. 73. Contra, ld. AR of the assessee supported the order of CIT(A) and relied on the order of Tribunal for earlier assessment years in assessee's own case. 74. We have heard rival submissions and perused the material on record. ld. DR submitted that the CIT(A) has erred in deleting the addition as the liabilities are unascertained liabilities, whereas ld. AR submitted that these are the ascertained liabilities and the assessee has filed details before the appellate proceedings. We found that the ld. DR could not controvert with any new findings of the CIT(A) except relying on the order of AO and on perusal of the CIT(A)'s order we found that the assessee has produced the bills and supporting documents. The CIT(A) having considered these facts and also claim made by the assessee has passed a reasoned decision treating as ascertained liabilities and directed the AO ....
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....;s reports and other relevant factors and the deduction claimed for period, between the expiry of one wage settlement or agreement, cannot be termed as contingent because the wage and the probable revision or rates of revision would be within the fair estimation of the employer thus, deduction claimed on account of wage revision are permissible. 9.2. Respectfully following the same we dismiss this ground of the Revenue." Respectfully following the judicial precedence and the facts and circumstances of the case, we are of the considered view that the CIT(A) has rightly deleted the addition and we do not see any reason to interfere with the findings of CIT(A) in this regard and we uphold the same and dismiss the ground of Revenue. 75. Ground No.4 in the assessment year 2011-2012 relates to disallowance made u/s.40(a)(ia) of the Act. The AO made the disallowance on account of non-deduction of tax at source from payments towards management development and training expenses. On appeal, the CIT(A) deleted the addition. 76. Ld. DR before us relied on the order of AO, whereas ld. AR relied on the order of CIT(A). 77. We have heard rival submissions and perused th....
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....prior period income set off against the expenditure and has solely relied on the expenditure and ignored the income. Ld. AR further submitted that the prior period expenses consists of administrative expenses and other income and settlement of claims or crystallization of liability disclosed under prior period expenses adjustments as per the accounting disclosure. Ld. AR subsantiated the arguments with the paper book. Whereas the CIT(A) found that the liability has accrued in the earlier years and the assessee cannot claim the same in the current assessment year and also the reasons envisaged were not supported with the evidence for claim during the current financial year. We considering the material aspects and the concept of income and expenditure remit this disputed issue to the file of AO to verify the claims and grant the set off of prior period income against the prior period expenses and passed the order on merits and the assessee shall cooperate in submitting the information and this ground of appeal of the assessee is allowed for statistical purposes. Since the issue is restored to the file of AO in earlier years and the CIT(A) has allowed the relief in favor of t....