TaxTMI 
TaxTMI 
2021 (1) TMI 783
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....09. Notice u/s 153A dated 07.10.2009 was served on assessee requiring the assessee to file the return of income with 16 days of the service of the aforesaid notice and in response to which assessee filed return of income on 11.12.2009 declaring the loss at Rs. 10,86,965/-. The case was taken up for scrutiny and thereafter, vide order dated 19.8.2011 passed u/s 153A the total taxable income was determined at Rs. 58,30,841/- 4. As far as A.Y. 2008-09 is concerned, Assessee had filed the original return of income on 30.09.2008 declaring loss of Rs. 2,82,80,689/- which was initially processed u/s 143(1) of the Act. Thereafter in view of the search u/s 132 conducted in the case of assessee, notice u/s 153A dated 07.10.2009 was served on the assessee on 19.10.2009 requiring the assessee to file the return of income within 16 days of the service of the notice. In response of notice u/s 153A of the Act, assessee filed return of income on 11.12.2009 declaring loss of Rs. 2,82,80,689/-. Subsequently, assessment was framed u/s 153A vide order dated 19.08.2011 and the total loss was determined at Rs. 1,87,63,172/-. 5. Aggrieved by the aforesaid orders of AO, assessee carried the matter befo....
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.... spent towards printing of memorandum of article is capital expenditure in nature and not a revenue expenditure and CIT(A) has erred in law and on facts in upholding the same. 10. That the explanations given, evidence produced and material placed and made available on record have not been properly considered and judicially interpreted and the same do not justify the addition made. 11. That the addition/disallowance made is based on mere surmises conjunctures and the same cannot be justified by any material on record is highly excessive. 12. That the interest u/s 234A, 234B, 234C and 234D has been wrongly and" illegally charged as there is no delay in filling of return and there is no default of payment of Advance tax as the receipt / income is liable to TDS and it could not have anticipated such additions. In any case the interest charged has been wrongly worked out and is excessive. 13. That all the above grounds are independent to each other and mutually exclusive. 14. The Appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing." 6. The grounds raised for AY 2008-09 in ITA No. 4158/Del/2013 reads as ....
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....ciate that payment is made out of commercial expediency and is allowable expenditure Addition on account of personal expenses 11. That in view of the facts and circumstances of the case and in law the A.O^ has erred in holding that an amount of Rs. 20,680/- is in nature of personal expense and thereby disallowing the same and CIT(A) has also erred in upholding the same. Addition on account of disallowance of additional depreciation 12. That in view of the facts and circumstances of the case and in law the A.O./CIT(A) has erred in law and on facts in confirming an addition on account of disallowance of additional depreciation on plant and machinery. Disallowance of expenses on account of Non-Deduction and Short-Deduction of TDS 13. That CIT(A), in view of the facts and circumstances of the case, has erred in law and on facts in only allowing the part relief in respect of disallowance made U/s 40(a)(ia) by the AO. The CIT(A) should have deleted the entire addition/disallowance on this account. 14. Without prejudice to the above, the CIT(A), in view of the facts and circumstances of the case, has erred in law and on facts in holding that where TDS has been deducted at less....
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....itions/disallowances in respect of which no incriminating material was found during the course of search by merely relying on the finding of the special auditor. He submitted that assessment u/s 153A of the Act can be made only on the basis of seized material found during the course of search and any addition made de-hors any material/document found during the course of search is clearly outside the scope of proceedings u/s 153A of the Act. He therefore submitted that the action of the AO in passing the impugned order is without jurisdiction, illegal and bad in law. Ld DR on the other hand supported the order of lower authorities. 11. We have heard the rival submissions and perused the material on record. In the present ground, assessee is challenging the assessment proceedings and the additions made thereat. 12. It is an undisputed fact that search u/s 132 of the Act has taken place at the premises of the Assessee on 10.02.2009 and on that date the assessment for A.Y. 2007-08 was pending and therefore as per the provisions of Section 153A, the assessment for A.Y. 2007-08 stood abated and in such a situation the total income of the assessee for that assessment year will have to b....
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....one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 13. In the light of the aforesaid decision of Hon'ble jurisdictional high Court we find that since it is on undisputed fact that assessment for the year had abated and in such a situation, as per the mandate of the provisions of the Act, the AO is required to compute the total income as a fresh exercise. In such a situation we find no reason to interfere with the order of CIT(A) and thus the grounds of Assessee are dismissed. 14. We now proceed with Ground No. 8 which is with respect to disallowance of personal expenses amounting to Rs. 2,49,650/-. 15. AO on examination of the P....
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....heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to disallowance of expenses of Rs. 2,49,650/-. These expenses have been disallowed for the reason that the assessee did not substantiate the nature of expenses and did not file the required details. Before us, Ld. AR has pointed to the details that have been filed by the assessee before the AO. The submissions of these details have not been controverted by the Revenue. Further Ld. AR has pointed to the fact that the expenses have been incurred for the travelling (including related foreign travel) expenses of the Directors and have been incurred for the purpose of the business of the assessee. These submissions have not been controverted by Revenue. Considering the totality of the aforesaid facts and the submissions of Ld. AR, we are of the view that the disallowance of expenses was not called for in the present case. We therefore, direct its disallowance. Thus this ground of assessee is allowed. 18. Ground No. 12 is with respect to levy of interest u/s 234A. 234B, 234C and 234D. 19. Before us, Ld AR submitted that the AO issued notice u/s 153A dated 07.10.200....
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....he AO, in response to the aforesaid request of the assessee had extended the time for filing the return of income. In such a situation we are of the view that there has been delay on the part of the assessee in filing the return of income and that the assessee was liable for payment of interest u/s 234A from immediately following the due date i.e. 20.10.2009. We finding no infirmity in the order of AO and thus the ground of appeal of the assessee is dismissed. 23. Thus the appeal of the assessee is partly allowed. 24. Now we take up Appeal in ITA No.4158/Del/2013 for A.Y. 2008-09. 25. Before us, at the outset, the Ld AR submitted that assessee does not wish to press Ground Nos.1 to 4 and 11. In view of the aforesaid submission of Ld AR, those grounds are dismissed as not pressed. 26. He further submitted that Grounds Nos.5 to 7 are identical and similar to the Grounds Nos. 5 to 7 raised in A.Y. 2007-08. In view of the aforesaid submission of Ld AR, we for the reasons similar to that given while deciding the appeal of the assessee for A.Y. 2007-08 and for similar reasons dismiss those grounds. 27. We now take Ground Nos. 8 to 10 which are with respect to disallowance made u/s 4....
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.... transporters/truck drivers. He submitted that in a contract of transport of goods there are at least three parties involved namely the transport company, truck owner/ driver and the assessee. In such a transaction normally the arrangement is between the assessee and the transport company and the truck owner/ driver is the intermediary between the two. When the truck owner/ driver carries the goods belonging to the assessee, he acts as an agent of the transport company to deliver the goods and collects the freight from the assessee on behalf of the truck company. In such a situation, the assessee is under obligation to make the payment to the truck driver as payments are made only after the receipt of goods. He therefore, submitted that considering the totality of the transaction, the payment of freight charges are to be considered to be exempt under sub Rule (k) of Rule 6DD of the I. T. Rules. In support of his contention for deleting the disallowance, he placed reliance on the decision of Pune ITAT in the case of Dhanshree Ispat (ITA No. 794 of 2013). He thereafter, fairly submitted that similar issue has been decided against the assessee in the case of L.T. foods Ltd, a Group C....
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....ns and perused the material available on record. The issue in the present ground is with respect to disallowance u/s 40A(3). 38. As far as the disallowance expenses paid as freight charges to transporters and truck operators is concerned before us, Learned AR has vehemently argued that the payments are covered under sub rule (k) of rule 6DD of I.T. Rules. Therefore, no disallowance u/s 40A(3) is called for and for which assessee has also relied on the decision of Pune Bench of Tribunal and Amritsar Bench of Tribunal. However, it is also a fact that on identical issue in the case of the group company of the assessee namely L. T. Food Ltd., the Co-ordinate Bench of Tribunal while deciding the appeal for A.Y. 2007-08 in ITA No.4164 of 2013 vide order dated 30.03.2020 has held that the payment cannot be covered under sub rule (k) of rule 6DD. The relevant findings of the Co-ordinate Bench of Tribunal reads as under: "80. We have gone through the record in the light of the submissions made on either side. According to the learned Assessing Officer the following cash payments aggregating to Rs. 40,00,647/- were made in contravention of provisions of section 40A(3) of the Act and conse....
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....k account or through such other electronic mode as prescribed under rule 6ABBA, no disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under subsection (3A) of section 40A of the Act. 83. According to the assessee, the truck driver acts as an agent of the assessee. By no stretch of imagination can we say that the truck driver who operates the track pursuant to the agreement between the assessee and the transport contractor would be the agent of the assessee. Even otherwise also, we are not prepared to accept such an argugment because such acceptance would render the provisions under section 40A(3) of the Act nugatory and every payment could be taken out of the purview of section 40A(3) of the Act by delivering the cash to some intermediary calling him as an agent. There is no privity of contract between the person receiving the sums in cash and the assessee and the truck driver. Such payments are not protected under rule 6 DD (k) of the Rules. On this premise, we reject contention of the assessee. 84. An alternative plea is taken on behalf of the assessee to the effect that in certa....
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....ther no material has been placed by Revenue to demonstrate that the genuineness of the payment and the identity of the payee was in doubt. Considering the totality of the aforesaid facts, we are of the view that the AO was not justified in disallowing the aforesaid expenses. 42. As far as the disallowance of Diwali expenses of Rs. 43,155/- is concerned. It is the contention of the assessee that the payments have been made to various parties and no individual payment exceeds Rs. 20,000/-. The aforesaid contention of the assessee has not been found to be incorrect nor the genuineness of expenditure has been doubted by Revenue. Considering the aforesaid facts, we are of the view that no disallowance of Diwali expenses is called for. 43. With respect to the advance payment of Rs. 97,734/-. It is the assessee's contention that the amount was paid to the contractor which in turn was to be distributed as daily wages to the labourers. It is also the contention that no payment to an individual was in excess of Rs. 20,000/-. Considering the aforesaid contention of the assessee it has been found that genuineness of the expenditure has not been doubted. We are of the view that no disallowanc....
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....d asset and it further states that the administrative and other expenses which are specifically attributable to construction of a project or to acquisition of fixed asset(s) or bringing assets to its working condition, it may be included as part of cost of the construction project or as part of the cost of the fixed asset. He further submitted that the Guidance Note on 'Treatment of Expenditure during the Construction Period issued by Institute of Chartered Accountants of India' also provides that the expenditure incurred which are not related directly or indirectly to the work of construction cannot be capitalized and cannot be added to the cost of asset. He submitted that following the Guidance Note and pronouncement of Institute of Chartered Accountants of India, the cost which are directly attributable to fixed asset had been capitalized and once the same has been capitalized and has been accepted by the AO along with depreciation and remains no reason to disallow the additional depreciation. 48. Learned DR on the other hand supported the order of lower authorities. 49. We have heard both the parties and perused all the relevant materials available on record. The issue in the....
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....the assessee by observing that no disallowance u/s 40(a)(ia) of the Act is to be made where the payment are in the nature of reimbursement of expenses, no disallowance in case of Railway freight, no disallowance to be made in cases where provisions of section 172 of the Act was applicable and in case of short deduction of tax at source, disallowance to be made only in respect of portion of payment on which TDS has not been deducted. With respect to the relief granted by CIT(A),it is the submission of the Learned AR that no appeal have been preferred by the Department and thus the grievance of the assessee is restricted to the disallowance upheld by the CIT(A) on account of non-deduction of TDS and on account of short deduction of TDS. With respect to non-deduction of TDS, the Learned AR submitted that disallowance u/s 40(a)(ia) of the Act if at all is required to be made, the same be restricted to 30% of the expenditure in view of the fact that the amendment of section 40(a)(ia) has been held to be curative in nature and was introduced to reduce the undue hardship caused to assessees on disallowance of entire amount of expenditure. He further submitted that identical issue arose in....
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.... the Act vide Finance Act 2014 was substantive. With respect to disallowance on account of short deduction of TDS, he has supported the order of lower authorities. 53. We have heard both the parties and perused all the materials available on record. The issue in the present ground is with respect to disallowance u/s 40(a)(ia) of the Act. The disallowance u/s 40(a)(ia) can be divided into two parts. One is with respect to non-deduction of TDS and the other is with respect to short deduction of TDS. As far as the issue of nonITA deduction of TDS is concerned, it is the contention of the assessee that the Co-ordinate Bench of Tribunal in assessee's own case and the various other benches of the Tribunal have held that the amendment u/s 40(a)(ia) of the Act to be clarificatory and retrospective and the disallowance was restricted to 30% of expenditure. We however, find that the Hon'ble Apex Court in the case of Shree Choudhary Transport Company (supra) noted inter alia that one of the question for determination before it is as under: "As to whether sub-clause (ia) of section 40(a) of the Act, as inserted by the Finance (No. 2) Act, 2004 with effect from 1-4-2005, is applicable only f....
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....so was amended by the Finance Act 2008 and that amendment of the year 2008 was provided retrospective operation by the legislature itself. For ready reference, we may reproduce in juxtaposition the main part of section 40(a) (ia) of the Act as it would read after the amendments of 2008, 2010 and 2014 respectively, as under: (i) 'After the amendment by Finance Act, 2008 "40. Amounts not deductible.-Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", (a) in the case of any assessee ** ** ** (ia) any interest, commission or brokerage, rent, royalty14, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid, (A) in a case where the tax was deductible and w....
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....has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, thirty per cent. of such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid: Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, 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.16 ** ** ** 19.2 The aforesaid amendment by the Finance (No.2) Act of 2014 was specifically made applicable w.e.f. 14-2015 and clearly represents the will of the legislature as to what is to be deducted or what percentage of ....
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....., from the very date of substitution of the provision. 20. Therefore, the assessees were, after the said amendment in 2008, classified in two categories namely: one, those who have deducted that tax during the last month of the previous year and two, those who have deducted the tax in the remaining eleven months of the previous year. It was provided that in the case of assessees falling under the first category, no disallowance under section 40(a)(ia) of the Incometax Act shall be made if the tax deducted by them during the last month of the previous year has been paid on or before the last day of filing of return in accordance with the provisions of section 139(1) of the Income-tax Act for the said previous year. In case, the assessees are falling under the second category, no disallowance under section 40(a)(ia) of Income-tax Act where the tax was deducted before the last month of the previous year and the same was credited to the Government before the expiry of the previous year. The net effect is that the assessee could not claim deduction for the TDS amount in the previous year in which the tax was deducted and the benefit of such deductions can be claimed in the next year ....
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.... made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes the subject matter of an order under section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation, i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe out the adverse effect and the financial stress. Such could not be the intention of the Legislature. Hence, the amendment made by the Finance Act, 2010 being curative in nature is required to be given retrospective operation, i.e., from the date of insertion of the said provision." 19.5 A bare look at the extraction aforesaid makes it clear that what ....