TaxTMI 
TaxTMI 
2021 (10) TMI 162
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.... account of bank guarantee commission invoking the provisions of section 40(a)(ia) of the Income Tax Act. 2 b) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO and ignoring the contention of the assessee that in view of the proviso to section 40(a)(ia), the deductee having including the income in its return of income the assessee cannot be treated as assessee in default and hence no disallowance can be made under section 40(a)(ia) of the Act. I.T.A. No. 3697/DEL/2018 (A.Y 2013-14) Revenue's appeal 1. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the addition of Rs. 6,48,20,000/- on account of accrued interest without considering the fact that the assessee was following mercantile system of accounting and the arbitration award give a right to the assessee to charge simple interest @ 5% per annum on the amount of advance given to M/s Karsan till the date of payment? 2. Whether on the facts and circumstances of the case, the Ld.CIT(A) is legally justified in deleting the disallowance of Rs. 2,59,00,000/- on account of d....
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....ount of accrued interest on deposits without considering the fact that the assessee is following mercantile system of accounting? 9. Whether on the facts and circumstances of the case, the Ld CIT (A) is legally justified in deleting the disallowance of Rs. 41,47,983/- on account of 'repair & maintenance expense' without considering the facts recorded by the AO in assessment order and also by ignoring the provisions of section 37 (1) of the Act in this regard?" I.T.A. No. 3438/DEL/2018 (A.Y 2014-15) Assessee's appeal 1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts. 2 (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the disallowance of an amount of Rs. 76,00,000/- made by AO on account of CSR Expenditure incurred by the assessee (ii) That the disallowance has been confirmed ignoring the submissions along with the evidences filed by the assessee in this regard. I.T.A. No. 3696/DEL/2018 (A.Y 2014-15) Revenue's appeal 1. Whether on the facts and circumstances of the case, the Ld CIT (A....
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....g I.T.A. No. 3437/DEL/2018 (A.Y 2013-14) which is assessee's appeal and ITA No. 3697/Del/2018 which is Revenue's appeal 3. The assessee is engaged in the business of manufacturing of Nitrogenous fertilizers and trading of Industrial Products. It filed its return of income for AY 2013-14 on 27/09/2013 declaring loss of Rs. 253,66,98,124/-. In the assessment u/s 143(3) vide the impugned order, the following additions were made:- (a) Addition on account of Interest accrued on advances given to M/s Karsan Rs. 6,48,20,000/- (b) Disallowance of Demurrage & Wharfage expenses Rs. 2,59,00,000/- (c) Disallowance on account of stores and spares written off expenses Rs. 3,91,00,000/ (d) Disallowance of Repairs and maintenance charges Rs. 41,47,983/- (e) Disallowance of depreciation on UPS and other computer peripherals Rs. 25,037/- (f) Disallowance of expense under section 14A of the Act Rs. 24,883/- (g) Disallowance of additional depreciation Rs. 6,45,673/- (h) Disallowance of bank guarantee commission Rs. 7,29,769/- (i) Addition on account of interest income Rs. 2,42,880/- (j) Other items written off....
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....ed by the state bank of India to the assessee. It cannot be said to be a "commission" as intended to u/s 194H of the but it is in the nature of Bank charges charged by the bank for provision of services to the assessee. Now this issue has been decided by the honourable Bombay High Court in case of CIT - TDS (1), Bombay versus Larsen and Toubro Ltd 101 taxmann.com 83 wherein the honourable High Court while dealing with the case for assessment year 2010 - 11 held as Under:- "3. Learned counsel for the Revenue stated that the Revenue had filed an appeal against the judgment of the Tribunal in case of Kotak Securities Ltd but that the appeal was withdrawn on the ground of low tax effect. He has, however, made available a copy of the judgment of the Tribunal in the said case which contains a detailed discussion on the issue at hand. In the said judgment, the Tribunal referred to Section 194H of the Act which requires an assessee responsible for paying any income by way of commission or brokerage to deduct tax at source. The Tribunal was of the opinion that the words "commission or brokerage" must take colour from each other. The Tribunal was of the opinion that the payment in q....
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....ed to u/s 194H of the but it is in the nature of Bank charges charged by the bank for provision of services to the assessee. Now this issue has been decided by the Hon'ble Bombay High Court in case of CIT - TDS (1), Bombay versus Larsen and Toubro Ltd 101 taxmann.com 83 as well as per Notification No. 56/2012 of the CBDT the said provisions will also applied to earlier period than the date of issue of notification. Thus, the Ground No. 2(a) and 2(b) of the Assessee's appeal are allowed. Hence appeal of the assessee being ITA No. 3437/Del/2018 is allowed. 8. As regards Ground No. 1 of the Revenue's appeal, the Ld. DR submitted that the CIT(A) erred in deleting the addition of Rs. 6,48,20,000/- on account of accrued interest without considering the fact that the assessee was following mercantile system of accounting and the arbitration award give a right to the assessee to charge simple interest @ 5% per annum on the amount of advance given to M/s Karsan till the date of payment. The Ld. DR relied upon the assessment order. 9. The Ld. AR submitted that the issue is squarely covered by the judgment of Hon'ble Jurisdictional High Court in assessee's own case for A.Y. 2006-07, 200....
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....ot be a situation of hypothetical income being taxed" 13. Indeed, it is seen that no part of the advance given by the Assessee to M/s. Karsan has been able to be recovered by it. As pointed out by learned counsel for the Assessee, there was a case registered with the Central Bureau of Investigation (CBI) in that regard and any prospect of the money being recovered has all but vanished. Since no part of the principal amount could actually be recovered by the Assessee, there was no 'real income' and the question of adding any notional accrued interest to its income on such amount does not arise. In the entire facts and circumstances of the case, the Court agrees with the concurrent findings of the CIT(A) and ITAT . No substantial question of law arises as regard this issue as well." Since, the issue contested in the present ground is identical to that of earlier assessment years and no distinguishing facts were pointed out by the Ld. DR. Ground No. 1 of the Revenue's appeal is dismissed. 11. As regards Ground No. 2 of the Revenue's appeal, the Ld. DR submitted that the CIT(A) erred in deleting the addition of Rs. 2,59,00,000/- made on account of disallowance of demu....
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....5. The Ld. AR submitted that the issue is squarely covered by the judgment of Hon'ble Jurisdictional High Court in assessee's own case for A.Y. 2006-07, 2007-08, 2008- 09 and 2009-10 in ITA Nos. 783, 785, 815 and 816 of 2016 dated 08.02.2017. 16. We have heard both the parties and perused the material available on record. It is pertinent to note that the Hon'ble High Court in assessee's case for AYs. 2006-07 to 2009-10 held as under: "5. This Court is of the opinion that the Revenue's contentions are unmerited. The assessee was all along reflecting the full value of the stock; for the year i.e. AY 2004-05 the CAG had made an observation that Slow-Moving Stock had to be realistically valued. This resulted in a fresh valuation by an engineering expert. Based upon this exercise the valuation was reduced to Rs. 47.76 crores. 6. Having regard to these circumstances, the Revenue's contention that the acceptance of 5% as the basis for valuing the Slow Moving Stock being unscientific, is baseless in our opinion. Once the engineering expert examined all the heads of stock and valued them, to the best of his judgment, and in the absence of any finding that the 5% was not....
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....of Expeditors International (India) Pvt. Ltd. Vs. ACIT, 118 TTJ 652 (Del), where it was held that printers, scanner, UPS would form integral part of the computer and as such, they are eligible for depreciation at a higher rate as applicable to the computer. 17. Both the parties were heard and orders of the authorities below have been perused. 18. In the case of CIT vs. BSES Yamuna Powers Ltd. (ITA No. 1267/2010), dated 31st August, 2010, the Hon'ble High Court has upheld the order of the Tribunal in allowing the depreciation @ 60% on computer peripherals and accessories such as printers, scanners and server etc. In that case, the Tribunal had followed the decision of coordinate Bench of the Tribunal in the case of ITO vs. Samiran Majumdar (2006) 98 ITD 119 (Kol.) and in the case of Expeditors International (India) (P) Ltd. (supra). 19. Respectfully following the aforesaid decision of the Hon'ble Delhi High Court confirming the Tribunal's order, we uphold the order of the learned CIT(A) in accepting the assessee's claim of depreciation @ 60% on UPS and LAN/WAN. Thus, this ground No. 2 raised by the revenue is also rejected." Since, the issue contested i....
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....ct. In the said case admittedly there was dividend earned on such investment. In other words, it was not a case, as the present, where no exempt income was earned in the year in question. Consequently, the said decision was not relevant and did not apply in the context of the issue projected in the present case. 23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression "does not form part of the total income‟ in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year." The Ld. AR also relied upon the decision of the Hon'ble Supreme Court in case of PCIT vs. Oil Industries Development Board (supra) wherein the Apex Court has confirmed the view of the Hon'ble Delhi High Court that in the absence of any exempt income, disallowance under Section 14-A of the Act of any amount was not permissible.....
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....power have expressly been included in the ambit. Thus, the CIT(A) rightly deleted the disallowance. Ground No. 7 of Revenue's appeal is dismissed. 26. As regards to Ground No. 8 of the Revenue's appeal, the Ld. DR submitted that the CIT(A) erred in deleting the addition of Rs. 2,42,880/- on account of accrued interest on deposits without considering the fact that the assessee is following mercantile system of accounting. The Ld. DR relied upon the assessment order. 27. The Ld. AR submitted that this addition is also made on account of notional interest on advances to Karsan on which the litigation is still pending. The addition was made on the ground that the addition of. Rs. 6,48,20,000/- was also made as per Ground No. 1. The CIT(A) also deleted the addition on the line of Ground No. 1 that the Hon'ble courts has already held that the advances given by the assessee to Karsan are pending recovery and cannot be assessed as income of the assessee in this year. Thus, the issue is identical to ground no. 1 as the Assessing Officer himself admitted the same and addition made by the Assessing Officer is uncalled for and rightly deleted by CIT(A). 28. We have heard both the part....
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....the disallowance. The Ld. AR further submitted that the CIT(A) has given the well reason finding and disallowance made by the Assessing Officer is an ad-hoc disallowance and cannot be sustained in view of the following judgments. CIT Vs Ms. Shehnaz Hussain 267 ITR 572 (Del. HC) ACIT Vs M/s. Modi Rubber Limited, ITA No.1952/Del/2014 (ITAT Delhi. ACIT v. Amtek Auto Limited [2006] 112 TTJ 455 M/s Nine Dot Nine Media work Pvt. Ltd., v. ITO [ITA No. 1262/Del/2016 And ITA No. 863/Del/2016] dated 30.07.2018 DCIT versus Grintex India Limited ITA No, 1262/Del/2016 And ITA No. 863/Del/2016] ITAT (Del.) dated 30.07.2018 DCIT Vs Grintex India Limited ITA No, 4622/Del/2016 (Del. Tribunal) Dhir & Dhir Associates v. ACIT in ITA NO. 2169/Del/2014 dated 16.06.2017 (Del. Tribunal) ACIT v. Precision Pipes & Profiles Co. Ltd. in ITA No. 4257/Del/2012 dated 12/10/2012. 31. We have heard both the parties and perused the material available on record. It is pertinent to note that disallowance made by the Assessing Officer is an ad-hoc disallowance. The submission of the Ld. AR that there is no estimate that the annual repair and maintenance....
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.... Section 37(1) can be made under the provisions of Section 37(1) since amendment vide the Finance (No 2) Act, 2014 whereby Explanation 2 to Section 37(1) was inserted is applicable from AY 2015-16. The CIT(A) has also confirmed the action of the Assessing Officer making the disallowance under Section 37(1) ignoring the contention of the assessee that the amendment made by the Finance Act ,2014 is not the retrospective amendment and will apply w.e.f. AY 2015-16. At the outset, the Ld. AR submitted this issue has come up before ITAT Delhi in various cases wherein it has been held that the Explanation 2 to Section 37(1) of the Income Tax Act will apply prospectively i.e. w.e.f. AY 2015-16. The Ld. AR relied upon the following judgments: DCIT vs. Great Eastern Energy Corporation ltd. and (vice-versa) ITA No.3310/Del/2015, ITA No. 3360/Del/2015 & 5728/De!/2016 - Dated 20.11.2019- ITAT Delhi. Wapcos Ltd. vs. ADDL. CIT ITA No. 3736/Del/2018-Dated 20.12.2018- ITAT Delhi. CENTRAL WAREHOUSING CORPORATION VERSUS ACIT, CIRCLE-3 (1) , C.R. BUILDING, NEW DELHI AND DCIT, CIRCLE-3 (1) , C.R.BUILDING, NEW DELHI VERSUS CENTRAL WAREHOUSING CORPORATION AND (VICEVERSA)- 2021 ....
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....ce appeal of the assessee being ITA No. 3438/Del/2018 is allowed. 37. As regards Ground No.1 of the Revenue's appeal relating to addition of Rs. 6,48,20,000/- made on account of interest accrued on advances given to M/s Karsan, the Ld. DR submitted that the same is identical to that of Ground No. 1 of Revenue's appeal for A.Y. 2013-14. The Ld. DR relied upon the assessment order. 38. The Ld. AR submitted that the issue is squarely covered by the judgment of Hon'ble Jurisdictional High Court in assessee's own case for A.Y. 2006-07, 2007-08, 2008-09 and 2009-10 in ITA Nos. 551, 782, 784 and 817 of 2016 dated 24.04.2017. 39. We have heard both the parties and perused the material available on record. This issue is identical to that of Ground No. 1 of revenue's appeal for A.Y. 2013-14 and no distinguishing facts are pointed out by the Ld. DR, hence, Ground No. 1 of the Revenue's appeal is dismissed. 40. As regards Ground No.2 of the Revenue's appeal relating to addition of Rs. 2,56,00,000/- on account of disallowance of demurrage and wharfage charges, the Ld. DR submitted that same is identical to that of Ground No. 2 of Revenue's appeal for A.Y. 2013-14. The Ld. DR relied ....