TaxTMI 
TaxTMI 
2021 (12) TMI 311
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.... ld. CIT(A) has erred in deleting the addition of Rs. 7,56,620/- ignoring the fact that the assessee company has made actual purchases of diamonds from grey market without any purchase bill and accommodation purchase bills were arranged without any actual delivery of diamond of inflate the purchases." 3. In ITA No. 6650/Del/2017, following grounds have been raised by the Revenue: "1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 9,04,19,545/- ignoring the fact that the assessee company has made actual purchases of diamonds from grey market without any purchase bill and accommodation purchase bills were arranged without any actual delivery of diamond to inflate the purchases." 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 5,42,517/- ignoring the fact that commission paid on bogus purchases was also bogus. 3. On the facts and under the circumstances, the Ld. CIT(A) erred in law by deleting the addition/disallowance of Rs. 1,57,049/- made by the AO u/s 2(24)(X) r.w.s. 36(1)(va) on account of delayed payment of EPF and ESIC, ignoring the ....
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....e making payment to the assessee for the goods purchased by the customers of the bank against the Debit and Credit cards issued by the bank to its customers. Ld. Counsel submitted that the bank was making the payments to the assessee after making the deduction of the charges to it, as such, there is no occasion for the assessee to deduct the TDS and further bank was not working for the assessee but on the other hand, it was working for its customers, as such, there is no requirement of TDS on bank charges. Ld. CIT (A) placed reliance on the binding decision of the Jurisdictional High Court in CIT vs. JDS Apparels (P) Ltd. (supra), wherein it was held as follows: "17. Another reason why we feel Section 40(a)(ia) of the Act should not have been invoked in the present case is the principle of doubtful penalization which requires strict construction of penal provisions. The said principle applies not only to criminal statutes but also to provisions which create a deterrence and results in punitive penalty. Section 40(a)(ia) is a deterrent and a penal provision. It has the effect of penalizing the assessee, who has failed to deduct tax at source and acts to the detriment of the....
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....amonds amounting to Rs. 60,52,691/- through commission agent from various parties and paid the entire amount through proper banking channel. Details and documentary evidences submitted vide letter dated 21-01-2016 including name of the commission agent from whom the diamonds were purchased, copy of bank statement of the respondent company, copy of bank statements of the sellers from the diamonds were purchased, copy of the sellers stock register and other documents. The retraction letter of Mr. Rajendra Jain the alleged entry operator with regard to the accommodation of purchase bills has also been filed before the AO. The Assessing officer rejected the submissions of the assessee and made addition @12.5% on purchases of Rs. 60,51,691/- as the income of the assessee on account of inflation of purchase price of diamonds on purchases from accommodation entry providers. 10. The CIT(A) in its order has held that the disallowance made by the Ld. Assessing officer is not valid as the Assessing officer has accepted the value and quantitative record of purchases and sales duly recorded in the books. No discrepancy has been shown in the audited books. The AO has also not questioned the v....
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....he purchases made by the assessee company have been credited to account of M/s Arihant Exports. iii) Confirmation of account by M/s Arihant Exports. iv) Copy of PAN Card of M/s Arihant Exports. v) Copy of proof of filing of Income Tax Return by M/s Arihant Exports. vi) Copy of Registration Certificate under state VAT of M/s Arihant Exports. vii) Copy of Certificate of Import Export Code (IEC) of M/s Arihant Exports issued by Ministry of Commerce, Govt. of India. viii) Confirmed copy of stock register of M/s Arihant Exports wherein quantitative details of their sale to the assessee company are accounted for. 2. Regarding transactions of purchase from M/s AVI Exports: (i) Copy of relevant portion of Bank Statement of the assessee company in proof of the fact that payments of purchases have been made through proper banking channel. (ii) Copy of the relevant portion of Bank Statement of M/s AVI Exports (ING Vysya Bank Ltd., A/c No.550011028755) in proof of the Fact that Payments of Purchases made by the assessee company have been credited to account of M/s AVI Exports. iii) Confirmation of account....
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....te of Import Export Code (IEC) of M/s Kriya Impex (P) Ltd. issued by Ministry of Commerce, Govt. of India. (viii) Confirmed copy of stock register of M/s Kriya Impex (P) Ltd. wherein quantitative details of their sale to the assessee company are accounted for." 16. Having considered the details filed above, reasoning of the ld. CIT(A) and the retraction statement of Sh. Rajendra Jain, we decline to interfere with the order of the ld. CIT(A) on this issue for the A.Y. 2013-14 and A.Y. 2014-15. ITA No. 6650/Del/2017 Delayed Payment of EPF and ESIC: 17. In view of the decision of the ITAT in ITA No. 1312/Del/2020 for A.Y. 2018-19 in the case of Vedvan Consultants Pvt. Ltd. which are squarely applicable to the facts of the case, the appeal of the revenue on this ground is being allowed. 18. In COs, the assessee has raised the following additional grounds: Additional Ground No. 1 2. On the facts and circumstances of the case, the expenditure incurred by the respondent in relation to Initial Public Offer (IPO) should be allowed u/s 35D in computing tax liability under the provision of the income tax Act. Additional Ground No. 2 ....
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.... 6. In the case of Jute Corporation of India Ltd. v. C.I.T. . this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting....
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....nature described in section 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". 25. The following judgments have been examined. 26. The Hon'ble Bombay High Court in the case of CIT vs. Mahindra Ugine & Steel C. Ltd. wherein it was held as under: "We do not find any merit in the above contention. Section 35D deals with amortisation of certain preliminary expenses. Under Section 35D(1)(ii), it is laid down that after the commencement of the business any expenditure as described in Section 35D(2), which is incurred in connection with the extension of the industrial undertaking or with regard to setting up a new industrial unit then the assessee shall be allowed a deduction at an amount equal to one-tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or the previous year in which expansion of the industrial undertaking is completed, etc. In ....
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....t by the tribunal does not indicate that a finding was recorded to the effect that the expansion of capital was undertaken to meet the need of more working funds. Therefore disallowed and treated as capital expenditure." 32. The Hon'ble Supreme Court in the case of CIT vs. Swaraj Engines Limited [Civil appeal no. 3347 of 2008] where it was held "that on business expenditure on technical knowhow, for the applicability if section 35AB, the nature of expenditure is decided at the threshold. If the expenditure is found to be revenue in nature, then section 35AB will not apply. If the expenditure is found to be capital in nature, then section 35AB will apply." 33. Hence, the claim of the assessee that the expenditure is in the nature of revenue expenses and hence allowable u/s 37(1) of the Act for the years in appeal in computing the total income under the normal provisions of the act as the fund raised is used as working capital by the company except an amount of Rs. 41.02 crores. As the assessee has utilised 92% of receipts on account of public issue on working capital and hence 92% of Rs. 38 crores of share issue expenditure would be revenue expenditure and balance 8% of share ....
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.... DCIT in ITA No.937 & 938/Kol/2018 dated 24.03.2019 wherein it was held that education cess is not tax and is an allowable expenditure. 41. The ld. DR argued that it is not the appropriate forum to raise the issue at this juncture. Since, there is no dispute between the assessee and the Assessing Authorities, a non-dispute cannot be adjudicated. He argued that the education cess is a part of the Income Tax and is a charge on the assessee. Hence, it cannot be treated as expense eligible for deduction. 42. Heard the arguments of both the parties and perused the material available on record. 43. Regarding the claim of education cess as an allowable expenditure, we find that the CBDT vide Circular No. 91/58/66 - ITJ(19) clarified as under: "Interpretation of provisions of Section 40(a)(ii) of the I.T Act - clarification regarding. Section 40(a)(ii) - Recently a case has come to the notice of the Board where the ITO has disallowed the 'cess' paid by the assessee on the ground that there has been no material change in the provisions of Section 10(4) of the old Act and Section 40(a)(ii) of the new Act. 2. The view of the ITO is not correct. Clause 40(a)....
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....n 2(43) of the Act to include only Income-tax, Super Tax and Fringe Benefit Tax (FBT). Provision of the section 2(43) is as given below: "tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA." 48. Surcharge on income-tax finds place in the First Schedule, but that is not the case so far as Education Cess is concerned. Therefore, the education cess on this reasoning cannot be equated as tax or surcharge. Based on this, it can be said that since the word 'Cess' is not specifically included in the definition, it cannot be considered a part of tax, and accordingly, it should not be disallowed in u/s 40(a)(ii) of the Act. 49. Further, we are guided by the judgment of the Constitutional bench which was also referred in the case o....
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....nciples in the aforesaid decision of Apex Court in the case of M/s Dewan Chand Builders (supra), it can be said that the same is not in the nature of tax. Hence, it is allowable as deduction. 52. Further, Provisions of Section 37 are perused which are as under: "37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Explanation 1.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate....