TaxTMI 
TaxTMI 
2022 (10) TMI 1204
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....goodwill - Rs. 6,57,08,884. (ii) Foreign royalty - Rs. 8,47,948. (iii) Disallowance u/s. 14A r.w. Rule 8D - Rs. 6,26,81,738. (iv) Disallowance u/s. 40(a)(ia) (a) In respect of year end provisions - Rs. 21,72,88,675. (b) Business promotion expenses - Rs. 1,44,00,000. (v) Disallowance u/s. 43B - Rs. 4,84,865 (vi) Excess claim of depreciation - Rs. 14,03,28,945. (vii) Disallowance of bad advances written off u/s 36(1)(vii) - Rs. 1,08,36,000. 3. Aggrieved, the assessee filed an appeal before the CIT(Appeals), who gave partial relief to the assessee in terms disallowance made u/s. 14A. The assessee is in appeals before the Tribunal against the order of the CIT(Appeals). Ground no.1 and 2 are general and Ground no.10 is consequential. Hence these grounds do not warrant a separate adjudication. Depreciation on goodwill 4. Ground No.3 raised by the assessee is as follows:- "3. Depreciation on Goodwill; 3.1 The learned CIT(Appeals) erred in confirming the action of the AO in disallowing Depreciation of Rs. 6,57,08,884 on Goodwill arising on acquisition of Karnataka Breweries and Distilleries L....
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....t neither TDS certificates nor actual consideration were received 4.2 The learned CIT(Appeals) erred in confirming the action of the AO in making addition of the withholding taxes deducted by foreign enterprises, disregarding the submission made on the nuances of Section 5 and Section 198 of the Act 4.3 The learned CIT(Appeals) erred in confirming the action of the AO disregarding the judicial decisions cited on the principle applicable to the issue; 4.4 The learned CIT(Appeals) erred in not adjudicating on the alternate ground raised that if the stand of the A.0 is upheld, then the appellant should be allowed credit for the tax withheld, as per the provisions of the applicable DTAA;" 9. During the year, the assessee received royalty from M/s. Independent Distilleries (Aust) Pvt. Ltd., Australia and Independent Distilleries (NZ) Ltd., New Zealand amounting to Rs. 35,81,869 and Rs. 58,39,779 respectively towards sale of Kingfisher Beer. The AO during the course of hearing noticed that the assessee has disclosed only 90% of the royalty amount. The assessee submitted before the AO that the balance 10% was withheld by the payer towards withholding of tax t....
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....ht any new evidence on record before us to substantiate the tax deducted by the payer, in the interest of justice, we are of the view that the assessee should be given an opportunity to produce the evidence. Therefore, we remit the issue back to the AO with a direction to allow credit for the tax paid in foreign countries on the doubly taxed income in accordance with provisions of section 90 /91 r.w. Rule 128 based on the documents / evidences submitted by the assessee in this regard. The assessee is directed to submit the relevant documents and cooperate with the proceedings before the AO. This ground is allowed for statistical purposes. Disallowance u/s. 40(a)(ia) 14. Ground No.5 reads as under:- "5. Disallowance of expenditure u/s 40(a)(ia) 5.1 The learned CIT(Appeals) has erred in confirming the action of the AO in making disallowance under section 40(a)(ia) amounting to Rs. 21,72,88,675 on the ground that TDS was not made on the year end provisions; 5.2 The learned CIT(Appeals) has erred in confirming the action of the AO in making the disallowance without appreciating that there was no requirement of making TDS on year end provisions when no c....
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....'s own case (supra) where it was held as under:- "50. In the present case, we notice that the assessee has furnished the details of subsequent deduction of tax from the year end provisions and the details of payment made before the due date for filing the return of income at pages 528 to 537 of the assessee's PB. In view of the above discussion and respectfully following the decision of the coordinate Bench of this Tribunal supra, we remand this issue back to the AO to verify the details of payments and tax deducted and allow the expenditure where the TDS is remitted to the Government account on or before the due date for filing the return of income. The assessee may be given a reasonable opportunity of being heard." 18. The ld. AR further submitted that in the above order, the Hon'ble ITAT has in principle held that if the assessee has deducted and remitted the tax into the Government account on or before the due date for filing the return of income the expenditure should be allowed and the issue was remitted for the limited purpose of verification of whether the tax is deducted and remitted into Government account on or before the due date for filing the return of....
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....4 for the disallowance u/s. 43B on the ground that no such expenditure was claimed in the P&L account and therefore the disallowance is untenable. The ld. AR also submitted that the AO has accepted the assessee's contention and passed the rectification order u/s. 154 deleting the disallowance and therefore this ground is not pressed for AY 2010-11. In view of the above submissions, we dismiss this ground as not pressed. Disallowance of depreciation 23. Ground No.7 raised by the assessee reads as follows:- "7. Disallowance of depreciation 7.1 The learned CIT(Appeals) has erred in confirming the action of the AO in making disallowance of depreciation to the extent of Rs 14,03,28,945, by holding it as excess claim made by mistake, without appreciating that the appellant has claimed additional depreciation on Plant & Machinery and Energy saving devices as allowed under law; 7.2 The learned CIT(Appeals) has erred in confirming the action of the AO in making disallowance of depreciation without considering the additional depreciation claim made in the electronic return filed by the appellant;" 24. The AO during the course of assessment held that assess....
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.... "8. Disallowance of Business Promotion expenses u/s 40(a)(ia) 8.1 The learned CIT(Appeals) has erred in confirming the action of the AO in making disallowance of Business Promotion expenses of Rs 1,44,00,000 on the ground that non deduction certificate was not available at the time of payment of the aforesaid sums; 8.2 The learned CIT(Appeals) erred in confirming the action of the AO in making the disallowance, without appreciating the fact that the non - deduction certificate was issued to the payee for the sums to be received for the full financial year, which is evident from the certificate; 8.3 The learned CIT(Appeals) erred in confirming the action of the AO in making the disallowance by holding that no deduction certificate is not applicable retrospectively, without appreciating that the certificate was issued for the payment to be received for the full year and hence there was no infirmity in the claim of no deduction on the impugned payments; 8.4 Notwithstanding the above, the learned CIT(Appeals) erred in not appreciating that the proviso to Section 201 are applicable to this case and the disallowance made amounts to double tax....
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.... in the case of Bovis Lend Lease India P. Ltd (supra) has considered a similar issue and held that - "14. Section 197 provides that the certificate shall be issued by the Assessing Officer if he is satisfied that the circumstances of the case justify a lower or nil deduction of tax at source. Satisfaction refers to situation where the element of uncertainty or doubt no longer exists. The expression employed in section 197(1) is 'satisfied'. As per Shorter Oxford English Dictionary, the term 'satisfaction' means 'sufficient information, proof or removal of doubt, conviction, provide with sufficient proof or information, free from doubt or uncertainty, convince'. The usage of the word 'shall' obligates or mandates an Assessing Officer to issue the certificate on being satisfied. The issue of a certificate under section 197(1) presupposes that the Assessing Officer is satisfied that the payments in question justify lower or nil deduction of tax at source. .......... 17. The aspect of "credit" of a sum to the account of the payee or any other account inviting or mandating the deduction of tax at source is not to be regarded as having an all pervasive effect. ....
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.... account of the payee would have already have been made. The law nevertheless visualizes and postulates a fresh application. ......... 39. Even otherwise, Circulars not beneficial are not binding on an assessee. They cannot affect an assessee in an adverse manner - UCO Bank v. CIT [1999] 237 ITR 8891 (SC). There is no mandate of law that the application has necessarily to be made before credit or payment. To that extent, the Circular is not to be regarded as binding and, hence, liable to be ignored." 37. In assessee's case, we notice that assessee has made three payments to the same payee on 14.4.2009 and 22.4.2009. We also notice that the AO has considered the certificate issued u/s. 197(1) for the payment made on 22.4.2009 since the certificate is dated 20.4.2009. However the AO did not consider the certificate for payment made on 14.4.2009. On perusal of the certificate, we notice that the same is issued for payments expected to be received during the FY 2009-10. The extract of certificate is given below:- 38. From the above, it is clear that certificate is issued for payments pertaining to FY 2009-10 and the impugned payment is made on 14.4.2009 falls wi....
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....t the major amount of disallowance is towards amount paid to Al Tajir Glass was towards purchase of blow moulds and therefore is an advance towards purchase of capital asset. The ld DR contended that the advance given towards purchase of the capital asset cannot be written off as revenue expenditure and in this regard relied on the decision of the coordinate Bench in the case of Velankini Information Systems Ltd. v. DCIT, ITA No.156/Bang/2017. 44. We have heard the rival submissions and perused the material on record. We notice that the assessee has submitted the break-up of the bad advances while filing Form 35 itself as per details given below:- "Disallowance of Bad Advance: The details are given below: Amount Narration 87,05,700.00 Amount paid to Al Tajir Glass as advance for making the blow moulds of bottles for new products like Buzz etc. vide BP/BDV/APR08 /0782, BP/BDV/FEB09/0767 AND BP/BDV/FEB09/0768 - WRITTEN OFF 9,358.00 BALANCE in Loan to Staff/Workmen as at 31.3.10 WRITTEN OFF 19,436.00 OTHER STAFF ADVANCES NOT RECOVERABLE WRITTEN OFF AS AT 31.03.10 82,054.00 VEHILCE LOAN BALANCES OF LEFT CASES AS AT 31.03.10 WRITT....
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....come Tax Rules and the issue is remitted to the AO to allow credit for the tax paid in foreign countries, provided the assessee is able to substantiate the same. The facts being identical we hold accordingly for the AY 201112 also. 51. Ground No.5 is regarding disallowance of expenditure u/s. 40(a)(ia) on the year end provision. This issue has also been dealt with for AY 2010-11 wherein it was held that the expenditure is allowable where tax is deducted and the same is remitted to the Govt. account on or before the due date for filing the return of income u/s. 139(1). The ratio laid by the coordinate Bench of the Tribunal in assessee's own case (supra) where the decision in the case of Biocon Ltd. v. DCIT in ITA No.1248/Bang/2014 is followed and order of AO passed u/s. 201(1) was considered while holding as above. For the year under consideration also, the ld AR submitted that the AO has passed order u/s. 201(1) where no tax was levied u/s. 201(1) on the basis of verification of details pertaining to subsequent tax deduction and payment into Government account. Therefore the ld AR prayed that the disallowance be deleted for AY 2011-12 also. We have in earlier part of the order h....