TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 263
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....7, CO. No. 28/Viz/2022 I.T.A. No.324/Viz/2017, I.T.A. No.399/Viz/2014, I.T.A. No.67/Viz/2021, C.O. No.51/Viz/2021 I.T.A. No. 67/Viz/2021, I.T.A. No.49/Viz/2021, C.O. No.50/Viz/2021 I.T.A. No. 49/Viz/2021 Shri Duvvuru Rl Reddy, Hon'ble Judicial Member And Shri S Balakrishnan, Hon'ble Accountant Member For the Assessee : Sri GVN Hari, AR For the Revenue : Sri MN Murthy Naik, CIT-DR ORDER PER BENCH : ITA No. 25/Viz/2014 & ITA No. 26/Viz/2014 (Assessee's Appeals) The captioned appeals are filed by the assessee against the order of the Ld. Commissioner of Income Tax-1, Visakhapatnam [Ld. CIT-1] passed U/s. 263 of the Income Tax Act, 1961 [the Act] vide F.No. CIT-1/VSP/263/2013-14, dated 21/11/2013 and F.No. CIT-1/VSP/263/2013-14, dated 21/11/2013 for the AYs 2010-11 and 2011-12 respectively. Since the issues raised in both the appeals are identical, we shall first take up ITA No. 25/Viz/2023 as a lead appeal. ITA No. 25/Viz/2014 (By assessee) AY: 2010-11 2. Briefly stated the facts of the case are that the assessee is a Port Trust which came into existence under the Major Port Trust Act, 1963 and has been carrying on commercial activities and services of a port and allied fac....
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..... Leave Encashment 4,44,91,804 Upto 2007-08 Upto 2008-09 5,09,64,466 3. The Ld. CIT-1, Visakhapatnam observed that since the assessee has been granted registration U/s. 12A of the Act up to the AY 2007-08, the entire income of the assessee was exempted from income tax. Therefore, the Ld. CIT-1, Visakhapatnam observed that in the light of the provisions of section 14A of the Act, the expenditure of Rs. 5,09,64,466/- pertaining to the AY 2007-08 and earlier assessment years, where exemption u/s 11 was claimed by the assessee, the expenditure pertaining to those assessment years clearly disqualified for being granted deduction on payment basis U/s. 43B of the Act on the reasoning that such disallowance made in the earlier years in the respective computation of income of the assessee did not materially affect the non-taxable status of the assessee which claimed and enjoyed the total exemption from taxation on account of its status as a Charitable Trust / institution. The Ld. CIT-1, Visakhapatnam observed that allowing the deduction of expenditure relating to the earlier assessment years during the AY 2010-11 amounted to grant of double benefit to t....
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....levant assessment year. 6. The Ld. CIT ought to have appreciated that view taken by the Assessing Officer to allow the above sum of expenditure is one of the possible views and hence the order of the Assessing Officer cannot be terms as erroneous. 7. The Ld. CIT erred in observed that the appellant admitted excess claim of deduction to the extent of Rs. 4,21,233/- and directing the Assessing Officer to consider initiation of penalty proceedings U/s. 271(1)(c) of the Act in respect of this amount. 8. The Ld. CIT ought to have appreciated that the above sum of Rs. 4,21,233/- pertains financial year 2008-09 in respect of which the appellant did not claim any exemption and such the provisions of section 14A are not at all applicable in respect of this amount even as per the view taken by the Ld. CIT. 9. Any other ground that may be urged at the time of appeal hearing." 5. As per the grounds of appeal raised by the assessee, we find that the core issue is with respect to disallowance of Rs. 5,09,64,466/- U/s. 14A of the Act. 6. The Ld. AR in his written submissions filed before us has stated that the assessee is eligible to claim deduction U/s. 43B of the Act on payment basis ....
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....CIT vs. Chettinad Logistics Pvt Ltd [2017] 248 Taxamn 0055 (Madras) (ii) Order of the Hon'ble ITAT in the case of D. Veerabhadra Reddy (HUF) in ITA No. 263/Viz/2014, dated 23/06/2017. (iii) Malabar Industrial Co. Ltd vs. CIT [2000] 243 ITR 83 (SC) (iv) CIT vs. Small Industries Development Bank of India [2012] 211 Taxman 341 9. The Ld. AR therefore pleaded that the order of the Ld. CIT-1, Visakhapatnam may be quashed. Per contra, the Ld. Departmental Representative (Ld DR) relied on the orders of the Ld. PCIT and argued in support of the same. 10. We have heard both the sides and perused the material available on record as well the orders of the Ld. Revenue Authorities. In the instant case, we find that there was a complete scrutiny assessment with respect to the AY 2010-11 wherein various details were called for by the Ld. AO before concluding the assessment order U/s. 143(3) of the Act. The Ld. AO in his detailed order has made various disallowances U/s. 14A of the Act and further has also observed that certain expenses as described U/s. 43B are allowed in the year of payment only. From this observation of the Ld. AO which was also relied on by the Ld. AR, we find that th....
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....aim of deduction U/s. 43B of the Act. We find merit in the submissions of the Ld. AR that this expenditure pertains to the AY 2009-10 whereas the Ld. CIT-1, Visakhapatnam has considered it as an expenditure pertaining to the AY 2007-08 and earlier years. Since the order of passed U/s. 263 by the Ld. CIT-1, Visakhapatnam is quashed as per the preceding paragraphs of this order, this ground raised by the assessee needs no separate adjudication and hence this ground is dismissed as infructuous. 12. In the result, appeal of the assessee (ITA No. 25/Viz/2014) is allowed. ITA No.26/Viz/2014 (By assessee) AY: 2011-12 13. This appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax-1, Visakhapatnam [Ld. CIT-1] passed U/s. 263 of the Income Tax Act, 1961 [the Act] vide F.No. CIT- 1/VSP/263/2013-14, dated 21/11/2013 for the AY: 2011-12. 14. The assessee has raised the following grounds of appeal: "1. The order of the Ld. CIT is contrary to the facts and also the law applicable to the facts. 2. The Ld. CIT is not justified in invoking the provisions of section 263 of the Act in as much as the order of the Assessing Officer U/s. 143(3) of the Act is neithe....
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....mpted U/s. 11 of the Act. Consequent to amendment to section 2(15) of the Act, the assessee filed its return of income for the AY 2009-10 onwards admitting its income under the head 'business income'. Further, the registration U/s. 12AA of the Act was cancelled w.e.f 1/4/2009 vide proceedings of the Ld. CIT-1, Visakhapatnam dated 11/09/2012. The assessee filed its return of income for the AY 2010-11 on 29/9/2010 admitting a total income of Rs. 81,20,30,260/-. The case was selected for scrutiny under CASS and accordingly notice U/s. 143(2) dated 5/9/2011 was issued and served on the assessee on 8/9/2011 by the DCIT, Circle-1(1), Visakhapatnam. The assessee in response to the notice, filed a revised return of income admitting the same income however, by claiming a higher TDS credit. Thereafter, the case has been assigned to the Addl. CIT, Range-1, Visakhapatnam by the Ld. CIT-1, Visakhapatnam vide letter in F.No. CIT-1/CAP/Security/2012-13, dated 31/7/2012. Thereafter, notice U/s. 143(2) and 142(1) of the Act dated 29/08/2012 were issued afresh and duly served on the assessee on the same date. In response to the notices, the assessee's Authorized Representative appeared from time to ....
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....the impugned assessment year and hence it is not a prior period expenditure. (c) Alternatively the Ld. CIT (A) ought to have held that the AO having chosen to consider for taxation prior period income of Rs. 2,83,04,075/- is not justified in disallowing prior period expenses. 3. (a) The Ld. CIT(A) is not justified in confirming the disallowance of arrears of salaries & wages amounting to Rs. 14,71,75,096 and arrears of pension amounting to Rs. 14,63,03,516. (b) The Ld. CIT(A) erred in holding that the above expenses are to be disallowed U/s. 14A of the Act. (c) The Ld. CIT(A) ought to have appreciated that the above expenses crystallized during the impugned assessment year and that in the absence of any exempted income for the impugned assessment year, provisions of section 14A are not applicable. 4. (a) The Ld. CIT(A) is not justi8fied in confirming the disallowance of alleged excess depreciation of Rs. 5,20,74,400/- claimed in respect of capital dredging. (b) The Ld. CIT(A) ought to have appreciated that capital dredging is a plant and machinery and hence the appellant is entitled for depreciation @ 15% as against 10% allowed by the Assessing Officer. 5. (a) The Ld.....
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....as been arrived between the Major Ports and All India Port & Dock Workers Federation (HMS). The Ld. AR also referred to Wage Settlement Memorandum and stated that the arrears due to the employees / workers have been agreed w.e.f 1/1/2007 onwards. The Ld. AR further submitted that this Wage Settlement was signed on 19/1/2010 and hence the arrears payable w.e.f 1/1/2007 has been provided in the books of account during the AY 2010-11. The Ld. AR relied on the various case laws as submitted in the paper book. Per contra, the Ld. DR fully supported the order of the Ld. Revenue Authorities. 23. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. We find from the submissions made by the Ld. AR that the Memorandum of Wage Settlement was signed on 19/1/2010 giving retrospective effect from 1/1/2007. The Memorandum of Settlement which was arrived at U/s. 12(3) of the Industrial Disputes Act, 1947 between the Five Major Federations operating in Major Port Trusts and Dock Labour Boards and the Management. Further, we also find that AS-5 issued by the ICAI clearly defines prior period items as follows: "Prior period....
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.... Revenue Authorities and stated that since the expenditure pertains to the earlier years where the assessee is entitled for exemption U/s. 11 of the Act, this expenditure needs to be disallowed U/s. 14A of the Act in the current assessment year. 26. We have heard both the parties and perused the material available on record as well as the orders of the Ld. Revenue Authorities.We find from the submissions made by the Ld. AR that the Memorandum of Wage Settlement was signed on 19/1/2010 giving retrospective effect from 1/1/2007. The Memorandum of Settlement which was arrived at U/s. 12(3) of the Industrial Disputes Act, 1947 between the Five Major Federations operating in Major Port Trusts and Dock Labour Boards and the Management. Further, we also find that AS-5 issued by the ICAI clearly defines prior period items as follows: "Prior period items are defined as income or expenses which arise in the current period as a result of errors or omission in the preparation of the financial statements of one or more periods". 27. However, in the instant case, the assessee is following the mercantile system of accounting. These items of prior period expenses raised in the grounds are crys....
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.... Hon'ble High Court of Bombay in the case of CIT vs. Mazagaon Dock Ltd reported in [1994] 206 ITR 260 (Bom.). 29. We have heard both the parties and perused the material available on record and the orders of the Ld. Revenue Authorities. Admittedly, the assessee has incurred expenditure of capital dredging on which the assessee claimed depreciation @ 15% considering the capital dredging as "Plant & Machinery". The Ld. AO disallowed the excess depreciation claimed by the assessee and observed that the assessee is entitled for depreciation @ 10% on capital dredging as it has to be considered as "buildings". We also find that the Ld. CIT(A) by relied on the decision of the Hon'ble High Court of Bombay in the case of CIT vs. Mazagaon Dock Ltd (supra) wherein it was held as under: "11. On a careful consideration of the rival submissions of the counsels for the parties, we find ourselves in agreement with the counsel for the revenue that the approach channel made by dredging the sea is more akin to 'road' than 'plant'. We are not impressed by the submission of the learned counsel for the assessee that judging from functional test the approach channel constructed by dredging the sea can....
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....view of the matter, we do not find any force in the submission of the counsel for the assessee that the approach channel should be treated not as 'road' but 'plant'. In our opinion, the distinction sought to be made between the Supreme Court case and the present case is not well-founded. Accordingly, we hold that the approach channel constructed by dredging the sea is at par with the roads and culverts constructed in the factory premises and the depreciation allowable at the rates applicable to the factory will be allowable thereon. It cannot be held to be 'plant' as contended by the assessee. In that view of the matter, question No. 2 referred to us is answered in the negative, i.e., in favour of the revenue and against the assessee. The other three questions have already been answered in favour of the assessee and against the revenue by us earlier. This reference is, therefore, disposed of accordingly. On the facts and circumstances of the case, we make no order as to costs." 30. After taking into account the facts of the instant case, we find that the ship way constructed for dredging is on par with the construction of roads and culverts constructed in the premises of the facto....
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....e Ld. AO in the case of P.L. Ganapathi Rao & ANR vs. CIT [2006] 285 ITR 501 (AP), cash basis accounting system was followed. Further, the Ld. AR also in his written submissions stated that the Ld. Assessing Officers in the earlier assessment years have accepted the amortization of income and without prejudice an amount of Rs. 9,14,57,284/- which was received in earlier years as upfront premium and accrued as income proportionately during the current AY, cannot be subjected to tax in the impugned assessment year. Per contra, the Ld. DR in his written submissions relied on the decision of the ITAT, Bangalore Bench in the case of New Mangalore Port Trust vs. ACIT, Circle-1(1), Mangalore reported in [2016] 65 taxmann.com 210 (Bangalore-Trib). The Ld. DR refered to para 9.4 of the said order wherein it was stated that under similar circumstances, the consideration received by the assessee in that case as upfront premium for 30 years was considered as revenue receipt. Countering the arguments of the Ld. DR, the Ld. AR referred to para 9.4 and submitted that in the said para 9.4 it was clearly mentioned that "this upfront premium amount is admittedly non-refundable amount irrespective of....
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....'s case (supra): "...A taxpayer is free to employ, for the purpose of his trade, his own method of keeping accounts, and for that purpose to value his stock-in- trade either at cost or market price. A method of accounting adopted by the trader consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping account or of valuation. The method of accounting regularly employed may be discarded only if, in the opinion of the taxing authorities income of the trade cannot be properly deduced therefrom. Valuation of stock at cost is one of the recognized methods. No inference may, therefore, arise from the employment by the company of the method of valuing stock at cost, that the stock valued was not stock-in-trade...." (p. 537) The alternative plea made by the Ld. AR in his written submissions wherein an amount of Rs. 9,14,57,284/- which was credited to the P & L Account in respect of proportionate upfront premium received on lease of land in earlier years, then the Revenue authorities should have adopted similar treatment upfront lease premium declared as income during the impugned assessment yea....
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....Thus, we do not want to interfere in the order of the Ld. Revenue Authorities. 36. With respect to the additional ground raised by the assessee, the Ld. AR did not press this ground and therefore the same is dismissed as infructuous. 37. In the result, appeal of the assessee (ITA No. 396/Viz/2014) is partly allowed: C.O. No. 26/Viz/2022 (By Revenue) (AY:2010-11) 38. This Cross Objection is raised by the Revenue against the additional ground raised by the assessee. Since the additional ground raised by the assessee in its appeal ITA No. 396/Viz/2014 (AY 2010-11) is not pressed by the assessee, the adjudication of the Cross Objection raised by the Revenue with respect to allowability of additional ground becomes infructuous. Accordingly, the grounds raised by the Revenue in its CO are dismissed as infructuous. 39. In the result, CO raised by the Revenue is dismissed as infructuous. ITA No. 397/Viz/2014 (By assessee) (AY: 2011-12) 40. This appeal filed by the assessee against the combined order of Ld. Commissioner of Income Tax (Appeals), Visakhapatnam in ITA No.0266/12-13/Addl.CIT, R-1/VSP/13-14 & ITA No. 0362/12-13/ACIT,C-1/VSP/2013-14 dated 28/03/2014 arising out of the or....
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....nd after discussing the case with the Ld. AR, the Ld. CIT(A) partly allowed the appeals of the assessee for the AY 2010-11 & 2011- 12. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us by raising the following grounds of appeal: "1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts. 2. (a) The Ld. CIT(A) is not justified in confirming the disallowance of prior period expenses of Rs. 3,82,46,499/- U/s. 14A of the Act. (b) The Ld. CIT(A) ought to have appreciated that the above expenses crystallized during the impugned assessment year and that in the absence of any exempted income for the impugned assessment year, provisions of section 14A are not applicable. (c) The Ld. CIT(A) ought to have considered the fact that the prior period expenses included a sum of Rs. 3,87,63,120/- towards reversal of income offered to tax for the AY 2009-10 and hence this amount could not be disallowed U/s. 14A of the Act. (d) The Ld. CIT(A) ought to have appreciated that expenditure to the extent of Rs. 37,55,082/- crystallized during the impugned assessment year and hence the same cannot be considered as prior period expe....
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.... & Machinery instead of treating it as Buildings. This issue has already been decided in ITA No. 396/Viz/2014 vide Ground No.4 and our decision given therein applies mutatis mutandis to issue involved in Ground No. 3 of ITA No. 397/Viz/2014 also. Accordingly, this ground raised by the assessee with respect to excess claim of depreciation in respect of capital dredging is dismissed. 47. With respect to Ground No.4 wherein the Ld. Revenue Authorities confirmed the addition of Rs. 54,86,32,514/- towards upfront premium received on lease of lands, we find that this issue is identical to that of the issue raised by the assessee in its appeal ITA No.396/Viz/2014 (Ground No.5) for the AY 2010-11. Since the facts and circumstances pertaining to this issue in both the appeals ie., ITA No. 396/Viz/2014 and ITA No. 397/Viz/2014 are same, our decision given while adjudicating the issue with respect to addition made by the Ld.AO and confirmed by the Ld. CIT(A) towards upfront premium received on lease of lands in ITA No. 396/Viz/2014 (AY: 2010-11) mutatis mutandis applies to the similar issue involved in Ground No.4 of ITA No. 397/Viz/2014 also. Hence, we hereby allowed the grounds raised by t....
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..../s. 36(1)(iv) of the Act, the same is allowable U/s. 37 of the Act. The Tribunal in the above case had followed the decision of this Court in the matter of Commissioner of Income Tax vs. Western India Paper and Paperboard Private Limited reported in 189 ITR 309. 4. In view of the above, we see no reason to entertain the question of law as proposed as the assessee in any view of the matter is entitled to the deduction U/s. 37 of the Act. Therefore, the question as raised is academic." 50. From the judicial pronouncements as relied on by the Ld. AR as extracted above, we find that the Hon'ble High Court of Bombay has held that even if the expenditure is not allowable U/s. 36(1)(iv) of the Act, but the same is allowable U/s. 37 of the Act. Respectfully following the above decision, we are inclined to allow the contribution to Pension Fund in excess of 27% on account of salaries, wages and pension U/s. 37 of the Act and hence this ground raised by the assessee is allowed. Since, the expenditure is allowed on contribution basis, we are of the opinion that the provisions of section 43B of the Act are not applicable. It is ordered accordingly. 51. The additional ground raised by the a....
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....Ld. AO, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee made various written submissions. The Ld. CIT(A) after considering the submissions, partly allowed the appeal directing the Ld. AO to make an addition of Rs. 8,47,67,472/-. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us by raising the following grounds of appeal: "1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts. 2. The Ld. CIT(A) is not justified in sustaining the addition of following amounts made by the AO towards disallowance U/s. 14A of the Act. (a) Gratuity - Rs. 2,75,84,078/- (b) Provident Fund - Rs. 5,71,83,394/- 3. The Ld. CIT(A) ought to have appreciated that the above amounts are to be allowed U/s. 43B of the Act. 4. Any other ground that may be urged at the time of appeal hearing." 57. At the outset, we find that the assessee has agitated before us in ITA No.25 & 26/Viz/2014 (AY 2010-11 & 2011-12) regarding the powers exercised by the Ld. CIT U/s. 263 of the Act. We have adjudicated that appeal in ITA No.25/Viz/2014 (AY: 2010-11) in favour of the assessee by quashing the order of the L....
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....d the submissions as called for. The Ld. AO after discussing the facts and examining the books of accounts, submissions of the assessee, completed the assessment U/s. 143(3) of the Act by making the following additions: Sl No Nature of addition Amount (Rs.) 1. Upfront premium added as income as per Para-4 26,39,48,118 2. Disallowance of excess claim of depreciation as per para-5 5,16,08,835 3. Disallowance of donation and contribution as per para-6 1,56,99,298 4. Disallowance of excess claim on account of 'contribution to pension fund' as per para 7 4,57,93,453 61. Aggrieved by the order of the Ld.AO, the assessee filed an appeal before the Ld. CIT(A)-1, Visakhapatnam. After considering the submissions made by the assessee from time to time and after discussing the case with the Ld. AR, the Ld. CIT(A) partly allowed the appeal of the assessee for the AY 2015-16. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us by raising the following grounds of appeal: "1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 26,....
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....z/2014 vide Ground No.4.Since the facts and circumstance of the case as well as the issue involved in both the appeals are identical our decision given on Ground No.4 of the assesse's appeal in ITA No. 396/Viz/2014 mutatis mutandis applies to the Ground No.3 of the instant appeal (ITA No.235/Viz/2020) also. Accordingly, we hereby confirm the order of the Ld. Revenue Authorities on this ground and thereby dismissed the grounds raised by the assessee. 66. Ground No.4 is with respect to with respect to sustenance of addition of Rs. 1,49,325/- being the expenditure incurred towards donations and contributions. Before us, the Ld. AR submitted that the assessee has incurred contribution to the Major Ports Sports Council Board (MPSCB) and also expenditure on compassionate grounds, disaster management plant, cultural activities, Teacher's Day celebrations etc. The Ld. AR submitted that Rs. 1,55,49,973/- was incurred towards contribution to the MPSCB stands for other expenditure. The Ld. AR therefore pleaded that the other expenditure is also in connection with the business activities of the assessee and therefore it should be allowed. Per contra, the Ld. DR relied on the of the Ld. Reven....
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.... In the result, appeal filed by the assessee (ITA No.235/Viz/2020) is partly allowed. ITA No. 325/Viz/2017 (By Assessee) (AY: 2012-13) 70. This appeal filed by the assessee is directed against the order passed by the Ld. CIT(A)-1, Visakhapatnam in ITA No. 144/2015-16/AC,C-1(1),VSP/2016-17, dated 13/3/2017 arising out of the order passed U/s. 154 of the Income Tax Act, 1961 [the Act] for the AY 2012-13. 71. The brief facts of the case are that the Ld. AO while passing the order U/s. 143(3) of the Act dated 23/3/2015 for the AY 2012-13 disallowed a provision for payment of gratuity for Rs. 30.17 Crs U/s. 40A(7) of the Act. The Ld. AO observed that this amount of Rs. 30.17 Crs was quantified by the Statutory Auditors in Point No. 17B(i) of Form-3CD as not allowable as deduction U/s. 40A(7) of the Act. The Ld. AO observed that while passing the order U/s. 143(3) this was not disallowed which is a mistake apparent from record and therefore issued a notice U/s. 154 of the Act. In response, the assessee submitted that to match with the actuarial liability of gratuity fund of Rs. 133.03 Crs, an addition contribution of Rs. 30.17 Crs was made in addition to the contribution made @ 8.33%....
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....ovision for payment of Gratuity for Rs. 30.17 Crs which is beyond the scope of the rectification U/s. 154 of the Act. Before us, the Ld. AR reiterated the submissions made before the Ld. Revenue Authorities and stated that the contribution to Gratuity Fund in addition to the ordinary contributions shall be allowed as deduction U/s. 37(1) of the Act. Alternatively, the deduction shall also be otherwise allowable U/s. 43B of the Act. The Ld. AR pleaded before us that since there was non-availability of funds to match the actuarial liability during the initial period when the Gratuity Fund was approved by the Ld. CIT during the AY 2002-03, the assessee could not make contributions initially and therefore has made contribution of Rs. 30.17 Crs during the impugned assessment year. The Ld. AR therefore pleaded that this shall be allowed as an expenditure. Per contra, the Ld. DR relied on the orders of the Ld. Revenue Authorities. 74. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. It is admitted fact that the assessee has made contribution towards Gratuity fund during the year in addition to the contributio....
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....gistration U/s. 12AA of the Act was cancelled w.e.f 1/4/2009 vide proceedings of the Ld. CIT-1, Visakhapatnam dated 11/09/2012. The assessee filed its original return of income for the AY 2016-17 on 13/10/2016 admitting NIL income. Subsequently, the assessee filed revised return of income for the AY 2016-17 on 22/03/2017 admitting NIL income. The case of the assessee was selected for scrutiny under CASS. Accordingly, notice U/s. 143(2) of the act was issued on 17/7/2017 which was duly served on the assessee on 25/07/2017. A notice U/s. 142(1) of the Act dated 9/2/2018 was issued which was duly served on the assessee on 15/2/2018. Due to change in incumbent, notice U/s. 143(2) of the act was issued through ITBA module on 14/08/2018. Thereafter a notice U/s. 1242(1) of the Act calling for certain information was also issued to the assessee on 31/8/2018. Thereafter, a show cause notice dated 9/11/2018 was also issued to the assessee through online. In response, the assessee filed the submissions / information through e-proceedings module from time to time. After examining the relevant information / written submissions filed by the assessee through ITBA module, the Ld. AO completed the....
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.... Act, 1961?" 81. Grounds No. 1 & 5 are general in nature and therefore they need no adjudication. 82. With respect to Ground No.2 wherein the Ld. Revenue Authorities confirmed the addition of Rs. 212,96,25,561/- towards upfront premium received on lease of lands, we find that this issue is identical to that of the issue raised by the assessee in its appeal ITA No.396/Viz/2014 (Ground No.5) for the AY 2010-11. Since the facts and circumstances pertaining to this issue in both the appeals ie., ITA No. 396/Viz/2014 and ITA No. 236/Viz/2020 are same, our decision given while adjudicating the issue with respect to addition made by the Ld.AO and confirmed by the Ld. CIT(A) towards upfront premium received on lease of lands in ITA No. 396/Viz/2014 (AY: 2010-11) mutatis mutandis applies to the similar issue involved in Ground No.2 of ITA No. 236/Viz/2020 also. Hence, we hereby allow the grounds raised by the assessee on this issue. 83. Ground No.3 raised by the assessee is with respect to disallowance of excess depreciation of Rs. 10,11,32,350/- on treating the capital dredging as Plant & Machinery instead of treating it as Buildings. This issue has already been decided in ITA No. 396/V....
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....rrowing, or (da) any sum payable by the assessee as interest on any loan or borrowing from [a deposit taking non-banking financial company or systemically important non-deposit taking non-banking financial company], in accordance with the terms and conditions of the agreement governing such loan or borrowing, or (e) any sum payable by the assessee as interest on any loan or advances from a scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank in accordance with the terms and conditions of the agreement governing such loan or advances, or" 86. Further, the Explanation-4 to section 43B of the Act is also extracted below: "Explanation 4.-For the purposes of this section,- 4. "public financial institutions" shall have the meaning assigned to it in section 4Aof the Companies Act, 1956 (1 of 1956); (aa) "scheduled bank" shall have the meaning assigned to it in the Explanation to clause (iii) of sub-section (5) of section 11; (b) "State financial corporation" means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of th....
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....mpany"; "micro enterprise" etc., have been defined. The intention of the Legislature is to disallow the interest if not paid within due date and remains payable to the above entities. Nowhere in the Explanation-4 to section 43B of the Act, the term "Government of India" has been used. 88. Further, from the case law relied on by the Ld. AR the Head Note is reproduced below: "III. Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment [Interest on unsecured loan] Assessment year 2002-03 - Assessee had received a loan from State Government for purpose of distribution of dearness allowance which could not be paid to employees before prescribed date - Deduction on account of short provision of DA arrears of employees in accounts was claimed by assessee but same was disallowed by Assessing Officer - Whether since section 43B is not applicable to interest on Government loans and for DA arrears of employees, assessee's claim was to be allowed - Held, yes [Para 11] [In favour of assessee]" 89. In the instant case the interest is payable on loans taken from Government of India. In our opinion interest payable on loans tak....
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....he then ACIT, circle-1(1), Visakhapatnam which was duly served on the assessee. Subsequently, the case was assigned to Addl. CIT, Range-1, Visakhapatnam vide order U/s. 120(4)(b) of the Act by the then CIT-1, Visakhapatnam in F.No. Tech/120(4)(b)/CIT-1/VSP/2013-14, dated 24/10/2013. Due to change in the incumbency, the statutory notice U/s. 143(2) dated 29/11/2013 and notice U/s. 142(1) dated 29/11/2013 along with questionnaire calling for certain information / details were issued by the then Addl. CIT, Range-1, Visakhapatnam which were duly served on the assessee. As per the direction of the Ld. CIT-1, Visakhapatnam vide his letter dated 22/09/2014 and due to change in incumbency, the statutory notice U/s. 143(2) dated 20/11/2014 and notice U/s. 142(1) along with questionnaire calling for certain information / details were issued and duly served on the assessee. In response, the Authorized Representative of the assessee appeared and filed the submissions as called for from time to time. After discussing the facts of the case and examining the books of accounts, the Ld. AO completed the assessment by making the following disallowances: Sl No Nature of addition Amount (Rs.) 1. ....
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.... the Income Tax Act, 1961?" 96. Grounds No. 1 and 7 are general in nature and therefore they need no adjudication. 97. With respect to Ground No.2 wherein the Ld. Revenue Authorities confirmed the addition of Rs. 3,07,59,772/- towards upfront premium received on lease of lands, we find that this issue is identical to that of the issue raised by the assessee in its appeal ITA No. 396/Viz/2014 (Ground No.5) for the AY 2010-11. Since the facts and circumstances pertaining to this issue in both the appeals ie., ITA No. 396/Viz/2014 and ITA No. 324/Viz/2017 are same, our decision given while adjudicating the issue with respect to addition made by the Ld.AO and confirmed by the Ld. CIT(A) towards upfront premium received on lease of lands in ITA No. 396/Viz/2014 (AY: 2010-11) mutatis mutandis applies to the similar issue involved in Ground No.2 of ITA No. 324/Viz/2017 also. Hence, we hereby allowed the ground raised by the assessee on this issue. 98. Ground No.3 pertains to disallowance of excess depreciation of Rs. 1,34,42,478/- as claimed by the assessee in respect of capital dredging. This issue identical to that of the issue raised by the assessee in its appeal ITA No. 396/Viz/201....
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....ssessee which is extracted herein below: "In the instant case, the business of the appellant is of giant proportion and therefore the principle enunciated by the Delhi High Court is fully applicable to the facts of the case of the appellant. The nature of expenses is recurring in a big organization like the appellant as there would be various bills pending for processing and even submissions of the bills would delayed even though advances would have been taken in different accounting years particularly by the employees. Expenditure incurred in the earlier years which could not be claimed in the relevant years on account of errors in accounting and claimed in subsequent year in which such error is rectified cannot be disallowed merely on the ground that it does not relate to the year of account particularly when occurring of such error is usual and common in large organizations like that of the appellant. The genuineness of these expenditures have not been disputed at any stage by the Assessing Officer. Moreover, the accounts of the appellant have been audited by the External Auditors. The External Auditors have made their annual report U/s. 227(2) of the Companies Act, 1956 to th....
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.... Security Fund. This being a provision shall be allowed in the year of payment, in accordance with the provisions of section 43B of the Act. The Ld. CIT(A) in para 9.4 of his order has held as follows: "9.4. The AR was asked to furnish the details of the contributions made. In response, the AR submitted that breakup: as per which Rs. 50,12,435/- was contributed towards assessee's share to Indian Port Association, Rs. 1,00,000/- was contributed to East Coast Port Vision Seminar, Rs. 80,000/- towards 150th Jayanthi Gurudev Rabindranath Tagore and it was represented that these contributions are more in the nature of publicity & not donations. I find that these expenditure are allowable U/s. 37 of the Act. In regard to the remaining amount, it was seen provision to the tune of Rs. 28,79,099/- was made to VPT employees family security fund. I find that this is merely a provision and as such not allowable. Therefore, the disallowance to the tune of Rs. 28,79,099/- is upheld." 104. The Ld. CIT(A) has therefore rightly considered the disallowance being the provision made in the books of account and hence we find no infirmity in the order of the Ld. CIT(A) on this ground and accordingly ....
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....in theHon'ble High Court of Bombay has held that even if the expenditure is not allowable U/s. 36(1)(iv) of the Act, but the same is allowable U/s. 37 of the Act. Respectfully following the above decision, we are inclined to allow the contribution to Pension Fund in excess of 27% on account of salaries, wages and pension U/s. 37 of the Act and hence this ground raised by the Revenue is dismissed. Since, the expenditure is allowed on contribution basis, we are of the opinion that the provisions of section 43B of the Act are not applicable. It is ordered accordingly. Thus, the Grounds raised by the Revenue are dismissed. 111. In the result, appeal of the Revenue (ITA No. 399/Viz/2014) is dismissed. ITA No.67/Viz/2021 (By Revenue) (AY: 2016-17) 112. This cross appeal is filed by the Revenue against the order of the Ld.CIT (A)-1, Visakhapatnam in ITA No. 10269/2018- 19/VSP/2020-21, dated 21/09/2020 arising out of the order passed U/s. 143(3) of the Act for the AY 2016-17. 113. Briefly stated the facts of the case are that the assessee is a Port Trust came into existence under the Major Port Trust Act, 1963 and has been carrying on commercial activities and services of a port and a....
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....d after discussing the case with the Ld. AR, the Ld. CIT(A) partly allowed the appeal of the assessee for the AY 2016-17. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us by raising the following grounds of appeal: "9. The order of the Ld. CIT(A) is erroneous on facts and in law. 10. The Ld. CIT(A) is not justified in restricting the rate of depreciation to 10% as against 15% (sic) in respect of depreciation Railway Permanent Way as the railway track is an integral unit of the system for carrying out materials for loading and unloading up to the railway siding of Indian Railways and accordingly railway permanent way should be treated as roads on par with buildings, which are entitled for depreciation at 10% only instead of 15%. 11. The Ld. CIT(A) is not justified in allowing the "prior period expenditure" of Rs. 86,96,880/- as these expenses did not pertain to the subject year and is as such not allowable for AY 2016-17. The expenditure is allowable in the year to which it relates. Except certain expenses eg., described U/s. 43B, the same are allowed in the year of payment only. The expenditure of prior period are allowed in the year of payment onl....
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....onsidering the Railway Permanent Way as "plant and machinery" and accordingly allowed the depreciation @ 15%. Since the decision of the Ld. CIT(A) was not challenged by the Revenue, we are inclined to uphold the order of the Ld. CIT(A) in the instant case and accordingly we do not find any infirmity in the order of the Ld. CIT(A) on this issue. Thus, this ground raised by the Revenue is dismissed. 119. Ground No.3 is with respect to allowance of "Prior Period Expenses" of Rs. 86,96,880/- by the Ld. CIT(A). On this issue, the Ld. DR submitted that the deduction of expenditure can allowed only when it is found to have been incurred in the relevant accounting period. Since these expenditure are pertained to earlier periods, these cannot be allowed in the impugned assessment year. He therefore pleaded that the order of the Ld. AO be upheld. Per contra, the Ld. AR submitted that the Prior Period Expenses arise out of the following: Sl No Particulars Amount (Rs.) 1. Expenses for Accounting of stock issues made in 2014-15 63,05,589 2. Expenses for wage revision arrears paid during FY 33,30,676 3. Less: Income related to reversals of excess provision for interest and expenditu....
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....on for the accounting of the stock issues amounting to Rs. 63,05,589/-. These arise on account of errors or omissions in accounting during the relevant assessment year and hence are considered as prior period expenses which need to be disallowed. We are therefore not in agreement with the decision of the Ld. CIT(A) on this issue and also direct the Ld. AO to make addition of Rs. 63,05,589/-. However, with respect to the settlement of wages and delay in releasing the arrears of payment on account of Court case attachments, we are of the opinion that these arrears or wages crystallized during the FY 2015-16 and hence cannot be considered as prior period expenses thereby no disallowance can be made on this amount of Rs. 33,20,676/-. We therefore concur with the view of the Ld. CIT(A) on this issue and direct the Ld. AO to delete the addition of Rs. 33,20,676/-. Accordingly, this Ground No.3 raised by the Revenue is partly allowed. 123. In the result, appeal of the Revenue (ITA No. 67/Viz/2021) is partly allowed. C.O. No. 51/Viz/2021 (By assessee) (AY: 2016-17) 124. This Cross Objection is filed by the assessee and raised the following grounds of cross objection: "1. The Ld. CIT(....
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....1) of the Act dated 6/2/2017 was issued and duly served on the assessee on 9/2/2017. Thereafter, a letter dated 21/8/2017 was issued to the assessee informing the assessee regarding the conversion of 'limited scrutiny' to 'complete scrutiny' with the approval of the Pr. CIT-1, Visakhapatnam as the case falls under the categories prescribed under the CBDT's Instruction No. 20/2015 dated 29/12/2014 and Instruction No.5/2016 dated 14/7/2016. Subsequently, notice U/s. 142(1) of the Act has been issued on 28/09/2017. In response to the notice, the assessee's Authorized Representative appeared from time to time and filed the submissions as called for. The Ld. AO after discussing the facts and examining the books of accounts, submissions of the assessee, completed the assessment U/s. 143(3) of the Act by making the following additions: Sl No Nature of addition Amount (Rs.) 1. Upfront premium added as income as per Para-4 26,39,48,118 2. Disallowance of excess claim of depreciation as per para-5 5,16,08,835 3. Disallowance of donation and contribution as per para-6 1,56,99,298 4. Disallowance of excess claim on account of 'contribution to pension fund' as per para 7 4,57,93,....