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2024 (1) TMI 107
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....f the case and the learned Commissioner (Appeals) erred in upholding the same. 3. The Officers below failed to appreciate that the interest paid on late payment of is not being in the nature of penalty and hence disallowance of same is unwarranted and uncalled for in the facts and circumstances of the case. 4. The learned officers below erred by not considering the submissions made by the appellant that the interest on late payment of TDS paid u/ s 201/ 201(1A) is an allowable expenses. 5. The Officers below failed to appreciate that the Appellant is adhering to the Revenue recognition Policy as mandated in Accounting Standard 7 and revenue is recognized in the of accounts based on the Percentage Completion Method and revenue is never recognised based on Form 26AS. 6. The Officers below erred in law and fact in restricting TDS credit under the facts and circumstances of the case. 7. That Officers below erred in the computation by adopting the figures incorrectly and hence the consequential demand is liable to be annulled. 8. The Appellant submits that each of the above grounds are mutually exclusive and without prejudice to one ....
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..... AO has never granted the TDS credit in any of the assessment years and hence the action of the Officers below is resulting in unjust enrichment, taxing the same income twice over, opposed to the principles of taxation and equity. 3. In respect of interest u/ s 234A, 234B, 234D: Without prejudice to the right to seek waiver with the Hon 'ble Chief Commissioner of Income Tax/ Director General of Income Tax under the provisions of the Act and as confirmed by the CBDT Circular No. 400/234/95IT (B) dated 23/05/ 1996, the Appellant Company denies itself liable to be charged to interest under section 234A, 234B and 2341) of the Act which under the facts and circumstances bf the case deserves to be cancelled. The calculation of interest under section 234A, 234B and 234D is not in accordance with law as the rate, amount and method for calculating interest is not discernible from the order of assessment. 4. The Appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allo....
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.... reason in filing the appeal belatedly before this Tribunal. Considering the facts and circumstances of the case, we admit the appeal for adjudication. 5. Now coming to the admission of additional grounds, in our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above additional grounds. Accordingly, by placing reliance on the judgement of Hon'ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC), we inclined to admit the additional grounds for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide. Main Grounds: 6. Ground Nos.1, 2, 8 & 9 are general in nature, which do not require any adjudication. 7. Ground Nos.3 & 4 are reproduced as under: 3. The Officers below failed to appreciate that the interest paid on late payment of is not being in the nature of penalty and hence disallowance of same is unwarranted and uncalled for in the facts and circumstances of the case. 4. The learned officers below erred by not considering the submissions made by the appellant that the ....
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....s expenditure. 16. The ratio of those cases is not applicable here. Incometax is not allowable as business expenditure. The amount deducted as tax is not an item of expenditure. The amount not deducted and remitted has the character of tax and has to be remitted to the State and cannot be utilised by the assessee for its own business. The Supreme Court in the case of Bharat Commerce and Industries [1998] 230 ITR 733, rejected the argument advanced by the assessee that retention of money payable to the State as tax or income-tax would augment the capital of the assessee and the expenditure incurred, namely, interest paid for the period of such retention would assume character of business expenditure. The court held that an assessee could not possibly claim that it was borrowing from the State, the amounts payable by it as income-tax, and utilising the same as capital in its business, to contend that the interest paid for the period of delay in payment of tax amounted to a business expenditure". (emphasis supplied) 22. The decision cited by the ld. counsel for the assessee of Kolkata Bench of the Tribunal on the issue is contrary to the decision of the Hon'bl....
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.... income-tax 'under the Income-tax Act are not deductible as expenditure and the further amounts which a person may be required to pay by a reason of failure to comply with the provisions requiring the payments of the tax are also amounts which cannot be regarded as deductible expenditure under Section 37 of the Act. The exact question considered by the Hon'ble Court was:- "Whether on the facts and in the circumstances of the case the claim for deduction of interest levied under Section 139 to the extent of Rs. 11,470/- and interest levied under Section 215 to the extent of Rs. 1,04,339/- was rightly rejected as not allowable under Section 37 of the Income-Tax Act, 1961 for the assessment year 1972-73?" 15. The Hon'ble Court held as follows: "It cannot be said, in the present case, that the payment of interest is in any way an expense incurred wholly or exclusively for the purpose of assessee's business. Nor is it a payment made for the purpose of preserving and protecting the assessee's business as in the case of Birla Cotton Mills (supra). Apart from section 37, the assessee has also present into service Section 36(1) (iii) which per....
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.... the following questions for consideration:- (1) What is meant by revenues, taxes, cesses and rates due? Does the word "due" refer merely to the liability to pay such taxes etc., or does it refer to a liability which has crystalised into a legally ascertained sum immediately payable? (2) Do the taxes (in clause (a) of Section 11(2) refer only to taxes relating to a specific period or to all taxes due from the notified person? (3) At what point or time should the taxes have become due? (4) Does the Special Court have any discretion relating to the extent of payments to be made under Section 11(2)(a) from out of the attached funds/property? (5) Whether taxes include penalty or interest? ..... 19. While answering Question No.5, the Court held:- "One other connected question remains: whether "taxes" under Section 11(2)(a) would include interest or penalty as well? We are concerned in the present case with penalty and interest under the Income Tax Act. Tax, penalty and interest are different concepts under the Income Tax Act. The definition of "tax" under Section 2(43) does not include penalty or interest. Similarly, under S....
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.... the Supreme Court in Harshad Shantilal Mehta v. Custodian the Supreme Court, in the course of its judgment observed that under the Income Tax Act, 1961 the definition of tax under Section 2(43) does not include penalty or interest and that the concepts of tax, penalty and interest are different concepts under the Act. Justice Sujata Manohar speaking for a Bench of three Learned Judges of the Supreme Court observed thus : "We are concerned in the present case with penalty and interest under the Income-tax Act. Tax, penalty and interest are different concepts under the Income-tax Act. The definition of "tax" under section 2(43) does not include penalty or interest. Similarly, under section 156, it is 2 (1998) 231 ITR 871. provided that when any tax, interest, penalty, fine or any of other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand as prescribed. The provisions for imposition of penalty and interest are distinct from the provisions for imposition of tax." 10. The decision of the Supreme Court was delivered in an appeal which arose out of the Special Court (Trial of Offences....
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....d in computing the income chargeable under the head "profits and gains of business or profession". Both these sections operate in different fields, the former is an enabling provision while the latter is a disabling provision. Therefore these decisions do not help the plea raised by the Assessee in this appeal. 26. The ld AR has quoted the following two decisions stating that there exists differentiation between the term 'Tax' used in 40(a)(ii) and 'Other Contractual obligations' parity of the same equally applies to differentiate the term 'tax' and expression 'interest' and to state that all the payments made to Government account would not partake the character of levy of taxes. We will first look at under what context these decisions have been rendered. 27. In Kerala State Beverages Manufacturing & Marketing Corporation Ltd. Vs ACIT [2022] 134 taxmann.com 11 (SC), the decision is rendered by the Hon'ble supreme Court in the context of allowability of Gallonage fee, licence fee and shop rental (kist) incurred towards retail trading of foreign liquor and therefore in a completely different context that cannot be equated to assessee's case. 28. In Krishna....
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.... [2009] 312 ITR 225 (SC) was rendered in the context of period up to which interest u/s. 201(1A) is to be calculated and in that regard held that interest under section 201(1A) is a compensatory measure for withholding the tax which ought to have gone to the exchequer. The decision of Hon'ble Karnataka High Court in CIT TDS vs Bharat Hotels Ltd [2015] 64 taxmann.com 325 (Karnataka) was also rendered in the context of period interest calculation u/s. 201(1A) and in that perspective held that "Interest, herein, being compensatory in nature, cannot be, thus, charged for the period beyond the date when such tax has already been deposited by the recipient". The decision in the case of CIT vs Oriental Insurance Company Ltd., [2009] 183 Taxman 186 (Karnataka), the decision of the Tribunal holding that the interest u/s. 201(1A) is penal in nature and cannot be levied was reversed by the Hon'ble Karnataka High Court to hold that levy of interest u/s. 201(1A) cannot be construed as penalty and has to be paid for failure on the part of the assessee to deduct tax at source. 32. In all these judgments, the issue under consideration was the mode of computation of interest u/s. 201(1A) a....
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....s a levy on delay in the payment of income tax and the TDS is nothing but the income tax paid on behalf of the payee and therefore the interest on the same u/s. 201(1A) is also in the nature of interest levied on the income tax. On that count also interest on delayed payment of TDS cannot be claimed as a deduction. 37. The ld AR quoted several decisions with regard to the allowability of cess which is not a settled position that cess is not an allowable deduction and hence we are not going into the submissions made in this regard. 38. The next contention of the ld AR is that the 'tax' used in 40(a)(ii) is to be considered as the tax on the total income of the assessee himself. In our considered view this contention of the ld AR is completely out of context as we have already held that Sec.40(a)(ii) is not relevant to the present issue before us at all. Besides the above, the decision of the Madras High Court in the case of Chennai Properties (supra) settles the issue. 39. The ld AR submitted the decision of the Madras High Court in the case of Standard Polygraph Machines (2002) 124 Taxman 669 (Madras) stating that the same judge who authored the decision ....
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.... a provision for recovery from the directors of a private company and in that context the legislature has defined the word 'tax due' . As we have already held that Section 40(a)(ii) is not applicable to the present case at all, we are of the view that the contentions raised in this regard are untenable." 7.2 In view of the above order of the Tribunal, taking a consistent view, these ground Nos.3 & 4 of the appeal of the assessee are dismissed. 8. Next ground Nos.5, 6 & 7 are reproduced below: 5. The Officers below failed to appreciate that the Appellant is adhering to the Revenue recognition Policy as mandated in Accounting Standard 7 and revenue is recognized in the of accounts based on the Percentage Completion Method and revenue is never recognised based on Form 26AS. 6. The Officers below erred in law and fact in restricting TDS credit under the facts and circumstances of the case. 7. That Officers below erred in the computation by adopting the figures incorrectly and hence the consequential demand is liable to be annulled. 8.1 The grievance of the assessee in these ground is with regard to non-giving of full TDS credit u/s 199 of the Act rea....
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....ne assessment year in respect of the TDS deducted and reflect in form No.26AS. Accordingly, this issue is remitted to the file of ld. AO for fresh consideration to carry out necessary enquiry on this regard. Additional grounds: 11. Ground Nos.1, 1(i), 1(ii), 1(iii) & 1(iv) are with regard to addition of Rs. 1.42 crores which is admitted as income during the course of survey proceedings. 11.1 The contention of the ld. A.R. is that there was no corroborative material supporting this addition and admission made by assessee in the sworn statement recorded during the course of survey cannot be basis for addition and prayed that same to be deleted. Further, it was submitted that even if it is considered as addition in this assessment year under consideration, which is relating to work-inprogress and that work in progress shall be the opening work in progress in the next assessment year 2015-16 and prayed that appropriate direction may be given. 11.2 He submitted that the learned assessing officer has placed reliance upon the sworn statement (filed by the revenue during the hearing) to make addition of Rs. 1.42 crores on the premise that the same was on account of; a)....
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.... it was a capital expenditure, which is as follows: Financial Year Amount 2012-13 Rs.47.84 Lakhs 2013-14 Rs.142 Lakhs 2014-15 Rs.9.37 Lakhs 2015-16 Rs.25 Lakhs 12.1 According to the ld. D.R., it is not correct to state that there was no material to support the addition of Rs. 1.42 crores. He submitted that the assessee has wrongly treated the capital expenditure as a revenue expenditure and charged to the P&L account and admitted to reduce the tax liability of the assessee for claiming excess expenditure, which is not wholly and exclusively incurred for the purpose of business and same has been unearthed by the survey team and consequent to the unearthing by the survey team, the assessee has admitted the above addition of Rs. 1.42 crores and same to be sustained. 13. We have heard the rival submissions and perused the materials available on record. In this case, there was a survey at the business premises of the assessee. Statement was recorded u/s 139(1) of the Act from the Chairman and Managing Director of assessee company on 22.1.2016 and during the course of survey, he stated that he answered to question No.9 as follows: "9. Are the ....
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.... authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A is not given an evidentiary value. The statement obtained under section 133A would not automatically bind upon the assessee. Therefore, admission made during such statement cannot be made the basis of any admission." 14.1 The same view has been confirmed by the Hon'ble Supreme Court in the judgement cited (supra). We are in full agreement with the above judgement of Hon'ble Supreme Court. However, in the present case, it is admitted fact that assessee has overstated the expenditure in the P&L account by showing the capital expenditure as revenue expenditure with regard to legal and professional charges by charging the same to the P&L account. By this action assessee overstated the expenditure and understated the income. This fact has been detected in the course of survey u/s 133A of the Act and Chairman and Managing Director of the assessee company has accepted to offer it for taxation. As such, once the Managing Director of assessee compan....